Justia Contracts Opinion Summaries

Linda Elam, after suffering significant medical issues including a stroke and complications from cancer treatment, was admitted to a nursing home operated by BLC Lexington SNF, LLC for rehabilitation. Her sister, Bonnie Townsend, acting under a power of attorney, handled the admission process and signed both the admission and an optional arbitration agreement as Elam’s representative. Following further health decline, Elam died, and her estate alleged that her death resulted from negligent care at the facility.After the estate filed suit in Kentucky state court against BLC Lexington and a former administrator, BLC Lexington responded in federal court, seeking to compel arbitration based on the agreement Townsend signed. The United States District Court for the Eastern District of Kentucky compelled arbitration for nearly all claims except wrongful death claims by nonsignatories. An arbitrator, after a week-long hearing, ruled in favor of BLC Lexington on all claims, finding Townsend had not met her burden of proof. The district court then confirmed the arbitration award, denying Townsend’s motions for reconsideration and to vacate the award.On appeal to the United States Court of Appeals for the Sixth Circuit, Townsend argued that compelling arbitration was improper because she did not sign as attorney-in-fact, that the arbitration agreement was indefinite, and that post-arbitration relief was warranted due to alleged arbitrator misconduct and the application of an incorrect legal standard. The Sixth Circuit affirmed the district court’s decisions, holding that the arbitration agreement was enforceable under Kentucky law, Townsend had acted as Elam’s representative, and no intervening change in law or arbitrator misconduct justified vacating the award. The court also found the arbitrator applied the correct evidentiary standard. The judgment of the district court was affirmed. View "BLC Lexington SNF, LLC v. Bonnie Town" on Justia Law

Fetch! Pet Care, Inc., a nationwide franchisor of pet-care services, alleged that a group of former franchisees coordinated to exit their franchise agreements and start competing businesses, allegedly misappropriating Fetch!’s branding, client lists, intellectual property, and trade secrets. The franchisees contended that the newer “2.0” franchise model imposed high fees, delivered poor support, and led to high attrition, while some “1.0” franchisees claimed they were forced out of the system unexpectedly, leaving them no choice but to start their own businesses. A franchisee association was formed, and many franchisees sent rescission notices and pursued arbitration. Fetch! responded by filing suit for breach of contract, trademark infringement, and misappropriation of trade secrets, and sought injunctive relief to prevent the franchisees from operating competing businesses or using its intellectual property.The United States District Court for the Eastern District of Michigan held evidentiary hearings and granted Fetch!’s motion for a temporary restraining order and preliminary injunction in part, ordering defendants to stop using Fetch!’s trademarks and cease communication with current Fetch! franchisees, but denied broader injunctive relief. The court reasoned that a full injunction could harm ongoing arbitration proceedings and found sufficient evidence to invoke the doctrine of unclean hands against Fetch!, based on allegedly deceptive conduct in selling franchises. Fetch! timely appealed the district court’s order.The United States Court of Appeals for the Sixth Circuit reviewed the district court’s application of the unclean hands doctrine for abuse of discretion and affirmed. The appellate court held that the district court acted within its discretion in denying broad injunctive relief based on Fetch!’s bad faith and deceptive marketing practices as an underlying cause of franchisee conduct. The court clarified standards for irreparable harm and affirmed the partial denial of preliminary injunction, relying on the doctrine of unclean hands rather than other defenses. View "Fetch! Pet Care, Inc. v. Atomic Pawz Inc." on Justia Law

The case concerns a life insurance policy that was issued by an insurer to Ewanda Ferguson. After the policy had lapsed for nonpayment, Ewanda applied for reinstatement by submitting an application in which she falsely denied having her driver’s license suspended or being convicted of DUI/DWI in the prior ten years. In reality, Ewanda had two operating-while-impaired convictions and a license revocation within that period. She died in an automobile accident a few months later. The insurer reinstated the policy posthumously and the beneficiary, Elizabeth Ferguson, submitted a claim for the death benefit.Following Ewanda’s death and the submission of the claim, the insurer discovered the misrepresentations in the reinstatement application. Because Ewanda died within the two-year contestability period, the insurer reviewed her application, determined that it would not have reinstated the policy had it known of her true driving history, and rescinded the policy. The insurer then refused to pay the death benefit. Elizabeth Ferguson filed suit in Michigan state court, alleging breach of contract. The insurer removed the case to the United States District Court for the Eastern District of Michigan and counterclaimed to confirm the propriety of rescission. The district court granted summary judgment to the insurer, holding that rescission was proper without balancing the equities, because Ferguson was not an “innocent third party” under Michigan law.On appeal, the United States Court of Appeals for the Sixth Circuit held that, under Michigan law, a life insurance beneficiary who is a third-party beneficiary stands in the shoes of the insured and has no greater rights than the insured would have had. Therefore, the insurer was entitled to rescind the policy based on material misrepresentations made by Ewanda, and the district court was not required to balance the equities before ordering rescission. The Sixth Circuit affirmed the district court’s judgment. View "Ferguson v. MetLife Investors USA Insurance Co." on Justia Law

A global manufacturer of automotive clutches entered into a contract with a components manufacturer to supply levers for use in the clutches. The levers were to be manufactured strictly according to the specifications provided, with no design responsibility on the supplier. Between 2017 and 2018, several of the supplied levers broke, causing clutch failures in the field. The buyer communicated with the supplier about these issues through emails, reports, and meetings, and the parties disputed whether these communications constituted notice of breach. The buyer eventually filed suit for breach of contract and breach of express and implied warranties.The United States District Court for the Northern District of Ohio denied the supplier’s motions for judgment on the pleadings and summary judgment, holding that there were sufficient allegations and factual disputes regarding whether the buyer had given adequate notice of breach as required under Ohio law. The case proceeded to trial, where the jury found in favor of the buyer on all claims and awarded significant damages. The supplier appealed, arguing that the Ohio statute requiring pre-suit notice of breach barred the buyer’s claims, and that errors in witness testimony and jury instructions warranted a new trial.The United States Court of Appeals for the Sixth Circuit affirmed the district court’s rulings. The appellate court held that under Ohio Revised Code § 1302.65(C)(1), interpreted through Ohio Supreme Court precedent, notice of breach does not require explicit language alleging breach, but rather communication sufficient to alert the seller that there is a problem. The court found the evidence supported the jury’s verdict, the jury instructions properly reflected Ohio law, and there was no reversible error in the admission of witness testimony. The judgment in favor of the buyer was affirmed. View "Eaton Corp. v. Angstrom Auto. Group, LLC" on Justia Law

An individual seeking to refinance his mortgage visited a website that offers mortgage information and referrals to affiliated lenders. During three separate visits, he entered personal information and clicked buttons labeled “Calculate” or “Calculate your FREE results.” Immediately below these buttons, the website displayed language in small font stating that clicking would constitute consent to the site’s Terms of Use, which included a mandatory arbitration provision and permission to be contacted by the site or affiliates. The Terms of Use were accessible via a hyperlinked phrase. After using the site, the individual was matched with a particular lender but did not pursue refinancing. Later, he received multiple unwanted calls from the lender and filed a class-action lawsuit under the Telephone Consumer Protection Act, alleging violations such as calling numbers on the Do Not Call registry.The United States District Court for the Eastern District of Michigan initially dismissed the complaint on the merits and denied the lender’s motion to compel arbitration as moot. Upon realizing the arbitration issue should have been decided first, the court reopened the case but found no enforceable agreement to arbitrate existed, denying the motion to compel arbitration. The court also denied reconsideration and allowed the plaintiff to amend his complaint. The lender appealed the denial of arbitration.The United States Court of Appeals for the Sixth Circuit reviewed the denial de novo. It held that, under California law, the website provided reasonably conspicuous notice that clicking the buttons would signify assent to the Terms of Use, including arbitration. The court found that the plaintiff’s conduct objectively manifested acceptance of the offer, forming a binding arbitration agreement. The court also concluded that the agreement was not invalid due to unspecified procedural details and that questions of arbitrability were delegated to the arbitrator. The Sixth Circuit reversed the district court’s decision and remanded for further proceedings. View "Dahdah v. Rocket Mortgage, LLC" on Justia Law

An individual who founded a Michigan biomedical research company sold a majority stake in 2019 to four defendants but retained a minority interest, later becoming dissatisfied with the company’s management and moving out of state. The new owners aimed to expand the company but withheld information from the plaintiff about their efforts to secure financing, including discussions with Avista Capital Partners, a venture capital firm that ultimately made a large investment. The plaintiff sold his shares in December 2020 for a price based on an annual valuation, prior to Avista’s capital infusion that significantly increased the company’s value. The plaintiff later sued, alleging violations of federal and state securities laws, breach of fiduciary duty under Michigan law, and various fraud and contract claims based on the defendants’ failure to disclose material facts about the company’s pursuit of equity financing and Avista’s interest.The case was first heard in the United States District Court for the Western District of Michigan. That court denied the defendants’ motion to dismiss but, following discovery, granted summary judgment in favor of the defendants on all counts. The court concluded that the omissions were not material under federal securities law and, applying Delaware law and a federal standard, also found no materiality for the breach of fiduciary duty claim under Michigan law.On appeal, the United States Court of Appeals for the Sixth Circuit affirmed the district court’s summary judgment as to the federal securities law claims, the Michigan Uniform Securities Act claim, and the contract-based claims, holding that the omissions were not material under the applicable federal standards. However, the Sixth Circuit reversed the summary judgment for the Michigan common-law fiduciary duty and fraud claims, finding the district court had applied an incorrect legal standard and that genuine disputes of material fact remained. The case was remanded for further proceedings on the fiduciary duty and fraud counts. View "Boyd v. Northern Biomedical Research Inc." on Justia Law

Two individuals worked as delivery drivers for a transportation company for over a decade, primarily out of the company’s New Jersey terminal. Their work mainly involved picking up and delivering goods in New Jersey, with occasional deliveries in neighboring states. Each driver had a contract with the company that included a forum-selection clause requiring any disputes to be litigated in Memphis, Tennessee, and a choice-of-law clause providing that Tennessee law would govern any disputes. The company is incorporated in Delaware, headquartered in Illinois, and has operations nationwide, including in Tennessee, but neither the drivers nor the company’s relevant activities were based in Tennessee.The drivers filed a putative class action in the United States District Court for the District of New Jersey, alleging that the company violated New Jersey wage laws by withholding earnings and failing to pay overtime, among other claims. The case was transferred to the United States District Court for the Western District of Tennessee pursuant to the forum-selection clause. The company then moved to dismiss the complaint, arguing that the Tennessee choice-of-law provision applied and that Tennessee law did not recognize the claims brought under New Jersey statutes. The district court agreed, upheld the choice-of-law provision, and dismissed the case.On appeal, the United States Court of Appeals for the Sixth Circuit reviewed the enforceability of the choice-of-law provision under Tennessee’s choice-of-law rules. The court held that the contractual choice-of-law clause was unenforceable because there was no material connection between Tennessee and the transactions or parties. As a result, the Sixth Circuit reversed the district court’s dismissal and remanded the case for further proceedings. The court did not reach the question of whether Tennessee law was contrary to the fundamental policies of New Jersey. View "Andujar v. Hub Group Trucking, Inc." on Justia Law

In this case, Christopher C. Brown, through his company Tattooed Millionaire Entertainment (TME), owned a Memphis music studio and insured both the studio and its equipment with Hanover American Insurance Company. John Falls, a musician, leased Studio B and its equipment from Brown and also obtained insurance from Hanover for the equipment and lost business income. In 2015, the studio was damaged by arson, and both Brown and Falls submitted insurance claims. Hanover discovered Brown had forged receipts for equipment purchases and sued to recover advance payments and for a declaratory judgment of no further liability. Brown, Falls, and another lessee counter-sued for breach of contract. After a jury trial in the United States District Court for the Western District of Tennessee, Falls was awarded $2.5 million for equipment loss and $250,000 for business income, while Brown was found to have committed insurance fraud.Hanover moved to set aside the verdict under Rule 50(b), which the district court granted. On appeal, the United States Court of Appeals for the Sixth Circuit reversed, holding Hanover had forfeited its Rule 50(b) motion by failing to make a Rule 50(a) motion as to Falls, and ordered reinstatement of the jury verdict. Subsequent proceedings included a federal interpleader action and a parallel state court action between Falls and TME. The district court enjoined the state action, but the Sixth Circuit reversed the injunction.In the present appeal, the United States Court of Appeals for the Sixth Circuit affirmed the district court’s allocation of the insurance payout, holding that Hanover was precluded by res judicata from challenging Falls’s recovery on grounds that could have been raised earlier. The court found the district court’s error in interpreting the wrong lease was harmless and upheld the allocation of funds based on the value of Falls’s leasehold interest. The court also held that Tennessee public policy barred Brown from recovering his allocated share due to his insurance fraud. The district court’s judgment was affirmed. View "Hanover American Insurance Co. v. Tattooed Millionaire Entertainment" on Justia Law

The founder and former CEO of a national pizza company brought suit against a public relations firm that had previously provided services to the company. The dispute arose after the plaintiff alleged that the firm leaked confidential and damaging information about him to the press, in violation of a nondisclosure agreement (NDA) that included an arbitration clause. The NDA was executed after the company requested the firm sign it, anticipating close work with the plaintiff during a period of reputational crisis. The relationship between the parties deteriorated following a conference call in which the plaintiff made controversial remarks, which were later reported in the media, leading to his resignation from the company’s board.The case was initially filed in state court and then removed to the United States District Court for the Western District of Kentucky. Over several years, the litigation involved multiple amended complaints, extensive discovery, and dispositive motions. The defendant did not move to compel arbitration until after the district court denied summary judgment on the NDA claim. The district court held a bench trial and found that the NDA was enforceable and contained a binding arbitration provision. However, the court concluded that the defendant had defaulted on its right to arbitrate by actively litigating the case for years before seeking arbitration, and thus denied the motion to compel arbitration.On appeal, the United States Court of Appeals for the Sixth Circuit determined it lacked jurisdiction to review the district court’s contract formation ruling but had jurisdiction to review the default determination. The Sixth Circuit affirmed the district court’s finding that the defendant defaulted on its arbitration rights by seeking a merits resolution in court before moving to compel arbitration. The court dismissed the appeal in part for lack of jurisdiction, otherwise affirmed the district court’s judgment, and denied the plaintiff’s request for sanctions. View "Schnatter v. 247 Group, LLC" on Justia Law

William Plott suffered severe, lifelong disabilities as a result of a vaccine administered in infancy. His family sought compensation under the National Vaccine Injury Compensation Program, filing a petition in the United States Court of Federal Claims. A special master determined that Plott’s parents were entitled to monetary relief for his care and ordered the Department of Health and Human Services (HHS) to pay a lump sum and to purchase an annuity from Wilcac Life Insurance Company, with annual payments to be made to Plott’s estate. After Plott’s death, his estate sought a final annuity payment, which Wilcac refused to pay, prompting the estate to sue both HHS and Wilcac.The estate initially filed suit in the Hamilton County, Ohio, Court of Common Pleas. Wilcac removed the case to the United States District Court for the Southern District of Ohio. HHS moved to dismiss for lack of subject matter jurisdiction, and the district court granted this motion, dismissing HHS from the case. Wilcac then argued that HHS was a necessary and indispensable party under Federal Rule of Civil Procedure 19, and the district court agreed, dismissing the entire case without prejudice because HHS could not be joined without defeating subject matter jurisdiction.The United States Court of Appeals for the Sixth Circuit reviewed the district court’s application of Rule 19. The appellate court held that the district court erred by applying a bright-line rule that all parties to a contract are necessary and indispensable under Rule 19. Instead, the court emphasized that Rule 19 requires a pragmatic, case-specific analysis. The Sixth Circuit reversed the district court’s dismissal and remanded the case for further proceedings, instructing the lower court to conduct a proper Rule 19 analysis based on the specific facts of the case. View "Estate of William Plott v. Health and Human Services" on Justia Law