ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Friday, October 10, 2008

Fashion Faux-Pas Could Cost Actress $20 Million

TheronThe 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

[Jeremy Telman]

October 10, 2008 in Celebrity Contracts, In the News | Permalink | Comments (0) | TrackBack (0)

Wednesday, October 8, 2008

A Minor Dispute Regarding the Peaceable Kingdom

HicksAccording 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.

[Jeremy Telman]

October 8, 2008 in In the News, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 7, 2008

VP Debate as Exam Skills Teaching Moment

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]

October 7, 2008 in Teaching | Permalink | Comments (0) | TrackBack (0)

Now in Print

- 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]

October 7, 2008 in Recent Scholarship | Permalink | TrackBack (0)

Hey! Ho! Let’s Sue!

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]

October 7, 2008 in Recent Cases | Permalink | TrackBack (0)

Business Associations Limerick of the Week: Caremark

Chancellor_allenIn 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.

[Jeremy Telman]

October 7, 2008 in Famous Cases, Limericks, Teaching | Permalink | Comments (0) | TrackBack (0)

Monday, October 6, 2008

A Motivated Employee

Aaa_12 From The Shining (1980):

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!

[Frank Snyder]

October 6, 2008 in Film Clips | Permalink | TrackBack (0)

Weekly Top Ten

Logo_social 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).

[Frank Snyder]

October 6, 2008 in Recent Scholarship | Permalink | TrackBack (0)

Glass Ceiling on Government Contracts?

SnoweLast 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, the Senate is considering a measure (or was in August) that would block the implementation of the proposed S.B.A. rule.

[Jeremy Telman]

October 6, 2008 in Government Contracting, In the News | Permalink | Comments (1) | TrackBack (0)

Contracts Limerick of the Week: Peevyhouse

JmauteIt 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!

[Jeremy Telman]

October 6, 2008 in Contract Profs, Famous Cases, Limericks, Teaching | Permalink | Comments (0) | TrackBack (0)