Saturday, February 17, 2018
A U.S. judge on Wednesday dismissed a lawsuit seeking the return by the Metropolitan Museum of Art in Manhattan of a Pablo Picasso masterpiece that a German Jewish businessman was allegedly forced to sell at a low price in order to fund an escape from the Nazis and fascism.
Paul and Alice Leffmann fled Germany for Italy in 1937. Paul Leffmann sold “The Actor” the next year to two art dealers for $12,000 to fund an escape to Switzerland from the Fascist regime of Benito Mussolini, a Hitler ally.
The Met acquired “The Actor” in a 1952 donation, but did not acknowledge Leffmann’s ownership until 2011, after decades of incorrect cataloguing. Leffman’s great-grand niece, who handles the estate of the Leffmans, claimed that the circumstances of the 1938 sale meant that her family never lost title. The Met disagreed, while expressing sympathy for the Leffmanns’ plight.
The judge found that the sale “occurred between private individuals, not at the command of the Fascist or Nazi governments,” and not because of a “wrongful threat” by the buyers that took away Leffmann’s free will.
“Although the Leffmanns felt economic pressure during the undeniably horrific circumstances of the Nazi and Fascist regimes,” the judge wrote, “that pressure, when not caused by the counterparties to the transaction (or the defendant) where the duress is alleged, is insufficient to prove duress with respect to the transaction.”
It is both sad and interesting that so many years after the fascist rise to and fall from power, these types of cases are still heard in courts in this country and beyond.
Friday, January 26, 2018
A recent case out of Michigan, Dalton Township v. Charter Township of Muskegon, No. 335743 (behind paywall), involved a dispute over the payment of “hydrant fees.” The defendant ceased paying the fees, alleging that it was not required to pay them under the parties’ contract, and the plaintiffs sued. The defendant won summary judgment on the issue based on a plain language reading of the contract. Reiterating that “unambiguous contractual language must be enforced as written,” the court embarked on a close reading of the contract and determined that nowhere did it require the defendant to pay the disputed fees. There was no mention of any “hydrant fees” in the contract and the clauses that discussed revenue and expenses never mentioned any such fees. The court found that this was unambiguous and must be enforced as written and would not consider any extrinsic evidence on the issue.
(There was another issue in the case regarding whether disputes under the contract could be brought to court. The court concluded that it could resolve the dispute under the contract’s terms.)
Thursday, January 25, 2018
A recent case out of the Northern District of Illinois, Washington v. Board of Education of the City of Chicago, No. 17 CV 2343 (behind paywall), tackles, among other things, fraud and duress in the context of enforcing a settlement agreement. Washington worked for the defendant. After a dispute arose between the parties, they entered into a settlement agreement. Washington now seeks to declare the settlement agreement unenforceable on a number of grounds.
First, Washington alleged fraud on the part of the defendant, alleging a number of misrepresentations and intentional omissions in the agreement. But the defendant argued that Washington's reliance on the alleged statements and omissions wasn't reasonable and further that it had no duty to disclose any information to Washington, which the court agreed with. Washington had her own counsel; had three weeks to consider the agreement; and had seven days after signing within which she could revoke the agreement. Since she had adequate counsel and time to consider the terms, the court found that Washington could not allege that the settlement agreement was procured by fraud.
Second, Washington alleged duress because she feared for the termination of her job and "a humiliating public hearing." The board argued that Washington had alternatives to signing the agreement, and in fact those alternatives would have entitled her to continue to receive her full salary while she pursued them, so there would have been no economic duress to those choices. Again, given her independent counsel and the amount of time she was given to consider her choices, the court found that Washington failed to allege duress.
Washington made many other allegations, including illegality, mistake, and lack of consideration, all of which the court dismissed.
Tuesday, January 23, 2018
A recent case out of Minnesota, Oberfoell v. Kyte, A17-0575, reminds all of us that noncompete agreements need to have a justification. Kyte worked for Oberfoell's online-auction business and signed a contract that contained a noncompete clause. He later left to start his own online-auction business and Oberfoell sued.
The lower court found the noncompete agreement to be unenforceable and this appellate court agreed. Oberfoell simply couldn't justify its necessity because he failed to assert a legitimate business interest protected by the noncompete clause. Oberfoell made general allegations that Kyte had personal relationships with many of Oberfoell's customers and thus possessed goodwill belonging to Oberfoell. But Oberfoell never identified any customers who he was worried about, nor did he ever introduce any evidence that Kyte had used any of Oberfoell's customer lists improperly. The court concluded that Kyte did not seem to be the "face" of the business nor was he the exclusive contact the customers had with the business. There was no evidence that any of Oberfoell's customers were concerned about Kyte leaving and no evidence that any of them followed Kyte to his new business. Therefore, Oberfoell failed to prove that the noncompete was protecting a legitimate business interest.
Oberfoell also tried to assert that his customer lists and other materials were taken by Kyte and qualified as a violation of the noncompete. The court pointed out that the customer lists weren't secret and weren't treated as secrets by Oberfoell, and so couldn't qualify as trade secrets. The other materials suffered from the same lack of confidential protection.
Finally, the noncompete also failed on the basis of reasonableness. It prohibited Kyte from competing in a radius of 150 miles for five years. The court found the 150-mile restriction to be "arbitrary," and Oberfoell produced no evidence justifying his choice of such a large radius. The five-year restriction was also unreasonable because the evidence showed Oberfoell could have replaced Kyte easily and quickly, so there was no reason to keep Kyte from competing for so long (in fact, Oberfoell apparently never hired anyone to replace Kyte, delegating his responsibilities to already-existing employees). There was no evidence that Kyte had received any extensive training that gave him an advantage in establishing his business, which took him a few months to get started.
Wednesday, January 17, 2018
Those posting ideas to the internet, in tweets or YouTube trailers or other websites: take note. This is an older decision, but one worth recounting on this blog I think. Out of the Central District of California, Alexander v. Metro-Goldwyn-Mayer Studios, Inc., CV 17-3123-RSWL-KSx, warns you that making your ideas available for free can mean that you forfeit the right to pursue compensation if someone else uses them.
The case concerns the movie "Creed," which the plaintiff Alexander alleged he came up with. He sued the defendants for misappropriation of his idea, breach of implied contract, and unjust enrichment. The misappropriation of idea claim fails in California, so the court moves on to the breach of implied contract claim, where Alexander also faltered because he failed to allege that he ever offered the "Creed" idea for sale. In tweeting the idea at Sylvester Stallone, the court read the allegations as portraying a gratuitous offer of the idea to Stallone.
Alexander argued that he thought he would be paid for the idea based on industry custom, and that the defendants understood that he tweeted the idea at them with the expectation of payment. But the court disagreed. All Alexander did was tweet the idea at Stallone and post it all over the internet; those actions were not compatible with expecting compensation, since the idea was widely available for free. There was never any communication between Alexander and the defendants, so the court found that it "strain[ed] reason" to imply an agreement for compensation from an unanswered tweet and the posting of the idea in other places on the internet.
Finally, the unjust enrichment claim also failed. Alexander could not allege how the defendants benefitted from his idea, since he never alleged how the defendants accepted the idea. At any rate, since the idea was available for free all over the internet, the court stated that it was "unclear" why the defendants should be expected to compensate Alexander.
Tuesday, January 16, 2018
The plaintiff Wilson resigned his position as the athletic director for the defendant Northland College after investigation for two sexual harassment complaints. Wilson and the college signed an agreement upon his resignation that restricted what the college could say about the situation to the media. The college radio station subsequently ran some stories reporting on Wilson's resignation. Wilson sued for, inter alia, breach of the separation agreement. The college moved to dismiss and the Western District of Wisconsin recently granted the motion in Wilson v. Northland College, 17-cv-337-slc (behind paywall).
The problem was Wilson couldn't identify any term of the contract that the college breached. The contract set forth a joint press release to be issued and stated that "[t]o the extent that either party is asked by a media source of any sort to provide an additional explanation, both parties will state that the mutually agreed upon statement speaks for itself." The college issued the require statement and the college radio host, beyond reporting that Wilson had resigned, did not provide any reasons for the resignation and referred to the press release, exactly as the contract required.
Wilson's main arguments were that the press release was supposed to be the college's only statement and that no college employee (which the radio host was) could speak about Wilson's conduct, sexual harassment, or investigations in any way. But the court concluded that that was not what the contract called for and the radio host's statements that the college would not comment for the reasons behind the resignation beyond the press release complied with the college's contractual obligations.
Wednesday, January 3, 2018
A recent case out of the Sixth Circuit, Heimer v. Companion Life Insurance Co., No. 16-2274, "is about whether a contract should mean what it says." The insurance policy at issue disclaimed coverage for injuries that resulted from the "illegal use of alcohol." Heimer legally consumed a great deal of alcohol (he was legal drinking age), but then illegally operated a motorbike while his blood alcohol level was nearly twice the legal limit. He collided with another motorbike and suffered extensive injuries.
The insurance company claimed that the policy didn't cover the accident because it resulted from the illegal use of alcohol. The court disagreed based on the plain language of the contract. The policy said "use," not "under the influence." Therefore, Heimer's injuries weren't covered only if his use of the alcohol was illegal, which it was not. Heimer's criminal offense was illegally using a motor vehicle, not illegally using alcohol.
The court acknowledged that obviously the insurance company didn't want to have to pay for the injuries caused by the drunken motorbike driving, but the court noted that the contract's language needed to be modified to reach that result.
A concurrence in part / dissent in part agreed with the outcome and accused the insurance company, the contract's drafter, of "sloppy drafting," but did allow that the phrase might be ambiguous.
Tuesday, January 2, 2018
A class action brought in the Western District of Tennessee over Internet service speeds, Carroll v. TDS Telecommunications Corp., No. 1:17-cv-01127-STA-egb (behind paywall), recently survived a motion to dismiss. Among the claims was a breach of contract claim based on the plaintiff's procurement of a high-speed Internet service plan. The plaintiff agreed to pay between $120 and $150 a month for access to service of a particular speed, which she alleged she did not receive, rendering her Internet incapable of supporting the uses, such as Netflix and YouTube, that she had been told the Internet plan would support. The court found these to be sufficient allegations of a breach of contract to survive the motion to dismiss. The plaintiff's other causes of action, including for fraud, unjust enrichment, and civil conspiracy, also survived the motion.
Tuesday, December 26, 2017
Intoxication always seems like such an irresistible thing to test, because it's so easy to slip into a hypo. A recent case out of Nevada, Wynn Las Vegas, LLC v. Tofani, No. 69936 (behind paywall), brings it up as an issue in the context of Las Vegas gambling. You can listen to the oral argument here (the audio quality is kind of terrible; sorry about that). The Wynn casino advanced Tofani $800,000 in credit, all of which Tofani gambled and lost, and the Wynn is now attempting to collect the debt. Tofani's main defense consisted of lack of capacity because he was intoxicated at the time he borrowed the money. (He also argued that he lacked capacity because of a gambling addiction, but the court found that to be irrelevant based on Nevada statute.)
The Wynn did win a jury verdict but only of $450,000. The majority opinion found that there were fact issues regarding Tofani's level of intoxication and reasonable disaffirmation of the contract, so those were questions that properly went to the jury. However, the jury instructions were incorrect, so the majority reversed and remanded for a new trial.
A concurrence in part - dissent in part walked through Tofani's intoxication defense in more detail. Tofani had indisputably affirmed his debt to Wynn in writing several times...until, eighteen months after incurring the debt, his wife found out how much money he owed, after which he began disaffirming the debt, leading to this lawsuit. The concurrence/dissent pointed out that either Tofani owed $800,000 or Tofani didn't. Therefore, the jury's verdict made no sense: Nobody contended at any point the possibility that Tofani only owed half the amount. The majority's way of dealing with this was through the incorrect jury instruction, but the concurrence /dissent pointed out that there was no fact issues for the jury to resolve: A contract entered into while intoxicated is voidable, not void. The intoxicated person must disaffirm the contract...which Tofani did not do for eighteen months and, to the contrary, repeatedly affirmed the contract in writing. Therefore, Tofani, having indisputably ratified the contract, could not disaffirm the contract later.
Anyway, entering into a contract while intoxicated doesn't mean you get to keep whatever you were given: "He doesn't get to keep the money forever just because the contract is void; it doesn't magically morph into a Christmas gift with no strings attached just because he was drunk."
Thursday, December 21, 2017
A recent case out of Connecticut, Madore v. ISCC, LLC, HHBCV166033741S, sits at the intersection of contract law and negligence. The plaintiff was bit by a dog at an ice skating rink operated by the defendant and sued under theories of both negligence and breach of contract. The contract theory pivoted around the defendant's obligation in its lease to keep the premises in "good, safe, and habitable condition." The plaintiff tried to argue that this created a duty of care toward the plaintiff to keep the premises safe for the plaintiff, which the defendant failed to do since the plaintiff was bit by a dog while on the premises. However, the court noted that the contract said nothing about dogs. The obligation to keep the premises safe did not require the defendant to ban dogs from the premises. Therefore, the provision could not be read to create a duty of care to keep the plaintiff safe from harm caused by dogs on the premises.
Wednesday, December 20, 2017
I may have just used the recent royal engagement news as the basis of my Contracts final hypo, so I read with interest this complaint out of the Eastern District of New York, Purcell v. Pressman, 17-cv-6879 (behind paywall), that got sent to me under an alert. (I have the alert set up for "fanfiction," because of my scholarly interest in fan activities, and sometimes I get the most random hits on it, like this one.) The complaint is behind a paywall, but the New York Post has an article up that summarizes both this complaint and the previous fraud complaint filed in Connecticut District Court by Pressman against Purcell a few days before Purcell filed her lawsuit.
Basically, Purcell's complaint alleges a passionate and intense relationship begun in a hotel in Puerto Rico and continued over lavish vacations in Antigua and New York City. At one point, Pressman allegedly drew up a contract between his alleged business Triton and Purcell, containing certain provisions under which the company agreed to pay some of Purcell's expenses, although neither party ever signed the contract. The contract, according to the allegations of the complaint, was meant to be a gesture of commitment on the part of Pressman to his romantic relationship with Purcell. Pressman's complaint denies ever drafting the contract.
The allegations continue: Purcell and Pressman moved in together. A few days later, Pressman suffered a medical emergency and was rushed to the hospital after Purcell called 911. Pressman also disputes this version of the tale in his complaint, claiming he called 911 himself after Purcell failed to assist him; as you can tell, Pressman's complaint tells a different story about the relationship with Purcell, accusing her of defrauding him, instead of Purcell's opposite allegations.
While in the hospital, Purcell claims to have answered Pressman's ringing cell phone and to have realized only then that Pressman was married. The complaint then continues to allege further events in the relationship and then asserts a number of causes of action, including breach of contract based on the contract Pressman had allegedly drawn up.
The complaint concedes that neither party ever signed the contract, but Purcell alleges that she acted in reliance on the enforceability of the contract and so, therefore, the contract should be treated as valid, with the execution of it merely a formality. As I've stated, Pressman has denied ever drafting the contract.
There are no other pleadings in this case yet.
Tuesday, December 19, 2017
A recent case out of the Seventh Circuit, ADM Alliance Nutrition, Inc. v. SGA Pharm Lab, Inc., Nos. 16-2331 and 16-2953, reminds us all that signing a release of unknown claims can, indeed, do exactly that. (You can listen to the oral argument here).
The parties in question were two sophisticated commercial parties with presumably access to legal advice if they desired it. When they terminated their business relationship, they signed a release from all claims, known or unknown. ADM then later discovered alleged fraud on SGA's part during the course of their former business relationship and sought to sue for this fraud. The Seventh Circuit, however, enforced the plain language of the release, noting that releases are permitted to encompass unknown fraud claims:
Two sophisticated businesses signed an agreement to walk away from each other here. ADM chose to relinquish its right to bring any and all claims arising out of the Purchase Agreement, whether known or unknown. It also agreed that no representations were made to induce it to enter into the Termination Agreement other than those contained in the agreement.
Therefore, the release was enforced. Let this be a word of warning: Be careful when signing releases.
Wednesday, December 6, 2017
A recent case out of the Southern District of New York, Nusbaum v. E-Lo Sportswear LLC, 17-cv-3646 (KBF) (behind paywall), granted summary judgment based on a chain of emails between an employer and employee. The emails were discussing a severance provision, and the last email in the chain read in relevant part, "I am agreeing to the below . . . . I will sign when I get back." The parties never executed any further document.
The court nevertheless found an enforceable contract between them. Although it was true that the emails seemed to contemplate a final agreement, it was also true that both parties regarded the negotiations as concluded and the agreement reached at the time of the final email. The employee than spent nineteen months performing under this perceived agreement. It was clear from the emails that the parties had reached agreement on the material term, and the matter was not so complex that it needed to be reduced to a formal writing. Indeed, the employer admitted it usually did not reduce employment agreements to a formal writing. Therefore, the emails demonstrated that the parties had reached agreement and they were enforceable.
Monday, December 4, 2017
If you're looking for fact patterns involving consideration, a recent case out of the Northern District of New York, West v. eBay, Inc., 1:17-cv-285 (MAD/CFH) (behind paywall), has one for you.
The following allegations appeared in the complaint: West worked as a consultant for eBay. As a consultant, West told eBay about a business plan he had which represented a "unique business model" for virtual marketplaces. West said he was cautious about sharing his business plan, and eBay promised to keep the business plan confidential. West then sent the business plan to eBay. eBay subsequently promised to compensate West if it used the business plan. eBay then developed a mobile app that West alleged used the business plan. eBay, however, stated that the app was "independently conceived" by other eBay employees. This lawsuit followed, and eBay moved to dismiss West's complaint.
One of eBay's asserted grounds for dismissal was a lack of adequate consideration for the contract alleged in West's complaint. eBay claimed that the business plan was not "novel" and so had no value and could not serve as consideration. The court noted that under New York law, a not-novel idea can be adequate consideration if it was novel to the party to whom it was being disclosed. This requires a fact-specific inquiry. At the motion to dismiss stage, West had asserted enough facts that the business plan was idea was novel to eBay, meaning that it could serve as adequate consideration for the contract.
There were other causes of action and arguments involved that I'm not going to get into here, but the complaint also contained promissory estoppel and unjust enrichment claims that also survived the motion to dismiss, if you're interested.
Friday, December 1, 2017
Montana brings us an anticipatory breach case about a Mexican restaurant, Bridger Del Sol, Inc. v. VincentView, LLC, DA 17-0186.
Bridger Del Sol ("BDS") leased some property from VincentView for the purpose of operating a "casual, young, fun Mexican restaurant." I appreciate these adjectives. BDS's Mexican restaurant sounds like a place I'd want to be friends with.
BDS opened its casual, young, fun restaurant but the upstairs tenants turned out to not be so keen on their hip new downstairs neighbor, complaining about noise and cooking smells. VincentView then sent BDS a Notice of Default and stated that it would take over the premises prior to the expiration of the lease unless BDS stopped playing music and emitting cooking odors.
The court characterized that as an anticipatory breach on VincentView's part. As the court noted, "Restaurants commonly play music and must cook. Thus, VincentView's new rules were not reasonable or fair to BDS." This was therefore a breach of VincentView's duty of good faith and fair dealing and VincentView would have been unjustified in retaking the premises as it threatened unequivocally to do.
Thursday, November 30, 2017
I always struggle to think of examples of illegal contracts other than contracts to kill people, which makes for a dramatic class discussion but I fear might cause the students to write off illegal contracts as a subject better suited for Breaking Bad or something. So I was delighted to come across this recent case out of Michigan, M-D Investments Land Management, LLC v. 5 Lakes Adjusting, LLC, No. 336394 (behind paywall), dealing with an illegal contract.
While the contract is found illegal in this case, the facts are not glamorous. The plaintiff hired the defendant to adjust its fire insurance claim and signed a contract for the services. Later, the plaintiff filed this action seeking a declaration that the contract between the parties was illegal as against public policy, and therefore voidable at the plaintiff's option. The issue was that the contract had not been approved by the Department of Insurance and Financial Services ("DIFS") as required by Michigan statute.
The trial court found the contract in violation of the statute and thus voidable, and this appellate court agreed. The statute required the adjuster to seek approval from DIFS of its contract, and the defendant's failure to do so, no matter the reason, made the contract at least voidable at the plaintiff's option (which the plaintiff had chosen to exercise), if not void altogether.
The defendant argued that it has since obtained DIFS approval of its contract. However, it was undisputed that it did not have this approval for the entire time the contract with the plaintiff was in effect. Thus, the contract could not be saved by after-the-fact approval.
Wednesday, November 29, 2017
As a recent case out of Utah, Desert Mountain Gold LLC v. Amnor Energy Corp., No. 20160654-CA, reminds us, if your contract tells you what to do, you'd better do it.
In the case, the two parties had entered into a contract regarding mining claims. Desert Mountain allegedly breached the contract, which Desert Mountain disputed. Under the terms of the contract, in the event of a disputed breach such as this, the parties were required to "hold one informal meeting" before resorting to legal proceedings. Amnor sent Desert Mountain a communication stating that it was "willing to meet to discuss" the dispute. When Desert Mountain never took them up on the offer to meet, Amnor argued that it was justified in treating the contract as breached.
The court disagreed, because the court found that Amnor's statement was merely "casual." That was not enough to fulfill the requirement of holding an informal meeting. It should proposed a time to meet. Further, Amnor did not argue that Desert Mountain was in breach until fourteen months later, when Desert Mountain accused Amnor of being in breach for missing a royalty payment. The court said that violated the contract's "demand that it promptly seek legal action in the event that an informal meeting proved to be unsuccessful."
I quoted that in full because I think it's an interesting finding. The relevant clause as excerpted by the court states that, if the informal meeting is unsuccessful, the dispute "shall be resolved in a legal proceeding." The only place "promptness" seems to show up as a requirement is when the court reads it in. It's unclear what timeline the court would have viewed as prompt, given the contract doesn't provide for one, except that this one wasn't it.
The lesson from this case seems to be that if your contract calls for an informal meeting, you'd better not be casual about asking for it. Your informal meeting demands a little more proactive effort on your part. After all, we all know when people vaguely say "We should get together soon," no plans ever materialize!
Wednesday, November 15, 2017
I love when I reach the end of the semester teaching contracts because everything is still extra-fresh in my mind and every case starts to read like an exam hypo to me. This recent case out of New York, GB Properties NYC LLC v. Bonatti, 503564/2017, discusses time is of the essence issues in the context of a real estate contract.
The parties entered into the contract on July 28, 2016, and while no date was set for closing in the contract, the contract stated it should take place within 60 days of the contract's execution or on some other mutually agreeable date. Sixty days after execution of the contract, the plaintiff had not provided the necessary information to close. Defendants' counsel informed plaintiff's counsel that the closing would be scheduled for December 6 and that the date was "of the essence." Plaintiff's counsel requested an extension, which was agreed to and set for December 28, but time was still deemed to be of the essence in the extension document.
On December 28, the defendants appeared for the closing but the plaintiff never appeared. Two days later plaintiff's counsel requested an extension to January 12. The defendants agreed only if the plaintiff timely provided additional money to be held in escrow; otherwise they would consider the parties' contract to be concluded for violation of the time is of the essence condition and they would keep the money already in escrow (as had been provided in the contract by way of liquidated damages). The plaintiff did not provide extra money. On January 27 the defendants entered into a contract to sell the property to someone else. This lawsuit resulted, with the plaintiff seeking specific performance of the contract.
The defendants maintained that both parties agreed that the December 28 date was of the essence and the plaintiff was not ready to fulfill its contractual obligations on that date. Therefore, the plaintiff breached the contract and the defendants were entitled to declare the contract terminated and maintain the down payment as liquidated damages. The plaintiff, however, alleged that the failure to close was the defendants' fault because the defendants had not provided clean title by the closing date and so the defendants were not ready to close on December 28.
The court found that the defendants were ready to close on December 28 and that the extension negotiated between the parties unequivocally made the December 28 date of the essence. The plaintiff's failure to appear on that date was a breach of contract. The plaintiff itself admitted that it did not have the money for the closing on that date. Therefore, the plaintiff was in breach and the defendants were entitled to retain the down payment pursuant to the liquidated damages provision in the contract.
Monday, November 13, 2017
A recent case out of the District of New Mexico, Laurich v. Red Lobster Restaurants, LLC, No. CIV 17-0150 JB/KRS (behind paywall but you can read an article written about the complaint here), enforced an arbitration agreement between Red Lobster and a former employee, Laurich. Laurich was working at a Red Lobster when the restaurant chain was sold to the current corporate entity, the defendant in this case. When the defendant bought the restaurant chain, Laurich was informed during a shift that she had to look over an employment agreement. She asked for a paper copy but was told there were none and it was only available on the computer. She was also told that she had to sign the electronic document or she would be taken off the work schedule. So Laurich signed the document and went back to work. Unsurprisingly, the document contained an arbitration provision.
Laurich alleged that a fellow employee at Red Lobster eventually began harassing her on the basis of her race and sex, escalating to physical assault. She complained to her supervisors and eventually requested that the other employee not be there while she was there. She then learned that Red Lobster had terminated her employment. Laurich then filed this complaint and Red Lobster moved to compel arbitration under the agreement.
Laurich argued that the arbitration agreement was both illusory and unconscionable. The court found that it was not illusory: Laurich agreed to arbitrate and Red Lobster agreed to continue employing Laurich. That was sufficient consideration on both sides. It wasn't as if Laurich was already working for this corporate entity when she was asked to sign the agreement "out of the blue." Rather, she was presented the agreement as soon as Red Lobster became her employee.
Nor was the agreement unconscionable. The agreement was only half-a-page long and it was similar to one Laurich had been working under before. And the threat to be taken off the work schedule was only a temporary threat, not a threat of termination. So there was no procedural unconscionability, nor was the arbitration agreement substantively unconscionable. Both sides were bound by the clause, and Laurich was excused from paying arbitration fees.
Therefore, the court enforced the arbitration agreement.
Friday, November 10, 2017
When I teach accord and satisfaction, I always remind my students, "Don't forget, for this to work, there has to be a good faith dispute!" A recent case out of Illinois, Piney Ridge Properties, LLC v. Ellington-Snipes, Appeal No. 3-16-0764, carries the same reminder. The defendant took out a mortgage of almost $26,000. Although his monthly payment was over $600, he paid only $354 a month, which he did for a little over a year, and then stopped paying altogether. The mortgage company filed a foreclosure action and asserted that the defendant owed around $10,000 on the mortgage. The defendant by letter to the mortgage company's counsel agreed that that was the amount he owed. However, about a year later, while the foreclosure action was still in progress, the defendant sent the mortgage company a check for $354 on which he wrote "Acceptance of this check constitute [sic] payment in full of account." The mortgage company cashed the check. The defendant then filed a motion to dismiss the foreclosure action, arguing that his check constituted an accord and satisfaction on the mortgage debt.
The parties agreed that the check had a conspicuous statement that it was to fully satisfy the mortgage debt, and they agreed that the mortgage company cashed the check. However, the court noted that an accord and satisfaction can only be successful if there is a bona fide good faith dispute about the debt. The defendant had already admitted that he owed around $10,000; he was not disputing the amount. The court, in fact, concluded that it was likely that the defendant's action was done "in hopes of deceitfully escaping his larger mortgage debt." There being no good faith dispute between the parties, an accord and satisfaction did not occur here.