ContractsProf Blog

Thanksgiving Frivolity: The Arthur Murray Cases and Malcolm in the Middle

This Thanksgiving, I am grateful for students who provide me blog fodder, in addition to a sense of professional purpose.

Somehow I was unaware that Malcolm in the Middle had an episode, Poker, back in 2002 that plays on the theme of the Arthur Murray Dance Studio cases previously discussed here.

Those cases generally involve an elderly woman (sometimes an elderly man) who pays an absurd amount of dance lessons.  Arthur Murray had a strategy to entice such investments: instructors would flatter and seduce until the marks came to believe themselves uniquely gifted.  They would buy scores of lessons, followed by packages, followed by lifetime memberships and, in some cases, multiple lifetime memberships.  It was all a con. However, as Deborah Threedy has argued, the "victims" of the con might have complicit in the scheme.  They enjoyed themselves, rode the tiger, and then sued once the ride had lost its appeal.

Mingle Media TV, CC BY-SA 2.0, via Wikimedia Commons

In the Malcolm in the Middle episode, far too little space is given, IMHO, to the plot line of the Lois character (the mother), played by the wonderful Jane Kaczmarek (left).  The incomparable Bryan Cranston (right), who plays her husband Hal, has bought her dance lessons as a birthday present.  But he is invited to a poker game and has to back out.  Lois goes alone, and the dance instructor pulls the usual schtick with her, complimenting her on her talent, her grace, her dancer's ankles.  It's all very convincing, because we see it all as Lois experiences it.  She performs a charming little dance number with her instructor that we get to see both in her imagination and from the more objective perspective of her son's video recorder.  The veil lifted, Lois abandons (for now) her dreams of advanced dance lessons and seems content to romp around the kitchen (gracefully or clumsily) with Hal.

Meanwhile, her oldest son is showing that Deborah Threedy was right: the women at the dance studios willingly pay to dance with Lois's oldest son, who happily accepts their payments and observes that a lot of people save up money all their lives and then end up with nothing to spend it on.  So why not spend it on dance?

H/T to my former (and future?) student Francisco Herrera Chinchilla.

Return of the Tuesday Top Ten - Contracts & Commercial Law Downloads for November 23, 2021

After an unexpected week in the November void last week, the Tuesday Top Ten makes its triumphal return. Let's see what's happening the world of contracts-adjacent downloads, shall we? We should note, however, that Juliet Moringiello & Chris Odinet's The Property Law of Tokens continues its adverse possession of the top spot on the Contracts & Commercial Law list. Yeah, just like some Property types to do that. 

 

Top Downloads For:

Contracts & Commercial Law eJournal

Recent Top Papers (60 days)

As of: 24 Sep 2021 - 23 Nov 2021

Rank	Paper	Downloads
1.	The Property Law of Tokens Juliet M. Moringiello and Christopher K. Odinet Widener University - Commonwealth Law School and University of Iowa - College of Law	621
2.	Shocking Business Bankruptcy Law Melissa B. Jacoby University of North Carolina School of Law	394
3.	Should Gatekeepers Be Allowed to Combine Data? - Ideas for Art. 5(a) of the Draft Digital Markets Act Rupprecht Podszun Heinrich Heine University Dusseldorf - Faculty of Law	293
4.	The Rise of Plain Language Laws Michael Blasie Pennsylvania State University, Dickinson Law	179
5.	Private Law Theory: The State of the Art Steve Hedley University College Cork	159
6.	Artificial Intelligence and Agents Daniel Kiat Boon Seng and Cheng Han Tan Director, Centre for Technology, Robotics, AI and the Law, Faculty of Law, National University of Singapore and City University of Hong Kong (CityU) – School of Law; Centre for Public Affairs and Law; Centre for Chinese and Comparative Law	120
7.	Advertising Injustices: Marketing Race and Credit in America Jim Hawkins and Tiffany Penner University of Houston Law Center and University of Houston, Law Center	104
8.	The “Code Adjudicator” Model: The Pubs Code, Statutory Arbitration and the Tied Lease Jed Meers and Liz Hind University of York, York Law School and University of York	98
9.	Contractual Depth Cathy Hwang and Matthew Jennejohn University of Virginia School of Law and Brigham Young University - J. Reuben Clark Law School	94
10.	Digital Technology, Future Lawyers and the Computable Contract Designer of Tomorrow Marcelo Corrales Compagnucci, Mark Fenwick and Helena Haapio Centre for Advanced Studies in Biomedical Innovation Law (CeBIL), Faculty of Law, University of Copenhagen, Kyushu University - Graduate School of Law and University of Vaasa, School of Accounting and Finance, Business Law	84

 

Top Downloads For:

Law & Society: Private Law - Contracts eJournal

Recent Top Papers (60 days)

As of: 24 Sep 2021 - 23 Nov 2021

Rank	Paper	Downloads
1.	The Rise of Plain Language Laws Michael Blasie Pennsylvania State University, Dickinson Law	179
2.	Artificial Intelligence and Agents Daniel Kiat Boon Seng and Cheng Han Tan Director, Centre for Technology, Robotics, AI and the Law, Faculty of Law, National University of Singapore and City University of Hong Kong (CityU) – School of Law; Centre for Public Affairs and Law; Centre for Chinese and Comparative Law	120
3.	The “Code Adjudicator” Model: The Pubs Code, Statutory Arbitration and the Tied Lease Jed Meers and Liz Hind University of York, York Law School and University of York	98
4.	Diversity, ESG, and Latent Board Power Gregory H. Shill and Matthew Strand University of Iowa College of Law and University of Iowa, College of Law	92
5.	Pirate Arbitration David Horton University of California, Davis - School of Law	39
6.	Is Insisting on Specific Performance under Smart Contracts Desirable? Inflexibilities of Smart Contracts and Potential Solutions Eyup Kun KU Leuven - Centre for IT & IP Law (CiTiP)	18

 

Squid Game and "Opportunity"

Last month, Nancy Kim introduced me to Squid Game with this post.  I read the post and thought, "I'm glad Nancy watched that so I don't have to.  Ultra-violent sadistic television show that portrays our current economy as a savage murderous game engineered to extinguish the hopes and dreams of ordinary folks?  Who needs that?  I have my life."  Meanwhile, unbeknownst to me, my bloodthirsty wife was reading up on the series and getting the popcorn ready.  I'll do anything to put off for a time my promise to my students to listen to Taylor Swift's music, so we watched the first episode.  Unlike Ms. Swift, the show is holding my interest, and then some.  It's a really smart, well-conceived series.  I could use a little less violence and sadism, and I could have passed on the strobe effects in episode 3 (or was it  4?), but maybe that's just me.

In any case, right at the beginning of Episode 2, "Hell," there's an interesting contracts moment.  After the first game, the players are begging to be allowed to leave.  The guards/men in pink tell the players that they have been given an opportunity.  The situation presents a variation of a classic riddle of the law of coercion.  The coercing party claims to be making an offer: e.g., I'm offering you, desperate, insolvent business, an opportunity to get paid off early.  In exchange, all I ask is that you accept my payment of 35% of what you claim I owe you as payment in full.  Or, in a situation that's a little closer to the Squid Game situation, "Hey, shipwreck, I'm offering to save you; all I ask in return is that you surrender your cargo to me."

The law does not turn on the formal aspects of the "offer."  The law of coercion does not turn on whether the offer is posed as an opportunity or a threat.  I offer my students the opportunity to hear me sing.  They know a threat when they hear one.  But in the context of economic coercion, it can be very difficult to differentiate opportunities from threats.

Without giving away too much of the plot, I would venture that the problem with the agreement at the heart of Squid Game is not so much coercion as illegality.

Sid DeLong on Restitution and the Case of Andrew Cuomo

More Restitutionary Pitfalls for Aspiring Authors (Who Serve in Government)

Sidney W. DeLong

A recent dispute involving the former Governor of New York raises interesting questions about disgorgement as a remedy for breach of fiduciary duty by government officials. It also dramatically illustrates the financial risks that liability for disgorgement poses to defendants who may not have realized that they were acting wrongfully and who have received and disposed of funds before learning that they must turn them over to the plaintiff.

Disgorgement is often the only effective remedy in cases in which a breach of fiduciary duty causes harm to the plaintiff that is difficult to prove or impossible to calculate, making an award of compensatory damages measured by the plaintiff’s loss unfeasible. If plaintiff can prove that defendant was enriched by the breach, the defendant must disgorge to the plaintiff any net gains it obtained as a result of the breach, regardless of their source. Such a claim for disgorgement is entirely unrelated to any harm the plaintiff may have suffered from the wrongdoing and may give plaintiff a windfall. But disgorgement of the wrongdoer’s entire gain from the breach is thought to be necessary to prevent defendant’s unjust enrichment from the wrong and has the virtue of completely removing the incentive for wrongdoing. The same rule applies to breaches of statutory duties and other tortious wrongs.

An earlier post suggested the potential liability of John Bolton for disgorgement of the proceeds of his book, In the Room Where it Happened, on the theory that his publication of the book violated federal law and his employment contract with the government. 

Perhaps inspired by Bolton’s dispute, as reported in The New York Times, the State of New York has recently announced that it will seek disgorgement of the proceeds of former Governor Andrew Cuomo’s book American Crisis: Leadership Lessons from the Covid-19 Pandemic on the grounds that, in obtaining legally-necessary permission from the Joint Commission of Public Ethics (JCOPE) to publish the book, Cuomo wrongfully failed to disclose that he had illegally used government resources, including employee time, to produce the book.  Cuomo denies wrongdoing and says that publication was not wrongful because he received permission from the Commission for the publication. The State seeks recovery (disgorgement) of all amounts paid or to be paid to Cuomo by his publisher.

According to news reports, Cuomo received an advance of over $3 million with $2 million more to be paid over the next two years. The latter payment is unlikely to come due because of poor sales of the book. Cuomo’s attorneys have stated that after payment of expenses and taxes, he donated $500,000 of the proceeds to charity and placed the $1.5 million remainder in a trust for his children.

As an accounting detail, disgorgement usually reaches only the net amount of unjust enrichment after deducting the wrongdoer’s out of pocket costs of obtaining it. But the amounts that Cuomo claims to have spent on income taxes should not reduce his duty to disgorge the entire sum. If he is forced to disgorge the publisher’s pre-tax payment his only remedy is to file an amended tax return and seek recovery of the tax overpayment from the U.S. Government. Of course, he would be required to disgorge the amounts of his gifts to charity and to his children’s trust.

In cases such as Cuomo’s in which the defendant’s violation of law is unclear or unintentional, disgorgement may seem draconian, conferring a windfall on the plaintiff out of proportion to any harm it may have suffered and sandbagging defendant with unexpected liabilities that it may be in no position to pay. This is a stiff price to pay for the deterrent

Restitutionary claims over identifiable proceeds of wrongdoing may sometimes even reach beyond the wrongdoer to innocent transferees of the proceeds. If Cuomo is unable to pay back the full $3 million, the State may seek to claw back the money from the charity or the children’s trust, using the legal theory of fraudulent conveyance. These claims seem unlikely to succeed, however, because there is no indication that the transfers were made to hinder, delay, or defraud Cuomo’s creditors. But if Cuomo becomes insolvent, his bankruptcy trustee might be able to recover the payments as fraudulent transfers without having to prove that they were made with such intent.

As cautionary tales for government-employed authors, the Bolton and Cuomo cases can be distinguished. Assuming in each case that the government’s allegations are correct, Bolton’s wrong was in breaching his statutory and contractual duties of pre-clearance and non-disclosure, security breaches that could potentially harm the government in ways that were incalculable. As in Snepp, disgorgement of all the author’s gains from such breaches was the only feasible remedy.

By contrast, Cuomo’s initial wrong seemingly consisted only in misappropriating or misusing government resources for his private benefit, trivial misbehavior that  harmed the government in ways that are easily calculable by reference to the wages of governmental employees and the costs of office supplies.

However, JCOPE’s main complaint is that his concealment of this misuse might also have constituted an ethical breach or even a breach of fiduciary duty. This would have breached his legal duties as governor as well, in which case, perhaps New York did not ask for enough. It is, after all, it is hornbook law that a faithless fiduciary forfeits his fee in addition to any profits he may have made by breaching his trust. See Restatement (Third) Restitution § 43. The theory is that the fiduciary did not earn the compensation because he did not fulfill his duties. On this theory, attorneys have forfeited their legal fees when they breached duties to their clients. One can see great revenue-raising potential in an aggressive use of this theory. Perhaps the State of New York should seek restitution of the salary and benefits of every state official who has been shown to breach his or her fiduciary duty to the State.  It’s not likely to happen, but if it does, remember you read it here first!

Are Fridgewrap Arbitration Clauses Enforceable

Contracts Prof Alan Hyde shared this image of the lovely surprise his student received upon opening the door of a new refrigerator.

As I read the draft Restatement of Consumer Contract Law § 2(b)(3), such terms would only become a part of the contract if "after the standard contract term is made available for review, the consumer has a reasonable opportunity to terminate the transaction without unreasonable cost, loss of value, or personal burden, and does not exercise that power."  Does that mean that the arbitration clause is not part of the contract if the student had to pay a non-refundable delivery/installation clause and could not return the fridge without cost?  

On the Connection Between Workplace Harassment and Compulsory Arbitration

The New York Times reported on Tuesday on women who gave congressional testimony, recounting how compelled arbitration had prevented from from going public with allegations of workplace sexual misconduct.  Their testimony came in the context of Congress's consideration of legislation that would ban mandatory arbitration of workplace sexual assault and harassment.  I wish I had more faith in Congress's ability to pass targeted legislation outside of the context of omnibus, must-pass spending bills.

Yesterday, I got some pushback on Twitter when I suggested that part of the problem was boilerplate.  Twitter is not a forum for precision.  I intended the word to capture the distinction Peggy Radin explored in her book, Boilerplate, which was the subject of an online symposium on the blog soon after its publication (links to the posts can be found at the bottom of this post).

Radin distinguishes between the realm of contracts we mostly teach about in the first-year contracts course, which involve negotiations and mutual consent, and modern contracting, which involves form contracts and do not provide an opportunity for the offeree to give meaningful consent to the terms.  Radin speaks of the former as World A contracts, which we can think of as contracts that entail mutual assent.  But most contracts exist in World B, the world of boilerplate that I was referencing, far too cryptically, in my Tweet from yesterday.

For example, one women who testified was 23-years-old when she was offered $60,000/year to work for a company owned by a family friend.  That very family friend then commenced a campaign of harassing e-mails and later sexually assaulted her.  Upon beginning employment, she had signed papers that required arbitration of all claims relating to her employment as well as strict confidentiality with respect to such claims.  The woman had no idea of what what she was signing, focusing more on the prospects of starting a career.  She did not give meaningful assent to the terms that bound her, both because she likely was not given adequate time to read and consider them, and because the terms were non-negotiable.  She would have needed legal advice to understand them, but given her market position, even a lawyer would not have been able to help her negotiate more favorable terms.  In such circumstances, which are the usual circumstances for almost all of us in almost all contractual settings, signing and hoping for the best is the rational thing to do.

Sarah Parshall Perry, a legal fellow at the Heritage Foundation, testified against the legislation, while likely means that it is doomed in the Senate.  She argued that the problem is not arbitration but confidentiality agreements.  It's really both.  Arbitration can be a way to protect bad actors from negative publicity and the binding nature of precedential decisions. Ms. Parshall Perry is quoted in the Times as saying, “Curtailing access to arbitration would injure, in the end, the very people that Congress has sought for nearly a century to protect.”  Statements like this give me fits. 

Ms. Parshall Perry's statement is both misleading and condescending.  It is misleading because nobody is talking about curtailing access to arbitration.  They are talking about restoring access to courts.  Parties can still choose arbitration when it suits their needs.  Consequently, Ms Parshall Perry's statement is also condescending, because it assumes that plaintiffs are incapable of determining what is in their best interests.  Arbitration has many advantages -- it is faster and cheaper, and in most situations, a plaintiff is likely to get at least  some sort of relief through arbitration, even on claims that might get dismissed for non-substantive reasons in courts.  Plaintiffs aren't idiots.  They should be free to choose, in consultation with their legal counsel,  the venue that best suits their needs.

CALL FOR PAPERS: 6th Annual Penn-NYU Empirical Contracts Workshop (June 2, 2022)

Paper Submission Deadline: March 1, 2022

The 6th Annual Penn-NYU Empirical Contracts Workshop is scheduled to place in person at the University of Pennsylvania Carey School of Law on June 2, 2022.  

The Workshop is a forum for the presentation and discussion of early and mid-stage projects analyzing contract law and practice from a variety of empirical perspectives. Papers are selected through a peer review process.  Attendees of the conference are expected to cover their own travel and lodging costs, but there are no conference fees.  

Submitted papers must be unpublished (and expected to be unpublished at the time of the conference). If accepted, authors will have an opportunity to submit a revised draft prior to the conference for presentation and discussion. Please note that accepted papers will be made available to all conference participants.  

Organizing committee:  Dave Hoffman (top left, Penn); Florencia Marotta-Wurgler (right, NYU) and Tess Wilkinson-Ryan (bottom left, Penn).  Please email submissions to dhoffman@law.upenn.edu

Jay-Z Convinces a Jury that the Jay-Z-Branded Fragrance Stinks!

Beginning in 2009, Jay-Z, entered into a series of agreements with Parlux Fragrance and parent company Perfumania (Plaintiffs).  The agreements granting them an exclusive license to use the Jay-Z trademark for manufacture, promotion, distribution, and sale of fragrances and related products.

According to the Complaint, the parties agreed that Plaintiffs could use the Jay-Z trademark on certain products and that Jay-Z (right, in a 1988 photo ) would not unreasonably withhold permission to use the trademark.   In 2013, Plaintiffs launched Gold Jay Z fragrance.  Plaintiffs maintain that, in order for a celebrity fragrance to succeed, the celebrity has to actively promote it, and they allege that Jay-Z was obligated under a licensing agreement to do so but breached those contractual obligations.

Plaintiffs claim multiple breaches by Jay-Z including: (i) declining to be interviewed, (ii) failing to provide a quote for an upcoming Women's Wear Daily article, (iii) failing to make various promotional appearances at Macy's in support of the product, (iv) declining to provide a quote or statement for the press release in connection with the product launch, (v) or to provide quotes or complete "Q & As" for Elle, Glamour, or Cosmopolitan, and (vi) rejecting five different concepts for a promotional contest involving a giveaway of an 18-carat gold bottle of GOLD JAY-Z created by Jacob the Jeweler valued at $20,000, and instead keeping the prototype gold bottle.

In the litigation, Jay-Z contended that Parlux proceeded with the launch despite knowing these promotional events conflicted with Mr. Carter’s Magna Carta World Tour, which made him unavailable for these promotional events.  In his testimony, according to Allhiphop.com, Jay-Z did not like the promotional work that Plaintiffs put together for the branded fragrances, calling it "B-rate" and called their efforts "crappy, lazy work."

After the initial launch, Plaintiffs began developing concepts for additional products for the brand but it was unclear whether these additional requests were included in the original product development plan. Jay-Z and his people felt under no contractual obligation to approve new products under the agreements.  Plaintiffs argued that Jay-Z's refusal to aid them in the development of new products was a breach of his obligations.

Jay-Z and his attorneys broadly argued that Plaintiffs failed to understand how to properly market his luxury brand and protect his products from being sold "on the shelves of Walmart between hand sanitizer and Tic-Tacs," as his attorney said in his opening statement.  Jay-Z counterclaimed, seeking $2.7 million in unpaid licensing fees.

On November 10, 2021, a New York jury, after a three-week trial, took only two hours to reject both parties' breach of contract claims.

Thanks to my research assistant, Alyssa Cross, for helping me with this stinky assignment.

Two Yale Law Students Sue Yale for Breach of Contract

Yale Law School (YLS) gets a bad wrap for being too theoretical.  Outside of the clinics, so that saying goes, one hardly learns doctrine at all during one's three years in law school.  A famous alum once said to me that practicing law with a degree from YLS and nothing else is a recipe for malpractice.  He may have proved himself right.

But two YLS students have figured out a way to immerse themselves in the practicalities of litigation: they are suing their law school!  The anonymous students, styled John Doe and Jane Doe in the complaint, allege that YLS's Dean and Associate Dean (the Deans) conspired to "blackball" the plaintiffs and cut them off from career opportunities in retaliation for their refusal to lie in support of the YLS's investigation of Amy Chua.

The allegations involve the YLS Dean's attempt to discipline Chua or alleged inappropriate conduct involving social gatherings at her home and advice relating to how to dress for success in the context of clerkships.  Both plaintiffs describe themselves as persons of color, and they reached out to Professor Chua, one of YLS's few faculty members of color, to discuss the peculiar obstacles they faced as students of color at YLS.  Two such meetings took place at Chua's home, allegedly in violation of a "no-socializing" agreement that Chua had entered into with YLS.  Word of these assignations somehow got to a third YLS student, who assembled the 20-page "Dossier" and turned it over to the YLS administration. 

Plaintiffs allege that the Deans approached a professor of constitutional law and pressured him to not hire the plaintiffs as Coker Fellows (teaching assistants) in retaliation for their refusal to lie about Amy Chua.  Given the lack of grades at YLS, a Coker Fellowship is a way for a Yale student to evidence their achievement.  As a result of the Deans' actions, plaintiffs were not hired as Coker Fellows, nor did they even apply for judicial clerkships because, they allege, the Deans threatened to share with any judges who might hire them Dossier detailing plaintiffs' alleged misconduct with Professor Chua.  Plaintiffs allege that the Deans violated the University’s Policy Against Discrimination and Harassment (the Handbook), which they say is a contract "by its own terms" that prohibits the administration from "retaliating against students who report a concern, file a complaint, and/or participate in an investigation."

 According to the complaint, the Deans and the YLS Director of Equity, Diversity and Inclusion, hounded the plaintiffs and pressured them on a daily basis to testify against Professor Chua.  When they refused to do so, retaliation ensued.  Both plaintiffs have been deeply affected by the incident.  Jane has taken a leave of absence; John has resigned as the Dean's speechwriter.  Both have physical symptoms brought on by the harassment to which they have been subjected.

The complaint alleges causes of action sounding in breach of contract and promissory estoppel, plus the torts of intentional interference with prospective business relations, defamation, unreasonable publicity, false light, and intentional infliction of emotional distress.

I will be very interested to see in what sense the Handbook is a contract "by its own terms."  The Complaint does not cite to any place in the Handbook where it so self-identifies, and most such handbooks are not contracts and sometimes explicitly say that they are not contracts.  But YLS is a unique institution, so who knows?

Nancy Kim, OpEd on Holding Facebook Accountable

People familiar with the blog know Nancy Kim as one of our contributing editors, author of books and books and books, including her recent novel, as well as law review articles too numerous to list.  Now, Nancy has also published an OpEd in the L.A. Times, showing that she is now a well-rounded public intellectual.

As Nancy explains, one obstacle to holding Facebook accountable for the well-documented harms it causes is Section 230 of the Communications Decency Act.   However, Section 230 should not shield Facebook from liability for the intentional harms it causes or for the misleading ways in which it markets its platforms.  Pointing out that Facebook is addictive by design and noting its suppression of its own research indicating the psychological harms it inflicts on its users, Nancy argues:

Facebook’s products and what the company says about them should be fair game for product liability lawsuits. People who suffer physical or emotional harm from those products — especially teenagers and young adults who are particularly vulnerable to the site’s features — should be able to sue the company without getting bogged down by Section 230.

Part of the solution would be a legislative fix, clarifying the limited scope of Section 230 protections for platforms like Facebook.  However, we should not limit ourselves to playing Waiting for Godot game with our feckless legislators.  For now, lawsuits might be the best way to shed some sunlight on Facebook's practices.

Richard Craswell's Allegheny College Suite

We are indebted to Richard Craswell for a great deal of contracts scholarship as well as quite a few musical compositions on the subject of contracts law.  We posted many of them back in 2012.  This one came later:

It is worth reading Professor Craswell's notes after the case.  They explain, among other things, why Judge Cardozo raises promissory estoppel but never rules on whether the College could enforce the charitable pledge on that basis. 

Judge Cardozo could not really rule on that basis, because the College never claimed any reliance.  Or could he?  He's Cardozo!  He could persuade me of just about anything.  Because he did not write it (but concurred in the decision), I will never understand the reasoning in Mitchill v. Lath.

H/T my student, Tom Taylor.

A $300 Million Proof-Reading Error Leads to Suit Against BigLaw, Orrick and Cleary

Remember back in the before-times, when we got excited over a missing Oxford comma leading, as reported in the New York Times, to a $5 million settlement?  Peanuts.  

Now, according to Bloomberg Law,  Terraform Power LLC (Terraform) was required to pay $300 million because M&A attorneys put the plural "buyers" in an agreement that should have referenced a singular "buyer."  Terraform, alleging legal malpractice, is seeking to recover over $300 million from the powerhouse law firms of Orrick, Herrington & Sutcliffe and Cleary Gottlieb Steen & Hamilton.  The firms say that the claims are without merit.  How lawyerly!

In the underlying transaction, TerraForm and another company SunEdison, Inc. (SunEdison) acquired two corporate entities collectively referred to as First Wind.  Terraform acquired First Wind’s operating  facilities; SunEdison acquired the rest of First Wind’s portfolio.  While most of the payment provisions of the Purchase and Sale Agreement (PSA) obligated one or the other "buyer," the provision at issue, an acceleration provision referenced "buyers" and thus obligated both entities to make the Accelerated Earnout Payment upon the occurrence of an Acceleration Event.  SunEdison's bankruptcy was such an Event, and guess what!  It occurred.

Plaintiffs in the underlying action sought recovery of the Earnout Payment from Terraform.  Terraform's defense was mutual mistake.  The Supreme Court for Manhattan County, New York State, charged with construing the PSA, noted that "it is not economically illogical, as part of the deal as a whole, for plaintiffs to have negotiated and for defendants to have agreed to pay the accelerated-earnout obligation in the event of, among other things, SunEdison’s bankruptcy." In addition, the court found that the plural "buyers" was used in 22 of 24 drafts of the PSA and therefore was unlikely to have been the product of a mutual mistake on the part of the drafters.  Finding no factual basis for Terraform's mutual mistake argument, the court entered a $231 million judgment against Terraform, plus 9% pre-judgment interest going back to 2016.  Terraform then settled with First Wind and now is after the attorneys.

According to the Complaint, the mistaken term "buyers" obligated the company to pay $300 million based on the occurrence of an event that was outside of Terraform's control.  Terraform contends that it never would have agree to any such provision, that attorneys at both firms knew that, and that the plural "buyers" therefore must be a product of attorney malpractice.  Attorneys at both firms call the plural term a "scrivener's error."  Terraform alleges that attorneys at both firms caught the error but never corrected it. 

Dear Reader, should you ever find an error on this blog that could expose us to hundreds of millions of dollars in liability, please use the comment function (or e-mail) to notify us of our mistakes.  Actually, given the standard income of Internet keyboard warriors, hundreds of dollars of exposure would suffice to put us in the poorhouse, and should anyone request any further scrivening from us, we should be obliged to offer Bartleby's response.  Spare us that fate!

H/T to Mitu Gulati (right), with an assist from @HoffProf.  Some Virginia contracts profs know the importance on staying on this blog's good side.  Others, well. . . . 

Tuesday Top Ten - Contracts & Commercial Law Downloads for November 9, 2021

Top Downloads For:

Contracts & Commercial Law eJournal

Recent Top Papers (60 days)

As of: 10 Sep 2021 - 09 Nov 2021

Rank	Paper	Downloads
1.	The Property Law of Tokens Juliet M. Moringiello and Christopher K. Odinet Widener University - Commonwealth Law School and University of Iowa - College of Law	520
2.	The New Formalism in Private Law Paul B. Miller Notre Dame Law School	309
3.	Shocking Business Bankruptcy Law Melissa B. Jacoby University of North Carolina School of Law	309
4.	Should Gatekeepers Be Allowed to Combine Data? - Ideas for Art. 5(a) of the Draft Digital Markets Act Rupprecht Podszun Heinrich Heine University Dusseldorf - Faculty of Law	282
5.	Contracts in Code? Dr Eliza Mik and Dr Eliza Mik The Chinese University of Hong Kong (CUHK) - Faculty of LawTILT	225
6.	Arthur Linton Corbin Gregory Klass Georgetown University Law Center	151
7.	Private Law Theory: The State of the Art Steve Hedley University College Cork	147
8.	The Rise of Plain Language Laws Michael Blasie Pennsylvania State University, Dickinson Law	147
9.	Artificial Intelligence and Agents Daniel Kiat Boon Seng and Cheng Han Tan Director, Centre for Technology, Robotics, AI and the Law, Faculty of Law, National University of Singapore and City University of Hong Kong (CityU) – School of Law; Centre for Public Affairs and Law; Centre for Chinese and Comparative Law	106
10.	Advertising Injustices: Marketing Race and Credit in America Jim Hawkins and Tiffany Penner University of Houston Law Center and University of Houston, Law Center	100

Top Downloads For:

Law & Society: Private Law - Contracts eJournal

Recent Top Papers (60 days)

As of: 10 Sep 2021 - 09 Nov 2021

Rank	Paper	Downloads
1.	Contracts in Code? Dr Eliza Mik and Dr Eliza Mik The Chinese University of Hong Kong (CUHK) - Faculty of LawTILT	225
2.	Arthur Linton Corbin Gregory Klass Georgetown University Law Center	151
3.	The Rise of Plain Language Laws Michael Blasie Pennsylvania State University, Dickinson Law	147
4.	Artificial Intelligence and Agents Daniel Kiat Boon Seng and Cheng Han Tan Director, Centre for Technology, Robotics, AI and the Law, Faculty of Law, National University of Singapore and City University of Hong Kong (CityU) – School of Law; Centre for Public Affairs and Law; Centre for Chinese and Comparative Law	106
5.	The “Code Adjudicator” Model: The Pubs Code, Statutory Arbitration and the Tied Lease Jed Meers and Liz Hind University of York, York Law School and University of York	97
6.	Diversity, ESG, and Latent Board Power Gregory H. Shill and Matthew Strand University of Iowa College of Law and affiliation not provided to SSRN	80
7.	An Impending 'Avalanche': Debt Collection and Consumer Harm after COVID-19 Lucinda O'Brien, Vivien Chen, Ian Ramsay and Paul Ali Melbourne Law School, Monash University - Department of Business Law & Taxation, Melbourne Law School - University of Melbourne and University of Melbourne - Law School	62
8.	Pirate Arbitration David Horton University of California, Davis - School of Law	39
9.	Appendices to the Rise of Plain Language Laws Michael Blasie Pennsylvania State University, Dickinson Law	38

 

Contracts Issues in Shameless, Season 11

Shameless (American version) has always been a very transactional series.  The Gallaghers, and their neighbors Kevin and Veronica, are hustlers.  They are always out to make a buck, and that often involves deals.  Season 11 is no different, but it happens in the world of the new normal, with the added ingredients of the pandemic and legalized marijuana.

First, congratulations to Shameless for presenting the world as it is today.  All of the other series I have been following, although set in the present, act as though the pandemic never happened.  Shameless thematizes masks, social distancing, lockdowns, supply-chain problems, and the political attitudes surrounding them.  Having all of the characters wears masks, at least part of the time, must have presented novel challenges to the sound people.  To the credit of the series' gritty verisimilitude, the actors, speaking through masks, sounded muffled, but they could still be understood, just like in real life.  

Just a taste of some of the contracts issues in Season 11 (some spoilers ahead):

• With their bar shut down during COVID, Kevin and Veronica wisely diversify, getting into the marijuana business.  They run into supply-chain problems, and hire Frank, a highly skilled procurement specialist.  There are some quick negotiations, and the parties settle on splitting the profits three ways.  After Frank also takes over as chief edibles confectioner, he demands a 60/40 cut in his favor.  Kevin and Veronica acquiesce as, by his impeccable logic, they are now merely distributors; he is doing all of the work.  That cut jumps to 70/30 in his favor when he catches them trying to bypass him by going directly to Frank's favored source.  They are not very skilled in negotiation.  How is Frank to distribute without their operation?  I don't remember Walter White and Jesse telling Gustavo Fring that they were entitled to 70% because of he was just the distributor.  Unfortunately, the permutations of this partnership are not further explored, as the supply-chain bottleneck clears up, and Kev and V can return to their Frank-free operations.
• However, Kev and V also need to hire some muscle.  Kev, in the early stages of his success, celebrates a bit too ostentatiously with a tricked-out truck and new clothes that he considers stylish.  South-siders recognize the vulnerability of the nouveau riche and quickly relieve him of all of his baubles, including his money roll.  Enter Micky Milkovich and Ian Gallagher, decked out in camo and battle gear.  They hijack an ambulance which, with the help of Ian's handy sister, Debbie, they turn into an armored vehicle.  At one point, they seemed to have entered into a side deal for $1000/day to provide the same transport services for a much more sophisticated enterprise, but that plot point was not pursued for some reason.
• Unsurprisingly, Frank does not really understand how restitution works.  Frank was going about his usual business, completely innocently, when somebody punched him the face, knocking him out, and left his body by a dumpster.  A good Samaritan discovered him and brought him to the emergency room.  We learn all this from the doctor who is stitching up Frank's face while testing him for brain injury.  He responds by inquiring whether the good Samaritan is going to pay for his transport to the ER via ambulance and for the treatment to which he never agreed.  

He must have watched only the first fifteen minutes of The Incredibles.

Teaching Restitution through The Incredibles

When I first started teaching Contracts law in 2005, I could assume that my students would be familiar with the the film, The Incredibles.  Their knowledge of the film made teaching restitution/unjust enrichment really easy.  I can no longer make that assumption.  In fact, mentions of the film now lead to confused conversations about which Incredibles movie I mean, how many there were, and which is the best (the original, obviously).  And so, I now have to schedule a screening outside of class time, to familiarize my students with the material.  As I explain to the students, it may be possible to cover this material without talking about The Incredibles, but I certainly don't know how to do it.

Mr. Incredible, Elastigirl, and Frozone routinely confer benefits on the public.  Are they entitled to restitution?  No, because they do not confer those benefits in expectation of payment.  Note how this scene does not end with any payment either for the dislodgment of the cat from the tree or for the assistance provided to the police.

Okay, but one would expect that Edna Mode gets paid for the supersuits she designs for her customers.  After all, her house is spectacular.  She must be making money somehow.  Can she, demand payment from Elastigirl when she makes supersuits for the entire Incredibles family?

No, Edna is quite obviously an officious intermeddler.  Elastigirl doesn't want the suits.  She has no need for the suits.  Jack-Jack doesn't even have any powers.  It doesn't matter how much work Edna put into the suits; she has not conferred a benefit on the family when the family doesn't want the suits.

However, things change once Elastigirl and the children set off in search of Mr. Incredible.  They end up using the suits, thus ratifying the transaction and cleansing it of its original, officious character.  The Incredibles now should pay Edna for the suits, assuming that is what one does.

There remains only the problematic opening sequence.  The scene is problematic both for its negative depiction of the legal profession and for the, I believe, faulty assumption that the law would award damages to a person whose suicide attempt was thwarted but who was injured in the process.  The law assumes that life is better than death, and so likely would regard the frustrated suicide attempt as a good, both to the plaintiff and to society as a whole.  

Fortunately, proper legal order is restored at the end of the film when the Incredibles and Frozone thwart Syndrome and save the city.  Supers are now free to return to their traditional practice of providing gratuitous material benefits to an adoring public.

Kudos to Kim Krawiec, but . . .

Kim Krawiec (right) was, until recently, a friend of the blog.  And with good reason.  She does interesting work on contracts law.  Indeed, you can see some of her interesting work on contracts law here.  But note that "here" does not mean here.  Professor Krawiec has chosen to post contracts content on a rival blog.  Not even a contracts blog.  Does she not know that this blog, i.e., the ContractsProf Blog, is the world's premiere contracts law blog?

If you were to go over to that other blog, where Professor Krawiec posted her contracts law content, which you totally shouldn't do because it's not the premiere contracts law blog or even a contracts law blog at all, you might learn the following:

Two medical centers have brought suit against the National Kidney Register (NKR).  Both were being charged under their agreements with NKR for having a kidney deficit -- that is, they took more kidneys from the register than they added to it.  The agreement provides that NKR can charge medical centers $1000/kidney/month every month until they make up the deficit.  The case raises interesting questions about liquidated damages/penalty clauses.

We could tell you more, but we don't want to spoil it for you.  Actually,  we do.  The cases settled, so we'll never know how the court would have resolved the issue.  And that's all you would know if you had read Professor Krawiec's post, which you totally shouldn't do because we've told you everything you would get out of reading her post, which is excellent, by the way.  Unless you want the links that she provides to documents relevant to the cases.  

So, kudos to Professor Krawiec for a great post about contracts law.

Next time, post on the ContractsProf Blog.  

H/T John Wladis, still a friend of the blog.

"Constructive Tuesday" Top Ten - Contracts & Commercial Law Downloads for November 3, 2021

Some days are "one of those days," like yesterday for yours truly. But the Tuesday Top Ten is not bound by the pedestrian constraints of the time-space continuum! We hereby declare this day to be Constructive Tuesday and offer the following peek into what is happening on SSRN. Take a look:

Top Downloads For:

Contracts & Commercial Law eJournal

Recent Top Papers (60 days)

As of: 04 Sep 2021 - 03 Nov 2021

Rank	Paper	Downloads
1.	The Property Law of Tokens Juliet M. Moringiello and Christopher K. Odinet Widener University - Commonwealth Law School and University of Iowa - College of Law	489
2.	The New Formalism in Private Law Paul B. Miller Notre Dame Law School	303
3.	Should Gatekeepers Be Allowed to Combine Data? - Ideas for Art. 5(a) of the Draft Digital Markets Act Rupprecht Podszun Heinrich Heine University Dusseldorf - Faculty of Law	277
4.	Contracts in Code? Dr Eliza Mik and Dr Eliza Mik The Chinese University of Hong Kong (CUHK) - Faculty of LawTILT	220
5.	Arthur Linton Corbin Gregory Klass Georgetown University Law Center	150
6.	Private Law Theory: The State of the Art Steve Hedley University College Cork	139
7.	Narrative Capacity James Toomey Harvard University - Harvard Law School	114
8.	The Rise of Plain Language Laws Michael Blasie Pennsylvania State University, Dickinson Law	111
9.	Advertising Injustices: Marketing Race and Credit in America Jim Hawkins and Tiffany Penner University of Houston Law Center and University of Houston, Law Center	98
10.	The “Code Adjudicator” Model: The Pubs Code, Statutory Arbitration and the Tied Lease Jed Meers and Liz Hind University of York, York Law School and University of York	97

 

Top Downloads For:

Law & Society: Private Law - Contracts eJournal

Recent Top Papers (60 days)

As of: 04 Sep 2021 - 03 Nov 2021

Rank	Paper	Downloads
1.	Contracts in Code? Dr Eliza Mik and Dr Eliza Mik The Chinese University of Hong Kong (CUHK) - Faculty of LawTILT	220
2.	Arthur Linton Corbin Gregory Klass Georgetown University Law Center	150
3.	Narrative Capacity James Toomey Harvard University - Harvard Law School	114
4.	The Rise of Plain Language Laws Michael Blasie Pennsylvania State University, Dickinson Law	111
5.	The “Code Adjudicator” Model: The Pubs Code, Statutory Arbitration and the Tied Lease Jed Meers and Liz Hind University of York, York Law School and University of York	97
6.	Artificial Intelligence and Agents Daniel Kiat Boon Seng and Cheng Han Tan Director, Centre for Technology, Robotics, AI and the Law, Faculty of Law, National University of Singapore and City University of Hong Kong (CityU) – School of Law; Centre for Public Affairs and Law; Centre for Chinese and Comparative Law	94
7.	Diversity, ESG, and Latent Board Power Gregory H. Shill and Matthew Strand University of Iowa College of Law and affiliation not provided to SSRN	71
8.	An Impending 'Avalanche': Debt Collection and Consumer Harm after COVID-19 Lucinda O'Brien, Vivien Chen, Ian Ramsay and Paul Ali Melbourne Law School, Monash University - Department of Business Law & Taxation, Melbourne Law School - University of Melbourne and University of Melbourne - Law School	60
9.	Pirate Arbitration David Horton University of California, Davis - School of Law	35
10.	Appendices to the Rise of Plain Language Laws Michael Blasie Pennsylvania State University, Dickinson Law	32

 

Carole Baskin Sues Netflix for Breach of Contract. Thanks, Carole!

I'll admit it.  I watched Tiger King.  My students at the time insisted that I do so.  My friends warned me away, because I don't like watching people being cruel to animals.  People told me that you either love it or hate it.  I did neither.  I get the over-the-topness of the series.  That part was fun, but I resented the way the series encouraged identification with its main character, Joe Exotic.  He's a complicated human.  I don't know if anybody merits the treatment they get from our criminal justice system.  But he should not be allowed anywhere near large cats.  I was also dimly aware that fans of the show had adopted Joe Exotic's perspective and treated Carole Baskin as a villain, accepting the false equivalence Joe Exotic tried to establish between his operation, which exploited animals for profit and bred them irresponsibly, and Carole Baskin's animal rescue preserve. 

Image by Zvi Roger, CC BY 3.0, via Wikimedia Commons

Now Tiger King II is about to come out.  Carole Baskin wants no part of it, and she is suing to enjoin use of footage of her from the first shoot in the second series.  She claims breach of contract The Complaint is here.

The Complaint is basically a vehicle for Baskin to tell her side of the story.  Much of it is taken up with the achievements and awards and recognition of her Big Cat Rescue organization.  Joe Exotic is introduced as follows. 

 Joe Exotic . . ., the operator of a private roadside zoo and prolific breeder of big cats and purveyor of cub petting services [sic] sought to discredit and silence the Baskins' [sic] and their advocacy through years of constant and persistent intimidating and libelous social media attacks and physically during one incident at Big Cat Rescue.

The Complaint explains how Joe Exotic retaliated against Ms. Baskin, misappropriating her intellectual property and hiring a hitman to execute her.  The former led to his bankruptcy; the latter led to his prosecution and conviction.  

 

According to the Complaint, Ms. Baskin participated in Tiger King without knowledge of what the show was really about.  She was under the impression that the aim of the documentary was to expose the exploitation and cruelty to animals involved in big cat breeding, a subject-matter aligned with her organization's mission.  Prior to the release of The Tiger King, Ms. Baskin alleges, the producers showed her three videos that were supposed to represent the nature of the project.  These videos left Ms. Baskin with the impression that the producers were engaged in an animal-welfare documentary which would portray her as a heroine.  

The heart of Ms. Baskin's current suit against the producers is her claim that the releases she signed allowing use of footage filmed with her was only with respect to a single "documentary motion picture."  She did not agree to participate in a second series, and when approached by the producers, her response was "No. And lose my number."  That's gold, baby!  If only that were in the new series!  Sorry.  

If you watch the trailer for the new series, linked to in ¶ 36 of the Complaint, prepare to be overwhelmed with the powerful stench of desperation.  Joe Exotic is in prison.  His zoo is shut down.  The film makers chase after similarly despicably situated persons, i.e., other polyamorous, gun-toting, purported animal-lovers, committed to money-making and lawless libertarianism.  Prepare also for unsubstantiated allegations, artfully edited and cross-cut to look as plausible as the rampant criminality and exploitation that was the very stuff of Joe Exotic's business.  The desperation comes from the producers, who, as the breathless editing of the trailer makes clear, no longer have a story to tell but want to mine this vein until it is completely tapped out.  It also comes from Netflix, which has recently made clear that it is committed to the view that the only thing worse than being talked about is not being talked about.

It is only because I am not a participant in cancel culture that I will not cancel my Netflix subscription in protest of their decision to release Tiger King II.  Also, the new season of Shameless just became available, and the forthcoming season of Ozark is one of the few things I have to look forward to in this life.

More Unilateral Contract News: Texas GOP Politician Pays out $25,000

Yesterday, we noted that Elon Musk's "offer" to donate $6 billion to solve world hunger was couched in conditions that rendered it non-binding.  Musk's offer likely was not serious.  Rather, it was a more clearly provocative version of the attempted jest in Lucy v. Zehmer.   It was more of a taunt than it was a charitable pledge.  In the alternative, Musk's offer could be characterized as an illusory promise.  Musk demanded proof that the UN World Food Program demonstrate its ability to do the work for which it won the Nobel Peace Prize in 2020.  He likely considered himself the lone arbiter of the adequacy of the evidence, and he was prepared to move the goalposts.

You can vote for your favorite characterization of Musk's Tweet by taking this Twitter poll.  Don't like any of the options?  Leave a comment!

But today, we have word of a real offer accepted through completed performance.  We posted ten months ago about Texas Lieutenant Governor Dan Patrick's offer of $25,000 for anyone who comes forward with evidence of voter fraud in connection with the 2020 Presidential election.  There was some skepticism expressed in the comments regarding the enforceability of the offer or of its duration.  One of my students, not satisfied with the efforts of the Republican governor, Republican secretary of state, or the Trump-appointed U.S. Attorney for Georgia, had to be restrained from undertaking her own investigation into electoral fraud in that state.  

But now, via Professor Miriam Cherry's reliable nose for contracts news, we learn from the Dallas Morning News that Dan Patrick (left) has cut his first check.  Alas, it does not relate to systematic voter fraud, and the fraud did not occur in Georgia.  It did occur in another contested state, Pennsylvania, but the fraud consisted of a single case of voter fraud by a Republican voter who tried to vote twice, once on his own behalf, and once for his son, a registered Democrat.  The Dallas Morning News describes the recipient of the $25,000 check as "the scion of a family of Democratic operatives."  What a strange phrase!  Is that on his c.v.?

In any case, let's credit Dan Patrick for doing the honorable thing and paying up.  On the other hand, it's not like he was paying out his own money.  The money came from his campaign war chest, which stands at $23 million right now.  In addition, maybe it is also time for Mr. Patrick to acknowledge what his offer really reveals.  Even with a pretty generous economic incentive (he set up a fund of $1 million), nobody was able to successfully claim the reward by having uncovered evidence of voting fraud by Democrats.  That is extraordinary, and extraordinarily telling.  Mr. Patrick ought to acknowledge that fact and concede that the allegations of election fraud in the 2020 elections had and have no basis in fact. Alas, according to the Dallas Morning News, Mr. Patrick had no comment.

Does USNews Understand How Offers Work? The Case of Elon Musk and World Hunger

According to the USNews website, Elon Musk offered $6 billion to the United Nations Food Programme if it can show how it will solve world hunger.  According to USNews, "Elon Musk says he will sell $6 billion worth of Tesla stock and donate it to the United Nations’ food agency if it could show how the money would solve world hunger."  I don't read Elon Musk's Tweet (yes, of course, he did it by Tweet) as an offer.  

David Beasley, the head of the UN's World Food Program, argued that governments are "tapped out," and that it's time for billionaires to step up to address the needs of 42 million people around the world who are on the verge of starvation.  As he told CNN, $6.6 billion would enable his agency to avert the food crisis for 42 million people.  He says it's not complicated.  

I'm not sure about the "not complicated" part.  I think the logistics of getting food to 42 million people would be challenging. 

In any case, Mr. Musk responded as follows:

I would not characterize this Tweet as an offer.  It's not even responsive to Mr. Beasley's challenge.  He did not state that he could solve world hunger with $6 billion.  He said he could feed 42 million people on the brink of starvation with $6.6 billion.  It's not clear why Mr. Musk is rounding down by $600 million.  I guess when you are as rich as he is, a few hundred million one way or another are nothing to fuss about.

Perhaps feeling insecure about his original Tweet, Mr. Musk then added another condition:

At best Mr. Musk's Tweet is a conditional offer, but the condition is so absurd as to render the promise illusory, most likely.  How is Mr. Beasley to describe in a Twitter thread how he would solve world hunger with $6 billion, given that he never claimed that he could do so?  Mr Musk seems to be trying to play Zehmer.  Beware, lest your teases and jokes be construed as offers.  But Mr. Beasley will not play Lucy.  He wants to negotiate:

The only thing I see on offer here is  an example of a billionaire's callous indifference to an urgent problem that his wealth could profitably address.  Mr. Musk likes sunlight.  Perhaps Mr. Beasley's attempt to publicly shame Mr. Musk into taking a break from playing with his rockets and address urgent human needs on earth will cause him to see his position as the world's wealthiest man in a new light.

Thanks to my OCU 1Ls to calling my attention to the Tweets!