March 12, 2005
Cases: Caveat negotiator
In the case "internationally renowned artist" Donald Sultan agreed with Park Plaza Worldwide LLC, to help design a new luxury hotel in Budapest. Under the deal, Sultan was to get a fee of something over $1 million, plus five percent of the hotel’s profits. PPW’s president, Read, represented that he had authority to enter this agreement. After Sultan learned that PPW, which had paid his fee, had no power to give him the profits, he sued. Read moved to dismiss, arguing that the claim was a simple breach of contract against PPW.
Denying the motion, Judge Peter Leisure of the Southern District of New York held that Read’s representations as to his and PPW’s authority were false and material statements of fact. The court rejected the argument that Sultan was dealing with PPW, not Read personally, finding that it was Read’s representations that were relied on for the cause of action.
Sultan v. Read, No. 03 Civ. 7462 (PKL), 2005 U.S. Dist. LEXIS 3133 (S.D.N.Y. March 1, 2005).
Today in history—March 13
1639: New College in Cambridge, Massachusetts, changes its name to "Harvard," in honor of a clergyman who bequeathed £800 and his library of 400 books. Today its endowment is $22.6 billion.
1865: A month before the war ends, the Confederate States finally decide that it might be a good idea to allow African-Americans to serve in the army.
1884: Fifteen-year-old Leland Stanford Jr. dies of typhoid fever. His parents decide that the best memorial for him will be a university.
1901: Benjamin Harrison, who gave up law practice to join the Union Army in the Civil War and later served as President of the United States, dies at Indianapolis. The city's Benjamin Harrison Law School will later become the Indiana University-Indianapolis School of Law.
1908: Media tycoon Walter H. Annenberg, who will take over the family business at 32 when his father dies in prison for tax evasion, is born at Milwaukee, Wisconsin.
1913: Future CIA Director William Joseph Casey (St. John's Law 1937) is born in Queens, New York.
1933: Banks in the U.S. begin to re-open after President Roosevelt's forced "bank holiday."
1991: The U.S. Justice Department announces that Exxon Corp. will pay $1 billion to clean up the spill from the Exxon Valdez. The bill will eventually go up to $2 billion, plus another billion for fines and untold tort damages, which are still being litigated.
Man sues dad over football tickets
There are some things more important than family affection. Among them are season tickets for the Pittsburgh Steelers. That’s why Daniel Lemke of Cranberry, Pennsylvania, is suing his 75-year-old father Herbert for an order requiring him to turn over the rights to two seats he agreed to sell to his son for $1,920 in 2003.
For those worried that a 2003 contract for a 2005 seat license might violate the statute of frauds, yes, there’s a memo. It’s headed, "From the Desk of Herb," and says, "When this season is over, I will transfer the tickets over to you. Appreciate your patience." It’s unsigned, but at the bottom is typed, "Thanks, The old man."
March 11, 2005
Cases: Continued employment = consideration
An employee who continues to work for an employer after the employer publishes a policy requiring arbitration of employment disputes is bound by that agreement, according to the U.S. Court of Appeals for the 6th Circuit in an unpublished opinion.
The plaintiff had been hired as a server at an Applebee’s Restaurant in July, 2000. In October, 2001, the employer unilaterally promulgated "a broad, mandatory dispute resolution process culminating in binding arbitration for employee claims against" the employer. She was not asked to sign the agreement until July, 2002, when she refused to do so. She later sued, claiming, among other things, violations of wage and hour laws and a hostile work environment.
The district court, applying Ohio law, found that the employer’s proposal was an offer for a unilateral contract, which the plaintiff accepted by subsequently showing up for work. The appellate court agreed, and added that by continuing to work after learning that the employer’s policy was mandatory, she manifested assent to it.
Dantz v. American Apple Group, LLC, No. 03-4128, 2005 U.S. App. LEXIS 3454 (March 1, 2005)
Today in history—March 12
1755: The first steam engine in America goes into operation at Col. John Schuyler's copper mine near what is now North Arlington, New Jersey. The machine is imported from England.
1832: Charles Cunningham Boycott, later land agent in Ireland for the Earl of Erne, is born at Burgh St. Peter, Norfolk. The word "boycott" will first appear in The Times in 1880.
1838: Sir William Henry Perkin is born. He will invent the world's first artificial dye at age 18.
1889: Irritated because the local telephone operator kept steering customer business to her husband instead of him, undertaker Almon B. Strowger of Kansas City patents the automatic telephone exchange, will allows calls to go through without human intervention.
1894: The first bottles of a new non-alcoholic nerve tonic called "Coca-Cola" go on sale. The original formula calls for lime, cinnamon, coca leaves, and the seeds of a Brazilian shrub; carbonated water will be added later.
1985: Auto dealer Tom Benson and a group of investors pays $64 million to buy the New Orleans Saints football team.
1987: There's a shuffle in the Dow Jones Industrials, as Coca-Cola and Boeing replace Owens-Illinois and Inco.
1998: There’s no "meeting of the minds" for the U.S. District Court for South Carolina, as it decides Hooters of America v. Phillips.
The one with the most money wins
Contracts folks who are also soccer fans may be interested in Deloitte & Touche’s annual "Money League"—the annual competition to see which team makes the most money. Part 1 of the article is here, part 2 is here.
Big surprise: Manchester United is the champion. Real Madrid, AC Milan, Chelsea, and Juventus round out the top five.
Revised Article 1 Update
The Arkansas Senate passed HB 1497 (see my prior post on this subject for more details about the bill) and transmitted it to the governor for approval. Assuming the governor signs or does not veto the bill, Arkansas should be the first state to enact Revised Article 1 this year.
Elsewhere, New Mexico's House Judiciary Committee unanimously recommended passage of, and its House of Representatives unanimously passed, HB 834. The bill is now before the New Mexico Senate Judiciary Committee.
And, the Illinois Senate's Judiciary Committee unanimously recommended passage of SB 1647. If enacted in its present form, Illinois SB 1647 would make Illinois the first state to adopt uniform R1-301.
March 10, 2005
Cases: Contract with unlicensed broker is void
A real estate commission contract with an unlicenced broker is void as against public policy in Georgia and the broker cannot recover under it, according to the U.S. Court of Appeals for the 11th Circuit,
The broker, WorkPlace U.S.A., Inc., was owned by a licensed broker, John Amend, but was not itself licensed. It entered a deal involving 300,000 square feet of space for WorldCom, Inc. After WorldCom’s "massive accounting implosion," WorkPlace was tossed out when it refused to agree to a reduced commission. It sued.
Georgia law requires real estate brokers to be licensed, said the court in a per curiam opinion, and an unlicenced broker cannot bring an action to collect a commission. Even in such cases some relief might be found if the illegality is severable from the remainder of the contract, but here, said the court, there was a single promise and a single consideration, and thus nothing to be severed. The court reserved judgment on a quantum meruit claim, noting that the question on whether that remedy is available in such cases is presently before the Georgia Supreme Court.
Amend v. 485 Props., LLC, No. 04-14635, 2005 U.S. App. LEXIS 3586 (11th Cir. March 3, 2005)
Revised UCC Article 1 Update
Since my February 1 posting, versions of Revised Article 1 have been introduced and are currently pending before the legislatures of Arkansas (HB 1497), Illinois (SB 1647), Kansas (HB 2453), Montana (SB 401), New Hampshire (HB 719), and New Mexico (HB 834). NCCUSL also reports that Revised Article 1 has been introduced in Oklahoma, as HB 2028. However, HB 2028 proposes only technical changes to Oklahoma’s version of pre-Revised 1-102. A search of other pending House measures reveals no comprehensive bill to revise Oklahoma's version of Article 1. Also, North Dakota SB 2143, introduced earlier this year, appears to have died on the vine, having been unanimously voted "do not pass" out of committee and defeated in the Senate 45-1.
I previously reported that the text of Connecticut HB 5975 was unavailable on-line. With thanks to Quinnipiac's Sandy Meiklejohn, I revisited he legislative website and saw that what I thought was a bill status summary was, in fact, the bill -- the entire text of which reads "Be it enacted by the Senate and House of Representatives in General Assembly convened: That title 42a of the general statutes be amended to adopt the revision of Article 1 of the Uniform Commercial Code concerning general provisions." I construe this to mean the uniform version of Revised Article 1, including uniform R1-201(b)(20), which eliminates the bifurcated good faith standard in pre-Revised 1-201(19) and pre-amended 2-103(1)(b) & 2A-103(3) and holds merchants and non-merchants alike to "honesty in fact and the observance of reasonable commercial standards of fair dealing" and uniform R1-301, which allows the parties to a non-consumer transaction to choose to have their contract governed by the law of a jurisdiction bearing no relation to either the parties or the transaction.
To date, only three of the seven states (Delaware, Minnesota, and Texas) that have adopted Revised Article 1 have adopted uniform R1-201(b)(20). The other four (Alabama, Hawaii, Idaho, and Virginia) have retained the bifurcated good faith standard by retaining the pre-R1 "honesty in fact in the conduct or transaction concerned" definition in pre-Revised 1-201(19) and leaving 2-103(1)(b) & 2A-103(3) unchanged. However, of the nine states with bills currently pending (assuming that I am correctly interpreting the import of Connecticut's bare language), only Nebraska LB 570 retains pre-Revised Article 1’s “honesty in fact in the conduct or transaction concerned.” The other eight -- Arizona SB 1234, Arkansas HB 1497, Connecticut HB 5975, Illinois SB 1647, Kansas HB 2453, Montana SB 401, New Hampshire HB 719, and New Mexico HB 834 -- choose the unitary good faith standard over the current bifurcated one (as did ill-fated North Dakota SB 2143).
Arkansas HB 1497, Montana SB 401, and New Mexico HB 834 join Nebraska LB 570 and the versions of Revised Article enacted in the seven enacting states in rejecting uniform R1-301 in favor of a choice-of-law provision that generally resembles pre-Revised 1-105. (Ill-fated North Dakota SB 2143 also rejected uniform R1-301.) Illinois SB1647, Kansas HB 2453, and New Hampshire HB 719, like Arizona SB 1234 and (again assuming that I am correctly interpreting the import of Connecticut's bare language) Connecticut HB 5975, include uniform R1-301.
Arizona SB 1234 is pending before the Arizona Senate Commerce and Economic Development Committee.
The Arkansas House has approved Arkansas HB 1497 (with one technical amendment) by a vote of 92-0 and transmitted the bill to the Senate for its consideration.
Connecticut HB 5975 is pending before the Connecticut Joint Committee on Judiciary
Illinois SB 1647 is pending before the Illinois Senate Judiciary Committee.
Kansas HB 2453 is pending before the Kansas House Judiciary Committee.
The Montana Senate has approved Montana SB 401 (as amended to correct the peculiar language in the scope provision that I mentioned previously) by a vote of 49-1 and transmitted the bill to the House for its consideration.
Nebraska LB 570, as amended, appears to have been voted favorably out of the Nebraska Legislature's Banking, Commerce, and Insurance Committee, but to not yet have been voted on by the Legislature.
New Hampshire HB 719 is pending before the New Hampshire House Commerce Committee.
New Mexico HB 834 has been unanimously voted "do pass" by the New Mexico House Business and Industry Committee and is now before the House Judiciary Committee.
From Pirates of the Caribbean: The Black Pearl (2003)
Elizabeth: Captain Barbossa, I am here [aboard the Black Pearl} to negotiate the cessation of hostilities against Port Royal.
Barbossa: There are a lot of long words in there, Miss; we’re naught but humble pirates. What is it that you want?
Elizabeth: I want you to leave and never come back. [Laughter]
Barbossa: I’m disinclined to acquiesce to your request. Means "no."
[After much talk, she finally convinces them to leave.]
Elizabeth: Our bargain?
Bo’sun: Still the guns and stow ‘em! Signal the men, set the flags and make good to clear port!
Elizabeth: Wait! You have to take me to shore. According to the code of the order of the brethren—
Barbossa: First, your return to shore was not part of our negotiations nor our agreement so I "must" do nothing. And secondly, you must be a pirate for the Pirate’s Code to apply and you’re not. And thirdly, the Code is more what you’d call "guidelines" than actual rules. Welcome aboard the Black Pearl, Miss Turner.
All right, listen up
TODAY IS THE LAST DAY to get a discount for the 2005 Spring Meeting of the ABA Section on Business Law in Music City, USA. You can register by going here.
Today in history--March 11
1702: The first English-language daily newspaper, the London Daily Courant, hits the newsstands, or would have if they had been invented yet.
1785: John McLean is born at Morris County, New Jersey. He will be a candidate for the Republican Presidential nomination in 1856 and 1860, but is best remembered for his U.S. Supreme Court dissenting opinion in Dred Scott v. Sandford.
1861: The Constitution of the Confederate States of America is adopted. As it turns out, this is the easy part.
1897: A meteorite explodes in the sky above New Martinsville, West Virginia, causing damage but no injuries.
1927: Samuel Roxy Rothafer opens a new theater in New York City, which he calls the "Roxy."
1936: Future law professor and U.S. Supreme Court Justice Antonin Scalia (Harvard Law 1960) is born in the Bronx, New York.
1993: Janet Reno (Harvard Law 1963) is sworn in as Attorney General of the United States.
1996: New South Wales solicitor John Winston Howard (Sydney Law 1961) takes office as Australia's 25th prime minister. He's now served longer than 23 of his predecessors.
Today in history—March 10
1629: King Charles I dissolves Parliament and will not call another one for eleven years. When members return, their mood will not be improved by the delay.
1876: Alexander Graham Bell makes the first successful telephone call, saying "Mr. Watson, come here, I want you."
1891: Kansas City undertaker Almon Strowger, angered that a local telephone operator kept steering his prospective customers to another undertaker (her husband), invents the first automatic telephone switch.
1926: The Book of the Month Club opens for business, selling books by mail at reduced prices.
1947: Future prime minister Avril Phaedra Douglas "Kim" Campbell, PC (British Columbia Law 1983), is born at Port Alberni, British Columbia.
1964: The first Mustang rolls of the Ford Motor Co. assembly line.
1977: Comedians around the world are delighted when scientists discover rings around Uranus.
2000: The NASDAQ stock market index hits a peak of 5048.62 as elderly grandmothers in Paducah shove money into Red Hat and Pets.com. They will lose much of that money.
March 9, 2005
Fortune smiles on Cunningham
Speaking of Lawrence Cunningham, Fortune magazine recently named the sometime Contracts prof's anthology, Essays of Warren Buffett: Lessons for Corporate America, one of the four "Smartest Books" on investing in the last half-century. That's some pretty fast company.
Cardozo v. Posner
In addition to new scholarship, the SSRN empire is growing to include interesting older articles on its database so that they can be accessed in full-text form. Recently up is Lawrence Cunningham's interesting Cardozo and Posner: A Study in Contracts, published ten years ago in the William and Mary Law Review. in which the grizzled casebook champion and the brash young challenger go toe-to-toe. The abstract:
This article critically evaluates the major judicial opinions on the law of contracts written by Judges Benjamin N. Cardozo and Richard A. Posner. Respectively, these judges are the first and third most influential judges on the subject measured by the frequency with which contemporary contracts casebooks reproduce their opinions. Exploring dozens of classic opinions of these judicial titans, the piece contrasts the philosophies and methods the two judges employ in wrestling with many fundamental challenges in contract law, from formation to performance to damages. The inquiry suggests that, using Isaiah Berlin's nomenclature, Judge Cardozo is the fox ["who knows many things"] of American contract law while Posner is its hedgehog ["who knows one big thing"]. Judge Cardozo displayed the thickly-textured doctrinalist, an optimizer of competing objectives; Judge Posner is a maximizer. (Accompanying tables report data on the contributions of the 15 most influential judges contributing to contract law.)
News in brief
U.S. digital media company SmartVideo Technologies has been hit with a GBP 2.1 billion suit for anticipatory breach of its 10-year contract with a European licensee.
The Japanese government is making warning noises against Intel Corp., whose share of the chip business in Japan has recently risen to 90 percent.
The Second Circuit affirms a judgment for National Geographic in a big copyright action brought by freelance writers.
Ohio State has given its men’s basketball coach a seven-year contract worth $11 million in guaranteed compensation, with additional bonuses also available.
The Oregon Supreme Court has held, 4-3, that some changes the state wants to make in public pensions are not a breach of contract and are not unconstitutional, although it struck down two particular provisions.
Student Resident Assistants at Northeastern University are battling against changes the school wants to make in their contracts.
Cal bar mulls dues hike
The cost of not practicing law in California is going up, as the state bar pushes for a dues hike of $5 a year for active members but $85 boost for inactives. This latter is presumably due to the skyrocketing costs involved in monitoring people who aren't actually practing law in the state.
Bar spokesman Anthony Williams notes that the state used to be among "the highest in the nation" for most expensive bar dues, but has fallen to 12th place, so something needs to be done.
Today in history—March 9
1832: Illinois lawyer Abraham Lincoln announces his first run for public office. He will lose.
1841: The U.S. Supreme Court decides the Amistad case, holding that unlawfully enslaved persons have a right to resist by violence.
1918: Frank Morrison "Mickey" Spillane is born at Brooklyn, New York. At one point seven of the top ten best-selling American novels of the 20th century will be his.
1921: Actor Carl (Judd for the Defense) Betz is born at Pittsburgh, Pennsylvania.
1933: The First Hundred Days of the New Deal kicks off, as Congress passes President Roosevelt's Emergency Banking Act.
1959: Mattel introduces the Barbie doll.
1964: The first Ford Mustang rolls off the production line.
1975: Construction begins on the Trans-Alaskan Pipeline.
1985: The home video version of Gone With The Wind goes on sale for the first time, at $89.95 a pop.
1989: Eastern Airlines goes bankrupt again.
March 8, 2005
News in brief
The State Bank of India, various industries, and 20,000 farmers have entered into agreements under which the farmers agree to produce, industry to buy, and the Bank to finance some 11 commodities, including onions, sugarcane, grapes, and dairy products.
Showing unusual good sense, the U.S. Justice Department has decided to go with Corel WordPerfect 12 instead of Microsoft Word.
Two-time National Football League MVP (and two-time Super Bowl winner) Kurt Warner has signed a one-year, $4 million deal with the Arizona Cardinals, one of the sport’s oldest and least successful franchises.
Employees at the Toronto Zoo are going to the bargaining table today to try to hammer out a new labor agreement; they say they’re underpaid compared to workers at similar facilities.
Oh, there wasn't time to write a full opinion
California’s abuse of the unpublished decision seems to be getting worse every day. In the first few days of March, the state’s appellate courts issued 12 cases that mentioned "breach of contract." Eleven of those were designated as "unpublished."
The extraordinary nature of this is shown by one of the unpublished cases, Russomano v. Russo, 2005 Cal. App. Unpub. LEXIS 1763 (2d Dist. March 1, 2005). This is hardly the sort of cookie-cutter decision that advocates of unpublished opinions often described. On the contrary, it’s a complex dispute among a tangled array of business entities, involving breach of contract, misappropriation of intellectual property, and tortious interference with contract. Among the various issues raised (in addition to the substantive ones) were appropriate jury instructions for joint and several liability, the liability of limited partners who actively engage in the LP's business activities, and the appropriateness of awarding expert witness fees fees when a settlement offer is rejected.
The plaintiff won $8 million in compensatory damages at trial and $46 million in punitives; one defendant's expert witness fees alone were $64,000. The appellate opinion runs 22,000 words—just under the preferred limit for a Harvard Law Review article—cites scores of cases and statutes, and has 33 footnotes. Yet none of this can be cited by future litigants and the court is free to come to the opposite conclusion in the next case.
It's getting hard to see the difference between an arbitral decision and the sort of private ruling that the California courts provide.