Justia Contracts Opinion Summaries

Dyax Corporation performed research for Ares Trading S.A. and licensed patents to Ares, including some held by Cambridge Antibody Technology (CAT Patents). Ares used Dyax’s research to develop a cancer drug, Bavencio, and agreed to pay royalties to Dyax based on the drug’s sales. The royalty obligation outlasted the lifespan of the CAT Patents. The District Court held that Ares’ royalty obligation was not unenforceable under Brulotte v. Thys Co., which prohibits royalties that extend beyond a patent’s expiration.The United States District Court for the District of Delaware found that Ares’ royalty obligation did not violate Brulotte because it was not calculated based on activity requiring the use of inventions covered by the CAT Patents after their expiration. The court characterized the royalties as deferred compensation for Dyax’s pre-expiration research. Additionally, the court noted that Ares’ royalty obligation could run until the latest-running patent covered in the agreement expired, which included patents other than the CAT Patents.The United States Court of Appeals for the Third Circuit affirmed the District Court’s decision. The Third Circuit held that Ares’ royalty obligation was not calculated based on activity requiring post-expiration use of the CAT Patents, and thus, Brulotte did not apply. The court emphasized that the royalties were based on sales of Bavencio, which did not require the use of the CAT Patents after their expiration. The court also rejected Ares’ argument that Dyax violated the implied covenant of good faith and fair dealing, noting that Ares received all the benefits promised under the agreement. The court concluded that Dyax did not breach any obligations under the agreement, and Ares’ royalty obligation remained enforceable. View "Ares Trading SA v. Dyax Corp" on Justia Law

Rose McAvoy, an undergraduate student at Dickinson College, alleged that the college violated Title IX and breached its contract by failing to respond adequately to her sexual assault claim. McAvoy reported that she was sexually assaulted by a fellow student, TS, in October 2017. She initially did not disclose TS's name but later requested a formal Title IX investigation in December 2017. Dickinson initiated an investigation, issued a no-contact directive, and provided McAvoy with various accommodations and support services.The United States District Court for the Middle District of Pennsylvania granted summary judgment in favor of Dickinson College. The court found that McAvoy failed to produce sufficient evidence that Dickinson acted with deliberate indifference under Title IX and did not show sufficient evidence of breach of contract damages. The court noted that Dickinson's response, including the investigation and accommodations provided, was not clearly unreasonable under the circumstances.The United States Court of Appeals for the Third Circuit reviewed the case and affirmed the District Court's decision. The Third Circuit held that Dickinson's actions, including the thorough investigation and the support provided to McAvoy, did not constitute deliberate indifference. The court emphasized that the investigation's length, while longer than the college's sixty-day objective, was justified by the need for thoroughness and fairness. Additionally, the court found no evidence that the lack of written notice about the investigation's delay caused McAvoy's claimed injuries, such as encountering TS on campus or delaying her graduation.The Third Circuit concluded that Dickinson's response to McAvoy's assault claim was not clearly unreasonable and that McAvoy did not establish a causal connection between the alleged breach of contract and her damages. Therefore, the court affirmed the summary judgment in favor of Dickinson College. View "McAvoy v. Dickinson College" on Justia Law

A motor vehicle manufacturer, General Motors LLC (GM), sought to terminate its franchise agreement with Mall Chevrolet, Inc., a successful car dealership in New Jersey, after discovering that the dealership had submitted false warranty claims for vehicle repairs. GM also intended to recoup the amounts it paid in disputed warranty claims through a chargeback process. In response, Mall Chevrolet sued GM under the New Jersey Franchise Practices Act to prevent the termination of the franchise agreement and the chargebacks. However, the dealership's claims did not survive summary judgment.The District Court found that there was no genuine dispute of material fact – the dealership did submit false claims for warranty repairs – and GM was entitled to judgment as a matter of law on each of the appealed claims. The dealership then appealed the District Court’s summary-judgment rulings.The United States Court of Appeals for the Third Circuit affirmed the judgment of the District Court. The court found that GM had good cause to terminate the franchise agreement because Mall Chevrolet had materially breached the contract by submitting false claims for warranty work. The court also found that the dealership's remaining statutory claims were barred by the defense provided in the New Jersey Franchise Practices Act, which allows a franchisor to avoid liability for any claim under the Act if the franchisee has not substantially complied with the franchise agreement. View "Mall Chevrolet Inc v. General Motors LLC" on Justia Law

The case revolves around a dispute between Sanofi-Aventis U.S. LLC and Mallinckrodt PLC. Sanofi sold its rights in a drug to Mallinckrodt for $100,000 and a perpetual annual royalty. The drug was successful, but Mallinckrodt filed for bankruptcy and sought to convert Sanofi's right to royalties into an unsecured claim. Mallinckrodt aimed to discharge all future royalty payments and continue selling the drug without paying royalties, leaving Sanofi with only an unsecured claim.The bankruptcy court approved Mallinckrodt's discharge, ruling that since Sanofi had fully transferred ownership years ago, the contract was not executory. It also held that Sanofi's remaining contractual right to future royalties was an unsecured, contingent claim, which Mallinckrodt could discharge. The District Court affirmed these rulings.The United States Court of Appeals for the Third Circuit reviewed these rulings de novo. The court held that Sanofi's right to payment arose before Mallinckrodt filed for bankruptcy, making its royalties dischargeable in bankruptcy. The court rejected Sanofi's argument that the future royalties were too indefinite to be a claim, stating that the Bankruptcy Code allows for claims that are both contingent and unliquidated. The court also disagreed with Sanofi's assertion that bankruptcy cannot resolve its royalties claim because it will not exist until Mallinckrodt hits the sales trigger each year. The court ruled that a claim can arise before it is triggered, and most contract claims arise when the parties sign the contract. The court affirmed the lower courts' decisions, ruling that Sanofi's contingent claim arose before Mallinckrodt went bankrupt and is therefore dischargeable in bankruptcy. View "In re Mallinckrodt PLC" on Justia Law

Epsilon, an Ohio corporation with a principal place of business in Texas, entered into Joint Operating Agreements (JOAs) with companies, including Chesapeake, an LLC whose sole member is an Oklahoma citizen, to develop natural gas in Pennsylvania. The JOAs require Chesapeake to “have full control of all operations on the Contract Area.” Chesapeake can be removed as Operator for good cause by a vote of the other JOA parties. The JOAs allow the “Non-Operator parties” to propose new well sites. The others have 30 days to decide whether to participate. The work is then ordinarily performed by Chesapeake. If Chesapeake does not approve the project, the Consenting Parties designate a Consenting Party as Operator. Chesapeake opposed wells proposed by Epsilon, then blocked Epsilon from operating the proposed project unilaterally.Epsilon sought a declaration to drill without Chesapeake’s participation. Chesapeake moved to dismiss the suit for failure to join the other JOA co-signatories. The district court dismissed for failure to state a claim. The Third Circuit remanded. The other contracting parties are required (Fed. R. Civ. P. 19(a)(1)). A declaratory judgment interpreting the JOAs to authorize a single Consenting Party to propose the drilling of a new well would affect all their interests. However, other Absent JOA Parties are citizens of Texas who cannot be feasibly joined without defeating diversity and destroying subject matter jurisdiction. Deciding whether to proceed without them requires findings by the trial judge. View "Epsilon Energy USA Inc. v. Chesapeake Appalachia LLC" on Justia Law

The universities, Pitt and Temple, offer traditional, on-campus educational programs. Temple also offers fully online distance-learning programs, which are separately advertised and priced. Students who enrolled in the Universities’ traditional on-campus programs for the Spring 2020 semester were required to pay tuition and mandatory fees and to sign a Financial Responsibility Agreement (FRA). On March 11, 2020, then-Governor Wolf ordered a temporary closure of all non-life-sustaining businesses, citing the rising number of COVID-19 cases. The Universities closed campus buildings, canceled all on-campus student events, announced that classes would be conducted online for the remainder of the semester, and urged students not to return to campus housing. Neither university offered any reduction in tuition or mandatory fees. Temple issued pro-rata housing and dining refunds. Pitt did so only for students who moved out by April 3, 2020.Students sued for breach of contract, or, alternatively, unjust enrichment, citing the Universities’ “website[s], academic catalogs, student handbooks, marketing materials, and other circulars, bulletins, and publications,” which described the benefits of campus life, and the reduced pricing for online courses.The Third Circuit reversed, in part, the dismissals of both suits. There is no express contract precluding the implied contract or unjust enrichment claims. The FRAs function as promissory notes, not integrated contracts. The students adequately pleaded their implied contract claims as to tuition in exchange for in-person education, Pitt’s mandatory fees, and Temple’s university services fee—but not as to Pitt’s housing and dining fees. The students also adequately pleaded unjust enrichment. View "Hickey v. University of Pittsburgh" on Justia Law

An Asset Purchase Agreement provided that the sellers could receive variable payments (Earn-Out Consideration) if the post-merger company (IAS) achieved specific benchmarks. Section 2.6(c) specifies that IAS had to provide the sellers with the computation for each period, to become final unless they submitted a “notice of disagreement.” Any disagreement would be settled according to Section 2.3(e),” which refers to resolution by an accounting firm. Section 11.17, however, directs the parties generally to use non-binding mediation, followed by litigation if mediation fails.IAS determined that the company did not meet its targets. The sellers claim that IAS intentionally prevented the company from hitting its targets. Negotiations failed. The sellers sued for breach of contract and tortious interference; later, they filed a notice of disagreement and sought a declaration that the lawsuit was outside the scope of sections 2.3(e) and 2.6(d). IAS sought to compel arbitration under 2.3(e). The district court held that the Agreement contained a valid agreement to arbitrate. An accounting firm subsequently determined that the sellers had no right to Earn-Out Consideration. The district court entered judgment for IAS.The Third Circuit vacated. The Purchase Agreement contains an agreement to submit narrow disputes to an accounting firm for expert determination, not arbitration. Although the statement of IAS’s financial benchmarks becomes final after the expert completes its accounting analysis, the authority to resolve legal questions—like whether IAS violated the duty of good faith— remains with the courts. View "Sapp v. Industrial Action Services LLC" on Justia Law

Energy contracted with Superior for hydraulic fracking services to extract natural gas. In 2007, Energy advised Superior that it believed Superior had damaged some wells. Superior notified its insurance provider, American, which agreed to provide Superior with defense counsel, reserving its right to contest coverage. Energy sued Superior in state court. A jury determined that Superior had damaged 53 wells; the verdict form specified that Superior “fail[ed] to perform its contract" with Energy "in a workman-like manner” and that this “failure” was “a substantial factor in causing damage.”Superior’s policy with American provided coverage for “property damage” arising out of an “occurrence,” defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions[,]” but it did not define the term “accident.” Superior also purchased an “underground resources and equipment coverage” (UREC) endorsement for coverage “against risks associated with well-servicing operations[.]”In a federal court declaratory judgment action seeking indemnification, American argued that damage caused by a failure to perform a contract “in a workman-like manner” is not an “occurrence” under the policy and that, even if the policy covered Superior’s claim, it would involve a single “occurrence” under Pennsylvania law and would be subject to a $2 million per-occurrence limit.The district court granted summary judgment for Superior. The Third Circuit reversed. An accident is “unexpected,” which “implies a degree of fortuity that is not present in a claim for faulty workmanship.” The UREC endorsement does not eliminate the policy’s “occurrence” requirement. View "American Home Assurance Co. v. Superior Well Services, Inc." on Justia Law

Current or former Uber drivers from different states agreed to Uber’s “Technology Services Agreement” as a condition of using Uber’s platform. The agreement requires drivers to resolve disputes with Uber on an individual basis through final and binding arbitration. Drivers may opt-out by sending Uber an email or letter. Singh’s class action alleged Uber had violated New Jersey wage and hour laws by misclassifying drivers as independent contractors, failing to pay them the minimum wage, and failing to reimburse them for business expenses. Calabrese’s class action, which was joined to Singh’s, sought to proceed collectively under the Fair Labor Standards Act.The district court ruled in Uber’s favor, compelling arbitration, having defined the relevant class as Uber drivers nationwide. The court found that interstate "rides constitute just 2% of all rides, resemble in character the other 98% of rides, and likely occur due to the happenstance of geography” for purposes of the exception in the Federal Arbitration Act (FAA) for arbitration agreements contained in the “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce,” 9 U.S.C. 1. The Third Circuit affirmed. The drivers' work is centered on local transportation. Most Uber drivers have never made an interstate trip. When Uber drivers do cross state lines, they do so only incidentally. They are not “engaged in foreign or interstate commerce.” View "Singh v. Uber Technologies, Inc" on Justia Law

Plaintiffs, owners of Samsung SmartTVs, filed a putative class action in 2017, alleging that the SmartTVs used automatic tracking software to collect personally identifying information about them, such as the videos or streaming services they watch, and transmit that data to third-parties, who allegedly used the information to display targeted advertisements. When setting up their SmartTVs, plaintiffs had to agree to Terms and Conditions to access the Internet-enabled services. On some SmartTVs, the Terms and Conditions contained an arbitration provision. In 2018, the plaintiffs disclosed the Model Numbers for the named plaintiffs' SmartTVs, which enabled Samsung to determine whether they agreed to Terms containing an arbitration clause.The district court dismissed all except for the Wiretap Act claims. In 2020, Samsung notified the court that it would move to compel individual arbitration, arguing that it did not waive its right to arbitrate because “the prerequisites of waiver— extensive discovery and prejudice—are lacking.” The Third Circuit affirmed the denial of the motion. Samsung waived its right to arbitrate and compelling arbitration would cause the plaintiffs to suffer significant prejudice. Samsung’s actions evinced a preference for litigation over arbitration. Samsung continuously sought and agreed to stays in discovery and pursued successful motions to dismiss on the merits. It assented to all pre-trial orders and participated in numerous court conferences. View "White v. Samsung Electronics America Inc." on Justia Law