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

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Friday, February 4, 2011

Are Baseball Players Suckers for Oddball Incentive Clauses?

Baseball money With the Superbowl coming up this Sunday, many sports fans currently are focused on football (or at least on the commercials to air during the football telecast).  However, a recent story collecting oddball terms in professional baseball players' contracts recently grabbed my attention.  Most of the terms detailed are incentive clauses of the "do "this thing, get this much more money" variety.  What makes these incentive clauses particularly interesting, however, is that many of the triggering actions appear impossible or near impossible to achieve.  For example, some players that have World Series MVP incentives play for teams that stand little chance of winning games let alone the World Series (sorry, Pittsburgh).  In another perplexing example, a player who is a designated hitter (meaning that he does not play in the field--ever) has a clause promising to pay him extra money if he wins a Gold Glove, an award given to the best fielding player at a particular position.  Ultimately, the article raises an interesting question that some of our readers may be able to address...why?  Why are these clauses, many of which sound downright silly, in these contracts at all?  Is it because the agent copied and pasted the terms from another player contract?  Is it because the player is delusional?  Or, is it because these incentives somehow help the contracts satisfy rules that apply solely to professional sports contracts (such as terms insisted upon by the players' union)?  If anyone has an idea, please post in the comments.  And enjoy the Superbowl!

[H.R.A. w/ hat tip to student Ron Angerer]

February 4, 2011 in Celebrity Contracts, Current Affairs, Sports | Permalink | Comments (0) | TrackBack (0)

TSA and Private Screeners: The Difference?

JohnMica As NPR reports here, the Transportation Security Administration does not want to hire private screeners to work at any more airports, although the private contractors will continue their work at the 16 airports at which they currently operate.  Florida Republican Representative John Mica (pictured right) protests, claiming that TSA is bloated and we would be better off with private screeners, given that "[n]early every positive security innovation since the beginning of TSA has come from the contractor screening program."

What innovations could Representative Mica be thinking of?  I wonder what the result would be if you asked airline travelers to name their favorite innovations in airport security in the past ten years.  Daniel Solove has been tracking these developments over at Concurring Opinions at some time.  Here is his post about standard TSA procedures.  How have things improved in the past few years?  Well, here is Solove's more recent post on the subject.  Is this the sort of innovation about which the good Congressman is crowing?

Not for nothing, NPR notes that Congressman Mica has received campaign donations from some of the private companies that are trying to win contracts to provide airport screeners.  A spokesman denies that such donations have played any role in the Congressman's position on this issue.  

Roy_Blunt, The Kansas City Star now reports that Senator Roy Blunt (pictured left) is also sponsoring legislation that would encourage the use of private screeners.  The legislation is said to be a response to the TSA's denial of a request by the Springfield-Branson airport to switch to private screeners.  The request reportedly came after two reports of federal employees being neglectful of passengers at the airport, causing delays that resulted in people missing their flights.  

According to the TSA's website, the standards for screening are identical, whether the screeners are private or federal: "TSA sets the security protocols and standards for all commercial airports nationwide, to include airports participating in [the private screeners programs]."  That would suggest that one's experience of private screeners should not be significantly different from one's experience of federal screeners.  But perhaps the private screeners are cheaper?  No, according to TSA:

ATSA mandates private screening companies to provide compensation and other benefits to their screeners that are not less than the level of compensation and other benefits provided to comparable Federal Government personnel. TSA conducted an extensive review of the private contractors and found overall the private screening companies are providing pay and benefits that equal or exceed the pay and benefits provided by the Federal Government.

But since the TSA has to monitor the private screeners, and because there are transactions costs involved in negotiating the terms under which the private contractors serve, it seems likely that private screeners actually add costs, even if they are not better paid.  And then what of legal wrangling if there are allegations of misconduct by a private screener?   

So, the argument for private screeners must run something like this.  Private companies are preferable because competition leads to better efficiency and better customer service.  In addition, private companies might have more rigorous hiring practices that ensure a higher quality of personnel.  Is there any empirical basis to support such reasoning or are there other justifications for preferring private screeners?

[JT]

February 4, 2011 in Government Contracting, In the News, Travel | Permalink | Comments (1) | TrackBack (0)

Thursday, February 3, 2011

Jim Bean v. Jose Cuervo: A Lesson on Material v. Minor Breach

It is not often that two of my favorite things – contract law and tequila --  converge in one place.  At least, whenever I enjoy my favorite sipping tequila, I get up the courage to move the conversation to contract law, and my attempts usually get derailed quickly.

Jim-beam-white Thankfully, a recent case from a New York County trial court manages Jose-Cuervo-Especial-lg
to merge my two interests.  Jim Beam Brands Co. (Jim Bean) has sued Tequila Cuervo Law Rojena S.A. de C.V. (Cuervo) for breach of a contract settling a previous trademark dispute.  Jim Beam holds the trademark for the names “Old Crow” and “Crow,” and various crow designs for whiskey and bourbon.  In the previous suit, Jim Beam sued Cuervo when Cuervo used a crow design and the word “crow” in advertising Cuervo products.  Eventually, they settled the dispute and agreed to limit Cuervo's use of the bird design.

Now, Jim Beam sues Cuervo, claiming breach of the contract.  Cuervo admits that, for seven years, it variously used a bird design in violation of the settlement.  Thus, Jim Beam sued claiming that Cuervo breached the contract.  Cuervo responded that the breach was not material.  The court held: so what, reminding Cuervo even minor breaches may entitle a party to damages.  The court recited the black letter law:

The New York courts routinely allow a nonbreaching party to seek damages, not only for a material breach (Texter v Trotta, 48 AD3d 455 [2d Dept 2008]), but also for a minor, or immaterial, breach as. well (Seidlitz v Auerbach, 230 NY 167 [1920]).

The materiality or non-materiality of a breach of contract only goes to the question of the type of remedy that may be allowed, not to the issue of liability. In order to be entitled to nonmonetary relief for breach of a contract, the non-breaching party must demonstrate that the breach was material.

"The right to rescission generally exists as an alternative remedy to an action for damages where there has been a material breach of a contract [emphasis added] (Manning v Manning, 97 AD2d 910, 911 [3d Dept 1983]); Richard A. Hutchens CC, L.L.C. v State of New York, 59 AD3d 766 [3d Dept 2009] [a material breach entitles injured party to seek rescission]); Jones v Jones, 232 AD2d 3130020[1st Dept 1996] [material breach entitles non-breaching party to seek rescission]).

However, even a minor breach allows the innocent party some measure of damages to put it in the same position that it would have been in if no breach had occurred.  

Thus, the court ruled for Jim Bean on liability and ordered a trial on damages.  

Jim Bean Brands Co. v. Tequila Cuervo La Rojena S.A. De C.V., 600122/08, NYLJ 1202480086862, at *1 (Sup. NY, Decided January 27, 2011) (Justice Richard B. Lowe, III).

[Meredith R. Miller]

 

February 3, 2011 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Belatedly Introducing Our New Contributing Editor, Eniola Akindemowo

New contributing editor, Professor Eniola Akindemowo of the Thomas Jefferson School of Law got up her first post before we got a chance to introduce her to our readers, but our loyal readers are probably remember her well, since she was featured on the blog three years ago.  Here is her official bio:

AkindemowoBefore joining the faculty at the Thomas Jefferson School of Law, Professor Eniola O. Akindemowo was a member of the law faculty at Monash University in Melbourne Australia, and before that of faculty of the University of Western Sydney, Australia.  She has also taught law at the University of East London, and at Middlesex University in the UK.

Professor Akindemowo has authored articles that have been published in both student-edited, and peer-reviewed journals. She is the author of the first substantive book on IT law published in Australia, and co-author of another on E-Commerce and the Law.  Her Ph.D. thesis titled Electronic Fund Transfers, Consumers, Electronic Funds and the Law, was a comparative study of U.S. and British law. Professor Akindemowo has been the recipient of several competitive research and travel grants. Her scholarly interests include comparative commercial law, e-money, m-payments and payment systems, anti-terrorism financing regulation, and contractual, consumer and intellectual property issues arising from e-commerce.

Professor Akindemowo is currently the Co-chair of the General Provisions Sub-committee of the American Bar Association (ABA) UCC Committee, and an executive committee member of the Association of American Law School (AALS) Internet and Computer Law Section.  She is also a member or associate of the American Bar Association (ABA), the National Bar Association, the Earl B. Gilliam Bar Association, and the International Technology Law Association. 

A keynote or featured speaker at numerous conferences, Professor Akindemowo currently teaches Contracts Law, Payments Law and eCommerce Law at the Thomas Jefferson School of Law.  She has been a visiting scholar of the University of New South Wales Faculty of Law, and a distinguished visitor at the University of Newcastle (NSW, Australia).  Before undertaking her LL.M. and Ph.D. research, Professor practiced commercial law in the law firms of J.B Majiyagbe (SAN) & Co, and Abayomi Sogbesan (SAN) & Co.

Welcome to the blog!  We look forward to many illuminating posts!

[JT]

February 3, 2011 in About this Blog, Contract Profs | Permalink | Comments (0) | TrackBack (0)

Happy Groundhog Day!

Groundhogday2005 It was Groundhog Day yesterday and Punxsuatawney Phil did not see his shadow.  Spring, in other words, is officially around the corner, definitely less than six weeks away.  Or is it?  Can we hold the Inner Circle the group on whose behalf  Punxsuatawney Phil acts – to this happy prediction?  What should we make of the annual February 2nd hoopla?  Does it provide a reliable forecast – it is promoted as a "reliable prediction of when spring will begin" after all

The pertinent question is whether there is even a hint of any intention to be legally obliged by the assurance of reliability that accompanies every such 'Philly' prediction?  An assurance, I might add, that draws thousands of avid devotees to the ceremony annually.  But then, do we even think of suing the weatherman when the weather forecast on the evening news is wrong?  Perhaps the analogy is not such a good one – we should compare apples with apples.  Your humble weatherman on the evening news is not to be compared with the likes of such a prophetic rodent as Phil, I suppose. 

A reasonable response to the spring prediction might be to treat it all as a publicity stunt.  Nothing but an elaborate performance.  One by Phil and the Inner Circle, on behalf of the Borough of Gobblers Knob in Punxsuatawney Pennsylvania that surely is most appreciative of the tourist traffic. 

So, perhaps it is all in jest?  This has, after all, been an annual event for the last 125 years.  Surely the groundhog Phil of yesterday’s prediction cannot be the same Phil of the first ever 'Philly' groundhog spring prediction.  Or, can he be?  There are those whispers about a certain elixir of life.   There is an alternative explanation of course – that the Inner Circle has had an inexhaustible supply of prophetic Phils over the years – but this strains credulity.

I suppose one could take an analytical approach and test Phil’s batting average over the years.  It is a matter of public record after all.  Apparently Phil has seen his shadow 99 times, and not seen his shadow 16 times .  It should not be too difficult to map Phil’s predictions against historical weather records.  But perhaps we need not bother to do even that.   

Considering the fierce snowstorms presently lashing a large swath of the US, a not unreasonable conclusion would be that Phil’s prediction yesterday morning was nothing but a bold faced statement to be taken with a pinch of salt.  How can spring be near when weathermen are panicking about 'thundersnow'?  Reasonably reliable?  I haven’t done the math, but I strongly suspect that Phil’s predictions are not very reliable at all.  Poor Phil.

This does mean of course, that Phil’s predictions are poor candidates for contractual liability.  No failure of consideration, no misrepresentation, no estoppel.  Poor disappointed litigious weather watchers.  Lucky Phil.  

[Eniola O Akindemowo]

 

February 3, 2011 in Commentary, Current Affairs, In the News | Permalink | Comments (0) | TrackBack (0)

Steve Feldman on General Dynamics and Boeing

In Part I of his guest blog on the General Dynamics and Boeing case, Neil O’Donnell commented on the Supreme Court’s oral argument and whether the contracting parties could have negotiated a special contract termination clause dealing with the state secrets privilege. Mr. O’Donnell observed that government contracts are “[i]n most respects a classic contract of adhesion, as about as negotiated as the policy that we all get from our insurance companies.” According to Mr. O’Donnell, “[w]here the underlying contract award is made competitively, there simply is not any negotiation of the terms of the contract.” He further commented that the standard default clauses under the Federal Acquisition Regulation (FAR) (48 C.F.R. Part 1 et seq.) are mandatory and that “any attempt to condition proposals on changing [those clauses] or any of the other mandated government contract provisions would have made their offers non-responsive and subject to rejection.”

I respectfully disagree with these characterizations of the government contracting process. Although older case law does observe in dicta that government contracts are adhesive, see Sandnes’ Sons, Inc. v. United States, 462 F.2d 1388, 1392 (Ct. Cl. 1972), the regulations have experienced a sea change since that time, including promulgation of the FAR in 1983 and a major FAR rewrite in 1997.  The better view is that government contracts are not adhesion contracts under standard legal principles and the instant facts did not present that possibility in any event. 48 C.F.R. Part 15 expressly allows parties to negotiate proposed contract terms and for offerors in the competitive range to correct proposal deficiencies.  The FAR specifically permits agencies to employ deviations from standard contract clauses for good reasons, including the opportunity for agencies to draft special termination clauses. Therefore, the Acting Solicitor General during oral argument was correct in raising the possibility that the parties could have drafted a special termination clause that made allowances for the state secrets privilege.

An adhesion contract is a form contract drafted unilaterally by one enterprise and forced upon another on a “take-it-or-leave-it” basis.  Even if a contract is offered on a “take-it-or-leave-it” basis, a plaintiff would need to show more to prove adhesion. First, plaintiff must show a great disparity in the parties' bargaining power. Second, a plaintiff must show that it was not given an opportunity for input or negotiation. Finally, a plaintiff must show that it could not have obtained adequate property or services elsewhere.  

Feldman
Courts considering adhesion contracts thus assess whether the drafting party has imposed the contract on the public, i.e., consumers, for necessary services or goods where the buyer realistically has nowhere else to go.  Some common examples of an adhesion contract are a real estate mortgage contract, an insurance policy, or a transportation ticket.  Adhesion contracts are not a sinister phenomenon but are a necessary concomitant of a sophisticated commercial society. With these instruments, the parties can devote scarce and costly time and skill to a class of transactions rather than to the details of individual bargains.  About the only legal consequence of an adhesion contract, no defect in the consent process appearing, such as unconscionability, is that any ambiguities in the agreement will be construed against the drafter.

Based on this formulation, a contract between the Department of Defense and these two military contractors for a complex weapons system was not an adhesion contract. The government was not foisting a non-negotiable contract on consumers for necessary services; the contract simply contained some standard form clauses. Further, the roles of the parties in an adhesion contract are a powerful seller and a weaker buyer.  This standard situation is distinguishable from the General Dynamics/Boeing scenario because the supposed weaker parties are two major defense contractors who were the sellers and not the buyers.  

Apart from this role reversal, the General Dynamics/Boeing scenario does not support the first element of an adhesion contract, stated above, which is a “great disparity” in the parties’ bargaining power. As Mr. O’Donnell concedes, these two contractors were “sophisticated and experienced government contractors.”  It strains credulity to contend that these two multi-billion dollar contractors believed that they were not negotiating as equals with the agency or that they felt compelled to knuckle under to the government’s form clauses and other contract terms.  Compare Double Circle Farm Supply Co., AGBCA No. 88-204-1, 90-1 BCA ¶ 22,556 (“Extensive negotiation between the parties would suggest the contract was not one of adhesion”); id. (“party that has ample opportunity to review an agreement and has the advice of counsel” cannot assert the contract is adhesive). Furthermore, it must be remembered that the military contract at issue was for research and development, in which the contractual scope of work is supposed to “[a]llow contractors freedom to exercise innovation and creativity.”  See 48 C.F.R. 35.005.  Such an open ended work statement is far afield from the “Government’s dictating terms to which any competing party must bid,” as claimed by Mr. O’Donnell.

  Army corps of engineers

Lastly, I do not accept Mr. O’Donnell’s implication that competitive contracts under 48 C.F.R Part 15 forestall any negotiation of the contract terms and that offers deviating from standard clauses are subject to peremptory rejection as being “nonresponsive.” Before the receipt of proposals, 48 C.F.R. 15.201 encourages the parties to exchange information about the proposed contract; dissatisfied vendors have a statutory right to protest any objectionable terms to the Government Accountability Office or the U.S. Court of Federal Claims. After receipt of proposals, 48 C.F.R. 15.306(d) expressly permits “bargaining” between the agency and offerors. This bargaining can include “give and take” on a host of subjects, including “terms of a proposed contract.”  

In contrast with sealed bidding, which does use the responsiveness concept, competitive proposals as in the A-12 case are not generally subject to peremptory rejection because of an offeror’s failure to accept a mandatory clause. Instead, proposers in a competitive range—such as the petitioners—must be afforded discussions under 48 C.F.R 15.306 and given a chance to correct their proposal “deficiencies.” 48 C.F.R. 15.001 defines a proposal “deficiency” as a “failure to meet a government requirement,” which could encompass a standard FAR clause.  Mr. O’Donnell cites none of the above 48 C.F.R. Part 15 regulations in his posting.

 If these contractors were as concerned with the potential  impact of the invocation of the state secrets privilege as they later asserted before the Supreme Court, they easily could have asked the agency before or after contract execution to seek a deviation under 48 C.F.R. 1.402 to revise the standard termination for default clause. This regulation encourages agencies to authorize revisions to standard clauses in the interests of promoting “new techniques and methods of acquisition.” The firms also could have requested that agency regulators draft a special termination clause for the A-12 contract, as allowed by 48 C.F.R 49.501.  It is mere speculation to say post-hoc that the parties could not have worked out some accommodation about the state secrets privilege.  Therefore, the procurement regulations grant industry and government significant bargaining flexibility even over standard contract terms and the Acting Solicitor General properly raised that point during the oral argument. 

 [Related posts listed below]

General introduction to the Roundtable

Professor Laura Donohue's comments

Some footnotes to Laura Donohue's comments

Links to additional comments on the case

Neil O'Donnell's Comments, Part I

Neil O'Donnell's Comments, Part II

New York Times Editorial on the Case

[Posted, on Steve Feldman's behalf, by JT]

February 3, 2011 in Commentary, Government Contracting, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Wednesday, February 2, 2011

Introducing Guest Blogger, Steven Feldman

Feldman Just when you thought it was safe to venture back on the blog without hearing more about the General Dynamics and Boeing cases, Steven Feldman has decided to join our roundtable discussion.  We will be posting his comments tomorrow, but in the meantime, here is a bio.

 
 Steve Feldman is an attorney for the U.S. Army Corps of Engineers in Huntsville, Alabama, where he has been advising  contracting officers on the federal procurement laws and regulations since 1985. He is the author of numerous works on federal acquisition for West Publishing, including the three volume treatise, Government Contract Awards: Negotiation and Sealed Bidding, the Government Contract Guidebook, Government Contract Changes (with Prof. Ralph Nash) and his upcoming work, Government Contracts in a Nutshell. He also has published numerous law journal articles in this field.

All opinions expressed in his blog posts are his personal views and do not represent the opinions of any federal agency. 

[JT]

February 2, 2011 in About this Blog, Government Contracting | Permalink | Comments (0) | TrackBack (0)

UCC Conference at South Texas College of Law

ANNOUNCEMENT AND CALL FOR PAPERS

Amended Article Two: Reversing the Curse?

            The uniform law for sales of goods in the United States has not been substantially amended since 1951.  The U.S. Constitution, during that time, has been amended five times.

            After an attempt at a full-scale UCC Article Two revision ended in the mid-1990s, the American Law Institute and the National Conference of Commissioners on Uniform State Laws organized a more modest effort to amend Article Two.  This effort ended with the promulgation of Amended Article Two in 2003.  The amendments provided for electronic transactions, updated the statute of frauds, addressed the battle of the forms, revised some consumer protection provisions, and repealed archaic shipping terms.  Few would quarrel with the need for such amendments, but Amended Article Two has not been enacted in any state.

            Will it be?  Could it be re-packaged and resold (in a commercially reasonable manner)?  If not, why not?  What does this mean for future amendments to Article Two?

  Houston
           To address these questions, a group of scholars, practitioners, and interested observers both for and against Amended Article Two's passage will convene at the South Texas College of Law in Houston, Texas, on April 8, 2011, at 9 am, for a one-day conference.  Committed participants include

Henry Gabriel, Professor of Law at Elon University School of Law and Reporter for Amended Article Two;

Larry Garvin, Lawrence D. Stanley Professor of Law at the Ohio State University College of Law;

Holly Towle, Partner at K&L Gates in Seattle, Washington; and

•Scott Burnham, Frederick N. & Barbara T. Curley Professor at Gonzaga University School of Law and conference co-organizer.

Contributions to the conference will be published in the South Texas Law Review, with an introduction by Fred Miller, Professor Emeritus at the University of Oklahoma School of Law.

            Of course, all interested are invited to attend.  Inquiries related to the conference should be made to Val Ricks at vricks@stcl.edu.

 [JT]

 

February 2, 2011 in Conferences | Permalink | TrackBack (0)

New in Print

Pileofbooks N.B.: Our methods for identifying recent publications in this area are imperfect.  If you are aware of a recent publication -- including books -- that is not included here, please feel free to let us know.

Richard R.W. Brooks & Alexander Stremitzer, Remedies On and Off Contract, 120 Yale L.J. 690 (2011)

David Chalkin, A Critical Examination of How Contract Law Is Use by Financial Institutions Operating in Multiple Jurisdictions, 34 Melbourne Univ. L. Rev. 34 (2010)

Trevor C. Hartley, Choice of Law Regarding Voluntary Assignment of Contractual Obligations under the Rome I Regulation, 60 Int'l & Comp. L. Quarterly 29 (2011)

[JT]

 

February 2, 2011 in Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Tuesday, February 1, 2011

Weekly Top Tens from the Social Science Research Network

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

December 2, 2010 to January 31, 2011

RankDownloadsPaper Title
1 695 Mortgage Servicing 
Adam J. LevitinTara Twomey
Georgetown University - Law Center, National Consumer Law Center, 
Date posted to database: December 18, 2010 
Last Revised: January 20, 2011
2 409 Choice of Law in the American Courts in 2010: Twenty-Fourth Annual Survey 
Symeon C. Symeonides
Willamette University - College of Law, 
Date posted to database: January 11, 2011 
Last Revised: January 25, 2011
3 195 Regulating Systemic Risk: Towards an Analytical Framework 
Iman AnabtawiSteven L. Schwarcz
University of California, Los Angeles (UCLA) - School of Law, Duke University - School of Law, 
Date posted to database: January 6, 2011 
Last Revised: January 7, 2011
4 127 The Role of Dynamic Renegotiation and Asymmetric Information in Financial Contracting 
Michael R. Roberts
University of Pennsylvania - The Wharton School - Finance Department; National Bureau of Economic Research (NBER), 
Date posted to database: December 31, 2010 
Last Revised: December 31, 2010
5 119 The Uncorporation and the Unraveling of 'Nexus of Contracts' Theory 
Grant M. HaydenMatthew T. Bodie
Hofstra University - School of Law, Saint Louis University School of Law, 
Date posted to database: December 10, 2010 
Last Revised: December 15, 2010
6 117 The Role of Securitization in Mortgage Renegotiation 
Sumit AgarwalGene AmrominItzhak Ben-DavidSouphala Chomsisengphet,Douglas D. Evanoff
Federal Reserve Bank of Chicago - Economic Research, Federal Reserve Bank of Chicago, Ohio State University - Finance Department, Fisher College of Business, Office of the Comptroller of the Currency - Economics Dept - Credit Risk Analysis Division, Federal Reserve Bank of Chicago, 
Date posted to database: January 17, 2011 
Last Revised: January 26, 2011
7 110 Pregnant Man?: A Conversation 
Darren RosenblumNoa Ben-AsherMary Anne CaseElizabeth F. EmensBerta E. Hernández-TruyolVivian M. GutierrezLisa Chiyemi IkemotoAngela Onwuachi-WilligJacob Willig-OnwuachiKimberly MutchersonPeter SiegelmanBeth Jones
Pace Law School, Pace University - School of Law, University of Chicago Law School, Columbia Law School, University of Florida Levin College of Law, Unaffiliated Authors - 
affiliation not provided to SSRN, University of California, Davis - School of Law, University of Iowa College of Law, Unaffiliated Authors - affiliation not provided to SSRN, Rutgers School of Law-Camden, University of Connecticut - School of Law, Unaffiliated Authors - affiliation not provided to SSRN
Date posted to database: December 17, 2010 
Last Revised: January 5, 2011
8 97 Avatar Experimentation: Human Subjects Research in Virtual Worlds 
Joshua Fairfield
Washington and Lee University - School of Law, 
Date posted to database: December 2, 2010 
Last Revised: December 15, 2010
9 76 Contract as Convention 
F. H. Buckley
George Mason University - School of Law, Faculty, 
Date posted to database: January 16, 2011 
Last Revised: January 23, 2011
10 67 Exit and the American Illness 
Erin A. O'HaraLarry E. Ribstein
Vanderbilt University - Law School, University of Illinois College of Law, 
Date posted to database: January 23, 2011 
Last Revised: January 31, 2011

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

December 3, 2010 to February 1, 2011

RankDownloadsPaper Title
1 412 Choice of Law in the American Courts in 2010: Twenty-Fourth Annual Survey 
Symeon C. Symeonides
Willamette University - College of Law, 
Date posted to database: January 11, 2011 
Last Revised: January 25, 2011
2 129 The Role of Dynamic Renegotiation and Asymmetric Information in Financial Contracting 
Michael R. Roberts
University of Pennsylvania - The Wharton School - Finance Department; National Bureau of Economic Research (NBER), 
Date posted to database: December 31, 2010 
Last Revised: December 31, 2010
3 112 Pregnant Man?: A Conversation 
Darren RosenblumNoa Ben-AsherMary Anne CaseElizabeth F. EmensBerta E. Hernández-TruyolVivian M. GutierrezLisa Chiyemi IkemotoAngela Onwuachi-WilligJacob Willig-OnwuachiKimberly MutchersonPeter SiegelmanBeth Jones
Pace Law School, Pace University - School of Law, University of Chicago Law School, Columbia Law School, University of Florida Levin College of Law, Unaffiliated Authors - 
affiliation not provided to SSRN, University of California, Davis - School of Law, University of Iowa College of Law, Unaffiliated Authors - affiliation not provided to SSRN, Rutgers School of Law-Camden, University of Connecticut - School of Law, Unaffiliated Authors - affiliation not provided to SSRN
Date posted to database: December 17, 2010 
Last Revised: January 5, 2011
4 77 Contract as Convention 
F. H. Buckley
George Mason University - School of Law, Faculty, 
Date posted to database: January 16, 2011 
Last Revised: January 23, 2011
5 69 Exit and the American Illness 
Erin A. O'HaraLarry E. Ribstein
Vanderbilt University - Law School, University of Illinois College of Law, 
Date posted to database: January 23, 2011 
Last Revised: January 31, 2011
6 40 A Toolbox for European Judges 
Martijn W. Hesselink
University of Amsterdam - Centre for the Study of European Contract Law (CSECL),
Date posted to database: December 17, 2010 
Last Revised: December 17, 2010
7 37 Legal Process and the Discovery of Better Policies for Fostering Innovation and Growth 
Henry N. ButlerLarry E. Ribstein
George Mason University - School of Law, Faculty, University of Illinois College of Law, 
Date posted to database: January 14, 2011 
Last Revised: January 17, 2011
8 33 Arbitration's Suspect Status 
Hiro N. Aragaki
Fordham University - Fordham University Schools of Business, 
Date posted to database: November 29, 2010 
Last Revised: December 28, 2010
9 28 Privatizing the Adjudication of International Commercial Disputes: The Relevance of Organizational Form 
Kevin E. Davis
New York University (NYU) - School of Law, 
Date posted to database: January 15, 2011 
Last Revised: January 15, 2011
10 18 'One Truth is Clear, Whatever is, is Right': The History, Indeterminacy, and Ideological Significance of the Doctrine of Economic Duress 
Frank C. Huntington
J.D., Harvard Law School (1984); Ph.D., Brown University (1981); B.A. Swarthmore College (1974), 
Date posted to database: December 31, 2010 
Last Revised: January 6, 2011

[JT]

February 1, 2011 in Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Monday, January 31, 2011

Interesting Attorneys' Fees Case from California

Last week, California's 6th District Court of Appeals issued its decision in Smith v. First Principle Church.  The problem facing the court was somewhat messy.  Plaintiff Russell Smith and his brother, I.M. Nome, founded the Church in the 1970's.  Smith served as the Church's minister until he retired in 1995.  The following year, it appears that he entered into an agreement with his brother, purportedly acting on behalf of the Church, to provide Smith and his wife Helga with a pension.  The Church paid pension benefits until 2003 and then stopped, after having paid over $260,000, arguing that there was no consideration for the payments. The Smiths sued for breach of contract and promissory estoppel, and the Church cross-claimed for recovery of its earlier payments.  

The trial court rejected Smith's claims, agreeing with the Church that there was no consideration for the payments and finding that Nome had no authority to authorize the pension agreement.  The court found that reliance on such a promise to pay was unreasonable and thus also rejected Smith's promissory estoppel claim.  The trial court found the counterclaims time-barred, a ruling that was reversed in part on appeal.

But here's where it gets interesting.  The written agreement relating to the pension contained the following clause that was at issue in the case:

If the Church refuses to honor the terms of this contract at any time and Russell Smith must take legal action to enforce this contract, all reasonable court and attorney’s fees incurred by him shall be borne by the Church. 

That clause caught my eye, because I litigated a similar clause in an executive compensation case a few years back.  Such clauses seem a bad idea to me, as they are an invitation to a law suit, but it appears that they are -- or once were -- quite common.  However, as both my own experience and this case indicate, they don't always work.  But when they don't work, they are even worse, because they entice people to sue and then saddle them with double costs.

After trial, the Church filed a motion for over $500,000 in attorneys' fees.  California has a statute, Civil Code Section 1717, that makes one-sided attorneys' fees provisions reciprocal.  Just an aside here -- the amount of the attorneys' fees in relation to the amount in controversy suggests more than a bit of hard feelings on both sides.  The trial court gave the Church a bit of a haircut, but still awarded fees in excess of $400,000.  

There were lots of difficult issues on appeal.  The appellate court focused on the issue of whether there was a prevailing party in the litigation and whether the counterclaims at issue were contracts claims within the ambit of the agreement.  The court concluded that, as the Church had prevailed on the contract issue, it was entitled to its fees, even if those fees were incurred prosecuting claims that the trial court found to be time-barred and which the appellate court found not be contracts claims.  The court did not address the question of why it should enforce an attorneys' fees provision in a contract that has been found to be unenforceable, and it does not seem that the parties focused on that issue.  Perhaps that point is already settled in California.

[JT]

January 31, 2011 in Recent Cases | Permalink | Comments (0) | TrackBack (0)