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

Articles Posted in Contracts
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The federally-recognized Native American Tribe (in California) started an online lending business, allegedly operated by non-tribal companies owned by non-tribal Defendants on non-tribal land. The Plaintiffs are Virginia consumers who received online loans from tribal lenders while living in Virginia. Although Virginia usury law generally prohibits interest rates over 12%, the interest rates on Plaintiffs’ loans ranged from 544% to 920%. The Plaintiffs each electronically signed a “loan agreement,” “governed by applicable tribal law,” and containing an “Arbitration Provision.” The borrowers defaulted and brought a putative class action against tribal officials and two non-members affiliated with the tribal lenders.The district court denied the defendants’ motion to compel arbitration and motions to dismiss on the ground of tribal sovereign immunity except for a Racketeer Influenced and Corrupt Organizations Act (RICO) claim. The Fourth Circuit affirmed. The choice-of-law clauses of this arbitration provision, which mandate exclusive application of tribal law during any arbitration, operate as prospective waivers that would require the arbitrator to determine whether the arbitration provision impermissibly waives federal substantive rights without recourse to federal substantive law. The arbitration provisions are unenforceable as violating public policy. Substantive state law applies to off-reservation conduct, and although the Tribe itself cannot be sued for its commercial activities, its members and officers can be. Citing Virginia’s interest in prohibiting usurious lending, the court refused to enforce the choice-of-law provision. RICO does not give private plaintiffs a right to injunctive relief. View "Hengle v. Treppa" on Justia Law

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EC contracted to repair the Navy ships Thunderbolt, Tempest, and Hurricane. The Navy claimed $474,600 in liquidated damages under the Tempest contract because of late delivery. Having already paid for the Tempest work, it withheld $473,600 under the Hurricane contract. EC claimed the Navy caused the delay and, after the contracting officer denied its claim, sued under the Tempest contract, referring specifically to the $473,600 setoff. While the litigation proceeded, EC sought additional compensation under the Hurricane contract for unexpected work on that ship and appealed to the Armed Services Board of Contract Appeals, seeking payment of the $473,600 “withheld from payments due under [the Hurricane] contract.”The parties settled the Tempest suit: EC released the government “from any and all actions, claims, . . . and liabilities of any type, whether known or unknown, suspected or unsuspected, foreseen or unforeseen, or open or hidden, which have existed, presently exist, or may exist in the future, arising out of or in any way relating to the [Tempest] Contract.” The government released EC from “any and all” claims “arising out of or in any way relating to the issues that were raised ... or could have been raised in the pleadings.”In 2019, EC asserted a right to the same $473,600 in a third request to the contracting officer, then filed suit. The Fourth Circuit affirmed summary judgment in favor of the government. The settlement agreement barred EC’s claims. View "East Coast Repair & Fabrication, LLC v. United States" on Justia Law

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After a jury returned a special verdict finding Norfolk Southern materially breached its contract with Drummond, the district court entered a declaratory judgment for Drummond and awarded limited equitable relief.The Fourth Circuit concluded that the district court properly denied Norfolk Southern's Federal Rule of Civil Procedure 50(b) Motion and did not abuse its discretion in denying Drummond's Rule 59(e) Motion seeking complete rescission. In this case, the court saw no evidence from which a jury could reasonably conclude that Norfolk Southern expressly breached Article 13 of the Agreement. Furthermore, there was sufficient evidence for a reasonable jury to find that Norfolk Southern breached the implied duty of good faith and fair dealing. The court noted that whether or not there was evidence of damages is beside the point. In this case, the jury was only asked whether Norfolk Southern materially breached its agreement with Drummond and, if so, when. Given the court's standard of review, the discretion afforded to courts under Virginia law in making decisions about equitable relief, and the district court's expansive reasoning assessing equities unique to this case, the court declined to find that the district court abused its discretion in denying Drummond complete rescission. View "Drummond Coal Sales, Inc. v. Norfolk Southern Railway Co." on Justia Law

Posted in: Contracts
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In 2012, Bishop Lawrence sought to disaffiliate his South Carolina-based diocese from the Episcopal “Mother Church”. Some parishes followed suit. The Mother Church purported to remove Lawrence and selected a new bishop. The Disassociated Diocese and Parishes sued the Mother Church to clarify their property rights in diocesan. The Mother Church filed counterclaims and separately filed trademark and false-advertising claims. Both cases are ongoing.The Church Insurance Company, wholly owned by the Church Pension Fund, is a freestanding nonprofit affiliated with the Mother Church. Captive insurance companies may only cover the risks of their parent companies and related entities. Before the schism, the Company issued a Diocesan Program Master Policy, listing as “named insured” the Episcopal diocese and listing 56 participant parishes, including the now-Disassociated Parishes, in its declarations. Each parish has a separate, individualized insurance policy and paid premiums directly to the Company. The policies provide liability coverage for injuries arising out of “infringement of copyright, title, slogan, trademark, or trade name” and include a broad duty to defend. The Company has reimbursed the Disassociated Parishes’ defense costs in connection with both lawsuits.The Associated Diocese sued the Company, alleging breach of contract, bad faith, breach of fiduciary duty, and aiding and abetting breach of fiduciary duty. The Fourth Circuit affirmed the dismissal of that suit for lack of standing. The Company has not strayed beyond its limitations as a captive insurer or breached its obligations under the policies, so there is no injury traceable to such conduct. View "Episcopal Church in South Carolina v. Church Insurance Company of Vermont" on Justia Law

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In 2014, the Rowlands first met with Morris (SMF), for financial planning advice. In 2015, Morris sold them two annuity contracts; in 2016, Morris sold them universal life insurance. In 2017, the Rowlands hired Morris to manage their investment accounts and completed SMF’s Asset Management Agreement (AMA) and new account forms from TD Ameritrade, which were bundled into a single, 54-page pdf. The Rowlands signed the forms using the online platform, “DocuSign.” The AMA included an arbitration section. Right above the signature block, the contract included this disclaimer, bolded and in all capital letters: “This Agreement contains a pre-dispute arbitration clause.”The Rowlands filed suit, alleging contract and fraud claims. The parties submitted different versions of the AMA to the court for its decision on SMF’s motion to compel arbitration. The district court found that the parties had not formed an agreement to arbitrate. The Fourth Circuit affirmed. Under the Federal Arbitration Act, courts determine whether a contract has been formed. Here, there was no meeting of the minds. The versions of the AMA signed by the Rowlands and by SMF’s agent contained materially different terms. View "Rowland v. Sandy Morris Financial LLC" on Justia Law

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Plaintiffs filed suit alleging that pressure tactics used by Quicken Loans and TSI to influence home appraisers to raise appraisal values to obtain higher loan values on their homes constituted a breach of contract and unconscionable inducement under the West Virginia Consumer Credit and Protection Act. The district court granted summary judgment to plaintiffs.The Fourth Circuit concluded that class certification is appropriate and that plaintiffs are entitled to summary judgment on their claims for conspiracy and unconscionable inducement. However, the court concluded that the district court erred in its analysis of the breach-of-contract claim. The court explained that the district court will need to address defendants' contention that there were no damages suffered by those class members whose appraisals would have been the same whether or not the appraisers were aware of the borrowers' estimates of value—which one might expect, for example, if a borrower's estimate of value was accurate. The court agreed with plaintiffs that the covenant of good faith and fair dealing applies to the parties' contract, but concluded that it cannot by itself sustain the district court's decision at this stage. The district court may consider the implied covenant of good faith and fair dealing to the extent that it is relevant for evaluating Quicken Loans' performance of the contracts. Accordingly, the court affirmed in part and vacated and remanded in part. View "Alig v. Quicken Loans Inc." on Justia Law

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GPI and Foodbuy were engaged in a non-exclusive commercial relationship, which was memorialized in a supplier agreement. Foodbuy subsequently filed suit against GPI alleging, among other claims, breach of contract for overcharging its Committed Customers. GPI counterclaimed, asserting, in relevant part, breach of contract for over-invoicing and violations of North Carolina's Unfair and Deceptive Trade Practices Act (UDTPA). The district court held that the Agreement's terms were unambiguous, and, under its plain language, required GPI to pay a volume allowance only for purchases made through Foodbuy's program (and thus at Foodbuy's price). In the alternative, the district court determined that should the Agreement's terms be found to be ambiguous, the same result would follow because the various methods of contract interpretation pointed to the same conclusion.The Fourth Circuit agreed with the district court that Foodbuy failed to show that it suffered any individualized harm as a result of GPI's alleged failure to sell its products to Committed Customers at the correct pre-determined prices under the Agreement. Therefore, the court affirmed the district court's dismissal of Foodbuy's overcharging claim for lack of standing. The court concluded that the district court did not abuse its discretion in denying Foodbuy's motion in limine to exclude GPI's damages calculation, and in denying Foodbuy's request for leave to amend its answer to conform to the evidence. The court noted that the proper framework for resolving the breach of contract claim involves the tools for interpreting ambiguous contracts. In this case, the district court undertook that analysis in its alternative holding wherein it concluded that the parties' intent was to require GPI to pay a volume allowance on only those purchases made through the Foodbuy program at the negotiated price. Because Foodbuy failed to present any argument in its opening brief taking issue with this facet of the district court's alternative holding, even though the court found the Agreement to be ambiguous, Foodbuy has waived any challenge to the district court's judgment on that ground. Therefore, the court affirmed the district court's interpretation of the Agreement. However, the district court wrongly denied GPI's cross-claim alleging violations of the UDTPA. Accordingly, the court vacated and remanded on this issue. View "Foodbuy, LLC v. Gregory Packaging, Inc." on Justia Law

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Defendant was a successful franchise operator of several tax preparation businesses under the umbrella of JTH Tax, Inc. and SiempreTax+ LLC (together, "Liberty Tax"). In this case, Liberty Tax requested that defendant assign it the leases for the franchise properties, as provided for by the Purchase and Sale Agreement (PSA). However, the parties could not agree to terms for the assignment. Liberty Tax subsequently filed suit and defendant countersued. Defendant largely prevailed and was awarded a significant sum of damages. The Fourth Circuit vacated a substantial portion of the damages award but upheld the judgment in defendant's favor. On remand, the district court recalculated damages based on the Fourth Circuit's instructions and then, on defendant's motion, subsequently amended the judgment, increasing the damages based on purportedly new evidence. Both parties appealed again.The Fourth Circuit found no error in the district court's denial of defendant's arguments for reinstatement of much of the original damages. The court explained that the district court did not err in concluding that the Rule 59(e) standard and the mandate rule precluded defendant's disgorgement theory. However, the court found error in the district court's conclusion that defendant met the standard for relief based on newly discovered evidence and in the award of nominal damages. The court concluded that, in the declaration and now on appeal, defendant does not show he exercised reasonable due diligence during the three years of litigation to discover and present evidence of unpaid rent on the Burnside property. Furthermore, nominal damages were unavailable because defendant was awarded compensatory damages to remedy Liberty Tax's breach of contract, regardless of the finding that Liberty Tax also breached the contract by breaching the implied covenant. Accordingly, the court affirmed in part, reversed and vacated in part, and remanded with instructions to recalculae damages. View "JTH Tax, Inc. v. Aime" on Justia Law

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Residents and businesses of Lumberton, North Carolina filed a putative class action alleging that CSX Transportation caused their property to be flooded during Hurricanes Matthew and Florence. The district court dismissed each claim as either insufficiently pleaded or preempted by federal law.The Fourth Circuit concluded that dismissal of the breach of contract claim was premature because plaintiffs have plausibly alleged that the Tri-Party Agreement was intended to directly benefit the class of persons to which they belong—the residents and businesses of South and West Lumberton left vulnerable to flooding through the gap. However, the court's holding is limited to the Tri-Party Agreement. In this case, plaintiffs alleged the existence of a second, unnamed and undated agreement, but failed to produce it or to plead any of its essential terms. The court also concluded that plaintiffs' tort claims are preempted by the federal Interstate Commerce Commission Termination Act. Accordingly, the court affirmed in part, reversed in part, and remanded. View "Edwards v. CSX Transportation, Inc." on Justia Law

Posted in: Contracts
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A jury awarded plaintiff $1 million on his claims against Sparrows Point for nonpayment of a commission on the sale of a large parcel of industrial property located on the Sparrows Point peninsula. Defendants contend that the evidence is insufficient to support the jury's verdict as to all claims. In the alternative, they seek a new trial, contending that the district court erred in admitting evidence of an alleged effort to compromise plaintiff's claim to a commission and in granting plaintiff a jury trial.The Fourth Circuit held that the evidence of defendants' effort to compromise plaintiff's claim was not admissible for any purpose under Federal Rule of Evidence 408 and the error was not harmless. The court explained that, even assuming that the evidence is sufficient as a matter of law to support the jury's verdict, the court cannot be confident that the jury was not substantially swayed by the evidentiary error. Therefore, the court held that defendants are entitled to a new trial. Finally, the court found that the district court enjoyed ample discretion to grant plaintiff's untimely request for a jury trial under Federal Rule of Civil Procedure 39(b), and thus the new trial may remain before a jury. View "Macsherry v. Sparrows Point, LLC" on Justia Law