ContractsProf Blog

Kill Lancome!

Uma Thurman is mad.  In fact, I haven't seen her this mad since Michael Madsen shot her in the chest, took her samurai sword and buried her alive.  She is no longer mad at Bill.  No, no, that's all in the past.  Now, she is mad at Lancome, according to the Wall Street Journal, because she alleges that the French cosmetics corporation is continuing to use her image to promote its products after the expiration of a licensing agreement.  Fans of movie stars, cosmetics and litigation can find the complaint here. 

The WSJ notes that Lancome has filed its own suit against Thurman, apparently claiming that, under the licensing agreement, it is not subject to liability for third-party use of Thurman's image .  Lancome issued a statement on Friday in which it said that it would not comment on on-going litigation but claimed that "The use of Ms. Thurman's image after her contract expired, however minor, was neither deliberate nor intentional."  Uh huh.  Sounds like the pot was already broken when they borrowed it.

[Jeremy Telman]

Rumors from the Campaign Trail II

Here's another rumor that is circulating:  At the height of the Lewinsky scandal, Bill Clinton (pictured saying "I did not have sex with that woman . . . " -- well, no, not really) promised Hillary that if she stuck by him, he would help her become President.  Many people on the Internet openly avow belief in the rumor.  For example, here (comment by "Donald"), here (comment by "Janette"), here (comment by "transam76"), here (comment by "Cameron"), and a more obscure reference here ("You see, they really deserve a second eight years. Bill promised Hillary all those years ago.").

I also have intelligent friends who report on this rumor to me with the sort of wide-eyed insistence I usually associate with people recounting their abduction by aliens.  The alleged promise is supposed to explain why Bill Clinton has inexplicably been out campaigning for -- of all people -- his wife! 

But this is exam season, so who can come up with arguments for why such a promise would or would not be enforceable?

[Jeremy Telman]

Rumors from the Campaign Trail

I have heard many versions of a rumor of a contract between Barack Obama and Hillary Clinton.  The deal is that she will get out of the race if he will get her campaign out of its debt . . .  to her.  In other words, it's greenmail: Obama would be paying Clinton to go away.

Yesterday, "The Caucus," the New York Times politics blog reported that Obama "would not rule out the possibility of helping Senator Hillary Rodham Clinton retire her campaign debt to bring her into the fold and unify Democrats," although discussions have not yet taken place.  Various websites provide versions of the rumor and commentary.  For example, Ashish on  411mania.com notes the irony that "Obama would essentially be using money people donated to his campaign to BEAT Clinton to pay off the debts Clinton accumulated while trying to beat Obama."  Forbes characterized the plan as a "buyout."

Apparently, that notion had some Obama supporters up in arms, as they do not want their campaign donations to go to Hillary.  As "The Caucus" reports, Obama staffers are now saying that there would be a separate fundraising drive to raise money for Hillary's reimbursement. 

A scientific poll on Democratic Underground.com suggests that 58% of the people scientifically selected to participate in the poll would oppose any assumption by Obama's campaign of the Clinton debt.

[Jeremy Telman]

Congress May Close Loophole for Defense Contractors

According to the Associated Press, as reported in the Orlando Sentinel, Congress is moving to close a loophole that until now has permitted military contractors to avoid paying taxes and evade the strictures of U.S. employment law by setting up off-shore shell corporations. 

According to the report, U.S.-based military contractors have been setting up subsidiaries in places like the Cayman Islands.  These subsidiaries then employ U.S. citizens who provide support services for the U.S. military abroad.  As foreign corporations doing work abroad, these subsidiaries do not pay social security or medicare taxes for their workers and need not abide by federal labor and anti-discrimination laws.  The A.P.'s investigation suggests that the off-shore subsidiaries exist only on paper, without an address or phone number. 

The House passed tax legislation two weeks ago that would treat  foreign subsidiaries of U.S. government contractors as U.S. corporations.  The Senate is now considering the measure.  Today's New York Times features an editorial urging passage of the legislation. 

[Jeremy Telman]

Drafting Conference at Emory Law School

On May 30-31, 2008, Emory Law School will be hosting a conference entitled "Teaching Drafting and Transactional Skills: The Basics and Beyond."  Given recent discussions on this blog (here) and recently scholarship on the subject (noted here) and scholarly interest in the subject evidenced by other conferences such as the one noted here,  this seems a timely event. 

More information on the conference is available here.

[Jeremy Telman]

More International Contracts Law Scholarship

Florida Coastal School of Law's Charles Martin (pictured) recently published The Electronic Contracts Convention, the CISG, and New Sources of E-Commerce Law  in 16 Tulane Journal of International and Comparative Law 1 (Fall 2007).  Here's the abstract: 

Although no non-European Union convention focusing on international electronic commercial contracts is currently in effect, such contracts are growing in number and importance and do not exist in a legal vacuum. The Convention on Contracts for the International Sale of Goods (CISG) has been interpreted by its Advisory Council to apply to such electronic contracts. International law, based on general principles of good faith and equity and on customary international law, is an existing and future source of international commercial electronic contract law. Customary international electronic commerce law is derived from the general practices of businesses contracting through electronic communications that are accepted as law, and from international treaties and model laws, and their interpretations, which have been accepted as authoritative descriptions of such practices. The United States will decide whether or not and how to ratify the Convention on the Use of Electronic Communications in International Contracts (CUECIC) that was proposed by it to the United Nations Commission on International Trade Law (UNCITRAL) and was drafted and approved by UNCITRAL. CUECIC advances further than existing law the legitimacy and functionality of international electronic commercial contracts. U.S. ratification decision makers should recognize this advancement, reinforce the freedom of contract norms promoted by CUECIC, and preserve the legitimacy of customary international law as a supplement to the limited contract formation rules of CUECIC.

[Jeremy Telman]

Limerick of the Week: Gay Jensen Farms Co. v. Cargill, Inc.

Gay Jensen Farms Co. v. Cargill Inc. is a great case for teaching the very important principle that contractual relations, including agency relations, can be implied through conduct.  In this case, the Warren Grain & Seed company defaulted on contracts made with farmers for the sale of grain.  Because Warren was judgment-proof, the plainitffs went after Cargill on the theory that Warren had become Cargill's agent.  The court found Cargill could be held liable as a principal both because of its creditor/debtor relationship and because of its buyer/supplier relationship with Warren.  Especially in connection with the former relationship, there was strong evidence that Cargill exercised effective control over Warren's business.

Gay Jensen Farms Co. v. Cargill, Inc.

Warren was deep in the hole,
So it went on the Cargill, Inc. dole.
No simple creditor,
Cargill's a predator,
And must pay, since it had control.

[Jeremy Telman]

People Is Stoopid: $5 Million Baby Pictures

Question: What kind of person would expose her children to ruthless paparazzi just in order to make a few bucks? 

Answer: The kind of person who doesn't need the money in the first place.

Today's New York Times reports that People Magazine paid $5 million for the first public pictures of J-Lo (pictured) and her newborn twins, so that you can see the same picture for free here.

One interesting thing about this agreement: In the New York Times article, it seems quite clear that the publishers cannot justify the prices they have been paying for baby pictures, which now frequently exceed $1 million. The Times quotes industry executives as saying that "the most important factors are impossible to measure: the value of being known as the place to go for those pictures, and of keeping them out of a competitor’s hands."  It gets clearer still:

Larry Hackett, People’s editor, said, “Last year, we lost a couple of weddings because OK! magazine was willing to spend more money than we thought made sense.” If that sort of thing becomes common, he said, “they’re going to get traction, and I don’t want any competitor to get traction where I can stop it.”

This kind of comment falls into a pattern of grossly inflated contracts that benefit the ultra-rich, something this blog has commented on before.  These contracts are not subject to rational defenses.  People is now pretty much admitting that it pays more for these photos than "makes sense."  The competition, OK!, has yet to make a profit.  The high prices are motivated by fear of the competition, which creates a feeding-frenzy dynamic in the bidding and defies conventional market logic.

[Jeremy Telman]

The Army Lawyer: Special Contracts Issue

The Army Lawyer's January 2008 issue is a special issue devoted to "Contracts and Fiscal Law Developments of 2007 -- The Year in Review.  As the Table of Contents indicates, much of the issue is taken up with developments in contracts law.

[Jeremy Telman]

Peter Alces in University of Illinois Law Review

Peter Alces (pictured) of the William and May School of Law has just published Unintelligent Design in Contract, in the University of Illinois Law Review.  Here is the abstract:

Scholars have expended considerable energy in the effort to “discover” a normative theory of Contract. This Article surveys that effort and concludes that something fundamental about Contract has been missed and has frustrated the search from the outset. Succinctly, Contract doctrine resists the neat formulation theory requires.
    Theorists’ perspectives on Contract may be generalized as attempts to impute either deontology or consequentialism to the Contract law. Focusing largely on deontological constructions of Contract, this Article demonstrates the inconsistencies among the extant heuristics—promise, reliance, and transfer—and more importantly, the failure of any of those constructions to provide a coherent explanation of Contract doctrine. This failure reveals a more fundamental failure of Contract theory generally: Because doctrine is a matter of historical accident rather than “divine” inspiration, efforts to explain doctrine as an outgrowth of some coherent and fundamental purpose are necessarily unavailing, and ultimately obfuscatory.
    Contract defies reduction into certain normative terms because Contract doctrine is an amalgam of normative inclinations. Neither pure deontology nor pure consequentialism is the source of all Contract; both rather serve as poles at the ends of a Contract continuum. This Article concludes that the search for the grail—the theory of Contract—heretofore has been misdirected. Our effort to understand Contract in normative terms should begin anew, from the premises offered here.

Heady stuff.

[Jeremy Telman]

New Contracts Scholarship

Jody Kraus's: From Langdell to Law and Economics: Two Conceptions of Stare Decisis in Contract Law and Theory, has just come out in the Virginia Law Review.  Here's the abstract:

In his classic monograph, The Death of Contract, Grant Gilmore argued that Christopher Columbus Langdell, Oliver Wendell Holmes, and Samuel Williston trumped up the legal credentials for their classical bargain theory of contract law. Gilmore’s analysis has been subjected to extensive criticism, but its specific, sustained, and fundamental charge that the bargain theory was based on a fraudulent misrepresentation of precedential authority has never been questioned. In this Essay, I argue that Gilmore’s case against the classical theorists rests on the suppressed premise that the precedential authority of cases resides in the express judicial reasoning used to decide them. In contrast, I argue that the classical theorists implicitly presuppose that the precedential authority of cases consists in the best theory that explains their outcomes, even if that theory is inconsistent with the case’s express judicial reasoning. The classical view of precedential authority completely defuses Gilmore’s charge of fraud. In Gilmore’s view, merely demonstrating the inconsistency between the proposition for which the classical theorists cited a case and the express reasoning in that case suffices as proof of misrepresentation. But in the classical theorists’ view, the express reasoning in a case is simply a theory of its precedential authority, which, like any theory, can be wrong. Thus, the classical theorists simply reject Gilmore’s claim that a case cannot properly be cited for a proposition inconsistent with its express reasoning. The real dispute, then, between Gilmore and the classical theorists is over the nature of precedential authority and not the content of contract law.
 
Having reframed the classic death-of-contract debate, I then trace these competing conceptions of precedential authority through the major schools of contemporary contract theory. I argue that a contract theory’s embrace of one view instead of the other can be explained by the relative priority it accords to each of the two components in a conception of adjudicative legitimacy. A conception of adjudicative legitimacy consists in a theory of what it means for a decision to be based on law and a theory of what is required for law to be justified. I explain why theories according priority to the former tend to subscribe to the precedents-as-outcomes view, while theories according priority to the latter tend to favor the express reasoning view. The Essay concludes by arguing that the economic analysis of contract law subscribes to the precedents-as-outcomes view and therefore is the contemporary jurisprudential successor to the late 19th century classical theorists.

Happy reading!

[Jeremy Telman]

The CISG: The Rodney Dangerfield of Treaties

In their new case comment, All Quiet on the CISG Front: Guiliani v. Invar Manufacturing, the Battle of the Forms, and the Elusive Concept of Terminus Fixus, James M. Klotz, Peter Mazzacano and friend of the Blog, Antonin I. Pribetic argue that the CISG gets no respect, no respect at all.  Not even in Canada!  Here's the abstract from SSRN:

Since Canada adopted the U.N. Convention on the International Sale of Goods (the "CISG") in 1992, international sales practitioners have been patiently waiting for a corpus of Canadian case law to develop. The slow pace of development of case law has been due, in large part, to the failure of litigants and judges to recognize that the CISG is the applicable law in numerous international contract disputes involving the sale of goods. The latest example, the recently reported case of Guiliani v. Invar Manufacturing is a further manifestation of this failure. Not only is this case the latest disappointment in Canadian CISG jurisprudence, the case also begs additional questions: When is contract formation complete? At what point does the "battle of the forms" end, and contract consummation begin? Finally, is there a specific point at which the contract is formed, or is the idea of terminus fixus in contracts an elusive goal? This Case Comment considers these questions within the broader context of the failure in Canadian jurisprudence to give the CISG its day in court.

HT: Antonin Pribetic!

[Jeremy Telman]

The General Services Administration: A Victim of "Terrorism"

According to the Wall Street Journal (see story "The Ousting of Lurita Doan"), Lurita Doan (pictured), as chief of the General Services Administration, oversaw "tens of billions of dollars in government contracts"  with the help of inspectors general.  In her two-year tenure as GSA chief, Doan generated a lot of controversy. 

In 2006, frustrated with oversight by those inspectors general, Doan proposed to cut the budget of the inspector general's office by $5 million.  Doan claimed that she was going after wasteful government spending, despite the fact that the office reported that its oversight had saved the government $1 billion over the previous two years through its watchdog efforts with respect to government contracts.  The Washington Post obtained a copy of notes from a GSA staff meeting in which she chided the inspectors general as terrorists: "There are two kinds of terrorism in the US: the external kind; and, internally, the IGs have terrorized the Regional Administrators,"

In January 2007, Doan admitted she made a "mistake" in awarding a no-bid contract to a friend.

In March, 2007, the House Committee on Oversight and Government Reform initiated investigations into Ms. Doan's conduct that may have violated the Hatch Act, which prohibits partisan campaign activities on federal property, when she allegedly directed GSA administrators to "help our [Republican] candidates" in a teleconference with one of Karl Rove's deputies on the line.

A full catalog of Washington Post stories covering Doan's career in public service is available here.

This week, Doan finally resigned from the GSA at the request of the White House.  Heckuva job, Doanie.

[Jeremy Telman]

New Topical Category: Limericks

Thanks to Joe Hodnicki of the Law Professors Blog Network and to Frank Snyder, whose limitless indulgence permits me to post here, we now have a new topical category for the Limericks fans out there.  It has not yet been fully populated, but I hope to do so over the next few weeks.  Then, those of you who want to gather the full collection of Limericks for Lawyers can do so by clicking on "Limericks" in our Topical Archive.  You can have a look at what's there now here.

[Jeremy Telman]

WSJ: Meet the New Boss

When The News Corporation bought Dow Jones & Company, publisher of the Wall Street Journal, the Bancroft family, which held a controlling interest in Dow Jones, put up a fight in an attempt to protect the Journal's independence.  The News Corporation is controlled by Rupert Murdoch (pictured), who is reputed to have "a history of bending news coverage to suit his views," according to today's New York Times.  In order to protect the paper, the Bancrofts insisted upon the creation of a special oversight committee with the power to block the firing or hiring of the Journal's managing editor.

Last week, the Times reported that Marcus Brauchli, the Journal's managing editor, was resigning, just four months after Murdoch took control of the paper.  The special oversight committee has no jurisdiction over resignations, but it found that Brauchli had been effectively forced to resign and thus that Brauchli was removed from his position in violation of both "the letter and the spirit of the agreement." 

The committee recognizes that Mr Brauchli cannot be "unresigned," and is therefore simply stressing its intention to play a role in selecting his replacement.  According to the Times, the committee's chairman, Thomas J. Bray, said that Brauchli did not believe that the News Corporation had compromised the integrity or independence of the Journal.  Still, the Times reported that Brauchli was frustrated by the perception (at least) that he was not truly in control of the paper he ostensibly led.

[Jeremy Telman]

Limerick of the Week: Gorton v. Doty

After a long hiatus from Limerick posting, I have decided to share with the blog's readership a selection from Volume II of my collection of Limericks for Lawyers.  Volume II summarizes cases covered in my Business Associations course, but many of the cases for that course raise contractual issues, so I figure that's a sufficient hook to permit me to post them here.

I teach the course using Klein, Ramseyer and Bainbridge's casebook, so those of you familiar with that book will know the cases.  Volume I of the Limericks for Lawyers series was based on my first-year contracts course, in which I used Knapp, Crystal and Prince's casebook. For the coming year, I am switching to the Conracts: Law in Action book, which means new cases, and yes, new contracts Limericks coming in the Fall.  This is not a knock on the Knapp book, of course, which I have enjoyed using.  I just need to use some new materials so as to awaken from my dogmatic slumbers.

So, without further ado.  The first case I teach in Business Associations is Gorton v. Doty, in which a high school teacher (Doty) is repaid for her patriot efforts on behalf of her school (Soda Springs) football team with a tort claim.  She loaned her car to Coach Garst so that he could drive the team to a game.  The Gorton boy was injured when Coach Garst got into an accident, but Ms. Doty was held liable as the principal since the court found that she had effectively made Coach Garst her agent by conditioning the loan of her car on his agreement to be the sole driver.

Gorton v. Doty

The court made Ms. Doty the heavy
When Coach Garst demolished her Chevy.
When Soda Springs lost the game,
Coach accepted the blame,
But the principal pays the tort levy.

[Jeremy Telman]

Girls Gone Litigious?!?

What do you get when you cross Ashley Alexandra Dupre, the woman with whom former New York Governor Elliot Spitzer allegedly had some very expensive private encounters, with the Girls Gone Wild franchise? 

a. A law suit.
b. A perfect storm for the blogarazzi.
c. A much-visited post on this blog.
d. All of the above.

If you guessed d, you may be right.  Time will tell if c is a winner. 

In any case, Comcast.net news reports that Ms. Dupre is seeking $10 million in damages from Girls Gone Wild and the mastermind behind it, Joe Francis, pictured above.  The ever-enterprising Mr. Francis reportedly offered Ms. Dupre $1 million to appear in one of his videos but then rescinded the offer when he learned that he already had footage of the pre-Spitzer Ms. Dupre.  Francis claims that Dupre spent a week on a Girls Gone Wild bus and made seven Girls Gone Wild videos.  The eleemosynary urge is strong in Mr. Francis: after their collaboration was at an end, he even bought her a bus ticket so that she could return to North Carolina.

Ms. Dupre's attorney contends that she was only 17 (and also drunk FWIW) when she signed releases permitting Mr. Francis to film her.  Her lawsuit thus challenges the validity of the releases and claims that defendants exploited her image without meaningful consent in order to promote their soft-porn products.

[Jeremy Telman]

Alamo and National Sue Orbitz

According to the St. Louis Business Journal, Alamo Rent-A-Car and National Car Rental are suing Orbitz Worldwide, Inc. for breach of contract, alleging that Orbitz has violated its online listing agreement with the two companies and has and improperly removed both Alamo and National from its main rental car matrix.

Both Alamo and National were acquired in 2007 by the Taylor family of St. Louis, which also owns Enterprise Rent-A-Car, when Enterprise acquired the parent company of Alamo and National, the Vanguard Car Rental Group.  The companies allege that Orbitz demanded an additional payment of $1.5 million in excess of what was required under the companies' agreement which runs through December 31, 2008.  Alamo and National allege that Orbitz removed them from its matrix when the Taylor family refused to pay.

Alamo and National are seeking a temporary restraining order, preliminary and permanent injunctive relief, and specific performance, punitive damages, and attorneys' fees.  Alamo contends that it stands to lose more than $27 million due to the alleged breach.  That being the case, I would pay the $1.5 million and sue later, but nobody asked my advice.

Orbitz maintains that the suit is without merit and that the two rental companies are making demands of it that are not required under the agreement.

[Jeremy Telman]

No Punitive Damages in Genentech Case

Last week, the California Supreme Court upheld a $300 million verdict on a breach of contract claim against the biotechnology company Genentech (HQ pictured) but struck the $200 million award of punitive damages, according to the San Francisco Chronicle.  The dispute relates to the discovery of a process for producing insulin made in the 1970s by two scientists working at the City of Hope National Medical Center, a cancer research center, City of Hope contracted with Genentech to patent and market products derived from the process in return for a 2 percent royalty.  Genentech paid City of Hope more than $300 million in royalties relating to the product the two scientists had synthesized but did not pay royalties relating to other products that were created using the engineering process that the two scientists had created. 

The jury had awarded punitive damages based on a finding that Genentech had breached a fiducity duty to City of Hope.  The Supreme Court refused to permit plaintiffs to get around the limitation on contractual damages by characterizing a breach of contract claim as one alleging a fiduciary breach.  Summarizing the opinion, the Chronicle reports:

The court said a company that markets another firm's scientific discoveries in exchange for royalties has no special obligation to protect the other's interests, apart from its duty to adhere to the contract. Without any such obligation, the justices said, punitive damages cannot be awarded for a breach of contract.

And there was much rejoicing among the amici.

[Jeremy Telman]

"Greed Is Good" Guy Sued

As TMZ.com puts it, "A guy that once starred in a movie with Michael Douglas, then became his business partner, is suing the Oscar winner, claiming he got screwed out of millions."  Now that's good reporting.  Want to know the details?  Well, TMZ says it's complicated but provides a link to the complaint, which alleges six causes of action including breach of contract and inducement to breach of contract, against Douglas and other individuals and business entities.

Plaintiff, Howard Zuker, aka Zack Norman, sues on his own behalf and derivatively on behalf of an LLC in which he has a 20% stake.  Plaintiff alleges that he managed the LLC while also active as a producer of Hollywood films.  The LLC's main asset seems to be a library of "owned or managed intellectual property rights."  Plainitff alleges that Michael Douglas prevented the LLC from advertising its existence, making it harder for the LLC to attract potential users of its assets.  Still, as of January 31, 2008, the complaint alleges that the LLC was involved in 31 active projects.

The complaint also relates the close personal relationship between plaintiff and Douglas.  According to TMZ, Douglas is plaintiff's former "BFF," but the complaint does not go that far.  It merely alleges that Douglas was kind to plaintiff and loaned him a lot of money.  The LLC was created to purchase a company that held the assets that are now the primary asset of the LLC.  According to the complaint, Douglas originally promised to put up half the capital necessary for that purchase but in the end put up much less, and the LLC was thus perpetually short of working capital.

Plaintiff alleges that he and Douglas created a joint venture agreement around January 2000 whereby the LLC would repay Douglas the loan he made at its founding plus 8% interest.  After that loan was repaid, the partners would share profits from the venture on a 50/50 basis.  But the complaint also alleges that Douglas made further loans to the LLC from 2001 to 2003 and that other parties who promised to provide capital did not perform.

Between 2002 and January 2006, plaintiff worked to created a new funding vehicle for the LLC, the AEHC Film Fund.  Plaintiff was supposed to receive a $1 million bonus for putting together the Film Fund, and he borrowed money from a banker (Baker) involved in the deal in order to tide him over until the work was completed.  In March 2006, according to the complaint, Douglas sent Plaintiff a new plan for the Film Fund, which was now renamed.  Under the new plan, the LLC's stake in the Film Fund would drop from 50% to 4%, with the remaining stakes going to film production companies controlled by Douglas and his wife. and the LLC would transfer its assets to a new entity, Granite-Glass, L.P. controlled by Douglas and Baker.  Recently, the LLC has stopped paying plaintiff his salary as manager and has refused to reimburse his business expenses.

Unfortunately, the complaint fails to allege that in pitching the new Film Fund to potential investors, Michael Douglas gave a rousing speech about the benefits of greed.

Plaintiff's main claim is for breach of fiduciary duty.  He seeks lost wages and the $1 million bonus he would have made for putting together the Film Fund.  He also seeks unspecified damages for harm done to the LLC.  Plaintiff's breach of contract claim is against the LLC, alleging that he is owed a part of his annual $192,000 salary as manager of the LLC.  Plaintiff names Baker as responsible for inducing the breach.

[Jeremy Telman]

"Family Guy" Writers Sue Fox

According to the Hollywood Reporter, Seth MacFarlane and 15 other writers of the animated sitcom "Family Guy" are suing 20th Century Fox TV,alleging breach of contract and other claims.  The writers allege that Fox has violated its contract with the writers by not paying them for 12 minutes of additional footage based on a script they wrote for a 2005 'Family Guy" DVD. They also allege that Fox failed to give them proper credit for the project. 

The Hollywood Reporter says that Fox would not comment on the law suit.  Not on record, perhaps.  Off the record, Fox's spokesperson said, "Twelve minutes of guys shaving off their strike beards is not remunerable.  Wait, wait.  'Remunerable' won't work as a laugh line.  How about this: Those guys probably couldn't even see through their strike beards to read the terms of the contract they signed.  They've got nothing!  Yeah, go with that, but off the record, okay?"

[Jeremy Telman]

Senate to Employees: You're on Your Own

In Ledbetter v. Goodyear Tire & Rubber Co., the Supreme Court ruled, in a 5-4 decision, that Title VII required that a plaintiff allege that defendant acted with discriminatory intent in making adverse pay decisions during the 180 days prior to the filling of a complaint with the Equal Employment Opportunity Commission (EEOC).

Lilly Ledbetter was employed as a manager by Goodyear from 1979-1998.  Initially she was paid the same as her male counterparts, but over time her pay slipped until she was paid significantly less than the lowest-paid male manager.  A jury rejected Goodyear's claim that it had non-discriminatory reasons for the pay disparity and awarded Ledbetter back pay.  The Eleventh Circuit reversed, finding that the allegedly discriminatory conduct had occurred prior to the 180-day window dating from the time of Ledbetter's complaint to the EEOC.  Justice Alito, writing for the majority, agreed, based on the statutory language and precedent.

Ledbetter and the dissent made policy arguments in favor of a more lenient rule.  Because employees are not entitled to know what their peers are being paid and because pay discrimination only occurs in slow imcrements that have a cumulative effect, Ledbetter argued that the 180 window should be expanded.  Justice Alito would not address those arguments, saying the court's role was simply to apply the statute as written.

The decision was thus, in effect, a remand back to Congress to clarify its legislative intent.  It attempted to do so through the Lilly Ledbetter Fair Pay Act of 2007, which effectively overrules Ledbetter and which passed the House by a vote of 225-199.  But the Act will not come to a vote in the Senate because it failed to win the 60 votes necessary to overcome Senate procedural rules.  Candidates Clinton and Obama returned to Washington to speak in favor of the Act and to cast their votes.  Candidate McCain remained on the campaign trail, but according to the New York Times, he said "he would have opposed the bill since it could contribute to frivolous lawsuits harmful to businesses."  Senator Hatch further explained the motives of the all but six Republican Senators who opposed the Act:  “The only ones who will see an increase in pay are some of the trial lawyers who bring the cases.”

So, employees who want to protect themselves against pay discrimination will have to negotiate harder during those oh-so-even-handed discussions they have with their employers when they take their positions.  Ms. Ledbetter, for example, after nearly 20 years in a supervisory position with Goodyear, was making nearly $45,000 a year.  With such princely resources at her disposal, imagine her bargaining power!

[Jeremy Telman]

Handwritten Letter of Intent Worth $10.5 Million

According to Newsday.com, a jury has awarded $10.5 million to internet executive Alfred West in his suit to enforce a handwritten agrement with IDT Corp.  According to the report, West met with IDT founder and chairman Howard S. Jonas on February 3, 2001.  The product of this meeting was two pages handwritten by Jonas which contained the terms of a deal in which West would develop a business within IDT.  The terms of the deal were as follows:

The deal called for an annual salary of $200,000 for five years, and an annual payment on Feb. 13 for the next five years of 70,000 shares and $1.5 million, which they estimated was worth "roughly" $14.3 million. The deal called for an annual salary of $200,000 for five years, and an annual payment on Feb. 13 for the next five years of 70,000 shares and $1.5 million, which they estimated was worth "roughly" $14.3 million.

Crucially, the handwritten agreement also contained the following langauge: "The parties will complete formal contracts as soon as possible but this is binding."

West was fired after six months at IDT.  His suit resulted in a 2005 jury verdict in his favor for $1.5 million.  The Third Circuit vacated that verdict and remanded, while reinstating West's breach of contract claim, which had been dismissed by the district court.  The second trial worked out even better for Mr. West, but IDT has promised a second appeal.

[Jeremy Telman]

Breaking 19th-Century News

National Public Radio reports that a 77-year-old Tampa woman is suing the city for its failure to repay a $300 loan made by her great-grandfather to the City of Tampa during the Civil War.  Assuming 147 years of interest at 8% per annum, the plaintiff figures she is owed $23 million. 

The past is passed, says Tampa (pictured), citing the statute of limitations, the demise of the currency in which plaintiff's great-grandfather was to be paid, and Section 4 of the 14th Amendment to the U.S. Constitution. Tampa also notes that the City of Tampa that incurred the debt dissolved in bankruptcy.  The current City of Tampa was founded years later.   

[Jeremy Telman]

There's No Crying in Baseball Contracting

Portfolio.com reports here on the death of mega-contracts in baseball.  Yes, we're thinking of you, Troy Tulowitzki (pictured), and also of Evan Longoria.  These are two young baseball players who signed rich but not jaw-dropping contracts with their teams either as rookies or after one year. 

This blog has suggested elsewhere that agreeing to pay any 42-year-old player nearly $30 million a year might be irrational.  Portfolio.com suggests the same, as the average player peaks at age 26.  Rational ball clubs thus offer reasonable multi-year contracts to very young players with huge potential, hoping to avoid having to pay them eye-popping contracts for post-prime years.

But nobody will walk away from the negotiating table crying.  Mr. Longoria negotiated a deal that will pay him $17.5 million over the next six years.  At the time he signed, he had played six games in the major leagues.  Tulowitzki will get over $5 million a year over a six-year period, but he had already proved himself last year as a rookie.  These contracts may seem rich, but with what you pay Tulowitzki to play every day for a full season you can barely get Roger Clemens to sit on the bench four games out of five for a month.

[Jeremy Telman]