Justia U.S. 4th Circuit Court of Appeals Opinion Summaries

Articles Posted in Contracts
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The law firm of Brown Goldstein Levy LLP (“BGL”) and one of its partners (collectively, “Appellants”) filed suit against their insurer, Federal Insurance Company (“Appellee”), when it refused to provide coverage for costs Appellants incurred after the Government investigated the partner, executed a search warrant at BGL’s office, and notified the partner that his representation of certain clients may present a conflict of interest. The district court dismissed Appellants’ complaint, holding that there was no “Claim,” as that term is defined in the insurance policy, and alternatively that any costs Appellants incurred were excluded from the policy’s definition of “loss.”   The Fourth Circuit affirmed, concluding that there is no “Claim.” Neither the search warrant application nor the resulting search warrant is “written demand[s] or written request[s] for . . . nonmonetary relief . . . against an Insured” as required by the Policy. Therefore, the Search Warrant Claim fails because Appellants cannot state a claim for relief. The Target Conflict Letter makes no demand or request for relief against an Insured. The Government’s request to be notified promptly as to how the partner intends to proceed is not a request for “the redress or benefit, esp. equitable in nature (such as an injunction or specific performance), that a party asks of a court.” The Conflict Letters are not “Claims.” The court explained that despite Appellants’ attempts to characterize them as “demands,” they are not. Therefore, Appellants cannot state a claim as to the Partner Claim. View "Brown Goldstein Levy LLP v. Federal Insurance Company" on Justia Law

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In 2015, Towers Watson & Co. (“Towers Watson”), a Delaware company headquartered in Virginia, purchased directors and officers (“D&O”) liability insurance coverage from several insurance companies, including National Union Fire Insurance Company of Pittsburgh, Pa. (“National Union”) as the primary insurer. Following Towers Watson’s merger with another company, Towers Watson shareholders filed several lawsuits against Towers Watson’s chairman and CEO and others, alleging that the shareholders received below-market consideration for their shares in the merger. The litigation was settled, and Towers Watson sought indemnity coverage from its insurers under the relevant D&O policies. The insurers refused the indemnity request, citing a so-called “bump-up” exclusion in the policies. This declaratory judgment action followed. The district court sided with Towers Watson and held that the bump-up exclusion “does not unambiguously” preclude indemnity coverage for the underlying settlements.   The Fourth Circuit vacated the district court’s judgment and remanded for further proceedings. Under Virginia law, it will not do to merely identify any conceivable basis to hold that an insurance-coverage exclusion does not apply before stripping the exclusion of all force. Rather, the language of the exclusion must reasonably lend itself to an “equally possible” interpretation precluding the exclusion’s applicability. Here, however, the district court’s chosen interpretation, which disregarded the Policy’s plain language and inserted terms not included by the parties, cannot be characterized as one of two “equally possible” constructions. View "Towers Watson & Co. v. National Union Fire Insurance Company" on Justia Law

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Plaintiff Moses Enterprises, LLC, sells cars. Moses had an insurance policy issued by defendant Lexington Insurance Company, with Defendant AIG Claims, Inc. serving as the claims administrator. Moses sued Lexington and AIG in federal district court. The complaint made four claims under West Virginia law, including—as relevant here—one for breach of the insurance contract and one for violating the State’s unfair trade practices statute. The district court granted partial summary judgment for Moses on the breach of contract claim but resolved only liability—not damages.   The Fourth Circuit vacated the district court’s judgment and remanded. The court explained that the district court’s later grant of partial summary judgment also did not obviate the need for further work to “obtain payment of the insurance proceeds.” However, at the same time the court rejected Moses’s contention that the district court committed no legal errors in concluding Moses was entitled to “the entire amount of attorney’s fees incurred until the final resolution of the case.” Thus, the court wrote because the district court committed legal error in awarding Moses the full amount of its requested fees without determining whether any of the work was properly attributed only to the Jenkins claim, the court vacated the fee award and remand for further proceedings View "Moses Enterprises, LLC v. Lexington Insurance Company" on Justia Law

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While working for Adnet, Inc. (“Adnet”), Defendants learned of a subcontract that Adnet was attempting to win. Thereafter, Defendants, through their own company, submitted a bid for that same subcontract. After Defendants won the subcontract, Adnet brought claims against them for breach of the duty of loyalty, tortious interference with a business relationship, and business conspiracy. The district court granted Defendants’ motion for summary judgment, concluding that Defendants did not compete against Adnet, that Adnet did not have a business expectancy in the subcontract, and that, without proof of an underlying tort, there was no business conspiracy. Adnet appealed.   The Fourth Circuit reversed the district court’s grant of summary judgment to Defendants on Adnet’s claims for breach of the duty of loyalty and tortious interference with a business relationship. Further, the court vacated the district court’s grant of summary judgment to Defendants on Adnet’s business conspiracy claim and remanded. The court explained that there is sufficient evidence of a direct competition for the subcontract between Adnet and Defendants while they were working for Adnet to bar a grant of summary judgment to Defendants. A reasonable juror could conclude that employees, like Defendants, breach their duty of loyalty to their employer when they learn of a potential business opportunity through their employment and then participate in direct competition with their employer for that opportunity while still employed. View "Adnet, Inc. v. Rohit Soni" on Justia Law

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Plaintiff, an African American woman, worked as a conductor for Amtrak National Railroad Passenger Corporation (Amtrak). During her employment, she belonged to a division of the Sheet Metal, Air, Rail and Transportation Workers (SMART) union, which maintained a collective bargaining agreement (CBA) with Amtrak. Plaintiff brought the instant lawsuit pro se. She named Amtrak and the company’s director of employee relations as Defendants, along with three other Amtrak colleagues. Plaintiff asserted state-law claims of breach of contract and tort, as well as a federal claim of racial discrimination in violation of Title VII. Defendants moved to dismiss, and Plaintiff moved for summary judgment as well as for leave to amend her complaint. The district court granted Defendants’ motion and denied Plaintiff’s two motions. The district court held that Plaintiff’s claims were subject to arbitration under the Railway Labor Act (RLA).   The Fourth Circuit affirmed. The court explained that it declines to unwind a statutory scheme without a clear congressional directive to do so. Plaintiff argued that at least her particular claim is not a minor dispute. The mere fact that Plaintiff’s claim arises under Title VII does not disqualify that claim from being a minor dispute within the RLA’s ambit. The thrust of Plaintiff’s Title VII claim is that Amtrak deviated from its policies when dealing with her. While Plaintiff’s allegations as to her own treatment are factual, those concerning Amtrak’s policies directly implicate the relevant CBA between Plaintiff’s union, SMART, and Amtrak. That some of Plaintiff’s interpretive disagreements concern the Drug-Free Program does not alter the character of her claim. View "Dawn Polk v. Amtrak National Railroad Passenger Corporation" on Justia Law

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Plaintiff was a subcontractor for Forney Enterprises, a contractor working for the Pentagon. Forney Enterprises was bonded through the Fidelity and Deposit Company of Maryland. Plaintiff worked as a project manager for Forney Enterprises, supervising others who engaged in manual labor. After Forney Enterprises’ work at the Pentagon was terminated, Plaintiff sued Fidelity to recover the value of the work he had not been paid for. The district court found that his supervisory work did not qualify as “labor” and granted summary judgment for Fidelity.   The Fourth Circuit affirmed. The court explained that Under the Miller Act, contractors hired to work on government projects are required to furnish bonds to pay those who provided labor and were not paid as a result of a dispute. But not all work on a government project qualifies as “labor” under the Miller Act. And even when the work qualifies as labor, to claim his piece of the bond, a laborer must sue within one year of completing the labor to recover. Here, the court found that much of Plaintiff’s work was “labor,” the only work he performed within one year of filing suit, a materials inventory, was not “labor.” And no circumstances warrant estopping Fidelity from asserting the statute of limitations. View "Elliot Dickson v. Fidelity and Deposit Company" on Justia Law

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Law firm Halscott Megaro, P.A. (“Halscott Megaro” or “the firm”) sued former clients and their guardians (collectively “former clients”), seeking to recover unpaid legal fees and expenses. A district court dismissed the action under Federal Rule of Civil Procedure 12(b)(6). The district court took judicial notice of a North Carolina State Bar Disciplinary Hearing Commission (“Commission”) decision that found the firm’s lead partner misled the former clients and engaged in other unethical conduct. The court then held the firm was precluded from relitigating issues decided by the Commission. It held that Halscott Megaro failed to plausibly plead claims for which relief could be granted. Halscott Megaro appealed, arguing the district court improperly considered matters outside the pleadings and failed to accept its allegations and all reasonable inferences from them as true in concluding that the Commission’s decision as to its lead partner bound the law firm.   The Fourth Circuit affirmed and held that the district court committed no reversible error in granting the former clients’ motion to dismiss or in denying the law firm’s motion for recusal. The court wrote that it agreed with the district court’s conclusion that the Commission was acting in a judicial capacity when it entered its discipline order against Megaro. The court also agreed that Megaro received a full and fair opportunity to litigate the issues and due process protections. Further, the court held that the firm’s allegations of impartiality were not related to any particular facts, sources or statements. A presiding judge is not required to recuse himself simply because of unsupported or highly tenuous speculation. View "Halscott Megaro, P.A. v. Henry McCollum" on Justia Law

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Plaintiff was on active duty with the United States Army. He bought a car from Select Cars of Thornburg in Fredericksburg, Virginia, and financed his purchase with a loan from United Auto Credit Corporation. The loan financed not only the car’s cost but also the cost of Guaranteed Asset Protection. Guaranteed Asset Protection is like extra insurance, covering any amount still due on the car loan after auto insurance is paid out if the car is totaled or stolen. Plaintiff’s claims arise from this single loan. This loan, Plaintiff alleged, violated the Military Lending Act because the loan agreement mandated arbitration and failed to disclose certain information. The district court dismissed the case, holding that the loan was not covered by the Act at all.   The Fourth Circuit affirmed. The court explained that a statutory provision must be given the ordinary meaning it had when it was enacted. Relevant dictionaries, carefully considered, sometimes shed light on that ordinary meaning. Yet here, dueling dictionaries provide more than one linguistically permissible meaning.  But by examining the relevant phrase in its statutory context. This context shows that while “the express purpose” can be used in different senses, it is best read in Section 987(i)(6) to mean the specific purpose. This loan was offered for the specific purpose of financing Plaintiff’s car purchase. And that satisfies Section 987(i)(6)’s relevant condition and the Act is inapplicable. View "Jerry Davidson v. United Auto Credit Corporation" on Justia Law

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Dmarcian, Inc. (dInc) and dmarcian Europe BV (dBV)—and a broken business relationship. The original dmarcian, dInc, is a Delaware corporation with headquarters in North Carolina. Its corporate homonym, dBV, is a Dutch entity based in the Netherlands. The two companies negotiated an agreement authorizing dBV to sell dInc’s software in Europe and Africa. The license was done on a handshake, and the parties now dispute its terms. Among other allegations, dInc accuses dBV of directly competing for customers, which prompted dInc to bring claims of copyright and trademark infringement, misappropriation of trade secrets, and tortious interference. The district court exercised personal jurisdiction over dBV and declined to dismiss for forum non conveniens. The district court also issued a preliminary injunction limiting dBV’s use of dInc’s intellectual property. The district court later held dBV in contempt for violating the injunction, and dBV appealed.   The Fourth Circuit affirmed except as to one aspect of the contempt order, which the court vacated and remanded for further proceedings as to the proper amount of sanctions. The court explained that the district court did not err in exercising personal jurisdiction, in declining to dismiss for forum non conveniens, and in issuing a preliminary injunction. Further, the court held that the district court was also justified in issuing a contempt sanction; but the court  requires a more thorough examination of the sanction amount. While the preliminary injunction may not be the final word on the merits, its entry was also not an abuse of discretion considering the weighty interests and detailed findings discussed at length above. View "Dmarcian, Inc. v. Dmarcian Europe BV" on Justia Law

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These consolidated cases involve a dispute between Antero Resources Corporation (“Antero”) and a group of landowners (“Lessors”) over the payment of natural gas royalties under several oil and gas leases. The leases permit Antero to extract and sell natural gas owned by the Lessors in exchange for royalty payments. Antero appealed from the district court’s summary judgment order, which held that Antero breached the terms of the leases by deducting certain “post-production costs” from the royalties it paid Lessors and awarded damages. Lessors cross-appeal the district court’s earlier dismissal of their fraud and punitive damages claims against Antero.   The Fourth Circuit affirmed the district court’s summary judgment order in part and vacated in part. The court concluded that some of the leases prohibit Antero from deducting any post-production costs from Lessors’ royalties, but other leases—namely, those that contain a “Market Enhancement Clause”—do authorize deductions in certain circumstances. Separately, the court affirmed the dismissal of the fraud and punitive damages claims because Lessors did not plead them with sufficient particularity. View "Gerald Corder v. Antero Resources Corporation" on Justia Law