ContractsProf Blog

Generalized Economic Interest: No Defense to Tortious Interference

It was previously noted that, last month, White Plains Coat & Apron v. Cintas was argued before the New York Court of Appeals.  (For a recap of the facts: see the original post).  The Second Circuit had certified the following question to New York's highest court:

“Does a generalized economic interest in soliciting business for profit constitute a defense to a claim of tortious interference with an existing contract for an alleged tortfeasor with no previous economic relationship with the breaching party?”

In a unanimous decision written by Chief Judge Kaye, the New York court answered the question in the negative.  The court's analysis is after the jump:

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Limerick of the Week

The end is near!!  Not only is the semester (and for some readers, the first year of law school) nearly over.  But I am almost out of Limericks.  Contracts Limericks, that is.  I still have a boatload of business associations Limericks (bwahaha!), but those will have to appear on a different blog, I suppose.

So, where would contracts profs be without celebrity contracts?  I mean, is there anything more certain to promote student interest than a law suit featuring Clint Eastwood?  Can any contract prof resist inviting Sondra Locke to ask herself, "Do I feel lucky?"  And then add, "Well do ya, punk?"  Now that's educatin'!  Of course, the time may eventually come when referencing "Dirty Harry" is about as hip as referencing "True Grit."  It's already quite hard to get students to care much about Shirley MacLaine.  And I think this is one reason why Sullivan v. O'Connor has dropped out of most casebooks.  On the other hand, in a few years, it should be possible to build an entire curriculum around Anna Nicole Smith.

Locke v. Warner Brothers

There once was an actress named Locke
Whose Ratboy is said to be schlock
Old Clint and Warner
Thought they could scorn her
In bad faith.  Now they're in hock.

[Jeremy Telman]

Limerick of the Week

Sherrodd, Inc. v. Morrison-Knudsen is a great teaching case.  It never ceases to outrage at least some students and thus leads to a very fruitful discussion of the pitfalls of the parol evidence rule.  In addition, it shows that a formal approach to contracts law is still with us, as the following Limerick illustates:

Sherrodd, Inc. v. Morrison-Knudsen

Behold, parol's bitter fruit:
Sherrodd's claim was deemed moot!
If he'd only known,
The great Corbin would groan
To see Williston's rule win repute.

[Jeremy Telman]

Elite NYC Prep School Sued

The former admissions director of the elite Riverdale Country School has sued the school and its headmaster, claiming, among other things, that it breached his employment contract by reneging on a promise to give him an opportunity to increase the diversity at the school.

The NYLJ reported (subscription required):

[t]he former admissions director claimed the school's insufficient commitment to diversity was one of the main reasons for his resignation. He said that Mr. Johnson repeatedly told him that he had a mandate to increase the economic, ethnic and religious diversity of the largely Jewish student body. But he said the headmaster and the school undermined that goal by refusing to increase the financial aid budget.

The school and the headmaster moved to dismiss the case, but a NY judge has allowed the suit to go forward.

[Meredith R. Miller]

More on Coaching Contracts

We recently reported on trends in college coaching contracts.

Like the animated mouse Savoir Raire, animated University of Toledo Law Professor Ben Daivis is everywhere, and so it is no surprise that he is also on the Contracts Profs Listserve helpfully providing a link to this interesting article about LSU's former basketball coach, Pokey Chatman.  Professor Davis suggests some interesting parallels between this case and the Odorizzi v. Bloomfield School District case, included in some casebooks

According to ESPN, Ms. Chatman's attorney is claiming that she was forced out of her coaching position -- or, more accurately, given the Odorizzian choice between resignation and public humiliation -- based on allegations that Chatman had engaged in inappropriate sexual relations with former players.  Chatman apparently had two years remaining on her contract and is seeking $900,000 in compensation.  While the ESPN report is not entirely clear, it seems that Chatman renounced her right to that compensation in a resignation agreement, the enforceability of which is now subject to question.  Chatman's attorney now claims that the resignation agreement was a "con," because Chatman's agreement was predicated upon representations that LSU had an "absolute zero tolerance" policy with respect to coach-player relationships.  Chatman's lawyer now believes that no such zero tolerance policy exists -- or perhaps it's just unclear that it would extend to former players.

[Jeremy Telman]

Ohio Court to Hear Arguments In Surrogacy Agreement Case

The Supreme Court of Ohio hears oral argument today in a case that raises the issue whether "a gestational surrogacy contract, in which a woman accepts payment for gestating the fertilized egg of a third party donor and agrees to surrender all custody rights to the child's biological father after the child is born, [is] unenforceable in Ohio on the basis that such a contract violates the public policy underlying the state's adoption and child support laws?"

Here is synopsis of the case from the Court's website:

BACKGROUND: In this case, James Flynn of Kirtland, Ohio entered into a surrogacy contract with Danielle and Douglas Bimber of Corry, PA. In the contract, which was arranged through an agency so that the parties initially did not know one another's identities, Danielle agreed to have three eggs that had been harvested from a paid third-party donor, Jennifer Rice, and fertilized in vitro by Flynn's sperm, implanted in her uterus. In return for a fee of $20,000 plus expenses of the pregnancy and delivery, the Bimbers agreed that Danielle would carry to term any embryos that successfully implanted, and that upon her delivery of a child or children the Bimbers would acknowledge Flynn as the natural father, would not attempt to establish a parental relationship, and would immediately "surrender any custody rights to the children to the birth father."

The contract provided that if the Bimbers should be awarded custody of the child or children resulting from the implantation, Flynn was indemnified against any liability for child support or pregnancy expenses and would be entitled to immediate reimbursement of all payments he had made to or on behalf of the Bimbers under the contract, plus attorney fees. Another contract clause specified that any contract-related legal dispute between the parties would be resolved under the laws of Ohio.

All three embryos developed and Danielle delivered triplets in Pennsylvania in November 2003. On the following day, she executed documents granting custody of the children to Flynn and authorizing him to remove them from the hospital. The next day she rescinded those documents and shortly thereafter the Bimbers took the children to their home without notifying Flynn and initiated proceedings to obtain permanent custody. Flynn filed suit in Erie County, PA to recover the children and establish his right to sole custody. The Pennsylvania court determined that, under the laws of that state, Danielle was the mother of the triplets and that Flynn had established his parentage by means of the contract. The Bimbers were authorized to go forward with a Pennsylvania custody action, which was contested by Flynn. In January 2005, the Pennsylvania court awarded primary custody of the triplets to the Bimbers. Flynn received visitation rights with the children, and was ordered to pay the Bimbers $1,750 per month in child support.

Flynn subsequently filed suit in the Summit County ( Ohio ) Court of Common Pleas, seeking to enforce the provisions of the surrogacy contract requiring the Bimbers to repay all amounts they had received from him and to indemnify him against any current or future child support obligation. The trial court granted summary judgment in favor of the Bimbers, ruling that the surrogacy contract was void and unenforceable because it was contrary to Ohio's public policy against (1) private agreements in which parents surrender their parental rights, especially when such agreements involve payment of money to a parent; and (2) attempts by a natural parent to "contract away" the legal obligation to provide financial support for his or her offspring.

Flynn appealed, and the 9th District Court of Appeals reversed the trial court. The 9th District held that, under Ohio law, Flynn and the egg donor, Jennifer Rice, were the natural parents of the triplets and therefore the Bimbers' contractual agreement to surrender custody of children with whom they had no biological relationship was not in violation of public policy. The court of appeals ruled that the surrogacy contract was enforceable and that the Bimbers had breached their agreements not to establish a parental relationship and to promptly surrender custody of the children to Flynn. The case was remanded to the common pleas court with a directive to determine and award damages to Flynn for the breach of contract, including reasonable attorney fees.

The Bimbers now ask the Supreme Court to reinstate the trial court's summary judgment in their favor. They argue that the court of appeals exceeded its authority by not only reversing the trial court's judgment, but going on to find that a breach of contract had occurred when the trial court did not reach that issue because it held that the contract was unenforceable. They assert that Pennsylvania had jurisdiction to determine the legal parentage of the triplets because they were born in that state, and argue that Ohio courts are bound to honor the Erie County court's recognition of Danielle as the legal mother of the triplets and its order that Flynn pay child support.

Attorneys for Flynn urge the Court to affirm the 9th District's ruling that his contract with the Bimbers is legal and enforceable. They note that, since the Ohio court of appeals issued its decision in this case, a Pennsylvania Superior Court has overruled the Erie County decision awarding custody and support to the Bimbers, and Flynn has gained custody of the triplets. They argue that surrogacy contracts held unenforceable in a 1982 Ohio Attorney General's ruling and in court cases cited by the Bimbers were clearly distinguishable from the contract in this case because those cases involved prenatal agreements by a woman to have her own egg fertilized and deliver a child, and then to surrender all parental rights to the father. In this case, they assert, Flynn is unquestionably the biological father of the triplets while Danielle Bimber is not their biological mother. Therefore, they say, the contract does not offend the public policy against "selling" children because Bimber had no parental rights to surrender either at the time she entered into the surrogacy contract or at the time the children were born.

The oral argument begins shortly (estimated 11:30 EST), with live video of the argument available on the Court's website. Archives of arguments are also available on the Court's site.

[Meredith R. Miller]

Limerick of the Week

This is a pretty poor Limerick, I admit it.  But let's face it: the facts of Thompson v. Libby are not such as to inspire great art.  In order to have anything to work with here, I had to make up some facts and pretend that the logs at issue in the case were defective because they were intended for the Christmas hearth but were not as fragrant as promised. 

In addition, this is one of several Limericks in which I defy conventional wisdom and employ the poetic device of enjambment in a Limerick.  Consider this an example of why conventional wisdom prevails.  But you see, that's what makes this Limerick so gosh darn funny!!

Thompson v. Libby

A plan to buy logs fit for Yule
Met up with the "four-corners" rule.
The parties, they feuded,
But the court, it excluded
Parol.  How Grinchy!  How cruel!

[Jeremy Telman]

Kansas Makes 25 (and Counting)

With a stroke (well, perhaps a few strokes) of her pen this past Monday, Governor Kathleen Sibelius made Kansas the 25th state to have enacted a version of Revised Article 1.  Like the versions of Revised Article 1 already in force in 22 states and the two enacted earlier this year in Utah and North Dakota, which will take effect on April 30 and August 1, respectively, Kansas SB 183 rejects "uniform" R1-301 for a choice of law provision similar to the one in pre-Revised 1-105.  (Kansas SB 183 will take effect on July 1, 2008.)  Kansas becomes the eighteenth state to enact uniform R1-201(b)(20)'s unitary good faith standard.

Indiana SB 419 awaits only gubernatorial action (or the running of time for a gubernatorial veto) before it becomes the 26th enactment.  Like Kansas SB 183, Indiana SB 419 rejects uniform R1-301 in favor of retaining the essence of pre-Revised 1-105.  Unlike Kansas SB 183, Indiana SB 419 also rejects uniform R1-201(b)(20) in favor of retaining the bifurcated good faith standard of pre-Revised 1-201(19) and 2-103(1)(b).  If enacted, Indiana SB 419 would take effect on July 1, 2007.

[Keith A. Rowley]

Two McDonald's Deals

The New York Times reports that McDonald's, following Wal-Mart's lead, is going to allow the formation of unions at its more than 750 outlets in the People's Republic of China. 

In the same article referenced above, The New York Times reports that McDonald's has agreeed to pay an additional penny-per-pound for the Florida-grown tomatoes that adorn your Big Mac. This is pursuant to an agreement negotiated between McDonald's and the Coalition of Immokalee Workers.  The deal was negotiated at the Carter Center in Atlanta and is expected to increase farm workers' pay from 40 cents to 72 cents per 32-pound bucket of tomatoes.

[Jeremy Telman]

Coach's Contracts

With all of the college basketball changes the past few weeks, it is worth looking again at what the coaches contract for with their colleges.

College football coaches contracts are treated in depth here:

USA Today

Basketball coaches here:

USA Today

Plenty of interesting features in these contracts besides the money.

[Stephen Safranek]

Yo, Taxi!

Because it's Monday, we could all use a little contracts-related frivolity.  Here's an excerpt from this story about a NYC couple who hailed a cab (formed a contract) to get to Arizona:

Betty and Bob Matas have retired and are moving to Arizona, but like many New Yorkers they don't drive, and they don't want their cats to travel all that way in an airliner cargo hold.

Their solution: "Hey, cabbie."

They met taxi driver Douglas Guldeniz when they hailed his cab after a shopping trip several weeks ago.

They got to talking about their upcoming move, and "we said 'Do you want to come?'" said Bob Matas, 72, a former audio and video engineer for advertising agencies. "And he said 'Sure.'"

It was initially a gag, Matas said, but as they talked over the ensuing weeks it became reality.

They plan to leave Tuesday on the 2,400-mile trip to Sedona, Ariz., with Guldeniz driving his yellow SUV cab 10 hours a day for a flat fee of $3,000, plus gas, meals and lodging.

They're getting a break. The standard, metered fare would be about $5,000 — each way, according to David Pollack, executive director of the Committee for Taxi Safety, a drivers' group. But city Taxi and Limousine Commission rules direct drivers and passengers to negotiate a flat fare for trips outside the city and a few suburban areas.

[Miriam A. Cherry]

Limerick of the Week

In a recent post, I complained about the difficulty of rhyming estoppel.  To my surprise, nobody wrote in to offer suggestions.  Very disappointing.  So this is what I'm left with:

Alaska Democrats v. Rice

This just in from our anchor, Ted Koppel:
The Statute of Frauds may just topple!
Politicians are snarky,
And yet their malarchy
Is binding if backed by estoppel.

Todd van Poppel is in the on-deck circle.  Be thee warned!!

[Jeremy Telman]

Google's Adwords Contract Upheld--Feldman v. Google

[cross posted to Technology & Marketing Law Blog]

Feldman v. Google, Inc., 2007 WL 966011 (E.D. Pa. March 29, 2007)

A law firm advertised via Google AdWords and allegedly was click frauded.  The lawyer then sued (on behalf of his law firm) Google for click fraud in Pennsylvania.  Google defended based on its AdWords contract, which has a mandatory venue provision specifying that all lawsuits shall be brought in California.  We saw virtually identical facts in the initial Person v. Google case, which also involved the AdWords contract (though that lawsuit was brought in NY).  The result was the same in both cases--each time, the court upheld the AdWords contract's mandatory venue clause and transferred the case to California.

Mechanically, Google's contract formation process is bullet-proof.  As the court describes:

To open an AdWords account, an advertiser had to have gone through a series of steps in an online sign-up process. (Hsu Decl. ¶ 3.) To activate the AdWords account, the advertiser had to have visited his account page, where he was shown the AdWords contract. (Hsu Decl. ¶ 4.)

Toward the top of the page displaying the AdWords contract, a notice in bold print appeared and stated, “Carefully read the following terms and conditions. If you agree with these terms, indicate your assent below.” (Hsu Decl. ¶ 4.) The terms and conditions were offered in a window, with a scroll bar that allowed the advertiser to scroll down and read the entire contract. The contract itself included the pre-amble and seven paragraphs, in twelve-point font. The contract's pre-amble, the first paragraph, and part of the second paragraph were clearly visible before scrolling down to read the rest of the contract. The preamble, visible at first impression, stated that consent to the terms listed in the Agreement constituted a binding agreement with Google. A link to a printer-friendly version of the contract was offered at the top of the contract window for the advertiser who would rather read the contract printed on paper or view it on a full-screen instead of scrolling down the window. (Hsu Decl. ¶ 5.)

At the bottom of the webpage, viewable without scrolling down, was a box and the words, “Yes, I agree to the above terms and conditions.” (Hsu Decl. ¶ 4.) The advertiser had to have clicked on this box in order to proceed to the next step. (Hsu Decl. ¶ 6.) If the advertiser did not click on “Yes, I agree ...” and instead tried to click the “Continue” button at the bottom of the webpage, the advertiser would have been returned to the same page and could not advance to the next step. If the advertiser did not agree to the AdWords contract, he could not activate his account, place any ads, or incur any charges. Plaintiff had an account activated. He placed ads and charges were incurred.

I always tell my students that the very best online contracts are "mandatory non-leaky clickthrough" agreements.  Like this one.

To get around this, the lawyer claims he was ignorant of the mandatory venue clause because he didn't read the contract.  Not a very persuasive argument.  Every lawyer learns very, very early in their first year Contracts course that a party is bound to contract terms they assent to, even if they chose not to read the terms. 

The court also rejects the plaintiff's other attacks on the contract:
* the contract didn't contain a definite price.  However, the contract contained the exact formula for computing the price.
* procedural unconscionability.  The court rejects this because the "Plaintiff was a sophisticated purchaser, was not in any way pressured to agree to the AdWords Agreement, was capable of understanding the Agreement's terms, consented to them, and could have rejected the Agreement with impunity."
* substantive unconscionability.  The court finds many of the contract terms reasonable.

This case is a nice win for Google for two reasons.  First, by upholding the mandatory venue clause, it should inhibit AdWords advertisers from suing Google all over the country.  Therefore, all lawsuits will have to be in Google's home court, which raises the costs of lawsuits for most plaintiffs and gives Google some other home-court advantages.  Second, by holding that this plaintiff is bound by the AdWords contract and those terms aren't substantively unconscionable, Google can now invoke its risk management clauses (like the warranty disclaimers, limits of liability, etc.) to cut the economic heart out of the click fraud claim.

[Eric Goldman]

Skittles Commerical Available

Update:  Thanks to Christopher Drahozal (Kansas), we have a link on the new skittles commercial, which can be found here.

The clip is even shorter than I remembered it, here’s the dialogue:

(Patron picks up pack of skittles and puts it on the counter)

Salesperson:  Three hundred dollars.

Patron:  Three hundred dollars?

Salesperson:  Or you can buy your skittles at some other store around here.

(Camera pans to show that they are surrounded by clouds)

Announcer:  Value the rainbow, taste the rainbow

[Miriam Cherry]

Limerick of the Week

Winternitz v. Summit Hills is a useful case for illustrating why the difference between law and equity might still matter in a modern court.  It is also a useful case for illustrating why tort law might matter in a modern court, if anyone is interested in such things.  The interplay between the real and the imaginary in the case gives it the feel of a Dr. Seuss book, and so this Limerick has a bit of a Seussical feel to it:

Winternitz v. Summit Hills

Hard cases result in bad laws.
But there's a solution because
The court can resort
To a sort of a tort
To remedy equity's flaws.

[Jeremy Telman]

When Real Estate Deals Fall Apart

When a real estate deal falls through, what contract damages are available to the seller? Recently, the Massachusetts Supreme Judicial Court addressed this question.

Buyer and seller had a $2,250,000 contract of sale for real estate located on Beacon Street in Boston. The contract of sale was rather unremarkable. It contained an acceptance of deed clause: “acceptance of deed by the BUYER, shall be deemed to be a full performance and discharge of every agreement and obligation herein contained or expressed.” It also contained a liquidated damages clause: “[if] the BUYER shall fail to fulfill the BUYER’s agreements herein, all deposits made hereunder by the BUYER shall be retained by the SELLER and this shall be SELLER’s sole remedy at law or in equity.” The contract did not contain a mortgage contingency clause, and recited that time was of the essence.

The buyer paid the $150,000 deposit. The buyer was not ready to close on the contract date because his financing had not been finalized. The seller’s attorney sent a notice to the buyer that, because the closing did not occur, the contract was breached and deposit was forfeited. Shortly thereafter, the buyer’s financing came through. Nevertheless, the seller put a new “for sale” sign on the property (an effort that was thwarted when the buyer obtained a lis pendens).

A trial judge ordered specific performance, directing that the sale take place at the contract price. The seller still sought liquidated damages. The issue: whether the seller is entitled to liquidated damages for the buyer’s breach of the contract of sale where, subsequent to the breach, the seller obtained court-ordered specific performance. The Massachusetts Supreme Judicial Court held:

When seeking specific performance of a contract, the seller offers to surrender title to the property and collect the purchase price. In bringing an action for damages on the breach of the contract, the seller proposes to retain the property and have his compensation in damages. While these remedies many not be inconsistent in the sense that they are both premised on the validity of the contract, ordinarily a seller is not entitled to seek both remedies; the retention of a deposit as liquidated damages is an alternative to specific performance, not an additional remedy.

The court held that “[t]he only additional damages the seller was entitled to seek under the contract were for carrying costs he incurred as a result of the delay between the expected date of performance and the time of actual conveyance. These carrying costs were separately provided for in the contract and ancillary to its performance.” In other words, these additional damages were not inconsistent with an award of specific performance.

The court concluded:

The law of contracts is intended to give an injured party the benefit of the bargain, not the benefit of the bargain and a windfall. . . . To award liquidated damages against the buyer for his failure to close and also specific performance to the seller requiring the buyer to acquire the property by a date certain at the contracted price, would violate the fundamental principles of contract law.

Perroncello v. Donahue.
Link to oral argument video.
Boston Herald article.

[Meredith R. Miller]

Great New Skittles Ad

I'm wondering whether anyone else has seen this new skittles commercial.  It features a man in the clouds, who is trying to buy a snack (some skittles) from a convenience stand.  The salesman wants to charge $300, and when the patron argues that this is exorbitant, the salesman asks whether he has any other options.  Is this price gouging in the clouds?  I couldn't find a clip on Youtube, but if anyone knows where I can find this, email me here.

[Miriam Cherry]