ContractsProf Blog

A Right to Health Insurance for Same-Sex Partners? It Depends on What You Mean by “Similar Union,” “Recognized,” “Only Agreement” and “For Any Purpose”

First Vermont allowed same-sex couples to enter into civil unions. Then Massachusetts allowed same-sex couples to marry. (And, JUST HOURS AGO, the Supreme Court of California lifted that state's ban on same-sex marriage). In response to the strides made by gay rights advocates in Vermont and Massachusetts, many states amended their constitutions to “defend” marriage. Michigan’s constitution was amended to provide:

To secure and preserve the benefits of marriage for our society and for future generations of children, the union of one man and one woman in marriage shall be the only agreement recognized as a marriage or similar union for any purpose.

(emphasis added).

A dispute arose when the Attorney General issued a formal opinion concluding that this so-called “marriage amendment” prohibited the city of Kalamazoo from providing health insurance to employees’ same-sex domestic partners.

Over a spirited defense, a majority of the Michigan Supreme Court recently held that this amendment to the Michigan constitution prohibits public employers from providing health insurance to employees' same-sex domestic partners. As the dissent paints it: “[t]he majority decides that the ‘marriage amendment’ prevents public employers from voluntarily entering into contractual agreements to provide health benefits to their employees' same-sex domestic partners.”

The majority's decision required many consultations with Webster’s Dictionary.

First, the court held:

[T]he amendment prohibits the recognition of a domestic partnership “as a marriage or similar union ....“ That is, it prohibits the recognition of a domestic partnership as a marriage or as a union that is similar to a marriage. * * * [J]ust because a public employer does not refer to, or otherwise characterize, a domestic partnership as a marriage or a union similar to a marriage does not mean that the employer is not recognizing a domestic partnership as a marriage or a union similar to a marriage.

The pertinent question is not whether public employers are recognizing a domestic partnership as a marriage or whether they have declared a domestic partnership to be a marriage or something similar to marriage; rather, it is whether the public employers are recognizing a domestic partnership as a union similar to a marriage. A “union” is “something formed by uniting two or more things; combination; ... a number of persons, states, etc., joined or associated together for some common purpose.” Random House Webster's College Dictionary (1991). Certainly, when two people join together for a common purpose and legal consequences arise from that relationship, i.e., a public entity accords legal significance to this relationship, a union may be said to be formed. When two people enter a domestic partnership, they join or associate together for a common purpose, and, under the domestic-partnership policies at issue here, legal consequences arise from that relationship in the form of health-insurance benefits. Therefore, a domestic partnership is most certainly a union.

The next question is whether a domestic partnership is similar to a marriage. Plaintiffs and the dissent argue that because the public employers here do not bestow upon a domestic partnership all the legal rights and responsibilities associated with marriage, the partnership is not similar to a marriage. Again, we respectfully disagree. “Similar” means “having a likeness or resemblance, [especially] in a general way; having qualities in common [.]” Random House Webster's College Dictionary (1991); [citations omitted]. A union does not have to possess all the same legal rights and responsibilities that result from a marriage in order to constitute a union “similar” to that of marriage. If the marriage amendment were construed to prohibit only the recognition of a union that possesses legal rights and responsibilities identical to those that result from a marriage, the language “or similar union” would be rendered meaningless, and an interpretation that renders language meaningless must be avoided. [citation omitted]. Further, the dissimilarities identified by plaintiffs are not dissimilarities pertaining to the nature of the marital and domestic-partnership unions themselves, but are merely dissimilarities pertaining to the legal effects that are accorded these relationships. However, given that the marriage amendment prohibits the recognition of unions similar to marriage “for any purpose,” the pertinent question is not whether these unions give rise to all the same legal effects; rather, it is whether these unions are being recognized as unions similar to marriage “for any purpose.”

Well, is the city of Kalamazoo “RECOGNIZING” a domestic partnership as a union similar to a marriage by providing health benefits to same-sex domestic partners? The court held yes:

“Recognize” is defined as “to perceive or acknowledge as existing, true, or valid[.]” Random House Webster' s College Dictionary (1991). When a public employer attaches legal consequence to a relationship, that employer is clearly “recognizing” that relationship. That is, by providing legal significance to a relationship, the public employer is acknowledging the validity of that relationship. When public employers provide domestic partners health-insurance benefits on the basis of the domestic partnership, they are without a doubt recognizing the partnership.

Sure, and this is where contract law comes in, is the city of Kalamazoo recognizing an “AGREEMENT” by providing health benefits to same-sex domestic partners? The court held yes:

An “agreement” is “the act of agreeing or of coming to a mutual arrangement.” Id. The city of Kalamazoo's, the University of Michigan's, and Michigan State University's policies require putative partners to sign a domestic-partnership agreement. The OSE's policy requires partners to “agree that they are jointly responsible” “for basic living expenses....” Obviously, if two people have decided to sign a domestic-partnership agreement or have agreed to be jointly responsible for basic living expenses, they have come to a mutual arrangement. Therefore, public employers recognize an agreement when they provide health-insurance benefits to domestic partners on the basis of a domestic partnership.

However, the marriage amendment specifically states that the “only” agreement that can be recognized as a marriage or similar union is the union of one man and one woman. “Only” means “the single one ... of the kind; lone; sole [.]” Random House Webster's College Dictionary (1991). Therefore, a single agreement can be recognized within the state of Michigan as a marriage or similar union, and that single agreement is the union of one man and one woman. A domestic partnership does not constitute such a recognizable agreement.

Further, the court discussed the meaning of the phrase “for any purpose”:

[T]he marriage amendment specifically prohibits recognizing “for any purpose” a union that is similar to marriage but is not a marriage. “Any” means “every; all[.]” Id. Therefore, if there were any residual doubt regarding whether the marriage amendment prohibits the recognition of a domestic partnership for the purpose at issue here, this language makes it clear that such a recognition is indeed prohibited “for any purpose,” which obviously includes for the purpose of providing health-insurance benefits. Whether the language “for any purpose” is essential to reach the conclusion that health-insurance benefits cannot be provided under the instant circumstances, or merely punctuates what is otherwise made clear in the amendment, the people of this state could hardly have made their intentions clearer.



National Pride at Work, Inc. v. Michigan, 2008 WL 1961465 (May 7, 2008).
[Meredith R. Miller]

EarthLink and Wireless Philadelphia Disconnecting

According to the Wall Street Journal, EarthLink announced on Tuesday that it would be discontinuing its wireless Internet service in municipal Philadelphia. 

Since 2006, Earthlink had been working with Wireless Philadelphia to provide low-cost wireless Internet service in the city.  EarthLink anticipated that 100,000 customers would sign up for the service, but less than 5,000 have done so.  EarthLink CEO Rolla Huff explained, "This was about a business model that simply didn't work."   Wireless Philadelphia vows to fight on, as the organization put it in a press release on its blog:

Today we received an announcement that EarthLink intends to discontinue operation of its Municipal Wi-Fi Network in Philadelphia. The reason cited was that negotiations with a certain party failed to come to a positive conclusion. The transfer of the EarthLink network is by definition a complex, time-intensive, multi-party transaction. Despite today's announcement, Wireless Philadelphia and the City are still working actively together to identify alternatives for preserving this network and applying it to numerous civic, commercial and social purposes. We remain optimistic for an orderly resolution of this matter. Regardless, Wireless Philadelphia is utterly steadfast in its determination to extend internet access to all members of the community, and we intend to do everything in our power to continue the momentum generated by WP in support of Digital Inclusion.

But wait.  Apparently EarthLink is not free to simply walk away from its partnership with the city.  It has therefore filed suit seeking permission to remove its Wi-Fi gear from utlity poles on June 12th and seeknig to cap its damages at $1 million.  Wi-Fi Net News's Glenn ("I haven’t read the contract’s provisions for this set of circumstances, and I’m not a lawyer") Fleishman expresses skepticism about the prospects for this suit:

EarthLink will ultimately have to pay much more than $1m, I predict, and I suspect some of the settlement will leave gear in selected neighborhoods behind for more modest networking purposes.

Apparently EarthLink is shutting down other, less ambitious, urban networks as well.

HT: Alan White (again!)

Update: The contract is available here.

[Jeremy Telman]

"No Damages for Delay" Clause Enforced in Colorado

A Colorado appellate court recently held that a "no damages for delay" clause in a construction subcontract was enforceable. The general contractor had a highway construction contract with the Colorado Department of Transportation. The general contractor entered into a subcontract for the earthwork on the project. The subcontract contained a "no damages for delay clause", which provided:

Section 6. Delays. (a) In the event the Subcontractor's performance of this subcontract is delayed or interfered with by acts of the Owner, Contractor or other Subcontractors, he may request an extension of time for the performance of same, as herein provided, but shall not be entitled to any increase in the subcontract price or to damages or additional compensation as a consequence of such delays or interference, except to the extent that the prime contract entitled the Contractor to compensation for such delays and then only to the extent of any amounts that the Contractor may, on behalf of the Subcontractor, recover from the Owner for such delays.

A dispute arose when the general contractor and subcontractor could not agree on the amount of the subcontractor's final compensation for the work. Among other things, the subcontractor sought additional compensation based on alleged delays relating to the construction of a retaining wall and traffic lane closures. The general contractor maintained that this compensation was precluded by the “no damages for delay” clause in the subcontract.

The appellate court affirmed the trial court, and enforced the clause:

We are unaware of any published state court decision in Colorado addressing a “no damages for delay” clause. However, a federal appeals court in a case arising in Colorado and the majority of courts in other jurisdictions that have addressed the issue have generally upheld the validity of such clauses. See W.C. James, Inc. v. Phillips Petroleum Co., 485 F.2d 22, 25 (10th Cir.1973) (observing that “[s]uch clauses are commonly used in the construction industry and are generally recognized as valid and enforceable”); Owen Constr. Co. v. Iowa State Dep't of Transp., 274 N.W.2d 304, 306 (Iowa 1979) (“Such clauses are defended [in cases involving public contracts] on the theory they protect public agencies which contract for large improvements to be paid for through fixed appropriations against vexatious litigation based on claims, real or fancied, that the agency has been responsible for unreasonable delays.”)(citing A. Kaplen & Son, Ltd. v. Hous. Auth., 42 N.J.Super. 230, 233, 126 A.2d 13, 15 (1956)); Maurice T. Brunner, Annotation, Validity and Construction of “No Damage” Clause with Respect to Delay in Building or Construction Contract, 74 A.L.R.3d 187 (1976 & 2007 Cum.Supp.)(collecting numerous state and federal cases upholding “no damages for delay” clauses); see also In re Marriage of Bolding-Roberts, 113 P.3d 1265, 1267 (Colo.App.2005); Kohn v. Burlington N. & Santa Fe R.R., 77 P.3d 809, 811 (Colo.App.2003) (observing that when there are no Colorado decisions, we may look to other jurisdictions, including federal jurisdictions, for guidance).

Nevertheless, “no damages for delay” clauses have been strictly construed against owners or contractees because of the harsh results that may flow from the enforcement of such clauses. See John E. Green Plumbing & Heating Co. v. Turner Constr. Co., 742 F.2d 965, 966 (6th Cir.1984) (applying Michigan law); E.C. Ernst, Inc. v. Manhattan Constr. Co., 551 F.2d 1026, 1029 (5th Cir.1977) (applying Alabama law); Cunningham Bros., Inc. v. City of Waterloo, 254 Iowa 659, 664, 117 N.W.2d 46, 49 (1962).

We are persuaded by these decisions, and we similarly conclude “no damages for delay” clauses are valid and enforceable in Colorado, but they are to be strictly construed against the owner or contractee.

Tricon Kent Co. v. Lafarge North America, Inc., __ P.3d __, 2008 WL 1902514 (Colo. App. May 1, 2008).

[Meredith R. Miller]

Handwritten Letter of Intent Worth $10.5 Million

According to Newsday.com, a jury has awarded $10.5 million to internet executive Alfred West in his suit to enforce a handwritten agrement with IDT Corp.  According to the report, West met with IDT founder and chairman Howard S. Jonas on February 3, 2001.  The product of this meeting was two pages handwritten by Jonas which contained the terms of a deal in which West would develop a business within IDT.  The terms of the deal were as follows:

The deal called for an annual salary of $200,000 for five years, and an annual payment on Feb. 13 for the next five years of 70,000 shares and $1.5 million, which they estimated was worth "roughly" $14.3 million. The deal called for an annual salary of $200,000 for five years, and an annual payment on Feb. 13 for the next five years of 70,000 shares and $1.5 million, which they estimated was worth "roughly" $14.3 million.

Crucially, the handwritten agreement also contained the following langauge: "The parties will complete formal contracts as soon as possible but this is binding."

West was fired after six months at IDT.  His suit resulted in a 2005 jury verdict in his favor for $1.5 million.  The Third Circuit vacated that verdict and remanded, while reinstating West's breach of contract claim, which had been dismissed by the district court.  The second trial worked out even better for Mr. West, but IDT has promised a second appeal.

[Jeremy Telman]

Legal Recruiters and Mutual Assent

A legal recruiter sued Akin Gump for a placement fee, and a New York trial court recently granted the law firm summary judgment.

The recruiter sent an unsolicited email to a partner of the law firm, attaching the resume of a candidate with specialization in Korean law.  The email stated that "[t]he interviewing of any attorney submitted to the firm will constitute acceptance of these terms and conditions unless [the recruiter] is notified to the contrary in writing prior to the first interview."  The law firm partner stated he had no recollection of receiving the recruiter's email.  A few months later, the firm hired this attorney and the recruiter sought a placement fee of more than $200,000.

The court granted the law firm summary judgment, finding the following undisputed facts:

While [the recruiter] may have been the first to submit [the attorney's] resume to defendant, there is no dispute that: (1) the resume was sent unsolicited; (2) it was sent to a non-hiring partner at the New York office, as opposed to either the recruitment office or to the Washington D.C. office, where the Korean practice was based; (3) there was no communication made by defendant to plaintiff acknowledging receipt of [the attorney's] resume or concerning his hiring; and (4) plaintiff never arranged an interview or had any conversation concerning either of the candidates with anyone at Akin Gump.

Thus, as a matter of law, the court held there was no mutual assent between the parties.  And, moreover, even a contract was formed, the recruiter was not the "procuring cause" of the attorney's placement and, thus, there was no breach of contract.

Sivin-Tobin Associates LLC v. Akin Gump Strauss Hauer & Feld LLP, 107123/06 (Solomon, J.).

[Meredith R. Miller]

Medellin and Contracts Revisited II

Justice Roberts' opinion in Medellin v. Texas has been praised as "modest and fairly careful."  But on the crucial question of self-execution, I find the opinion both bold and confusing.  Bold, because I think the petition for cert. was improvidently granted in this case.  As Justice Roberts notes in footnote 1 of the opinion, because Medellin confessed within three hours of his arrest, and because according to the ICJ's judgment in Avena, consular notification would have been timely if effected within three days, Medellin could not have been prejudiced based on the U.S. violation of the Vienna Convention on Consular Relations.  The Texas courts so found on the merits of Medellin's habeas petition.  The Court could have simply upheld that decision as satisfying the "review and reconsideration" required by Avena.  End of the matter.

I find Roberts' opinion confusing on the vital matter of what it takes to make an international agreement self-executing.  Or to put it in less technical language, when does an international agreement have direct effect as domestic law even without any congressional implementing legislation and under that test, must state courts give effect to the CISG in disputes where it provides governing law?  Michael Van Alstine and Antonin I. Pribetic provide reasoned grounds for thinking that the CISG is a self-executing agreement under the test articulated by Justice Roberts.

Van Alstine writes:

Chief Justice Roberts' opinion in Medellin does not require express language for self-execution. Indeed, at one point he refers to the intent of the Senate upon giving its consent to treaty ratification. See slip op. at 12 (reasoning in part that the UN Charter was not self-executing because there was no "indicat[ion] that the Senate that ratified the U. N. Charter intended" it to have direct domestic law effect). Moreover, he quoted with approval Judge Boudin's opinion from Igartúa-De La Rosa v. United States, 417 F. 3d 145, 150 (1st Cir. 2005) to the effect that a treaty need merely "convey[] an intention that it be 'self-executing' and [be] ratified on these terms.” Slip op. at 9.

Antonin Pribetic applies Justice Roberts' reasoning to the CISG as follows, beginning with a quotation from page 9, fn 3 of the Majority opinion:

"Accordingly, a number of the Courts of Appeals have presumed that treaties do not create privately enforceable rights in the absence of express language to the contrary. [citations omitted]."

Clearly, the CISG does "create private rights" or does "provide for a private cause of action", in circumstances where both parties are from Contracting States (CISG, Art. 1(1)(a)) and the pre-requisites of applicability, internationality and territoriality are otherwise met (Art. 2-6).

These readings of Roberts' opinion are well-justified and should prevail. 

But the dissent provides an alternative reading of Roberts' opinion which is not without support in that text.  For example, the language from Igartúa-De La Rosa v. United States quoted by Michael Van Alstine above actually suggests to me (as it does to the dissent) that a court must look to language in the treaty conveying an intention that the treaty be self-executing.  This reading is reinforced on page 18 of the opinion where Justice Roberts writes that "we do think it rather important to look to the treaty language to see what is has to say about the issue" of self-execution. 

But as the dissent points out at page 12 (quite rightly in my opinion), it is unlikely that a multilateral treaty would ever address the issue of self-execution, as that issue is handled differently in different domestic contexts.  Rather, treaties usually express the expectation (though language such as the U.N.Charter Art. 94's "undertake to comply") that states will take whatever measures are necessary as a matter of domestic law to make the relevant provisions effective as a matter of domestic law. 

In short, I think a smart commercial lawyer whose client would prefer to have her contract governed by the U.C.C. could convince a trial court that Justice Roberts' opinion now means that because there is no language in the CISG that expresses or implies an intention on the part of the parties to the CISG that it be a self-executory agreement, it cannot be given direct effect by U.S. courts absent congressional legislation to that effect. 

[Jeremy Telman]

Medellin and Contracts Revisited I

Having now carefully read the Medellin case, I have two more comments to make that relate to earlier posts on contracting with the U.S. government and the enforceability of international agreements as domestic law.  Today, I will take up the first theme.  The good news is that both the Medellin majority and the dissent agree that making it easy for third parties to predict when the U.S. will abide by its international obligations is a good thing.  The bad news is that they come to different conclusions about how to facilitate U.S. cooperation in treaty regimes.

Justice Roberts, writing for the majority, chateracterizes the dissenting judges' approach to the issue of self-execution of treaties as entailing "an ad hoc judgment of the judiciary," which could result in differing outcomes even if the same international agreement was at issue in successive cases. Slip op. at 19.  Justice Roberts rejects this approach:

It is hard to believe that the United States would enter into treaties that are sometimes enforceable and sometimes not.  Such a treaty would be the equivalent of writing a blank check to the judiciary.  Senators could never be quite sure what the treaties on which they were voting meant.  Only a judge could say for sure and only at some future date.  This uncertainty could hobble the United States' efforts to negotiate and sign international argreements.

Id. at 19-20 (majority opinion).  Justice Breyer, writing in dissent, characterizes the majority as requiring language in a treaty specifying that the treaty is to be self-executing before it can be given direct effect as domestic law.  Slip op. at 12 (Breyer, J., dissenting).  After pointing out that few multilateral treaties would contain such language, since in some countries (e.g., the Netherlands) treaties concluded by the executive, are always given direct effect, even absent parliamentary approval, Justice Breyer gets a bit colorful:

In a word, for present purposes, the absence of presence of language in a treaty about a provision's self-execution proves nothing at all.  At best the Court is hunting the snark.  At worst it erects legalistic hurdles that can threaten the application of provisions in many existing commercial and other treaties and make it more difficult to negotiate new ones.

Id. at 12-13.  And there you have it.  The Justices want to facilitate U.S. participation in international agreements, but each side is convinced that the other side's approach to the question of self-execution undermines such participation.

Tune in tomorrow for a discussion of why I am less certain than Michael Van Alstine and Antonin Pribetic that the self-executory nature of the CISG is beyond question.

[Jeremy Telman]

Bloggers Sued for Breach of Contract

The Law Professors Blog Network (LPBN) is suing bloggers Franklin G. Snyder (left, top) and Keith A. Rowley (left, bottom) for breach of contract in connection with their blogging activities on the Commercial Law blog, allegedly in breach of contractual provisions committing both contracts professors to devote "their full time and skill exclusively to the ContractsProfs Blog."  According to the complaint, although Snyder and Rowley are listed as Blog Editor and Contributing Editor respectively of the ContractsProfs Blog, they have joined "a ragtag crew of renegades seeking to undermine the LPBN's dominance in law prof blogging, promote communism and end civilization as we know it."  Rowley is listed as a "Contributor" on the Commercial Law Blog; Snyder is listed as a "Guest." 

Reached for comment at his vacation home on a private island, Professor Rowley argued that his agreement with LPBN came in the form of a click-wrap contract, the terms of which he never read.  "Who does?" he queried. 

Snyder, reached at his new offices in Texarkana, responded to the lawsuit as follows, "Look, just because I'm a guest, doesn't mean I'm a welcome one.  Besides, -- STRIKE?!? HOW CAN YOU CALL THAT A STRIKE?!?  IT WAS THREE FEET OVER HIS HEAD!"

[The Editors}

Potential Plot Line for "Six Feet Under"

The Metropolitan News-Enterprise is fast becoming one of my favorite sources of contract law news.  Last week, the News-Enterprise supplied the basis for a post about chutzpah. Today, the News- Enterprise reports on a fascinating case involving a missing cadaver. 

In March 1996, Isol Cartheuser entered into an agreement with the University of California, Irvine (UCI) to donate her body to UCI's College of Medicine after her death.  Ms. Cartheuser died later that year.  Two years later, Ms. Cartheuser's grandson and adopted son, Butch Vanderpool, and his wife contacted UCI to learn when it would return Ms. Cartheuser's remains.  They received no reply, and months later they learned of news stories about UCI's failure to keep track of donated bodies and unauthorized sales of body parts. 

UCI eventually confirmed receipt of the body but explained that it had no information regarding the disposing of the cremated ashes.  The Vanderpools and four other families then sued UCI alleging breach of contract and other causes of action.  The breach of contract claim was apparently based on the Vanderpools' assertion that Ms. Cartheuser had agreed to donate her body on condition that her remains be returned to her family after UCI was done with it.  California's Fourth District Court of Appeal rejected the Vanderpools' claim, finding that there was no such unambiguous promise, nor was it clear to whom the body was to be returned if there was such a promise.

Vanderpool v. Regents of the University of California can be found here (decided March 28th).

[Jeremy Telman]

International Agreements: Once More

Apologies to those of you who are getting tired of the treaties-as-contracts theme,but once more unto the breach!  We have had a couple of recent posts, here and here, about the danger that its international partners will be less willing to enter into agreements with the United States because of recent trends in U.S. law, and today there are new developments on this topic, although this is hardly news.

Our friends over at the Consumer Law and Policy blog have a post today on a New York Times story about the refusal of an Italian court to enforce a judgment against an Italian motorcycle helmet manufacturer because "a peculiarity of American law — punitive damages — was so offensive to Italian notions of justice that it would not enforce the Alabama judgment." 

One might assume that some sort of international agreement would be in place that would reqiure foreign courts to enforce judgments of U.S. courts.  According to the U.S. Department of State, no such agreements are in place and here's why:

Although there are many reasons for the absence of such agreements, a principal stumbling block appears to be the perception of many foreign states that U.S. money judgments are excessive according to their notions of liability.

[Jeremy Telman]

Medellin and the CISG

The University of Michigan's Bruce Frier has raised the following interesting question in the aftermath of the Supreme Court's decision in Medellin v. Texas (already mentioned on this blog here) yesterday:

Does anyone know whether the CISG is among the treaties whose enforceability within the United States is endangered by today's Supreme Court decision?

I'm not sure anyone knows, but two Contracts Profs have ventured opinions and given me permission to post them here. 

University of Maryland's Michael Van Alstine writes:

The CISG should satisfy even the Court's (misguided and historically unfounded) heightened requirement for self-execution.  In his message to the Senate in 1983, President Reagan expressly stated the premise that the CISG would be self-executing upon Senate consent and later ratification.  See Message from the President of the United States to the Senate Transmitting the United Nations Convention on Contracts for the International Sale of Goods, Sept. 21, 1983, S. Treaty Doc. No. 98-9 (1983) ("The Convention is subject to ratification by signatory States (Article 91(2)), but is self-executing and this requires no federal implementing legislation to come into force throughout the Untied States").

Seton Hall's Michael Zimmer is unpersuaded:

Given that the Court said the Treaty must explicitly include a provision that it is self-executing, I am not sure that, without more, President Reagan's statement is any better than President Bush's statement.

One note of clarification might be helpful for our readers.  Because the CISG is a treaty, under the Supremacy Clause, it is binding law for international contracts for the sale of goods, provided that the parties to the contract are nationals of signatory states.  The parties might clarify that they intend to be bound by the CISG or by the UCC, and if they do so, this issue would not arise, because parties can freely contract around the CISG or free to choose to be bound by it.  The issue would only arise if the parties do not specify which law governs and at least one party tries to argue that U.S. law relating to the sale of goods rather than the CISG should govern.

The Blog would welcome additional thoughts.

[Jeremy Telman]

Medellin and Contracts

The U.S. Supreme Court today decided Medellin v. Texas.  Links to the opinion as well as extended scholarly discussion of the case can be found, for example, on Opinio Juris, here, and on SCOTUSblog, here, here and here.  The crucial question in the case is whether the International Court of Justice's 2004 ruling in Mexico v. U.S. (Avena) requires implementation by state courts (in this case Texas courts) where the President has issued a memorandum directing state courts to implement the decision. 

In Avena, the ICJ found that the U.S. had violated its obligations under Article 36 of the Vienna Convention on Consular Relations by failing to advise foreign nationals who are criminal suspects of their right to consular notification and consultation.  The ICJ suggested that the appropriate remedy was a case-by-case review and reconsideration to determine whether the foreign nationals had suffered prejudice because they were denied their right of consular notification and consultation.  Medellin, who was arrested, convicted and sentenced to death in Texas without being informed of his Article 36 rights, is one of the criminal defendants potentially affected by the rulling.  Texas has taken the position that the ICJ ruling cannot override state procedural rules limiting defendants' rights to file successive habeas petitions and that the President lacks constitutional authority to require state courts to comply with a decision of the ICJ. 

In an opinion authored by Chief Justice Roberts, the U.S. Court ruled 6-3 in favor of Texas.  Justice Roberts first noted that the ICJ statute is not a self-executing treaty and that Congress has taken no action to make it so. Article 94 of the U.N. Charter, under which each state undertakes to comply with decisions of the ICJ, does not mean that there are to be domestic remedies in case of non-compliance.  The Chief Justice also found no authorization, either from Congress or in the Constitution, empowering the President to direct state courts to implement a decision of the ICJ.

So, how does this relate to contracts?  Well, first, there is some overlap between this ruling and a previous post about how recent developments in U.S. doctrine are creating new obstacles for parties considering entering into agreements with the U.S.  The majority's expansive view of the doctrine of non-self-executing treaties leaves the U.S. (or in this case state governments) free to refuse to abide by the U.S.'s international obligations.  As Justice Breyer's dissenting opinion makes clear, there are strong arguments suggesting that the purpose of the Supremacy Clause was to create a presumption that treaties are self-executing. 

Second, contracts scholars are already discussing the ramifications of this opinion with respect to the Convention on the International Sale of Goods.  If Article 94 of the U.N. Charter does not obligage the U.S. to implement decisions of the ICJ by enforcing them domestically, could there be a problem if, for example, state courts were to decide that the CISG is not binding on them? 

The Medellin opinion is long and I just gave it a quick read.  I will be grateful to anyone who can provide additional thoughts on the opinion and/or corrections to my initial chracterization of it.  I also welcome thoughts on the CISG issue.

[Jeremy Telman]

A Bad Case of Chutzpah

The Metropolitan News-Enterprise reports on a charming little case called Shalant v. Smith that was recently affirmed by the California Court of Appeals, 2nd District. 

In 1998, Stuart Smith retained Joseph L. Shalant for $5000 to represent him in a malpractice action.  Shalant filed claims against two physicians on Smith's behalf and eventually informed Smith that he had done so.  Four days before Smith was to be deposed in the action, Shalant demanded a non-refundable $25,000 fee plus $10,000 in costs and threatened to discontinue the representation if Smith did not pay.  Smith paid. Some time later, Smith fired Shalant after Shalant shouted at him in a telephone conversation.  Smith demanded a return of the $25,000 retainer on the ground that it violated California's Medical Injury Compensation Reform Act (MICRA).  Shalant refused.

In 2002, having retained new counsel, Richard Booth, Smith was able to settle his malpractice claim for $500,000.  Shalant claimed entitlement to a part of that recovery based on quantum meruit, but Smith and Booth refused.  Meanwhile, the State Bar Association was investigating Shalant for having entered into an illegal fee agreement with Smith.  Indeed, the State Bar Court found that the fee agreement violated MICRA and was the product of abusive conduct by Shalant constituting "a coercive act involving moral turpitude."  Since Shalant had been disciplined on four previous occasions, he was disbarred as a result of this conduct.  Shalant refused to return the improper $25,000 fee so the State Bar reimbursed Smith.  Happy ending, no?

No.  In 2006, Shalant sued Smith and Booth for quantum meruit, claiming entitlement to 85% of the appropriate MICRA fee that Booth had received.  The case was dismissed because the statute of limitations for quantum meruit claims had lapsed.  Shalant amended his complaint to add claims for breach of contract by both Smith and Booth and alleging that Booth was unjustly enriched.  The California Court of Appeal this week affirmed the dismissal of that amended complaint.  Shalant was not in privity with Booth and thus could not sue him for breach of contract.  Shalant was in privity with Smith, but since a client has a right to discharge his attorney, Shalant's only possible recovery would have been in quantum meruit.  However, any possible quantum meruit claim, the court found, was still barred by the statute of limitations, as was Shalant's unjust enrichment claim.

The full case can be downloaded here.  The opinion issued on March 19, 2008.

[Jeremy Telman]

The Mortgage Contingency Clause: A Nice Example of a Condition

When teaching the law of contract conditions, I find that the mortgage contingency clause contained in most residential real estate contracts is a palpable example.  A simple and recent New York Supreme Court case provides a ready illustration.

Plaintiffs/sellers contracted with defendant/buyer for the purchase of real estate.  Buyer deposited $35,000 in escrow with the sellers' attorney.  Sellers were ready, willing, able to close on the date provided in the contract.  However, buyer's attorney informed the sellers that the buyer would not be appearing at the closing because the buyer did not have a valid mortgage commitment in place.  The buyer requested return of the down payment.

Sellers brought suit seeking summary judgment in lieu of complaint, relying on the contract of sale.  Buyer cross-moved for summary judgment, pointing to the contract's mortgage contingency clause.  The clause provided that the obligations of the buyer were conditioned upon the issuance of a written commitment on or before "45 days from date hereof."  The paragraph provided that, if the commitment was not issued within that time,"then either party may cancel this contract by giving notice to either party . . ., in which case the contract shall be deemed canceled. . . ."

The court granted the buyer's cross-motion for summary judgment, holding:

[T]he defendant, has demonstrated that she made a good faith attempt to obtain a written commitment. The mortgage contingency clause contained in the contract provides that the purchaser shall (a) make prompt application to a lender for a mortgage loan, (b) furnish accurate and complete information as required, (c) pay all fees related to the application and loan, (d) pursue such application with due diligence, (e) cooperate in good faith with the lender, and (f) promptly give notice to the seller of the name and address of each lender that the purchaser has made an application to. The defendant has demonstrated compliance with such terms.

* * *

As the defendant was unable to obtain a mortgage commitment with due diligence, and notified the plaintiff accordingly prior to the closing date, the contract was deemed canceled and therefore, the defendant is entitled to a full refund of her down payment.

Buyer was awarded the return of her down payment.

Schwiesow v. Werner (NY Supreme Court, Nassau County) (Friedman, J.)

[Meredith R. Miller]

What We Talk About When We Talk About Supporting the Troops

MTV films is releasing Stop-Loss at the end of the month.  Here's a synopsis from the website:

Decorated Iraq war hero Sgt. Brandon King makes a celebrated return to his small Texas hometown following his tour of duty. He tries to resume the life he left behind. Then, against Brandon’s will, the Army orders him back to duty in Iraq, which upends his world. The conflict tests everything he believes in: the bond of family, the loyalty of friendship, the limits of love and the value of honor.

But for those of you who like your media old school, The Nation has published Michael Zweig's "The War and the Working Class"  The essay explores a number of contract issues in connection with the U.S. military's recruitment practices.  These issues include "stop-loss," which Zweig describes as the military reserving "the right to extend the deployment time and active-duty status of every soldier beyond the service dates prescribed in their enlistment contracts and mobilization papers."  According to Zweig, most soldiers were unaware of the stop-loss provision but by 2006, it had been enforced against 50,000 soldiers.  Zweig also reports that court challenges to the enforcement of the stop-loss provision were unsuccessful. 

Zweig also identifies another questionable practice.  The military entices recruits with promises of benefits, such as educational training and signing bonuses but reserves the right not to pay such bonuses if the soldier leaves the military before her or his commitment is over, even if the reason for the soldier leaving the military is severe combat injuries.  This seems like the sort of loophole that a legislature concerned about supporting the troops could easily close, but Congress has not done so yet.

[Jeremy Telman]

It's a Mystery: Author's Settlement Agreement is Ambiguous

Walter Mosley and Joy Kellman were married for over 13 years.  During that time, Mosley commenced his writing career and became famous for, among other works, a series of stories starring a detective named Easy Rawlins, and his sidekick, Mouse.  Mosely and Kellman entered into a settlement agreement in tandem with their divorce.  At the time, Mosley had written seven Easy Rawlins books and three others, all of which were defined by the parties' agreement as "Marital Books."  Further, Paragraph 4.1(d) of the parties' 27-page agreement settling their divorce provided that:

the Wife shall receive 25 percent. . . of any funds. . . paid to the Husband on account of Marital Books/Literary Works. . . in written, verbal and visual communications, whenever produced after the date of execution of this Agreement, including but not limited to future publishing of Marital Books/Literary Works, screenplays. . ., motion picture rights, fiction and non-fiction, magazines, records, tapes (audio and video), disks (audio, video, CD, DVD, computer), theatrical productions of any kind, movies, television, television movies and radio productions, and any spin-off from any of the foregoing, including but not limited to any television series based on Easy Rawlins and Mouse.

In New York County Supreme Court, Kellman has sued Mosley for breach of contract, alleging, among other things, that he breached Paragraph 4.1(d).  Kellman claims that Mosley published three new Easy Rawlins novels since the execution of the Agreement, and that, in addition to other projects, a motion picture of one post-divorce title, Little Scarlet, is set to be released.  She argues that she has not received her share of the proceeds from these projects.  And, she argues that she is entitled to her percentage of the proceeds because she reads Paragraph 4.1(d) as entitling her to 25% of any future books or projects which are based on Easy Rawlins and Mouse, regardless of whether the the new projects are listed as "Marital Books."  She basically claims the right to a percentage of net proceeds from any new works or projects which involve the character Easy Rawlins in any way.

Mosley responds that Kellman is not entitled to a percentage of the earnings on the new books in the Easy Rawlins series that were written post-divorce.

In a recent decision, Supreme Court, New York County (Silbermann, J.) denied Kellman's motion for partial summary judgment.  It held that this provision was "ambiguous as to the extent to which Kellman's interest follows Mosley's exploitation of Easy Rawlins in the future works." The court paid particular attention to the words "fiction and non-fiction" and the meaning of the word "spin off."  Further, the extrinsic evidence offered by Mosley of the drafting process merely offered a different view of the meaning of the contested terms "fiction and non-fiction" and did not clarify the meaning of the contract language.

Law.com coverage.

Kellman v. Mosley (2/22/08, Justice Silbermann).

[Meredith R. Miller]

Real Estate Developer's Detrimental Reliance Entitles Him to $6.5 million

A trial judge in Suffolk County, New York has awarded a real estate developer roughly $6.5 million in damages based on the developer's "detrimental reliance."

The plaintiff Ron Parr, a local real estate developer, had entered into business dealings with another developer, defendant Pitcairn Properties, Inc. The parties' stated intention was to develop and manage real property in Suffolk County, Long Island. In connection with a real estate transaction to obtain undeveloped lots in Ronkonkoma, defendant promised to "issue shares of voting common stock [of a single purpose entity that was to hold title to the properties] to [plaintiff] Ron Parr or his designee for 50 percent of the agreed upon residual value. . . of the property at closing . . ., less the amount paid for the property together with all related costs." When a 50% interest was not transferred to plaintiff, he sued. Plaintiff asserted that "he relied, in good faith, upon all of the representations made to him, most especially that he was entitled to a fifty percent share in the properties."

The court primarily justified its decision to award damages to plaintiff based on plaintiff's detrimental reliance on defendant's promise to transfer the half interest in the properties.* Yet, the court based its damages award on the full expectation measure -- that is, the court awarded plaintiff the value of the performance he was entitled to under the contract, roughly $6.5 million. Perhaps reliance and expectation were one in the same here, because plaintiff originally obtained the right to title to the properties as part of the settlement of a previous action, and transferred that title to the single purpose entity, presumably in reliance on the promise of receiving a half interest.

*A sentence in the opinion that baffles me: "Since a portion of the Plaintiff's action sounds in contract, it is necessary to address only the issues of detrimental reliance and foreseeability inasmuch as the existence of an agreement is not in dispute." Did the judge mean to say "inasmuch as the existence of a promise is not in dispute"? Because, technically, all plaintiff needs is a definite promise to seek damages for detrimental reliance, not the existence of a contract. Perhaps I am missing something here.

Parr v. Ronkonkoma Realty Venture I LLC (2/26/08, Justice Jeffrey Arlen Spinner).

[Meredith R. Miller]

Consequential Damages Welcome Here!

In two cases decided on February 18, 2008, the New York Court of Appeals permitted the award of consequential damages despite contractual provisions in insurance policies excluding consequential loss, so long as the damages were the "foreseeable" and "natural and probable consequence" of a policy breach and were "within the contemplation of the parties" at the time the policy was issued.  So reports James W.. Carbin on the Duane Morris LLP website. 

The cases are Bi-Economy Market, Inc. v. Harleysville Ins. Co. of N.Y., 2008 WL 423451, 2008 N.Y. Slip. Op. 01418 (N.Y. Feb. 19, 2008) and Panasia Estates, Inc. v. Hudson Ins. Co., 2008 WL 420014, 2008 N.Y. Slip Op. 01419 (N.Y. Feb. 19, 2008) and both can be found here.  In both cases, the policies in question excluded coverage for consequential losses, but the Court of Appeals held the insurers liable where the consequential damages flowed not from the event insured against but from the insurer's failure to timely pay the claim.

According to Mr. Carbin, "[t]he Court of Appeals' decision in Bi-Economy is the first recognition that a policy insuring 'business interruption' proves the foreseeability required for an award of consequential damages stemming from an insurer's breach of the policy contract by failure to timely pay a claim, even where the policy contains an exclusion for 'consequential loss.'"  The Court applied the same rule in Panasia Estates but remanded the case for a determination of whether the consequential losses at issue were foreseeable.

[Jeremy Telman]

Peevyhouse Redux?

This story from Robert J. Ambrogi at law.com's Legal Blog Watch:

It is debatable whether George Washington ever chopped down a cherry tree, but we can be certain he was never dragged into court over it. Not so the Martha's Vineyard property owner and his unfortunate landscaper who must pay $90,000 after chopping down 10 of his neighbor's trees. Boston lawyer Terry Klein, at his blog Decisionism, urges anyone considering chopping a neighbor's tree to read yesterday's Massachusetts Appeals Court decision, Glavin v. Eckman.

So who knew that Massachusetts has a law imposing treble damages on anyone who cuts down a neighbor's tree? Certainly not Bruce Eckman. His view of the ocean from the pricey Aquinnah section of this resort island off the Cape Cod coast was obstructed by trees inconveniently located on the lot of his neighbor, James A. Glavin. In 1996, Eckman asked Glavin for permission to cut the trees, but the neighbor said no. Five years later, apparently unable to endure his obscured view any longer, Eckman hired a landscaper and gave him his marching orders: cut down any trees that blocked the view. The landscaper complied and thus this litigation.

Complicating it all was that these weren't just any 10 trees. These were large, mature oak trees. In fact, the trees were a key part of the reason Glavin purchased the lot, which adjoined another lot on which he'd built his vacation home five years earlier. The trees, as the court explained, "were ideally situated to provide shade and serve as a backdrop to a pond that Glavin planned to restore."

That Massachusetts law against cutting your neighbor's trees is silent on how to measure the damages should such cutting occur. Courts generally use either the value of the cut timber or the diminution of property value. But Glavin argued that neither would compensate him. He asked for, and the jury awarded, damages based on what it would cost him to restore the trees. This came to $30,000, the jury concluded, and the trial judge tripled that to $90,000. This was OK, the Appeals Court said, given that "any diminution in market value arising from the wrongful cutting was of less importance than was the destruction of the special value that the land and its stand of mature oak trees held for Glavin."

If there is anyone comparable to George Washington in this tree-chopping tale, it may be the landscaper, who chose not to appeal the jury's verdict against him. It is almost as if the landscaper chose to say, "I cannot tell a lie."

Glavin v. Eckman

Hold back your chainsaws, Massachusetts!

[Meredith R. Miller - h/t Alan Hornstein]

Why Is a Burrito Sandwich So Hard to Swallow?

As Professor Marjorie Florestal (University of the Pacific McGeorge School of Law) notes in the abstract to her new article, Is a Burrito a Sandwich? Exploring Race, Class and Culture in Contracts, a recent case involving the question of whether or not a burrito is a sandwich sparked a "firestorm of media attention."  She might have cited to this blog as evidence.  Some readers may be disappointed to learn that the article does not in fact answer the question in its title.  Well, one thing we know for sure, since it's not a goose, a duck or a turkey, a burrito must be a chicken.

In any case, for those hungry for Professor Florestal's insights on the case, here's the rest of the abstract:

A superior court in Worcester, Massachusetts, recently determined that a burrito is not a sandwich. Surprisingly, the decision sparked a firestorm of media attention. Worcester, Massachusetts, is hardly the pinnacle of the culinary arts - so why all the interest in the musings of one lone judge on the nature of burritos and sandwiches? Closer inspection revealed the allure of this otherwise peculiar case: Potentially thousands of dollars turned on the interpretation of a single word in a single clause of a commercial contract. Judge Locke based his decision on common sense and a single definition of sandwich - two thin pieces of bread, usually buttered, with a thin layer (as of meat, cheese, or savory mixture) spread between them. The only barrier to the burrito's entry into the sacred realm of sandwiches is an additional piece of bread? What about the one-slice, open-face sandwich? Or the club sandwich, typically served as a double-decker with three pieces of bread? What about wraps? The court's definition lacked subtlety, complexity or nuance; it was rigid, not allowing for the possibility of change and evolution. It was a decision couched in the primitive formalism Judge Cardozo derided nearly ninety years ago when he said [t]he law has outgrown its primitive stage of formalism when the precise word was a sovereign talisman, and every slip was fatal. It takes a border view today. Does it? Despite the title of this piece, my goal is not to determine with any legal, scientific or culinary specificity whether a burrito is a sandwich. Rather, I explore what lies beneath the primitive formalism or somewhat smug determination of the court that common sense answers the question for us. I suggest Judge Locke's gut-level understanding that burritos are not sandwiches actually masks an unconscious bias. I explore this bias by examining the impact of race, class and culture on contract principles and on the determination of this case.

[Jeremy Telman]

Courts Should Not Imply Employment Contracts in U.K.

When is someone who works for an employer an "employee"?  The question can be significant in the U.K., where "employees" have certain rights that "agency employees" do not.  Agency employees are those who work for employment agencies, who in turn provide the workers to the ultimate employer.  Under the law, employees get protection from unfair dismissal when they are "employed under a contract of service, express or implied."  The question thus becomes when should a court imply a contract with the end user of the services if they are performed under an express contract with an employment agency?

In a recent decision, James v. London Borough of Greenwich, [2008] EWCA Civ 35, the Court of Appeal held that courts should not routinely imply a contractual relationships for such workers.  In the case, Merana James signed a "temporary work agreement" with an employment agency, which then found her a job working for the Borough Council.  Her contract plainly stated that she was not an employee of the Council, but rather was an employee of the agency.  She worked for the Council for several years, before being replaced by another agency worker.  She claimed unfair dismissal, and argued that she should be considered an employee of the Council.

Not so, said the court. Under some circumstances it might be necessary to imply a contract with the end user if that were the only way to make sense of a particular transaction.  If the conduct of the parties could only be explained by the existence of a contract with the end user, there would be an implied contract.  But here, said the court, the conduct of the parties was fully explained by the agency contract signed by James and the contract between the agency and the Council. It was thus irrelevant that James thought herself an employee of the Council and that others thought of her as an employee.  Lord Justice Mummery noted that the question of whether protection should be given to agency workers was an important one, but not one for the court to decide:

The courts and tribunals are fully aware of the current controversy about the absence of job protection for agency workers, who do not have an express or implied contract of employment. While this appeal and this judgment were pending articles appeared in the newspapers under such headlines as "The slow death of the Real Job is pulling society apart", "Agency Workers could get full-time rights" and "Temps may get full work rights under EU Law." A Private Members' Bill was introduced to reform the law. It was doomed to failure for lack of support from the Government and failed to get a reading. There is no current government proposal to introduce legislation giving agency workers similar rights to those enjoyed by employees. There are negotiations about the possible regulation of agency workers through the medium of an EC Directive to member states on agency/temporary workers.

The courts and tribunals are also well aware of the nature of the arguments for and against a change in the law, but it is not for them to express views about a change or to initiate change. This is a matter of controversial social and economic policy for debate in and decision by Parliament informed by discussions between the interested parties- the Department for Business and Enterprise, the TUC, the CBI and other employers' organisations and the European institutions and governments of member states. The questions for discussion, negotiation and decision are not legal questions susceptible to adjudication or appropriate for comment by a court or tribunal. The questions are outside their province and competence.

[Frank Snyder]

Higher Wages Can't Count as Reimbursement

California employers and their employees cannot agree to a system under which the worker gets a higher wage and pays his or her own business expenses, according to a recent decision by the state supreme court.  The California Labor Code requires employers to reimburse all expenses that employees incur in the course of their work.  Many employers have tried to deal with this rule by offering higher salaries or by offering lump-sum payments to workers.  But the recent decision in Gattuso v. Harte-Hanks Shoppers, Inc., makes that very difficult to do, according to a recent client advisory by Laura P. Worsinger and Chad C. Coombs of Los Angeles’s Buchalter Nemer PLC.

[Frank Snyder]

Supreme Court: Arbitration Clause Trumps State Law

Law professors keep writing about the problems with pre-dispute arbitration clauses and their possible interference with important public interests.  Meanwhile, the U.S. Supreme Court keeps ignoring all that advice.  Latest win for the pro-arbitration forces is Justice Ruth Bader Ginsburg's 8-1 decision in Preston v. Ferrer, No. 06-1463 (U.S. Feb. 20, 2008), which holds that the question of whether a contract is unenforceable under California's Talent Agencies Act is one that must be decided by an arbitrator, not by a court.

California law puts certain restrictions on talent agents, and vests exclusive jurisdiction over their contracts in the state's Labor Commissioner.  Television's "Judge Alex" Ferrer (left) got into a dispute with entertainment lawyer Arnold Preston (right).  Preston claimed certain fees under a contract with The Judge, and invoked arbitration, as provided in the contract.  Ferrer countered by claiming that the contract with Preston was invalid because it was in violation of the TAA.  The state Court of Appeals held that arbitration had to be stayed while the Commissioner reviewed the contract.

This was error, wrote Ginsburg, since when the parties have an arbitration clause the Federal Arbitration Act supersedes state laws that provide for a specific forum.  It is for the arbitrator, not the Commissioner, to determine whether the contract violates the state's TAA.

Justice Thomas dissented on the ground that the Federal Arbitration Act does not apply in state court proceedings.

[Frank Snyder] 

Contracting Around Rent Stabilization: Void Ab Initio

Riverside Syndicate, Inc. v. Munroe is a recent (2/7/08) New York Court of Appeals decision that provides a nice example of a contract that is against public policy. 

Tenants leased three rent-stabilized apartments that were apparently combined into one unit.  One of those apartments was originally subleased by the tenants - and the landlord brought an eviction proceeding, claiming the sublet was illegal.  In order to settle the eviction proceeding, the tenants and the landlord agreed that the tenants "shall be recognized as the lawful, rent stabilized tenants of the subject premises at a monthly rental rate of $2,000."  This monthly rent was well above the maximum amount allowed under rent stabilization laws (according to the landlord, the maximum rent at the time would have been $1325; the tenants suggested a lower amount).  As part of this settlement, the tenants waived the right to challenge the legality of the rent and agreed that, if the apartments were deregulated, the landlord would offer a 2-year renewal lease with a maximum rent increase of 8%.  In 2000, the apartments were deregulated.  Things were fine until 2003, when the landlord began eviction proceedings based on the claim that the tenants were not using the apartments as their primary residence.  The landlord sought a declaratory judgment that the settlement agreement was void as against public policy.

The Court unanimously held that the agreement was against public policy.  The Court held that the agreement was, on its face, a waiver of the benefit of rent stabilization and, therefore, void.  Judge Smith wrote:

Such an agreement allows a tenant who already has one home, and who is able to pay more than the legal rent for a second one, to use the law as a means of getting that second home in perpetuity at a bargain price. * * * [T]o countenance such an arrangement would violate the fundamental policies and purposes of the statutory rent regulation scheme.

What is the net result?

The agreement is void as to both parties, and neither party is entitled to rely on it.  The tenants may well have a strong claim, subject to any statute of limitations defense that may exist, to recover the excess rent they paid; they may also have a strong claim to rescind the deregulation of the apartments, if that deregulation was the result of the illegal agreement.  We do not prejudge these claims except to say that, having successfully argued that the agreement was void at inception, the landlord may not invoke the agreement in its own defense.

Casting aside any policy debates about the propriety and effectiveness of rent stabilization laws, it seems like this is a reasonable and uncontroversial result.  Judge Smith seems to hit the nail on the head: "Agreements like the one at issue here distort the market without benefiting the people the rent stabilization laws were designed to protect." 

[Meredith R. Miller]

Conservative Authors' Suit Headed to Arbitration

As reported in The New York Times last year, a group of five authors sued Eagle Publishing, the parent company of Regnery Publishing, alleging that the publisher was depriving authors of royalties by selling the books at deep discounts through affiliated entities.  The suit is of greater interest than your run-of-the-mill contract dispute because the press has made a name for itself as a conservative press.  Authors and publishers are united not in the quest for profits but in the honorable cause of spreading the conservative gospel in its various forms, ranging from "Unfit for Command: Swift Boat Vetermans Speak Out Against John Kerry" to "Dereliction of Duty: The Eyewitness Account of How Bill Clinton Compromised America's National Security."  As one of the plaintiffs put it, "We're not looking for a payoff.  We're looking for justice."

Today, the New York Times reports that Judge Huvelle of the U.S. District Court in Washington dismissed the case based on an arbitration clause in the plaintiffs' contract with Regnery.  Plaintiffs have announced their intention to continue the quest for justice in arbitration next week.

[Jeremy Telman]