Justia U.S. 8th Circuit Court of Appeals Opinion Summaries

A “viatical” or “life settlement” permits an insured to sell his life insurance policy. Federal tax and some state laws have been amended to accommodate the practice. In 2006, an agent persuaded Close, age 74, to apply for a $5 million life insurance policy. As submitted to PHL, his application falsely stated Close’s net worth and income, and failed to disclose his conviction for receiving illegal kickbacks. Under the agent’s guidance, Close falsely stated his net worth to obtain a two-year, $300,225 premium financing loan from CFC, a PHL-approved funding source. The policy was pledged as collateral; Close personally guaranteed 25 percent of the loan, believing that the policy would be worth $1.3 million in two-years, when it became “incontestable” under Minn. Stat. 61A.03.1(c) and that he would be able to sell it for $500,000. PHL conducted minimal investigation and received premiums of $272,025; CFC received $14,200 in fees; and the agent and a CFC employee split substantial commissions. In 2009, BNC explained Close’s options for repayment: refinancing, selling, or relinquishing the policy to the lender. The secondary market had crashed. Close surrendered the policy. When Close died in 2011, investigation revealed the fraudulent misrepresentations, but rescission was foreclosed by the incontestability statute. PHL sought a declaratory judgment that the policy was void as contrary to public policy for lack of an insurable interest. The district court agreed. The Eighth Circuit reversed, stating that permitting insurers to resist paying based on evidence that an insured used premium financing and planned to sell, is “not a result the Supreme Court of Minnesota would find acceptable in exercising its ‘delicate and undefined power’ to declare a contract void. View "PHL Variable Ins. Co. v. Bank of Utah" on Justia Law

In 2001, St. Jude hired Tormey to sell cardiac-related medical devices. Tormey entered into several agreements, providing Tormey’s initial sales quota would be zero due to a noncompete agreement; that St. Jude would hire a technical support specialist (TSS) to assist Tormey; and that St. Jude could terminate Tormey if he failed to meet sales quotas. St. Jude made a $650,000 interest-free loan; Tormey executed a promissory note. Around the time he began selling for St. Jude’s, Tormey’s wife was diagnosed with terminal lung cancer. Tormey informed St. Jude of his wife’s condition. He began inquiring about when St. Jude would hire a TSS and negotiated sales quotas accordingly. Tormey rejected the TSS assigned in October 2003. Tormey’s wife’s condition worsened in November; Tormey thereafter did not meet quotas. She died in May, 2004. Two weeks later, St. Jude, terminated the agreements. Tormey claimed that he accepted St. Jude’s proposal that if Tormey waived any actions against St. Jude, it would waive repayment of the $650,000 and presumed his obligations had been discharged. There are no written documents and St. Jude denies any such agreement. The district court rejected Tormey’s counterclaims alleging fraud and, after a jury was unable to reach a verdict, entered judgment for St. Jude on the note, finding that it did not first commit a material breach. The Eighth Circuit affirmed. View "St. Jude Med. S.C., Inc. v. Tormey" on Justia Law

IPSCO Tubulars contracted for Ajax to provide equipment to heat-treat steel pipe at IPSCO’s Blythesville plant, which produces pipe for use in the oil and gas industry. After installation, the product did not perform properly. Tubing processed through the equipment was badly distorted. IPSCO sued for breach of contract, gross negligence, and punitive damages. The district court found Ajax liable for breach of contract, awarding $5,162,298.55 in damages. The Eighth Circuit reversed and remanded the breach-of-contract damages, holding that there were inadequate findings to support the award, and affirmed in all other respects. The most reasonable interpretation of the contract as a whole obligated Ajaxto provide equipment that could uniformly heat-treat pipe, at 96 fpm, without causing distortion, cracks or inconsistencies that would prevent the pipe's conversion to higher American Petroleum Institute grades; the evidence was sufficient to establish that the defects in the Ajax equipment was the cause of the defects in the pipe. View "IPSCO Tubulars, Inc. v. Ajax TOCCO Magnathermic Corp." on Justia Law

Licensees entered into a licensing agreement with Safeblood Tech for the exclusive rights to market patented technology overseas. After learning that they could not register the patents in other countries, Licensees sued Safeblood for breach of contract and sued Safeblood, its officers, and patent inventor for fraud, constructive fraud, and violations of the Arkansas Deceptive Trade Practices Act (ADTPA), Ark. Code 4-88-101 to -115. The district court dismissed the fraud claims at summary judgment. The remaining claims proceeded to trial and a jury found for Licensees, awarding them $786,000 in contract damages and no damages for violations of the ADTPA. The district court awarded Licensees $144,150.40 in prejudgment interest. The Eighth Circuit reversed as to the common-law fraud claim and the award of prejudgment interest, but otherwise affirmed. Licensees produced sufficient evidence that the inventor made a false statement of fact; the district court did not abuse its discretion when it gave the jury a diminution-in-product-value instruction; and Licensees waived their inconsistent-verdict argument. View "Yazdianpour v. Safeblood Techs., Inc." on Justia Law

Plaintiffs, Germain and GM Enterprises, filed suit against defendants, HCH and Metropolitan, alleging breach of contract claims related to an option to purchase based on the assignment of a lease agreement. The district court dismissed the complaint because plaintiffs were precluded from bringing the action where a state court already had decided the issue underlying the claims alleged in their federal complaint. As a preliminary matter, the court held that the Rooker-Feldman doctrine does not bar plaintiffs' claims where their complaint alleged injuries caused by breach of contract and related to torts. Turning to section 13 of the Restatement (Second) of Judgments, the court believed that the Arkansas Supreme Court would hold that the state-court judgment in this case was sufficiently firm to be considered final for purposes of issue preclusion; based on the state court's conclusion and the terms of the subordination agreement, Germain was not entitled to specific performance of the option and dismissal of the federal declaratory-judgment action was appropriate; and the district court did not abuse its discretion in awarding attorneys' fees to defendants. The court affirmed the judgment of the district court. View "Germain Real Estate v. HCH Toyota" on Justia Law

NanoMech, researcher and developer of nanotechnologies, filed suit against defendant, a former employee, for breach of a noncompete agreement. On appeal, NanoMech challenged the district court's judgment on the pleadings for defendant. The court affirmed the district court's finding that the noncompete agreement was unenforceable under Arkansas law where any error in the district court's decision to convert defendant's motion to dismiss into a Rule 12(c) motion for judgment on the pleadings was harmless; under Arkansas law, a noncompete agreement must be valid as written; and a blanket prohibition on defendant's ability to seek employment of any kind with an employer in the nanotechnology industry anywhere in the world is overbroad, unreasonable, and therefore unenforceable. View "NanoMech, Inc. v. Suresh" on Justia Law

Lincoln, a meat-packing company, and Puretz, an investor, formed Hastings, an Illinois LLC, to bid on cattle-processing plants being sold at a bankruptcy auction. Puretz was to contribute 70% of acquisition and start-up capital; Lincoln 30%, plus management and 40,000 head of cattle per year. Additional details about financing and operations were to be negotiated. To bid, Hastings had to deposit $250,000. Puretz contributed $150,000; Lincoln contributed $100,000. Hastings successfully bid at $3,900,000. Negotiations regarding operations and financing deteriorated. Hastings closed the purchase. Lincoln refused to contribute additional funds and dissociated from Hastings. Under Illinois law, if a member dissociates and the LLC does not dissolve, the LLC must purchase the dissociating member’s distributional interest. Lincoln sought a determination of fair value. The district court held that Lincoln and Puretz each held a 50% interest in Hastings, that the value of Hastings on the dissociation date was $3,900,000, and that Lincoln’s only contribution was $100,000, rejecting Lincoln’s assertions that its identification of the opportunity, business plan, and “sweat equity” had “substantial value.” The court concluded that the value of Lincoln’s interest was $1,950,000, less 30% that Lincoln failed to contribute ($1,170,000), plus return of $100,000, and awarded Lincoln $880,000. The Eighth Circuit reversed. Lincoln and Puretz contemplated that any capital contributed to Hastings would be returned in proportion to their contributions before profits or losses generated by operations were divided equally. Because Lincoln did not make its 30% contribution to capital, it was not entitled to a 30% distribution. View "Lincoln Provision, Inc. v. Aron Puretz" on Justia Law

Debtors and Starion entered into loan transactions. The promissory notes and mortgages provided that the Debtors were liable for Starion’s attorney fees and costs of collections. The Debtors also executed personal guarantees. Defaults resulted in a 2012 Workout Agreement between Starion and the Debtors, who consented to entry of judgments against them to secure their personal guarantees. Based upon properly filed confessions of judgment, executed under the Agreement, a North Dakota state court entered judgments against Debtors for $2,078,034.26 and $1,000,000.00, plus interest. Debtors filed a voluntary chapter 11 petition. The Debtors’ Second Amended Plan of Reorganization stated: Debtors agree to pay Starion’s allowable attorney’s fees and costs associated with both Debtors’ bankruptcy proceedings including but not limited to reasonable attorneys’ fees, consulting, appraisal, filing fees, late fees … as provided in the Plan. The Plan was confirmed. Later the Debtors refused to pay requested appraisal and engineering costs and attorneys’ fees. Starion requested that the bankruptcy court compel payment of $125,014.64 based upon the Plan and 11 U.S.C. 506(b). The bankruptcy court ruled in favor of the Debtors. The Eighth Circuit Bankruptcy Appellate Panel reversed, noting that the obligation has appeared throughout the long documented history of the relationship. View "Starion Fin. v. McCormick" on Justia Law

Ibson and her family were insured by UHS through a policy available to her to as a member of her law firm. Due to an error, UHS began informing Ibson’s medical providers that Ibson and her family no longer had insurance coverage. Although UHS eventually paid the claims it should have paid all along, Ibson sued, raising state law claims of breach of contract, negligence, and bad faith, and seeking punitive damages. UHS responded that Ibson’s claims were preempted by the Employee Retirement Income Security Act (ERISA) and barred by the policy’s three-year contractual limitations period. The district court agreed and entered summary. The Eighth Circuit reversed and remanded, agreeing that Ibson’s state law claims are preempted under ERISA, but rejecting entry of summary judgment on the basis of the three-year contractual limitations period. View "Ibson v. United Healthcare Servs., Inc." on Justia Law

Stonebridge appealed the district court's judgment in favor of Trip Mate, holding that Stonebridge breached an implied amendment to the parties' Managing General Agent Agreement that was incorporated into the Termination Agreement they executed in 2009. The court reversed the district court's judgment in favor of Trip Mate and remanded with instructions to dismiss the case. The court concluded that the district court's comments to the parties regarding their course of dealings were too vague and ambiguous to provide the parties with actual notice that the court amended the pleadings to include the implied amendment theory. The parties did not have actual notice of the implied amendment issue or an adequate opportunity to cure the suprise of this issue being added to the case. View "Trip Mate, Inc. v. Stonebridge Casualty Ins., et al." on Justia Law