Justia Contracts Opinion Summaries

In May 2013, plaintiffs Annemarie Morgan and Tiffany Dever filed suit against defendants Sanford Brown Institute, its parent company, Career Education Corporation, and Sanford Brown's chief executive officer, admission and financial aid officers, and clinical director. Sanford Brown was a private, for-profit educational institution with a campus in Trevose, Pennsylvania, that offered medical-related training programs. In the complaint, plaintiffs claimed that defendants misrepresented the value of the school's ultrasound technician program and the quality of its instructors, instructed students on outdated equipment and with inadequate teaching materials, provided insufficient career-service counseling, and conveyed inaccurate information about Sanford Brown's accreditation status. The complaint further alleged that Sanford Brown employed high-pressure and deceptive business tactics that resulted in plaintiffs financing their education with high-interest loans, passing up the study of ultrasound at a reputable college, and losing career advancement opportunities. The Sanford Brown enrollment agreement included payment terms for tuition and fees, disclaimers, and an arbitration provision. Without answering the complaint, defendants filed a motion to compel arbitration and to dismiss plaintiffs' claims. The Appellate Division found the parties clearly and unmistakably agreed an arbitrator would determine issues of arbitrability and that plaintiffs failed to specifically attack the delegation clause. The panel therefore determined that arbitrability [was] for the arbitrator to decide. The Supreme Court reversed, finding that the Appellate Division and trial court did not have the benefit of "Atalese v. U.S. Legal Servs. Grp.," (219 N.J. 430, 436 (2014), cert. denied, __ U.S. __, 135 S. Ct. 2804, 192 L. Ed.2d 847 (2015)) at the time they rendered their decisions. The New Jersey Court held in "Atalese" that an arbitration provision in a consumer contract that fails to explain in some minimal way that arbitration is a substitute for a consumer s right to pursue relief in a court of law was unenforceable. This case was therefore remanded for further proceedings in light of Atalese. View "Morgan v. Sanford Brown Institute" on Justia Law

Riverside, owned half by GMH and half by Heritage (Rezko’s company), owned a valuable Chicago property. Sirazi had helped Rezko finance several investments, including guaranteeing a $5 million loan from Republic. The loan came due in 2006. Rezko was already in default on millions of dollars borrowed from Sirazi. Sirazi and Rezko signed a settlement agreement: Rezko gave Sirazi a security interest in all distributions from Heritage and committed to a priority order for paying off debts using Heritage proceeds. Rezko defaulted on another loan, triggering Sirazi’s guaranty, so that Rezko then owed Sirazi $12.9 million. Meanwhile, Rezko had been indicted. GMH bought him out for $31.8 million. Rezko received $5 million, which paid for his criminal defense; the balance consisted of forgiveness of Rezko’s debt to GMH. With the approval of Heritage’s general counsel and GMH chairman Auchi, the agreement ignored Sirazi’s interest. A jury awarded Sirazi compensatory damages of $12.9 million against GMH and Auchi and punitive damages of $5 million against each; the judge set aside the award against Auchi. The Seventh Circuit affirmed in part, in favor of Sirazi. Rezko breached the settlement by failing to pay Sirazi; the jury reasonably found GMH liable for tortious interference with contract. GMH was enriched unjustly. The award was reduced by $524,000 that Sirazi received in Rezko’s bankruptcy and the award against Auchi was reinstated. View "Sirazi v. Gen. Mediterranean Holding, S.A." on Justia Law

Trans-Western filed an amended complaint in federal district court asserting claims against U.S. Gypsum for breach of an oil and gas lease and breach of the covenant of quiet enjoyment. The district court found that U.S. Gypsum had wrongfully rescinded the lease and that the rescission constituted a breach of contract and a breach of the covenant of quiet enjoyment. The court awarded nominal damages of one dollar to Trans-Western. The parties appealed. The Tenth Circuit Court of Appeals certified to the Supreme Court the question of how to measure expectation damages for the breach of an oil and gas lease. The Supreme Court answered (1) expectation damages for the breach of an oil and gas lease are measured in much the same way as expectation damages for the breach of any other contract; (2) damages may include general and consequential damages; and (3) trial courts may allow the use of post-breach evidence to help establish and measure expectation damages. View "Trans-Western Petroleum, Inc. v. U.S. Gypsum Co." on Justia Law

The United States Court of Appeal for the First Circuit certified two questions of state law to the Massachusetts Supreme Court. The questions arose in the context of a bankruptcy proceeding, and concerned the power and effect of an affidavit of an attorney, executed pursuant to G.L. c. 183 section 5B, in relation to a mortgage containing a defective certificate of acknowledgement. The first question centered on whether, pursuant to the statute, a recorded mortgage omitting the name of the mortgagor, a material defect of that mortgage. The second question centered on whether the recording of that allegedly defective mortgages provides constructive notice of the mortgage to a bona fide purchaser, either independently or in combination with the mortgage. The Massachusetts Supreme Court answered both questions "yes." View "Bank of America, N.A. v. Casey" on Justia Law

Using a form provided by CGS, the general contractor for construction of an 18-story Milwaukee office building, PNA submitted a $12,675,421 bid to provide a glass curtainwall--a nonstructural outer covering for weatherproofing and aesthetics. The contract manual provided by CGS stated that “[t]he bidder must accept all terms of the [standard CGS] subcontract as a condition for submitting a bid.” After CGS chose PNA’s bid, PNA repeatedly expressed a need to review the finalized prime contract before it would execute a formal subcontract. CGS and PNA engaged in a “value engineering process” during which they refined the price and other terms of the subcontract. PNA regularly updated the proposed price and communicated the updates to CGS. Several times, PNA raised concerns about subcontract terms. CGS never indicated to PNA that, in CGS’s view, there was already an agreement in place. The parties never entered into a formal subcontract. CGS had to use a different subcontractor at a higher price. CGS filed suit. The district court granted PNA summary judgment, finding that the parties did not intend to be bound until the execution of a formal subcontract. The Seventh Circuit affirmed, agreeing that the parties never entered into a binding contract and that CGS’s promissory estoppel claim fails as a matter of law. View "C.G. Schmidt Inc. v. Permasteelisa N. Am." on Justia Law

Kentucky Shakespeare Festival, Inc. (KSF) and Brantley Dunaway entered into an employment agreement. Two years later, KSF terminated Dunaway’s employment. When KSF informed Dunaway that he was not entitled to a bonus for the 2013 fiscal year, Dunaway filed an action for breach of contract. Nearly one year later, KSF filed a motion for partial summary judgment and declaratory relief, arguing that KSF’s determination that Dunaway was not entitled to a bonus was a binding “arbitration award” issued by an independent accounting firm. The circuit court denied relief, concluding that the employment agreement did not contain an agreement to forgo litigation and arbitrate any bonus dispute. The court of appeals affirmed. The Supreme Court affirmed, holding that no arbitration agreement existed between KSF and Dunaway, and because no arbitration proceeding occurred, there was no arbitration award to be confirmed. View "Kentucky Shakespeare Festival, Inc. v. Dunaway" on Justia Law

Defendants, three excess liability insurers, appealed the district court's grant of summary judgment to plaintiffs on their breach of contract claims. The district court concluded that Georgia's uninsured/underinsured motorist (UM) statute imposed upon defendants an unconditional obligation to provide UM coverage to the insured as if they were primary insurers, and that defendants' failure to tender payment amounted to a breach of contract. The court held that Georgia's UM statute, Ga. Code Ann. 33-7-11, applies to defendants' excess liability policies; defendants' excess liability policies contain vertical exhaustion requirements; and section 33-7-11 does not supersede the vertical exhaustion requirements in defendants' excess liability policies. Accordingly, the court reversed and remanded. View "Coker v. American Guarantee and Liability Ins. Co." on Justia Law

Joann Enrique appealed the Superior Court’s grant of summary judgment for State Farm Mutual Automobile Insurance Company in an action she brought for bad faith denial of uninsured motorist (“UM”) coverage stemming from a 2005 car accident. In 2005, an uninsured driver crashed into Enrique’s car by improperly turning into her lane. Enrique suffered a fractured rib, trauma to the right knee requiring arthroscopic surgery, trauma to the left knee for which she was a candidate for arthroscopic surgery, abrasions, and soft tissue injuries. Throughout the settlement negotiations and the processing of Enrique’s claim, State Farm personnel expressed concerns about whether Enrique’s knee injuries were caused by pre-existing conditions. The record was unclear as to why there were large lapses in time during the settlement negotiations. While the parties were waiting for the Independent Medical Examiner report, in July 2008, Enrique filed suit against State Farm, seeking benefits up to the $100,000 policy limits, as well as punitive damages against State Farm for bad faith by refusing to pay up to those limits. In support of the bad faith claim, Enrique alleged that State Farm refused to compensate her up to the UM policy limits without any reasonable justification. In October 2008, the Superior Court severed and stayed the bad faith claim pending resolution of the UM damages claim. The parties then stipulated to a partial dismissal of the bad faith claim without prejudice. Due to the continuing impasse, in September 2008 State Farm decided to advance Enrique $25,000, as the parties both agreed the claim was worth at least that much. As trial approached, State Farm offered Enrique another $20,000 to settle the case, for a total of $45,000. Enrique also revised her demand, and as of January 2010, was willing to settle for an additional $65,000, representing a $90,000 demand. The parties could not bridge the gap, and the damages case went to trial in February 2010. The jury returned a $260,000 verdict. State Farm did not seek remittitur, but did appeal on an evidentiary issue. The Delaware Supreme Court affirmed, and State Farm paid the remaining $75,000 of their policy limits, costs and interests. Enrique then pursued her bad faith claim against State Farm, claiming as damages the unpaid $160,000 portion of the jury verdict, prejudgment interest, and punitive damages. The Superior Court granted State Farm summary judgment because Enrique failed to make a prima facie showing of bad faith. The court based its decision on causation issues arising from Enrique’s pre-existing knee problems (which gave State Farm a reasonable basis for its actions), State Farm’s multiple valuations of Enrique’s claim that put it below policy limits, and her failure to offer facts showing State Farm exhibited reckless indifference in handling her claim. Finding no reversible error as to the Superior Court's grant of summary judgment, the Supreme Court affirmed. View "Enrique v. State Farm Mutual Automobile Insurance Co." on Justia Law

In 1993, plaintiff Dean Altobelli began working as an attorney for Miller, Canfield, Paddock and Stone, P.L.C. (“the Firm”). Upon joining the Firm, plaintiff signed the “Miller Canfield Operating Agreement” (“Operating Agreement”), a document governing the Firm’s internal affairs. By January 2006, plaintiff had become a senior principal at the Firm. However, in late May or early June 2010, plaintiff decided he wanted to pursue a new opportunity as an assistant coach for the University of Alabama football team. Plaintiff proposed a 7- to 12-month leave of absence from the Firm to defendant Michael Hartmann, the Firm’s CEO, and defendant Michael Coakley, who was the head of the Firm’s litigation group but was not a managing director. Plaintiff suggested that the Firm permit him to maintain his ownership interest and return to the Firm as a senior principal any time before June 1, 2011. Plaintiff avers that Hartmann initially promised plaintiff that he could spend as much time at the University of Alabama as he wanted and still receive certain allocated income from his clients. Hartmann disputed this, claiming that plaintiff voluntarily withdrew from the partnership. Plaintiff claimed he was improperly terminated, and that the Firm shorted plaintiff's income as a result. Plaintiff's attempt to resolve the matter through the direct settlement and mediation process, as outlined in the arbitration clause of the Operating Agreement, was unsuccessful. In November 2011, plaintiff filed a demand for arbitration as provided for in the arbitration clause. Despite having made the demand for arbitration, he filed suit alleging that the seven individuals named as defendants were responsible for engaging in tortious conduct with regard to plaintiff's request for a leave of absence and retention of his equity ownership in the Firm. Defendants moved for summary judgment and a motion to compel arbitration as required by the arbitration clause. Plaintiff moved for summary judgment too. The circuit court denied defendants’ motions and granted plaintiff's motion for partial summary judgment, finding as a matter of law that plaintiff did not voluntarily withdraw from the Firm. Rather, the circuit court concluded that defendants had improperly terminated plaintiff's ownership interest without authority. The Court of Appeals affirmed. The Supreme Court reversed the part of the Court of Appeals’ opinion regarding the motion to compel arbitration and instead held that this case was subject to binding arbitration under the arbitration clause of the Operating Agreement. Accordingly, the lower courts should not have reached the merits of plaintiff’s motion for partial summary disposition, as the motion addressed substantive contractual matters that should have been resolved by the arbitrator. The case was remanded back to the trial court for further proceedings. View "Altobelli v. Hartmann" on Justia Law

Parties to an agreement regarding an area of mutual interest for the purposes of oil and gas exploration sought to determine their respective rights under the agreement. The agreement gave the respondents in this case the right to participate in wells in futuro. The petitioners urged that the provision violated the rule against perpetuities. The district court agreed and granted judgment to the petitioners. The Court of Civil Appeals affirmed in part and reversed in part remanded the matter for further proceedings. The issues this case presented for the Supreme Court's review centered on whether a clause in an agreement giving a limited liability company the right to participate in all future wells on unleased property violated Article II, Section 32 of the Oklahoma Constitution prohibiting perpetuities, and whether a limited liability company was a "life in being." The Court answered the first question in the affirmative and the second question in the negative, finding that the district court did not err in granting a motion to dismiss based on these two questions. View "American Natural Resources, LLC v. Eagle Rock Energy Partners, L.P." on Justia Law