Sunday, January 25, 2015
An Ohio appellate court upheld a $1.2 million breach of contract judgment against Kent State's men's basketball coach, Geno Ford. The judgment enforced a liquidated damages clause entitling Kent State to damages equal to Ford's annual salary ($300,000) multipled by the number of years remaining on his contract at the point of breach. In Kent State University v. Ford, Coach Ford tried to characterize the liquidated damages clause as a penalty. The court applied Ohio law to determine whether at the time the contract was entered into: 1) damages were uncertain; 2) the damages provided for in the contract were not unconscionable; and 3) the parties intended for damages to follow a breach. The court upheld the trial court's determination that the standard was satisfied in this case. Coach Ford can take consolation in the fact that his salary is short of Jim Harbaugh's by an order of magnitude.
PetaPixel.com reports on a wedding photographer who, after charging a couple $6000 to shoot a wedding album, sought an additional $150 for the album cover. The couple balked, so the photographer is refusing to hand over the photographs and is threatening to charge them an additional $250 "archive fee" if they do not pay up in a month. PetaPixel draws the following lesson from the story:
This all goes to show that as a photographer, you should never rely on verbal agreements when it comes to conditions and charges. Always get everything in writing.
Maybe. The photographer herself has an extremely lengthy blog post about the entire affair in which she claims that everything should have been clear from the written contract. PetaPixel's story makes it seem like an additional charge was added after the contract had been entered into, and if that's the case, the couple might well have balked whether or not the new terms were in writing.
Contracts Prof/Con Law Prof Randy Barnett, writing at the Volokh Conspiracy picked up by the Washington Post, muses interestingly on the applicability of the contractual duty of good faith to the President's duty to faithfully execute the laws in the Constitution's Take Care clause. This helps Barnett reconcile his empathy for the President's refusal to enforce federal drug laws in the face of permissive state laws permitting use of marijuana with his opposition to the President's new initiative on immigration. I've never been persuaded that the contractual analogy is particularly useful in Constitutional interpretation. Suggesting that the contracts doctrine of "good faith" provides a useful gloss on the Take Care clause strikes me as a stretch, but Professor Barnett is always stimulating.
Monday, January 12, 2015
A misplaced comma (or something) cost an Oregon Ducks fan his premium seats to the college football championship game. According to this report from The Oregonian, a University of Oregon alumnus found premium tickets to the game (which he knew were selling for $4000) for $400 on StubHub. When, he placed his order, StubHub indicated that he would be charged $16,59.36, but his credit card was charged $16,059.36. He protested, and StubHub refused to honor the purchase, removing the charge and offering $1600 in StubHub vouchers, which the angry Duck says he will not use. He blows off some steam in a blog post, with observations about obnoxious terms and conditions.
In a sign of the times, MasterCard has filed suit in the Southern Distroct of New York against Nike, according to this report from Bloomberg.and Oregon Live (you have to go through a short survey to read it), for having poached a few of its cyber-security experts. MasterCard is suing the employees for breach of contract and Nike for tortious interference. Nike denies all wrongdoing.
We could not have made this up: The St. Louis Post-Dispatch reports that the Devin James Group (DLG), a public relations firm, is suing another public relations firm, Elasticity. Apparently, Elasticity hired DLG to help represent the City of Ferguson in the aftermath of the shooting of Michael Brown. Elasticity fired DLG when it discovered that DLG's owner had a criminal record. Mr. James was convicted in 2006 for having shot an unarmed man. He claims he did $50,000 of work for which he has not been paid.
In another chapter in the dangers of state governments hiring private companies to handle public services, NJ.com reports that Hewlett Packard will refund New Jersey $7.5 million to get out of its contract to deliver a unifed system to administers the state's public assistance program. The Christie administration and HP agreed last year to suspend work on the project and they entered into a separation agreement in which each side agreed not to sue the other for breach of contract. The state is now looking for a new partner. In the meantime, it "continues to hobble along on its 1980s-era mainframe system," according to NJ.com.
Finally, an interesting conflict between a franchise and a large franchisee. Wendy's is requiring its franchisees to make technology upgrades and renovate stotes. DavCo, which operates 152 Wendy's restaurants is refusing to do so, claiming that Wendy's lacks the authority to require the changes. According to the Baltimore Sun, Wendy's has filed suit to terminate DavCo's franchises.
Monday, December 8, 2014
Yet another non-disparagement case, this time for WTOC.com. This time, it was a woman who cancelled an agreement with a wedding photographer within the contractually created cancellation period, and then went online to explain why she had done so. The photographer threatened legal action claiming that she had violated a non-disparagement clause in the now-cancelled contract.
There was an interesting story last week on the International Business Times about Yo-Yo car sales. Apparently, there are many variations to the practice, but the basic scheme runs as follows: car dealer sells a car to person with bad credit, who is happy to be able to buy a car on any terms. Then, the dealer tries to sell the loan to a third party. If it cannot do so, it calls the buyer back in and demands either a change in the loan terms or the return of the car. The IBT story focuses on a buyer whom the dealer claimed committed felony auto theft and fraud. The buyer filed a civil suit against the dealer, with claims ranging from violations of the Truth in Lending Act to defamation and deceptive trade practices. The dealer has counterclaimed for fraud and breach of contract.
According to an AP story posted here in the UK's Daily Mail, California is wrangling with investors in a $2.3 billion deal for the sale and lease back of state properties. The deal was conceived in the Schwarzenegger administration, but Governor Brown has determined that the deal will cost the state $1.5 billion. California alleges that the investors failed to make an initial $50 million payment, triggering the State's rights to terminate the contract. The investors are seeking a forced sale of the properties. My students have their exam this week, so they might want to think about what we have here: partial breach? material breach? total breach? failure of a condition? did California seek adequate written assurances? The AP story does not clarify these highly testable issues.
Finally, we are happy to report that the law has saved hockey! At least in Erie, Pennsylvania, according to this story on GoErie.com (Warning! This site has lots of annoying popups!). Apparently, the Edmonton Oilers sought to enforce a judgment against the Otters' General Manager Sherry Bassin through a forced sale of the team. The Oilers' scheme then involved buying the Otters through a subsidiary and moving them to Hamilton, Ontario. But U.S. District Court Judge David Cercone blew the whistle and checked the Oilers when he set aside a judgment against Bassin The Oilers would have to proceed through a breach of contract claim if they want to penalize Bassin for misconduct. In the meantime, the good people of Erie can enjoy their Otters.
Monday, November 10, 2014
According to this report on the International Business Times website, two children, through their mother, are suing Malaysia Airlines for breach of contract and negligence in connection with their father's death on Flight MH370. Plaintiffs allege that the airline breached a safety agreement that it entered into with their father and the other passengers on the flight.
As reported here in the Bellingham Herald, the Indiana Supreme Court heard arguments on October 30th about the state's contract with IBM to privatize its welfare services. The state was so disappointed with IBM's performance that it cancelled the contract three years into a $1.3 billion, ten-year deal. Friend of the blog, Wendy Netter Epstein (pictured), has written about this case in the Cardozo Law Review.
Sunday's New York Times Magazine has a cover story pondering whether lawyers are going to do to football what they did to tobacco. As an example of what this might look like we have this case filed on October 27, 2014 on behalf of Julius Whittier and a class of plaintiffs who played NCAA football from 1960-2014, never played in the NFL, and have been diagnosed with latent brain injury or disease. Mr. Whittier suffers from early-onset Alzheimer's. The complaint alleges, among other things, breach of contract, based on NCAA documents requiring each member instittuion to look after the physical well-being of student athletes.
Monday, November 3, 2014
As reported on JDSupra here, the Florida District Court of Appeal for the Fourth District, sitting en banc, held that while an insurer’s liability for coverage and the extent of damages must be determined before a bad faith claim becomes ripe, the insured need not also show that the insurer is liable for breach of contract before proceeding on the bad faith claim.
We have also learned from JD Supra of Piedmont Office Realty Trust v. XL Specialty Ins. Co., 2014 U.S. App. LEXIS 20141 (11th Cir. Oct. 21, 2014), in which the United States Court of Appeals for the Eleventh Circuit, elected to certify to the Supreme Court of Georgia the question of whether an insured’s payment obligations under a judicially approved settlement agreement qualify as amounts that the insured is “legally obligated to pay,” and if so, whether the insured’s failure to have obtained the insurer’s consent to settle resulted in a forfeiture of coverage.
According this this report on Yahoo! Sports, Oklahoma State is suing the former Offensive Coordinator of its football team, Joe Wickline (who now is a coach for the University of Texas), and Wickline has countersued. According to the report, Wickline's contract with Oklahoma State require that he pay the balance of his contract ($593,478) if he left for another position and was not his new team's play-caller. Wickline claims that he is calling plays at Texas. What a bizarre thing to put in a contract. It's a reserve non-compete! In effect, Oklahoma State is saying that it would pay Wickline to call plays for a rival.
According to this report from the Courthouse New Service, Ted Marchibroda Jr., the son of NFL Football coach Ted Marchibroda, filed a $1 million malpractice lawsuit against Sullivan, Workman & Dee and trial lawyer Charles Cummings , alleging breach of contract, professional negligence and breach of fiduciary duty. In a 2011 lawsuit, Marchibroda accused sports agent Marvin Demoff of breaching an agreement to share the proceeds of NFL contracts for linebacker Chad Greenway. He claims that he is also owed money for recruiting center Alex Mack.
And continuing our sports report, Golf.com notes that golfer Rory McIlroy is taking a break from the "sport" to pursue his legal claims against his former management company, Horizon Sports Management. McIlroy claims that Horizon took advantage of his youth to extract an unconscionable 20% fee for McIlroy's off-the-course income. Horizon is claiming $3 million in breach-of-contract damages.
In a simpler companion case to the Sharpe v. AmeriPlan Corp. case about which we blogged earlier today, the Eighth Circuit affirmed the District Court's denial of a motion to compel arbitration in Quam Construction Co., Inc. v. City of Redfield. As reported here on Law.com, the case was relatively easy, since the contract at issue contained permissive language: "the parties may submit the controversy or claim to arbtiration." Given such language, the Eighth Circuit agreed with the Distrcit Court that arbitration could not be compelled.
Tuesday, August 19, 2014
Plaintiff sued the YMCA for injuries sustained when he slipped and fell on stairs that he alleged were negligently maintained. First, let’s get this out of the way:
The YMCA argued that plaintiff was contractually barred from seeking damages against the YMCA because plaintiff had voluntarily signed an exculpatory clause in his membership agreement. That clause provided:
I AGREE THAT THE YMWCA WILL NOT BE RESPONSIBLE FOR ANY PERSONAL INJURIES OR LOSSES SUSTAINED BY ME WHILE ON ANY YMWCA PREMISES OR AS A RESULT OF A YMWCA SPONSORED ACTIVITIES [SIC]. I FURTHER AGREE TO INDEMNIFY AND SAVE HARMLESS THE YMWCA FROM ANY CLAIMS OR DEMANDS ARISING OUT OF ANY SUCH INJURIES OR LOSSES.
A New Jersey trial court granted summary judgment dismissing the complaint. An appellate court reversed. The appellate court framed the issue as “whether a fitness center or health club can insulate itself through an exculpatory clause from the ordinary common law duty of care owed by all businesses to … invitees[.]” The court held that it could not.
While the New Jersey Supreme Court upheld an exculpatory clause in Stelluti v. Casapenn Enters., Inc., 203 N.J. 286 (2010), that case was characterized as involving allegations of injury based upon risks inherent in the activity (bike riding in a spin class). In Stelluti, the New Jersey Supreme Court did not specifically address or decide whether an exculpatory clause may waive ordinary negligence.
Given the expansive scope of the exculpatory clause here, we hold that if applied literally, it would eviscerate the common law duty of care owed by defendant to its invitees, regardless of the nature of the business activity involved. Such a prospect would be inimical to the public interest because it would transfer the redress of civil wrongs from the responsible tortfeasor to either the innocent injured party or to society at large, in the form of taxpayer-supported institutions.
The appellate court also noted that the agreement was presumably a contract of adhesion.
This is a case worth following if appealed to the New Jersey Supreme Court. And a good teaching case because it lays bare the tension between freedom to contract and overriding concerns about general public welfare.
Walters v. YMCA, DOCKET NO. A-1062-12T3 (Superior Ct. of N.J. App. Div. Aug. 18, 2014).
Tuesday, February 18, 2014
During a basketball game at West Chester University in Pennslyvania, freshman Jack Lavery was randomly picked for the $10,000 halftime challenge. Lavery had 25 seconds to make a lay-up, shot from the free throw line, shot behind the three-point line and a half-court shot. Lavery successfully made a lay-up, a shot from the behind the free throw line, and then a shot behind the three-point line. As the clock was winding down, Lavery attempted the half-court shot, but missed. With one hand, he made the half-court shot on his second attempt just as the buzzer went off. As Lavery explains it:
"I stopped and did that one handed shot and it happened to go in. I ran to the other side of the court just high fiving everyone and then I went and bear hugged my dad," said Lavery.
See for yourself:
As you see, the crowd cheered, but the University refused to award the prize money. Why? The contract.
Intrepid reporting by Action News obtained a copy of a contract signed by Lavery. The rules of the contest provide:
I shall have as many opportunities as necessary at each of the first three (3) locations to make a shot; however, no more than ONE (1) attempt may be made at the HALF COURT shot, provided that there is still time left on the shot clock.
Lavery took more than one attempt at the half court shot and, therefore, the University claims that he is inelgible for the prize. Nevertheless, apparently his father intends to "challenge the wording of the contract."
Additionally, the contract reportedly states that anyone who played basketball in high school would be ineligible to collect the prize money. Lavery played high school ball, another reason for his ineligibility.
Reminds me of this:
Monday, January 27, 2014
Today's New York Times has a long story about college coaches in non-money sports, like soccer and lacrosse, recruiting middle schoolers. Like most intersections between amatuer athletics and money, this phenomenon is bad for everyone. According to the Times, the new trend is an unintended consequence of Title IX. There is lots of scholarship money chasing relatively few talented athletes, especially female athletes, in the non-money sports. As a result, players of promise get snatched up very early, so now schools offer scholarship money to eighth graders in the hope that they will commit to play for them when they go to college.
The result is bad for everyone for obvious reasons. Coaches cannot really predict which 13-14 year olds will be All-American athletes. Even if athletic potential is there, injuries, loss of interest or other factors (e.g., life outside of sports) can intervene. The dynamic hurts young athletes because it forces them to focus on one sport very early, playing that sport year round and increasing the likelihood of injury. Then, many athletes recruited in middle school are not top players in college, so they spend their college years as frustrated bench warmers, has-beens at the age of 18. The coaches hate it as well. They've got better things to do with their time than endless telephone converstions with middle schoolers, and they hate the dynamic of having to commit to student athletes before they are confident of the students' potential.
But it's actually hard to have that much sympathy for the coaches, since this is a world they have created by exploiting loopholes in NCAA rules. They could voluntarily self-regulate or simply work at getting a reputation for being a school that only accepts students who arrive at a particular sports program as a result of more mature deliberation. Perhaps it won't work and then a school might have to suffer the ignominy of not having, for example, a top ten women's soccer team. The horrors. University administrators should focus more an graduation rates, employment rates and student well-being and less on rankings.
But the reason I am posting about this is of course the relevant contacts issues. The Times is silent on how the minors bind themselves to particular universities. Since these middle schoolers cannot bind themselves contractually, there must be parents involved. Still, I wonder what the remedy is if a student athlete decides not to attend the university to which she has pre-committed. Of course, the student will sacrifice her scholarship, but if a recruited soccer player decides that she wants to play at a different school, will it really be impossible for her to find a school that will offer her a scholarship when she is a senior? Given that the coaches know that they will make mistakes in recruiting 14-year-olds, they ought to hold a few scholarships in reserve so that they can make offers to late bloomers.
But students may be unwilling to renege on their commitments. As the closing line of the Times article suggests, students may be happy to simply be done with the process, even though they know that they are pretty poor predictors of what they will want for themselves in four years' time. The disservice we do to student athletes is obvious. But the process also disserves colleges and universities. There are lots of reasons to go to college, but the chief reason for almost all students ought to be educational. By forcing to middle schoolers to pick a school based on a sport which will almost certainly never be anything more than a hobby for them, we present a distorted picture of the purposes of higher education -- or perhaps we simply contribute to a realistic picture of higher education which is in fact a disfigurement of education.
Monday, December 23, 2013
Motion to Compel Arbitration Granted in Part, Denied in Part in Antitrust Case v. Cable Providers and Sports Organizations
On November 25, 2013, Judge Scheindlin of the Southern District of New York issued an opinion in Laumann v. National Hockey League, granting in part and denying in part a motion to compel arbitration brought by defendant Comcast and denying in full a similar motion brought by defendant DIRECTV. Plaintiffs claim that defendants, including the National Hockey League and Major League Baseball, along with the major cable and satellite television service providers entered into "agreements to eliminate competition in the distribution of [baseball and hockey] games over the Internet and television [by] divid[ing] the live-game video presentation market into exclusive territories, which are protected by anticompetitive blackouts," and by "collud[ing] to sell the `out-of-market' packages only through the League [which] exploit[s] [its] illegal monopoly by charging supra-competitive prices." These agreements allegedly violate the Sherman Antiturst Act.
At the heart of plaintiffs' beef, it seems, is that if one wants to view "out-of-market" games -- that is, games that do not feature the team from one's home city or the city where one is located -- one must purchase television packages which inculde all out-of-market games, even if one is only interested in the games of one out-of-market team.
Both Comcast and DIRECTV have customer service agreements that feature arbitration clauses and so both defedants moved to compel arbitration. Judge Scheindlin granted Comcast's motion with respect to one plaintiff who purchased an out-of-market package directly from Comcast and thus was clearly bound by the arbitration provision. The remaining plaintiffs had a more complicated relationship to Comcast and claimed that their claims did not arise directly under their customer service agreements with Comcast.
Judge Scheindlin first ruled that any colorable dispute about the scope or validity of the arbitration clause must be referred to the arbitrator. Plaintiffs colorfully objected that where the relationship between the agreements and the claims are too attenuated, granting Comcast's motion would be like compelling arbitration of a claim by a plaintiff who had been hit by a Comcast bus. Judge Scheindlin agreed with respect to one plaintiff, where "the sole nexus between his claims and his Comcast service is the allegation that his DIRECTV package contained material produced by the Comcast" Regional Sports Networks.
Comcast also sought to compel arbitration of claims brought against it pursuant to arbitration clauses in plaintiffs' agreements with DIRECTV. With respect to these claims, Judge Scheindlin noted that there was no clear intent to have questions of arbitrability between a signatory and a non-signatory decided by the arbitrator. She then ruled that the arbitration clause in the DIRECTV agreements did not encompass plaintiffs' claims against Comcast. She also rejected Comcast's claim that plaintiffs should be estopped from bringing a claim under the DIRECTV agreements through any mechanism other than arbitration.
DIRECTV's motion to compel arbitration against another plaintiff failed because the plaintiff is not a DIRECTV customer bound by its arbitration agreement. The DIRECTV subscription is in the name of plaintiff's wife, and the court rejected any claim that he could be bound by admission or estoppel.
Saturday, December 7, 2013
Tough Mudder hosts extreme 10-mile obstacle course challenges. If you are unfamiliar with the company, this video should give you a sense of the challenges Tough Mudder creates:
Before a participant may enroll in an event and run the course, he/she must agree to an assumption of risk, waiver of liability and indemnity agreement.
Outdoor magazine has a story this month about the tragic death of Avishek Sengupta at a Tough Mudder event in Maryland. He jumped into the deep, muddy pool at the "Walk the Plank" obstacle and did not emerge. His tragic death is recounted in harrowing detail in the Outdoor magazine article, which mentions that Avishek's family has sued Tough Mudder and Amphibious Medics, a subcontractor that was onsite to provide rescue services.
Central in the case will be the enforceability of the waiver of liability. The parties weren't too fortchoming with litigation strategy but the article does provide:
Tough Mudder won't discuss its strategy for the Senguptas' legal action—nor will anyone from Amphibious Medics—but if the suit goes forward, its lawyers will likely stress the fact that Avi signed what Tough Mudder calls a Death Waiver, exculpating the company of liability for certain acts of "ordinary negligence" and "inherent risks," such as "inadequate or negligent first aid and/or emergency measures" and "errors in judgment by personnel working the event."
But the Boston-area firm Gilbert and Renton, representing Avi's estate, will likely argue that such waivers do not relieve Tough Mudder of the legal "duty of care" that exists whenever a business knowingly creates predictable hazards for the public. In the case of Walk the Plank, the predictable hazard—drowning—is clear enough. Hence the presence of a rescue diver and lifeguards at the obstacle on the day Avi drowned.
This will be an important and interesting case for liability waivers. Worth following.
[Meredith R. Miller]
Wednesday, November 13, 2013
In a situation that underscores the importance of thinking twice about very long term contracts, the NBA wants to end a contract which requires it to pay two brothers a percentage of its broadcast revenues. Back in 1976, the Silna brothers owned an ABA franchise, the Spirits of St. Louis. When the ABA merged with the NBA, the Silnas agreed to this bargain - they would dissolve their team in exchange for 1/7 of the television revenues for the four ABA teams that were merged. The four teams were the Indiana Pacers, the San Antonio Spurs, the Brooklyn Nets and the Denver Nuggets.
Sure, back in 1976, the Silnas might have looked silly for giving up a huge buyout for something that seemed pretty worthless (the NBA wasn't even televised prime time) but now the deal is being called "the greatest sports deal of all time."
Not kidding about that "all time" either - the Silvas reportedly received $19 million under the contract last season and the contract term is "in perpetuity." Fat chance the NBA will be able to scream foul on the basis of lack of mutuality...
Thursday, September 26, 2013
NFL v. MIA: we've mentioned issues related to this incident on this blog in the past. But, if you ask me, it just got good.
Here's the background: at the 2012 Superbowl, this little flip of the bird happened during the halftime show:
The NFL has since sued (in arbitration) M.I.A. (the bird-flipping artist in the video above) for $1.5 million. The NFL’s claim? It claims that M.I.A. breached her contract because the “offensive gesture” was “in flagrant disregard for the values that form the cornerstone of the NFL brand and the Super Bowl." In the contract, she apparently acknowledged “the great value of the goodwill associated with the NFL and the tremendous public respect and reputation for wholesomeness enjoyed by the NFL."
The case, it sounds, comes down to what is “offensive” and what exactly are the “wholesome” values of the NFL. This FoxSports column does a great job explaining why the lawsuit is “laughable” – with video footage as evidence of just how wholesome the NFL is.
A video of M.I.A. has recently surfaced. In the video, she (rather articulately) explains the absurdity of the lawsuit. As 411Mania.com describes:
[M.I.A.] says the NFL is "scapegoating me into trying to set the goalpost for what is offensive in America." She notes that the picture in which she is seen giving the middle finger also has a group of sixteen year-old girls who were selected from a high school in Indianapolis who are in cheerleader outfits with their "hips thrusted in the air, legs wide open, in this very sexual...sexually provocative position."
Here’s M.I.A. regarding the lawsuit, which she describes as "a massive display of... powerful corporation dick shaking." In light of the 16-year-old cheerleaders on stage behind her, she frames the issue in the lawsuit as whether female sexual exploitation or empowerment is more offensive. Interesting stuff:
[Meredith R. Miller]
Wednesday, July 31, 2013
Today's New York Times features an article on a relatively recent sports phenomenon -- the one-day contract. In a nutshell, the one-days permit a retired player to re-sign with the team he played for in his prime, so that he can retire as a member of that team. The player then shows up at the stadium and the fans can cheer him one last time (until the next opportunity comes around). The team may benefit from the one-day contract in that fans may show up to cheer a retired star and re-experience a team's glory days. The Times charaterizes these contracts as effecting for the players "a meaningless return to a team so they can reflect on how meaningful that team was to them."
This characterization strikes me as unfortunate. The return is far from meaningless. In fact, the contract is all about meaning and not at all about playing a particular sport or even about money for the athlete. San Francisco 49er star Jerry Rice (pictured) was given a one-day contract that actually specified an amount, consisting of his rookie year (1985), his number (80), his retirement year ('06) and then 49, totaling $1,985,806.49. But according to the Times (and Wikipedia), the amount was ceremonial. Rice was not actually paid anything when he re-signed with the 49ers. In baseball, the actual contracts are with farm teams, as teams cannot afford to give up a roster spot during the season -- even for one day. This too is evidence that the contracts are not meaningless.
One blogger thinks the one-day contract phenomenon has gone too far, arguing both that it is meaningless and trivial and that it is an attempt at revisionist history. These players did not actually end their careers with the teams that meant the most to those careers, and so the one-day contracts perpetrate a fraud.
Another way to look at it is that sports is imitating art, at least if the television series Lost is art. Like the characters on Lost, these players get to return to a virtual reality in which they share experiences with the people who meant the most to them at the time in their lives when they had their biggest impact.
Tuesday, July 30, 2013
Today's New York Times features a lengthy article about the Los Angeles Angels' contract with Albert Pujols, the once-mighty St. Louis Cardinals slugger to whom the Times now refers as a faded star. Between now and 2021, the Angels are contractually obligated to Pujols to the tune of $212 million. In the last year of his contract, when Pujols will be 41, he is scheduled to earn $30 million. The article explores the reasoning behind these contracts to some extent. The Angels found that they could not compete with teams like the Yankees in the post-season without the marquee players whom one could only attract with hefty long-term contracts.
But the Yankees' model of buying up the top players in the league does not look so effective right now. They won the World Series in 2009, and they have been contenders most years, but the 1996-2000 glory days are long behind them. The Times article on Pujols notes that the Yankees may well be secretly hoping to get out of their comparable contract with Alex Rodriguez through the deus ex machina of a life-time ban due to Rodriguez alleged involvement in the Biogenesis doping scandal.
The Times implies that the Yankees at least got their money's worth out of Rodriguez, whom the Times credits with "leading" the Yankees to a championship in 2009. But baseball doesn't work that way. Rodriguez was a part of an extremely strong team. Just on the offensive side, arguably, Rodriguez was about the middle of the pack among the Yankees' starters that year, who included: Derek Jeter, who hit .334 and had 30 stolen bases; Robinson Cano, who hit .320, with 25 home runs; and Mark Teixeira, who hit 39 home runs, drove in 122 and batted .292. Johnny Damon, Hideki Matsui and Jorge Posada all posted offensive numbers not too different from Rodriguez's highly respectable ones. Given their offense, the Yankee' didn't really need great pitching, but C.C. Sabathia won 19 games, and Mariano Rivera saved 44, while posting an E.R.A. of 1.76. The only category in which Rodriguez led the Yankees that year was salary.
Pujols career is far from over. He is suffering from a foot injury that has hampered his performance this year. But has there ever been a Pujols-like power hitter (other than the tainted Barry Bonds) who continued to perform at All-Star levels after age 35? Does it make sense to pay a designated hitter a top salary?
As we have argued over and over again, to no avail, the solution is to design contracts that pay players for performance (rather than rewarding them for past performance). Alfonso Soriano got hot at just the right point in the season, and now he is wearing the Yankee pinstripes again. But Cubs fans should just be overjoyed to have been relieved of about $7 million of the psychotic $24.5 million the Cubs would otherwise have had to pay a guy who will struggle to hit .250 for the rest of the year. I would love to like Soriano, but his salary has hurt his team more than he can help it.
Tuesday, March 19, 2013
Elvis Kool Dumervil, the star defensive end for the Denver Broncos, has been in the news recently based on an alleged mix-up involving a contract renegotiation with the team. I have read multiple reports and still cannot figure out exactly what happened from a contractual formation standpoint. But here's my current understanding and analysis...
Dumervil's contract with the Broncos, like most NFL player contracts, had an "opt out" of sorts for the Broncos. Under the contract, the Broncos could either pay Dumervil $12 million to play next season--and have that entire amount count against the team's salary cap--or cut him ("cut" being the sports term for "fire") and only have a portion of his salary count against the team's cap. Without getting into too much detail, each team has a maximum amount of money it is allowed to pay in player salaries per year, subject to various adjustments. If the Broncos were able to reduce how much Dumervil's salary would count against their team's cap, they conceivably would have been able to spend more money to sign other players and improve their team; hence their interest in keeping the cap number down.
To avoid a bad salary cap consequence and still keep Dumervil, the Broncos sought to renegotiate a middle ground. They offered to keep versus cut Dumervil but for a reduced salary amount of $8 million. According to various reports, that offer was only open until 1pm MDT on Friday, March 15th. The Broncos set that deadline because they faced a deadline of their own set by the NFL. Specifically, the only way the Broncos could avoid the full salary cap hit of $12 million under NFL rules was to cut Dumervil by 2pm MDT (or show that they had re-signed him to a different deal). If they cut him prior to 2pm MDT, they'd only take a $5 million hit; if they cut him anytime after 2pm MDT, they'd take a $12 million hit.
In the early afternoon of March 15th, Dumervil reportedly rejected the Broncos' $8 million offer over the phone (thereby terminating the Broncos' offer, most likely). However, Dumervil later told the Broncos that he had changed his mind. The Broncos then renewed their $8 million offer but specified that Dumervil could accept only by faxing his acceptance to them prior to the NFL's 2pm deadline. When the Broncos did not receive a fax from Dumervil by that time, they cut him. Dumervil's agent has said that the fax was sent to the Broncos at 2:06pm due to some delay in getting a fax from Dumervil.
When the story first broke, some media outlets were reporting that a fax machine malfunction was to blame. Thus, many commentators initially expressed frustration that a bungled or late transmission via fax, a now-outdated device, could have such a significant impact. When I heard those reports, it seemed that the media outlets, like some first-year law students, were overemphasizing the need for a writing and deemphasizing the parties' actual intent. As we teach our students, a signed writing often is not required; contracts are formed all the time without that formality. Subject to the statute of frauds and other exceptions, a contract can be formed without a writing, faxed or otherwise. And, unless the offeror limits the form of acceptance to a signed and faxed writing, the acceptance may be communicated in any reasonable manner. In sum, it is intent of the parties that controls. Thus, if the Broncos really wanted to sign Dumervil to a new $8 million deal (that could be completed within 1 year of its making) based on his verbal agreement, no rule of contract law would have prevented it. In other words, if Dumervil truly had communicated his acceptance to the Broncos, the absence of a faxed signature from Dumervil would not prevent contractual formation unless: (i) the Broncos had stated that acceptance could only be via fax or similar writing; or (ii) the contract was one that could not be performed within a year or otherwise subject to the statute of frauds. We would need more facts to analyze both of those issues.
Of course, another possibility outside of traditional contract law (and the proverbial elephant in the locker room) is that the NFL likely has its own rules regarding contractual formation under its collective bargaining agreement or through some other mechanism. That's the part of the mystery about which I have no information at this point. Some reports seem to indicate that the NFL's rules somehow prevented contractual formation and that the Broncos are seeking a change of heart from the NFL. Perhaps someone more familiar with the NFL's rules can comment on that. In the meantime, I think Bronco fans can stop blaming general contract law and continue blaming the Broncos and the NFL. At least for now.
[Heidi R. Anderson]
Tuesday, March 5, 2013
LeBron James participated in this year's NBA All-Star game but one former player, Magic Johnson, was not happy. Magic, like many fans, would like to see the league's star players participate in the fun events leading up to the game, such as the slam dunk contest. Apparently, Magic would like that so much that he's willing to offer $1 million to the winner of next year's slam dunk contest if the contest includes LeBron James. He made that offer on ESPN's show, NBA Countdown:
When I first learned of this, I suspected that Magic's statement was an offer to James himself. However, in the video, Magic appears to say that the money would go to the winner of the contest, LeBron or not (OK, sure, the winner likely would be LeBron but you never know--underdogs can win, too).
Jalen Rose, Magic's co-host of the show NBA Countdown, stated that another player, Blake Griffin, would have to participate, too. Magic's verbal agreement with Rose seems to indicate a modified offer--one in which the $1 million payout is now conditioned on the participation of James and Griffin. From the video, it also appears that Magic is bargaining for performance versus promise but I'm not 100% sure.
For professors looking for a modern-day reward-style offer, this could serve as a less political alternative to the recent reward-style offers by Donald Trump and Bill Maher, about which we previously blogged.
[Heidi R. Anderson]
Thursday, January 17, 2013
I start the second semester of Contracts with the Parol Evidence Rule. I think it's a complex but manageable topic that engages my no-longer-terrified "seasoned" students at the beginning of the semester. Some students, however, struggle to understand exactly what the effect of the rule is, especially after I tell them that it's not really a rule of evidence. Then, after we cover the exceptions, they're even more confused. So, for the visual thinkers in the class, I show this clip:
For the students not familiar with football, I explain that the player featured in the video, Michael Oher, is an offensive lineman at the heart of the book and movie, The Blind Side. His primary job is to protect the quarterback. More specifically, Oher's job is to protect the quarterback's "blind side"--the side the QB can't see when looking downfield to pass (for right-handed quarterbacks, the left tackle protects the blind side; for lefty QBs, it's the right tackle's job).
Then, I say, "Michael Oher is the Parol Evidence Rule. The defenders rushing in are parol (or extrinsic) evidence. Defensive linemen are prior written agreements. Linebackers are contemporaneous statements. The safety is fraud in the inducement. The quarterback is the judge. Most of the time, Michael Oher (a.k.a., the Parol Evidence Rule) is keeping the extrinsic evidence away from the quarterback/judge. The QB/Judge knows the evidence is there but it does not reach him or affect his decision. That said, Michael Oher is not perfect. Neither is the parol evidence rule. Sometimes, a safety gets through, and for good reason."
And so on. The analogy breaks down in various places but still seems to work for some students. Thus, I thought I'd share it on the blog. I hope some of you find it useful.
[Heidi R. Anderson]
Monday, December 17, 2012
As reported here in the Telegraph, Rory McIlroy (pictured), this year's world #1 golfer, is not Tiger Woods. In addition, it appears that Mr. McIlroy has been endorsing Oakley sportswar until recently and now wants to jump ship and join team Nike. Oakley is claiming a right of first refusal and claims that it offered to match Nike's offer to Mr. McIlroy. He apparently spurned that offer and so is, according to Oakley, in breach of contract.
Oakley is claiming that it is irreparably harmed by the breach and seeks to enjoin Mr. McIlroy from enjoying the benefits of his $200 million Nike agreement. In the alternative, Oakley is seeking unspecified damages.
Reading between the lines, there do appear to be issues that are of some interest. Usually a right of first refusal requires the holder of the right to match the competing offer. But ESPN.com suggests that Oakley was only offering McIlroy $60 million to continue endorsing its products. Perhaps that amount is equal to the portion of McIlroy's Nike deal that relates to Nike apparel. In addition, ESPN reports on an e-mail sent by Oakley to McIlroy's agent back in September when contract negotiations were breaking down. The e-mail read, "Understood. We are out of the mix. No contract for 2013."
McIlroy will argue that the e-mail suggests that Oakley waived its option to renew its agreement with McIlroy. Oakley contends that, notwithstanding the September e-mail, negotiations resumed and Oakley claims to have matched Nike's offer.
So, there will be unwonted excitement on the golf tour next year as viewers tune in to see what McIlroy is wearing.
Friday, September 14, 2012
Last night, the Green Bay Packers redeemed themselves against the Chicago Bears after a disappointing Week 1 loss to the San Francisco 49ers. However, the Packers' quarterback, Aaron Rodgers, still has not redeemed himself after allegedly backing out on a bet with Nathan Morris of the R&B group, Boyz II Men. The terms of their original deal reportedly were as follows: (i) Boyz II Men agreed to perform the national anthem before the Packers' week 1 game with the 49ers at Lambeau Field; and (ii) in exchange, Aaron Rodgers agreed to wear a 49ers jersey but only if the Packers lost to the 49ers. (Even though Boyz II Men were part of the "East Coast Family" of the 1990s, they're apparently fans of a West Coast NFL team, the San Francisco 49ers. But I digress.) Sounds like a pretty straightforward promise to perform in exchange for a promise to perform subject to a condition precedent, right? Well, Boyz II Men performed, and the 49ers won, but... Aaron Rodgers has not worn the 49ers jersey. Cue the Twittersphere and TMZ. Rodgers, like Zehmer, claims that his jersey-wearing promise was a joke. In this interview clip, Rodgers says, "It was a [unintelligible] joke between friends" that's been "blown out of proportion." Morris claims it was a serious deal, tweeting after the game that he "was pressing the jersey now." However, Boyz II Men also suggested they will give Aaron Rodgers more time to perform. If not, anyone want to represent them against Rodgers? Or is this the End of the Road for this matter?
[Heidi R. Anderson]
Wednesday, September 5, 2012
As reported here by mlb.com, ESPN and Major League Baseball (MLB) have entered into an eight-year, $5.6 billion agreement, which includes TV and radio rights to MLB programming both in the U.S. and internationally, keeps baseball on the network through 2021 and includes a record-setting increase in annual rights fees (doubled to $700 million from $360 million annually).
And there was much rejoicing.
ESPN's president said, “Baseball remains the national pastime," but the truth is, baseball has long been eclipsed by other sports and then by video games based on other sports and then by video games about killing people, and then by video games about killing zombies. Meanwhile, there was recently talk of MLB becoming a wholly-owned subsidiary of Justin Bieber, Inc. Commissioner Bud Selig commented that "today is a very historic day for baseball." Taken in the context of a sport that is so hung up on statistics that every day is considered "historic" (Wow, Lou, that's the first time that a rookie switch-hitter has struck out looking from both sides of the plate in the same inning -- what a historic day!), Selig's comments seems to be downplaying the deal.
According to the New York Times, ESPN's rival networks, Fox, TBS, NBC and CBS, are still contenders in the baseball airing arena, as ESPN did not manage to grab the division series or league championship series games. There's still some history out there to be made.
[JT and Christina Phillips]