Contracts


Last week I had the pleasure of being a panelist at the Association for Corporate Growth (Boston) and the Turnaround Management Association (Northeast) joint conference on “Challenges and Opportunities in US Manufacturing.” A theme common to all of the speakers was the need to address workforce issues, whether with respect to training, engagement or transition. 

The challenges posed by human capital can often propel or derail improvement strategies, yet certain employment law issues are often overlooked or only addressed at the last minute. If in-house counsel are aware that an improvement plan that requires the exit of employees is being considered, the following issues in advance may help alleviate some last minute problems.

  1. Be sure that all employees have up-to-date, enforceable post-employment restrictive covenants. After implementing a layoff or termination of employees, the last thing that a company needs is to be surprised by a former employee’s attempt to use the company’s confidential information or goodwill to give a competitor an advantage. Reviewing existing confidentiality, non-solicitation and non-competition agreements for enforceability under applicable state laws, and even considering the company’s plan (and costs) for enforcement of post-termination restrictive covenants, will go far to help avoid unpleasant surprises.
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Porreca v. The Rose Group was a class action lawsuit brought by Carly Porreca and Charles Walton, alleging that their employer, Applebee’s Neighborhood Grill and Bar, had violated the Fair Labor Standards Act. After Porreca was dismissed from the lawsuit, the restaurant management company that owned and operated the Applebee’s at which Porreca and Walton worked, the Rose Group, sought a stay of the litigation as well as an order (i) compelling Walton to arbitrate his claim individually, and (ii) barring him from pursuing a class action in that arbitration.  In support of this request, the Rose Group relied on the fact that Walton had signed an agreement binding him to the company’s Dispute Resolution Program, which specifically stated the following:

The Company and I agree that all legal claims or disputes covered by the Agreement must be submitted to binding arbitration …. We also agree that any arbitration between the Company and me is of an individual claim and that any claim subject to arbitration will not be arbitrated on a collective or a classwide basis …. 

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Time-honored precedent holds that “[a]n agreement to reach an agreement is a contradiction in terms and imposes no obligation on the parties thereto.”  Thus, as I discussed in a prior post, a letter of intent (LOI) will not be binding if it does not contain all of the material terms of the contemplated agreement.  But what happens if there is an open material term, and the parties agree to “negotiate in good faith” towards resolving that outstanding matter?  That is exactly the situation addressed by the Delaware Supreme Court in Siga Technologies, Inc. v. Pharmathene, Inc.… Keep reading

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Many businesses use standard form contracts which may or may not be negotiable by a potential business partner. It is not unusual for such a contract to include a provision like the following:

In order to accept this Contract, you must have an authorized representative execute it where indicated and return the signed original to the Company within 10 days of the date appearing on the first page hereof.

Because, as noted in a recent blog post, a series of emails can form a binding agreement, and in another blog post, it was discussed that an email could satisfy the signature requirement of the statute of frauds, one would expect that an email to the Company, stating: “We have your contract, and we agree to its terms” would create a binding contract (assuming, of course, that such an email was sent within 10 days of the date of the contract). In Host v. Gray, however, a Massachusetts Superior Court Judge ruled that an email purporting to accept an offer was insufficient because the offer stated that it should be “signed … and returned ….”… Keep reading

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Many companies have bonus plans that require the employee to be employed through a certain date before the right to be paid vests.  If such a plan is in place, any employee terminated reasonably close to the vesting date is likely to demand payment of the bonus, claiming that his termination was a ruse designed to avoid the company’s obligation to pay him.  Unfortunately, employers who legitimately terminate employees near such a vesting date often get leveraged into paying monies that they legitimately should not have to pay because a contingent fee attorney has threatened to sue.  In Weiss v. DHL Express, Inc., however, the First Circuit implicitly gives employers a road map as to how they may be able to avoid such issues.… Keep reading

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In a prior post, I discussed how a letter of intent could constitute a binding agreement even if the parties contemplated that they later would execute a full-blown contract.  Last month, the Federal District Court in Boston went one step further and ruled that a series of e-mails constituted a binding agreement to settle a litigation even though a settlement agreement and related documents never were executed.… Keep reading

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In a prior post, I noted that if you want all disputes between contracting parties to be resolved in one and only one specific forum, it is imperative to expressly state this with great clarity in your agreement.  In light of the Massachusetts Appeals Court’s recent decision in Try Switch, Ltd. v. Endurance International Group, a similar approach should be taken if a contracting party wants a non-party to be a bona fide “third-party beneficiary” who is legally permitted to enforce some right or obligation under that contract.

In Try Switch, the plaintiff sued Endurance International Group in the Massachusetts Superior Court for breach of contract, and Endurance moved to dismiss for improper venue.  More specifically, Endurance argued that it was the third-party beneficiary of a contract between Try Switch and ValueClick International, and that contract included the following provision:

The exclusive forum for any actions related to this [a]greement shall be in the [c]ourts in Dublin, Ireland.

While the Superior Court agreed with Endurance and dismissed the case, the Appeals Court reversed.  In doing so, the Appeals Court first acknowledged that even though no Massachusetts case addresses the issue as to whether a non-party to … Keep reading

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A Right to Match Can Provide Multiple Benefits


Photo Credit: David W. Leindecker

A client recently forwarded me an article about a lawsuit that Oakley brought against Nike and golf wonder-boy Rory McIlroy.  In that suit, Oakley claims that as part of its endorsement agreement with McIlroy it had a right to match any new endorsement proposals made to McIlroy.  Nevertheless, after Nike made a proposal to McIlroy, the golf star refused to consider Oakley’s tender of a match.  While it appears that Oakley’s claims in that case will rise or fall based on whether McIlroy/Nike can prove that Oakley waived its right to match, the dispute reminded me that rights to match (sometimes denoted as  “rights of first refusal”) can turn out to be extremely valuable assets in a host of contexts.

Perhaps the most common use of rights to match arises in the context of restrictions on the transfer of equity in a closely held business.  Indeed, without such restrictions, a competitor might easily be able to buy out a minority equity holder and instantly gain access to key company data.  Even if that is not a genuine concern, those involved in a closely held business generally do not want a stranger to suddenly … Keep reading

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Beware of Choice of Law When Drafting Independent Contractor Agreements


As we have previously posted in Choice of Law in a Contract Can Be Critical, Ensuring Your Dispute Is Resolved in the Forum You Want Is Not Always Easy, and Selection of Forum Other Than Massachusetts May Not Avoid Wage Act Enforcement, choice of law and forum selection provisions should be conscious decisions made in the context of each specific contract.  If in-house counsel do not carefully draft these provisions in their independent contractor or consulting agreements, they may be overlooking a possible means of avoiding or minimizing liability in Massachusetts under the so-called Massachusetts Independent Contractor Law (M.G.L. c. 149, §148B), the Massachusetts Weekly Payment of Wages Act (M.G.L. c. 149, §148) and/or the Massachusetts minimum wage and overtime laws.  Because these statutes do not contain any explicit geographic restriction on their application, their applicability to non-Massachusetts residents performing work outside of Massachusetts for Massachusetts companies has been unsettled.  (I have previously posted here and here on the staggering ramifications of misclassifying a worker as an independent contractor in Massachusetts.) 

In Taylor v. Eastern Connection Operating, Inc., the Massachusetts Supreme Judicial Court took up the issue of whether New York residents who perform … Keep reading

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