July 1, 2011
Protection of Domestic Industry UK Style
Today's Guardian has a story about two cabinet ministers who have sent a carefully worded letter of complaint to British Prime Minister David Cameron protesting the award of a £3 billion contract for the manufacture of train carriages (cars) to the German company, Siemens. The ministers are upset that the contract was not awarded to Bombardier, which employs 3,000 people in Derby and is the last remaining train factory in Britain.
The ministers apparently express concern that Britain EU partners do not play fair. After all, the German government recently awarded a £5.4 billion high-speed train contract to German-based Siemens. And just last year, the French government awarded a £540 million contract to Siemens rather than to Paris-based Alstom.
Wait a minute. Doesn't this suggest that Siemens always wins these big contracts rather than that member states of the EU engage in favoritism? Moreover, Bombardier is not even a UK company. It's Canadian! A union representative in Derby is quoted by the Guardian as expressing concern that Bombardier will shut down operations in England. After all, if it can't win a UK contract, what's the point of even having a factory there? Simple solution. Sell the factory to Siemens. They seem pretty busy.
E-mail Threatening Resignation Constitutes Repudiation in Virginia
On June 9, 2011, The Virginia Supreme Court decided an employer could use repudiation of an ongoing contract as a defense against a suit for breach of contract by the employer in Bennett v. Sage Payment Solutions, Inc.
Robert P. Bennett, former President of Sage Payment Solutions, brought suit against the company for severance payments due under his employment agreement.
Bennett was promoted to President of Sage Payment Solutions in February 2008. With this promotion, Sage and Bennett entered into an Executive Employment Agreement. Under this agreement, Bennett earned $360,000 annually which automatically renewed for one-year terms every year. Other provisions of the contract included severance benefits which were due Bennett unless he resigned without “good cause” or was terminated for “good cause” and a non-competition agreement that restricted Bennett’s employment for 12 months.
On June 7, 2008, Bennett e-mailed Sage requesting a salary increase to around $1 million annually. After all, in 2008 the economy was humming along and what could possibly go wrong? The e-mail specified that if this request could not be satisfied, a mutually agreeable transition plan would need to be entered because Bennett would be leaving. When his compensation did not increase, Bennett looked for other positions openly but continued in his position. Sage claims the e-mail was a resignation, while Bennett characterizes the refusal to meet the compensation demands as termination. Either way, Bennett’s employment was terminated September 30, 2008.
Bennett filed suit against Sage seeking his severance payments. After some delay, Sage asserted the affirmative defense of repudiation. Although Bennett objected, repudiation was submitted to the jury, which ruled in favor of Sage. The issue on appeal to the Supreme Court of Virginia was: Can an employee’s repudiation of an employment agreement be used as a defense to a breach of contract claim against the employer after performance has begun?
Virginia generally recognizes that anticipatory repudiation can be a defense to breach of contract, it had never ruled on repudiation after performance had begun. In Bennett, the Court drew on one of its previous decisions, one decision from the U.S. Supreme Court and the Restatement (2d) of Contracts § 250 and determined that repudiation may apply to a contract that has been partially performed, if future obligations are repudiated.
Applying this principle to Bennett, the Court found that his e-mail constituted a repudiation of the contract by stating he would leave the company four months into a yearlong contract if his salary was not increased.
[JT & Katherine Freeman]
June 29, 2011
Supreme Court to Decide Contractor Liability for Bivens Actions
Pollard was incarcerated at a federal prison that had, for several years by then, been operated by an independent contractor, now known as The GEO Group (GEO). Pollard alleges that he was mistreated by GEO personnel after he fell over a cart in the prison and may have fractured both his elbows. The GEO employees allegedly put Pollard in restraints that caused him great pain, did not get him the bilateral slings prescribed for his injuries, failed to properly attend to him while he was injured and forced him to return to work before his injuries had healed. He sued GEO, seven GEO employees, and a doctor employed by another entity, alleging violations of his 8th Amendment rights and seeking damages pursuant to Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971).
GEO was not subject to suit, due to a prior ruling that private entities that run prisons are not subject to Bivens actions. The District Court dismissed his action in its entirety. A divided panel of the 9th Circuit reversed. The majority ruled that: 1) private contractors running a federal prison act under color of federal law; and 2) the availability of state remedies does not foreclose Pollard's Bivens action. In so ruling, the 9th Circuit acknowledged that it was creating a split between its law and the laws of the 4th and 11th Circuits.
Over at SCOTUSblog, Lyle Denniston predicts that the Supreme Court granted the petition in order to curb any attempts by the lower courts to expand the availability of the Bivens action. I wouldn't wager against him.
June 28, 2011
NY Appellate Division Upholds Dismissal of Franchisee's Claims
In 2003, Jeffrey Yamin and others (Yamin) entered into an agreement with Moe's Southwest Grill (Moe's -- see official logo at left) to open up to three restaurants in Albany County by 2005. This establishment is not to be confused with Moe's Tavern, which has only one location in Springfield and is operated by the gentleman at right. After that agreement terminated, and only one restaurant had been established, the parties entered into a second agreement permitting Yamin to establish two more restaurants by the end of 2006. Moe's rejected one location, as it was permitted to do under the agreement, but a second restaurant opened in December 2006. Negotiations continued as to whether the parties would negotiate a new agreement.
Meanwhile, Moe's had entered into a separate agreement with Jonathan Trager permitting Trager to open restaurants nearby. In 2007, Moe's and Trager renewed their agreement, this time granting Trager exclusive rights to open restaurants within a five-mile radiius of his area of responsibility. Under this agreement, Trager opened a restaurant on the same street (although at a different place on that street) as the location Moe's had rejected when Yamin had suggested it. Yamin sued for breach of contract and for bad faith in refusing to approve his proposed location.
Applying Georgia law, the court had to determine what constituted "bad faith" in rejecting a proposed restaurant site where the agreement provided that the decision: 1) was in Moe's "sole discretion" and 2) was to be made in accordance with Moe's "then-current site selection policies and procedures." The court's gloss on this language is that Moe's retained discretion to reject a site based on virtually any reason. Moe's provided some factual justifications for its decision, and as those facts were undisputed, the trial court found no breach of the duty of good faith, and the Appellate Division affirmed.
The Appellate Division also affirmed the trial court's ruling that Moe's did not breach its agreement with Yamin by entering into an exclusive agreement with Trager because the former agreement had expired at the time that Moe's entered into the latter agreement.
The opinion is Yamin v. Moe's Southwest Grill, LLC.
[JT & Jared Vasiliauskas]
June 27, 2011
Weekly Top Tens from the Social Science Research Network
Professional Gambler's Suit Reinstated in the 9th Circuit
In 2009, Cycalona (Clonie) Gowen brought suit in the United States District Court for the District of Nevada against Tiltware and related entities, alleging breach of contract among other things, and sought specific performance. We reported on this suit previously in this horribly pun-filled post. Gowen alleged breach of an oral contract made over the phone between herself and Tiltware CEO Raymond Bitar. Gowen alleged that the contract would pay her 1% of Tiltware’s profits once it became profitable if she would agree to be a celebrity representative for the company and promote Full Tilt Poker, the company’s online poker website. When Gowen did not receive any compensation for her promotion, she sued.The district court granted defendant Tiltware’s motion to dismiss.
In a short, unpublished opinion, the 9th Circuit Court of Appeals affirmed in part and reversed in part, dismissing the related entities but reinstating Gowen's claims against Tiltware. In granting Tiltware’s motion to dismiss the claim, the district court found that Gowen failed to state with specificity the terms of contract she was claiming was breached. The district court ruled that the claim could not proceed because Gowen did not state her obligations or the terms of the contract in her complaint. In addition she was not specific about the 1% share in Tiltware she was allegedly supposed to receive. She did not state when it was calculated from and what other entities of Tiltware would be included in the calculation.
While the 9th Circuit affirmed parts of the District Courts ruling, the panel reversed the dismissal of the breach of contract claim against Tiltware. The court ruled that there was sufficient information in the pleading to make a breach of contract claim. The court rejected the Tiltware’s claim that this contract would be barred by the statute of frauds. Even though this was an oral contract the terms did not preclude performance within one year and therefore the alleged contract would be enforceable.
The 9th Circuit also reinstated the claims for promissory estoppel and unjust unenrichment, since Gowen alleged that she supported Full Tilt poker and did so relying on the promise of a 1% interest in the company. The court held that, since Gowen alleged an enforceable contract, the district court erred in dismissing the claim as well as the claims for breach of implied duty of good faith and fair dealing and specific performance.
[JT & Jared Vasiliauskas]