January 1, 2005
Happy New Year!
Today in history—January 1
1815: Samuel Cunliffe Lister, the inventor of wool-combing and silk-spinning machines who became a major mill owner, is born. The company he founds at age 23, Lister-Corniche Fabrics, is still in business.
1890: Real estate boosters in Pasadena, California, eager to lure Easterners to their marvelous climate, create the first Tournament of Roses Parade. Two thousand people watch the horse-drawn floats followed by foot races, polo matches and tugs-of-war on the town lot.
1909: Barry Morris Goldwater, whose career in the family department store business will be interrupted by World War II, is born at Prescott, Arizona Territory.
1964: Article 2 of the Uniform Commercial Code goes into effect in Michigan.
1968: Performing a stunt for Caesar’s Palace in Las Vegas, stuntman Evel Knievel loses control of his motorcycle while attempting to jump the casino fountains and is badly injured.
1971: Under pressure from the government, commercial broadcasters ban cigarette advertising.
1976: NBC television, which has used a peacock as its emblem since color television began, with great hoopla announces a new, stylized "N" as its new logo. It spent a million dollars developing it. Only after launching it did NBC discover that Nebraska Public Television was already using the same logo.
1998: The California state government bans smoking in bars. Smoking has been replaced by state lotto games on television screens.
1999: Eleven European countries launch the new "Euro" currency. The original group is made up of Germany, France, Italy, Spain, Netherlands, Austria, Belgium, Finland, Ireland, Portugal, and Luxembourg.
2000: The world does not end, even though experts had predicted that the Y2K bug would create massive disruptions in all developed countries.
Man, that's got to hurt
Like Hamer v. Sidway, it’s really a case about inter vivos gifts, not contracts, but in case you missed it, Anna Nicole Smith—a/k/a Mrs. Vickie Lynn Marshall—has lost her battle for $88 million from the estate of her octogenarian spouse. The Ninth Circuit held that the district court that awarded Smith/Marshall (left) the money lacked jurisdiction. The opinioni is here.
Law firm sues over oral contract for fees and expenses
Winston & Strawn, a major international law firm, is suing the former owners of the Salt Lake City Tribune for $350,000 in allegedly unpaid fees and expenses.
W&S represented the McCarthey family in its battle to regain control of the Trib from Denver’s MediaNews Group, Inc. The firm says that it had an oral agreement with Salt Lake Tribune Publishing, the McCarthey’s corporation, and had been providing legal services since 1999. A family spokesman said he was "baffled" by the claim, since he says no promises were made.
Via Howard Bashman at HowAppealing.
December 31, 2004
Fashion firm sues designer over license deal
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."
Studio wants to freeze cable defendants' assets
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.
Cases—Unlawful contracts—Insurance policy runs afoul of securities regulation
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).
Today in history—December 31
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.
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 30, 2004
What's in a Number?
Ifeanyi 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 front 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.
Ted Nugent festival suit is still on
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.
Cases—Good Faith—No good faith duty to allow collateral to be re-leased
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).
Today in history—December 30
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.
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.
Inflation v. Improvement
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.
Mere breach of contract isn’t a tort in a franchise relationship
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 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.
Today in history—December 29
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.
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.
Cases—Damages—Economic loss rule does not bar damages for parties not in privity
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 28, 2004
Winemaker Mondavi in scrap with cork manufacturer
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.
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.
California allows punitive damages for warranty breach
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."