Justia Contracts Opinion Summaries

David Day, an ERISA plan beneficiary, elected to roll over his pension benefits into an individual retirement account (IRA) upon separation from his employer, AT&T. Exercising its discretion, the plan's claims administrator construed Day's lump sum rollover as the equivalent of his having "received" his pension benefits and, according to the terms of AT&T's Disability Income Benefit Plan, reduced Day's long-term disability (LTD) benefits by the amount of the rollover. The district court entered judgment in favor of the plan. The Ninth Circuit Court of Appeals affirmed, holding (1) the administrator reasonably interpreted the plan; (2) AT&T did not breach its fiduciary duties by failing to disclose the possibility that Petitioner's LTD benefits would be reduced by his receipt of pension benefits; and (3) the administrator's actions did not violate the Age Discrimination in Employment Act.

In February of 2009, a vehicle driven by Antoine Ellis ran a stop sign and struck a vehicle owned and operated by Ann Bernard. Norell Bernard and Andrea Bernard were guest passengers in Ann Bernard's vehicle at the time of the accident. Mr. Ellis was uninsured, and Ann, Norell and Andrea Bernard all filed suit against Imperial (Ann Bernard's insurer) for UM coverage. While Imperial did not dispute its named insured Ann Bernard was entitled to UM coverage, it filed a Motion for Partial Summary Judgment as to Norell and Andrea Bernard's claims on the basis that the guest passengers were not residents of Ann Bernard's household, and therefore did not meet the definition of "insured person" under the terms of the insurance policy for UM coverage. Imperial challenged the court rulings that denied the insurer summary judgment on that issue. After its review of the record, the Supreme Court held that the Plaintiffs were liability insureds under the Imperial policy and therefore entitled to UM coverage. Thus, the Court affirmed the rulings of the lower courts, denying Imperial's motion for partial summary judgment.

The issue before the Supreme Court in this case centered on a binding arbitration clause in an attorney-client retainer agreement and whether that clause was enforceable where the client filed suit for legal malpractice. This case presented two important countervailing public policies: Louisiana and federal law explicitly favor the enforcement of arbitration clauses in written contracts; by the same token, Louisiana law also imposes a fiduciary duty "of the highest order" requiring attorneys to act with "the utmost fidelity and forthrightness" in their dealings with clients, and any contractual clause which may limit the client's rights against the attorney is subject to close scrutiny. After its careful study, the Supreme Court held there is no per se rule against arbitration clauses in attorney-client retainer agreements, provided the clause is fair and reasonable to the client. However, the attorneys' fiduciary obligation to the client encompasses ethical duties of loyalty and candor, which in turn require attorneys to fully disclose the scope and the terms of the arbitration clause. An attorney must clearly explain the precise types of disputes the arbitration clause is meant to cover and must set forth, in plain language, those legal rights the parties will give up by agreeing to arbitration. In this case, the Defendants did not make the necessary disclosures, thus, the arbitration clause was unenforceable. Accordingly, the judgment of the lower courts was affirmed.

Jason McCann was involved in an automobile accident with Jeffrey Kreml. McCann's insurer, Auto Club Insurance Association, defended McCann against Kreml's personal injury action. After Kreml and McCann settled, Auto Club sought contribution from Sentry Insurance, the insurer for McCann's employer, claiming Sentry was obligated to provide co-primary coverage for McCann. The court granted summary judgment to Sentry, finding the Sentry policy only obligated Sentry to provide excess liability coverage, and McCann had no excess exposure because he settled within the limits of the Auto Club policy. The Eighth Circuit Court of Appeals affirmed, holding that the district court's interpretation of the policy was reasonable.

Insurer issued Insured a commercial general liability policy. After a third party sued Insured, Insured rejected the representation offered by Insurer under the policy on the ground that Insurer's reservation-of-rights letter had created a conflict of interest. Insured hired its own independent counsel, and when Insurer refused to reimburse Insured for the cost of its independent counsel, Insured filed an action seeking a declaratory judgment that Insurer had a contractual duty to defend and indemnify Insured in the third party lawsuit. The magistrate judge rejected Insured's claim, ruling that Insurer was not required to reimburse Insured for the cost of independent counsel. The Fifth Circuit Court of Appeals affirmed, holding (1) because the facts to be adjudicated in the third party lawsuit were not the same facts upon which coverage depended, the potential conflict in this case did not disqualify the attorney offered by Insurer to represent Insured; and (2) therefore, Insured was not entitled to reimbursement from Insurer for the cost of hiring independent counsel.

Petitioner Kilnwood on Kanasatka Condominium Unit Association, Inc. (Association) appealed a superior court's decision that dismissed its petition to change the ownership form of twenty-nine units in a residential subdivision from condominiums to single-family simple lots. In 2010, the Association members considered reforming the Declaration to convert it from a condominium association to single-family homes, but they could not reach the unanimous vote required by the Declaration to do so. Unable to reach an accommodation with the minority members, Perry Smith, Andy and Jill Belliveau, and Rob and Candy Baker, the Association petitioned the superior court to reform the Declaration. The minority members, who are the respondents in this case, cross-petitioned the court to declare that Kilnwood remain a condominium association, and moved to dismiss. The Association argued that the Declaration should have been reformed because it was not intended to create a condominium, but rather a subdivision of single-family residential lots. Finding that the fact that large majority of the Association’s members no longer found it desirable to own their property as condominiums did not alter the underlying contractual requirement contained in the Declaration, that any amendment to “matters . . . adjudicating the ownership interest in common areas” must be approved by unanimous vote. The failure of one local realtor to list the homes for sale in Kilnwood as condominiums was irrelevant to the inquiry into the intent of the Developer when it created Kilnwood as a condominium association or when Association members purchased condominium units within Kilnwood. Accordingly, the Supreme Court affirmed the superior court in dismissing the Association's petition.

Plaintiff Phaneuf Funeral Home appealed a superior court order that granted motions for summary judgment in favor of Defendants Little Giant Pump Company, Boyer Interior Design, Leviton Manufacturing Company and The Elegant Earth, Inc. Phaneuf hired Boyer to do interior design and light renovation work in the basement and adjacent hallway of the funeral home. In the hallway, Boyer installed a wall-mounted water fountain that it purchased from Elegant, an Alabama-based household goods retailer. Defendant Leviton supplied the fountain’s power cord to Little Giant, which manufactured the fountain. A fire broke out at the funeral home. Alleging that the water fountain’s defective pump and power cord caused the fire, Phaneuf brought negligence and strict product liability claims against each defendant, although it later withdrew its negligence claim against Boyer. Each defendant moved for summary judgment, arguing that Phaneuf’s claims were time-barred by RSA 508:4-b, I (2010), the statute of repose for “Damages From Construction.” The superior court agreed, and granted each motion. Upon review of the facts in the superior court record, the Supreme Court affirmed the lower court's grant of summary judgment as to Boyer, but reversed as to the remaining defendants. The case was remanded for further proceedings.

The United States Bankruptcy Appellate Panel of the Court of Appeals for the Ninth Circuit ("the BAP") certified a question to the Alabama Supreme Court: "In Alabama, is a 'default' judgment premised upon discovery sanctions or other post-answer conduct of the defendant sufficient to support the application of issue preclusion in a later proceeding?" Debtor-Defendant Anthony Malfatti was one of three principals of TA Financial Group ('TAF') purportedly designed to assist credit card holders in arbitration of disputes with the card issuers. The arbitration providers were selected by the card holders from a list provided by TAF. Among the arbitration providers was Arbitration Forum of America, Inc. ('AFOA'). AFOA was not conducting legitimate arbitrations; every arbitration resulted in an award in favor of the card holder, which was then reduced to judgment. Malfatti claims he was unaware that AFOA's practices and the judgments stemming therefrom were illegitimate. At some time after the banks involved learned of the judgments, they filed cross-complaints against the card holders to set aside the judgments as fraudulently obtained. In September 2005, the banks, including Bank of America, N.A. (USA) filed Amended Third Party Complaints against, among others, Malfatti and TAF, alleging tortious interference with contract, abuse of process, wantonness, and civil conspiracy, and sought an injunction against further arbitrations. The Banks moved for default judgments against Malfatti and TAF for failing to comply with discovery orders, repeated failures to appear for depositions, and failure to respond to written discovery. Malfatti and TAF filed a motion to set aside the defaults. The court found Malfatti and TAF to be jointly and severally liable for compensatory damages, awarded punitive damages against Malfatti, and found Malfatti to be liable for punitive damages awarded against TAF under the alter ego doctrine. Malfatti filed for Chapter 7 bankruptcy the Banks filed an adversary proceeding alleging the debt owed to them by Malfatti was nondischargeable. Upon review, the Alabama Supreme Court answered the certified question in the negative: "[f]or purposes of determining whether an issue is precluded by the doctrine of collateral estoppel, Alabama law makes no distinction between a simple default and a penalty default."

Auto Owners Insurance, Inc. ("Auto Owners"), appealed a circuit court's denial of its motion to dismiss or, in the alternative, to compel arbitration in an action against it filed by Blackmon Insurance Agency, Inc. Blackmon served as an agent for Auto Owners since 1995. The agency agreement the parties signed provided for commission to Blackmon for the sale of Auto Owners policies; the agreement also included an arbitration agreement should there be a dispute among them. In 2010, Blackmon filed a complaint in the circuit court seeking a declaratory judgment as to the arbitrability of a dispute between Blackmon and Auto Owners as to which Auto Owners had already initiated arbitration proceedings. In its complaint, Blackmon alleged that Auto Owners had initiated the arbitration proceedings against Blackmon in Eaton County, Michigan. Blackmon also alleged that in the Michigan arbitration proceeding Auto Owners bases its claims on a 2005 document and 2009 supplemental agreement. Auto Owners moved to dismiss, or in the alternative, to compel arbitration. The circuit court denied Auto Owners' motion, and Auto Owners appealed. Upon review of the documents at the heart of this dispute, the Supreme Court concluded the circuit court erred in denying Auto Owners' motion to compel arbitration. The Court therefore reversed the circuit court and remanded the case with instructions that the lower court grant the motion and either issue a stay of these proceedings pending arbitration, or dismiss the case.

Town & Country Property, L.L.C., and Town & Country Ford, L.L.C. (collectively referred to as "T&C") appealed a circuit court's grant of summary judgment Amerisure Insurance Company and Amerisure Mutual Insurance Company (collectively referred to as "Amerisure"), holding that Amerisure was not obligated to pay a $650,100 judgment entered on a jury verdict in favor of T&C and against Amerisure's insured, Jones-Williams Construction Company, because, the trial court reasoned, the faulty construction of the T&C facility upon which the judgment was based was not an "occurrence" covered under the commercial general-liability ("CGL") insurance policy Amerisure had issued Jones-Williams. On October 21, 2011, the Supreme Court affirmed in part the judgment entered by the trial court, agreeing that faulty construction did not in and of itself constitute an occurrence for CGL-policy purposes and that, accordingly, "Amerisure was not required to indemnify Jones-Williams for the judgment entered against it insofar as the damages represented the costs of repairing or replacing the faulty work." On remand, the parties filed briefs with the trial court: T&C argued that the vast majority of the $650,100 judgment should be attributed to covered damage, while Amerisure argued that the damages T&C sought for the repair and/or replacement of defective construction exceeded the amount of the verdict and thus none of the judgment should be attributed to covered damage to personal property or nondefective portions of the T&C property. In its order resolving the issue on remand, the trial court identified $257,500 in damages claimed by T&C at trial as representing the repair or replacement of faulty construction. It therefore subtracted that amount from the $650,100 awarded by the jury and awarded T&C $392,600 plus interest and costs. Upon a review of the record, the Supreme Court found that the $392,600 judgment entered by the trial court was not supported by the evidence. The judgment entered by the trial court on remand was accordingly reversed, and the case was again remanded for the trial court to enter a final judgment in favor of T&C for the amount of damages the Supreme Court deemed T&C was entitled to: $600.