Justia Contracts Opinion Summaries

Frederick and Mandelena Harmon bought a home pursuant to a buy-sell agreement that realtor Dianne Burright, a licensed real estate salesperson who worked for Fiscus Realty, prepared at the Fiscus Realty office. The home was built by Dianne's husband, Jerry. The Harmons subsequently discovered numerous construction problems. The Harmons sued Defendants Jerry and Dianne Burright and Fiscus Reality, raising several causing of action, including a claim under the Unfair Trade Practices and Consumer Protection Act (the Act). A jury returned a verdict against the Burrights on breach of warranty and negligent misrepresentation claims and held for Defendants on all other claims. After trial, Defendants filed motions for attorney fees as prevailing parties under the Act, which the district court denied. Fiscus Realty appealed. The Supreme Court affirmed, holding that the district court did not abuse its discretion in denying an award of attorney fees to Fiscus Realty as the Harmons' claims had a basis in fact and law and were not frivolous, unreasonable or unfounded.

In two similar cases, Lincoln National Life Insurance Co. v. Joseph Schlanger Trust (Schlanger) and PHL Variable Insurance Co. v. Price Dawe 2006 Insurance Trust (Dawe), an insurer sought a judicial declaration that a life insurance policy was void as an illegal contract wagering human life that accordingly lacked an insurable interest. The district court denied both motions to dismiss and certified three questions to the Supreme Court of Delaware concerning the incontestability provision under 18 Del. C. 2908 and the insurable interest requirement under 18 Del. C. 2704. The certified question, shared by both Dawe and Schlanger, concerned whether an insurer could claim that a life insurance policy never came into existence, on the basis of a lack of insurable interest, where the challenge occurred after the insurance contract's mandatory contestability period expired. The court answered in the affirmative and held that a life insurance policy lacking an insurable interest was void as against public policy and thus never came into force, making the incontestability provision inapplicable. The second certified question concerned whether the statutory insurable interest requirement was violated where the insured procured a life insurance policy with the intent to immediately transfer the benefit to an individual or entity lacking an insurable interest. The court answered in the negative, so long as the insured procured or effected the policy and the policy was not a mere cover for a wager. The third certified question concerned whether the relevant statutory provisions conferred upon a trustee an insurable interest in the life of the individual insured who established the trust if the insured intended to transfer the beneficial interest in the trust to a third-party investor with no insurable interest. The court answered in the affirmative, as long as the individual insured actually established the trust. If, however, the insured did not create and fund the trust then the relationship contemplated under section 2704(c)(5) was not satisfied.

In two similar cases, Lincoln National Life Insurance Co. v. Joseph Schlanger Trust (Schlanger) and PHL Variable Insurance Co. v. Price Dawe 2006 Insurance Trust (Dawe), an insurer sought a judicial declaration that a life insurance policy was void as an illegal contract wagering human life that accordingly lacked an insurable interest. The district court denied both motions to dismiss and certified three questions to the Supreme Court of Delaware concerning the incontestability provision under 18 Del. C. 2908 and the insurable interest requirement under 18 Del. C. 2704. The certified question, shared by both Dawe and Schlanger, concerned whether an insurer could claim that a life insurance policy never came into existence, on the basis of a lack of insurable interest, where the challenge occurred after the insurance contract's mandatory contestability period expired. The court answered in the affirmative and held that a life insurance policy lacking an insurable interest was void as against public policy and thus never came into force, making the incontestability provision inapplicable.

Plaintiff brought suit against the Dealership and Porsche when the pre-owned car that she purchased from the Dealership developed serious mechanical problems during the warranty period and the Dealership refused to honor her warranty claims. Plaintiff alleged breach of implied and express warranties under the Magnuson-Moss Warranty Act (MMWA), 15 U.S.C. 2301 et seq., and breach of contract and unconscionability under California law. The district court granted the Dealership's petition to compel arbitration pursuant to the mandatory arbitration provision in the sales contract that plaintiff signed when she bought the car and stayed the action against Porsche. Plaintiff's principal argument on appeal was that the MMWA barred the provision mandating pre-dispute binding arbitration of her warranty claims against the Dealership. Although the text of the MMWA did not specifically address the validity of pre-dispute mandatory binding arbitration, Congress expressly delegated rulemaking authority under the statue to the Federal Trade Commission (FTC). The FTC construed the MMWA as barring pre-dispute mandatory binding arbitration provisions covering written warranty agreements and issued a rule prohibiting judicial enforcement of such provisions with respect to consumer claims brought under the MMWA. Because it was required to defer to the reasonable construction of a statute by the agency that Congress had authorized to interpret it, the court held that the MMWA precluded enforcement of pre-dispute agreements such as Porsche's that required mandatory binding arbitration of consumer warranty claims. The court declined to address plaintiff's remaining claims. Accordingly, the court reversed and remanded for further proceedings.

Plaintiff brought suit against Toyota when the new car that she leased developed mechanical problems during the warranty period and Toyota failed to repair them to her satisfaction. In addition to several California state law claims, she alleged breach of warranty under the Magnuson-Moss Warranty Act (MMWA), 15 U.S.C. 2301 et seq. The district court granted Toyota's motion to dismiss for lack of subject matter jurisdiction on the ground that plaintiff did not, before filing suit in civil court, pursue her claims through the California Dispute Settlement Program (CDSP) that Toyota maintained and specified in its warranty. Plaintiff appealed, arguing that her failure to initially resort to the CDSP provided Toyota an affirmative defense to her warranty claims under the MMWA, but did not defeat subject matter jurisdiction. The court held that the prerequisite in section 2310(a) of the MMWA that a "consumer may not commence a civil action... unless he initially resorts to [an informal dispute settlement procedure]" was merely a codification of the MMWA's exhaustion requirement and did not operate as a jurisdictional bar. Accordingly, the court reversed and remanded so that the district court could consider how to proceed with the instant action, including the failure-to-exhaust issues.

This consolidated appeal arose from a contract dispute between Douglas Asphalt Company (Douglas) and the Georgia Department of Transportation (GDOT) where GDOT had awarded Douglas two paving contracts to mill and resurface certain stretches of interstate highway. GDOT subsequently retained QORE, Inc., an engineering and materials testing company, to remove asphalt samples from the first project site and conduct tests to determine the samples' lime content. QORE retained, at GDOT's direction, Applied Technical Services, Inc. (ATS), to perform a test that GDOT developed, called an atomic absorption test. QORE and ATS sent the data that those tests produced to GDOT for its analysis and consideration and GDOT concluded from those data that the asphalt that Douglas had laid did not contain enough hydrated lime; GDOT then relied, in part, on those test results to justify its decision to place Douglas in default on both highway contracts. Douglas responded by filing this action against QORE, ATS, and several individual GDOT officials. On appeal, Douglas contended that the district court erred by dismissing its Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1961-1968, claims and by granting summary judgment for QORE on its claims for defamation and negligence. ATS maintained that the district court erroneously failed to grant its motions for judgment as a matter of law on both the defamation and negligence claims. The court held that the district court did not err in dismissing Douglas's RICO claim and that QORE and ATS were entitled to judgment as a matter of law on both the defamation and negligence claims. Therefore, the court affirmed in part, reversed in part, vacated the judgment against ATS, and remanded for entry of judgment in favor of ATS.

Plaintiff, a freight railroad, owned a spur line connecting to a plastics plant, the only shipper located on the spur. Defendant, another railroad, bought the lines, including the spur. The sales contract allowed plaintiff to continue to run trains on the lines being sold and granted plaintiff an exclusive easement to use the spur to serve the plant. Several years later, the plant entered receivership. The receiver sold all assets, including the plant. The buyer continues to manufacture plastics in the plant. Contending that the change in ownership voided the exclusive easement, defendant contracted with the buyer to ship products over the spur, leaving plaintiff with diminished use of the spur. The district court ruled in favor of defendant, reasoning that the contract referred specifically to the plastics company in business at that time. The Seventh Circuit affirmed, based on the language of the contract in light of extrinsic evidence, and rejected a trespass claim.

John Miller pled guilty to two counts of deliberate homicide. Miller later filed suit against James Goetz, the attorney that defended him, and arranged for Patrick Begley's limited representation in his claims against Goetz. Begley later withdrew from representing Miller. Miller then filed suit against Begley, alleging breach of contract, breach of the covenant of good faith and fair dealing, and fraudulent deceit. The district court granted summary judgment to Begley, finding that Begley had reasonably assisted Miller with his claims against Goetz and the dismissal of the Goetz claim was based on legal deficiencies unrelated to Begley's legal services. The Supreme Court affirmed, holding that the district court did not err in granting summary judgment to Begley as Miller failed to demonstrate genuine issues of material fact existed regarding his claims.

This was the second appeal in litigation arising from the Secretary of Health and Human Services' (HHS) decision not to enter into a self-determination contract with the Southern Ute Indian Tribe (Tribe). In an initial order, the district court ruled that HHS's decision was unlawful, granted summary judgment to the Tribe, and directed the parties to prepare a proposed order for injunctive relief. After the parties were unable to agree on the proposed order, the district court issued an interlocutory order in which it endorsed HHS's approach to the contractâs start date and contract support costs. The Tribe appealed, and the Tenth Circuit dismissed the appeal for lack of jurisdiction. On remand, the district court issued a final order, directing the parties to enter a self-determination contract including HHS's proposed language regarding the contract start date and contract support costs and denying the Tribeâs request for damages. Both parties appealed. Upon review, the Tenth Circuit affirmed the district court's determination that HHS was required to contract with the Tribe and regarding the contract start date, but reversed the court's decision regarding contract support costs.

Plaintiff appealed from the district court's grant of summary judgment to National Union with respect to his claims under the Texas Insurance Code (Insurance Code), Tex. Ins. Code Ann. 541.003, 541.051, 541.052, 541.061, and the Texas Deceptive Trade Practices Act (DTPA), Tex. Bus. & Com. Code Ann. 17.46, 17.50, asserting misrepresentation and unconscionability. At issue was the Description of Coverage documents that National Union sent to plaintiff regarding eligibility for permanent total disability benefits under two insurance policies. The court held that plaintiff's contention that he had insufficient notice of National Union's basis for seeking summary judgment on his misrepresentation claims was unsustainable. The court also held that the definition of permanent total disability in the Descriptions of Coverage was ambiguous. The court held, however, that the ambiguity did not rise to the level of a misrepresentation within the meaning of the Insurance Code or the DTPA. To the extent that the Insurance Code required additional information to clarify an ambiguity, the reference to the master policy as controlling adequately informed a reasonable person that an ambiguity in the Description of Coverage was not binding if it conflicted with the policy. The court further held that plaintiff's unconscionability claims failed where he had not offered any reasoning as to the relevance of certain evidence regarding allegations of unconscionable conduct and where the claims were premised on conduct that had occurred after his injury and well after the inception of coverage under the policies. Accordingly, the court affirmed the district court's grant of summary judgment.