ContractsProf Blog

Breaking: Bieber Requires NDA of Guests in His Home

We interrrupt the highbrow discussion of boilerplate and SCOTUS cases to bring you this breaking news from news.com.au that falls right within the utterly sweet spot of contracts and pop culture:

YOU party at Justin Bieber's house? You tell no one - or it'll cost you $5 million.

After a string of bad press in recent months, the 19-year-old has taken the extreme measure of asking guests to sign a confidentiality agreement before they enter his property.

TMZ claims to have obtained a document that everyone must sign before entering his property for one of the infamous get-togethers.

Entitled a Liability Waiver and Release, the website says the paper states that guests must not make comments or post anything on social media about what happened inside the house.

This reportedly includes the "physical health, or the philosophical, spiritual or other views or characteristics" of Justin and other partygoers.

Anyone in breach of the waiver can be sued for an enormous amount of money.

You blog? $5 million. You tweet? $5 million. You Instagram? $5 million.

While no one knows exactly what goes on inside these parties, the document also warns the get-togethers may include activities that are "potentially hazardous and you should not participate unless you are medically able and properly trained".

The risks involved apparently include "minor injuries to catastrophic injuries, including death".

Justin may be eager to change public perception after hitting headlines for a number of controversial reasons lately.

As well as turning up late for a UK gig and being accused of assaulting a neighbour, the star has now come under fire for "abandoning" his pet monkey.

Here's a copy of the document that TMZ claims is the NDA.  

Where exactly was this news story when I needed an exam question?  And is this liquidated damages clause a penalty?

[Meredith R. Miller]

 

 

Plain Meaning Leads to Mood Indigo for Ellington Heir

Duke Ellington’s grandson brought a breach of contract action against a group of music publishers; he sought to recover royalties allegedly due under a 1961 contract. Under that contract, Ellington and his heirs are described as the “First Party” and several music publishers, including EMI Mills, are referred to as the “Second Party.” On appeal from the dismissal of the case, Ellington’s grandson pointed to paragraph 3(a) of the contract which required the Second Party to pay Ellington "a sum equal to fifty (50 percent) percent of the net revenue actually received by the Second Party from…foreign publication" of Ellington's compositions. Ellington’s grandson argued that the music publishers had since acquired ownership of the foreign subpublishers, thereby skimming net revenue actually received in the form of fees and, in turn, payment due to Ellington’s heirs.

The appellate court explained the contract and the grandson’s argument:

This is known in the music publishing industry as a "net receipts" arrangement by which a composer, such as Ellington, would collect royalties based on income received by a publisher after the deduction of fees charged by foreign subpublishers. As stated in plaintiff's brief, "net receipts" arrangements were standard when the agreement was executed in 1961. Plaintiff also notes that at that time foreign subpublishers were typically unaffiliated with domestic publishers such as Mills Music. Over time, however, EMI Mills, like other publishers, acquired ownership of the foreign subpublishers through which revenues derived from foreign subpublications were generated. Accordingly, in this case, fees that previously had been charged by independent foreign subpublishers under the instant net receipts agreement are now being charged by subpublishers owned by EMI Mills. Plaintiff asserts that EMI Mills has enabled itself to skim his claimed share of royalties from the Duke Ellington compositions by paying commissions to its affiliated foreign subpublishers before remitting the bargained-for royalty payments to Duke Ellington's heirs.

Ellington’s grandson asserted on appeal that the agreement is ambiguous as to whether "net revenue actually received by the Second Party" entails revenue received from EMI Mills's foreign subpublisher affiliates. The appellate court found no ambiguity in the agreement; the court stated that the agreement “by its terms, requires EMI Mills to pay Ellington’s heirs 50 percent of the net revenue actually received from foreign publication of Ellington’s compositions.” It reasoned:

"Foreign publication" has one unmistakable meaning regardless of whether it is performed by independent or affiliated subpublishers. Given the plain meaning of the agreement's language, plaintiff's argument that foreign subpublishers were generally unaffiliated in 1961, when the agreement was executed, is immaterial.

The court continued by stating that “the complaint sets forth no basis for plaintiff's apparent premise that subpublishers owned by EMI Mills should render their services for free although independent subpublishers were presumably compensated for rendering identical services.” Thus, dismissal of the suit was affirmed.

Ellington v. EMI Music, 651558/10, NYLJ 1202598616249, at *1 (App. Div., 1st, Decided May 2, 2013). 

[Meredith R. Miller]

Harper Lee Sues to Recover Her Rights to To Kill a Mockingbird

For many lawyers, To Kill a Mockingbird (TKAM) is at the top of their list of "favorite books/movies about a lawyer." TKAM is about more than lawyering, of course.  It's about racism, family, class and much more.  This week, TKAM also is about "fraudulent inducement," "consideration" (a lack thereof) and "fiduciary duty." All of those subjects are in the complaint filed by TKAM author, (Nelle) Harper Lee, against her purported literary agent.

In the suit, Lee alleges that Samuel L. Pinkus (and a few other defendants) fraudulently induced her to sign her TKAM rights over to one of Pinkus's companies in 2007 and again in 2011. According to Lee, Pinkus, the son-in-law of Lee's longtime agent, Eugene Winick, transferred many of Winick's clients to himself when Winick fell ill in 2006. Pinkus then allegedly misappropriated royalties and failed to promote Lee's copyright in the U.S. and abroad.

For Contracts professors, the Lee v. Pinkus suit provides some interesting hypos to discuss when teaching fraud, consideration, and assignments of rights. Regarding fraud, Lee alleges that Pinkus lied to her about what she was signing at a time when she was particularly vulnerable due to a recent stroke and declining eyesight.  Consideration is in play because there allegedly was no consideration from Pinkus to Lee in exchange for Lee's transfer of rights to Pinkus.  Assignment issues arose because the many companies who owed Lee royalties reportedly struggled to figure out which company or companies they should pay given Pinkus's many shell companies.  Overall, it's a sad story for Ms. Lee but one that students may find particularly engaging.

[Heidi R. Anderson]

p.s. Although there are many quote-worthy passages in TKAM, a favorite of mine (useful when advising students about their writing) is: “Atticus told me to delete the adjectives and I'd have the facts.” Please feel free to share your favorites in the comments.

Lil Wayne Loses Endorsement Over Emmett Till Lyrics, But Don't Worry, Celebrating Violence Against Women Is Still Fine

As reported here in Rolling Stone, Mountain Dew has terminated its endorsement deal with Lil Wayne because of offensive lyrics in an unauthorized leak of a remix of Future's "Karate Chop."  The offensive lyrics can be found here, except that the online version omits the reference to Emmett Till, a fourteen year old African-American boy who was tortured and killed in Mississippi in 1955, after allegedly having whistled at a white woman.  Lil Wayne's lyrics brag that he will do to a woman's vagina what was done to Emmett Till.

Emmett Till's family was outraged by the reference.  As noted in the New York Times, although Rolling Stone and others have characterized Lil Wayne's response as an apology, the family recognized that it was not an apology. Lil Wayne "acknolwedged" the family's hurt and pledged not to reference Emmett Till in his lyrics in the future.  

What is really striking is the utter lack of comment on the rest of the lyrics.  The reference to Emmett Till imay only be the most offensive thing about the song, but all of the lyrics in Lil Wayne's verse are absolutely vile.  The Times reports that Al Sharpton has been called in to take advantage of this "teaching moment" to help young artists like Lil Wayne understand more about the civil rights movement.  

Violence against women is also a civil rights issue.

[JT]

Yogurt Deal Goes Sour

Interesting story here on the Wall Street Journal's Market Watch blog.  Interesting because it seems like the case will be very difficult for plaintiff to prove and its damages will be a challenge to calculate with requisite specificity.

The facts, as also reported here on Food Navigator-USA are as follows:

In 2012, Tula Foods introduced its Better Whey of Life premium Greek yogurt line, which is now sold in over 400 stores.  Tula contracted with the Kroger Co., which in addition to its retail stores owns and operate 37 manufacturing plants at which it produced, among other things, Tula's Better Whey of Life yogurts.  According to the complaint, as summarized on the Market Watch blog, becasue Kroger did not produce the yogurt according to Tula's specification (and it allegedly did so knowlingly).  Tula also brings claims against Weber Flavors, which Tula claims failed to properly "treat and process the vanilla bean base" in Tula's yogurt.   As a result, Kroger released "poor-quality unappetizing yogurt on the market."  If that isn't not specific enough for you, the complaint specifies that, as a result of the improperly processed vanilla bean base, Tula found mold growing in its finished yogurt, resulting in a recall.

Just an aside here, for fans of Slings and Arrows, doesn't that slogan (something like, "Tula provides only poor-quality unappetizing yogurt laced with mold") strike you as precisely the sort of ad campaign that Froghammer would have come up with if they were hired to market Better Whey of Life yogurts?

 

 There is also a misappropriation claim, since Kroger allegedly used Tula's trade secrets to make a competing store brank of Greek yogurt -- but was it of equally poor quality and equally unappetizing?  Surely a jury question there. 

The theory of contract damages will be a challenge, because Tula will have to show that its product would have taken off were it not for the devastating effects on its reputation caused by the alleged breaches and resulting product recalls.  Demonstrating defendants' failure (perhaps intentional failure) to adhere to Tula's specifications will also be a lot of work.  But those allegations will also be very difficult to dismiss without a lot of discovery and perhaps a trial, so the settlement price should be high if the complaint adequately states a cause of action.  Moreover, as Tula is also bringing claims for breach of express and implied warranties, a record of moldy yogurt ought to do the trick.

[JT]

"Cop Killer" Reward Offer Leads to Breach of Contract Suit

We previously blogged about high-profile reward offers by Donald Trump, Bill Maher, a laptop-seeking music producer, and a Hong Kong businessman. Only one of those (the producer) led to an actual lawsuit.  The latest reward offer in the news involves murder.

In February of this year, the City of Los Angeles and other entities collectively offered a $1 million reward for information regarding Chris Dorner.  Dorner was the former policeman and Navy officer who (allegedly) killed four people, including two policemen. The manhunt for Dorner, labeled the "Cop Killer," reportedly was one of the largest in LA County's history. 

One of the people claiming the reward, Rick Heltebrake, has filed a breach of contract suit in LA Superior Court (the complaint can be obtained here but only for a fee).  Heltebrake is suing the City of Los Angeles, and supporting entities for $1 million and is suing three cities that offered separate $100,000 rewards related to Dorner. Heltebrake was a carjacking victim of Dorner's. After he escaped, Heltebrake called the police and told them where they could find Dorner. Because Dorner was found at the location Heltebrake identified, he is seeking the rewards.  

The contract controversy is one of interpretation.  The rewards reportedly were available for "information leading to the apprehension and capture of" Dorner, for the "identification and apprehension" of Dorner, for the "capture and conviction" of Dorner, and for "information leading to the arrest and conviction of" Dorner (I do not have the complaint so these excerpts are cobbled together from TMZ, Courthouse News Service, ABC and other sources).  Police charged Dorner on February 11, 2013. Heltebrake called police on February 12.  On February 25, after a shootout with police and structure fire, Dorner was found dead from an apparently self-inflicted gunshot wound.

Given the above facts, some of the intepretations questions are: (i) whether the authorities' shootout and recovery of Dorner's body qualifies as "apprehension" or "arrest," (ii) whether the "and" between "identification and arrest" or between "capture and conviction" means that both are required in order to collect, and many, many more. A complicating factor is that the $1 million reward was merely announced on TV; no written record was made.  At least one reward offeror, the City of Riverside, has stated that the lack of a "conviction" means that it won't pay. Although this is a tragic story, I may mention it the next time I teach the Carbolic Smoke Ball case.

If anyone is able to find the complaint for free, please post a link in the comments.

[Heidi R. Anderson]

 

Movie Producers Sue Michael Keaton for Breach of Contract

We are grateful to the website Lexology.com and to Ellen D. Marcus of Zuckerman Spaeder LLP for this informative and interesting post about this complaint filed in the Northern District of Illinois by Merry Gentlemen, LLC against actor and director, Michael Keaton.  According to the complaint, Keaton breached his contract to act in and direct a film called Merry Gentlemen by failing to deliver it on time and by marketing his own version of the film to the Sundance Film Festival.  The film cratered, grossing only $350,000 at the box office.  Moreover, the producers allege that Keaton's various breaches caused "substantial delays and increased expenses in the completion and release of the movie," thus causing the producers to suffer "substantial financial loss."

Ms. Marcus's post picks it up there, citing Restatement 2d's Section 347 on the elements of expectation damages and illustrating what sort of sums the producers might be looking to recover.  Ms. Marcus has to speculate, as the producers cite no figures beyond those required to meet the amount-in-controversy requirement to get their diversity claim into a federal court.

Whether or not the allegations of the complaint are true, they paint a nice picture of the behind-the-scenes machinanations invovled in getting a film out to the viewing public.  According to the complaint, Keaton produced a "first cut" that all agreed was unsatisfactory.  There then followed both a "Chicago cut," edited by the producers and by Ron Lazzeretti, the screenwriter and the producers' original choice for director, as well as Keaton's second director's cut.  

The producers then shopped the Chicago cut to the Sundance Film Festival, where they were awarded a prime venue.  Keaton then allegedly threatened not to appear at Sundance unless his cut was screened.  That was a dealbreaker for Sundance, so despite already having sunk $4 million in to the film, the producers claim they had no choice but to agree to screen Keaton's second cut at the festival.   They did so through a Settlement and Release (attached to the complaint, but not to the online version) entered into with Keaton, which they now claim was without consideration, despite the recital of consideration in the agreement, and entered into under duress.

Despite all of this, the complaint alleges that the Sundance screening was a success, since the USA Today identified "Merry Gentlemen" as one of ten stand-out films screened that year.  But the producers were unable to capitalize on this success, since Keaton's alleged continuing dereliction of his directorial duties resulted in dealys of the release of the film from October of November 2008 to May 2009.  The producers allege that the film was a Christmas movie (or at least was set around Christmas time), so Keaton's delays caused the movie to premiere during the wrong season.  

The producers allege that Keaton continued to refuse to cooperate with them after Sundance.  Somehow, the movie nonetheless was released to some positive reviews:  

The movie, as released (based upon Keaton’s second cut and numerous changes made by plaintiff), received substantial critical praise. Roger Ebert called the film “original, absorbing and curiously moving in ways that are far from expected.” The New York Times’ Manohla Dargis called it “[a]n austere, nearly perfect character study of two mismatched yet ideally matched souls.” David Letterman said on his Late Night  talk show, “What a tremendous film . . . . I loved it.”

Note to the producers' attorneys: if you've got Roger Ebert and Manohla Dargis in your corner, you don't need Letterman (or The USA Today for that matter).

Nonetheless, the film did not succeed, grossing only $350,000, allegedly because of Keaton's failure to promote it.  Indeed, some of the complaints allegations relating to Keaton's promotion efforts suggest some real issues.  Upon being asked by an interviewer if she had accurately summarized the film's plot, Keaton allegedly responded that he had not seen it for a while.  

We note also that Ms. Marcus's post is cross-posted on Suits by Suits, a legal blog about disputes between companies and their executives, a site to which we may occasionally return for more blog fodder.

[JT]

Paperless Tickets and Licenses

 

The Sacramento Bee reports that a California legislative committee (if you really want to know,  it’s called the Assembly Arts, Entertainment, Sports, Tourism and Internet Media committee) “gutted” a bill that would have illegalized “paperless” tickets.  Paperless tickets are more (or is it less?) than what they sound like – they are a way for companies like Ticketmaster to sell seats without permitting purchasers to resell those seats.  Purchasers must show their ID and a credit card to attend the show.  The bill pitted two companies, Live Nation (owner of Ticketmaster) and StubHub, against each other. 

This bill and the related issues should be of interest to contracts profs because it highlights the same license v. sale issues that have cropped up in other market sectors where digital technologies have transformed the business landscape.  Like software vendors and book publishers, Ticketmaster is concerned about the effect of technology and the secondary marketplace on its business.  Vendors, using automated software (“bots”), can quickly purchase large numbers of tickets and then turn around and sell these tickets in the secondary marketplace (i.e. at StubHub) at much higher prices.  Both companies argue that the other is hurting consumers.  Ticketmaster argues that scalpers hurt fans, who are unable to buy tickets at the original price and must buy them at inflated prices.  Stub Hub, on the other hand, argues that paperless tickets hurt consumers because they are unable to resell or transfer their tickets. 

The underlying question seems to be whether a ticket is a license to enter a venue or is it more akin to a property right that can be transferred.  Or rather, should a ticket be permitted to be only a license or only a property right that can be transferred?  The proposed pre-gutted legislation would have taken that decision out of the hands of the parties (the seller and the purchaser) and mandated that it be a property right that could be transferred.  In other words, it would have made a ticket something that could not be a contract.  Of course, given the adhesive nature of these types of sales, a ticket as contract would end up being like any other mass consumer contract – meaning the terms would be unilaterally imposed by the seller. In this case, that would mean the ticket would be a license and not a sale of a property right. 

It’s not just the media giants who are feeling the disruptive effect of technology  - we contracts profs feel it, too. 

[NB:  My original post confused StubHub with the vendors who use the site.  StubHub is the secondary marketplace where tickets can be resold.  Thanks to Eric Goldman for pointing that out].

[Nancy Kim]

What Jay-Z Can Teach

The entertainment mogul Shawn “Jay-Z” Carter has added another hat, er, baseball cap, to his rather extensive collection.  The NYT reports that his company, Roc Nation Sports, just signed up to represent Robinson Cano, the New York Yankees second baseman.  I’ve long been interested in Jay-Z’s business acumen and his ability to gauge where unpredictable markets are headed (and made a brief mention of it in this short essay).  More than that, he seems to be making the most of these changes rather than resisting them.  When he signed with LiveNation in 2008, Jay-Z was one of the first musicians to work with, rather than fight or deny, the changes in the music business (Madonna, another savvy business person, did too).  He took that money and started Roc Nation (of which Roc Nation Sports is a part).  Now he’s realizing the potential to be found in the blurring of sports and entertainment (and the public's perception of athletes and entertainers) .  An athlete typically has a relatively short shelf life in the field, so why not make that short shelf life as lucrative as possible?  Furthermore, an athlete may have a longer shelf life as a brand.  Gven the coalescence of sports and entertainment, and the way social media makes celebrities so accessible, there's a lot of revenue generating opportunities there.  So why should this be interesting to readers of this blog, many of whom may have no interest in baseball?  Sure, Jay-Z is probably a great negotiator and the contract – if we ever get to see it – will be interesting.  But more than that, we should be like Jay-Z and recognize how quickly the landscape and technology changes – and consider what impact those changes might have on our contracts.  For example, there are outstanding recording/distribution contracts which predate digital distribution formats.  Are digital recordings included under such contracts? ( The Eminem case touches upon a related issue having to do with a failure to anticipate digital tunes). The book publishing industry is another sector that is undergoing much disruption.  While no lawyer is expected to be an oracle, it may help your client – or help your students to help their future clients) to think about future marketplace and technological changes during contract negotiations, especially where the contract is a long term one.

[Nancy Kim]

Liquidated Damages Clause Leads to Protests in the Streets of Ann Arbor

A student recently sent me this story as an example of a liquidated damages clause gone awry, at least for the contractor. The contractor, Crystal Corp., was supposed to remodel a building to be the new location for a restaurant, Kuroshio, by September 30th. The work was not completed until late December. The contractor does not appear to be contesting whether there was a breach. However, he is contesting the damages.

The contract apparently contained a liquidated damages clause that specified a per-day penalty for any delays. It also required Crystal to notify Kuroshio, in writing, of any delays, and the reason(s) for those delays. Crystal did not supply the required notice. And, because of the length of the delay, the contractor now reportedly owes more money to Kuroshio than he is owed for completing the work. Further, because the contractor has not been paid by the restaurant, he reportedly has not paid his own employees. Thus, the contractor and/or his employees have taken to the street in front of the restaurant.  According to AnnArbor.com, they protested in front of the restaurant every evening for over a week (there's no obvious update since late March). A protester's photo is available here.

I thought this case was a good one to mention in class because it's not every day that a contract dispute leads to public protest. More specifically, I hope to use this dispute to illustrate how liquidated damages clauses may not be enforceable (the cases in the text I use, Kvassay and O'Brian, are great but a present day example always seems to work better for cementing the material into students' minds).  

I also hope to use this dispute as an example of another theme I stress in class.  I tell my studentes that, as a deal lawyer, they'll often have to be the most negative person in the room.  They have to ask many "what if" questions of their clients before suggesting they sign contracts.  For example, "What if...you get inside and find out that the HVAC system is in terrible disrepair? Are you going to want to pay the per-day penalty in that situation? If not, then we need to revise the contract because, as written, you're going to be on the hook for the daily penalty no matter what."  I'm not sure how much of this they'll remember but I'm hopeful that at least some of it will stick with them.

[Heidi R. Anderson, h/t to student Michael DeRosa]

Yoga Fail: Lululemon Recalls Revealing Yoga Pants

Lululemon manufactured and sold yoga pants that turn out to be "see-through."  These basic facts would make for some interesting UCC hypos (better than widgets): 

Lululemon Yoga Pants via ABC News

The Mystery of the Elvis Dumervil Contract Mix-up

Elvis Kool Dumervil, the star defensive end for the Denver Broncos, has been in the news recently based on an alleged mix-up involving a contract renegotiation with the team. I have read multiple reports and still cannot figure out exactly what happened from a contractual formation standpoint. But here's my current understanding and analysis...

Dumervil's contract with the Broncos, like most NFL player contracts, had an "opt out" of sorts for the Broncos.  Under the contract, the Broncos could either pay Dumervil $12 million to play next season--and have that entire amount count against the team's salary cap--or cut him ("cut" being the sports term for "fire") and only have a portion of his salary count against the team's cap.  Without getting into too much detail, each team has a maximum amount of money it is allowed to pay in player salaries per year, subject to various adjustments.  If the Broncos were able to reduce how much Dumervil's salary would count against their team's cap, they conceivably would have been able to spend more money to sign other players and improve their team; hence their interest in keeping the cap number down.

To avoid a bad salary cap consequence and still keep Dumervil, the Broncos sought to renegotiate a middle ground.  They offered to keep versus cut Dumervil but for a reduced salary amount of $8 million.  According to various reports, that offer was only open until 1pm MDT on Friday, March 15th.  The Broncos set that deadline because they faced a deadline of their own set by the NFL.  Specifically, the only way the Broncos could avoid the full salary cap hit of $12 million under NFL rules was to cut Dumervil by 2pm MDT (or show that they had re-signed him to a different deal).  If they cut him prior to 2pm MDT, they'd only take a $5 million hit; if they cut him anytime after 2pm MDT, they'd take a $12 million hit.

In the early afternoon of March 15th, Dumervil reportedly rejected the Broncos' $8 million offer over the phone (thereby terminating the Broncos' offer, most likely).  However, Dumervil  later told the Broncos that he had changed his mind. The Broncos then renewed their $8 million offer but specified that Dumervil could accept only by faxing his acceptance to them prior to the NFL's 2pm deadline.  When the Broncos did not receive a fax from Dumervil by that time, they cut him.  Dumervil's agent has said that the fax was sent to the Broncos at 2:06pm due to some delay in getting a fax from Dumervil.

When the story first broke, some media outlets were reporting that a fax machine malfunction was to blame. Thus, many commentators initially expressed frustration that a bungled or late transmission via fax, a now-outdated device, could have such a significant impact. When I heard those reports, it seemed that the media outlets, like some first-year law students, were overemphasizing the need for a writing and deemphasizing the parties' actual intent.  As we teach our students, a signed writing often is not required; contracts are formed all the time without that formality. Subject to the statute of frauds and other exceptions, a contract can be formed without a writing, faxed or otherwise.  And, unless the offeror limits the form of acceptance to a signed and faxed writing, the acceptance may be communicated in any reasonable manner.  In sum, it is intent of the parties that controls. Thus, if the Broncos really wanted to sign Dumervil to a new $8 million deal (that could be completed within 1 year of its making) based on his verbal agreement, no rule of contract law would have prevented it. In other words, if Dumervil truly had communicated his acceptance to the Broncos, the absence of a faxed signature from Dumervil would not prevent contractual formation unless: (i) the Broncos had stated that acceptance could only be via fax or similar writing; or (ii) the contract was one that could not be performed within a year or otherwise subject to the statute of frauds. We would need more facts to analyze both of those issues.

Of course, another possibility outside of traditional contract law (and the proverbial elephant in the locker room) is that the NFL likely has its own rules regarding contractual formation under its collective bargaining agreement or through some other mechanism. That's the part of the mystery about which I have no information at this point. Some reports seem to indicate that the NFL's rules somehow prevented contractual formation and that the Broncos are seeking a change of heart from the NFL. Perhaps someone more familiar with the NFL's rules can comment on that.  In the meantime, I think Bronco fans can stop blaming general contract law and continue blaming the Broncos and the NFL.  At least for now.

[Heidi R. Anderson]

Surrogate Offered Money to Have Abortion

After a surrogate refused to abort a fetus with abnormalities, a tangled legal battle ensued.  The surrogacy contract provided that the surrogate would have an abortion "in case of severe fetus abnormality" but the surrogate refused the biological parents' pleas (and offer of $10,000) to have an abortion.  Here's some of the story from CNN.com:

On February 22, 2012, six days after the fateful ultrasound, Kelley received a letter. The parents had hired a lawyer.

"You are obligated to terminate this pregnancy immediately," wrote Douglas Fishman, an attorney in West Hartford, Connecticut. "You have squandered precious time."

On March 5, Kelley would be 24 weeks pregnant, and after that, she couldn't legally abort the pregnancy, he said.

"TIME IS OF THE ESSENCE," he wrote.

Fishman reminded Kelley that she'd signed a contract, agreeing to "abortion in case of severe fetus abnormality." The contract did not define what constituted such an abnormality.

Kelley was in breach of contract, he wrote, and if she did not abort, the parents would sue her to get back the fees they'd already paid her -- around $8,000 -- plus all of the medical expenses and legal fees.

Fishman did not return phone calls and e-mails from CNN.

Kelley decided it was time to get her own attorney.

Michael DePrimo, an attorney in Hamden, Connecticut, took the case for free. He explained that no matter what the contract said, she couldn't be forced to have an abortion.

DePrimo sent an e-mail to Fishman, the parents' lawyer, stating that Kelley was not going to have an abortion.

"Ms. Kelley was more than willing to abort this fetus if the dollars were right," Fishman shot back.

"The not-so-subtle insinuation that Ms. Kelley attempted to extort money from your clients is unfounded and reprehensible," DePrimo responded. "If you wish to propose a solution to this unspeakable tragedy, I will listen and apprize (sic)my client accordingly."

"However, as I mentioned in my previous correspondence, abortion is off the table and will not be considered under any circumstance," he said.

The entire story is here.

[Meredith R. Miller]

Are Contracts to Blame for Rising Mortality Rates on Downton Abbey?

***SPOILER ALERT: IF YOU HAVE NOT YET FINISHED SEASON 3 AND DO NOT WANT TO KNOW WHAT HAPPENS, READ NO FURTHER***

As those of you who watched Season 3 of Downton Abbey already know, several major characters died unexpectedly this season.  Today's New York Times contains an interview with screenwriter Julian Fellowes, who suggests that contracts are to blame for these deaths.  Fellowes claims that, while American actors in a television series routinely sign on for five or even seven years, English agents won't agree to more than three.  

So, says Fellowes, the actors portraying the late Lady Sybil and the late Matthew Crawley, wanted to go after three seasons, and the screenwriter had no choice but to off them (as melodramatically as possible).  Fellowes then explains why death was the only option.  If they were merely servants, well, the writers would simply find the characters a new situation in a different household and that would be that.  But when you are dealing with members of family, death is the only option if they are unwilling to perform the occasional cameo.  Actually, this may show the limits of Mr. Fellowes' imagination.  One of my all-time favorite shows, My So-Called Life, had a fairly significant character who never appeared on screen at all, although he was referenced in almost every episode.

In any case, it seems unfair to makes contracts the heavy.  In the case of Lady Sybil, clearly English medicine bears part of the blame.  And in Matthews case, the whole business could have been avoided with seat belts, air bags, anti-lock brakes and paved roads wide enough to accomodate two motorcars.

Of course, all of this will be different when Netflix brings out the American version of Downton.  In that version, viewers will get to vote characters out of the series, and I would off Cora as quickly as possible -- but tastefully, off-stage.  We wouldn't want to overtax the actor's abilities.  If I were deciding the vote, we'd pretty quickly be left with just the Dowager Countess, Carson and the dog.

[JT]

What Does the Cruise Contract Say?

CNN's Erin Burnett did some intrepid reporting and "went to book a cruise . . .  on Carnival so we could look at the contract..."  The contract apparently says that, even after 5 days of being stuck on a disabled ship with no electricity or plumbing, "you're out of luck": 

Shute v. Carnival Cruise Lines reprise?

[Meredith R. Miller]

Update: Maher Takes Aim at Trump's Lawyer

We had previously blogged about the demand letter that Donald Trump sent to Bill Maher.  Maher dedicated a segment on his show to the dispute, taking aim at Trump's lawyer.  Maher begins: “Donald Trump must learn two things: what a joke is and what a contract is.”  

The segment is reminiscent of the Leonard v. Pepsico decision when Judge Wood takes on the task of explaining why the harrier jet commercial was "evidently done in jest." Here, Maher continues the humor in explaining why it was parody when challenged Trump to prove that he (Trump) was not born of an orangutan.

Here's the clip:

[Meredith R. Miller]

CA fires contractor, providing a helpful breach of K scenario

The LA Times reports that the state of California has terminated its contract with SAP Public Services, a contractor that was supposed to fix the state's outdated computer network system that handles paychecks and medical benefits for 240,000 state employees. 

While both SAP and California are unhappy about the state of events, I have just covered breach, substantial performance, conditions and damages in my Contracts course and was delighted to find a real life scenario to illustrate the relevance of the material we just covered. 

So what triggered CA's termination?  SAP was hired three years ago but when its program was tested, it made errors at "more than 100 times" the rate of the old system. 

Was failing this test a breach?  If so, was it a minor or material breach?  It seems it would depend on what was in the contract. As contracts profs know, the first place to look in a contract dispute is the contract itself.  The are terms in the contract that will be relevant in evaluating whether there was a breach or the applicable measure of damages.  For example, there may be performance targets (i.e. conditions) that SAP had to meet which weren't met.  Those conditions would be relevant in determining each party's obligations (would the contract terminate upon failure to meet the condition, for example?)  There's also likely to be a provision dealing with whether SAP gets paid per deliverable or target met or per person/hour or time spent on a project. If this was a scheduled deliverable, then the facts tend toward finding a breach (or, if the contract language indicates, it could be a condition that was just never met).  If it was a test done in the course of moving the project toward completion, CA may have jumped the gun.  A material breach would allow CA to then terminate its obligation.  If not a material breach, CA should have sought adequate assurance of performance and could itself be in breach by terminating the contract.

 Facts matter, as I repeat like a broken record to my students (I guess I should update my reference for the iPod generation) - so it matters what it means to say that SAP failed the test.  The LA Times reports that:

    "During a trial run involving 1,300 employees....some paychecks went to the wrong person for the wrong amoung.  The system canceled some medical coverage and sent child-support payments to the wrong beneficiaries."

Furthermore, because the system sent money to retirement accounts "incorrectly,"' the state had to pay $50,000 in penalties.

Given the late stage of the project, if not a material breach itself, the failed trial seems to at least give rise to a reasonable belief that SAP would breach.  What did CA do then?  Did it immediately terminate or seek explanations/reassurance? 

 Another issue is what damages measure is applicable?  CA paid SAP $50million dollars but it had incurred much more trying to get the system up and running.  It wasn't clear to me whether the $50million dollar amount was the amount paid up to that point, or the total due to SAP.  In class, the cases we study regarding breach of contract to provide services typically involve some type of construction contract.  The standard measure then would be the difference between the cost of completion and the contract price.  But in a situation like this, the cost of completion is a bit funny given the various factors involved - and the period of time it would take to implement a new project (SAP took the project over from a prior contractor).  Furthermore, the purpose of the new system wasn't so CA could make money (no loss profit measure applicable here).  Given that, the standard expectation measure likely would not be appropriate and a reliance (or restitution) measure makes more sense.  Not surprisingly, CA is seeking recovery of the $50million dollars paid. 

What about SAP? Will it claim that it substantially performed?  I don't think it can with a straight face, but again, I am only basing my conclusion upon the facts contained in the newspaper article.  Will SAP seek restitution for the reasonable value of its services to CA?  It very well may, (and any students reading this, should raise it on an exam...) since it has spent three years on this project.  Based upon the information in the article, it doesn't sound as though CA received any benefit from the services rendered.  If SAP is determined to be the breaching party, it may not get awarded anything. The real world problem for SAP is that trying to hang on to money for delivering a system that doesn't work might hurt its reputation even more.  And it doesn't help that the other party is a state entity - meaning lots of future potential business at stake.  (The LA times noted that SAP projects with other CA entities are not going so well, either).

As is true for other contracts profs, I spend a lot time trying to situate doctrine into a problem solving (or minimizing) scenario since this is how most lawyers deal with contract law.  For example, prior to cancelling the contract, the attorneys for the state of CA most likely sat down and discussed its available options under both the contract and contract law.  SAP, too, likely reviewed (or is reviewing) its options under the contract and contract law.  My guess is that the contract terms probably permit CA to cancel under these circumstances, although a spokesperson for SAP stated that it believed it had "satisfied all contractual obligations in this project."

I'm sure I missed a few things in my quick analysis of ths situation, so feel free to note any other issues in the comments.

[Nancy Kim]

A Unilateral Contract to "Like"

Shades of Hamer v. Sidway!  A man offered his daughter $200 if she quits Facebook for five months.  It seems that the daughter was well aware of the irresistible time-wasting hazards of the popular social networking site, but needed an incentive to quit.  The father even had her sign a contract.  But, as contractsprofs know, it's not the written form that makes the contract but the bargain.  Even though quitting Facebook may be better for productivity (as I keep telling my students....), it is still a legal "detriment" so if she's successful, dad should pay up.

[Nancy Kim]

Murder-suicide and the new homeowner

A Pennsylvania homeowner is suing the seller of the house and a real estate agent, claiming fraud and misrepresentation, for failing to tell her that the home she recently purchased had been the scene of a murder-suicide the previous year.  The homeowner had moved to Pennsylvania from California with her two children after her husband's death.  She learned of the murder-suicide from a neighbor, several weeks after moving in.  You can read about it here.

I don't know about you, but I think a murder suicide is pretty material, although there aren't enough facts here to indicate whether the seller and agent deliberately concealed the fact or whether the buyer inquired as to any unusual events happening in the house....  With respect to the seller, it might be one of those "tough luck" situations where the law just doesn't help the buyer even if the court feels sympathetic toward the buyer's situation.  It's not clear whether the agent is the buyer's agent - if so, the agent should have disclosed this as a fiduciary.  But it's more likely that the agent was actually the seller's agent, and not the agent of the buyer or a dual agent.  (Got that?  Just because someone has the word "agent" in their job title doesn't make that person your agent.  Who is paying the commission?  When in doubt about where the agent's loyalties lie - ASK the agent).

The lesson here - especially relevant given the recent rise in home sales - is BUYER BEWARE.  I wonder if a quick online search of the address would have uncovered the grisly events that took place in it.  It would probably be prudent for all potential home buyers to expressly ask, "Did anything unusual ever happen in this house that we should know about such as any crimes?"  A buyer should also ask how long the current sellers have lived in the house and why they are moving. [In this case, such a question probably wouldn't have helped the homeowner.  The immediate sellers were not the owners of the house when the murder-suicide took place, but subsequent owners who bought it, presumably at a low price given what had just happened in it, and then turned around and sold it to the out-of-state buyer].  The seller's failure to disclose in a situation where the buyer has specifically asked is entirely different from a failure to affirmatively disclose unasked for (albeit material) information.

N.B.  Under California real estate law (which imposes a duty to disclose facts materially affecting the value of real property where the facts would be hard to uncover), the result would probably have been different.  See Reed v. King, 145 Cal. App. 3d 261 (1983) involving a failure to disclose a multiple murder by a home seller.  Interesting, given that the PA home buyer was from California and might have expected a bit more from the seller based upon her real estate experiences there...

[Nancy Kim]

 

First Circuit Dismisses as Moot Contracts Case with Constitutional Implicatons

In 2006, the U.S. Department of Health and Human Services (HHS) recieved funds under the federal Trafficking Victims Protection Act (TVPA) and contracted with the United States Conference of Catholic Bishops (the Conference) to provide services to trafficking victims.  It did so after issuing a request for proposals (RFP) and receiving submissions only from the Conference and the Salvation Army, both of which are religiously affiliated.  

The Conference insisted that the contract provide that neither the Conference nor any of its sub-contracts would use the TVPA funds to counsel or provide abortions or contraceptive services and prescriptions to trafficking victims.  The panel that reviewed the RFP's deducted points from the Conference's submission because of that condition, but it still rated the Conference's RFP far more favorably than that of the Salvation Army.

The Conference did not provide any direct services to trafficking victims.  Rather, it subcontracted with hundreds of other organizations, which provided services to over 2200 victims over a four-year period.  The Conference entered into agreements with its sub-contractors prohibiting them from using TVPA for any purposes relating to contraception or abortion, but the sub-contractors were not prohibited from using their own funds for those purposes.  

In 2009, the American Civil Liberties Union of Massachusetts (ACLUM) brought suit alleging that the contract violated the First Amendment's Establishment Clause.  The contract expired in 2011, and HHS replaced its program run through the Conferece with a grant program in which the Conference as not involved.  The District Court nonetheless granted ACLUM's motion for summary judgment in March 2012, finding that the claim was not moot because the "voluntary cessation" exception to the mootness doctrine applied.

On January 15, 2013, the First Circuit issued its opinion in American Civil Liberites Union of Massachusetts v. United States Conference of Catholic Bishops, and it reversed.  It remanded the case to the Distrcit Court for an entry of an order of dismissal because the case is rendered moot by the expiration of the contract at issue.  In so doing, the First Circuit noted that the voluntary cessation doctrine has no application where the cessation is unrelated to the litigation.  The exception exists to deter strategic behavior in which a party ceases the challenged behavior only to avoid further litigation and may reasonably be expected to resume the behavior once the threat of litigation has subsided.  There is no likelihood that a contract will be awarded to the Conference in the foreseeable future, as HHS has locked itself into three-year agreements with other organizations under its new grant program.

As long as our first lady has ba-ba-ba-bangs [relevant "analysis" starts about a minute into the video], it seems unlikely that HHS will be contracting with the Conference and that, it seems, is enough to render ACLUM's challenge moot.

[JT]