Friday, March 20, 2009
Thursday, March 19, 2009
Wednesday, March 18, 2009
A forum on the NYT site "Room for Debate" includes short reactions from Tom Baker, Charles Fried, Frank Snyder, Glenn Greenwald, James P. Tuthill and Deborah W. Post: check it out here.
The NY Times also has an op-ed by Lawrence Cunnhingham: AIG's Bonus Blackmail.
A Q&A from the WSJ.
[Meredith R. Miller]
Tuesday, March 17, 2009
A number of interesting-looking pieces have made their way over the transom in recent weeks; and, now that spring break is upon me (yeah!), and several outside promotion and tenure reviews are behind me (yeah!!), I have time to pass news of these items along to you.
I am also combining recent U.S.-based and recent non-U.S. publications on the theory that my annoyance at otherwise well-researched books and articles published outside the U.S. for not citing relevant works in U.S. publications might be more righteous if I stopped segregating the lists of new publications.
Allan Beever, Agreements, Mistakes, and Contract Formation, 20 King's L.J. 21 (2009).
Robert B. Bennett, Jr., Trade Usage and Disclaiming Consequential Damages: The Implications of Just-in-Time Purchasing, 46 Am. Bus. L.J. 179 (2009).
J. Zach Burt, Comment, Playing the "Wild Card" in the High-Stakes Game of Urban Drilling: Unconscionability in the Early Barnett Shale Gas Leases, 15 Tex. Wesleyan L. Rev. 1 (2008).
Gilles Cuniberti, Beyond Contract -- The Case for Default Arbitration in International Commercial Disputes, 32 Fordham Int'l L.J. 417 (2009).
Francesco Giglio, Pseudo-Restitutionary Damages: Some Thoughts on the Dual Theory of Restitution for Wrongs, 22 Can. J.L. & Juris. 49 (2009).
Will Hendrick, Comment, Pay or Play?: On Specific Performance and Sports Franchise Leases, 87 N.C. L. Rev. 504 (2009).
Allen Kamp, No Compensation for Slave Traders: Some Implications, 14 Tex. Wesleyan L. Rev. 289 (2008).
Pedro Barasnevicius Quagliato, The Duty to Negotiate in Good Faith, 50 Int'l J.L. & Mgmt. 213 (2008).
Adam Ship, The Primacy of Expectancy in Estoppel Remedies: An Historical and Empirical Analysis, 46 Alberta L. Rev. 77 (2008).
Dan Jerker B Svantesson, Codifying Australia's Contract Law -- Time for a Stocktake in the Common Law Factory, 20 Bond L. Rev. 92 (2008).
Joel Rothstein Wolfson, An Intellectual Property Lawyer's Reading of UCC § 2-312, 126 Banking L.J. 141 (2009).
[Keith A. Rowley]
Pedros was a family business run by three brothers. Alfred discovered that his brothers, Carl and Eugene were embezzling from the business, and he wouldn't shut up about it. After two investigations, some funds could not be accounted for. Carl and Eugene repeatedly warned Alfred to move on, but he refused. Eventually, they were forced to tell employees that poor Alfred had suffered a nervous breakdown and would no longer be able to work. I mean really -- what choice did they have? He was also frozen out of the decision-making process and otherwise deprived of the benefits of his ownership share in the corporation.
They court found that Carl and Eugene had violated their fiduciary duties to Alfred and ordered damages, including his reasonable expectation of lifetime employment, without any requriement that Alfred show that his brothers' misconduct caused actual harm to the corporation,
Pedro v. Pedro
Alred loved Carl and Eugene,
Though they thought him off his bean.
Their breaches frenetic
Made judges splenetic
So they paid for their freeze-out routine.
We previously mentioned a NYT article about a lawsuit to unravel a divorce settlement that included a payout from husband to wife for the right to keep the $5.4 million (or so they thought) Madoff account. As part of the settlement husband had paid wife $2.7 million in cash, and he now wants the money returned. From the news article, it appeared that the husband would argue mutual mistake. We now have a copy of the complaint, and that is, indeed, the husband's argument: count one seeks reformation based on mutual mistake as to the value of the "account." There is also a count for restitution/unjust enrichment.
[Meredith R. Miller][h/t Isaac Samuels]
Some attorneys are asking why the government, which owns 80 percent of AIG, didn't pressure the company to withhold payments while it investigated ways to stop them.
"There wasn't any hurry to pay them out," says Miriam A. Cherry, an associate professor of contract law at the University of the Pacific. Cherry says it would have been better to force AIG employees to bring a case explaining why they were entitled to the bonuses.
Once in the hands of employees, those payments will be very hard to claw back. AIG reportedly told Treasury Secretary Timothy Geithner that if it didn't pay out the bonuses that were due on Sunday, it could wind up paying twice as much. Under a Connecticut law, employees can collect double damages plus attorneys fees if an employer withholds wages and the employee can prove bad faith. Cherry says she is not sure whether bonuses would qualify for wages under this law.
AIG paid additional bonuses to workers in other parts of its insurance empire, but they are not generating as much outrage as bonuses paid to employees of its Financial Products division, which wrote contracts that essentially guaranteed securities backed by pools of loans including subprime mortgages.
Losses on those securities grew so large that in September 2008, the Federal Reserve agreed to provide an $85 billion credit facility to AIG in exchange for nearly 80 percent of its stock. The government has injected a total of $173 billion into AIG, more than it has put into any other financial firm.
Neither AIG nor the Obama administration has disclosed which Financial Products division employees got bonuses and why. New York Attorney General Andrew Cuomo has said he will subpoena AIG to find out who got the money.
According to the Wall Street Journal, 400 employees were set to receive bonuses ranging from $1,000 to $6.5 million. The bonus pool included retention bonuses that AIG agreed to pay employees in early 2008 to prevent them from quitting.
It's hard to imagine how anyone in the division that drove AIG to the brink of bankruptcy could have earned a performance bonus for 2008.
"The dismal performance of the financial products unit was apparent in the earlier part of 2008," says Lucian Bebchuk, Director of the program on Corporate Governance at Harvard Law School.
"Similarly, it is hard to justify the bonuses as essential for retention, as they were not made contingent on executives' staying with the company. The executives who recently received the bonus payments are now free to leave AIG with the bonuses in their pockets," Bebchuk adds.
"To make its claim more credible," he says, the company should disclose the terms and dates of the contracts.
Without knowing the details, lawyers say it is hard to gauge AIG's chances of getting the money back.
"If the bonuses have been earned, I don't think there is any good contract remedy for getting them back," said Frank Snyder, a law professor with Texas Wesleyan University. "Some of my colleagues have suggested using a doctrine called changed circumstances or frustration of purpose" under the theory that things have changed so much the contract can be undone. "But that doesn't apply when one party has done all the things they have to do."
Snyder says that if AIG had been allowed to go bankrupt, the contracts might have been undone in bankruptcy court. But "the government didn't let them go under, so the company is stuck with the contracts it has."
Theoretically, AIG's nongovernment shareholders could try to sue the board for violating its duty of care, but "I'm sure AIG (like most companies) has a provision that says you can't sue directors for violating duty of care," he adds.
Snyder says AIG's best chance of getting back the money is through public pressure: "The government is capable of starting a criminal investigation to get money from people they think shouldn't have gotten paid."
Read the rest of the article here.
[Meredith R. Miller]
Monday, March 16, 2009
Considerable populist outrage is being directed towards AIG, which is planning to pay around $120 million in bonuses to employees. Some of these employees were "executives in the same business unit that brought the company to the brink of collapse last year." Good use of bailout money? AIG and the Treasury say that the firm has no choice:
Word of the bonuses last week stirred such deep consternation inside the Obama administration that Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said. But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them.
[Meredith R. Miller]