June 10, 2011
Is Britney Spears the New Lady Duff-Gordon?
One of my favorite ways to teach a Contract law concept is to introduce it via a dry traditional case and keep the discussion going by mentioning a more exciting modern case involving a similar issue. Then, I ask students to argue whether the modern case can be distinguished from the traditional case factually, whether the modern case should be decided the same way as the traditional case, etc. Based on recent events described below, the modern version of Wood v. Lucy, Lady Duff-Gordon I use next fall may just be the one and only Lady Britney Spears.
It seems that the sometimes-not-so-ladylike Spears, like Duff-Gordon, had an exclusive licensing arrangement in which she would lend her name to certain products in the hopes that her endorsement would increase sales. The party negotiating those deals for her then would pay her some portion of the licensing royalties. In Spears's case, the go-between was a company called Brand Sense; for Duff-Gordon, it was, of course, Mr. Wood. Under one of the endorsement deals negotiated by Brand Sense, with the fragrance arm of Elizabeth Arden, Spears would endorse the fragrance "Radiance." Brand Sense would collect the royalties from Elizabeth Arden directly, keep its 35% commission, and pass the remaining 65% on to Spears. Like many long-term contracts, all went well for several years until, well, it didn't. Earlier this year, at Spears's request, Brand Sense agreed to have the Arden payments sent directly to Spears, who then would send the 35% commission to Brand Sense. However, no further payments to Brand Sense ever arrived. According to Brand Sense's complaint, this was because Spears "secretly made a separate deal with Elizabeth Arden in a sneaky underhanded effort to circument and evade its obligations to Brand Sense." Thus, Brand Sense argues, Spears breached her contract by not paying the commission and by negotiating a new deal with Arden.
At this early stage, it seems that Spears, like Duff-Gordon, no longer wanted to share royalties with someone she perceived as doing nothing. For teaching purposes, this one's a bit of a stretch given that the primary legal issues in the two cases are different (Spears turns on a standard breach of express contractual promise while Duff-Gordon typically is used to teach the implied duty of good faith and fair dealing and consideration). However, both involve an exclusive licensing arrangement gone bad and a controversial female style maven and that's good enough for me.
As for what happens next in the case...Commentators I expect Brand Sense to argue "I'm a Slave 4 U" and Spears to argue "Gimme More." Earlier this week, Britney fired back with the "Oops!...I Did It Again!" defense and with a cross-complaint in which she alleges improper accounting and delayed payments by Brand Sense. Results to be determined; hopefully, it won't be too much of a "Circus."
June 7, 2011
Weekly Top Tens from the Social Science Research Network
June 6, 2011
Turning the Tables: Florida Couple Forecloses on Bank of America Branch
Warren and Maureen Nyerges bought a foreclosure in Naples with cash in 2009 and never dreamed they would end up in court, fighting foreclosure.
Bank of America mistakenly filed a foreclosure claim against the couple even though they had no mortgage at all. The couple fought the case in court and won, but then asked Bank of America to pay for $2,534 in attorney fees. A Collier County judge ruled the bank should pay, but the bank never did.
On Friday, the couple's lawyer went to a Bank of America branch with two sheriff's deputies. He was prepared to take possession of furniture inside the bank to pay the debt.
One hour later, the bank wrote a check for $5,772.88 to satisfy the original debt plus other fees.
[Meredith R. Miller]
Second Circuit Reinstates Breach Claims in Todd Oldham's Suit v. Old Navy
The Second Circuit describes Todd Oldham (pictured) as a "world famous artist, fashion and graphic designer, photographer, writer and television personality." Since 1989, he has operated through L-7 Designs, which manages his design services and intellectual property rights.
In 2007, L-7 approached Old Navy and proposed a strategic partnership. Old Navy eventually requested that Oldham become its Design Creative Director. The deal called for L-7 to design a Todd Oldham branded line of clothing in return for 5% of sales. Oldham would be paid an annual "fee" of $2 million for three years plus bonuses. The deal was announced and was supposed to begin in October 2008, but Old Navy dragged its corporate feet. On September 30, 2008, Old Navy informed L-7 that it wanted to postpone the signing of a license for the Oldham branded line indefinitely.
One week later, L-7 notified Old Navy that it was in material breach of the original agreement for failure to negotiate in good faith. Old Navy responded that it was not contractually obligated to do anything and regretted that it was simply unable to enter into the license agreement due to economic conditions. L-7 responded with a letter demanding lost royalties and reputational damages ($75 million) plus Mr. Oldham's fees for the second and third years the agreement ($4 million). Old Navy denied that it had breached the duty to negotiate in good faith, pointing out that the parties had genuine differences that made it impossible to move forward as initially planned. Negotiations to work out an alternative deal failed in early 2009. L-7 sued and Old Navy then terminated its deal with L-7, claiming that L-7 had materially breached the agreement by filing a lawsuit and not participating meaningfully in negotiations.
In January 2010, the district court dismissed L-7's complaint, specially finding implausible, based on the documentation of negotiations attached to Old Navy's answer, L-7's claim that Old Navy failed to negotiate in good faith. In the district court's view, L-7 made "extraordinarily high demands" and could not show failure to negotiation in good faith simply be arguing that Old Navy had insisted on terms to the point of impasse. The district court also dismissed L-7's claim for wrongful termination on the ground that, although Old Navy did not provide 30-days notice as required, such notice would have been futile as L-7 had already sued.
The Second Circuit reversed both of these dismissals, while upholding the district court's dismissal of L-7's remaining claims. The Second Circuit concluded that L-7 did state a claim alleging that Old Navy breached its duty to negotiate a license agreement in good faith because it failed to participate in negotiations between April and December 2008 and then ultimately proposed terms that it knew would be rejected. The Second Circuit found these allegations plausible for the purposes of a motion to dismiss.
The Second Circuit rejected the district court's dismissal of L-7's claim for wrongful termination because L-7 alleged that it had been terminated without notice and Old Navy has conceded as much. In so ruling, the Second Circuit made the obvious point that bringing suit seeking a declaration of the meaning of an agreement is not a breach of that agreement. The district court's conclusion that cure was impossible was speculative.
The Second Circuit opinion in L-7 Designs, Inc. v. Old Navy, LLC. can be found here.