Justia Contracts Opinion Summaries

Michael J. Kiely, an Irish resident, and MDMK Ltd., an Irish corporation, filed a lawsuit against HYPH (USA), Inc., HYPH Corporation, XHAIL, Inc., and several individual defendants. The plaintiffs alleged that the defendants conspired to fraudulently induce Kiely to sell shares of a company he founded at a significant discount, subsequently transferring most of those shares to a new company, thereby depriving Kiely of any ownership interest in the new company.The Superior Court of Los Angeles County granted the defendants' motion to stay or dismiss the action, determining that the case should be heard in Sweden based on a mandatory forum selection clause and traditional forum non conveniens grounds. The court found that Sweden was a suitable alternative forum and that both private and public interest factors weighed in favor of Sweden as the forum. The plaintiffs appealed the decision, contesting both grounds of the ruling.The California Court of Appeal, Second Appellate District, reviewed the case and concluded that the trial court did not abuse its discretion in determining that private and public interest factors favored Sweden as the forum. The appellate court held that the trial court properly stayed the action on the alternative independent ground of traditional forum non conveniens. Additionally, the appellate court addressed the impact of the California Supreme Court's decision in EpicentRx, Inc. v. Superior Court on the plaintiffs' claim that the enforcement of the forum selection clause operated as an "implied waiver" of their jury trial right. The appellate court affirmed the trial court's order, finding that the enforcement of the forum selection clause did not violate California public policy regarding the right to a jury trial. View "Kiely v. Hyph (USA), Inc." on Justia Law

In the 1950s, Goodrich Corporation built a vinyl-manufacturing complex in Calvert City, Kentucky, and used unlined ponds for hazardous waste disposal. In 1988, the EPA declared the site a Superfund site. Goodrich sold the complex to Westlake Vinyls, Inc. in the 1990s, agreeing to cover future cleanup costs. In 2000, PolyOne Corporation (now Avient Corporation) assumed Goodrich’s responsibilities. Disputes arose over cleanup costs, leading to a 2007 settlement agreement that included arbitration provisions for future cost allocations.The United States District Court for the Western District of Kentucky previously reviewed the case. Avient had twice sought arbitration under the agreement, first in 2010 and again in 2017. In 2018, Avient challenged the arbitration provisions' validity, but the district court held that Avient had waived this argument by initiating arbitration. The court enforced the arbitration award, and Avient did not challenge this decision. In 2022, Westlake demanded arbitration, and Avient again claimed the arbitration provisions were invalid. The district court granted summary judgment to Westlake, holding that Avient’s challenge was waived and barred by res judicata and judicial estoppel.The United States Court of Appeals for the Sixth Circuit reviewed the case. The court affirmed the district court’s judgment but on different grounds. The court held that the settlement agreement’s provision for de novo judicial review of arbitration awards was invalid under the Federal Arbitration Act, as established in Hall Street Associates, L.L.C. v. Mattel, Inc. However, the court found that this invalid provision could be severed from the agreement without affecting the economic and legal substance of the transactions contemplated by the parties. Therefore, the arbitration provisions remained valid and enforceable. The court affirmed the district court’s judgment. View "Avient Corp. v. Westlake Vinyls, Inc." on Justia Law

The case involves a dispute between John B. Clinton, a former member and manager of CCP Equity Partners, LLC (CCP), and three other members and managers of CCP, Michael E. Aspinwall, Steven F. Piaker, and David W. Young. Clinton alleged that the defendants breached their contractual duties under CCP’s operating agreement by amending the agreement in 2008, removing him as a member in 2013, and maintaining an unnecessary $3 million capital reserve fund.The trial court, after a jury trial, found in favor of Clinton on his breach of contract claim, awarding him damages. The defendants appealed, arguing that the trial court incorrectly interpreted the second sentence of the duty of care provision in the operating agreement as imposing affirmative duties on them and improperly instructed the jury based on that interpretation. They also contended that the trial court abused its discretion by admitting the testimony of Clinton’s expert witness regarding the capital reserve fund.The Connecticut Supreme Court reviewed the case and agreed with the defendants that the trial court misinterpreted the second sentence of the duty of care provision, which is an exculpatory clause under Delaware law that limits liability rather than creating duties. The court found that the trial court’s jury instructions were incorrect and harmful, as they allowed the jury to find the defendants liable for acting in bad faith or with gross negligence or willful misconduct, which are not duties imposed by the agreement. The court also noted that the trial court improperly delegated the task of determining whether the contract provisions were ambiguous to the jury.The Connecticut Supreme Court reversed the trial court’s judgment and remanded the case for a new trial. The court also vacated the trial court’s awards of attorney’s fees, costs, and interest to Clinton. However, the court found no abuse of discretion in the trial court’s admission of the expert witness’s testimony regarding the capital reserve fund. View "Clinton v. Aspinwall" on Justia Law

In 2011, Deutsche Bank filed a breach-of-contract action against Walter M. Potenza and Carmela Natale, alleging default on a promissory note and loan modification agreement. Deutsche Bank obtained a judgment for $1,662,837.12 in 2017. In 2021, the plaintiffs filed an independent action in equity, claiming Deutsche Bank committed fraud on the court by falsely asserting it was the holder of the note, despite knowing the note had not been properly endorsed.The Superior Court granted Deutsche Bank's motion for judgment on the pleadings, finding no credible evidence of fraud and determining that the plaintiffs' failure to obtain the deposition earlier was due to their attorneys' negligence. The plaintiffs appealed this decision.The Rhode Island Supreme Court reviewed the case and affirmed the Superior Court's decision. The Court held that the plaintiffs could not establish all the elements required for relief under Rule 60(b). Specifically, the plaintiffs admitted Deutsche Bank was the holder of the note in their 2011 answer and did not present evidence or seek a continuance during the 2017 summary judgment hearing. The Court concluded that the plaintiffs' failure to challenge the validity of the note or the knowledge of Deutsche Bank's affiant precluded them from obtaining relief. The judgment in favor of Deutsche Bank was affirmed, and the case was remanded to the Superior Court. View "Potenza v. Deutsche Bank National Trust Company" on Justia Law

The plaintiff, Colleen Ryan, was injured in a parking lot owned by Sea Colony Recreational Association, Inc. while attending an event organized by Operation SEAs the Day, Inc. Before the event, Ryan signed a liability waiver that covered the event organizer and its agents. Upon arrival, she was directed to park in Sea Colony's lot, where she tripped in a hole and injured her ankle. The relationship between the event organizer and the parking lot owner was not clear from the pleadings.The Superior Court of Delaware granted judgment on the pleadings in favor of Sea Colony, concluding that Sea Colony was an agent of the event organizer based on the fact that the parking lot was used for the event. The court found the waiver unambiguous and applicable to Sea Colony, and that Ryan's injuries fell within its scope. Ryan's motion for reargument, which included new information that she was a registered guest at Sea Colony, was denied.The Supreme Court of Delaware reviewed the case and reversed the Superior Court's decision. The Supreme Court held that the Superior Court erred in finding an agency relationship between Sea Colony and the event organizer based solely on the use of the parking lot. The Supreme Court noted that the pleadings did not contain sufficient facts to establish an agency relationship and that other reasonable inferences could be drawn, such as a license agreement or public use of the lot. The case was remanded for further proceedings to determine whether the waiver covered Sea Colony and whether Ryan's injuries fell within its scope. View "Ryan v. Sea Colony Recreational Association, Inc." on Justia Law

A qui tam relator, Sedona Partners LLC, alleged that several transportation service providers (TSPs) engaged in a fraudulent scheme to defraud a U.S. government shipping program. The TSPs were accused of submitting low-ball bids to win contracts and then falsely certifying the need for foreign flag vessel waivers, despite knowing that U.S. flag vessels were available. This allowed them to use cheaper foreign vessels, thereby increasing their profits while undercutting competitors who submitted legitimate bids.The United States District Court for the Southern District of Florida initially dismissed Sedona's first amended complaint without prejudice, citing a lack of specificity in the allegations. Sedona then filed a second amended complaint, which included new allegations based on information obtained during discovery. The defendants moved to dismiss this complaint and to strike the new allegations, arguing that they were derived from discovery and thus circumvented the heightened pleading requirements of Federal Rule of Civil Procedure 9(b). The district court agreed, struck the discovery-based allegations, and dismissed the second amended complaint with prejudice, concluding that without these allegations, Sedona failed to meet Rule 9(b)'s particularity requirement.The United States Court of Appeals for the Eleventh Circuit reviewed the case and reversed the district court's decision. The appellate court held that Rule 9(b) does not prohibit courts from considering allegations based on information obtained in discovery when deciding a motion to dismiss. The court emphasized that Rule 9(b)'s text does not restrict the source of information used to satisfy its requirements and that supplementing the rule with such a restriction would contravene the Supreme Court's guidance against adding pleading requirements on a case-by-case basis. The appellate court vacated the district court's order dismissing the complaint and remanded the case for further proceedings. View "Sedona Partners LLC v. Able Moving & Storage Inc." on Justia Law

Cory Fitzgerald Sanders, through his company SandTech, LLC, contracted with the federal government to supply teleconference equipment and support services. Sanders won contracts by bidding on the online platform "FedBid" and affirming that he would supply the requested equipment or services according to the contract terms. However, Sanders failed to fulfill these obligations, providing used equipment instead of new, misrepresenting his company's certifications, and using falsified documents to claim higher certification levels. After several contracts were terminated, Sanders formed a new company, CyCorp Technologies, LLC, to continue bidding on federal contracts, again using fraudulent means to secure contracts and conceal the true nature of the equipment provided.The United States District Court for the District of Maryland convicted Sanders of wire fraud, submitting false claims, and submitting a false document. Sanders was sentenced to 45 months in prison. He appealed, arguing that a jury instruction misstated the law and that the district court erred in applying a sentencing enhancement for using "sophisticated means" to carry out his fraud.The United States Court of Appeals for the Fourth Circuit reviewed the case. The court found no error in the jury instructions when considered as a whole, determining that they adequately informed the jury of the required intent and did not mislead or confuse them. The court also upheld the district court's application of the sophisticated means enhancement, noting that Sanders' conduct involved especially complex or intricate offense conduct, including the use of multiple business names, falsified certifications, and blind-shipping to conceal the source of equipment. The Fourth Circuit affirmed both Sanders' convictions and his sentence. View "United States v. Sanders" on Justia Law

Barbie Jean Schwinn and Deborah Schwinn Bailey filed a lawsuit against Robert Schwinn, TJ Schwinn, and Terry Ann Palazzo to wind up and terminate the Ignaz Schwinn Family Partnership Co. The district court found that the appellants wrongfully dissociated from the partnership, there were no grounds to terminate or wind up the partnership, and the appellants could no longer participate in the management of the partnership. The court granted the appellants a lien against the partnership’s assets for their interests, to be satisfied when the partnership eventually wound up.The district court held a bench trial and dismissed the appellants' claims for breach of contract, breach of fiduciary duty, and breach of the duty of good faith and fair dealing. The court also dismissed the appellants' claims to dissolve and wind up the partnership, finding it was a partnership for a definite term or particular undertaking under Illinois law. The court determined the appellants' dissociation was wrongful and that they were not entitled to payment for their interests until the completion of the undertaking. The court denied the appellees' other counterclaims.The Wyoming Supreme Court reviewed the case and found that the partnership was an at-will partnership, not one for a particular undertaking. The court held that the appellants' dissociation was not wrongful and that their withdrawal triggered the dissolution and winding up of the partnership under Section 801(1) of the Revised Uniform Partnership Act (RUPA). The court reversed the district court's decision and remanded the case for further proceedings to determine if the partnership agreement varied the RUPA's default rules and whether winding up was required under Section 801(5)(iii) due to a deadlock in management. The court also instructed the district court to determine if judicial supervision of the winding up was warranted. View "Schwinn v. Schwinn" on Justia Law

Rodney Alexander and Steve Hobart entered into an agreement granting Alexander a right of first refusal to purchase Steve’s cattle and to have Steve’s national forest livestock grazing permit transferred to him. An addendum later clarified that the agreement extended to Steve’s son, Nick. Years later, Nick sold the cattle and transferred the permit to a third party without notifying Alexander, who then sued for breach of contract and fraud. The defendants moved for judgment on the pleadings, arguing the contract was void due to impossibility of performance or because it was for an unlawful object, and that the right of first refusal was an unreasonable restraint on property alienation.The Circuit Court of the Seventh Judicial Circuit, Pennington County, South Dakota, granted the motion, ruling the contract void for impossibility of performance. Alexander appealed, asserting the court erred in its conclusion. Nick, through notice of review, sought to challenge the court’s ruling that the right of first refusal was not an unreasonable restraint on alienation.The Supreme Court of the State of South Dakota reviewed the case de novo. It found that the contract did not require the Hobarts to transfer the permit directly, but rather that the purchase was contingent on the USFS transferring the permit to Alexander. The court concluded that the contract was not void for impossibility of performance. Additionally, the court affirmed the lower court’s ruling that the right of first refusal was not an unreasonable restraint on alienation, considering the purpose, price, and duration of the agreement, and the mutual consent of the parties.The Supreme Court reversed the circuit court’s order and judgment, remanding the case for further proceedings. View "Alexander v. Estate Of Hobart" on Justia Law

The Nelson Estate claimed an interest in a coin shop and alleged conversion of its property. Dr. Earl Nelson had provided funds for the business, resulting in a 50% ownership interest, which was confirmed by William Tinkcom. After Dr. Nelson's death in 2013, Tinkcom continued to operate the business and assured Nelson's heirs of their 50% interest. Tinkcom died in 2022, and the business was sold to Eddie Welch without including the Nelson Estate in the final agreement. The Nelson Estate sued the Tinkcom Estate, Welch, and Mere Coin Company, LLC, for breach of contract, unjust enrichment, and other claims, including conversion of valuable coins and collectibles.The Circuit Court of the Second Judicial Circuit in Minnehaha County, South Dakota, granted the defendants' motion for judgment on the pleadings, concluding that the statute of limitations barred all claims. The Nelson Estate argued that the statute of limitations had not expired and that equitable estoppel or fraudulent concealment should prevent the statute of limitations defense.The Supreme Court of South Dakota reviewed the case and affirmed the circuit court's determination that the first six business interest claims accrued upon Dr. Nelson's death in 2013. However, the court reversed the dismissal of these claims because the circuit court did not address the Nelson Estate's defenses of equitable estoppel and fraudulent concealment. The court also reversed the dismissal of the tortious interference and civil conspiracy claims, as these claims arose from the 2022 sale of the business. Lastly, the court reversed the dismissal of the conversion claim, noting that the record did not establish when the conversion occurred or when the Nelson Estate became aware of it. The case was remanded for further proceedings. View "Nelson v. Tinkcom" on Justia Law