I live in one of Ann Arbor’s most vibrant, diverse and eclectic residential neighborhoods, called North Central.  Three Oaks, a developer group, purchased several houses on speculation for a planned-unit development (PUD) which in its current form, grossly exceeds the zoning requirements.  I’m a business attorney and I’m for development, but I’m not for any development.  I’m posting the text of my letter to the Ann Arbor Planning Commission so that it may easily be accessed in conjunction with tonight’s Planning Commission meeting.  My letter against NeNo is also posted here in PDF.

City of Ann Arbor Planning Commission
Guy C. Larcom, Jr. Municipal Building
100 North Fifth Ave.,
Ann Arbor, MI  48104

June 15, 2009

Dear Commissioners:

I am a long-term resident of the North Central neighborhood which is directly impacted by the proposed NeNo PUD.  I am also a business attorney with several years of private practice in Ann Arbor, and what I am seeing, alarms me.  I am writing to urge you to oppose the NeNo project being proposed by the Three Oaks Group, not only on the merits but also on principles of fairness and ethics in commercial conduct.

I consider the way that this project has been conceived and sold, to set a very bad direction for the City going forward.  The NeNo developers have engaged in a pattern of unfair and unprincipled conduct which the City and the Planning Commission should not, under any circumstances, condone or sanction – or it will lower the bar for every developer who may want to do a project in Ann Arbor.

Continue reading ‘Ann Arbor “Near North” Project — NeNOT’

Governor Jennifer Granholm signed a new Michigan law modifying foreclosure and loan modification rights (2009-PA-0029, 2009-PA-0030, 2009-PA-0031) to help financially distressed homeowners on May 21, 2009. The new foreclosure law takes effect on July 5, 2009. I have posted a copy of the new Michigan foreclosure law. [PDF - all acts] Individual bills/acts in the new Michigan foreclosure law are here:

2009-PA-0029 (House Bill No. 4453) [PDF]
2009-PA-0030 (House Bill No. 4454) [PDF]
2009-PA-0031 (House Bill No. 4455) [PDF]

I’ll be speaking at the Detroit MusicBizCamp ‘Unconference’ next week about mistakes not to make: http://bit.ly/uCI8I

Link to MusicBizCamp here. The mission of MusicBizCamp is to jump-start education for “new jobs for a new music industry.”

With massive layoffs, Wall Street bonuses, and employment contracts in the news, many people are taking a close look at their own employment contracts for the first time and focusing on new concerns and questions about job security and performance: What does the contract say about your right to continuing employment? What would justify your termination? Can an employer change the terms of your contract without requiring you to sign a new agreement?

“At will” employment is the rule, not the exception
In most cases, an employment agreement is going to be what we call an “at will” agreement: the employee is employed at the will of the employer — and can be let go at any time, at the will of the employer. What if there’s a written agreement, but it doesn’t specify whether employment is “at will”? If the employment agreement doesn’t specify that an employee can only be terminated “for cause,” then the employment agreement is “at will.” At will employment is the default in most states (Michigan included).

Some written employment agreements specify that an employee may only be terminated for cause. Barring special circumstances (such as employment under a union or other associational agreement), termination “for cause” must be spelled out in writing in the terms and conditions of the employment agreement. The employment agreement should have a termination section that indicates when an employee can be terminated “for cause,” and it should contain a definition of the causes that justify termination within the agreement. (Note to employers: acts justifying termination for cause should be clearly spelled out. This benefits the employer as well as the employee, and avoids having a court modify the employment agreement in a legal dispute.)

Employment agreements which can only be terminated for cause are frequently used in a wide variety of industries and situations. For cause agreements are used for key employees in technology companies, founders and managers in startup ventures, professionals in finance and accounting, doctors and lawyers, and employees in unionized businesses and companies. For cause employment contracts are typical where the employee has more leverage than an ordinary worker and cannot easily be replaced.

There’s no employment contract
There is always a contract between a worker and a hiring party — even if there’s no written agreement. In the absence of a written contract, employment is always “at will”: the employee can be let go immediately. Unless, of course, the employee isn’t really an employee — many business owners are shocked to find out that in the eyes of the IRS and/or the state department of labor, their ‘contractors’ are really employees, or vice versa. If you’re the employer in this situation, ‘misclassification’ of an employee as a contractor is a very expensive mistake.

“Two weeks’ notice”
Many people believe that a company or employee owes the other party “two weeks’ notice” for terminating the work relationship. That’s not a legal rule, it’s a conventional practice. “At will” employees can be escorted off the premises immediately upon notice of termination, with an arrangement to pick up their belongings at a later time. While this can come as a shock to the employee, it’s something that attorneys routinely recommend to employers as a standard employment policy, for security reasons.

The Copyright Office released a report on March 15, 2009 that provides for increases in several fees, citing rising labor costs and current budget constraints. While the cost of basic online copyright registration (eCO) for most types of works remains the same, the cost of registering a copyright via a 2D barcode application will increase from $45 to $50.

The most significant increase for typical copyright filers is in traditional paper applications (Form TX, VA, SR, GR). The Copyright Office has proposed a 44% increase in filing by paper — raising the fee from $45 to $65. Critics contend that this unfairly penalizes copyright authors and owners without Internet access. Pending Congressional approval, the new Copyright Office fee structure is scheduled to take effect on August 1, 2009.  If copyright owners have registrations they have been putting off, now would be a good time.

A chart comparing the current and new copyright registration fees is here on the Arborlaw website.

As part of the No Worker Left Behind law [PDF], Michigan has created a Green Jobs Initiative which provides statewide, regional and local resources and training opportunities in alternative energy, green building and construction and retrofitting, and sustainable business practices.

If you’re unemployed or looking to re-educate and change careers, you can identify training opportunities for green jobs by county or region.

If you have a business, the No Worker Left Behind program will assist you in moving into green industries — by providing consulting and employee training resources to facilitate the development of employee skills and expertise for green jobs within your company. Here’s a resource page containing links to several local and regional green initiatives. There’s a mailing list to receive information about green jobs in Michigan here.

The Associated Press (AP) announced Monday, April 6, 2009 that it is launching an initiative to control the online use of content created by its newspaper members. The association’s plan is to aggressively seek licensing for any and all uses of its content — including uses such as repeating headlines with a link to the AP article itself — which most copyright experts believe are “fair use” under Section 107 of the 1978 Copyright Act.

The AP’s karma has been sinking in the online world lately. Between the high-profile copyright lawsuit against Obama poster artist Shepard Fairey and dodgy DMCA takedown claims against bloggers for reprinting brief quotes from news stories and then linking the source, the AP is poised to become the most-hated intellectual property association since the RIAA.

Here’s the text of Section 107 of the Copyright Act:

§ 107. Limitations on exclusive rights: Fair use

The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.

Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include—

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work.

Notice the phrase above: “for purposes such as criticism, comment, news reporting, teaching…scholarship or research, is not an infringement of copyright.” Traditionally, “comment and news reporting” are highly protected fair uses of copyrighted works — due to the conscious interplay between copyright “fair use” and the requirements of the First Amendment to the US Constitution, which states that “Congress shall make no law…abridging the freedom of speech, or of the press.”

Let me pause and note the irony of this: The AP lives and dies by the First Amendment, and relies upon the First Amendment daily in its own “fair use” of the copyrighted works of others.

If not a valid copyright argument, what legal legs can the AP be standing on? A quasi-copyright doctrine called “misappropriation” and/or the “hot news doctrine” which, ironically, was of the AP’s own making in 1918. In the case of INS v. AP, 248 U.S. 215 (1918), the INS (long dead and gone news agency) was the target of a legal attack by the AP for copying news. The INS gained access to AP news through early editions of newspapers, rewrote the news, and published in on the West coast at the same time or prior to the AP’s own publication. The Supreme Court held that news (and facts) were not copyrightable — but went on to use the general legal principles of unfair competition to create a “proprietary right” against “misappropriation” in “hot news.”

The INS v. AP decision has been much-criticized by judges, copyright experts and legal scholars in the intervening 90 years, but it is very much alive. While there was no development of the doctrine for decades, in 1997 the Second Circuit breathed new life into the “misappropriation” doctrine in National Basketball Association v. Motorola, Inc. d/b/a Sportstrax, which held that Motorola could not transmit scores or other data about NBA games in progress via a system of subscription pagers (remember pagers?) or an online AOL presence. And as recently as February 2009, the AP won a legal victory against AHN for using AP content as the basis for writing news stories and publishing them on the web.

I’ll be writing more soon about the hot news / misappropriation doctrine. For now, I’ll just state the obvious: taking on the thousands of bloggers cutting and pasting and quoting and hyperlinking news stores from around the web is going to prove much less popular than the RIAA’s campaign against college students and grannies: bloggers are not only invested in the outcome, they are committed content providers in the habit of expressing their opinions daily in thousands of locations around the internet.

It has the makings of a fair fight, and it will be interesting to watch.

This blog focuses on the concerns of hard-working ordinary people creating new companies and new ideas. They want to sell these products and services globally, but let’s face it, prosperity begins at home. Sometimes it’s hard to get up in the morning to face such injustice in the morning paper: The tarring and feathering of automakers, auto companies, and auto workers by Washington — while Wall Street fat cat insiders and their rockstar derivatives traders walk off with their pockets stuffed with our money, and post haughty defenses of their multi-million-dollar bonuses, like Jake DeSantis, an executive vice president of the American International Group’s financial products. People around here are taking 10 percent pay cuts and losing their jobs because of people like you: get over yourself. Frank James of the Tribune’s Washington bureau was one of the first to post the obvious question: Why no GM Treatment for Wall Street?

What’s good for the goose, is apparently not good for the Michigander.
Apparently the Administration believes that this may be the only course to save the auto industry over the long run, but is the cost worth it? The message being sent here is very dangerous: if you are down in the trenches trying to create long-term productivity, you are last on the list of Washington priorities. But, according to the Wall Street Journal, if you are Citibank CEO Vikram Pandit, taking hundreds of billions of taxpayer dollars because of dodgy financial practices, you are incapable of being replaced:

Citigroup Inc., by contrast, has received three government rescues since October, under which the U.S. will own up to 36% of the company’s stock. Officials have in the past considered removing CEO Vikram Pandit, but demurred, in part because of the paucity of candidates to replace him, people familiar with the matter say. A spokesman for Citigroup couldn’t be immediately reached for comment.

Courtesy of Rep. Barney Frank and the New York Times’ Dealbook: a copy of the AIG Financial Products Corporation 2008 Employee Retention Plan (aka the “AIG contract”).

I stated in the previous post that “Contracts are good.” I didn’t, however, say that contracts were sacrosanct or could never be broken (or that you can wave the word “Contract!!” like a magic wand, as if to repel the snakes from Ireland). But that is indeed the argument advanced by several media pundits as a justification for allowing rockstar derivatives traders to keep $165M in bonus pay larded out from the vast $170 billion-dollar corpus of the US taxpayers’ AIG bailout. To quote Andrew Sorkin in the New York Times yesterday, “the fundamental value in question here is the sanctity of contracts.” In Sorkin’s moral view of capitalism, it’s a stark dichotomy: you either “swallow hard” and pay the rockstars, or you engage in the “tearing up” of contracts.

It’s just not that simple. Contracts are a set of rules that spell out the parties’ mutual intentions and individual obligations for a jointly-agreed undertaking. Good contracts not only spell out the structure and the rules, they spell them out taking into account a wide variety of alternate realities — not just what everyone had in mind when they first started to negotiate and everything was kumbayah — but also how things should go under…weird circumstances. Wierd circumstances like floods, fires, earthquakes, strikes, martial law, and the US government taking over your company due to a collapse of the financial system.

Suppose you and I make a contract for me to tap-dance on your coffin on the date of your funeral, and in exchange I will receive a $1M dollar “retention bonus” (for sticking around until you are actually dead). You fulfill one of your obligations under the contract by showing up (dead), thereby providing me the necessary coffin to tap-dance upon. (And I made sure that you pre-arranged payment to me via a third party, since you wouldn’t be there to hand me my bonus check.) Just before I am about to start my tap-dance routine, the law of gravity is rescinded, causing me to fly off the earth, and causing your coffin to fly off the earth, too. I couldn’t tap-dance on your coffin, as I contracted, if I wanted to. Weird circumstances.

In writing good contracts, good contract lawyers actually spend a fair amount of time thinking along these “What are all the bad things that could go wrong?” lines. US commercial law has a doctrine for dealing with weird circumstances called “force majeure.” A force majeure term in a contract excuses either or both parties from their obligations under an agreement, because it is no longer possible to perform as promised due to circumstances beyond the parties’ control. (The great majority of professionally negotiated contracts contain a force majeure clause.)

My response to Mr. Sorkin’s argument in favor of paying the AIG rockstars used force majeure as an example of one of the many ways that a contract could be interpreted to excuse non-performance. I stated that AIG was extremely likely to be able to be excused from paying the bonuses due to the collapse of the financial system, and without breach under the actual terms of the contract — IF there were a force majeure clause in the contract to rely on. Here’s the link to my AIG bonuses / force majeure comment on the New York Times (and here’s a permalink to the comment text which I have placed here on the Arborlaw site.)

But, we don’t have to stop at force majeure, the issue which I chose. There are at least a dozen more legal theories that would support withholding those AIG bonuses. The New York Times has a pretty nice roundup of the main legal theories here: “Room for Debate: When Bonus Contracts Can Be Broken,” The New York Times (March 17, 2009), and Lawrence Cunningham makes an excellent and concise summary of the basic legal principles in an op-ed comment here: “A.I.G.’s Bonus Blackmail,” The New York Times (March 18, 2009).

Score another one for the contract attorneys (maybe).