Wednesday, August 1, 2018
Yet another contract aspect has emerged to the Harvey Weinstein situation, beyond the NDAs with the accusers, the contracts between lawyers and private investigators, and the complicated situation with the National Enquirer. Now insurance policies have stepped into the fray. According to this article, Weinstein's insurance companies are denying coverage based on alleged exclusions of "blatantly egregious and intentionally harmful acts." Weinstein, as his defense has stated, denies the accusations against him and counters that the insurance companies are siding with the accusers in order to get out of paying their obligations.
According to the insurers, Weinstein is facing eighteen lawsuits and other claims that have been filed in the past year. Naturally, Weinstein's defense is costing a great deal of money. Whether the insurance companies need to pay out under the policies (and which insurance companies need to pay out) probably depends on the exact wording of the policies, which seem to all be slightly different. For instance, one carrier was providing "crisis assistance" in the event of "significant adverse regional or national media coverage." Another was apparently a policy for legal defense that according to Weinstein explicitly included criminal investigations.
Friday, July 27, 2018
23andMe, one of the services that takes your saliva and analyzes your DNA for you, has announced a partnership with GlaxoSmithKline to use its DNA database to develop targeted drugs. I've written before about the fairly broad consent Ancestry.com's similar home DNA service elicited under its terms and conditions, which 23andMe also enjoyed. According to the article, 23andMe considers itself to have gained consent from its users, and is allowing users to opt out if you wish.
I think most of us have little problem with our DNA being used to find cures for terrible diseases and afflictions. If my DNA could be used to cure cancer, I am happy to line right up. (And, in fact, when my father had cancer, we did provide express consent to his doctors for us to assist in their DNA research.) But I think most of us, if asked, would have said something like, "I want my DNA to be used to cure cancer so people with cancer can be cured."
However, the way the pharmaceutical industry works in this country, that's not exactly what happens. The cure, as we know because we talk about health insurance A LOT, is then available to those who can afford it. Many of Wikipedia's drug entries keep track of the cost of pharmaceuticals in the U.S. against the cost of producing the drug, as can be seen here. So I don't want to sound like a terrible person trying to stall progress, but, well, the users in the database paid to use 23andMe, and now their DNA is being sold to a pharmaceutical company, so 23andMe has now made money off of the DNA twice, and then it's going to get used to develop into medications that will then be sold again, back to the people who need the medications, who may be the same people whose DNA was used to develop the drug. At that point your DNA has been profited off of three times, and never by you, and possibly twice at your own personal expense. And, if history is anything to go by, that pharmaceutical is your DNA coming back to you at a tremendous mark-up. So you could find yourself in a position where you paid to have a pharmaceutical company take your DNA, turn it into the drug that could save your life, and then ask you to pay, again, much more money than you have, to gain access to the drug. You paid to donate your DNA so they could charge you for the benefits it provides. And, according to the terms and conditions, you consented to that.
Wednesday, June 20, 2018
Recently a video went viral showing a 2016 altercation around an umpire ejecting Mets pitcher Noah Syndergaard after he threw a fastball behind the Dodgers' Chase Utley. Umpires wear microphones during Major LeagueBaseball games, and the resulting (often loud and profane) discussions with Mets players and especially Mets manager Terry Collins was recorded.
The video recently surfaced in an apparent leak, because MLB has announced its intention to try to scrub the video from the internet. MLB's reason for this is that it violates a "commitment" that "certain types of interactions" involving umpires during baseball games would not be made public, claiming it was "in the collective bargaining agreement" and that there was "no choice" but to scrub the video from the internet. Indeed, according to one report it had already been scrubbed.
Not so fast, though, because I found it still embedded in news reports about it. It's hard to get anything to vanish from the internet, especially once it's gone viral, but it's not that difficult to locate this video at all.
And it's not hard to see why it went viral. It's a fascinating glimpse into a part of the game fans seldom get to see. As others have pointed out, the umpire does a fantastic job in the clip, so it's hardly like he's being cast in a bad light. The manager doesn't even come across all that poorly. In fact, in my opinion, the party that comes out of the clip looking the worst is Major League Baseball and its confusing way of handling the explosive Chase Utley situation.
It's unclear what "interactions" were agreed to be withheld from the public, but this one is certainly an interesting one. I'd love to know what the contract terms actually are.
Friday, June 15, 2018
New scientific studies have proven what we might all have been jokingly saying, but which apparently is true: the world population is increasing, but IQ levels are decreasing. The reason? Nurture, not nature.
The studies claim that after 1975, IQ levels started to drop because of, it is thought, "environmental factors." These could include pollution, changes in the education system and media environment, nutrition, reading less, and being online more. Yikes.
"It's not that dumb people are having more kids than smart people, to put it crudely. It's something to do with the environment, because we're seeing the same differences within families," said one of the co-authors and lead researchers on the project.
For us, this is not good news for obvious reasons. But are we, in fact, a contributing cause? I know that some of my students, for example, do not enjoy and sometimes simply will not read long homework assignments, don't read privately, and indeed spend large amounts of time online. I'm sure your students are not very unlike mine in that respect. Other studies that I don't have handy here also demonstrate that our students have difficulty reading longer texts simply because they are not used to reading anything much longer than blog posts, twitter feeds, and maybe the occasional article here and there, but certainly not books.
Read the entire findings. References to "changes in the education system" and "decreasing access to education" are disturbing.
Wednesday, May 30, 2018
Although this post does not have anything to do with contracts law, it is hopefully interesting to many of you law professors anyway.
Scientific research shows that in years with warmer temperatures, students score worse on tests. The link is "significant." Researchers calculated that for every 0.55° C increase in average temperature over the year, there was a 1% fall in learning.
Colder days did not seem to damage achievement - but the negative impact began to be measurable as temperatures rose above 21° degrees C. The reduction in learning accelerated once temperatures rose above 32° C and even more so above 38° C.
A simple solution could be to use more airconditioning on test days. The more complex, but necessary, solution is to curb climate change. The world is still not doing enough in that respect despite the 2015 Paris Agreement. In particular, it is problematic that the USA has announced its withdrawal from the climate change agreement.
Could increasing temperatures also be part of the reason for our students' worse and worse bar performances? Apparently so.
Friday, May 25, 2018
As widely reported in, for example, the Washington Post, whose owner founded Amazon, President Trump has pushed Postmaster General Megan Brennan to double the rate that the post office charges Amazon.com and some, but not all, similar online retailers.
The contracts between the Postal Service and Amazon are secret out of concerns for the company's delivery systems. They must additionally be reviewed by a regulatory commission before being changed. That, perhaps unsurprisingly, does not seem to phase President Trump who appears to be upset at both Amazon and the Washington Post. The dislike of the latter needs no explanation, but why Amazon? Trump has accused it of pushing brick-and-mortar stores out of business. Others point out that if it weren't for Amazon, it is the post office which may be out of business.
Aside from the political aspects of this, does Trump have a point? Is Amazon to blame for regular stores going out of business? I am no business historian, but it seems that Amazon and others are taking advantage of what the marketplace wants: easy online shopping. Yes, it is very sad that smaller, "regular" stores are closing down, most of us probably agree on that. But retail shopping and other types of business contracting will evolve over time as it has in this context. That's hardly because Amazon was founded; surely, the situation is vice versa. Such delivery services are fulfilling a need that arose because of other developments.
From an environmental point of view, less private vehicle driving (for shopping, etc.) is better. Concentrating the driving among fewer vehicles (FedEx, UPS, USPS, etc.) is probably better, although I have done researched this statement very recently. One fear may be the additional and perhaps nonexistent/overly urgent need for stuff that is created when it becomes very easy to buy, e.g., toilet paper and cat litter online even though that may in and of itself create more driving rather than just shopping for these items when one is out and about anyway, but that is another discussion.
Suffice it to say that Trump should respect the federal laws governing the Postal Service _and_ existing contracts. What a concept! If the pricing structure should be changed, it clearly should not be done almost single-handedly by a president.
Meanwhile, the rest of us could consider if it is really necessary to, for example, get Saturday snail mail deliveries and to pay only about 42 cents to send a letter when the price of such service is easily quadruple that in other Western nations (Denmark, for example, where national postal service has been cut back to twice a week only and where virtually all post offices have been closed). Fairly simple changes could help the post office towards better financial health. This, in turn, would help both businesses and private parties.
Wednesday, May 23, 2018
PNC Bank, Wells Fargo and U.S. Bank have been sued for charging interest from homeowners paying off their mortgages early without disclosing how to avoid the charges in spite of HUD rules requiring the latter (and, in the case of one California plaintiff, the California Unfair Competition Law). When do they ever learn, you ask yourself? - Not soon enough, seems to be the answer.
This is how the most recent scandal went down (and might still be, so anyone wishing to pay off their mortgages before time, be aware): Homeowners paying off their mortgages ahead of schedule were charged “post-payment interest charges” for the entire month in which the loan was otherwise paid off. What’s the big deal, you ask yourself? Consider this: Lead California plaintiff Sandi Vare alleged that she asked PNC for a payoff statement when refinancing her home in July 2016. She was charged $1,227.16 in interest for the entire month, despite the fact that her loan was paid off on July 16; roughly $600 too much. Even for you and I, that’s a good chunk of change.
Banks, it seems, try whatever they can to fog and outright cheat their own clients in many contexts and certainly in the home financing/refinancing ones. I am personally altering my home loan with Wells Fargo to 1) pay a chunk extra into the principal and 2) pay the loan off in a shorter timeframe than the current one. The amount of fogging and, in effect, secret “code talk” one has to be subject to or use to achieve such a simple objective is amazing. For example, if one does not mention the word “recast,” the bank representative may not mention this or may not outline the otherwise relatively advantageous terms of obtaining such a contractual amendment. If one does not very specifically ask for the interest rates and amounts per month, total loan period and interest vs. principal amount, etc. (you get it), the bank – at least Wells Fargo – does not seem to lay out all the details that could work in the borrower’s favor. Granted, they do if one asks them to do so, but is this this amount of fogging, secrecy, and, in the case of the above-mentioned lawsuit, outright disregard of not only contractual ethics, but also state and federal law what we wish to accept as society just so that banks, who have repeated proved to not follow the law, ethics or even sound market-based risk principles, can continue to make money on services that their customers actively seek to avoid? One would hope not, but as this case shows, more litigation is apparently needed to continue reigning in overly greedy banks.
The case is Vare et. al v. PNC Bank, U.S. District Court for the Northern District of California, 18-2988. The lawsuit is asking for a nationwide class for breach of contract. Wells Fargo and U.S. Bank defeated nationwide class status last year as too many state-specific rules were involved in that case.
The dream of becoming a practicing attorney still attracts many students to law school. As we know, many will make it in the legal industry, but many will never get a chance as they will either be attrited from their law schools or, yet worse, never be able to pass the bar. Still, many law schools continue contracting with students they know have a poor chance of ever making it. From a contracts point of view, this is arguably at least bad faith in contracting if not worse. See well-known bar passage analyst David Frakt's blog on the issue here.
Monday, April 30, 2018
Opting out of Facebook once you've opted in (or, you can check out anytime you like, but you can never leave)
In the earlier years of the twenty-first century, I did what now literally billions of people have done and opened a Facebook account. I didn't use it for very long, and in fact I stopped using it probably almost ten years ago at this point. I stopped for a variety of reasons, but I left the account up because of that rule about how bodies at rest tend to stay at rest, I suppose. I didn't use it, it was just a passively existing thing, and it seemed like effort to get rid of it.
With everything coming out about Facebook and data, I started wondering why I still had that account sitting there. I didn't think Facebook had a whole lot of data on me since I'd stopped using it so many years ago, but I figured, What was the point of giving it any info on me at all? Why not just delete the account?
I don't know if you've ever tried to delete your Facebook account. There are two options: deactivation, which deactivates your account but continues its existence, or deletion, which actually deletes your account. I wanted the latter, which requires you to fill out a contact form saying you would like to delete your account. So, in January, I filled out the form and received a verification email saying that my account would be deleted within the next two weeks, and I moved on with my life.
Except. No, I didn't. Because Facebook kept emailing me little updates about my friends on Facebook, even though I kept clicking the "unsubscribe" link to try to get out of the emails. And then an email came in saying that someone had sent me a message. Which seemed like something they shouldn't be able to do if my account was deleted. I asked a friend still on Facebook to check for me, and she said that yup, I was still on Facebook. My account had never been deleted.
And now's where the confusion really started, because, well, after literally months of dealing with this, I have to admit: I have no idea how to contact Facebook without being on Facebook. It's so convoluted that in fact an entire scam has mushroomed up around it, taking advantage of people who just want to try to get in touch with Facebook.
Facebook's log-in page (if you're logged out of Facebook) has no real contact info on it. The "About" link takes you to Facebook's Facebook page (so meta!), which contains links to a "website" and "company" info, both of which take you to "Page Not Found" pages, which is kind of hilarious to me. It seems to recommend you use Facebook Messenger to contact them, but...I'm not on Facebook Messenger. That's the whole point.
When you click on the "Help" link, it takes you to a FAQ page divided by topics, some of which are about account deletion but it seems to just be a bunch of people complaining about how Facebook won't delete their accounts. Or, what's worse, suggesting you call a customer service number that seems to be a scam, as evidenced by complaints here and here; by the fact that NPR did a previous story on the fact that Facebook has no customer service number; and the fact that Facebook itself appears to say it's a scam, as the below Google snippet shows:
That link looked to me like exactly what I'm trying to track down, so I clicked on it, but, alas, it's only available to me if I join Facebook.
So it looks like, once you've opted into Facebook, there really is no opting out. I've tweeted at them with no response and tried some general email addresses (info@facebook; support@facebook) with no response. The emails I keep trying to unsubscribe from give me a physical mailing address, so I guess I could send them a letter asking them to follow through and delete my account and also unsubscribe me from the email lists, but I'm not hopeful that will get a response, either.
I am hardly the first person to realize that Facebook is nearly impossible to get in touch with (the Sikhs for Justice case seems to have kicked off based at least in part on an inability to get any substantive responses from Facebook), but it seems like, in the wake of a lot of questions about control over our own data, our first step might at least make it a requirement that websites provide contact info for discussions about that data -- contact info that doesn't require you to first "opt in" to their terms and conditions (which is exactly what I'm trying to get out of!).
We've been doing a lot of talking about the terms and conditions we agree to without reading them, and I guess I always assumed that if I changed my mind, I could back out. Facebook's terms and conditions even allow for that, stating that I can delete my account at any time. But it has turned out not to be nearly so simple, and I am literally flummoxed as to what options I have, seeing as how I don't really feel like going to court in the State of California, as required by the terms and conditions. It looks like I have an account on Facebook, whether I like it or not, for the foreseeable future. You don't realize how much privacy you've already given up until you try to get just a bit of it back.
Tuesday, April 10, 2018
In case you missed it in the onslaught of news we're subjected to these days, the agreements settling several of the sexual harassment claims against Bill O'Reilly have been made public, thanks to a federal judge overruling the contracts' confidentiality clauses ("Strict and complete confidentiality is the essence of this agreement," reads one). You can read about them all over, including the New York Times, CNN, ThinkProgress, and Vogue.
The contracts say the usual things that we have come to expect regarding the confidentiality of the accusations but at least one of them contains the added twist that, should any incriminating documents come to light, the woman settling the claim is required to declare them to be "counterfeit or forgeries." The truth of the statement is irrelevant; the contract evidently requires the woman to lie and say they're counterfeit and forgeries even if they're genuine.
Another interesting part of that "counterfeit or forgeries" contract is that the accusing woman's attorney agrees not to cooperate in any other action against O'Reilly and, indeed, agrees to switch sides and advise O'Reilly "regarding sexual harassment matters." This sounds like it raises all sorts of ethical issues. They're brought up in the other articles I've linked, and Bloomberg has a rundown of the ethical issues as well.
Things lurking in these confidential agreements...
Sunday, April 1, 2018
Lots of people have been discussing the recent Central District of California ruling, Disney Enterprises v. Redbox Automated Retail, Case No. CV 17-08655 DDP (AGRx) (those links are a random selection), a lawsuit brought by Disney against Redbox's resale of the digital download codes sold within Disney's "combo pack" movies, which allow instant streaming and downloading of the movie. There is an obvious copyright component to the dispute, but I thought I'd highlight the breach of contract portion of the decision.
The DVD/Blu-Ray combo packs were sold with language on the box reading "Codes are not for sale or transfer," and Disney argued that Redbox's opening of the DVD box formed an enforceable contract around that term, which Redbox breached by subsequently selling the codes. However, the court found no likelihood of success on the breach of contract claim, based on the fact that the language on the box did not provide any notice that opening the box would constitute acceptance of license restrictions. The court distinguished other cases that provided much more specific notice. Redbox's silence could not be interpreted as acceptance of the restrictions. This was especially so because the box contained other language that was clearly unenforceable under copyright law (such as prohibiting further resale of the physical DVD itself). Therefore, the court characterized the language as "Disney's preference about consumers' future behavior, rather than the existence of a binding agreement."
The court ended up denying Disney's motion for preliminary injunction.
Wednesday, March 21, 2018
Slate has a piece analyzing the enforceability of the liquidated damages provision in Stormy Daniels's contract with Donald Trump, quoting several very keen legal minds. (Disclaimer: including mine ;-))
Thursday, March 15, 2018
The New York Times reports that an upcoming Broadway production of "To Kill a Mockingbird" is embroiled in a contract dispute. The new production features a script by Aaron Sorkin, governed by a contract that requires it to keep to "the spirit of the Novel." Author Harper Lee's estate believes the play's new script has breached this contract provision.
The crux of the disagreement seems to be that Sorkin's script apparently updates the novel's depiction of racial politics and shifts Atticus Finch's developmental arc. Atticus, well-known as the crusading heroic lawyer at the center of the novel, apparently begins the play "as a naive apologist for the racial status quo" who eventually develops into the Atticus familiar from the novel. Sorkin in an interview described Atticus as evolving in part through interactions with a black character, Calpurnia, whose role Sorkin had expanded in the play as compared to the book.
Lee's estate is objecting to the "massive alteration" of the novel, but the play's producers contend that, although the play is "different" from the novel, it is still true to the novel's spirit, pointing out that Lee's novel's universe was itself expanded and complicated by the recent publication of "Go Set a Watchman," in which an older Atticus is portrayed as a racist and segregationist.
As anyone who's sat in an English class might agree, "the spirit of a novel" is rather vague and can be the source of much contentious disagreement. Literature can be a very personal experience, and what stands out as the vitally important part of a novel to one person can barely register to another. We could probably as a society reach a consensus on what "the spirit" of "To Kill a Mockingbird" might be, but I still don't think that would be of much assistance in resolving this dispute. There are, I think, two approaches to adapting a novel, and one is a requirement to be faithful to the letter, and the other is to be faithful in a more abstract way. I suspect that both parties here actually agree about what the spirit of "To Kill a Mockinbird" is but that Lee's estate believes the former approach to adaptation to be the only acceptable one, and that the producers of the play believe the latter to be acceptable. This reminds me of a recent New Yorker article on the proper role of translators.
(As an unabashed fan of Sorkin's writing, as soon as I read the first paragraph of the article, I have to admit my reaction was: "Let me guess, the script sounds like Aaron Sorkin instead of Harper Lee." I haven't seen the script, of course, but there are few writers in my experience whose style is as instantly recognizable as Sorkin's.)
Sunday, March 11, 2018
I have the great honor and pleasure of posting the below guest blog written by noted environmental scholar Dan Farber, the Sho Sato Professor Of Law and the Faculty Director of the Center For Law, Energy, & The Environment at UC Berkeley.
There has been increasing interest in the environmental law community in the role that private firms can play in sustainability. For example, many major corporations bemoaned Trump’s withdrawal from the Paris Agreement and pledged to continue their own environmental efforts. In fact, as a recent book by Michael Vandenbergh and Jonathan Gillian documents, these firms already have their own programs to cut emissions. It’s worth thinking about the ways in which contracts between these companies could serve some of the same functions as government action.
Group action, based on contracting, could be a way of amplifying these efforts by individual firms. One possibility would stick pretty close to the structure of the Paris Climate Agreement. Under the Paris Agreement, nations agree to engage in certain types of monitoring and to implement emissions cuts that they set themselves. There are already ways that corporations can publicly register their climate commitments. The next step would be to
enter into contracts to engage in specified monitoring activities and report on emissions. The goal would be to make commitments more credible and discourage companies from advertising more emissions efforts than they actually undertake.
The contracts could be structured in different ways. One possibility is for each company to contract separately with a nonprofit running a register of climate commitments. The consideration would be the nonprofit’s agreement to include the company in the register and require the same monitoring from other registered companies. An alternative structure would be for the companies making the pledge to contract with each other, ensuring that there would be multiple entities with incentives to enforce the agreement against noncompliant firms. The biggest contract law issue is probably remedial. It would be difficult to prove damages, so a liquidated damage clause might be useful, assuming the court could be persuaded that significant liquidated damages are reasonable. An alternative set up would be to require representations by the company about compliance with monitoring protocols at they make their reports, providing a basis for a misrepresentation action.
We can also imagine something like a private carbon tax in which companies pledge to pay a nonprofit a fixed amount based on their carbon emissions. The nonprofit would use the funds to finance renewable energy projects, promote sustainability research, or fund energy efficiency projects such as helping to weatherize houses. Such pledges would probably be enforceable even without consideration under Cardozo’s opinion in Allegheny College. Damages would presumably be based simply on the amount of unpaid “taxes.”
It’s also possible to think in terms of a private cap-and-trade scheme, something like the ones used by California and by the Northeastern states. In these markets, governments set caps on total emissions and auction or otherwise distribution allowances, each one giving the owner the right to emit a single ton of carbon. In the contractual version, firms would agree to create a market in carbon allowances and to buy as many allowances as they need to cover their emissions. For instance, firms could agree to cut their emissions on a schedule of, say, 2% per year for five years. Every year, they would get allowances equal to their current target, which could be traded. Firms that were able to cut their emissions more than 2% could recoup the cost by selling permits to firms that found it too expensive to make their own cuts. Each firm would have to be bound contractually to pay for purchased allowances coupled with an enforceable obligation to achieve the target. If firms fail to buy the needed allowances, the measure of expectation damages seems to be the market price of the allowances the contract required them to purchase from other firms.
One advantage of government regulation is that the government can assess penalties, while contract law does not enforce penalties. For that reason, arguments for substantial compensatory damages will be crucial to provide an incentive for compliance. There will also be questions about how to structure the contracts (between firms or only between each firm and the nonprofit administering the scheme). And of course, all the usual issues of contract interpretation, materiality of breach, etc., will surface. (If nothing else, this could be the basis for an interesting exam question.)
Whether any of this is practical remains to be seen. There are also potential antitrust problems to contend with. But it is intriguing to think about ways that private contracting could be used to address societal issues such as climate change, particularly in situations where the government seems unlikely to act. There might be real gains from using private-law tools like contract to address public-law problems.
Wednesday, March 7, 2018
That's going to be the blog's new slogan.
Frances McDormand briefly made contract law trend on Twitter by using "inclusion rider" as her important two-word closing. At the time, there was only one result for "inclusion rider" when you Googled it. Now, if you Google it, you get a million results of articles explaining what an "inclusion rider" is. But here's the original video from Stacy Smith which was the one result before McDormand made it a cultural conversation.
I've had a series of blog posts over the past few years discussing the ways in which private contract law has been used to obscure systemic discrimination and abuse and harassment (a bunch of them are linked in this post). This is a nice suggestion for a way to use private contract law to try to correct some of the problems we've now exposed.
Monday, March 5, 2018
To the New Jersey native it happened to, well, a very costly mistake through several states.
According to this article, the man called an Uber after going out with friends in West Virginia. He was staying near West Virginia University, but he apparently requested an Uber to drive him to his home...which is in New Jersey. The drive was 300 miles, and problematically the man was drunk and so passed out upon getting into the car. He didn't wake up until two hours into the drive.
The news article is unclear as to the status of the trip. Uber claims the man has agreed to pay the fare; the man says he's contesting the fare because he never requested the Uber drive him to his home. It is true that Uber allows you to store a home address and also pulls up recent destinations when you request a ride, so one could foresee how such a mistake could happen.
It seems to me from the story that this was more likely user error, as the man was admittedly fairly drunk at the time he ordered the Uber. This also means that the man was probably too intoxicated to comprehend what he was doing as he entered into the agreement with Uber to order the car to take him home, but how was the anonymous Uber app to know? One could, however, foresee a separate confirmation page being necessary if the ride is going to cost more than, say, a thousand dollars (at least), but it's unclear that would have avoided the mistake, as the man may have been too drunk to grasp the import of the message. What should Uber do to try to avoid this sort of mishap? Anyone else have similar Uber mistakes?
h/t to reader Timothy Murray of Murray, Hogue & Lannis for sending this story to our attention!
Thursday, March 1, 2018
A recent case out of New York, Heritage Auctioneers & Galleries, Inc. v. Christie's, Inc., 651806/2014, deals with the world of luxury auctions. The plaintiff alleged, inter alia, that the defendant Rubinger breached the non-compete provision of his employment agreement when he resigned his position and went to work for Christie's Hong Kong office. The opinion is behind a paywall but the many points of contention between these companies has been documented in several places, including here, here, and here.
The employment agreement was governed by Texas law, so the court applied Texas law to determine that the non-compete provision was overly broad. The non-compete prohibited Rubinger from providing services for any business that participated, either directly or indirectly, in auctioning collectibles in North America in a manner competitive to the plaintiff's auction business. The problem was that the non-compete tried to prohibit Rubinger from providing any services for such business. As the court noted, Rubinger could have violated the agreement by working as a janitor at Sotheby's or in the mailroom at Christie's. The court therefore concluded that the non-compete was unreasonable.
However, under Texas law, the court reformed the provision to be enforceable, rewriting the provision to prevent Rubinger from providing services to competitors identical to those he provided to the plaintiff. Because that was exactly what Rubinger was doing, he was in violation of this rewritten non-compete provision.
The court found the time and geographic scope of the non-compete to be reasonable, and then found that the question of whether Rubinger's activities in Hong Kong violated it was a factual determination that could not be resolved.
Rubinger's employment agreement also contained a non solicitation covenant. When Rubinger resigned from the plaintiff to move to Christie's, two of Rubinger's staff resigned on the same day to make the identical move. The court found the non solicitation covenant enforceable, but nevertheless dismissed the claim because the non solicitation covenant, by its terms, prohibited Rubinger from soliciting the plaintiff's employees after termination of his employment. Because Rubinger's solicitation of his staff took place prior to termination of his employment, it was not prohibited by the terms of the contract.
There were many other claims in this complaint, including trade secret allegations and unjust enrichment. I focused on Rubinger's alleged breach of contract in this blog entry, but there were other aspects to the court's decision.
Sunday, February 25, 2018
The largest U.S. producer of farmed salmon has lost a contract on a lease site in Puget Sound. The decision came after multi-agency state investigation in connection with a broken holding pen. The investigation said that the net collapsed due to Cooke Aquaculture Pacific’s failure to adequately clean their nets per the contract. The extra weight of mussels and other debris caused the net to fail and allowed thousands of non-native fish to escape into the Sound. Cooke has disputed the state’s findings about the amount and size of the fish that weren’t recovered.
The blowback from the pen failure has resulted in Washington state voting to phase out net pen salmon farming in Puget Sound. While Cooke argues there is no scientific basis for claiming the farmed Atlantic salmon are a threat to Pacific salmon, but the new regulations could endanger their other operations in Washington. Cooke maintains four facilities in western Washington, with two being closed for violations in the last two months.
The legislation against net pens could spell the end of aquaculture in 1,020 sq. mi. Puget Sound. It is too early to measure the economic impact that these phase-outs will have, but Cooke employees could be out of a job. Cooke’s violations of their lease agreement not only include improperly maintaining their nets, but also anchor lines outside the lease zone, and an unapproved feed barge. The Washington Department of Natural Resources cited that remaining net pen groupings were in danger of catastrophic failure. The repercussions of the net breakage has already created a massive ripple in the Washington aquaculture industry. This simply goes to show the importance of following the rules established when parties enter into a contract.
Saturday, February 24, 2018
The Weinstein Co. has had yet another lawsuit filed against it for breach of contract over the Canadian distribution rights of “Paddington 2.” Prior to the allegations against co-founder Harvey Weinstein, the company had an agreement with Toronto-based EOne to distribute the film throughout Canada. In their lawsuit, EOne is seeking to recover $7.8 million that it advanced to Weinstein to obtain the rights to distribute the film throughout Canada. Amidst the controversy surrounding Harvey Weinstein, the company sold the rights to Warner Bros. After Weinstein broke the agreement, EOne terminated the distribution deal. The original contract provided for post-termination repayment of the advance.
Beyond the $7.8 million advance that EOne paid the Weinstein group, an action for lost profits may be available. The movie has so far grossed $192 million. The U.S. and Canadian box offices opened at $11 million. However, if EOne does decide to try to recover lost profits, it had better act fast. Since the allegations of misconduct were levied against Harvey Weinstein, the company has been on the verge of bankruptcy. The sale of “Paddington 2” to Warner Bros was enough to keep the company afloat until January. According to Reuters, the company is $375 million in debt. Killer Content and Abigail Disney have said that bankruptcy may be the best option for Weinstein Co.
Also found in the complaint is an allegation that Bob Weinstein telephoned the EOne division president to apologize for the sale to Warner Bros and to acknowledge that they would have to compensate EOne. It will be interesting to see if this argument is permitted. Further, the term “compensate” could be construed to include further damages. While only time will tell what the fallout will be from the ongoing Weinstein court battles, it is clear that the bucket is draining quickly.
Saturday, February 17, 2018
A U.S. judge on Wednesday dismissed a lawsuit seeking the return by the Metropolitan Museum of Art in Manhattan of a Pablo Picasso masterpiece that a German Jewish businessman was allegedly forced to sell at a low price in order to fund an escape from the Nazis and fascism.
Paul and Alice Leffmann fled Germany for Italy in 1937. Paul Leffmann sold “The Actor” the next year to two art dealers for $12,000 to fund an escape to Switzerland from the Fascist regime of Benito Mussolini, a Hitler ally.
The Met acquired “The Actor” in a 1952 donation, but did not acknowledge Leffmann’s ownership until 2011, after decades of incorrect cataloguing. Leffman’s great-grand niece, who handles the estate of the Leffmans, claimed that the circumstances of the 1938 sale meant that her family never lost title. The Met disagreed, while expressing sympathy for the Leffmanns’ plight.
The judge found that the sale “occurred between private individuals, not at the command of the Fascist or Nazi governments,” and not because of a “wrongful threat” by the buyers that took away Leffmann’s free will.
“Although the Leffmanns felt economic pressure during the undeniably horrific circumstances of the Nazi and Fascist regimes,” the judge wrote, “that pressure, when not caused by the counterparties to the transaction (or the defendant) where the duress is alleged, is insufficient to prove duress with respect to the transaction.”
It is both sad and interesting that so many years after the fascist rise to and fall from power, these types of cases are still heard in courts in this country and beyond.