Justia Contracts Opinion Summaries

Serta Simmons Bedding, LLC, an American mattress manufacturer, executed financing deals in 2016 and 2020 with various lenders. Following financial struggles exacerbated by the COVID-19 pandemic, Serta filed for bankruptcy. The 2020 financing deal, known as the "uptier" transaction, involved Serta and some lenders (Prevailing Lenders) exchanging existing debt for new super-priority debt, which was controversial and led to multiple legal disputes.The bankruptcy court in the Southern District of Texas reviewed the case. Serta and the Prevailing Lenders sought a declaratory judgment that the 2020 uptier transaction was valid under the 2016 agreement's "open market purchase" exception. The bankruptcy court granted partial summary judgment in their favor, ruling that the term "open market purchase" was unambiguous and that the 2020 uptier was valid under this exception. The Excluded Lenders and LCM Lenders, who did not participate in the uptier, appealed this decision.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court held that the 2020 uptier transaction was not a permissible "open market purchase" under the 2016 agreement. The court found that an "open market purchase" refers to transactions on a specific market generally open to various buyers and sellers, such as the secondary market for syndicated loans. The 2020 uptier, conducted privately with individual lenders, did not meet this definition. The court reversed the bankruptcy court's ruling on this issue.Additionally, the court addressed the inclusion of an indemnity provision in Serta's bankruptcy reorganization plan, which aimed to protect the Prevailing Lenders from losses related to the 2020 uptier. The court found that this indemnity was an impermissible end-run around the Bankruptcy Code's disallowance of contingent claims for reimbursement and violated the Code's requirement of equal treatment for creditors. The court reversed the bankruptcy court's confirmation of the plan insofar as it included this indemnity. View "Excluded Lenders v. Serta" on Justia Law

Campbell and Jennie Clegg purchased first-class round-trip tickets from American Airlines for themselves and three family members for travel between Albany, New York, and San Francisco, California, in May 2022. They agreed to American’s Conditions of Carriage, which required check-in at least 45 minutes before departure. The night before their flight, the Cleggs were unable to check in online and were instructed to check in at the airport. They arrived at the airport at 4:47 a.m. for their 6:04 a.m. flight but were unable to check in due to a computer system issue. Consequently, they missed their flight and later found that their return flight was canceled. They did not receive a refund for either flight.The Cleggs filed a complaint in the Cumberland County Superior Court, alleging breach of contract, fraud, and breach of the Maine Unfair Trade Practices Act. The court granted American Airlines' motion for summary judgment, ruling that the Cleggs’ claims were preempted by the Airline Deregulation Act. The Cleggs appealed the decision.The Maine Supreme Judicial Court reviewed the case and vacated the Superior Court's judgment in part. The court held that while the Airline Deregulation Act preempts state law claims related to airline services, the Cleggs could pursue a breach of contract claim based on the Conditions of Carriage. The court determined that the Cleggs might be entitled to a refund for their tickets and any extras, as specified in the Conditions of Carriage. However, the court affirmed that the Cleggs could not recover consequential or punitive damages, attorney fees, or costs, as these were preempted by the Airline Deregulation Act. The case was remanded for further proceedings consistent with this opinion. View "Clegg v. American Airlines, Inc." on Justia Law

This case involves a dispute over an unrecorded parking agreement related to an office building, hotel, and parking garage in downtown San Antonio. The agreement, executed in 2005, reserved parking spaces in the garage for the office building's occupants and was intended to run with the land. However, it was not recorded in the county's real property records. In 2006, HEI San Antonio Hotel, LP purchased the garage and hotel, financing the purchase through a loan from Merrill Lynch, which was aware of the parking agreement. In 2008, Cypress Real Estate Advisors, through its entity CRVI Crowne Plaza, purchased a note from Merrill Lynch but did not inquire about the parking agreement despite having access to relevant documents.The trial court ruled that the parking agreement was an enforceable easement and rejected the lender's and its affiliate's bona fide purchaser defenses. The Court of Appeals for the Fourth District of Texas agreed that the agreement was an easement but concluded that the lender took the loan without notice of the easement, thus sheltering its affiliate from enforcement.The Supreme Court of Texas reviewed the case and agreed with both lower courts that the parking agreement is an easement. However, it disagreed with the Court of Appeals regarding the notice issue. The Supreme Court concluded that both the lender and its affiliated owner had sufficient notice to remove any bona fide purchaser protection. Therefore, the easement was enforceable against the affiliated owner.The Supreme Court of Texas reversed the judgment of the Court of Appeals and remanded the case to the trial court for further proceedings consistent with its opinion. View "425 SOLEDAD, LTD. v. CRVI RIVERWALK HOSPITALITY, LLC" on Justia Law

Employees of Mercedes-Benz Research and Development North America, Inc. accidentally set fire to a property leased from Airport Boulevard Associates, LLC (ABA) while transferring gasoline between vehicles. ABA's insurer, Pioneer State Mutual Insurance Company, paid ABA for the damages and sought reimbursement from Mercedes and its insurer, Allianz Global Risks US Insurance Company. Unable to resolve the matter, Pioneer filed a lawsuit in federal court.The United States District Court for the Eastern District of Michigan denied Pioneer's motion for summary judgment and granted summary judgment to Mercedes and Allianz. Pioneer appealed the decision.The United States Court of Appeals for the Sixth Circuit reviewed the case. The court affirmed the district court's decision regarding Allianz, holding that the No-Fault Act did not apply because the vehicle was exempt from registration and the Allianz policy did not provide property protection insurance. The court also rejected Pioneer's argument for apportionment of recovery between the insurers, as the policies insured different parties and risks.However, the court reversed the district court's decision regarding Mercedes. The court found that Mercedes potentially breached the lease by handling hazardous materials, specifically gasoline, on the property. This breach could allow Pioneer to recover damages despite the lease's waiver-of-subrogation clause. The case was remanded for further proceedings on the claims against Mercedes. View "Pioneer State Mut. Ins. v. HDI Global" on Justia Law

Plaintiff leased a new 2021 Volkswagen Atlas from Galpin Volkswagen, LLC, and experienced several issues with the vehicle, including problems with the check engine and airbag lights, ignition, and door locks. After multiple repair attempts and delays due to a backordered part, the plaintiff requested Volkswagen Group of America, Inc. (VWGA) to repurchase the vehicle. VWGA offered to repurchase the vehicle, including reimbursement for payments made and additional attorney fees, but included a financial confidentiality provision in the offer. Plaintiff did not accept the offer and continued to use the vehicle.The Superior Court of Los Angeles County granted summary judgment in favor of the defendants, VWGA and Galpin, on the plaintiff’s breach of warranty claims. The court found that VWGA’s offer to repurchase the vehicle was prompt and compliant with the Song-Beverly Act, including the calculation of the mileage offset and the inclusion of a financial confidentiality provision. The court concluded that the plaintiff could not prove damages for the breach of the implied warranty of merchantability, as VWGA’s offer exceeded the restitution amount required by the Act.The Court of Appeal of the State of California, Second Appellate District, Division Three, affirmed the lower court’s judgment. The appellate court held that VWGA’s offer was prompt and compliant with the Act, including the use of the vehicle’s agreed value for the mileage offset calculation. The court also determined that the financial confidentiality provision was permissible under the Act. As a result, the plaintiff could not prove the necessary elements for breach of express or implied warranty claims, and the summary judgment in favor of the defendants was affirmed. View "Carver v. Volkswagen Group of America, Inc." on Justia Law

CKY, Inc. entered into a fixed-price construction contract with the United States Army Corps of Engineers (Corps) in October 2012. CKY encountered unexpected conditions, including heavy rainfall and undisclosed culverts, which led to additional expenses. CKY sought compensation for these expenses, but the Corps denied the requests. CKY then filed a claim under the Contract Disputes Act, seeking $1,146,226 for the additional costs incurred. The Armed Services Board of Contract Appeals (Board) ruled in favor of CKY regarding the undisclosed culverts but denied compensation for other claims.The Board awarded CKY $185,000 plus interest for the expenses related to the undisclosed culverts. CKY then applied for attorney’s fees and expenses under the Equal Access to Justice Act (EAJA). The Board granted the application, concluding that the government’s position regarding the undisclosed culverts was not substantially justified. The Board limited its substantial-justification inquiry to the government’s litigation position on the specific claim where CKY prevailed.The United States Court of Appeals for the Federal Circuit reviewed the case. The court held that the Board erred by categorically narrowing its substantial-justification inquiry to the government’s litigation position and to the specific claim on which CKY prevailed. The court emphasized that the substantial-justification inquiry should consider both the agency’s pre-litigation conduct and its litigation position, and should treat the case as an inclusive whole rather than focusing on individual claims. The court vacated the Board’s decision and remanded the case for reconsideration without the categorical limitations previously applied. View "In Re SECRETARY OF THE ARMY " on Justia Law

The plaintiff, a roofing business owner, sought a judgment declaring that the defendant, a workers' compensation insurance carrier, was obligated to defend and indemnify him in connection with a claim filed by his employee. The trial court granted the plaintiff's motion for summary judgment, determining that the defendant did not effectively cancel the workers' compensation insurance policy. The court found that the conflicting notices provided by the defendant, including a noncooperation notice and a cancellation notice, did not constitute an unambiguous and unequivocal notice of cancellation.The Appellate Court reversed the trial court's judgment, concluding that the defendant effectively canceled the policy before the employee's injury by complying with the statutory requirements of § 31-348, which governs the reporting and cancellation of workers' compensation insurance policies. The plaintiff argued that the Appellate Court incorrectly concluded that the cancellation notice effectively canceled the policy.The Supreme Court of Connecticut reviewed the case and concluded that insurers must strictly comply with § 31-348 when canceling a workers' compensation insurance policy. However, compliance with the statute does not supplant an insurer's obligations under contract law, which requires that a notice of cancellation must be definite, certain, and unambiguous. The court held that the Appellate Court incorrectly limited its analysis to the statutory compliance and failed to consider all relevant communications between the parties.The Supreme Court found that the defendant's notice of cancellation was not objectively definite and certain due to the conflicting noncooperation and cancellation notices, which provided indefinite and ambiguous information about the status of the plaintiff's insurance coverage. Consequently, the Supreme Court reversed the judgment of the Appellate Court and remanded the case with direction to affirm the trial court's judgment in favor of the plaintiff. View "Napolitano v. Ace American Ins. Co." on Justia Law

Steven Andrew Clem, the former owner of a defunct homebuilding company, appealed a judgment regarding the nondischargeability of a debt incurred from a failed home construction project. An arbitration panel had found Clem personally liable to LaDainian and LaTorsha Tomlinson for breach of contract and violations of the Texas Deceptive Trade Practices Act (DTPA). Clem subsequently filed for Chapter 7 bankruptcy, and the Tomlinsons initiated an adversary proceeding. The bankruptcy court determined that Clem had obtained over $660,000 from the Tomlinsons through false representation or false pretenses, making the debt nondischargeable under 11 U.S.C. § 523(a)(2)(A).The bankruptcy court's decision was based on findings that Clem had committed fraud by nondisclosure during the performance of the contract, including failing to inform the Tomlinsons about the switch from concrete piers to helical steel piers, failing to disclose the puncturing of a water line, and misrepresenting the purchase of a Builder’s Risk insurance policy. The court also found that Clem failed to provide proper accounting for the Tomlinsons' funds. The district court affirmed the bankruptcy court's decision.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court concluded that the bankruptcy court erred in not applying collateral estoppel to the arbitration findings, which had already determined that Clem's actions did not constitute knowing violations of the DTPA or fraud. The appellate court found that the issues of fraudulent misrepresentation and nondisclosure had been fully litigated in the arbitration, and the arbitration panel had explicitly found no fraud or knowing DTPA violations.The Fifth Circuit reversed the bankruptcy court's judgment and rendered judgment in favor of Clem, holding that the Tomlinsons were collaterally estopped from relitigating the fraud claims and that Clem's conduct did not meet the criteria for nondischargeability under Section 523(a)(2)(A). View "Clem v. Tomlinson" on Justia Law

Plaintiff, Shareholder Representative Services LLC, acting as the Equityholder Representative, filed a breach of contract action against Defendant, Renesas Electronics Corporation. The dispute arises from a 2021 Merger Agreement under which Renesas acquired Celeno Communications Incorporated. Plaintiff alleges that Renesas failed to pay two Earn-Out Milestone payments related to the development of a semiconductor chip, the [REDACTED] Product, as stipulated in the Merger Agreement. Plaintiff seeks damages and specific performance of certain contractual provisions.The Court of Chancery assigned the action to the current court on November 6, 2023. Plaintiff filed its Verified Complaint on October 31, 2023, and Renesas moved to partially dismiss the complaint. Plaintiff then filed a Verified Amended Complaint on February 28, 2024, asserting four breach of contract claims. Renesas sought dismissal of Counts One, Two, and Four. Plaintiff opposed the motion, and Renesas replied. A hearing was held on September 5, 2024, after which the court took the motion under advisement.The Court of Chancery of the State of Delaware reviewed the case. The court granted in part and denied in part Renesas's partial motion to dismiss. The court denied the motion regarding Counts One and Two, finding that Plaintiff had sufficiently alleged that the Tape-Out Milestone and Mass Production Milestone were met, despite Renesas's arguments to the contrary. However, the court granted the motion regarding Count Four, determining that specific performance of the meeting requirement was not warranted, as monetary damages would provide an adequate remedy. The court found that the contractual provision establishing irreparable harm was sufficient but noted that the ultimate relief sought was payment of the Earn-Out Amounts, not a meeting. View "Shareholder Representative Service LLC v. Renesas Electronics Corp." on Justia Law

Pharma Conference Education, Inc. entered into an agreement with the University of Tennessee Health Science Center to produce pharmaceutical continuing education programs "as is feasible." The Health Science Center terminated the agreement before any programs were held. Pharma sued to enforce the agreement, but the State argued that the agreement lacked consideration and was not a valid contract. The key issue was whether the promise to produce programs "as is feasible" constituted consideration or was an illusory promise.The Tennessee Claims Commission granted summary judgment in favor of the State, concluding that the agreement lacked consideration because Pharma's promise was illusory. The Court of Appeals affirmed, agreeing that Pharma's promise gave it complete discretion and was therefore illusory. Both courts relied on the deposition testimony of Pharma's president, John W. Smith, to support their conclusions.The Supreme Court of Tennessee reviewed the case and held that Pharma's promise to produce as many programs "as is feasible" constitutes adequate consideration. The Court explained that the term "feasible" has an objective meaning and does not give Pharma unfettered discretion. The Court also noted that the statutory presumption of consideration under Tennessee Code Annotated section 47-50-103 applies, and the State failed to rebut this presumption. The Court reversed the Court of Appeals' decision and remanded the case to the Claims Commission for further proceedings, including consideration of the State's argument regarding mutual assent. View "Pharma Conference Education, Inc. v. State" on Justia Law