February 16, 2008
Patriot Spygate and Breach of Contract
Ever notice that, sooner of later, nearly everything involves a contract dispute? Take the controversy over whether the New England Patriots improperly videotaped the St. Louis Rams prior to their meeting in the 2002 Super Bowl. The Patriots won that game 20-17.
It may be a costly win. A group of players and fans are suing the Patriots and coach Bill Belichick, for some $100 million, claiming fraud, racketeering, and (of course) breach of contract. The contract claim involves an action on behalf of the 72,000 fans at the game for refunds of the average $400 each they paid for each tickets.
February 15, 2008
To the left is Levi Leipheimer, the cyclist I was hoping would win this year's Tour de France. Why? Because I have great sympathy for any world-class athlete named Levi. But the Tour organizers have dashed my hopes, announcing that Leipheimer's Astana team will be barred form participating in this year's race. That team also includes the 2007 Tour de France champion and undisputed wearer of Le Maillot Jaune, Alberto Contador, and the talented German rider, Andreas Kloeden. Kloeden wowed me in last year's Tour by riding heroically on a broken tailbone until his team pulled out when team leader Alexander Vinokourov was dismissed from the Tour for blood doping.
Vinokourov is no longer with Team Astana, and that team has also hired a new manager, Johan Bruyneel, who led Lance Armstrong and Alberto Contador to victory in past Tours. I'm not sure why Astana should be excluded from the Tour when they've had such turnover. It's not like Astana is the only team that ran into trouble in last year's tour. What about Rabobank? But here's what I really don't get, and I will be grateful to anyone who can explain this to me. It seems like any team would kill to get Leipheimer, Kloeden and Contador -- especially Contador, who was just brilliant in last year's tour. What sort of contractual obligations might prevent these riders from jumping ship to a team with which they can actually compete in the main events in their sport?
Law School for Sale
A potential buyer is in the wings for the American Justice School of Law in Paducah, Kentucky. The private school -- now almost always described as "troubled" -- saw five of its faculty resign two weeks ago, calling for the ouster of the dean. This followed a lawsuit last November on behalf of students seeking $120 million in damages from the school. The students claim that the school, among other things, withheld their student loan money from them to earn extra interest. Making things curiouser is that the lawsuit was filed by Paducah litigator Thomas L. Osborne -- a shareholder in the school -- who filed it immediately after he resigned (or was forced out, depending on who you talk to) as chair of AJSL's Board of Trustees. Osborne has been reportedly been putting together his own group to take over the school.
Dr. Robert Meriwether, a successful Paducah neurosurgeon, has apparently put up money to keep the school going while he mulls over a two-month option to acquire the school. He estimates that it would take $4 million to bring the school up to snuff.
Paducah, which has a metro area of about 100,000, is roughly equidistant from Louisville, Memphis, Nashville, and St. Louis.
Carry Me Back to Ye Olde Virginnie
It's amazing what you can find on the Internet these days. For those who teach the most famous contracts case in the history of the Old Dominion, Lucy v. Zehmer, here's a blast from the past: A postcard from Ye Olde Virginnie, "The One Stop Motel" in McKenney, Virginia.
The card isn't dated, but probably comes from the early 1960s. The back says, "Individual and Family-type rooms -- Air conditioned -- Steam Heat -- Television -- Restaurant -- Service Station -- Garage." The view appears to be from the south, coming up U.S. Highway 1 from Petersburg.
February 14, 2008
Love Contracts, Revisited
Last year, on Valentine's Day, this Blog appropriately recognized the existence of "Love Contracts." Unfortunately, due to the author's preference to wait until commercial television shows appear on DVD so that he can watch them without commercial interruption, he was unaware that the topic had already been treated in the American sitcom, "The Office." This blog has little to add to the insights one can derive from that show pertaining to love and contracts.
In the relevant episode, Michael Scott (Steve Carrell) and his supervisor, Jan Levinson (Melora Hardin), decide to go public with their sexual relationship. In order to protect herself and the Dunder Mifflin paper company, Jan presents Michael with a document pursuant to which he agrees not to sue the company for sexual harassment in the event of an adverse employment decision. Michael refers to the document as a "love contract." Jan objects, but I think Michael's got it right for once.
And isn't it lovely that the writers' strike has ended so that we can see what will come next for the happy couple? Now that's what a call a thoughtful Valentine's Day present.
February 13, 2008
Intrade Calls the Democratic Race for Obama
Why is this man smiling? Well, there is website called Intrade that, as described in David Leonhardt's "Economic Scene" column in today's New York Times, permits members to "buy and sell contracts whose price is tied to real-world events." Right now, Intrade is saying that there is a 75% chance that Barak Obama will be the Democratic candidate for President and a 51.2% chance that he will be elected President. According to Leonhardt, Intrade is winning a reputation for being a more reliable predictor of election outcomes than exit polls. That is awfully good news for Mr. Obama.
But Intrade was wrong about the California primary. Intrade predicted that Obama would win, but as you can see, Hillary Rodham Clinton is still smiling. Is that because Ms. Clinton knows that Intrade says there is a 68% chance that a Democrat will win the 2008 Presidential election, and she will be happy so long as a representative of her party is in the White House in 2009?
Perhaps. Or perhaps she, like Serge Ravitch, described in the Times as a "27-year-old lawyer turned poker player" is planning on exploiting inefficiencies in Intrade to make a profit that she can use to fund her stumbling campaign. Ravitch boasts a 35% return. According to the Times then, it seems that one good strategy Clinton might follow is to bet on Intrade against Ron Paul for the Republican nominee or against Al Gore as the Democratic vice presidential nominee. But Clinton will have to beware. Intrade can be exploited because it is slow to react to new information, in large part because the volume of trades is so small. Should Intrade really heat up, she and Mr. Ravitch may have no choice but to return to their day jobs.
William & Mary President's Contract Not Renewed
Remember the old Dick van Dyke Show? Well, memories of that show stay with me. In one episode Rob (Dick van Dyke), in desparation, hires his wife Laura (Mary Tyler Moore) as a typist for the comedy show ("The Alan Brady Show") for which Rob is the head writer. Rob and Laura get into a fight, I think because Laura kept offering jokes and Rob kept rejecting them, which culminates in Laura quitting. Laura's in such a tizzy, she says, "I'm fired!" Rob responds, "You can't fire, I quit you!!" I haven't checked the script, but I'm pretty sure that's right.
I've always found that exchange hilarious. And apparently a similar exchange has now occurred between the College of William and Mary and its (now ex-) President, Gene R. Nichol. But unless Nichol has Mary Tyler Moore's extraordinary comic delivery, the recurrence is probably more in the mode of tragedy than of farce. According to The Washington Post, upon learning that his contract would not be renewed, Nichol resigned, effective immediately. The College's Board of Visitors contends that the decision had nothing to do with ideology or public controversy, but one William and Mary professor characterized the decision as the result of a conflict between "old Virginia and new Virginia."
Many William and Mary alumni were unhappy with Nichol because he had a permanent cross taken down from the school chapel in the Wren Building. According to Wikipedia, Nichol thought that removing the cross would make the place more welcoming to non-Christians. After protests, Nichol announced that the cross would be displayed on Sundays and other Christian holidays. Further controversies involving NIchol relate to the student sponsored Sex Workers Art Show. Nichol allowed the show to proceed, while not endorsing its content, on free speech grounds.
Nichol will now return to teaching in the Law School. Current Law School Dean, W. Taylor Reveley III, whose work on war powers I've long admired, will act as interim president.
A Good Time Was Had By All
Last weekend, dozens of Contracts professors and other cool cats gathered in sunny Sacramento for the Fourth International Conference on Contracts, hosted this year by the University of the Pacific's McGeorge College of Law. Well-organized once again by ContractsProf blogmeister and conference impresario Frank Snyder, the conference featured an array of scintillating panels Friday and Saturday, the premiere of Judith Maute's documentary film about Peevyhouse v. Garland Coal & Mining Co., 382 P.2d 109 (Okla. 1962), and a lifetime achievement award for Joe Perillo.
Stetson University College of Law will host next year's conference in coastal Gulfport, Florida, scheduled for February 6-7, 2009. Watch this blog and the AALS Contracts list serve for a call for papers and panels.
[Keith A. Rowley]
UCC Revised Article 1 Update
As of January 1, 2008, Revised UCC Article 1 was in effect in 28 states -- Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Indiana, Iowa, Kentucky, Louisiana, Minnesota, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Oklahoma, Rhode Island, Texas, Utah, Virginia, and West Virginia. Kansas's version of Revised Article 1, enacted last year, will take effect on July 1. Of the 29 state enactments to date, 0 of 29 include the uniform Revised 1-301 choice of law provision -- each of the 29 enacting state legislatures having opted instead for some variation of its state's pre-revised 1-105 -- and only 20 of 29 include the uniform 1-201(b)(20) definition of "good faith" -- 9 state legislatures opting to retain the pre-revised "honesty in fact" definition in Article 1 and reserve "the observance of reasonable commercial standards of fair dealing" requirement for parties and transactions subject to that standard under another Article.
As of February 12, 2008, bills proposing to enact Revised Article 1 were pending in four states: Massachusetts, Pennsylvania, South Dakota, and Vermont. Massachusetts HB 4302, which succeeds the previously unsuccessful HB 3731, is currently awaiting a third reading in the Massachusetts House. Pennsylvania HB 1152, which was tabled last fall after passing the Pennsylvania House, was removed from the table today and awaits a third reading in the Pennsylvania Senate. South Dakota SB 93 (apparently now with the blessing of the South Dakota Bar Associations Business Law Committee) unanimously passed the South Dakota Senate on January 29 and is now before the South Dakota House Judiciary Committee. Vermont HB 563 passed the Vermont House on January 24 and is now before the Vermont Senate Economic Development, Housing & General Affairs Committee. All four currently-pending bills reject the uniform Revised 1-301 choice of law provision (opting instead for some variation of pre-revised 1-105) and embrace the unitary good faith standard of uniform Revised 1-201(b)(20).
[Keith A. Rowley]
February 12, 2008
A Legal Obligation to be Witty?
The Boston Globe's Miss Conduct, who answers such pressing etiquette questions as whether one should say "bless you" when an aetheist sneezes, reports that she has signed a book deal. Feeling the pinch of reality after having actually executed a written deal, she notes one of the contract's curious requirements:
I must say I love this, from the first paragraph in the contract:
"The Work shall be an approximately 65,000-75,000 word (256-288 book page) witty, sophisticated compendium of etiquette advice for the modern, socially diverse world ..."
I've never been under legal obligation to be witty before! It's rather frightening. I have Kafkaesque nightmares about being sued for breach of contract. ("Your honor, we submit that the defendant only thinks she's funny ...")
Shouldn't Hemingway's quip that "you lose it if you talk about it" apply to contracts?
[Meredith R. Miller]
February 11, 2008
Contracting Around Rent Stabilization: Void Ab Initio
Tenants leased three rent-stabilized apartments that were apparently combined into one unit. One of those apartments was originally subleased by the tenants - and the landlord brought an eviction proceeding, claiming the sublet was illegal. In order to settle the eviction proceeding, the tenants and the landlord agreed that the tenants "shall be recognized as the lawful, rent stabilized tenants of the subject premises at a monthly rental rate of $2,000." This monthly rent was well above the maximum amount allowed under rent stabilization laws (according to the landlord, the maximum rent at the time would have been $1325; the tenants suggested a lower amount). As part of this settlement, the tenants waived the right to challenge the legality of the rent and agreed that, if the apartments were deregulated, the landlord would offer a 2-year renewal lease with a maximum rent increase of 8%. In 2000, the apartments were deregulated. Things were fine until 2003, when the landlord began eviction proceedings based on the claim that the tenants were not using the apartments as their primary residence. The landlord sought a declaratory judgment that the settlement agreement was void as against public policy.
The Court unanimously held that the agreement was against public policy. The Court held that the agreement was, on its face, a waiver of the benefit of rent stabilization and, therefore, void. Judge Smith wrote:
Such an agreement allows a tenant who already has one home, and who is able to pay more than the legal rent for a second one, to use the law as a means of getting that second home in perpetuity at a bargain price. * * * [T]o countenance such an arrangement would violate the fundamental policies and purposes of the statutory rent regulation scheme.
What is the net result?
The agreement is void as to both parties, and neither party is entitled to rely on it. The tenants may well have a strong claim, subject to any statute of limitations defense that may exist, to recover the excess rent they paid; they may also have a strong claim to rescind the deregulation of the apartments, if that deregulation was the result of the illegal agreement. We do not prejudge these claims except to say that, having successfully argued that the agreement was void at inception, the landlord may not invoke the agreement in its own defense.
Casting aside any policy debates about the propriety and effectiveness of rent stabilization laws, it seems like this is a reasonable and uncontroversial result. Judge Smith seems to hit the nail on the head: "Agreements like the one at issue here distort the market without benefiting the people the rent stabilization laws were designed to protect."
[Meredith R. Miller]
February 10, 2008
Contracting Around Free Speech
According to the BBC, the British Olympic Association (BOA) has, for the first time, asked athletes to sign a contract pledging to abide by an Olympic rule prohibiting political demonstrations or propaganda. The rule in question is Section 51 of the International Olympic Commmittee Charter.
The existence of Section 51 might come as a surprise, since who would ever think that the Olympics could become a site for political demonstration or expression?!? Oh yeah . . . that.
Apparently, the BOA has not yet determined what remedy will follow if an athlete violates this new contractual provision. According to The Guardian, a BOA spokesman would not say whether an offending athlete would be sent home in the "hypothetical" case of a breach. The BOA also insists that there was no pressure from China to include the new provision, but many other countries, including the United States and Canada, are expressly permitting their athletes to voice any opinions they care to voice. Back in Britain, politicans and human rights organizations are putting pressure on the BOA to remove the offending clause.
The BOA insists there is a simple out for any athlete inclined to talk politics. The BOA now claims that its athletes do not violate the contract if they state their views in response to direct questions. This position seems inconsistent with an earlier statement, reported on CNN Intnerational, that the contract entailed a promise "not to comment on any politically sensitve issues." We'll see if the BOA continues to hope that silence is golden.