Monday, August 22, 2016
In a move that demonstrates how contracts for various aspects of marijuana products and services are going mainstream, Microsoft Corp. has accepted a contract to make marijuana-tracking software available for sale on its cloud computing platform. The software is developed by “cannabis compliance technology” Kind Financial and allows regulators to track where and how much marijuana is being grown, sold or produced in real time. In turn, this lets the regulators know how much sales and other tax they should be collecting and from whom (maybe this is the beginning of the end of some growing marijuana plants in state and national parks to hide their activities from the government).
This contract – called a “breakthrough deal” because it is the first time that Microsoft ventures into the marijuana business - may end up enabling the software developer to capture as much as 60% of this very lucrative market. (Other companies with government contracts often end up with such a large market share.)
How did the company strike such a lucrative deal? You guessed it: by networking. Kind’s CEO was introduced by a board member to an inside contact in Microsoft.
Monday, May 2, 2016
You Might Think City Buses Don't Have a System, But They Totally Do! (it just might be copyright infringing)
Entities and people come together, do business, have disagreements, go their separate ways. It happens all the time. But nowadays, since so many things have embedded software, these break-ups of business relationships have copyright implications. If you don't have a license to continue using the embedded software, when you break up with another business, that means you have to stop using whatever contains the software, too. Theoretically.
A recent case out of the Middle District of Tennessee, ACS Transport Solutions, Inc. v. Nashville Metropolitan Transit Authority, 3:13-CV-01137, dealt with this issue. The Nashville Metropolitan Transit Authority ("MTA") had contracted with ACS to develop a system for MTA to manage its buses. The system ACS created contained copyrighted software that ACS expressly licensed to MTA. A few years after the development of the system, MTA discontinued its relationship with ACS, but it continued to use the system that contained the embedded software. ACS contacted MTA and told it that it was using the software without a license and infringing ACS's copyright. Nevertheless, MTA continued to use the system with the embedded software, and so ACS eventually brought this lawsuit.
MTA argued that, when it terminated its relationship with ACS, it did not terminate the license to use the software, and so it was still properly licensed. However, MTA's relationship with ACS was governed by a contract, within which was the software license. Terminating the relationship set forth by that contract, the court found, necessarily terminated the software license also found in that contract.
MTA additionally argued that it had paid for the system and that therefore it should be entitled to use the software within the system indefinitely. ACS did agree that MTA had paid for the system and would not have owed ACS any further payments...if ACS and MTA had fulfilled the rest of their contractual obligations. Instead, ACS argued, MTA breached its obligations. Therefore, ACS rescinded MTA's license to use the software.
There was some slim hope for MTA. MTA argued that it had an implied license to use the software for a "reasonable" period of time while it transitioned to the new software of the company it hired to replace ACS. The court seemed skeptical that the length of time MTA had used ACS's software after terminating ACS (it ended up using the software for more than two years after terminating ACS) was reasonable; the court implied that, even if MTA had had an implied license to use the software while it transitioned, MTA's use had exceeded that implied license's scope. However, the court found this to be a material fact in dispute and so inappropriate to resolve at the summary judgment stage.
Under the terms of its contract with ACS, MTA received only a non-exclusive, revocable license for the software. If MTA had wanted more protection, MTA should have negotiated better license terms. ACS, of course, might never have been amenable to granting better license terms. But let this case be a lesson: Many things are going to come with embedded software these days, and that software is copyrighted. You're going to need to dot your copyright i's and cross your copyright t's regarding this software; don't lose sight of that by focusing instead on the larger product you're buying. MTA may have thought of itself as buying a system, but it really needed to think of itself as buying the software within the system.
Wednesday, December 16, 2015
How does paying 18 cents a minute for a local phone call in 2015 sound to you – fair enough or a scam? How about 23 cents a minute for a non-local call? If you think that no one can possibly charge that much today or that no one in their right minds would pay it, think again (ok, at least the former).
In Orange County, California, jails, the average phone call costs just that. In return for providing phone service in a county’s jail system, a telecommunications company typically guarantees the county a multi-million dollar “commission” as well as a percentage of the revenue. For example, Alabama company Global Tel-Link guarantees a payment of $15 million or two-thirds of phone revenue, whichever is greater, to Los Angeles County. To be able to pay such a high price, the phone companies of course pass the cost on to the end clients; the inmates in at least Southern California counties.
The inmates and their families have had enough. They filed suit recently against Los Angeles and nearby counties alleging that the fee for inmate telephone calls are “grossly unfair and excessive” and amount to an illegal moneymaking scheme for local governments.
Before you ask yourself who is calling the kettle black, as I must admit I did when I first learned of this story, think of this: criminal recidivism is greatly reduced by family communication. The Federal Communications Commission last month capped local call rates and trimmed the cap on interstate long-distance calls for this and other reasons. Mothers with husbands in jail have paid several thousand dollars to telecommunications companies so that their children can talk to their fathers, undoubtedly a benefit to not only the families, but also society in the long run.
Of course, the inmates have few alternatives as cell phones are very typically not allowed in jail.
It continually amazes me how much Americans are willing or have to pay for phone service, Internet service, and cable TV service. In the case of inmates, of course, they have little choice. To avoid paying large monthly fees for cell phone service, I have kept my “dumb phone,” but instead find myself annoyed at still, in 2015, not being able to get more selective cable TV for only those stations I truly watch (the news, if you can call it that these days). Monopolies or not: communications companies still typically have the upper hand in contractual bargaining situations.
Friday, August 28, 2015
In breaking Bieber news, HuffPo reports that Justin Bieber (pictured, left) claimed breach of contract in canceling a scheduled appearance in Montreal. The venue where Bieber was scheduled to perform seems to belieber the young artist, as it posted on its Facebook page a notice that neither it nor Mr. Bieber were liable for the cancellation. Bieber himself tweeted the cancellation, specifically referring to the promoter's breach (and to lying, but we prefer the legal jargon).
In Presidential candidate news, the Wisconsin Gazette reported that Wisconsin taxpayers might have to pay $50 million in damages because Governor Scott Walker (pictured, right) breached a contract that his predecessor had entered into to modernize the states rail service. According to the Gazette, Spanish train-maker Talgo sued the state for $66 million. The case settled, with the state agreement to pay nearly $10 million on top of the $42 million it had already paid for trains that it never received.
The Washington Post reports that a Maryland firm, CNSI, that lost a $200 million contract when its Senior Vice President blew the whistle on irregularities in the award of the contract. CNSI won a contract to process medicaid claims for the state of Louisiana while one of its former executives was Louisiana's Secretary of the Department of Health and Hospitals. The contract was cancelled in 2013 and the Secretary of the Department of Health and Hospitals has been indicted for perjury. CNSI claims that the whistle blower was a disgruntled employee who breached his contract and tortiously interfered. An investigation into possible wrongdoing by CNSI in connection with the contract is ongoing.
Thursday, August 13, 2015
According to this report in the Chicago Sun Times, The Chicago Teachers' Union (CTU) is calling "strikeworthy" a proposal by Chicago Public Schools (CPS) CEO Forrest Claypool that teachers pay their full pension contributions. The proposal would result in a seven percent pay cut according to CTU PresidentKaren Lewis. The CTU had previously agreed to a seven percent "pension pick-up" in lieu of a pay raise. Claypool now claims that there is no solution to CPS's $9.5 billion pension crisis that does not involve an end to the pick-up. Chicago teachers will likely return to work without a contract and could strike at any time. Mayor Rahm Emanuel (pictured) has proposed phasing out the pick-up over a period of years in an attempt to ease the blow.
The Los Angeles Times reports that UC San Diego and the University of Southern California (USC) have filed competing lawsuits in a battle over control of a long term research project that seeks to develop treatments for Alzheimer's. A researcher at UC San Diego switched his affiliation to USC and has sought to take some of the project's funding with him. In early rounds, a San Diego judge has sided with UC San Diego on ownership of the project, including databases relevant to the project's ongoing research. Eli Lilly & Co. had pledged up to $76 million to UC San Diego to test a new Alzheimer's medication that the company is developing. Lilly now plans to move those fund to USC's new institute. The future of this research project seems caught in the cross-hairs of competing claims to contractual entitlement to both funding sources and intellectual property.
The Business Insider reported last week that Fox Sports analyst Craig James is suing the network, alleging that he was fired for voicing his opposition to gay marriage. James alleges breach of contract and discrimination. His termination, days after he was hired, allegedly relates to a statement he made in 2012 when he was running for U.S. Senate that gays and lesbians would have "to answer to the Lord for their actions."
Monday, August 3, 2015
In the continuing fallout from Donald Trump's Presidential candidacy (photo right by Michael Vadon via Wikimedia Commons), Trump is now suing celebrity chef Jose Andres. According to the Washington Times, Andres was to open a restaurant in Washington, DC's old post office building, which will soon be the Trump International Hotel. He now claims that Trump's anti-immigrant comments make it impossible for him to do so. It seems that Trump's attorneys' response is to claim that his views on immigration were well known and consistent and should not have come as a surprise to Mr. Andres. The lawsuit seeks $10 million in damages.
In other Presidential candidate news, three unions representing New Jersey public employees are suing the state for breach of contract. The suit arises out of Governor Chris Christie's efforts to address a budget shortfall by cutting contributions to the state pension fund. Excellent coverage of this suit and its background can be found in the Winnipeg Free Press here.
The Fay Observer reports that Intersal, a company that discovered the wreck of Blackbeard's ship of the coast of North Carolina, is suing North Carolina. The suit alleges that the state has breached a contract pertaining to the use photos and video relating to the wreck and seeks $8.2 million in damages.
Monday, April 27, 2015
In yet another government outsourcing scheme gone wrong, KOLO TV news is reporting that Nevada is alleging breach of contract against the companies it hired to administer Common Core testing in the state's schools. Apparently, when thousands of students attempted to log on so that they could take their exams, they received an error message and could not proceed. Educators across the state are aggrieved, but students across the state are generally fine with it.
Nonprofit Quarterly reports that three students, three parents and three alumnae are alleging breach of contract and seeking an injunction to keep open Sweet Briar College in Lynchburg, VA. They allege that they had entered into express and implied agreements with the College that they would not only have the benefit of a four-year degree from the College but would also enjoy the benefits of being alumnae or of having children who were alumnae.
According to the Des Moines Register, in 2011, an 87-year-old grandmother was playing the slots, when the screen told her that she had a "bonus award" of $41797550.16. Last week, Iowa's Supreme Court ruled unanimously that she had won $1.85. They rejected claims of breach of an implied contract and found that the "bonus award" was just the product of a computer glitch.
Wednesday, April 22, 2015
On Monday, a California Appellate Court declared the tiered water payment system used by the city of San Juan Capistrano unconstitutional under Proposition 218 to the California Constitution. The California Supreme Court had previously interpreted Prop. 218’s requirement that “no fees may be imposed for a service unless that service is actually used by, or immediately available to, the owner of the property in question” to mean that water rates must reflect the “cost of service attributable” to a particular parcel.
At least two-thirds of California water suppliers use some type of tiered structure depending on water usage. For example, San Juan Capistrano had charged $2.47 per “unit” of water (748 gallons) for users in the first tier, but as much as $9.05 per unit in the fourth. The Court did not declare tiered systems unconstitutional per se, but any tiering must be tied to the costs of providing the water. Thus, water utilities do not have to discontinue all use of tiered systems, but they must at least do a better job of explaining just how such tiers correspond to the cost of providing the actual service at issue. This could, for example, be done if heavy water users cause a water provider to incur additional costs, wrote the justices.
The problem here is that at the same time, California Governor Jerry Brown has issued an executive order requiring urban communities to cut water use by 25% over the next year… that’s a lot, and soon! Tiered systems are used as an incentive to save water much needed by, for example, farmers. The California drought is getting increasingly severe, and with the above conflict between constitutional/contracting law and executive orders, it remains to be seen which other sticks and carrots such as education and tax benefits for lawn removals California cities can think of to meet the Governor’s order. Happy Earth Day!
Wednesday, April 1, 2015
Indiana Governor Mike Pence (pictured) is in a tough spot. As reported here, Indiana is facing protests, threats of boycotts and possible losses of business opportunities as a result of its version of the state Religious Freedom Restoration Act. As illustrated in the Indy Star here, Indiana's law makes it easier for individuals and business entities to rely on the statute as a defense to allegations of discriminatory treatment. Even Pence's predecessor, Mitch Daniels, in his current capacity as a university president, has distanced himself from the law.
Pence is in a tough spot because he signed the law to show his conservative bona fides, perhaps because he has aspirations to national executive office. But he may have overreached, as the backlash against the new law may hurt his chances to appeal to a national electorate. Pence's position is made more difficult by the fact that he now wants the Indiana legislature to "clarify" the law so that it doesn't look like it was designed to discriminate. But the Indiana legislators may well have exactly the clarity they wanted, and they do not share Pence's national aspirations.
Lambda Legal is among the many organizations that have objected to the law as a license to discriminate against LGBT groups, especially in the context of same-sex marriages. Now Lambba is offering Pence a way out. In a draft contract that the parties have shared with this blog (and only with this blog as far as we know), Pence and Lambda have agreed that Pence will hire LGBT applicants for at least 30% of staff associated with his current position as Governor of Indiana and as part of his election staff leadership for all political campaigns through 2020. "I may lead a red state," Pence told our correspondent, "but I expect to be flying the rainbow flag over the White House in a few years." A Lambda spokesperson said that details of the agreement are still being negotiated but that "all us us are Lambda are looking forward to a faaabulous Inaugural Ball."
Clearly this a win-win.
Tuesday, March 31, 2015
My friend Ken Ford is enjoying his fifteen minutes of fame, courtesy of the Department of Energy (D0E), which is displeased with his memoir, Building the H-Bomb: A Personal History. According to this report in the New York Times, DoE officials told Dr. Ford to make cuts to his book that would have eliminated 10% of the text. DoE personnel flagged 60 separate passages in the book for editing.
This demand (and the DoE made clear that it was making demands not requests) came as a surprise to Dr. Ford, who had submitted the book for DoE review expecting the process to be a mere formality. In Dr. Ford's view, the book contains no secrets, as the information that he included in his book relating to the history of the hydrogen bomb either had been previously disclosed or was released to him through FOIA requests. The DoE sees things differently, but the agency is unlikely to respond to the publication of Dr. Ford's book, in large part because any action it takes would only draw attention to the information whose disclosure it regards as improper.
The Times articles covers the story well and provides some examples of material that the DoE regards as classified but Dr. Ford regards as public. We would like to focus on a couple of contractual issues. First, the Times references Ken's alleged contractual obligation arising from a non-disclosure agreement he signed in the 50s. Dr. Ford does not recall what that agreement said, but he provided this blog with a copy of a similar agreement dated from September 2014. The DoE asked Dr. Ford to sign this new non-disclosure agreement in connection with its review of his manuscript. That document provides the government with multiple remedies should Dr. Ford reveal any classified information, including:
- termination of security clearances and government employment;
- recovery of royalties and other benefits that might result from any sort of disclosure of classified information; and
- criminal prosecution under Titles 18 and 50 of the U.S. Code and the Intelligence Identities Protection Act of 1982.
Given this non-disclosure agreement, one would expect that Dr. Ford's publisher would be reluctant to publish the book, fearing that it too might become a target of government scrutiny. In order to protect his publisher against liability, Dr. Ford agreed to amend his publication agreement to expand the usual indemnification clause. The additional language in the contract provides that Dr. Ford will indemnify his publisher "against any suit, demand, claim or recovery, finally sustained, by reason of . . . any material whose dissemination is judged by the United States Government to have violated the Author's obligations regarding the handling of sensitive information."
Steven Aftergood provides further information on the Federation of American Science Secrecy blog here.
Dr. Ford provides an overview of the story that his book tells, as well as links to about a score of documents, eight of which are annotated with Dr. Ford's comments, on George Washington University's National Security Archives.
Thursday, March 26, 2015
Some weeks ago, I blogged here about water rights and shortages in drought-ridden California. Of course, California is not the only state where contractual water rights interface with development and public health concerns.
In Ohio, shale driller Gulfport Energy recently filed suit against the town of Barnesville for rights to extract water for Gulfport’s fracking operations. Gulfport had a contract with Barnesville entitling it to draw water from a local reservoir at one cent per gallon. Under the contract, Gulfport would be able to draw the water unless the village determined that such action would endanger public health. Water rights were subsequently also issued to another driller. In the fall of 2014, the village told Gulfport to stop drawing water from the reservoir because of too low water levels. Gulfport’s suit now asks for adequate assurances of performance of the water contract to ensure that it can continue its fracking operations.
Whether that is a good idea is another story. From a short-term perspective: yes, we need energy preferably domestically sourced to avoid international supply interruptions and the geopolitical problems that are associated with importing energy raw materials. But fracking and fossil fuel production in general are associated with other severe problems including heavy water usage in the case of fracking. Such water, the argument goes, is better used for other things such as farming and household consumption.
Business as usual for fracking companies may not be the best idea seen from a societal point of view. Contracts rights are only a small part of this much bigger problem. However, time seems to have come for governments to incorporate escape clauses not only for “public health concerns” into water contracts, but also for drought concerns. This is not always done, as the above case shows, but such a relatively easy step could help solve at least some contractual disputes. In times of increasing temperatures and decreasing rainfall in some areas, such contract drafting may well make sense.
Thursday, March 5, 2015
The official portrait of former President Bill Clinton has been completed. See it here. It was painted in the “conservative realistic style” … maybe a little too realistic and not sufficiently conservative?
According to the artist, Nelson Shanks, the bluish shadow of a person that you see on the mantelpiece next to Clinton is that of Monica Lewinski in her infamous blue dress. You got that right: the artist himself has admitted that he purposefully scarred the picture just as the Lewinsky scandal scarred Clinton’s second term. The artist has apparently caught quite some flak for having done this. Regardless of artistic freedom and setting aside all thoughts about the scandal per se, what is, after all, at issue here is a contract for artwork depicting a former President of the United States of America. A bit more respect may have been in order. This was not any regular client having a portrait done; it’s in effect the entire nation that commissioned this work. Perhaps a subjective satisfaction clause would have been in order here. Even if it had been any “regular” client, deliberately depicting one’s paying client in a highly controversial light seems to me to be in questionable taste.
On the other hand, the argument has been made that if the artist had been held to certain contractual stipulations, the portrait of the 42nd President would have been “stiff and untrue.”
That’s not the case? Take a look and judge for yourself. While much has been made of Clinton holding an actual, gash, newspaper – so retro – the strange positioning of his fingers on his hip looks more bizarre to me. An indication of his alleged two-sided look at what constituted “the truth” in certain contexts? To me, it looks more like the V sign for, perhaps, Clinton’s ultimate victory over at least some of the political and other challenges he faced.
Wednesday, February 11, 2015
Property development is often considered a way for local communities to earn more taxes and evolve with times in general. But when construction and other development is approved in geologically risk areas such as flood zones and things go awfully wrong, is this a mere property and contracts issue, or may criminal liability lie?
In France, the answer is the latter. The former mayor of the small French seaside town La Faute-sur-Mer was just sentenced to jail for four years for deliberately hiding flood risks so that he and the town could benefit from the “cash cow” of property development, a French court has held. His deputy mayor received a two-year sentence in the same plot.
In 2010, the cyclone Xynthia hit western Europe and knocked down seawalls in the French town, leading to severe floods and 29 deaths.
Wait… a cyclone in France? Yes. Climate change is real and it’s here. Unless we do something about it (which apparently we don’t), things will only get worse. As on-the-ground steps that could prevent extreme results such as the above are often simply ignored or postponed while more and more research is done and money saved at various government scales, lawsuits will necessarily follow. The legal disciplines, including contracts law, will have to conform to the new realities of a rapidly changing climate. For starters, we need to seriously question the wisdom and continued desirability of constructing more and more homes in coastal and other flood prone areas. Ignoring known risks is, well, criminal.
Monday, January 12, 2015
A misplaced comma (or something) cost an Oregon Ducks fan his premium seats to the college football championship game. According to this report from The Oregonian, a University of Oregon alumnus found premium tickets to the game (which he knew were selling for $4000) for $400 on StubHub. When, he placed his order, StubHub indicated that he would be charged $16,59.36, but his credit card was charged $16,059.36. He protested, and StubHub refused to honor the purchase, removing the charge and offering $1600 in StubHub vouchers, which the angry Duck says he will not use. He blows off some steam in a blog post, with observations about obnoxious terms and conditions.
In a sign of the times, MasterCard has filed suit in the Southern Distroct of New York against Nike, according to this report from Bloomberg.and Oregon Live (you have to go through a short survey to read it), for having poached a few of its cyber-security experts. MasterCard is suing the employees for breach of contract and Nike for tortious interference. Nike denies all wrongdoing.
We could not have made this up: The St. Louis Post-Dispatch reports that the Devin James Group (DLG), a public relations firm, is suing another public relations firm, Elasticity. Apparently, Elasticity hired DLG to help represent the City of Ferguson in the aftermath of the shooting of Michael Brown. Elasticity fired DLG when it discovered that DLG's owner had a criminal record. Mr. James was convicted in 2006 for having shot an unarmed man. He claims he did $50,000 of work for which he has not been paid.
In another chapter in the dangers of state governments hiring private companies to handle public services, NJ.com reports that Hewlett Packard will refund New Jersey $7.5 million to get out of its contract to deliver a unifed system to administers the state's public assistance program. The Christie administration and HP agreed last year to suspend work on the project and they entered into a separation agreement in which each side agreed not to sue the other for breach of contract. The state is now looking for a new partner. In the meantime, it "continues to hobble along on its 1980s-era mainframe system," according to NJ.com.
Finally, an interesting conflict between a franchise and a large franchisee. Wendy's is requiring its franchisees to make technology upgrades and renovate stotes. DavCo, which operates 152 Wendy's restaurants is refusing to do so, claiming that Wendy's lacks the authority to require the changes. According to the Baltimore Sun, Wendy's has filed suit to terminate DavCo's franchises.
Tuesday, December 9, 2014
As indicated in this story,* CNN.com is greatly invested in the story of Morten Storm, who claims that he is a Danish double-agent who infiltrated Al Qaeda in the Arabian Penninsula (AQAP) and thus helped the U.S. target and kill AQAP operative and U.S. citizen Anwar al-Awlaki.
Storm (and his CNN co-authors) have quite a story to tell. Among other things, he claims that the United States promised him $5 million for helping the U.S. in its al-Awlaki operation. Although Storm is clearly an international man of mystery, there is little mystery on the question of whether he would have any luck on a claim against the U.S. for breach of a promise to pay $5 million. The U.S. would undoubtdedly point to the Totten case, as updated in Tenet v. Doe, and courts will find the claim non-justiciable.
NB: When you click on this site, you will see the following browsewrap banner across the top:
If you do not want to spend an hour or two parsing CNN's terms and don't want to be bound to terms that you have not read or cannot understand, do not "continue to use" CNN's site (whatever that means).
Hat tip to my student, Brandon Carter.
Tuesday, December 2, 2014
Ilya Shapiro at the Cato Institute posted last week about Century Exploration v. United States, decided by the Federal Circuit on March 14, 2014. Century Exploration (Century) acquired a lease for an oil field in the Gulf of Mexico. It paid $23 million up front, plus $50,000 per year of the lease. Century sought to protect itself against possible changes in applicable laws governing such leases through a contractual provision that no changes in law, other than reulgations created pursuant to the Outer Continental Shelf Lands Act (OCSLA), would affect Century's rights under the lease.
In the wake of the Deepwater Horizon fire, Congress passed the Oil Pollution Act (OPA), which required oil exploration companies to develop worst case scenarios and certify that they have reserves adequate to address such worst cases. Using a methodology required by the Interior Department, Century would have to have $1.8 billion on hand to deal with such a worst case. When Century could not prove that it had such funds, the government sought to cancel the lease. Century brought suit, relying on the contractual provision that protected it against regulatory changes, such as those promulgated pursuant to the OPA. Ilya Shapiro questions whether the directives from the Interior Department even qualify as government regulations, as they were sent via e-mail by "a civil servant in the Interior Department." The government filed for summary judgment, and both the Court of Federal Claims and the Federal Circuit sided with the government.
The Federal Circuit acknowledged that this case involves a lease provision nearly identical to that at issue in Mobil Oil Exploration & Producing Southeast, Inc. v. United States, 530 U.S. 604 (2000). However, in this case, the Federal Circuit found that the new regulations were actually promulgated pursuant to the OCSLA rather than the OPA. As such, they were within the carve-out to the contractual provision protecting Century against regulatory changes. In short, the Federal Circuit found this case distinguishable from Mobil Oil because of the nature of the regulations at issue.
To see in detail why the Cato Institute disgrees with that holding, you can have a look at its amicus brief. Ilya Shapiro provides the following summary:
First, it is vital to the smooth operation of the government and the health of the economy that private entities are confident that the government will honor its contractual promises. Federal spending on contracts has totaled roughly $500 billion annually since 2008—or 15% of the federal budget. If businesses and individuals have no reason to believe that the government will live up to its business obligations, they’ll have no reason to work with it. The Federal Circuit’s decision, which condoned the government’s flagrant breach of its contract with Century, sets a bad example and must be reversed.
Second, and quite simply, words have meaning—in the Constitution, in statutes, and yes, in contracts. A “regulation” is a formal rule adopted and issued by an authorized agency, in accordance with strict procedural protocols. It’s not a casual email. Giving informal government policy documents created by civil servants the full weight of the law is unconstitutional, undemocratic, and unsustainable.
Monday, November 24, 2014
File this under "Nice!" According to this report in the Durham Herald Sun, the parents of a child who has been prohibited from attending his private school, the Mount Zion Christian Academy, are suing the school for breach of contract. The allegations of breach are based on the fact that the child's parents are paying tuition, but their son is forbidden to attend his school.
And what has the child done to earn this suspension? Nothing! His parents were informed that the child would not be permitted to attend school becasue his father had traveled to Nigeria, and the school did not want to risk the spread of ebola. The school took these precautions despite the fact that:
- there is no ebola in Nigeria;
- the father had no contact with anyone with ebola;
- the father was screened at the airport and cleared.
The superintendent of schools failed to appear at a hearing and a judge ordered the school to allow the child to return
According to this story from the Spokane Spokesman Review, an Idaho judge has thrown out as invalid a $60 million contract that the state entered into with Education Networks of America (ENA) and Qwest to provide a broadband network that would link every Idaho high school. The plaintiff in the case, Syringa, had partnered with ENA on one of the two bids on the contract, but when the state awarded the contract to ENA, it cut Syringa out of the allocation of work in the contract. The court found this a violation of state procurement law.
Sandra Troian a physicist at CalTech, has filed a complaint against the school, alleging violations of the California whistleblower protection statute and breach of contract, among other things. Troian alleges that she had reported that the school had been infiltrated by a spy who was sending classified information to the Israeli government. Troian alleges that the school ignored her because it did not want to endanger a large contract with Jet Propulsion Laboratories. She further alleges that the school has retaliated against her for blowing the whistle.
Monday, November 10, 2014
According to this report on the International Business Times website, two children, through their mother, are suing Malaysia Airlines for breach of contract and negligence in connection with their father's death on Flight MH370. Plaintiffs allege that the airline breached a safety agreement that it entered into with their father and the other passengers on the flight.
As reported here in the Bellingham Herald, the Indiana Supreme Court heard arguments on October 30th about the state's contract with IBM to privatize its welfare services. The state was so disappointed with IBM's performance that it cancelled the contract three years into a $1.3 billion, ten-year deal. Friend of the blog, Wendy Netter Epstein (pictured), has written about this case in the Cardozo Law Review.
Sunday's New York Times Magazine has a cover story pondering whether lawyers are going to do to football what they did to tobacco. As an example of what this might look like we have this case filed on October 27, 2014 on behalf of Julius Whittier and a class of plaintiffs who played NCAA football from 1960-2014, never played in the NFL, and have been diagnosed with latent brain injury or disease. Mr. Whittier suffers from early-onset Alzheimer's. The complaint alleges, among other things, breach of contract, based on NCAA documents requiring each member instittuion to look after the physical well-being of student athletes.
Wednesday, October 1, 2014
In a recently unsealed ruling, the U.S. Court of Claims has awarded $1.1 million in damages for breach of contract to a former undercover Drug Enforcement Administration ("DEA") informant who was kidnapped in Colombia and held captive for more than three months.
Here's a flavor from the opening paragraphs of the 52-page decision:
This breach-of-contract action comes before the Court after a trial on damages. In its decision addressing liability, the Court determined that the Drug Enforcement Administration (“DEA”) breached an implied-in-fact contract and its duty of good faith and fair dealing by failing to protect Plaintiff, an undercover informant. During an undercover operation in Colombia, Plaintiff, known as “the Princess,” was kidnapped and held captive for more than three months. Plaintiff claims that her kidnapping and prolonged captivity caused the onset of her multiple sclerosis and seeks compensatory damages in the amount of $10,000,000 for financial losses, inconvenience, future medical expenses, physical pain and suffering, and mental anguish arising from Defendant’s breach.
Because Plaintiff demonstrated that Defendant’s breach of contract was a substantial factor in causing the Princess’ kidnapping and captivity, and triggering her multiple sclerosis, the Court awards the Princess the value of her life care plan, $1,145,161.47. Plaintiff failed to prove any other damages.
The decision covers a number of issues related to damages. For example, the court holds that it was reasonably foreseeable at the time of contracing that a DEA informant would be kidnapped in Colombia and suffer resulting health issues:
The inquiry under foreseeability in this case is whether Plaintiff's damages, namely her multiple sclerosis and the ensuing costs of her medical care, were reasonably foreseeable at the time of contract formation. Anchor Sav. Bank, FSB, 597 F.3d at 1361; Pratt v. United States, 50 Fed. Cl. 469, 482 (2001) (“Whether damages are foreseeable is a factual determination made at the time of contract formation.”) (citing Bohac v. Dep't of Agriculture, 239 F.3d 1334, 1340 (Fed.Cir.2001)). Hence, Plaintiff must show that both the kidnapping, her ensuing health problems, and consequential financial costs of medical care constituted the type of loss that was reasonably foreseeable when the parties formed their implied-in-fact contract.
Plaintiff has established that her kidnapping was reasonably foreseeable at the time the contract was entered into. From the outset ASAC Salvemini voiced concerns for the Princess' safety, and DEA moved her family because of the dangers of her operation as part of her agreement to work with DEA. Evidence revealed that kidnappings were not uncommon in Colombia at the time. 2007 Tr. 270 (Princess); 2007 Tr. 1523 (Warren) (“[W]e got the report [the Princess] had been abducted. That was not an unusual report in Colombia then or now unfortunately.”). Plaintiff established that harm to undercover informants, including injury and death, were reasonably foreseeable consequences of a breach at the time of contract formation.
Knowing, as DEA did, of the dangers inherent in undercover operations aimed at highechelon Colombian traffickers, especially kidnapping in Col ombi a–a “hot spot”–the Princess' kidnapping and resultant harm to her health was a reasonably foreseeable type of injury at contract formation. The Court recognizes that DEA likely did not specifically foresee that the injury would be multiple sclerosis, but this is not a requirement for a showing of foreseeability. Anchor Savings Bank, FSB, 597 F.3d at 1362–63 (noting that “the particular details of a loss need not be foreseeable,” as long as the mechanism of loss was foreseeable) (quoting Fifth Third Bank v. United States, 518 F.3d 1368, 1376 (Fed.Cir.2008)).
Not the ordinary intrigue of the average contracts case.
SGS-92-X003 v. U.S., No. 97-579C (Ct. of Fed. Claims, filed Aug. 30, 2014)(republished Sept. 26, 2014).
Thursday, August 7, 2014
It is not often that the Supreme Court of the United States entertains a contract issue (which is, coincidentally, one of the main reasons it is such a delight to teach contract law). The Supreme Court did, however, recently settle a contract dispute of its own.
The curious case of the trapezoidal windows at the U.S. Supreme Court is closed.
Documents filed recently in lower courts indicate that a contentious seven-year dispute over mistakes and delays in the renovation project at the high court has been settled.
“Everybody was worn out by the litigation,” Herman Braude of the Braude Law Group said this week. Braude represented Grunley Construction Company, the main contractor for the modernization project on the nearly 80-year-old building. “All good things have to come to an end,” he said.
The most contested feature of the litigation was the belated discovery by contractors that more than 150 large windows, many of which look out from justices’ chambers, were trapezoidal—not strictly rectangular. The building's persnickety architect, Cass Gilbert, designed them that way so they would appear rectangular from below, both inside and outside the building.
But Grunley and its window subcontractor failed to measure all four sides of the windows before starting to manufacture blast-proof replacements, so some of them had to be scrapped.
Grunley claimed it was not obliged to make the measurements, asserting that the government had “superior knowledge” of the odd shape of the windows that it should have shared with contractors. The company asked for an extra $757,657 to compensate for the extra costs of fabricating the unconventional windows.
But the federal Contract Appeals Board in 2012 rejected Grunley’s claim, stating: “We find inexcusable the firms’ failure to measure a necessary component of the windows prior to installation.”
Grunley appealed to the U.S. Court of Appeals for the Federal Circuit and placed other contract disputes before that court and the U.S. Court of Federal Claims. Both sides eventually agreed to settlement negotiations.
In February, both parties reported to the federal circuit that “the parties are now in the final process of closing out the underlying construction contract and settling various requests for equitable adjustment.” They also told the federal circuit that “the settlement discussion are at a very high level between the parties … and are being primarily led by the principals of each party, not the litigation counsel.”
Subsequent orders by both courts have dismissed the litigation, but no details of the settlement are available on the docket of either court.
Attempts to obtain details of the settlement have been unsuccessful so far. The Architect of the Capitol—the congressional agency that has jurisdiction over the Supreme Court building and was the defendant in the litigation—did not respond to a request for comment. The U.S. Department of Justice’s civil division, which handled the litigation for the architect's office, did not respond as of press time, and neither did anyone from the Supreme Court.
Braude, Grunley's attorney, was reluctant to give details. “The dollar figure doesn’t matter,” he said. But when pressed, Braude said his client “got some” of the $15 million in extra compensation it was seeking from the government, beyond its original $75 million contract for the work.
“Everybody agreed to an adjusted contract price that recognizes the budget limitations of the government,” Braude said, adding that the settlement was “satisfactory to all parties. Nobody was jumping for joy, but everybody was a little happy.” Braude also said the Supreme Court signed off on the settlement.
John Horan of McKenna Long & Aldridge, an expert on government contract disputes, said there is no general rule about the confidentiality of settlements, and sometimes “the government doesn’t go out of its way to make settlements public.” But a document spelling out terms of the agreement is sometimes made part of the public record or can be obtained through the Freedom of Information Act, he said. The Supreme Court and the Architect of the Capitol, an arm of Congress, are exempt from the FOIA.
The modernization project at the Supreme Court broke ground in 2003 and the target completion date was 2008, though some follow-up work is still underway. The court's aging infrastructure—including one of the oldest Carrier air-conditioners in existence—was the trigger for the project, which has cost an estimated $122 million overall.
More here. Great basis for an exam hypo. And, wow! -- to be the attorney that sues the Supreme Court!