Sunday, January 31, 2010
American courts and legislatures rely on notions of public policy to override the wishes of contracting parties, refusing to enforce contracts (or parts of contracts) which they deem to be contrary to important public interests. They also often adopt policies to encourage certain kinds of contracting behavior. What happens when the two situations collide? A new law student paper, The One-Sided Voidability of Contracts Impacted by 47 U.S.C. § 230, takes a look at one example of the problem -- the interaction of contract law with the Communications Decency Act of 1996.
Friday, January 29, 2010
In the mail today, a hard copy of Juliet Moringiello's article What Virtual Worlds Can Do for Property Law, out in the January issue of the Florida Law Review, 62 Fla. L. Rev. 159 (2010). Here's the abstract:
For those without a law library handy, an earlier version of the paper is here.
Suppose you had a secret recipe that had made your company the dominant firm in your field for more than 125 years. And suppose there were only ten people on earth who knew the secret recipe, all of whom learned it from you and work for you. And suppose that there were other giant firms out there that would like nothing better than to knock you off your perch. And suppose one of them had just hired one of those ten.
That appears to be the situationthat Bimbo Bakeries USA, parent of Thomas' English Muffins, is dealing with. You'd think that the company would have locked up those ten employees with good, solid noncompete contracts, but apparently it didn't. So now it's trying to prevent a former executive who knows the secret of how you get Thomas's famous "nooks and crannies" [left] from jumping ship to Hostess Brands, a major competitor of Bimbo. The trade secret law, according to the report from Law.com, looks chancy.
Is it possible for food to be too cheap? For example, Burger King has a “value menu,” which includes a double cheeseburger for 99 cents. Even if economies of scale purports to explain how Burger King can still profit while selling its products at a lower price than other, smaller food establishments, 99 cents seems too cheap to me for a double cheese burger. The price does not turn me on; rather, it turns me off. I just can’t believe that a quality, tasty meal can be made at such a low production cost. I assume the worst about all of its ingredients.
Well, based on an ongoing dispute between Burger King and its franchisees, the franchisees also are not thrilled about the price of the double cheeseburger. Maybe Burger King is able to turn a profit at this price point, but the franchisees claim that they are not. According to a recent WSJ article, Burger King insists that “its two beef-patty sandwich” be sold for no more than $1 on its “Value Menu.” The franchisees claim that they are losing money on the sales, and they have sued. The issue comes down to the terms of the boilerplate franchise contracts, and whether those contracts allow Burger King to dictate prices. Here’s a taste from he WSJ:
Most franchisees are following orders for now, but the National Franchisee Association for Burger King, which represents restaurant operators across the U.S., filed a lawsuit last fall in U.S. District Court in Florida, asserting that the company's franchise agreements don't allow it to dictate prices.
Burger King, a unit of Burger King Holdings Inc., Miami, says it sees the value promotion as key to competing effectively in the current consumer environment. Franchisees who ignore its pricing instructions "may be declared in default of their franchise agreement," the company says.
The court has yet to rule on Burger King's request to dismiss the case.
A ruling that's favorable to Burger King could embolden other franchisers to mandate prices. Many franchisees have long regarded their power to set prices as testament to their independence.
It used to be that franchisers weren't allowed to impose maximum prices, says Francine Lafontaine, who teaches the economics of franchising at the University of Michigan's Stephen M. Ross School of Business. But a 1997 Supreme Court case involving a Chicago service station dealer and his gasoline wholesaler opened the door for the practice.
Still, many have chosen not to do it, and left in place boilerplate franchising agreements that don't include pricing requirements, says Ms. Lafontaine.
Burger King's franchisees say they usually get the chance to sign off on price changes, and that they've twice rejected a $1 double cheeseburger. Burger King confirms that it previously didn't dictate prices on individual items, though it did require a $1 maximum price on Value Menu items.
The company won a separate case in 2008 requiring franchisees to offer the Value Menu, which is core to its efforts to attract price-conscious consumers.
A company might choose to set prices if it thinks the stores are charging so much that its royalties—and its reputation—are being diminished. But most companies don't like to rile their franchisees, experts say.
Disclaimer coming soon to a Burger King coupon near you: “valid only at participating restaurants”?
[Meredith R. Miller]
In the mail today, the brand-new 6th edition of the Uniform Commercial Codehornbook by Jim White and Bob Summers. It's the first update since 2000 of the classic text that has been helping law students work through the maze of UCC 2-207 for 37 years. The new edition cuts down on the citations and increases the examples, as well as dealing with the latest changes to Articles 1 and 9.
Thursday, January 28, 2010
According to this story in the Los Angeles Times (and about a zillion other websites), Michael Lynche has been cut from the top 24 contestants of this year's version of American Idol. The ground for his dismissal is breach of contract. The breach allegedly occurred when Lynche's soon-to-be-estranged father confirmed rumors that his son had made the semi-final round. This a breach of the contestants' agreement that they will not divulge their fates on the show.
"Aww, come on!" I hear you type into your favorite blog, "Michael Lynche is awesome!!!" That may well be. I wouldn't know, as I don't watch the show. But one aspect of the report strikes me as very interesting. According to this report, the non-disclosure agreement binds not only the contestants, but also their families. Now how does the network manage that? I mean, if I ever did anything of which my family could be proud, what could I do to prevent my mother from reporting on the nachas? "So, you said he was a nichtgutkeit," I can hear her crow, "But now whose son is idle -- eh? Eh?"
Tuesday, January 26, 2010
Monday, January 25, 2010
A New York Times story published last week provides all sorts of interesting details about the negotiations of basketball star Gilbert Arenas' contract with the Washington Wizards. Arenas has been in the news a lot lately. He brought some guns into the arena where the Wizards play and the guns allegedly figured in an argument he had with a teammate in the team locker room. Arenas was charged with, and plead guilty to, the felony of carrying an unlicensed handgun. The league has suspended him indefinitely.
The Times reports that Arenas represented himself in the negotiation of the contract. Maybe that's why his nickname is "Agent Zero." In order to avoid insulting him with a low-ball offer, the team offered him a very generous contract, with the option to take a bit less so that the Wizards could still retain some other top players. The result was a six year, $111 million deal.
The team still owes Arenas $80.2 million on the contract for the next four NBA seasons, but the Times suggests that the Wizards are seeking to avoid any further obligations by invoking the contract's morals clause, which is standard on all NBA contracts. The standard clause requires players to conform their personal conduct to standards of good citizenship, good character and good sportsmanship. By good character, the league means that players must not engage in acts of moral turpitude, whether criminal or non-criminal in nature.
This is a shockingly elastic standard that I would argue could be invoked at random. For example, last season, LeBron James refused to shake hands with opposing players after his team lost a playoff series. Many commentators viewed this conduct as evidence of poor sportsmanship, but there was no invocation of and no talk of invocation of the morals clause. Nor was there any such talk with respect to Kobe Bryant's morals clause although he allegedly admitted to shocking marital infidelities. Now, the reasons why the teams and the league did not invoke the morals clause in those cases are obvious, and I am not suggesting that the clauses should have been invoked. I am simply wondering about the boundaries of the teams' and the league's discretion in invoking the clause and whether that discretion does not render the clause void for vagueness.
Thursday, January 21, 2010
We have posted before about rumors that Tiger Woods is negotiating with his wife so that she will stay in the marriage. Well, it seems that he has chosen not to take the same approach with his corporate sponsors. The New York Times reports that AT&T severed ties with the world's best golfer without paying him fees still owed under the parties' agreement, and it did not have to go to court in order to do so. Although nobody wants to talk on the record, the Times story prints off-the-record conversations with people in the know who claim that the agency that represents Tiger Woods let the corporate sponsors out of the contracts in order to preserve its good relations with those corporations.
Ordinarily, a sponsor would protect itself and leave itself a contractual out through a morals clause that would permit it to sever the relationship if the celebrity spokesperson for the product turned out to be unsuitable. The Times report suggests that Woods might have had sufficient bargaining power so as to eliminate the morals clause or to insist on one with very limited applicability. Nonetheless, the Times also points out that Woods likely would not want to have his conduct further scrutinized and subject to public inquiry. In these circumstances, it may have been best for all involved to simply part company.
But the report also raises troubling issues about an agency that might have to balance its relationship with sponsors against the interests of its clients. The best interests of the agency will not always coincide with the best interests of the agency's client.
Wednesday, January 20, 2010
National Football Post is not the place one looks in the hopes of finding a reference to Hadley v. Baxandale, but the case figures prominently in this report on the Washington Redskins' new head coach, Mike Shanahan. The article assumes a level of knowledge regarding the NFL to which I can only aspire, but I glean from it, with the help of Wikipedia, that Mike Shanahan was formerly the head coach of the Denver Broncos. He was sacked after the 2008 season and sat out this past season but was still paid under his old contract. Now, he has been hired by the Washington Redskins, thus mitigating the damages due to him under his contract with the Broncos.
So, what does all this have to do with Hadley? Fair question. I do not know. The National Football Post cites to Hadley and accurately recites its basic facts, but the issue here is mitigation of damages, not foreseeability of consequential damages. Hadley would seem to have no application at all.
Apparently, NFL coaching contracts clearly spell out a duty to mitigate damages. The result is that Coach Shanahan will only make slightly more than he would have made under his Denver contract. However, if he had not actively sought work, Denver might have refused to pay, citing the duty to mitigate. But Hadley would only come into play if Shanahan were, for example, claiming entitlement to further recovery contingent upon information that the Broncos did not have at the time the contract was executed.
This is what happens when reporters call audibles too close to their publication deadline.
Tuesday, January 19, 2010
According to the Wall Street Journal, NBC and Conan O'Brien will soon finalize an agreement that terminates his short stint on The Tonight Show in return for $40 million, the right to baffle his audience on a different network and a promise not to bad mouth NBC or to make any jokes about chins.
For some reason, I can't link to the WSJ article, but here is the New York Post, doing what most newspapers do best, reporting on what other reporters have reported. Kind of like bloggers that way.
The WSJ reports that Jay Leno will return to The Tonight Show, a fact that suggests that either 1) NBC executives do not read this blog; or 2) they read it and yet are ignoring our recommendations for successors to Conan. Both possibilities are inconceivable, so the WSJ must be wrong about Jay's return.
In the immortal words of Milhouse Van Houten, "How could this have happened? [They] started out like Romeo and Juliet, but it ended in tragedy." So it was wth Empire Resorts and its now-former CEO, Joseph Bernstein. As the Wall Street Journal reports, Bernstein came on board in May to bring Empire back from bankruptcy. He was fired in December.
Bernstein says the termination was "payback" because he blew the whistle to the New York State Racing and Wagering Board upon discovering a financing strategy that had not been disclosed to the company's shareholders. As reported in the Times Herald-Record, the complaint alleges that Bernstein's disclosures were a breach of confidentiality. Empire also accuses Bernstein of making threats and demands towards the end of his tenure. The demands included a $500,000 bonus, a $500,000 consulting fee and the immediate vesting of his stock options. Bernstein appears ready to duke it out in court.
This case interests me because I litigated a similar one in practice. The only difference was that in my case, the CEO negotiated his contract during a bull market and the contract basically guaranteed an absurd severance package, so long as the termination was not for cause, and "cause" was pretty much limited to war crimes. It seems that times have changed.
Monday, January 18, 2010
As the ever-reliable SCOTUSblog reports, on Friday, the U.S. Supreme Court announced that it would review Rent-A-Center West, Inc. v. Jackson, a case decided by the Ninth Circuit last September. The NInth Circuit opinion is available here.
In the case, Plaintiff Antonio Jackson brought a claim in the federal district court claiming race discrimination and retaliatory termination. Rent-A-Center moved to dismiss and compel arbitration pursuant to a "Mutual Agreement to Arbitrate Claims" that the parties had signed and which specifically lists discrimination claims among those subject to arbitration. Noting that the Arbitration Agreement gave the arbitrator exclusive powers to interpret it and to determine its enforceability, the District Court granted the motion to dismiss, unconvinced by Jackson's argument that the Agreement is unconscionable.
The Ninth Circuit vacated that dismissal and remanded, finding that where a party asserts that there was no reasonable assent to an arbitration agreement because that agreement is both substantively and procedurally unconscionable, the question of unconscionability is for the court. The Ninth Circuit further found that, although the District Court properly rejected one of Mr. Jackson's arguments for the substantive unconscionability of the Agreement, it did not address his other two arguments.
There was a dissenting opinion on the Ninth Circuit, which may foretell what the Supreme Court will find. Dissenting Judge Hall found that the Agreement was, in anything, more favorable to employee interests than are most such agreements. The upshot of the Ninth Circuit opinion, said Judge Hall, will be mini-trials in the district court prior to the arbitration proceedings to which the parties agreed for any party who is clever enough to challenge the arbitration agreement on unconscionability grounds.
I will find this case especially interesting to watch and may teach it if the Supreme Court has interesting things to say on the subject, as I find that the issue of the unconscionability of binding arbitration in employment agreements is one that frequently elicits passionate exchanges among my students. The question of the substantive unconscionability of such agreements is a complex one, and perhaps it is one for which first-year law students usually have inadequate information.
Many if not most of my students have worked before coming to law school and so they have had the experience of arriving for their first day of work and then being told that they must sign a stack of forms, including one that provides for binding arbitration. Very few people have any bargaining power at that stage in their employment history. The situation strikes my students as fundamentally unfair.
However, many students defend the practice, pointing out that arbitration also has advantages for employees and that the deal is not substantively unconscionable. Moreover, the savings to employers can translate into savings to consumers as a whole. It will be interesting to see how the Supreme Court does the dance this time around, but I'm predicting a unanimous reversal.
For some reason, an article about the BigLaw slump that is making for a very challenging environment for recent law graduates turned up in the Sunday New York Times Fashion and Style section. "No Longer Their Golden Ticket" describes the current situation, in which even students from top law schools who are hard working and dedicated to their careers may find themselves out of work because the firms simply do not have work for them to do.
I think I can safely say that law professors generally are very concerned and sympathetic to the fate of our graduates. I can't say that I've even heard much grumbling among law professors about the fact that our students have the opportunity to make more as first-year associates at the big law firms than most of us do as full professors. Good for them. We hope they remember their law schools when they need a tax write-off. But one quotation in the article does indicate why some people might be less than 100% supportive of young lawyers earning six-digit figures.
The Times quotes a blogger who posts under the name of Legal Tease complaining that
If you do the math, you’re making less than a baby sitter — not a nanny even, but an actual baby sitter in high school.
This is, of course, not the case. No matter how you do the math, associates at BigLaw get paid far more than babysitters, whether or not they know how to do math.
Friday, January 15, 2010
Conan is gone! Long live Conan! IMHO, Jay Leno is now damaged goods, especially with the younger, hipper crowd who can't think of anything better to do than watch network news and then The Tonight Show. Since Top Ten lists are a sort of late-night television staple, here is my top ten list of potential hosts for the time slot, whatever NBC now chooses to call it.
#10: Tyra Banks. She's had a daytime show and she always makes me laugh.
#9: Rosie O'Donnell. She's had some talk show experience on her own show and on The View. She's good at stirring up controversy, and when you're trying to attract viewers, the only thing worse than being talked about is not being talked about.
#8: Whoopi Goldberg. She's done it all. She's been successful in so many different media. She can be lively and outspoken but she can also just be a good listener -- like when she tended bar on Star Trek.
#7: Orpah Winfrey. Just say she's not up to it. I dare you!
#5 Dave Chappelle. He'd be great if anyone can find him.
#4 Jon Stewart. We know he's got the Sitzfleisch to get on the air every night, but he might have to be smart and mature more consistently. He can do it, but he may not want to, and a lot of traditional NBC constituencies may be unwilling to stop associating him with liberalism and fart jokes.
#3 Jerry Seinfeld. I think he's the closest thing my generation has to a Johnny Carson. His act is clean and funny, but he's such a perfectionist about his material, it's not clear he can be funny doing bits written by others.
#2 Stephen Colbert. By which I mean Stephen Colbert, the infinitely funny, inventive and talented comedian and not "Stephen Colbert" the Bill O'Reilly parody, although the latter can certainly put in appearances. He's got incredible comedic range -- from the faux gravitas he often engages in on his current show to the absurdist stuff in which he specialized more when he was on The Daily Show.
#1 Ellen DeGeneres. Once again, she's shown that she's got the stamina to do a daily talk show, and after Finding Nemo and hosting the Academy Awards, she would seem to have established her ability to appeal to a national audience that could include people who are not entirely comfortable with her sexuality. If they get uncomfortable, such people can simply close their eyes and pretend they are listening to Dory. It would be a bold move for NBC to pick Ellen, but she's certainly got the talent and the energy that the network needs, and she would come with her own dedicated fan base.
Thursday, January 14, 2010
We have posted before on Dan Rather losing his suit against CBS, but now New York's Court of Appeals has rejected Rather's appeal, and even he now seems to recognize that his $70 million suit against the network that employed him for 44 years is over.
We first reported on the suit in April 2008, after New York state court Justice Ira Gammerman dismissed Rather's claims against individual defendants. As we reported in September 2008, the remainder of the case was then permitted to proceed. Last September, we noted that New York's Appellate Division overturned that decision, dismissing Rather's appeal in toto.
This week, as reported in the Daily News, New York's Court of Appeals affirmed the appellate division's decision. Rather expressed disappointment at what he characterized as "a grave miscarriage of justice."
Wednesday, January 13, 2010
Yesterday's New York Times reported that Conan O'Brien is being courted by the Fox Network. Apparently Jay Leno's prime time talk show was not the hit NBC was hoping for, so they are carting his chin back to Jay's old 11:35 PM EST time slot. Conan would still host The Tonight Show, but with a start time of 12:05 AM, the show would be better named The Late Show. Is that name taken? As the picture at left indicates, Conan is so angry at this treatment, his hair is on end. But would he go so far as to jump ship to Fox?
According to the Times, O'Brien might not be free to take Fox up on its offer. The Times suggests that O'Brien's contract with NBC includes a non-compete clause that could prevent him from jumping to a rival network for a year or more. In order for O'Brien to extract himself form this NBC contract, he would have to show that the 1/2-hour time change constitutes a breach of contract by NBC. Unfortunately, for Mr O'Brien, his contract with NBC does not specify the time slot for The Tonight Show.
At least one commentator thinks that Conan's lawyers "screwed up" by failing to specify the time slot of The Tonight Show in his employment agreement. At least one other commentator thinks the "screw up" insignificant because a court will assume that the parties intended for The Tonight Show to air in its traditional time slot. Unfortunately, this latter commentator can only cite this blog as her authority. Of course, we were not privy to the negotiations that resulted in that contract, but certainly NBC's good faith could be questioned if Mr. O'Brien emerged from the negotiations in the reasonable belief that The Tonight Show would continue to air at its usual time.
First, over at Concurring Opinions, Lawrence Cunningham has given the Conan O'Brien/Jay Leno controversy the full-blown IRAC treatment. I think I'd give myself about a B- on the issue-spotting exam, since I didn't address the mitigation issues nor did I think about the effect of the controversy on third-parties. But I still have the temerity to quibble with Professor Cunningham's conclusion that, on the whole, NBC would have the stronger position if the controversy were to end up in court. Much might depend on what percentage of The Tonight Show's target audience has the stamina to pay much attention after the opening monologue, but I suspect that viewership declines drastically after the witching hour.
One factor that might be crucial to a determination of which party has the stronger bargaining position is the rumor that Conan's agreement with NBC included some sort of $45 million penalty clause. The Daily Beast here contemplates the consequences of a broad reading of that penalty clause. In the report cited above, The New York Times, suggests that the $45 million would only have come into play if Conan had never gotten to host The Tonight Show. But if NBC's intention all along was to bring Jay Leno back if his prime time show failed, was Conan really given a chance?
Second, today's New York Times reports -- on page A1 above the fold no less! -- that Conan has thrown down the gauntlet, pronouncing that he will not go back to early a.m. television. His intention is apparently to soldier on until NBC throws a pile of money at him and allows him to get on with his career unimpeded.
Tuesday, January 12, 2010
Readers of this blog probably mostly associate Texas Tech with its University Press, which has brought forth some of the best formal poetry of the early 21st century. Apparently, the school also has a sports program.
An Associated Press report posted on ESPN.com states that Texas Tech's President fired the university's football coach Mike Leach for cause based on allegations that he had mistreated a student-athlete who has suffered a concussion. Leach was fired one day before an $800,000 bonus would have been triggered.
On January 8th, Leach sued, as reported on RedRaiders.com, sued for breach of contract, fraud and defamation, among other things. Texas Tech is claiming sovereign immunity to suit, but Leach is claiming protection under Texas' whistleblower statute and claims that under that statute, sovereign immunity does not apply.
According to this report on RedRaiders.com, Leach has a good chance of succeeding in his lawsuit. According to the report, Leach's best legal argument would be to claim that his conduct did not rise to the level that would justify a "for cause" firing. The report suggests that the good people of West Texas will support Coach Leach regardless of any misconduct, and that attitude might force the university into a settlement.