June 27, 2008
Contracts Prof Snubbed in New Collection of Limericks
As reported in the Washington Times, Ernest W. LeFever has just published Liberating the Limerick, which includes 230 representative examples of the undersigned's preferred poetic form, contributed by over fifty writers, not including the undersigned. Those of you interested in purchasing the book can find it available for purchase here. You may note that the book has been criticized on the Amazon website for its principles of selection, although the exclusion from the collection of the works of the author of the (still unpublished) collection, Limericks for Lawyers, is not a part of the criticism.
Thanks so very much to my colleague, Zachary Calo, who took time off from work on his seventh doctoral dissertation (which is really remarkable when you consider that he is only 23 years old) to send me cheering news of the revival of interest in the Limerick.
June 26, 2008
The Newest Investment Vehicle: "Personal Seat Licenses"?
How are football franchises managing to raise money for their new stadiums? Well, if the local city and state legislators won't pony up tax dollars, one option is to sell "personal seat licenses" ("PSLs") to well-healed and die-hard fans. The Jets are apparently contemplating whether to issue such licenses when they move into their new billion dollar stadium in 2010. Unlike season tickets, the Jets would license the rights to the seats. The licenses seem to have a perpetual duration (or, at least, certainly last beyond one season) and may carry a $30,000 price tag. The NY Post explains:
The most expensive package is for lower level seats, where the Jets would charge $5,000 up front, then $5,000 a year for five years in PSL fees. The season ticket itself would cost $1,650 a year. The cheapest option is in the upper level corner, where seats cost $200 down, $200 a year for five years and $1,000 a year for the ticket itself.
Plus, the license is transferrable, which could turn out to be a wise investment:
PSLs have also proven to be a wise investment for deep-pocketed fans. For example, the Panthers - whose seat licenses were sold in 1996 for between $600 and $5,400 each - are currently selling PSLs for $3,000 to $20,000 on Internet auction site eBay.
I am not much of a sports fan, so please forgive any ignorance reflected in this post, but that is a pretty good ROI.
[Meredith R. Miller
Duke Football Wins!!!
At left is the Wallace Wade Stadium, home to the Duke Blue Devil football team and site of the 1942 Rose Bowl. These days, Duke isn't really thinking Rose Bowl. Or any bowl really. According to the Louisville Courrier-Journal, Duke football has achieved a record of 6-45 in its last five seaons, which may be why Duke opted out of a contract to play the University of Louisville football team in 2007, 2008, and 2009.
According to press reports, the two teams agreed to play four times, but after the 2002 game, in which Duke football came in a distant second, Duke opted out of the remaining games. The contract called for damages of $150,000 unless Louisville could line up a game against an opponent "of similar stature." Duke's lawyers persuaded the court that Duke's team is so bad that any college football team would qualify as "of similar stature" and the court threw out Louisville's $450,000 breach of contract claim.
HT: Stetson's James W. Fox, Jr.
June 25, 2008
Judge Demeans Himself: Composes Legal Limerick
For some reason, my co-blogger Meredith Miller thinks I ought to be the one to blog about an opinion recently issued by Judge Berle M. Schiller of the U.S. District Court in Philadelphia. The full report on the case is available for subscribers to the New York Lawyer here. The rest of you will have to do with my synopsis of the report.
The case, Sullivan v. Limerick Golf Club Inc., involved a brawl at the Golf Club's bar, the Sand Trap. Plaintiff Sullivan alleged that the club was liable because it served his alleged assailant drinks after the latter was already visibly intoxicated. The club tardily moved to implead the allaged assailant in violation of F.R.C.P. 14, leading the Judge to quip:
"Unfortunately for Limerick, their sub-par performance occurred in the pleading stage of this case and not on the golf course." Already drunk with his own wit, the judge then summarized his holding as follows:
With arguments hard to resist,
The movant correctly insists,
His joinder was tardy,
And so the third-party
Complaint is hereby dismissed.
In my view, this opinion sets a bad precedent.
June 24, 2008
Would You Really Want Credit for this Idea?
Corey Feldman and Corey Haim are out of the spotlight, but that's nothing a little car-wreck-reality-tv can't temporarily fix (see, e.g., VH1's Surreal Life). The two former childhood stars have been sued for $1 million in L.A. Superior Court based on claims of breach of contract, unjust enrichment, unfair competition and fraud.
Feldman and Haim allegedly agreed to star in a reality show with writers David Pullano, Matthew Odgers and Jeff McCarthy. The show, entitled "The Two Coreys," would focus on their attempts to regain the spotlight. But, before the writers could pitch the show to TV networks, the Coreys allegedly sold the show to A&E without the writers.
As you might imagine, the show is apparently "hard to watch." While some may have only "vaguely heard of the show", the lawsuit does bring it some publicity. And, with a sleeper reality tv concept like this (apparently it just started its second season), it seems that any publicity is, well, good publicity.
[Meredith R. Miller]
Change in Reporting Relationship Entitles Ex-President/CEO to Severance Payments
A trial judge in New York recently granted plaintiff C. Richard Stafford summary judgment, holding that his former employer breached his employment contract by failing to make severance payments.
Scientia Health Group, Inc., is a venture capital firm that invested in the medical and biotech fields. In the spring of 2002, Dr. Samuel Waksal (yes, of IMClone/Martha Stewart fame), then Scientia's executive chairman, recruited Stafford to become president of Scientia. In June 2002, Stafford and Scientia entered into an Executive Employment Agreement, which provided the terms of Stafford's employment as president and chief operating officer of Scientia. Under the Agreement, Stafford was to "report to the Chairman of the Company," and he had "primary authority for the day-to-day financial administration and operations of the Company."
Under the Agreement, Stafford was entitled to a healthy severance payment in the event that he terminated "his employment for Good Reason or the Company terminates [his] employment without Cause." This provision also entitled Stafford "to continue to participate in all health, life and disability insurance plans in which he participated immediately prior to the Date of Termination," during the period that he was entitled to receive severance. The Agreement defined "Good Reason" as any of the following, without Stafford's "express written consent":
(i) [Stafford] shall not have the title or reporting relationship as set forth in Section 1.2 hereof;
(ii) the assignment to [Stafford] of any duties that are materially inconsistent with, or a substantial alteration in the nature or status of, [Stafford's] position, authority or responsibilities or the conditions of his employment;
(iii) the failure of the Company to pay [Stafford] any compensation or provide other benefits as specified in Section 2 or 5 of this Agreement . . . .
In July 2002, Waksal resigned as chairman of Scientia. Scientia did not appoint a replacement for Waksal. In February 2003, Stafford tendered his resignation, purportedly for "Good Reason" under the Agreement. The trial granted Stafford summary judgment, holding that the change in reporting relationship constituted "good reason" for Stafford's resignation and entitled him to severance payments under the Agreement.
This is only a brief recap of a larger picture: here's a summary from the NYLJ.
Stafford v. Scienta Health Group, 600666/03 (Supreme Court, New York County, June 9, 2008).
[Meredith R. Miller]
Further, on Consideration
When it comes to the doctrine of consideration, Tulane University School of Law's Mark Wessman (pictured) is a one-man wrecking crew. His latest assault on the doctrine, Recent Defenses of Consideration: Commodification and Collaboration, can be found in the Indiana Law Review -- specifically at 41 Ind. L. Rev. 9 (2008). Here's the abstract from SSRN:
In this article, Professor Wessman supplements his previous criticism of the traditional requirement of consideration in contract law. Specifically, he addresses innovative arguments by Professors Eisenberg and Markovits, respectively, that aspects of that traditional requirement are supported by notions of commodification and collaboration. Ultimately, he concludes that neither of those theoretical concepts provides an adequate basis for a defense of the classical rules pertaining to consideration.
June 23, 2008
Now in Print: When Tomorrow Has Arrived
Lately, SSRN is all the rage. The popularity of SSRN makes sense given that, as it promises, it brings us "tomorrow's research today." And, given that it can sometimes take over a year from manuscript submission to law review publication, it often seems like tomorrow may never come.
Don't get me wrong, I love the quick and early access of SSRN. But, I am also nostalgic for final, print versions of papers. Plus, for various reasons, SSRN does not capture all available papers. So, I thought we could add a weekly feature called "Now in Print." With the help of my SmartCILP feed, these post will list the contact-related scholarship that has just been made available in print. So, here, we'll bring you today's research, well, within the week.
- Sarah Baumgartel, Nonprosecution Agreements as Contracts: Stolt-Nielsen and the Question of Remedy for a Prosecutor's Breach, 2008 Wis. L. Rev. 25-68.
- John J. Chung, Promissory Estoppel and the Protection of Interpersonal Trust, 56 Clev. St. L. Rev. 37-82 (2008).
- Rachel S. Conklin, Student article, Be Careful What You Click For: An Analysis of Online Contracting, 20 Loy. Consumer L. Rev. 325-347 (2008).
- Benjamin Klein and Joshua D. Wright, The Economics of Slotting Contracts, 50 J.L. & Econ. 421-454 (2007).
- David T. Robinson and Toby E. Stuart, Financial Contracting in Biotech Strategic Alliances, 50 J.L. & Econ. 559-595 (2007).
- Symposium: Governing Contracts--Public and Private Perspectives. Osgoode Hall Law School, Toronto, November 9-10, 2006. Introduction by Peer Zumbansen; articles by Peer Zumbansen, Marc Amstutz, Andreas Abegg, Vaios Karavas, Peter Vincent-Jones, Alfred C. Aman, Jr., Karl-Heinz Ladeur, Andreas Maurer, Luke Nottage, David V. Snyder, Ralf Michaels and Graf-Peter Calliess; reply by David Campbell, 14 Ind. J. Global Legal Stud. 181-483 (2007).
[Meredith R. Miller]
Limerick of the Week: Manning v. Grimsley
Above is a picture of Fenway Park (actual size!), site of Ross Grimsley's immortality as an icon of scope of employment doctrine. On September 16, 1975, some Red Sox fans were doing their best to encourage Grimsley, who was warming up to pitch for the Baltimore Orioles. Grimsley was so grateful to the Boston faithful that he decided to provide them with a souvenir. He hurled a baseball into the crowd. It penetrated the protective netting and struck plaintiff, who then sued Grimsley and his team (but not, for mysterious reasons, the obviously negligent Red Sox who failed to maintain the protective netting).
The liabiility of the Baltimore Orioles turned on whether Grimsley was acting within the scope of his employment at the time of his mis-directed pitch. In Massachussetts, a servant acts in the scope of employment if, among other things, her use of force is in response to conduct from the planitiff that "presently interferes" with the servant's duties. The court found that the heckling during Grimsley's warm-ups was indeed a present interference with Grimsley's work and thus held that the Orioles could be vicariously liable for Grimsley's tort.
Manning v. Grimsley
A reliever awaiting deployment
May act in the scope of employment
If he throws some high heat
At a fan in his seat
Unless for his own sheer enjoyment.
When Worlds Collide
Lately, I've been feeling a bit guilty about posting my business associations Limericks on a contracts blog. But now Emory Law School's Professor Frederick Tung (pictured below the supernova) has solved my problems with an article posted on SSRN and entitled: The New Death of Contract: Creeping Corporate Fiduciary Duties for Creditors. I am indebted to Professor Tung for showing how business associations law often relates to fundamental contracts issues and for showing the consequences of the collision involving these two realms of legal doctrine.
The abstract from SSRN is posted below:
The article identifies a worrisome trend in corporate law and scholarship. Across seemingly unrelated issue areas, courts and scholars have lost faith in private corporate bargains. They invite judicial intervention into private contract, proposing to expand fiduciary duties beyond their traditional shareholder centered focus to protect non-shareholder claimants from managerial opportunism. When conflict between claimant classes becomes acute, managers pursuing shareholder value may make inefficient investments that benefit shareholders but harm other claimants and the firm generally. I argue that claimants' private contracts with the firm are superior to expanded duty for constraining this opportunism.
I focus on one specific conflict - the conflict between shareholders and creditors. Existing doctrine already works a shift in fiduciary duties to creditors when this conflict becomes acute - when a firm becomes insolvent. Scholars propose to expand on current doctrine to include more creditors more of the time. I argue that both existing doctrine and its proposed expansions suffer fatal theoretical infirmities. The chief failing is that the accepted hypothetical bargain analysis from which corporate fiduciary duty derives cannot justify current doctrine or expansion proposals. Expanded duty to creditors is also costly compared to private contract.
I propose an approach I call contract primacy. Shareholder primacy should remain the default rule. Private contracting should be effective to curb manager opportunism. Additional legal constraints are costly and unnecessary. Sophisticated creditors typically negotiate elaborate covenant protections by the time a firm is in distress, often to the benefit of other creditors, who implicitly delegate monitoring responsibilities to the low cost monitor. A creditor may even negotiate for control of the firm, displacing shareholder primacy. Against the current doctrine and conventional wisdom, courts should vindicate these contracts for creditor primacy without insisting on the firm's insolvency. The doctrine should be abandoned, and proposals for further expansion of fiduciary duty for creditors should be rejected.