ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Friday, December 31, 2004

Fashion firm sues designer over license deal

Ozwald_boateng Trendy London designer and Savile Row tailor Ozwald Boateng—whose work is hip enough to be used in James Bond films—has been sued for breach of contract by the Marchpole fashion group.

Marchpole distributes a line of expensive Boateng designs ("Diffusion") under license from the designer.  Boateng (left) had a previous deal with Debenhams for a cheaper menswear line called "O-Z."  Marchpole says that the Debenhams deal was supposed to run out before its own started.  But it claims that Boateng and Debenhams are still selling the cheaper stuff in competition with its own line, costing its sales.  Marchpole is enthusiastic about Boateng, it says—it just doesn’t want unfair competition.

While we're on the subject, today’s fashion tip from Ozwald: "A change of cufflinks can be used to easily change your look and say something different about your personality."

December 31, 2004 in In the News | Permalink | Comments (0) | TrackBack (0)

Studio wants to freeze cable defendants' assets

Warner_bros_logo A Hollywood studio that won a $19 million breach of contract verdict in California against three Israeli cable companies has filed in action in Tel Aviv district court to freeze their assets.

Warner Brothers filed the petition claiming that it thinks the companies may collapse before it can recover its judgment, or that they may shift assets to other entities to avoid execution.

December 31, 2004 in In the News | Permalink | Comments (0) | TrackBack (0)

Cases—Unlawful contracts—Insurance policy runs afoul of securities regulation

Pennsylvania_flag_1 An insurance company that refused to permit the owners of "variable premium" "flexible benefit" life insurance policies to day trade the mutual funds in which they were invested—in violation of a specific policy provision—was nevertheless entitled to summary judgment in its favor on a breach of contract claim because the policies were illegal, according to a Pennsylvania federal court.

Plaintiffs had bought seven different policies from the defendant insurer, and for more than five years had daily switched assets among mutual funds in furtherance of their "market timing" strategy.  Their policy specifically permitted them to trade up to once a day.  The company, however, finally prohibited them from further trading by telephone, Internet, or fax, and the plaintiffs sued for breach of contract.

The contract was clear enough, said Judge Herbert A. Hutton, applying Pennsylvania law, but the problem was that the contracts were illegal.  They permitted the plaintiffs to trade up to 4:00 p.m. Central Time, and to get the current day’s prices. But federal law makes it illegal to allow trading after 4:00 p.m. Eastern Time.  The contracts therefore would permit trading in violation of federal regulations, and were therefore illegal and unenforceable.  The company was entitled to summary judgment.  Prusky v. Reliastar Life Ins. Co., 2004 U.S. Dist. LEXIS 24802 (E.D. Pa. Dec. 7, 2004).

December 31, 2004 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Today in history—December 31

Edison_electric 1879: Thomas Edison gives the first public demonstration of his incandescent lighting in Menlo Park, New Jersey.  His Edison Electric Light Co. will later, after mergers, become the General Electric Corp.  At left, an original notice to hotel guests unfamiliar with how to use the newfangled Edison lights (click).

1929: The Hotel Roosevelt Grill in New York starts a tradition, hiring Guy Lombardo and his Royal Canadians to usher in the New Year.

1940: The five year music licensing contract between ASCAP (American Society of Composers, Authors, and Performers) and the lapses and the parties reach impasse. ASCAP, which has been getting 5 percent of radio revenues, wants 10 percent.  For 11 months no ASCAP songs can be played on the air—giving a huge boost to the "race" and "hillbilly" music of rival Broadcast Music, Inc., that will later evolve into R&B and country/western music.

Wrap_dress 1945: Fashion tycoon Diane von Fürstenberg is born in Brussels, Belgium.  She will marry her prince and then hit the big time in 1975, selling 6 million of her "wrap" dresses (left) that year.  Motto: "Life is a risk."

1955: General Motors becomes the first American company to earn $1 billion in a year.  Honda and Toyota notice.

1958: The California Supreme Court rewrites the economics of subcontracting with its decision in Drennan v. Star Paving

1975: Elvis Presley earns a then-record $800,000 for a single performance at the Pontiac Silverdome in Michigan.

1997: Microsoft, trying to strengthen its E-mail presence, buys Hotmail.

December 31, 2004 in Miscellaneous | Permalink | Comments (0) | TrackBack (0)

Thursday, December 30, 2004

What's in a Number?

Ohalete_1Ifeanyi Ohalete (pictured left), now with the Arizona Cardinals football team but formerly with the Washington Redskins, has filed a breach of contract action in Maryland District Court, claiming that former teammate Clinton Portis (pictured below) owes him $20,000 of $40,000 promised by Portis to purchase jersey No. 26 from Ohalete.  Portis wore No. 26 in two seasons with the Denver Broncos and wanted to retain it when traded to Washington.  He paid $20,000 up Portis_2front to Ohalete but failed to make two promised payments of $10,000 during the season, according to the complaint.  Ohalete switched to No. 30 after making the deal, but was cut by Washington during training camp in August.  He's now starting free safety for Arizona, where he wears jersey No. 25.  Ohalete, through his agent, said the dispute was "about honesty and principle."   And maybe about the $20,000.

December 30, 2004 in In the News | Permalink | Comments (0) | TrackBack (0)

Ted Nugent festival suit is still on

Ted_nugent The lawsuit of rock star Ted Nugent against a Muskegon, Michigan, music festival will go forward.  A state court judge denied a motion to dismiss based on Nugent’s failure to turn over materials in discovery, and gave the rocker another chance to deliver.

The Muskegon Summer Celebration canceled Nugent’s performance last year after he reportedly used racially offensive terms during an interview on a Denver radio station.  The controversial Nugent (left), whose God, Guns, and Rock and Roll was a New York Times best-seller, is not the sort to quietly fade away.  He sued, alleging breach of contract, and is seeking $1.8 million in damages for disruption of his tour.

December 30, 2004 in In the News | Permalink | Comments (0) | TrackBack (0)

Cases—Good Faith—No good faith duty to allow collateral to be re-leased

New_york_flag_3 A finance company had no good faith duty to give its consent to re-leasing of aircraft by a financially troubled lessor, because the financing document put no restrictions on its ability to withhold consent, according to a federal court in Minnesota, applying New York law.

With extremely bad timing, Ameriquest Holdings got into the plane leasing business in 2000, getting financing from U.S. Bancorp.  Following the collapse of the airline industry after September 11, 2001, its leased aircraft were returned to it and it was unable to re-lease them domestically.  USB, insisting it only did business in the U.S., refused permission to lease the planes to other countries, including Pakistan, Nigeria, and Indonesia.  Ameriquest ultimately went bust, and USB repossessed the planes and sold them into the depressed market for a pittance.

Ameriquest argued that USB had a good faith duty to agree to the lease, but District Judge Ann D. Montgomery disagreed. USB had reserved the right to consent in the agreements, and there was no provision (such as the standard "not to be unreasonably withheld") that would limit its discretion. Even if USB were unreasonable, Ameriquest had no complaint.

In the course of the opinion, Judge Montgomery also disposed of claims that USB’s sale of the planes was commercially unreasonable, and that the 9/11 events made the contract impossible to perform or frustrated its purpose.  U.S. Bancorp Equip. Fin., Inc. v. Ameriquest Holdings, LLC, 2004 U.S. Dist. LEXIS 24709 (D. Minn. Dec. 7, 2004).

December 30, 2004 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Today in history—December 30

Santa_anna 1853: The United States pays General Antonio López de Santa Anna (left) $10 million for a slice of Mexican territory known as the Gadsden Purchase.  It is part of a plan to build a southern transcontinental railroad linking the slave states with the west coast, but the line is never built.

1873: Alfred Emanuel "Al" Smith is born in Manhattan. He will become governor of New York and Democratic candidate for president, but his lasting legacy is his later work as president of Empire State, Inc., the company that builds the Empire State Building.

1919: Lincoln’s Inn admits its first female law student.

1940: California opens the first freeway, named the Arroyo Seco Parkway but later called the Pasadena Freeway. Original speed limit: 45 miles per hour.

Mike_nesmith 1942: Michael Nesmith (left) is born in Dallas, Texas. He will become fleetingly famous a a member of the Monkees, but will go on to created the music video and Nickelodeon's Pop Clips program that will later be developed into MTV. After winning a $46 million breach of contract judgment against PBS, he says, "It's like finding your grandmother stealing your stereo.  You're happy to get your stereo back, but it's sad to find out your grandmother is a thief."

1953: Radio Corporation of America puts the first color television on sale in the United States. They’re priced at $1,175—over $8,000 in 2003 dollars.

1963: Article 2 is enacted in the District of Columbia, a year after the contracts in Williams v. Walker Thomas Furniture Co.

December 30, 2004 in Miscellaneous | Permalink | Comments (0) | TrackBack (0)

Inflation v. Improvement

Nber_logo Measuring inflation is difficult.  It’s hard enough when the thing itself stays the same but the price changes, but what happens when the thing itself is becoming better?

That’s the problem examined in a new research paper from the National Bureau of Economic Research.  In Measuring the Growth from Better and Better Goods, Mark Bils of the University of Rochester examines the quality changes in consumer durable goods, and tries to figure out how much of the price increases are the result of inflation, and how much quality improvement.

His conclusion? Since 1988, price increases have reflected primarily changes away from older to new and better products, rather than inflation.

December 30, 2004 in Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Mere breach of contract isn’t a tort in a franchise relationship

Piper_rudnick The distinction between franchisor actions that merely breach the contract and those that interfere with the business relations of franchisees—a tort—can be a little fine, but the New York Court of Appeals has clarified things considerably.  In Carvel Corp. v. Noonan the court ruled that a mere breach of the franchise agreement is not enough to trigger the tort; the plaintiff must show an illegal act, malicious motive, or egregious misconduct.

The implications of the decision on franchise agreements is analyzed in a client article by Lewis G. Rudnick, Barry Heller and W. Parker Baxter of Piper Rudnick LLP. Their take? The New York courts will look to contract law, not tort, to handle franchise disputes, so careful planning is critical.

December 30, 2004 in Commentary | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 29, 2004

Michigan adopts identify theft package

Michigan Governor Jennifer Grantholm yesterday signed eleven new pieces of legislation aimed at identity theft. Among the new statutes are one prohibiting the use of more than four digits of a Social Security Number on badges, envelopes, membership cards, etc., and another that prohibits the practice of requiring an SSN as a condition of doing business.

December 29, 2004 in In the News | Permalink | Comments (0) | TrackBack (0)

Today in history—December 29

Goodyear 1800: Charles Goodyear (left)  is born. In 1834, after going bankrupt as a Philadelphia hardware merchant, he will make rubber usable and popular by developing the "vulcanization" process.  He will nevertheless spend much of his life in debtors’ prisons and will die $200,000 in debt.  "I am not disposed to complain that I have planted and others have gathered the fruits," he will write. "A man has cause for regret only when he sows and no one reaps."

1827: Seth Wyman, of Wyman v. Fletcher, dies.

1845: The Republic of Texas, independent of Mexico since 1836, joins the Union as the 28th state. It is a defeat for followers of former President Mirabeau B. Lamar, who believe an independent Texas, not the United States, should become the dominant power on the Pacific.

1910: The Intercollegiate Athletic Association of the United States changes its name to the National Collegiate Athletic Association.  The NCAA’s mission is to prevent student athletes from being exploited by anyone except member schools.

1913: The Selig Polyscope Company of Chicago produces the first motion-picture serial cliffhanger, The Adventures of Kathlyn. The picture is a joint production with the Chicago Tribune, whose circulation rises 10 percent when it prints the weekly serial story.

1936: Mary Tyler Moore, whose acting career starts with as gig as "Happy Hotpoint" the little elf who dances around on top of Hotpoint kitchen appliances, is born in Brooklyn.

Sheb_wooley 1945: Music City, USA is born, as actor/singer/comedian Sheb Wooley (left) makes the first commercial recording in Nashville, Tennessee.  It goes nowhere.

1967: Paul Whiteman, whose orchestra made the black music known as "jazz" popular with Americans and who created the big-band sound of the thirties, dies in Doylestown, Pennsylvania.  His first hit, Whispering, sold two million copies in 1920, and his commissioning of George Gershwin to write Rhapsody in Blue made the new music respectable.

December 29, 2004 in Miscellaneous | Permalink | Comments (0) | TrackBack (0)

Cases—Damages—Economic loss rule does not bar damages for parties not in privity

Florida_flag_1 Speaking of the economic loss rule, Howard Bashman at the appellate litigation blog How Appealing reports on a new decision by the Florida Supreme Court holds that the rule does not bar damages for negligence by those who are not parties to the contract.  The decision is here.

Answering a question certified to it by the Eleventh Circuit, the court said, "We conclude that the 'economic loss doctrine' or 'economic loss rule' bars a negligence action to recover solely economic damages only in circumstances where the parties are either in contractual privity or the defendant is a manufacturer or distributor of a product, and no established exception to the application of the rule applies."

December 29, 2004 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 28, 2004

Winemaker Mondavi in scrap with cork manufacturer

Robert_mondavi All is not wine and roses in California’s Napa Valley.  Gardner Technologies, a high-tech cork maker, is suing giant Robert Mondavi Winery for breach of contract over a busted deal to put a new kind of cork in Mondavi bottles.

Gardner makes a device called the "Meta Cork," which does not require a corkscrew to remove it and also includes a cap that eliminates the need for a bottle stopper.  Gardner says it had reached a deal with Mondavi, but that company executives later pulled out.  At stake is more than the profit on that deal, according to Gardner. Mondavi was to be the company’s entry into the big time.  "If you get Bob Mondavi to place MetaCork on his wine, the entire wine industry will start using it," the company says it was told.

Mondavi says customer focus groups did not like the new cork. Gardner seeks about $7 million in damages.

December 28, 2004 in In the News | Permalink | Comments (0) | TrackBack (0)

VCs sue over inflated purchase price

Three venture capital firms that bought Healthcare Management Resources of Hendersonville, Tennessee, are suing the sellers for fraud and breach of contract. The firms claim the previous owners generated fictitious invoices that added $943,000 to earnings figures, which means that the $16.5 million purchase price was about $5 million too high.

The company has not prospered, and the VCs are asking for rescission of the purchase or, in the alternative, for compensatory and punitive damages. T hey are also seeking an injunction to prevent the defendants from spending the purchase money until the matter is resolved.  A hearing is scheduled for January 6.

December 28, 2004 in In the News | Permalink | Comments (0) | TrackBack (0)

California allows punitive damages for warranty breach

California_flag_2 Punitive damages for breach of contract will apparently be available in California as a result of last week's decision by the state's supreme court.  In a 6-1 decision, the court reinstated a punitive award of $6 million (on top of a $1.5 million breach of warranty award) against a helicopter parts supplier.

The supplier, Dana Corp., delivered a batch of clutches to Robinson Helicopter, about 9 percent of which were defective.  Robinson claimed that the defects were due to a chance in Dana's manufacturing process, about which it did not tell Robinson.   Robinson suffered $1.5 million in actual damages from recalls, but the $6 million in punitives, said the court, were to protect "innocent parties" from "fraudulent conduct."

December 28, 2004 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Today in history—December 28

John_molson 1763: John Molson (left) is born in Lincolnshire, England.  At age 23, he will have the apparently insane idea of building a beer brewery in Montreal, a place where everybody drinks wine.  He will become enormously successful, selling his brew at 5¢ a bottle.  He will go on to found Canada’s first steamship company, be president of its first bank, pay 25 percent of the cost of its first railroad, and build its first true theater.  A CBC poll of Canadians will later rank him as the 92d greatest Canadian, only sixty-odd places behind wrestler Bret "Hitman" Hart.

1846: Iowa enters the Union as the 22nd state.

1869: William Finley Semple of Mt. Vernon, Ohio, receives a patent for an improved chewing gum made from rubber, chalk, powdered licorice root, and charcoal.  It is not a success. The first successful, flavored chewing gum, "Black Jack" will be made a year later by somebody else.

1912: The first municipally owned street cars go into operation in San Francisco.  The city is now the only place in the world that operates cable cars.

Spiderman 1922: Stanley Martin Lieber, a cousin of the owner of little Timely Comics, is born in New York City.  As "Stan Lee" he will in 1963 invent a character who will star in two of the 15 highest-grossing films in world history: The Amazing Spider-Man (left, in difficulties).

1941: Facing wartime shortages of tea from India, Lipton Tea cancels The Helen Hayes Theater on CBS radio.

1964: That great sweeping epic of Russia, Dr. Zhivago, begins filming on location—in Spain.

1981: Warner-Elektra-Atlantic Records boosts the price of a 45-rpm single to $1.98. Other companies follow suit.  The 45 quickly becomes obsolete.  Coincidence?

December 28, 2004 in Miscellaneous | Permalink | Comments (0) | TrackBack (0)

Cases—Parol evidence—Oral “referral agreement” dismissed

Illinois_3 A contractor who claimed damages for breach of an oral "referral agreement" in connection with a home remodeling job lost the claim, because his own "self-serving affidavit" claiming such a contract conflicted with three written agreements.

The parties to the construction dispute had signed three separate documents that made up their contract.  None of them contained an integration clause.  Nevertheless, said Judge William J. Hibbler, applying Illinois law, it was "clear that the parties intended the contracts to be the final and complete expressions of their agreement." The parol evidence therefore barred the contractor’s affidavit.

The contractor’s claim that it had given a discount in exchange for the promise to be a reference was disposed of on summary judgment.  Johnson v. Wattenbarger, 2004 U.S. Dist. LEXIS 24739 (N.D. Ill. Dec. 6, 2004).

December 28, 2004 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Monday, December 27, 2004

Spot the issues

Canadian_trash The city of Toronto is locked in a dispute with its trash hauler, Wilson Logistics, Inc.  Toronto, which has a contract with Wilson to haul Canadian trash to the U.S. for disposal, says the company is in breach by failing to renew a $20 million performance bond.  Toronto is seeking specific performance, asking the court to order Wilson to renew the bond.

Wilson, meanwhile, has been trying to renegotiate the deal.  The parties have a 20-year contract to haul 1.3 million tonnes of trash a year.  But Wilson says U.S. trucking regulations are now driving up costs.  To avoid breaking the rules, the company has to use two sets of drivers, not one.

Wilson, which at one point said it might "fold up its tent," will continue to haul the trash, it says, but claims its financial condition makes it impracticable to get the bond.

The company sends 130 truckloads of Canadian garbage to the U.S. every day.  In a related story, Michigan residents aren't happy about it, since the Toronto garbage doesn't comply with Michigan environmental standards.   The state is exploring ways to ensure that the Canadians keep their own waste.  "You make the mess, you should find a way of disposing it in your back yard," says Port Huron City Manager Thomas Hutka.

(Photo: Canadian trash arriving at the Carleton Farms landfill in Michigan, from the Detroit Free Press.)

December 27, 2004 in In the News | Permalink | Comments (0) | TrackBack (0)

Today in history—December 27

1703: England and Portugal sign the "Methuen Treaty," which gives English textiles preference in Portugal and Portuguese wines preference in England. It stimulates the growth of the Oporto region of Portugal and the English infatuation with port wine.

1717: Lawyer Giovanni Angelo Braschi is born at Cesena, Italy. As Pope Pius VI he will see the conquest of Rome by Napoleon but, though captured and imprisoned until his death, will refuse to surrender his sovereignty.

1822: Louis Pasteur, the man who will revolutionize the world’s dairy industry by discovering "pasteurization," is born in Dule, France.

1845: Dr. Crawford Long of Georgia delivers the first child while using anaesthesia. Long had previously conducted the first surgical operation under ether in 1839. Emory University’s Crawford Long Hospital is named for him.

Greenstreet 1879: Perhaps film’s most famous black market overlord, Sydney Greenstreet (Signor Ferrari in Casablanca, at left with Paul Henreid and Ingrid Bergman) is born in Sandwich, Kent.  Greenstreet got his first film role, in The Maltese Falcon, at age 62.

1900: Carrie Nation launches her first attack on a saloon, using an axe to break all the bottles in the place.

1900: William George Armstrong, 1st Baron Armstrong, who exchanged a career in law for one in engineering and founded Britain’s Armstrong-Siddeley manufacturing empire, dies

1927: The Golden Age of Broadway Musicals begins at the Ziegfield Theater, as the Rogers and Hammerstein musical Show Boat opens on Broadway.

Radio_city 1932: New York’s Radio City Music Hall (left) opens with a spectacular six-hour show that loses a half-million dollars in six weeks.

1945: The International Bank for Reconstruction and Development, better known as the "World Bank" is created by 28 nations to stimulate growth and eliminate poverty in developing nations. Its first loan goes to France.

2001: The People’s Republic of China is given permanent normal trade status with the United States.

December 27, 2004 in Miscellaneous | Permalink | Comments (0) | TrackBack (0)