ContractsProf Blog

Fun With Non-competes: Hair Removal Service is Not Unique and Extraordinary

Judge Margaret Chan (New York County Supreme Court) recently invalidated a non-compete in an employment contract as unduly restrictive.  [Ed. side note: Is "Eyes of the World," a Grateful Dead song title, really a good name for a personal grooming business?]  Anyway, the facts:

Defendant Boci ("Boci") was an employee of plaintiffs Eyes of the World, Inc. D/B/A Shobha and Shobha, Inc. (collectively "Shobha") performing hair removal services at plaintiffs' business locations from 2006 to 2009. On February 15, 2009, defendant Boci voluntarily resigned her position with Shobha and began working for NYC Waxing, LLC. Plaintiffs settled their claim against NYC Waxing, LLC, which is no longer a party to this action.

Boci's employment agreement with Shobha, dated March 24, 2006, stated in part:

For a period of one (1) year following termination of your employment for any reason, you agree not to provide Salon Services in New York City to any client of Eyes of the World, Inc. or Shobha, Inc. for whom you provided services during the last twelve (12) months of your employment with Eyes of the World, Inc.

Plaintiffs seek to enforce this restrictive covenant in the employment agreement and seek damages. Plaintiffs allege that Boci performed services on former Shobha clients at her new place of employment. In fact, plaintiffs assert Boci performed services for eighty six (86) former plaintiffs' clients at her new employer within one (1) year of her termination.

The court invalidated the restrictive covenant in its entirety.  The court waxed poetic:

"In order to be enforceable, an anticompetitive covenant ancillary to an employment agreement must be reasonable in time and area, necessary to protect the employer's legitimate interests, not harmful to the public, and not unreasonably burdensome to the employee" (Crown IT Servs., Inc. v. Koval-Olsen, 11 AD3d 263 [App Div, 1st Dept 2004] citing BDO Seidman v. Hirshberg, 93 NY2d 382 [Ct App 1999]). Restrictive covenants are generally frowned upon by courts due to public policy considerations that seek to prevent restrictions on a person's livelihood (see Kanan, Corbin, Schupak & Aronow, Inc. v. FD International, Ltd., 8 Misc3d 412 [Sup Ct, NY Cty 2005] citing Purchasing Associates, Inc. v. Weitz, 13 NY2d 267, 271 [Ct App, 1963]). It has been held that "[s]ince there are 'powerful considerations of public policy which militate against sanctioning the loss of a [person's] livelihood' restrictive covenants which tend to prevent an employee from pursuing a similar vocation after termination of employment are disfavored by the law" (Columbia Ribbon & Carbon Mfg. Co. v. A-1-A Corp., 42 NY2d 496, 499 [Ct App 1977]). Consequently these covenants, "will be enforced only if reasonably limited temporally and geographically and then only to the extent necessary to protect the employer from unfair competition which stems from the employee's use or disclosure of trade secrets or confidential customer lists", or if the employee's services are unique or extraordinary (id. at 499; Reed, Roberts Assoc. v. Strauman, 40 NY2d 303, 307-308 [Ct App 1976]).

Plaintiffs attempted to establish that the services provided by Boci are unique and extraordinary, however, there is nothing to support such a contention. Boci did not have access to trade secrets, client lists, or proprietary information (see Columbia Ribbon & Carbon Mfg. Co., Inc. v. A-1-A Corp., 42 NY2d 496 [Ct App 1977]; Reed, Roberts Assoc. v. Strauman, 40 NY2d 303; Maltby v. Harlow Meyer Savage, Inc., 223 AD2d 516 [App Div, 1st Dept 1996]; Michael G. Kessler & Associates, Ltd. v. White, 28 AD3d 724 [App Div, 2nd Dept 2006]).

The covenant at bar is unreasonable in its limitation, burdensome to the employee, and not necessary to protect the employer's legitimate interests. The Appellate Division First Department in Investor Access Corp. v. Doremus & Co., Inc., 186 AD2d 401, did not enforce a restrictive covenant of one (1) year that prevented the employee, a public relations account executive, from soliciting or servicing any current or former client of the plaintiff employer. The court held that the restrictive covenant did not protect the legitimate interests of the employer because the defendant did not provide unique or extraordinary services to his employer, and had not misappropriated any trade secrets or confidential information. The court went on to find that clients' decisions to follow the defendant were based upon the clients' needs and the employee's outstanding ability in the field (id. at 404).

Similarly here, when considering all the prongs necessary to enforce such an agreement, the employers' legitimate interests do not mandate such a restrictive covenant (see BDO Seidman v. Hirshberg, 93 NY2d 382 [restrictive covenant will not be enforced in the absence of circumstances evincing a need for the protection of the former employer]). As discussed above, despite Boci's training, her job and skills used for that job are not legally considered unique or extraordinary. Likewise to the situation in Investor Access Corp. v. Doremus & Co., Inc., it appears that clients opted to follow Boci based on their needs and her ability. Shobha's restrictive covenant is overly broad and unenforceable.

Eyes of the World v. Boci, CV 46549/09, NYLJ 1202512541125, at *1 (Sup., NY, Decided August 19, 2011).

[Meredith R. Miller]

Insurer's Data Shows that Breach of Contract is Top Risk for Tech Companies

The culprit?  Shoddy drafting.  Here's the story from a British site smeweb.com:

The top risk faced by technology companies is a client suing them for breach of contract, according to data from Hiscox. The business insurer analysed data from over five years to establish that 49% of all technology professional indemnity claims handled have stemmed from contract breach.

Some of the most common causes that tech companies’ clients use as the basis to sue include project delay and the supplied service being regarded as not fit for purpose. However, Hiscox has also seen disagreements over fees and material defects such as loss of client data.

Alan Thomas, technology risks and insurance expert at Hiscox, said: "Breach of contract is the most common cause of professional indemnity claims we see when it comes to the technology sector. Very often this is down to poorly worded contracts which can lead to misunderstandings between suppliers and their clients.

"Smaller businesses can also often feel pressured into signing customers’ contracts or terms and conditions without feeling able to challenge or even review specific clauses.

"One of the most effective ways to reduce the chance of a claim being made, which in turn reduces the chance of expensive litigation and, as importantly, a breakdown in relationships, is to ensure that contracts drafted at the outset lay out clear responsibilities and that there is an agreed process if mediation is required ."

Other risks that technology companies face include intellectual property claims, for example accidentally breaching someone else’s copyright, and theft of high value equipment from offices or data centres.

[Meredith R. Miller]

Welcome New Law Students!

All over the country, tens of thousands of students are starting law school.  Law school gets a bad rap in many quarters, and so right here at the start, it's important to remind new recruits why we do it.

Bert Lahr poses the right questions:

What makes a King out of a slave?
What makes the flag on the mast to wave?
What makes the elephant charge his tusk, in the misty mist or the dusky dusk?
What makes the muskrat guard his musk?
What makes the sphinx the seventh wonder?
What makes the dawn come up like thunder?
What makes the Hottentot so hot?
What puts the "ape" in apricot? 

Consideration, that's what!

[JT]

Weekly Top Tens from the Social Science Research Network

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of Contracts & Commercial Law eJournal 
June 30, 2011 to August 29, 2011

Rank	Downloads	Paper Title
1	613	How Markets Work: The Lawyer's Version  Mark C. Weidemaier, G. Mitu Gulati,
2	134	Non-Recourse, No Down Payment and the Mortgage Meltdown: Lessons from Undercapitalization  Dov Solomon, Odelia Minnes
3	123	Subprime: Why a Free and Democratic Society Needs Law  Joseph William Singer
4	102	Contract Drafting: A Prerequisite to Teaching Transactional Negotiation  Tina L. Stark
5	101	Contract as Meaning: An Introduction to 'Contract as Promise at 30'  Jeffrey M. Lipshaw
6	73	Measurement of Restitution: Coordinating Restitution with Compensatory Damages and Punitive Damages  Doug Rendleman
7	69	Not Out of the (Fox)Woods Yet: Indian Gaming and the Bankruptcy Code  Emir Aly Crowne (né Mohammed), Andrew Black, S. Alex Constantin
8	67	Skin-in-the-Game: Risk Retention Lessons from Credit Card Securitization  Adam J. Levitin
9	65	Why There is No Duty to Pay Damages: Powers, Duties, and Private Law  Nathan B. Oman
10	62	The Hardship and Force Majeure Clauses in International Petroleum Joint Venture Agreements  Talal A. Q. Al-Emadi

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of LSN: Contracts (Topic)  
June 30, 2011 to August 29, 2011

Rank	Downloads	Paper Title
1	613	How Markets Work: The Lawyer's Version  Mark C. Weidemaier, G. Mitu Gulati
2	102	Contract Drafting: A Prerequisite to Teaching Transactional Negotiation  Tina L. Stark
3	61	The Irony of AT&T v. Concepcion  Colin P. Marks
4	51	Law as a ByProduct: Theories of Private Law Production  Bruce H. Kobayashi, Larry E. Ribstein
5	51	Bringing Order to Contracts Against Public Policy  David Adam Friedman
6	49	Contracting for Procedure  Kevin E. Davis, Helen Hershkof
7	38	Restitution and Relationships  Hanoch Dagan
8	29	The Family, the Market, and ADR  Amy J. Cohen
9	22	Consultation Paper on Restrictive Covenants  British Columbia Law Institute
10	22	Private Ordering in the Shadow of Copyright Law: Google Books as a Blueprint  Jeanette Hofmann

[JT]

Plaintiff's Inartful Pleading Leaves Queens Judge Yearning for Some "Old-Fashion Formalism"

In a case that appears to be about a breach of a construction contract, the plaintiff's attorney receives a benchslap from Judge Markey in Queens [ouch!]:

This is an action essentially for breach of a construction contract, where the plaintiff contends that it was not paid for its work. The defendants seek to dismiss the second and third causes of action of the complaint.

The Court, as an initial matter, does not find that the plaintiff's complaint is a model of clarity. The first cause of action is essentially for breach of contract, but the word "breach" does not appear in the complaint. The second cause of action is for unjust enrichment, but the plaintiff fails to narrow that broad concept to the facts by either naming or exploring concepts of "quasi-contracts" or "quantum meruit." Indeed, plaintiff's second cause of action implies that defendants retained or accepted the services provided. None of the essential elements of unjust enrichment, quasi-contract, or quantum meruit are spelled out thoroughly.

Justice Benjamin N. Cardozo, while a Judge of the New York Court of Appeals, said famously: "The law has outgrown its primitive stage of formalism when the precise word was the sovereign talisman, and every slip was fatal. It takes a broader view today." Wood v Lucy, Lady Duff-Gordon, 222 N.Y. 88, 91 [1917]. Despite Cardozo's beautiful articulation of the concept, one reads the plaintiff's complaint yearning for some old-fashioned formalism that would spell out and sustain a cause of action.

The third cause of action is for fraud, but the acts or words of fraud are not spelled out. There is no clue of whether the fraud was in the inducement of the contract or in its execution. Plaintiff seems to be saying that the fact of nonpayment on a contract is enough to sustain a cause of action for fraud and its demand for punitive damages.

Even worse, it would have been helpful, although not essential, for plaintiff to attach a copy of the contract as an exhibit to the complaint. Plaintiff's counsel, in opposition to the defendants' motion does supply it: the original version in Chinese, not accompanied by a certified translation into English. See, e.g., Altivater Gessler-J.A. Baczewski Intern. (USA) Inc. v Sobieski Destylarnia S.A., 572 F.3d 86, 88 n.3 [2nd Cir. 2009] [Both sides offered proper English translation of contract in Polish]; Azimut-Benetti, S.P.A. v Magnum Marine Corp., 55 A.D.3d 483 [1st Dept. 2008] [contract translated to English from Italian]; American Swiss Potash Min. Corp. v Brugger, 137 N.Y.S.2d 729 [Sup. Ct. New York County 1954] [N.O.R.].

In fact, without a proper translation, the Court is unable to determine whether the contract contained a specific disclaimer clause that would have an effect on any oral recitations, possibly relevant to the third cause of action for fraud. See, e.g., Tarantul v Cherkassky, 84 A.D.3d 933 [2nd Dept. 2011].

Before dismissing plaintiff's second and third causes of action, the judge gives defense counsel a little benchslap as well: "The motion to dismiss by defendants is also not particularly helpful since there is no recitation of the salient facts, and the motion begins almost from the start with a legal argument by defense counsel."

[UPDATE 10/7/11: I had a nice chat with defendant's counsel in this case.  It sounds that she did everything she could under the circumstances, and she did ultimately prevail.  She asked what interested me in writing about the case and I reminded her of contractsprof's obsession with anything even marginally related to Judge Cardozo and/or Lady Duff-Gordon.]

[Meredith R. Miller]

9th Circuit Rejects Northwest/Delta's "Hock Mir Nisht Keyn Chainik" Defense

On August 5th, the Ninth Circuit issued its opinion, reinstating plaintiff's claim for breach of the covenant of good faith and fair dealing in Ginsberg v. Northwest, Inc.

Plaintiff, Rabbi, S. Binyomin Ginsberg had been a member of Northwest's frequent flyer program, WorldPerks, since 1999.  By 2005, he was such a macher, Northwest granted him Platinum Elite Status (oy, what nachas!).  In 2008, Northwest revoked his membership. Ginsberg claims that Northwest took this action because he was a kvetch. We weren't there, of course, but we can imagine that Ginsberg was vocal about the inadequacies of modern air travel. Northwest's customer service department no doubt took the usual approach of such departments, wondering why anyone would complain about the quality of service provided by U.S. domestic airlines. When Ginsberg persisted, the corporation threw up its hands, said "Hock mir nisht kein chainek," or words to that effect, and terminated his membership.

The official reason provided for the termination was that Northwest had discretion "in its sole judgment," to cancel a member's account due to abuse of the program. Apparently, such judgment includes the ability terminate a membership if complaints persist after the "Enough with the complaining already!" warning.   Ginsberg sued, asserting four causes of action, but Northwest moved for dismissal, arguing that the Airline Deregulation Act (ADA) preempted all of Ginsberg's claims.  The nichtgutkeit District Court dismissed all of Ginsberg's claims, which was a real shonda. The only issue on appeal was whether the ADA preempted Ginsberg's claim for breach of the implied covenant of good faith and fair dealing.

The Ninth Circuit reviewed the purposes behind the ADA's preemption clause and determined that prior precedents had given that clause a narrow reading. Claims for breach of contract do not seem to be preempted.  More specifically, the Ninth Circuit found that Ginsberg's "claim for breach of the implied covenant of good faith and fair dealing does not interfere with the [ADA's] deregulatory mandate."  Moreover, the Ninth Circuit rejected the Distrct Court's finding that Ginsberg's claim related to prices and services. The Ninth Circuit found the link to prices too tenuous and found that the preemption clause was only intended to prevent states from dirctly "regulating rates, routes or services."  Ginsberg claim was not within the narrow scope of the preemption clause and thus was reinstated.  Such a mechaya!

Fuhr gesunderheit, Rabbi Ginsberg!

[JT]

 

Court of Federal Claims Delivers Tongue-Lashing to the United States

Thanks to Steven L. Schooner and the Government Contracts at GW Law Facebook page, we have word of this juicy decision by Judge Sweeney of the Court of Federal Claims in Systems Applications and Technologies, Inc. v. United States.  The opinion is long, but as Professor Schooner points out, the headings alone are enticing.

This basically a Fatal Attraction case.  Michael Douglas's character, played by the United States Army Aviation and Missile Life Cycle Management Command Contracting Center (the Army), gets tired of its long-time partner, Anne Archer, played by Madison Research Corporation, a wholly owned subsidiary of Kratos Defense & Security Solutions, Inc. (Kratos).  It takes up with Glenn Close's character, played by Systems Applications & Technologies, Inc. (SAT).  In this version of the movie, which we admit is far less cinematic than a knife fight, the Army returns to its old partner after a brief dalliance with SAT.  The return takes the form of a renewed solicitation of bids followed by a bid protest from the jilted suitor. 

The facts go back to June 2010, when the Government issued a solicitation of bids for "aerial target flight operations and maintenance services in support of its subscale, ballistic, rotary wing, and ballistic missile target systems."  The Army had to choose among three qualified offerors, and to cut to the chase, it chose SAT.  Kratos immediately filed a bid protest, which the Government Accountability Office found had merits.  The Arny thus proposed corrective action, including canceling the contract with SAT and reopening the bid process.  SAT sued to enjoin the corrective action.  On cross-motions to dismiss/for judgment on the adminsitrative record, the court ruled for SAT.

After 10 pages on jurisdiction and justiciability (i.e. non-contractual stuff = BORING), the court gets to the meat of its decision.  The headers tell it all:

A. The Army’s Decision to Take Corrective Action Constitutes a Significant Error in the Procurement Process

1. The Army’s Reliance on the GAO Attorney’s April 20, 2011 Electronic-Mail Message Renders Its Decision to Take Corrective Action Irrational

2. The Army’s Decision to Take Corrective Action Is Irrational and Unlawful

a. The Army’s Decision to Take Corrective Action Lacks a Rational Basis

b. The Army’s Decision to Take Corrective Action Violates Procurement Statutes and Regulations

B. SA-TECH Is Prejudiced by the Army’s Decision to Take Corrective Action

The Army is thus enjoined from canceling its contarct with SAT and re-opening the bid process.

[JT]

So You Think You Can...Contract?

Many of us who start our Contracts classes with contractual formation likely are, or soon will be, discussing offers, acceptance, and the Objective Theory in class.  This recent clip from the popular reality television show, So You Think You Can Dance, may be a fun way to spice up those discussions.  I plan to use it to illustrate the difference between an offer and a mere invitation to offer but I could see using it for other concepts, too, such as the importance of context when judging whether a reasonable person would view the discussion as an offer. 

The relevant portion should begin automatically after a commercial or two.  If not, jump directly to the 26-minute mark.  The exchange is between a contestant on the show, the host of the show, and one of the judges.  The primary potential offer is one to perform in the judge's upcoming re-make of Dirty Dancing. 

[HR Anderson, with H/T to student Elisabeth Whitmire]

Monkey Business Leads to Breach of Contract Claim

The New York Post reports that the Jane Goodall Institute for Wildlife Research, Education and Conservation is suing Sprout Foods in a $720,000 breach of contract claim.  We have not been able to locate an online version of the complaint, but media reports suggest that the Goodall Institute agreed to help market a new baby food to be named "Janey Baby" in return for an estimated $850,000 in royalties.  According to the Post, the Institute derives some of its revenue by permitting Jane Goodall's name to be linked with products that are appropriate for association with that name.  Since the Goodall name is associated with chimpanzees (and don't worry, we are aware that the picture at left does not contain a chimp), it's not clear to me why that's the name you would want on your baby food, but SpongeBob is on my daughter's toothpaste, despite the fact that we've never associated him with good personal hygiene.  Marketing is indeed a mysterious field.  

Despite ambitious plans for the new food, and despite the fact that Goodall herself went out to Oregon to visit Sprout's organic farm, Sprout never brought the product to market and never paid the institute its fee.  Sprout's primary defense appears to be that the contract was negotiated with its former CEO who was not "authorized" to enter into such an agreement.  Hmmm.  Although Sprout is defending itself against the charge of contractual breach, it is also "begun discussions with the institute concerning a revised relationship that would be of substantial benefit to both parties," according to the Post.  

If your best argument is that your CEO was not an authorized agent on a contract that apparently was partly performed, discussing a revised relationship seems like a good option.

[JT]

Lucy v. Zehmer, Interrupted

I've survived a contracts conference shipwreck.  And now I can say I've experienced an earthquake in the middle of teaching Lucy v. Zehmer. Apparently the epicenter is in Mineral, Virginia, population 500.  Coincidentally, this looks to be only about a two-hour drive from MCKenney, Virginia, home of the Ye Olde Virginnie. 

I hope everyone and everything nearby is safe.

[Meredith R. Miller]

Weekly Top Tens from the Social Science Research Network

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of Contracts & Commercial Law eJournal 
June 23, 2011 to August 22, 2011

Rank	Downloads	Paper Title
1	555	How Markets Work: The Lawyer's Version  Mark C. Weidemaier, G. Mitu Gulati,  University of North Carolina (UNC) at Chapel Hill - School of Law, Duke University - School of Law
2	123	Non-Recourse, No Down Payment and the Mortgage Meltdown: Lessons from Undercapitalization  Dov Solomon, Odelia Minnes
3	118	On the Meaning of Horizontal Agreements in Competition Law  Louis Kaplow,  Harvard University - Law School - Faculty
4	97	Contract as Meaning: An Introduction to 'Contract as Promise at 30'  Jeffrey M. Lipshaw,  Suffolk University - Law School
5	86	Unfair Terms in Contracts between Businesses  Martijn W. Hesselink,  University of Amsterdam - Centre for the Study of European Contract Law (CSECL)
6	83	Pluralism and Perfectionism in Private Law  Hanoch Dagan,  Tel Aviv University - Buchmann Faculty of Law
7	80	Contract Drafting: A Prerequisite to Teaching Transactional Negotiation  Tina L. Stark,  Boston University School of Law
8	68	Not Out of the (Fox)Woods Yet: Indian Gaming and the Bankruptcy Code  Emir Aly Crowne (né Mohammed), Andrew Black, S. Alex Constantin,  University of Windsor - Faculty of Law, Unaffiliated Authors - affiliation not provided to SSRN, Unaffiliated Authors - affiliation not provided to SSRN
9	67	Measurement of Restitution: Coordinating Restitution with Compensatory Damages and Punitive Damages  Doug Rendleman,  Washington and Lee University - School of Law
10	66	Law, Economics, and Morality: Response to Critiques  Eyal Zamir, Barak Medina,  Hebrew University of Jerusalem - Faculty of Law, Hebrew University of Jerusalem - Faculty of Law

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of LSN: Contracts (Topic)  
June 23, 2011 to August 22, 2011

Rank	Downloads	Paper Title
1	548	How Markets Work: The Lawyer's Version  Mark C. Weidemaier, G. Mitu Gulati,  University of North Carolina (UNC) at Chapel Hill - School of Law, Duke University - School of Law
2	86	Unfair Terms in Contracts between Businesses  Martijn W. Hesselink,  University of Amsterdam - Centre for the Study of European Contract Law (CSECL)
3	83	Pluralism and Perfectionism in Private Law  Hanoch Dagan,  Tel Aviv University - Buchmann Faculty of Law
4	76	Contract Drafting: A Prerequisite to Teaching Transactional Negotiation  Tina L. Stark,  Boston University School of Law
5	53	The Possible Irony of AT&T versus Concepcion  Colin P. Marks,  St. Mary's University School of Law
6	49	Law as a ByProduct: Theories of Private Law Production  Bruce H. Kobayashi, Larry E. Ribstein,  George Mason University - School of Law, University of Illinois College of Law
7	47	Contracting for Procedure  Kevin E. Davis, Helen Hershkoff,  New York University (NYU) - School of Law, New York University (NYU) - School of Law
8	33	Deleted Words, Prior Negotiations and Contract Interpretation  David McLauchlan,  Victoria University of Wellington - Faculty of Law
9	30	Restitution and Relationships  Hanoch Dagan,  Tel Aviv University - Buchmann Faculty of Law
10	30	Bringing Order to Contracts Against Public Policy  David Adam Friedman,  Willamette University College of Law

[JT]

Local News: Fight Over A School Board's Decision to Buy a Scoreboard

This is the sort of mess that local governments deal with all the time, but this one hits home for those of us in the Valparaiso Community School District.  As reported in the Northwest Indiana Times, the Valparaiso Community School Board held a special meeting on August 4th to approve a contract to erect a $250,000 scoreboard at the high school in time for the start of the football season.  As public expenditures go, this one seems a no-brainer, as the Board apparently believed on August 4th that it could cover the cost of the new scoreboard with advertising revenues within five years.

Some Valparaisans were outraged, however, by the lack of public discussion and by the deficient notice prior to the special meeting held on August 4th.  At a subsequent Board meeting on August 16th, public outrage was exacerbated by the revelation that the school had in fact secured only $54,000 in advertising revenues and there are divergent accounts of what information about advertising commitments was supplied to the Board at the time it approved the contract.    

But here's where it gets interesting.  The Board defended its hasty action on the ground that the $250,000 contract had already been entered into by unnamed "individuals who thought they had the authority" to enter into such a contract.  This revelation by the Board was met with a smattering of laughter at the public meeting.  Why were the outraged Valparaisans laughing?  Because they know that, under agency law, thinking you have the authority to enter into a $250,000 contract is not the same thing as having such authority.  And if residents find it laughable that some employee of the high school would claim to have such authority, the other party to the contract knew or should have known that such contracts require Board approval to be binding.  In short, there was no need for the Board to rush to approve the contract, because the contract was never binding in the first place.  

In addition, there is the separate, disputed issue of whether such a contract must be awarded only after a solicitation of competitive bids, which did not occur in this case.

Whether or not the contract was enforceable at the time it was signed, the Board has now adopted it, so it has become binding.  That does not mean that it could not be challenged of course.  Angry Valparaisans could run to court and seek to enjoin any further measures to install the new scoreboard.  But doing so would cost taxpayers more money, and so citizens who would like to hold the allegdly unaccountable Board to account while also preventing improper expenditures of public funds are faced with a Hobson's choice.

[JT]

Soros ex Seeks $50million for alleged breach of contract

Another school year is upon us.  This post is for the profs who begin the course with a discussion of consideration.  

George Soros was sued by a former girlfriend. She alleges that Soros broke promises to buy her apartments (yes, plural) in New York City.  She seeks $50 million in damages.  Here's more from the WSJ:

Hedge fund titan George Soros is facing a lawsuit from a former girlfriend, who alleged that he broke promises to buy her apartments in New York City.

The lawsuit, filed in state Supreme Court in Manhattan, also alleged that after an argument about the apartments in August 2010, Mr. Soros slapped the woman, Adriana Ferreyr, across the face while the two were in bed, attempted to strike her with a lamp and tried to choke her.

Mr. Soros's lawyer, William D. Zabel, said in a statement that the lawsuit is "frivolous and entirely without merit." The lawsuit was first reported in the New York Post.

Robert Hantman, a lawyer for Ms. Ferreyr, 28 years old, didn't immediately return a call seeking comment.

The lawsuit seeks damages of $50 million. One of the apartments at issue in the lawsuit was valued at about $2 million and the other was valued at about $4 million, the complaint said.

Mr. Zabel said in the statement that Mr. Soros, 80, did have an "on-again, off-again and non-exclusive relationship" with Ms. Ferreyr, which lasted from about 2006 to 2010.

He said the complaint "is riddled with false charges" in an attempt to "extract money" from Mr. Soros, who is one of the wealthiest people in the world, with a personal net worth of about $14 billion.

The lawyer said police investigated the August 2010 incident but filed no charges.

"George Soros did not slap, choke or throw a lamp at her," he said, adding that he will seek to have the lawsuit dismissed.

[Meredith R. Miller]

 

Investigation into Conflicts of Interest at DARPA

According to this exclusive report from Wired.com, the Department of Defense's Inspector General is looking into $1.7 million in contracts between the Defense Advanced Research Projects Agency (DARPA), the Pentagon's top research division, and RedXDefense a corporation owned in part by DARPA's director, Regina Dugan.  According to Wired, RedXDefense is indebted to Dugan to the tune of $250,000.  

DARPA representatives claim that the investigation is routine and that RedXDefense won its contracts fair and square.  Dugan reportedly recused herself from all deliberations that resulted in the award of contracts to RedXDefense.  Still, Wired reports that the contracts were not reviewed by someone outside of DARPA so that decision-makers likely were still subject to Dugan's influence.

In other news, Pentagon officials are denying rumors of a merger between DARPA and the Dharma Initiative.

[JT]

Wisconsin Contracts Conference, October 21-22, 2011

To be held at the Wisconsin Law School:

The title of the conference is: Empirical and Lyrical: Revisiting the Contracts Scholarship of Stewart Macaulay.  A website with details about the conference, including a draft program and a brief description of paper topics, has been established at  http://law.wisc.edu/ils/2011contractsconf/homepage.html.  Sixteen papers will be presented at the conference, by the following scholars: David Campbell, Robert W. Gordon, Ethan Leib, Brian Bix, Jay Feinman,  Gillian Hadfield, Claire Hill, Charles Knapp, Deborah Post, Edward Rubin, Carol Sanger, Robert Scott, D. Gordon Smith, Josh Whitford and Li-Wen Lin, John Wightman and William Woodward.  The conference will conclude with a banquet on Saturday, October 22, at which Stewart Macaulay will give a talk.  The conference papers will later be published as a book.

    All faculty and academic staff at any university are welcome to attend.  There is no conference fee.  Pre-registration is required for the conference and for the conference banquet.  For more information, including housing information, see the website linked above.  Questions about registration, housing, etc., should be directed to Pam Hollenhorst, Conference Coordinator, at [email protected].  Other questions about the conference should be directed to Bill Whitford, at [email protected].

Jean Braucher, University of Arizona Law College

John Kidwell, Wisconsin Law School

Bill Whitford, Wisconsin Law School

[JT]

Eleventh Circuit Will Not Permit Escape from SCOTUS's Holding in Conception

Last week, the Eleventh Circuit Court of Appeals decided Cruz v. Cingular Wireless, LLC, a case very similar to AT&T Mobility v. Concepcion, which we have previously discussed here and here.  In light of the Supreme Court's decision in Concepcion, the Eleventh Circuit unanimously affirmed the District Court, which had granted the defendant's motion to compel arbitration.

In Concepcion, the Supreme Court held that California's state law rendering unenforceable provisions in arbitration agreements that preclude class actions are themselves pre-empted by the Federal Arbitration Act.  Florida has a law similar to California's.  The defendant in the Florida case is now called AT&T Mobiility (ATTM), since AT&T acquired Cingular.  Consumers who use ATTM's services are subject to a Wireless Service Agreement which contains an arbitration provision and expressly prohibits class actions in connection with the agreement.  

Plaintiffs nonetheless attempted to bring a class action suit to protest montly $2.99 charge for roadside assistance which plaintiffs claimed they never ordered, could not easily identify on their bill and could not get removed even if they expressly declined the service.  Pre-Concepcion, it appears that Florida courts simply found the agreement's provision barring class actions to be enforceable as a matter of Florida law.  Plaintiffs were alleging that ATTM's practices violated the Florida Deceptive and Unfair Trade Practices Act, but that Act is enforceable in arbitration, so the agreement does not undermine the Act.  Plaintiffs objected that nobody is going to go to the expense of individual arbitration over a monthly charge of less than $3.  But that objection was nullified because the Act allows for the recovery of all arbitration costs, including attorneys' fees, and because under the agreement, ATTM agreed to pay all arbitration costs, regardless of outcome, so long as the claim was not frivolous.  

Post-Concepcion, Plaintiffs argued that the remedial goal of the Act would be undermined if class action status was not available because: 1) no attorney will represent an individual plaintiff with a small but complex claim; and 2) consumers would not even know that they had a claim with out the notice provisions made possible through the class action mechanism.  The Eleventh Circuit was unmoved.  These very policy arguments were considered and rejected in Concepcion.  Additional empirical evidence presented in this case did nothing to undermine the applicability of the principle articulared in Concepcion to this very-nearly identical case.

[JT]

What Not to Wear: Carpenter's Edition

We learn from our sources (and from this story on ESPN.com) that carpenter Brent
Loveland is suing Oklahoma State football coach Mike Gundy (pictured, left) for breach of contract.  According to ESPN, Loveland claims that he showed up for work wearing a t-shirt that read "Oklahoma Baseball" in offensive red block letters.  Gundy then allegedly did his best Dogberry saying in effect:

Dost thou not suspect my place? Dost thou not suspect my years? . . . No, thou villain, thou art full of piety, as shall be proved upon thee by good witness. I am a wise fellow, and which is more, an officer, and which is more, a householder, and which is more, as pretty a piece of flesh as any is in Messina, and one that knows the law, go to . . . and one that hath two gowns, and everything handsome about him. Bring him away.

 Loveland claims $30,000 in damages from the loss of 13 weeks of work.  In the alternative, he could be given a $5000 debit card and a trip to NYC in order to buy a new wardrobe (with the advice of Stacy London, pictured, right) before being handed over to Ted Gibson and Carmindy for the final touches.

[JT, hat tip to Brian Shannon, of the Texas Tech University School of Law]

Weekly Top Tens from the Social Science Research Network

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of Contracts & Commercial Law eJournal  
June 16, 2011 to August 15, 2011

Rank	Downloads	Paper Title
1	112	On the Meaning of Horizontal Agreements in Competition Law  Louis Kaplow
2	106	Commercializing Property Rights in Inventions: Lessons for Modern Patent Theory from Classic Patent Doctrine  Adam Mossoff
3	96	Non-Recourse, No Down Payment and the Mortgage Meltdown: Lessons from Undercapitalization  Dov Solomon, Odelia Minnes
4	93	How Markets Work: The Lawyer's Version  Mark C. Weidemaier, G. Mitu Gulati
5	91	Contract as Meaning: An Introduction to 'Contract as Promise at 30'  Jeffrey M. Lipshaw
6	82	Pluralism and Perfectionism in Private Law  Hanoch Dagan,
7	79	Unfair Terms in Contracts between Businesses  Martijn W. Hesselink
8	66	Not Out of the (Fox)Woods Yet: Indian Gaming and the Bankruptcy Code  Emir Aly Crowne (né Mohammed), Andrew Black, S. Alex Constantin
9	64	Law, Economics, and Morality: Response to Critiques  Eyal Zamir, Barak Medina
10	64	Measurement of Restitution: Coordinating Restitution with Compensatory Damages and Punitive Damages  Doug Rendleman,

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of LSN: Contracts (Topic)  
June 16, 2011 to August 15, 2011

Rank	Downloads	Paper Title
1	106	Commercializing Property Rights in Inventions: Lessons for Modern Patent Theory from Classic Patent Doctrine  Adam Mossoff
2	93	How Markets Work: The Lawyer's Version  Mark C. Weidemaier, G. Mitu Gulat
3	82	Pluralism and Perfectionism in Private Law  Hanoch Dagan
4	79	Unfair Terms in Contracts between Businesses  Martijn W. Hesselink
5	48	The Possible Irony of AT&T versus Concepcion  Colin P. Marks
6	45	Law as a ByProduct: Theories of Private Law Production  Bruce H. Kobayashi, Larry E. Ribstein
7	41	Contract Drafting: A Prerequisite to Teaching Transactional Negotiation  Tina L. Stark
8	40	Contracting for Procedure  Kevin E. Davis, Helen Hershkoff
9	29	Deleted Words, Prior Negotiations and Contract Interpretation  David McLauchlan
10	25	The Family, the Market, and ADR  Amy J. Cohen

[JT]

New Collective Bargaining Agreement Ends NFL Lock-Out

In March the National Football League Owners (NFL) elected to lockout the players organized through the National Football League Players Association (NFLPA) as the parties could not agree on a new Collective Bargaining Agreement (CBA). This lead to several star players, including Tom Brady and Payton Manning, brining an antitrust suit against the NFL. Four and a half months later, as reported here on National Football Post.com, the two sides have agreed to a new CBA that will last through the 2020 season and the 2021 draft.  ESPN reports that as a condition of the new CBA, all pending litigation needed to be settled.  In the end, as ESPN reports here, NFL players agreed to release their claims without any compensation.  

National Football Post.com provides a detailed summary of the 300-page plus CBA.  The new CBA introduces several changes from the prior agreement, focusing on the players’ health and safety, benefits for retired players, the draft and free agency, compensation for rookies entering the league, and the economics surrounding the salary cap. In order to promote player health and safety, the new CBA reduces the length of off-season programs and organized team activities. If limits on-field practice time and the amount of contact practices, and increases the number of days off for players. In addition, the CBA allows current players to remain in the player medical plan for life and offers enhanced financial protection for injured players. The NFL and NFLPA also agreed to a $50 million per year joint fund for medical research, healthcare programs and charities.

Increased benefits for retired players include the creation of a “Legacy Fund” devoted to increasing the pension for those players who retired before 1993. The two sides also agreed to improve post-career medical options, the disability plan, the 88 plan (which provides assistance to disabled players and those with certain diseases developed due to playing), career transition and degree completion programs, and player care plan.  

Under the new CBA players become unrestricted free agents (UFA) after four accrued seasons in the league. Players can become restricted free agents (RFA) after three accrued seasons in the league. Teams with RFAs have a right of first refusal on players who sign an offer sheet with another team allowing teams the opportunity to match the offer or receive draft pick compensation for the players.

Another new element to the CBA is the creation of a rookie pay scale. Under the new agreement, all drafted players will receive 4 year contracts and all undrafted players receive 3 year contracts. The teams have a maximum total compensation they can spend for each draft class and there are limited contract terms within the rookie contracts. The CBA also contains strong rules against rookies holding out and not signing with the teams, and teams also have the option to extended the rookie contract of a first round draft pick to a fifth year based on an agreed upon tender amount. The money saved by teams based on this structure is creating a new fund starting in 2012 to redistribute the money to current and retired players as well as into a veteran player performance pool.  

The two sides also agreed upon a new salary cap and revenue sharing agreement that will be in place over the length of the new CBA. Starting with the 2012 season the salary cap will now be based on a share of “all revenue,” and the players are to receive 55% of the national media revenue, 45 % of NFL ventures revenue, and 40% of local club revenue.  Player minimum salaries also saw a 10% increase for this year and will continue to increase throughout the length of the agreement.

Finally,  the agreement also stipulates that there is to be no judicial oversight of the CBA, and that if there are disputes the NFL and NFLPA will employ an independent third party arbitrator which they agree upon to settle the dispute. To insure labor peace, the new agreement contains a clause stating that the players will not strike nor will the owners lock out the players during the duration of the agreement.

Boogity, boogity, boogity, Amen.

[JT & Jared Vasiliauskas]

Yale Honors 100 Year Old Contract & Returns Antiquities to Peru

We somehow missed this one when it was fresh, but watching The Daily Show this week we learned of a lovely contracts story.  The relevant segment, which will probably go up on the The Daily Show website next week, was Jon Stewart's interview with Mark Adams, author of Turn Right at Machu Picchu: Rediscovering the Lost City One Step at a Time.  In the interview, Adams mentions that Hiram Bingham III, the man credited with "discovering" Machu Picchu in 1911, brought back relics from the site which he subsequently donated to Yale University.  

As recounted in this article from National Public Radio, the Peruvian government permitted Bingham to take relics back to Yale for study in return for his promise to return them upon demand by Peru.  When Peru asked Yale to return its artifacts, Yale at first refused, claiming that the custom at the time of Bingham's discovery was more or less "finders, keepers" and dismissing Bingham's letters acknowledging his agreement with the Peruvian government as non-binding.  Peru filed suit in 2008 (here is the complaint), and at the end of last year, the two sides entered into a Memorandum of Understanding. 

Under the MOU, the artifacts are to be returned to Peru by the end of 2012.  In return for the return of its property, Peru has agreed to build a museum in Cuzco, the ancient Incan capital, to house them and to establish an international center at which scholars from around the world can have access to them.  

Here's the Daily Show clip.  Great line: Jon Stewart tells Mark Adams he looks like the issue of Drew Carey and Jon Hodgman.  There's no denying it.

The Daily Show - Mark Adams
Get More: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

 

[JT]