Monday, October 5, 2009



WASHINGTON, D.C.--Reason, Commerce, Justice & Free Beer has just learned that the United States Supreme Court has ruled that "a contract is a contract" in the much-followed case Gaffaello Mutual Equity Partners LLP v. Marquez, No. 08-9851. Scholars and lawyers alike have reacted with surprise to the Court's decision. "We expected a narrower ruling," said Mr. Thomas J. Knickerbocker, Esq., partner at New York's Knickerbocker, Chance & Willoughby LLC, a prominent Wall Street law firm. "We thought the Court would be more straightforward. But it simply said 'a contract is a contract.' This is a complicated idea. It is hard for both lawyers and the public to understand."

Today's ruling has broad implications for the business community. It also represents a milestone in legal reasoning and rhetoric. The case arises from a dispute between a janitor, Mr. Rodolfo G. Marquez, of Grand Concourse, The Bronx, and Gaffaello Mutual Equity Partners, a large Wall Street investment house handling more than $45,000,000,000 in assets.

According to filings and the Court's decision, Mr. Marquez orally agreed to "use best efforts" to "satisfactorily" clean every toilet located at Gaffello's office building in downtown Manhattan. In return, an unnamed agent acting for the investment house promised to pay Mr. Marquez $40 per day "until told otherwise" and "subject to all reasonable alterations by promisor." The agent allegedly also told Mr. Marquez that he had "to supply his own materials" and he had to "wipe all shit and piss from all affected toilet facilities to the satisfaction of any Gaffaello director to the extent permitted by applicable law." Mr. Marquez allegedly acquiesced to Gaffaello's terms. He further acquiesced to Gaffaello's demand that he "waive all remedies, at law or equity, or at common justice, for any alleged breach of aforesaid agreement, be it oral or in writing."

Mr. Marquez immediately went to work. Both employees and officers found Mr. Marquez' work excellent. According to one Vice President in the Appropriations Department: "I've never seen a cleaner shitter. That muchacho sure knows what the fuck he's doing." Around the same time, an authorized Gaffaello budget deputy presented a written contract to Mr. Marquez. The written contract included all the terms to which he orally agreed, as well as a clause that imposed a duty on Mr. Marquez to "act in good faith in the performance hereof; but such duty shall not extend to promisor, Gaffaello Mutual Equity Partners LLP; and it is further agreed, covenanted and promised that promisee , Mr. Rodolfo G. Marquez, shall have no right of action, cause of action or any other legal, equitable, natural or other remedy, either now or hereafter, today or tomorrow--or forever--for promisor's wanton or negligent failure, refusal, or decision not to use good faith in the execution, performance, observation or fulfillment of the mutual covenants set forth in this, the Master Contract for the Performance of Toilet Cleaning Services, notwithstanding all oral assertions to the contrary hereof, so help him God."

Mr. Marquez signed the contract, even though he did not read English. According to a Gaffaello witness, he said: "I understand it."

For two months, Mr. Marquez dutifully upheld his end of the bargain. He cleaned 4000 toilets, scrubbed 50,000 square feet of tile bathroom flooring every night and purified 4000 toilet stalls. In the process, he overcame horrific sights and odors. He worked at least 12 hours each day. He received $31.02 for his first day's work less taxes, fees and Social Security contributions. Although he was not eligible for Gaffaello's health coverage plan, he nevertheless paid toward it because he could not understand his paycheck statement. Over the next week, Gaffaello began paying Mr. Marquez a dollar less each day. Beginning the second week, it began subtracting two dollars per day from his daily check. After reducing his daily wage to $3.29, Gaffaello stopped paying Mr. Marquez at all. Instead, it sent a junior supply clerk to inform him that "he would be paid later."

Trusting that Gaffaello would honor the contract they signed, Mr. Marquez continued working. Eventually, however, Mr. Marquez gave up. He allegedly told a Gaffaello employee that he "could not continue working without pay" and that he "had a family to feed." In response, the employee said: "You can't leave. You promised to use best efforts and to act in good faith under this contract until told otherwise." Mr. Marquez said "they could sue him." With that, he walked off the job.

Gaffaello did sue him. Within two days, it served papers on Mr. Marquez and haled him into the United States District Court for the Southern District of New York for breach of contract. Although the trial judge wondered why the dispute fell under Federal jurisdiction, Gaffaello's legal team presented evidence to show that Gaffaello was a Delaware limited liability partnership, while Mr. Marquez was a New York resident. It also showed that the contract between Gaffaello and Mr. Marquez "represented a lucrative business relationship implicating more than $75,000 in janitorial services." These facts, according to established Federal law, warranted Federal court jurisdiction. Mr. Marquez, who could barely speak English, let alone understand an argument involving Federal diversity jurisdiction, said nothing in response.

Gaffaello demanded a fast track trial. The trial judge--A. Harry Peters--had no sympathy for a recent immigrant like Mr. Marquez because President George H.W. Bush appointed him to the bench. He quickly surveyed the evidence and found that Mr. Marquez breached the contract. In a detailed opinion, the trial judge wrote: "Mr. Marquez knowingly and voluntarily assumed the obligations set forth in the contract he signed with Gaffaello. It is not for courts to pass upon the providence or fairness of written agreements between mature business actors. Rather, we must merely apply relevant law to resolve any allegation that one party breached the terms upon which they mutually agreed. Under law, we assume all terms to be valid and voluntary. In this case, Mr. Marquez has no answer to contradict the assertion that he walked off a job he contractually agreed to perform. He says he left because Gaffaello did not pay him, but that is not technically true. Gaffaello said it would 'pay him later.' This does not mean it 'did not pay' him. Gaffaello never breached the contract. Only Mr. Marquez did. Furthermore, Mr. Marquez promised to use best efforts and to comply with the contract in good faith. By walking off the job without notice or cause, he violated both obligations. In sum, Mr. Marquez breached the contract. I order him to return to work immediately, or to pay Gaffaello the reasonable value of his lost services, in an amount not less than $75,000.01."

Mr. Marquez appealed the trial court's ruling to the United States Court of Appeals for the Second Circuit. His case attracted notice from the Puerto Rican Legal Defense Fund, and their lawyers hastened to his cause. They argued that the contract was invalid because it was "unconscionable" and because no contract may bind a man to work in the United States. The three-judge panel--including two Clinton appointees--agreed. They said: "We find the contract by and between Gaffaello Mutual Equity Partners LLP and Mr. Rodolfo G. Marquez unconscionable as a matter of law. We find every argument to the contrary unconvincing. No matter what anyone says about our country or its free enterprise spirit, we refuse to entertain appellees' contention that the United States Constitution guarantees the 'unlimited freedom to bargain for employment terms.' This agreement verifiably 'shocks the conscience.' We cannot permit the contract to stand, no matter how 'voluntary' it may have been at signing. Appellees' conduct in this case borders on the sadistic. Judgment reversed."

Judge Ferguson H. Klosterbach, George W. Bush's lone appointee on the appellate panel, dissented. He wrote: "I think the trial judge was right. A contract is a contract. Mr. Marquez breached it. He is also an immigrant."

Dissatisfied with the Second Circuit's reasoning, Gaffaello applied to the United States Supreme Court for certiorari. In its brief, Gaffaello phrased the case as follows: "This is a case about the freedom to contract. It is not about fairness. It is about a willful contract breacher who did not do what he promised to do." In response, Mr. Marquez' lawyers said: "This is not a case about the freedom to contract. This is a case about unfairness and injustice. This is a case about a powerful company forcing one-sided terms upon a powerless immigrant. If this Court has a shred of decency and compassion, it will affirm the judgment of the United States Court of Appeals for the Second Circuit."

Chief Justice John G. Roberts, Jr. delivered the Court's opinion to a packed house. In a calm, steady voice, he began: "Our free market economy values fairness. But it values contracts more. In our view, contracts are contracts. Promises are promises. When commercial actors make promises, we do not excuse them lightly for failing to adhere to their commitments. This case involves promises and contracts. No matter how 'unfair' or 'unjust' those promises may seem in hindsight, we refuse to second-guess reasonable commercial actors who voluntarily make commitments. Contrary to Respondents' contention, this Court has no power to rule on 'elementary justice.' This Court applies the law. And the law in this case has a simple answer: Contracts are contracts.

"Our common law values contracts. Commerce prospers when commercial men feel assured that others will fulfill their commitments. That is why courts in our system rarely allow litigants to escape voluntary contractual obligations. True, contractual obligations only arise to the extent that parties make them freely. But there is no evidence in this case that Mr. Marquez faced 'coercion' to bargain with Gaffaello. He agreed to act in good faith, to waive his remedies and to use 'best efforts' while cleaning every toilet at Gaffaello's downtown facility 'until told otherwise.' At the same time, Gaffaello freely and voluntarily agreed to pay Mr. Marquez $40 per day 'subject to all reasonable alterations.' Mr. Marquez says that Gaffaello did not pay him. But the record clearly shows that it did. The fact that Gaffaello slowly decreased Mr. Marquez' daily wage did not change the contract. In fact, Gaffaello had every right to make 'reasonable alterations' to Mr. Marquez' pay. Mr. Marquez acquiesced to this term when he signed the contract. And--unlike Mr. Marquez--Gaffaello had no obligation to perform the contract in good faith. If Gaffaello somehow acted in bad faith, that was a risk Mr. Marquez knowingly and voluntarily assumed when he signed the contract. It is not for us to question these private contractual relations.

"We hold as a matter of constitutional law that contracts are contracts. Neither the Judiciary nor the Legislature has power to retroactively invalidate private contractual terms concerning legal subject matter. We are neither philosophers nor moralists. We are legal technicians. We do not interfere with private bargains, nor do we save private individuals from their improvident business decisions. No matter how 'shocking' the terms may have been in Mr. Marquez' case, we are not fairness referees. We simply look to the contract and the circumstances to determine whether both parties freely and voluntarily assumed their duties. If we determine that they did, our inquiry ends. If we scrutinized every private bargain for terms we considered 'unfair' or 'oppressive,' we would undermine the spirit of private enterprise that drives our free market system. We are not paternalistic. We trust the market. We do not second-guess it.

"This is not new law. Our courts have held that 'contracts are contracts' for centuries. Even our English forebears so held. In the case Coxwell v. Bainbridge (King's Bench 1612), Lord Chief Justice Coke stated the basic principle that we continue to follow today: "Hath the yeoman signed the Pact of Free Wille as aforesaid? Say he the Parchmente be void for offending that Certaine Spiritte or Ghoste of Justice that doth dwell at the Hearte of all the dealings of Menne? What of it? This Courte judgeth not for Justice nor Rightte, but for Lawe. Promise a Manne he shall builde a Bridge o'er the Thames for a threepence in Two Days' Tyme, so he must, so long he have said so of Free Minde. I be of mind that pacta sunt servanda. It be of no Moment what the bound Manne saith. The Lawe doth presume a Manne do a Thinge with Free Minde. Comes now no Evidence or Witnesse thereagainst, it being a Cleare Thinge, et.c., what be left for a Court to say? Let Menne bargainne as they please. What they say be no Matter for the Lawe, but that the Lawe allow it.'

"We could not agree more. We find that Mr. Marquez knowingly and voluntarily assumed the obligations set forth in his contract with Gaffaello. We express no judgment on the 'fairness' or 'equity' of that contract. We refuse to entertain the Respondents' invitation to sit as a permanent referee for contractual fairness. Such a role would contravene our duty to apply the law and to defend private autonomy in a free market system. Judgment REVERSED. This case is REMANDED to the United States Court of Appeals for the Second Circuit with an order to issue judgment against Respondent consistent with this opinion.

"It is so ordered."

Justices Scalia, Kennedy, Thomas and Alito joined the Chief Justice's opinion. Justice John Paul Stevens wrote a dissent. In it, he blamed the majority for "enshrining unfairness" and "exulting the powerful over the powerless." He concluded as follows: "The Constitution imposes limits upon the freedom to contract when contract terms offend our most basic sense of justice."

In a separate concurrence, Justice Scalia responded to Justice Stevens' dissent: "Justice Stevens once again proves his unrivaled ability to put his head up his dumb wrinkled ass. L0s3r, pwned!!!!"

Reason, Commerce, Justice & Free Beer is pleased to see that both collegiality and prudence are alive and well at the Supreme Court as it begins its new session.

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