Justia Contracts Opinion Summaries

A medical institution in Puerto Rico borrowed over $10 million from a bank in 1984 to build a hospital, but soon disputes arose regarding the loan. The bank claimed the institution defaulted, while the institution asserted the bank failed to disburse funds as required. Litigation and bankruptcy proceedings followed. In 1991, the parties settled, but the terms of that settlement—whether the debt was split into interest-bearing and non-interest-bearing portions—remained contested. Over the next decades, the loan changed hands, and in 2013 the institution filed for Chapter 11 bankruptcy again. The current loan-holder claimed a significantly higher outstanding balance than the institution believed was owed, due in part to differing interpretations of the 1991 agreement and subsequent bankruptcy plan.The United States Bankruptcy Court for the District of Puerto Rico previously addressed these disputes. It issued orders requiring the institution to demonstrate, with evidence, that the 1991 agreement created a non-interest-bearing note and that it had made payments in accordance with the bankruptcy plan. The court denied discovery, required summary judgment briefing, and ultimately issued an order with minimal analysis, granting the loan-holder’s motion to dismiss and denying the institution’s motion for summary judgment. The court’s reasoning was ambiguous, referencing both summary judgment and pleading standards, and did not clearly identify the basis for its decision.On appeal, the United States District Court for the District of Puerto Rico affirmed, concluding the bankruptcy plan did not incorporate the 1991 bifurcated note arrangement. The United States Court of Appeals for the First Circuit, reviewing the case, found the bankruptcy court’s order insufficiently reasoned to permit meaningful appellate review. The First Circuit vacated the lower courts’ decisions and remanded for further proceedings, instructing the bankruptcy court to clarify its reasoning, identify the applicable legal standards, and consider whether summary judgment or further fact-finding is appropriate. View "Instituto Medico del Norte, Inc. v. Greengift Capital, LLC" on Justia Law

Several counties and municipalities in New York initiated lawsuits in state courts against two pharmacy benefit managers, Express Scripts, Inc. and OptumRx, Inc., alleging that these companies contributed to the opioid epidemic in their communities. The claims are based on state law and center on the defendants’ alleged practices in negotiating with opioid manufacturers and managing prescription formularies, which plaintiffs contend led to an oversupply of prescription opioids and caused substantial public harm and government expense.The defendants removed the cases to federal court—the United States District Courts for the Southern and Eastern Districts of New York—arguing removal was proper under the federal officer removal statute, 28 U.S.C. § 1442(a)(1), because some of the challenged conduct was performed under contracts with federal agencies, such as the Department of Defense (TRICARE), the Office of Personnel Management (FEHBP), and the Veterans Health Administration. After removal, the plaintiffs amended their complaints to disclaim any claims based on the defendants’ work for federal clients, seeking to have the cases remanded to state court. The district courts accepted the disclaimers and remanded the cases.The United States Court of Appeals for the Second Circuit reviewed the district courts’ decisions. It concluded that the disclaimers were ineffective because the alleged wrongful conduct and resulting harms could not be separated between federal and non-federal clients; the conduct was indivisible. Relying on the Supreme Court's decision in Chevron USA Inc. v. Plaquemines Parish, the Second Circuit held that the defendants satisfied all statutory requirements for federal officer removal: they acted under federal direction, were sued for acts relating to federal authority, and asserted colorable federal defenses. The Second Circuit therefore reversed the remand orders and returned the cases to the district courts for further proceedings. View "County of Westchester v. Express Scripts" on Justia Law

This case concerns a dispute between two sophisticated energy companies over a merger agreement. In December 2017, Trireme entered into an agreement with Innogy Renewables US, LLC, a subsidiary of a German energy company, to transfer valuable development companies related to wind and solar projects in exchange for an upfront payment and the possibility of future milestone payments. The agreement included provisions restricting Innogy from transferring these assets without Trireme’s consent. After a complex asset swap and corporate restructuring involving Innogy’s parent company and other entities, Trireme alleged that the assets were transferred within the corporate family in violation of the agreement.Previously, Trireme filed a lawsuit—referred to as Trireme I—in the United States District Court for the Southern District of New York, alleging breaches of other sections of the merger agreement but not the section concerning asset transfers. Later, Trireme sought to amend its complaint to add this new breach-of-contract claim. The district court denied the motion to amend, finding that Trireme had not acted diligently to discover the claim and was on notice of the potential breach before filing the initial action. Trireme did not pursue an appeal of this denial but instead filed a new lawsuit asserting the same claim. The district court dismissed the new case on grounds of res judicata.The United States Court of Appeals for the Second Circuit reviewed the case and affirmed the district court’s dismissal. The court held that when a party seeks to assert a claim in a new action after unsuccessfully moving to amend its complaint in a prior action, courts should consider several factors, including whether the denial was on the merits, whether the plaintiff failed to appeal, the timing of the claim, the plaintiff’s diligence, and whether the plaintiff was represented by counsel. Applying these factors, the Second Circuit concluded that res judicata barred Trireme’s new claim and affirmed the judgment. View "Trireme Energy Development v. RWE Renewables" on Justia Law

A municipal corporation operating a large regional commuter rail system in the Chicago area provided rail service on lines owned by a freight rail company. For decades, this service was conducted under a series of agreements, but in 2019, the freight rail company announced it would cease operating the commuter trains. Following litigation, the freight company obtained a declaratory judgment that it had no ongoing obligation to provide such service. While the commuter rail operator began transitioning to run the service itself, the parties failed to reach agreement on compensation for continued use of the lines. With no long-term agreement in place and negotiations at an impasse, the commuter rail operator applied to the federal Surface Transportation Board for terminal trackage rights, which would allow it to use the lines despite the lack of agreement.The Surface Transportation Board granted the application, finding the lines to be terminal facilities for a reasonable distance from the terminal, and that the use would be practicable, in the public interest, and not substantially impair the freight carrier’s operations. The Board did not set compensation or use conditions at that time but pledged to do so retroactively if the parties could not agree. The freight rail company sought review of this decision in the United States Court of Appeals for the Eighth Circuit.The Eighth Circuit held that the Board acted within its statutory authority in granting terminal trackage rights to the commuter operator, including over the full extent of the lines at issue, and properly concluded the public interest was served. However, the court found that the Board erred by granting immediate rights without first ensuring that compensation was paid or adequately secured, as required by statute. The court vacated the Board’s order and remanded for further proceedings, allowing time for the parties to address compensation. View "Union Pacific Railroad Company v. STB" on Justia Law

After purchasing a trucking company through an asset purchase agreement, Jim Daws Trucking, LLC (JDT) alleged that the sellers—James and Lana Daws, Daws, Inc., and other affiliated entities—violated the APA’s noncompete provision by engaging in competing trucking operations. The APA included a $12 million purchase price, with $4.5 million allocated to goodwill, and a five-year noncompete clause barring the sellers from participating in trucking nationwide. After the relationship between Jim Daws and JDT deteriorated, Jim Daws left JDT and communicated with former employees about starting new trucking ventures, allegedly causing JDT to lose significant personnel and drivers.The United States District Court for the District of Nebraska granted a temporary restraining order, then a preliminary injunction, prohibiting Jim Daws and associates from engaging in trucking or advising new trucking companies nationwide, except for operating certain pre-existing businesses. The district court determined that the noncompete provision was valid and enforceable under Nebraska law, that JDT was likely to prevail on its breach of contract claim, and that irreparable harm existed due to loss of goodwill. The district court also ordered Jim Daws to release $500,000 in funds from an account used for JDT’s operations and set a $480,000 bond based on potential lost revenue.On appeal, the United States Court of Appeals for the Eighth Circuit reviewed the district court’s grant of the preliminary injunction, the order to release funds, and the bond amount. The appellate court affirmed the district court’s decisions, holding that the noncompete provision was reasonable in scope and duration given the sale of goodwill and the nature of the trucking business. The court found no clear error in the district court’s factual findings, no abuse of discretion in ordering the release of funds as injunctive relief, and no abuse of discretion in setting the amount of the bond. View "Jim Daws Trucking, LLC v. Daws, Inc." on Justia Law

A group of Guatemalan nationals were recruited under the H-2A visa program by a Michigan agricultural company and its owners to work seasonal jobs between 2017 and 2019. The plaintiffs alleged that the defendants illegally charged recruitment fees, underpaid wages, forced them to live in poor conditions, confiscated personal documents, limited their freedom, and threatened them with deportation if they complained. The plaintiffs claimed these actions violated federal anti-trafficking laws, the Fair Labor Standards Act, Michigan labor and trafficking statutes, and state contract law.In the United States District Court for the Western District of Michigan, the case proceeded to a jury trial. The jury found in favor of the plaintiffs on most claims, awarding both compensatory and punitive damages, while denying certain claims against one defendant and rejecting the defendants’ counterclaims. The district court denied the defendants’ motions for mistrial, to dismiss for forum non conveniens, for a new trial, and for remittitur of punitive damages. The court entered judgment for the plaintiffs, including damages, attorney fees, and costs.The United States Court of Appeals for the Sixth Circuit reviewed the case. The court held that the punitive damages awarded were not grossly excessive or arbitrary and thus did not violate due process, applying the guideposts from BMW of North America, Inc. v. Gore and State Farm Mutual Automobile Insurance Co. v. Campbell. The court also found no abuse of discretion in the district court’s evidentiary rulings, denial of a mistrial, or in allowing the case to proceed in Michigan rather than Guatemala. The court further concluded that alleged statute of limitations defenses were either inapplicable or waived. The Sixth Circuit affirmed the district court’s judgment in all respects. View "Gomez-Echeverria v. Purpose Point Harvesting, LLC" on Justia Law

Cheryl Walker used her Uber account to order a guest ride for her husband, Carroll Walker. Carroll had never downloaded the Uber app or created an account, and he consistently stated that he does not read or reply to text messages. On the relevant occasion, Cheryl ordered a ride for Carroll, and Uber sent Carroll a text message with ride details and a hyperlink to its Terms of Use, which included an arbitration provision. Carroll did not see the message. During the ride, an accident occurred, allegedly due to the driver’s distraction by Uber’s app, resulting in severe injuries to Carroll.In the United States District Court for the District of Columbia, Cheryl Walker sued Uber on Carroll’s behalf, asserting negligence and products liability claims. Uber moved to compel arbitration, arguing Carroll was bound to arbitrate either because he had notice of the Terms via Uber’s text message or as a third-party beneficiary of Cheryl’s contract with Uber. The district court denied Uber’s motion, finding Uber failed to establish that Carroll was on inquiry notice of the Terms and concluding that Carroll was not bound as a third-party beneficiary or estopped from refusing arbitration.The United States Court of Appeals for the District of Columbia Circuit reviewed the district court’s denial of Uber’s motion to compel arbitration de novo, applying D.C. contract law. The Court held that Uber had not shown Carroll agreed to be bound by its Terms of Use, as Carroll lacked actual or inquiry notice of the Terms. The Court further determined that Carroll was not bound by Cheryl’s contract as a third-party beneficiary or by equitable estoppel, since Carroll was not seeking to enforce Cheryl’s contract and his claims were independent of it. The judgment of the district court was affirmed. View "Walker v. Uber Technologies, Inc." on Justia Law

T-Mobile and KAIFI settled a patent infringement lawsuit involving claims of U.S. Patent No. 6,922,728, which covers Wi-Fi calling technology. As part of their settlement, T-Mobile agreed to make two payments: one immediate payment and another conditional payment, the latter to be made if any of the asserted patent claims “survived” an ex parte reexamination (EPR) at the United States Patent and Trademark Office. After the Patent Office confirmed the patentability of most of the asserted claims without amendment, T-Mobile refused to make the additional payment, arguing that the claims had not truly “survived” the EPR due to alleged changes in claim scope and supposed inequitable conduct by KAIFI during the reexamination.T-Mobile filed a declaratory judgment action in the United States District Court for the Eastern District of Texas, seeking a determination that it had not breached the settlement agreement by withholding the payment. The district court granted summary judgment for KAIFI, holding that the settlement agreement was clear: a claim “survives the EPR” if the Patent Office confirms its patentability in the Reexamination Certificate. The court found T-Mobile’s arguments about claim scope and inequitable conduct irrelevant to the payment obligation and ordered T-Mobile to make the additional payment.On appeal, the United States Court of Appeals for the Federal Circuit reviewed whether it had subject-matter jurisdiction. The court determined that the dispute centered on the interpretation of a contract governed by Texas law and did not necessarily involve a substantial question of federal patent law. Consequently, the court held that it lacked appellate jurisdiction and transferred the case to the United States Court of Appeals for the Fifth Circuit, which has jurisdiction over appeals from the Eastern District of Texas. View "T-MOBILE US, INC. v. KAIFI LLC " on Justia Law

A plaintiff leased a new vehicle from a dealership and soon experienced significant problems, including charging failures, starting difficulties, and an event involving fire risk. Despite attempts at repair by the dealership and authorized facilities, the vehicle remained inoperable. The plaintiff’s lease included an arbitration provision broadly defining disputes to include claims concerning the vehicle’s condition and warranties. The plaintiff sued the vehicle manufacturer under California’s Song-Beverly Consumer Warranty Act for a range of statutory violations related to the vehicle’s defects and warranty service.The Santa Clara County Superior Court denied the manufacturer’s motion to compel arbitration. The trial court reasoned that the manufacturer could not enforce the arbitration agreement as a third party beneficiary under the rationale of Ford Motor Warranty Cases, because the plaintiff’s statutory claims arose from the manufacturer’s obligations under the Song-Beverly Act, not from the lease itself. The court also rejected the manufacturer’s equitable estoppel argument, and, finding no enforceable arbitration agreement between the parties, declined to address issues of unconscionability or delegation.The California Court of Appeal, Sixth Appellate District, reviewed the matter. It held that the manufacturer was in fact a third party beneficiary of the arbitration provision, as the lease explicitly defined the manufacturer as a party entitled to enforce arbitration and covered disputes involving the vehicle’s condition and warranties. The court distinguished the California Supreme Court’s decision in Ford Motor Warranty Cases, finding it inapplicable where the manufacturer is named in the lease. The Court of Appeal reversed the trial court’s order and remanded the case for the trial court to decide whether the arbitration provision’s delegation clause is unconscionable. The appellate court expressed no opinion on unconscionability, leaving that issue for the trial court. View "Srivastava v. BMW of North America" on Justia Law

A defendant pleaded guilty to attempted battery with substantial bodily harm, an offense that can be classified as either a gross misdemeanor or a felony. In exchange for the guilty plea, the State agreed to recommend the lesser gross misdemeanor classification and a sentence of 225 days in county detention. The plea agreement included a clause stating that if the defendant failed to appear at any subsequent hearing, the State would be released from its promises under the agreement and could argue for any legal sentence. After pleading guilty, the defendant remained in custody but failed to appear at a continued sentencing hearing because he refused transport from jail, for nonmedical reasons.The Eighth Judicial District Court in Clark County determined that the defendant’s failure to appear constituted a breach of the plea agreement. As a result, the court released the State from its obligations under the agreement, permitting the State to recommend a felony sentence. The State then argued for, and the court imposed, a sentence of 19 to 48 months in prison.The Supreme Court of the State of Nevada reviewed the case and considered whether a failure-to-appear clause in a guilty plea agreement can be enforced against a defendant who remains in custody. The court held that such a clause cannot be enforced against in-custody defendants because they lack control over their appearance in court, and the State retains the means to produce them for hearings. The court vacated the defendant’s sentence and remanded the case for resentencing before a new judge, instructing the State to abide by its original sentencing recommendation. The sentencing judge remains free to determine the appropriate sentence. View "Stafford v. State" on Justia Law