ContractsProf Blog

Editor: D. A. Jeremy Telman
Valparaiso Univ. Law School

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Thursday, September 17, 2009

Guitar Hero, Nirvana, (Giving) Love (a Bad Name), and Contract Law

Guitar Hero.  I've never understood the fascination, but I do have a number of friends who've purchased it "for the kids."  (Which, I must assume, is why one new iteration features the Beatles).

Apparently the new version of the game also has Curt Kobain as a character, and his Nirvana bandmates and wife Courtney Love aren't happy.  Love took her disappointment to Twitter and laid the groundwork for the lawsuit in < 140 characters:

For the record this Guitar Hero s--t is breach of contract on a Bullys part and there will be a proper addressing of this and retraction...WE are going to sue the s--t out of ACtivision we being the Trust the Estate the LLC the various LLCs Cobain Enterprises.

Love's attorney issued a statement, clarifying that the claimed breach of contract was the use of Cobain to sing songs of other artists:

Ms. Cobain is extremely upset about Activision's use of Mr. Cobain's likeness to sing the songs of others in its Guitar Hero game. . .. Activision was granted permission by Kurt's trust solely to use his name and likeness. Activision was not given an unbridled right to use Mr. Cobain's name and likeness. Kurt's songs have a special and unique meaning to his fans and his image and legacy are very important to Ms. Cobain.

The agreement Activision has with the trust doesn't allow them to use his likeness in ways that denigrate his image. We would hope Activision would do the right thing on its own and prohibit game users from using Kurt's image to sing others songs and if they don't we expect the trust to take appropriate action to protect Mr. Cobain's image.

Well, that presents an interesting question of contract interpretation: Does it "denigrate" Cobain's image to "belt[] out Flavor Flav ad-libs, Dave Mustaine giggle-rants, Billy Idol come-ons, and Jon Bon Jovi exhortations" -- including, "You Give Love a Bad Name" (and there's no small irony in that lyric)?  You be the judge:

Bon Jovi is the latest to comment, telling the BBC that he declined an offer to be part of the Guitar Hero series:

To hear someone else's voice coming out of a cartoon version of me? I don't know. It sounds a little forced...I had the paperwork, they wanted me to be on that game and I just passed...But no-one even broached the subject with me that I would be singing other people's stuff. I don't know how I would have reacted to that. I don't know that I would have wanted it either.

[Meredith R. Miller]

September 17, 2009 in In the News | Permalink | Comments (1) | TrackBack (0)

Wednesday, September 16, 2009

Macaulay & Whitford on Hoffman v. Red Owl Stores

Red Owl When I first learned that Steward Macaulay and William Whitford had written a new “Law Stories” article about Hoffman v. Red Owl Stores, all I could do was groan.  I had already read Robert Scott’s piece on the case.  How much background material can I possibly incorporate into a discussion of one case?!?  But Professors Macaulay and Whitford have made use of their access to the plaintiff in the case, Joseph Hoffman, and do indeed have new information to share.  Based on new factual findings the two reach different conclusions from those of Professor Scott.  And they do so, I must say, with class, praising him as a giant of contracts scholarship.   As I have only read a draft of the Macaulay and Whitford article, I will not quote them, but you can find their draft here and their very respectful expression of disagreement with Professor Scott can be found in footnote 15 of the draft.

It is a piece that pays great dividends, not only for what it says about Hoffman, but also for all the pearls of wisdom the authors let fall along the way, which relate not only to contracts doctrine, but also to pedagogy and the advantages of the Law Stories approach to scholarship.  Here is the abstract from SSRN:

Hoffman v. Red Owl Stores is one of the most famous 20th century cases in American contract law, usually credited both with expanding the reach of the promissory estoppel doctrine and with opening up the issue of liability for precontractual reliance. It is a staple in contracts casebooks. By fortunate circumstance we have located the plaintiff, who retains a vivid memory about many of the circumstances in his famous case. We have interviewed him and we have examined the full trial record as well as the briefs on appeal. In this article we tell the story of what we have learned about this famous case, including what happened after the appellate decision. We conclude that a fuller understanding of the facts provides information about a promise that was made, yet was not described in the Court’s opinion. This promise supports the outcome of the litigation. Justice was done! The plaintiff substantially relied to his detriment after receiving specific assurances from an authorized agent of the defendant that he would receive a franchise if he relied by selling his bakery building and business. Reimbursing precontractual reliance in this circumstance can be done without creating a rule that would justify reimbursement of precontractual reliance in all circumstances.

I see that the article is now forthcoming in the Hastings Law Journal, so congratulations to the authors on that fine placement!

[Jeremy Telman]

September 16, 2009 in Famous Cases, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 15, 2009

NY Court of Appeals Hears Contract Damages Case

The 2009-2010 term of the New York Court of Appeals begins today, and scheduled for oral argument is St Lawrence Factory Stores v. Ogdensburg Bridge and Port Authority, a case about contract damages.

 

Here's the case summary prepared by Public Information Office of the Court:

St. Lawrence Factory Stores, a partnership of Frank Arvay and Richard Lepine, entered into an option contract with the Ogdensburg Bridge and Port Authority (OBPA) in February 1990 for an option to buy 12 acres of land to develop a retail factory outlet center. The contract also provided, "Since the objective of [OBPA] in offering this option is not merely the sale of land but rather to encourage the development of this specific project, [Factory Stores] shall erect a retail factory outlet and related facilities on said TRACT and said TRACT shall not be used by [Factory Stores] for any other purpose or purposes." Arvay, who eventually held an 85 percent interest in the partnership, sought financing and tenants for the project and exercised the option in July 1991. OBPA sent a letter to the partners in October 1991 expressing "concern about the viability of your project and your ability to perform" and threatening to void the contract if they did not provide proof of adequate financing by the end of the month. The partnership responded that, under the contract, securing financing was not a condition precedent to closing, which was scheduled for January 1992. At the closing, Arvay tendered his 85 percent share of the $298,000 purchase price, but Lepine refused to tender his share and walked out. Arvay then offered his personal check for the remaining 15 percent, but OBPA refused to accept it and declined to close.

 

The Factory Stores partnership sued for breach of contract seeking, among other things, reliance damages for recoupment of its investment costs. Supreme Court partially granted OBPA's summary judgment motion by dismissing the partnership's claims for reliance damages and lost profits. The Appellate Division, Third Department affirmed. Regarding reliance damages for costs incurred by Factory Stores in preparing to develop the site, the Appellate Division said, "The contract in question does not require plaintiff to engage in any of the preparatory tasks for which it seeks to be compensated. Simply put, this is a contract for the sale of land requiring plaintiff to tender defendant the sale price upon closing. Accordingly, plaintiff's reliance damages would encompass only those ordinarily incurred regarding such a contract, such as a title search, survey and attorney's closing fees."

 

After a bench trial, Supreme Court found that OBPA had breached the option contract in bad faith, but it awarded no damages. The Appellate Division affirmed.

 

Factory Stores argues that it should have been allowed to recover reliance damages because its expenses "were incurred in reliance upon the contract, they are ascertainable, and they arose naturally from defendant's breach in the ordinary course of things." It contends the Appellate Division mischaracterized the contract as one solely for the sale of land, saying the option contract "not only mandated the purchase and sale of the subject property, it also contractually obligated the plaintiff to develop/build, at its own cost, the very outlet center that plaintiff intended to develop/build anyway." Factory Stores also argues it is entitled to damages for lost profits and benefit of the bargain damages.

Here's the Appellate Division decision.

 

[Meredith R. Miller]

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

Blogging and Scholarship (More Self-Promotion)

Hippies The ContractsProf Blog may be a gateway drug that can lead to serious scholarship.  As depicted at left, it may have all started with an innocent conversation at Woodstock about contract law, party sophistication and the new formalism, and the next thing you know, you are writing law review articles.  The ContractsProf Blog has been cited to by name as authority in five such articles since 2008.

But here's where it gets really bizarre: a while back, I posted a Limerick on this blog about one of my favorite business associations cases, Lovenheim v. Iroquois Brands, Ltd.  Some months later, I received a brief e-mail saying "loved the Limerick."  The sender was Peter Lovenheim.  After a bit of research, I discovered that this Lovenheim was the Lovenheim, and I e-mailed back asking if he had any war stories to share.  We got in touch, and the result is a law review article, Is the Quest for Corporate Responsibility a Wild Goose Chase? The Story of Lovenheim v. Iroquois Brands, Ltd.  Like most law review articles in the Law Stories tradition, it is a piece that should illuminate aspects of the case that do not make it into the casebooks.

Here is the abstract.

Lovenheim v. Iroquois Brands, Ltd. is not only a standard teaching case in corporate law courses, it is routinely cited by the Securities and Exchange Commission (SEC) in response to corporations seeking to exclude shareholder proposals from proxy materials on the ground that the proposals are not significantly related to the corporations’ businesses. Despite the case’s prominence, its story has not been told in detail. That is a shame because the details of the case are as surprising as its outcome must have been when the court granted Peter Lovenheim the injunction he sought, forcing Iroquois Brands to include in its proxy materials Lovenheim’s proposal calling for an investigation into whether Iroquois’ French supplier of pâté de foie gras force-fed the geese whose livers they later harvested.

This Article explores the law of shareholder proposals and the reasons why the SEC and the courts permit proposals relating to social or ethical issues (social proposals) so long as those issues relate to the corporation’s business. After a history of the relevant SEC regulations and their fates in the courts, the Article presents the complete narrative of the Lovenheim case, providing details that are not captured in the decision or in the limited secondary literature relating to the case. Finally, the Article explores the legal landscape in the aftermath of Lovenheim. It explains why the case has remained good law in the 25 years since the case was decided and why corporations are not motivated to pressure the SEC to limit shareholders’ rights to bring social proposals.

You can download the paper here.

[Jeremy Telman]

September 15, 2009 in About this Blog, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Monday, September 14, 2009

Limerick of the Week: Leonard v. Pepsico, Inc.

Harrier As most readers of this blog likely know, John Leonard saw a Pepsi commercial and then attempted to accept what he took to be Pepsi's offer of a Harrier Jet.  The commercial seemed to indicate that one could get a Harrier in exchange for 7,000,000 Pepsi Points.  Relying on the Pepsi Stuff catalogue, Leonard learned that he could turn in 15 Pepsi Points and provide the remaining consideration in cash, so he attempted to accept Pepsi's purported offer with 15 Pepsi Points and just over $700,000 in cash.

Judge Kimba Wood found that the ad was not an offer, distinguishing it from the advertisments discussed in the last two Limericks cases, Lefkowitz and Izadi.  The ad, said Judge Wood, was not an offer, largely because the Harrier Jet was not included in the Pepsi Stuff Catalogue that provides further information about the Pepsi Points program. Moreover, Judge Wood added, the ad was a joke, and anybody who didn't recognize it as such was simply past help.  Explaining why a joke is funny defeats the purpose of jokes, Judge Wood opined. 

At least some of my students agreed.  They felt that, while both Lefkowitz and Izadi were taken in by intentionally misleading advertisements, Leonard must have known that the Harrier commercial was just supposed to be absurd.  Among other things, my students pointed out that Pepsico was unlikely to have access to a piece of military hardware like the Harrier.  They also deemed it unlikely that the high school kid featured in the commercial would have been able to get a license to fly a Harrier in any case.  

They are probably right, and yet, as far as we can tell, Lefkowitz was the only person to come forward to complain about having been mislead by the Great Minneapolis Surplus Store's ad.  Izadi seems to have been the only one who tried to trade in a matchbox car in order to get $3000 off a new Ford truck.  But Leonard was not alone.  He did not just happen to have $700,000 lying around; he raised the money necessary to accept Pepsi's "offer" by finding interested investors who thought his interpretation of the commercial as an offer had merit.

Interestingly enough, Pepsi released a second version of the commercial.  It contains only one change.  Now the "offer" requires 700,000,000 Pepsi points for a Harrier jet.  There is also a third version, which ads the additional verbiage: "Just kidding."  Apparently Pepsi's non-offer was not as clearly not an offer as it could have been.

Leonard v. Pepsico

Intent to be bound was a barrier
To Leonard's acquiring a Harrier.
Now he only drinks Coke,
And he gets every joke
But I would not say he's much merrier.

[Jeremy Telman]

September 14, 2009 in Famous Cases, Limericks, Teaching | Permalink | Comments (0) | TrackBack (0)