ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Tuesday, May 21, 2019

Information Asymmetries Lead to Women Being Underpaid

Democratic presidential candidate Kamala Harris has revealed a plan that would overhaul American discrimination laws to ensure that women and men are paid the same for the same work. Unknown-1

Under the plan, companies with 100 or more employees would, among other things, be required to obtain a federal certification showing they are not underpaying women.  If they fail to do so, they may be fined.  The burden would be on the employers to show that any pay gap is based on merit, performance, or seniority.  If companies discriminate, they would be fined 1% of their average daily profits for every 1% of their average daily profits for every 1% gap that exists between the gender-based pay differential.  The plan would also bar employers from asking job applicants about their salary history and ban forced arbitration in pay discrimination disputes.

But is this really necessary?  Can’t employees themselves contract around this problem in a free marketplace? Unknown

Sadly, the answer is no. Women who work full time are paid an average of 80 cents for every dollar paid to men.  For black women, the figure is 61 cents.  For Latinas: only 53 cents.  And we are talking about pay for the same jobs; not educational or other relevant differences.

Of course, this is just a proposal from a political candidate who at this point in time appears unlikely to win the race.  But it raises an important, yet sadly not new, contractual problem, namely that of disparity in bargaining positions.  As the situation is now, much of the burden of avoiding this problem is on the potential or actual employee.  If a woman needs a job, how is she going to ensure that she is, in effect, paid the same as her fellow male workers?  In other words, how would she even find out what males earn in a particular job?  She can’t. And the pressure of adding one’s salary history is also known to create a bargaining inequality.  This is an example of information asymmetry; a situation in which government action might help ensure a better situation for individuals who have proved unable to obtain that situation contractually.  This is a political issue that will, of course, have to be decided by legislators.  The free market is not producing an acceptable situation here as it is unacceptable that employers pay their employees differently simply because of gender. The fact that race makes the pay disparity even greater makes matters worse.

May 21, 2019 in Contract Profs, Current Affairs, In the News, Labor Contracts, Legislation | Permalink | Comments (1)

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)

Wednesday, April 17, 2019

Reminder: unconscionability requires both procedural and substantive

A recent case out of the Northern District of California, Sanchez v. Gruma Corporation, Case No. 19-cv-00794-WHO, is a good case to point to to remind students that unconscionability has both procedural and substantive sides, and you need to have both. In the case, the court admits that the plaintiff's account of the signing of the contract raised procedural unconscionability issues: the plaintiff alleged that he was given no choice, was told if he did not sign the contract he could not work at the company, was not told what the contract really meant, and was given no opportunity to review the contract. However, this procedural unconscionability ultimately didn't matter, because the court ruled the contract was not substantively unconscionable. There was one provision the court found unenforceable but the court severed that provision and enforced the rest of the agreement. 

 

 

April 17, 2019 in Labor Contracts, Recent Cases, Teaching, True Contracts | Permalink | Comments (0)

Thursday, March 14, 2019

An employer isn't bound by a policy unless the employee is aware of and relies upon the policy (e.g., reads the handbook!)

A recent case out of Illinois, Brown-Wright v. East St. Louis School District 189, NO. 5-18-0311 (behind paywall), finds that in order for an employee policy to operate as a binding contract, the employee has to have read the policy.

In the case, the plaintiff was suing based on an alleged violation of the sick leave payout policy. The plaintiff, however, did not find out about the policy her case was relying upon interpreting until after her employment ended. Therefore, it was not the case that she learned of the policy and continued to work as acceptance of and consideration for that policy. Because the plaintiff did not read the policy before terminating employment, she could not rely upon it now. 

This is a lesson to all of us to read those policies our employers send around. 

March 14, 2019 in Commentary, Government Contracting, Labor Contracts, Recent Cases, Teaching, True Contracts | Permalink | Comments (2)

Thursday, February 28, 2019

Arkansas court refuses to enforce overbroad non-compete

Sometimes it can seem so tempting to draft the broadest possible non-competition provision, but a recent case out of the Western District of Arkansas, Foster Cable Services v. Deville, Case No. 1:18-cv-1049, reminds us of why that can be dangerous.

In the case, Deville, a former employee, had signed a contract that classified "all information" given to Deville by the plaintiff as a trade secret and/or confidential, with no time or geographical limitations. Deville left the plaintiff's employment and the plaintiff sued that Deville had breached his employment agreement because he had disclosed confidential information to his new employer. 

The court agreed with Deville's contention that the agreement he signed was unenforceable. The contract prohibited Deville from disclosing any information he learned while employed by the plaintiff, forever. The court found this unreasonable. Covenants not to compete should be reasonably drawn to protect genuine confidential information, whereas this agreement was broad enough to cover all experience and knowledge that Deville gained during his employment, forever. Therefore, the court refused to enforce it as an unreasonable restraint on trade.  

February 28, 2019 in Labor Contracts, Recent Cases, True Contracts | Permalink | Comments (0)

Tuesday, February 19, 2019

Again, make sure you keep good records of notifying your employees of your arbitration clause

I just blogged about a case in which failure to keep proper records meant there wasn't enough proof of agreement to the arbitration clause, and here's another one out of Texas, Stagg Restaurants, LLC v. Serra, No. 04-18-00527-CV. Stagg tried to compel arbitration, but the employee denied ever receiving notice of the clause or the agreement it was contained in. There was no signature on that particular agreement and none of Stagg's records indicated that it had ever been provided to the employee, even though the records indicated many other documents had been provided to him. Once again: make sure you keep good records. 

February 19, 2019 in Labor Contracts, Recent Cases, True Contracts | Permalink | Comments (0)

Monday, February 4, 2019

Keeping records on when and how your employees sign their arbitration agreements could be helpful if there's ever a dispute over them

I just blogged about an arbitration case, and here's another one out of California, Garcia v. Tropicale Foods, Inc., E069024. In the last case I blogged about, arbitration was compelled, but in this one, the court reaches a different conclusion, finding that the employer Tropicale failed to prove that Garcia signed the arbitration agreement. The case serves as a lesson to employers hoping to enforce arbitration agreements against their employees: They need to be able to offer information about the circumstances of the employee signing the agreement. Garcia maintained that she never signed the agreement, and in response Tropicale offered a declaration of an employee saying that Garcia did sign the agreement. But that bare declaration wasn't enough, according to the court. It did not offer any sense of the timing or circumstances of the signature, which were important in this case, since the date on the agreement looked like September 2015, but Garcia had been terminated in August 2015. Therefore, the court did not compel arbitration.

February 4, 2019 in Commentary, Labor Contracts, Recent Cases, True Contracts | Permalink | Comments (0)

Friday, February 1, 2019

An arbitration clause that allows you to pursue injunctive relief in the court system still requires arbitration of the underlying claims

A recent case out of the District of Oregon, Sixel, LLC v. Penning, No. 6:17-cv-01846-AA, has a fairly typical fight over whether or not a claim needs to be arbitrated, but in this case it's the employer who doesn't want to arbitrate and the employees who are fighting to enforce the arbitration clause. 

The case involves allegations of trade secret theft, and Sixel relies on the fact that the arbitration clause permits it to pursue injunctive relief in the court. However, the employees maintain that that is limited to the pursuit of relief and does not allow the litigation of the underlying claim in court. The court sides with the employees, finding that the exception to the arbitration clause is explicitly in its plain language only in terms of remedies, not any cause of action. The court therefore finds that Sixel can seek injunctive relief in court and pursue the underlying claims in arbitration. The claims in question fall squarely under the arbitration clause, and given the law's preference for enforcing arbitration provisions, the court chooses to enforce the provision. 

February 1, 2019 in Labor Contracts, Recent Cases, True Contracts | Permalink | Comments (0)

Wednesday, January 30, 2019

Contract dispute between university and its former president goes to jury trial

I had previously blogged about this case involving a dispute between a university and its retired president over his retirement contract during its motion to dismiss phase. Now it's completed its trial, and the jury verdict is in. The jury ruled against the former president Taylor and in favor of the university, finding that the university did not have to pay Taylor under the asserted contract. It seems from the press coverage of the closing arguments that there were two warring versions of the facts: Taylor asserted that the board of trustees approved the contract as a reflection of Taylor's worth to the university. The university, however, asserted that Taylor drafted the contract himself and then had his friend, who happened to be the chairman of the university's board, sign it, meaning that it was never reviewed by university attorneys and never approved by the board of trustees. 

You can read more about the case here and here

h/t to Eric A. Chiappinelli of Texas Tech University School of Law for passing this one along!

January 30, 2019 in Current Affairs, In the News, Labor Contracts, Recent Cases, True Contracts | Permalink | Comments (0)

Tuesday, December 18, 2018

A past consideration case reminds us that being recognized for your past hard work isn't good for your breach of contract claim

I don't know about everyone else but my casebook teaches past consideration using very old cases. Here's past consideration raised as an issue with a recent case out of the Southern District of California, Wright v. Old Gringo Inc., Case No. 17-cv-1996-BAS-MSB (behind paywall). 

The case is really interesting, because the court acknowledged that the complaint had proper consideration allegations: ownership interest, salary, and performance bonuses in exchange for providing "expertise and services." The problem came from the deposition testimony, all of which seemed to establish that in fact the ownership interest had been provided as a reward for previous work. The plaintiff herself testified that the ownership interest was effective even if she immediately quit the job, indicating it wasn't in exchange for future services. Plaintiff's friends and relatives provided similar testimony, that the ownership interest was given "to show . . . appreciation" and "for . . . recognition of her hard work." There was no evidence presented that the ownership interest was offered on the condition of future work in exchange. For that reason, the court granted summary judgment for failure of consideration. 

The plaintiff's remaining claims were permitted to go forward, including promissory estoppel and tort claims. Those claims (as I remind my students!) don't require consideration. 

I find this case really interesting because I'm sure the plaintiff's friends only thought they were helping her with their testimony. This is the kind of thing that I think makes instinctive sense to non-lawyers: the plaintiff did something awesome and they recognized it by giving her an amazing gift. But lawyers know that consideration doctrine makes that a bad thing, not a good one. 

(The decision also contains a statute of limitations and damages discussion.)

December 18, 2018 in Commentary, Labor Contracts, Law Schools, Recent Cases, Teaching, True Contracts | Permalink | Comments (2)

Wednesday, December 12, 2018

When setting a noncompete time period, "not less than five years" = five years

A recent case out of Illinois, Pam's Academy of Dance/Forte Arts Center v. Marik, Appeal No. 3-17-0803 (behind paywall but you can listen to the oral argument here), highlights the weirdness of just throwing extra words into a contract without thinking through what they really mean. 

The dispute concerned a noncompete between a dance studio and Marik, one of its employees. The covenant not to compete stated that Marik wouldn't engage in any similar business "for a period of not less than five (5) years," and wouldn't solicit any teachers or students "for a period of not less than three (3) years." The parties were arguing over whether this language meant "five years" and "three years," or whether it meant that the noncompete could extend past five and three years. 

In a vacuum, the statement "not less than five years" reads as "at least five years" to me, meaning that the time period could last longer. But as a matter of contract interpretation, that makes no sense. Could the noncompete theoretically go on for 50 years? After all, that would be a period "not less than" five. On the other hand, as the defendants argued, interpreting the time periods as five and three years would render the "not less than" language as "mere surplusage" -- an interpretation courts usually strive to avoid. 

The court noted that contract interpretation's goal is to discern the intent of the parties. "Not less than" has been interpreted by Illinois courts in a variety of ways, but never in the context of a noncompete. However, many out-of-state courts had come to the conclusion that, in a covenant not to compete, "not less than five years" should be construed as meaning five years. This would prevent the employer from arguing that the noncompete was violated six years later. Indeed, the court thought that arguing that it meant six years would amount to bad faith. 

Whether the five- and three-year periods were reasonable was a fact-based inquiry that had to be determined by looking at the totality of the circumstances. 

This is a situation where I'm sure the "not less than five years" language sounded fancy and official but it was truly pointless. I think the employee probably understood it to be five years and three years (to the extent that the employee read and understood the agreement), and to the extent the employer understood the language to mean otherwise and entitle it to set an indefinite time period, I'm with the court that that's an unreasonable interpretation. 

December 12, 2018 in Commentary, Labor Contracts, Recent Cases, True Contracts | Permalink | Comments (0)

Monday, December 3, 2018

Taylor Swift and Contract Law

Sorry for being absent lately. Blame exam season! So this is slightly old news but I plan to bring it up in my Entertainment Law class in the spring, so I was doing a sprint through the news reporting on it: Taylor Swift and her new contract

December 3, 2018 in Celebrity Contracts, Current Affairs, In the News, Labor Contracts, Music, True Contracts, Web/Tech | Permalink | Comments (0)

Sunday, November 11, 2018

No Compete Clauses in Bilateral Contracts (No Unilaterality)

In a recent case, employment agency Robert Half International, Inc. (“Robert Half”) brought suit against a former employee, Nicholas Billingham, and Billingham’s current employer, Beacon Hill Staffing (a competitor of Robert Half) for actual and anticipatory breach of contract. Billingham’s contract with Robert Half included the agreement that Billingham would not compete with or solicit clients from Robert Half if leaving the company.  Nonetheless, Billingham accepted employment with Robert Half’s direct competitor where he stated that he intended to “add to my team quickly and take market share from Beacon Hill’s competitors.”  Robert Half brought suit.  Billingham and Beacon Hill moved to dismiss the complaint for failure to state a claim. 0*4-RMaI7gnFkJ32nX.

Billingham first defended himself arguing that unilateral contracts cannot be anticipatorily breached since they technically seen do not arise until the actual performance has been rendered.  He argued that his contract was unilateral since his remaining obligations were not yet due.  (Strangely, he did so although he had already terminated the relationship himself.)  The court corrected him on this point, noting that a unilateral contract is one that “occurs when there is only one promisor and the other party accepts, not by mutual promise, but by actual performance or forbearance.”  (Quoting Williston § 1:17).  To help my students distinguish accepting by beginning of performance in bilateral contracts from offers for unilateral contracts, which is sometimes confusing for them, I tell them that they must scrutinize what type of acceptance is sought by the offeror: if onlythe actual performance, then there is a truly an offer for a unilateral contract. If this is not clearly the case, there is an offer for a “regular” bilateral contract.  In this instance, the contract between Billingham and Plaintiff was bilateral, not unilateral.  Robert Half promised to employ Billingham in exchange for Billingham's promise to abide by the restrictive covenants in the Agreement.  Billingham's promise included the prospectiveagreement that he would refrain from certain activities upon departing the company.  Billingham was thus not correct that the agreement “became unilateral” after his resignation.  That is a legal impossibility.  His obligations to forbear from the non-competitive agreements became due the moment he left Robert Half.  As with many other contractual issues, unilaterality and bilaterality are examined at the point of contract formation, not by looking at what actually happened thereafter.

The court thus found that plaintiffs had sufficiently pled a claim of anticipatory, if not actual, breach of contract. 

Science-non_compete-contracts-labs-contract-law-aton4475_lowPlaintiffs also stated a claim for unjust enrichment. Defendants argued that Robert Half has not actually “conferred” any benefits on Beacon Hill and would thus not be liable for compensation under that theory.  The court noted that this is wrong.  Beacon Hill received a “benefit” from Billingham's employment through the revenue that he generates, his professional training, his relationships with customers and candidates, and his industry knowledge.  Beacon Hill's retention of these benefits is “unjust” as they are benefits that Billingham is barred, by the agreement, from conferring on Beacon Hill.

The case is Robert Half International Inc. v. Billingham, 317 F.Supp.3d 379, 385 (D.D.C., 2018).

November 11, 2018 in Commentary, Contract Profs, Labor Contracts, Miscellaneous | Permalink | Comments (1)

Friday, November 9, 2018

Not remembering signing your arbitration agreement doesn't mean you didn't sign it

Another day, another arbitration compelled, this time in a recent case out of the Northern District of Illinois, Nitka v. ERJ Dining IV, LLC, Case No. 18 cv 3279. The plaintiff sued the defendant for sexual harassment, sex discrimination, and assault and battery. The defendant countered that the plaintiff had signed an agreement to arbitrate disputes relating to her employment, which these were. The plaintiff stated she had no memory of signing the arbitration agreement, but the defendant's Vice President of People and Development testified that it required new employees to sign such agreements before entering employment and maintained them in the usual course of business. The plaintiff's arbitration agreement was located in her personnel file. Furthermore, the plaintiff had apparently affirmatively indicated on an electronic form that she had signed the agreement. 

The plaintiff then argued that she had been a minor at the time of signing the agreement, but the court pointed out that she ratified the agreement by continuing to work for the defendant after her eighteenth birthday. 

I believe that the plaintiff did not remember signing the arbitration agreement. To be honest, I believe that, even if she remembered, she probably had no idea what it really was. She was a minor trying to get a job at a Chili's. I'm sure she signed what she was told to sign and clicked the electronic check-boxes she was told to click -- exactly the way the vast majority of us do when getting a new job. 

November 9, 2018 in Commentary, Labor Contracts, Recent Cases, True Contracts | Permalink | Comments (0)

Thursday, November 1, 2018

In honor of the Red Sox, some baseball contracts

Hello! I was away at a conference last week and then the Red Sox* decided to win the World Series, which threw off all productivity for a while. As I ease back into blogging, I thought I'd link you to this piece from Business Insider, analyzing some of the terms set forth in the 2011-era version of Major League Baseball's uniform contract. I find my students always love to look at real-life contracts, and this is a nice point in the year to do it, as it's a nice way to demonstrate that they are now able to (or should be able to!) understand more of the contract than they might have on the first day of class. 

Of course, I always try to impress upon my students that contracts can be negotiated, so here's a list of some more unusual contract clauses baseball players were successful in getting teams to agree to. 

*(not the Red Sex)

November 1, 2018 in Labor Contracts, Sports, Teaching, True Contracts | Permalink

Friday, October 26, 2018

Attorneys cannot use anti-SLAPP statutes to strike client complaints

Is an attorney’s work in underlying lawsuits on behalf of clients protected speech under the United States or similar state constitutional standards?  No, held a California Appellate Court recently. Images

The California anti-SLAPP provisions state that “[a] cause of action against a person arising from any act of that person in furtherance of the person's right of petition or free speech under the United States Constitution or the California Constitution in connection with a public issue shall be subject to a special motion to strike unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.  An act in furtherance of a person's right of petition or free speech under the United States or California Constitution in connection with a public issue includes ... any written or oral statement or writing made in connection with an issue under consideration or review by a ... judicial body....” 

A client alleged that his attorney misrepresented his labor law expertize when negotiating the retention agreement between the two and that the attorney conducted settlement negotiations with the opposing party in order to drive up fees.  When the attorney sued his client to collect his fees, the client cross-complained for fraud and breach of contract.  The attorney then moved to strike the cross-complaint under the California anti-SLAPP statute, Code of Civil Procedure § 425.16. 

UnknownThe court found that merely because attorneys occur as part of litigation – the client’slitigation – a malpractice claim such as this is not subject to anti-SLAPP.  Said the court, “[i]t is the principal thrust or gravamen of the plaintiff's cause of actionthat determines whether the anti-SLAPP statute applies, and when the allegations referring to arguably protected activity are only incidental to a cause of action based essentially on non-protected activity, collateral allusions to protected activity should not subject the cause of action to the anti-SLAPP statute.”

“Although attorney retention negotiations may in a sense be ‘connected’ with judicial proceedings involving the client, they in no way relate to the substance of an issue under review in the proceedings or further the attorney's petition or free speech rights in them.  If they did, then every communication between an attorney and a client who is or may become involved in judicial proceedings would constitute an exercise of the attorney's petition and free speech rights, and every lawsuit for malpractice would be required to undergo a second-prong anti-SLAPP analysis.  No principle or authority supports such a proposition.

The case is Mostafavi Law Group v. Ershadi, 2018 WL 4690887, (Cal.App. 2 Dist., 2018)

October 26, 2018 in Contract Profs, Labor Contracts, Miscellaneous, Recent Cases, True Contracts | Permalink

Monday, October 15, 2018

Lack of Consideration – Or Not!

Currently in the midst of teaching consideration, I found the following case curious not so much because of its somewhat questionable facts, but because of the court’s puzzling reasoning.

Plaintiff Jose Torrez, a skilled laborer, agreed to renovate some buildings owned by defendant Koray Ergur and his companies.  Torrez was promised a bonus of $150,000 for nine months’ worth of work if he would work for the “reduced hourly wage” of $10 per hour.  He did. At some point in time, his hourly pay was increased to $11 per hour.  After completing a total of 18 months of labor, Torrez was terminated and – you guessed it – denied the bonus.  He brought suit claiming, among other things, breach of oral contract and the bonus $150,000 in damages. Images

The court rejected the latter.  Of course, since the contract was for the completion of nine months of labor, the Statute of Frauds was not implicated and the oral promise was thus enforceable if the court had wanted to do so.  It did not, however.  Instead, it found that Torrez had, during the legal proceedings, “contractict[ed] his allegation of reduced wages as the consideration for the $150,000 bonus.”  The court concluded that “while Torrez recited facts in his pleading to support the element of consideration for the promised bonus [i.e. the low pay of $10 per hour], the evidence presented by deposition and at Hearing [i.e. the “non-reduced” hourly wage of $11 per hour] refutes the existence of consideration … Therefore … it is clear that no consideration existed for the promise to pay a bonus.”

The court apparently found that because Torrez actually received one single dollar more per hour over nine months, there was no consideration for the original promise of working for a “reduced salary.”  However, consideration is measured at the point of contract formation, not after the subsequent turn of events.  Receiving only $10 or even $11 per hour instead of what skilled, manual laborers could get is a “reduced wage” given the market for such work.  It is puzzling why the court found that “no consideration existed for the promise to pay a bonus” when such consideration was fairly clearly present from the outset, namely the promise to work for not much with a promise of a bonus upon completion of the work. Unknown

Is something else at play here?  I think so.  It strikes me as odd that, pardon me, a manual laborer would be promised a bonus of no less than $150,000 for nine months of work.  That is $16,999 per month or, working 40 hours a week, $104 per hour.  Skilled workers can and do demand high fees in some locales, and maybe in Ohio as well. But $150,000 does seem high.  Was the court simply trying to protect the defendant from what may have been an attempted fraud by Torrez?

The truth will probably never be known here. Regardless, this case nicely demonstrates how the consideration doctrine is still relevant and, as always, the importance of getting contracts in writing even though they do not haveto be.  Even if Torrez had been promised the asserted bonus, it is also wise to remember the old adage that if something seems too good to be true, it might be.  Maybe Torrez was the one fooled in this case.

The case is Jose Torrez v. Koray Ergur, et al., Case No. G-4801-CI-201604375-000 (Court of Common Pleas, Ohio, Aug. 31, 2018).

H/t to colleagues on Contracts listserv for bringing this case to the attention of all of us.

October 15, 2018 in Labor Contracts, True Contracts | Permalink | Comments (0)

Wednesday, September 26, 2018

Deciding insubordination isn't the same as judging spiritual leadership

I just blogged about the ministerial exception of the First Amendment, and now here's another case discussing it! This recent case out of California, Sumner v. Simpson University, C077302, was a dispute over Sumner's dismissal for insubordination. Sumner sued for breach of her employment contract. Simpson argued that the ministerial exception of the First Amendment protected its contractual decision from judicial examination. The court agreed that Simpson was a religious group and also found that Sumner was a ministerial employee even though she wasn't technically titled a minister. Her job duties at the university required her to have a doctorate in ministry or a related field and included promoting the university through preaching appearances. 

However, the court still permitted Sumner's breach of contract claim to go forward, based on the fact that the ministerial exception should not bar all contract actions involving a religious group and its ministerial employees. Rather, it should only operate to bar those causes of action that would require the court to decide religious matters. Sumner was purportedly terminated for insubordination, which was defined by the faculty handbook incorporated into Sumner's contract. The alleged insubordination involved Sumner's violation of the university's written protocol. Sumner, however, alleged that she was never provided with the written protocol and so her conduct could not be found to be insubordinate. Resolving this dispute would not require "wad[ing] into doctrinal waters," because Sumner's religious qualifications weren't at issue and the dispute didn't concern Simpson's religious autonomy. 

September 26, 2018 in Labor Contracts, Recent Cases, Religion, True Contracts | Permalink | Comments (0)

Wednesday, September 12, 2018

Court refuses to judge what adequate spiritual leadership looks like

A recent case out of the Third Circuit, Lee v. Sixth Mount Zion Baptist Church of Pittsburgh, No. 17-3086, applies the ministerial exception of the First Amendment and refuses to entangle the court in a breach of contract dispute between a pastor and his former church. The parties had entered into a contract providing that Lee would serve as the Church's pastor for a twenty-year term. The contract provided for termination if its terms were breached. The Church terminated Lee's employment and alleged that he had failed to provide adequate spiritual leadership, as he was required to do by the terms of the contract. Lee disputed this, but the court refused to get involved, citing the ministerial exception. Courts aren't supposed to get entangled in "religious governance and doctrine," and asking the court to judge the quality of Lee's spiritual leadership under the contract would be just such an entanglement. 

 

You can listen to the oral arguments here. Some press coverage of the district court's decision can be found here

September 12, 2018 in Current Affairs, In the News, Labor Contracts, Recent Cases, Religion, True Contracts | Permalink | Comments (0)

Monday, September 10, 2018

Here's one for the "house renovations gone wrong" file

If you're turning to teaching damages in your semester, here's a recent case out of Florida for you, Forbes v. Prime General Contractors, Inc., Case No. 2D17-353. This is one of those cases where the homeowners and the contractor had a contract where the homeowners would pay periodically, as milestones for the work were reached. After completion of the scheduled demolition, though, the contractor told the homeowners that the cost to complete the project had almost doubled. The homeowners refused to pay the extra money, insisting on enforcement of the cost in the contract. The contractor walked off the job at that point. The home, having been in the demolition stage of the project, was uninhabitable. The homeowners rented another house and looked in vain for another contractor to finish the job. Finally, they bought a new house and let the old house go into foreclosure. They also sued the contractor for breach of contract. 

The homeowners won their beach of contract case, but the lower court only awarded them their cost of renting the alternative house as damages, stating that the homeowners had failed to prove any other damages and also had failed to mitigate damages. The appellate court disagreed. The appellate court permitted the homeowners to treat the breach of contract as total and found that they should be awarded damages to place them in the position they would have been in had they never signed the contract. This could include reimbursement of the amount they had paid the contractor and the equity they lost in their home when they had to let it lapse into foreclosure, as well as the rent they had paid. 

The appellate court also found that the homeowners had taken reasonable steps to mitigate damages. They rented while they searched for someone to finish the renovations. When that search failed, they bought a new house rather than continuing to make rent payments. Even if they hadn't bought the new house, they would not have been able to afford continuing to pay rent and the mortgage on the uninhabitable house, so whether they were renting or owning that house would have lapsed into foreclosure either way. The appellate court found that there was nothing else the homeowners could have done to avoid further damages. 

September 10, 2018 in Labor Contracts, Recent Cases, Teaching, True Contracts | Permalink | Comments (0)