ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Tuesday, April 21, 2009

Business Associations Limerick of the Week: Paramount Communications v. QVC Network, Inc.

Paramount v. QVC is a lot like Paramount v. Time, and the decisions are entirely consistent: Paramount always loses.  Beyond that, it is hard to say what principles are operative here.  In this case, Paramount was trying to protect a friendly merger with Viacom and fend off a hostile offer from QVC.  Viacom and Paramount agreed to the usual array of defensive measures and treated QVC disdainfully.  Sounds a lot of like the way Time treated Paramount.  

This time, however, the Delaware Supreme Court enjoined the key defensive measures.  Because Viacom's chief, Sumner Redstone, was a controlling shareholder and would be so in the newly combined entity, this transaction contemplated a change in control, an element missing from the proposed Time/Warner merger.  This difference necessitated the imposition of Revlon duties, so Paramount could not engage in defensive measures that shut down an active bidding process.
Paramount v. QVC

The Court invokes the old adage;
We expect that managers manage.
But Boards must patrol:
Where there's loss of control,
Shareholders must win some advantage.

[Jeremy Telman]

April 21, 2009 in Famous Cases, Limericks, Teaching | Permalink | Comments (0) | TrackBack (0)

Monday, April 20, 2009

Today in history: April 20

On this date in 1871, Congress passes the Civil Rights Act of 1871 at the urging of President U.S. Grant.  The measure, originally aimed at suppressing the Ku Klux Klan in the South, will eventually come to be codified as one of the most important civil rights laws, as 42 U.S.C. § 1983.

[Frank Snyder]

April 20, 2009 in Today in History | Permalink | TrackBack (0)

Weekly Top Ten

Ssrn Most of the top papers stay the same this week, with only one new paper cracking our Top 10.  Following are the ten most-downloaded new papers from the SSRN Journal of Contract and Commercial Law for the 60 days ending April 19, 2009.

1 (1) Rethinking Free Speech and Civil Liability, Daniel J. Solove (Geo. Washington) & Neil M. Richards (Washington U.).

2 (2) The Sale of the Century and its Impact on Asset Securitization: Lehman Brothers, Stephen J. Lubben (Seton Hall) & Chip Bowles (Greenebaum Doll & McDonald).

3 (3) Contracts and Friendships, Ethan J. Leib (UC-Hastings).

4 (4) True Sale of Receivables: A Purposive Analysis, Kenneth C. Kettering (New York LS).

5 (5) Tempering ‘Buy American’ in the Recovery Act -- Steering Clear of a Trade War, Steven L. Schooner & Christopher R. Yukins (Geo. Washington).

6 (-) Can Contracts Solve the Hold-Up Problem? Experimental Evidence, Eva I. Hoppe & Patrick W. Schmitz (Cologne).

7 (8) Leverage in the Board Room: The Unsung Influence of Private Lenders in Corporate Governance, Frederick Tung (Emory).

8 (6) A License to Deceive: Enforcing Contractual Myths Despite Consumer Psychological Realities, Debra Pogrund Stark (John Marshall) & Jessica M. Choplin (DePaul).

9 (9) Intent to Contract, Gregory Klass (Georgetown).

10 (7) Limitation of Sales Warranties as an Alternative to Intellectual Property Rights: An Empirical Analysis of iPhone Warranties' Deterrent Impact on Consumers, Marc Lane Roark (Missouri)

[Frank Snyder]

April 20, 2009 in Recent Scholarship | Permalink | TrackBack (0)

Auction house reneges on sale guarantee after market drops

A Christie’s is being sued by the consignor of a painting (left) by Francis Bacon (the other Francis Bacon, not the English lawyer who was Sir Edward Coke's rival in love and politics) after the international auction house allegedly reneged on a guarantee that the owner would get at least $40 million for the painting.  The chronology of events isn’t clear, but the auction house allegedly refused to go through with the minimum price guarantee after the art market tumbled as part of the recession.

Is a global recession which leads to a downturn in the art market a "contingency the non-occurrence of which was a basic assumption on which the contract was made" which would excuse Christie’s? Or does the minimum price guarantee suggest that Christie’s accepted the risk of a collapse in the market?

[Frank Snyder]

April 20, 2009 | Permalink | TrackBack (0)

Rescinding offers of at-will employment

Over at the Volokh Conspiracy, David Post wonders whether law firms who renege on their at-will employment agreements with new associates are nevertheless liable for damages:

X offers (in September, 2008) to hire me beginning in September 2009, and I accept. They rescind the offer in April. I have damages, even though their promise to hire me would have allowed them to fire me immediately. I didn't look for another job in the intervening six months. I rented an apartment in NYC. I don't have health insurance.

The latter strikes me as potentially very important -- if I'm hired and then immediately fired as an at-will employee, I have all sorts of vested rights -- perhaps in the firm 401(k) plan, certainly in their health insurance coverage (which, once I'm fired, can't be taken away from me, as I understand things, for one year, by virtue of COBRA). Now, because they never hired me in the first place but instead rescinded the offer, I'm uninsured beginning in September.

The post prompts a discussion with some interesting comments.

[Frank Snyder]

April 20, 2009 in In the News | Permalink | TrackBack (0)

Banks struggle to get away from "TARP-baby"

Bbb Banks who want to pay back their TARP loans won’t be allowed to do so unless it’s in the "national interest," reports the Financial Times. Solvent banks want to repay the TARP funds pressed on them during the Bush Administration to avoid looming regulations that will restrict their employee compensation. The usual "senior administration official" says that they ought "in principle" to be allowed to repay, but that will depend, said the SAO, on the "wider economic interest."

Meanwhile, the Obama Administration has come up with a way to put more money into U.S. banks without going back to Congress for more. The solution: turn existing loans into common stock, thus bolstering the banks’ capital and giving the government big stakes in the banks.  For some of these banks, the government would become the largest shareholder, raising interesting fiduciary duty issues if it decided to exert its influence.

[Frank Snyder]

April 20, 2009 in In the News | Permalink | TrackBack (0)

Sunday, April 19, 2009

Today in history: April 19

On this date in 1782, the Republic of the Seven United Netherlands becomes the first nation to recognize the independence of the United States.   This is historically important because it marked the United States' first entry onto the world stage, a process that would culminate two centuries later with atification of the United Nations Convention on Contracts for the International Sale of Goods.

[Frank Snyder]

April 19, 2009 in Today in History | Permalink | TrackBack (0)

Saturday, April 18, 2009

Today in history: April 18

A On this date in 1923, Babe Ruth hits a home run and the New York Yankees beat Boston 4-1 in the first game ever played at the new Yankee Stadium.  The team''s owners built the stadium with their own money on land they bought and paid for themselves.  And they paid taxes on the property after they built it.

Yes, times have changed.

[Frank Snyder\

April 18, 2009 in Today in History | Permalink | TrackBack (0)

Treasury recalls toxic cash

The U.S. Treasury department announced today that it is recalling some $776 billion in U.S. currency which has been contaminated by toxic ink.

[Frank Snyder]

April 18, 2009 in In the News | Permalink | TrackBack (0)

Friday, April 17, 2009

Today in history: April 17

A On this date in 1492, one of the most important contracts in history is signed, as Queen Isabella I of Castile and León inks a deal with a Genoese sailor, Christopher Columbus, to sail westward to the Orient in search of spices.

Columbus subsequently sets sail with three ships, but it turns out that both parties are laboring under a mutual mistake of fact.

[Frank Snyder]

April 17, 2009 in Today in History | Permalink | TrackBack (0)

Signs of the times, continued

Over at Legal Profession Blog they're linking to a story about a man denied admission to the New York BAr because he had too many outstanding student loans.

As an aside, bankruptcy law has always puzzled me.  If you buy a $400,000 yacht you can't pay for, you can wipe the slate clean in bankruptcy and the lender takes a bath.  If you buy a $400,000 education you can't pay for . . . it's a different story.

[Frank Snyder]

April 17, 2009 in In the News | Permalink | TrackBack (0)

Michigan jury gives Chrysler win in breach of K suit

A It's not all doom and gloom for Chrysler.  Sure, its banks are balking at its reorganization plan.  Its loyal longtime customers are fleeing to foreign models.  Ottawa is saying it might let the company's Canadian operations die.  Fiat is suggesting it might walk away from the shotgun marriage that the U.S. administration has proposed.  threatening to walk away from a potential merger.  Even the guy the government appointed to supervise the company's turnaround is now being investigated for illegal kickbacks involving a New York pension fund.

But there's a piece of good news.  A jury in Oakland County, Michigan, has awarded the carmaker $47 million in a breach of contract claim against a supplier who allegedly breached its warranties.  Chrysler had to recall 400,000 cars due to defects in the underbody.  Apparently all the recall costs were recovered as consequential damages.

April 17, 2009 in In the News | Permalink | TrackBack (0)

A brief detour into international civil procedure

Aaa In a case that could have major implications for U.S. civil actions against Mexican parties, a U.S. district court has held that the only way of lawfully serving a Mexican defendant is through the country's central authority in the Ministry of Foreign Affairs.  The case,OGM Inc v. Televisa, 08-cv-05742 (C.D. Calif.), is a breach of contract and copyright action against a leading Mexican broadcaster.

Apparently U.S. plaintiffs for the last decade or so have been serving Mexican defendants by mail or through a process server, but that practice, said the court, is based on an erroneous translation of Mexico's declarations under the Hague Convention.  The ruling could have a major impact on many decisions entered against Mexican defendants who did not appear to defend themselves.

[Frank Snyder]

April 17, 2009 in Recent Cases | Permalink | TrackBack (0)

Thursday, April 16, 2009

PA Law Profs Sue West over "Sham" Treatise Supplement

Boozy Prof. William Clark isn't the only one to sue West over a treatise.  According to, Profs. David Rudovsky (U Penn) and Leonard Sosnov (Widener) have sued West, claiming that authorship of the December 2008 pocket part to their treatise, Pennsylvania Criminal Procedure -- Law, Commentary and Forms, was falsely attributed to them.  They allege that the pocket part was "so poorly researched that it will harm their reputations if allowed to remain on library shelves."

Further, according to the article:

[T]he book was first published in 1988 and had a second edition in 2001.

The professors claim that in every year since the book was released, they have worked diligently to keep the treatise current by authoring annual supplements that include case notes on about 100 to 150 cases as well as rule changes.

But Rudovsky testified in the injunction hearing that he and Sosnov decided to stop working on the book when West announced that it was cutting their pay in half -- from $5,000 each per year to $2,500.

Rudovsky testified that he had proposed to West that it was time to release a third edition of the treatise, but that West was not interested in spending the money to do so. Court records show that Rudovsky and Sosnov were each paid $12,000 for their work on the second edition.

$12,000 each!  West is not only publishing bunk, it is cheap.

If the good Profs could fathom teetotaling, they'd be better off with Clark's deal: stay sober while you write, and get $6.00 per page.  According the CPI indicator, $6.00 in Clark's time (1908) is equivalent to about $144 today.  After all, Volumes 2 and 2A of the treatise appear to total around 1000 pages.  

Though, is abstinence even possible while writing about Criminal Procedure?

[Meredith R. Miller]

April 16, 2009 in In the News | Permalink | Comments (0) | TrackBack (0)

Today in history: April 16

A On this date in 1905, steel tycoon Andrew Carnegie (left) donated $10 million to create the eponymous Carnegie Foundation for the Advancement of Teaching.  It's not really clear whether it helped.  A hundred and four years later, American law schools are still teaching the same way they were in 1905. 

["Mr. Hart?" he droned, "Can you tell us the facts of Paradine v. Jane?"]

[Frank Snyder]

April 16, 2009 in Today in History | Permalink | TrackBack (0)

Employee contract rights overridden by bankruptcy

A A Canadian employee who was fired after his company sought bankruptcy protection found himself out of luck in his claim for wrongful termination.  In West Bay SonShip Yachts Ltd. v. Esau, Gerald Esau had been an employee of West Bay for nearly 15 years, when his insolvent employer filed an application for protection under Canada's Companies' Creditor Arrangement Act, seeking to reorganize.  A month later Esau was notified that he was terminated as VP of the company.  Esau subsequently brought a wrongful termination action against the bankruptcy plan.

The British Columbia Court of Appeals held that because Esau's contract with West Bay was executory at the time the petition was filed, the terms of the agreement were overridden by the CCAA plan, which allowed West Bay to rationalize its business and thus change his contract rights.  The court noted that "it has now become common [in CCAA proceedings] for courts to sanction the indefinite, or even permanent, affecting of contractual rights."

Lawyers David W. Mann and David LeGeyt of Calgary's Fraser Milner Casgrain LLP offer a synopsis of the case in this client memorandum.  (Free registration required.)

[Frank Snyder]

April 16, 2009 in Recent Cases | Permalink | TrackBack (0)

Happy 5th anniversary to TaxProf

A Hard to believe that it's been half a decade since a dynamic and far-seeing tax law professor (okay, who would have thought that there was such a thing?) at the University of Cincinnati took a listserv dedicated to tax professors and turned it into TaxProf Blog, the progenitor of the 50+ blogs that now make up the Law Professor Blog Network.  Five years later Paul Caron's blog is still the ne plus ultra (if that's the phrase I'm looking for) of the academic blogging world, and the one that provided the inspiration for our own (modest cough) efforts here.  (Left:  Leslie Caron.  No relation to Paul, but better looking.)

Congrats to Paul for the fifth anniversary of TaxProf, a site that in spite of all odds has managed to make tax law fun and interesting.  Here in Texas we'll have a pitcher of margaritas on the porch this evening in your honor.  Or maybe two.  ¡Salud!

April 16, 2009 in Miscellaneous | Permalink | TrackBack (0)

Wednesday, April 15, 2009

The ACORN bus brigade will be there soon

The American Lawyer is reporting that lawyers working on the Lehman Brothers bankruptcy matter have already billed an amazing $84 million for the work done during the past four and a half months.  On an annualized basis, that's a nice $224 million in payouts for the lawyers, about what AIG paid out in total bonuses.

I don't really know why that comparison is relevant, but it did strike me as interesting.

[Frank Snyder]

April 15, 2009 in In the News | Permalink | Comments (0) | TrackBack (0)

We're cool, oh yeah, we're cool

A ContractsProf, The World's Foremost Web Provider of Odd Nuggets of Stuff Primarily of Interest to People Who Teach Contract Law,tm has once again made the list of the top law-professor-edited legal blogs in this quadrant of the Milky Way.  Kudos to all!

Okay, yeah, we finished 35th out of the 35 blogs who made the list, but academics like us don't put much stock in those kinds of cheap comparisons, do we?  I mean, at least we made the list, unlike, say, ChampertyMaintenanceandBarratryProf 

Did you notice, though, that with only four o us posting here we pulled in 144,235 visitors over the past year, which is only about 16,000 visitors less than the ENTIRE FREAKING UNIVERSITY OF CHICAGO FACULTY on its Faculty Blog?   Uh-huh!  Uh-huh!

Of course, Glenn Reynolds at Instapundit had 110 million visitors last year and there's only one of him.  So did we mention that academics like us don't put much stock in these kind of trivial comparisons?

[Frank Snyder]

April 15, 2009 in About this Blog | Permalink | Comments (0) | TrackBack (0)

NY Appellate Court Holds that Dental Student's Claims Were Properly Fashioned as Breach of Contract

Steve Martin

We previously noted a NY trial court decision holding that a former NYU dental student improperly fashioned an administrative challenge (Art. 78 proceeding) as sounding in breach of contract.  Well, an appellate court has unanimously reversed:

Plaintiff properly brought this action for breach of contract, rather than an article 78 proceeding, because, in the school's July 18, 2002 letter, he was promised that he would be billed per credit and would obtain a degree upon completion of the three courses; however, the school failed to bill plaintiff as promised, failed to correct the tuition bill in a timely manner, failed to notify plaintiff of his de-enrollment by e-mail in accordance with its handbook's announced preference for e-mail, and failed to grant plaintiff a degree when he paid the correct amount of tuition in full.

The appellate court directed the trial court to award plaintiff a degree and diploma and any authorizations he may need to take the dental boards.

Eidlisz v. NYU, (App. Div. 1st Dep't.  Apr. 14, 2009)

[Meredith R. Miller]

April 15, 2009 in Recent Cases | Permalink | TrackBack (0)