Wednesday, October 15, 2008
As the previous post indicates, our own blogger, University of the Pacific McGeorge School of Law's Miriam Cherry, is now doing double duty as a guest blogger on Concurring Opinions where she is blogging not only about contracts but about other things as well. You can read, for example, Professor Cherry's views on gloablizing the curriculum here. You can read her ideas for promoting faculty scholarship here. And here is Professor Cherry on technology and death.
So, if you are a fan of any combination of globalism, scholarship, technology or death, you should stroll over to Concurring Opinions and check out Professor Cherry's posts.
Those who are subscribers to the AALS listserve, or who have had other occasion to interact with Sid Delong (Seattle) will not be surprised to see an example of his razor-sharp wit, but it was still a surprising amount of fun to see him take on the topic of “statutory poetry” in a short essay appearing in the Journal of Legal Education. I had no idea that Sid could find poetry in the Model Rules of Professional Responsibility, 1.17, comment 13, yet he has:
This Rule applies to the sale of a law practice by representatives of a deceased, disabled, or disappeared lawyer.
Sid comments: “[D]isappeared lawyer.’ What poignancy lies in that phrase! The image triggers a flood of allusion: Judge Crater, the Chesire cat. And consider the prosodic significance of the alliterative series ‘deceased, disabled, or disappeared.’ One cannot help but wonder what additional alternatives the poet considered and rejected: dissipated, diseased, demented, despondent, depressed, degenerate, dejected, defunct.” In the rest of the essay Sid has fun with the UCC and the bankruptcy code, noting that some of his poetry analysis “confirms what many have long suspected: Revised Article 9 was drafted not by human beings at all, but by non-English speaking robots[.]” The whole Essay is highly recommended (apparently not online except for the table of contents, but free in a faculty mailbox near you) especially if you are feeling in a mood that is either curmudgeonly or poetic (or both).
[Miriam A. Cherry / Cross-posted at Concurring Opinions]
Tuesday, October 14, 2008
Alas, I found no public domain images of Jean Tennyson, wife of Camille Dreyfus, who was president of the Celanese Corporation at the time it decided to promote its product (which is not, I repeat, not rayon) by sponsoring a classical music program on radio intended for the discriminating ears of those who might be inclined to care about the difference between rayon and celanese. The image to the left might help us imagine Ms. Tennyson in her prime. In Bayer v. Beran, plaintiffs challenged the corporation's decision to promote its products through a radio program featuring the boss's wife. Even if the decision to spend $1 million on a radio show was justified, why not feature popular music?
The case illustrates the standard of review that applies to claims that board members violated their duty of loyalty due to a conflict of interest in the challenged transaction. Interestingly, in this case, the Board had no conflict of interest, since only one Board member stood to gain financially from a decision to hire Jean Tennyson. Still, the court treated the situation as one in which the entire Board was interested. In short, this was a rare case in which a Delaware court recognized structural bias in such a transaction. It did so in this case because the company really was Mr. Dreyfus's creation, and the Board members owed their positions to him.
The decision to have a classical music program was accorded the protections of the business judgment rule. The decision to hire Ms. Tennyson was subjected to a heightened standard, total fairness. The burden was placed on the Board to demonstrate that the decision to hire Ms. Tennyson was in the best interests of the corporation and not simply designed to further her musical career. Because Ms. Tennyson was found to be a "competent" singer, and her pay was actually somewhat lower than that of the other singers, the court found the transaction fair. Those interested in listening and judging for themselves can pay for the opportunity to hear Ms. Tennyson singing Verdi, in a duet featuring Mario Lanza, here.
Bayer v. Beran
The Bayer v. Beran court teaches
That a firm does not commit breaches
When it employs
A director's wife's voice . . .
Unless she emits only screeches.
The Wall Street Journal Law Blog is in mourning. "Oh what fun it could have been," laments the blog. We haven't had a knock-down, drag-out tortious interference with contractual relations claim like this since the glory days of the Texaco-Pennzoil fight over Getty Oil.
Citigroup thought it had a deal to buy Wachovia's banking operations for $2.2 billion. Instead, Wachovia agreed to permit Wells Fargo to purchase all its operations for $15.4 billion. The case was filed in the New York Supreme Court's Commercial Division, where it landed on Justice Ramos's docket. The complaint alleged causes of action for breach of contract and tortious interference with contract and sought specific performance, injunctive relief and damages of (pinky finger rising to the corner of the mouth) $60 billion. Justice Ramos extended the deadline on an exclusivity agreement between Citi and Wachovia in order to preserve the status quo until the matter could be decided.
Meanwhile, Wachovia filed its own suit in Federal District Court, relying on some provisions of the recently adopted $700 billion bail-out bill (the Emergency Economic Stabilization Act of 2008, or "EECS!!"). Tulane Law's Elizabeth Nowicki, advising the Law Blog, suggested that Wachovia's reliance on the Bail Out bill was misplaced. Over the weekend, James McGuire of the New York State's Appellate Division, reversed Justice Ramos's order, in part because the emergency hearing was held in Justice Ramos's Connecticut home and it was unclear that a New York State Justice could issue an order from outside of his own jurisdiction. Justice McGuire gave additional reasons, but I like that one. Also over the weekend, the Charlotte News & Observer reported that, in a suit brought by Wachovia shareholders, a North Carolina state court judge entered a temporary restraining order enjoining Citigroup from enforcing its exclusivity agreement.
And then, on Thursday, Citigroup announced that it would not oppose the Wachovia/Wells Fargo merger. It still intends to pursue damages claims on behalf of its shareholders. That's good news for litigators, who will be racking up the billable hours on the case. Professor Nowicki thinks there might be some meat to Citigroup's claims against Wachovia, but the Bail-Out Bill might just protect Wells Fargo from liability.
Monday, October 13, 2008
Sullivan v. O'Connor involves a promise by a doctor to provide the plaintiff with a nose that "would enhance her beauty and improve her appearance." However, after three surgeries, the plaintiff emerged with a nose that was disfigured and deformed (as the photo to the left illustrates). She also experienced both mental and physical pain. Plaintiff sued both for medica malpractice and for breach of contract. The jury found for the doctor on the malpractice claim but for plaintiff on the breach of contract claim. She was awarded damages in the amount of $13,500.
This verdict was upheld on appeal, with the Massachusetts Supreme Court ruling that plaintiff was entitled to recover her out-of-pocket expenses ($622.65), for the worsening of her condition and for pain, suffering and mental distress involved in the third operation. Ducking the difficulty of reconciling such damages with contracts doctrine, the court found such harms compensable as either expectancy or reliance damages.
To be honest, I never much cared for this case or its hairy-handed twin, Hawkins v. McGee. They have, for me, the musty scent of a now abandoned pedagogy:
Still, even if legal pedagogy has moved on, the cases are with us -- and yes, they do raise interesting damages issues. Accordingly, a Limerick for Sullivan.
Sullivan v. O'Connor
Assessing a botched operation
Requires tort-like harm calculation.
Suffering and pain
Invade contracts domain
Both as reliance and expectation.
Friday, October 10, 2008
The Wall Street Journal's Law Blog reports that Charlize Theron has been "cheating on" Raymond Weil, cuckolding the Swiss watchmaker through a dangerous liaison with Dior. Raymond Weil claims that Theron was caught in flagrante delicto when she wore a Dior watch in Texas and other Dior jewelry in advertisements. The Smoking Gun website provides the complaint here.
The WSJ's Law Blog now reports that Raymond Weil won a summary judgment from New York's Southern District on September 30th. The opinion can be found here.
HT: James Saqui
Wednesday, October 8, 2008
According to the Wall Street Journal, tech entrepreneur and multimillionaire Halsey Minor bought the painting shown at left, Edward Hicks' "The Peaceable Kingdom With the Leopard of Serenity," from Sotheby's for $9.6 million. At the same time, Mr. Hicks bought other paintings from Sotheby's and the celebrated auction house is now suing Mr. Hicks to collect $13.8 million. Mr. Minor is fighting back, however, with a suit of his own in which he alleges that a Sotheby's agent encouraged him to purchase the Hicks painting without disclosing that Sotheby's had an economic interest in it. As the WSJ puts it, Mr. Minor alleges that Sotheby's was selling the painting in order "to recoup money owed it by another collector."
The WSJ reports that the Hicks painting had been used by its owner as collateral for an $11.5 million loan that the owner negotiated with Sotheby's. New York law requires auctioneers to disclose economic interests in the pieces that they sell with a symbol next to the painting in the catalogue. Sotheby's did not include such a symbol in this case because it claims its interest in the painting was a "security interest," not an "economic interest."
The voluble Mr. Minor tells his story, at remarkable length, in an exchange of e-mails published in Valleywag here. Among other things, Mr. Minor writes the following:
its just like a broker showing you houses. he has to let you know if one belongs to him if he was showing it to you. Sotheby's must show a triangle by the lot number in these cases. Many people believe it should be way more evident. I was sold this painting by the American specialist. I thought she was serving as an expert but in fact she was a saleswoman for Sotheby's.
. . .
They tried to intimidate me and the story grew far larger than they expected and blew up in there face. I enjoy collecting art but its not my business. It is there business and they rely on people's trust and confidence. Even if they were right I would be creating a reasonable doubt about there business practices. Considering the last CEO and Chairman did jail time I think I would have taken another tact. i would have confessed and tried to work something out. I would have been reasonable then but not now.
Tuesday, October 7, 2008
Sure, the Biden/Palin VP debate in St. Louis seems like years ago, but it is worth noting that it provides a wonderful teaching moment. In exam taking, students struggle with answering the call of the question. If I tell the students to assume that a contract has been formed, and to tell me whether that contract is enforceable, many will still go into a diatribe about offer and acceptance. So, I think it far from partisan to note that this exchange during the VP debate provides for a great teaching moment about what it looks like when a student does not answer the call of the question:
IFILL: Governor, please if you want to respond to what he said about Senator McCain's comments about health care?
PALIN: I would like to respond about the tax increases. We can speak in agreement here that darn right we need tax relief for Americans so that jobs can be created here. Now, Barack Obama and Senator Biden also voted for the largest tax increases in U.S. history. Barack had 94 opportunities to side on the people's side and reduce taxes and 94 times he voted to increase taxes or not support a tax reduction, 94 times.
Now, that's not what we need to create jobs and really bolster and heat up our economy. We do need the private sector to be able to keep more of what we earn and produce. Government is going to have to learn to be more efficient and live with less if that's what it takes to reign in the government growth that we've seen today. But we do need tax relief and Barack Obama even supported increasing taxes as late as last year for those families making only $42,000 a year. That's a lot of middle income average American families to increase taxes on them. I think that is the way to kill jobs and to continue to harm our economy.
Lest we be accused of taking this exchange out of context, the full transcript is here.
[Meredith R. Miller]
- Mary Hunter Morris, Comment, Only "The Punctilio" if I say So: How Contractual Limitations on Fiduciary Duties Deny Protection to Victims of Oppressive Freeze-Outs within Private Business Entities, 10 Duq. Bus. L.J. 73 (2008).
[Meredith R. Miller]
From 1983 to 1987, Richard Reinhardt was a drummer for the legendary New York City punk rock band, The Ramones. As was the band's custom, he took the last name “Ramone” and, with that, the stage name “Ritchie Ramone.” Reinhardt left the band in 1987 on acrimonious terms, and appears to have been embroiled in legal battles for royalties ever since.
Reinhardt commenced a lawsuit in New York County against, among others, the trust of another band member, the band’s production company and the band’s ex-manager. Reinhardt seeks to recover royalties he claims are due to him from The Ramones record sales. The defendants moved to dismiss Reinhardt’s complaint, which the trial court (Solomon, J.) recently granted on all counts except his breach of contract claim against one of the defendants (subscription required).
Reinhardt argued that he only received a fraction of the royalties he was owed for composing a few hit songs during his tenure with the Ramones. The court noted that Reinhardt accepted the $32,500 settlement offer which covered 2002 royalties. Reinhardt executed a release for all claims up to and including June 30, 2001. In connection with the settlement agreement, Reinhardt's suit alleged breach of contract and breach of fiduciary duties, and alleged fraud and negligent misrepresentation by the ex-manager, and others. The court stated that, while Reinhardt "insinuated he agreed to the 2002 settlement under sinister circumstances," the facts alleged did not make out a claim for fraud or negligent misrepresentation. It also denied the breach of fiduciary claim, yet permitted a limited breach of contract claim to proceed against Ramones Productions – because discovery was warranted concerning a the amount of revenue Ramones Productions received that may be payable to Reinhardt.
Reinhardt v. John Family Trust of 1997, 601064/04 (Sup. Ct. N.Y. County Sept. 30, 2008).
[Meredith R. Miller]
In In re Caremark International Inc. Derivative Litigation, Chancellor William T. Allen (pictured) set aside the existing Delaware standard governing a Board's duty of oversight, which had been established in the 1963 case, Graham v. Allis Chalmers. In Graham, the Delaware Supreme Court held that directors have no duty to set up a system of corporate self-monitoring absent reason for suspicion that misconduct was occurring within the firm. Chancellor Allen essentially said that things have changed since 1963, and the Graham rule is no longer appropriate.
Instead, the rule is that directors do have a duty to establish and maintain reasonable precautionary measures to prevent corporate misconduct. In this case, Chancellor Allen found that the Board had done so. It is a remarkable opinion in that Chancellor Allen single-handedly remakes Delaware law at the trial court level. The Delaware Supreme Court has subsequently embraced Chancellor Allen's position in Stone v. Ritter, although it ludicrously characterized the duty to monitor as a subsidiary duty of the duty of loyalty rather than applying the duty of care standard as Chancellor Allen did. I mean, come on guys, the case is called Caremark, not Loyaltymark!!
In any case, it is a wonderful tribute to Chancellor Allen that duty of oversight cases are now routinely referred to as Caremark cases.
The case also illustrates the willingness of the Delaware courts to find that shareholder derivative litigation conferred some benefit on the corporation as a whole, justifying an award of lawyers' fees to the plaintiffs' attorneys out of the corporate coffers. The Caremark plaintiffs sought certain prospective measures to prevent a repeat of the sort of misconduct for which Caremark had already paid out $250 million to government agencies and private parties. None of the Caremark directors were implicated in the misconduct, and the Board had already taken almost all of the measures sought by plaintiffs. Chancellor Allen nonetheless approved a settlement granting nearly $1 million in attorneys fees.
In re Caremark International Inc. Derivative Litigation
In Caremark, Chancellor Allen,
Whose mind is as sharp as a talon,
Found the settlement fair,
Though the Board used due care,
And the lawyers got fees by the gallon.
Monday, October 6, 2008
Jack: Have you ever thought about my responsibilities?
Wendy: Oh Jack, what are you talking about?
Jack Torrance: Have you ever had a SINGLE MOMENT'S THOUGHT about my responsibilities? Have you ever thought, for a single solitary moment about my responsibilities to my employers? Has it ever occurred to you that I have agreed to look after the OVERLOOK Hotel until May the FIRST. Does it MATTER TO YOU AT ALL that the OWNERS have placed their COMPLETE CONFIDENCE and TRUST in me, and that I have signed a letter of agreement, a CONTRACT, in which I have accepted that RESPONSIBILITY? Do you have the SLIGHTEST IDEA, what a MORAL AND ETHICAL PRINCIPLE IS, DO YOU? Has it ever occurred to you what would happen to my future, if I were to fail to live up to my responsibilities? Has it ever occurred to you? HAS IT?
Wendy: [swings the bat] Stay away from me!
Another Monday and another new Weekly Top Ten, this one featuring a new article by Benjamin Alarie suggesting a new solution to the old Peerless problem. Following are the top ten most-downloaded new papers from the SSRN Journal of Contract and Commercial Law for the 60 days ending September 28, 2008. (Last week's rank in parentheses.)
1 (1) Freedom of Contract, David E. Bernstein (Geo. Mason).
2 (2) Contract Enforcement and Institutions Among the Maghribi Traders: Refuting Edwards and Ogilvie, Avner Greif (Stanford-Econ)
3 (3) Consent in Contract Law, Brian Bix (Minnesota).
4 (5) Rewriting Contracts, Wholesale: Data on Voluntary Mortgage Modifications from 2007 and 2008 Remittance Reports, Alan M. White (Valparaiso).
5 (4) Law's Illusion: Scientific Jurisprudence and the Struggle with Judgment, Jeffrey M. Lipshaw (Suffolk).
6 (6) Resolving the Foreclosure Crisis: Mortgage Modification in Bankruptcy, Adam Levitin (Georgetown) & Joshua Goodman (Columbia-Econ).
7 (7) The British Approach to Consumer Financial Disputes: A Model for Reform in Insurance Law and Beyond, Daniel Schwarcz (Minnesota).
8 (8) Troubled Foundations for Private Law: A Review Essay of 'The Foundations of Private Law' by James Gordley, Stephen A. Smith (McGill).
9 (-) Mutual Misunderstanding in Contract, Benjamin Alarie (Toronto).
10 (9) Intellectual Property and Restrictive Covenants, Orly Lobel (San Diego).
Last Thursday, the New York Times reported that although women own almost half of all small businesses in the country, generating $2 trillion in revenue, they are awarded only 3.4% of annual federal contracts. In 2000, Congress voted to put in place safeguards so that businesses owned by women would be awarded at least 5% of such contracts, but implementing that legislation has been difficult. Senator Olympia J. Snowe of Maine (pictured) is dismissing as "a sham" the Small Business Association's proposed rule to implement Congress's directive from 2000.
She and 15 other women in the Senate have written to the S.B.A. to urge the agency to revisit the rule. Meanwhile, according to fcw.com, the Senate is considering a measure (or was in August) that would block the implementation of the proposed S.B.A. rule.
It is a pleasure to be able to post about a case that needs no introduction. Peevyhouse v. Garland Coal is an old stand-by. It's a great teaching case. Not only does it illustrate important issues regarding the proper measure of expectation damages, but it also stimulates interesting public policy discussions.
But teaching Peevyhouse has become even easier because of the efforts of the University of Oklahoma's Judith Maute (pictured). Professor Maute's much-cited study of the Peevyhouse case, Peevyhouse v. Garland Coal Co. Revisited: The Ballad of Willie and Lucille, 89 Nw. U. L. Rev. 1431 (1995), is a great teaching aid, as is the recent documentary film that she made about the case: The Ballad of Willie & Lucille: Disappointed Expections of Contract Law and the Legal System. Contracts profs out there: if you have half an hour to spare, I highly recommend this film, which explores the background of the case, introduces students to Willie Peevyhouse, shows the land at issue in the case, and gives students a useful lesson in how litigation strategy can affect outcomes. The film has the added bonus of featuring several contracts profs, and it is just plain fun to see these folks on screen.
Peevyhouse v. Garland Coal
Before you let Garland Coal
Turn your backyard into a hole,
Make sure that your land
Is worth 25 grand
Or your state Supreme Court has a soul!
Wednesday, October 1, 2008
I don't know why I keep getting annoyed by companies that claim that you can deal with them without having "a contract." This report of a release from Verizon Wireless, for example, reprinted in a reasonably reputable newspaper:
Verizon Wireless today turned up the heat on Sprint and other competitors, offering its regular wireless plan prices to customers without a contract.
The new plan allows customers to snag a no-strings wireless plan using their own handsets or by purchasing a phone at full retail -- no discounts, but no termination fees if they decide to drop the service after a couple of months.
The company said the month-to-month deal would be offered on all of its nationwide voice and data plans to new and existing customers.
The plan is undoubtedly an outgrowth of consumer complaints and an FCC inquiry into early termination fees charged by wireless companies. It also is likely to spur competitors to match the Verizon plan as wireless companies try to add customers from an increasingly smaller pool.
"The new month-to-month agreement is an extension of the company's overall commitment to delivering its customers quality products and services over the nation's most reliable wireless network, while providing the industry's best customer service," Verizon said in a release.
It's nice that there are no termination fees, but it would be even nicer if they used the word "contract" correctly.
The U.S. District Court for the District of Maryland (Titus, J.) recently had occasion to address the modification of a clickwrap agreement. Plaintiffs, real estate appraisers, used defendant FNC’s internet-based service, “Appraisal Port.” Plaintiffs brought a class action against FNC, alleging that FNC falsely claimed that information entered in Appraisal Port would be kept private and would be transmitted securely. FNC moved to stay the proceedings pending arbitration of plaintiffs’ claims, pointing to an arbitration provision contained in the user agreements that plaintiffs acknowledged when joining the service.
Plaintiffs argued that they were not parties to a valid arbitration agreement because FNC amended their user agreements during their memberships, replacing them with a new agreement that did not include any arbitration clause. FNC recognized that it “attempted” to so amend the user agreements but argued that its attempt “failed” because plaintiffs did not acknowledge the changes. Based on the language of the original clickwrap agreement, which included a clause about modification, the court concluded that the modification was effective and, thus, plaintiffs were not bound to arbitrate. The court denied the motion to stay.
(Note the interesting posture here. Usually, the party seeking arbitration is arguing effective unilateral modification to include arbitration terms; here, it is the parties opposing arbitration that point to a unilateral modification as effective, because the modification did not include arbitration terms).
(The court's reasoning is after the jump).
Our own Keith Rowley was on the program for the conference on Fault in Contract Law held this past weekend at the University of Chicago Law School, with the papers to be published in the Michigan Law Review. I will therefore leave it to Keith to report on those proceedings in detail. But I do feel that one aspect of the conference falls clearly within my jurisdiction -- that is, the intersection between contracts law and poetry. George M. Cohen (pictured) noted at the beginning of his presentation that the title of his conference paper, "The Fault that Lies within Our Contract Law," is iambic pentameter. Judge Richard Posner's title, on the other hand, "Let Us Never Blame a Contract Breaker," is also pentameter, but beginning with a stressed syllable, Posner's meter is trochaic rather than iambic. The difference, Cohen remarked, between those who, like him, believe that there is room for discussion of fault in contract law and those who, like Posner, would banish notions of morality from the law, is really one of emphasis. Professor Cohen had a very good day when he realized that he could indicate that point by contrasting his own title with that of Judge Posner.
Another highlight of the conference: Judge Posner praised Oliver Wendell Holmes' The Common Law and especially the option theory of contract contained therein. Chicago's Richard Epstein objected that Holmes' book is incoherent, and he could not imagine why anyone would seek to rely on Holmes as a source for a comprehensive approach to contracts. There was some uneasiness in the room as these formidable scholars prepared to lock horns, but Judge Posner evaded the controversy, conceding that there was only one person in the room about whom people living 127 years now from would say that he had a completely coherent approach to the law. Professor Epstein received Judge Posner's bon mots with his wonted grace.