Wednesday, April 30, 2008
When The News Corporation bought Dow Jones & Company, publisher of the Wall Street Journal, the Bancroft family, which held a controlling interest in Dow Jones, put up a fight in an attempt to protect the Journal's independence. The News Corporation is controlled by Rupert Murdoch (pictured), who is reputed to have "a history of bending news coverage to suit his views," according to today's New York Times. In order to protect the paper, the Bancrofts insisted upon the creation of a special oversight committee with the power to block the firing or hiring of the Journal's managing editor.
Last week, the Times reported that Marcus Brauchli, the Journal's managing editor, was resigning, just four months after Murdoch took control of the paper. The special oversight committee has no jurisdiction over resignations, but it found that Brauchli had been effectively forced to resign and thus that Brauchli was removed from his position in violation of both "the letter and the spirit of the agreement."
The committee recognizes that Mr Brauchli cannot be "unresigned," and is therefore simply stressing its intention to play a role in selecting his replacement. According to the Times, the committee's chairman, Thomas J. Bray, said that Brauchli did not believe that the News Corporation had compromised the integrity or independence of the Journal. Still, the Times reported that Brauchli was frustrated by the perception (at least) that he was not truly in control of the paper he ostensibly led.
Tuesday, April 29, 2008
After a long hiatus from Limerick posting, I have decided to share with the blog's readership a selection from Volume II of my collection of Limericks for Lawyers. Volume II summarizes cases covered in my Business Associations course, but many of the cases for that course raise contractual issues, so I figure that's a sufficient hook to permit me to post them here.
I teach the course using Klein, Ramseyer and Bainbridge's casebook, so those of you familiar with that book will know the cases. Volume I of the Limericks for Lawyers series was based on my first-year contracts course, in which I used Knapp, Crystal and Prince's casebook. For the coming year, I am switching to the Conracts: Law in Action book, which means new cases, and yes, new contracts Limericks coming in the Fall. This is not a knock on the Knapp book, of course, which I have enjoyed using. I just need to use some new materials so as to awaken from my dogmatic slumbers.
So, without further ado. The first case I teach in Business Associations is Gorton v. Doty, in which a high school teacher (Doty) is repaid for her patriot efforts on behalf of her school (Soda Springs) football team with a tort claim. She loaned her car to Coach Garst so that he could drive the team to a game. The Gorton boy was injured when Coach Garst got into an accident, but Ms. Doty was held liable as the principal since the court found that she had effectively made Coach Garst her agent by conditioning the loan of her car on his agreement to be the sole driver.
Gorton v. Doty
The court made Ms. Doty the heavy
When Coach Garst demolished her Chevy.
When Soda Springs lost the game,
Coach accepted the blame,
But the principal pays the tort levy.
What do you get when you cross Ashley Alexandra Dupre, the woman with whom former New York Governor Elliot Spitzer allegedly had some very expensive private encounters, with the Girls Gone Wild franchise?
a. A law suit.
b. A perfect storm for the blogarazzi.
c. A much-visited post on this blog.
d. All of the above.
If you guessed d, you may be right. Time will tell if c is a winner.
In any case, Comcast.net news reports that Ms. Dupre is seeking $10 million in damages from Girls Gone Wild and the mastermind behind it, Joe Francis, pictured above. The ever-enterprising Mr. Francis reportedly offered Ms. Dupre $1 million to appear in one of his videos but then rescinded the offer when he learned that he already had footage of the pre-Spitzer Ms. Dupre. Francis claims that Dupre spent a week on a Girls Gone Wild bus and made seven Girls Gone Wild videos. The eleemosynary urge is strong in Mr. Francis: after their collaboration was at an end, he even bought her a bus ticket so that she could return to North Carolina.
Ms. Dupre's attorney contends that she was only 17 (and also drunk FWIW) when she signed releases permitting Mr. Francis to film her. Her lawsuit thus challenges the validity of the releases and claims that defendants exploited her image without meaningful consent in order to promote their soft-porn products.
Monday, April 28, 2008
According to the St. Louis Business Journal, Alamo Rent-A-Car and National Car Rental are suing Orbitz Worldwide, Inc. for breach of contract, alleging that Orbitz has violated its online listing agreement with the two companies and has and improperly removed both Alamo and National from its main rental car matrix.
Both Alamo and National were acquired in 2007 by the Taylor family of St. Louis, which also owns Enterprise Rent-A-Car, when Enterprise acquired the parent company of Alamo and National, the Vanguard Car Rental Group. The companies allege that Orbitz demanded an additional payment of $1.5 million in excess of what was required under the companies' agreement which runs through December 31, 2008. Alamo and National allege that Orbitz removed them from its matrix when the Taylor family refused to pay.
Alamo and National are seeking a temporary restraining order, preliminary and permanent injunctive relief, and specific performance, punitive damages, and attorneys' fees. Alamo contends that it stands to lose more than $27 million due to the alleged breach. That being the case, I would pay the $1.5 million and sue later, but nobody asked my advice.
Orbitz maintains that the suit is without merit and that the two rental companies are making demands of it that are not required under the agreement.
Last week, the California Supreme Court upheld a $300 million verdict on a breach of contract claim against the biotechnology company Genentech (HQ pictured) but struck the $200 million award of punitive damages, according to the San Francisco Chronicle. The dispute relates to the discovery of a process for producing insulin made in the 1970s by two scientists working at the City of Hope National Medical Center, a cancer research center, City of Hope contracted with Genentech to patent and market products derived from the process in return for a 2 percent royalty. Genentech paid City of Hope more than $300 million in royalties relating to the product the two scientists had synthesized but did not pay royalties relating to other products that were created using the engineering process that the two scientists had created.
The jury had awarded punitive damages based on a finding that Genentech had breached a fiducity duty to City of Hope. The Supreme Court refused to permit plaintiffs to get around the limitation on contractual damages by characterizing a breach of contract claim as one alleging a fiduciary breach. Summarizing the opinion, the Chronicle reports:
The court said a company that markets another firm's scientific discoveries in exchange for royalties has no special obligation to protect the other's interests, apart from its duty to adhere to the contract. Without any such obligation, the justices said, punitive damages cannot be awarded for a breach of contract.
And there was much rejoicing among the amici.
Sunday, April 27, 2008
As TMZ.com puts it, "A guy that once starred in a movie with Michael Douglas, then became his business partner, is suing the Oscar winner, claiming he got screwed out of millions." Now that's good reporting. Want to know the details? Well, TMZ says it's complicated but provides a link to the complaint, which alleges six causes of action including breach of contract and inducement to breach of contract, against Douglas and other individuals and business entities.
Plaintiff, Howard Zuker, aka Zack Norman, sues on his own behalf and derivatively on behalf of an LLC in which he has a 20% stake. Plaintiff alleges that he managed the LLC while also active as a producer of Hollywood films. The LLC's main asset seems to be a library of "owned or managed intellectual property rights." Plainitff alleges that Michael Douglas prevented the LLC from advertising its existence, making it harder for the LLC to attract potential users of its assets. Still, as of January 31, 2008, the complaint alleges that the LLC was involved in 31 active projects.
The complaint also relates the close personal relationship between plaintiff and Douglas. According to TMZ, Douglas is plaintiff's former "BFF," but the complaint does not go that far. It merely alleges that Douglas was kind to plaintiff and loaned him a lot of money. The LLC was created to purchase a company that held the assets that are now the primary asset of the LLC. According to the complaint, Douglas originally promised to put up half the capital necessary for that purchase but in the end put up much less, and the LLC was thus perpetually short of working capital.
Plaintiff alleges that he and Douglas created a joint venture agreement around January 2000 whereby the LLC would repay Douglas the loan he made at its founding plus 8% interest. After that loan was repaid, the partners would share profits from the venture on a 50/50 basis. But the complaint also alleges that Douglas made further loans to the LLC from 2001 to 2003 and that other parties who promised to provide capital did not perform.
Between 2002 and January 2006, plaintiff worked to created a new funding vehicle for the LLC, the AEHC Film Fund. Plaintiff was supposed to receive a $1 million bonus for putting together the Film Fund, and he borrowed money from a banker (Baker) involved in the deal in order to tide him over until the work was completed. In March 2006, according to the complaint, Douglas sent Plaintiff a new plan for the Film Fund, which was now renamed. Under the new plan, the LLC's stake in the Film Fund would drop from 50% to 4%, with the remaining stakes going to film production companies controlled by Douglas and his wife. and the LLC would transfer its assets to a new entity, Granite-Glass, L.P. controlled by Douglas and Baker. Recently, the LLC has stopped paying plaintiff his salary as manager and has refused to reimburse his business expenses.
Unfortunately, the complaint fails to allege that in pitching the new Film Fund to potential investors, Michael Douglas gave a rousing speech about the benefits of greed.
Plaintiff's main claim is for breach of fiduciary duty. He seeks lost wages and the $1 million bonus he would have made for putting together the Film Fund. He also seeks unspecified damages for harm done to the LLC. Plaintiff's breach of contract claim is against the LLC, alleging that he is owed a part of his annual $192,000 salary as manager of the LLC. Plaintiff names Baker as responsible for inducing the breach.
Thursday, April 24, 2008
According to the Hollywood Reporter, Seth MacFarlane and 15 other writers of the animated sitcom "Family Guy" are suing 20th Century Fox TV,alleging breach of contract and other claims. The writers allege that Fox has violated its contract with the writers by not paying them for 12 minutes of additional footage based on a script they wrote for a 2005 'Family Guy" DVD. They also allege that Fox failed to give them proper credit for the project.
The Hollywood Reporter says that Fox would not comment on the law suit. Not on record, perhaps. Off the record, Fox's spokesperson said, "Twelve minutes of guys shaving off their strike beards is not remunerable. Wait, wait. 'Remunerable' won't work as a laugh line. How about this: Those guys probably couldn't even see through their strike beards to read the terms of the contract they signed. They've got nothing! Yeah, go with that, but off the record, okay?"
In Ledbetter v. Goodyear Tire & Rubber Co., the Supreme Court ruled, in a 5-4 decision, that Title VII required that a plaintiff allege that defendant acted with discriminatory intent in making adverse pay decisions during the 180 days prior to the filling of a complaint with the Equal Employment Opportunity Commission (EEOC).
Lilly Ledbetter was employed as a manager by Goodyear from 1979-1998. Initially she was paid the same as her male counterparts, but over time her pay slipped until she was paid significantly less than the lowest-paid male manager. A jury rejected Goodyear's claim that it had non-discriminatory reasons for the pay disparity and awarded Ledbetter back pay. The Eleventh Circuit reversed, finding that the allegedly discriminatory conduct had occurred prior to the 180-day window dating from the time of Ledbetter's complaint to the EEOC. Justice Alito, writing for the majority, agreed, based on the statutory language and precedent.
Ledbetter and the dissent made policy arguments in favor of a more lenient rule. Because employees are not entitled to know what their peers are being paid and because pay discrimination only occurs in slow imcrements that have a cumulative effect, Ledbetter argued that the 180 window should be expanded. Justice Alito would not address those arguments, saying the court's role was simply to apply the statute as written.
The decision was thus, in effect, a remand back to Congress to clarify its legislative intent. It attempted to do so through the Lilly Ledbetter Fair Pay Act of 2007, which effectively overrules Ledbetter and which passed the House by a vote of 225-199. But the Act will not come to a vote in the Senate because it failed to win the 60 votes necessary to overcome Senate procedural rules. Candidates Clinton and Obama returned to Washington to speak in favor of the Act and to cast their votes. Candidate McCain remained on the campaign trail, but according to the New York Times, he said "he would have opposed the bill since it could contribute to frivolous lawsuits harmful to businesses." Senator Hatch further explained the motives of the all but six Republican Senators who opposed the Act: “The only ones who will see an increase in pay are some of the trial lawyers who bring the cases.”
So, employees who want to protect themselves against pay discrimination will have to negotiate harder during those oh-so-even-handed discussions they have with their employers when they take their positions. Ms. Ledbetter, for example, after nearly 20 years in a supervisory position with Goodyear, was making nearly $45,000 a year. With such princely resources at her disposal, imagine her bargaining power!
Tuesday, April 22, 2008
According to Newsday.com, a jury has awarded $10.5 million to internet executive Alfred West in his suit to enforce a handwritten agrement with IDT Corp. According to the report, West met with IDT founder and chairman Howard S. Jonas on February 3, 2001. The product of this meeting was two pages handwritten by Jonas which contained the terms of a deal in which West would develop a business within IDT. The terms of the deal were as follows:
The deal called for an annual salary of $200,000 for five years, and an annual payment on Feb. 13 for the next five years of 70,000 shares and $1.5 million, which they estimated was worth "roughly" $14.3 million. The deal called for an annual salary of $200,000 for five years, and an annual payment on Feb. 13 for the next five years of 70,000 shares and $1.5 million, which they estimated was worth "roughly" $14.3 million.
Crucially, the handwritten agreement also contained the following langauge: "The parties will complete formal contracts as soon as possible but this is binding."
West was fired after six months at IDT. His suit resulted in a 2005 jury verdict in his favor for $1.5 million. The Third Circuit vacated that verdict and remanded, while reinstating West's breach of contract claim, which had been dismissed by the district court. The second trial worked out even better for Mr. West, but IDT has promised a second appeal.
Monday, April 21, 2008
National Public Radio reports that a 77-year-old Tampa woman is suing the city for its failure to repay a $300 loan made by her great-grandfather to the City of Tampa during the Civil War. Assuming 147 years of interest at 8% per annum, the plaintiff figures she is owed $23 million.
The past is passed, says Tampa (pictured), citing the statute of limitations, the demise of the currency in which plaintiff's great-grandfather was to be paid, and Section 4 of the 14th Amendment to the U.S. Constitution. Tampa also notes that the City of Tampa that incurred the debt dissolved in bankruptcy. The current City of Tampa was founded years later.
Portfolio.com reports here on the death of mega-contracts in baseball. Yes, we're thinking of you, Troy Tulowitzki (pictured), and also of Evan Longoria. These are two young baseball players who signed rich but not jaw-dropping contracts with their teams either as rookies or after one year.
This blog has suggested elsewhere that agreeing to pay any 42-year-old player nearly $30 million a year might be irrational. Portfolio.com suggests the same, as the average player peaks at age 26. Rational ball clubs thus offer reasonable multi-year contracts to very young players with huge potential, hoping to avoid having to pay them eye-popping contracts for post-prime years.
But nobody will walk away from the negotiating table crying. Mr. Longoria negotiated a deal that will pay him $17.5 million over the next six years. At the time he signed, he had played six games in the major leagues. Tulowitzki will get over $5 million a year over a six-year period, but he had already proved himself last year as a rookie. These contracts may seem rich, but with what you pay Tulowitzki to play every day for a full season you can barely get Roger Clemens to sit on the bench four games out of five for a month.
Sunday, April 20, 2008
The New York Times reports that JP Morgan has notified new Bear Stearns hires that they will not be needed. But the unemployed recruits can still keep what the Times calls a consolation prize -- they can keep their signing bonuses if they sign contracts in which they agree not to sue JP Morgan over their lost jobs. The bonuses range from $10,000 for college seniors to $50,000 for newly-minted MBAs. According to the Times, the students were paid these signing bonuses last fall, and JP Morgan is threatening to demand their return if the students refuse to sign the new contracts.
Thursday, April 17, 2008
Governor Jim Douglas signed Vermont HB 563 into law on April 10. Governor Ed Rendell did likewise to Pennsylvania HB 1152 on April 16. Pennsylvania HB 1152, by its terms, takes effect on or about June 15, 2008. Vermont HB 563, along with Kansas SB 183 (enacted last year) and South Dakota SB 93 (enacted earlier this year), will take effect on July 1, 2008.
Vermont HB 563 and Pennsylvania HB 1152 both eschew uniform R1-301 (making it 0-for-32 for those scoring at home) and adopt the uniform R1-201(b)(20) good faith definition (that tally now stands at 23-to-9 in favor of the new unitary standard).
The Tennessee Senate and House have approved slightly different versions of Tennessee SB 3993. The Tennessee Senate is scheduled to vote next Monday (April 21) whether to accept the House's amended version.
The Illinois Senate has unanimously approved Illinois SB 2080, which now awaits a first reading in the Illinois House.
Massachusetts HB 4302 continues to idle.
The bills pending in Tennessee, Illinois, and Massachusetts all reject uniform R1-301. The Massachusetts bill adopts the uniform R1-201(b)(20) good faith definition, while the bills pending in Tennessee and Illinois retain the bifurcated good faith standard currently in effect by replacing the language of uniform R1-201(b)(20) with "honesty in fact in the conduct or transaction concerned."
[Keith A. Rowley]
Tuesday, April 15, 2008
The International Herald Tribune reports that four Southwest Airlines passengers are bringing a federal action alleging breach of contract and other causes of action relating to missed inspections of airplanes over a six-year period. According to plaintiffs' lawyer Lew Garrison, as reported in the Charleston Gazette, plaintiffs seek reimbursement for tickets on the ground that the airline "did not comply with government regulations and did not honor its contract with its customers." The suit also seeks punitive damages. Mr Garrison's co-counsel, Mr. Mackey added, "The airline lied to us. Ahhh, you shouldn't lie. Ahh, lying's bad mmkay?"
According to the Associated Press, the Virginia Supreme Court heard on Monday from Wyatt B. Durrette, Jr., attorney for women students admitted to the Randolph Macon Women's College (now known as Randolph College) who have alleged that the college's governing board breached a contract with them by admitting men. Mr. Durrette pointed to advertising materials and brochures that touted the school's single-sex approach to education.
The suit was dismissed by a trial court last year. The school argues that the case is now moot, as 60 men have already been admitted. The case raised some interesting issues not only of contract but of education. Mr. Durrette analogized his clients' situation to that of a person admitted to a dentistry school who learned only after enrollment that it was really a veterinary school. The school countered that since students do not commit to staying at one school for all four years, enrollment in any particular school is really at most a one-semester contract. Mr. Durrette countered that it is more like a lease with an option to renew.
In a related case, the Virginia Supreme Court also heard argument in a case involving college donors to Randolph College who do not want their charitable contributions expended on a co-educational institution. As is common in such cases, the move to co-education is driven by low enrollments. Randolph's board hoped opening the college's doors to men would increase enrollment. So far, according to the AP, it has not had that effect.
Sunday, April 13, 2008
The Cyberknife Center of Florida's Treasure Coast is suing the St. Lucie Medical Center (SLMC) in a Marin County court for fraud and breach of contract. Cyberknife opened a multimillion dollar cancer center last summer but closed it in January when, according to the complaint as reported on here, SLMC failed to get approval for medicare billing. The suit alleges that, despite assurances that it had sought the necessary provider-based status before the cancer treatment center opened in June, SLMC did not apply for such status until after the treatment center opened. In January, still not having obtained the necessary status, SLMC determined that it had no choice but to close the center. It is not clear why SLMC was unable to obtain the necessary status for the treatment center, but as the above-referenced article suggests, confusion about effective ownership of the center may have been an issue.
Saturday, April 12, 2008
"He has his half hours."
"It's better than it sounds."
For fans of Richard Wagner (left), there is no better way to spend 15-16 hours than listening to his singular Gesamtkunstwerk, "Der Ring des Nibelungen." That is why, as the New York Times reports, members of the Wagner Society of NewYork are hitting high C's in expressions of outrage over New York's Metropolitan Opera's decision to end its unofficial policy of giving Wagnerians the first pick of tickts for the Met's production of the Ring. Instead, the Met's regular subscribers and patrons will be given preference. As a consequence of this decision, Wagnerians contend that they may have to spend extra hundreds or even thousands of dollars to secure good seats for the last performance of Otto Schenk's classic production of the Ring in 2009.
The Met's Peter Gelb is unrepentant:
“Wagnerians are very emotional,” he said. “But I have to look at the larger picture of the Met’s interests,” he said.
Limiting “Ring” priority to patrons and overall subscribers is another incentive to raise money and sell subscriptions, Mr. Gelb said. “We felt we needed to reward people who are patrons or subscribers,” he said. He provided his own baseball analogy: It is like buying season tickets for the Yankees, which includes the bonus of watching them play the Red Sox.
Mr. Gelb also pointed out that the earlier practice was not official policy, and that the Met was giving ample advance notice. “We don’t want to offend Wagner lovers, certainly, but hopefully they understand we are trying to maximize attendance and ticket revenues at the Met.”
So, here's the potential contract issue. Is Mr. Gelb admitting too much when he acknowledges an earlier practice, even if that practice was not "official policy?" Perhaps the prices that members of New York's Wagner Society were paying for their tickets included the consideration that those tickets assured them a place at the head of the line for future productions.
Friday, April 11, 2008
All glory is fleeting. When CBS News hired Katie Couric a year and a half ago, the move represented a clear break with its past. Couric was sure to bring CBS into the 21st century by completing the People Magazinfication of the evening news. And CBS paid big time, entering into a five-year $75 million contract with Couric.
Now, as those clever headline writers at the New York Daily News report, CBS recognizes that the contract was a "Kat-astrophe." CBS News is mired in third place, where it was before Couric arrived. While all involved are denying rumors of Couric's imminent departure, the smart money indicates she will be gone before the next presidential inauguration.
The New York Times suggests that CBS's problems are broader than its ties with Kouric. Given the rise of the 24-hour news networks, the traditional network news divisions may no longer be able to compete. ABC News has clearly given up on breaking news. Meanwhile, the Times reports that CBS is rumored to be talking of a partnership with CNN.
Dan Rather (pictured) sued his former employer last September. Yesterday, most reports suggested that CBS won something of a victory, with headlines such as "Dan Rather's CBS Lawsuit Loses Some Steam," "Court Dismisses Majority Of Claims In Dan Rather's Lawsuit Against CBS" and "Judge Dismisses Bulk of Dan Rather's Suit vs. CBS." In its web edition the New York Times offered a more measured headline, "Parts of Rather's Suit Against CBS Dismissed," but in the print edition, schadenfreude apparently won the day, as the headline reads "CBS Is Denied a Move To Dismiss Rather's Suit."
As you may recall, the former CBS anchor was fired for attempting to engage in journalism. Yesterday, New York State Supreme Court Justice, Ira Gammerman, set aside Mr. Rather's claims against individual defendants such as Sumner Redstone and Leslie Moonves, but left in tact Mr. Rather's breach of contract claim against CBS. Mr. Rather alleges that CBS breached its contract with him by effectively marginalizing him for more than a year after he departed from the evening news. Mr. Rather's fraud claim against CBS was dismissed.
I suspect that Justice Gammerman let Sumner Redstone off because of his competitive streak. Gammerman has been around forever and doesn't like his longevity to be upstaged. Gammerman well remembers the Roosevelt administration but Sumner Redstone well remembers the Lincoln administration.
Wednesday, April 9, 2008
A legal recruiter sued Akin Gump for a placement fee, and a New York trial court recently granted the law firm summary judgment.
The recruiter sent an unsolicited email to a partner of the law firm, attaching the resume of a candidate with specialization in Korean law. The email stated that "[t]he interviewing of any attorney submitted to the firm will constitute acceptance of these terms and conditions unless [the recruiter] is notified to the contrary in writing prior to the first interview." The law firm partner stated he had no recollection of receiving the recruiter's email. A few months later, the firm hired this attorney and the recruiter sought a placement fee of more than $200,000.
The court granted the law firm summary judgment, finding the following undisputed facts:
While [the recruiter] may have been the first to submit [the attorney's] resume to defendant, there is no dispute that: (1) the resume was sent unsolicited; (2) it was sent to a non-hiring partner at the New York office, as opposed to either the recruitment office or to the Washington D.C. office, where the Korean practice was based; (3) there was no communication made by defendant to plaintiff acknowledging receipt of [the attorney's] resume or concerning his hiring; and (4) plaintiff never arranged an interview or had any conversation concerning either of the candidates with anyone at Akin Gump.
Thus, as a matter of law, the court held there was no mutual assent between the parties. And, moreover, even a contract was formed, the recruiter was not the "procuring cause" of the attorney's placement and, thus, there was no breach of contract.
Sivin-Tobin Associates LLC v. Akin Gump Strauss Hauer & Feld LLP, 107123/06 (Solomon, J.).
[Meredith R. Miller]