ContractsProf Blog

School handbook statements about civility, respect, diversity, and inclusiveness are aspirational, not contractually binding

A recent case out of the First Circuit, G. v. The Fay School, No. 18-1602 (behind paywall), has an ADA angle, but I'm focusing on the breach of contract claim, which was based on statements in the school handbook about respect, civility, and diversity. The court held, though: "Without diminishing the importance of these words, they are exactly the sort of generalized, aspirational statements that are insufficiently definite to form a contract." For a school handbook to form a binding contract, it has to consist of "well-defined procedures and policies," rather than just generalized statements such as those at issue in this case. The student and his parents failed to point to any statements in the handbook definite enough to form the basis of a contract, borne out by the fact that the school's enrollment contract, signed by the student's parents, specifically stated that the handbook was not a contract but rather just "general expectations." 

The First Circuit decision is behind a paywall but you can read some reporting on the district court decision here. 

Deleting the terms of use can help indicate you were aware of them and assented to them

A case out of the Ninth Circuit, Domain Name Commission Ltd. v. DomainTools, LLC, No. 18-35850, affirmed a preliminary injunction against the defendant based on the likelihood of success of the plaintiff's breach of contract claim based on mutual assent to the terms of use of its site. The terms of use were conspicuously displayed and the defendant "must have had actual knowledge" of these terms, because it deleted them from the information it received from the plaintiff before displaying that information. Moreover, the defendant never denied knowledge of the terms of use. The terms were clear that the defendant's behavior was prohibited, and so, as the other factors were also met, the preliminary injunction was properly granted. 

You can watch the appellate arguments in the case here. 

What you should do if you want your Super Bowl party to be able to last until 4 a.m. (hint: not this)

A recent case out of New York, PJAM Prods., LLC v. M Light, LLC, 652409/2018, stems from a Super Bowl party. PJAM licensed M Light's venue to hold a party coinciding with Super Bowl weekend. There were discussions about the party being allowed to go on until 4 a.m., even though local law required the party to shut down by 2 a.m. PJAM claimed that M Light talked about being able to get permission from the city to keep the venue open until 4 a.m.  

No such permission was ever received, however, and PJAM sued for breach of contract. The problem was there was nothing in the contract requiring M Light to get such permission. The contract required M Light to have the proper government permits for the party, but did not specify that those permits should allow the party to extend until 4 a.m., and PJAM acknowledged that the law in the city was to close by 2 a.m., so that's what the proper government permits would have said, too. There was nothing in the Agreement about M Light lobbying the city to keep the venue open until 4 a.m. 

PJAM's fraudulent inducement claim also failed, because there was no allegation that M Light was lying about its intention to lobby the city when it said that it was going to. As for allegations the M Light led PJAM to believe its connections with the city were such that the lobbying would be successful, the court called those "mere puffery." The court said it was not justifiable for PJAM to rely on M Light's statements to believe that the 4 a.m. permission would definitely be obtained; rather, PJAM was taking a risk, and there was no indication that things would have turned out differently if M Light had lobbied harder or had better city connections. 

Basically, if PJAM wanted M Light to bear the risk of the 4 a.m. permission not coming through, it should have been put in the contract, and it wasn't. The contract was integrated, with a merger clause, so the court did not allow parol evidence of this as an additional term. 

The moral of the story is: If you're signing a written contract, don't rely on oral representations different from the contract. 

Lawyers: Beware your obligations when you sign a contract

A recent case out of California, Monster Energy Co. v. Schechter, S251392, concerns a settlement agreement imposing confidentiality obligations. The parties signed the settlement agreement. Their lawyers also signed the settlement agreement, under the preprinted notation "APPROVED AS TO FORM AND CONTENT." One of the lawyers then made public statements about the settlement and was sued for breach of contract. The lawyer argued that they were not personally bound by the confidentiality obligations and their signature meant only that they had approved that their client be bound. 

The trial court disagreed with the lawyer's argument. The court of appeals reversed, finding that the attorneys were not personally bound based on the presence of the notation. This California Supreme Court ruling reversed again, concluding that the notation did not preclude a finding that the attorneys were personally bound. The agreement itself included counsel in its confidentiality provisions, and a signature on a contract usually indicates consent to be bound by that contract. 

While it is true that the included notation is generally understood to mean that the attorney has read the document and recommends that their client should sign it, that does not mean that it also inevitably means that the attorney is not bound by the agreement. In this case, where the agreement expressly referenced the confidentiality obligations of counsel, a conclusion that counsel intended to be bound by their signature, even with the notation, was plausible. 

(h/t to Eric Chiappinelli of Texas Tech for passing this case along!)

Ja Rule mostly dismissed from Fyre Festival case, with the possibility of one pesky tweet coming back to haunt him

If you're not familiar with the debacle of Fyre Festival, you can watch two documentaries about it, or catch up on the Wikipedia page. The tl;dr version is: It was billed as a luxury music festival that would blow Coachella out of the water, and was canceled on the day it was to start, leaving attendees, who had paid thousands of dollars to attend, stranded with FEMA tents for accommodation. The festival had some big names associated with it, co-founded by Ja Rule and promoted on social media by people like Kendall Jenner and Bella Hadid. Ja Rule was sued, along with Billy McFarland, CEO of Fyre Media, who has already pleaded guilty to fraud in connection with the festival and has been sentenced to prison. 

Now, there's a recent ruling out of the Southern District of New York in In re Fyre Festival Litigation, 17-cv-3296 (PKC) (see links at end of blog post), that might succeed in dismissing Ja Rule from the case. The plaintiffs have been granted a very limited leave to amend with respect to one specific tweet, so Ja Rule might stay in the case on the basis of that tweet. 

The case has contract claims against Fyre Media, but this opinion focuses on individuals, Ja Rule and Grant Margolin, former Chief Marketing Officer for Fyre Festival. Neither Margolin nor Ja Rule was a party to the contract at issue in the case, so this decision doesn't take up the contract issues, but it is interesting on the fraud issue, so I'm blogging it anyway (also, how can you not blog a court opinion that has a footnote explaining what "FOMO" means?). Fraud requires pleading with particularity, and the plaintiffs fail to meet this burden. Although they allege many allegedly fraudulent statements, they fail to allege when many of those statements were made or whether the defendants knew at the time that the statements were untrue. After all, the defendants could have made the statements about Fyre Festival with every intention of delivering on their promises of an incredible festival. 

The one exception to this is a particular tweet at issue by Ja Rule. The plaintiffs properly allege the date of that tweet, which was the day before the festival was scheduled to start (and instead was canceled). The tweet reads, "The stage is set!!! In less than 24 hours, the first annual Fyre Festival begins. #festivallife" The plaintiffs also allege that Ja Rule must at least have been reckless in continuing to encourage people to attend a festival whose stage was not at all set. The plaintiffs trip up when it comes to alleging reliance on their part on the tweet, but the court gives them leave to amend to try to fix this failure. The court does not give the plaintiffs leave to amend any of the other failings of the complaint because of delay on the part of the plaintiffs. 

The court also discusses some negligence issues as well as tortious interference and unjust enrichment claims. When it comes to tortious interference, there were no allegations that Ja Rule or Margolin interfered with or caused Fyre Festival's inability to perform the contract, merely that they knew Fyre Festival would not be able to perform. As for the unjust enrichment claim, the court warns that this is not a catch-all cause of action and cannot be used to cure the defects in the other causes of action. 

Some other reporting on this ruling here, here, and here.  

(edit: h/t to Ryan Smith of Smith Law for sending the motion: Download 1-17-CV-03296-PKC Brief and opinion: Download Fyre Dismissal to me)

Warren Calls Arbitration “Exploitation”

In a letter to JPMorgan Chase & Co.’s CEO, Presidential hopeful Elizabeth Warren asked the bank to stop “exploiting its customers” by using what the bank considers the “standard practice” of asking its customers to arbitrate potential claims against it.  Chase’s customers can, however, opt out of mandatory arbitration by mailing written rejection notices by Aug. 9, 2019.

Arbitration is, of course, easier for banks and other defendants than having to face a multitude of individual lawsuits.  The concern for smaller plaintiff such as private bank customers is that arbitration is not as neutral as a lawsuit as arbitrators are hired privately by, for example, the banks.  Arbitrators may thus be unduly biased in favor of the banks and more business savvy than bank customers, who might obtain greater protections from hiring an attorney and going to court.  The exploitation part comes in when defendants arguably seek to "sneak" arbitration onto unsuspecting, unsavvy bank customers who are not aware of all the pros and cons of various types of dispute resolution.

Case reminds us to pay for the insurance if you want recovery for a lost package

My students are always asking me about misdelivered packages, so I read this recent case out of the District of Oregon, Mansfield v. Leigh, Case No. 6:19-cv-00254-MK (behind paywall), with interest. It's a fairly straightforward case about a lost package, and a fairly straightforward analysis of your options for recovery if a package goes missing. The plaintiff was seeking over a thousand dollars in damages for the lost package, but the court finds that her recovery was limited to the fifty dollars of insurance she purchased (she actually received slightly more because the post office also refunded her service charge). 

This case is a reminder to take the postal insurance seriously. I once had a package go missing and I had insured it but not nearly for the value of what went missing. That was all on me, and I've taken that insurance situation seriously ever since. 

Unambiguously worded contract means no extrinsic evidence

A recent case out of the Southern District of Ohio, The Devine Group, Inc. v. Omni Hotels Corp., Civil Action No. 1:18-cv-186 (WOB) (behind paywall), is a fairly straightforward contract interpretation case with a good parol evidence discussion. The court finds that the contract is unambiguously worded and so refuses to look to any extrinsic evidence. If you're looking for a contract clause example to use in class, this might be a good one. 

 

Black family fires racist contractor

For very good reason, a black family fires a contractor who showed up for a job with a confederate flag on his truck in GA.  This raises issues of whether one can simply terminate a contract once entered into (one cannot with out at least having to pay damages, potentially in the form of wasted time and gas money here) or whether this was simply an at-will contract that can be terminated (that does not seem to be the case here.).  At any rate, isn't it incredible that in 2019, some "proud Southerners" still have to display their pride in such a blatantly tone deaf manner?  Racism ought to be a thing of the distant past, but clearly is not.  Shameful!

An ambiguity decision

A recent case out of Texas, Bitter Creek Water Supply Corp. v. Sims, No. 11-17-00080-CV (behind paywall), talks about a lot of contract issues, but I found the ambiguity discussion most interesting. The contract at issue, signed in 1986, tied the purchase price to whatever price Bitter Creek was paying the City of Sweetwater for water. At the time, Bitter Creek had been buying water from the City for many years. However, Bitter Creek no longer buys water from the City. Therefore, there's a dispute over how to interpret the contractual purchase price now that there is no City purchase price to tie it to.

Sims contended that under the UCC he could opt to read a reasonable price into the contract, now that the City purchase price had failed. Bitter Creek, though, argued that the parties had agreed to an express fixed price that they no longer had agreement on. The court discusses the UCC's application and ambiguity and finds that the provision is ambiguous and the parties' intent needs to be examined, leading to a factual dispute that can't be resolved on summary judgment. 

 

Contractors with White Ancestry got $300 million Claiming to be Native American

In St. Louis, MO, a contractor recently was awarded a lucrative government contract set aside for minority businesses by claiming to be Cherokee.  He was found out and stripped of his minority status.

“Since 2000, the federal government and authorities in 18 states, including California, have awarded more than $300 million under minority contracting programs to companies whose owners made unsubstantiated claims of being Native American.  The minority-owned certifications and contract work were issued in every West Coast state, New Mexico and Idaho, Texas and four Southern states, several states in the Midwest and as far east as Pennsylvania.”

There are only three federally recognized Cherokee tribes, but members of unrecognized, self-described Cherokee groups have received more than $300 million dollars in funds set aside for minorities. 

This, of course, is infuriating, but the “vetting process for Native American applicants appears weak in many cases, government records show, and officials often accept flimsy documentation or unverified claims of discrimination based on ethnicity. The process is often opaque, with little independent oversight.”

People trying to milk the system this way should be identified and action should, if appropriate, be taken against them to further deter such despicable contractual conduct. It is a federal crime, for instance, to sell arts and crafts falsely labeled as Native American.  Perhaps many different groups and gender identifications are discriminated against to some extent in government contracting, but existing law was created to remedy a very real problem: the white “old boys club.” Sorry for saying the truth, but the problem is real and needs to be addressed and remedied.