When Evergreens Get Chopped

In Legal Interpretation, Minnesota Appellate Decisions by Joseph Pull

An “evergreen” contract is a contract which automatically renews at periodic intervals. Evergreen contracts are useful but can lead to problems if the parties become complacent. Imagine Ingmar & Ingrid, Inc. enters into a contract for one year to receive a weekly delivery[1] from Antony & Cleopatra, LLC.  The contract includes an evergreen provision that each year the contract will automatically be extended for another twelve months unless Ingmar & Ingrid before December 1 sends a written notice of termination to Antony & Cleopatra. The contract is convenient because it allows the parties to continue their relationship without the hassle of renegotiating every year. If Ingmar & Ingrid likes its weekly deliveries, it can continue receiving them without ever doing anything more than paying for each week’s installment, secure in the knowledge that it will get at least a month’s notice (and perhaps much more than a month) before the deliveries stop. Antony & Cleopatra gets the same assurance about its weekly sale. However, an evergreen contract can also lull the parties into dangerous complacency. After five years of weekly deliveries, Ingmar & Ingrid may forget that its contract can only be terminated before December 1 each year. Ingrid & Ingmar may decide on December 2 that it no longer wants the weekly delivery – only to discover that it is bound by its contract to pay for another year of services it no longer wants. On the other side, Antony & Cleopatra may discover on December 2 that it can no longer make money on the weekly delivery, but it will be bound to continue making the deliveries for another year and losing money on each delivery, because it missed the deadline to terminate the contract. Evergreen contracts are useful but can lead to problems if the parties become …

A Little Contract, a Little Latin, a Little Property

In Legal Interpretation, Minnesota Appellate Decisions, Property by Joseph Pull

(Unenforceable Terms, Expressio Unius, and the Right of Redemption) Minnesota courts enforce contracts.  Someone who signs an agreement cannot later escape it by saying he never read it,[1] and or that it is harsh.[2] A little hyperbolically, Minnesota courts occasionally explain that contracts must be enforced or else “chaos would prevail in our business relations.”[3] And yet. In certain circumstances, a Minnesota court will refuse to enforce the plain terms of a contract. One example of particular importance to borrowers and lenders is the statutory right of redemption of foreclosed property. The Minnesota Court of Appeals has decided this right cannot be waived. If the borrower signs an agreement waiving it, the waiver is not enforceable.[4]

SEC Patrols the Bakken: “Making” Statements about Stocks

In Legal Interpretation, Oil & Gas Investments, Securities Fraud by Joseph Pull

Securities fraud litigation bubbles up with the oil in the Bakken. For example, the U.S. District Court for the Southern District of New York[1] was presented with the question whether defendant Eric Dany, an established stock commentator with his own “Stock Prospector” brand and newsletter, could be held responsible under the SEC’s Rule 10b-5 as the “maker” of allegedly misleading statements about the stock of Norstra Energy Inc., a would-be Bakken player. A third party paid Dany for the use of his name in publishing a statement in promotional materials: My name is Eric Dany. I’m editor and publisher of Eric Dany’s Stock Prospector, Main Street Research . . . Now I’m predicting that NORX could be my best ever call! I believe the company’s estimated 8.5 billion barrels of oil in place could easily fetch $25 a share in a takeover! Act now, before a takeover move, and you could make a fortune! . . . Don’t wait! As you’ll see when you read on, I believe one of the majors may be reading a takeover offer that, the minute it leaks out, could send this stock flying! The SEC sued Norstra Energy, its CEO, and Dany, alleging the statement (and others) was misleading. Exchange Act Rule 10b-5(b), 17 C.F.R. § 240.10b-5(b), prohibits making untrue statements of material fact in connection with the purchase or sale of securities. Dany argued that, as a matter of law, he could not be held responsible because he did not “make” the statement, since it was published by someone else. The Supreme Court decided in 2011 that “[f]or purposes of Rule 10b-5, the maker of a statement is the person or entity with ultimate authority over the statement.”[2] Accordingly, showing that someone else published an allegedly fraudulent statement is not enough to escape responsibility. …

Elements of Fraud: The I-Stole-from-Her-But-Lied-to-Him Defense

In Claims, Fraud, Legal Interpretation, Supreme Court by Joseph Pull

An elementary principle of litigation is keeping an eye on the elements. A federal appellate court decided in August that the federal mail and wire fraud statutes allow a defendant to be convicted for engaging in a “scheme to defraud” even if the defendant’s deceptive statements were made to different people than the victims who actually lost their money.[1] The defendant had argued that the conduct he was accused of engaging in – lying to banks and credit card processors about unauthorized credit card charges, and using unauthorized credit card charges to obtain money from customers – was not wire fraud because he lied to different people than he stole from. The court’s decision to reject the I-stole-from-her-but-lied-to-him defense may seem obvious, but it’s a little more complicated than it looks. The reason requires an understanding of the legal principle of “elements.”

Mining “or” for Grammatical Immunity

In Legal Interpretation, Minnesota Appellate Decisions, Supreme Court by Joseph Pull

In a dispute over whether a defendant could claim immunity from being sued, the Minnesota Supreme Court recently relied upon a principle of grammar to determine the meaning of the word “or” in the applicable statute.[1]  The Court deployed the terms “conjunctively” and “disjunctively” to explain its decision, and the cases cited in the Court’s opinion show that legal disputes concerning the meaning of “or” arise with some frequency — which means “conjunctively” and “disjunctively” are apt to recur as well.[2] What, exactly, do these grammar terms mean?