Justia Contracts Opinion Summaries

The Reefer arrived at the Port of Wilmington, Delaware for what its owner, Nederland, expected to be a short stay. Upon inspection, the Coast Guard suspected that the vessel had discharged dirty bilge water directly overboard and misrepresented in its record book that the ship’s oil water separator had been used to clean the bilge water prior to discharge. Nederland, wanting to get the ship back to sea as rapidly as possible, entered into an agreement with the government for the release of the Reefer in exchange for a surety bond to cover potential fines. Although Nederland delivered the bond and met other requirements, the vessel was detained in Wilmington for at least two additional weeks.Nederland sued. The Delaware district court dismissed the complaint, holding that Nederland’s claims had to be brought in the U.S. Court of Federal Claims because the breach of contract claim did not invoke admiralty jurisdiction a claim under the Act to Prevent Pollution from Ships (APPS) failed because of sovereign immunity. The Third Circuit reversed. The agreement is maritime in nature and invokes the district court’s admiralty jurisdiction. The primary objective of the agreement was to secure the vessel's departure clearance so that it could continue its maritime trade. APPS explicitly waives the government’s sovereign immunity. View "Nederland Shipping Corp. v. United States" on Justia Law

In March 2018, following sexual misconduct allegations against TWC’s co-founder Harvey Weinstein, TWC sought bankruptcy protection. TWC and Spyglass signed the Asset Purchase Agreement (APA). The sale closed in July 2018. Spyglass paid $287 million. Spyglass agreed to assume all liabilities associated with the Purchased Assets, including some “Contracts.” The APA identifies “Assumed Contracts,” as those Contracts that Spyglass would designate in writing, by November 2018.In May 2018, TWC filed an Assumed Contracts Schedule, with a disclaimer that the inclusion of a contract did not constitute an admission that such contract is executory or unexpired. A June 2018 Contract Notice, listed eight Investment Agreements as “non-executory contracts that are being removed from the Assumed Contracts Schedule.” The Investment Agreements, between TWC and Investors, had provided funding for TWC films in exchange for shares of future profits. Spyglass’s November 2018 Contract Notice listed nine Investment Agreements as “Excluded Contracts,”In January 2019, the Investors requested payments from Spyglass--their asserted share of a film’s profits. The Bankruptcy Court rejected the Investors’ claim that Spyglass bought all the Investment Agreements under the APA. The district court and Third Circuit affirmed. The Investment Agreements are not “Purchased Assets” and the associated obligations are not “Assumed Liabilities.” The Investment Agreements are not executory contracts under the Bankruptcy Code. View "The Weinstein Co. Holdings, LLC v. Y Movie, LLC" on Justia Law

Dansko conducted due diligence to replace the trustee for its employee stock ownership plan. Benefit falsely denied having been recently been investigated by the Department of Labor. Dansko’s board passed a resolution appointing Benefit as the new trustee under the Trust Agreement. Around that time, Dansko decided to refinance its debt. Benefit never agreed in writing to help with the refinance but allegedly said it would “be able to do the [deal]” and estimated that it would need a month or more to do due diligence for the trust. Dansko thought Benefit would be the trustee for the deal. In December 2014, Benefit told Dansko that it would not serve as trustee for the debt deal, which delayed the deal and allegedly cost Dansko more than $2 million in extra interest.Dansko sued Benefit, alleging breach of the trust agreement, breach of an implied promise (promissory estoppel), and that Benefit fraudulently induced Dansko to hire it by falsely denying the DOL investigation. Benefit counterclaimed for its defense costs under an indemnification clause in the trust agreement. The district court rejected Dansko’s claims but held that Dansko did not have to indemnify Benefit for its defense costs. Applying Pennsylvania law, the Third Circuit vacated. The court erred in rejecting Dansko’s contract, estoppel, and fraud claims but under the trust agreement, Dansko must advance the trustee’s reasonable litigation expenses. View "Dansko Holdings Inc. v. Benefit Trust Co." on Justia Law

In 2012, Earl contracted for the purchase of a house in Allegheny County from NVR, the seller and builder of the house. NVR's agents made representations about the house’s construction, condition, and amenities, including that the house would be constructed in a good and workmanlike manner; that NVR would remedy any deficiencies; and that the house would be constructed in accordance with relevant building codes and standards. Construction was completed around March 2013. Upon moving in, Earl encountered several material defects. NVR’s attempts to repair the defects were inadequate and exacerbated some of the issues, despite NVR’s assurances that the problems were remedied. Several promised conditions and amenities that Earl had relied upon had not been provided.Earl, claiming that NVR’s failure to provide the promised conditions and amenities of the agreement were knowing and willful, sued for violation of the Unfair Trade Practices and Consumer Protection Law (UTPCPL) and breach of implied warranty of habitability. The Third Circuit reversed the dismissal of her UTPCPL claim. Rulings by Pennsylvania appellate courts subsequent to an earlier Third Circuit holding have cast substantial doubt upon the continuing validity of prior interpretations of the UTPCPL. The economic loss and “gist of the action” doctrines no longer bar UTPCPL claims. View "Earl v. NVR Inc" on Justia Law

In a dispute concerning a construction company’s liability for contributions to the Benefits Fund, the Fund unilaterally scheduled arbitration. The company sought to enjoin arbitration, alleging fraud in the execution of the agreement it signed. The district court concluded that the court had the primary power to decide whether fraud in the execution vitiated the formation or existence of the contract containing the arbitration provision. The court enjoined arbitration pending resolution of factual issues that bear upon that claim.The Third Circuit affirmed. Under the Federal Arbitration Act (FAA), 9 U.S.C. 4, questions about the “making of the agreement to arbitrate” are for the courts to decide unless the parties have clearly and unmistakably referred those issues to arbitration in a written contract whose formation is not in issue. Here, the formation of the contract containing the relevant arbitration provision is at issue. View "MZM Construction Co. Inc. v. NJ Building Laborers Statewide BenefitsFunds" on Justia Law

The plaintiffs obtained payday loans from AWL, an online entity owned by the Otoe-Missouria Tribe of Indians. The loan agreement stated that the loan was governed by tribal law and that the borrowers consented to the application of tribal law. The plaintiffs filed a purported class action, asserting that AWL charged unlawfully high interest rates, in violation of federal and Pennsylvania law, including the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1961-1968. The defendants moved to compel arbitration. The district court denied their motion, holding that the loan agreements, which provided that only tribal law would apply in arbitration, stripped the plaintiffs of their right to assert statutory claims and were therefore unenforceable. The Third Circuit affirmed. Because AWL permits borrowers to raise disputes in arbitration only under tribal law, and such a limitation constitutes a prospective waiver of statutory rights, its arbitration agreement violates public policy and is therefore unenforceable. View "Williams v. Medley Opportunity Fund II, LP" on Justia Law

The Council handles contracts for over 200 New Jersey municipalities, police departments, and school districts. Mid-American sells bulk road salt. The Council's members estimated their salt needs for the 2016-17 winter. The Council issued a comprehensive bid package, anticipating the need for 115,000 tons of rock salt. MidAmerican won the contract, which stated: There is no obligation to purchase [the estimated] quantity. As required by the contract, Mid-American obtained a performance bond costing $93,016; imported $4,800,000 worth of salt from Morocco; and paid $31,250 per month to store the salt and another $58,962.26 to cover it. Mid-American incurred at least another $220,000 in finance costs and additional transportation costs. Council members purchased less than five percent of the estimated tonnage. Mid-American claims “several” Council members purchased salt from MidAmerican’s competitors, who lowered their prices after MidAmerican won the contract.Mid-American sued the Council and 49 of its members, alleging breach of contract, breach of the covenant of good faith and fair dealing, and bad faith under UCC Article 2. The Third Circuit affirmed the denial of relief. No valid requirements contract existed here because the contract was illusory. These sophisticated parties were capable of entering into precisely the contract they desired. Neither the Council nor its members ever promised to purchase from Mid-American all the salt they required View "Mid-American Salt LLC v. Morris County Cooperative Pricing Council" on Justia Law

Founding USM to acquire FCC licenses, Elkin contributed $750,000 and Norman $250,000. Norman acquired the licenses; his day-to-day involvement ended. In 1998, the FCC announced another auction. USM won several licenses, which Elkin transferred to TEG, another company that he owned; purportedly USM did not have sufficient funds. Elkin did not respond to Norman's inquiries. Some FCC notices listed USM as the winning bidder; others referred to TEG as the licenses' owner. Before 2002, without notifying Norman, Elkin caused USM to enter into a Shareholder Loan Agreement (SLA) to treat any amount Elkin contributed above his capital requirement as a loan. Elkin lent USM more than $600,000. In 2000-2001, USM sold licenses. Norman received federal income tax forms that declared USM had realized a capital gain. In 2000-2002, USM paid Elkin $615,026 from the sales proceeds. Norman received nothing. In 2002. Elkin admitted that licenses had been sold and that he had taken a distribution. Norman's 2004 Delaware "books and records" action was resolved in his favor in 2005. Norman sued, raising various tort and contract claims After two trials and a remand, the district court concluded that the limitations period for each of Norman’s claims was tolled during the Delaware Action and that Norman’s claim based on 2002 distributions was timely. Oer Third Circuit mandate, the court ruled in Normans' favor with respect to the execution of the SLA. For Norman’s other claims, including those based on 2001 distributions, the court held that Norman had at least inquiry notice beyond the limitations period. Elkin then argued that Norman was not entitled to tolling relating to the Delaware Action because he brought that suit in bad faith. The district court refused to consider new evidence. The Third Circuit affirmed, except with respect to Norman’s claim based on 2001 events. View "Norman v. Elkin" on Justia Law

Walgreen sells Remicade, a drug used to treat autoimmune diseases that is marketed and manufactured by Janssen. Walgreen procures Remicade from the Wholesaler, which acquires Remicade pursuant to a Distribution Agreement with JOM, a Janssen affiliate. Only Wholesaler and JOM are identified as parties to the Distribution Agreement. New Jersey law governs the Distribution Agreement, which contains an Anti-Assignment Provision, stating that “neither party may assign, directly or indirectly, this agreement or any of its rights or obligations under this agreement … without the prior written consent of the other party.” In 2018, Wholesaler assigned to Walgreen “all of its rights, title and interest in and to” its claims against Janssen “under the antitrust laws of the United States or of any State arising out of or relating to [Wholesaler]’s purchase of Remicade[.]” Walgreen filed suit against Janssen, asserting various federal antitrust claims relating to Remicade, citing exclusive contracts and anticompetitive bundling agreements with health insurers that suppressed generic competition to Remicade, which allowed Janssen to sell Remicade at supra-competitive prices. If the Anti-Assignment Provision prevented the assignment, then, under Supreme Court precedent, Walgreen, an “indirect” Remicade purchaser, would lack antitrust standing to assert claims against Janssen. The district court granted Janssen summary judgment. The Third Circuit reversed. The antitrust claims are a product of federal statute and thus are extrinsic to, and not rights “under,” a commercial agreement. View "Walgreen Co. v. Johnson & Johnson" on Justia Law

National, hoping to contract with the federal government to provide student loan collection services, reached an Agreement with Net Gain, which procured networking relationships for its clients. In return for introductions, National agreed to pay a finder’s fee for any related contract that National “consummated” during the Agreement’s term. A few years later, Net Gain assigned the Agreement to Fed Cetera. During the effective period of the Agreement, National signed a contract with the government. It did not begin performance on that contract until after the Agreement’s applicable period ended. National refused to pay the finder’s fee, arguing that it had not “consummated” the federal contract. The district court ruled in favor of National. The Third Circuit reversed. The Agreement did not require some degree of performance while the Agreement was in force in order for a contract to be “consummated.” A Fee Transaction is consummated when it is formed, not when performance has begun. The economics of the contract are plausible only if Fed Cetera’s compensation turns on the satisfactory completion of its function—not events, like performance by National, that post-date the only service Fed Cetera performs and are outside of its control. View "Fed Cetera LLC v. National Credit Services Inc" on Justia Law