September 7, 2007
In the News: September 7
Chinese oil companies have inked two 20-year contracts to buy liquefied natural gas from Australian fields; the $52 billion estimate (about $43 billion U.S.) makes it Australia’s largest export deal ever.
Speaking of China, America’s Fluor Corp. has won a $1 billion contract to provide engineering, design, and construction management services for a new polysilicon plant in Xinyu City.
The former CEO of Pomeroy IT Solutions, fired for unspecified reasons following an internal legal investigation, has sued the company, claiming breach of contract, promissory estoppel, and fraud.
The ex-host of a Catholic TV talk show is suing her co-host (a 94-year-old retired archbishop) and their network for breach of contract for breach of contract, claiming that she was fired because she remarried without getting an annulment in violation of Catholic teaching.
An Iowa jury has awarded a Sioux City businessman $10 million in damages for the breach of a contract to manage a casino. The defendant argued that the deal had never been consummated because the parties had not intended to be bound until the final written agreement was signed.
Romania says it’s planning to sue Britain’s BAE Systems for failing to live up to its half of a contract under which Romania bought two pre-owned British naval vessels for £116 million.
Taxpayers in Queensland are making noise about a $900,000 contract the Brisbane government awarded to a history professor to write a sesquicentennial history of the state; the contract was not put out for bids.
More of Asia’s most successful publicly traded companies are based in India (12) than anywhere else, according Forbes Magazine’s annual Fabulous 50 survey; four of them are IT outsourcing businesses.
An Idaho hospital has been socked with a $63.5 million verdict for backing out of a contract with a radiology firm.
Contract Breach Results in Emotional Distress Damages
It’s common for home buyers to sue sellers for breach of contract or fraud when the home turns out to have an undisclosed problem. But a recent Massachusetts decision gives them an additional cause of action: negligent infliction of emotional distress.
In the case, Pizzochero v. Vergados, Mass. Law. Weekly No. 13-049-07, the buyer suffered headaches caused by sewage in the basement, which presumably came from the septic system. He testified that the odor caused him nausea and headaches for six months. At trial he won on his breach of contract and misrepresentation claims, and the jury also gave him $7,000 for his emotional distress.
The state appellate court held that he could recover the money even though the sole evidence of his physical symptoms was his own testimony.
Damages Availabale for Breach of Arbitration Clause
When a party who has signed an arbitration clause fails to comply and brings suit, the other party generally has a right to go to court to compel arbitration. But does bringing the suit also entitle the other party to damages? That was the question in a recent English Court of Appeal case, Sunrock Aircraft Corporation Limited v Scandinavian Airlines System Denmark-Norway-Sweden,  EWCA Civ 882.
And the answer, said the Court, is yes. Failure to comply with a contractually agreed-upon term is a breach of contract. It would therefore entitle the other party to any damages that would ordinarily flow from any breach of contract. Jeremy Glover of London’s Fenwick Elliott LLP offers a rundown of the case and commentary in Is There A Remedy For Breaching The Dispute Resolution Provisions Of A Contract? (Free registration required.)
September 6, 2007
In the News: September 6
The rich get richer. Singer/actress Jennifer Lopez had her $545,000 breach of contract arbitration award against her ex-husband -- an immigrant waiter who represented himself pro se -- confirmed by a California court.
Some residents of Buffalo are demanding stricter enforcement of the city’s Living Wage Law. The city sets minimum wages that contractors who do business with it must pay workers, but it’s paying less to its own seasonal work force.
Japan Airlines has decided to sell its hangars at Japanese airports and lease them back; it expects to make ¥10 billion, or about $87 million.
The manager of Britain’s Arsenal soccer team has signed a new contract which will pay him about $8 million a year. Soccer must be pretty big over there.
The employment contract of new Qwest Communications CEO Edward Mueller contains a provision that allows his family to use the firm’s corporate jet to commute from company headquarters back to his home in California. His daughter can use the plane to get back and forth to her California high school.
The government of Kazakhstan says that the big Italian oil company Eni is on the verge of breaching its contract to develop the country’s oilfields. Eni says it may take two more years and $80 billion more than the contract price to get the job done.
Film Academy Claims Right to Buy Back Oscar for $10
An interesting restraint-on-alienation case is brewing in Hollywood. Does the winner of an Academy Award (or her heirs) have the right to sell the Oscar statuette, or does the Academy have a contractual right in perpetuity to buy the statuette back for a pittance?
That’s the issue involving heirs of silent film star and film mogul Mary Pickford. Pickford won an Oscar as Best Actress in 1930 for her first speaking part, in Coquette -- that's her with her statuette -- and got a Lifetime Achievement Award in 1975. She was also a co-founder of United Artists. Her heirs want to sell the Oscar statues. Presumably many collectors of film memorabilia would be interested.
But the Academy of Motion Picture Arts & Sciences is suing to prevent them from selling the awards. AMPAS says that Oscar-winners are required to sign an agreement that gives it a perpetual right to buy back any Oscar statuette for $10 if it ever goes on sale.
In addition to the contractual issues, there may be problems (according to a colleague) with the Rule Against Perpetuities in at least some states, since the repurchase right isn’t limited to lives-in-being plus 21 years.
September 5, 2007
Time, Newsweek: You're on Notice!!
Some weeks ago, we criticized the magazine, Business 2.0 for encouraging entrepreneurial schemes designed to put lawyers out of work. Not surprisingly, Business 2.0, stung by this rebuke, has announced that it is shutting down its operations.
Sure, Business 2.0 told the New York Times that the problem is reduced advertising revenue. But we know the truth. This is one surly group of law professors, and Business 2.0's demise is just one example of what befalls those who move us to hit the smite button. Just look at our editors, Frank Snyder and Carol Chomsky (pictured at left)! If you think they're tough, you should see their minions!
So watch out, print media, we've got you in our sights!
In the News: September 5
Former HBO executive VP Steven Rosenberg has reached an out-of-court settlement in his breach of contract suit against the company. Rosenberg claimed he was fired in violation of a "for cause" term in his employment agreement.
Lone Star State authorities have signed a contract to turn over the Texas State Railroad to a private operator. American Heritage Railways of Texas will run the state-owned line, a former prison railroad that runs 25 miles from Rusk to Palestine.
General Electric's NBC TV unit, locked in a squabble with Apple over downloads of television programs, has reached a deal with Amazon.com to offer downloads of certain NBC series at lower prices over Amazon’s new Unbox system.
Former lawyers for the mother of a Northwestern University football player who died during a team practice have sued her, claiming she fired them without cause and claiming $4.8 million in fees earned to date.
The case management meeting in the big SAP-Oracle software dispute has been suspended indefinitely due to the illness of the judge.
Australia’s Workplace Authority says that fifteen percent of the employment contracts it has audited are unfair, because they fail to provide workers with the compensation to which they are entitled under the law.
Contracts for home sales in July were at their lowest level in six years -- and anecdotal evidence also says that more contracts are lapsing before they get to closing.
After four years of contract dispute and three months of a management lockout, workers at Canada’s oldest cemetery are apparently headed back to work -- where corpses and claims by unhappy families have been piling up in their absence.
Lawyer Malpractice: The Operetta
Lawyer-client disputes in the U.S. often get nasty. They do things in better style in the world of operetta. The following is from Die Fledermaus, by Johann Strauss, Jr., libretto by Carl Haffner & Richard Genée.
In the scene, Eisenstein -is meeting with his lawyer, Blind, and his inamorata, Rosalinde. Eisenstein is furious that Blind, hired to defend him, actually managed to get his sentence increased.
No, with advocates like this
One is sold short and betrayed,
Making one lose patience.
Just be patient!
Instead of the matter being over,
It’s changed for the worse
And it’s all his fault.
Who’s at fault?
His fault? Could it be his fault?
Yes, it is entirely his fault!
That’s not true.
You’ll soon see.
What’s happened? Explain yourself.
So listen to me!
No, first I will defend myself!
Save yourself the trouble,
Such a thing is not to be defended!
It seems to me you want to insult me!
Calm down, blood! Why the fury?
This notary babbles like a fool.
Herr Eisenstein started to shout.
You’re stuttering with every word!
You keep on scolding!
You’re crowing like a rooster!
You’re a boor!
You’re an idiot!
You are quite inhuman!
You rant as in a fever frenzy
And gobble like a turkey-cock!
You’re spouting cod liver oil
And spinning like a weathercock.
Save your voice,
Be done with all this.
It would be best if you went out
Or this will become a scandal.
Yes, she is right, go out
Or this will become a scandal!
Yes, go, there is the door,
No, this tone can’t be tolerated!
I’m going out!
I’m just leaving this house!
It is best you go out!
It would be best if you went out!
Florida Man Wants Emotional Distress Damages in Breach of K Case
A dispute in Florida offers an interesting question of damages. Jay Fischer bought a 2006 Hummer H2 from a reputable Palm Beach (Fla.) car dealer. Turns out the car was stolen, though sophisticated forged papers and VIN had duped the dealership. Fischer and his wife suffered some anguish when police arrived at their home to seize the vehicle and determine how the 40-year-old accountant had acquired it.
The dealership obviously breached its warranty of title. But the question is what damages does Fischer get? The dealership has offered to refund his down payment and has paid off the $41,000 loan he took to buy the vehicle. It’s also offered to give him a new 2007 model for the same price he paid. Fischer, though, claims he ought to get compensated for the mental stress and embarrassment he suffered when police came to his house.
California Supreme Court Addresses Class Action Waiver
Just before the Labor Day weekend, in a 4-3 decision, the California Supreme Court held that courts may invalidate arbitration agreements that purport to waive an employee's right to bring a class action lawsuit. The Court directed the lower courts to invalidate such a clause if class arbitration would be a significantly more effective means than individual arbitration actions in vindicating the employee’s statutory rights (there, statutory claims to overtime). The court also held that providing an employee 30 days after hire to opt out of an arbitration clause did not preclude a finding that the clause was unconscionable.
Gentry v. Circuit City Stores, Inc., 07 CDOS 10363 (Aug. 30, 2007).
[Meredith R. Miller]
September 4, 2007
In the News: September 4
A New York appellate court has reversed a $158 million judgment that Merrill Lynch won against Allegheny Energy. A trial court had ordered Allegheny to pay the full purchase price of a subsidiary it purchased from Merrill in 2001; Allegheny claimed that Merrill had misrepresented the business and that it would not have agreed to that price if Merrill had been straightforward.
A "paid escort" has been fired by Britain's McKenzies Escort Service for "breach of contract" after she broke company policy by discussing details of a four-hour sex spree she had with members of the Manchester United football team with a daily newspaper.
Accounting firm KMPG is facing a class action suit in Canada by workers claiming breach of contract and statutory violations over the companyâs overtime policies.
The cricket situation is heating up in New Zealand, as 18-year-veteran Chris Harris -- star of the Canterbury team -- seems poised to jump to a new rival league; New Zealand Cricket has threatened to sue him and other potential defectors for breach of contract.
IBM is claiming victory in a massive breach of contract and copyright action brought against it by SCO Group over claims relating to the Linux operating system.
Weekly Top Ten
Several papers from last week's list continue to show good legs, with only one new entrant cracking this week's Top Ten. Following are the most-downloaded new papers from the SSRN Journal of Contract and Commercial Law for the 60 days ending September 2, 2007. (Last week's ranking in parentheses.)
1 (1) Usury Law, Payday Loans, and Statutory Slight of Hand: An Empirical Analysis of American Credit Pricing Limits, Christopher Lewis Peterson (Florida).
2 (2) Consumer Protection in the United States: An Overview, Spencer Weber Waller & Jillian G. Brady (Loyola-Chicago).
3 (3) You Asked for it, You Got it...Toy Yoda: Practical Jokes, Prizes, and Contract Law, Keith A. Rowley (UNLV/Alabama).
4 (7) Renting the Good Life, Jim Hawkins (Independent).
5 (4) The Other Side of the Picket Line: Contract, Democracy, and Power in a Law School Classroom, Richard Michael Fischl (Connecticut).
6 (5) A Positive Law Theory of Contract, Fergus Farrow (Victorian Bar).
7 (6) Anti-Social Contracts: The Contractual Governance of Online Communities, Joshua Fairfield (Indiana-Bloomington).
8 (8) Economics of Contract Law, Cento Veljanovski (Case Associates).
9 (9) A Study of Interest, John Y. Gotanda (Villanova).
10 (-) Consent and Exchange, Oren Bar-Gill (NYU) & Lucian Arye Bebchuk (Harvard).
A Nice Case of Contract Assignability
There’s a good interpretation question bubbling up in world of stock car racing. Ordinarily a company that acquires another obtains all the contractual rights that the acquired company has. But not always.
AT&T, it seems, is suing NASCAR after the stock car racing group refused to allow it to replace the Cingular logo on driver Jeff Burton’s car with the AT&T logo following AT&T’s acquisition of Cingular. AT&T changed Cingular's name to "AT&T" and is busy replacing the old Cingular logo. It wants the right to continue sponsorship of Burton's No. 31 car, and it maintains a web site for fans. (Left: Burton with his AT&T logo.)
The problem is that the NASCAR series Burton races in is called the "Nextel Cup" after a rival telecom company -- and only cellular companies whose logos were on cars before Nextel became the chief sponsor (it used to be the "Winston Cup") were subsequently allowed to have their logos on race cars. When AT&T acquired Cingular, it changed the company’s name, and NASCAR apparently argues that this means that AT&T no longer has the right to put a logo on the car. AT&T says that NASCAR never advised it of that particular restriction.
September 3, 2007
Teaching Assistants: Mark Pettit, Jr.
In this second installment of our new feature, Teaching Assistants, we have a look at Mark Pettit, Jr.'s essay, Modern Unilateral Contracts, 63 B.U. L. Rev. 551 (1983). This is an especially useful piece of contracts scholarship for instructors and students who wonder why casebooks and hornbooks usually treat the distinction between unilateral and bilateral contracts as fundamental while the Restatment (Second) on Contracts (R.2d) tries to will unilateral conracts out of existence. Pettit's article provides useful insights into the development of unilateral contract doctrine. In so doing, he also provides challenging scenarios in which we can test our instincts about the most fundamental question in contracts theory -- what sorts of promises should be enforceable at law?
Although Pettit eschews provocative language, one gets the sense that this is one area where Karl Llewellyn's faith in his own ability to devise legal doctrines appropriate to the real needs of commerce was sadly misplaced. Llewellyn believed that real, unilateral contracts (as opposed to what he termed "pseudo-unilaterals") tend to involve improbable scenarios about walking across the Brooklyn Bridge or climbing greased flagpoles. Id. at 551. The R.2d's solution is to turn pseudo-unilaterals into bilateral contracts by implying a promise to perform wherever possible. Still troubled by what Llewellyn called "unjust and inequitable" results that flow from the rare, true unilateral contract, the R.2d's drafters permit acceptance of a unilateral contract through tender of part performance in s. 45. Id. at 551.
However, as Pettit explains, while Llewellyn sought to banish unilateral contracts to a "freak tent," courts continue to welcome them into the Big Top. Id. at 552. Pettit gives two reasons for this. First, while Llewellyn sought to limit unilateral contracts to situations where an offeror would not be satisfied by promissory acceptance, courts recognize the formation of a unilateral contract whenever an offeree makes no promise. Id. at 573-74. Second, modern unilateral contratcs arise in non-commercial contexts that tend to pit an individual against a large and perhaps powerful organization. Id. at 574. Thus lines of cases involving unilateral contracts ome in the empoyment context (commissions or benefits -- id. at 559-67); in cases seeking to enforce plea bargains and other contexts in which citizens attempt to hold the state to a unilateral promise (id. at 568-72); in cases in which students sue educational institutions (id. at 572-73); and even in civil rights cases. Id. at 574-75. Ironically, although Llewellyn disliked unilateral contracts as an obstacle to the enforcement of promissory obligations, they are now invoked in order to expand the scope of enforceable promises.
Pettit thus notes that while defendants used to rely on unilateral contract theory to avoid liability, in modern cases, plaintiffs rely on unilateral contracts theory in order to enforce promises in situations where plaintiffs themselves are not bound to do anything. As Pettit puts it,
the defendant's alleged promise is a promise to maintain the status quo, and the plaintiff's peformance is simply continuing the status quo.
Id. at 576. For example, an employer who offers a bonus to her sales force if they achieve certain performance targets can be held to her promise to pay that bonus if the employees achieve such targets, even if they achieve such targets by performing their ordinary duties.
Pettit notes a problem with modern unilateral contracts in the employment context. Courts have enforced promises to provide insurance or retirement benefits even when the employer went out of its way to stress that it was not guaranteeing the continuation of such benefits and when the employee did not rely on their continuation. Id. at 579-80. Such unilateral contracts, it would seem, protect neither an expectation nor a reliance interest. Pettit also notes with alarm a tendency to use the unilateral contract concept to expand liability in personal injury cases. Id. at 584-87. For example, victims of a collapse of stands at a high school football game were allowed to pursue a claim of liability against the local board of education based on unilateral contract, where an ordinary tort claim was barred under immunity doctrine. The court enforced an implied promise by the board of education that the viewing premises were reasonably safe. Id. at 584.
Finally, Pettit considers promissory estoppel as an alternative to unilateral conract theory as an avenue of recovery. Id. at 591-93. He concludes that specifying the extent of reliance is problematic in such cases. Still, in some unilateral contracts cases, awarding full expectation damages seems excessive, especially if plaintiff has neither offered new consideration in return for the unilateral promise or relied on that promise.