Plaintiff, who was being treated for hairy-cell leukemia, allowed the removal of his spleen and repeated cell samples under the belief that this was necessary for his health. Physician servants of the Defendant used his tissue to develop and patent a cell line for commercial use. Plaintiff sued for conversion and breach of nondisclosure observations.
Questions of law
What ownership interest does an individual maintain in bodily tissue? What are the limits of conversion with respect to ownership interests?
Conclusions
The court found that plaintiff did not have a sufficient ownership interest to sustain a claim for conversion, no matter how egregious the defendants’ breach of fiduciary duty or lack of informed consent were.
Two thieves, Bernaradini and Ricci, arranged to “purchase” broken barrels from a landlord which they knew to be valuable. The landlord sold his tenant’s barrels to them for a small sum. The tenant sued for the value of the barrels (about $51,000 in 2020 dollars).
Questions of law
What role does intent play in conversion? If a defendant believed the property of no value, is he to be held responsible for its full value?
Conclusions
The court found that the only requirement for conversion to lie was the intent to commit the tortious act, not any particular special knowledge or wrongful mental state. “Conceding all that may be argued as to the absence of improper motives, he sold barrels that did not belong to him and which did with their contents belong to the plaintiff.”
Defendant, a former employee of Plaintiff, persistently sent emails critical of Plaintiff to all Plaintiff employees using Plaintiff’s intranet. After repeated requests to Defendant to cease and desist, Plaintiff sued, alleging trespass to chattels.
Questions of law
Is actual injury a requirement for trespass to chattels? Can frustration with the content of a communication give rise to a claim for trespass to chattels via the mode of the communication? What is the impact of intent?
Conclusion
In a lengthy opinion, the California Supreme Court held that it would be an unacceptable expansion of tort liability to expand trespass to chattels to include the use, however unwelcome, of a publicly-accessible computer intranet which caused no injury to the system. The example was made to mailboxes or telephones — the content of communication in no way injures the operation of the mailbox or the telephone equipment.
Shady Grove, a Maryland corporation, sued Allstate, a New York corporation, in diversity for unpaid statutory interest in a class action. Under New York law, class actions may not be maintained for any “action to recovery a penalty, or minimum measure of recovery created or imposed by statute.” The federal trial court dismissed for lack of jurisdiction, arguing class actions were barred and the amount did not meet controversy requirements for subject matter jurisdiction in diversity. The Second Circuit affirmed and the case was appealed to SCOTUS.
Questions of law
Does FRCP 23 answer the question of whether a class action can be maintained for a statutory penalty? If so, would it exceed statutory authorization or Congressional rulemaking power? Is the eligibility of a class in a federal class action in diversity dependent on a specific state cause of action?
Conclusions
The trial court and the Second Circuit believed that FRCP 23 on class actions touched on a different issue than New York law. SCOTUS, however, ruled that the federal rule on class actions was dispositive with respect to the formation of a class action.
SCOTUS further ruled that Rule 23’s “[a] class action may be maintained” was different from “may be permitted” because the litigants maintain the action, not the court. Discretion rests with the litigants, not with the court.
SCOTUS said that the federal rules permit all class actions that meet Rule 23 requirements, and a state cannot structure its statutes to limit that permission. No argument grounded in the New York legislative purpose could override the clear text of the federal rule, and such a basis would only confuse because it could result in two states with identical statutes, one which overrides federal law and one which does not.
The test is not whether a rule affects a litigant’s substantive rights, but what it regulates. “If it governs only “the manner and the means” by which the litigants’ rights are “enforced,” it is valid if it alters “the rules of decision by which [the] court will adjudicate [those] rights,” it is not.” Rules allowing multiple claims to be litigated together are valid because they neither change plaintiffs’ separate entitlements to relief nor abridge defendants’ rights. The fact that some plaintiffs would not bring individual suits for relatively small sums has no bearing on substantive rights.
It is not the substantive or procedural nature or purpose of the affected state law, but the substantive or procedural nature of the Federal Rule.
The forum-shopping potential of this decision would be unacceptable if it resulted from judge-made law, but because it arises from the FRCP, it is the inevitable and “one might say the intended” result of the uniform system of federal procedure enacted by Congress.
Crow purchased a pleasure boat from Bayliner, but became dissatisfied when it was not as fast as he wanted for his fishing plans. One brochure provided by the salesman stated that similar models could achieve speeds of 30 mph. Crow sued Bayliner under express warranty, implied warranty of merchantability, and implied warranty of fitness. Trial court found for Crow and Bayliner appealed.
Rules of law
Express warranty must be specific, not mere commendation or puffery. Reasonably relied upon? Implied warranty of merchantability is an objective standard contemplating general use and reasonable satisfaction. Implied warranty of fitness requires effectual communication of intended use to merchant.
Arguments
Crow and the trial court argued that the boat was too slow to be used for offshore fishing and he would not have purchased it if he had not believed it as fast as he wanted. He also argued that his inquiries about the boat’s speed and his desired purpose were enough to trigger implied warranty of fitness. He argued statements about speed were express warranties and that the lack of utility for offshore fishing was a breach of warranty of merchantability.
The appellate court argued that commendations of the boat were mere puffery which did not constitute any express warranty. The brochures advertised a different rotor and lighter load and thus were not applicable. There was no evidence Crow had effectually communicated his intended purpose or specific needs. Finally, the boat was within the range of suitability for typical, objective use.
Conclusion
The appellate court reversed and ordered a directed verdict for Bayliner.
Sondra Locke, with the assistance of ex Clint Eastwood, entered into an agreement under which Warner Bros. would entertain film pitches. Unknown to her, Eastwood was reimbursing Warner for their costs in exchange for not considering Locke’s films. Locke sued for sex discrimination, breach of the implied obligation of good faith, breach of contractual obligations, and fraud. The trial court granted Warner’s motion for summary judgment.
Rule of law
The implied obligation of good faith extends to discretion even in dealing with issues of artistic discretion. It may be fraud to enter into a contract with intent to breach it.
Arguments
The trial court, along with Warner, argued that because Warner had paid Locke the sums due under the contract, and because Warner had no obligation to make any of Locke’s films, there was no breach. It held that the questions of bad faith or fraud were barred because there was actual breach, and the only evidence of fraud was after the fact.
The appellate court, on the other hand, pointed out that simply paying the fees due under the contract were not enough because Warner had a good faith obligation to actually consider the films, and Locke had evidence they had failed to do so. It stated that it was bad faith for Warner to try to deprive Locke of the fruits of her contract and that she might have a claim for fraud based on the facts presented.
GM hired defendant’s firm to perform construction, and defendant firm hired plaintiff to supply ad erect aluminum walls. The contract specified the wall type and said the walls had to satisfy the agent of GM. The wall was rejected despite being virtually perfect, and defendant hired another company to replace them while witholding payment from plaintiff. Plaintiff sued for the balance and won; defendant appealed on jury instructions.
Rules of law
In contracts with satisfaction terms, satisfaction is judged on an objective, reasonable-businessperson standard when the service or goods is of a utilitarian use and a subjective, good-faith-vs-bad-faith basis when it is a matter of aesthetics.
Arguments
Defendant argued that the word “aesthetics” was included and so actual subjective satisfaction was required. The court argued that this was boilerplate and made null by adjacent language. It argued that plaintiff would not have entered into the contract expecting to be bound to the whimsy of a specific person and that the defendant would have known that such a requirement would only come at an additional premium. They also noted that if a subjective standard were to be upheld, they would need to determine the actual mental state of the GM agent to evaluate bad faith.
Conclusion
The court upheld the jury instructions and decision, saying the contract should be evaluated on an objective standard with respect to satisfaction.
After plaintiffs sold their brokerage firms to defendant in exchange for defendant stock, management positions, and profit proceeds, defendant failed to perform as plaintiffs expected and ultimately terminated them. Plaintiffs sued for breach of good faith and the court dismissed for failure to state a claim.
Rules of law
The parole evidence rule applies to evidence presented to alter or supplement a contract, not to the implied covenant of good faith. Good faith may involve factors such as unequal bargaining power, frustration of purpose, the drafting party, the discretion of the parties, and a standard of commercial reasonableness.
Arguments
The trial judge dismissed for failure to state a claim, arguing that parole evidence barred the bad faith allegations and that the parties did not have unequal bargaining power or inequity in drafting power.
Conclusion
The court held that bad faith can contemplate oral agreements without violating the parole evidence rule as well as the exercise of discretionary performance, so it should not have been dismissed.
A garage door manufacturer and a garage door distributor entered into an oral exclusive distribution agreement, but the manufacturer terminated without advance notice when sales declined. The trial court entered a motion for summary judgment on the grounds that the agreement was not for the sale of goods and there was no expectation of reasonable notice.
Rules of law
A contract which is primarily about the sale of goods is a sale of goods contract. Under U.C.C. ยง2-309, termination of a contract of indefinite duration requires reasonable notification unless the parties otherwise agree.
Arguments
The manufacturer argued that the agreement was a distribution arrangement rather than a goods contract, and so the U.C.C. should not apply. It argued that under the common law an agreement of indefinite duration can be terminated at will by either party.
The distributor argued that the contract was for the sale of goods and argued that under a sale of goods contract they were entitled to reasonable notice.
Conclusion
The Kentucky Court of Appeals ruled that the Uniform Commercial Code clearly applied to a case where the essential arrangement was the sale of goods even though the agreement could be termed a “distribution” arrangement. It ruled that the trial court erred in granting summary judgment on the question of reasonable notice.
Defendant, a fashion influencer, entered into an agreement with plaintiff under which he had exclusive rights to market her brand and she would receive half of all proceeds. When she violated the agreement, he sued; she countered by arguing that there was no consideration because plaintiff was not bound to do anything.
Rule of law
A promise lacking in an agreement but clearly implied by the intent of the parties and the context may be provided by the court.
Arguments
Defendant argued that because there was no requirement for plaintiff to use reasonable efforts to market her brand, the contract was invalid. Plaintiff argued that reasonable effort was implied and that the promise to pay half the profits and render accounts monthly was a thing of value suitable as consideration
Conclusion
The court reversed the appellate decision and granted judgment for plaintiff.
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