ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Tuesday, November 22, 2005

Testamentary Promise is Not a Contract Claim

California_flag_18 A claimed oral "contract" that a testator would leave money to a nephew was not a “creditor’s claim,” but rather a “contest” of the will’s provisions, according to a recent decision by the California Court of Appeals.

In the case, Nephew claimed that Aunt and Uncle, with whom he had lived, had promised to leave him 50 percent of their joint estate.  Uncle died first, and Aunt subsequently changed her will, giving Nephew considerably less.  Aunt also put a “no contest” clause in the will, providing that if anyone challenged the will, he or she would lose all rights under it.  Nephew nevertheless filed a claim, based on the oral contract, noting that contract claims are by statute not within the scope of a “no contest” clause.

One interesting thing about the claim is that the court recited no consideration for the purported “contract.”  The court didn’t go off on that ground, however, finding that where the alleged contractual promise is to leave money, a claim based on it is not a “creditor’s claim,” but rather a challenge to the distribution system itself.  Accordingly, it fell within the “no contest” clause.  (Although the court noted that the case was “more complex” than previous decisions, and that there was no case exactly on point, it nevertheless decided not to publish it.)

Zwirn v. Schweizer, 2005 Cal. App. Unpub. LEXIS 10429 (2d Dist. Nov. 14, 2005)

[Frank Snyder]

November 22, 2005 in Recent Cases | Permalink | TrackBack (0)

Law Firms Focus on Color

A piece today from examines the way law firms use color in their web site.  Most firms use blue, a color "that conveys authority and royalty, as well as a sense of calm."  But like the law schools that produce their lawyers, many national and international firms have their own colors:

Wilmer Cutler (Black & White)
Ropes & Gray (Blue & Gray)
Covington & Burling (Black & Red)
Sullivan & Cromwell (Navy & White)
Latham & Watkins (Maroon & Gray)
Skadden Arps (Cardinal & White)
Wachtell Lipton (Black & Green)
Jones Day (Blue & White)
Sidley Austin (Black & Gold)
Kirkland & Ellis (Gray & White)
Cleary Gottlieb (Crimson & White)
Holland & Knight (Orange & White)
Paul Weiss (Sky Blue & White)
Fulbright & Jaworski (Red & Gray)

Plaintiffs firms can be a little less traditional.  The securities firm of Milberg Weiss uses Teal & Gray.

[Frank Snyder]

November 22, 2005 in Miscellaneous | Permalink | TrackBack (0)

Today in History: Allegheny College

Allegheny_college On this date, November 22, 1927, Judge Cardozo made a major dent in the doctrine of consideration and ensured himself an even bigger place in contracts casebooks when he issued the opinion in Allegheny College v. National Chautauqua County Bank, 246 N.Y. 369 (1927).

In the case, Mrs. Mary Yates Johnston made a $5,000 pledge to the college’s fund drive, to be paid from her estate.  She subsequently revoked the gift.  After she died, the college sued to collect.  Held: The college won.  Ordinarily, uncompleted gifts can be revoked by the giver, and Mrs. Johnston had plainly revoked.  The promise could be enforced only if Cardozo could find a contract.  He did:

The promisor wished to have a memorial to perpetuate her name. She imposed a condition that the "gift" should "be known as the Mary Yates Johnston Memorial Fund." The moment that the college accepted $1,000 as a payment on account, there was an assumption of a duty to do whatever acts were customary or reasonably necessary to maintain the memorial fairly and justly in the spirit of its creation.  The college could not accept the money, and hold itself free thereafter from personal responsibility to give effect to the condition.   More is involved in the receipt of such a fund than a mere acceptance of money to be held to a corporate use. The purpose of the founder would be unfairly thwarted or at least inadequately served if the college failed to communicate to the world, or in any event to applicants for the scholarship, the title of the memorial. By implication it undertook, when it accepted a portion of the "gift," that in its circulars of information and in other customary ways, when making announcement of this scholarship, it would couple with the announcement the name of the donor.

Cardozo seems to be (deliberately or not) confusing a conditional gift (“I’ll give you a car if you promise never to drive over the speed limit”) with a contract.  But while the reasoning is suspect, the rule that you don’t need consideration to support a charitable pledge has gone into the books.

Allegheny College (top left), by the way, is still educating students in Meadville, Pa., a town known for being equally distant from Pittsburgh, Cleveland, and Buffalo.  Allegheny is a small (2,100 students) liberal arts college, loosely affiliated with the Methodist Church.  Its annual tuition these days is $31,000, and its current endowment is $113 million.

One source suggests that the Mary Yates Johnston scholarship is still around.  The school’s web site today makes no mention of her.

[Frank Snyder]

November 22, 2005 in Famous Cases, Today in History | Permalink | TrackBack (0)

Monday, November 21, 2005

One Sided Contracts

"One Sided Contracts in Competitive Consumer Markets"

Before you go out for your holiday shopping, you may want to read this paper. It is a theory about why stores print out pages of sheets along with your receipt whenever you buy things.

The authors state:

This discussion paper shows that "one-sided" terms in standard contracts, which deny consumers a contractual benefit that seems efficient on average, may arise in competitive markets without informational problems (other than those of courts). A one-sided term might be an efficient response to situations in which courts cannot perfectly observe all the contingencies needed for an accurate implementation of a "balanced" contractual term when firms are more concerned about their reputation, and thus less inclined to behave opportunistically, than consumers are. We develop this explanation, discuss its positive and nor-mative implications, and compare them to those of information-based explanations for one-sided terms.

Bebchuk, Lucian Arye and Posner, Richard A., "One-Sided Contracts in competitive Consumer Markets" (November 9, 2005). Harvard Law and Economics Discussion Paper No. 533

[Stephen Safranek]

November 21, 2005 in Recent Scholarship | Permalink | TrackBack (0)

Managing Public Image in Star-for-Hire Contracts

The N.Y. Times reports on a "growing trend": the very rich are increasingly hiring superstars to perform at their private parties. These "star-for-hire" private performances can command up to $1 million, and because of the "cheese factor" many stars demand that the performances be kept private. The article explains:

Before committing to a private date most stars or their representatives carefully read the guest list and demand a clause in the contract forbidding publicity: no press, no cameras, no video. The secrecy, say people involved in these functions, stems in part from the stars' insecurity. They worry that cashing a six-figure check for a couple of hours of rocking out for Aunt Alice or Cousin Bobby will make them look like sellouts - or, maybe worse, wedding singers. The last thing they want is to be associated in the gossip pages with an event that smacks of elitist excess.

Presumably, no hot ticket performer wants to be seen as a wedding singer. This is likely why a spokeswoman for Sir Elton John refused to comment on rumors that the artist had performed at the wedding of a British financier. Instead, she explained to the newspaper that "‘private concerts’ are private." It raises an important question, though: how many six-figure "private performances" does it take for a superstar to become a wedding singer?

[Meredith R. Miller]

November 21, 2005 in In the News | Permalink | TrackBack (0)

Lipshaw on Rational Frogs

Lipshaw Jeffrey M. Lipshaw (Wake Forest) has been doing a lot of work lately exploring the ethical aspects of transactional law.  His latest, Reason, Self-Deception and Rational Frogs: Reconciling Comprehension and Responsibility in Law and Business Ethics, is now up on SSRN.  Here's the abstract:

This is my attempt to dig deeply into the descriptive and normative aspect of our study of business law and ethics. The possibility of conflation of the descriptive and normative is reflected in no discipline as much as law. The coincidence of legal positivism (a view I largely endorse) and the adoption of a social science approach has, it seems to me, not only created some questionable social science, but has left a significant void in the way legal academics (and perhaps lawyers) look at ethical duties and responsibilities, particularly in business. I am particularly concerned with two topics that go to the heart of what business lawyers do: (a) justifying harm to others, and (b) resolving inter-firm or inter-personal conflicts, where there may be wide variances in legitimately-held professional and personal values. Hence, this is an epistemological search for a satisfying secular business ethic.

Although it appears to me this will approach book length, I have finished (at least, I hope, to the point of a moderately professional standard) a preface, an introductory Chapter 1 that at least outlines the entire argument, and Chapter 2, which is the bulk of the theory that will be applied in later chapters. At this point, I am willing to make it public for purposes of scholarly reaction.

[Frank Snyder]

November 21, 2005 in Recent Scholarship | Permalink | TrackBack (0)

Weekly Top Ten

Ssrn_logo_33There are few changes this week in the Top Ten.  Following are the top ten most-downloaded papers from the SSRN Journal of Contract and Commercial Law for the 60 days ending November 20, 2005.  (Last week's position in parentheses.)

1 (1) Risk Management in Long-Term Contracts, Victor P. Goldberg (Columbia).

2 (2) Katrina's Continuing Impact on Procurement - Emergency Procurement Powers in H.R. 3766, Christopher R. Yukins & Joshua I. Schwartz (Geo. Washington).

3 (3) Resolving the Paradox of the Consideration Doctrine: The Implications of Inefficient Signaling and of Anti-Commodification Norms, David Scott Gamage (Texas) & Allon Kedem (Independent).

4 (4) In Memoriam, John Cibinic, Jr., Ralph C. Nash (Geo. Washington), et al.

5 (5) Rethinking Spyware: Questioning the Propriety of Contractual Consent to Online Surveillance, Wayne Barnes (Texas Wesleyan).

6 (6) Are Heuristics a Problem or a Solution?, Douglas A. Kysar (Cornell).

7 (7) The Hidden Roles of Boilerplate and Standard Form Contracts: Strategic Imposition of  Transaction Costs, Segmentation of Consumers and Anticompetitive Effects, David Gilo & Ariel Porat (Tel Aviv).

8 (8) Contracting in the Shadow of the Law, Nicola Gennaioli (IIES-Stockholm).

9 (-) Taking Information Seriously: Misrepresentation and Nondisclosure in Contract Law and Elsewhere, Richard Craswell (Stanford).

10 (9) Effective vs. Nominal Valuations in Venture Capital Investing, Michael Woronoff (Proskauer Rose) & Jonathan Rosen (Shelter Capital).

[Frank Snyder]

November 21, 2005 in Recent Scholarship | Permalink | TrackBack (0)

Contract Doesn't Require "Pointless" Hearing

Florida_flag_4 A physician had a contractual right to a hearing before his hospital privileges were terminated, but the right didn't apply where the termination was purely a business matter that did not cast doubt on his competence, according to a recent decision by the Florida Court of Appeals.

In the case, the plaintiff physician had enjoyed privileges for pain management services at Naples Community Hospital.  The hospital bylaws provided that physicians are entitled to a hearing before their privileges are terminated.  The hospital subsequently entered into an exclusive contract with another provider, and the physician’s privileges were terminated without a hearing.

Florida had previously held that such bylaws create a contract with the physician.  The district court accordingly ruled for the physician, issuing an injunction restoring his privileges.  The Court of Appeals reversed.  The bylaws did create a contract, the court agreed, but the question was one of interpretation.  Read as a whole, the hearing procedures clearly contemplate a  situation where privileges are being withdrawn for cause, such as incompetence.  Such an action has a potentially serious effect on the physician and his reputation.  Here, a hearing would seem to be pointless:

We cannot imagine how Dr. Hussey's hearing, if he were to get one, would proceed.  There would be no statement of acts or omissions, no patients records, and no testimony casting doubt on his skill -- no accusations against which to defend himself. Ultimately, the decision of reappointment would fall to the Board of Directors of the Hospital, the very body that made the business decision that adversely affected Dr. Hussey's clinical privileges at the Hospital. According to the Policy, the express purpose of a hearing "shall be to recommend a course of action to those acting for the hospital corporation." Here, those acting for the corporation have already entered into an exclusive contract with another provider, thus making the recommendation and hearing process useless. The hearing process described in the Bylaws clearly does not apply when a staff member is denied reappointment because of a business decision to enter into an exclusive contract with another provider.

Naples Community Hospital, Inc. v. Hussey, 2005 Fla. App. LEXIS 17657 (2d Dist. Nov. 9, 2005).

[Frank Snyder]

November 21, 2005 in Recent Cases | Permalink | TrackBack (0)

Today in History: The Mayflower Compact

Mayflower_compact On this date, November 21, 1620, the first English written contract in North America is executed aboard the Mayflower off Cape Cod, Massachusetts.  Forty-one men sign what will come to be known as the Mayflower Compact:

In ye name of God, Amen. We whose names are underwriten, the loyall subjects of our dread soveraigne Lord King James by ye grace of God, of Great Britaine, Franc, & Ireland king, defender of ye faith, &c.

Haveing undertaken, for ye glorie of God, and advancemente of ye Christian faith, and honour of our king & countrie, a voyage to plant ye first colonie in ye Northerne parts of Virginia, doe by these presents solemnly & mutualy in ye presence of God, and one of another, covenant & combine our selves togeather into a civill body politick; for our better ordering & preservation & furtherance of ye ends aforesaid; and by vertue hearof, to enacte, constitute, and frame shuch just & equall lawes, ordinances, acts, constitutions, & offices, from time to time, as shall be thought most meete & convenient for ye generall good of ye Colonie:  unto which we promise all due submission and obedience.  In witnes wherof we have hereunder subscribed our names at Cap-Codd ye .11. of November, in ye year of the raigne of our soveraigne lord King James of England, France, & Ireland ye eighteenth, and of Scotland ye fiftie fourth. Ano: Dom .1620.

[Frank Snyder]

November 21, 2005 in Today in History | Permalink | TrackBack (0)

Sunday, November 20, 2005

Looking Like a Harvard Professor

[Beat poet Cappy (Morey Amsterdam) and sociology professor Dr. Robert Sutwell (Bob Cummings) are talking.  Sutwell has an extremely prominent beard]
     Cappy:  Just one thing, Professor, will you level with me?  What's with the feather duster?  The beard?  You think it moves the chicks?
     Sutwell:  No, it usually works the other way.
     Cappy:  I don't dig.  You don't want to level with me?
     Sutwell:  All right I'll level with you.  When I first started out a Harvard, I was the youngest professor at the university.  I was so young that it was sickening.  No one took me seriously.  Every time when I opened my mouth to speak, my students laughed, the other professors laughed, even the janitors laughed.  Well, I knew it couldn't go on for long before I was fired, so one day at lunch, I sat down in the student cafeteria and presented my problem to this old professor friend of mine.  And without even glancing up from his soup, he said to me: "buy yourself a pair of glasses and grow a beard."  So you see, all of this is just 18 years of professor window dressing.
     Cappy:  Amazing how our lives parallel. You have that, and I have this.  [points to his chin, which has a beatnik beard]  You know why I grew this?  I got a dimple in my chin and I didn't want anyone mistaking me for Kirk Douglas.
     Sutwell:  But you don't look anything like Kirk Douglas.
     Cappy:  See? It works.

                 From Beach Party (1963)

November 20, 2005 in Film Clips | Permalink | TrackBack (0)

Today in History: November 20

Voc_logo Four hundred years ago today, February 20, 1605, the first known Europeans set eyes on the continent that would come to be known as Australia.  The Dutch East India Co.'s (Verenigde Oost-Indische Compagnie) sailing ship Duyfken, under the command of company employee, Willem Janszoon, enters the Gulf of Carpenteria.  Janszoon names the place "Nieu Zelandt."  The name doesn’t catch on, though, and so will be available later for a different country.  (Left: Corporate logo of the Dutch East India Co.)

[Frank Snyder]

November 20, 2005 in Today in History | Permalink | TrackBack (0)

Ahdieh on Boilerplate

AhdiehRecently posted on SSRN is a working paper by Robert Ahdieh titled The Strategy of Boilerplate.  Here's the abstract:

Boilerplate is everywhere. Its use in contracts among unsophisticated parties - and in standard-form contracts between dominant repeat-players and their inexperienced and uncounseled customers - may not be surprising. Yet boilerplate is also pervasive in contracts among sophisticated and recurrent contracting parties, ably represented by well-compensated counsel. While various explanations have been offered for this phenomenon - including transaction cost and network effect theories - the incompleteness of each approach invites further attention to the sources of standardization in contracting. Here, I offer a 'strategic' conception of boilerplate in facilitating communication among sophisticated parties.

Contrary to our common emphasis on the element of conflict in bargaining, its essential feature is a dynamic of coordination. Given the resulting mixed-motive game, direct communication may not be the primary means of communication in bargaining. Both the use of boilerplate and deviations from it, by contrast, may speak worlds. Perhaps most significantly, for all the sense of 'boilerplate' as somehow passive or inert, it may - in appropriate circumstances - constitute an effective weapon in bargaining parties' efforts to advance their contracting interests.

Click here to download the paper.

[Bill Sjostrom]

November 20, 2005 in Recent Scholarship | Permalink | TrackBack (0)

Saturday, November 19, 2005

Who Will Guard the Guard? And Will They Get Paid?

Stephon_marbury Basketball star Stephon Marbury has been sued for breach of contract by a New York City security firm.   SafirRosetti LLC says it provided 454 hours of "personal protection services" for the Knicks guard, for a total bill of $42,312.  According to the court papers, Marbury paid only $8,000 of the bill.  (Image: PR Photo, Wikipedia)

[Frank Snyder]

November 19, 2005 in In the News | Permalink | TrackBack (0)

Ayres & Klass on Promissory Fraud

Insincere_promises_1 Oliver Wendell Holmes famously noted that there is no moral component to contract law; that a contract was a mere option either to perform what was promised or to pay damages for failing to do so. Some of the recent work of Ian Ayres (Yale) has focused on an idea that Holmes presumably would have scorned: that taking such an option with knowledge that it won't be exercised ought to lead to penalties for fraud.

Now Yale University Press is releasing Insincere Promises: The Law of Misrepresented Intent, by Ayres and New York attorney Gregory Klass. Click on "continue reading" for the description.

(As an aside, it's ironic (if "ironic" is the word I want) that, given Ayres's views, published on the Yale web site, about the insensitivity of professors to the price their students pay for books, Yale University Press will nevertheless give you a free copy if you make ten of your students buy one.  Looks like they've decided not to follow his suggestions in New Haven.)

[Frank Snyder]

Continue reading

November 19, 2005 in Recent Scholarship | Permalink | TrackBack (0)

Today in History: Sixteen Tons

Fifty years ago today, on February 19, 1955, "Tennessee" Ernie Ford’s Sixteen Tons, in only its third week on the Cashbox charts, hit number two, making it the fastest-rising single in the country.

I was born one morning when the sun didn’t shine
I picked up my shovel and I walked to the mine
I loaded Sixteen Tons of Number Nine coal
And the straw boss said, “Well, bless my soul!”

You load Sixteen Tons, and what do you get?
Another day older, and deeper in debt.
St. Peter, don’t you call me, ‘cause I can’t go -
I owe my soul to the company store

One of the interesting things about the song, with its folk-song sound and hardscrabble lyrics, is that it originated in a Capitol Records talent scout's deadline pressure to get out an album quickly:

Cliffie Stone, then an assistant producer and talent scout for Capitol Records, called Merle Travis (a Capitol hitmaker at that time) about recording a 78 rpm album (four discs in a binder) of folk songs.  Capitol, seeing the success of a Burl Ives album,  wanted their own folk music album. Merle told Cliffie he figured, "Ives has sung every folk song." Stone suggested Travis write some new songs that sounded folky, and to do so quickly; the first four-song session was scheduled for the next day. Travis recalled the traditional Nine Pound Hammer and wrote three songs that night about life in Muhlenberg County, Kentucky's coal mines, where his father worked. One was Dark As A Dungeon, the other, Sixteen Tons.

[Frank Snyder]

November 19, 2005 in Quotes, Today in History | Permalink | TrackBack (0)

Friday, November 18, 2005

Turkeys, Oral Contracts and Mr. Gouge

Turkeys_1George R. Whaley had been a poultry farmer for some 35 years. For 20 of those years, under oral contract, Whaley supplied turkeys to H&H Poultry Co., a poultry processor. Whaley would pay for the poults, feed and labor, and would provide the necessary housing and equipment. In return, H&H compensated Whaley on a per pound live weight basis on the date of pickup, at a price determined by a day to day variable market value in the turkey growing Shenandoah Valley area of Virginia and North Carolina.  (Image source: Wikipedia).

Whaley would routinely call H&H in the spring to determine how many turkeys H&H wanted and, without more details, would buy the poults and raise them. For the six years before the dispute arose, for the Thanksgiving market, Whaley grew 24,000 turkeys for H&H.

One year in the late 1970’s, Whaley made his spring telephone call to H&H. H&H had a new controlling stockholder and chairman of the board, Mr. Gouge (yes, that was his name). Whaley testified that Mr. Gouge put in an order for 24,000 turkeys. After the conversation, Whaley purchased 24,000 poults, built 40 new rain shelters at $2000 each, purchased 60 feeders for $6000 each, and installed an underground pipe which he otherwise would not have needed. Come November, Whaley called Mr. Gouge to remind him it was time to weigh a cross section of the turkeys to see what size they were. Mr. Gouge denied making the order.

Mr. Gouge died before he could be deposed. The president of H&H denied emphatically that H&H told Whatley to grow turkeys that year. The president testified that “Whaley was told that if he put turkeys in, he was on his own.” H&H claimed that it had completely changed its processing equipment and building, and could no longer process turkeys.

From the bench, the trial court issued a ruling concerning whether an enforceable contract existed:

Gentlemen, I have determined that I could not get any better of a feeling for a close case, where I believe people may sincerely feel they are telling the story as it is, than I have now, and there is no need to deliberate on the matter. I am convinced that judgment must be and shall be entered in favor of the plaintiff in this case.

The trial court awarded Whaley damages (the difference between what Whaley would have received under the oral contract with H&H the day after the breach and the amounts he received from another poultry processor, plus loading costs usually borne by H&H).

The Delaware Supreme Court affirmed the determination that an enforceable contract existed and affirmed the damages award.

Likewise, the Delaware Supreme Court affirmed the trial court’s denial of H&H’s motion to amend its answer to include the statute of frauds as an affirmative defense. H&H had waited three years to move to amend, and this inexcusable neglect would prejudice Whaley – especially because of Mr. Gouge’s death before his deposition.

H&H Poultry Co. v. Whaley, 408 A.2d 289 (Del. 1979).

[Meredith R. Miller]

November 18, 2005 in Miscellaneous | Permalink | TrackBack (0)

Donald Trump on Excuses

     Troy McClain:  . . .  I would say that I thought that you guys wanted an explanation, and I went ahead and gave an explanation --
     Donald Trump:  It was a long, boring explanation, and I didn't wanna hear it.

                    From:  The Apprentice

November 18, 2005 in Film Clips | Permalink | TrackBack (0)

Cases: Collateral Estoppel by Arbitral Award

California_flag_17 An arbitrator’s decision that a contract is unenforceable because it was not signed by the defendant collaterally estops the plaintiff from raising issues under the contract in a subsequent court proceeding, according to a new unpublished decision by the California Court of Appeals.  But it can raise non-contract-based theories that arise out of the same transaction.

In the case,  plaintiff Ultimate Experience sold a ride simulator to defendant Castle Rock, an amusement park.  When a dispute arose, Ultimate sought arbitration.  The three arbitrators subsequently agreed unanimously that the contract had never been validly signed and executed by Castle Rock.  Accordingly, they issued a “take nothing” order against Ultimate.  Ultimate then sued in state court, arguing in effect that if there was no valid contract with Castle Rock, there was no valid arbitration clause.  If there was no valid arbitration clause, then Ultimate had not agreed to arbitrate.  If it had not agreed to arbitrate, it was free to bring an action in state court on its contract claims.

Wrong, said the court.  The determination that the contract is unenforceable was validly before the arbitrators, and its decision that plaintiffs cannot claim under the contract -- made on whatever ground -- collaterally estops the plaintiffs from recovering.  But that doesn’t end the inquiry.  Here,

Ultimate alleges that Castle Park had possession of its property (the simulator and accessory equipment) and was so careless about storing it that losses were suffered due to exposure to the elements, vandalism, and theft. It also alleges that Castle Park refused to return the property, retaining it for its own use.

These aren’t contractual claims, and the arbitrators did not rule on them.  Therefore the determination that the contract was unenforceable does not prevent Ultimate from bringing an action in state court.

Ultimate Experience v. Raging Waters Group, 2005 Cal. App. Unpub. LEXIS 10277  (2d Dist. Nov. 9, 2005)

[Frank Snyder]

November 18, 2005 in Recent Cases | Permalink | TrackBack (0)

Thursday, November 17, 2005

Reality TV Shows, Confidentiality Clauses and Liquidated Damages Clauses

Like most (all?) "reality" TV shows, the Apprentice TV show imposes a contractual gag order on participants covering every aspect of the participant's experience.  The contract couples that covenant with a liquidated damages clause requiring participant-breachers to pay $5 million plus attorneys' fees and disgorge their profits.

In 2001, a similar clause was invoked in a Survivor dispute (Survivor and Apprentice are both produced by Mark Burnett).  Then, last week, this clause was invoked again agaist two Apprentice participants (Markus and Jennifer W.) due to their public claims that the show's editing is misleading and that The Donald is sexist.

I've always found the gag order + liquidated damages clause in these reality TV show agreements problematic for three reasons:

1) The $5M liquidated damages should be prima facie unenforceable because it does not vary with the type of breach.  There's a wide range of public disclosures that might occur, some significant (blowing the entire season by preannouncing the winner) and some trivial (such as a snarky comment about Trump's choice of ties).  A one-size-fits-all liquidated damages clause does not appear to represent a reasonable estimate of the damages in these different contexts.

Even if the clause is not a penalty, I wonder if it violates public policy.  There's no question that the agreement could protect the producers' trade secrets, but the clauses often go far beyond that, limiting participants' abilities to discuss their experiences, criticize the show or even enforce their legal rights.  At some point, extensive gag orders violate public policy.  See, e.g., People v. Network Associates, Inc., 195 Misc. 2d 384 (N.Y. Sup. Ct. Jan 6, 2003) (enjoining the use of a clause prohibiting product reviews and product comparisons of anti-virus software).

2) Liquidating the damages has the perhaps-unintended consequence of capping the TV show producer's damages.  If a participant disclosure really blew the entire season, would $5M be enough?

3) I believe that liquidating damages significantly reduces the likelihood of getting injunctive relief.  (After all, it's hard to argue that damages are insufficient if the parties have agreed upon damages in the contract).  So, if the TV show producers ever tried to stop publication of unwanted disclosures, I wonder if the liquidated damages clause would sink any chance of equitable relief.

For these reasons, I would think the TV show producers (and their lawyers) would know better than to include such a high-risk clause in their contracts.  On the other hand, despite its legal shakiness (and its even-more-dubious prospects for producing judgments that could be collected), the clause nevertheless may be effective at deterring unwanted behavior.  After all, what participant wants to test the clause at the peril of being wrong and on the hook for $5M?

Meanwhile, despite the draconian threat, information has dribbled out about the behind-the-scenes shenanigans of reality TV shows.  My favorite article discusses life on "Loser Island."

[Eric Goldman]

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November 17, 2005 in Celebrity Contracts | Permalink | TrackBack (0)

A Humorous Look at Law Review Offer and Acceptance

During the last round of law review submissions, my colleague Brannon Denning and I were musing about stressful the process was.  Perhaps we were also reading too much legal theory and drinking too much coffee, but the angsty (and hopefully humorous) result was “The Five Stages of Law Review Submission.” 

In this piece, we discuss the process of getting an offer of publication, and compare it to the five stages of grief described by Elisabeth Kubler-Ross (denial, anger, bargaining, depression, acceptance).  Acceptance, in this context, does not mean ultimate publication of your work, but instead, coming to terms with the offers you want, the offers you have, and the wisdom to know the difference.  Here’s a sample:


A Serenity Prayer for Law Review Authors

(With apologies to Reinhold Niebuhr)

Editor-in-Chief of the Universe,

Grant me the serenity to accept the things I cannot change—

like the U.S. News rankings of the law reviews that give me offers, the public law bias of law review editors, the idiosyncratic article selection processes of the elite law reviews, the fact that article selection editors don’t appreciate how important my topic is, and the timing of law review editorial board elections;

the courage to change things I can—

like tailoring my articles to the latest academic fad no matter how tenuous the connection, using cutesy titles for articles, and staggering my submissions in order to get expedited review from a highly-ranked law review;

and wisdom to know whether it is better to accept an offer from an elite school’s specialty journal, as opposed to the general journal of a lower-ranked school, or vice-versa.

Living one article at a time;

Enjoying one publication at a time;

Accepting rejection letters and placements at lower-ranked journals as the pathway to peace.

Taking the submissions process

As it is, not as I would have it;

Trusting that the editors will make things right

If I surrender to their will;

That I may be reasonably happy with this placement

And supremely happy with the next.


Hope you find it funny - for more check it out here.  The piece has gotten some attention over at Conglomerate and Larry Solum’s Legal Theory blog (thanks!).   

[Miriam Cherry]

November 17, 2005 in Miscellaneous | Permalink | TrackBack (0)