Wednesday, January 3, 2024
I am often baffled by sports contracts. Recently, there was the story of a public university paying a man $75 million not to coach its football team, but my interest in bad contracts (or contracts that seem bad to the outside observer) goes back to Bobby Bonilla. In this case, Fabian Ardaya and Evan Drellich explain the Los Angeles Dodger's contract with Shohei Ohtani (right) on The Athletic, and it seems pretty sensible.
The contract has been variously described as a ten-year deal for $700 million, a twenty-year deal for $700 million, and a $46 million/year contract. The wrinkle is that, although Mr. Ohtani has contracted to pay for the Dodgers for the next ten years, 97% of his pay is deferred until after than time. He will have to economize and live on $2 million/year for the next decade. Thereafter, he will be paid $68 million/year for ten years. All he had to do was sign.
Given the discount rate, the $700 million deal is worth about $46 million/year in 2023 dollars. Both parties seem to benefit from the arrangement. Mr. Ohtani might derive certain tax benefits, especially if he leaves California before 2034. The team gets to dodge (get it?) luxury taxes and have payroll flexibility to surround Mr. Ohtani with talented teammates. One would think that the obligation to pay Mr. Ohtani buckets of money starting in 2034 would weigh on the team's prospects during that decade. But perhaps in 2034 $68 million/year won't buy a chicken dinner. Or a tsunami might wash Los Angeles into the sea. Or the rapture. . . . Optimism fuels baseball.
Wednesday, November 29, 2023
Recently, Sid DeLong wowed us with an interesting perspective on the case of Danish performance artist Jens Haaning. As readers of the blog well know, Haaning was commissioned to produce artwork incorporating $70,000 in Danish currency that the commissioning museum advanced to him for incorporation into the work. Hanning never provided the work; instead, he delivered two blank canvases entitled Take the Money and Run.
No biggy, Sid pointed out. People get paid for doing nothing all the time. Farmers get paid not to plant crops when the government is trying to control against overproduction. Young William Story was entitled to collect from his Uncle William for successfully abstaining from certain corrupt behaviors before turning twenty-one.
But if you really want to get paid the big bucks for doing nothing, I recommend coaching. As I learned from Bobby Chesney and Steve Vladeck on their excellent, most recent, edition of the National Security Law Podcast, Texas A & M University is paying Jimbo Fisher (right) $75 million for not coaching its football team between now and 2031.
Doug Lederman provides some details in Inside Higher Education. According to the story, Mr. Fisher's contract was renewed in 2021 for ten years, and the contract was guaranteed, which meant that he would be paid whether or not he continued as coach. You might be wondering how the taxpayers of Texas feel about having their money being used in a Bobby Bonilla style boondoggle. The answer is probably that they are fine with it. What's government for if not for building college football programs? But just in case Texas taxpayers have other priorities, the university stresses that the $75 million will not come out of the university's regular budget but from "donor funds."
This strikes me as a relatively transparent shell game. That $75 million in donor funds that will be going into Mr. Fisher's pocket are $75 million that the university might use for other, presumably sports-related, purposes. And if the university cannot raise more private donor funds to attract its next football coach, or football stadium, or training facility, or whatever else it needs, the money to cover these new costs will indeed come from university funds that might have been used for, I don't know, educational purposes?
Last I checked, the Texas A &M football team is not ranked in either the AP nor the Coaches poll, nor did they have any votes in either poll, meaning that nobody polled thought that they were a top 25 team. CBS Sports ranks them at 37. Meanwhile, Texas A & M's law school is ranked 29th. By my math, that ranking should entitle the law school's Dean to a guaranteed ten-year contract worth at least $85 million, and some portion of that money ought to go to the Blog, given that the Blog was founded by Texas A & M law faculty member Frank Snyder (left), and Texas A & M faculty member Mark Edwin Burge (right) continues to serve as a contributing editor. Even a million or two would go a long way towards meeting the Blog's pressing fiscal needs. I'm not asking for much.
One might think that Mr. Fisher will not in the end actually collect his $75 million from Texas A & M or its donors, because of the duty to mitigate. But we've been down this path before on the blog, and I think we discovered that coaches who depart with guaranteed contracts do not have a duty to mitigate. Mr. Fisher is perfectly free to move on to his next gig, command another Brobdingnagian salary, and continue to collect his spoils from Texas A & M. In our world of the parable of his talents, this is righteousness. Not compounding his windfall with greater lucre would be regarded as a wasteful, and Mr. Fisher would be consigned to that outer darkness, complete with ambient weeping and gnashing of teeth.
Thursday, September 28, 2023
The playoffs are on their way. In the context of this case, I have only one thought. Go Cubs!
In 2001, the Baltimore Orioles and TCR Sports Broadcasting, LLC (TCR) established the Orioles’ Television Network, which had the exclusive right to broadcast Orioles games in the region, covering seven states and the District of Columbia. When Major League Baseball (MLB) decided to move the Montreal Expos to Washington D.C., where they became the Nationals, the Orioles chirped a bit, but the Orioles, MLB, and TCR entered into a settlement agreement, converting the Orioles' Television Network into the MidAtlantic Sports Network (MASN), a two-team regional sports network.
This was a sweet deal for the Orioles, because they got to keep the majority of the revenues from the network. That was intentional and intended to compensate the Orioles for the revenues they would lose, having to share the market with the upstart Nationals. The structure is also a bit unwieldy. MASN was to pay both teams equally for the right to broadcast their games, but given that the Orioles got the lions share of MASN's profits, it was incentivized to sell its rights rather cheaply in order to reap benefits from the Nationals' television revenues.
The first time the parties tried to negotiate telecast rights fee, they failed to reach agreement. The parties chose not to avail themselves of the mediation process provided for in their agreement, and so they opted for arbitration through a body provided for in the agreement consisting of the three members of the MLB revenue-sharing committee. There were complications, but the arbitral body eventually determined that each teams' revenues should be set at $53 million for 2012, rising to $67 million for 2016. MASN and the Orioles objected and, despite MLB's insistence that the parties avoid litigation, the Orioles filed suit in New York. They claimed that MLB was biased in favor of the Nationals.
The New York court vacated the arbitral award on the ground that the Nationals' attorneys, Proskauer, also represented MLB in various matters. This ruling was affirmed on appeal, and so the case was sent back for a new arbitration, this time with a different panel and without Proskauer. The result of the second arbitration was pretty similar to the first, and the Nationals moved in a New York state court to have the second decision enforced. The Orioles still called foul, but the New York trial court affirmed the arbitral award, entering a judgment of $105 million, including pre-judgment interest. New York's Appellate Division affirmed, and the Orioles appealed both the 2017 and the 2020 decisions.
Still think arbitration is a fastball? Seems more like a knuckler.
In Matter of TCR Sports Broadcasting Holding, LLP v WN Partner, LLC , New York's highest court affirmed the arbitral award and yet still condemned the parties to "extra innings." Baseball puns? So unprofessional!
The Court of Appeals found no impropriety in the trial court's decision to return the matter to the original arbitral body, and it agreed with the lower courts that the second proceeding was free from the taint of partiality. While the lower courts thus properly affirmed the second arbitral award, they erred in awarding the Nationals prejudgment interest and rendering a money judgment in the Nationals’ favor. As the Court of Appeals explains:
The settlement agreement grants the RSDC the power only to determine “the fair market value” of the telecast rights fees. The parties did not agree that the RSDC could resolve disputes over nonpayment of such fees. Instead, remedies for MASN’s nonpayment of those fees are governed by a different provision of the settlement agreement, which sets forth certain requirements, including a cure period. Only after that cure period expires do the Nationals “have a right to seek money damages.” Further, disputes over nonpayment of the fees appear to be governed by the settlement agreement’s more general dispute resolution provisions. Now that our courts have confirmed the RSDC’s determination of the fair market value of the telecast rights, the parties must resolve any disputes over nonpayment of those fees in accordance with their agreement.
One hopes that these court-ordered "extra innings" will be quickly completed. After all, with so many legal matters sorted out after over ten years of adjudication, it's almost like having a runner on second base at the start of an inning.
Go, Cubs, Go.
Tuesday, September 12, 2023
I have been using Brian Blum's Examples and Explanations book as a supplement to my first-year contracts course for years. This week, we are covering offers. Professor Blum (right) provides Example 13 of chapter 4, which involves the acceptance of an offer to enter into a unilateral contract by hitting a hole-in-one at a charity golf tournament. Professor Blum's hypo is based on a case out of Utah, and he cites another case out of South Dakota.
But they just keep coming. As Teny Sahakian reports for Fox News, Linda Chen hit a hole-in-one at a charity golf tournament in Florida. She claimed entitlement to a new Mercedes Benz, valued at $90,000. The tournament organizers denied her the prize on the ground that the offer was only made available to amateurs, and Ms. Chen had been a professional golfer from 1994-96. She claims that she is now "officially registered" as an amateur. Gosh. I'm not registered. What does that make me?
According to her complaint, as reported on Fox News, Ms. Chen claims that "By showing up, entering the Fins on the Fairway golf tournament, her host paying the entry fees, and hitting a hole in one," Chen "accepted the Defendants’ offer, formed a contract, paid consideration, and fulfilled her obligations under the contract." The tournament organizers claim that only amateurs were qualified to claim the prize. And no, this is not a Lefkowitz situation, because the limitation to amateurs was not some unspoken "house rule"; it was a stipulation of the tournament rules, a copy of which Ms. Chen signed.
But is someone who has not been a professional golfer since 1996 a professional for the purposes of the contest? Did Ms. Chen have duty to disclose her status as a former professional. The tournament organizers insist that other professionals had registered in the tournament as such. If Ms. Chen had only done that, they say . . . Well, if she had only done that, what exactly? Are they suggesting that they would have told her, imitating a Seinfeld character, "No Mercedes for you!"? In any case, we can now layer interpretive issues on top of the unilateral contract issues to make one lovely fact pattern! I hope you are paying attention, Professor Blum.
Thanks to OCU 1L Hunter Lovell (left) for sharing the story with me.
Tuesday, September 5, 2023
Kienus Perez Boulware (Boulware) was employed by the Winston-Salem State University (WSSU) since 2010. In 2016, he entered into a four-year contract as head coach. Among his "other duties . . . as may be assigned," Boulware served as a Campus Security Authority, tasked with assisting WSSU in complying with its duties under the Clery Act, which requires universities to track and report crimes.
In April 2019, two football players got into a fight on the field. They then fought in the locker room. They were sent home to their dorms, where they continued to fight. The father of one of the football players told Mr. Boulware that there might have been a gun involved. Mr. Boulware went to the dorm room, discovered what was likely marijuana, but did not search for a gun after the players denied that there was one.
A few weeks later, the school began proceedings to terminate Mr. Boulware for cause. He had not notified campus police or any other authorities, despite a situation that clearly posed a potential threat to security on campus. He thus violated his duties as a Campus Security Authority. Mr. Boulware exhausted his on-campus avenues of review and then appealed his termination in state court.
In July, in Boulware v. University of North Carolina Board of Governors, the North Carolina Court of Appeals sided with WSSU and ruled that his termination was valid. WSSU had correctly interpreted the Clery Act and had stated multiple grounds for terminating Mr. Boulware and had been asserting those grounds consistently throughout the proceedings.
Monday, August 21, 2023
On the first day of class each year, I tell my contracts students about the blog. They may or may not think that they are interested in contracts law, but I think it is good to introduce them to the idea that the whole of existence can be considered through the lens of contracts law, which is what we do here.
And then, without warning, on the second day of class, I was blindsided when OCU 1L Sydney Freshwater (left) asked me to blog about suit brought by Michael Oher (below right) challenging the conservatorship set up purportedly on his behalf in 2004.
I protested that I sat out the whole Britney Spears thing, and as a result, I know nothing about conservatorships. Sydney was unfazed and insistent. The world needs to read the contracts angle on all of this, she scolded. Well here goes.
According to Claudia Rosenbaum writing in Vulture, Mr. Oher was not adopted by the Tuohy family as he and millions of movie-goers believed. Rather the Tuohy's set up a conservatorship that provided, among other things, that Mr. Oher could not enter into any contracts without their direct approval.
Mr. Oher claims that he was told that the conservatorship was the legal equivalent to an adoption. Adoption itself was not an option, he was told (falsely, according to the article), as Mr. Oher was over 18 at the time the conservatorship was established. No conservatorship was necessary, he now claims, as he suffered from no disability, and he claims that the conservatorship cost him millions of dollars. He wants the conservatorship to be ended, and he seeks an accounting. The Tuohys were paid $225,000 each (it's not clear if that is for husband and wife alone or also for their two children) plus 2.25% of profits on the movie The Blind Side, which grossed over $300 million.
They respond to this suit by a man they "love as a son" by calling it "hurtful and absurd." They are absurdly rich. So rich, apparently, that their attorney thinks that hundreds of thousands in up-front payments from a movie studio plus perhaps millions in post-production profits amount to "a few thousand dollars in profit participation payments." It's easy to lose track of one's spare millions when you are just throwing them on the pile. They characterize his lawsuit as "ludicrous" and dismiss it as an attempt to drum up interest in his new book. Gosh, they are so loving! Imagine what they would say about him if they had actually adopted him.
Mind you, there is a lot going on here that doesn't add up. It seems odd that Mr. Oher has gotten this far in life without noticing that the Tuohys were necessary parties to his multiple contracts over the years. At no point did his agent tell advise him that he didn't need the Tuohys around? Does he need to check with them before he signed with multiple NFL teams? Closed on a house? Agreed through clickwrap to a website's Terms of Service? Bought a car?
With both parties here are well-resourced, one hopes that this case will be quickly resolved through mediation. Otherwise both sides might be blindsided and made worse off by attorneys fees.
Thursday, August 10, 2023
I have been writing for the last two years or so about the interaction between contracts rights and First Amendment rights. There are links to lots of posts starting with this one. I have an article forthcoming on the case from 2021 in which SCOTUS found that a middle school could not discipline a cheerleader who posted a Snap that read "fuck school fuck softball fuck cheer fuck everything."
So, I was intrigued when I read Dean Straka's article on CBS's Sports' website, that Florida A & M University's (FAMU) football coach, Willie Simmons, acknowledge free speech issues in announcing on July 21st that he was suspending "all football activities" due to an unauthorized rap video posted on YouTube.
The artist in question is Real Boston Richey. He appears in the video, among other places, in the FAMU football team's locker room. He is shown wearing FAMU gear, including football helmets, and he is surrounded by team members, also wearing FAMU gear. The Rapper performed at FAMU's homecoming game last season, so there seems to be a genuine bond there. It is unknown how he and his crew gained access to FAMU's facilities for the purpose of recording the video. FAMU notes that the unauthorized use of apparel and logos violates licensing agreements.
In suspending all football activities, Coach Simmons expressed his support for free speech but said that the language in the video "is not consistent with FAMU's core values, principles and beliefs." That's a bit hard to square with FAMU's invitation to Richey to perform at homecoming. Coach Simmons said of his athletes, "They will all learn from this mishap and we will continue to work hard every day to become the best version of ourselves and continue to make Rattler Nation proud." Sure.
The video is no longer viewable, as far as I can tell, but you can listen to the song here. You can find the lyrics to the song here. I don't have the expertise to comment on the their qualities, but it seems understandable that FAMU would not want to be associated with the rap's message, at least if one associates the message of the song with the words as written.
I assume that the students who join college football teams enter into agreements that include limitations on their rights of free expression. FAMU is a state university, so there ought to be First Amendment protections that the athletes cannot bargain away. That said, the cheerleader in the SCOTUS case signed an agreement in which she promised not to make disparaging comments about her school or cheerleading on social media, and then she proceeded to do that very thing. SCOTUS said that the school could not discipline her in any way consistent with the First Amendment.
In this case, it seems like there was non-expressive conduct that could be punished consistent with the First Amendment. There was unauthorized access to FAMU's facilities. There were the licensing violations. But some of those pertain only to Real Boston Richey and his crew, and some of those pertain to the individual students who presumably allowed him into the locker room and joined him in the music video. Suspending all football activities seems to punish student athletes who had no involvement. Perhaps for that reason, among others, the suspension was lifted on July 24th. According to Jim Henry, reporting in the Tallahassee Democrat, no information regarding player discipline has been made public, but the investigation is ongoing.
Monday, July 31, 2023
Which Contract is Better?
By Michael A. Blasie
If presented with two contracts with wildly different language about the same transaction, how would you tell which is better? To work towards an answer, let’s consider the waiver for the Paine to Pain Trail Half-Marathon, which is a trail running race in southern New York.
- Waiver Language
- The Introduction
The waiver begins “We bet you’ve never seen a waiver and disclaimer like ours” and has an image of the word “legalese” circled in red.
- Kind of Hazards
In a few paragraphs comprised of short, plain, humorously-worded sentences, the waiver explains how natural and human-made, known and unknown hazards can injure racers.
First, it describes a category of natural tripping hazards: “The trail has plenty of rocks, roots, stumps and other tripping hazards.” Then it describes a category of human-made tripping hazards: “A faster runner might, therefore, knock you to the side, causing you to slam headfirst into a tree or be impaled on a jagged root.”
It warns of general health hazards caused by nature, “like poison ivy, ticks, bugs, wasps and other woodsy things you find in the great outdoors.” When pointing out how weather can affect racers, the waiver notes “[w]ind and rain may create mud holes, fell trees and limbs and create hazards that race officials don’t even know about. Even if we detect a hazard, don’t expect us to warn you. You’re on your own.”
Almost in a chuckling tone, the waiver warns about directions: “Vandals may swipe trail markings. You could veer off course and run straight into a horse’s ass for all we know. . . . race officials may deliberately create extra hazards. Just for fun. (Don’t worry, this gets better.)”
When discussing the importance of hydration and nutrition, it warns “[t]here are only three water stops, so it’s important to carry a water bottle and any food that you want. If you get dehydrated, it could be months before we find your pile of vulture-picked bones. (Ever had so much fun reading a disclaimer?)”
Last, it points out road crossing dangers: “There are some road crossings. They might have police coverage. Or they might not.”
- Release Language
Then comes the release language: “But even though you might get hurt or lost, you’re agreeing to all this crap because you want to run this race.”
To describe who the racer is releasing, the waiver states: “You are therefore releasing and discharging all race officials, volunteers, sponsors, municipalities, and school districts, as well as releasing the rocks, roots, bugs, tree limbs, and other stuff, dead or alive, gnarly or not, that might poke an eye out or otherwise hurt you. Because you know that trail running is a high-risk activity.” In case the bottom line was unclear, the waiver states “[i]n other words, you won’t sue any of the people or groups responsible for this race if you get hurt or suffer illness (such as COVID).”
- Known and Unknown Risks
“We’re almost done. This is the important part. This trail has known knowns; there are things we know that we know. There are also known unknowns; that is to say, we know there are some things we do not know. But there are also unknown unknowns – there are things we do not know that we do not know. You are accepting all these risks; known and unknown.”
- Concluding Swipe at Typical Waiver Language
“And you are agreeing to all of this even though it’s written in plain English instead of stupid legalese.”
- Is This Waiver Better?
By the way, you might like to know a plaintiffs’ personal injury lawyer created the race. The fact that a lawyer who likely has extensive experience attacking waivers would choose to use one with very different language likely untested in court piqued my interest.
The waiver’s language is unique. It certainly looks nothing like the kind of language usually found in waivers for high-risk activities. Indeed, it openly mocks typical waiver language, while also invoking humor and using plain language. All that makes it different. But different is not necessarily better.
Is this waiver better than the traditionally worded waiver? I am less interested in the answer and more interested in the process of getting to an answer because I am not convinced lawyers or scholars have a way of evaluating contract language.
Of course, most would say the waiver must be enforceable. Ok, so it has to have all the requirements for contract formation and nothing that would render it unenforceable. But that is a fairly low bar, and many differently-worded waivers would meet this threshold.
And you would want the waiver to contain the right substance. This analysis prompts an interesting question: does this waiver offer more, less, or the same substance as a traditionally worded waiver? For the moment, let’s assume both options are coextensive.
Next, you would probably say it should be enforceable the way the client wants it to be. In other words, we want to be able to predict a court will interpret language to our client’s advantage. Fair enough, but without case law interpreting the language, it seems hard for a lawyer to claim one set of language is more predictable of how a court would rule than another.
Here is where deciding between the two gets murky. I do not think there is widespread agreement on what else a lawyer or a client would consider when evaluating a contract. Here are other potential considerations:
- Should the waiver be understandable to the participant?
- Should the waiver be understandable to race administrators?
- Should the waiver’s writing style be consistent with or supportive of the company’s brand?
- Should the waiver decrease the chance a racer will be harmed, which in turn decreases the chance of a lawsuit?
- Should the waiver decrease the chance an injured racer would sue (even if you believe you would win at trial)?
What else would you consider?
A contract may serve a client in ways beyond being enforceable in court the way the client intended. Looking at unconventionally-worded contracts like this one may provide some insights as to what additional purposes contractual language might serve.
Monday, July 3, 2023
I am taking the month off to move house and try to get some scholarship done before the new semester begins. There may be guest posts and Top Tens, but I do not anticipate putting up fresh content until August.
If you need diversion, I recommend the Tour de France!
Tuesday, June 6, 2023
Thursday, May 18, 2023
Unfortunately, I have not been able to locate a digital copy of the arbitral decision. I will make do with reporting from Ewan Murray in The Guardian. A dozen professional golfers (none of whom are included in the painting at left) played in a tournament sponsored by the LIV Golf Circuit. The DP World Golf Tour sanctioned the players with fines of up to £100,000. The players denied that they had violated their agreement with the DP World Tour by playing for the rival organization.
Last month, an arbitral panel ruled that DP World Tour had acted within its rights in fining the players and had in fact reacted reasonably in the circumstances. DP World Tour issued a statement, noting that 26 players are now subject to sanctions for playing in LIV Golf events, with fines ranging from £12,500 to £100,000 as well as suspensions. The statement notes that players who have resigned from the DP World Tour will not be reinstated until they pay their fines. According to SkySports, as of December 2022, Henrik Stenson, Lee Westwood, Ian Poulter, Sergio Garcia and Richard Bland had resigned their memberships.
As of three days ago, it seems that all fined golfers other than Sergio Garcia had paid their fines. Ankita Yadav, writing in Sportskeedasuggests that LIV Golf paid the fines for seven golfers and provides the following list of golfers who have paid.
- Ian Poulter
- Richard Bland
- Laurie Canter
- Branden Grace
- Justin Harding
- Sam Horsfield
- Martin Kaymer
- Pablo Larrazabal
- Graeme McDowell
- Shaun Norris
- Wade Ormsby
- Adrian Otaegui
- Patrick Reed
- Charl Schwartzel
- Bernd Wiesberger
Interesting international developments as the U.S. tightens rules on non-compete clauses.
Tuesday, January 31, 2023
When SCOTUS Says It’s So, It’s So:
A Speech Act Analysis of the eBay Opinion
Sidney W. DeLong
Suppose that in the Spring of 2006, you had been grading final exams in your Remedies class. You had posed a question about whether a property owner could obtain a permanent injunction against a neighbor who was threatening to misappropriate some of the owner’s property. Several classes had been devoted to the rules and principles on which courts enter permanent injunctions.
One student began his answer as follows:
According to well-established principles of equity, a plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief. A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.
Notwithstanding its superficial precision and its confident tone, you gave this answer no points because you identified at least six substantive errors in it. The most glaring mistake is that says that issuance of a permanent injunction requires a plaintiff to “demonstrate that it has suffered an irreparable injury.”
That statement is wrong in at least two ways. First, because an injunction is intended to prevent future injury, it is never necessary that the plaintiff demonstrate that it has already suffered an injury. More importantly, the student fails to say that a court will not issue an injunction unless the plaintiff demonstrates that it will suffer injury in the future if the defendant is not enjoined. (The other obvious errors are discussed at the end of this post.)
Now suppose that, in an exam review after the end of the semester, the student who wrote that paragraph unexpectedly defended his answer by drawing your attention to a hot-off-the-presses Supreme Court slip opinion in eBay v Mercexchange, L.L.C, 547 U.S. 388, 390 (2006) where, (miraculously?) the identical 85-word paragraph appeared. The student demanded to know how his answer could be “wrong” if it coincided exactly with Justice Thomas’s opinion? How would you have explained his grade?
I would have found this to be a formidable task. Just saying “Well, the Court just got it wrong!” as I would have to a colleague would have sounded arrogant if not megalomaniacal to a student, even though it is exactly what I thought. Incidentally, I am not alone in this view. See, e.g. Laycock and Hansen, Modern American Remedies (Concise 5th Ed. 2019) 353-57 (below, right); Mark P. Gergen, John M. Golden, & Henry E. Smith, The Supreme Court’s Accidental Revolution? The Test for Permanent Injunctions, 112 Colum. L. Rev. 203 (2012). But how can I explain what “wrong” means in such circumstances?
Not wishing to get into waters this deep, I think instead I would have invoked speech act theory to explain how the court could have been “right” and the student wrong. In speech act theory, despite all appearances, this was not a case of two different people saying the same thing. The two identically worded utterances are different speech acts that are doing different things.
The student’s answer consisted of assertions, which are speech acts that make a statement of fact. Assertions are either true or false. Unhappily, the student’s statements about the law of permanent injunctions were all false and misleading, which I could easily prove.
Although the Supreme Court’s opinion used identical language, it performed a completely different speech act. Rather than being assertions, the Court’s language was a series of performative utterances, sometimes known as declarations. Performative utterances are what most people think of when they think of speech acts and they are particularly characteristic of legal speech. According to speech act theorist John Searle (below left) “Declarations bring about some alteration in the status or condition of the referred to object or objects solely in virtue of the fact that the declaration has been successfully performed.” When uttered by the right persons under the right circumstances, declarations or “explicit performatives” change the world in the way mentioned in the utterance.
In a successful declaration, just saying something makes it so. “I hereby declare the meeting to be adjourned” adjourns the meeting. “The motion is hereby overruled” overrules the motion. “I hereby accept your offer” accepts the offer. The speaker’s use of the legal-sounding adverb “hereby” is a universal signal of an explicit performative. Although the word may be omitted when it is tacitly understood, “hereby” can be added to any performative phrase without changing its meaning or effect.
Unlike assertions, declarations are neither true nor false: instead, they are effective or ineffective, depending on who does the declaring and under what circumstances. When an umpire yells “You’re out!” in a baseball game, the runner is out. When a fan yells “you’re out” in identical circumstances the runner is not out. When a law student writes, “A plaintiff must demonstrate that it has suffered an irreparable injury,” his writing has no declarative effect and does not affect the law. When five justices of the Supreme Court write the same sentence in an opinion, the words have a declarative effect, which creates the rule it just announced.
But it gets a bit more complicated. Often an utterance can have both assertive and performative illocutionary force. “The bar is closed” when said by a disappointed patron to a hopeful arrival is an assertion and is either true or false. But when it is loudly announced by the publican to the patrons in the bar, it is a declaration that becomes “legally” effective upon its utterance: Saying it closes the bar. But in those circumstances, it is also a true statement by the publican about the bar’s status. As such it is an assertion whose purpose is to give information to the hearers.
The same expression can thus serve two functions, formally closing the bar and truthfully informing the patrons of that sad fact. Searle called such hybrid expressions “assertive declarations.” An assertive declaration in a judicial opinion would simultaneously change the law in some way and truthfully assert that the law had become the way it described.
Finally, to complicate things still further, whether an utterance is an assertion, a declaration, or an assertive declaration depends on its correct interpretation by the hearer. The “illocutionary force” or speech act status of an utterance is always a matter of interpretation, no less than is its meaning.
What then is the speech act status of the eBay Court’s statement that, under the familiar four-factor test, the issuance of a permanent injunction requires a plaintiff to “demonstrate that it has suffered an irreparable injury”? If it was only an assertion, like the student’s answer, then it was false, as a host of Remedies authorities have confirmed. See above. It completely misstated existing law.
On the other hand, if the Court had written an explicit performative: “We hereby rule that a permanent injunction requires a plaintiff to demonstrate that he has suffered an irreparable injury,” that utterance would have been neither true nor false because it would not be an assertion. It would instead have been legally effective to change the law of injunctions in federal courts. It would have been formally unobjectionable, although of course subject to criticism as to its wisdom.
But did the court intend for its statement to be declarative of law despite its omission of “hereby”? Ostensibly, the court was merely reporting the existence of a “well-recognized four factor test” and reciting part of that test. In this, it was mistaken. Its declaratory powers do not include the power to change facts.
But the Court did more than assert the existence of the test as a fact. It implicitly adopted the test as its own and used it to resolve the case. In doing so, it declared the four-part test to be federal law, even if, as Gergen et. al. have suggested, “accidental” law.
As an “assertive declaration,” the paragraph became not only legally effective but, as a consequence, also became factually true as a description of federal law. In other words, the paragraph became a true assertion about federal law as soon as it was published, as does any successful assertive declaration. Saying it made it so.
Should my hypothetical student then have won the argument over his exam? Technically, his statements were false and misleading when he wrote them but they became true only later with the publication of eBay. Moreover, even after eBay, the non-federal law applicable to the exam hypothetical remained unchanged. I continued to teach subsequent classes the actual tests for permanent injunctions in courts uninfluenced by eBay and that its effect on federal court cases that do not involve patents is still uncertain. There is no sign that the Court itself is inclined to clarify the ruling and that is where things stand.
But I confess, if any of my students had been sharp enough to find the eBay opinion and make that argument in an exam review, he or she would have earned a grade increase for initiative.
Postscript: My brief enumeration of inaccuracies in the eBay paragraph follows. Although Justice Thomas authored the opinion, any blame for its mistakes was equally shared by the entire Court because none of them was challenged or corrected.
Monday, December 26, 2022
Tom Brady: From G.O.A.T. to Scapegoat:
A Cautionary Tale of Influencer and Endorser Liability
Sidney W. DeLong
If the next Tom (the Greatest Of All Time) Brady is in college today he is sure to be earning a lot more money than Tom was able to scrape together as a student athlete when he played for Michigan. As predicted in an earlier post, Name, Image, and Likeness Mercenaries: NIL Desperandum in College Athletics, the next Tom is already aboard the Name, Image, Likeness (NIL) bandwagon that has already showered millions of dollars in “endorsement” income on student-athletes. The NIL beneficiaries are Very Definitely Not being “Paid to Play” for the schools that woo them to step through the Transfer Portals into a world of big money endorsement contracts. Star athletes can earn tens or hundreds of thousands of dollars, ostensibly as pitchmen for local car dealerships and plumbing companies. All of which is good practical training for the much more lucrative and slickly produced product endorsements for which they will be paid when they become professionals, endorsing insurance companies, sneakers and fast food.
And in a sense, NIL income for athletes is only fair compensation for the hard and dangerous work they must put in to earn their scholarships. Star athletes must keep up financially with their non-athletic but internet-famous classmates who pull down five and six-figure salaries as Influencers, persuading their followers to buy whatever music, fashions, and cosmetics that their advertisers are paying them to pitch. “Influencer: It’s not just a side-hustle, it’s a career.”
But the shock waves emanating from recent collapses in the world of crypto portend risks that a fledgling NIL athlete or Influencer might well bear in mind. It turns out that touting a product as a celebrity endorser or influencer can lead to significant personal financial liability for the endorser, especially if what is being touted is not a diet plan but what a judge may later call a “security.”
Endorser liability is a relatively new concept and the courts have not yet evolved clear rules. The common law offers few theories under which a buyer might sue a seller’s agent for personal liability resulting from misleading statements the agent made about a purchase of a commodity, whether in the form of facts or opinions. Lies by a non-seller might justify avoidance or a warranty claim against the seller, but the agent owes no common law duty to the buyer to make only truthful statements about the product.
By statute, however, two forms of endorser liability have emerged in the U.S. For the sale of goods, The Federal Trade Commission has issued regulations making it illegal for a product endorser to fail to disclose whether she is compensated for her endorsement or to publish a misleading consumer product review of the product. The FTC has even published “guidelines” for social media influencers. Because these rules are aimed at misleading endorsement rather than misstatements of fact, liability can be avoided if the celebrity announces, ‘I am just saying this because I have been paid to do so.” Of course, such candor would defeat the purpose of the endorsement. Actual disclosures are more subtle, but effective in avoiding liability. But the American public has always been fully aware that every celebrity endorser since Lucy, Lady Duff-Gordon (left) has compensated and so the formalistic acknowledgement of compensation that is demanded by the FTC seems to be a solution in search of a problem. Or perhaps an example of straining at a gnat and swallowing a camel.
A far more lethal risk arises if the product being endorsed is held to be a security as defined in federal and state law. Which leads us to the crypto disaster. Tom Brady, along with his wife Gisele Bundchen, Shaquille O’Neal, Naomi Osaka, Larry David, Steph Curry, and many other celebrity endorsers of crypto products have been sued for damages and fines by the Securities and Exchange Commission (SEC) and classes of private parties under theories of securities act violations, violations of FTC disclosure regulations, and common law fraud, all arising from their promotional activities on behalf of FTX, Crypto.com and other sellers of crypto assets.
In a widely-publicized enforcement action, Kim Kardashian (right) was fined $1. 2 million in penalties plus disgorgement of profits by the SEC for failing to disclose a $250,000 payment she received to publish a post on her Instagram account promoting EthereumMax’s crypto asset security EMAX tokens. The article suggests that Matt “Fortune Favors the Brave” Damon was not charged because he was promoting a website, Crypto.com, rather than a specific security offered by his principal. More importantly, because EthereumMax’s tokens declined in value by 98% following Kardashian’s promo, she has been sued by disappointed investors for their losses.
Even the question whether Bitcoins themselves are securities may be an open question about which legal advice would be necessary. Gary Gensler, Chairperson of the SEC, has said that he believes that most cryptocurrencies are securities, as defined under the Howey Test, leading many to anticipate regulation of the market. If a celebrity touts an unregistered security, that alone could subject them to potential fines and jail time as well as to civil claims by disappointed purchasers regardless of the celebrity’s disclosure of their interest.
In addition to liability for fraud or for promoting the sale of unregistered securities, endorsers may run afoul of the SEC’s statement of policy about “celebrity backed” initial coin offerings requiring disclosure of compensation paid for endorsements (concerning the policy relating to “initial coin offerings”). Under this theory, Brady and Bundchen may have additional disclosure obligations arising from an alleged equity stake they took in FTX in 2021, before the endorsements.
What conclusions should a lawyer representing Future Tom Brady or Future Gisele Bundchen draw from the GOAT’s latest problems? I would suggest at least the following.
First, you should have final review of any endorsement contract and should not depend on the endorsement agent’s version, whose financial interests are not coincident with his own. Tell the client that “Jerry Maguire is interested only in his cut of the promotional fees; he won’t be there for you when you are sent away for securities fraud.”
Second, you will require securities law expertise whenever there is any possibility that what the client is touting is a security. With novel crypto products, it may be months or years before the courts decide whether the thing being touting is a “security,” under some version of the Howey test. Emphasize to the client that the personal liability for violating the securities laws can be staggering: that is the reason that liability insurance for securities lawyers is so expensive. An endorsement fee cannot possibly compensate for this level of risk.
Third, insist that the entity paying for the endorsement agree to indemnify the client and hold them harmless from any liability they may incur to any person or organization resulting from their performance of the endorsement contract. The indemnity must also include compensation for attorneys’ fees and other professional fees incurred, tax-related losses, and any other financial liability resulting from the product endorsement. (An agreement to pay criminal fines might be unenforceable on grounds of public policy, but it cannot hurt to obtain it.) If you cannot obtain indemnity, you should probably advise the client to walk away from the deal. If they refuse, you should (sad to say) probably memorialize your advice to the client.
When Matt Damon (left) told America that “Fortune favors the Brave” he was really sending a double message. He was not only encouraging ordinary people to risk their life savings on Bitcoin in a bold bid to earn a fortune. He was also, by his own example, encouraging celebrities to risk losing everything they owned in a securities fraud class action just to earn a hundred-thousand-dollar fee. Both messages proved to be disastrous, but at least some of the celebrities may end up as the bigger losers.
Thursday, December 22, 2022
Last week, Tariq Panja spilled the tea in The New York Times about David Beckham's contract to promote Qatar in connection with the World Cup and his utter failure to do so in any way that would have the sort of impact for which Qatar shelled out (perhaps?) $150 million. That said, he didn't exactly breach either. He kinda ChatGPT'd it.
Some people think you ought to actually enthuse to the media about Qatar when you enter into a contract to promote Qatar. Others think that you ought not to promote Qatar in connection with the World Cup if that might force you to opine about workers' rights or LGBTQ+ issues.
Or so I imagine ChatGPT would respond if I asked it about Beckham's contractual performance.
Mr. Beckham's strategy, according to the New York Times, is to show up for events when asked, on condition that his appearance not be announced in advance and the press not be notified. Mr. Beckham's bearded visage can be seen all around Qatar, on billboards and signs promoting Qatar and the World Cup, but the man himself is rarely seen and largely inaccessible. When pressed to speak about why he is endorsing Qatar or about his views on the various controversies that swirled around the World Cup and its 2022 host, Mr. Beckham issued press statements that sounded genuine, by which I mean that they genuinely sounded like they were generated by ChatGPT. Some samples:
David has been involved in a number of World Cups and other major international tournaments both as a player and an ambassador and he has always believed that sport has the power to be a force for good in the world.
We understand that there are different and strongly held views about engagement in the Middle East but see it as positive that debate about the key issues has been stimulated directly by the first World Cup being held in the region.
Other celebrity sponsors of the World Cup have apparently been irked by Mr. Beckham's special treatment. But some of them, unlike Mr. Beckham, have won the World Cup tournament, so there may be some consolation in that.
Tuesday, November 22, 2022
The New York Times provides two separate stories that those inclined towards conspiratorial thinking might think are linked. First, Adam Crafton reports in the Times curated collection of longish-form sports journalism, The Athletic, that Lionel Messi signed a "lucrative deal" to promote Saudi Arabia as the host of the 2030 edition of the World Cup.
In the same paper, Rory Smith reports on Saudi Arabia's shocking upset of Argentina, lead by their star -- you guessed it -- Lionel Messi in the team's first match in the 2022 World Cup. As Rory Smith puts it,
Messi, a being seemingly hewn from pure, uncut poise, seemed afflicted, rushing his passes, missing his beats, fading from the game as the clock ticked rather than bending it to his will.
All is not lost, Argentina. The team just has to prevail over Mexico and Poland, and it can still emerge from its group. But people will be left to wonder: is contractual obligation the one thing that can overcome Messi's competitive drive?
Monday, November 21, 2022
In a sobering development, Qatar has announced that it will not allow for beer sales at the World Cup. As Simone Foxman and Adveith Nair report on Bloomberg here, this decision might entail a breach of not one but two contracts! First, in banning beer from football stadiums, Qatar seems to be violating its agreement with FIFA, the entity responsible for organizing the World Cup. In addition, Anheuser-Busch InBev NV is the official beer of the World Cup and paid millions to be exclusively available at World Cup venues. Now beer sales will be relegated to "fan zones" outside stadiums.
According to Tariq Panja reporting in The New York Times, FIFA President Gianni Infantino responded to criticisms of the decision to hold the World Cup in Qatar, criticisms that have focused not so much on beer but on the working conditions of foreign laborers who built the stadiums and on Qatar's human rights record. Comparing his experience as a redheaded child of immigrants to Switzerland to the plight of homosexuals in the Middle East, he decried the hypocrisy of human rights organizations and invited his audience to crucify him. Nobody in the audience seemed inclined to do so, and FIFA is such a deeply corrupt organization, I don't think anybody thinks much will come from repeating the obvious.
According to Wikipedia, the following organizations have criticized Qatar for human rights abuses in connection with treatment of workers involved in constructions projects for the World Cup: Human Rights Watch, the International Trade Union Confederation, Amnesty International, the International Labor Organization, the UK Daily Mirror, the UK Guardian, Equidem, and FIFA. Yup. Hypocrites.
Will the result of the beer ban in major league baseball be replicated? In 1961, the Milwaukee Braves attempted to ban carry-ins at their baseball stadium As reported here, in the Milwaukee Journal Sentinel, the ban did not go well. Fans noticed, for the first time, that baseball is an incredibly boring sport. There was a 26% drop in attendance. Angry, sober fans burned down the stadium, killed and roasted the mascot, and renamed the team the Brewers. Some of the details provided here might go beyond the accounts in the lamestream media, but we just report; you decide.
Thursday, September 22, 2022
Two pieces of news that I came across this week highlight just how broken college sports is. First, as Zac Al-Khateeb reported here in The Sporting News (in a story first reported in The New York Times' The Athletes, the University of Texas at Austin spent $280,000 on a recruitment trip involving Arch Manning and some other students. The system disgusts me so much that I can't be bothered to keep up with the current state of things. I don't know whether players are allowed to be paid yet. If they are not allowed to be paid, well, this story suggests that they absolutely are being paid. And if they are being paid, well, pay them to play, not to have dinner at the local steakhouse with their families. But please, do start paying them and do it soon, so that the entire corrupt system can come crashing down under the weight of its own excess, greed, and unreality.
Second, Billy Witz reports here in the New York Times, that the University of Connecticut (UConn) has agreed to a $3.9 million settlement with its former coach Kevin Ollie (right), who was fired for cause in connection with an NCAA recruiting violation investigation that ultimately resulted in the team being placed on probation for two years. An arbitrator had awarded Mr. Ollie, who was found to have skirted NCAA rules, the $11 million remaining on his contract at the time of his termination. UConn had originally responded by calling that award "nonsensical." The fact that Ollie negotiated down from an arbitral award suggests that he was less than 100% confident that it would hold up, but who knows what absurd terms were in the contract. Paying coaches millions of dollars to head teams made up of talented athletes who get paid nothing and who are supposed to be attending college rather than training for professional sports is what is really non-sensical.
NO OTHER COUNTRY IN THE WORLD DOES THIS!!! And it does not pay for itself. Not even close. This article from Tom Dart in The Guardian about the University of Houston has the same message as every other truthful article about college sports: "A handful of athletics departments, such as Texas (which has newly renovated one end of its football stadium at a cost of $175m) are profitable. Many others, such as Houston, subsidise sports programmes through funds from the university’s wider budget, mandatory student fees of hundreds or even thousands of dollars each year, and donations."
When sports programs do well, they bring in money that is used on sports. When law schools do well (and many make a profit for their universities most years), they contribute to the university's overall budget. Instead of painting their faces, attending tail-gating parties, and screaming for three hours on a Saturday, undergraduates should be bringing snacks and coffee to the law libraries and encouraging the students who are training to become the lawyers of tomorrow. Their tuition dollars are funding that climbing wall in your college gymnasium today.
Monday, September 19, 2022
Last week, we posted about Nebraska's decision to fire its head football coach Scott Frost and pay him $15 million in severance. Victor Goldberg shared Coach Frost's contract and its two addenda, with me. You can also find it online here.
One big takeaway from Professor Goldberg's work is that sophisticated parties fashion their own remedies, and those remedies often depart from the default rules set out in the common law. So too in the realm of coaching contracts. You might think that a coach who gets a $15 million severance package for early termination of his contract would have to mitigate should he land comparable employment at another school. Not so here.
As Professor Goldberg notes after reviewing the contracts in his comment here, Coach Frost's initial Dec. 2017 contract provided that, while he had no obligation to mitigate, if he got another coaching job, either in the NFL or with another Division I NCAA team, the severance pay (termed "Liquidated Damages") would be offset (set forth in Section 13(b) of the original agreement). But the addenda provided for neither a duty to mitigate nor an offset (in paragraph 2 of the 2021 addendum and paragraph 3 of the 2019 addendum).
The mystery to me is why the addenda, negotiated after Coach Frost and Nebraska football suffered through several losing seasons, would be more generous than the original contract, negotiated when Coach Frost was the hottest coach on the market. One would have to review the contracts as whole to determine what Coach Frost gave up in exchange for more generous liquidated damages provisions.
Thursday, September 15, 2022
You have to be an extraordinary person to be an elite college football coach. You must be unusually savvy about contracts. That must be true, because I know a lot about contracts but I can't make any sense of the incentive structures in the contract of former Nebraska head coach Scott Frost (right). Andrew Doughty of BetMGM has the numbers here.
Coach Frost had an extraordinary second season, leading the University of Central Florida to an undefeated campaign and defeating Auburn in the Peach Bowl. Nebraska paid $3 million to buy out his contract and then agreed to a seven year, $35 million contract with Coach Frost. Two dismal years in, the contract was extended through 2026. After two more dismal years, Nebraska and Coach Frost renegotiated his contract, reducing his annual salary to a miserly $4 million/year. The buyout structure is complicated, but in the end, Coach Frost is entitled to a $15 million buyout. If the team had waited until October to buy him out, it would have owed only $7.5 million.
You might think that Nebraska is not really out that $15 million because Coach Frost has a duty to mitigate. Except that I seem to recall reading somewhere in Victor Goldberg's Rethinking Contract Law and Contract Design that coaches' contracts often specify that there is no duty to mitigate [if someone can find the cite or knows from some other source, please chime in]. Moreover, Coach Frost's record at Nebraska was 16-31 overall, 10-26 against conference opponents, and the team was winless against ranked teams. When Nebraska landed Coach Frost, he was the most sought-after young coach in college football. Now, he's asking Kramer's question after a prolonged cigar binge:
Why, you might ask, did Nebraska not wait until October? Some sportswriters speculate that the timing was dictated by an upcoming game against the Oklahoma Sooners. Nebraska's athletic director did not want to see his team humiliated by the team he played for. One would think that even rabid Nebraska football fans would not think that motivation justified a $7.5 million price tag. But there are other reasons that would surely pass a business-judgment-rule type sniff test. It seems there are advantages to being the first in the pool when it comes to picking a new head coach.
Has Nebraska learned its lesson? Coach Frost's resume shows that past performance is no guarantee of future success.
Friday, September 9, 2022
On Fridays, we often post about things that are funny and contract related or funny and not contract related and just contracts adjacent. Today, I am posting a link to my latest article, which I have uploaded to SSRN. Although the piece is about the First Amendment, there is a contracts argument in there, and the piece grew out of this blog post. It is, I hope, the first in a series of articles in which I argue that contractual rights and interests ought to be part of the rights mediation process that, following Jamal Greene, I think constitutional adjudication should entail.
Here's the abstract:
Fifty years ago, public school children in Iowa, including Mary Beth and John Tinker, protested the Vietnam War, signifying their political views by wearing black armbands. The Supreme Court found that the school violated the students' right to freedom of expression when it suspended them for their silent, solemn protest, which caused no substantial disruption and did not interfere with the rights of others.
In 2017, a junior varsity cheerleader, frustrated at not getting picked for the varsity squad, profanely expressed her disappointment in two Snaps that she shared with 250 followers, including other cheerleaders. Her coaches suspended her from the junior varsity team for one year. The Supreme Court, applying the same standard as applied in Tinker, found that the school's disciplinary actions violated the cheerleader's free expression rights.
This is dumb.
The Court's decision in Mahanoy Area School District v. B.L. is dumb because, even under Tinker, B.L.'s profane Snaps were disruptive in ways that the Tinkers' protests were not. It is dumb because the Court furthers no identifiable interest that the First Amendment is supposed to protect by preventing coaches from enforcing their own disciplinary rules. Finally, the Mahanoy decision is dumb because it is a product of the rights absolutism, identified by Jamal Greene in his 2021 book, How Rights Went Wrong. The Court provides near-absolute protection to certain privileged rights, broadly understood, while pretty much ignoring all other interests impacted by its decisions.
Following Greene, this Article advocates that courts engage in rights mediation, deciding only the cases before them. If the courts do so, they will, in many cases, return decision-making processes to politically accountable local officials. Our absolutized First Amendment jurisprudence is dumb, and it results in dumbed-down civil discourse. Not all expression demands the same protection as core political speech. There are other interests to be weighed, and each factual scenario brings with it its own constellation of rights and interests. The weighing of those interests is best achieved through local decision-making processes, and the courts’ role in such matters ought to be small and incremental.
I submitted this article early in the August law review sweeps. Crickets. So now it is in shop. Comments more than welcome.