BLT/4e CP 7-10
Chapter 12
Consideration
Case 12.1
27 N.E. 256
(Cite as: 124 N.Y. 538, 27 N.E. 256)
HAMER
v.
SIDWAY
Court of Appeals of New York, Second Division.
April 14, 1891.
Appeal from an order of the general term of the supreme court in the fourth judicial department, reversing a judgment entered on the decision of the court at special term in the county clerk's office of Chemung county on the 1st day of October, 1889. The plaintiff presented a claim to the executor of William E. Story, Sr., for $5,000 and interest from tuld at that time pay him, the said William E. Story, 2d, the sum of $5,000 for such refraining, to which the said William E. Story, 2d, agreed,' and that he 'in all things fully performed his part of said agreement.' The defendant contends that the contract was without consideration to support it, and therefore invalid. He asserts that the promisee, by refraining from the use of liquor and tobacco, was not harmed, but benefited; that that which he did was best for him to do, independently of his uncle's promise,--and insists that it follows that, unless the promisor was benefited, the contract was without consideration,--a contention which, if well founded, would seem to leave open for controversy in many cases whether that which the promisee did or omitted to do was in fact of such benefit to him as to leave no consideration to support the enforcement of the promisor's agreement. Such a rule could not be tolerated, and is without foundation in the law. The exchequer chamber in 1875 defined 'consideration' as follows: 'A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other.' Courts 'will not ask whether the thing which forms the consideration does in fact benefit the promisee or a third party, or is of any substantial value to any one. It is enough that something is promised, done, forborne, or suffered by the party to whom the promise is made as consideration for the promise made to him.' Anson, Cont. 63. 'In general a waiver of any legal right at the request of another party is a sufficient consideration for a promise.' Pars. Cont. *444. 'Any damage, or suspension, or forbearance of a right will be sufficient to sustain a promise.' 2 Kent, Comm. (12th Ed.) *465. Pollock in his work on Contracts, (page 166,) after citing the definition given by the exchequer chamber, already quoted, *546 says: 'The second branch of this judicial description is really the most important one. 'Consideration' means not so much that one party is profiting as that the other abandons some legal right in the present, or limits his legal freedom of action in the future, as an inducement for the promise of the first.' Now, applying this rule to the facts before us, the promisee used tobacco, occasionally drank liquor, and he had a legal right to do so. That right he abandoned for a period of years upon the strength of the promise of the testator that for such forbearance he would give him $5,000. We need not speculate on the effort which may have been required to give up the use of those stimulants. It is sufficient that he restricted his lawful freedom of action within certain prescribed limits upon the faith of his uncle's agreement, and now, having fully performed the conditions imposed, it is of no moment whether such performance actually proved a benefit to the promisor, and the court will not inquire into it; but, were it a proper subject of inquiry, we see nothing in this record that would permit a determination that the uncle was not benefited in a legal sense. Few cases have been found which may be said to be precisely in point, but such as have been, support the position we have taken. In Shadwell v. Shadwell, 9 C. B. (N. S.) 159, an uncle wrote to his nephew as follows: 'My dear Lancey: I am so glad to hear of your intended marriage with Ellen Nicholl, and, as I promised to assist you at starting, I am happy to tell you that I will pay you 150 pounds yearly during my life and until your annual income derived from your profession of a chancery barrister shall amount to 600 guineas, of which your own admission will be the only evidence that I shall receive or require. Your affectionate uncle, CHARLES SHADWELL.' It was held that the promise was binding, and made upon good consideration. *547 In Lakota v. Newton, (an unreported case in the superior court of Worcester, Mass.,) the complaint averred defendant's promise that 'if you [meaning the plaintiff] will leave off drinking for a year I will give you $100,' plaintiff's assent thereto, performance of the condition by him, and demanded judgment therefor. Defendant demurred, on the ground, among others, that the plaintiff's declaration did not allege a valid and sufficient consideration for the agreement of the defendant. The demurrer was overruled. In Talbott v. Stemmons, 12 S. W. Rep. 297, (a Kentucky case, not yet officially reported,) the step-grandmother of the plaintiff made with him the following agreement: 'I do promise and bind myself to give my grandson Albert R. Talbott $500 at my death if he will never take another chew of tobacco or smoke another cigar during my life, from this date up to my death; and if he breaks this pledge he is to refund double the amount to his mother.' The executor of Mrs. Stemmons demurred to the complaint on the ground that the agreement was not based on a sufficient consideration. The demurrer was sustained, and an appeal taken therefrom to the court of appeals, where the decision of the court below was reversed. In the opinion of the court it is said that 'the right to use and enjoy the use of tobacco was a right that belonged to the plaintiff, and not forbidden by law. The abandonment of its use may have saved him money, or contributed to his health; nevertheless, the surrender of that right caused the promise, and, having the right to contract with reference to the subjectmatter, the abandonment of the use was a sufficient consideration to uphold the **258 promise.' Abstinence from the use of intoxicating liquors was held to furnish a good consideration for a promissory note in Lindell v. Rokes, 60 Mo. 249. The cases cited by the defendant on this question are not in point. In Mallory v. Gillett, 21 N. Y. 412; Belknap v. Bender, 74 N. Y. 446; and Berry v. Brown, 107 N. Y. 659, 14 N. E. Rep. 289,--the promise was in contravention of that provision of the statute of frauds which declares void all promises to answer for the debts of third persons unless reduced to writing. In Beaumont *548 v. Reeve, Shir. Lead. Cas. 7, and Porterfield v. Butler, 47 Miss. 165, the question was whether a moral obligation furnishes sufficient consideration to uphold a subsequent express promise. In Duvoll v. Wilson, 9 Barb. 487, and Wilbur v. Warren, 104 N. Y. 192, 10 N. E. Rep. 263, the proposition involved was whether an executory covenant against incumbrances in a deed given in consideration of natural love and affection could be enforced. In Vanderbilt v. Schreyer, 91 N. Y. 392, the plaintiff contracted with defendant to build a house, agreeing to accept in part payment therefor a specific bond and mortgage. Afterwards he refused to finish his contract unless the defendant would guaranty its payment, which was done. It was held that the guaranty could not be enforced for want of consideration; for in building the house the plaintiff only did that which he had contracted to do. And in Robinson v. Jewett, 116 N. Y. 40, 22 N. E. Rep. 224, the court simply held that 'the performance of an act which the party is under a legal obligation to perform cannot constitute a consideration for a new contract.' It will be observed that the agreement which we have been considering was within the condemnation of the statute of frauds, because not to be performed within a year, and not in writing. But this defense the promisor could waive, and his letter and oral statements subsequent to the date of final performance on the part of the promisee must be held to amount to a waiver. Were it otherwise, the statute could not now be invoked in aid of the defendant. It does not appear on the face of the complaint that the agreement is one prohibited by the statute of frauds, and therefore such defense could not be made available unless set up in the answer. Porter v. Wormser, 94 N. Y. 431, 450. This was not done.
In further consideration of the questions presented, then, it must be deemed established for the purposes of this appeal that on the 31st day of January, 1875, defendant's testator was indebted to William E. Story, 2d, in the sum of $5,000; and, if this action were founded on that contract, it would be barred by the statute of limitations, which has been pleaded, but on that date the nephew wrote to his uncle as follows: *549 'Dear Uncle: I am 21 years old to-day, and I am now my own boss; and I believe, according to agreement, that there is due me $5,000. I have lived up to the contract to the letter in every sense of the word.' A few days later, and on February 6th, the uncle replied, and, so far as it is material to this controversy, the reply is as follows: 'Dear Nephew: Your letter of the 31st ult. came to hand all right, saying that you had lived up to the promise made to me several years ago. I have no doubt but you have, for which you shall have $5,000, as I promised you. I had the money in the bank the day you was 21 years old that I intend for you, and you shall have the money certain. Now, Willie, I don't intend to interfere with this money in any way until I think you are capable of taking care of it, and the sooner that time comes the better it will please me. I would hate very much to have you start out in some adventure that you thought all right, and lose this money in one year. * * * This money you have earned much easier than I did, besides acquiring good habits at the same time; and you are quite welcome to the money. Hope you will make good use of it. * * * W. E. STORY. P. S. You can consider this money on interest.' The trial court found as a fact that 'said letter was received by said William E. Story, 2d, who thereafter consented that said money should remain with the said William E. Story in accordance with the terms and conditions of said letter.' And further, 'that afterwards, on the 1st day of March, 1877, with the knowledge and consent of his said uncle, he duly sold, transferred, and assigned all his right, title, and interest in and to said sum of $5,000 to his wife, Libbie H. Story, who thereafter duly sold, transferred, and assigned the same to the plaintiff in this action.' We must now consider the effect of the letter and the nephew's assent thereto. Were the relations of the parties thereafter that of debtor and creditor simply, or that of trustee *550 and cestui que trust? If the former, then this action is not maintainable, because barred by lapse of time. If the latter, the result must be otherwise. No particular expressions are necessary to create a trust. Any language clearly showing the settler's intention is sufficient if the property and disposition of it are definitely stated. Lewin, Trusts, 55. A person in the legal possession of money or property acknowledging a trust with the assent of the cestui que trust becomes from that time a trustee if the acknowledgment be founded on a valuable consideration. His antecedent relation to the subject, whatever if may have been, no longer controls. 2 Story, Eq. Jur., s 972. If before a declaration of trust a party be a mere debtor, a subsequent agreement recognizing the fund as already in his hands, and stipulating for its investment on the creditor's account, will have the effect to create a trust. Day v. Roth, 18 N. Y. 448. It is essential that the letter, interpreted in the light of surrounding circumstances, must show an intention on the part of the uncle to become a trustee before he will be held to have become such; but in an effort to ascertain the construction which should be given to it we are also to observe the rule that the language of the promisor is to be interpreted in the sense in which he had reason to suppose it was understood by the promisee. White v. Hoyt, 73 N. Y. 505, 511. At the time the uncle wrote the letter he was indebted to his nephew in the sum of $5,000, and payment **259 had been requested. The uncle, recognizing the indebtedness, wrote the nephew that he would keep the money until he deemed him capable of taking care of it. He did not say, 'I will pay you at some other time,' or use language that would indicate that the relation of debtor and creditor would continue. On the contrary, his language indicated that he had set apart the money the nephew had 'earned,' for him, so that when he should be capable of taking care of it he should receive it with interest. He said: 'I had the money in the bank the day you were 21 years old that I intend for you, and you shall have the money certain.' That he had set apart the money is further *551 evidenced by the next sentence: 'Now, Willie, I don't intend to interfere with this money in any way until I think you are capable of taking care of it.' Certainly the uncle must have intended that his nephew should understand that the promise not 'to interfere with this money' referred to the money in the bank, which he declared was not only there when the nephew became 21 years old, but was intended for him. True, he did not use the word 'trust,' or state that the money was deposited in the name of William E. Story, 2d, or in his own name in trust for him, but the language used must have been intended to assure the nephew that his money had been set apart for him, to be kept without interference until he should be capable of taking care of it, for the uncle said in substance and in effect: 'This money you have earned much easier than I did. * * * You are quite welcome to. I had it in the bank the day you were 21 years old, and don't intend to interfere with it in any way until I think you are capable of taking care of it; and the sooner that time comes the better it will please me.' In this declaration there is not lacking a single element necessary for the creation of a valid trust, and to that declaration the nephew assented. The learned judge who wrote the opinion of the general term seems to have taken the view that the trust was executed during the life-time of defendant's testator by payment to the nephew, but, as it does not appear from the order that the judgment was reversed on the facts, we must assume the facts to be as found by the trial court, and those facts support its judgment. The order appealed from should be reversed, and the judgment of the special term affirmed, with costs payable out of the estate. All concur.
Case 12.2
484 F.3d 1276
United States Court of Appeals,
Tenth Circuit.
James BARFIELD and Chris Barfield, Plaintiffs-Appellants,
v.
COMMERCE BANK, N.A., Defendant-Appellee.
No. 06-3087.
May 1, 2007.
Before KELLY, McCONNELL, and HOLMES, Circuit Judges.
McCONNELL, Circuit Judge.
Chris Barfield, an African-American man, entered a Commerce Bank branch in Wichita, Kansas, and requested change for a $50 bill. He was refused change on the ground that he was not an account-holder. The next day, Chris Barfield's father, James Barfield, asked a white friend, John Polson, to make the same request from the bank. Mr. Polson was given change, and the teller never asked whether he held an account with the bank. A few minutes later, James Barfield entered the bank, asked for change for a $100 bill, and was told that he would not be given change unless he was an account-holder.
James Barfield then enlisted the help of a white news reporter and his African-American colleague. The two men, separately, visited the bank to request change. The African-American man was asked whether he was an account holder, and the white man was not.
The Barfields filed suit under 42 U.S.C. § 1981, alleging racial discrimination in the impairment of the ability to contract. The Bank moved to dismiss for failure to state a claim. While that motion was pending, the two sides engaged in extended mediation and negotiation, which ultimately failed. During that period, the Barfields moved for class certification and to amend their complaint to include a claim under Title VI of the Civil Rights Act of 1964. The judge denied both plaintiffs' motions and granted the defendant's motion to dismiss. The Barfields timely appealed.
I.
[1] Originally enacted in the wake of the Civil War, Section 1981(a) states:
All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and no other.
42 U.S.C. § 1981(a) (emphasis added). As part of the Civil Rights Act of 1991, Congress added part b to the statute: “For purposes of this section, the term ‘make and enforce contracts' includes the making, performance, modification, and termination of contracts, and the enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship.” Id. § 1981(b). The purpose of part b was to expand the statute to encompass “all phases and incidents of the contractual relationship.” Rivers v. Roadway Express, Inc., 511 U.S. 298, 302, 308, 114 S.Ct. 1510, 128 L.Ed.2d 274 (1994).
[2] Section 1981 claims are subject to a three-part test. The claimant must demonstrate: “(1) that the plaintiff is a member of a protected class; (2) that the defendant had the intent to discriminate on the basis of race; and (3) that the discrimination interfered with a protected activity as defined in § 1981.” Hampton v. Dillard Dep't Stores, Inc., 247 F.3d 1091, 1102 (10th Cir.2001). Only the third prong is at issue here.
All courts to have addressed the issue have held that a customer's offer to do business in a retail setting qualifies as a “phase[ ] and incident[ ] of the contractual relationship” under § 1981. In Christian v. Wal-Mart Stores, Inc., 252 F.3d 862 (6th Cir.2001), the Sixth Circuit upheld a § 1981 claim where an African-American customer, ready to make a purchase, was accused of shoplifting and removed from the store:
we have no trouble concluding that [the appellant] made herself available to enter into a contractual relationship for services ordinarily provided by Wal-Mart: the record reflects that she had selected merchandise to purchase, had the means to complete the transaction, and would, in fact, have completed her purchase had she not been asked to leave the store.
Id. at 874. The Fifth Circuit has written that “when a merchant denies service or outright refuses to engage in business with a consumer attempting to contract with the merchant, that is a violation of § 1981.” Causey v. Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285, 290 (5th Cir.2004). See also Green v. Dillard's, 483 F.3d 533, 539 (8th Cir.2007) (“Under § 1981 contract formation begins and the statutory protections are triggered once a customer has made some tangible attempt to contract ....” (internal quotation marks omitted)); Watkins v. Lovley Dev., Inc., No. Civ. 04-211-B-H, 2005 WL 2746664 (D.Me. Oct.24, 2005) (finding a valid § 1981 claim when a customer attempted to make a purchase at Dunkin Donuts but was refused service); Henderson v. Jewel Food Stores, Inc., No. 96C3666, 1996 WL 617165 (N.D.Ill. Oct.23, 1996) (finding a valid § 1981 claim when a defendant had initiated but not completed a purchase); Shen v. A & P Food Stores, No. 93CV1184(FB), 1995 WL 728416 (E.D.N.Y. Nov.21, 1995) (finding a valid § 1981 claim after Chinese customers attempted to purchase apple juice and were refused); Washington v. Duty Free Shoppers, Ltd., 710 F.Supp. 1288, 1289-90 (N.D.Cal.1988) (finding a valid § 1981 claim when African-American customers were stopped after entering a duty-free shop and asked for their passports but white customers were not).
The question, then, is whether the Barfields' proposal to exchange money at a bank is a contract offer in the same way as an offer to purchase doughnuts or apple juice. The claim made by the appellees, and accepted by the district court, is that the Barfields' proposed exchange was not a contract because it involved no consideration: “The bank would not have received any benefit or incurred a detriment if it had agreed to change the Barfields' bills.” App. at 56. That reasoning, however, departs in several significant ways from our understanding of contract law.
[3] To determine the contours of a contract, we look to state common law. Hampton, 247 F.3d at 1104; 42 U.S.C. § 1988(a). Under Kansas law:
A contract must be supported by consideration in order to be enforceable. State ex rel. Ludwick v. Bryant, 237 Kan. 47, 697 P.2d 858 (1985); Mitchell v. Miller, 27 Kan.App.2d 666, 8 P.3d 26 (2000). ‘Consideration is defined as some right, interest, profit, or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other.’ 17A Am.Jur.2d, Contracts § 113, p. 129. A promise is without consideration when the promise is given by one party to another without anything being bargained for and given in exchange for it. 2 Corbin on Contracts § 5.20 (rev.ed.1995).
Varney Bus. Servs., Inc. v. Pottroff, 275 Kan. 20, 59 P.3d 1003, 1014 (2002). See also French v. French, 161 Kan. 327, 167 P.2d 305, 308 (1946) (noting that “inconvenience to the promisee” is valid consideration).
[4] [5] In the most straightforward sense, the transaction proposed by the Barfields was a contract of exchange: they would give up something of value (a large-denomination bill) in exchange for something they valued more (smaller-denomination bills). It is hard to see why this is not a contract. If two boys exchange marbles, their transaction is a contract, even if it is hard for outsiders to fathom why either preferred the one or the other. Consideration does not need to have a quantifiable financial value:
[T]he legal sufficiency of a consideration for a promise [does not] depend upon the comparative economic value of the consideration and of what is promised in return, for the parties are deemed to be the best judges of the bargains entered into.... Where a party contracts for the performance of an act which will afford him pleasure, gratify his ambition, please his fancy, or express his appreciation of a service another has rendered him, his estimate of value must be left undisturbed....
In re Shirk's Estate, 186 Kan. 311, 350 P.2d 1, 10 (1960).
[6] The Bank, however, argues that the proposed exchange was not a contract because it received no remuneration for performing the service of bill exchange. In other words, rather than view the transaction as an exchange of one thing for another, the Bank urges us to treat the transaction as a gratuitous service provided by the Bank, for no consideration. We cannot regard the Bank's provision of bill exchange services as “gratuitous” in any legal sense. Profit-making establishments often offer to engage in transactions with no immediate gain, or even at a loss, as a means of inducing customers to engage in other transactions that are more lucrative; such offers may nonetheless be contractual, and they do not lack consideration. See Idbeis v. Wichita Surgical Specialists, P.A., 279 Kan. 755, 112 P.3d 81, 90 (2005) (holding that unquantifiable consideration, such as an employee's goodwill and professional contacts, is adequate to sustain a contract). If, as is alleged in the complaint, the Bank effectively extends bill exchange services to persons of one race and not the other, that is sufficient to come within the ambit of § 1981.
Appellee relies heavily on a part of this Court's holding in Hampton v. Dillard Department Stores, Inc., 247 F.3d 1091 (10th Cir.2001). That case involved two individuals-an aunt and a niece-shopping together at a department store. Id. at 1099. After the aunt, Ms. Hampton, made a purchase, a store clerk offered each of the two women a coupon for a free fragrance sample. Id. at 1100. The women went to the fragrance counter and were in the process of redeeming their coupons when they were stopped by a security guard, who suspected them of shoplifting. Id. The guard searched Ms. Hampton's bag and found no stolen merchandise; the women, after verbally expressing their displeasure, left the store without renewing their attempts to obtain fragrance samples. Id.
They brought suit in federal court alleging interference with contractual rights under § 1981. Although the district court allowed Ms. Hampton's § 1981 claim to proceed to the jury and this Court upheld the jury verdict in her favor, the district court dismissed the claim of her niece, Ms. Cooper, on summary judgment, and this Court affirmed. Appellee suggests that our affirmance of summary judgment against Ms. Cooper stands for the broad proposition that gratuitous offers do not constitute contracts within the meaning of Section 1981, and argues that because the Bank's service of providing change was gratuitous, any racial discrimination with respect to that service would fall outside the ambit of the statute.
Appellee reads Hampton too broadly. Hampton did not establish any sweeping limitations on the coverage of Section 1981. Rather, Hampton was based on a specific finding that the coupon in question in that case was a contract benefit valid only upon purchase of merchandise. Id. at 1104-05. Because Ms. Cooper's aunt made a purchase, “she completed the invited performance in accordance with the terms of the offer” and thus had a valid contractual right to the coupon and its attendant benefits. Id. at 1104. In contrast, Ms. Cooper never “ma[de] or attempt[ed] to make a purchase at Dillard's,” id. at 1118, and thus she had no right to the contractual benefit. Hampton thus stands for the sensible proposition that a customer who fails to comply with a store's contractual terms cannot then claim that subsequent conduct by the store's employees interfered with her contractual right.
Instead of holding, as the Bank asserts, that offers of free merchandise can never constitute contracts under § 1981, Hampton reserves that question for another day. Id. at 1105. However, its consideration of the issue in dicta supports the conclusion we come to today. In describing the coupon, the Hampton Court noted that a retail establishment's offer of a free service or sample in fact could constitute a contract within the meaning of Section 1981. The establishment receives a benefit from such offers because “to sample those products, the customer would traverse the store, perhaps eyeing other merchandise for purchase.” Id. at 1105.
We therefore reverse the district court's dismissal of the Barfield's Section 1981 claim.
II.
[7] The Barfields moved to amend their complaint on November 5, 2005, seeking to add class allegations. The federal rules provide that leave to amend a complaint “shall be freely given when justice so requires.” Fed.R.Civ.P. 15(a). We review a denial of leave to amend a complaint for abuse of discretion. Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962).
Unlike the original complaint, which contained specific factual allegations, the new allegations included only generalized conclusions, alleging that the bank had:
a. Den[ied] qualified African-Americans the opportunity to open checking accounts;
b. Den[ied] qualified African-Americans the opportunity to open saving's [sic] accounts;
c. Den[ied] qualified African-Americans home loans;
d. Den[ied] qualified African-Americans small business loans;
e. Refus[ed] to cash checks drawn on Commerce Bank accounts presented by African-Americans;
f. Refus[ed] to exchanging [sic] currency of African-Americans;
g. Refus[ed] to cash cashier's checks presented by African-Americans; and
h. Den[ied] qualified African-Americans personal loans.
App. at 26. The district court noted that “[t]he Barfields have not ... asserted any actual facts to support these allegations, such as the identities of the individuals who were denied services, the dates on which these events occurred, etc. Further, the pleading contains no allegations that the Barfields were denied any of these additional services.” Id. at 59.
[8] The Federal Rules of Civil Procedure require a plaintiff to provide “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). This standard, known as “notice pleading,” is intended to “give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). Although we “do not require a claimant to set out in detail the facts upon which he bases his claim,” id., we do require enough specificity for the defendant to be able to respond to the allegations. As Judge Friendly has noted, Rule 8 requires more than a statement that the defendant has violated the statute in question: “[a] mere allegation that defendants violated the antitrust laws as to a particular plaintiff and commodity[, or that] a defendant made an undescribed contract with the plaintiff and breached it, or that a defendant owns a car and injured plaintiff by driving it negligently” is not sufficient to meet the notice pleading requirements. Klebanow v. N.Y. Produce Exch., 344 F.2d 294, 299 (2d Cir.1965).
Because the plaintiffs' proposed amended claim “furnishes not the slightest clue as to what conduct by the defendants is claimed to” violate federal law, id., it leaves defendants “without fair notice as to the grounds upon which plaintiffs' ... allegation rests and ... in no position to produce a responsive pleading,” Mountain View Pharmacy v. Abbott Labs., 630 F.2d 1383, 1388 (10th Cir.1980). As the amendment makes out no valid new complaint, we hold that the district court did not abuse its discretion in denying leave to amend.
III.
We REVERSE the district court's ruling on the motion to dismiss, AFFIRM the denial of permission to amend the complaint, and REMAND for further proceedings in accordance with this opinion.
C.A.10 (Kan.),2007.
Barfield v. Commerce Bank, N.A.
484 F.3d 1276
Briefs and Other Related Documents (Back to top)
• 2006 WL 3837279 (Appellate Brief) Brief for Appellee Commerce Bank, N.A. (Nov. 17, 2006)
• 06-3087 (Docket) (Mar. 8, 2006)
• 2006 WL 3099068 (Appellate Brief) Appellant's Opening Brief (2006)
Case 12.3
324 F.Supp.2d 602
United States District Court,
E.D. Pennsylvania.
Jamil BLACKMON,
v.
Allen IVERSON.
No. CIV.A. 01-CV-6429.
April 4, 2003.
MCLAUGHLIN, District Judge.
The plaintiff, Jamil Blackmon, has sued the defendant, basketball player Allen Iverson, for idea misappropriation, breach of contract, and quantum meruit (unjust enrichment), all arising out of the defendant's use of "The Answer," both as a nickname and as a logo or slogan. The plaintiff, who describes himself as Mr. Iverson's "surrogate father," alleges that Mr. Blackmon came up with the idea that Mr. Iverson use "The Answer" as a nickname, and that Mr. Iverson promised that he would pay Mr. Blackmon twenty-five percent of the proceeds from the sale of merchandise using "The Answer."
Presently before the Court is the defendant's motion to dismiss. The Court will grant the motion.
I. Background
The facts, according to the amended complaint are as follows [FN1] Mr. Blackmon met Mr. Iverson and his family in 1987. At that time, Mr. Iverson was a young high school student who showed tremendous promise as an athlete. Mr. Blackmon maintained a close personal friendship and relationship with Mr. Iverson and his family from 1987 forward. At various times in their friendship, Mr. Blackmon provided Mr. Iverson and his family with financial support, allowed Mr. Iverson and his family members to live in Mr. Blackmon's home, and provided other support to Mr. Iverson, such as picking him up from school and providing him with a tutor.
FN1. The defendant brought his motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). In considering a motion to dismiss under Rule 12(b)(6), the Court "take[s] all well pleaded allegations as true, construe[s] the complaint in the light most favorable to the plaintiff, and determine[s] whether under any reasonable reading of the pleadings, the plaintiff may be entitled to relief." Colburn v. Upper Darby Township, 838 F.2d 663, 665 (3d Cir.1988).
In July of 1994, Mr. Blackmon suggested that Mr. Iverson use "The Answer" as a nickname in the summer league basketball tournaments in which Mr. Iverson would be playing. Mr. Blackmon told Mr. Iverson that Mr. Iverson would be "The Answer" to all of the National Basketball Association's ("NBA's") woes. Mr. Blackmon and Mr. Iverson also discussed the fact that the nickname "The Answer" had immediate applications as a label, brand name, or other type of marketing slogan for use in connection with clothing, sports apparel, and sneakers. The parties also discussed using "The Answer" as a logo.
Later that evening, Mr. Iverson promised to give Mr. Blackmon twenty-five percent of all proceeds the merchandising of products sold in connection with the term "The Answer." The parties understood that in order to "effectuate Mr. Iverson's agreement to compensate" Mr. Blackmon, Mr. Iverson would have to be drafted by the NBA.
Mr. Blackmon thereafter began to invest significant time, money, and effort in the refinement of the concept of "The Answer." Mr. Blackmon continued to develop and refine the marketing strategy for the sale of merchandise, such as athletic wear and sneakers, in connection with the term "The Answer."
Mr. Blackmon retained a graphic designer to develop logos bearing "The Answer" as well as conceptual drawings for sleeveless t-shirts, adjustable hats, and letterman jackets for sale in connection with "The Answer."
In 1994 and 1995, during Mr. Iverson's freshman year at Georgetown University and the summer thereafter, there were numerous conversations between Mr. Blackmon and Mr. Iverson regarding Mr. Blackmon's progress in refining the marketing concept for "The Answer."
In 1996, just prior to the NBA draft, during which Mr. Iverson was drafted by the Philadelphia 76ers, Mr. Iverson advised Mr. Blackmon that Mr. Iverson intended to use the phrase "The Answer" in connection with a contract with Reebok for merchandising of athletic shoes and sports apparel. Mr. Iverson repeated his promise to pay Mr. Blackmon twenty-five percent of all proceeds from merchandising goods that incorporated "The Answer" slogan or logo.
On July 10, 1996, Mr. Iverson's lawyers wrote to Mr. Blackmon and stated that, despite the fact that Mr. Iverson and Mr. Blackmon reached an agreement regarding "The Answer," Mr. Iverson would not use "The Answer" because it was already a federally protected trademark.
Many months later, Reebok began manufacturing, marketing, and selling a line of athletic sportswear and sneakers using and incorporating "The Answer" slogan and logo. On numerous occasions thereafter, Mr. Iverson repeated his promise to pay Mr. Blackmon.
In the fall of 1997, Mr. Iverson told a third party that Mr. Blackmon had told him, "you need to call yourself 'The Answer,' " and had then explained to him the many marketing applications of "The Answer." During the week of Thanksgiving 1997, Mr. Iverson again promised to give Mr. Blackmon twenty-five percent of the "Reebok deal."
During the 1997-1998 NBA season, there were numerous conversations regarding Mr. Blackmon's marketing plan for merchandise, such as athletic wear and sneakers, sold in connection with "The Answer." Mr. Iverson also continued to repeat his promise to pay Mr. Blackmon.
Also during the 1997-1998 season, Mr. Iverson persuaded Mr. Blackmon to relocate to Philadelphia so that Mr. Blackmon could "begin seeking the profits from his ideas." Mr. Iverson also wanted to pay Mr. Blackmon back for the benefits the Iverson family had received when they had lived with Mr. Blackmon.
In the fall of 1998, Mr. Iverson advised Mr. Blackmon that Mr. Iverson had instructed his attorney to account for the number of "The Answer" units sold by Reebok and to distribute proceeds from those units to the plaintiff. At Thanksgiving of that year, Mr. Iverson told a third party that Mr. Blackmon was about to be a rich man, and that Mr. Blackmon could have twenty-five percent of Mr. Iverson's proceeds from the Reebok deal.
During the 1998-1999 NBA season, Mr. Blackmon again presented Mr. Iverson with logos incorporating "The Answer." Mr. Iverson advised Mr. Blackmon that Mr. Iverson intended to have Reebok incorporate the logo, that Mr. Iverson would give the logos to his lawyer, Lawrence Woodward, "Woody," and that Woody would present them to Reebok.
Thereafter, a meeting took place between Mr. Blackmon, Mr. Iverson, Mr. Woodward, and another individual. Mr. Blackmon told Mr. Woodward that Mr. Blackmon wanted to present him with some things Mr. Blackmon had produced for "The Answer" project. Mr. Blackmon then gave him with a package containing logos and graphics for jackets, t-shirts, and other items relating to "The Answer" project. Mr. Woodward agreed to discuss the matter with David Falk, Mr. Iverson's agent.
During the 1998-1999 and 1999-2000 NBA seasons, Mr. Iverson told Mr. Blackmon and a third party that Mr. Iverson was going to make sure that Mr. Blackmon got his due compensation from the Reebok proceeds. Mr. Iverson also told someone that he was happy that Mr. Blackmon would receive compensation from the exploitation of "The Answer" because he would not have to pay Mr. Blackmon directly from his basketball contract. Mr. Iverson stressed that the proceeds from "The Answer" were the vehicle for Mr. Blackmon's financial independence and restoration.
On or about November of 2000, Mr. Iverson was questioned as to why he had not talked to Mr. Blackmon about "The Answer" deal. Mr. Iverson stated that his attorney, Woody, had instructed him to cease all communications with Mr. Blackmon.
Reebok has continued to sell products bearing "The Answer" slogan and Mr. Iverson has continued to receive profits from the sale of products bearing "The Answer" slogan. Despite repeated requests and demands from Mr. Blackmon, Mr. Iverson has never compensated Mr. Blackmon and continues to deny Mr. Blackmon twenty-five percent of the proceeds from the merchandising of products incorporating "The Answer."
The plaintiff has not alleged that either Mr. Iverson or Reebok used any of the graphics or logos that he designed using "The Answer." At oral argument, the plaintiff conceded that his graphics were not incorporated into any of Reebok's products sold in connection with "The Answer." Transcript of September 5, 2003 Oral Argument (hereinafter "T.") at 62-64.
As damages for his misappropriation claim, the plaintiff requests all gains, profits, and advantages the defendant derived from the misappropriation. For the breach of contract claim, the plaintiff seeks compensation in an amount equal to twenty-five percent of the profits received by Mr. Iverson from the sale of goods using "The Answer." For the unjust enrichment claim, the plaintiff seeks compensation in an amount equal to the defendant's unjust enrichment.
II. Analysis
The essence of all three of the plaintiff's claims is that the defendant took and used the plaintiff's ideas without compensating the plaintiff. This case raises the question of what legal protection is given to ideas--products of the mind.
Judicial decisions in this area of intellectual property attempt to "balanc[e] the rights of the creator of ideas or information to exploit them for commercial gain against the public's right to free access in these ideas." United States Golf Ass'n v. St. Andrews Sys., 749 F.2d 1028, 1035 (3d Cir.1984).
The three established statutory systems for protecting intellectual property are copyright, patent, and trademark/deception as to origin. Courts have also been willing to give protection to ideas under various other legal theories: idea misappropriation; contract; quasi-contract or unjust enrichment; implied contracts; property theories; and confidential relationship theories. The plaintiff's claims fall into this latter category of protection.
A. Idea Misappropriation
[1] The elements of an idea misappropriation claim are that (1) the plaintiff had an idea that was novel and concrete, and (2) his idea was misappropriated by the defendant. [FN2] Sorbee Int'l Ltd. v. Chubb Custom Ins. Co., 1999 Pa.Super. 178, 735 A.2d 712 (1999).
FN2. See generally William Lockard, You Have No Idea, 23-APR L.A. Law. 32 (April 2000) (discussing the cause of action for idea misappropriation); Kim Radbell, The Law of Idea Misappropriation in New York: An Argument for Change, 5 Hofstra Prop. L.J. 427 (1993) (same).
1. Was the Plaintiff's Idea Novel?
A threshold requirement for an idea misappropriation claim is that the plaintiff's idea be novel and concrete. The Sorbee court, taking guidance from Thomas v. R.J. Reynolds Tobacco Co., 350 Pa. 262, 38 A.2d 61 (1944), held that novelty and concreteness are required so that the court could identify the idea as having been created by one party and stolen by another. Sorbee, 1999 Pa.Super. at 179, 735 A.2d 712. See Thomas, 350 Pa. at 263, 38 A.2d 61 (idea to use fact that Camel cigarettes are more economical because they burn more slowly not novel); Sorbee, 1999 Pa.Super. at 180, 735 A.2d 712 ("low calorie," "sugar free," "fat free," and "cholesterol free" not novel); Vernick v. N.W. Ayer & Son Inc., No. 637, 1973 WL 19917, at *4 (Pa..Pl. Jan. 15, 1973) (idea to use existing plastic ball to promote existing "Red Ball Service" not novel).
[2] Denying recovery for the use of ideas that are not novel properly confines protection to those ideas that are truly valuable to society. See generally Reitenour, 18 Wm. Mitchell L.Rev. at 146. An idea is novel and merits protection when it is truly innovative, inventive, and new. See, e.g., Paul v. Haley, 183 A.D.2d 44, 53, 588 N.Y.S.2d 897 (1992) (novelty determined by whether an idea is "truly innovative" and merits special protection); Desny v. Wilder, 46 Cal.2d at 742, 299 P.2d 257 (1956) (novel idea is unprecedented idea that has never before been conceived by anyone). An idea is not novel if it is merely a clever version or variation of already existing ideas. E.g., Murray v. Nat'l Broadcasting Co., 844 F.2d 988 (2d Cir.1988) (idea for sitcom not novel because simply a variation of already existing ideas); Downey v. General Foods Corp., 31 N.Y.2d 56, 334 N.Y.S.2d 874, 286 N.E.2d 257 (1972) (no novelty where plaintiff had come up with clever version of already existing marketing strategy).
[3] The idea for which the plaintiff seeks compensation is that the defendant use the nickname "The Answer" as a professional basketball player in a marketing strategy scheme to sell various products, such as sneakers and sportswear. T., at 56-57. The use of a nickname by a professional sports figure is not novel; nor is the idea of selling products labeled with a nickname. The plaintiff concedes that these ideas are not novel but argues that the particular nickname he suggested was not in use so it is novel. Id.
The defendant argues that there is nothing innovative or novel in the words "The Answer," or using them as a nickname. The defendant contends that it is common for basketball players to use nicknames that consist of ordinary words with ordinary meanings.
It is doubtful that the suggestion of a nickname to a professional athlete could ever be novel; but, the Court need not decide this issue here because the complaint fails to allege other elements of idea misappropriation.
2. Was the Plaintiff's Idea Misappropriated?
The doctrine of idea misappropriation is derived from the seminal Supreme Court case of Int'l News Svc. v. The Associated Press, 248 U.S. 215, 39 S.Ct. 68, 63 L.Ed. 211 (1918). The complainant in Int'l News, the AP newswire service, put time and effort into collecting information and transmitting this information to its subscribers, which were news publications. The defendant, a competing newswire service, took the information from the early editions of the news publications put out by the plaintiff's subscribers and transmitted the information to its own paying customers.
The Supreme Court held that, under federal common law, although any member of the general public had a right to use and retransmit the ideas contained in the publications, a competitor did not. Id. at 239, 39 S.Ct. 68. The Court found that equitable relief was warranted under an unfair competition theory; the defendant had acquired the information at little or no cost, used it to make a profit, and gained an unfair advantage over the complainant who was burdened with the expense of gathering the news. This amounted to an unauthorized interference with the complainant's business--a diversion of a portion of profits from the complainant. The Supreme Court held that the misappropriation of ideas was actionable as a subset of unfair competition.
Under the Supreme Court's reasoning in Int'l News Svc., direct competition is an essential element of idea misappropriation. The Court of Appeals for the Third Circuit also held that under New Jersey law direct competition is required for idea misappropriation, absent a substantial justification for making an exception, because "it properly balances the competing concerns of providing incentives to producers of information while protecting free access." United States Golf Ass'n, 749 F.2d at 1039. [FN3] The Third Circuit reasoned that requiring direct competition "protects the public interest in free access to information except where protection of the creator's interest is required in order to assure that the information is produced." Id. at 1039, n. 17.
FN3. After the Supreme Court's decision in Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), misappropriation became a question of state rather than federal law. United States Golf Ass'n, 749 F.2d at 1036.
With this background, the Court examines Pennsylvania law to determine if Pennsylvania requires that the plaintiff and the defendant be direct competitors before a plaintiff may bring a claim for idea misappropriation. [FN4]
FN4. The parties agree that Pennsylvania law applies to the idea misappropriation claim.
In Sorbee Int'l Ltd. v. Chubb Custom Ins. Co., 1999 Pa.Super. 178, 735 A.2d 712 (1999), the Pennsylvania Superior Court, in the context of an insurance policy, explored the meaning of the term "misappropriation of advertising ideas." The Superior Court quoted with approval the three elements of a common law tort of misappropriation:
(1) the plaintiff "has made a substantial investment of time, effort, and money into creating the thing misappropriated such that the court can characterize the 'thing' as a kind of property right," (2) the defendant "has appropriated the 'thing' at little or no cost, such that the court can characterize defendant's actions as 'reaping where it has not sown,' " and (3) the defendant "has injured the plaintiff by the misappropriation."
Id. at 182, 735 A.2d 712 (quoting Lebas Fashion Imports of USA Inc. v. ITT Hartford Ins. Group, 50 Cal.App.4th 548, 561, 59 Cal.Rptr.2d 36 (1996)).
The Superior Court then cited a Wisconsin case, again apparently with approval:
See also Atlantic Mutual Ins. Co. v. Badger Medical Supply Co., 191 Wis.2d 229, 528 N.W.2d 486 (1995) (essence of cause of action of misappropriation is the defendant's use of the plaintiff's product, into which plaintiff has put time, skill and money; and the defendant's use of the plaintiff's product or a copy of it in competition with the plaintiff and gaining an advantage in that competition because the plaintiff, and not the defendant, has expended the energy to produce it.)
Sorbee, 1999 Pa.Super. at 182, 735 A.2d 712.
These two definitions arguably are different. Under the first, the plaintiff may not have to be a competitor of the defendant; but, he must have been "injured" by the misappropriation. Under the second, the plaintiff and the defendant must be competitors, as was required by the Supreme Court in Int'l News and by the Third Circuit in United States Golf Ass'n.
[4] The Court does not have to decide between the two definitions in Sorbee because under either definition, the plaintiff has failed to make out the element of misappropriation that requires that the plaintiff suffer a loss of competitive advantage or otherwise be injured in his business.
It is not alleged that either the defendant or Reebok is in direct competition with the plaintiff. The plaintiff has admitted that he wanted and intended for the defendant to use his idea. The plaintiff does not allege that he had any use for the idea himself or that he would have been able to sell it to anyone else. The plaintiff, therefore, has not alleged that he suffered any competitive or other financial loss when the defendant took his idea.
[5] The plaintiff instead alleges that he suffered a loss when the defendant did not pay him for the use of the idea. This is insufficient. In order to state a claim for idea misappropriation, it must be the taking of the idea itself that causes the plaintiff a competitive or other financial harm. This occurs only when the defendant's use of the idea deprives the plaintiff of some competitive or financial benefit or causes some other detriment separate from the misappropriation. The loss must be independent of a defendant's failure to pay; to hold otherwise would render the third element of misappropriation superfluous. Because there is no allegation that the plaintiff was harmed competitively or financially by the misappropriation, the plaintiff has not properly pled misappropriation. See also J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, 4th Ed., § 10:51 (direct competition is not required but there must always be some diversion of profits or other injury to the plaintiff's bottom line); David M. Nimmer, Nimmer on Copyright, § 16.01 (direct competition is not necessary in an idea misappropriation claim, but instead requires that there be a legal relationship between the parties, by express contract, quasi-contract, implied contract, or a fiduciary relationship).
The complaint also fails to allege the first two elements of a misappropriation claim: a substantial investment of time, effort, and money into creating an idea that the defendant has appropriated at little or no cost. The complaint does allege a substantial investment of time, effort, and money but not in the creation of anything the defendant appropriated. The plaintiff alleges that he spent time and money coming up with graphics and marketing ideas. Amended Complaint, at ¶ 29-31. There is no allegation, however, that the defendant or Reebok appropriated any of these graphics or marketing ideas. T., at 62-64.
B. Breach of Contract
The plaintiff claims that he entered into an express contract with the defendant pursuant to which he was to receive twenty-five percent of the proceeds that the defendant received from marketing products with "The Answer" on them. The defendant argues that there was not a valid contract because the claim was not timely filed under the Pennsylvania statute of limitations, the terms of the contract were not sufficiently definite, and there was no consideration alleged. [FN5]
FN5. As a threshold matter, the parties disagree as to whether Virginia law or Pennsylvania law should apply to this claim. The plaintiff argues that Pennsylvania law applies; the defendant advocates the application of Virginia law. Because the Court finds that the claim should be dismissed for lack of consideration, a requirement in both Virginia and Pennsylvania, dismissal would occur regardless of which law is applied. Because there is, in essence, no real conflict, the Court need not decide the choice-of-law issue. See Williams v. Stone, 109 F.3d 890, 893 (3d Cir.1997) (where there is a "false conflict" and law of both jurisdictions mandate the same answer, the court should avoid the choice-of-law question).
Because the Court has determined that the claim should be dismissed for failure to allege proper consideration, the Court need not address the defendant's other arguments about the statute of limitations and definiteness of terms.
[6] Under Pennsylvania law, a plaintiff must present clear and precise evidence of an agreement in which both parties manifested an intent to be bound, for which both parties gave consideration, and which contains sufficiently definite terms. Lombardo v. Gasparini, 385 Pa. 388, 393, 123 A.2d 663 (1956); Biddle v. Johnsonbaugh, 444 Pa.Super. 450, 664 A.2d 159 (1995); see also R.K. Chevrolet v. Hayden, 253 Va. 50, 480 S.E.2d 477 (1997) (consideration and definiteness in terms required for binding contract under Virginia law).
[7][8] Consideration confers a benefit upon the promisor or causes a detriment to the promisee and must be an act, forbearance, or return promise bargained for and given in exchange for the original promise. Eighth North-Val, Inc. v. William L. Parkinson DDS P.C. Pension Trust, 2001 Pa.Super. 101, 107, 773 A.2d 1248 (2001); Brewer v. Bank of Danville, 202 Va. 807, 815, 120 S.E.2d 273 (1961). See also Restatement of Contracts 2d, § 71. Under Pennsylvania and Virginia law, past consideration is insufficient to support a subsequent promise. See Sager v. Basham, 241 Va. 227, 401 S.E.2d 676, 677 (1991); Cardamone v. Univ. of Pittsburgh, 253 Pa.Super. 65, 384 A.2d 1228 (1978).
It is difficult to analyze the alleged contract because the complaint describes various promises that were made by the defendant at various times. This problem with the plaintiff's alleged contract became even clearer at the hearing on the motion. Counsel for the plaintiff gave various dates for the formation of the alleged contract. T., at 80-95 (the "agreement and the discussions took place in early 1994;" "the last part of the contract didn't really take place until 1997;" "there was a meeting of the minds that took place in 1994, albeit the last ... part of that contract didn't really take place until after Mr. Iverson had gotten into the pros;" "there was an initial understanding in 1994 that is then modified for a more specific situation in 1996;" "in Philadelphia in 1997 there is a modification of the original understanding;" "the original contract could have been rescinded, it could have been modified by the parties;" and the contract "most importantly came into being in 1996"). On this basis alone, the complaint fails adequately to set forth the elements required for a contract claim.
The Court, nevertheless, will consider whether there was consideration at the various times the plaintiff alleges the formation of a contract.
The plaintiff has argued that, in exchange for the defendant's promise to pay the twenty-five percent, the plaintiff gave three things as consideration: (1) the plaintiff's idea to use "The Answer" as a nickname to sell athletic apparel; [FN6] (2) the plaintiff's assistance to and relationship with the defendant and his family; and (3) the plaintiff's move to Philadelphia. T., at 94, 97.
FN6. Some courts, applying the contract theory to protect products of the mind, have required that an idea be novel and concrete in order to constitute consideration. E.g., Masline v. New York, 95 Conn. 702, 112 A. 639 (1921); Soule v. Bon Ami Co., 201 A.D. 794, 195 N.Y.S. 574 (1922). See also David M. McGovern, What is Your Pitch?: Idea Protection is Nothing but Curveballs, 15 Loy. L.A. Ent. L.J. 475, 491-493 (1995). These courts reason that, if the idea is common and general to the whole world, the idea is not valuable and cannot qualify as consideration. There are no Pennsylvania or Virginia cases on point. Some commentators reason that parties should be able to bargain for the disclosure of an idea on their own terms, regardless of the idea's status as property or how valuable the idea is to non-parties to the agreement. See Nimmer at § 16.08[A]. The Court will assume that under Pennsylvania and Virginia law, novelty and concreteness would not be required.
[9] According to the facts alleged by the plaintiff, he made the suggestion that the defendant use "The Answer" as a nickname and for product merchandising one evening in 1994. This was before the defendant first promised to pay; according to the plaintiff, the promise to pay was made later that evening. The disclosure of the idea also occurred before the defendant told the plaintiff that he was going to use the idea in connection with the Reebok contract in 1996, and before the sales of goods bearing "The Answer" actually began in 1997.
Regardless of whether the contract was formed in 1994, 1996, or 1997, the disclosure of "The Answer" idea had already occurred and was, therefore, past consideration insufficient to create a binding contract.
The plaintiff also argued that the plaintiff's relationship with and assistance to the defendant and his family and the defendant's move to Philadelphia during the 1997-1998 season constituted consideration for the defendant's promise to pay. There is no allegation in the complaint that these actions by the plaintiff were in exchange for the defendant's promise to pay.
[10] According to the complaint, the plaintiff's relationship and support for the defendant, his "surrogate father" role, began in 1987, seven years before the first alleged promise to pay was made. There is no allegation that the plaintiff began engaging in this conduct because of any promise by the defendant, or that the plaintiff continued his gratuitous conduct in 1994, 1996, or 1997 in exchange for the promise to pay. These actions are not valid consideration. Greene v. Oliver Realty, 363 Pa.Super. 534, 546, 526 A.2d 1192 (1987) (promise is only binding if made in exchange for consideration); Brewer, 202 Va. at 815, 120 S.E.2d 273 (consideration is something given in exchange for the promise to pay).
[11] The plaintiff also alleged at oral argument that his move to Philadelphia during the 1997-1998 season was consideration for the promise to pay. If the parties reached a mutual agreement in 1994, the plaintiff has not properly alleged that the move was consideration because there is no allegation that the parties anticipated that the plaintiff would move to Philadelphia three or four years later, or that the plaintiff promised to do so in exchange for the defendant's promise to pay.
Nor is there any allegation that the move was part of the terms of any contract created in 1996 or 1997. The complaint states only that the defendant "persuaded" him to move to Philadelphia to "begin seeking the profits from his ideas." Even when the complaint is construed broadly, there is no allegation that the move was required in exchange for any promise by the defendant to pay. In the absence of valid consideration, the plaintiff has no claim for breach of an express contract.
The plaintiff has not made a claim of promissory estoppel. At the hearing, the plaintiff confirmed that he was not making an argument based on detrimental reliance or promissory estoppel because he would only be entitled to reliance damages, an amount far less than what the plaintiff is seeking here. T., at 107.
If the plaintiff wishes to amend the complaint to state a claim of promissory estoppel, the Court will permit him to do so. The Court does note, however, that in order for the Court to have jurisdiction under 28 U.S.C. § 1332, the plaintiff's damages must exceed $75,000.00.
C. Unjust Enrichment
[12] The plaintiff has also brought a claim for unjust enrichment. Under Pennsylvania law, [FN7] the elements of a claim for unjust enrichment are "benefits conferred on defendant by plaintiff, appreciation of such benefits by the defendant, and the acceptance and retention of such benefits as it would be inequitable for the defendant to retain the benefit without payment of value." Wiernik v. PHH U.S. Mortgage Corp., 736 A.2d 616, 622 (1999).
FN7. The parties agree that Pennsylvania law applies to this claim.
The alleged benefit in this case was the use of the plaintiff's idea. Several courts require that a plaintiff show that his idea was novel and concrete before the court will find unjust enrichment based on the use of that idea. E.g., Hamilton Nat'l Bank v. Belt, 210 F.2d 706 (D.C.Cir.1953); Werlin v. Reader's Digest Ass'n, 528 F.Supp. 451, 466 (S.D.N.Y.1981); Galanis v. P & G Corp., 153 F.Supp. 34, 38 (S.D.N.Y.1957); see also McGovern, 15 Loy. L.A. Ent. L.J. at 488-89.
These courts reason that, absent novelty and concreteness, the plaintiff has not provided the defendant with anything that can be properly be deemed the property of the plaintiff; upon their release from the brain, non-novel and non-concrete ideas are common property. E.g., Galanis v. Proctor & Gamble, 153 F.Supp. 34, 37 (S.D.N.Y.1957). In the absence of novelty and concreteness, the plaintiff cannot show that he enriched the defendant; the defendant has only received an idea that he was already free to use. E.g., Werlin v. Reader's Digest Ass'n, 528 F.Supp. at 465-66.
[13] Although the Pennsylvania Supreme Court has not opined on whether a claim of unjust enrichment based on the use of an idea requires novelty, it has required novelty in an implied contract case involving the use of an idea. Thomas, 350 Pa. at 266-67, 38 A.2d 61. The Thomas court reasoned that novelty was required for the creator to have a property right in the idea used by the other party. Id. I hold that the Pennsylvania Supreme Court would reach the same conclusion in an unjust enrichment case.
[14] As discussed above, it is very doubtful that the plaintiff's idea was novel. Even if the idea to use "The Answer" as a nickname were novel, the plaintiff would still not have made out a claim for unjust enrichment. The facts alleged in the complaint do not include an allegation that the plaintiff expected payment if the defendant used the nickname "The Answer." The plaintiff's facts show that he wanted and intended the defendant to use the nickname in summer league basketball tournaments, starting in 1994, without expecting any payment for that use. The plaintiff cannot make out a claim that the defendant was unjustly enriched by the use of a nickname that the plaintiff freely offered.
[15] It is the use of the nickname on products for which the plaintiff claims damages. But the use of the nickname on products came years after the defendant began using the nickname. If the plaintiff concedes, as he does, that the idea of putting a nickname on products is not novel; and if the plaintiff is not claiming any damages for merely suggesting the use of the nickname to the defendant, and he is not, there is no unjust enrichment alleged in the complaint. Any benefit to the defendant from the marketing of products with "The Answer" on them comes from his fame as a basketball player and the investment in marketing the products by Reebok.
An appropriate order follows.
ORDER
AND NOW, this 4th day of April, 2003, upon consideration of the defendant's Motion to Dismiss (Docket No. 13), the plaintiff's opposition thereto, and all supplemental filings by the parties, and following oral argument, IT IS HEREBY ORDERED that the motion is GRANTED and the plaintiff's first amended complaint is DISMISSED for the reasons set forth in a memorandum of today's date.
AND IT IS FURTHER ORDERED THAT, if the plaintiff wishes to amend his complaint to state a claim for promissory estoppel, he may do so on or before May 2, 2003.
Supplemental Case Printout for: Contemporary Legal Debates
(Cite as: 256 Neb. 19, 588 N.W.2d 798)
137 Lab.Cas. P 58,566, 14 IER Cases 1394
Julie GOFF-HAMEL, appellant,
v.
OBSTETRICIANS & GYNECOLOGISTS, P.C., appellee.
No. S-97-1007.
Supreme Court of Nebraska.
Jan. 29, 1999.
WRIGHT, J.
NATURE OF CASE
Julie Goff-Hamel brought this action against Obstetricians & Gynecologists, P.C. (Obstetricians), seeking damages for breach of an alleged oral employment contract or, in the alternative, damages for detrimental reliance on a promise of employment. The trial court granted summary judgment in favor of Obstetricians, and Goff-Hamel appeals.
SCOPE OF REVIEW
[1] In reviewing a summary judgment, an appellate court views the evidence in a light most favorable to the party against whom the judgment is granted and gives such party the benefit of all reasonable inferences deducible from the evidence. Foreman v. AS Mid-America, 255 Neb. 323, 586 N.W.2d 290 (1998).
[2] In reviewing a question of law, an appellate court reaches a conclusion independent of the lower court's ruling. Hoiengs v. County of Adams, 254 Neb. 64, 574 N.W.2d 498 (1998).
FACTS
Goff-Hamel worked for Hastings Family Planning for 11 years. Prior to leaving Hastings Family Planning, Goff-Hamel was earning $24,000 plus the following benefits: 6 weeks' paid maternity leave, 6 weeks' vacation, 12 paid holidays, 12 sick days, an educational reimbursement, and medical and dental insurance coverage.
In July 1993, Goff-Hamel met with representatives of Obstetricians regarding the possibility of employment. Present at the meeting were Janet Quackenbush, the office manager; Dr. *21 George Adam, a part owner of Obstetricians; and Larry Draper, a consultant of Obstetricians involved in personnel decisions. Adam had approached Goff-Hamel in June 1993 about working for him as a patient relations and outreach coordinator at Obstetricians. Goff-Hamel initially declined the offer, explaining that she had made commitments to do some training in the fall and to hire and help train a new bookkeeper. Adam spoke to Goff-Hamel approximately 1 month later, asking her to reconsider and whether she was ready to "jump ship and come work for him." Goff-Hamel told Adam she would be interested in hearing some details, and an interview was set for July 27 at Adam's office.
At the meeting, Adam represented to Goff-Hamel that the position would be full time and would start at a salary of $10 per hour and that she would be provided 2 weeks' paid vacation, three or four paid holidays, uniforms, and an educational stipend. A retirement plan would start after the end of the second year, retroactive to the end of the first year. The job would not provide health insurance.
Goff-Hamel was offered a job with Obstetricians during the July 27, 1993, meeting, and she accepted the job offer at that time. She expressed concern that she be given time to finish some projects at Hastings Family Planning, and it was agreed that she would start her employment on October 4. Goff-Hamel gave notice to Hastings Family Planning in August, informing them that she would be resigning to take a job with Obstetricians.
Subsequently, Goff-Hamel went to Obstetricians' office and was provided with uniforms for her job. She was given a copy of her schedule for the first week of work, but did not receive a copy of the employee handbook.
**801 On October 3, 1993, Goff-Hamel was told by Draper that she should not report to work the next morning as had been planned. Draper told her that Janel Foote, the wife of a part owner of Obstetricians, Dr. Terry Foote, opposed the hiring of Goff-Hamel.
The trial court found that there were no facts in dispute and that Goff-Hamel had not turned down any other employment opportunities between July and October 1993. The court found that she had terminated her employment at Hastings Family *22 Planning in reliance on an offer of employment from Obstetricians; however, the prospective employment agreement was not for a specific term of employment. The court noted that Goff-Hamel sought replacement employment, but was unable to obtain employment until April 1995, when she was employed part time at the rate of $11 per hour.
The trial court concluded that since Goff-Hamel was to be employed at will, her employment could be terminated at any time, including before she began working. The court concluded that under either contract law or promissory estoppel, Obstetricians was entitled to a judgment as a matter of law.
ASSIGNMENTS OF ERROR
Goff-Hamel asserts that the trial court erred in sustaining Obstetricians' motion for summary judgment and in overruling her motion for summary judgment.
ANALYSIS
[3] In sustaining Obstetricians' motion for summary judgment, the trial court concluded as a matter of law that since Goff-Hamel's employment could have been terminated after 1 day without Obstetricians incurring liability, logic dictated that her employment could also be terminated before it started without liability.
[4] It is undisputed that on July 27, 1993, Obstetricians offered Goff-Hamel employment and that she accepted. The oral agreement did not specify that the employment was for a definite period. We have consistently held that when employment is not for a definite term and there are no contractual, statutory, or constitutional restrictions upon the right of discharge, an employer may lawfully discharge an employee whenever and for whatever cause it chooses. See, Myers v. Nebraska Equal Opp. Comm., 255 Neb. 156, 582 N.W.2d 362 (1998); Gillis v. City of Madison, 248 Neb. 873, 540 N.W.2d 114 (1995); Hamersky v. Nicholson Supply Co., 246 Neb. 156, 517 N.W.2d 382 (1994). Therefore, the trial court correctly determined as a matter of law that Goff- Hamel could not bring a claim for breach of an employment contract.
Goff-Hamel's second cause of action was based upon promissory estoppel. " '[T]he development of the law of *23 promissory estoppel "is an attempt by the courts to keep remedies abreast of increased moral consciousness of honesty and fair representations in all business dealings." ' " Rosnick v. Dinsmore, 235 Neb. 738, 751, 457 N.W.2d 793, 801 (1990).
[5][6] Promissory estoppel provides for damages as justice requires and does not attempt to provide the plaintiff damages based upon the benefit of the bargain. Id. It requires only that reliance be reasonable and foreseeable. It does not impose the requirement that the promise giving rise to the cause of action must be so comprehensive in scope as to meet the requirements of an offer that would ripen into a contract if accepted by the promisee. Hawkins Constr. Co. v. Reiman Corp., 245 Neb. 131, 511 N.W.2d 113 (1994); Rosnick v. Dinsmore, supra.
We have not specifically addressed whether promissory estoppel may be asserted as the basis for a cause of action for detrimental reliance upon a promise of at-will employment. In Merrick v. Thomas, 246 Neb. 658, 522 N.W.2d 402 (1994), the employee was terminated from her job approximately 4 months after she had been hired. We determined that because the employee had worked for a time, the employer had kept his promise to employ the plaintiff and that promissory estoppel was not available. We did not consider whether a cause of action based upon promissory estoppel could be stated by a prospective at-will employee who had been induced to leave previous gainful employment**802 based upon the promise of other employment, but who did not commence employment at the new job.
Other jurisdictions which have addressed the question of whether a cause of action for promissory estoppel can be stated in the context of a prospective at-will employee are split on the issue. Some have held that an employee can recover damages incurred as a result of resigning from the former at-will employment in reliance on a promise of other at-will employment. They have determined that when a prospective employer knows or should know that a promise of employment will induce an employee to leave his or her current job, such employer shall be liable for the reliant's damages. Recognizing that both the prospective new employer and the prior employer could have fired the employee without cause at any time, they have concluded that the employee would have continued to work in his *24 or her prior employment if it were not for the offer by the prospective employer. Although damages have not been allowed for wages lost from the prospective at-will employment, damages have been allowed based upon wages from the prior employment and other damages incurred in reliance on the job offer.
In contrast, other jurisdictions have held as a matter of law that a prospective employee cannot recover damages incurred in reliance on an unfulfilled promise of at-will employment, concluding that reliance on a promise consisting solely of at-will employment is unreasonable as a matter of law because the employee should know that the promised employment could be terminated by the employer at any time for any reason without liability. These courts have stated that an anomalous result occurs when recovery is allowed for an employee who has not begun work, when the same employee's job could be terminated without liability 1 day after beginning work.
PROMISSORY ESTOPPEL ALLOWED
The following cases have held that a prospective employee had a cause of action for damages incurred in reliance upon a promise of employment. In Grouse v. Group Health Plan, Inc., 306 N.W.2d 114 (Minn.1981), a pharmacist working at a drugstore desired employment with a hospital or clinic. He accepted employment with a clinic and gave 2 weeks' notice to the drugstore. During this period, he declined a job with a hospital because he had accepted employment with the clinic. Upon reporting to work, he was told that someone else had been hired because the pharmacist did not satisfy certain hiring requirements of the clinic. He had difficulty obtaining other full-time employment and suffered wage loss as a result.
The clinic argued that the application of promissory estoppel would create an anomalous rule such that an employee who is told not to report to work the day before he is scheduled to begin has a remedy, while an employee who is discharged after the first day does not. In rejecting the clinic's argument and allowing recovery, the court concluded that under the circumstances it would be unjust not to hold the clinic to its promise. The court stated:
*25 [A]ppellant had a right to assume he would be given a good faith opportunity to perform his duties to the satisfaction of respondent once he was on the job. He was not only denied that opportunity but resigned the position he already held in reliance on the firm offer which respondent tendered him.
Id. at 116.
The court also recognized that under appropriate circumstances, promissory estoppel could apply even if the employee was fired after he had commenced employment, thus concluding that its ruling would not necessarily create an anomalous result. Since the prospective employment could have been terminated at any time, the court explained that the damages were not what the pharmacist would have earned from the clinic, but, rather, what he lost by quitting the job he held and declining at least one offer of employment elsewhere. See, also, Gorham v. Benson Optical, 539 N.W.2d 798 (Minn.App.1995); Rognlien v. Carter, 443 N.W.2d 217 (Minn.App.1989).
In Gorham, summary judgment was granted against the employee, who sued the employer for breach of contract, fraud, and promissory estoppel. The appellate court reversed **803 the summary judgment on the promissory estoppel claim. The employee had been called in September 1993 about a job opportunity with Benson Optical. At the time, he earned $38,000 annually as a manager for LensCrafters. He was offered a position for $50,000 with Benson Optical, and he accepted and gave notice of resignation to LensCrafters. The employee's last day of work for LensCrafters was October 1, and on October 3, he attended Benson Optical's national sales meeting. On October 4, he attended a "getting to know you" meeting which left him with the impression that his employment had been or would be terminated, and on October 15, his employment was officially terminated.
Relying upon Grouse, the Gorham court found no relevant difference between the prospective Benson Optical employee, who reported for work and was terminated 1 day later, and the employee in Grouse, who was denied even 1 day on the job. Both men had relied to their detriment on the promise of a new *26 job. Neither man had a good faith opportunity to perform his duties.
In Ravelo v. County of Hawaii, 66 Haw. 194, 658 P.2d 883 (1983), a police officer resigned from his position in reliance on an offer of employment in another city. His wife resigned her job, and they informed the private school where their children were enrolled that they were being removed from school. Subsequently, the police officer was told that he was not going to be hired, and he and his wife were unsuccessful in attempting to get back their previous jobs. Relying upon the Restatement of Contracts § 90 (1932), the Supreme Court reversed the trial court's dismissal and concluded that promissory estoppel could be applied in the case of a promise of at-will employment.
In Bower v. AT & T, Technologies, Inc., 852 F.2d 361 (8th Cir.1988), the court distinguished between an at-will employer who fires an employee 1 day after beginning work and an at-will employer who withdraws the offered employment before the employee is given an opportunity to perform. The court stated that an employer who withdraws the offered employment before the employee is given an opportunity to perform fails to keep its promise in any respect. The court concluded that the prospective employee whose offer was withdrawn had a cause of action.
In Peck v. Imedia, Inc., 293 N.J.Super. 151, 679 A.2d 745 (1996), the court stated that the application of promissory estoppel to prospective at-will employees recognizes that there may be losses incident to reliance upon a job offer itself, even though the employer can terminate the relationship at any time. The court concluded that reliance on the promise of at-will employment gave rise to a cause of action for damages flowing from the prospective employee's giving up her prior business and moving to another state. The court stated that the prospective employer's delay in informing the employee of its decision not to employ could give rise to damages based upon the employer's lack of good faith and fair dealing.
In Sheppard v. Morgan Keegan & Co., 218 Cal.App.3d 61, 266 Cal.Rptr. 784 (1990), the court held that under a theory of either breach of implied covenant of good faith and fair dealing *27 or promissory estoppel, an investment banker could recover for damages incurred when a prospective employer failed to fulfill its promise of at-will employment. In reliance upon the promise of employment, the banker had resigned his previous employment and arranged to move to another city, signing a lease on an apartment there. Adopting the reasoning of Grouse v. Group Health Plan, Inc., 306 N.W.2d 114 (Minn.1981), the court stated: "[A]n employer cannot expect a new employee to sever his former employment and move across the country only to be terminated before the ink dries on his new lease, or before he has had a chance to demonstrate his ability to satisfy the requirements of the job." Sheppard, 218 Cal.App.3d at 67, 266 Cal.Rptr. at 787. See, also, Comeaux v. Brown & Williamson Tobacco Co., 915 F.2d 1264 (9th Cir.1990).
PROMISSORY ESTOPPEL NOT ALLOWED
The following cases have held as a matter of law that prospective at-will employees cannot state a claim for promissory estoppel. In Bakotich v. Swanson, 91 Wash.App. 311, 957 P.2d 275 (1998), the court rejected the prospective employee's claim for damages incurred in reliance upon a promise of at-will **804 employment. Although the employee alleged that he terminated his prior employment in reliance on the job offer, the court held that the supposed promise was only of at-will employment and that there was no promise or reasonable expectation of permanent employment. Therefore, the court declined to extend contract principles to at-will employment absent a clear and definite promise of permanent employment which would support promissory estoppel.
In White v. Roche Biomedical Laboratories, Inc., 807 F.Supp. 1212 (D.S.C.1992), the court held that reliance on a promise consisting solely of at-will employment was unreasonable as a matter of law, since the promise created no enforceable rights in favor of the employee other than the right to collect wages accrued for work performed. The court held that to hold otherwise would create an anomalous result insofar as the prospective employee would be placed in a better position than an employee whose at-will employment was terminated at some point after the employee began working.
*28 Similarly, in Rosatone v. GTE Sprint Communications, 761 S.W.2d 670 (Mo.App.1988), the court found that allowing claims of promissory estoppel in cases of unfulfilled promises of at-will employment would create an anomalous result to prior holdings which denied recovery to at-will employees who had commenced work. See, also, Faust v. Ryder Commercial Leasing & Serv., 954 S.W.2d 383 (Mo.App.1997); Morsinkhoff v. DeLuxe Laundry & Dry Cleaning Co., 344 S.W.2d 639 (Mo.App.1961).
In Heinritz v. Lawrence University, 194 Wis.2d 606, 535 N.W.2d 81 (Wis.App.1995), the court rejected the claim of promissory estoppel by a prospective employee who had terminated his prior employment in reliance upon an employment offer. The court stated that such reliance did not change the nature of the promise, which was for an at-will relationship that could be terminated at any time by either party without cause.
In Meerman v. Murco, Inc., 205 Mich.App. 610, 517 N.W.2d 832 (1994), the court stated that to support a claim of promissory estoppel upon an unfulfilled promise of at-will employment, there must be a distinguishing feature which would remove the case from the general rule of at-will employment. The court determined that an employee who was sought out by a prospective employer and induced to leave other employment failed to establish reliance of a kind that would remove the case from the general rule regarding at-will employment. Rather, the court opined that such reliance merely involved the customary and necessary incidents of changing jobs and was not consideration to support a promissory estoppel claim. Compare, Filcek v. Norris-Schmid, Inc., 156 Mich.App. 80, 401 N.W.2d 318 (1986); Hackett v. Foodmaker, Inc., 69 Mich.App. 591, 245 N.W.2d 140 (1976).
[7][8] Having reviewed and considered decisions from other jurisdictions, we conclude under the facts of this case that promissory estoppel can be asserted in connection with the offer of at-will employment and that the trial court erred in granting Obstetricians summary judgment. A cause of action for promissory estoppel is based upon a promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee which does in fact induce such action or *29 forbearance. Here, promissory estoppel is appropriate where Goff-Hamel acted to her detriment in order to avail herself of the promised employment.
[9] We next consider whether the trial court should have granted summary judgment in favor of Goff-Hamel. Although the denial of a motion for summary judgment is not a final order and thus is not appealable, when adverse parties have each moved for summary judgment and the trial court sustained one of the motions, the reviewing court acquires jurisdiction over both motions and may determine the controversy which is the subject of those motions. Zimmerman v. FirsTier Bank, 255 Neb. 410, 585 N.W.2d 445 (1998); Pettit v. Paxton, 255 Neb. 279, 583 N.W.2d 604 (1998).
[10] In the present context, the questions are (1) whether Obstetricians made a definite promise of employment to Goff-Hamel which Obstetricians reasonably expected or should have expected would induce Goff-Hamel to **805 terminate her present employment; (2) whether Goff-Hamel was, in fact, induced to act by such offer; (3) whether the action taken by Goff-Hamel was detrimental to her; and (4) whether justice requires that Obstetricians reimburse Goff-Hamel for damages incurred as a result of the promise of employment. See Eby v. York-Division, Borg-Warner, 455 N.E.2d 623 (Ind.App.1983).
The facts are not disputed that Obstetricians offered Goff-Hamel employment. Apparently, at the direction of the spouse of one of the owners, Obstetricians refused to honor its promise of employment. It is also undisputed that Goff- Hamel relied upon Obstetricians' promise of employment to her detriment in that she terminated her employment of 11 years. Therefore, under the facts of this case, the trial court should have granted summary judgment in favor of Goff- Hamel on the issue of liability.
[11][12][13] However, there remains a material issue of fact regarding the amount of damages sustained by Goff-Hamel. On a motion for summary judgment, the question is not how a factual issue is to be decided, but whether any real issue of material fact exists. Kozicki v. Dragon, 255 Neb. 248, 583 N.W.2d 336 (1998); Herman Bros. v. Great West Cas. Co., 255 Neb. 88, 582 N.W.2d 328 (1998). Promissory estoppel provides for damages as justicerequires*30 and does not attempt to provide the plaintiff damages based upon the benefit of the bargain. Rosnick v. Dinsmore, 235 Neb. 738, 457 N.W.2d 793 (1990). For example, the damages sustained by an employee who quits current employment to accept another job are different than the damages sustained by an employee who had no prior employment but may have moved to a new location in reliance upon a job offer. In the latter case, wages from prior employment are not considered in the determination of damages because the party did not give up prior employment in reliance upon the new offer. In neither case are damages to be based upon the wages the employee would have earned in the prospective employment because the employment was terminable at will.
In any event, the amount of damages to be awarded, if any, is a question of fact to be determined from the circumstances of each case, i.e., as justice requires.
We therefore reverse the judgment of the trial court and remand the cause for further proceedings in accordance with this opinion.
REVERSED AND REMANDED FOR FURTHER PROCEEDINGS.
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