Business Law Case Study: Analysis of Clement v Durban and IDT Corp.

This assignment presents a detailed analysis of two significant business law cases: Clement v Durban (2018) and IDT Corp. v Tyco Group, S.A.R.L. (2014). The Clement v Durban case examines whether New York's security for costs provisions violate the Privileges and Immunities Clause of the US Constitution, focusing on the differential treatment of resident and non-resident litigants. The analysis covers the legal issue, the relevant rule of law, its application to the case facts, and the court's conclusion, which favored the defendant. The IDT Corp. v Tyco Group case addresses a breach of contract claim related to a settlement agreement requiring good-faith negotiations. The analysis explores whether Tyco's actions breached this agreement, focusing on the obligation to negotiate in good faith and the absence of a guarantee for a final contract. The case study follows the IRAC method to provide a clear understanding of the legal reasoning and outcomes, concluding that Tyco did not breach the agreement. Both cases provide valuable insights into legal principles and their application in business contexts.

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Case 1: Clement v Durban (2018) NY
Issue
The key issue was to decide if the security for cost provisions as highlighted under CPLR
8501 (a) and 8503 tend to extend a differential treatment to resident and non-resident
litigants. As a result, the courts had to decide if the provisions highlighted above are in
violation of Privileges and Immunities Clause which has been highlighted in Section 2 of the
US Constitution (Justia, 2018).
Rule
The objective of the Privileges and Immunities Clause is ensure that the all citizens
irrespective of whether they are residents or not must be given equal treatment and therefore
focuses on extending privileges and immunities to the nation as one single unified entity. One
of the fundamental privileges extended through this clause is citizen’s right to pursue legal
actions in court(s) in the state of residence or other states. Also, this privilege is extended
equally to both residents and non-residents. However, in the Toomer v Witsell, 334 US 385,
396 [1948] case, it has been highlighted by the Supreme Court that privileges and immunities
clause is not absolute. Hence, the role of the clause is to ensure that the state does not impose
any “unreasonable” burden on non-residents which restricts their court access (Justia, 2018).
The objective of this clause is not to erase distinction between residents and non-residents
even though the former may have some inherent advantage in the litigation process. Further,
in order to prove that a state has violated the Privileges and Immunities Clause, two step
process needs to be adhered to. In the context of access of courts, firstly, it needs to be
analysed if the action or stature enacted by state prohibits access to courts by non-residents or
not. If the statute enacted continues to provide reasonable and adequate access to the court for
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the non-residents, then the state cannot be held for violation on the grounds of non-existence
of parity between residents and non-residents. Secondly, the courts are inclined to invalidate
the action or statute enacted by the state if it cannot establish that action or policy tends to
advance a key interest of the state (Justia, 2018).
As per the court rules along with statutory provisions, across all states in US it is necessary
for non-residents to pose security in line with the anticipated costs in the event of case being
lost. With regards to New York directive, s. 8501(a) CPLR highlights the security is required
for non-residents and the same is waived only for poor people or cases involving habeas
corpus. CPLR 803 highlights that an undertaken of $ 500 need to be given for counties
located within New York and $ 250 for outside counties. Also, CPLR 8502 highlights that if
the plaintiff refuses security payment within 30 days from the order of court, then the
complaint can be dismissed by the court (Justia, 2018).
Application
In the given case, the plaintiff started the personal injury action as a New York resident but
later shifted to Georgia owing to which defendants as per CPLR 8501(a) and 8503 demanded
a $ 500 security to be posted by the non-resident plaintiff. The plaintiff highlighted that
CPLR 8501(a) and 8503 were unconstitutional as they were in violation of the Privileges and
Immunities Clause. The Supreme Court decided in favour of the defendant and hence the
plaintiff brought the case of the Court of Appeals (Justia, 2018).
The Appellate division also reiterated the decision taken by the Supreme Court and granted
relief to the defendant. It highlighted that CPLR article 85 satisfies the standards whereby it is
imperative that non-residents must be provided access to the courts on reasonable terms
which do not deny any rights. It also reiterated that the Immunities and Privilege Clause aim
that state action are not required to end any differentiation between the residents and non-
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residents but to ensure that the access to courts is not hampered. Also, the provision for
security has been enacted in all states and in no way discriminatory and do not violate the
fundamental rights under s.2 of the US Constitution (Justia, 2018).
Conclusion
It may be concluded that CPLR 85 and other provisions do not violate the fundamental rights
extended under s.2. Hence, stay was awarded as per the defendant’s request till the time
security money was paid by the appellant in accordance with CPLR 8502.
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Case 2: IDT Corp. v Tyco Group, S.A.R.L. 2014 NY
Issue
The key issue is to decide if there has been a breach of contract by Tyco International, Ltd
(“Defendant”) on account of violating the commitment to negotiate in good faith with IDT
Corp (“Appellant”) with regards to contract enacted between the two parties in 1999
(Casetext, 2012).
Rule
In case of contracts where it is obligatory for the contracting parties to negotiate further,
denial on the part of any party to negotiate further would result in breach of contract and
would lead to suitable remedies for the innocent party. But it is quite possible that this
obligation of the contracting parties may conclude without formation of a contract. This is
because negotiation in good faith does not mean that it would lead necessarily to the
formation of the contract as mutual consideration and consent is required for the same
(Casetext, 2012).
This has been highlighted in Teachers Ins. and Annuity Assoc. v Tribune Co. 670 F Supp 491,
505 [SD NY 1987]. In this case, the court indicated that despite having a preliminary
agreement which forms a basis for future negotiations, it is possible that this may not
culminate in a legally enforceable contract without any breach of the preliminary agreement.
It is quite possible that when negotiations happen, a particular party may have lost interest in
the transaction or owing to change in business environment may not wish to go ahead with
the proposed transaction. This would not lead to breach of preliminary agreement since both
parties did engage in negotiation. A similar stance has been assumed in comparable cases in
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the US where the pivotal obligation is engaging in negotiation in good faith and not
enactment of a final contract (Casetext, 2012).
Application
The given case pertains to a memorandum of understanding which was enacted between IDT
Corp and Tyco International Ltd whereby the two entities under a joint venture would
develop a telecommunication system based on an undersea optic fibre. However, a lawsuit
regarding the same was brought in 2000 which was settled through a settlement agreement
signed in 2000 between the parties. As per this agreement, IDT Corp would be provided an
indefeasible right to use for a particular optic fibre capacity without any charge. However, the
system to which the optic fibre belonged was not constructed at the time. Subsequently, the
two parties negotiated from 2001 to 2004 without yielding a final contract for the
telecommunication system development (Casetext, 2012).
A lawsuit was filed by IDT Corp based on this accusing Tyco of breach of settlement
agreement but the court in 2008 decided in favour of Tyco. Additional negotiations were
carried between both parties even though honourable court highlighted that there was no
obligation on the part of Tyco to engage in the same. These negotiation failed to yield any
result and hence the present case was filed. The court in this instance cited the various cases
where negotiation in good faith is obligatory but not the final contract. It upheld that Tyco
has engaged in fair negotiation but this right does not place an obligation to indefinite
negotiation and hence held that no breach of contract was done by Tyco on account of failure
to reach a final contract (Casetext, 2012).
Conclusion
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It can be concluded based on the above discussion that a preliminary agreement to negotiate
further for final contract does not imply that the final contract would be reached. As a result,
Tyco International was not in breach of the settlement agreement or the MOU.
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References
Casetext (2012) IDT Corp.v.Tyco Group, S.A.R.L., Retrieved from
https://casetext.com/case/idt-corp-v-tyco-grp-1
Justia (2018) Clement v. Durban, Retrieved from
https://law.justia.com/cases/new-york/court-of-appeals/2018/118.html
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