ContractsProf Blog

Editor: D. A. Jeremy Telman
Valparaiso Univ. Law School

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Friday, October 31, 2008

Brown on Halloween, Promises & Signed Documents

Halloween time always reminds me of the Peanuts Special, It's The Great Pumpkin Charlie Brown. Of course, my thoughts turn to two wise philosophers, admirable contract scholars and lovable losers: Charlie Brown and Linus.

For example, in light of the approaching election day, don't forget Linus' pertinent reminder:

"I've learned there are three things you don't discuss with people: religion, politics and the Great Pumpkin."

Further, the following familiar exchange between Charlie Brown and Lucy (also captured in the clip below) provokes normative questions about the tension between formal legal requirements and fundamental fairness :

Lucy Van Pelt: Say Charlie Brown, I’ve got a football. How about practicing a few placekicks. I’ll hold the ball and you come running and kick it.

Charlie Brown: Oh brother. I don’t mind your dishonesty half as much as I mind your opinion of me. You must think I’m stupid.

Lucy: Oh come on Charlie Brown.

Charlie: No.

Lucy: I’ll hold it steady.

Charlie: No.

Lucy: Please….

Charlie: You just want me to come running up to kick that ball so you can pull it away and see me land flat on my back and kill myself.

Lucy: This time you can trust me. See, here’s a signed document testifying that I promise not to pull it away.

Charlie: It is signed! It’s a signed document! I guess if you have a signed document in your possession you can’t go wrong. This year I’m really going to kick that football.

[Charlie runs and goes to kick the ball and, of course, Lucy pulls it away, causing Charlie to fall.]

Lucy: Peculiar thing about this document, it was never notarized.

Poor Charlie. He is persistent at trick-or-treating, and all he can say is "I got a rock!" I suppose that's better than a mere peppercorn. Happy Halloween!

[Meredith R. Miller]

October 31, 2008 in About this Blog, Film Clips, Quotes | Permalink | Comments (0) | TrackBack (0)

Wednesday, October 29, 2008

An Update on the Google Book Scanning Project

Googlelogo Back in 2005 (time does fly when you're blogging), we mentioned Google's plans to scan basically all the books in the world and make them available on the Internet.  Publishers and authors were outraged by the project.  The Chronicle of Higher Education reports that Google, publishers and authors have reached a settlement agreement in the book-scanning class action lawsuit (it is annoying, indeed, but subscription is required):

Under the terms of the deal, Google will pay $125-million to establish a Book Rights Registry, to compensate authors and publishers whose copyrighted books have already been scanned, and to cover legal costs.

The settlement, which still needs court approval to go into effect, would resolve a class-action lawsuit brought in 2005 by the Authors Guild as well as a separate lawsuit filed on behalf of the publishers’ association. Publishers and authors argued that Google’s scanning of books for its Google Book Search program was a flagrant violation of copyright law's provisions governing fair use.

“We had a major disagreement with Google about copyright law,” Paul Aiken, the guild’s executive director, said during a joint teleconference that Google and the publishers held with reporters. “We still do, and probably always will.” But he said that the parties had been “able to set those issues aside” for what “may be the biggest book deal in U.S. publishing history.”

The deal goes far beyond money. Richard Sarnoff, chairman of the publishers’ association, described it to reporters as “breathtaking in scope, groundbreaking for publishers and authors, and trailblazing for intellectual property in general.”

The settlement unlocks the full texts of books that searchers can only now read online in snippets.  For those interested in arcane or hard-to-get texts, it may be a real boon, as the Chronicle reports that "[i]nstitutions would be able to buy subscriptions so that their students and faculty members could have full access to complete texts. All public libraries in the United States would be given free portals for their patrons."

[Meredith R. Miller]

October 29, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)

New Recruiting Tool: Sue Students Who Don't Attend Classes

CincyCincinnatti.com reports that the University of Cincinnati is seeking to recover $6300 from Angela Caliguri. Ms. Caliguri claims that she went onto UC's website to look at its course offerings in 2004. She then compared those course offerings to those from Cincinnati State Technical and Community College. Finding UC's tuition too high, Ms. Caliguri enrolled at Cincinnati State. But UC claims that Ms. Caliguri signed up for UC courses before logging out. Although it concedes that Ms. Caliguri did not attend any classes at UC, UC claims that it held a spot open for her in the courses for which she had enrolled.

UC duly billed Ms. Caliguri for the courses in which she had allegedly enrolled. Tuition, fees and health insurance charges amounted to over $3150. Adding interest and collection fees, the University now seeks damages in excess of twice the original bill. Ms. Caliguri's court papers claim that she contacted UC repeatedly in order to explain that she never attended and never intended to enroll, but UC is pursuing its claim nonetheless. It claims that about 2 percent of UC students do not pay their tuition, costing the University $6 million annually. But Ms. Caliguri's case suggests that the University needs to reconsider how it counts its "students."

[Jeremy Telman]

October 29, 2008 in In the News | Permalink | Comments (2) | TrackBack (0)

Tuesday, October 28, 2008

At Last, A Soft-Drink Company that Keeps Its Word

Dr_pepperOkay, first a little background. There is a group of musicians that calls itself Guns N' Roses. The band is quite popular, but it has not released a studio recording since 1991. Recently, Guns N' Roses announced that it would be releasing a new album called Chinese Democracy, and this announcement created a considerable stir. For reasons that remain obscure. the makers of the soft drink, Dr. Pepper, promised a free soda to every American (in Indiana, Americans must show a picture I.D. in order to qualify for the offer), if the new recording was released before the end of 2008.

According to Billboard.com, this is how the company explained its marketing strategy:

"It took a little patience to perfect Dr Pepper's special mix of 23 ingredients, which our fans have come to know and love," Dr Pepper director of marketing Jaxie Alt says. "So we completely understand and empathize with Axl's quest for perfection -- for something more than the average album. We know once it's released, people will refer to it as 'Dr Pepper for the ears' because it will be such a refreshing blend of rich, bold sounds - an instant classic."

When the release date was announced, a Dr. Pepper spokesman was clearly abashed: "We never thought this day would come," he explained. I guess when it comes to a band like Guns N' Roses, double-daring really works.

MTV Newsroom now reports that "Chinese Democracy" will be released on November23rd, and Dr. Pepper will make good on its word. In order to collect your free soda, all you have to do is visit the Dr. Pepper website on the release date, November 23, 2008, and log on. You can read all about it on a special blog created in connection with the offer. Once the company has collected all relevant information about you, it will send you a coupon which you can present at any store and then collect your free soda.

[Jeremy Telman]

October 28, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)

Business Associations Limerick of the Week: In re eBay

EbayThis is a pretty simple case about usurpation of a corporate opportunity. Investment bankers approached eBay's principals with offers of shares in companies to be distributed in public offerings that the banks were underwriting. In return, the investment banks hoped to win eBay's business in future transactions in which eBay would need investment banking services. At the time of these transactions, getting one's hands on shares from such public offerings was very desirable, as the shares were inevitably undervalued and would appreciate quickly in value in the days after the public offering. Buying such shares and then quickly re-selling them is a practice known as "spinning." The shares were in effect a gift that resulted in millions of dollars in profits for the eBay executives. What did they do with those profits? Threw them on the pile, I suppose.

In any case, eBay shareholders sued, arguing that the profits really belonged to eBay and not to the executives. After all, the investment banks could have offered those shares to any random multi-millionaire or billionaire. They chose to offer the shares to eBay executives because the investment banks were interested in the company's business. The court agreed, finding that the investment opportunities were in eBay's line of business and that the company had an interest or expectancy in the opportunity.

In re eBay

"A billion? It's a beginning,
But I need more -- think I'll try spinning."
The court said "No way!
You have to repay
eBay, whose profits you're skimming."

[Jeremy Telman]

October 28, 2008 in Famous Cases, Limericks, Teaching | Permalink | Comments (0) | TrackBack (0)

Monday, October 27, 2008

Now in Print

Stack_of_papers_woman - Wayne Barnes, The Objective Theory of Contracts, 76 U. Cin. L. Rev. 1119 (2008).

- Daniel B. Bogart, Good Faith and Fair Dealing in Commercial Leasing: The Right Doctrine in the Wrong Transaction, 41 J. Marshall L. Rev. 275 (2008).

[Meredith R. Miller]

October 27, 2008 in Recent Scholarship | Permalink | TrackBack (0)

Marvin v. Marvin Updated: The Tim Burton Case

Tim_burtonSince we have just posted a Limerick commemorating the most celebrated of palimony cases, Marvin v. Marvin, it is worthy of note that, as MSNBC reports, Los Angeles Superior Court Judge Teresa Sanchez-Gordon issued an order on September 16th of this year finding that director Tim Burton's ex, Lisa Marie, is not entitled to a share of his wealth based on their long-term relationship. Mr. Burton is pictured at left. Ms. Marie is so breathtakingly beautiful that posting pictures of her cannot be risked. Actually, she is featured in the video below. According to the wikipedia entry for Lisa Marie, the two were engaged from 1993-2001 and during that time, she was seen but not heard in several of Mr. Burton's films. At the time the pair separated, Mr. Burton agreed to provide her with, among other things, $5.5 million, a New York apartment and a car. That agreement was found valid and enforceable. But Lisa Marie claims that she was coerced into signing the agreement, that Mr. Burton had promised during their relationship to support her throughout her life, and that she is now so poor she cannot even afford a proper last name.

This video provides some sense of what the couple's life was like in happier times:

[Jeremy Telman]

October 27, 2008 in Celebrity Contracts, In the News | Permalink | Comments (0) | TrackBack (0)

Contracts Limerick of the Week: Marvin v. Marvin

Lee_marvinMarvin v. Marvin provides for wonderful opportunities to discuss social issues relating to promises made in the context of marriages and other forms of cohabitation. Lee Marvin and Michelle Triola Marvin lived together for six years. At the start of their relationship, Lee was married to Betty Ebeling. At the end of his relationship with Triola, Lee Marvin married Pamela Freeley. Triola alleged that she and Lee had entered into an agreement whereby they would hold themselves out as husband and wife and that they would "share equally any and all property accumulated as a result of their efforts." After the demise of their relationship, Triola sought to enforce the alleged agreement, seeking a settlement in excess of $1 million. The trial court denied Triola relief, finding such promises unenforceable on public policy grounds. The Supreme Court of California, over a strident dissent that referred to the relationship as "meretricious," found that promises of the sort alleged can be enforced by a court and that such promises can also be implied through conduct.

Dick_van_dykeIn this particular case, the trial court on remand found that there was no agreement between the parties of the kind alleged by Triola. Apparently, the court found it unlikely that Marvin could have promised half his income to Triola while still married to his first wife. Moreover, while Triola could have recovered in quantum meruit for the non-sexual services she provided to Lee, she had already been duly compensated during the course of the relationship. The trial court's award of $104,000 in "rehabilitation" damages to Triola was overturned on appeal. Not to worry. Michelle knows how to land on her feet. According to her Wikipedia entry, she has lived with Dick van Dyke (pictured) for many years.

Oooooh, Rob! How could you ever leave Laura?!?

The case is especially timely these days with the on-going controversy over recognizing gay marriages and civil unions. Interestingly, some of my women students had very little sympathy for women who live for many years out-of-wedlock with men, bear and help raise the couple's children and support the man of the house while he pursues an education and a profitable career. This new feminism (or post-feminism or whatever it is) puts the burden on women in relationships to demand legal recognition of their status. But when it came to gay relationships, many of these same women changed their tune. Where marriage is not an option, the law must protect the rights and interests of people who commit to long-term cohabitation partnerships, regardless of gender and regardless of the nature of the relationship.

I've tried a couple of variants here.  You can vote for your favorite!!

Marvin v. Marvin

The Marvin court's ruling's propitious
For relationships non-meretricious.
Michelle can recover
From Lee, her ex-lover,
If his promises weren't capricious.

Michelle and Lee lived in sin,
A fact once viewed with chagrin.
Now she can recover
From her ex-lover
If he promised to keep her in gin.

[Jeremy Telman]

October 27, 2008 in Celebrity Contracts, Famous Cases, Limericks, Teaching | Permalink | Comments (0) | TrackBack (0)

Thursday, October 23, 2008

Creep Bliss in Seattle

SlawsonEmeritus Professor David Slawson (pictured) of USC's Gould School of Law, provides this link from the Seattle Times, as well as the following summary:

A firm based in New York State sells credit-card machine leases to merchants, using supposedly independent contractors in various states to actually make the sales. The salespersons the contractors employ tell the merchants that the leases will cost them only $20 a month but if they don't prove profitable, the merchants can transfer their leases to someone else and be free of the rental obligation. However, the fine print makes the leases nontransferable and noncancelable without a big cancelation fee and also much more expensive than $20 a month. In total, it costs a merchant $12,000 to $15,000 to get out of the lease or to continue using it for its full term. The fine print also apparently makes New York law control, and if a merchant stops paying, the New York firm brings suit against them in New York, making it very difficult and expensive for them to defend. The suit itself, if not settled, can ruin a merchant's credit rating.

Professor Slawson appends the following questions for any who might care to offer advice:

1. Aren't the local contractors still the New York firm's agents, despite being independent contractors, because an agent is someone who has the power to make contracts for the principal, *by definition?*

2. Would any of the limits on choice of law for contracts allow a Washington court to apply Washington law despite the contract?

3. Since it would not be enough merely to declare these contracts unenforceable, because the New York firm could continue to ruin a merchant's credit rating anyway, simply by bringing suit (and possibly alleging some
new fact that distinguished the Washington court's decision), what basis might there be for bringing a fraud action against the Washington contractor and/or the New York firm?

Comments will be greatly appreciated.

[Jeremy Telman]

October 23, 2008 in In the News | Permalink | Comments (1) | TrackBack (0)

Wednesday, October 22, 2008

Chapman, Alabama, 1925

Aaa Some time ago we noted here that when Joe Webb of Webb. v. McGowin fame was working at the W.T. Smith Lumber Company back in the 1920s, one of his co-workers was Alonzo Huble "Lon" Williams, driver of the train that brought the logs to the mill (left).  Lon's son Hiram, nicknamed "Hank," went on to be one of the greatest country singers and songwriters of all time.

We noted that Hank wrote a song about his daddy and the W.T. Smith log train.  Well, somebody has now come up with a YouTube version of Hank Williams's performance of The Old Log Train, illustrated with photos of Williams and the old W.T. Smith mill.  Enjoy!

(P.S. Maybe Jeremy knows how to insert the video into the post, but I can't figure it out.)

Happy to oblige:

October 22, 2008 in Famous Cases, Teaching | Permalink | TrackBack (0)

Can two people "cohabit" without. . . "doing it"?

Coahead01A majority of the New York Court of Appeals held yesterday that the word "cohabitation" was ambiguous as used in a separation agreement -- namely, because it is unclear whether two people must engage in sexual relations to be cohabiting rather than, well, simply living together.

Husband and wife separated and agreed that husband would pay wife $11,000 a month for a period of time, unless one of four specified "termination events" occurred. One such event was "[t]he cohabitation of the Wife with an unrelated adult for a period of sixty (60) substantially consecutive days." The agreement did not define cohabitation.

Husband argued that he no longer had to make payments to wife, alleging that the wife and an unrelated man ("MP") were cohabiting within the meaning of the settlement agreement -- because MP had stayed overnight in the wife's vacation home in Connecticut for at least 60 substantially consecutive days during the summer of 2004, as borne out by surveillance.

Wife argued that she did not "cohabit" with MP, and that their relationship was strictly platonic, as proven by evidence of MP's sexual incapacity and her diminished sexual desire caused by prescribed medication. She argued that "use [of] the word 'cohabitation' –- rather than 'living together' or 'residing' . . . plainly mean[t] having sexual relations." The husband argued that the definition of cohabitation "could not possibly require sexual relations."

Jread04The trial court sided with the husband, holding that sexual relations were not determinative of cohabitation, and noting that the parties functioned as an economic unit by sharing expenses. Over a two judge dissent, the Appellative Division affirmed. Judge Read, writing for a 4-judge majority of the Court of Appeals, reversed:

We do not agree that "the term cohabitation has a plain meaning which contemplates changed economic circumstances, and is not ambiguous" absent an explicit provision to the contrary in a separation agreement or stipulation (Graev, 46 AD3d at 451), or, put slightly differently, is necessarily determined by whether a "couple share[s] household expenses or function[s] as a single economic unit" (id. at 453). Rather, the word "cohabitation" is ambiguous as used in this separation agreement: neither the dictionary nor New York caselaw supplies an authoritative or "plain" meaning. Similarly, courts in other states have not ascribed a uniform meaning to the word "cohabitation" as used in separation agreements (see Allen, Annotation, Divorced or Separated Spouse'sLiving with Member of Opposite Sex as Affecting Other Spouse's Obligation of Alimony or Support Under Separation Agreement, 47 ALR4th 38, §§ 6[a] and 6[b]).
In addition to the definition in Black's Law Dictionary, already set out, "cohabit" is variously defined as "[t]o live together as husband and wife: often said distinctively of persons not legally married" (Oxford English Dictionary [2d ed 1989]); "to live together and have a sexual relationship without being married" (The New Oxford American Dictionary [2d ed 2005]); "to live together as or as if as husband and wife" (Webster's Third New International Dictionary [2002]); "to live together as husband and wife, usually without legal or religious sanction," or "to live together in an intimate relationship" (Random House Webster's Unabridged Dictionary [2d ed 2001]); and "to live together as or as if a married couple" (Merriam Webster's Collegiate Dictionary [10th ed 1997]). The common element in all these definitions is "to live together," particularly in a relationship or manner resembling or suggestive of marriage, and New York courts have, in fact, used the word "cohabitation" interchangeably with the phrase "living together" (see e.g., Markhoff, 225 AD2d at 1001; Olstein, 309 AD2d at 698; Scharnweber, 65 NY2d at 1017). Ultimately, however, "living together" as if husband and wife is no less opaque than "cohabitation": both bring to mind a variety of physical, emotional and material factors, and therefore might mean anynumber of things in a separation agreement, where otherwise unexplained in the text, depending on the parties' intent. For example, the parties here might reasonably have meant "cohabitation" to encompass whether [the wife] engaged in sexual relations with an unrelated adult; whether she and the unrelated adult commingled their finances or -- just the opposite -- whether she supported the unrelated adult financially; whether she and the unrelated adult shared the same bed; or some combination of these or other factors associated with living together as if husband and wife.

Therefore, the majority of the court held that the word "cohabitation" was ambiguous in the parties separation agreement and, without extrinsic evidence of the parties' intent, the court could not assess what they meant by it. The Court reversed and remitted for further proceedings.

Graffeo04Judge Graffeo, writing for the dissent, found that the term "cohabitation" has a "commonly-accepted core meaning:habitually living with an unrelated adult in the same residence while engaged in an intimate relationship without being legally married to that person." She explained:

In fact, we have explained that "cohabitation" is synonymous with the phrase "habitually living with another" person for purposes of the maintenance termination provisions of Domestic Relations Law § 248 (citations omitted). It is true, however, that the use of the term "cohabitation" without elaboration or conditions is capable of causing ambiguity. This is because a living arrangement becomes cohabitation only if it is habitual and this requirement may not be quantified in every situation. But the parties in this case were careful to avoid this pitfall by indicating that the benchmark would be a specific duration -- "sixty (60) substantially consecutive days" -- a practice that is implicitly recommended by a leading New York treatise (see Scheinkman, West's New York Practice Series, New York Law of Domestic Relations, Appx B, at 550 ["openly and continuously cohabits with an unrelated male for a continuous period exceeding 30 days . . ."]). This was sufficient to make the cohabitation clause here unambiguous.

Graev v. Graev, __ N.Y.3d ___ (Oct. 21, 2008).

[Meredith R. Miller]

October 22, 2008 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Robin Williams v. Frank & Beans: A Couple of Dicks

Robin_williamsE! Online reports that Robin Williams is suing a production company by the name of Frank & Beans for $6 million. E! also provides the complaint, which alleges causes of action for breach of contract and promissory estoppel here. According to the complaint, Williams was to be paid $6 million for making a film called "A Couple of Dicks." The filming was supposed to begin in April. In March, defendant Frank & Beans and its parent company Gold Circle Films (also a defendant) notified Williams that the film had been shelved. Williams alleges that his agreement was "pay or play," and that defendants had agreed to pay him his $6 million whether or not the film was produced.

Nice work if you can get it.

The contract also allegedly specified that Mr. Williams would get top billing. I wonder how the other Dick felt about that.

[Jeremy Telman]

October 22, 2008 in Celebrity Contracts, In the News | Permalink | Comments (2) | TrackBack (0)

Tuesday, October 21, 2008

Gift Card Class Action Survives in NY Appellate Court

ImagesWe previously mentioned a federal class action against Amex over gift card fees. Well, in a separate state case against Simon Property Group over gift card fees, an appellate court in New York (Second Department) recently held that, in the absence of clear and unambiguous disclosure, the imposition of dormancy and administrative fees decreasing the redeemable value of a gift card constitutes a sufficient predicate for a cause of action to recover for breach of contract.

Plaintiffs commenced a class action challenging, among other things, a $2.50 monthly "dormancy fee" imposed by the defendant in connection with its promotion and sale of Simon Gift Cards, and the allegedly improper manner in which such fees were disclosed. The court explained:

The Simon Gift Card (hereinafter the card) is a prepaid, stored-value card, which is issued by Bank of America, N.A., pursuant to a license from Visa U.S.A., Inc., and may be used everywhere Visa is accepted. The card is programmed to hold a balance that is recorded on it at the time of purchase, and stored on it thereafter. Each time the card is used, the amount of the transaction is deducted from the available balance. The card is plastic and resembles a standard credit card. There is a magnetic strip on the back of the card, below which is recited, in relevant part, as follows: "An administrative fee of $2.50 per month will be deducted from your balance beginning with the seventh month from the month of card purchase." Once the card is activated, it is placed in a cardboard sleeve, which is styled as a cardboard folding "book" with the sleeve at the top, into which the card is inserted, along with five additional folding double-sided "pages" which are attached to the sleeve. On the front five "pages," general information about the card and its use is included, and on the back five "pages" the cardholder agreement and terms and conditions are articulated. The amended complaint alleges that the five "pages" on the back of the card sleeve that contain the terms and conditions of the card, including the dormancy fees, are in small print, in fonts materially less than that required pursuant to CPLR 4544, concealed, and in violation of General Business Law 396-i(3), which provides that "[t]he terms of a gift certificate or store credit shall be clearly and conspicuously stated thereon."

* * *

A section on the back of the card sleeve, entitled "Do I ever expire?" provided: "An administrative fee of $2.50 per month will be deducted from your balance beginning in the seventh month from the month of card purchase." The actual card term regarding the dormancy fees is placed on the very last page on the back of the 10 folding pages' of information included with the card sleeve. That section, entitled "Service Charges," provides, in relevant part, as follows:

"If a balance remains on the Gift Card after the sixth month, the Gift Card will be charged a $2.50 monthly service fee. The fee will be deducted automatically, starting on the seventh month after the month of purchase, from any remaining value on the card on the first day of the month until the value reaches zero."

Defendant moved to dismiss. The trial court denied the motion as to plaintiffs' causes of action for breach of contract and deceptive business practices. The Second Department affirmed. It explained in part:

Breach of the Implied Covenant of Good Faith and Fair Dealing

"Implicit in all contracts is a covenant of good faith and fair dealing in the course of contract performance . . . This embraces a pledge that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract . . . Where the contract contemplates the exercise of discretion, this pledge includes a promise not to act arbitrarily or irrationally in exercising that discretion" (Dalton v Educational Testing Serv., 87 NY2d 384, 389 [internal quotation marks and citation omitted]). "If a factfinder concluded that the [fee] disclosure statement was not clear or conspicuous as required by [law], it could invalidate the fee provision or, alternatively, see it as a violation of the implied duty of good faith and fair dealing" (see Sims v First Consumers Natl. Bank, 303 AD2d at 290). The amended complaint alleges that the terms of the fee disclosure are not clear and conspicuous, but rather, unclear and hidden, which is sufficient to maintain a claim based upon a breach of the implied covenant of good faith and fair dealing.

Furthermore, the amended complaint alleges that the amount of the dormancy fee is grossly excessive. Even were the defendant entitled to charge dormancy fees, it is still precludedunder the implied covenant of good faith and fair dealing from setting such fees at grossly excessive amounts. Thus, the amended complaint sufficiently states a claim to recover damages for breach of the implied covenant of good faith and fair dealing (see Englade v HarperCollins Publs., 289 AD2d 159; Broder v MBNA Corp., 281 AD2d 369).

More coverage at Law.com.

Lonner v Simon Prop. Group, Inc., 2008 NY Slip Op 07877 (App. Div. 2d Dep't Oct. 14, 2008).

[Meredith R. Miller]

October 21, 2008 in Recent Cases | Permalink | TrackBack (0)

Business Associations Limerick of the Week: Broz v. Cellular Information Systems

Cell_phones
Robert Broz wore two corporate hats. He was the President and sole shareholder of RFB Cellular (RFB), and he was also a member of the board of Cellular Information Systems (CIS). A broker of telephone service licenses approached Broz in his RFB capacity and asked if he would be interested in a license known as Michigan 2. Broz checked with some of the principals of CIS, who had no objections, and then purchased the license for his own company. In fact, CIS was in financial difficulties and was seeking to unload its existing licenses rather than buying new ones.

Meanwhile, another company, PriCellular, was seeking to acquire both CIS and the Michigan 2 license. PriCellular lost out to Broz in the bidding war over Michigan 2, but when it acquired CIS, it sued Broz for usurpation of a corporate opportunity. The court adopts a four-factor test, or so it says. The case really turns on the fact that, at the time Broz took the opportunity, CIS was financially unable to do so. Having so found, I don't see how the court could reason that the other factors could or should play any role. In any case, it found that Broz had not usurped a corporate opportunity.

Broz v. Cellular Information Systems

Alleging some corporate faux pas,
PriCellular sued Robert Broz.
The outcome is clear
From that sound you all hear:
It's his butler, uncorking Shiraz.

[Jeremy Telman]

October 21, 2008 in Famous Cases, Limericks, Teaching | Permalink | Comments (0) | TrackBack (0)

Monday, October 20, 2008

L'il Kim and a L'suit

LilkimAccording to the New York Times, rap star L'il Kim has been enjoined temporarily from recording new music. A New York Supreme Court Justice set November 5th as the date for a hearing on the injunction. Independent label Brookland Media seeks $2.5 million from L'il Kim on a breach of contract claim. Brookland alleges that it paid $300,000 to buy out L'il Kim's contract with Atlantic Records. In return, L'il Kim agreed to record a new album with Brookland, but by the end of the summer she had only recorded three tracks.

According to lalate.com, L'il Kim views the lawsuit as a bargaining strategy: Brookland is simply seeking to "leverage its position" in a contract dispute. EURweb.com provides further details: L'il Kim's attorney describes Brookland as "wonderful people" with whom L'il Kim expects to do business. However, L'il Kim's attorney claims, Brookland did not honor the terms of their agreement.

[Jeremy Telman]

October 20, 2008 in Celebrity Contracts, In the News | Permalink | Comments (0) | TrackBack (0)

Saturday, October 18, 2008

Contracts Limerick of the Week: Balfour v. Balfour

Kings_benchMr. and Mrs. Balfour lived together in Ceylon for 15 years. While Mr. Balfour was on leave from his position in Ceylon and the two were living in England, Mrs. Balfour developed rheumatic arthritis. Her doctors suggested that the cool, damp climate of England was just the thing for her condition, and so she stayed behind when hubby returned to Ceylon. She was to remain in England for three months in the hope that her condition might improve. In the meantime, Mr. Balfour promised to send her 30 pounds a month. But once in Ceylon, Mr. Balfour proposed to sweeten the offer by extending their separation in perpetuity. He also neglected to pay her the 30 pounds a month. They were later divorced, but Mrs. Balfour sued to collect on what she took to be a contractual obligation to pay her the promised amount. The trial court found in Mrs. Balfour's favor, reasoning that Mrs. Balfour's agreement to define his obligation to support her at 30 pounds/month was sufficient consideration for his promise.

In Balfour v. Balfour, the Court of Appeal reversed. There were three concurring opinions in the case. Lord Warrington found no contract because he found no bargain. Lord Duke was discomfited by the prospect of endless litigation between spouses seeking to enforce promises that are part of ordinary domestic relationships. Lord Atkins stressed that the parties had no intention to enter into legal relations and that marital promises such as this one thus are not the types of promises that the law ought to enforce. In short, whether or not a promise is legally binding depends on the state of mind of the parties at the time the promise is made.

The poet takes some liberties and assumes that Mr. Balfour did not leave his wife solely based on an antipathy to the arthritic.

Balfour v. Balfour

Balfour gave in to his id,
And stopped paying his wife thirty quid.
His word has no force,
For, before their divorce,
The pair did not think that it did.

[Jeremy Telman]

October 18, 2008 in Famous Cases, Limericks, Teaching | Permalink | Comments (0) | TrackBack (0)

Friday, October 17, 2008

Now In Print

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- Michael D. Cicchini, Broken Government Promises: A Contract-based Approach to Enforcing Plea Bargains, 38 N.M. L. Rev. 159 (2008).

- Mahmoud A. El-Gamal, Incoherence of Contract-based Islamic Financial Jurisprudence in the Age of Financial Engineering, 25 Wis. Int'l L.J. 605 (2008).

- Shahar Lifshitz, Oppressive-exploitative Contracts: A Jewish law Perspective, 23 J.L. & Relig. 425 (2007-2008).

- Meredith R. Miller, Contracting Out of Process, Contracting out of Corporate Accountability: An Argument Against Enforcement of Pre-dispute Limits on Process, 75 Tenn. L. Rev. 365 (2008).

- Alan N. Resnick, The Enforceability of Arbitration Clauses in Bankruptcy, 15 Am. Bankr. Inst. L. Rev. 183 (2007).

[Meredith R. Miller]

October 17, 2008 in Recent Scholarship | Permalink | TrackBack (0)

A Take on Clickwrap?

Well, not really, but this piece from the Onion does speak volumes about the Internets:

CHINO, CA—In an unprecedented and historic event Monday, the "I Am Under 18" button, an Internet security device which if selected restricts access to websites featuring adult content, was clicked for the first time ever. "I knew I could simply claim to be over 18 and continue onto my desired destination, but I also realized that I would have to live with that lie for the rest of my life," said local resident Garrett Kinley, 17. "I admit, I was curious to see what type of material I would find on www.juggworld.com, but that button was clearly placed there for a reason, and let's face it: 17 and three-quarters is not 18. I plan to return to the site three months from now, when I will be mature enough to handle its content." Moments later, Kinley's friend Dave Gerrard, 17, pushed Kinley aside and clicked the "I Am Over 18" button himself, at which point a tactical police unit broke down his bedroom door and arrested him.

[Meredith R. Miller]

October 17, 2008 in E-commerce | Permalink | TrackBack (0)

Rapid Expansion Leads to Venti Triple Lease Breach

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Having outgrown itself, Starbucks is in a slump. Back in July, it announced its first list of store closings - taking with it the life of our short-lived outfit in Central Islip, NY. And with the store closings, the WSJ reports that landlords are experiencing more than caffeine withdrawal (subscription required). The article reports:

A handful of property owners and developers have filed lawsuits alleging that the Seattle coffee giant owes them money for rent or other expenses on properties where the company has shut down a store or decided not to open one after entering a lease. At least seven lawsuits have been filed against Starbucks since last year, but the anger isn't limited just to litigants.

Starbucks, which is facing slow sales and weak earnings growth as customers cut back on lattes and Frappuccinos, intends to shut down more than 600 U.S. locations by early next year as part of a broader plan to revive the company.

The lease battles represent a turnabout for Starbucks, which has been one of the most sought-after retail tenants of the past decade. The chain helped draw other retailers to shopping centers and spent top dollar to get the best real estate during its rapid U.S. expansion.

Some landlords contend Starbucks is paying rent late or darkening stores before specifying the closure dates to make the landlords wary of a fight and to pressure them into letting the company out of leases for a price they deem too low.

Starbucks says that, in general, it is in compliance with its lease obligations and not aware of locations where it is behind on rent. The company isn't necessarily obligated to pay rent for sites it no longer plans to open. In court responses, Starbucks has denied many of the allegations in the lawsuits. In some cases, Starbucks has contended that the landlord didn't uphold its responsibility or that the lease gives the company the right to terminate it.

Starbucks' senior VP of U.S. store development explained: "We're not doing anything out of the norm of any other company that would seek to restructure its real-estate portfolio[.] Our No. 1 objective is to maximize shareholder value."

Apparently the lease language allows Starbucks to negotiate out of the leases but "landlords in general and liquidation professionals, based on their background knowledge, say there is no clear-cut way for the company to exit from all these leases."

Starbucks stated in July that it planned to spend $120 million to $140 million through early next year on lease terminations.

The summary from the McCain/Palin camp: in this economy, my friends, there is goin' to be a whole bunch of contract breachin'.

And the summary from the Obama/Biden camp: in this economy, some belt-tightening is going to be necessary, including your regular half-caf triple venti machiatto.

I wonder whether the Starbucks inside the restroom of the existing Starbucks is in arrears.

[Meredith R. Miller]

October 17, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)

Thursday, October 16, 2008

Non-Competes in Russia

125pxflag_of_russiajpgHave you ever wondered whether non-compete clauses are enforceable in Russia? Yury Ivanov writes in the Moscow Times:

The main problem with a non-compete clause in Russia is that it may, in certain circumstances and in certain wordings, contradict with Article 37 of the Constitution of the Russian Federation. It proclaims: "Labor is free. Everyone shall have the right to free use of his labor capabilities and choice of type of activity and profession." This rule of law just generally provides freedom of labor, but the Constitution to a certain extent allows restriction of this principal rule. For example, Article 55 stipulates that "human and civil rights and freedoms may be limited by federal law only to the extent necessary for protecting the rights and lawful interests of other persons."

Russian law thus provides for many restrictions on infringement of confidentiality -- the Labor Code, Civil Code, and other federal laws concerning information protection and secrecy. These rules make employees liable only for divulging only confidential information. Unfortunately, in practice, confidential information is usually defined separately from a particular person, in our case the employee. Yet during the period of employment, the employee may obtain not only information separated from him but many other skills and knowledge, as described above. Moreover, the employee may not only divulge the information, but also use it in his own business or work for another employer. Furthermore, the non-compete clause is an independent covenant in any particular labor relationship and cannot be simply reduced to a confidentiality covenant.

More here.

[Meredith R. Miller]

October 16, 2008 in Labor Contracts | Permalink | TrackBack (0)