Thursday, November 9, 2017
I mean, our entire society is filled with contracts, so it's no surprise that Harvey Weinstein was surrounded by a web of contracts designed to protect himself from accusations. Not just the NDAs I've previously discussed, but also contracts with his lawyer and with the investigators they hired. Not to the mention the interaction between his contracts with the National Enquirer's publisher and the National Enquirer's information. Because Dylan Howard at the National Enquierer's publisher considered himself to have to act in Weinstein's best interests because of other business deals, it affected the way National Enquirer used the information gained by its reporters.
You can read the whole story here. It's extremely lengthy and I have not done it justice at all in this tiny blog entry, but it's got a lot about contracts there: what they said, why they existed, what was being done under them, etc. Just...a lot of contracts. All of them to keep people silent.
Tuesday, October 31, 2017
A recent case out of California, Diaz v. Hutchinson Aerospace & Industry, Inc., B271563, has a nice, organized unconscionability analysis that leads to finding an arbitration clause unenforceable.
The case concerns an employment agreement signed by Diaz with his employer Hutchinson. The employment contract was indisputably an adhesion contract, because it was distributed pre-printed to employees with no opportunity to negotiate. That does carry some degree of procedural unconscionability but the court characterized it as minimal, since it was not accompanied by any other elements of surprise or sharp dealing. Given the low degree of procedural unconscionability, the court required a high degree of substantive unconscionability.
Unfortunately for Hutchinson, that high degree of substantive unconscionability was met. First, the arbitration provision was one-sided: only claims against the employer were required to go to arbitration, not claims against the employee. Second, the arbitration provision limited discovery in such a way as to make it impossible for the employees to vindicate their rights.
Because this high degree of substantive unconscionability combined with the procedural unconscionability rendered the arbitration clause unenforceable, the court was justified in finding the entire agreement "permeated by an unlawful purpose" and refusing to enforce it.
Monday, October 30, 2017
In the wake of the Weinstein revelations, everyone is talking about it: NDAs seem to be part of the problem. They were used consistently to silence people from speaking out. The NDA seemed to be how you could get away with it, as Weinstein's last-ditch offer to Rose McGowan to keep the lid on the story seems to illustrate. You can read criticisms of NDAs at Vox, Variety (and again), CNN (and again), the New York Daily News, Above the Law, and Forbes. And that was just my first page of Google results. I've been blogging about the danger of them for a while. It's not just the rich and powerful using them; college campuses are also using them in the sexual assault context. And they're not just being used to cover up sexual abuse; Amber Heard's NDA restricted her from apparently ever even mentioning domestic abuse at all. It's easy to see why NDAs are popular among the powerful (the President also loves them). They allow complete and total control of the narrative. An NDA can make it a legal breach for you to tell the truth; an NDA can indeed make it legally enforceable for you to lie, basically. And, in this way, the fuzzy line between truth and fiction becomes fuzzier and fuzzier. And people get victimized and feel alone and the culture of contractual silence makes them lonelier, depriving them of support systems.
NDAs also exist for lots of valid and important reasons. But they are also being widely and abusively used and we as a society need to confront that. The question isn't why less powerful people sign these NDAs. Until we can fix power imbalances (and we're a long way from that), it's always going to happen. But we should really question the public policy justifications for NDAs in certain circumstances. These past couple of weeks have spotlighted lots of troubling systemic issues in our society. This is one of them.
Sunday, October 29, 2017
As reported on The Hill and in several other national and international news outlets, tiny Montana energy company Whitefish Energy – located in Interior Secretary Ryan Zinke’s very small hometown – stands to profit greatly from its contract with the Puerto Rico Electric Power Authority. That’s fine, of course. However, highly questionable issues about the contract have surfaced recently. For example, Whitefish very famously prohibited various government bodies from “audit[ing] or review[ing] the cost and profit elements of the labor rates specified herein.”
What were those? The Washington Post reports that under the contract, “the hourly rate was set at $330 for a site supervisor, and at $227.88 for a ‘journeyman lineman.’ The cost for subcontractors, which make up the bulk of Whitefish’s workforce, is $462 per hour for a supervisor and $319.04 for a lineman. Whitefish also charges nightly accommodation fees of $332 per worker and almost $80 per day for food.” Another news source notes that “[t]he lowest-paid workers, according to the contract, are making $140.26 an hour. By comparison, the minimum wage in Puerto Rico is $7.25 an hour … [T]he average salary for a journeyman electrical lineman is $39.03 per hour in the continental U.S. However, a journeyman lineman on Whitefish Energy's Puerto Rico project will earn $277.88 per hour.”
Little wonder why the company did not want anyone to “audit or review” its labor rates. If it wasn’t for the apparent “old boy”/geographical connections that seemed to have led to this contract to have been executed in the first place, hopefully no Puerto Rican official would have accepted this contract in the form in which it was drafted.
But it doesn’t end there. When the San Juan mayor called for the deal to be “voided” and investigated, Whitefish representatives tweeted to her, “We’ve got 44 linemen rebuilding power lines in your city & 40 more men just arrived. Do you want us to send them back or keep working?”
To me, this entire contract to violate several established notions of contract law such as, perhaps, undue influence or duress (in relation to contract formation but perhaps also, if possible, to continued contractual performance), bad faith, perhaps even unconscionability, which is a alive and well in many American jurisdictions.
This could work as an interesting and certainly relevant issue-spotter for our contracts students. It also gives one a bad taste in the mouth for very obvious reasons. It will be interesting to see how this new instance of potentially favoring contractual parties for personal reasons will pan out.
Wednesday, October 4, 2017
The Eight Circuit Court of Appeals has held that conduct tending to show fraud and bad faith in relation to one contract is not an excuse for not performing in a closely related contract.
Dr. Halterman signed a recruitment agreement, an employment contract, and a promissory note in the amount of $50,000 as a “signing advance” – a loan - for his upcoming work as a doctor with the Johnson Regional Medical Center (“JRMC”). The recruitment agreement stipulated that the monthly payments on the signing advance would be forgiven so long as Dr. Halterman’s employment at JRMC “continued.” It did not. Five months into his employment, Dr. Halterman quit, citing to, i.a., JRMC’s fraudulent misrepresentations in negotiating his call-coverage obligations and bad faith in that respect. Dr. Halterman had also suffered a shoulder injury that both parties at one point agreed would result in him not being able to do all the work for JRMC that the parties had originally agreed upon.
JRMC claimed repayment of $37,894 still owed by Dr. Halterman when he resigned without, in the hospital’s opinion, a “legal defense.” Dr. Halterman sought to excuse himself from having to repay the remainder of the loan.
The appellate court agreed with JRMC that Dr. Halterman’s obligations to pay the remaining debt were not excused by his allegations (or eventual proof) of fraud or breach of the duty of good faith in the employment contract. An executory contract procured by fraud is not binding on the party against whom the fraud has been perpetrated. Here, Dr. Halterman sought not to perform under the employment contract, but the court found that the loan agreement was an entirely separate contract that thus still had to be performed.
This situation could have been avoided with more legally apt language, of course. Such language could have included express conditions stating that the loan was not to be repaid under a set of circumstances covering, for example, fraud. However, I find it troublesome that the legal effects of three contracts that clearly were meant to relate to and arguably depend on each other were separated decisively as the court did here. In fact, the parties disagreed on whether the three executed documents should be considered separately or as one single contract. The court analyzed the employment contract as separate from the recruitment agreement and note, which were treated as one. That may or may not make sense. Granted, it may make sense that sophisticated parties such as these could simply, if they had intended one single legally binding contract to arise, have worded their documents accordingly. On the other hand, it does not make much common sense to find that a “recruitment” contract is entirely different from an “employment” contract; the two are clearly connected. If fraud has arisen, is not the result of the above that the party acting fraudulently – the hospital, allegedly – can if not outright recover from a fraud, then at least avoid losses from it? Although I do agree with the outcome here, it seems like it to me that some troublesome aspects of this finding remain, namely that an employer apparently got away with broken employment promises fairly scot-free. That’s not fair.
The case is Johnson Regional Medical Center v. Dr. Robert Halterman, 867 F.3d 1013 (Eighth Cir. Ct. of App. 2017).
Friday, September 15, 2017
A recent case out of California, Pimpo v. Fitness International, LLC, D071140 (behind paywall), finds an arbitration clause in a contract unenforceable due to unconscionability.
In the case, Pimpo worked at one of Fitness International's fitness centers, where another employee sexually harassed her. Pimpo made several reports about the other employee's behavior and ultimately ended up suing over the sexual harassment. Fitness International responded by moving to compel arbitration based on a contract Pimpo electronically signed when she submitted her application for employment with Fitness International. However, the very terms of that agreement said it was only effective for 45 days, so it had expired by the time Pimpo filed suit. Fitness International tried to argue that Pimpo had signed a different arbitration agreement upon accepting employment but the trial court found no evidence of such agreement and the appellate court said that Fitness International's statement that it moved to compel arbitration based on this other agreement for which there was no evidence "border[ed] on a misrepresentation to this court."
So the appellate court already wasn't too happy with Fitness International as it began its unconscionability analysis, which it turned to in the interest of thoroughness. The arbitration clause that Pimpo signed when she applied for employment, the court concluded, was unenforceable due to unconscionability. Because the contract was a contract of adhesion presented to Pimpo on a take-it-of-leave-it basis, the court found that it was "by definition procedurally unconscionable." The court then went on to note, though, that Pimpo was in the usual position of someone applying for a job: She needed money to survive and did not have the resources to hire an attorney to look over the contracts for every application that she submitted.
The court also found substantive unconscionability because the clause was drafted to be breathtakingly broad. It explicitly required Pimpo to give up her right to a jury trial on all claims, "even those unrelated to the application or her employment," against Fitness International and "its officers, directors, employees, agent, affiliates, entities, and successors," forever. The court noted that this language meant that if Pimpo got into a car accident with a Fitness International employee, it was covered by this arbitration clause. Fitness International tried to argue that the clause should be read more narrowly than that but the court noted that that was not how it was drafted (and Fitness International had drafted it). In addition, the discovery procedure that the arbitration clause allowed for placed Pimpo at such a disadvantage that the court agreed that was substantivaly unconscionable, too.
Beware of drafting your clauses too broadly. Such can be the outcome. Even arbitration clauses can have their limits.
Friday, September 8, 2017
In my head it's still the beginning of the school year, even though at my school we just finished our third week of classes already. This means that, because we only have a one-semester Contracts course, I'm just finishing up contract formation and moving on, and this case is kind of a nice little reminder review about the principles surrounding offers.
The case out of New Jersey, Kristine Deer, Inc. v. Booth, No. C-29-16 (behind paywall), involved a luxury active wear company, K-DEER, for which the defendant, Booth, worked. Booth had several conversations over the course of her employment with K-DEER's sole shareholder, Kristine Deer, about Booth receiving possible equity interest in the company. However, every one of those conversations was fairly vague. Deer seemed to always finish the conversations with some kind of demurral: that she had to "think about" it more, or that she wasn't "ready to have the conversation." Eventually, Booth resigned with an e-mail that read "If you are not willing to pursue an active dialog about ownership I am not interested in working at K-DEER."
The parties are now involved in litigation, which included, among other things, Booth's counterclaim for breach of contract. She alleged that "Deer led [her] to believe she was a partner and had a right to equity in K-DEER," because she "did not explicitly deny her requests for equity" and called her a "partner" at times. However, the court quoted at length from Booth's deposition, where she admitted that Deer did not offer her any equity and that, in fact, her unwillingness to do so was why she resigned. Under these circumstances, it was impossible to find an offer from Deer to Booth. There was no expression of commitment on Deer's part. In fact, all of Deer's statements seemed to evince the opposite. So the court found no contract existed between the parties.
As I am teaching my students to do now, the court then moved on, examining Booth's claim for quantum meruit. However, Booth never alleged that she wasn't adequately compensated, just that she would have left K-DEER earlier had she realized Deer wasn't going to give her equity. That did not justify quantum meruit. The court found that Booth had been compensated for all the work she had performed, so there was no unjust enrichment on K-DEER's part.
Sunday, August 20, 2017
Beauty Salon's Customer Lists Weren't Confidential When They Were on Social Media (and more beauty salon rulings)
A recent case out of New York, Eva Scrivo Fifth Avenue, Inc. v. Rush, 656723/2016, stems from the defendant, Rush, being discovered working for a rival beauty salon, Marie Robinson, while still employed by the plaintiff, Scrivo. Scrivo terminated Rush upon learning of this. Rush spoke to two clients in the Scrivo salon before exiting the salon, allegedly saying she would get in touch with them, and at least one of the clients left the salon, refusing to be serviced by anyone but Rush. Rush also posted a note on her personal Instagram saying that she would be moving to Marie Robinson and people should get in touch with her for appointments.
Scrivo sued alleging, among other things, breach of contract, based on the restrictive covenant contained in the Employment Agreement, which prohibited Rush from, among other things, soliciting Scrivo's clients and disclosing confidential information and trade secrets. Scrivo sought to enjoin Rush from soliciting, communicating with, or providing services to anyone she serviced while working for Scrivo, for a period of one year.
Unfortunately for Scrivo, the court denied its motion. The court noted that the noncompete needed to protect Scrivo's legitimate interests, avoid undue hardship on Rush, and be in the public interest. The court found that Scrivo failed to demonstrate the that noncompete was necessary to protect its interests. There was nothing about Rush's services that were "unique or extraordinary," and Rush was replaceable. Scrivo's customer lists were not confidential information, because the identity of its customers was pretty readily available online in social media posts and Scrivo never attempted to hide any of it. None of the skills Rush used in cutting hair were confidential, either. Rush claimed to be self-taught, claimed not to have taken any customer lists, and claimed that any clients that followed her did so of their own accord and initiative and that she did not solicit them.
Not only was the court dubious that Scrivo had legitimate interest to protect, the court also thought the sought injunction was unduly burdensome on Rush. Scrivo provided evidence that Rush had serviced 900 clients over the course of six years at Scrivo. Rush would surely have to therefore affirmatively ask each person who came to Marie Robinson if they had ever been serviced at Scrivo in order to ascertain if there was a possibility Rush had worked on them. Scrivo wanted Rush to turn away clients who came in independently, and the noncompete had only required Rush to refrain from soliciting clients.
Finally, the court didn't think Scrivo would suffer any irreparable harm without injunctive relief. If Scrivo could prove Rush violated the noncompete, then Scrivo could get the value of the services the client didn't purchase from Scrivo.
Wednesday, August 16, 2017
In times when it seems that employers often not only attempt to, but also often get away with, unreasonable demotion and/or termination attempts, the Eighth Circuit Court of Appeals has upheld the rights of employees not to be forced into unreasonable demotion “agreements.”
The crucial facts of the case are as follows: In 2011, Timothy Gilkerson was hired by Nebraska Colocation Centers (“NCC”) as a Vice President and General Manager in an IT function that also included Gilkerson’s expanding the company’s customer base. Among other things, the employment contract stated that Mr. Gilkerson could only be fired for cause defined as the “willful misconduct in carrying out Executive’s duties which causes economic harm” to NCC or the “persistent failure to perform the duties and responsibilities of his employment hereunder….” The contract also specified various generous sales and retirement bonuses.
NCC subsequently became dissatisfied with Gilkerson’s sales-related performance. Gilkerson received an employee performance review with an “Unsatisfactory” rating for “Achieved Sales Goals” and “Fulfills the terms of his contract.” Gilkerson signed the review document, but noted his dissatisfaction with the sales goal rating. NCC ultimately determined that Gilkerson was not “effective” in his role, announced the hiring of a new Vice President and, the same day, told Gilkerson that 1) the new employee would be moving into Gilkerson’s office and 2) that Gilkerson’s job ti
tle was changed to something less desirable from his point of view.
Crucially to the case, Gilkerson was presented with a “Mutual Rescission” to rescind the employment contract and a “Term Sheet” which set forth new and much less desirable terms of Gilkerson’s employment. In other words” NCC sought to demote Gilkerson. Importantly, the “mutual rescission” sought to convert Gilkerson’s contractual status to be an at-will employee. Gilkerson smartly consulted with an attorney who told him not to sign the Mutual Rescission. At a subsequent meeting with the NCC president, Gilkerson was told he had two choices: Accept the rescission and term sheet or be fired for cause; an obvious Hobson’s choice. Gilkerson signed. You guessed it: he was then also fired.
Gilkerson filed suit, claiming contractual duress which, in Nebraska, involves a two-part test: First, the agreement obtained must have been obtained by means of pressure. Second, the agreement itself must be unjust, unconscionable, or illegal. Whether particular facts are sufficient to constitute duress is, in Nebraska, a matter of law.
The duress test sounds like a high standard to meet. Sure enough: on a motion for summary judgment, the trial court found that “had the revised terms … been given to a newly-hired employee, they would certainly have been seen as fair, or even generous.” However, as the Court of Appeals pointed out: Gilkerson was not a new employee. It was just wrong for the employer and court to treat him as such. The Court found the new “term sheet” unjust because, after analyzing case precedent, there was no economic justification for requiring Gilkerson to accept an at-will employment agreement, other than “it allowed NCC to avoid the provisions of the Contract that were most favorable to Gilkerson.” No kidding. The court also specifically took issue with the provision that made Gilkerson an at-will employee after having served in a contractually better position for quite some time. The appellate court thus found duress to lie.
Contracts are, of course, negotiable at the outset. However, in times of fierce competition in many job markets, it is good to see that courts standing up for employees presented with clearly unreasonable employment “choices” and decisions by employers well into an employment situation. It is one thing if an employee is at working will. It is quite another if he/she is not, as this case clearly demonstrates. Contracts must be performed in good faith by both parties. That, of course, includes the employer as well. In times when unemployment rates are dropping, hopefully employees will obtain stronger bargaining positions both at the outset of and during the employment relationship. Nonetheless, presenting employees with unreasonable “choices” such as the above. Of course, employees should rise to the reasonable expectations of employers. But employers do not and should not have carte blanche to do whatever they wish to contractually bound employees. This can hardly come as a surprise to any reasonable employer.
The case is Gilkerson v. Nebraska Colocation Centers LLC., 2017 WL 2656073.
Thursday, June 15, 2017
I've blogged before about whether a faculty handbook creates a binding contract between a university and its faculty. A recent case out of Indiana, Dodson v. Board of Trustees of Indiana University, Court of Appeals Case No. 45A03-1611-CT-2703, found that disclaimers contained within the faculty handbook can protect it from being considered a binding contract.
Dodson had alleged that she had been denied tenure in contravention of the faculty handbook, and that this constituted a breach of contract on behalf of the university. The university, however, pointed out that the handbook had a disclaimer that it was not be a construed as a contract, and as a result Dodson's claim failed. The disclaimer was evidence that the university never intended the handbook to be part of its contract with Dodson.
Monday, June 5, 2017
I've already blogged about the contractual disputes around the music that the late artist Prince left behind when he died unexpectedly. They continue with another case in the District of Minnesota, Paisley Park Enterprises, Inc. v. Boxill, Case No. 17-cv-1212 (WMW/TNL). In this dispute, Boxill, a consultant and sound engineer who worked with Prince, had announced that he would release five Prince recordings in his possession on the anniversary of Prince's death. Prince's estate sued, seeking a preliminary injunction against the release, which the court granted. One of the causes of action revolved around the Confidentiality Agreement that Boxill had entered into with Prince. Under the terms of the agreement, Boxill was allowed to enter Prince's home and work with Prince and disclaimed any property interest connected with this work. Yet when Prince's estate demanded return of the recordings in Boxill's possession, he refused to turn them over. This was sufficient to demonstrate a likelihood of success on the merits for breach of the contract.
Boxill's main argument was that the Confidentiality Agreement only covered his work consulting on the remodel of Prince's music studio; the Confidentiality Agreement did not cover Boxill's work as a sound engineer recording music with Prince. Boxill's reasoning on this was that the Confidentiality Agreement prohibited him recording any of Prince's performances, but he was required to do so when he was working with Prince as a sound engineer. The Prince estate's response to this was that it had waived the recording portion of the Confidentiality Agreement but the rest stayed in force and covered all of Boxill's activities. The Court concluded that either interpretation was plausible, and that Prince's estate had a "fair chance" of prevailing on the merits.
A motion to dismiss is currently pending in the case, so we'll see what happens!
Wednesday, May 10, 2017
In a recent case out of the Western District of Pennsylvania, Argue v. Triton Digital, Inc., Civil Action No. 16-133 (behind paywall), Argue, an engineer, brought suit alleging that his employer had been unjustly enriched by Argue's efforts. It's an interesting allegation. The court pointed out that what Argue was characterizing as "unjust enrichment" was really just him performing his job. He received a salary in exchange for his work, which included inventions, and his employer took that work and those inventions and used them to increase the value of its business. That wasn't unjust enrichment; the employer was entitled to do exactly what it did.
Complicating this further? Argue had an employment agreement. The court pointed out that unjust enrichment is a doctrine that's supposed to be used only when no contract exists between the parties. Here there was a written agreement that provided Argue's employer with the right to Argue's inventions on the job. He could not, therefore, argue unjust enrichment at all.
Monday, May 8, 2017
In a recent case out of the District of New Jersey, Saturn Wireless Consulting, LLC v. Aversa, Civ. No. 17-1637 (KM/JBC) (behind paywall), the court took a (light) "blue pencil" to a non-solicitation covenant in the parties' contract.
Saturn hired Aversa and they entered into a non-solicitation clause that prohibited Aversa from contact with any entity connected with Saturn, for the purpose of diverting work from Saturn, for a period of one year following Aversa ceasing to work for Saturn. Aversa resigned from Saturn and set up his own business that was partly in competition with Saturn. Saturn sought a preliminary injunction prohibiting Aversa from these activities based on the non-solicitation clause of the employment contract.
The court carefully interpreted the non-solicitation clause, noting that Aversa was restrained from doing some business with Saturn's customers but not restrained from doing any business with them. Rather, the non-solicitation said that the prohibited activities had to be "for the purpose of diverting work or business." If Aversa was working with some entities in some areas where Saturn was not operating--as he was--then those activities were permitted under the agreement.
The court did not, however, buy Aversa's argument that he did not run afoul of the non-solicitation clause because he did not contact the customer; the customer contacted him. The court noted that the clause had been expansively worded to include any "contact," not just solicitation, and therefore Aversa's returning of the customer's phone calls qualified.
Aversa also tried to argue that Saturn had not alleged any trade secrets or confidential information that Aversa knew that Saturn was trying to protect. Rather, Saturn's allegations were more generally about Aversa's relationships with the customer at issue. Aversa stated that Saturn was therefore trying to prevent him from using his general skills and know-how, which it could not do. However, the court found that Saturn had a legitimate interest in protecting customer relationships to some extent, independent of any trade secrets or confidential information. The evidence showed that Saturn invested resources to help Aversa build business relationships on Saturn's behalf. Aversa could not then turn around and use that investment to harm Saturn. However, the court made clear that this prohibition applied only to Aversa working with the same people he'd personally worked with while at Saturn. Otherwise, Aversa would be subjected to undue hardship in his chosen career field.
Sunday, February 26, 2017
Just when you think the political debacle in this country cannot get anymore grotesque, here's a recent proposal by Iowa State Senator March Chelgren: to counter the liberal slant at Iowa's three public universities, the job candidates' political affiliations would have had to be considered. Why? To ensure "balanced speech" and avoid the "liberal slant" in public universities these days.
Under SF 288, the universities would use voter registration information when considering job applicants, and could not make any hire that would cause declared Democrats or Republicans on the faculty to outnumber the other party by more than 10%.
Demonstrating the very deep and logical (not!) argument, check this line of thinking: Chelgren said professors who want to be hired could simply change their party affiliation to be considered for the position. "We have an awful lot of taxpayer dollars that go to support these fine universities," he said. "(Students) should be able to go to their professors, ask opinions, and they should know publicly whether that professor is a Republican or Democrat or no-party affiliation, and therefore they can expect their answers to be given in as honest a way possible. But they should have the ability to ask questions of professors of different political ideologies."
Sunday, February 12, 2017
A recent case out of the Eastern District of Kentucky, Taylor v. University of the Cumberlands, Civil No: 6:16-cv-109-GFVT (behind paywall), has lots of causes of action, including an interesting dispute over whether an agreement between the university and its former President and Chancellor was supported by consideration.
While the decision itself, granting in part and denying in part the university's motion to dismiss, is behind a paywall, the dispute has been reported and described in the press. Dr. Taylor served as the President of the university for 35 years. He alleged that the school had agreed to pay him and his wife almost $400,000 annually after his retirement until they were both dead. The school disputed the validity of that agreement. The Taylors then brought several claims against the university, including breach of contract.
On the motion to dismiss, the main contract argument involved consideration. The university argued that the contract was given in recognition of the Taylors' successful fundraising efforts and service to the school, which had already occurred. This, the university contended, meant it was past consideration and rendered the agreement unenforceable.
The court acknowledged that the agreement discussed the Taylors' past behavior. However, the court also identified five current promises the Taylors made under the agreement: to continue to serve as president until he decided to retire; to accept the role of Chancellor until he decided to retire; to serve as an Ambassador of the university; to serve the university in any capacity requested; and to continue to fundraise for the university. Therefore, there was consideration.
The university then argued that the agreement had no definite end date, which would mean it was terminable at will. However, the court noted that that rule applies to contracts that would otherwise run forever. In such a circumstance, the right to terminate at will can be considered appropriate. In this case, the contract would terminate once both of the Taylors were dead. No one knew when that date would be, but presumably the Taylors will not live forever and therefore the contract will not run forever. Therefore, the contract was not terminable at will, and the Taylors lived to fight another day on their breach of contract claim (although the court noted that there were significant disputes surrounding the execution of the agreement and its proper interpretation).
Saturday, February 4, 2017
A recent case out of New York, Wilson v. New York State Thruway Authority, 931-16, deals with the collective bargaining agreement between the New York State Thruway Authority and its retirees over whether the Thruway Authority was contractually bound to provide health insurance coverage to the retirees at no cost. The retirees had enjoyed free health insurance until April 1, 2016, when the Thruway Authority required them to start paying six percent of their premiums. The retirees wanted to introduce evidence that the parties understood that the Thruway Authority was going to pay all of their health insurance premiums, pursuant to the collective bargaining agreement.
The problem was that the contract between the parties contained no such obligation and the court found that the contract was unambiguous on its face. All that the contract stated was that the Thruway Authority should provide "retirement benefits" made available by New York statutes the contract went on to enumerate. None of those statutes contained provisions requiring the Thruway Authority to provide health insurance coverage. In fact, health care benefits were governed by different New York statutes, not the ones enumerated, and New York state courts had long pointed out that "retirement benefits" and "health care benefits" were two different things governed by two different statutes under New York law. Given that, the court concluded that "retirement benefits" was an unambiguous term of art that the parties knew the definition of, given their particular citation of New York statutes to define it. The court refused to allow extrinsic evidence in the face of this lack of ambiguity. If the retirees had wished the Thruway Authority to pay for their health insurance premiums, they should have included an express provision saying that in the collective bargaining agreement, as many other collective bargaining agreements construed under New York law had done.
This decision is fairly straightforward as a matter of the law: finding that the term was unambiguous (and indeed basically defined within the document through the statutory citations) and so therefore extrinsic evidence was unnecessary to decide the breach of contract action (the court here concluded that, with no obligation to pay the health insurance premiums, the Thruway Authority had not breached the contract). However, it is a legal dispute that we might see more and more of, as deals with retirees are reevaluated and altered in an age of shrinking budgets.
Friday, January 13, 2017
Frequently when I teach Contracts I find myself telling the students to just put in the contract exactly what they want it to say, because so often I feel like cases revolve around parties saying, "I know what it said, but I thought that meant something else entirely." Although, often, of course, these might be ex post facto proclamations when a situation turns out to not be exactly what the party thought it was going to be.
A recent case out of Maryland, Norman v. Morgan State University, No. 1926 September Term 2015 (behind paywall), is another illustration of a party claiming that a contract means what a court finds it does not mean. In that case, Norman had sued Morgan State after he was denied tenure there. The parties entered into a settlement agreement under which Norman was permitted to apply for "any non-tenure track position at [Morgan State] for which he was qualified." The current lawsuit is the result of Norman's allegation that Morgan State prevented him from applying for an external research grant that that would have funded a future position at the school for him.
The court, however, found that the contract clearly stated that Norman could apply for "any non-tenure track position." It said nothing about external grants and external grants are not non-tenure track positions. Therefore the settlement agreement did not require Morgan State to permit Norman to seek the external grant. Norman tried to argue that he would not have agreed to the settlement agreement had he known it allowed Morgan State to block applications for external grants, but the court dismissed that argument based on the plain and unambiguous language of the contract.
Saturday, January 7, 2017
Photo Source: hgtv.com
The main reason I have cable these days, honestly, is because of my HGTV addiction. I like that the shows are so predictable and formulaic, which makes them low-stress. It's a habit I started years ago as a stressed-out lawyer in a law firm, when I needed to come home and watch something that didn't require thought, and it's kept me company as I transitioned into academia. And I'm apparently not alone in using it as comfort television.
I use HGTV a lot in my Contracts class as the foundation of hypotheticals (so much that I'm contributing a chapter to a book detailing how I use it) and so I'm always interested when there is a real-life HGTV contract problem...such as is happening right now with "Flip or Flop."
You might not be anxiously following HGTV shows, so let me tell you that the world was recently rocked (well, a small corner of the world) by the revelation that Christina and Tarek, the married couple with two young children at the center of the house-flipping show "Flip or Flop," were separated and/or getting divorced. And now come reports that HGTV has threatened them with a breach of contract action if their ongoing marital problems affect the filming of the show.
This is an example of the interesting issues that arise when your personal life becomes the equivalent of your contractually obligated professional life. Christina and Tarek no longer want to be married to each other, apparently, which is a stressful enough situation, without adding in the fact that their marriage is also the source of their livelihood. HGTV has a point that the show is less successful when you know that their personal life is a mess. The network was running a commercial pretty steadily through the holiday season where Christina and Tarek talked about their family Christmas, and every time I saw it I thought it was so weird and that they should pull the commercial. But that was clearly the advertising campaign HGTV had long planned for the show and it was probably costly for HGTV to change it at that point.
I am curious to see what the resolution of this is. I'm unclear how much longer Christina and Tarek were under contract for. They probably hoped to keep their separation quiet for as long as they could (they had, after all, kept it quiet for several months). But now that it's out in the open, we'll have to see how the parties recalibrate not just their personal but also their contractual relationships with each other. There is always a lot of talk about how "real" the shows on HGTV is. This situation is testing where our boundaries on "real" vs. "fake" actually lie.
Thursday, December 1, 2016
How is this for a most bizarre contract law decision: The Chicago Housing Authority (“CHA”) contracted with architectural and engineering company DeStefano and Partners (“DeStefano”) for consulting services in connection with the construction of seven multifamily residential buildings. CHA required a certain percentage of the homes to comply with Section 504 of the Rehabilitation Act of 1973 and other federal law (some of the housing was to be accessible by mobility impaired individuals, some by elderly residents). Among other things, DeStefano was made contractually aware that the company was to “certify that all work was performed under the direct supervision of the Project Architect and that it conforms to… the American with Disabilities Act of 1990 … [and] Section 504 of the Rehabilitation Act of 1973.”
During the construction, CHA was notified by HUD that the project did not meet the various federal requirements. CHA hired another architecture firm to perform the work necessary to comply with its obligations under the voluntary compliance agreement with HUD. CHA incurred more than $4.3 million to bring the buildings into compliance with federal standards and brought suit against DeStefano for material breach of contract.
DeStefano defended itself by, at bottom, arguing that since CHA had a nondelegable duty to comply with the federal accessibility standards, it should not be able to recover damages from DeStefano for CHA’s failure to do so. In other words: “It’s your own fault that you have this problem, not ours, even though we were the designers and the problem was with the design.” Yah.
But wait, it gets better than that: the court agreed! It apparently bought wholesale defendant’s argument that “permitting CHA to proceed with its state-law breach of contract action would discourage CHA from fulfilling its own obligations to prevent discrimination under Section 504 and the ADA, directly undermining the goal and purpose expressed by Congress in enacting those statutes.” It also stated that “notably, however, … there are no provisions within the ADA, or its accompanying regulations, that permit indemnification or the allocation of liability between the various entities subject to the ADA.” The court found that CHA’s duties were, as mentioned, nondelegable and, because the duties were imposed on CHA by HUD, CHA’s failure to comply was the problem. “CHA was a ‘wrongdoer’ in the sense that it failed to ensure the subject premises complied with the applicable federal accessibility standards in order to prevent discrimination.”
Wait a minute! So, in trying to make sure that the housing in fact complied with the law, the housing authority was found to have violated it! That’s just crazy.
This case may work as a good example if you want to train your students how to identify faulty reasoning and logic by courts.
The case is can be found here. Hat tip to Justen Hansen of WesTech Engineering for bringing this to my attention. http://www.westech-inc.com/en-usa
Thursday, November 24, 2016
As our friends on the Faculty Lounge just announced, Dean Schwartz was just forced to step down as Dean of the University of Arkansas, Little Rock, School of Law. Why? After the recent presidential election, he sent an email to students offering counseling to those upset by the results. Similar initiatives were undertaken around the nation in places so politically and geographically different as the University of South Dakota and Occidental College in Los Angeles.
Apparently, what really cost Dean Schwartz his position was his personal opinion given in the email, namely that the services would be offered to students who “feel upset” following the “most upsetting, most painful, most disturbing election season of my lifetime.”
A colleague of Schwartz's, Robert Steinbuch, who previously tussled with Schwartz over diversity in admissions, explained [cite to FL]: “If you tell people every time they lose they’re entitled to counseling, you elevate the perceived level of wrong beyond what it is. Most assuredly, Democrats are disappointed a Republican won. I recall when the Democratic Party won the Presidency twice each of the previous two elections. I knew plenty of people who were disappointed at that time, but I didn’t know anybody that needed grief counseling. I think when we tell people that they need some form of grief counseling we are normalizing hysteria and suggesting there’s something immoral or wrong about our democratic process.”
How incredibly misunderstood and off point. First, there really is something wrong about our democratic process when repeatedly, the person winning most of the popular votes in an election does not become the president. Similarly, our two-party only, “winner takes it all” system is arguably not a sufficiently faceted system that can be considered to be a true representative, deliberative democracy. But I get that, the system should then be changed before the next election. That won’t happen, just like time after time, mass shooting episodes don’t cause a change to our gun laws or the mass murder situation in general. Such is our country, and so be it, apparently.
What is incredible to me in relation to the above is not Schwartz’ alleged normalization of “hysteria” (read: justified outrage), it is attempts to make this particular election appear normal. It simply was not. Everyone seems to agree on that, Democrats and Republicans alike. In fact, note that many Republicans were outraged as well – and for good reason. Should it be acceptable that we now have a President who, for example, is proud that he “grabs women by the pussy” and “just start[s] kissing them” whether or not they want it? Someone who claims that he is “smart” for not paying taxes for, apparently, many years to a country that he wants to lead, even though he could easily afford doing so? A person who, in spite of sound science proving otherwise until at least yesterday claimed that climate change is a “hoax made up by the Chinese”?
I would hope not. But as we see, apparently that is what we just have to put up with and not even opine about, even in legal academia, in the form of a sentence as innocuous as one that refers to simple, but honest, feelings shared by millions of other people as well.
Throughout history, censorship has never proved particularly effective. As a nation, if we seek to revert to such strategies, we are truly in trouble. Schwartz’ comments may well have upset Republican law students, but maybe that in and of itself would have had some value, especially in an academic setting where thoughts are valued for being just that; thoughts that just might help improve our nation.
On an up note: Happy Thanksgiving, and thanks to Michael Schwartz for being a such a courageous, thoughtful dean and legal scholar!
Greetings from Berlin.
November 24, 2016.