Alaska Law Blog

The Shocking Loss Of A Gritty Banana Peel

2008-07-10T21:49:27Z

Chris Slottee, my esteemed colleague here at Atkinson, Conway & Gagnon, has already reported on the Alaska Supreme Court’s recent decision in Edenshaw v. Safeway, Inc. Chris’ blog post calmly notes that the decision may impose greater liability on property owners than was previously the case. I think that Chris has vastly understated the significance of the decision. This new decision totally knocks out one of the bulwarks of established tort law. I mean, what the heck happened to the Gritty Banana Peel Doctrine?

When I was in law school (back in the far, far recesses of the last century), they taught us fledgling lawyers that negligence was not the equivalent of strict liability. To be negligent and liable for someone’s injuries, you had to do something wrong. More specifically, you had fail to act in the manner that a reasonable person would have acted. Negligence law, good old Professor Dente said, accounted for the fact that BAD STUFF HAPPENS. Sometimes, its nobody’s fault and the plaintiff just has to take it in the shorts. (I'm paraphrasing the professor's comments here.)

This principle of negligence law meant that just because a guy injures himself by falling down in a grocery store does not mean the store owner is liable. If the guy slipped on a banana peel, the store owner is not responsible unless the owner should have cleaned the thing up. So if the banana peel is a fresh one that was not previously tromped upon, it indicates the damn thing just fell on the floor and the store owner can’t be expected to have known about it or to have picked it up. But if the banana peel is all nasty from being on the floor for awhile this demonstrates a reasonable property owner had time to discover the peel and pick it up. This is the Gritty Banana Peel Doctrine.

You probably think I’m making this up. I'm not. In my first-year casebook on Torts from 1977, there were two cases on banana peels. In Anjou v. Boston Elevated Ry. Co., 94 N.E. 386 (Mass. 1911) the plaintiff won because she provided proof of negligence. The banana peel she slipped on “felt dry, gritty, as if there were dirt upon it,” and it was “black, flattened out and gritty.” But in Joye v. Great Atlantic and Pacific Tea Co., 405 F.2d 464 (4th Cir. 1968) the plaintiff lost because there was no proof of negligence. “Plaintiff offered no direct evidence below as to how long the banana had been on the floor before the accident . . . the jury could not tell whether the banana had been on defendant’s floor for 30 seconds or 3 days.” (My Torts book also had a case about pizza on the floor, but to avoid confusing myself or anyone else I want to stick to one kind of food.)

The Alaska Supreme Court in Edenshaw threw the Gritty Banana Peel Doctrine into the dumpster. The Court said a plaintiff can maintain a negligence action without specific evidence showing that the property owner knew or should have known of the dangerous condition. The Court also did not pin the property owner's liability to him doing anything else in particular wrong (like stacking up the bananas in a faulty manner in the first place). In essence, the Court decided to entirely punt the question of sufficient proof of negligence to the jury. The plaintiff does not have to show the property owner did anything specifically wrong in order to roll the dice with the jury.

Under Edenshaw, it presumably will be enough for the plaintiff to show that he went into the defendant’s store, encountered a patch of gravity there, fell down and hurt himself. The poor trial court judge can only shrug her shoulders, hand the thing off to the jurors, and let them retreat to the back room to make sausage with it.

Many years ago the Alaska Supreme Court eliminated that old common law rules that had been developed in so-called premises liability cases. Those old rules had different standards depending on whether the plaintiff was classified as a trespasser, or a licensee, or an invitee. Since it was often hard to tell who was exactly what type of person, and since feudal law designed to protect landowners at all costs had fallen out of fashion, the Court chucked out these rules in favor of a plain reasonable care standard that applied to everyone. This change in the old rules was brilliant, visionary, super keen. It made life easier for everyone. But junking the Gritty Banana Peel Doctrine and cutting these cases free from any sort of objective proof standard? That’s just goofy.

I predict that Edenshaw will be distinguished into near oblivion as future cases are decided. (Write that down, folks, and remember that you heard it here first.)

The Court's Edenshaw decision only makes sense if you assume they really meant to say advance notice of a dangerous condition is not the only way to prove negligence; a myriad of other ways are permitted. Nevertheless, some sort of minimally adequate proof of negligence still has to be provided to get to the jury (reasonable minds differing and all that). The trial judge can be asked to verify this through a summary judgment or directed verdict motion. I have to admit, though, that the Edenshaw opinion does not come close to expressly stating this. But in my view this is what the opinion should have said.

Weekly Summary of Alaska Supreme Court Opinions

2008-07-07T22:37:59Z

Well, after a few months of having other things to occupy my time, namely these darling three month olds (Isaac & Aaden), it is time for me to renew Atkinson Conway & Gagnon’s attempt to, ahem, timely summarize the Alaska Supreme Court decisions of the week.

First up is Pebble Limited Partnership v. Parnell, S-13059/S-13060, in which the Alaska Supreme Court rejected an attempt to remove an initiative from the November ballot that will impose new requirements on mining in Alaska. The opinion has no real reasoning, as it’s actually an order with an opinion to follow, issued so that the State has time to print ballots for the election this fall. I won’t go into the arguments regarding the merits of the underlying mining initiative, but if you listen to the radio or watch TV for five minutes, you are almost sure to see ads from both sides of the issue.

The only other opinion of real interest is Edenshaw v. Safeway, Inc., S-12583, in which the Alaska Supreme Court held that to prevail on a premises liability claim in Alaska, a plaintiff does not need to show that the business owner had actual or constructive knowledge of the dangerous condition. Instead, the Court held there was only a basic reasonableness test, in which the business owner’s notice of a dangerous condition was a factor to consider, but not a dispositive or required one. This case is a departure from prior cases in which the Alaska Supreme Court held that the State of Alaska had to have actual or constructive knowledge of a defect in a highway to be liable if that defect caused an injury. In Edenshaw, the Court distinguished these prior cases by noting that a grocery store (which was where the injury occurred in Edenshaw) is a much more tightly controlled area, and thus it was more reasonable to impose a general duty of care on the business owner regardless of whether the business owner had actual or constructive knowledge of a dangerous condition on the property.

This opinion will have a significant effect in future litigation, as business owner now can be exposed to liability for injuries caused by dangerous conditions of which they were both not aware and had no reason to be aware. It is also certain to make premises liability cases more expensive and difficult to defend, as the question of the reasonableness of an owner’s actions will almost always be a fact question. Consequently, now that a business owner cannot rely on a lack of notice, constructive or actual, to avoid liability as a matter of law, it will be very difficult to obtain summary judgment or resolution of a premises liability case short of actual trial.

A Secret Rule of Law

2008-07-02T04:23:23Z

Let me tell you a secret. The secret is that there is an undisclosed rule of law that governs all of the big civil lawsuits. Lawyers know about this rule. But they either avoid speaking of it all (just like Lord Voldemort), or they talk of it only in guarded tones among themselves. Judges often apply the rule. But the judges will never, ever acknowledge that they are actually doing so. Instead, they will go out of their way to avoid disclosing the existence of the rule at all, writing at length about all kinds of legal esoterica to disguise what is really going on.

This secret rule is generally known by its initials. Those initials are: TFM. TFM stands for TOO FRIGGING MUCH. Actually, I’m fibbing about the "frigging." The “F” in TFM stands for a harsher word than “frigging.” But you get the idea.

TFM is not a new rule of law. It goes way back. But the U.S. Supreme Court just issued what has to be the quintessential decision invoking TFM. I speak, of course, about Exxon Shipping Co. v. Baker. This tarball has blackened all who have touched it. It was released from the hold of the Exxon Valdez just after midnight on March 24, 1989. It rolled around spoiling the most beautiful place on the face the Earth (Prince William Sound), ruined the lives of all sorts of sea creatures (humans among them), and was flushed out down the Alaska coastline all the way to the Aleutians. Then it landed with a plop in federal court in Anchorage, until it was picked up by the Ninth Circuit Court of Appeals. The Court of Appeals used it in a super slo-mo game of ping pong that left a black smear across the federal judiciary. The U.S. Supreme Court finally picked up the dripping mess and dunked it in a vat of WD-40 in an effort to mostly dissolve the damn thing.

We all knew it was coming. When the Big Court accepted cert on the case last fall, you could hear the chant in the hills: “TFM . . . TFM . . . TFM.” The public comments of the Governor and others showed that they knew what was going to happen. (A "kick in the gut" was how Gov. Palin characterized the Court's decision to take the case.) The High and Mighty Supremes did not take the case to just say: “Ditto, Ninth Circuit!” They were going to change the outcome in some way. The oral argument was another sign of things to come. In commenting on why the Supremes took the case, Justice Scalia joked that there was an interesting legal point or two in the case and some “2.5 billion other reasons.”

Still, you wanted to hope that there was at least some chance the large verdict would be upheld. Pristine Alaska wilderness wrecked. A thriving fishing economy ruined. The largest (and most profitable) oil company was responsible for the stupid debacle. A jury of 12 upstanding PFD recipients delivered a deservedly stiff rebuke. A conscientious trial judge carefully controlled the whole thing. If you couldn’t whack Exxon for a few billion dollars out of its petty cash fund in this instance, then when can you whack someone?

But the unspoken rule, TFM, says you can’t whack anybody this hard. Not even Exxon, I guess. Justice Souter wrote a 42 page opinion to explain the Big Court’s reasoning in creating a federal common law rule to limit punitive damages. He needn’t have gone to such lengths. He could just as easily said, “We all puckered up something fierce at the thought of two and a half BILLION (with a "B") dollars. So we just had to chop this thing down to something most of us could stomach.” That would have been a more honest assessment, but it would have required an express acknowledgement of the TFM rule.

One can legitimately debate the reasoning the Curiae Maximus used in its decision. If the purpose of punitive damages is to punish the wrongdoer and deter others, then why tie punitives to a rigid 1:1 ratio with compensatory damages? It is not hard to think of cases where really bad conduct could cause only minimal compensatory losses. The need to punish the bad actor and put a damper on other miscreants should dictate that no rigid 1:1 formula should be followed. And, are the compensatory damages the fisherfolk suffered in the case ($507.5 million) really a good measure for puntives? Exxon trumpeted the fact that it spent some $2.1 billion in an effort to clean up the spill. Wouldn’t tying the punitives to these expenses (or these expenses plus the fisherpeople's compensatories) have been a better measure of the proper amount? After all, aren’t these clean-up expenses part of overall compensation due for the spill even though they were not directly paid to the plaintiffs?

And, gosh, why adopt this as a rule of federal common law just applicable to maritime cases? This sidesteps the more important question of whether due process requires this same ratio as matter of constitutional law. Does the Constitution allow a greater ratio of punitives to compensatories to be employed? If so, why not go to the full limit the Constitution allows in this ugly case? At least why not explain the reasons for not going to the full constitutional limit for this awful and wholly avoidable disaster?

But this sort of quibbling is all very much beside the point. The whole case turned on the unspoken TFM rule. From Alaska's standpoint, its sad to say that $2.5 billion for despoiling the most fabulous place on Earth and groin-punching the citizenry who live and work there was just TOO FRIGGING MUCH.

Confessions Of A Hipster Doofus

2008-06-12T22:17:32Z

Look, I’m willing to admit it. It’s nothing to be ashamed of, not really. Just because most everyone else does not feel this way is no reason that I should deny my true nature. You see, the thing is, I have to confess something: Arbitration clauses in contracts make me nervous.

Yes, I know, I know. Arbitration is trendy, arbitration is hip. It’s as cool as wearing sunglasses on a rainy night in Belltown. It’s as fashionable as those ugly plastic clogs with the holes in them. It’s as scenester as post-post-emo rock. Arbitration is so cutting edge that all those boutique lawyers who are putting the clauses into their copyrighted, intellectual property have paper cuts all over their hands. I mean, Dawg, what sort of hipster doofus doesn’t think that arbitration is just da wicked phat bomb?

Well, actually, that hipster doofus would be me. I paw through a lot of contracts. And every time I get to one where there is an arbitration clause (it's happening with greater frequency), I wince. Usually I reach in my desk drawer and pull out the faithful red pen, a/k/a d’Artagnan. A swift stroke of d’Artagnan’s blade and the clause is excised from the contract, tossed back into the ever flowing river of the law like so much salmon guts.

I don’t like arbitration clauses because arbitration can be a half-a-loaf deal. No matter how right your client may be in whatever the dispute is, arbitration carries with it a built-in pressure to compromise. People don’t like absolutes and usually look for a way to reach what they consider to be a happy medium. And arbitrators are people just like everyone else (or at least most of them are). So arbitration cases often result in a half-assed compromise decision that pleases neither side.

Plus, arbitration is outlaw territory. The rules the rest of us have to live by don’t apply in the land of arbitration. For example, the law is well-established in Alaska that a landlord of a commercial property can distrain for rent due, at least when the lease provides for it. (To “distrain” means to hold the tenant’s personal property until he pays up.) But an arbitrator is not obligated to follow the law. Some of them seem to know this. An arbitrator can decide that distraint is a barbaric custom that should have gone out with maiden rents. So the arbitrator can rule the landlord was wrong to distrain the tenant’s property and must pay the tenant damages for doing so.

And once the arbitrator rules this way there is almost nothing you can do about it. The courts won’t overturn an arbitrator’s decision absent showing out-and-out bribery occurred, or something close to it. The fact that the arbitrator was a stubborn pinhead who ignored the governing law on the subject gets you precisely nowhere in court. The arbitrator has ruled and the client is just plain stuck with that decision.

Sure, there can be instances where arbitration makes sense for some clients. When the client wants efficiency above all else, or when the client is a big corporation that is concerned about what a jury might do, arbitration would be logical. But in too many instances, arbitration is just a way to double-down on the regrettable uncertainty that is already built into the legal system.

So I have to confess that I’m way out of step with enlightened society on this. But what else would you expect from a hipster doofus lawyer who gives names to his pens?

By the way, did you know that the real person who inspired the character of d’Artagnan in Dumas’s books was killed in 1673 at the siege of Maastricht? The Musketeer caught a musketball in the throat. You can almost see him standing at the gate to the city, leading the charge with his rapier pointed forward. "One for all, and all for [bang!] . . . . gurgle . . . gurgle . . . gurgle." It would have been ironic that a gun was used to kill the greatest swordsman in all of France, if they actually had irony back in those days. (I think of this every time I get red ink on my fingers.)

The Supreme Court Catches A "Waive"

2008-06-05T22:12:10Z

The Alaska Supreme Court does not often delve into the world of commercial lease clauses. When it does so, we commercial real estate lawyers have to sit up and take notice. The rest of you out there can safely ignore these court decisions because they are B-O-R-I-N-G. But those of us toiling in the field have to read them whether we want to or not.

A few weeks ago the Court decided Carr-Gottstein Foods Co. v. Wasilla, LLC. The case turned on the application of a . . .wait for it now . . . WAIVER clause in a commercial lease. And I mean, really, is it possible to get any S-E-X-I-E-R than that? (OK, maybe a waiver clause tied into an insurance subrogation claim would be just a bit more dazzling, but we can’t always get everything we want.)

It seems that in 1996 Safeway's predecessor (Carr’s) moved out of the stand-alone liquor store it had been leasing in Wasilla from some formerly affiliated company, which I’ll just call Landlord LLC for simplicity. Safeway moved its liquor store into part of its main grocery store space that it was also renting from Landlord LLC. Landlord LLC knew about the move and even helped with it. Landlord LLC later affirmed for lenders that Safeway was not in default on its lease. The head man at Landlord LLC (a lawyer no less) said he thought the move was a technical default under the lease but he decided that he would “keep his options open” and not declare the tenant in default until the “economic ramifications” shook out. (The technical legal term for this is "lying in the weeds.")

Some six years later, after letting the situation ride without complaint, Landlord LLC sued Safeway for breaching the lease. Landlord LLC based its case on the use restrictions in the lease (supermarket only) and the prohibition against subleasing (the liquor store was technically owned by a separate entity). Landlord LLC offered up a creative damage theory to go with its claim. Since Safeway had fully paid its rent to Landlord LLC all along for the main store, Landlord LLC said its damages were the loss of rentals on the stand-alone store that had been vacated years earlier. Sure, the lease for that stand-alone store had expired six years ago, but Landlord LLC claimed that if Safeway had not moved its liquor store to the main building then it would have continued to rent the stand-alone store to sell liquor and it would have paid rent on it all those years.

So the reality was that Landlord LLC was suing to recover rent under a lease that did not actually exist for premises that the supposed tenant did not actually occupy. Can you spell C-H-U-T-Z-P-A-H?

It was not hard for the Supreme Court to decide that this was not a situation crying out for the terrible swift sword of justice. (Or even the terrible slow sword of justice, which would be a more accurate characterization.) But the Court did two interesting things in leaving Landlord LLC hanging out there with its chutzpah flapping in the breeze: (1) the Court decided Landlord LLC had waived its default claims as a matter of law; and (2) the Court sidestepped the anti-waiver clause in the lease by saying it only applied to future breaches.

In finding waiver as a matter of law, the Court’s decision deviated from the conventional wisdom that waiver is a fact issue, one that has to be decided by the jury. The Court in effect held that some instances of waiver are just soooooo obvious that even a lowly Superior Court judge can make that call. (As opposed to letting unsophisticated jurors flip a coin in the back room.) Unfortunately, though, the Court gave no practical guidance for distinguishing waivers as a matter of law that the judge should decide from the more garden variety waivers that are fact issues to be punted to the jury.

In characterizing the waiver clause as being applicable only to future breaches, the Court ducked the more difficult question of on-going obligations under the lease. Sure, the past breaches of the “use” and “sublease” covenants of the lease were waived. But those covenants impose on-going obligations on the tenant that are theoretically violated anew with each day the liquor store remains in operation on the main premises. Isn’t the anti-waiver clause meant to apply in exactly that sort of situation? The Court did not really come to grips with this.

But don’t get me wrong. I am not criticizing the Supreme Court’s decision. I have no doubt the outcome of the case was entirely correct. Even if the anti-waiver clause should not have been sidestepped, the clause itself can be treated as being waived. It’s the same thing as orally amending a contract that says it can only be amended in writing, because the writing requirement itself can be orally modified. It sounds wacky, I know, but there is a lot of 24-carat legal authority vouching for it as the real deal.

And, you know, if the circumstances are so egregious that a mere trial court judge should be able to figure it out, then there’s got to be a waiver of the anti-waiver clause as a matter of law. Because the fundamental truth is, at bottom, the law just does not let you get away with this C-R-A-P.

(Hey, I warned you upfront that it was B-O-R-I-N-G.)

Personal Satisfaction and the Gerund Man

2008-05-11T03:09:32Z

I discussed the topic of contract conditions in an earlier blog posting. This got me thinking about conditions that require the personal satisfaction of one party to the contract. For example, the contract may provide that Harry Houdini only has to pay Magic Tricks, LLC for a new water escape chamber if Harry is satisfied with the chamber’s construction. If Harry does not like the completed chamber because it leaks water all over the stage, then Harry will be excused from his obligations under the contract.

Personal satisfaction conditions bedevil the law for a variety of reasons. Often the contracts are not written clearly enough to make the satisfaction condition truly personal. The law generally takes the view that an objective standard is to be used to determine whether the condition has been met or not. Like in Harry’s case, where a leaking water escape chamber is something no one really wants. If you are going to use one of these things, you pretty much want it to be watertight. The theatrical effect of the whole escape is lost when all the water drains out of it so that you can breathe normally while you wiggle out of the padlocks and chains.

But the situation would be different if Harry did not like the chamber because Magic Tricks, LLC used brass rivets instead of copper ones. The functionality of the chamber would not be diminished then. Its just that Harry has a weird thing for copper since he thinks copper better transmits the “good vibes” of the spirit world. Harry will have a hard time avoiding having to pay for the chamber with the brass rivets because objectively there is nothing wrong with the chamber. Harry needs to have his contract clearly written to say that his personal judgment is the one and only standard by which satisfaction can be measured.

Only when the contract is one that involves "personal or artistic" matters does the law assume the personal judgment of the party to the contract is the measuring stick for satisfaction. In this area, the law sensibly recognizes that there is no accounting for taste. So if you make a contract to commission a piece of artwork you can pretty well count on your personal satisfaction being the only measure of satisfaction.

A good example of this would be the sculpture the Anchorage Museum commissioned for its new expansion project. The Museum picked a UK artist, Antony Gormley, and paid him $350,000 to come up with a suitable work of art to sit on the lawn outside the new addition. The sculpture Mr. Gormley designed for Anchorage was a cubist, block-style rendition of a squatting man. It’s a design that I have taken to calling the “Gerund Man,” ever since the Dear and Esteemed Wife pointed out to me that it looks like the figure is in the process of evacuating his bowels.

The name “Gerund Man” seems to fit since the guy is demonstrating any number of gerunds. (If you recall junior high school English, gerunds are verbs that are transformed into nouns and take the ending “ing”.) You see, Mr. Gormley has designed for us a fellow taking a dump, pinching a loaf, dropping a deuce, firing off a missile, launching a p-u boat and spawning a brown trout.

The proposed sculpture caused a bit of a stink when it was announced. There was a high-toned debate between two University artist types in the Sunday paper one week, although neither one mentioned the excretory aspect of the proposed work. The objection of the guy writing against the artwork was that it did not seem very Alaska oriented. But that issue can be easily remedied. Just put a cubist rendering of an outhouse around the guy, or maybe round out the base he’s squatting on so that it artistically resembles a five gallon pail. There’s nothing more Alaskan than depositing a dookie in a honey bucket.

Still, one might hope that the Museum’s contract with Mr. Gormley has a personal satisfaction clause. As long as the Museum Board isn’t afraid to declare that the Emperor has no clothes, they should be able to invoke their own personal dissatisfaction to get their money back. There's no accounting for taste, I know, but I’m pretty sure that an artistic rendering of pumping out a pile on the Museum’s lawn is not acceptable, even under a purely objective standard.

Anchorage would not be the first community to reject one of Mr. Gormley’s sculptures. The hip and progressive city of Seattle found that Mr. Gormley tested even its limits. For Seattle, Mr. Gormley designed the sculpture of a 39-foot-high standing figure of a man that would have been placed along the waterfront, facing Elliott Bay. The sculpture would have been plumbed with a fountain that shot a stream of salt water from the figure’s loins into the bay every five minutes. (The UK reports on the design described the water as shooting out of the figure's "metal todger.") The city council decided not to proceed with the project because it felt that even Seattle was not yet ready for “Ejaculating Man.” Perhaps the termination of the project came through the failure to satisfy the condition imposed by a personal satisfaction clause in the contract.

Pat Gilmore Gets A Clue (And An Award)

2008-05-02T01:10:16Z

One of Atkinson, Conway & Gagnon’s very own, Patrick B. Gilmore, received the 2008 Professionalism Award from the Alaska Bar Association. The award was announced at the May 1 Bench and Bar Luncheon, a part of the Bar’s Annual Convention.

The award was a surprise to Pat when he heard his name called. (Pat is better known as “Gil” amongst the cognoscenti of Alaska.) Gil had been lured to the luncheon by a longtime friend, knowing nothing about the award. He probably should have thought it strange that his wife, Chris, and 22 year old daughter, Casey, showed up at a Bar Association lunch. The fact that a couple of Pat’s clients were there as well could have been a tip off that something was in the works. But Gil was as low key as ever, oblivious to it all. (I guess no one ever said “professionalism” was necessarily synonymous with “swift on the uptake.”)

The Bar’s Professionalism Award is a true honor, serving as recognition from fellow lawyers of the respect with which the recipient is held. And really there could not be a better person for the award than Pat. He is a lawyer who quietly and efficiently goes about his client’s business. He is never flashy and never obstructive, but always effective. Unlike many lawyers who talk about the importance of pro bono work, but do not follow through and actually provide it, Pat has without fanfare given substantial time to handling cases for the domestic violence project. He is the embodiment of the highest ideals that every lawyer should strive to achieve. Pat is a throwback to a nobler age, a reminder that the law is a learned profession and not a mercenary pursuit.

So let us all raise a glass to Patrick Gilmore and congratulate him on a well-deserved award!

(Hey, I’m more than willing to make Pat the butt of jokes, but you have to hand it to a guy who gets the Professionalism Award. And besides, anyone who names his dog “Bluto” after the late, great Senator John Blutarsky is A-OK in my book.)

Wooing Contract Conditions

2008-04-16T23:55:15Z

You see it again and again in lawsuits over contracts. Almost everyone gets confused when its comes to conditions. The courts frequently mess up on the rules that apply to conditions. The lawyers often don’t realize the problems they are dealing with involve conditions. And the clients don’t even know what conditions are. The result is that some poor schmuck who has charged off suing the other side thinking he was given the shaft gets smacked down in court. The poor schmuck finds out that, because of the failure of a condition, the shaft was part of his deal all along.

A condition in a contract is simply something that has to happen before something else happens. Easy to say, but not so easy to apply. Conditions are imposed on one party’s obligation to perform under the contract. The contract might say, for example, that Andy Hardy does not have to buy Aunt Milly’s house until Andy Hardy first sells his existing home. If Andy Hardy cannot sell his existing home then the condition has failed and he is never obligated to actually fork over the money for Aunt Milly’s house.

But what if Andy Hardy does not really try very hard to sell his existing home because he’s too busy “pitching some woo” with Polly Benedict? Can Aunt Milly take Andy to court and complain that Andy’s out-of-control hormones kept him from making a decent effort to fulfill the condition? This gets us into conditions creating "implied promises" and the ever popular "excuse of conditions." Aunt Milly might have a good case here, if you can ignore the fact that Andy’s dad is Judge Hardy.

Conditions can be tricky because the contract may not make it clear exactly what is a condition. Time deadlines are often put in contracts but the deadlines are not always stated as being a condition to performance. The courts are no help in straightening the situation out because judges don’t really like conditions very much. The failure of a condition means the jackass on one side of the deal does not have to deliver on his promise. For some odd reason, this raises a judge’s hackles. So a judge can go to some lengths to say that the time deadline in the contract that every normal person would think is pretty darn important does not really mean much at all.

The sale contract says: “The closing deadline shall be April 1, 2008.” When Andy Hardy fails to show up at the title company on that date with his dough, Aunt Milly calls the deal off and makes a separate deal to sell her house to Beezy Anderson for more money. So Andy takes Aunt Milly to court to force her to sell the house to him. Not surprisingly, Judge Hardy sides with his boy Andy on the matter. The old judge (who might well have sat in contracts class with a young Charles Kingsfield) rules the closing deadline wasn’t a condition after all. It was more like an aspirational guideline. So it was okey-dokey for Andy to take a couple of extra weeks to get his cash together and wander into the title company with it. (Besides, Andy had to go to the doctor to get treatment for the social disease he caught along with Polly’s “woo.”)

Poor Aunt Milly’s lawyer is left outside the courthouse scratching his head as to what part of the word “deadline” the judge did not understand. But what the guy really needed in his appearance before the Honorable Old Fogey was a contract provision that said: “The closing deadline shall be April 1, 2008, time being of the essence. The parties’ obligations to close are expressly conditioned on the deadline being met.” (That last sentence is actually redundant, since "time being of the essence" is a phrase of art that means performance on time is an express condition. But you can't count on judges actually knowing this, since its not explained on red wine labels or anything else a judge is likely to actually read. So it does not hurt to use the lawyer's trick of saying the same thing over again in a different way. In fact, if I was writing the contract, I would be tempted to drive the point home by adding the line: “And judge, we really, really mean it.")

The law on contract conditions can get trickier still when you delve into the necromancy of “constructive conditions” and the accompanying two-headed beast of "substantial performance/material breach." The law here is filled with vague lists of "factors" that have to be considered, along with brain-numbing concepts. Its enough to make strong men and women of the Bar promise the Lord-High-Chancellor-of-Us-All that they will swear off “woo” forever if they can just get a clue about what the heck this legal mumbo-jumbo means. If you have the ill-fortune to stumble into this area, you might be able to figure out the nuances of the law after a good bit of study. But you are going to have a damned hard time getting old Judge Hardy to follow along, especially after he's had a glass or two of red wine.

A Called Shot

2008-04-05T22:40:41Z

The Alaska Supreme Court yesterday ruled that two elders' benefit programs of an ANCSA Regional Corporation were valid. Atkinson, Conway & Gagnon handled the case for the winning side. The case is Bodkin v. Cook Inlet Region, Inc. The Court held that CIRI's elders' programs were authorized under Section 7(r) of ANCSA and that no constitutional challenges to the programs could be sustained.

The ruling gives me a chance to toot my own horn over a job well done in the appellate court because I wrote the brief and argued the case. BLAAAPPP! (Sorry. My horn is strained a bit from driving around with all the other knuckleheads out there this winter.)

The Court's decision was especially gratifying since I was already on record as saying the Court would rule this way. I spoke about the case at the November 2007 meeting of the Alaska Native Law Section of the Alaska Bar Association. I boldly predicted that the Alaska Supreme Court would affirm the lower court's decision and uphold CIRI's programs. I even made this prediction with the lawyer on the other side of the case, Fred Triem, sitting there, participating in the discussion. Yes, that's right my friends. Just like Babe Ruth and Joe Namath, I have successfully called my own shot.

[Since I've wandered into the sports area, I thought I would add a side note for the Dear and Esteemed Wife that, upon my passing, I think it would be great idea to have Dave Niehaus, the Hall of Fame announcer for the Seattle Mariners, make the "call" at my memorial service. Something like the following would be nice:

"The designated hitter, Grim Reaper, steps up to the plate now. Grim carries an astonishing, perfect 1.000 batting average, as his long uppercut swing eventually catches up to every pitch thrown his way. Here's Jerome's pitch now . . . and its BELTED deep towards center! Its going, going, going . . . The center fielder, Moe "Darn" Medicine, gives chase but he's not going to bring this one back . . . ITS OVER THE WALL, far, far out there in dead center field, straight above the 'eternity' sign! FLY AWAY! My, Oh, My!" (Wild cheering ensues.)

Just an idea, D.E.W. With any luck, you and Dave will have about three decades or so to work on it.]

Anyhow, the Bodkin case was really not difficult to predict. Fred Triem had made essentially the same arguments in a series of other cases filed in the federal and state courts over the years. He'd lost on every one, ever since Congress amended ANCSA to cut the Native Corporations some slack to honor their cultures. So it was no surprise the Alaska Supreme Court ruled the way it did in Bodkin, and my predicting the outcome was not much of an achievement.

I teased Fred at the Alaska Native Law Section meeting about running a "cottage industry" in these cases over elders' benefits. The decision in Bodkin should just about shut down Fred's little industry for good. Although you can never be 100% sure about these things, the door to Fred's "cottage" should be pretty well barricaded now and the windows shuttered, more or less nailed tight. BLAAAPPP! (Wild cheering ensues.)

Of Zyprexa And A Puddle

2008-03-27T21:20:07Z

The State of Alaska just cratered on its claims against Eli Lilly & Company over Zyprexa. “Cratered” is a such a harsh word, though. Maybe “had their backbones dissolve into a puddle on the courtroom floor just before closing argument” would be a more accurate description of what happened. In wrapping up the case and dismissing the jurors, Judge Rindner might well have said: “Thank you very much, and please watch your step on the way out!”

I admit that I’m not really qualified to pass judgment on the State’s decision. The only information I actually have about the case is from watching the TV news, unless you count eavesdropping on other non-involved lawyers at the next table while I was eating lunch at the Sandwich Deck. (And it didn’t help that I was choking on a dry-as-death chicken sandwich at the time.) But I’m an American and an Alaska lawyer. So I’m free to go on at length over stuff I actually know nothing about.

The State gave up its claims worth a supposedly solid $200 million for $15 million. (Actually, the Wall Street Journal reported the State’s total claims were originally pegged at a nifty $1 billion.) The math itself shows you who got the better end of this deal. But really all you needed to see were the interviews on Channel 2 News last night. Assistant State Attorney General Ed "The Glide" Sniffen was talking at length about the settlement. He had to explain to everyone -- himself included -- why the State decided to take the deal. The Lilly lawyer said almost nothing at all on camera but was smiling as wide as the Hoosier farmlands.

I can understand the State’s discomfort about the case. The 8,000 pound elephant in the courtroom was the U.S. Supreme Court. The High and Mighty Court earlier this year ruled that defective product claims against medical device makers had to be given the big “No Way Jose!” under the Medical Device Amendment to the Food, Drug and Cosmetic Act. The creeping fear amongst the plaintiff-type lawyers is that the High and Mighties may well extend this same reasoning to another pending case that, like the Zyprexa lawsuit, involves drug labeling under the Act. (The High and Mighties should not be confused with the Tighty Whities, which can ride up, creating a whole different kind of “creeping fear.”)

Still, I would have thought that the State at least would have let the panel of 12 hometown Alaskans render a thumping fine verdict against Lilly. There was always time to compromise later on, while the case was up on appeal. With a bright and shiny jury verdict in hand the State just might have gotten a bit more consideration in the deal.

And what, my friends, does all this portend for the pitfall-laced lawsuit the State has in the works against the actuaries who advised on the State’s pension plans?

[FULL DISCLOSURE: I'm originally from Indianapolis (Lilly's HQ) and I own a small position in Lilly. My equity interest is so small that the bump up in Lilly stock the settlement provided today was only just enough to buy me a couple of lunches of food-like substances at the Sandwich Deck.]

The Vulcan Salute

2008-03-21T10:01:01Z

The court system is a very strange place. Too often people put themselves inside it when they have no business being there. They start out all revved up about righting some perceived injustice. But they quickly discover that they have just placed their foot on the first step down into Hades and they cannot back out. They’d be much better off steering clear of the courts altogether.

Many years ago, I had an odd encounter when I was clerking for a federal judge in Portland, just after I graduated from law school. The Portland federal courthouse in those days had nothing like the security the courthouses now have. Anyone could get inside the courthouse and walk right up to the door of the judge’s chambers, if so inclined. The door to our chambers was kept locked, though. There was a camera and an intercom system just outside the door. Visitors had to push the buzzer to connect with the judge’s secretary before she would admit them through the door. The secretary was a formidable old battleaxe, who disliked me and all other pipsqueak law clerks something fierce. But the whole security set up was nothing that a determined nutjob could not have gotten past if he was bent on getting revenge against the judge.

There weren’t many people who actually bothered trying to be admitted to chambers. But we did get a regular visitor to the checkpoint right outside the door. Every month or so an older looking gentleman would show up. He was always dressed neatly but he was clearly not quite all there mentally. He would walk up to the security camera and, without pushing the buzzer to connect on the intercom, he would hold up a hand-written piece of paper. He would stand there for maybe 15 minutes, holding his paper up to the security camera. If he stood there too long, the battleaxe would call someone to come up from the clerk’s office to get rid of him, but he would always wander off before anyone actually showed up to escort him out.

One day curiosity got the better of me. After the guy had been standing there with his paper up to the camera for maybe 15 minutes, I went out to see what this fellow was all about. The battleaxe growled at me but I went out nonetheless. The guy was turning to leave just as I walked out the door. He was shocked to see me; it must have been like one of the gods had just descended from Olympus to mingle with the mortals.

“Can I help you?” I asked. The guy stared at me all wide-eyed and held out his piece of paper. I looked at it but I couldn’t make out what it was trying to say. The words were in English but they made no sense at all.

“I don’t understand,” I said. He started talking in a strange language that I had never heard before. “Prosim zabramit mi,” he said. It could have been Czech or another Slavic tongue, but to me it made as much sense as Klingon.

He gestured emphatically to the paper. “Prosim zabramit mi!” And he held it up in front of my face. The old battleaxe, who had been watching on the security camera, barked over the intercom: “I’m calling the U.S. Marshal!”

The guy seemed harmless enough so I didn’t want to see him dragged away in handcuffs. I put my hand on his shoulder and lead him back down the hallway to the elevator. As we were waiting for the elevator to show up, he was jabbering away in that strange lingo of his.

The elevator arrived finally and I gently nudged him into it. He held up the paper to my face again, through the open door. Right then it occured to me that this guy just wanted someone to hear about his plight. He had a grievance and he wanted to petition the government for redress, just like it says in the Constitution. He thought that holding the paper up to the camera was the way you asked for relief from the court.

As the door started to close I said to him: “Sir, we have heard your complaint and we will look into it.” I gave him the Vulcan salute that Mr. Spock used on Star Trek. The guy put his hands down and, as the door closed, he smiled so brightly it was like a Roman candle went off in that elevator car.

The guy never showed up outside our chambers again. I guess he was content that his grievance had been heard, whatever it was. And, although I couldn’t be sure, it kind of seemed like the old battleaxe was just a wee bit nicer to me afterwards.

Now when I have clients who are bound and determined to file a lawsuit and sue the evil snakes on the other side, I always caution them about getting in over their heads. I’m also tempted to take them over to the courthouse and have them just tell their tale to one of the security cameras there, instead of actually filing a lawsuit. They would probably feel better afterwards and in most cases it would save them a lot of money and anguish in the long run.

* * * *
Read up on the Czech language here.

You can buy a Klingon dictionary and other useless stuff through the Klingon Language Institute.

The U.S. Marshals Service has its own website with a lot of interesting things on it, including their "Most Wanted" list. And don't try to sneak a cell phone past them at the federal courthouse because they still have the legal authority to form a posse to hunt down outlaws.

Beware! The Ides Of March Has Come But It Has Not Passed

2008-03-14T10:01:01Z

Mark Twain said, “The difference between the right word and the almost right word is the difference between lightning and a lightning bug.” I’ve been mulling over Twain’s words as I sit here at the Commercial Law Juggernaut that is the southwest corner of Atkinson, Conway & Gagnon.

It is appropriate that this topic comes up just before the fateful Ides of March because any number of misfortunes can befall the hapless, gentle businessperson who ends up using the wrong set of words. Like a big unexpected expense, if the gentle businessperson who is selling a few truckloads of logs uses the phrase “FOB” when she meant to say “FAS.” I had a client actually do that once. By chance, I got a look at the contract right before it was to be signed. I was just in the nick of time to explain that “FOB” means “free on board” and that the client had to pay for the cost of loading the logs. This is in contrast to “FAS,” which means “free alongside” and obligates the buyer to pay for the loading. The client was glad there was a Commercial Law Juggernaut backing her up on that day.

There can be any number of ways of saying the same thing, but the words used can give a completely different sense to it. For instance, let’s take the beginning of William Shakespeare’s famous funeral oration from Julius Caesar. In the oration, Mark Antony is eulogizing Caesar, who Brutus and others murdered on the Ides of March (depicted below in a painting by Vincenzo Camuccini).

Shakespeare started the oration this way:

Friends, Romans, countrymen, lend me your ears; I come to bury Caesar, not to praise him. The evil that men do lives after them; The good is oft interred with their bones; So let it be with Caesar.

Contrast Shakespeare's words with those of Beat Generation cult figure Lord Buckley, who re-wrote the passage this way:

Hipsters, flipsters, and finger-poppin’ daddies, Knock me your lobes. I came here to lay Caesar out, Not to hip you to him. The bad jazz that a cat blows, Wails long after he’s cut out. The groovey, the groovey is often stashed With their frames. So don’t put Caesar down. To swing, or not to swing, that is the hang-up!

(That last line is, of course, a take off from a different Shakespeare play, Hamlet. But you can’t expect an inventive mind like Lord Buckley's to always color inside the lines.)

Now Shakespeare -- who Buckley called “Willie the Shake” -- and Buckley were both writing about the exact same thing. The words each chose, however, gave the oration an entirely different tenor. The same thing can happen with commercial contracts. You might mean to say that your obligation to deliver that load of logs is conditioned on the weather allowing you to cut the timber, but it might not come out that way on paper. If you use the almost right word instead of the right one, your contract could excuse you from performing when a plague of lightning bugs descends rather than when unusual lightning and rainstorms occur.

So whether you are a gentle businessperson, or a Roman, or a finger-poppin’ daddy, beware the Ides of March and the opacity of the English language. The jazz a bad contract blows can wail long after the deal has been cut out.

* * * *
Brush up on your Shakespeare! You can read all of Willie the Shake’s plays in their entirety on-line: Shakespeare On Line.

Information on the one and only Lord Buckley can be found here: Dig Lord Buckley!

A short biography of Neoclassic painter Vincenzo Camuccini is posted on Wikipedia: Camuccini Bio.

Tell 'Em Large Marge Sent Ya!

2008-03-02T23:19:14Z

The Alaska Supreme Court’s decision last week in Mullins v. Oates is a cautionary tale for those selling real estate in Alaska. The case shows that you have to be careful about how your deal gets put together. For just this reason, its always helpful to have a pessimistic, worrywart real estate lawyer in your corner who can point out the pitfalls up ahead.

In the Mullins case, Alice Oates, the owner of some land and a building in the burgeoning metroplex of Tok, Alaska, sold the property to Margret Mullins. Mullins apparently lacked the ability to get a bank loan so Oates engaged in a form of owner financing for the deal. Oates sold the property to Mullins under a contract of sale. (The phrase “contract of sale” should mean that red lights are flashing for all the cynical real estate lawyers out there. The red lights are also probably flashing even for the optimistic, sunny-side-of-the-street real estate lawyers out there, if there actually are any such creatures.)

You see, a sale on a contract means that the seller hangs on to the title to the real estate until the seller is paid in full. The buyer gets the immediate right to occupy the property and can even make improvements to it while its being paid off. But if the buyer fails to make the required payments, the contract says that the seller can take the property back and throw the buyer out into the street. At least, the contract gives the seller that right in theory.

The problem with this arrangement is that the law does not know what to do when a default occurs. Equity abhors a forfeiture and so do most judges. The courts don’t like to see the poor buyer get stiffed on the property after perhaps making years of payments and even erecting a building or two. To complicate matters further, there is no easy remedy available to the seller to enforce the requirement that the buyer get lost after failing to make the payments. The non-judicial foreclosure procedure that is available for deeds of trust does not apply to contract deals. The contract seller ordinarily has to go to court for a judicial foreclosure to actually terminate the buyer’s rights.

(As an aside, I will point out that on occasion one comes across a lower court judge who has no problem enforcing a contract as written, even if it means a forfeiture occurs. These rare and enlightened beings -- who are like a fresh summer breeze blowing through the mausoleum that is the courthouse -- are almost certain to have the highest reversal rates in the appellate courts.)

So poor Alice Oates had to go to court to throw out Margret Mullins when the required payments were not made. It turned out that the sweet, hard-working Maggie Mullins who Oates originally made her deal with later changed into the buyer from hell. The transformation was one worthy of Large Marge in the movie Pee-Wee’s Big Adventure.

Large Marge Mullins represented herself in the lawsuit and battled over nearly everything. The parties eventually struck a settlement, but Mullins disavowed it and went as far as accusing the Magistrate who brokered the deal of coercion. Large Marge also wrapped herself in the Constitution, desperately claiming that she was being deprived of equal protection of the law and due process by being held to the deal she had made.

The Alaska Supreme Court rejected Large Marge’s arguments and upheld the lower court’s judgment in favor of Alice Oates. The end result was a judgment confirming the property belonged to Oates. The only problem was that the confirmation finally came more than six full years after Mullins stopped making payments on the property. This is in contrast to the four or five months that a non-judicial foreclosure would have taken if the original deal had been structured correctly.

But have we heard the last of Margret Mullins? Perhaps not. Its unclear whether the judgment in Alice Oates' favor is really an order for judicial foreclosure or not. The argument can be made that it has to viewed that way. In a judicial foreclosure setting, Mullins would have a one-year right of redemption through which she could regain the property. We can only hope that Large Marge Mullins does not tumble to this issue. Or just maybe she will come to the belated realization that nothing in the Tok metroplex is really worth fighting over after all.

By the way, the best line from Pee-Wee's Big Adventure comes when Pee-Wee is talking with the cafe waitress, Simone, about her dream to live in Paris one day. Pee-Wee encourages Simone to just go for it, at which point the following dialogue occurs:

Simone: I know you're right, Pee-Wee. But, . . .

Pee-Wee: Everyone I know has a big "But." (Sigh.) C'mon, Simone, let's talk about your big "But."

Weekly Summary of New Alaska Supreme Court Opinions

2008-02-22T22:47:39Z

Well, the Alaska Supreme Court did not issue any new opinions today. At Atkinson Conway & Gagnon, weeks like this are met with equal parts frustration and relief. Frustration that no new case law has been made that we can apply on behalf of our clients, and relief that the Alaska Supreme Court has not reached down with its invisible hand to gleefully scatter our carefully researched and briefed motions into chaos.

In short, it's a good Friday and time to head downstairs for the one of the best benefits of working at 420 L Street.

Doing Deals Can Be An Ordeal

2008-02-20T19:23:11Z

February 2008 has been the month for closing commercial real estate deals here at Atkinson, Conway and Gagnon. In the first two weeks of this month alone, I have personally closed a half dozen transactions in which something like $20 million has changed hands. I say “something like $20 million" because they do not actually let me handle the money itself in these deals. I just make it possible for the money to get passed around amongst the other kids on the playground.

The deals this month have ranged from helping a client sell a couple of office buildings to assisting a client in buying a Midtown trailer park. (Earl Hickey, Come On Down!) Its always gratifying to see a deal come together and successfully close.

Some deals are harder to get closed than others. The deals over the office buildings were particularly troublesome. While my client was in Anchorage, the buyers were a couple of Delaware limited partnerships run by a guy in New York with a lender in Seattle and a lawyer and title company in Washington D.C. The money also had to go through a bond broker and bond trustee before any of it could find its way into my client’s pockets. All the e-mails scurrying back and forth amongst this crowd trying to pull these deals together could have crashed and melted the entire computer infrastructure of any number of Central Asian countries. Like the Republic of Uzbekistan for instance, where the President-For-Life has his very own Apple IIe sitting on his desk.

(I made that last part up. The Uzbeks can actually boast that a whole 15% of their universities in the capitol city of Tashkent have access to e-mail and the Internet: Uzbek Internet )

And speaking of Uzbekistan -- truthfully, how often does that country come up in the course of a day? -- I just had to mention that the Uzbeks issued a terrific postage stamp a few years back. The 20 kopeck stamp shows just how highly regarded the Unibrow is in the rest of the world and how backwards we Americans are when it comes to the appreciation of female body hair. (Note that this gal -- Princess Nodira, the wife of Omar Khan -- bears a strong resemblance to Princess Jasmine of the Disney movie Aladdin, except that the lame Disney animators gave Jasmine a wax job on the eyebrows in order to be more politically correct for Western audiences. It just goes to show that the PC police can take the fun out of everything, including facial hair and trailer parks.)

Anyway, the deals for the office buildings turned into ordeals. I had my client twice sign the impressive pile of the closing documents just to have the buyers fail to come through with the money to pay for the buildings. Arghh! Here another man might have initiated an e-mail flamefest using some choice legal terms like “material breach,” “consequential damages” and “sniveling weaselface.” But I held my fire and listened to the client. For some reason, he was anxious for the deals to go through and not so anxious to pay through the nose to have his lawyer sue the other side. We sat on our hands for a few days until – REJOICE! -- the money appeared. After a third round of document signing, the deals were completed.

And so my friends the lesson to be learned is that the Art of the Deal takes many forms, one of which may include chewing your fingernails whilst doing nothing else in particular. Other than perhaps working on your stamp collection, or maybe keeping an eye out for a clean, low mileage double-wide to fit in that open trailer park space you just happen to know is available.