Court Opinion

ID: 9891342
Source: CourtListenerOpinion
Date Created: 2023-10-18 14:03:34.441825+00
Date Added: 2024-06-11T13:47:05.443454
License: Public Domain

Cite as 2023 Ark. App. 455
                   ARKANSAS COURT OF APPEALS
                                       DIVISION IV
                                       No. CV-20-692

 EL DORADO AMMONIA, LLC, AND EL Opinion Delivered October 18, 2023
 DORADO CHEMICAL COMPANY
                                APPEAL FROM THE UNION
     APPELLANTS/CROSS-APPELLEES
                                COUNTY CIRCUIT COURT
                                [NO. 70CV-16-76]
 V.
                                                HONORABLE DAVID F. GUTHRIE,
 GLOBAL INDUSTRIAL, INC.                        JUDGE
      APPELLEE/CROSS-APPELLANT
                                                REVERSED AND REMANDED

                                RITA W. GRUBER, Judge

       El Dorado Ammonia, LLC, and El Dorado Chemical Company filed an interlocutory

appeal of the April 23, 2020 “Amended Judgment I” of the Union County Circuit Court,

and Global Industrial, Inc., cross-appeals. The parties raise multiple points on appeal, but

only two of those points are dispositive: (1) whether the materialmen’s lien filed by Global

was perfected; and (2) whether the circuit court’s reference to damages for “unpaid invoices”

is a judgment that is collectible through remedies other than the materialmen’s lien. We

reverse and remand.

                            I. Factual and Procedural Background

                                     A. Project History
       In its simplest terms, this is a case about a subcontractor attempting to get paid for

work it performed during the construction of an ammonia plant.

       El Dorado Chemical Company (“EDCC”) owns a chemical plant in Union County,

Arkansas, that suffered an explosion in 2012. EDCC’s parent company created El Dorado

Ammonia (“EDA”) to own and operate an ammonia facility that would be constructed at

the plant after the explosion. For purposes of this opinion, EDCC and EDA have the same

interests and make the same arguments, so they will be referred to collectively as “El Dorado

Chemical.” Although the parent company was originally a party to this lawsuit, it was

dismissed voluntarily in 2018.

       In 2013, EDA engaged Leidos Constructors, LLC (“Leidos”), to be the general

contractor on a project during which an ammonia plant in Louisiana would be dismantled,

and the salvage from that plant would be used in constructing the ammonia facility in Union

County (the “Project”). Leidos hired Global Industrial, Inc. (“Global”), to be a subcontractor

for the Project. Through three subcontracts, Leidos engaged Global in 2014 to perform both

salvage and reconstruction work during the Project. Global agreed to perform its work on a

time-and-materials basis. Through an additional subcontract, Leidos also engaged Global to

perform repair work on other parts of the chemical plant after the explosion. Global agreed

to perform this work in exchange for a lump sum. There was no contract between Global

and EDA or EDCC for any work that Global performed.

       On July 1, 2015, Leidos issued a written notice of termination to Global. At the time

of termination, Global had already submitted invoices totaling $9,068,754.43. After

                                              2
termination, Global submitted additional invoices, and the total of all unpaid invoices was

$12,426,140.68. Also after the termination, Leidos and El Dorado Chemical hired

replacement subcontractors to cure nonconforming work and to complete the Project. In

November 2015, Leidos issued a $9,977,357 back charge against Global’s outstanding

invoices. Of this amount, $4,914,850 represented costs to cure Global’s alleged

nonconforming work, and the remaining $5,062,507 was for “inefficiency and project

impact costs.”

                              B. Materialmen’s Lien History

       On September 29, 2015, Global recorded a materialmen’s lien in the amount of

$12,426,140.68. The lien stated:

       The real property which is charged with this lien is a portion of the property
       described on Exhibit A attached hereto and incorporated herein by this
       reference. Such property is commonly known as the El Dorado Chemical
       Plant, and such plant is located at the following address: 4500 N. West
       Avenue, El Dorado, AR 71730.

Exhibit A was a property description for the entirety of the property owned by EDCC at that

address, which includes hundreds of acres and many buildings. Global also included as

exhibits two overhead shots from Google Images showing the property and claimed exhibit

B-2 “is a more detailed/closer aerial photograph depicting the general location in which the

labor was furnished and materials provided.” Exhibit B-2 is an aerial photograph that

includes many structures and buildings with text added that says, “Plant area where Global

Industrial, Inc. provided labor and materials.”

                                              3
        After the original materialmen’s lien was filed, Leidos paid Global for the difference

between the amount invoiced and the amount of the back charge. Global then amended its

materialmen’s lien on February 23, 2016. The first amended lien was in the amount of

$8,772,815.69. The amended lien did not describe the property on which work was

performed with any further specificity. On February 26, 2016, Global filed a lis pendens that

covered all property owned by EDCC in Union County. More than a year later, on May 30,

2017, Global filed its second amended materialmen’s lien that included a metes and bounds

description of precisely where on EDCC’s property Global had performed work. On

November 14, 2018, during trial, Global filed an amended lis pendens to include only the

property identified in the second amended materialmen’s lien and released the remaining

previously identified portion of EDCC’s property from the lien claim.

                                    C. Procedural History

       Global filed its complaint against Leidos, EDA, EDCC, and other defendants on

February 26, 2016, alleging breach of contract, foreclosure, and negligence. On December

28, 2017, Global filed its second amended complaint against Leidos, EDA, EDCC, and

others. This is the operative complaint in the lawsuit. On January 12, 2018, Leidos filed a

counterclaim against Global for breach of contract. At various points during the litigation,

other parties filed claims, counterclaims, cross-claims, and third-party claims.

       On September 24, 2018, the circuit court entered an order bifurcating all cross-

claims, Leidos’s counter cross-claims against EDA and EDCC, Leidos’s counter cross-claims

against EDCC’s parent company, and the third-party claims. In other words, all claims by

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and directly against Global were to be tried in “Phase I,” while all other matters would be

heard in “Phase II.” In its bifurcation order, the circuit court also stated that the parties were

“free to assert at trial any and all defenses that relate to the claims by Global and the

counterclaim by Leidos against Global.”

       Phase I was a four-week bench trial from October 22 through November 14, 2018,

during which Global’s five surviving causes of action were litigated: (1) breach of contract

against Leidos; (2) breach of contract against EDA; (3) lien foreclosure against Leidos; (4)

lien foreclosure against EDCC; and (5) lien foreclosure against EDA, as well as the

counterclaims asserted by Leidos against Global. During trial, Global presented evidence of

unpaid invoices totaling $9,068,754.43. Leidos presented evidence of $10,080,849 in charge

backs. At the end of trial, Global moved to conform the pleadings to the evidence, which

added claims for intentional interference with a contract against EDA and EDCC.

       On March 12, 2020, the circuit court entered Judgment I, disposing of all claims and

counterclaims tried in Phase I. In that order, the circuit court awarded judgment to Global

against EDA “on its derivative action for debt on [certain subcontracts] for the sum of

$3,028,082” and another judgment to Global against EDCC “on its derivative action for

debt on [a certain subcontract] for the sum of $4,356,781.” Judgment I then foreclosed on

Global’s lien in the amount of $7,384,863 and denied relief on all other claims against all

other parties.

                                                5
       El Dorado Chemical filed a motion for reconsideration under Arkansas Rule of Civil

Procedure 59. Global filed a motion to amend the judgment to include attorneys’ fees and

a judgment against Leidos.

       On April 23, 2020, the circuit court entered Amended Judgment I. After changing

some language from Judgment I, Global was awarded judgment against EDA “on its action

for nonpayment of invoices on [certain subcontracts] for the sum of $3,028,082 . . .” and

another judgment against EDCC “on its action for nonpayment of invoices on [a certain

subcontract] for the sum of $4,356,781 . . .” in Amended Judgment I. The circuit court then

went on to foreclose on Global’s lien against EDA and EDCC “to satisfy the debt of

$4,356,781 and $3,028,082 respectively[.]” The circuit court also awarded Global

prejudgment interest on a portion of the judgment and postjudgment interest against the

entirety of the judgment.

       As to the other claims, the circuit court ruled that no defendant was liable for breach

of contract, unjust enrichment, or tortious interference. Because each party was successful,

in part, in litigation that spanned many years, the circuit court did not award attorneys’ fees

to any party. There is a detailed and sufficient Rule 54(b) certificate attached to Amended

Judgment I. El Dorado Chemical and Global all filed timely notices of appeal.

                                    II. Standard of Review

       We review lien-foreclosure cases de novo on appeal. Fla. Oil Inv. Grp., LLC v. Goodwin

& Goodwin, Inc., 2015 Ark. App. 209, at 5, 463 S.W.3d 323, 326.

                                 III. The Materialmen’s Lien

                                              6
     A. Property Description in the Original and First Amended Materialmen’s Liens

       Materialmen’s liens are governed by Arkansas Code Annotated sections 18-44-101 et

seq. (Repl. 2015 & Supp. 2023). These code sections lay out a process with many steps and

requirements. The determinative issue in this appeal is whether the property description in

the lien was legally sufficient.

       Arkansas Code Annotated section 18-44-117(a) (Supp. 2023) mandates that a person

wishing to place a materialmen’s lien on a piece of property must file a lien account within

120 days after the work was performed. The filing must include, among other information,

“a correct description of the property to be charged with the lien, verified by affidavit.” Ark.

Code Ann. § 18-44-117(a)(2)(A). The statute is explicit that for real property, “a street address

is not a correct description of the property under subdivision (a)(2)(A) of this section.” Id. §

18-44-117(a)(2)(B).

       The materialmen’s-lien statute is strictly construed “because it is an extraordinary

remedy not available to every merchant or worker.” Servewell Plumbing, LLC v. Summit

Contractors, Inc., 362 Ark. 598, 606, 210 S.W.3d 101, 107 (2005) (citing Christy v. Nabholz

Supply Co., Inc., 261 Ark. 127, 546 S.W.2d 425 (1977)). Additionally, the statute is “in

derogation of the common law and therefore [is] strictly construed, thus requiring strict

compliance.” JMAC Farms, LLC v. G&C Generator, LLC, 2017 Ark. App. 658, at 8, 537

S.W.3d 274, 278. If a subcontractor complies with the lien statutes, then it is entitled to “a

lien upon the improvement and on up to one (1) acre of land upon which the improvement

                                               7
is situated, or to the extent of any number of acres of land upon which work has been done

or improvements erected or repaired.” Ark. Code Ann. § 18-44-101(a) (Repl. 2015).

       To determine whether a lien account has a suitably specific description of the

property, the test is whether it “sufficiently described the improvements of the [improved

property] as to afford information concerning the situation of the property to be charged

with the lien and that it is sufficient to enable anyone familiar with the locality to identify

the premises intended to be described with reasonable certainty, to the exclusion of others.”

Ark. Foundry Co. v. Am. Portland Cement Co., 189 Ark. 779, 784, 75 S.W.2d 387, 390 (1934).

       In this case, we must determine whether Global’s property description was too broad

to comply with the statute. We conclude that it was. While there are situations in which an

overinclusive property description can pass the test and describe the location such that a

person familiar with the locality could identify it with reasonable certainty, this is not such

a situation.

       In Whitener v. Purifoy, 177 Ark. 39, 40, 5 S.W.2d 724, 724 (1928), a contractor had

furnished “one brick trowel . . . and six sheets iron roofing” for a house on a tract in Dallas

County. The contractor stated in the affidavit and lien account that the materials had been

provided for a house in “the southwest quarter of the northwest quarter section 3 township

8 south, range 15 west, and the southeast quarter of the northeast quarter section 4,

township 8 south, range 15 west, in Dallas [C]ounty, Ark.” Id. at 40, 5 S.W.2d at 724–25.

That property description encompassed the entirety of the owner’s eighty-acre farm and was

employed in the original complaint. Id. at 40–41, 5 S.W.2d at 725. The contractor did

                                              8
ultimately amend the property description within his complaint—not the affidavit or

account—to the acre of land described by metes and bounds upon which the house was

located. Id. at 40, 5 S.W.2d at 725. However, the court, in determining that the affidavit was

sufficient, emphasized that there was only one dwelling on the land, and therefore, there

could “be no uncertainty as to the house upon which the lien is claimed.” Id. The court also

noted that there was no ambiguity “before the complaint was so amended.” Id. at 43, 5

S.W.2d at 726.

       Contrast that case with Arkmo Lumber Co. v. Cantrell, 159 Ark. 445, 252 S.W. 901

(1923), which is more like the situation here. In Arkmo, a company provided $992.75 worth

of lumber and materials to D.H. Scroggin, a tenant and alleged agent of J.H. McClung, to

build improvements on a 1,380-acre tract in Jefferson County owned by McClung. Id. at

450–51, 252 S.W. at 902–03. In an attempt to be compensated for the lumber and materials,

the company filed the duly verified account, with a description of the property upon which

the lien was claimed, and then filed suit. Id. at 451, 252 S.W. at 902. The lien account

described the real property as “the property of J.H. McClung, deceased, Bessie Cantrell,

administratrix.” Id. at 457, 252 S.W. at 905. The affidavit included with the lien account

described the entire tract of land—some 1,380 acres—“but not the improvements.” Id. at 457–

58, 252 S.W. at 905. There, the owner contended that the company did not properly perfect

its lien because it failed to describe the specific improvements for which the materials were

used and the specific acre of ground upon which the improvements were situated. Id. at 458,

252 S.W. at 905. The supreme court, in concluding that the lien was not properly perfected,

                                              9
explained that while no “particular form” was required with respect to the description, “the

account or claim for a lien” was “too vague and indefinite, since it does not describe the

particular land or the particular buildings upon which the lien is sought to be established.”

Id. at 459, 252 S.W. at 905–06. In other words, the fact that the lien account identified too

much real property was not fatal—instead, the defect was the inability to identify the area of

improvement with any certainty.

          Similarly, the property description in Global’s original lien and the first amended lien

was insufficient. It included hundreds of acres. The aerial photograph included as exhibit B-

2 does not identify precisely where the improvements were made. There are many buildings

shown across many acres, but there is no indication by which even an individual familiar

with the locality could identify which specific structures were improved by Global. Out of

the hundreds of acres in the property description, Global performed work on buildings

covering only 3.562 acres of the property. It is true that extrinsic evidence can be used to

determine which segment of the property is subject to the lien. See Arkhola Sand & Gravel Co.

v. Hutchinson, 291 Ark. 570, 573, 726 S.W.2d 674, 676 (1987). However, Global’s own

expert testified that he could not identify which portion of the property was encumbered on

the basis of the original materialmen’s lien and the first amended lien. The property

description in the original lien and the first amended lien was not “sufficient to enable

anyone familiar with the locality to identify the premises intended to be described with

reasonable certainty, to the exclusion of others.” Ark. Foundry, 189 Ark. at 784, 75 S.W.2d

at 390.

                                                 10
       Global argues that El Dorado Chemical would not allow Global’s surveyor to enter

the land, and therefore, Global could not have gotten a more specific description of its

improvements before filing the lien account. This fact is not persuasive in this case. No case

or statute requires a specific metes and bounds description of the improvements. Rather,

only a description “sufficient to enable anyone familiar with the locality to identify the

premises intended to be described with reasonable certainty, to the exclusion of others” is

required. Id. In Whitener, it was determined that the property description within the affidavit

was sufficient despite the fact that it encompassed the entirety of the owner’s eighty-acre farm

because it also stated that the materials had been provided for a house, and there was only

one house located on the eighty acres. Whitener, supra. As such, the premises could be

identified with reasonable certainty. We are not convinced that Global could not obtain a

survey or use alternate means to specifically identify the encumbered property on its lien

account. It did not, and neither its original materialmen’s lien nor its first amended lien was

perfected.

                    B. Timing of Second Amended Materialmen’s Lien

       Having concluded that the property description in the original materialmen’s lien

and the first amended lien was insufficient, we now must determine whether the second

amended lien cured that insufficiency. There is no dispute that the property description in

the second amended lien identified the area of improvement with certainty.

       However, the lien account must be filed within 120 days after the performance of the

work or provision of materials. Ark. Code Ann. § 18-44-117(a)(1). The original

                                              11
materialmen’s lien was timely filed. Moreover, all actions must be commenced within fifteen

months after filing the lien account. Ark. Code Ann. § 18-44-119(a) (Repl. 2015). And, a

lien expires after fifteen months unless “(1) An action shall be instituted as described in this

subchapter; and (2) A lis pendens is filed under § 16-59-101 et seq.” Id. § 18-44-119(b)

(emphasis added).

        As stated above, strict compliance with the statute is required “primarily for the

protection of third parties who might acquire rights in, or liens upon, the property.” Wiggins

v. Searcy Fed. Sav. & Loan Ass’n, 253 Ark. 407, 410, 486 S.W.2d 900, 902 (1972). The

statutory scheme is also designed to protect the landowner by ensuring that the owner has

notice of any potential action and an opportunity to protect its property from the potential

effects of a lien. See id.

        In Wiggins, a contractor constructed a residence on a piece of real property. The

contractor filed a complaint against the property owner within 120 days of completion of

the work, claiming that he was entitled to a materialmen’s lien on the property. Id. at 408–

09, 486 S.W.2d at 902. A bank, which had not been included as a defendant, intervened to

ensure that the contractor’s lien did not get priority over the bank’s mortgage on the

property, and the ultimate issue in the case was which lien had priority. Id. While the

contractor filed the complaint within 120 days of completion of the work, he did not file a

lien account under the statute within 120 days of completion of the work. Id. In concluding

that the bank had priority, the supreme court noted, “It is true that, as between the landowner

and the lien claimant, the filing of a suit against all necessary parties to preserve and enforce

                                               12
the lien within the 120-day period is a substantial compliance with the statute which cures

the omission to file the account with the circuit court clerk.” Id. at 409–10, 486 S.W.2d at

902 (emphasis added) (citing Burks v. Sims, 230 Ark. 170, 321 S.W.2d 767 (1959); Rust v.

Kelley Bros.’ Lumber Co., 180 Ark. 517, 21 S.W.2d 973 (1929)). The supreme court further

noted this was a “relaxation of the statutory requirement.” Wiggins, 253 Ark. at 410, 486

S.W.2d at 902. However, that relaxation was justified because the notice of filing of the

lawsuit within the 120 days gave the landowner “as much notice of the assertion of the lien

and opportunity to protect his property from it as he would have by a strict compliance with

the statute and that the filing requirements are intended primarily for the protection of third

parties who might acquire rights in, or liens upon, the property.” Id. (citing Anderson v.

Seamans, 49 Ark. 475, 5 S.W. 799 (1887); Pfeiffer Stone Co. v. Brogdon, 125 Ark. 426, 188

S.W. 1187 (1916); Rust, supra). To meet this relaxed standard, the complaint must be filed

within 120 days and must either include the loan account “or allegations of the complaint

which embrace substantially all that the statute requires to appear in the verified account are

treated as a substitute for the account required by the statute.” Id. at 410, 486 S.W.2d at

902–03.

       In this case, Global filed its defective original materialmen’s lien on September 29,

2015. It filed the defective first amended lien on February 23, 2016. The lis pendens was

filed three days later, on February 26, 2016. The lis pendens gave notice that there was an

action to foreclose on the property described in the defective original materialmen’s lien and

the defective first amended lien. In other words, the original lien, the first amended lien,

                                              13
and the lis pendens were not compliant with the statute because the property description

was insufficient. The action to foreclose on the lien was instituted on February 26, 2016,

much more than 120 days after the work was completed, so the relaxed standard articulated

in Wiggins does not apply.

        Although it is not exactly the same situation, Servewell Plumbing is instructive. In

Servewell Plumbing, a subcontractor performed work for a general contractor. 362 Ark. at 601,

210 S.W.3d at 104. The subcontractor filed its original complaint within 120 days of

completing the work, making claims for breach of contract and unjust enrichment and

alleging that it had a lien, but the lien was not yet perfected. Id. at 605, 210 S.W.3d at 107.

Two months later, the subcontractor filed an amended complaint seeking enforcement of

the lien. Id. However, the subcontractor’s lien account was filed 124 days after the work had

been completed, missing the statutory 120-day cutoff. Id. at 605–06, 210 S.W.3d at 107.

Because the lien was filed outside the 120-day deadline, it was not perfected at the time the

amended complaint was filed. Id. at 606, 210 S.W.3d at 107. There is a similar failing in this

case.

        Global filed the second amended lien on May 30, 2017, which is the document

containing the updated and sufficient legal description. This was twenty months after the

original materialmen’s lien was filed. Global did not file the amended lis pendens until

November 14, 2018, during trial. This amended lis pendens gave notice that there was an

action to foreclose on the property that had been properly described in the second amended

                                              14
lien. However, the amended lis pendens was filed thirty-seven months after the original

materialmen’s lien, which is long after the fifteen months prescribed by statute.

       Because Global filed the complaint outside the 120-day window, strict compliance

with the materialmen’s-lien statute is required. The original materialmen’s lien would expire

unless a lawsuit and a lis pendens properly identifying the property was filed within fifteen

months. Global did not meet either of those requirements. The second amended complaint,

which incorporated the proper description in the second amended lien, was filed twenty-six

months after the original materialmen’s lien—far more than 120 days after the work had been

performed. The amended lis pendens was filed thirty-seven months after the original

materialmen’s lien. The time period to enforce the lien had long passed by that point.

       For these reasons, this court reverses the circuit court’s order to foreclose on Global’s

lien in Amended Judgment I.

                           IV. Reference to Nonpayment of Invoices

       In Judgment I, the circuit court awarded judgment to Global against EDA “on its

derivative action for debt on [certain subcontracts]” and another judgment to Global against

EDCC “on its derivative action for debt on [a certain subcontract].” This language was

changed in Amended Judgment I, which states that Global was awarded judgment against

EDA “on its action for nonpayment of invoices on [certain subcontracts] for the sum of

$3,028,082” and another judgment against EDCC “on its action for nonpayment of invoices

on [a certain subcontract] for the sum of $4,356,781.” The circuit court then went on to

                                              15
foreclose on Global’s lien against EDA and EDCC “to satisfy the debt of $4,356,781 and

$3,028,082 respectively[.]”

       El Dorado Chemical argues that this judgment is improper and classifies this finding

as “a fictitious cause of action” and further states that Global never brought an action against

EDA or EDCC for “nonpayment of invoices.”

       One reason Global filed the lawsuit in the first place was to foreclose on a

materialmen’s lien against El Dorado Chemical. To determine whether Global was entitled

to foreclose on the lien, “[t]he court shall ascertain by a fair trial, in the usual way, the amount

of the indebtedness for which the lien is prosecuted and may render judgment therefor . . .

.” Ark. Code Ann. § 18-44-127(a) (Repl. 2015). We interpret Amended Judgment I as simply

stating how the circuit court came to ascertain “the amount of indebtedness.” Determining

the value of the “unpaid invoices” seems to have been the circuit court’s way of quantifying

the indebtedness. In support of this interpretation, the circuit court goes on to state a few

sentences later that foreclosure of the lien was granted to satisfy EDA’s and EDCC’s debt to

Global. Additionally, the circuit court denied all of Global’s other causes of action that could

have given rise to an additional judgment. As such, this court believes the circuit court’s

language concerning “nonpayment of invoices” was not an attempt to establish a further

cause of action.

       To the extent that the language could be interpreted as a judgment for “nonpayment

of invoices,” such judgment is reversed and remanded. Nonpayment of invoices is not an

independent cause of action. The courts have recognized some flexibility in recognizing a

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new cause of action “to adjust to meet society’s changing needs.” See Dowty v. Riggs, 2010

Ark. 465, at 6, 385 S.W.3d 117, 120. However, because there are “boundless claims in an

already crowded judicial system,” we “will decline to recognize a new cause of action if there

are other sufficient avenues . . . that serve to remedy the situation for a plaintiff.” Id.

Interpreting “nonpayment of invoices” as a separate cause of action would be to recognize a

newly invented claim when many already exist in Arkansas law to address the situation at

hand, for example, breach of contract, foreclosure on a materialmen’s lien, unjust

enrichment, or tortious interference with contract.1

       Because this court reverses the circuit court’s foreclosure of the materialmen’s lien

and any judgment for “unpaid invoices,” all additional issues raised by the parties are moot.

       Reversed and remanded.

       GLADWIN and MURPHY, JJ., agree.

       Greenberg Traurig LLP, by: James R. Leahy, Mary-Olga Lovett, and Stephen Edmundson;

and Quattlebaum, Grooms & Tull PLLC, by: Joseph R. Falasco, for appellants/cross-appellees.

       Logan & Lowry, LLP, by: David E. Jones; and Stone & Sawyer, PLLC, by: R. Jeffrey Sawyer,

for appellee/cross-appellant.

       1
         Global did not appeal the adverse rulings on breach of contract, unjust enrichment,
or tortious interference.

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