ContractsProf Blog

Reefer Brief: Ignite International in Contract Dispute with Consulting Firm

FILMORA NEWS, CC BY 3.0, via Wikimedia Commons

According to Law360 (behind a paywall), a Nevada District Court has ordered Instagram Celebrity and CBD oil entrepreneur Dan Bilzerian (left) to pay $1.6 million and dismissed a breach of contract claim.  Prior to that decision, the case generated a lot more heat than light. 

There are some larger-than-life characters involved.  Dan Bilzerian is the son of Paul Bilzerian.  According to Wikipedia, Paul was a successful entrepreneur and takeover specialist until he ran into trouble with the SEC and was jailed in the early 199os.  After his release from prison, Paul launched a Utah-based software company, Cimetrex, but the government confiscated his ownership interest in that company in 2002.  Paul declared bankruptcy in 1991 and again 2001, but, according to Dan Bilzerian's Wikipedia entry, the government alleges that he concealed assets, passing some of them on to his two sons.  It is unclear whether Dan used those funds or his poker winnings to fund his companies, Ignite International Brands and affiliated entities (collectively Ignite).  Paul played a role in the negotiations between Ignite and a consulting firm, Consulting by AR (AR) .

Piecing together the nature of the dispute from redacted pleadings found on Westlaw, Alan Richardson, AR's principal, reached out to Dan Bilzerian in January 2021 to offer his consulting services in assisting Ignite in gaining a marketing foothold in Las Vegas.  Ignite, in case you were wondering, markets vaping products, spirits, apparel for people who prefer not to leave much to the imagination (based on the website), and at least at one point, a CBD-infused lip balm (hence its presence on the Reefer Brief).  AR hoped to link Ignite's products with Las Vegas's newest casino and resort, Resorts World Las Vegas (Resorts World, below right)).  The parties entered into a letter agreement in March 2021, providing that AR would be compensated with stock in Ignite should an agreement with Resorts World be completed by July 1, 2021.  

Problems arose according to AR's counterclaims, with Dan Bilzerian demanding a better deal than the one originally negotiated. AR claims that it successfully negotiated terms more generous to Ignite than those in the original letter agreement.  In April, 2021, the parties entered into a Letter of Intent, the terms of which provided for a strategic partnership between Ignite and Resorts World.  Dan Bilzerian then appeared at Resorts World's grand opening in June 2021, as required under the letter agreement.  Afterwards, AR claims that it facilitated an updated letter agreement, with terms still more favorable to Ignite than previous iterations had been.  

Logan Frick, CC BY-SA 4.0, via Wikimedia Commons

Thereafter, AR alleges that Ignite ceased to cooperate with AR, refused to pay any compensation to AR, and accused AR of poisoning its relationship with Resorts World.  After an exchange of letters relating to the possibility of arbitration, AR sent a demand letter.  Paul Bilzerian wrote to Alan Richardson, urging settlement.  Here are some excerpts from that letter as cited in AR's counterclaims;

Hi Alan, I understand that your lawyer sent a letter to Ignite that essentially said either Ignite accedes to your demands or suit will be filed next week. I know Ignite will not be happy with this response so it is pretty clear where this is headed at the moment. . . .  Of course your lawyer will tell you that you have a great case and can't lose. I have heard that speech so many times over the past 43 years I lost count decades ago. . . .  You do have some goodwill left on the Ignite side which is why Paul Holden [Ignite's general counsel] suggested binding arbitration. . . .  All you need to do is choose the path you want to follow: prompt, cost effective settlement or bitter, costly, scorched earth litigation with the only winners being the lawyers. I hope you make a good choice.

Notwithstanding this letter, it was Ignite that filed suit, seeking a declaratory judgement.  AR counterclaimed.  The parties have spent much of the intervening period in discovery disputes.  It did not go well for Ignite.  Here, for example is an August 2022 decision of the District Court ordering Ignite to file under seal 65 documents allegedly subject to claim of privilege.  Here is a March 2023 order, finding Ignite in contempt for its failure to do so.  The $1.6 million judgement followed just weeks later.  We will see if the Bilzerians pay for a quick end to the matter or, take Paul Bilzerian's road oft-traveled road of scorched-earth litigation with the only winners being the lawyers.  Either way, he will have been proven correct.

Ignite filed its appeal with the Ninth Circuit on April 28, 2023.  Perhaps they did so, like King Croesus, based on the advice of the Delphic oracle, who said, "If Ignite makes war upon AR Consulting, it will destroy a great empire." 

Metropolitan Opera Ordered to Pay $200,000 to Putin Stan Anna Netrebko

We have been posting occasionally on the interaction of the Russian war against Ukraine on the blog.  The most recent such post is here.  Today, care of  Javier C. Hernández and The New York Times, we have a new installment.

By Kremlin.ru, CC BY 4.0

Russian soprano Anna Netrebko (pictured at right receiving the State Prize of the Russian Federation) was scheduled to perform at the Metropolitan Opera in Don Carlo this season and La Forza del Destino and Andrea Chénier next season but the Met cancelled those performances when Ms. Netrebko refused its demand that she denounce Vladimir Putin after the Russian invasion of Ukraine.  

An arbitrator awarded Ms. Netrebko $200,000 under a "play or pay" clause in her agreement with the Met, finding that her support for Putin did not rise to the level of moral turpitude nor was it actionable misconduct.  However, the arbitrator did fine her $30,000 for "highly inappropriate" statements on social media.  The Met has also terminated Ms. Netrebko's husband, tenor Yusif Eyvazov, who was slated to perform in Tosca.  The Met says that they will compensate Eyvazov.  Ukrainian soprano Liudmyla Monastyrska will sing the role of Tosca in four performances.

Admittedly, Netrebko is in a tough spot.  Facing cancellations throughout the West (but she has performances scheduled in Vienna and Milan), she has attempted to distance herself from Putin saying that she met him only a few times, but the penalties she might face in Russia were she to denounce the invasion could be far more grave that losing a gig at the Met.  As Radio Free Europe/Radio Liberty reports, Putin recently signed into law a new provision in Russia's criminal code that provides for up to fifteen years in prison for "false news" relating to the Russian military.  Helen Sullivan reports in The Guardian on Alexei Moskalyov, whom Russian authorities tracked down in Belarus after he attempted to escape form two years of house arrest, in part because of anti-war drawing by his 13-year-old daughter.  She was removed from his care and placed in a state-run rehabilitation center.  

Warner Bros. to Paramount: Screw You Guys, I'm Going Home!

I learned from OCU 1L Austin Manley that the South Park guys seem to have sold exclusive rights to their show twice.  Well, maybe not.  It's a matter of interpretation. 

As Gene Maddaus reports in Variety (complaint at the bottom of the story), HBO's parent company, Warnermedia Direct is suing Paramount and others for breach of a 2019 deal in which HBO claims it won an intense bidding war by offering  $500 million for an exclusive license to stream episodes of the South Park animated television series, including three seasons' worth of new episodes.  It's a nifty little contract interpretation/good faith issue, because while HBO has the exclusive right to stream episodes of the regular South Park series, Paramount is claiming to have retained the rights to stream specials and other content.  HBO is screaming, "You bastards!"

But it gets worse: HBO claims it was promised at least ten episodes per season, but it has gotten only only eight, with six more slated for the third promised season, giving HBO a total of only fourteen of at least thirty promised episodes.  Because new episodes are far more valuable than the library of old episodes, HBO claims, what it got is worth far less than the $500 million it paid.

Sidebar: really?  I mean, yes, usually, I would be far more interested in new episodes than old episodes, but I haven't watched South Park in over a decade.  Have I missed anything?  Recently I warned my students that because nobody comes to my office hours, they should probably send me an e-mail to let me know they are coming.  Otherwise, I forget that I'm holding office hours, pull a Towelie, and just wander off.    Crickets.  According to the Complaint, "South Park is premium content and a top performer, especially with the highly prized 18-34 audience that is dedicated to the show and engages in repeated viewing."  My students don't even know who Towelie is.  So if old fans of the show (me) aren't watching the show, and my students are not watching the show, why are new episodes valuable? My students are within the 18-34 target audience, and either they are not watching the show or they are gaslighting me.  And if I were willing to shell out money for HBO Max, I would be far more likely to watch old episodes than new.  I have access to all 3,759 seasons of The Simpsons, but I'm mostly interested in Seasons 2-5.

Image by Gage Skidmore, CC BY-SA 3.0 

But wait, there's still more.  Paramount, through its subsidiary MTV, has announced a $900 million deal with the South Park creators, Trey Parker and Matt Stone (above), for exclusive South Park content to run on Paramount +.   Why can't stuff just be on TV like it used to be?  The new content is not "episodes" Paramount maintains; it is "movies," "films" (is that just movies shot in black and white?), and "events"?   Indeed, according to the Complaint, Paramount has acknowledged that South Park content is at the heart of its strategy to develop Paramount +.   

According to the Complaint, Paramount and its joint venture with Parker and Stone informed HBO that it could not make new seasons during the COVID-19 pandemic.  But during that same pandemic, it produced two South Park 50-minute specials that aired on Comedy Central, a Paramount subsidiary.  Two recent "supersized" specials aired on Paramount + with the seemingly self-referential titles The Streaming Wars and The Streaming Wars, Part 2.  The whole thing is so over-the-top, convoluted, and at least based on the Complaint so obviously wrongful, it reads like a plot from a South Park episode.  No wait, this is too big for an episode -- a South Park movie.

The Complaint alleges causes of action for breach of contract and the implied covenant of good faith and fair dealing, statutory claims, tortious interference, and unjust enrichment.  It seeks not only damages for breach of contract, but also disgorgement and punitive damages.  Expect counterclaims alleging that HBO has failed to pay the licensing fees.

Flo Rida Wins $82 Million Judgment Against Celsius Energy Drinks

As Marisa Dellatto reports in Forbes, rapper Flo Rida prevailed in a jury trial on his claims against energy drink company, Celsius.  Being a man who can now count his age in decades, I had never heard of or taken note of this line of beverages or of Flo Rida, but my daughter went to Flo Rida concert last year, and now I am seeing Celsius ads every time I stream content on services that have ads.  Live and learn.

The suit arises out of an endorsement deal that Flo Rida (Flo? Mr. Rida?) signed with with Celsius.  The deal was renewed in 2016 and terminated in 2018,  Flo Rida claimed that he was entitled to shares in the company, and a jury agreed.  Celsius argued that the statute of limitations had lapsed, but the jury found(!) that Celsius was equitably estopped from making such an argument.  

The verdict consists, in part, of 250,000 shares in the company, which at the time of the verdict were selling for $110/share.   That accounts for $27 million of the verdict.   I'm not sure where the rest comes from. 

Flo, I've never tasted the stuff, but my advice is: liquidate your shares in a hurry, because this stuff has fad written all over it.  It's already down to $84.50/share, but as recently as May 2020, it was below $5/share, and those times may well return. 

Unilateral Contract or Just Blackmail?

 

Here is a new twist on a familiar narrative.  

Celebrity loses dog.

Celebrity offers reward for dog.

Celebrity refuses to pay person who finds and returns dog . . . 

and now the twist . . .

because the finder is the person who conspired to kidnap the dog and who was convicted as part of a conspiracy to do so, which also involved shooting the celebrity's dogwalker.

In February, 2021, Lady Gaga's assistant was walking Lady Gaga's bulldogs, Koji and Gustav (for images of the dogs, you can watch this video), when she was shot and her attackers made off with the dogs.  Two months later, five people were arrested in connection with the dognapping incident.  One of those people was Jennifer McBride, who returned the dogs.  She had a connection with the father of one of the men involved in the attack, and she pleaded no contest on one count of receiving stolen property.  She received two years probation.

But apparently that brush with fame did not sate Ms. McBride.  As Paige Skinner reports on BuzzFeed News,  Ms. McBride noted that Lady Gaga had offered $500,000 to anyone who returned the dogs "no questions asked." Ms. McBride now claims to have complied with the terms of Lady Gaga's unilateral offer.  Worse still, she alleges that she was the victim of a fraud perpetrated by Lady Gaga when the latter allegedly made a promise she never intended to perform.   In short, Ms. McBride claims that she was tricked into returning the stolen dogs.  That sneak Lady Gaga intended all along for the police to question Ms. McBride about how she came into possession of the dogs all along.  The nerve!

Marisa Sarnoff of Law and Crime provides some additional details, including a link to the complaint (journalists of the world, take note -- this is what we all want to see!).  The fraud claims are crucial because Ms. McBride alleges harms, including pain and suffering, mental anguish, and loss of enjoyment of life.  As a result, she claims entitlement not only to $500,000 in compensatory damages but also to $1.5 million to compensate her for the foregoing tort harms.

Hat tip: Meredith Miller

Justin Bieber Is Selling His Soul. No, That's Not News. He's Selling His Music

As Nimo Omer, in conversation with Eamonn Forde, reports in The Guardian, Justin Bieber (below -- honest, I'm not trying to be mean (yet) by posting his mugshot; it's the only public domain image I could find!) has entered into a $200 million deal giving Hipgnosis Songs Capital the rights to all of his music recorded before 2021.  Baby, baby, baby, oh, that's a lot of money!  But it covers 290 titles, even though I can only think of one.

The transaction is an indicator of a trend.  Music is back, according to The Guardian, with album sales climbing in the U.S. over the past two years.  I'm not sure what these guys mean by "album," but whatever. 

And it's not just about you-know-who who is committed to owning all of her own music and insists on bringing out a new (old) album every year in order to do so to the delight of her fans who apparently are unaware that the world is teeming with talented artists of whom they've never heard (like Sarah Dooley) because all they listen to is this poor girl who is the most downloaded artist in history but for some reason is still singing about somebody who broke up with her ten years ago when she is not setting records for use of her private jet in a year when she's not even touring. 

Haters gonna hate. 

Actually, I wouldn't hate this artist if she were just stupendously successful.  I hate that she takes up all the oxygen in the room so that no other artists can breathe (and my students disappear for 48 hours after she drops a new album so that they can commit every syllable to memory and then shoot each other knowing looks when I accidentally use some utterly humdrum phrase that also happens to have found its way into her lyrics, which are 98% utterly humdrum phrases. 

But I digress.

Anyhew, Hipgnosis is a big player in the market, and that company and its rivals are betting on the long-term value of the songs that they are buying up.  Hipgnosis principal proclaims himself to be a "disruptor" who wants to destroy the traditional model of music publishing.   It's not clear to me that there's anything left to destroy, but his company has literally spent billions of dollars on demolition, so I suppose there's still work to be done.  

Among the things that makes me wonder whether the parties know what they are doing is the round numbers involved in these transactions.  According to the Guardian, "Stevie Nicks sold her catalogue for $100m. Bob Dylan shed his for a cool $300m-400m. Bruce Springsteen tops the lot at $550m."  Okay, so a Bieber is twice a Nicks and half a Dylan?  But also, what are these numbers based on.  If there were a formula, it would produce a number with more significant digits.  I think these deals are very rough guesstimates to true value, which is why I have decided not to buy the rights to all of Britney Spears' music just yet.

Sid DeLong: Risks Associated with Name, Image & Likeness Deals

Tom Brady: From G.O.A.T. to Scapegoat:
A Cautionary Tale of Influencer and Endorser Liability
Sidney W. DeLong

If the next Tom (the Greatest Of All Time) Brady is in college today he is sure to be earning a lot more money than Tom was able to scrape together as a student athlete when he played for Michigan. As predicted in an earlier post, Name, Image, and Likeness Mercenaries: NIL Desperandum in College Athletics, the next Tom is already aboard the Name, Image, Likeness (NIL) bandwagon that has already showered millions of dollars in “endorsement” income on student-athletes. The NIL beneficiaries are Very Definitely Not being “Paid to Play” for the schools that woo them to step through the Transfer Portals into a world of big money endorsement contracts. Star athletes can earn tens or hundreds of thousands of dollars, ostensibly as pitchmen for local car dealerships and plumbing companies. All of which is good practical training for the much more lucrative and slickly produced product endorsements for which they will be paid when they become professionals, endorsing insurance companies, sneakers and fast food.

And in a sense, NIL income for athletes is only fair compensation for the hard and dangerous work they must put in to earn their scholarships. Star athletes must keep up financially with their non-athletic but internet-famous classmates who pull down five and six-figure salaries as Influencers, persuading their followers to buy whatever music, fashions, and cosmetics that their advertisers are paying them to pitch. “Influencer: It’s not just a side-hustle, it’s a career.”

But the shock waves emanating from recent collapses in the world of crypto portend risks that a fledgling NIL athlete or Influencer might well bear in mind. It turns out that touting a product as a celebrity endorser or influencer can lead to significant personal financial liability for the endorser, especially if what is being touted is not a diet plan but what a judge may later call a “security.”

Endorser liability is a relatively new concept and the courts have not yet evolved clear rules. The common law offers few theories under which a buyer might sue a seller’s agent for personal liability resulting from misleading statements the agent made about a purchase of a commodity, whether in the form of facts or opinions. Lies by a non-seller might justify avoidance or a warranty claim against the seller, but the agent owes no common law duty to the buyer to make only truthful statements about the product.

By statute, however, two forms of endorser liability have emerged in the U.S. For the sale of goods, The Federal Trade Commission has issued regulations making it illegal for a product endorser to fail to disclose whether she is compensated for her endorsement or to publish a misleading consumer product review of the product. The FTC has even published “guidelines” for social media influencers.  Because these rules are aimed at misleading endorsement rather than misstatements of fact, liability can be avoided if the celebrity announces, ‘I am just saying this because I have been paid to do so.” Of course, such candor would defeat the purpose of the endorsement. Actual disclosures are more subtle, but effective in avoiding liability. But the American public has always been fully aware that every celebrity endorser since Lucy, Lady Duff-Gordon (left) has compensated and so the formalistic acknowledgement of compensation that is demanded by the FTC seems to be a solution in search of a problem. Or perhaps an example of straining at a gnat and swallowing a camel.

A far more lethal risk arises if the product being endorsed is held to be a security as defined in federal and state law. Which leads us to the crypto disaster. Tom Brady, along with his wife Gisele Bundchen, Shaquille O’Neal, Naomi Osaka, Larry David, Steph Curry, and many other celebrity endorsers of crypto products have been sued for damages and fines by the Securities and Exchange Commission (SEC) and classes of private parties under theories of securities act violations, violations of FTC disclosure regulations, and common law fraud, all arising from their promotional activities on behalf of FTX, Crypto.com and other sellers of crypto assets.

In a widely-publicized enforcement action, Kim Kardashian (right) was fined $1. 2 million in penalties plus disgorgement of profits by the SEC for failing to disclose a $250,000 payment she received to publish a post on her Instagram account promoting EthereumMax’s crypto asset security EMAX tokens. The article suggests that Matt “Fortune Favors the Brave” Damon was not charged because he was promoting a website, Crypto.com, rather than a specific security offered by his principal. More importantly, because EthereumMax’s tokens declined in value by 98% following Kardashian’s promo, she has been sued by disappointed investors for their losses.

Even the question whether Bitcoins themselves are securities may be an open question about which legal advice would be necessary. Gary Gensler, Chairperson of the SEC, has said that he believes that most cryptocurrencies are securities, as defined under the Howey Test, leading many to anticipate regulation of the market. If a celebrity touts an unregistered security, that alone could subject them to potential fines and jail time as well as to civil claims by disappointed purchasers regardless of the celebrity’s disclosure of their interest.

In addition to liability for fraud or for promoting the sale of unregistered securities, endorsers may run afoul of the SEC’s statement of policy about “celebrity backed” initial coin offerings requiring disclosure of compensation paid for endorsements (concerning the policy relating to “initial coin offerings”). Under this theory, Brady and Bundchen may have additional disclosure obligations arising from an alleged equity stake they took in FTX in 2021, before the endorsements.

What conclusions should a lawyer representing Future Tom Brady or Future Gisele Bundchen draw from the GOAT’s latest problems? I would suggest at least the following.

First, you should have final review of any endorsement contract and should not depend on the endorsement agent’s version, whose financial interests are not coincident with his own. Tell the client that “Jerry Maguire is interested only in his cut of the promotional fees; he won’t be there for you when you are sent away for securities fraud.”

Second, you will require securities law expertise whenever there is any possibility that what the client is touting is a security. With novel crypto products, it may be months or years before the courts decide whether the thing being touting is a “security,” under some version of the Howey test. Emphasize to the client that the personal liability for violating the securities laws can be staggering: that is the reason that liability insurance for securities lawyers is so expensive. An endorsement fee cannot possibly compensate for this level of risk.

Third, insist that the entity paying for the endorsement agree to indemnify the client and hold them harmless from any liability they may incur to any person or organization resulting from their performance of the endorsement contract. The indemnity must also include compensation for attorneys’ fees and other professional fees incurred, tax-related losses, and any other financial liability resulting from the product endorsement. (An agreement to pay criminal fines might be unenforceable on grounds of public policy, but it cannot hurt to obtain it.) If you cannot obtain indemnity, you should probably advise the client to walk away from the deal. If they refuse, you should (sad to say) probably memorialize your advice to the client.

When Matt Damon (left) told America that “Fortune favors the Brave” he was really sending a double message. He was not only encouraging ordinary people to risk their life savings on Bitcoin in a bold bid to earn a fortune. He was also, by his own example, encouraging celebrities to risk losing everything they owned in a securities fraud class action just to earn a hundred-thousand-dollar fee. Both messages proved to be disastrous, but at least some of the celebrities may end up as the bigger losers.

The World Cup of Contracts: Bend Contractual Obligations Like Beckham?

Last week, Tariq Panja spilled the tea in The New York Times about David Beckham's contract to promote Qatar in connection with the World Cup and his utter failure to do so in any way that would have the sort of impact for which Qatar shelled out (perhaps?) $150 million.  That said, he didn't exactly breach either.  He kinda ChatGPT'd it. 

Some people think you ought to actually enthuse to the media about Qatar when you enter into a contract to promote Qatar.  Others think that you ought not to promote Qatar in connection with the World Cup if that might force you to opine about workers' rights or LGBTQ+ issues.

Or so I imagine ChatGPT would respond if I asked it about Beckham's contractual performance.

Mr. Beckham's strategy, according to the New York Times, is to show up for events when asked, on condition that his appearance not be announced in advance and the press not be notified.  Mr. Beckham's bearded visage can be seen all around Qatar, on billboards and signs promoting Qatar and the World Cup, but the man himself is rarely seen and largely inaccessible.  When pressed to speak about why he is endorsing Qatar or about his views on the various controversies that swirled around the World Cup and its 2022 host, Mr. Beckham issued press statements that sounded genuine, by which I mean that they genuinely sounded like they were generated by ChatGPT.  Some samples:

David has been involved in a number of World Cups and other major international tournaments both as a player and an ambassador and he has always believed that sport has the power to be a force for good in the world.

We understand that there are different and strongly held views about engagement in the Middle East but see it as positive that debate about the key issues has been stimulated directly by the first World Cup being held in the region.

Other celebrity sponsors of the World Cup have apparently been irked by Mr. Beckham's special treatment.  But some of them, unlike Mr. Beckham, have won the World Cup tournament, so there may be some consolation in that.

The Signature of the Artist in the Age of Its Mechanical Reproducibility

Mr. Dylan, in 1966

Mark Savage reports on BBC.com that Bob Dylan has apologized.  You need not read any further.  That is news in and of itself.  I'm wracking my brain.  Has Bob Dylan ever apologized before?  For anything?  Isn't that more of a John Denver vibe?

What has finally made the American Bard issue an apology?  Breach of contract, of course.  Mr. Dylan's publisher, Simon & Schuster sold for $600 each 900 "hand-signed" copies of Mr. Dylan's new book, The Philosophy of Modern Song.  Some Dylan aficionados, it turns out, were also signature aficionados, and they discovered that the "hand-signed" books were signed using an autopen.  The publisher went through the five stages of settlement: anger, denial, reference to "letters of authenticity," consultations with PR, the offer of refunds. 

For his part, Mr. Dylan regretted an "error of judgment," but he also offered explanations.  He has vertigo, so it takes a team of five to accompany him during signing sessions.  I recently saw Bob Dylan in concert, and I can confirm that he is unsteady on his feet.  During the pandemic, such sessions became a health risk and so, "with contractual deadlines looming" (that's an actual Dylan quote!!) when some unnamed person recommended the use of the autopen, accompanied by assurances that people do it all the time, Mr. Dylan agreed to auto-sign copies of his book.  The BBC report suggests that other artists have indeed used the same device.  Sinead O'Connor was unapologetic, but signed copies of her book sold for £30, so no big deal.

What is the difference in value between a book hand-signed by Bob Dylan and a book auto-signed by Bob Dylan?  Apparently, quite a bit, and the reason for that turns, contrary to what Walter Benjamin (left) would have you believe, on the ability of works of art to retain their auras, even when they have been stripped of their unique existence in an (often sacred) time and space.  Remy Tumin reports in The New York Times on what motivated one fan, who already owned the book in both in hardcover (unsigned), audio, and Kindle versions, to buy the signed version. “If he touches this book — he wrote it, signed it — it feels like the soul of Bob Dylan is with me.”  That, my friends, articulates the power of the aura of an authentic work of art, or at least, a thing touched by the artist.  

There is a great deal to unpack in all of this, and I wish Benjamin were around to reflect on it.  Works of art once had a specific cultural role.  They elevated and celebrated; they connected us to the divine.  In the modern, disenchanted world, when they became reproducible, the cult value of the work of art is supplemented and eventually replaced with its exhibition value.  The role of the work of art changes as the sources of its value changes.  Benjamin celebrated the transformation of the social function of art.  Art, freed from cultic aura, is democratized.  Pictures, movies, electronic files, etc. can be endlessly reproduced and enjoyed by the masses.  The museum, the gallery, the cafe, the salon, the cinema become the new settings in which the work of art does its work.

At this point, one wants Adorno to step in and to warn about the susceptibility of art to commodification.  People still long for the cultic aura -- the verisimilitude of proximity to artistic creation.  We cannot look over Bob Dylan's shoulder as he writes "Mother of Muses" (below), my favorite song on Rough and Rowdy Ways.  He will not premiere his new songs for us.  The best we can do is buy memorabilia, and we value that memorabilia to the extent that we think it connects us to art or the artist, but the connection is attenuated, shrouded in mists or mysticism.  And then we degrade the artwork's aura (or that of its creator) by reducing its value to the cash nexus.  Appalling!  As thought paying for something would reduce our alienation from our species-being rather than embodying it!  It's in the 1844 manuscripts people!!!

Console yourself that with each breath, you likely inhale some of the same molecules that Mr. Dylan inhaled just before he sang "Blowin' in the Wind" for the first time.  By paying for his signature, you might as well be breathing in molecules Mr. Dylan exhaled during the recording of "Idiot Wind."  Better than either option, you can get a whiff of Dylan's aura at the Dylan Archives in Tulsa.  I plan a pilgrimage soon, even though I reside firmly on the post-Weberian side of disenchantment.

That said, I was thinking about art and aura when I saw Bob Dylan live.  The stage was crowded.  I heard him before I could pick him out, in the (I assume intentionally) one dark patch of an otherwise carefully illuminated mis-en-scene.  The voice was unmistakable.  Bob Dylan was there, singing an unrecognizable version of a recognizable song.  And so it would continue for ninety minutes or so.  Eventually I found him, hunched over a keyboard, looking down at his lyrics, harmonica at the ready, and I was enchanted.

 

Adidas Terminates Agreement with Kanye West (Ye) over Anti-Semitic Comments

Adidas has a line of shoes branded "Yeezy," a brand associated with Kanye West, who now goes by Ye (right).  According to Jaclyn Peiser and Jacob Bogage of the Washington Post,  the brand generated $2 billion in revenue last year and accounts for nearly ten percent of Adidas' annual revenue.  The end of the contract will be costly to Ye, but Adidas estimates that it will also cost the company about $250 million.  Adidas is the last domino to fall.  Numerous other companies had already severed ties with Ye. 

None of the articles that I have looked at discuss the basis for terminating the deals.  One expects that the contracts have morals clauses, but one would like to have a look at them to see whether Ye's partners have discretion to invoke them selectively.  As discussed below, his anti-Semitic outbursts are not the first occasion that might have given corporate partners concerns about how Ye's conduct reflected on the product.  To date, I haven't seen anything suggesting that Ye was challenging the companies' rights to termination his deals.  

Earlier, Ye's social media accounts were restricted in connection with statements viewed to be anti-Semitic.  Ye responded, according to media accounts, by entering into a preliminary agreement to buy Parler, a social media platform that promotes itself as more amenable to unbridled freedom of expression than its mainstream rivals.  

The Washington Post provides many reasons why Adidas might have been willing to bid auf wiedersehen to Ye.  He was not easy to work with, to say the least, and his recent barrage of provocative speech is not his only brush with controversy.  The Post speculates that, shunned by the fashion industry, Ye might fall back on music to keep his empire afloat.  But there is also the danger that the major music platforms will also refuse to distribute his products.  

That seems unlikely to me.  It's not as if Ye supporters are in it for the anti-Semitism, but as Lisa Respers of CNN reports, many have noticed that corporate partners did not sever ties with Ye when he made statements that could be construed as anti-Black, such as when he donned a "White Lives Matter" t-shirt, called slavery a "choice," and decried racism as "a dated concept."  Those who were willing to stick with Ye despite his anti-Black expression and expressive conduct would likely continue to do so notwithstanding his anti-Semitism.

Doing so, in my view, would not make them complicit in Ye's anti-Semitism.  Most of his fans dislike his anti-Semitism, but many would overlook it because of his unique attributes as an artist.  I'll admit it, when I recently learned that Eric Clapton (far right, with Blind faith) had expressed support for Enoch Powell's British fascism, and that David Bowie (left) had expressed unseemly enthusiasm for Hitler and the Third Reich, it had no effect on my enjoyment of Layla or Changes.  I forgive them their trespasses or their not-so-youthful indiscretions or whatever made these wonderful musicians say such stupid things.  Our broken world is full of broken people, including broken artists.  Sometimes, it is more appropriate to respond with compassion than with judgment.

Follow-up on Former Nebraska Coach Scott Frost's Contract

By Huskerdood - Own work, CC BY-SA 4.0

Last week, we posted about Nebraska's decision to fire its head football coach Scott Frost and pay him $15 million in severance.   Victor Goldberg shared Coach Frost's contract and its two addenda, with me.  You can also find it online here.

One big takeaway from Professor Goldberg's work is that sophisticated parties fashion their own remedies, and those remedies often depart from the default rules set out in the common law.  So too in the realm of coaching contracts.  You might think that a coach who gets a $15 million severance package for early termination of his contract would have to mitigate should he land comparable employment at another school.  Not so here.

As Professor Goldberg notes after reviewing the contracts in his comment here, Coach Frost's initial Dec. 2017 contract provided that, while he had no obligation to mitigate, if he got another coaching job, either in the NFL or with another Division I NCAA team, the severance pay (termed "Liquidated Damages") would be offset (set forth in Section 13(b) of the original agreement).  But the addenda provided for neither a duty to mitigate nor an offset (in paragraph 2 of the 2021 addendum and paragraph 3 of the 2019 addendum).  

The mystery to me is why the addenda, negotiated after Coach Frost and Nebraska football suffered through several losing seasons, would be more generous than the original contract, negotiated when Coach Frost was the hottest coach on the market.  One would have to review the contracts as whole to determine what Coach Frost gave up in exchange for more generous liquidated damages provisions.

The Case of the Nebraska Football Coach's Buyout

By Huskerdood - Own work, CC BY-SA 4.0

You have to be an extraordinary person to be an elite college football coach.  You must be unusually savvy about contracts.  That must be true, because I know a lot about contracts but I can't make any sense of the incentive structures in the contract of former Nebraska head coach Scott Frost (right).  Andrew Doughty of BetMGM has the numbers here.

Coach Frost had an extraordinary second season, leading the University of Central Florida to an undefeated campaign and defeating Auburn in the Peach Bowl.  Nebraska paid $3 million to buy out his contract and then agreed to a seven year, $35 million contract with Coach Frost.  Two dismal years in, the contract was extended through 2026.  After two more dismal years, Nebraska and Coach Frost renegotiated his contract, reducing his annual salary to a miserly $4 million/year.  The buyout structure is complicated, but in the end, Coach Frost is entitled to a $15 million buyout.  If the team had waited until October to buy him out, it would have owed only $7.5 million.  

You might think that Nebraska is not really out that $15 million because Coach Frost has a duty to mitigate.  Except that I seem to recall reading somewhere in  Victor Goldberg's  Rethinking Contract Law and Contract Design that coaches' contracts often specify that there is no duty to mitigate [if someone can find the cite or knows from some other source, please chime in].  Moreover, Coach Frost's record at Nebraska was 16-31 overall, 10-26 against conference opponents, and the team was winless against ranked teams.  When Nebraska landed Coach Frost, he was the most sought-after young coach in college football.  Now, he's asking Kramer's question after a prolonged cigar binge:

Why, you might ask, did Nebraska not wait until October?  Some sportswriters speculate that the timing was dictated by an upcoming game against the Oklahoma Sooners.  Nebraska's athletic director did not want to see his team humiliated by the team he played for.  One would think that even rabid Nebraska football fans would not think that motivation justified a $7.5 million price tag.  But there are other reasons that would surely pass a business-judgment-rule type sniff test.  It seems there are advantages to being the first in the pool when it comes to picking a new head coach.

Has Nebraska learned its lesson?  Coach Frost's resume shows that past performance is no guarantee of future success.

Dog Bites Man: Trump Entity Is (Allegedly) Breaching Its Contractual Obligations

According to media reports, including this one from Drew Harwell in The Washington Post, FPOTUS Donald Trump's Twitter clone, Truth Social, is in financial difficulties.  An SEC S-1 filing from Digital World Acquisition Corp., the company that is supposed to take the Trump Media and Technology Group (TMTG) public, contains all sorts of statements casting doubt on the viability of the enterprise.  Mind you, SEC filings are supposed to protect against claims by investors that they were mislead as to the company's prospects for success.  Pessimism is common.  When I was in private practice helping to deal with the fallout of the post 2000 .com bust, every SEC filing I read about a technology company made the following points:

• We are bleeding money;
• We have never made money;
• We don't know when we ever will make money; and
• We have invested heavily in companies just like us that are bleeding money, have never made money, and don't know whether they will ever make money.

My job was to explain why my clients nonetheless advised their clients to invest in such companies.

Perhaps more alarming is the report that TMTG has stopped paying its bills.  According to WaPo, TMTG stopped paying its web-hosting service, RightForge, in March and is now in arrears to the tune of over $1 million.  As WaPo also notes, the man behind TMTG has a long history of not paying his bills.  Not to mention the fraudulent businesses.  Not to mention the fraudulent charitable organizations.  More alarming still, an SEC investigation into the planned transaction involving TMTG and Digital World has placed the entire deal on hold. 

The FPOTUS has been in the news of late.  Another dog bites man story.  Despite the FPOTUS having posted (that is "truthed") on his site "WE GAVE THEM MUCH," he has also claimed that: (1) the FBI planted incriminating and classified documents; (2) he had declassified the documents; (3) he was entitled to keep the documents, and (4) the documents are subject to executive and/or attorney-client privilege.  All of these shenanigans have somehow not improved traffic on Truth Social, which now is down from a peak of 1.5 million to about 300,000 views per day.  

Our goal on this blog is to overtake Truth Social for page views.  Now that would be a man bites dog story.

Second Circuit Affirms Dismissal of Roy Moore's Suit against Sacha Baron Cohen

We have covered this case before, but it is a useful reminder of the power of releases.

In 2018, Roy Moore, former Chief Justice of the Alabama Supreme Court, former U.S. Senate candidate agreed to be interviewed by Sacha Baron Cohen.  As is his wont, Baron Cohen misrepresented the purposes of the interview.   He pretended to be an Israeli intelligence offer, and he lured Judge Moore into the interview by claiming that the purpose was to present the Judge with an award for his support of Israel.  During the interview, Baron Cohen produced an instrument that he claimed Israel had developed to detect underground tunnels.  Baron Cohen then claimed that it could also detect pedophiles, and, sure enough, it started beeping whenever help up close to Judge Moore's body.  Judge Moore's alleged stalking of women as young as 14 had been an issue in his election campaign.  

The interview did not go well, as you can see below, and the problems go well beyond Baron Cohen's mock unibrow:

In its opinion, the Second Circuit points out the Judge Moore signed a standard consent agreement, which provided in relevant part: 

[Judge Moore] waives, and agrees not to bring at any time in the future, any claims against the Producer, or against any of its assignees or licensees or anyone associated with the Program, which are related to the Program or its production, or this agreement, including, but not limited to, claims involving assertions of . . . (h) infliction of emotional distress (whether allegedly intentional or negligent), . . . (m) defamation (such as any allegedly false statements made in the Program), . . . [or] (p) fraud (such as any  alleged deception about the Program or this consent agreement).

Judge Moore crossed out other language in the Release, but the Second Circuit agreed with the District Court that he agreed to enough to bar his claims for defamation, infliction of emotional distress, and fraud.  

Judge Moore claimed that the entire agreement was the product of fraudulent inducement, but any such claim was barred under New York law because, in the Release, Judge Moore also  confirmed that he was not not "relying upon any promises or statements made by anyone about the nature of the Program or the identity, behavior, or qualifications of any other participants, cast members, or other persons involved in the program,” and that he was “signing this agreement with no expectations or understanding concerning the conduct, offensive or otherwise, of anyone involved in this Program.”  The Second Circuit also agreed with the District Court's rejection of Judge Moore's arguments that New York law does not enforce general releases.  This was not a general release.  It specifically released the defendants from the very claims Judge Moore sought to bring.  

Judge Moore's wife's claims of intentional infliction of emotional distress were barred under the First Amendment.  Judge Moore is a public figure and, given his candidacy for public office, the subject matter of the segment was clearly of public concern.  The court found that "no reasonable person" could have taken it seriously.  Thus, while the representation that the "pedophile detector" was a reliable device was clearly false, in context, nobody would have thought otherwise.  

We may have to revisit this doctrine in a world in which many people believe that "you can't trust the media."  In our current environment, Sacha Baron Cohen is at least as reliable a source as George Stephanopoulos.  I once was engaged in a political debate with a former student, and he pointed me to an article from the Babylon Bee.  When I informed him his source was satire, and he might was well be citing The Onion, he responded, "What difference does that make?"  At that point, I knew that I had lost.  And that all was lost.

Comedians' Suit Against Pandora Is No Joke!

According to Rolling Stone Magazine, the estates of some comedians, as well as some comedians who are still alive, are suing Pandora for breach of copyright.  Robin Williams' estate is seeking over $4 million; George Carlins' estate is seeking $8.4 million.  All together, five comedians have filed suit seeking over $40 million collectively.  

Rolling Stone quotes from the complaint:

While it is commonplace in the music industry for companies like Pandora to enter into public performance licensing agreements with performance rights organizations like BMI and ASCAP for musical compositions, these entities do not license literary works. Therefore, it was the responsibility of Pandora to seek out the copyright owners and obtain valid public performance licenses.

The comedians' record labels have shared their recordings on Pandora.  However, the comedians claim, the recordings are separate from the jokes, which remain the intellectual property of their creators.  As Variety explains here, the comedians claim "that they should be treated like singer-songwriters, earning a separate royalty for the underlying 'literary work' in addition to the performance of it."  

Just a quick anecdote about Robin Williams.  I saw him perform live stand-up in San Francisco.  I think it must have been in the late 1980s.  I went with a friend to a comedy club.  At the end of the scheduled performances, the M.C. got up and said, "Hey, Robin Williams is here, and he wants to do a set.  Do you all want to stick around and give him a listen?"  It was late, but it was Robin Williams.  We indicated our enthusiastic assent.  

He was clearly excited to try out some material.  He had more energy than the small space could contain.  The material was raw.  Most of the jokes didn't fly.  He was sweating and agitated.  After about ten minutes, the M.C. came back and, apologizing to Robin Williams, said that by city ordinance, he had to stop.  I guess they were already past the time when comedy clubs were supposed to shut down.  Robin Williams pleaded, could he do one more bit?  The M.C. allowed it.  It was Robin Williams.  The last bit wasn't much better than the others, but he was trying so hard.  He attempted to engage in "safe comedy" by placing a condom over the microphone.  Edgy?  In desperation, the club cut the lights and the mike.  It seemed there was no other way to get him to stop.

It was not the best stand-up I've ever seen, but it was certainly the most memorable.  I loved that he was still so eager for an audience, that he was still so hungry to create new comedy, and ultimately that he, by that time, rich beyond imagining, possessing iconic fame, was still so naked and vulnerable and pathetically desirous of our approval.   

Watching Robin Williams cover himself in inglorious flop-sweat reminded me of Robert Musil's essay, Flypaper.  Musil observes the moment when the flies stop struggling to escape the flypaper's grasp and relax a bit into their fate, freezing in ridiculous poses.  "They no longer hold themselves up with all their might, but sink a little, and at that moment appear totally human."  Never did I see anyone look more human than Robin Williams did as he utterly bombed in a San Francisco comedy club.  

Quentin Tarantino gets sued, demonstrating that NFTs are about contracts after all

I’m excited to teach copyright this semester and while I miss teaching contracts, there is a lot of synergy between the two subjects.  So, I was interested to read that the director Quentin Tarantino is being sued by Miramax in an action claiming copyright infringement and breach of contract.  The lawsuit involves Tarantino’s efforts to auction pages of the script from Pulp Fiction as non-fungible tokens or NFTs. 

(Readers of this blog are of course familiar with NFTs, thanks to Juliet Moringiello and Christopher Odinet’s article and Jeremy Telman’s blog post on it here).

The issue is whether Tarantino owns the rights to the NFTs.  That will depend on the contract between Tarantino and Miramax and whether the language the parties used was broad enough to capture this type of technology – technology that wasn’t contemplated at the time the parties entered into their agreement.

 

Prince Andrew and the Awesome Power of Contracts Law

Image by Titanic Belfast, CC BY 2.0 , via Wikimedia Commons

Here's the problem about writing about the British Royal Family.  If you are someone who cares about the Royals, you know approximately 1.7 million times more about them than I do.  If you don't care about the Royals, nothing in the post will be of the slightest interest to you.  And yet, there is a big story out there; contracts law is at the center of it.  I am somewhat compulsive.  Sigh.  Here we go.

Earlier this month, Sid DeLong posted about the argument that Virginia Roberts Giuffre's suit against Prince Andrew alleging sex trafficking should be dismissed based on a Settlement Agreement and Release that she entered. into with Jeffrey Epstein in 2009. Last week, Judge Lewis Kaplan denied Prince Andrew's motion to dismiss in a 46-page opinion.  In that opinion, Judge Kaplan carefully considers whether Prince Andrew was among the defendants whom the parties intended to release or whether he is a third-party beneficiary of the Agreement.  At this point in the litigation, Judge Kaplan concluded, it is too early to rule definitively on either argument.  Judge Kaplan also rejects the so-called "Dershowitz argument."  That is, because Ms. Giuffre dismissed her claims against Mr. Dershowitz when the Agreement was raised as a potential defense, the same result should obtain here.  Judge Kaplan avoided speculating on why the Release might be helpful to Mr. Dershowitz but insisted in any case to consider independently the Release's applicability to every potential defendant. 

There is more to the opinion, but the rest of it does not really touch on contracts law or the law of third-party beneficiaries, so we will leave it to others to expound.  What interests us for now is the Crown's response to this opinion. 

As Dan Bilefsky of The New York Times reports here, that response was "quick and punishing." Upon learning of Judge Kaplan's decision, Buckingham Palace issued a statement.  It reads, in full:

With The Queen's approval and agreement, The Duke of York’s military affiliations and Royal patronages have been returned to The Queen.

The Duke of York will continue not to undertake any public duties and is defending this case as a private citizen. 

He may no longer use the honorific "His Royal Highness," and he had to surrender his military titles.  The BBC, perhaps a more reliable source on this subject, clarifies, "Like Harry and Meghan, Prince Andrew retains his title HRH but will not use it in any official capacity."  I'll assume you all know to which "Harry and Meghan" the BBC refers, and I will leave it at that.

Sid DeLong, Is Prince Andrew a Third-Party Beneficiary of the Giuffre Release?

“Yes Virginia, There is a Santa Clause”: The Giuffre Release
Sidney DeLong

Image by Titanic Belfast, CC BY 2.0 , via Wikimedia Commons

Denied the benefits of three years of law school, the general public must learn what it can about contract law in piecemeal fashion, in the school for scandal afforded by news reports of highly publicized cases. Thus, for example, the Stormy Daniels controversy introduced everyone to the law of mandatory arbitration, non-disclosure agreements, and temporary restraining orders.

Seen as a teaching moment, the sexual abuse lawsuit brought by Virginia Roberts nee Giuffre against Prince Andrew may further educate the laity about the arcana associated with general releases and third-party beneficiary law. It also may give an incidental education in the state of legal prose.

Last Monday, the court unsealed a Settlement Agreement and Release entered into by Virginia Roberts (Giuffre’s maiden name) and Jeffrey Epstein (below, right) in 2009. The agreement settled her lawsuit and released all her then-pending tort claims against Epstein. Her allegations included that he trafficked her, while a minor, to his powerful friends, who included politicians, academicians, and “royalty.” The Release states that it was executed in connection with a non-prosecution agreement entered into by a Florida federal prosecutor and Epstein, an agreement that was later to become controversial in itself when he was prosecuted in New York.

In her current lawsuit against Prince Andrew, Giuffre alleges that he was a friend of Epstein who sexually assaulted her on multiple occasions when she was a minor.  Without admitting any of her allegations, he has pleaded as an affirmative defense that she released her claims against him when she signed the Epstein release, even though he was not a party to the Epstein lawsuit and is not named in the release. Instead, he claims that he is an unnamed third-party beneficiary of the release because it extends to “any other person or entity who could have been included as a potential defendant” to the Epstein lawsuit. 

The Settlement Agreement and General Release contains language that, although it is boilerplate familiar to many litigators, would strike most laypersons and many lawyers as bizarre. Like many other forms of contractual boilerplate, release boilerplate grows by accretion and never seems to diminish. As a result, it contains many terms that have no application to this controversy.

Thus, the agreement binds not only Giuffre and Epstein in the singular, but also in the plural:

Virginia Roberts and her agent(s), attorney(s), predecessor(s), successors(s), heir(s), administrator(s), and/or assign(s)/(hereunder, “First Parties”) and Jeffrey Epstein and his agent(s), attorney(s), predecessor(s), successors(s), heir(s), administrator(s), and/or assign(s)/(hereunder, “Second Parties”).

All this means that in form the agreement is between two large groups of people, real and imaginary. More significantly, the agreement also refers to a third group of unnamed persons: “any other person or entity who could have been included as a potential defendant (“Other Potential Defendants”).

The First Parties not only “release“ the Second Parties and the Other Potential Defendants from the Giuffre claims, but also “remise, release, acquit, satisfy, and forever discharge” them.

When the drafter(s) entitled the document a “General” release they were not kidding.  The released claims include not only the tort claims Giuffre brought against Epstein in the lawsuit, but also (take a deep breath)

all, and all manner of, action and actions of Virginia Roberts, including State or Federal, cause and causes of action (common law or statutory), suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, executions, claims, and demands whatsoever in law or in equity for compensatory or punitive damages that said First Parties ever had or now have or that any personal representative, successor, heir, or assign of said First Parties hereafter can, shall, or may have, against Jeffrey Epstein, or Other Potential Defendants for, upon or by reason of any matter, cause, or thing whatsoever (whether known or unknown), from the beginning of the world to the day of this release.

For a unique experience, legally trained readers may, for once in their professional life, actually read this passage word-for-word, preferably aloud, and reflect on its meaning. They might then reflect on the fact that no living person fully understands every word of this paragraph. Non-lawyers may be surprised that, as Holmes famously remarked, the law finds no difficulty under the objective theory of contract in holding parties to the terms of agreements that neither of them may correctly understand.

If we had world enough and time, it would be highly rewarding to parse this language, lingering lovingly over each word, imagining what drafting disaster in what ancient agreement led to its inclusion in the ever-growing, immortal mass that is the result. Does anyone remember what a “specialty” is? What “variances” might Epstein have committed against Giuffre, assuming one can commit a variance?

Sadly, courts do not always ignore such boilerplate. In the infamous decision, Hershon v. Gibraltar Building & Loan Assoc., Inc., 864 F.2d 848 (D.C. Cir. 1989) a general release with even more extravagant language that was intended only to settle five business claims was held to have inadvertently cancelled a debt of $265,000 owed by the released party to the releasing party in a completely unrelated and uncontested loan.The majority rested on a rather punitive application of the plain meaning theory of contract, visiting the sins of the drafters on their clients. Under Hershon’s reasoning, the Giuffre release would discharge any claim of any sort that she might have had against anyone who might have been a “possible defendant” in her action against Epstein, such as his insurer.

The unique feature of the release is not that it refers to “the beginning of the world”: they all do. Rather, it is that it extends to “said Second Parties and any other person or entity who could have been included as a potential defendant ('Other Potential Defendants').” In a sea of everyday lawyer prose, the phrase “who could have been included as a potential defendant” sticks out like a sore thumb. The phrase has no settled legal meaning, and so the litigants have focused on it intently, as it limits the scope of the The unique feature of the release is not that it refers to “the beginning of the world”: they all do. Rather it is that it extends to “any other person or entity who could have been included as a potential defendant (“Other Potential Defendants”).” In a sea of everyday lawyer prose, the phrase “who could have been included as a potential defendant” sticks out like a sore thumb. The phrase has no settled legal meaning and so both litigants have focused on it intently, as it limits the scope of the release.  According to NPR, Giuffre’s lawyers, for example, have argued that it did not include Prince Andrew because, inter alia, he could not have been sued in the jurisdiction where the action was brought. His lawyers argue that, although innocent of any wrongdoing, he is clearly in the category of unnamed “royalty” whose crimes were alleged in the Epstein complaint and who might have been sued along with Epstein.

There were easily-imagined reasons for Epstein’s lawyers to employ the ambiguity so as not to name the “powerful friends” that Epstein wanted to shield with this settlement. But in this case, professional coyness might encourage a court sympathetic to the plaintiff to refuse to read their names into the agreement.

A final question is whether a release can be a “third-party beneficiary contract.” First, a release is not a contract as the Restatement defines it because, as Restatement (Second) of the Law: Contracts § 278, cmt. c acknowledges. A release is not a promise that creates rights and duties but instead extinguishes rights and duties. But there is no reason the Release may not be construed to extinguish claims against third parties if that is the intent. Protection of third parties is common in tort settlements.

Under Restatement (Second) of the Law: Contracts § 302, a third party may enforce a promise whenever the promisee manifests an intention that third parties have enforcement rights and that they are appropriate to achieve the promisee’s purposes. If Epstein intended to give the unnamed friends the benefit of the release, it should be “enforceable” by those third parties if the court resolves the issue noted above as to their identity.

Two things raise doubts about whether Epstein manifested an intent that Andrew be able to enforce the release. First, the release seems not to have been disclosed to Andrew until discovery in the pending case. Than alone argues against Andrew being an intended third-party beneficiary.

A second, related doubt about third party rights arises from the following term.

Additionally, as a material consideration in settling, First Parties and Second Parties agree that the terms of this Settlement Agreement are not intended to be used by any other person nor to be admissible in any proceeding or case against or involving Jeffrey Epstein, either civil or criminal. (emphasis added).

Is Prince Andrew an “other person” who is trying to “use the terms” of the agreement? Or does the term “other person” not include the previously mentioned “Other Potential Defendants”? Does the phrase “in any proceeding or case against or involving Jeffry Epstein” modify the clause limiting the intended use by other persons, so that Prince Andrew may argue that he may use the release because this is not a case “against or involving” Epstein?

What lessons might the public learn from this combination of verbal overkill and under-specificity in Settlement Agreement and General Release? Perhaps that lawyers are paid by the word rather than the thought.

Unilateral Contracts in the News: Found Dog Edition

My students think I hate unilateral contracts.  It's not true.  I hate the statute of frauds and the parol evidence rule.  I'm fine with unilateral contracts.  They are interesting. They are also uncommon.  That is to say, they make up a tiny percentage of the universe of contracts.  That's why they show up in the news.  

As reported in the New York Times, Daniel Sturridge, an English football (soccer) star, made a video after his dog, Lucci, a Pomeranian, disappeared from his Los Angeles home.  In the video, Mr. Sturridge offered a reward, "20 Gs, 30 Gs, whatever" to anybody who helped him to recover the dog.  Soon thereafter, Foster Washington, found the dog.  

Mr. Sturridge claims that he already paid Mr. Washington a reward.  On Tuesday, a judge found otherwise.  Mr. Sturridge now plays in Australia.  When he was signed as a striker with Liverpool in 2013, the contract was valued at $20 million.  Lucci is valued at $5300.  Mr. Washington has three children and makes $14/hour working as a security guard.  His utterance may have been too vague to be considered a clear offer.  Is it a promise to pay 20 G? 30? Whatever?  Is it an invitation to bargain?  Don't care.  You are rich.  A poor man helped you out, thinking you would honor your pledge to provide a reward.

Pay the man.

More On Compensation Inequity: College Football Edition

Yesterday, I ranted about executive compensation.  Today, I will rant about compensation paid to college football head coaches.  If you think that college football coaches deserve to be, in most states, the highest paid public employees, feel free to tune out.

Recently, a friend recommended that I listen to a story at the start of this Advisory Opinions podcast.  I don't want to ruin the story, I've put it below the fold.   If you want to listen, it just takes up the first two or three minutes of the podcast, which I do not otherwise recommend.

I bring up the story in this context because I recently was conversing with a neighbor who had various criticisms of Dr. Fauci.  Among Dr. Fauci's misdeeds, according to my neighbor, is that he is the highest-paid employee of the federal government.  It's true.  According to Forbes, Dr. Fauci's annual compensation is now over $400,000, and in the decade between 2010 and 2019, he earned $3.6 million.  Okay, so let's use football coaches' salaries to put that in perspective.  

First, according to the New York Times, Louisiana State University (LSU), a public institution, is paying its new coach $9 million/year.  That is well over twice what Dr. Fauci made over ten years.  At the same time, it is paying its former coach $17 million to step aside, so that former coach will be paid nearly five times what Dr. Fauci made over ten years, and he will make it for doing precisely nothing. 

Second, and this is crucial, Dr. Fauci is the highest paid federal employee because people who understand his role (that is, not Senator Rand Paul), know that he is an incredibly dedicated, effective public servant who has provided unparalleled leadership since the AIDS crisis.  If Dr. Fauci were to leave public service and work in the for-profit bio-tech sector, he could easily command salaries akin to what we pay corporate executives in those fields -- that is, many multiples of what he makes as a public servant.  Before one criticizes Dr. Fauci for making $400,000 a year, consider that the opportunity cost for him to do so by working as public employee is likely $1-2 million/year.

LSU's new coach, on the other hand, is guaranteed a bonus of $500,000 if LSU manages to win half its games, which would be a pretty unimpressive accomplishment for a team that has won three national championships since 2003.  That's right, on top of his salary, which is already twenty-two times higher than Dr. Fauci's, LSU's coach will get a bonus in excess of Dr. Fauci's salary if the team underperforms during his first year as badly as it did this year.

For my money, an Anthony Fauci is worth more than the best football coach in the country.  For my money, investing in great scientists who can guide our country through catastrophic health crises makes more sense than investing in men who can win college football games.  I would also venture to guess that the secondary effects of investing in science, in terms of gains in useful knowledge that can be applied to future medical challenges, greatly outweigh the benefits of having a successful college football team in the state.   As this story from the Guardian makes clear, most college sports programs operate at a loss.  Mad about the high tuition and fees you are paying for your child's education at a public university?  Maybe you should talk to your legislators about the high costs of college sports programs.  And those costs could be cut very easily if every state paid its coaching staff a decent but not excessive wage.  Salaries in line with what full professors in competitive fields like, law, business, medicine, or engineering, seem about right to me.  University presidents are also absurdly overcompensated, given that they take on no downside risk, but that can be a subject for some other post.

And since anybody who disagrees with me probably stopped reading a long time ago, let me add that the United States is the only country in the world that operates this way, and it is wholly irrational.  Universities are primarily about education and research.  Young people who are primarily interested in athletics can pursue that dream through developmental leagues, like the rest of the world has.  Teams in those leagues could be located in or near college towns, and universities that want to create a connection between the teams and their institutions can offer scholarships to the athletes who play on those teams.  Those students may have to attend part-time, as athletics is their day job.  Still, universities could provide support so that those students can succeed either as athletes, or as students, or as both, if they have the requisite aptitudes in both areas.  Given that very few students athletes become professional athletes, and professional athletic careers are very short on average, very little is lost if students choose to try their luck in the lottery of professional sports and then pursue college eduction at the age of 25 or 29.

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