Articles Posted in Contracts

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Hemlock and Sachsen manufacture components of solar-power products. They entered into a series of long-term supply agreements (LTAs), by which Hemlock in Michigan would supply Sachsen in Germany with set quantities of polycrystalline silicon (polysilicon) at fixed prices from 2006-2019. The market price of polysilicon was initially well above the LTA price, but the market price plummeted after the Chinese government began subsidizing its national production of polysilicon. The parties reached a temporary agreement to lower the LTA price in 2011. When that agreement expired, Hemlock demanded that Sachsen pay the original LTA price for 2012. Sachsen refused. Hemlock sued for breach of contract. The district court granted Hemlock summary judgment and awarded nearly $800 million in damages and prejudgment interest. The Sixth Circuit affirmed. The district court: properly struck Sachsen’s antitrust defense because enforcing the take-or-pay provision does not require the parties to engage in the precise conduct that is allegedly unlawful; properly struck Sachsen’s defense that the LTAs illegally tied Sachsen’s predominant demand for polysilicon to a single seller in violation of E.U. antitrust law; properly concluded that Sachsen’s affirmative defenses of commercial impracticability and frustration of purpose lack merit; and properly awarded the full amount of the remaining contract price as liquidated damages, despite Sachsen’s argument that the award was an unreasonable penalty. View "Hemlock Semiconductor Operations, LLC v. SolarWorld Industries Sachsen GMBH" on Justia Law

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Gerboc used the Wish Marketplace website to buy portable speakers for $27. Sellers on Wish can include a Manufacturer’s Suggested Retail Price, which appears (crossed-out) on a product’s “detail page.” Gerboc saw “$300” next to the speakers’ purchase price. Gerboc believed the crossed-out price was a promise of a 90% markdown but the speakers allegedly never sold for $300. Gerboc decided that he never received the promised discount and filed suit on behalf of himself and a class of similarly situated buyers. Arguing that Wish’s price visuals are deceptive, he alleged breach of contract, unjust enrichment, fraud, and violations of the Ohio Consumer Sales Practices Act (OCSPA). ContextLogic removed to federal court under the Class Action Fairness Act, 28 U.S.C. 1332(d). Gerboc abandoned his contract claim; the court dismissed his unjust enrichment, fraud, and class OCSPA claims. The Sixth Circuit affirmed. Gerboc did not establish unjust enrichment; he got what he paid for. Nor did he establish the notice element of an OCSPA claim: The consumer must show either that the Ohio Attorney General had already “declared [the seller’s practice] to be deceptive or unconscionable” or that an Ohio court had already “determined [the practice] . . . violate[s] [the OCSPA]” before the seller engaged in it. View "Gerboc v. ContextLogic, Inc." on Justia Law

Posted in: Consumer Law, Contracts

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A tree fell on Kaitlyn and Joshua. Kaitlyn died. She was pregnant. Doctors delivered the baby, but he died an hour later. Joshua survived with serious injuries. A state jury found the Somerset Housing Authority liable and awarded $3,736,278. The Authority belonged to the Kentucky Housing Authorities Self-Insurance Fund, which provided a policy with Evanston. Evanston sought a declaratory judgment limiting its liability under the Fund’s policy to $1 million. Meanwhile, through mediation of the state court case, Evanston agreed to pay the “policy limits” in return for an agreement to dismiss the state court action and release the Authority from further liability. Evanston claimed that $1 million was the coverage cap; the defendants claimed it was $2 to $4 million. The district court determined that there was complete diversity and ruled for Evanston on the merits. The Sixth Circuit affirmed. The district court properly aligned the parties given their respective interests in the primary dispute at the time of filing, so that diversity jurisdiction was not destroyed. The policy obligates Evanston to provide a maximum of $1 million of coverage per “occurrence,” with an aggregate limit of $2 million for more than one occurrence. The contract defines “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” When one tree falls at one time, that is one occurrence and one accident. View "Evanston Insurance Co. v. Housing Authority of Somerset" on Justia Law

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Lincoln Park’s dire financial condition led Michigan officials to place the city under the purview of an Emergency Manager pursuant to the Local Financial Stability and Choice Act, Mich. Comp. Laws 141.1541. Emergency Manager Coulter, with the approval of Michigan’s Treasurer, issued 10 orders that temporarily replaced Lincoln Park retiree health-care benefits with monthly stipends that retirees could use to purchase individual health-care coverage. Retirees filed sui under 42 U.S.C. 1983, asserting violations of the Contracts Clause, the Due Process Clause, and the Takings Clause. The district court rejected the Treasurer’s motion to dismiss, arguing qualified immunity and Eleventh Amendment immunity. The Sixth Circuit reversed. The court held, as a matter of first impression, that an alleged Contracts Clause violation cannot give rise to a cause of action under section 1983. With respect to other constitutional claims, the claimed property right derives from contract; a state contract action would be sufficient to safeguard the retirees’ contractual property rights. Because the state contract action is available as a remedy for any uncompensated taking the challenges to the constitutionality of Coulter’s orders are not ripe for resolution. As the claims fail on the merits, there is no need to evaluate the alleged immunity defenses. View "Kaminski v. Coulter" on Justia Law

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Great Lakes Brewing sought to end its relationship with one of its distributors, Glazer’s., after it executed a corporate merger without seeking Great Lakes’ consent, as required by their contract. Glazer’s successor corporation sought to preliminarily enjoin the impending termination, arguing that the contract’s consent requirement was invalid under the Ohio Alcoholic Beverages Franchise Act, Ohio Rev. Code 1333.82–87. The district court agreed and found that the remaining equities weighed in favor of granting the preliminary injunction. The Sixth Circuit reversed. Because the parties’ consent provision is valid under state law, the distributor had no likelihood of success on the merits. Far from prohibiting such provisions section 1333.84(F) actually anticipates that parties will include such provisions in their written franchise agreements; the fact that it requires manufacturers to “act in good faith in accordance with reasonable standards for fair dealing” regarding the sale of a distributor’s business necessarily implies that manufacturers can have a say over the transaction. View "Southern Glazer's Distributors of Ohio, LLC v. Great Lakes Brewing Co." on Justia Law

Posted in: Business Law, Contracts

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Reid founded Capitol, which owned commmunity banks, and served as its chairman and CEO. His daughter and her husband served as president and general counsel. Capitol accepted Federal Reserve oversight in 2009. In 2012, Capitol sought Chapter 11 bankruptcy reorganization and became a “debtor in possession.” In 2013, Capitol decided to liquidate and submitted proposals that released its executives from liability. The creditors’ committee objected and unsuccessfully sought derivative standing to sue the Reids for breach of their fiduciary duties. The Reids and the creditors continued negotiation. In 2014, they agreed to a liquidation plan that required Capitol to assign its legal claims to a Liquidating Trust; the Reids would have no liability for any conduct after the bankruptcy filing and their pre-petition liability was limited to insurance recovery. Capitol had a management liability insurance policy, purchased about a year before it filed the bankruptcy petition. The liquidation plan required the Reids to sue the insurer if it denied coverage. The policy excluded from coverage “any claim made against an Insured . . . by, on behalf of, or in the name or right of, the Company or any Insured,” except for derivative suits by independent shareholders and employment claims (insured-versus-insured exclusion). The Liquidation Trustee sued the Reids for $18.8 million and notified the insurer. The Sixth Circuit affirmed a declaratory judgment that the insurer had no obligation with respect to the lawsuit, which fell within the insured-versus-insured exclusion. View "Indian Harbor Insurance Co. v. Zucker" on Justia Law

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Corey worked as a machine operator in Eaton’s Ohio factory. Corey has long suffered from cluster headaches— extremely painful attacks that strike several times per day for weeks on end. In 2014, Corey applied for short-term disability benefits under Eaton’s disability plan after a bout of headaches forced him to miss work. After granting a period of disability, the third party administering Eaton’s disability plan discontinued benefits because Corey failed to provide objective findings of disability. Under the plan, “[o]bjective findings include . . . [m]edications and/or treatment plan.” Corey’s physicians treated his headaches by prescribing prednisone, injecting Imitrex (a headache medication), administering oxygen therapy, and performing an occipital nerve block. The district court upheld the denial. The Sixth Circuit reversed, citing the Employee Retirement Income Security Act, 29 U.S.C. 1132(a)(1)(B). Corey’s medication and treatment plan satisfy the plan’s objective findings requirement. View "Corey v. Sedgwick Claims Management Services, Inc." on Justia Law

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Ridgeway was employed as a Stryker sales representative from 2001-2013. Stryker’s faxed employment offer stated Ridgeway’s employment was contingent on his signing and returning an offer letter, a form non-compete agreement, and a code of conduct. From 2000-2005, Stryker used the same form non-compete agreement with all employees, which included a one-year non-compete clause, a customer non-solicit clause, an employee non-solicit clause, and a Michigan choice-of-law clause and a Michigan forum-selection clause. Ridgeway signed and returned the documents. Despite becoming one of Stryker’s top performers, in 2013, Ridgeway considered working for Stryker’s competitor, Biomet. Ridgeway claims that Stryker indicated that he was not covered under a non-compete agreement. Stryker terminated his employment and Ridgeway began working for Biomet within his former Stryker Louisiana-based sales territories. Stryker filed suit. The district court denied Ridgeway’s motion to dismiss based on the forum-selection clause in the non-compete agreement. Biomet terminated Ridgeway for fear of liability. A jury returned a verdict in favor of Stryker on its breach-of-contract, breach-of-fiduciary-duty, and misappropriation-of-trade-secrets claims and awarded damages in the amount of $745,195. The Sixth Circuit affirmed, rejecting Ridgeway’s challenges to the authenticity of the agreement and to the choice of law provision. View "Stone Surgical LLC v. Stryker Corp." on Justia Law

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In 2008, the Sixth Circuit held that the retired employees of Meritor and Meritor’s predecessors had a vested right to lifetime healthcare benefits. A petition for rehearing was held in abeyance for eight years while the parties attempted to settle their dispute. During the intervening eight years, the Supreme Court abrogated precedent on which the Sixth Circuit had relied, holding that a series of collective bargaining agreements materially indistinguishable from those involved in the Meritor case did not provide the retirees with lifetime healthcare benefits. On rehearing, the Sixth Circuit entered a superseding opinion and reversed, acknowledging that the case is now controlled by the Supreme Court’s decisions in Tackett (2015) and Gallo (2016) and that the language of the documents does not guarantee lifetime benefits. View "Cole v. Meritor, Inc." on Justia Law

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Nearly 20 years after defendants built, sold, and leased back a Rockport Indiana coal-burning power plant, they committed, in a consent decree resolving lawsuits involving alleged Clean Air Act violations at their other power plants, to either make over a billion dollars of emission control improvements to the plant, or shut it down. The sale and leaseback arrangement was a means of financing construction. Defendants then obtained a modification to the consent decree providing that these improvements need not be made until after their lease expired, pushing their commitments to improve the air quality of the plant’s emissions to the plaintiff, the investors who had financed construction and who would own the plant after the 33-year lease term. The district court held this encumbrance did not violate the parties’ contracts governing the sale and leaseback, and that plaintiff’s breach of contract claims precluded it from maintaining an alternative cause of action for breach of the covenant of good faith and fair dealing. The Sixth Circuit reversed, holding that a Permitted Lien exception in the lease unambiguously supports the plaintiff’s position and that the defendants’ actions “materially adversely affected’ plaintiff’s interests. View "Wilmington Trust Co. v. AEP Generating Co." on Justia Law