January 21, 2010
Tiger Woods' Amicable Separation -- From His Sponsors
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.
January 20, 2010
Hadley v. Baxandale in the News
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.
Weekly Top Ten from the Social Science Research Network
January 19, 2010
Conan Has Nothing but Regrets -- Oh, and $40 Million
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.
Empire Resorts and Former CEO at Odds
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.
January 18, 2010
Supreme Court to Hear Unconscionability Challenge to Arbitration Clause
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.
The Market for Law Associates: Doing the Math
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.