Justia U.S. 7th Circuit Court of Appeals Opinion SummariesArticles Posted in Contracts
Brian Hughes v. Southwest Airlines Co.
Hughes bought a ticket from Southwest to fly to Chicago. Just before the flight was to board, Southwest canceled it. Hughes, who chose an alternate flight through Omaha, claims that the cancellation was because Southwest ran out of de-icer and that no other airlines had a similar problem. He claims he incurred additional costs for lodging and similar expenses. The Seventh Circuit affirmed the dismissal of his breach of contract claim. There was no breach; the contract allows the airline to cancel and either reschedule the passenger or refund the fare. There is no implied duty to avoid cancellation. View "Brian Hughes v. Southwest Airlines Co." on Justia Law
R3 Composites Corp. v. G&S Sales Corp.
G&S had a written contract to work as a representative for a manufacturer, R3. The critical term dealing with sales commissions did not show any agreement on commission rates. It said that the parties would try to agree on commission rates on a job-by-job, customer-by-customer basis. While the original 2011 “agreement to agree” would not have been enforceable by itself, the parties did later agree on commission rates for each customer and went forward with their business. In 2014, changes made by customers in their ordering procedures led to disputes about commissions. The district court granted summary judgment for R3, relying primarily on the original failure to agree on commission rates. The Seventh Circuit reversed. A reasonable jury could find that the later job-by-job commission agreements were governed by the broader terms of the original written contract. The rest of the case is “rife with factual disputes that cannot be resolved on summary judgment.” View "R3 Composites Corp. v. G&S Sales Corp." on Justia Law
Acheron Medical Supply, LLC v. Cook Medical Inc.
In 2014, Cook Medical entered a five-year agreement for Acheron to serve as the distributor of Cook medical devices and products to VA and Department of Defense Medical Centers. Sales to Defense are primarily made through a Distribution and Pricing Agreement (DAPA); sales to the VA require a Federal Supply Schedule (FSS). Cook already had a DAPA, but not an FSS; the agreement required Acheron to obtain an FSS. Cook refused to submit to a required audit of its commercial sales records as required by 48 CFR 515.408(b)(5) to obtain an FSS and refused to deactivate its DAPA, preventing Acheron from selling Cook products to Defense through Acheron’s own DAPA. Cook sent notice that Acheron was in material breach and terminated the agreement 30 days later due to Acheron’s failure to cure. Acheron filed suit. The district court granted Cook summary judgment; Acheron materially breached its obligation to obtain an FSS but owed no damages because the breach was excused by the force majeure clause. The Seventh Circuit affirmed. The Agreement does not expressly obligate Cook to submit to the VA audit or to deactivate its DAPA. The duty of good faith requires that a party perform its obligations under the contract in good faith but does not require a party to undertake a new, affirmative obligation. Neither party actively sought to sabotage the other party’s performance to escape its own obligations or obtain an unfair advantage. View "Acheron Medical Supply, LLC v. Cook Medical Inc." on Justia Law
Stampley v. Altom Transport, Inc.
Stampley, the owner-operator of a tractor-trailer, provided hauling services for Altom. Altom agreed to pay Stampley 70% of the gross revenues that it collected for each load he hauled and to give Stampley a copy of the “rated freight bill” or a “computer-generated document with the same information” to prove that it had properly paid Stampley. The contract granted Stampley the right to examine any underlying documents used to create a computer-generated document and required him to bring any dispute regarding his pay within 30 days. Years after he hauled his last Altom load, Stampley filed a putative class action, alleging that Altom had shortchanged him and similarly situated drivers. The district court certified a class and held that Altom’s withholdings had violated the contract. Stampley had moved for summary judgment on the 30-day provision before the class received notice. The court subsequently denied Stampley’s motion for summary judgment, decertified the class, granted Altom summary judgment, and held that Stampley’s individual claims were barred. The Seventh Circuit affirmed. The district court did not abuse its discretion in finding Stampley an inadequate class representative and decertifying the class. The court found that the 30-day period began to run as soon as Stampley received any computer-generated document purporting to have the same information as the rated freight bill, necessarily including those that lacked the same information as the rated freight bill. View "Stampley v. Altom Transport, Inc." on Justia Law
Taylor v. J.P. Morgan Chase Bank, N.A.
Taylor fell behind on his mortgage payments during the 2008 financial crisis and sought help under the Home Affordable Mortgage Program (HAMP), which allowed eligible homeowners to reduce their monthly mortgage payments to avoid foreclosure. The first step toward a permanent loan modification was for qualifying borrowers to enter into a Trial Period Plan (TPP, 12 U.S.C. 5219(a)(1)) with their lenders and make lower payments on a provisional basis. Taylor’s lender, Chase, sent him a proposed TPP agreement to be signed and returned to Chase to start the process. That agreement stated that the trial period would not begin until both parties signed the TPP and Chase returned to Taylor a copy bearing its signature. Taylor signed the proposed agreement, but Chase never did. Taylor’s loan was never modified. Taylor sued Chase. The district court granted Chase judgment on the pleadings. The breach of contract claim failed because Taylor failed to allege that Chase had signed and returned a copy of the TPP. The Seventh Circuit affirmed. Chase never pre-committed to sending Taylor a countersigned copy of the TPP; it expressly reserved the right not to The return of the signed copy was a condition precedent to contract formation. Taylor alleged no actions by Chase from which it could be reasonably inferred that Chase intended to proceed with the trial modification absent a countersignature. View "Taylor v. J.P. Morgan Chase Bank, N.A." on Justia Law
Skyrise Construction Group LLC v. Annex Construction LLC
Skyrise bid $950,000 to supply “stick building” rough frame carpentry for building housing units near the University of Wisconsin-Oshkosh. Upon receiving a letter of intent from Annex, the general contractor, to enter into a contract, Skyrise blocked the project on its calendar and declined other work. Skyrise delayed returning the actual proposed contract for two months. Amex rejected Skyrise’s subsequent proposals for a broader scope of work and a different payment plan and awarded the carpentry contract to another firm. Skyrise sued for breach of contract, promissory estoppel, negligent misrepresentation, violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, and violation of the Wisconsin Deceptive Trade Practices Act. The Seventh Circuit affirmed summary judgment in favor of the defendants. Although the parties signed various proposals during their negotiations, no contract formed. The undisputed, objective evidence demonstrates that both parties intended for their relationship to be governed by a detailed contract that remained under review until Skyrise ultimately rejected that contract by making material alterations. Skyrise knew or should have known, that the negotiations could fall apart before the parties entered into a binding agreement. Annex never represented to Skyrise that it had the framing subcontract. View "Skyrise Construction Group LLC v. Annex Construction LLC" on Justia Law
Markel Insurance Co. v. Rau
United owns a fleet of ambulances. In 2016, Stofko was driving his car when a United ambulance crashed into it; Stofko’s injuries were fatal. United was insured by Markel but the particular ambulance that crashed was not listed on the policy. Rau, the representative of Stofko’s estate, argued that it was nevertheless covered by the policy because before the crash United sent Markel’s agent, Insurance Service Center, an email requesting that the vehicle be added to the policy. The Center denied seeing the email and United acknowledged that it had not received a response as was customary. Markel argued that even if United had sent an email, it never endorsed the change, which the policy requires, and has no duty to indemnify United or the driver and no duty to defend in Rau’s suit. The Seventh Circuit affirmed summary judgment in favor of Markel. It is not necessary to resolve what happened to the email request to add the vehicle to the policy; under Indiana law courts may not rewrite an insurance contract. Neither Center nor Markel accepted or responded in any way to United’s request, so the ambulance was not covered. View "Markel Insurance Co. v. Rau" on Justia Law
Rexing Quality Eggs v. Rembrandt Enterprises, Inc.
Rembrandt contracted to supply Rexing with 3,240,000 cage-free eggs every week for a year. Eight months later, Rexing claimed that Rembrandt failed to provide eggs that met the specified quality standards. Rexing sought a declaration that it was excused from accepting any more eggs, and incidental and consequential damages. Rembrandt counterclaimed, seeking damages. The trial court determined that Rexing had unilaterally terminated the contract and that the breach was not excused. Rembrandt was awarded $1,522,302.61 in damages. Rexing voluntarily dismissed its subsequent appeal and filed suit in state court, alleging conversion and deception. Rexing claimed that Rembrandt had refused to return reusable shipping materials, the “EggsCargoSystem,” Rexing had provided. In the first suit, Rexing had sought the value of the EggsCargoSystem as part of the start-up costs that it allegedly incurred in reliance on the agreement. Rembrandt removed the second suit to federal court and argued that the claims were barred by claim-preclusion in light of the district court’s grant of summary judgment in the first suit and that Rexing had improperly split its claims between the two cases. The Seventh Circuit affirmed the dismissal of the second suit. Rexing impermissibly split its claims. Both suits centered around the same controversy. Under Indiana’s doctrine prohibiting claim splitting, a plaintiff cannot bring a new lawsuit based upon the same transaction or occurrence that underlies claims brought in another lawsuit. View "Rexing Quality Eggs v. Rembrandt Enterprises, Inc." on Justia Law
Depuy Synthes Sales, Inc. v. Orthola, Inc.
DePuy manufactures medical instruments. Its Los Angeles area exclusive distributor was OrthoLA. The agreement included an arbitration provision. When that distribution arrangement ended, OrthoLA sued in Los Angeles Superior Court, alleging tort and contract claims. DePuy moved, unsuccessfully, to refer those claims to arbitration. DePuy appealed and filed a demand for arbitration with the American Arbitration Association. Three days later, DePuy filed this suit in the federal district court in Indianapolis, seeking an order compelling arbitration and an injunction against the state court proceedings. The district court stayed the case, pending the resolution of the California action. The Seventh Circuit affirmed. The lawsuits are parallel by any definition. Evaluating the “exceptional circumstances,” the court reasoned that the risk of splintering this litigation was great: functionally identical suits in two places creates a high risk of inconsistent results and wasteful duplication. The California courts were the first to take jurisdiction; that litigation is well along the road to resolution. The state courts are co-equal partners with the federal courts in protecting federal rights. The court speculated that “DePuy’s decision to open a second front in its effort to obtain arbitration just three days after it filed its appeal in the California courts was at best opportunistic and at worst manipulative.” View "Depuy Synthes Sales, Inc. v. Orthola, Inc." on Justia Law
Brickstructures, Inc. v. Coaster Dynamix, Inc.
Brickstructures and Coaster executed a fill‐in‐the‐blank joint venture agreement to design a roller coaster kit, compatible with LEGOs. Many of the blanks went unfilled. The agreement contained an arbitration clause. They successfully released one product but the relationship fizzled. Coaster independently launched another LEGO‐compatible kit, without any credit to Brickstructures. Brickstructures sued, claiming that Coaster breached the agreement and its fiduciary duties and violated the Lanham Act. Coaster moved to dismiss, arguing that the arrangement was not an enforceable contract. The court dismissed the complaint for a jurisdictional defect. An amendment cured that issue. Coaster again moved to dismiss, arguing that the amended complaint did not allege a binding joint venture or, alternatively, that arbitration was the exclusive forum for the claims. Brickstructures demanded that Coaster withdraw the arbitration arguments, claiming Coaster waived them by not advancing them in its first motion. Coaster formally withdrew those arguments. The court found that the amended complaint adequately alleged a binding agreement. Coaster then moved to compel arbitration. The court found that Coaster waived arbitration, rejecting an argument that it was reasonable to abandon an arbitration demand in acquiescence to Brickstructures’s threat to seek sanctions. The Seventh Circuit affirmed. "Having put the arbitration card on the table and then taken it back, Coaster was not permitted to play that card again." A court has the discretion to allow recission of a waiver of the right to arbitrate only in “abnormal” circumstances, View "Brickstructures, Inc. v. Coaster Dynamix, Inc." on Justia Law