August 6, 2005
Cases: Narrow arbitration clause doesn’t bar lawsuit
A party who terminates a contract and is sued by the other party may not be able to rely on an arbitration clause in the agreement, according to a recent 2-1 decision by the Florida Court of Appeals, because the termination of the contract may terminate the contractual obligation to arbitrate.
In the case, the owner of the Aberdeen Golf & Country Club hired Bliss Construction to build a $2 million clubhouse. After a dispute arose, the owner fired Bliss, terminated the contract, and refused to pay. Bliss sued. The contract contained an alternative dispute resolution clause that required resort first to a decision by the architect, then to mediation, and finally to arbitration. But language in the agreement, noted the court,suggested that not all disputes were supposed to be subject to arbitration:
One section [of the agreement] requires any dispute to be initiated by notice to the architect within 21 days after it has occurred and, in any event, not later than 30 days before the final payment. This is obviously meant to insure that all disputes will be resolved before completion, or laid on the table when it comes time for the owner to make the final payment on the contract price, perhaps with an adjustment for any unresolved dispute. Another section emphasizes that "pending final resolution of a claim . . . the Contractor shall proceed diligently with performance of the Contract and the Owner shall continue to make payments in accordance with the Contract documents." In short, the contract requires both sides to continue to perform through disputes, with the goal that most things will be resolved as they arise or with the final payment. Critically, another section of the contract expressly limits the grounds for either party terminating the entire contract before completion. Essentially [Bliss] may terminate if the owner fails to make a draw payment certified as due by the architect. The owner may terminate if [Bliss] and the subs fail to carry on construction diligently.
Thus, said the court, it appears that the arbitration clause was only designed to deal with disputes that took place while construction was in progress. After termination of the agreement, construction stopped. The owner therefore could not compel arbitration of Bliss’s claim.
Aberdeen Golf & Country Club v. Bliss Construction, Inc., 2005 Fla. App. LEXIS 11092 (4th Dist., July 20, 2005).
Free (or at least inexpensive) culture
Contract law is one of the ways by which owners of intellectual property seek to modify the scope of federal copyright law. If you’re worried about how Big Media "uses technology and the law to lock down culture and control creativity," you’ll be interested in an upcoming symposium, Free Culture and the Digital Library Symposium. It’s slated for Emory Law School in Atlanta, October 14, 2005. Details are here.
Today in History: August 6
1221: St. Dominic de Guzmán, one of the dominant figures of the medieval world, founder of the Dominicans and first Inquisitor, dies at Bologna, Italy.
1890: William Kemmler, who had killed his common-law wife with an axe, becomes the first person to die in the electric chair when he is executed at Auburn Prison in New York. It takes two tries, the second lasting more than a minute, to kill him.
1902: Arthur Flegenheimer, a/k/a "Dutch Schultz," is born at the Bronx, New York. His Harlem numbers racket is today known as the New York Lottery.
1960: Caudillo Fidel Castro nationalizes all American property in Cuba; the U.S. responds with an embargo which the rest of the world ignores.
1965: President Johnson signs the Voting Rights Act of 1965.
1991: College dropout and network anchor man Harry Reasoner dies at 68, after a fall at his home in Westport, Connecticut.
1996: Scientists announce that a meteorite from Mars, found in Antarctica, contains evidence of primitive life forms. Later study shows that it doesn’t.
1997: Microsoft buys a $150 million stake in Apple Computer, which is on the skids. Turns out to be a good investment.
August 5, 2005
Associate sues over partnership promise
The ABA Journal has a story about a law firm associate suing his former firm for breach of contract over an alleged promise that he would make partner if he stayed with the firm.
Patrick Hoeffner is seeking $100 million from Orrick, Herrington & Sutcliffe after it pushed him out instead of making him a partner. Hoeffner says that the promises were made in writing to induce him to stay at the firm when other lawyers were defecting. The firm says no promises were made and that it will "vigorously defend" the case.
Requiescat in pace: John Cibinic, Jr.
One of the giants of government contract law, George Washington Professor Emeritus John Cibinic, Jr., died this week. Cibinic, who went to night law school at GW and later taught at the school for more than 30 years, was one of the founders of modern procurement law.
Cibinic joined the GW faculty in 1963, after stints working for the Navy Bureau of Aeronautics and then American Machine & Foundry. In 1964 he published Cost Determination, the first book ever written on what would become the important field of government cost accounting. With his long-time colleague Ralph Nash, he published the first great government contracts casebook, Federal Procurement Law, and he wrote or co-wrote several other books, including Formation of Government Contracts, Administration of Government Contracts, and Competitive Negotiation. He was co-editor of the popular and authoritative Nash & Cibinic Report. Although he continued to teach, he retired from GW in 1993. In 2002 he and Nash were both honored with University Distinguished Alumnus Awards. (Photo: Cibinic, left, with GW Dean Michael Young, and Nash).
Cibinic is survived by his wife, Jean, children Jean, Amy, Jennifer, and John, and several grandchildren. The family is creating a memorial fund in his honor at GW. Contributions can be sent to
The George Washington University Law School
2000 H St. NW
Washington, DC 20052
Cases: Dog bites insurer
Where any part of a claim can possibly fall within the coverage of an insurance policy, the insurer has a duty to defend the policy holder, according to a recent decision by the Connecticut Supreme Court.
Mitch Wylie, the owner of a dirt bike company called Strictly Dirt, Inc., had a homeowner’s policy with Hartford Casualty and commercial premises policies from Litchfield Mutual. While Wylie was at Strictly Dirt, his dog bit a two-year-old girl in the face, injuring her severely. Her parents sued both Wylie, as the dog’s owner, and Strictly Dirt, the owner of the premises. Litchfield defended Strictly Dirt, but refused to defend Wylie, on the grounds that he wasn’t the insured. Hartford defended Wylie, settled the claim, and then sought declaratory judgment that Litchfield was liable for breach of its duty to defend.
The key here, said the court, in an opinion by Justice Christine Vertefeuille, is that the policy issued to Strictly Dirt extended to cover "your employees, for acts within the scope of their employment by you (this does not include your executive officers)." Wylie was at least arguably an "employee" of the business he owned, and therefore within the definition. Whether he was or was not acting within the scope of his employment in bringing the dog to the premises, the complaint contained enough information to trigger the duty to defend.
Hartford Casualty Insurance Co. v. Litchfield Mutual Fire Insurance Co., 2005 Conn. LEXIS 269 (July 19, 2005).
Harvard to take over Supreme Court
We don't normally pay much attention to the U.S. Supreme Court here, since it plays the same role in contract law that fleas play on a dog. But an historic event is about to occur: Harvard Law School is poised to have five justices (Breyer, Kennedy, Scalia, Souter, Roberts) serving on the Court simultaneously, which will be a first. Another justice (Ginsburg) attended before transferring to Columbia. Four of the justices will also have been clerks to previous justices.
It's reassuring to know that the members of the Supreme Court, the institution that tries to resolve some of the most divisive political and social issues in the country, enjoy such diverse educational backgrounds.
Today in History: August 5
1583: The first English colony in the New World is established, when Sir Humphrey Gilbert claims what is now St. Johns, Newfoundland, for the English, assuming control of fishermen who have been working the area for more than 80 years.
1641: Future Massachusetts Justice John Hathorne, who will help preside over the Salem Witch Trials, is born at Salem, Massachusetts.
1861: The income tax is born with the Revenue Act of 1861. The rate is 3 percent on all income above $800 -- the wage equivalent of $118,000 today.
1882: The Standard Oil Co. of New Jersey is formed, taking advantage of New Jersey laws that, contrary to practices in other states, allow one corporation to own stock in another.
1914: The American Traffic Signal Co. installs the first electric traffic signal system at Cleveland, Ohio. Originally the lights are red and green; yellow is added six years later.
1908: Harold Edward Holt (Melbourne Law 1930), Australia’s 17th Prime Minister, is born at Sydney, New South Wales.
1962: The body of actress Marilyn Monroe is found at her Brentwood home. She made only about $1,000 for her first major film, The Asphalt Jungle, but for The Seven Year Itch she earned $250,000 and ten percent of the gross over $4 million.
August 4, 2005
Plea Bargain is a Contract
A plea bargain is a contract, according to the U.S. Court of Appeals for the Seventh Circuit in a recent decision, and it should be interpreted like one.
In the case, Curtis Barnett head pleaded guilty to being a felon in possession of a gun. In exchange for his plea, he was granted "intensive probation" instead of prison time. Intensive probation gave probation officers the right to search Barnett's home, office, car, or person at any time and without probable cause. This is beyond what ordinary probation allows, and Barnett appealed, claiming that his"blanket waiver of the Fourth Amendment" was invalid and unconstitutional.
A contract, wrote Judge Richard Posner for the court, is presumed to "make both parties better off and do no harm to third parties." He went on:
Nothing in the Fourth Amendment's language, background, or purpose would have justified forcing Barnett to serve a prison sentence rather than to experience the lesser restraint of probation. Nothing is more common than an individual's consenting to a search that would otherwise violate the Fourth Amendment, thinking that he will be better off than he would be standing on his rights. Often a big part of the value of a right is what one can get in exchange for giving it up. Here, given the alternative facing him of a prison sentence, Barnett gave up nothing.
Barnett argued that the open-ended nature of intensive probation made the contract too indefinite to enforce, but Posner noted that even if it were, Barnett wouldn't be entitled to be freed from the probation. If a contract fails for indefiniteness, he noted, the parties are put back where they were before they started. Here, that means that Barnett wouldn't be set free, he'd be back facing prison.
United States v. Barnett, 2005 U.S. App. LEXIS 14432 (7th Cir., July 18, 2005).
What does "preponderance" mean?
Legal terms often have meanings at variance with the ones ordinary humans use. A recent New York trial court decision suggests that it's reversible error for the jury to understand the normal meaning of a term. In the case, reported in the New York Law Journal, a jury, puzzled by what "preponderance" meant in the judge's instructions, looked up the word in a dictionary. Sounds reasonable enough, but New York City Justice Lottie Wilkins found this to be so improper that the verdict must be set aside and a new trial ordered. According to the Law Journal:
In this case, the misconduct presented a "sufficient likelihood" that the foreman's acts affected jurors' views regarding the meaning of "preponderance," Wilkins ruled.
She suggested that the verdict sheet may have placed "undue emphasis" on the concept of "preponderance of the evidence."
We're not sure exactly how you can put too much emphasis on "preponderance," since that's the standard.
Today in History: August 24
79: Mount Vesuvius erupts, which is bad news for Pompeii and Herculaneum. They are buried under as much as 75 feet of red-hot, smoking ash.
1215: In an early decision on contractual duress, Pope Innocent III declares the Magna Carta extorted by English barons from King John to be unenforceable.
1511: The port of Malacca falls to Afonso de Albuquerque. Controlling the straits of Malacca, it will become a key post in the trading empires of the Portuguese, then the Dutch, then the English.
1682: William Penn receives the tract now known as the state of Delaware, which he adds to his Pennsylvania colony. Disputes over boundaries with the Calvert family of Maryland will lead to 100 years of litigation and ultimately to the Mason-Dixon line.
1814: British troops burn federal buildings in Washington, D.C., including the White House. A nice try, but they’ll all get rebuilt, and then some.
1821: The Treaty of Córdoba grants independence from Spain to Mexico.
1854: At the Moon Lake Lodge in Saratoga Springs, New York, chef George Crum invents the potato chip (or “crisp” in Britain).
1890: The original “Big Kahuna” who will make surfing a popular sport, Duke Paoa Kahinu Mokoe Hulikohola Kahanamoku (“Duke” is his first name) is born in Hawaii.
1945: Vincent Kennedy McMahon, the man who would miraculously take pro wrestling out of dingy arenas and into mainstream popular culture, is born at Pinehurst, North Carolina.
1946: U.S. Supreme Court Justice James Clark McReynolds (Virginia Law 1884) dies at Washington, D.C.
1995: Microsoft Corp. releases Windows 95. It is reported that the company paid the Rolling Stones $12 million to appear in the product’s advertising campaign.
Freedom and Contract
Lipshaw, Jeffrey M., "Freedom, Compulsion, Compliance and Mystery: Reflections on the Duty Not to Enforce a Promise" (July 17, 2005). http://ssrn.com/abstract=742844
This paper discusses how a promisor may feel bound even though the promisee has not intention of forcing the promisee to perform. This is a form of moral compulsion which is dependent upon the will of the freely acting agent. Although this article may too cleanly separate what it calls moral freedom and legal compulsion, it is worth reading for its insight into moral action in promises.
Today in History: August 4
1265: King Edward I shows the barons who’s in charge, defeating them at the Battle of Evesham and killing their leader, Simon de Montfort.
1693: The Benedictine monk Dom Perignon invents champagne. Actually, he doesn’t exactly invent it, but he has the best marketing department, so his name sticks.
1735: Newspaper entrepreneur John Peter Zenger is acquitted of seditious libel against the governor of New York. Zenger’s first two lawyers were disbarred in the course of the proceedings, but his third, Andrew Hamilton, manages to convince the jury that the charges were true.
1790: At the urging of Treasury Secretary Alexander Hamilton, Congress establishes the Revenue Cutter Service, forerunner of the U.S. Coast Guard.
1821: Printers Atkinson & Alexander of Philadelphia publish the first issue of a new four-page newspaper without illustrations. They call it the Saturday Evening Post.
1854: Japan adopts the Hinomaru ("sun disc") -- a red disc on a white background -- as its official naval flag.
1947: American occupation authorities create the Supreme Court of Japan.
August 3, 2005
OSU's Garvin promoted
Garvin joined the OSU faculty after several years at Florida State, where he served as associate dean for academic affairs. He’s also taught as a visitor at Texas and Washington-St. Louis. He earned a B.A. in history and a B.S. in Physiology and Biochemistry from Michigan State, an M.S. in Neurosciences from Michigan, and a J.D. from Yale, where he was Managing Editor of the Yale Law Journal. Before going into teaching he practiced law with Shea & Gardner in Washington, D.C., and clerked for District Judge Edward Cahn of the Eastern District of Pennsylvania.
Garvin is the co-author of The Law of Entrepreneurial Finance (Aspen 2004), and Secured Transactions and Payment Systems: Problems and Answers (2d ed. Aspen 2003), and was recently named the new editor of Farnsworth on Contracts. He sings baritone.
Help Wanted: Dean
Confederate raiders burned Lawrence, Kansas, to the ground during the Civil War. But they’ve rebuilt it and we hear it’s pretty nice. The National Trust for Historic Preservation even ranks its downtown one of the nation’s top dozen.
Why are we mentioning this? Because the University of Kansas (left) is looking for a new dean for its law school. Even better than the downtown, there’s not a law school in the country with a better basketball program. Here’s the job description.
Today in History: August 3
1492: Christopher Columbus sets sail from Spain on a voyage to find the East Indies by going west.
1678: René Robert Cavelier, Sieur de La Salle, completes work at Niagara Falls on the forty-five ton Le Griffon, the first ship built in America and the first to sail the Great Lakes.
1811: Elisha Graves Otis, whose development of the safety elevator will make the skyscrapers of the world's great cities possible, is born at Halifax, Vermont.
1856: Alfred Deakin is born at Melbourne, Victoria. He'll earn his law degree at the University of Melbourne but make his name as a journalist before becoming Australia’s second prime minister.
1900: The Firestone Tire and Rubber Co. is created at Akron, Ohio. It will go on to become one of the world’s biggest companies before going bankrupt in 2003.
1923: Northampton, Massachusetts lawyer Calvin Coolidge is sworn in as President of the United States following the death of President Harding.
1946: The National Basketball Association (originally called the Basketball Association of American) is founded with 11 teams: Boston Celtics, Chicago Stags, Cleveland Rebels, Detroit Falcons, New York Knickerbockers, Philadelphia Warriors, Pittsburgh Ironmen, Providence Steamrollers, St. Louis Bombers, Toronto Huskies, and Washington Capitols.
1946: British Foreign Minister John Whitaker "Jack" Straw (Leeds Law 1967) is born to a single mother in Essex.
1981: Thirteen thousand members of the Professional Air Traffic Controllers Association walk off the job. President Reagan fires all of them.
How do we know what words mean?
Evolving Business and Social Norms and Interpretation Rules: The Need for a Dynamic Approach to Contract Disputes" by NANCY KIM, California Western School of Law
Document: Available from the SSRN Electronic Paper Collection: http://papers.ssrn.com/paper.taf?abstract_id=713962.
In this paper, Professor Kim analyzes contracts in light of e-commerce and globalization arguing that a new dynamic is therefore needed to protect various minority groups.
August 2, 2005
Spurlock honored by Mongolia
Texas Wesleyan contracts prof Joe Spurlock has been presented with Mongolian Government’s highest award, the Medal of Friendship, for his work in training the Mongolian judiciary. He’s the first foreign lawyer to receive the award, which was presented by Chief Justice Ganbat of the Mongolian Supreme Court at a dinner in June.
Spurlock has been working with Mongolian judges since 2000, and runs TWU’s Asian Judicial Institute, which provides annual training in Fort Worth to members of the judiciary. He received a B.A. from Texas A&M University, a J.D. from the University of Texas, and an LL.M.from the University of Virginia.
Spurlock worked as an aide to former Governor Dolph Briscoe before serving in the Texas House of Representatives, and later as a trial judge, before serving as a Justice of the Texas Court of Appeals. He’s twice been named TWU's professor of the year, and in 1992-93 was Delta Theta Phi’s Outstanding Faculty Member in the United States.
Depends on what you mean by "sex"
It’s a question of statutory interpretation, not contract interpretation, but it’s interesting anyway. Does a state law defining a prostitute as one "who engages or agrees or offers to engage in sexual conduct with another person in return for a fee," cover actors paid to engage in sex in the process of making pornographic films?
No, according to New York Supreme Court Justice Budd Goodman. The essence of prostitution, he concludes, is a bilateral arrangement where A pays B for sex with A. If A pays B to have sex with C, so that A can make a ton of money, it’s not prostitution, it’s a legitimate business.
E-Contracts group to meet at ABA
The ABA Cyberspace Law Committee’s Working Group on Electronic Contracting Practices is inviting those interested in, well, Electronic Contracting Practices, to join them at the Annual Meeting in Chicago this week. The ABA Annual Meeting starts Thursday, August 4, and the Committee meeting will be Sunday, August 7, at 3:30. Details are here. The rest of the interesting stuff going on at the meeting is available from the ABA Cyberspace Law Committee Blog.