Thursday, October 6, 2011
On September 28, 2011, Judge Blackburn of the Northern District of Alabama upheld against federal challenge most of Alabama's new immigration law, proclaimed to be the "toughest in the nation" when it comes to undocumented aliens. The case is United States v. State of Alabama and the opinion is here (Thank you, thank you, New York Times! Why do so few organizations provide links to public legal documents?!?).
Among the challenged provisions of the law was Section 27, which bars courts from enforcing contracts with undocumented aliens, assuming the other party to the contract knows of that immigration status. The federal government challenged this section as preempted by federal immigration laws. Judge Blackburn spent less than a page on the topic, finding that no federal law specifically addresses the enforceability of contracts with undocumented aliens. She therefore refused to preliminarily enjoin the enforcement of Section 27.
Why no Contracts Clause challenge? Even given that such claims are very difficult to win, it seems like the sort of situation where at least some consideration ought to be given to the Clause. After all, the language of the Constitution seems to clearly prohibit states from interfering with contractual obligations. But the Constitution does not mean what is seems to mean (anymore). In Energy Reserves Group, Inc. v. Kansas Power & Light, the Supreme Court ruled that even if state action amounts to "substantial impairment" of private contracts, such laws can be justified if designed to address a significant and legitimate public purpose, such as remedying a broad or general social or economic problem. Since the states are not involved in the contracts at issue, courts are generally to defer to the legislature's judgment as to the appropriateness of the chosen remedy.
Monday, October 3, 2011
Maybe it’s because my Contracts class is discussing unconscionability and I’ve got bargaining on my mind, but it seems that bargaining was everywhere in the news this week. Jesse Jackson, for example, seems to be calling out Capital’s One’s bargaining naughtiness when he criticizes its marketing practices aimed at vulnerable borrowers. In a different context altogether, Ohio’s governor John Kasich has waded into the collective bargaining fray. Finally, there’s this article about the increase in debit fee charges to consumers. Consumers, of course, don’t like these increases but are in a take ‘em- or- leave ‘em position given the difficulties of mobilizing disparate individuals to bargain collectively. [This article advocates the leaving 'em -- and joining a credit union-- alternative, whereas this article touches upon the problems of mobilizing disparate individuals to bargain collectively]. Super star executives are in a much different bargaining position. As this article and Jeremy's recent post points out, they can negotiate highly lucrative compensation packages , where they receive millions in severance pay even when they are essentially fired for poor performance.
Thursday, September 22, 2011
Friday, September 16, 2011
Texas Rangers outfielder Josh Hamilton previously has earned media attention in some rather depressing ways, including via his own battle with drug addiction and his attempt to throw a ball to a fan that led to the fan's death. This time, he is in the news for something that makes others--including Contracts professors--very happy. A Texas flooring retailer recently ran a promotion promising a refund on their flooring purchase if Hamilton hit a grand slam during September. And he did! Click here for the story, the actual ad "as seen on TV," and some written commentary. I think the clip serves as a fun way to review some contracts issues just prior to midterms. My students saw partial parallels to Lefkowitz, Leonard, and even Carbolic Smoke Ball and I'm sure there are others. Go Rangers!
[HR Anderson w/ hat tip to student Matthew Lynn]
Friday, August 26, 2011
Many of us who start our Contracts classes with contractual formation likely are, or soon will be, discussing offers, acceptance, and the Objective Theory in class. This recent clip from the popular reality television show, So You Think You Can Dance, may be a fun way to spice up those discussions. I plan to use it to illustrate the difference between an offer and a mere invitation to offer but I could see using it for other concepts, too, such as the importance of context when judging whether a reasonable person would view the discussion as an offer.
The relevant portion should begin automatically after a commercial or two. If not, jump directly to the 26-minute mark. The exchange is between a contestant on the show, the host of the show, and one of the judges. The primary potential offer is one to perform in the judge's upcoming re-make of Dirty Dancing.
Friday, July 29, 2011
For anyone in need of a current case/hypo to help illustrate promissory estoppel (and perhaps the statute of frauds along with unjust enrichment), consider the latest suit filed by famous actor, Joe Pesci. In his breach of oral contract complaint,* Pesci claims that he was promised the role of round-faced Angelo Ruggiero in a new film about famed gangster, John Gotti, to be played by John Travolta. In reliance on that promised role, Pesci abandoned his usual diet and exercise routine and gained thirty pounds to look more like Ruggiero. After the weight gain, producers advised Pesci that he no longer would be playing Ruggiero in exchange for the initially-promised $3 million; instead, he would be offered a lesser role (playing the man who allegedly killed Gotti) for $1 million. Pesci alleges that the film producers were enriched because they used his established mobster-playing cache to help promote the movie and obtain funding. The film's current producer claims that Pesci was the one who backed out of the deal after Pesci's preferred director, Nick Cassavetes, quit. Pesci acknowledges that there was no written contract but a signed writing likely would not be required in this case. If Pesci can't show an otherwise valid oral contract, promissory estoppel issues to ponder include...Was there an actual promise? (Pesci points to a press conference and a website announcement as possible sources of the promise.) Was Pesci's reliance reasonable? Is there injustice absent enforcement of the promise? And what exactly are his damages?
* Pages missing
Friday, July 22, 2011
Michael Waltrip of NASCAR fame (fame earned both as a driver and now as a team owner) has filed a complaint against auto designer Mike Coughlan. The suit claims that Coughlan breached the contract by leaving his position with Waltrip's race team prior to the end of his employment contract term. And, to make it worse, Coughlan reportedly left Waltrip's team to design cars for the Formula One team, Williams. Given NASCAR’s reported inferiority complex with respect to the older and allegedly more complex F1 racing (i.e., a kind of racing that requires one to do more than just turn left), this departure "across the pond" was especially vexing to Waltrip. The particular contractual terms cited include a “loyalty clause” and the duty of good faith and fair dealing. If the contractual fight takes any dramatic turns, perhaps Sascha Baron-Cohen will reprise his role as a Formula One turned NASCAR driver in the movie version of this dispute.
Wednesday, July 13, 2011
It is rare that a day passes without some headline or other about the affairs of the major players in the fields of information technology (IT), Internet Business (IB) or Social Networking (SN). The cast of players - a revolving door of usual suspects – includes Microsoft, Apple, Google, Facebook etc. The relative harmony that once derived from their clearly differentiated activities – e.g. personal computing, online searching or social networking – is now a thing of the past. Brittle harmony has given way to - shades of the 1990s - blow by blow accounts of smear tactics, strategic protests, general blogfare, and of course, court actions . Why? Because the players are slugging it out in the mush pit which the converging IT/IB/SN arena has become – all for a (bigger) piece of the pie.
The average observer might be daunted by the copious data and convoluted interrelationships typically involved. Close contemplation of contractual details, particularly those undergirding the relentless strategizing, negotiating, and (guarded) cooperation of such parties, is clearly something the average observer does not relish. Yet the nitty gritty of who is doing what to whom, and where, to get to the bottom of what is really going on in a dispute may not be that hard to find. Help is found in unexpected places – even in very contracts that are dauntingly associated with such transactions. Or more precisely, even from the angst created by such contracts.
There is a struggle, you see, between an industry giant, Microsoft, who is determined not to be past its prime, and an equally determined giant slayer, Google, a relative upstart that is notoriously hungry for power. Microsoft is determined to reinvent itself. It is trying to build on its dominant market position to expand beyond the dated server based computing approach. The aim is to become the leader of the emerging ‘cloud based enterprise solution revolution’. All very well. The thing is, however, that Google is eagerly developing competing products in the same field. And Google is striving, mightily, to market those products. So, here is the rub – Google has been having a hard time persuading potential customers, a significant percentage of whom are loyal customers of Microsoft’s email and other office offerings, to make the switch.
This is why Google cried foul, and loudly, when the U.S. govt., through the agency of the Department of the Interior (DoI), issued a request for quotations – an invitation for offers as we know – but allegedly indicated that it would not entertain offers from Google. The DoI subsequently awarded the contract to Microsoft.
Google objected to not being invited to the party by filing a bid protest in the U.S. Court of Federal Claims. In the filing, Google asserted infringements of the Competition in Contracting Act’s policy requirements which mandated that “technology vendor neutrality as far feasibly possible” must be maintained. Google has asked the court to enjoin the DoI from awarding the contract to Microsoft until competitive bidding has taken place.
This dispute between the parties has been anything but straightforward. The DoI has asserted that Google was ineligible for consideration because Google’s products were not certified under the Federal Information Security Management Act (FISMA) at the time. But here’s the thing - it now seems that Google had this certification – or at least for a related product, while Microsoft at the time of the award of the contract, allegedly did not. Microsoft reportedly received the certification after the award, but this disparity is a fierce point of contention.
Google clearly understands that it has a huge task to unseat the Microsoft behemoth. Its hopes of entering into what must be an accelerating volume of contracts required for market viability, if not market dominance, depends on a spreading domino effect. An increasing number of smaller users will need to take their cue (to contractually adopt Google products) from the bigger fish who adopt Google’s applications.
The bigger war for market dominance is not limited to Microsoft and Google, of course. When this slender threat of a bid protest is traced, it leads to a whole other can of worms: cut throat rivalry not only for cloud computing, but voice over IP, mobile tasking, and mobile payment also (to name a few). But that can of worms is for another day……
It's hard to believe that Kevin Costner never has appeared on this esteeemed blog...until now. The contract that brings him here was between Costner and an artist involving the sale of...you can't make this stuff up...bison sculpture replicas. Several years ago, Costner planned to build a luxury resort in South Dakota, the entrance to which would feature a field of dreams bronze bison being hunted by Native Americans (inspired, of course, by his experiences in the film Dances with Wolves). Although the resort,The Dunbar, never materialized, the sculptures were completed and later featured by Costner as a standalone tourist site aptly named Tatanka.
In the original agreement between Costner and the artist, Peggy Detmers, Costner was to pay Detmers $250,000 for the sculptures plus a share of the proceeds from future sales of sculpture replicas to wealthy resort visitors. Detmers claims that she charged Costner far less than the sculptures' actual value, which she estimated to be $4 to $6 million, in anticipation of a significant number of replica sales (because, as any wealthy resort visitor knows, who wants a snow globe when you can have bison...14 of them...you know, for your yard). Years later, when resort construction was delayed, Costner agreed to pay Detmers an additional $60,000. The amended letter contract also stated as follows: "[I]f The Dunbar is not built within ten (10) years or the sculptures are not agreeably displayed elsewhere, I will give you 50% of the profits from the sale of the [sculputures] after I have recouped my costs...."
In 2009, Detmers filed suit to enforce that quoted provision, i.e., to make Costner sell the sculptures and split the proceeds 50/50 with her. Costner claimed that no sale was required because displaying the sculptures at Tatanka qualified as them being "agreeably displayed elsewhere." Detmers claimed that she never agreed to that display location. The court thus had to decide how to interpret the arguably ambiguous term of "agreeably displayed elsewhere." Earlier this summer, Circuit Judge Randall Macy decided that the forced sale provision had not been triggered because Detmers had agreed, albeit passively, to have the sculptures displayed at Tatanka. Specifically, Judge Macy stated: "[Detmers's] significant involvement in the Tatanka project and her failure to tell Costner or anyone else that she did not agree with placement at Tatanka indicate she was agreeable to the sculptures' placement at Tatanka for the long term."
I suppose that the lesson for contract drafters is to specify what "agreeably" means or to avoid that kind of ambiguity altogether. Drafters at least should specify how the "agreeableness" is to be recorded in order to be effective, such as "upon written consent," with or without the typical "not to be unreasonably withheld" modifier. The other lesson is to never trust a man who thought that this movie and this movie were 'sure things."
Wednesday, June 22, 2011
Trust me when I tell you that it is very difficult to get friends, family, students and acquaintances engaged in a meaningful discussion of "mandatory arbitration." Trust me further that there is now a wonderful documentary that manages to make this and other civil justice topics interesting and engaging for everyone. (Indeed, my viewing companion, proudly not a lawyer, turned to me at one point in the movie and whispered "didn't you write a paper about something like that?")
Last night, I was fortunate enough to invite myself via twitter get invited to a screening of Hot Coffee at HBO. Hot Coffee is a must see documentary about the way that business interests, "tort reform," judicial elections and "mandatory arbitration" have systematically worked in concert to deny plaintiffs access to civil justice. It is the work of the energetic and passionate director Susan Saladoff who spent 25 years as a trial lawyer before becoming a filmmaker. The documentary is well-conceived and thought provoking. It takes some very complex topics and organizes them and presents them through compelling personal stories.
The title "Hot Coffee" refers to the iconic case that is ubiquitous in pop culture as a symbol of the frivolous lawsuit: the woman who sued McDonalds because she was served a coffee that was too hot. The film starts very strong by retelling this story through interviews with the plaintiff's family. This challenged me (and from the gasps in the theater, I suspect everyone else viewing the film) to see the case in an entirely different light. With that strong start, the viewer is engaged and ready to hear about damage caps, judicial elections and mandatory arbitration in consumer and employment contracts.
Here's the trailer:
After the film, there was a Q&A session moderated by Jeffrey Toobin. He appeared to receive the movie very favorably, noting that the fine print in a cell phone contract is not one of the sexy topics that CNN hires him to discuss on the evening news segments (which reminded me of this Dahlia Lithwick piece in Slate, which seemed to begrudgingly report on AT&T v Concepcion).
Toobin did mention one frustration, which could be leveled as a critique of the film -- that it only presents one point of view. Notably absent and/or unwilling to participate were voices from the "other side," i.e., those in favor of damage caps and mandatory arbitration. Saladoff's response, I thought, hit the nail on the head: in so many words, she said that she wanted to tell this side of the story, and the voices in favor of these reforms already had a well-financed platform (and, indeed, overtaken the public consciousness). Perhaps I am partial to her response because her film paints a picture in line with my world view, and I am just so thrilled to finally see an engaging and accessible presentation explaining the systematic erosion of civil justice at the behest of corporate interests.
Our students come to law school generally ignorant of or misinformed about tort reform, mandatory arbitration and many of the other topics presented in this film. However, they do at least know of handful of cases -- OJ, Bush v Gore and, of course, the hot coffee case. I have no doubt that this film will be used in the classroom. It is masterfully done and captivates those uninitiated with these topics as well as those who have studied them (and even includes a few clips of interviews with George Lakoff). Please tune in to HBO on Monday night.
[Meredith R. Miller]
Tuesday, May 3, 2011
The heartwarming recovery of Representative Gabrielle Giffords who was inexplicably shot by a clearly troubled Jared Loughner has been an upbeat staple of news reports since January. Hopes that Rep. Giffords would be recovered sufficiently to attend the launch of the space shuttle Endeavor this April ending have been realized – she travelled to Florida for the launch. Although the launch is briefly postponed, she was well enough to receive a visit from President Obama, who was also at the launch site with the First Lady to witness the launch. She plans to return for the rescheduled launch.
The shooter Loughner, who was arrested at the scene and charged with murder and attempted murder, is being assessed in the meantime for his mental fitness to stand trial. His mental state will feature prominently in his trial, and not only in terms of whether he is fit to stand trial. Amid speculation that it is all but certain that the prosecution will seek the death penalty, it is expected that Loughner will plead insanity as a defense. Loughner’s statements and journal entries to the effect that his actions were deliberate and premeditated will make the plea of legal insanity a difficult one for him to sustain.
The emerging timeline of Loughner’s movements reveals that he made two trips to Walmart in the early hours of the day of the shooting. It seems Loughner tried to buy some ammunition at a Walmart store - but was unsuccessful - so he went to another Walmart nearby where he purchased ammunition and a black backpack-style diaper bag. A similar black bag, now in the possession of the FBI, was later found in a dry riverbed near Loughner's parent’s home. Seven boxes of ammunition - the same type used in the shooting – and a receipt for the purchase of the bag were found in the bag. The awful incident has revived calls for more robust gun controls. The father and fiancé of Representative Gifford’s aide Gabe Zimmerman, who was killed during the shooting, have thrown their support behind renewed campaigns for more restrictive gun control laws.
This brings me to the contractual hook. Reports suggest that Loughner was turned away from the first Walmart by a sales clerk. Walmart demurred later that Loughner was not turned away – that Loughner merely left the store before completing the transaction. Does it make a difference - is it important how Loughner came to leave the first Walmart empty handed? , Why the careful clarification by Walmart, in other words?
If the ammunition seeking Loughner was in fact turned away from one Walmart but not from the other, the two transactions invite closer scrutiny. What did Loughner do in the first store to motivate the rejection of the store clerk? Did Loughner behave strangely, or did the clerk merely react instinctively to Loughner’s allegedly unnerving persona? If the clerk in one Walmart store was sufficiently spooked to deny Loughner the sale of ammunition, why didn’t the clerk in the other Walmart store do so also? Was the same behavior perceived as normal by Walmart clerk #2 – or did a determined Loughner have the presence of mind to adjust his behavior to a semblance of normalcy on his second attempt? The point this scenario highlights, is that it can be difficult for an ordinary person, e.g. someone who is not Dr Drew, to accurately assess the mental fitness of another person to enter into a contract – yet parties to a contract are expected to make snap decisions about the mental fitness of the other to enter into the transaction they are both contemplating..
A person suffering from a mental illness or defect is given the choice of backing out from a contract in certain circumstances. This power of avoidance is conditioned on a on a short list of alternative contingencies, including the requirement that the other party be without knowledge of the mental defect or illness. A seller of weapons has even more sobering reasons to be wary of the mental health of a customer than the risk of avoidance. It is an offence to sell weapons to mentally ill persons under existing and proposed laws. It is an offence under s.922 of the federal Gun Control Act 1968, to sell or otherwise dispose of any firearm or ammunition to any person knowing or having reasonable cause to believe that such person has been adjudicated as a mental defective or has been committed to any mental institution for example (italics mine). While the tests and policies underlying such rules in contractual and criminal contexts are different, the fact remains that a seller may be disadvantaged in either context because he did not respond to the strangeness of a customer, or he failed to refuse a sale in circumstances another seller deems strange enough to warrant a refusal.
The wholesomeness of a one party’s mental capacity to contract hinges on a cognitive test or a test of volition. If a party is unable to understand in a reasonable manner the nature and consequences of the transaction, she fails the cognitive test. It does not matter if this inability is known to the other party or not. Even if the other party was unaware of the cognitive disability, the disabled party can avoid the transaction. If, on the other hand, she is unable to act in a reasonable manner in relation to the transaction, she will fail the volition test. The results of the volition test - unlike the cognitive test – depend on what the other party knew however. Not only must the mentally impaired party be unable to act reasonably in relation to the transaction, the other party must be aware that the mentally impaired party is unable to act reasonably before avoidance will be permitted. The disabled party will not be able to avoid the transaction because of his impaired volition, if the other party did not have reason to know (and did not know) that the disabled party was suffering from said impaired volition. A cognitive disability confers a broad power to avoid, while a volitional disability confers a limited power to do so. Whether broad or narrow, the power of avoidance may terminate where the contract was made on fair terms, and the other party had no knowledge of the defect/illness if the contract has in fact been wholly or partly performed. The power will also be terminated if the other party had no knowledge and it was made on fair terms if the circumstances has so changed that avoidance would be unjust.
So, it all hinges on what the other party knew, or ought to have known about the mental fitness of the mentally disabled party – yet what the assessing party knew or ought to have deduced from the circumstances may be arguable or it may be hard to pin down - as in our Walmart situation. In the contractual context where the objective is to shield a disabled person from obligations neither properly related to nor understood, the fuzzy logic of snap capacity assessments are more defensible. The aim is to protect a person of ‘feeble mind’ rather than secure perfect fairness for the perfectly sane other party. The fact that one party might assess the mentally impaired other party as perfectly sane, whereas another in that situation would or did arrive at a different conclusion is not regarded as a major problem. “All’ that hangs on the outcome is the ability of the sane party to enforce the transaction, and a court may still rule as it sees fit in the interests of justice (provided the sane party was unaware of the other party’s disability, and the contract was made on fair terms).
Reliance on such fuzzy logic is less defensible where a wrong assessment of mental ability may result in the commission of an offence. This may be one reason why some state gun control laws are worded more specifically to prohibit ownership or sale to person deemed mentally unfit by court order, by confinement to a mental hospital or institution, or where the person is deemed a danger to himself or others pursuant to an unrevoked court order. There are however some laws that simply prohibit sale to or ownership by persons who are mentally incompetent or of unsound mind. Others do not even reference mental incapacity at all.
It may be ultimately decided that the Walmart clerk that sold the ammunition to Loughner had no reason to be aware of Loughner’s alleged mental impairment. If so, the fact that another clerk refused Loughner the sale will be harmless. If however it is determined that Loughner was so strange that a reasonable clerk would have been alerted to his mental impairment, the different outcomes in the two stores will land Walmart in trouble. Whether because the Walmart employee was unreasonably unobservant of Loughner’s alleged mental impairment, or because Walmart did not have in place (or its employees did not observe) safeguards designed to prevent the sale of ammunition to mentally disabled persons, Walmart may get into trouble for selling weapons to an unsuitable person.
This throws some light on why Walmart would want to clarify that an employee did not find Loughner’s behavior strange - negative inferences may be drawn from the failure of the other Walmart clerk to arrive at the same conclusion, while questions may arise about what measures Walmart has in place to guard against just that type of mishap.
E. O. Akindemowo.
Tuesday, April 5, 2011
Monday, March 14, 2011
A relationship, in pseudo contractual terms, is the interaction of two persons who, because of mutually agreeable expectations, have chosen to spend time together and are willing to perform in certain ways. "I am willing to commit to this relationship", a prospective girlfriend might say, "because I want to have a companion for social events – a liberator from the dating jungle - and I’m attracted to you and want to get to know you better". Marriage, the ultimate relational commitment, is thus described as a marriage contract, while actions for breach of promise to marry - aka heart balm actions - are not unheard of. (Who on earth, you may wonder, even thinks of suing for breach of promise to marry these days? Evidently the few that live in a jurisdiction where the cause of action still exists, and are both extraordinarily peeved and brave enough to pursue a claim.)
Once upon a time, the idea of an eBaying paramour would have been unthinkable. Monogamous marital relationships were the default sixty years ago. Faithfulness was expected ‘till death do us part’, children out of wedlock were a disgrace, and adultery was a heinous wrong. To put it mildly, times have changed. Marriage is not the objective of a relationship for many nowadays . In fact, some statistics would have us believe that marriage is depressingly out of reach for some. So what might two people be committing to – or to rephrase for the commitment phobic - what might their expectations be when people decide to ‘become an item’? Monogamy as in a faithful, exclusive, romantic relationship with only one person at a time? An enjoyable companionship in which compatibility rather than passion is key? Expectations of trust and respect driving good faith efforts to abstain from all others, or an ‘open relationship’? Symbiotic cohabitation, or merely a friendship ‘with benefits'? The last two do not infer expectations of fidelity or exclusivity, so what was the girlfriend expecting? This incident clearly illustrates the hellish wrath of a woman scorned. Since the catalyst for her titillating revenge was discovering her boyfriend had been seen with other women, it is safe to infer that she expected fidelity from the guy.
So, she is furious. We don’t know if he expressly or implicitly promised to be faithful, but she clearly expected that he would be. Likely she would assert, if asked, that he induced her to believe that he would be faithful – that is, if she was not explicitly promised faithfulness (i.e. as an express term of their relational agreement) by the guy. However they arose, her expectations of faithfulness were disappointed. Should her ex be allowed to get away with his relational crime – or should he be estopped from denying his obligation to be true (if any) and be accordingly punished? Presumably she doesn’t want the guy back. Her actions indicate that she wants to make him pay for the betrayal and she wants it to hurt. How she goes about this is the crux of the story. The boyfriend preferred her to dress conservatively during their relationship so what does she do? She posts scantily clad pictures of herself draped with the items in question on eBay. Revenge and liberation in one fell swoop – so take that, ex boyfriend!
But wait a minute – who’s hurting whom? To a more conservative eye, she cut her nose off to spite her face by baring – on a global auction site no less – her assets in a demeaning display. Undignified perhaps, but understandable all the same? Relationships are more often emotional affairs than business arrangements so it is to be expected that the behavior of the parties will be illogical at times. A person braver than I might even suggest a correlation between the frequency of illogical responses and the sex (of the actor) involved - but I won’t venture into that particular minefield. The response of the scornee in this scenario is what should be our focus. She eBayed the scorner's clothes. She set up a website. She advertised the items for auction on eBay. She linked the risqué auctions to her new website. This drummed up traffic to her website. Immodest yes, but maybe not so illogical after all.
Were the items in question hers to sell? She claims to have bought most of the items. But even if she did, surely it was with the intention of giving them to him as a gift. If so, the clothes became his property at that point. She did not have title to the items and had no right to dispose of them if that was the case. She didn’t, that is, unless the relationship was based on the understanding – a sub provision of an implicit termination clause? – that in case of unfaithfulness or other just cause, all gifts given to an offending donee will revert to the affronted doner. Her disposal of the property would be justified alternatively, if it had been abandoned by its owner. As she reportedly locked him out by changing the locks and has been impervious – thus far - to his alleged pleas to return, the latter is unlikely on the facts. If in her rage, she has treated someone else’s property as her own, the legal ingredients for conversion –and perhaps theft – have been satisfied.
Will the scorner-donee-ex-boyfriend have the gumption to strike back – say by suing his scorned ex-girlfriend for the return of his property? Might he seek damages for whatever injuries he has sustained from this now very public exacting of revenge? In that case (if you will forgive the puns) , the shoe would be on the other foot – a suit for an intentional tort or negligence, rather than a case for breach of promise to marry (jilting). Assuming that he chooses not to press criminal charges, that is. But it seems the boyfriend has attempted at least one retaliatory blow – the auctions were taken down by eBay staff, allegedly at the instigation of her ex, for being too sexy. Undeterred, the enterprising Miss re-posted the listings in the ''art'' category. Although the ‘art’ advertised for sale is the collection of photographs showing her modelling different items (of her ex’s clothing), the ingenious gal still manages thus to accomplish her aim of profiting from, and getting rid of, her ex’s clothes. As an incentive to buy each photograph, she offers to ‘throw in’ (or should that be ‘throw out’?) the actual item photographed as a ‘gift’. Contractually, prospective buyers more interested in the ‘gift’ item than the photograph may be reassured in at least two ways. Either the promise of a ‘gift’, though made before the sale, induced the sale, and for that reason may be deemed a term of the contract (i.e. ‘gift’ is a misnomer as the item is jointly supported by the consideration provided by the price paid for ‘the photograph’). Alternatively, the promise of the gift, though unsupported by consideration - and to that extent not contractually mandated – may still be enforced by means of an estoppel. Bottom line, the girlfriend followed up her saucy baseline serve with a volley (that was ultimately met by eBay restricting the most risque pictures to the adult section).
But she may have moved on. It seems girlfriend has other fish to fry. Initially motivated by anger, she is now enjoying the attention of being a guest on TV networks here and overseas. More, she has a new business venture to think about. "I'm realising that maybe there's something there to explore with a website where I can invite women to also share their breakup stories and maybe also give them the opportunity to sell products and things like that as well," she has reportedly said. With careful execution, perhaps the conversion of her website into a portal for jilted lover-sellers will not create an exponentially greater liability minefield.
Of such a budding entrepreneurial empire however, one can only caution: buyers beware – the scorners may strike back! The Machiavellian tangles of sweet revenge reach far.
Eniola O. Akindemowo.
Friday, March 11, 2011
Well, he did say he would sue - back when Charlie wanted to revive the show from hiatus. But then Warner Bros went and changed the game when, as the entire world probably knows by now, Warner Bros fired Charlie Sheen. Charlie, not being the type to take such things lying down, has returned fire with a lawsuit against Warner Bros and Charles Lorre, the producer of Two and a Half Men.
Charlie - fire-breathing, fire-fisted Charlie - is cast by his lawsuit as the victim - and a defender of the weak. In short, the lawsuit alleges that Warner Bros. and executive producer Charles Lorre maliciously conspired to wind down Two and a Half Men (2½ M) before Charlie Sheen went on the rampage. Sheen's suit portrays Warner Bros. as an immoral, conspiratorial, hypocritical, profit hungry betrayer, and Lorre as a fabulously wealthy, egotistical, vindictive bully.
The lawsuit contends that Sheen's antics were not a problem previously - on the contrary, at a time when the star was at risk of being convicted for a felony punishable with imprisonment, Warner Bros is alleged to have been eager to sign Sheen for another two seasons.
So what changed? According to the lawsuit - in two words - Charles Lorre. Sheen alleges a pattern of harassment, humiliation, and aggravation against him by Lorre over a period of years (Lorre's 'vanity cards' are referred to in the suit as an example of this). The suit alleges that Warner Bros. is utterly loyal to Lorre because of the close, lucrative working relationship between Lorre and Warner Bros - Lorre is said to have an office on the Warner Bros lot, and to have three new series, (for which his cut is allegedly higher than what he gets for 2½ M) under development. Stung by Sheen's radio and TV blitz that was supposedly provoked by the said harassment, Lorre allegedly decided to no longer work with Sheen and from the point onward refused to provide new scripts in breach of his contractual obligations. The suit alleges this is why Sheen was turned away from the set of 2½ M although he had undergone private rehab (that allegedly involved the services of an expert recommended by Lorre) and was ready, willing, and able to get to work. Sheen further alleges that the line that he was fired for being incapable to fulfil his duties is a trumped up story. Sheen strongly contends that he is fit and well, sober (as indicated by recently publicized drug test results), and that he is and always has been ready, willing and able to work. Warner Brothers, in other words, is accused of scheming with Lorre to maliciously suspend the show, and then wrongfully terminate Sheen's contract for no just cause.
Warner Bros is portrayed as fraudulent, immoral and hypocritical for allegedly pretending to fire Sheen for reasons of moral turpitude when, the suit alleges, it eagerly courted Sheen for the renewal of his contract after he had been charged with a felony and was facing jail time. Warner Bros is alleged to have reassured Sheen that their contractual relationship would not be jeopardized so long as Sheen's conviction and sentence did not interfere with his recording schedule. Warner Bros is also portrayed as mercenary and merciless for firing Sheen instead of accommodating him, when he was alleged to be suffering from certain physical and mental illnesses (which ailments Sheen denies in any event). The portrayal of Sheen as the victim continues through mention of Lorre's "vanity cards" as a deliberate attempt to harass, humiliate and damage Sheen, through to mention of the incident in which Sheen was turned away from the Warner lot.
The lawsuit recites a litany of woes including breach of express terms, anticipatory breach, breach of good faith and fair dealing, breach of duty to a third party beneficiary, intentional interference with rights, interference with prospective economic advantage, frustration of common purposes, disappointment of reasonable expectations and loss of intangible opportunities (continuation as the lead in a star series, and the opportunity to attract endorsements). Employment discrimination makes an appearance, as well as claims for unpaid wages on behalf of himself and the cast and crew of 2½ M. The suit seeks compensatory, punitive and exemplary damages, as well as attorneys fees.
Warner Bros' termination letter, and Sheen's lawsuit present two alternative universes in which an innocent plaintiff is utterly wronged by a deliberate defendant. Given the impression created by Sheen's seemingly erratic behavior in recent times, Warner Bros is seen by some as having a strong case - if indeed it did terminate Sheen for incapacity and his blistering radio and TV rampage. Warner Bros seeks to portray those events as the last straw that led to a justifiable termination, following evidence of an uncured incapacity or serious medical condition, (a terminable event in Sheen's contract if lasting for ten or more consecutive days, or more than fifteen days in the aggregate over any single production year). Newspaper accounts seem to suggest that Sheen may have exceeded this allowance, but I wouldn't put my money on Warner Bros just yet.
Regardless of what has been decided in the court of public opinion, incapacity or a serious health (read mental) illness on the part of Sheen has not been proved yet. If Charlie did exceed the number of incapacitated or sick days permitted, there still may be room for a waiver argument. If Warner Bros truly sought Sheen out for renew his contract after he was charged with a felony, and further, reassured him that a conviction and jail time would not jeopardize their working relationship, Warner Bros may have waived the moral clause (subject to public policy concerns). Those actions if proved would also undermine the justifiability of terminating his contract on grounds of moral turpitude (was he allowed to stay in character off set?). Then there is the question of whether Sheen was terminated because Lorre felt it would be immoral to be a part of Sheen's alleged meltdown, rather than because of Lorre's allegedly egotistical, malicious wishes. Lorre allegedly has a history of personality clashes with stars he has worked with.
Of course, the whole issue of arbitration still has to be decided. Warner Bros insists that the contract requires the matter to be arbitrated. Team Sheen has made it clear ,by filing the lawsuit, that it does not share that opinion. Prepare for a rumble in the Tinseltown jungle. In the meantime, Charlie still has the (literary) Midas touch.....
Eniola O. Akindemowo.
Wednesday, March 9, 2011
- I speculated that the gloves might 'come off' in response to Charlie's rant against Charles Lorre, creator of Two and a Half Men; The TL indicates that this, in conjunction with another bizarre interview (held on the same day), tried Warner Bros.' patience to the limit. The last straw was Charlie's non response to the request for confirmatory notice of treatment that Warner Bros. requested after the show was put on hiatus.
- The time for gritted teeth and walking on eggshells is over. No longer willing to put a good face on things, Warner Brothers has replaced the (forced) smile with the menacing growl of its notice of intention to seek legal remedy. Notice of this intention was served in the TL thus:
- "Mr Sheen's conduct constitutes breach of contract, breach of the covenant of good faith and fair dealing and tortious interference with Warner Bros.'s contracts with third parties, among other causes of action.....In any ensuing arbitration, Warner Bros. will seek recovery of all of its damages including lost revenue from the show and all other damages the law allows."
- Time Warner was sensitive to the possibility that it might be accused of illegal or immoral motives for standing by the self destructing actor after all. The letter states "in halting production of Two and a Half Men...Warner Brothers took the only responsible action open to it - morally and legally - in these painful circumstances. Warner Bros. would not, could not, and should not attempt to continue 'business as usual' while Mr Sheen destroys himself as the world watches".
- There was in fact a morals clause in Charlie's contract, albeit an unusually narrow one. If the producer in good faith was of the opinion that a felony offence involving moral turpitude had been committed, or if the actor was indicted or convicted of such an offence, the clause conferred on the Producer the right to treat the commission of those acts as an actionable breach. Sheen's proud assertion that Warner Bros did not have the power to 'dominate and totally interfere with my personal life', was therefore not entirely true. In fact Warner Bros.statements in the TL indicate further that regardless of whether Charlie was hired to play himself or not, he was not at liberty to cross the line of criminal conduct, or bring the network in disrepute by his self destructive behavior. The letter further states that "his admitted extreme cocaine use violates his obligation under ....the Terms & Conditions not to engage in any extra-hazardous activity without Producer's prior written consent..."
- I suggested that the lack of a morals clause could cut both ways - freeing Charlie from the moralistic control of the network while absolving the network from responsibility for his poor choices. In detailing the actions justifying their invocation of the morals clause, Warner Bros pointedly refers to Charlie's alleged supply of illegal drugs to a third party in the TL rather than Charlie's alleged personal use of such drugs.
- Good faith and fair dealing have come into it - Warner Bros claims that it has discharged it's contractual duties of good faith and fair dealing to Charlie while asserting that Charlie has failed to do so.
- I mused on how reputational mud just didn't seem to stick to 'Teflon Charlie' and wondered if Warner Bros. would resort to some 'teflon abrasive', if the gloves were to come off. Well they have, they did, and the mud slinging has not merely stained his reputation. In the eyes of some, he's mired in the mud.
- Charlie's mental health is now squarely in issue. The TL opens with a direct attack on his mental state:
- "At the outset, let us state the obvious: Your client has been engaged in dangerously self-destructive conduct and appears to be very ill. For months before the suspension of production, Mr Sheen's erratic behavior escalated while his condition deteriorated.....Now the entire world knows Mr Sheen's condition from his alarming outbursts over just the last few weeks....". Later, the letter continues "In any event, Warner Bros is entitled to suspend Mr Sheen's employment...due to his "Incapacity"....defined....as including..."any physical or mental disabilities, which due to the unique nature of the Performer's Obligations, are not subject to reasonable accommodation".
- Warner Bros utilises speculative comments about Charlie Sheen's mental condition by a number of talking head medical experts in alleging mental disorder/mental incapacity:
- A number of health care experts observing Mr Sheen during these interviews have commented that he (1) appears to be 'manic' and/or 'bipolar,' (2) he suffers from a 'hypomanic' psychological state; (3) potentially poses a dangerous threat to himself and others; (4) requires immediate professional care."
- The suspension of the show was indeed a first discreet step towards distancing and ultimately disengaging from Charlie.
- Warner Bros relies on several grounds for termination. I suggested earlier that consistently failing to be in a fit condition to work, bringing the network into disrepute, and being charged with a serious felony were possible grounds for termination. The TL asserts that Warner Bros is entitled to terminate Charlie Sheen's contract because :
- he is not in a fit state to work due to mental incapacity or a serious health condition
- they have reason to believe that he has committed at least one felony involving moral turpitude, and thus breached his morals clause
- he has engaged in (harmful) PR activities without authorization..
Other grounds relied upon are that:
- by failing to perform material obligations (the TL asserts that his condition prevents him from doing so) Charlie committed an immediate default, also that,
- by refusing or failing to return to work, he also repudiated his obligation to perform,
- his incapacity, once persisting over a (fairly limited) period, constitutes a default justifying suspension, and,
- force majeur events have occurred as a result of his hampering production of the show, his being out of control (of Warner Bros.), his illness and loss of weight (disfigurement), and his breaches of contract.
The TL summarizes the case for termination by observing "based on the totality of Mr Sheen's statements, conduct and condition, including but not limited to his refusal to offer any cure in response to the notice of suspension, Warner Bros. is exercising its rights to terminate the Agreement under the provisions specified above."
Warner Bros. terminated Charlie's contract summarily, asserting the right to terminate, with written notice, for a serious health condition or uncured incapacity (lasting for more than 10 consecutive days, or 15 days over the course of the year), or anytime following suspension for a default. Charlie Sheen's contract obviously contained an arbitration clause, as the TL states "...Warner Bros. has submitted this dispute to arbitration...as required by the Agreement....We look forward to your cooperation with the arbitration process." The letter further insists in a heading that "This Dispute Must Be Arbitrated'.
Though short of a cliff hanger, we are left with several questions. Will Charlie Sheen respond with 'all barrels blazing', or will he back down - or at least adopt a less confrontational approach - to begin to attend to the repair of his disintegrating life? Will he submit to arbitration, or fight for his day in court? Will there be a response, from health care officials, to the deepening allegations about his mental state? To what extent will his alleged mental state/incapacity lessen the brunt of the legal storm he has unleashed? Who will represent him - legally, publicly - now? (Reports of recent firings and resignations from his support team suggest that he will need to recruit new representatives.)
The first salvo, in what is likely to be a drawn out sensational (ist) legal battle, has been dispatched. Brace yourselves for the next episode of this tragic drama, in which family, mental health officials, and law enforcement officials may have more than a walk on role.
Eniola O. Akindemowo.
Monday, February 28, 2011
Charlie Sheen’s antics, documented virtually everywhere, have kept the public agog for months. As the seriousness of his scrapes escalates, questions swirl about how this will all end. As parents caution a hyperactive child obviously heading for a fall that “it will all end in tears”, I am rooting for a happy ending, despite all indications. I am hoping, as I watch this awful drama unfold, that it will not culminate in a tragic end.
It was only a few weeks ago that Charlie Sheen reportedly announced that his contract for Two And A Half Men has no morality clause. It was alleged that he proudly asserted that he could do as he pleased, because he had not given the powers that be the contractual power to ‘dominate and totally interfere with my personal life’.
The unfolding drama raises contract questions galore. Is it true, for instance, that there is no moral clause in his contract? Really? It almost makes you want to incredulously ask who wrote the thing, until you realize that morality clauses are no longer de rigueur – at least not in entertainment contracts. He may even have such a clause in his contract - some accounts have him confirming the existence of such a clause but admitting that he hasn’t read it.
Clause or not, good luck Charlie; in the past a mere whiff of scandal could be the kiss of death for a career – yet this has not happened to Charlie - yet. A conceptual pair of reins over his scandalous behavior would do him some good, I think. A morality clause, and a carefully crafted artistic control clause, for example, could do some good. Regarding contractual control over his artistry however, this may depend on where performing ends and true life starts for Charlie. The two may have blurred into one. It almost seems like he was hired to play himself. (Does that make anything he does off set a spin-off? One might be forgiven for thinking so by his behavior).
It seems, in any case, that artistic authenticity is important to Charlie. Charlie wants to be true to self . The tragic thing about this is that he allegedly believes that authenticity precludes sobriety - at least for him. This brings to mind a pantheon of tormented stars that departed before their time. It makes you want to shake the guy saying “Snap out of it man – you’re not doomed. It doesn’t have to end this way".
Did he ever take the time to read the contract? We can safely presume that he signed it or that it was signed on his behalf, but he allegedly claims to not have read it. Perhaps he is no different from the large number of people who routinely sign before reading. Or perhaps he has not read it because he feels that is what he pays his legal team for. It’s hard, admittedly, to imagine Charlie Sheen taking the time to read a how-many-pages-long contractual document of carefully worded clauses at this point. Perhaps he once did – during that awful five years of sobriety a long time ago.
Maybe he enough patience for his legal team to give him only the nitty gritty of his contract i.e. what behavior will get him fired. He certainly seems confident that he has a long string to play with. Although he comes across as cocky, I suppose he has some reason for this – he is not known as ‘Teflon Charlie’ for nothing.
So here’s another question – what makes it so difficult for the reputational mud to stick to Teflon Charlie? Does he have a super slick contract assisting his PR agent? If so, what might be the ingredients for the slickest contractual Teflon – a tepid moral clause and wide discretion? The right to engage in ‘artistic expression’ so long as that bargain, and its expression, remain on the right side of public policy? Maybe being liked in the industry pragmatically translates to Teflon? Or is it just a good old double standard at work?
It’s hard to believe a party the size and sophistication of the CBS TV/Warner Joint Venture would leave itself contractually vulnerable to the antics of a Teflon profligate. CBS/Warner is surely working through its arsenal of options. That would include termination – firing Charlie – although the CBS/Warner has stopped short, for now, of doing so.
Another option, of course, would be to stand by Charlie - with gritted teeth. The show’s ratings have not been harmed by his troubles. It is likely, in fact, that his antics have helped the ratings. The show has performed so strongly, that if no more epsodes are made, the CBS/Warner will still profit handsomely from syndication which likely would go on for years. That’s good news and bad news for Charlie. It's good news if he gets a percentage cut of profits. Onthe other hand, the fact that he is no longer indispensible may be a bad omen for his continued antics as a CBS-Warner star.
CBS-Warner has undoubtedly weighed its choices every step of its turbulent journey with Charlie. So far the preference has been to put a good face on things. After his latest antic however - savaging the hand that fed him – it will be understandable if the CBs/Warner decides it’s time for the gloves to come off.
Before things turn really nasty, before the last straw breaks the camel’s back, might a point be reached when it becomes immoral – contractually speaking - to stand by and watch an actor, no matter how profitable, implode? It’s one thing to condone the omission of a morals clause – big boys are allowed to live out the bargains of their choice after all, but when does standing by and watching a train wreck become permissible? When does benefitting from the fast motion slide of a rakishly cute actor morphing into something less cute – though compelling viewing - become a breach of the duty of good faith and fair dealing? “All publicity is good publicity” the show biz adage goes – but might there be a point where standing by an out of control star begins to seem a cynical enablement of that actor’s race to self destruction?
He’s a big boy you may say – he knows when to say no – but does he, really? The ability to say no to poor choices is playing a starring role in this whole drama. His family is concerned and has asked the public to pray. Allegedly plagued by all manner of addiction issues, it is becoming harder after his latest rant to argue that Charlie’s ordinary judgment, let alone his contractual ability is intact. He may even think that HE is a contract. Concerned contemporaries and celebrity doctors are predicting that things will end badly if he does not get help now.
Let’s say hypothetically that the acceptance of an offer to make another season of a hugely popular show could be convincingly shown to be more likely harmful than beneficial to a random troubled star. Addicted not only to substances, but to public attention, the hypothetical star accepts the offer in a snap. Establishing that the hypothetical contract is voidable - because the hypothetical star, due to his substance induced intoxication was either unable to understand what he was getting into (unlikely) or act reasonably in relation to the bargain (more likely) , and hence a bad deal for him - could be a step toward establishing a lack of good faith on the part of the Network. Entering into a contract ,knowing the star has addiction issues, and then standing by while the star self-destructs amid skyrocketing ratings could arguably qualify if, for example, the contract obliges the Network not only to provide employment, but employment that is reasonably likely to enhance or benefit to the star's image. Though unlikely in an ordinary employment contract, this makes sense in an agreement for the employment of an actor - as an independent contractor - to whom image building is of primary importance. The act of facilitating the self destruction of a known addict would be deemed detrimental to that actor, one would hope. The chances of success will be stronger where the argument that the Network callously failed to intervene to wring out maximum profits is credible on the facts. The omission of a morality clause from the hypothetical star's contract could cut both ways. While freeing the star from the moral control of the network, it could also release the network from the already minimal responsibility the network might have for the hypothetical star's poor choices.
CBS/Warner Bros may be in the early process of disassociating itself from the imploding soap opera that has become Charlie’s life. The discreet cancellation of the rest of the season first, and then what? You can be sure of this – Charlie will not go quietly. He is not happy about the cancellation of the remainder of the season, and he wants the world to know it.
So, now what? Time to activate some Teflon abrasive – the moral clause (if there is indeed one in his contract) or a close equivalent? Perhaps another clause might have the bite of a moral clause? A moral clause is a glorified termination sub clause, in one sense, and as we all know, a termination clause is the emergency escape chute. If there is no moral clause, check the wording of the termination clause next. Actions such as consistently failing to be in a fit condition to work, bringing the network into disrepute (a.k.a making the boss look bad), or being charged with a serious felony, could easily fall within the terminations clause of an entertainment contract.
More details will definitely seep out in ensuing weeks. We will discover whether termination is on the cards for Charlie Sheen - and whether Charlie is really going to sue. Should CBS/Warner get to the point of pulling the plug – and it’s not a given that it will, it will certainly be interesting to see what finally is deemed grounds to terminate the contract rather than merely exercising the option to cancel a season.
Eniola O. Akindemowo.
Friday, February 18, 2011
Behind the placid exterior, shown at left, not all is well at Fannie Mae Headquarters. Legal fees have mounted for the mortgage giant's former executives. The executives have been defending themselves against accusations of accounting improprieties alleged in a shareholder suit brought in 2004. The New York Times reports that their legal fees have climbed to over $100 million since the suit began, with the best estimate being in the $160 million range. It is not difficult to rack up such fees when, as Ohio Attorney General Mike DeWine claims in the Washington Post, they are “lawyering this case to death.” Evidence of such over-lawyering included bringing upwards of 13 seemingly mute lawyers to some 123 depositions and another 35-40 lawyers to monthly conference meetings. All of this, and the former executives are reportedly still years from trial.
Who could be paying for all of this you ask?
Well, you are, in a way. As of 2008, the government took over Fannie Mae. The executives were part of the deal, along with contracts including standard provisions calling upon Fannie Mae to indemnify them for “reasonable” legal fees associated with their employment at Fannie Mae. These contracts remain in place, even though the Housing and Economic Recovery Act of 2008, the act that created the Federal Housing Finance Agency, empowered to oversee of Fannie Mae and Freddie Mack, allowed for these contracts to be voided. Officials at the Federal Housing Finance Agency have claimed that overturning these contracts would have been "inappropriate and possibly unconstitutional."
In any case, if the executives are found liable, the Times reports, the executives will have to reimburse the corporation for the legal fees. The executives, who have already paid $31 million to settle with the Office of Federal Housing Enterprise Oversight, a predecessor regulator, may not have the means to repay the legal fees already advanced to them.
Members of Congress know a moral hazard when they see one. At a Congressional Hearing earlier this week, lawmakers questioned whether these fees are actually “reasonable.” Randy Neugebauer, chairman of the Oversight and Investigations Subcommittee of the House Financial Services Committee, claims that keeping these contracts intact gives the former execs incentive to keep running up enormous legal bills- all at the expense of the taxpayers. U.S. District Judge Richard J. Leon said it best at a hearing in 2009, "I am not so sure the taxpayers are doing pretty well, but the lawyers are doing pretty well in this deal."
[JT & Katherine Freeman]
Thursday, February 17, 2011
What is “a good bargain”? Is it all in the price? The price may or may not reflect the value of the subject of the bargain. It may be underpriced (to the glee of the buyer), or overpriced (to the satisfaction of the seller). An underlying belief about what the basic value of the subject is must also exist. Without that underlying belief, judgments about how underpriced or overpriced - and thus, how good or bad - the proposed contractual bargain (price) is, cannot be made. So, what is the true value of the Huffington Post? Some see the HuffPo as a barely five year old celebrity upstart that defied expectations to become a remarkably popular blog. Was it a steal or a bust at 315 million?
Celebrity, even notoriety, seems admired and highly valued these days. And, if admiration is not quite the word, the fact of celebrity - even where the person concerned is famous for simply being famous – certainly draws our attention. It is because of this that the 'art' of being a celebrity is a hardnosed business pursuit rather than a frivolous lark. There is no shortage of promoters willing to pay someone - anyone - who can attract, however fleetingly, the public’s attention. In this era of the ever shrinking attention span therefore, the proverbial fifteen minutes of fame is a lifetime in dog celebrity years. How to explain otherwise the high dollar book deals, and the endorsements that are the badge of even the most tenuous celebutante?
So, how to quantify the objects of our admiration? We may not even be dealing with objects but with abstract values if you will – celebrity, popularity, notoriety to name a few. Might a sampling of celebrity book deal dollar values yield a value index of sorts? Perhaps - if accurate figures were not so fiercely guarded and exaggerated accounts were not so eagerly circulated. Perhaps a listing of celebrity books on the New York Times Bestseller List might provide a surrogate of sorts? One can only hope it was no mean feat for the reflections of a celebutante to make the New York Times Best Seller list at the same time that the memoirs of a former U.S. president did.
Contract law permits a wide exercise of choice here. As one person’s trash may be another’s treasure, it is the buyer’s (or seller’s) choice to make a deal that might seem a bad idea to someone else. Choice is the operative word – if the party was misled, unduly influenced or improperly threatened for example, the deal will of course be voidable.
Twenty years ago, America On Line (AOL) was a profitable media giant. A decade later, a less vibrant AOL consented to become a part of the Time Warner group. Seen as a bad idea at the time by some and now viewed as possibly the worst merger deal in history, there was no suggestion when it all ended badly, that it was anything other than an ill-advised gamble. Now a very publicly ailing member of a reputably dying breed of media and print enterprises, AOL has by this merger bought itself a chance to turn around it’s all but inevitable demise.
Presuming that this can only be a good deal for AOL which had to do something, anything, or die, what about the Huffington Post? Did the HuffPo get ‘good value’ for the trade? The jury is out on whether the deal will be a vindicated or regretted. Contractually speaking, however, a contractual party is entitled to exactly what he or she bargained for – nothing more, nothing less. Full performance of a party’s side of the bargain discharges that party’s duty to perform, while the unexcused non performance of even part of a due duty is a breach per the Restatement of Contracts (2nd) §235.
The bargain, ideally, was shaped by the parties preferences. A party may thus receive as the exchange, if she chooses, a little something now whose value at the time of contracting is greater to her than its face value. She may promise to pay, if she wishes, double, threefold or more of that face value in exchange, sometime in the future. She may choose, conversely, to pay big money for a subject of seemingly slight value in the hope that the potential she sees will soon be realized. If that potential is unrealized, she will wear the risk. Unfair tactics and public policy aside, the law is content to permit her to assign whatever value she chooses to the subject of her desire be it increased popularity, an entry pass into a stronger corporate group, or a chance to play with the big boys.
Should we conclude therefore that value is in the eye of the beholder, and that the measure of a subject’s value is how much people are willing to pay for it? This is a logical deduction, but only one side of the value-is-determined-subjectively v objectively jurisprudential debate. It must be harder in any event, to quantify the value of celebrity musings without reference to sponsored endorsements, celebrity impact rankings and such. It evidently is just as difficult, if not more so, higher up the food chain. Take our example of a very popular upstart website/blog. Analyses of monitored acquisition deals indicate that online media sites are typically acquired for 1½ times the amount of their generated revenues. Launched barely five years ago, the Huffington Post was acquired for 315 million - reportedly five times its generated revenue. It is hard to know whether this figure is a hardnosed assessment of the HuffPo’s worth, or a reflection of the fact that the negotiations were between an ailing giant and an ambitious upstart fledgling.
If all goes well, the ultimate verdict may one day be that the HuffPo was a steal at 315 M. It is possible that Adrianna Huffington may come to rue the bargain that looked oh so good at the time. If AOL’s profitability hemorrhage is not stemmed by this deal, on the other hand, its 315 M payout will be just one more milestone in its march to oblivion. There is no contractual rule against a deal that was, with hindsight, ruefully underpriced or fatally expensive. Contract law will be content where the regretted deal, truly bargained for and not compromised by vitiating factors, was based upon a freely quantified exchange.
The parties considered the bargain. They assessed its value. Once you have done that, “you pays your money and you takes your choice.”
[Eniola O Akindemowo]
Tuesday, February 15, 2011
After we discuss ambiguity, contractual interpretation, interpretive maxims and other related topics, I have my first-year Contracts students draft a morals clause for a faux contract between a television network and a performer. The exercise is an attempt to put the issues "in context" and demonstrate how and why ambiguity actually arises. We also discuss the general benefits of brevity versus the costs of leaving something out of the contract. It seems that Warner Brothers may be facing the latter scenario in its contract with actor Charlie Sheen. The clause allegedly left out is a morals clause.
Most contracts between producers and performers routinely contain a "morals clause," the breach of which entitles the show's producer to fire the performer. Conduct swept within a morals clause can range from more serious offenses, such as criminal convictions, to any behavior that merely would make the producer or network look bad. For example, as we've previously reported, Tiger Woods's reported marital infidelities may have triggered the morals clauses in some of his endorsement contracts. Because Sheen's recent off-camera behavior has made him appear to be, ahem, less than 100% moral, some industry insiders have suggested that Sheen would be fired from the highly-successful CBS show, Two and a Half Men, produced by Warner Brothers. Not so fast, says Sheen. Sheen reportedly is telling friends and advisors not to fear because his contract, unlike most others, has no morals clause. Thus, in Sheen's world, he cannot be fired from the show without his firing being a breach of the contract by Warner Brothers.
So, if you are tired of hearing about Charlie Sheen's off-camera exploits on this blog or elsewhere, blame Warner Brothers' lawyers. If they had included a morals clause in his contract, I am confident that Sheen would not be doing these allegedly immoral things (this sentence brought to you by our sponsor, Sarcasm).
Friday, February 4, 2011
With the Superbowl coming up this Sunday, many sports fans currently are focused on football (or at least on the commercials to air during the football telecast). However, a recent story collecting oddball terms in professional baseball players' contracts recently grabbed my attention. Most of the terms detailed are incentive clauses of the "do "this thing, get this much more money" variety. What makes these incentive clauses particularly interesting, however, is that many of the triggering actions appear impossible or near impossible to achieve. For example, some players that have World Series MVP incentives play for teams that stand little chance of winning games let alone the World Series (sorry, Pittsburgh). In another perplexing example, a player who is a designated hitter (meaning that he does not play in the field--ever) has a clause promising to pay him extra money if he wins a Gold Glove, an award given to the best fielding player at a particular position. Ultimately, the article raises an interesting question that some of our readers may be able to address...why? Why are these clauses, many of which sound downright silly, in these contracts at all? Is it because the agent copied and pasted the terms from another player contract? Is it because the player is delusional? Or, is it because these incentives somehow help the contracts satisfy rules that apply solely to professional sports contracts (such as terms insisted upon by the players' union)? If anyone has an idea, please post in the comments. And enjoy the Superbowl!
[H.R.A. w/ hat tip to student Ron Angerer]