October 26, 2006
Contracts Prof Weekly Spotlight: Jamie Fox
Jamie Fox is a Professor of Law at Stetson University College of Law in Gulfport, Florida.
I have been at Stetson since 2000, before which I taught as a visitor at Mercer University Law School. After law school in Ann Arbor, I clerked for Judge Phyllis Kravitch on the Eleventh Circuit and worked at Covington & Burling in Washington, D.C., where, among other things, I had the pleasure of serving as a temporary attorney at Neighborhood Legal Services. I am also currently President of the Board for Gulfcoast Legal Services.
I write and teach in the areas of American legal history, contracts, and poverty law. I have recently written articles on the Reconstruction and Jim Crow eras, and am currently exploring the intersection of mid-nineteenth century contract law, contract ideology, and the implementation of the Fourteenth Amendment through the Freedmen's Bureau. I am also interested in the connections between poverty law and contract, particularly under the present regime of responsibilities-oriented welfare programs. When I am not writing or teaching, I spend most of my time with my wife, Maria, and our three children, Nicholas (8), Luke (6), and Grace (2). And, I have to say,raising children keeps teaching me surprising lessons about legal formalism, norms, interpretation, and excuse that weirdly affect my thinking about contract law. In whatever time that remains I enjoy reading even more about history and theory or watching grainy documentaries (my wife, a literature scholar and fiction fanatic, finds this deeply odd). I also enjoy college basketball (as a Carolina grad this might more aptly be described as an obsession), cooking (and, yes, eating), and a very occasional game of golf.
October 25, 2006
Yetis, Chickens, and Other Urban Myths
A propos of Meredith's earlier post on urban legends... Did you ever notice how there are some urban legends about law schools and universities that never die? Like the old saw (debunked here) that if your roommate commits suicide, you get a 4.0? Or the one about the professor stuck in the law school during an ice storm, who had to raid the vending machines for sustenance?
Well, when I started teaching contracts three years ago, a colleague at Cumberland told me that he knew of a professor who dressed up in a chicken costume once a year. The costume went with a particular lesson on the interpretation of the term “chicken” in a contract. See Frigaliment Importing Co. v. B.N.S. Int’l Sales Corp., 190 F. Supp. 116 (1960). It’s truly a casebook classic, and Judge Friendly’s opinion begins in high dudgeon by saying “The issue is, what is chicken?” (It just gets better from there…).
Anyway, I thought that this claim about the chicken outfit was just an effort by my colleague to pull my leg. A practical joke that could result in my embarrassment (since he seemed to imply that any contracts teacher worth her salt would of course don a chicken costume). I chalked it up to an urban legend – until I asked the ever fabulous AALS contracts listserve about it. A couple people mentioned names of professors who they thought had dressed up as chickens, but those professors never wrote in to confirm, so I was unwilling to take that as proof. One professor wrote in to say that of course he dressed as a chicken, as opposed to the other days when he dressed as a duck or a swan. Somehow I don’t think he was serious.
But then, the other day, I got independent confirmation from an anonymous source. Two photos. Not an urban legend. The chicken lives!
October 24, 2006
Texas Supreme Court on Consideration and Covenants Not to Compete
This from Workplace Prof Blog:
The Texas Supreme Court last week changed its law about when such noncompetition agreements are supported by adequate consideration. In Sheshunoff Management Services, Inc. v. Kenneth Johnson and Strunk & Associates, No. 03-1050 (Tx. Oct. 20, 2006), the court found that a unilateral promise by the employer may support a covenant not to compete. More specifically, the court held:
In this case we revisit the Court’s 1994 decision in Light v. Centel Cellular Co. and again consider the enforceability of covenants not to compete in the context of at-will employment. The question today is whether an at-will employee who signs a non-compete covenant is bound by that agreement if, at the time the agreement is made, the employer has no corresponding enforceable obligation. Under Light, the answer to that question was always “no.” Today we modify our holding in Light and hold that an at-will employee’s non-compete covenant becomes enforceable when the employer performs the promises it made in exchange for the covenant. In so holding, we disagree with language in Light stating that the Covenants Not to Compete Act requires the agreement containing the covenant to be enforceable the instant the agreement is made.
[Meredith R. Miller]
Up in Smoke
The antecedent of the legend? Possibly a joke about accountants that goes something like this:
"He's the kind of accountant you've got to admire. Last year he deducted eighty cartons of cigarettes from my income tax. Called it loss by fire!"
There is even a song out there about the legend.
[Meredith R. Miller -- h/t Skipp C. Galythly]
Anchoring and The Psychology of Selling
There is an interesting article in the LA Times about the psychology of selling a home. The story goes like this: say you bought your home ten years ago for $250,000. Now you're thinking of selling it. You put it on the market for $600,000. No takers. You reduce the price to $575,000, then to $550,000. An offer finally comes in for $520,000, which you reject. Then, you take the house of the market and wait for "better times" to sell. Apparently, this is common in places where the real estate market was previously much "hotter." Why are homeowners doing this? Is this behavior rational? What is the right price for your house?
There are at least two ways for the seller to look at the situation: (1) $520,000-250,000 = I've more than doubled my money considering what I paid 10 years ago or, alternatively, (2) $600,000 - $520,000 = feels like a sizable loss because I asked for $80,000 more. Which one is the rational view? Perhaps cognitive psychology helps explain the behavior:
Decades of research in decision-making has taught us that people depend a great deal on such anchors, or frames of comparison, in assessing the value of any deal. Unlike expectations, which are consciously held attitudes, people are influenced by anchors without even realizing it. If you ask college students if the average price of a textbook is more or less that $7,000, they look at you like you're crazy and say "less, of course." If you ask other students if the average price of a textbook is more or less than $12, they wonder if you've been asleep for 30 years and say "more, of course." Then ask both groups of students what they think the average price of a textbook actually is, and the first group will give an estimate that is more than twice the second group's. Even though the starting point that you've imposed on each group ($7,000 or $12) is absurd, it nonetheless anchors their subsequent estimate, though they don't realize it.
Is $279 a lot of money to spend on an automatic bread maker? When Williams-Sonoma first marketed these then-novel gadgets more than 20 years ago, no shopper knew what a bread maker ought to cost, and Williams-Sonoma didn't sell a lot of them. Then it introduced a deluxe, $450 model. The company didn't sell many of these either, but sales of the $279 model went through the roof. The deluxe bread maker made the regular one seem like a bargain. Conclusion: We are affected by anchors whether it's rational or not, whether we want to be or not.
And so, when irrational exuberance induces people in hot housing markets to put very high asking prices on their houses, the asking price, and not their original purchase price, will be the anchor for some, and having to come down from that price will hurt. How can $520,000 sting so much when it's actually a huge capital gain? Because another thing we have learned from research on decision-making is that people hate to suffer losses — and they feel far more pain from the loss of a sum of money than they experience pleasure from the gain of the same sum.
* * *
Knowing these quirks in decision-making helps us understand why some people take their houses off the market even when they stand to make a very large profit by selling them. Having been seduced — by real estate agents, by the media, by their neighbors — to set a high anchor, they will feel like losers even when they double their money.
The effects of "anchoring" permeate all of our decisions: political choices, choices whether to sell or hold stocks. This is not the newest of ideas in academic circles, but, as evidenced by the newspaper article, these ideas are becoming part of popular psychology.
[Meredith R. Miller]
Grasso's Compenation: The Contracts Counterclaims
In a 72-page opinion, Justice Ramos of the New York Supreme Court's Commercial Division, denied Richard Grasso's motions to dismiss claims broght against him by the State of New York and granted motions dismissing Mr. Grasso's counterclaims. The full opinion can be found on the Commercial Division's website (Index No. 401620/2004, Motion No. 28). According to press reports, the ruling will require Grasso to repay up to $100 million of a $140 million payment he received in 2003 as compensation for his services as CEO and Chairman of the Board of the New York Stock Exchange.
Grasso brought a counterclaim for breach of contract, alleging that he was entitled to $6.2 million in benefits because the NYSE terminated him without cause in 2003. Justice Ramos dismissed the counterclaim, even assuming that any such claim had not been waived when Grasso voluntarily waived entitlement to benefits beyond the $140 million already paid, on the ground that Grasso's employment agreement provided for termination benefits only upon written notice of termination and no such written notice was provided.
Justice Ramos conceded that the result was harsh:
Though harsh, the Court is compelled to hold that without a written ntoice, no matter the circumstances, Mr. Grasso must fail because a written notice is required by all of the contracts he signed (Ramos Oct. 18 2006 Op. at 18).
Still, he viewed his ruling as compelled by prior precedent and by Section 15-301(4) of New York's General Obligations Law.
Stay tuned, as Grasso plans an appeal.
October 23, 2006
Limerick of the Week
Judge Cardozo seems not to have been a slave of fashion. I wonder what prompted the supersilious tone with which Wood v. Lucy, Lady Duff-Gordon begins. Be that as it may, this is a highly Limerick-worthy case:
The Titanic's wreck, that was rough,
But nothing could sink Lady Duff!
Is now de rigeur
But Wood gets to market her stuff.
Peer Reviewers: Careful What You Say
A peer review is undertaken by a physician's peers. So who reviews the peers? Answer: A jury.
After Dallas's Presbyterian Hospital suspended a physician's privileges after a negative peer review, he sued, alleging (among other things) breach of contract, and claiming that the physicians who reviewed him were in fact competitors. A jury agreed in 2004, socking the physician who led the review with $142 million in damages and nailing two others who participated with $32 million in damages each. It added another $161 million from the hospital for good measure.
The hospital and the physicians appealed, and a judge has now cut the amount to $22.8 million, with a mere $12.8 million coming from the lead physician.
As your mother told you, if you can't say something nice, don't say anything at all.
October 22, 2006
Ono: Lennon Owed More Royalties
Yoko Ono, the late John Lennon's widow, is suing EMI Records for $10 million, claiming that the U.K. label systematically underpaid royalties on Lennon's solo works. A spokesman for EMI says that recording contracts are so complicated that "differences of opinion" about the amounts due to artists are common.
Soccer Star Hit With $6.3 Million Breach: It Could Have Been Worse
It's not clear from the story why, but a Spanish court has held that 23-year-old soccer player Iban Zubiaurre won't have to pay the full $41.4 million required under his contract with the Real Sociedad club, after he signed with its arch-rival with one year left on his contract. Iban Zubiaurre's contract apparently contained the buyout clause in the event he wanted to leave early, but a Spanish court has cut the damages down to $6.3 million.
An interesting feature of the case is that the Basque fullback has been barred from playing soccer until the dispute with his former club is resolved.