ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Thursday, July 18, 2019

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. 

July 18, 2019 in Commentary, Games, Recent Cases, Sports, Television, True Contracts | Permalink | Comments (0)

Tuesday, July 16, 2019

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!)

July 16, 2019 in Commentary, Recent Cases, True Contracts | Permalink | Comments (1)

Thursday, July 11, 2019

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)

July 11, 2019 in Celebrity Contracts, Commentary, Current Affairs, In the News, Recent Cases, True Contracts | Permalink | Comments (0)

Monday, July 8, 2019

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.

July 8, 2019 in Commentary, Current Affairs, Famous Cases, In the News, Miscellaneous, True Contracts | Permalink | Comments (0)

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. 

July 8, 2019 in Commentary, Government Contracting, Recent Cases, True Contracts | Permalink | Comments (0)

Saturday, July 6, 2019

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. 

 

July 6, 2019 in Commentary, Law Schools, Recent Cases, Teaching, True Contracts | Permalink | Comments (0)

Friday, July 5, 2019

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! 4543a520-9d01-11e9-b3ff-b4c8c3c3f024

July 5, 2019 in Commentary, Current Affairs, In the News, Labor Contracts, True Contracts | Permalink | Comments (0)

Monday, July 1, 2019

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.

July 1, 2019 in Commentary, Current Affairs, In the News, True Contracts | Permalink

Wednesday, June 26, 2019

Don't rely on vague promises that you'll be "taken care of"

I had been paying attention to this case out of the Western District of Washington, Moi v. Chihuly Studio, Inc., Cause No. C17-0853RSL (behind paywall), because it raises interesting copyright authorship issues. The case is a lawsuit brought by a person who was one of Chihuly's assistants, who create artwork in Chihuly's name under Chihuly's supervision. The plaintiff worked for Chihuly in this way for fifteen years, until a falling-out between Chihuly and another of the assistants resulted in the deterioration of the plaintiff's relationship with Chihuly as well. The plaintiff filed this lawsuit alleging co-authorship of 285 artworks and requesting compensation for his work on them. You can read more about the lawsuit here

As I said, I was paying attention to this case for the copyright authorship analysis, which follows the Aalmuhammed test and finds that, because the plaintiff did not exercise control, he is not an author of the artworks, despite his copyrightable contributions to the artworks. The authorship test analysis also considers the lack of contract between the plaintiff and Chihuly as indicating that Chihuly did not intend to share authorship with the plaintiff. 

That same lack of contract dooms the plaintiff's attempt to seek compensation for his work. Because there's no contract, the plaintiff's cause of action is promissory estoppel, but Chihuly's promises over the years to compensate plaintiff by keeping track of which artworks plaintiff had contributed to were, in the court's view, too vague to constitute promises that the plaintiff could have relied on. The plaintiff confessed that he had no idea what his eventual compensation might be or when he would receive it, just that he trusted Chihuly to treat him "fairly." Promises forming the basis of promissory estoppel need to be clear and definite, and Chihuly's statements were simply too vague. Considering that plaintiff couldn't even say what they meant, the court refused to enforce them. 

This is, once again, a lesson in making sure you have a clear and complete understanding with someone, and not just vague platitudes. 

June 26, 2019 in Celebrity Contracts, Commentary, Current Affairs, In the News, Labor Contracts, Recent Cases, True Contracts | Permalink | Comments (0)

Wednesday, June 19, 2019

A brand new apple variety leads to a discussion about extrinsic evidence

Continuing the theme of thinking about fall courses, a recent case out of the Western District of Washington, Phytelligence, Inc. v. Washington State University, Case No. C18-405 RSM (behind paywall), has a discussion about both extrinsic evidence and agreements to agree -- both topics my students often struggle with. Might be worthwhile to take a look at this recent analysis, especially if you teach in Washington. 

Plus it's a dispute about a new apple variety, which is pretty cool. You can read more about it here and here

 

June 19, 2019 in Commentary, Current Affairs, Food and Drink, In the News, Law Schools, Recent Cases, Teaching, True Contracts, Web/Tech | Permalink | Comments (0)

Monday, June 17, 2019

If you don't pay for a raffle ticket, there's no contract for the prize

If you've already started thinking about gathering examples for your courses this fall, here's a consideration case for you out of Ohio, Forbes v. Showmann, Inc., Appeal No. C-180325. Forbes was an employee of Showmann, and at a holiday party Showmann gave its employees, including Forbes, raffle tickets. One of the prizes was what sounds like a pretty sweet cruise package, and Forbes won the cruise. Showmann terminated Forbes's employment a few weeks later and informed Forbes that the cruise package was conditioned on Forbes still being a Showmann employee when she took the cruise. 

Forbes sued for breach of contract but the problem was that it was undisputed that Forbes did not pay for the raffle ticket. Showmann simply distributed the raffle tickets for free to its employees. Therefore, there was no consideration with which to form a contract. Forbes tried to argue her employment by Showmann was the consideration for the ticket but Forbes's employment was not used to bargain for the raffle ticket in exchange, so therefore there was no contract. 

If you feel bad for Forbes, which I admit I kind of did based on these given facts, her conversion claim does survive, so there is some hope for her. 

June 17, 2019 in Commentary, Games, Labor Contracts, Law Schools, Recent Cases, Teaching, Travel, True Contracts | Permalink | Comments (0)

Friday, June 14, 2019

The challenges of licensing music

This isn’t, strictly speaking, about contracts, I guess. But it is about a consent decree, which is at heart a document that binds parties to terms. The Department of Justice has announced that it is reviewing the antitrust consent decree that governs ASCAP and BMI, the two major performing rights organizations used by songwriters and music publishers. Because ASCAP and BMI control so much of the music licensing market, they have been governed by a consent decree for several decades, with the Department of Justice worried about the competitive effects of their near-monopoly over music licensing.

I thought, therefore, that maybe it was time for me to share my friend's Music Licensing Experience.

The music copyright holders keep noting that piracy is a major problem. However, piracy tends to decrease if you make it easier for people to gain legal access to the work in the question. For some time now, studies have shown that people will pay for content, if they are given a feasibly legal way to do it.

A friend of mine was starting a noncommercial podcast. Podcasts are all the rage now. They’re low-cost and have few barriers to entry, and recording equipment is so cheap and easy to come by these days, basically anyone can have a podcast. I am frequently asked by students for information about using music on podcasts. They’ve heard, of course, that any length of time less than thirty seconds is “automatic fair use.”

So my friend’s got this noncommercial podcast and they want to use, in a single episode, two separate clips of the same copyrighted song. Together, the clips total less than forty seconds. My friend, who is not a lawyer, was inclined to do what so many lawyers do, and just take the risk and use the song. “But no!” I protested. “You know me, a copyright lawyer! You should properly license the song!”

I had, in actuality, never licensed a song before. But, I thought, how hard can it be? It shouldn’t be hard, right? Wouldn’t it be in the best interest of the music copyright holders to make it relatively easy for this kind of use to be licensed? Especially given the apparent stance BMI takes that there is no way for you to use music without a license.

Capture

(Fair use? What fair use?)

I told my friend that either BMI or ASCAP would probably have the rights to the song, and they should just ask for a license through the right one. So they looked into it. BMI ended up being the organization to contact, and my friend found a literal tab for Podcasts on the BMI website, so they contacted BMI.

I thought that would be the end of it for my friend, but BMI’s response, unfortunately, was not very helpful. BMI said that the only license it offers is a blanket license, so my friend could not license a single work the way they wanted. The blanket license would be an annual license of almost four hundred dollars a year – a lot of money for a noncommercial podcast that wanted to use a grand total of forty seconds of music from a single song. But, BMI informed them, that license would get my friend access to fourteen million songs!

The problem: My friend didn’t want access to fourteen million songs. My friend wanted one song. Also, I’m pretty sure that BMI is actually required by that consent decree currently under review to offer per-song licensing rates. See Section IX.C ("[BMI] shall not, in connection with any offer to license by it the public performance of musical compositions by music users other than broadcasters, refuse to offer a license . . . for the performance of such specific (i.e., per piece) musical compositions, the use of which shall be requested by the prospective licensee."); see also United States v. Broad. Music, Inc., 275 F.3d 168, 178 n.2 (2d Cir. 2001) ("[T]he per piece license . . . is explicitly required in Section IX(C).”). My friend told me what BMI said, and I told my friend that maybe they should try again, maybe they weren’t clear the first time. So they wrote back to BMI, clarifying that they wanted a per-song rate.

BMI responded saying that it was not capable of providing my friend with the licensing rights they wanted. Despite the fact that it had been very willing to provide my friend with a license for several hundred dollars in the previous email, it now took the stand that it did not have the ability to provide rights for a song used within a podcast, and my friend had to contact a different entity. I don’t know if I’m more alarmed by BMI trying to sell my friend a license that wouldn’t actually cover their use, or BMI lying about whether it could sell them a license that would cover their use.

At any rate, BMI at least provided my friend with the contact information for another entity, which my friend contacted. But that entity wrote back and said it was not the right entity and provided the contact information for yet another entity. Which never wrote back to my friend’s request at all.

So, in the end, that’s how music licensing goes if you’re a little guy, I guess: It doesn’t. My friend lost a little bit of faith in the U.S. copyright legal system as a result of their experience, and that definitely harms all of us. And as we’re thinking about the music business in the context of the consent decree, maybe we should also think about the people who use music. Because, sometimes, as studies keep showing, they’d really love to pay the artist, they literally can’t find the way to do it.

(Could my friend’s use qualify as fair use? I am offering no legal opinion on that. What I will say is that, fair use doesn’t stop you from getting a DMCA notice.)

June 14, 2019 in Commentary, Current Affairs, In the News, Music, True Contracts, Web/Tech | Permalink | Comments (0)

Friday, May 24, 2019

About those added convention center fees...

I spent the past few days at a conference at the Boston Convention Center, a place so cavernous that at least I easily met my step targets every day walking between meeting rooms. The conference was an expensive one to attend (it would have been waaaay out of my price range if not for the academic rate), and enormously well-attended, and I found myself doing a lot of math: how much money in registration fees? but also, how much money to use this convention center? 

This post on extra convention center fees came across my social media just as I was musing on all of that. I know from other people who have dealt with convention centers that the extra fees are the real killer: You have to pay extra to use their catering, their AV equipment, etc. Even if all you've planned is a wedding, then you know how this goes with the add-ons. This is an arrangement that we seems to just be accepting, but maybe there should be more vocal outrage about it. 

May 24, 2019 in Commentary, Conferences, True Contracts | Permalink | Comments (0)

Thursday, May 16, 2019

Adobe reminds everyone just how much power it has over end users

Very few of us actually read the terms and conditions of the many, many, many services we register for every day. It's not like we can negotiate them, anyway, so I think, as a matter of sheer efficiency, most of us just grin and bear it. We want or need the particular service in question, it comes with conditions we can't get out of, so we just click "OK" and move on with our lives. I think a lot of people think, well, how bad can it be? 

But these terms and conditions often give the licensor a great deal of power, leaving end users with very few rights to whatever they want to gain access to. A perfect illustration of this: As many outlets have reported (here's a link to just one), Adobe has told its users that it's discontinuing older versions of popular programs like Photoshop, and so users are no longer allowed to use those versions under the licenses they agreed to years ago when they gained access to the program. We've gotten blase about the lack of ownership we have over many things in our current economy, but this action is exposing the fact that, when you rent everything instead of owning it, then there's very little we can do to keep the things we like; all of the control over them always continues to rest with the original licensor, and we possess them only so long as the original licensor lets us. You might have preferred the older version of Photoshop, but that doesn't matter; Adobe's terms of service let Adobe choose when you are allowed access to Photoshop. 

Many of the terms and conditions we agree to have clauses that leave us exposed to the whims of the more powerful party in the transaction, and consumers therefore have very little recourse. A lot of social media websites have a lot of discretion over terminating accounts, for either no reason or vaguely worded reasons that leave them with a lot of leeway. So I would caution everyone to please be careful about what you're storing on social media accounts and make sure you have copies of anything you really care about elsewhere (preferably on a device that actually belongs to you), because the terms of use make clear that there's no guarantee that social media account (or even remote storage) will always be there. 

May 16, 2019 in Commentary, Current Affairs, In the News, True Contracts, Web/Tech | Permalink | Comments (2)

Tuesday, May 7, 2019

The Controversy over the Restatement of Consumer Contracts

As some readers of this blog may be aware, the American Law Institute will be voting on whether to approve the Restatement of Consumer Contracts at its upcoming Annual Meeting on May 21. The proposed Restatement is controversial for several reasons and was the subject of a recent Yale Journal on Regulation symposium. Concerns have been raised by contractsprofs Gregory Klass, Adam Levitin and others (including yours truly) regarding the Reporters' methodology and interpretation of case law.  Of particular note, is this post written by the preeminent contracts law scholar Melvin Eisenberg. As Prof. Eisenberg points out, the doctrinal problems are glaring, harmful to consumers, and will make it even harder to explain contract law to 1Ls.

In addition to the doctrinal inconsistencies, the proposed Restatement ignores the problems created by form and digitization and does nothing to address the problems created by ubiquitous digital contracts. As Colin Marks's study showed, retailers often have different and more onerous terms for online purchases than when customers make those same purchases in-store.  

The law is still developing when it comes to digital contracts and there are signs that courts in some jurisdictions, such as California, are inclined to move the law in a more consumer-friendly direction. This Restatement would impede that evolution. Furthermore, this proposed Restatement would create a different set of rules when the contract is between two businesses and between a business and a consumer. The result in some cases is that the Restatement would subject a consumer to more stringent contract terms than a business would be subjected to under common law. While this might seem like good news for businesses, it actually is not. In many cases, due to the problem of “contract creep” which Ethan Leib and Tal Kastner discuss in their forthcoming Georgetown Law Journal article, courts are likely to end up applying the law of “consumer contracts” to all contracts, including those between businesses.  The result?  The proposed Restatement of Consumer Contracts would harm both consumers and businesses.  Instead of helping courts make sense of the evolving law, it would cement law that is incoherent and inconsistent.  Contractsprofs should be particularly concerned because it will make contract law that much more difficult to explain to 1Ls. The ALI plans to vote on the proposed Restatement of Consumer Contracts on May 21. All readers of this blog who are members are encouraged to attend and provide input.

 

May 7, 2019 in Commentary, Meetings, Miscellaneous | Permalink | Comments (0)

Monday, May 6, 2019

An arbitration clause means you're waiving your ability to go to court! Remember that!

A recent case out of New York, Umeh v. Checole, 159884/2018, reminded me of the first time I negotiated a publishing contract (sidenote: I happen to also be a published novelist). The dispute is a straightforward one: the publishing contract contained an arbitration clause, the plaintiff alleges she didn't realize the arbitration clause meant she was giving up her ability to go to court, the court decides that arbitration is favored and the plaintiff wasn't "naive" so her agreement to the contract represented "a clear and unmistakable intent by two willing parties to resolve disputes by arbitration." 

My publishing contract didn't have an arbitration clause, but this case reminded me of it nonetheless because, after the contract was sent to me by my editor, I asked for a couple of changes and sent it back, and my editor replied something along the lines of, "Hey, I was wondering actually if you could explain to me what that part of the contract means, I've never understood." And that was my introduction to the fact that so, so, so many people are entering into contracts that they have no idea what they mean. This was a contract the publishing company sent to me, but there wasn't enough of a communication to non-lawyers in the company what the contract meant. I write fiction for fun, but I think one of the biggest fictions is the one in which we pretend that people understand the contracts they're entering into.  

May 6, 2019 in Commentary, Recent Cases, True Contracts | Permalink | Comments (0)

Monday, April 29, 2019

Would we really say that Weinstein's company's directors didn't approve of his pattern of sexual misconduct?

This, strictly speaking, isn't really a contract case, although there is an employment contract at issue so I guess that's how it got caught in my filter. But I read it and thought that this case is raising important enough issues that we should be discussing them. 

The case is David v. The Weinstein Company LLC, 18-cv-5414 (RA), out of the Southern District of New York, and it's a case centering around the alleged sexual assault perpetrated by Harvey Weinstein on the plaintiff. The story the plaintiff tells is a familiar one to those who have read the Weinstein reporting, that "Weinstein asked her to meet him in his hotel room to discuss potential acting roles, and then, on one occasion, forcibly raped her." This decision isn't so much about Weinstein's conduct, though, as it is about the former directors of Weinstein's companies, who the plaintiff contends "enabled Weinstein's sexual misconduct, making them liable for general negligence and negligent retention or supervision." 

The court dismisses the claims against the directors, and the reasons why were what caught my eye about this case. Plaintiff's allegations were that the directors were aware of Weinstein's harassing behavior toward women, based on a number of things: a written communication within the company calling his behavior a "serial problem" the company had to deal with; the characterization by a company executive of Weinstein's female assistants as "honeypot[s]" to lure actresses into meetings with Weinstein; a formal complaint by an employee about Weinstein's behavior; an employee memo summarizing two years' worth of allegations of sexual harassment and misconduct by Weinstein and characterizing the company as a "toxic environment for women"; the settlement of many sexual misconduct claims against Weinstein; and at least one police investigation into Weinstein's behavior. 

None of the allegations established negligence on the part of the directors, according to the court. First of all, the directors did not owe the plaintiff a duty of care, and there is no case law that directors of a company can be held liable for an employee's tortious act. The plaintiff pointed to the fact that the directors renewed Weinstein's contract in 2015 with a provision that prevented Weinstein from being fired for sexual misconduct as evidence that they were enabling Weinstein's conduct, but the court found that this was "a far cry from them approving of Weinstein's sexual assault." While the court admitted that the directors "were not without moral culpability," their actions were not negligence as a legal matter. 

Nor did the plaintiff assert a claim for negligent retention or supervision. The plaintiff did not show that Weinstein's sexual assault took place on the company's premises, since she asserted it happened at a hotel not affiliated with the directors. While the plaintiff argued that Weinstein used company credit cards to pay to the hotel room and lured her to the hotel room under the guise of a business meeting regarding employment by the company, that was regarding the company, not the directors sued here. 

As a matter of law, the court's reasoning makes sense.

As a matter of recognition of how oppressive power structures work, this decision is terrible.

When I learned negligence way back in law school, I remember so many discussions about the policy behind it, about not wanting to hold people to a generalized duty to protect everyone on the planet, about how we decide proximate causation, about how it's really at heart about what we want to hold people liable for and what we don't. 

So this decision makes sense in terms of worrying about generalized duties, of not dismissing the culpability of those committing the intentional tortious act. But it doesn't make sense in terms of thinking about the type of society we want to live in. The Weinstein reporting tells a story of serial abuse that was systemically protected for years by the power structure around Weinstein. To say that nobody else in the power structure was sexually assaulting women is a true statement of legal fact, but also seems disingenuous at this point. Weinstein's abuse was so widespread and lasted so long not only because of Weinstein but also because of the entire operation around him deflecting culpability for it. 

The negligence analysis in this case feels like it's operating in a vacuum, which is kind of how we teach our students to think, presenting them with discrete hypotheticals, but might not be the best or most effective way to set up a fair legal system that protects the most vulnerable and least powerful in society. The societal discussion about the oppressive system that permitted Weinstein (and others) to perpetrate so much abuse has just begun, and maybe we should include how the legal system interacts with those power structures in the discussion. If negligence is all about policy decisions about who you need to protect and how much, then maybe we should have a policy discussion about how to make those decisions, especially if we're making them in the context of an abusive pattern that might be obscured by looking at things in isolation.  

The plaintiff's allegations in this case contain many damning examples that many people around Weinstein knew about the disturbing pattern of sexual misconduct, and made affirmative choices to find ways to use the power structure to protect Weinstein. I appreciate the court's statement that the directors might be morally culpable but not legally culpable, and I recognize that law and morals are two different things. But I don't know that I agree that the director's actions are "a far cry from them approving of Weinstein's sexual assault . . . ." Given the allegations about what the directors knew and how they reacted to that knowledge, I think we could read their actions as indicating that they were a far cry from disapproving of Weinstein's sexual assault.

April 29, 2019 in Celebrity Contracts, Commentary, Current Affairs, Famous Cases, In the News, Labor Contracts, Recent Cases, True Contracts | Permalink | Comments (0)

Monday, April 22, 2019

Don't just stand there, let's get to it: Second Circuit orders payment of "Vogue" royalties (aside, I hadn't listened to "Vogue" in a while, and it totally started my week off right!)

A recent case out of the Second Circuit, Pettibone v. WB Music Corp., 18-1000-cv, caught my eye because I teach the underlying copyright dispute driving this contractual dispute. You can listen to the case's oral argument here.

Pettibone composed the song "Vogue" with Madonna and entered into a contract with Warner where Warner collected the royalties for the song and split them with Pettibone. In 2012, Pettibone and Warner were sued for copyright infringement. They each had their own counsel and each bore their own costs in successfully defending the lawsuit, both in the trial court and on appeal. (You can read the appellate court decision here. We talk about it in my Transformative Works and Copyright Fair Use class when we do a unit on music.)

After the conclusion of the copyright suit, Warner withheld over $500,000 worth of royalties from Pettibone, claiming that under Section 8.1 of the agreement between Warner and Pettibone, it was allowed to withhold the royalties to pay for its defense of the copyright infringement suit. Section 8.1 read in part, "Each party will indemnify the other against any loss or damage (including court costs and reasonable attorneys' fees) due to a breach of this agreement by that party which results in a judgment against the other party . . . ." 

Pettibone sued, arguing that he had never breached the agreement and therefore Section 8.1 did not permit Warner to withhold any royalties. The district court found that Section 8.1 "unambiguously requires Pettibone to indemnify Warner for the attorneys' fees and costs," and dismissed Pettibone's complaint. 

In another example of ambiguous understandings of ambiguity, the appellate court here reversed the district court's holding, instead finding that Section 8.1 is "pock-mocked with ambiguity." In the Second Circuit's opinion, a better reading of the section was that, if there was no breach, each party should carry its own attorneys' fees and costs. In fact, Section 8.1 went on to read that "each party is entitled to be notified of any action against the other brought with respect to [the song 'Vogue'], and to participate in the defense thereof by counsel of its choice, at its sole cost and expense" (emphasis added). A fair reading of the section, the Second Circuit said, was that it required Pettibone to indemnify Warner if Pettibone breached the contract, but not otherwise.

Warner was the party that drafted the contract, and could easily have stated that indemnification happened in the event of any allegations, not just any breach. That was not, though, how the contract was drafted. 

The effect of Warner's argument would be to shift a million dollars' worth of attorneys' fees onto Pettibone, just because there was a lawsuit, "regardless of merit or frivolousness." The Second Circuit found that to be "an extraordinary result" not justified by the section's ambiguous language. Therefore, the Second Circuit ordered reversal of the district court's dismissal, judgment for Pettibone, and calculation of the royalties improperly withheld from Pettibone, as well as consideration of Pettibone's request for attorneys' fees in connection with the instant action and appeal. 

April 22, 2019 in Celebrity Contracts, Commentary, Film Clips, Law Schools, Music, Recent Cases, Teaching, True Contracts | Permalink | Comments (0)

Monday, April 1, 2019

Some express condition language for you

When I teach express conditions, we talk a lot about the language that you use to create them. A recent case out of the Northern District of Ohio, Health and Wellness Lifestyle Clubs, LLC v. Raintree Golf, LLC, Case No. 1:17CV2189 (behind paywall), has some examples. The agreement in question read that it was "contingent upon Purchaser's obtaining and delivering to Seller a written unconditional commitment or commitments," and continued that "the obligations of Seller to consummate the transaction . . . shall be subject to the fulfillment on or before the date of Closing of all of the following conditions," both of which created an express condition that a written unconditional commitment needed to be delivered. Because there was never any such written unconditional commitment in this case, the dependent obligations never became due.  

April 1, 2019 in Commentary, Law Schools, Recent Cases, Teaching, True Contracts | Permalink | Comments (0)

Sunday, March 31, 2019

An interesting case about reformation...and tricking ourselves about our pasts

Reformation is one of those doctrines that I love to have class discussions over, really interrogating when (and whether) courts should employ it. A recent decision out of Delaware, In re 11 West Partners, LLC, C.A. No. 2017-0568-SG, has a nice reformation discussion in clear, straightforward language that I think could be useful in class. I especially like the Court's remarks about "the conclusions of social scientists and psychologists that witnesses may come to believe in factual scenarios beneficial to them . . . ." It's a gentle and sympathetic decision regarding "honorable" men whose recollections of the truth all differ. 

h/t to Eric Chiappinelli at Texas Tech for forwarding us this case!

March 31, 2019 in Commentary, Law Schools, Recent Cases, Teaching, True Contracts | Permalink | Comments (0)