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Business Law Legal Research Blog

CONTRACTS: Virginia Unconscionability Decision Shows That Extreme Facts May Indeed Make Bad Law

Posted by Paul A. Ferrer on Thu, Jun 25, 2020 @ 12:06 PM

Paul Ferrer, Senior Attorney, National Legal Research Group

   The Virginia Supreme Court's recent decision in Flint Hill School v. McIntosh, No. 181678, 2020 WL 33258 (Va. Jan. 2, 2020), seems to provide some support for the old adage that "bad facts make bad law." In that case, the McIntoshes enrolled their minor child in Flint Hill School, a private school in Fairfax County, Virginia. The McIntoshes signed an enrollment contract in which they agreed to pay "all attorneys' fees and costs" incurred by the school "in any action arising out of or relating to this Enrollment Contract." Significantly, the provision did not require that the school be the prevailing party in order to recover its attorneys' fees. As the Virginia Supreme Court pointed out, the practical effect of such a provision, if applied as written, is essentially to foreclose all litigation on the contract.

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Topics: contracts, Paul A. Ferrer, contract of adhesion, meaningful alternatives, common law of unconscionability, procedural unconscionability

CONTRACTS:  Contract Excuses and the COVID-19 Pandemic

Posted by Anne B. Hemenway on Thu, Jun 25, 2020 @ 10:06 AM

Anne Hemenway, Senior Attorney, National Legal Research Group

     The economic fallout from the COVID-19 pandemic and the sudden and worldwide shuttering of large and small businesses may be felt for a long time. One of the resulting issues is the applicability of a force majeure clause, or common-law impossibility, frustration of purpose, or commercial impracticability excuses for contract performance and obligations. Force majeure clauses come into effect when events occurring beyond the control of the parties prevent performance of contract obligations. Some contracts include specific force majeure events that will excuse performance at this time, such as a pandemic (the World Health Organization declared a pandemic on March 11, 2020) or when governmental or administrative action is taken that disrupts or precludes performance under a contract.

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Topics: contracts, Anne B. Hemenway, COVID-19, force majeure clause, frustration of purpose, excuse for performance

PATENTS: A Federal Agency Is Not a "Person" for Purposes of Review of the Validity of a Patent Under the Leahy-Smith Act

Posted by Anne B. Hemenway on Fri, Dec 20, 2019 @ 09:12 AM

Anne Hemenway—Senior Attorney, National Legal Research Group

            In Return Mail, Inc. v. USPS, 139 S. Ct. 1853 (2019), the U.S. Supreme Court held that a federal agency is not considered a "person" for purposes of seeking review of the validity of a patent under the Leahy-Smith America Invents Act of 2011 ("AIA"), 35 U.S.C. §§ 1 et seq.  The AIA, enacted on September 16, 2011, changed the patent system from a first-to-invent to a first-inventor-to-file system.  The transition to a first-to-file system took place over a period of approximately 18 months.

            The AIA also created the Patent Trial and Appeal Board and established three types of administrative review proceedings before the Board.  See 35 U.S.C. § 6.  The reviews include an "inter partes review," a "post-grant review," and a "covered-business-method" ("CBM") review.  See id. §§ 311, 321.

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Topics: Anne B. Hemenway, validity, patents, first-inventor-to-file system

ATTORNEY AND CLIENT: Maintaining Professional Competence in the Digital Age

Posted by Amy Gore on Tue, Feb 5, 2019 @ 11:02 AM

Amy G. Gore—Senior Attorney, National Legal Research Group

            The Model Rules of Professional Conduct provide that “[t]o maintain the requisite knowledge and skill, a lawyer should keep abreast of changes in the law and its practice, including the benefits and risks associated with relevant technology.”  Model Rules of Prof’l Conduct R. 1.1 cmt. 8.  Maintaining computer security is both a business responsibility and an ethical obligation for all lawyers.  Additionally, attorneys are charged with the ethical obligation to make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information relating to the representation of a client.  Id. R. 1.6(c).  The need for attorneys to maintain current security protocols for the technology used in their offices has never been more pressing. 

            Computer “hackers” have infiltrated thousands of computer systems from private individuals to government entities, and litigation firms have increasingly been targeted.  A recent article highlights the story of several firms involved in litigation arising out of the 9/11 attack, including the ransoming of sensitive and confidential information that had been on the firms' systems. 

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Topics: Amy Gore, unauthorized disclosure, ethical obligations of attorneys, computer security, security protocols, safeguards

Is Predictive Dialer an Autodialer Subject to the Telephone Consumer Protection Act?

Posted by Alistair D. Edwards on Thu, Jan 24, 2019 @ 10:01 AM

Alistair Edwards—Senior Attorney, National Legal Research Group

            The Telephone Consumer Protection Act (“TCPA” or the “Act”) makes it unlawful “to make any call . . . using any automatic telephone dialing system . . . to any telephone number assigned to a . . . cellular telephone service.” 47 U.S.C. § 227(b)(1)(A)(iii).

            In Maes v. Charter Communication, No. 18-cv-124-jdp, 2018 WL 5619199 (W.D. Wis. Oct. 30, 2018), the United States District Court for the Western District of Wisconsin recently considered whether a predictive dialer constituted an autodialer (an automatic dialing system) under the TCPA. In that case, the telemarketer called the plaintiff using a predictive dialer, a piece of equipment used in call centers to automatically dial phone numbers and connect representatives to customers that answer the phone. When the plaintiff answered phone calls from the telemarketer, he heard silence before the phone system connected him with a representative. The plaintiff then proceeded to sue the telemarketer under 47 U.S.C. § 227(b)(1)(A)(iii), which prohibits making “any call . . . using any automated telephone dialing system . . . to any telephone number assigned to a . . . cellular telephone service.”

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Topics: Alistair D. Edwards, Telephone Consumer Protection Act, autodialer, cellular service, telemarketing

CONTRACTS: Investigating and Defending Against Student Loan Claims

Posted by Lee P. Dunham on Thu, Jan 10, 2019 @ 09:01 AM

Lee Dunham—Senior Attorney, National Legal Research Group

            Student debt is the second-largest source of U.S. household debt, at nearly $1.4 trillion. Federal Reserve Bank of New York, Quarterly Report on Household Debt and Credit (accessed on Nov. 10, 2018). It is projected that nearly 40% of student loan borrowers will default by 2023. Judith Scott-Clayton, The Looming Student Loan Default Crisis Is Worse Than We Thought (accessed on Nov. 10, 2018). Many attorneys have seen increased requests for student loan advice.

            Because students are often young and legally unsophisticated at the time they borrow, many understand little about their contracts, or have lost—or never obtained—copies of the essential documents. The first step in such circumstances is to have the client contact the servicer to request copies of the promissory note and related documents, payment history, name and address of the current lender, and documentation of any transfers.

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Topics: contracts, Lee Dunham, default on loan, student debt, obtaining essential documents

BANKRUPTCY: Reluctant Judicial Enforcement of Prepetition Automatic Stay Waivers

Posted by Anne B. Hemenway on Thu, Dec 13, 2018 @ 12:12 PM

Anne Hemenway—Senior Attorney, National Legal Research Group

 

Courts are reluctant to enforce prepetition automatic stay waivers, but will not rule out the possibility of enforcement. Often found as a clause in a forbearance agreement, prepetition automatic stay waivers are therefore not per se unenforceable, notwithstanding the fact that their close relative, prepetition waivers of bankruptcy filings, are per se unenforceable. See In re Simpson, Case No. 17-10442, 2018 WL 1940378 (Bankr. D. Vt. Apr. 23, 2018). Generally, courts will hold that the debtor must carry the burden of proving that such contractual waivers should not be enforced. In re A. Hirsch Realty, LLC, 583 B.R. 583 (Bankr. D. Mass. 2018). 

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Topics: bankruptcy, Anne Hemenway, prepetition automatic stay waivers, preclusive effect, forebearance waiver

CREDITOR’S RIGHTS: IRS Form 1099-C—Reporting Requirement or Debt Extinguishment Trap?

Posted by Charlene J. Hicks on Thu, Dec 13, 2018 @ 12:12 PM

Charlene Hicks—Senior Attorney, National Legal Research Group 

       

            To date, no consensus has been reached among courts throughout the United States on the question as to whether a creditor’s issuance of an IRS Form1099-C results in the extinguishment of the reported debt in favor of the debtor. Form 1099-C bears the title “Cancellation of Debt,” and, according to the IRS, a creditor should issue this form to the debtor for any year in which a debt is cancelled. Depending on the state in which the debtor resides, a creditor’s issuance of a Form 1099-C may have the effect of barring further collection efforts and of completely discharging the reported debt.

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Topics: creditor's rights, Charlene J. Hicks, IRS Form 1099-C, extinguishment of debt, discharge of debt

CONTRACTS: The Importance of Distinguishing a Contracting Party from a Stranger

Posted by Charlene J. Hicks on Thu, Jul 19, 2018 @ 10:07 AM

Charlene Hicks—Senior Attorney, National Legal Research Group

     Although the law generally does not allow a contracting party to bring a tort claim against another party to the same contract, this protection does not extend to persons or entities that are classified as "strangers" to the contract. Thus, a contracting party may maintain a viable claim for tortious interference with contractual relations against a stranger to the agreement. In practice, however, the performance of a contract is often contingent on the acts and approval of persons or entities that did not formally enter into the agreement. This makes it difficult to distinguish between a protected contracting "party" and an unprotected "stranger."

     The popular Trader Joe's grocery chain recently found itself pushed into the murky realm of being classified as a "stranger" to a contract between two parties to which Trader Joe's had close business ties. In Redfearn v. Trader Joe's Co., 20 Cal. App. 5th 989, ___ Cal. Rptr. 3d ___ (2018), the evidence showed that Caliber Sales and Marketing Corporation, a food broker, entered into contracts with various manufacturers of food products and attempted to place those food products in Trader Joe's stores. Trader Joe's worked with Caliber in finding new products for its stores. Caliber's assignee alleged that a Trader Joe's executive falsely accused Caliber of spreading a rumor that the store's employees were soliciting bribes from brokers and that this false accusation tarnished Caliber's professional reputation to such an extent as to cause two food suppliers to terminate their contracts with Caliber to supply food products to Trader Joe's. Read More

Topics: contracts, tortious interference with contract, stranger to a contract, intentional and negligent interference

CONTRACTS: Like Oil and Water: Contract and Tort Claims Don't Mix in Virginia

Posted by Emily Abel on Wed, May 9, 2018 @ 10:05 AM

Emily Abel—Senior Research Attorney, National Legal Research Group

            The Virginia Supreme Court recently reiterated its position that in Virginia, the source-of-duty rule prohibits suing in tort when the only basis for the duty breached lies in contract. In MCR Federal, LLC v. JB&A, Inc., 294 Va. 446, 808 S.E.2d 186 (2017), decided on December 14, 2017, the seller of a government contracting business brought breach of contract and fraud claims against the buyer of their firm. As part of the parties' agreement, the buyer warranted that there were no adverse suits, investigations, or government actions against it at the time the parties signed the contract. The contract also required that the buyer deliver to the seller a "bring down certificate" reaffirming those warranties at closing.

            While the warranties were accurate at the time of contracting, they were no longer accurate at the time of closing. In the period between contracting and closing, the United States Air Force launched an investigation into the buyer for their actions pertaining to a contract unrelated to the contract between seller and buyer and suspending the buyer from government contracting. Because of this investigation, the business did not meet earnings thresholds set forth in the contract, which resulted in the seller not receiving additional payments. The seller sued the buyer, claiming the "bring down certificate" produced at closing was a breach of contract and fraud because it did not reveal the Air Force investigation. After a lengthy bench trial, the circuit court found in favor of the seller on both the fraud and breach of contract claims.

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Topics: contracts

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