Thursday, September 20, 2012
Did varying hyphen use in a credit swap agreement create an ambiguity? According to a panel of New York appellate judges (First Department): No, an errant hypen here-or-there does not change the natural meaning of the language.
Here’s a nice summary of the case from the NYLJ (link may require subscription):
Brazilian infrastructure company Concessionaria Do Rodoanel Oeste does not have to pay a termination fee for prepaying $895 million in loans and thereby terminating interest rate swap agreements with investment banks Banco Espirito Santo, Caiza Banco de Investimento and Credit Agricole Corporate Investment Bank, a unanimous appeals panel has ruled in rejecting the banks' argument that the inconsistent use of a hyphen in the swap agreements created ambiguity.
Rodoanel took out $895 million in loans to complete a highway project and hedged them by entering into interest rate swap agreements, a type of derivative, with the banks. Rodoanel decided to pay down the debt before it was due, allowing it to terminate the swap agreements. The banks claimed that Rodoanel owed them a termination fee, called the "Close Out Amount" or "Close-out Amount" in different documents. They said that the differing punctuation created ambiguity about what the term meant, requiring the use of parol evidence in addition to the contracts themselves.
The trial court held that the discrepancy in hyphenation caused an ambiguity and allowed the banks to introduce parol evidence. The appellate panel reversed and held that the agreement was not ambiguous and that the “ordinary and natural meaning” of the language was dispositive. It appeared to the court that the banks were attempting to manufacture an ambiguity to effectuate a result that the banks should have provided for in the agreement:
If plaintiffs, who are commercially sophisticated "hedge providers," had intended that, in the event of an early termination, the party "in the money" was entitled to retain the benefits of this favorable market condition, they could easily have expressed this intent in the language of the interest rate swap agreement.
Further, the court wrote that punctuation is a guide in interpreting a contract, but should not be used to contravene the parties’ clearly manifested intent:
Ultimately, this case serves as a reminder that, in a contract containing punctuation marks, the words and not the punctuation guide us in its interpretation (see 17A CJS Contracts §406; 12 AM Jur Contracts §256). Punctuation is always subordinate to the text and is never allowed to control its meaning (Sirvint v. Fidelity & Deposit Co. of Md., 242 App Div 187, 189 [1st Dept. 1934), affd, 266 NY 482 ; see also 17A Jur 2d Contracts §366 ; 68A NY Jur Insurance §869). Of course, punctuation in a contract may serve as a guide to resolve an ambiguity that has not been created by punctuation or the absence therein, but it cannot, by itself, create ambiguity (Wirth & Hamid Fair Booking, Inc. v. Wirth, 265 NY 214 ; see also Stoddart v. Golden, 179 Cal 663, 178 P. 797 ; Randolph v. Fireman's Fund Ins. Co., 255 Iowa 943, 124 NW2d 528 ). It is a cardinal principle of contract interpretation that mistakes in grammar, spelling or punctuation should not be permitted to alter, contravene or vitiate manifest intention of the parties as gathered from the language employed (Sirvint, 242 App Div at 189; Wirth & Hamid Fair Booking, 265 NY at 219).
Banco Espírito Santo, S.A. v. Concessionária Do Rodoanel Oeste S.A., 652013/11, NYLJ 1202571875870, at *1 (App. Div., 1st, Decided September 18, 2012) (link may require subscription to NYLJ).
[Meredith R. Miller]
As reported here by Entertainment Weekly, Anthony Puzo (“Puzo”), son of Mario Puzo—well-known author of popular mafia novel “The Godfather”—has alleged, on behalf of the Puzo Estate (the “Estate”), material breach of contract and tortious interference on the part of Paramount Pictures (“Paramount”), and has petitioned a Manhattan federal court to deny Paramount the right to make future Godfather films.
Paramount first brought suit in February of 2012 seeking to enjoin the Estate from publishing sequel novels written by new authors using elements and characters from “The Godfather.” Paramount sought a court declaration that a 1969 agreement that it entered into with Mario Puzo had granted it all rights and copyright interests, including literary rights and rights to the usage of its characters in any sequel or variation of “The Godfather.” Paramount claims that the only right left to the Estate was the right to publish the original novel.
However, in his Counterclaim, Anthony Puzo alleges that his father deleted the language that would have granted Paramount the exclusive right to publish any versions or adaptations of “The Godfather”, and instead opted to retain those rights himself (rights which, if so retained, now belong to his Estate). In addition, Puzo claims Paramount tortiously interfered with contracts between the Estate and Grand Central Publishing Company and Random House, which have agreed to publish various novels using characters from “The Godfather” written by new authors.
Puzo claims Paramount has attempted to either delay, or prevent entirely, the publishing of the new novels. In light of Paramount’s conduct, Puzo and the Estate seek a termination of the 1969 agreement and, which would then permit the publication of the books at issue and whatever else might follow. In addition to declaratory relief, Puzo seeks actual damages expected to be in excess of $5 million, punitive damages for Paramount’s alleged malicious conduct and costs of the suit.
As reported here on boston.com, the Estate-commissioned novel, “The Family Corleone,” was published in May, but profits from the book are to remain in escrow until the litigation between the parties has been settled.
[Christina Phillips & JT]
Wednesday, September 19, 2012
Kenneth G. Engerrand, Indemnity for Gross Negligence in Maritime Oilfield Contracts, 10 Loy. Mar. L.J. 319 (2012)
Teresa Ghilarducci, Governor Cuomo's New York State Public Sector Pension System Pension Proposals and the New York State's Retirement Income Security Crises, 5 Alb. Gov't L. Rev. 829 (2012)
Matthew M. McCluer, Reading the Fine Print: Emerging Views on the Successorship Doctrine and Mandatory Arbitration Provisions, 31 Miss. C.L. Rev. 85 (2012)
Tim R. Samples, and Jose Luis Vittor, Energy Reform and the Future of Mexico's Oil Industry: The Pemex Bidding Rounds and Integrated Service Contracts. 7 Tex. J. Oil Gas & Energy L. 215 (2011-2012)
David W. Spohr, (When) Does a Contract Claim Trump a Takings Claim? Lessons from the Water Wars, 2 Wash. J. Envtl. L. & Pol'y 125 (2012)
Tuesday, September 18, 2012
In addition to teaching Lucy v. Zehmer for the first time this semester, I was also introduced to a new case, B. Lewis Productions, Inc. v. Angelou, thanks to the Kunz & Chomsky casebook. The case is a modern re-telling of Wood v. Lucy, Lady Duff-Gordon.
In 1994, Butch Lewis, a boxing promoter and manager, entered into a letter agreeement with the autobiographer and poet, Maya Angelou (left) to promote her writings through their pubication on greeting cards, stationery, calendars, etc. According to the case, Mr. Lewis came very close to closing the deal with Hallmark, but Ms. Angelou backed out, perhaps because she was disturbed when she saw him "punctuate a conversation with white people by grabbing his crotch." Why the court thought it was important or thought that Angelous thought it important that Lewis's audience is white is a subject reserved for our speculation.
The crotch grab took place in Las Vegas, which makes it seem quite tame, but in any case Angelou was angry. She shared some choice words with Lewis and told him that their joint venture was at an end, but subsequent letters indicated that her interest remained. Angelou famously likened herself to Balzac and other 19th-century writers who said "I write for money." Perhaps she did not want to burn her bridges entirely with Lewis, if he could get her a sweet deal with Hallmark.
In 2000, Angelou negotiated her own deal with Hallmark, leaving Lewis out. Since their original letter agreement stressed that Lewis would be her exclusive agent, and that status was confirmed in a 1996 letter from Angelou, Lewis, playing the role of Wood, sued for breach of contract.
After a lengthy discussion of Wood v. Lucy, the Southern Distrct of New York denied summary judgment to both sides, leaving open the question of whether Angelou had successfully terminated her agreement with Lewis before entering into negotiations with Hallmark. According to the Kunz & Chomsky casebook, the parties then settled for $1 million.
The case got me thinking about why more poets don't write greeting cards. I am married to a poet, so I know that very few can write for money, as Balzac put it, although many would be happy to do so if they could.
Man hands down misery to man.
It deepens like a coastal shelf.
Get out as early as you can,
And don't have any kids yourself.
That would really make Mom's day!
Of course, the first verse of that poem would make an even better card, but this is a family-friendly blog.
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|2||179||You Definitely Should Have: A Contractual Look at Israeli Wedding Gift Culture
Zvi H. Triger,
Striks School of Law, The College of Management Academic Studies (COLMAN)
|3||168||Hollywood Deals: Soft Contracts for Hard Markets
USC Gould School of Law
|4||137||Allocating Risk Through Contract: Evidence from M&A and Policy Implications
John C. Coates, IV,
Harvard Law School
|5||96||The Importance of Fault in Contract Law
Robert A. Hillman,
Cornell Law School
|6||92||The Return-Reducing Ripple Effects of the 'Carried Interest' Tax Proposals
Heather M. Field,
University of California - Hastings College of the Law
|7||89||Disarming the Trojan Horse of the UAAA and SPARTA: How America Should Reform its Sports Agent Laws to Conform with True Agency Principles
Barry University - Dwayne O. Andreas School of Law
|8||88||Autonomy, Pluralism, and Contract Theory
Tel Aviv University - Buchmann Faculty of Law
Anna Gelpern, G. Mitu Gulati,
American University Washington College of Law, Duke University - School of Law
|10||75||The Government’s Proposed 'Review of Australian Contract Law': A Preliminary Positive Response
Luke R. Nottage,
University of Sydney - Faculty of Law
Monday, September 17, 2012
When Trinity Medical Center (Trinity) terminated Dr. Bassam Assaf’s employment as its medical director, Assaf filed suit for breach of contract. Assaf and Trinity’s new CEO, Tom Tibbitts, negotiated an out-of-court settlement. In return for dropping his claim, Assaf agreed to the following terms:
- A salary of $50,000 each year from 2009-2011; and
- Automatic one-year renewal of his employment thereafter unless either party gave 90-days notice of intention to terminate the agreement
In Assaf v. Trinity Medical Center, the Seventh Circuit upheld part of the Magistrate's ruling but found that the Magistrate had abused his discretion in preventing Assaf from introducing evidence of lost professional fees. Assaf sought specific performance of the settlement agreement, entitling him to employment through 2012. He claimed that Trinity could not terminate him pursuant to an agreement that it had breached. But while contract law does not permit a party in material breach to benefit from a contract term, the Seventh Circuit was not persuaded that Trinity had taken unfair advantage of the contact terms simply by exercising its right of termination with notice.
The Magistrate denied Assaf's claims for professional fees because Assaf had disclosed his damage calculations after discovery had ended. The Seventh Circuit found that excusion of the evidence was an abuse of discretion. Assaf provided the information a month before trial was set to begin. Not only was Trinity aware that Assaf sought professional fees, it had access to the information regarding these fees all along, since the information was contained in Trinity's files. The case was remanded for a determination of the fees owed to Dr. Assaf.
[Christina Phillips & JT]
Speaking of Lucy v. Zehmer, I had never taught the case until this year. I don't know why so many casebooks no longer include it. My students responded very well to it, and we had a very interesting discussion both of the joke/dare issue and of the drunkenness issue. How drunk does one have to be to be adjudicated incompetent to enter into a contract? Zehmer claimed he was "high as a Georgia pine." That might have been enough, but the court didn't buy it.
Lucy v. Zehmer Limerick
come to Virginnie
Some come to draft contracts and sign.
As did Zehmer, and so
He was bound even though
He was high as an old Georgia pine.