What does the termination of a contract do to certain intellectual property rights that were granted, in perpetuity, from one party to another within that document? A recent ruling in the U.S. Southern District of New York can be instructive on this issue.
Jim Tomsula is credited as being a defensive wizard in NFL circles. The defensive line coach for the Washington Redskins was integral in turning around the club’s defense in 2017. Prior to that, he served in a variety of positions, including as head coach of the San Francisco 49ers from 2015-16.
It was a short stint for Tomsula with the 49ers, but as is the case for all coaches, he was bound by a contract with the team. And the team was bound to perform according to the contract.
In January 2017, Tomsula was referred to Heitner Legal to assist the coach with getting all the money due to him from the 49ers. The 49ers owed Tomsula severance compensation to be set-off by his new deal with the Redskins. In a letter, we noted that 49ers CEO/owner Jed York further recognized the compensation due in a statement wherein he said, “I would say this; we’ve got several years of Jimmy T’s salary left and we’re going to eat it. Whether he’s coaching somewhere else or not, we owe him that. That’s not a concern.”
After a bit of negotiation, we were able to resolve the matter with the 49ers, without litigation, and allow Tomsula to move on to only thinking about how he could improve the Redskins’ defense.
Transactions in the equine industry often involve animals worth thousands, if not hundreds of thousands of dollars. These transactions get especially daunting in the world of equine sports; the average selling price of a horse at the Keeneland September Yearling Sale – the nation’s premiere Thoroughbred auction – was $130,780, with 18 yearlings selling for $1 million or more.
While most horse buyers aren’t looking to purchase a horse worth as much as a home, they may be looking for a horse to play the equestrian sport of polo. Polo ponies are not as costly as premiere racehorses, but ponies that are suitable for low to medium post play can still range from $15,000 to $35,000 or more. Intuitively, one would think that these transactions involve piles of paperwork, lengthy negotiations, and the parties having a clear understanding of what rights are changing hands. For many of these transactions, this is not the case, and the sales are only memorialized with a handshake. Unfortunately for many buyers and sellers in the equine industry, these handshake transactions can have dire consequences.
In order to avoid the risks inherent in engaging in handshake transactions, buyers and sellers in the horse industry should seek and expect written contracts in transactions involving these large, valuable animals. Written contracts can protect both buyers and sellers in the horse industry, yet the same people who save receipts from buying horse feed have no papers to memorialize an agreement to buy a horse.
While a written contract cannot completely prevent any disputes from occurring, legal disputes become much more expensive to resolve and less manageable when a written contract is not available to interpret.
Contracts involving the sale and purchase of horses are important, and an equine sale contract should at least include six main components:
- The names, addresses, and contact information of the buyer, seller, and sales agent (if any);
- A clear description of the horse sold;
- A promise that the seller owns the horse and has the legal authority to sell it to the buyer;
- The full purchase price;
- The date the seller was paid; and
- That the seller was paid in full (or the remaining sum that is due and when it must be paid).
Veterinary history is another important factor that horse buyers should ask to have included in a contract, since it can be difficult to prove that a seller made any promises with regards to the animal’s veterinary history, and any vices or bad habits the horse may have.
In addition to the points outlined above, another vital clause to include in equine contracts is the horse’s ability to breed and the transfer or retention of breeding rights. There has been confusion over what law should govern the sale of breeding rights, and this confusion can lead to litigation with unanticipated results. Depending on the circumstances of the agreement, a breeding right could be characterized as either a good or a general intangible, which impacts the applicability of Article 2 of the Uniform Commercial Code (UCC) and other sources of law.
Given the high prices of equine breeding rights and other transactions, these dealings often rely on credit to run smoothly, and such agreements should be transacted in writing. Typical sources of credit in the horse industry are either directly from the seller or from a third party, such as a bank. Therefore, execution of promissory notes and the granting of collateral to the lender under Article 9 of the UCC are both quite common. In order to ensure that all of the value of the equine collateral will be available to satisfy the security interest, lenders in these cases should seek a security interest in additional collateral, such as the born or unborn offspring of the horse, all contract rights and general intangibles of the debtor pertaining to the horse, racing income, breeder’s awards, and other income related to the horse, breeder’s certificates pertaining to the horse, and all other proceeds and products of the horse.
In order to avoid costly litigation over the terms of an unwritten agreement, equestrian transactions should be written down and recorded. These high-priced agreements are prone to disputes, and the absence of a written contract only amplifies these concerns. It is time for the equine industry to finally buck the trend of transacting business while relying on a simple handshake. Heitner Legal, with its wealth of experience regarding contracts, negotiations and dealings in the world of Sports Law, is happy to help.
Robert Frank, Horse Cents: Racehorse Prices Back on the Run, CNBC.com (Sep. 20, 2013, 10:53 AM), http://www.cnbc.com/id/101050384.
Julie I. Freshtman, Horse Sales Disputes Waiting to Happen, The Equine Chronicle (Aug. 31, 2013), http://www.equinechronicle.com/horse-sales-disputes-waiting-to-happen/.
John J. Kroppa, J. Jeffrey Landen, & Daniel C. Heyd, Horse Sense and the UCC: The Purchase of Racehorses, 1 Marq. Sports L.J. 171 (1991).
Melissa Zeller, Beyond the Handshake Deal, United States Eventing Association (Mar. 16, 2010, 8:31 PM), http://useventing.com/news/beyond-handshake-deal.
On November 29, I discussed Anheuser-Busch Inc.’s lawsuit against MLB. In its Complaint, Anheuser-Busch claimed that the company was entitled to a multi-year renewal on its beer-sponsorship rights based on negotiations that ended with a letter agreement in April 2010, and that MLB all of a sudden went back on its promise to renew, asking for much higher fees. More specifically, Anheuser-Busch claims that MLB changed its mind after it found out the details of the beer company’s new sponsorship agreement with the NFL.
MLB has released a response stating that no enforceable contract ever existed between the two entities. Instead, MLB claims that there was merely a non-binding letter of intent. Additionally, MLB says that by signing a major deal with the NFL, Anheuser-Busch violated its own promise to make baseball its top sports property in the United States. Read more “MLB Responds To Anheuser-Busch’s Complaint”
For over 20 years, South Florida has hosted an annual week-long event called the Winter Music Conference (WMC). People from around the world come to the event, which includes over 500 sub-events under WMC’s umbrella of festivities. One of the more popular sub-events is the Ultra Music Festival (Ultra). For the first year, in 2011, Ultra will be a 3-year festival. From 2007-2010 it encompassed 2 days of shows. Ultra is an outdoor music festival comprised of the most popular electronic DJs in the world. Last year, Ultra had over 100,000 attendees.
Ultra has grown so large that it plans on throwing its 2011 event outside of WMC week. WMC extremely displeased with this decision. Should WMC decide to take legal action, the conference might have a leg to stand on. Read more “Winter Music Conference In A Fight With Ultra Music Festival”
While Miami Heat fans are still wondering whether the team made a good decision by signing Jerry Stackhouse after Mike Miller had surgery to repair a broken thumb, the team has its own concerns in a legal matter off the court. The Miami Heat filed a legal action against Clear Channel Broadcasting, claiming that Clear Channel is breaching its radio coverage contract with the Heat.
In the contract with Clear Channel, the Heat have a “most favored nation” clause, which is basically a provision that guarantees the Miami Heat the same terms that any other entity in a similar agreement with Clear Channel would get. But Clear Channel has said that on October 31, when the Miami Heat and Miami Dolphins are scheduled to play at the same time, its radio broadcast will cover the Dolphins game. Read more “Miami Heat Not Feeling “Favored” By Clear Channel Broadcasting”
One of the first things any law school student will learn in what is usually a 2L Legal Drafting course is that punctuation, grammar, and sentence structure really do matter. I remember my professor telling us that the placement of a single comma affected whether the plaintiff in a case would be given a $2+ million award or nothing at all. I bet the legal clerk drafting that contract wish he/she took an extra .2 hours to double check in that instance. It probably would have cost the client all of $30.
The punctuation, sentence structure, and words used comes in to play in contractual matters more often that one might initially think. For instance, whether the word “inclusive” or “exclusive” was used in an agreement could decide who actually owns the Los Angeles Dodgers. Read more “Bad Contract Drafting Leaves The Los Angeles Dodgers Ownership Unknown”
A no-poach agreement is just slightly different than a non-compete agreement. A majority of states permit employers to place non-compete clauses in employer contracts and even have standalone non-compete agreements with employees that are separate from the employment contracts that are executed. California is known as being one of the few states that rarely permits a non-compete clause or contract to exist between employer and employee. It just so happens that a lot of tech companies are based in the state.
Even outside of California, companies have to be careful with the type of non-competes they use with their employees. It is not as if a company will be punished if the non-compete is too overbroad; the non-compete just will not be enforced by a court of law.
When a non-compete is designed to protect some legitimate interest (e.g. a trade secret), it will be enforced if reasonable in duration and geographic coverage. When it is overbroad, but no taint of unfairness exists, some courts will modify the restrictions. Reasonableness is based on duration of the restriction, territory covered, and subject matter. Some courts will apply the “blue pencil rule” in which the offensive portions of the contract are excised and the remainder enforced, if read alone, it makes sense grammatically.
Quite a few tech companies, including Adobe, Google, Intel, Intuit, Apple, and Pixar were entering into no-poach agreements with each other, where instead of inserting language into the employment contract with employees that would restrict their job opportunities after leaving their current employment, the companies were agreeing with each other to not pursue one another’s former employees. Read more “Google, Apple, Intel, Adobe, Pixar, Intuit Told To Get Out Of Bed With Each Other”