ContractsProf Blog

Students Suing Universities

A sexual investigation was launched against male student “John Doe” of Columbia College of Chicago (“Columbia”) after a female accused Doe of non-consensual sexual relations.  A formal investigation and a hearing led to Doe being suspended from Columbia for an academic year.  Doe then filed suit in federal court alleging, i.a., Title IX violations and that Columbia had breached its contract with him by not providing him with an impartial investigation and adjudication of the matter.  He also asserted that he did not get access to the documentation relating to his hearing, that Columbia failed to discipline female individuals who engaged in similar conduct, and that the hearing panel’s decision was against the weight of the evidence.

The trial and appellate courts both pointed out that Illinois courts have expressed a reluctance to interfere with academic affairs and have held that a student’s breach of contract claim must involve decisions that were arbitrary, capricious, or made in bad faith.  Thus, Columbia would not even have been liable if the court had found that it exercised its academic judgment unwisely; rather, it must have disciplined a student without any rational basis.  This was not the case here.

Doe had had a chance to review the documentation, it was found.  Further, Columbia was not arbitrary or capricious in its response to Doe’s complaints about female students: they responded quickly, investigated, handled his complaints, and encouraged him to inform the university if any further incidents occurred. 

In other words, the burden in such cases is high.  To find in the student’s favor, the courts must find that the university “did not exercise its academic judgment at all, instead acting arbitrarily or in bad faith in its treatment of plaintiff.”

This outcome was probably warranted in this case and the reaffirmation of the standard welcome to educational institutions.  On the other hand, I find it slightly disturbing that, under better facts, a student’s contractual rights and arguments could not be given any weight even if the student could show that the university “exercised its academic judgment unwisely” or “at all”?  Of course, as law professors, we are aware of the difficulty it can be to deal with students who may be complaining about something out of emotional issues with their grades or the like.  However, just because a student is a student and, of course, protected by federal civil rights law does not mean that the student may not have a valid contractual argument.  As we know from extensive media discussions about the expense of going to college modernly, does it make sense from a contracts law point of view to say that the students cannot prevail with a contract claim even if the university exercised its judgment unwisely?  - Is the latter not exactly what you pay a university for?

Of course, these issues intersect with constitutional law, which must be followed.  But the standard is somewhat troubling under some circumstances, I think.

The case is Doe v. Columbia College Chicago, 2019 WL 3796000.

Teaching Contract Law (and More) to Legal Masters Students - Part 3: Avoiding the Simulated Law Practice Paradigm

(Part 1 of this multi-part post is available here).

(Part 2 of this multi-part post is available here).

Adapted from Mark Edwin Burge, Access to Law or Access to Lawyers? Masters Programs in the Public Educational Mission of Law Schools., 74 U. Miami L. Rev. __ (forthcoming 2019), available here or at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3420457 (footnote numbering changed).

Course Design Principle #2: Avoid premising problems and writing assignments on simulated law practice.

Legal masters programs typically accept the proposition that writing and are a need and a value within the curriculum. The value exists both where courses are primarily skills oriented and also where writing is a method of formative assessment in a principally doctrinal course. This noncontroversial premise can lead to difficulty in its execution. The baseline starting point for many law schools’ curriculum development in the area of analytical writing skills, not surprisingly. is that with which they are already familiar: the 1L legal research and writing course that already exists in some form in every J.D. program in the United States.[1] That legal analysis and writing course is quite appropriately grounded in expressing the application of actual law to simulated facts in a setting where students play the role of a lawyer. Writing assignments in doctrinal courses, while usually not playing as dominant a course role as their skills-course counterparts, nevertheless follow the same paradigm. The problems are premised on assuming the role of a lawyer who is practicing law.

Simulated law practice is the problem. The crucial value added in a J.D. course setting is, in fact, a distraction to the masters students, sometimes to the point of detriment. Why would this be so? The programmatic and course outcomes for masters students do not contemplate their representation of clients. Time and instruction spent on the underlying assumption of taking on the lawyer’s role undermines the developing professional identity of the affiliated non-lawyer professional by, in effect, forcing it through a level of translation. While students whose goals include taking the bar exam and representing clients are well-served by assignments prompting the imagination of themselves in the role of the attorney,[2] other professionals are not. If we in legal education believe, as we certainly should, in the crucial role that J.D. legal education plays in formative professional development, then recognizing the need for analogous development of the professional identity of legal masters students is but a small step.

A related and ever-present issue in a legal masters program is discouraging the unauthorized practice of law. A well-designed program will build in training and frequent cautioning against unauthorized practice of law throughout the curriculum. Perhaps the most important aspect of any such training, however, is repeated emphasis on the bright-line prohibition against non-lawyers taking on or advising clients on legal matters. All United States jurisdictions share this rule in some fashion, despite their variance on numerous other questions of what does and does not qualify as unauthorized practice.[3]  Accordingly, a further problem with the pedagogy of simulated law practice is that it actively engages legal masters students in doing the one thing above all others that they are expressly prohibited from doing.

If the lens of simulated law practice is where a fundamental disconnect occurs between masters curriculum and its students, then it requires a pedagogical replacement to fill the hole in problem analysis and legal writing. Though the replacement lens could take several possible forms, the most useful descriptive category is simulated client practice. What would such a simulation look like and what would it seek to elicit from the student? Consider three examples from the Legal Analysis and Writing for Clients (LAWC) course at Texas A&M. In all three examples, goals include the teaching of legal concept and communications, but doing so from the perspective of a client rather than a lawyer.

The first LAWC example is tied to the course unit covering basic legal analysis and introducing, by example, the traditional legal memorandum. The memo, however, is not the end goal; rather, it serves as an illustration of the paradigmatic means by which lawyers document and support their analysis of a legal problem. The unit is tied to understanding why lawyers do what they do, and, most critically, recognizing work product in which lawyers are employing traditional analysis, such that a client can be empowered to take predictive analysis into account.

The summative assignment for this unit involves giving the student a legal case file, much like in a 1L course, except that the case file already includes what would be the J.D. course final product—a predictive memorandum. And that is because the actual assignment is still to come. Accompanying the case file is the actual assigning memorandum, which is addressed—not to “Junior Associate” at a law firm—but the “Assistant Risk Manager” at the client company. The risk manager must read the case file, the legal memorandum, and additional facts regarding the company’s business situation. These documents form the basis the ultimate assignment: Write a report to a supervisor that (1) summarizes the legal findings, (2) summarizes the business situation, and (3) makes recommendations for the company in light of the combination of both the legal analysis and the business reality. The legal prediction and the business facts frequently do not point the same direction. For example, a memorandum predicting that the client company could win a breach of contract lawsuit may ultimately be offset by the probable negative impact of burning the business relationship with the prospective defendant. Ultimately, the legal masters student is accounting for the lawyer’s role, but is accomplishing something quite different with her report.

A second example from the LAWC course arises from a unit on understanding common and foundational litigation documents, particularly pleadings and motions. In the underlying simulation, the students are given access to selected documents from the docket of an actual case. For federal court cases, the raw PDF documents are available through the PACER, which most legal educators can access through Bloomberg Law.[4] The real case is not random, of course, but is one selected for its relevance and application to the final project, which is (again) an internal company report. Out of the wealth of real and comparatively recent federal cases that are no longer active, the instructor should select and carefully curate one involving a business dispute and parties that can serve as background for a new simulation.

Consider, for the present description, the use of a breach of warranty lawsuit regarding the quality of commercial building supplies. For the new assignment hypothetical, the company employing the masters students as risk managers happens to have a similar problem with the seller who is a defendant in the previous litigation. Upon learning that the seller had been sued before, the company president obtains the key lawsuit documents from the longtime outside counsel, who provides them as a favor to a valued client. The president then tasks the risk manager (the student) with reviewing the documents and preparing a report in light of information about the company’s present situation involving the same seller. The report assignment requires the student to provide (1) a summary of the underlying dispute from the prior litigation, (2) a summary of what—procedurally—occurred in the prior litigation, and (3) an identification of potential problems that may arise in a new lawsuit against the seller. In essence, the students are required to demonstrate literacy in litigation documents sufficient to recognize possible business concerns and cautionary tales. In one version of this assignment in the Texas A&M program, the students could discern that the seller operates as several, similarly-named entities, some of which were not subject to the court’s personal jurisdiction. The students could also report on potential causes of action from the previous litigation. In the end, the students are able to make a low-cost evaluation of their company’s situation in advance of incurring the cost of bringing in outside counsel—a worthwhile contribution to the cause of client autonomy.[5] Once again, the purpose of the assignment is not to simulate the role of the lawyer; rather, the goal is to simulate the role of a legally-literate business professional—a potential client in the making.

The third assignment example from the LAWC course at Texas A&M involves contract drafting; more specifically, it involves the intersection of contract drafting and working effectively with lawyers. The assignment  is, again, not directed to a junior attorney, but to a company “Contracting Officer” who is provided the details on either a preliminary deal or an area in which her employer needs to create a form contract. In initial substance, the assignment packet has much in common with what one might find in a J.D. contract drafting course.[6] In the lead-up to the assignment, the students receive instruction in contracting literacy, including typical document structures, purposes and examples of boilerplate, and methods of presenting substantive terms. The shift away from the J.D. framework comes in the ultimate assignment. The students are provided with specific business goals and concerns that the company wants dealt with in the final contract, and the student assignment is to prepare an annotated first draft contract to be sent to the company’s general counsel. “First draft” in this context does not mean a rough draft. It means a polished product that is nonetheless understood to be a precursor to the final product.[7] Perhaps the most important aspect of this document is that it is annotated. What does annotated mean in this assignment? The comment-bubble notes are (1) explanations of why the initial drafter did what she did, and (2) questions for the general counsel that arose in the drafting process.

For learning purposes, the annotations are more important to this assignment than is the actual contract text. The masters students are achieving two critical learning outcomes with this assignment. First, they are developing legal literacy with regard to working in and around contract documents. Business decision makers ought to be able to understand the private-law agreements to which they are or might be bound. Contending otherwise is antithetical to the purpose of private law autonomy, which is empowering parties with a modicum of legal control over their own destinies.[8] Second, the students are developing the skill of effective collaboration with lawyers, a skill that involves and requires a recognition of when and how to ask questions. Legal issues do not always show up on a company’s doorstep in the prepackaged form of a citation and summons. The contract-creation assignment provides an opportunity for initial issue spotting by the client at a far more subtle level, empowering the client with greater facility in knowing when to bring in a lawyer.[9]

All three of these example assignments teach legal-interaction skills but do not place them in the developmentally counterproductive context of simulating the practice of law. The replacement model is simulated client practice. Legal masters programs should not only address students where they are, but courses should be constructed around the imagination of where they will be. Although these examples are drawn from a skills course, their underlying philosophy should impact a doctrinal course as well. The problems and hypotheticals grounded in a call of the question like, “How would you advise your client?” should be replaced with the client-side perspective, ranging from “What legal risks concern you here?” to “What would you do?” realizing that answers to the latter question will more than occasionally include the phrase, “I’d consult a lawyer regarding . . . .”

 

[1] See ABA Standards and Rules of Procedure for Approval of Law Schools 2018-2019, Standard 303(a)(2), https://www.americanbar.org/content/dam/aba/publications/ misc/legal_education/Standards/2018-2019ABAStandardsforApprovalofLawSchools/2018-2019-aba-standards-chapter3.pdf (requiring that the J.D. program of legal education at an ABA-accredited law school include “one writing experience in the first year and at least one additional writing experience after the first year, both of which are faculty supervised”).

[2] William M. Sullivan et al., Educating Lawyers: Preparation for the Profession of Law 185-203 (2007). See also William M. Sullivan, After Ten Years: The Carnegie Report and Contemporary Legal Education, 14 U. St. Thomas L.J. 331, 334 (2018) (advocating greater support by law schools in training future lawyers by “providing entrants to the field effective ways to engage and make their own the ethical standards, social roles, and responsibilities of the profession, grounded in the profession's fundamental purposes.”).

[3] See Leonor E. Miranda, Finding A Practical Solution to Bridging the Justice Gap for Immigrants in the United States, 30 Geo. Immigr. L.J. 163, 183 n.135 (2015) (“All 50 states have rules and laws prohibiting the unauthorized practice of law, mainly to protect consumers. Non-lawyers are generally prohibited from practicing law; however, what constitutes the ‘practice of law’ or the ‘unauthorized practice of law’ is by no means uniform, even within the same jurisdictions[.]”) (internal quotation marks omitted).

[4] Although it is a comparative latecomer to the commercial online research arena, Bloomberg Law has carved a recognized niche in its expansion of academic access to federal court dockets and documents. See, e.g., UCLA School of Law Hugh and Hazel Darling Law Library, Dockets and Court Documents in Bloomberg Law: Getting Started, https://libguides.law.ucla.edu/dockets (“Bloomberg Law is an excellent alternative to PACER. It provides access to all dockets available in PACER, and there is no charge to search dockets or to retrieve court materials from Bloomberg Law.”).

[5] Accord Anthony J. Sebok, What Do We Talk About When We Talk About Control?, 82 Fordham L. Rev. 2939, 2959 (2014) (“[T]he fear that nonlawyers will use control to influence the reasons that clients receive concerning legal decisionmaking, while genuine, needs to be balanced against client autonomy: loyalty to clients may require lawyers (and nonlawyers) to allow clients to hear opinions from whomever the client chooses.”).

[6] See, e.g., Tina L. Stark, Drafting Contracts: Why Lawyers Do What They Do (2d ed. 2014).

[7] Perhaps oddly, this situation is analogous to legal writing practices that predominated among many lawyers before the widespread adoption of word processing technology. See Lucia Ann Silecchia, Of Painters, Sculptors, Quill Pens, and Microchips: Teaching Legal Writers in the Electronic Age, 75 Neb. L. Rev. 802, 846 (1996) (“A legal writer in this earlier environment would be concerned primarily with ensuring that a first draft was relatively polished, given the practical difficulties in editing. . . . A lawyer in the pre-electronic age would, most likely, write with the expectation that there would be less rewriting and revision than is possible today.”).

[8] Cf. Mark Edwin Burge, Too Clever by Half: Reflections on Perception, Legitimacy, and Choice of Law Under Revised Article 1 of the Uniform Commercial Code, 6 Wm. & Mary Bus. L. Rev. 357, 380–81 (2015) (“Proponents of choice-of-law autonomy thus find it foundational that in the absence of third-party effects, the parties to the transaction should be permitted to choose the applicable law through contract without reference to any limiting test. In this view, law is not and should not be different from any negotiated and fully private contract term: let law be part of a marketplace.”) (internal cites and quotations omitted).

[9] Such empowerment on the client side would also arguably support a client-centered approach to representation by the lawyer. See Katherine R. Kruse, Beyond Cardboard Clients in Legal Ethics, 23 Geo. J. Legal Ethics 103, 127 (2010) (describing the client-centered approach as “directly responsive to the problem of legal objectification” in that it “urges lawyers to unlearn the professional habit of ‘issue-spotting’ their clients and to approach their clients as whole persons who are more than the sum of their legal interests.”).

Teaching Contract Law (and More) to Legal Masters Students - Part 2: Focus on Structural Legal Literacy

(Part 1 of this multi-part post is available here).

Adapted from Mark Edwin Burge, Access to Law or Access to Lawyers? Masters Programs in the Public Educational Mission of Law Schools., 74 U. Miami L. Rev. __ (forthcoming 2019), available here or at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3420457 (excerpt footnotes omitted).

Course Design Principle #1:  Focus legal text comprehension on structural legal literacy.

Understanding the general meaning and structure of legal texts—especially cases, statutes, and regulations—is a critical goal for professionals who will deal with lawyers or be the first line of defense for an organization’s legal compliance. The baseline level of this comprehension should be structural legal literacy—a broad-based ability to recognize and identify a legal text’s design features. For cases, this recognition would cover judicial rule statements, analogies to precedent, and ultimate holdings. For statutes and regulations, the identification of elements, factors, and code-defined terminology (such as definitions) would likewise be a core competency. Such parsing of legal text is an early focus of J.D. legal education, but there it builds out toward more advanced concepts like the temporal development of common law and the discernment of legislative intent. For masters students, the structural comprehension is not merely a means to other ultimate goals; rather, it is itself an ultimate goal.

That distinction between being an end rather than a means to an end is a substantive one: It impacts fundamental pedagogy. Most significantly, the signal, historical pedagogy of legal education—the Socratic method—is ill-advised for masters-type legal education. As others have observed in the J.D. context, Socratic method has some significant educational value, but it is inefficient for teaching the law. Indeed, the Socratic method’s purpose, in the very real articulation of the famous-but-fictional Professor Kingsfield, is not to teach the  law, but rather to train students to think like a practicing lawyer. While “thinking like a lawyer” is a time-honored and worthy goal in the halls of the legal academy, it is inapposite for students in a program that, by definition, is not designed to turn them into lawyers.

In the masters program setting, accordingly, the primary purpose of reading a case involving contract law primarily is to learn the contract law—both in its abstract, black-letter sense (the rule) and in its applied-example sense (the immediate story of how the rule operates). The top-level goal is not to discern procedural nuances and the murky role of dicta, nor is it to construct the historical development of doctrines like consideration or promissory estoppel. Consequently, the students would seldom benefit from “hide the ball” type classroom engagements as those detract from the principal task of top-level legal literacy. Likewise, the study of statutes or regulations requires focus on navigating and discerning the meaning of rule texts, including integrated codes. It can rightfully exclude excessive focus on ambiguity, drafting errors, and legislative history. Hypotheticals directed toward teasing out absurd results of statutory canons may well be fun, but they are beside the point. A non-lawyer needs a working level of comfort with assimilating legal texts, the vast majority of which whose meaning is not in both serious and consequential question. The more complex—and frankly more rare—arguments over legal meaning can (and should) be brought to the lawyers.

[Continued in Part 3]

Teaching Contract Law (and More) to Legal Masters Students - Part 1: Principles of Masters Course Design

Adapted from Access to Law or Access to Lawyers? Masters Programs in the Public Educational Mission of Law Schools., 74 U. Miami L. Rev. __ (forthcoming 2019), available here or at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3420457.

Abstract:

The general decline in J.D. law school applicants and enrollment over the last decade has coincided with the rise of a new breed of law degree. Whether known as a master of jurisprudence, juris master, or master of legal studies, these graduate degrees all have a target audience in common: adult professionals who neither are nor seek to become practicing attorneys. Inside legal academia and among the practicing bar, these degrees have been accompanied by expressed concerns that they detract from the traditional core public mission of law schools—educating lawyers. This article argues that non-lawyer masters programs are not a distraction from the public mission of law schools, nor are they a necessary evil foisted upon legal education by economic trends. Rather, such degrees reflect a paradigm shift that law schools and attorneys should embrace rather than resist: a move away from law being largely accessed primarily through a licensed elite and toward a greater role for autonomy in public engagement with the legal system. The law school function of serving the public goes well beyond training future lawyers or even marshalling them in the advance of access to justice. The expanded legal education vision advocated here includes those functions, but as part of a more encompassing mission: ensuring access to law rather than simply access to lawyers. This article then sets forth foundational frameworks for such programs to succeed at their goals, both at the programmatic level and at the course-design level.

 

From the Article (footnotes omitted):

Like the article as a whole, this consideration of course design is informed by the author’s own experiences, victories, and defeats on the instructional battlefield. The examples here are principally drawn from two courses. The first of these is Contracts, a doctrinal staple of the J.D. curriculum that I have taught in in three forms: the fully-J.D. format, the mixed J.D.-and-masters format, and the masters-only format. The second course is one styled Legal Analysis and Writing for Clients, a masters-only course created as an adaptation of J.D. lawyering-skills and legal writing curriculum for the needs of working professionals. Both courses have played important roles in bringing me to the viewpoints expressed here regarding how masters students should be accounted for in course design as compared to their J.D. counterparts.

The specific topical coverage of any law course can be as varied as the doctrine and skills encompassed by law itself. For that reason, the focus of this section is on principles of masters course design rather than bright-line rules. Any attempt at stating hard-and-fast requirements for masters courses as compared to their J.D. counterparts is certain to face death by counterexample. Something will inevitably not fit within the rigid rules. For that reason, a principles-based approach is the preferable way to conceive of course design in this space, recognizing that aspiration must have the flexibility to give way to reality. General principles are critical, however, to answering the specific questions faced by law school masters programs. The following three principles, while hardly an exclusive list, state tendencies that will best align masters courses with their appropriate programmatic outcomes, which in turn will fulfil the expanded law school public mission advocated by this article:

(1) Focus legal text comprehension on structural legal literacy.

(2) Avoid premising problems and writing assignments on simulated law practice.

(3)  Prefer practical reality over theory.

The remainder of this section addresses each of these principles with a goal of illustrating how they might look in practice.

[Continued in Part 2]

 

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. 

 

Another consideration discussion

I just blogged about a consideration case last week, and now here's another one out of Illinois, Johnson v. Illinois Alcohol & Other Drug Abuse Professional Certification Association, Nos. 4-18-0562 4-18-0575 cons (behind paywall). This case concerns an at-will employment contract that was later modified to include a definite retirement date. The defendant argues that there was no consideration for this modification of the contract, and thus it's not binding. However, the court notes that Johnson gave up his ability to work for the defendant beyond the retirement date and that that served as consideration for the modification of the employment contract. There were also some changes in job duties and title as well as an additional agreement reached on how sick and vacation days would be used over the remainder of the employment term. All of this was sufficient to show that both parties bargained for things from the other in this new binding contract. 

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. 

 

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. 

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. 

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.  

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!

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.)

If you're looking for a statute of frauds "cannot be performed within a year" case

I just gave a midterm in my contracts class, which is always so useful to crystallize the places where the students are having consistent understanding issues. For me this year, one of the tricky parts seems to be the statute of frauds, so it was nice to see this recent case out of the Eastern District of Wisconsin, Northern Group, Inc. v. Tech 4 Kids Inc., Case No. 17-C-1367 (behind paywall), that deals with a fairly straightforward statute of frauds issue. 

In the case, Northern Group alleged that the parties had an oral agreement for commissions for sales and brought causes of action related to the breach of this agreement. Tech 4 Kids argued that the claims should be dismissed, in part because the oral agreement should have been in writing under the statute of frauds. However, as the court noted, the statute of frauds does not require a contract to be in writing unless it cannot be performed within a year. While it was true that the sales agreements required to be formed to result in commissions under the contract could sometimes taje years to finalize, Northern Group could conceivably have arranged some sales agreements within a year. Moreover, the agreement was terminable at will by either party, so either party could have decided within a year not to continue with the arrangement. Therefore, the oral agreement was capable of being performed within one year and so was not void under the statute of frauds. 

Banksy keeps things interesting

Here's me poking my head out from a weekend of midterm grading to thank Banksy for a situation right out of a contracts hypothetical. 

Thank you to Eric Chiappinelli and Jennifer Taub for the heads-up!

Uber fails to establish an accord and satisfaction on a motion to dismiss

If you're looking for a recent accord and satisfaction case, look no further! I've got one for you out of the Northern District of California, TSI USA LLC v. Uber Technologies, Inc., Case No. 17-cv-03536-HSG (behind paywall). In the case, Uber and TSI had a contract that Uber terminated. TSI received a termination notice and a check for a little over $200,000. TSI responded to Uber with outstanding invoices Uber owed payment on, amounting to more than $1.4 million. TSI eventually sued Uber for, inter alia, breach of contract, and Uber moved to dismiss the claim, arguing that that TSI's cashing of the $200,000 check operated as an accord and satisfaction, prohibiting TSI's breach of contract claim. 

The court disagreed. Accord and satisfaction requires that the check be presented in good faith and with a conspicuous statement that it is meant to satisfy the entire debt. Construing the facts in the light most favorable to TSI, Uber could not establish that its check of $200,000 met "reasonable commercial standards of fair dealing," given that TSI alleged Uber owed over $1.4 million. In addition, while the termination notice stated "by executing below you acknowledge and agree that such payment constitutes full and final payment," it was followed by a line for signature labeled "Chief Executive Officer." TSI asserted that it thought the signature of the CEO was required for the payment to constitute full and final payment, not that the cashing of the check by itself. The court agreed with TSI that the language was not so "explicit and unequivocal as a matter of law so as to preclude TSI from asserting its breach of contract claim." Therefore, the breach of contract claim survived. 

Sometimes you've just got to shrug and live with the precedent you've got

There comes a time in every teaching semester (usually very early on...) where you have to coax your students to be comfortable with courts contradicting each other. You have to teach them to distinguish the cases, to make sense of it, but sometimes I feel like the answer to the contradictions is "the parties didn't argue that point and it just got missed and now we just have to deal."

I was thinking about this as I read a recent case out of the Third Circuit, Cook v. General Nutrition Corp., No. 17-3216 (behind paywall), which affirmed a failed lawsuit against GNC for, among other things, breach of contract. The appellants made several arguments for why their claims should not have been dismissed, one of them that GNC's termination of the contract was a breach. But the Third Circuit noted that termination was permitted by the contract: "[The contract] expressly permit[ted] GNC to unilaterally modify or cancel the agreement at any time, with or without notice."

That was the line that gave me pause, because I only recently taught Harris v. Blockbuster, which holds a contractual provision illusory precisely because it permitted Blockbuster to unilaterally change the contract at any time without even having to provide any notice. Other courts have definitely agreed with Harris, and  while it's been distinguished I didn't really see any courts disagreeing with the conclusion. Third Circuit courts do seem to apply the illusory promise doctrine, so it doesn't seem like they've just decided to do without this doctrine in the Third Circuit. 

It does seem like Harris can be read as only applying in the context of agreements to arbitrate and not all agreements (although there was apparently an arbitration clause in the GNC contract). Unfortunately, this is just me guessing as to how you can distinguish Harris, because there is zero discussion of illusory promises in the Third Circuit's very brief opinion. The court asserts that the contract gave GNC this right, and that while it might be "unfortunate," it was permissible and therefore not a breach. 

UCC statute of limitations dooms claim

Here at the beginning of the semester, I've just been going over determining whether the UCC or common law applies to contract claims, and here's a recent case out of the Seventh Circuit, Heiman v. Bimbo Foods Bakeries Distribution Co., No. 17-3366, that illustrates why that question can be important. 

The case involves some pretty eyebrow-raising allegations, as, according to the complaint, the defendant began "fabricating" breaches of the contract between the parties, so that it could terminate the contract based on these allegedly faked breaches. Pretty dramatic stuff, but the case falls apart on a statute of limitations issue. The UCC statute of limitations is four years; the relevant common law statute of limitations was ten years. All parties agreed that the cause of action accrued in 2011, so the statute of limitations would have already run if the UCC applied; not so if the common law statute of limitations was applied. 

The court looked at the primary purpose of the agreement. The agreement at issue was a distribution agreement, and the court noted that jurisdictions overwhelmingly interpret distributorship agreements to be about the sale of goods. While the agreement certainly also covered "a significant amount of services," those serves were all "incidental to the larger purpose of the contract, which [was] to sell goods to consumers." Therefore, the contract was governed by the UCC and barred as untimely. 

There was also a tortious interference claim that likewise failed because the complaint admitted that the plaintiff was aware of the possibility of its tortious interference claim in 2011, and so therefore this claim was also untimely under the relevant statute of limitations. The court also added that a party cannot tortiously interfere with its own contract, so the claim failed on the merits as well. 

Waiver as a shield, not a sword

It's the time of year when I start thinking about the fact that I should be thinking about my fall classes, and right on cue, here's a case out of the Seventh Circuit, Knopick v. Jayco, Inc., No. 17-2285, that's thoughtful about how waiver works and the policy underlying it. (You can listen to the oral argument here.)

The waiver portion of the case (there was also a jurisdictional issue) involved a warranty that stated it did not apply to RVs purchased by LLCs. The RV in question was purchased by an LLC. Therefore, under the unambiguous language of the warranty, the RV was not covered. However, Knopick argued that Jayco waived this exclusionary language of the warranty when it voluntarily performed some repairs to the RV as if the warranty applied. The warranty, though, had an additional clause stating that such "good will" repairs would not alter the exclusionary language of the warranty. 

Even without that language, the court was skeptical that waiver could be used to achieve what Knopick wanted here. The court noted that waiver is ordinarily used as a "shield" to excuse non-performance. It's used so that a party cannot be "lulled" into a belief that its compliance is sufficient to fulfill a contractual obligation only to be surprised by a lawsuit for inadequate compliance later. Knopick, the court said, was trying to use waiver as a "sword." Rather than protecting himself, he wished to use it to compel performance by Jayco. The court, wary of expanding waiver because of how greatly it would damage the predictability of contracts, stated that it was unwilling to use the doctrine of waiver to compel Jayco, as such an action would have the effect of discouraging parties from "good faith" actions such as that undertaken by Jayco for fear of opening themselves up to expanded liability. 

h/t to Timothy Murray of Murray, Hogue & Lannis for passing this one along!

 

If you want something specific, ask for it in your contract

A recent case out of the Second Circuit, Ortho-Clinical Diagnostics Bermuda Co. Ltd. v. FMC, LLC, No. 17-2400-cv (behind paywall), is another case about interpretation of contract terms -- twice over. Because here the parties entered into a contract, fought over breach of that contract, and then entered into a settlement agreement, which they were also fighting over. The moral is that, if you want something specific, you should ask for it rather than relying on unspoken industry practices. 

The initial agreement between the parties was about an IT operating system. Although the system was going to cost $70 million, the contract wasn't very detailed, with no technical specifications or description of building methods. The parties' relationship deteriorated and they eventually entered into a Settlement Agreement to terminate the project. Under these new terms, FCM would be released from its obligation to provide the system to Ortho, while providing assistance while Ortho transitioned to a different contractor. After execution of the Settlement Agreement, Ortho apparently realized that FCM was not as far along as Ortho had thought and had not prepared certain items that Ortho had assumed it had prepared, and so Ortho claimed that as a result the IT system cost more and took longer. 

The court, however, noted that there was nothing in the contract requiring FCM to produce the certain deliverables Ortho had been looking for. Ortho claimed it was "standard practice in the industry," but the court said that wasn't the equivalent of it being a contractual obligation. FCM was contractually required to provide assistance -- no more, no less. There was nothing in the contract about the job having to be at a particular stage of completion, or that any particular deliverables or documentation had to exist. 

The court also pointed out that Ortho had released its claims regarding the original agreement in the Settlement Agreement. Ortho tried to argue that it had released claims but not damages but the court called that "a nonsensical reading." 

Robert Ahdieh named dean at Texas A&M University School of Law

Forgive my taking an editor's privilege here to share an exciting announcement from my home institution. We are thrilled to have Bobby Ahdieh joining our faculty as dean!

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Texas A&M University has appointed Robert B. Ahdieh as dean and holder of the Anthony G. Buzbee Endowed Dean’s Chair at its School of Law, located in Fort Worth.

Ahdieh is currently the K.H. Gyr Professor of Private International Law and Director of the Center on Federalism and Intersystemic Governance at Emory University School of Law in Atlanta, Georgia.

University officials say the School of Law has made unprecedented strides since joining the Texas A&M community in 2013, currently ranking among the top 80 law schools in the nation according to U.S. News & World Report. Officials say the School of Law’s forward progress is due to a number of efforts which include increasing its entering class profile; hiring a cohort of nationally recognized scholars who have added to the research strengths of the existing faculty; and enhancing its academic programs, allowing it to offer a rich educational experience to its students.

“We couldn’t be more proud of what our law school faculty, staff, and students have achieved during the School of Law’s first few years as part of Texas A&M,” said Texas A&M University President Michael K. Young. “With the university’s support and Bobby Ahdieh’s vision, scholarly reputation and administrative experience, we are well-positioned to accelerate the law school’s progress even more in the years to come.”

As dean, Ahdieh will oversee all academic and operational affairs of the law school, and will report to Texas A&M Provost and Executive Vice President Carol Fierke, who in announcing his appointment, emphasized Ahdieh’s achievements as a leader in the field of legal education, his significant administrative experience as vice dean and associate dean of faculty at Emory University, and the strength of his scholarly credentials. In particular, she highlighted his record of success in a variety of critical areas, including admissions, alumni relations, career development, faculty appointments and development, interdisciplinary initiatives, and the development of non-JD degree programs during his tenure at Emory.

Ahdieh holds a Bachelor of Arts from Princeton University’s Woodrow Wilson School of Public and International Affairs and a Juris Doctor from Yale Law School. He served as law clerk to Judge James R. Browning of the U.S. Court of Appeals for the Ninth Circuit before his selection for the Attorney General’s Honors Program of the Civil Division of the U.S. Department of Justice.

His scholarly interests revolve around questions of regulatory and institutional design, especially in the business and financial arena. In addition to a monograph on legal transition in the former Soviet Union, published while he was still in law school, Ahdieh’s work has appeared in leading journals including the NYU Law Review, the Michigan Law Review, the Minnesota Law Review, the Boston University Law Review, and the Southern California Law Review.

In accepting the position, Ahdieh reflected on the significant potential of the law school, saying, “I believe no law school in the country has traveled further, in so short a time. Nor does any have more upside potential, going forward.”

Among the key priorities for the School of Law in the coming years, say university officials, will be continuing to build a world-class faculty and ensuring that faculty have the resources necessary to produce research of consequence and significance; extending the audience for a Texas A&M legal education beyond students seeking a three-year J.D., including through new and expanded non-J.D. programs; and enhancing the scope of the law school’s external engagement through active outreach to the community, graduates, and colleagues in legal academia – an effort that will require the active participation of faculty and staff.

Continued investment in faculty excellence and in the recruitment of great students, systematic efforts to increase awareness of the school’s achievements, a focused fundraising campaign, and employer outreach targeted to improving the quantity and quality of placement opportunities available to students around Texas, the United States, and around the world are particular initiatives Ahdieh says he plans to undertake upon taking up the deanship on July 15.

Young and Fierke acknowledged the work of the Search Advisory Committee and thanked Professor Thomas W. Mitchell for his invaluable service as interim dean over the last year.

About Texas A&M University

Texas A&M, established in 1876 as the first public university in Texas, is one of the nation’s largest universities with more than 66,000 students and more than 440,000 living alumni residing in over 150 countries around the world. A tier-one university, Texas A&M holds the rare triple land-, sea- and space-grant designation. Research conducted at Texas A&M represented annual expenditures of more than $905.4 million in fiscal year 2017. Texas A&M’s research creates new knowledge that provides basic, fundamental and applied contributions resulting, in many cases, in economic benefits to the state, nation and world. The school’s Lead by Example campaign is a comprehensive effort to raise $4 billion by the year 2020, making it the largest higher education campaign in Texas history and the second largest conducted nationally by a public university. Aggies are known for their deep commitment to the success of each other and a strong desire to serve.

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Media Contact:  Kelly Brown, [email protected].