ContractsProf Blog

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

Wednesday, November 30, 2011

Criminal Suspect Sues Couple Alleging Breach of Contract to Hide Him from Police

Punch CardAccording to this story, brought to us from via the Charlotte School of Law's Jason Jones, Jason Dimmick held a Kansas couple hostage while fleeing from the police who sought to question him in connection with the beating death of a Colorado man.  The couple, Jared and Lindsay Rowley, fed Mr. Dimmick snacks and watched movies with him until he fell asleep.  Then they fled.  He was convicted of holding the couple hostage and sentenced to an eleven-year prison sentence.

And then the couple really pissed off Mr. Dimmick.  They sued him for invading their home and causing emotional distress.  They seek $75,000 in damages.  He has counterclaimed.  According to KMBC, this is his theory:

I, the defendant, asked the Rowleys to hide me because I feared for my life. I offered the Rowleys an unspecified amount of money which they agreed upon, therefore forging a legally binding oral contract. . . .

Mr. Dimmick seeks $235,000 in damages, largely arising from the fact that he was hospitalized after the police shot him while trying to arrest him.  

The Rowleys' attorney is seeking to have the counterclaim thrown out.  Given the facts, which of the following arguments would you lead with if you were the Rowleys' attorney:

A. The alleged oral contract is illegal and therefore void
B. Because the Rowleys knew that Mr. Dimmick was armed, the Rowleys were under duress and any alleged oral contract would be void
C. Contracts to aid and abet a criminal suspect who is seeking to avoid the police must be in writing in order to be enforceable 
D. Because the parties never agreed on a price term, there was no meeting of minds and any alleged oral agreement would be unenforceable
E. Under the parol evidence rule, any evidence of the alleged oral agreement cannot be presented to the trial court until Mr. Dimmick is paroled.

You'll have to read the whole story to find the answer.


November 30, 2011 in In the News | Permalink | Comments (2) | TrackBack (0)

New in Print

There don't seem to be any new contracts law articles out this week, but Burnham I've got a new book to promote.  It's Scott Burnham's Contract Law for Dummies.

From time to time, students ask me if I can recommend a study guide for them.  My usual answer is, "No, I can't," because I never used any study guides when I was a law student and have never had occasion to read one subsequently, so I wouldn't know what to recommend.  But I have read Scott Burnham's book, because I provided some comments on it for the editor, and so I know that it is very good.  

Here's the publisher's summary:

DummiesTake the mumbo jumbo out of contract law and ace your contracts course

Contract law deals with the promises and agreements that law will enforce. Understanding contract law is vital for all aspiring lawyers and paralegals, and contracts courses are foundational courses within all law schools. Contract Law For Dummiestracks to a typical contracts course and assists you in understanding the foundational legal rules controlling voluntary agreements people enter into while conducting their personal and business affairs. Suitable as a supplement to introductory and advanced courses in contract law, Contract Law For Dummies gives you plain-English explanations of confusing terminology and aids in the reading and analysis of cases and statutes.

Contract Law For Dummies gives you coverage of everything you need to know to score your highest in a typical contracts course. You'll get coverage of contract formation; contract defenses; contract theory and legality; agreement, consideration, restitution, and promissory estoppel; fraud and remedies; performance and breach; electronic contracts and signatures; and much more.

  • Tracks to a typical contracts course
  • Plain-English explanations demystify intimidating information
  • Clear, practical information helps you interpret and understand cases and statutes

If you're enrolled in a contracts course or work in a profession that requires you to be up-to-speed on the subject, Contract Law For Dummies has you covered.


November 30, 2011 in Recent Scholarship | Permalink | TrackBack (0)

Tuesday, November 29, 2011

Weekly Top Tens from the Social Science Research Network

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

September 25, 2011 to November 24, 2011

Rank Downloads Paper Title
1 292 The Corporation as Social Contract
M. Kaptein, Johan Wempe,
Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM), Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM)
2 190 Incentive Contracting
Ralph C. Nash,
George Washington University - Law School
3 186 Codification and Flexibility in Private International Law
Symeon C. Symeonides,
Willamette University - College of Law
4 174 The Three and a Half Minute Transaction: Boilerplate and the Limits of Contract Design
G. Mitu Gulati, Robert E. Scott,
Duke University - School of Law, Columbia University - Law School
5 143 Analyzing Law - A Framework for Understanding Law of All Sorts and for All Purposes (Cases, Exercises and Commentary)
Neil K. Komesar,
University of Wisconsin - Madison
6 130 Bijzondere Overeenkomsten in Kort Bestek (Specific Contracts in a Nutshell)
Alain-Laurent Verbeke, Pieter Matthias Brulez, Nicolas Carette, Nele Hoekx,
University of Leuven, Faculty of Law, Department of Private Law, Unaffiliated Authors - affiliation not provided to SSRN
7 118 Keynote Address: A Regulatory Framework for Managing Systemic Risk
Steven L. Schwarcz,
Duke University - School of Law
8 117 Lochner and Constitutional Continuity
David Bernstein,
George Mason University - School of Law, Faculty
9 115 A Theory of Redressive Justice
Andrew S. Gold,
DePaul University - College of Law
10 105 Arbitral Power and the Limits of Contract: The New Trilogy
Alan Scott Rau,
University of Texas at Austin School of Law

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

September 25, 2011 to November 24, 2011

Rank Downloads Paper Title
1 174 The Three and a Half Minute Transaction: Boilerplate and the Limits of Contract Design
G. Mitu Gulati, Robert E. Scott,
Duke University - School of Law, Columbia University - Law School
2 105 Arbitral Power and the Limits of Contract: The New Trilogy
Alan Scott Rau,
University of Texas at Austin School of Law
3 102 The General Principles of Civil Law: Their Nature, Roles and Legitimacy
Martijn W. Hesselink,
University of Amsterdam - Centre for the Study of European Contract Law (CSECL)
4 94 How to Opt into the Common European Sales Law? Brief Comments on the Commission’s Proposal for a Regulation
Martijn W. Hesselink,
University of Amsterdam - Centre for the Study of European Contract Law (CSECL)
5 80 The Law of Contract: An Introduction
Jan M. Smits,
Maastricht University Faculty of Law - Maastricht European Private Law Institute (M-EPLI)
6 72 Classical Contract Law, Past and Present
Anat Rosenberg,
Interdisciplinary Center (IDC) Herzliyah - Radzyner School of Law
7 70 Introduction: The Three and a Half Minute Transaction: Boilerplate and the Limits of Contract Design
G. Mitu Gulati, Robert E. Scott,
Duke University - School of Law, Columbia University - Law School
8 60 The Architecture of Post-National European Contract Law from a Phenomenological Perspective – A Question of Institutions
Kai Peter Purnhagen,
University of Amsterdam Law School
9 57 The Missing Elements of Contract Damages
Mitchell L. Engler, Susan Schwab Heyman,
Yeshiva University - Benjamin N. Cardozo School of Law (faculty), Roger Williams University School of Law
10 45 Contract Versus Statute in Internet Governance
Lee A. Bygrave,
University of Oslo



November 29, 2011 in Recent Scholarship | Permalink | TrackBack (0)

Don't Buy This: 'Tis the Cyber Season of Reverse Psychology

Yesterday, now widely known as "Cyber Monday," I received a marketing email from Patagonia.  The message: "Don't Buy This Jacket."  The email read in part:

Because Patagonia wants to be in business for a good long time - and leave a world inhabitable for our kids - we want to do the opposite of every other business today. We ask you to buy less and to reflect before you spend a dime on this jacket or anything else.

The advertisement reminded me to "think twice" and instructed not to "buy what [I] don't need."  The jacket, "[m]ade of warm, breathable, compressible and stretchy high-loft fleece," is apparently one of Patagonia's bestsellers; retail price of $149.

Ha! Nice try, Patagonia. I will not be manipulated by your reverse psychology. Though, it did remind me of a contracts exam fact pattern I used a few years back that involved an email where the sender said something like "I'm selling my house but, trust me, you don't want to buy my house because it has been a real money pit."  Seller also says all sorts of funny and brutally frank things about the house.  One of the questions raised was whether this email constitued an offer to contract.  I am also reminded of the parking lot of a Grateful Dead show in the early 90's and a gentleman wandering around saying "bad [acid] trips, who wants 'em? I got 'em!"  But I digress, though only slightly (e.g., Ship of Fools, see below).

Elvis Costello is also participating in this season of reverse psychology.  His message: "don't buy my new box set."  In fact, Costello apparently wrote on his website: "Unfortunately, we at find ourselves unable to recommend this lovely item to you as the price appears to be either a misprint or a satire."  The price?  $225.  NBC reports:

Costello tried to get the record company to knock the price down, but was unsuccessful. So he is recommending buying the work of another legendary artist.

"If you should really want to buy something special for your loved one at this time of seasonal giving, we can whole-heartedly recommend, 'Ambassador of Jazz' -- a cute little imitation suitcase, covered in travel stickers and embossed with the name 'Satchmo' but more importantly containing TEN re-mastered albums by one of the most beautiful and loving revolutionaries who ever lived – Louis Armstrong," Costello wrote. "The box should be available for under one hundred and fifty American dollars and includes a number of other tricks and treats. Frankly, the music is vastly superior."

It may be earnest, but I read it as a brilliant marketing ploy.  Who would have known that Elvis Costello was issuing a new box set?  I mean, who buys physical CDs anymore?  And it even comes with a vinyl record... but it is overpriced and you don't want it.

[Meredith R. Miller]

November 29, 2011 in E-commerce, In the News, Miscellaneous, Music, Quotes | Permalink | Comments (1) | TrackBack (0)

Fourth Circuit Invalidates Fraudulently-Induced Settlement Agreement

On Novmeber 10, 2011, the Fourth Circuit issued its unpublished per curiam opinion in Paul Morrell, Inc. v. Kellogg, Brown & Root Services in which it affirmed a nearly $20 million fraudulent inducement judgment against Kellogg Brown & Root (KBR) and related entities.  The judgment included prejudgment interest and $4 million in punitive damages.

MREThe suit arose out of a contract dispute and settlement between KBR and Paul Morrell, which was doing business as The Event Source (TES) and was a sub-contractor on a contract in which KBR and TES provided dining services for US troops in Iraq.  A government audit revealed that KBR was charging the government for more meals that were actually served and so the government decided to withhold nearly 20% of its payments to KBR.  KBR passed this loss on to its subcontractors.  For reasons that are unclear but were based on fraudulent misreprentations that KBR made to TES, TES agreed to payments of $24 million for its services under the contract when it was in fact entitled to $36 million.

The district court determined that KBR made material false statements in order to induce TES to accept a settlement payment that was approximately $12.4 million less than what KBR had previously acknowledged it owed TES.  Applying Texas law in this diversity case, the Court of Appeals had to determine whether TES's reliance on KBR's fraudulent misrepresentations was reasonable.  That issue raises a mixed question of fact and law, but in this case, the trial court's ruling turned on factual determinations that could only be not clearly erroneous.  

The Fourth Circuit also rejected KBR's additional challenges to the District Court's judgment.


November 29, 2011 in Government Contracting, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Monday, November 28, 2011

"The Implied Covenant of Good Faith and Fair Dealing Is Not a License for a Court to Make Stuff Up"

StrineThus Delaware Chancellor Strine (pictured) in Winshall v. Viacom Int'l Inc. This case emerged as a result of a merger through which Viacom International (Viacom) became the parent corporation of Harmonix Music Systems (Harmonix), the company that brought us Guitar Hero, Rock Band, among other happy diversions.  Under the terms of the 2006 merger agreement, Mr. Winshall and other selling shareholders were paid $175 million plus an uncapped right to certain earn-outs based on the extent to which Harmonix exceeded certain earnings goals in 2007 and 2008.  

Rock Band was a huge success, causing its distributor, Electronic Arts, Inc. (EA) to want to re-negotiate its agreement with Harmonix so as to secure broader distribution rights over Rock Band and its sequels.  Harmonix elected to do so, but the way Harmonix negotiated distribution fees did not have the positive impact on Mr. Winshall believed it could have had.  Harmonix elected to front-load the distribution fees paid to EA in order, so Mr. Winshall argued, to avoid having to share the benefits of Rock Band's success with the selling shareholders.  Based on that belief, Mr. Winshall sued Viacom for breach of the covenant of good faith and fair dealing, but Chancellor Strine was having none of it.

Chancellor Strine's view of the case is that Mr. Winshall believes that Viacom and Harmonix were obligated to take advantage of their increased bargaining power with EA, derived from Rock Band's success, to lower the distribution fees paid to EA in 2008 and thus to increase the 2008 earn-out payment to the selling shareholders.  The Chancellor rejected this argument: 

I find that Winshall has failed to allege facts that support a reasonable inference that the Selling Stockholders did not get the benefit of their bargain under the Merger Agreement. On these facts, even viewed in the light most favorable to Winshall, the Selling Stockholders could not conceivably have had a reasonable expectation that Viacom and Harmonix had a duty to renegotiate the Original EA Agreement to increase the amount of earn-out payments the Selling Stockholders would receive.


November 28, 2011 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Friday, November 25, 2011

The Muppets and Contracts

As you may have heard, the new Muppets movie is out. Yes, your old favorites are back - Kermit, Miss Piggy,Fozzie Bear, the whole gang. You might have also heard that there's a new star in the movie. No, not is-he-a-man-or-a-muppet Walter. It's....a CONTRACT! That's right, the star of the new Muppets movie is a long, scrolled, fine print contract signed by none other than Kermit the Frog. The entire plot hinges on it. Without giving too much away - (c'mon, the Muppets are not about cliff hangers) - a condition in the contract requires the Muppets to raise $10,000,000 by a certain date or else they lose their beloved, but now decrepit and abandoned, theatre. A real live condition - but is it a condition precedent or condition subsequent? In addition, there are issues of nondisclosure (there's oil under the theatre, but the evil Tex Richman isn't telling). Is there a duty to disclose? When did Tex learn about the oil - at the time the contract was formed? Does it matter? Was Kermit tricked? Is the contract unconscionable? And finally, there's the interpretation issue -- the "theatre" is also called a "studio." Is it the same building? Is there possibly a misunderstanding here? Strangely, the Muppets movie doesn't even try to answer these questions. No, they make the movie all about finding love and relevancy in the digital age. But we contracts profs know - as Tex Richman's henchmen point out - the contract is the critical plot point. There would be no movie without it. Keith Rowley - are you listening? Pirates of the Carribean - make way for the Muppets!

[Nancy Kim]

November 25, 2011 in Celebrity Contracts, Film | Permalink | Comments (1) | TrackBack (0)

Continued Fall-Out from the Supreme Court's "Third Arbitration Trilogy"

There has been a steady stream of interesting and high-profile arbitration law cases following in the footsteps of what Pepperdine Law's Thomas J. Stipanowich has identified as the Supreme Court's Third Arbitration Law TrilogyStolt- Nielsen S.A. v. AnimalFeeds International, 130 S. Ct. 1758 (2010); Rent-A-Center, West v. Jackson, 130 S. Ct. 2772 (2010); andAT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011).

  • In KPMG v. Cocchi, the U.S. Supreme Court granted cert. to review a decision from Florida's Fourth District Court of Appeals.  The state appellate court upheld a trial court’s refusal to compel arbitration of respondents’ claims after determining that two of the four claims in a complaint were nonarbitrable.  The Supreme Court, per curiam, vacated and remanded the case for a determination of whether the remaining two claims are arbitrable.  Because of the emphatic federal policy in favor of alternate disptue resolution, courts must compel arbitration of claims even if the result is piecemeal litigation in which some claims must be arbitrated while others are resolved through the court system.  Because the Court of Appeals did not rule on the arbitrability of two of the claims, the Supreme Court vacated its refusal to compel arbitration.
  • In Sanchez v. Valencia Holding Company, California's Court of Appeals for the Second District found a way around the Supreme Court's holding in Concepcion by ruling that an entire arbitration provision in a sales contract from a car dealership was unconscionable because it involved oppression and surprise due to unequal bargaining poiwer as well as harsh, one-sided terms in favor of the car dealer.  The arbitration provision was substantively unconscionable because its location on the back of the last page in small font with reduced line spacing made it unnoticeable to the buyer.  It was substantively unconscionable because of four facially neutral provisions that, practically speaking, imposed an unduly harsh burden on the buyer.  The Court of Appeals upheld the trial court's denial of Valencia's motion to compel and the case was cleared to proceed as a class action.


November 25, 2011 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Thursday, November 24, 2011

New in Print (and Online): Thanksgiving Edition

Pile of BooksAs we've mentioned here before, this Thanksgiving, there's one thing we can all be thankful for: legal scholarship!

Kenneth A. Adams, Making a Mess of Ambiguity: Lessons from the Third Circuit’s Opinion in Meyer v. CUNA Mutual Insurance Society, Bus. L. Today (the ABA Business Law Section's Online Resource) (Nov. 24, 2011)

Jennifer L. Blair, Surviving Reality TV: The Ultimate Challenge for Reality Show Contestants, 31 Loy. L.A. Ent. L. Rev. 1 (2010-2011)

Meredith Goldich,  Comment. Throwing out the Threshold: Analyzing the Severability Conundrum Under Rent-A-Center, West, Inc. v. Jackson, 60 Am. U. L. Rev. 1673 (2011)

Woodrow Hartzog,  Website Design as Contract, 60 Am. U. L. Rev. 1635 (2011)

Kermit A. Mawakana, In the Wake of Coast Federal: The Plain Meaning Rule and the Anglo-American Rhetorical Ethic, 11 U. Md. L.J. Race, Religion, Gender & Class 39 (2011)

Kelly M. O'Bryan, Comment. Mommy or Daddy and Me: A Contract Solution to a Child's Loss of the Lesbian or Transgender Nonbiological Parent, 60 DePaul L. Rev. 1115 (2011)

Christine M. Westphal, Restrictive Covenants in Employment Contracts: Regulating Employee Solicitation. 37 J. Legis. 108 (2011)


November 24, 2011 in Recent Scholarship | Permalink | TrackBack (0)

Wednesday, November 23, 2011

Let's Dance: Hoffman on Mentoring v Scamming

In a characteristically insightful blog post, Dave Hoffman uses Vokes v. Arthur Murray as a nice launching point to discuss some aspects of the scam-critiques aimed at law schools.  Vokes is such a great teaching case, and Dave's post leaves me feeling like I could have done a better job teaching it this year.  

There's not much to add to the mix in the scamosphere, as many bloggers, including some of our own here at ContractsProf, have already commented very thoughtfully.  In my humble opinion, the law school scam coverage is old news often sloppily reported with the vitriol amps turned up higher.  And the coverage of these law school scam stories, at the New York Times in particular, seems completely disproportionate to the coverage of the number of other significant things happening in the world.  (You really want cynicism?  These stories get linked all over and end up on the most read and emailed list on the newspaper's website, driving page views. Page views drive advertising revenue.  So, why not write another law-school-is-a-scam article?).

Anyhow, perhaps ironically in light of the recent spate of "scam" coverage about law schools, it seems that the vast majority of my students had very little sympathy for Ms. Vokes.

[Meredith R. Miller]

November 23, 2011 in Famous Cases, In the News, Law Schools | Permalink | Comments (0) | TrackBack (0)

The Spring Contracts Conference Will Be in San Diego This Year!

Conference Announcement and Call For Papers
7th International Conference on Contracts
Thomas Jefferson School of Law,
San Diego, California  March 2nd – 3rd 2012

The 7th Annual International Conference on Contracts will be hosted by the Thomas Jefferson School of Law in its new state of the art facility in San Diego California on March 2nd & 3rd 2012.

 In the fine tradition of previous conferences held at Stetson, UNLV, McGeorge, South Texas, Texas Wesleyan and Gloucester, England, this conference will provide scholars and teachers at all experience levels the opportunity to present, discuss and receive feedback on a wide spectrum of scholarship.  Articles recently published, articles-accepted-but-not-yet-published, works-in-progress, not yet fully formed ideas for scholarship or pedagogical innovations are welcome.  The conference also provides an eagerly anticipated annual opportunity to network with colleagues, potential collaborators and mentors from the U.S. and around the globe.

San Diego
Call For Papers and Panels
:  We invite paper, presentation and panel proposals exploring any aspect of contract law, theory and policy.  The topic range is deliberately broad to permit an as full as possible exploration of contractual themes.  Past programs have thus included panels on “traditional” contracts topics (e.g. remedies, formation, defenses, etc), on contract-related subjects (insurance, consumer law, commercial law, dispute resolution, family law and restitution), and from a rich variety perspectives (historical, jurisprudential, empirical, institutional, law-and-economics, international and comparative contracting and others).  We also solicit volunteers to serve as moderators or discussants for panels that are not “pre-packaged”.

Participation: We will try to accommodate as many presenters, moderators, and discussants as possible.  Junior scholars and those working in non-U.S. legal systems in particular are encouraged to propose papers or panels and to volunteer to serve as discussants or moderators.  Anyone wishing to attend to enjoy the conference without presenting or serving as a discussant or moderator is also welcome.  There is no publication requirement for conference participants.  (Experience suggests that individual papers and panels are often published elsewhere).

 Proposal Submissions: To propose a presentation or panel, please email a title, brief description, and any supporting materials to (email preferred) or to Eniola Akindemowo at the address below by Friday, December 23rd 2011.   If your interest is to discuss or moderate, please let us know (indicating your interests and availability) by Friday, December 23rd 2011 also.  All proposals received by the December 23rd deadline will be evaluated and we will try to accommodate all requests to discuss or moderate.  Proposals and requests received after the December 23rd deadline will be entertained on a space-available- basis.

 Registration and Preliminary Schedule:  Final details (including the conference hotel, registration details, and a conference website) are being finalized and will be circulated shortly, however we do not expect the registration fee to be more than $250.  The registration fee will cover the costs of a continental breakfast, lunch and tea breaks on both days and a reception dinner on the Friday.  The conference program will take place between approximately 9:00 am – 5:30 pm on both days. 


Proposals and Participation Requests Due:                  Friday, December 23rd, 2012
Papers and Presentations in Final Form Due:               Friday, February 10th, 2012
Conference Begins:                                                 Friday, March 2nd, 2012
Conference Ends:                                                     Saturday, March 3rd, 2012

Conference Contacts

Eniola Akindemowo,
Professor of Law,
Thomas Jefferson School of Law,
1155 Island Avenue,
San Diego, CA 92101
(619) 916-4204. 

Donna Gelken,
Faculty/Conference Assistant,
Thomas Jefferson School of Law,
1155 Island Avenue,
San Diego, CA 92101
(619) 961-4254


November 23, 2011 in Conferences | Permalink | Comments (0) | TrackBack (0)

Tuesday, November 22, 2011

Court of Federal Claims Construes "Best Efforts" Clause

CoFCThere are lots of interesting facts in The Marquardt Co. v. United States for those of us who are not experts in government contracts.  The United States agreed to pay The Marquardt Company (TMC) nearly $1.5 million to settle the United States' obligations under 23 contracts with TMC.  The agreement included (what to me at least seems) a very strange provision that, while the parties recognized that the Government did not at the time of the agreement have the funds available to pay the $1.5 million, it would use its "best efforts" to get the necessary funds in an expeditious manner.  When the Government did not pay up, TMC sued to collect, but the Government moved to dismiss arguing that TMC "must be able to prove that it would have received more money but for the alleged breach of the Government’s best-efforts obligation” and that it could not do so.  

The Court ruled that the government misunderstood the relevant burdens of proof in the circumstances.  The proper burden on plaintiff here is that "it must show facts, by 'citing to particular parts of materials in the record,' RCFC 56(c)(1)(A), that tend to show that but-for the government’s breach, plaintiff could have been paid additional funds.”  The Court therefore concluded as follows:

Making all reasonable inferences from the evidence proffered by TMC, the court concludes that, had the government sought funding from outside the buying commands, as was suggested by its own employees, . . . additional funds could have been made available to pay TMC. Plaintiff has therefore alleged sufficient specific facts to show that “defendant’s action materially increased the risk of the injury that occurred,” Corbin on Contracts § 55.7 n.10, and that but-for the government’s breach of its best efforts obligation, it could have secured additional funds. There is a genuine issue for trial, Celotex, 477 U.S. at 324, and accordingly, summary judgment for defendant is not appropriate at this time.

But what constitutes "best efforts"?

The Government claimed that it had to seek funds from the military agencies with which TMC had contracted, but the language of the agreement contained no such limitation on what constituted "best efforts."  TMC contended that the Government was obligated to seek funds from other sources, including the Defense Finance and Accounting Service and the Pentagon.  The Court determined that further development of the record was necessary as disputed issues of material fact prevented the Court from determining precisely what constituted "best efforts" in the circumstances.  

In a careful and richly detailed exercise in contract interpretation, which we will not attempt to summarize here, the Court also concluded that the Government improperly withheld about $160,000 that had been taken into account when the parties agreed to the $1.5 million settlement.


November 22, 2011 in Government Contracting, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Weekly Top Tens from the Social Science Research Network

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

September 22, 2011 to November 21, 2011

RankDownloadsPaper Title
1 279 The Corporation as Social Contract 
M. KapteinJohan Wempe
Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM), Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM)
2 187 Incentive Contracting 
Ralph C. Nash
George Washington University - Law School
3 183 Codification and Flexibility in Private International Law 
Symeon C. Symeonides
Willamette University - College of Law
4 169 The Three and a Half Minute Transaction: Boilerplate and the Limits of Contract Design 
G. Mitu GulatiRobert E. Scott
Duke University - School of Law, Columbia University - Law School
5 139 Analyzing Law - A Framework for Understanding Law of All Sorts and for All Purposes (Cases, Exercises and Commentary) 
Neil K. Komesar
University of Wisconsin - Madison
6 129 Bijzondere Overeenkomsten in Kort Bestek (Specific Contracts in a Nutshell) 
Alain-Laurent VerbekePieter Matthias BrulezNicolas CaretteNele Hoekx
University of Leuven, Faculty of Law, Department of Private Law, Unaffiliated Authors - affiliation not provided to SSRN
7 117 Lochner and Constitutional Continuity 
David Bernstein
George Mason University - School of Law, Faculty
8 117 Keynote Address: A Regulatory Framework for Managing Systemic Risk 
Steven L. Schwarcz
Duke University - School of Law
9 112 A Theory of Redressive Justice 
Andrew S. Gold
DePaul University - College of Law
10 104 Arbitral Power and the Limits of Contract: The New Trilogy 
Alan Scott Rau
University of Texas at Austin School of Law

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

September 22, 2011 to November 21, 2011

RankDownloadsPaper Title
1 168 The Three and a Half Minute Transaction: Boilerplate and the Limits of Contract Design 
G. Mitu GulatiRobert E. Scott
Duke University - School of Law, Columbia University - Law Schoo
2 104 Arbitral Power and the Limits of Contract: The New Trilogy 
Alan Scott Rau
University of Texas at Austin School of Law
3 100 The General Principles of Civil Law: Their Nature, Roles and Legitimacy 
Martijn W. Hesselink
University of Amsterdam - Centre for the Study of European Contract Law (CSECL)
4 80 How to Opt into the Common European Sales Law? Brief Comments on the Commission’s Proposal for a Regulation 
Martijn W. Hesselink
University of Amsterdam - Centre for the Study of European Contract Law (CSECL)
5 78 Is Private Law Meaningless? 
Steve Hedley
University College Cork (UCC)
6 74 The Law of Contract: An Introduction 
Jan M. Smits
Maastricht University Faculty of Law - Maastricht European Private Law Institute (M-EPLI)
7 70 Introduction: The Three and a Half Minute Transaction: Boilerplate and the Limits of Contract Design 
G. Mitu GulatiRobert E. Scott
Duke University - School of Law, Columbia University - Law School
8 67 Classical Contract Law, Past and Present 
Anat Rosenberg
Interdisciplinary Center (IDC) Herzliyah - Radzyner School of Law
9 59 The Architecture of Post-National European Contract Law from a Phenomenological Perspective – A Question of Institutions 
Kai Peter Purnhagen
University of Amsterdam Law School
10 54 The Missing Elements of Contract Damages 
Mitchell L. EnglerSusan Schwab Heyman
Yeshiva University - Benjamin N. Cardozo School of Law (faculty), Roger Williams University School of Law


November 22, 2011 in Recent Scholarship | Permalink | TrackBack (0)

Monday, November 21, 2011

Quote of the Day [On Consumer Choice and Pre-Dispute Arbitration]

Victor Schwartz testifying before the Senate Judiciary Committee concerning the Arbitration Fairness Act:

"It may seem extraterrestrial, but I have lived in a world where people did not have cell phones or the gadgetry we see in our daily lives. Folks did survive."

I happened upon the quote in this piece by Public Citizen in favor of the Arbitration Fairness Act.  The reaction to the quote in that article:

"[Schwartz'] comment was obviously puzzling in a modern context, and distracted from the real issue at hand, consumer rip-offs perpetuated by wireless companies, particularly in the fine print of cell phone contracts. Schwartz’s answer to the problems: Give up your mobile device." 

To be fair, I will place the quote in its greater context within Schwartz' testimony:

Another commonly employed argument against pre-dispute arbitration provisions is that
they disadvantage consumers and employees because these groups have no bargaining power or
have unequal bargaining power. This argument adds that these arbitration clauses are often
buried in the “fine print” or are in contracts written in “legalese,” leaving many consumers or
employees unaware that these provisions even exist. But, here is the key point mentioned in the
beginning of my testimony. Consumers and employees voluntarily enter these contracts. It may
seem extraterrestrial, but I have lived in a world where people did not have cell phones or the
gadgetry we see in our daily lives. Folks did survive. If consumers balked at these agreements
and refused to buy products or services unless they could litigate disputes, it is my belief that at
least one or more companies would offer a non-arbitration alternative; in fact in many industries
where arbitration is used, some non-arbitration alternatives exist. The argument that consumers
lack bargaining power is a fallacy; consumers gain more bargaining power everyday through
increased competition and more avenues, such as on the Internet, to rate products and services.

So, who has the better side of the debate?  Is not participating in consumption a solution?  If you don't like pre-dispute arbitration, don't have a cell phone? Would enough consunmers really give up their cell phones to create a market for a "non-arbitration alternative"?  

[Meredith R. Miller]

November 21, 2011 in In the News, Legislation | Permalink | Comments (1) | TrackBack (0)

The Real Problem with Legal Scholarship

The legal blogs are afire (see our very own Jeremy Telman's post here, and others here , here and here ) about this article  about the impracticability of the law school curriculum. The article takes aim at “chin-stroking scholarship” that supposedly “nobody” reads. I'm puzzled about labeling scholarship as worthless  because it's not more widely read - that doesn't necessarily reflect the potential value of the article.  The article grossly over generalizes the nature of legal scholarship. Maybe it’s my chosen areas (contracts and cyberlaw), but most of what I read --and yes, I do read a lot of law review articles-- tackles real world, sticky social and legal issues caused by technological developments and contemplates possible solutions based on (surprise!) legal doctrine. Theoretical articles, as we contracts profs know, shed light on the “why” questions and thus help in the application of doctrinal rules to novel situations. The bad rap that scholarship receives seems to come from a handful of articles which are published by a handful of journals that push the envelope and get all the attention of (some) journalists and (some) judges. (I’m not commenting about the articles cited in the NYT piece because, unlike the journalist, I try not to judge an article I haven’t read by its title). I don’t think that’s a problem in and of itself – not all of legal scholarship should be about real world solutions and what might seem like an outrageous, pie-in-the-sky idea now may not seem so outrageous in a few years. (The anti-intellectual criticisms in the article remind me of equally inane arguments about the irrelevance of a humanities curriculum, literary novels, classical music and art). What is problematic is when journalists or judges use a handful of articles as examples of what all law review articles are like. These folks just don’t know the good stuff that’s out there -- many articles do in fact explain doctrine, have at least the potential for practical application or contribute in some way to our understanding of the law. The fact that more articles don't get cited by courts is a shame and may reflect more about the elitist bent of (some) judges than it does about the nature of legal scholarship generally. The real problem with legal scholarship is that it's not more widely read.  I think that more judges should read more legal scholarship, and in a wider variety of journals. Maybe then we wouldn’t have short-sighted, doctrinally confused cases like ProCD v. Zeidenberg – a case about which many of us contracts profs have written.  Unfortunately, not enough courts seemed to have read those articles.  Maybe the state of contract law would be better if they had.


[Nancy Kim]

November 21, 2011 in Commentary, Contract Profs, Current Affairs, In the News, Law Schools | Permalink | Comments (0) | TrackBack (0)

More (Illegal) Fun with TOS

In Friday’s Wall Street Journal, Eric Felten writes something that we Contracts Profs know all too well, “Ours is the age of fine print.” He is specifically referring to the terms of use from companies such as Amazon and Apple which he points out can run to “more than 17,000 words of boilerplate.” The length of online contracts is something that I discuss in the book I am currently writing on ‘wrap contracts (or that I should be writing instead of blogging right now). Felten talks about how, back in the day, “we could walk into a record store, pick out a disc and plunk down some cash” whereas now, we have to enter into a contractual relationship before we buy music (something which I’ve blogged about before). The insidious thing about these online contracts, however, is something that has also been mentioned on this blog –they may interact with other laws in unexpected ways. Felten writes, “”under the Justice Department’s expansive reading of the Computer Fraud and Abuse Act, underage Googling, or any other violation of a Terms of Service agreement may well be a crime.” Of course, the good people at the Justice Department scoff at this notion. But despite that scoffing, I think a proper application of contract law and the CFAA would make violations of TOS a violation of the CFAA (and a federal offense). The problem, as Orin Kerr (who is cited in the WSJ article) points out, is that the wording of the CFAA is too broad. But that’s not the only problem – the other problem is that contract law is too lenient with its notions of mutual assent, especially online. If we expect others to take contracts seriously, we should come up with a law of contracts that reflects reality and deserves to be treated seriously.

[Nancy Kim]

November 21, 2011 in Current Affairs, E-commerce, Miscellaneous, Web/Tech | Permalink | Comments (1) | TrackBack (0)

Virginia Supreme Court on Non-Competes

TermitesThe issue in Home Paramount Pest Control Cos. v. Shaffer was whether a non-compete clause in an employment agreement was overbroad.  Mr. Shaffer was an employee of Home Paramount Pest Control (Paramount) for about six months before he resigned and went to work for a rival pest control company, Connor's.  

Mr. Shaffer had signed a non-compete clause when he went to work for Paramount which provided that he would not have any involvement in any pest control business in the cities and/or counties in which he worked for a two year period after the termination of his employment with Paramount.  Paramount brought suit against Shaffer, alleging breach of contract, and against Connor's, alleging tortious interference.  The trial court found the non-compete overbroad and dismissed the suit.  The Virginia Supreme Court heard Paramount's appeal. 

In Virginia, a non-compete is enforceable if it “is narrowly drawn to protect the employer’s legitimate business interest, is not unduly burdensome on the employee’s ability to earn a living, and is not against public policy.”  In determining whether or not the test is met, the court considers together three elements: function, geographic scope and duration.  On appeal, Paramount argued that the trial court focused on function, especially on the fact that the non-compete at issue prohibited Mr. Shaffer from having any role in a pest control enterprise:

The Employee will not engage directly or indirectly or concern himself/herself in any manner whatsoever in the carrying on or conducting the business of exterminating, pest control, termite control and/or fumigation services as an owner, agent, servant, representative, or employee, and/or as a member of a partnership and/or as an officer, director or stockholder of any corporation, or in any manner whatsoever. . . .

Paramount argued that the relatively narrow geographic and durational components of the non-compete compensated for the potential overbreadth of the fuctional element.  Virginia's Supreme Court disagreed: Virginia courts have repeatedly struck down non-competes that purport to prohibit a person from doing anything in an industry, while they uphold non-competes that prohibit a person from engaging in the same sort of activity as she was employed to engage in previously.  Since the non-compete at issue here would have prevented Mr. Shaffer from even participating in a pest control business as a passive investor, it clearly was overbroad.  

The Court acknowledged that the language of the challenged non-compete was identical to that of a non-compete that the Court declared enforceable in a 1989 case, Paramount Termite Control Co. v. Rector, 238 Va. 171, 380 S.E.2d 922 (1989).  The Court ruled that it was not bound by stare decisis in this case, as many subsequent decisions had whittled away at Rector, which the Court now expressly overruled.  The Court would not even consider Paramount's evidence that Mr. Shaffer had solicited its customers.  Given that the entire non-compete was found to be unenforceable, evidence of a breach of that provision is irrelevant.

Although the Court does not address the issue, it seems that Virginia courts apply a formal approach to non-competes.  There is no mention of the "blue pencil test," which would have permitted a court to render the non-compete enforceable by editing out the offensive language relating to function.  If, as seems likely, Mr. Shaffer has agreed to perform the same work for Connor's as he did for Paramount (while poaching customers in the process, perhaps in violation of a common-law fiduciary duty -- see Town & Country Serv. v. Newberry), the result here does not seem fair to Paramount.  True, it should not be permitted to limit Mr. Shaffer's opportunities to the extent that it sought to do, but it is hard to imagine that both parties did not understand that the non-compete was intended to prohibit precisely the conduct in which Mr. Shaffer engaged.  


November 21, 2011 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Sunday, November 20, 2011

The Value of Law Reviews

YLJFor those in the academia with low blood pressure, I recommend reading David Segal's reportage on the current state of law schools (the latest can be found on the front page of Sunday's New York Times) because he can raise your blood pressure in a hurry.  And I'm not certain if anybody will really be happy to read what he has to say, because the message is that law schools are running a scam and that anyone who depends on law schools -- students, law firms that have to hire law school graduates, clients -- is a chump.  In the end, Segal's angle is great at generating rage but terrible at generating solutions.

The heart of his argument in the most recent article is that law students pay outrageous tuition but get no practical training.  His solution, to the extent that he offers one, is that there ought to be stronger skills programs, including clinics, but of course the tremendous growth of clinics, with their small student-to-faculty ratios, is one of the most important reasons for rising tuition.  Teaching students the law, legal ethics and practical skills turns out to be an expensive proposition.  Law schools in the United States have chosen to try to do all three.  If Mr. Segal wants to see legal education that ignores the development of practical skills, he should have a look at legal education in other parts of the world.  Nonetheless, given the fluidity of laws and regulations, law schools in the United States have chosen quite sensibly to give students sufficient training in legal reasoning so that they can figure out the rest on their own.  

HLRIt may well be that students thus emerge from law school ignorant of practical matters, like (taking Mr. Segal's opening anecdote) the steps one has to take to accomplish a merger.  I teach business organizations, and I confess that I do not cover the steps necessary to accomplish that goal.  However, I am pretty certain that even if I did, my students would forget those humdrum details until reminded of them in practice and that, once reminded by a partner in that practice area, they would have the tools they need to master the process.  In Mr. Segal's anecdote, a first year associate confuses a merger with a stock purchase, but that distinction is covered in the law school curriculum.  It turns out that it is just very difficult for students to retain all such information through three years of law school, bar preparation and entry into the work force.  

In this blog post, I want to focus on one of Mr. Segal's side points, which goes to something like a contractual issue.  Mr. Segal argues that law reviews churn up a lot of resources at law schools -- including a big chunk of student tuition -- and result only in wildly impractical navel-gazing.  The implication is that not only students but also taxpayers who stand behind student loans are thus paying for something for which they did not bargain.  There's a lot to be said about this.  

VULRMr. Segal presents some statistics suggesting that about 40% of law review articles are never cited either by other law review articles or by courts.  That suggests that there is quite a bit of useless scholarship out there, but I think the numbers would be quite different if he focused only on scholarship published in the top flagship law reviews and the top specialized journals.  Those publications get cited to a lot and they very rarely have subject matters as esoteric as (to take Chief Justice Roberts's example) "the influence of Immanuel Kant on evidentiary approaches in 18th-century Bulgaria."  Mr. Segal also ignores the fact that a lot of faculty scholarship involves writing casebooks and treatises and engaging in law reform, the impact of which immeasurably larger (not to say more important) than that of legal scholarship published in law reviews.

But what of the other 40%?  Are those resources simply being dumped down the toilet?  My answer is no for a lot of reasons, but here I just want to focus on the one reason most relevant to Mr. Segal's critique of law schools.  Some of the best training that happens at law schools happens at law reviews.  I came to law school with ten years of scholarly experience under my belt, because I had written a doctoral dissertation, published historical scholarship and taught before making the jump to law school.  Still, my skills as a researcher skyrocketed in my third year as a law student when I was responsible for overseeing a team of cite and substance editors on a number of review essays that we published in our Review of Law and Social Change.  The evidentiary standards for legal scholarship are far more exacting than they are in the humanities and the non-quantitative social sciences.  No claim can be made without authority.  As a result, I became a far more intrepid researcher, and I unlearned intellectual habits acceptable to my former field of study and adopted intellectual habits essential to successful lawyering.  

I know that others have had very different experiences at their law reviews, but my experience is an important reason why every law school has a law review.  In fact, when law reviews proliferate so that there may be half a dozen or more at prestigious schools, the impetus for such proliferation comes from the students who recognize, among other things, that the experience of working on a law review will help them develop important, practical lawyering skills as well as a greater appreciation of the theoretical underpinnings of legal doctrine.



November 20, 2011 in Commentary, In the News, Law Schools, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Friday, November 18, 2011

NY Court of Appeals Holds that "No Layoff" Clause is Ambiguous

The collective bargaining agreement between the Firefighters Union and Johnson City, NY, states:

A. The Village shall not lay-off any member of the bargaining unit during the term of this contract.  B. The Village shall not be required to 'back fill' hire additional members to meet staffing level of expired agreement. 

Images-1Facing budgetary constraints, Johnson eliminated 6 firefighter positions.  The Union filed a grievance, which was denied.  The Union then filed a notice of intent to arbitrate.  By the time the dispute worked its way up to the New York Court of Appeals, the issue was whether the "no layoff clause" is arbitrable.  The Court held that it is not arbitrable because the clause is "not explicit, unambiguous and comprehensive."  Writing for the majority, Judge Pigott reasoned:

From a public policy standpoint, our requirement that "job security" clauses meet this stringent test derives from the notion that before a municipality bargains away its right to eliminate positions or terminate or lay off workers for budgetary, economic or other reasons, the parties must explicitly agree that the municipality is doing so and the scope of the provision must evidence that intent.  Absent compliance with these requirements, a municipality's budgetary decisions will be routinely challenged by employees, and its ability to abolish positions or terminate workers will be subject to the whim of arbitrators.

The pertinent portion of the no-layoff clause here states that the "Village shall not lay–off any member of the bargaining unit during the term of this contract" but this language, in and of itself, does not explicitly prohibit the Village from abolishing firefighter positions out of budgetary necessity (cf. Yonkers Fedn. of Teachers, 40 NY2d at 275-276). Unlike the clause in Yonkers Fedn. of Teachers, the clause here does not explicitly protect the firefighters from the abolition of their positions due to economic and budgetary stringencies. That is not to say that the parties could not have bargained for such a broad clause, only that it is unclear on its face whether they did so at all, which means that the clause is hardly unambiguous (see Crossing Guard Union, 39 NY2d at 965).

The term "layoff" is undefined in the CBA, and is open to different and reasonable interpretations.  Indeed, the parties' disagreement over whether the term "layoff" constitutes a permanent or non-permanent job loss, and whether the Village's abolition of the firefighter positions constituted a layoff, underscores its ambiguity.  Moreover, the clause does not comprehensively prohibit the Village from abolishing firefighter positions, and, given its narrow and limited language, it cannot be construed as such.  Had the Union desired that its members be protected from the elimination of firefighter positions, it could have bargained for such protections.

So, essentially, the New York Court of Appeals held that it was ambiguous whether an elimination of a position constitutes a layoff.  

ImagesJudge Ciparick dissented, writing: 

At a time when the term "layoff" pervades the public dialogue, typically signifying the kind of large scale public and private workforce reductions that have characterized recent economic crises, it is reasonable to conclude that the parties employed that term to succinctly but thoroughly address the threat of job insecurity.  Regardless, then, of whether "layoff," pertained to a temporary period of unemployment or a permanent job cut -- an issue of interpretation, which should be decided by an arbitrator -- the no-layoff clause at issue here should be deemed an explicit, unambiguous and comprehensive job security provision. 

And, here's a recap from WBNG in Binghamton, NY:

Matter of Johnson City Professional Firefighters Local 921 (Village of Johnson City), 2011 Slip Op 08226 (NY Nov. 17, 2011).

[Meredith R. Miller]


November 18, 2011 in In the News, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Lawsuit against Southwest Airlines alleging Breach of Free-Drink Coupon Contract

Offer, acceptance and consideration? Black label letter contract law? The plaintiffs think so. The story from ABA Journal:

Although the airline revised its policy in August of last year, notifying customers that such coupons would be honored only on the day of the flight after August 2011, a Chicago lawyer is challenging that change.

Adam J. Levitt, who allegedly has about 45 now-worthless free-drink coupons from Southwest, filed suit yesterday in federal court in Chicago, according to Reuters.

The complaint, which seeks class action status, contends that the carrier breached a contract with passengers by changing its policy and refusing to honor the coupons, which have no expiration date. Alcoholic beverages purchased on board otherwise would cost about $5 each.

Levitt, who practices at Wolf Haldenstein Adler Freeman & Herz, is the plaintiff in the case. He is represented by Joseph J. Siprut of the Siprut law firm, who tells the ABA Journal that the situation is akin to a retailer refusing to honor a customer's gift card.

Describing Levitt as a "customer who got burned," Siprut said his client and many others aren't getting the benefit of their bargain. When they purchased their Business Select tickets, they expected to get a free drink, too. But now Southwest has changed the terms of their deal, after the fact.

"This is where a class action lawsuit really is the appropriate mechanism to deal with this issue," Siprut said. Given the $5 value of the free drink, "it only makes sense to do this as a class action on an aggregate basis."

Attorney Tommy Wells of Alabama, a former president of the ABA, says he himself has quite a collection of worthless Southwest drink tickets, too. He plans to use some of them as exhibits when he defends the airline in the case.

The Levitt suit, he tells the ABA Journal, is the second of two would-be federal class actions filed by lawyers against Southwest over the airline's cancellation of its free-drink coupons. The plaintiff has since been substituted in the Birmingham, Ala., federal suit, however, eliminating Wells' plan to ask the original attorney plaintiff, with whom he is friendly, in a deposition why he needs a drink on a one-hour Southwest flight to New Orleans.

The earlier suit, Wells explained, focused more on another type of free-drink ticket earlier offered by Southwest, which essentially was a bonus gift sent out in a coupon book when a customer used Rapid Reward frequent-flyer miles to purchase a ticket.

It is black-letter contract law, Wells said, that such offers can be rescinded prior to acceptance, which would be manifested, in the case of the bonus drink coupons, by actually presenting them for a drink on a Southwest flight.

Similarly, although the free-drink coupons associated with the Business Select tickets purchased by Levitt and others contained no expiration date, they were intended to be used on the ticketed flight, Wells said. However, the ability of customers to print out or duplicate multiple free-drink tickets while booking a flight thwarted that expectation.

Given a choice between keeping flights affordable for all customers on the highly competitive routes that it flies and continuing to offer free drinks to some customers, Southwest opted to eliminate the booze benefit, Wells explained.

In a statement emaiiled to the ABA Journal, the carrier said that "Southwest Airlines works to reward our loyal customers by offering perks for their business. The perks that accompany our Business Select product include a complimentary drink for day of travel, in addition to premiere boarding and extra Rapid Reward points.

"When the Business Select program initially launched, drink coupons associated with the purchase of a Business Select fare did not specify an expiration date," the statement continues. "But we found that some customers were photocopying drink coupons to obtain multiple drinks from a single coupon. We made the decision to post an expiration date on the coupon to prevent the unauthorized copying of the coupons. We cannot directly comment on pending litigation, but we value our customers and we will continue to look for ways to offer rewards for their business."

Wells said the airline is still mulling its options concerning whether to try to consolidate the two would-be class actions in Birmingham and Chicago or attempt to get one of the two cases dismissed.

Not a happy hour for plaintiffs or Southwest.  Cheers!

[Meredith R. Miller]


November 18, 2011 in In the News, Teaching | Permalink | Comments (0) | TrackBack (0)