LEGAL
A recent New York Court of Appeals decision holding that a plaintiff's lost profits were general damages and not subject to the parties' damages limitation provision indicates that contracting parties should not rely on limitation of liability provisions for protection against claims for lost profits.
In Biotronik A.G. v. Conor Medsystems Ireland, Ltd., Biotronik sued Conor for breaching a distribution and resale agreement and sought lost profits as damages. Conor argued that lost profits are a form of consequential damages, which were precluded by the agreement's damages limitation provision.
The damages limitation provision restricted the parties to general damages. However, it did not explicitly:
After rejecting a bright-line rule that lost resale profits could never be general damages, the court evaluated whether, in the context of the agreement, the lost profits were either:
The court ultimately found that Biotronik's lost profits were general damages because:
While the distinction between general and consequential damages is well defined, its application to lost profits can be difficult, especially when limitation of liability provisions do not specifically address lost profits. Therefore, counsel should carefully draft limitation of liability provisions to explicitly preclude claims for lost profits.
For more information on the types of damages related to contract breaches, see Damages for Breach of Commercial Contracts Checklist.
For a model limitation of liability provision to be used in a sale of goods or services transaction, see Standard Clause, General Contract Clauses: Limitation of Liability.
A recent Sixth Circuit decision modernizes the concept of attendance and suggests that courts are more likely to find telecommuting to be a reasonable accommodation under the Americans with Disabilities Act (ADA).
In EEOC v. Ford Motor Co., the Sixth Circuit held that an employee's physical presence at work might not be an essential function of her job and reversed summary judgment for the employer on the Equal Employment Opportunity Commission's (EEOC's) claims that the employer failed under the ADA to reasonably accommodate the employee's request to telecommute. The Sixth Circuit found that:
In light of this decision, employers should:
For more information on employer accommodation obligations, see Practice Note, Disability Accommodation under the ADA.
Public companies should take note of a recent Delaware Court of Chancery decision that addresses the application of traditional takeover defenses against activist shareholders.
In Third Point LLC v. Ruprecht, the Delaware Court of Chancery rejected a motion for a preliminary injunction of Sotheby's annual meeting, holding that activist hedge fund Third Point was unlikely to prove that the board of Sotheby's had breached its fiduciary duties by adopting and refusing to waive its shareholder rights plan. Third Point had argued that the Sotheby's rights plan was discriminatory against activist shareholders and disproportionate under the circumstances. In Third Point's view, the poison pill was an inappropriate response because it only wanted to elect its preferred candidates and introduce new views into the boardroom, not acquire the entire company.
While expressing certain reservations, the court essentially declined to treat the issue as an entirely new and unprecedented situation, instead following existing precedent on poison pills. In doing so, the court ruled that:
For more information on the various takeover defenses available to public companies, see Practice Note, Defending Against Hostile Takeovers .
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