In class this week we talked about the potential dangers of appointing a contracting party as your “agent.” Here’s a Seventh Circuit opinion issued yesterday: “[A] district judge concluded that DISH Network and its agents committed more than 65 million violations of telemarketing statutes and regulations. The penalty: $280 million.” United States v. DISH Network LLC, No. 09-3073, slip op. at 1 (7th Cir. Mar. 26, 2020) (cleaned up; emphasis added).
The court noted: “The contract [between DISH and its representatives] asserts that it does not create an agency relation, but parties cannot by ukase negate agency if the relation the contract creates is substantively one of agency.” Id.,, slip op. at 5 (italics in original, bold-facing added).
Judgment affirmed, mostly. (The damages award was vacated and remanded for reconsideration for unrelated reasons.)
From the 9th Circuit, in a case under Hawai’i law: “[T]he terms of a contract alone cannot require a court to grant equitable relief. In doing so, we adopt the accepted rule of our sister circuits that have addressed the question.” Barranco v. 3D Sys. Corp., No. 18-1608, slip op. at 16 (9th Cir. Mar. 12, 2020) (reversing grant of disgorgement remedy) (citing cases).
As a real-world example of a contract termination: Amazon terminated its contract with a delivery company, Bear Down Logistics — which led to Bear Down closing some of its facilities and laying people off.
Presumably Bear Down took this “what if” possibility into account when negotiating its contract with Amazon — and that’s an area where lawyers can add value: by nudging the business people to think about unpleasant possibilities (because sometimes business people might look only on the bright side of life).
Ultimately the responsibility for business planning is on the client, of course. But it can’t hurt to try to help clients think ahead.
(Shorthand: Think like a CEO — but remember that you’re not.)
In researching something, TIL (Today I Learned) that when Texaco got hit with a $10.3 billion damages verdict back in the mid-1980s (for tortiously interfering Pennzoil’s acquisition of Getty Oil), Texaco couldn’t find anyone to finance the required appeal bond in the same amount, and it even had trouble getting routine working capital, because of the high-handed way it had treated others in the past. As one author recounts:
When Texaco was doing well, it had played hardball with its lenders as well as with other oil companies. Now that it was in trouble, these lenders and oil companies may have been looking to exact a little revenge. At a minimum, they were unwilling to take any risk to do a favor for someone who had refused to do favors for them. The New York Times quoted a New York banker as saying, “If it were Exxon or Mobil, all the big banks would rally around it.”
Robert M. Lloyd, Pennzoil v. Texaco, Twenty Years After: Lessons for Business Lawyers, Transactions: Tenn. J. Bus. L. 330, 349-50 (2005) (footnotes omitted).
I’m going to add this to the wounded-tiger post.
Final-offer arbitration has been described by a Canadian court (quoting an earlier opinion) as “an intentionally high risk form of arbitration that encourages settlement and tempers final positions“; the court observed that in the specific business context (rate-setting for railroad shipping charges),”[t]he limited duration of the decision’s binding effect on the parties is closely linked to the limited timeframe within which the arbitration process occurs.” Canadian Nat’l R.R. Co. v. Gibraltar Mines Ltd, 2019 FC 1650 ¶ 27 (cleaned up, emphasis added, citation omitted) (hat tip: Daniel Urbas).
Final-offer arbitration is also known as baseball arbitration or last-offer arbitration, which has a very high settlement rate. A couple of years ago I proposed a similar, hybrid dispute-resolution procedure in which (i) early in the case, an arbitrator hears the parties’ opening statements and provides her tentative views on the merits; (ii) if the parties don’t settle — and hearing the arbitrator’s views should make settlement more likely — then at the close of the evidence, each party makes a final offer, and the arbitrator must choose one of the offers, just as in baseball arbitration.