Activists against the death penalty are seizing on a botched execution in Arizona Wednesday. Witnesses say that death row inmate Joseph Rudolph Wood gasped for air, taking nearly two hours to die by lethal injection.
Saturday, July 26, 2014
The Best of Legal Tech for Solos and Small Firms 2014
There are a multitude of technology options to help run small firms and solo practices, but deciding on which ones can be a daunting endeavor. Mac vs. PC, practice management systems, and encryption of client data are among numerous issues attorneys must resolve. On this episode of The Digital Edge, hosts Sharon Nelson and Jim Calloway interview John Simek from Sensei Enterprises. Together, they discuss modern innovations that make running firms easier and keep client data safe. Tune in to learn more about meta data, benefits of paperless, and John's favorite software tools.
John Simek is the vice president of Sensei Enterprises, a digital forensics, information technology and information security firm located in Fairfax, Virginia. He is a co-author of The 2014 Solo and Small Firm Legal Technology Guide: Critical Decisions Made Simple, published by the American Bar Association along with many other books on technology, security and electronic evidence. John is a testifying expert and holds many technical certifications. He's also a co-host on another Legal Talk Network podcast, the Digital Detectives.
John Simek is the vice president of Sensei Enterprises, a digital forensics, information technology and information security firm located in Fairfax, Virginia. He is a co-author of The 2014 Solo and Small Firm Legal Technology Guide: Critical Decisions Made Simple, published by the American Bar Association along with many other books on technology, security and electronic evidence. John is a testifying expert and holds many technical certifications. He's also a co-host on another Legal Talk Network podcast, the Digital Detectives.
Source: http://legaltalknetwork.com/podcasts/digital-edge/2014/05/best-legal-tech-solos-small-firms-2014
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Can’t A Man, Alone In Elevator, Have A Little Privacy?
If you live in Britain, you have to know that cameras are everywhere. And yes, that includes elevators too. And seriously, you couldn’t wait another minute or two? Per The Daily Post:
A man who defecated in a lift is being hunted by police as part of a crackdown on “shameless” passengers who use North Wales train stations as toilets.
Yes, you read that right. And the CCTV video can be found at the link at the end of this post.
Officers with British Transport Police have released CCTV images of a person they would like to speak to in connection with the incident at Prestatyn station on Friday, June 13. Human excrement was found in the lift when station staff turned up for work the following morning.
The force has urged those who urinate and defecate at stations to “clean up their act” or face the consequences, and will send officers out onto the region’s stations and trains to tackle the “revolting” problem over the coming weeks.
Sergeant Tony Stamp of British Transport Police said: “In recent months, we have seen an increase in incidents of anti-social behaviour, particularly people urinating and defecating on station premises.
“This is very much about standards of behaviour and is often influenced by alcohol consumption.
No! Alcohol? Shocking. So what happens if the miscreants are caught?
“Anyone committing such an offence could be banned from travelling on the rail network and will receive a criminal record, which may affect their employment.”
The Juice would suggest some community service too – cleaning up feces and urine of course. Here’s the source, with the video.
Source: http://rss.justia.com/~r/LegalJuiceCom/~3/zsCMX9rEFP0/fds-2.html
NLRB's recent significant decisions
The NLRB this week made public a number of significant decisions, most reached in the final days of the term of Member Brian Hayes, which ended on December 16. The Board continues with three members, Chairman Mark Gaston Pearce and Members Richard F. Griffin, Jr. and Sharon Block.
The decisions touch on a variety of issues including social media postings, charter school jurisdiction, backpay awards, the chargeability of certain union lobbying expenses, and an employer’s responsibility to continue dues collection after the expiration of a contract.
Hispanics United of Buffalo
The Board found that the employer unlawfully fired five employees because of their Facebook posts and comments about a coworker who intended to complain to management about their work performance. In its analysis, the Board majority applied settled Board law to the new world of social media, finding that the Facebook conversation was concerted activity and was protected by the National Labor Relations Act. Member Hayes dissented.
Alan Ritchey, Inc.
In a unanimous decision that resolved the last of the two-member cases returned following the 2010 Supreme Court decision in New Process Steel, the Board found that where there is no collectively-bargained grievance-arbitration system in place, employers generally must give the union notice and an opportunity to bargain before imposing discipline such as a discharge or suspension on employees. Member Hayes was recused.
Latino Express
In a decision that will affect most cases in which backpay is awarded, the Board decided to require respondents to compensate employees for any extra taxes they have to pay as a result of receiving the backpay in a lump sum. The Board will also require an employer ordered to pay back wages to file with the Social Security Administration a report allocating the back wages to the years in which they were or would have been earned. The Board requested briefs in this case in July 2012. Member Hayes did not participate in the case.
Chicago Mathematics & Science Academy
Rejecting the position of a teachers’ union, the Board found that it had jurisdiction over an Illinois non-profit corporation that operates a public charter school in Chicago. The non-profit was not the sort of government entity exempt from the National Labor Relations Act, the Board majority concluded, and there was no reason for the Board to decline jurisdiction. Member Hayes dissented in part.
United Nurses & Allied Professionals (Kent Hospital)
The Board, with Member Hayes dissenting, addressed several issues involving the rights of nonmember dues objectors under the Supreme Court’s Beck decision. On the main issue, the majority held that, like all other union expenses, lobbying expenses are chargeable to objectors, to the extent that they are germane to collective bargaining, contract administration, or grievance adjustment. The Board invited further briefing from interested parties on the how it should define and apply the germaneness standard in the context of lobbying activities.
WKYC-TV, Gannet Co.
Applying the general rule against unilateral employer changes in terms and conditions of employment, the Board found that an employer’s obligation to collect union dues under a check-off agreement will continue after the contract expires and before a bargaining impasse occurs or a new contract is reached. Member Hayes dissented.
Source: http://www.lawmemo.com/blog/2012/12/nlrbs_recent_si.html
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Friday, July 25, 2014
OPINION: Chemerinsky: God, Birth Control and Corporate America
Can a corporation claim to have religious beliefs and, if so, does it violate those beliefs to force the business to include contraceptive coverage in the health insurance it provides its employees? The U.S. Supreme Court has just granted review in two cases on the issue.
Source: http://www.nationallawjournal.com/id=1202631180111?rss=rss_nlj
Judge rules Colorado ban on same-sex marriage unconstitutional
[JURIST] A federal judge for the US District Court for the District of Colorado [official website] on Wednesday struck down Colorado's ban on same-sex marriage [JURIST backgrounder] as unconstitutional, but he elected to stay his ruling until August 25 pending an appeal to a higher court. Wednesday's ruling found in favor of six same-sex couples [Reuters report] who brought a challenge to the 2006 marriage amendment [Amendment 43, PDF] in the state that defines marriage as a union between a...
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DePuy Hip Implant Deal Excludes Thousands
Just weeks after DePuy Orthopaedics Inc. announced a $2.5 billion settlement to resolve the bulk of the litigation over its recalled hip implants, some lawyers have raised concerns about the thousands of patients excluded from the deal and the process that determines how the plaintiffs will be compensated.
Source: http://www.nationallawjournal.com/id=1202631268495?rss=rss_nlj
60 Years After Brown v. Board of Education, Equal Educational Access Remains Elusive
May 17th, 2014 marked the 60th Anniversary of Brown v. Board of Education, the landmark Supreme Court Decision that held state laws establishing separate public schools for black and white students as unconstitutional because they violate the Equal Protection Clause of the 14th Amendment. Today, some six decades later, many parents and teachers are still worried that America's children are not receiving equal access to education envisioned in that case. On this episode of Lawyer 2 Lawyer, hosts Bob Ambrogi and J. Craig Williams shed light on this issue with guests Christian D'Andrea from the MacIver Institute and Kyle Serrette from The Center for Popular Democracy. Together they discuss private schools, charter schools, and homeschooling vs. the community school model. Tune in to learn more about funding concerns, oversight issues, and the proper role of teachers unions in the school choice debate.
Christian D'Andrea is an Education Policy Analyst with the John K. MacIver Institute for Public Policy in Madison, WI. He earned his Master's of Public Policy degree at Vanderbilt University and has previously worked for the Friedman Foundation for Educational Choice as a State Policy Director and Policy Analyst. He is the author of several studies that examine the fiscal and personal impacts of educational reform, and his work has been featured everywhere from the Huffington Post to EducationNext.
Kyle Serrette is the Director of Education Justice Campaigns at The Center for Popular Democracy and works with their partner organizations to strengthen their public education coalitions, develop strategy to help close the opportunity gaps, and coordinates national and regional campaigns that work to bolster our public education system. Prior to joining The Center for Popular Democracy, Kyle spent over 10 years working on corporate campaigns with groups such as Service Employees International Union, Change to Win, and the American Federation of State, County and Municipal Employees. He was awarded the 2010 Joe Hill Organizing Achievement Award by the LA Fed and the Los Angeles Orange County Organize Committee.
Special thanks to our sponsor, Clio.
Christian D'Andrea is an Education Policy Analyst with the John K. MacIver Institute for Public Policy in Madison, WI. He earned his Master's of Public Policy degree at Vanderbilt University and has previously worked for the Friedman Foundation for Educational Choice as a State Policy Director and Policy Analyst. He is the author of several studies that examine the fiscal and personal impacts of educational reform, and his work has been featured everywhere from the Huffington Post to EducationNext.
Kyle Serrette is the Director of Education Justice Campaigns at The Center for Popular Democracy and works with their partner organizations to strengthen their public education coalitions, develop strategy to help close the opportunity gaps, and coordinates national and regional campaigns that work to bolster our public education system. Prior to joining The Center for Popular Democracy, Kyle spent over 10 years working on corporate campaigns with groups such as Service Employees International Union, Change to Win, and the American Federation of State, County and Municipal Employees. He was awarded the 2010 Joe Hill Organizing Achievement Award by the LA Fed and the Los Angeles Orange County Organize Committee.
Special thanks to our sponsor, Clio.
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LawBiz® Legal Pad: Selling Your Practice
Will you be one of the 400,000 lawyers retiring in the next 10 years? Ed discusses what to do when it’s time to move on.
Source: http://feeds.lexblog.com/~r/LawBizBlog/~3/-MWLcvfob-M/
Resolution to OK Boehner Suit Against Obama Advances in House
- European Pressphoto Agency
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DOMA down, but why?
The 1st Circuit today held that the Defense of Marriage Act's denial of federal benefits to married same-sex couples is unconstitutional. Massachusetts v. US Department of Health and Human Services (1st Cir 05/31/2012).
The federal Defense of Marriage Act (DOMA) Section 3 prevents same-sex married couples from filing joint tax returns, prevent a surviving spouse from collecting Social Security survivor benefits, and prevents federal employees from sharing medical benefits with same-sex spouses.
The trial court held that DOMA Section 3 is unconstitutional; the 1st Circuit affirmed.
The court's decision surveys equal protection and federalism issues and concludes that "governing precedents under both heads combine - not to create some new category of 'heightened scrutiny,' ..., but rather to require a closer than usual review based in part on discrepant impact among married couples and in part on the importance of state interests in regulating marriage."
Thus the court gave less deference to, and "closer scrutiny of government action touching upon minority group interests and of federal action in areas of traditional state concern."
The court concluded that denial of federal benefits to same-sex married couples "has not been adequately supported by any permissible federal interest."
The court stayed its mandate, thus extending the trial court's stay, in anticipation of the losing parties seeking certiorari in the US Supreme Court.
My view:
This is a decision, purportedly based on the US Constitution, that essentially avoids making an explicit connection to the text of the Constitution.
The idea is that states regulate marriage, the federal government may have something to say in this regard, but the reasons behind the federal government's actions didn't have enough oomph. No, there's no 10th amendment violation, and no violation of the Spending Clause. And no, there's no "strict scrutiny" going on. And no "new category of 'heightened scrutiny.'" But wait, let's give the legislation "closer scrutiny."
I'm no fan of DOMA, but it's not really clear to me what this court is doing.
[By the way, similar DOMA issues are pending in the 9th Circuit.]
Source: http://www.lawmemo.com/blog/2012/05/doma_down_but_w.html
Recruitment of child soldiers persists in DRC: UN report
[JURIST] UN Special Representative for Children and Armed Conflict Leila Zerrougui [official profile] presented [press release] her fifth report on the situation of children affected by armed conflict in the Democratic Republic of the Congo (DRC) [UN backgrounder] to the Security Council Working Group on children and armed conflict Monday. The UN has documented almost 4,200 cases of recruitment of boys and girls by both government and rebel forces between 2010 and 2013. According to the UN report, one-third of...
Source: http://jurist.org/paperchase/2014/07/recruitment-of-child-soldiers-persists-in-drc-un-report.php
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Thursday, July 24, 2014
Federal courts warn of email scam
The federal judiciary has learned of an email scam, in which emails purporting to come from federal and state courts are infecting recipients with computer viruses, it announced on its website
According to the Security Operations Center of the Administrative Office of the U.S. Courts, the emails are instructing recipients to report to a hearing on a specified day and time. The emails also instruct recipients to review an attached document for detailed case information. When the attachments or links in the email are opened, a malicious program is launched that infects the recipient’s computer. Several state courts have reported similar schemes, and also are warning the public about potential viruses.
The court’s website states that unless you are actively involved in a case in federal court and have consented to receive court notifications electronically, you generally will not be served with court documents electronically.
Source: http://minnlawyer.com/minnlawyerblog/2014/01/20/federal-courts-warn-of-email-scam/
Delaware Court of Chancery Rejects Indemnification Sleight of Hand
In Branin v. Stein Roe Inv. Counsel, LLC, C.A. 8481-VCN, 2014 WL 2961084 (Del. Ch. June 30, 2014), the Delaware Court of Chancery held that a vested right to indemnification may not be rescinded by a subsequent amendment to the governing corporate document.
Francis S. Branin Jr. (“Branin”) owned and managed the investment management firm Brundage, Story & Rose, which was sold to Bessemer Trust, N.A. (“Bessemer”) in 2000. Nearly two years later, Branin left Bessemer and was hired by Stein Roe Investment Counsel LLC (“SRIC”), taking former clients with him. Bessemer proceeded to sue Branin under New York’s Mohawk Doctrine, which refers to an implied covenant imposed on the seller of a business that prevents the seller from approaching former customers and attempting to regain their patronage after the seller has purported to transfer the sold business’ goodwill to the purchaser. As a result of the legal claim by Bessemer, Branin sought indemnification under the directors and officers indemnification provisions of the operating agreement of SRIC (the “Operating Agreement”).
The Operating Agreement in effect when Branin was hired by SRIC provided that, “each member, manager or employee of [SRIC] shall be entitled to indemnification from [SRIC]for any loss, damage or claim by reason of any act or omission performed or omitted by such Person in good faith on behalf of [SRIC]” (the “Original Indemnification”). Following the lawsuit by Bessemer, SRIC adopted an amendment to the Operating Agreement to exclude from the indemnification provision claims for damages incurred as a result of a “breach of any agreement, express or implied, entered into by such Person with one or more outside parties prior to such Person’s association with the [SRIC]” (the “Amended Indemnification”). The issue before the Court hearing Branin’s claim against SRIC was which version of the Operating Agreement should govern.
Under Delaware law, limited liability companies have the ability to indemnify members and managers and have significant freedom to define, limit and amend these rights. Therefore, the issue is not whether SRIC was within its rights to amend the Original Indemnification to exclude certain types of claims, but rather when Branin’s right to indemnification (pursuant to the Original Indemnification) became a vested interest. The Court looked to the terms of the Original Indemnification, which covered a “claim” and determined that, without more, the right to indemnification would be triggered by the initial occurrence of a “claim.” The Court concluded that Branin established the right to pursue a claim for indemnification under the Original Indemnification, agreeing with the examined case law that “generally protects indemnitees and looks to the operating agreement in place when the events giving rise to the claim accrued or when the lawsuit involving the claim was filed.” (emphasis added) See Branin at page 19. The Court held that once a right to indemnification vests, it may not thereafter be rescinded by an amendment to the operating agreement. See Branin at page 18.
The Court, however, reinforced the concept that the terms of the agreement will govern and chose to not grant Branin’s motion for judgment on the pleadings, as there was a question of fact regarding whether Branin had satisfied all of the requirements of the Original Indemnification clause in the Operating Agreement. In this case, the full text of the Original Indemnification included the requirements that a potential indemnitee have acted “in good faith on behalf of [SRIC] and, as applicable, in a manner reasonably believed to be within the scope of the authority conferred on [him] by this agreement.” Therefore, Branin must still prove that he acted in good faith and within the scope of his authority in order to have a successful indemnification claim.
Although this case concerns a limited liability company and not a corporation, the concepts and reasoning behind the Court’s decision will likely be applied to claims under indemnification provisions of by-laws in the same way as it was applied to operating agreements here. For this reason, it is important for all companies to note that while the specific restrictions and carve-outs of an indemnification provision will be applied to the facts of a claim, such indemnification provision may not be amended in order to avoid liability if the right to indemnification has already vested pursuant to the terms of such indemnification provision.
For questions or additional information, please contact Ariel Yehezkel (212-634-3064), Thomas Michael (212-634-3055) or your usual Sheppard Mullin contact.
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Comity Prompts Court’s Deferral
A Richmond Circuit Court denies plaintiff’s motion to add party defendants, and says these proposed defendants are the same ones named as defendants in a companion case pending before another judge of this court and it appears plaintiff is seeking an end run around an adverse ruling by another court. Since the issue of whether ...
Source: http://valawyersweekly.com/2014/01/02/comity-prompts-courts-deferral/
Mid-year union dues increase: Hudson notice required, opt-in not opt-out
The US Supreme Court this morning held that "when a public-sector union imposes a special assessment or dues increase, the union must provide a fresh Hudson notice and may not exact any funds from nonmembers without their affirmative consent."
Knox v. Service Employees Intl Union (US Supreme Ct 06/21/2012)
This is a remarkable decision for two reasons.
First, the Court has never before held that unions must issue a Hudson notice before changing the amount of dues. Hudson notices have always been based on an after-the-fact look-back based on the previous year's audited accounts.Second, the Court has never before held that unions cannot collect fees from nonmembers unless they affirmatively opt in. The Hudson notice system has always been based on the idea that nonmembers can get an after-the-fact refund.
The union representing California public sector employees has an agency shop agreement which requires nonmembers to pay an annual fee for "chargeable" expenses - nonpolitical costs related to collective bargaining. In June 2005 the union sent out its annual Hudson notice which estimated that chargeable expenses would be 56.35% of its total expenditures. After the 30-day period that nonmembers had to object, the union announced a 25% increase to fund a broad range of political expenses, but nonmembers were given no choice as to whether they would pay into this fund.
The US Supreme Court held (7-2) that
"when a public-sector union imposes a special assessment or dues increase, the union must provide a fresh Hudson notice and may not exact any funds from nonmembers without their affirmative consent."
The Court described this case as one involving compelled funding of the speech of other private speakers or groups, which is akin to compelled speech and compelled association. Therefore, it is subject to "exacting First Amendment scrutiny." In order to prevent the union from extracting a loan from unwilling nonmembers, the union must issue a fresh Hudson notice and must exempt nonmembers unless they opt in.
Two Justices, CONCURRING in the judgment, criticized the majority for adopting an opt-in system of fee collection which was "not contained in the questions presented, briefed, or argued."
Two Justices, DISSENTING, pointed out that unions have always been allowed to calculate each year's fee based on its expenses during the previous year. Although an imperfect system, it is not unconstitutional.
Source: http://www.lawmemo.com/blog/2012/06/midyear_union_d.html
Iowa Mayor Calls For 'Caring Cities' To Take In Young Immigrants
The governor of Iowa says he's empathetic but doesn't want to host any of the unaccompanied and undocumented children from Central America. But advocacy groups and other officials in the state are urging Iowans to welcome them.
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Dry Times: How to Deal with the Impact of California’s Drought on Critical Commercial Agreements
On January 17, 2014, California Governor Jerry Brown declared a “State of Emergency” in California due to the severity of drought conditions across the State. Since then, the California drought continues to be severe and unprecedented in recent years, and is taking a pervasive toll on California residents, businesses, farm land, foliage and wildlife. Despite recent rainfall, local water districts and the State have called for voluntary, and in some locales, mandatory reduction in consumption of water. After considering the severe human toll, anyone doing business with an entity located in California (or other western states experiencing similar drought conditions) that requires water for any business purpose, particularly farmers in Northern and Central California where there are fewer alternative sources of water, must be concerned about inventory and the impact of the drought on its supply chain. Can my California contract counterparty fulfill its obligations to produce sufficient quantities of produce, dairy products, steel, flowers, honey, etc., to meet my contract needs? Waiting for a delivery that never arrives, is delayed or arrives in lower quantity or, worse yet, quality, is not a viable option. The key is to be prepared to find an alternative supplier so that production goals can be timely met. Successful navigation of these issues requires careful contract drafting and contemplation in advance of new agreements, and critical analysis of existing contracts. This article highlights the pertinent legal mechanisms at work and options for your business.
Section 2-609 of the Uniform Commercial Code (the “UCC”) follows the longstanding common law derived principle of allowing the concerned recipient of supplies to demand adequate assurance of its supplier’s ability to perform. The law adopted in most states provides that “when reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until he receives such assurance may if commercially reasonable suspend any performance for which he has not already received the agreed return.” For purposes of Section 2-609, “reasonableness” will be “determined according to commercial standards” between merchants. A failure by the recipient of a justified demand for adequate assurance to provide such assurances within a reasonable time, not to exceed thirty days, will be treated as a repudiation of the contract.
The key for those seeking assurances of performance is to describe with as much specificity as possible the reasonable grounds for “insecurity.” In the case of the drought, one does not have to look far to find news articles describing the historic drought in significant detail and showing the hardest hit regions. The form of the demand need not be a formal lawyers’ letter, but can be a friendly request to a good, long term vendor asking for assurances that product of the quality and quantity the recipient has come to expect will continue to be delivered within the time expected. Setting a reasonable time frame for a response to the demand is also important and will depend upon the imminence of the need for or expected receipt of goods.
The form and clarity of the response will be key and is often heavily litigated. Anything short of a prompt promise by a supplier to meet delivery and production obligations is a red flag and may be grounds for termination of an existing contract to purchase goods from that supplier; however, an unjustified early termination of contract rights is a breach, so a party considering terminating a supplier under an agreed contract should consider the risks of termination, particularly where the supplier is attempting to retain the right to supply. Further, before demanding adequate assurance, the recipient may wish to investigate an alternative supply chain in case the response is insufficient and goods need to be reordered from another source.
Significantly, a supplier in dire financial straits that ends up in bankruptcy may still be the recipient of a demand for adequate assurance of its ability to perform. Indeed, asking a debtor in bankruptcy for adequate assurance of its ability to perform its contractual obligations is a prudent business approach, though the ability of the non-debtor contract party to terminate is limited (proceeding by motion before the bankruptcy court to terminate is often the appropriate option if adequate assurance is not received or if a debtor confirms that it cannot perform).
Where a contract calls not just for supplies but for services, contract parties should look beyond the UCC to the Restatement (Second) of Contracts (“Restatement”). Section 251 of the Restatement provides in part that “where reasonable grounds arise to believe that the obligor will commit a breach by non-performance that would of itself give the obligee a claim for damages for total breach,” then the “obligee may demand adequate assurance of due performance and may, if reasonable, suspend any performance for which he has not already received the agreed exchange until he receives such assurance.” In the Restatement, as in the UCC, failure to provide such assurance within a reasonable time is treated as a repudiation of the contract.
From the other perspective, a supplier who fears that it will be unable to meet the terms of its contract to supply goods in sufficient quantity, quality, or price, particularly where the costs of producing have markedly increased due to the impact of the drought, may attempt to invoke a claim of force majeure. Many contracts have a force majeure provision that excuses performance (or non-performance) upon the occurrence of events such as (i) acts of God (e.g., severe droughts and storms) and (ii) man-made events (e.g., wars or certain acts of governments). Employee strikes may also be viewed as a basis for a finding of force majeure in some contracts.
For the purposes of California law, the California Supreme Court gave the definitive definition of a force majeure in Pacific Vegetable Oil Corp. v. C. S. T., Ltd., 29 Cal. 2d 228 (1946). The Court explained that “‘Force majeure,’ or the Latin expression ‘vis major,’ is not necessarily limited to the equivalent of an act of God. The test is whether under the particular circumstances there was such an insuperable interference occurring without the party’s intervention as could not have been prevented by the exercise of prudence, diligence and care.” Id. at 238.
Additionally, acts of God can be involved in related “impossibility” scenarios. For example, in Squillante v. California Lands, Inc., 5 Cal. App. 2d 89 (1935), the California Court of Appeal excused a grower from having to deliver a full quantity of grapes under an excuse of impossibility due to drought conditions. There, the contract stipulated a certain quality and variety of grape. The drought made it impossible for that grower to grow grapes of the sufficient quality and variety, and therefore the court held that the grower could not be compelled to perform impossibilities and that it could not be held liable in damages for its failure to comply with the contract because the failure resulted from no fault of its own. (The court also stressed the importance of the “grower” not being a “dealer” of grapes, in that they suggest that a dealer may not have been so excused.) While this case dates from 1935, it is apparently still good law.
The scenarios above do not address the situation where a supplier is not necessarily prevented from supplying, but the cost of supplying increases so significantly higher than anticipated, that performance under the contract becomes commercially “impracticable.” While related to the concepts of force majeure and impossibility, impracticability is a distinct problem. Section 2-615 of the UCC provides that, absent a supplier assuming a greater obligation, “delay in delivery or non-delivery in whole or in part by a seller . . . is not a breach of his duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid.”
A successful defense of impracticability also requires that seller “notify the buyer seasonably that there will be delay or non-delivery,” and, in the case of reduced or limited capacity to perform, that the seller then allocate production and deliveries among his customers in a “fair and reasonable” manner.
In the Official Comments to UCC Section 2-615, the American Law Institute explained that generally, “increased cost alone does not excuse performance unless the rise in cost is due to some unforeseen contingency which alters the essential nature of the performance. Neither is a rise or a collapse in the market in itself a justification, for that is exactly the type of business risk which business contracts made at fixed prices are intended to cover. But a severe shortage of raw materials or of supplies due to a contingency such as war, embargo, local crop failure, unforeseen shutdown of major sources of supply or the like, which either causes a marked increase in cost or altogether prevents the seller from securing supplies necessary to his performance, is within the contemplation of this section” (emphasis added).
Whether a defense of impracticability rests on the increased cost resulting from shortages of water or other inputs affected by the drought, or from a governmental regulation or order limiting access to water, impracticability clearly represents an intractable problem absent clear contract drafting and advice. Contract drafters have several tools at their disposal to more clearly delineate the parties’ risk allocation. For example, properly constructed force majeure clauses should address the risk of supervening events expressly in the agreement. Additionally, “hell or high water” provisions make it clear the parties’ intend to implacably bind themselves despite any contingencies.
When problems raising impossibility, force majeure, or impracticability issues arise, the key will be managing expectations. If buyers suspect there are delays or other issues on the horizon, they should not hesitate to seek adequate assurances of performance from their suppliers. Likewise, if there are substantial additional costs or problems in maintaining the quality or quantity or the timing of supply, suppliers should notify their buyers as soon as practicable to adequately manage the relationship in the near term and maintain the relationship as the drought subsides and production gets back on track.
Think ahead when drafting important supply contracts. Read your contracts closely when a problem arises and reach out to counterparties early to address potential problems before they arise or worsen.
Litigation Surrounding General Motors Ignition Switch Problem
General Motors (GM) faces litigation stemming from an ignition switch problem in some recalled vehicles and now, families of the deceased or injured are seeking justice. On this Ringler Radio podcast, host Larry Cohen and co-host Mike Casey from Ringler Associates talk with Attorney Adam J. Levitt, director at Grant and Eisenhofer P.A. about the GM litigation, the National Highway Traffic Safety Administration's role and ultimately what this ignition problem means for the car giant.
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