ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Wednesday, September 21, 2016

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

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

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

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

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

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

Tuesday, September 20, 2016

Epipen and Potentially Anti-competitive Clauses

New York Attorney General Eric Schneiderman has launched an investigation into whether now-notorious EpiPen manufacturer Mylan inserted potentially anticompetitive terms into its EpiPen sales contracts with numerous local school systems. Unknown-1

EpiPens are carried by those of us who have severe allergies to, for example, bee stings. The active ingredient will help prevent anaphylactic shocks that can quickly result in death. In 2007, a two-pack of EpiPens sold for $57. Today, the price is $600. The company touts various coupons, school purchase programs and the like, but in my experience, at least the coupons are mere puffery unless you are very lucky to fit into a tiny category of users that I have not been able to take the time to identify.

ImagesHowever, there is finally hope for some real competition in this field: Minneapolis doctor Douglas McMahon has created an EpiPen alternative that he is trying to market. This doctor claims that Mylan and companies like it have lost sigh of patient needs and are catering to investors. In his opinion, that is the true reason for the skyrocketing prices. Well said.

The doctor is even resorting to something as unusual as a fundraising website to raise money for the required FDA testing and other steps.

Another contractual issue seems to be why customers have to buy at least two Epipens at a time. The active ingredient only lasts for one year. Those of use who carry EpiPens hope never to have to use them, but if we will, it is extremely unlikely that we will have to do so twice in a year! But alas, in the United States at least, you have to buy this product in a two-pack (EpiPens are sold individually in countries such as Canada and the UK). It may be a regulatory and not a pure contractual issue, but if the company truly sticks to its current story that it is on the up-and-up in all respects in this context, they should at least enable people to offer to buy only what they need, which in many cases would be only one EpiPen at a time.

Hat tip to Professor Carol Chomsky of the University of Minnesota School of Law for the information on the Minnesota doctor.

September 20, 2016 in Commentary, Current Affairs, In the News, Miscellaneous, Science, True Contracts | Permalink | Comments (0)

Monday, September 19, 2016

Teacher loses breach of contract action against school district

A now formerly tenured teacher with the Saint Paul Public School District http://www.spps.org/domain/1235 had several complaints lodged against him by students. The teacher was alleged to have been racially discriminative towards certain students and to have exhibited “other inappropriate conduct towards students.”

The story continued as follows: the district placed the teacher on paid administrative leave pending further investigations. The teacher obtained legal representation from a union attorney. The school’s investigations uncovered “additional issues” in relation to the teacher and notified the teacher that his termination would be proposed at a school board meeting. The teacher’s attorney advised him that he could (1) acquiesce in the termination, (2) negotiate a separation, or (3) attend a hearing.

The teacher subsequently testified that he felt like a gun had been placed to his head and that he had been forced to resign. Prior to the district taking any action against him, he sent a draft resignation letter to the district, requesting that in exchange for his resignation, he would be allowed to take his sick days, would receive a clean employment file, a letter of recommendation, and an opportunity to continue teaching driver’s education.

The dispute took some other twists and turns, but ended up with the teacher being upset that he could not continue as a driver’s ed teacher and attempting to withdraw a resignation letter that he had submitted. The district declined this. The teacher filed suit for duress and misrepresentation.

As for the duress, the teacher claimed that the district didn’t have the actual intent to fire him and no grounds to do so either. He also alleged that the district had promised not to report him if he resigned, which was a violation of Minn. Stat. § 122.A.20. He also claimed economic duress.

Strangely, economic duress is not recognized in Minnesota. Only “when an agreement is coerced by physical force or unlawful threats … which destroys the victim’s free will and compels him[/her] to comply with some demand of the party exerting the coercion” may suit lie. Bond v. Charlson, 374 N.W.2d 423, 428 (Minn. 1985); Wise v. Midtown Motors, 42 N.W.2d 4040, 407 (1950).

As for the regular duress, the court found that the teacher could not demonstrate that his free will had been destroyed. The court found that doing so requires more than “a scintilla of evidence” and that the teacher simply had not presented enough evidence of any wrongdoing by the district. The court also emphasized the fact that the teacher was represented by and received counsel from a union attorney skilled in these very matters. The court found no misrepresentations made by the school district.

Intimidating procedures or not: if one wishes to retain a chance to keep a job even in times of severe allegations, it becomes necessary to stand by one’s rights at all times until, perhaps the bitter end. The duress claim does indeed seem very weak here - almost fabricated after the fact.

What seems more surprising is the fact that Minnesota does not recognize economic duress. In times when the employment situation for many is still not the easiest (understatement), that’s a tough limitation on the legal rights of employees. This is exacerbated by the fact that employees have recognized property interests in both their jobs and teaching licenses. But of course, “where there’s smoke, there’s [often] fire.” At least in this case, it does seem that there was underlying wrongdoing by the teacher, so it’s a bit difficult to feel too sorry for him as well.

The case is Olmsted v. Saint Paul Public Schools, 2016 WL 4073494.

September 19, 2016 in Commentary, Current Affairs, Government Contracting, True Contracts | Permalink

Political Ads, Free Speech, and Tortious Interference with Contracts

An interesting recent case out of Texas, Deuell v. Texas Right to Life Committee, Inc., No. 01-15-00617-CV (behind paywall), deals with political advertisements, cease-and-desist letters, First Amendment free speech rights, and yes, contract. 

In the case, Deuell was a candidate for state senate. Texas Right to Life Committee (TRLC) ran some radio ads stating, among other things, "Bob Deuell sponsored a bill to give even more power to . . .  hospital panels over life and death for our ailing family members. Bob Deuell turned his back on life and on disabled patients." Deuell's lawyers sent cease-and-desist letters to the radio stations stating that the ads were defamatory and "respectfully demand[ing]" that the radio stations cease airing the ads. The radio stations, upon receipt of the letters, contacted TRLC and told it they were suspending the ads. TRLC then produced a new advertisement that the radio stations found acceptable to air, and also contracted "for additional airtime to compensate for the lost advertising time." TRLC then sued Deuell for tortious interference with contract and sought recovery of the amount it expended to produce the new ad and buy more airtime. Deuell moved to dismiss, arguing that the Texas Citizens Participation Act (TCPA) protected his cease-and-desist letter as free speech and that TRLC's allegations were not sufficient to overcome this. 

The court disagreed and denied the motion to dismiss. The court found that TRLC had adequately alleged the existence of contracts with the radio stations and that the cease and desist letters were "clear and specific evidence" (the relevant standard under the TCPA) that Deuell had intentionally and willfully interfered with these contracts that proximately caused TRLC to suffer the damages it alleged. The TCPA and Deuell's free speech rights therefore did not operate to prohibit TRLC's cause of action. 

Deuell did attempt to argue other things, including that TRLC's ads were illegal under the Texas Election Code, rendering TRLC's contracts with the radio stations to run the ads illegal contracts that could not result in tortious interference, as "a defendant cannot be held liable for tortiously interfering with an illegal contract." The court concluded, however, that there was no basis for declaring the contract illegal because the section of the Texas Election Code at issue had actually been declared unconstitutional.

There was a dissent in this case that would have held that Deuell's cease-and-desist letter implicated free speech rights under the TCPA and that TRLC did not provide the "clear and specific evidence" that would permit its case to survive in the face of those free speech implications. 

September 19, 2016 in Current Affairs, In the News, Recent Cases, True Contracts | Permalink | Comments (0)

Wednesday, September 14, 2016

The Great Nut Caper

 Blanched pistachios

I'm cheating a little because, while this case has a breach of contract claim in it, it doesn't really have anything interesting to say about contract law, mostly because the claim fails because the complaint didn't identify any contract, any terms to the contract, or any facts about the formation of the contract. 

But this case out of the Northern District of New York, Golub Corp. v. Sandell Transp., Inc., 1:15-CV-0848 (LEK/CFH) (behind paywall), has an amazing set of facts relayed by the judge in a playful way, and sometimes you just want to read about a good pistachio heist, you know? 

Because yes, that's what happened in this case. Golub in New York ordered some pistachios from Wonderful in California. Sandell was arranged to ship the pistachios. Sandell sought to subcontract out the job by posting on an industry job board and hiring a company called GM EXPRESS. In the court's words: 

But appearances can be deceiving, and it turns out that "GM EXPRESS" was not actually GM EXPRESS. Unknown to Sandell, the identity of GM EXPRESS had been stolen by criminals who were set on pilfering Golub's pistachio shipment. . . . In this shell game of trucking companies, the pistachio thieves provided Sandell with stolen yet still valid bona fides, including insurance information, tractor and trailer license plate numbers, and a driver's license number (which Sandell claims was valid despite its conspicuously sequential numbering of B7890123). . . . Through this scheme, Sandell and Wonderful would become the thieves' unwitting insiders, happily loading the nuts directly onto the getaway vehicle.

As I said, the breach of contract claim doesn't amount to much in this case, but I enjoyed reading this opinion nonetheless and felt I had to pass it on, so you too can now ponder the disappearing truck of pistachios whose fate remains unknown. 

September 14, 2016 in Commentary, Food and Drink, Recent Cases, True Contracts | Permalink | Comments (0)

Monday, September 12, 2016

Ordering Subject to Seller's Terms and Conditions Makes You Subject to Seller's Terms and Conditions (Even If You Claim You Never Saw Them)

 

Blueberries in market, close-up.jpg
By atul666 from Portland, USA - blueberries, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=4112199

A recent case out of Michigan, Naturipe Foods, LLC v. Siegel Egg. Co., No. 327172, affirmed a high six-figure jury verdict against Siegel Egg Co. in the case of an alleged breach of contract over blueberries. Naturipe sent Siegel an offer to sell Siegel blueberries. Siegel specified in writing on the received offer that the blueberries in question were to be Grade A. Siegel than signed the offer. Underneath the line provide for Siegel's signature (where Siegel in fact signed) was the pre-printed phrase, "Subject to Seller's Terms and Conditions." Naturipe sent Siegel two shipments of the blueberries ordered. The blueberries, according to Siegel, were not Grade A. Siegel therefore never paid for the blueberries it received nor did it ever order the rest of the blueberries that were supposed to be shipped under the contract. So Naturipe sued and won over $700,000 in damages, costs, and fees after a jury trial. 

On appeal here, Siegel's main argument centered around the trial court's decision that Naturipe's terms and conditions did indeed apply to the contract. The terms and conditions at issue specified that Siegel's only remedies for breach of the contract were replacement of the blueberries in question or a credit of the price paid for those blueberries. Furthermore, Siegel was required under the terms and conditions to provide Naturipe with thirty days' notice of any breach of contract. Siegel failed to provide notice and sought cancellation of the entire contract as its remedy, in violation of these terms and conditions. 

However, Siegel argued, Naturipe's terms and conditions should not have been considered part of the contract between the parties binding on Siegel because, according to Seigel, it was never given a copy of the terms and conditions, nor were they ever explained to Siegel. But, the court said, it was Siegel's duty to ask for an explanation and obtain a copy of the terms and conditions, because they were referenced in the offer Siegel signed. Therefore, Siegel was on notice that there were other contractual obligations in play and Siegel should have asked what those were. The court noted that Siegel had annotated the offer to require Grade A blueberries, and so was plainly capable of crossing out the "Subject to Seller's Terms and Conditions" phrase if it had so desired. Because it failed to, the court found that it was clear and unambiguous that the parties intended their contract to be subject to those terms and conditions. 

I'm sure Siegel probably never gave a second thought, either at the time it was ordering or the time it received the shipments, to Naturipe's terms and conditions. That said, this case stands as a lesson that it's probably always a good policy to call someone up when you're dissatisfied with the product they have provided you. You don't necessarily have to know the law to give people an opportunity to cure; sometimes it seems like it could, in most circumstances, be the most efficient first option. 

September 12, 2016 in Commentary, Food and Drink, Recent Cases, True Contracts | Permalink | Comments (1)

Saturday, September 10, 2016

Strongarming Car Renters to Buy Insurance

In an 8/27 article, the New York Times (paid access only) reports how Payless Car Rental, owned by Avis Budget, basically forces at least some of its customers to buy personal liability insurance whether or not they want it. Here’s how the story reports it done – well worth repeating on this website to show the blatant disregard for contract law displayed by Payless Car Rental: Images

A client states repeatedly to the car rental company that he or she does not want insurance. When returning the car after the rental period is over, guess what shows up on the receipt: of course, the declined insurance – in one case $222. When the renter complains, the car rental agency representative snatches the contract that had been initialed by the renter, who apparently thought he or she indicate that they did not want the insurance. Instead, although orally and repeatedly stating that, the initials indicated that he or she did want the insurance (fine print probably not read by renter at airport counter).

ImagesAfter not getting the reimbursement requested, he or she disputed the charge with credit card provider American Express. The amount was refunded, the renter thought… until Payless sent a letter titled “Debit notice” which indicated that the amount would now be sent to collection by a company located on, I kid you not, “32960 Collection Center Drive, Chicago, Ill.” The problem with that is that no such address exists! Try in Google Maps. At least I and the New York Times reporter could not bring it up.

Payless also told the renter that if he or she did not react, his/her “rental privileges” would be suspended(!). Not sure why they would think that their renter would ever want to rent from that company again…

A Payless PR representative did not, when contacted about this incident, offer any explanation or apologies. She simply stated that the issue had been resolved and that “we will reinforce with our associates … the importance of ensuring that our customers clearly understand which services and options they are selecting.” It seems like they should also train their associates to accept the contractual choices then made by the customers.

September 10, 2016 in In the News, Miscellaneous, Travel, True Contracts | Permalink | Comments (0)

Wednesday, September 7, 2016

Ambiguous Insurance Policy Blocks Insurer's Summary Judgment Motion

I really like this Eastern District of Pennsylvania case, Ionata v. Allstate Insurance Company, Civil Action No. 15-6561, because I think it illustrates really nicely the contractual ambiguity at issue and the consequences of that ambiguity. I might use it as an example in class. 

Ionata and her then-husband bought the property at issue together and it was insured with a standard Allstate Homeowner's Policy, which Ionata kept current through the relevant time period. In 2011, Ionata and her husband divorced. Ionata continued to use the house as her mailing address and also continued to keep her stuff there but seems to have slept on a nightly basis somewhere else. In 2014, Ionata had allowed a close family friend to live in the house. During this time period, the house was destroyed by a fire. 

The policy covered a "Dwelling," defined as a building "where you reside."Allstate argued that residence required "physical occupation" of the house by the policyholder. Therefore, it argued, the house was no longer covered by the homeowner's policy because Ionata was no longer "residing" in it. 

The court noted that Allstate's argument made perfect sense in isolation, but it was inconsistent with other clauses within the policy. So, for instance, the policy contained a clause that permitted the house to "be vacant or unoccupied." As the court succinctly put it, "Logically, it is difficult to reconcile Allstate's position that the policyholder must be living on the premises with a clause that provides the Property may be vacant or unoccupied for any length of time." 

Nor was this the only clause that raised the ambiguity. There was another clause that explicitly permitted the occasional renting of the entire property for residential purposes. If a policyholder was allowed to rent the entire property to others, then the policyholder couldn't simultaneously be required to live in the property herself. 

The court therefore denied Allstate's motion for summary judgment, calling out "the artificial and often arcane structure and language of insurance policies" in making the decision. 

September 7, 2016 in Recent Cases, Teaching, True Contracts | Permalink | Comments (0)

Tuesday, September 6, 2016

Vast Majority of Consumers Prefer Court Procedure over Arbitration

Vast Majority of Consumers Prefer Court Procedure over Arbitration

We have discussed arbitration clauses in this blog several times. Now, a Pew Charitable Trust survey of more than 1,000 individuals shows that 95% of consumers prefer judge or jury trials regarding questionable bank fees and similar practices over arbitration clauses. 89% want to be able to join a class action lawsuit. At the same time, no less than 93% of banks include jury (but not bench) trial waivers in their checking account agreements.

What about the argument that the only thing that consumers get out of this is higher fees and fewer services to cover increased litigation costs? First, consumers are not prohibited from choosing arbitration, it’s the option to have class action suits that is at issue here. And as the Los Angeles Times reported, “if banks keep their noses clean, they won’t end up in court” in the first place. Besides, it’s not so much consumers that choose to litigate, businesses file four times as many lawsuits as individuals. Maybe this is for good reason: arbitrators ruled in favor of banks and credit card companies 94% of the time in disputes with California consumers.  Maybe it is not: since banks are the ones who pay for the arbitration process, a recurring concern is that arbitrators may be reluctant to find against the banks.

Of course, class action lawsuits is the only feasible way for consumers to have their legal rights vindicated because of the small individual amounts involved. For the banks, however, this is big business – literally: In April, the Supreme Court let stand a decision that Wells Fargo had deliberately arranged checking-account payments in order to “maximize the number of overdrafts” resulting in fees of $25-35. http://www.scotusblog.com/wp-content/uploads/2016/03/13-16195.pdf

September 6, 2016 in Commentary, Current Affairs, Famous Cases, In the News, Miscellaneous, True Contracts | Permalink | Comments (0)

Monday, September 5, 2016

More on Alleged Property Shark Amtrak

A few days ago, I posted a blog here on Amtrak raising the rent on backyard lots neighboring Amtrak's railroad lines in New York.  The rent in some cases went up by 100,000% (!) according to the website of Congressman Joseph Crowley

Professor Bruckner posed the relevant question of whether the now hotly contested leases are truly new leases or the renegotiation of existing ones.  I've been trying to find out, but not having seen the actual letter from Amtrak (yet), I've dug through news reports and website of legislators.  This is the upshot as best as I can find out right now: It looks like Amtrak is upping the price on _existing_ leases after having had very low prices for years.  See, e.g., these statements: "For decades, Amtrak has leased the property underneath the trusses to homeowners for a nominal fee which releases the agency from the burden of maintaining the premises. Residents were given a 30-day notice to accept an unconscionable annual rent increase – in some cases as much as 100,000 percent or tens of thousands of dollars" and "[i]n a letter addressed to homeowners, Amtrak argues that a review of the lease and the premises it covers, indicates the lease is substantially undervalued. For some, the rent will go up from $25 annually to over $26,000 annually. Failure to approve the new rental amount would result in the termination of the lease 30 days from the notice."

To me, that does indeed seem if not outright unconscionable, then certainly in violation of reasonable contractual expectations and the contractual terms what appears to be an already existing contract. 

As mentioned, Amtrak does have a good argument in its prices having been exceptionally low for decades, but perhaps market prices should be introduced over time as the lessees get replaced over time with the existing leases somehow being grandfathered in?  Granted, the turnover in the NYC real estate market may  not be high in the case of lucrative deals, but on the other hand, nobody lives in any home forever.  Underlying this story does seem to be the fact that Amtrak got upset not so much about the low rents per se, but the fact that some renters were making profits off them.

September 5, 2016 in Commentary, Contract Profs, Current Affairs, In the News, Miscellaneous, True Contracts | Permalink | Comments (0)

One-Year Nationwide Non-Compete Found Reasonable in Organic Product Market

I always think it's interesting to see how courts judge the reasonableness of non-competition provisions. In this recent case out of the Eastern District of New York, Grillea v. United Natural Foods, Inc., 16-CV-3505 (SJF)(SIL) (behind paywall), a judge declined to preliminarily enjoin the employer from enforcing the former employee's non-compete and blocking him from accepting his new position, finding that the former employee had not shown a likelihood of success that the non-compete wasn't enforceable. 

The plaintiff and former employee was one of the top executives at the defendant, United Natural Foods. He had signed a non-competition agreement that prohibited him from working anywhere in the United States for one year for any of United's direct competitors. After a few years, United terminated the plaintiff's employment. There was a lot of negotiation about when the termination would take place, which stock options were going to vest, which benefits would keep accruing, how the plaintiff would be categorized, etc., but for purposes of this blog entry, eventually the termination became effective and the plaintiff left United's employ. 

Plaintiff received a job offer from a division of another company called Threshold. Plaintiff spoke to people at United about the job offer. They expressed concern that it would violate his non-compete. Plaintiff said he disagreed because he would be dealing with manufacturing, which was not what his responsibilities had been at United. Plaintiff put people at United down as references and Threshold called and spoke to them. They claimed they informed Threshold they thought what plaintiff was doing was a conflict of interest. 

This dispute followed, with plaintiff seeking a preliminary injunction that United not enforce the non-compete so that plaintiff can accept his new position. The court, however, denied plaintiff's motion. The court found that the one-year time period of the non-compete was reasonable and also that the fact that it had no geographic limitation was reasonable because United is a nationwide company (the geographic limitation thing was important to plaintiff's argument because he was switching coasts for the new job). 

What I found most interesting about this case was that the judge emphasized several times that United had stated that the non-compete only prevented plaintiff from working for twenty-nine companies (of which Threshold was one). That was clearly a detail that was compelling to the court. 

September 5, 2016 in Commentary, Labor Contracts, Recent Cases, True Contracts | Permalink | Comments (0)

Saturday, September 3, 2016

Egregious Price Increases

You heard about Epipen, the “price of which has climbed sixfold over the last several years. At drug price-comparison website GoodRx, the cheapest price today is $614 for a package containing two, or more than $300 per EpiPen, up from about $100 for two.”

Now there’s Amtrak. The company just raised the prices for renting backyard spaces underneath the Hell Gate Bridge in New York from, in one case, $25 to $25,560 a year (that’s not a typo) and, in another, from $50 to $45,000 a year. Images

The homeowners that rent these “additional” spaces have been given 30 days to accept the new leases or else give up the land. Some use it for recreational purposes but others rent it out as parking lots, which has allegedly caused Amtrak to reconsider these contracts. The company has confirmed the rent hikes, stating that “some lease holders have not seen an increase in more than 70 years” and that renters can still expect to pay only “a fraction (less than 1 percent) of the fair market rental rates.” Amtrak will be “working with each person individually to determine the exact terms of their lease.”

Is this fair? Many of the renters have decks, pools, and established plants on the land. They also clear snow, remove falling bricks and other debris from the land. They’ve been able to enjoy the land for years, perhaps creating a reasonable “course of performance” expectation that the rents would not be increased to such a high extent.

On the other hand, the rent is exceptionally low for New York and has not been increased for many decades. Then again, if the intent of these contracts was for them to serve mainly recreational purposes, what about people that now convert the land into commercial use (parking lots, of all things)? Does that matter?

This case raises interesting issues of contract interpretation, unilateral contract modification, good faith obligations by both parties, etc. It seems to me that Amtrak might, depending on the wording of these contracts, be able to now increase the rent somewhat, but to the extent done here, the intent seems to be an arguably contractually impermissible penalty rather than, perhaps, a good-faith renegotiation of contract terms.

Hat tip to Shubha Ghosh for alerting my attention to this issue.

September 3, 2016 in Current Affairs, In the News, Miscellaneous, True Contracts | Permalink | Comments (1)

Wednesday, August 31, 2016

Ownership of Steve Harvey's Comedy Tapes Is Ambiguous

Ambiguous contracts can be a nightmare to untangle, especially twenty years later. A recent case out of the Northern District of Texas, Cooper v. Harvey, Civil Action No. 3:14-CV-4152-B (behind paywall), illustrates just that. 

Steve Harvey, currently the host of "Family Feud," has been sued by Joseph Cooper over Harvey's attempts to curtail Cooper's use of performances Cooper taped at Harvey's comedy club in 1993. Cooper claims Harvey gave him permission to film the performances, paid Cooper to film them, and gave Cooper ownership of the videotapes and the right to use and display them. Since that time, Harvey and Cooper have had multiple disputes over the footage, most recently over Cooper's posting of some of it to YouTube. 

Harvey disputes Cooper's claim. He says that he paid Cooper to tape the performances so that Harvey could use them "as study material," and that he never granted Cooper ownership or any rights in the videotapes. Harvey alleges that Cooper uses the video footage as a type of blackmail, essentially, knowing that Harvey might find the material on the videotape embarrassing to have made public. 

This case isn't just he-said/he-said, in that there does appear to be an actual written contract between the parties, even if there is some debate whether or not Harvey ever signed it. At any rate, seeking summary judgment, Harvey argues that the written contract is ambiguous and that the court can therefore hear parol evidence as to whether the parties intended for Harvey to bargain away all of his rights to the work in question. Cooper, for his part, argues that the contract is unambiguous and that, according to its terms, bargaining away all of his rights is exactly what Harvey did. 

The court agreed with Harvey that the contract is ambiguous in whether Cooper or the Comedy House was intended to own the videos under the contract. But, turning to the parol evidence, the court found that nothing Harvey had put forth shed any light on Cooper's intent in entering into the contract. Harvey provided an affidavit that he did not intend the contract to convey his ownership rights but that didn't resolve what the parties' intent was when they signed the contract in 1993. Therefore, the court denied summary judgment on the breach of contract claim. 

Which seems like, in the end, this written contract is going to come down to he-said/he-said. 

August 31, 2016 in Celebrity Contracts, Commentary, Film Clips, Recent Cases, Television, True Contracts, Web/Tech | Permalink | Comments (0)

Monday, August 29, 2016

“Trophy hunting” contracts – unenforceable for reasons of public policy

Allow me to highlight my most recent article on the questionable ecosystem viability and contractual common law validity of so-called “trophy hunting” contracts. With these contracts, wealthy individuals in or from, often, the Global North contract for assistance in hunting rare animals for “sport.” Often, these hunts takes place in the Global South where targeted species include giraffes, rhinos, lions, and other vulnerable if not outright threatened or endangered species.  Images
A famous example of this is Minnesota dentist Walter Palmer killing “Cecil the Lion” in 2015 causing widespread outcry in this country and around the world. Trophy hunting also takes place in the USA and Canada, where targeted animals include polar bears, grizzly bears, and big horn sheep.

Trophy hunting should be seen on the background of an unprecedented rate of species extinction caused by several factors. Some affected species are already gone; others are about to follow. Western black rhinoceroses, for example, are already considered to have become extinct in 2011.   The rest of the African rhinoceros population may follow suit within the next twenty years if not sufficiently protected. In the meantime, more than 1.2 million “trophies” of over 1,200 different kinds of animals were imported into the United States just between 2004 and 2015. In addition to the extinction problem, the practice may also have ecosystem impacts because, among many other factors, the trophies often stem from or consist of alpha animals.

UnknownOf course, no one is arguing that rare species should be driven to extinction, in fact, quite the opposite: both trophy hunters and those opposing the practice agree that such species should be conserved for the future. However, the question lies in how to do so. Some argue that trophy hunting creates not only highly needed revenue for some nations, but also brings more attention to the species conservation issue.

I argue that at least until there is much greater certainty than what is currently the case that the practice truly does help the species in the long run (and we don’t have much time for “the long run”!), legal steps must be taken against the trophy hunting. Even when positive law such as hunting laws and/or the Endangered Species Act (“ESA”) do not address the issue (yet), common law courts may declare contracts that have proved to be “deleterious effect upon society as a whole,” “unsavory,” “undesirable,” “nefarious,” or “at war with the interests of society” unenforceable for reasons of public policy. Images-2

In the case of Cecil, African lions had been proposed for listing under the ESA when the animal was killed, but the listing did not take effect until a few months later. The case, others like it, and several studies demonstrate that a sufficient and sufficiently broad segment of the population have come to find the killing of very rare animals so reprehensible that common law courts can declare them unenforceable should litigation on the issue arise. This has been the case with many other contracts over time. The same has come to be the case with trophy hunting. As long as doubt exists as to the actual desirability of the practice from society’s point of view – not that of a select wealthy individuals – the precautionary principle of law calls for nations to err on the side of caution. The United States prescribes to this principle as well.

The article also analyzes how different values such as intrinsic and existence values should be taken into account in attempts to monetize the “value” of the practice. Instead of the here-and-now cash that may contribute to local economies (much revenue is also lost to corruption in some nations), other practices such as photo safaris are found by several studies to contribute more, especially in the long term. (Note that Walter Palmer paid a measly USD 50,000 for his contract with the landowner and local hunting guide).

Finally, the article draws in arguments under the public trust doctrine and the state ownership of wildlife doctrine. Ethically, these animals belong to all of us (or none of us). Images-1

Trying to save rare animals by shooting them simply flies in the face of common sense. It also very arguably violates notions of national and international law.

August 29, 2016 in Commentary, Current Affairs, Famous Cases, In the News, Legislation, Recent Scholarship, Science, Travel, True Contracts | Permalink | Comments (0)

If You Contract for a $2 Million Watch, You Probably Want the Original Dial

A recent case out of the District of Arizona, Cavan v. Maron, No. CV-15-02586-PHX-PGR (behind paywall), concerns a deal for rare Patek Philippe watches. The plaintiff agreed to purchase two watches for almost $4 million, providing a down payment of almost $3 million. The defendant did not deliver the watches and, in fact, allegedly sold them to someone else, so the plaintiff demanded his down payment back. A watch broker negotiated between the two parties and they decided that, instead, the defendant would sell the plaintiff another rare Patek Philippe watch that was worth more than $2 million. 

The defendant gave the plaintiff the promised watch, and a few years later, when the plaintiff was considering selling the watch, he brought it to an auction house for valuation. The auction house raised questions that the watch's dial had been replaced. A "world renowned watch expert" agreed and pronounced the new dial "inferior," meaning that the watch was now worth significantly less than it would have been with its original dial. 

This lawsuit resulted. The defendant argued that the agreement between the parties never expressly required that the watch had to be sold with its original dial. The court doesn't let the defendant off on that technicality, though. The court notes that it was plausible that the parties intended, when they negotiated to buy and sell a watch worth more than $2 million, that the watch would have all of its original parts, and that a disclosure to the contrary might have been necessary. 

This decision was just surviving a motion to dismiss. Stay tuned for more exciting developments in the luxury watch contract world. 

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

Friday, August 26, 2016

Ryan Lochte and Morals Clauses

I have witnessed with interest the evolving story of what exactly happened in Rio involving Ryan Lochte the morning of August 14. Initially Lochte claimed he had been robbed at gunpoint. I later heard through the gossip mill that that story was untrue and that Lochte had in fact beat up some security guards. That turned out, it seems, just to be rumor-mongering, but the story has continued to evolve from there, with both Lochte and the Rio police making statements that later seem untrue, or only partially true, or exaggerated. Slate has a good run-down of the changing versions of Lochte's story, although it's from a week ago. Now Lochte has been charged with filing a false police report, since it does seem clear at this point that no robbery happened. Even that, however, is confusing to parse if you read a lot of articles about it: It seems like the crime is more accurately making a false communication to police, as some articles have eventually stated, since there are conflicting reports about whether a police report was ever filed. 

In the wake of this whole mess, Lochte has lost several of his sponsorship deals (although he's also picked one up). It's unclear, because the contracts don't seem to be public, whether this is a choice of just not renewing the contract (apparently that's the case with Ralph Lauren) or if a violation of a morals clause is being invoked to allow cancellation of the contract (which might be what's going on with Speedo). All of this provokes an interesting morals-clause conversation to me, and we had a bit of discussion about it on the Contracts Professors listserv. It seems clear that Lochte engaged in some sort of inappropriate behavior, and it seems also clear that whatever that behavior was, even the most minor version of the story is arguably a violation of any morals clause out there.

What is most clear is that, no matter what really happened, this has definitely served to tarnish his reputation, and that's is what's striking to me. This story has taken on an enormous life of its own, with many differing versions of it floating around the Internet. This situation has been caused, of course, by Lochte's many differing stories, together with some apparent conflicting statements by the Rio police, coupled with reporting that may have been less than precise itself in describing what was going on. One online story details all the conflicting information and asks the individual reader what they believe about the story.

While this particular maelstrom seems to have some basis in fact, it's not difficult to imagine something like this getting out of control without such justifying behavior at the root of it. Morals clauses tend to be about perception, but does that mean you can manipulate the perception of someone, through no real fault of their own? Take, for instance, the "Ted Cruz is the Zodiac Killer" meme that was popular on the Internet earlier this year. Ted Cruz wasn't born until after some of the Zodiac killings had happened, so he obviously could not have been the Zodiac Killer, and in fact some people interviewed about the meme noted that was the point: what they were saying was impossible. Nevertheless, it was reported that polls indicated 38% of those surveyed thought he might, in fact, be the Zodiac Killer, despite the impossibility. If a substantial number of people start thinking you did something you absolutely did not do, is that enough for a morals clause to be violated, because of the perception that you did it? 

August 26, 2016 in Celebrity Contracts, Commentary, Current Affairs, Games, In the News, Sports, Travel, True Contracts, Web/Tech, Weblogs | Permalink | Comments (0)

Thursday, August 25, 2016

Rent-to-Own Contracts: Caveat Emptor or Unconscionable Behavior?

The New York Times reports here (paid access) on the increasing use of so-called “rent-to-own” housing contracts. Under these contracts, companies from big Wall Street giants to a slew of small landlords hoping to strike it rich lend or, should I say, purport to sell homes to tenants who contractually commit to make all repairs on the homes no matter how major or minor (yes, you read that right: all repairs… and it gets more extreme than that, read on!). Typically, tenants under such contracts are not told what repairs are needed, yet face a contractual deadline for making sure that the houses in question are brought up to local code. Unlike most typical home purchases, rent-to-own contracts do not require the tenant/buyer to obtain an independent home inspection.  Images-2

We probably all know how many things can go wrong with older homes, even newer ones. Examples of how bad things can go in this context thus abound. One tenant moved into a home not having been told that it had several unresolved building code violations and had to remain vacant by city order. Another moved into a home that had no heat, no water, and major problems with its sewage system that led to nearly $10,000 in repairs (many of these homes have been purchased by the lender for less than $10,000 and are not worth very much more than that, if any). A third example describes a woman moving into a home with her three children and partner in Michigan, living in the house during cold winter with the only heat sources being one electric heater and a wood-burning stove in the kitchen, only to be evicted and charged $3,100 in overdue rent after she stopped paying rent because of the heat issue.

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People who accept these kinds of contracts often do not qualify for mortgages. Banks have virtually stopped making mortgages on homes worth less than $100,000, which leaves millions of people with few options for - now or one day - owning their own homes.

One company that rents homes on a rent-to-own basis does so “as is,” calling the contracts “hybrid leases” that allow people to build up “implied equity.” If tenants are evicted during the contract (typically of a seven-year-duration), they get no credit for money spent on repairs or renovations. Neither do they receive any equity unless they actually end up buying the home at the end of the contract term. At that point, they still need financing for the home which, as mentioned, many people just cannot obtain.

A number of legal questions arise in this context, among them several contractual ones such as the role of caveat emptor vs. the violation of a possible duty to disclose. If the landlords know of the problems from which many of these houses suffer, should they disclose this knowledge? On the other than, shouldn’t these potential (long-term) buyers be presumed to have at least enough savvyness to not promise to bring a home that they do not own outright up to Code by a certain deadline? Then again, are landlords fraudulent in their dealings with these folks when the landlords require such potentially extensive repairs when, as the owners of the homes, they presumably if not actually have actual knowledge of the problems from which these houses suffer? What about the statement that renters get “implied equity?” What in the world does that mean, if anything? Do low-income folks that may never have been homeowners truly understand what it means to bring a home “up to Code” and buying “as is?” Does it matter? And what about the doctrine of unconscionability, which is alive and well in some states such as California? If nothing else, this case seems to smack of both procedural and substantive issues. Images

In some states, landlords are required to keep homes and apartments in habitable condition. But rent-to-own contracts have, for good reason, been said to reside in a gray area of the law: are they rental contracts? - Or purchase contracts? Or something else?

Further, rent-to-own contracts may, to some extent, resemble contracts for deeds. However, the latter are subject to basic consumer-lending regulations such as the Federal Truth in Lending Act.

The housing market again seems to host highly questionable practices. This story almost reads as a contract or property law issue-spotting exam. Meanwhile, housing sharks seem to be swimming relatively freely in some areas of the nation.

For further information, see Alexandra Stevenson and Matthew Goldstein, Rent-to-own Homes: A Win-Win for Landlords, a Risk for Struggling Tenants, the New York Times, Aug. 21, 2016.

August 25, 2016 in Commentary, Current Affairs, In the News, Legislation, Miscellaneous, True Contracts | Permalink | Comments (0)

Monday, August 22, 2016

Microsoft Does Marijuana

In a move that demonstrates how contracts for various aspects of marijuana products and services are going mainstream, Microsoft Corp. has accepted a contract to make marijuana-tracking software available for sale on its cloud computing platform. The software is developed by “cannabis compliance technology” Kind Financial and allows regulators to track where and how much marijuana is being grown, sold or produced in real time. In turn, this lets the regulators know how much sales and other tax they should be collecting and from whom (maybe this is the beginning of the end of some growing marijuana plants in state and national parks to hide their activities from the government). Medical-marijuana-colorado

This contract – called a “breakthrough deal” because it is the first time that Microsoft ventures into the marijuana business - may end up enabling the software developer to capture as much as 60% of this very lucrative market. (Other companies with government contracts often end up with such a large market share.)

How did the company strike such a lucrative deal? You guessed it: by networking. Kind’s CEO was introduced by a board member to an inside contact in Microsoft.

Happy semester!

August 22, 2016 in Commentary, Current Affairs, Food and Drink, Government Contracting, In the News, Miscellaneous, True Contracts, Web/Tech | Permalink | Comments (0)

Sunday, August 21, 2016

Does “Similar Quality” Reflect a $17,100 Reduction in Car Resale Value?

Plaintiff William Baldwin’s almost new Toyota Tundra pickup truck was badly damaged when, while parked, the cars of two other men slammed into it. This decreased the car’s future resale value by more than $17,100. Mr. Baldwin filed suit against his insurance company, AAA, among others. He wanted either the pre-accident value of the car or a sum which would allow him to repair the pickup truck to its original pre-accident condition. He contended that the truck did not match such condition with respect to safety, reliability, mechanics, cosmetics, and performance. Unknown

The interpretation of an insurance contract is, in California, a matter of law. This insurance policy provided that AAA “may pay the loss in money or repair.” Further, under the Limits of Liability, that AAA’s coverage responsibility for car damage would “not exceed the lesser of those two options,” namely paying “the actual cash value of the damaged property or the amount necessary to repair the property … with similar kind and quality.” (My emphasis).

The court found that the insurance policy “ambiguously gave the insurer the right to elect to repair the insured’s vehicle to a “similar condition if repair costs would be less than the actual cash value of the vehicle.”

In other words, the court supported AAA’s reading that a car with a realistic loss in value of $17,000 was in a “similar condition” to its almost-new value. You can see why this lawsuit came about. On the other hand, the car was repaired and was fully functional. Should insurance companies then additionally have to pay out a sum that would correspond to an arguably hypothetical resale value (the owner may never sell the car at the relevant moment in time)? Arguably, that would drive up insurance prices too much. Note too that this case is from California where cars are almost members of one’s family…

The case is Baldwin v. AAA Northern California, et al., 1 Cal.App.5th 545 (Cal. Ct. App. 2016).

August 21, 2016 in Recent Cases, Travel, True Contracts | Permalink | Comments (0)

Saturday, August 20, 2016

My Least Favorite Contractual Relationship at the Moment Is with AT&T

I apologize for my lack of blogging lately, but, you see, AT&T was supposed to have my Internet connected last Monday and still hasn't managed to get around to it,  after a series of delayed appointments, canceled appointments, and appointments where no technician ever showed up. On Wednesday evening when I called to express my displeasure about all of this, I was told that my failure to accept the delays without complaining meant that they were now pushing my installation back even further, so that now I am looking at sometime next week. 

Naturally, at a time when I will be teaching, so the Saga of Internet-less may drag on for a while. 

I would love to examine my AT&T contract in detail to see what my rights (if any) are,  but, of course, the contract requires me to have Internet access to get to it! So for the time being I am keeping my mouth shut and hoping AT&T decides to show up next week and then I will return to my regularly scheduled blogging!

August 20, 2016 in Commentary, True Contracts, Web/Tech, Weblogs | Permalink | Comments (2)