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CONTRACT LITIGATION

PROGRAM MATERIALSNovember 17, 2017179704

creo

CONTRACT LITIGATION1 of 174

November 17, 2017 ICLE: State Bar Series

CONTRACT LITIGATION

6 CLE Hours including1.5 Professionalism Hour | 4.5 Trial Practice Hours

Sponsored By: Institute of Continuing Legal Education


iiiFOREWORD

Dear ICLE Seminar Attendee,

Thank you for attending this seminar. We are grateful to the Chairperson(s) for organizing this program. Also, we would like to thank the volunteer speakers. Without the untiring dedication and eff orts of the Chairperson(s) and speakers, this seminar would not have been possible. Their names are listed on the AGENDA page(s) of this book, and their contributions to the success of this seminar are immeasurable.

We would be remiss if we did not extend a special thanks to each of you who are attending this seminar and for whom the program was planned. All of us at ICLE hope your attendance will be benefi cial as well as enjoyable We think that these program materials will provide a great initial resource and reference for you.

If you discover any substantial errors within this volume, please do not hesitate to inform us. Should you have a diff erent legal interpretation/opinion from the speaker’s, the appropriate way to address this is by contacting him/her directly.

Your comments and suggestions are always welcome.

Sincerely, Your ICLE Staff

Jeff rey R. DavisExecutive Director, State Bar of Georgia

Tangela S. KingDirector, ICLE

Rebecca A. HallAssociate Director, ICLE

Printed By:

Copyright © 2017 by the Institute of Continuing Legal Education of the State Bar of Georgia. All rights reserved. Printed in the United States of America. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic, mechanical photocopying, recording, or otherwise, without the prior written permission of ICLE.

The Institute of Continuing Legal Education’s publications are intended to provide current and accurate information on designated subject matter. They are off ered as an aid to practicing attorneys to help them maintain professional competence with the understanding that the publisher is not rendering legal, accounting, or other professional advice. Attorneys should not rely solely on ICLE publications. Attorneys should research original and current sources of authority and take any other measures that are necessary and appropriate to ensure that they are in compliance with the pertinent rules of professional conduct for their jurisdiction.

ICLE gratefully acknowledges the eff orts of the faculty in the preparation of this publication and the presentation of information on their designated subjects at the seminar. The opinions expressed by the faculty in their papers and presentations are their own and do not necessarily refl ect the opinions of the Institute of Continuing Legal Education, its offi cers, or employees. The faculty is not engaged in rendering legal or other professional advice and this publication is not a substitute for the advice of an attorney. This publication was created to serve the continuing legal education needs of practicing attorneys.

ICLE does not encourage non-attorneys to use or purchase this publication in lieu of hiring a competent attorney or other professional. If you require legal or other expert advice, you should seek the services of a competent attorney or other professional.

Although the publisher and faculty have made every eff ort to ensure that the information in this book was correct at press time, the publisher and faculty do not assume and hereby disclaim any liability to any party for any loss, damage, or disruption caused by errors or omissions, whether such errors or omissions result from negligence, accident, or any other cause.

The Institute of Continuing Legal Education of the State Bar of Georgia is dedicated to promoting a well organized, properly planned, and adequately supported program of continuing legal education by which members of the legal profession are aff orded a means of enhancing their skills and keeping abreast of developments in the law, and engaging in the study and research of the law, so as to fulfi ll their responsibilities to the legal profession, the courts and the public.

Publication No.179704


AGENDA

Presiding:John K. Larkins, Jr., Program Co-Chair, Chilivis Cochran Larkins & Bever LLP, AtlantaJohn D. “Randy” Dalbey, Co-Chair, Chilivis Cochran Larkins & Bever LLP, Atlanta

7:30 REGISTRATION AND CONTINENTAL BREAKFAST (All attendees must check in upon arrival. A removable jacket or sweater is recommended.)

8:15 WELCOME AND PROGRAM OVERVIEW John K. Larkins, Jr.

8:30 CASE LAW DEVELOPMENTS ON CONTRACT ESSENTIALS Richard B. Caplan, LeClairRyan, Atlanta

9:15 LITIGATING A CONTRACTS CASE: THE VIEW FROM THE BENCH Hon. John K. Larkins, III, United States Magistrate Judge, Northern District of Georgia, Atlanta

10:00 BREAK

10:15 THE CONTRACT DRAFTER’S GUIDE TO CONTRACT DRAFTING George M. Fox, Fox+Mattson, P.C., Atlanta

11:00 CYBER RISK MANAGEMENT THROUGH VENDOR CONTRACTS Mitzi L. Hill, Taylor English Duma LLP, Atlanta

11:45 LUNCH (Included in registration fee.)

12:15 DAMAGES AND THE USE OF EXPERTS IN A CONTRACTS CASE Lauren A. Warner, Chilivis Cochran Larkins & Bever LLP, Atlanta

1:00 INTEGRATED CONTRACTS, MERGER CLAUSES AND IMPLIED TERMS Michael J. King, Greenberg Traurig LLP, Atlanta

1:45 BREAK

2:00 HOW TO WIN YOUR CONTRACT CASE THROUGH CROSS-EXAMINATION Stephen T. LaBriola, Fellows LaBriola LLP, Atlanta

2:45 MEDIATING BUSINESS AND CONTRACT DISPUTES: PROCESS, PERSPECTIVE AND PATIENCE David C. Nutter, Miles Mediation & Arbitration Services LLC, Atlanta

3:30 ADJOURN

v


TABLE OF CONTENTSvii

Foreword .................................................................................................................................................. iii

Agenda ........................................................................................................................................................v

CONTRACT LITIGATION .............................................................................................................. 9- 174

Appendix: ICLE Board ................................................................................................................................................. 1Georgia Mandatory CLE Fact Sheet ................................................................................................ 2

Page


8:30 CASE LAW DEVELOPMENTS ON CONTRACT ESSENTIALS Richard B. Caplan, LeClairRyan, Atlanta


© Richard Caplan

2017 Contract Litigation Seminar

CASELAW DEVELOPMENTS ON CONTRACT ESSENTIALS

Richard Caplan LeClairRyan, A Professional Corporation

1170 Peachtree Street, Suite 2350 Atlanta, Georgia 30309

[email protected] 404-267-2732

2


I. Introduction

Despite a half a millennium or so of written contract law to draw from, there is

no universal agreement on how to describe the elements of a contract.1 Other

speakers today will focus on different parts of contract law, such as damages, trial

preparation in a contracts case, and litigation itself. This paper will (re)focus on the

essentials of contract formation: the elements.

This paper begins with some background on contract fundamentals, including a

look at what the Georgia Supreme Court and other state Supreme Courts have said.

It then turns its focus to assent to a contract, including how the assent doctrine grew

over the past few hundred years. It then moves to a discussion of recent caselaw on

assent in Georgia. After reviewing a few more recent caselaw developments in the

world of contracts, the paper concludes with a brief look to the future and a

discussion of the intersection between contract law and artificial intelligence.

II. Refresher on Contract Fundamentals

How many elements are there in contract formation? As with many questions

involving the law, the answer is: it depends who you ask. According to the Mississippi

Supreme Court, for example, a valid contract requires six elements: “(1) two or more

1 I owe a debt of gratitude to Val Ricks for his provocative article on this subject. See Assent Is Not an Element of Contract Formation, 61 U. Kan. L. Rev. 591 (2013).


© Richard Caplan

2017 Contract Litigation Seminar


Richard Caplan LeClairRyan, A Professional Corporation

1170 Peachtree Street, Suite 2350 Atlanta, Georgia 30309

[email protected] 404-267-2732

2


I. Introduction

Despite a half a millennium or so of written contract law to draw from, there is

no universal agreement on how to describe the elements of a contract.1 Other

speakers today will focus on different parts of contract law, such as damages, trial

preparation in a contracts case, and litigation itself. This paper will (re)focus on the

essentials of contract formation: the elements.

This paper begins with some background on contract fundamentals, including a

look at what the Georgia Supreme Court and other state Supreme Courts have said.

It then turns its focus to assent to a contract, including how the assent doctrine grew

over the past few hundred years. It then moves to a discussion of recent caselaw on

assent in Georgia. After reviewing a few more recent caselaw developments in the

world of contracts, the paper concludes with a brief look to the future and a

discussion of the intersection between contract law and artificial intelligence.

II. Refresher on Contract Fundamentals

How many elements are there in contract formation? As with many questions

involving the law, the answer is: it depends who you ask. According to the Mississippi

Supreme Court, for example, a valid contract requires six elements: “(1) two or more

1 I owe a debt of gratitude to Val Ricks for his provocative article on this subject. See Assent Is Not an Element of Contract Formation, 61 U. Kan. L. Rev. 591 (2013).


3

contracting parties, (2) consideration, (3) an agreement that is sufficiently definite, (4)

parties with legal capacity to make a contract, (5) mutual assent, and (6) no legal

prohibition precluding contract formation.”2 The Supreme Judicial Court of Maine,

by contrast, has stated “allegations of a meeting of the minds, consideration, and

mutuality of obligations state a legally enforceable contract.”3 In 1868 the Supreme

Court of Texas, after reviewing several treatises, stated that “the essential elements of

a contract [are], to wit: Parties capable to give mental assent; that there is a mutual

assent; that sufficient inducement, motive, or consideration exists; and that something

is to be done or forborne, by one or both, which is legally allowable.”4

To determine the essentials of a contract in Georgia, the first place to turn is

O.C.G.A. § 13-3-1. The article is called, after all, “Essentials of contracts generally.”

Its text states: “To constitute a valid contract, there must be parties able to contract, a

consideration moving to the contract, the assent of the parties to the terms of the

contract, and a subject matter upon which the contract can operate.” It is interesting

to see the slight variances in how O.C.G.A. § 13-3-1 was turned into Georgia Pattern

Jury Instruction 16.020. That instruction, which cites only to O.C.G.A. § 13-3-1,

states: “To constitute a lawful contract, there must be parties able to contract, a

2 Estate of Davis v. O’Neill, 42 So. 3d 520, 527 (Miss. 2010) (quotation marks omitted). 3 Dom J. Moreau & Son, Inc. v. Fed. Pac. Elec. Co., 378 A.2d 151, 153 (Me. 1977).4 Vincent v. Rather, 31 Tex. 77, 78 (1868). Ricks believes there are five elements: “(1) a promise (2) that is sufficiently definite (3) by a party with capacity, (4) consideration, and (5) no legal prohibition.” Ricks at 653.

4

consideration for the contract, the agreement of the parties to the terms of the

contract, and a lawful subject matter.” “Valid” changes to “lawful,” the “moving to”

language is dropped, and “assent” becomes “agreement.”

So how many elements is that, anyway? O.C.G.A. § 13-3-1 lists “parties able to

contract,” let’s call that one; “a consideration moving to the contract,” two; “the

assent of the parties to the terms of the contract,” three; “and a subject matter upon

which the contract can operate.” Four? The Georgia Court of Appeals says there are

three, based on the language of the statute: “subject matter of the contract,

consideration, and mutual assent by all parties to all contract terms.”5 The Court’s

element three seems to combine elements one and four of O.C.G.A.§ 13-3-1.

As far as assent and consideration go when thinking about contract formation,

certainly they are inextricably linked. But are they truly independent elements? First,

consider what the Restatement of the Law of Contracts has to say. It separates

“Formation of Contracts–Mutual Assent”6 from “Formation of Contracts–

Consideration.”7 And it explicitly separates the two in the primary statement of

5 Cline v. Lee, 581 S.E.2d 558, 562 (Ga. Ct. App. 2003); see also Netsoft Associates, Inc. v. Flairsoft, Ltd., 771 S.E.2d 65, 67 (Ga. Ct. App. 2015) (“Under OCGA § 13-3-1, a valid contract includes three elements . . . .”).6 Restatement (Second) of Contracts (1981), ch. 3. 7 Restatement (Second) of Contracts (1981), ch. 4.


5

elements for formation: “[T]he formation of a contract requires a bargain in which

there is a manifestation of mutual assent to the exchange and a consideration.”8

But now consider what one of the fathers of modern contract law, Karl

Llewellyn, had to say on the subject: “I am persuaded that in initiation of business

deals one can safely take the problems of acceptance and of consideration as

coinciding.”9 Consider further what the UCC says regarding “formation in general”

of contracts for the sale of goods:

(1) A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.

(2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.

(3) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.10

The discussion in 2-204, particularly 2-204(1), focuses only on assent, and not

consideration. Consideration appears merely assumed. But if every promise that is

part of a sale of goods in fact has consideration, this would seem to ensure that assent

alone proves consideration is present.

With that, I turn to a discussion focused on assent.

8 Restatement (Second) of Contracts (1981), ch. 3 § 17(1) (emphasis added). 9 K. N. Llewellyn, Our Case-Law of Contract: Offer and Acceptance, II, 48 Yale L.J., 779, 784 (1939) (emphasis added). 10 U.C.C. § 2-204.

6

III. Focus on Assent

A. A Quick Dive Into Contract Law’s Past.

In a world in which Sir William Blackstone is still frequently cited,11 some

historical perspective is useful. There is no developed assent doctrine in the literature

of contract law in the 16th and 17th centuries.12 Further, “assent was not an element

of assumpsit, the form of action that came to dominate recovery of a promise.”13

But times change. The use of the legal concept of assent in common contract

law, “not yet part of any doctrine,” first occurred in 1789.14 The case involved an

auction sale where the bidder withdrew his bid before the hammer struck. The court,

for the first time, dealt “in a mutual promise case with the issue of when the promisor

becomes bound.”15 Through this case, “the language of assent entered contract

law.”16 From there the “assent doctrine spread to unilateral contract cases.”17

11 The Georgia Supreme Court has cited Blackstone multiple times this year already. E.g., Grange Mut. Cas. Co. v. Woodard, 797 S.E.2d 814, 819 (Ga. 2017) (citing “2 William Blackstone, Commentaries of the Laws of England 899 n.19 (William Draper Lewis ed., 1902) (‘[A]n implied contract only differs from an express contract in the mode of proof; both equally proceed upon the mutual agreement of the parties, and cannot exist without it.’)”). See also § III.A, infra. 12 This is certainly not to say that the word was missing from contract law altogether. E.g., Ricks at 609 (quoting a statement from the year 1530 that “[S]uche bargaynes and sales be called contractes & be made by assent of the partyes vppon agreement between theym of goodes or lands for money or for other recompence . . . .”). 13 Ricks at 610. 14 Ricks at 606 (discussing Payne v. Cave, 100 Eng. Rep. 502 (K.B.), 3 T.R. 148 (1789). 15 Ricks at 615 (emphasis added). 16 Ricks at 615–16. 17 Ricks at 621.


7

Since assent has assumed the role it now plays, it has not waivered much. Its

primary function is to demonstrate when consideration came to exist for a promise.

Ricks argues that there was a long-ago effort to replace consideration in contract

doctrine with assent. It failed.18 Fundamentally, the doctrine of consideration is the

cornerstone of contract formation. Even assent signed in blood is worthless without

consideration.19

In Georgia, assent is addressed most explicitly in O.C.G.A. § 13-3-2. It states:

“The consent of the parties being essential to a contract, until each has assented to all

the terms, there is no binding contract; until assented to, each party may withdraw his

bid or proposition.” The language tracks very closely with the relevant jury

instruction.20

Let me be clear: assent is necessary for contract formation. The issue raised

here is simply one of language precision. Assent serves an essential purpose in

determining when consideration came to exist. But that does not mean it is a separate

element of contract formation. If assent can exist without consideration, but

consideration necessarily implies consent, then with respect to contract formation,

between assent and consideration only the element of consideration would be

necessary and fundamental, as it would presume, and therefore subsume, assent.

18 Ricks at 632–34. 19 E.g., Kim v. Son, No. G 039818, 2009 WL 597232 (Cal. App. Dep’t Super. Ct. Mar. 9, 2009) 20 See Georgia Pattern Jury Instruction 16.030.

8

B. Caselaw Regarding Contract Formation Generally and Assent Specifically, including Moreno v. Smith, 299 Ga. 443 (July 5, 2016) and Extremity Healthcare, Inc. v. Access to Care America, LLC, 793 S.E.2d 529 (Ga. Ct. App. Oct. 28, 2016).

As the Georgia Supreme Court has long explained, when determining if there

was a “meeting of the minds” to form a contract, an objective theory of intent is

applied.21 Although a court need not consider extrinsic evidence in this inquiry, it

freely may. “[C]ircumstances surrounding the making of the contract, such as

correspondence and discussions, are relevant in deciding if there was a mutual assent

to an agreement, and courts are free to consider such extrinsic evidence.”22 Further,

in determining whether the parties reached an agreement, “an objection of

indefiniteness may be obviated by performance on the part of one party and the

acceptance of the performance by the other.”23

Although parol evidence can’t be used to contradict or vary the terms of a valid

contract, it can be used to demonstrate no valid agreement ever existed.24 “Where

such extrinsic evidence exists and is disputed, the question of whether a party has

assented to the contract is generally a matter for the jury.”25 That is why the issue of

assent is generally not susceptible to summary judgment. If extrinsic evidence is

21 Cox Broadcasting Corp. v. National Collegiate Athletic Assoc., 297 S.E.2d 733 (Ga. 1982). 22 Cox, 250 Ga. 391, 395. 23 Arrow Exterminators, Inc. v. Gates Condominium Homeowners Association, Inc., 294 Ga. App. 620, 623 (2008). 24 Bellsouth v. McCollum, 209 Ga. App. 441, 444 (1993). 25 Bedsole v. Action Outdoor Advertising JV, LLC, 750 S.E.2d 445, 450 (Ga. Ct. App. 2013).


9

validly disputed, the matter must be submitted to a factfinder. Thus, including

arguments about assent could be a good way to get in parol evidence that you want a

court or jury to hear.

Moreno v. Smith will be among the last, if not the last, cases on contract

fundamentals and assent that the Georgia Supreme Court hears on direct appeal from

a Superior Court.26 It arises in what the Court refers to as “unusual” circumstances.27

A mother, Dolores Moreno, gave her daughter, Gina Moreno, a one-half interest in

some property as a gift. Regarding the other half, the mother and daughter entered

into a signed document. But was it a contract?

The document said that Gina would pay Dolores $400 per month, until a

payment of $75,000 was reached. Gina did not pay for six years, and then Dolores

sued. Gina submitted an affidavit in opposition to a summary judgment motion

stating that “she had signed the document in question at the request of her mother for

the sole purpose of enabling Dolores to demonstrate an interest in the property and

that she was earning income from it.”28 Also in the affidavit, Gina said Dolores

consistently made statements indicating Gina was not expected to actually pay

26 See Appellate Jurisdiction Reform Act of 2016, Ga. L. 2016, p.884, § 1-1. 27 299 Ga. 443 (July 5, 2016), Slip Op. at 4. 28 Slip Op. at 3.

10

anything.29 The trial court granted partial summary judgment to Dolores, finding in

part that the evidence was undisputed that Dolores and Gina entered into a contract.

The Supreme Court reversed. It relied on the caselaw just discussed, including

that courts are “free” to consider the circumstances surrounding any alleged contract

formation, such as correspondence and communications.30 Because of the disputed

facts about contract formation in the record by means of Gina’s affidavit, the

Supreme Court found that summary judgment was not proper.31

There is also one additional quirk about this case. The contract lens has a

unique focus with respect to families. “[T]he fact that the parties to an agreement are

members of the same family is given weight as showing an intention not to be legally

bound.”32

About three-and-a-half months after Moreno, the Court of Appeals of Georgia

decided Extremity Healthcare, Inc. v. Access to Care America, LLC.33 This case deals

with a dispute between several parties to a failed joint venture. One party filed an

arbitration claim with the American Arbitration Association. Another filed an action

29 Slip Op. at 3. 30 Slip Op. at 4 (citation omitted). 31 A review of the online docket at Gwinnett Superior Court indicates that, a few weeks after the Supreme Court’s ruling, a consent judgment was entered on Aug. 24, 2016 ending the case. 32 Slip Op. at 5 (emphasis added). See also id. at 6 (“And although it is the parties’ intent at the time they allegedly entered the contract that matters, the evidence presented by Gina of their discussions at that time is arguably bolstered by other evidence of the circumstances surrounding the purported contract, including the ongoing relationship between the parties as mother and daughter . . . .”). 33 793 S.E.2d 529 (Ga. Ct. App. Oct. 28, 2016).


11

in the Superior Court of Fulton County to stop the arbitration. After the trial court

found the arbitration clause enforceable, the fight moved to the Court of Appeals.

Distinguishing Moreno somewhat, the Court of Appeals affirmed. In

Extremity Healthcare, the Court of Appeals followed the precedent discussed above.34

However, it found that the parol evidence, even when considered, did “not show a

lack of mutual assent.”35 That is because the emails proffered to show a lack of

mutual assent were from after the execution of the contract, and reliance on them was

therefore “misplaced.”36 The Court then notes that its decision should be

“[c]ompare[d]” with Moreno, because although in Moreno there was also parol

evidence of conduct after execution, that was “combined with”37 the affidavit

discussed immediately above.

IV. Other Interesting and Recent Contract Cases

A. One Case Dealing with Contract Fundamentals: Grange Mutual Casualty Company v. Woodard, 300 Ga. 848 (Mar. 6, 2017).

This case arrived to the Georgia Supreme Court via certified questions from

the United States Court of Appeals for the Eleventh Circuit. Although the case began

as a personal injury case involving a tragic automobile accident, it arrived at the

34 No citation to Blackstone this time, but rather a different titan of the law, Learned Hand. See 793 S.E.2d at 536 (“As Learned Hand reminded, whatever the formal documentary evidence, the parties to a legal transaction may always show that they understood a purported contract not to bind them.”). 35 793 S.E.2d at 536. 36 793 S.E.2d at 537. 37 793 S.E.2d at 537 (emphasis in original).

12

Supreme Court for a question on contract formation. File a personal injury case in

federal court, wind up with a contract case at a state Supreme Court. You never

know.

In this case, a car driven by Thomas Dempsey collided with a truck driven by

Boris Woodard. Mr. Woodard was injured in the accident, and his daughter, a

passenger in the car, was killed. Mr. Dempsey’s car was insured under a policy by

Grange Mutual Casualty Company.

The case centered on the meaning of language in O.C.G.A. § 9-11-67.1, “Offer

to settle tort claim must be in writing; terms.” As the Supreme Court explained, it

“governs the formation of settlement agreements” in certain contexts.38 In this case,

an attorney sent a settlement offer “pursuant to OCGA § 9-11-67.1” that included a

list of demands in bold that were to be “fully and strictly complied with in order to

accept this offer,” including the making of a payment.39 As you may have guessed,

Grange Mutual did not fully and strictly comply. Nonetheless, Grange filed a one-

count claim in the United States District Court for the Northern District of Georgia

alleging breach of the settlement contract. The Northern District agreed with counsel

38 Slip Op. at 1. 39 Slip Op. at 2.


13

for the Woodards “that the statute does not prohibit a party from requiring payment

as a condition of acceptance.”40

Grange appealed to the United States Court of Appeals for the Eleventh

Circuit. That Court found, as described by the Georgia Supreme Court, that the

statute posed an interpretive problem because: “On the one hand . . . the statute

appears to contemplate that an offeree will accept an offer in writing, such that

payment would be a term of contract performance, not contract formation. On the

other hand . . . [one part of the statute] arguably permits the parties to reach an

agreement as they see fit, including by contracting around [another part of the

statute].”41 The Eleventh Circuit decided, therefore, to certify certain questions to the

Georgia Supreme Court.

The Georgia Supreme Court found that yes, O.C.G.A. § 9-11-67.1 “permits

‘unilateral’ contracts whereby Pre-Suit Offers may demand acceptance in the form of

performance (in addition to the statutorily mandated written acceptance) before there

is a binding enforceable settlement contract.42 Its reasoning involved a slight lean on

Sir Blackstone.43

40 Slip Op. at 6. 41 Slip Op. at 7. 42 Slip Op. at 21. The Supreme Court noted that settlement agreements are to be interpreted as would other contracts. Id. at 9. 43 See Slip Op. at 10 (citing Blackstone twice).

14

The variance between the offer from the Woodards and the actions by Grange

doomed Grange’s chances. As the Supreme Court noted, a contract requires mutual

agreement, and “the offer must be accepted unequivocally and without variance of

any sort.”44

This was not a unanimous case. Two Justices, Justice Melton and Justice

Blackwell, dissented. O.C.G.A. § 9-11-67(g) provides that a party making an offer

may require payment that “shall not be less than ten days after the written acceptance

of the offer to settle.” The dissenting Justices therefore reached the conclusion that

the statute created a two-step process: “create an enforceable settlement agreement

through a conforming Pre-Suit Offer and the acceptance of the offer; and step two

allows a claimant to require payment on the now binding settlement agreement within

a time frame of no less than ten days.”45

The split between the opinion for the court and that of the dissent hinges in

part on the term “written acceptance” in the statute.46 The majority found that the

term is not equated “with necessarily effectuating a binding settlement,” but the issue

“depends on the offer.”47 Some contract formation metaphysics.

44 Slip Op. at 10 (quotation marks omitted). 45 Melton, P.J., dissenting. 46 See O.C.G.A. § 9-11-67(b) (“The recipients of an offer to settle made under this Code section may accept the same by providing written acceptance of the material terms outlined in subsection (a) of this Code section in their entirety.” (emphasis added)). 47 Slip Op. at 16–17.


15

Finally, there is a bit of easy-to-miss comedy in this opinion. Another

important part of the statutory interpretation in the case deals with the fact that the

offer as provided in O.C.G.A. § 9-11-67(a) must “contain” five material terms, but the

majority found that “contain” was not a word of limitation and thus the Woodards

could add, for example, a payment condition. The Supreme Court notes in discussing

this issue that the Georgia Code “contains” examples that support its reasoning.48 It

includes a footnote (mid-sentence) on the word “contains”, which reads: “Yet another

example of ‘contain’ being used non-exclusively.”49

B. One Regarding the Contours of the Duty of Good Faith and Fair Dealing: Brazeal v. NewPoint Media Group, LLC, 798 S.E.2d 300 (Ga. Ct. App. Mar. 13, 2017).

The 2017 version of this case is really Brazeal II, as it is the second time to have

reached the Court of Appeals. The first time, in 2015, that Court ruled for NewPoint

on Mr. Brazeal’s claim for severance under the terms of an employment agreement.

This time the case was back on Mr. Brazeal’s claim for breach of the implied warranty

of good faith and fair dealing, which had been rejected by the trial court on summary

judgment upon the return of the case.

In this case, Mr. Brazeal’s employment agreement with NewPoint had “two

separate and distinct provisions governing how Brazeal and NewPoint could end the

48 Slip Op. at 13. 49 Slip Op. at 13 n.3.

16

employment relationship.”50 NewPoint decided to replace Mr. Brazeal about six

months after it hired him, but did not tell him immediately. If Mr. Brazeal was

terminated during his one-year contract with only 30-days notice, he would be entitled

to severance pay. When NewPoint did notify Mr. Brazeal several months later, it

invoked a part of the agreement that allowed it to evade certain severance pay by not

renewing a one-year contract, which under the agreement did not provide for

severance pay. The trial court held that NewPoint exercised discretion available to it

and therefore did not breach the covenant of good faith and fair dealing.

The Court of Appeals affirmed again. It repeated an earlier holding that

although there is a duty of good faith, at the same time contracts are entitled to be

enforced “to the letter, even to the great discomfort of their trading partners, without

being mulcted for lack of good faith.”51 The fact that NewPoint had multiple options

available to it was dispositive for the Court. It did not matter whether it chose “the

method that would be most advantageous, or less damaging, to the other party.”52 Is

there no spread between the options one party to a contract could choose? The

outermost contours of the good faith and fair dealing doctrine are yet to be written.

One other interesting thing to note here: Judge Miller concurred in the judgment only,

50 798 S.E.2d at 301. 51 798 S.E.2d at 302 (quoting Martin v. Hamilton State Bank, 723 S.E.2d 726 (Ga. Ct. App. 2012) and calling it “instructive”). 52 798 S.E.2d at 303.


17

but did not write separately. What did she see in the opinion that gave her cause for

concern?

V. Artificial Intelligence and Contract Formation

Our understanding of contract fundamentals, including assent, may change

rapidly as artificial intelligence technology develops. Various applications of artificial

intelligence (AI) are already creeping into the legal profession. “AI technology is

already here, and is rapidly changing and automating the way we practice law, from e-

discovery and contract review to compliance and intellectual property management.”53

There are multiple companies working on debt-collection bots.54 What many do not

realize is that AI is on the doorstep of the essential elements of contract formation.

Already there is new technology related to Contracting Automation Tools, or

CATs. CATs can be beneficial for businesses that have high volume sales executives

and other staff who work with contracts on a daily basis but are not trained in the law.

For example, CATs will build on past experience from contract templates and use

input from legal departments on negotiation “red lines,” and then provide guidance

53 Artificial Intelligence Meets the Mainstream: AI’s Potential Impact on In-House Practice, ACC Docket, Mar. 2017. 54 Kevin Maney, How Facebook’s AI Bots Learned Their Own Language and How To Lie, Newsweek, Aug. 5, 2017, available at www.newsweek.com/2017/08/18/ai-facebook-artificial-intelligence-machine-learning-robots-robotics-646944.html.

18

for others to negotiate and complete contracts “within the system’s digitally set

boundaries.”55

At least one firm with a presence in Atlanta, Eversheds Sutherland, is dipping

its toes into AI and contract formation.56 A new product unveiled last month “allows

a lawyer to rapidly analyse a contract for certain types of risk and then automatically

receive a detailed report. . . . Risks are highlighted and the contract is given a rating via

the platform’s dashboard.”57

In June of this year, new research was published on AI dialog agents with the

ability to negotiate.58 I note, in an act of Georgia pride, that one of the researchers for

the project is Georgia Tech’s Dhruv Batra. However, to some the news might seem a

bit unsettling. As one newspaper headline explained in part: “Facebook shuts down

robots after they invent their own language.”59 That’s right, the AI agents developed

55 Avvoka and the Rise of Contracting Automation Tools (CATs), June 6, 2017, available at www.artificiallawyer.com/2017/06/06/avvoka-and-the-rise-of-contracting-automation-tools-cats. 56 AI Co. ThoughtRiver Releases Public Version of Contract Risk Tool, Sept. 18, 2017, available at www.artificiallawyer.com/2017/09/18/ai-co-thoughtriver-releases-public-version-of-contract-risk-tool. 57 AI Co. ThoughtRiver Releases Public Version of Contract Risk Tool, Sept. 18, 2017, available at www.artificiallawyer.com/2017/09/18/ai-co-thoughtriver-releases-public-version-of-contract-risk-tool. 58 Deal or no deal? Training AI bots to negotiate, June 14, 2017, available at https://code.facebook.com/posts-1686672014972296/deal-or-no-deal-training-ai-bots-to-negotiate. The Facebook post states the following about negotiation: “Negotiation is simultaneously a linguistic and a reasoning problem, in which an intent must be formulated and then verbally realized.” 59 Matthew Field, The Telegraph (UK), Aug. 1, 2017, available at www.telegraph.co.uk/technology/2017/08/01/facebook-shuts-robots-invent-language.


19

their own language because, according to Mr. Batra, “[t]here was no reward to sticking

to English language.”60 So what came out looked like this:

Bob: i can i i everything else ………….. Alice: balls have zero to me to me to me to me to me to me to me to me

to Bob: you i everything else ……………. Alice: balls have a ball to me to me to me to me to me to me to me to

me Bob: i i can i i i everything else ………… Alice: balls have a ball to me to me to me to me to me to me to me to

me Bob: i ………………. Alice: balls have zero to me to me to me to me to me to me to me to me

to Bob: you i i i i i everything else ………… Alice: balls have 0 to me to me to me to me to me to me to me to me to Bob: you i i i everything else………….. Alice: balls have zero to me to me to me to me to me to me to me to me

to61

But the invention of a new language is only part of what was both fascinating

and troubling with the research. In addition to creating a new language, the bots also

taught themselves to lie; or, in Facebook’s terminology, learned “intelligent

maneuvers.”62 “This behavior,” explains Facebook, “was not programmed by the

researchers but was discovered by the bot as a method for trying to achieve its goals.”

60 Matthew Field, The Telegraph (UK), Aug. 1, 2017, available at www.telegraph.co.uk/technology/2017/08/01/facebook-shuts-robots-invent-language. 61 Mark Wilson, AI Is Inventing Languages Humans Can’t Understand. Should We Stop It?, Fast Company, July 14, 2017, available at www.fastcodesign.com/90132632/ai-is-inventing-its-own-perfect-languages-should-we-let-it. 62 Deal or no deal? Training AI bots to negotiate, June 14, 2017, available at https://code.facebook.com/posts-1686672014972296/deal-or-no-deal-training-ai-bots-to-negotiate.

20

Contract formation is aided by precision and clarity in language and behavior.

If our language is not the most precise, what should we do? AI research on

negotiation will continue, but what to make of the fact that the bots that have been

created have learned to lie? “Put all of these negotiation-bot attributes together and

you get a potential monster: a bot that can cut deals with no empathy for people, says

whatever it takes to get what it wants, hacks language so no one is sure what it’s

communicating and can’t be distinguished from a human being. If we’re not careful, a

bot like that could rule the world.”63

These issues raise many questions that are beyond the scope of this paper.

Some that immediately come to mind are: How do you prove assent where two bots

enter a contract? How will we clarify the rules regarding when bots have authority to

enter a contract on behalf of a principle? Can a principle consent to everything an AI

bot learns and evolves to? Stay tuned.

VI. Conclusion

Contract law has deep roots, but nothing is static. The outlines of contract law

continue to morph, despite hundreds of years of guidance. This is so as a result of

new caselaw developments, as well as other factors, including technology. What’s

next? The future is unwritten.

63 Kevin Maney, How Facebook’s AI Bots Learned Their Own Language and How To Lie, Newsweek, Aug. 5, 2017, available at www.newsweek.com/2017/08/18/ai-facebook-artificial-intelligence-machine-learning-robots-robotics-646944.html.


9:15 LITIGATING A CONTRACTS CASE: THE VIEW FROM THE BENCH Hon. John K. Larkins, III, United States Magistrate Judge, Northern District of Georgia, Atlanta


IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA

ATLANTA DIVISION

PLAINTIFF,

Plaintiff, v. DEFENDANT,

Defendant.

CIVIL ACTION FILE NO. 1:XX-cv-1234-ABC-JKL

MAGISTRATE JUDGE’S SCHEDULING ORDER AND INSTRUCTIONS

REGARDING MANAGEMENT OF CIVIL CASES

On ___________, the parties in this case filed a joint preliminary report and

discovery plan. [Doc. _.] The time limits for adding parties, amending the

pleadings, filing motions, completing discovery, and discussing settlement are as

stated in the joint preliminary report and discovery plan. Discovery shall close on

___________. The parties shall file any motions for summary judgment no later

than 30 days after the close of discovery, presently ____________, unless

otherwise permitted by order of the Court.


2

A. CONTACTING CHAMBERS

Courtroom Deputy Clerk Cynthia Mercado is your principal point of contact

on administrative matters relating to this case. Neither the parties, nor their counsel

should discuss the merits of the case with Ms. Mercado or any of the Court’s law

clerks. Ms. Mercado’s contact information is as follows:

Honorable John K. Larkins III ATTN: Cynthia Mercado, Courtroom Deputy 1837 United States Courthouse 75 Ted Turner Drive, SW Atlanta, Georgia 30303-3309 [email protected]

If a telephone call is necessary, you may reach Ms. Mercado at 404-215-

1365.

B. COURTESY COPIES Except for emergency motions filed pursuant to LR 7.2B, NDGa., or a

request from Chambers, the delivery of a hard copy of a document, in addition to

the electronically filed copy, is not necessary, as the Court prefers to rely on its

electronic access to court filings. The Court will occasionally request a courtesy

copy of electronically filed documents but, if they are needed, a representative from

Chambers will contact counsel.


3

C. DISCOVERY

1. Discovery Disputes

Counsel or pro se litigants are required to confer, by telephone or in person,

in good faith before bringing a discovery dispute to the Court. See Fed. R. Civ. P.

26(c) and 37; LR 37.1A, NDGa. The duty to confer is not satisfied by sending a

written document, such as a letter, email or fax, to the adversary, unless repeated

attempts to confer by telephone or in person are met without success due to the

conduct of the adversary. If counsel or pro se litigants are unable to informally

resolve the discovery dispute, they should arrange a telephone conference with the

Court through the Court’s courtroom deputy. The Court may then schedule a

conference call in which the Court will attempt to resolve the matter, without the

necessity of a formal motion. The Court may request that each side submit a brief

statement of the issues in advance of the conference.

The Court is usually available by telephone to resolve objections and

disputes that arise during depositions.

D. REQUESTS FOR PROTECTIVE ORDERS AND/OR MOTIONS TO SEAL The Court will not sign a protective or confidentiality order that permits the

parties to automatically file pleadings or materials under seal with the Clerk. As a


4

general matter, this Court will seal only those items enumerated in the Court’s

Standing Order 04-02 regarding sensitive information and public access to

electronic case files. A party seeking to file a document under seal must follow the

rules and procedures set forth in Appendix H to the Local Rules. Detailed

procedures for electronic filing under seal in civil cases is available at

http://www.gand.uscourts.gov/cv-sealed-procedures.

E. ELECTRONIC FILING OF EXHIBITS AND ATTACHMENTS

The parties should make every effort to label all electronically-uploaded

exhibits and attachments according to their content to assist the Court in making its

ruling. For example, the Court would prefer to have documents uploaded as Ex. A:

Excerpts from Smith Deposition, Ex. B: Employment Contract, and Ex. C: Jones

Letter, rather than Ex. A, Ex. B, and Ex. C.

F. MOTIONS FOR SUMMARY JUDGMENT

1. Record References

All citations to the record evidence should be contained in each party’s brief,

not just in the party’s statement of undisputed (or disputed) material facts. When

filing a brief in support of or in opposition to a motion for summary judgment, the

party shall simultaneously file an electronic copy of the complete transcript of each


5

deposition referenced in the brief, and a notice of filing of the deposition

transcript(s).

The party should include in the brief, immediately following the deposition

reference, a citation indicating the page and line numbers of the transcript where

the referenced testimony can be found. The party should also attach to the brief a

copy of the specific pages of the deposition that are referenced in the brief. The

party should not attach to the brief a copy of the entire deposition transcript.

2. Statement of Material Facts and Response

Absent prior permission of the Court, no party may file a statement of

undisputed (or disputed) material facts that exceeds twenty-five (25) double-spaced

pages in length. A motion requesting an increase in the page length must be filed

along with a proposed order prior to the due date for the motion for summary

judgment. In addition to following the form instructions set out in LR 56.1B,

NDGa., a party responding to a statement of material facts shall copy into its

response document the numbered statement to which it is responding and provide

its response to that statement immediately following. A party that chooses to reply

to a response shall copy into its reply document its original numbered statement of

material facts and the opposing party’s response, and then provide its reply to that


6

statement immediately following. Each party shall file its documents in a text-

searchable PDF format. Statements of material facts that do not conform to these

instructions will be returned to counsel for revision.

IT IS SO ORDERED this __ day of _________, 2017.

____________________________________ JOHN K. LARKINS III United States Magistrate Judge


The Chief Justice’s Commission on Professionalism(Founded 1989)

A Brief History of the Chief Justice’s Commission on Professionalism

Avarita L. Hanson, Executive Director

The mission of the Commission is to support and encourage lawyers to exercise the highest levels ofprofessional integrity in their relationships with their clients, other lawyers, the courts and the public, and to fulfilltheir obligations to improve the law and legal system and to ensure access to that system.

After a series of meetings of key figures in Georgia’s legal community in 1988, in February of 1989, theSupreme Court of Georgia created the Chief Justice’s Commission on Professionalism, the first entity of this kindin the world created by a high court to address legal professionalism. In March of 1989, the Rules of the State Barof Georgia were amended to lay out the purpose, members, powers and rules of the Commission. The brainchildof Justice Thomas Marshall and past Emory University President James Laney, they were joined by Justices CharlesWeltner and Harold Clarke and then State Bar President A. James Elliot in forming the Commission. The impetusfor this entity then and now is to address uncivil approaches to the practice of law, as many believe legal practiceis departing from its traditional stance as a high calling – like medicine and the clergy – to a business.

The Commission carefully crafted a statement of professionalism, A Lawyers Creed and AspirationalStatement on Professionalism, rules and standards addressing attorneys’ relationships with colleagues, clients,judges, law schools and the public and retained its first executive director, Hulett “Bucky” Askew. Professionalismcontinuing legal education was mandated and programming requirements were developed by then assistant andsecond executive director Sally Evans Lockwood.

In the 1990s, after a series of convocations with the bench and bar to discern professionalism issues frompractitioners’ views, the State Bar instituted new initiatives, such as the Committee on Inclusion in the Profession(fka Women and Minorities in the Profession Committee). Then the Commission sought the concerns of the publicin a series of town hall meetings held around Georgia. Two concerns were raised in these meetings: lack of civilityand the economic pressures of law practice. As a result, the State Bar of Georgia established the Law PracticeManagement Program.

Over the years, the Commission has worked with the State Bar to establish other programs that supportprofessionalism ideals, including the Consumer Assistance Program and the Diversity Program. In 1993, underPresident Paul Kilpatrick, the State Bar’s Committee on Professionalism partnered with the Commission inestablishing the first Law School Orientation on Professionalism Program for incoming law students held at everyGeorgia law school. This program is now replicated at more than forty U.S. law schools. It engages volunteerpracticing attorneys, judges and law professors with law students in small group discussions of hypotheticalcontemporary professionalism and ethics situations.

In 1997, the Justice Robert Benham Community Service Awards Program was initiated to recognizemembers of the bench and bar who have combined a professional career with outstanding service to theircommunities around Georgia. The honorees are cited for voluntary participation in community organizations,

government-sponsored activities, youth programs, religious activities or humanitarian work outside of theirprofessional practice or judicial duties. This program is now held annually at the State Bar Headquarters in Atlanta,is co-sponsored by the Commission and the State Bar, and attracts several hundred attendees who celebrate thecommunity and public servants.

Today, the Commission is under the direction and management of its third executive director, veteranattorney and former law professor, Avarita L. Hanson. It continues to support and advise persons locally, nationallyand globally who are interested in professionalism programming and maintains a resource library to support itsmission. The Chief Justice of the Supreme Court of Georgia serves as its chair, and in this year both Chief JusticeHugh P. Thompson and Chief Justice P. Harris Hines serve in that capacity. The Commission has twenty-twomembers representing practicing lawyers, the state appellate and trial courts, the federal district court, all Georgialaw schools and the public. It meets three times a year and in addition to its executive director, staff includes TerieLatala (Assistant Director) and Nneka Harris Daniel (Administrative Assistant). With its chair, members and staff,the Commission is well equipped to inspire and develop programs to address today’s needs of the legal professionand those concerns on the horizon.

The Commission works through committees (Access to Justice, Finance and Personnel, Educational VideoProjects, Professionalism Curriculum, Benham Awards Selection) in carrying out some of its duties. It also workswith other state and national entities, such as the American Bar Association’s Center for Professional Responsibilityand its other groups. The Executive Director served as the Chair of the ABA Consortium on ProfessionalismInitiatives, a group that informs and vets ideas of persons interested in development of professionalism programs.She authored the chapter on Reputation, in Paul Haskins, Ed., ESSENTIAL QUALITIES OF THE PROFESSIONAL

LAWYER, ABA Standing Committee on Professionalism, ABA Center for Professional Responsibility (July 2013)and recently added to the newly-released accompanying Instructor’s Manual (April 2017). To keep Georgia Barmembers abreast of professionalism activities and issues, there is a regular column on the Professionalism Page ofevery issue of the Georgia Bar Journal. Current Commission projects include: the delivery of legal services,addressing issues of lawyers aging in the practice of law, intergenerational communications, innovations inprofessionalism law school curriculum and supporting access to justice initiatives.

After 28 years, the measure of effectiveness of the Chief Justice’s Commission on Professionalism mayultimately rest in the actions, character and demeanor of every Georgia lawyer. There remains work to do. TheCommission’s leadership and dedication to this cause, along with Georgia’s capable, committed and innovativebench and bar, will continue to lead the charge, movement and dialogue on legal professionalism.

Chief Justice’s Commission on Professionalism104 Marietta Street, N.W.Suite 104Atlanta, Georgia 30303(404) [email protected]


CHIEF JUSTICE'S COMMISSION ON PROFESSIONALISM

INTRODUCTION

In 1986, the American Bar Association ruefully reported that despite the fact that lawyers'observance of the rules of ethics governing their conduct is sharply on the rise, lawyers'professionalism, by contrast, may well be in steep decline:

[Although] lawyers have tended to take the rules more seriously because of anincreased fear of disciplinary prosecutions and malpractice suits, . . . [they] have alsotended to look at nothing but the rules; if conduct meets the minimum standard,lawyers tend to ignore exhortations to set their standards at a higher level.1

The ABA's observation reflects a crucial distinction: while a canon of ethics may cover whatis minimally required of lawyers, “professionalism” encompasses what is more broadly expectedof them -- both by the public and by the best traditions of the legal profession itself.

Also in 1986, President James T. Laney of Emory University delivered a lecture on “MoralAuthority in the Professions.” While expressing concern about the decline in moral authority of allthe professions, he focused on the legal profession because of the respect and confidence in whichit has traditionally been held and because it has been viewed as serving the public in unique andimportant ways. Dr. Laney expressed the fear that the loss of moral authority has as serious aconsequence for society at large as it does for the legal profession.

In response to these challenges, the Supreme Court of Georgia and the State Bar embarkedupon a long-range project -- to raise the professional aspirations of lawyers in the state. Accordingly, in early 1989, the Georgia Supreme Court, acting through the State Bar of Georgia,established the Chief Justice's Commission on Professionalism. The Commission -- the first suchbody of its kind in the country -- has as its primary charge ensuring that the practice of law remainsa high calling, enlisted in the service not only of the client, but of the public good as well.

Composed of representatives of the organized bar, practicing bar, judiciary, law schools, andthe public, the Commission serves as a catalyst for systemic change in the legal profession through(a) educational programming and (b) periodic recommendations to the State Bar, the judiciary,and the law schools.

To further its mission and charge, the Commission:

! Coordinates professionalism activities in the organized bar, courts, law schools, and lawfirms

! Develops educational materials, law school curricula, and continuing legal and judicialeducation programs on the professionalism values of competence, character, civility, andcommitment to the public good

! Administers the Professionalism Continuing Legal Education (CLE) requirement, effective

American Bar Association Commission on Professionalism, “ . . . In the Spirit of Public Service:” A Blueprint for the Rekindling1

of Lawyer Professionalism, (1986) p.7.

January 1, 1990, by which the Georgia Supreme Court mandated that each active memberof the State Bar complete annually one hour of CLE on the topic of professionalism

! Provides guidance to professionalism efforts in other states

! Serves as both an archive and a clearinghouse for exchange of information regardingprofessionalism efforts past and present, local and national

The Commission’s major activities include:

� Statewide Convocations on Professionalism

� Law School Orientations on Professionalism

� Upper Level Law School Professionalism Programs

� Annual Law School Symposia on Ethics and Professionalism in the Practice of Law

� Approval and oversight of more than 700 Professionalism Continuing Legal Education

sessions annually

� Production of Professionalism CLE curricula and materials

� Statewide Town Hall Meetings for lawyers and judges to address ethics and professionalism

concerns

� Justice Robert Benham Awards for Community Service

� Continuing Judicial Education sessions on Professionalism

� Judicial District Professionalism Program

� Transition into Law Practice Program

� Resource for professionalism initiatives of lawyers, judges, local bar associations



INTRODUCTION

In 1986, the American Bar Association ruefully reported that despite the fact that lawyers'observance of the rules of ethics governing their conduct is sharply on the rise, lawyers'professionalism, by contrast, may well be in steep decline:

[Although] lawyers have tended to take the rules more seriously because of anincreased fear of disciplinary prosecutions and malpractice suits, . . . [they] have alsotended to look at nothing but the rules; if conduct meets the minimum standard,lawyers tend to ignore exhortations to set their standards at a higher level.1

The ABA's observation reflects a crucial distinction: while a canon of ethics may cover whatis minimally required of lawyers, “professionalism” encompasses what is more broadly expectedof them -- both by the public and by the best traditions of the legal profession itself.

Also in 1986, President James T. Laney of Emory University delivered a lecture on “MoralAuthority in the Professions.” While expressing concern about the decline in moral authority of allthe professions, he focused on the legal profession because of the respect and confidence in whichit has traditionally been held and because it has been viewed as serving the public in unique andimportant ways. Dr. Laney expressed the fear that the loss of moral authority has as serious aconsequence for society at large as it does for the legal profession.

In response to these challenges, the Supreme Court of Georgia and the State Bar embarkedupon a long-range project -- to raise the professional aspirations of lawyers in the state. Accordingly, in early 1989, the Georgia Supreme Court, acting through the State Bar of Georgia,established the Chief Justice's Commission on Professionalism. The Commission -- the first suchbody of its kind in the country -- has as its primary charge ensuring that the practice of law remainsa high calling, enlisted in the service not only of the client, but of the public good as well.

Composed of representatives of the organized bar, practicing bar, judiciary, law schools, andthe public, the Commission serves as a catalyst for systemic change in the legal profession through(a) educational programming and (b) periodic recommendations to the State Bar, the judiciary,and the law schools.

To further its mission and charge, the Commission:

! Coordinates professionalism activities in the organized bar, courts, law schools, and lawfirms

! Develops educational materials, law school curricula, and continuing legal and judicialeducation programs on the professionalism values of competence, character, civility, andcommitment to the public good

! Administers the Professionalism Continuing Legal Education (CLE) requirement, effective

American Bar Association Commission on Professionalism, “ . . . In the Spirit of Public Service:” A Blueprint for the Rekindling1

of Lawyer Professionalism, (1986) p.7.

January 1, 1990, by which the Georgia Supreme Court mandated that each active memberof the State Bar complete annually one hour of CLE on the topic of professionalism

! Provides guidance to professionalism efforts in other states

! Serves as both an archive and a clearinghouse for exchange of information regardingprofessionalism efforts past and present, local and national

The Commission’s major activities include:

� Statewide Convocations on Professionalism

� Law School Orientations on Professionalism

� Upper Level Law School Professionalism Programs

� Annual Law School Symposia on Ethics and Professionalism in the Practice of Law

� Approval and oversight of more than 700 Professionalism Continuing Legal Education

sessions annually

� Production of Professionalism CLE curricula and materials

� Statewide Town Hall Meetings for lawyers and judges to address ethics and professionalism

concerns

� Justice Robert Benham Awards for Community Service

� Continuing Judicial Education sessions on Professionalism

� Judicial District Professionalism Program

� Transition into Law Practice Program

� Resource for professionalism initiatives of lawyers, judges, local bar associations


HISTORICAL BACKGROUND OF THE COMMISSION AND

THE GEORGIA PROFESSIONALISM PROJECT

Since 1985, Georgia's Supreme Court and State Bar have been heavily involved in anongoing project to promote professionalism among the state's lawyers. During his 1985-86 term ofoffice as State Bar President, Jule Felton appointed a Special Committee on Professionalism torecommend ways in which the Georgia Bar might foster professionalism among its members. In2

1988, responding to a proposal from the Court, Emory University President James Laney hosted aConsultation on Professionalism where, for the first time, the topic might be discussed at length by40 of the state's most distinguished lawyers and judges. Held in March, 1988, at Emory in Atlanta,and chaired by Chief Justice Thomas O. Marshall, the Consultation set in motion the process ofaddressing the issue of professionalism in a systematic and sustained manner.

State Bar President A. James Elliott gave that process additional momentum when he placedthe professionalism project at the top of his agenda upon taking office in June, 1988. In conjunctionwith Chief Justice Marshall, President Elliott gathered 120 prominent judges and lawyers fromaround the state to attend the first Annual Georgia Convocation on Professionalism. Prior to theconvocation, each invitee received a copy of the edited Emory proceedings as background for theupcoming deliberations. Those deliberations, which took place in Macon on October 14, 1988,centered around two questions: (1) “The Practice of Law: Is There Anything More To It ThanMaking Money?” and (2) “How Can Professionalism Be Institutionalized?”

The second question in particular reflected an entirely new approach to the professionalismissue. According to Professor Thomas Morgan of Emory Law School, writer of the ABA'sprofessionalism report and a convocation moderator, previous attempts to examine the issue hadtaken too narrow a focus. They concentrated exclusively on the individual practitioner and failedto analyze professionalism problems -- and remedies -- from a broader, systemic standpoint. Bycontrast, the convocation's invitees were selected precisely because they occupied the institutionalniches (such as, for example, managing partner) where they had the opportunity to affect those legalinstitutions that most affect lawyers' conduct: law firms, courts, law schools, and the organized bar. The convocation sought commitments from each of those four institutional sectors to begin pilotprojects which would, in turn, propel the professionalism project as a whole.

For its part, the Georgia Supreme Court took three important steps to further the enterprise. First, at the convocation itself, the Court announced and administered to those present a newGeorgia attorney's oath emphasizing the virtue of truthfulness, reviving language dating back to1729. Reflecting the idea that the word “profession” derives from a root meaning “to avowpublicly,” this new oath of admission to the State Bar of Georgia indicates that whatever otherexpectations might be made of lawyers, truth-telling is expected, always and everywhere, of everytrue professional. Since the convocation, the new oath has been administered to thousands of

That Special Committee has now become the Standing Committee on Professionalism.2

Attorney's Oath

I,_____________, swear thatI will truly and honestly, justly, anduprightly demean myself, according tothe laws, as an attorney, counselor,and solicitor, and that I will supportand defend the Constitution of theUnited States and the Constitution ofthe State of Georgia. So help meGod.

lawyers in circuits all over the state. Additionally, thenew oath -- together with the broader professionalismproject itself -- has been the subject not only of localnews reports but also of a story nationally broadcast onCable News Network (CNN).3

As its second institutional action meant toensure that professionalism efforts in Georgia wouldcontinue, the Court issued an order, effective January1, 1990, requiring each of the state's then 16,000 activelawyers to attend at least one hour per year ofcontinuing legal education (CLE) on the topic ofprofessionalism. This CLE professionalism

requirement was the first of its kind in the nation. The Court, in concert with the Institute ofContinuing Legal Education in Georgia, began to develop original instructional materials for usein the new professionalism courses.

Third, and perhaps most important for the long-term prospects of the professionalism project,the Court in 1989 launched the Chief Justice's Commission on Professionalism. In effect, theCourt's action institutionalized the professionalism project itself, thereby weaving it into the actualinstitutional fabric of the organized Bar in Georgia. As such, the Commission has the potential toserve as an institutional model that can be replicated by other bars and professionalism projectsthroughout the country. As an example, the Commission developed and adopted a Lawyer's Creedand an Aspirational Statement on Professionalism. It is the hope of the Commission, and of theSupreme Court, that Georgia's lawyers, judges and legal educators will use these as inspiration tore-examine the justifications of the practice of law and will consider their conduct in light of thesegoals.

The Commission's initial funding was provided by a grant from the Commission onContinuing Lawyer Competency in Georgia from funds generated by continuing legal educationfees. The initial funding was devoted to payment of consultant fees and the first and secondconvocations. Permanent funding through the professionalism continuing legal education feesprovides for staff salaries and benefits, office space, supplies, equipment, data base creation andmaintenance, and program development.

Prior to 1823, the attorneys’s oath in Georgia contained the wording: “I swear that I will truly and honestly demean myself . . . .” 3

This oath was taken from an English statute dating back several years before the founding of the colonies. From 1823-1988, the oathcalled for attorneys to conduct themselves “justly and uprightly.” In 2002 the Professionalism Committee of the State Barrecommended that the oath be revised with updated and clarifying language. (See page 53). However, the 2002 revision left intact thelanguage on truthfulness restored in 1988. 29 Georgia State Bar Journal No. 2, 66 (1992).


SUMMARY

For some years now, many have talked of the need to restore to America's lawyers a sense

of professionalism, a sense of the highest aspirations that the legal profession in America has, at its

best moments, embodied. But sadly, much of the talk about professionalism has tended to remain

only talk.

In marked contrast, however, Georgia's Supreme Court and State Bar have in fact acted to

promote professionalism. They have devoted considerable time, energy, and funding to their shared

project of raising professionalism standards. Although much has been done -- the development of

a Mission Statement, Lawyer’s Creed, and Aspirational Statement on Professionalism, the creation

and staffing of a commission to oversee the professionalism CLE requirement, annual

professionalism convocations, town hall meetings, law school orientations, production of videotapes

and publications on professionalism, the community and public service effort, mentoring programs

-- much more remains to be done. Whether we speak of convocations, regional meetings, CLE

seminars, or the Commission itself, we are always speaking of bold, imaginative projects which can

serve as models for the legal profession throughout the United States, carrying with them profound

implications for the life of that profession. The Commission can accomplish its charge, and in the

process, start to accomplish professionalism's overriding goal: “knowledge and skill in the law

faithfully employed in service of client and public good.”


2016 - 2017

Members

The Honorable P. Harris Hines (Chair), Atlanta

Professor Nathan S. Chapman, Athens

Professor Clark D. Cunningham, Atlanta

The Honorable David P. Darden, Marietta

The Honorable J. Antonio DelCampo, Atlanta

Mr. Gerald M. Edenfield, Statesboro

Associate Dean A. James Elliott, Atlanta

The Honorable Horace J. Johnson, Covington

The Honorable Steve C. Jones, Atlanta

Ms. C. Joy Lampley-Fortson, Atlanta

Professor Patrick E. Longan, Macon

Ms. Kellie K. McIntyre, Augusta

The Honorable Carla W. McMillian, Atlanta

Jennifer Campbell Mock, Statesboro

Dean Malcolm L. Morris, Atlanta

Ms. Wanda M. Morris, Atlanta

Mr. Patrick T. O’Connor, Savannah

Ms. Claudia S. Saari, Decatur

Assistant Dean Rita A. Sheffey, Atlanta

Mr. R. Kyle Williams, Decatur

Dr. Monica Lauren Willis-Parker, Stone Mountain

Advisors

The Honorable Robert Benham, Atlanta

Ms. Jennifer M. Davis, Atlanta

The Honorable Britt C. Grant, Atlanta

The Honorable Harold D. Melton, Atlanta

Professor Roy Sobelson, Atlanta

LIAISONS

Mr. Jeffrey R. Davis, Atlanta

Ms. Elizabeth L. Fite, Atlanta

Ms. Paula J. Frederick, Atlanta

Professor Nicole G. Iannarone, Atlanta

Ms. Tangela S. King, Atlanta

Ms. Michelle E. West, Atlanta

Staff

Ms. Avarita L. Hanson, Atlanta

Ms. Terie Latala, Atlanta

Ms. Nneka Harris-Daniel, Atlanta

Italics denotes public member/non-lawyer


CHIEF JUSTICE’S COMMISSION ONPROFESSIONALISM

P. Harris Hines, Chief JusticeSupreme Court of Georgia

Avarita L. HansonExecutive Director

Terie LatalaAssistant Director

Nneka Harris-DanielAdministrative Assistant

MISSION STATEMENT,

OATH OF ADMISSION,

LAWYER’S CREED

AND

ASPIRATIONAL STATEMENT

ON

PROFESSIONALISM

Suite 620 • 104 Marietta Street, NW • Atlanta, Georgia 30303Phone: (404) 225-5040 • Fax: (404) 225-5041 • E-mail: [email protected]

MISSION STATEMENT

The mission of the Chief Justice’s Commission onProfessionalism is to support and encourage lawyers to exercisethe highest levels of professional integrity in their relationshipswith their clients, other lawyers, the courts, and the public andto fulfill their obligations to improve the law and the legalsystem and to ensure access to that system.

CALLING TO TASKS

The Commission seeks to foster among lawyers an activeawareness of its mission by calling lawyers to the followingtasks, in the words of former Chief Justice Harold Clarke:

1. To recognize that the reason for the existence of lawyersis to act as problem solvers performing their service onbehalf of the client while adhering at all times to thepublic interest;

2. To utilize their special training and natural talents inpositions of leadership for societal betterment;

3. To adhere to the proposition that a social conscience anddevotion to the public interest stand as essential elementsof lawyer professionalism.


Attorney’s Name

OATH OF ADMISSION

TO THE STATE BAR OF GEORGIA

“I,_________________, swear that I will truly and

honestly, justly and uprightly conduct myself as a

member of this learned profession and in accordance

with the Georgia Rules of Professional Conduct, as an

attorney and counselor and that I will support and

defend the Constitution of the United States and the

Constitution of the State of Georgia. So help me

God.”

As revised by the Supreme Court of Georgia, April 20, 2002

A LAWYER'S CREED

To my clients, I offer faithfulness, competence, diligence, and goodjudgement. I will strive to represent you as I would want to be represented andto be worthy of your trust.

To the opposing parties and their counsel, I offer fairness, integrity, andcivility. I will seek reconciliation and, if we fail, I will strive to make our disputea dignified one.

To the courts, and other tribunals, and to those who assist them, Ioffer respect, candor, and courtesy. I will strive to do honor to the search forjustice.

To my colleagues in the practice of law, I offer concern for yourwelfare. I will strive to make our association a professional friendship.

To the profession, I offer assistance. I will strive to keep our businessa profession and our profession a calling in the spirit of public service.

To the public and our systems of justice, I offer service. I will striveto improve the law and our legal system, to make the law and our legal systemavailable to all, and to seek the common good through the representation of myclients.

Entered by Order of Supreme Court of Georgia, October 9, 1992, nunc pro tunc July 3, 1990; Part IX of the Rules and Regulations of the State Bar of Georgia


Attorney’s Name

OATH OF ADMISSION

TO THE STATE BAR OF GEORGIA

“I,_________________, swear that I will truly and

honestly, justly and uprightly conduct myself as a

member of this learned profession and in accordance

with the Georgia Rules of Professional Conduct, as an

attorney and counselor and that I will support and

defend the Constitution of the United States and the

Constitution of the State of Georgia. So help me

God.”

As revised by the Supreme Court of Georgia, April 20, 2002

A LAWYER'S CREED

To my clients, I offer faithfulness, competence, diligence, and goodjudgement. I will strive to represent you as I would want to be represented andto be worthy of your trust.

To the opposing parties and their counsel, I offer fairness, integrity, andcivility. I will seek reconciliation and, if we fail, I will strive to make our disputea dignified one.

To the courts, and other tribunals, and to those who assist them, Ioffer respect, candor, and courtesy. I will strive to do honor to the search forjustice.

To my colleagues in the practice of law, I offer concern for yourwelfare. I will strive to make our association a professional friendship.

To the profession, I offer assistance. I will strive to keep our businessa profession and our profession a calling in the spirit of public service.

To the public and our systems of justice, I offer service. I will striveto improve the law and our legal system, to make the law and our legal systemavailable to all, and to seek the common good through the representation of myclients.



ASPIRATIONAL STATEMENT ON PROFESSIONALISM

The Court believes there are unfortunate trends of commercialization and loss of professional

community in the current practice of law. These trends are manifested in an undue emphasis on the

financial rewards of practice, a lack of courtesy and civility among members of our profession, a

lack of respect for the judiciary and for our systems of justice, and a lack of regard for others and

for the common good. As a community of professionals, we should strive to make the internal

rewards of service, craft, and character, and not the external reward of financial gain, the primary

rewards of the practice of law. In our practices we should remember that the primary justification

for who we are and what we do is the common good we can achieve through the faithful

representation of people who desire to resolve their disputes in a peaceful manner and to prevent

future disputes. We should remember, and we should help our clients remember, that the way in

which our clients resolve their disputes defines part of the character of our society and we should

act accordingly.

As professionals, we need aspirational ideals to help bind us together in a professional

community. Accordingly, the Court issues the following Aspirational Statement setting forth

general and specific aspirational ideals of our profession. This statement is a beginning list of the

ideals of our profession. It is primarily illustrative. Our purpose is not to regulate, and certainly not

to provide a basis for discipline, but rather to assist the Bar's efforts to maintain a professionalism

that can stand against the negative trends of commercialization and loss of community. It is the

Court's hope that Georgia's lawyers, judges, and legal educators will use the following aspirational

ideals to reexamine the justifications of the practice of law in our society and to consider the

implications of those justifications for their conduct. The Court feels that enhancement of

professionalism can be best brought about by the cooperative efforts of the organized bar, the courts,

and the law schools with each group working independently, but also jointly in that effort.


GENERAL ASPIRATIONAL IDEALS

As a lawyer, I will aspire:

(a) To put fidelity to clients and, through clients, to the common good, before selfishinterests.

(b) To model for others, and particularly for my clients, the respect due to those we callupon to resolve our disputes and the regard due to all participants in our disputeresolution processes.

(c) To avoid all forms of wrongful discrimination in all of my activities includingdiscrimination on the basis of race, religion, sex, age, handicap, veteran status, ornational origin. The social goals of equality and fairness will be personal goals forme.

(d) To preserve and improve the law, the legal system, and other dispute resolutionprocesses as instruments for the common good.

(e) To make the law, the legal system, and other dispute resolution processes availableto all.

(f) To practice with a personal commitment to the rules governing our profession andto encourage others to do the same.

(g) To preserve the dignity and the integrity of our profession by my conduct. Thedignity and the integrity of our profession is an inheritance that must be maintainedby each successive generation of lawyers.

(h) To achieve the excellence of our craft, especially those that permit me to be themoral voice of clients to the public in advocacy while being the moral voice of thepublic to clients in counseling. Good lawyering should be a moral achievement forboth the lawyer and the client.

(I) To practice law not as a business, but as a calling in the spirit of public service.



SPECIFIC ASPIRATIONAL IDEALS

As to clients, I will aspire:

(a) To expeditious and economical achievement of all client objectives.

(b) To fully informed client decision-making. As a professional, I should:

(1) Counsel clients about all forms of dispute resolution;(2) Counsel clients about the value of cooperation as a means towards the

productive resolution of disputes;(3) Maintain the sympathetic detachment that permits objective and independent

advice to clients;(4) Communicate promptly and clearly with clients; and,(5) Reach clear agreements with clients concerning the nature of the

representation.

(c) To fair and equitable fee agreements. As a professional, I should:

(1) Discuss alternative methods of charging fees with all clients;(2) Offer fee arrangements that reflect the true value of the services rendered;(3) Reach agreements with clients as early in the relationship as possible;(4) Determine the amount of fees by consideration of many factors and not just

time spent by the attorney;(5) Provide written agreements as to all fee arrangements; and(6) Resolve all fee disputes through the arbitration methods provided by the

State Bar of Georgia.

(d) To comply with the obligations of confidentiality and the avoidance of conflictingloyalties in a manner designed to achieve the fidelity to clients that is the purpose ofthese obligations.

As to opposing parties and their counsel, I will aspire:

(a) To cooperate with opposing counsel in a manner consistent with the competentrepresentation of all parties. As a professional, I should:

(1) Notify opposing counsel in a timely fashion of any cancelled appearance;(2) Grant reasonable requests for extensions or scheduling changes; and,(3) Consult with opposing counsel in the scheduling of appearances, meetings,

and depositions.

(b) To treat opposing counsel in a manner consistent with his or her professionalobligations and consistent with the dignity of the search for justice. As aprofessional, I should:


(1) Not serve motions or pleadings in such a manner or at such a time as topreclude opportunity for a competent response;

(2) Be courteous and civil in all communications;(3) Respond promptly to all requests by opposing counsel;(4) Avoid rudeness and other acts of disrespect in all meetings including

depositions and negotiations;(5) Prepare documents that accurately reflect the agreement of all parties; and(6) Clearly identify all changes made in documents submitted by opposing

counsel for review.

As to the courts, other tribunals, and to those who assist them, I will aspire:

(a) To represent my clients in a manner consistent with the proper functioning of a fair,efficient, and humane system of justice. As a professional, I should:

(1) Avoid non-essential litigation and non-essential pleading in litigation;(2) Explore the possibilities of settlement of all litigated matters;(3) Seek non-coerced agreement between the parties on procedural and

discovery matters;(4) Avoid all delays not dictated by a competent presentation of a client's claims;(5) Prevent misuses of court time by verifying the availability of key participants

for scheduled appearances before the court and by being punctual; and(6) Advise clients about the obligations of civility, courtesy, fairness,

cooperation, and other proper behavior expected of those who use oursystems of justice.

(b) To model for others the respect due to our courts. As a professional I should:

(1) Act with complete honesty;(2) Know court rules and procedures;(3) Give appropriate deference to court rulings;(4) Avoid undue familiarity with members of the judiciary;(5) Avoid unfounded, unsubstantiated, or unjustified public criticism of members

of the judiciary;(6) Show respect by attire and demeanor;(7) Assist the judiciary in determining the applicable law; and,(8) Seek to understand the judiciary's obligations of informed and impartial

decision-making.

As to my colleagues in the practice of law, I will aspire:

(a) To recognize and to develop our interdependence;

(b) To respect the needs of others, especially the need to develop as a whole person; and,

(c) To assist my colleagues become better people in the practice of law and to accepttheir assistance offered to me.



As to our profession, I will aspire:

(a) To improve the practice of law. As a professional, I should:

(1) Assist in continuing legal education efforts;(2) Assist in organized bar activities; and,(3) Assist law schools in the education of our future lawyers.

(b) To protect the public from incompetent or other wrongful lawyering. As aprofessional, I should:

(1) Assist in bar admissions activities;(2) Report violations of ethical regulations by fellow lawyers; and,(3) Assist in the enforcement of the legal and ethical standards imposed upon all

lawyers.

As to the public and our systems of justice, I will aspire:

(a) To counsel clients about the moral and social consequences of their conduct.

(b) To consider the effect of my conduct on the image of our systems of justice including thesocial effect of advertising methods. As a professional, I should ensure that anyadvertisement of my services:

(1) is consistent with the dignity of the justice system and a learned profession;(2) provides a beneficial service to the public by providing accurate informationabout the availability of legal services;(3) educates the public about the law and legal system;(4) provides completely honest and straightforward information about myqualifications, fees, and costs; and(5) does not imply that clients' legal needs can be met only through aggressivetactics.

(c) To provide the pro bono representation that is necessary to make our system ofjustice available to all.

(d) To support organizations that provide pro bono representation to indigent clients.

(e) To improve our laws and legal system by, for example:

(1) Serving as a public official;(2) Assisting in the education of the public concerning our laws and legal

system;(3) Commenting publicly upon our laws; and,(4) Using other appropriate methods of effecting positive change in our laws and

legal system.



10:15 THE CONTRACT DRAFTER’S GUIDE TO CONTRACT DRAFTING George M. Fox, Fox+Mattson, P.C., Atlanta


Exhibits, Page 1

I.R.C. Sec. 341(e)(1) [repealed]

For purposes of subsection (a)(1), a corporation shall not be considered to be a collapsible corporation with respect to any sale or exchange of stock of the corporation by a shareholder, if, at the time of such sale or exchange, the sum of -

(A) the net unrealized appreciation in subsection (e) assets of the corporation (as defined in paragraph (5)(A)), plus

(B) if the shareholder owns more than 5 percent in value of the outstanding stock of the corporation the net unrealized appreciation in assets of the corporation (other than assets described in subparagraph (A)) which would be subsection (e) assets under clauses (i) and (iii) of paragraph (5)(A) if the shareholder owned more than 20 percent in value of such stock, plus

(C) if the shareholder owns more than 20 percent in value of the outstanding stock of the corporation and owns, or at any time during the preceding 3-year period owned, more than 20 percent in value of the outstanding stock of any other corporation more than 70 percent in value of the assets of which are, or were at any time during which such shareholder owned during such 3-year period more than 20 percent in value of the outstanding stock, assets similar or related in service or use to assets comprising more than 70 percent in value of the assets of the corporation, the net unrealized appreciation in assets of the corporation (other than assets described in subparagraph (A)) which would be subsection (e) assets under clauses (i) and (iii) of paragraph (5)(A) if the determination whether the property, in the hands of such shareholder, would be property gain from the sale or exchange of which would under any provision of this chapter be considered in whole or in part as ordinary income, were made -

(i) by treating any sale or exchange by such shareholder of stock in such other corporation within the preceding 3-year period (but only if at the time of such sale or exchange the shareholder owned more than 20 percent in value of the outstanding stock in such other corporation) as a sale or exchange by such shareholder of his proportionate share of the assets of such other corporation, and

(ii) by treating any liquidating sale or exchange of property by such other corporation within such 3-year period (but only if at the time of such sale or exchange the shareholder owned more than 20 percent in value of the outstanding stock in such other corporation) as a sale or exchange by such shareholder of his proportionate share of the property sold or exchanged, does not exceed an amount equal to 15 percent of the net worth of the corporation.

Exhibits, Page 2

Homer Simpson, Owner, Promotional Concepts, Inc Dba Do-It-Yourself Resume

5000 Masters Lane, MidCity, GA 31909 706…………

March 27, 2008

Dear Mr. Ned Flanders, The Webmakers, Inc.

As discussed in recent previous emails and conversations with you, Ned, I explained that I am positioning our company for changes: shared ownership, sale, and or web design. In order to move our company forward, I requested and you agreed to grant me, Homer Simpson, the President and owner of Promotional Concepts, Inc dba Sprawl-Mart full ownership of any and all property that The Webmakers, Inc. and any if it’s employees have developed, collaborated on, or produced including the items paid for to include but not be limited to the website, code, CDs, marketing ideas / processes and all appropriate physical or proprietary items. I understand that all of these assets are currently in my possession, having been delivered at the close of each contracted project, or are located on the web server, which is currently registered in my name and managed by me. The purpose of this document is to clarify ownership of these assets and ideas as all assets have already been turned over to me.

I submit this letter and agreement to make sure ownership, license, and code etc are addressed and granted. This serves as a legal agreement representing your approval to grant full ownership and license to me, Homer Simpson, and that any and all materials / website etc, that have been created under contract for Sprawl-Mart, Inc. and Promotional Concepts Inc. by your company Webmakers, Inc. be recognized as solely owned by me. Furthermore, you agree that any and all previous agreements that included binding language (if any) and service contracts, implied or not, be rescinded since you agree to grant me full ownership of any and all property associated with both Sprawl-Mart, Inc. and Promotional Concepts, Inc.

I, Homer Simpson, do hereby acknowledge, as do you, that all previous agreements, original or not, be replaced by this new agreement. By signing this agreement, we both (personally and corporately) “mutually release” and both mutually “hold harmless” all parties involved for future issues. As representative of my company, I have signed the


Exhibits, Page 3

agreement below and expect that you, representing The Webmakers, Inc., will do so as well. This agreement will be ratified upon both signatures being present and when one completed copy is returned to me. I have enclosed 2 documents. Both documents I have signed. Please keep one for your records and scan one and send back to me.

Thank you for your work to help me develop my company and for your continued co-operation in this effort.

HOLD HARMLESS AGREEMENT: Both I, Homer Simpson, and Ned Flanders (and companies named) hereby irrevocably acknowledges the undersigned parties indemnify and save harmless all parties from and against any and all claims, demands, actions, suits, losses, costs, charges, expenses, damages and liabilities whatsoever which may pay, sustain, suffer or incur by reason of or in connection with the use of Sprawl-Mart website etc, including, without limiting the generality of the foregoing, all costs and expenses (legal expenses) incurred in connection with any such loss or damage.

FULL AND FINAL RELEASE: Receipt and sufficiency of which is acknowledged by The Webmakers, Inc., hereby releases and forever discharges Homer Simpson, Promotional Concepts, Inc. dba Sprawl-Mart, his or her heirs, executors, administrators, successors and assigns of and from all actions, causes of action, damages, claims and demands whatsoever, which The Webmakers, Inc. had, now has or which his or her heirs, executors, administrators and assigns or any of them hereafter can, shall or may have for any reason whatsoever, including but not limited to all actions, causes of action, damages, claims and demands arising out of any future ownership, rights to website or future claim of any kind by The Webmakers, Inc. against the Homer Simpson, Promotional Concepts Inc or its employees. The Webmakers, Inc. further agrees not to make claim or take proceedings against Homer Simpson or Promotional Concepts, Inc or Sprawl-Mart or it’s employees or any other person or entity which may claim contribution or indemnity under the provisions of any statute or otherwise and In witness whereof The Webmakers, Inc. has executed this “Release” as listed below.

Signature of D. Homer Simpson, Owner: ________________________________________________________

Signature: Ned Flanders, The Webmakers, Inc. ________________________________________________________

Exhibits, Page 4

:

The Ultimate Force Majeure Provision

Either party's non-performance of this Agreement shall be excused to the extent that it is caused by any of the following events:

1. Alien abduction, invasion, possession or interference. As used herein, "alien" means a life form, whether or not carbon-based, from any other time, world, galaxy, uni-verse, or dimension, and includes angels, Lucifer and his minions, Yeti (a/k/a Bigfoot), Mothman, Chupacabra, Gozer, Pukwudgies and the so-called "Grays." For avoidance of doubt, "alien" does not mean a foreign national without a work visa.

2. A pandemic or plague, whether or not caused by an unknown virus released during an alien autopsy at Area 51.

3. Seas boiling (whether or not the result of global warming), the rising of the dead (whether or not the dead appear as so-called zombies), mountains falling (but not earthquakes), the re-emergence of Atlantis, and dogs and cats living together.

4. Destructive power unleashed by any of the following: the finding of the remaining crystal skulls, the reverse engineering of alien technology, or the discovery of the Ark of the Covenant.

5. The end of the world on December 21, 2012, according to the Mayan calendar. "

* * *

From www.contractualmusings.blogspot.com, and used by permission of its author Chadwick C. Busk, Esq.


11/9/17

1

The Contract Drafter’s Guide to Contract Drafting.

George M. Fox, Esq. Fox+Mattson, P.C.

4788 Long Island Drive Atlanta, GA 30342

www.GaLaw.com

November 17, 2017

1

Thanks to the following for their contributions and permissions: Professor Sue Payne, Director of the Center for Transactional Law and Practice, Emory University School of Law. Professor Tina L. Stark and Stark Legal Education, Inc. Chadwick Busk, Esq.

Claire Mattson, Esq. and Jennifer Thomas, Esq.

John Larkins, Esq., who literally “wrote the book.”

The material in this presentation does not constitute legal advice. It is also not intended to be definitive. So do not rely on anything in here in any transaction or other legal matter without doing your own research.

2

Section 1: This isn’t about offer and acceptance . . . Slide #3 Section II: Avoiding ambiguity. . . . . . . . . . . . . . . . . . . . . . Slide #10 Section III: A contract’s building blocks. . . . . . . . . . . . Slide #31 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . ………... . . . . . . . . . . . . follow Slides

11/9/17

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The Contract Drafter’s Guide to Contract Drafting

Getting to a contract which means what it says and says what

it means.

How to unearth what’s meant, or conversely, how to write

what you mean.

The parts of a contract, their legal significance and how to

un-blur them for the right remedies.

Introduction: that’s what I thought, too.

3

Section 1: This isn’t about offer and acceptance.

In case you’re asked: •  For an opinion letter.

•  To review a contract.

•  By general counsel.

•  To submit a pleading, and you want your client’s punch line right up front.

As a litigator, when would this ever, ever apply to me?

4


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3

I write to the ear and speak to the eye. “When people read what I write, I want them to hear me talking. “And when I talk, I want them to see what I’m saying. “I think good writing and good speaking are deeply intertwined.

“

”

McElhaney on Litigation:“Stop Sounding Like a Lawyer” ABA Journal, Nov. 2008. Used with permission.

5

An example: would you ever use “and/or” in a sentence? Three times? And could you say this sentence out loud with one breath?

Quote from Kahn v. Portnoy, C.A. No. 3515-CC (Del. Ch. 12/11/08); for a GA case on “and/or”: Bank Bldg. & Equipment Corp of America v. Georgia State Bank, 132 Ga.App. 762 (1974).

Unless otherwise expressly provided in this Agreement or required by the Delaware LLC Act, whenever a potential conflict of interest exists or arises between any shareholder or an Affiliate thereof, and/or one or more Directors or their respective Affiliates and/or the Company, any resolution or course of action by the Board of Directors in respect of such conflict of interest shall be permitted[.]”

6

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Unless otherwise expressly provided in this Agreement or required by the Delaware LLC Act, whenever a potential conflict of interest exists or arises between any Shareholder or an Affiliate thereof, and/or one or more Directors or their respective Affiliates and/or the Company, any resolution or course of action by the Board of Directors in respect of such conflict of interest shall be permitted [.]”

7

So: when would this apply? The conflicts considered:

a.  Any Shareholder vs. any Director. b.  Any Shareholder vs. several Directors. c.  Any Shareholder vs. the Company. d.  Any Shareholder vs. one/more Directors and the Company. e.  Any Affiliate vs. any Director. f.  Any Affiliate vs. several Directors. g.  Any Affiliate vs. the Company. h.  Any Affiliate vs. one/more Directors and the Company. i.  Any Shareholder and Affiliate vs. Directors. j.  Any Shareholder and Affiliate against the Company. k.  Any Shareholder and Affiliate against one/more Directors and

the Company. l.  Any Directors vs. the Company.

8


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The 451-word sentence:

See Exhibits, Page 1.

Evidence of Satisfaction of Conditions - Any condition of this Agreement which requires the submission of evidence of the existence or non-existence of a specified fact or facts implies as a condition the existence or non-existence, as the case may be, of such fact or facts and Lender shall, at all time, be free independently to establish to its satisfaction in its absolute discretion such existence or non-existence.

9

Section II:

Avoiding Ambiguity.

or

Translating What They Meant It To Say.

10

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Isn’t there enough to deal with?

Consider the Toronto Comma Case:

In Georgia: Kushner v. McLarty, 165 Ga.App. 400 (1983); Berman v. Rubin, 138 Ga.App. 849 (1976).

“This Agreement shall be effective from the date it is made and shall continue in force for a period of five (5) years from the date it is made, and thereafter for successive five (5) year terms, unless and until terminated by one year prior notice in writing by either party.”

11

“Hereof,” “hereto,” “thereof,” “hereafter” and

other old words. Original: The Escrow Fund shall be held by the Escrow Agent under the Escrow Agreement pursuant to the terms thereof. Redraft: The Escrow Agent shall hold the Escrow Funds in accordance with the Escrow Agreement’s terms.

12


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Original: Employment Agreement, dated March 13, 20XX, between Rollerblades Inc., a Delaware corporation (hereinafter, the “Employer”), and Maria Rodriguez, residing at 21 Melmartin Road, Chicago, Illinois 60606 (hereinafter, the “Employee”). Redraft: Employment Agreement, dated March 13, 20XX, between Rollerblades Inc., a Delaware corporation (the “Employer”), and Maria Rodriguez, residing at 21 Melmartin Road, Chicago, Illinois 60606 (the “Employee”). 13

Provisos

Typical drafting: Bathroom Tile. The Contractor shall change the color of the bathroom tile, provided that the Owners notify the Contractor on or before September 30, 20XX. More precise drafting: Bathroom Tile. If the Owners notify the Contractor on or before September 30, 20XX that they want to change the color of the bathroom tile, then the Contractor shall change the color of the bathroom tile. 14

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Typical drafting: Maintenance. The Tenant shall maintain the Premises; provided, however, the Landlord shall maintain the boiler.

More precise drafting:

Maintenance The Tenant shall maintain the Premises, except that the Landlord shall maintain the boiler.

Typical drafting: Notice. The Manufacturer shall notify the Wholesaler of any anticipated delays of longer than five days, provided that it shall also notify the Wholesaler of any anticipated early shipments.


Notice. The Manufacturer shall notify the Wholesaler of any anticipated delays longer than five days and any anticipated early shipments.

15

Ambiguities in setting standards.

Alterations. The Landlord shall not unreasonably withhold permission from the Tenant in determining whether the Tenant may proceed with making changes or alterations to the Premises. Alterations. The Tenant shall not make any changes or alterations to the Premises without the Landlord's prior consent, which Landlord shall not unreasonably withhold.

16


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Original: Employment Agreement, dated March 13, 20XX, between Rollerblades Inc., a Delaware corporation (hereinafter, the “Employer”), and Maria Rodriguez, residing at 21 Melmartin Road, Chicago, Illinois 60606 (hereinafter, the “Employee”). Redraft: Employment Agreement, dated March 13, 20XX, between Rollerblades Inc., a Delaware corporation (the “Employer”), and Maria Rodriguez, residing at 21 Melmartin Road, Chicago, Illinois 60606 (the “Employee”). 13

Provisos

Typical drafting: Bathroom Tile. The Contractor shall change the color of the bathroom tile, provided that the Owners notify the Contractor on or before September 30, 20XX. More precise drafting: Bathroom Tile. If the Owners notify the Contractor on or before September 30, 20XX that they want to change the color of the bathroom tile, then the Contractor shall change the color of the bathroom tile. 14

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8

Typical drafting: Maintenance. The Tenant shall maintain the Premises; provided, however, the Landlord shall maintain the boiler.


Maintenance The Tenant shall maintain the Premises, except that the Landlord shall maintain the boiler.

Typical drafting: Notice. The Manufacturer shall notify the Wholesaler of any anticipated delays of longer than five days, provided that it shall also notify the Wholesaler of any anticipated early shipments.


Notice. The Manufacturer shall notify the Wholesaler of any anticipated delays longer than five days and any anticipated early shipments.

15

Ambiguities in setting standards.

Alterations. The Landlord shall not unreasonably withhold permission from the Tenant in determining whether the Tenant may proceed with making changes or alterations to the Premises. Alterations. The Tenant shall not make any changes or alterations to the Premises without the Landlord's prior consent, which Landlord shall not unreasonably withhold.

16


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Ambiguities because of vagueness.

12.1 Assignment. With the prior written consent of the other party, either party may assign any right under this Agreement to any Person. Manufacturer consents, without any further consent being required, to the assignment by Purchaser to any affiliate of Purchaser that is as creditworthy as Purchaser. 12.1. Assignment. Manufacturer consents, without any further consent being required, to the assignment by Purchaser to any affiliate of Purchaser that is at least as creditworthy as of the date of the assignment as Purchaser is as of the date of this Agreement.

17

Eliminating unnecessary couplets and triplets. : Original: At the Closing, the Seller will sell, transfer, assign, convey and deliver to the Buyer, and the Buyer will purchase, accept and acquire from the Seller, all of the Purchased Assets. Redraft: At the Closing, the Seller shall sell the Purchased Assets to the Buyer, and the Buyer shall purchase them.

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Doubles you don’t need. And why.

free and clear: the Old English “free” and the French word “clair.”

acknowledge and confess: Old English and Old French.

breaking and entering:

Old English and French. goods and chattel:

Old English and Old French. right, title and interest:

Old English, Old English and French.

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Doubles and triples you probably don’t mean.

An exception: when you mean two different things: e.g., “represent and warrant.” Another exception: when state law requires all words: e.g., “remise, release and forever quitclaim.”

Not really exceptions any longer: Give, devise and bequeath instead of Give? Null and void instead of void?

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•  null, void and of no effect

•  over and above

•  part and parcel

•  rest, residue and remainder

•  sole and exclusive

•  suffer or permit

•  to have and to hold

•  then and in that event

•  true and correct

•  understood and agreed

•  amend, modify or change

•  by and between

•  convey, transfer and set over

•  covenant and agree

•  due and owing

•  each and every

•  final and conclusive

•  full force and effect

•  known and described as

•  made and entered into

More redundant doubles and triples.

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Hideous phrases ending with prepositions and

their plain English alternatives.

a number of > many/some/(the exact

number)

is desirous of > wants

concerning the matter of > about

the totality of > all

is binding on > binds

due to > because

prior to > before

is able/unable to > can/cannot

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A post-break, pre-lunch group exercise:

Hideous prepositional phrases and their plain English alternatives.

1.  at present >

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2.  at the place >

3.  at the present time >

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4.  at the time that >

5.  at that point in time >

6.  at this point in time >

7.  by means of >

8.  by reason of >

9.  for the duration of >

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10.  for the purpose of >

11.  for the reason that >

12.  from the point of view >

13.  in a case in which >

14.  in accordance with >

15.  in all likelihood >

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16.  in an X manner >

17.  in close proximity >

18.  in connection with >

19.  in favor of >

20.  in light of the fact that > 21.  as a result of >

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22.  in order to >

23.  in point of fact >

24.  in reference to >

25.  in regard to >

26.  in relation to >

27.  in terms of >

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28.  in the course of >

29.  in the event that >

30.  in the nature of >

31.  inasmuch as >

32.  on a number of occasions >

33.  on the basis of >

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34.  on the part of >

35.  to the effect that >

36.  until such time as >

37.  with a view to >

38.  with reference to >

39.  with regard to >

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Section III: A contract’s building blocks.

What it means to the drafter: are we setting up for the right remedy? What it means to the client: are we getting the right remedy? What it means to the litigator: can we sue for the right remedy?

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Defined: •  A statement of fact

•  as of a moment in time

•  intended to induce reliance; to establish standards of liability; to allocate risk.

Note: justifiable reliance is generally required for a cause of action based on a representation.

1. The first building block: a Representation.

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Technical definition: A promise that a statement is true.

Purposes: to provide an indemnity if a statement isn’t true; to allocate risk. Translation:

A promise that the maker of a statement will pay damages to the recipient of the statement if the statement isn’t true and the recipient suffers damages.

There is no reliance component. Example: The car is purple.

2. The second building block: a Warranty.

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Risk Allocation in Reps and Warranties, and the two types:

Flat representation –  Unequivocal –  Without wiggle room

Qualified representation o  Hedged

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Why Receive Both Representations and Warranties?

•  Representations –  Avoidance. –  Restitution. –  Maybe punitive damages.

•  Warranties –  No reliance component --

additional cause of action. –  “Benefit of the bargain”:

damages. –  No need to prove

defendant’s state of mind.

Does it matter?

CBS Inc. v. Ziff-Davis Publg. Co, 554 NYS2d 449 (1990)

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3. The third building block: a Covenant

•  A covenant is a promise to perform. •  It can be a promise to do something or

•  It can be a promise not to do something.

•  It creates a duty/obligation to perform.

Example: “The Landlord shall heat the Tenant’s premises.” Purpose: to require or to prohibit an action; to establish standards of liability; also to allocate risk.

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4. The fourth building block: a Right.

A right is the flipside of a covenant. A right shares the same purpose of a covenant:

–  to require or to prohibit an action; –  to establish standards of liability; also –  to allocate risk.

Example: “If George is obligated to do something for John,

then John has a right to George’s performance.”

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Covenant or Right: what’s the difference? The Landlord shall heat the Tenant’s premises. The Tenant has a right to have its premises heated.

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5. The fifth building block: Condition to an Obligation

A condition to an obligation is a state of facts that must exist before a party has an obligation to perform.

The occurrence of the condition must be uncertain. The purpose: to establish when a party is obligated to perform a

covenant. It also allocates risk.

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Condition to an Obligation Type A: Ongoing Conditions

“If the Retailer notifies the Manufacturer that it

requires Additional Merchandise, then the

Manufacturer shall ship the Additional

Merchandise to the Retailer no later than three

business days after it receives notice from the

Retailer.”

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Condition to an Obligation Type B - Walk-Away Condition.

“The following are conditions to the Buyer’s obligation to perform:

a)  The Buyer must have received an opinion from the Seller’s counsel, substantially in the form of Exhibit A.

b)  The Seller must have obtained all the consents listed in Schedule 3.14.”

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Building Blocks and their Interplay:

•  Rep and Warranty: –  The car is red.

•  Covenant: –  Seller shall not paint the car.

•  Condition: –  Seller must have complied with all covenants.

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6.  The sixth building block: Discretionary Authority

Definition: the right to choose what action to take; or Permission to act. Purpose: to provide a choice or permission; to allocate risk.

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Examples of Discretionary Authority:

1. Have a choice:

“Either party may terminate this Agreement at any time by sending written notice to the other party.”

2. You have permission to act, previously denied:

“The Borrower shall not invest in any Entity, except the Borrower may invest in any wholly-owned subsidiary of the Borrower.”

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7. The seventh building block: Condition to Discretionary Authority

Defined: a state of facts that must exist before a party may exercise discretionary authority.

“If the Author submits an unsolicited manuscript to the Publisher, the Publisher may accept or reject it, in its sole judgment.”

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A statement of fact as to which both parties agree, but with respect to which neither party has any right or remedy.

Purpose: to create definitions and

to establish policies.

Damages: ain’t none.

8. The eighth building block: a Declaration.

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A declaration that’s a definition:

The term “Purchase Price” means $200,000.

The laws of Georgia govern all matters relating to this Agreement, including torts.

An assignee of a limited partnership interest cannot become a Limited Partner unless the General Partner gives its consent.

Declarations which are policy statements:

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A condition to a declaration is a state of facts that must exist before a policy has substantive consequences.

9. The ninth building block: a Condition to a Declaration.

“If a purported assignment is made in violation of this Section 9.3, it is void.”

Purpose: to establish when a policy applies.

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A recurring phrase: to allocate risk.

Building blocks which allocate risk: Representations. Warranties. Covenants. Rights. Walk-away conditions.

The remedy of this building block: Restitution, maybe damages. Damages. Damages, maybe specific performance. Damages, maybe specific performance. Rescission.

And which things don’t contain a remedy?

Discretionary Authority, and Condition to Discretionary Authority; Declarations, and the Conditions to Discretionary Authority.

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When building blocks blur, the contract is a mess.

Example: The “did-it-himself”contract at Exhibits pp. 2-3.

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The first parts of a contract: The Easy Stuff Up Front.

•  Preamble: title, parties, and date.

•  Recitals.

•  “. . . The Parties agree as follows:”

•  Definitions

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The second part of a contract: The Core of the Contract.

Action Sections - the essence:

–  Subject matter provisions. –  Money and other payment

terms.

–  Closing Detail (if appropriate).

–  Closing Deliveries (if appropriate).

–  Term (if appropriate).

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•  Other business provisions (representations and warranties, covenants, rights, conditions, discretionary authority, and declarations)

•  Endgame provisions

•  Boilerplate

•  Signatures

The third part of a contract: More core and the wrap-up.

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Boilerplate Provisions

–  Confidentiality?

–  Anti-assignment?

–  Waiver of jury trial?

–  Choice of law and forum?

–  Notices?

–  Severability?

–  Force Majeure? See Exhibit 4.

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1.  Don’t tell me that “No one ever changes this Agreement.”

2.  Your contract is written in a font less than 11 point, in two columns.

3.  Your contract is not paginated.

4.  Your contract contains typographical or grammatical errors.

5.  Your contract contains Goofy provisions.

6.  Your contract contains an unrealistic sunset date.

7.  You won’t accept a faxed or imaged signature as an “original.”

Avoiding Irrelevancies and Obfuscations: A line in the sand from an in-house counsel to

potential vendors.

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Literary Advice for Lawyers who Write: Mark Twain: "The difference between the almost right word and the right word is really a large matter--'tis the difference between the lightning bug and the lightning."

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11:00 CYBER RISK MANAGEMENT THROUGH VENDOR CONTRACTS Mitzi L. Hill, Taylor English Duma LLP, Atlanta


12:15 DAMAGES AND THE USE OF EXPERTS IN A CONTRACTS CASE Lauren A. Warner, Chilivis Cochran Larkins & Bever LLP, Atlanta


1:00 INTEGRATED CONTRACTS, MERGER CLAUSES AND IMPLIED TERMS Michael J. King, Greenberg Traurig LLP, Atlanta


MERGER CLAUSES, INTEGRATED CONTRACTS AND IMPLIED TERMS

Michael J. King Greenberg Traurig, LLP Terminus 200, Suite 2500 3333 Piedmont Road, NE Atlanta, Georgia, 30305

1


There are any number of variations from drafter to drafter, but the gist is generally the

same:

Entire Agreement. This agreement constitutes the entire agreement and understanding among the parties hereto and replaces, cancels and supersedes any and all prior agreements and understandings among them pertaining to the subject matter hereof. There is no separate agreement, representation or other inducement for the execution of this agreement.

Simple enough. This provision is a weapon against any number of contentions by

contracting parties as to the meaning of a contract. Then again, there are numerous

circumstances in which an entire agreement is not an entire agreement and its meaning is

informed by other agreements or implied terms not expressed within the four corners of the

document.

I. MERGER CLAUSES

A. Merger clauses can preclude consideration of prior agreements

“[W]here a written contract contains a comprehensive merger clause, ‘prior or

contemporaneous representations that contradict the written contract cannot be used to vary the

terms of a valid written agreement purporting to contain the entire agreement of the parties . . . .”

Legacy Academy, Inc. v. Mamilove, 297 Ga. 15, 20, 771 S.E.2d 868, 872 (2015).

Merger is not solely a matter of contract. It also exists at common law, even without a

written merger clause. “An existing contract is superseded and discharged whenever the parties

subsequently enter upon a valid and inconsistent agreement, completely covering the subject-

matter which was embraced by the original contract. Such a subsequent agreement amounting to

a substitution of the former contract may be collected from several different contemporaneous



Michael J. King Greenberg Traurig, LLP Terminus 200, Suite 2500 3333 Piedmont Road, NE Atlanta, Georgia, 30305

1


There are any number of variations from drafter to drafter, but the gist is generally the

same:

Entire Agreement. This agreement constitutes the entire agreement and understanding among the parties hereto and replaces, cancels and supersedes any and all prior agreements and understandings among them pertaining to the subject matter hereof. There is no separate agreement, representation or other inducement for the execution of this agreement.

Simple enough. This provision is a weapon against any number of contentions by

contracting parties as to the meaning of a contract. Then again, there are numerous

circumstances in which an entire agreement is not an entire agreement and its meaning is

informed by other agreements or implied terms not expressed within the four corners of the

document.

I. MERGER CLAUSES

A. Merger clauses can preclude consideration of prior agreements

“[W]here a written contract contains a comprehensive merger clause, ‘prior or

contemporaneous representations that contradict the written contract cannot be used to vary the

terms of a valid written agreement purporting to contain the entire agreement of the parties . . . .”

Legacy Academy, Inc. v. Mamilove, 297 Ga. 15, 20, 771 S.E.2d 868, 872 (2015).

Merger is not solely a matter of contract. It also exists at common law, even without a

written merger clause. “An existing contract is superseded and discharged whenever the parties

subsequently enter upon a valid and inconsistent agreement, completely covering the subject-

matter which was embraced by the original contract. Such a subsequent agreement amounting to

a substitution of the former contract may be collected from several different contemporaneous


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writings, which, when taken together, constitute a new and complete agreement.” Hennessy v.

Woodruff, 210 Ga. 742, 82 S.E.2d 859, 861-62 (1954).

The advantage of a written merger clause is that it can remove any ambiguity about

whether the prior contract is superseded. The common law rule leaves open the question of

whether the latter contract “completely” covers the subject matter of the original contract.

The Supreme Court confronted that issue in Wallace v. Bock, 279 Ga. 744, 620 S.E.2d

820 (2005). There, the court recognized the common law rule that a written agreement

supersedes antecedent oral understandings and agreements. “Having reduced their contract

writing, all prior oral negotiations and agreements pertaining to the same subject-matter are

merged into the writing and superseded by the writing.” Id. at 745, 620 S.E.2d at 822. However,

when two distinct written contracts exist, for the common law rule to apply, the second contract

must cover the entirety of the subject-matter addressed and be inconsistent with the prior

agreement. Id. at 746, 620 S.E.2d at 823.

A written merger clause not only precludes proof of inconsistent terms for purposes of

contract construction, it also serves as a defense in fraud cases. An element of any fraud claim is

reasonable reliance. A merger clause defeats that element of the fraud claim because “the

plaintiff cannot simultaneously affirm a contract which states that no representations were made

and allege fraud based on such representations.” Stricker v. Epstein, 213 Ga. App. 226, 227, 444

S.E.2d 91, 93 (1994). Thus, “when one has entered a contract with a binding and comprehensive

merger clause, any reliance upon precontractual representations is, generally speaking,

unreasonable as a matter of law.” Raysoni v. Payless Auto Deals, LLC, 296 Ga. 156, 157, 766

S.E.2d 24, 26 (2014).

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As the Supreme Court held in Raysoni, however, a defective merger clause will not

necessarily bar a fraud claim. In that case involving the sale of a used car, the buyer sued for

fraud based upon false assurances that the minivan had never been involved in a collision or

otherwise damaged. The dealership relied on contractual language reading that “NO SALEMAN

VERBAL REPRESENTATION IS BINDING ON THE COMPANY.” Justice Blackwell’s

opinions stated that to the extent the provision amounted to a merger clause of sorts, “it is only a

partial merger clause, one limited to ‘verbal’ representations.” The plaintiff alleged that not only

had the salesman made oral representations that the car had never been damaged, but he provided

a false Carfax report that said the same thing. The written document did not fall within the

exclusion of verbal representations and therefore the plaintiff’s fraud claim survived.

B. Contract Interpretation unaffected by merger clauses As Justice Carley wrote in Wallace, “insofar as antecedent oral negotiations,

understandings and agreements are concerned, the principal of merger is effectuated by the parol

evidence rule.” Wallace, 279 Ga. at 745, 620 S.E.2d at 822. A merger clause and the parol

evidence rule work hand in hand such that “[e]vidence as to an alleged understanding which is

antagonistic to and inconsistent with the terms of the instrument is inadmissible to vary such

terms.” Southeastern Underwriters Inc. v. AFLAC, Inc., 210 Ga. App. 444, 446, 437 S.E.2d 556,

558 (1993). Parol evidence cannot be admitted “to add to, to take from or vary the writing itself .

. .” Buice Grading & Pipeline, Inc. v. Bales, 187 Ga. App. 263, 264, 370 S.E.2d 26, 27 (1988).

There are exceptions.

1. Patent Ambiguity

The rules of contract interpretation hold that “[p]arol evidence is inadmissible to add to,

take from or vary a written contract. All the attendant and surrounding circumstances maybe


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proved and if there is an ambiguity, latent or patent, it may be explained . . .” O.C.G.A. § 13-2-

2(1).

The concept of using parol evidence to explain a patently ambiguous contract certainly

needs no amplification. A latent ambiguity is a more curious concept, and there is little case law

to explain what it is.

A latent ambiguity exists where the contract, within its four corners is clear, but in the

context of the facts as they exist, the contract becomes unclear. “If the language is apparently

not of double meaning, but is shown to be so only by the aid of collateral or extrinsic facts, the

ambiguity is latent.” Oliver v. Henderson, 121 Ga. 836, 49 S.E. 743 (1905).

In one of its earliest decisions, the Georgia Supreme Court quoted Lord Bacon for the

proposition that a latent ambiguity is “that which seems certain and without ambiguity for

anything that appeareth upon the deed or instrument, but there is some collateral matter, outside

the deed, that breatheth the ambiguity.” Walker v. Wells, 25 Ga. 141 (1858).

Leaving the 16th century of Lord Bacon, but staying firmly planted in the 19th Century,

Walker explains how such facts can create a latent ambiguity. The case involved the grant of a

parcel of property “to Berry Stephens, an orphan . . . . but it turns out, that there was never such a

person as Berry Stephens, an orphan. It must be, that some person, not a mere name, was meant.

Who then was the person meant by the name? This is the necessary question. Who he was is

ambiguous—doubtful. Here then is a ‘collateral matter out of the’ grant, ‘that breatheth the

ambiguity.’ The case, therefore, is one of latent ambiguity.” Walker, 25 Ga. at 142-43.

Oliver involved a similar ambiguity. In that case, the testator conveyed to one of his

heirs land lot 78 in Dooly County. The problem with the devise was that the testator did not own

lot 78. The heir sought to use parol evidence to establish the property the testator meant to

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devise to him, but because the testator owned different lots in Dooly County, the evidence was

rejected because parol evidence was not admissible to show that a testator meant one thing when

he said another.

The most recent reported decision from Georgia came in 1977. At issue was a divorce

agreement that was denominated a property settlement. Such a property settlement was

dischargeable in the husband’s subsequent bankruptcy. The court, however, determined that

there was at least a latent ambiguity as to whether the divorce decree was intended as support

and maintenance for the wife which was not dischargeable in bankruptcy. The court held that

the wife was entitled to introduce parol evidence to establish the intent of the parties. Manuel v.

Manuel, 239 Ga. 685, 238 S.E.2d 328 (1977).

To conclude this topic, “an ambiguity is latent when the language employed is clear and

intelligible and suggests but a single meaning, but some extrinsic fact or extraneous evidence

creates a necessity for interpretation or a choice among two or more possible meanings. Moore

v. Pennsylvania Castle Energy Corp., 89 F.3d 791, 796 (11th Cir. 1996).

C. Don’t follow the form

An interesting case involving merger clauses as they are commonly drafted is HA&W

Financial Advisors, LLC v. Johnson, _______ Ga. App. _______, 782 S.E.2d 855 (2016). In

HA&W, the employee, Johnson, was recruited from a competitor to work in HA&W’s financial

advisory business. HA&W Wealth Management, LLC (“Wealth”) promised that it would invest

$10 million dollars into the new business, and made other promises important to Johnson. As

negotiations about Johnson’s employment agreement concluded, Wealth formed a wholly owned

subsidiary, HA&W Financial Advisors, LLC (“Financial”) with whom Johnson signed his


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employment agreement. The merger clause stated that all prior understandings and agreements

between the “parties” were merged into the employment agreement.

Trouble ensued when Wealth did not fulfill its promise to invest $10 million dollars to

grow the business. During litigation, Financial took the position that all of the promises made

prior to the employment contract were merged into the agreement by the merger clause.

Johnson, however, contended that the misrepresentations were made by Wealth, which was not a

party to the employment agreement and therefore not covered by the merger clause.

The Court of Appeals agreed, holding that “[g]iven the express language and structure of

the employment agreement, it is clear that the merger clause was not intended to apply to non-

party affiliates of HAW Financial such as HAW Wealth.” Id. at 864. As a drafting

consideration, therefore, scriveners should consider expanding the language of their standard

merger clauses to include affiliates and other third parties.

II. INTEGRATED CONTRACTS

HA&W is a good transitional case to introduce the concept of integrated contracts. That

case also considered how the employment agreement and certain promissory notes were to be

interpreted. The court read the three agreements as forming one integrated contract, because

“contemporaneous agreements entered into by the same parties arising out of the same

transaction may be read together to show one contract. Id at 866, citing Foreman v. Chattooga

International Technologies, 289 Ga. App. 894, 896, 658 S.E.2d 470 (2008).

“‘Contemporaneous’ in this setting does not ‘connote perfect or absolute coincidence in point of

time’ and has been held to mean ‘reasonably contemporaneous.’” Kelley v. McCormack, 548

B.R. 862, 886, citing Dabbs v. Key Equip Fin. Inc., 303 Ga. App. 570, 574, 694 S.E.2d 161, 165

(2010).

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Agreements read together flush out the full meaning of the agreements and the intent of

the parties. Consider Hardin v. Great Northern Nekoosa Corp., 237 Ga. 594, 229 S.E.2d 371

(1976). In that case, the owner of property entered into three different contracts. One was the

sale of timber and mineral rights. The second was a lease back agreement that did not impact the

decision. The third contract was a farm lease whereby the owner of the property reserved the

right to use part of the acreage covered by the timber contract for farming purposes. The timber

company also had the right to terminate the farming lease. The timber company eventually

terminated the farming lease and then rented the property to third party farmers. The estate of

the property owner sued, contending that the timber company’s only right was to utilize the farm

for raising timber and exploiting the mineral rights, not crop farming. The Supreme Court

agreed. Reading the agreements together, the purpose of the business transaction was the

exploitation of timber rights and not crop farming, such that the timber company was not

permitted to engage in the use of the property for crop farming.

Reading separate agreements collectively also places them in context. Such was the case

in American Control Systems, Inc. v. Boyce, 303 Ga. App. 664, 694 S.E.2d 141 (2010). Boyce

sold a business pursuant to one agreement and signed a separate employment agreement that

contained a restrictive covenant with respect to his employment. Under the prior practice of

viewing such restricted covenants with different levels of scrutiny, the employment agreement,

standing alone, would have been subject to strict scrutiny. However, in context with the sale of

stock, the employment agreement was held to be ancillary to the sale of a business and subject to

much less scrutiny. Id., 694 S.E.2d at 145 and footnote 17.


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III. IT’S IN THERE: IMPLIED INGREDIENTS IN THE CONTRACTUAL POT

A. Introduction In the spaghetti sauce commercial, the skeptical consumer is repeatedly assured that key

ingredients are “in there.” In the contractual pot, there is no definitive assurance as to exactly

what is “in there.” Well drawn and thorough contracts can still be supplemented by implied

terms imposed by the courts. In other circumstances, courts will abstain from adding terms to

porous agreements. This paper explores the governing principles and some of the interpretive

case law.

B. Implied Terms and the Implied Covenant of Good Faith Under Georgia Common Law

For the contract lawyer, the implied covenant of good faith and fair dealing is a vexatious

creation of the common law. This covenant has the potential for introducing terms into the

parties’ agreement by judicial act rather than by the time-honored method of offer and

acceptance. This is not to say that the covenant lacks foundation in common sense and justice.

Nevertheless, implied terms cannot be seen with the bare eye, and their presence may ultimately

be gleaned only with the benefit of a court’s 20-20 hindsight.

Performance under a contract “must be substantially in compliance with the spirit and the

letter of the contract . . . .” O.C.G.A. § 13-4-20. As interpreted by the Georgia Supreme Court,

this statute “calls for ‘substantial compliance with the spirit, and not the letter only, of the

contract’ in its performance.” Crooks v. Chapman, 124 Ga. App. 718, 719-720, 185 S.E.2d 787

(1971). Every contract susceptible to review by a Georgia court “implies a covenant of good

faith and fair dealing in the performance of the terms of the agreement [cit.]; [t]his implied duty

‘requires both parties to a contract to perform their promises and provide such cooperation as is

required for the other party’s performance.’” Camp v. Peetluk, 262 Ga. App. 345, 350, 585

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S.E.2d 704, 708 (2003); see also, Brack v. Brownlee, 246 Ga. 818, 273 S.E.2d 390 (1980).

“[The] ‘Good faith’ duty imposed upon [a] party is a shorthand way of saying substantial

compliance with the spirit, and not merely the letter, of a contract.” Fisher v. Toombs County

Nursing Home, 223 Ga. App. 842, 845, 479 S.E.2d 180, 184 (1996). In effect, courts may imply

terms and duties that are not otherwise present in the agreement. Larkins, Ga. Contracts, § 5-6,

citing Fowler v. Smith, 230 Ga. App. 817, 498 S.E.2d 130 (1990).

Implied terms generally allow the court to address controversies when a contract’s terms

are (1) “ambiguous or do not cover disputed conduct, or (2) where the action at issue is taken

pursuant to a grant of discretion in the contract and scope of that discretion has not been

designated.” Rhode Island Charities Trust v. Engelhard Corp., 109 F. Supp. 2d 66, 73-74 (D.

R.I. 2000) (interpreting Georgia law). Put more broadly, the court may employ implied terms to

remove ambiguity generally. Consequently, the imposition of any implied terms must conform

to the rules of construction governing the resolution of ambiguity.

1. Construction and Interpretation

Georgia courts follow a three-step construction process. Id. at 76; see also, Lostocco v.

D’Eramo, 238 Ga. App. 269, 275, 518 S.E.2d 690 (1999). In the first step of contract

construction, the court must decide, whether the language of the contract is ambiguous.

Lostocco, 238 Ga. App. at 275, citing CareAmerica v. Southern Care Corp., 229 Ga. App. 878,

880, 494 S.E.2d 720 (1997). The existence or nonexistence of an ambiguity is a question of law

for the court.” Corey v. Clear Channel Outdoor, Inc., 299 Ga. App. 487, 683 S.E.2d 27, 31

(2009). “Whenever the language of a contract is plain, unambiguous, and capable of only one

reasonable interpretation, no construction is required or even permissible, and the contractual

language used by the parties must be afforded its literal meaning.” Willis v. First Data POS,


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Inc., 273 Ga. App, 792, 794, 546 S.E.2d 781 (2001), citing Baker v. Baker, 257 Ga. 187, 356

S.E.2d 873 (1987).

If, however, an ambiguity lies, courts must then apply rules of construction to remove the

ambiguity. “Ambiguity in a contract is defined as duplicity, indistinctness, or an uncertainty of

meaning or expression.” Horwitz v. Weil, 275 Ga. 467, 468, 569 S.E.2d 515 (2002). In this

second step of construction, courts will apply statutory rules of construction to resolve the

ambiguity. Georgia courts must adhere to a variety of construction rules and guidelines, but

primarily they must adhere to one principle of construction, ascertaining the intent of the parties.

See e.g., Schwartz v. Schwartz, 275 Ga. 107, 108, 561 S.E.2d 96 (2002). If the intention of the

parties is clear from the instrument, it should be given effect regardless of conflict between the

different clauses of the agreement. Golden Peanut Co. v. Bass, 275 Ga. 145, 149, 563 S.E.2d

116 (2002).

If after applying the rules of construction, an ambiguity still exists, the court follows a

third step of construction. It sends the issue to a trier of fact to resolve the dispute. Lostocco,

supra, 238 Ga. App. at 275, 518 S.E.2d at 695.

The good faith requirement is a collateral rule of construction, a gap-filler that imposes

limits upon one contracting party’s ability to adversely impact the contract’s value to the other

party. Therefore, it determines when a party to a contract may no longer pursue his or her own

self-interest but rather must cooperate by deferring to the other party’s contractual interests. See

Larkins, Ga. Contracts, § 5-6 (2002); 3 Corbin on Contracts, § 507 (Supp. 1999); and 11

Williston on Contracts §§ 31:8, 32:2 (4th ed. 1999). As a rule of construction, it is not

independent from the contract in creating a cause of action; it merely modifies existing terms,

becoming part of the contract itself. Stuart Enterprises Int’l, Inc. v. Peykan, Inc., 252 Ga. App.

11

231, 234, 555 S.E.2d 881 (2001).

[T]he introduction of an implied term into the contract of the parties can only be justified when the implied term is not inconsistent with some express term of the contract and where there arises from the language of the contract itself, and the circumstances under which it was entered into, an inference that it is absolutely necessary to introduce the term to effectuate the intention of the parties. Consequently, though courts are generally reluctant to make contracts for the parties, they will imply promises or duties when justice, good faith, or fairness so demand. Higginbottom v. Thiele Kaolin Co., 251 Ga. 148, 149(1), 304 S.E.2d 365 (1983). “An implied term in an agreement exists where it is reasonable and necessary to effect the full purpose of the contract and is so clearly within the contemplation of the parties that they deemed it unnecessary to state.” Fisher v. Toombs County Nursing Home, 233 Ga.App. 842, 845(2), 472 S.E.2d 180 (1996). In determining whether to imply a contractual term, “each case must be examined in light of its particular facts,” including the language of the contract and the circumstances of the case. Higginbottom v. Thiele Kaolin Co., 251 Ga. at 151(1), 304 S.E2d 365.

Wireless MD, Inc. v. Healthcare.com Corporation, 271 Ga.App. 461, 463-64, 610 S.E.2d 352,

355 (2005).

The court in WirelessMD invoked three separate ways that an implied term could be read

into a contract: (1) to introduce an absolutely necessary term when justice, good faith or fairness

so demand; id. at 463, 610 S.E.2d at 355, (2) to imply a term where “other circumstances exist . .

. that make it necessary to imply a duty;” id. at 465, 610 S.E.2d at 356; and (3) implication by

way of the covenant of good faith and fair dealing.

Implied terms must, however, derive from the language of the contract. In addition, the

covenant of good faith does not create an independent cause of action separate from a claim for

breach of contract. In Stuart’s, the plaintiff, a buyer of a business, sued the seller of that business

for breach of contract, claiming that the seller failed to hand over all assets as agreed because a

third party had already registered the business’ name. 252 Ga. App. at 233. The jury found for

the seller on the breach of contract claim but also found that the seller had violated the implied

covenant of good faith by taking a case of liquor and $300 from the cash register shortly before


12

the closing of the sale. The Court of Appeals agreed with the 11th Circuit Court of Appeals’

holding in Alan’s of Atlanta, Inc. v. Minolta Corp., 903 F.2d 1414 (1990), that “Georgia law

would not recognize an independent cause of action.” Because the jury had not found a breach

of contract, there could be no breach of the implied covenant of good faith. Stuart’s, supra, 252

Ga. App. at 234, citing Alan’s, 903 F.2d at 1429.

Stuart’s establishes that breach of the duty of good faith must rest on contractual terms.

If there has been no breach of contract, the parties’ intent has been satisfied. However, in

construing a contract to effectuate the parties’ intent, the rule of good faith does not afford the

court Carte Blanche to reform the contract to suit its own sensibilities. “The . . . court cannot

imply an obligation on one party to [a] [c]ontract that is not fairly imposed under the express

terms of [a] [c]ontract.” Department of Human Resources v. Citibank F.S.B., 243 Ga. App. 433,

439, 534 S.E.2d 422 (2000). Courts impose an implied provision “only where such provision is

necessary to effect the full purpose of the contract and is so clearly within the contemplation of

the parties that they apparently deemed it unnecessary to state it.” Ellis v. Brookwood Park

Venture, 161 Ga. App. 242, 243, 288 S.E.2d 308 (1982).

Thus, in order to state a claim for breach of the implied duty of good faith and fair dealing, a plaintiff must set forth facts showing a breach of an actual term of an agreement. General allegations of breach of the implied duty of good faith and fair dealing not tied to a specific contract provision are not actionable.

American Casual Dining, L.P. v. Moe’s Southwestern Grill L.L.C., 426 F. Supp. 2d 1356, 1370

(N.D. Ga. 2006).

2. Application

As stated above, the implied covenant of good faith generally addresses two scenarios:

(1) the absence of a specific standard governing a party’s exercise of discretion under the

contract; and (2) the absence of a specific contractual provision. In both scenarios the court has

13

the same goal, enforcing the parties’ intentions. However, the court follows different criteria to

determine breach under each scenario. The following sections will address these cases as well as

those where the court implies terms without the use of the implied covenant of good faith.

a. Absence of a Specific Standard Governing a Party’s Exercise of Discretion

“[W]here the manner of performance of a contractual provision is left more or less to the

discretion of one of the parties, he is bound to the exercise of good faith.” Ameris Bank v.

Alliance Inv. & Mgmt. Co., LLC, 321 Ga. App. 228, 234, 739 S.E.2d 481, 486 (2013). In cases

“where a decision is left to the discretion of a designated entity, the question is not whether it

was in fact erroneous, but whether it was in bad faith, arbitrary or capricious so as to amount to

an abuse of that discretion.” MacDougald Construction Co. v. State Highway Dept., 125 Ga.

App. 591, 593, 188 S.E.2d 405, 406 (1972).

In MacDougald, the Georgia Court of Appeals, on review of jury instructions, examined

a good faith issue arising from a contract requiring a highway contractor to plant sod on the

right-of-way before receiving final payment. The Highway Department claimed that the

contractor had violated his duty of good faith by using 30 times the amount of water stipulated in

the contract, despite a contractual provision stating that “the use of water will be left to the

judgment and decision of the contractor. Id. at 592. The contract also stated that “water used

after sprigs ha[d] been placed [would] be paid for at the contract unit price established for

water.” Id. at 592. The Court of Appeals affirmed the trial court’s jury charge based on

evidence that the contractor had continued to use an excessive amount of water despite a request

from the Highway Department to desist, and that he stood to gain in making such a decision.

The Court held that “where the manner of performance is left . . . to the discretion of [a] part[y],

he is bound to the exercise of good faith . . . . [and] that the reasonableness . . . of [his] decision .


14

. . is to be considered in determining whether an honest judgment was exercised rather than

whether the conclusion was in fact free from error.” Id. at 594. However, the court further held

that parties could draft a contract with a grant of discretion so absolute that “the issue of good

faith is irrelevant.” Id. at 594, citing VTR, Inc. v. Goodyear Tire & Rubber Co., D.C., 303

F.Supp. 773.

In Automatic Sprinkler Corp. v. Anderson, 243 Ga. 867, 257 S.E. 2d 283 (1974), a sales

representative who voluntarily resigned, sued his former employer for incentive compensation.

The terms of his employment contract stated that for those representatives terminated for reasons

other than retirement or disability, the payment of any compensation not yet received rested

solely in the “absolute and final” discretion of a compensation committee. Automatic Sprinkler,

supra, 243 Ga. at 867. The Supreme Court of Georgia reversed the Court of Appeals’ denial of

the employer’s motion for summary judgment, holding that, because the terms of the contract

were unambiguous and the representative claimed that he had read the contract thoroughly, the

company had the right to refuse him his compensation for any reason, just as the contract

expressed. Id. at 869. Thus, there is “no breach of an implied covenant of good faith where a

party to a contract has done what the provisions of the contract expressly give him the right to

do.” Martin v. Hamilton State Bank, 314 Ga. App. 334, 723 S.E.2d 726, 727 (2012); Nine

Twenty, LLC v. Bank of the Ozarks, 337 Ga. App. 180, 183, 786 S.E.2d 555, 558 (2016).

The key to understanding the conflict in these holdings is to always keep in mind that the

court’s primary goal in a contract dispute is to ascertain the parties’ intentions. In scope of

discretion cases, the court looks at the parties’ intent in designating discretion. MacDougald,

125 Ga. at 594. In MacDougald, the parties expressed the scope of discretion of the contractor in

ambiguous terms, so the court was free to impose a “good faith” standard qualifying that

15

discretion. Based on the evidence, the Highway Department granted discretion to the contractor

because it believed the contractor would be better situated to make decisions about water usage

based on weather and soil conditions. The parties likely never reasonably intended for the

contractor to use 30 times the amount of water stipulated in the contract. Therefore, the court

held that a jury question remained as to the reasonableness of the contractor’s actions. In

Automatic Sprinkler, the contract’s terms unequivocally conferred absolute discretion in the

employer. The parties’ intent in assigning absolute discretion deprived the Court of an

opportunity to impose a good faith obligation.

The courts have clearly identified unchecked discretion as a target for applying a rule of

good faith. In reviewing a property owner’s refusal to consent to an easement holder’s

assignment of rights under the easement, the Court of Appeals railed against the property

holder’s abuse of discretion in order to secure the easement for itself or to extract additional

compensation. “‘Good faith’ and ‘reasonableness’ do not comprehend arbitrary or capricious

reasons, or considerations based on pecuniary gain, or merely personal preferences; rather, they

refer to ‘considerations of fairness and commercial reasonableness.’” Hunting Aircraft, Inc. v.

Peachtree City Airport Authority, 281 Ga. App. 450, 452, 636 S.E.2d 139, 141 (2006).

Hunting formed the basis for the court’s decision allowing a counterclaim to move

forward in Maree v. ROMAR Joint Venture, 329 Ga. App. 282, 763 S.E.2d 899 (2014). The

counterclaimant, Maree, alleged that Bank of America, as the managing member of the ROMAR

joint venture, breached its duty of good faith by failing to market and lease the joint venture

property. Because the contract did not establish the manner in which the Bank was to manage

and control the property, the duty of good faith filled in the gap and governed the Bank’s

discretion. Id. at 294, 763 S.E.2d at 909.


16

The Hunting court did recognize a particular exception to the duty to consent as it arises

in the context of landlord/tenant law. Three cases hold that in the context of a lease, there is no

“reasonableness” requirement governing the landlord’s decision to consent to the assignment of

the lease. See, The Tap Room v. Peachtree-TSG Assoc., 270 Ga. App. 90, 91, 606 S.E.2d 13

(2004). In light of the application of good faith rules in so many other contexts, the continued

viability of this rule is certainly up for argument.

b. Absence of a Specific Contractual Provision

In cases where a contract lacks a provision dealing with disputed conduct, the court

generally looks not to why and how a party performed a known duty, as it does with discretion

cases, but at whether a party’s particular action or inaction, not expressed in the contract, violates

the mutual purpose of the contract.

In Fisher v. Toombs County Nursing Home, 223 Ga. App. 842, 479 S.E.2d 180 (1996), a

woman sued a nursing home when it released her alleged husband into the custody of the

husband’s son without notifying her. After the son removed the husband to Michigan, the wife

sued for breach of contract for failing to notify her of the discharge. The nursing home claimed

that they had no duty to notify the wife, despite the fact that she provided the payment for their

services. A fractured Court of Appeals reversed the trial court’s grant of summary judgment in

favor of the nursing home, recognizing separately both an implied term and a potential breach of

the implied duty of good faith. The Court held as a matter of law that the contract contained an

implied term that the woman be notified of her husband’s release because she was listed as the

“responsible party” on the contract and because she and the patient were married. Id. at 845,

846. The court further held that a jury could find that the nursing home, in failing to notify the

woman, did not conform to the “‘spirit’ of the contract, and was therefore not in good faith.” Id.

17

at 846, quoting Crooks, supra, 124 Ga. App. 718, 185 S.E.2d 787 (1971); O.C.G.A. § 13-4-20.

Fisher presents a case where more than one term was implied into the contract: an additional

contractual term and the implied duty/covenant of good faith. Of course, the court’s right to

imply any term derives from the duty of good faith, so the distinction is one without a difference.

Implied duties do not arise, however, for the purpose of expanding the contract, as

opposed to giving effect to its unstated purpose. In Walker v. Gwinnett Hospital System, Inc.,

263 Ga. App. 554, 558, 588 S.E.2d 441, 445 (2003), a hospital loaned a physician money

interest-free for expenses, including her own salary and that of four employees, so that she would

open an office near the hospital. Their agreement stated that she would pay the hospital monthly

all profit exceeding $3,000. The physician asked for more money to hire a fifth employee. The

hospital refused and the physician stopped repaying the loan, thereby prompting the hospital’s

action against her. The physician raised a set-off defense, claiming that she could repay the loan

faster with a fifth employee, and thus, the hospital had breached its duty of good faith by its

refusal. The trial court granted summary judgment against the physician, and the Court of

Appeals affirmed, holding that the hospital had no duty to pay for a fifth employee when the

contract stated that the hospital would pay for the expense of only four employees. In reaching

its conclusion the court stated the following:

The implied duty doctrine “requires both parties to a contract to perform their promises and provide such cooperation as is required for the other party’s performance.” . . . see Southern Business Machines of Savannah v. Norwest Financial Leasing, 194 Ga. App. 253, 256(2), 390 S.E.2d 402 (1990) (duty of good faith and fair dealing implied “whenever the co-operation of the promisee is necessary for the performance of the promise . . .”)

Id. at 558, 588 S.E.2d at 445.

The Court has determined that it was a jury issue as to whether a landlord was obligated

to pursue a second zoning variance in order to allow its tenant to continue to occupy the premises


18

in the same fashion throughout the lease term. Myung Sung Presbyterian Church, Inc. v. North

American Association of Slavic Churches & Ministries, Inc., 291 Ga. App. 808, 662 S.E.2d 745

(2008). When the tenant entered into the lease for use of a modular building for 10 years, all the

parties understood that the building was permitted only under a 5-year zoning variance. When

the variance expired and the landlord failed to seek an extension of the variance, the litigation

ensued on the tenant’s claim that the landlord had violated the implied covenant of good faith

and fair dealing. The Court held that the lease contained an implied term that the landlord would

make a good faith attempt to obtain an additional variance.

c. Good Faith by Any Other Name

Be it an implied duty to seek financing, Brack v. Brownlee, 246 Ga. 818, 273 S.E.2d 390

(1980), an implied duty to give notice, Ellis v. Brookwood Park Venture, 288 S.E.2d 308 (Ga.

App. 1982), an implied duty to make reasonable efforts, Wood v. Lucy, Lady Duff-Gordon, 222

N.Y. 88, 118 N.E. 214 (N.Y. App. 1917) (Cardozo, J.), or plain bad faith, Nguyen v.

Lumbermans Mutual Casualty Co., 261 Ga. App. 553, 583 S.E.2d 220 (2003), courts have found

a number of ways to imply terms. Just as with the implied covenant of good faith, these implied

duties are all tools for construing a contract so as to ascertain the parties’ intentions, and,

therefore, they are essentially all the same doctrine.

i. Duty to Seek Financing

In Brack, a seller rescinded a real estate contract because, he alleged, the terms were too

ambiguous and lacking in mutuality. The contract contained the following language, “this

contract is contingent upon purchaser being able to secure (adequate) financing.” Brack, supra,

246 Ga. at 818. The court held that a buyer has an implied duty to diligently seek financing,

which must be exercised in good faith. Id. at 819, quoting Warren v. Camp, 232 Ga. 681, 682,

19

208 S.E.2d 489 (1974); Fourteen West Realty v. Screw, 147 Ga. App. 362, 248 S.E.2d 722

(1978). Therefore, the agreement was not lacking in mutuality because a buyer cannot avoid his

obligations under the contract. Brack, 246 Ga. at 819. In addition, the court held that a seller in

a sales contract has an implied duty to allow a purchaser a reasonable time to obtain financing.

Id. at 819-820. In reaching its conclusion, the court determined that parties intend financing

conditions as protection for buyers; sellers are not concerned with how a buyer pays, just that he

does. Id. at 820.

ii. Duty to Give Notice

In Ellis, a landlord brought a dispossessory warrant proceeding against tenants in an

apartment because the tenants were allegedly holding over. The lease agreement stated that

tenants would be allowed to renew their leases at the end of the lease term for an additional two

years. 161 Ga. App. at 242. The trial court granted summary judgment in favor of the landlord

and held that the lease implied a duty to give notice of renewal in writing, as per a clause

requiring any notice to be given in writing, and, because there was no evidence that the tenants

gave any written notice, they were holdovers. Id. at 242, 243. The Court of Appeals affirmed

and distinguished it from Linch v. McNeil Real Estate Fund VI, LTD, 146 Ga. App. 505, 507(2),

246 S.E.2d 718, where notice of renewal was not implied, stating that the parties intended a new

lease be executed because they had not included a provision for increasing rent at the time of

renewal and there was no waiver of lease provisions. Ellis, 161 Ga. App. at 243, 244.

iii. Duty to Use Reasonable Efforts

In Wood, considered one of the earliest implied terms cases, the court imposed upon a

businessman an implied duty to use reasonable efforts to market a fashion designer’s designs so

as to avoid a lack of mutuality. The court held that “a promise may be lacking, and yet the whole


20

writing may be ‘instinct with an obligation’ imperfectly expressed.” 118 N.E. at 215. The

businessman had an exclusive license and the fashion designer’s sole compensation under the

contract was half the profits. Therefore the parties must have intended that he use reasonable

efforts to market the designs, otherwise his promise to account for profits would be meaningless.

Id. at 215.

A series of Georgia cases has wrestled with the issue of implying a duty of reasonable

effort in the context of mining leases. Palmer Brick Co. v. Woodward, 138 Ga. 289, 75 S.E. 480

(1912); Hodges v. Georgia Kaolin Co., 108 Ga. App. 115, 132 S.E.2d 86 (1963); Higginbottom

v. Thiele Kaolin Co., 251 Ga. 148, 304 S.E.2d 365 (1983). These cases generally stand for the

proposition that the court will imply a duty to exercise reasonable or best efforts only when a

party’s sole benefit under a contract depends upon the other party’s efforts.

In Palmer, a landowner leased many acres to a brick making company for the purpose of

mining clay and crafting bricks; the mining company could build those structures and that

infrastructure necessary for such a purpose. The contract stated that the company could take as

much or as little clay as it thought proper. In exchange, the company would give the landowner

$250 at the outset and 12 1/2 cents per 1,000 bricks manufactured with a monthly minimum of

$100. The contract also called for a yearly accounting. If the company showed that in the

exercise of reasonable diligence it was able to produce fewer bricks than that necessary to meet

the $100 monthly minimum, its rent would be reduced accordingly; if the company produced

more bricks than that necessary to meet the $100 monthly minimum, the landowner would

receive the excess at the contracted rate. The landowner sued when the company failed to pay

rent. The Brick Company claimed that it had no duty to mine or pay rent. The Court disagreed,

holding that as the company could encumber the land, it had the duty to either pay the minimum

21

rent or exercise reasonable diligence. Palmer, 75 S.E. at 483-484. The court further stated that

any other a construction “would deprive the lessor of his rent, the privilege of mining the clay

himself, or from leasing it to other for that or any other purpose. The law does not sanction such

an absurdity.” Id. at 484.

In Hodges, a case with both minimum rent and royalties, the court found initially that the

kaolin mining company did not have an implied duty to mine, but that subsequent events resulted

in a duty to mine with “reasonable diligence.” As first agreed, the lease contained a minimum

rent provision in addition to a potential royalty. The minimum rent provision demonstrated that

the parties contemplated that the lease might not result in royalties. Id. at 117-18. When the

mining company subsequently announced its intention to commence mining and required the

lessor to remove timber and overburden from the property, however, the court inferred from that

conduct a duty on the part of the mining company to proceed with reasonable diligence.

In Higginbottom, the Supreme Court sought to explain the state of the law. First,

construing Palmar Brick, the Court stated:

The implication was that if a minimum annual rental is paid and is credited only to royalties due for the year it is made, then there is no implied duty to mine. Accord, Sewell v. Aggregate Supply Co., 214 Ga. 545(3)(5) 106 S.E.2d 16 (18958), and Smith v. Aggregate Supply Co., 214 Ga. 20, 23-24, 102 S.E.2d 539 (1958)). This conclusion is based on the premise that where such an annual rental is provided for by the parties, it indicates that they knew that mining might not occur for some time and intended that in that event the rental would be sufficient consideration. Hodges, supra, 108 Ga. App. p. 117, 132 S.E.2d 86; Tennessee Valley Kaolin Corp. v. Perry, 526 S.W.2d 488, 291 (Tenn. App. 1975).

Conversely, the implication in Palmer Brick was that if the lease does not provide for a minimum rental, but instead makes rent contingent on royalties, there is an implied duty to mine within a reasonable time. The theory is that if the parties have entered into such a lease they must have contemplated a duty to mine, since otherwise the lessor would receive no benefits at all from the contract, thus frustrating his or her intention in entering the agreement. 3 Corbin on Contracts, 541; Crain v. Pure Oil Co., 25 F.2d 824, 829 (8th Cir. 1928).

Higginbottom, 251 Ga. at 150.


22

Then interpreting Hodges, the Court said:

[T]he Court went on to establish an additional principle by holding that once Georgia Kaolin had cleared the land a duty to exercise reasonable diligence in mining the property did arise, since notions of good faith and fairness demand the imposition of a duty to mine in exchange for exercising the right to clear and possess the lessor’s property, which renders the land useless to the owner. Hodges, supra, 108 Ga. App. p. 118, 120, 132 S.E. 2d 86. See also Palmer Brick, supra, 138 Ga. App. p. 297-98, 75 S.E. 480, where in reaching our decision we considered it important that the lessee had taken possession of the property, thus denying the owner the benefit of its possession and control.

Higginbottom, 251 Ga. at 150-51.

In the end, the Court held:

Although the above discussion highlights considerations important to the question of whether a duty to mine should arise by implication, each case must be examined in light of its particular facts.

Id.

Essentially, these cases protect the parties’ right to mutuality. The parties contemplate

that something might be mined, hence the royalty provisions; they also contemplate that

something will not be mined, hence the minimum rent provisions. If there is no minimum rent,

one party is without consideration unless the other uses reasonable efforts ala Wood.

These authorities served as the precedential foundation for the decision in WirelessMD.

WirelessMD arose from an asset sale between companies in which the buyer acquired the seller’s

assets, including software technology. The underlying contract contained an “earn out” by

which the seller would recognize royalties upon buyer’s marketing of the software. Seller sued

upon the allegation that buyer was not engaged in good faith efforts to market the software.

The Court was persuaded that the up-front consideration to seller of the forgiveness of $3

million in debt conferred a benefit on the seller such that it was not absolutely necessary to imply

a duty on buyer to market the software in order to ensure sufficient consideration for the

contract. WirelessMD, 271 Ga. App. at 465, 610 S.E.2d at 356.

23

The Wireless court relied on national authorities concerning implied duties to utilize

“best efforts” or “reasonable efforts” to market and sell in the context of patent royalties, post-

closing earnouts and licensing agreements.

For instance, Permanent Corp. v. Kennametal, Inc., 908 F.2d 98, 99 (6th Cir. 1990),

involved a license agreement for the defendant’s use of the plaintiff’s patented process for

forming certain alloys in exchange for an up front payment of $250,000 by the defendant and the

defendant’s promise to pay royalties of 3½% of any sales of products the defendant developed

using the patented processes. The plaintiff sued the defendant for breach of contract, alleging

that the defendant failed to fulfill its implied duty to use its best efforts to exploit the patents. Id.

The Permanence court recognized that a more accurate description of the implied duty to use

best efforts would be the exercise of “reasonable efforts” or “due diligence.” Permanence, 908

F.2d at 100, n. 2. The court affirmed summary judgment in favor of the defendant, and noted

that the key provisions that militated against implying a duty on the defendant to use best efforts

to exploit the patents were those that obligated the defendant to make a substantial up front

payment.

The Permanence court stated, “an obligation to employ best efforts has generally been

implied in contracts in which the only consideration for a grant of property lies in payment of

royalties.” Id. The court articulated the reasoning behind this rule:

The existence of a best efforts obligation should not be lightly inferred since “such an obligation subjects the licensee to significant litigation exposure and deprives him of the fundamental power of determining for himself the reasonableness of his marketing efforts.” Where it is unnecessary to imply such an obligation in order to give effect to the terms of the contract, the obligation will not be implied.

Id. at 101, citing Kardios Sys. Corp. v. Perkin-Elmer Corp., 645 F. Supp. 506, 509 (D. Md.

1986); Willis Bros., Inc. v. Ocean Scallops, Inc., 356 F. Supp. 1151, 1155 (E.D.N.C. 1972)


24

(emphasis added). The court went on to state:

Courts have held that by imposing a substantial minimum or advance royalty payment, the licensor, in lieu of obtaining an express agreement to use best efforts, has protected himself against the possibility that the licensee will do nothing. Rather than leaving the licensor at the mercy of the licensee, the demand for a substantial up front or advance royalty payment creates an incentive for the licensee to exploit the invention or patent.

Permanence, 908 F.2d at 102.

Like the court in Permanence, the courts in Beraha v. Baxter Health Care Corp., 956 F.2d

1436 (7th Cir. 1992) and Emerson Radio Corp. v. Orion Sales, Inc., 253 F.3d 159 (3d Cir. 2001),

also refused to imply duties to use “best efforts” or “reasonable efforts” to generate royalty fees

where the defendant made a substantial up front payment to the plaintiff. The plaintiff in Beraha

was the inventor of a biopsy needle who granted the defendant an exclusive license to

manufacture and sell the needle in exchange for an up front payment of $50,000 and a promise to

pay annual royalties of 3½% of the defendant’s net sales of the needle. Id. at 1438. After years

passed and the defendant still had not fully developed and marketed the needle, the plaintiff sued

the defendant, alleging that the defendant breached an implied best efforts provision. Id. at

1439-40. Similarly, in Emerson, the plaintiff granted the defendant an exclusive license to

utilize and exploit the Emerson trademark in connection with the manufacture, sale, marketing

and distribution of certain Emerson electronic products. Emerson, 253 F.3d at 161. When the

defendant failed to exploit the Emerson trademark, the plaintiff sued, alleging that the defendant

breached an implied obligation to exercise reasonable efforts and due diligence in marketing and

selling Emerson products. Id. at 165-66.

The Seventh Circuit Court of Appeals in Beraha, and the Third Circuit Court of Appeals

in Emerson, refused to impose implied obligations on the part of the defendants to use best or

reasonable efforts to manufacture and sell (Beraha) or to utilize and exploit (Emerson) the

25

products at issue. Both Courts based their decisions on the fact that it was not necessary to

impose the implied duty to use reasonable efforts into the contracts in order to effectuate the

intentions of the parties because of the upfront payments. Both courts also found that the

inclusion of merger and “arms length” clauses in the agreements demonstrated that the alleged

implied duties should not be imposed.

Specifically, in Beraha, the court, relying on Permanence, noted that it would not imply a

duty on the defendant to use best efforts to manufacture and sell the needle where it was not

necessary to do so in order to effect the intentions of the parties. Beraha, 956 F.2d at 1442-43.

Significantly, the court concluded that it was not necessary to imply a duty to use best efforts to

market and sell the needles because the defendant had made an up front payment of $50,000. Id.

at 1442.

Likewise, the court in Emerson, analyzing Permanence and Beraha, noted that “a

substantial advance minimum royalty payment serves to protect the [plaintiff] from the

possibility of the failure of the [defendant] to use reasonable or best efforts.” Emerson, 253 F.3d

at 169. Finding that there was a mutuality of obligation under the agreement and thus no need to

imply a duty to use reasonable efforts into the agreement, the court reasoned:

[the] minimum royalty provision discharges the court of its duty to imply an obligation to use reasonable efforts because it ensures that [the plaintiff] has “some assurance of benefit arising from the agreement independent of the efforts of [the defendant.]”

Id. (emphasis supplied). As the Emerson court noted:

The choice lies between implying a promise to correct an apparent injustice in the contract, as against holding the parties to the bargain which they have made. The latter alternative has especial force where the bargain is the result of elaborate negotiations in which the parties are aided by counsel, and in such circumstances it is easier to assume that a failure to make provision in the agreement resulted not from ignorance of the problem, but from an agreement not to require it.

Emerson, 253 F.3d at 168.


26

In ParaData Computer Networks, Inc. v. Telebit Corp., 830 F. Supp. 1001 (E.D. Mich.

1993), the court found that it could not imply a duty to use best efforts to market and sell

software where it was not absolutely necessary to do so in order to effectuate the intentions of

the parties. In ParaData, the plaintiff sold exclusive rights to a computer software product in

exchange for a one million dollar up front payment by the defendant and the defendant’s

agreement to pay royalties on any sales of the product for four years according to an extensive

formula. Id. at 1002. The plaintiff sued the defendant based on the defendant’s failure to use

efforts to market and sell the software. Id. The agreement did not contain an express duty to use

efforts to market and sell, but the plaintiff argued that the court should imply a duty on the

defendant to use best efforts to market and sell the software. Id. at 1006.

Granting summary judgment to the defendant, the court found that it could not imply a

duty to use best efforts to market and sell the software unless it was absolutely necessary to do

so. Id. The court then noted that the up front payment precluded the court from finding that it

was absolutely necessary to imply a duty to use best efforts to market and sell the software. Id.

The court held:

There is no reason to imply a duty of best efforts in this case as there was in [Wood v. Lucy, Lady-Duff Gordon], where there was no consideration given in advance for the exclusive license. Here, [the defendant] made a substantial upfront payment of royalties that makes it unnecessary to imply such a duty.

Id. (emphasis added). The court also noted the reasoning behind its holding:

The prepaid royalty payments assured [the plaintiff] that it would receive something for its sale of the [software]. It also gave [the defendant] an incentive to effectively market [the software] in order to make up for the cost of acquiring the system that it paid to [the plaintiff] in the first place.

Id.

Other jurisdictions have similarly held that an implied duty to use reasonable efforts in

this context should only apply when there would otherwise be a failure of consideration or

27

mutuality. See, e.g., Triple Point Tech., Inc. v. D.N.L. Risk Mgmt. Inc., No. Civ. A. 99-4888,

2000 WL 1236227 at *3-4 ("Generally, courts will imply an obligation to use ‘best efforts’ to

market products under an exclusive licensing agreement [ ] only if, in the absence of such a duty,

'the contract at issue would lack mutuality of obligation and be inequitable.' ... When, however,

purchasers bargain for consideration apart from scheduled royalty payments, courts will not

imply a 'best efforts' obligation." Where contract included up-front purchase price as well as

royalties, no implied obligation would be imposed); see also Kardios Sys. Corp. v. Perkin-Elmer

Corp., 645 F.Supp. 506, 509-10 (D.Md. 1986) (applying New York law, finding no best effort

obligation because of, inter alia, up-front payments of almost $200,000).

iv. Bad Faith

The decision of an EMC board to disqualify an individual seeking election to the board

was held to be arbitrary and capricious and therefore made in bad faith. Rigby v. Boatright, 330

Ga. App. 181, 767 S.E.2d 783 (2014). The court reasoned that the EmC’s bylaws were to be

construed according to principles of contract law, and that a duty to exercise good faith and

honest judgment . . . arises from the implied duty of good faith and fair dealing imposed upon

virtually every contract under Georgia law.” Id. at 184, 767 S.E.2d at 787.

In Nguyen v. Lumbermens Mutual Casualty Co., 261 Ga. App. 553, 583 S.E.2d 220

(2003), the Court of Appeals looked at the issue of whether an insurance company acted in bad

faith, capriciously or arbitrarily so as to amount to an abuse of its discretion when it settled a

claim against Nguyen for fraudulently obtaining mortgages. Nguyen had a surety bond with

Lumbermans that provided that she would indemnify Lumbermans against any loss it incurred

under the bond. It further stated that Lumbermans had discretion to “adjust, settle, or

compromise any claim” upon such bond unless Nguyen requested litigation and supplied


28

collateral. Id. at 553-54. Although Nguyen denied wrongdoing, she never requested litigation.

She alleged that the surety acted in bad faith by settling claims against her without ensuring that

the mortgage company repurchased any of the loans. “Bad faith is not simply bad judgment or

negligence, but it imports a dishonest purpose or some moral obliquity, and [it] implies

conscious doing of wrong, and means breach of a known duty through some motive of interest or

ill will.” The Court of Appeals affirmed the trial court’s grant of a directed verdict for the surety

because, “insurers that act reasonably [as a matter of law] do not act in bad faith.” Because the

broker neither requested litigation nor paid the collateral, the surety acted reasonably, as a

matter of law, when it investigated the mortgage company’s claim for four months, despite

evidence that the mortgage company had not repaid all the loans. Id. at 555-56.

Despite the similarity in language between the scope of discretion cases and Nguyen,

there are significant differences. First, as the Nguyen definition of bad faith states, bad faith

requires a breach of a known duty; good faith can be violated by failing to act or acting in a way

that compromises the parties’ mutual intent. Second, in Nguyen, the court did not look at the

parties’ intentions for entering into the contract. The lesson in this is that the courts use similar

terminology for implied terms, good faith, and bad faith, and sometime use them

interchangeably, but one cannot assume that a court will always do so.

ATL 22400513v1


2:00 HOW TO WIN YOUR CONTRACT CASE THROUGH CROSS-EXAMINATION Stephen T. LaBriola, Fellows LaBriola LLP, Atlanta


2:45 MEDIATING BUSINESS AND CONTRACT DISPUTES: PROCESS, PERSPECTIVE AND PATIENCE David C. Nutter, Miles Mediation & Arbitration Services LLC, Atlanta


Lessons from the Great War for Mediating Business and Contract

Disputes: Process, Perspective, and Patience

David C. Nutter Miles Mediation and Arbitration Services, LLC

Atlanta, Georgia

1

Lessons from the Great War for Mediating Business and Contract Disputes:

Process, Perspective, and Patience

As a mediator, coming to a conclave of commercial litigators to speak on

mediation can seem at first glance like a pacifist speaking to a gathering of Green

Berets. If you had told me thirty years ago when I began practicing law, that today

I would be a full-time mediator, I would have been insulted and said you were

crazy. But I have now been mediating for fourteen years and know that an effective

mediator is no pacifist. Litigation, like warfare, is just another form of negotiation.

And an effective commercial litigator is a trinity of one-part trial warrior, one-part

counselor at law, and one-part negotiator all under the title attorney at law. The

mediator is part of that continuum.

Foundations

In 1940, the great Oxford Don turned Christian apologist, C.S. Lewis, was

invited to speak to The Pacifist Society in Oxford on the topic, “Why I am not a

Pacifist.” War, again, with Germany had been declared only months before in

September 1939. Lewis, who had been wounded in the front-line trenches in WWI,

was uniquely suited to address the question. He acknowledged that as a Christian

he was called “to turn the other cheek” and resist the desire for retaliation when

personally wronged. However, he noted, that when good man A is attacked by bad


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man B, then good man C has a moral duty to intervene. Anything else is

cowardice. Further, the proverb says, “Like a trampled stream and a polluted well,

so is a righteous man that gives way before the wicked.” In the same way, most

commercial disputes have more at stake than just personal insult. There are a

multitude of people and interests who are affected by the outcome.

An effective mediator, like a good diplomat, understands this. In order to do

the job, the mediator must be the ultimate realist. Some fights must be fought. We

have built courthouses for a reason. The recognition of this reality is the starting

point for any negotiated resolution.

Thus, the first order of business for successful mediations in contract

disputes, or for that matter any other kind of disputes, is preparation to fight to win

if necessary. I’m sure some of you have seen the recent movie, Dunkirk, that tells

the story of the miraculous rescue of the British (and part of the French) army--

338,682 troops--in early June 1940. The 700 civilian “Little Boats of Dunkirk”

were the heroes of the evacuation. But as the new Prime Minister, Winston

Churchill—only three weeks on the job—observed in his speech to the House of

Commons on June 4, 1940: “We must be very careful not to assign to this

deliverance the attributes of a victory. Wars are not won by evacuations.”

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Churchill had been warning the British public for a decade that to avoid

another fight they needed to be supremely prepared to fight one. If Munich (“Peace

in our time”) was the climax of the post-WWI pacifist perfidy, then Dunkirk was

its denouement. While pacifism was certainly an understandable longing following

the carnage of WWI, the British and French had learned the wrong lesson. It was

C.S. Lewis at the Pacifist Society who put it most plainly: “Only liberal societies

tolerate Pacifists. In the liberal society, the number of Pacifists will either be large

enough to cripple the state as a belligerent, or not. If not, you have done nothing. If

it is large enough, then you have handed over the state which does tolerate Pacifists

to its totalitarian neighbor who does not. Pacifism of this kind is taking the straight

road to a world in which there will be no Pacifists.” This is true in the realm of

international relations. It is also true in the stream of commerce, and in my view, is

the first law of litigation and therefore mediation. You must be prepared to fight.

Only then will you have a chance to negotiate a fair resolution.

Most truth, however, is paradoxical, and there is a countervailing reality that

to be too war-minded or litigation-minded invites disaster. The tragic two-volume

saga of WWI and WWII proves the paradox. There is a vital place for turning the

other cheek in international relations and business disputes, while being supremely

prepared to fight. Removing personal animus and retribution as motives are vital to

making sound political and business decisions. Pursuing the things that make for


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peace and establishing communication structures that promote peace have the

promise of great rewards for nations and businesses. This is the heart of mediation.

Perspective and the Politics of Reality

The German political writer, Ludwig von Rochau, popularized the term

realpolitik (the politics of reality) in the mid-1800’s to describe the use of

pragmatism in pursuit of idealistic national and international goals. Rochau was a

disappointed idealist, who in the aftermath of the failed European revolutions of

1848, coined the term to reflect the necessary tension and balance involved in the

pursuit of Enlightenment ideals using pragmatic considerations and political and

military power. The term is most commonly associated with the first German

chancellor of the unified German state, Otto von Bismarck, who in practice turned

the term into “might makes right” to promote the cause of German nationhood.

Bismarck’s realpolitik was pragmatism wrapped in manipulation and deception: a

seed planted in 19th century Germany with tragic fruit in the 20th.

In litigation it is Rochau’s conception, not Bismarck’s, that should govern

our actions. There is a “politics of reality” that is crucial to successful business

mediations. There is a necessary pragmatism of honest self-evaluation and risk

assessment that the mediation process is designed to facilitate.

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We have gathered here to consider the actual process and substance of

mediating business and contract disputes. While mediation has some common

elements for all litigated matters, business and commercial disputes have some

unique features that require the right perspective. There are questions that need to

be asked explicitly, or implicitly, at the commencement of a dispute, at the

initiation of litigation, at mediation, and on the eve of trial. When I was trying

cases, I began thinking about the trial the day the file landed on my desk. I began

assessing weaknesses as well as strengths from the very start. This is a useful

discipline and provides a healthy context in which to ask new clients searching and

perhaps difficult questions. There are certain realities about business litigation that

should not be ignored.

Self-Examination. Why is this dispute happening? The easy answer is that

the other side are jerks. We hope that is what the jury will decide. And while it

might be the case, rarely is that the whole story. It is a healthy discipline at the start

of a case to engage in some serious self-examination. One of the problems I see

with the current age is that we have forgotten the principle that most of my

problems are a result of me, not someone else. The fact is that selfishness and

conflict are endemic to our world. Look at driving. I see cars with Christian fish

symbols on the bumper, World Peace bumper stickers, Coexist bumper stickers—

all of these have cut me off in traffic. And I am not immune. I have cut others off


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in traffic. How are we to coexist and have world peace if I can’t even respect your

rights on the roadway? And you mine? There is something in each of us—that we

all have an alarming tendency to overlook in ourselves—that day in and day out

seems to have the tendency to give rise to conflict—on the roadway, in our

commercial dealings, and in our homes.

If nothing else, it is worth it to ask the question at the outset of a contract

dispute, “Why was I such a poor judge of character regarding the other party?” Or,

“Why was my due diligence so misinformed?” Or, “Why was my communication

so misunderstood?” Or, “What might I have done differently?” Or, “Is there

anything I did that has contributed at all to this problem?” These, and many other

similar questions, are the ones that opposing counsel will endeavor to ask in less

friendly forms. So why not ask them of ourselves at the very start. It is good to ask

these sorts of questions before launching into business litigation. It is crucial to ask

these questions before a trial because the jury will be asking them with potential

serious repercussions during their deliberations. And, therefore, it is important to

grapple with these self-searching questions at mediation. It is best if attorney and

client have already begun to grapple with such considerations before the mediation

so that the mediator can start building on a foundation that counsel has already

established.

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In most business disputes I have mediated, I have at some point asked

questions like these in some form. Timing of course is important, and I do not

usually ask such questions at the outset of the mediation. But they do need to be

asked at some point. Too often business owners and decisionmakers want to ignore

their own role in a dispute. But to accurately assess their risk, they must honestly

assess their role.

To be sure, the questions do need to be asked in a way that can be received.

One good way to broach such an issue is in the context of thinking about how to

try the case. There is no perfect case. Opposing counsel will come up with

something to say at trial. How are we going to deal with their points? How are we

going to make our potential weaknesses part of our story? Most clients are

interested in how best to present their case at trial. In that context, clients can

usually begin to accept and consider their weak points.

Complexity. Many business and contract disputes will be very difficult to

explain to a jury. The technical aspects of a particular business likely will be lost

on the jury. We should assume that the jury will not understand the mores and

business culture in which the dispute arises. This can easily lead to the wrong

conclusion.


8

Many years ago, I mediated a dispute regarding the restoration of a Vietnam

era military aircraft by a local company on behalf of a successful businessman who

had flown this type of aircraft during the war. At my initial meeting with the

plaintiff and his counsel, the plaintiff asked how much I knew about avionics. I

told him that the best answer I could give him was that I had a picture of my wife

eight months pregnant under the kitchen sink fixing the plumbing because she was

much better at that sort of thing than I was. The plaintiff covered his face with his

hands in despair. But then I said, “I’m sure I will be like a second grader when you

explain the details of avionics to me. However, keep in mind that your jury will be

more like two-year-olds when you present your case to them.” He got it. The case

settled.

Populist Age. We live in a populist age. This is not a political statement. It is

a reality that a business litigator needs to acknowledge and that a mediator needs to

express. There is a great risk that the jury will not care about the business dispute,

especially if the dispute is between two large or medium sized companies.

Certainly, this can be overcome, but it is an issue that must be addressed and

should be considered before choosing a jury trial.

I have mediated many partnership breakups. Once two professionals were

mediating with me and both expressed the desire to just go to trial rather than

compromise with their estranged partner. Both earned high six figure annual

9

incomes. I suggested to each separately that we go down the elevator at the King

Building and walk outside and find the first twelve people with the stupidest

expressions we could find and ask them how the case should come out, and

whatever the twelve said would be the settlement. Both, separately, went nuts and

said no way. I then asked why they thought taking their case to a jury was any

different. They reached a reasonable settlement a few hours later.

The Success Syndrome. It is a normal human tendency to think we are

always right and to assume that reasonable people will agree with us. This

tendency is magnified when a person has experienced some degree of success in

life. Because I have been successful, therefore, I am right about everything. And

thus, if I am in a lawsuit, the jury will see it my way. Those who have experienced

success in business and corporate life, like all of us, are prone to this mistake.

The wiser and more realistic course in litigation is to assume the opposite—

that the jury will not perceive your client the way your client perceives themselves.

The reality is that successful people in any arena have a healthy view of

themselves that a jury may not share. This is especially true when the person is far

more successful than the members of the jury.

When I was in the U.S. Attorney’s office in Atlanta, Jack Williams and I

prosecuted an art-kiting fraud case against a Buckhead art dealer. Our victims were


10

among the wealthiest Georgians. The jury did return a guilty verdict (otherwise I

wouldn’t tell you the story), but it took three days. Now certainly Ed Garland and

Don Samuel had a lot to do with the difficulty in getting a conviction. But jurors

also expressed a certain indifference toward mega-wealthy people losing a paltry

few millions. The same principle can be at work in many business disputes.

Beware!

Winning the Right War. Business owners like to win and are used to

winning. This can be one of the biggest impediments to a negotiated settlement.

One of the realities that is essential to a successful mediation is that the war is

business success, not winning the lawsuit. The litigation is not the war. It is not

even the battle. It is a distraction from the real war, the real purpose, which is

business success. In Patton’s drive through France in the summer of 1944, he

circumvented towns where the enemy was entrenched. The objective was

Germany not side engagements with an entrenched enemy. The same principle is at

play in much business litigation.

Mediation is all about minimizing problems and eliminating unnecessary

risk. Wrong focus can ruin a business mediation and turn a small problem into a

big problem. One of my former partners was hired to handle an appeal in which a

business owner had been tagged with a huge verdict at trial in what was in reality a

minor shareholder claim. A sensible settlement had been readily available at the

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front end. But the need to “win” the dispute had blinded the client to the better

business decision.

View Most Disputes as a Cancer to be eliminated as soon as possible. In a

related vein, the reality is that most disputes are a cancer on a business

organization and should be treated as such. The goal should be to remove the

dispute as quickly and cheaply as possible, not to feed it. The time, risk, and

expense can be debilitating, especially to a smaller organization. Obviously, there

are some types of disputes that cannot be settled without inviting a flood of

copycat litigation. But outside of that context, the objective should be to close

down the dispute as quickly as possible.

Timing does matter. Often some discovery will be required. But it is a

mistake for a client to view litigation as a profit center. I often remind business

owners and representatives that it is insurance companies who consistently manage

litigation in a profitable way. I challenge business representatives to think about

their disputes in the same way an insurance adjuster would.

Ongoing business relationship? In business and contract litigation, one of

the distinguishing features is that there may well be an ongoing business

relationship or, at least, the potential for one. This can provide a pathway for

settlement in some cases provided the parties act quickly to correct the areas of


12

conflict. It is usually easier to resolve a case in the context of future work if the

relationship has not been irreparably damaged.

Emotional Baggage? Since contract disputes by their nature arise in the

context of an existing relationship, there often is emotional baggage, personal

animosity, and defensiveness among the players that does not plague certain other

types of mediation, such as personal injury cases. The mediation is more likely to

be successful if the decisionmakers are not also the players in the underlying case.

This may not be possible in some cases. But where possible it is best for the one

negotiating the settlement to be separated from the underlying events giving rise to

the dispute.

Assume You Won’t Recover Attorney’s Fees. In the absence of a clear

contract provision, the safest assumption for settlement purposes is that neither

side will recover attorney’s fees. No doubt nearly everyone here as won a

significant attorney’s fee award at some point. Nevertheless, I believe the wisest

course is to assume you won’t in most cases. Especially in smaller contract cases,

this ought to be a compelling factor and should move the parties to seek an early

resolution. There is a “cost cliff” in smaller contract cases. Once the parties go

over this cliff, it is very difficult to settle the case and very difficult to end up with

a happy client. A pound of flesh is not as gratifying as a positive recovery.

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Size considerations. Is this case a David v. Goliath? Goliath v. another

Goliath? Or mom and pop v. another mom and pop? Sometimes a Goliath ignores

the jury appeal of a David figure such as in the shareholder case I referenced

earlier. Other times, small clients are unrealistic about the overwhelming resources

a large opponent can commit to a dispute. Further, when two very large entities are

pitted against each other, they sometimes forget that the usual power play

employed against smaller opponents will not work against an equal player.

Check and re-check your motives. A wise man once said, “The measure you

give is the measure you will get.” This principle is built into our world as surely as

is gravity. If our approach is always scorched earth and take no prisoners, it will

eventually come back on us. When you have won, it is time to declare victory. Not

recognizing when to declare victory can be a grievous error in business litigation.

You can shape and define victory at mediation. Not so much in the hands of a jury.

Indeed, the shrewdest litigator will sometimes allow their opponent to have the last

word and save face so as to close the deal. Bad motive blinds good business

judgment.

The failure of pure motives among the Allies at the close of WWI led

directly to Adolph Hitler and WWII. The need for vengeance and retribution in the

Treaty of Versailles set up the world financial system for the Great Depression.

The desire to grind the opponent into dust and humiliate them will come back on


14

us. By the close of WWII, the West had learned the lesson. The Marshall Plan,

rather than unrealistic war reparations, was the pathway forward in peace.

The Process of Peace and the Lessons of WWI

In my view, WWI is one of the great tragedies in world history. There was

no reason for that war to have occurred. The Kaiser’s son, the Crown Prince, said

as much in the very midst of the conflict. Very poor peace structures and ill-

considered communication processes turned a local war into a worldwide

conflagration from which, in some ways, the world has never recovered. To

paraphrase one British writer, the energetic optimism of the British Empire died on

the banks of the Somme where on the first day of the battle the British army

suffered 57,470 casualties and their total casualties for that one battle exceeded

400,000. The Germans suffered over 500,000 casualties in the same battle. Over 1

million men wounded or killed in one battle.

Actually, for all his manipulation, Bismarck was brilliant at establishing

stable structures that provided security for the German state and limited the scope

of conflicts. Geographically, Germany lacked sufficient natural barriers between

France and Russia. Bismarck was realistic about this problem. It had been France

which had terrorized Europe until the final exile of Bonaparte. Bismarck had

15

established treaties with Russia, Austria and Italy, which isolated France. He also

acknowledged British dominion of the seas and did nothing to antagonize them.

Unfortunately, the young, prideful, insecure Kaiser Wilhelm II understood

none of this when he came to power in 1888 at the age of 29. He promptly

dismissed Bismarck, allowed the treaty with Russia to lapse, and began

belligerently competing with his cousins in Britain and Russia. The result was that

France seized the opportunity to make a treaty with Russia, and Britain turned

away from her historic opposition to France to establish the Entente Cordiale in

1904. Now it was Germany, with the strongest army in Europe, yet isolated and

insecure. This was a structure doomed to conflict.

And so, Archduke Franz Ferdinand, heir to the Austrian-Hungarian throne

was assassinated by a Bosnian teenager involved in a terrorist organization based

in Serbia on June 28, 1914. Austria blamed Serbia and declared war on July 28,

1914. Russia began to mobilize to defend its ally Serbia. Germany warned Russia

to cease mobilization. Russia ignored the warning. On August 1, 1914, Germany

declared war on Russia. France refused to give Germany assurances of neutrality,

and so Germany declared war on France as well. Germany then attacked France

through neutral Belgium to try to knock out France quickly and avoid a two-front

war. This brought Britain into the war on the side of France and Russia.


16

The end result was 18 million dead and 23 million wounded—41 million

total casualties. WWI also likely led directly to the great flu epidemic of 1918

(estimated 50 to 100 million dead), the Great Depression, and WWII (60 to 80

million killed, 22 million wounded), among other things. The consequences of

poor peace-making processes and bad motive are mind boggling. As the proverb

says, “The beginning of strife is like the letting out of water, so cease from the

dispute before it begins.”

Peace processes, whether the mediation of an international dispute or a

contract case, are all about pursuing pure motives using proper procedures. There

are a lot of lessons for the business litigator in the WWI saga.

Is this a fight worth fighting? One question that the major European powers

needed to take far more seriously before the onset of WWI was: Is this a fight

worth fighting? In hindsight, it clearly was not. It is an important question to ask

before engaging in a commercial dispute. One should assume that the litigation

will be costlier than anticipated. Indeed, in some cases, like WWI, the litigation

takes on a life of its own, and the costs far exceed anything the parties could have

imagined in the beginning. Sometimes the better option is to limp along under a

bad contract until it expires, learn the lessons from what led to the bad contract,

and view its expiration as your victory. Especially in smaller contracts and those

17

involving individuals, this can be the most effective course. I have done this in my

own personal dealings and have helped others to do the same to good effect.

Pride goes before destruction. Historians have rightly noted that the

arrogance and pride of Kaiser Wilhelm was a significant contributing factor to

WWI. But the reality is that all five of the major European powers—Britain,

France, Germany, Austria-Hungary and Russia were full of pride. They all grossly

underestimated the cost of a general conflict. They all overestimated their strength.

They all underestimated their opposition. They all overlooked the danger of losing

even when you win. Britain and France won WWI but they have never recovered

from it.

Pyrrhus, King of Epirus, was a Greek ruler who opposed the growing power

of Rome from 297 through 272 B.C. He won two victories against Rome, but at

tremendous cost. After the second victory, he was reported to exclaim, “Another

such victory and I shall be ruined.” This phenomenon has been known ever since

as a “Pyrrhic victory.” Commercial litigation is a fertile field for such outcomes.

The costs in time and resources and diversion from productive business activity

can be all consuming.


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Poor communication creates conflict. Kaiser Wilhelm and Tsar Nicholas

were third cousins and first cousins by marriage. Scholars have studied closely the

history of their correspondence and particularly the flurry of telegrams that went

back and forth on July 29, 1914 (the day after Austria had declared war on Serbia)

trying to avert a general European war—the so-called “Willy and Nicky

telegrams.” This was the last opportunity to avoid WWI; and they failed, resulting

in the destruction of both of their kingdoms. Nicky suggested that they take the

dispute to The Hague, but he did not stop mobilizing his troops. Actions can

indeed speak louder than words.

Likewise, so much commercial litigation is caused by poor communication.

If both parties had communicated more clearly at the beginning, the dispute could

have been avoided or minimized. One of the primary functions of mediation is to

change the course of the communications to put the parties on a pathway towards

peace.

Positive communication cures conflict. Many years ago at Christmas time,

my wife and I overheard our five kids arguing about the logistics of the upcoming

Christmas morning. The four youngest kids, led by my son, Jim, number 2 in the

pecking order, were arguing with our then only teenager and oldest child, our

daughter, Jane, about what time she was going to get up on Christmas morning.

She was thinking about 8:30 or 9 a.m. This was upsetting the rest of the crew

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because the house rule is that there will be no presents opened until all are awake.

The four youngest were thinking 5 a.m. would be a good time to get up. We

decided to have a mediation with Mom advising the younger 4 while I advised the

oldest. The offers and counteroffers flew back and forth. Who would turn on the

Christmas lights? Who would open the first gift? Who would light the fire? All

sorts of negotiation points. A deal was struck and a written agreement completed.

All would awake at 6:40 a.m. with privileges distributed amongst the kids. The

amazing thing was that a source of true conflict had been turned into a fun family

activity that now is a much-anticipated annual family tradition—the negotiating of

the family Christmas contract.

The negotiation process has within itself the power of peace because it

begins to take adversaries off of the issues of disagreement and change the focus to

moving forward and finding possible solutions.

Pre-mediation communications with the mediator. Effective communication

at mediation actually begins before the mediation session. In commercial disputes,

I strongly recommend that parties submit mediation statements to the mediator. It

helps the mediator to be up to speed on the facts and be armed with points that can

be used at the proper time in the course of the mediation. Also, the mediation

statement is a great opportunity to remind the mediator of key legal points that

should frame the discussion. It is also a chance to alert the mediator of any special


20

considerations or potential pressure points and hot spots during the mediation. If

cost is a factor, a pleading or brief or a phone call can work just as well as a formal

mediation statement. I do not grade on style points. The modern practice of law is

very busy and difficult. As the mediator, I am here to help you, not the other way

around.

Further, even if you submit a mediation statement, a phone call with the

mediator might well be helpful before the mediation session to alert the mediator

of any client issues or other special considerations.

Pre-mediation communications with opposing counsel. In this area, it is

more what not to do. Information and document dumps a few days before

mediation are never helpful. A new and much higher demand a few days before the

mediation is never helpful. On the other hand, if the parties have not had any

settlement negotiations before the mediation, the attorneys ought to at least

consider exchanging a demand and an offer a few weeks before going to the

mediation session. This can help avoid useless mediation sessions and allow the

parties to begin to assess and manage client expectations before their arrival at the

mediation.

Pre-mediation communications with the mediator and opposing counsel. A

very important consideration in commercial disputes is whether to have a

21

substantive joint caucus at the beginning where the parties make formal opening

statements, or to skip the substantive openings and simply shake hands and meet

separately with the mediator, or to skip the joint sessions altogether and have no

personal interaction between the parties. There is no single right answer to this

issue. I have done all of these. Today, the most common approach seems to be to

get the parties together to shake hands and express their good faith and then meet

separately with the mediator.

In any case, this is a topic that should be discussed with the mediator before

the mediation session. Sometimes one party desires a substantive joint caucus and

the other does not. That issue will need to be resolved before the mediation can

begin. I have resolved it before the mediation by telephone conference with the

attorneys. I have also resolved it the morning of the mediation by getting the

attorneys together and working through it.

The conflict on this point usually arises because one attorney sees a need to

inform the other of some issues, but the other attorney is concerned about an

emotional reaction by his client or the opposing client that will be an impediment

to resolution. One work around on this is to get the attorneys together with the

mediator for substantive openings and leave the clients out of that session.


22

Sometimes the parties will exchange written mediation statements with each

other and the mediator in advance of the mediation in lieu of opening statements.

Other times, an attorney feels the need to show the flag for his client and put on a

dog and pony show, and the other side doesn’t want to listen to it and is concerned

it will only make their client mad. Usually, getting the attorneys together to discuss

the matter will result in some sort of satisfactory agreement as to the best

procedure. The point here is that it needs to be discussed in advance with the

mediator.

Communication at the mediation. The proverb says, “A gentle answer turns

away wrath; a harsh word stirs up anger.” Usually conciliatory and neutral tones

are the order of the day at mediation. The very best trial lawyers I know don’t get

angry at mediation. They just go to court and let their actions talk. At mediation,

they are very calm and usually pretty humble. None of us know exactly what will

happen on a particular day in front of a jury. And if you try enough cases, you will

have some surprises and disappointments. Anger and bluster usually don’t

accomplish anything useful at mediation.

Initial meetings with the clients and counsel. My practice is to meet with

each party separately before any joint caucus. I do this even if we have had

extensive communications before the mediation. I want to meet the parties

separately and hear if there have been any further developments. I want to assess

23

the emotional temperature in each room. I want to know how serious at the outset

the parties are about settlement. I want to know if there are any bombs getting

ready to go off!

If the parties have decided to have substantive opening statements, I will

remind the parties that this is a great opportunity to listen to the other side and gain

valuable insight on how their opponent intends to approach the case in front of the

jury. I encourage clients to resist the temptation to get angry and offended, but

instead view it as an opportunity to preview the opposing side’s “playbook.” We

would never get angry before the Super Bowl if the opposing coach offered to

share his playbook with us. Why get angry at opposing counsel’s opening

statement previewing their trial strategy?

Trials are in some ways more like an alley fight than a search for the truth.

And trial lawyers are more like movie makers than dispassionate historians. Do we

get angry at a movie because its fiction? The question is will this story have

evidence to support it at trial and can it move a jury? That is valuable information

to a trial lawyer. Don’t get angry. Listen and learn.

Substantive Joint Caucus. We have already discussed the pros and cons of

conducting a joint opening caucus. If the parties decide to present substantive

opening statements at a joint caucus, I will first attempt to develop consensus on


24

the length of the presentations. The vast majority of the time, opening statements

are productive, reasonably brief, and go off without a hitch. Very rarely, tempers

flare. In such case, I usually interrupt and observe that it doesn’t seem to be

helping us move towards resolution. At that point, we usually break up into

separate rooms.

Private caucuses with mediator. The question here is how much time do

you want your client to spend with the mediator. There are different styles. Some

attorneys keep strict control and limit the contact with their client. Others allow

unlimited communications.

To maximize the mediator’s effectiveness, I prefer that the mediator have

sufficient access to the clients to have a degree of potential influence with them. It

is really in the private caucuses that the mediator can make the most difference. I

like to do a lot of listening as a mediator. It helps me see where a settlement might

be fashioned. The mediator has the advantage of being in both rooms and can

judge the atmosphere in each. Even when we have conducted substantive openings

and I received pre-mediation statements from both parties, it is still very helpful to

allow clients to verbalize to the mediator in private their view of the dispute and

their reaction to the opening statements. It is in these confidential sessions that I

usually learn what I need to know to help settle the case.

25

As the mediator gets to know the client, the mediator can develop a sense of

what really matters to the client and what arguments are most likely to be

persuasive in both rooms. Coming from a neutral position but with the experience

of many mediations, the mediator can be a credible advocate for a settlement that

allows the litigator to play the role of the trial warrior. Indeed, some friendly

tension between mediator and lawyer on some discussion points actually can be

beneficial. The mediator can raise potential questions and weak points while

counsel remains in the role of advocate for the client. This can produce a context

where the attorney can say, “I think we can deal with your point by arguing X, but

you do raise a jury risk that we need to think about.” In this way, the attorney

remains in the posture of advocate for the client, while the mediator is the one

raising the negative points, hopefully in a respectful and friendly manner.

Timing is absolutely crucial in discussing talking points with clients. Until

the parties are starting to close the gap, it is usually not advisable to play your best

cards. But when a settlement begins to look to be possible, then a timely talking

point can be most helpful. If the mediator has had sufficient time with the clients in

each room, he can also steer the conversation and talking points in a direction that

is most likely to lead to settlement and avoid emotional eruptions.

Having said this, it is very normal and expected for the mediator to be

kicked out of the caucus rooms so client and lawyer can talk privately. This is a


26

normal part of every mediation, and I inform the clients of this at the initial private

caucus. The process is for the clients, not the mediator. It actually builds trust for

the mediator to acknowledge and embrace this. To be most successful at

mediation, attorneys and clients need to use a mediator that on some level they

trust.

I am not always right, but I endeavor to always be honest and

straightforward with clients. If there is an argument that is a potential problem, I

will say so when the timing is right. Hopefully, I will say it in a way that a client

can hear it and help them move to a reasonable settlement zone. But it is essential

that the mediator be prepared to deliver difficult news. Many of the realities

discussed earlier in this paper will come out in the natural course of the private

caucuses if the mediator is given sufficient time with the clients.

Further, if attorney and client like and trust the mediator, the mediator can be

an encourager to keep the parties negotiating. Sometimes a settlement looks

impossible based on the numbers but the mediator has reason to believe that a

settlement is actually in reach. I often jokingly say that I believe about 7% of what

I hear at a mediation, and I encourage the parties to stick with it. The numbers

often don’t mean what they seem to say. This office of encourager is really one of

the most important roles the mediator plays. But it works most affectively when

the mediator has spent enough time with the client to develop some degree of trust.

27

Getting to the real issues and acknowledging our adversary’s needs. The

real issues at work in WWI were that Germany, Austria, Russia (and to some

degree Great Britain) all felt insecure about the influence of the others in the

Balkans; and France and Germany had historic animosity and mutual insecurity

regarding their common border. Instead of openly addressing these concerns in a

mutually satisfactory compromise, they were allowed to fester and became a time

bomb ready to explode. No one was willing to do the hard work of acknowledging

the need of their adversaries for assurances of security.

In a similar way, this is often a problem in commercial disputes as well. To

settle the dispute, the needs (not wants) of your adversary must be considered. This

often comes up in so-called “blood out of turnip” cases in which one party is

claiming an inability to pay any settlement or verdict. I have mediated such cases

many times, often in the context of loan workouts. In such a case, the plaintiff will

usually need some evidence and validation of the financial status of the defendant

before they will agree to a lesser settlement. Often the defendant is reluctant to

give too much information. The case will settle if a satisfactory verification process

can be established.

Round I mediations. Some mediations, particularly in the business context,

are not intended by the parties to produce an immediate settlement. Rather, both

parties implicitly view it as an opening round in ongoing discussions. This is fine if


28

both parties share this expectation. Often these mediations occur early in the

litigation process. The parties usually will have substantive opening statements to

educate the opposing side of some of their facts and arguments. The parties will

negotiate to a point and then agree to suspend the mediation with an eye towards

continuing the negotiations, perhaps after some further discovery. This is a natural

part of the process, particularly in larger matters.

Numbers running. In mediations where the parties are truly trying to get to a

settlement, at some point it will boil down to an exchange of numbers. Sometimes

there are other creative avenues that can be pursued such as ongoing and future

business opportunities. But most of the time, settlement negotiations get down to

the dollars.

Initially, the question is where to start? The answer is high if you are the

plaintiff, but not too high, and low if you are the defendant, but not too low. I have

mediated a few business disputes where the opening demand exceeded any

theoretical calculation of damages. This is never helpful. I have also had

defendants start so low that the mediation ended before it even got started.

If both parties are really interested in trying to settle the case, they will be

walking the testing/enticing tight-rope all day long. You want your negotiating

29

numbers to challenge but not chill your opponent. If either party is too generous in

their opening moves, they might mislead their opponent and be unable to recover.

As the parties begin to exchange numbers, the mediator can certainly help

keep the process moving by the messages delivered with the numbers. There will

inevitably be stages where the mediator is just running numbers for awhile. The

reason for this is that for certain information to be usefully exchanged, the number

gap needs to be sufficiently narrow. The only thing to do is to try to move the

numbers closer. I try to acknowledge this openly to the parties. For the case to

settle, both sides need to be feeling some pressure. It is easy to walk away as long

as the parties are far apart. As the gap closes, the walkaway gets riskier.

If the negotiations seem to be stalling, as often happens early in the day, then

there are a number of messages and tools that can be employed to try to break the

jam. Setting a ceiling or floor can work. Persisting in small moves with a

consistent message of range can work. At the right time, a larger move can work.

At the right time, brackets can work. It very much depends on the particular

negotiating dynamic at play in each case. A high-risk, high-reward approach to

breaking logjams later in the day is to allow the decisionmakers to meet alone with

the mediator (or perhaps even alone). Obviously, attorneys and clients all have to

be on board with this. I have seen miracles happen at such meetings. I have also

seen them go down in flames.


30

Sometimes part of the negotiating strategy is for a party to walk out of the

mediation before reaching settlement. This too is a normal practice in business

mediations. I have settled many a case a few days or weeks later by email or over

the phone. Sometimes parties will need to reevaluate and reassess based on what

they have learned at mediation. Sometimes the parties agree to conduct a little

more limited discovery and then reconvene. As long as the gap has been

sufficiently narrowed at mediation, the pathway to settlement should be clear.

Closing the deal. It is not uncommon in business mediations for the

mediator to need to take the final step to close the deal. If the parties have gotten

sufficiently close, then a “silver bullet” or “mediator’s settlement number” usually

can bring the case to closure. I will usually have had a lot of conversation with

each party before I put out a mediator’s settlement proposal and will have a pretty

good idea of the likelihood of settlement. If the parties are too far apart, this

technique probably won’t work. I don’t like to use a mediator’s number unless I

think it has a good chance of settling the case.

Another way to get to the same place is for one party to say, “We will move

to X, but if you offer us Y we can settle the case.” Again, if the numbers are

sufficiently close, this can be a good way to close the deal.

31

Settlement Terms. There are standard terms in all cases. But business

disputes are much more likely to have special terms. It is usually best to start

getting those out on the table relatively early in the negotiation. If there is an

essential term that must be in the deal, that is not a normal, expected term, then it is

good to let the opposing side know before the end of the day. To be sure, a party

might not want to discuss terms too early. But if the negotiations seem to be

moving towards a settlement number, it is wise to start talking terms before the

very end. Payment terms usually will become part of the negotiation exchange

reasonably early in the negotiations. Confidentiality usually comes up late in the

day. But if there is a term that has a chance of being controversial, it is probably

better to bring it up before the parties have reached a final number.

Leaving the gleanings. In the ancient Israelite agricultural system, there was

a principle of “leaving the gleanings.” An owner of a field was to leave the corners

of the field unharvested so that the poor could come in and gather the gleanings. It

was a welfare system that preserved the dignity of work and earning one’s way.

Also imbedded in the idea of leaving the gleanings was the notion that one ought

not try to squeeze all the profit from the endeavor. There was to be some grace in

the gathering of crops.

The same principle applies in effective peacemaking. The question is not

have I squeezed every dime I can get out of my opponent. The question is have I


32

reached a reasonable resolution of the dispute. If so, wrap it up. It is okay if you

left a little for the other party.

The failure to leave any gleanings for Germany in the Versailles Treaty at

the close of WWI contributed to the collapse of the world financial system in 1929

and fostered a spirit of bitterness that Hitler exploited. The British Prime Minister,

David Lloyd George, had famously bragged in his December 1918 re-election

campaign following the November 11th Armistice: “We will squeeze them

[Germany] till the pips squeak.” Big words in 1918. But when the bombs began

falling on London in the summer of 1940, the folly of Versailles was evident to all.

They failed to leave the gleanings, and they reaped the whirlwind.

Patience

Perhaps the most important virtue in peacemaking is patience. A settlement

solution usually does not present itself immediately. Persistence and patience pays

off in peacemaking. On the other hand, impatience and rashness are devastating to

a peacemaking process.

The German Kaiser was notoriously impatient, and it cost him dearly in the

lead up to, and conduct of, WWI. In 1917, Wilhelm all but had the war won.

Russia had collapsed. France and Britain were reeling. But the Kaiser’s rash

decision to return to unrestricted submarine warfare ensured the entrance of the

33

United States into the conflict. The arrival of 2 million fresh doughboys in Europe

in 1918 spelled doom for the Kaiser.

Patience at mediation can be difficult for business owners and decision

makers who are used to quick decisions and a more rapid pace. I advise parties at

the outset that a mediation has its own pace which is often slower than other

business negotiations. It is the patient party that usually gets the prize. Keep

negotiating. Keep moving. Keep listening. Keep proposing. It is amazing how a

settlement can suddenly appear out of the most unpromising soil when the parties

are patient.

William Wilberforce came to the British parliament in 1784 and began

working in 1787 through parliamentary measures to end, first, the slave trade in the

British Empire, and then, slavery itself. Wilberforce was patience and persistence

personified. Facing for years ridicule and persecution, Wilberforce persisted in his

peaceful pursuit of abolition through constitutional structures, negotiation, and

parliamentary measures. His persistence resulted first in the Slave Trade Act of

1807 ending slave trade in the British Empire and then the Slavery Abolition Act

of 1833 ending slavery in most of the British Empire.

In April, 1833 Wilberforce made his final anti-slavery speech. The next

month, the bill was proposed that became the Slavery Abolition Act and where


34

Wilberforce’s contribution was formally acknowledged. On July 26, 1833,

Wilberforce heard of government concessions that would ensure the passage of the

Act, including the payment of £20 million as compensation to plantation owners,

and the formal institution of a system of apprenticeship to provide a transition.

Wilberforce died three days later on July 29, 1833. Forty-six years of patience and

persistence in pursuit of peacemaking had finally paid off.

May he be an example to us all.

Appendix

APPENDIX

ICLE BOARD

Name Position Term Expires

Member 2019

Member 2019

Member 2018

Member 2019

Member 2018

Member 2020

Member 2018

Member 2020

2019

2019

2019

2019

2018

Carol V. Clark

Harold T. Daniel, Jr.

Laverne Lewis Gaskins

Allegra J. Lawrence

C. James McCallar, Jr.

Jennifer Campbell Mock

Patrick T. O'Connor

Kenneth L. Shigley

A. James Elliott

Buddy M. Mears

Dean Daisy Hurst Floyd

Carol Ellis Morgan

Hon. Harold David Melton

Jeffrey Reese Davis

Tangela Sarita King

2018

Appendix1 of 2

Emory University

John Marshall

Mercer University

University of Georgia

Liaison

Staff Liaison

Staff Liaison 2018

Appendix2 of 2

GEORGIA MANDATORY CLE FACT SHEET

Every “active” attorney in Georgia must attend 12 “approved” CLE hours of instruction annually, with one of the CLE hours being in the area of legal ethics and one of the CLE hours being in the area of professionalism. Furthermore, any attorney who appears as sole or lead counsel in the Superior or State Courts of Georgia in any contested civil case or in the trial of a criminal case in 1990 or in any subsequent calendar year, must complete for such year a minimum of three hours of continuing legal education activity in the area of trial practice. These trial practice hours are included in, and not in addition to, the 12 hour requirement. ICLE is an “accredited” provider of “approved” CLE instruction.

Excess creditable CLE hours (i.e., over 12) earned in one CY may be carried over into the next succeeding CY. Excess ethics and professionalism credits may be carried over for two years. Excess trial practice hours may be carried over for one year.

A portion of your ICLE name tag is your ATTENDANCE CONFIRMATION which indicates the program name, date, amount paid, CLE hours (including ethics, professionalism and trial practice, if any) and should be retained for your personal CLE and tax records. DO NOT SEND THIS CARD TO THE COMMISSION!

ICLE will electronically transmit computerized CLE attendance records directly into the Offi cial State Bar Membership computer records for recording on the attendee’s Bar record. Attendees at ICLE programs need do nothing more as their attendance will be recorded in their Bar record.

Should you need CLE credit in a state other than Georgia, please inquire as to the procedure at the registration desk. ICLE does not guarantee credit in any state other than Georgia.

If you have any questions concerning attendance credit at ICLE seminars, please call: 678-529-6688

I.C.L.E. 248 Prince Avenue, Athens, Georgia www.iclega.org

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