ContractsProf Blog

We *think* there's an NDA. Or is there?

Someday I will blog about things other than NDAs again but I feel like every time I open the internet there's another story about an NDA. Everyone today was talking about last night's interview of Stormy Daniels on Jimmy Kimmel Live!, which was a bizarre series of answering-questions-with-questions and playing coy and talking around the main issue, which was her alleged affair with Donald Trump in 2006. You can find lots of articles online; here's one that lays it out. Those trying to summarize the interview generally seem to assume that Daniels must be restricted by an NDA, because she could say if there wasn't an NDA, but it's the proving of a negative, basically; the reporters are trying to make sense of the blank space the non-answers leave in their wake. 

It's all had me wondering about the role NDAs played--or maybe more importantly, didn't seem to play?--during the Clinton impeachment. Lots of details about Clinton's sexual harassment history came out during the impeachment, and from my brief research into it, it doesn't seem like there were any NDAs in play. Does anybody have other information about this? How do the number of NDAs around Trump in play today shift our perspective, conversation, and legal analysis? 

Whitefish Energy - Strongarming Puerto Rico into Contractual Acceptance and Compliance?

As reported on The Hill and in several other national and international news outlets, tiny Montana energy company Whitefish Energy – located in Interior Secretary Ryan Zinke’s very small hometown – stands to profit greatly from its contract with the Puerto Rico Electric Power Authority. That’s fine, of course. However, highly questionable issues about the contract have surfaced recently.   For example, Whitefish very famously prohibited various government bodies from “audit[ing] or review[ing] the cost and profit elements of the labor rates specified herein.”

What were those? The Washington Post reports that under the contract, “the hourly rate was set at $330 for a site supervisor, and at $227.88 for a ‘journeyman lineman.’ The cost for subcontractors, which make up the bulk of Whitefish’s workforce, is $462 per hour for a supervisor and $319.04 for a lineman. Whitefish also charges nightly accommodation fees of $332 per worker and almost $80 per day for food.” Another news source notes that “[t]he lowest-paid workers, according to the contract, are making $140.26 an hour. By comparison, the minimum wage in Puerto Rico is $7.25 an hour … [T]he average salary for a journeyman electrical lineman is $39.03 per hour in the continental U.S. However, a journeyman lineman on Whitefish Energy's Puerto Rico project will earn $277.88 per hour.”

Little wonder why the company did not want anyone to “audit or review” its labor rates. If it wasn’t for the apparent “old boy”/geographical connections that seemed to have led to this contract to have been executed in the first place, hopefully no Puerto Rican official would have accepted this contract in the form in which it was drafted.

But it doesn’t end there. When the San Juan mayor called for the deal to be “voided” and investigated, Whitefish representatives tweeted to her, “We’ve got 44 linemen rebuilding power lines in your city & 40 more men just arrived. Do you want us to send them back or keep working?”

To me, this entire contract to violate several established notions of contract law such as, perhaps, undue influence or duress (in relation to contract formation but perhaps also, if possible, to continued contractual performance), bad faith, perhaps even unconscionability, which is a alive and well in many American jurisdictions.

This could work as an interesting and certainly relevant issue-spotter for our contracts students. It also gives one a bad taste in the mouth for very obvious reasons. It will be interesting to see how this new instance of potentially favoring contractual parties for personal reasons will pan out.

Los Angeles Allegedly Violates Free Speech Rights with Entertainment Contracts

Pershing Square in downtown Los Angeles is an outdoor area that is regularly the home of free summer concerts and demonstrations of various kinds throughout the year. You would think you could snap as many photos as you wanted of events there since it is an outdoor, public area, right?

This past summer, the answer was no. A photojournalist wanted to take pictures of, among others, the B-52s. However, he was informed of a policy that had been set up with the performers per contractual agreement. The policy barred professional photography equipment, albeit not cell phone usage, from the square during concerts.

ACLU has complained to the Los Angeles City Attorney and the General Manager of the Department of Recreation and Parks, claiming that the city does not have a right to contract away the general public’s First Amendment rights because some performers want it that way.

How do you see contractual rights intersecting with the First Amendment in the government contracting context? Comment below!

Prison Telephone Service Provider Continues to Lose on Enforcing Arbitration Provision

I have already blogged about a related case out of the Western District of Arkansas, in which the court concluded that prison inmates did not consent to arbitrate when they funded their telephone accounts to enable them to make calls. This case out of the Third Circuit, James v. Global Tellink Corp., No. 16-1555, affirms a similar conclusion by the District of New Jersey. To refresh your memory, GTL provides telephone services to prison inmates. Inmates sign up for accounts and deposit funds into the account, either through GTL's website or through its automated telephone service. When interacting with GTL's automated telephone service, users are alerted that their transactions are governed by the terms of use found online but they are not required to indicate their assent to those terms. Inmates have brought a class action alleging that GTL's charges are unconscionable. GTL moved to compel arbitration based on its online terms of use, but the district court found that those who used GTL's automated telephone service never agreed to be bound by those terms of use. 

The Third Circuit agreed with the district court's conclusion. The subject of how to form a binding contract through interactive telephone services was a new and different one, as most of these cases involve websites these days. GTL argued that the inmates manifested the requisite assent by continuing to use the telephone services after being notified there were terms of use. But the inmates never had to perform any affirmative act to indicate their assent, and they were never told that their continued use alone would constitute such assent. None of the inmates in question who used the automated telephone services had ever taken the necessary extra step to access GTL's website to see the terms of use, so they were never presented with the terms of use or the arbitration provision in question. The inmates simply never received the terms, and were never told that use of the telephone system would bind them to the terms. 

Inmates Didn't Consent to Be Bound to a Contract Every Time They Used the Telephone

Myanna has already blogged about the problem of inmate telephone rates being set unreasonably high. Myanna's blog post was about a dispute in California but a recent decision out of the Western District of Arkansas, In re Global Tel*Link Corporation ICS Litigation, Case No. 5:14-CV-5275 (behind paywall), deals with the same issue. (There are several of these litigations, as well as other government debates about regulation of these rates.) In the Arkansas decision, the court refuses to compel arbitration. 

Global Tel*Link's allegation was that the inmates consented to the terms of use when they funded their accounts to enable them to make phone calls, and the terms of use contained an arbitration clause. Every time the inmates put money on their accounts with Global Tel*Link, they heard a message similar to the following: 

Please note that your account, and any transactions you complete with GTL or any of its affiliates, are governed by the terms of use and the privacy statement posted at www.connectnetwork.com . The terms of use and the privacy statement were most recently revised on March 30, 2015.

The court determined, however, that a reasonable person would not have understood this message as referring to a contract and as constituting consent to be bound by that contract, since it never used any contract buzzwords like "contract," "consent," "agree," "assent," "offer," "accept," etc. The court said that, as far as the inmate listening to the message was concerned, the terms of use and privacy statements could have been just generally applicable legal rights imposed by regulators. The court characterized Global Tel*Link's behavior as basically hiding the contract ball: Global Tel*Link could have straightforwardly said the inmates were entering into a contract but instead "invite[d] [them] to visit a website where [they] might accidentally stumble across this fact." (I went to connectnetwork.com. The terms of use are located at the bottom of the page and required me to scroll to find them, and I just blogged about a case where the persistent location of the terms of use hyperlink at the bottom of the page didn't constitute enough notice.)

Because the inmates never signed anything, never clicked or punched any button signifying acceptance of contract terms, never had an opportunity to review the terms of use prior to using Global Tel*Link's services, and would not reasonably have understood the message to be referring to contractual terms, the inmates did not assent to the contract and thus are not bound by the contract's arbitration provision. 

Iowa Bill Proposal: To Get Faculty Position, Must Have Correct Political Affiliation

Just when you think the political debacle in this country cannot get anymore grotesque, here's a recent proposal by Iowa State Senator March Chelgren: to counter the liberal slant at Iowa's three public universities, the job candidates' political affiliations would have had to be considered.   Why?  To ensure "balanced speech" and avoid the "liberal slant" in public universities these days. 

Under SF 288, the universities would use voter registration information when considering job applicants, and could not make any hire that would cause declared Democrats or Republicans on the faculty to outnumber the other party by more than 10%.

Demonstrating the very deep and logical (not!) argument, check this line of thinking: Chelgren said professors who want to be hired could simply change their party affiliation to be considered for the position.  "We have an awful lot of taxpayer dollars that go to support these fine universities," he said. "(Students) should be able to go to their professors, ask opinions, and they should know publicly whether that professor is a Republican or Democrat or no-party affiliation, and therefore they can expect their answers to be given in as honest a way possible. But they should have the ability to ask questions of professors of different political ideologies."

Duh!

Providing "Retirement Benefits" Isn't the Same as Providing Health Insurance Coverage

A recent case out of New York, Wilson v. New York State Thruway Authority, 931-16, deals with the collective bargaining agreement between the New York State Thruway Authority and its retirees over whether the Thruway Authority was contractually bound to provide health insurance coverage to the retirees at no cost. The retirees had enjoyed free health insurance until April 1, 2016, when the Thruway Authority required them to start paying six percent of their premiums. The retirees wanted to introduce evidence that the parties understood that the Thruway Authority was going to pay all of their health insurance premiums, pursuant to the collective bargaining agreement. 

The problem was that the contract between the parties contained no such obligation and the court found that the contract was unambiguous on its face. All that the contract stated was that the Thruway Authority should provide "retirement benefits" made available by New York statutes the contract went on to enumerate. None of those statutes contained provisions requiring the Thruway Authority to provide health insurance coverage. In fact, health care benefits were governed by different New York statutes, not the ones enumerated, and New York state courts had long pointed out that "retirement benefits" and "health care benefits" were two different things governed by two different statutes under New York law. Given that, the court concluded that "retirement benefits" was an unambiguous term of art that the parties knew the definition of, given their particular citation of New York statutes to define it. The court refused to allow extrinsic evidence in the face of this lack of ambiguity. If the retirees had wished the Thruway Authority to pay for their health insurance premiums, they should have included an express provision saying that in the collective bargaining agreement, as many other collective bargaining agreements construed under New York law had done. 

This decision is fairly straightforward as a matter of the law: finding that the term was unambiguous (and indeed basically defined within the document through the statutory citations) and so therefore extrinsic evidence was unnecessary to decide the breach of contract action (the court here concluded that, with no obligation to pay the health insurance premiums, the Thruway Authority had not breached the contract). However, it is a legal dispute that we might see more and more of, as deals with retirees are reevaluated and altered in an age of shrinking budgets. 

Apollo 11 Moon Rock Bag Stolen, Sold to BFPV at Auction, Now Government Wants it Back

In times with enough serious and often depressing news, I thought I would bring you this little neat story (with profuse apologies to everyone, including my co-bloggers, for my virtual absence for a few months):

An Apollo 11 bag used to protect moon rocks samples was stolen by Max Ary, a former curator convicted in 2006 of stealing and selling space artifacts that belonged to the Cosmosphere space museum in Hutchinson, Kansas. Mr. Ary subsequently served two years in prison and was sentenced to pay more than $132,000 in restitution. Space artifacts found in his home, including the Apollo 11 bag, were forfeited to meet that debt. However, the Apollo 11 bag was incorrectly identified as Ary's and subsequently sold to Nancy Carlson for $995 in February 2015 at a Texas auction held on behalf of the U.S. Marshals Service.

The government petitioned the court to reverse the sale and return the lunar sample bag to NASA, alleging that due to a mix up in inventory lists and item numbers, the lunar sample bag that was the subject of the April 2014 forfeiture order was mistakenly thought to be a different bag and that no one, including the United States, realized at the time of forfeiture that this bag was used on Apollo 11. The government cited cases where federal courts vacated or amended forfeiture orders, including where inadequate notice was provided to a property owner, as a justification for the bag's return to NASA.

Judge J. Thomas Marten ruled in the U.S. District Court for Kansas that Ms. Carlsen obtained the title to the historic artifact as "a good faith purchaser, in a sale conducted according to law." With her title to the bag now ordered by the Kansas court, Carlson needs to file a motion in the U.S. District Court for Texas for its return from NASA's Johnson Space Center in Houston. However, “[t]he importance and desirability of the [lunar sample] bag stems solely and directly from the efforts of the men and women of NASA, whose amazing technical achievements, skill and courage in landing astronauts on the moon and returning them safely [to Earth] have not been replicated in the almost half a century since the Apollo 11 landing," the judge wrote … Perhaps that fact, when reconsidered by the parties, will allow them to amicably resolve the dispute in a way that recognizes both of their legitimate interests," J. Marten wrote.

H/t to Professor Miriam Cherry for bringing this story to my attention.

City Can't Delegate Duties as Owner of Apartment Units

If you're looking for an example of duties unable to be delegated, a recent case out of the Middle District of Florida, Floyd v. City of Sanibel, Case No. 2:15-cv-00795-SPC-CM, has one for you. In the case, the Floyds live in a housing unit owned by the City of Sanibel. The City claimed to have delegated its housing duties to Community Housing & Resources ("CHR"), with whom the Floyds entered into a lease that named CHR as its landlord. However, the City was heavily involved with both funding CHR and making decisions on everyday operations for CHR's properties, undermining the assertion that it wasn't involved with the contract at issue. Even without that involvement, though, Florida law dictates that property owners cannot delegate their duties to provide reasonably safe premises by hiring another entity to operate and maintain the property. Therefore, the court allowed the Floyds' claims against the City to stand, holding the City to the lease as CHR's principal. 

Air Force None?

Recently, Donald Trump famously tweeted that “Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!”  Trump has not said why he believes the planes will cost "more than $4 billion." Boeing says it currently has an Air Force One contract worth $170 million.

This raises several contractual issues that could be used as an interesting issue-spotting practice for our students. At first blush, it seems like an impossible attempt at a breach of contract that would, conversely, at least give very reasonable grounds for insecurity if not constitute an anticipatory repudiation outright.

Needless to say, Trump’s remark that “[w]e want Boeing to make a lot of money, but not that much money” finds no support in contract law. One contractual party has no control over how much money the other party should make. One would have thought that Trump – as a staunch “market forces” supporter – would have understood and embraced that idea, but that either was not the case or he is flip-flopping in that respect as well.

Digging deeper into the story, however, it turns out that “not even [Boeing] can estimate the cost of the program at this time, since the Pentagon has not even decided all the bells and whistles it wants on the new Air Force One." Further, “without knowing all the security features, it is hard to estimate the cost … and the Air Force isn't even sure whether it wants two or three of the planes.” Does a contract even exist at this point, then, when the essential terms have apparently not been mutually agreed upon, or is there simply an unenforceable agreement to agree? A valid argument cold be made for the latter, I think.

Mr. Trump has been accused of overestimating the cost of the planes. Does he, however, have a point? “So far[,] the Air Force has budgeted $2.9 billion through 2021 for two new Air Force Ones.” It is not inconceivable that the price tag may, in these circumstances, run higher than that. That circularity goes back to the essential terms – the price in this case – arguably not having been decided on yet.

There might, of course, be other issues in this that I have not seen in my admittedly hasty review of the story, but it is interesting how the media jumps at a legally related story without thoroughly or even superficially attempting to get the law right.

Considering Parol Evidence to Decide If There Was Ever a Contract

One of the things I find students struggle with when it comes to parol evidence is determining for what purpose they are considering the evidence. A recent case out of Maryland, Wiencek + Associates Architects + Planners v. Community Homes Housing, Inc., No. 0642 September Term 2015 (behind paywall), has a nice discussion on this. 

In the case, the parties both signed a document that was called "Agreement to Redevelop and Preserve Affordable Housing." The contract contained an integration clause. Both parties also admitted later that they had signed the document because it was required to obtain financing from the Department of Housing and Urban Development ("HUD"), which the parties had both desired. HUD, however, refused to guarantee any financing for the project. Community Homes then took the position that there was no contract with Wiencek because the contract was not to take effect unless HUD financing was received. Wiencek disagreed and sued Community Homes for breach of contract.

The trial court considered parol evidence to determine whether the contract between the parties was enforceable. Wiencek argued this was improper because of the contract's integration clause. But Community Homes noted that the parol evidence was not being considered to add a term to the contract; rather,  it was being considered to determine if the contract even existed in the first place, and therefore was permissible. The court agreed with Community Homes that considering parol evidence was perfectly acceptable in this situation. The court noted that it could not enforce the contract's integration clause when what it was trying to determine was whether the contract containing the integration clause even existed. 

The parties here had agreed orally that the contract would not come into effect unless HUD guaranteed financing. Although there was nothing in the contract about that, the parol evidence admitted as to the intent of the parties was clear. The contract was only signed in order to try to obtain the HUD financing; once that objective had failed, the parties did not intend the contract to be enforceable any longer. 

Wiencek tried to make an argument that the law should have a policy to deter "fictitious" contracts. In effect, Wiencek claimed that the court was allowing the parties to "pretend" to have entered into a contract to try to "trick" HUD into providing financing, with no intention of actually entering into a contract with each other. The court, however, did not see any reason to enforce the contract between the parties in this circumstance. It was the court's view that, if HUD felt it had been harmed by the representation that there had been a contract between the parties (even though the court did not decide one way or the other whether that representation was incorrect), HUD should seek a remedy from the court for the harm, not Wiencek. 

Outlandish Contract Decision re. ADA-related Construction

How is this for a most bizarre contract law decision: The Chicago Housing Authority (“CHA”) contracted with architectural and engineering company DeStefano and Partners (“DeStefano”) for consulting services in connection with the construction of seven multifamily residential buildings. CHA required a certain percentage of the homes to comply with Section 504 of the Rehabilitation Act of 1973 and other federal law (some of the housing was to be accessible by mobility impaired individuals, some by elderly residents). Among other things, DeStefano was made contractually aware that the company was to “certify that all work was performed under the direct supervision of the Project Architect and that it conforms to… the American with Disabilities Act of 1990 … [and] Section 504 of the Rehabilitation Act of 1973.”

During the construction, CHA was notified by HUD that the project did not meet the various federal requirements. CHA hired another architecture firm to perform the work necessary to comply with its obligations under the voluntary compliance agreement with HUD. CHA incurred more than $4.3 million to bring the buildings into compliance with federal standards and brought suit against DeStefano for material breach of contract.

DeStefano defended itself by, at bottom, arguing that since CHA had a nondelegable duty to comply with the federal accessibility standards, it should not be able to recover damages from DeStefano for CHA’s failure to do so. In other words: “It’s your own fault that you have this problem, not ours, even though we were the designers and the problem was with the design.” Yah.

But wait, it gets better than that: the court agreed! It apparently bought wholesale defendant’s argument that “permitting CHA to proceed with its state-law breach of contract action would discourage CHA from fulfilling its own obligations to prevent discrimination under Section 504 and the ADA, directly undermining the goal and purpose expressed by Congress in enacting those statutes.” It also stated that “notably, however, … there are no provisions within the ADA, or its accompanying regulations, that permit indemnification or the allocation of liability between the various entities subject to the ADA.” The court found that CHA’s duties were, as mentioned, nondelegable and, because the duties were imposed on CHA by HUD, CHA’s failure to comply was the problem. “CHA was a ‘wrongdoer’ in the sense that it failed to ensure the subject premises complied with the applicable federal accessibility standards in order to prevent discrimination.”

Wait a minute! So, in trying to make sure that the housing in fact complied with the law, the housing authority was found to have violated it! That’s just crazy.

This case may work as a good example if you want to train your students how to identify faulty reasoning and logic by courts.

The case is can be found here. Hat tip to Justen Hansen of WesTech Engineering for bringing this to my attention. http://www.westech-inc.com/en-usa

Trump: Contractual Landlord and Lessee at the Same Time

The lease for the Trump International Hotel, housed in Washington’s historic Old Post Office Pavilion owned by the federal General Services Administration (“GSA”), contains a clause forbidding elected officials from involvement. Trump, as president, essentially would be both landlord and tenant.

That may be an ethical problem as well as a federal contract law violation. Trump would oversee the GSA and appoint its administrator ― a conflict of interest with his hotel interest. GSA officials are looking into the matter.

Steven Schooner and Daniel Gordon, former government officials who specialize in federal contract law, have recommended that GSA “immediately end the hotel lease relationship, before Trump becomes president” to avoid ethics problems. Of course, if GSA terminates the lease contract, it risks litigation potentially with… Trump as a winner.

However, says Schooner, that’s a risk worth running. “In the end, it’s just a frigging lease.” It would also be a president heavily involved in private business affairs over which he would exercise significant power, real and perceived. But that may just be how our country is developing these days. We frown on similar behaviors in relation to other countries, but when it comes to our own, we are apparently either becoming accepting of unacceptable behaviors or powerless to do much about them.

Teacher loses breach of contract action against school district

A now formerly tenured teacher with the Saint Paul Public School District http://www.spps.org/domain/1235 had several complaints lodged against him by students. The teacher was alleged to have been racially discriminative towards certain students and to have exhibited “other inappropriate conduct towards students.”

The story continued as follows: the district placed the teacher on paid administrative leave pending further investigations. The teacher obtained legal representation from a union attorney. The school’s investigations uncovered “additional issues” in relation to the teacher and notified the teacher that his termination would be proposed at a school board meeting. The teacher’s attorney advised him that he could (1) acquiesce in the termination, (2) negotiate a separation, or (3) attend a hearing.

The teacher subsequently testified that he felt like a gun had been placed to his head and that he had been forced to resign. Prior to the district taking any action against him, he sent a draft resignation letter to the district, requesting that in exchange for his resignation, he would be allowed to take his sick days, would receive a clean employment file, a letter of recommendation, and an opportunity to continue teaching driver’s education.

The dispute took some other twists and turns, but ended up with the teacher being upset that he could not continue as a driver’s ed teacher and attempting to withdraw a resignation letter that he had submitted. The district declined this. The teacher filed suit for duress and misrepresentation.

As for the duress, the teacher claimed that the district didn’t have the actual intent to fire him and no grounds to do so either. He also alleged that the district had promised not to report him if he resigned, which was a violation of Minn. Stat. § 122.A.20. He also claimed economic duress.

Strangely, economic duress is not recognized in Minnesota. Only “when an agreement is coerced by physical force or unlawful threats … which destroys the victim’s free will and compels him[/her] to comply with some demand of the party exerting the coercion” may suit lie. Bond v. Charlson, 374 N.W.2d 423, 428 (Minn. 1985); Wise v. Midtown Motors, 42 N.W.2d 4040, 407 (1950).

As for the regular duress, the court found that the teacher could not demonstrate that his free will had been destroyed. The court found that doing so requires more than “a scintilla of evidence” and that the teacher simply had not presented enough evidence of any wrongdoing by the district. The court also emphasized the fact that the teacher was represented by and received counsel from a union attorney skilled in these very matters. The court found no misrepresentations made by the school district.

Intimidating procedures or not: if one wishes to retain a chance to keep a job even in times of severe allegations, it becomes necessary to stand by one’s rights at all times until, perhaps the bitter end. The duress claim does indeed seem very weak here - almost fabricated after the fact.

What seems more surprising is the fact that Minnesota does not recognize economic duress. In times when the employment situation for many is still not the easiest (understatement), that’s a tough limitation on the legal rights of employees. This is exacerbated by the fact that employees have recognized property interests in both their jobs and teaching licenses. But of course, “where there’s smoke, there’s [often] fire.” At least in this case, it does seem that there was underlying wrongdoing by the teacher, so it’s a bit difficult to feel too sorry for him as well.

The case is Olmsted v. Saint Paul Public Schools, 2016 WL 4073494.

Microsoft Does Marijuana

In a move that demonstrates how contracts for various aspects of marijuana products and services are going mainstream, Microsoft Corp. has accepted a contract to make marijuana-tracking software available for sale on its cloud computing platform. The software is developed by “cannabis compliance technology” Kind Financial and allows regulators to track where and how much marijuana is being grown, sold or produced in real time. In turn, this lets the regulators know how much sales and other tax they should be collecting and from whom (maybe this is the beginning of the end of some growing marijuana plants in state and national parks to hide their activities from the government).

This contract – called a “breakthrough deal” because it is the first time that Microsoft ventures into the marijuana business - may end up enabling the software developer to capture as much as 60% of this very lucrative market. (Other companies with government contracts often end up with such a large market share.)

How did the company strike such a lucrative deal? You guessed it: by networking. Kind’s CEO was introduced by a board member to an inside contact in Microsoft.

Happy semester!

You Might Think City Buses Don't Have a System, But They Totally Do! (it just might be copyright infringing)

 

Entities and people come together, do business, have disagreements, go their separate ways. It happens all the time. But nowadays, since so many things have embedded software, these break-ups of business relationships have copyright implications. If you don't have a license to continue using the embedded software, when you break up with another business, that means you have to stop using whatever contains the software, too. Theoretically. 

A recent case out of the Middle District of Tennessee, ACS Transport Solutions, Inc. v. Nashville Metropolitan Transit Authority, 3:13-CV-01137, dealt with this issue. The Nashville Metropolitan Transit Authority ("MTA") had contracted with ACS to develop a system for MTA to manage its buses. The system ACS created contained copyrighted software that ACS expressly licensed to MTA. A few years after the development of the system, MTA discontinued its relationship with ACS, but it continued to use the system that contained the embedded software. ACS contacted MTA and told it that it was using the software without a license and infringing ACS's copyright. Nevertheless, MTA continued to use the system with the embedded software, and so ACS eventually brought this lawsuit. 

MTA argued that, when it terminated its relationship with ACS, it did not terminate the license to use the software, and so it was still properly licensed. However, MTA's relationship with ACS was governed by a contract, within which was the software license. Terminating the relationship set forth by that contract, the court found, necessarily terminated the software license also found in that contract. 

MTA additionally argued that it had paid for the system and that therefore it should be entitled to use the software within the system indefinitely. ACS did agree that MTA had paid for the system and would not have owed ACS any further payments...if ACS and MTA had fulfilled the rest of their contractual obligations. Instead, ACS argued, MTA breached its obligations. Therefore, ACS rescinded MTA's license to use the software. 

There was some slim hope for MTA. MTA argued that it had an implied license to use the software for a "reasonable" period of time while it transitioned to the new software of the company it hired to replace ACS. The court seemed skeptical that the length of time MTA had used ACS's software after terminating ACS (it ended up using the software for more than two years after terminating ACS) was reasonable; the court implied that, even if MTA had had an implied license to use the software while it transitioned, MTA's use had exceeded that implied license's scope. However, the court found this to be a material fact in dispute and so inappropriate to resolve at the summary judgment stage. 

Under the terms of its contract with ACS, MTA received only a non-exclusive, revocable license for the software. If MTA had wanted more protection, MTA should have negotiated better license terms. ACS, of course, might never have been amenable to granting better license terms. But let this case be a lesson: Many things are going to come with embedded software these days, and that software is copyrighted. You're going to need to dot your copyright i's and cross your copyright t's regarding this software; don't lose sight of that by focusing instead on the larger product you're buying. MTA may have thought of itself as buying a system, but it really needed to think of itself as buying the software within the system. 

Phone Companies Still Trying to Take Advantage of Callers

How does paying 18 cents a minute for a local phone call in 2015 sound to you – fair enough or a scam?  How about 23 cents a minute for a non-local call?  If you think that no one can possibly charge that much today or that no one in their right minds would pay it, think again (ok, at least the former).

In Orange County, California, jails, the average phone call costs just that.  In return for providing phone service in a county’s jail system, a telecommunications company typically guarantees the county a multi-million dollar “commission” as well as a percentage of the revenue.  For example, Alabama company Global Tel-Link guarantees a payment of $15 million or two-thirds of phone revenue, whichever is greater, to Los Angeles County.  To be able to pay such a high price, the phone companies of course pass the cost on to the end clients; the inmates in at least Southern California counties. 

The inmates and their families have had enough.  They filed suit recently against Los Angeles and nearby counties alleging that the fee for inmate telephone calls are “grossly unfair and excessive” and amount to an illegal moneymaking scheme for local governments.

Before you ask yourself who is calling the kettle black, as I must admit I did when I first learned of this story, think of this: criminal recidivism is greatly reduced by family communication.  The Federal Communications Commission last month capped local call rates and trimmed the cap on interstate long-distance calls for this and other reasons.  Mothers with husbands in jail have paid several thousand dollars to telecommunications companies so that their children can talk to their fathers, undoubtedly a benefit to not only the families, but also society in the long run.

Of course, the inmates have few alternatives as cell phones are very typically not allowed in jail.

It continually amazes me how much Americans are willing or have to pay for phone service, Internet service, and cable TV service.  In the case of inmates, of course, they have little choice.  To avoid paying large monthly fees for cell phone service, I have kept my “dumb phone,” but instead find myself annoyed at still, in 2015, not being able to get more selective cable TV for only those stations I truly watch (the news, if you can call it that these days).  Monopolies or not: communications companies still typically have the upper hand in contractual bargaining situations.

Weekly News Roundup

In breaking Bieber news, HuffPo reports that Justin Bieber (pictured, left) claimed breach of contract in canceling a scheduled appearance in Montreal.  The venue where Bieber was scheduled to perform seems to belieber the young artist, as it posted on its Facebook page a notice that neither it nor Mr. Bieber were liable for the cancellation.  Bieber himself tweeted the cancellation, specifically referring to the promoter's breach (and to lying, but we prefer the legal jargon).

In Presidential candidate news, the Wisconsin Gazette reported that Wisconsin taxpayers might have to pay $50 million in damages because Governor Scott Walker (pictured, right) breached a contract that his predecessor had entered into to modernize the states rail service.  According to the Gazette, Spanish train-maker Talgo sued the state for $66 million.  The case settled, with the state agreement to pay nearly $10 million on top of the $42 million it had already paid for trains that it never received. 

The Washington Post reports that a Maryland firm, CNSI, that lost a $200 million contract when its Senior Vice President blew the whistle on irregularities in the award of the contract.  CNSI won a contract to process medicaid claims for the state of Louisiana while one of its former executives was Louisiana's Secretary of the Department of Health and Hospitals.  The contract was cancelled in 2013 and the Secretary of the Department of Health and Hospitals has been indicted for perjury.  CNSI claims that the whistle blower was a disgruntled employee who breached his contract and tortiously interfered.  An investigation into possible wrongdoing by CNSI in connection with the contract is ongoing.

Weekly News Roundup

According to this report in the Chicago Sun Times, The Chicago Teachers' Union (CTU) is calling "strikeworthy" a proposal by Chicago Public Schools (CPS) CEO Forrest Claypool that teachers pay their full pension contributions.  The proposal would result in a seven percent pay cut according to CTU PresidentKaren Lewis.  The CTU had previously agreed to a seven percent "pension pick-up" in lieu of a pay raise.  Claypool now claims that there is no solution to CPS's $9.5 billion pension crisis that does not involve an end to the pick-up.  Chicago teachers will likely return to work without a contract and could strike at any time.   Mayor Rahm Emanuel (pictured) has proposed phasing out the pick-up over a period of years in an attempt to ease the blow.

The Los Angeles Times reports that UC San Diego and the University of Southern California (USC) have filed competing lawsuits in a battle over control of a long term research project that seeks to develop treatments for Alzheimer's.  A researcher at UC San Diego switched his affiliation to USC and has sought to take some of the project's funding with him.   In early rounds, a San Diego judge has sided with UC San Diego on ownership of the project, including databases relevant to the project's ongoing research.  Eli Lilly & Co. had pledged up to $76 million to UC San Diego to test a new Alzheimer's medication that the company is developing.  Lilly now plans to move those fund to USC's new institute.  The future of this research project seems caught in the cross-hairs of competing claims to contractual entitlement to both funding sources and intellectual property.

The Business Insider reported last week that Fox Sports analyst Craig James is suing the network, alleging that he was fired for voicing his opposition to gay marriage.  James alleges breach of contract and discrimination.  His termination, days after he was hired, allegedly relates to a statement he made in 2012 when he was running for U.S. Senate that gays and lesbians would have "to answer to the Lord for their actions."

Weekly News Roundup

In the continuing fallout from Donald Trump's Presidential candidacy (photo right by Michael Vadon via Wikimedia Commons), Trump is now suing celebrity chef Jose Andres.  According to the Washington Times, Andres was to open a restaurant in Washington, DC's old post office building, which will soon be the Trump International Hotel.  He now claims that Trump's anti-immigrant comments make it impossible for him to do so.  It seems that Trump's attorneys' response is to claim that his views on immigration were well known and consistent and should not have come as a surprise to Mr. Andres.  The lawsuit seeks $10 million in damages.

In other Presidential candidate news, three unions representing New Jersey public employees are suing the state for breach of contract.  The suit arises out of Governor Chris Christie's efforts to address a budget shortfall by cutting contributions to the state pension fund.  Excellent coverage of this suit and its background can be found in the Winnipeg Free Press here.

The Fay Observer reports that Intersal, a company that discovered the wreck of Blackbeard's ship of the coast of North Carolina, is suing North Carolina.  The suit alleges that the state has breached a contract pertaining to the use photos and video relating to the wreck and seeks $8.2 million in damages.