ContractsProf Blog

Disney board "did the right thing" in Ovitz contract

The $140 million employment contract that Michael Ovitz (left) got from the Walt Disney Company was actually not as generous as those given to other similarly situated executives, a management compensation consultant told a Delaware jury Wednesday. Ovitz’s contract is the subject of a protracted shareholder derivative action that has already gone on for more than seven years. Plaintiffs’ lawyers claim that the Disney board of directors acted wrongly when it agreed to the contract, and then compounded the problem by giving Ovitz a no-fault termination.

Consultant Graef Crystal pointed out that Ovitz had been making $25 million a year as Hollywood’s biggest talent agent—which would have amounted to $125 million over the five-year period of his contract with Disney. Crystal said that the option vesting provisions of the deal were actually more severe for Ovitz than those of many entertainment executives.

http://www3.cjad.com/content/cp_article.asp?id=/global_feeds/canadianpress/businessnews/b1110113A.htm

Aspen scores hat trick of new editions

Aspen Publications has announced new editions of two popular student texts and a new edition of a standard casebook on sales and leases.

Allan Farnsworth’s hornbook on Contracts (4th edition), will presumably retain its authoritative coverage and its readable style, while adding coverage of revised Articles 2, as well as the new versions of Articles 1 and 9.

Brian Blum’s Contracts: Examples & Explanations (3d edition), will, in addition to the updates, include even more of the diagrams that students find especially useful.

Douglas Whaley’s Problems and Materials on the Sale and Lease of Goods (4th ed.) will continue its focus on the precise statutory language of the Code; it also adds coverage of the new Article 2 and offers an expanded teacher’s manual.

Cases—Preemption—ERISA preempts state contract claims

Former employees of US Bancorp had no state contract causes of action against it for pension promises it made, according to the U.S. Court of Appeals for the Eighth Circuit.  The state contract claims were preempted by ERISA as a matter of law.

Plaintiffs argued that during and after a corporate merger, they were promised certain benefits, but Chief Judge Loken affirmed a district court dismissal of the claim, holding that they were not entitled even to discovery on the issue.

Johnson v. U.S. Bancorp, 2004 U.S. App. LEXIS 22679 (8th Cir. Nov. 2, 2004).

Talking international contracts

For those looking for contracts discussions with an international flavor, Andrew Tettenborn (Exeter) and Tang Hang Wu (Singapore) both recommend the Obligations Discussion Group, an interesting quasi-blog run by the folks at the University of Western Ontario Faculty of Law.

Wu also recommends the Restitution and Unjust Enrichment web site, which collects a great many international resources on the topic and also has a discussion group.

Cardozo in context

David Gruning (Loyola-New Orleans) points out in a Comment that yesterday's quote from Judge Cardozo was taken somewhat out of context.   He notes that the quoted sentence precedes the following:

A definition of law which in effect denies the possibility of law since it denies the possibility of rules of general operation must contain within itself the seeds of fallacy and error.  Analysis is useless if it destroys what it is intended to explain.  Law and obedience to law are facts confirmed every day to us all in our experience of life.  If the result of a definition is to make them seem to be illusions, so much the worse for the definition; we must enlarge it till it is broad enough to answer to realities."  Nature of the Judicial Process, p 126-27.

Military procurement and "exceptionalism" in government contract law

The federal government may enter into contracts just as private parties do, but the law that governs those agreements is vastly different from the law that governs similar private transactions.  Federal contracts are different, and not merely because they are subject to the mighty Federal Acquisition Regulation (with its myriad supplements) and a host of unsual statutes and doctrines.

The exceptional nature of federal procurement law, argues Joshua Schwartz of GWU in a new paper, The Centrality of Military Procurement: Explaining the Exceptionalist Character of United States Federal Public Procurement Law, is driven in part by the importance of military procurement in the process.

Abstract:

This study builds upon prior work that delineates opposing tendencies of exceptionalism and congruence that measure the degree to which a body of public contracts law diverges or adheres to the norms of private contract law. This study has two objectives. First, it seeks to define more precisely, and track the incidence and locus of a phenomenon described as exceptionalism in public procurement law. Exceptionalism enhances the powers or reduces the liabilities of the government with respect to its private contracting partners. The first branch of this study also seeks to distinguish such true exceptionalism from a phenomenon of reverse exceptionalism that imposes duties on the government that private parties engaged in procurement do not share. This study concludes that true exceptionalism is strongly associated with the law governing performance of federal public procurement contracts, while reverse exceptionalism is associated characteristically with the law of federal public contract formation.

The second objective of this study concerns the role of military procurement - which historically has been central to the development of the procurement law system in the United States. This feature of the United States public procurement regime distinguishes it from the national law of many other nations, and from the requirements of many transnational public procurement regimes. This study demonstrates the strong causal role played by military procurement, in the emergence of this exceptionalist tendency in the United States law governing performance of federal public procurement contracts. These findings have particular relevance for developing nations and transitional economies emerging from state socialism. Although the common practice of excluding military procurement from the field of newly established competitive procurement regimes in such nations is entirely understandable, this study suggests that this approach fosters the adoption of regime that lacks appropriate flexibility. The experience of the United States should caution other nations to consider the unrecognized costs of broadly excluding military procurement from their procurement regimes at the threshold.

Kate Beckinsale: All natural

A spokesman for Kate (Pearl Harbor) Beckinsale has hotly denied that a clause in the actress’s contract provides that she may not be filmed leaning over at more than a 45-degree angle because "her boob implants slide up to her collar bone."  That was the substance of a claim by fellow British actress Sienna (Resident Evil 2) Guillory, who said that Beckinsale (left) had yielded to Hollywood pressure to enhance her appearance and was no longer "cool."

Not only is there no such clause, said Beckinsale’s agent, but the actress does not, in fact, have implants.  Still, another report quotes Beckinsale's 5-year-old daughter Lily wondering why her mother  "look[s] like J.Lo all the time?"

[Ed. note:  An exhaustive search of Web photos of Beckinsale does not disclose one that shows her leaning over more than 45 degrees, but this of course proves nothing.]

New ABA book on counseling "microenterprises"

Contracts problems don’t necessarily get simpler when businesses get smaller—as Matt (ProCD v.) Zeidenberg discovered—but new small businesses have their own unique problems.  The ABA Section on Business Law is offering a publication on that subject, Legal Guide to Microenterprise Development, by clinical professor Susan R. Jones (left) GWU.

The book is specifically targeted at lawyers who provide much of the pro bono representation of these businesses.

Cases—Good faith—Does it requires more than honesty?

Does Delaware law impose a duty of "good faith" on contracting parties that requires them to go beyond merely avoiding "fraud, deceit or misrepresentation"?  Although the Delaware Supreme Court has not addressed the issue, the U.S. Court of Appeals for the Tenth Circuit thinks so, refusing to follow lower court rulings to the contrary.  In the case, defendant boat manufacturer bought plaintiffs’ boat building business; part of the compensation was an "earn-out" under which plaintiffs would get more money if the business met certain targets. It did not, and plaintiffs claimed that this was defendants’ fault. The Tenth Circuit decided to rely on Restatement (Second) § 205 rather than lower-court Delaware decisions.

Oddly, Judge Briscoe reasoned that while Delaware courts in employment cases have held that employers owe merely a duty to avoid fraud, deceit, or misrepresentation, commercial parties bargaining at arms’ length owe a greater duty to each other than do employers and employees.

O'Tool v. Genmar Holdings, Inc., 2004 U.S. App. LEXIS 22726 (10th Cir. Nov. 2, 2004).

Battling over the remains

The recent movie Ray has helped to keep the late R&B star Ray Charles a hot ticket. Hot enough that litigation is under way over who has the rights to the "Ray Charles" name for goods that include calendars, dolls, collectible wine, and (naturally) sunglasses.

Richard Ricks, who claims he had an exclusive seven-year deal for marketing the name, is seeking at least $1 million from the Charles estate.  Ricks claims that the family made "secret deals" with others in violation of the exclusivity clause.  Lawyers for the estate say that the "so-called contract was improperly obtained," and that it is "not enforceable."

New edition for Speidel & Rusch

A second edition of Richard Speidel and Linda Rusch’s Commercial Transactions: Sales, Leases, and Licenses will be coming out shortly. West Publishing says the new edition retains the same structure but adds new cases, problems, and text. It increases coverage of CISG and decreases coverage of UCITA.

Don't bogart that joint, my friend

Randy Barnett (Boston U.) will give the 2004-05 Brennan Lecture at Oklahoma City University School of Law on November 18.  This year's lecture will be a little different—Barnett will present his forthcoming Supreme Court argument in the medical marijuana case of Raich v. Ashcroft in front of a moot court panel of OCU faculty.  Barnett successfully argued the case in the Ninth Circuit.

The session is free and open to the public.

Passing of a giant

The commercial law world lost one of its greatest lights Sunday with the death of William D. Hawkland.  Hawkland, author of the magisterial 18-volume Uniform Commercial Code series, was 83.  Over the course of nearly half a century he taught at Tennessee, Temple, UCLA, Rutgers, Illinois, Buffalo, Texas, NYU, and Minnesota, and at law schools in Louvain and Strasbourg.  He retired as chancellor of LSU in 1989.  Over the course of his career Hawkland wrote 18 books and upwards of 75 law review articles in nearly every area of commercial law.

A memorial service is planned in Baton Rouge next Tuesday, November 17.  Contributions may be made to a scholarship fund in his honor at LSU.

"Rocky Mountain high" in Colorado

Worried about its reputation as a party school, the University of Colorado has opened negotiations with Coors Brewing Co. over whether to extend a $2.1 million contract, under which Coors licenses the CU name for sports promotions.  The campus recently has been plagued with an off-campus riot, an alleged alcohol-fueled gang rape involving football players, and the alcohol-poisoning death of a freshman two months ago.  But the Coors deal brings in $350,000 a year.

Guam court cuts off "continuous" contract

The PacifiCare HMO can stop providing health and dental services to government employees in Guam, according to a decision Monday by the Supreme Court of Guam.  The government had argued that under a decades-old contract requiring "continuous" health care, PacifiCare’s contract renewed automatically every year, so the company could not stop providing services.  The Supreme Court disagreed, allowing the company to terminate coverage.  The government has seen an exodus of companies willing to provide coverage to its employees.

Finders keepers

A deep-sea diver is suing the Uruguayan government for £58 million in a breach of contract action over the salvage rights to Lord Nelson’s favorite ship, HMS Agamemnon, which sank off the Rio de la Plata in 1809. The Agamemnon was a 64-gun third-rater built in 1781, which sank when she ran aground and her rotted timbers gave way.

Also at issue in the dispute are the remains of the German battleship Graf Spee, which was scuttled near the same place in 1939.

Duties to Disclose

When do contracting parties have to reveal information to their counterparties? There are any number of theories about when a duty to disclose does (or should) arise.  But in a new paper, Common Law Disclosure Duties and The Sin of Omission: Testing the Meta-theories, authors Kimberly Krawiec and Kathryn Zeiler (left) take an empirical crack at the problem.

The article abstract:

Since ancient times, legal scholars have explored the vexing question of when and what a contracting party must disclose to her counterparty, even in the absence of explicit misleading statements. This fascination has culminated in a set of claims regarding which factors drive courts to impose disclosure duties on informed parties. Most of these claims are based on analysis of a small number of non-randomly selected cases and have not been tested systematically. This article represents the first attempt to systematically test a number of these claims using data coded from 466 case decisions spanning over a wide array of jurisdictions and covering over 200 years.

The results are mixed. In some cases it appears that conventional wisdom is correct. For example, our data support the claim that courts are more likely to require disclosure of latent, as opposed to patent, defects. In addition, courts are more likely to require full disclosure between parties in a fiduciary or confidential relationship. On the other hand, our results cast doubt on much of the conventional wisdom regarding the law of fraudulent silence. Indeed, our results challenge ten of the most prominent theories that have been asserted to explain when courts will require disclosure. We find that courts are no more likely to impose disclosure duties when the information is casually acquired as opposed to deliberately acquired and that unequal access to information by the contracting parties is not a significant factor that drives courts to require disclosure. We do find, however, that when these two factors are present simultaneously courts are significantly more likely to force disclosure. Perhaps most interestingly, although it is generally understood that courts have become more likely to impose disclosure duties over time, we find that courts actually have become less likely to require disclosure over time.

Legal Cliche of the Day

"Law never is, but is always about to be."

          Benjamin Nathan Cardozo
          The Nature of the Judicial Process

[Ed. note:  If this were true, and known to be true, how could you ever decide anything?]

Cases—Specific Performance—Think before you send the e-mail

A distributor lost its claim for specific performance against a manufacturer because it had itself announced termination of the agreement by e-mail before bringing suit, according to the First Circuit. The manufacturer and distributor had negotiated an agreement, but trouble developed, and the manufacturer refused to forward a signed copy of the agreement.  The distributor sent an e-mail saying, "It is over." Judge John R. Gibson (on loan from the Eighth Circuit) found that this had the effect of terminating the contract and that the distributor could no longer claim specific performance. Roger Edwards, LLC v. Fiddes & Sons, Ltd., 2004 U.S. App. LEXIS 22636 (1st Cir. Nov. 1, 2004).

Frisco Hotel Blues

The latest on the San Francisco hotel strike that may cause some disruption at the AALS conference this January.