Two recent court decisions dealing with mandatory arbitration agreements highlight why some manufacturers may gain by requiring pre-dispute employment arbitration agreements, writes Matthew Miklave for the Robinson+Cole Manufacturing Law Blog.

He discusses two federal court rulings favoring individual arbitration over litigation.

In one of the cases, the Second Circuit Court of Appeals reversed a lower court and found that a union labor contract which contained a clause requiring the arbitration of all disputes between the union represented employees and the employer prevented an employee from bringing an individual claim in federal court.

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In its Contract Corner feature, Morgan Lewis highlights considerations for drafting sublicense provisions in the context of an intellectual property license.

“A sublicense in the context of an IP license is any agreement where the licensee grants a third party rights to any of the licensed IP,” the article explains. “This provision is often overly broad, but can be tailored to include standard exceptions (e.g., ordinary course agreements with End Users, distributors, etc.) in order to avoid an overly broad definition and to make sure that the royalty calculations are clear.”

Authors Emily R. Lowe and Morgan Oksana Dudkewitz discuss sublicensing approval, compensation, termination, flow down, document control, and licensor-imposed sublicensing.

Read the article.

Periodic review and maintenance of noncompetition and other restrictive covenants agreements is crucial to ensure employers get the maximum available legal protection from theft of their customer base and business opportunity, employee talent and confidential information, advises Akin Gump Strauss Hauer & Feld in a website post.

The article summarizes some of the recent and noteworthy state statutes concerning such agreements.

The article adds: “Even in states where there has been no statutory activity, changes in an employee’s job or the underlying competitive landscape can affect the scope of enforceability of noncompete agreements. Post-employment restrictions on working for a competitor or soliciting former co-workers or customers are contracts that must satisfy the usual elements of an enforceable agreement, including a valid offer, acceptance of the offer and consideration to support the parties’ agreement.”

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The Eighth Circuit recently ruled that an employee was not subject to the employer’s arbitration agreement, including a delegation clause. The agreement was contained in an employment handbook addendum, which was available to the employee electronically.

Henry Allen Blair, writing for Arbitration Nation, discusses the case in a post about the ruling in Shockley v. PrimeLending.

Blair cites the court’s opinion, which states that “[w]e are aware of no legal authority holding that an employee’s general knowledge or awareness of the existence of a contract constitutes the positive and unambiguous unequivocal acceptance required under Missouri law.”

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Every real estate and construction contract contains a list of insurance requirements identifying specific types and amounts of coverage for one or both parties, but too often these requirements are included in a form exhibit that is attached to contracts year after year, project after project, without careful review.

In a new website post, Lyndon Bittle of Carrington Coleman discusses  “traps for the unwary” lurking in construction contract insurance requirements, focusing on the ubiquitous commercial general liability policy.

Many of the traps pop up in connection with making one party an additional insured on the other party’s liability policies, Bittle writes. “One deceptively problematic provision is a requirement that the owner be ‘named an additional insured,’ without further details. That request conveys almost nothing.”

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Some companies, hoping to prevent negative online consumer reviews, include clauses in form contracts stating that bad reviews are prohibited and punishable by fines. However, the Federal Trade Commission seeks to protect U.S. consumers and ensure fair competition and business practices, according to a post on the website of Ryley Carlock & Applewhite.

The FTC’s Consumer Review Fairness Act states that such gas clauses  are illegal and void in form contracts.

Companies should treat such gag clauses in past contracts as void, and essentially should ignore negative reviews from a relatively few consumers, the authors advise.

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The ABA Journal reports that a lawyer who sued Monster Energy in the cardiac death of a teenager can be sued for allegedly violating a confidentiality clause that was part of the case settlement.

The California Supreme Court has ruled that Monster Energy could sue Bruce Schechter and his firm, the R. Rex Parris Law Firm, based on language in the agreement that could be construed to bind the attorneys, reports the Journal‘s Debra Cassens Weiss.

Schecter argued that he and the firm weren’t bound by the confidentiality clause because he signed the agreement under the preprinted notation “approved as to form and content.” Schechter said the notation meant he was approving the agreement only for his clients’ signatures.

Read the ABA Journal article.

A contract with an express end date means what it says, writes Glenn D. West for the Global Private Equity Watch of Weil, Gotshal & Manges.

“The end date for a contract without an express end date, or one that purports to continue indefinitely, or even forever, may in fact be subject to early termination, or have an implied end date, depending on the particular approach of the courts of the state governing that particular contract,” he adds.

He discusses a recent Minnesota Supreme Court decision, Glacial Plains Cooperative v. Chippewa Valley Ethanol Co., LLLP, in which the court held that a long-term agreement to supply grain to an ethanol plant, which did not otherwise contain an end date, did “not unambiguously express an intent to form a contract of perpetual duration, and [was] thus a contract of indefinite duration [that] . . . is terminable at will upon reasonable notice once a reasonable time has passed.”

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The overwhelming majority of contracts and purchase orders are fulfilled without a major issue, but contractual limitation on liability can have significant impact for a business, warns Glen W. Price of Best Best & Krieger.

He discusses the two types of limitation of liability.

“The first limitation is on the type of damages you can claim if there is a breach of contract. The most common damages to be waived or limited in contracts are indirect or consequential damages and lost profits,” Price writes.

The second type of limitation on liability he discusses is a dollar limitation or cap.

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Jeffrey Neuburger of Proskauer writes that two recent web scraping disputes highlight some important issues regarding whether a website owner may successfully allege a breach of contract action against a commercial party that has scraped website content contrary to “clickwrap” and “browsewrap” website terms of use.

Writing in the New Media and Technology Law Blog, West describes a Texas case in which a court declined to dismiss Southwest Airlines Co.’s breach of contract claim against an entity that scraped airfare data from Southwest’s site in violation of the website terms of use.

He also discusses a similar case in the Southern District of New York, in which the court granted the plaintiff’s request for a default judgment on some scraping-related claims.

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Delta Air Lines scored a victory when a California federal court granted the company’s motion to dismiss a putative class action based on a data breach, primarily by arguing that its publicly posted privacy policy is not a contract and Delta did not have any enforceable obligation to keep the plaintiff’s data secure, reports Manatt, Phelps & Phillips.

A Delta passenger sought to represent a nationwide class of consumers alleging breach of contract after the airline suffered a data breach, explains Jesse M. Brody.

The court found that the plaintiff could not assert a breach of contract based on Delta’s privacy policy, because it expressly disclaimed that it constitutes a contract, stating, “This Privacy Policy is not a contract and does not create any legal rights or obligations.”

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The Supreme Court of Texas delivered a reminder that when drafting contracts, you should say what you mean and mean what you say, and reliance on oral representations directly contrary to the terms of a written agreement between sophisticated parties is not justifiable, reports Carrington Coleman Sloman & Blumenthal’s Sua Sponte blog.

Derrick Ward explains that the case considered a farmout contract between Barrow-Shaver Resources Company and Carrizo Oil & Gas for Barrow-Shaver to build a well on a lease held by Carrizo in exchange for an interest in the mineral rights. When Barrow-Shaver raised  concerns about the consent-to-assign provision and sought to add language that would prohibit Carrizo from withholding consent unreasonably, Carrizo’s representative allegedly offered assurances that Carrizo would work cooperatively if the assignment became an issue.

When it became an issue, litigation resulted. The court ultimately concluded the consent-to-assign provision “unambiguously allowed Carrizo to refuse its consent for any reason,” Carrizo’s refusal to consent to the assignment could not constitute a breach of contract as a matter of law.

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Although the United States does not have a uniform set of privacy laws and regulations for websites, it is still important to understand the current legal landscape when creating or updating a privacy policy, including the specific jurisdictions, types of data, or industries that apply to the company, warns a post by Morgan Lewis.

Writing in the firm’s Tech & Sourcing blog, Peter M. Watt-Morse and Valerie A. Gross caution that “failing to be aware of laws and regulations pertinent to your particular industry and business and ultimately implementing inaccurate or misleading privacy policies could expose your company to liability from regulatory and legal actions.”

In the article, they list some items that should be covered in a company’s privacy policy.

Read the article.

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A Brouse McDowell Insurance Blog post discusses the drafting of insurance requirements in a contract to ensure that, in the event of a loss arising out of the work performed, parties will have assets available for that loss.

“If you are the general contractor, or you are hiring subcontractors or vendors, there are several things you need to know,” writes Stacy RC Berliner.

Topics discussed include: specify the right policies and limits to be procured, get endorsed as an additional insured, make sure the other’s policy is primary and non-contributory, specify maximum deductibles and self-insured retentions, and verification.

Read the article.

A post on the website of Allen Matkins offers five strategies for real estate buyers to increase their leverage when dealing with a seller who requires a sign-and-go-hard transaction.

Such an agreement means the buyer must commit its deposit upon execution of a purchase agreement, without the opportunity to reclaim such investment if it discovers an undesirable condition after opening escrow, explain the authors, Alain M. R’bibo and Shannon I. Snell.

They discuss strategies that involve early access agreements, seller representations, carving out title and survey from the diligence period, expanding conditions precedent, and closing extension options.

Read the article.

Reprinted from Saxe Doernberger & Vita, P.C.

On April 4, 2019, the Appellate Division of the New Jersey Superior Court confirmed that the waiver of subrogation provision in a commonly used form construction contract, American Institute of Architects (AIA) form A201 — 2007 General Conditions of the Contract for Construction, precluded an insurer’s claims against a subcontractor.

In Ace American Ins. Co. v. American Medical Plumbing, Inc., the court considered Ace American Insurance Company’s (Ace) subrogation claim against a plumbing subcontractor who was allegedly responsible for a water main leak that caused approximately $1.2 million in damages to Ace’s insured, Equinox Development Corporation (Equinox).

In March 2012, Equinox entered into a contract with Grace Construction Management Company, LLC (Grace) to build the “core and shell” of a new health club. Equinox and Grace used AIA form A201 for their contract. Grace then hired American Medical Plumbing, Inc. (American) as a plumbing subcontractor for the project. In April 2013, the water main failed, flooding the health club.

Ace, Equinox’s first-party property insurer, paid Equinox for the damages and sued American to recover these damages. American sought summary judgment, arguing that the waiver of subrogation provision in the contract between Grace and Equinox precluded Ace’s claim.

The relevant contract provision states that:

“The Owner and Contractor waive all rights against … each other and any of their subcontractors, sub-subcontractors, agents and employees, each of the other … for damages caused by fire or other causes of loss to the extent covered by property insurance obtained pursuant to this Section 11.3 or other property insurance applicable to the Work, except such rights as they have to proceeds of such insurance held by the Owner as fiduciary.”

The trial court granted summary judgment in favor of American, finding that the waiver of subrogation in the contract applied to Ace’s claim. Ace appealed.

On appeal, Ace argued that the waiver only applied to claims for damage to the construction work itself and did not apply after the competition of construction. In this case, the damage was to not to the construction work itself – i.e., the “core and shell” of the health club. Instead, the majority of the damage was to the health club’s internal construction and furnishings.Additionally, the water main failed after the completion of construction.

The appellate court affirmed the trial court’s ruling, finding that “Ace misconstrue[d] the basic structure of the contract’s waiver provision.” The court found that the waiver applied to all damages covered by the property insurance regardless of whether the damage occurred after the completion of construction or included damage to work besides the contractor’s work.

The court also rejected Ace’s argument that this broad application of the waiver was inconsistent with AIA form A201’s requirement that the contractor carry liability insurance. The court found that “the subrogation waiver takes precedence over the contractor’s insurance obligation.” The court found that the contractor’s liability insurance served other important functions such as providing an extra layer of coverage beyond the owner’s property insurance and providing protection against injured third parties.

The New Jersey appellate court’s ruling follows the majority position on the scope of the waiver of subrogation in the standard AIA contract. However, a minority of jurisdictions do not recognize a waiver.

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1. No. A-5395-16T4 (N.J. App. Div. April 4, 2019)

The feedback license appears in many tech contracts, usually giving the vendor a broad, perpetual license to any “feedback” from the customer’s staff: any suggestion about the vendor’s products or services, explains a post on the website of Tech Contracts Academy.

“Sometimes the clause goes further, assigning ownership of feedback to the vendor,” writes author David Tollen. “The problem is, no one can actually own an idea or suggestion. There’s no such thing as a patent or copyright on an idea. And if no one would own feedback, what does the clause license or assign? What does the feedback clause actually do?”

In his article, Tollen offers an alternate clause, one that he calls a “feedback disclaimer.”

Read the article.

The growing complexity of the modern day supply chain creates an environment of uncertainty that is a good reason to reassess whether supply chain agreements are drafted with a mind toward key provisions that can protect a company, warns a post on the Foley & Lardner website.

One point to consider, the authors explain, involves indemnification and consequential damage disclaimers. They write that “it is important to ensure that contracts expressly address how indemnification clauses and damage disclaimers interact with one another.”

Other points discussed in the article are the company’s warranty limitations, force majeure provisions, and termination provisions.

Read the article.

The Texas Utilities Code was recently modified by House Bill 2845 to now require any person who leases land for a wind power facility (grantee) to be responsible for removing its wind power facility at the end of the lease, writes John Clardy, a summer associate at Holland & Knight.

“As part of this obligation, grantees must obtain financial assurance to secure the performance of the grantee’s wind power facility removal,” he explains in the firm’s Energy and Natural Resources Blog. “The new law specifies that land leases for a wind power facility must include particular provisions and voids any waiver that purports to exempt a grantee from the statute. The new law goes into effect on Sept. 1, 2019.”

Clardy added that the “decommissioning process entails clearing, cleaning and removing from the property each wind turbine generator (including towers and pad-mount transformers), each substation, each overhead power and communications line installed by the grantee, and all liquids, greases, or similar substances contained in wind turbine generators and substations.”

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If a contract is extinguished by rescission, it would seem that all of its provisions, including a prevailing party attorney’s fee clause, would be extinguished. According to a California Court of Appeal decision handed down recently, that isn’t necessarily the case, writes Keith Paul Bishop for the Allen Matkins California Corporate & Securities Law blog.

Bishop explains:

“The case involved a suit by a tenant and a guarantor (Paul Orozco) against a landlord for fraud. The tenant won an award of compensatory damages on its fraud claim and Paul Orozco succeeded in rescinding his guaranty of the lease. Although the guaranty included an attorney’s fee clause, the trial court declined to award Orozco his fees. The Court of Appeal disagreed.”

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