April 22, 2011
Nancy Grace Sued for Breach of Contract
On March 8, 2011, Patricia Caruso filed this complaint against former prosecutor and television personality Nancy Grace, alleging a $15 million breach of contract. The two met back in 2002, when both were working for CourtTV. They became colleagues and friends. Caruso claims that she advised Grace when Grace's contract with CNN was up for renewal. She claims that she persuaded Grace to insist on a "carve-out" to permit her to create a syndicated vehicle for her talents, while continuing her gig with CNN.
Caruso alleges that Grace breached a contract to develop a syndicated television series, which Grace would host and Caruso would produce. Caruso claims that she worked tirelessly to market, develop and sell the show, which she wanted to call Grace's Cases. Grace allegedly provided near-constant assurances that she would not proceed with any such show without "patty in place," Here is a video of their most recent interaction which illustrates the importance of having your patty in the right place:
According to the complaint, Swift Justice with Nancy Grace, which is a version of the show that Caruso helped develop, premiered in Fall 2010 without Caruso and has been a huge success. Although Grace was allegedly assuring Caruso that she would be one of the show's executive producers as late as January 2010, in February, CBS offered her a one-year position as “Executive, Talent and Audience Relations," with the possibility for a renewal and a salary of $100,000.
The complaint provides interesting details about the industry. For example:
Were she an executive producer of Swift Justice with Nancy Grace, Caruso would reasonably expect to be compensated consistent with industry standards, namely with a fee in the range of ten percent (10%) of the show budget per week and “back end” compensation in the
16 range of ten percent (10%) of the modified adjusted gross revenue (MAGR) for the life of a television series.
The complaint also provides a little glimpse into the lives of the rich and famous: restaurants are the site for many of the dramatic scenes recounted in the complaint.
April 21, 2011
Another Marvin v. Marvin Suit Bites the Dust
The Los Angeles Times reports here that a jury rejected Cheri Olvera's claims against her ex-fiance baseball player Brian Giles (pictured at left while playing for the San Diego Padres). The jury also ordered the return of a $107,000 engagement ring. Olvera's complaint can be found on Findlaw.com's sports section [really!] here. It relies on causes of action recognized in the earlier California case, Marvin v. Marvin, about which we have blogged in the past.
According to the complaint, Olvera and Giles started dating in May 2002. In September of that year, Giles invited Olvera to come live with him. She claims that Giles told her to sell her house and all of her possessions, which she did, in reliance on his promise to provide for her. She alleges that the parties entered into a detailed oral agreement in December 2002 according to which she agreed to be his partner, homemaker, and caretaker for their respective children in return for financial security for life. The parties became engaged to be married in 2005, but the marriage never took place, due to Olvera's allegations that she was a victim of domestic abuse. Giles counterclaimed alleging that he had been the victim of domestic violence. Olvera filed suit in 2008, alleging breaches of express and implied contracts and other causes of action.
According to this article from Sign On San Diego, although Olvera's complaint originally sought $10 million in contractual and other damages, at trial, her attorney told the jury that she sought only $500,000, to which the parties had agreed in an unsigned pre-nuptial agreement that the parties negotiated in 2005. This was apparently a strategy to address the impression that Olvera's suit was motivated only by a desire for money. Olvera is engaged to another former baseball player, Chuck Knoblauch, who is now cast in the role of Dick van Dyck to Giles' Lee Marvin.
April 20, 2011
Charlie Sheen Claims that Arbitration Provision is Unconscionable.
Just when I thought that the Charlie Sheen saga was over (at least from a Contract Law blogging perspective), this comes along. Charlie Sheen--entangled in a contractual dispute with his employer, Warner Brothers--first claimed that his contract had no morals clause (which turned out to be false) and later claimed (and said) all sorts of much crazier things. Now, Sheen and his lawyers are arguing that the provision in his contract requiring any dispute to be resolved via arbitration is unconscionable. Yes, you read that correctly. Charlie Sheen--whom many have described as having no conscience--is claiming unconscionability.
When I teach the concept of unconscionability, I emphasize that a provision is unconscionable only if there is both procedural unconscionability (one party has substantially more bargaining power than the other, among other factors) and substantive unconscionability (the term itself unreasonably favors one party). I also state that there is a sliding scale--the more procedural unconscionability you can show, the less substantive unconscionability you need to show, and vice versa. Admittedly, these are generalizations, but they're the kind of generalizations that tend to work well for first-year Contracts students.
I doubt Charlie Sheen could show either procedural or substantive unconscionability here. As Warner Brothers' lawyers note, the procedural element likely is lacking when the party claiming that he had little bargaining power was able to bargain for "$2 million dollars for [every] 22 minute[s] of television." To counter that point, Sheen's lawyers understandably emphasize that Sheen's contract was "non-negotiable" and, on the substantive side, was quite "onerous." I am not familiar with the nuances of California law on this subject so it will be interesting to see how this particular case is decided.
It's not unheard of for courts to rule that arbitration provisions are unconscionable (see our earlier post regarding the AT&T case recently heard by the Supreme Court). However, if you are tired of hearing about Mr. Sheen, you should hope that the court finds that the arbitration term was valid. That's because...if it is unconscionable, the case most likely will be heard in a California court, where the whole thing will be filmed and potentially broadcast to us all. Yikes.
For previous ContractsProf Blog posts about other Sheen-focused Contract Law topics, see here (Warner Brothers' termination notice), here (Warner Brothers' complaint), here (Sheen's countersuit alleging interfence with contractual relations), here (Sheen's bargaining power--perhaps relevant to his unconscionability claim), and here. At this point, I'm wondering if I could teach every Contract Law topic via Charlie Sheen. The textbook, entitled, "Winning at Contract Law!" sure would be fun to write.
Mad Men Contract Disputes Apparently Resolved -- Now Fix Me a Drink
Things were definitely iffy for those looking for a new season of Mad Men, but now it appears that the new season is a go -- with a slight delay. AMC was in a mess of contract negotiation problems for the award winning hit summer show. The contractual issues involved both Lionsgate, the production company behind the show, and Mathew Weiner, the show’s creator. The new season will begin March 2012 reports the Huffington Post.
Matthew Weiner finally accepted a $30 Million deal for three more seasons of the show after his previous contract expired last October, according to the Los Angeles Times. The contract calls for two seasons for certain, with the possibility of a third if a majority of the cast sticks around. Apparently, the sticking points in negotiations included: whether or not to shorten the show by two minutes per episode; decreasing the cast budget; and additional product placement as previously reported by the New York Times. The parties reportedly agreed to have the first and last episodes of the season run the usual 47 minutes, while the middle episodes will be shortened. They also agreed to keep the current cast for at least two years.
The next problem that may occur with the fan base. Will Mad Men junkies stick around for close to another year? Is the cliffhanger of the 4th Season enough to draw people back in? Or will the familiar celebratory blend of style, misogyny and alcoholism be enough to keep people glued to their high-definition screens? Tune in in about eleven months to find out. Meanwhile, for a devastating take on the show’s appeal, see Daniel Medelsohn’s article in the New York Review of Books.
[Katherine Freeman and JT]
April 19, 2011
Weekly Top Tens from the Social Science Research Network
Defeat Is an Orphan, but Facebook Has a Thousand Fathers
Just a week ago, the Ninth Circuit ruled in favor of Facebook, finding the parties bound by a 2008 settlement agreement. But before you can say Winkelvosses, Facebook is back in court, this time in the Southern District of New York, being sued by yet another claimant to the title of Facebook co-founder. As reported in the New York Times, Paul Ceglia claims that the guy who claims to have founded Facebook -- no, not the Winklevosses and not Eduardo Saverin, but Mark Zuckerberg (pictured) -- was working for Ceglia at the time he developed the idea for what was then called "The Facebook" and that Zuckerberg agreed to share profits from the venture 50/50 with Ceglia.
The Times provides the following additional details about the case:
- Ceglia alleges that a work-for-hire contract that he entered into with Zuckerberg when the latter was 18 entitles Ceglia to at least a 50% share in Facebook;
- The suit is based on a 2003 written contract and an exchange of e-mails;
- Asked why he waited until 2010 to claim an ownership stake in Facebook, Mr. Ceglia told Bloomberg News that he had forgotten about his contract with Mr. Zuckerberg until he was looking through old files so that he could find assets with which to pay customers of his wood-pellet service and discovered that he owned a majority stake in a multi-billion dollar business;
- Ceglia first filed his complaint last year, but now he has filed an amended complaint and is represented by DLA Piper;
- Robert W. Brownlie, a partner at DLA Piper, has never seen the original documents on which Ceglia's claims are based but he warns that “Anyone who claims this case is fraudulent and brought by a scam artist will come to regret those claims”;
- Facebook claims that the e-mails are fabricated and the case a fraud;
- In 2009, Ceglia was arrested, charged with fraud and had his environment-friendly wood pellet business shut down by then NY State Attorney General Andrew Cuomo.
April 18, 2011
A Passover Retreat: Good or Service?
It is time to get into the Passover spirit by revisiting Fallsview Glatt Kosher Caterers v. Rosenfeld, 7 Misc.3d 557 (Civ. Ct. Kings County, NY, 2005), which gave us the opportunity to pause and consider: is a “Passover retreat” predominantly a good or service under the UCC? (Which, also came to be known as an added, fifth question for the youngest child at the seder).
Plaintiff Fallsview operated a retreat during Passover at Kutscher’s Country Club. (A Jewishy resort in the Catskills where, as a young child, I spent all of my grandmother’s laundry quarters on Ms. Pac-Man). For those that did not grow up going to B’nai Brith conventions in “The Country” (that’s what the NYC Jews called it), see this video, which comports with my memory.
Fallsview’s “retreat” included accommodations, entertainment and kosher food service. Willie Rosenfeld allegedly reserved spaces for 15 members of his family and agreed to pay $24,050 for the retreat. Fallsview made necessary arrangements, but Rosenfeld failed to appear at the hotel and did not remit the payment. Fallsview sued Rosenfeld for breach of contract.
Rosenfeld moved to dismiss, pointing to the statute of frauds. Rosenfeld argued that there was no agreement and, even if there was, it was oral and did not satisfy UCC 2-201, which requires that contracts for the sale of goods for the price of $500 or more be in writing. Fallsview’s response: the UCC does not apply because the Passover retreat is a service, not a good.
Because the alleged contract called for accommodations, entertainment and food, it was a hybrid transaction, and the court looked to whether goods or services predominated. Rosenfeld argued that the retreat was about food, a conclusion that he argued was “compelled by the very nature of the Passover holiday”:
The essential religious obligation during this eight day period- and the principal reason why people attend events similar to the Program sponsored by plaintiff- is in order to facilitate their fulfillment of the requirement to eat only food which is prepared in strict accordance with the mandate of Jewish law for Passover, i.e., food which is ‘Kosher for Passover’. It is the desire to obtain these ‘goods'-and not the urge for ‘entertainment’ or ‘accommodations'-that motivates customers to subscribe to such ‘Programs.’
But the court noted all of the possible daily activities at the retreat included “tennis, racquetball, swimming, Swedish massage, ‘make over face lift show,’ ‘trivia time,’ aerobics, bingo, ice skating, dancing, ‘showtime,’ ‘power walk,’ arts and crafts, day camp, ping-pong, Yiddish theater, board games, horse racing, horseback riding, wine tasting, and indoor bocci-and that is only through Wednesday.” There were also “ traditional and Orthodox religious services, lectures on religious and other subjects (presumably with a religious or cultural perspective), and a series of activities that are clearly designed to be of interest to families of observant Jews during a highly significant period in their calendar. “ The all-inclusive price covered these activities, as well as accommodations and food.
The court (Battaglia, J., who coincidentally, used to teach at my home institution), sided with Fallsview and decided the essence of the retreat was a “family and communal ‘experience’” and, therefore, was defined primarily by services and not by goods. Rodenfeld’s motion to dismiss was denied.
[Meredith R. Miller]
Grab Some Popcorn....
Thanks to the good folks at Stetson, many of the panels from the Sixth Annual Contracts Conference at Stetson are now available for your viewing pleasure.
[Meredith R. Miller]
Third-Party Beneficiary Issue in the Court of Federal Claims
So many cases that end up in litigation begin with parties trying to do their best to fulfill their contractual obligations. So it is with FloorPro, Inc. v. United States. Back in 2002, the Navy awarded a contract to GM&W Construction to install new floor coatings in some warehouse bays. GM&W sub-contracted with FloorPro and the latter was to be paid about ninety percent of the contract price -- $37,500 out of $42,000. FloorPro did the work but was not paid, apparently because GM&W was in financial difficulties. FloorPro wrote to the contracting officer to complain of the non-payment. The contracting officer felt guilty, because s/he had asked FloorPro to work with GM&W.
In order to facilitate payment, the Navy entered into a contract modification which provided for a joint check to be issued to both FloorPro and GM&W and also provided that the government was thereby released from any claim against it by the contractor. Unfortunately, the joint check was not issued. Instead, the government paid GM&W, and FloorPro never got paid. It sued the government on the theory that it was a third-party beneficiary to the contract modification.
The general rule is that subcontractors do not have standing to bring claims against the government for breach of contract when they are not in privity with the government. However, subcontractors will have standing if they can establish that they were intended third-party beneficiaries of a contract with the government. The court applied the following test to determine whether FloorPro had standing as a third-party beneficiary: (1) Did the contracting officer intend to benefit FloorPro through the modification? and (2) Did the modification result in a direct benefit to FloorPro?
The answer to the first question was obviously yes, since the purpose of the contract modification was to help get FloorPro paid. The court likewise had no difficulty in determining that the joint check conferred a benefit on FloorPro because such a check could not be deposited without FloorPro's endorsement.
The court rejected the government's argument that there be a third prong to the third-party beneficiary test, requiring that a contract modification intended to benefit a third party must be a “condition precedent” to further performance. Although there is some language to that effect in Flexfab, L.L.C. v. United States, 424 F.3d 1254, (Fed. Cir. 2005), no court in the Circuit had adopted that language as part of the test for third-party beneficiary standing.
The court accordingly denied the government's motion for summary judgment and granted summary judgment to FloorPro.