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    The Lawletter Blog

    Paul A. Ferrer

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    CONTRACTS: An Object Lesson in How Not to Mitigate Damages

    Posted by Paul A. Ferrer on Thu, Aug 19, 2021 @ 11:08 AM

    The Lawletter Vol 46 No 4

    Paul Ferrer—Senior Attorney, National Legal Research Group

                Well-established contract law holds that when one party breaches a contract, the nonbreaching party must make reasonable efforts to mitigate its damages. The consequences of failing to mitigate are well illustrated by a recent Illinois appellate decision. See Mayster v. Santacruz, 2020 IL App (2d) 190840, 163 N.E.3d 246.

                The plaintiff owned and operated a Mathnasium math tutoring franchise. The franchisee entered into a binding purchase agreement to sell the franchise for $100,000. The parties bickered over several terms, but the disagreement did not justify the buyer's termination, which therefore constituted a breach. Soon after the breach, however, the buyer offered to reinstate the deal and buy the franchise for the same $100,000 originally agreed. The franchisee refused, choosing instead to raise the asking price to $130,000 to explore more profitable opportunities. The franchisee also declined the franchisor's suggestion that it advertise the franchise for sale in an internal publication that targeted Mathnasium owners, and would thus have been more likely to produce a new buyer. The trial court concluded that the buyer had breached the contract but that the franchisee could not recover any damages based on its absolute failure to mitigate. The only questions presented on appeal were whether the franchisee had failed to mitigate its damages and, if so, whether its failure barred it from recovering anything at all.

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    Topics: contracts, Paul A. Ferrer, failure to mitigate, no recovery of damages

    CIVIL PROCEDURE: Attorney's Fees as Damages for Breach of Covenant Not to Sue

    Posted by Paul A. Ferrer on Fri, Aug 13, 2021 @ 11:08 AM

    The Lawletter Vol 46 No 4

    Paul Ferrer—Senior Attorney, National Legal Research Group

                The familiar "American rule" holds that a prevailing party generally cannot recover its attorney's fees from the losing party in the absence of a statute or contract provision specifically authorizing an award of such fees. Jurisdictions are divided on the issue of whether a party can recover its attorney's fees as damages, rather than costs, for the breach of a covenant not to sue the other party. In those jurisdictions that have not permitted attorney's fees to be awarded as damages, courts have reasoned that the contract containing the covenant not to sue can itself provide for attorney's fees in the event of its breach if that is the parties' intention. See Artvale, Inc. v. Rugby Fabrics Corp., 363 F.2d 1002, 1008 (2d Cir. 1966) ("Certainly it is not beyond the powers of a lawyer to draw a covenant not to sue in such terms as to make clear that any breach will entail liability for damages, including the most certain of all—defendant's litigation expense."). By contrast, other courts have determined that the American rule does not apply in "those cases in which the attorney fees are not awarded to the successful litigant in the case at hand, but rather are the subject of the law suit itself." Zuniga v. United Can Co., 812 F.2d 443, 455 (9th Cir. 1987). Virginia recently adopted the latter view.

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    Topics: Paul A. Ferrer, civil procedure, attorneys fees, breach of covenant, damages vs. costs

    CIVIL PROCEDURE: Bid to Recover Picasso Painting Foiled in Rare Case Where Laches Defense Overcomes Express Statute of Limitations

    Posted by Paul A. Ferrer on Fri, Dec 18, 2020 @ 11:12 AM

    The Lawletter Vol 45 No 6

    Paul Ferrer—Senior Attorney, National Legal Research Group

                Laches is "a defense developed by courts of equity to protect defendants against unreasonable, prejudicial delay in commencing suit." SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC, 137 S. Ct. 954, 960 (2017) (internal quotation marks omitted). It is frequently said, however, that laches cannot be invoked to bar legal relief in the face of an express statute of limitations enacted by Congress. Id. at 959. But that is exactly what happened in Zuckerman v. Metropolitan Museum of Art, 928 F.3d 186 (2d Cir. 2019), cert. denied, 140 S. Ct. 1269 (2020).

                In Zuckerman, the plaintiff, Laurel Zuckerman, brought suit to recover a painting—"The Actor" by Pablo Picasso—that had been owned by her great-granduncle and aunt, the Leffmanns. The Leffmanns were German Jews who were forced to flee the country in 1937. They arranged for the painting to be held by a Swiss acquaintance, who sold the painting in 1938 to raise funds for the Leffmanns to relocate to Brazil.

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    Topics: Paul A. Ferrer, statute of limitations, laches defense, Picasso painting, Zuckerman v. MOMA

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

    Posted by Paul A. Ferrer on Wed, Jun 17, 2020 @ 11:06 AM

    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, contract of adhesion, meaningful alternatives, common law of unconscionability, procedural unconscionability

    CIVIL PROCEDURE: Effect of COVID-19 Pandemic on Discovery Deadlines

    Posted by Paul A. Ferrer on Wed, May 6, 2020 @ 11:05 AM

    The Lawletter Vol 45 No 3

    Paul Ferrer—Senior Attorney, National Legal Research Group

         Based on the exceptional circumstances presented by the COVID-19 pandemic, many state and federal courts have entered general orders altering deadlines for a wide variety of matters, including deadlines for filing appeals, the most notable example being the U.S. Supreme Court's extending the period to seek review of a lower court decision by writ of certiorari from 90 to 150 days. Counsel should be aware, however, that in the absence of an order of general applicability, deadlines will not be extended without a specific order from the court in a particular case. To the contrary, judges are loath to allow "all litigation to grind to a halt in many cases," as "allowing that to happen will only exacerbate, in many cases, the detrimental effects of this crisis." Horning v. Resolve Marine Group, No. 19-60899-CIV, 2020 WL 1540326, at *1 (S.D. Fla. Mar. 30, 2020) (Scola, J.).

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    Topics: Paul A. Ferrer, discovery deadlines, specific order requirement, extension of time, COVID-19

    CIVIL PROCEDURE:  Is Virginia Inching Toward The Federal Twiqbal Pleading Standards?

    Posted by Paul A. Ferrer on Wed, Feb 5, 2020 @ 11:02 AM

    The Lawletter Vol 45 No 1

    Paul Ferrer—Senior Attorney, National Legal Research Group

                Practitioners in federal court are by now aware of the revolution in federal pleading fashioned by the U.S. Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), which are often referred to jointly using the portmanteau "Twiqbal." Under the Twiqbal analysis, a district court considering the legal sufficiency of a complaint on a motion to dismiss for failure to state a claim initially separates factual allegations, which are still entitled to the presumption of truth, from legal conclusions (such as "[t]hreadbare recitals of the elements of a cause of action"), which are not.

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    Topics: sufficient factual allegations, civil procedure, federal pleading standard, Twombly, Iqbal, legal sufficiency of complaint

    CIVIL PROCEDURE: Contractual Waivers of the Statute of Limitations Unenforceable in Virginia

    Posted by Paul A. Ferrer on Mon, Dec 16, 2019 @ 12:12 PM

    The Lawletter Vol 44 No 6

    Paul Ferrer—Senior Attorney, National Legal Research Group

                In a decision with far-reaching implications in the commercial world, the Virginia Supreme Court has decided that contractual waivers of the right to plead the statute of limitations that do not meet specified statutory criteria are unenforceable under Virginia law. See Radiance Capital Receivables Fourteen, LLC v. Foster,  ___ Va. ___, 833 S.E.2d 867 (2019), available at http://www.courts.state.va.us/opinions/opnscvwp/1180678.pdf. The statute in question provides that unless the failure to enforce a promise not to plead the statute of limitations would operate as a fraud on the promisee, a written promise not to plead the statute of limitations is valid and enforceable only "when (i) it is made to avoid or defer litigation pending settlement of any case, (ii) it is not made contemporaneously with any other contract, and (iii) it is made for an additional term not longer than the applicable limitations period." Va. Code Ann. § 8.01-232(A).

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    Topics: Paul A. Ferrer, statute of limitations, civil procedure, contractual waivers, unenforceable contract

    CIVIL PROCEDURE: Dismissal of Frivolous Prisoner and In Forma Pauperis Actions in Federal Court

    Posted by Paul A. Ferrer on Wed, Jul 31, 2019 @ 12:07 PM

    The Lawletter Vol 44 No 5

    Paul Ferrer—Senior Attorney, National Legal Research Group

                Federal courts may be inundated with frivolous pleadings filed by prisoners or other claimants proceeding in forma pauperis. But the courts have powerful statutory weapons for dealing with such pleadings and dismissing them at the earliest stage of a proceeding, if warranted. In fact, federal courts are specifically required to screen prisoner actions and dismiss them if they fail to pass muster. See 28 U.S.C. § 1915A.

                Section 1915A affirmatively requires the district court to review, before docketing if feasible or as soon as practicable after docketing, every civil complaint in which a prisoner seeks redress from a governmental entity or officer or employee of a governmental entity. Id. § 1915A(a). After reviewing the complaint, the court must either identify any cognizable claims or dismiss all or part of the complaint if it is “frivolous, malicious, or fails to state a claim upon which relief may be granted.” Id. § 1915A(b)(1). Another federal statute similarly requires a district court to dismiss any proceeding brought in forma pauperis if the court determines, “at any time,” that the action is “frivolous or malicious” or “fails to state a claim on which relief may be granted.” Id. § 1915(e)(2)(B)(i), (ii).

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    Topics: frivolous claims, civil procedure, In Forma Pauperis Actions, federal court

    CIVIL PROCEDURE: Facebook's Alleged Intrusion on Users' Privacy Confers Standing to Maintain Class

    Posted by Paul A. Ferrer on Fri, Jan 18, 2019 @ 09:01 AM

    The Lawletter Vol 44 No 1

     

    Paul Ferrer—Senior Attorney, National Legal Research Group

     

             In a putative class action against Facebook, a federal district court in California has determined that "[i]ntrusion on privacy alone can be a concrete injury" for purposes of establishing standing to bring suit in federal court. Patel v. Facebook Inc., 290 F. Supp. 3d 948, 954 (N.D. Cal. 2018). In reaching that conclusion, the court applied the concreteness analysis laid out by Justice Alito in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016).

     

             The judicial power of the United States resides in the federal courts and extends only to "Cases" and "Controversies." U.S. Const. art. III, § 2. Standing to sue is a doctrine "rooted in the traditional understanding of a case or controversy," and limits the category of litigants who can maintain an action in federal court. Spokeo, 136 S. Ct. at 1547. To have standing, a plaintiff must plead and prove three elements: (1) an injury in fact that is (2) fairly traceable to the defendant's conduct and (3) likely to be redressed by a judicial decision in the plaintiff's favor.

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    Topics: Paul A. Ferrer, Facebook, invasion of privacy, putative class action, concrete injury

    CIVIL PROCEDURE: Submission of Materials Outside the Pleadings in Response to a Rule 12(b)(6) or Rule 12(c) Motion

    Posted by Paul A. Ferrer on Mon, Oct 1, 2018 @ 11:10 AM

    The Lawletter Vol 43 No 5

    Paul Ferrer—Senior Attorney, National Legal Research Group

             We have written frequently in the Lawletter about the revolution in federal pleading practice occasioned by the Supreme Court’s decisions in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009). Under the new standard, a claim is sufficient to withstand a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure (or a motion for judgment on the pleadings under Rule 12(c)) only when, accepting as true the facts alleged in the complaint but not any legal conclusions, the claim has “facial plausibility,” that is, it allows the court “to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678; see also Twombly, 550 U.S. at 570 (the plaintiff must allege enough by way of factual content to “nudge” her claim “across the line from conceivable to plausible”). This standard requires the plaintiff to include more facts in her complaint than were necessary before the dawn of the Twombly/Iqbal era.

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    Topics: civil procedure, facial plausibility, Rule 12 motion, evidentiary support documents

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