Will Disproportionate Forfeiture Lead to More Trials?

For seemingly run-of-the-mill breach of contract cases where someone refuses to pay based on a technicality, things may have just gotten more complicated. After all, the question of whether a particular provision was material and the question of whether the forfeiture is proportionate are likely fact questions reserved for the jury.
The doctrine of disproportionate forfeiture is alive and well—and, based on a recent ruling from the Minnesota Supreme Court—it just may preclude summary judgment. The Minnesota Supreme Court’s holding in Capistrant v. Lifetouch may allow a breaching party to be excused from a breach (so long as the provision breached was not material) and force a non-breaching party to pay up (so long as to do otherwise would be a disproportionate forfeiture). Capistrant v. Lifetouch Nat’l School Studios, Inc., —- N.W.2d —-, 2018 WL 3558943 (July 25, 2018).
The basic facts of the Capistrant v. Lifetouch case are straightforward. When Capistrant retired from Lifetouch, he and his employer had some on-going disagreements. As a result, Capistrant sought a declaratory judgment to confirm his entitlement to around $2.6 million in residual commissions. But, during the discovery, Capistrant revealed that he still had a variety of confidential Lifetouch information. Upon demand, Capistrant returned the information, and further discovery confirmed that Capistrant had not shared the information with any third parties or that Capistrant never intended to use the information to compete. Nevertheless, Lifetouch—relying on an obligation to “immediately” return the information in a decades old agreement—claimed that Capistrant was in breach for failing to “immediately” return the information when his employment ended and, as a result, was not entitled to the $2.6 million.