ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Thursday, February 8, 2018

Contract law and doll designs

I am late to the party on this, but I still thought I would point you to Jill Lepore's recent review in the New Yorker of (among other books) Orly Lobel's You Don't Own Me: How Mattel v. MGA Entertainment Exposed Barbie's Dark Side. The book is about the epic showdown between Mattel, makers of Barbie, and MGA, maker of rival dolls Bratz, and it has a contract law angle: The designer who created Bratz worked for Mattel and allegedly arrived at the design for Bratz while under an employment contract with Mattel that would have entitled Mattel to the copyright for the design. 

The review relays testimony from Mattel's CEO regarding his understanding of the scope of such clauses in employment contracts, namely that they are broad enough to entitle Mattel to claim ownership of designs created decades before the employee in question was hired. Unsurprisingly, in my experience, corporations frequently believe that clauses in employment contracts are indeed very broad; it's unclear how much the assertions of such broad readings affect employees' understandings of their rights. 

February 8, 2018 in Celebrity Contracts, Commentary, Famous Cases, True Contracts | Permalink | Comments (0)

Wednesday, January 31, 2018

We *think* there's an NDA. Or is there?

Someday I will blog about things other than NDAs again but I feel like every time I open the internet there's another story about an NDA. Everyone today was talking about last night's interview of Stormy Daniels on Jimmy Kimmel Live!, which was a bizarre series of answering-questions-with-questions and playing coy and talking around the main issue, which was her alleged affair with Donald Trump in 2006. You can find lots of articles online; here's one that lays it out. Those trying to summarize the interview generally seem to assume that Daniels must be restricted by an NDA, because she could say if there wasn't an NDA, but it's the proving of a negative, basically; the reporters are trying to make sense of the blank space the non-answers leave in their wake. 

It's all had me wondering about the role NDAs played--or maybe more importantly, didn't seem to play?--during the Clinton impeachment. Lots of details about Clinton's sexual harassment history came out during the impeachment, and from my brief research into it, it doesn't seem like there were any NDAs in play. Does anybody have other information about this? How do the number of NDAs around Trump in play today shift our perspective, conversation, and legal analysis? 

January 31, 2018 in Commentary, Current Affairs, Government Contracting, In the News, Television, True Contracts | Permalink | Comments (0)

Monday, January 29, 2018

Society continues to rely on women breaking NDAs to report abuse

I’ve written many, many times now on the ways in which NDAs have been used to protect and enable systemic abuse of less empowered people, and they’re in the news again. USA Gymnastics has decided not to fine McKayla Maroney for violating her NDA and speaking out about the abuse she suffered at the hands of Larry Nassar, the Team USA doctor who recently pled guilty to sexual assault and has been accused by over 140 women. The women’s stories reveal how enforced silence can be used to obscure the full extent of harmful, abusive, and criminal conduct, making it seem as if each account was an isolated incident instead of a pattern of behavior.

A recent report from the Financial Times also makes this point. An expose on a men-only charity event in London, the article revealed that the hostesses hired for the event were asked to sign NDAs (which they were not allowed to read or take with them). Afterwards, during the event, they were subjected to multiple instances of groping, including hands up skirts, and one report of having a penis exposed to her. But we only know about this treatment because the NDAs meant to protect this behavior were broken.

January 29, 2018 in Celebrity Contracts, Commentary, Current Affairs, In the News, Sports, True Contracts | Permalink | Comments (2)

Thursday, January 18, 2018

But what does the HQ stand for????

Everyone is talking about HQ Trivia right now, it seems. I'll be honest, though: Last week was the first time I've ever heard of the app. "It's a live trivia show," I was told. "You play twice a day with hundreds of thousands of your closest friends and try to win money." 

I downloaded the app because I was curious, and everything about it was an odd, surreal experience. I hadn't expected there to be a live host making uncomfortable one-sided banter to fill time while the start of the game was delayed. Then, when the questions started up, I...had no idea what to do, because nothing about my screen ever changed. I was just staring at the host the whole time. I couldn't figure out how to answer a question. 

I found out later that the question is supposed to pop up on your screen. It didn't on my screen, an issue that I saw other people online complaining about, so I know it at least wasn't my own incompetence. I didn't really stick around for more, though. I deleted the app, thinking it was just something that didn't seem to be my kind of thing. 

While I was Googling my app experience, though, I came across this pretty wild article from The Daily Beast and it made me think about a thought exercise I like to make my contracts students engage in at the very beginning of the semester: What does each party to a transaction want from the relationship they're about to enter into, and how will that translate into the contract? The article recounts an interview the Daily Beast conducted with the app's main host, and then their interactions with the app's CEO. At the end, it's revealed that the app is in a negotiation for a long-term contract with the main host. The rest of the article provides a lot of meat for speculation as to how those negotiations might go, based on the comments of both the main host and the CEO. The CEO appears to be very worried about the app's trade secrets being revealed, so one can assume that the contract would be very strict about the host's interactions with the media. Doubtless the parties will discuss a non-competition clause as well.  And how much will the negotiations be impacted by the newness of the HQ app phenomenon; the uniqueness of its setup; and the fuzziness of its future plans? All interesting things to consider. 

January 18, 2018 in Commentary, Current Affairs, E-commerce, Games, In the News, True Contracts, Web/Tech | Permalink | Comments (0)

Wednesday, January 17, 2018

A decision to make you think twice before tweeting your idea to a celebrity

Those posting ideas to the internet, in tweets or YouTube trailers or other websites: take note. This is an older decision, but one worth recounting on this blog I think. Out of the Central District of California, Alexander v. Metro-Goldwyn-Mayer Studios, Inc., CV 17-3123-RSWL-KSx, warns you that making your ideas available for free can mean that you forfeit the right to pursue compensation if someone else uses them. 

The case concerns the movie "Creed," which the plaintiff Alexander alleged he came up with. He sued the defendants for misappropriation of his idea, breach of implied contract, and unjust enrichment. The misappropriation of idea claim fails in California, so the court moves on to the breach of implied contract claim, where Alexander also faltered because he failed to allege that he ever offered the "Creed" idea for sale. In tweeting the idea at Sylvester Stallone, the court read the allegations as portraying a gratuitous offer of the idea to Stallone. 

Alexander argued that he thought he would be paid for the idea based on industry custom, and that the defendants understood that he tweeted the idea at them with the expectation of payment. But the court disagreed. All Alexander did was tweet the idea at Stallone and post it all over the internet; those actions were not compatible with expecting compensation, since the idea was widely available for free. There was never any communication between Alexander and the defendants, so the court found that it "strain[ed] reason" to imply an agreement for compensation from an unanswered tweet and the posting of the idea in other places on the internet.  

Finally, the unjust enrichment claim also failed. Alexander could not allege how the defendants benefitted from his idea, since he never alleged how the defendants accepted the idea. At any rate, since the idea was available for free all over the internet, the court stated that it was "unclear" why the defendants should be expected to compensate Alexander. 

January 17, 2018 in Celebrity Contracts, Commentary, Film, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Monday, January 15, 2018

In which I arrive at a comic strip idea Marvel wouldn't approve of

I would say this is the time of year when I am perpetually behind, except that that is every time of year, so it's not surprising that it's taken me a bit to blog about Marvel's Create Your Own platform. As the article here makes clear, the terms and conditions require those uploading to the site to provide to Marvel the right to do almost anything it wishes with the material, without limit, notice, attribution, or payment. You can read all of the terms and conditions here.

In addition, the terms and conditions contain a long list of prohibited content, including such vague terms as "sensationalism" (defined as "killer bees, gossip, aliens, scandal, etc." which is one of my favorite collections of nouns ever) and "alternative lifestyle advocacies" (who is deciding what an alternative lifestyle is?), "misleading language" (misleading as to what?), and a catch-all "other controversial topics." (Incidentally, it also includes what I assume is a typo, as it prohibits "suggestive or revealing images" which it defines as "bare midriffs, lets, etc." I assume that's meant to be "legs.")

...Am I the only one who now wants to read a comic strip about aliens who advocate alternative lifestyles and raise killer bees, sharing scandalous gossip and double entendres (also prohibited) with their other alien alternative-lifestyle friends over a couple of glasses of wine (ditto) during their weekly high-stakes poker game (yup), all while baring their midriffs? 

(All of the prohibitions are blanket prohibitions except for graphic violence, which might be approved on a case-by-case basis.)

January 15, 2018 in Commentary, Current Affairs, In the News, True Contracts, Web/Tech | Permalink | Comments (0)

Thursday, January 11, 2018

Starbucks Wins: Enough Coffee in Cup

As we all know, there is a lawsuit for everything, including whether Starbucks deliberately underfills its lattes to save on the cost of milk. This could constitute a breach of express warranty. So argued a group of plaintiffs in the United States District Court for the Northern District of California recently. The court dismissed the argument on a motion for summary judgment. Unknown

Plaintiffs’ arguments were threefold: First, that “when filled to the brink,” Starbucks’ cups hold only exactly the beverage volumes listed on the menus. The court dismissed that argument because Starbucks requires its cup manufacturers to make the cups 8-12% larger than the promised beverage volume. Second, that the milk foam added to lattes should not count towards the beverage volume. However, as plaintiffs themselves had argued that milk foam is a component of a latte, the court quickly dismissed that argument as well. Third, plaintiffs argued that the “fill-to” lines in steaming pitchers used by baristas to make the lattes are too low for the finished product to contain the expressly promised volume. The court also dismissed that as the steam is an essential part of a latte.

In short, the court agreed with Starbucks that plaintiffs could not prove that any false statements had been made at all. What was warranted was also what was sold.

Incidentally, Starbucks is – as many other previously very popular brands – increasingly suffering from an image problem: they have apparently become too boring and basic. Once seen as cool and edgy, they are now seen as too ubiquitous, in large part because they simply have too many stores. Their solution is to open upscale Roasteries and Reserve stores.

Images
Meanwhile, the competition – Dunkin’ Donuts and McDonald’s for example – charge $3 less for coffee than Starbucks. The same fate might be countered by Subway Sandwiches, previously the nation’s second-largest fast-food chain.  They too might have grown too much and too fast. Additionally, Subway’s menus are seen as too boring, especially by younger millennials who prefer a more diverse range of options, including salads and healthier choices."

The Starbucks case is Strumlauf et. al. v. Starbucks Corporation, Case No. 16-cv-01306-YGR.

January 11, 2018 in Commentary, Current Affairs, Famous Cases, Food and Drink | Permalink

Monday, January 8, 2018

Heating oil contracts in the record cold

The news tonight reported on a real-life contracts issue near and dear to my heart, since my grandmother got caught up in an identical situation with her oil. Basically, New England has been in the middle of a two-week stretch of below-freezing temperatures, unusual for us. It's cold here, but not usually -18. Lots of people have contracts with oil companies that provide for automatic tank refill. These contracts are not cheap to enter into. My grandmother's cost hundreds of dollars a year, and that's just for them to show up; we still have to pay for the oil on top of it. But, because everyone's been using more oil than usual, the oil companies have been caught completely unprepared for how many of their automatic-renewal-contract customers have needed oil. How unprepared? Well, my 85-year-old grandmother spent more than 12 hours completely without heat, problematic in the arctic cold we were gripped in. And the problem is: What were our options? We'd paid hundreds of dollars to never be left in a situation, we thought, when our grandmother's tank would go empty. That was supposed to be the point of the contract, that we wouldn't have to worry about her running out of oil. But that was exactly what happened. 

And, as the news report makes clear, once you enter into this contract, you're not allowed to get your oil from anybody else. So we were in a situation where we couldn't get the service we'd paid for, and we were prohibited by contract from getting the service from anyone else. As the news report states, the oil company may waive the fee on a case-by-case basis. But, for many people on limited incomes dealing with already expensive heating costs, taking the risk of being charged a $399 fee might not be acceptable. 

January 8, 2018 in Commentary, Current Affairs, In the News, True Contracts | Permalink | Comments (2)

Tuesday, December 19, 2017

If you're going to release your right to pursue unknown claims, you'd better mean it

A recent case out of the Seventh Circuit, ADM Alliance Nutrition, Inc. v. SGA Pharm Lab, Inc., Nos. 16-2331 and 16-2953, reminds us all that signing a release of unknown claims can, indeed, do exactly that. (You can listen to the oral argument here).

The parties in question were two sophisticated commercial parties with presumably access to legal advice if they desired it. When they terminated their business relationship, they signed a release from all claims, known or unknown. ADM then later discovered alleged fraud on SGA's part during the course of their former business relationship and sought to sue for this fraud. The Seventh Circuit, however, enforced the plain language of the release, noting that releases are permitted to encompass unknown fraud claims: 

Two sophisticated businesses signed an agreement to walk away from each other here. ADM chose to relinquish its right to bring any and all claims arising out of the Purchase Agreement, whether known or unknown. It also agreed that no representations were made to induce it to enter into the Termination Agreement other than those contained in the agreement.

Therefore, the release was enforced. Let this be a word of warning: Be careful when signing releases. 

December 19, 2017 in Commentary, Recent Cases, True Contracts | Permalink | Comments (0)

Monday, December 18, 2017

Facebook's terms of use have gaps that leave consumers powerless

Venkat Balasubramani over on Technology and Marketing Law Blog has a piece on the defeat of a recent lawsuit against Facebook based on Facebook's tracking of logged-out users on third-party websites. The court had previously rejected other claims, which left only contract-based claims, which the court also rejected in this most recent ruling. Basically, Facebook's statements about not tracking logged out users could not be found in the terms of service. Instead, Facebook made them in other documents, like data use policies and help center pages. Therefore, the court found there was no contractual provision governing Facebook's behavior. 

As the blog notes, "Ouch." It takes the court a long time to wade through Facebook's voluminous documents to determine what is and is not a contractual promise, an act that we surely can't expect the typical consumer (even if a lawyer) to engage in. This ruling seems to allow Facebook to be a little bit coy about where it makes its statements in order to avoid certain claims. The gap on tracking logged-out users in the terms of use seems to leave consumers without a cause of action here, and to make it difficult for consumers to piece together all of the documents to determine Facebook's true stance on the issue. 

December 18, 2017 in Commentary, True Contracts, Web/Tech | Permalink | Comments (0)

Monday, December 11, 2017

Contracts Law Contributing the Greatest to MBE Performance

Were you aware of this?  A first-of-its-kind study exploring the relationship between specific law school courses and components of the bar exam has identified Contracts as making the greatest contribution to performance on the Multistate Bar Examination among first-time takers.  Most of the other MBE-subject courses showed no significant contribution to overall MBE performance.  Austin, Christopher, and Dickerson, Will I Pass the Bar Exam?: Predicting Student Success Using LSAT Scores and Law School Performance, 45 Hofstra Law Review 753, 772 (2017), available here: http://www.hofstralawreview.org/wp-content/uploads/2017/06/BB.2.Austin-et-al.NEW_.pdf

Hat tip to Otto Stockmeyer for this story!

 

December 11, 2017 in Commentary, Contract Profs, Law Schools | Permalink

Friday, December 1, 2017

Casual, young, fun Mexican restaurants have to be allowed to play music!

Montana brings us an anticipatory breach case about a Mexican restaurant, Bridger Del Sol, Inc. v. VincentView, LLC, DA 17-0186

Bridger Del Sol ("BDS") leased some property from VincentView for the purpose of operating a "casual, young, fun Mexican restaurant." I appreciate these adjectives. BDS's Mexican restaurant sounds like a place I'd want to be friends with. 

BDS opened its casual, young, fun restaurant but the upstairs tenants turned out to not be so keen on their hip new downstairs neighbor, complaining about noise and cooking smells. VincentView then sent BDS a Notice of Default and stated that it would take over the premises prior to the expiration of the lease unless BDS stopped playing music and emitting cooking odors. 

The court characterized that as an anticipatory breach on VincentView's part. As the court noted, "Restaurants commonly play music and must cook. Thus, VincentView's new rules were not reasonable or fair to BDS." This was therefore a breach of VincentView's duty of good faith and fair dealing and VincentView would have been unjustified in retaking the premises as it threatened unequivocally to do. 

December 1, 2017 in Commentary, Recent Cases, True Contracts | Permalink | Comments (0)

Thursday, November 30, 2017

Here's an Example of an Illegal Contract

I always struggle to think of examples of illegal contracts other than contracts to kill people, which makes for a dramatic class discussion but I fear might cause the students to write off illegal contracts as a subject better suited for Breaking Bad or something. So I was delighted to come across this recent case out of Michigan, M-D Investments Land Management, LLC v. 5 Lakes Adjusting, LLC, No. 336394 (behind paywall), dealing with an illegal contract. 

While the contract is found illegal in this case, the facts are not glamorous. The plaintiff hired the defendant to adjust its fire insurance claim and signed a contract for the services. Later, the plaintiff filed this action seeking a declaration that the contract between the parties was illegal as against public policy, and therefore voidable at the plaintiff's option. The issue was that the contract had not been approved by the Department of Insurance and Financial Services ("DIFS") as required by Michigan statute. 

The trial court found the contract in violation of the statute and thus voidable, and this appellate court agreed. The statute required the adjuster to seek approval from DIFS of its contract, and the defendant's failure to do so, no matter the reason, made the contract at least voidable at the plaintiff's option (which the plaintiff had chosen to exercise), if not void altogether. 

The defendant argued that it has since obtained DIFS approval of its contract. However, it was undisputed that it did not have this approval for the entire time the contract with the plaintiff was in effect. Thus, the contract could not be saved by after-the-fact approval.  

November 30, 2017 in Commentary, Law Schools, Recent Cases, Teaching, True Contracts | Permalink | Comments (0)

Wednesday, November 29, 2017

If You Really Want a Meeting, Don't Be Casual About It - Propose a Time!

As a recent case out of Utah, Desert Mountain Gold LLC v. Amnor Energy Corp., No. 20160654-CA, reminds us, if your contract tells you what to do, you'd better do it. 

In the case, the two parties had entered into a contract regarding mining claims. Desert Mountain allegedly breached the contract, which Desert Mountain disputed. Under the terms of the contract, in the event of a disputed breach such as this, the parties were required to "hold one informal meeting" before resorting to legal proceedings. Amnor sent Desert Mountain a communication stating that it was "willing to meet to discuss" the dispute. When Desert Mountain never took them up on the offer to meet, Amnor argued that it was justified in treating the contract as breached. 

The court disagreed, because the court found that Amnor's statement was merely "casual[]." That was not enough to fulfill the requirement of holding an informal meeting. It should proposed a time to meet. Further, Amnor did not argue that Desert Mountain was in breach until fourteen months later, when Desert Mountain accused Amnor of being in breach for missing a royalty payment. The court said that violated the contract's "demand that it promptly seek legal action in the event that an informal meeting proved to be unsuccessful." 

I quoted that in full because I think it's an interesting finding. The relevant clause as excerpted by the court states that, if the informal meeting is unsuccessful, the dispute "shall be resolved in a legal proceeding." The only place "promptness" seems to show up as a requirement is when the court reads it in. It's unclear what timeline the court would have viewed as prompt, given the contract doesn't provide for one, except that this one wasn't it. 

The lesson from this case seems to be that if your contract calls for an informal meeting, you'd better not be casual about asking for it. Your informal meeting demands a little more proactive effort on your part. After all, we all know when people vaguely say "We should get together soon," no plans ever materialize!

November 29, 2017 in Commentary, Recent Cases, True Contracts | Permalink | Comments (0)

Tuesday, November 21, 2017

Desperate times for law schools

As widely reported elsewhere such as by  David Frakt in The Faculty Lounge, law schools seem to be turning desperate to hide their student recruiting practices and ABA communications (see, e.g., Desperation Times at Thomas Cooley).  That blog post was cited to by the ABA in its brief in opposition to a motion filed by the Cooley law school for a temporary restraining order and preliminary injunction in an attempt to prevent the ABA from publishing a letter online stating Cooley's noncompliance with at least one accreditation standard. Images

Of course, law students choosing to attend law school execute legally binding contracts with their schools.  So do employees choosing to work for these schools, many of which seem to be on the brink of discontinuation of operations.  For how much longer can we as law schools continue defending _not_ telling applicants the real truth about their prospects for passing the bar given our applicants' LSAT scores which are, we have to admit, highly determinative in predicting ultimate bar passage rates?  Is what we do ethical and professional?  Do we even follow contract laws against fraud in the inducement, or torts fraud laws, when we as schools have information that could and likely is crucial to applicants' decision-making?

David Frakt developed what he calls a "risk band" that correlates LSAT scores and students' risk of failing the bar.  Taking that even further, shouldn't applicants be told their _individual_, percent-wise chance of passing the bar?  If, for example, students know that with an LSAT score of 143 (this is just a random example), they have virtually zero chance of passing the bar, would they still execute a three-year contract with a law school that may cost them upward of $100,000?  I doubt it.  More honesty and transparency is clearly required in both the law school hiring and admissions world.

 

November 21, 2017 in Commentary, Contract Profs, In the News, True Contracts | Permalink

Thursday, November 9, 2017

The Weinstein Protection Machine Was Fueled by Contracts

I mean, our entire society is filled with contracts, so it's no surprise that Harvey Weinstein was surrounded by a web of contracts designed to protect himself from accusations. Not just the NDAs I've previously discussed, but also contracts with his lawyer and with the investigators they hired. Not to the mention the interaction between his contracts with the National Enquirer's publisher and the National Enquirer's information. Because Dylan Howard at the National Enquierer's publisher considered himself to have to act in Weinstein's best interests because of other business deals, it affected the way National Enquirer used the information gained by its reporters. 

You can read the whole story here. It's extremely lengthy and I have not done it justice at all in this tiny blog entry, but it's got a lot about contracts there: what they said, why they existed, what was being done under them, etc. Just...a lot of contracts. All of them to keep people silent. 

November 9, 2017 in Celebrity Contracts, Commentary, Current Affairs, In the News, Labor Contracts, True Contracts | Permalink | Comments (0)

Sunday, November 5, 2017

St. Vincent de Paul trademark battle falters on breach of contract and promissory estoppel, but unjust enrichment survives

I think there is sometimes an impression out there that implied-in-fact contracts can be used to save all situations where formal contracts weren't executed, but that is definitely not the case. Implied-in-fact contracts still require some allegation of contractual intent between the parties. A recent case out of the Western District of Wisconsin, National Council of the U.S. Society of St. Vincent de Paul, Inc. v. St. Vincent de Paul Community Center of Portage County, Inc., 16-cv-423-bbc, reiterates this. (Actually, this case dates from late May, but just crossed my inbox now. No idea why, but I'll blog it for you anyway!)

The case is a trademark dispute over several trademarks owned by the plaintiff. The plaintiff sued the defendant for trademark infringement and the defendant asserted a number of counterclaims, including breach of contract. The defendant's breach of contract claim was based on a "contract implied in fact" because the plaintiff allegedly knew (either constructively or actually) about the defendant's use of the marks and the course of dealing between the parties created an implied contract regarding this use. But the complaint failed to show any intention to contract between the parties. Rather, its allegations illustrated that the parties coexisted but that they did so independent of each other. 

Even if there was an implied-in-fact contract, though, it would be terminable at will, meaning that the plaintiff could terminate it when it objected to the arrangement. The court refused to infer that any implied-in-fact contract waived the plaintiff's trademark rights against defendant in perpetuity, considering that there was so little evidence of any contractual intent in the first place. 

The defendant next asserted promissory estoppel but there was no allegation the plaintiff had ever made any promise that the defendant could rely on. The defendant's unjust enrichment claim, however, was allowed to proceed. The defendant had alleged that the plaintiff would benefit unjustly from the goodwill the defendant had built up in the community and that was enough to survive the motion to dismiss. 

November 5, 2017 in Commentary, Recent Cases, True Contracts | Permalink | Comments (0)

Thursday, November 2, 2017

Shenanigans with a fake ruby at an auction

This recent case out of Nevada, Edy v. McManus Auctions, No. 70737 (behind paywall), caught my eye because it has facts that sound like a hypo. Basically, Edy attended a McManus auction. Prior to the auction, he examined what was purported to be a ruby pendant with a certificate estimating its value as $127,500. At the auction, Edy won the pendant with a bid of $15,842. However, when he brought the pendant to be appraised, he learned it was not a ruby and was only valued at $8,675. 

Edy sued for breach of contract, unjust enrichment, and fraudulent misrepresentation, inter alia. However, his fraudulent misrepresentation claim was struck after he failed to submit a timely damages calculation pursuant to a court order. On an incomplete appellate record, the court found that the district court did not abuse its discretion in striking these claims. That left a contract claim without any allegations of misrepresentation, and the court found that the contract entered into at the auction was valid and binding. So Edy lost. 

However, a concurrence in this case talked more about the misrepresentation allegations. The concurrence agreed that the district court's striking of the allegations was not an abuse of discretion, but the concurrence went on to analyze those allegations as if they have been permitted. McManus, at trial, admitted that the pendant was shown before the auction with a certificate claiming it was a ruby worth $127,500, just as Edy had claimed. McManus also testified that it knew there was a reserve price of $10,000, meaning that was the minimum acceptable bid, which was obviously far lower than the estimated value. Nevertheless, McManus did not independently verify the pendant nor did it disclose to the bidders that it might not be genuine or that it had such a low reserve price nor did it allow the bidders to get independent appraisals before the auction. Representations of value, the concurrence noted, are usually tricky bases for fraud, but here the pendant was unequivocally presented as a genuine ruby worth $127,500. The concurrence thought that was sufficient to constitute representations on behalf of McManus, had those allegations not been struck. But, without an adequate appellate record, the concurrence agreed that the district court's decision could not be reversed. 

This case is a little tragic to me. I'm not sure what happened at the district court level, but it seems like the concurrence thinks the auction company was behaving questionably here. The concurrence stands as a warning to the auction company to be cautious about its practices in the future. 

November 2, 2017 in Commentary, Recent Cases, True Contracts | Permalink | Comments (0)

Monday, October 30, 2017

The Culpability of NDAs in Perpetuating Sexual Assault Culture

In the wake of the Weinstein revelations, everyone is talking about it: NDAs seem to be part of the problem. They were used consistently to silence people from speaking out. The NDA seemed to be how you could get away with it, as Weinstein's last-ditch offer to Rose McGowan to keep the lid on the story seems to illustrate. You can read criticisms of NDAs at Vox, Variety (and again), CNN (and again), the New York Daily News, Above the Law, and Forbes. And that was just my first page of Google results. I've been blogging about the danger of them for a while. It's not just the rich and powerful using them; college campuses are also using them in the sexual assault context. And they're not just being used to cover up sexual abuse; Amber Heard's NDA restricted her from apparently ever even mentioning domestic abuse at all. It's easy to see why NDAs are popular among the powerful (the President also loves them). They allow complete and total control of the narrative. An NDA can make it a legal breach for you to tell the truth; an NDA can indeed make it legally enforceable for you to lie, basically. And, in this way, the fuzzy line between truth and fiction becomes fuzzier and fuzzier. And people get victimized and feel alone and the culture of contractual silence makes them lonelier, depriving them of support systems. 

NDAs also exist for lots of valid and important reasons. But they are also being widely and abusively used and we as a society need to confront that. The question isn't why less powerful people sign these NDAs. Until we can fix power imbalances (and we're a long way from that), it's always going to happen. But we should really question the public policy justifications for NDAs in certain circumstances. These past couple of weeks have spotlighted lots of troubling systemic issues in our society. This is one of them. 

October 30, 2017 in Celebrity Contracts, Commentary, Current Affairs, In the News, Labor Contracts, Law Schools, True Contracts | Permalink | Comments (0)

Sunday, October 29, 2017

Whitefish Energy - Strongarming Puerto Rico into Contractual Acceptance and Compliance?

As reported on The Hill and in several other national and international news outlets, tiny Montana energy company Whitefish Energy – located in Interior Secretary Ryan Zinke’s very small hometown – stands to profit greatly from its contract with the Puerto Rico Electric Power Authority. That’s fine, of course. However, highly questionable issues about the contract have surfaced recently.   For example, Whitefish very famously prohibited various government bodies from “audit[ing] or review[ing] the cost and profit elements of the labor rates specified herein.” DNHKNDgW4AACWYJ

What were those? The Washington Post reports that under the contract, “the hourly rate was set at $330 for a site supervisor, and at $227.88 for a ‘journeyman lineman.’ The cost for subcontractors, which make up the bulk of Whitefish’s workforce, is $462 per hour for a supervisor and $319.04 for a lineman. Whitefish also charges nightly accommodation fees of $332 per worker and almost $80 per day for food.” Another news source notes that “[t]he lowest-paid workers, according to the contract, are making $140.26 an hour. By comparison, the minimum wage in Puerto Rico is $7.25 an hour … [T]he average salary for a journeyman electrical lineman is $39.03 per hour in the continental U.S. However, a journeyman lineman on Whitefish Energy's Puerto Rico project will earn $277.88 per hour.”

Little wonder why the company did not want anyone to “audit or review” its labor rates. If it wasn’t for the apparent “old boy”/geographical connections that seemed to have led to this contract to have been executed in the first place, hopefully no Puerto Rican official would have accepted this contract in the form in which it was drafted.

But it doesn’t end there. When the San Juan mayor called for the deal to be “voided” and investigated, Whitefish representatives tweeted to her, “We’ve got 44 linemen rebuilding power lines in your city & 40 more men just arrived. Do you want us to send them back or keep working?”

To me, this entire contract to violate several established notions of contract law such as, perhaps, undue influence or duress (in relation to contract formation but perhaps also, if possible, to continued contractual performance), bad faith, perhaps even unconscionability, which is a alive and well in many American jurisdictions.

This could work as an interesting and certainly relevant issue-spotter for our contracts students. It also gives one a bad taste in the mouth for very obvious reasons. It will be interesting to see how this new instance of potentially favoring contractual parties for personal reasons will pan out.

October 29, 2017 in Commentary, Contract Profs, Current Affairs, Famous Cases, Government Contracting, In the News, Labor Contracts, True Contracts | Permalink | Comments (0)