March 5, 2005
News in brief
Former employees of the eBay online auction service are suing for breach of contract, claiming that the company sold a subsidiary and canceled stock options for the division's workers.
Physicians in Ontario have tentatively agreed to a new contract, retroactive to last year, that will net them an additional $2.4 billion over four years.
Euopre's ENI oil company has won a $1.4 billion contract to produce 24,400 tons of propane and butane a day for Abu Dhabi Gas Industries, Ltd.
Two long-time soccer rivals are headed for even more acrimony, as Juventus apparently plans to lure away Roma star Antonio Cassano with five year deal (worth £3 million a year), a package that Roma probably cannot match.
Speaking of Juventus, star Adrian Mutu will face a suit by his old team Chelsea, which claims he owes them £8 million for failing a cocaine test.
Britain's Tories are challenging the selection of America's EDS for a massive contract to re-do the Ministry of Defence's IT systems.
Efficient breach in China
The doctrine of "efficient breach" is one rooted in Justice Holmes's old notion that a contract is nothing more than an option, where the promisor may elect to perform or pay. That idea is not shared in some other legal systems. In a new article, A Case Study of Legal Transplant: The Possibility of Efficient Breach in China, Toronto's Ni Zhu takes a look at how one particular doctrine might be adapted in a very different regime. The abstract:
This article hypothetically places the theory of efficient breach in the context of Chinese society. Assuming that the Chinese lawmakers accept the idea of efficient breach and are willing to change the laws accordingly to carry out this idea, the article examines factors that may influence the viability of efficient breach as a legal transplant in China. It seeks to particularize the relevant context in which the theory of efficient breach as a legal transplant is embedded. Elements of the relevant context include: the social attitude on litigation, the availability of information, the competence of the judiciary, and the traits of judicial practice in granting contractual remedies. It shows that even if lawmakers are willing to make every change in rules to suite the theory of efficient breach, whether efficient breach-or-perform decisions can be made in practice and whether efficiency can be achieved through breach of contract depend on many factors external to the theory and legal rules designed accordingly.
Today in history--March 5
1558: Spaniard Francisco Fernandez lays the foundation for one of the New World's biggest industries by introducing tobacco to Europe.
1836: Using his new interchangeable-parts process, Samuel Colt makes the first production revolver.
1868: Englishman C.H. Gould patents a new device for fastening sheets of paper together, the stapler.
1872: George Westinghouse patents the first railroad air brake, drastically improving safety and allowing for faster trains.
1893: Water entrepreneur Emmett J. Culligan ("Hey, Culligan man!") is born in Yankton, South Dakota.
1933: President Franklin D. Roosevelt orders all U.S. banks closed and freezing all commercial transactions.
1944: Louis Jordan is on the music charts with Pete Clark's Ration Blues:
I like to wake up in the morning with my jelly by my side
Since rationing started baby, you just take your stuff and hide
They reduced my meat and sugar and rubber's disappearing fast
You can't ride no more with poppa, 'cause Uncle Sam wants my gas
I got the ration blues, blue as I can be
Oh me, I've got those ration blues
1984: Quarterback Steve Young and the Los Angeles Express of the United States Football League sign one of the most lucrative sports deals to date. It's also one of the most complicated, paying out $40 million over 43 years--or about 42 years longer than the team and the league will last.
March 4, 2005
News in brief
Singer/actress Cher and members of her ex-husband Sonny Bono’s family are suing Chappell/Warner Music for breach of contract, claiming that they haven’t been paid some $250,000 in royalties.
The University of Wisconsin-Madison is set to renew a contract with Adidas for a new six-year term, under which the Badgers will get as much as $400,000 in cash and $950,000 in goods a year.
Physicians in Italy are staging a one-day walkout—the fourth work stoppage in little over a year—to protest their continuing lack of a contract with the government.
Japan’s Midrex Technologies lands a $267 million contract to build an iron-ore plant in Qatar.
Facing an 18-fold increase in plastic surgery, Germany is pondering advertising restrictions on surgeons to prevent the common "before" and "after" ads.
Middlemen are ubiquitous in nearly every economy above the level of hunter-gatherer. One of their biggest functions has been information: They invest in (and profit by) developing information about buyers and sellers that it would not be profitable for buyers and sellers to develop themselves.
By increasing information and decreasing search costs, the information age has changed that function. Just how, and how much, will be the subject of a conference at the Michigan State University College of Law on April 8-9, 2005. It’s called W(h)ither the Middleman: The Role and Future of Intermediaries in the Information Age, and there’s a pretty formidable lineup of speakers on nearly every aspect of the issue. The conference announcement is here.
Punies aren't puny
In a very recent case, Willow Inn Inc. v. Public Service Mutual Insurance Co., the U.S. Court of Appeals for the Third Circuit affirmed a punitive damages verdict that was 75 times actual damages in a bad-faith insurance claim. In a client advisory, lawyer and insurance consultant Barry Zalma takes a look at the case and its implications for insurers.
Oral change orders are too indefinite to enforce
A homebuilder who put a clause in a contract requiring all change orders to be in writing could nevertheless recover for oral change orders because the clause was orally waived, according to the Tennessee Court of Appeals, but he went on to lose because the changes and the allagedly agreed upon amounts were not certain enough to be enforced.
Based upon our careful analysis of the evidence with respect to each of the matters for which Mr. James seeks additional payment, we are compelled to the conclusion that there was not "a meeting of the minds of the parties in mutual assent to the terms" at issue. Our reasons for this conclusion, as set forth above, are varied. However, with respect to all of the items listed, we find that the parties "have not expressly or implicitly agreed upon a reasonable price nor have they agreed upon a practicable method of determination of price and, accordingly we hold that any agreement Mr. James alleges the parties had that they would pay for these charges over and above the original contract price of $360,000.00 is unenforceable. We further hold that by refusing to sell the Vatts the house unless they pay the asserted additional charges Mr. James materially breached the contract which provides that he sell them the house for $360,000.00. Accordingly, the Vatts are entitled to a refund of the $5,000.00 earnest money deposit which currently remains in escrow. The Vatts are further awarded reasonable attorney’s fees and court costs pursuant to . . . the contract . . . .
Vatt v. James, No. E2004-00785-COA-R3-CV (Tenn. Ct. App. Feb. 28, 2005).
Today in history—March 4
1394: The man who will do as much as anyone to break the Muslim monopoly on eastern trade, Prince Henry ("the Navigator") of Portugal, is born.
1665: British and Dutch trade rivalries in North America and West Africa erupt into the Second Anglo-Dutch War.
1681: King Charles II grants a charter to the Quaker leader, William Penn, for the territory that will later become Pennsylvania.
1791: Vermont is admitted to the Union as the 14th state.
1849: According to legend, Senator David Rice Atchison of Missouri becomes President of the United States for one day, between the administrations of James K. Polk and Zachary Taylor.
1881: Dr. John Watson, breakfasting with his new roommate, first learns that Sherlock Holmes’s job is "consulting detective." A letter that day will launch A Study in Scarlet.
1917: Jeannette Rankin (R-Mont.) becomes the first woman to sit in the U.S. House of Representatives.
1944: One of the few CEOs to be sentenced to death for legal violations, Louis Buchalter of Murder, Inc., goes to the electric chair at Sing Sing.
1989: Time, Inc. and Warner Bros. announce plans for the shareholder disaster that will be "Time Warner."
1999: Supreme Court Justice Harry Blackmun (Harvard Law 1932) dies at Arlington, Virginia.
March 3, 2005
Frae bonnie Scotland
The publishers of the new Journal of Private International Law are putting together a big conference March 29-30 at the University of Aberdeen, to launch the new venture. The sessions look a bit light on the commercial aspects of international law, but for those whose interests also run toward more litigation-type issues, there's a good mix of top-notch speakers and eager young postgrads sharing their research.
The conference flyer, with registration materials, is here.
Watching train wrecks
Do you ever run across those cases where you want to scream at the parties, What are you people doing? Couldn't you idiots work this thing out between you?
A recent example of this is a case involving the leaking roof at the Kohl's Department Store in West Paterson, New Jersey, which managed to work its way up to the U.S. Court of Appeals for the Third Circuit. It starts when the roof leaks, and the landlord won't fix it, and the tenant does, and the tenant sues the landlord, and the landlord sues the tenant for damaging the roof, and then the tenant gets an injunction, and then the parties go to mediation, and then they settle, and then they don't settle, and meanwhile nobody tells the guarantor, and then they settle again, and there's a judgment, and then a motion to re-open, and meanwhile the guarantor . . . .
Kohl's Dep't Stores, Inc. v. Levco-Route 46 Associates, L.P., 2005 U.S. App. LEXIS 2889 (3d Cir. Feb. 18, 2005).
Chipping the rough edges off arbitration
The Washington Supreme Court has decided a couple of important cases recently on enforceability of arbitration clauses, Adler v. Fred Lind Manor and Zuver v. Airtouch Communications, Inc., both employment cases. In a recent client alert, Gregory Hendershott of Dorsey & Whitney describes the two decisions, in which the court enforces the clause but strikes down some features that unfairly favor employers on grounds of substantive unconscionability.
Don't say we didn't tell you
A private vocational school with campuses in California, Colorado, Georgia, Illinois, and Texas is being sued by students who claim that their degrees, which cost them as much as $30,000 in tuition, are worthless. Students who earned credits have found that they are not transferable to most other academic institutions. A group of 67 former students is claiming deceptive trade practices and breach of contract.
The college, however, says it never promised them that the credits would be transferable. Its web site mentions three community colleges with which it has "articulation agreements" that will take its credits, but then says:
Westwood College does not guarantee the transferability of its credits to any other other institution unless there is a written Articulation Agreement with that institution. Contact the Director of Education for information on Articulation Agreements.
Transferability of credits is always determined by the receiving institution. It is your responsibility to confirm whether an institution will accept credits from Westwood. It is unlikely that the academic credits you earn at Westwood College will transfer to another school.
News in brief
The Supreme Court rules 9-0 that the federal governmet must pay the Cherokee Nation $8.5 million for breaching its health services contract with the group.
The Chicago Mercantile Exchange has announced plans to launch its first ethanol futures contracts on March 29.
Singapore is putting off its decision on who it will buy 20 new fighter jets (worth about $1 billion) while three bidders battle it out.
Major oil companies are threatening to stop investment in Nigeria if the government goes forward with planned tax changes, saying that it breaches promises made to them.
Dell Computer is nearing completion on a deal to build a new $100 million plant in Forsythe County, North Carolina; it appears to call for government entities to kick in $22 million up front and to give another $16 million or so in tax abatements.
Japan's All Nippon Airways inks a $1 billion deal for aircraft engines with Britain's Rolls Royce.
No suit on spy contract, says Court
In a 9-0 opinion (with a concurrence by Stevens and Ginsburg and a concurrence by Scalia disagreeing with Stevens's concurrence--do these folks have too much time on their hands?) the Chief Justice holds that the prior Civil War-era decision in Totten v. United States bars suits by spies claiming breach of contract when the government reneges.
Today in history—March 3
1820: The U.S. Congress passes the Missouri Compromise, which outlaws slavery in all the territory bought from France north of 36° 30’, except Missouri—a provision that will be struck down in Dred Scott v. Sandford.
1831: George Pullman, who will drop out of school at 14 and later develop the first railroad sleeping car, is born at Brocton, New York.
1845: Florida is admitted to the Union as the 27th state.
1845: On President John Tyler’s last day in office, Congress overrides his veto of a funding bill, the first override in U.S. history.
1847: Alexander Bell (he will later adopt the middle name "Graham") is born at Edinburgh, Scotland. He will become a U.S. citizen in 1888 but will nevertheless be named one of the "100 Greatest Canadians of All Time" by viewers of the CBC.
1891: Congress creates the United States Courts of Appeals.
1923: Henry Luce and his college friend Briton Hadden publish the first issue of a new magazine called Time.
1949: The world’s most famous failed car company, Tucker Corp., goes out of business after having made 58 cars.
1991: The founder of America’s second-oldest franchised business, dance master Arthur Murray Teichman (he dropped the last name in 1917) dies at Honolulu, Hawaii. Trivia question: What's the oldest U.S. franchise business?
March 2, 2005
News in brief
Oscar-winning Lord of the Rings director Peter Jackson is suing New Line Cinema, claiming that it is improperly withholding profits it should have paid him for the films.
It's official: The EDS/Fujitsu/General Dynamics consortium will get the £4 billion contract to re-do the technology systems at Britain's Ministry of Defence.
American baseball executives are shaking their heads over how the Atlanta Braves convinced one of baseball's best young pitchers to agree to a deal worth much less than he would have made elsewhere.
An Indian state-owned company has been awarded the contract to develop Qatar's offshore Najwat Najeman oilfield.
A top Apple Computer executive is suing the company over his firing, saying it was backdated to deny him stock options he would otherwise have received.
Contract manufacturing is on the rise: A new study says it will be a $300 billion industry by 2008.
Living in interesting times
These are interesting times to be a government contractor, what with procurement scandals, the situation in Iraq, and all. Steven Schooner and Christopher Yukins of George Washington offer a good overview of what's going on in a new paper, Emerging Policy and Practice Issues. Here's the abstract:
This paper, presented at the West Government Contracts Year in Review Conference (covering 2004), attempts to identify the key trends and issues for 2005. The paper suggests that two rather unique items merit particular attention: the Darleen Druyun saga and the plight of contractors working in Iraq. Both frame compliance issues in stark relief. At the same time, we address what we perceive as the far more vexing issue that permeates federal procurement today: the excessive reliance upon, and corresponding misuse of, task-order contracting. We also discuss procurement spending trends (and the inevitable belt-tightening that must follow); contract-related litigation trends; rewarding excellence in public procurement; and lessons learned from the European Union's procurement reform efforts.
When a sale is not a sale
When a sale is really a "sale" is sometimes an important question in commercial law, but it may also have some importance in the field of competition regulation, particularly when a vendor says its goods are "on sale." Canada has regulations governing what it means to offer a "sale" price, and Lori A. Cornwall and Mark C. Katz of Davies Ward Phillips & Vineberg have a review of some recent litigation on the topic.
Court confirms $8.6 million judgment against Williams
The opinion in the Miami Dolphins' breach of contract action against former star running back Errick "Ricky" Williams is now available. In the case, an arbitrator (appointed under the collective bargaining agreement with the players) required Williams, who quit football before the end of his contract, to repay some $8.6 million to the Dolphins.
Williams subsequently challenged the arbitrator's decision, claiming that the contract provisions were not liquidated damages provisions but rather were unenforceable penalties. Judge James Cohn, however, held that while the provisions might be a penalty, the arbitrator was within the scope of his discretion in concluding that they were not.
Miami Dolphins, Ltd. v. Williams, No. 04-61422-CIV-COHN, 2005 U.S. Dist. LEXIS 2086 (S.D. Feb. 15, 2005).
Faculty governance: Oxymoron or just a bad idea?
This week’s discussion on the Becker-Posner Blog isn’t contracts, but faculty governance. Some of our colleagues, of course, we wouldn't trust to manage a lemonade stand, so why, wonders Judge Posner, should they be running a a multi-billion dollar university? Becker has a response.