Sunday, November 13, 2016
Allow me to highlight my most recent article, An “Act of God”? Rethinking Contractual Force Majeure in an Era of Anthropogenic Climate Change.
Given anthropogenic climate change, what were previously considered to be inexplicable and unpredictable “acts of God” cannot reasonably be said to be so anymore. They are acts of man. “Extreme” weather events have become the new normal. Accordingly, the contractual force majeure defense, which largely rests on the notion that contractual parties may be exculpated from liability for failed or delayed performances if supervening unforeseen events that the party could not reasonably control or foresee have made a performance impracticable, is becoming outdated in the weather context. It makes little sense to allow contractual parties to escape contractual performance liability for events that are highly foreseeable given today’s knowledge about climate change. Parties can and should take reasonable steps to contractually assess and allocate the risks of severe weather events much more accurately than ever before. Further, they should be better prepared to take reasonable steps to alleviate the effects of severe weather on their contractual performances instead of seeking to avoid liability at the litigation stage.
Time has come for the judiciary to rethink the availability of the impracticability defense based on “extreme” weather for public policy purposes. Perhaps most importantly, by taking a hard look at the doctrine and modernizing it to reflect current on-the-ground reality, the judiciary may help instigate a broader awareness of the underlying pollution problem and need for action at many scales. Meanwhile, a more equitable risk-sharing framework that might become known as “comparative risk sharing” and which would resemble the notion of comparative negligence in torts could be introduced where parties have failed to reach a sufficiently detailed antecedent agreement on the issue. This is surprisingly often the case. Parties often use mere boilerplate phrases that do not reflect today’s highly volatile weather and appurtenant risks.
The law is never static. It must reflect real world phenomena. Climate change is a super-wicked problem that requires attention and legal solutions at many fronts to many problems, including contractual ones. The general public is often said to have lost faith in the judiciary. Given this perception, courts could regain some of that faith in the context of contracts law and force majeure caused by events for which no “God,” other supernatural power, or even nature can be blamed.
The article can be downloaded here.
I apologize that I have not been able to post very many blogs recently and that I will, for family and work reasons, also not be able to do so until January. I trust it that my lovely assistant Ashley and my co-bloggers will keep you intrigues until then!
Wednesday, November 9, 2016
Here's a Nice Case to Use to Review Contract Formation, Conditions Precedent, and Promissory Estoppel
As we reach the end of the semester, I keep trying to remind my students of what we learned at the beginning of the semester, which was only a few weeks ago but feels like several lifetimes ago. As we turn our attention to our last topic of third-party rights, I don't want the students to forget the basics of contract formation. I want them to realize that contracts law builds on itself and is self-referential and so they can't just forget about the stuff that came first.
Anyway, I say all of that to lead into this nice recent case out of the Eastern District of Pennsylvania, Killian v. Ricchetti, Civil Action No. 16-2874, that deals with issues of contract formation, and then turns to promissory estoppel. Exactly as I keep trying to remind my students to do! So I couldn't resist writing this case up for the blog. It serves as a nice review of a lot of what we've learned and I think I may actually use it in class.
The alleged contract was a series of e-mails exchanged between two friends. The first e-mail set out a bunch of terms and ended with "there are more little details...it's a start." The response to the e-mail added a few additional terms. This, the court found, did not form a contract, because the response was not an acceptance but rather a counteroffer, due to the fact that it added terms. There was never any reply to that particular e-mail, so the counteroffer was never accepted.
After these initial e-mails, there were further e-mails between the two regarding the real estate transactions at the heart of the alleged agreement. Those e-mails were enough to form a contract as follows: The first e-mail read, "[W]hen the Pine [Street property] is clear title we form an LLC with an equal partnership of 50% . . . ." with some further details given. The reply to the e-mail was "OF COURSE," which constituted an acceptance. However, there was a condition precedent to this contract: that the parties receive clear title on the Pine Street property in question. Due to no fault of the parties themselves, they never received this clear title, so the condition precedent never occurred, so no duties to perform under the contract ever arose.
The court then turns to the promissory estoppel question, though. The court found here there were genuine issues of material fact whether there was a promise made and whether the other party acted in reliance on that promise. Similar issues of material fact existed for the unjust enrichment and qunatium meruit claims. Therefore, although the court granted summary judgment on the breach of contract claims, it denied summary judgment on the remaining claims.
Monday, November 7, 2016
I was struck by this ad that Liberty Mutual Insurance is now running:
Because what it boils down to is a call for greater clarity in contracts so that they can be more easily understood by consumers. (I appreciate the lawyer shout-out but not even all lawyers read all 22 pages!) But, in the midst of trying to simplify things, the small print on the commercial takes care to explain that "Not all of your coverages are shown in Coverage Compass(TM). For complete explanation of your coverages, please consult your Liberty Mutual sales representative and your policy" (emphasis added). You can try to streamline things, but there's no avoiding that 22-page policy in the end!
Wednesday, November 2, 2016
Thanks to InsideHigherEd, I became aware of this recent case out of the First Circuit, Walker v. President and Fellows of Harvard College, No. 15-1154, and seeing as it involved JOLT, the Harvard Journal of Law and Technology that I was an executive editor of when I was in law school there, I couldn't resist digging into the case.
And I'm glad I did, because it's a really interesting case about the lingering effect of honor code violations and the wording of school academic policies.
The plaintiff graduated from Harvard Law School in 2009. During her time at Harvard, she was a member of JOLT. In that capacity, she drafted a student note. However, when she sent the note to senior editors at JOLT, they became concerned about plagiarism issues and referred the note to the HLS Administrative Board. The Board concluded that the plaintiff's note contained plagiarism that violated the school's Handbook of Academic Policies and a notation was placed on her transcript. The plaintiff still graduated from HLS but had a "lucrative" offer of employment withdrawn after the notation was placed on her transcript. So the plaintiff sued to have the notation on her transcript removed. HLS won summary judgment at the district court level and this appeal followed.
The court affirmed the judgment of the district court. The parties agreed that the Student Handbook constituted a contract between the plaintiff and HLS. (The court noted that this was not actually obvious under Massachusetts law but that it would treat the handbook as a contract because the parties did not dispute it.) Therefore, the court focused its review on whether the plaintiff's behavior violated the stated plagiarism policy in a way that the plaintiff should have reasonably expected.
The Handbook stated: "All work submitted by a student for any academic or non-academic exercise is expected to be the student's own work." The plaintiff's main argument was that the student note she sent to the JOLT editors was just a draft that she planned to edit in the future, and the Handbook policy should be read as only applying to completed work that was not expected to undergo further editing. The court disagreed, however. The wording of the Handbook was extremely broad, referring to "all work." A student in the plaintiff's position should reasonably have expected that any student note submitted to the editors, whether a draft or in final form, would be held to the standards of the policy. Nothing about "all work" would make a student think that drafts were omitted from the definition, according to the court.
Monday, October 31, 2016
A recent case out of the Western District of Pennsylvania, Douglas v. University of Pittsburgh, Civil Action No. 15-938 (behind paywall), found that there were factual disputes precluding summary judgment regarding whether or not a contract was in place between the plaintiff, an assistant football coach, and the University.
The plaintiff alleged that he was orally told by Pittsburgh's head football coach when he was offered the job that it would be a two-year-contract with $225,000 in the first year and $240,000 in the second year, with other perks. The plaintiff accepted the terms and began the job immediately upon receiving this alleged oral offer from the head coach.
A little more than a week later, the plaintiff received a proposed Employment Contract. The contract had his second-year salary as $235,000 instead of $240,000 and also stated that the University could terminate the plaintiff's employment if the head coach left the school. The plaintiff had concerns about these clauses and other parts of the contract and brought these concerns to the head coach, who allegedly told the plaintiff that he would take care of the issues.
A few months later, the plaintiff moved his wife and children to join him in Pittsburgh. Over the course of the next few months, the plaintiff claims to have periodically raised the issue that he had never signed a contract and was allegedly told by various people not to worry about it.
Less than a year after the plaintiff started the assistant coach job, the head coach left Pittsburgh to take a job at the University of Wisconsin. Pittsburgh then subsequently terminated the plaintiff and all of the other assistant football coaches. The University informed the plaintiff that, because he had never signed the Employment Contract, he was an "at-will" employee. The plaintiff, in the wake of losing his job, took a job at Florida State for $40,000 per year, necessitating more moving costs.
Not happy about how this all played out, the plaintiff sued the University of Pittsburgh. The plaintiff's allegation was that he was orally offered a contract for two years of employment that he accepted, and that the University breached that oral contract. The University responded that the conversation between the plaintiff and the head coach on which the plaintiff pins his hopes did not have enough essential terms to be considered a contract and that the essential terms were in the Employment Contract. Although the plaintiff refused to sign that written contract, the University maintained that he accepted the terms of the written contract when he continued to work for the University. The plaintiff, however, argued that the head coach's offer of employment was specific enough, giving job duties, term, and salary, to constitute a binding contract between the parties, and the plaintiff stated that he resigned from his job and moved his family in reliance on this.
The University moved for summary judgment but the court found that there was enough evidence that a jury could conclude that the plaintiff and the University had agreed to enough essential terms to form a contract. However, the court dismissed the plaintiff's claims for fraud in the inducement and negligent misrepresentation as merely duplicating the surviving breach of contract claim. I'll keep you posted on what happens!
Law360 has an article about the filing of this lawsuit here.
Wednesday, October 26, 2016
We've been talking about contract interpretation in my Contracts class lately and I'm always struck by how many cases involve a lower court ruling of ambiguity and then an appellate court reversal of that ruling, because it always strikes me as such a funny thing. The very definition of ambiguity would seem to be "multiple people disagreeing on the meaning of the word," but the appellate court decisions in those cases necessarily have to dismiss the reasonableness of the lower court's understanding of the meaning in order to assert that the meaning is SO OBVIOUS. This always makes these cases feel a little more...condescending? Than the typical reversal. Like, "We don't know what you were so confused about, lower court, this is OBVIOUS."
A recent case out of California, Borgwat v. Shasta Union Elementary School District, No. C078692, is another example of this. The plaintiff, upon retiring from the defendant, was entitled to a monthly post-retirement contribution toward her "medical insurance coverage." For a couple of years, the defendant paid the contribution toward the plaintiff's dental and vision coverage. But then the defendant concluded that dental and vision insurance was not included in "medical insurance coverage" and ceased paying the contribution. This lawsuit resulted.
The lower court found the phrase "medical insurance coverage" to be ambiguous and allowed extrinsic evidence to illuminate its definition, including the fact that the defendant had initially paid the plaintiff the contribution for a few years. Therefore, the lower court endorsed the plaintiff's interpretation that "medical insurance coverage" included dental and vision insurance.
The appellate court here reversed, though, saying that "medical insurance coverage" was not an ambiguous term. The relevant section of the contract was Section 5.7 but the appellate court looked to Section 5.2, which dealt with benefits during the course of employment. In that section, the defendant had agreed to pay sums "toward the cost of medical, dental and vision benefit coverage." The fact that dental and vision were considered independent from medical insurance in Section 5.2 rendered the use of "medical insurance" in Section 5.7 unambiguous: It can't include dental and vision insurance, because the parties in Section 5.2 revealed that they didn't understand medical to include dental and vision insurance when they felt it necessary to list all three. For this reason, the appellate court refused to allow any extrinsic evidence, because the defendant's mistake in paying for the dental and vision insurance could not change the unambiguous terms of the contract.
So there you have it. OBVIOUSLY. :-)
Monday, October 24, 2016
I have never been to a trampoline park but doing this blog has given me the impression that they're dangerous! I've already blogged about one in New York, in which the court refused to enforce a waiver of liability for negligence. Now, in this recent case out of Louisiana, Duhon v. Activelaf, No. 2016-CC-0818, a court again finds against another trampoline park's enforceability of its contract terms. This time the term at issue is the contract's arbitration provision.
The plaintiff was injured at the trampoline park and filed suit seeking damages. The trampoline park responded seeking to compel arbitration pursuant to the agreement that the plaintiff was required to sign before entering the trampoline park.
However, the Louisiana Supreme Court found that the plaintiff did not consent to the arbitration clause. It noted that the clause was buried in the rest of the fairly lengthy agreement in such a way as to be concealed from the plaintiff. Specifically, it was found in the eleventh line of the third paragraph, a paragraph that also meandered through topics such as: the customer's physical ability to partake of the trampoline park, assumption of risks, agreement to follow the trampoline park's rules, and certification that customers would explain those rules to any children accompanying them. To the court, this hodge-podge, catch-all paragraph drowned the arbitration clause in the middle of unrelated information. This was extra-noteworthy because the rest of the agreement was divided into short one-topic paragraphs, save the relevant one containing the arbitration language. The court refers to it as being "camouflaged" within an eleven-sentence paragraph, nine sentences of which had nothing to do with arbitration. Because of this, the court found that the plaintiff did not truly consent to the arbitration provision.
This was reinforced by a lack of mutuality in the provision. The clause required all customers of the trampoline park to submit to arbitration, but there was no corresponding requirement on the trampoline park's part. In conclusion, the court found the arbitration clause to be unenforceable.
Saturday, October 22, 2016
A friend of mine asked me the other day about the ongoing controversy over all of that unaired Apprentice footage that is apparently sitting around somewhere. MGM and Mark Burnett have both claimed that they are not allowed to release the tapes due to confidentiality provisions in their contracts with Donald Trump. (Fortune has an article about this here, as does the New York Times.) My friend's question basically boiled down to this: Yeah, sure, maybe that deal made sense when the contract was signed with a New York self-professed billionaire but now he's running for President of the United States, and shouldn't that mean something?
Other people have raised this issue. What seems to me unique about the Donald Trump situation isn't necessarily the confidentiality provisions over the Apprentice tape, but how often, during this political campaign, we've been debating the secrecy Trump requires from all of those around him. The Apprentice contract is just the latest example of this. Over the summer, several news outlets reported on the unusually broad terms of the NDA Trump required his staffers to sign. To be fair, NDAs are not unusual during a Presidential campaign and Hillary Clinton has allegedly had her staffers sign them as well. But Trump's apparently are unusually broad, and he requires them even of volunteers who show up to make calls for Trump's campaign and presumably never even really meet Trump? What confidential information could these volunteers even know? Well, Trump is the one who gets to tell them that. And he's not afraid to sue on the NDAs: We know of at least one arbitration filed against a former staffer, alleging damages of $10 million.
Two things I take away from this:
(1) Donald Trump seems to be obsessed with controlling his image, which makes total sense, as he's made an entire career out of Being Donald Trump and it could even make him President. Trump is so fond of restricting what those around him can say about him that he's even said he'll make his federal employees sign NDAs if he does become President. At the same time, of course, Trump himself doesn't appear to feel restrained in any way to say any thought that comes into his head. So we seem to have a situation where part of the advantage of being rich is being able to say absolutely anything you want and also control to some degree what the people around you get to say, even once your relationship with them has been terminated.
(2) Despite this, however, we all know more about Donald Trump than I think he wants us to know. In the relentless glare of a Presidential campaign, no matter how many NDAs you leave in your wake, is it just impossible to keep secrets forever? And, maybe, is there something comforting about that? My friend wants to see the Apprentice tapes, but we don't know what's in the Apprentice tapes, and we don't know who even has time to review them. But we do know a great deal, maybe not Apprentice-related, but maybe enough?
P.S. This is not the first time I've blogged about Donald Trump's contracts. If you're curious, that case hasn't really progressed since that blog entry.
Monday, October 17, 2016
I was listening to the podcast No Such Thing as a Fish (highly recommended) when I learned that Einstein used his Nobel Prize money as a divorce settlement to his first wife...the only catch being that he divorced her in 1919 and won the Nobel Prize in 1921. The podcast characterized this as: "If I win the Nobel Prize, I'll give you the money." Amazing! Imagine being so confident in your Nobel Prize chances! (I guess if you are Einstein, you would be that confident.)
I know I just found a new go-to hypo to use in class.
Friday, October 14, 2016
This week, while teaching parol evidence, I taught the case of Mitchill v. Lath, which involves an oral agreement between the parties to tear down an ice house on land to the land their sales agreement was about. A student asked what the deal was with the guy who owned the land the ice house was on, and I admit I didn't know the deal, so I went and looked it up, and here's the deal:
He was George Richard Lunn, a clergyman who was born in Iowa but settled in Schenectady, where he was elected mayor on a Socialist ticket and later served in the House of Representatives and as Lieutenant Governor of New York. I had no idea who Lunn was and thought it was interesting that he turned out to have a Wikipedia page. The Wikipedia page doesn't mention his role in Mitchill v. Lath but his Prabook entry does.
Wednesday, October 12, 2016
'Tis the season!
No, not that season--yet--although last week I was shopping and noticed that the shelves are full of Christmas merchandise already so maybe it is that season.
But the real season is Halloween! Now I enjoy Halloween well enough but I'm not much of a haunted house person (or even a scary movie person), so I don't know much about them, and I was fascinated to learn that there are several haunted houses around the country that require attendees to sign waivers. In the words of this Cosmo article, "A 'if you're so scared that you actually die, your family won't sue us into oblivion' type of waiver." (Some haunted houses even involve electric shocks, I was told. Electric shocks!! I had no idea.)
I was able to locate a couple of these haunted house waivers online. Here's one that acknowledges risk of animal bites and contacts with poisonous plants (yikes!). Here's another one (with I have to admit a fair amount of typos) that contains a little clause down at the bottom acknowledging that you've been offered safety glasses.
At least one article queries whether this practice is entirely legal. The article asks, "Is it okay to mentally and even physically abuse individuals if they sign a waiver? Is there a limit to what should be legally acceptable?" and notes that few people are able to complete the experience and that it frequently leaves participants bruised, cut, and apparently shivering with shock. The haunted house they're talking about in the article requires guests to go through a health check first, I guess to try to minimize the possibility that they will suffer any lasting harm--either physically or mentally--from whatever crazy thing is going on in there. While this might sound terrifying to me, it apparently just sounds like an awesome time to a bunch of people. According to this article, there's a 17,000-person waiting list to get into this haunted house.
Another interesting thing I learned while researching this stuff (peering at the scary descriptions from between my fingers) is that apparently some of the haunted houses also make the guests sign confidentiality provisions? I guess to preserve the surprise for others. At any rate, now I've creeped myself out just looking at this stuff and I need to go watch some HGTV just to stop shuddering!
Btw, if you are a haunted house person and you're curious if one of these extreme you-would-have-to-pay-me-a-million-dollars-to-go-in-here experiences is near you, I found lists here and here. Or feel free to leave your personal favorite in the comments! Happy haunting!
Wednesday, October 5, 2016
Hip-Hop Contracts Week continues! This time with a recent ruling out of the Southern District of New York in Walker v. Carter, #1:12-cv-05384-ALC-RLE (behind paywall).
In the case, the plaintiff, Walker, sued Jay-Z and others regarding not a song but the logo for Roc-a-Fella Records. The court was dismissive of Walker's relationship to the logo right off the bat: "Plaintiff casts himself as the creative mastermind of the Logo's design, though he admits that he neither came up with the idea for the Logo nor drew any part of it." Right away you can tell that this doesn't sound like a judge who's inclined to find for the plaintiff here.
And he doesn't. He grants defendants' motion for summary judgment, finding that there was no evidence of any written contract between the parties and so Walker's breach of contract claims could not survive. Walker had alleged that he and the defendants had entered into a contract providing for royalties to be paid over a period of ten years. Unfortunately for Walker, this contract--which couldn't possibly be performed within a year--is subject to the Statute of Frauds and required to be in writing, or at least for there to be sufficient evidence that a writing once existed. Generally, in New York this evidence has consisted of either the admission by the other party that a writing did exist at one time or the testimony of witnesses regarding the signing and content of the now-lost writing. Here, defendants denied that any writing had ever existed (which seems predictable, frankly) and Walker could produce no witnesses as to the signing of the contract, as Walker stated that no one other than the defendants and himself were there when the contract was signed.
Walker did produce two witnesses regarding the existence of the contract. However, they were insufficient. One testified that he had seen a piece of paper Walker told him was a contract but that he didn't read the contract and did not know what the contract said. The other testified in a number of ways that contradicted Walker's own testimony regarding the contract: Walker claimed to have written the contract in the same face-to-face meeting when it was signed, but the witness claimed to have seen the contract before it was signed, which couldn't have been possible if Walker's testimony was true. Walker claimed to have lost the contract in 1996, but the witness claimed to have seen it in 2000. Walker claimed the contract was written on blank paper, the witness claimed the contract was on lined paper. Et cetera. The court felt justified, given all of these impossible contradictions in the testimony, in disregarding this witness's testimony, especially since the witness also claimed to have a direct interest in the contract due to his close relationship with Walker. In fact, the court recounted that the witness had initially testified that he had never seen the contract, and only changed his testimony after being spoken to by counsel and after the statute of frauds had become an issue in the case.
Therefore the court concluded that the statute of frauds required the contract to be in writing, there was no writing, and there was no genuine issue of material fact that there had ever been a writing, and so granted defendants' summary judgment motion.
(He also found that Walker's copyright infringement claims were time-barred, so this was a total victory for Jay-Z and the other defendants.)
(A Reuters article about the case can be found here.)
Monday, October 3, 2016
In 2003, 50 Cent released the song "P.I.M.P." The song was a huge top-ten hit for the hip-hop artist, achieving gold status in sales.
The problem is that Brandon Parrott alleges that the song contains, without his prior consent, a track he wrote called "BAMBA."
The parties had apparent discussions about this in 2003, entering into a settlement agreement under which Parrott received some royalties on "P.I.M.P." in exchange for Parrott licensing the pieces of his song that were used in "P.I.M.P." and agreeing to release all of his remaining claims. According to the defendants, the contract between the parties contained a clause in which Parrott represented "that no promise, representation, or inducement not expressed herein" was made in connection with the contract.
The parties are back in court, though, with Parrott alleging in a pro se complaint filed in the Central District of California, Parrott v. Porter, #2:16-cv-04287-SJO-GJS (behind paywall), that that the settlement agreement is invalid because he was basically tricked into signing it "under false and fraudulent pretenses." Parrot argues that he thought the defendants acted in "Good Faith" and used "BAMBA" in "P.I.M.P." entirely accidentally. However, Parrott claims that he has now realized that the defendants knew that "P.I.M.P." contained Parrot's music and deliberately released "P.I.M.P." without attempting to contact Parrot for permission beforehand. In addition, Parrott appears to contend that there are inconsistencies with the royalty statements he's been sent under the settlement agreement that he has been unable to reconcile due to the defendants' lack of cooperation.
The defendants have now responded to the complaint with a motion to dismiss, apparently resting mainly on the fact that the settlement agreement is valid and governs the situation between the parties, under which Parrott has been collecting royalties for years.
Where is 50 Cent in all of this? Preoccupied with his own ongoing bankruptcy proceedings.
(Hollywood Reporter article on all this here.)
Thursday, September 29, 2016
In 2012, Mr. Flores decided to go skydiving in California. He contracted with Skydive Monterey Bay Inc. (“Skydive”) to do so. Unfortunately, his parachute deployed prematurely, rendering him unconscious during the jump that in turn resulted in severe injuries upon landing. Flores of course sues Skydive for various torts. Skydive cross-complains alleging breach of contract based on the release that Flores had signed before the accident. This read that Flores would not “sue or make any claim of any nature whatsoever against Skydive … for personal injuries or other damages or losses sustained … as a result of my ‘parachuting activities’ even if such injures or other damages or losses sustained by me as a result of my ‘parachuting activities’ are caused by the negligence, in any degree, or other fault of Skydive….”
Flores filed a motion to strike Skydive’s cross-complaint under the California anti-SLAPP statute. This is a two-prong test that at bottom required Flores to prove that his lawsuit arose from protected activity and Skydive to prove that it had a probability of prevailing on the claim, in this case the breach of contract.
The court found that despite the contractual clause, Flores had not “waived” his right to the protections of the anti-SLAPP provisions as Skydive argued. The court found that the “filing of a complaint is an act undertaken in furtherance of the constitutional right to petition.” The burden then shifted to Skydive to demonstrate that its breach of contract claim had “minimal merit.” Skydive did not meet that low burden because it failed to provide evidence of damages resulting from the breach (the court relied on the four familiar elements of a contract: existence, performance or excuse by plaintiff, defendant’s breach, and damages). Skydive had simply called Flores’ breach of contract “incredulous,” but did not submit “any affidavits or declarations to support the allegations of damages” such as the costs of defending against the lawsuit and the potential damages on the merits of the claim.
Flores can now continue his lawsuit. The case shows the high importance of not relying on self-serving statements, accusations and bare allegations in legal proceedings. This is another aspect of the law that should be obvious, but apparently is not.
The case is Gerardo Flores v. Skydive Monterey Bay, Inc., 2016 WL 4938863 (not officially published), Monterey County Super. Ct. No. M126778.
Wednesday, September 28, 2016
A recent case out of the District of Utah, HealthBanc International v. Synergy Worldwide, Case No. 2:16-cv-00135-JNP-PMW, reminds us all of this rule. Well, it definitely reminded the parties and now I'm blogging about it and reminding all of you!
This case revolves around "a recipe for a powder comprised of various grasses and other components." Apparently you can combine this powder with water to make a nutritional supplement. HealthBanc entered into a contract with Synergy whereby Synergy would distribute the powder and pay HealthBanc royalties for every bottle of powder it sold. After almost a decade of doing business together, the relationship between the two parties soured. HealthBanc sued first, and then Synergy counterclaimed, alleging that HealthBanc had led Synergy to believe that it owned intellectual property rights in the recipe for the power, which apparently turned out to be untrue. HealthBanc then moved to dismiss this fraudulent inducement claim based on lack of particularity in Synergy's pleadings. The court here grants the motion.
Synergy's complaint just generally alleged that HealthBanc had made misrepresentations. Those general allegations are not enough for a fraudulent inducement claim. Synergy identified nothing about the misrepresentations: When did they happen? Where did they happen? Were they written? Oral? Who made them? Without any of this information, the court finds this cause of action can't survive.
The contract between the parties did contain a clause where HealthBanc
represents and warrants that it is the sole and exclusive owner of the entire rights, title and interest, including without limitation all patent, trademark, copyright and other intellectual property rights,
and another clause where HealthBanc "represents and warrants" that it has exclusive rights to the recipe that it can provide to Synergy. But those clauses don't raise a valid fraudulent inducement claim. Synergy made no allegations about the drafting of those clauses, nor did it allege that those clauses caused it to falsely believe that HealthBanc owned IP rights in the recipe and that that false belief prompted Synergy to sign the contract.
Likewise, Synergy failed to allege any particular way that it was harmed by the alleged misrepresentations.
Therefore, on basically every single element Synergy made very general claims that failed to meet the particularity standards. The court does dismiss without prejudice, though, giving Synergy the opportunity to try to fix the deficiencies. Stay tuned!
*Note the first: Synergy Worldwide sounds vaguely like what a company would be called in a Marvel movie so I actually looked the company up to see what it does. It seems to be a company specializing in nutritional supplements: "Your source for ProArgi-9 Plus, the highest quality l-arginine supplement on the market, as well as Mistica acai supplement, Core Greens, and more."
*Note the second: I also looked up "greens formula," which is what the court here refers to the recipe as. Wikipedia just wants to tell me about mathematical theorems, which then sent me down the Wikipedia rabbit hole to learn about George Green, a self-taught mathematical genius who received only one year of formal schooling as a child and to this day no one really knows where or how he learned the form of calculus that his theorems advanced.
Monday, September 26, 2016
This recent case out of the Western District of Pennsylvania, Landan v. Wal-Mart Real Estate Business Trust, 2:12cv926 (behind paywall), is sort of a try-try-again case, although the "try again" part has as negative an outcome for the plaintiffs as the "try" part did. The plaintiffs' breach of contract claim had already failed here because the court found there was no oral agreement between the parties and the parties' signed letter of intent indicated that the parties did not wish to be bound until a final formal contract was executed (as never happened).
In the face of the failure of their breach of contract claim, the plaintiffs turn here to promissory estoppel. But the lack of a final formal contract haunts the promissory estoppel analysis, too. The court finds the plaintiffs were unable to explain what promises had been made to them and characterizes the plaintiffs' stance as "unclear, inconsistent, constantly shifting, and ultimately unavailing." Given the confusion about the statements at issue, the court concludes that any reliance on such vague statements on the plaintiffs' part was unreasonable. A lot of the courts' characterization of the statements and the reasonableness, though, seem to revolve around the fact that the parties never reached a final formal contract: It would be hard for the plaintiffs to allege definite promises, the court says, because the parties were negotiating and hadn't entered into a formal deal yet; maybe Wal-Mart did make some statements but, the court says, in the context of the ongoing negotiations it would have been unreasonable for the plaintiffs to rely on those statements.
Granted, there seem to definitely be issues with the plaintiffs' promissory estoppel claim here. The court points out that the plaintiffs themselves behaved sometimes as if they did not understand Wal-Mart to be making any promises to them, apparently negotiating with other parties over the same piece of land because of their skepticism about the Wal-Mart deal going through. And there was the letter of intent between the parties that did seem to make it less reasonable that the plaintiffs would rely on indefinite negotiating statements that hadn't been reduced to writing the way others of the statements had been. But it also seems like, once the court decided that the letter of intent wasn't binding because it contemplated a subsequent agreement, the plaintiffs' promissory estoppel claim was likewise doomed. Without a formal executed agreement, there was nothing for the plaintiffs to do to save their claim.
Wednesday, September 21, 2016
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.
Tuesday, September 20, 2016
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.
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.
However, 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.
Monday, September 19, 2016
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.
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.