ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Wednesday, December 7, 2016

Prince's Complicated Legal Legacy Continues

When the legendary musician Prince died suddenly, he left behind an enormous volume of music and no will. The courts have already been dealing with how to distribute Prince's assets to a complicated and squabbling cadre of potential heirs. The rights to all of his music have raised their own complicated issues that have most recently manifested themselves in a lawsuit in the District of Minnesota, NPG Records, Inc. v. Roc Nation LLC, Case No. 16-cv-03909

The case revolves around Roc Nation's streaming of Prince's music on its streaming service Tidal, and whether or not it had the contractual rights to do so. Roc Nation alleges yes, based on what it terms both written and oral agreements that it struck with Prince before his death. Commentators have tried to draw conclusions about these agreements based on Prince's statements and other behavior before his death. NPG, meanwhile, claims that there was a single contract between Prince and Roc Nation and that it only allowed Roc Nation to stream a very limited number of songs, which Roc Nation has now violated in streaming a much wider variety of Prince's song catalog. The case has been reported on in multiple places, including here and here and here and here.

If this case progresses, it seems like it's going to require an untangling of written contracts between the parties, whatever oral statements Prince will allege to have been made, and the interaction between the two. It adds an interesting layer to consider that Prince was notorious for fighting for artists' rights to their music and had a fraught relationship with online streaming of music. He does seem to have favored Tidal above the other Internet services. In any case, although NPG claims that there was never any such license and Tidal has been infringing the songs' copyright since it began streaming them, NPG has already proactively sought to cancel any license that Prince may have granted to Roc Nation to stream the music in question. 

(I'd post something Prince-related from YouTube, but Prince didn't like his music to be on YouTube. And, in fact, Lenz v. Universal Music Corp., the recent case that wended its way through the Ninth Circuit and is currently on petition to the Supreme Court, involves a Prince song in a YouTube video.)

December 7, 2016 in Celebrity Contracts, Commentary, Current Affairs, In the News, Music, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Monday, December 5, 2016

Considering Parol Evidence to Decide If There Was Ever a Contract

One of the things I find students struggle with when it comes to parol evidence is determining for what purpose they are considering the evidence. A recent case out of Maryland, Wiencek + Associates Architects + Planners v. Community Homes Housing, Inc., No. 0642 September Term 2015 (behind paywall), has a nice discussion on this. 

In the case, the parties both signed a document that was called "Agreement to Redevelop and Preserve Affordable Housing." The contract contained an integration clause. Both parties also admitted later that they had signed the document because it was required to obtain financing from the Department of Housing and Urban Development ("HUD"), which the parties had both desired. HUD, however, refused to guarantee any financing for the project. Community Homes then took the position that there was no contract with Wiencek because the contract was not to take effect unless HUD financing was received. Wiencek disagreed and sued Community Homes for breach of contract.

The trial court considered parol evidence to determine whether the contract between the parties was enforceable. Wiencek argued this was improper because of the contract's integration clause. But Community Homes noted that the parol evidence was not being considered to add a term to the contract; rather,  it was being considered to determine if the contract even existed in the first place, and therefore was permissible. The court agreed with Community Homes that considering parol evidence was perfectly acceptable in this situation. The court noted that it could not enforce the contract's integration clause when what it was trying to determine was whether the contract containing the integration clause even existed. 

The parties here had agreed orally that the contract would not come into effect unless HUD guaranteed financing. Although there was nothing in the contract about that, the parol evidence admitted as to the intent of the parties was clear. The contract was only signed in order to try to obtain the HUD financing; once that objective had failed, the parties did not intend the contract to be enforceable any longer. 

Wiencek tried to make an argument that the law should have a policy to deter "fictitious" contracts. In effect, Wiencek claimed that the court was allowing the parties to "pretend" to have entered into a contract to try to "trick" HUD into providing financing, with no intention of actually entering into a contract with each other. The court, however, did not see any reason to enforce the contract between the parties in this circumstance. It was the court's view that, if HUD felt it had been harmed by the representation that there had been a contract between the parties (even though the court did not decide one way or the other whether that representation was incorrect), HUD should seek a remedy from the court for the harm, not Wiencek. 

December 5, 2016 in Government Contracting, Recent Cases, True Contracts | Permalink | Comments (0)

Wednesday, November 30, 2016

A Settlement Agreement That's Too Vague Doesn't Settle Much At All

I am always saying to my students that if they care about something, they should put it in their contract, and they should be specific about what it is they want. I think sometimes people might think there's something to gain strategically by being vague, but introducing ambiguity into a contract can work out very poorly (and also takes control out of the hands of the parties). A recent case out of Florida, Boardwalk at Daytona Development, LLC v. Paspalakis, Case No. 5D15-1944, is a case where the court, faced with an ambiguous description of the land at issue in a contract, just threw up its hands in frustration. 

The dispute between these two parties has been long and contentious. According to this article, it's dragged on for over a decade. It was originally rooted in an eminent domain proceeding in which Boardwalk at Daytona ("BDD")'s predecessor obtained property belonging to Paspalakis and the other appellees. The appellees contested BDD's acquisition of their land and eventually that lawsuit was settled. The settlement agreement provided the appellees with an option to purchase and operate 7500 square feet of retail space on the Daytona Boardwalk. The agreement contained no legal description or street address for the property at issue. The agreement said that the land would: (1) be adjacent to another particular business; (2) have a minimum of 50 boardwalk frontage feet; and (3) have sufficient land to build a 7500-square-foot, one-story building. Unfortunately for the appellees, there were at least three parcels of land that met this description, and they ranged drastically in size from around 7700 square feet to over 17,000 square feet. 

The problem with the description of the land in the settlement agreement was exposed when the appellees tried to operate their option. BDD offered a piece of property that met all three criteria set forth in the settlement agreement. However, the property required unusual structural design features that troubled the appellees and also came with a negative easement for light, air, and unobstructed view that benefitted the BDD property next door. The appellees therefore objected to this plot of land and asked for another one. 

BDD sought a declaratory judgment that the plot of land it proposed was sufficient under the settlement agreement and that it did not have to provide another plot of land. The appellees, in response, sought specific performance that BDD provide  a plot of land fitting the description in the settlement agreement, without the restrictions of the land BDD had offered. In the face of the counterclaim, BDD shifted stance and argued that the settlement agreement was too ambiguous to be enforced. 

The trial court sided with the appellees and ordered BDD to convey the largest possible plot of land to the appellees. BDD appealed, and this court agreed with BDD. The court noted that a description of the land in question is usually considered an essential part of any land purchase agreement, and that without any such description there are serious doubts whether the parties reached a meeting of the minds. The description of the land in the settlement agreement here was ambiguous. The trial court correctly examined parol evidence to try to resolve the ambiguity, but it didn't help. The contract terms at issue here simply could have been fulfilled by any of three very different parcels of land.  To this court, there was no contractual way to choose between them and no parol evidence that shed light on which parcel of land the parties had in mind. Indeed, the court was skeptical the parties ever really agreed on which parcel of land would be conveyed, and so the parties never reached a meeting of the minds that could be enforced. Therefore, the court reversed the order of specific performance and entered judgment for BDD instead. 

A bitter pill here for the appellees, who doubtless thought that they were getting something of value in the settlement agreement they struck and end up with nothing to show for it. But it does seem like there was considerable confusion about which land was affected by the situation here. I guess it's a lesson to all of us: try to be as specific as possible. I tell my students drafting contracts is frequently like playing a game of what-if with yourself. What if BDD offers this parcel of land instead of that parcel of land? If the answer to that question is that you would prefer one parcel of land over the other, best to be specific in the contract. 

November 30, 2016 in Commentary, Current Affairs, In the News, Law Schools, Recent Cases, Teaching, True Contracts | Permalink | Comments (2)

Monday, November 28, 2016

Rights of First Refusal to License Mineral Rights and Unconscionability

If you are looking for a case with a nice analysis of procedural and substantive unconscionability, a recent case out of Ohio, Christ Holdings, LLC v. Schleappi, Case No. 15 NO 0427, has one. 

The case involved a right of first refusal that the defendants claimed was unconscionable. The trial court agreed with the defendants, but this court reversed the finding. The court started by looking at procedural unconscionability and noting that it requires consideration of "age, education, intelligence,  business acumen and experience," etc. The court then presented in some amount of detail the education and employment history of both parties, concluding that their educational level is roughly equivalent but that the plaintiff did have more business acumen and experience than the defendant. 

However, importantly for this decision, the court noted that the parties actually had a history of conducting real estate transactions between them without the aid of any attorneys, negotiating several times over the course of several years. To the court, this was an indication that both parties were knowledgeable in the particular type of real estate transaction at issue here, even if the plaintiff had more general business acumen. 

The trial court had also been very concerned about the fact that the defendant had been operating under time constraints. But this court noted that the time constraints were not the plaintiff's fault: he gave no indication that he wouldn't have given her time to read the contract over if she had requested it (which she did not). 

After finding no procedural unconscionability, the court then turned to substantive unconscionability. The trial court had found substantive unconscionability for a number of reasons, most notably, though, because this right of first refusal involved the licensing of mineral rights. The trial court asserted that rights of first refusal should be limited to real estate purchases, not to the leasing or licensing of real estate as was at issue here. The trial court seemed to think that rights of first refusal to license were unconscionable in and of themselves, without further inquiry into their terms. This court, however, said that there was no reason to so narrowly restrict the ability of the parties' to use rights of first refusal in their agreements. It found the right of first refusal to be enforceable and remanded for further proceedings. 

 

November 28, 2016 in Recent Cases, Teaching, True Contracts | Permalink | Comments (0)

Wednesday, November 23, 2016

Here's a Nice Anticipatory Repudiation Case for the Next Time You Teach That

A recent case out of West Virginia, Stiles Family Limited Partnership v. Riggs and Stiles, Inc., No. 16-0220, does a nice job analyzing the fact that an anticipatory breach must be unequivocal. The fairly straightforward facts could be a useful way of helping to illustrate this topic the next time you teach it. 

The parties (all members of the same family) entered into a lease under which Riggs and Stiles agreed to farm the property at issue. The lease has been in effect since 2006 without dispute until 2013, when Riggs and Stiles allowed a production company to file an application for a permit to hold a music festival on the farm property. When Stiles Family Limited Partnership learned of the application, they objected; the following month, when they failed to convince the Partnership to allow them to hold the music festival, Riggs and Stiles withdrew the application, and no music festival was ever held on the property. However, the Partnership tried to terminate the lease, arguing that Riggs and Stiles had anticipatorily repudiated the lease when it permitted the filing of the application.  The Partnership claimed that this permission by Riggs and Stiles demonstrated an unequivocal intent on their part to use the land for something other than farming, in violation of the terms of the lease, and it made sense to treat the lease as breached as the moment of application rather than having to wait for the music festival to actually take place.  

The court disagreed, however. It was undisputed that Riggs and Stiles had at all times farmed on the land, never stopping and continuing to farm on the land even after the filing of the application. The application alone was not a breach of the promise to use the land only for farming, as it was undisputed that it was all Riggs and Stiles ever did. And continuing to farm the land was not consistent with an unequivocal repudiation of the lease, because it was actually what Riggs and Stiles was required to do under the lease. Performing consistent with the lease couldn't be considered an unequivocal repudiation of the lease. Moreover, when the Partnership informed Riggs and Stiles that it didn't agree to the music festival being held on the land, Riggs and Stiles withdrew the application for the permit. Rather than being an unequivocal intent to breach the contract, that displayed equivocation on the part of Riggs and Stiles: they sought to take actions to not breach the contract.  

November 23, 2016 in Commentary, Recent Cases, Teaching, True Contracts | Permalink | Comments (0)

Wednesday, November 16, 2016

Remember: Things That Are "Routine" to Lawyers Can Be Confusing to Pro Se Plaintiffs

A recent case out of the Eastern District of Michigan, Bucciarelli v. Wells Fargo Home Mortgage, No. 15-13900, is an illustration of the confusion that can sometimes occur when two parties talk past each other and never really understand each other. The result is that there is no enforceable contract between these parties who never seem to be on the same page.

This is a mortgage foreclosure case in which settlement was attempted but complicated by the fact that there was a lawyer on one side and a pro se plaintiff on the other and they never seemed to be speaking the same language. The defendant's counsel tried to settle the case by by proposing a "routine" settlement to the plaintiff of $500. The plaintiff responded to the proposal by calling the defendant's counsel leaving the following message:

I don't know where it stands but I got it couple days ago regarding the settlement offer of $500 from Countrywide. We can go ahead and do that. So if you wanna give me a call back. My number is []. I do have a lot of mistakes in the Countrywide financial [unclear]. Of those funds that were applied and misapplied to my account but my main focus is Wells Fargo who purchased the loans from Countrywide after Countrywide made some substantial mistakes. Give me a call back. Mary. Thanks bye.

The defendant focused on the "We can go ahead and do that," but the court pointed out that the plaintiff went on after that statement to make allegations regarding Countrywide's mistaken behavior toward her. The court characterized this voicemail as "ambiguous as to her acceptance of all the proposed terms" of the settlement agreement, especially considering that, once the plaintiff received an actual draft of the entire settlement agreement, she refused to execute it. When the defendant moved to enforce the settlement agreement on the basis of the voice message (and subsequent other telephone calls whose contents seem to be disputed), the plaintiff countered that there was no agreement to settle the case. 

In this situation, the court said that it did not feel that the parties had ever agreed on all of the material terms of the settlement. There was no mutual understanding between the parties. The court concluded that each party "heard only what it wanted to hear," and pushed back on defendant's characterization of the settlement offer as "routine": "[I]t must be remembered that Ms. Bucciarelli is appearing pro se, and therefore it is likely that nothing in this litigation is 'routine' to her." 

November 16, 2016 in Recent Cases, True Contracts | Permalink | Comments (2)

Monday, November 14, 2016

If You're Going to Plead Promissory Estoppel, Be Specific!

I just wrote up a promissory estoppel case last week, and here's another one out of Connecticut, Sorrentino v. Rizza, Docket Number CV156013599 (behind paywall). In this case, the plaintiff failed to allege specific enough statements to form the foundation of her promissory estoppel claim. The case is a dispute over a promise of employment, and the relevant part of the complaint alleged that the defendant had promised the plaintiff "on several occasions" that she would be given "a similar position" with the defendant's company as the plaintiff already held in another company, with "a salary plus a percentage of any advertisement revenue she generated." 

This was, in the court's view, "nebulous at best." No specific dates or locations were given for the promises in question, there was no explanation of the salary that was discussed, and there were no details about what percentage of revenues the plaintiff had been promised. The plaintiff's allegations were about indefinite statements that seemed to lack any material terms. The court said those could not be construed as any "clear and definite promise" that could the plaintiff could reasonably have relied on. 

So if you think you have a promissory estoppel claim, the lesson from this case is to make sure you are very specific in relaying to the court exactly what was said and when. 

November 14, 2016 in Commentary, Labor Contracts, Recent Cases, True Contracts | Permalink | Comments (0)

Wednesday, November 9, 2016

Here's a Nice Case to Use to Review Contract Formation, Conditions Precedent, and Promissory Estoppel

As we reach the end of the semester, I keep trying to remind my students of what we learned at the beginning of the semester, which was only a few weeks ago but feels like several lifetimes ago. As we turn our attention to our last topic of third-party rights, I don't want the students to forget the basics of contract formation. I want them to realize that contracts law builds on itself and is self-referential and so they can't just forget about the stuff that came first. 

Anyway, I say all of that to lead into this nice recent case out of the Eastern District of Pennsylvania, Killian v. Ricchetti, Civil Action No. 16-2874, that deals with issues of contract formation, and then turns to promissory estoppel. Exactly as I keep trying to remind my students to do! So I couldn't resist writing this case up for the blog. It serves as a nice review of a lot of what we've learned and I think I may actually use it in class. 

The alleged contract was a series of e-mails exchanged between two friends. The first e-mail set out a bunch of terms and ended with "there are more little details...it's a start." The response to the e-mail added a few additional terms. This, the court found, did not form a contract, because the response was not an acceptance but rather a counteroffer, due to the fact that it added terms. There was never any reply to that particular e-mail, so the counteroffer was never accepted. 

After these initial e-mails, there were further e-mails between the two regarding the real estate transactions at the heart of the alleged agreement. Those e-mails were enough to form a contract as follows: The first e-mail read, "[W]hen the Pine [Street property] is clear title we form an LLC with an equal partnership of 50% . . . ." with some further details given. The reply to the e-mail was "OF COURSE," which constituted an acceptance. However, there was a condition precedent to this contract: that the parties receive clear title on the Pine Street property in question. Due to no fault of the parties themselves, they never received this clear title, so the condition precedent never occurred, so no duties to perform under the contract ever arose. 

The court then turns to the promissory estoppel question, though. The court found here there were genuine issues of material fact whether there was a promise made and whether the other party acted in reliance on that promise. Similar issues of material fact existed for the unjust enrichment and qunatium meruit claims. Therefore, although the court granted summary judgment on the breach of contract claims, it denied summary judgment on the remaining claims. 

November 9, 2016 in Commentary, Law Schools, Recent Cases, Teaching, True Contracts, Web/Tech | Permalink | Comments (1)

Wednesday, November 2, 2016

A Student Plagiarism Contract Case

Thanks to InsideHigherEd, I became aware of this recent case out of the First Circuit, Walker v. President and Fellows of Harvard College, No. 15-1154, and seeing as it involved JOLT, the Harvard Journal of Law and Technology that I was an executive editor of when I was in law school there, I couldn't resist digging into the case. 

And I'm glad I did, because it's a really interesting case about the lingering effect of honor code violations and the wording of school academic policies. 

The plaintiff graduated from Harvard Law School in 2009. During her time at Harvard, she was a member of JOLT. In that capacity, she drafted a student note. However, when she sent the note to senior editors at JOLT, they became concerned about plagiarism issues and referred the note to the HLS Administrative Board. The Board concluded that the plaintiff's note contained plagiarism that violated the school's Handbook of Academic Policies and a notation was placed on her transcript. The plaintiff still graduated from HLS but had a "lucrative" offer of employment withdrawn after the notation was placed on her transcript. So the plaintiff sued to have the notation on her transcript removed. HLS won summary judgment at the district court level and this appeal followed. 

The court affirmed the judgment of the district court. The parties agreed that the Student Handbook constituted a contract between the plaintiff and HLS. (The court noted that this was not actually obvious under Massachusetts law but that it would treat the handbook as a contract because the parties did not dispute it.) Therefore, the court focused its review on whether the plaintiff's behavior violated the stated plagiarism policy in a way that the plaintiff should have reasonably expected.

The Handbook stated: "All work submitted by a student for any academic or non-academic exercise is expected to be the student's own work." The plaintiff's main argument was that the student note she sent to the JOLT editors was just a draft that she planned to edit in the future, and the Handbook policy should be read as only applying to completed work that was not expected to undergo further editing. The court disagreed, however. The wording of the Handbook was extremely broad, referring to "all work." A student in the plaintiff's position should reasonably have expected that any student note submitted to the editors, whether a draft or in final form, would be held to the standards of the policy. Nothing about "all work" would make a student think that drafts were omitted from the definition, according to the court. 

November 2, 2016 in Current Affairs, In the News, Law Schools, Recent Cases, True Contracts | Permalink | Comments (0)

Monday, October 31, 2016

A Tale of a University and a Football Coach

A recent case out of the Western District of Pennsylvania, Douglas v. University of Pittsburgh, Civil Action No. 15-938 (behind paywall), found that there were factual disputes precluding summary judgment regarding whether or not a contract was in place between the plaintiff, an assistant football coach, and the University. 

The plaintiff alleged that he was orally told by Pittsburgh's head football coach when he was offered the job that it would be a two-year-contract with $225,000 in the first year and $240,000 in the second year, with other perks. The plaintiff accepted the terms and began the job immediately upon receiving this alleged oral offer from the head coach. 

A little more than a week later, the plaintiff received a proposed Employment Contract. The contract had his second-year salary as $235,000 instead of $240,000 and also stated that the University could terminate the plaintiff's employment if the head coach left the school. The plaintiff had concerns about these clauses and other parts of the contract and brought these concerns to the head coach, who allegedly told the plaintiff that he would take care of the issues. 

A few months later, the plaintiff moved his wife and children to join him in Pittsburgh. Over the course of the next few months, the plaintiff claims to have periodically raised the issue that he had never signed a contract and was allegedly told by various people not to worry about it. 

Less than a year after the plaintiff started the assistant coach job, the head coach left Pittsburgh to take a job at the University of Wisconsin. Pittsburgh then subsequently terminated the plaintiff and all of the other assistant football coaches. The University informed the plaintiff that, because he had never signed the Employment Contract, he was an "at-will" employee. The plaintiff, in the wake of losing his job, took a job at Florida State for $40,000 per year, necessitating more moving costs. 

Not happy about how this all played out, the plaintiff sued the University of Pittsburgh. The plaintiff's allegation was that he was orally offered a contract for two years of employment that he accepted, and that the University breached that oral contract. The University responded that the conversation between the plaintiff and the head coach on which the plaintiff pins his hopes did not have enough essential terms to be considered a contract and that the essential terms were in the Employment Contract. Although the plaintiff refused to sign that written contract, the University maintained that he accepted the terms of the written contract when he continued to work for the University. The plaintiff, however, argued that the head coach's offer of employment was specific enough, giving job duties, term, and salary, to constitute a binding contract between the parties, and the plaintiff stated that he resigned from his job and moved his family in reliance on this. 

The University moved for summary judgment but the court found that there was enough evidence that a jury could conclude that the plaintiff and the University had agreed to enough essential terms to form a contract. However, the court dismissed the plaintiff's claims for fraud in the inducement and negligent misrepresentation as merely duplicating the surviving breach of contract claim. I'll keep you posted on what happens!

Law360 has an article about the filing of this lawsuit here

 

October 31, 2016 in Labor Contracts, Recent Cases, Sports, True Contracts | Permalink | Comments (0)

Wednesday, October 26, 2016

Judicial Disagreement Over Contract Ambiguity: When Are Things OBVIOUS?

We've been talking about contract interpretation in my Contracts class lately and I'm always struck by how many cases involve a lower court ruling of ambiguity and then an appellate court reversal of that ruling, because it always strikes me as such a funny thing. The very definition of ambiguity would seem to be "multiple people disagreeing on the meaning of the word," but the appellate court decisions in those cases necessarily have to dismiss the reasonableness of the lower court's understanding of the meaning in order to assert that the meaning is SO OBVIOUS. This always makes these cases feel a little more...condescending? Than the typical reversal. Like, "We don't know what you were so confused about, lower court, this is OBVIOUS." 

A recent case out of California, Borgwat v. Shasta Union Elementary School District, No. C078692, is another example of this. The plaintiff, upon retiring from the defendant, was entitled to a monthly post-retirement contribution toward her "medical insurance coverage." For a couple of years, the defendant paid the contribution toward the plaintiff's dental and vision coverage. But then the defendant concluded that dental and vision insurance was not included in "medical insurance coverage" and ceased paying the contribution. This lawsuit resulted. 

The lower court found the phrase "medical insurance coverage" to be ambiguous and allowed extrinsic evidence to illuminate its definition, including the fact that the defendant had initially paid the plaintiff the contribution for a few years. Therefore, the lower court endorsed the plaintiff's interpretation that "medical insurance coverage" included dental and vision insurance. 

The appellate court here reversed, though, saying that "medical insurance coverage" was not an ambiguous term. The relevant section of the contract was Section 5.7 but the appellate court looked to Section 5.2, which dealt with benefits during the course of employment. In that section, the defendant had agreed to pay sums "toward the cost of medical, dental and vision benefit coverage." The fact that dental and vision were considered independent from medical insurance in Section 5.2 rendered the use of "medical insurance" in Section 5.7 unambiguous: It can't include dental and vision insurance, because the parties in Section 5.2 revealed that they didn't understand medical to include dental and vision insurance when they felt it necessary to list all three. For this reason, the appellate court refused to allow any extrinsic evidence, because the defendant's mistake in paying for the dental and vision insurance could not change the unambiguous terms of the contract. 

So there you have it. OBVIOUSLY. :-)

October 26, 2016 in Commentary, Labor Contracts, Recent Cases, Teaching, True Contracts | Permalink | Comments (0)

Monday, October 24, 2016

Warning: Don't Bury Your Arbitration Clause in a Hodge-Podge Paragraph (my official legal term)

I have never been to a trampoline park but doing this blog has given me the impression that they're dangerous! I've already blogged about one in New York, in which the court refused to enforce a waiver of liability for negligence. Now, in this recent case out of Louisiana, Duhon v. Activelaf, No. 2016-CC-0818, a court again finds against another trampoline park's enforceability of its contract terms. This time the term at issue is the contract's arbitration provision. 

The plaintiff was injured at the trampoline park and filed suit seeking damages. The trampoline park responded seeking to compel arbitration pursuant to the agreement that the plaintiff was required to sign before entering the trampoline park.

However, the Louisiana Supreme Court found that the plaintiff did not consent to the arbitration clause. It noted that the clause was buried in the rest of the fairly lengthy agreement in such a way as to be concealed from the plaintiff. Specifically, it was found in the eleventh line of the third paragraph, a paragraph that also meandered through topics such as: the customer's physical ability to partake of the trampoline park, assumption of risks, agreement to follow the trampoline park's rules, and certification that customers would explain those rules to any children accompanying them. To the court, this hodge-podge, catch-all paragraph drowned the arbitration clause in the middle of unrelated information. This was extra-noteworthy because the rest of the agreement was divided into short one-topic paragraphs, save the relevant one containing the arbitration language. The court refers to it as being "camouflaged" within an eleven-sentence paragraph, nine sentences of which had nothing to do with arbitration. Because of this, the court found that the plaintiff did not truly consent to the arbitration provision. 

This was reinforced by a lack of mutuality in the provision. The clause required all customers of the trampoline park to submit to arbitration, but there was no corresponding requirement on the trampoline park's part. In conclusion, the court found the arbitration clause to be unenforceable. 

October 24, 2016 in Games, Recent Cases, True Contracts | Permalink | Comments (1)

Friday, October 21, 2016

Non-Assignment Clauses and Patent Assignments

If a patent license agreement contains a non-assignment clause, does that also prohibit assignment of the patent?  A recent case said not necessarily.  It depends on the precise wording.

In Au New Haven v. YKK Corp. (1:15-cv-3411-GHW), (thanks to Finnegan's law firm) YKK entered into an exclusive license agreement with the patent owner, Au New Haven (actually the inventors, but I'm simplifying things here).  The agreement contained the following clause:

“Neither party hereto shall assign, subcontract, sublicense or otherwise transfer this Agreement or any interest hereunder, or assign or delegate any of its rights or obligations hereunder, without the prior written consent of the other party.  Any such attempted assignment, subcontract, sublicense or transfer thereof shall be void and have no force or effect.  This Agreement shall be binding upon, and shall inure to the benefit of the parties hereto and their respective successors and heirs.  “

Subsequently, Au New Haven assigned the patent to Trelleborg without requesting YKK’s consent.  Au New Haven and Trelleborg later sued YKK for patent infringement and breach of the patent licensing agreement.  YKK filed a motion to dismiss against Trelleborg, arguing that Trelleborg lacked standing to sue for patent infringement because Au New Haven failed to obtain YKK’s consent to the patent assignment which meant that it was void as stated in the agreement.

The federal district court (SDNY) stated that the anti-assignment language did not expressly limit transfer of the underlying patent or render it void.  The question then was whether the patent constituted an “interest hereunder,” meaning an interest under the licensing agreement.  The court stated:

“Here, the anti-assignment provision does not expressly bar transfers of the ‘214 Patent itself, or render transfers fo the ‘214 Patent void…the 2014 Assignment would be void ab initio only if the ‘214 Patent is an “interest” under the licensing agreement (i.e., an “interest hereunder”).  The Court finds that it is not.”

The Court’s rationale was that although the ‘214 Patent was the subject of the agreement, it did not “originate” from the licensing agreement, it did not “arise under” the agreement and it was not “created” in accordance with the agreement.  Consequently, the anti-assignment provisions did not render the underlying patent assignment void and Trelleberg had standing to sue for patent infringement.

The decision doesn’t seem right to me.  If the plaintiffs couldn’t assign their rights under the agreement, but they could assign their patent rights to a third party, then wouldn't they be in breach of contract at the very least?  Notably, the Court’s conclusion was limited to whether the patent assignment was void, not whether it breached the licensing agreement.  It was thus following New York law by narrowly construing the effect of an anti-assignment clause.  Still, I don't think it makes sense to construe a clause so that it permits a party to do something that would be a breach of the agreement (which is different from construing a clause as a personal covenant where a violation of the clause would be a breach of contract but the assignment would still be enforceable).  The case could lead to some pretty puzzling results and not necessarily in favor of Au New Haven....

October 21, 2016 in Miscellaneous, Recent Cases | Permalink | Comments (0)

Friday, October 14, 2016

Month-long TV Station Outage and the Duty of Good Faith

DISH Network sells satellite television packages to viewers nationwide.  In 2014, its contracts with Turner Network Sales and FOX News Networks expired. DISH was not able to negotiate renewals with these stations for approximately one month. DISH Network also did not offer complaining subscribers any form of monetary relief for the interruptions with the result that subscribers that had selected packages including FOX and Turner TV filed a class action suit for breach of contract in spite of being able to access literally hundreds of other channels.

One of the issues on appeal before the Eighth Circuit Court of Appeals was whether DISH Network violated the duty of good faith and fair dealing by not providing those two particular channels in an uninterrupted manner.  The court found that not to be the case. Images

The contract provided a Limitation of Liability Clause which, in relation to interruptions and delays, stated that “[n]either we nor our third-party billing agents … will be liable for any interruption in any service or for any delay or failure to perform, including without limitation … DISH Network’s access to all or any portion of services….”

The covenant of good faith will “not contradict terms or conditions for which a party has bargained.”  Thus, said the court, the argument was precluded by the unambiguous terms of the agreement.  “Courts must take care to ensure that we don’t use the covenant as another means for substituting a different deal from the one the parties contemplated.” 

That makes sense.  I can’t help thinking how litigious our society can be in allowing suits such as the above to proceed that far.  Does it really matter that one cannot get a couple of TV stations out of hundreds for a month?  Is it worth burdening the court system such a matter?

On the other hand, DISH could also just have offered some sort of compensation to its customers.  Cable TV is indeed very expensive these days, so the subscribers do have a point here. 

Furthermore, Cable TV providers still refuse to unbundle services to an arguably sufficient extent.  What about those of us who really truly only want to see a few specific stations?  Why should we continually have to pay for a bunch of extra stations that we never watch?  Until such unbundling become reality, arguments such as there being many other stations to choose from are arguably somewhat irrelevant.

The case is Neil Stokes; Craig Felzien v. DISH Network, L.L.C., 2016 WL 5746329.

October 14, 2016 in Current Affairs, Recent Cases, Television | Permalink

Wednesday, October 5, 2016

Further Adventures in Hip-Hop Contracts: Jay-Z Edition

Hip-Hop Contracts Week continues! This time with a recent ruling out of the Southern District of New York in Walker v. Carter, #1:12-cv-05384-ALC-RLE (behind paywall). 

Rocafella

source: Wikipedia

In the case, the plaintiff, Walker, sued Jay-Z and others regarding not a song but the logo for Roc-a-Fella Records. The court was dismissive of Walker's relationship to the logo right off the bat: "Plaintiff casts himself as the creative mastermind of the Logo's design, though he admits that he neither came up with the idea for the Logo nor drew any part of it." Right away you can tell that this doesn't sound like a judge who's inclined to find for the plaintiff here. 

And he doesn't. He grants defendants' motion for summary judgment, finding that there was no evidence of any written contract between the parties and so Walker's breach of contract claims could not survive. Walker had alleged that he and the defendants had entered into a contract providing for royalties to be paid over a period of ten years. Unfortunately for Walker, this contract--which couldn't possibly be performed within a year--is subject to the Statute of Frauds and required to be in writing, or at least for there to be sufficient evidence that a writing once existed. Generally, in New York this evidence has consisted of either the admission by the other party that a writing did exist at one time or the testimony of witnesses regarding the signing and content of the now-lost writing. Here, defendants denied that any writing had ever existed (which seems predictable, frankly) and Walker could produce no witnesses as to the signing of the contract, as Walker stated that no one other than the defendants and himself were there when the contract was signed.

Walker did produce two witnesses regarding the existence of the contract. However, they were insufficient. One testified that he had seen a piece of paper Walker told him was a contract but that he didn't read the contract and did not know what the contract said. The other testified in a number of ways that contradicted Walker's own testimony regarding the contract: Walker claimed to have written the contract in the same face-to-face meeting when it was signed, but the witness claimed to have seen the contract before it was signed, which couldn't have been possible if Walker's testimony was true. Walker claimed to have lost the contract in 1996, but the witness claimed to have seen it in 2000. Walker claimed the contract was written on blank paper, the witness claimed the contract was on lined paper. Et cetera. The court felt justified, given all of these impossible contradictions in the testimony, in disregarding this witness's testimony, especially since the witness also claimed to have a direct interest in the contract due to his close relationship with Walker. In fact, the court recounted that the witness had initially testified that he had never seen the contract, and only changed his testimony after being spoken to by counsel and after the statute of frauds had become an issue in the case. 

Therefore the court concluded that the statute of frauds required the contract to be in writing, there was no writing, and there was no genuine issue of material fact that there had ever been a writing, and so granted defendants' summary judgment motion. 

(He also found that Walker's copyright infringement claims were time-barred, so this was a total victory for Jay-Z and the other defendants.)

(A Reuters article about the case can be found here.)

October 5, 2016 in Celebrity Contracts, Commentary, Current Affairs, Music, Recent Cases, True Contracts | Permalink | Comments (0)

Friday, September 30, 2016

Payments Law Meets Free Speech at the Supreme Court

Credit-cardsYesterday, the United States Supreme Court granted certiorari in the case of Expressions Hair Design v. Schneiderman, which could result in a significant change in the way end users perceive credit card use. The issuing banks and card networks would, for obvious reasons, prefer a system in which the costs of card usage are borne by merchants and are hidden from the card-using customers who then perceive card use as free. Since that preference has found its way into the law of several states, it has raised a First Amendment issue.

Tony Mauro of law.com summarizes the case as follows:

In the Expressions case, the court will be asked to decide the constitutionality of laws in 10 states that allow merchants to charge customers more for credit-card transactions—but require them to call the difference a cash “discount,” not a credit-card “surcharge.” California, Connecticut, Florida, Massachusetts, New York and Texas are among the states with similar statutes on the books.

The credit-card industry has lobbied for such laws since the 1980s, critics say, because using the word “surcharge” would discourage shoppers from using credit cards.

“A ‘surcharge’ and a ‘discount’ are just two ways of framing the same price information—like calling a glass half full instead of half empty,” Deepak Gupta of Gupta Wessler wrote in his petition challenging New York’s law. “But consumers react very differently to the two labels, perceiving a surcharge as a penalty for using a credit card.”

Expressions Hair Design posted a sign that said it would charge three percent more for paying by credit “due to the high swipe fees charged by the credit-card industry.” It and other merchants challenged the law as a violation of their First Amendment speech rights. The U.S. Court of Appeals for the Second Circuit rejected the claim, finding that the law regulates “merely prices,” not speech.

*   *   *

A coalition of large merchants including Albertsons, Rite Aid and Spirit Airlines sided with the petitioners in urging the court to take the case.

September 30, 2016 in Current Affairs, E-commerce, Recent Cases | Permalink | Comments (0)

Thursday, September 29, 2016

Anti-SLAPP Motion Granted when Filing Suit in Spite of Contractual Promise Not to Do So

In 2012, Mr. Flores decided to go skydiving in California. He contracted with Skydive Monterey Bay Inc. (“Skydive”) to do so. Unfortunately, his parachute deployed prematurely, rendering him unconscious during the jump that in turn resulted in severe injuries upon landing. Flores of course sues Skydive for various torts. Skydive cross-complains alleging breach of contract based on the release that Flores had signed before the accident. This read that Flores would not “sue or make any claim of any nature whatsoever against Skydive … for personal injuries or other damages or losses sustained … as a result of my ‘parachuting activities’ even if such injures or other damages or losses sustained by me as a result of my ‘parachuting activities’ are caused by the negligence, in any degree, or other fault of Skydive….” Unknown

Flores filed a motion to strike Skydive’s cross-complaint under the California anti-SLAPP statute. This is a two-prong test that at bottom required Flores to prove that his lawsuit arose from protected activity and Skydive to prove that it had a probability of prevailing on the claim, in this case the breach of contract.

The court found that despite the contractual clause, Flores had not “waived” his right to the protections of the anti-SLAPP provisions as Skydive argued. The court found that the “filing of a complaint is an act undertaken in furtherance of the constitutional right to petition.” The burden then shifted to Skydive to demonstrate that its breach of contract claim had “minimal merit.” Skydive did not meet that low burden because it failed to provide evidence of damages resulting from the breach (the court relied on the four familiar elements of a contract: existence, performance or excuse by plaintiff, defendant’s breach, and damages). Skydive had simply called Flores’ breach of contract “incredulous,” but did not submit “any affidavits or declarations to support the allegations of damages” such as the costs of defending against the lawsuit and the potential damages on the merits of the claim. Images

Flores can now continue his lawsuit. The case shows the high importance of not relying on self-serving statements, accusations and bare allegations in legal proceedings. This is another aspect of the law that should be obvious, but apparently is not.

The case is Gerardo Flores v. Skydive Monterey Bay, Inc., 2016 WL 4938863 (not officially published), Monterey County Super. Ct. No. M126778.

September 29, 2016 in Recent Cases, True Contracts | Permalink | Comments (0)

Wednesday, September 28, 2016

Remember, Fraudulent Inducement Requires Particularity

A recent case out of the District of Utah, HealthBanc International v. Synergy Worldwide, Case No. 2:16-cv-00135-JNP-PMW, reminds us all of this rule. Well, it definitely reminded the parties and now I'm blogging about it and reminding all of you!

This case revolves around "a recipe for a powder comprised of various grasses and other components." Apparently you can combine this powder with water to make a nutritional supplement. HealthBanc entered into a contract with Synergy whereby Synergy would distribute the powder and pay HealthBanc royalties for every bottle of powder it sold. After almost a decade of doing business together, the relationship between the two parties soured. HealthBanc sued first, and then Synergy counterclaimed, alleging that HealthBanc had led Synergy to believe that it owned intellectual property rights in the recipe for the power, which apparently turned out to be untrue. HealthBanc then moved to dismiss this fraudulent inducement claim based on lack of particularity in Synergy's pleadings. The court here grants the motion. 

Synergy's complaint just generally alleged that HealthBanc had made misrepresentations. Those general allegations are not enough for a fraudulent inducement claim. Synergy identified nothing about the misrepresentations: When did they happen? Where did they happen? Were they written? Oral? Who made them? Without any of this information, the court finds this cause of action can't survive. 

The contract between the parties did contain a clause where HealthBanc

represents and warrants that it is the sole and exclusive owner of the entire rights, title and interest, including without limitation all patent, trademark, copyright and other intellectual property rights,

and another clause where HealthBanc "represents and warrants" that it has exclusive rights to the recipe that it can provide to Synergy. But those clauses don't raise a valid fraudulent inducement claim. Synergy made no allegations about the drafting of those clauses, nor did it allege that those clauses caused it to falsely believe that HealthBanc owned IP rights in the recipe and that that false belief prompted Synergy to sign the contract. 

Likewise, Synergy failed to allege any particular way that it was harmed by the alleged misrepresentations. 

Therefore, on basically every single element Synergy made very general claims that failed to meet the particularity standards. The court does dismiss without prejudice, though, giving Synergy the opportunity to try to fix the deficiencies. Stay tuned!

*Note the first: Synergy Worldwide sounds vaguely like what a company would be called in a Marvel movie so I actually looked the company up to see what it does. It seems to be a company specializing in nutritional supplements: "Your source for ProArgi-9 Plus, the highest quality l-arginine supplement on the market, as well as Mistica acai supplement, Core Greens, and more."

*Note the second: I also looked up "greens formula," which is what the court here refers to the recipe as. Wikipedia just wants to tell me about mathematical theorems, which then sent me down the Wikipedia rabbit hole to learn about George Green, a self-taught mathematical genius who received only one year of formal schooling as a child and to this day no one really knows where or how he learned the form of calculus that his theorems advanced. 

September 28, 2016 in Commentary, Food and Drink, Recent Cases, True Contracts | Permalink | Comments (0)

Monday, September 26, 2016

Lack of Formal Executed Contract Haunts Promissory Estoppel Analysis

This recent case out of the Western District of Pennsylvania, Landan v. Wal-Mart Real Estate Business Trust, 2:12cv926 (behind paywall), is sort of a try-try-again case, although the "try again" part has as negative an outcome for the plaintiffs as the "try" part did. The plaintiffs' breach of contract claim had already failed here because the court found there was no oral agreement between the parties and the parties' signed letter of intent indicated that the parties did not wish to be bound until a final formal contract was executed (as never happened).

In the face of the failure of their breach of contract claim, the plaintiffs turn here to promissory estoppel. But the lack of a final formal contract haunts the promissory estoppel analysis, too. The court finds the plaintiffs were unable to explain what promises had been made to them and characterizes the plaintiffs' stance as "unclear, inconsistent, constantly shifting, and ultimately unavailing." Given the confusion about the statements at issue, the court concludes that any reliance on such vague statements on the plaintiffs' part was unreasonable. A lot of the courts' characterization of the statements and the reasonableness, though, seem to revolve around the fact that the parties never reached a final formal contract: It would be hard for the plaintiffs to allege definite promises, the court says, because the parties were negotiating and hadn't entered into a formal deal yet; maybe Wal-Mart did make some statements but, the court says, in the context of the ongoing negotiations it would have been unreasonable for the plaintiffs to rely on those statements. 

Granted, there seem to definitely be issues with the plaintiffs' promissory estoppel claim here. The court points out that the plaintiffs themselves behaved sometimes as if they did not understand Wal-Mart to be making any promises to them, apparently negotiating with other parties over the same piece of land because of their skepticism about the Wal-Mart deal going through. And there was the letter of intent between the parties that did seem to make it less reasonable that the plaintiffs would rely on indefinite negotiating statements that hadn't been reduced to writing the way others of the statements had been. But it also seems like, once the court decided that the letter of intent wasn't binding because it contemplated a subsequent agreement, the plaintiffs' promissory estoppel claim was likewise doomed. Without a formal executed agreement, there was nothing for the plaintiffs to do to save their claim. 

September 26, 2016 in Commentary, Recent Cases, True Contracts | Permalink | Comments (0)

Wednesday, September 21, 2016

Your Apartment May Have a Leak, But You Still Have to Prove Damages

We are just about to start discussing damages in my Contracts class, so this recent case out of the District Court for the District of Columbia, Parham v. Cih Properties, Inc., Case No. 14-cv-1613 (GMH) (behind paywall), caught my eye. And then I realized that, wait a second, these are the same parties from one of my very first cases I ever blogged! Small world! They're still fighting with each other!

And the plaintiff is still looking for a real win, because even though she wins here, she only wins nominal damages of $1.00. 

The plaintiff alleged that water leaked into her apartment and damaged a number of items, including a mink coat, a cape with mink tassels, five designer bags, a leather trench coat, two suede suits, snakeskin boots, a box of ivory china, and various other clothes, accessories, and glassware. The court agreed with the plaintiff that the leak had occurred and found that the defendant landlord had breached the warranty of habitability. However, the court found that the plaintiff had failed to provide the court with any reasonable basis on which to base a damages award. The court noted that the plaintiff asserted the loss of a number of unique, designer items that required some sort of expert testimony (not provided) to settle the value. The court further noted that, even for the non-unique items, the plaintiff's testimony as to their value was the only piece of evidence she provided. She had no receipts, appraisals, or even surveys of prices of comparable items, and the court found her personal estimates unpersuasive because she was "an easily confused witness" whose estimated values of the items (if she provided them) were inconsistent and sometimes appeared to be "conjur[ed] out of thin air." Even plaintiff's counsel said in court, "I don't think we really proved damages."

The court agreed with this assessment, finding that the plaintiff provided no reasonable basis for the court to determine damages. The court did,  however, agree that she was entitled to nominal damages, given that the landlord had breached the warranty, and so awarded her $1.00. 

September 21, 2016 in Recent Cases, Teaching, True Contracts | Permalink | Comments (0)