Monday, May 25, 2015
Ronald and Anna Andermann had had cell phone service through US Cellular since 2000. Their service contract provided for arbitration of all claims. The contract also provided that US Cellular could assign the contract without notice to the Andermanns. The Andermanns renewed their contract every two years up until 2012. In May 2013, they received notice that their contract had in fact been assigned to Sprint but that it could not be renewed because their phone was not compatible with Sprint's network. Sprint called the Andermanns six times (three times each) to try to persuade them to purchase a new phone that would be compatible with Sprint's network, but the Andermanns decided to move to a different service provider instead.
They also decided to sue Sprint on behalf of a class of similarly situated consumers, alleging that the undesired calls violated the Telephone Consumer Protection Act (TCPA). Sprint filed a motion to compel arbitration, which the District Court denied on the ground that the calls originated after the contract had terminated and thus the legality of the calls had no connection to the contract.
In Andermann v. Sprint Spectrum L.P., the Seventh Circuit reversed and remanded with instructions to order arbitration. Judge Posner an found intimate relation between the contract and the calls. The case was an easy one according to Posner because the claims here clearly arose out of or related to the agreement. Sprint was attempting to offer consumers a way to continue their services. This case was thus easily distinguishable from other cases, more favorable to plaintiffs, in which the plaintiffs had agreements with defendants that were governed by arbitration provisions but plaintiffs' claims related to contracts that did not contain arbitration provisions.
Having quickly dispensed with plaintiffs' opposition to the motion to compel arbitration, Judge Posner then focused his attention on Sprint's effusive celebration of arbitration provisions as "a darling of federal policy" (Judge Posner's wording). Judge Posner emphasized that language encouraging judges to enforce arbitration clauses was a corrective to an era when judges disfavored arbitration. The aim of federal policy is neither to favor nor disfavor arbitration but to compel arbitration when the parties have agreed to arbitrate claims. Fortunately for Sprint, this case was, in Judge Posner's view, not a close call.
Judge Posner then when on to note Sprint's motives in challenging the denial for arbitration when, in Judge Posner's view, the Andermanns will lose on the merits wherever their claim is decided. Judge Posner pointed out that Sprint wants to avoid class action litigation, which is prohibited under the applicable arbitration provision. He also noted that without the class action option, the claim is unlikely to be brought at all. Judge Posner then explained the absurd results that would follow from a finding that Sprint had violated the TCPA, thus effectively deciding a claim that the Seventh Circuit ruling will prevent from ever being brought, before catching himself and noting that the decision is really for the arbiter and limiting the Court's ruling to the instruction that the claim be sent to arbitration.
Monday, May 18, 2015
In 2001, Kanosky & Associates (now Kanosky Bresney) hired Lawrence Hess to handle medical malpractice suits. In 2007, the firm fired Mr. Hess. Under Mr. Hess's employment agreement, Hess was entitled to bonus pay in the amount of fifteen percent of all fees “generated over the base salary." The employment agreement also stated that the “[b]onus shall increase” to twenty-five percent “on all fees received annually in excess of $750,000.00.”
Mr. Hess conceded that he was not entitled to any additional fees "received," but he claimed that his work had "generated" fees for which he had not been compensated. The District Court found that "generated" and "received" had the same meaning within the employment agreement, and in oral argument before the Seventh Circuit in Hess v. Kanosky Bresney, Mr. Hess conceded as much.
However, Mr. Hess pointed to a 2002 modification of his employment agreement that entitled him to 40% of all revenue "generated." Both parties also relied on additional language in Section 8 of the original employment agreement:
[W]here the Corporation retains clients upon Employees [sic] termination that Employee has no proprietary interest in fees to be earned since the Employee is to be fully compensated through his salary and/or bonus for all work done while an Employee of the Corporation” (emphasis added).
Mr. Hess read this provision to entitle him to compensation for revenues "generated" while he was an employee; the firm read the provision to bar him from any post-employment compensation.
The Seventh Circuit rejected Mr. Hess's arguments. While implying that the employment agreement could have been more clearly drafted, the Court found that reading "generate" and "receive" as synonyms results in a simple, straightforward compensation scheme. Reading generate as Hess would have it read, leads to headaches, as the contract does not specify (and doing so would be very difficult) how one is to determine any individual attorney's role in "generating" fees. Hess's interpretation of the contract was "less plausible" than the firm's, and he produced no extrinsic evidence suggesting that his interpretation should be favored despite its facial implausibility. Given the Court's presumption that the firms documents use "generate" and "receive" interchangeably, Mr. Hess's 2002 Modification did not avail him.
Friday, May 15, 2015
In 2013, Kmart hired Adrian Lopez, then age 16, as a cashier. Before beginning work, Lopez received online training, and in order to do so, he had to acknowledge receipt of various Kmart forms, including an arbitration agreement. One month after turning 18, Lopez filed a putative class action lawsuit against his employer for breaches of California's wage and hours laws. Kmart sought to compel arbitration.
Under California Family Code § 6710, minors (under the age of 18) may enter into contracts, but they have a right of disaffirmation "before majority or within a reasonable time afterwards." In Lopez v. Kmart Corp., Magistrate Corley, of the Northern District of California, held that Lopez disaffirmed his arbitration agreement with Kmart by filing the lawsuit within one month of turning 18 and that one month was a "reasonable" time under § 6710.
While California Family Code § 6712 excepts certain categories of contracts from the right of disaffirmation, Kmart did not argue that its contract with Lopez fell within any of those categories. Instead, Kmart sought to argue that the contract could not be disaffirmed because California Family Code § 6711 removes the right of disaffirmation of any contract entered into "under the express authority or direction of a statute." Magistrate Corley disagreed with Kmart, finding that § 6711 did not apply and that the argument was waived because first raised at oral argument.
Kmart next argued that §6710 only applies to contracts for goods or services and not to employment contracts. Magistrate Corley simply noted that the statutory language contains no such limitation. In any case, the contract was for services, as Lopez was to serve as a cashier.
Finally, Kmart urged the court to deny the disaffirmation in the exercise of its equitable powers. Magistrate Corley noted that she could not exercise such powers where the authority for disaffirmation was statutory. Kmart cited to cases from other jurisdictions in which courts had exercised such equitable powers in the employment context, but Magistrate Corley noted that they did so in the context of common law, not statutory infancy doctrines.
Friday, May 8, 2015
The Orlando Sentinel reported that an arbitrator has reinstated Disney workers who had refused to perform in a Disney Animal Kingdom Show, the Festival of the Lion King. The workers refused to perform because the unitards they were expected to wear for the show were not clean and dry as required in the Collective Bargaining Agreement between Disney and Teamsters Local 385 of the Services Trade Council Union (Attachment 6, Part C).
Disney was forced to cancel a performance of the show and then terminated the objecting workers. Disney will have to pay the workers back-pay for the time they were out of work (minus what they earned at other jobs), and reprimands will be removed from their files.
Thursday, May 7, 2015
Gary Rich and Joseph Simioni met in connection with an asbestos case involving West Virginia University. Rich is an attorney. Simioni has a J.D. but was never admitted to the bar. Starting in the 1990s, the two men collaborated on two additional asbestos cases and contracted with out-of-state law firms to help them class action litigation. It appears that until 2002, the men agreed that they would split the proceeds of their work 50/50. but then Rich announced there would be an 80/20 split in his favor. The parties then proceeded on this basis and committed their agreement to writing in 2005.
Rich now contends that he was under the impression that Simioni was a licensed attorney, and he did not realize that Simioni was not licensed until 2000 or 2001. He consulted with the former Chief Lawyer Disciplinary Counsel of the West Virginia State Bar, who told him that Sinioni “might not be able to get paid ethically."
Simioni eventually filed sued in District Court against the out-of-state law firms, seeking recovery based in quantum meruit, unjust enrichment and breach of an implied contract. The District Court certified the following question to the Supreme Court of Appeals:
Are the West Virginia Rules of Professional Conduct statements of public policy with the force of law equal to that given to statutes enacted by the West Virginia State Legislature?
The Supreme Court of Appeals answered in the affirmative, at least with respect to Rule 5.4 of the Rules of Professional Conduct. which prohibits fee-sharing between lawyers and non-lawyers.. The Court held for the first time (but based on numerous authorities) that fee-sharing agreements between lawyers and non-lawyers violate public policy. The parties sought to persuade the court to find an alternative mechanism for compensating Simioni by setting aside the agreement to share fees and compensate Simioni in quantum meruit, but the Court rejected that as an attempt to circumvent the rule.
Friday, May 1, 2015
In March, while I was co-teaching a course called International Humanitarian Law in Israel and Palestine with Professor Yaël Ronen, I visited Bethlehem with my students. Among other things, we saw the image at left, attributed to Banksy, on a wall in Bethlehem.
So today's New York Times story about Banksy's other creations in Gaza caught my eye. The heart of the story, for the purposes of this blog, is that Banksy apparently painted an image of a weeping Greek goddess an the iron door of a destroyed home in Gaza. An enterprising Gazan artist bought the door for less than $200, saying he wanted to protect the goddess. The owner of the door was unaware that the painting could be worth hundreds of thousands of dollars.
According to the Times, the local authorities, Hamas, have confiscated the door, and its ownership and value are to be determined by a court. I'm not sure what law the courts in Gaza would apply to such a dispute. Does anybody think the buyer of the door has a duty to disclose its possible worth to the vendor?
Wednesday, April 22, 2015
On Monday, a California Appellate Court declared the tiered water payment system used by the city of San Juan Capistrano unconstitutional under Proposition 218 to the California Constitution. The California Supreme Court had previously interpreted Prop. 218’s requirement that “no fees may be imposed for a service unless that service is actually used by, or immediately available to, the owner of the property in question” to mean that water rates must reflect the “cost of service attributable” to a particular parcel.
At least two-thirds of California water suppliers use some type of tiered structure depending on water usage. For example, San Juan Capistrano had charged $2.47 per “unit” of water (748 gallons) for users in the first tier, but as much as $9.05 per unit in the fourth. The Court did not declare tiered systems unconstitutional per se, but any tiering must be tied to the costs of providing the water. Thus, water utilities do not have to discontinue all use of tiered systems, but they must at least do a better job of explaining just how such tiers correspond to the cost of providing the actual service at issue. This could, for example, be done if heavy water users cause a water provider to incur additional costs, wrote the justices.
The problem here is that at the same time, California Governor Jerry Brown has issued an executive order requiring urban communities to cut water use by 25% over the next year… that’s a lot, and soon! Tiered systems are used as an incentive to save water much needed by, for example, farmers. The California drought is getting increasingly severe, and with the above conflict between constitutional/contracting law and executive orders, it remains to be seen which other sticks and carrots such as education and tax benefits for lawn removals California cities can think of to meet the Governor’s order. Happy Earth Day!
Monday, April 13, 2015
On March 20, 2015, in First State Ins. v. National Casualty Co., the First Circuit affirmed a District Court's refusal to vacate an arbitral remedy that the party seeking vacation claimed was "plucked out of thin air" and not derived from any term in the contract at issue. When reviewing an arbitral award, the only question is whether the arbiter was even arguably construing the agreements. Here, the First Circuit found that the arbiter unquestionably was doing so. Moreover, the contracts at issue directed the arbiter to consider each agreement as "an honorable engagement rather than merely a legal obligation" and relieved the arbiters "of all judicial formalities and may abstain from following the strict rules of law." This provision permitted arbiters to grant equitable remedies, which is precisely what they did. Justice Souter sat on the panel and joined in Judge Selya's opinion for the unanimous panel.
On March 25, 2015, the Eight Circuit decided Torres v. Simpatico, Inc. The issue in that case was that a number of franchisees claimed that an arbitration provision in a franchise agreement was unconscionable because the individual arbitration processes were prohibitively expensive. The Eighth Circuit affirmed the District Court's finding that plaintiffs had not met their burden of establishing that the arbitration costs would be prohibitively high for any particular plaintiff. The court also rejected plaintiffs claim that non-signatories to the arbitration agreement could not seek to compel arbitration. In this case, the non-signatories were third-party beneficiaries entitled to invoke the arbitration provision.
On March 27, 2015, the Sixth Circuit decided Shy v. Navistar Int'l, Corp. That case involved claims that Navistar was improperly classifying aspects of its business activities and structuring its business so as to evade its profit-sharing obligations under an agreement relating to a consent decree in a litigation relating to Navistar employee retirement benefits. The Sixth Circuit affirmed the District Court's finding that the claims were subject to an arbitration provision in the parties' agreement. However, it reversed the District Court's finding that Navistar's conduct amounted to a waiver of its right to compel arbitration. The case was remanded with instructions to compel arbitration. Judge Clay dissented, finding both that the parties had not contemplated arbitrating claims of this scope that that Navistar had waived its right to arbitration "by engaging in an unmistakable campaign of avoidance and delay both before and after the SBC intervened to enforce the settlement agreement in the instant litigation."
Monday, April 6, 2015
We saw this report over on the Faculty Lounge. This is fallout from the proposed merger of Hamline University School of Law and the William Mitchell College of Law (William Mitchell). Two William Mitchell faculty members are claiming that the merger, which will necessitate the elimination of two tenured faculty lines, is a a breach of contract.
The Complaint alleges that law schools must comply with ABA Standard 405(b) by maintaining policies for academic freedom and tenure. William Mitchell has a faculty handbook that incorporates the AAUP's 1940 Statement on Academic Freedom, which regards tenure as indispensable to such freedom. Under William Mitchell's Tenure Code, tenured professors may only be dismissed for adequate cause or in cases of "bona fide financial exigency."
In February, when the merger of the two law schools was proposed, William Mitchell announced that is was considering amendments to its Tenure Code to permit termination of tenure based on a merger. Plaintiffs allege that William Mitchell now intends to amend its Tenure Code to permit termination of tenure even if the merger does not go through, to permit termination of tenure without cause and without declaring the existence of a financial exigency.
Plaintiffs seek a judgment declaring that the proposed amendment to William Mitchell's Tenure Code would constitute a breach of contract.
Monday, March 30, 2015
Writing for Forbes.com, Santa Clara Law Prof Eric Goldman (pictured) reports on a recent SDNY case, Galland v. Johnston. The case is similar to others about which we have blogged recently. Plaintiffs rent out their apartment in Paris through a website. The rental agreement associated with the property provides that defendants would “not to use blogs or websites for complaints, anonymously or not." Notwithstanding this clause, defendants posted reviews of the apartment that were not entirely positive. In one case, plaintiffs offered a defendant $300 to remove a three-star review from a website. The defendant refused and complained to the website. Plaintiff then sued defendants for, among other things, breach of contract, extortion and defamation.
The magistrate judge dismissed all of the claims except the breach of contract claim. Plaintiffs objected to this disposition. Defendants did not, which may be a good reason why the District Court let the breach of contract claim stand while upholding the Magistrate's dismissal of the remaining claims. Indeed, the District Court's opinion did not address the breach of contract claim.
Professor Goldman expresses surprise that the Magistrate allowed the breach of contract claim to stand. Other New York courts have found that contracts clauses that prohibit customer reviews are a deceptive business violate New York's consumer protection laws. Professor Goldman also points out that they violate public policy regardless of New York law.
Thursday, March 26, 2015
BNSF Railway Company (BNSF) and Alstom Transportation, Inc. (Alstom) had a Maintenance Agreement that included an arbitration clause. BNSF notified Alstom that it was eliminating locomotives from its active fleet, which triggered a clause in the Maintenance Agreement that required discussions so that an economic adjustment could be made in Alstom's favor. BNSF then terminated the Agreement before any such discussions took place.
BNSF sought declaratory relief in a District Court, but the District Court granted Alstom's motion to compel arbitration. The Arbitration Panel (Panel) found that BNSF's termination of the contract violated the contractual duty of good faith and fair dealing and awarded Alstom damages. When Alstom sought to enforce the award in the District Court, BNSF moved to vacate. The District Court granted the motion to vacate, finding that the Panel had not applied Illinois law correctly.
In BNSF Railway Co. v. Alstom Trans., Inc., the Fifth Circuit vacated the District Court's order and remanded with instruction to reinstate the arbitral award. The Fifth Circuit noted that the Supreme Court has instructed that district courts’ review of arbitrators’ awards under § 10(a)(4) is limited to the “sole question . . . [of] whether the arbitrator (even arguably) interpreted the parties’ contract.” Oxford Health, 133 S. Ct. at 2068. After a brief review of the interpretive options, the Fifth Circuit concluded that "BNSF fails to show that the Panel could not have been interpreting the Agreement when it concluded that Illinois law imposes a limitation on the right to terminate 'without cause' based on the covenant of good faith and fair dealing." The Panel also interpreted the Agreement in determining damages. For the purposes of judicial review, it does not matter whether the interpretation was right or wrong.
Tuesday, March 24, 2015
The following guest post is from Tina Stark, a Professor in the Practice of Law (retired) and the Founding Executive Director of Emory's Center for Transactional Law and Practice. Tina is one of the pioneers of teaching transactional skills and the founder and first Chair of the AALS Section on Transactional Law and Skills. She is also the author of Drafting Contracts: How and Why Lawyers Do What They Do and the editor and co-author of Negotiating and Drafting Contract Boilerplate. Welcome, Tina!
When I speak about contract drafting, I often state that contract drafting sits at the intersection of law and business. Students can learn about style, organization, process, interpretation, ambiguity, and clarity, but if they don't know the law and understand the deal, the contract will be ripe for litigation.
In Buckingham v. Buckingham, 14335 314297/11, NYLJ at *1 (App. Div., 1st, Decided March 19, 2015), a well-known matrimonial lawyer botched the drafting of a prenuptial agreement. As drafted, the relevant provision stated that if the husband sold "MS or any of its subsidiaries or related companies," he was obligated to pay the wife a share of the proceeds. But the provision did not address the consequences of the husband's sale of any shares he owned in those businesses. Stated differently, the agreement gave the wife the right to proceeds from asset sales, but was silent about the right to proceeds from stock sales.
The couple married; time passed; and the marriage failed. Along the way, the husband sold shares of his business and the ex-wife wanted her share of the proceeds: about $950,000. The husband and the courts said "no." The court reasoned that the relevant language created a condition to the husband's obligation to pay sale proceeds to his ex-wife, but that language encompassed only asset sales. Therefore, because the husband's sale of shares did not satisfy the condition, the wife had no right to any proceeds. (Technically, there was a condition to an obligation and an obligation. The condition to the obligation was an asset sale, and the obligation was the husband's obligation to pay the wife a share of the proceeds. The husband's obligation to pay created the wife's reciprocal right to receive the proceeds.)
As the dissent points out, the business deal was almost undoubtedly that the wife was entitled to money if the husband received proceeds from a business disposition. But the court held the provision unambiguously applied only to business dispositions that were asset sales, and it refused to rewrite the provision. Bottom line: the wife’s lawyer didn’t know the law. She didn’t understand the difference between an asset sale or a stock sale and language embraced only the former. This is a classic case of a business issue driving the litigation, not unclear, ambiguous drafting. It was “bad” drafting, but not for reasons of style, lack of clarity, or ambiguity. It was “bad” because it didn’t memorialize the parties’ intent.
And that's why matrimonial lawyers need to understand business and business law and how drafting sits at the intersection of law and business.
Monday, March 23, 2015
The case is DIRECTV, Inc. v. Imburgia. You can read all about it on SCOTUSblog.
The issue is:
Whether the California Court of Appeal erred by holding, in direct conflict with the Ninth Circuit, that a reference to state law in an arbitration agreement governed by the Federal Arbitration Act requires the application of state law preempted by the Federal Arbitration Act.
The case involved a consumer contract with a class action waiver in Section 9. It also provided as follows: “if . . . the law of your state would find this agreement to dispense with class arbitration procedures unenforceable, then this entire Section 9 is unenforceable.” However, Section 10 states that "Section 9 shall be governed by the Federal Arbitration Act."
The California Court of Appeal for the Second District affirmed the superior court's denial of DirectTV's motion to compel arbitration. Because the class action waiver violates California law, the entire arbitration clause is unenforceable. We'll see what SCOTUS (or at least five of its members) has to say about that!
As reported here in Onward State, Former Penn State University President Graham Spanier (left) is now suing his former employer for breach of contract, while also naming the University and former FBI Director Louis Freeh in a defamation claim. The allegations stem from the Freeh Report, which Mr. Freeh undertook as a private consultant hired to look into allegations of sexual misconduct within the Penn State athletics program. The complaint alleges that the University breached its separation agreement with him by publicizing the Freeh Report and through other statements. Mr. Spanier has set up a website purporting to refute the findings of the Freeh Report.
In a potentially very interesting, bizarre and short(!) opinion, the Delaware Supreme Court weighed in on a hypothetical case not before it in Friedman v. Khosrowshahi, No. 442,2014 (March 6, 2015). The Court said that if a stockholder brings suit alleging breach of a stockholder approved plan as a contract, and she seeks recovery under contract law, such a plaintiff would not have to make demand on the board before proceeding in a derivative action because "directors arguably have no discretion to violate the terms of a stockholder adopted compensation plan whose terms cannot be amended without the stockholders’ approval."
MarketWired.com reports that Canadian purchasers of Lenovo computers are seeking $10 million in breach of contract damages for Lenovo's violation of their privacy rights by installing Superfish on their personal computers. Superfish allegedly makes it possible for third parties to use wireless networks to steal private information off of Lenovo computers. The Statement of Claim (Canadian, we assume for Complaint) can be found here.
And, as Spring training is underway and Opening Day is only a fortnight away, we should mention the ongoing contract dispute between the Chicago Cubs and the parties with whom the team entered into a revenue-sharing agreement relating to rooftop seating across the street from Wrigley Field. The Cubs want to put up a video board that the Sheffield Avenue property owners claim will block views in violation of the terms of the revenue-sharing agreement. The latest news on the subject matter can be found on Crain's Chicago Business here. The Cubs' opposition to plaintiffs' motion for an injunction is here. As a life-long Cubs fan, I stand by my view that not having to watch the Cubs play actually enhances the value of the seats, but hope springs eternal.
As reported here in the Cranston Patch, a teachers' union is suing a school district for breach of contract and violations of civil and religious rights. The school district decided to hold classes on religious holidays, including Good Friday, but to permit teachers two days of religious leave each year. The school district then denied leave to teachers who sought to use their leave on Good Friday. The community is predominantly Catholic, and it is likely that the school district had not plan for replacing the 200 teachers who applied for leave on Good Friday. Heavy snows and the large number of snow days this year might also have played a role.
Wednesday, February 18, 2015
According to this story in the LA Times, James and Catherine Emmi are seeking the return of $3 million that they have already donated as part of a $12 million charitable pledge to Chapman University. They are also asking the University to renounce any claim to the remaining $9 million. If the account is accurate, the Emmis seem to be claiming that:
- they never made the $12 million pledge;
- the University took advantage of James Emmi's "confusion in his old age" and preyed on him for the donation (are they alleging mental incapacity or undue influence?);
- the University harassed the couple by inviting them to events, sending them cards and "referring to them as family";
- the University breached its agreement with the Emmis by
- not publicly recognizing them in a 2013 ceremony, and
- not making sufficient progress on "Emmi Hall."
It is not clear how the Emmis account for their having already made a $3 million payment towards the $12 million pledge that they claim they never made.
[H/T Miriam Cherry]
Monday, February 16, 2015
An interesting test for contracts rights of first refusal. As reported here in Indianapolis Business Journal (IBJ.com), an Indianapolis-based media company, Emmis Communications (Emmis) is suing a Los Angeles radio personality Kurt Alexander (known as "Big Boy"). The latter received a generous offer from iHeartMedia, which Emmis claims to have matched. Big Boy is jumping ships nonetheless, so Emmis is suing for breach of contract.
According to this account in the Bangor Daily, a Maine author, Tess Garritsen will get to refile her claims against Warner Bros. for breach of contract in connection with the studio's film, Gravity. A District Court in California dismissed her complaint but has allowed her twenty days to amend and refile. The complaint is based on a $1 million contract Gerritsen signed in 1999 to sell the book’s feature film rights to a company that was eventually purchased by Warner Bros. Gerritsen has admitted that the film "is not based on" her book, but she asserts that the book clearly inspired the film.
According to this story on NJ.com, a Federal District Judge rejected a motion to set aside a $7.3 million jury award in Wendy Starland's suit against record producer Rob Fusari. The payoff was in consideration of Starland's discovery of Stefani Germanotta, aka Lady Gaga (pictured).
Tuesday, February 10, 2015
In Sussex v. U.S. Dist. Ct. for the Dt. of Nevada, Las Vegas, Petitioners filed a writ of mandamus seeking to overturn the District Court's disqualification of an arbitrator for "evident partiality." The underlying arbitration involved several civil actions against Turnberry/MGM Grand Towers, LLC, the developer and seller of a condominium project. Turnberry sought removal of the arbitrator, who had become involved in business ventures, which he characterized as "completely dormant," through which he sought to create a fund as an investment vehicle that would provide capital for litigation. The District Court granted Turnberry's motion to disqualify the arbitrator.
On a writ of mandamus, the Ninth Circuit applies the "clear error" standard. The Ninth Circuit articulated its test for when a District Court may intervene in an arbitration in Aerojet-General Corp. v. Am. Arbitration Ass’n, 478 F.2d 248 (9th Cir. 1973). That test provides that a court should intervene only in "extreme cases." The Ninth Circuit characterized this standard as very close to a blanket rule against court intervention in an ongoing arbitration.
Applying this standard, the Ninth Circuit found that the District Court had clearly erred in disqualifying the arbitrator. The Court stressed that this case, in which it was not established that the arbitrator's modest business venture would prejudice him against either party, was "emphatically not" the sort of extreme case that would warrant court intervention.
The Petition was granted.
Monday, February 2, 2015
In Benz-Elliott v. Barrett Enterp., LP, the Tennessee Supreme Court clarified the method for determining the statute of limitations when a case raises multiple claims. In such cases, the court must determine the gravamen of each claim and the nature of damages sought. In this case, which involved a sale of property, plaintiff alleged breach of contract and sought contractual damages. The Supreme Court reversed the Court of Appeals, which had dismissed plaintiff's claim based on a three-year statute of limitations relating to property claims. The six-year statute of limitations for breach of contracts should apply to plaintiff's claims, which were reinstated.
Eric Macramalla reports in Forbes that a Jets fan attempted to sue Bill Belichick, the New England Patriots and the NFL on behalf of a class of season ticket holders for having secretly recorded and then destroyed videotapes revealing signals given by New York Jets coaches (which players variously interpreted as "fumble," "drop the pass" and "miss your defensive assignment," inter alia). The suit was dismissed because the their seasons' tickets only permitted them to watch the game, which they did. Macramalla predicts similar suits may follow the great under-inflated ball scandal, which, lets face it, is a great distraction from all the other scandals facing the NFL these days.
Monday, January 26, 2015
A group of retirees had worked for the Pleasant Point Polyester Plant. They retired before Petitioner M&G Polymers (M&G) acquired the plant in 2000. At the time of that acquisition, M&G entered into a collective bargaining agreement and a pension agreement with a union that represented retirees. Those agreements created a right to lifetime, contribution-free health care benefits for the retirees, their surviving spouses, and their dependents. However, in 2006, M&G announced that it would begin requiring retirees to contribute to the cost of their health care benefits. Retirees objected that their rights had already vested and could not be withdrawn.
Retirees sued, but M&G claimed that the benefits expired with the termination of the earlier agreements. The Sixth Circuit, relying on a 1983 precedent sided with the retirees, reasoning that retiree health benefits would not likely be subject to future negotiations. Earlier precedent in similar cases had found that, even if the agreements at issue are ambiguous, the parties likely intended for them to apply in perpetuity for workers whose rights had vested and who, as retirees, would no longer be able to engage in collective bargaining. In M&G Polymers USA, LLC v. Tackett, Justice Thomas, writing for the unanimous Court, reversed, finding the Sixth Circuit opinion inconsistent with ordinary principles of contracts law.
In this and prior cases, the Court held, the Sixth Circuit had departed from contracts principles by placing a thumb on the scales in favor of retiree benefits. The Sixth Circuit's "assessment of likely behavior in collective bargaining is too speculative and too far removed from the context of any particular contract to be useful in discerning the parties’ intention," the Court found. In addition, the Sixth Circuit approach misapplies the presumption against illusory promises. The Sixth Circuit found that agreements such as the one at issue would be illusory if benefits could be withdrawn from some potential beneficiaries. The Court pointed out that a contract cannot be partly illusory. If it provides benefits some poetntial beneficiaries, that suffices to render the contract non-illusory. Moreover, the Sixth Circuit ignoreed both the traditional contracts presumption that contractual rights usually terminate with the underlying agreement and the presumption against contracts rights that vest for life. The Court remanded the case with instructions that the lower courts should apply ordinary contracts principles
Justices Ginsburg, Breyer, Sotomayor and Kagan concurred. They agreed that ordinary contracts principles should govern the interpretation of the agreements at issue. However, they rejected M&G's contention that the retirees need to show "clear and express" language that their rights had vested. The concurring Justices pointed to provisions that might support the retirees' claims and joined the opinion of the Court in urging the lower courts to review the agreements in light of ordinary contracts principles and without a thumb on the scales in favor of a finding of vested rights.
Sunday, January 25, 2015
An Ohio appellate court upheld a $1.2 million breach of contract judgment against Kent State's men's basketball coach, Geno Ford. The judgment enforced a liquidated damages clause entitling Kent State to damages equal to Ford's annual salary ($300,000) multipled by the number of years remaining on his contract at the point of breach. In Kent State University v. Ford, Coach Ford tried to characterize the liquidated damages clause as a penalty. The court applied Ohio law to determine whether at the time the contract was entered into: 1) damages were uncertain; 2) the damages provided for in the contract were not unconscionable; and 3) the parties intended for damages to follow a breach. The court upheld the trial court's determination that the standard was satisfied in this case. Coach Ford can take consolation in the fact that his salary is short of Jim Harbaugh's by an order of magnitude.
PetaPixel.com reports on a wedding photographer who, after charging a couple $6000 to shoot a wedding album, sought an additional $150 for the album cover. The couple balked, so the photographer is refusing to hand over the photographs and is threatening to charge them an additional $250 "archive fee" if they do not pay up in a month. PetaPixel draws the following lesson from the story:
This all goes to show that as a photographer, you should never rely on verbal agreements when it comes to conditions and charges. Always get everything in writing.
Maybe. The photographer herself has an extremely lengthy blog post about the entire affair in which she claims that everything should have been clear from the written contract. PetaPixel's story makes it seem like an additional charge was added after the contract had been entered into, and if that's the case, the couple might well have balked whether or not the new terms were in writing.
Contracts Prof/Con Law Prof Randy Barnett, writing at the Volokh Conspiracy picked up by the Washington Post, muses interestingly on the applicability of the contractual duty of good faith to the President's duty to faithfully execute the laws in the Constitution's Take Care clause. This helps Barnett reconcile his empathy for the President's refusal to enforce federal drug laws in the face of permissive state laws permitting use of marijuana with his opposition to the President's new initiative on immigration. I've never been persuaded that the contractual analogy is particularly useful in Constitutional interpretation. Suggesting that the contracts doctrine of "good faith" provides a useful gloss on the Take Care clause strikes me as a stretch, but Professor Barnett is always stimulating.