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Sour Grapes: Attorney’s Oral Agreement Might Be Okay if Fair, Just, and Fully Advised

The US Court of Appeals for the Ninth Circuit found that a district court erred in declaring on summary judgment that an attorney had no ownership interest in a winery because the alleged agreement was made orally. The Ninth Circuit explained that there were triable issues of fact as to whether the attorney could rebut the presumption against oral agreements by showing that the transaction was fair and just and that the client was fully advised. Schrader Cellars, LLC v. Roach, Case Nos. 23-15862; -15990 (9th Cir. Feb. 21, 2025) (Smith, Bennett, Johnstone, JJ.)

Fred Schrader is the former owner of Schrader Cellars (Cellars). Robert Roach is a Texas attorney who claims to have entered into an oral agreement with Schrader regarding the creation of another company, RBS LLC, which Roach asserts has an ownership interest in Cellars. After Schrader sold Cellars in 2017, Roach sued Schrader in Texas state court, claiming that the sale was improper. In 2021, Cellars filed a lawsuit in the US District Court for the Northern District of California, seeking, among other things, a declaration that Roach did not have any ownership interest in Cellars. Roach asserted various counterclaims.

The district court granted summary judgment on Cellars’ request for declaratory relief and dismissed Roach’s counterclaims. The case proceeded to trial on Cellars’ remaining claim for breach of fiduciary duty. The district court instructed the jury that, as a matter of law, Roach had breached his fiduciary duties to Cellars, so the jury decided only the issue of harm. The jury found that Roach’s breach of fiduciary duty had harmed Cellars during the limitations period but did not award damages because of the “litigation privilege defense.” Roach appealed the summary judgment order.

The Ninth Circuit found that the district court erred in granting Cellars summary judgment. Roach argued that the district court erred in declaring that he had no ownership interest in Cellars via the purported RBS agreement. At summary judgment, Cellars argued that even if Roach’s version of the RBS oral agreement existed, Roach could not enforce it because it violated California Rules of Professional Responsibility, which require written advisories and disclosures. Relying on this provision, the district court concluded that even if an oral argument existed, it was unenforceable, and Roach therefore could not have any ownership interest in Cellars. The district court noted that although “[a]n attorney may rebut the presumption of undue influence by showing that ‘the dealing was fair and just,’ and ‘the client was fully advised[,]’ . . . Roach has made no such effort to rebut this presumption.”

The Ninth Circuit found that the district court erred because there were triable issues of fact concerning whether Roach rebutted the presumption regarding the alleged breach of his client duties. The Court explained that not only did Roach expressly argue fairness before the district court, but the basic facts of the case (when viewed in the light most favorable to Roach) demonstrated that the transaction was fair and just and that [...]

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Agreement to One Is Not Consent to All

Addressing a myriad of issues involving unauthorized use of professional models’ photographs for gentlemen’s clubs’ promotional materials, the US Court of Appeals for the Second Circuit held that the district court erred in its interpretation of “consent,” and vacated and remanded to adjudicate the scope of the consent given. The Second Circuit simultaneously affirmed the district court’s dismissal of claims under the Lanham Act and New York corporate and libel law. Electra v. 59 Murray Enterprs., Case No. 19-235 (2d Cir. Feb. 9, 2021) (Pooler, J.)

Eleven famous female models, including celebrity Carmen Electra, brought claims against three gentlemen’s clubs for using photographs of the models without permission. Plaintiffs had posed for the photographs for modeling agencies and signed release agreements for those agencies to use the photos. The clubs were given these photographs through third-party contractors that used the images to promote social events, including advertisements on the clubs’ website and social media. Plaintiffs never provided the clubs with any authorization or written consent to use their photos, nor were they compensated. Plaintiffs maintained that they do not endorse the clubs and were harmed by the unauthorized use of their likeness in association with prurient activities that the clubs promote. The clubs argued that their contractors obtained the images from a catalogue source that they believed had all rights in the images.

The main issues on appeal were whether plaintiffs had provided their “written consent” to the clubs to use their photos when they signed releases with their own agencies (despite never authorizing the clubs to use the photos), and whether the releases barred their claims.

Of the 11 plaintiffs, only six were not time barred, and of those, only two had disputed terms of their agreements. The Court opined for those two plaintiffs.

Under New York Civil Rights Law §§ 50-51 (statutory right of privacy and publicity), it is a misdemeanor to “use for advertising purposes, or for the purposes of trade, the name, portrait or picture of any living person without having first obtained the written consent of such person.” This protects both private individuals and those in the public eye, such as the plaintiffs, if they did not give written permission for that particular use. In deciding whether plaintiffs gave their consent for lawful use, the Second Circuit explained that there is no consent if the use exceeds the terms of the agreement, a factual inquiry into the text and terms of the releases.

The district court granted the clubs summary judgment under § 51 claims, finding that each plaintiff with a timely claim had entered into a “comprehensive” release that “grant[ed] the releasee unlimited rights to the use of the images at issue.” The plaintiffs argued that the district court erred in so finding because the record did not contain releases for the images at issue. The district court did not address whether the releases constituted written consent, but mused that it would be “inconsistent” with the statute for plaintiffs to sign unlimited releases and [...]

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$6 Million Verdict Vacated in Flooring Tech Trade Secrets Row

The US Court of Appeals for the 11th Circuit reversed a judgment of trade secret misappropriation because the plaintiff had not proved that the defendant’s duty to maintain the secret arose at the time it acquired the secret. AcryliCon USA, LLC v. Silikal GmbH, Case No. 17-15737 (11th Cir. Jan. 26, 2021) (Tjoflat, J.)

AcryliCon USA, LLC (AC-USA), AcryliCon International, Ltd. (AC-I) (collectively, AcryliCon), and Silikal are in the industrial flooring business. Hegstad is a chemical engineer who founded AC-I. In 1987, Hegstad invented, with Silikal’s help, a formula for a special industrial flooring material called 1061 SW. The formula belonged to Hegstad, and Silikal possessed the formula as the manufacturer of 1061 SW resin for Hegstad and AC-I. In 1997, AC-I and Silikal contractually established AC-I as the exclusive distributor of 1061 SW resin. In 2008, AC-USA was incorporated and entered into license agreements to obtain the right to import, market and sell 1061 SW (among other products) in the United States.

Thereafter, a dispute arose between AC-I and Silikal. The dispute was resolved by a 2010 global settlement agreement (GSA), which ended the prior agency relationship but provided (inter alia) that Silikal would preserve the secrecy of the formula and not sell 1061 SW resin to anyone but AcryliCon. The GSA also contained a forum selection provision stating that disputes arising from activities in the United States would be governed by Georgia law and waiving objections to personal jurisdiction in the Northern District of Georgia.

AC-USA sued Silikal in 2014 in the Northern District of Georgia, claiming that Silikal breached the GSA by manufacturing 1061 SW resin, selling it globally and taking credit for 1061 SW in its marketing. AC-USA’s complaint included several other causes of action, including misappropriation of trade secrets. Silikal moved to dismiss for lack of personal jurisdiction, contending that it had not sold 1061 SW to anyone other than AcryliCon in the United States. The district court denied the motion on evidence that such sales had occurred. AC-USA moved for partial summary judgment on its contract claim and sought a permanent injunction barring Silikal from producing or selling 1061 SW. The district court granted the motion and injunction because “previous counsel for Silikal admitted” that there had been sales of 1061 SW in violation of the GSA and Silikal did not dispute that there had been a breach of contract. After trial, the jury found for AC-USA, awarding $1.5 million on the misappropriation claim and $1.5 million on the contract claim. The district court added $3 million in punitive damages. Silikal moved for judgment as a matter of law (JMOL), arguing that the district court lacked personal jurisdiction, that AcryliCon had failed to prove misappropriation, and that AcryliCon had failed to prove cognizable damages on its contract claim. The district court denied the motion, awarded AC-USA attorneys’ fees and entered judgment for AC-USC. Silikal appealed.

The 11th Circuit held that Silikal waived its challenge to personal jurisdiction by appealing only the pre-trial jurisdiction ruling [...]

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