Tuesday, August 14, 2012
Monday, August 13, 2012
In Barnes v. Board of Regents, the Superior Court of Fulton County, Georgia found that Valdosta State University's student handbook serves as a binding contract that guaranteed students certain procedural rights before they could be expelled from the university and that the state had waived its sovereign immunity defenses to suit for violations of the student handbook by entering into such a contract with its students.
In 2008, former Valdosta State University (“VSU”) student Thomas Barnes (“Barnes”) sued the Board of Regents of the University System of Georgia (the “Board”) and VSU's President, Ronald M. Zaccari (Zaccari) for breach of contract. Barnes' complaint describes the underlying facts as follows:
Barnes was summarily expelled from VSU without notice or hearing in May 2007. Since March 2007, Barnes had been voicing his objections (on environmental and financial grounds) to a proposed new campus parking garage. Beginning in April 2007, Barnes and Zaccari had a series of meetings at which, according to Barnes, Zaccari castigated the student for having embarrased Zaccari. According to the complaint, since the meetings did not deter Barnes from protesting the new parking garage, Zaccari began digging into Barnes’s academic and psychiatric records looking for grounds for expulsion. Zaccari decided to “administratively withdraw” Barnes without notice or a hearing on the ground that “Barnes presented a clear and present danger to the campus.”
Query: is expelling a potentially dangerous student a good way of keeping your campus safe? Wouldn't such an expulsion be more likely to unhinge a student whose mental balance was already on edge (not that there's any evidence that Barnes did in fact pose a threat)? It's not as if college campuses are equipped with cutting-edge electronics, including those retinal scanners that Phillip K. Dick imagined in Minority Report, and could prevent any expelled student from ever returning to campus.
But we digress.
Barnes originally filed suit in federal court, and the Eleventh Circuit had ruled that the Board is immune to Barnes’s suit based on 11th Amendment sovereign immunity, although Barnes' suit agianst Zaccari was permitted to proceed. Barnes re-filed his suit against the Board in state court, and the Fulton County Superior Court rejected the defense of sovereign immunity because, under Georgia law, such immunity is waived in actions alleging the breach of a written contract.
[Christina Phillips & JT]
The facts of Westlake Petrochemicals v. United Polychem are complicated. Here's a nutshell of the facts:
- In July 2008, A broker matched a bid for 5 million pounds of ethylene per month in 2009 by United Polychem (UPC) with an offer to sell by Westlake Pharmaceuticals (Westlake);
- Westlake's offer to sell was subject to approval of UPC's credit;
- Credit approval proved problematic, and UPC's President was required to provide a personal guaranty
- In September 2008, Westlake also demanded that UPC secure its credit with a $2 million letter of credit; and
- In October 2008, UPC claimed that because Westlake had never formally accepted UPC's credit, the deal had never closed.
At trial, the District Court found UPC liable for $6.3 million in damages plus $634,000 in attorneys' fees. The District Court also held UPC's President jointly and severally liable based on the guaranty.
- Westlake did not have a unilateral right to reject UPC's credit, but would have been subject to a breach of contract claim had it done so, as the deal is considered made with the expiration of a short window after the broker brings the parties together;
- Because credit is not considered an "eseential element for the purposes of the Statute of Frauds, the Statute was satisfied here by the broker's written confirmations to both parties by instant message (!) and e-mail, even thought those writings omitted the credit term;
- The broker had authority to bind the parties; and
- Westlake's approval of UPC's credit was not a condition precedent to the formation of the contract.
On the damages issue, the District Court ruled that the jury shoudl be instructed that, pusuant to UCC s. 2-708(a) Westlake was entitled to the difference between the contract and market price at the time and place of tender. The parties gave various estimates of what damages would be appropriate, but since the price of ethylene dropped after the contract was formed, the amount was considerable. However, in this case the Fifth Cicuit found that s. 2-708(b) applies instaed of 2-708(a) and that Westlake is only entitled to its lost profits. The Fifth Circuit so concluded because Westlake never purchased the ethylene it was to sell to UPC, and awarding it full expectation damages in such circumstances would constitute a windfall. The Fifth Circuit remanded the case to the Distirct Court for a new calculation of damages.
As to UPC's President's liability, the Fifth Circuit found the Guaranty ambiguous. It had been cancelled before the first payment on ethylene shipments would have been due. It was not entirely clear whether the Guaranty was to apply to all shipments under the contract or only to those on which payment was due prior to calculation. In such circumstances, the Fifth Circuit held that the guaranty must be construed in favor of UPC's President and that he could not be held jointly and severally liable with UPC.
Friday, August 10, 2012
I try to avoid reading the Yahoo stories with the headlines that try so hard to pique your interest, but this one was sent to me by someone who knew I'd be interested in the contracts-related issues. Maryann Sahoury is suing a production company, Meredith Corp., after she particpated in an instructional breast feeding video that was used by a third party to create pornography. Sahoury participated in the video to help other moms who might have trouble breastfeeding their children. She was told by the producer that only her first name would be used in the video. After the filming and while juggling her baby, she was asked to sign a "piece of paper" which she did without reading it.
When she later conducted a search of her name, she found numerous links to pornographic sites and found one that showed her breastfeeding video spliced with another pornographic one containing a woman with similar features. Even a search of her baby's name turned up links to pornographic sites and videos. Her lawsuit is not claiming that the production company is responsible for creating the pornographic spliced video; rather her lawsuit states that the production company posted the breastfeeding video on YouTube and used her full name, when it represented it would only post it on Parents TV and cable television and use her first name.
The production company, Meredith, said that Sahoury had signed a release that allowed the company to use her "image, voice and name."
I find the company's response infuriating. Any dummy knows that posting a video anywhere on the internet can be misused - especially when the video contains a woman's breast. It doesn't sound like Sahoury is trying to make money from this - the article states that she is seeking only an order prohibiting the defendants from using the video featuring her and her daughter for any purpose (and attorney fees).
This situation raises a host of legal and policy related issues, but I'm going to try to focus on the contract ones. The first issue that comes to mind is whether the release is even enforceable. Was there consideration for the release given that it was signed after filming ended. (She wasn't paid for her participation in the filming). I also wonder whether there might be an interpretation issue that could work in her favor - "image, voice and name," - does that mean first name or first and last name? If nothing more is stated in the release, the verbal assurance that only her first name would be used should be highly relevant to interpret the meaning of the word "name". Furthermore, did the release state in what medium or outlet the video could be used? If it wasn't worded sufficiently broadly, the verbal assurance that it would only be posted on Youtube should limit the scope of the license she granted. In addition, was there an integration clause in the event to allow oral statements (and get around the parol evidence rule). Along the same lines, was the assurance that it would be posted only on Parents TV and cable television given before or after she signed the release?
I know I'm missing other issues so please feel free to add your thoughts in the comments.
Thursday, August 9, 2012
On August 6, 2012, the Sixth Circuit decided Branham v. Thomas M. Cooley Law School, a case involving the termination of a tenured law professor, Lynn Branham. Professor Branham, currently visiting at the St. Louis University School of Law, is an expert in criminal law and had been teaching at Cooley Law School since 1983. For some reason, the Cooley Law School asked her to teach constitutional law and torts in Spring 2006. She complained but complied and then went on leave for a semester. When she returned, she was again asked to teach constitutional law. When she refused, she was terminated.
A District Court found that Professor Branham had not been properly terminated, because the dismissal process had not been in accord with those provided for in her employment contract. Cooley then followed the proper procedures -- Cooley's faculty voted to dismiss Branham and the Cooley's Board of Directors upheld that decision. The District Court was thereby satisfied, and it entered judgment for Cooley.
The Sixth Circuit affirmed the District Court's ruling on the breach of contract issue. Professor Barnham had entered into a one-year contract with Cooley, and the fact that she had tenure did not create rights beyond those provided in the employment agreement. She was entitled to a faculty vote and then the vote of the Board of Directors. Both of those occurred, and the Sixth Circuit was not overly concerned with the fact that they occurred tardily.
Under Michigan law, an employer's process must comply with five elements of "elementary fairness": notice, opportunity to be heard, formulation of issues and fact, a rule of finality and other procedural elements appropriate to the nature of the proceeding. The Sixth Circuit was satisfied that the elements of elementary fairness were met in this case.
One might think that Professor Barnham should be entitled, at the very least, to damages for breach of contract for the period during which she had been dismissed without appropriate procedures, but the Sixth Circuit found that because Cooley eventually followed the appropriate procedures, Professor Barnham had no claim for damages. She was only entitled to equitable relief, which she apparently recieved when Cooley complied with the District Court's order to give her appropriate process.
The Sixth Circuit opinion focuses on the contractual issues and on the question of whether Cooley followed the appropriate procedures for the termination of a faculty member. The Court defers to the faculty members who determined that Cooley had "good cause " for termination of Professor Barnham. We can only hope that, at some point, some body with authority to make such a determination de novo will recognize that a tenured faculty member's refusal to teach courses removed from her area of expertise does not constitute "good cause" for her termination.
Wednesday, August 8, 2012
Matthew Edward Cavanaugh, Contract + Tort = Property: The Trade Secret llustration, 16 Marq. Intell. Prop. L. Rev. 427 (2012)
Tuesday, August 7, 2012
Monday, August 6, 2012
Sometimes, as this article froom Bloomberg Businessweek points out, it pays not to work. John Krenicki, a former executive of GE, will be paid $89,000 a month until 2022 to keep him from working for a competitor for three years. That doesn't mean,(as my misleading first sentence indicates), that he can't work for anyone, In fact, according to a WSJ article (that I won't link to because you hit a subscriber paywall), Mr. Krenicki is going to take a job as a partner at a private equity firm. As the Bloomberg article notes, the three year non-compete is three times as long as the average because Krenicki is, apparently, worth it.
Friday, August 3, 2012
For those of you attending the ABA conference in Chicago this week, there is a CLE program on Clickwraps, Browsewraps and Why ESIGN Deserves a Bum Rap. The speakers are Mark J. Furletti of Ballard Spahr, Christine Poulon of PayPal and yours truly. The panel is from (the unspeakable hour of) 8:00am-10:00am. If any of you early risers are at the meeting in Chicago, stop by for an earful about the state of electronic contracts.
In an earlier post, we detailed the dispute between the Hollywood Foreign Press Association (“HFPA”), which votes on and presents the Golden Globe awards, and Dick Clark Productions (“DCP”), which produces the award telecast. One issue in the case involved the parol evidence rule. HFPA argued that DCP could not renew its contract with the NBC television network without first obtaining HFPA's consent. Because the writing did not specify this type of consent right, HFPA wanted to bring in extrinsic evidence regarding its existence. We then updated the story after HFPA lost at the district court level and after Dick Clark's passing. The latest development is related to the appeal. According to the Hollywood Reporter:
A federal judge has agreed to a motion by the HFPA which will allow the press group to file an appeal to their loss at trial with the appeals court prior to the second phase of the trial. As part of the decision by federal Judge Howard Matz, the second phase of the trial will now be put off at least until the appeals court rules on this motion.
Daniel Petrocelli, attorney for the HFPA, said that normally there would be no appeal until the entire trial was concluded, including the second phase which has to do with such issues as what expenses DCP takes out from the show’s production, who has the right to the pre-show and who holds digital rights.
Petrocelli estimates the appeal will take as much as 18 months to reach a judgment. He said that he will actually file the appeal, following a notice of appeal, around October or November.
So, final resolution of the issue will take some time. Expect more updates here when that finally occurs.
[Heidi R. Anderson]
Next week might be a bit slower than usual on the blog. As you read this, I am pedaling my way from Chicago to Michigan. It's not that long a ride for a serious bike rider, but I'm a law prof. . . . If I survive, my posts should start showing up again some time in the middle of the week.
HelloFax, the company that lets you send and receive digital faxes, has spun off its digital signature service into a new stand-alone product: HelloSign.
“Everyone has to sign documents, and it’s done in a really poor way right now, which is what we’re trying to fix,” Joseph Walla, CEO of HelloSign (and HelloFax) told Mashable.
Documents can be signed and securely returned to their sender from both the web and the company’s new iPhone application. Unlike some similar services and apps that are already out there, digital signatures using the service are free and unlimited so you can send and receive just a few documents — or all the contracts for your business — with the service at no cost.
On the iPhone application, you sign a document with your finger on the screen. Once you’re done signing, the signature is brought back into your document, then you can place it where you want it to go. The same experience can be done on your home computer using a mouse.
When you send documents to be signed with HelloSign you can also track those documents with read receipts and audit trails, so you know exactly what’s going on with the document every step of the way.
Walla says that, while digital signatures have been legal in the U.S. for any document that can be signed with a pen for the past 12 years, many companies are still using pen and paper to get the job done. He sees the service as being invaluable to companies and businesses that are faced with delays waiting on paperwork to be signed.
“What we found out is that the only reason people fax things is that the vast majority of these documents are being signed,” Walla said when we spoke to him about HelloFax earlier this year. “What we’ve found is a lot of people joined us for faxing, and now they’ve converted to electronic signatures. We have a lot users who were fax users and now they don’t fax at all.”
With HelloSign, contracts and the like can be handled almost instantly, saving everyone involved in the process valuable time. The only type of document the service can’t handle is one that requires a notary.
HelloSign and its iPhone app are available now. For a limited time, those who sign up for HelloSign will also receive 25GB of free storage from Box.
[Meredith R. Miller]
Thursday, August 2, 2012
Social Impact Bonds: “The most interesting government contract written anywhere in the world this year”….
…. And the award goes to… Goldman Sachs and New York City. According to the ABA Journal, Goldman Sachs has loaned $9.6M to New York City to fund a new social services program with the aim of “reducing recidivism among young men at Rikers Island.” Details are to be provided later today (Thursday). The loans are being described as “social impact bonds” and they carry a nice return ($2.1 million) if there is a “significant reduction” in recidivism. If not, Goldman could lose up to $2.4 million (though, we know, Goldman won’t lose the money because, as a “market maker,” it will just turn around and sell the “shitty” bonds to an unwary client).
About the contracts that lie at the heart of the deal, the ABA Journal provides:
“This will get attention as perhaps the most interesting government contract written anywhere in the world this year,” said Jeffrey B. Liebman, a public policy professor at Harvard University. “People will study the contract terms, and the New York City deal will become a model for other jurisdictions.”
Similar programs have been tried in Great Britain and Australia and currently are being considered in Massachusetts.
But the New York Times reports that this program is different because Mayor Bloomberg’s foundation is a guarantor on the loan:
In a twist that differentiates New York’s plan from other governments’ experiments with social impact bonds, Mr. Bloomberg’s personal foundation, Bloomberg Philanthropies, will provide a $7.2 million loan guarantee to MDRC. If the jail program does not succeed, MDRC can use the Bloomberg money to repay Goldman a portion of its loan; if the program does succeed, Goldman will be paid by the city’s Department of Correction, and MDRC may use the Bloomberg money for other social impact bonds, said James Anderson, director of the foundation’s government innovation program.
The social impact bonds are not without critics:
But social impact bonds have also worried some people in the nonprofit and philanthropy field, who say monetary incentives could distort the programs or their evaluations. “I’m not saying that the market is evil,” said Mark Rosenman, a professor emeritus at Union Institute and University in Cincinnati, “but I am saying when we get into a situation where we are encouraging investment in order to generate private profit as a substitute for government responsibility, we’re making a big mistake.”
The proponents argue that this financing model is a transformative way to fund social programs, with benefits to both taxpayers and private investors. They argue that it is a way for government to pay to achieve outcomes.
[Meredith R. Miller]
Over at Concurring Opinions, David Hoffman has called our attention to a "bizarre" consideration issue at the Olympics. Professor Hoffman liniks to this story in The USA Today, according to which the performers at the Olympics halftime show -- whoops, make that opening ceremonies -- including Paul McCartney, donated their time. According to The USA Today, the performers received a mere one pound for their performances, and that one pound was paid in order to make the performers' agreements with the Olympics binding.
Professor Hoffman comments as follows:
If true, I take it that British law takes the position that nominal consideration can bind obligees, but that “false” nominal consideration can’t. Thus, the organizers had to both promise to pay McCartney a pound and actually pay it before the ex-Beatle was bound to perform.
To my mind, this is the least good resolution of the consideration problem possible. Look: either consideration should mean something – bargained for exchange motivating actual counter-promising – or parties should be free to dispose of the requirement of consideration entirely. In the United States, only Pennsylvania has taken that sensible latter position. The rest generally tend to require actual bargained for exchange, excepting only charitable subscriptions, which the Olympics are not. The Brits, who handed us this mess in the first instance, have apparently now embraced the unfortunate, mumbo-jumbo, hybrid, which reduces the sensible formality of consideration to a bit of a magical contract theatre. Does anyone think that that pound of consideration actually motivated McCartney’s promise to perform?
Interesting comments follow, including those of Patrick O'Donnell, to whom we tip our virtual hats for having directed us to the Concurring Opinions post.
Unfortuantely, we have at present nothing substantive to add to the learned discussion of at Concurring Opinions. However, we would like to observe that perhaps Sir Paul is happy to work for nominal consideration given that just a few weeks ago, as reported by the BBC, concert organizers pulled the plug on him and Bruce Springsteen because they performed past a curfew in Hyde Park.
Band member and erstwhile proprieter of "Da Bing," Steven Van Zandt, tweeted rhetorically "When did England become a police state?"
Wednesday, August 1, 2012
When did you realize you had a passion for contract law?
I fell in love with contracts while working in the legal department of a Fortune 500 company during a 15-month period early in my legal career (on loan from my law firm through a secondment). I’ve long been fascinated by business, and contracts are where the rubber meets the road and business deals are hammered out. Nothing is more satisfying than looking at a deal through lawyer goggles and identifying important business issues that your client hasn’t thought of.
Who is your typical client?
I do M&A and general corporate work in addition to commercial transactions, and the typical client profile varies depending on the type of work. Contracts clients tend to be larger companies in industries where a business’s relationship with its suppliers or customers is complex. The best clients are those who’ve found contract religion as the result of being involved in litigation over a contract and having an unfavorable result. Those clients tend to appreciate the danger of time bombs sitting in their file cabinets in the form of bad contracts.
What is something interesting you worked on recently?
One of the most interesting projects I’ve done involved a franchisor that wanted its franchisees in the US and Canada to refresh the look of their stores. I represented the contractor that won the bid to perform the work. The project involved drafting and negotiating an agreement between the contractor and the franchisor that balanced the interests of the franchisor and contractor, while properly inducing the franchisees to participate. It was interesting work for a wonderful client with exceptional opposing counsel.
What is the single most valuable lesson you learned in the first year (or so) of practice?
Always produce quality work product. In the rough and tumble of practice you often have to juggle deadlines and multiple projects and sometimes something has to give. Shoddy work product is always the wrong answer. Also, for those who plan to practice in large firms, the proper method of genuflection varies from partner to partner. Keep a list.
What do you wish someone told you when you were in law school?
What are your 3 favorite legal blogs or websites?
Who should ContractsProf readers be following on Twitter?
Has legal scholarship ever been valuable to you in your practice?
I often go to the journals when I’m doing in-depth research. One of the most useful articles I’ve read is “After the Battle of the Forms” by Francis J. Mootz III in I/S: A Journal of Law and Policy. The article has informed my thinking about the battle of the forms in today’s contracting world. Plus, it introduced me to the term “sign-wrap,” which I think is a good way to think of on-line contract terms that are incorporated into paper contracts by reference.
Best efforts or reasonable efforts?
Reasonable efforts. If anything beyond reasonable is expected, it should be spelled out in the contract.
What is your favorite restaurant in St. Louis?
[Meredith R. Miller]
Norman D. Bishara, and David Orozco. Using the Resource-Based Theory to Determine Covenant Not to Compete Legitimacy, 87 Ind. L.J. 979 (2012)
Charles K.Whitehead, Sandbagging: Default Rules and Acquisition Agreements, 36 Del. J. Corp. L. 1081 (2011)
In addition, we just learned of this publication by a reader of the blog:
Eric Voigt, A Company's Voluntary Refund Program for Consumers Can Be a Fair and Efficient Alternative to a Class Action,"31 Rev. Litig. 617 (2012)
Here is Professor Voigt's description of his article:
My article concludes that Rule 23 requires courts to consider a company's voluntary refund program (and other non-judicial methods) in determining whether the proposed class action is the superior procedure. My conclusion is strongly supported by the Advisory Committee Notes to the 1966 amendment to Rule 23, as well as commentary by two former members of the Committee (including Professor Wright), the original purpose of the superiority requirement, and courts’ initial interpretations of the 1966 amendment. No federal court or scholar has analyzed the historical meaning of Rule 23(b)(3) as it applies to a voluntary refund program.
The last part of my article discusses what features a refund program should have for it to qualify as a fair and efficient alternative to a class action. The fairness prong requires companies to (1) replace the product at issue or reimburse consumers for out-of-pocket expenses, such as the product’s purchase price and any property damages caused by the product, and (2) notify most affected consumers about the refund program so that the program is a real, not illusory, remedy. The type of notice depends on the circumstances. For example, in some cases, postings at the point of sale would be sufficient; in other cases, notice should be published nationally on the internet and in print.