ContractsProf Blog

Editor: D. A. Jeremy Telman
Valparaiso Univ. Law School

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Thursday, April 11, 2013

7th Circuit to Johnson Controls: No Second Bite at the Apple for You!

7th CirAccording to Judge Wood, Johnson Conrols, Inc. v. Edman Controls, Inc., was a simple case of a party agreeing to arbitration and then seeking to avoid arbitration once the decision went against it.  The parties had an agreement according to which Edman Controls (Edman) was supposed to have the exclusive right to distribute the products of Johnson Controls (Johnson) in Panama.  The agreement provided for arbitration of all disputes under Wisconsin law and for the losing party to pay the prevailing party's attorneys' fees.  At the time of the agreement, both parties were aware that Edman would rely on its Panamanian subsidiaries (Pinnacle) to carry out the distribution agreement.  

In 2009, Johnson breached the agreement by seeking to sell its products directly in Panama.  The Seventh Circuit noted that there was nothing subtle about the breach.  Johnson approached Edman's clients directly and refused to communicate with Edman about attempts to market its products in Panama,  In 2010, Edman brought its claims, sounding in tortious interference, unjust enrichment and breach of the duties of good faith and fair dealing to an arbitrator.

The arbitrator ruled in Edman's favor and awarded about $750,000 in damages.  However, the arbitrator dismissed Edman's claims relating to tortious interference with Pinnacle, finding that he had no authority over the relations between Johnson and Pinnacle.  "Aha!" said Johnson (we paraphrase).  Challenging the arbitral award, Johnson argued that all of Edman's harm actually derived from Pinnacle's harm, and the arbitrator had no jurisdiction over Pinnacle's harms.  

The District Court was unimpressed.  The parties knew that Edman would be operating through Pinnacle, and given the narrow scope of the court's review on a challenge to an arbitral award, Johnson's claim that the arbitrator had been mistaken in his understanding of Wisconsin law was unavailing.  But thanks for playing, Johnson.  For your troubles, the District Court awarded Edman attorneys' fees of about $250,000, bringing the total in damages to a tidy $1 million.

On appeal, the Seventh Circuit noted that although both parties relied on Chapter 1 of the Federal Arbitration Act (FAA), the case was actually governed by either the FAA's Chapter 2, which incorporates the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, or the FAA's Chapter 3, which incorporates the (Panama) Inter-American Convention on International Commercial Arbitration.  The Seventh Circuit noted that it was not clear whether a court could rely on FAA Chapter 1 to vacate a decision taken by a U.S. arbitrator relating to an agreement that is governed by either the New York or the Panama Convention.

In a close case, the Seventh Circuit opined, a court would have to address that issue, as the grounds for vacatur in FAA Chapters 2 and 3 are different from those in Chapter 1.  But this was not a close case.  Arbitral decisions are not overturned lightly and will be upheld so long as “an arbitrator is even arguably construing or applying the contract and acting within the scope of this authority.”  Johnson claimed that the arbitrator exceeded its power by letting Edman bring claims on behalf of its subsidiary.  But that would only be a mistaken application of Wisconsin law if Johnson were correct.  Such a mistake would not be enough to overturn the award, and Johnson is not correct as to Wisconsin law.  And in any case, it seems, not of that matters anyway, because Edman was directly harmed by Johnson's breach and the arbitrator allowed recovery only for Edman's direct losses.  

The Seventh Circuit also affirmed the award of attorneys' fees, finding that the District Court had not abused its discretion in finding that Johnson had to pay a 33% contingency fee to Edman's attorneys.  The Court denied Edman's request that the Court impose Rule 38 sanctions on Johnson for a frivolous appeal largely, it said, because the attorneys' fee award was already sanction enough.

[JT]

April 11, 2013 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 10, 2013

New in Print

Pile of BooksKenneth S. Abraham, Liability for Bad Faith and the Principle without a Name (Yet). 19 Conn. Ins. L.J. 1 (2012-2013)

Cynthia M  Adams & Peter K. Cramer, Drafting Contracts in Legal English: Cross-Border Agreements Governed by U.S. Law (Aspen, 2013)

Erez Aloni, Registering Relationships, 87 Tul. L. Rev. 573 (2013)

Sarah Howard Jenkins, Rejection, Revocation of Acceptance, and Avoidance: A Comparative Assessment of UCC and CISG Goods Oriented Remedies, 22 Minn. J. Int'l L. 152 (2013)

Robert H. Jerry, II, Bad Faith at Middle Age: Comments on "The Principle without a Name (Yet)," Insurance Law, Contract Law, Specialness, Distinctiveness, and Difference. 19 Conn. Ins. L.J. 13 (2012-2013)

Harry Surden, Computable Contracts, 46 UC Davis L. Rev. 629 (2012)

[JT]

April 10, 2013 in Books, Recent Scholarship | Permalink | TrackBack (0)

Tuesday, April 9, 2013

Weekly Top Tens from the Social Science Research Council

RECENT HITS (for all papers announced in the last 60 days) 

SSRNTOP 10 Papers for Journal of Contracts & Commercial Law eJournal 
February 8, 2013 to April 9, 2013

RankDownloadsPaper Title
1 517 Living with 'ADR': Evolving Perceptions and Use of Mediation, Arbitration and Conflict Management in Fortune 1,000 Corporations 
Thomas StipanowichJ. Ryan Lamare
Pepperdine University School of Law, Pennsylvania State University - Department of Labor Studies and Employment Relations
2 220 The Fiduciary Obligations of Financial Advisors Under the Law of Agency 
Robert H. Sitkoff
Harvard Law School
3 156 Offer and Acceptance in Modern Contract Law: A Needless Concept 
Shawn J. Bayern
Florida State University - College of Law
4 138 Computable Contracts 
Harry Surden
University of Colorado at Boulder - School of Law
5 115 A Theory of Preferred Stock 
William W. BrattonMichael L. Wachter
Institute for Law and Economics, University of Pennsylvania Law School, University of Pennsylvania - Law School - Faculty
6 98 Dude, Where's My Car Title?: The Law, Behavior, and Economics of Title Lending Markets 
Kathryn FritzdixonJim HawkinsPaige Marta Skiba
Vanderbilt University, University of Houston Law Center, Vanderbilt Law School
7 92 Personalizing Default Rules and Disclosure with Big Data 
Ariel PoratLior Strahilevitz
Tel Aviv University, University of Chicago Law School
8 90 No Contract? 
Oren Bar-GillOmri Ben-Shahar
New York University (NYU) - School of Law, University of Chicago Law School
9 89 Regulation by Liability Insurance: From Auto to Lawyers Professional Liability 
Tom BakerRick Swedloff
University of Pennsylvania Law School, Rutgers School of Law - Camden
10 87 Tailoring a Consent Inquiry to Fit Individual Employment Contracts 
Lisa J. Bernt
Northeastern University School of Law

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

February 8, 2013 to April 9, 2013

RankDownloadsPaper Title
1 517 Living with 'ADR': Evolving Perceptions and Use of Mediation, Arbitration and Conflict Management in Fortune 1,000 Corporations 
Thomas StipanowichJ. Ryan Lamare
Pepperdine University School of Law, Pennsylvania State University - Department of Labor Studies and Employment Relations,
2 174 One Sided Jurisdiction Clauses - A Casenote on Rothschild 
Pascal AncelGilles Cuniberti
Universite du Luxembourg, University of Luxembourg
3 155 Offer and Acceptance in Modern Contract Law: A Needless Concept 
Shawn J. Bayern
Florida State University - College of Law
4 138 Computable Contracts 
Harry Surden
University of Colorado at Boulder - School of Law
5 114 Culpa in Contrahendo in European Private International Law: Another Look at Article 12 of the Rome II Regulation 
Najib Hage-Chahine
Université Paris II - Panthéon-Assas
6 90 No Contract? 
Oren Bar-GillOmri Ben-Shahar
New York University (NYU) - School of Law, University of Chicago Law School
7 89 Regulation by Liability Insurance: From Auto to Lawyers Professional Liability 
Tom BakerRick Swedloff
University of Pennsylvania Law School, Rutgers School of Law - Camden
8 86 Tailoring a Consent Inquiry to Fit Individual Employment Contracts 
Lisa J. Bernt
Northeastern University School of Law
9 86 Transfer of Rights and Obligations Under DCFR and CESL: Interactions with English and German Law 
Hugh BealeWolf-Georg Ringe
Warwick School of Law, Copenhagen Business School, Department of Law
10 68 Efficient Breach Is Dead; Long Live Efficient Breach 
Gregory Klass
Georgetown University - Law Center

[JT]

April 9, 2013 in Recent Scholarship | Permalink | TrackBack (0)

Monday, April 8, 2013

Svidrigailov's Contract with Marfa Petrovna

DosteovskyIn Part VI, Chapter 4 of Fyodor Dosteovsky's Crime & Punishment (beginning on page 834 in this version), Svidrigailov, the unrepentant libertine whose attentions nearly ruined the life of Raskolnikov's sister, Avdotya (Dunya) Romanovna, describes to Raskolnikov the nature of what Svidrigailov characterizes as his "contract" with his (now decesased) wife, Marfa Petrovna.

According to Svidrigailov (and he is by no means a reliable narrator), the agreement, which he specifies was unwritten, had the following terms:

1. Svidrigailov would never leave Marfa Petrovna and would always be her husband;

2. He would never absent himself from her without her permission;

3. That he would never take on a "permanent mistress";

4. In return, Marfa Petrovna would give Svidrigailov "a free hand with the maidservants, but only with her secret knowledge";

5. Svidrigailov was expressly forbidden to faill in love with a woman of his own station;

6. But should 5 occur, Svidrigailov must reveal that fact to Marfa Petrovna.  

So this sounds like a prenuptial agreement that would not be enforceable because not reduced to writing.  Anybody out there know the 19th-century Russian rule on such matters?  Moreoever, without a remedial provision, it is not clear what this contract accomplishes.  

[JT]

 

April 8, 2013 in Books, Commentary | Permalink | Comments (5) | TrackBack (0)