Monday, December 12, 2016
If you've ever been in charge of taking care of a swimming pool, you know that it has a lot of moving parts and requires a working knowledge of chemistry and an adroitness at mathematics that is often lacked by those who become lawyers.* So I started reading this case because the first sentence told me it was about a swimming pool, but it's an interesting and fairly straightforward situation of contract ambiguity being resolved by extrinsic evidence. If you're looking for a recent case for your students to see this in action, this one might be it.
The case is Horizon Pools & Landscapes, Inc. v. Sucarichi, No. 01-15-01079-CV, out of Texas. Sucarichi entered into a contract with Horizon to install a swimming pool and spa. The dispute centered around the number of lights Horizon was supposed to install. Sucarichi alleged that Horizon was supposed to install three lights total: two in the swimming pool and one in the spa. Horizon maintained that it was supposed to install two lights total: one in the swimming pool and one in the spa.
The contract was ambiguous on this point. The contract was divided into many different sections. The relevant ones were as follows:
- A section reading "Lights(s)" [sic] with the handwritten notation "(2) L.E.D."
- A section reading "Pool Light" with a handwritten notation that was illegible
- A section concerning the spa reading "Light 100 watt."
The court found that it was equally plausible that the contract here required three lights total, with the first general light section referring to two in the swimming pool and the spa section referring to one, or that the contract required two lights total, with the first general light section giving just the total of lights to be installed between the swimming pool and the spa. The illegibility of the "Pool Light" section made this question impossible to resolve without looking to extrinsic evidence.
Horizon admitted that its salesman filled out the contract (including the illegible notation). Horizon also did not contest that its salesman told Sucarichi he needed to have two lights installed in his swimming pool. Sucarichi testified that he thought the contract provided for two lights in the swimming pool, based on the Horizon salesman's recommendation, and one light in the spa, for three total. He wrote as much in a letter to Horizon prior to the beginning of the court case, when he was trying to get Horizon to add the second light. Therefore, the court thought there was sufficient proof that the parties had agreed to install a total of three lights, with two in the swimming pool and one in the spa.
One of the lessons to take away: Make sure your contracts are legible!
*gross overgeneralization based on me and my frequent intense confusion when I try to take care of our family swimming pool. My talents lie elsewhere!
Wednesday, December 7, 2016
When the legendary musician Prince died suddenly, he left behind an enormous volume of music and no will. The courts have already been dealing with how to distribute Prince's assets to a complicated and squabbling cadre of potential heirs. The rights to all of his music have raised their own complicated issues that have most recently manifested themselves in a lawsuit in the District of Minnesota, NPG Records, Inc. v. Roc Nation LLC, Case No. 16-cv-03909.
The case revolves around Roc Nation's streaming of Prince's music on its streaming service Tidal, and whether or not it had the contractual rights to do so. Roc Nation alleges yes, based on what it terms both written and oral agreements that it struck with Prince before his death. Commentators have tried to draw conclusions about these agreements based on Prince's statements and other behavior before his death. NPG, meanwhile, claims that there was a single contract between Prince and Roc Nation and that it only allowed Roc Nation to stream a very limited number of songs, which Roc Nation has now violated in streaming a much wider variety of Prince's song catalog. The case has been reported on in multiple places, including here and here and here and here.
If this case progresses, it seems like it's going to require an untangling of written contracts between the parties, whatever oral statements Prince will allege to have been made, and the interaction between the two. It adds an interesting layer to consider that Prince was notorious for fighting for artists' rights to their music and had a fraught relationship with online streaming of music. He does seem to have favored Tidal above the other Internet services. In any case, although NPG claims that there was never any such license and Tidal has been infringing the songs' copyright since it began streaming them, NPG has already proactively sought to cancel any license that Prince may have granted to Roc Nation to stream the music in question.
(I'd post something Prince-related from YouTube, but Prince didn't like his music to be on YouTube. And, in fact, Lenz v. Universal Music Corp., the recent case that wended its way through the Ninth Circuit and is currently on petition to the Supreme Court, involves a Prince song in a YouTube video.)
Recently, Donald Trump famously tweeted that “Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!” Trump has not said why he believes the planes will cost "more than $4 billion." Boeing says it currently has an Air Force One contract worth $170 million.
This raises several contractual issues that could be used as an interesting issue-spotting practice for our students. At first blush, it seems like an impossible attempt at a breach of contract that would, conversely, at least give very reasonable grounds for insecurity if not constitute an anticipatory repudiation outright.
Needless to say, Trump’s remark that “[w]e want Boeing to make a lot of money, but not that much money” finds no support in contract law. One contractual party has no control over how much money the other party should make. One would have thought that Trump – as a staunch “market forces” supporter – would have understood and embraced that idea, but that either was not the case or he is flip-flopping in that respect as well.
Digging deeper into the story, however, it turns out that “not even [Boeing] can estimate the cost of the program at this time, since the Pentagon has not even decided all the bells and whistles it wants on the new Air Force One." Further, “without knowing all the security features, it is hard to estimate the cost … and the Air Force isn't even sure whether it wants two or three of the planes.” Does a contract even exist at this point, then, when the essential terms have apparently not been mutually agreed upon, or is there simply an unenforceable agreement to agree? A valid argument cold be made for the latter, I think.
Mr. Trump has been accused of overestimating the cost of the planes. Does he, however, have a point? “So far[,] the Air Force has budgeted $2.9 billion through 2021 for two new Air Force Ones.” It is not inconceivable that the price tag may, in these circumstances, run higher than that. That circularity goes back to the essential terms – the price in this case – arguably not having been decided on yet.
There might, of course, be other issues in this that I have not seen in my admittedly hasty review of the story, but it is interesting how the media jumps at a legally related story without thoroughly or even superficially attempting to get the law right.
Thursday, December 1, 2016
How is this for a most bizarre contract law decision: The Chicago Housing Authority (“CHA”) contracted with architectural and engineering company DeStefano and Partners (“DeStefano”) for consulting services in connection with the construction of seven multifamily residential buildings. CHA required a certain percentage of the homes to comply with Section 504 of the Rehabilitation Act of 1973 and other federal law (some of the housing was to be accessible by mobility impaired individuals, some by elderly residents). Among other things, DeStefano was made contractually aware that the company was to “certify that all work was performed under the direct supervision of the Project Architect and that it conforms to… the American with Disabilities Act of 1990 … [and] Section 504 of the Rehabilitation Act of 1973.”
During the construction, CHA was notified by HUD that the project did not meet the various federal requirements. CHA hired another architecture firm to perform the work necessary to comply with its obligations under the voluntary compliance agreement with HUD. CHA incurred more than $4.3 million to bring the buildings into compliance with federal standards and brought suit against DeStefano for material breach of contract.
DeStefano defended itself by, at bottom, arguing that since CHA had a nondelegable duty to comply with the federal accessibility standards, it should not be able to recover damages from DeStefano for CHA’s failure to do so. In other words: “It’s your own fault that you have this problem, not ours, even though we were the designers and the problem was with the design.” Yah.
But wait, it gets better than that: the court agreed! It apparently bought wholesale defendant’s argument that “permitting CHA to proceed with its state-law breach of contract action would discourage CHA from fulfilling its own obligations to prevent discrimination under Section 504 and the ADA, directly undermining the goal and purpose expressed by Congress in enacting those statutes.” It also stated that “notably, however, … there are no provisions within the ADA, or its accompanying regulations, that permit indemnification or the allocation of liability between the various entities subject to the ADA.” The court found that CHA’s duties were, as mentioned, nondelegable and, because the duties were imposed on CHA by HUD, CHA’s failure to comply was the problem. “CHA was a ‘wrongdoer’ in the sense that it failed to ensure the subject premises complied with the applicable federal accessibility standards in order to prevent discrimination.”
Wait a minute! So, in trying to make sure that the housing in fact complied with the law, the housing authority was found to have violated it! That’s just crazy.
This case may work as a good example if you want to train your students how to identify faulty reasoning and logic by courts.
The case is can be found here. Hat tip to Justen Hansen of WesTech Engineering for bringing this to my attention. http://www.westech-inc.com/en-usa
Wednesday, November 30, 2016
I am always saying to my students that if they care about something, they should put it in their contract, and they should be specific about what it is they want. I think sometimes people might think there's something to gain strategically by being vague, but introducing ambiguity into a contract can work out very poorly (and also takes control out of the hands of the parties). A recent case out of Florida, Boardwalk at Daytona Development, LLC v. Paspalakis, Case No. 5D15-1944, is a case where the court, faced with an ambiguous description of the land at issue in a contract, just threw up its hands in frustration.
The dispute between these two parties has been long and contentious. According to this article, it's dragged on for over a decade. It was originally rooted in an eminent domain proceeding in which Boardwalk at Daytona ("BDD")'s predecessor obtained property belonging to Paspalakis and the other appellees. The appellees contested BDD's acquisition of their land and eventually that lawsuit was settled. The settlement agreement provided the appellees with an option to purchase and operate 7500 square feet of retail space on the Daytona Boardwalk. The agreement contained no legal description or street address for the property at issue. The agreement said that the land would: (1) be adjacent to another particular business; (2) have a minimum of 50 boardwalk frontage feet; and (3) have sufficient land to build a 7500-square-foot, one-story building. Unfortunately for the appellees, there were at least three parcels of land that met this description, and they ranged drastically in size from around 7700 square feet to over 17,000 square feet.
The problem with the description of the land in the settlement agreement was exposed when the appellees tried to operate their option. BDD offered a piece of property that met all three criteria set forth in the settlement agreement. However, the property required unusual structural design features that troubled the appellees and also came with a negative easement for light, air, and unobstructed view that benefitted the BDD property next door. The appellees therefore objected to this plot of land and asked for another one.
BDD sought a declaratory judgment that the plot of land it proposed was sufficient under the settlement agreement and that it did not have to provide another plot of land. The appellees, in response, sought specific performance that BDD provide a plot of land fitting the description in the settlement agreement, without the restrictions of the land BDD had offered. In the face of the counterclaim, BDD shifted stance and argued that the settlement agreement was too ambiguous to be enforced.
The trial court sided with the appellees and ordered BDD to convey the largest possible plot of land to the appellees. BDD appealed, and this court agreed with BDD. The court noted that a description of the land in question is usually considered an essential part of any land purchase agreement, and that without any such description there are serious doubts whether the parties reached a meeting of the minds. The description of the land in the settlement agreement here was ambiguous. The trial court correctly examined parol evidence to try to resolve the ambiguity, but it didn't help. The contract terms at issue here simply could have been fulfilled by any of three very different parcels of land. To this court, there was no contractual way to choose between them and no parol evidence that shed light on which parcel of land the parties had in mind. Indeed, the court was skeptical the parties ever really agreed on which parcel of land would be conveyed, and so the parties never reached a meeting of the minds that could be enforced. Therefore, the court reversed the order of specific performance and entered judgment for BDD instead.
A bitter pill here for the appellees, who doubtless thought that they were getting something of value in the settlement agreement they struck and end up with nothing to show for it. But it does seem like there was considerable confusion about which land was affected by the situation here. I guess it's a lesson to all of us: try to be as specific as possible. I tell my students drafting contracts is frequently like playing a game of what-if with yourself. What if BDD offers this parcel of land instead of that parcel of land? If the answer to that question is that you would prefer one parcel of land over the other, best to be specific in the contract.
The lease for the Trump International Hotel, housed in Washington’s historic Old Post Office Pavilion owned by the federal General Services Administration (“GSA”), contains a clause forbidding elected officials from involvement. Trump, as president, essentially would be both landlord and tenant.
That may be an ethical problem as well as a federal contract law violation. Trump would oversee the GSA and appoint its administrator ― a conflict of interest with his hotel interest. GSA officials are looking into the matter.
Steven Schooner and Daniel Gordon, former government officials who specialize in federal contract law, have recommended that GSA “immediately end the hotel lease relationship, before Trump becomes president” to avoid ethics problems. Of course, if GSA terminates the lease contract, it risks litigation potentially with… Trump as a winner.
However, says Schooner, that’s a risk worth running. “In the end, it’s just a frigging lease.” It would also be a president heavily involved in private business affairs over which he would exercise significant power, real and perceived. But that may just be how our country is developing these days. We frown on similar behaviors in relation to other countries, but when it comes to our own, we are apparently either becoming accepting of unacceptable behaviors or powerless to do much about them.
Thursday, November 24, 2016
As our friends on the Faculty Lounge just announced, Dean Schwartz was just forced to step down as Dean of the University of Arkansas, Little Rock, School of Law. Why? After the recent presidential election, he sent an email to students offering counseling to those upset by the results. Similar initiatives were undertaken around the nation in places so politically and geographically different as the University of South Dakota and Occidental College in Los Angeles.
Apparently, what really cost Dean Schwartz his position was his personal opinion given in the email, namely that the services would be offered to students who “feel upset” following the “most upsetting, most painful, most disturbing election season of my lifetime.”
A colleague of Schwartz's, Robert Steinbuch, who previously tussled with Schwartz over diversity in admissions, explained [cite to FL]: “If you tell people every time they lose they’re entitled to counseling, you elevate the perceived level of wrong beyond what it is. Most assuredly, Democrats are disappointed a Republican won. I recall when the Democratic Party won the Presidency twice each of the previous two elections. I knew plenty of people who were disappointed at that time, but I didn’t know anybody that needed grief counseling. I think when we tell people that they need some form of grief counseling we are normalizing hysteria and suggesting there’s something immoral or wrong about our democratic process.”
How incredibly misunderstood and off point. First, there really is something wrong about our democratic process when repeatedly, the person winning most of the popular votes in an election does not become the president. Similarly, our two-party only, “winner takes it all” system is arguably not a sufficiently faceted system that can be considered to be a true representative, deliberative democracy. But I get that, the system should then be changed before the next election. That won’t happen, just like time after time, mass shooting episodes don’t cause a change to our gun laws or the mass murder situation in general. Such is our country, and so be it, apparently.
What is incredible to me in relation to the above is not Schwartz’ alleged normalization of “hysteria” (read: justified outrage), it is attempts to make this particular election appear normal. It simply was not. Everyone seems to agree on that, Democrats and Republicans alike. In fact, note that many Republicans were outraged as well – and for good reason. Should it be acceptable that we now have a President who, for example, is proud that he “grabs women by the pussy” and “just start[s] kissing them” whether or not they want it? Someone who claims that he is “smart” for not paying taxes for, apparently, many years to a country that he wants to lead, even though he could easily afford doing so? A person who, in spite of sound science proving otherwise until at least yesterday claimed that climate change is a “hoax made up by the Chinese”?
I would hope not. But as we see, apparently that is what we just have to put up with and not even opine about, even in legal academia, in the form of a sentence as innocuous as one that refers to simple, but honest, feelings shared by millions of other people as well.
Throughout history, censorship has never proved particularly effective. As a nation, if we seek to revert to such strategies, we are truly in trouble. Schwartz’ comments may well have upset Republican law students, but maybe that in and of itself would have had some value, especially in an academic setting where thoughts are valued for being just that; thoughts that just might help improve our nation.
On an up note: Happy Thanksgiving, and thanks to Michael Schwartz for being a such a courageous, thoughtful dean and legal scholar!
Greetings from Berlin.
November 24, 2016.
Wednesday, November 23, 2016
A recent case out of West Virginia, Stiles Family Limited Partnership v. Riggs and Stiles, Inc., No. 16-0220, does a nice job analyzing the fact that an anticipatory breach must be unequivocal. The fairly straightforward facts could be a useful way of helping to illustrate this topic the next time you teach it.
The parties (all members of the same family) entered into a lease under which Riggs and Stiles agreed to farm the property at issue. The lease has been in effect since 2006 without dispute until 2013, when Riggs and Stiles allowed a production company to file an application for a permit to hold a music festival on the farm property. When Stiles Family Limited Partnership learned of the application, they objected; the following month, when they failed to convince the Partnership to allow them to hold the music festival, Riggs and Stiles withdrew the application, and no music festival was ever held on the property. However, the Partnership tried to terminate the lease, arguing that Riggs and Stiles had anticipatorily repudiated the lease when it permitted the filing of the application. The Partnership claimed that this permission by Riggs and Stiles demonstrated an unequivocal intent on their part to use the land for something other than farming, in violation of the terms of the lease, and it made sense to treat the lease as breached as the moment of application rather than having to wait for the music festival to actually take place.
The court disagreed, however. It was undisputed that Riggs and Stiles had at all times farmed on the land, never stopping and continuing to farm on the land even after the filing of the application. The application alone was not a breach of the promise to use the land only for farming, as it was undisputed that it was all Riggs and Stiles ever did. And continuing to farm the land was not consistent with an unequivocal repudiation of the lease, because it was actually what Riggs and Stiles was required to do under the lease. Performing consistent with the lease couldn't be considered an unequivocal repudiation of the lease. Moreover, when the Partnership informed Riggs and Stiles that it didn't agree to the music festival being held on the land, Riggs and Stiles withdrew the application for the permit. Rather than being an unequivocal intent to breach the contract, that displayed equivocation on the part of Riggs and Stiles: they sought to take actions to not breach the contract.
Monday, November 21, 2016
My love for the British car show "Top Gear" over the past few years was deep and abiding, despite the fact that I am not interested in cars at all. Like most of the people I know, I watched Top Gear for the hosts, Jeremy Clarkson, Richard Hammond, and James May--a trio of men whose friendly and hilarious chemistry was, I thought, a little like capturing lightning in a bottle; it comes around so infrequently that it's striking when it does.
For a taste of what this version of Top Gear was like, please enjoy my personal favorite, one of the caravan episodes:
Or maybe you would prefer one of the boat-car episodes:
The Top Gear Wikipedia entry details that the show's popularity resulted in consistently high ratings, a waiting list for tickets to the stage-filmed portion of the show that numbered in the hundreds of thousands, and a Guinness World Record for the world's most widely watched factual television show.
There have been a number of high-profile Top Gear events over the years that I could document here, from Richard Hammond's terrifying crash while filming the show to the fascinating contractual dispute over the Stig, the show's famously anonymous racing driver, revealing his true identity.
But what I'm really focusing on in this entry is the fact that the Top Gear hosts have a new show, "The Grand Tour," that looks a whole lot like their old show, and it made me wonder what their contracts looked like.
The hosts left Top Gear over controversially. The BBC declined to renew Jeremy Clarkson's contract in March 2015, following an attack by Clarkson on one of the producers on the show (later the subject of a lawsuit that Clarkson settled for a hundred thousand pounds and a formal apology). The other two presenters, Hammond and May, also had contracts up for renewal and chose not to re-sign with the BBC, instead following Clarkson to Amazon, where the trio have launched a show called The Grand Tour.
I didn't know what to expect from The Grand Tour but it turns out to be Top Gear by a different name. Where Top Gear had a Stig, The Grand Tour has "the American" -- and they tell us who he is right off the bat, rather than get embroiled in that kind of controversy again. Top Gear had a segment called, simply, "The News"; The Grand Tour launched a similar segment called "Conversation Street." Top Gear had a segment called "Star in a Reasonably Priced Car"; The Grand Tour...well, you should watch the show for its take on that segment. This review does a nice job running down all the similarities between the old show and the new.
This all fascinated me from a contract perspective. I knew that Clarkson had previously co-owned the commercial rights to Top Gear. He sold them to the BBC in 2012 for fourteen million pounds. So, having given up those rights and left the BBC, Clarkson clearly couldn't keep making "Top Gear." But he is making a motoring show that is almost identical in every cheeky winking respect to the one he left behind (right down to a simple title highlighting a prominent "T" and "G").
I do think, from an IP point of view, the new show seems safe: they've been careful to avoid any trademarks and only seem to resemble Top Gear in the uncopyrightable idea level, i.e., being a playful show about cars. But I assumed that Clarkson, Hammond, and May had to have had a non-compete with the BBC, so I went looking for it, and I did find evidence that there was one. It apparently prohibited the three from presenting a competing car program for a period of two years. The two years aren't up yet, leaving lawyers to speculate that a conclusion was drawn that the non-compete only applied to terrestrial broadcast stations and not to Amazon's streaming Internet television. The entertainment industry is changing so quickly, it doesn't surprise me that the contracts are having trouble keeping up.
Surely the BBC would have preferred to keep Clarkson, Hammond, and May from kicking a rival car show into production so quickly, especially while the BBC's relaunched Top Gear has reportedly struggled. But apparently their contracts failed to give them sufficient protection to save them from the result.
I will leave for another day the issues of contracts made during the filming of Top Gear itself; like, for instance, the time Clarkson offered to save Hammond from a sinking boat in exchange for a bucket...that turned out to have holes.
And instead I will leave this entry with an acknowledgment that Jeremy Clarkson is a problematic and controversial figure who is not a stranger to making offensive statement. That's beyond the scope of this article about the BBC's contracts, but this review, I think, does a decent job of capturing the internal tension of a former Top Gear fan contemplating the new Grand Tour.
Thursday, November 17, 2016
When it comes to networked and code-controlled products, such as driverless cars and household appliances (the Internet of Things), as I've written elsewhere, contract law can go in two different directions, depending upon how responsive it is to the needs of society. In this essay, Professors Michael Rustad and Thomas Koenig address the problem of contractual limitations of liability when it comes to driverless cars and other software controlled and networked products. They place the current era of networked products into historical context and argue that companies "should not be permitted to use contract law to shift the cost of defective code to the end user or consumer." Their essay is an important reminder that contracts - especially mass consumer adhesive form contracts - are not the solution when it comes to consumer products.
Monday, November 14, 2016
I just wrote up a promissory estoppel case last week, and here's another one out of Connecticut, Sorrentino v. Rizza, Docket Number CV156013599 (behind paywall). In this case, the plaintiff failed to allege specific enough statements to form the foundation of her promissory estoppel claim. The case is a dispute over a promise of employment, and the relevant part of the complaint alleged that the defendant had promised the plaintiff "on several occasions" that she would be given "a similar position" with the defendant's company as the plaintiff already held in another company, with "a salary plus a percentage of any advertisement revenue she generated."
This was, in the court's view, "nebulous at best." No specific dates or locations were given for the promises in question, there was no explanation of the salary that was discussed, and there were no details about what percentage of revenues the plaintiff had been promised. The plaintiff's allegations were about indefinite statements that seemed to lack any material terms. The court said those could not be construed as any "clear and definite promise" that could the plaintiff could reasonably have relied on.
So if you think you have a promissory estoppel claim, the lesson from this case is to make sure you are very specific in relaying to the court exactly what was said and when.
Sunday, November 13, 2016
Allow me to highlight my most recent article, An “Act of God”? Rethinking Contractual Force Majeure in an Era of Anthropogenic Climate Change.
Given anthropogenic climate change, what were previously considered to be inexplicable and unpredictable “acts of God” cannot reasonably be said to be so anymore. They are acts of man. “Extreme” weather events have become the new normal. Accordingly, the contractual force majeure defense, which largely rests on the notion that contractual parties may be exculpated from liability for failed or delayed performances if supervening unforeseen events that the party could not reasonably control or foresee have made a performance impracticable, is becoming outdated in the weather context. It makes little sense to allow contractual parties to escape contractual performance liability for events that are highly foreseeable given today’s knowledge about climate change. Parties can and should take reasonable steps to contractually assess and allocate the risks of severe weather events much more accurately than ever before. Further, they should be better prepared to take reasonable steps to alleviate the effects of severe weather on their contractual performances instead of seeking to avoid liability at the litigation stage.
Time has come for the judiciary to rethink the availability of the impracticability defense based on “extreme” weather for public policy purposes. Perhaps most importantly, by taking a hard look at the doctrine and modernizing it to reflect current on-the-ground reality, the judiciary may help instigate a broader awareness of the underlying pollution problem and need for action at many scales. Meanwhile, a more equitable risk-sharing framework that might become known as “comparative risk sharing” and which would resemble the notion of comparative negligence in torts could be introduced where parties have failed to reach a sufficiently detailed antecedent agreement on the issue. This is surprisingly often the case. Parties often use mere boilerplate phrases that do not reflect today’s highly volatile weather and appurtenant risks.
The law is never static. It must reflect real world phenomena. Climate change is a super-wicked problem that requires attention and legal solutions at many fronts to many problems, including contractual ones. The general public is often said to have lost faith in the judiciary. Given this perception, courts could regain some of that faith in the context of contracts law and force majeure caused by events for which no “God,” other supernatural power, or even nature can be blamed.
The article can be downloaded here.
I apologize that I have not been able to post very many blogs recently and that I will, for family and work reasons, also not be able to do so until January. I trust it that my lovely assistant Ashley and my co-bloggers will keep you intrigues until then!
Wednesday, November 9, 2016
Here's a Nice Case to Use to Review Contract Formation, Conditions Precedent, and Promissory Estoppel
As we reach the end of the semester, I keep trying to remind my students of what we learned at the beginning of the semester, which was only a few weeks ago but feels like several lifetimes ago. As we turn our attention to our last topic of third-party rights, I don't want the students to forget the basics of contract formation. I want them to realize that contracts law builds on itself and is self-referential and so they can't just forget about the stuff that came first.
Anyway, I say all of that to lead into this nice recent case out of the Eastern District of Pennsylvania, Killian v. Ricchetti, Civil Action No. 16-2874, that deals with issues of contract formation, and then turns to promissory estoppel. Exactly as I keep trying to remind my students to do! So I couldn't resist writing this case up for the blog. It serves as a nice review of a lot of what we've learned and I think I may actually use it in class.
The alleged contract was a series of e-mails exchanged between two friends. The first e-mail set out a bunch of terms and ended with "there are more little details...it's a start." The response to the e-mail added a few additional terms. This, the court found, did not form a contract, because the response was not an acceptance but rather a counteroffer, due to the fact that it added terms. There was never any reply to that particular e-mail, so the counteroffer was never accepted.
After these initial e-mails, there were further e-mails between the two regarding the real estate transactions at the heart of the alleged agreement. Those e-mails were enough to form a contract as follows: The first e-mail read, "[W]hen the Pine [Street property] is clear title we form an LLC with an equal partnership of 50% . . . ." with some further details given. The reply to the e-mail was "OF COURSE," which constituted an acceptance. However, there was a condition precedent to this contract: that the parties receive clear title on the Pine Street property in question. Due to no fault of the parties themselves, they never received this clear title, so the condition precedent never occurred, so no duties to perform under the contract ever arose.
The court then turns to the promissory estoppel question, though. The court found here there were genuine issues of material fact whether there was a promise made and whether the other party acted in reliance on that promise. Similar issues of material fact existed for the unjust enrichment and qunatium meruit claims. Therefore, although the court granted summary judgment on the breach of contract claims, it denied summary judgment on the remaining claims.
Monday, November 7, 2016
I was struck by this ad that Liberty Mutual Insurance is now running:
Because what it boils down to is a call for greater clarity in contracts so that they can be more easily understood by consumers. (I appreciate the lawyer shout-out but not even all lawyers read all 22 pages!) But, in the midst of trying to simplify things, the small print on the commercial takes care to explain that "Not all of your coverages are shown in Coverage Compass(TM). For complete explanation of your coverages, please consult your Liberty Mutual sales representative and your policy" (emphasis added). You can try to streamline things, but there's no avoiding that 22-page policy in the end!
Wednesday, October 26, 2016
We've been talking about contract interpretation in my Contracts class lately and I'm always struck by how many cases involve a lower court ruling of ambiguity and then an appellate court reversal of that ruling, because it always strikes me as such a funny thing. The very definition of ambiguity would seem to be "multiple people disagreeing on the meaning of the word," but the appellate court decisions in those cases necessarily have to dismiss the reasonableness of the lower court's understanding of the meaning in order to assert that the meaning is SO OBVIOUS. This always makes these cases feel a little more...condescending? Than the typical reversal. Like, "We don't know what you were so confused about, lower court, this is OBVIOUS."
A recent case out of California, Borgwat v. Shasta Union Elementary School District, No. C078692, is another example of this. The plaintiff, upon retiring from the defendant, was entitled to a monthly post-retirement contribution toward her "medical insurance coverage." For a couple of years, the defendant paid the contribution toward the plaintiff's dental and vision coverage. But then the defendant concluded that dental and vision insurance was not included in "medical insurance coverage" and ceased paying the contribution. This lawsuit resulted.
The lower court found the phrase "medical insurance coverage" to be ambiguous and allowed extrinsic evidence to illuminate its definition, including the fact that the defendant had initially paid the plaintiff the contribution for a few years. Therefore, the lower court endorsed the plaintiff's interpretation that "medical insurance coverage" included dental and vision insurance.
The appellate court here reversed, though, saying that "medical insurance coverage" was not an ambiguous term. The relevant section of the contract was Section 5.7 but the appellate court looked to Section 5.2, which dealt with benefits during the course of employment. In that section, the defendant had agreed to pay sums "toward the cost of medical, dental and vision benefit coverage." The fact that dental and vision were considered independent from medical insurance in Section 5.2 rendered the use of "medical insurance" in Section 5.7 unambiguous: It can't include dental and vision insurance, because the parties in Section 5.2 revealed that they didn't understand medical to include dental and vision insurance when they felt it necessary to list all three. For this reason, the appellate court refused to allow any extrinsic evidence, because the defendant's mistake in paying for the dental and vision insurance could not change the unambiguous terms of the contract.
So there you have it. OBVIOUSLY. :-)
Saturday, October 22, 2016
A friend of mine asked me the other day about the ongoing controversy over all of that unaired Apprentice footage that is apparently sitting around somewhere. MGM and Mark Burnett have both claimed that they are not allowed to release the tapes due to confidentiality provisions in their contracts with Donald Trump. (Fortune has an article about this here, as does the New York Times.) My friend's question basically boiled down to this: Yeah, sure, maybe that deal made sense when the contract was signed with a New York self-professed billionaire but now he's running for President of the United States, and shouldn't that mean something?
Other people have raised this issue. What seems to me unique about the Donald Trump situation isn't necessarily the confidentiality provisions over the Apprentice tape, but how often, during this political campaign, we've been debating the secrecy Trump requires from all of those around him. The Apprentice contract is just the latest example of this. Over the summer, several news outlets reported on the unusually broad terms of the NDA Trump required his staffers to sign. To be fair, NDAs are not unusual during a Presidential campaign and Hillary Clinton has allegedly had her staffers sign them as well. But Trump's apparently are unusually broad, and he requires them even of volunteers who show up to make calls for Trump's campaign and presumably never even really meet Trump? What confidential information could these volunteers even know? Well, Trump is the one who gets to tell them that. And he's not afraid to sue on the NDAs: We know of at least one arbitration filed against a former staffer, alleging damages of $10 million.
Two things I take away from this:
(1) Donald Trump seems to be obsessed with controlling his image, which makes total sense, as he's made an entire career out of Being Donald Trump and it could even make him President. Trump is so fond of restricting what those around him can say about him that he's even said he'll make his federal employees sign NDAs if he does become President. At the same time, of course, Trump himself doesn't appear to feel restrained in any way to say any thought that comes into his head. So we seem to have a situation where part of the advantage of being rich is being able to say absolutely anything you want and also control to some degree what the people around you get to say, even once your relationship with them has been terminated.
(2) Despite this, however, we all know more about Donald Trump than I think he wants us to know. In the relentless glare of a Presidential campaign, no matter how many NDAs you leave in your wake, is it just impossible to keep secrets forever? And, maybe, is there something comforting about that? My friend wants to see the Apprentice tapes, but we don't know what's in the Apprentice tapes, and we don't know who even has time to review them. But we do know a great deal, maybe not Apprentice-related, but maybe enough?
P.S. This is not the first time I've blogged about Donald Trump's contracts. If you're curious, that case hasn't really progressed since that blog entry.
Monday, October 17, 2016
I was listening to the podcast No Such Thing as a Fish (highly recommended) when I learned that Einstein used his Nobel Prize money as a divorce settlement to his first wife...the only catch being that he divorced her in 1919 and won the Nobel Prize in 1921. The podcast characterized this as: "If I win the Nobel Prize, I'll give you the money." Amazing! Imagine being so confident in your Nobel Prize chances! (I guess if you are Einstein, you would be that confident.)
I know I just found a new go-to hypo to use in class.
Monday, October 10, 2016
Exciting news! JOTWELL (the Journal of Things We Like - Lots!) has a new Contracts section - and it has just gone live! David Hoffman (Temple) and I are the Section editors. Aditi Bagchi (Fordham), Dan Barnhizer (Michigan State), Shawn Bayern (Florida State), Omri Ben-Shahar (Chicago), Martha Ertman (Maryland), Robert Hillman (Cornell), Hila Keren (Southwestern), Florencia Marotta-Wurgler (NYU), Eboni Nelson (South Carolina), Robert Scott (Columbia), Tess Wilkinson-Ryan (Pennsylvania) and Eyal Zamir (Hebrew University) are contributing editors so expect to see articles from them over the next few months.
The inaugural article is by Prof. Robert Hillman of Cornell and reviews Aaron Perzanowski & Chris Jay Hoofnagle's article, What We Buy When We Buy Now, (forthcoming U. Pa. L. Rev.). The article raises interesting issues about ownership of digital "goods" and has already sparked interest in the popular press.
Welcome to the world of contracts JOTWELL!
Wednesday, October 5, 2016
Hip-Hop Contracts Week continues! This time with a recent ruling out of the Southern District of New York in Walker v. Carter, #1:12-cv-05384-ALC-RLE (behind paywall).
In the case, the plaintiff, Walker, sued Jay-Z and others regarding not a song but the logo for Roc-a-Fella Records. The court was dismissive of Walker's relationship to the logo right off the bat: "Plaintiff casts himself as the creative mastermind of the Logo's design, though he admits that he neither came up with the idea for the Logo nor drew any part of it." Right away you can tell that this doesn't sound like a judge who's inclined to find for the plaintiff here.
And he doesn't. He grants defendants' motion for summary judgment, finding that there was no evidence of any written contract between the parties and so Walker's breach of contract claims could not survive. Walker had alleged that he and the defendants had entered into a contract providing for royalties to be paid over a period of ten years. Unfortunately for Walker, this contract--which couldn't possibly be performed within a year--is subject to the Statute of Frauds and required to be in writing, or at least for there to be sufficient evidence that a writing once existed. Generally, in New York this evidence has consisted of either the admission by the other party that a writing did exist at one time or the testimony of witnesses regarding the signing and content of the now-lost writing. Here, defendants denied that any writing had ever existed (which seems predictable, frankly) and Walker could produce no witnesses as to the signing of the contract, as Walker stated that no one other than the defendants and himself were there when the contract was signed.
Walker did produce two witnesses regarding the existence of the contract. However, they were insufficient. One testified that he had seen a piece of paper Walker told him was a contract but that he didn't read the contract and did not know what the contract said. The other testified in a number of ways that contradicted Walker's own testimony regarding the contract: Walker claimed to have written the contract in the same face-to-face meeting when it was signed, but the witness claimed to have seen the contract before it was signed, which couldn't have been possible if Walker's testimony was true. Walker claimed to have lost the contract in 1996, but the witness claimed to have seen it in 2000. Walker claimed the contract was written on blank paper, the witness claimed the contract was on lined paper. Et cetera. The court felt justified, given all of these impossible contradictions in the testimony, in disregarding this witness's testimony, especially since the witness also claimed to have a direct interest in the contract due to his close relationship with Walker. In fact, the court recounted that the witness had initially testified that he had never seen the contract, and only changed his testimony after being spoken to by counsel and after the statute of frauds had become an issue in the case.
Therefore the court concluded that the statute of frauds required the contract to be in writing, there was no writing, and there was no genuine issue of material fact that there had ever been a writing, and so granted defendants' summary judgment motion.
(He also found that Walker's copyright infringement claims were time-barred, so this was a total victory for Jay-Z and the other defendants.)
(A Reuters article about the case can be found here.)
Wednesday, September 28, 2016
A recent case out of the District of Utah, HealthBanc International v. Synergy Worldwide, Case No. 2:16-cv-00135-JNP-PMW, reminds us all of this rule. Well, it definitely reminded the parties and now I'm blogging about it and reminding all of you!
This case revolves around "a recipe for a powder comprised of various grasses and other components." Apparently you can combine this powder with water to make a nutritional supplement. HealthBanc entered into a contract with Synergy whereby Synergy would distribute the powder and pay HealthBanc royalties for every bottle of powder it sold. After almost a decade of doing business together, the relationship between the two parties soured. HealthBanc sued first, and then Synergy counterclaimed, alleging that HealthBanc had led Synergy to believe that it owned intellectual property rights in the recipe for the power, which apparently turned out to be untrue. HealthBanc then moved to dismiss this fraudulent inducement claim based on lack of particularity in Synergy's pleadings. The court here grants the motion.
Synergy's complaint just generally alleged that HealthBanc had made misrepresentations. Those general allegations are not enough for a fraudulent inducement claim. Synergy identified nothing about the misrepresentations: When did they happen? Where did they happen? Were they written? Oral? Who made them? Without any of this information, the court finds this cause of action can't survive.
The contract between the parties did contain a clause where HealthBanc
represents and warrants that it is the sole and exclusive owner of the entire rights, title and interest, including without limitation all patent, trademark, copyright and other intellectual property rights,
and another clause where HealthBanc "represents and warrants" that it has exclusive rights to the recipe that it can provide to Synergy. But those clauses don't raise a valid fraudulent inducement claim. Synergy made no allegations about the drafting of those clauses, nor did it allege that those clauses caused it to falsely believe that HealthBanc owned IP rights in the recipe and that that false belief prompted Synergy to sign the contract.
Likewise, Synergy failed to allege any particular way that it was harmed by the alleged misrepresentations.
Therefore, on basically every single element Synergy made very general claims that failed to meet the particularity standards. The court does dismiss without prejudice, though, giving Synergy the opportunity to try to fix the deficiencies. Stay tuned!
*Note the first: Synergy Worldwide sounds vaguely like what a company would be called in a Marvel movie so I actually looked the company up to see what it does. It seems to be a company specializing in nutritional supplements: "Your source for ProArgi-9 Plus, the highest quality l-arginine supplement on the market, as well as Mistica acai supplement, Core Greens, and more."
*Note the second: I also looked up "greens formula," which is what the court here refers to the recipe as. Wikipedia just wants to tell me about mathematical theorems, which then sent me down the Wikipedia rabbit hole to learn about George Green, a self-taught mathematical genius who received only one year of formal schooling as a child and to this day no one really knows where or how he learned the form of calculus that his theorems advanced.