This article surveys business litigation cases decided from October 1, 2021, through September 30, 2022. This survey includes cases from various federal circuit courts as well as numerous state appellate and supreme courts. The subject matter and issues addressed range from arbitration and mediation, including a decision reversing the confirmation of an arbitration award because it was procured through fraud, to different aspects of breach of contract actions, including the enforcement of contractual provisions and the evidentiary burden in such cases and the damages allowed under the contract. The cases also address procedural pitfalls in business litigation matters, which practitioners should always aim to avoid, to at the very least, get their case to the merits.
MDK, a Bolivian company, filed suit against Proplant, a Texas corporation under breach of contract and tort theories of recovery. The Fifth Circuit affirmed the district court’s grant of summary judgment in favor of Proplant, concluding that MDK failed to meet the standard under Rule 56(d) of the Federal Rule of Civil Procedure for deferring summary judgment. Therefore, there was no error on the part of the district court in ruling on Proplant’s summary judgment motion prior to the end of discovery. Additionally, MDK’s opening brief failed to adequately present its arguments that Proplant’s motion for summary judgment and the district court’s order were legally deficient; therefore, those arguments were waived. Moreover, the Fifth Circuit likewise rejected MDK’s argument that the district court erred in granting summary judgment on its two breach of contract claims. Considering those claims, the Fifth Circuit concluded that MDK failed to identify sufficient evidence and issues of fact concerning the execution of a critical document and award of a contract.
In this case, the Eighth Circuit affirmed the district court’s finding that a consequential-damages exclusion is enforceable in a contract for the sale of goods. The Eighth Circuit determined that the contract clearly relieved Viracon of any potential liability for consequential damages and found Far East’s counter arguments unpersuasive. The Eighth Circuit held that the consequential-damages exclusion provision was not unconscionable under Minn. Stat. § 336.2-719(3), and the alleged failure of the contract’s exclusive remedy had no effect on the validity of the consequential-damages exclusion. However, Far East’s also brought an indemnity claim, and the Eighth Circuit articulated that to the extent that claim survived the consequential-damages exclusion, it ultimately failed because there was no express agreement obligating Viracon to reimburse it for the liability of the character involved. Finally, the Eighth Circuit denied leave to amend.
In Thornhill Motor Car, the West Virginia Supreme Court granted a writ of prohibition sought by Thornhill Motor Car, Inc. to preclude the Mingo County Circuit Court from enforcing an order denying Petitioner’s motion to dismiss based on improper venue. The West Virginia Supreme Court found that Thornhill established that it was entitled to the writ. Originally, Moore Chrysler, Inc. sued Thornhill, alleging violations of W. Va. Code § 17A-6A-1 to -18 and sought both declaratory and injunctive relief. In response, Thornhill filed a motion to dismiss, alleging improper venue, and asserting that the proper venue was Logan County pursuant to the state’s general venue statute. The circuit court denied the motion, deciding to apply the state’s specific venue statute, which specifically governs declaratory judgment actions brought by vehicle dealers against manufacturers or distributors. Thornhill then sought the writ of prohibition at issue. The West Virginia Supreme Court granted the writ, holding that the circuit court committed clear legal error in applying § 17A-6A-12(3) rather than § 56-1-1.
In 2001, Presbyterian, a nonprofit, organized a partnership for purposes of operating an affordable housing community under the Low-Income Housing Tax Credit (LIHTC) program. A limited partner SunAmerica provided $8,747,378 in capital for nearly 100% of the $11,606,890 in LIHTC credit. The partnership agreement gave Presbyterian (for one year following the 15-year LIHTC Compliance Period) a right of first refusal (ROFR) to buy the property under fair market value and a unilateral option to purchase for fair market value under certain circumstances. Prior to the expiration of the Compliance Period, Presbyterian expressed its desire to purchase the Property. After the Compliance Period, the General Partners told SunAmerica that they had received a bona fide offer from Lockwood and that Presbyterian could exercise its ROFR. SunAmerica filed suit. The district court granted SunAmerica’s motion for summary judgment, and it reasoned that Lockwood offer was not a bona fide offer because it was obtained only for the purpose of triggering the ROFR. The Sixth Circuit reversed and remanded, articulating that the ROFR must be construed in light of the LIHTC’s goals, which include making it easier for nonprofits to reacquire properties for purposes of continuing the availability of low-income housing.
In S&H Farm Supply, Inc. v. Bad Boy, Inc., the Eighth Circuit affirmed the district court’s jury verdict in favor of S&H in an action brought by Bad Boy, alleging that its termination of its farm equipment dealership contract violated Missouri’s outdoor power equipment statute. Concerning the breach of contract claim, the district court found that the evidence was sufficient for a reasonable jury to find that there was mutual assent, which was disputed, as to the size and measurement of the protected territory under the contract. Moreover, there was also sufficient evidence that a reasonable jury could have accepted S&H’s theory regarding causation of its lost profits. The Eighth Circuit also concluded that the evidence was sufficient to support S&H’s outdoor power equipment statutory claim. The Eighth Circuit rejected claims of evidentiary errors and jury instruction errors, affirming the award of attorneys’ fees, expenses, and costs.
Roe invented a nozzle that transforms gas into liquid. Roe assigned the nozzle to Nano Gas, in exchange for 20% equity in Nano and a board seat. The relationship floundered. Roe left Nano, taking a prototype machine and some of Nano’s intellectual property produced by Hardin, another employee, and continued to develop the technology. An arbitrator determined that Roe should compensate Nano ($1,500,000) but that Roe deserved compensation for his work ($1,000,000) in the form of an offset against Nano’s award. The arbitrator noted that Roe remained a Nano shareholder and could benefit financially in the future, then ordered Roe to return the Hardin work-papers to Nano, or, if unable to do that, to pay Nano $150,000. Nano sought to enforce the award and obtained judgment for $650,000. Nano filed a turnover motion seeking Roe’s Nano stock, valued at approximately $117,000. Roe argued that the award explicitly stated he could pay the remaining amount “in such manner as Roe chooses,” and provided he would remain a shareholder. The district court reasoned that Roe could choose how to pay the $500,000 award, but ordered Roe to turn over the stock or identify other assets to satisfy the $150,000 award. The Seventh Circuit reversed regarding Roe’s discretion to satisfy the $500,000 award and affirmed the $150,000 award for the Hardin papers. The award is devoid of any language indicating Roe shall remain a shareholder indefinitely or that Roe has complete discretion to decide if, when, and how Roe pays the award.
The Supreme Court of Minnesota affirmed the judgment of the court of appeals affirming the district court’s judgment concluding that Tennis breached the contract between the parties and that, as a result of the breach, Vermillion State Bank suffered $1.92 million in damages, holding that the court of appeals did not err. Tennis repudiated an alleged oral contract it negotiated with Vermillion for its purchase of certain assets, including garbage trucks and customer routes, of a trash collection business in bankruptcy. After Tennis’s repudiation, Vermillion sold the assets to another company at a significantly lower price. Vermillion then sued Tennis for breach of contract. The district court entered judgment for Vermillion. The court of appeals affirmed. The Supreme Court of Minnesota affirmed, holding that hybrid contract involving goods and non-goods should be interpreted based on the predominant purpose of the contract.
In this case, Google emailed users who submitted photographs to Google maps, but were not yet members of Google’s Local Guides Program, inviting them to join the program. Plaintiff joined and claimed his free terabyte of Google Drive storage space. While Google explained that the free storage was only for two years, plaintiff alleged that he assumed Google that the free storage was for life. Plaintiff filed suit for breach of contract and conversion. Google moved for summary judgment, and the district court considered the photo impact email, the enrollment document, and the rule for the program. The district court concluded that the evidence did not reflect a unilateral contract offer for one terabyte of free lifetime storage.
On appeal, the Ninth Circuit affirmed, articulating that advertisements are not typically understood as offers, but there is an exception for offers of a reward. The issue under California law is whether the advertiser clearly promised performance in exchange for something provided in response to a request and whether the recipient reasonably may have concluded that by acting upon request a contract would be formed. The Ninth Circuit further reasoned that the evidence neither informed users how an agreement could be executed, nor requested specific action, leaving nothing to negotiate.
The owners of the Venice Beach Hotel Erwin and Larry’s, an adjacent restaurant as well as affiliated corporate entities and an individual as the Trustee sued Fireman’s Fund Insurance Company alleging the COVID-19 virus was present and caused direct physical loss or damage within the meaning of Fireman’s Fund’s commercial property policy and that Fireman’s Fund refused to pay for resulting covered losses. The trial court sustained Fireman’s Fund’s demurrer to the insureds’ first amended complaint without leave to amend and dismissed the lawsuit. The trial court concluded that the COVID-19 virus cannot cause direct physical loss or damage to property for purposes of insurance coverage.
The Second Appellate District reversed finding that it was an error at the nascent phase of the case. The Second Appellate District explained that because the insureds adequately alleged losses covered by Fireman’s Fund’s policy, they are entitled to an opportunity to present their case, and the judgment of dismissal based on the trial court’s rejection of those allegations, whether ultimately reasonable or not, must be reversed.
After plaintiff filed a class-action complaint, defendants filed a motion to compel arbitration. The trial court granted the motion, and Plaintiff appealed. The court of appeals affirmed, and the Oregon Supreme Court granted review and found that the parties executed a Driver Services Agreement (DSA), where plaintiff provided delivery services for defendants. The DSA included a dispute resolution provision that allowed either party to propose mediation as means for resolving a dispute arising out of the DSA. However, in the event of unpursued or failed mediation of any dispute, including a dispute as to the validity of the DSA, the dispute could be resolved through binding arbitration conducted by a panel of three arbitrators. On review, plaintiff argued that the DSA’s arbitration agreement was unconscionable because it required arbitration of wage and hour claims but precluded the panel from providing relief on those claims. Plaintiff relied on a provision of the arbitration agreement, whereby the arbitrators could not “alter, amend or modify” the DSA. However, the court of appeals sided with the defendants interpretation of the DSA, along with the Supreme Court of Oregon, which explained that read in context of the entire DSA, the “alter, amend or modify” provision “is not plausibly read as a restriction on their authority to determine what terms are enforceable or what law is controlling.”
PSI submitted a purchase order to its Chinese manufacturers indicating that P.B. would purchase 100,000 Orgo (custom cosmetic) Bags in year one and purchase another 1.5 million bags annually thereafter. Over the first eighteen months, P.B. purchased 38,296 Orgo Bags. Consequently, PSI instructed its Chinese manufacturer to stem its losses and liquidate the materials purchased for the Orgo bags. After losing $506,129.44, PSI sued P.B., Aldez, Copek, and Byrne, alleging breach of contract, promissory estoppel, fraud, silent fraud, negligent misrepresentation, innocent misrepresentation, and non-acceptance of conforming goods under the U.C.C. The district court dismissed Copek, Byrne, and Aldez but allowed PSI to pursue some claims against P.B.
In 2021, PSI sued Aldez for breach of contract, promissory estoppel, and nonacceptance of conforming goods, arguing that in the 2019 suit, its claims were pleaded directly against Aldez, whereas in the 2021 suit, it sought to pierce P.B.’s corporate veil and hold Aldez vicariously liable. The district court dismissed, citing res judicata. The Sixth Circuit affirmed. The complaint does not allege any wrongdoing by Aldez and corporate veil piercing is not a cause of action under Michigan law; the 2021 suit’s complaint fails to state a claim.
Crozer owns healthcare companies that operate as wholly owned subsidiaries. Prospect employs professionals who work at hospitals, and CCMC, is a hospital that hired Abdurahman as an emergency medical resident. Abdurahman executed an at-will employment agreement with Crozer and an arbitration agreement with Prospect. Abdurahman alleged that her supervisor sexually harassed her, but the supervisor denied the allegations and claimed the opposite and informed CCMC Human Resources that Abdurahman had assaulted her. Eventually, Abdurahman was fired.
Abdurahman then filed a complaint with the Pennsylvania Human Relations Commission and the EEOC, alleging defamation and discrimination under Title VII, Title IX, 42 U.S.C. 1981, and the Pennsylvania Human Relations Act. She then filed suit against CCMC and Jacobs. The district court denied a motion to compel arbitration, and the Third Circuit affirmed. The Third Circuit found that Abdurahman signed an arbitration agreement with Prospect, not CCMC and reasoned that such an agreement cannot encompass Abdurahman’s employment with CCMC.
Plaintiff signed a Financial Responsibility Agreement (FRA) with Baylor University to secure her enrollment for the Spring 2020 semester. The FRA required Plaintiff to pay Baylor for “educational services,” and she paid her tuition bill in full. During the second half of the semester, Baylor responded to the COVID-19 pandemic by severely limiting on-campus activities and opportunities while conducting classes remotely. It did not, however, refund any tuition or fees. Plaintiff filed a class action against Baylor asserting a breach of contract claim, alternatively sought unjust enrichment.
The Fifth Circuit affirmed in part and reversed in part, and remanded. The Fifth Circuit explained that the FRA is a valid contract because it describes the essential terms with a reasonable degree of certainty and definiteness. Plaintiff failed to state a claim for contract invalidity. But, the Fifth Circuit explained that “the crux of the parties’ dispute remains the interpretation of ‘educational services.’” The Fifth Circuit also explained that on remand, the district court must consider whether Baylor’s or Plaintiff’s interpretation of “educational services” prevails. If the term, “educational services” is latently ambiguous, the Fifth Circuit provided that “further proceedings may be necessary to explore its meaning.” Also on remand, the Fifth Circuit explained that the district court must examine the surrounding circumstances relevant to the formation of the FRA.
In this dispute between Boston Executive Helicopters (BEH) and the Town of Norwood, the First Circuit affirmed in part and reversed in part the judgment of the district court denying BEH’s motions to enforce the parties’ settlement agreement as construed by BEH and to rescind the settlement agreement, holding that Norwood breached one provision of the settlement agreement.
The settlement agreement at issue temporarily resolved the parties’ dispute, but BEH later moved the district court to enforce the agreement as construed by BEH. On appeal from the district court’s denial of the motion, BEH filed a motion to rescind the settlement agreement, or in the alternative, to reconsider its denial of the motion to enforce. The district court denied the requests. The First Circuit largely affirmed, holding: (1) remand was required for consideration of BEH’s motion to enforce the agreement as it pertained to one issue; and (2) otherwise, the district court’s judgment was without error.
TIG Insurance Company (TIG) appeals from a judgment and order of the district court. TIG asserts that Judge Ramos erred in ordering it to arbitrate a coverage dispute with ExxonMobil Oil Corporation (Exxon). TIG contends that Judge Ramos erred in awarding Exxon prejudgment interest when confirming the arbitral award. After entering judgment, and after TIG had appealed, the district court clerk informed the parties that it was brought to Judge Ramos’s attention that he owned stock in Exxon while this case was pending before him. The Second Circuit noted that there was nothing in the record to suggest that Judge Ramos was aware of his conflict at the time he made his decisions. TIG moved in the district court to vacate the judgment. The case was reassigned to a different judge, who denied the motion to vacate. TIG appealed from that denial as well.
The Second Circuit affirmed the district court’s denial of TIG’s motion to vacate and the district court’s order compelling arbitration, reversed in part its decision granting Exxon’s request for prejudgment interest, and remanded to the district court for further proceedings. The Second Circuit explained that “[v]acatur was not required because this case present[ed] only questions of law, and a non-conflicted district judge reviewed the case de novo.” As to the merits, the Second Circuit held that the district court did not err in compelling arbitration because the parties were subject to a binding arbitration agreement, but that the district court erred in ordering TIG to pay pre-arbitral-award interest.
R&C, run by two employees, entered into an agreement to haul equipment for American Wind. The agreement’s arbitration clause provides:
any claim, dispute or controversy including, but not limited to the interpretation of any federal statutory or regulatory provisions purported to be encompassed by this Agreement; or the enforcement of any statutory rights emanating or relating to this Agreement shall be resolved on an individual basis (and not as part of a class action) exclusively between Contractor and Carrier by final and binding arbitration to be held in Allegheny County, Pennsylvania before the American Arbitration Association (“AAA”).
R&C alleges that American Wind failed to make agreed-upon detention payments, resulting in a cash shortfall, forcing R&C to sell its trucks. R&C continued to haul equipment for American Wind but on behalf of the trucks’ new owner.
R&C filed suit, alleging breach of contract and contending that the arbitration clause was unenforceable because R&C is a transportation worker operating under a contract of employment, exempt from the Federal Arbitration Act (FAA). R&C also argued that the arbitration provision was unconscionable. After R&C refused to arbitrate, the case was dismissed for failure to prosecute. The Third Circuit affirmed, noting that R&C had not sought interlocutory review of the order compelling arbitration, as permitted by the FAA. The interlocutory order was not part of the final order, so the court concluded it lacked jurisdiction to review it.
The Supreme Court of Kentucky reversed the decision of the court of appeals affirming the judgment of the trial court dismissing Constance Mouanda’s complaint against Jani-King International (Jani-King) and Cardinal Franchising, Inc. (Cardinal) alleging fraud, breach of contract, and unconscionability, holding that the trial court erred in granting Cardinal’s and Jani-King’s motion to dismiss.
Mouanda formed the Matsoumou’s LLC, for which Cardinal provided the necessary legal documents. The LLC entered into a franchise agreement with Cardinal and began operating as a unit franchisee. Mouanda later brought suit alleging fraud, breach of contract, and unconscionability and seeking damages for Cardinal and Jani-King’s failure to comply with Kentucky’s wage and hour laws. Cardinal and Jani-King moved to dismiss based on Mouanda’s failure to bring the lawsuit on behalf of the LLC. The court of appeals affirmed. The Supreme Court of Kentucky reversed, holding that the franchise agreement contained nothing that would preclude a wage and hour claim by Mouanda individually and that the fraud claim was not dependent on the LLC being a party to the action. The Supreme Court of Kentucky remanded the case to allow the parties to conduct further discovery so the trial court can determine whether Mouanda has a valid wage and hour claim and/or fraud claim.
Taizhou, a Chinese manufacturer, entered into a Cooperation Agreement with Z Outdoor, a Wisconsin company owned by Casual Products in which Taizhou would manufacture outdoor furniture and other related items for Z Outdoor to sell to customers. Z Outdoor eventually stopped paying Taizhou. The Cornings, on behalf of Z Outdoor, made false statements about future business, forthcoming payments, and causes for the delays. Taizhou continued to fill customer orders without receiving compensation. In 2018, AFG (a Wisconsin LLC also owned by Casual) started submitting purchase orders to Taizhou. AFG never signed the Cooperation Agreement. Taizhou filled the orders and sent AFG invoices. AFG eventually stopped paying Taizhou and made false statements regarding payment delays. The total due from Z Outdoor and AFG accrued to
$14 million for purchase orders sent during 2017-2019.
The district court entered a default judgment against the corporate defendants on Taizhou’s contract claims but ruled against Taizhou on unjust enrichment, fraud, and conversion claims, finding the fraud and conversion claims barred by Wisconsin’s economic loss doctrine and “mere repackaging of Taizhou’s ‘straightforward breach of contract claim.’” The Seventh Circuit affirmed. The Seventh Circuit also found that the fraud was interwoven with the Cooperation Agreement such that the economic loss doctrine applied. To the extent the damages amounted to lost profits or lost business, those are also economic losses under Wisconsin law.
Bernstein and France are certified agents, registered with the NFL Players Association to represent NFL players in contract negotiations. Bernstein also owns Clarity, which represents professional athletes in matters such as marketing and endorsement contracts. Golladay signed a standard representation agreement with Bernstein in 2016, before Golladay’s rookie season with the Detroit Lions, and signed a separate agreement with Clarity for representation in endorsement and marketing deals. In January 2019, Golladay terminated both agreements three days after participating in an autograph-signing event that Bernstein had played no role in arranging. Golladay immediately signed with France. Bernstein believed France was behind the signing event and filed a grievance against France pursuant to the NFLPA dispute resolution provisions. The matter went to arbitration. In pre-hearing discovery, France denied possessing any documents pertaining to the event and denied any involvement in the event. France’s lies were not uncovered until after the arbitration was decided in his favor.
The Third Circuit reversed the district court’s confirmation of the arbitration award because France’s fraud procured it. The Federal Arbitration Act, 9 U.S.C. § 10, permits an award to be vacated under narrow circumstances, including “where an award was procured by corruption, fraud, or undue means.” France’s fraud was not discoverable through reasonable diligence and was material to the case.
CAE Integrated L.L.C. and Capital Asset Exchange and Trading, L.L.C. (collectively “CAE”) sued its former employee and his current employer, Moov, for misappropriation of trade secrets and then moved for a preliminary injunction. The district court denied the preliminary injunction and CAE appealed. The Fifth Circuit affirmed the denial finding that CAE failed to establish a likelihood of success on the merits of its claims. The Fifth Circuit acknowledged that “trade secret is information which derives independent economic value from being not generally known or readily ascertainable through proper means.” CAE argued that “transactional documents” are files from Google Drive with purchase orders, invoices, customer equipment needs, and pricing history. The former employee has not had access to his MacBook since 2016, and he testified that Google Drive contained none of the transactional documents when he started at Moov. The district court found the former employee’s testimony credible, and the forensic analysis confirmed that before he began at Moov, he deleted any remaining transactional documents from his Google Drive. Therefore, the Fifth Circuit found that the district court did not err in finding that neither the employee nor Moov misappropriated trade secrets. Further, even if CAE had established that the former employee or Moov misappropriated trade secrets, it failed to show the use or potential use of trade secrets.
The issue this appeal presented for the New Jersey Supreme Court’s review centered on an exclusionary clause in a commercial general liability insurance policy issued by Admiral Insurance Company (Admiral) to Richfield Window Coverings, LLC (Richfield). Richfield sold window coverage products, including blinds, to national retailers like Home Depot and provided retailers with machines to cut the blinds to meet the specifications of the retailers’ customers. Colleen Lorito, an employee of a Home Depot located in Nassau County, was injured while operating the blind cutting machine. She and her husband filed a civil action against Richfield, asserting claims for product liability, breach of warranty, and loss of spousal services. Admiral denied any obligation to defend or indemnify, asserting the claims were not covered under the policy based on the Designated New York Counties Exclusion of the insurance policy. Richfield filed a declaratory judgment action seeking to compel Admiral to defend it in the Lorito case and, if necessary, indemnify it against any monetary damages awarded to the plaintiffs. The Law Division granted summary judgment in favor of Admiral.
The Appellate Division reversed, finding that “Richfield’s limited activities and operations have no causal relationship to the causes of action or allegations.” The Supreme Court of New Jersey found that the policy’s broad and unambiguous language made clear that a causal relationship was not required in order for the exclusionary clause to apply; rather, any claim “in any way connected with” the insured’s operations or activities in a county identified in the exclusionary clause was not covered under the policy. Richfield’s operations in an excluded county were alleged to be connected with the injuries for which recovery was sought, so the exclusion applied. Thus, the Supreme Court of New Jersey ruled that Admiral had no duty to defend a claim that it was not contractually obligated to indemnify.
Plaintiffs purchased tickets for Defendant’s commercial flights from Miami to Venezuela. Plaintiffs allege that their ticket prices reflected the “fully-paid contract,” and that Defendant failed to sufficiently disclose any other fees required for passage. When checking in for their flights at the airport, however, Defendant informed Plaintiffs that they had to pay an additional $80 “Exit Fee” before being allowed to board their flights. Plaintiffs filed a breach of contract putative class action. The district court dismissed the suit, concluding that the Airline Deregulation Act preempted Plaintiffs’ breach of contract claim because it related to the price of the airline ticket and the Act’s preemption provision identifies actions relating to price as preempted. The Eleventh Circuit reversed holding that the Plaintiffs plausibly alleged facts that would establish diversity jurisdiction. It further found that Plaintiffs’ breach of contract claim merely sought to enforce the parties’ private agreements regarding the cost of passage and did not invoke state laws or regulations to alter the agreed-upon price. The Airline Deregulation Act, 49 U.S.C. § 41713(b)(1), provides: “[A] State . . . may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of an air carrier.” The Eleventh Circuit found that this suit fell within the category of cases protected from preemption by the U.S. Supreme Court precedent.
The Supreme Court of Wyoming reversed the judgment of the district court’s ruling that enjoined Jorge Malave, an employee of Western Wyoming Beverages, Inc. (WWB) from working as a salesman for WWB’s direct competitor. The district court concluded that there was a valid and reasonable noncompete agreement between the parties, that WWB would likely succeed on the merits of its claim that Malave had violated the noncompete agreement and would suffer possible irreparable injury if no injunction were entered. The Supreme Court of Wyoming reversed, holding that WWB did not meet its burden of proving probable success on the merits of the reasonableness of its noncompete agreement with Malave.
