November 6, 2004
Korobkin on settlements
Russell Korobkin (UCLA) has a paper out on the SSRN network, The Role of Law in Settlements.
Litigants often view the choice between seeking an adjudicated outcome of a dispute and settling out of court as one between invoking the public rule of law as a dispute resolution mechanism on one hand and substituting private contract for law on the other. This dichotomy overstates the difference in the role law plays in adjudication and in alternative dispute resolution (ADR). Law significantly affects non-adjudicative settlements in two related but distinct ways. First, the parties' substantive legal entitlements affect out-of-court settlement outcomes, because a litigant with a strong case can demand more as a condition of agreeing to a private settlement than can a party with a weaker case. . . . Second, the legal rules governing settlement behavior and many of the rules governing the adjudication process also influence nominally private dispute resolution activities. This [second and] less-recognized effect of law on ADR is the subject of this article . . . .
Voluntary payment rule explained
The Voluntary Payment Rule is an equitable defense based on the general common law rule that a person cannot recover money which he has voluntarily paid with full knowledge of the facts. The Rule charges the claimant with knowledge of the law, even arcane law such as tax law.
Bettino points out that the rule was used to throw out a case challenging an early lease termination fee as a penalty under Article 2A, because the lessee had already paid the fee.
They give awards for this?
The Kansas Secretary of State’s Online UCC Filing System is a finalist for the 2004 Best of the Web competition for Digital Government Achievement, according to a release from the office. A check of the site shows it to be easy and intuitive to use, allowing quick filing and payment by credit card.
November 5, 2004
Lawyer shot by opposing counsel in contract dispute
A Seattle lawyer was seriously wounded today, apparently by his opposing counsel in a bitter contract case. Kevin Jung had been "maddened" by attorney William Joice's refusal to turn over documents in the case and obstructionist tactics. He had moved for sanctions against Joice. Joyce, a former deputy prosecutor, allegedly drove into a parking lot, "pointed a gun out of the driver's side window," and shot Jung while the latter was sitting his his car. From Guardian Unlimited:
A review of the court file in the contract dispute reveals Jung's frustration with Joice. Jung represented a Korean-American couple who opened a franchise of a store owned by another Korean-American couple, represented by Joice.
"You and your clients' failure to comply with court rules and unprofessional conduct on your part are just incomprehensible, as you have never been timely on any response due,'' Jung wrote to Joice last Aug. 9.
"This is getting out of hand,'' he said in another letter three days later.
Court commissioners repeatedly punished Joice for missing hearings and failing to provide documents by forcing him to pay Jung's fees, to the tune of thousands of dollars. Most recently, Joice wrote Jung a check in mid-October for $4,382, to settle fees and fines imposed by the court.
Jung is in critical condition; Joice is being held on $5 million bond for attempted first degree murder.
Cases—Statue of Frauds—Signing counter-offer doesn't do it
An employee who made “material changes” in his three-year employment agreement before signing it could not enforce it against his employer, which had rejected the changes, according to a federal district court in Pennsylvania. The employee claimed he had agreed on the telepone to an oral three-year contract, and had later signed a draft employment agreement with the three-year term. But he unilaterally modified the non-compete and vacation pay provisions. The employer never accepted the changes. He was subsequently fired four months after starting the job, and sued.
Senior Judge Gene Carter held that under the Pennsylvania statute of frauds, the parties’ failure to reduce the transaction to writing made the oral agreement unenforceable. The employer was entitled to summary judgment.
Gallagher v. Medical Research Consultants, LLP, 2004 U.S. Dist. LEXIS 19981 (E.D. Pa. October 1, 2004)
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Flu shot litigation, round 1
Gloucester County, New Jersey, has sued Aventis Pasteur, the French pharmaceutical giant, for failure to deliver 10,000 doses of flu vaccine to the county. Aventis Pasteur is the only current producer of the vaccine, which is in short supply around the country. According to the Cherry Hill Courier Post:
The 10,000 doses were supposed to be delivered by [last] Friday. Gloucester County intended to resume its flu clinics, which have been suspended since Oct. 22, and offer the shot to people with the highest risk of getting influenza.
That changed . . . when Aventis notified the county it had been directed by the [Center for Disease Control] and the New Jersey Department of Health and Senior Services to send the vaccines to other parts of the state.
However, when the county contacted CDC and state health department representatives, they said there never had been a written order to redirect the vaccines, said county Freeholder-Director Stephen Sweeney.
"This is just a drug company doing what it wants to do," Sweeney said. "We did everything right. We ordered it."
Little company gets big contract
A little Brisbane, California biotech company has landed an $878 million federal government contract to produce anthrax vaccine. The purchase is the first under a bill signed by President Bush in July. The government will buy enough vaccine for about 25 million people.
The contract is more than twice the entire market capitalization of VaxGen, Inc., a company that lost a hefty $26 million last year.
No "Mickey Mouse" deal
Little Buffy and Jody won't have to cross picket lines this winter to shake hands with Goofy and Snow White. The House of Mouse's season at its Florida theme park will apparently go on without interruption. The Walt Disney Company has reached tentative agreement on a new contract with unions representing 40 percent of theme park workers.
Setting the election line
Contracts for tangible goods are one thing; contracts for terrorist attacks or election outcomes are something different. Yet markets in contracts involving such things are increasingly being seen as a way to improve predictions of the future. In a new National Bureau of Economic Research Working Paper, Can Markets Predict the Future?, the authors explore how and why the futures market seems to beat predictions both of polls and of experts:
Charting the pricebids for the past four presidential elections, the data show that as election day drew nearer, the prediction markets' projected candidate vote shares grows more accurate. Prediction markets also beat appeared better calibrated than independent analysts on the probability of the ouster of Saddam Hussein. The Hollywood Stock Exchange likewise has proved highly accurate in predicting opening weekend box office success and Oscar winners.
Empirical legal scholarship
Goodness knows we need more empirical work in Contract law. So Anheuser-Busch Hall at Washington University (left) will, as usual, be the site of the Fourth Annual Conducting Empirical Legal Scholarship Workshop, May 9-11, 2005. The "mini-course" is designed to "teach legal scholars how to design and conduct empirical studies and to use statistical software to manage and analyze data."
Groucho: It's all right, that's in every contract. That's what they call a "sanity clause."
Chico: Ha ha ha ha ha ha! You can't-a fool me. There ain't-a no Sanity Clause.
A Night at the Opera (1936)
November 4, 2004
Meetings: ABA Business Law Section
Music City, U.S.A., will be the site for the ABA Section of Business Law's 2005 Spring Meeting. The home of the Grand Ole Opry will feature meetings by some 200 committees and subcommittees. This year's early registration deadline is February 4. More info is available on the Business Law Section web site.
Golfer Tiger Woods has brought a $50 million breach of contract claim against the shipyard that built his 155-foot yacht, Privacy. A provision in the contract allegedly prohibits Christensen Shipyards from revealing the fact that Woods bought the boat from it. But Woods says that Christenson nevertheless sent photos of the yacht (left) to magazines and boasted that Woods was a customer. The golfer calculates his damages by estimating what it would have cost Christensen to hire him to do endorsements of its products—which would presumably be the amount by which Christensen was enriched.
R&B singer R. Kelly (left) has hit rapper Jay-Z with a $75 million lawsuit after the collapse of a joint world tour, called “Best of Both Worlds.” Kelly claims that Jay-Z broke up what Kelly modestly described as a “historic and highly anticipated tour.” The break-up came in a bizarre incident at a sold-out New York event:
Kelly cut his set at New York's Madison Square Garden short after he claimed to spot a pair of men brandishing guns in the audience. After a security check confirmed that there were no weapons in the building, Kelly was allegedly pepper-sprayed by a member of Jay-Z's entourage as he tried to reclaim his spot on the stage. Jay-Z carried on without Kelly and then reportedly kicked the singer off the tour.
Kelly says that Jay-Z used “threats and acts of violence”; Jay-Z says that Kelly is a nut job. Said the rapper’s lawyers:
Jay-Z sees that statement [that he saw people brandishing guns] as the equivalent of screaming “fire” in a crowded theater and was unable to continue with someone whose actions could potentially create a dangerous situation.
[Ed. note: Students sometimes forget that it’s only a problem if you falsely cry “Fire!” in a crowded theater.]
Oops, you thought we had a deal?
Another South Carolina jury—see the Vince Carter story below—has ordered a utility company to pay $48 million to a disappointed bidder for one of its divisions. The utility, SCANA, was looking to sell its propane division back in 1999. Heritage Propane bid $73.5 million, which was apparently the highest bid at the time, but SCANA continued to shop the division around, eventually selling it to a competitor of Heritage for $20 millon more.
SCANA argued that it had a fiduciary duty to its shareholders to maximize the sale price. “If you're selling your house,” said a company spokesman, “and one buyer comes in and offers a better price over other interested parties—and you don’t have a signed contract—you take the better offer. It’s plain and simple. We feel the verdict is unjustified and contrary to accepted business practices.”
Cases—Precontractual Liability—No lost profits on prospective venture
A supermarket developer who wasted time negotiating with "sellers" over a piece of property that was not, in fact, for sale, could not recover lost profits on the transaction, according to the Third Circuit. The developer negotiated with two members of a family about a piece of family-owned property. Discussions went on for three months before the developer learned that the family did not intend to sell the property and the two members had no authority to negotiate. The developer sued for breach of duty to negotiate in good faith, promissory estoppel, and fraud, and sought lost profits on the deal.
The court held that there was nothing to show that even had the parties negotiated in good faith, a final agreement necessarily would have been reached, and no guarantee that necessary zoning permits could be obtained. Lost profits were thus too speculative. Lost profits were not available on the fraud claim, either, because the measure of damages for fraud is actual loss, not the value of the lost bargain.
B&P Holdings I, LLC v. Grand Sasso Inc., 2004 U.S. App. LEXIS 20559 (Ct. App. 3d Cir. Sept. 30, 2004) (unpublished)
New edition of Burnham's Drafting
Speaking of Scott Burnham, a new edition of his Drafting and Analyzing Contracts: A Guide to the Practical Application of the Principles of Contract Law, will soon be out. The 3rd edition of the book, like its predecessors, integrates teaching the principles of contract law with lawyering skills. If you don't get a copy, call LexisNexis at 800-533-1646.
Cases—Consideration—Uniltaral promise to retirees may create claim
Employees who got lifetime travel passes as part of their retirement benefits from now-defunct TWA Airlines may have a breach of contract claim against American Airlines, which purchased TWA’s assets out of bankruptcy, according to a federal district court in Delaware. The employees had no right to the passes under the bankruptcy sale, but claimed that American had unilaterally made a subsequent promise to maintain the benefit, ostensibly to gain the cooperation of the labor unions. The airline argued that there was no consideration for a unilateral promise to those already retired.
Judge Joseph Farnan, while expressing some doubt that the elements of an enforceable contract had been pleaded, nevertheless refused to dismiss, instead permitting the plaintiffs to take further discovery. Frazier v. American Airlines, Inc., 2004 U.S. Dist. LEXIS 19875 (D. Del. Sept. 30, 2004).
Hoops star hit with $4.7 million verdict
It was bad enough for basketball player Vince Carter to see his agent go to prison for money laundering and fraud after taking millions from clients. But now the Toronto Raptors player will have to pay the man—William “Tank” Black, who is still in prison—another $4.7 million. A South Carolina jury found that Carter breached his contract with Black by terminating it in 2000 while Black was suffering “legal problems.” The compensation is for commissions on endorsements that Black negotiated for Carter.
One part of the case of particular interest to contracts profs is a deal that Black negotiated for Carter with a shoe company, Puma. Carter stopped wearing the shoes because they hurt his feet, and had to pay $3 million buyout fee to get out of the contract. He blamed Black for negligently failing to negotiate an escape clause on the contract if the shoes proved unsatisfactory.