Tuesday, February 28, 2012
Stephen Colbert (pictured) often makes a big deal about the "Colbert Bump" that candidates get from appearing on his show, but that's nothing compared to the Berggren Bump that contracts profs get when ContractsProf Blog Intern 2.0 Justin Berggren posts about their work. Take as a case in point Zev Eigen, whose work Empirical Studies of Contract was enjoying the respectful obscurity that all too often greets works of serious scholarship. But now that Justin has given his endorsement of Professor Eigen's project, he's sprung to the top of the Law & Society: Contracts Top Ten!
Folks on the Contracts & Commercial Law Top Ten, you'd better watch out if you are north of #5. And the rest of you, perhaps it's time you had your people contact Justin's people. But don't come on too strong. Start by taking him to lunch.
|1||132|| Empirical Studies of Contract
Zev J. Eigen,
Northwestern University School of Law
|2||111|| Contract Theory: Is There a Path Through the Theoretical Jungle?
University of Edinburgh - School of Law
|3||96|| Judging Lite: How Arbitrators Use and Create Precedent
Mark C. Weidemaier,
University of North Carolina (UNC) at Chapel Hill - School of Law
|4||77|| Aggregation and Law
Ariel Porat, Eric A. Posner,
Tel Aviv University, University of Chicago - Law School,
Date posted to database: December 20, 2011
Last Revised: February 23, 2012
|5||65|| A Dual Approach to Contract Remedies
Michael D. Knobler,
Yale University - Law School,
Date posted to database: December 9, 2011
Last Revised: February 10, 2012
|6||60|| Beyond Ex Post Expediency - An Ex Ante View of Rescission and Restitution
Richard R. W. Brooks, Alexander Stremitzer,
Yale University - Law School, UCLA School of Law
|7||54|| Contract Law's Inefficiency
David M. Driesen,
Syracuse University - College of Law
|8||53|| Private Law and Moral Practices Part 1: Contract
Prince Saprai, George Letsas,
University College London - Faculty of Laws , University College London - Faculty of Laws
|9||50|| Non-State Law in the (Proposed) Hague Principles on Choice of Law in International Contracts
Genevieve Saumier, Lauro Gama,
McGill University - Faculty of Law, PUC-Rio
|10||48|| Contracts Meet Henry Ford
Barak D. Richman,
Duke University - School of Law
Monday, February 27, 2012
In Empirical Studies of Contract, Zev Eigen, examines scholarly works published in the last seven years from the fields of, among others, law, management, sociology, psychology, and law and economics to report the trend of empirical analysis of the relationship of contracting party behavior to contract terms. Eigen aims to determine whether scholars are asking the right questions and whether their methods are producing reliable empirical data.
Professor Eigen briefly reviews the history and evolution of contracts doctrine and the trend noted as early as 1963 (by Stewart Macaulay) of a growing “discord between how contract is experience and how the law assumes contract is experienced.” He next presents the methods used to classify the papers reviewed. Professor Eigen classified 113 empirical papers according to the eight questions they sought to answer. These eight questions are then sorted in relation to two propositional poles: 1) Contracts are a product of how drafters and signers interpret the law; and 2) Contracts are a product of factors exogenous to the law.
The paper’s findings include the following: 1) researchers are increasingly persuaded that actors do not behave rationally or in ways that optimize efficiency; 2) moral constraints are important in understanding how individuals interpret contractual obligations; and 3) there has been a notable rise in scholarly exploration of form contracting.
Professor Eigen recommends that scholars improve the substance and methods of collecting empirical data. He notes in the scholarship a disproportionate focus on certain questions and corresponding neglect of others. He makes a number of suggestions for empirical projects that scholars might undertake. As to method, Professor advocates more qualitative analysis as well as the observation that forty percent of the papers evaluated used experimental methodologies, a relatively high percentage.
Based on his review of recent empirical works on contracts, Professor Eigen concludes that they review “the fungibility of contract law in . . . post-Durkheimian and post-Weberian contemporary life, wherein the role of law is reduced, and perhaps more importantly, compartmentalized.” In our world, contract law parallels or shadows “extra-legal sources of power, authority, status and norms of exchange” rather than moderating and mediating social and economic exchange on its own.
[JT and Justin Berggren]
We will be honoring Professor Melvin Eisenberg for a lifetime of important contributions to contracts scholarship. We will also be honoring our selection for the best contracts article to appear in 2011 (keep an eye on this blog for an announcement of the winner later this week).
For those seeking more information on the conference, at which CLE credits are available, here is the main page.
And for those already stocking up on suntan lotion for the trip to San Diego, here is the conference program.
We at the blog are proud to note one of our own contributors, Eniola Akindemowo, is the conference organizer. Thanks and congratulations to Eniola for pulling this conference together!
Friday, February 24, 2012
In other news about J.K. Rowling, it turns out that the hugely successful author of the Harry Potter series has just signed a contract for an adult novel (no not an adult novel, but an adult novel). The Washington Post has the story here What's interesting is that the book did not go to "auction" but was negotiated by her new agent with Little Brown, a new publisher. I would love to see the terms of that publishing contract!
The Telegraph reports here that JK Rowling has settled a dispute with her former literary agent, Christopher Little. Little was the agent who pulled Rowling's manuscript for the first Harry Potter book out of the slush pile. Much to Little's surprise, Rowling decided to join a former agent of Little's, Neil Blair, at Blair's new agency. It seems like there's loads of contract law issues here - Little undoubtedly had an exclusive agreement with Rowling to represent her, Blair may have had a non-compete with Little. Did Little's agency agreement contain the exclusive right to represent Rowling with respect, not just to her published works and associated film rights, but "new media" such as Rowling's Pottermore website (which she and Blair were working on while both were with Little)? Did the work done by Rowling and Blair on Pottermore violate their agreements with Little? Unfortunately for us contracts profs, the terms of the agreements are all confidential....
This situation brings up an issue that I've always wondered about with respect to exclusive agency agreements -contract law seems to me somewhat one-sided, in favor of agents, when it comes to exclusive agency contracts. Wood v. Lucy, Lady Duff Gordon held that an exclusive agency agreement that did not specify performance targets did not lack consideration because it was implied that an exclusive agent would exercise reasonable efforts to perform, otherwise the agent wouldn't get paid. But I think it's not uncommon for agents representing uknown writers, actors and singers, to spend their time on their established clients and only use minimal efforts to promote their new, lesser known, clients. Clients typically terminate the agency after the period of exclusivity in that situation, but under the rationale in the Lady Duff Gordon case, couldn't the clients sue for "breach" of the duty to use reasonable efforts? I would think the answer is yes. The bigger hurdle would be damages, which would be hard to calculate with any certainty for a new, unproven artist. There's also the bargaining power issue. There's typically a lack of bargaining power between a new client and an agent (we're not talking here about Rowling the rich and famous author, but Rowling the unpublished struggling single mom on government benefits). Theoretically, a client could terminate an agency agreement during the period of exclusivity if the agent is not exercising reasonable efforts - but a client would only do that if she had another agent or was able to sell her [insert creative work here] on her own. In that case, the terminated agent would likely sue the client for a share of any royalties, claiming that the client did not give the agent adequate time to perform under the agency agreement.
According to The Guardian, Fabio Capello (pictured), manager of England’s national football team could be in breach of contract after publicly challenging the Football Association’s (FA) decision to strip John Terry, England’s national football team captain, of his captaincy. The Guardian reports that the FA made this decision after John Terry allegedly racially abused English footballer, Anton Ferdinand. Capello was upset that this decision was taken without consulting him. Capello said that he felt “undermined by the FA decision to notify him after the decision had been made.
Capello also objects to the substance of the decision, finding it premature. Preferring civil justice to sports justice, Capello believes that Terry should remain captain until the courts decide whether he committed the crime.
While the details of Capello’s contract are unknown, People Management reports the contract likely gives the FA final say regarding squad selection, but does that also relate to choosing the team captain? People Management also suspects that the contract contains some sort of gag provision and notes that in the UK, senior executive contracts often contain a provision preventing the employee from bringing the company into disrepute or making a public statement that is in direct conflict with a statement made by the employer. If Capello’s contract contained this provision, he may be in breach for making his views, opposing the FA’s decision, public. Whether such a remedy entitles the FA to treat Capello’s conduct as a repudiation of the agreement or can serve as grounds for dismissal will turn on the precise contractual language.
As the Guardian reports here, Capello resigned as Manager on February 8th, and the parties agreed to a £1.5 million settlement. Capello's annucal salary was £6 million. A confidentiality agreement means we will never get to explore the issues of breach in more detail.
[JT & Janelle Thompson]
Thursday, February 23, 2012
In yet another arbitration case, on Tuesday the Supreme Court decided per curiam Marmet Health Care Center, Inc. v. Brown. The Court chastised West Virginia’s Supreme Court of Appeals for handing down three decisions that disregarded the Court’s interpretations of the Federal Arbitration Act (FAA). The Court vacated the West Virginia rulings, which had held unenforceable pre-dispute arbitration agreements that apply to claims alleging personal injury or wrongful death at nursing homes.
In all three cases, a family member of a deceased patient sued the nursing home for negligent injuries or harm resulting in the patient’s death. The nursing homes sought to compel arbitration. The cases were consolidated, and the West Virginia Supreme Court of Appeals held, as a matter of public policy, that no agreement could compel arbitration of a claim of negligence that results in personal injury or wrongful death. Calling the Supreme Court’s interpretation of the FAA “tendentious” and reasoning that Congress did not intend for the FAA to apply to personal-injury or wrongful-death suits, the West Virginia Supremes refused to compel arbitration.
The Court pointed out that the FAA does not contain exceptions for wrongful-death or personal-injury claims. Instead it enforces the parties’ bargain to arbitrate disputes and “reflects an emphatic federal policy in favor of arbitral dispute resolution.” Furthermore, the court explained that in AT&T Mobility LLC v. Concepcion, the U.S. Supreme Court held that “when state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.”
Although the West Virginia Court had also found the arbitration agreements invalid because unconscionable, the U.S. Supremes remanded on that issue, indicating suspicion that the West Virginia had held the agreement unconscionable because it violated West Virginia public policy, a notion the Court held preempted under the FAA. On remand the state court must decide if the arbitration clauses at issue are unconscionable under state common law principles that somehow escape federal preemption.
[JT and Janelle Thompson]
It is common at sporting events to have a segment during time-outs at which the camera focuses on couples (always heterosexual, natch) and, as the crowd looks at their images on the Jumbotron, the couples almost invariably kiss. This practice is known as the Kiss-Cam.
This week's installment of This American Life includes a short introductory segment in which tv producer Bill Langworthy recounts how he was induced by the Kiss-Cam to kiss his ex-girlfriend's best friend, a woman whom, according to Bill, he would not otherwise kiss for any amount of money.
This American Life's host, Ira Glass, points out that Bill "did not have to kiss her; there would be no penalty; there was no contract; no money had changed hands. . . . " Bill explains that he felt that, with everyone watching, and with a producer looking at him, expecting him to act, he felt compelled to kiss his ex-girlfriend's best friend. This is a nice little gloss on the view that we often comply with our obligations (or even our perceived obligations) whether or not we are legally obligated to do so for reasons apart from contractual obligation. And so, a surprisingly high percentage of commercial obligations -- even among sophisticated parties who could lawyer the relationship to death if they so choose -- arise informally.
But we offer a different perspective on what is going on here. Bill explains that he attended the ball game with two friends, a married couple. Someone who coordinates the Kiss-Cam segment came around and asked the married couple if they would mind kissing for the Jumbotron. They agreed. This was already a revelation, since the parties often look as though they are taken by surprise when the Kiss-Cam seizes upon them. Who knew it was all a set-up? In any case, according to Bill, a few beer runs later, the parties had switched seats, so when the Kiss-Cam alighted, it hit him and his ex-girlfriend's best friend, instead of their married neighbors.
Since Bill is himself a producer, it seems reasonable to assume that he understood how things like the Kiss-Cam operate. Having identified its prey, the Kiss-Cam was going to focus on a particular seat, rather than on, for example, the tall guy wearing a baseball cap and the home team's jersey., since that latter description lacks specificity in the context of a sporting event.
Come on Bill, maybe you really wanted to kiss her and were just waiting for the Jumbotron to permit you to break the taboo?
Wednesday, February 22, 2012
Well, anything really. . . .
(sorry about the commercial)
But the answer we were looking for is a lawsuit about FarmVille:
According to a decision issued on February 6, 2012, by Oakland, California Judge Yvonne Gonzales Rogers, popular game developer Zynga, Inc., (“Zynga”), may owe some of its success to rival game creator, SocialApps, LLC, (“SA”). As stated in SA’s First Amended Complaint, the company invested substantial time, resources and money to develop “myFarm,” the first social networking game to allow players to create their own virtual farms, which it released on Facebook in or about November 2008. In or about May of 2009, Zynga approached SA about a possible purchase or license agreement regarding intellectual property rights, confidential information and source code for myFarm. The parties subsequently entered into a letter agreement wherein SA agreed to provide information to Zynga for “due diligence” purposes. Under both the express and implied terms of the agreement the parties had a mutual expectation that if Zynga used SA’s myFarm concept and distinct features, Zynga would compensate SA for such use. However, once SA provided Zynga with its source code for myFarm, Zynga stopped communicating and never compensated or credited SA.
After Zynga’s June 19, 2009 release of its own game, FarmVille, SA filed suit, believing Zynga had used its confidential source code without permission or compensation to develop the game. Zynga subsequently filed a Motion to Dismiss SA’s claims of misappropriation of trade secrets and various breach of contract claims. Judge Rogers allowed the various breach of contract claims to move forward, but dismissed the claim in regards to theft of trade secrets related to images and various features of myFarm, on the grounds that these images were available to the public before the May 2009 letter agreement or June 2009 release of FarmVille.
While Zynga obtained a partial win, Judge Rogers let stand the three claims for breach of implied contract, confidence, and implied covenant related to the myFarm source code. According to the Judge, “the allegations here are sufficient to allege conduct beyond a mere breach of the terms of the agreement which would support a claim for tort damages." As reported by Law.com, Zynga has yet to seek dismissal of SA’s claims for copyright infringement and breach of written contract.
[JT & Christina Phillips]
Tuesday, February 21, 2012
|1||412|| The Scope and Implications of Stern v. Marshall, 131 S. Ct. (2011)
Michael St. Patrick Baxter, Elizabeth Gibson, Randal C. Picker, R. Patrick Vance,
Covington & Burling LLP, University of North Carolina (UNC) at Chapel Hill - School of Law, University of Chicago - Law School, Jones Walker - New Orleans Office
|2||338|| Choice of Law in the American Courts in 2011: Twenty-Fifth Annual Survey
Symeon C. Symeonides,
Willamette University - College of Law
|3||153|| Bankruptcy, Backwards: The Problem of Quasi-Sovereign Debt
American University Washington College of Law
|4||111|| The Proposal for a Regulation on a Common European Sales Law: Shortcomings of the Most Recent Textual Layer of European Contract Law
Horst Eidenmueller, Nils Jansen, Eva-Maria Kieninger, Gerhard Wagner, Reinhard Zimmermann,
University of Munich, University of Muenster, University of Wuerzburg, University of Bonn, Max Planck Institute for Comparative and International Private Law
|5||101|| Contract Theory: Is There a Path Through the Theoretical Jungle?
University of Edinburgh - School of Law,
Date posted to database: January 12, 2012
Last Revised: February 3, 2012
|6||90|| Judging Lite: How Arbitrators Use and Create Precedent
Mark C. Weidemaier,
University of North Carolina (UNC) at Chapel Hill - School of Law,
Date posted to database: January 10, 2012
Last Revised: January 27, 2012
|7||89|| Boomer-Ang Eldercare: Deductible Claim?
Wendy C. Gerzog,
University of Baltimore - School of Law
|8||81|| The WTO’s Revised Government Procurement Agreement - An Important Milestone Toward Greater Market Access and Transparency in Global Public Procurement Markets
Robert D. Anderson, Steven L. Schooner, Collin D. Swan,
World Trade Organization, George Washington University - Law School, George Washington University - Law School
|9||76|| A Radical View of Legal Pluralism
Jan M. Smits,
Maastricht University Faculty of Law - Maastricht European Private Law Institute (M-EPLI)
|10||69|| Aggregation and Law
Ariel Porat, Eric A. Posner,
Tel Aviv University, University of Chicago - Law School
Sunday, February 19, 2012
In a previous post, I outlined some parallels between Britney Spears and Lady Duff Gordon, both of whom were sued for violating allegedly exclusive licensing deals. Britney's dispute was with Brand Sense, who sued upon discovering that Britney was entering into fragrance deals with other parties despite their allegedly exclusive arrangement with her to promote the fragrance, Radiance (ad embedded). According to the ever-reliable TMZ, Britney and Brand Sense have settled their dispute, with Britney agreeing to pay the overdue commissions. Bummer. I was hoping for a reported opinion.
Friday, February 17, 2012
The ABA Journal reports that The Cheesecake Factory will begin posting drink prices in Massachusetts after a lawyer threatened suit. According to the article, the lawyer "threatened to sue under the Massachusetts Consumer Protection Act on behalf of a friend who was charged $11 for a margarita at a Cheesecake Factory in Chestnut Hill. The price was not on the menu and the server was only able to provide a range of drink costs."
The ABA Journal looks to our very own founder, Franklin Snyder, for guidance. Previously, Frank had commented in a New York Times column about Nello. This Manhattan restaurant has (had?) a practice of not mentioning the price of a white truffle pasta lunch special. This practice shocked a recent diner when he turned over a bill charging $275 for the dish. To the New York Times, Snyder commented:
“You might be interested in letting your readers know that a restaurant meal is a ‘sale of goods’ under Article 2 of the Uniform Commercial Code,” he wrote. “The code provides that where the buyer and seller have agreed to a contract but have not agreed on the price, the price is not what the seller subsequently demands. It’s a reasonable price for the goods at issue. Thus a customer has no obligation to pay for anything more than the reasonable price of a pasta meal at a trendy restaurant.”
He continued: “In this circumstance, a customer should make a reasonable offer for the value of the meal, then walk out and wait to be sued for breach of contract. Be sure to leave the restaurant full contact information so they can’t claim that you’re trying to steal something.”
Thanks for the tip, Frank! I'm heading over to Nello for the truffle pasta dish. I hope there isn't a price listed on the menu.
[Meredith R. Miller]
In a little-noticed incident, since most people were watching Downton Abbey that night, a British rapper, M.I.A. (pictured left) performing during this year’s NFL Super Bowl halftime show, looked into the camera, uttered an expletive, and flipped the bird to millions of viewers around the world. As a result, in addition to millions of people knowing of her existence, she may be in breach of contract with the NFL.
As reported by Yahoo.com Sports, NFL spokesman, Greg Aiello, maintains that when the league hires the entertainment for the show, the artists are required to sign an agreement containing safeguards concerning artists’ conduct. TMZ.com reports that the agreement between M.I.A. and the NFL contained a clause indemnifying the NFL against any fines that may be imposed by the Federal Communications Commission (FCC) as a result of her behavior during the halftime show. TMZ also reported that the NFL agreed to indemnify NBC against any such fines, because the NFL is responsible for the halftime show’s content. M.I.A. thus may be contractually obligated to pay any fines that the FCC chooses to impose on NBC and the NFL. The news reports do not make clear what other remedies the NFL might have against M.I.A., since the indemnification clause would seem to cover any harms the NFL could suffer as a result of M.I.A.’s conduct.
The FCC sets out the relevant regulatory scheme as follows:
Obscene material is not protected by the First Amendment and cannot be broadcast at any time. To be obscene, the material must have all of the following three characteristics:
- an average person, applying contemporary community standards, must find that the material, as a whole, appeals to the prurient interest;
- the material must depict or describe, in a patently offensive way, sexual conduct specifically defined by applicable law; and
- the material, taken as a whole, must lack serious literary, artistic, political, or scientific value.
Indecent material is protected by the First Amendment, so its broadcast cannot constitutionally be prohibited at all times. However, the courts have upheld Congress' prohibition of the broadcast of indecent material during times of the day in which there is a reasonable risk that children may be in the audience, which the Commission has determined to be between the hours of 6 a.m. and 10 p.m. Indecent programming is defined as “language or material that, in context, depicts or describes, in terms patently offensive as measured by contemporary community standards for the broadcast medium, sexual or excretory organs or activities.” Broadcasts that fall within this definition and are aired between 6 a.m. and 10 p.m. may be subject to enforcement action by the FCC.
Profane material also is protected by the First Amendment, so its broadcast cannot be outlawed entirely. The Commission has defined such program matter to include language that is both “so grossly offensive to members of the public who actually hear it as to amount to a nuisance” and is sexual or excretory in nature or derived from such terms. Such material may be the subject of possible Commission enforcement action if it is broadcast within the same time period applicable to indecent programming: between 6 a.m. and 10 p.m.
So, FCC fines may result if the FCC determines that M.I.A.'s conduct was either obscene, indecent or profane, as the halftime show aired before 10 PM.
[JT and Christina Phillips]
Wednesday, February 15, 2012
In a case decided last week, the New York Court of Appeals held that, where a seller has repudiated a contract to sell real property, the buyers must prove they were ready, willing and able to close the transaction. The holding resolved a conflict among the Appellate Division Departments.
Judge Smith wrote for the unanimous court:
The main issue before us is whether a buyer in a damages suit like this one must show that it was ready, willing and able to close the transaction — i.e., that but for the seller's repudiation, the transaction could and would have closed. This issue has divided the Appellate Division departments. The Second Department has held, in a number of other cases as well as in this one, that no such showing is required (e.g., Ehrenpreis v Klein, 260 AD2d 532, 533 [2d Dept 1999]; Karo v Paine, 55 AD3d 679, 680 [2d Dept 2008]). The Third and Fourth Departments, however, have required a "ready, willing and able" showing (Madison Invs. v Cohoes Assoc., 176 AD2d 1021, 1022 [3d Dept 1991]; Scull v Sicoli, 247 AD2d 852, 853 [4th Dept 1998]).
The rule followed by the Third and Fourth Departments is the correct one. It is the rule stated by the leading treatises on contracts (4 Corbin on Contracts § 978 at 924 ; 13 Williston on Contracts § 39:41 ), and applied in several federal cases (Towers Charter & Marine Corp. v Cadillac Ins. Co., 894 F2d 516, 523 [2d Cir 1990] [applying New York law]; United States v Hon, 17 F3d 21, 26 [2d Cir 1994]). Our agreement with that rule is implied by the language we used in Deforest Radio Tel. & Tel. Co. v Triangle Radio Supply Co. (243 NY 283 ), where we held that, when a contract has been repudiated, the non-repudiating party need not actually tender performance. We said:
"Where one party to a contract repudiates it and refuses to perform, the other party by reason of such repudiation is excused from further performance, or the ceremony of a futile tender. He must be ready, willing and able to perform, and this is all the law requires"
(id. at 293 [emphasis added]; see also Bigler v Morgan, 77 NY 312, 318  ["The refusal of the defendant to perform . . . did not dispense with the necessity of showing that the plaintiff was able, ready and willing to perform"]).
The rule requiring non-repudiating buyers to show their readiness, willingness and ability to perform is supported by common sense. It is axiomatic that damages for breach of contract are not recoverable where they were not actually caused by the breach — i.e., where the transaction would have failed, and the damage would have been suffered, even if no breach occurred. The real question is one of burden of proof: Should the buyers be required to show they would and could have performed, or should the seller have the burden of showing they would not or could not? Since the buyers can more readily produce evidence of their own intentions and resources, it is reasonable to put the burden on them.
This allocation of the burden of proof is not inconsistent with our decision in American List Corp. v U.S. News & World Report (75 NY2d 38 ). That case involved the repudiation by a magazine of a contract to rent mailing lists from a list supplier "over a 10-year period" (id. at 39). We held that "[t]he nonrepudiating party need not . . . prove its ability to perform the contract in the future" (id. at 44). In context, this meant that the plaintiff would not be forced to meet the perhaps impossible burden of showing what its financial condition would have been for many years to come. No comparable burden falls on the non-repudiating party in a case like this one. These buyers need only show that they would and could have closed the transaction if the seller had proceeded to a closing as the contract required.
Here, the buyers did submit evidence of their financial condition, but that evidence was not conclusive on the issue of their ability to make the purchases. Whether the buyers were ready, willing and able to close therefore presented an issue of fact, and the buyers' motion for summary judgment should have been denied.
I wonder if this really is the approach "supported by common sense." If Party A repudiates then Party B might stop taking the steps to put itself in a position to be able to perform. Placing the burden on Party B to show readiness and willingness makes sense, but a showing of ability to perform might raise some problems in light of Party A's repudiation.
Pesa v. Yoma Dev. Group, Inc., 2012 NY Slip Op 00856 (Decided Feb 9, 2012).
[Meredith R. Miller]
Tuesday, February 14, 2012
What better way to spend Valentine's Day than to (almost live) blog the Simkin v. Blank oral argument before the New York Court of Appeals? The argument includes a shout out to Rose of Aberlone.
It does not appear that Judge Smith partook. Video should be posted to the web in the next week.
Richard D. Emery (for Blank, appellant):
[Reserves 3 minutes for rebuttal]
Theme: this case is about finality and valuation.
Judge Pigott: Suppose shoe was on other foot and the non-moneyed spouse was rendered destitute -- finality rules? It depends. Here, parties got the benefit of the bargain.
Judge Jones: Wasn't the agreemet based and founded on certain assumptions that turned out not to be so? All agreements are founded on assumptions that turn out not to be true, that is the risk of making an agreement.
Judge Lippman: Is the defining difference between this and other mutual mistake cases that, here, the mistake was about valuation? Yes, mistaken valuation doesn't give rise to mutual mistake case. In fact, account was cashed in at the time.
Judge Graffeo: Is this about value of account at time of agreement? Wasn’t there some withdrawal at the time in order to pay Blank; money was there at time? Yes, shout out to Prof. Siegel’s treatise; don’t fall for pleading ploys. These are conclusory allegations that mean nothing in the context of the actual case.
Judge Graffeo: Was it agreed that there would be a 50-50 split of this account? If so, does that matter? That was not mentioned in agreement all. Many separation agreements will say 50-50 split per account; different situation here - he could have chosen to do whatever he wanted to pay her here (e.g. take loan from Paul Weiss) and he chose to withdraw from account.
Judge Pigott: Isn’t the existence of the account an issue of fact? Court does not have to rollover and counterfactually accept what is obviously not the case. And, account existed. Just not worth what they thought. There was money in it and money paid out of it. At time, Madoff accounts were paying -- so, counterfactual allegation that court need not accept.
Judge Lippman: What happens now with Madoff accounts? There will be no clawbacks; he did get insurance money and tax write offs. Has value now, had value then. Pure valuation case.
Judge Read: So no mutual mistake here? Right - each side got the benefit of the bargain here. Just a mistake in valuation.
Judge Ciparick: Did the parties contemplate as a 5-50 split? No, my client wanted $6 mill plus house, etc and he got the rest.
Judge Graffeo: How is this different than a case where we set aside the agreement for fraud? This is an asset that is not worth what it was thought to be worth -- your decision in Walsh makes plain that the public policy of repose trumps innocent fraud.
Judge Jones: Different if wife knew of the wrongful valuation? Yes, then she would be knowingly getting fruits of fraud - would be a different case.
Judge Ciparick: Is this different than asset valued at a certain sum that later tanks? No different from every single deal where stocks are exchanged.
Judge Ciparick: Should we go with value of account as of date of agreement? Yes.
Judge Graffeo: What about the unjust enrichment claim? We have a valid contract, unjust enrichment claim is superfluous. Window dressing contract claim to attack a valid agreement.
Allan J. Arffa (for Simkin, respondent):
Judge Lippman: How is this different than a valuation case? Why is this not the same as a stock that turns out the be worth less than thought? The thing they thought they had never existed.
Judge Lippman: But isn’t it in essence the same thing – because, here, there was a Ponzi scheme? No. The account didn’t exist; it wasn't the thing they thought it was.
Judge Lippman: Didn’t Simkin draw on the account at the time? Yes, but they didn't know he was actually drawing on other people's money.
Judge Lippman: How could the account not exist? He withdrew the money? It didn't exist in the way he thought it did.
Judge Lippman: What if had stock and turns out fraud relating to business that stock represents. Why different? There you have stock; known thing was stock, it existed.
Judge Read: What if it was Enron stock? Still had stock in a corporation; it had attributes of stock. Here, interest was fictitious.
Judge Ciparick: What if the asset was a house but it turns out the title was bad? That is mutual mistake - if you don't own what you think you own, there is a mutual mistake.
Judge Lippman: How do we draw the line here – why isn’t this just a valuation case? How do we distinguish between the subject matter existing and it not being worth as much as thought? We are on a motion to dismiss. At the time they contracted, they didn’t own an account; they didn’t have securities; the account was a total fiction.
Judge Graffeo: Did they try to cash out in June 2006? Would they have been paid? Paid from proceeds of other investors. Would not have been redeeming account as they thought = stealing.
Judge Pigott: You argue for reformation of this part of the agreement, not the entire agreement? Issue for down the road; what to reform is a remedy issue.
Judge Graffeo: Where is it in agreement that you agreed to split the asset 50-50? It is our allegation that this is what the parties intended. The parol evidence rule and statute of frauds do not apply. Shout out to Rose of Aberlone: in the pregnant cow case, the contract did not say we are selling you a barren cow.
Judge Graffeo: I’m trying to understand, do you want us to set aside the entire agreement? That is a matter of relief; we can discuss whether to reform or rescind later.
Judge Lippman: What about finality? When does a matrimonial case end? Isn’t there a policy argument for finality? Here's the problem: if you say finality trumps, then there is no mutual mistake -- writes doctrine out of the law.
Judge Lippman: But the divorce was 6 years ago, doesn't amount of time matter? It matters regarding relief.
Judge Lippman: What is rule? 10 or 6 or 20 years? Not one mutual mistake case that raises finality. Depends on circumstances.
Judge Pigott: You win the appeal. They answer. Then what? Jury decides? Yes, jury hears testimony; finality gets played into standards for materiality of mistake.
Judge Lippman: Answer Judge Piggott’s question. What exactly does the jury decide here?
Judge Pigott : Does the jury decide whether there was an ccount or not? Existence v. value of account: question of fact or law? Question of fact; these are question of intent.
Judge Pigott: Can you get there if there was no account? If no account existed, aren’t you entitled to summary judgment? If the account did exist, aren’t they entitled to summary judgment? This was a ponzi scheme.
Judge Lippman: With all the attention on Madoff, etc., a jury is going to determine whether this ponzi scheme made account nonexistent? Yes, for jury to decide.
Judge Lippman: What is the significance of time passing here since divorce? This factors into relief but to say we are going to ignore that there was this massive fraud and half assets of this family turned out not to exist -- not fair. On marital cases, equitable principles may trump finality. And, again, we are just at motion to dismiss stage.
Judge Pigott: Say the asset was gold bars in a safe deposit box and it turns out that Uncle Bernie took them; no longer there? Here, did know account was liquid at time of agreement and even took money out of it. And account has value now; Simkin has recovered some money and has tax write offs. Not so worthless he'd give away now.
Closing point: talking about domestic relations. 6 years since divorce; let spouses go off and live their lives. Human thing; not about finality words; about a woman entangled with a husband she wants to get away from.
Judge Pigott: What if we turn the tables? You'd be arguing the opposite for her? No, my client would not have gone after him; she wants nothing to do with him.
[Meredith R. Miller]
We have recently discovered a wonderful TNT-network series, Men of a Certain Age. Unfortunately, the series was cancelled after its second season. Ray Romano, pictured at left, a co-creator of the show played one of the three main characters. His character, Joe, is a nice guy with a serious gambling problem, so here we show the actual Ray Romano gambling. How's that for irony?!?
In a ContractsProf Blog exclusive, we have discovered what did the show in. It was not the ratings, and it was not the demographic challenges of marketing a show that is not about 20-somethings. Nor was it because of the fact that the show illustrates that middle-aged people do have sex, enjoy it, and can be pretty good at it. Nope. The show's demise was clearly a product of the improbable plot twists involving Andre Braugher's character Owen and his relationship to his father's car dealership.
Owen works at his father's Chevy dealership. He anticipates that he will one day succeed his father as owner and manager, but he never meets his father's expectations. Towards the end of season 1, Owen's father decides to step down, but he appoints a hot-shot salesman to run the operations, and Owen retains his status as a regular salesman. After putting up with the humiliation for a few weeks, Owen bolts to the rival Chevy dealership, where he prospers. His father, duly chastened, offers Owen the dealership, and Owen returns.
So, I don't know for certain that car salesmen have non-compete agreements as a standard element of their contracts, but they certainly ought to, as the show illustrates. A car salesman is not like an attorney in terms of the law's regard for their relationship with their clientele, but the show does indicate that long-term relationships exist with repeat buyers. Accordingly, it would not be a wise business practice for any car dealer to permit salesmen to bolt to a rival and to take their client-base with them. But Men of a Certain Age makes no mention of a non-compete agreement.
And that's what did them in.
You read it here first.
Monday, February 13, 2012
At right, we have an image of housewifery form the 19th Century. Times have changed. The Huffington Post reports that the Bravo network may soon replace Real Housewives of Beverly Hills personality Taylor Armstrong, who is being sued by MyMedicalRecords.com for $1.5 million in a breach of contract lawsuit. The suit originally named both Taylor and her husband, Russell Armstrong, as defendants. However, in August 2011 after suit was brought, Russell committed suicide, leaving Taylor to answer the lawsuit alone.
According to HuffPo, Russell was the largest shareholder of MyMedicalRecords.com, which at the time was a privately held company. The company provides “secure Personal Health Records and electronic safe deposit storage solutions.” The company discovered that Russell was misappropriating investor money and also diverting shares of the company. The company removed Russell from the board, and he signed a $250,000 settlement agreement. The settlement required that Russell identify parties to whom he had sold shares of MMRGlobal. When he failed to do so, the $1.5 million dollar lawsuit followed.
Money is not the only thing at stake for Taylor. Co-star Camille Grammer, ex-wife of Kelsey Grammer, told The Huffington Post that chances are good that Taylor will not be asked back for Season 3 of Real Housewives of Beverly Hills. According to Grammer, Bravo executives “are going to start casting, looking for new housewives.” HuffPo speculates that Bravo executives could be deposed in the lawsuit, as MMRGlobal’s attorneys seek information about Taylor’s income and how it might have been disposed of.
[JT and Janelle Thompson]
Friday, February 10, 2012
As the ABAJournal reports here, two students have elected not to go gently into that good night but to sue their law school for dismissing them after they failed to maintain a 2.0 GPA at the end of their first year in law school. The culprit, the students allege, was their contracts course, in which they were awarded grades of "D." The kicker -- the course was taught by an adjunct professor.
The offending course was Contracts II, a 3-credit course which accounted for precisely 10% of the students' aggregate GPA for the first year. It is very hard to imagine that this "D" was a significant departure from the students' performance in their other first-year courses.
This brings to mind once again Professors Amar and Ayres' proposal that Law Schools offer to rebate 50% of first-year students' tuition if they will quit after the first year. These two students would benefit from such a system, although one might doubt that bounded rationality would enable the students who, in the long term, would benefit most from such an offer would actually take it.
These are the top vote-getters for the first annual ContractsProf Blog prize for the best contracts law scholarship of the year:
Congratulations to our finalists!
The winner will be notified soon and then announced at the Spring Contracts Conference.