Articles Posted in Breach of Contract

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When a contract dispute arose between two telecommunications companies over the rates charged during the switching process of telephone call transmission, district court committed error in granting partial summary judgment to plaintiff, as it was likely that the same facts and issues would appear before the appellate court in the future after the FCC resolved certain regulatory issues.

Local Exchange Carriers and Interexchange Carriers are types of telecommunications service providers. LECs operate in limited geographical regions, and IXCs transport calls between them, enabling consumers to make long distance telephone calls. IXCs pay a fee in exchange for access to an LEC’s network. These rates are set either by regulatory agencies or in negotiated agreements between the IXC and the LEC.

In February 2009, Peerless Network, a LEC, and Verizon, an IXC, entered into one such agreement. The contract provided for lower rates for certain switching services. If a rate in the agreement did not apply, Peerless billed Verizon at its tariff rates, which were the rates that Peerless had filed with the Federal Communications Commission. In 2013, the relationship between Peerless and Verizon broke down, and Verizon began withholding payment. In September 2014, after negotiations failed to resolve the dispute, Peerless sued Verizon.

Peerless’ complaint alleged several counts, including breach of the Tandem Service Agreement, and breach of federal and state tariffs. Verizon asserted that Peerless was not entitled to the higher rates that it charged, due to its status as an Access Stimulator, which is a LEC that charges high rates to companies engaged in high volume call services, such as adult entertainment calls, chat lines and “free” conference call lines. Such LECs charge high rates to IECs and then pass a portion of the tariff revenue back to the companies that generated the high call volume. In turn, the FCC regulates the maximum rates that LECs meeting this definition can charge. Continue reading

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Where a beverage distributor fell behind on license payments and failed to hit required annual sales targets, the trial court did not err at trial when it admitted evidence of threats made by a manager at beverage distributor and declined to interrupt jury deliberations.

Playboy Enterprises International, Inc. is a corporation with its principal place of business in California. Playboy derives substantial revenue from licensing its name and bunny-head logo to entities who sell products as varied as apparel, handbags, luggage, and fragrances. PlayBev is a limited liability company based in Utah, which was formed in 2006 for the purpose of creating and selling a non-alcoholic drink.

PlayBev and Playboy entered into an exclusive license agreement in December 2006. Playboy agreed to license the Playboy marks to PlayBev for use on the Playboy Energy Drink. The license agreement provided that PlayBev would pay Playboy minimum annual royalties, beginning at $1 million and later increasing to $2 million, for the use of the marks. The agreement also required PlayBev to achieve certain annual sales. The original principals of PlayBev did not have experience with beverage marketing or distribution. In 2007, the PlayBev principals sold their interest in PlayBev to Iehab Hawatmeh, the CEO of Cirtran Beverage Corporation. CTB had experience in marketing consumer products. PlayBev subsequently contracted with CTB to manufacture and distribute the Playboy Energy Drink. Continue reading

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Where an insurance agent’s contract with Allstate was terminated for failure to meet performance goals, and the insurance company subsequently denied the agent’s request to transfer the book of business to the agent’s husband, instead selling to the wife of the agent’s former supervisor, the trial court erred in dismissing agent’s claims for breach of contract and breach of the covenant of good faith and fair dealing.

In 2004, Ray McKnight, a territory manager for Allstate Insurance began recruiting Mary Slay to become an exclusive Allstate insurance agent in Lake City, Florida. Ray offered Mary the opportunity to purchase an existing book of business from a retiring agent, Rick Bringger. Ray, however, failed to disclose that he had a conflict of interest, as his wife, Faye McKnight, wanted to purchase an Allstate agent’s book of business and open up her own office in Lake City in direct competition with Mary. Ray also failed to disclose that Allstate was in the process of canceling approximately 30% of the policies in Bringger’s book of business and that Allstate had begun the process of non-renewing all mobile home policies, commercial policies, and landlord and rental policies in Florida.

In reliance on Ray’s representations, Mary retired from her job, obtained an $800,000 loan to purchase Bringger’s book of business, and signed an exclusive agency agreement with Allstate. Mary worked as an exclusive agent reporting directly to Ray, and she subsequently grew her book of business. A few months later, Ray’s wife Faye opened an exclusive Allstate agency, competing directly with Mary’s agency. Mary’s business was also harmed by the subsequent announcement by Allstate that it would no longer write commercial insurance policies in Florida and that it would not renew 95,000 homeowner insurance policies. Allstate also implemented substantial price increases, and in 2008 had its license to write new policies suspended by the Florida Insurance Commission due to its failure to comply with a subpoena. Continue reading

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When a holding company guaranteed lease that a subsidiary assumed for railcars, and then failed to honor guaranty when subsidiary defaulted on the lease, judgment in favor of railcar supplier was affirmed. The appellate panel found that the holding company’s guaranty was a contract to pay a debt, not a lease for goods or services, and the Uniform Commercial Code did not apply as a result.

In January 2003, Ponderosa Petroleum Company entered into a lease with General Electric Railcar Services Corporation for 47 railcars to carry crude petroleum. Over the next several years, the companies executed several riders to the lease agreement extending the term of the lease agreement. The last extension gave the agreement a termination date of February 2020. In April 2015, Associated Energy Services, a wholly owned subsidiary of NuDevco Partners Holdings, assumed the obligation to make payments under the lease, though Ponderosa remained the party to the lease.

In September 2015, Union Tank acquired the lease, riders, and railcars from General Electric Capital Corporation. That same month, Associated Energy sent a notice of termination of the lease to GE Railcar, citing as a justification that the railcars were approaching the end of their permitted use to haul crude oil. The lease did not authorize termination for this reason. Associated Energy then began to return the railcars to Union Tank, and discontinued rental payments at the end of the month. Union Tank invoked NuDevco Partners’ lease guaranty, but NuDevco refused to honor it. Continue reading

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IMG_6355_3-300x189The district court rejected personal jurisdiction over a business and two of its employees where the alleged breach of contract and tortious interference occurred in a different state, and the employees and business lacked sufficient contacts with Illinois to justify jurisdiction.

Tower Communications and TSC Construction are competitors in the business of building and repairing wireless communication infrastructure. In 2017, both companies were working on an infrastructure construction project that spanned North and South Carolina. Tower sued TSC, alleging that during this project TSC poached Tower’s employees, Gary Juknevicius and Ruslan Tulegenov, and that TSC obtained confidential information from the poached employees and used that information to benefit its business.

The employment agreements that Juknevicius and Tulegenov had provided that they could not work for a competing company that worked on the same project as Tower for a period of six months after their employment ended. The agreement also prevented the employees from soliciting Tower’s employees, and from disclosing confidential information to a competitor. Included in the agreements was an arbitration clause. Continue reading

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A developer of healthcare software was denied damages for breach of contract. The court found that the developer had failed to take advantage of a substitute opportunity when its customer ceased paying on its consulting agreement and transferred its obligations to a successor company. Rather than contracting with the successor company, the owner of the software developer formed an entirely separate company to administer the new consulting arrangement. The court rejected this convenient manuever as a failure to mitigate damages, finding that the new arrangement would have completely offset the developer’s losses.

Orawin is a software technology consulting company, owned and operated by a single person. In 2002, the company developed software for SeniorDent, Inc., a dental management company that focuses on providing dental care to nursing home residents. In 2013, the two companies entered into a Consulting Services Agreement which required Orawin to maintain the software’s dental and vision operating systems and provide modifications determined by SeniorDent. SeniorDent agreed to pay Orawin a monthly retainer upon receipt of invoices.

SeniorDent later attempted to merge with Healthcare Delivered, LLC (“HCD”). HCD and Orawin entered into an amended consulting agreement, transferring all rights and obligations from SeniorDent to HCD. Two months later, the merger of SeniorDent and HCD fell apart, and HCD distributed SeniorDent to a holding company owned by the original owners of SeniorDent (“F&R”). HCD then transferred all of its rights to SeniorDent to the holding company. The owner of Orawin later sought payment for consulting services from HCD, and was told that the F&R was responsible for paying his invoice. The owner of Orawin later formed a new company, O&O, to provide services to the newly reorganized SeniorDent. SeniorDent paid O&O its standard fee beginning in December 2015 and has continued to pay every month since. Continue reading

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Where circuit court did not err when it ordered plaintiff and defendant to each pay their own attorneys’ fees in case for breach of a lease agreement because the plaintiff and defendant both won and lost on some of their claims, and neither party prevailed on claims that were significantly complex.

Oak Forest Properties is a landlord that operates a strip mall in Oak Forest, Illinois. RER Financial is a franchisee of a consumer tax preparation business. The two companies entered into a commercial lease agreement. Oak Forest agreed to divide one of its buildings into two spaces, and RER agreed to lease one of those spaces. Oak Forest agreed to take on the construction costs of the division, and RER agreed to bear the costs of any interior construction of the space after the division.

The agreement required Oak Forest to finish construction before RER started any aspects of its interior build-out. The parties, however, ignored that requirement and combined their efforts to divide and build-out space, using the same contractor and a single building permit for all work. Eventually, the parties’ relationship broke down and RER exercised an option to terminate the lease. Continue reading

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Being skilled at contracts and the negotiation process is important.  Knowing when to enter and when to exit is equally as important.  Some terms become non-negotiable and some bargaining points.  Knowing strategy, weakness and plus points always help.

Some key pointers include:

  1. Analyze -your source of power and know when to walk away –  the best source of power lies in an ability to walk away from bargaining.
  2. Listen – to what is being said, do not just assume – listen to the arguments being made.  Paraphrase and clarify where necessary.  Know where difficulties may lie in their stance.
  3. Trade off – where can you make concessions? Identify issues that the other party may value and the ones which you do not.
  4. Contingent – where penalties will be imposed or how events may unfold can be calculated in.  This becomes like a pilot test process.
  5. Rapport – what is the background history and level of trust.  Can this be established and built?

How Did Dish TV Network Use these skills in their Contractual Approach?

Dish Network TV obviously had to examine the scope of some of these questions when considering the need to re-negotiate contracts with certain TV Channels.  Certain demands of what they were wanting to be met and where they did not want to make an agreement were examined when they had to revise contractual agreements that had long been in place.

Why Renegotiate?

Renegotiation of contracts which were to be licensed with multiple other channels was made instead.  This time, it was decided that these contracts were to be entered into on a week-to-week basis.  A rapport was already in place. Majority of the disputes in the past and re-negotiations centered on programming or retransmission fees. Entering agreements this way, most possibly helps them gain greater control and leverage on when they want to be able to walk away from a contract without being bound to it on a long-term basis.

Some channels do not like to be at a point where an extension may not be a likelihood and do not enter those contracts for that reason.  This is a big change for what it used to have before, which was similar to the three-year contract.  Being able to hold accountability can give one party an upper hand when it comes to renewals.  Viewers also want to be kept out of any dispute and public image will matter.

These sorts of contracts can allow for gaining greater power but also require much time invested when it comes to re-entering contracts on a timely basis and can require scrutinization of terms and agreements over and over.  When disputes arise, they become programming disruptions.  There contracts also apply for channels in the Spanish language and have been subject to the most of the disruptions.  Continue reading

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Handshake deals (known as “oral contracts” in the legal industry) have long thrived in Hollywood. If, for example, an agent agrees to represent an artist in exchange for a percentage of that artist’s income (known as a contingent fee), that agreement would be considered binding even without a written contract. Whether the same can be said of attorneys seeking a percentage fee was recently up for debate in Johnny Depp’s lawsuit against his former attorney, Jake Bloom.

The dispute began last fall when Depp sued Bloom for allegedly collecting more than $30 million in fees, despite the absence of a proper contract. Bloom countersued Depp for breach of contract, citing their 1999 handshake deal. Depp’s attorneys pointed out that California law does not recognize oral contracts, but Bloom’s attorneys maintained that the contract was ratified when Depp continued to accept legal services. Moreover, they pointed out that Depp continued to accept legal counsel from Bloom and his firm after settling his lawsuit with his former management company – a lawsuit that included allegations that the company had failed to maintain proper written agreements.

This last point Judge Terry Green found to be a point in favor of (rather than against) the need to maintain written contracts. Continue reading

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Most people associate Fuji and Xerox with an office setting involving photocopying and printing. If you go to their website at: https://www.fujixerox.com They advertise smart work innovation that liberates from Restraints with an open professional expertise.  These are work aspects that most professionals want to aspire to be a part of and probably one of the reasons why they have taken off in the US market.

Fuji Xerox Co., Ltd., is a joint venture partnership between Fujifilm Holdings and Xerox, both being document related services.  Operating out of Tokyo, it was set to be one of the most powerful alliances held between the Japanese and Americans. Continue reading