ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Monday, June 16, 2008

Limerick of the Week: Ira S. Bushey & Sons v. U.S.

We already know what to do with a drunken sailor.  That question has been answered in the famous sea shanty and illustrated in this video (with thanks to Meredith Miller for her technical assistance!):

But Judge Friendly had to address the vicarious liability of the U.S. government for the conduct of one of its sailors who returned from shore leave "in the condition for which seamen are famed."  Upon his return to the scenic Gowanus Canal in Brooklyn, where his ship was docked, the sailor turned some valves which caused both vessel and dock to list.  The sailor made some attempt to confess his actions but, according to Judge Friendly, his "condition was not such as to encourage proximity."  Eventually the ship fell off the blocks and against the drydock wall, causing damages which the drydock owner sought to recover from the master. 

Judge Friendly rejected the then-operative "motive" or "purpose" test for vicarious liability in favor or a general foreseeability test. 

Ira S. Bushey & Sons, Inc. v. United States

Knowing sailors can drink with the best,
Judge Friendly proposed that the test
For vicarious liailbity
Be foreseeability
Not: "Was it done at the master's behest?"

[Jeremy Telman]

June 16, 2008 in Famous Cases, Limericks, Teaching | Permalink | Comments (0) | TrackBack (0)

ATA Sues FedEx for Breach of Contract

Ata_airlines_logo_2001Ahh, ATA.  I have such pleasant memories of flying on your planes out of Midway to LaGuardia.  Where are you now, old friend?  Alas, like most air carriers, you are in the throes of bankruptcy.  Supporters of deregulation, be careful what you wish for.

But even while in bankruptcy, airlines still retain their legal personhood and they also retain attorneys, and so according to The New York Times, ATA is suing FedEx, alleging that the latter breached an agreement with ATA in January when it dropped ATA from its military charter team. 

The Associated Press quotes ATA's attorney as claiming that notice of FedEx's decision to drop ATA came "out of the blue."  That's rich!  Get it?  Airplane contracts? out of the blue?!?  It's clever, no?  Unfortunately, the loss of the contract with FedEx was no laughing matter for ATA, which relied on the military personnel charters to generate over $400 million in revenue annually.  ATA had been a member of the FedEx team for over 20 years and had just spent $50 million buying aircraft from Northwest Airlines in reliance on its continued membership in the team.  Damages sought are not yet specified but are expected to be in the tens of millions.

ATA alleges that FedEx's breach drove the airline into bankruptcy.  I wonder what drove all the other airlines into bankruptcy?

Also, why do we use a freight company to transport military personnel?

[Jeremy Telman]

June 16, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 10, 2008

Limerick of the Week: The Franchise Cases

Humbleoil If you were looking for this weekly installment yestereday, when it usually appears, and were outraged that you could not find it, please sue American Airlines for all damages reflecting your disppointment, including pain and suffering of course.  Today's Limerick is delayed because my return flight from Philadelphia was diverted to Indianapolis.  And when American Airlines tells you that the diversion of my flight was due to weather conditions beyond their control. don't believe them!!  If it weren't for a mechanical problem that delayed our take-off from Philly, we would have beat the front that hit O'Hare last night.

I will do my best to make things better, offering an almost unprecedented Limerick two-fer. The cases herein memorialized are actually tort cases and thus, to some extent, beneath the dignity of contracts profs and readers of the Contracts Profs Blog.  Still, the vital question at issue in both cases is whether an agency relationship arises from the typical franchise agreement between gas station franchisees and the oil companies with which they contract.  While the tort aspects of the case create the typical intellectual challenges posed by a prat-fall, the agency aspects of the cases, touching as they do on contractual relations, are complicated. 

Both cases involve accidents at service stations.  In the first (Humble Oil), a car is raised for servicing without the parking break engaged.  It rolls down a hill (comically no doubt) and then (less comically) mows down some innocent bystanders.  The question is whether Schneider, the franchisee, can be liable for the harm done to the bystanders.  In the second (Hoover), plaintiff was injured in a fire that erupted at the back of his car while it was being filled with gasoline (see Limerick for my theory as to how the fire might have started).  The question here is whether the franchisee Barone can be liable for plaintiff's harm.  While the torts involved are different, the law and the legal framework governing the cases are similar.  Still, the cases come out differently, and both are wrongly decided IMHO.  The Limericks lay out the bases for the courts' reasonsing, with some simplification:

Humble Oil v. Martin

To Humble must Schneider report,
Humble set the hours, so the court
Refused to remand.
The verdict must stand;
The franchisor's liable in tort.

Hoover v. Sun Oil

In Hoover, the gas-filling bloke
Chose an unfortunate time for a smoke.
Sun Oil owned the station,
Equipment, location,
But Barone set the hours, now he's broke.

[Jeremy Telman]

June 10, 2008 in Famous Cases, Limericks, Teaching | Permalink | Comments (2) | TrackBack (0)

Mandatory Arbitration of Credit Card Disputes Gets Mainstream Press Attention

Finally, Business Week's cover story, Banks v. Consumers (Guess Who Wins), brings a mainstream press indictment of the big business of The National Arbitration Forum (NAF), and the not-so-mysterious fact that consumers lose these cases more than 90% of the time. The article echoes what some contract scholars have been saying for years about the lack of consent to arbitrate. The article begins:

What if a judge solicited cases from big corporations by offering them a business-friendly venue in which to pursue consumers who are behind on their bills? What if the judge tried to make this pitch more appealing by teaming up with the corporations' outside lawyers? And what if the same corporations helped pay the judge's salary?

It would, of course, amount to a conflict of interest and cast doubt on the fairness of proceedings before the judge.

Yet that's essentially how one of the country's largest private arbitration firms operates. The National Arbitration Forum (NAF), a for-profit company based in Minneapolis, specializes in resolving claims by banks, credit-card companies, and major retailers that contend consumers owe them money. Often without knowing it, individuals agree in the fine print of their credit-card applications to arbitrate any disputes over bills rather than have the cases go to court. What consumers also don't know is that NAF, which dominates credit-card arbitration, operates a system in which it is exceedingly difficult for individuals to prevail.

[emphasis added]. The article continues:

An arbitration company collaborating with law firms to land business troubles some legal scholars. "Most people would be shocked," says Jean Sternlight, an arbitration expert at the University of Nevada, Las Vegas. "Our adversarial system has this idea built into it that the judge is supposed to be neutral, and NAF claims that it is," she adds. "But this certainly creates a great appearance, at a minimum, of impropriety, where the purportedly neutral entity is working closely with one of the adversaries to develop its business."

The only criticism I have of the article is that it doesn't mention any solutions -- in particular, The Arbitration Fairness Act, which would ban pre-dispute agreements to arbitrate in the consumer, franchise and employment contexts.

[Meredith R. Miller]

June 10, 2008 in In the News | Permalink | TrackBack (0)

Monday, June 9, 2008

T-Mo Sues Starbucks Over Free Wi-Fi Plan

Coffeecup01_3In light of slumping profits, it is no secret that Starbucks is looking to restore its image to the humble coffeehouse of Seattle in 1971. That is, it has undertaken "initiatives intended to restore an authentic coffeehouse experience to the stores and, in turn, re-energize an ailing stock that has lost half its value in the last 15 months." (Query whether it is possible to turn back time when a corporation has 15,011 stores in 44 countries).

In this effort, the ubiquitous coffee chain carted out a new logo (causing some controversy because the new logo sports a bare chested mermaid). It also purchased the Clover coffee machine, likely pulling from underneath the non-publicly held, truly local coffee shops the possibility of obtaining a $11,000 coffee machine that brews by the cup and had the potential to change how we think about coffee (note that this Slate piece was written before Starbucks got its hand on the Clover). Starbucks has also announced a "loyalty program" - which could act like the punch card system of the local coffee house ("get your 10th cup free"), but sounds more like the fine print bureaucracy of frequent flier programs of major airlines (will Starbucks have blackout dates?).

Further to the effort, Starbucks has announced free wi-fi (that is, at least for a couple of hours a day). This actually does sound like the small, local coffeeshop - though, they ordinarily don't limit access to two hours. T-Mobile, however, is not happy with the coffee chain's plan. Starbucks had an existing wi-fi contract with T-Mo, pursuant to which Starbucks customers paid for the wi-fi access. The cellphone giant claims that Starbucks breached that contract by allowing rival AT&T to supply the free wireless service to customers. Here's more on the lawsuit:

In its 12-page complaint, filed Thursday in New York State Supreme Court in Manhattan, T-Mobile alleged breach of contract, interference with contract and unfair competition over a recent Starbucks Wi-Fi promotion with AT&T Internet Services Inc., which T-Mobile claims risks overloading its lines and equipment.

T-Mobile, which had been exclusively providing Wi-Fi service at Starbucks since 2002, accused Starbucks of "secretly" developing a promotional plan to let AT&T provide free Internet service at more than 7,000 U.S. Starbucks stores. T-Mobile said it is bearing the cost and burden of that offer, because it still provides equipment and technology in all but two of Starbucks' U.S. markets.

"The conduct of Starbucks has caused T-Mobile monetary damages, and such damages will continue should Starbucks continue its breaching conduct," T-Mobile said.

Starbucks began transitioning from T-Mobile to AT&T as its Wi-Fi provider in February. T-Mobile maintains that the Starbucks promotion violates a transition agreement giving T-Mobile exclusive rights to market and sell Wi-Fi Internet access at Starbucks stores until Jan. 4, 2009.

The transition agreement gave AT&T and Starbucks only "limited rights" to promote the move to another Wi-Fi provider. T-Mobile said only two markets, San Antonio and Bakersfield, Calif., have fully converted from T-Mobile to AT&T, the biggest U.S. phone company.

T-Mobile said Starbucks gives free Wi-Fi service using T-Mobile's equipment and lines to anyone with a Starbucks Card, which causes "risks of spikes in usage, drains on that network and T-Mobile's resources and therefore causes delays, frustrations and other harm to all users of T-Mobile's network."

The provider seeks unspecified damages, legal fees and an order preventing Starbucks from breaching the transition agreement.

In a statement Friday responding to the suit, Starbucks said, "Our goal is to ensure Wi-Fi access at all Starbucks locations. This is a benefit offered to our Starbucks Card Rewards members as well as AT&T subscribers, and steps are being taken to ensure that this access continues."

Bradley Ruskin of the law firm Proskauer Rose, who is representing T-Mobile, declined to comment further on the suit.

The case is T-Mobile USA Inc. v. Starbucks Corporation, 601702/2008, New York State Supreme Court (Manhattan).

[Meredith R. Miller] [disclosure: some time ago, I worked at Proskauer, and participated in the representation of T-Mobile, but not in connection with the matter discussed in this post]

June 9, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)

Friday, June 6, 2008

I'll make her an offer she can't refuse...

For those of you that yearn for the guilty pleasure of celebrity related contract news, book publisher HarperCollins has sued mob daughter Victoria Gotti for the return of a $70,000 advance on a memoir. Reuters reports:

Gotti and HarperCollins signed a contract in 2005 for two books, including an untitled memoir, according to the lawsuit filed in New York state court, which accused Gotti of breach of contract.

Gotti, who was once a columnist for the New York Post, has written several books and was the star of the reality television show "Growing up Gotti."

She was paid $70,000 for the memoir and promised to deliver a complete manuscript by November 2005.

Gotti twice delivered an outline of the book but the outlines were rejected as "unacceptable" by the publishing house and she was advised that the outlines "were not capable of producing a complete manuscript," the lawsuit said.

Gotti was asked to return the money but never complied, it said.

Gotti was not immediately available for comment.

[Meredith R. Miller]

June 6, 2008 in In the News | Permalink | TrackBack (0)

Thursday, June 5, 2008


Icj_2 I'm interrupting my vacation to bring this breaking news.  I have already posted numerous times (e.g., here, here, and here) on the recent U.S. Supreme Court decision in Medellin v. Texas, in which the Court found that the State of Texas does not have to implement the International Court of Justice's Avena decision. 

Now, as reported on Opinio Juris and the International Law Profs Blog, Mexico has upped the ante, bringing a new case before the International Court of Justice (represented metonymically at left) and seeking both provisional measures to prevent the execution of Mexican nationals denied their VCCR rights and an order that the U.S. provide "review and reconsideration" of cases involving such Mexican nationals in accordance with the Avena decision.

I call this sweet for three reasons: first, it allows the ICJ to weigh in on Chief Justice Roberts' view that the sole remedy  for a state's failure to abide by a judgment of the ICJ is a political solution via the U.N. Security Council.  Second, it could even permit the ICJ to suggest what practical steps the United States must take, in light of the Medellin case, in order to comply with its obligations under the VCCR and Avena.  Third -- perhaps the sweetest of all -- the Bush administration basically backed Mexico in the Medellin case, calling upon Texas to provide review and reconsideration in accordance with Avena.  But it did so in a rather diffident manner, through a Presidential memo (what, Dubya couldn't find the form for an executive order?!?) which cited the principle of comity as the basis for its directive to the states to implement the Avena decision.  So what will the administration do now when Mexico is in effect calling its bluff.  Will the Bush administration introduce legislation calling on state courts to provide review and reconsideration of Avena defendants' convictions and sentences which, according to the Roberts Court, would suffice to override state procedural rules barring successive habeas petitions?

[Jeremy Telman]

June 5, 2008 in Commentary, In the News, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Away for the Weekend

I will be away this weekend, attending the West Chester University Poetry Conference.  Hopefully, I will be able to brush up on my prosody a bit and thus improve the Limericks.

If you are in the Philadelphia area and would benefit from some instruction in the area of formal poetry, you should stop in.  Or keep the conference in mind for next year.  It is an annual event and I think unique (as poetry conferences go in the United States) in its (non-exclusive) focus on rhymed, metrical poetry.

Full disclosure: one reason I am partial to this conference is that my wife is on the faculty, as are several of my favorite poets (and I like their poetry too).

[Jeremy Telman]

June 5, 2008 in About this Blog | Permalink | Comments (0) | TrackBack (0)

Weiskopf on Lady Duff

Ladyduffgordon1919 St Johns University's Nicholas Weiskopf has a new article forthcoming in the Pace Law Review about Cardozo's famous decision involving Lucy, Lady Duff-Gordon (pictured).  It's always nice to have occassion to ponder Lady Duff-Gordon and Cardozo's opinion in the Wood v, Lucy case, even if, as Professor Weiskopf notes, the case seems to be falling out of favor.  Here is the abstract:

This piece was prepared in connection with a Fall Law School Symposium marking the 90th anniversary of Judge Cardozo's famous New York Court of Appeals decision in Wood v. Lucy 222 N.Y. 88, 118 N.E. 214 (1917). It deals with tensions in the case law as to whether the implied covenant of good faith and fair dealing may permissibly create contractual duties wholly independent of any actually agreed to by the parties, whether on a theory of presumed intent or what in actuality is judicially legislated construction designed to preserve minimum decencies. Wood, with its finding of a reasonable efforts requirement to be imposed on one with a marketing exclusive, is described as an early example of the latter approach, and contrasted to decisions which, to this day, insist that good faith can only be used to prevent abuse of actual terms of agreement.

[Jeremy Telman]

June 5, 2008 in Famous Cases, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Supersonic Contract Dispute


This is Seattle.  A nice place for a basketball team.  Or so thought former Seattle Supersonics owner, Howard Schultz.

Oklahoma_city_1890_3 This is Oklahoma City, home of the new owners of the team, including the group's chairman, Clay Bennett.  A bit retro, but still nice.

But Howard Schultz is not pleased, and according to, he is suing the Bennett group for (among other things), you guessed it! - breach of contract.  Schultz argues that the new owners violated the contract by failing to make a good faith attempt to keep the team in Seattle.  According to Schultz's attorney, the sale of the team was negotiated on condition that the Bennett's group negotiate or propose "a reasonable arena plan, instead [of] proposing an arena substantially exceeding the team's needs and requiring unprecedented amounts in public subsidies."

According to the Seattle Times, the Schultz suit seeks to unwind the sale transaction based on fraud, misrepresentation and breach of contract.  Key evidence in the suit turned up in the form of e-mails exchanged among the Oklahoma City partners suggesting that they had intended to move the team to Oklahoma City all along.

The City of Seattle is also suing the Bennett group, seeking to force the team to play in Seattle until the end of its lease with the city's KeyArena.  The Bennett group has offered to pay the remaining rent on the facility but that may not be enough to placate the city.

[Jeremy Telman]

June 5, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)

Monday, June 2, 2008

Limerick of the Week: Hoddeson v. Koos Bros.

Shakespeare Shakespeare?  Overrated!  I mean, I've looked through the guy's works -- ahem, excuse me, oeuvre -- and I have many complaints.  First, the guy can't spell.  Second, his plays are full of cliches.  "There's something rotten in the state of Denmark;" "To be or not to be;" "It was [all] Greek to me;" "All the world's a stage;" "Parting is such sweet sorrow;" etc., etc.  Sheesh.  Get a ghost writer if you can't come up with your own ideas.  Third, if this so-called poet thinks that "brevity is the soul of wit," why does he have this thing for sonnets?  Why say something in fourteen lines of pentameter that can be said in five lines of trimeter and dimeter?  Indeed, the man wrote all these plays and sonnets, but not a stinkin' Limerick!! And still, courts quote him with abandon, as if he were a source of law, like foreign law and international law is.

To wit, in Hoddeson v. Koos Bros., the court explains Ms. Hoddeson's trip to the furniture store as follows: "her eyes had fallen upon certain articles of bedroom furniture which she ardently desired to acquire for her home."  Understandable.  The learned judge continues: "It has been said that 'the sea hath bounds but deep desire hath none.'"  I knew right off (from the misspellings/archaisms) that this must be Shakespeare.  Fancy.  Big deal.  The case isn't even about maritime law.

Anyway, after lengthy negotiations, Ms. Hoddeson tendered $168.50 to what she took to be a salesman.  He told her to expect delivery of the furniture but did not give a receipt.  This man turned out to be a silver-haired mountebank and the furniture never arrived.  Indeed, this is the stuff of tragedy.  A truly great tradegian would find suitable materials here.  But the case also serves to illustrate the doctrine of agency by estoppel.  A wordy person could write a sonnet to convey that information, but a truly talented poet can make due with a Limerick:

Hoddeson v. Koos Bros.

"Desire hath no bounds," quoth the bard,
But Ms. Hoddeson had maxed out her card!
Unless the store is estopped,
Her suit must be dropped
And shoppers must be on their guard.

[Jeremy Telman]

June 2, 2008 in Famous Cases, Limericks, Teaching | Permalink | Comments (1) | TrackBack (0)