Nollan v. California Coastal Comm’n, 483 U.S. 825, 107 S. Ct. 3141, 97 L. Ed. 2d 677 (1987).

Facts: Nollan (P) applied for a permit to build a residence on a parcel of beachfront property located between two public beaches. Nollan originally leased the property with an option to buy conditioned on his promise to demolish a small bungalow on the property. To build on the lot the Nollans had to submit a plan to the California Coastal Commission (D) in order to obtain a coastal development permit. The plan called for the removal of the bungalow and the construction of a three-bedroom house conforming to other homes in the the neighborhood. The Commission conditioned approval for Nollan’s permit upon his allowing an easement for public passage across the property in order to make it easier for the public to pass between the two public beaches to the north and south of Nollan’s property.

Nollan sued, claiming that the Commission deprived them of their property rights without due process. Nollan contends that the condition could not be imposed absent evidence that their proposed development would have an impact on public access to the beach. The trial court ruled for Nollan, the court of appeals reversed, and the U.S. Supreme Court granted cert.

Issues: 1) Must the conditioning of a grant of a land use permit upon the landowner’s grant of a permanent easement be substantially related to a legitimate government interest in order to avoid violating the Takings Clause? 2) Will the lack of a nexus between the condition and the original purpose for requiring the building restriction alter that purpose and cause the condition to constitute a taking?

Holding and Rule (Scalia): 1) Yes. The conditioning of a grant of a land use permit upon the landowner’s grant of a permanent easement must be substantially related to a legitimate government interest in order to avoid violating the Takings Clause. 2) Yes. The lack of a nexus between the condition and the original purpose for requiring the building restriction alters that purpose and causes the condition to constitute a taking.

If the California Coastal Commission had simply required Nollan to make an easement available on a permanent basis in order to increase public access to the beach we have no doubt that there would have been a taking. We have repeatedly held that as to property reserved by its owners for private use, the right to exclude others is among the most important sticks in the bundle of rights commonly characterized as property. Where there is a permanent physical occupation, our cases have found a taking without regard to whether the action achieves an important public benefit or has only minimal economic impact on the owner. A permanent physical occupation has occurred when individuals are granted a permanent and continuous right to pass so that the property may continuously be traversed even though no particular individual is permitted to station himself permanently upon the premises.

The only question that needs to be determined is requiring the easement as a condition for issuing a land use permit alters this basic outcome. Land use regulation does not effect a taking if it substantially advances legitimate state interests and does not deny an owner economically viable use of his land. A broad range of governmental purposes and regulations satisfies these requirements.

This constitutionality disappears if the condition substituted for the prohibition utterly fails to further the end advanced as the justification for the prohibition. When this nexus is eliminated the situation becomes untenable. The lack of nexus between the condition and the original purpose of the building restriction converts that purpose to something other than what it was. The purpose would then become the obtaining of an easement without payment of compensation. Unless the permit condition serves the same governmental purpose as the development ban, the building restriction is not a valid regulation of land use but an out and out plan of extortion.

A state cannot condition a property use permit on an act that does not address the problem caused by the permitted use. A land use regulation is not a taking if it substantially advances state interests and does not deny an owner economically viable use of the land. In this case the California Coastal Commission substituted a condition for outright prohibition that failed to further any of the legitimate government interests that were advanced as justification. The easement for public access did nothing to help the public’s view of the beach. If the Commission wants an easement across Nollan’s property it must pay for it.

Disposition: Reversed.

Dissent (Brennan, Marshall, Blackman, Stevens): This decision has imposed an unwarranted and discredited standard of precision upon a State’s exercise of police power. The police power of the State grants it the authority to impose conditions on private development. This power is to be judged according to what the State could have rationally decided. Under these facts, the California Coastal Commission has conditioned development upon preservation of public access to the ocean and tidelands by requesting an easement. The Court finds fault because it regards the condition as insufficiently tailored to address the precise type of reduction in access produced by the new development. Such a narrow conception of rationality has long been discredited as judicial arrogation of legislative authority.

The Takings Clause has never been read to require the states or the courts to calculate whether a specific individual has suffered burdens in excess of the benefits received. The demand for this heightened precise fit is based on the assumption that private landowners possess a reasonable expectation regarding the use of their land and the public has attempted to disrupt it. Here the situation is reversed; it is Nollan who is the interloper. The public’s expectation of access considerably antedates any private development of the coast.

Adarand Constructors, Inc. v. Peña

Phillips v. Moor, 71 Me. 78 (1880).

Facts: Moor (D) contracted to purchase hay from Phillips (P). On June 15th Moor mailed an offer to Phillips to purchase three tons of hay at $5.00 per ton and the remaining hay at $9.50 per ton. On June 20th Phillips replied that Moor could have the hay at the price in his offer but added that if you can “’see fit to pay the $10 after getting it in please feel free to do so”. Moor received the letter that evening and the hay was burned in the barn the next day. Phillips brought suit when Moor refused to pay.

Issue: When does the risk of accident vest in the buyer?

Holding and Rule: When the terms of sale are agreed upon and everything that the seller has to do with the goods is complete, the contract for sale becomes absolute without actual payment or delivery. The risk of accident vests in the buyer even if he has not paid for the goods or taken actual delivery.

The acceptance of D’s offer was absolute and unconditional. The sale of hay was complete and was not qualified by the expression of P’s hopes for more money. D had been told that he might take it and had nothing to do but arrange to have it hauled and to appropriate it to himself without any further act on the part of the seller. This is true even when the goods are merely identified for sale from a bulk of goods destroyed.

Disposition: Judgment for P.

Notes: Risk of loss passes on identified goods once the deal is done and is not dependent on delivery. UCC 2-509 covers this issue and the risk of loss passes at different times depending on whether a party is a merchant or not.

Summary of Taylor v. Caldwell

Hickman v. Taylor, 329 U.S. 495, 67 S. Ct. 385, 91 L. Ed. 451 (1947).

Facts: A tugboat sank killing five crew members. Hickman (P) brought suit as representative of one of the deceased against Taylor et al. (Ds). The four survivors testified at a public hearing before the United States Steamboat Inspectors and their testimony was recorded and made available to all of the parties. Ds also held their own interviews of the survivors and others with information regarding the accident.

Ds answered all other interrogatories but declined to summarize the statements that were obtained via their own interviews on the grounds that they were “privileged matter obtained in preparation for litigation”. P objected and the district court held that the requested information was not privileged and ordered their production. Ds counsel refused and were held in contempt.

The Court of Appeals reversed and the Supreme Court granted cert.

Issues: 1) Do the FRCP pertaining to discovery require an attorney to produce oral and written statements or other information obtained in preparation for possible litigation after a claim has arisen? 2) Is information prepared or obtained by counsel in preparation for litigation after a claim has arisen protected by the attorney-client privilege?

Holding and Rule (Murphy): 1) No. In these circumstances, Rules 26, 33 and 34 of the FRCP do not require an attorney to produce oral and written statements or other information obtained in preparation for possible litigation after a claim has arisen. 2) No. Information prepared or obtained by counsel in preparation for litigation after a claim has arisen is not protected by the attorney-client privilege and is not protected from discovery on that basis.

Discovery of written materials obtained or prepared by opposing counsel in preparation for possible litigation may not be had unless party seeking discovery can establish that relevant and non-privileged facts remain hidden in an attorney’s file and where production of those facts is essential to the preparation of one’s case.

Rule 30(b) gives the trial judge the requisite discretion to make a judgment as to whether discovery should be allowed as to written statements secured from witnesses; but, in this case, there was no ground for the exercise of that discretion in favor of P.

The Court held that the District Court erred in holding Ds in contempt for failure to produce that which was in the possession of their counsel, and in holding their counsel in contempt for failure to produce that which he could not be compelled to produce under either Rule 33 or Rule 34.

Public Policy: The general policy against invading the privacy of an attorney’s course of preparation is so essential to an orderly working of our system of legal procedure that a burden rests on the one who would invade that privacy to establish adequate reasons to justify production through a subpoena or court order. There must be some showing of necessity or justification by the party seeking its discovery. If relevant and nonprivileged facts remain hidden in an attorney’s file and the production of those facts is essential to the preparation of a case, discovery may be made.

Under the circumstances of this case, no showing of necessity could be made which would justify requiring the production of oral statements made by witnesses to Ds‘ counsel, whether presently in the form of his mental impressions or in the form of memoranda.

P had an adequate opportunity to seek discovery of the same facts particularly by the direct interviews of the witnesses. P made no attempt to show why it is necessary that Ds‘ attorney produce the material.

Disposition: Affirmed.

Concurrence (Jackson): The question is simply whether such a demand is authorized by the rules relating to various aspects of “discovery.” Discovery should provide a party access to anything that is evidence in his case. Discovery should not however nullify the privilege of confidential communication between attorney and client. But those principles give us no real assistance here because what is sought is neither evidence nor is it a privileged communication between attorney and client.

To consider first the most extreme aspect of the requirement in litigation here, we find it calls upon counsel to “set forth in detail the exact provision of any such oral statements or reports.” Thus, the demand is not for the production of a transcript in existence, but calls for the creation of a written statement not in being. But the statement by counsel of what a witness told him is not evidence when written plaintiff could not introduce it to prove his case.

Coleman v. Smith Summary

Apex Hosiery Co. v. Leader Summary

Foxco Industries, Ltd. v. Fabric World, Inc., 595 F.2d 976 (5th Cir. 1979).

Facts: Foxco Industries (P) was a manufacturer of knitted fabrics and Fabric World (D) sold fabrics at retail. D gave P an order for 12,000 yards of first quality fabric, at a price of $36,705, to be delivered by January 1975. The price of yarn fell sharply a few weeks after the order was placed and D wrote to P to cancel the order. P replied that the order was substantially completed and that it would not accept the cancellation. P informed D that if the goods were not accepted, the order would be completed and the goods sold, and P would sue for the difference between the contract price and the sales price. D agreed to accept the order but threatened to return the entire shipment if it contained a single flaw.

P did not believe that it would be possible to produce such a large order without a single flaw and decided not to ship it. On the date the order was to have been shipped the fair market value was 20% less than the contract price. P made no effort to sell the goods for 8 months by which time the value had fallen by 50%.

P sued D in diversity. By the time of trial 15 months after the contract shipment date, P had sold part of the order for $10,100 and had on-hand the remainder of the order with a value of $6,250.

D claimed that “first quality” goods meant fabric containing no flaws. P introduced evidence of industry standards from the Knitted Textile Association, a large textile industry group. The standards established the amount and types of flaws that were permissible in fabric labeled as “first quality”.

D was not a member of that association and claimed it had no knowledge of its standards. The district court entered judgment for P for $26,000 and D appealed on several grounds. D claimed that the standards of a trade association of which it had no knowledge were not admissible to show the disputed meaning of an undefined contract term.

Issue: Are the parties to a contract presumed to have intended to incorporate trade usage under UCC 2-202?

Holding and Rule: Yes. The parties to a contract are presumed to have intended to incorporate trade usage under UCC 2-202.

D contended that it was not a member of the Knitted Textile Association, was unaware of its existence until the time of trial, and that that group’s standards were inadmissible because they were a custom or usage of the trade of which D had no knowledge. Under the traditional application of the parol evidence rule D’s argument might have merit; the private, subjective intent of a contracting party may well be irrelevant in determining the meaning of a contract term unless it is shown that that intent was communicated to the other party. There was no direct evidence that D was put on notice that the term “first quality” would be defined according to usage and custom, as embodied in the industry standards. Under UCC 2-202 the parties to a contract such as this are presumed to have intended the incorporation of trade usage in striking their bargain and trade usages may help explain or supplement contract terms.

A usage of trade is any practice or method of dealing having such regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question. The existence and scope of such a usage are to be proved as facts. A course of dealing between parties and any usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware give particular meaning to and supplement or qualify terms of an agreement.

Disposition: Affirmed.

Ghen v. Rich Summary

Vieth v. Jubelirer, 541 U.S. 267, 541 U.S. 267, 124 S.Ct. 1769, 158 L.Ed.2d 546 (2004).

Facts: Pennsylvania’s General Assembly passed a redistricting plan after the state lost two seats in the House of Representatives. Republicans controlled the governor’s office and both houses of the state legislature.

Vieth et al. (Ps), residents of Pennsylvania registered to vote as Democrats, brought suit in federal district court against the State and officers involved in implementing the plan (Jubelirer et al., Ds). Vieth alleged that the plan violated the “one person one vote” requirement of Article I Section 2 of the U.S. Constitution, and that the plan was a political gerrymander in violation of Article I and the Equal Protection Clause of the Fourteenth Amendment. Jubelirer moved to dismiss. The three judge panel granted the motion to dismiss the political gerrymandering claim. The court dismissed the remaining claims against the State on Eleventh Amendment grounds, but did not dismiss the other claims against Jubelirer and the other remaining defendants.

At trial, the court entered judgment for Vieth and retained jurisdiction over the case pending the court’s approval of a new plan. The governor then signed into law a new redistricting plan designed to cure the apportionment problem. Vieth moved to impose their own new redistricting plan in favor of the State’s new plan on the same grounds as its predecessor. The district court denied Vieth’s motion, holding that the State’s new plan was not malapportioned. Vieth appealed and the Supreme Court granted cert.

Issue: Is political gerrymandering nonjusticiable?

Holding and Rule (Scalia): Yes. Political gerrymandering is nonjusticiable.

No judicially discernible and manageable standards for adjudicating claims of gerrymandering exist. The plurality therefore would overrule Davis v. Bandemer. In Bandemer, the Court held that such claims are justiciable but could not agree upon a standard for assessing political gerrymandering claims under the facts.

The Framers provided a remedy for the problem of gerrymandering: the Constitution gives state legislatures the initial power to draw federal election districts, but authorizes Congress to “make or alter” those districts. In Bandemer, the Court held that the Equal Protection Clause also grants judges the power and duty to control that practice. However, neither Art. I, §2 or §4, nor the Equal Protection Clause, provides a judicially enforceable limit on the political considerations that the States and Congress may take into account when districting.

One of the tests for nonjusticiability or political question is a lack of judicially discoverable and manageable standards for resolving the question (see Baker v. Carr). The court held that because the Bandemer court was unable to discern what the standards for deciding gerrymandering cases might be, and because no standards could be discerned in the following eighteen years, such issues are in fact nonjusticiable.

Concurrence (Kennedy): I would not foreclose all possibility of judicial relief if some limited and precise rationale were found to correct an established Constitutional violation. There is a fundamental lack of comprehensive and neutral principles for drawing electoral boundaries, and an absence of rules to limit and confine judicial intervention.

A determination that a gerrymander violates the law must rest on a conclusion that the classifications, though generally permissible, were applied in an invidious manner or in a way unrelated to any legitimate legislative objective. With no agreed upon substantive principles of fair districting, there is no basis on which to define clear, manageable, and politically neutral standards for measuring the burden a given partisan classification imposes on representational rights. Suitable standards for measuring this burden are critical to our intervention.

Arguments for holding cases like this to be nonjusticiable are not so compelling that they require the Court now to bar all future partisan gerrymandering claims. That a workable standard for measuring a gerrymander’s burden on representational rights has not yet emerged does not mean that none will emerge in the future. The Court should adjudicate only what is in the case before it.

Disposition: Affirmed.

Notes: There was no majority opinion in this case. There were four justices in favor of Scalia’s opinion and a concurrence by Kennedy. This case therefore did not overrule overrule Davis v. Bandemer.

Yick Wo v. Hopkins Summary

World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980).

Parties: The plaintiffs in the underlying action were the Robinsons. This part of the case involves a request for a writ of prohibition brought by the defendants (Word-Wide Volkswagen and Seaway) against the trial court judge, Woodson.

Facts: The Robinsons (P) purchased an Audi from Seaway Volkswagen, Inc. (D1), a New York car dealership. One year later while driving through Oklahoma, another car hit them from behind, causing a fire which caused severe injuries to Mrs. Robinson and her two children. P brought a products liability suit in state court against four parties including Seaway and its distributor, World-Wide Volkswagen Corp. (Ds). Ds were New York corporations and did no business in Oklahoma. Ds entered special appearances claiming that Oklahoma could not exert in personam jurisdiction over them by virtue of the Due Process Clause of the Fourteenth Amendment. The trial court found that it had jurisdiction and the Oklahoma Supreme Court denied Ds’ request for a writ of prohibition to restrain the trial judge from exercising in personam jurisdiction over them. The U.S. Supreme Court granted cert.

Issue: In order to exercise personal jurisdiction over a nonresident party, how extensive must the party’s contacts be to satisfy due process?

Holding and Rule (White): The party’s contacts with the state must be such that maintenance of the suit does not offend traditional notions of fair play and substantial justice. The relationship between the party and the state must be such that it is reasonable to require the corporation to defend the particular suit which is brought there.

A state court may exercise personal jurisdiction over a party only if the party has minimum contacts with the forum state (see International Shoe Co. v. Washington). The court held that there was a total absence of circumstances that are necessary to permit an exercise of personal jurisdiction. Ds did not solicit business in Oklahoma through salespersons or advertising reasonably calculated to reach the state. Although it was foreseeable that one of their cars could be involved in an accident in Oklahoma, forseeability alone is not sufficient for personal jurisdiction under the Due Process Clause. The degree of forseeability that must exist is not the mere likelihood that a product will find its way into the state, but that the defendant’s conduct and connection with the state are such that he should reasonably anticipate being haled into court there. Purposeful availment provides clear notice of jurisdiction.

Disposition: Reversed.

Dissent (Brennan): States may exercise jurisdiction over a defendant even if that party has not deliberately or purposefully sought contact with the state. It would be difficult to believe that Ds truly believed that none of the cars they sold would ever leave the New York area. The contacts of Ds with Oklahoma were not extensive but it was reasonable for them to be subjected to jurisdiction. Fairness dictates that the sale of a mobile item such as a car should satisfy the minimum contacts necessary for jurisdiction.

Dissent (Marshall): Jurisdiction here is based on the deliberate and purposeful acts of Ds in choosing to become part of a global network for marketing and servicing cars. Ds must have anticipated that a substantial portion of the cars sold would travel to remote states. The probability that some of the cars would eventually get to all contiguous states is a virtual certainty. This knowledge would alert a reasonable businessman to the likelihood that a defect might manifest itself in the forum state.

Dissent (Blackmun): It is the nature of the instrumentality that is critical. With our network of interstate highways, Ds could not have believed that their cars would remain in the vicinity of their retail sale. It is not unreasonable, unconstitutional, or beyond International Shoe to uphold jurisdiction in this instance.

Hanson v. Denckla Summary

Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984).

Facts: Helicopteros Nacionales de Colombia (D), a Colombian corporation, purchased most of its helicopter fleet and obtained training for some of its pilots from a Texas manufacturer but had no place of business in Texas. Helicopteros contracted to provide helicopter transportation service for a Peruvian consortium, which was the alter ego of a joint venture headquartered in Houston. In the course of providing service under the contract, one of D’s helicopters crashed killing four U.S. citizens on board.

Hall et al. (P) brought suit on behalf of the decedents in Texas state court against Helicopteros and other parties including Bell Helicopter, the Texas-based manufacturer of the helicopter. Helicopteros made a special appearance and moved to quash service for lack of personal jurisdiction on the grounds that it had very little contact with the state, and that its performance under the service contract involved no contact with the state. The trial court denied Helicopteros’s motion and the jury entered a verdict for Hall. The Texas Court of Appeals reversed, holding that the court did not have personal jurisdiction over Helicopteros. The Texas Supreme Court reinstated the trial court’s ruling and the jury award. The U.S. Supreme Court granted cert.

Issue: How extensive must a party’s contacts with a forum state be in order for a court of that state to exercise general in personam jurisdiction over that party?

Holding and Rule (Blackmun): In order to exercise general in personam jurisdiction over a party, the party’s contacts with the forum state must be of a “continuous and systematic” nature.

The court held that D’s contacts with Texas did not satisfy the requirements of the Due Process Clause, and the Texas court therefore could not assert in personam jurisdiction over D.

The one trip to Houston by D’s CEO for negotiating the transportation services contract and other activities unrelated to the cause of action were not contacts of a continuous and systematic nature and did not support an assertion of general jurisdiction. Nor did D’s purchases of helicopters and training of its pilots from the Texas manufacturer form a sufficient basis for jurisdiction. Mere purchases, even if occurring at regular intervals, are not enough to warrant a State’s assertion of in personam jurisdiction over a nonresident corporation in a cause of action not related to the purchases.

Disposition: Reversed.

Dissent (Brennan): D purposefully availed itself of the benefits and obligations of the forum state. Active participants in interstate and foreign commerce take advantage of the economic benefits and opportunities offered by the various states. It is only fair and reasonable to subject to them to the obligations that may be imposed by those jurisdictions. D’s contacts were sufficiently related to the underlying cause of action. The wrongful death claims assert the necessary requirements for specific jurisdiction because D’s contacts with Texas were directly related to the negligence that P alleged in his complaint.

Notes: The cause of action in this case involved wrongful death claims based on D’s negligence. There were no claims for breach of contract. Since D’s CEO had negotiated the contract in Texas it is likely that the court would be able to exert in personam jurisdiction over D for breach of contract claims.

Burger King Corp. v. Rudzewicz Summary

Moore v. Regents of the University of California, 51 Cal. 3d 120, 271 Cal. Rptr. 146, 793 P.2d 479, cert. denied 499 U.S. 936 (1991).

Facts: Moore (P) was treated for hairy cell leukemia by Golde (D) at UCLA Medical Center. Test results revealed that Moore’s cells would be useful for genetic research and Golde removed blood, bone marrow, Moore’s spleen, and other tissues. Golde did not inform Moore of his plans to use the cells for research.

After Moore underwent surgery Golde falsely told him that he needed follow up treatment and further tests which must be conducted at the UCLA Medical Center. Golde took blood and tissue samples from Moore on several occasions over a seven year period and retained Moore’s spleen for research without Moore’s knowledge or consent.

Golde patented a cell line using Moore’s cells. D received substantial royalties from licensing the technology including cash and stock options. Moore learned of D’s activities and sued in state court on thirteen counts including a claim for conversion, claiming that his blood and tissues and the cell line developed from them were his tangible personal property. The trial court sustained D’s demurrer on the conversion claim and dismissed the case on the grounds that all of the remaining claims were subordinate to the conversion claim. On appeal, the Court of Appeal reversed, holding that informed consent was inadequate and concluding that there were no grounds establishing that Moore had abandoned or consented to the use of his tissue for research unrelated to his treatment. Golde and the Regents of the University of California appealed.

Issues: 1) Does a claim for conversion lie for the use of a plaintiff’s bodily tissue in medical research without his knowledge or consent? 2) Under the duty to obtain informed consent, must a doctor disclose his intent in using a patient for research and economic gain?

Holding and Rule (Panelli): 1) No. A claim for conversion does not lie for the use of a plaintiff’s bodily tissue in medical research without his knowledge or consent. 2) Yes. Under the duty to obtain informed consent, a doctor must disclose his intent in using a patient for research and economic gain.

Rule for Conversion: To establish conversion, plaintiff must establish an actual interference with his ownership or right of possession. Where plaintiff neither has title to the property alleged to have been converted, nor possession thereof, he cannot maintain an action for conversion.

The court held that since Moore did not expect to retain possession of his cells, to sue for their conversion he must have retained an ownership interest in them. There are several reasons to doubt that he retained such interest. First, there is no precedent in support of Moore’s claim. Second, California statutes drastically limit any continuing interest of a patient in excised cells by requiring that they be destroyed after use. Third, the subject matter of the patent (i.e. the patented cell line and the products derived from it) cannot be Moore’s property.

Moore’s allegations state a cause of action for invading a legally protected interest of his patient. A cause of action can lie under the informed consent doctrine as a breach of the fiduciary duty to disclose material facts, or the lack of informed consent in obtaining consent to conduct medical procedures. A reasonable patient would want to know that his physician’s professional judgment might be impaired by an independent economic interest.

Public Policy: The court stated that it must balance the competing interests in determining whether conversion liability should be extended. Extension of conversion liability would produce great harm to future medical research. The court held that this was an issue better left to the legislative branch.

Disposition: The complaint states a cause of action for breach of the physician’s disclosure obligations, but not for conversion.

Mohr v. Williams Summary

Ghen v. Rich, 8 F. 159 (Mass. 1881).

Facts: Ghen (P) killed a whale at sea leaving his identifying bomb-lance in the whale. The custom and usage in the whaling industry in Cape Cod had been that one who kills a whale using a specially marked bomb lance owns the whale. If such a whale were found on a beach the finder would notify the killer and receive a finders fee.

The whale later washed up on shore 17 miles away and was discovered by Ellis. Ellis knew or should have known of the custom and usage of the whaling industry regarding the finding of a lost whale killed by another. Ellis sold the whale at auction to Rich (D) who then shipped off the blubber. Ghen discovered the fate of the whale and initiated a libel action against Rich to recover the value of the whale.

Issues: 1) Can the court look to custom and usage within an industry to determine the rule of law regarding the ownership of property? 2) Who is the owner of a whale who is shot and then found on shore by another?

Holding and Rule: 1) Yes. The court can look to custom and usage within an industry to determine the rule of law regarding the ownership of property. 2) The owner of a whale who is shot and then found on shore by another is the property of the killer.

The rule that the killer of a whale is the rightful owner has been recognized and acquiesced in for many years and embraces an entire industry. The rule requires the first taker to do all that is possible under the circumstances and offers reasonable salvage to the finder for securing or reporting the property. Unless it is sustained, the whaling industry must necessarily cease, for no person would engage in it if the fruits of his labor could be appropriated by a chance finder.

Disposition: For P.

Pierson v. Post Summary

Izadi v. Machado (Gus) Ford, Inc., 550 So.2d 1135 (Fla. 3d DCA 1989).

Facts: Machado (D) placed a newspaper ad offering a minimum $3,000 trade-in regardless of the car’s actual value. The ad also contained very fine print that stated that the offer applied only to a specific type of car in stock, and that the offer was based on a trade-in worth at least $3,000.

Izadi saw the ad and attempted to purchase a 1988 Ford Ranger pickup for $3,595 in cash plus trade-in. Machado refused to accept the offer. Izadi sued Machado for breach of contract, fraud, and misleading advertising. The trial court dismissed P’s complaint with prejudice and P appealed.

Issue: Does the general rule that a newspaper advertisement is not an offer apply where an ad employs bait-and-switch tactics?

Holding and Rule: No. An ad that employs bait-and-switch tactics is interpreted under standard contract principles and not under the general rule that an ad does not constitute an offer.

The court held that the complaint properly alleged that the advertisement contained an objectively unqualified offer to pay at least $3,000 for any trade-in regardless of condition.

The test for the true interpretation of an offer or acceptance is not what they party making it thought it meant or intended it to mean but what a reasonable person in the position of the parties would have thought it meant. Normally an enforceable contract does not arise from an offer contained in an advertisement. The basis for upholding the breach of contract claim is the prospect that this offer was used as bait to be followed by a switch to another deal when the acceptance of that offer was refused by D. It is difficult to find any other purpose when the bold offer is made conditioned on sub-microscopic print to apply to two models not listed in the present ad.

Disposition: For P; affirmed in part and reversed in part.

Leonard v. Pepsico, Inc. Summary

Seidenberg v. Summit Bank, 348 N.J. Super. 243, 791 A.2d 1068 (N.J. Super. Ct. App. Div. 2002).

Facts: Seidenberg and another plaintiff (Ps) sold their insurance brokerage business to Summit Bank (D). In exchange they received 445,000 shares of stock in Summit Bank’s parent corporation and were to continue as executives of the brokerage firms. The employment agreements acknowledged the joint obligation to work together, and provided that Ps and D would formulate a joint marketing program to provide the brokerage firm with access to D’s marketing resources.

D later terminated Ps and Ps brought suit for breach of contract, contending that D had failed to honor its obligations regarding joint marketing, thereby impacting negatively Ps’ expected compensation and future involvement. Ps claimed that their allegations gave rise to an inference of bad faith and that D had never been committed to developing the business with Ps, and that D had merely sought to acquire Ps’ business to operate it themselves.

All claims except Ps‘ claim of a breach of the implied covenant of good faith and fair dealing were settled. The lower court dismissed the remaining claim, holding that the sellers sought to use parol evidence to prove an oral agreement made beyond the four corners of the written contract. Ps appealed.

Issues: 1) Must a court allow parol evidence in determining whether a breach of the covenant of good faith has occurred? 2) Is a claim under the implied warranty of good faith and fair dealing negated merely because the claimant had equal bargaining power, had engaged counsel, or was not financially vulnerable when negotiating the agreement?

Holding and Rule: 1) Yes. A court must allow parol evidence in determining whether a breach of the covenant of good faith has occurred. 2) No. A claim under the implied warranty of good faith and fair dealing is not negated merely because the claimant had equal bargaining power, had engaged counsel, or was not financially vulnerable when negotiating the agreement. These are factors which the trier of fact may consider in weighing the sufficiency of plaintiffs’ claim but they are not the only factors.

The covenant of good faith and fair dealing is contained in all contracts and mandates that neither party do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.

While the bargaining power and sophistication of the parties must be viewed as significant, it is not the sole criterion by which this claim must be resolved. The parol evidence rule prohibits the introduction of oral promises which tend to alter or vary an integrated written instrument. A parol agreement which contradicts the express words of a written contract necessarily is ineffectual and evidence of it inadmissible. Parol evidence may be admitted in order to provide understanding of the parties’ intentions. The parol evidence rule does not come into play until the true intentions of the parties is determined. The rule cannot inhibit the application of the implied covenant of good faith and fair dealing because that covenant is contained in all contracts made by operation of law.

There are limits and the implied covenant of good faith and fair dealing cannot override an express term in a contract. The implied covenant can require that a contracting party act in good faith when exercising discretion in performing its contractual obligations. It may occur that a party will be found to have breached the implied covenant even if the action complained of does not violate a pertinent express term.

In this case Ps do not seek to contradict or alter any express term in their written contract, but rather question D’s good faith in both its performance and termination of the contract. To determine what is considered a good faith performance, the court must consider the expectations of the parties and the purposes for which the contract was made. It would be difficult, if not impossible, to make that determination without considering evidence outside the written contract. Therefore, in determining whether a breach of the covenant has occurred, a court must allow for parol evidence.

Ps‘ allegations of bad faith and ill motives are sufficient to survive dismissal.

Disposition: Reversed.

American Standard, Inc. v. Schectman Case Summary