In honor of the New Year, I am posting an article from The Hollywood Reporter. This is a list of the most outrageous celebrity lawsuits of 2011. Some of my favorites:
I bought a used car from a dealership. I negotiated over the phone, but did not inspect the car prior to purchasing it. I mailed the dealership a check. They delivered the car. When the car arrived, it had more damage than the salesperson stated. In addition, when I tried to start the car, it did not work. I contacted the dealership. They want me to buy a newer car and pay $10,000 more than what I already paid. What are my options?
This is my answer:
You have many options. It appears to me that you have a breach of contract claim and possibly a violation of the Pennsylvania Unfair Trade Practice Act. You can try to contact the dealership’s consumer relations department or their general manager. If that doesn’t work you can contact the Pennsylvania Attorney General. File a complaint online. If that is not successful, then contact an attorney. A letter from your attorney may be sufficient to resolve the matter. If not, then prepare to sue them in court. If you are successful in proving that the dealership violated the Unfair Trade Practices act, then you may be entitled to an additional amount equal to triple your damages.
Good luck.
An artist’s promises on Twitter to pay $1mm for returning his missing laptop. A stranger returns the laptop. Does the artist have to pay the stranger $1mm? In Pennsylvania, probably yes.
Artist Ryan Leslie lost his laptop while on tour in Germany. This is the tweet : “I’m absolutely continuing my Euro tour plus raised the reward for my intellectual property to $1mm. Click to watch: http://on.fb.me/bCBnrM””. Does this 160-character statement make a contract? Would a reasonable person read this tweet, and believe all she has to do is find the laptop and she will become a millionaire? Well, Armin Augstein has filed a lawsuit in New York claiming that Leslie’s tweet is a binding contract.
While New York law will determine the lawsuit’s outcome, let’s imagine what would happen if Augstein sued Leslie in Pennsylvania. The contract in dispute is called a unilateral contract; it means that Leslie made a promise and all that is requried to convert this promise into a contract is that the other party must merely act—or in this case—find the laptop. Ordinarily, a contract requries two parties to commuincate with each other. (this is called a bilateral contract). If this situation were a bilateral contract, Leslie would make an offer by tweet; someone would accept his offer by tweet, and a contract is born.
However, a unilateral contract is different. The person accepting the offer does not have to communicate his/her acceptance. The person accepts the contract by acting.1 The law will examine the tweet for “some language of commitment or some invitation to take further action without further communication.”2 The threshold question is: would a reasonable person read the tweet and understand that she would receive one million dollars if, without further communication with Leslie, she found the laptop. Without this language, the law may find this tweet was merely an advertisement or invitation to begin negotiations. So, in short, if Leslie were sued in Pennsylvania, he may lose a million dollars. My best advice to Leslie: settle early before your legal bill also reaches a million dollars.
There, of course, is a separate issue of whether Leslie is morally or ethically responsible for paying the promised million. I believe the answer is yes. I think Leslie is a sophisticated public figure, and New York Law School agrees with me. He understands the power of Twitter and the media. He is a Harvard-graduate at the age of 19 and a Grammy-award nominee. He should have known better. Thus, the court should hold him accountable for the promises he makes in public.
Sharmil McKee
sm@mckeeoffice.com
Business Attorney
Philadelphia, PA
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1. Bauer v. Pottsville Area Emergency Med. Serv., Inc., 758 A. 2d 1265 (Pa. Super. 2000).
2. Bourke v. Kazaras, 746 A.2d 642, 644 (Pa. Super. 2000).
A French court awarded Spike Lee $46 million for a breach of contract. In 2007, Lee and TF1 Droits Audiovisuels executed a contract where TF1 agreed to distribute Lee’s film “Miracle at St. Anna” worldwide, except in the U.S., Canada, and Italy. When TF1 failed to honor it’s promises, Lee sued. Even though TF1 claimed that they could not distribute the film because Lee failed to deliver the film, the court did not agree. In the end, the court ruled that TF1 was at fault for breaching the agreement,
and ordered TF1 to pay $46 million in Euros to the film’s producers.
Lee will collect $1.5 million of the judgment.
The film is about the story of four black American soldiers who get trapped in an Italian village during WWII. The movie is based on a book written by James McBride, which tells the untold story of African American’s contributions in WWII. In the U.S., the film grossed $7 million but cost $45 million to make.
This award is a relief for Lee because reportedly, he is having trouble
finding financing to produce Inside Man 2.
What can you, as a business owner, learn from Lee’s lawsuit? When deciding to execute an agreement, examine contract laws from other countries. In the U.S., no state allows recovery for moral prejudice.* However, in France, this is a valid cause of action.
*I am only licensed in Pennsylvania, so I can only attest to Pennsylvania’s contract law. Nevertheless, I have colleagues in other jurisdictions; I have never heard of a claim for moral violations. If I am wrong, please post a comment.
Has someone breached or violated your agreement? Call us for a free
consultation. Sharmil McKee @ 215-242-5260.
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Sharmil McKee
Business Attorney
Philadelphia, PA
What happens if you demand that a website take down some copyright material, but it turns out that you don’t actually own the material? Well, Summit Entertainment may soon find out. Summit distributes the Twilight series. They successful got songwriter Matt Heart’s song “Eternal Knight” kicked off YouTube, iTunes, and Amazon, claiming the song improperly copied the Twilight intellectual property. This story is interesting because Heart produced the song before the Twilight movie came out. The story is also interesting because Summit is only claiming that Heart violated Twilight’s trademark; however, You Tube, Amazon, and iTunes’ ‘take down’ procedure only refers to copyright infringement. In this case, Heart’s CD cover states “inspired by Twilight”. This only appears to violate Summit’s trademark, not their copyright. (What is the difference between trademarks and copyrights)
So, Heart believes that Summit misled YouTube, Amazon, and iTunes about the extent of their intellectual property rights; thus he is suing Summit for $75,000. Summit is very aggressive about protecting its property; some retailers have filed lawsuits to protect themselves from Summit.
Summit should be concerned. If someone demands that a website takes down infringing material, but misrepresents the extent of their ownership or rights, under the Copyright Law, the innocent party is entitled to cost and attorney fees.
Sharmil McKee
Business Lawyer
Philadelphia, Pennsylvania
blog@mckeeoffice.com
Will and Jada Smith have responded aggressively to legal threats that they fraudulently induced someone to invest in their film project.
In 2007, Jada wrote a film, the “Human Contract”; Will produced it. They convinced David Grasso to invest in the film. He did with $5 million dollars. The film went straight to DVD. In January 2010, Grasso’s attorney threatened to sue the couple because they failed to guarantee Grasso’s investment. Grasso claims that the couple promised a high return on his $5 million dollar investment. So far, Grasso states that he only recouped $1 million of his investment.
In response to Grasso’s threats, the couple filed a lawsuit in California, asking a judge to declare that they have done anything wrong and are not liable for Grasso’s losses. This is called declaratory relief. Here is the complaint.
Of course this complaint was filed in California, so California law will decide who wins. However, let us pretend that the complaint was filed here, in Philadelphia (this is not a far-fetched fantasy… David Grasso, the defendant lives in Philadelphia).
It would be a tough for Grasso to win here in Pennsylvania because Grasso and the couple formed a limited partnership for the sole purpose of producing this film. Grasso played a management role and was involved in the operation of the business (according to the complaint). With partnerships, members share the profits and the losses. The law would only permit Grasso to recover his losses if he could prove that the Smiths breached their fiduciary duty and wasted the partnership’s assets. Based on the complaint alone, this doesn’t seem to be the case. The couple’s only duty to Grasso is to exercise the best business judgment under the circumstances.
The question on your mind, dear reader, is why would Will and Jada Smith file this lawsuit if they did nothing wrong. The answer is precisely because they do not believe they are liable for Grasso’s losses. The Smiths could have waited until Grasso sued them or they could make a preemptive strike and sue Grasso for declaratory relief. I believe they filed the declaratory relief to send a strong message to the industry. They will not be bullied–if you are going to send a letter threatening a lawsuit, then be sure to have the evidence to support your claim.
What can you, as a business owner, learn from this case? Seeking a declaratory judgment from a court is always an available option to you. In Pennsylvania, under the Declaratory Judgment Act, you may ask a judge to resolve your dispute as long as you meet the following conditions:
The citation to the Pennsylvania Declaratory Judgment Act is 42 Pa. C.S.A. Section 7531. You may bring a declaratory judgment action to construe a contract either before or after a breach of the contract. A declaratory judgment is an ideal avenue if someone threatens to sue you for breaching a contract that you believe you are not responsible for. Otherwise, you must hold your breath for two years while waiting for that person to file a lawsuit against you.
Sharmil McKee | Business Lawyer | blog@mckeeoffice.com
Jill Scott is facing a possible multi-million dollar judgment. Her record label, Hidden Beach, is suing her for breach of contract. They claim that she promised to produce 6 albums, but she has only produced 3 so far. They are seeking to recover the money they would have earned had she produced the final 3 albums. The lawsuit was filed in California, so California law will govern whether Hidden Beach will win or not. However, let us imagine what would happen if the lawsuit was filed in Pennsylvania.
In Pennsylvania, a plaintiff is entitled to recover the money that she expected to earn if the defendant fulfilled his contractual obligations. This law assumes that the plaintiff did not cause the defendant to breach (or break) his promises. Did Hidden Beach require Jill Scott to produce only a certain genre of music? Did they interfere with her ability to create music? Were they stealing money from her or failing to pay her as they promised? The law also assumes that the defendant could actual perform as promised, and that no outside forces prevented the defendant from performing. For example, did Jill Scott lose her voice or was she disabled?
On the other hand, Pennsylvania only permits the plaintiff to recover her actual losses. If Hidden Beach filed this lawsuit here, it would have to prove to a reasonable certainty that had Jill Scott produced the final 3 albums, they would have been successful, profitable albums. The law allows the defendant to reduce the plaintiff’s recovery by the value of defendant’s partial performance. Hidden Beach already earned millions from Jill Scott’s previous albums. So, this amount could be deducted from Hidden Beach’s claimed damages. In addition, the law requires the plaintiff to take reasonable steps to mitigate her damages. For example, Hidden Beach could be required to hire new talent to replace Jill Scott.
What can you learn from Jill Scott’s contract troubles? When negotiating your contract, always plan the exit. Resolve these two issues while you and the other side are still in the honeymoon stage: What happens if you cannot fulfill your promises? What happens if the other side cannot fulfill its promises?
Also, understand that you have several legal defenses to a breach of contract lawsuit in Pennsylvania. First, the law gives you time to perform your contractual obligations, if the contract does not specifically state a deadline. If the deadline has not passed, then you cannot legally breach the contract. Second, the plaintiff has a duty to mitigate her losses. If she does not take reasonable steps to stem her losses, you may only be responsible for a portion of her damages.
In addition, the plaintiff is only entitled to recover damages if she did not cause you to breach your obligations. If, for example, plaintiff interfered with your task, or created an unreasonably hostile environment, she is not entitled to recover damages. And finally, you can always challenge the plaintiff’s calculation of her damages. You are only responsible for damages that are a natural, foreseeable consequence of your action or inaction (like a series of dominoes falling).
I am sure you, astute reader, have figured out that I am a Jill Scott fan. I wish her great success.
Is your business being sued for a breach of contract? Contact us today to discuss your options. We offer free consultations.
Sharmil McKee | Business Lawyer | blog@mckeeoffice.com
Nicholas Cage is being sued for fraud.
Red Curb Investments alleges that Nicholas Cage failed to repay a $5 million loan. A loan is a contract where Party A agrees to lend money to Party B. In exchange, Party B agrees to repay the money on a certain day. When Party B fails to repay the money, he has breached the loan contract. Now, you may be asking yourself, if Cage breached his agreement– why o why—are they suing him for fraud? That is a very good question, astute reader.
The rationale lies in the damages that are available in court following a breach of contract compared to fraud. In Pennsylvania, the plaintiff in a breach of contract lawsuit is only entitled to her actual damages and any consequential damages that she can prove. Consequential damages can range from loss of profit to loss of product. Punitive damages are not permitted in a breach of contract action. However, the plaintiff in a fraud lawsuit is entitled to punitive damages which are not related to the plaintiff’s actual losses. Punitive damages are designed to deter the defendant from future similar bad acts. While Pennsylvanian law does not offer a formula to calculate punitive damages, it is often a function of the defendant’s financial abilities.
Therefore, it appears that Red Curb is seeking punitive damages or an amount greater than their actual and consequential damages.
Do you have a question about contracts? Chat online with a business attorney every Monday through Friday from 8 am to 8 pm at www.mckeeoffice.com.
Sharmil McKee | Business Attorney | blog@mckeeoffice.com
R. Allen Stanford Took a Blood Oath to Hide a Scam
Is a contract written in blood enforceable in court? No.
It is hard to imagine that in 2009, people would ever resort to using blood to write contracts. However, in 2009, the courts address two different contracts written in blood. The first was a $170,000 loan between two friends. The loan agreement was written in blood on a napkin. The second was an agreement to commit a crime between two companies. The company executives swore a blood oath in a brotherhood ceremony. The court ruled the contracts are unenforceable.
What can you, as a small business owner, learn from these cases? First, a contract to commit a crime is not enforceable in court. Ever. Second, a valid contract does not need blood to be enforced by a judge. Parties to a contract must exchange promises where each party agrees to give up something or do something. This exchange is called “legal consideration”. A simple example is a car purchase. The car owner is giving up his car. The car buyer is giving up her money. This is an exchange or legal consideration, so a judge would enforce this contract. Without this exchange, the contract is merely a gift. And gifts, even if written in blood, are not enforceable.
Do you a legal question about contracts? We offer free consultations on this and other issues. Chat, live and privately, online with an attorney every Monday through Friday from 8 a.m. to 8 p.m.
Sharmil McKee | Business Lawyer | blog@mckeeoffice.com
In a recent study by the American Justice Partnership, Pennsylvania ranked 48 out of 50 states as providing the worst legal climate for tort liability. The study states that PA is tort-friendly and change is NOT on the horizon. In short, the study argues that Pennsylvania’s current liability laws stifle business growth and job creation. Whether you agree with the study’s analysis or not, it does make a very sound conclusion–if you are a business owner in Pennsylvania, you should budget now for the real possibility that your company will be sued. And remember even defending your company in a lawsuit costs money and time.
