Justia Contracts Opinion Summaries

Articles Posted in US Court of Appeals for the Fifth Circuit
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Fountain of praise, a church, leased space to Central Care Integrated Health Services. Shortly after the execution of the lease, the relationship soured when the parties disagreed on the frequency and amount of rent payments. Eventually, Fountain of Praise terminated the lease and successfully evicted Central Care from the premises.Subsequently, Central Care filed for Chapter 11 reorganization. Central Care then sued Fountain of Praise in state court, claiming breach of contract and unjust enrichment. Fountain of Praise then removed the case to bankruptcy court as an adversary proceeding. The bankruptcy court entered judgment in favor of Fountain of Praise, finding that any breach was excusable due to Central Care's failure to make timely rent payments and that Central Care lacked the requisite interest in the property for an unjust enrichment claim.Central Care appealed, and the district court judge assigned to the case reassigned the case to a magistrate judge who affirmed the bankruptcy court's judgment.On appeal, the Fifth Circuit vacated the magistrate judge's order, finding that the district court improperly authorized referral of the appeal from a bankruptcy court decision to a magistrate judge. Under 28 U.S.C. Section 158, appeals from a bankruptcy court must be heard either by the district court or a panel of bankruptcy court judges. View "South Central v. Oak Baptist" on Justia Law

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Triller Inc., a social media company was being sold to a group of owners, including Carnegie Technologies, Inc. Prior to the sale, Triller executed a promissory note in favor of Carnegie and then immediately assigned the note to a group of “legacy” owners—including Carnegie—as part of the deal’s closing. After the note was defaulted, Carnegie sued Triller to collect the amounts due. Triller claimed that it had no obligations under the note because it had been assigned, resulting in novation. The district court rejected Triller's novation defense and Triller appealed.The Fifth Circuit affirmed, finding that the plain meaning of the agreement was silent on the extinction of any obligation between Triller and Carnegie. The laws of both California and Texas require clear evidence illustrating the parties' intent to replace an earlier agreement, and the agreement's merger clause precludes evidence of a contemporaneous or earlier agreement. Thus, the court held that Triller failed to raise an issue of material fact regarding whether its obligations under the note were extinguished. View "Carnegie Technologies. v. Triller" on Justia Law

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American Express National Bank (“AmEx”) filed suit for breach of contract in Mississippi state court to recover $2,855.74 of unpaid credit card debt incurred on Plaintiff's account. Plaintiff contended an unknown person incurred this debt fraudulently. Plaintiff then filed Fair Credit Reporting Act (“FCRA”) claims against AmEx and other defendants in Mississippi state court. The district court denied AmEx’s motion to compel arbitration.   The Fifth Circuit vacated the decision of the district court and remanded for reconsideration in the first instance in light of Forby v. One Techs., L.P and Morgan v. Sundance, Inc. The court held that these cases were decided on the same day and after the district court’s ruling. Forby clarified the test for waiver by a party of the right to compel arbitration and reiterated that waiver analysis occurs on a claim-by-claim basis. In addition, Morgan addressed this and other sister circuits’ tests for waiver by a party of the right to compel arbitration. The court explained that although it can apply subsequent precedent to cases before it, “[a]s a court for review of errors, we are not to decide facts or make legal conclusions in the first instance." Thus, the court’s task is to review the actions of a trial court for claimed errors. View "Barnett v. American Express National" on Justia Law

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Plaintiff took out a home equity loan on a house in Texas (“Property”). Deutsche Bank National Trust Company (“Deutsche Bank”) is the trustee of the loan. Deutsche Bank sought a non-judicial foreclosure order on the Property.   Plaintiff sued Deutsche Bank in Texas state court, alleging violations of the Texas Debt Collection Act (“TDCA”), breach of the common-law duty of cooperation, fraud, and negligent misrepresentation. Despite the stipulation, Deutsche Bank removed the case to federal district court. Plaintiff then moved to remand the case back to Texas state court because, in his view, the amount in controversy could not exceed the stipulated maximum of $74,500. The district court denied Plaintiff’s motion to remand.   The Fifth Circuit reversed and concluded that the district court erred in denying Plaintiff’s motion to remand, and it lacked subject-matter jurisdiction when it entered final judgment. The court reasoned that Deutsche Bank failed to establish that the amount in controversy exceeds the jurisdictional floor of $75,000.   The court first noted that the bank points out that Plaintiff’s suit requested relief which might be read to suggest Plaintiff also sought injunctive relief. But the bank makes that argument only to establish that Plaintiff’s initial pleading seeks nonmonetary relief not to establish that the requested nonmonetary relief put the house in controversy. Whatever the merit of that latter contention might otherwise be, the court held that Deutsche Bank forfeited it. Moreover, the mere fact that Plaintiff pleaded a demand for specific damages cannot support bad faith. View "Durbois v. Deutsche Bank Ntl Trust" on Justia Law

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Plaintiff experienced financial difficulties and applied for a loan modification. In response, CitiMortgage mailed Plaintiff an offer to participate in a Trial Period Plan (“TPP”). The TPP provided that “the terms of your  TPP are effective on the day you make your first trial period payment, provided you have paid it on or before the last day of [January 2019].” Plaintiff effectively accepted the terms of the TPP when he made the first trial period payment of $1,293.66. CitiMortgage sent him a letter informing him that he was “ineligible” for the loan modification and then posted Plaintiff’s property for foreclosure.   Plaintiff filed suit against CitiMortgage in state court, asserting claims for breach of contract. The district court granted summary judgment to CitiMortgage concluding that Plaintiff failed to comply with the TPP’s payment deadlines.   The Fifth Circuit reversed finding that Plaintiff met his obligations under the TPP by making timely payments. CitiMortgage, by contrast, violated its obligations by refusing to grant the permanent loan modification and proceeding with foreclosure. The court explained that the TPP establishes a grace period. It accepts payment so long as it is made “in the month in which it is due.” Neither the TPP nor the parties use the term “grace period” to describe this language. But that is plainly what the text contemplates. And no one disputes that Plaintiff’s payments comply with the governing grace periods. CitiMortgage has offered no reason why favoring the monthly deadlines and ignoring the grace period would “do the least damage” to the text of the TPP. View "Burbridge v. CitiMortgage" on Justia Law

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Plaintiffs, two sisters, and a family friend own a large farm in north Louisiana. The farm sits atop the storied Haynesville Shale. A bank’s landman who was managing the sisters’ interests extended a mineral lease for only a tenth of the farm. The landman had misread the extension, which covered the whole farm. Within months, advances in drilling technology would open up the Haynesville Shale. Lease bonuses soared. But the faulty extension clouded the sisters’ farm.   Plaintiffs sued the bank for breach of contract. The district court found the landman violated the standards of his profession by extending the entire lease. But the court ruled this was a “mistake in judgment” under the bank’s contract with the sisters, shielding the bank from liability. It also ruled the mistake was not gross fault, which a Louisiana contract cannot exculpate.   The Fifth Circuit affirmed in part, reversed in part, and remanded. Then court explained that the landman did not make a mistake in judgment, but a mistake pure and simple. He misread the extension. The contract’s exculpatory clause does not cover this kind of error, and so the court reversed the dismissal of the sisters’ claims. The court remanded as to damages. The extension stuck the sisters with a lower royalty rate than they would have gotten otherwise. But the parties’ experts disagree over whether the differing rates would make any economic difference. The district court did not resolve this technical, fact-bound question. View "Franklin v. Regions Bank" on Justia Law

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Plaintiff, a law firm with offices in Dallas, Texas and Atlanta, Georgia, sued to recover lost income and expenses incurred as a result of the COVID-19 pandemic under an insurance policy issued by The Cincinnati Insurance Company. The district court dismissed Plaintiff’s claims and the Fifth Circuit affirmed.   The court explained that under the policy a “Covered Cause of Loss” is a “direct ‘loss’ unless the loss is excluded or limited in this Coverage Part,” and “loss” is an “accidental physical loss or accidental physical damage.” So, to recover under any of the three forms of coverage, there must be a physical loss or physical damage to the Plaintiff’s property. Here, there was no Covered Cause of Loss as there was no underlying physical loss or damage to insured property. Plaintiff was not deprived of its property nor was there a tangible alteration to its property, so there was no underlying “direct ‘loss’” to trigger coverage. View "Ferrer & Poirot v. Cincinnati Ins Company" on Justia Law

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The Knights of Columbus (“the Order” or “the KCs”) offers insurance products to its members. To promote and sell these insurance products, the Order contracts with Field Agents (“FAs”) and General Agents (“GAs”). FAs promote and sell insurance products to prospective customers, and GAs recruit and oversee FAs within a specified territory.  Plaintiff began selling insurance for the Order in 2006 as an FA. He worked in that capacity until he became a GA.   He brought suit against the KCs alleging breach of contract, breach of duty of good faith, and wage payment law violations. The district court dismissed each of the claims for failure to state a claim.   The Fifth Circuit partly disagreed and thus reversed in part and affirmed in part.  The court reversed the district court’s holding that Plaintiff failed to state a claim upon relief which can be granted regarding a breach of contract in relation to Section 4 of the GA contract, Section 6 of the FA contracts to which he was a party, and Section 7(c) of Plaintiff’s original FA contract reversed the district court’s holding that Plaintiff has failed to state a claim for the breach of the duty of good faith and fair dealing in relation to the performance of Section 4 of the GA contract and Section 6 of the FA contracts. The court also reversed the district court’s holdings that Plaintiff failed to state a claim under both the Connecticut and Louisiana wage payment laws. The court affirmed the remainder of the district court’s judgment, including the dismissal of Plaintiff’s equitable claims. View "Ottemann v. Knights of Columbus" on Justia Law

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Plaintiff appealed the district court’s summary judgment dismissal of the breach of contract claims that he has asserted, as a third-party beneficiary, against Defendant. The district court determined that the insurer’s duty to defend its insured, on which Plaintiff’s claims were based, was never triggered, relative to Plaintiff’s underlying personal injury suit, because the insured, N.F. Painting, Inc., never requested a defense or sought coverage.   The Fifth Circuit affirmed finding no error in the district court’s assessment under Texas law. The court explained that it is well-established, that under Texas law, despite having knowledge and opportunity, an insurer is not required to simply interject itself into a proceeding on its insured’s behalf.   Here, as stated, N.F. Painting did not seek defense or coverage from Defendant when it was served with Plaintiff’s original state court petition. The undisputed facts show that N.F. Painting chose, with the assistance of counsel, to handle Plaintiff’s personal injury claims in its own way, without involving Defendantin its defense, as it was entitled to do. And Plaintiff has put forth no evidence suggesting that Defendant was not entitled to rely on that decision. Having made that decision, it is N.F. Painting, and thus Plaintiff, as third-party beneficiary, not Defendant who must bear responsibility for any resulting adverse consequences. In other words, the law will not permit a third-party beneficiary to simply disregard an insured’s litigation decisions, i.e., essentially re-write history, merely because he has no other means of satisfying his judgment against the insured. View "Moreno v. Sentinel Ins" on Justia Law

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Plaintiff bought a home insurance policy from Allstate that covered damage from wind and hail. On June 6, 2018, a wind and hail storm hit the area where Plaintiff lived, allegedly damaging his roof. An Allstate adjuster estimated the value of the loss at less than the deductible and paid Plaintiff nothing. Allstate later moved for summary judgment on Plaintiff’s remaining claims for breach of contract and failure to conduct a reasonable investigation. The district court granted Allstate’s motion finding that Plaintiff’s losses involved concurrent causes and Plaintiff had not carried his burden of proving how much damage came from the June 6, 2018 incident.   The Fifth Circuit explained that Texas’s concurrent causation doctrine instructs leaves questions about when the doctrine applies, and what plaintiffs must prove when it does. The court certified to the Supreme Court three questions:   1. Whether the concurrent cause doctrine applies where there is any non-covered damage, including “wear and tear” to insured property, but such damage does not directly cause the particular loss eventually experienced by plaintiffs;2. If so, whether plaintiffs alleging that their loss was entirely caused by a single, covered peril bear the burden of attributing losses between that peril and other, non-covered or excluded perils that plaintiffs contend did not cause the particular loss; and3. If so, whether plaintiffs can meet that burden with evidence indicating that the covered peril caused the entirety of the loss (that is, by implicitly attributing one hundred percent of the loss to that peril). View "Overstreet v. Allstate" on Justia Law