Saturday, September 17, 2005
An interesting interpretation question is shaping up in the wake of Hurricane Katrina: Does damage caused by tidal surge or the breach of a levee count as damage from "water" (which is not covered by most insurance policies) or a "hurricane," which is? Insurance companies, claiming that they charged no premiums for flood damage, say that water damage is water damage, whatever natural phenomenon causes it..
Mississippi's attorney general and its top plaintiffs' lawyer are suing several companies, claiming that denial of coverage violates the state's Consumer Protection Act. (Hat tip: Beth Winston (Whittier)).
In Bob Dylan's recent autobiography, he wrote about his contract with Columbia Records:
[Al] Grossman was the biggest manager around
Greenwhich Village. He had seen me around before but had paid me little mind. After my first record on Columbia had been released, there was a noticeable shift on his part to represent me. I welcomed the opportunity because Grossman had a stable of clients and was getting all of them work. When he began to represent me, the first thing he wanted to do was get me out of my Columbia Records contract. I thought that this was screwing around. Grossman informed me that I had been under twenty-one when I’d signed the contract, therefore I had been a minor, making the contract null and void . . . that I should go up to the Columbia offices and talk to John Hammond and tell him that my contract was illegal and that Grossman would be coming up to negotiate another one. Sure. I went up to see Mr. Hammond, but I had no intention of doing that. Not if I had been offered a fortune would I have done it. Hammond had believed in me and had backed up his belief, had given me my first start on the world’s stage, and no one, not even Grossman had anything to do with that.
Chronicles, Vol. 1, at 289 (Simon & Schuster 2004).
[Meredith R. Miller]
1630: Settlers found a new town in the Massachusetts Bay Colony, which they name Boston, after the place in Lincolnshire. The city motto is Sicut patribus, sit Deus nobis (“God be with us, as he was with our fathers”).
1787: Drafters at Philadelphia, Pennsylvania, finish work on the proposed new Constitution of the United States.
1859: Joshua Abraham Norton, who had gone bankrupt the year before trying to corner the rice market in San Francisco, declares himself Emperor of the United States and Protector of Mexico. Ghirardelli Chocolate subsequently introduces the “Emperor Norton” sundae, which includes two bananas and a handful of nuts.
1907: U.S. Chief Justice Warren Earl Burger (William Mitchell Law 1931) is born at St. Paul, Minnesota.
1908: Lt. Thomas Selfridge, USA, becomes the first known airplane fatality when a Wright Bros. “Flyer” crashes at Fort Myer, Virginia.
1920: At Canton, Ohio, the American Professional Football Association is formed. It will change its name to “National Football League” in 1922.
1939: Justice David Hackett Souter (Harvard Law 1966) is born at Melrose, Massachusetts.
1984: Businessman-lawyer Brian Mulroney (Laval Law 1965) is sworn in as Prime Minister of Canada.
1986: The U.S. Senate confirms William Hubbs Rehnquist as Chief Justice of the United States.
1996: Former U.S. Vice President Spiro Theodore Agnew (Baltimore Law 1947) dies at Berlin, Maryland.
Friday, September 16, 2005
Competing studios are claiming the rights to the film “Thank You for Smoking,” which was recently shown at the Toronto International Film Festival. The movie is a satire featuring Aaron Eckhart and Katie Holmes.
As the September 13, New York Times reports, movie deals “are commonly made on a handshake at film festivals, where frenzied competition and the numerous movies leave little time to iron out all the legal niceties.” But now, one unidentified studio head commented to reporters that “with competition the way it is, I wouldn’t trust anything anywhere . . . I’d have something on paper, even if it’s just on a napkin.” (Hat-tip: Jori Schwartzman)
After years of laboring under a logo that some critics said looked like it was created by a high school graphic arts class in 1972, the Association of American Law Schools has unveiled its much anticipated new look. The new logo design is designed to help catapult the Learned Society into the 20th century. This is it:
The new logo changes the Mother Ship's image from that of a rather stodgy small-town non-profit, viz
to that of a bankrupt airline:
Spokespersons for the group say that the pyramid shape represents neither a Ponzi scheme nor the structure of a typical law firm, but "the strength, leadership, and commitment to improvement that the AALS embodies. They don't explain the part of the logo that looks like an arrow pointing down, but presumably it serves to symbolize the group's intent to anchor legal education to real-world practice. Or maybe not.
For those who complain that companies are often bad about hiding the bad terms in a contract, the NASDAQ stock exchange is refreshingly blunt. Here are the headnotes to the contract you ("Subscriber") must sign to subscribe to its real-time quote service through your own brokerage firm ("Vendor"):
DISCLOSURE – PLEASE READ
Subscribers must sign a contract entitled The Nasdaq Stock Market, Inc. (“Nasdaq”) Subscriber Agreement ("Agreement") in order to receive Information [see definition in Paragraph  of the Agreement] from Nasdaq. While all terms are important, please particularly note the following. For more information regarding each term, the paragraph number at the end of each term refers to the paragraph in the Agreement where more information can be located.
RESTRICTIONS ON USES & TRANSFER: Subscribers may not provide access to Information or transfer the Agreement to others. The Information is only for personal non-professional use or, if you are a Professional Subscriber (see definition in Paragraph  of the Agreement) for internal business use and/or personal use. [Paragraph 3]
MOST TYPES OF DAMAGES ARE EXCLUDED AND REMAINING DAMAGES ARE LIMITED: Nasdaq is not liable for trading losses, lost profits or incidental, consequential or other indirect damages, even if the Information is untimely or incorrect. Other damages (if any), are strictly limited (in contract, tort, or otherwise) to a capped amount. [Paragraphs 9 and 10]
NO IMPLIED OR STATUTORY WARRANTIES OR DUTIES: All warranties and duties (if any) are eliminated. There are no express warranties except for a Limited Warranty regarding efforts only. STOCK QUOTES MIGHT NOT BE CURRENT OR ACCURATE. [Paragraph 9]
SUBSCRIBERS PROVIDE AN INDEMNITY: Subscriber indemnifies and holds harmless Nasdaq for any Claims or Losses (see definition in Paragraph  of the Agreement) resulting from Subscriber’s breach of the Agreement, for Subscriber’s infringement of a third party's intellectual property rights, or from any third party suit related to Subscriber’s use or receipt of the Information. [Paragraph 13 and 14]
MARYLAND LAWS AND COURTS APPLY: Everything relating to the Agreement is governed by the laws of the United States and the State of Maryland and any disputes can only be heard in Maryland. [Paragraph 23]
NO ORAL AMENDMENTS & ONLY NASDAQ MAY AMEND: The Agreement may not be altered orally and may be altered by Nasdaq pursuant to an Agreement procedure which includes notice either to Subscriber or to Vendor. Failure to terminate the Agreement before, or use of Information after, an amendment will be Subscriber’s consent (or confirmation of an earlier consent) to the amendment. [Paragraph 17 and 21]
VENDORS CAN IMPACT SUBSCRIBER’S RIGHTS BUT NOT NASDAQ’S RIGHTS: Vendor does not have authority to change the Agreement. Vendors are obligated to provide notice of Nasdaq changes to Subscriber, but if they do not, Nasdaq’s notice to Vendor is still effective, as to Subscriber including notice of cancellation. [Paragraph 1 and Paragraph 17]
The detailed text of the agreement can be found by clicking on "continue reading."
1736: Thermometer maker Gabriel Fahrenheit dies at the Hague in the Netherlands.
1810: Priest Miguel Hidalgo of Dolores, inaugurates the Mexican War of Independence when he issues the Grito de Dolores ("Cry of Dolores" or "Cry of Pain") from the belfry of his parish church.
1875: Retailer James Cash Penney is born on a farm near Hamilton, Missouri. He’ll go into business at age eight when his father tells him he has to start buying his own clothes.
1893: A gun goes off and some 100,000 potential claimants swarm across the Oklahoma border to claim one of the 42,000 farmsteads available in what comes to be known as the Oklahoma Land Race.
1908: William C. Durant creates General Motors as a holding company for his Buick Motor Co. He’ll raise $12 million in stock sales in 12 days and will use the proceeds to buy Oldsmobile, Oakland (later Pontiac), and Cadillac.
1953: The St. Louis Browns baseball team gets league approval to move east and become the Baltimore Orioles, fifty years after the original Orioles had moved north to become the New York Yankees.
1956: Toymaker Rainbow Crafts introduces a new product that had accidentally been invented by two men looking for a way to clean wallpaper. They call it "Play-Doh."
Thursday, September 15, 2005
The Second Circuit decision in Specht v. Netscape got a great deal of attention in the Contract law world. But do you know what happened to the case after it went back down to the district court?
The University of Idaho is looking for two tenure-track hires for next year. Interests are in “Contracts, Commercial Law (particularly UCC Article 9 and State Debtor-Creditor Law), Bankruptcy, and Local Government as part of the College’s Business emphasis; and Criminal Law, Evidence, Practice Court (a simulated trial training course), Lawyering Process (a pretrial practice course), Civil Procedure, and Remedies.” Contact is Prof. Elizabeth Brandt, College of Law, University of Idaho, PO Box 442321, Moscow, ID 83844-2321. You can e-mail Prof. Brandt here.
Contracts professors are one of the few groups who find boilerplate fascinating. (Left, a classic boilerplate from the U.S.S. Mullenix.) The Boilerplate: Foundations of Market Contracts conference next week in Ann Arbor (Mich.) will expore a number of fascinating aspects of the boilerplate problem. The papers are now up and available online, for those who either want to read them in advance or can't make it. Here they are:
Robert Ahdieh (Emory), The Strategy of Boilerplate.
Douglas Baird (Chicago), The Boilerplate Puzzle.
Lucian Bebchuk (Harvard) & Hon. Richard Posner (7th Circuit/Chicago), One-Sided Contracts in Competitive Consumer Markets.
Omri Ben-Shahar & James J. White (Michigan), Boilerplate and Economic Power in Auto Manufacturing Contracts.
Michelle Boardman (Geo. Mason), Contra Proferentem: The Allure of Ambiguous Boilerplate.
David Gilo & Ariel Porat (Tel Aviv), The Hidden Roles of Boilerplate in Standard Form Contracts.
Robert Hillman (Cornell), On-Line Boilerplate: Would Mandatory Website Disclosure of E-Standard Terms Backfire?
Ronald Mann (Texas), "Contracting" for Credit.
Henry Smith (Yale), Modularity in Contracts: Boilerplate and Information Flow.
A battle between the software giant and the search engine giant began back in July with Microsoft’s request for a temporary order restraining its former executive, Kai-Fu Lee, from performing his new job heading Google’s China operation. Microsoft sued both Google and Lee, claiming that the work Lee is doing for Google violates a non-competition clause contained in paragraph 9 of his Microsoft employment agreement. The Washington court granted the TRO, stating that Microsoft had a “well-grounded fear” that leaked trade secrets could hurt its business.
The saga continues and, earlier this week, a Washington Superior Court judge granted Microsoft a preliminary injunction in its case against Google and Lee. The ruling enjoins Lee from doing some, but not all, work he was slated to do for Google in China, and both sides are claiming victory.
Lee can start recruiting employees for Google, meeting with government and university officials, and establishing a headquarters for Google's new research center. But, pending trial, Lee is enjoined from hiring anyone away from Microsoft, using confidential information he learned during his employment there, or working in computer search and other specific projects for Google.
According to the preliminary injunction, one issue at trial in January will be “whether independent consideration exists to support the [non-competition] Agreement.”
Some reports of a Microsoft settlement offer spread around shorlty after the judge issued the prelimary injunction, but it does not appear from news accounts that the parties have settled yet.
[Meredith R. Miller]
1830: The Liverpool & Manchester Railroad, the world’s first intercity steam-powered railroad, opens for business. The engine almost immediately runs over and kills a Liverpool MP who was standing on the track (left), making him the world’s first railway passenger fatality. (Photo: Wikipedia.)
1857: William Howard Taft (Cincinnati Law 1880), the first man to be both President and Chief Justice of the United States, and the first to throw out the first pitch of a baseball season, is born at Cincinnati, Ohio.
1949: The Lone Ranger, a hit on radio for the previous 16 years, debuts on the ABC Television Network.
1965: Wall Street lawyer Oliver Wendell Douglas and his Hungarian wife Lisa take up residence in Hooterville, as the first episode of Green Acres appears on CBS.
1982: The first issue of the Gannett Co.’s USA Today is published. People sneer at the "McPaper," but it sells like, well, Big Macs.
1986: LA Law, which did more for law school recruiting than all the glossy brochures combined, debuts on NBC-TV.
1997: Elton John’s remake of Candle in the Wind (for the late Princess Diana) sells 600,000 copies in its first day.
Wednesday, September 14, 2005
Samuel Goldwyn apparently once said that "[a]n oral contract isn't worth the paper it's written on." Indeed, this was the lesson recently in Trustmark Insurance Co. v. General & Cologne Life Re of America, where the Seventh Circuit affirmed summary judgment in favor of the defendant on plaintiff's breach of contract claim because the plaintiff could not produce a written document to satisfy the requirements of the statute of frauds.
Judge Williams began the opinion:
Surely, if there is any moral to this story, it is to "get it in writing." It is astounding in this day and age to find it necessary to repeat this admonition but no less so than to find a sophisticated party willing to leverage an agreement involving multiple years and millions of dollars solely on the enforceability of a simple handshake. Yet that is precisely what happened in this case. Plaintiff Trustmark Insurance Company ("Trustmark") brought suit against defendant General & Cologne Life Re of America ("Cologne"), another insurance company, over an alleged reinsurance deal that was not committed to writing.
[Meredith R. Miller]
"HOFSTRA LAW SCHOOL is expanding its faculty and seeks experienced lateral applicants for tenured and tenure-track faculty positions to begin in the 2006-2007 academic year. We invite applications in all areas of law, but our strongest curricular needs include Business Organizations, Commercial Law, Securities, Transactional Skills and Tax as well as Environmental Law, Intellectual Property, Property, and Civil Procedure. We have a strong institutional commitment to diversity and particularly welcome applications from women and minorities. Applicants should have outstanding records as teachers and scholars."
Contact: Professor Nora V. Demleitner, Chair, Lateral Appointments Committee, School of Law, 121 Hofstra University, Hempstead, NY 11549, or by e-mail here.
An employee whose contract provided that he would keep his job title and benefits following a merger had no cause of action for constructive discharge after his authority was cut back, according to a recent decision by the Ohio Court of Appeals.
Joseph Usaj was V.P. of Human Resources at Marconi Medical Systems. Philips Medical Systems bought out Marconi in 2001. Philips entered into an employment contract with Usaj stating that he would retain his title for two years with Philips. The contract also provided that if Usaj voluntarily left before the two years, he would not be paid any severance pay or bonus. A year after the takeover, Usaj gave his letter of resignation. When Philips refused to pay him severance money, Usaj sued for breach of contract. Summary judgment was granted for Philips; Usaj appealed.
Usaj argued that his new position at Philips was inferior to his previous position at Marconi. Those who had been his subordinates were now, for all practical purposes, his supervisors. This, he argued, was a breach of contract that justified his resignation. It also amount to a constructive discharge, which meant that his departure was not “voluntary” within the terms of the agreement.
The court disagreed. The contract protected his job title with the company; there were no representations about duties or responsibility. His constructive discharge claim failed because he was unable to show that his work environment was so difficult that a reasonable person in the same position would have felt compelled to leave. He never felt humiliation or emotional stress, and he never complained during that year. The court noted that he was throughout this period pursuing alternate employment. Thus summary judgment for Philips was appropriate. Usaj v. Philips Medical Systems, 2005 Ohio 4132, 2005 Ohio App. LEXIS 3780 (8th Dist. Aug. 11, 2005).
1638: Thirty-year-old clergyman John Harvard dies, leaving £800 and his library of around 400 volumes to a new school in Cambridge, Massachusetts.
1814: Lawyer Francis Scott Key writes the words to a poem he calls “The Defense of Fort McHenry,” but which will later become known as the “Star Spangled Banner.”
1836: Lawyer and former U.S. Vice President Aaron Burr dies at Port Richmond, New York.
1901: Law school dropout Theodore Roosevelt is sworn in as President of the United States at the Ansley Wilcox House in Buffalo, New York.
1960: Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela form the Organization of Petroleum Exporting Countries..
1998: WorldCom and MCI complete their $37 billion merger.
2003: Swedish voters reject adoption of the Euro.
Tuesday, September 13, 2005
Gilo, David and Porat, Ariel, "The Hidden Roles of Boilerplate in Standard Form Contracts " . Michigan Law Review, Vol. 104, March 2006 http://ssrn.com/abstract=798308
This article focuses on other benefits the supplier can derive from the transaction costs that boilerplate language creates, most of which have been ignored by courts and legal writers. As the Article demonstrates, transaction costs generated through boilerplate language could have different impacts on different types of consumers, enabling, inter alia, screening out unwanted consumers, price discrimination, cartel stabilization and the studying of consumer preferences. On other occasions, the transaction costs are imposed in order to hide benefits granted to certain consumers. On yet other occasions the transaction costs are self-imposed by the supplier, in order to signal to buyers or to his competitors that negotiation of the contract would be very costly. There are also cases in which boilerplate language does create asymmetry of information between the supplier and his consumers, as in the classic discussions of boilerplate language, but the asymmetry is used as a cartel-facilitating tool, an anticompetitive signaling device, or a tool for creating the appearance of a fair contract, rather than to merely extract surplus from uninformed consumers.
One of this Article's conclusions is that the law's concern should not be only with harsh boilerplate terms, but also with beneficial boilerplate terms. At times, beneficial boilerplate terms extract surplus from uninformed consumers, exactly as harsh terms do, but by using a different technique. Another conclusion of the Article is that boilerplate language should be carefully reviewed even when no particular terms are hidden in it, neither beneficial nor harsh, because the boilerplate provisions could be used just for the sake of artificially complicating the transaction.
The Article also inquires whether the various uses of boilerplate language are desirable from a social perspective, and if not, it asks how the law should discourage them. The Article shows that the lack of awareness of the various uses of boilerplate language on the part of courts, legislatures and administrative agencies has resulted in a lack of sufficient legal tools to handle these uses. One of the Article's goals is to develop such tools.
How (or whether) disparities in bargaining power ought to be taken into account in Contract law is one of the great recurring themes in Contract scholarship. Daniel Barnhizer (Michigan State) weighs in with an ambitious and interesting take, Bargaining Power in Contract Theory. Here's the abstract:
This Article analyzes the role that legal conceptions of bargaining power play in defining the jurisprudence of contract law. Contract law cannot ignore bargaining power asymmetries. Unchecked power imbalances in the bargaining context soon become indistinguishable from naked coercion, and at some level the imbalance undermines both the consent of the weaker party and the legitimacy of the resulting bargain. The debate over the role of the legal doctrine of inequality of bargaining power and subdoctrines such as unconscionability and duress has largely focused on whether and how the state should intervene in individual private agreements to correct perceived power disparities. While bargaining power disparities may be difficult to analyze in these individual cases, legal conceptions of bargaining power may also be useful in defining the boundaries of contract law. Specifically, where both parties to a transaction possess some ability to affect the outcome of that transaction, they may take advantage of the relatively flexible and unregulated regime of private contract. In other types of transactions - such as labor agreements, consumer credit contracts and intrafamily gifts - one or both parties lack legally cognizable bargaining power and the resulting transaction is subject to relatively greater degrees of public ordering. At this macro level, bargaining power provides both a positive and normative explanation for why some promises are enforceable in contract and others are regulated under relatively more intrusive public orderings.
Laura Spitz has joined the law faculty at the University of Colorado as an Associate Professor. Before that, Professor Spitz studied law at Cornell Law School, the European University Institute, and the University of British Columbia; practiced law in Vancouver, B.C.; taught Commercial Transactions at the University of New Mexico; and clerked at the Supreme Court of British Columbia. And before that, she drove a forklift and unloaded fishing boats just off the coast of Alaska. And played field hockey for the Canadian equivalent of the NCAA Div. 1 champions.
"I'm well known for my Canadian Imperialism," she says. Asked repeatedly during the interview process why she was looking for teaching positions in the U.S. rather than returning home to Canada to teach (remember it was election season here) her standard response was that the world needed more Canada, and the key was for Canadians to spread out. "Sort of take over the U.S. while it isn't looking." At school, she says she's frequently referred to as "the" Canadian.
A recipient of several fellowships, including a John M. Olin Foundation Fellowship, a British Columbia Law Foundation Graduate Fellowship and a Gender, Sexuality & Family Project Scholarship, Professor Spitz’s research focuses on the effects of transnational economic integration and trade liberalization on national regulation and norm harmonization in North America. Maybe she can work in the Alaskan fishing industry and field hockey as well.
This week, the New York Court of Appeals will hear oral argument in Rodrigues v. N&S Building Contractors, Inc. In this case, an employee of a subcontractor (Caldas) was injured at a construction site. The employee sued the general contractor (N&S) who, in turn, commenced a third-party action against the subcontractor for indemnification. The subcontractor and general contractor had an "Insurance, Indemnification and Safety Agreement" providing that:
To the fullest extent permitted by law, Subcontractor shall indemnify and hold harmless [the general contractor] and Owner against any claims, damages, losses, and expenses, including legal fees, arising out of or resulting from performances of subcontracted work to the extent caused in whole or in part by the Subcontractor or anyone directly or indirectly employed by the Subcontractor.
Section 11 of New York Workers’ Compensation Law precludes third-party indemnification against employers unless (1) the employee sustains a "grave injury" or (2) the claim is "based upon a provision in a written contract entered into prior to the accident or occurrence by which the employer had expressly agreed to contribution to or indemnification of the claimant or person asserting the cause of action for the type of loss suffered." The contractor argued that the indemnification agreement between the parties came within the second exception.
The trial court dismissed the indemnification claim. The appellate court affirmed, holding that the agreement did not specify the types of losses or locations to be covered. The court noted that the Workers’ Compensation Law was intended to limit employers’ exposure to third-party liability and "[w]hen a party is under no legal duty to indemnify, a contract assuming that obligation must be strictly construed to avoid reading into it a duty which the parties did not intend to be assumed. . . ."
[Meredith R. Miller]