Appellate Law & Practice

CA1: accrual of warranty claims under the UCC

Trans-Spec Truck Ser v. Caterpillar Inc., No. 07-1476.  This is a long case, which comes down to “the accrual and statute of limitations provisions of the Uniform Commercial Code of Massachusetts to breach of warranty claims.”   Mass. Gen. Laws ch. 106, § 2-725(1) (four years from delivery).  The exception is in (2) for future performance contracts "the four-year clock begins to tick when the breach is discovered or should have been discovered, or when the explicit time period expires, whichever occurs first."  Taking an Eerie guess, the First concludes that a repair promise is a promise for future performance, such as a service plan.  However, the First says that this service plan (and most) are not actually warranties, but rather a promise to fix things that break.  The plaintiff also fails to make an equitable estoppel argument.

Reviewing a grant of summary judgment on a negligence claim, the First holds that a disclaimer of negligence claims wasn’t unconscionable, and besides, the plaintiffs could have sued under the contract theory.

Procedurally, the First explains how a 12(b)(6) motion can be converted into a 56 motion.  The First figures out that because it wasn’t converted to a motion for summary judgment, the District Court and the First Circuit need to only address the pleadings.  The First goes on to note that a District Court judge can “sparingly” consider matters not before the magistrate.  See 28 U.S.C. § 636(b)(1).

A late motion to amend the pleadings to include an unfair trade claim is denied.

CA1: unreasonable gas prices, relation back, and franchise law

Marcoux et al v. Shell Oil Products et al. 05-2771. Shell franchisees are suing Shell, claiming that Shell told them that they would always get a discount on the cost of the franchise providing based on their sales. Then that discount stopped.

First, and of general interest to all lawyers is a civil procedure issue. Initially the plaintiffs sued as an unincorporated association. The District Court dismissed for lack of standing, but noted that the plaintiffs could try again as individuals, and that action would relate back. (This matters for statute of limitations purposes.) On appeal, the defendants argue that this really isn’t possible. The First says that Fed. R. Civ. P. 15(c)’s advisory committee note says that the rule is “"intimately connected with the policy of the statute of limitations” and in this case the defendants knew full well that they couldn’t expect to have any “repose” so even the rule doesn’t really talk about substitution of plaintiffs, there is no bar to relation back.

The second most interesting (to everyone) is an affirmance of a jury verdict which held that the gas prices were not set in good faith and were unreasonable under the UCC as channeled though Mass. Gen. Laws ch. 106, § 2-305(2).

There is more below. 

CA1: stock option period strictly enforced

Mariasch v. Gillette Company, 07-1549.  An employee got some stock options from his employer.  He says he gets to exercise them late.  There is a choice of law issue, but the First says that this is really a matter of internal corporate governance, and therefore the state of incorporation of the corporation (Delaware) provides the rule of decision.  Applying First Marblehead Corp. v. House, 473 F.3d 1 (1st Cir. 2006) (our coverage here), the First says that the option exercise period must be strictly enforced.  An equitable estoppel argument fails, because at a deposition he said some things that foreclosed it.

CA1: guarantors gotta pay

Wheeler v. Blumling, No. 07-1992.  A loan broker became a guarantor on a loan with a “breathtaking” interest rate  – over 1000% per annum.  The guaranty agreement specified a maximum amount that he would be liable for.  The guys that wanted the guarantee were “indicted in the Southern District of New York on charges of conspiracy and wire fraud.”  The loan defaulted.  The broker/guarantor later signed a forbearance agreement, waiving defenses. He didn’t pay on that, either.   

You.  Read.  On.

CA1: Tax Court stipulations are like contracts and are interpreted under Federal Common law

Nault v. US, No. 07-1455 affirms the decision of District Court which essentially interpreted stipulated decisions by the Tax Court in litigation involving a partnership which this plaintiff was involved in.  The plaintiff filed amended returns and essentially claimed that he was entitled to “ordinary loss deduction for the taxable basis that was ‘restored’ [by the conclusion of the tax court litigation] to his then-worthless partnership interests.”  The claims were denied and he brought suit for a refund.  This would be an interesting tax discussion, but the First sees it purely as a matter of interpretation of the Tax Court’s decision.  Again, this plaintiff was not the Tax Matters Partner, so he wasn’t really in the drivers seat in the Tax Court litigation.

The First says that the stipulations are governed by contract principles, and the court applies whatever the federal common law of contracts is.  The First looks at the stipulations and concludes that they are not ambagious, and concludes that the Tax Court parties had stipulated that some transactions lacked economic substance.  Moreover, since these stipulations are like contracts (while they are interpreted as contracts, I am not sure that they really *are* contracts), the First says that only in extreme cases should the District Court consider extrinsic evidence.

CA1: Refund contract enforceable

PR Electric Power v. Action Refund,  No. 07-1847.  The defendants are in the business of getting refunds from the Department of Energy (based on a settlement of a large lawsuit involving overcharges for petroleum) in exchange for a commission.  Puerto Rico Electric Power entered into a contract with them, then they decided that the contract was fraudulent, and all those big words they use to get out of contracts and sought a declaratory judgment.  (They seem to also argue that the DOE would have paid them, anyway.) The District Court held on summary judgment that the contract was binding, and that the plaintiffs owed the defendants their commissions. 

CA1: denial of motion to arbitration confirmed

Combined Energies v. CCI, Inc., No. 07-1766 (2/1/08) affirms the denial of a motion to stay proceedings and compel arbitration in a dispute between ex-partner businesses.  Their partnership agreement apparently had an arbitration clause.  According to the plaintiff business, after their deal broke down, they started “raiding” the plaintiffs workforce, preventing alleging preventing the plaintiff from performing on its current contracts.  The defendants argue that a “Purchase Order Agreement.”  The First points out that “CE existed as a business before entering into any sort of relationship with CCI and had operations apart from CCI; the gravamen of CE's allegations--that CCI set upon a course of conduct that resulted in the destruction of CE's business--reverberate far beyond the POA and would stand regardless of the parties' rights and responsibilities as defined by that contract.”  It also rejects the notion that the Purchase Order Agreement another agreement was not incorporated by reference into this POA, however, 1) the POA on its face doesn’t apply to disputes regarding all contract documents; and 2) there really was no incorporation of one document into another, but rather the drafters listed a hierarchies of documents to refer to in deciding what one document meant.

CA1: juries should not determine the legality of contracts

Bohne v. Computer Associates, No. 06-1745.  The plaintiff was a “sales executive” (I think that means “saleman.”) He was fired.  One claim reached trial: that despite his at-will employment contract included an "implied covenant of good faith and fair dealing" that entitled him to the commission, even though no commission was due to him under the terms of his contract.  The jury found in the plaintiffs favor, under the theory that provision of his contract which Bohne was denied compensation was itself unlawful.  But, the First says that there is no basis in Massachusetts law for such an instruction, and, quite frankly, it says, good faith and fair dealing doesn’t go to the legality of the contract. 

What is strange about this, is that the First is saying that the judge must determine the legality of the contract, and it will always be wrong to tell the jury to make that determination.  Well, maybe this isn’t too strange. So, the First reverses, saying that since he didn’t ask the judge to strike the a provision as illegal, that issue shouldn’t be taken to the jury.

The First puts in some language about how these cases (under Massachusetts law) should be worked in the future.

CA1: laches on the high seas

Doyle v. Huntress, Inc., Nos. 07-1396, 07-1506.  Some fishermen went to sea and were paid based on oral agreements under the "lay share system," (which gives them a percentage of the profits.)  So, we go to admiralty.  Under 46 U.S.C. § 11107, seamen can sue their employers for wages as 46 U.S.C. § 10601 requires that the seamen be given pre-trip written agreements.  But, the District Court said that there were laches and waives issues that needed to be resolved at trial.  The plaintiffs took an interlocutory appeal, and the District Court was affirmed in Doyle v. Huntress, Inc. (Doyle II), 419 F.3d 3, 15 (1st Cir. 2005) (our coverage here).  At trial, the seamen received very low amounts.

Insert fisherman joke and keep reading. 

 

CA1: is there any procedural justice in CDP hearings?

Drake v. CIR, No. 06-2507.  Oh good.  A Tax case.  The earlier proceedings were important to tax practitioners because they involved the extent to which Appeals Officers could engage in ex parte contacts with other parts of the service.  There was a remand by the Tax Court to the IRS.  He attempts to raise these issues again, but the First says that the remand purged the taint.

Starting with the worst part of the opinion: The First holds, without any real analysis that “the circuits that have all agree that a prevailing party must prevail in the final outcome of the case.”  Therefore, he doesn’t get attorneys fees.  Pathetically the First cites three cases.  One isn’t even under the Internal Revenue Code (which has its own fee-shifting provision), and the two are not directly on point with the petitioner’s argument – that he was entitled to fees for the initial tainted proceedings that the IRS botched. Instead, they deal fee issues relating to whether someone “substantially prevailed.”  I don’t know why the First dropped the ball on this.

You should like totally read on.