May 7, 2005
Selling the family business
Few transactions require a broader range of skills from a transactional lawyer than the sale of a family-owned business. In addition to the ordinary business, regulatory, and tax implications, the lawyer representing the business has to be up to date on family law, estate planning issues—and it doesn’t hurt to be a teacher, hand-holder, and psychologist.
The ABA Business Law Section is holding a one-hour overview that will highlight some of the issues, called Representing the Seller of a Family Business. It’s slated for June 8. Registration is free for the first 250 members of the Business Law Section to sign up.
Cases: E-mail abuse leads to termination
Violating the employer’s e-mail policy is a valid reason for termination, according to a federal district court in Pennsylvania. In the case, the employer had a policy which stated:
Use of Company resources, including computers, e-mail or the Internet for other than Company business functions is a violation of Company policy. This applies at any time (working hours and non-working hours, including lunch). Inappropriate use of Company time and resources (including...E-mail) can result in disciplinary action up to and including termination...Use of Company computers, E-Mail, and the Internet is monitored to ensure proper use.
The employee was fired after the employer investigated high-volume e-mail users. Since the employee conceded that he had in fact sent or received e-mails in violation of the policy, his dismissal was appropriate, despite his claims that the real reason was age discrimination. The court overturned a contrary decision by the EEOC.
Today in history--May 7
1832: After more than 300 years of Ottoman rule, and with military support from Britain, France, and Russia, Greece formally becomes independent.
1847: One of the world's most successful cartels, the American Medical Association, is founded in Philadelphia.
1868: Henry Peter Brougham, 1st Baron Brougham and Vaux, the brilliant barrister and Lord Chancellor who helped lead to the fight to abolish slavery, dies at age 90 at Nice.
1915: The Cunard Liner Steamship Co.'s RMS Lusitania is torpedoed and sunk by the German submarine U-20 off the coast of Ireland.
1941: Glenn Miller and his Orchestera record Chattanooga Choo-Choo at the Victor Recording Studios in Hollywood. It is said to be the first million-selling record.
1946: Masaru Ibuka and Akio Morita found Tokyo Tsushin Kogyo, with about 20 employees. They later want to change the name, but their first choice, "TTK," is taken. So they choose "Sony."
1947: Looking to promote its new aerosol cheese product, "Cheez Whiz," Kraft Foods launches Kraft Television Theater, an anthology series that will run for 11 years.
1950: Tim Russert (Cleveland-Marshall Law 1976), who will leave work as an aide to Mario Cuomo and Daniel Patrick Moynihan to join NBC News, is born at Buffalo, New York.
1958: Pianist Van Clibern signs his first recording contract with RCA Victor Records.
1983: One of the great product placement hits of all time rides high on the Country charts: Shelly West's Jose Cuervo.(You Are a Friend of Mine).
1992: Two hundred and three years after it is introduced, Michigan becomes the final state to ratify the 27th amendment to the U.S Constitution, barring congressional representatives from voting themselves raises.
1996: Pepsico rejects John Leonard's attempt to buy $700,000 worth of Pepsi Points and redeem them for a Harrier jet.
1998: Germany's Daimler Benz buys Chrysler Corp. for $40 billion, in what is billed as the largest industrial merger to date.
May 6, 2005
Film Clips: Cousin Vinny on counter-offers
Vinny Gambini: I understand you played a game of pool with Lisa for two hundred dollars, which she won. I'm here to collect.
J.T.: How 'bout if I just kick your ass?
Vinny Gambini: Oh, a counter-offer. That's what we lawyers -- I'm a lawyer -- we lawyers call that a "counter-offer." This is a tough decision here. Get my ass kicked or collect two hundred dollars. Let me think. [Pause] I could use a good ass-kickin', I'll be very honest with you.. . Nah, I think I'll just go with the two hundred.
From: My Cousin Vinny (Fox 1992)
"Agreement to agree" isn't too vague
A classic "agreement to agree" case has survived a summary judgment motion in New York. In the case, reported by the New York Law Journal, via Law.com, the law firm of Pryor Cashman Sherman & Flynn had a contract with its client, Cary Brody, who was facing a possible $11 million in tax problems from New York State. The agreement provided:
We [the firm ] hope to achieve outstanding results on your behalf. Assuming that proves to be the case, we would expect to receive a bonus, subject to mutual agreement, in the neighborhood of the aggregate 20 percent reductions in our fees to such date.
After getting a negotiated settlement of $1 million, Brody refused to pay the bonus, which the firm calculates at $260,500, claiming both that the provision was an unenforceable agreement to agree, and that it was also a personal satisfaction clause and he wasn't satisfied. The judge disagreed, holding the case can go to trial.
Earth + Rain = Mud, says Cal Court
An insurance policy that excludes coverage for "earth movement" and "weather conditions" does not cover a house destroyed when heavy rain triggers a mudslide, according to a new decision by the California Supreme Court.
Yes, we know it sounds like an easy case, true, but it's harder than it looks because of the state's "efficient proximate cause" doctrine, which puts some limits on policy exclusions. The California Supreme Court Blog has a quick summary and a link to the opinion.
Vandy loses Confederate battle
Mike Madison of Pitt has a report in his Madisonian Theory blog on Vanderbilt University's loss in the Confederate Hall case. In that case, which we reported on previously, Vanderbilt was seeking permission to change the name of the building, which had been donated by the United Daughters of the Confederacy, on grounds that "Confederate" was now something of an embarrassment, particularly in recruiting. Madison has a link to the opinion.
He also raises the interesting question whether, since the Tennessee Court of Appeals said that the name must be kept as long as the building stands, Vandy could knock it down and build something new there. [Ed. note: One possible response would be that knocking a perfectly good building down for the sole purpose of escaping its promise might be bad faith.]
Today in history—May 6
1658: Maximilien François Marie Isidore de Robespierre is born at Arras, France. He will be one of the relatively few lawyers to be nicknamed “The Incorruptible.”
1889: The Eiffel Tower opens for business in Paris. Most Parisians complain that the big metal erector-set thing is weird and ugly, but they eventually get used to it.
1915: Future genius and TV pitchman Orson Welles is born at Kenosha, Wisconsin. A vivid transcript of a genius recording a commercial for peas is here.
1919: Lyman Frank Baum, who used his part-time “Oz” series of books to finance all his serious literary and theatrical failures, dies at Hollywood, California.
1935: President Roosevelt signs the Executive Order creating the Works Progress Administration.
1937: The passenger Zeppelin Hindenburg catches fire and burns in under a minute at Lakehurst, New Jersey. Zeppelins had previously flown millions of miles without a single passenger injury, but after the newsreel and radio broadcasts Zeppelin travel in the U.S. is dead.
1994: Queen Elizabeth and French President Miterrand dedicate the Channel Tunnel, perhaps the most expensive hole in the ground ever dug.
2002: The World Wrestling Federation, following a legal battle over the “WWF” logo with the World Wildlife Fund, changes its name to World Wrestling Entertainment, Inc.
2004: After 10 years and too many romantic entanglements to count, the sitcom Friends airs its last episode. By the end of the series, each of the six stars make $1 million per episode. Not counting residuals.
May 5, 2005
Stick 'em up! This is a holdup!
In Contract law, "holdup" doesn’t mean the sort of thing that folks with guns do to convenience store owners. It’s the problem that comes when one party improperly uses its bargaining power or the circumstances to extract more from the other than might be "fair." Exactly when and how contracts ought to be policed for holdups is the subject of a new National Bureau of Economic Research paper by Steven Shavell, Contracts, Holdup, and Legal Intervention. Click on "continue reading" for the abstract.
This article develops the point that the problems associated with contractual holdup may justify legal intervention in theory, and the article relates this conclusion to legal intervention in practice. Contractual holdup is considered for both fresh contracts and for modifications of contracts. The law can in principle alleviate the incentive and risk-bearing problems due to holdup in two ways. One approach is for the law simply to void agreements made in certain circumstances, since that will remove the prospect of profit from holdup. This policy may be desirable when the events that permit holdup are engineered, for these events would not have been instigated if they would not have resulted in enforceable contracts. When situations of need are not engineered (bad weather puts a ship in jeopardy), flat voiding of contracts is undesirable, since contracts for aid in situations of need (to tow a ship) are often socially beneficial. In these circumstances, the policy of controlling the contract price is preferable, as that policy can reduce the problems of holdup but still allow contracts to be made. Both types of legal intervention in contracts and their modifications -- voiding without regard to price and control of price -- are used by courts to counter problems of pronounced holdup. Also, various price control regulations appear to serve the same objective, at least in part, for instance maximum price ordinances for car towing services, emergency price regulations, and the historically important rule of laesio enormis of the Middle Ages.
California looks at requiring property registration
A bill to establish "an electronic reporting system" for pawn shops and second-hand goods dealers has passed out of a committee in the California legislature. The goal is to have such sellers create electronic records of all the tangible personal property they acquire. Proponents argue it will help combat the problem of stolen property.
The measure exempts most of those groups likely to be able to mount effective lobbying pressure: charitable organizations, swap meets, third-party auctioneers, and gun shows. Looks like eBay is the only major outfit likely to oppose it, since their sellers will be subject. The measure will be paid for by fees on the sellers.
Today in history—May 5
1789: In France, the Estates-General convenes for the first time since 1614. Members have managed to save up quite a few grievances in that time.
1818: Future law student, philosopher, and socio-economist Karl Marx is born at Trier, in Germany.
1864: Elizabeth Jane Cochran, who will earn fame as a journalist under the name Nellie Bly, is born at Cochran’s Mills, Pennsylvania. She may be the only person in history to get hired as a reporter as a result of writing a nasty letter Letter to the Editor.
1865: At North Bend, Ohio, a dozen men tear up the tracks of the Ohio & Mississippi Railroad, derail the train, blow the express car safe, and then rob 100 passengers at gunpoint in the first train robbery in U.S. history. None are caught.
1886: Banker T.C. Sherwood visits a farm owned by Hiram Walker & Sons Distillery, and sees a cow named Rose.
1891: Guest conductor Peter Ilych Tchaikovsky officially opens the new Carnegie Hall in New York City. Andrew Carnegie not only pays for the hall, he owns it.
1893: A stock market crash on Wall Street triggers the Panic of 1893, the worst financial crisis in U.S. history that date. About 15,000 companies and 500 banks will fail, unemployment will hit 18 percent, but the economy will be back on track by 1896.
1922: Work begins in the Bronx on a new stadium for the New York Yankees. It’s a fixed-price, $2.5 million contract, and the White Construction Co. will bring it in on budget and on schedule for Opening Day, 1923.
1986: The Love Boat, a kind of Full Employment Act for over-the-hill TV and film personalities, makes its last voyage.
1994: Sixteen-year-old Michael Fay, who had spray-painted and egged several expensive cars in Singapore, is publicly caned, causing several American pundits to explode.
2000: The Sun, Moon, Earth, Venus, Mars, Jupiter, and Saturn all align in what is called the "Convergence." Nothing in particular happens.
Revised Article 1 Update
Governor Brian Schweitzer signed Montana SB 401 into law May 2, making Montana the 11th state to enact a version of Revised Article 1. Like all ten of its predecessors, Montana's version of Revised Article 1 rejects uniform R1-301 in favor of a choice of law provision closely resembling pre-revised 1-105. Like five of its predecessors (Arkansas, Delaware, Minnesota, New Mexico, and Texas), Montana's version of Revised Article 1 adopts uniform R1-201(b)(20). SB 401 will take effect on October 1, 2005.
Oklahoma HB 2028 awaits only gubernatorial action, or the end of the day May 7, whichever comes first. If Governor Brad Henry signs or fails to veto the bill by the end of the day May 7, it will become law. Like Montana SB 401, Oklahoma HB 2028 rejects uniform R1-301, but embraces uniform R1-201(b)(20). If enacted, HB 2028 will take effect January 1, 2006.
The Illinois Senate unanimously passed SB 1647, as amended by its sponsor to reject both uniform R1-301 and uniform R1-201(b)(20) in favor of their pre-revised counterparts, on April 15. Amended SB 1647 was read for the first time in the Illinois House on April 26 and referred to the Rules Committee. It is presently before the House Executive Committee, which had not scheduled as hearing as of May 4 and is not scheduled to meet during the week of May 2-6. The House must approve the bill by May 20 before it can be presented to Governor Rod Blagojevich for his signature or veto.
On April 20, the Nevada Senate passed SB 201 (amended before it was reported out of committee to reject uniform R1-301 in favor of language closely resembling current 1-105) without opposition. On April 21, SB 201 was read for the first time in the Assembly and assigned to the Assembly Judiciary Committee, which held a hearing on SB 201 on May 2, but has yet to take any further action on the bill. The Assembly must pass SB 201 by May 27 before it can be presented to Governor Kenny Guinn for his signature or veto.
Connecticut HB 6985, which supersedes HB 5975 introduced earlier this year, was reported out of the Joint Committee on Judiciary without objection on April 15, but only after the committee amended the bill to replace uniform R1-301 with an interesting substitute that rejects the thus far uniformly rejected unfettered choice of law language in uniform R1-301(c), but retains other elements of uniform R1-301, such as the consumer/non-consumer distinction. (It is unclear whether the effect of this hybrid of current 1-105 and R1-301 will work any differently in practice than current 1-105; but, that may be a subject for another day.) After favorable reports from the Office of Legislative Research and Office of Fiscal Analysis, on April 28 the Legislative Commissioners’ Office reported amended HB 6985 favorably back to the House, which placed it on the May 4 “Go List.” As yet, neither house of the Connecticut legislature has passed HB 6985, although the House may have done so (or may have voted not to pass it) by the time you read this post.
By all appearances, Arizona SB 1234, Kansas HB 2453, New Hampshire HB 719, and West Virginia HB 3095 and SB 660 have run out of time this legislative session. Whether they will be back next session; and, if so, in what form, remains to be seen.
May 4, 2005
News in brief
A pro football player injured in a motorcycle accident may suffer something even more painful: coughing up $4.4 million for breaching a contract provision against engaging in activities "which may involve a significant risk of personal injury."
In a stunning turn of events, the R.R. Donnelly Co. has won a $400 million contract to print telephone directories for the R.H. Donnelly Co.
Four months after the AALS left, 37 hotel workers invaded the lobby of the San Francisco Hilton and were arrested for trespassing; the group was protesting the lack of a contract.
The government workers’ union in Ontario is urging members to do as little as they need to do on their jobs, in hopes of pressuring the province on a new contract.
Formosa Automobile has a new deal with Škoda AG to bring the Czech auto maker’s products to Taiwan, a move that it hopes will improve sales of its own Matiz and Magnus marks.
The betting is running about 3:1 against the Philadelphia Eagles giving disgruntled player Terrell Owens a new contract by opening day, according to the folks at WagerWeb.com.
A British environmental group has unveiled a new model contract that sets uniform standards for manufacturing compost.
Asheville, N.C., is losing its championship minor-league basketball team, the Altitude, which has been sold to a group that will move it to either Tulsa, Albuquerque, or Fort Worth.
Which country most exploits emigrant Indian workers? Malaysia, according to a new count by India’s Protector of Emigrants. Saudi Arabia finished second.
A South African breeder of white lions is seeking $2.5 million in damages from a feed manufacturer whose product allegedly killed ten lions.
Oesterle launches BusLaw blog
Contract types who dabble in corporate law will be interested in a new blog from one of our own—Dale Oesterle’s new BusinessLaw Prof, a welcome addition to the Law Professor Blogs Network. Oesterle, the J. Gilbert Reese Chair in Contract Law at Ohio State, opened his blog for business on Monday.
Judging by the early returns, its focus will be on the public securities markets and it will have a lot of Oesterle’s own thoughtful commentary.
All merchants are not created equal
In the mail this week we got a copy of Larry Garvin's new article, Small Business and the False Dichotomies of Contract Law, 40 Wake Forest L. Rev. 295 (2004). The law is replete, he says, with distinctions between merchants and non-merchants, and between business and consumer. But all merchants are not alike; some are gigantic and sophisticated enterprise, while others are unlettered individuals working out of their garage. Should the same rules apply to a small-time eBay seller as to Wal-Mart?
Six months and counting
Today marks the six month anniversary of ContractsProf Blog. During that period we’ve had nearly 60,000 visitor, and these days we average some 400 a day. Most of our readership comes from North America, but 35 percent is outside that area, especially in Japan, the Netherlands, France, Belgium, Switzerland, Denmark, Iceland, Lithuania, Russia, Sweden, and Israel. About 30 percent of the regular readership are (is?) full-time law professors; many of the rest are judges, lawyers, officials, and law students. Of course, some are also folks who wound up here accidentally, looking for nude photos of Kate Beckinsale. (To the latter: Welcome! Go here.)
Thanks for the support to date. Don’t hesitate to send us stories, articles, or thoughts about how to make the place better.
Regulating franchises via contract law
Germany does not have the sort of franchisee-protection laws that franchisee lobbyists have succeeded in enacting in the U.S. and elsewhere. But its courts are sometimes coming to the same results by using the doctrine of culpa in contrahendo, according to an interesting new piece by Karsten Metzlaff of Berlin’s Nörr Stiefenhofer Lutz.
G-town gets new digs
Talk about insults. In the mail today is a glossy little flyer from Georgetown that "celebrates the opening" of the new Eric E. Hotung International Law Center Building and the Sport and Fitness Center. It's bad enough when you don't invite someone; it's going over the line to send them a brochure telling them what they missed.
Cool building, though. From the pictures it looks like Georgetown students dress a lot better than those at most law schools.
Today in history—May 4
1493: In the bull Inter coetera, Pope Alexander VI tries to limit conflict between Spain and Portugal by providing that the Spanish can colonize everything west of a line 100 miles west of Cape Verde, while the Portuguese get the east.
1626: The Dutch East India Company’s Peter Minuit arrives at Manhattan Island to become the director of the Company’s New Netherland colony; his assignment is to buy the land from the local inhabitants.
1796: Horace Mann is born in poverty at Franklin, Massachusetts. He will go on to become a successful Bay State lawyer, but will be best known as one of the leaders of the state common school system.
1871: America’s first professional baseball league, the National Association of Professional Baseball Players, opens for business. It will fold five years later, but two of the original nine teams are still around: the Chicago Cubs and the Atlanta Braves.
1886: An angry labor protest meeting at Chicago’s Haymarket Square erupts into violence when someone throws a bomb at police, killing several, and police fire into the crowd. This comes to be known as the Haymarket Riot.
1930: Lawyer Mohandas Gandhi becomes one of 60,000 people arrested by British India authorities for making their own salt in violation of law.
1932: Mobster Al Capone begins serving his ten-year sentence for income tax evasion at a federal prison in Atlanta.
1979: Margaret Thatcher becomes the first female Prime Minister of the United Kingdom. France is unimpressed. "I am not prepared," Prime Minister Jacques Chirac will later sniff, "to accept the economics of a housewife."
May 3, 2005
News in brief
Donald Trump’s breach of contract lawsuit against the Eastern Pequots can go forward, says a judge, ruling against sovereign immunity for the tribe.
Community college presidents in Massachusetts are pressuring the governor to sign off on a new contract for unionized faculty, who have been without a contract for three years.
A contract battle in Australia is running into a roadblock—no one seems to be able to find the actual contract document.
Linkin Park’s contract demands to Warner Bros. Music apparently are driven by the band’s desire to get a cut of the money the company plans to make in its upcoming IPO.
A proposed jail services contract in Athens (Ga.) has city council members talking about ambiguous contract clauses.
Rapper Lil’ Kim, already facing 20 years in prison for perjury, has been sued by two men who claim they wrote part of the songs on her hit album but were not paid.
The All India Muslim Personal Law Board’s new model marriage contract seems to be getting a positive reception among Muslims in Bihar.
Canada’s Alcan Aluminum has a won a major contract to supply tobacco packaging to R.J. Reynolds, and will open a new factory in Winston-Salem, N.C., to serve the business.