My last article pointed out a situation where parties conflate contractual indemnity and damages clauses.  The standard language in Dunce’s Caps’ contract provided for an indemnification of “any and all losses arising from any breach of any representation or warranty in the agreement” and capped those losses at the price of the order. When Dunce’s failed to deliver the promised 100,000 hats, Flat Backs filed an arbitration action seeking recovery of an alleged $4 million in damages, even though the purchase order price was only $500,000. Ignoring Dunce’s damages cap argument, the arbitrator Terry B.L. Judge awarded Flat Backs the full $4 million. Arguing that Judge was not permitted to award Flat Backs more than $500,000, Dunce’s appealed to the state court seeking to overturn the arbitration award because Judge exceeded his jurisdictional limits. Did Dunce’s contractual indemnification provision operate as a cap on the damages that Flat Backs could recover for Dunce’s breach of contract?
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Nifty Counsel, Dunce’s Caps in-house lawyer, came up with what he thought was a brilliant way to minimize the company’s liability to its customers.  Nifty added arbitration provisions to Dunce’s customer purchase order agreements, and included language that the customer agreed the arbitrator could not award the customer damages exceeding the price of the order.  Flat Backs, a major retail hat company, filed an arbitration action against Dunce’s after Dunce’s failed to deliver 100,000 Auburn Tigers 2019 NCAA Men’s Basketball Champions hats.[1]  The demand for arbitration alleged $4 million in damages, even though the purchase order price was only $500,000.  Terry B.L. Judge, the arbitrator, ignored Dunce’s arguments that the purchase order’s arbitration clause prohibited Judge from awarding Flat Backs more than $500,000, and awarded Flat Backs the requested $4 million.  Dunce’s then asked a court to overturn the arbitration award for the same reason – Judge exceeded his jurisdictional limits.    
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After several months of telling family and friends that his wedding venue business on Big Bux Ranch was for sale, Jeff Bux is contacted by his biggest competitor Hustler Plentee who also owns a wedding venue in the next town south of Buxboro. Hustler asks if Jeff will tote-the-note because his credit is maxed out at Buxboro State Bank, which is owned by Ernest “Big Daddy” Bux. Wanting to avoid a broker’s fee and an attorney’s time, and hoping that he might be able to get a job at the Bank, Jeff – uncharacteristically – asks his father for advice to help him sell it himself. Can Jeff sell his own business? If you were Big Daddy what would you say?
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Seeing the bottom line awash with red ink yet again, Susie Sears reluctantly decided to shut down her family-owned Widgets-R-Us.  Pressured by thinning margins, a weakening labor pool and increasing competition from foreign markets, Widgets-R-Us is leveraged to the hilt and profits are insufficient to pay even her secured debt. With no viable assets or business, there’s nothing to mortgage or to sell. How can Susie and her fellow company officers walk away without becoming personally liable?

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In the summer of 2016 Stormy Sultry aka Peggy Peterson and Dennis Duck aka David Dennison engaged in some alleged hanky-panky. Wanting to nip in the bud any later stories about what happened, Duck’s agent gets Sultry to sign a non-disclosure agreement (NDA) in exchange for which Duck happily pays Sultry $130,000 for her silence and her agreement that any dispute over the NDA could only be pursued in a private arbitration. Agreeing that damages for any breach are not readily determinable in dollars, the NDA has a liquidated damages provision that damages are $1 million per breach. Is the NDA enforceable?
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Having won her primary, Starr Struuck is ready to update her campaign website and Instagram feed to jazz up her image and promote the reasons why she should win the general election. Having been chastised by Captain Kurff of Star Warp’d who tweeted Struuck to take her personalized and autographed photograph of the two of them at the Comic-Con convention off her newsletter and website, she remains determined to stick with her Star Warp’d theme. A Getty image photograph of the Starship Enterprise circling an unknown planet is now pasted across her social media. This time Getty images complains. Again, Struuck insists that she was merely publicly confessing her affection for geeky space adventure shows. Is Getty in the right to complain and demand to be paid?

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 After setting up new locations in Texas, N. O. Smelz, owner of Smelz Rug Cleaning, obtained a hazardous waste permit from the Texas Commission on Environmental Quality for the disposal of the company’s cleaning chemicals after use.  In addition to the permit, the TCEQ issued a compliance plan to Smelz.  Because he was too busy managing the financial side of the company, N.O. delegated oversight and implementation of the compliance plan to Wright Handman.  Compliance is running smoothly for about a year, but business is growing quickly and Handman doesn’t have time to train Rhule Brecker, a new carpet cleaning technician.  In fact, Handman never trains Brecker.  During Brecker’s second year on the job, Handman sees that Brecker is pouring the used cleaning chemicals into a storm drain on the street, which violates the compliance plan.  Two weeks later, Smelz gets a notice from TCEQ that it believes Smelz is violating the compliance plan and that an investigation will be conducted.  Brecker fesses up, and Handman also admits he didn’t train Brecker properly.  TCEQ sues Smelz, Handman and Brecker for civil penalties of $50 per day for failing to properly implement the compliance plan.  Are Handman and Brecker personally liable to the State?     

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Running for office, Starr Struuck sent out a campaign newsletter extolling her qualifications and a list of reasons why she should be elected rather than her incumbent opponent. Prominently displayed in her newsletter and website was a personalized and autographed Comic-Con convention photograph of Starr Struuck perched beside wildly popular and well-known Captain Kurff of Star Warp’d. When advised of her campaign literature, Captain Kurff tweeted Struuck demanding that she destroy all copies of the campaign newsletter and remove his likeness from any of her campaign materials as he was not endorsing her. Protesting that she was merely publicly confessing her affection for the Captain and geeky shows generally, Starr resisted. Is Captain Kurff right?

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