August 19, 2006
Dispute Over Elvis Home in Court
Elvis Presley's first house in Memphis and two prominent men from the 1970s are involved in an interesting contract dispute going to federal court there. Psychic Uri Geller -- famous in those days for bending spoons with his mind on national television -- was the high bidder ($905,100 ) for the three-bedroom ranch-style house at an auction.
But when Geller and his partner declined to go along with a clause allowing the current owners 60 days to move out, they sold it instead to Mike Curb. In the 1960s Curb created the clean-cut "Mike Curb Congregation" singers ("The Candy Man"), then took over MGM Records at age 25, and later served as California's lieutenant governor under Jerry Brown. Curb paid $1 million for the house. Geller is suing for breach of contract. (Image: Geller bending a spoon, GNU License, Wikipedia.)
The house, at 1034 Audubon Drive in Memphis, is a few blocks from the University of Memphis campus.
Conditional Waivers in Employment
Much of the relationship between employer and employee is governed by status-based regulation, which cannot be varied by agreement. But some is left to mostly unfettered contract law. Courts will not enforce an employee's agreement to, for example, not join a union, but they will enforce an agreement on how long the employment will last.
There is a category of employment terms that fall in the middle of this spectrum -- where employee status-based protections collide with contract law. In such areas as employee non-compete covenants and employee arbitration clauses, free contract has come into conflict with policies designed to protect workers.
In a new paper, Between Rights and Contract: Arbitration Agreements and Non-Compete Covenants as a Hybrid Form of Employment Law, NYU's Cynthia Estlund takes a look at these areas and argues for a middle ground of "conditional waivability." Here's the abstract:
The employment relationship is governed largely by contract, but with a heavy overlay of rights: minimum terms and individual rights that are established by external law and typically non-waivable. But some terms of employment are governed neither by ordinary contract nor by ordinary rights, nor even by ordinary waivable rights. Consider the two most controversial instruments in employment law today: non-compete covenants (NCCs) and mandatory arbitration agreements (MAAs). Both take the form of written contracts that waive important employee rights (the right to compete post-employment, the right to litigate future claims); both are subject to substantive criteria of validity that are set by external law. Both bodies of law may be usefully described as recognizing conditionally waivable rights.
This paper aims first to show structural parallels between NCCs and MAAs that place them at a distinct intermediate point along the spectrum between non-waivable rights and ordinary contract that I call conditional waivability. Second, it seeks to uncover a common logic underlying the law's choice of this particular hybrid of rights and contract. The linchpin of that common logic lies in the threat that unregulated waiver of one right (the right to compete or to litigate future claims) poses to an adjacent employee right that the law deems non-waivable. Third, the paper deploys that underlying logic to offer a critical assessment of the law governing NCCs and MAAs. Finally, the paper tentatively explores the broader potential usefulness of conditional waivability as a way of regulating some terms of employment. The intriguing potential of conditional waivability lies in its injection of some of the virtues of contract -- especially flexibility and variability in the face of widely divergent and changing circumstances -- into the pursuit of public goals and the realization of rights in the workplace.
August 18, 2006
For some reason, you almost never see the words "exciting" and "boilerplate" in the same sentence. Robert Ahdieh (Emory) wants to remedy that situation, in a new paper, The Strategy of Boilerplate, forthcoming in the Michigan Law Review. It's a big job, but he's the guy to do it. Here's the abstract:
Boilerplate can be exciting. It is this, perhaps hard-to-swallow, proposition that the present analysis attempts to convey. Particularly in invoking the work of Thomas Schelling on the role of focal points in coordination games, it offers what can be characterized as a "strategic" theory of boilerplate, in which boilerplate plays an active, even aggressive, role.
Contrary to the relatively inert quality of boilerplate implied by conventional treatments in the legal literature, boilerplate may serve essential signaling and coordination functions in contract bargaining. In appropriate circumstances, its proposed usage may be a valuable weapon in the arsenal of a bargaining party, helping it to secure negotiating advantage and success over its counterparty.
Best Firms to Work For: 2007
The good folks at Vault, whose mission is to do for law firms what U.S. News has done for law schools, have released their rankings of the Most Prestigious Law Firms for 2007. This year's survey is sensibly based on responses from 15,000 associates at big firms, who are the ones who keep up with prestige changes on a regular basis.
Especially interesting for aspiring associates who want prestige and cutting-edge business work, but also want to be treated like a human being, four of the most prestigious firms are also ranked among the top 20 in the associates' survey for quality of life. Using our own proprietary "Prestige/Quality Index" ranking methodology, which involves careful adding together the rankings in each category and then dividing by two, we at ContractsProf have ranked the Four Most Desirable Law Firms for 2007:
1 9.5 Debevoise & Plimpton LLP, New York
2. 10.0 Latham & Watkins LLP, Los Angeles
3 10.5 Davis, Polk & Wardwell, New York
4 13.5 Weil, Gotshal & Manges, New York
When you apply to these firms, please tell them that you heard about them on ContractsProf. (Images: Happy associates at Latham, left, and Davis Polk, right.)
August 17, 2006
As my five-year-old, young Williston Langdell ("Will") Snyder (left), bravely went off to his first day of kindergarten yesterday, he was required to bring in a signed agreement among himself, his parents, and his teacher. Given the fact that I'm also a party, I was reluctant to give him legal advice, so I told him the best thing to do was to sign it without reading it, which is good because he probably couldn't, anyway. Here it is:
COLLEGE STATION INDEPENDENT SCHOOL DISTRICT
College Hills Elementary School
Student, Parents/Guardians and Teacher School Compact
As a STUDENT at College Hills Elementary School, I will take responsibility for my learning:
I will be proud of College Hills Elementary School, have respect for everyone there, and follow the school rules along with the Skills of Success (S.O.S.).
I will be responsible for my own behavior and choices.
I will put forth my best effort and attitude at all times.
I will remember to take home my homework and any notes for my family.
I will share at least (3) important things happening at school each day with my family.
[Child's signature] [Date]
As a PARENT/GUARDIAN of a student at College Hills Elementary School, I will take responsibility for his/her learning:
I will seek opportunities to help with my child's education and to praise him/her each day.
I will listen to, talk with, and be aware of my child's friends, concerns, and behaviors.
I will work and communicate with my child's teacher, as needed.
I will control TV viewing and video/computer games.
I will establish a designated time and place to read to and work with my child each day.
I will have my child rested, prepared, and on time to learn each day.
As a TEACHER at College Hills Elementary School, I will take responsibility for my students' learning:
I will listen to and respect your child and you at all times.
I will provide an environment conducive to learning.
I will keep you, the parent/guardian, informed as to your child's progress at least every three weeks (if grades are 75 or below) and at the end of every six weeks.
I will provide the instruction necessary to assist your child in acquiring the skills for the successful completion of the current grade level.
It's in quadruplicate -- white copy for the teacher, pink for the office, yellow for the child, and goldenrod for the parents.
There are obvious questions here. Is Will bound? He's a minor, but the thing is also signed by his parent, me. I'm signing on my own behalf, but don't I now have a possible conflict of interest? If he is bound, is he in breach of the contract if he decides he is not, in fact, proud of College Hills elementary school? Suppose he's just doing that in bad faith? If three important things don't actually happen to him in school, so that he can't share them with his family, does he have an impossibility excuse? Does "family" mean he has to share them will all of us, including his older brother Llewellyn, who will hold his hands over his ears? I suppose a child is never too young to start learning contract law.
Contracts Prof Weekly Spotlight: Angelique EagleWoman (Wambdi WasteWin)
J.D., University of
Angelique EagleWoman has joined the Hamline University Law faculty this August. Her teaching areas include Contracts I, Contracts II and Native American Law in 2006-2007.
I grew up both on the reservation and off, between
During my preteen years, my father often gave me political
manifestos to read. I read “Custer Died
for Your Sins,” “The Trail of Broken Treaties,” and “Bury My Heart at
Through my high school years, I attended both public schools
and a tribal school. I applied to
Stanford and was routed to a postgraduate year at the preparatory school,
Northfield Mount Hermon in
From there, I took several years off to return to my home
reservation and soon moved to a nearby reservation, the Spirit Lake Reservation
In the midst of the Indian mascot controversy, I spent a
tense three years at the University of North Dakota School of Law. During the summers, I clerked at the
prestigious Indian law firm of Sonosky, Chambers, Sachse & Endreson in
After a year and a half with Upward Bound, I reentered legal practice at the request of my Tribe, the Sisseton-Wahpeton Dakota Oyate. Representing my Tribe and working as an associate at several Indian law firms over the years, I worked on various contracts involving Tribal Nations, state governments and agencies, federal governmental agencies, and private tribal clients conducting businesses. After several years, I followed the old dream to the University of Tulsa College of Law and attained my L.L.M. in American Indian and Indigenous Studies with Honors.
I am pleased to be a new member of the Hamline Law faculty and teaching a full year of Contracts Law to first year law students. The law of contracts is a fundamental building block for lawyers working in all areas of economic development, for those who will represent clients seeking to enter into commercial relationships with Tribal Nations, and for those who will be representing Tribal Nations and other tribal business clients.
[To have your profile featured in the weekly ContractsProf Spotlight or recommend someone to be featured, please email Meredith Miller]
Liability for Defective Contracts
Years ago, contract law played an important role in the field of products liability. Not any more, of course, after the expansion of strict tort liability for defective products. Today, breach of warranty for personal injuries is the last resort of a lawyer who blew the tort statute of limitations.
Might the same thing happen with other kinds of contracts? In a new paper, A Products Liability Theory for the Judicial Regulation of Insurance Policies, forthcoming in the William and Mary Law Review, Daniel Schwarz (Harvard) argues that at least in the realm of insurance contracts, tort law principles of "defective products," rather than contract doctrines like "reasonable expectations," should govern insurance disputes. Here's the abstract:
Many insurance law commentators believe that judges should "regulate" the substance of insurance policies by refusing to enforce insurance policy terms that are exploitive or otherwise unfair. The most common guide for the judicial regulation of insurance policies is the "reasonable expectations doctrine," which requires courts to disregard coverage restrictions that are beyond insureds' reasonable expectations unless the insurer specifically informed the insured about the restriction at the time of purchase. This Article argues that while there is a potential role for the judiciary to play in policing insurance policy terms, that role should not be defined by reference to consumers' reasonable expectations. Instead, drawing on the parallels between insurance policies and ordinary consumer products, this Article advances a products liability framework for understanding how and why courts should regulate insurance policies. It proposes that just as firms that make defective products must pay for the resulting injuries, insurers that issue "defective insurance policies" should have to provide coverage to insureds. The Article argues that the usefulness of the analogy to products liability law goes well beyond understanding the normative basis for the judicial regulation of insurance policies. Products liability law offers important insights into how courts can efficiently correct failures in insurance markets by encouraging effective disclosure to consumers and appropriately setting penalties so that insurers take an optimal amount of care in drafting policy terms.
August 16, 2006
Katrina Storm Surge is "Flood," Not "Wind"
In the big contract law news today, Mississippi senior federal judge L. T. Senter, Jr., has ruled that the insurance policies issued by Nationwide Mutual Insurance do not cover losses caused by wind-driven water, or "storm surge." It's a major ruling from Judge Senter, who is presiding over virtually all of the Mississippi insurance claims related to Hurricane Katrina.
The case, Leonard v. Nationwide Mutual Insurance Co., involved damage to a house in Pascagoula, Mississippi. The standard language in the homeowners' policy excluded flood damages but did include damages from wind. Flood insurance must ordinarily be purchased separately from the National Flood Insurance Program, but the plaintiffs (like many other residents of Pascagoula) had not bought flood insurance. Nationwide's policy read:
We do not cover loss to any property resulting directly or indirectly from any of the following. Such a loss is excluded even if another peril or event contributed concurrently or in any sequence to cause the loss. . . . (b) Water or damage caused by water-borne material. Loss resulting from water or water-borne material damage described below is not covered even if other perils contributed, directly or indirectly to cause the loss. Water and water-borne material damage means: . . . flood, surface water, waves, tidal waves, overflow of a body of water, spray from these, whether or not driven by wind.
The plaintiffs argued that this language was ambiguous, and that since the storm surge that engulfed Pascagoula, Mississippi, was caused by wind, all damages to their home were covered. Senter ruled that the clause was ambiguous, but not that ambiguous -- it plainly excluded wind-driven water.
Commentary on the Leonard decision from the insurers' point of view, can be found at at Insurance Coverage Blog, here and here. (Top left: Storm surge damage in Pascagoula, courtesy Wikipedia GNU License.)
The Billboard in Van Wagner
For those of you who teach the specific performance case of Van Wagner Advertising v. S & M Enterprises. 492 N.E.2d 756 (N.Y. 1986), Michael Greenfield (Wash U) has a couple of pictures of the building and the billboard at issue.
The case involved a billboard on the side of a building in a very desirable location, "smack-dab in your face" as you enter Manhattan from the Mid-Town Tunnel. When the building was sold, the new owner terminated the billboard lease, and the lessee sued for specific performance. Although the trial court found that this particular billboard was unique, Judge Kaye and the New York Court of Appeals nevertheless found that specific performance was unavailable.
The web site for Van Wagner Outdoor advertising is here.
One of the hottest topics in contract law these days is the rise of new forms of mass-market contracts. These include "shrinkwrap" (contract terms included inside a closed box), "clickwrap" (those screens that require you to click "I agree" to various terms), and "browsewrap" (terms put on a web site that you don't actually have to click to agree with).
These practices are controversial, with proponents pointing out that they streamline transactions and allow businesses to better control their liabilities, while opponents point out the dangers of oppressive terms that can be hidden from the buyer.
We have faced a situation like this before, decades ago. As business-to-business commerce became more common in the middle of the 20th Century, companies began putting standard contract terms on the back of their purchase orders and shipment invoices. When each side to a contract used such a form, courts had to confront the question of whose form controlled. After unsuccessful judicial experimentation with a variety of rules, the Uniform Commercial Code resolved this "battle of the forms" by adopting a compromise under which if the terms conflicted, neither party's terms became part of the contract unless the party demonstrated its willingness to forego the deal over it. Rather, the default rules of contract law applied where the parties' standard forms disagreed, but where neither party in fact insisted on those terms.
Lack of Due Diligence or "Act of God"?
The Alaskan Prudhoe Bay oil field -- the biggest oil field
Exxon Mobil and ConocoPhillips each have a roughly 36% interest in the oil field; minority owner BP has 26% share and operating and maintenance responsibilities. Today's New York Times has an AP article reporting that Exxon Mobil and ConocoPhillips are apparently attempting to invoke a force majeure clause to be excused from any responsibilities to oversee BP’s maintenance of the oil field. The companies apparently argue that they were surprised to hear the pipeline was corroded and the state of the pipes was beyond their control.
Engineering Professor Michael J. Economides of the
Yes, they had no choice but to invoke force majeure, but they depend on BP's due diligence, which in my estimation has been questionable. . . . I don't like the statement that BP was surprised by the corrosion[.] A company that size should have first-rate engineers and managers. We don't like surprises in my business, and good due diligence precludes all of these things.
However, J. Lanier Yeates, an oil and gas attorney in Houston, told the AP that energy companies typically account for problems like corrosion in their contracts with clients, suppliers and royalty owners (here, the State of Alaska). He stated that the force majeure clauses in these contracts are designed to cast a wide net and often use a very general set of criteria. He commented:
I expect the provisions in the contracts that apply here are broad enough to include these kinds of problems from the wear and tear and corrosions and deterioration of the pipes. . . . I would be greatly surprised if there weren't contractual provisions that relate to damages to the pipeline.
Professor Patrick Martin of LSU Law
There are often questions raised as to whether one could have taken steps to avoid circumstances they claim to be force majeure. . . . But my guess is, you won't see it out of this. . . . I don't think ConocoPhillips or Exxon Mobil could be tagged with breach of contract if the oil is not available to them.
Even assuming a broadly cast force majeure clause, should ConocoPhillips and Exxon Mobil be excused from liability because the corrosion was beyond their control or, rather, is this a serious failure of diligence for which they should be liable?
[Meredith R. Miller]
August 15, 2006
Back to School Shopping
Have you thought about what you will wear for the first day of classes? Here's a suggestion:
[Meredith R. Miller]
August 14, 2006
Weekly Top 10
Three new papers make our Top Ten list this week. Following are the top 10 most-downloaded recent papers from the SSRN Journal of Contract and Commercial Law for the 60 days ending August 13, 2006. (Last week's ranking in parentheses.)
2 (4) The Strategy of Boilerplate, Robert B. Ahdieh (Emory).
3 (5) Rise of the Financial Advisers: An Empirical Study of the Division of Professional Fees in Large Bankruptcies, Lynn M. LoPucki & Joseph W. Doherty (UCLA).
4 (6) From 'Federalization' to 'Mixed Governance' in Corporate Law: A Defense of Sarbanes-Oxley, Robert B. Ahdieh (Emory).
5 (7) A Coasean Analysis of Marketing, Eric Goldman (Marquette).
7 (8) Bankruptcy, Creditor Protection and Debt Contracts, Stefano Rossi & Nicola Gennaioli (Stockholm).
6 (9) The Demand for Immutable Contracts: Another Look at the Law and Economics of Contract Modifications, Kevin E. Davis (NYU).
8 (-) Finding Nemo: Rediscovering the Virtues of Negotiability in the Wake of Enron, Adam Levitin (3rd Circuit).
9 (-) Juries, Judges, and Punitive Damages: Empirical Analyses Using the Civil Justice Survey of State Courts 1992, 1996, and 2001 Data, Michael Heise (Cornell), et al.
10 (-) Between Rights and Contract: Arbitration Agreements and Non-Compete Covenants as a Hybrid Form of Employment Law, Cynthia L. Estlund (NYU).
E-Mail and the Statute of Frauds
Does an e-mail with the sender’s name and address in the header -- inserted by the Internet service provider -- count as a “signed” writing for purposes of the statute of frauds relating to guarantees?
No, according to a recent U.K. decision reported by Ruth Pedley of London’s CMS Cameron McKenna LLP.
When Lawyers Fall Out
A Texas toxic tort lawyer (say that three times fast) who sold his interest in the firm he founded in 2002 is suing for breach of contract, alleging that the buyer and other conspired to do him out of the money he should have got going forward. The Texas Lawyer has the story.
Enforcing No-Modification Clauses
Sophisticated parties frequently agree to provisions in their agreements that prevent future modifications. Courts just as frequently strike these down on one or another ground. The classic argument in favor of such clauses is that allowing parties to agree to restrict their own future contractual power enhances their own contracting power. More recently, economists have argued that there may be good economic reasons to enforce such clauses.
The latter argument is the target of Kevin Davis (NYU) in a new paper, The Demand for Immutable Contracts: Another Look at the Law and Economics of Contract Modifications, forthcoming in the NYU Law Review. Here's the abstract:
One of the most challenging questions in contract law is whether parties should be free to create contracts that limit their own freedom of contract and thereby, in effect, contract over the scope of freedom of contract itself. So far the debate has revolved around the enforceability of "anti-modification clauses," which state that subsequent modifications to the contract in which they are contained will be unenforceable. The courts appear reluctant to enforce anti-modification clauses. Some prominent law and economics scholars have argued that in certain circumstances parties would benefit from being able to make their contracts immutable and that courts therefore should enforce anti-modification clauses.
This Article advances several claims that contradict the underlying premises of this argument. It begins by setting out a variety of reasons why the demand for immutable contracts, or at least those created by adopting anti-modification clauses, might be low. The central claim is that although anti-modification clauses may be unenforceable, contracting parties can duplicate their economic effects by using a technique labeled the "representative trustee technique." The essence of this technique is that the parties agree to turn over the benefits of any modification to a trust with a large number of beneficiaries. The conceptual building blocks of the representative trustee technique are all familiar, yet there is no indication of its use in practice. If valid, these observations are inconsistent with the idea that there is a significant demand for enforceable anti-modification clauses. It is, however, possible that, contrary to the primary argument in this Article, contracting parties are unaware of the possibility of adopting the representative trustee technique. In that case, the analysis here is still relevant because it suggests that once the technique is publicized it will satisfy at least some of the demand for enforceable anti-modification clauses. In any case, there seems to be no compelling reason to heed calls to enforce anti-modification clauses.
August 13, 2006
Can I See Your License, Ma'am?
A software end user license agreement (EULA) trumps copyright doctrines on copying, the Los Angeles County Sheriff's Department has learned in a recent dispute over jail software. In the case, the cops were found making more copies of some software than they had licenses for.
They argued, unsuccessfully, that the copies were proper under copyright doctrine, but they lost because the EULA apparently prohibited them. The InfoWorld site gives some details and a critical commentary on the decision.