September 20, 2007
In the News: September 20
America’s Honeywell International has won a 20-year, $16 billion contract to "build and service mechanical systems" for Europe’s Airbus S.A.S. Chicago Bulls guard Ben Gordon is suing his former financial advisors for breach of contract and breach of fiduciary duty, claiming that they took a bigger cut of his salary than agreed and cheated him on a real estate deal. Australian cleaning companies say that they’re scrapping their Workplace Agreements because they apparently don’t meet the Government’s "fairness" standards; the companies say the rules are "complex," "confusing," "pointless," and "farcical." Uganda will not cancel its contract with the Taxi Operators and Drivers Association even though the group is late in making payments, because it says provides superior public transportation that not only operates door-to-door but requires no Government subsidy. The United Auto Workers and General Motors are reportedly still far apart in their negotiating positions for a new five-year agreement; the old one expired September 15. A Canadian tribal group is suing the Saskatchewan government in a bitter battle over who gets to control a lucrative casino. [Frank Snyder]
America’s Honeywell International has won a 20-year, $16 billion contract to "build and service mechanical systems" for Europe’s Airbus S.A.S.
Chicago Bulls guard Ben Gordon is suing his former financial advisors for breach of contract and breach of fiduciary duty, claiming that they took a bigger cut of his salary than agreed and cheated him on a real estate deal.
Australian cleaning companies say that they’re scrapping their Workplace Agreements because they apparently don’t meet the Government’s "fairness" standards; the companies say the rules are "complex," "confusing," "pointless," and "farcical."
Uganda will not cancel its contract with the Taxi Operators and Drivers Association even though the group is late in making payments, because it says provides superior public transportation that not only operates door-to-door but requires no Government subsidy.
The United Auto Workers and General Motors are reportedly still far apart in their negotiating positions for a new five-year agreement; the old one expired September 15.
A Canadian tribal group is suing the Saskatchewan government in a bitter battle over who gets to control a lucrative casino.
Martin on Contracting in War Zones
Speaking of the contract issues surrounding the use of private firms to perform quasi-military functions in Iraq, Jennifer Martin (Pitt) has a new paper, Contracting for Wartime Actors: The Limits of the Contract Paradigm, that takes a hard look at the question. Here's the abstract:
Much can be (and has been) said about the war in Iraq. This essay explores the role of contract in wartime and (particularly) reconstruction. First, it considers the use of government contracts to privatize numerous government functions during the reconstruction and conflict in Iraq. Second, it considers the private ordering by contract done by government contractors to obtain security and related services from third parties. Both types of contracting raise complicated issues including: the proper use of force; to what extent the contracts should have government oversight; to what extent contractors should be accountable for crimes; and whether contractors qualify as noncombatants in case of capture. The special issues of contracting in a war zone are not best addressed primarily by common law doctrine. Additional rules and regulations are necessary to address the special issues of non-state actors who contract with the U.S. government.
September 19, 2007
Hadley v. Baxendale Rides Again
In The Achilleas  EWCA Civ 901 (9/6/2007) the time charterers of a bulk carrier redelivered her 8 days late and got sued for damages by the owners. Big deal, you might say (and the charterers not surprisingly did say): liability is clearly the difference between the charter rate and the market rate for those 8 days, which works out at a fairly modest $160,000.
Wait a minute, riposted the owners. You see, we had fixed the ship for six months end-on with someone else (i.e. Cargill) at no less than $40,000 a day on the assumption that the charterers would redeliver on time. Because the charterers redelivered late we lost the benefit of that contract and Cargill, knowing they had us over a barrel, agreed to take the ship but screwed our rate down to only $32,000 a day. Therefore the damages are six months at $8,000 a day, or something like $1.4 million.
Who was correct? In the event the owners won right along: at arbitration, before the judge and in the Court of Appeal. Once it was found foreseeable that the ship would be fixed end-on and that the benefit of that subsequent charter might be lost with late redelivery, that was it: there was no reason to limit liability to the market difference, and however large and disproportionate the loss caused by the cancellation of the following charter, the charterers were liable for it.
This case has caused, to say the least, some unease among shipping lawyers here (some use rather stronger language). An appeal to the House of Lords, we understand, is not unlikely.
Dan Rather Sues CBS for Breach of Contract
We interrupt the regularly scheduling contract blogging about suing god to mention, on a less divine note, that Dan Rather is suing CBS for breach of contract. This just in from the WSJ law blog (internal links omitted):
Rather, 75, whose vaunted career at CBS News ended on a sour note last year over his role in a story on President Bush’s National Guard service, claims that the network violated his contract by giving him insufficient airtime on “60 Minutes” after forcing him to step down as the nightly news anchor in early 2005, according to the Times. He also contends that the network committed fraud and damaged his reputation by commissioning a “biased” and incomplete investigation of the Guard broadcast, which was co-headed by K&L Gates’s Dick Thornburgh. (Click here for a copy of the report.)
The lawsuit also names CBS CEO Leslie Moonves, Viacom CEO Sumner Redstone, and former CBS News president Andrew Heyward. The suit, filed in New York State Supreme Court in Manhattan, seeks $20 million in compensatory damages and $50 million in punitive damages.
Here's the complaint.
[Meredith R. Miller]
More on Suing God
Apropos our comments yesterday on the Nebraska legislator who's suing God, philosophy professor Patrick O'Donnell writes to note that the man-sues-God theme was the subject of a 2001 Australian film, The Man Who Sued God. In the flick, a lawyer whose marine insurance doesn't include coverage for "acts of God" decides to sue the Big Fella. O'Donnell says the film is "delightful" and actually raises some interesting issues about the role of churches in society and the practices of big insurance companies.
From the film's description, it appears that the Australian courts let him get all the way to trial on his complaint. It is a comedy, after all.
Contracting for Force in Iraq
The use of government contractors to provide security services in Iraq (read, "carry guns in a war zone") has raised a lot of interesting questions for the contract law community. Historically, use of private force under vaguely government authority was common; much of the colonization of America was done by private entrepreneurs using force under Royal charters that often allowed them to kill as many natives as necessary. The Constitution specifically authorizes Congress to grant letters of marque (left) to private shipowners to wage war on enemies. As late as 1856, the British East India Company operated its own empire with its own army. Even today there are private armies in many countries.
But over the past century, the U.S. and other developed countries have elected to entrust the use of force in war zones to their own employees rather than private contractors. That means that the war in Iraq has raised significant issues about who should be using force, who should be watching those who apply force, and exactly what contract law has to do with all this.
George Washington's Steve Schooner is quoted in an interesting piece that goes over the issues in a story today from the Associated Press.
Top 20 Law Schools
Three are out and three are in this week, in our rankings of the Top 20 law schools in the U.S. UCLA took the biggest fall, dropping from No. 11 completely off the charts. Tennessee and Arkansas both also drop from the 20. Southern Cal remains the top law school in the U.S. for the third straight week, although Louisiana State is hard on its heels and Florida is moving up strongly. This week's Top 20:
1 (1) Southern California
2 (2) LSU (Hebert)
3 (3) Florida (Levin)
4 (3) Oklahoma
5 (3) West Virginia
6 (6) Texas
7 (8) Cal-Berkeley
8 (7) Wisconsin
9 (10) Ohio State (Moritz)
10 (12) Penn State (Dickinson)
11 (15) South Carolina
(15) Boston College
14 (-) Alabama
15 (9) Louisville (Brandeis)
(18) Hawai'i (Richardson)
17 (-) Georgia
18 (-) Kentucky
19 (13) Nebraska
20 (20) Missouri
September 18, 2007
Teaching Assistants: William S. Dodge
One of the most useful pieces of legal scholarship I have ever read is William S. Dodge's Teaching the CISG in Contracts, 50 J. Legal. Educ. 72 (2000). At the time I came across Dodge's essay, I had just completed teaching a four-credit contracts class. I attended an AALS session on introducing international and comparative perspectives into the first-year curriculum with two thoughts in my mind:
1. As a student, I took a five-credit contracts course and I don't recall any mention of the CISG.
2. There was absolutely no way I was going to cram more material into my contratcs course.
Well, I attended the session, read the article, and the scales fell from my eyes. Moreover, with the assistance of Dodge's article, working a few key provisions from the CISG into a first-year contracts course -- and vitally, putting students on notice that the CISG exists and will govern international commercial agreements involving the sale of goods if not contratced around -- is really as easy as UCC 2-207. Easier even, perhaps.
Each section of the article focuses on a different doctrinal area in which the CISG differs from the UCC.or the common law, but the parts of the article that I have basically just plugged into my course are its discussions of the S.D.N.Y.'s handling of the CISG's version of the Battle of the Forms in Filanto, S.p.A. v. Chilewich Int'l Corp. (789 F.Supp. 1229 (1992) and of the Eleventh Circuit's treatment of the non-existence of the parol evidence rule in MCC-Marble Cermaic Cneter, Inc. v. Ceramica Nuova D'Agostino, S.p.A. (144 F.3d 1384 (1998). I highly recommend this readable and immensely useful introduction to the CISG.
Now, there's no way I'm going to try to discuss the new UCC in my contracts course . . . .
Presumably You'd Have to Serve One of His Agents
A Nebraska legislator who has somehow discovered the astonishing fact that anyone can sue anyone for anything has illustrated it by filing a suit against God. According to State Sen. Ernie Chambers (left), the Supreme Being has been tough on Nebraskans this year -- inflicting on them such devastating "disasters as floods . . . horrendous hurricanes, terrifying tornadoes," not to mention publicity-seeking State Legislators with too much time on their hands. He also charges the Big Kahuna with making terroristic threats against him and his constituents.
Having discovered that anyone can file a frivolous lawsuit, perhaps he will also discover that anyone can also be sanctioned for filing a frivolous lawsuit.
Chemerinsky is In, Yale is Out, Ave Maria is Messed Up
Lots of law school news today. At the top, Erwin Chemerinsky is now back in as founding dean of the new state law school at the University of California-Irvine. UCI Chancellor Michael Blake, doing his best imitation of a reed in a gale, apparently bowed to pressure to bring Chemerinsky on board less than a week after he had bowed to contrary pressure to toss him out. Those concerned that UCI wouldn't have been able to hire a faculty if Chemerinsky's firing had remained a blot on its escutcheon can now breathe a sigh of relief.
Meanwhile, though it's not exactly man-bites-dog news, the U.S. Court of Appeals for the Second Circuit has thrown out Yale University's argument that it has a constitutional right to receive federal government funding even if it refuses to go along with federal government regulations that compel it to allow military recruiting on campus. The handwriting had been on the wall after the U.S. Supreme Court decided Forum for Academic and Institutional Rights v. Rumsfeld, which had upheld the validity of the Solomon Amendment. Not even the best arguments from Yale law professors, ably assisted by Cravath, Swaine & Moore and amicus briefs from colleagues at Harvard, Chicago, Columbia, Cornell, NYU, and Penn, and by the AAUP, could keep the Second Circuit from the swift completion of it appointed rounds. Yale, with an endowment reported at some $15 billion dollars, could probably manage to scrape by without federal cash if it felt strongly enough about its anti-discrimination policy, but that's apparently not something that's on the table.
On a less cynical note, things seem to be going from bad to worse at Ave Maria Law School. The folks at the always interesting Mirror of Justice blog have issued a joint statement expressing serious concern over the treatment of tenured and untenured faculty who have disagreed with the policies set forth by the dean and the Board, saying that "the Catholic nature vital to [Ave Maria's] founding and sustenance has been derailed" by a series of arbitrary actions.
September 17, 2007
In the News: September 17
Two rich guys are locked in a battle over who will buy a historic Methodist church in Sag Harbor, N.Y. (left). One wants it to house his $100 million art collection, the other wants to house his even more valuable family.
The NASCAR team owner who’s being sued for breach of contract by drivers Sterling Marlin and Joe Nemechek says that he’s surprised by the suits because he’s met all of his contractual obligations to the pair.
A former star of TV’s Flip This House is being sued for fraud and breach of contract over a real estate transaction in California.
A D.C. clergyman who is being sued for mismanagement and breach of contract by some parishioners can keep his job, at least for now, according to a court ruling that overruled a congregational vote.
United Auto Workers leaders say they’re close to a deal with General Motors on a new contract that would turn over responsibility for retiree health care to the union in exchange for job security in the U.S.
Ugandan guards who signed up to work in Iraq are suing the contractor who employed them, claiming that it has paid much less than it promised.
The al Quaeda group has put out an offer for a unilateral contract on the life of Danish cartoonist Lars Vilks; they’ll give $100,000 for his murder, or $150,000 if he is "slaughtered like a lamb."
The managers of an Australian singer whose self-funded record unexpectedly hit number one on the charts are suing her for lost earnings, claiming her behavior made their positions "untenable" and led to a split.
Usury By Any Other Name Would Smell as Sweet
One of the more interesting philosophical questions in commercial law is why there are so few restrictions on allowing people to buy things, while there are so many apparent restrictions on loaning money to those same people to finance that same purchase. When, for example, a high-risk debtor borrows money from a subprime lender to buy a home theater system from Best Buy, the retailer reaps a nice profit on the deal while our attention (and disapprobation) seems to be focused on the lender, not the seller. Why?
A new paper by Christopher Peterson (Florida) doesn’t purport to answer that question, but it does suggest that the reasons for usury law lie in some deeply felt moral sense than in any practical reality. The reality, he suggests in Usury Law, Payday Loans, and Statutory Slight of Hand: An Empirical Analysis of American Credit Pricing Limits, is that usury laws are not doing the kind of heavy lifting many of us expect them to. He finds that they are rooted in "an ancient moral tradition" which -- like so many ancient moral traditions today -- seems to have been overridden by market forces even as the rhetoric continues. Here's the abstract:
In the Western intellectual tradition usury law has historically been the foremost bulwark shielding consumers from harsh credit practices. Historically, the United States commitment to usury law has been deep and consistent. However, the recent rapid growth of the "payday" loan industry belies this longstanding American tradition. In order to understand the evolution of American usury law, this paper presents a systemic empirical analysis of all fifty state usury laws in two time periods: 1965 and the present. The highest permissible price of a typical payday loan authorized under each state's usury law was calculated. These prices were then translated into Annual Percentage Rate (APR) format following the federal Truth-in-Lending Act price disclosure regulations. Moreover, this Article also compares how each state legislature describes its most expensive permissible payday loan, with how that loan is characterized under federal price disclosure law. It does so by suggesting a new financial concept which I label: salience distortion. This analysis produces three findings: (1) usury law has become more lax; (2) usury law has become more polarized; and, (3) usury law has become more misleading. These findings suggest that the numeric language in current state usury statutes is not chosen because it helpfully describes some expectation of commercial behavior. Rather, legislatures have chosen the language of most current credit price caps because it sounds in an ancient moral tradition - a mythology of sorts - that roughly delineates popular perception of moral and immoral interest rates. Exploiting this normative tradition as well as common behavioral economic heuristics, many state legislatures use small, innocuous numbers in usury law because they are attempting to minimize the public and media outcry over their decision to legalize triple digit interest rate consumer loans.
Weekly Top Ten
The more things change, the more they stay the same. No surprises on this week's Top Ten, as all ten of last week's most popular papers return. Following are the top ten most-downloaded new papers from the SSRN Journal of Contract and Commercial Law for the 60 days ending September 16, 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) Explaining the Spread of At-Will Employment as an Inter-Jurisdictional Race-to-the-Bottom of Employment Standards, Richard A. Bales (No. Kentucky).
4 (4) You Asked for it, You Got It . . . Toy Yoda: Practical Jokes, Prizes, and Contract Law, Keith A. Rowley (UNLV/Alabama).
5 (5) Renting the Good Life, Jim Hawkins (Independent).
6 (6) The Other Side of the Picket Line: Contract, Democracy, and Power in a Law School Classroom, Richard Michael Fischl (Connecticut).
7 (7) Anti-Social Contracts: The Contractual Governance of Online Communities, Joshua Fairfield (Indiana-Bloomington).
8 (9) Economics of Contract Law, Cento Veljanovski (Case Associates).
9 (8) A Positive Law Theory of Contract, Fergus Farrow (Victorian Bar).
10 (10) A Study of Interest, John Y. Gotanda (Villanova).
Gambling Debts Now Enforceable in U.K.
Britain’s Gambling Act of 2005 -- which comes into effect this year -- has garnered a lot of attention. But one aspect of the new law hasn’t gotten much play, according to Carl Rohsler of London’s Hammonds. It’s the sentence in the act that says, "the fact that a contract relates to gambling shall not affect its enforcement."
That sweeping statement, says Rohsler, "wipes out over 200 years of precedent . . . not only in the UK but also in most common law jurisdictions around the world, that gambling contracts are debts of honour only." Gambling houses that once had to demand that gamblers cough up the cash in advance (because they could not collect the debts in court) can now lend money to gamblers and collect their debts in the usual way. Rohsler’s comments on this development are here. A more general introduction to the Act, by Paul Renney of London’s Campbell Hooper, is here. (Free registration required for each.)