Karen Morris' Bio
Karen Morris is a Distinguished Professor of Business Law at Monroe Community College in Rochester, New York where she has taught for 31 years. She is also an elected town judge and the author of two textbooks - New York Cases in Business Law and Hotel, Restaurant and Travel Law. Karen also writes a treatise on New York Criminal Law and a column in Hotel Management Magazine. She recently published her favorite work - Law Made Fun Through Harry Potter's Adventures. Professor Morris is the recipient of numerous teaching awards and recently received the Humanitarian Award from her county Bar Association.
Marianne Jennings' Bio
Professor Marianne Jennings is a member of the Department of Management in the W.P. Carey School of Business at Arizona State University and is a professor of legal and ethical studies in business. At ASU she teaches graduate courses in the MBA program in business ethics and the legal environment of business. She served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. From 2006-2007, she served as the faculty director for the MBA Executive Program.
In a recent survey of big money international arbitration awards, some for more than $2 billion, Stockholm emerged as a leader in large awards, topping New York in that category.
Why Sweden? Many of the biggest cases involve natural resources from Russia. Russians prefer the cultural familiarity of Stockholm to other forums that seem more unfamiliar.
Despite the arbitration being based in Sweden, most of the attorneys are based in the big London firms.
The U.S. government listed polar bears as threatened species in 2008 and bans the importation of bear parts from Canada. The U.S. would allow imports only if the U.S. Secretary of the Interior determines that Canada’s hunting program is “based on scientifically sound quotas ensuring the maintenance of the affected population stock at a sustainable level.”
Polar bears are not considered endangered by the government of Canada. The population in Canada has doubled over the past 40 years to 15,000. Their hunting is managed largely by Inuits (indigenous peoples of the Arctic regions of Canada).
The ban has hurt the revenues earned by Inuits who sponsor big-game hunters from the U.S. who want to try to bag a bear. Americans can go on a hunt, but cannot bring home a trophy.
Rodger DeVries of Michigan, went on a polar bear hunt eleven years ago—in 2000. He obtained a license in Nunavut and paid an outfitter $12,500 to take him hunting. He got a bear and had a taxidermist in Canada mount it. He left it with a friend in Canada. In 2007, he returned to Canada and brought the bear home. Someone saw the critter and called wildlife authorities. One went to DeVries’ home. He let the agent in. The agent saw the bear.
Criminal charges were filed for possessing the threatened species. DeVries, age 73, who had no criminal history, pleaded guilty and can be sentenced up to a year in prison and pay up to $100,000 in fines.
“The polar bear is an ecological and cultural treasure of the American and Canadian Arctic,” U.S. Assistant Attorney-General Ignacia Moreno said. “We will not tolerate the illegal importation of polar-bear trophies and will fully prosecute all violations of federal law.” That is, the fact that polar bear hunting in Canada is legal, and that DeVries hunted before the U.S. decided to list the bear as threatened, does not matter.
Some Canadians disagree with the ban. Gabriel Nirlungayuk, Director of Wildlife for Nunavut Tunngavik Inc., the organization that advocates for the territory’s Inuit, says “We have a very good polar bear hunt management.” The fees paid by American hunters are important revenues to Inuit, who are further economically marginalized by the loss of another income source—selling their hunting tags and serving as hunt guides.
The Humane Society International argues that trophy bear hunting is not an Inuit tradition, so they should not complain. Nirlungayuk says, “Who are they to say that it’s not traditional? It’s not traditional for you guys to be in a car. Should you be riding horses? Our culture has evolved.”
In Quill Corporation v North Dakota, 504 U.S. 298 (1992), the U.S. Supreme Court held that a company could not be forced t collect sales tax for a state unless it had a physical presence in that state. Since the time of that decision, we have experienced the advent and growth of internet sales and increasing efforts on the part of state treasurers to collect taxes from internet sellers who have an extended and regular presence through deliveries of good to residents. A University of Tennessee study found that states lost have lost $11 billion in sales tax revenues on internet sales to date in 2011 because of internet sellers work to avoid paying such sales taxes on the basis of the Quill case physical presence standard.
However, some states have been able to expand their collection of internet taxes by passing statutes that redefine what constitutes a physical presence in the state. For example, internet sellers who work with affiliates in a particular state will have to collect and pay sales taxes. These statutes use the Quill case as their foundation and attempt to define physical presence within the case’s constitutional parameters for interstate taxation.
Other states have passed statutes that are designed to capture taxes from internet sellers who have employees in the state for a certain number of days per year. Amazon does pay sales taxes in those states in which it has an actual physical property retailed presence, but does not pay taxes in those states where it simply has a facility, such as a warehouse. The states that have Amazon facilities located within their borders have assessed Amazon for sales to their residents. However, Amazon is challenging the constitutionality of those attempts through a lawsuit in one state and a ballot initiative in another.
Amazon has active and detailed policies on what employees can and cannot do within states so that the state statutes on physical presence are not triggered. Amazon has a map of the 50 states, colored by red, yellow, or green shading. For those states that are shaded red, employees are not permitted to travel into the state without first consulting their managers and legal counsel because their presence in the state could trigger the need to pay sales taxes. Green states are safe states because the state has not taken action to try and collect internet sales taxes. Yellow states also require approval for travel to and actions within a state. Employees have specific guidelines on what business cards they use while in the states (the cards do not have amazon.com on them) and they are instructed not to send e-mails from those states. The Amazon caution map appears below:
A summary of the types of state laws appears below:
Affiliate relationships are a physical presence
Arkansas, Connecticut, Illinois, Vermont, North Carolina, Rhode Island, and New York
Online advertising relationships with a local affiliate are a physical presence
Physical presence if the internet seller owns 50% or more of an in-state retailer
In states in which Amazon is battling the taxes, it has threatened to end relationships with affiliates if the states insist on collecting sales tax from internet sales. The battle is likely to continue with other retailers hoping that Amazon's litigation provides the constitutional clarification necessary in this new era of interstate sales.
1. Why are states limited in the taxes they can collect from interstate businesses?
2. Isn’t the presence of a warehouse in a state a physical presence for purposes of the Quill case? What about business offices? What about affiliations with local retailers who ship for Amazon to those state customers?
3. A federal judge declared a Colorado law that required internet retailers to either pay sales taxes on sales to customers in the state or disclose their sales records to state officials. Why would the judge declare such a law unconstitutional?
4. Is it ethical for Amazon to avoid paying sales taxes? What do you think of Amazon's tactics on employee cards and e-mail restrictions?
Rapper Pitbull sings a catchy song entitled “Give Me Everything”. It is his first number one hit on the Billboard Hot 100. It also reached number one in England, Canada and several other countries. There is a line in it that has aroused the ire of singer Lindsay Lohan who has had trouble with the law of late. She was convicted of driving while intoxicated and thereafter violated the terms of her probation with a failed drug test. She served 13 days in jail followed by an inpatient rehabilitation program. Later she was convicted of stealing a necklace from a store which landed her a sentence of 120 days in jail. Lucky for her, she was allowed to satisfy the sentence doing house arrest, wearing a tracking ankle monitor for 35 days, due to jail overcrowding.
The lyric Lohan likes not is, “So, I’m tiptoein’, to keep flowin’, I got it locked up like Lindsay Lohan.” She is suing Pitbull and the song’s composers seeking to bar further broadcast of the song and to collect damages in an unspecified amount. She claims a violation of the tort called right of privacy which, in New York where the lawsuit is pending, means use of a person’s name or picture for advertising or other business purpose without written permission.
While at first blush the lawsuit may seem to have merit, Lohan will likely lose. An exception exists to the right of privacy that permits use of a person’s picture or name without authorization if the person is newsworthy. Thus, for example, news media do not need to obtain President Obama’s written okay every time they use his name or picture in the news. Lohan too is newsworthy. She has been a well-known actress and singer, as well as the subject of countless articles and media coverage as she has progressed through her legal and addiction difficulties. Because she is of interest to the public, her name and picture can be used by others in connection with the facts that make her newsworthy. Her lawsuit is thus not destined for success.
Another ground on which she might have considered suing is defamation, which consists of making an untruthful statement about someone that subjects that person to ridicule or scorn. Attributing illegal conduct to others surely subjects them to derision. However, truth is a complete defense to defamation. This means that it is okay to make even unflattering comments about someone provided the statements are accurate. Concerning Lindsay Lohan, It is truthful that she was “locked up”. The truth defense is no doubt the reason why Ms. Lohan is not framing her case as one for defamation.
Pitbull is not capitulating. Indeed, he sang “Give Me Everything” at MTV’s Video Music Awards two nights ago using the original lyrics referencing Lohan’s jail stint. His lawyer presumably advised him he is on safe ground despite Lohan’s lawsuit.
1) Why does the law permit use of pictures and names of newsworthy people?
2) Why does the law permit truthful but disparaging statements about people?
Examples are always the best tool for understanding negligence liability: Who is responsible for injuries? When are they responsible? And are there times when no one is responsible for an injury? And the courts have had two recent decisions that provide color and charm even as they offer insights into duty, breach of duty, and liability for negligence. Below are two cases with colorful facts and insights into duty, invitees, and businesses as insurers of customer safety.
Penny Pinchers v. Outlaw, 61 So. 3d 245 (Miss. Ct. App. 2011)
Cindy Scott was the manager of Penny Pinchers, a discount grocery store located in West Point, Mississippi. She was also the owner of a four-month-old dachshund puppy named Sophie, which weighed four pounds and one ounce. Scott took Sophie to work with her every day. She set up a piece of peg board to keep Sophie contained in the area behind the checkout counter. Scott testified that this was to protect Sophie from the customers because Sophie was such a tiny dog.
On August 16, 2006, Lenetra Outlaw entered Penny Pinchers. She said hello to Scott, who was having a conversation with Anita Reeves, an employee, and Ivy Mann, a customer. Outlaw testified that she started walking down an aisle when she heard a dog bark. Because she is terrified of dogs, she started running down the aisle toward the back of the store. She said that she could hear the claws of the dog hit the floor as the dog chased her down the aisle. When she turned to see how close the dog was, she ran into a freezer at the back of the store. She then tried to jump on top of the freezer to get away from the dog.
Outlaw testified that Scott picked up the dog and told Outlaw that the dog would not hurt her. When Outlaw saw how small the dog was, she began to laugh and tell Scott about her extreme fear of dogs. Outlaw then went on with her shopping. She bent down to reach a five-pound bag of catfish in the deep freezer. She took the catfish to the counter and then walked fifteen feet to another aisle where she bent down to the bottom shelf to pick up a four-pound bag of sugar. Outlaw testified that she began to feel a severe pain in her hip as she continued to shop.
Scott's testimony of the events surrounding Outlaw's injuries was markedly different. She testified that she unknowingly left the pegboard enclosure open. While she was talking to Reeves and Ivy, she heard Sophie bark from the front side of the counter. Scott realized Sophie was out of the enclosure, so Scott stepped in front of the counter and picked up the dog.
Scott testified that it only took a moment for her to pick up Sophie after she heard the bark. By then, Scott said that Outlaw was already thirty feet away at the back of the store. That is when Outlaw turned and saw the dog and began to laugh and explain her fear of dogs. Scott told Outlaw that Sophie would not hurt her, and Outlaw continued her shopping.
When Outlaw returned to the counter with the sugar, she began to sob. Scott testified that she asked Outlaw whether she needed an ambulance. Scott said that she could not understand Outlaw because of the sobbing. Scott called Johnson, the owner of Penny Pinchers, who came to the store. He called an ambulance, and Outlaw was transported to the hospital.
Outlaw had extensive health problems before this incident. She had Perthes Disease as a child, a condition that caused severe hip problems. She also suffers from rheumatoid arthritis. She had a total replacement of the left hip in 1995. Because the prosthetic device used in the hip replacement only lasts between ten to fifteen years, Outlaw underwent a revision surgery in 2005. Again, that prosthetic device was estimated to last from ten to fifteen years; however, Outlaw had to have a second revision surgery in 2006 following her collision with the freezer at Penny Pinchers.
Outlaw filed suit against Penny Pinchers, Johnson, and Scott. Scott, in her individual capacity, was dismissed as a defendant prior to trial. Outlaw alleged that Penny Pinchers negligently failed to (1) maintain the premises in a safe condition, (2) provide proper restraint of the dog, and (3) warn customers of the dog's presence. At the close of Outlaw's case-in-chief, Penny Pinchers moved for a directed verdict claiming that Outlaw had presented no evidence of any dangerous condition. Penny Pinchers further asserted that Outlaw had failed to show that Sophie had previously exhibited any dangerous propensities or that Penny Pinchers knew or should have known of such a danger. The motion for a directed verdict was denied.
GRIFFIS, Presiding Judge
It was undisputed that, as a customer of Penny Pinchers, Outlaw was classified as a business invitee. A business owner owes a business invitee a duty of ordinary care to keep the business premises in a reasonably safe condition. Waller v. Dixieland Food Stores, Inc., 492 So.2d 283, 285 (Miss.1986). The owner has a duty to warn invitees of dangerous conditions that are not apparent to the invitee, of which the owner or occupier knows or through the exercise of reasonable care should know. However, the owner is not an insurer against all injuries that may occur on the premises. Jerry Lee's Grocery, Inc. v. Thompson, 528 So.2d 293, 295 (Miss.1988).
Thus, Penny Pinchers owed Outlaw a duty to keep the store in a reasonably safe condition. Penny Pinchers had a duty to warn Outlaw of any dangerous conditions of which it knew or should have known. However, implicit in that duty is that a dangerous condition must exist.
Further, the owner “is not required to keep the premises absolutely safe, or in such a condition that no accident could possibly happen to a customer.” “The owner is merely required to anticipate a result that is more apt to happen than not to happen, that is to say he must anticipate only such a result as is reasonably foreseeable as a probable consequence of his act.”
Here, the dispute is whether the presence of the dog in the store created a dangerous condition. Outlaw, who claims that Sophie barked at and chased her, argues that Sophie was a dangerous condition. Penny Pinchers disagrees and says it had no reason to believe that Sophie's presence in the store created any danger. Because Sophie had never exhibited any dangerous propensities, Penny Pinchers claims that it could not and should not have known of any dangerous condition.
While this is not a traditional “dog-bite” case, we find it instructive that the supreme court has held that dogs are not dangerous per se. To impose liability on a dog owner for personal injuries caused by the dog, “there [must] be some proof that the animal has exhibited some dangerous propensity or disposition prior to the attack complained of, and, moreover, it must be shown that the owner knew or reasonably should have known of this propensity or disposition and reasonably should have foreseen that the animal was likely to attack someone.” Poy v. Grayson, 273 So.2d 491, 494 (Miss.1973).
Considering the specific facts of this case, even in a light most favorable to Outlaw, we find no proof that Sophie created a dangerous condition at Penny Pinchers. There was no proof that Sophie had previously exhibited any of the behaviors that Outlaw alleged. Scott took Sophie with her to Penny Pinchers on a daily basis. Sophie had never barked or chased any of the other customers. In fact, there was no proof that any other customer had a problem with Sophie.
We must also consider that Sophie was a four-pound puppy at the time of the incident. Outlaw admitted that, when she heard the bark, she never turned to look at the dog. Instead, she started running toward the back of the store. She further admitted that she began to laugh when she finally saw that such a small dog had caused her to run into the freezer. While we agree with Outlaw that it is possible that the presence of a dog inside a grocery store could create a dangerous condition, the facts that she presented at trial do not prove that a dangerous condition existed here.
We acknowledge Outlaw's extreme fear of dogs. However, we cannot say that it was reasonable for Penny Pinchers to anticipate that anyone, even someone with a great fear of dogs, would have such a reaction to Sophie's presence in the store. “The invitee is required to use in the interest of his own safety that degree of care and prudence which a person of ordinary intelligence would exercise under the same or similar circumstances.” Penny Pinchers was not required to protect Outlaw from any possible injury, but only those injuries that were a foreseeable result of Penny Pinchers' action of allowing a four-pound puppy to be present in the store.
We find that Outlaw failed to prove that Sophie created a dangerous condition. As such, Outlaw failed to prove that Penny Pinchers had breached its duty to provide her reasonably safe conditions within the store. The judgment of the circuit court is reversed, and judgment is rendered in favor of Penny Pinchers.
1. What is the duty of a store toward customers?
2. Why does the court discuss Outlaw’s fear of dogs?
3. Could a dog create a dangerous condition in a grocery store? How?
4. Why do you think the manager’s and Outlaw’s versions of the facts are so different?
5. Why do you think Scott was dismissed out of the case?
Pfenning v. Lineman, 947 N.E.2d 392 (Ind. 2011)
On August 19, 2006, a golf outing, the annual Whitey's 31 Club Scramble, was held at the Marion Elks Country Club and attended by customers and friends of Whitey's (a tavern) and its proprietor, Joseph Lineman. Persons wishing to participate signed up on a poster board that had been hung on a wall at Whitey's. Each golfer paid a charge of $45.00 per person to the Elks, which provided the golf carts and the beverages that were made available to the golfers. Whitey's provided the sign-up list to the Elks, which then made cart signs, team sheets, score cards, and starting hole assignments. The plaintiff, Cassie Pfenning, then sixteen years old, attended the outing at the invitation of her grandfather and with the permission of her mother. The grandfather (now deceased) previously had signed up at Whitey's as a volunteer to drive a beverage cart at the event. He brought Cassie with him for company.
Shortly after the Cassie and her grandfather arrived at the event, he retrieved a gasoline motor powered beverage cart for their use. It had a large cooler on the back containing water, soda pop, and beer. This beverage cart had no windshield, and the evidence is in conflict regarding whether it was equipped with a roof. Shortly after providing Cassie with the beverage cart, the grandfather joined a shorthanded group of golfers and left Cassie at the beverage cart with Lottie Kendall, sister of the grandfather and Cassie’s great aunt. But within about ten minutes, Lottie, the great aunt, also joined another group of golfers, and an employee of Whitey's, Christie Edwards, joined Cassie and was present with her on the beverage cart during the event. Cassie drove the cart, and Christie served the beverages to groups of golfers on the golf course for about three and a half hours.
After making several trips around the 18–hole golf course, Cassie was suddenly struck in the mouth by a golf ball while driving the beverage cart on the cart path approaching the eighteenth hole's tee pad from its green. The ball was a low drive from the sixteenth tee approximately eighty yards away. The golfer's drive traveled straight for approximately sixty to seventy yards and then severely hooked to the left. He noticed the roof of another cart in the direction of the shot and shouted “fore.” But neither Cassie nor her beverage-serving companion heard anyone shout “fore.” After hearing a faint yelp, the golfer ran in the direction of the errant ball and discovered Cassie with her injuries. She suffered injuries to her mouth, jaw, and teeth.
At the trial court level, the Elks sought summary judgment, urging that participants and spectators in sporting events are precluded from recovery for injuries that result from the sport's inherent dangers and that the Elks had no liability as the operator of the golf course because it was entitled to expect Cassie to realize and appreciate the dangers she encountered. The golfer supported his request for summary judgment by contending that he had no duty of care to a co-participant at a sporting event with respect to risks inherent in the sport. Whitey's sought summary judgment, alleging that it was not subject to premises liability and did not otherwise owe any duty to Cassie. The grandfather sought summary judgment on grounds that he did not have a legal duty to warn his granddaughter about the inherent risks of driving the beverage cart during the golf event.
The trial court granted summary judgment for all of the defendants in the case and Cassie appealed.
The golfer, Joseph Lineman, sought summary judgment on grounds that he could not be held liable under a negligence theory because the plaintiff was a co-participant in the sporting event, and her injuries resulted from an inherent risk of the sport.
Although this Court has not addressed the issue, several decisions from the Indiana Court of Appeals, invoking varying and inconsistent rationales, have concluded that participants in athletic events owe no duty of care as to risks inherent in the sport and must refrain only from intentional or reckless infliction of injury to others.
The focus on duty arises from its role as one of the essential elements of a negligence action. A plaintiff seeking damages for negligence must establish (1) a duty owed to the plaintiff by the defendant, (2) a breach of the duty, and (3) an injury proximately caused by the breach of duty. Caesars Riverboat Casino, LLC v. Kephart, 934 N.E.2d 1120, 1123 (Ind.2010). “Absent a duty, there can be no breach, and therefore, no recovery for the plaintiff in negligence.” Vaughn v. Daniels Co. (West Virginia), Inc., 841 N.E.2d 1133, 1143 (Ind.2006). The determination of whether a duty exists is generally an issue of law to be decided by the court. N. Ind. Pub. Serv. Co. v. Sharp, 790 N.E.2d 462, 466 (Ind.2003). To decide whether a duty exists, a three-part balancing test developed by this Court “can be a useful tool.” Kephart, 934 N.E.2d at 1123; Sharp, 790 N.E.2d at 465. This test, first enunciated in Webb v. Jarvis, 575 N.E.2d 992 (Ind.1991), balances three factors: “(1) the relationship between the parties, (2) the reasonable foreseeability of harm to the person injured, and (3) public policy concerns.”
A significant variety of approaches to sports injury cases is also found among the case law and statutes of other jurisdictions. Many have adopted some variety of the general formulation that no duty is owed by a sports participant except to refrain from intentional injury or reckless conduct. Cases in several states employ the primary assumption of risk rationale for their no-duty rule.
In various cases from several other states, we find a no-duty approach applied but primarily for public policy reasons and without evident reliance on the concept of primary assumption of risk.
Some cases have declined to adopt a reduced-duty standard but employ a traditional negligence analysis in all sports injury cases.
Cases from a few states have used a combination of approaches depending upon the nature of the activity involved.
Two states, New Hampshire and Arizona, provide enhanced protection from liability for sports participants by focusing not on the element of duty but rather on breach of duty, finding that no breach of duty occurs from the ordinary activities of a sport.
Significant variations thus can be seen among the decisions from our sister jurisdictions as they wrestle with the issue of liability for sports injuries. In resolving the issue for Indiana, a foremost consideration must be the Indiana General Assembly's enactment of a comparative fault system and its explicit direction that “fault” includes assumption of risk and incurred risk. Ind.Code § 34–6–2–45(b).
As to judicial policy, however, we are in agreement with our colleagues in the Court of Appeals and many of the courts of our fellow states that strong public policy considerations favor the encouragement of participation in athletic activities and the discouragement of excessive litigation of claims by persons who suffer injuries from participants' conduct. Sound policy reasons support “affording enhanced protection against liability to co-participants in sports events.” Athletic activity by its nature involves strenuous and often inexact and imprecise physical activity that may somewhat increase the normal risks attendant to the activities of ordinary life outside the sports arena, but this does not render unreasonable the ordinary conduct involved in such sporting activities.
We conclude that sound judicial policy can be achieved within the framework of existing Indiana statutory law and jurisprudence. As noted previously, there are three principal elements in a claim for negligence: duty, breach of duty, and a proximately caused injury. When there is no genuine issue of material fact and any one of these elements is clearly absent, summary judgment is appropriate. But rather than focusing upon the inherent risks of a sport as a basis for finding no duty, which violates Indiana statutory and decisional law, the same policy objectives can be achieved without inconsistency with statutory and case law by looking to the element of breach of duty, which is determined by the reasonableness under the circumstances of the actions of the alleged tortfeasor. Breach of duty usually involves an evaluation of reasonableness and thus is usually a question to be determined by the finder of fact in negligence cases. But in cases involving sports injuries, and in such cases only, we conclude that a limited new rule should apply acknowledging that reasonableness may be found by the court as a matter of law. As noted above, the sports participant engages in physical activity that is often inexact and imprecise and done in close proximity to others, thus creating an enhanced possibility of injury to others. The general nature of the conduct reasonable and appropriate for a participant in a particular sporting activity is usually commonly understood and subject to ascertainment as a matter of law. This approach is akin to that taken by the Arizona courts when faced with the Arizona Constitution's explicit declaration that assumption of risk is a question of fact that shall be left to the jury.
We hold that, in negligence claims against a participant in a sports activity, if the conduct of such participant is within the range of ordinary behavior of participants in the sport, the conduct is reasonable as a matter of law and does not constitute a breach of duty.
Our opinion today thus disapproves of the no-duty approach employed by the Court of Appeals. But we agree with the Court of Appeals in permitting liability when an athlete intentionally causes injury or engages in reckless conduct. The Court of Appeals did not apply its no-duty formulation to such intentional injuries or reckless conduct.
In any sporting activity, however, a participant's particular conduct may exceed the ambit of such reasonableness as a matter of law if the “participant either intentionally caused injury or engaged in [reckless] conduct.” Such intentional or reckless infliction of injury may be found to be a breach of duty.
As to the golfer's hitting an errant drive which resulted in the plaintiff's injury, such conduct is clearly within the range of ordinary behavior of golfers and thus is reasonable as a matter of law and does not establish the element of breach required for a negligence action.
The plaintiff's action against the golfer is also predicated upon her claims that he hit an errant drive when he knew of the presence of bystanders on the golf course and that he failed to yell “fore” in a manner sufficient to enable her to avoid being struck. Both the golfer and another golfer in his foursome state that he yelled “fore” when his shot hooked to the left. But neither the plaintiff nor the woman with her on the beverage cart heard any warning. With respect to the alleged failure to warn, the plaintiff does not present any evidence directly disputing the golfer's claim that he yelled “fore,” only that she didn't hear it, but her undisputed failure to hear the warning may arguably warrant an inference disputing the golfer's assertion. The parties agree that conventional golf etiquette includes calling “fore” when a golfer's shot may endanger others. But whether giving such warning can be effective in providing protection is dependent upon a variety of factors including the distance involved, the velocity and trajectory of the ball, the course topography, the presence of wind and ambient sound sources, the existence of foliage or other impediments to sound, the timing and volume of the golfer's shout of “fore,” and the flexibility of movement possible within the available seconds for persons at risk to avoid or protect themselves from a ball coming from an unknown direction.
For each of two reasons, we find that neither the omission nor manner of yelling “fore” can be a proper basis for a claim of negligence in golf ball injury cases. First, the myriad of factors that relate to the effectiveness of such a warning at any particular time will almost inevitably call for speculation and surmise, precluding the establishment of the element of proximate cause necessary for liability. Second, we find that a golfer's yelling “fore” or failure to do so, and the manner of doing so, is within the range of ordinary behavior of golfers, and that, as a matter of law, neither the manner of doing so nor the failure to do so constitutes a breach sufficient to support a claim for negligence.
While not asserted in her memorandum in opposition to summary judgment at trial, the plaintiff declares in her Appellant's Brief that a question of fact precluding summary judgment “exists as to whether [the golfer] acted recklessly” in failing to yell “fore” or, if not, “whether he did so timely and sufficiently.” We reject this claim. For the same reasons that we hold that whether and how a golfer yells “fore” in a particular situation cannot be a basis for a claim of negligence, it likewise cannot support a claim of liability based on recklessness.
Summary judgment was properly granted in favor of the golfer.
Motion for Summary Judgment by the Elks
In its motion for summary judgment, the Elks asserted two claims: (a) regardless of whether the plaintiff is considered a participant or a spectator in the golf event, she is precluded from recovery for injuries resulting from the sport's inherent dangers, and (b) as to the plaintiff's premises liability claim, the Elks is not liable because her injury did not result from an unreasonable risk of harm nor one that the Elks should have expected the plaintiff would fail to realize and protect against.
In seeking summary judgment against the plaintiff's claim of premises liability, the Elks argues that the undisputed designated evidence conclusively establishes that one of the elements of premises liability is not satisfied and that the plaintiff's premises liability claim fails because of a lack of evidence on one of the necessary elements of her claim. As authority, the Elks cited a case strikingly similar to the present one, Lincke v. Long Beach Country Club, 702 N.E.2d 738 (Ind.Ct.App.1998), where the court affirmed summary judgment for a golf course in an action by a golfer struck by an errant drive from an adjoining tee. Noting that one of the elements of an invitee's premises liability claim is that the owner “should expect that the invitee will fail to discover or realize the danger or fail to protect against it,” the Lincke court found that the designated evidence did not suggest that the country club should have known that the plaintiff would not realize the possible danger of being struck by the ball.
In opposing the motion at the trial court, and in her arguments on appeal, the plaintiff has not directly responded to the claim that the evidence conclusively establishes that one of the elements of premises liability is not satisfied. Instead, she urges for a broader application of the Webb test, arguing that (a) the Elks had a duty of reasonable care “because her care had been entrusted in them,” (b) the Elks failed to follow its own protocol in providing safety instructions to beverage cart operators, and (c) the Elks should not have permitted a minor to operate a cart from which alcoholic beverages were served. The plaintiff emphasizes that she was not given the usual instructions regarding operation of the beverage cart. Because the Elks was the proprietor of the golf course, its employees managed essentially all aspects of the golf outing except for the initial participant sign-up at Whitey's 31 Club, and the plaintiff's injuries arose from a condition on the premises, we address the issue of the Elks's liability as a matter of premises liability law.
The elements of premises liability discussed in Lincke are well established. A landowner owes to an invitee or social guest “a duty to exercise reasonable care for his protection while he is on the landowner's premises.” To articulate the contours of this duty, we have adopted the Restatement (Second) of Torts § 343 (1965):
A possessor of land is subject to liability for physical harm caused to his invitees by a condition on the land if, but only if, he
(a) knows or by the exercise of reasonable care would discover the condition, and should realize that it involves an unreasonable risk of harm to such invitees, and
(b) should expect that they will not discover or realize the danger, or will fail to protect themselves against it, and
(c) fails to exercise reasonable care to protect them against the danger.
Because the plaintiff's liability claims against the Elks are predicated on its actions as landowner and operator of the golf course, these requirements apply to all of her claims against the Elks. Thus, for the Elks to obtain summary judgment, the designated evidence must demonstrate that one of these elements of premises liability is not satisfied. The Elks urges that the relevant facts are undisputed and preclude the element that it should have expected that the plaintiff would fail to discover or realize the danger of being struck by a golf ball and fail to protect herself against it.
The plaintiff notes that the designated materials show that she had never played golf before and had no interest in it, that she did not know any golf safety or etiquette rules, and that she had been to a golf course only once before when she was six or seven years old. She urges that a subjective test should apply to show her actual lack of appreciation of the risks involved. We disagree. While the subjective test is essential in assessing the defense of incurred risk, for the purpose of our premises liability jurisprudence, the issue here is not what risk the plaintiff subjectively incurred but whether the Elks objectively should have expected that the plaintiff would be oblivious to the danger or fail to protect herself from it. We find no genuine issue of fact to contravene the objectively reasonable expectation by the Elks that persons present on its golf course would realize the risk of being struck by an errant golf ball and take appropriate precautions.
More significantly, we find the absence of a genuine issue of fact regarding the first element of premises liability—that the premises owner had actual or constructive knowledge of a condition on the premises that involves an unreasonable risk of harm to invitees. The determination of duty is one of law for the court, and we hold that the risk of a person on a golf course being struck by a golf ball does not qualify as the “unreasonable risk of harm” referred to in the first two components of the Burrell three-factor test.
We find that the undisputed designated evidence conclusively establishes that crucial aspects of two of the elements of premises liability are not satisfied. There is no showing that (a) the Elks should have reasonably expected that its invitees would fail to discover or realize the danger of wayward golf drives, and (b) the risk of being struck by an errant golf ball involved an unreasonable risk of harm. For these reasons, the plaintiff cannot prevail on her premises liability claim against the Elks.
Summary judgment was properly granted in favor of the Elks.
Motion for Summary Judgment by Whitey's
In seeking summary judgment, Whitey's asserted that the undisputed facts establish that it was not subject to premises liability because it did not own, control, or have any interest in the Elks golf course and that it otherwise owed no duty to the plaintiff.
As against Whitey's, the plaintiff asserts claims of negligent supervision and premises liability, arguing that Whitey's allowed the sixteen-year-old plaintiff to ride on an alcoholic beverage cart, failed to issue safety instructions, placed her on a golf cart under dangerous conditions, and placed her in a windowless, roofless cart with an inadequately-trained employee.
With respect to the premises liability issue, the facts are undisputed that the golf event was conducted on premises owned and operated by the Elks, not Whitey's. The fact that Whitey's arranged for the advance promotion and sign-up of golfers for the event, or that the grandfather, as a volunteer for Whitey's, selected the particular beverage cart used by the plaintiff, does not establish that Whitey's was a possessor of the golf course so as to subject it to premises liability. Summary judgment was correctly entered in favor of Whitey's on the plaintiff's claim for premises liability.
The plaintiff argues that she was “put to [the] purpose” of distributing beverages by Whitey's and her grandfather, from which arose a relationship “to instruct, warn and/or supervise [the plaintiff], as an unknowledgeable minor.” She claims that her lack of understanding about golf, the absence of safety instructions given her in contrast to the usual safety instructions given other beverage cart operators, and Whitey's knowledge of the risk of being struck by an errant golf ball are all relevant considerations in determining whether her injury was reasonably foreseeable. As to public policy, the plaintiff urges that permitting negligence claims by persons not players or ticketed spectators would create a bright-line approach that would be convenient to administer, that Whitey's and the Elks have a better capacity to bear any loss and prevent future injuries, and that adults who organize and run golf events should be discouraged from putting unsupervised minors on a beverage cart without instructions on safety or golf etiquette. Acknowledging that the determination of duty is a question of law for the court, the plaintiff nevertheless argues that it depends on a full development of the underlying facts at trial.
Whitey's argues that there was “no relationship” between it and the plaintiff, and that, until after the injury occurred, “Whitey's did not even know that [the plaintiff] was on the golf course that day.” Whitey's challenges the plaintiff's assertion that it provided her with the beverage cart, arguing that the assertion is unsupported. Further urging that it had no knowledge of the plaintiff's presence on the golf course that day, Whitey's argues that it could not have foreseen the risk of injury to her. As to public policy, Whitey's argues that it bears no “moral blame” for the mishap and that finding a duty would create a potential for mass litigation and deter sports participation.
Upon several issues related to these arguments by Whitey's, the designated summary judgment materials favor the plaintiff or are not conclusive as to the issue of duty. Contrary to Whitey's claims that it had no knowledge of the plaintiff's presence at the outing, there is support for the fact that for three and one-half hours the plaintiff was driving the beverage cart accompanied by an adult woman who was or had been an employee of Whitey's and that the proprietor of Whitey's was personally present as a participating golfer. It is unclear from the designated materials whether the woman was at the time acting in the course of or within the scope of such employment. The plaintiff's presence on the golf course resulted from the actions of her grandfather who had signed up at Whitey's to work as a volunteer beverage cart driver for the Whitey's 31 Club Scramble. Because there exist insufficient undisputed facts as to issues of relationship and foreseeability, we find that the designated summary judgment materials are insufficient to establish the absence of any duty on the part of Whitey's.
If warranted by the designated materials, the elements of breach of duty and proximate cause, however, may provide alternative bases for granting summary judgment for Whitey's. An appellate court may affirm summary judgment if it is proper on any basis shown in the record.
The plaintiff claims that the breach of duty by Whitey's may be established by facts showing the failure to inform her of the usual safety instructions; the placement of her on a golf cart under dangerous conditions and in a windowless, roofless cart with an inadequately-trained employee; and the selection of the sixteen-year-old plaintiff to drive a beverage cart serving alcoholic beverages.
As to her claim of omitted safety instructions, the designated materials show that the plaintiff was not given the usual directive to operate the beverage cart only on cart paths, to drive in a direction always facing the approaching tee, and to protect herself if she hears a shout of “fore.” At the time the plaintiff was stuck by the golf ball, her beverage cart was proceeding on a cart path and facing in the direction of the eighteenth tee that she was approaching from its green, and she did not hear anyone shout “fore.” Thus, the absence of such instructions was not causally related to her injuries. This is likewise true as to her claim that the woman accompanying her lacked knowledge or instruction about how to respond in the event of a shout of “fore” because she also did not hear any such warning before the ball struck the plaintiff. Similarly, the issue of whether the beverage cart was used to distribute alcoholic beverages fails for a lack of proximate cause.
But, with respect to the plaintiff's claim that Whitey's, presumably through the conduct of her grandfather arguably as an agent of Whitey's, provided her with a windowless and roofless beverage cart, issues of fact exist that preclude summary judgment. There is a factual dispute regarding whether her cart was equipped with a roof. And while the deposition of the Elks's representative stated that roofs and windshields are used to shelter cart occupants from inclement weather, an assertion the plaintiff does not dispute, there are no facts that obviate the possibility that such equipment may also serve other safety functions and might have operated here to shield the plaintiff or deflect the errant drive. In addition, the designated materials do not sufficiently designate the precise location and angle of the beverage cart and the plaintiff's body with respect to the trajectory of the golf ball so as to prove that the plaintiff's injuries would have been inflicted even if the cart was equipped with an impervious windshield and/or roof. Finally, genuine issues of fact remain regarding whether the grandfather or the woman accompanying the plaintiff on the beverage cart were in sufficient relationship with Whitey's to vicariously impose upon Whitey's the legal responsibility for their permitting the plaintiff to use a windowless or roofless beverage cart.
Because the undisputed facts shown in the materials designated on summary judgment fail to conclusively establish a lack of duty on the part of Whitey's or the absence of a breach of duty or proximate cause, Whitey's is not entitled to summary judgment.
Motion for Summary Judgment by the Grandfather
To support his motion for summary judgment, the grandfather asserted to the trial court that the designated materials establish that he did not have a legal duty to warn his granddaughter about the inherent risks of driving the beverage cart during the golf event. On appeal, he additionally argues in the alternative that the plaintiff failed to timely present her claim of negligent supervision in the trial court, or that such claim cannot succeed because he owed no duty to the plaintiff as a golf participant or spectator, and that he had no duty to guard against every possible hazard or to serve as an insurer of her safety.
In the trial court, the plaintiff's written opposition to the grandfather's motion for summary judgment claimed negligence on the part of her grandfather because he brought a minor child who knew nothing about golf or golf course safety to work at a golf event, volunteered her to work on a beverage cart, failed to provide her with safety instructions, and allowed her to work on a cart serving alcoholic beverages. At argument during the trial court hearing on summary judgment, the plaintiff's counsel explicitly argued her claim of negligent supervision and provided supporting legal authority, although acknowledging that the claim “was something I didn't dwell on in my brief.” Her argument reflected facts shown in the designated evidence. We decline to find forfeiture against the plaintiff on the issue of negligent supervision.
With respect to the grandfather's claim of no duty, on appeal he seeks refuge both in the sports participant no-duty test of which we disapprove today, and in application of the Webb three-factor test. He minimizes their relationship, arguing that he “simply picked his granddaughter up to spend the afternoon with him at the golf tournament.” While not discussing foreseeability, he asserts that “public policy would not stand for” imposing liability on “any parent or grandparent who wants to attend a sporting event with a child/grandchild and a freak accident occurs.”
We find that the facts do not preclude the existence of a duty on the grandfather to exercise reasonable care in the supervision of the plaintiff. Negligent supervision involves the “well recognized duty in tort law that persons entrusted with children, or others whose characteristics make it likely that they may do somewhat unreasonable things, have a special responsibility recognized by the common law to supervise their charges.” [P]laintiff was explicitly entrusted to her grandfather's care and supervision by her mother.
As in our discussion with respect to Whitey's, we also consider whether the designated evidence forecloses the plaintiff's claim against her grandfather on grounds that he did not breach such duty of reasonable care or that there is an absence of proximate cause. While the mechanism of her injury, being struck by an errant golf ball, is not an unusual risk to adults on a golf course, a possible viable claim for breach of duty is nevertheless shown by the particular circumstances of the present case. The grandfather does not challenge the facts and inferences indicating that he was aware of the plaintiff's age, her lack of familiarity with golf, and particularly her lack of awareness of the risk of injury from wayward golf balls. The designated evidence does not establish that the plaintiff's mother was aware of and agreed to her daughter's exposure to such risks. As to the issue of breach of duty, whether it was reasonable for him to subject her to such risks depends upon genuine issues of fact for determination at trial.
Furthermore, the designated materials indicate that the grandfather selected and provided the plaintiff with the beverage cart without a windshield. Whether it was equipped with a roof is disputed. As discussed above with respect to Whitey's, there is no evidence regarding whether the lack of either a roof or windshield would have in fact shielded the plaintiff from the injuries caused by the golfer's errant drive. These are genuine issues of material fact that preclude us from finding the absence of breach of duty or proximate cause sufficient for summary judgment.
The grandfather is not entitled to summary judgment.
We reverse the summary judgment granted to Whitey's 31 Club, Inc. and to the estate of the grandfather, Jerry A. Jones. This cause is remanded for further proceedings.
1. Give a list of things you would do as a business if you were somehow sponsoring or associated with a golf tournament. For example, what would you require from those who will be attending or working at the tournament?
2. Why is the golf course owner (the Elks) entitled to summary judgment?
3. Why is the golfer who hit the ball entitled to summary judgment?
4. What factual issues require determination before the lower court can determine liability?
5. What would be the basis for holding Whitey’s 31 Club liable for the injuries from the golf ball?
Disney’s movie Up is a computer-animated comedy adventure film produced by Pixar/Disney. The story involves an elderly widower and a boy who together soar to South America attached to a house buoyed by countless balloons. The film won Golden Globe Awards forBest Animated Feature Film and Best Original Score, and was nominated for five Academy Awards including Best Picture.
In real life, a builder recently constructed a replica of the house. It had many of the identifying features including gabled roof, scalloped siding, coiled hose next to the porch, hardwood floors and wallpaper, and even the same knickknacks on a shelf. Normally Disney would not tolerate such use of one of its characters. Indeed, Disney is known for being stingy in this regard. How stingy? It denied the family of a deceased child the right to carve Winnie the Pooh into theyoungster’s gravestone until it was forced to relent in the face of much negative publicity. The reason Disney can restrict use of its characters is the law of copyrights, the exclusive right to copy creative works including cartoon characters. Copyright infringement is a tort consisting of use of someone else’s copyrighted work without the owner’ permission. If however the copyright owner consents to another’s use of the copyrighted work, such use is legal. A copyright owner can be as generous or restrictive with permission as it sees fit.
Given Disney’s track record, it is surprising that the company did not deny permission to construct a replica of the flying house. The builder had two passions in life - houses and animation, making UP a fascination for him. He was fortunate because he had a friend who worked at Disney and surprisingly, was able to finagle permission to build the house. The authorization Disney gave is for one house only. If another is built, that would constitute infringement. Also unusual, Disney also gave permission for the contractor to use the Disney name, logos and “Up” artwork. While the artwork would be protected by copyright, the company’s name and logo are protected by the law of trademarks. These are business names which an owner has the exclusive right to use. The tort of trademark infringement involves using another’s trademark without permission of the owner. Since the builder had permission to use the Disney name and logo, his use did not constitute infringement.
1) What is the policy reason behind copyright law?
2) Why do you think Disney only authorized the builder to make one replica of the house in the
3) What is the difference between matters protected by copyright and those protected by trademark?
Firms such as Cash America provide payday loans—relatively small loans made based on the promise of payment when the debtor gets the next pay check. The basic idea is that the loan helps tide over the borrower until the paycheck arrives.
Such loans have high interest rates if calculated on an annual percentage rate (APR) basis. A $100 loan may have a $15 fee for two weeks, which is 15% over the two weeks, but 390% APR. The reason, of course, is the paperwork cost of making a small loan, plus the risk of nonpayment. Self-described “consumer advocates” have long attacked payday loans as exploiting low income people, who tend to be the biggest user of payday loans. Some states ban such loans, others place severe restrictions on them.
Regular banks claim not to be in the payday loan business, as it is considered low class. But some, including U.S. Bancorp and Wells Fargo offer “direct-deposit advances.” Wells Fargo charges $1.50 every two weeks for every $20 borrowed. When the borrower gets a paycheck, banks get repaid and a fee. Of course, the loan can be extended. It is expensive credit, but that is made clear in the loan document and it is convenient credit for those with no good alternatives.
Direct-deposit advances have helped banks take business away from payday lenders, which have declines by 4,500 outlets from 2006 to 2010, when there were 19,700 outlets in states allowing that business.
Consumer groups have complained that the banks are evading regulations that apply to traditional payday lenders because their loans take a somewhat different legal form. The Office of the Comptroller of the Currency (OCC), which regulates national banks, is proposing its first regulations over the practice, contending that they “raise operational and credit risks.”
The Center for Responsible Lending says all such loans are “quicksand” for borrowers. The OCC and other bank regulators should do more to control such loans, not just insist on clear disclosure of loan terms to borrowers.
Question: If payday loans, or direct-deposit advances, were severely restricted, what alternatives exist for low-income consumers to receive small loans quickly?
“Use your time wisely.” So went the counsel from Navy officers to submariners who were on breaks during their exams. Translation according to crew members: Go look up the answers you don’t know. Other submariners were e-mailed answer keys and still others were permitted to ask their officers for help during the exams. The fleet of 70 Navy nuclear subs requires high levels of knowledge and analytical skills from the crew. The training is long, the terms are technical, and the exams are challenging. Following an investigation of cheating aboard the Memphis submarine, 10% of the crew were dismissed from the Memphis and the commanding officer relieved of duty. The Navy imposed various levels of sanctions, from dismissal from the Navy to reassignment.
Interestingly, a book written by a former Navy officer and published last year alleged widespread cheating in the Navy fleet because of “pressure” to meet higher performance goals on the exams and the increasing difficulty of those exams.
1. What effect does pressure have on you when you are completing papers or facing difficult exams?
2. What is the role of leaders in an organization in scandals such as these? Why do you think the commanding officer was dismissed if the investigation determined that he was not involved in the cheating processes?
3. Who is harmed by the submariners cheating on their exams?
4. What if the exams do not really test what the submariners actually need to know and use in operating the sub?
Gambling via the internet is currently illegal in this country. Nonetheless, in these times of budgetary distress, numerous state governments are viewing gambling proceeds as a relatively easy way to replenish dwindling coffers. Money would be generated from revenue-sharing between the operators of the gambling site and state governments, and also from taxes on players’ winnings.
In Business Law we encounter gambling in the chapter on illegal contracts. Gambling is based on a contract between the gambler and the casino or other entity organizing the game of chance. The consideration given by the gambler is typically money. The consideration given by the organizer is a chance to win a prize. To constitute gambling, the prize must be awarded by chance and not by skill or talent. An example of the latter is the TV show Idol which awards the title and prizes to the contestant judged to be the best performer . Thus, any entrance fee the contenders might have to pay would not constitute gambling.
An illegal contract is void. If gambling is illegal, the promise to pay the winner is unenforceable. In most localities gambling is illegal (other than Las Vegas, Nevada and Atlantic City, New Jersey). Some exceptions exist for state-run lotteries such as Lotto, Mega, and Power Ball., and in some states, racetrack casinos. Additionally, Native Americans tribes often run casinos on their reservations (land owned by tribes). They are able to do so because they are sovereign nations, meaning they have their own binding law which may or may not parallel that of the state in which the reservation is located. Most Native American law permits gambling.
Where gambling is illegal, it is also not permissible on the internet. In addition to state law prohibitions,
there is a federal law called the Wire Act of 1961 which bars wagering over most communication systems that cross state or national borders.
Arguments in favor of pursuing online gambling include, in addition to huge financial benefits ,job creation. Critics say online gambling will encourage addictive gambling and lead to the accumulation of much personal debt. To some, it is a business model built on addiction and indebtedness.
Another issue studied in Business Law is lobbying, the process of attempting to persuade legislators to vote either for or against a particular bill. Lobbying is a legal act provided money or other things of value are not exchanged for a vote. Native American tribes have started to lobby states to convince them to contract with Indian nations to address their casino plans rather than authorizing new companies to operate new gambling initiatives. Likewise, the nine existing racetrack casinos in New York State, which are authorized to offer slot machines but not the lucrative table games such as poker and craps, are lobbying the legislature to change the law to permit the full range of gaming.
Watch for developments in the law of gambling, both online and land-based.
1) Why do you think gambling is illegal in most places?
2) When lobbying, why is it illegal to exchange money for a vote?
3) If you were a state legislator and you were voting on a bill to legalize online gambling, how would you vote and why?
4) What is your view of the current state of the law with so many exceptions to the prohibition on gambling? If you were a legislator, what changes might you propose, if any?
Nicotine is a highly addictive drug, so it is hard to stop smoking. Nevertheless, the percent of the population that smokes has gradually fallen over time. As the level of education rises, the incidence of smoking falls, so smoking is concentrated among people with less education.
The government has long required warning labels on cigarettes and most advertising has been restricted since President Nixon signed legislation prohibiting much of it.
Wishing to further discourage smoking and thinking that the current warning by the Surgeon General that cigarettes are bad for your health are ignored, the FDA has a new rule, scheduled to go into effect in October 2012, that would require graphic color warnings such as those seen here. The warnings, such as “cigarettes cause cancer” and “smoking can kill you” along with the images must take up half of the front and back of the covers of cigarette boxes and be the top 20 percent of any advertising material.
Big tobacco is fighting back, asserting that the mandatory warnings violate the First Amendment as a form of forced speech. The companies assert that the new labels are not informative—everyone knows cigarettes cause health problems—but are intended to discourage consumption by disgust over the graphics on the products.
The companies also allege that the FDA is violating the Administrative Procedure Act by going beyond the authority the agency was granted in the Tobacco Control Act.
Stay tuned for the litigation.
Because of changes made to U.S. copyright laws in 1998, the music albums of artists such as Billy Joel, Bruce Springsteen, the Eagles, the Doobie Brothers, Donna Summer, and many more from 1978’s top musical acts may be up for copyright renegotiation. The recording industry has bene hit hard during the past decade with unauthorized downloading of music and the resulting loss in revenues. However, these renegotiation rights mean that the sales percentages the recording producers will have is likely to decrease because these established artists are likely to demand more of a percentage for themselves than they were able to negotiate when they were not well established, multi-decade successful acts.
Copyright laws have evolved in the United States since the time of the Constitution’s enumerated congressional power in Article I, Section 8, “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” Congress has been modifying the protections in response to concerns about relationships between authors and publishers (and the possible lack of bargaining power). The history below summaries what has happened under copyright laws:
1790 14 years, with the right to renew for another 14 years
1831 28 years, with the right to renew for another 14 years
1909 Copyrights lasted for 28 years; owners had the right to renegotiate their rights after 28 years for another 28 years (total of 56)
1976 Existing copyrights were extended for 19 years (which resulted in a total of 75 years’ protection for copyrights originally created under the 1909 Act: 56 (original) + 19 (extension) = 75 years)
New copyrights were given a new life of the author plus 50-year length
1992 Congress did away with the renewals rights of the 1909 law but added 47 years to the 1909 copyright laws (thus producing the 75 years granted in 1976)
1998 Sonny Bono Copyright Term Extension Act; Also known as the “Mickey Mouse Copyright Protection Act” because of extensive lobbying efforts by the Walt Disney Company in its efforts to retain its copyright on the founding character of the Disney empire; New copyrights (granted after the act took affect) run for life of the author plus 70 years: new corporate rights run for the earliest date of 120 years from the time of creation or 95 years from publication); copyrights granted in 1923 or later will not expire until 2019; Law reinstated renewal rights, which means that those who grant copyrights to others can terminate those agreements after 35/40 years (see below) and renegotiate their terms.
Those who have transferred their copyrighted works, such as writing and recording artists, can terminate their transfers of their copyrights if the original grant was made on or after January 1, 1978 and the grant meets the following qualifications:
1. The work was not a work for hire (as when an artist is paid to do a mural in a building)
2. The grant was made by the person claiming the right to termination and not by a group or company (there are different requirements for heirs who want to assert their decedents’ termination rights); and3. The copyright was not granted pursuant to a will (the assumption is that a transfer or gift at death does not include termination rights)
4. The termination rights are demanded in a timely manner.
The section of the law that applies is 17 U.S.C. § 203(a)(3), which provides:
Termination of the grant may be effected at any time during a period of five years beginning at the end of thirty-five years from the date of execution of the grant; or, if the grant covers the right of publication of the work, the period begins at the end of thirty-five years from the date of publication of the work under the grant or at the end of forty years from the date of execution of the grant, whichever term ends earlier.
So, what does this statute mean? Suppose that the singer/songwriter executed a copyright agreement/recording contract with a record producer in 1978. Suppose that the singer/songwriter’s album was released in 1979. So, the date of execution is 1978 and the date of publication is 1979.
1978 + 40 = 2018
1978 + 35 = 2013
So, the earliest date for termination would be 2013. So, all the 1978 agreements would be subject to termination rights in 2013. Further, the artist/singer can apply for termination rights as early as 2003 and as late as 2011. Because it is 2011, the termination rights are floating in and include requests from Bob Dylan, Tom Petty, Bryan Adams, Loretta Lynn, Kris Kristofferson, Tom Waits, and Charlie Daniels.
There are several questions that could require litigation and judicial review. For example, are record producers, session musicians, and engineers authors for purposes of termination rights? Another is the right of British musicians (Led Zeppelin, Rolling Stones, Pink Floyd, and Dire Straits) to exercise termination rights in the United States when their agreements were entered into in Britain.
1. Why the need for copyright protection?
2. Where do you think the Berne Convention fits in with the changes made by the U.S.?
3. What kind of contract would the artist have had that would allow early termination?
Facebook’s games are a big attraction to the incredibly popular site. The number of gamers is massive – exceeding 200 million monthly. This fact is not lost on Google Plus, sometimes called G+, a social networking service that launched on June 28, 2011. It seeks to compete with Facebook and claims to already have 25 million members (compare this figure with Facebook’s 750 million). G+t is now actively seeking a piece of the gaming action. It just launched a gaming platform to attract more people to its social network and compete directly with Facebook.
To entice game designers to its site, Google+ is offering them financial incentives greater than Facebook. Whereas the latter pockets 30% of a game’s revenues and gives developers 70%, Google+ retains just 5%, paying the developers 95%. Additionally, the number of games available through Facebook is large, making it difficult for designers to garner attention for their products. In contrast, in these early stages of Google+, the inventory is finite and notice easier to come by. These factors get the attention of the developers.
The most popular games on Facebook include CityVille, FarmVille, and Empires and Allies. These are not available on Google + and are believed to be subject to an exclusivity agreement with Facebook. This type of contract bars designers from selling their games elsewhere. Still, Google’s inventory includes games from top developers such as Dragon Age Legends by Electronic Arts, Bejeweled Blitz by PopCap Games, and Zynga Poker. Commented an industry analyst, “Google is going after Facebook seriously.”
In Business Law we study the tort of wrongful interference with a business relationship. It outlaws predatory behavior that targets a competitor’s customers and is pursued with the intention of unlawfully driving a competitor completely out of business. For example, it would be illegal for one company to assign an employee to stand at a competitor’s entrance and redirect the customers to the intruding company.
Contrast that conduct with competitive practices directed to all potential customers. Remember that competition is generally a legal activity and encouraged by our economic and legal systems . Only when it is aggressive, targeted and predatory is it illegal.
The competition for Google+ and Facebook to grow their social network and attract new members is fierce. Nonetheless, competition among them, within limits, is a legal activity. Google+ recognized a popular activity able to cultivate members (gaming) and is pursuing it. Google+ is not communicating directly with Facebook’s members nor is it targeting Facebook’s customers but rather the entire potential market for social networks and gaming. This does not constitute wrongful interference with a business relationship.
Another tort we study is wrongful interference with a contractual relationship. This tort has three elements : 1) the existence of a valid contract between two parties; 2) a third party is aware of that contract; and 3) the third party intentionally induces one party to breach the contract. Concerning the relationship between the social networks and game developers, while the first two elements are present (some designers have exclusive contract with Facebook and G+ knows that), Google has not encouraged them to break those contracts and bring those games to Google Plus. Therefore the tort of wrongful interference with a contractual relationship is not implicated here.
So Google+ and gamers, play on!
Nicholas Spaeth has what would seem to be a most accomplished career in law. He graduated magna *** laude from Stanford and was a Rhodes Scholar at Oxford, where he earned a Masters. He then returned to Stanford for his law degree where he graduated at the top of his class and went on to clerk for the 8th Circuit Court of Appeals and then the Supreme Court. For the next six years he was with two law firms and then was elected Attorney General of North Dakota twice. After that, he returned to practice before becoming senior in house counsel at GE and other firms. He has numerous scholarly publications and has argued cases before the Supreme Court.
Deciding to take his experience to the classroom, for 2010-2011 he served as a visiting professor at the University of Missouri School of Law and applied for a regular faculty position at various law schools for the 2011 school year. No one was interested.
Contending that the lack of interest is because of his age, 61, he has filed an age discrimination suit against the Michigan State College of Law. He was not even one of the 24 people interviewed, let alone hired. His complaint contends that the three persons hired by Michigan State, all much younger, have inferior qualification.
Spaeth filed age discrimination complaints with the EEOC against 100 other law schools that also ignored his application to be considered for a faculty position and says more age discrimination suits will be filed.
Dodd-Frank required the SEC (15 U.S.C. Section 78u) and the Commodities Futures Trading Commission (CFTC) to develop new rules for whistleblower protection. As the two agencies began their task of outlining the appropriate steps for whistleblowers in light of the new and substantial recovery provisions for those whistleblowers under Dodd-Frank, they were faced with strong push-back from both the National Whistleblowers Association and companies as well as the complexity of statutory interpretation in a court case that confused everyone.
In Egan v. TradingScreen, Inc., 2011 WL 1672066 (S.D.N.Y.), the court dealt with an issue of a whistleblower who was fired after raising an issue that turned out to be a problem for the company. In early 2009, Patrick Egan worked at TradingScreen, Inc., a financial software business that provides hedge funds, asset managers, private bankers, and high net-worth individuals with software that helps them conduct trades on the internet. Philippe Buhannic is Chief Executive Officer of TradingScreen, Inc. Egan had been hired on August 6, 2003 with the right to participate in company benefit plans, including its Executive Stock Incentive Plan. He was awarded stock options on April 1, 2005, April 1, 2006, and March 1, 2007. In 2007 Egan was promoted to Head of Sales for the Americas. On April 1, 2009, and March 2, 2010, Egan was granted shares of restricted common stock in TradingScreen, totaling 67,280 shares.
In early 2009, Egan learned that Buhannic was diverting TradingScreen's corporate assets to another company which he solely owned, SpreadZero, which offered products and services similar to those of TradingScreen. Egan felt that Buhannic was using TradingScreen employees to do unpaid work for SpreadZero, cannibalizing TradingScreen's customer lists, and invoicing SpreadZero at below-market rates for various services. By late 2009, Egan concluded that Buhannic's behavior was costing TradingScreen hundreds of thousands of dollars and posing a threat to the existence of TradingScreen's business.
In January 2010, Egan reported Buhannic's behavior to the President of TradingScreen, Michael Chin, who passed the information to those members of TradingScreen's Board of Directors who were not controlled by Buhannic (the “Independent Directors”). The Independent Directors hired the law firm of Latham & Watkins LLP to conduct an internal investigation. In March 2010, Latham issued a report confirming Egan's allegations. On March 12, 2010, the Independent Directors informed Buhannic that he would have to resign, but on March 15 Buhannic gained control of the Board and thereby prevented the Independent Directors from forcing his resignation. On March 19, David Roscoe and Piero Grandi, two of the Independent Directors, sent Egan an email assuring him that he would not be fired without the approval of the Board of Directors. Buhannic fired Chin on June 2, 2010 and fired Egan on August 2, 2010, without first informing the Board. Buhannic told Egan that he would not receive TradingScreen's customary severance package of one month's pay for every year worked, here totaling $110,833, or the opportunity to cash out his stock options, which Egan values at approximately $850,000.
The question in the case was whether the plain text of Dodd-Frank requires that a whistleblower report to the SEC in order to invoke the anti-retaliation provisions of the Act. The Dodd–Frank Act defines a whistleblower making disclosures under the SEC's jurisdiction as follows: “The term ‘whistleblower’ means any individual who provides, or 2 or more individuals acting jointly who provide, information relating to a violation of the securities laws to the Commission, in a manner established, by rule or regulation, by the Commission.” Egan argued that such a plain reading of the statute would undermine its purpose in encouraging employees to come forward with information in their companies. Egan’s case is what is known as one that involves “an issue of first impression in the federal courts.” No court had yet interpreted Dodd-Frank’s requirements for whistleblowers.
The court held that the statute was clear and that employees must first report to the SEC. However, the court did not throw out his case all together. The court held that Mr. Egan could amend his complaint to allege that through his reporting to the company and through the Latham & Watkins lawyers, who then disclosed the issues to the SEC, meant that he had done what was required under Dodd-Frank so as to invoke his right to collect the rewards provided for under the act for employees who report financial misconduct within their companies.
Faced with this decision, the SEC and the CFTC took comments on their proposed rules. The comments were emotional and divided into two camps. From companies, corporate counsel organizations, and law firms, the two commissions heard that requiring employees to go to the regulator first deprives them of the opportunity to stop conduct and that such a requirement would defeat the purpose of compliance and reporting systems within companies that have taken many years and much money to develop and render effective. Organizations and law firms representing employees argued that internal reporting requirements jeopardize careers and that many times such internal reporting is ineffective and only postpones the need for internal action and reforms.
The end results (see a video of the SEC chairman's statement on the rules) under both commissions’ final rules are as follows:
1. Employees are NOT required to first report internally.
2. A whistleblower’s voluntary participation in an entity’s internal compliance and reporting systems is a factor that can increase the amount of an award.
3. A whistleblower’s interference with internal compliance and reporting is a
factor that can decrease the amount of an award.
4. A whistleblower can receive an award for reporting original information to an entity’s internal compliance and reporting systems, if the entity reports information to the SEC or CFTC that leads to a successful regulatory action. Under this part of the rule, all the information provided by the entity to the Commission will be attributed to the whistleblower, which means that the whistleblower will get credit -- and potentially a greater award -- for any additional
information generated by the company in its investigation.
5. The final rule extends the time for a whistleblower to report to the SEC or CFTC after first reporting internally and still be treated as if he or she had reported at the earlier reporting date. The proposed rules originally had a “lookback period” of 90 days after the whistleblower’s internal report, but in response to comments, this period was extended to 120 days in the final rules.
6. Some employees are excluded from recovery for reporting such as the compliance folks in organizations who gather the information on wrongdoing.
1. Discuss how the original proposed rules were modified. In other words, explain the administrative process that resulted in the final rules with modifications.
2. Why are companies worried about employees going directly to government agencies and collecting a reward for doing so?
3. Why are employees worried about having to report these financials issues to their employer first before going to a government agency?
4. Is there still a risk an employee could be fired?
5. Why do the final rules give employees greater rewards for reporting to their companies first?
6. Why do the final rules take away rewards to employees who delay reporting problems?
7. What could the directors in the Egan case have done differently to ease the steps Egan took to help the company?
One of the many roles of the Securities and Exchange Commission is monitoring stockbrokers and investment advisors, people who assist others in buying and selling stocks and other investments. Such positions are career possibilities for students with an interest in finance and investments.
To work as a stockbroker or investment adviser requires a license which is issued by the Securities and Exchange Commission. To qualify requires a certain level of education about investments and relevant laws and rules, plus passage of an exam.
One of those rules requires that brokers ensure that investments they sell are suitable to the buyer. This means that the risk associated with the investment must be disclosed to the buyer and must be generally consistent with the buyer’s investment strategy, risk-tolerance, and financial resources. This rule acknowledges that many investors are neither knowledgeable about the stock market nor interested in doing their own research on particular investments. Instead, they rely on their broker or advisor. Therefore the broker or advisor must inquire about the customer’s financial situation, goals, resources, and investment experience, and inform the investor about the risks involved.
The rule also recognizes that some stocks and investments are riskier and therefore more likely to result in a loss than others. The reasons for the variances are due to many factors including: the demand for the product or service offered by the company; market factors such as a recession, terrorist attack, or natural disaster; and the competency of the company’s managers.
The SEC is currently accusing a brokerage firm named Stifel Nicolaus, located in St. Louis, Missouri, of violating the suitability rule. Five school districts in Wisconsin invested a total of $200,000 of education funds in a risky investment. The unfortunate outcome was that the entire $200,000 was lost. This resulted even though representatives of the districts had informed the brokerage house that their investment goals were conservative (meaning they prefer investments where their principal is at little or no risk, even at the expense of earning lower returns) , and they were risk-adverse. Given that the districts’ mission is to provide quality education to students at a time when funding is tight, such an investment strategy is wise and predictable. The brokers should have known it and matched the investment recommendations to it. Instead, the court papers allege that the investment was complex and risky, and thus not suitable. Additionally the complaint alleges that the brokers told the district representatives that the investment was safe when in fact it was known to be otherwise.
This is not the only recent case based on unsuitability. Both Goldman Sachs and JP Morgan, two big brokerage firms, recently paid large penalties for misleading buyers about the riskiness of investments. Indeed in 2010 Goldman Sachs paid $550,000,000, the largest penalty against a Wall Street firm in SEC history.
When Kindle, the e-book reader from Amazon, was introduced, it was a huge seller. E-books now often outsell traditional print books.
Amazon had a $9.99 price policy for the e-books it sold. Some publishers refused to lower their prices, charging the same for electronic files as they did for hard copy, despite the e-version being less costly. Amazon often ate the loss on the difference between its $9.99 price and the higher price they had to pay the publisher. The low price for consumers helped spur Kindle sales and Amazon may have figured that as e-books came to dominate, publishers would cut their prices.
The publishers were not happy with Amazon and it was forced to retreat and raise prices. The e-book version sometimes costs more than the print version.
The publishers are under attack by the European Commission, which states that it “has reason to believe that the companies concerned may have violated EU anti-trust rules that prohibit cartels and other restrictive business practices.” Similarly, the UK’s Office of Fair Trading is looking into whether agreements between certain publishers and retailers such as Apple “may breach competition law.”
A U.S. firm, Hagens Berman, has now filed a class action suit (see statement and link to filing here) in federal court in San Francisco against five major book sellers and Apple. Plaintiff states that “We intend to prove that Apple needed a way to neutralize Amazon’s Kindle before its popularity could challenge the upcoming introduction of the iPad, a device Apple intended to compete as an e-reader.”
The suit notes that the publishers adopted an “agency model” arrangement with Apple, by which it would act as an agent for publishers, accepting their prices and simply taking a cut of the revenue in a 70/30 deal. The purpose, it is claimed, is to force up e-book prices above the $9.99 model tried by Amazon.
A tattoo-parlor owner must pay for unemployment insurance. He cannot claim that tattooing his part of his ministry, the Utah Court of Appeals ruled.
Gregory Lowrey had challenged the Utah Department of Workforce Services Appeals Board's decision that former employee Jacklyn Johnson's wages were subject to unemployment insurance. Lowrey, owner of Happy Valley Tattoo, argued that the business was part of his church, UBU Ministries, which includes tattooing among its religious beliefs.
An administrative law judge did not agree, and neither did the appeals board. Lowrey asserted that Johnson was an employee of UBU and was fired for just cause. The Court of Appeals said Lowrey failed to prove that UBU qualified as an exempt religious organization.
About one in five homeowners belong to one of 300,000 homeowners’ associations around the country. Due to the collapse of the real estate market, and the downturn in the economy in general, many of the associations face the problem because more homeowners than usual are not making their association payments.
The Inlet House is a condo complex in Fort Pierce, Florida. Many of the owners are retired. It is a modest place, where condos sold for about $80,000 when the market was doing well. It had a nice pool and well-kept grounds for the owners. When the market collapsed, some owners deserted their condos. Some were sold in bankruptcy for as a little as $3,000. As the number of paying owners dropped, the association was in trouble. Empty units caused major maintenance problems that require costly work.
The association levied a $6,000 assessment on all owners to cover the added maintenance. Many owners are retired, living on modest pensions, and cannot afford the extra assessment. They were not behind on their payments. But, the association can foreclose on condo owners who do not pay up. The managers of the association say they must act or the whole complex will become unlivable.
When owners do not make their contributions to their associations, they may lose all rights to common areas, have utilities cut, income garnished, and even face foreclosure on their property.
Homeowners who bought in an area with an association knew they would be making monthly payments, but did not budget for the bigger payment that would be needed if there are many delinquent homeowners and empty units. The paying homeowners get stuck with the bill caused by the non-payers.
Question: Is there any way to head off this kind of problem before it becomes so costly?
Of the 1000’s who sadly died on 9/11/2001 when terrorists hijacked planes and drove them into the World Trade Center Towers and the Pentagon, only one family has refused to settle their legal claims. Mark Bevis died on Flight 175, the second plane to hit the World Trade Center. His mother and siblings claim gross negligence by United Airlines and a security firm that had been hired to run the checkpoint where the hijackers boarded the flight – Logan International Airport in Boston. According to family members, United ignored government warnings about terrorist threats, and the security company did not adequately screen. Both defendants deny the allegations.
In the lawsuit plaintiffs seek damages for wrongful death as well as pain and suffering for the “21 minutes of terror” experienced by the passengers before their death. The “sheer terror” has been captured in various calls made from the plane to loved ones on the ground. The information gleaned includes that the hijackers used pepper spray and knives; both pilots were killed; a flight attendant was stabbed; passengers were throwing up and getting sick, and said one man to his father, “I think we are going down.”
Pain and suffering is an element of damages that compensates for mental and/or physical distress a person endures as a result of another’s negligence. Clearly the angst experienced by the passengers in the period prior to the plane hitting the tower was horrific.
Some states’ law limits compensation for mental pain and suffering to circumstances where the anguish accompanies a physical injury. The defendants’ lawyers argued such was the status of the law in Massachusetts where the case will be tried in November. Their position is that since the physical injury, which was death, was instantaneous once the plane collided with the tower, there was no mental anguish for which the law permits compensation. In a pretrial decision on this issue, the judge rejected the position of the airline and security firm.
The trial will lay bare additional details about the occurrences inside the plane’s cabin following the hijacking. It will no doubt make for very difficult observing.
+ + + + + + + + + + + + + + + + +
1) Why might the law permit compensation for mental pain and suffering independent of a physical injury?
2) Before any damages can be awarded, what must the jury decide?
3) How might a jury go about calculating an appropriate amount of damages in this case?
4) Why do you think all the other families chose to settle their cases? Why do you think the Bavis family chose to persevere with the lawsuit?
Martin Resendiz, the mayor of Sunland Park, New Mexico, a border town, signed 9 contracts with the California architectural design firm, Synthesis + sometime in May or June 2008. If the ambiguity on the date of the contract signing seems odd, well, there is an explanation. Mayor Resendiz has claimed in a deposition, taken in June 2010 as part of a suit filed by Synthesis+ against Sunland Park to collect $1,000,000 under the contracts, that he was drunk at the time he signed the contracts and that the town cannot be held liable for payment.
In the deposition, the good mayor said, “The day I signed, . I had way too much to drink. It was after 5 p.m. and I signed it (the contracts) and I didn’t know what I was signing.” He added that he was too drunk to drive and that his sister had to pick him up after he signed the agreements. Also, Sunland Park’s City Council has declared that it never approved the signed contracts and that, therefore, they are not valid with just the mayor’s signature.
The story that unfolds through the mayor’s deposition and that of City Councilman, Daniel Salinas, who was also present at the time of the signing, is a fascinating one when it comes to contract defenses. The two had engaged in several hours of drinking with executives from Synthesis+ at Ardovino’s Desert Crossing, an Italian restaurant in Sunland Park.
The mayor testified, “Again, this was after two or three hours of us drinking, not exactly the best time to do business, not exactly the best time to read over legal documents, which he (Daniel Soltero, an executive with ) did not portray at any time to be legal documents.” Councilman Salinas testified that he was at the restaurant meeting and signing and that he was also inebriated. No one is clear who paid for the trip to the restaurant.
Synthesis+ maintains that the contracts were signed in July 2008 at the Sunland Park city hall, that the mayor was sober, and that it is owed money for work performed even if the contract is voidable.
The information about the deposition came to light when Sunland Park’s contract attorney disclosed the information to the city manager. The mayor tried to have the city manager fired, but termination required council approval, something that the council was not ready to do given the mayor’s conduct and the suit by Synthesis+.
1. How drunk would the mayor have to be to have a capacity defense? Are there facts that indicate he may meet that standard?
2. Why is the issue of council approval important for purposes of determining whether there is a valid contract?
3. Would it matter if there was a valid contract if Synthesis+ has been doing work and council members are aware of the work?
4. What protections would the city manager have if he had been fired for disclosing the information about the suit and deposition?
The bad economy had meant many bankruptcies and, even if someone is not in bankruptcy, a failure to make mortgage payments, leading to foreclosure. Bank of America is based in North Carolina. It foreclosed on a home in Florida, claiming that the homeowners were delinquent on their mortgage.
Problem is, the homeowners never had a mortgage on the home—they paid cash for it. They had no relationship at all with Bank of America. They went to court to prove they owned nothing; the judge ordered the bank to pay the legal fees of the homeowners as the attempted foreclosure was wrongful.
Bank of America never paid the fees despite being hounded for five months. The homeowners returned to court and asked to seize bank assets. The judge ordered the sheriff to foreclose on a local branch of Bank of America. Movers were instructed to remove desks, copiers, computers, and any cash in the tellers’ drawers.
After being locked out of the bank for about an hour, the bank manager produced a check for the legal fees so as to regain possession.
The defense attorney said “sweet justice.”
Faye Dunaway is facing eviction proceedings on her New York City apartment, but Ms. Dunaway is headed to court with her side of the story. Ms. Dunaway had a one-bedroom walk-up apartment that she leased for $1,048.72 per month, an amount she was charged because of rent stabilization. However, the rent stabilization program requires that in order to receive the lower-than-market rent, the tenant must live in the apartment as a primary residence. Ms. Dunaway lives in California, ergo, her landlord has filed to have her evicted.
Ms. Dunaway says, however, that she moved out of the apartment because it was filled with bugs and because the landlord would not paint it despite her repeated requests. Nonetheless, Ms. Dunaway has not turned over her keys and has staged a media battle against her landlord, who she calls a “slum lord.” Her landlord has said that Ms. Dunaway’s comments should be taken with a grain of salt because her “Mommie Dearest” character is surfacing.
Her landlord indicates that he cannot remove her things until she is evicted. “I don’t have legal possession.” Ms. Dunaway says on a voice mail to her landlord that she will turn over the keys and added one more thing, “I hope you have a terrible life.”
1. Describe when a landlord has access to a tenant’s apartment.
2. When could a landlord remove a tenant’s personal property?
3. Why does Ms. Dunaway bring up the bugs in response to the eviction?
4. If Ms. Dunaway turns over the keys is the lease over? Can the landlord enter the apartment legally? What should he do with any personal property left there by Ms. Dunaway?
 Christine Haughney, “Actress Says She Can’t Be Evicted Because She Moved Out,” New York Times, August 4, 2011, p. A19.
Central Falls has a place in U.S. history books – the tiny Rhode Island town will stand among a handful of municipalities that have been forced into Chapter 9 bankruptcy. Vallejo, California has been in Chapter 9 bankruptcy for 3 years. Chapter 9 is an arduous process that requires balancing which stakeholders (bondholders, pension beneficiaries) will get how much. However, the handful of government entity bankruptcies may expand shortly as Jefferson County, Alabama and Harrisburg, Pennsylvania contemplate a similar fate.
Most of us are familiar with Chapters 7, 11, and 13 bankruptcies, but we do not often study Chapter 9 – bankruptcies for cities, towns, and counties (i.e., government entities). We don’t study Chapter 9 precisely because it is so rare. However, that rarity is changing because so many municipalities are under water. That is, they have pension and bond obligations that they can no longer continue to pay.
Central Falls, for example, with its mere 19,000 residents, owes $80 million in unfunded pension obligations. It runs a deficit of $5 million annually. Harrisburg suffers from similar pension issues, and Jefferson County has bond obligations from public works projects that were subject to excessive cost overruns because of corruption in the awarding and performance of the construction contracts.
Rhode Island has passed a statute that puts obligations to bondholders above all other creditors. That statute, which will be part of the Chapter 9 proceeding, is a public policy call designed to ensure market faith in Rhode Island bonds, something that provides the state, cities, and towns with the ability to raise money in the future. However, this priority ranking also means that pensioners have less priority and will have their pension benefits cut through the Chapter 9 proceedings.
Once these priorities and payments are made, Central Falls will be able to emerge from bankruptcy with a clean slate.
1. Is Chapter 9 a form of reorganization, similar to Chapter 11?
2. Why are state statutes controlling in a Chapter 9 bankruptcy?
3. What advice would you give to pension holders in other states, cities, and towns were there is an underfunding situation?
Our law requires that all people be on relatively equal footing when deciding whether to buy or sell stock. Some people have information about events in the life of a corporation that is not yet available to the general public. That information may be such that it impacts the value of the company’s stock, either positively or negatively. Such information is called inside information. Those with access to inside information typically include officers, directors, lawyers, and accountants (“insiders”) plus their tippees, that is the people who the insiders tell or “tip off”. Since the public does not have access to the knowledge, the law prohibits the insiders from trading on inside information until it is made available to the public. Violations of the insider trading laws can result in criminal liability and a prison term.
Playboy Magazine is well-known for its photos of nude women. Its founding chief executive was Hugh Hefner, followed by his daughter Christie. The Securities and Exchange Commission filed a complaint yesterday against her husband, William A. Marovitz,a former Illinois state senator, alleging insider trading in Playboy stock. According to the complaint Marovitz obtained information from his wife, deeming him a tippee. She, along with the general counsel of Playboy, allegedly warned him against buying or selling the company’s stock. The specific allegations are that he sold stock prior to public announcements of negative earnings, and bought stock prior to Playboy’s potential acquisition of Iconix Brand Group. That company “owns a diversified portfolio of fashion and home brands” including Candie’s, Joe Boxer, Bongo, London Fog, Danskin, Rocawear, and Material Girl.
1) What is the purpose of the insider trading law? Based on this case, does the law appear to fulfill that purpose?
2) What do you think prompted the rule prohibiting tippees from trading on inside information?
3) Spouses, roommates and children are classic tippees. Why is this?
The parent company of Dunkin Donuts and Baskin Robbins made an IPO – Initial public offering – of new stock on July 27th. The sale was an immediate success with the price of the stock selling at well above the initial asking price.
What drives investors to purchase stock? One thing is familiarity with the brand. Who does not know Dunkin’ Donuts.? For many, it’s their favorite place to grab a cup of joe, or a Coolatta, or a breakfast sandwich. The business is known and liked by the public. Baskin Robbins too offers a well-received product.
Investors also consider future plans and profit potential of the company. While Dunkin Donuts is strong in the east, the number of stores in the west is relatively small. The company’s plans for the proceeds of the stock sale include increasing significantly the number of stores in currently uncharted territory, suggesting to investors enhanced profit potential.
Investors should not and need not make decisions based only on their limited connections with the company. Rather, before a business can sell stock, it must prepare a prospectus and file it with the Security and Exchange Commission, the federal agency that oversees the sale of stocks and bonds. The prospectus is a disclosure document and must be available to all buyers. In it the company is required to reveal much information about itself. Indeed, the purpose of the prospectus is to instruct interested investors on the circumstances of the company and the risks it faces.
Specific items of information mandated to be in a prospectus include objectives of the company, its future plans, the risks and competition in the industry, financial statements, information about the directors and officers including their background, experience and pay, and identity of the auditors. Among the risks Dunkin Donut faces is fierce competition from McDonald’s and Starbucks for coffee and related snacks. Both other companies are aggressively positioning themselves to retain and increase their market shares.
False information in a prospectus has the potential to mislead investors and is grounds for criminal penalties, including jail, for those with a hand in any inaccurate disclosures – be they officers, directors, accountants, lawyers or others. Rights of investors in this regard were strengthened in 2002 with the Sarbanes Oxley Act, also known as the Public Company Accounting Reform and Investor Protection Act.