ContractsProf Blog

Using the Government's Breach of Contract Suit Against Navy Seal "Mark Owen" in Class?

The U.S. government reportedly is considering filing a breach of contract suit against the Navy Seal (pseudonym "Mark Owen") who wrote a book about the raid and killing of Osama bin Laden.  According to a letter obtained by Reuters, the Pentagon has told Owen that his publication of the book would further violate certain confidentiality provisions in agreements between him and the U.S. government.  The Huffington Post reports the contents of the letter as follows:

"In the judgment of the Department of Defense, you are in material breach and violation of the non-disclosure agreements you signed....Further public dissemination of your book will aggravate your breach and violation of your agreements." 

I recently thought about how I could use this case in class without crossing any lines of impropriety (read: without crossing over into an uncomfortably political discussion).  One angle I envisioned was using it when we get to specific performance.  A topic closer to the (mythical?) impropriety line would be whether Owen would have any arguments regarding why the agreements should not be enforced, perhaps including public policy or duress.  Both are a stretch without more facts.  Regardless of specifics, I think it could be a great case to use when discussing the general topics of the limits of contract law and the limits of contract law remedies. 

[Heidi R. Anderson]

NYLJ Article: Does a Landlord Have A Duty to Mitigate?

According to Sateesh Nori the answer in New York is "No, but maybe."  The article begins:

A lease is both a contract between parties—the landlord and the tenant—and an interest in land. However, this duality has created conflict in determining whether a landlord has a duty to mitigate damages in the event of a tenant's early termination of a lease. The rule that a landlord has a duty to mitigate derives from basic principles of contract law. The doctrine that the landlord has no duty to mitigate, which views a lease not as a contract but as an interest in land, was seemingly mandated by the Appellate Division, Second Department, in Rios v. Carrillo in 2008. Now, four years later, uncertainty still abounds as courts waver in applying contract principles to lease breaches and carve exceptions into the rule that a landlord has no duty to mitigate. This article attempts to identify the factors relied upon by courts where a duty to mitigate has been applied in contravention of established case law.

Worth a read.

[Meredith R. Miller]

A Reminder from the AALS Section on Contracts

CALL FOR SUBMISSIONS

AALS Section on Contracts, 2013 Annual Meeting Program

The Executive Committee of the AALS Contracts Section solicits proposals for presentations at the Section’s Annual Meeting program, The Law of Contracts or Laws of Contracts?, to be held in New Orleans, Louisiana on Saturday, January 5, 2013.

             In The Path of the Law, Oliver Wendell Holmes wrote,

"There is a story of a Vermont justice of the peace before whom a suit was brought by one farmer against another for breaking a churn. The justice took time to consider, and then said that he had looked through the statutes and could find nothing about churns, and gave judgment for the defendant."

This story was meant to ridicule the Vermont justice, but he may have been ahead of his time.  This year’s Section Meeting will revisit perennial and fundamental questions about “contract law” as a legal rubric.  Is it preferable to analyze “contracts” as a category, or to disperse contracts into “churn–like” categories, such as sales, consumer protection, employment, family relations, intellectual property, securities, and so on?  To what extent does the experience of one type of contract justify generalizations about “contract law”? Conversely, what kinds of contracts implicate context-specific practices, markets, or policy concerns justifying specialized analysis and/or doctrine? 

The Section seeks three to five presentations that address these and related questions.  We welcome papers that address these questions broadly as well as those that more narrowly discuss the doctrinal, transactional, or policy characteristics of a specific contractual context.

Submissions:

Full-time faculty members of AALS member law schools are eligible to submit proposals.  Please e-mail an abstract or proposal (500 words or fewer) to section chair Thomas Joo ([email protected]) by 5:00 p.m. (Pacific Time) September 7, 2012.  Drafts and completed papers are welcome (though not required), but must be accompanied by an abstract.  Please indicate whether the paper has been published or accepted for publication (and if so, provide the anticipated or actual date of publication).  There is no publication requirement, but preference will be given to papers that will not have been published by the date of the Annual Meeting.

We particularly encourage submissions from contracts scholars who have been active in the field for ten years or less, especially those who are pre-tenured, as well as more senior scholars whose work may not be widely known to members of the Contracts Section.  We will give some preference to those who have not recently participated in the Section’s annual meeting program. 

Thank you for your consideration.  Please contact Thomas Joo or any other Executive Committee Member if you have any questions.

 

AALS Section on Contracts Executive Committee

Curtis Bridgeman

Danielle Hart

Thomas Joo (Chair)

Larry Garvin (Chair-Elect)

Emily Houh

Nancy Kim (Secretary)

[JT]

The Case of the Non-Existent Arbitral Body

On July 26th, the Third Circuit decided Control Screening LLC v. Technological Application and Prod. Co.  The case involved a dispute over the purchase of eight customized X-ray machines for a price of just over $1 million.  The transaction soured and both sides claimed breach.  Control Screening is a New Jersay Company; Techological Application and Production Company (Tecapro) is a state-owned Vietnamese company.  

Although the parties' agreement contained an arbitration clause, Tecapro initiated arbitral proceedings in Belgium under the Belgian Judicial Code.  Control Screening filed a motion to compel arbitration in the United States District Court of New Jersey and to enjoin proceedings in Belgium.    Here's where it gets interesting.  The arbitration clause reads as follows:

In the event all disputes are not resolved, the disputes shall be settled at International Arbitration Center of European countries for claim in the suing party's country under the rule of the Center. Decision of arbitration shall be final and binding [sic] both parties.

The problem is that there is no such thing as the International Arbitration Center of European countries.  

The district court determined that the “only reasonable interpretation of the arbitration clause" was that Taxapro could seek to arbitrate in Vietnam and Control Screening could seek to aribrate in New Jersey.  Since Control Screening exercised its contractual option first, arbitration in New Jersey was proper.  The district court granted Control Screening's motion to compel arbitration.

On appeal, the Third Circuit looked to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), which binding in both the U.S. and Vietnam and is implemented in the U.S. through the Federal Arbitration Act (FAA).    Article II(3) of the New York Convention invalidates an agreement to arbitrate "only when it is subject to an internationally recognized defense such as duress, mistake, fraud, or waiver…”  Here, because the parties mistakenly designated arbitration to commence at a non-existent arbitral body, the forum selection clause of the arbitration agreement is inoperative.  However, the remainder of the agreement establishes an intent to arbitrate.  The Third Circuit treated the agreement as though it had no forum selection clause.  

The FAA provides that “arbitration hearings and proceedings shall be within the district in which the petition for an order directing such arbitration is filed.”  On that basis, the Third Circuit determined that New Jersey was the proper district for the commencement of arbitration.  Because Control Screening’s motion to compel arbitration was brought in the District of New Jersey, the New Jersey arbitration site was proper.

This resolution is not entirely satisifying, as Marc. J. Goldstein points out in his detailed discussion of the case on his Arbitration Commentaries blog.  The parties did not agree on a particular venue, but it was pretty clear that they wanted to arbitrate in Europe.  The Third Circuit acknowledges as much when it rejects (in a footnote) the district court's conclusion that the only reasonable interpretation of the agreement was that each party could initiate arbitration in their home countries.  

The opinion does not state what became of Control Screening's motion to enjoin the proceedings in Belgium.  If a U.S. court grants a motion to compel arbitration in the U.S., does it automatically enjoin foreign aribtral proceedings that had already commenced?  We can understand why that result would follow from the district court's reading of the agreement, but the Third Circuit rejected that reading.  Having acknowledged that the parties anticipated arbitration in Europe, why would the Third Circuit enjoin such a proceeding in favor of a venue to which the parties likely considered and rejected?

[JT and Christina Phillips]

 

 

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 28, 2012 to August 27, 2012

Rank	Downloads	Paper Title
1	1452	A Transactional Genealogy of Scandal: From Michael Milken to Enron to Goldman Sachs  William W. Bratton, Adam J. Levitin,  University of Pennsylvania - Law School, Georgetown University - Law Center
2	168	You Definitely Should Have: A Contractual Look at Israeli Wedding Gift Culture  Zvi H. Triger,  Striks School of Law, The College of Management Academic Studies (COLMAN)
3	159	What Can Be Wrong with an Option? An Optional Common European Sales Law as a Regulatory Tool  Horst Eidenmueller,  University of Munich
4	141	The Dynamics of Contract Evolution  Stephen J. Choi, G. Mitu Gulati, Eric A. Posner,  New York University (NYU) - School of Law, Duke University - School of Law, University of Chicago - Law School
5	139	Featuring People in Ads  Eric Goldman, Rebecca Tushnet,  Santa Clara University - School of Law, Georgetown University - Law Center
6	135	Hollywood Deals: Soft Contracts for Hard Markets  Jonathan Barnett,  USC Gould School of Law
7	113	Contract and Innovation: The Limited Role of Generalist Courts in the Evolution of Novel Contractual Terms  Ronald J. Gilson, Charles F. Sabel, Robert E. Scott,  Stanford Law School, Columbia University - Law School, Columbia University - Law School
8	82	Autonomy, Pluralism, and Contract Theory  Hanoch Dagan,  Tel Aviv University - Buchmann Faculty of Law
9	82	The Importance of Fault in Contract Law  Robert A. Hillman,  Cornell Law School
10	78	Do Promises Distinguish Contract from Tort?  Curtis Bridgeman, John C. P. Goldberg,  Florida State University - College of Law, Harvard Law School

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of LSN: Contracts (Topic)  
June 28, 2012 to August 27, 2012

Rank	Downloads	Paper Title
1	168	You Definitely Should Have: A Contractual Look at Israeli Wedding Gift Culture  Zvi H. Triger,  Striks School of Law, The College of Management Academic Studies (COLMAN)
2	159	What Can Be Wrong with an Option? An Optional Common European Sales Law as a Regulatory Tool  Horst Eidenmueller,  University of Munich
3	135	Hollywood Deals: Soft Contracts for Hard Markets  Jonathan Barnett,  USC Gould School of Law
4	82	Autonomy, Pluralism, and Contract Theory  Hanoch Dagan,  Tel Aviv University - Buchmann Faculty of Law
5	82	The Importance of Fault in Contract Law  Robert A. Hillman,  Cornell Law School
6	75	The Return-Reducing Ripple Effects of the 'Carried Interest' Tax Proposals  Heather M. Field,  University of California - Hastings College of the Law
7	73	Reflections on the Two-Handed Lawyer: Thinking versus Action in Business Lawyering  Jeffrey M. Lipshaw,  Suffolk University - Law School
8	62	The Proposal for a Regulation on a Common European Sales Law: Deficits of the Most Recent Textual Layer of European Contract Law  Horst Eidenmueller, Nils Jansen, Eva-Maria Kieninger, Gerhard Wagner, Reinhard Zimmermann,  University of Munich, University of Muenster, University of Wuerzburg, University of Bonn, Max Planck Institute for Comparative and International Private Law
9	56	Contracts, Treaties and Umbrella Clauses: Some Jurisdictional Issues in International Investment Arbitration  Velimir Zivkovic,  University of Belgrade - Faculty of Law
10	52	The Contract that Neither Party Intends  David McLauchlan,  Victoria University of Wellington - Faculty of Law

[JT]

Sixth Circuit Upholds Sanctions and Remands Union Dispute to the NLRB

In July, 2009, DiPonio Construction Company, Inc. (DiPonio) terminated its collective bargaining agreement (CBA) with the International Union of Bricklayers and Allied Craftworkers Local 9’s (the Union).  The Union brought a claim for unfair labor practices (ULP) before the National Labor Relations Board (NLRB) alleging that DiPonio was required by the National Labor Relations Act (NLRA) to bargain for a new CBA.  Five days before the NLRB filed a ULP complaint against DiPonio, DiPonio sought a declaratory judgment from the district court stating that it had properly terminated the CBA.  When the NLRB moved to dismiss DiPonio’s claim for lack of subject matter jurisdiction, DiPonio amended its complaint to include a breach of contract claim and filed a motion to stay the NLRB proceedings.  The timing of the contract claim made it seem motivated by a desire to create jurisdiction in federal court over a dispute over which the NLRB would otherwise have exclusive jurisdiction.

The district court granted the NLRB’s motion to dismiss and imposed sanctions against DiPonio under Rule 11 of the Federal Rules of Civil Procedure.  DiPonio appealed to the Sixth Circuit and the Union sought further sanctions.  Last month, in DiPonio Constrcution Company, Inc. v. Interaitonal Union of Bricklayers and Allied Craftworkers Local 9, the Sixth Circuit affirmed the district court’s ruling in its entirety, while refusing to impose further sanctions.  The Sixth Circuit found that the question at issue was primarily one of representation rather than of contractual interpretation, and thus that resolution of the dispute in a federal court was inappropriate. 

The NLRB has exclusive jurisdiction over controversies concerning sections 7 or 8 of the NLRA, but federal courts have concurrent jurisdiction with the NLRB over contracts interpretation issues.  However, where the matter is primarily one of representation instead of contractual interpretation, courts defer to the NLRB. 

The nature of DiPonio’s bargaining obligations depends on whether the parties entered into the CBA pursuant to § 8(f) or § 9(a) of the NLRA.  Section 9(a) requires employers to “bargain with a union that has been designated by a majority of the employees in a unit for the purposes of collective bargaining with the employer,” while section 8(f) “allows unions and employers in the construction industry to enter into CBA’s without requiring the union to establish that it has the support of a majority of the employees in the unit covered by the CBA.”  In short, if the CBA is a § 8 contract, DiPonio has no duty to negotiate for a new CBA, but if it is a § 9(a) contract, it does.

In a 2006 decision, the Sixth Circuit found that a dispute will be treated as “primarily representational” (1) “where the NLRB has already exercised jurisdiction over a matter and is either considering it or has already decided the matter,” or (2) “where the issue is an ‘initial decision’ in the representation area.”  Here, the question of whether the contract was entered into pursuant to § 8(f) or § 9(a) was already before the NLRB (the Union’s ULP Complaint).  Thus, the matter was deemed primarily representational, and the Sixth Circuit handed the case over to the NLRB.

The Sixth Circuit upheld the Rule 11 sanctions that the district court imposed because DiPonio’s breach of contract claim was without merit and was filed in order to delay the NLRB proceedings.

[JT and Christina Phillips]

Contracts Limerick of the Week: Pennsy Supply v. American Ash Recycling Corp.

Just when you thought it was safe to venture onto the blog. . . .

I've actually been in Limerick rehab for the past three years.  But with a new casebook, I have some fresh material.  I think I'm still a bit rusty because the facts of this case are highly Limerickworthy, and yet I'm uncertain that this is a keeper.  

American Ash made available to paving companies a material known as AggRite -- all the paving companies had to do was cart it away.  Pennsy Supply did so for use in paving driveways and parking lots in a high school in Northern York County, Pennsylvania.  In fact, it carted away 11,000 tons of the stuff.  

The AggRite didn't work so well, and the pavement cracked during its first winter.  Pennsy perfomed all the repairs, which involved carting away and disposing of the AggRite, which it turns out is hazardous waste.  I love the idea of dumping 11,000 tons of hazardous waste in a public high school parking lot.  It's the kind of metaphor that could be at the heart of a Don DeLillo novel.  

The Superior Court of Pennsylvania found that there was consideration and thus that Pennsy had a viable warranty claim (at least for the purposes of surviving a motion to dismiss/demurrer).  American Ash received a benefit when Pennsy agreed to haul away 11,000 tons of hazardous waste for free.

Pennsy Supply, Innc. v. American Ash Recycling Corp. of Pennsylvania

The court found a bargain was closed
When American Ash Corp. disposed
Of its AggRite through Pennsy
In the ideal dispens’ry:
A lot to a school juxtaposed.

[JT]

Update Regarding "Earth, Wind & Contract"

In March, we briefly mentioned a contract-based royalty payment dispute between one member of the disco group Earth, Wind and Fire, and the children of a deceased member of the group.  According to this story, the defendant, Maurice White, now has responded in court.  (It is unclear whether White's response was an answer to the complaint, a motion for summary judgment, or something else).  White alleges that there was no oral agreement pursuant to which he was to pay royalties and that, if there was an oral agreement, it is not enforceable.  This could end up being a good case to discuss when presenting the statute of frauds.  Expect another post if/when I am able to find the court filings.

[Heidi R. Anderson]

Cigarette Packaging and - Contracts?

Last week, the Australian High Court upheld a ban on company logos on cigarette packages. The law that was upheld also requires that the front of cigarette packages show images of the harmful effects of smoking (e.g. mouth ulcers, tumors, etc).

Okay, you might be wondering what this has to do with contracts.  One of my current research interests (obsessions) is the idea of notice substituting for actual assent, especially with online contracts. A dinky hyperlink nestled at the bottom of a page can serve as "notice," at least in the eyes of some courts although most people don't actually notice them.  The fuss over the cigarette packaging (and Big Tobacco really fought hard over this one) underscores something that is often lost on courts evaluating notice in contract cases -- the quality of the notice matters. A warning label in a small text box gets ignored; graphic visual depictions of injured human organs do not. Snazzy corporate labels make smoking seem cool; plain labels don't have that same cachet. Websites, too, could draw more attention to their contracts, but they don't. They certainly know how to grab our attention when they want it, with images and sounds. So why make legal terms so unobtrusive?  Could it be that they don't really want us to read them?

[Nancy Kim]

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 21, 2012 to August 20, 2012

Rank	Downloads	Paper Title
1	1302	A Transactional Genealogy of Scandal: From Michael Milken to Enron to Goldman Sachs  William W. Bratton, Adam J. Levitin,  University of Pennsylvania - Law School, Georgetown University - Law Center
2	197	The Optional Instrument of European Contract Law: Opting-in through Standard Terms – A Reply to Simon Whittaker  Jürgen Basedow,  Max Planck Institute for Comparative and International Private Law
3	164	You Definitely Should Have: A Contractual Look at Israeli Wedding Gift Culture  Zvi H. Triger,  Striks School of Law, The College of Management Academic Studies (COLMAN)
4	150	What Can Be Wrong with an Option? An Optional Common European Sales Law as a Regulatory Tool  Horst Eidenmueller,  University of Munich
5	132	Featuring People in Ads  Eric Goldman, Rebecca Tushnet,  Santa Clara University - School of Law, Georgetown University - Law Center
6	132	The Dynamics of Contract Evolution  Stephen J. Choi, G. Mitu Gulati, Eric A. Posner,  New York University (NYU) - School of Law, Duke University - School of Law, University of Chicago - Law Schoo
7	122	Hollywood Deals: Soft Contracts for Hard Markets  Jonathan Barnett,  USC Gould School of Law
8	102	Affirmatively Inefficient Jurisprudence?: Confusing Contractors’ Rights to Raise Affirmative Defenses with Sovereign Immunity  Steven L. Schooner, Pamela Kovacs,  George Washington University - Law School, George Washington University - Law School
9	99	Contract and Innovation: The Limited Role of Generalist Courts in the Evolution of Novel Contractual Terms  Ronald J. Gilson, Charles F. Sabel, Robert E. Scott,  Stanford Law School, Columbia University - Law School, Columbia University - Law School
10	96	Law and the Stable Self  Rebecca E. Hollander-Blumoff,  Washington University in Saint Louis - School of Law

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of LSN: Contracts (Topic)  
June 21, 2012 to August 20, 2012

Rank	Downloads	Paper Title
1	197	The Optional Instrument of European Contract Law: Opting-in through Standard Terms – A Reply to Simon Whittaker  Jürgen Basedow,  Max Planck Institute for Comparative and International Private Law
2	164	You Definitely Should Have: A Contractual Look at Israeli Wedding Gift Culture  Zvi H. Triger,  Striks School of Law, The College of Management Academic Studies (COLMAN)
3	150	What Can Be Wrong with an Option? An Optional Common European Sales Law as a Regulatory Tool  Horst Eidenmueller,  University of Munich
4	122	Hollywood Deals: Soft Contracts for Hard Markets  Jonathan Barnett,  USC Gould School of Law
5	96	Law and the Stable Self  Rebecca E. Hollander-Blumoff,  Washington University in Saint Louis - School of Law
6	81	Autonomy, Pluralism, and Contract Theory  Hanoch Dagan,  Tel Aviv University - Buchmann Faculty of Law
7	73	The Return-Reducing Ripple Effects of the 'Carried Interest' Tax Proposals  Heather M. Field,  University of California - Hastings College of the Law
8	70	The Importance of Fault in Contract Law  Robert A. Hillman,  Cornell Law School
9	69	Reflections on the Two-Handed Lawyer: Thinking versus Action in Business Lawyering  Jeffrey M. Lipshaw,  Suffolk University - Law School
10	53	The Renegotiating Clause in Petroleum International Joint Venture Agreements  Talal Abdulla Al-Emadi,  University of Qatar

[JT]

In Memoriam: David Rakoff

On August 9th, 2012, David Rakoff died of cancer.  David and I went to college together.  We had two things in common: before college, we had both belonged to the same socialist zionist youth group, and we both danced.  Since college, we stayed in touch a bit, because David was a very generous person, but he was out of my league, and we both knew it (although only I would say it).  David was probably the most creative person I ever knew.  

David was incredibly good at so many things.  He made things all the time.  I still remember vividly the characters he created for our college's variety show circa 1984: the Neanderthal, bone-through-the-nose ladies' man who runs into some toughs from the Male Feminist League; the director of Cliffs' Notes music videos, all of whose productions involve columns and leather-clad women with odd markings all over their bodies dancing erotically; and of course the lead in his short, 16mm spoof of French New Wave cinema, Pain D'Amour, in which he falls in love with a baguette.  That was thirty years ago.  I've seen so much theater since then, and so little has stayed with me as David's work has done.  

But he was creative in very basic ways.  One evening, three of us were trying to figure out what to do for dinner.  We went into our friend's kitchen and catalogued the food in her refrigerator and cupboards.  While I mentally reviewed my list of affordable restaurants within walking distance, David gleefully rattled off the useful ingredients he had come across, "Et voilà!".  I could think of no way that the named ingredients could be combined to make something edible, so I asked, "We put all those together, and what do we have?"  "Dinner!" David exclaimed.  It turned out to be a quiche, and it was delicious.  I didn't know it was possible to just make one of those.  Forgive me, I was 20, but David was 19.

Around the same time, David made me a hand-painted birthday card that was also a sort of portrait. The card congratulated me at the beginning of my third decade.  I had to get out a calculator to figure out how I could be entering my third decade at the age of 20.  David accompanied me when I cut off my pony tail.  He kept the hair to use for paintbrushes, or so he said.  I hope he wasn't fibbing.

Although I have all these intimate memories of David, I probably never counted as one of his closest friends.  But who knows?  I think David was still coming to grips with the consequences of his homosexuality in the age of AIDS when we knew each other.   As a result, there were parts of his private life that were closed off to me in that unenlightened era.  David wrote about how he never really formed close attachments to people.  I think his line is "loved by everybody; beloved by none."  If you go to David's Facebook page, you'll see that there are probably hundreds of people who can share memories of David similar to mine in their fondness and intimacy.  If he wasn't capable of true compassion, he did a damn good job of faking it.  For all of his argumentative skills, David succeeded in convincing only himself that he was anything but a mensch.

Although his short film, The New Tenants won an Academy Award, David moved on from film and acting to writing.  He wrote three books, and I learned on Saturday from This American Life, that a novel in verse is forthcoming.  A novel in verse!  

But wait, there is a contracts hook here.  Here is a link to a hilarious contract that David wrote and read for another episode of This American Life.  

David's life was far too short, but he lived it very, very well.

[Jeremy Telman]

TOS Grading

An article posted on TechCrunch, available here, discussed a new site which reviews terms of service (TOS) of various websites. The site provides a "grade" for website policies and can be accessed here (btw, it is looking for people to get involved).

[Nancy Kim]

Strike Settlement Considered a Win for Caterpillar

"Strike" from the National Museum in Warsaw, Poland

As reported in Saturday's New York Times, 780 members of the International Association of Machinists ended their fifteen-week strike when, against the recommendation of union leaders, the workers voted to ratify a six-year contract that contained almost all of the concessions that Caterpillar demanded.  

The contract that the Caterpillare offered included a six-year wage freeze for workers hired before May 2005, a move that Caterpillar justified by claiming that its senior workers were being paid above market levels.  At the time Caterpillar made this pooposal, it was reporting record profits.  

The workers were losing a war of attrition.  105 workers had alredy crossed the picket line and returned to work and no concessions were in sight.  In addition to the pay freeze, the workers agreed to a pension freeze for the same group of senior workers and an increase in employee contributions for health care.  They were able to get Caterpillar to increases the "ratification bonus" form $1000 to $3100.  Caterpillar also agreed to a single 3% increase for workers hired after 2005 at the end of this year.  Finally, workers won a concession on the reasignment of workers, regardless of seniority.  Caterpillar wanted to be able to assign workers to new jobs indefinitely, regardless of seniority.  Under the new agreement, they may do so for a maximum of 90 days.  k

The senior workers subject to the pay freeze earn, on the average, $26/hour, which comes out to about $50,000/year gross, plus overtime.  Caterpillar reported profits of $4.9 billion last year and expects earnings to be stronger still in 2012.  Its chief executive, Douglas R. Oberhelman, increased by 60 percent in 2011 to $16.9 million.  That means his raise was about $8000 per striking worker.  

[JT]

AMR Corporation motion to end pilots' contract denied

Last week, a federal judge denied AMR Corporation's request to abandon collective bargaining agreements with its pilots' union.  AMR Corp. is the parent company of American Airlines.  AMR is undergoing bankruptcy and the motion was part of its reorganization efforts.  You can read more here. 

[Nancy Kim]

New Year, New Casebook!

Next week, after a two-year hiatus, I will embark on my sixth semester teaching contracts.  This time, for the first time, I will be using Christina Kunz (left) and Carol Chomsky's (right) casebook, Contracts: A Contemporary Approach.  I am looking forward to returning to teaching contracts and especially to trying out a new approach.  

In addition to the new casebook, I am also incorporating clickers into my course for the first time.  That is, I will be polling my students and giving them little un-graded mini-quizzes.  They will give me answers by pressing buttons on their clickers, and I will see the results immediately.  Because the clickers enable the students to participate anonymously, they need not be nervous about getting the wrong answers and I hope that this technology will help me quickly take the temperature of my students and see if the material is sinking in.  

I have colleagues who find one casebook and stick with it, but I am a firm believer in the switcheroo.  I've learned a great deal from teaching out of each of the casebooks I have used prior to this one.  I expect that I will learn a great deal from an intense immersion into Chomsky's and Kunz's approaches to teaching contracts.  And I am eager to see how and the extent to which m students make use of their casebook's interactive features.

But mostly, the new casebook will give me the opportunity to cover some cases that I haven't used before, and new cases mean new limericks!

Stay tuned (bwhahahaha!)

[JT]

An Early Win for Hewlett-Packard in Its Battle with Oracle

For three decades Oracle and Hewlett-Packard (“HP”)  worked together, with HP selling its hardware and Oracle selling its software, to their shared customers and the two corporations cooperating to make certain that Oracle's software was compatible with HP's servers which run on a system called "Itanium."  Tensions arose when Oracle acquired Sun Microsystems (“Sun”), a direct HP competitor, in 2010.  And things did not get better when Oracle hired HP's former CEO, Marc Hurd, and HP sued to enjoin Hurd from sharing trade secrets with his new employers.  Meanwhile, HP sought assurances from Oracle that it would continue to offer its software on HP’s platforms.  Along with assurances from Oracle’s most senior software execs that it was committed to business as usual, the parties signed a “reaffirmation agreement” (the Agreement), which stated in Paragraph 1:

Oracle and HP reaffirm their commitment to their longstanding relationship and their mutual desire to continue to support their mutual customers.  Oracle will continue to offer its product suite on HP platforms, and HP will continue to support Oracle products…on its hardware in a manner consistent with that partnership as it existed prior to Oracle’s hiring of Hurd.

The parties continued business as usual until Oracle abandoned this “work together” approach.  In a press release issued in March, 2011, it announced, without notice to HP, that new versions of Oracle’s software would no longer be compatible with HP’s server platform.  HP then filed suit, soon followed by Oracle’s very colorful cross-complaint. 

After a 12-day trial, on August 1st, the Santa Clara Couty Superior Court bestowed this win on HP, fiinding in HP's favor on its claims for both breach of contract and promissory estoppel.  The court found that the parties are bound by the Agreement, and that Oracle has a continuing obligtation to offer its product suite on HP's Itanium-based server platforms until HP discontinues the sale of its Itanium-based servers.   

The Superior Court began its inquiry by breaking down the plain language of Paragraph 1 and determined that (1) the first sentence was fully consistent with a continued obligation to make certain that Oracle software is compatible with HP servers, and (2) the second sentence used the language “Oracle will continue…” which can “only be reasonably interpreted as requiring Oracle to continue offering its product on HP’s Itanium platforms.”

The court rejected Oracle's argument that the Agreement  “merely a ‘public hug’ that imposed no obligations on either party,” and that Oracle “retained absolute discretion with regard to” making its software compatible with HP's systems.  In rejecting the "public hug" theory, the court noted that throughout the parties’ history, 99% of their dealings were accomplished without contracts.  Therefore, based on the parties’ prior course of dealing and the plain language of Paragraph 1, because HP was simply asking Oracle to maintain the business relationship as it had been prior to Oracle’s hiring of Hurd, it was fair and reasonable to require Oracle to continue its obligation to make its software compatible with HP systems.  Since the court interpreted the Agreement as a promise by Oracle to continue to work with HP, it found that Oracle's unilateral announcement that it would no longer make its software compatiable with HP systems constituted a breach of contract.

The court also ruled for HP on its promissory estoppel claim, based upon unambiguous promises made by two Oracle executives.  In reliance upon these assurances, HP provided Oracle with nearly $5 million of Itanium servers for porting and continued to invest in research and development in order to optimizing compatibility with Oracle’s software.  Further, HP also entered into the Itanium Collaboration Agreement (“ICA”) with Intel, a $264 million investment.  As the parties’ had been long-time business partners, it was foreseeable that HP would have no reason to doubt Oracle’s word and would make investments based on its support.   HP relied upon the parties’ long-term, upstanding business relationship to its detriment.  As a result, the court found that all elements of a promissory estoppel claim were satisfied. 

In sum, the plain language of the agreement, Oracle’s continued assurances of commitment, both to HP and to the public, and the parties’ long history of informal dealing sans contracts led the court to find for HP on both the breach of contract and promissory estoppel claims.  The court ordered Oracle to continue its porting obligations without charge “until such time as HP discontinues the sale of its Itanium-based servers.”

As reported here by allthingsd.com, Oracle released the following statement:

“Last March, Oracle made an engineering decision to stop future software development on the Itanium chip.  We made the decision as we became convinced that Itanium was approaching its end of life and we explained our rationale to customers here.  Nothing in the Court’s preliminary opinion changes that fact.  We know that Oracle did not give up its fundamental right to make platform engineering decisions in the 27-words HP cites from the settlement of an unrelated employment agreement.  HP’s argument turns the concept of Silicon Valley ‘partnerships’ upside down.  We plan to appeal the Court’s ruling while fully litigating our cross claims that HP misled both its partners and customers.” 

So, the battle has been lost but the war continues.

[Chrstina Phillips and JT]

 

Don't Get Screwed Over

Docracy is an open source legal document site.  The site has launched a video campaign called "Don't Get Screwed Over" - it very effectively conveys the importance of freelancers having written contracts:

A free open source contract site is a great idea. I am not convinced, however, that it obviates the need for an attorney.  That said, it is true that, regardless of whether an attorney is involved, freelancers should always get their deals in writing and carefully express expecations and payment schedule.  The site's founder Matt Hall appears to share in my sentiment and believes that his site is a starting point for freelancers to figure out what they need and to find an attorney.  Hall told .net magazine:

[T]he video was designed to "make sure freelancers are aware how important it is to have a contract for work they do, and that there are resources like Docracy that can take the fear and mystery out of the process". He said it's increasingly common that freelancers don't get paid for work they've done, starkly highlighted by projects like the World's Longest Invoice.

Hall recommended "upfront and clear communication with your client about what's expected, when it's expected and when you'll be paid", and then getting this all down in writing and signed. "Clear communication can go a long way to avoiding problems in the future," he added. And while Docracy can be a starting point, Hall said such sites are not a replacement for proper legal advice: "A good lawyer who understands your business will save you money over the long term, so get educated and then find a good lawyer you like working with. We have a bunch of great, tech-savvy lawyers on the site who have already shown their willingness to help freelancers, so they might be a good start."

[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 14, 2012 to August 13, 2012

Rank	Downloads	Paper Title
1	221	Party Choice and the Common European Sales Law, or: How to Prevent the CESL from Becoming a Lemon on the Law Market  Jan M. Smits,  Maastricht University Faculty of Law - Maastricht European Private Law Institute (M-EPLI)
2	202	Regulatory Techniques in Consumer Protection: A Critique of European Consumer Contract Law  Oren Bar-Gill, Omri Ben-Shahar,  New York University (NYU) - School of Law, University of Chicago Law School
3	194	The Optional Instrument of European Contract Law: Opting-in through Standard Terms – A Reply to Simon Whittaker  Jürgen Basedow,  Max Planck Institute for Comparative and International Private Law
4	161	You Definitely Should Have: A Contractual Look at Israeli Wedding Gift Culture  Zvi H. Triger,  College of Management Academic Studies (COMAS) School of Law
5	147	What Can Be Wrong with an Option? An Optional Common European Sales Law as a Regulatory Tool  Horst Eidenmueller,  University of Munich
6	128	Featuring People in Ads  Eric Goldman, Rebecca Tushnet,  Santa Clara University - School of Law, Georgetown University - Law Center
7	126	The Dynamics of Contract Evolution  Stephen J. Choi, G. Mitu Gulati, Eric A. Posner,  New York University (NYU) - School of Law, Duke University - School of Law, University of Chicago - Law School
8	104	Hollywood Deals: Soft Contracts for Hard Markets  Jonathan Barnett,  USC Gould School of Law
9	101	Affirmatively Inefficient Jurisprudence?: Confusing Contractors’ Rights to Raise Affirmative Defenses with Sovereign Immunity  Steven L. Schooner, Pamela Kovacs,  George Washington University - Law School, George Washington University - Law School
10	95	Law and the Stable Self  Rebecca E. Hollander-Blumoff,  Washington University in Saint Louis - School of Law

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of LSN: Contracts (Topic)  
June 14, 2012 to August 13, 2012

Rank	Downloads	Paper Title
1	194	The Optional Instrument of European Contract Law: Opting-in through Standard Terms – A Reply to Simon Whittaker  Jürgen Basedow,  Max Planck Institute for Comparative and International Private Law
2	161	You Definitely Should Have: A Contractual Look at Israeli Wedding Gift Culture  Zvi H. Triger,  College of Management Academic Studies (COMAS) School of Law
3	147	What Can Be Wrong with an Option? An Optional Common European Sales Law as a Regulatory Tool  Horst Eidenmueller,  University of Munich
4	104	Hollywood Deals: Soft Contracts for Hard Markets  Jonathan Barnett,  USC Gould School of Law
5	95	Law and the Stable Self  Rebecca E. Hollander-Blumoff,  Washington University in Saint Louis - School of Law
6	74	Autonomy, Pluralism, and Contract Theory  Hanoch Dagan,  Tel Aviv University - Buchmann Faculty of Law
7	68	Reflections on the Two-Handed Lawyer: Thinking versus Action in Business Lawyering  Jeffrey M. Lipshaw,  Suffolk University - Law School
8	62	Mistake Under the Common European Sales Law  Ariel Porat,  Tel Aviv University
9	62	The Importance of Fault in Contract Law  Robert A. Hillman,  Cornell Law School
10	52	The Renegotiating Clause in Petroleum International Joint Venture Agreements  Talal Abdulla Al-Emadi,  University of Qatar

[JT]

Georgia State Court Reinstates Suit by Student Claiming Unlawful Expulsion

In Barnes v. Board of Regents, the Superior Court of Fulton County, Georgia found that Valdosta State University's student handbook serves as a binding contract that guaranteed students certain procedural rights before they could be expelled from the university and that the state had waived its sovereign immunity defenses to suit for violations of the student handbook by entering into such a contract with its students.  

In 2008, former Valdosta State University (“VSU”) student Thomas Barnes (“Barnes”) sued the Board of Regents of the University System of Georgia (the “Board”) and VSU's President, Ronald M. Zaccari (Zaccari) for breach of contract.  Barnes' complaint describes the underlying facts as follows:

Barnes was summarily expelled from VSU without notice or hearing in May 2007.  Since March 2007, Barnes had been voicing his objections (on environmental and financial grounds) to a proposed new campus parking garage.  Beginning in April 2007, Barnes and Zaccari had a series of meetings at which, according to Barnes, Zaccari castigated the student for having embarrased Zaccari.  According to the complaint, since the meetings did not deter Barnes from protesting the new parking garage, Zaccari began digging into Barnes’s academic and psychiatric records looking for grounds for expulsion. Zaccari decided to “administratively withdraw” Barnes without notice or a hearing on the ground that “Barnes presented a clear and present danger to the campus.”  

Query: is expelling a potentially dangerous student a good way of keeping your campus safe?  Wouldn't such an expulsion be more likely to unhinge a student whose mental balance was already on edge (not that there's any evidence that Barnes did in fact pose a threat)?   It's not as if college campuses are equipped with cutting-edge electronics, including those retinal scanners that Phillip K. Dick imagined in Minority Report, and could prevent any expelled student from ever returning to campus.

But we digress.

Barnes originally filed suit in federal court, and the Eleventh Circuit had ruled that the Board is immune to Barnes’s suit based on 11th Amendment sovereign immunity, although Barnes' suit agianst Zaccari was permitted to proceed.   Barnes re-filed his suit against the Board in state court, and the Fulton County Superior Court rejected the defense of sovereign immunity because, under Georgia law, such immunity is waived in actions alleging the breach of a written contract.  

[Christina Phillips & JT]

 

Gnarly Formation and Damages Case out of the Fifth Circuit

The facts of Westlake Petrochemicals v. United Polychem are complicated.  Here's a nutshell of the facts:

• In July 2008, A broker matched a bid for 5 million pounds of ethylene per month in 2009 by United Polychem (UPC) with an offer to sell by Westlake Pharmaceuticals (Westlake);
• Westlake's offer to sell was subject to approval of UPC's credit;
• Credit approval proved problematic, and UPC's President was required to provide a personal guaranty
• In September 2008, Westlake also demanded that UPC secure its credit with a $2 million letter of credit; and 
• In October 2008, UPC claimed that because Westlake had never formally accepted UPC's credit, the deal had never closed.

At trial, the District Court found UPC liable for $6.3 million in damages plus $634,000 in attorneys' fees.  The District Court also held UPC's President jointly and severally liable based on the guaranty.

Ethylene

On appeal, UPC contended that there was no consideration for the agreement.  Westlake's obligations were contingent on its approvel of UPC's credit, which it never gave.  The Fifth Circuit ruled as follows:

• Westlake did not have a unilateral right to reject UPC's credit, but would have been subject to a breach of contract claim had it done so, as the deal is considered made with the expiration of a short window after the broker brings the parties together;
• Because credit is not considered an "eseential element for the purposes of the Statute of Frauds, the Statute was satisfied here by the broker's written confirmations to both parties by instant message (!) and e-mail, even thought those writings omitted the credit term;
• The broker had authority to bind the parties; and 
• Westlake's approval of UPC's credit was not a condition precedent to the formation of the contract.

 On the damages issue, the District Court ruled that the jury shoudl be instructed that, pusuant to UCC s. 2-708(a) Westlake was entitled to the difference between the contract and market price at the time and place of tender.  The parties gave various estimates of what damages would be appropriate, but since the price of ethylene dropped after the contract was formed, the amount was considerable.  However, in this case the Fifth Cicuit found that s. 2-708(b) applies instaed of 2-708(a) and that Westlake is only entitled to its lost profits.  The Fifth Circuit so concluded because Westlake never purchased the ethylene it was to sell to UPC, and awarding it full expectation damages in such circumstances would constitute a windfall.  The Fifth Circuit remanded the case to the Distirct Court for a new calculation of damages.  

As to UPC's President's liability, the Fifth Circuit found the Guaranty ambiguous.  It had been cancelled before the first payment on ethylene shipments would have been due.  It was not entirely clear whether the Guaranty was to apply to all shipments under the contract or only to those on which payment was due prior to calculation. In such circumstances, the Fifth Circuit held that the guaranty must be construed in favor of UPC's President and that he could not be held jointly and severally liable with UPC.

[JT]