Justia Contracts Opinion Summaries

The Fifth Circuit affirmed the district court’s order denying Klairmont Korners, L.L.C. (“Klairmont”) claim that a debtor’s decision to reject a commercial lease pursuant to 11 U.S.C. Section 365 should not receive deference under the business judgment rul Klairmont Korners, L.L.C. (“Klairmont”) appeals a district court order denying its claim that a debtor’s decision to reject a commercial lease pursuant to 11 U.S.C. Section 365 should not receive deference under the business judgment rule because of “bad faith, whim, or caprice” inherent in a third party’s negotiations with Klairmont.   The Fifth Circuit affirmed. The court explained that Klairmont’s contentions fail under this court’s own standard for overcoming the business judgment rule, as well as the “bad faith” test Klairmont encourages us to adopt. The court explained that Klairmont’s position is untenable, even under the test it proposes the court adopt from another circuit, under which courts should not defer to a debtor’s decision under Section 365 that is “the product of bad faith, or whim, or caprice.” Klairmont misunderstands this standard, urging the court to hold that any bad faith involved in the bankruptcy proceedings should prompt a bankruptcy court to decline a debtor’s decision regarding an executory contract. That is not the test these other courts have adopted. Klairmont will not find relief in asserting that the debtor’s decision deserves no deference under the business judgment rule.     . View "Klairmont Korners, L.L.C." on Justia Law

Appellant Advanced Indicator and Manufacturing, Inc. claims its building was damaged by Hurricane Harvey’s winds. Advanced’s insurer, Acadia Insurance Company, determined that the damage to the building was caused by poor maintenance and routine wear and tear. When Acadia denied Advanced’s claim, Advanced sued. Advanced filed a motion to remand the case to state court   The district court granted Acadia’s motion and granted summary judgment on Advanced’s extra-contractual claims. The Fifth Circuit affirmed the district court’s denial of the motion to remand, reversed the grant of summary judgment on Advanced’s claims, and remanded the matter to the district court.   The court explained that Advanced’s argument is unavailing because it fails to consider Flagg’s command that “the district court must examine the plaintiff’s possibility of recovery against that defendant at the time of removal.” At the time of removal, then, it would have been proper for the district court to find that “there is no possibility of recovery by [Advanced] against an in-state defendant.” Accordingly, the differences between Sections 542A.006(b) and 542.006(c) are not material as long as the insurer elects to accept liability for the agent before removal. The court held that summary judgment was not warranted on Advanced’s breach of contract claim given the evidence Advanced has put forth. This conclusion requires the reversal of the district court’s dismissal of Advanced’s other claims. View "Adv Indicator v. Acadia Ins" on Justia Law

Plaintiff began receiving prescription medication administered through a pain pump and filled by AIS Healthcare (“AIS”). In 2021, she discovered that AIS was billing her insurer at a rate of $120 per day for allegedly unauthorized services. Plaintiff filed suit in state court, seeking damages for contract, tort, and unjust enrichment claims. AIS removed to federal court and moved to dismiss the case on grounds that Plaintiff lacked standing to sue because she had suffered no injury. Noting that “a breach of contract alone is an insufficient injury in fact,” the district court concluded that Plaintiff could not satisfy standing’s redressability element for the claims asserted and dismissed them with prejudice under Rule 12(b)(1).   The Fifth Circuit affirmed the district court’s judgment dismissing Plaintiff’s claims for lack of standing, however, the court modified the district court’s judgment dismissing Plaintiff’s claims for lack of standing. First, the court explained that the district court erred in holding that Plaintiff failed to show an injury in fact through her associated breach of contract and tort claims. However, because the court agreed with the district court that Plaintiff’s claims are not redressable by the damages she seeks, the court affirmed its dismissal of her claims for lack of standing. Further, the district court’s dismissal with prejudice appears to be a “scrivener’s” error. The court thus modified the district court’s judgment dismissing Plaintiff’s claims with prejudice to make it without prejudice and affirm the judgment as modified. View "Denning v. Bond Pharmacy" on Justia Law

In a dispute over the applicability of a forum selection clause contained in a franchise agreement, the Fifth Circuit held that non-signatories to a franchise agreement may be bound to the contract’s choice of forum provision under the equitable doctrine that binds non-signatories who are “closely related” to the contract. View "Franlink v. BACE Services" on Justia Law

During the covid-19 pandemic, state and local authorities in Louisiana ordered nonessential businesses to close for a time. This required Plaintiff to temporarily shut his jewelry stores and event spaces in New Orleans. To recoup income lost during the closure, Plaintiff claimed reimbursement under his insurance policy’s coverage for “direct physical loss of or damage to” his property. Plaintiff’s insurer, Axis, denied the claim.   Plaintiff sued Axis along with his insurance agent and broker. The district court dismissed Plaintiff’s claims, concluding that Plaintiff suffered no covered loss or damages and that his agent and broker violated no duty to advise Plaintiff about pandemic-related coverage.   The Fifth Circuit affirmed. The court explained that what denied Plaintiff use of his property was the government’s closure orders. Such losses do not involve a “tangible alteration to, injury to, or deprivation of property.” The district court therefore correctly dismissed Plaintiff’s claims against Axis. Further, contrary to Plaintiff’s arguments, what creates a Louisiana insurance agent’s duty to procure particular coverage is not a “close relationship” with the insured but an insured’s “specific” request for “the type of insurance coverage . . . needed.” Here, Plaintiff did not allege he specifically requested pandemic-related coverage from either the wholesale broker or insurance agent, therefore Plaintiff’s claims against those Defendants were properly dismissed. View "Adler & Sons v. Axis Surplus Ins Co" on Justia Law

Pontchartrain Partners, L.L.C. (“Pontchartrain”) and Tierra De Los Lagos, L.L.C. d/b/a Bee Sand Company (“Bee Sand”) are construction companies involved in a breach-of-contract dispute. In June 2021, Bee Sand sued Pontchartrain in Texas state court. Pontchartrain removed the case to federal court in July. Later that month, Bee Sand voluntarily dismissed the case and explained to Pontchartrain that it intended to refile in September— after a new Texas law governing attorney’s fees went into effect. Bee Sand also offered to refile in federal court to spare Pontchartrain the expense of a second removal, and Pontchartrain said that it would consider the matter. In response to Pontchartrain’s declaratory judgment action, Bee Sand argued that it was anticipatory in nature, meaning that the Southern District of Texas is the proper forum for this dispute. The district court agreed and dismissed the case.The Fifth Circuit affirmed. The court held that the district court’s consideration of the abstention factors provided adequate justification for granting Bee Sand’s motion. Moreover, these same reasons more than satisfy the “compelling circumstances” needed to obviate the “first-to-file” rule’s application, so the district court was not obligated to hear this case under that rule. Accordingly, the district did not abuse its discretion in dismissing Pontchartrain’s anticipatory lawsuit, and Pontchartrain’s jurisdictional and venue arguments need not be considered. View "Pontchartrain v. Tierra de Los Lagos" on Justia Law

Plaintiff signed a Financial Responsibility Agreement (“FRA”) with Baylor University to secure her enrollment for the Spring 2020 semester. The FRA required Plaintiff to pay Baylor for “educational services,” and she paid her tuition bill in full. During the second half of the semester, Baylor responded to the COVID-19 pandemic by severely limiting on-campus activities and opportunities while conducting classes remotely. It did not, however, refund any tuition or fees. Plaintiff filed a class action against Baylor asserting a breach of contract claim, alternatively sought unjust enrichment.   The Fifth Circuit affirmed in part and reversed in part, and remanded. The court explained that the FRA is a valid contract because it describes the essential terms with a reasonable degree of certainty and definiteness. Plaintiff failed to state a claim for contract invalidity. But the crux of the parties’ dispute remains the interpretation of “educational services”. The court explained that on remand, the district court must consider whether Baylor’s or Plaintiff’s interpretation of “educational services” prevails. If the term is latently ambiguous, then further proceedings may be necessary to explore its meaning. Also on remand, the court must examine the surrounding circumstances pertinent to the making of the FRA. View "King v. Baylor University" on Justia Law

Harrison Co., L.L.C. executed a credit agreement with A-Z Wholesalers, Inc. to supply A-Z with tobacco products and other goods. Barkat Ali personally guaranteed A-Z’s payment. A-Z fell behind $2.6 million on payments for the goods it received, so Harrison sued for breach of contract and breach of guaranty actions against A-Z and Ali. The district court granted summary judgment for Harrison.A-Z and Ali argue there is a genuine dispute of material fact as to whether the sales that Harrison is seeking payment for were, in reality, sales from Imperial following the merger of the two companies. The Fifth Circuit affirmed. The court wrote that Imperial and Harrison are—and always have been—separate entities with their own employees, customers, and warehouses. As the district court explained, A-Z and Ali do not allege, let alone present evidence, “that A-Z experienced any changes in ordering procedures, pricing, delivery schedules, type or brand of goods, inventory availability, or any other indicia that . . . [shows] it was no longer doing business with Harrison.” Therefore, the district court did not err in granting summary judgment. View "Harrison Company v. A-Z Whsle" on Justia Law

CAE Integrated L.L.C. and Capital Asset Exchange and Trading, L.L.C. (collectively CAE) sued its former employee and his current employer, Moov, for misappropriation of trade secrets and then moved for a preliminary injunction. The district court denied the preliminary injunction and CAE appealed.   The Fifth Circuit affirmed the denial finding that CAE failed to establish a likelihood of success on the merits of its claims. The court considered that trade secret information derives independent economic value from being not generally known or readily ascertainable through proper means. What CAE refers to as the “transactional documents” are files from Google Drive with purchase orders, invoices, customer equipment needs, and pricing history. The former employee has not had access to his MacBook since 2016 and he testified that Google Drive contained none of the transactional documents when he started at Moov. The district court found the employee’s testimony credible and the forensic analysis confirmed that before the employee began at Moov, he deleted any remaining transactional documents from his Google Drive. Therefore, the district court did not clearly err in finding that neither the employee nor Moov misappropriated trade secrets. Further, even if CAE had established that the employee or Moov misappropriated trade secrets, it failed to show the use or potential use of trade secrets. View "CAE Integrated v. Moov Technologies" on Justia Law

GenMa is a power company that, long ago, leased two coal-fired power plants from the Lessors. To comply with those leases, GenMa paid NFC $130 million to insure the Lessors up to that sum if GenMa didn’t pay rent. Too late, NFC realized it had promised the Lessors more than $130 million. The Lessors forced NFC to honor its promise, and NFC sued GenMa and others for its losses.   GenMa removed NFC’s claims to district court, which then transferred those claims to a bankruptcy court in Texas. After losing there and at the district court, NFC appealed. It says that its claims against GenMa should return to New York state court because the federal court lacked jurisdiction or because federal law required abstention. NFC also insists, pressing four contract-law theories, that GenMa must cover NFC’s losses.   The Fifth Circuit affirmed holding that the district court had jurisdiction; abstention was not required; and NFC’s claims lack merit.  The court explained that the parties may have miscalculated the amount of credit support needed to satisfy GenMa’s lease obligations. But that mistake, mutual or not, was GenMa’s problem. Had Natixis carefully crafted its letters of credit, NFC would not have had to pay any more to the Lessors than GenMa had paid it, no matter how badly the parties miscalculated the credit support that GenMa’s leases required. The court agreed with GenMa: “NFC cannot demand more money from GenMa for discovering that it could have obtained less credit support” than the Agreement required, and reformation cannot erase that unforced blunder. View "Natixis Funding v. GenOn Mid-Atl" on Justia Law