Justia U.S. 3rd Circuit Court of Appeals Opinion SummariesArticles Posted in Contracts
Epsilon Energy USA Inc. v. Chesapeake Appalachia LLC
Epsilon, an Ohio corporation with a principal place of business in Texas, entered into Joint Operating Agreements (JOAs) with companies, including Chesapeake, an LLC whose sole member is an Oklahoma citizen, to develop natural gas in Pennsylvania. The JOAs require Chesapeake to “have full control of all operations on the Contract Area.” Chesapeake can be removed as Operator for good cause by a vote of the other JOA parties. The JOAs allow the “Non-Operator parties” to propose new well sites. The others have 30 days to decide whether to participate. The work is then ordinarily performed by Chesapeake. If Chesapeake does not approve the project, the Consenting Parties designate a Consenting Party as Operator. Chesapeake opposed wells proposed by Epsilon, then blocked Epsilon from operating the proposed project unilaterally.Epsilon sought a declaration to drill without Chesapeake’s participation. Chesapeake moved to dismiss the suit for failure to join the other JOA co-signatories. The district court dismissed for failure to state a claim. The Third Circuit remanded. The other contracting parties are required (Fed. R. Civ. P. 19(a)(1)). A declaratory judgment interpreting the JOAs to authorize a single Consenting Party to propose the drilling of a new well would affect all their interests. However, other Absent JOA Parties are citizens of Texas who cannot be feasibly joined without defeating diversity and destroying subject matter jurisdiction. Deciding whether to proceed without them requires findings by the trial judge. View "Epsilon Energy USA Inc. v. Chesapeake Appalachia LLC" on Justia Law
Hickey v. University of Pittsburgh
The universities, Pitt and Temple, offer traditional, on-campus educational programs. Temple also offers fully online distance-learning programs, which are separately advertised and priced. Students who enrolled in the Universities’ traditional on-campus programs for the Spring 2020 semester were required to pay tuition and mandatory fees and to sign a Financial Responsibility Agreement (FRA). On March 11, 2020, then-Governor Wolf ordered a temporary closure of all non-life-sustaining businesses, citing the rising number of COVID-19 cases. The Universities closed campus buildings, canceled all on-campus student events, announced that classes would be conducted online for the remainder of the semester, and urged students not to return to campus housing. Neither university offered any reduction in tuition or mandatory fees. Temple issued pro-rata housing and dining refunds. Pitt did so only for students who moved out by April 3, 2020.Students sued for breach of contract, or, alternatively, unjust enrichment, citing the Universities’ “website[s], academic catalogs, student handbooks, marketing materials, and other circulars, bulletins, and publications,” which described the benefits of campus life, and the reduced pricing for online courses.The Third Circuit reversed, in part, the dismissals of both suits. There is no express contract precluding the implied contract or unjust enrichment claims. The FRAs function as promissory notes, not integrated contracts. The students adequately pleaded their implied contract claims as to tuition in exchange for in-person education, Pitt’s mandatory fees, and Temple’s university services fee—but not as to Pitt’s housing and dining fees. The students also adequately pleaded unjust enrichment. View "Hickey v. University of Pittsburgh" on Justia Law
Sapp v. Industrial Action Services LLC
An Asset Purchase Agreement provided that the sellers could receive variable payments (Earn-Out Consideration) if the post-merger company (IAS) achieved specific benchmarks. Section 2.6(c) specifies that IAS had to provide the sellers with the computation for each period, to become final unless they submitted a “notice of disagreement.” Any disagreement would be settled according to Section 2.3(e),” which refers to resolution by an accounting firm. Section 11.17, however, directs the parties generally to use non-binding mediation, followed by litigation if mediation fails.IAS determined that the company did not meet its targets. The sellers claim that IAS intentionally prevented the company from hitting its targets. Negotiations failed. The sellers sued for breach of contract and tortious interference; later, they filed a notice of disagreement and sought a declaration that the lawsuit was outside the scope of sections 2.3(e) and 2.6(d). IAS sought to compel arbitration under 2.3(e). The district court held that the Agreement contained a valid agreement to arbitrate. An accounting firm subsequently determined that the sellers had no right to Earn-Out Consideration. The district court entered judgment for IAS.The Third Circuit vacated. The Purchase Agreement contains an agreement to submit narrow disputes to an accounting firm for expert determination, not arbitration. Although the statement of IAS’s financial benchmarks becomes final after the expert completes its accounting analysis, the authority to resolve legal questions—like whether IAS violated the duty of good faith— remains with the courts. View "Sapp v. Industrial Action Services LLC" on Justia Law
American Home Assurance Co. v. Superior Well Services, Inc.
Energy contracted with Superior for hydraulic fracking services to extract natural gas. In 2007, Energy advised Superior that it believed Superior had damaged some wells. Superior notified its insurance provider, American, which agreed to provide Superior with defense counsel, reserving its right to contest coverage. Energy sued Superior in state court. A jury determined that Superior had damaged 53 wells; the verdict form specified that Superior “fail[ed] to perform its contract" with Energy "in a workman-like manner” and that this “failure” was “a substantial factor in causing damage.”Superior’s policy with American provided coverage for “property damage” arising out of an “occurrence,” defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions[,]” but it did not define the term “accident.” Superior also purchased an “underground resources and equipment coverage” (UREC) endorsement for coverage “against risks associated with well-servicing operations[.]”In a federal court declaratory judgment action seeking indemnification, American argued that damage caused by a failure to perform a contract “in a workman-like manner” is not an “occurrence” under the policy and that, even if the policy covered Superior’s claim, it would involve a single “occurrence” under Pennsylvania law and would be subject to a $2 million per-occurrence limit.The district court granted summary judgment for Superior. The Third Circuit reversed. An accident is “unexpected,” which “implies a degree of fortuity that is not present in a claim for faulty workmanship.” The UREC endorsement does not eliminate the policy’s “occurrence” requirement. View "American Home Assurance Co. v. Superior Well Services, Inc." on Justia Law
Singh v. Uber Technologies, Inc
Current or former Uber drivers from different states agreed to Uber’s “Technology Services Agreement” as a condition of using Uber’s platform. The agreement requires drivers to resolve disputes with Uber on an individual basis through final and binding arbitration. Drivers may opt-out by sending Uber an email or letter. Singh’s class action alleged Uber had violated New Jersey wage and hour laws by misclassifying drivers as independent contractors, failing to pay them the minimum wage, and failing to reimburse them for business expenses. Calabrese’s class action, which was joined to Singh’s, sought to proceed collectively under the Fair Labor Standards Act.The district court ruled in Uber’s favor, compelling arbitration, having defined the relevant class as Uber drivers nationwide. The court found that interstate "rides constitute just 2% of all rides, resemble in character the other 98% of rides, and likely occur due to the happenstance of geography” for purposes of the exception in the Federal Arbitration Act (FAA) for arbitration agreements contained in the “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce,” 9 U.S.C. 1. The Third Circuit affirmed. The drivers' work is centered on local transportation. Most Uber drivers have never made an interstate trip. When Uber drivers do cross state lines, they do so only incidentally. They are not “engaged in foreign or interstate commerce.” View "Singh v. Uber Technologies, Inc" on Justia Law
White v. Samsung Electronics America Inc.
Plaintiffs, owners of Samsung SmartTVs, filed a putative class action in 2017, alleging that the SmartTVs used automatic tracking software to collect personally identifying information about them, such as the videos or streaming services they watch, and transmit that data to third-parties, who allegedly used the information to display targeted advertisements. When setting up their SmartTVs, plaintiffs had to agree to Terms and Conditions to access the Internet-enabled services. On some SmartTVs, the Terms and Conditions contained an arbitration provision. In 2018, the plaintiffs disclosed the Model Numbers for the named plaintiffs' SmartTVs, which enabled Samsung to determine whether they agreed to Terms containing an arbitration clause.The district court dismissed all except for the Wiretap Act claims. In 2020, Samsung notified the court that it would move to compel individual arbitration, arguing that it did not waive its right to arbitrate because “the prerequisites of waiver— extensive discovery and prejudice—are lacking.” The Third Circuit affirmed the denial of the motion. Samsung waived its right to arbitrate and compelling arbitration would cause the plaintiffs to suffer significant prejudice. Samsung’s actions evinced a preference for litigation over arbitration. Samsung continuously sought and agreed to stays in discovery and pursued successful motions to dismiss on the merits. It assented to all pre-trial orders and participated in numerous court conferences. View "White v. Samsung Electronics America Inc." on Justia Law
Sovereign Bank v. Remi Capital Inc.
In 2007, Sovereign extended a $15 million line of credit to REMI to fund residential mortgage loans. Kaiser guaranteed REMI’s obligations. Sovereign and Kaiser agreed that any judgment entered against Kaiser would bear interest at the Prime Rate plus six percent per annum, not at the statutory rate of interest after judgment. REMI defaulted. Sovereign sued REMI and Kaiser. The parties resolved the case by agreement, which the district court entered as a $1,560,430.24 consent judgment in 2010. The Judgment was silent about any applicable interest rate.In 2017, Kaiser moved to declare that judgment had been satisfied. The district court denied the motion, ordering that the applicable interest rate is the federal statutory post-judgment interest rate, fixed by the Federal Reserve Bank, at 0.26%; and that REMI may serve discovery to determine the status of payments made toward the Consent Judgment. The court reasoned that no clear, unambiguous, and unequivocal language in the Consent Judgment demonstrated an intent to depart from the rate of interest provided by 28 U.S.C. 1961. The Third Circuit affirmed. It is incumbent on the parties to detail, with precision and with clarity, the bargain they have struck. The failure to do so in a consent judgment precludes a district court from enforcing an otherwise-silent provision one party asks it to enforce. View "Sovereign Bank v. Remi Capital Inc." on Justia Law
Aldossari v. Ripp
In the 1990s, Aldossari’s company, Trans Gulf, entered into an agreement in Saudi Arabia with three other businesses to establish and operate an oil refinery in Saint Lucia, a Caribbean island nation. Crude oil was to be sourced from the Saudi government or its national oil company, Saudi Aramco. The project went forward, but, Aldossari alleged, the owners of the three contract counterparties – one of whom became the Crown Prince of Saudi Arabia –refused to pay Trans Gulf its share of the proceeds. Two decades later, the soon-to-be Crown Prince promised to pay Aldossari but never did. Aldossari, transferred his rights to his minor son, a U.S. citizen.The federal district court dismissed Aldossari’s subsequent tort and contract claims. The Third Circuit affirmed, holding that dismissal of the claims against a deceased defendant was proper because Aldossari failed to allege any basis for exercising subject-matter jurisdiction over those claims. As for the surviving defendants, the lack of any meaningful ties between those defendants and the United States in Aldossari’s claims defeats his effort to sue them in the U.S. The Foreign Sovereign Immunities Act precludes subject-matter jurisdiction over the claims against Saudi Arabia and Saudi Aramco. The case was remanded with directions to dismiss without prejudice since none of the dispositive rulings reach the merits. View "Aldossari v. Ripp" on Justia Law
Field Intelligence Inc v. Xylem Dewatering Solutions Inc
Xylem, which sells large-capacity water pumps, requested that Field develop hardware to interface with the pumps and computer software for monitoring and controlling the equipment. A 2013 “NonDisclosure Agreement” contained an arbitration provision. Xylem purchased the units from Field via written Purchase Orders and purchased monthly subscriptions that permitted Xylem’s customers to use Field’s software via cellular networks to monitor and control their Xylem pumps. There was no written agreement governing Xylem’s software subscription purchases until the 2017 “Software Subscription Service Agreement,” which contained an “integration clause” stating that “[t]his Agreement constitutes the entire agreement between the parties with respect to its subject matter and supersedes any and all prior or contemporaneous understandings or agreements.” The 2017 contract contained no arbitration provision, instead requiring any “action under or concerning” that contract to be litigated in New Jersey. Xylem began building its own hardware.Field sued, in New Jersey, for breach of the 2017 contract. In discovery, Xylem sent Field an interrogatory asking whether it intended to rely on the 2013 contract to support any of its claims. Field responded that Xylem breached the 2013 contract by its actions. Xylem then filed an arbitration demand. The district court held that the 2017 agreement superseded the earlier contract, eliminating any duty to arbitrate. The Third Circuit vacated in part. The district court was authorized to determine whether the second agreement superseded the first but the first agreement was not superseded. View "Field Intelligence Inc v. Xylem Dewatering Solutions Inc" on Justia Law
Zirpoli v. Midland Funding LLC
OneMain, a non-bank finance company, loaned Zirpoli $6,200.08, to be repaid at a rate of 26.91% (total $11,364.35). The loan was issued under the Consumer Discount Company Act (CDCA), a consumer protection statute, which creates an exception to Pennsylvania’s usury law. The loan is governed by a disclosure statement, a security agreement, and an arbitration agreement. Later, OneMain sold delinquent accounts to Midland, including Zirpoli’s loan. Midland sued Zirpoli but later dismissed the suit and undertook collection efforts.Zirpoli filed a class action, alleging that Midland’s collection activities constituted an unlawful attempt to collect the loan because Midland does not have a CDCA license and never obtained nor requested approval from the Department of Banking. Midland was, therefore, not lawfully permitted to purchase the loan. Midland moved to compel arbitration. The court denied the motion, focusing on the validity of the assignment from OneMain and Midland. The Third Circuit vacated. The ultimate illegality of a contract does not automatically negate the parties’ agreement that an arbitrator should resolve disputes arising from the contract. The parties to the loan clearly agreed to arbitrate the issue of arbitrability. The arbitration agreement provides that an arbitrator shall resolve the arbitrability of defenses to enforcement, including alleged violations of state usury laws. View "Zirpoli v. Midland Funding LLC" on Justia Law