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What You Should Learn From The LA Rams’ Controversial Contracts

The Los Angeles Rams were recently in hot water with the National Football League Players Association over a choice of law provision in the team’s contracts.  This clause established that all disputes would be governed by Missouri law, where the Rams had previously played.  Missouri law is more favorable to management than employees relative to California law.  This is a high-profile example which has made headlines, but choice of law provisions are common in many contracts.  They’re often short clauses and can be easy to overlook, but can have major consequences that alter the balance of power between the parties in the event of a dispute.

There are several reasons why a contract drafter may want such a provision.  The provision may provide a set of laws that are more favorable to one party than the other, as in this situation.  The drafter may have specific statutes in mind when choosing a certain state over another.  Here, the Missouri Workers’ Compensation Act was specifically named in the Rams’ provision. The drafter could also prefer the general legal climate in one state over another.  Instead of a specific statute or specific set of laws, the drafter may feel that one state may be generally more favorable to plaintiffs or defendant in a particular type of dispute.  The drafter’s location could also influence choice of law.  A business based in a particular state may want all disputes to be heard on its home turf.

The Rams situation is interesting as it involves a business leaving a state under controversial circumstances but still attempting to take advantage of the favorable laws in its former home.  It’s also one of the few opportunities for a common contract provision like choice of law to get any press.  Take it as an indication to always read the contracts you sign carefully and be aware that small clauses can have big effects.    

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Had A Bad Time At A Condo? A Negative Review Might Bring More Headache

I stayed at a condo on the Gulf Coast earlier this summer and noticed our contract with the condo owner had a non-disparagement clause.  I enjoyed my time at the condo, but what if I didn’t?  Could I have left a negative review online stating that I felt the experience wasn’t up to par without getting into legal trouble with the condo owner?  The answer depends on the interpretation of the clause and the capacity for risk.

Many contracts contain a non-disparagement clause that is designed to prevent or punish you for leaving negative remarks. These clauses are common in business and employment contracts and are intended to keep a party from actively hurting the reputation of the entity protected by the clause.

 Broadly speaking, non-disparagement clauses are enforceable.  However, enforcement of these clauses can be tricky.   How do we define disparagement?  Is anything less than a glowing review disparagement?  Are you disparaging a business if you write that the experience was merely okay? There’s no easy answer.  Generally, I’d err on the side of caution and assume that a review that would cause you to skip that condo (or any other service or product) could be construed as disparagement.

 Let’s say you have already written a negative review, even with such a clause in your contract.  Should you worry about legal action?  Unfortunately, there’s no sure way to know, because it will likely come down to a matter of time and expense for the other party.  Generally, lawsuits are filed when the value of the likely recovery (either in dollars or in getting someone to do something) is expected to exceed the cost in time and money of pursuing the suit.  In other words, do the alleged damages suffered make this worth getting an attorney involved?  In a simple breach of contract case where one party pays $50,000 to another for construction services and the other party never provides those services, determining the damages can be relatively simple.  Likewise, a contract may provide for stipulated damages (for example, $1,000 for a   breach of a non-disparagement clause).   It could even allow the business or condo owner to keep your deposit or charge your credit card to collect on those stipulated damages without involving the legal system.  Without such a damages clause, however, determining the extent of damages in a non-disparagement case would be more complex because there’s no baseline dollar figure to begin the analysis.  In this situation, it’s hard to determine whether it makes financial sense for the supposedly disparaged business to come after you.  Of course, a particularly hurt or spiteful owner might decide to ignore the financial implications and get his or her attorney involved anyway.

 The takeaway is to be aware of non-disparagement clauses in the contracts you sign.  If you have signed a contract with such a clause, you should consider that you don’t really know whether or not the other party will be interested in any sort of legal action in response to a negative review.  If a business owner came to me with a disparagement issue, I would tell him or her that the potential gains and potential costs should be carefully considered before going forward. However, a contract is a contract. So even if you believe that an owner may not take legal action, that doesn't mean that they don't have the right to or won't.   In other words, leave that review at your own risk.

 

This post features my legal opinions, but not legal advice.  Legal advice can only be provided after an inquiry into the specific facts of a case.  If you are interested in legal advice, email me at chris@liuzzalaw.com or call me at (504) 298-8018.

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