Teaching Assistants: George Cohen on Cardozo’s Sun Printing Opinion

It is always enticing when a scholar I admire writes about a case, like Sun Printing v. Remington Paper, which I teach and find compelling. In this case, the subject is a Judge Cardozo opinion, so I demand reverence. Professor Cohen (left) gets off to a great start with a beautiful epigraph from the man himself. Alas, Professor Cohen has come not to praise Sun Printing, but to bury it.

I have challenged an entire generation of students now to explain to me how you calculate damages if Judge Cardozo is right that the contract lacks both a price term and a duration term. The dissent would complete the contract, but it does so by adding terms to which the parties did not agree “We are not at liberty,” Judge Cardozo scolds, “to revise while professing to construe.” A one-month renewal period would be perfectly reasonable, but it also would have been easy to specify. The parties did not do so.

Judge Cardozo here plays the role of dogged textualist, while Judge Crane’s dissent relies on common-sense contextualism. Surely, these sophisticated parties intended to be bound. There are numerous ways to determine the duration term, and any such determination is far preferable to allowing Remington Paper (Remington) to wriggle out of its contractual obligations. I’m no formalist, but I am still stumped by the plentiful options. In order to enforce a material term, we have to know that the parties have agreed to a term, rather than to a menu of terms. When the case returned to the Court of Appeals, Cardozo looked for some way to provide Sun Printing (Sun) some relief. He could find no way to do so, and neither can I. Scholars criticize Judge Cardozo for finding the contract to be an unenforceable agreement to agree. They offer various options for the duration terms. But the various options are the problem.

I was intrigued to read Professor Cohens solution. His thesis is stated clearly at the outset:

My conclusion is that Cardozo mischaracterized and misunderstood the contract, that his opinion is more likely to have increased uncertainty rather than alleviated it, and that he may unwittingly have helped facilitate and perpetuate anticompetitive activity in the newsprint paper industry.

Bummer.

Professor Cohen reprints the contract in its entirely. As one might have surmised, Remington Paper (Remington) terminated its contract with Sun Printing (Sun) because paper prices had skyrocketed. Sun covered but at a much higher cost, and it had to purchase paper of inferior quality, reduce the size of its newspapers, and reject advertising. It claimed damages of $1.5 million based on the difference between the price it paid and the Canadian Export Paper Company price (Canadian) referenced in the contract, calculated on a monthly basis (which Judge Cardozo found not to be specified in the contract).

One would think that if prices went up, the Canadian price would also go up. Apparently, the Canadian price was below the market price in the relevant year. In addition, Professor Cohen points out, Canadian changed its price duration from three months to six months, for reasons that remain obscure.

And this is where Professor Cohen thinks Cardozo got things wrong. He treated the Canadian price as a spot market price. In fact, the Canadian price had a duration built into it, first quarterly, then semi-annually.  Remington got spooked by the longer duration as prices were rising. That is why it wanted to wriggle out of the contract. Judge Cardozo assumed the materiality of the duration term, but as the Canadian price was fixed for six months, it would make no difference what durational period governed the contract between Sun and Remington; the price was not going to move until July. The Canadian price set a ceiling on price and established a minimum duration term of six months. There is no evidence that Sun sought a longer durational term.

So this is all convincing. Judge Cardozo got it wrong. But wait, I’m not sure he got it wrong based on the facts presented to him. In fact, I can’t figure out, and Professor Cohen does not explain, why Sun failed to clarify to the Court what should have been obvious to all — the price duration was irrelevant because the Canadian price was fixed for six months. Sun had no “option” to demand a price adjustment each month, and why would it want new prices on a monthly basis when the price was going up and the Canadian price was fixed for six months? That is, Professor Cohen’s explication of the facts makes perfect sense, but the lawyers did not present those facts to the Court, and if the facts are as Professor Cohen says, the behavior of the parties and their lawyers remains mysterious.

Professor Cohen considers the effects of Judge Cardozo’s opinion, and I remain unconvinced, as I usually am when people fault Judge Cardozo. Professor Cohen criticizes Judge Cardozo for not providing clearer guidance about when it is appropriate to imply terms. Was the problem that two material terms were missing? Well, yes, but Cardozo does not tailor his rule statement to the facts before him. He aspires for generalities to guide us epigones.

I find that his opinion in Sun Printing neatly harmonizes with guidance from Judge Cardozo in other cases. Judges can imply terms when they are confident that the parties intended from them to be part of the agreement. Here, the parties did not provide a duration term and, based on what was presented to the Court, there was no reason to think they had reached agreement. Indeed, as Professor Cohen notes, there was language available from other contracts that specified a term and provided for termination in case of the parties’ failure to reach agreement. That did not happen here, perhaps because the parties could not even agree on what to do in case of disagreement. I don’t think Judge Cardozo could have said more in this context to clarify when courts should imply terms. He provided ample reasons for why he could not do so here, and extrapolation would have required a far-sightedness that Judge Cardozo’s modesty would not permit him to claim.

Professor Cohen also suggests that Judge Cardozo’s opinion unintentionally contributed to anti-competitive behavior in the industry. This claim is hard to credit. As Professor Cohen notes, Stewart Macaulay surveyed the industry and discovered that Judge Cardozo’s opinion had no impact. Parties continued to use the same form that the parties to Sun Printing used. They knew that it was unenforceable; they didn’t care. It is hard to see how an opinion that was ignored by the industry also had an impact on the industry. The subsequent behavior may speak to Judge Cardozo’s perspicacity. His view was that the parties never intended to be legally bound. Parties kept using the same instrument. Perhaps they don’t intend to be bound. Their unenforceable agreement to agree still serves some purpose, but that purpose is not to create legally binding obligations.

Although I resist Professor Cohen’s conclusions, I am grateful for his careful work excavating the factual foundations of this bewildering case. His article unravels some of the mysteries underlying the case but others remain. Without more, it looks like Sun’s lawyers did a terrible job of educating the courts on the practices of the industry.  But I am loathe to assume such legal malpractice. I don’t have a satisfying explanation for the disconnect between the facts as Professor Cohen explicates them and the litigation strategy pursued by competent attorneys presumably familiar with those facts.