540 F. App'x 823
10th Cir.2013Background
- In August 2006 iFreedom sold its retail and wholesale mortgage operations to First Tennessee under an Asset Purchase Agreement (APA) that included potential post-closing “Earnout Payments” contingent on employee loan production targets.
- First Tennessee paid earnouts in 2007; in 2008 it sold the mortgage operations to MetLife and attempted to pay a $220,588 earnout, which iFreedom refused to accept.
- iFreedom sued in March 2009 for breach of contract and breach of the covenant of good faith and fair dealing; the district court denied summary judgment and the case proceeded to trial.
- At close of evidence the district court directed verdict for First Tennessee on several claims (including breaches of §§ 2.5(b), 4.5, 5.6, and 10.1) but let § 10.5 (a non-assignment clause) to the jury; it also directed verdict on estoppel but not on waiver.
- The jury found First Tennessee did not breach § 10.5; iFreedom appealed. The Tenth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Jury instruction on definition of “assignment” | Court should give iFreedom’s full proposed instruction including that assignor loses control and cannot defeat assignee’s rights | Instruction’s second sentence was unnecessary and inapplicable | Court acted within discretion in giving only the general definition and not the second sentence |
| Jury instruction re: non-assignability for contracts grounded in personal trust (Lancaster rule) | Court should instruct that contracts relying on personal skill/credit are not assignable without consent | APA §10.5 already expressly prohibited assignment without consent; Lancaster rule inapplicable | Court correctly refused the instruction; APA text controlled |
| Directed verdict on alleged breaches of §§ 4.5, 5.6, 10.1 (representations/warranties and limitations) | These provisions were breached when First Tennessee sold to MetLife | §4.5 representations were made as of the agreement date (not continuing); §5.6 governed pre-closing changes; §10.1 is a 3‑year contractual limitations provision | Court properly directed verdict for First Tennessee on these claims |
| Special verdict form & waiver affirmative defense | Form was flawed and waiver should not have been submitted; error prejudiced iFreedom | Only §10.5 breach/damages remained; iFreedom conceded it was not seeking unpaid earnouts; jury found no breach so waiver question was moot | No reversible error; any inclusion of waiver was harmless because jury found no breach |
Key Cases Cited
- Zokari v. Gates, 561 F.3d 1076 (10th Cir. 2009) (standard of review for refusal to give a proposed jury instruction and review of instructions as a whole)
- Tanberg v. Sholtis, 401 F.3d 1151 (10th Cir. 2005) (de novo review of directed verdict)
- Johnson v. Structured Asset Servs., LLC, 148 S.W.3d 711 (Tex. Ct. App. 2004) (definition of “assignment” under Texas law)
- Lancaster v. Greer, 572 S.W.2d 787 (Tex. Civ. App. 1978) (non-assignability rule for contracts grounded in personal trust and confidence)
- Crim Truck & Tractor Co. v. Navistar Int’l Transp. Corp., 823 S.W.2d 591 (Tex. 1992) (general rule and exception on assignability for contracts involving personal trust)
- Strickland Tower Maint., Inc. v. AT&T Commc’ns, 128 F.3d 1422 (10th Cir. 1997) (harmless‑error analysis where a submitted claim produced no damages)