Shep Davidson

Often, one of the last provisions in a contract will say:

This contract shall be governed and construed in accordance with the laws of the State of ______.”

Most courts will abide by the parties’ choice and apply the law designated by them – even if the law selected is not from the state where the case is being tried.  It is only in limited situations, such as (i) where application of the selected law would undermine a significant public policy of the jurisdiction where suit is filed, or (ii) if the locale of the law selected has no relation to the parties or the dispute, that a court is unlikely to abide by the parties’ choice of governing law.

Why should in-house counsel care about choice of law?  Well, while most states may have similar common law with respect to garden variety contract or tort claims, all states have statutory claims that only can be pursued if their own law is applicable.… Keep reading

If you read my earlier blog posting, “In-House Counsel and the Attorney-Client Privilege,” and wanted additional insight on the topic, please join me for the webinar “Silence is Golden: The Attorney-Client Privilege” on Friday, June 22 from 12:00 pm – 1:00 pm (EST), sponsored by the Global Outsourcing Association of Lawyers.  I will address when the privilege applies, what the privilege covers and when the privilege is waived.  There will also be opportunities for you to submit questions.  Please click here to register.… Keep reading

Over three prior posts on the subject of mediation, I have discussed what mediation is and is not, explained the process of how mediation works, and most recently, examined under what circumstances it makes sense to mediate.  Here, I will conclude this series of mediation posts by breaking down how, once you reach an agreement in principle, you limit the risk of losing it.

After a very long day of back and forth with your mediator, you authorize one last proposal for the mediator to take to the other side.  The mediator comes back 20 minutes later and tells you that your offer has been accepted.  The mediator then invites all of the parties and their counsel into the same conference room in which you began the mediation process nine hours earlier, to go over the terms.  One by one, he goes through each of the six settlement terms, and each time both sides indicate that they agree.

While you do and should feel a sense of satisfaction (even if the settlement is not exactly what you had hoped it would be), do not think for one minute that the process is over.  Indeed, one of … Keep reading

After having read Mediation 101 and Mediation 201, you should have a solid understanding of what mediation is and how it works.  Now, let’s discuss when it makes sense to mediate.

While different types of cases get resolved through mediation every day, mediation is not likely to be successful in every case.  As a general rule, when parties agree to mediate, it is implied that they are willing to at least consider some sort of compromise or “outside the box” resolution to the dispute (it is for this reason that I believe court mandated mediation often leads to nothing more than a waste of time and money).  Part of the reason for this is that no matter how reasonable a party’s position may be, mediators are wired to be impartial, and telling one party from the outset that it must capitulate goes against mediator DNA.  Another reason for this is that all but the most inexperienced litigators know that mediation implies some sort of compromise.  Thus, if a party claims at the mediation that it will not compromise one bit, such a position is not likely to be taken seriously – even if it is genuine.  Likewise, a … Keep reading

Hopefully, Mediation 101 gave you a clear understanding as to what mediation is.  Now, let’s discuss how mediation works.

Pre-Mediation Considerations

While selecting a mediator can be critical, unlike when selecting an arbitrator, parties should not be very concerned that a biased mediator might force them to enter into a “bad” settlement.  Because mediation is voluntary, a mediator simply does not have the power to force a party to agree to any settlement with which that party is not completely satisfied.  What is crucial about the selection of the mediator, however, is that s/he has credibility with the ultimate decision makers, i.e., the parties, not counsel.  Without credibility, the parties are not going to give the mediator’s comments the full consideration that might lead them to modify their positions and settle.  Consequently, it is important to ask questions like the following:

  • If industry knowledge is important in understanding the dispute, does the potential mediator have sufficient industry knowledge?
  • Will it impress the parties and increase the persuasiveness of the mediator if s/he is a former judge and/or has some other has special background or experience?
  • How many cases similar to the one at issue did the
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Over the past 15 years, Alternative Dispute Resolution (ADR) has become all the rage as parties try to limit the time and expenses they might expend if forced to litigate disputes in court.  One of the ADR mechanisms whose use has exploded in growth is mediation.  Indeed, it seems that every month or two I see an announcement that a recently retired judge is joining one of the big mediation firms, such as JAMS, or is starting his or her own mediation practice.

While I often engage in mediation as a way to try to resolve my clients’ disputes, it is important to understand what mediation is, and what mediation is not, so that you can evaluate whether it might be an appropriate vehicle to use in an effort to settle a particular dispute that you or your business might have.

Although people often confuse mediation with arbitration, the only real similarity is that parties generally cannot be forced to either mediate or arbitrate a dispute; they must voluntarily agree to engage in either process.  Substantively, however, mediation could not be more different than arbitration.… Keep reading

As suggested in “The Effective Use of Liquidated Damages Provisions,” there can be a fine line between an enforceable liquidated damages provision and an unenforceable penalty clause.  Thus, when drafting an agreement, it is important to keep in mind that a payment-for-breach provision will only be enforceable if, at the time of drafting:

  1. It would be difficult to determine the damages that would be caused if the contemplated breach were to occur; and 
  2. The amount of the of the liquidated damages is a reasonable estimate of the actual damages that your company would suffer if there were a breach.

In light of these overarching principles, be sure that the contract expressly states that:

  1. All parties agree that if a breach were to occur, it would be difficult to determine actual damages;
  2. Based on what the parties presently know (include specifics if you can), they agree that $X is a reasonable estimate of the damages that would accrue if a breach occurred in the future; and
  3. All parties agree that the amount of liquidated damages is fair and reasonable and would not act as a penalty to the breaching party.
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In an earlier post, “Is Arbitration Quicker, Cheaper and Better for You?” I discussed why having a faster and less expensive dispute resolution mechanism may not be in your best interest.  Make no mistake, however, the differences between traditional litigation and arbitration go well beyond the time and expense it takes to complete the respective processes.  The following are a few of the more notable substantive distinctions between these two dispute resolution mechanisms:

  1. Litigation allows for extensive “discovery” (e.g., depositions, document requests and interrogatories) from parties and non-parties.  Discovery in arbitration often is limited to document requests, but can be broadened by the arbitrator or agreement of the parties.
  2. Because arbitrators are not required to abide by any Federal or State Rules of Evidence, they routinely consider information that never would be admissible in court.
  3. A “bad” decision in a court of law almost always can be appealed.  An arbitrator’s decision, on the other hand, rarely can be appealed – even if it obviously is contrary to the applicable law.
  4. Notwithstanding a lack of empirical data, most litigators agree that arbitrators are much more likely than a judge/jury to issue a compromise decision and/or one based on fairness principles
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Like many lawyers, I learned way back in law school that an “agreement to reach an agreement is a contradiction in terms and imposes no obligation on the parties thereto,”  (Rosenfield v. United States Trust Co. ). What I didn’t learn until many years later, however, was that although a Letter of Intent (LOI) expressly says that the parties’ rights and obligations are subject to the execution of a full-blown contract, that LOI can be binding – even if the contemplated full-blown contract never is executed. 

I learned this through my representation of Robert and Juliann DiMinico in the case of McCarthy v. Tobin.  In that case, Ann Tobin and John McCarthy executed a one-page “Offer to Purchase Real Estate” in connection with Tobin’s condominium at Burrough’s Wharf.  The Offer to Purchase expressly made the parties’ rights and obligations “Subject to a Purchase and Sale Agreement satisfactory to Buyer and Seller,” which was required to be executed by August 16, 1995, and time was of the essence.  After McCarthy failed to return a signed Purchase and Sale Agreement by the August 16 deadline, Tobin sold her property to the DiMinicos.

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The Basics of Liquidated Damages Provisions

A liquidated damages provision fixes the amount of money one party will pay to the other if a breach occurs.  Because the law of contracts is designed to be compensatory, however, a payment-for-breach-clause that is penal will not be enforceable (Some reasons for this are discussed in “Why Not Enforce ‘Penalty’ Liquidated Damages Clauses?”).  Accordingly, even if a contract conspicuously says: “If the purchaser is one second late to the closing, it shall pay the seller $10,000,000,” that clause very likely will be deemed to be an unenforceable penalty.

So what makes for a valid liquidated damages provision?  There are two essential conditions:

  1. At the time the contract was executed, it must have been the case that it would have been difficult to determine the damages caused by a breach.
  2. At the time the contract was executed, the amount of the monetary payment designated must have appeared to have been a reasonable estimate of the expected damages for the contemplated breach. 
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