ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Tuesday, March 15, 2011

Nice Hypo from the World of Art Law

Cow As reported in the New York Times, one day, art collector Charles Cowles thought to himself, "Hey I could use some money."  So, he decided to see Mark Tansey's 1981 painting, "The Innocent Eye Test," in which a cow gazes at a painting of a two cows.  Monaco-based British collector Robert Wylde purchased the painting for $2.5 million through the Gagosian Gallery.  For that price, Mr. Wylde thought he had purchased a 100% interest in the painting.  Apparently, Mr. Tansey forgot to mention that the Metropolitan Museum of Art already owned a 31% interest in the painting.  Oops.  Now Mr. Wylde is suing the Gagosian Gallery.

By the way, we are envious of the first comment from "Freddie" in the Times link.  "Heifer cow is better than not having any part of one."  That's rich!  And Mr. Cowles is now Cowless!  Brilliant!

Freddie notes that that the case is reminiscent of "one of those nutty issue spotter exams we'd get in law school."  Now there my friend, you have gone too far.  If this were an issue-spotter exam, we would add the following twist: Mr. Tansey was willing to sell the painting of the cow in part because he thought it was a barren painting.  Mr. Wylde discovered shortly after the purchase that the painting was not only fertile but was with calf.  Mr. Tansey sought to void the sale based on the doctrine of mutual mistake.  


March 15, 2011 in In the News, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Monday, March 14, 2011

Move Over Tiger Mother...

Here's the story from the Daily News:

A Manhattan mom is suing a $19,000-a-year preschool, claiming it jeopardized her daughter's chances of getting into an elite private school because she had to slum with younger kids.

Nicole Imprescia yanked 4-year-old Lucia from the York Avenue Preschool last fall, angry the tyke was stuck learning about shapes and colors with tots half her age - when she should have been prepping for a standardized test.

"This is about a theft where a business advertises as one thing and is actually another," said Mathew Paulose, a lawyer for the mom.

"They're nabbing $19,000 and making a run for it."

Impressed by the school's pledge to ready its young students for the ERB - a test used for admission at top private elementary schools - Imprescia enrolled her daughter at York in 2009.

A month into this school year, she transferred the child out of the upper East Side center because she had been lumped in with 2-year-olds.

"Indeed, the school proved not to be a school at all, but just one big playroom," the suit says.

Imprescia's court papers suggest the school may have damaged Lucia's chances of getting into a top college, citing an article that identifies preschools as the first step to "the Ivy League."

* * *

York's owner, Michael Branciforte, declined comment on the suit, which seeks a refund and class action-status on behalf of similarly wronged toddlers.

On its website, York Avenue Preschool touts its music and physical education programs, weekly library trips and French classes for four-year-olds.

"Our goal is to reach each child and work with them towards their 'next steps,'" the site says.

Its claim of offering age-specific learning environments is a "complete fraud," Imprescia charged.

Sounds like Imprescia is seeking rescission of the contract based upon fraud.  If there is no fraud or misrepresentation, query whether the preschool is even in breach (what is an "age-specific learning environment"?).  If the school is in breach, the story provides a nice example of the limitations on contract damages.  Imprescia might get a refund for the remainder of the year, but she's not going to be compensated for her 4-year-old daughter's lost chance at admission to Harvard.... and all the attendant shame and suffering.

[Meredith R. Miller]

March 14, 2011 in In the News | Permalink | Comments (1) | TrackBack (0)

Killing Two Birds With One e-Bay: Boyfriends, Buyers Beware.

RisquefuriousgirlfriendeBaysite_cropped Reading about yet another disciplinary use of eBay, a mad girlfriend who ebayed her cheating boyfriend’s things provides food for thought about contractual expectations in relationships. 

A relationship, in pseudo contractual terms, is the interaction of two persons who, because of mutually agreeable expectations, have chosen to spend time together and are willing to perform in certain ways.  "I am willing to commit to this relationship", a prospective girlfriend might say, "because I want to have a companion for social events – a liberator from the dating jungle - and I’m attracted to you and want to get to know you better".  Marriage, the ultimate relational commitment, is thus described as a marriage contract, while actions for breach of promise to marry - aka heart balm actions - are not unheard of.  (Who on earth, you may wonder,  even thinks of suing for breach of promise to marry these days?  Evidently the few that live in a jurisdiction where the cause of action still exists, and are both extraordinarily peeved and brave enough to pursue a claim.) 

Once upon a time, the idea of an eBaying paramour would have been unthinkable.  Monogamous marital relationships were the default sixty years ago.  Faithfulness was expected ‘till death do us part’, children out of wedlock were a disgrace, and adultery was a heinous wrong.  To put it mildly, times have changed.  Marriage is not the objective of a relationship for many nowadays .  In fact, some statistics would have us believe that marriage is depressingly out of reach for some.   So what might two people be committing to – or to rephrase for the commitment phobic - what might their expectations be when people decide to ‘become an item’?  Monogamy as in a faithful, exclusive, romantic relationship with only one person at a time?  An enjoyable companionship in which compatibility rather than passion is key?  Expectations of trust and respect driving good faith efforts to abstain from all others, or an ‘open relationship’?  Symbiotic cohabitation, or merely a friendship ‘with benefits'?  The last two do not infer expectations of fidelity or exclusivity, so what was the girlfriend expecting?  This incident clearly illustrates the hellish wrath of a woman scorned.  Since the catalyst for her titillating revenge was discovering her boyfriend had been seen with other women, it is safe to infer that she expected fidelity from the guy.

So, she is furious. We don’t know if he expressly or implicitly promised to be faithful, but she clearly expected that he would be.  Likely she would assert, if asked, that he induced her to believe that he would be faithful – that is, if she was not explicitly promised faithfulness (i.e. as an express term of their relational agreement) by the guy.  However they arose, her expectations of faithfulness were disappointed.  Should her ex be allowed to get away with his relational crime – or should he be estopped from denying his obligation to be true (if any) and be accordingly punished?  Presumably she doesn’t want the guy back.  Her actions indicate that she wants to make him pay for the betrayal and she wants it to hurt.  How she goes about this is the crux of the story. The boyfriend preferred her to dress conservatively during their relationship so what does she do?  She posts scantily clad pictures of herself draped with the items in question on eBay.  Revenge and liberation in one fell swoop – so take that, ex boyfriend!

But wait a minute – who’s hurting whom?  To a more conservative eye, she cut her nose off to spite her face by baring – on a global auction site no less – her assets in a demeaning display.  Undignified perhaps, but understandable all the same?  Relationships are more often emotional affairs than business arrangements so it is to be expected that the behavior of the parties will be illogical at times.  A person braver than I might even suggest a correlation between the frequency of illogical responses and the sex (of the actor) involved - but I won’t venture into that particular minefield.  The response of the scornee in this scenario is what should be our focus.  She eBayed the scorner's clothes.  She set up a website.  She advertised the items for auction on eBay.  She linked the risqué auctions to her new website.  This drummed up traffic to her website.  Immodest yes, but maybe not so illogical after all.

Were the items in question hers to sell?  She claims to have bought most of the items.  But even if she did, surely it was with the intention of giving them to him as a gift.  If so, the clothes became his property at that point.  She did not have title to the items and had no right to dispose of them if that was the case.  She didn’t, that is, unless the relationship was based on the understanding – a sub provision of an implicit termination clause? – that in case of unfaithfulness or other just cause, all gifts given to an offending donee will revert to the affronted doner.   Her disposal of the property would be justified alternatively, if it had been abandoned by its owner.  As she reportedly locked him out by changing the locks and has been impervious – thus far - to his alleged pleas to return, the latter is unlikely on the facts.  If in her rage, she has treated someone else’s property as her own, the legal ingredients for conversion –and perhaps theft – have been satisfied.  

Myexboyfriendscloset items_censoredcropped Will the scorner-donee-ex-boyfriend have the gumption to strike back – say by suing his scorned ex-girlfriend for the return of his property?  Might he seek damages for whatever injuries he has sustained from this now very public exacting of revenge?  In that case (if you will forgive the puns) , the shoe would be on the other foot – a suit for an intentional tort or negligence, rather than a case for breach of promise to marry (jilting).  Assuming that he chooses not to press criminal charges, that is.  But it seems the boyfriend has attempted at least one retaliatory blow – the auctions were taken down by eBay staff, allegedly at the instigation of her ex, for being too sexy.  Undeterred, the enterprising Miss re-posted the listings in the ''art'' category.  Although the ‘art’ advertised for sale is the collection of photographs showing her modelling different items (of her ex’s clothing), the ingenious gal still manages thus to accomplish her aim of profiting from, and getting rid of, her ex’s clothes.   As an incentive to buy each photograph, she offers to ‘throw in’ (or should that be ‘throw out’?) the actual item photographed as a ‘gift’.  Contractually, prospective buyers more interested in the ‘gift’ item than the photograph may be reassured in at least two ways.  Either the promise of a ‘gift’, though made before the sale, induced the sale, and for that reason may be deemed a term of the contract (i.e. ‘gift’ is a misnomer as the item is jointly supported by the consideration provided by the price paid for ‘the photograph’).  Alternatively,  the promise of the gift, though unsupported by consideration  -  and to that extent not contractually mandated – may still be enforced by means of an estoppel.  Bottom line, the girlfriend followed up her saucy baseline serve with a volley (that was ultimately met by eBay restricting the most risque pictures to the adult section). 

But she may have moved on.  It seems girlfriend has other fish to fry.  Initially motivated by anger, she is now enjoying the attention of being a guest on TV networks here and overseas.  More, she has a new business venture to think about.  "I'm realising that maybe there's something there to explore with a website where I can invite women to also share their breakup stories and maybe also give them the opportunity to sell products and things like that as well," she has reportedly said.  With careful execution, perhaps the conversion of her website into a portal for jilted lover-sellers will not create an exponentially greater liability minefield. 

Of such a budding entrepreneurial empire however, one can only caution: buyers beware – the scorners may strike back!  The Machiavellian tangles of sweet revenge reach far.

Eniola O. Akindemowo.

March 14, 2011 in Commentary, Contract Profs, Current Affairs, E-commerce | Permalink | Comments (0) | TrackBack (0)

Audiofile of Interview with Son of Plaintiff in Lucy v. Zehmer

Richmanb Schmelzer_Dennis Barak Richman (pictured, left) and Dennis Schmelzer (pictured right) have a new article up on SSRN on the celebrated case of Lucy v. Zehmer, about which we have posted in the past.  Here is the abstract of the article:
This article reexamines Lucy v. Zehmer, a staple in most contracts courses, and makes the following discoveries: (1) Lucy, acting as a middleman for southern Virginia’s burgeoning pulp and paper industry, sought the Ferguson Farm for its rich timber reserves; (2) Lucy was one of scores of aggressive timber middlemen eager to purchase timberland across the region, in what amounted to a chaotic land grab that left a wake of shady transactions and colorful litigation; and (3) Within the eight years of winning injunctive relief from the Virginia Supreme Court and purchasing the Ferguson Farm from Zehmer for $50,000, Lucy earned approximately $142,000 from the land and its natural resources. These findings bring into question the opinion’s assertion that $50,000 was a fair price, its conclusion that Zehmer’s actions indicated contractual intent, and its confidence that the objective method captured the relevant background in which Lucy’s and Zehmer’s exchange took place. More generally, they suggest that conclusions reached by the objective method are highly dependent on the facts that are retold and the context in which they occur.
Professor Richman was kind enough to share with us an audiofile of an interview with John C. Lucy's son, John II, recounting his memories of his father's business and the case.  The audio file is available here

March 14, 2011 in Famous Cases, Recent Scholarship | Permalink | Comments (1) | TrackBack (0)

Friday, March 11, 2011

Return Fire! Charlie Sheen Sues Warner Bros.

Sheen Lawsuit Well, he did say he would sue - back when Charlie wanted to revive the show from hiatus. But then Warner Bros went and changed the game when, as the entire world probably knows by now, Warner Bros fired Charlie Sheen.  Charlie, not being the type to take such things lying down, has returned fire with a lawsuit against Warner Bros and Charles Lorre, the producer of Two and a Half Men.  

Charlie - fire-breathing, fire-fisted Charlie - is cast by his lawsuit as the victim - and a defender of the weak.  In short, the lawsuit alleges that Warner Bros. and executive producer Charles Lorre maliciously conspired to wind down Two and a Half Men (2½ M) before Charlie Sheen went on the rampage.  Sheen's suit portrays Warner Bros. as an immoral, conspiratorial, hypocritical, profit hungry betrayer, and Lorre as a fabulously wealthy, egotistical, vindictive bully. 

The lawsuit contends that Sheen's antics were not a problem previously - on the contrary, at a time when the star was at risk of being convicted for a felony punishable with imprisonment, Warner Bros is alleged to have been eager to sign Sheen for another two seasons. 

So what changed?  According to the lawsuit - in two words - Charles Lorre.  Sheen alleges a pattern of harassment, humiliation, and aggravation  against him by Lorre over a period of years (Lorre's 'vanity cards' are referred to in the suit as an example of this).  The suit alleges that Warner Bros. is utterly loyal to Lorre because of the close, lucrative working relationship between Lorre and Warner Bros - Lorre is said to have an office on the Warner Bros lot, and to have three new series, (for which his cut is allegedly higher than what he gets for 2½ M) under development. Stung by Sheen's radio and TV blitz that was supposedly provoked by the said harassment, Lorre allegedly decided to no longer work with Sheen and from the point onward refused to provide new scripts in breach of his contractual obligations.  The suit alleges this is why Sheen was turned away from the set of 2½ M although he had undergone private rehab (that allegedly involved the services of an expert recommended by Lorre) and was ready, willing, and able to get to work.  Sheen further alleges that the line that he was fired for being incapable to fulfil his duties is a trumped up story.  Sheen strongly contends that he is fit and well, sober (as indicated by recently publicized drug test results), and that he is and always has been ready, willing and able to work.  Warner Brothers, in other words, is accused of scheming with Lorre to maliciously suspend the show, and then wrongfully terminate Sheen's contract for no just cause. 

Warner Bros is portrayed as fraudulent, immoral and hypocritical for allegedly pretending to fire Sheen for reasons of moral turpitude when, the suit alleges, it eagerly courted Sheen for the renewal of his contract after he had been charged with a felony and was facing jail time.  Warner Bros is alleged to have reassured Sheen that their contractual relationship would not be jeopardized so long as Sheen's conviction and sentence did not interfere with his recording schedule.  Warner Bros is also portrayed as mercenary and merciless for firing Sheen instead of accommodating him, when he was alleged to be suffering from certain physical and mental illnesses (which ailments Sheen denies in any event).  The portrayal of Sheen as the victim continues through mention of Lorre's "vanity cards" as a deliberate attempt to harass, humiliate and damage Sheen, through to mention of the incident in which Sheen was turned away from the Warner lot.

The lawsuit recites a litany of woes including breach of express terms, anticipatory breach, breach of good faith and fair dealing, breach of duty to a third party beneficiary, intentional interference with rights, interference with prospective economic advantage, frustration of common purposes, disappointment of reasonable expectations and loss of intangible opportunities (continuation as the lead in a star series, and the opportunity to attract endorsements).  Employment discrimination makes an appearance, as well as claims for unpaid wages on behalf of himself and the cast and crew of 2½ M.  The suit seeks compensatory, punitive and exemplary damages, as well as attorneys fees.

Warner Bros' termination letter, and Sheen's lawsuit present two alternative universes in which an innocent plaintiff is utterly wronged by a deliberate defendant.  Given the impression created by Sheen's seemingly erratic behavior in recent times, Warner Bros is seen by some as having a strong case - if indeed it did terminate Sheen for incapacity and his blistering radio and TV rampage.   Warner Bros seeks to portray those events as the last straw that led to a justifiable termination, following evidence of an uncured incapacity or serious medical condition, (a terminable event in Sheen's contract if lasting for ten or more consecutive days, or more than fifteen days in the aggregate over any single production year).  Newspaper accounts seem to suggest that Sheen may have exceeded this allowance, but I wouldn't put my money on Warner Bros just yet.

Regardless of what has been decided in the court of public opinion, incapacity or a serious health (read mental) illness on the part of Sheen has not been proved yet.   If Charlie did exceed the number of incapacitated or sick days permitted, there still may be room for a waiver argument.  If Warner Bros truly sought Sheen out for renew his contract after he was charged with a felony, and further, reassured him that a conviction and jail time would not jeopardize their working relationship, Warner Bros may have waived the moral clause (subject to public policy concerns).   Those actions if proved would also undermine the justifiability of terminating his contract on grounds of moral turpitude (was he allowed to stay in character off set?).  Then there is the question of whether Sheen was terminated because Lorre felt it would be immoral to be a part of Sheen's alleged meltdown, rather than because of Lorre's allegedly egotistical, malicious wishes.  Lorre allegedly has a history of personality clashes with stars he has worked with.

Of course, the whole issue of arbitration still has to be decided.  Warner Bros insists that the contract requires the matter to be arbitrated. Team Sheen has made it clear ,by filing the lawsuit, that it does not share that opinion.  Prepare for a rumble in the Tinseltown jungle.  In the meantime, Charlie still has the (literary) Midas touch.....

Eniola O. Akindemowo.

March 11, 2011 in Celebrity Contracts, Commentary, Current Affairs, Television | Permalink | Comments (0) | TrackBack (0)

The New Hampshire Approach to Breach of Contract Suits by State Employees

New_Hampshire All eyes have been on Wisconsin lately, as Republican Governor Scott Walker has succeeded in pushing through legislation that repeals collective bargaining rights for state employees and requires state workers to make financial contributions for their health care and retirement benefits. New York Times coverage of that saga is available here and here.  Little noticed has been New Hampshire’s push for reforming state employee benefits, as reported by the Union Ledger. The proposed plan would raise the retirement age for police and firefighters, reduce the amount of each worker’s salary included in the formula for pensions, and require workers to contribute more of their salary toward their retirement benefits.

What makes New Hampshire’s plan interesting is an amendment that was added to the bill that would effectively penalize workers who sue the state for breach of contract in court and win. These workers would pay “an additional 3% of their salary in pension contributions starting 10 days after a court victory.” Practically speaking, this provision makes a breach of contract suit by the state workers a lose-lose proposition: either pay the increased contributions, or hire a lawyer, win your lawsuit, and pay increased contributions anyway. Diana Lacey, the president of the State Employees Association, argues that punishing workers who seek to protect their rights in court is a “chilling attack on democracy.”  As reported in the Nashua Telegraph, supporters of the legislation argue that reforming state-employee retirement benefits is “essential to the long-term viability of the system.”

How likely is it that the bill will pass? Talking Points Memo points out that the New Hampshire GOP has veto-proof majorities in the State House and Senate. While it is possible that there may be some Republican defections, the State House just passed Right-to-Work legislation, which demonstrates GOP solidarity on labor issues. If Republicans don’t break ranks on the bill, Democratic Governor John Lynch will have little to no power to stop the bill’s passage.

One wonders, however if the penalty provision could survive court scrutiny.  Is it an unconstitutional state impairment of the obligation of contracts?  Is it a possible due process violation because it chills access to the courts as a remedy for contractual wrongs?

[Jon Kohlscheen & JT]

March 11, 2011 in Government Contracting, In the News, Labor Contracts | Permalink | Comments (0) | TrackBack (0)

Thursday, March 10, 2011

Self Promotion: Telman on the Totten Doctrine

Lincoln I have floated my ideas about Totten on this blog before here and here.  My students booed and hissed when I scolded Honest Abe for having breached his promise to pay William Lloyd for espionage services provided during the Civil War.  "Too soon," they howled.  Undeterred, I have developed my ideas about Totten in a new article, Intolerable Abuses: Rendition for Torture and the State Secrets Privilege, now available for dowload on SSRN.  The discussion of the Totten doctrine takes up pages 15-45 of the draft.  

That part explores the ambiguities of the case and decries its deployment in the state secrets privilege context in cases that do not involve contractual claims.  The case is ambiguous because in the space of a two page opinion, the Supreme Court gives numerous reasons for refusing to enforce the government's alleged promise to Mr. Lloyd.  Perhaps there was an implied promise of secrecy.  Perhaps public policy forbids the disclosure and thus the enforcement of such a policy.  Perhaps there is some sort of evidentiary privilege that prevents the claim from going forward, but if so, its operation is unlike that of any other evidentiary privilege.  And then in the end, what is the Totten doctrine?  Is it simply the application of one of the above-mentioned contracts or evidentiary doctrines or is it a principle of non-justiciability?

The discussion of Totten takes up about 1/3 of the piece.  Here is the abstract for the whole thing:

In Mohamed v. Jeppesen Dataplan, Inc., the Ninth Circuit, sitting en banc, issued a 6–5 opinion dismissing a complaint brought by five men claiming to have been victims of the U.S. government’s extraordinary rendition program, alleged to involve international kidnapping and torture at foreign facilities. Procedurally required to accept plaintiffs’ allegations as true, the court nonetheless dismissed the complaint before discovery had begun based on the state secrets privilege and the Totten doctrine, finding that the very subject matter of plaintiffs’ complaint is a state secret and that the defendant corporation could not defend itself without evidence subject to the privilege. This Article contends that courts should almost never dismiss suits based on the state secrets privilege and should never do so in a case like Jeppesen Dataplan, in which plaintiffs did not need discovery to make out their prima facie case alleging torts by the government or its contractors.

While much has been written on the state secrets privilege since 9/11, this Article focuses on the role of the Totten doctrine in transforming the state secrets privilege into something like a government immunity doctrine. The Article first argues that Totten was wrongly decided because it is overprotective of state secrecy and requires dismissal with prejudice of suits that would more appropriately be dismissed without prejudice, subject to re-filing when the relevant secrets are declassified. The Article next contends that Totten is a very narrow doctrine that cannot and should not have any role in informing cases such as Jeppesen Dataplan in which plaintiffs did not contract with the government. 

In addition, the Article argues that the state secrets privilege, as laid out in the 1953 Reynolds case and subsequently expanded by lower courts, permits pre-discovery dismissal of suits based on the state secrets privilege and thus exacerbates the pro government bias already present in Reynolds. The Article explores seven ways in which lower court decisions have all tended to make it easier for the government to assert the state secrets privilege, while the lack of penalties for overly aggressive assertion of the privilege results in intolerable abuses. 

While the Article thus offers fundamental critiques of both the Totten doctrine and the state secrets privilege, it does not advocate disclosure of state secrets. Rather, in a concluding section, the Article draws on federal statutory schemes relating to the introduction of classified information in criminal trials and offers numerous alternatives to judgment in favor of the government and its contractors before discovery has begun in cases implicating state secrets. Congress has repeatedly empowered courts to make decisions that protect government secrecy while facilitating limited access to secret information when necessary in the interests of justice and open government. In some cases, the government’s inability to defend itself may necessitate the socialization of the costs associated with national security secrets, but that result is preferable to forcing plaintiffs to bear all the costs of government secrecy.

Comments welcome!


March 10, 2011 in Famous Cases, Government Contracting, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Lawyer Sues Firm for Breach of Contract, Inter Alia

As reported in The Am Law Daily, in a case reminiscent of that Business Organizations chestnut, Day v. Sidley & Austin, attorney Raymond J. Carey is suing his firm, Foley & Lardner, for breach of contract and others claims, as reflected in this complaint.  The complaint alleges that F&L is operating as an employer of its partners instead of a partnership, with the Management Committee (appointed by itself) running the show.

According to the complaint, Carey, a labor and employment partner, joined the firm in 2000 after being sought out as part of an effort by the firm to open a Detroit office (which may or may not be visible in the night photo of the Detroit skyline below).  Carey alleges F&L induced him to leave his equity partnership with another firm with an assortment of promises about his status at F&L that he now claims F&L had no intention of keeping.   Those promises included a position as a full partner in F&L, guaranteed minimum monthly and annual compensation, which was to increase annually based on Carey's productivity, and a guarantee that he would be treated on a par with other F&L partners.  Negotiations were protracted, allegedly due to F&L's refusal to provide documentation that Carey requested.  Carey claims that he only accepted F&L's offer, which attached conditions to which he did not agree, because F&L posted his biography on its firm website, thus destroying his relationship with the firm at which he was then a partner.

Carey alleges that F&L did not honors its promises made during the contractual negotiations.  Instead, the complaint alleges, he was denied partnership status until 2003.  Even after this, F&L took away earnings rightfully owed to him by misrepresenting client relationships. During this period, Carey claims he was never even allowed to see his partnership agreement.  When he eventually signed on as partner, Carey claims, F&L sent him only signature pages and refused to share with him the entire partnership agreement to which he became a party.

Carey, a 57 year old white male, was among the lowest paid F&L partners in 2010.  Although he claims that he is the victim of "a pattern of discrimination on account of gender, race and age," he also alleges that he was discriminated against because he "continued to complain" to F&L's management that F&L had breached various promises relating to his conditions of employment.  Carey claims that he has billed millions of dollars of hours for the firm and had equal or greater personal productivity than similarly situated F&L partners who are better compensated than he is.

Carey's breach of contract claim is interesting.  He is alleging a breach of contract dating back to "at least October 2001" as evidenced by conduct in fiscal years 2005 through 2010.

[Katherine Freeman & JT] 


March 10, 2011 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 9, 2011

Warner Bros vs Charlie Sheen: The First Salvo After The Last Straw

Well, it happened - Warner Brothers fired Charlie Sheen.  Several questions raised in my previous post about Charlie Sheen have been answered by the termination letter (TL) dated March 7th 2011:

  • I speculated that the gloves might 'come off' in response to Charlie's rant against Charles Lorre, creator of Two and a Half Men; The TL indicates that this, in conjunction with another bizarre interview (held on the same day), tried Warner Bros.' patience to the limit.  The last straw was Charlie's non response to the request for confirmatory notice of treatment that Warner Bros. requested after the show was put on hiatus. 
  • The time for gritted teeth and walking on eggshells is over.  No longer willing to put a good face on things, Warner Brothers has replaced the (forced) smile with the menacing growl of its notice of intention to seek legal remedy.  Notice of this intention was served in the TL thus:
    • "Mr Sheen's conduct constitutes breach of contract, breach of the covenant of good faith and fair dealing and tortious interference with Warner Bros.'s contracts with third parties, among other causes of action.....In any ensuing arbitration, Warner Bros. will seek recovery of all of its damages including lost revenue from the show and all other damages the law allows."
  • Time Warner was sensitive to the possibility that it might be accused of illegal or immoral motives for standing by the self destructing actor after all.  The letter states "in halting production of Two and a Half Men...Warner Brothers took the only responsible action open to it - morally and legally - in these painful circumstances.  Warner Bros. would not, could not, and should not attempt to continue 'business as usual' while Mr Sheen destroys himself as the world watches".
  • There was in fact a morals clause in Charlie's contract, albeit an unusually narrow one.  If the producer in good faith was of the opinion that a felony offence involving moral turpitude had been committed, or if the actor was indicted or convicted of such an offence, the clause conferred on the Producer the right to treat the commission of those acts as an actionable breach.  Sheen's proud assertion that Warner Bros did not have the power to 'dominate and totally interfere with my personal life', was therefore not entirely true.  In fact Warner Bros.statements in the TL indicate further that regardless of whether Charlie was hired to play himself or not, he was not at liberty to cross the line of criminal conduct, or bring the network in disrepute by his self destructive behavior.  The letter further states that "his admitted extreme cocaine use violates his obligation under ....the Terms & Conditions not to engage in any extra-hazardous activity without Producer's prior written consent..."
  • I suggested that the lack of a morals clause could cut both ways - freeing Charlie from the moralistic control of the network while absolving the network from responsibility for his poor choices.  In detailing the actions justifying their invocation of the morals clause, Warner Bros pointedly refers to Charlie's alleged supply of illegal drugs to a third party in the TL rather than Charlie's alleged personal use of such drugs. 
  • Good faith and fair dealing have come into it - Warner Bros claims that it has discharged it's contractual duties of good faith and fair dealing to Charlie while asserting that Charlie has failed to do so.
  • I mused on how reputational mud just didn't seem to stick to 'Teflon Charlie' and wondered if Warner Bros. would resort to some 'teflon abrasive', if the gloves were to come off.  Well they have, they did, and the mud slinging has not merely stained his reputation.  In the eyes of some, he's mired in the mud.
  • Charlie's mental health is now squarely in issue.  The TL opens with a direct attack on his mental state:
    • "At the outset, let us state the obvious: Your client has been engaged in dangerously self-destructive conduct and appears to be very ill. For months before the suspension of production, Mr Sheen's erratic behavior escalated while his condition deteriorated.....Now the entire world knows Mr Sheen's condition from his alarming outbursts over just the last few weeks....". Later, the letter continues "In any event, Warner Bros is entitled to suspend Mr Sheen's employment...due to his "Incapacity" including..."any physical or mental disabilities, which due to the unique nature of the Performer's Obligations, are not subject to reasonable accommodation". 
  • Warner Bros utilises speculative comments about Charlie Sheen's mental condition by a number of talking head medical experts in alleging mental disorder/mental incapacity:
    • A number of health care experts observing Mr Sheen during these interviews have commented that he (1) appears to be 'manic' and/or 'bipolar,' (2) he suffers from a 'hypomanic' psychological state; (3) potentially poses a dangerous threat to himself and others; (4) requires immediate professional care."
  • The suspension of the show was indeed a first discreet step towards distancing and ultimately disengaging from Charlie.
  • Warner Bros relies on several grounds for termination.  I suggested earlier that consistently failing to be in a fit condition to work, bringing the network into disrepute, and being charged with a serious felony were possible grounds for termination.  The TL asserts that Warner Bros is entitled to terminate Charlie Sheen's contract because :
    • he is not in a fit state to work due to mental incapacity or a serious health condition
    • they have reason to believe that he has committed at least one felony involving moral turpitude, and thus breached his morals clause
    • he has engaged in (harmful) PR activities without authorization.. 

Other grounds relied upon are that:

  • by failing to perform material obligations (the TL asserts that his condition prevents him from doing so) Charlie committed an immediate default, also that, 
  • by refusing or failing to return to work, he also repudiated his obligation to perform,
  • his incapacity, once persisting over a (fairly limited) period, constitutes a default justifying suspension, and,
  • force majeur events have occurred as a result of his hampering production of the show, his being out of control (of Warner Bros.), his illness and loss of weight (disfigurement), and his breaches of contract.

The TL summarizes the case for termination by observing "based on the totality of Mr Sheen's statements, conduct and condition, including but not limited to his refusal to offer any cure in response to the notice of suspension, Warner Bros. is exercising its rights to terminate the Agreement under the provisions specified above."

Warner Bros. terminated Charlie's contract summarily, asserting the right to terminate, with written notice, for a serious health condition or uncured incapacity (lasting for more than 10 consecutive days, or 15 days over the course of the year), or anytime following suspension for a default.  Charlie Sheen's contract obviously contained an arbitration clause, as the TL states "...Warner Bros. has submitted this dispute to required by the Agreement....We look forward to your cooperation with the arbitration process."  The letter further insists in a heading that "This Dispute Must Be Arbitrated'.

  Though short of a cliff hanger, we are left with several questions.  Will Charlie Sheen respond with 'all barrels blazing', or will he back down - or at least adopt a less confrontational approach - to begin to attend to the repair of his disintegrating life?  Will he submit to arbitration, or fight for his day in court? Will there be a response, from health care officials, to the deepening allegations about his mental state?  To what extent will his alleged mental state/incapacity lessen the brunt of the legal storm he has unleashed?  Who will represent him - legally, publicly - now? (Reports of recent firings and resignations from his support team suggest that he will need to recruit new representatives.)

The first salvo, in what is likely to be a drawn out sensational (ist) legal battle, has been dispatched.  Brace yourselves for the next episode of this tragic drama, in which family, mental health officials, and law enforcement officials may have more than a walk on role.


Eniola O. Akindemowo.

March 9, 2011 in Celebrity Contracts, Commentary, Contract Profs, Current Affairs, In the News | Permalink | Comments (0) | TrackBack (0)

Second Circuit Again Invalidates Amex Class Action Waiver

Amex_logo A group of merchant plaintiffs filed an antritrust class action against Amex.  Based upon a class action waiver in its mandatory arbitration provision, Amex sought to compel individual arbitration.  In February 2009, the Second Circuit (Pooler, Sack and Sotomayor) invalidated the class action waiver on unconscionability grounds.  See In re Am. Express Merchs. Litig., 554 F.3d 300 (2d Cir. 2009).

The case returned to the Second Circuit after the Supreme Court vacated the judgment and remanded for consideration in light of Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp, 130 S.Ct. 175 (2010).  Yesterday, the Second Circuit again concluded (this time without Sotomayor) that "(1) the question of the enforceability of the class action waiver provision is properly decided by the court and (2) the class action waiver provision is unenforceable under the Federal Arbitration Act."

The Circuit Court again rested its decision on the evidence that plaintiffs "would incur prohibitive costs if compelled to arbitrate under the class action waiver."  It held that "[t]he Card Acceptance Agreement therefore entails more than a speculative risk that enforcement of the ban will deprive [the plaintiffs] of substantive rights under the federal antitrust statutes."

In Re: American Express Merchants' Litigation, 06-1871-cv, NYLJ 1202484853954, at *1 (2d Cir., Decided March 8, 2011.

[Meredith R. Miller]

March 9, 2011 in In the News, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 8, 2011

Today in the NYLJ: Applicability of the UCC to Software Transactions

By Richard Raysman and Peter Brown.  Read it here. (Subscription required).

[Meredith R. Miller]

March 8, 2011 in E-commerce, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Breaking News from Lithuania

Lithuanian Flag Friend of the blog, Tadas Klimas reports on his blog, Civitatus, that Lithuania has finally done away with the requirement that business entities use seals in connection with their government contracts.  Professor Klimas links to a government press release which explains that the government is eliminating the seal requirement because seals have no utility.  As the press release is in Lithuanian, we will have to take his word for it.  In any case, Professor Klimas fully endorses this view, noting that no "normal" -- i.e. Western -- country uses seals.  

So, Professor Klimas enthusiastically endorses the death of the seal, lamenting only that the change is long overdue.  We offer a different perspective.  Seals may be useless, but they are quaint, and imagine the poor Lithuanian artists who will be reduced to web design, now that life support has been removed from the seal industry.  Now that seals have been sacrificed to the gods of utility, what's next?  Coffee houses?  Poetry?  SpongeBob? Justin Bieber? Bricks and mortar law schools?!?


March 8, 2011 in Commentary, Government Contracting, In the News | Permalink | Comments (0) | TrackBack (0)

Weekly Top Tens from the Social Science Research Network

SSRN RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of Contracts & Commercial Law eJournal 

January 6, 2011 to March 7, 2011

RankDownloadsPaper Title
1 496 Choice of Law in the American Courts in 2010: Twenty-Fourth Annual Survey 
Symeon C. Symeonides
2 296 Regulating Systemic Risk: Towards an Analytical Framework 
Iman AnabtawiSteven L. Schwarcz
3 198 The Role of Securitization in Mortgage Renegotiation 
Sumit AgarwalGene AmrominItzhak Ben-DavidSouphala Chomsisengphet,Douglas D. Evanoff
4 158 Policy Options for Progress Towards a European Contract Law: Comments on the Issues Raised in the Green Paper from the Commission of 1 July 2010, COM (2010) 348 Final 
Jürgen BasedowGregor ChristandlWalter DoraltMatteo FornasierMartin Illmer,Jens KleinschmidtSebastian A.E. MartensHannes RöslerJan Peter Schmidt,Reinhard Zimmermann
5 130 American Indian Tribal Law 
Matthew L. M. Fletcher
6 117 Metaphor, Models, and Meaning in Contract Law 
Jeffrey M. Lipshaw
7 103 Contract as Convention 
F. H. Buckley
8 101 The Regulation of Reputational Information 
Eric Goldman
9 98 When Money Grew on Trees: The Untold Story of Lucy v. Zehmer 
Barak D. RichmanDennis Schmelzer
10 92 Emerging Policy and Practice Issues (2010) 
Steven L. SchoonerDavid J. Berteau,

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of LSN: Contracts (Topic)  

January 7, 2011 to March 8, 2011

RankDownloadsPaper Title
1 496 Choice of Law in the American Courts in 2010: Twenty-Fourth Annual Survey 
Symeon C. Symeonides
2 107 Contract as Convention 
F. H. Buckley
3 98 When Money Grew on Trees: The Untold Story of Lucy v. Zehmer 
Barak D. RichmanDennis Schmelzer
4 82 Exit and the American Illness 
Erin A. O'HaraLarry E. Ribstein
5 67 Legal Process and the Discovery of Better Policies for Fostering Innovation and Growth 
Henry N. ButlerLarry E. Ribstein
6 41 Privatizing the Adjudication of International Commercial Disputes: The Relevance of Organizational Form 
Kevin E. Davis
7 34 Contracting in China: Comparative Observations on Freedom of Contract, Contract Formation, Battle of Forms and Standard Form Contracts 
Nicole KornetNicole Kornet
8 33 Promoting Business Success Through Contract Visualization 
Gerlinde Berger-WalliserRobert C. BirdHelena Haapio
9 33 Five Political Ideas of European Contract Law 
Martijn W. Hesselink
10 31 Afterthoughts: International Commercial Contracts and Arbitration 


March 8, 2011 in Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Monday, March 7, 2011

Warner Bros Officially Terminates Charlie Sheen - Read the Nastygram

Warner Bros has sent a persuasive and well-written nastygram to Charlie Sheen, setting forth in great detail its right to terminate his contract.  Appears that Warner Bros is relying on an incapacity clause.  I know, the constant network and tabloid coverage of Sheen is annoying, obnoxious, etc.  But this is a well-lawyered and very public contract battle to follow.

Read the nastygram here, courtesy of TMZ.

[Meredith R. Miller]

March 7, 2011 in Celebrity Contracts, In the News | Permalink | Comments (0) | TrackBack (0)

Charlie Sheen's Bargaining Power

My co-bloggers have ably and fully discussed Charlie Sheen and his lack of morals a morality clause in his contract for Two and Half Men.  The absence of the morality clause turns out to be explained by Sheen's adonis DNA tiger blood sheer bargaining power as a cash cow.  The New York Times reports:

It was not the first time that the show’s managers had tried to intercede, but they had limited options: Mr. Sheen’s contract does not include any kind of morals provision that would have allowed him to be fired or replaced. According to one longtime Hollywood agent (who, like many people quoted in this article, spoke on the condition of anonymity so as not to create any conflicts in their business), the show’s success had provided him with the leverage he needed to keep any such clause out.

“He’s money,” this agent said. “He makes the cash register ring.”

[Meredith R. Miller h/t Fabrice Charles]

March 7, 2011 in Celebrity Contracts, In the News | Permalink | Comments (0) | TrackBack (0)

Will Sabathia Opt Out of the Bronx?

CC_Sabathia_2009 As Spring Training keeps moving on towards opening day, an interesting option looms for the Yankees' star pitcher CC Sabathia.  Sabathia has a clause built into his current contract with the team that allows him to opt out of his contract at the end of the 2011 season and become a free agent.  According to ESPN, by opting out, Sabathia would walk away from approximately $90 million in guaranteed salary.  However, Sabathia has hinted at the idea after seeing Cliff Lee (age 32) sign a five- year, $120 million contract with the Phillies this past off season.  Sabathia would be 31 at the end of the season and still able to command top dollar.  However, if he waited until the end of his current contract, he would be 35 years old and may no longer have the bargaining leverage necessary to secure a long-term, high-salary contract.

If Sabathia decides to opt out of his contract at the end of the season, the decision could impact the rest of Major League Baseball and perhaps the entire sports industry.  Prominent players may decide to ask for opt-out clauses in their contracts similar to Sabathia’s.  Such clauses would enable star players to leave their teams if they were not happy with the atmosphere or the direction the team was going.  It would also mean that players with opt-out clauses could choose to test the market if they think they could receive a higher salary on the free agent market after several years of solid performance.  From the player’s perspective, such a clause is a win-win.  The player has the option to stay with a guaranteed, long-term agreement or to seek a still richer payoff elsewhere.

If the opt-out clause becomes de rigueur among star players, the owners could respond by refusing to enter into long term contracts.  If that were to happen, players would obviously be the big losers, as guaranteed, long-term contracts are an insurance policy against injury or Milton Bradley-like underperformance.  In the alternative, the owners could demand a reciprocal opt-out option.  Such an option could provide, for example, that if the player has not played a certain percentage of games during the first part of his contract due to injury, the team could opt out or could renegotiate the salary.  It could also provide that if a player did not average certain statistical numbers over the first part of the contract, the team could opt out of the contract.  This would get us closer to the pay for performance that this blog has explored in the past.

[Jared Vasiliauskas & JT]

March 7, 2011 in In the News, Sports | Permalink | Comments (0) | TrackBack (0)

Friday, March 4, 2011

Finding a Diamond--and a Good Anticipatory Repudiation Case--in the Rough

Debeers Whenever possible, I like to point students toward a very recent case that illustrates a concept we addressed via older cases.  This week, a student pointed me to the UK case of De Beers v. Atos Origin to illustrate how anticipatory repudiation applied in a more modern context.  In this case, Atos Origin, a large European IT services company, agreed to assist De Beers, the famous diamond distributor, with its supply-side management system in Botswana.  Unfortunately, contracts are not forever.  Although the contract called for the parties to cooperate closely, the relationship later soured, and each side blamed the other for the break up (not-so-subtle pun intended).  More specifically...Atos argued that De Beers had repudiated by withholding a progress payment and by trying to expand the scope of the project.  De Beers argued that Atos had repudiated by refusing to continue to perform unless the contract was renegotiated.  According to this report, the Court found that De Beers's witholding of a payment was not repudiation but that Atos's refusal to continue was repudiation.  In the words of the case we often use in class, Atos's conduct was a "clear and unequivocal" refusal to perform while De Beers's conduct was not.  Or, in the words of UCC 2-610 comment 1 (should this contract have involved a sale of goods, which it did not), Atos's refusal "demonstrat[ed]...a clear determination not to continue with performance," while De Beers's conduct did not.  Sadly, the Court never directly declared that De Beers no longer was Atos's best friend. Nor did the Court conclude that damages amounted to approximately two months' salary.  But it would be a lot funnier if it did. 

[Heidi R. Anderson, hat tip to Zachary Ritz]

March 4, 2011 in In the News, Recent Cases, Teaching | Permalink | Comments (0) | TrackBack (0)

Question for Natalie Portman and Dior: Do Morals Clauses Cut Both Ways?

Natalie_Portman Big news from the Oscars involving Natalie Portman (pictured)!  No, the news is not about what she won.  Nor is the news that she did not laugh awkwardly during her acceptance speech, although this time the moment provoked tears rather than laughter.  No.  The news is that she wore a Rodarte dress despite her contractual relationship with Dior and endorsement of its Miss Dior Cherie fragrance.  Sidebar: the consensus is that she looked ***faaaabulousss!***

It is not clear that her choice of attire was related to her recent denunciation of Dior's chief designer, John Galliano, for an anti-Semitic rant -- or perhaps for a series of them.  While some reports suggest that Ms. Portman has severed her ties with Dior, the New York Times provides the more sober assessment that it is not clear what effect her statements relating to Mr. Galliano will have on her contract with Dior.  Dior has already terminated Mr. Galliano's employment, despite what has been characterized as an apology for his comments.  It's not clear what Galliano is apologizing for, since he denies the allegations and stresses his opposition to all forms of prejudice.

In any case, the controversy raises an interesting theoretical possibilty.  We have been posting a bit recently about morals clauses.  This situation raises the question of whether an athlete or celebrity who has agreed to endorse a product can opt out of the contract based on the conduct of the endorsee or one of its agents.  In this case, the possibility is remote, given Dior's actions in terminating Mr. Galliano's employment, but what if Dior had accepted his pseudo-apology and kept him on, subject to his agreement to seek counseling?  Although we don't know the specifics with respect to Ms. Portman's contract, let's assume that it includes a morals clause.  Could a court imply that the clause must be reciprocal? 

If the purpose of such clauses is to protect the endorsee from being sullied with the moral taint associated with a falled endorser, is there any danger of its working in reverse?  If Al Gore had signed up to promote the pre-spill BP as an environmentally friendly power company, he might want to opt out post-spill.  But could Ms. Portman, who has described herself as "an individual who is proud to be Jewish," really be tainted by her association with a Dior fragrance, based on the now-disavowed views of one prominent Dior employee?


March 4, 2011 in Celebrity Contracts, Commentary, In the News | Permalink | Comments (0) | TrackBack (0)

Thursday, March 3, 2011

The Suez Canal and Impracticability - A Video Clip for Class

Given the current political turmoil in Egypt, a discussion of the Suez Crisis and impracticability may actually meet with fewer yawning students this year.  In preparing to present a hypothetical based on the cases (e.g., American Trading and Production v. Shell Int'l Marine Ltd, 453 F.2d 939 (2d Cir. 1972), I discovered some newsreel footage from 1956, which may help tell the story:

There are many other clips, but this one seemed like just the right length for class.  Coincidentally, today, Reuters reports that Egypt's Suez Canal Authority announced that it will leave transit fees unchanged until the end of 2011.

[Meredith R. Miller]

March 3, 2011 in Famous Cases, Film, Teaching | Permalink | Comments (0) | TrackBack (0)

Should the Mets Leave the Concession Stands at CitiField to an “Even Higher Authority”?

Mets_hat The owners of the Mets have a $300 million Madoff problem, but that hasn’t distracted them from attempting to ban a kosher concession stand from selling food at CitiField during the Sabbath. 

Kosher Sports has a 10-year contract to sell hot dogs at the stadium and it sued the Mets last summer after being told it could not operate on Friday nights and Saturdays.  In August, Judge Jack Weinstein ordered the Mets to stop banning the company’s sale of food during the Sabbath.  At the time, he said with a smile, “I cannot get involved in (a dispute) over rabbinical law.”

Perhaps that is why the case ended up before Magistrate Judge Andrew Carter.  But, he recused himself earlier this week because a Kosher Sports lawyer spotted him wearing a Mets hat outside the courthouse.

I imagine that this is a dispute about what the word “kosher” means in the 10-year contract.  The Mets say the food isn’t “kosher” if the stand operates during the Sabbath.  Kosher Sports begs to differ, and (likely) adds that the contract does not expressly restrict Sabbath sales.  What’s the answer?  What’s “kosher”?  Apparently, whether a purveyor can sell food on the Sabbath and retain kashrut status is very complicated under Jewish Law.  Some won’t allow it at all; some will allow it with particular conventions followed (conventions which are difficult to follow in a stadium on a Saturday because they require proper supervision and the qualified supervisors are prevented from stopping by on the Sabbath).

No wonder Judge Weinstein did not want to get involved, there’s an even higher authority involved in this dispute:

Certainly, this could be handled with more precise contract drafting in the future.  Though, the inability to operate a concession stand on Friday nights and Saturdays (when, I imagine, the stadium has the highest turnout for games), could make it a losing proposition.  Which, in the end, could mean no kosher option at all (whatever that means).

[Meredith R. Miller]

March 3, 2011 in In the News, Religion, Sports | Permalink | Comments (0) | TrackBack (0)