Justia Contracts Opinion Summaries

Pro-Mark Services, Inc., a general contracting construction company, obtained payment and performance bonds from Hartford Accident and Indemnity Company as required by the Miller Act. To facilitate this, Pro-Mark and other indemnitors entered into a General Indemnity Agreement (GIA) with Hartford, assigning certain rights related to bonded contracts. Later, Pro-Mark entered into two substantial business loan agreements with Capital Credit Union (CCU), secured by most of Pro-Mark’s assets, including deposit accounts. Recognizing potential conflicts over asset priorities, Hartford and CCU executed an Intercreditor Collateral Agreement (ICA) to define their respective rights and priorities in Pro-Mark’s assets, distinguishing between “Bank Priority Collateral” and “Surety Priority Collateral,” and specifying how proceeds should be distributed.After Pro-Mark filed for chapter 7 bankruptcy in the United States Bankruptcy Court for the District of North Dakota, CCU placed an administrative freeze on Pro-Mark’s deposit accounts and moved for relief from the automatic stay to exercise its right of setoff against the funds in those accounts. Hartford objected, claiming a superior interest in the funds based on the GIA and ICA. The bankruptcy court held hearings and, after considering the parties’ briefs and stipulated facts, granted CCU’s motion, allowing it to set off the funds. The bankruptcy court found CCU had met its burden for setoff and determined Hartford did not have a sufficient interest in the deposited funds, focusing on the GIA and North Dakota’s Uniform Commercial Code, and not the ICA.On appeal, the United States Bankruptcy Appellate Panel for the Eighth Circuit held that while the bankruptcy court had authority to adjudicate the priority dispute, it erred by failing to analyze the parties’ respective rights under the ICA, which governed the priority of distributions. The Panel reversed the bankruptcy court’s order and remanded the case for further proceedings consistent with its opinion. View "Hartford Accident and Indemnity Company v. Capital Credit Union" on Justia Law

Carol Rose, a prominent figure in the American Quarter Horse industry, entered into a series of agreements with Lori and Philip Aaron in 2013. The Aarons agreed to purchase a group of Rose’s horses at an auction, lease her Gainesville Ranch with an option to buy, and employ her as a consultant. The relationship quickly soured after the auction, with both sides accusing each other of breaches. Rose locked the Aarons out of the ranch and asserted a stable keeper’s lien for charges exceeding those related to the care of the Aarons’ horses. The Aarons paid the demanded sum and removed their horses. Litigation ensued, including claims by Jay McLaughlin, Rose’s former trainer, for damages related to the value of two fillies.The bankruptcy filings by Rose and her company led to the removal of the ongoing state-court litigation to the United States Bankruptcy Court. After trial, the bankruptcy court ruled in favor of the Aarons on their breach of contract and Texas Theft Liability Act (TTLA) claims, awarding damages and attorneys’ fees, and in favor of McLaughlin on his claim. The United States District Court for the Eastern District of Texas reversed the bankruptcy court’s rulings on the Aarons’ claims and McLaughlin’s claim, vacating the damages and fee awards.On appeal, the United States Court of Appeals for the Fifth Circuit affirmed the district court’s reversal of the damages award for the Aarons’ breach of contract claim, holding that the Aarons failed to prove damages under any recognized Texas law measure. The Fifth Circuit reversed the district court’s judgment on the TTLA claim, holding that Rose’s threat to retain the Aarons’ horses for more than the lawful amount could constitute coercion under the TTLA, and remanded for further fact finding on intent and causation. The court also reversed and remanded the judgment regarding McLaughlin’s claim, finding his damages testimony legally insufficient. The court left the issue of attorneys’ fees for further proceedings. View "Rose v. Equis Equine" on Justia Law

Two plaintiffs, each holding checking accounts with a bank, brought a class action lawsuit challenging the bank’s practices regarding overdraft fees. One plaintiff alleged that the bank breached its contract by charging multiple overdraft fees on transactions that did not initially overdraw the account but were later settled when the account was already overdrawn. The other plaintiff claimed a breach of contract when the bank charged multiple overdraft fees for repeated attempts to process a single payment that was returned for insufficient funds. Both plaintiffs sought to represent similarly situated customers.The Shawnee District Court granted the bank’s motion to dismiss, relying on a contract provision requiring customers to notify the bank of any “errors or improper charges” within 30 days of receiving their account statement. The court found this notice provision unambiguous and concluded that, because the plaintiffs did not provide timely notice, they were barred from bringing their claims. The Kansas Court of Appeals reversed, holding that the term “improper charges” in the contract was ambiguous and that the district court improperly engaged in fact-finding at the motion to dismiss stage. The appellate court determined that whether the notice provision applied was a factual question and that the ambiguity should be construed against the bank as the contract’s drafter.The Supreme Court of the State of Kansas reviewed the case and agreed with the Court of Appeals that the term “improper charges” was ambiguous. The Supreme Court went further, holding that this ambiguity must be construed against the bank, and as a matter of law, the notice provision did not apply to the overdraft fees at issue. The Supreme Court affirmed the judgment of the Court of Appeals, reversed the district court’s dismissal, and remanded the case for further proceedings. View "Harding v. Capitol Federal Savings Bank " on Justia Law

Cherry Oil is a closely held corporation in eastern North Carolina, primarily owned and managed by members of the Cherry and Mauck families. Armistead and Louise Mauck, who together own 34% of the company’s shares, became involved in the business after Armistead was invited to join during a period of financial difficulty. In 1998, the families formalized their relationship through a Shareholder Agreement, which included provisions allowing either party to force a buyout of shares at fair market value. Over time, disputes arose regarding management and succession, culminating in the Maucks’ removal from the board and Cherry Oil’s attempt to buy out their shares. The buyout process stalled, leaving the Maucks as minority shareholders no longer employed by the company.The Maucks filed suit in Superior Court, Lenoir County, asserting claims for judicial dissolution under N.C.G.S. § 55-14-30, breach of fiduciary duty, constructive fraud, and breach of the Shareholder Agreement. The case was designated a mandatory complex business case and assigned to the North Carolina Business Court. The Business Court dismissed most claims, including the judicial dissolution claim for lack of standing, finding that the Shareholder Agreement’s buyout provision provided an adequate remedy. It also dismissed other claims for reasons such as untimeliness and insufficient factual allegations. The court later granted summary judgment to defendants on the remaining claims, concluding that the actions taken by the Cherry family were valid corporate acts and that the Maucks had not demonstrated breach of duty or contract.On appeal, the Supreme Court of North Carolina held that the Maucks did have standing to seek judicial dissolution but affirmed the dismissal of that claim under Rule 12(b)(6), finding that the Shareholder Agreement’s buyout provision provided a sufficient remedy and that the complaint did not allege facts showing dissolution was reasonably necessary. The Supreme Court otherwise affirmed the Business Court’s rulings. View "Mauck v. Cherry Oil Co." on Justia Law

Nilfisk, Inc. leased a large warehouse building in Springdale, Arkansas from Fort Worth Partners, LLC under an industrial lease that required Nilfisk to maintain property insurance covering the full replacement cost of the building, excluding certain foundation and below-grade structures. In March 2022, a tornado destroyed the building, and Nilfisk’s insurance coverage at the time was significantly less than the full replacement cost required by the lease. Fort Worth Partners sued Nilfisk and its parent company for breach of contract, seeking damages equal to the full replacement cost that would have been covered by adequate insurance.The United States District Court for the Western District of Arkansas reviewed cross-motions for summary judgment. It denied Nilfisk’s motion and granted Fort Worth Partners’ motion in part, finding Nilfisk had breached its insurance obligation under the lease. The court held a bench trial to determine damages, considering expert testimony from both parties. It awarded Fort Worth Partners damages for the building’s replacement cost, excluding foundation damages per the lease, and also awarded attorney’s fees and costs, with reductions for limited success and prevailing local rates. Nilfisk appealed the denial of summary judgment and the damages award, while Fort Worth Partners cross-appealed aspects of the damages and fee awards.The United States Court of Appeals for the Eighth Circuit affirmed the district court’s grant of partial summary judgment for Fort Worth Partners and its denial of Nilfisk’s summary judgment motion. The appellate court held that Fort Worth Partners’ claim was timely, as each deficient insurance policy constituted a separate breach with its own limitations period. The court also affirmed the district court’s interpretation of the lease excluding all foundation damages and upheld the reduction in attorney’s fees. However, it reversed and remanded the damages award for unrebutted costs, instructing the district court to make specific factual findings supporting that portion of the award. View "Fort Worth Partners, LLC v. Nilfisk, Inc." on Justia Law

L Squared Industries, Inc., a Florida-based operator of gas stations, purchased a storage tank liability insurance policy from Nautilus Insurance Company to cover cleanup costs resulting from pollution caused by underground storage tank discharges. In 2018, after a consultant’s report identified groundwater contamination at one of its stations, L Squared did not notify Nautilus of the pollution condition until eight months later, despite a policy requirement to provide notice within seven days of becoming aware of such a condition. L Squared subsequently sought indemnification from Nautilus for cleanup and defense costs, but Nautilus denied coverage.L Squared filed suit in Florida state court, seeking a declaration of coverage and damages for breach of contract. The case was removed to the United States District Court for the Middle District of Florida. Both parties moved for summary judgment. The district court granted summary judgment to Nautilus, finding that L Squared failed to comply with the policy’s seven-day notice provision, and thus Nautilus had no duty to defend or indemnify. L Squared’s motion for reconsideration was denied, and it appealed.The United States Court of Appeals for the Eleventh Circuit reviewed the district court’s summary judgment order de novo. The appellate court held that, under Florida law, when an insured breaches a prompt-notice provision but provides notice within the policy period, coverage is not automatically forfeited; rather, the insurer is presumed prejudiced, but the insured may rebut this presumption. In this case, L Squared failed to timely raise arguments or evidence to rebut the presumption of prejudice. The Eleventh Circuit affirmed the district court’s grant of summary judgment in favor of Nautilus, holding that L Squared’s failure to comply with the seven-day notice provision barred coverage. View "L. Squared Industries, Inc. v. Nautilus Insurance Company" on Justia Law

The case concerns a dispute between purchasers of a used vehicle and the seller, a car dealership, over the enforcement of a vehicle service warranty contract. The purchasers alleged that after buying the vehicle and a service contract, they repeatedly sought repairs from the dealership, paid deductibles, were denied direct communication with the repair shop, and did not receive the necessary repairs. They claimed the dealership falsely represented that repairs had been completed. As a result, they filed suit for breach of contract, breach of warranty, and breach of the duty of good faith and fair dealing.The District Court for Tulsa County, presided over by Judge Damon Cantrell, reviewed the dealership’s motion for partial summary judgment. The dealership argued that Oklahoma’s Service Warranty Act, specifically Title 15, Section 141.24(B), barred tort claims for breach of the duty of good faith and fair dealing in connection with service warranty contracts. The purchasers contended that this statutory provision was an unconstitutional special law. Judge Cantrell denied the dealership’s motion, finding the statute unconstitutional.The Supreme Court of the State of Oklahoma reviewed the case on a writ of prohibition. The Court held that Title 15, Section 141.24(B) is not an unconstitutional special law because it applies uniformly to all service warranty contracts, including those issued by companies with significant assets, and does not single out a particular class for disparate treatment. The Court further held that the statute abrogates the prior judicial rule allowing tort claims for breach of the duty of good faith and fair dealing in this context. The Supreme Court granted the writ of prohibition, precluding enforcement of the lower court’s order, and remanded the case for further proceedings. View "AMERICA'S CAR MART v. CANTRELL" on Justia Law

A group of dentists, who are both members of a nonprofit mutual benefit corporation and parties to provider agreements with that corporation, challenged the corporation’s decision to unilaterally amend its fee schedules and related rules. The provider agreements allowed the corporation to set the fees paid to dentists for services rendered to plan enrollees, and the agreements, as amended by a 2018 settlement, expressly permitted the corporation to make unilateral changes to the fee structure with 120 days’ notice, during which dentists could terminate their agreements if they did not accept the new terms. In 2022, the corporation announced further amendments that, according to the dentists, reduced fees and altered the fee determination process. The dentists alleged that these changes breached the implied covenant of good faith and fair dealing in their provider agreements and that certain directors breached fiduciary duties owed to them as members.The Superior Court of San Francisco City and County sustained demurrers by all defendants without leave to amend. The court found that the corporation could not breach the implied covenant by exercising rights expressly granted in the agreements, and that the directors owed no fiduciary duty to the dentists in connection with the corporation’s exercise of its contractual rights to amend fee schedules.The California Court of Appeal, First Appellate District, Division One, affirmed the trial court’s judgment. The court held that the implied covenant of good faith and fair dealing cannot be used to override or limit a party’s express contractual right to unilaterally amend fee schedules, provided the contract is supported by consideration and the changes are prospective, with adequate notice and an opportunity to terminate. The court also held that directors of a nonprofit mutual benefit corporation owe fiduciary duties to the corporation itself, not to individual members in their capacity as contracting parties. View "California Dental Assn. v. Delta Dental of California" on Justia Law

A pathologist who was an officer, director, shareholder, and employee of a closely held professional corporation was subject to annual employment agreements and the corporation’s bylaws, which required shareholders to be employed by the corporation. The employment agreement allowed for termination “for any reason or no reason,” and the bylaws provided that a shareholder who ceased to be an employee would have their shares redeemed at book value. After several incidents involving the pathologist’s performance, the board voted not to renew his employment agreement. As a result, his employment ended, and the corporation sought to redeem his shares at book value, as specified in the bylaws.The pathologist filed suit in the District Court for Lancaster County, alleging breach of fiduciary duty, shareholder oppression justifying judicial dissolution, and seeking declaratory relief regarding the value of his shares and the enforceability of a noncompetition provision. The corporation moved for summary judgment. The district court granted summary judgment in part, dismissing claims related to termination of employment and the noncompetition provision, but allowed discovery and further proceedings on the valuation and redemption of shares. After additional discovery, the corporation again moved for summary judgment. The district court granted summary judgment on the remaining claims, finding no genuine issue of material fact and that the corporation had acted in accordance with the agreements. The court also denied the pathologist’s motions to compel further discovery and to continue the summary judgment hearing.On appeal, the Nebraska Supreme Court reviewed the grant of summary judgment de novo and the discovery rulings for abuse of discretion. The court held that the pathologist had no reasonable expectation of continued employment given the clear terms of the agreements he signed, and that the corporation’s actions in redeeming his shares at book value did not constitute a breach of fiduciary duty or shareholder oppression. The court affirmed the district court’s judgment in all respects. View "Noel v. Pathology Med. Servs." on Justia Law

A lessor and two lessees entered into a lease with an option to purchase a residential property in Calhoun County, Alabama. The agreement required the lessees to make monthly rent payments, annual payments, and an initial deposit, with certain payments to be credited toward the purchase price if the option was exercised. Disputes arose near the end of the lease term regarding the timeliness of the lessees’ payments and whether the lessees had complied with all contractual requirements, including providing written notice of their intent to purchase.The Calhoun Circuit Court conducted a bench trial and found that a valid lease-to-purchase contract existed, that the lessees had complied with its terms, and that the lessor still owed a mortgage on the property. The court ordered that all funds held by the parties be paid to the lessor to reduce the mortgage principal, required the lessor to satisfy the mortgage and convey clear title to the lessees by a specified date, and assigned responsibility for property taxes to the lessees. The lessor’s postjudgment motion, which challenged the findings regarding compliance and payment timeliness, was denied.On appeal, the Supreme Court of Alabama reviewed the trial court’s factual findings under the ore tenus standard, deferring to the trial court’s credibility determinations unless clearly erroneous. The Supreme Court affirmed the trial court’s finding that the lessees had not breached the lease, concluding that the lessor’s actions had contributed to any payment delays. However, the Supreme Court reversed the trial court’s judgment to the extent it credited monthly rent payments toward the purchase price, holding that only the initial deposit and annual payments should be applied, as the contract unambiguously required. The case was remanded for further proceedings consistent with this holding. View "McCain v. Sneed" on Justia Law