Victory!, Part II.

Background

My client, A Company ("A Co."), "provides physical and occupational therapy to patients. During the course of treatment, therapists can recommend to patients that they obtain durable medical equipment, such as wheelchairs, walkers, canes, crutches, braces, and hospital beds. For insurance purposes, often patients will first obtain a prescription from their physician before ordering the needed durable medical equipment from a vendor.

"In August 2002, [A Co.'s] vice president, C, entered into a written “Exclusive Referral” agreement with P, president of S Inc., promising 'to refer all durable medical equipment prescriptions' to S Inc. (hereafter, the A Co.-S Inc. Agreement). A Co. did not receive a fee for this exclusive arrangement. C testified it would have been illegal to have received a kickback from any medical equipment referrals.

"Within two years, S Inc. hired a broker to find a buyer for the exclusive referral arrangement. In February 2004, M Corp., a pharmacy and home medical equipment company, expressed an interest in making a deal. After meetings and telephone calls with the broker, C and P, regarding the quantity and types of referrals, M Corp. agreed to purchase the exclusive referral arrangement...

"M Corp. executed two agreements on the same day. The first was with C, on behalf of A Co., and the second was with P, on behalf of S Inc. Both contracts contained provisions expressly integrating the prior A Co.-S Inc. agreement’s terms, stating the documents constituted 'the complete and exclusive statement of the [a]greement between the [p]arties[.]'

"M Corp.’s agreement with A Co. (hereafter, referred to as the Exclusive Referral Agreement) stated A Co. agreed 'to refer all durable medical equipment prescriptions to M Corp. for a term of five years. In the document, A Co. was called either the 'physical therapy/referral company' or 'Seller.' M Corp. was either the 'Buyer' or 'exclusive referral recipient.' There was no provision stating A Co. would be paid a fee in exchange for the exclusive referral rights. Moreover, M Corp. did not promise to actually fill the prescriptions referred.

***

"The parties agreed the agreement could be terminated for good cause by giving three weeks written notice.

"The second agreement stated M Corp. (buyer) had agreed to pay S Inc. (seller) 'for the sixty (60) month Avalon . . . Exclusive Referral Agreement from S Inc. ...' This contract (hereafter, referred to as the Purchase Agreement) provided, 'Seller represents that . . . S Inc. is not an affiliate, subsidiary or under contract with A Co. excepting the [A Co.-S Inc.] agreement.' ... The payee on checks written for the purchase was S Inc.

"Thereafter, A Co. failed to refer any medical equipment prescriptions to M Inc., prompting it to file a lawsuit against [A Co., C, S Inc., and P]. It alleged two claims for breach of contract as well as a fraud cause of action. The first cause of action alleged that in February 2004, A Co. executed and breached its Exclusive Referral Agreement by referring prescriptions to other businesses.

"The second claim for breach of contract alleged that in February 2004, S Inc. breached the Purchase Agreement by failing to facilitate the transfer of referrals from A Co., and instead A Co. referred those prescriptions to other businesses. It was alleged S Inc. 'promised to deliver and facilitate to plaintiff the exclusive referrals of all durable medical equipment prescriptions from A Co. pursuant to an A Co.-S Inc. agreement' executed on August 20, 2002.

After trial, the fact-finder rejected all claims for fraud against my clients A Co. and C, but found them liable for $75,000.

Briefs

Here are salient parts of my briefing to the appellate court:

"Although S Inc. did not sue Appellants A Co. and C for breach of the 2002 Exclusive Referral Agreement [ ], had S Inc. sought to enforce this agreement, it would have been unsuccessful due to lack of consideration. [footnote omitted].

"The reason is S Inc. was bound to do nothing. At best, the 'agreement' was merely a one-way proposition. A Co. 'agree[d] to refer all durable medical equipment prescriptions to S Inc.' ... However, S Inc. did not even agree to fill such prescriptions, provide any compensation to A Co., [fn: A Co. believes that any such payment would have been a violation of federal law] or do anything of substance.

"Upon closer examination, A Co. was likewise bound to refer no level of durable medical equipment prescriptions. In other words, it could have fully complied with the terms of the 'agreement' even if it referred exactly zero prescriptions to S Inc. ...

A. No Valid Consideration Existed for the 2004 Exclusive Referral Agreement

"Notably, the two 'referral agreements' paralleled each other in the operative language. The 2004 referral agreement likewise stated: “A Co. agrees to refer all durable medical equipment prescriptions to M Corp….”

"Significantly, nothing in the Agreement bound M Corp. to do anything in return. Both parties could have fully complied with its terms by doing nothing. M Corp. promised nothing to A Co., such as filling any such referrals or paying any compensation, and Avalon promised no set amount of referrals to M Corp.... M Corp.'s President conceded he had no evidence of any referrals going to any competitors of M Corp. (citation omitted.)

"Further, regardless of whether there was consideration, the trial court found that M Corp. failed to show any lost profits for any failure to refer prescriptions to it. (citation omitted.) In so doing, the court found that the purported lost profits were speculative. (citation omitted.) This is another way of saying that it was pure conjecture that M Corp. would fill any such prescriptions, for the same reason, that it was pure conjecture that there would be any referrals of prescriptions by A Co. to M Corp.

"Finally, since Appellant C was not a party or signatory to the 2004 agreement (or any written agreement in this case), it necessarily follows that there was no consideration flowing to him from any such agreement."

B. Neither Referral Agreement Can Be Enforced Without Consideration

"Since there was no consideration for either agreement, Appellants submit neither can be enforced. Appellants are unaware of any legal theory under which they could be enforced, even if M Corp. were to seek to enforce them. As noted above..., M Corp. sued neither Appellant under the 2002 Referral Agreement (which was between S Inc. and Appellants only), and M Corp. sued only A Co. under the 2004 Referral Agreement. However, it was not the 2004 Agreement under which the trial awarded any damages, but the separate purchase agreement (citation omitted), on which neither Appellant was sued."

I closed one of my briefs by quoting part of my closing argument at the trial: "Not one dime has gone to C [or A Co.]. C [and A Co.] [are] victims in this affair. [They've] not receiv[ed] anything, except this lawsuit." See if the Court of Appeal picked up this theme later.

Bottom-Line

Here's what the appellate court ruled, in pertinent part:

"A Co.'s subsequent exclusive referral agreement with M Corp. was illusory and nonenforceable. Under the terms of the agreement, A Co. was not to receive any consideration for its promise to refer its patients’ durable medical equipment prescriptions. ...

"Moreover, under the terms of both Exclusive Referral Agreements, neither M Corp. nor S Inc. was legally obligated to fill any specific quantity of prescriptions referred by A Co. Absent from the agreements is any language indicating best efforts or good faith would be used with regard to filling the prescriptions. Indeed, nothing in the agreement bound Medical Nutritionals to do anything in return for the referrals. Likely, this is because the parties understood filling a patient’s prescription benefited the patient, not his or her physical therapist from A Co. A Co.'s clients certainly were under no obligation to seek A Co.’s assistance in obtaining medical equipment prescribed by their treating physicians.

"It is well settled sufficient consideration is an essential element of any contract. (Civ. Code, § 1550.) As stated long ago in Scott v. Cline Electric Mfg. Co. (1930) 104 Cal.App. 122, 125-126, 'A promise is a good consideration for a promise, provided always that it imposes some legal liability on the person making it. If it imposes none, then it cannot be a good consideration. A promise may be too vague and uncertain to amount to a consideration for a promise made by the other party.’ [Citation.] [¶] ‘A purported contract between a cement manufacturer and a cement dealer, whereby the dealer, in consideration that he would give the manufacturer’s brand the preference in his sales and 'push' the same, was to have a lower rate per barrel than other dealers, was void for lack of mutuality, since the dealer did not bind himself to make any sales of cement.’ [Citation.]' Similarly, here, the Exclusive Referral Agreement with A Co. was unenforceable because neither party was bound to perform.

***

"Alternatively, M Corp. argues the Exclusive Referral Agreement is enforceable because it is tied to the $75,000 Purchase Agreement. It fails to appreciate that if the two agreements are treated as one, the $75,000 will serve as consideration and render the entire scheme illegal under anti-kickback laws.

"We recognize an innocent buyer of property under an illegal contract of sale can recover the consideration paid to the seller. However, in this case, it was undisputed only S Inc. received the sale proceeds. No evidence was produced that proved A Co. received a single dime. [fn. omitted.] Recovery against S Inc. (and its principal) is not feasible because they were dismissed for a waiver of costs at the beginning of trial. We find no legal basis to hold A Co. must return funds it never received.

[ ] It cannot be assumed that just because A Co. may have helped S Inc. with its efforts to broker the deal, A Co. necessarily received some of the sale proceeds. The court rejected the conspiracy and fraud claims, and C testified neither he nor A Co. received anything from the transaction."

Good day at the office.

Victory!

It's just that this victory came about 1 year and 9 months after the trial.

After putting together a string of trial victories spanning a few years, the streak was snapped in November, 2005, when my clients suffered an arguable loss.

Even though I was able to persuade the fact-finder to reject the plaintiff's claim of over half-a-million dollars, the award against my clients of a modest $75,000 still seemed like a loss.

Analyzing the award, I determined it only could have resulted from legal error. Consequently, my clients agreed to have the appellate court take a look at the case. To the clients' credit, they maintained complete confidence in my abilities.

Today, I was vindicated. After last Thursday's oral argument, the court of appeal reversed the judgment in its entirety--unanimously (3-0). The court called the plaintiff's case "a house of cards," collapsing under its own weight. Nice analogy. Feels good to be a lawyer.

Book Review: Rough Justice: Days and Nights of a Young D.A.

In Rough Justice: Days and Nights of a Young D.A., David Heilbroner chronicled his three-year stay at the Manhattan's DA in the mid-1980s.

Coming from the comfy confines of Harvard and then Northeastern's law school, Heilbroner realized early in his career that law has an underbelly.

Instead of engaging in ivory-tower, pristine discussions of jurisdiction and preemption, Heilbroner was thrust into a world of shared cubicles, bolted-down furniture, corkboard decorations and other insults to one's senses. His practical education didn't just assault his senses but also his sensibilities.

Heilbroner learned that witnesses can lie, judges can manipulate, and rules can be mangled for expedience. Heilbroner often wanted to dismiss charges, decline to prosecute, or diminish punishment to "time served." Heilbroner summarized his exasperation: "And in every direction innumerable aspects of the justice system cried out for reform: police misconduct, defense attorneys' delays, meaningless paperwork, the rubber-stamp grand jury, rigid strictures on sentences, incarceration of psychiatric patients, insufficient numbers of judges and courtrooms, to name just a few of the more egregious problems." (p. 284.)

Heilbroner seemed ill-suited to prosecution, and much of this story seemed to be a "fish-out-of-water" variant. To his credit, Heilbroner fulfilled his informal three-year commitment to the D.A.'s office, despite an ostensible desire to bail out at the outset.

On the other hand, I suspect Heilbroner became a D.A. as an avenue to write this book. At his first opportunity, he "upgraded" from prosecuting subway "farebeats" to working in the department dealing with the insanity defense. This assignment provided book fodder, detailing some of the more colorful folks in the government's care. But these exercises amounted mostly to psychiatric testimony about whether the patient/prisoner should be released. Almost invariably, they weren't. Sometimes the D.A.'s office wouldn't even ask any questions, leaving the work to the hospital's attorney. Hardly the glamorous stuff of television courtroom dramas.

It seems that Heilbroner was really toiling to fill enough pages for a book, as opposed to one of those nearly endless essays in the Atlantic Monthly. Surprisingly, Heilbroner would begin a story or subplot only to abandon it without resolution. In one instance, he set the bait about a credit card scam ostensibly engineered by a civil attorney only to finish it with mere conjecture. Why and how did this unfinished story survive the editing process?

Nevertheless, Heilbroner is a gifted writer. In fact, the book indicates that he left the law to become a writer. Since several years have passed following Rough Justice's publication, I investigated whether he fulfilled his dream. He did publish another book shortly thereafter, but more recently has entered the film industry. According to Amazon.com, he and his wife Kate directed a 2006 DVD entitled, Pucker Up, a study of whistling. I can't make this stuff up.

Book Review: The Secret.

How much of a secret can a book known by millions be?

On top of being widely-published, The Secret also enjoyed dissemination as a film and a topic on Oprah Winfrey's television show: (http://www.oprah.com/tows/pastshows/200702/tows_past_20070208.jhtml)

Not so secretive.

It's not difficult to find the secret in the book either. It's printed on page 25. Thereafter, the book amounts to endless fugues playing off this same theme. So even if you missed it the first hundred times, there's still hope the ubiquitous secret will announce itself yet again.

Here's the not-so-secretive secret of The Secret. It's repackaged power-of-positive thinking. Or repackaged gnosticism. Or repackaged name-it-and-claim-it. In any event, it's nothing new and it's packaged.

Because one cannot deny the power of optimism, a surface appeal exists. This universal truth probably reduces resistance in many. Author Rhonda Byrne even posits that The Secret can be employed by church groups, i.e. it's fully compatible with Christianity. Byrne enthuses: "The Secret has inspired...churches of all denominations...." (p. xi.) But something far more sinister lurks beneath its surface.

It must be quoted because the book indicts itself: "You are God in a physical body." (p. 164.) No camera or editing tricks employed here. That's precisely what it says--unapologetically. Church groups are inspired by this? Inspired to do what?, I must query. Proselytize more diligently?

Can anyone identify a single mainstream (or even riverbank) Christian denomination that would endorse such a view? If so, please specify it and provide support for the contention in the comments.

The Secret reveals some interesting "secrets" about Jesus as well. "If you have been brought up to believe that being wealthy is not spiritual, then I highly recommend you read The Millionaires of the Bible Series by Catherine Ponder. In these glorious books you will discover that Abraham, Isaac, Jacob, Joseph, Moses, and Jesus were not only prosperity teachers, but also millionaires themselves, with more affluent lifestyles than many present-day millionaires could conceive of." (p. 109; emphasis supplied.)

Support? Chapter and verse from a canonical gospel or even an extra-biblical historical citation please.

With these (and other) gross overstatements, the book's credibility deflates faster than a newly punctured Hummer tire.

Preview of Coming Attractions.

Posting has been nonexistent due to foreign travel, but this peripatetic lifestyle has allowed me to complete several books, including:

A Letter to a Christian Nation by Sam Harris;
g-d is Not Great by Christopher Hitchens;
Simply Christian by N.T. Wright;
The Secret by Rhonda Byrne; and
The 4-Hour Workweek by Timothy Ferriss.

If you're interested in any or all of these controversial, best-selling works, tune-in for upcoming reviews.

Pot Meet Kettle.

I just received a solicitation to donate money to a conservative think-tank.

Like similar pleas for cash, this letter was loaded with buzzwords about political boogeymen (boogeypersons?).

I decided to count the number of times the correspondence managed to inject variations of liberal, left, radical fringe or combinations thereof (e.g., "radical left").

In the 5-and-1/2-page letter, the author (a former presidential candidate) achieved no fewer than 35 instances of such name-calling.

My favorite passage was the following three-fer:

"Why should we care what the crazy left does? Because the ideas percolating through Congress's left were first brought up in the organizations, publications, and websites of the radical left." (emphases supplied.)

In addition to being a non-sequitur, this short excerpt succeeded in displaying these terms three times--in case one might forget whom the writer is talking about.

But it gets better.

The author actually complained about the crazy, radical left's name-calling in the same letter.

Enjoy the hypocrisy: "You'll hear ... a great deal of name-calling directed at those who disagree with the left."

Does anyone feel the need to part with money as a result of this kind of rhetoric?