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Monday, April 30, 2012

Elizabeth Travis Sues Ex-Husband Randy Travis for Breach of Management Contract

Randy_TravisWe were hoping to bring you a copy of the complaint from the EOnline site, but the link seems to be broken (we are keeping it here in case it comes back up).  In any case, the EOnline provides the basics here.  Apparently Elizabeth Travis served as manager for her husband, Randy Travis (pictured)  for nearly 30 years, including throughout their 19-year marriage.  After their divorce, the parties allegedly agreed that she was to continue to serve as his manager but Elizabeth Travis now claims that the singer breached that agreement.  According to the complaint (as summarized on EOnline):

"[Randy] had a large truck, an armed guard and several other men" turn up at her Music Row office and remove "practically all of the property and business records" from her custody, including computers, photographs and framed record plaques.

It's not clear from these reports (and that's why we'd love to see the complaint) if her claim is that this conduct constituted a constructive termination of the management agreement or if there was some separate termination letter.  If the former, than one is put in mind of Schwarzenegger's rather poorly delivered "Consider that a divorce." 

 

According to HuffPo, Mr. Travis is unimpressed: "It is unfortunate that it's come to this," Travis said. "We believe the lawsuit lacks merit and that we have legal defenses to her claims."

[JT]

April 30, 2012 in Celebrity Contracts, In the News, Music, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Insurance Companies Agree to Pay Death Benefits Despite Clear Contractual Obligations

Met Life BuildingFriend of the blog Alan White, whose whereabouts are currently unknown but who was recently seen in New Orleans and who, according to a Google search, is currently an adjunct professor at the CUNY law school, sent us this news item from the New York Times last week.  According to the Times, MetLife is now the third major life insurance company to settle with regulators from numerous states.  The basic issue is that policy holders die and the insurance companies do not pay out their claims.  The way the policies are written, a survivor or representative must contact the insurer to colelct on the claim, but often the survivors either do not know of the policy or cannot find any information relating to it.  The states say that it is no great burden for the insurers to run their list of policy holders against the Social Security Administration's master death index.  They do so regularly in the case of customers who purchase annuities, and they halt payments upon learning of the eath of an annuity holder.

The states expect to collect over $1 billion from the three major insurers over a number of years.  New York state has been separately pursuing unpaid death benefits and has recovered $262 million from the insurers.

[JT]

April 30, 2012 in In the News | Permalink | Comments (0) | TrackBack (0)

Thursday, April 26, 2012

Query: Why Is a Unilateral Contract to Seriously Injure Someone Not a Crime?

PaytonSorry, this story is a bit stale, but we've been occupied with the semester.  Last month, the New York Times reported that the head coach for the New Orleans Saints, Sean Payton (pictured) would be suspended without pay for one year "for his role in a bounty program that promised money to players if they injured opponents and knocked them out of games."

Upon learning this news, the Saints' quarterback, Drew Brees tweeted as follows:  “I am speechless. Sean Payton is a great man, coach, and mentor. The best there is. I need to hear an explanation for this punishment.”

Well, we are not likely the source that Drew Brees looks to for explanations of such things, but is it not obvious that we are talking about serious crime here and is it not equally obvious that, if the bounty program is as described above, the appropriate penalty is not a one-year suspension for Coach Payton but a criminal investigation that could lead to significant jail time and a lifetime ban from the sport for Payton and all other members of the staff or the team who conspired to commit these crimes?  We are talking about offering players money for attempting to intentionally injure other players.  How is that not simply felonious conduct?  And it's not as if the perpetrators in this case can claim, as Michael Vick more plausibly could do, that their criminal conduct is the product of some sub-culture in which outrageous, inhumane behavior is considered normal.  Payton and his staff are NFL insiders who rub shoulders with the very people who are disciplining them for their conduct.  

If the suspension is upheld, Payton will be deprived of $7 million in salary.  Perhaps the Saints can contribute that money to a fund for NFL players and their families who are suffering from the long-term effects of the brain injuries they suffered while playing.

[JT]

April 26, 2012 in Celebrity Contracts, Commentary, Sports | Permalink | Comments (0) | TrackBack (0)

Professor DeAngelis on Substantial Performance

Today, we bring to a provisional close (pending the composition and YouTube posting of more contracts-based songs) our series of posts featuring   Professor Mark DeAngelis's "Law Lessongs."  Previous posts have shared songs based on Raffles v. Wichelhaus, the UCC's Battle of the Forms (2-207),substantial performanceoffersmixed contracts, and the Mirror Image Rule from Professor DeAngelis's YouTube site.  

MdeangelisToday, we offer Professor DeAngelis's song on the Statute of Frauds, which he introduces as follows:

This is a "Law Lessong" - a law lesson in a song - that I wrote to help students remember the 6 categories of contracts that require a writing in order to be enforceable. 

The Statute of Frauds Song
Lyrics by M. DeAngelis
Melody based on "Jamaica Farewell"

Oh, I'm glad to say, that any day,
An oral contract is still OK.
But it's a fact, for 6 kinds of pacts,
The Statute of Frauds requires a written contract.

Please, oh please, won't you marry me?
I will give you riches and jewels that shine.
I'll say "I do" and marry you,
As soon as you sign on the dotted line!

Oh, I'm glad to say, that any day,
An oral contract is still OK.
But it's a fact, for 6 kinds of pacts,
The Statute of Frauds requires a written contract.

If one day, a party say
The debt of another she guarantees.
If no writing, there's no denying,
The contract lacks enforceability.

  

Ah, but don't forget, you may enforce it yet
If leading object of the debt
Was to benefit the one who said it
Then an oral contract the law will permit.

When an estate debt cannot wait
The executor pledges payment pers'nally 
That pledge is toast from coast to coast,
When the promise is made simply orally.

Oh, I'm glad to say, that any day,
An oral contract is still OK.
But it's a fact, for 6 kinds of pacts,
The Statute of Frauds requires a written contract.

If it appears that within a year,
The contract performance cannot be done.
Do not frown, just write it down
And the parties' intentions won't be undone.

Ah, but don't forget, you may enforce it yet
Even lifetime employment
Enforceability applies orally
Though long term sounding it appears to be.

If its land we understand 
That's the subject of an interest transferring
If money's spent even just for rent 
Of more than a year you need some scribbling.

Ah, but don't forget, you may enforce it yet
If a Buyer's made partial payment
And entered the land or built something grand
Or if promissory estoppel rules take command.

Finally, under the UCC, 
A sale of goods worth 500 or more.
The UCC treats writings differently
And a full written contract may not be in store.

Oh, I'm glad to say, that any day,
An oral contract is still OK.
But it's a fact, for 6 kinds of pacts,
The Statute of Frauds requires a written contract.

[JT]

April 26, 2012 in Music, Teaching | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 25, 2012

New in Print (including New Books and New Editions)

Pile of BooksRonen Avraham & Zhiyong Liu. Private Information and the Option to Not Sue: A Reevaluation of Contract Remedies. 28 J.L. Econ. & Org. 77 (2012)

Ian Ayres & Gregory M. Klass, Studies in Contract Law (8th ed. 2012)

Steven J. Burton, Priniples of Contract Law (4th ed., forthcoming May 2012)

Thomas Dietz, Contract Law, Relational Contracts, and Reputational Networks in International Trade: An Empirical Investigation into Cross-Border Contracts in the Software Industry. 37 Law & Soc. Inquiry 25 (2012)

Daniel W. Elfenbein & Josh Lerner, Exclusivity, Contingent Control Rights, and the Design of Internet Portal Alliances. 28 J.L. Econ. & Org. 45 (2012)

David G. Epstein, Hon. Bruce A. Markell & Lawrence Ponoroff, A Short and Happy Guide to Contracts (2012)

Daniel Markovits, Contract Law and Legal Methods (forthcoming June 2012)

William K. Sjostrom, Jr., An Introduction to Contract Drafting (2012)

[JT]

April 25, 2012 in Recent Scholarship | Permalink | TrackBack (0)

Clickwrap Isn’t Just for Consumers… Employee's Pattern-or-Practice Claim Does Not Trump Class Action Waiver

Bretta Karp sued her employer, CIGNA Healthcare, in the U.S. District Court of Massachusetts, alleging systematic gender discrimination.  She purported to bring the suit as a class action.  CIGNA moved to compel arbitration and argued that a class action and class-wide arbitration was waived under the company’s Dispute Resolution Policy.

In 1997, when Karp began her job with CIGNA she signed an acknowledgment of receipt of the dispute resolution policy in the Employee Handbook.  At that time, the policy did not mention class actions or arbitrations.  In 2005, CIGNA sent a company-wide e-mail informing employees that the Handbook had been updated to reflect changes in the policy.  The e-mail contained a link to the Handbook and instructed employees to complete an electronic receipt indicating that they had received the Handbook.  The e-mail indicated that failure to fill out the receipt could impact the employee’s future employment with the company.  After two follow up emails reminding Karp to acknowledge receipt of the policy changes, she clicked “yes” on the Employee Handbook acknowledgment.  The acknowledgment mentioned mandatory arbitration but did not mention the class arbitration waiver.  In fact, the Employee Handbook referenced the dispute resolution policy and stated that full details were contained on CIGNA’s website; on the website, the dispute resolution policy specifically waived class-wide arbitration.

The parties did not dispute that Karp knowingly agreed to arbitrate her claims of gender discrimination.  They disagreed, however, about whether Karp was entitled to bring a class-based pattern-or-practice claim.  Karp argued that she did not agree to the class arbitration waiver.  In an interesting contortion, the court held that CIGNA did not agree to permit class arbitration and could not be compelled to proceed on a class-wide basis.  Here’s the reasoning (some citations omitted; emphasis in original):

The Court can only compel class arbitration if there is a “contractual basis for concluding that [the parties] agreed to do so.” Stolt-Nielsen, 130 S. Ct. at 1775 (emphasis in original)… The Supreme Court has recently emphasized that “the ‘changes brought about by the shift from bilateral arbitration to class-action arbitration’ are ‘fundamental,’” and thus non- consensual, “manufactured” class arbitration “is inconsistent with the FAA.” AT&T Mobility, 131 S. Ct. at 1750 (quoting Stolt-Nielsen, 130 S. Ct. at 1776).

Class arbitration is thus permissible only if both parties agree. Put another way, a party cannot be compelled to arbitrate class claims unless something in the contract indicates, at least implicitly, that it agreed to permit class arbitration. See Stolt-Nielsen, 130 S. Ct. at 1776; Jock v. Sterling Jewelers Inc., 646 F.3d 113, 124 (2d Cir. 2011) (“Stolt-Nielsen does not foreclose the possibility that parties may reach an ‘implicit’—rather than ‘express’—agreement to authorize class-action arbitration.”).

Here, the Handbook is silent on the issue of class arbitration. However, it states: “[b]y accepting employment . . . you have agreed to arbitrate serious employment-related disagreements between you and the Company . . . using the Company’s Employment Dispute Arbitration Policy and Employment Dispute Arbitration Rules and Procedures.” The company policy and procedures unambiguously provide that “[n]o class-wide arbitrations are allowed under the CIGNA Companies’ Employment Dispute Arbitration Policy or the Rules and Procedures,” and that “[e]ach party seeking resolution of its, his or her claims pursuant to an agreement to arbitrate under these Rules and Procedures must proceed individually. There shall be no class or representative actions permitted.”

Plaintiff disputes whether, under the circumstances, she agreed to the bar on class arbitration, or agreed to waive her class arbitration rights. There is certainly some question whether defendant’s policies and procedures can be enforced against plaintiff simply because she agreed to the terms of the Handbook.  But there is no doubt that defendant did not agree to permit class arbitration. Indeed, its policies and procedures state clearly that class arbitration is not permitted. Accordingly, defendant cannot be compelled to submit to class arbitration. See AT&T Mobility, 131 S. Ct. at 1750 (stating that class arbitration must be consensual).

The court did state in a footnote that Karp may not have been provided with sufficient notice of the waiver because the Handbook incorporated the policies which were posted on the company’s website.  The court also held that, by agreeing to arbitration, Karp could not litigate her claims in court as a class action.

Karp argued that her pattern-or-practice claim could not be vindicated in a bilateral arbitration because (1) case precedent required it to be brought as a class action and (2) as a practical matter, discovery would be too limited in arbitration.  Plus, she could not obtain injunctive relief.  The court essentially said that the pattern-or-practice claim is “unusual” with a “peculiar genesis” and was only a method of proof, not a claim in itself.  The court broke from precedent requiring a pattern-or-practice to be established in a class action and held that Karp's substantive rights could still be vindicated in bilateral arbitration.

Karp v. Cigna, Case 4:11-cv-10361-FDS (D. Mass. April 18, 2012)  (Saylor, J).

[Meredith R. Miller]

April 25, 2012 in E-commerce, Labor Contracts, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 24, 2012

Weekly Top Tens from the Social Science Research Network

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

February 24, 2012 to April 24, 2012

RankDownloadsPaper Title
1 352 The Impact of the Broker-Dealer Fiduciary Standard on Financial Advice 
Michael S. FinkeThomas Patrick Langdon
Texas Tech University, Unaffiliated Authors - affiliation not provided to SSRN
2 276 Emerging Policy and Practice Issues (2011) 
Steven L. SchoonerDavid J. Berteau
George Washington University - Law School, Center for Strategic and International Studies, Defense - Industrial Initiatives Group
3 216 A License is Not a 'Contract Not to Sue': Disentangling Property and Contract in the Law of Copyright Licenses 
Christopher M. Newman
George Mason University - School of Law, Faculty
4 174 The Effect of Bargaining Power on Contract Design 
Albert H. ChoiGeorge G. Triantis
University of Virginia School of Law, Stanford Law School
5 136 Does the Constitution Protect Economic Liberty? 
Randy E. Barnett
Georgetown University Law Center
6 109 Controlling Financial Chaos: The Power and Limits of Law 
Steven L. Schwarcz
Duke University - School of Law
7 91 'Offer to Sell' as a Policy Tool 
Lucas Osborn
Campbell University Law School
8 78 Why Courts Make Orders (and What this Tells Us About Damages) 
Stephen A. Smith
McGill University - Faculty of Law
9 77 The Perils of Social Reading 
Neil M. Richards
Washington University in Saint Louis - School of Law
10 67 Parallel Contract 
Aditi Bagchi
University of Pennsylvania - Law School - Faculty

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

February 24, 2012 to April 24, 2012

RankDownloadsPaper Title
1 559 A Legal Analysis of Romantic Gifts 
Ruth Sarah Lee
Harvard Law School
2 289 The Common European Sales Law and the CISG - Complicating or Simplifying the Legal Environment? 
Nicole KornetNicole Kornet
Maastricht University - European Private Law Institute (M-EPLI), Maastricht University - METRO Institute
3 216 A License is Not a 'Contract Not to Sue': Disentangling Property and Contract in the Law of Copyright Licenses 
Christopher M. Newman
George Mason University - School of Law, Faculty
4 174 The Effect of Bargaining Power on Contract Design 
Albert H. ChoiGeorge G. Triantis
University of Virginia School of Law, Stanford Law School
5 136 Does the Constitution Protect Economic Liberty? 
Randy E. Barnett
Georgetown University Law Center
6 77 The Perils of Social Reading 
Neil M. Richards
Washington University in Saint Louis - School of Law
7 67 Parallel Contract 
Aditi Bagchi
University of Pennsylvania - Law School - Faculty
8 66 Errors of Fact and Law: Race, Space, and Hockey in Christie v. York 
Eric M. Adams
University of Alberta - Faculty of Law
9 62 The Unenforceable Corrupt Contract: Corruption and 19th Century Contract Law 
Zephyr Teachout
Fordham University - School of Law
10 53 Instructing Juries on Noneconomic Contract Damages 
David A. HoffmanAlexander Radus
Temple University - James E. Beasley School of Law, Temple University James E. Beasley School of Law

[JT]

April 24, 2012 in Recent Scholarship | Permalink | TrackBack (0)

Certified Insurance Law Question to the Nevada Supreme Court

9th CircuitWhile staying at the Casino West Motel, four people died from acute carbon monoxide poisoning when fumes from the motel’s pool heater leaked into their rooms.  Their estates’ subsequent wrongful death suit against the motel and its insurer, Century Surety Co. (Century), has raised questions of Nevada law of first impression, prompting the Ninth Circuit to certify two questions to the Nevada Supreme Court. 

In Century Surety Co. v. Casino West, the Ninth Circuit has asked the Nevada Supremes to interpret two pollution-related exclusions in the motel’s comprehensive general liability insurance policy, which Century has invoked in order to escape its obligation to either cover or defend against the estates’ suit.

After Century received the autopsy report indicating carbon monoxide poisoning as the cause of death, Century cited two exclusions in the policy, a pollution exclusion and an indoor air quality exclusion, and informed the motel that the policy did not cover the incidents at issue.  Century next sought a declaratory judgment in a federal district court stating that it has no duty to indemnify or defend the motel in the wrongful death actions.  The motel filled counterclaims for breach of contract, bad faith, and insurance unfair trade practices. 

In denying Century’s motion for summary judgment, the district court found that the exclusions were ambiguous and, therefore, did not prevent coverage.  The Ninth Circuit granted the parties’ joint request for an interlocutory appeal to review the district court’s denial of summary judgment.  In attempting to determine how courts have interpreted pollution exclusion clauses, the Ninth Circuit found that, although the issue has been heavily litigated, there are conflicting decisions throughout the country. 

Responding to Casino’s argument that the myriad outcomes reached by courts on the issue establishes the exclusion as ambiguous, the court noted that it could not find any Nevada case finding a pollution exclusion ambiguous.   In contrast, the court determined that indoor air quality exclusions have not been heavily litigated and could not find any published Nevada cases on point. 

The questions of law to be answered are:

(1) Does the pollution exclusion in Century's insurance policy exclude coverage of claims arising from carbon monoxide exposure?

(2) Does the indoor air quality exclusion in Century's insurance policy exclude coverage of claims arising from carbon monoxide exposure?

The Ninth Circuit has stayed further proceedings pending receipt of the answers to the certified questions. 

[JT and Justin Berggren]

April 24, 2012 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Monday, April 23, 2012

Contracts Issues in Tim Burton's "Big Fish" (2003)

Danny_DeVito_by_Gage_SkidmoreLast night, I watched Tim Burton's "Big Fish," a film that somehow escaped my notice when it first came out.  The film is a collection of tall tales told by the protagonist's father.  The father is a gifted raconteur, but the son is troubled by the fact that the autobiographical stories the father tells are all lies, and as the father nears death, the son despairs of knowing his real father.  

In any case, the film illustrates two means of entering into a contract, written and oral, in rapid succession.  The first contract is between Amos (played by Danny DeVito -- pictured left) and Karl (played rather hauntingly by the late Matthew McGrory).  The second is between Amos and the young father (Edward Bloom, played by Ewan McGregor).

Here are the contracts scenes from the script: 
                                      AMOS
                         Tell me Karl, have you ever heard of 
                         the term "involuntary servitude?"

               Karl shakes his head.

                                     AMOS
                         "Unconscionable contract?"

               Nope.

                                     AMOS
                         Great, great. That's fantastic.

Karl then signs the contract on the back of a clown, whom Amos introduces as his attorney, Mr. Soggybottom.  Meanwhile, Edward has caught sight of a beautiful woman, played as a young woman by the beautiful Allison Lohmann and played as an older woman by the even more beautiful Jessica Lange.  Amos knows who she is, but he at first refuses to help Edward find her.

                                    EDWARD
                         I'll work night and day, and you 
                         won't have to pay me. You just have 
                         to tell me who she is.

               Amos takes a long look at him. Ultimately, there's no way he 
               can say no. He shrugs. What the hell.

                                     AMOS
                         Every month you work for me, I'll 
                         tell you one thing about her. That's 
                         my final offer.

               Edward shakes Amos's hand before he can retract the offer. 
               We move into a MONTAGE:

Shockingly, DeVito plays an unscrupulous circus impressario.  But he honors his contract with Edward, even though it doesn't seem like something he would do.  Still, Edward has to work for three years before he discovers the identity of his true love.

Here's a trailer to give a better flavor of the film:

 

[JT]

April 23, 2012 in Film | Permalink | Comments (0) | TrackBack (0)

You Say Morals, I Say Conflict of Interest, Bobby Petrino, Let's Call the Whole Thing Off

PetrinoAccording to ESPN, on April 1st, the University of Arkansas's head football coach, Bobby Petrino (pictured) was in a motorcycle accident.  He suffered four broken ribs, a crcked vertebra in his neck and facial abrasions.  He failed to disclose that he was not alone on that motorcycle.  The married father of four was out on a joy-ride with his 25-year-old mistress (and employee).

On Apirl10th the University fired Petrino for conduct that violated the University’s conflict of interest policy and for refusing to admit, despite numerous chances to do so, to the nature of his relationship with his passenger. 

Petrino’s employment agreement with the University allows the University’s athletic director, Jeff Long, to suspend or fire the coach for conduct that “negatively or adversely affected the reputation of the University of Arkansas’s athletics programs.” 

Petrino's passenger was hired just four days before the motorcycle crash that exposed the couple's inappropriate relationship.  Petrino was in the middle of a seven-year contract with the University under which his salary averaged $3.53 million per year.  Petrino’s contract guaranteed him $18 million from the Razorback Foundation if the university terminated him for convenience.  However, because he was terminated for cause, he gets nothing.  According to ESPN, Petrino has apologized and, although he has the option, has said that he will not appeal his firing nor will he seek any of the $18 million buyout that would have been part of his contract had he not been terminated for cause.

[JT & Christina Phillips]

April 23, 2012 | Permalink | TrackBack (0)

Friday, April 20, 2012

More on Morals Clauses

Scarlett LetterFrank touched on the issue of morals clauses in a post earlier this week.  The case on which Frank commented involved a professional athlete, and most most morals clause cases that we have addressed here involve celebrities and often celebrity endorsements.  But today we report on a morals cause case that invovles an ordinary working Joe (well, Jane actually).

According to abcnews.go.com, Heritage Christian Academy in Rockwall, Texas fired teacher and coach, Cathy Samford, for getting pregnant out of wedlock.  The school claims that Samford violated the “moral clause” in her contract.  Samford and her fiancé had plans to marry at the end of the summer, but a series of events delayed the wedding.  Shockingly marital relations were not similarly delayed.  The school informed Samford that she was to be terminated, even though Samford and her fiancé offered to marry immediately, as that was the plan regardless. Samford has filed a charge of gender and pregnancy discrimination with the U.S. Equal Employment Opportunity Commission and is preparing a lawsuit against the school.

Samford maintains that she did not violate her contract in any way and that the morals clause is vague and unenforceable, as it merely calls on employees to be “Christian role models.”  Samford’s attorney, Colin Walsh, explained to ABCNews.com that “It’s against the law to fire someone for them taking a pregnancy leave and you can’t preventatively fire someone.  You can’t contract around anti-discrimination laws. . . ." 

The school’s headmaster, Dr. Ron Taylor, told ABC News that “the issue is that Samford is an unmarried mother, and everything the school stands for says and they want their teachers, who are considered to be in the ministry, to model what a Christian man or woman should be”.  Taylor further intimated that “[the school] had the feeling that because kids on [Samford’s] volleyball team and kids in her classes knew she was pregnant, her getting married would not change the fact that her behavior was out of wedlock.”  The language of ministry is significant, since the Supreme Court recently held in Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC that the Establishment and Free Exercise Clauses of the First Amendment bar suits brought on behalf of ministers against their churches, claiming termination in violation of employment discrimination laws.  Samford's attorney contends that the school cannot invoke this ministerial exception for all of its employees just because it is a Christian institution.

[JT and Christina Phillips]

April 20, 2012 in In the News, Recent Cases, Religion | Permalink | Comments (0) | TrackBack (0)

Thursday, April 19, 2012

If you liked it then you should have put a pen to it...

Quill-penSamuel Goldwyn remarked that “an oral contract isn’t worth the paper its written on.”  But Daniel Ryan fared ok -- that is, after a trial and two appeals. 

In 2003 Ryan was approached about leaving a brokerage firm to join Kellogg Partners, a broker-dealer being formed to trade stocks for institutional investors.  Ryan told Kellogg he wanted a package of $350,000 to leave his current position, and Ryan testified at trial that Kellogg promised to compensate him with $175,000 salary and a non-discretionary $175,000 bonus to be paid out in late 2003 or early 2004.  Ryan took the job with Kellogg.  Ryan testified that Kellogg kept delaying payment of the bonus and, ultimately offered Ryan $20,000 and terminated him.  Ryan sued for breach of contract and violations of NY Labor Law.

At trial, Kellogg’s managing partner “in every conceivable way contradicted Ryan’s testimony on the topic of bonuses; in particular, he told the jury that the subject ‘simply did not come up’ during the course of bringing Ryan on board at Kellogg, and that bonuses were discretionary only.”  The jury discredited Kellogg’s testimony and found in favor of Ryan.

Addressing Kellogg’s motion to set aside the jury verdict, the trial court held that the bonus agreement was supported by consideration because it was forward looking, not compensation for a benefit previously conferred.  The trial court also held that the bonus agreement did not come within the statute of frauds because it was capable of being performed within one year.

By the time the case worked its way to the New York Court of Appeals, Kellogg had a few theories for reversal; in particular, Kellogg argued that the evidence was insufficient to support the jury’s verdict because statements in Ryan’s employment application and Kellogg’s employee handbook negated Ryan’s testimony of an agreement to pay him a non-discretionary bonus.  New York’s highest court unanimously held that the job application and employee handbook, while stating that Ryan was an at-will employee, said nothing about bonus policy and, therefore, did not negate his testimony.

The New York Court of Appeals opinion is highly recommended for contracts profs – it seems that Kellogg’s lawyers raised every NY GOL defense they could think of (statute of frauds, benefit previously conferred and even an oral modification unsupported by consideration).

The lesson, kids: get it in writing.

Ryan v. Kellogg Partners Institutional Services (March 27, 2012 New York).

[Meredith R. Miller]

 

April 19, 2012 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

New in Print

Wednesday, April 18, 2012

There's No Such Thing As a Free Drink (Anymore)

CouponsSouthwest Airlines, of "your bags fly free" fame, likely is toasting a recent decision involving its free drink coupons and breach of contract.  The plaintiff in the case, Charles S. Grimsley, alleged that Southwest breached a contract with him when it refused to honor a "1 free drink" coupon he earned as a member of the airline's Rapid Rewards program (Southwest's version of a frequent flier program).  Southwest reportedly had terminated the original coupon program, despite no expiration date appearing on the coupons themselves, in an effort to reduce costs (see picture on right for new vs. old coupon format). In an April 17, 2012 opinion, Judge L. Scott Coogler granted Southwest's motion to dismiss, based on the basic yet critical elements of offer, acceptance and consideration. In dismissing the case, the court noted as follows: "Nothing in the [complaint] alleges that the Coupons promise a [drink] in exchange for the performance of some action on the part of the coupon-holder (emphasis in original)."  The opinion continues:

"Although Plaintiff claims that he was induced to remain a member of the Southwest Airlines Rapid Rewards Program and fly with Defendant in order to enjoy a free beverage (Doc. 9 ¶ 12), he never alleges that the Coupons, on their face, requested such actions in exchange for the promised drink. “A proposal of a gift is not an offer . . . ; there must be an element of exchange. Whether or not a proposal is a promise, it is not an offer unless it specifies a promise or performance by the offeree as the price or consideration to be given by him. It is not enough that there is a promise performable on a certain contingency.”  Restatement (Second) of Contracts § 24(b). Plaintiff has not alleged facts sufficient to establish that the Coupons made a contractual “offer.” Plaintiff also does not allege sufficient facts establishing that he accepted an offer by performing an action that constitutes sufficient consideration to make that offer legally binding. See Smith v. Wachovia Bank, N.A., 33 So. 3d 1191, 1197-98 (Ala. 2009). Accordingly, Plaintiff fails to state a claim for breach of contract."

No offer, no acceptance, no exchange = no contract.  Interested readers also may wish to read about a similar case brought by a different plaintiff summarized by our very own Meredith Miller here.

[Heidi R. Anderson]

April 18, 2012 in Recent Cases | Permalink | TrackBack (0)

"Good faith" breaches

A recent discussion on the AALS Contracts listserv got me to thinking about the question when a party acts in "good faith" in threatening to breach a contract unless the other (nonbreaching) party agrees to pay more. Take this situation:

A has a contract with B. A is losing money on the transaction and is facing bankruptcy unless it can get more money from B. A threatens to breach unless B pays more. At this point, B could refuse the request, in which case A will breach and B will be left with a lawsuit against a probably judgment-proof debtor. Or B could agree to the price increase. Suppsoe B agrees, and A goes ahead and performs, and then B refuses to pay the higher amount. Is B's subsequent promise enforceable? The answer will often turn on whether we think that A was acting in "good faith" in obtaining the modification.

The fact that the company will go bankrupt if it cannot get a higher price seems to be an important factor for many people who say that the promise should be enforced. They argue that the threatening party is acting in "good faith," in a way it would not if it just wanted more money to pass on to its shareholders.

But I'm not sure I agree. In this situation it seems to me that all A is doing is taking advantage of one of its creditors over whom it has a great deal of leverage (B, to whom it owes a performance), so that it can transfer B's money to creditors over which it has less leverage (landlord, bank, IRS, employees). I don't particularly see why it's more moral to exploit a customer for one's creditors than for one's stockholders. There's a natural tendency to see "taking loss" as different from "not getting a gain," but behavioral economics, I think, teaches us that this is simply fallacious reasoning.

Take this hypothetical:

Airline sells me an advance ticket to fly from DFW to New York for $200. Fuel and other prices rise, and Airline decides it won't make money on me. Moreover, Airline is teetering on the edge of bankruptcy, and unless it can get more revenue it will go under. The day before I am to fly, Airline informs me that it will breach the contract unless I agree to pay $400. A quick check of airlines shows that $400 is still less than what I would have to pay to get a last-minute ticket on the other airline. If I refuse to pay the extra, the airline will sell the seat to someone else. I can either pay the extra $200 and fly, or I can pay $800 to fly on another airline, and file a $600 lawsuit against Airline. If I agree to pay the extra, is my promise binding?

Has Airline acted in good faith? What is the relevance of the fact that Airline is near bankruptcy? Why should a company that has managed itself so incompetently as to face bankruptcy be able to get this kind of price increase, while a well-run company in good financial shape would not? My own tentative view is that a company's motive for exploiting a contracting party ought usually to be irrelevant.

But I'm interested in thoughts on the topic.

FGS

April 18, 2012 in Commentary | Permalink | Comments (2) | TrackBack (0)

Professor DeAngelis on the Mirror Image Rule

MdeangelisWe have previously posted links to Professor Mark DeAngelis's "Law Lessongs" on Raffles v. Wichelhaus, the UCC's Battle of the Forms (2-207), substantial performance, offers and mixed contracts from Professor DeAngelis's YouTube site .  

A nice companion piece to the Battle of the Forms and the offer song is this law lessong about the Mirror Image Rule, which professor DeAngelis introduces as follows:

This is a "Law Lessong" - a law lesson in a song - that I wrote to help students consider the application of the Mirror Image Rule to contract acceptances. This song deals with the issues of acceptance of contract offers. At Common Law, the Mirror Image Rule required that the acceptance language mirror that of the offer. Any different or additional language may convert the attempted acceptance into a counteroffer - terminating the ability to accept the original offer. The modern trend is for courts to soften the MIR by looking at the substance and meaning of additional language - finding counteroffers where the attempted acceptance manifests an intent to contract only under the new or different terms.

Mirror Image Rule
Lyrics by M. DeAngelis
Tune: Secret Agent Man

There's a rule of contract law that's danger,
For businessfolks to whom contract law's a stranger.
With each offer in the trade,
How is acceptance made?
You don't want to risk a counteroffer!

 


Refrain: Mirror Image Rule, Mirror Image Rule, The language of acceptance and the offer must be the same.

Any different language could be trouble.
Add another term - you've got trouble doubled!
At Common Law it's true,
With additional language you're through.
No acceptance here, it's counteroffer.

Refrain

[JT]

April 18, 2012 in Music, Teaching | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 17, 2012

Welcome to the Blogosphere (again): Frank Snyder's Lawyer Apocalypse

Frank-snyder1As readers might have noted in viewing this recent post, our Founding Brother, Frank Snyder (pictured) has a new blog called Lawyer Apocalypse.  Here's what Frank has to say about the new venture:

This blog reflects the thoughts of Frank Snyder, a law professor and former Big Law partner, on the massive changes that law schools and the legal profession are facing in the decades ahead, and on the larger role of lawyers in society.  Plus some other things, from time to time.

And here's what Frank has to say about Frank and his views:

I'm a law professor who has taught at law schools in each quartile of the USNews rankings, been a partner at an AmLaw 20 firm, and owned a couple of independent mionor league baseball teams.

You can find my current school on a Google search, but I'm not putting it here because I want to emphasize that this blog reflects my personal observations on legal education, the profession of law, and the vast changes (the "Apocalypse") that are looming on the horizon for each. I claim no special expertise in these topics, except for having practiced law for nearly 15 years and taught in law schools nearly as long.

Unlike some other critics, I believe that the law is the greatest of the secular professions It has played a critical role in American life. Law school is not a scam. Law has offered, and continues to offer, incredibly rewarding careers to thousands of new lawyers. My view of the American law school is like that of reforming 15th-century Catholics to abuses in the Church -- a deep love for an institution but a strong concern that it has fallen under some very bad influences.

Unless attributed and linked to specific others, all of the thoughts here are mine, unless I unconsciously stole them, in which case I apologize. None of them should be taken as the opinions of my employer, my publishers, my students, or any other person or institution

As always, we wish Frank all the best in this new venture.

[JT]

April 17, 2012 in Contract Profs, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Weekly Top Tens from the Social Science Research Network

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

February 17, 2012 to April 17, 2012

RankDownloadsPaper Title
1 324 The Impact of the Broker-Dealer Fiduciary Standard on Financial Advice 
Michael S. FinkeThomas Patrick Langdon
Texas Tech University, Unaffiliated Authors - affiliation not provided to SSRN
2 270 Emerging Policy and Practice Issues (2011) 
Steven L. SchoonerDavid J. Berteau
George Washington University - Law School, Center for Strategic and International Studies, Defense - Industrial Initiatives Group
3 212 A License is Not a 'Contract Not to Sue': Disentangling Property and Contract in the Law of Copyright Licenses 
Christopher M. Newman
George Mason University - School of Law, Faculty
4 161 The Effect of Bargaining Power on Contract Design 
Albert H. ChoiGeorge G. Triantis
University of Virginia School of Law, Stanford Law School
5 128 Boomer-Ang Eldercare: Deductible Claim? 
Wendy C. Gerzog
University of Baltimore - School of Law,
6 115 Does the Constitution Protect Economic Liberty? 
Randy E. Barnett
Georgetown University Law Center
7 97 Controlling Financial Chaos: The Power and Limits of Law 
Steven L. Schwarcz
Duke University - School of Law
8 86 The Impact of Directive 2011/83/EU on Consumer Rights 
Anca Daniela Chirita
Durham University - Department of Law
9 84 'Offer to Sell' as a Policy Tool 
Lucas Osborn
Campbell University Law School
10 74 Why Courts Make Orders (and What this Tells Us About Damages) 
Stephen A. Smith
McGill University - Faculty of Law

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

February 17, 2012 to April 17, 2012

RankDownloadsPaper Title
1 519 A Legal Analysis of Romantic Gifts 
Ruth Sarah Lee
Harvard Law School
2 259 The Common European Sales Law and the CISG - Complicating or Simplifying the Legal Environment? 
Nicole KornetNicole Kornet
Maastricht University - European Private Law Institute (M-EPLI), Maastricht University - METRO Institute
3 212 A License is Not a 'Contract Not to Sue': Disentangling Property and Contract in the Law of Copyright Licenses 
Christopher M. Newman
George Mason University - School of Law, Faculty
4 160 The Effect of Bargaining Power on Contract Design 
Albert H. ChoiGeorge G. Triantis
University of Virginia School of Law, Stanford Law School
5 115 Does the Constitution Protect Economic Liberty? 
Randy E. Barnett
Georgetown University Law Center
6 65 Parallel Contract 
Aditi Bagchi
University of Pennsylvania - Law School - Faculty
7 60 The Unenforceable Corrupt Contract: Corruption and 19th Century Contract Law 
Zephyr Teachout
Fordham University - School of Law
8 50 Instructing Juries on Noneconomic Contract Damages 
David A. HoffmanAlexander Radus
Temple University - James E. Beasley School of Law, Temple University James E. Beasley School of Law
9 45 Good Faith in Civil Law Systems – A Legal-Economic Analysis 
Ejan Mackaay
University of Montreal
10 43 From Lord Coke to Internet Privacy: The Past, Present, and Future of the Law of Electronic Contracting 
Juliet M. MoringielloWilliam L. Reynolds
Widener University - School of Law, University of Maryland - Francis King Carey School of Law

[JT]

April 17, 2012 in Recent Scholarship | Permalink | TrackBack (0)

Monday, April 16, 2012

Football, terrorists, Twitter, and contract law

Over at the Technoloogy & Marketing Law Blog, Eric Goldman (Santa Clara) and Venkat Balasubramani share their thoughts about an interesting new case involving an NFL player (the Steelers' Rashard Mendenhall) whose endorsement contract was terminated when he made some unpopular comments about Osama bin Laden. It's decided as an "implied covenant of good faith" case, but I make the argument here that it's better viewed as a simple matter of contract interpretation. Either way, seems like it comes out correctly at this stage, which is merely a motion for judgment on the pleadings.

Thanks to Eric and Venkat for finding and sharing.

FGS

April 16, 2012 | Permalink | TrackBack (0)

Mark DeAngelis's Mixed Contracts Law Lessong

MdeangelisWe have previously posted links to Professor Mark DeAngelis's "Law Lessongs" on Raffles v. Wichelhaus, the UCC's Battle of the Forms (2-207), substantial performance, and offers from Professor DeAngelis's YouTube site .  

Today, we share his song about mixed contracts -- that is, how one decides whether a contract is one for goods, covered by the Uniform Commercial Code, or for services, covered by general rules of contract law

Here is his explanation of the lessong:

This is a "Law Lessong" - a law lesson in a song - that I wrote to help students consider the problem of mixed contracts under the Uniform Commercial Code. The mixed contract or "hybrid contract" involving both services and the sale of goods can be problematic for students. If the contract is predominantly one for the sale of goods, then the law of article 2 of the UCC applies. Often, this determination, that of which law applies, leads to an obvious resolution of the underlying legal issue. This song does not so much present students with strategies to make this determination, but acts as a reminder to do the "predominant purpose" analysis in the first place.

 

The Mixed Contract Song
By Mark DeAngelis

In a mixed contract, if issues arise,
In a mixed contract, what law applies?
With a mixed contract the UCC should,
If the predominant purpose is a sale of goods

Just last week I went to the store
I needed some carpet to cover my floor
The salesman said, "If you buy from me,
It's a special deal -- the installation is free."

The workers came in, they put the rug down.
"This carpet's not right," I said with a frown.
Ah, luckily with the UCC,
There's "perfect tender" and warranty.

A mixed contract, if issues arise,
A mixed contract, what law applies?
With a mixed contract use the UCC
If it's a sale of goods, predominantly.

With a Mixed contract, -- goods and services, too.
In a Mixed contract what law will do?
With a mixed contract under the UCC,
There's perfect tender and warranty.

[JT]

April 16, 2012 in Music, Teaching | Permalink | Comments (0) | TrackBack (0)