August 31, 2012
Using the Government's Breach of Contract Suit Against Navy Seal "Mark Owen" in Class?
The U.S. government reportedly is considering filing a breach of contract suit against the Navy Seal (pseudonym "Mark Owen") who wrote a book about the raid and killing of Osama bin Laden. According to a letter obtained by Reuters, the Pentagon has told Owen that his publication of the book would further violate certain confidentiality provisions in agreements between him and the U.S. government. The Huffington Post reports the contents of the letter as follows:
"In the judgment of the Department of Defense, you are in material breach and violation of the non-disclosure agreements you signed....Further public dissemination of your book will aggravate your breach and violation of your agreements."
I recently thought about how I could use this case in class without crossing any lines of impropriety (read: without crossing over into an uncomfortably political discussion). One angle I envisioned was using it when we get to specific performance. A topic closer to the (mythical?) impropriety line would be whether Owen would have any arguments regarding why the agreements should not be enforced, perhaps including public policy or duress. Both are a stretch without more facts. Regardless of specifics, I think it could be a great case to use when discussing the general topics of the limits of contract law and the limits of contract law remedies.
[Heidi R. Anderson]
NYLJ Article: Does a Landlord Have A Duty to Mitigate?
A lease is both a contract between parties—the landlord and the tenant—and an interest in land. However, this duality has created conflict in determining whether a landlord has a duty to mitigate damages in the event of a tenant's early termination of a lease. The rule that a landlord has a duty to mitigate derives from basic principles of contract law. The doctrine that the landlord has no duty to mitigate, which views a lease not as a contract but as an interest in land, was seemingly mandated by the Appellate Division, Second Department, in Rios v. Carrillo in 2008. Now, four years later, uncertainty still abounds as courts waver in applying contract principles to lease breaches and carve exceptions into the rule that a landlord has no duty to mitigate. This article attempts to identify the factors relied upon by courts where a duty to mitigate has been applied in contravention of established case law.
[Meredith R. Miller]
August 29, 2012
A Reminder from the AALS Section on Contracts
CALL FOR SUBMISSIONS
AALS Section on Contracts, 2013 Annual Meeting Program
The Executive Committee of the AALS Contracts Section solicits proposals for presentations at the Section’s Annual Meeting program, The Law of Contracts or Laws of Contracts?, to be held in New Orleans, Louisiana on Saturday, January 5, 2013.
In The Path of the Law, Oliver Wendell Holmes wrote,
"There is a story of a Vermont justice of the peace before whom a suit was brought by one farmer against another for breaking a churn. The justice took time to consider, and then said that he had looked through the statutes and could find nothing about churns, and gave judgment for the defendant."
This story was meant to ridicule the Vermont justice, but he may have been ahead of his time. This year’s Section Meeting will revisit perennial and fundamental questions about “contract law” as a legal rubric. Is it preferable to analyze “contracts” as a category, or to disperse contracts into “churn–like” categories, such as sales, consumer protection, employment, family relations, intellectual property, securities, and so on? To what extent does the experience of one type of contract justify generalizations about “contract law”? Conversely, what kinds of contracts implicate context-specific practices, markets, or policy concerns justifying specialized analysis and/or doctrine?
The Section seeks three to five presentations that address these and related questions. We welcome papers that address these questions broadly as well as those that more narrowly discuss the doctrinal, transactional, or policy characteristics of a specific contractual context.
Full-time faculty members of AALS member law schools are eligible to submit proposals. Please e-mail an abstract or proposal (500 words or fewer) to section chair Thomas Joo (firstname.lastname@example.org) by 5:00 p.m. (Pacific Time) September 7, 2012. Drafts and completed papers are welcome (though not required), but must be accompanied by an abstract. Please indicate whether the paper has been published or accepted for publication (and if so, provide the anticipated or actual date of publication). There is no publication requirement, but preference will be given to papers that will not have been published by the date of the Annual Meeting.
We particularly encourage submissions from contracts scholars who have been active in the field for ten years or less, especially those who are pre-tenured, as well as more senior scholars whose work may not be widely known to members of the Contracts Section. We will give some preference to those who have not recently participated in the Section’s annual meeting program.
Thank you for your consideration. Please contact Thomas Joo or any other Executive Committee Member if you have any questions.
AALS Section on Contracts Executive Committee
Thomas Joo (Chair)
Larry Garvin (Chair-Elect)
Nancy Kim (Secretary)
The Case of the Non-Existent Arbitral Body
On July 26th, the Third Circuit decided Control Screening LLC v. Technological Application and Prod. Co. The case involved a dispute over the purchase of eight customized X-ray machines for a price of just over $1 million. The transaction soured and both sides claimed breach. Control Screening is a New Jersay Company; Techological Application and Production Company (Tecapro) is a state-owned Vietnamese company.
Although the parties' agreement contained an arbitration clause, Tecapro initiated arbitral proceedings in Belgium under the Belgian Judicial Code. Control Screening filed a motion to compel arbitration in the United States District Court of New Jersey and to enjoin proceedings in Belgium. Here's where it gets interesting. The arbitration clause reads as follows:
In the event all disputes are not resolved, the disputes shall be settled at International Arbitration Center of European countries for claim in the suing party's country under the rule of the Center. Decision of arbitration shall be final and binding [sic] both parties.
The problem is that there is no such thing as the International Arbitration Center of European countries.
The district court determined that the “only reasonable interpretation of the arbitration clause" was that Taxapro could seek to arbitrate in Vietnam and Control Screening could seek to aribrate in New Jersey. Since Control Screening exercised its contractual option first, arbitration in New Jersey was proper. The district court granted Control Screening's motion to compel arbitration.
On appeal, the Third Circuit looked to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), which binding in both the U.S. and Vietnam and is implemented in the U.S. through the Federal Arbitration Act (FAA). Article II(3) of the New York Convention invalidates an agreement to arbitrate "only when it is subject to an internationally recognized defense such as duress, mistake, fraud, or waiver…” Here, because the parties mistakenly designated arbitration to commence at a non-existent arbitral body, the forum selection clause of the arbitration agreement is inoperative. However, the remainder of the agreement establishes an intent to arbitrate. The Third Circuit treated the agreement as though it had no forum selection clause.
The FAA provides that “arbitration hearings and proceedings shall be within the district in which the petition for an order directing such arbitration is filed.” On that basis, the Third Circuit determined that New Jersey was the proper district for the commencement of arbitration. Because Control Screening’s motion to compel arbitration was brought in the District of New Jersey, the New Jersey arbitration site was proper.
This resolution is not entirely satisifying, as Marc. J. Goldstein points out in his detailed discussion of the case on his Arbitration Commentaries blog. The parties did not agree on a particular venue, but it was pretty clear that they wanted to arbitrate in Europe. The Third Circuit acknowledges as much when it rejects (in a footnote) the district court's conclusion that the only reasonable interpretation of the agreement was that each party could initiate arbitration in their home countries.
The opinion does not state what became of Control Screening's motion to enjoin the proceedings in Belgium. If a U.S. court grants a motion to compel arbitration in the U.S., does it automatically enjoin foreign aribtral proceedings that had already commenced? We can understand why that result would follow from the district court's reading of the agreement, but the Third Circuit rejected that reading. Having acknowledged that the parties anticipated arbitration in Europe, why would the Third Circuit enjoin such a proceeding in favor of a venue to which the parties likely considered and rejected?
[JT and Christina Phillips]
New in Print
Donald C. Carroll, At-Will Employment: The Arc of Justice Bends Towards the Doctrine's Rejection, 46 U.S.F. L. Rev. 655 (2012).
Chris Dent, Negotiating Control of Artefacts of Creation -- Intellectual Property, Know-How, Confidential Information and Contracts, 43 IIC: Int'l Rev. Intell. Prop. & Competition L. 248 (2012)
Henry Deeb Gabriel, The 2003 Amendments of Article Two of the Uniform Commercial Code: Eight Years or a Lifetime after Completion. 52 S. Tex. L. Rev. 487 (2011)
Fred H. Miller, What Can We Learn from the Failed 2003-2005 Amendments to UCC Article 2? 52 S. Tex. L. Rev. 471 (2011)
John E. Murray, Jr. Revised Article 2: Eliminating the "Battle" and Unconscionability, 52 S. Tex. L. Rev. 593 (2011)
George P. Roach, Rescission in Texas: A Suspect Remedy. 31 Rev. Litig. 493 (2012)
John M. Scheib, Mind the Gap: Why the Current Case Law on Demurrage Makes Little Sense and Undermines the Federal Statute, 39 Transp. L.J. 53 (2012)
Holly K. Towle, Enough Already: It Is Time to Acknowledge that UCC Article 2 Does not Apply to Software and Other Information, 52 S. Tex. L. Rev. 531 (2011)
Maureen A. Weston, The Death of Class Arbitration after Concepcion? 60 U. Kan. L. Rev. 767 (2012)
August 28, 2012
Weekly Top Tens from the Social Science Research Network
August 27, 2012
Sixth Circuit Upholds Sanctions and Remands Union Dispute to the NLRB
In July, 2009, DiPonio Construction Company, Inc. (DiPonio) terminated its collective bargaining agreement (CBA) with the International Union of Bricklayers and Allied Craftworkers Local 9’s (the Union). The Union brought a claim for unfair labor practices (ULP) before the National Labor Relations Board (NLRB) alleging that DiPonio was required by the National Labor Relations Act (NLRA) to bargain for a new CBA. Five days before the NLRB filed a ULP complaint against DiPonio, DiPonio sought a declaratory judgment from the district court stating that it had properly terminated the CBA. When the NLRB moved to dismiss DiPonio’s claim for lack of subject matter jurisdiction, DiPonio amended its complaint to include a breach of contract claim and filed a motion to stay the NLRB proceedings. The timing of the contract claim made it seem motivated by a desire to create jurisdiction in federal court over a dispute over which the NLRB would otherwise have exclusive jurisdiction.
The district court granted the NLRB’s motion to dismiss and imposed sanctions against DiPonio under Rule 11 of the Federal Rules of Civil Procedure. DiPonio appealed to the Sixth Circuit and the Union sought further sanctions. Last month, in DiPonio Constrcution Company, Inc. v. Interaitonal Union of Bricklayers and Allied Craftworkers Local 9, the Sixth Circuit affirmed the district court’s ruling in its entirety, while refusing to impose further sanctions. The Sixth Circuit found that the question at issue was primarily one of representation rather than of contractual interpretation, and thus that resolution of the dispute in a federal court was inappropriate.
The NLRB has exclusive jurisdiction over controversies concerning sections 7 or 8 of the NLRA, but federal courts have concurrent jurisdiction with the NLRB over contracts interpretation issues. However, where the matter is primarily one of representation instead of contractual interpretation, courts defer to the NLRB.
The nature of DiPonio’s bargaining obligations depends on whether the parties entered into the CBA pursuant to § 8(f) or § 9(a) of the NLRA. Section 9(a) requires employers to “bargain with a union that has been designated by a majority of the employees in a unit for the purposes of collective bargaining with the employer,” while section 8(f) “allows unions and employers in the construction industry to enter into CBA’s without requiring the union to establish that it has the support of a majority of the employees in the unit covered by the CBA.” In short, if the CBA is a § 8 contract, DiPonio has no duty to negotiate for a new CBA, but if it is a § 9(a) contract, it does.
In a 2006 decision, the Sixth Circuit found that a dispute will be treated as “primarily representational” (1) “where the NLRB has already exercised jurisdiction over a matter and is either considering it or has already decided the matter,” or (2) “where the issue is an ‘initial decision’ in the representation area.” Here, the question of whether the contract was entered into pursuant to § 8(f) or § 9(a) was already before the NLRB (the Union’s ULP Complaint). Thus, the matter was deemed primarily representational, and the Sixth Circuit handed the case over to the NLRB.
The Sixth Circuit upheld the Rule 11 sanctions that the district court imposed because DiPonio’s breach of contract claim was without merit and was filed in order to delay the NLRB proceedings.[JT and Christina Phillips]
Contracts Limerick of the Week: Pennsy Supply v. American Ash Recycling Corp.
I've actually been in Limerick rehab for the past three years. But with a new casebook, I have some fresh material. I think I'm still a bit rusty because the facts of this case are highly Limerickworthy, and yet I'm uncertain that this is a keeper.
American Ash made available to paving companies a material known as AggRite -- all the paving companies had to do was cart it away. Pennsy Supply did so for use in paving driveways and parking lots in a high school in Northern York County, Pennsylvania. In fact, it carted away 11,000 tons of the stuff.
The AggRite didn't work so well, and the pavement cracked during its first winter. Pennsy perfomed all the repairs, which involved carting away and disposing of the AggRite, which it turns out is hazardous waste. I love the idea of dumping 11,000 tons of hazardous waste in a public high school parking lot. It's the kind of metaphor that could be at the heart of a Don DeLillo novel.
The Superior Court of Pennsylvania found that there was consideration and thus that Pennsy had a viable warranty claim (at least for the purposes of surviving a motion to dismiss/demurrer). American Ash received a benefit when Pennsy agreed to haul away 11,000 tons of hazardous waste for free.
Pennsy Supply, Innc. v. American Ash Recycling Corp. of Pennsylvania
The court found a bargain was closed
When American Ash Corp. disposed
Of its AggRite through Pennsy
In the ideal dispens’ry:
A lot to a school juxtaposed.