Wednesday, May 22, 2013
Breaking: Bieber Requires NDA of Guests in His Home
We interrrupt the highbrow discussion of boilerplate and SCOTUS cases to bring you this breaking news from news.com.au that falls right within the utterly sweet spot of contracts and pop culture:
YOU party at Justin Bieber's house? You tell no one - or it'll cost you $5 million.
After a string of bad press in recent months, the 19-year-old has taken the extreme measure of asking guests to sign a confidentiality agreement before they enter his property.
TMZ claims to have obtained a document that everyone must sign before entering his property for one of the infamous get-togethers.
Entitled a Liability Waiver and Release, the website says the paper states that guests must not make comments or post anything on social media about what happened inside the house.
This reportedly includes the "physical health, or the philosophical, spiritual or other views or characteristics" of Justin and other partygoers.
Anyone in breach of the waiver can be sued for an enormous amount of money.
You blog? $5 million. You tweet? $5 million. You Instagram? $5 million.
While no one knows exactly what goes on inside these parties, the document also warns the get-togethers may include activities that are "potentially hazardous and you should not participate unless you are medically able and properly trained".
The risks involved apparently include "minor injuries to catastrophic injuries, including death".
Justin may be eager to change public perception after hitting headlines for a number of controversial reasons lately.
As well as turning up late for a UK gig and being accused of assaulting a neighbour, the star has now come under fire for "abandoning" his pet monkey.
Here's a copy of the document that TMZ claims is the NDA.
Where exactly was this news story when I needed an exam question? And is this liquidated damages clause a penalty?
[Meredith R. Miller]
News Flash: SCOTUS Takes a Contracts Case
blogged about this case before. Since that time, a panel of the Ninth Circuit issued a new opinion that is available here.
The Court agreed to decide whether airline passengers who are removed from a “frequent flyer” entitlement list have a right under state law to sue the airline for alleged violation of a promise that they could continue to enjoy the benefits. The case of Northwest, Inc., v. Ginsberg (12-462) tests whether such legal claims are preempted by federal law governing regulation of commercial air service.
SCOTUSblog also provides this statement of the issue in the case:
Issue: Whether the court of appeals erred in holding, in contrast with the decisions of other circuits, that respondent’s implied covenant of good faith and fair dealing was not preempted under the Airline Deregulation Act because such claims are categorically unrelated to a price, route, or service, notwithstanding that respondent’s claim arises out of a frequent-flyer program (the precise context of American Airlines, Inc. v. Wolens ) and manifestly enlarged the terms of the parties’ undertakings, which allowed termination in Northwest’s sole discretion.
We are looking forward to the Supreme Court's ruling (although the tea leaves seem pretty clear), and we hope that they cite to our earlier post as (some kind of) authoirty.
New in Print
Papers from the American Bar Foundation - The Labor Law Group Conference on The Proposed Restatement of Employment Law
The Proposed Restatement of Employment Law at Midpoint
The Restatement's Supersized Duty of Loyalty Pension
Contingent Loyalty and Restricted Exit: Commentary on the Restatement of Employment Law
Catherine Fisk & Adam Barry
An Excursion Through Strange Terrain: Chapter 6 (Defamation) And 7 (Privacy and Autonomy)
Matthew W. Finkin
What Should The Proposed Restatement of Employment Law Say About Remedies?
Remedies Doctrines in Employment Law: Ready to be Restated, or in Need of Remedial Remedies?
Papers from the Associations of the American Law Schools 2012 Annual Meeting Section of Labor Relations and Employment Law
Introduction: Guaranteeing the Rights of Public Employees
Ann C. McGinley & Kenneth G. Dau-Schmidt
Five Dead in Ohio: Ohio Citizens Overwhelmingly Support Public Employee Collective Bargaining (61 Percent to 39 Percent) in a November 2011 State Referendum Blocking the Implementation of Senate Bill 5
Jeffrey H. Keefe
"Before Wisconsin and Ohio": The Quiet Success of Card-Check Organizing in the Public Sector
Timothy D. Chandler & Rafael Gely
Boilerplate Symposium IX B: Kim Krawiec on Contracts as Disclosure, Part II
This is the second part of the ninth in a series of posts reviewing Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law.
As I stated in my last post, I want to use the example of the travel company liability waiver at left to illustrate the boilerplate phenomenon. And here is where my analysis would differ from Peggy’s, perhaps in important ways. She argues, for example, that many consumers cannot understand the complicated legalese in boilerplate. That may be true with some boilerplate, but these terms are quite simple. Plus, in my experience, the consumers of this kind of adventure travel tend to be fairly sophisticated in terms of their ability to read and understand the kind of document I’ve posted above. Certainly many if not all of these purchasers can understand that the tour company is saying that it is not responsible even if you die through the negligence of its employees.
Peggy also argues that many consumers do not bother to read the boilerplate. That is often true, but my experience suggests that it is not accurate with respect to my fellow adventure travelers. The liability waiver, which the company hounds you to sign prior to departure, is a regular lamentation/good laugh over the group dinners. Finally, Peggy argues that consumers miscalculate the cost of such waivers because we are bad at assessing risk, which she appears to equate with underestimating risk. Again, this is sometimes true, but people are prone to risk overestimation, as well as underestimation, depending on the circumstances. Finally, and this is the lesson from the disclosure literature, famously advanced by Alan Schwartz in the boilerplate context, not everyone needs to read, understand, and act on her preferences in order to effect a change in boilerplate terms. By voting with their feet, consumers (like investors) can, at least in theory, force down the price of products and services accompanied by onerous boilerplate, thus opening up an opportunity for boilerplate entrepreneurs to intervene with terms more palatable to consumers. Yet that has not happened in the adventure travel context. Why not?
Let me offer a few possibilities. One possibility, of course, is that consumers are not actually willing to pay for the ability to hold tour companies liable – they prefer lower prices instead. I’ll return to that possibility in a moment. However, it is also possible that consumers have not fully impounded the information regarding liability waiver into product price. This is not because such consumers are unsophisticated, or don’t read, or are helpless against big bad travel companies, but because the purchase of an adventure travel package is a complex decision, requiring the trade-off of numerous factors affecting the quality and price of the product/service + boilerplate package. And most of us just aren’t very good at that. Consumers are not just weighing the costs and benefits of various liability waivers against price, but a multitude of factors, including the reputation of the company for both fun and safety, the type of travel and activities offered, and even other elements of the contract, such as the cancellation policy and the availability of travel insurance to cover the type of travel and activities in question.
This analysis, if true, is both good and bad for Peggy’s purposes. On the plus side, it supports her fears of market failure, even when consumers are relatively sophisticated and informed. But at the same time, it cautions against the possible efficacy or easy application of her solution. If calculating the optimal trade-offs among price and the numerous other elements of the product/service + boilerplate adventure tour package is decisionally complex for experienced consumers of travel services, then it is difficult for courts and lawmakers as well. Perhaps the legislature was right in crafting a default rule placing liability for negligence on the tour operator, in the hopes of creating incentives for such tour operators to exercise care before putting their clients at risk. And perhaps consumers are mistaken in signing away those rights, thus “deleting” rights thoughtfully granted by the legislature. Peggy places a high value on democratically-generated rules such as these, and demonstrates more faith in such democratic processes than in market ones.
Perhaps she is right. But, perhaps, the legislature simply got this one wrong. Perhaps consumers believe that there are cheaper and more effective mechanisms for differentiating trustworthy and careful adventure tour operators from untrustworthy and negligent ones. Perhaps consumers have quite rationally concluded that firm reputation; their own repeated positive experiences with a particular operator; the prior impressions of friends, neighbors, and other experienced travelers; and third parties, such as travel insurance companies, all have helped them to choose a tour operator whose risk of negligent operation is – if not fully controllable – at least tolerable, given the price paid.
With Boilerplate, Peggy Radin has hit another home run. As with her work on contested commodities, she has forced me to reconsider my priors, and has poked some holes in my assumptions. But in both cases a basic ideological difference -- the extent to which we trust private ordering as compared to public -- prevents a full meeting of the minds.
[Posted, on Kim Krawiec's behalf, by JT]
Boilerplate Symposium IX A: Kim Krawiec on Contracts as Disclosure, Part I
This is the first part of the ninth in a series of posts reviewing Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law.
Kimberly D. Krawiec is the Kathrine Robinson Everett Professor of Law at the Duke University School of Law.
Thanks to Jeremy for inviting me to review Peggy Radin’s new book, Boilerplate. Peggy’s work on contested commodities has hugely influenced my thinking about taboo trades, and I suspect that her work on boilerplate will prove similarly influential, so I’m grateful for this opportunity for early engagement.
First, as Peggy defines boilerplate, we are talking about take it or leave it contracts. There is no dickering over terms, no negotiation: if the consumer doesn’t like the offered contract, then the only remedy is to refuse to purchase the packaged product that includes some good or service, along with the accompanying boilerplate. This “take it or leave it” nature of boilerplate does not necessarily harm consumers as a group, however, provided that they have agreed to give up those rights in exchange for a lower purchase price.
This leads to the second relevant insight from the disclosure comparison: there is a large literature regarding the extent to which disclosure can protect (and harm) even consumers who are ignorant of the disclosure, by impacting price. Third, and relatedly, there is a large literature regarding the conditions under which we cannot expect market prices to accurately reflect all of the available information about a product. Fourth, and finally, Peggy does not propose more or better disclosure as the solution to boilerplate, but instead proposes a substantive regulation of contract terms – what is often referred to within securities law as “merit regulation.” Merit regulation forms the basis of many state blue-sky laws, in contrast to federal securities law, which is historically disclosure based. Thus, at least some of the debates between boilerplate “autonomists” and “apologists,” to borrow Omri Ben-Shahar's phrasing, have also been addressed in the numerous debates, dating back at least to the 1930’s, on merit-based versus disclosure-based securities regulation.
Peggy’s contention (to oversimplify, as is so frequently necessary in Blog World) is that we cannot infer from the widespread persistence of a particular boilerplate term that consumers have chosen it through their willingness to buy the product/service + boilerplate bundle at a given price. Instead, we must treat it as a case of potential market failure. So, what might lead to this market failure? I want to illustrate one possibility – and highlight some unanswered questions that I think Peggy and other boilerplate autonomists need to address – using the example of a fairly common exculpation clause used by tour group operators.
If you’ve taken almost any type of organized tour or active vacation and bothered to read the liability waiver that you were almost certainly asked to sign, then you’ve seen an agreement similar to the one I’ve included at right limiting the tour company’s liability for their negligence involving pretty much everything from a bad hotel room to your death from falling into an active volcano. Such waivers are ubiquitous, varying only slightly in their particulars.
And I have signed one every year for over a decade. Why? Well, the simple answer is that I have no choice, given that I want to participate in organized adventure travel and all tour companies have a similar waiver. But that’s too easy. The real question, as Peggy acknowledges, is why, if this is a term that consumers value, a competing adventure tour company has not arisen to offer a similar tour experience without the offending boilerplate language, potentially at higher cost? I’ll venture an answer in my next post.
[Posted, on Kim Krawiec's behalf, by JT]
Tuesday, May 21, 2013
Weekly Top Tens from the Social Science Research Council
Boilerplate Symposium VIII: Daniel Schwarcz on a Tort-Based Approach to Standard Form Contracts
This is the eighth in a series of posts reviewing Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law.
Daniel Schwarcz is an Associate Professor of Law at the University of Minnesota School of Law.
One of the most provocative arguments in Margaret Jane Radin’s bold and compelling book, Boilerplate, is that legal evaluation of contracts of adhesion should employ tort principles rather than contract principles. As Radin acknowledges, this is an idea that I have explored in the specific context of insurance policies. In this guest post, I hope to discuss some of the similarities and differences between Radin’s proposed approach and my own.
In some important ways, Radin and I make similar arguments for moving to a tort-based approach to standard form contracts. For instance, we both argue that the lack of meaningful assent to boilerplate means that standard contract law doctrines are often an awkward fit for evaluating boilerplate. Thus, people who “consent” to contracts of adhesion do not generally have any expectations at all regarding the specific terms to which they adhere. Many rules designed to police unreasonable terms in standard form contracts, such as the reasonable expectations doctrine, consequently become analytically confusing. Similarly, the familiar (and insurance-super-charged) doctrine that ambiguities are interpreted against the drafter is an odd fit for contracts of adhesion, given that (i) the rule is principally meant to encourage clearer drafting, and (ii) less ambiguous drafting does not actually promote better understanding among most consumers, who do not read or understand boilerplate in the first place.
From this starting point, though, Radin and I develop quite different ideas for how tort law could help police standard form contracts. Radin ultimately endorses a new tort of “intentional deprivation of legal rights” that would focus on the extent to which boilerplate deprived individuals of “market-inalienable” rights. Radin says that she prefers this approach to one employing products liability law because the nature of the consumer harm caused by boilerplate is not physical. But an intentional torts approach also allows Radin to directly target her primary complaint with boilerplate: that it often undermines various democratically-granted political and individual rights. Because these “market inalienable” rights are relatively specific and limited – encompassing, for instance, the right to a jury trial or legal redress for an injury – they can easily be protected by declaring their deprivation through boilerplate to constitute an intentional tort. By contrast, Radin tellingly admits that her approach would have little to say about insurance policies, for instance, presumably because they tend not to contain arbitration provisions, forum selection clauses, or other terms that implicate political or individual rights.
By contrast, I embrace a products liability approach to boilerplate because I am much less concerned than Radin about “the deprivation of legal rights,” and much more concerned about the potential inefficiencies of boilerplate. To be sure, Radin fairly lays out the standard law-and-economics analysis of boilerplate, which emphasizes that it is really just a product feature that is subject to market forces. Whether these forces are sufficient to deter exploitive terms depends on market-specific factors, such as the information known to consumers, the heuristics and biases consumers face, and the ability of firms to segment sophisticated and unsophisticated consumers. As such, the strength of efficiency-based defenses of boilerplate “will vary from market to market.”
Although Radin lays out all of these points eloquently, she uses them sparingly to inform her proposed tort-based approach to boilerplate. By contrast, I embrace a products liability approach to boilerplate because products liability law is focused on the very same issues that determine the efficiency of boilerplate: that consumers are ignorant of product safety problems, systematically misperceive the likelihood of these problems, and can be substantially injured by them. A products liability frame for evaluating boilerplate thus focuses courts (and regulators) on the right questions, in my view: whether particular terms are likely to (i) be subject to inadequate market pressures and (ii) cause substantial consumer harm. From this perspective, insurance policies are actually prime candidates for judicial (and regulatory) scrutiny: insurance policy terms are actively hidden from consumers, consumers generally must purchase coverage as a pre-requisite for some other transaction, consumers as a group are likely to be over-optimistic about their risk of suffering a loss, and the terms of insurance policies are particularly important because they are the only product that a consumer actually purchases.
On the other hand, the deprivation of legal rights caused by boilerplate is much less troubling for me than it is for Radin. As Radin acknowledges, legislatures are perfectly free to limit the capacity of parties to contract around particular rights, as they do, for instance, in the case of the implied warranty of habitability. When legislatures do allow for the contractual modification of rights, the democratic process seems to me to be perfectly respected. This, for instance, seems to me to be a fair description of the right to a jury trial and the Federal Arbitration Act. Of course, it may be that courts misinterpret certain laws to allow for greater contractual modification of rights than the legislature intended. But this type of risk is less about boilerplate generally than specific contract terms, and therefore seems to be of limited use in crafting a generalizable tort-based approach to standard form contracts.
[Posted, on Daniel Schwarcz's behalf, by JT]
Boilerplate Symposium VII: Oren Bar-Gill on Consent Without Reading
This is the seventh in a series of posts reviewing Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law.
Oren Bar-Gill is a Professor of Law and Co-Director of the Center for Law, Economics and Organization, New York University School of Law
Professor Radin’s book is an eloquent and powerful critique of the fine-term, boilerplate contracts that pervade modern life. Its breadth – in terms of the range of theoretical perspectives that it considers and the different legal policy responses that it discusses – is impressive. In this comment, I focus on the economic analysis of boilerplate. I suggest that Radin’s treatment of this particular perspective, while clearly very useful, is, in some respects, incomplete.
In her discussion of the economic analysis of boilerplate, Radin focuses on, and criticizes, a Chicago-school approach that minimizes any concern about boilerplate. But this is only one strand in the economic analysis of form contracts. There is another, perhaps more influential strand that readily acknowledges the challenges that boilerplate presents for market efficiency and for welfare maximization.
Radin emphasizes the importance of consent. Economists don't care about consent as such; they care only about the functional role that consent plays in achieving Pareto efficiency. But this functional role is key for the economist. And economists recognize that, for most consumers, reading the fine print is simply irrational. Meaningful consent that comes out of such reading is, therefore, a myth.
But perhaps there could be meaningful consent without reading. Perhaps consumers can learn about the important features of boilerplate through other means. This is where economists have been focusing their recent efforts. Reputation, as bolstered by ratings and reviews (that are becoming increasingly important with the expansion of the Internet and the rise of social networks), plays a key role here. We see more and more examples where sellers compete over fine-print terms – where the terms rise from the fine print to the billboards. Consider automobile warranties or, more recently, early-termination fees in cellphone contracts and late fees and currency conversion fees in credit card contracts.
Consent, even meaningful consent, without reading is possible. We cannot always count on it, however. The challenge is to identify those cases where consent, including consent without reading, is absent. That is where we should focus our regulatory efforts.
Along these lines, I note two aspects of consumer contracts that deserve, perhaps, more attention than Radin gives them. First is the increasingly prevalent problem of unilateral modification, by sellers, of consumer contracts (with or without a specific unilateral modification clause in the initial contract). When a pro-consumer contract or term can so easily be changed, the forces that can generate consent-without-reading are substantially weakened.
Second, Radin focuses, in large part, on legal terms. But non-legal terms, specifically prices and fees can be similarly hidden and misunderstood by consumers. Such terms can be as harmful to consumers as the right-divesting terms that attract most of Radin’s critical attention.
Radin’s book is a great achievement. Among its many contributions is a critical account of the economic analysis of boilerplate. While I agree with much of this criticism, I have tried, in this brief comment, to sketch a richer picture of the economic approach to consumer contracts. I suspect that Radin would be quite sympathetic to this more nuanced approach.[Posted, on Oren Bar-Gill's behalf, by JT]
Monday, May 20, 2013
Boilerplate Symposium VI: Brian Bix on Democratic Degradation
This is the sixth in a series of posts reviewing Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law.
Brian Bix is the Frederick W. Thomas Professor for the Interdisciplinary Study of Law and Language at the University of Minnesota Law School
(The following is adapted from a much longer review that will appear in the Tulsa Law Review.)
In her important, timely, and provocative book, Boilerplate: The Fine Print, Vanishing Rights, and the Rule of Law, Margaret Jane Radin offers some scathing observations regarding the motivation and effects of the terms placed in consumer and employee contracts. She argues that the current contracting practices make a mockery of consent, and undermine the rule of law. Radin is clearly correct in her essential claim, that for many contracting parties freedom of contract is less an ideal than a sham, and that boilerplate provisions are being used by companies to circumvent substantive rights and remedies consumers, employees, and other contracting parties would otherwise have.
There is one issue, however, on which I might want to offer a qualified dissent, or at least suggest a slight modification. In Boilerplate, Radin expresses concerns about the “democratic degradation,” by which she means the way in which important legislatively created rights can be (enforceably) diminished or waived through contractual agreement. (pp. 33-51) Her argument is that businesses should not be able to undo through simple contractual provisions (especially provisions that are hidden, hard to understand, and hard to avoid) what has been passed through the popular, democratic law-making process.
The difficulty with this argument is that the ability to modify or waive these rights is itself also the direct or indirect product of legislation. The most obvious example is the Federal Arbitration Act (FAA), Pub. L. No. 68-401, 43 Stat. 883 (1925), codified as amended at 9 U.S.C. §§ 1-14, which has been the ground for enforcing the arbitration agreements Radin complains about that waive consumers’ and employees’ rights to litigate claims in court and to bring class action claims. The ability of vendors to remove consumer’s rights has been enhanced substantially by the United States Supreme Court’s robust reading in recent years of the Federal Arbitration Act. See, e.g., AT&T v. Concepcion, 131 S. Ct. 1740 (2011); Rent-A-Center, West, Inc. v. Jackson, 130 S. Ct. 2772 (2010); Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006). (Of course, one might disagree with the reading of the FAA that the majority of the Supreme Court has given, but that is a separate issue.)
Similarly, Congress and state legislatures certainly have the ability to make the right to litigate certain claims or to bring class actions non-waivable, and have occasionally done so. For example, Congress has forbidden mandatory arbitration provisions in consumer credit agreements with members of the United States military. (See John Warner National Defense Authorization Act of 2007, Pub. L. No. 109-364, § 670(a), 120 Stat. 2083, codified at 10 U.S.C. §§ 987(e)(3), (f)(4).) One can also find state laws that expressly restrict the ability of parties to waive procedural rights, at least for certain categories of transactions. One example is the Illinois Franchise Act, where Section 4 states: “Any provision in a franchise agreement that designates jurisdiction or venue in a forum outside of this State is void, provided that a franchise agreement may provide for arbitration in a forum outside of this State.” 815 ILCS 705/4.
Someone might object that the argument here is putting too much argumentative weight on the fact that federal or state legislatures have not acted to restrict the effect of contractual boilerplate, and that one should not make too much of legislative inaction. However, the fact that state and federal legislatures have shown the ability and willingness to restrict the use of certain kinds of boilerplate means that the failure to do so in other circumstances is at least noteworthy. Additionally, Congress has sometimes offered express permission to have certain types of claims resolved by arbitration or other forms of alternative dispute resolution. For example, the Civil Rights Act of 1991 includes the following language: “Where appropriate and to the extent authorized by law, the use of alternative means of dispute resolution, including . . . arbitration, is encouraged to resolve disputes arising under [Title VII].” Pub. L. No. 102-166, § 118, 105 Stat. at 1081.)
It is not democratic degradation, but the lesser side of American political life – the power of business interests, business lobbying, corporate money after Citizens United, etc. – that contributes significantly to the current contract law world in which rights disappear through boilerplate. One need only watch the way that the Congress continues to hobble the Federal Consumer Finance Agency (there had once been talk of that agency acting against mandatory arbitration in consumer and employment agreements, but that now seems highly unlikely).[Posted, on Brian Bix's behafl, by JT]
Boilerplate Symposium, Week 2
For those who missed it, last week we posted five responses to Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law.
We heard from:
- Peter Alces on consent;
- Theresa Amato on proposed solutions to the problems posed by Boilerplate;
- Andrew Gold on the question of whether boilerplate is contractual;
- David Horton on mass arbitration and democratic degradation; and
- Ethan Leib on the fetishization of consent
This week, we will feature posts from the following contracts scholars:
Oren Bar-Gill is a Professor of Law and Co-Director of the Center for Law, Economics and Organization, New York University School of Law, where he has taught since 2005. Professor Bar-Gill’s scholarship focuses on the law and economics of contracts and contracting. Before joining the faculty at NYU, he was at Harvard University, where he was a Fellow at the Society of Fellows, as well as an Olin Fellow at Harvard Law School. Professor Bar-Gill holds a B.A. (economics), LL.B., M.A. (law & economics) and Ph.D. (economics) from Tel-Aviv University, as well as an LL.M. and S.J.D. from Harvard Law School. Bar-Gill served in the Israeli JAG, from 1997-1999, where he participated in criminal, administrative and constitutional proceedings before various courts including the Israeli Supreme Court and the IDF Court of Appeals. A list of his publications can be found here. A link to our recent symposium on his book, Seduction by Contract, can be found here.
Brian Bix is the Frederick W. Thomas Professor for the Interdisciplinary Study of Law and Language at the University of Minnesota Law School, where he has taught since 2001. He teaches in the areas of jurisprudence, family law, and contract law. He holds a joint appointment with the Department of Philosophy.received his B.A., summa cum laude, Phi Beta Kappa, from Washington University in St. Louis in 1983; his J.D., magna cum laude, from Harvard Law School in 1986; and his D.Phil. in Law from Balliol College, Oxford University, in 1991. Professor Bix taught at Quinnipiac University School of Law, as Associate Professor (1995-1997) and Professor (1998-2001). He was a Visiting Professor of Law at Georgetown University Law Center during the spring semester of 2000 and at George Washington University Law School in the fall of 1999. Professor Bix was the Lecturer in Jurisprudence and Legal Reasoning at King's College, University of London, from 1991 to 1993; he taught at St. Edmund Hall, Oxford University, from 1989 to 1990. He was a law clerk for Justice Benjamin Kaplan at the Massachusetts Appeals Court (1993-95, while on leave from the King's College), and he also clerked for Judge Stephen Reinhardt, Ninth Circuit Court of Appeals (1987-1988), and Justice Alan Handler, New Jersey Supreme Court (1986-1987). He is a member of the American Law Institute. A list of his publications can be found here.
Kimberly D. Krawiec is the Kathrine Robinson Everett Professor of Law at the Duke University School of Law. She is an expert on corporate law and teaches courses on securities, corporate, and derivatives law. Her research interests span a variety of fields, including the empirical analysis of contract disputes; the choice of organizational form by professional service firms, including law firms; forbidden or taboo markets; corporate compliance systems; insider trading; derivatives hedging practices; and “rogue” trading. Prior to joining academia, Professor Krawiec was a member of the Commodity & Derivatives Group at the New York office of Sullivan & Cromwell. She has served as a commentator for the Central European and Eurasian Law Initiative (CEELI) of the American Bar Association and on the faculty of the National Association of Securities Dealers Institute for Professional Development at the Wharton School of Business. She holds a juris doctorate from Georgetown University and a bachelor’s degree from North Carolina State University. A visiting professor at Duke Law during the 2008-09 academic year, Krawiec also has taught law at the University of Virginia, the University of North Carolina, Harvard, and Northwestern, where she received the 1999-2000 Robert Childres Award for Teaching Excellence. A list of her publications can be found here.
Daniel Schwarcz received his A.B. magna cum laude from Amherst College and his J.D. magna cum laude from Harvard Law School. After law school, Schwarcz clerked for Judge Sandra Lynch of the U.S. Court of Appeals for the First Circuit (2003-2004), and later was an associate at Ropes & Gray in Boston, MA (2004-2005). He served for two years as a Climenko Fellow at Harvard Law School (2005-2007) before being appointed Associate Professor of Law at the University of Minnesota School of Law in 2007. He visited at UCLA School of Law for the Spring, 2013 semester. Professor Schwarcz teaches insurance law, health care regulation and finance, contract law, and commercial law. His research primarily focuses on consumer protection and regulation in property/casualty and health insurance markets. In 2011, his article, "Reevaluating Standardized Insurance Policies," 77 University of Chicago Law Review (2011), received the Liberty Mutual Prize for an exceptional article on insurance law and regulation. He has also published articles in The Virginia Law Review, Minnesota Law Review, North Carolina Law Review, William and Mary Law Review, and Tulane Law Review. A full list of his publications can be found here.
We look forward to another lively week of contributions by our guest bloggers.
Thursday, May 16, 2013
New in Print
Sean M. Collins and R. Mark Isaac, Holdout: Existence, Information, and Contingent Contracting. 55 J.L. & Econ. 793 (2012)
Christine Spinella Davis,et al., Recent Developments in Business Litigation, 48 Tort Trial & Ins. Prac. L.J. 115 (2012)
Robert W. Emerson and Uri Benoliel, Are Franchisees Well-Informed? Revisiting the Debate over Franchise Relationship Laws. 76 Alb. L. Rev. 193-216 (2012/2013)
Orit Gan, Contractual Duress and Relations of Power, 36 Harv. J. L. & Gender 171 (2013)
Orit Gan, Promissory Estoppel: A Call for a More Inclusive Contract Law, 16 J. Gender, Race & Justice 47 (2013)
David Hricik, Dear Lawyer: If You Decide It's Not Economical to Represent Me, You Can Fire Me As Your Contingent Fee Client, but I Agree I Will Still Owe You a Fee, 64 Mercer L. Rev. 363 (2013)
Arthur J. Park, What to Reasonably Expect in the Coming Years from the Reasonable Expectations of the Insured Doctrine, 49 Willamette L. Rev. 165 (2012)
Wednesday, May 15, 2013
Boilerplate Symposium V: Ethan Leib on the Fetishization of Consent
This is the fifth in a series of posts reviewing Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law.
Ethan Leib s Professor of Law at Fordham Law School and is the author of What is the Relational Theory of Consumer Form Contract?, in Revisiting the Contracts Scholarship of Stewart Macaulay: On the Empirical and the Lyrical 259 (Jean Braucher, John Kidwell & William Whitford eds., Hart Publishing 2013)
People tend to begin with praise. In this case, it isn’t just throat-clearing. Although one could be forgiven for thinking that the subject of consumer form contracts has been mined to death, much impresses in Peggy Radin’s Boilerplate. Although I don’t agree with all of them, here are just a few of the book’s productive interventions:
- Radin invites us to consider whether tort law rather than contract law would make better sense of the consumer form contract gone wrong in which someone is harmed, “out of the blue, by the unexpected actions of another” (23);
- Radin invites us to think about how complicity with certain types of boilerplate that divests important procedural and substantive rights has had the systematic effect of converting property rules to liability rules, unilaterally priced by form drafters (75);
- Radin questions whether we should be allowing contract to undermine the value of “fair use” of intellectual property or the value of free expression, since some seemingly enforceable boilerplate purports to limit consumers’ permission to use or criticize the products they buy (172-76);
- Radin reminds us that when consumers’ reasonable expectations are that they will be exploited by boilerplate, the judicial doctrine allowing enforcement of only consumers’ “reasonable expectations” will prove inadequate in addressing the problems with boilerplate (highlighting the ambiguity in the doctrine between positive and normative expectations) (85);
- Radin provokes us by characterizing consumer form contracts as “sturdy indefensibles:” we might need to use them even though they don’t fit the “‘grammar’ of the legal infrastructure of contract law” (143); and
- Radin argues that boilerplate should be judged based on the nature of the right involved, the quality of consent provided by those bound, and the dissemination of the right that is purportedly infringed (155).
But I had one quite basic problem with the book, which cuts to the very core of Radin’s approach.
Most importantly, she really tries to train the reader not to consider boilerplate instruments as actually contractual. Indeed, if her editor had allowed it, she might very well have used scare quotes throughout the whole book (rather than just the beginning) to highlight that consumer form contracts with boilerplate are not really contracts. The reason for their exclusion from the world of contract: because of the routine absence of consent in transactions using boilerplate. It is the lack of consent (or the severely attenuated consent) in consumer form contracting which underwrites her claim that boilerplate contributes to “normative [and] democratic degradation,” a central trope that recurs throughout the book.
Admittedly, it seems intuitive to root contract in consent. The liberal theory of autonomy to which many versions of contract theory owe their genesis promotes consent as a principal virtue. So it is no surprise that Radin seeks to maintain the liberal theory of autonomy and contract with it.
But there is a whiff of fetishizing of consent in Radin’s rendering. Absence and attenuation of consent is everywhere in the transactional world of contract: in employment, long-term corporate relationships, in franchises, in marriage. Contract is a multifarious enterprise that ultimately governs many modalities of exchange. Radin surely attempts to explore the fine line between the consensual and non-consensual. But excluding a huge portion of voluntary exchange from the domain of contract seems unlikely to be true to the rich practice that has, from time immemorial, been a method of channeling and regulating complex relationships in which transactions occur. I fear a “purer” contract – one without boilerplate and one which squeezes out all attenuated consent – will ultimately leave us with a more ideological product, one that undergirds, reinforces, and grows out of a libertarian rather than a liberal theory of autonomy. And that may lead to more substantial normative degradation than would fighting bad contracts with some contract law.
[Posted, on behalf of Ethan Leib, by JT]
Boilerplate Symposium IV: David Horton on Mass Arbitration and Democratic Degradation
This is the fourth in a series of posts reviewing Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law.
David Horton is Acting Professor of Law at the UC Davis School of Law.
One of Boilerplate’s most provocative claims is that mass contracting causes “democratic degradation.” To be sure, this idea is not entirely new. In 1931, Karl Llewellyn called standard forms “the exercise of unofficial government”; forty years later, W. David Slawson analogized to administrative law and argued that adhesive terms, like rules promulgated by unelected bureaucrats, suffer from a democracy deficit. However, with the rise of public choice theory—which blurs the line between public and private lawmaking by conceptualizing statutes as “deals” between politicians and interest groups—these critiques have all but vanished. Professor Radin seeks to reinvigorate them. She contends that boilerplate replaces “the law of the state with the ‘law’ of the firm” and therefore undermines our commitment to representative democracy (p. 16).
I’m particularly interested in how Professor Radin’s democratic degradation thesis plays out in the field of consumer and employment arbitration. (For whatever it’s worth, I’ve explored similar issues here and here, and in my forthcoming review of Boilerplate). Of course, unlike other controversial fine print terms, arbitration clauses can claim to have a democratic pedigree: Congress passed the Federal Arbitration Act in 1925 to encourage the use of private dispute resolution. Nevertheless, it is widely accepted—even among the Justices—that the FAA’s current musculature is “an edifice of [the Court’s] own creation.” In addition, the saturation of mandatory pre-dispute arbitration clauses—at least among major companies in certain industries—rivals traditional lawmaking in its scale. For instance, the class arbitration waiver in AT&T’s wireless service contract binds more customers than the combined populations of California, Texas, New York, and Florida. Thus, to borrow from Professor Slawson, if by making “law” we mean creating or altering enforceable rights or duties, then companies make more law in a day by projecting arbitration across the economy than Congress makes in a year.
Is this spectacular display of private power legitimate? Professor Radin suggests that it’s not. She notes that “most people don’t know what arbitration is” and that arbitrators “are widely believed to be more favorable to businesses” (p. 4). Yet a skeptical reader might push back. What if, as the Court has repeatedly declared, the bare decision to resolve a dispute in the arbitral forum does not affect its outcome? Arguably, then mass arbitration is an elegant shortcut to the meandering path of litigation. Moreover, there are safeguards against drafter overreaching. Courts can invalidate one-sided arbitration clauses under the contract defense of unconscionability. Likewise, the vindication of rights doctrine entitles plaintiffs to a judicial forum if they prove that they can’t effectively vindicate federal statutory claims in arbitration. Before we condemn mass arbitration as do-it-yourself law reform, shouldn’t we insist on evidence that it deprives consumers and employees of substantive rights?The rejoinder to this rejoinder can be found in the Court’s recent jurisprudence. In AT&T Mobility LLC v. Concepcion, the Court held that class arbitration waivers must be enforced even if small-value consumer protection claims will “slip through the legal system.” Thus, in perhaps the most fraught context in all civil litigation—the class action—the Court has disavowed the principle that the switch to an arbitral forum is outcome-neutral. It has allowed drafters to engage in aggregate contracting—a practice that Professor Radin persuasively argues is not “contracting” at all—while denying adherents the ability to aggregate claims. And in the pending case of American Express Co. v. Italian Colors Restaurant, the Court is expected to extend Concepcion and mandate bilateral arbitration of federal antitrust claims even though the cost of expert fees alone greatly exceeds any individual plaintiff’s potential recovery. Just as Professor Radin contends, the casualties of this quiet revolution will be “rights that are granted through democratic processes” (pg. 16).
[Posted, on David Horton's behalf, by JT]
Tuesday, May 14, 2013
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Boilerplate Symposium III: Andrew Gold, Is Boilerplate Contractual?
This is the third in a series of posts reviewing Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law.
Andrew Gold is a Professor of Law at the DePaul University College of Law.
Margaret Jane Radin’s new book, Boilerplate, is an outstanding contribution to the literature on contract theory and policy. In this review, I will focus on her analysis of consent, and in particular what it means to have consent for purposes of contract theory. For the most part, my concern will be conceptual, and not normative. This conceptual focus has normative implications, however. Radin argues that tort law is an appropriate means to regulate mass market boilerplate, in part because she believes that boilerplate is not properly conceptualized in contract terms. As she concludes: “it would be better to stop referring to boilerplate as contractual, because of its lack of fit with contract theory and with the basic principles of the legal system regarding what a contract is and what a contract is for.” (Radin, Boilerplate, at 242) This claim appears to be grounded in the vital role consent plays in contract theory. I share the view that consent is vital to contracts, but I am less sure that boilerplate should be seen as non-contractual.
As Radin indicates, boilerplate involves a spectrum of cases. At one end of the spectrum are the “sheer ignorance” cases. In these circumstances, the hapless consumer discovers after the fact that he or she is supposed to have entered a contract. Yet the consumer has no idea that this was happening at the time the contract was supposedly entered into. (Id. at 21-23) A good example is a purported agreement which states, at the bottom of the page, “‘Upon reading this page, you agree to be bound by these terms and conditions.’” (Id. at 13) There is no ready way to square these cases with standard views of consent, and I entirely agree with Radin that they are problematic. It is questionable whether they should properly be called contracts. With that in mind, let’s bracket the sheer ignorance cases.
Suppose, instead, that we consider another case – the online consumer who has been presented with detailed terms and clicked “I agree,” thus purportedly entering into a boilerplate contract. Very often, the consumer has not read the terms when clicking “I agree,” and would not fully understand them if they had been read. This is apparently not a sheer ignorance case as Radin defines that category. Can these cases be understood in terms of contractual consent? Maybe not, if consent means informed consent. At times, Radin seems to mean informed consent, as when she suggests that information asymmetry would render it problematic to assimilate clicking “I agree” to what she calls “the ordinary conception of consent”. (Id. at 25) Yet it is highly debatable whether consent means informed consent, outside of those limited areas in which the law goes out of its way to insist on informed consent (e.g., the provision of medical services). And there is no indication that contract theory relies on the idea of informed consent as it is usually applied.
Assuming informed consent is not the standard, there are a variety of fact patterns which suggest that clicking “I agree” can implicate consent. Randy Barnett has offered a compelling example of this type. He describes a promise based on a sealed envelope:
Suppose I say to my dearest friend, “Whatever it is you want me to do, write it down and put it into a sealed envelope, and I will do it for you.” Is it categorically impossible to make such a promise? Is there something incoherent about committing oneself to perform an act the nature of which one does not know and will only learn later?
(Randy E. Barnett, Consenting to Form Contracts, 71 Fordham L. Rev. 627, 636 (2002).) This is a quite plausible case of consent – full-fledged consent – and this would be so even if consent is understood in subjective terms. It also has important implications for the present inquiry. It suggests that not knowing precisely what one has consented to is not a per se bar to consent.
Barnett recognizes an important limit on the envelope example. There are cases where a promisor could reasonably say: “‘while I did agree to be bound by terms I did not read, I did not agree to that.’” (Id. at 637) Radically unexpected terms would not have been consented to in a case like the envelope case. A similar limit seems to apply in the case of clicking “I agree” with respect to unread boilerplate.
Radin raises several concerns with a focus on expectations. She suggests that expectation-based approaches will not make for a predictable jurisprudence. (Radin, supra, at 85) That may be right, although this is an empirical question. But the possibility that courts are not institutionally well-situated to assess the unexpectedness of contract terms is not an argument that addresses the conceptual question at issue. It does not tell us whether we have consent for contract theory purposes. Instead, it is an institutional argument regarding good legal policy.
Another response draws our attention to the distinction between empirical expectations and a separate category, normative expectations. The argument here is that we have an ambiguity between expectations as they may exist among contracting parties (the empirical kind), and expectations in the sense of “the just practices that a citizen has a right to expect” (the normative kind). (Id.) There are notable and interesting differences between the two types of expectations, and the book offers important insights by drawing our attention to this issue. In fact, I’m sympathetic to Radin’s concern that empirical and normative expectations can be mixed together in contracts jurisprudence. Courts may look to either sense of expectations, and the jurisprudence may become unpredictable. But again, this concern does not tell us whether we have consent for contract theory purposes. This too is an argument regarding good legal policy.
Radin also offers a further argument concerning the different views on contractual consent. She suggests that the meaning of clicking “I agree” is “more analogous to a contested concept.” (Id. at 90) This could raise doubts as to which terms parties have consented to. It could also raise doubts that any consent exists at all. The two situations need not coincide. While the scope of consent could be very uncertain as a matter of objective meaning, this may not mean that people who click on “I agree” have no idea they are agreeing to anything at all. Whether there is any recognized objective meaning to clicking “I agree” is again an empirical question, and it may vary by community. Depending on context, I suspect that if you ask online consumers whether they have agreed to anything after clicking “I agree” when confronted by a list of terms, many would think they had agreed to something. (Of course, it might be something far less than the content which the firm would hope to cover with their contract!)
None of this is to say that Radin is wrong in her policy prescriptions. My concern, as noted at the outset, is conceptual. Once we bracket sheer ignorance cases, it is far from clear that mass-market boilerplate falls outside of the consent requirement that underpins much contract theory. Radin has many other reasons to suggest changes to our legal regime, and I am hopeful that her work will trigger further discussion of the concerns she raises. Yet it is one thing to say that boilerplate should be regulated in various ways, and another thing altogether to say that it is not contractual. With that caveat, this book draws our attention to a variety of important consent-related problems. Boilerplate is a very important contribution to existing debates, and it should be read by anyone interested in understanding the current state of contract law and its potential for reform.[Posted, on Andrew Gold's behalf, by JT]
Boilerplate Symposium II: Theresa Amato on Remedies to the Problems Posed by Boilerplate
This is the second in a series of posts reviewing Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law.
Theresa Amato, a public interest lawyer, is the executive director of Citizen Works, and the director of the Fair Contracts Project (faircontracts.org).
Professor Radin’s masterpiece Boilerplate sets forth the intellectual underpinnings for an energetic movement to correct the imbalance of power between corporations and consumers in fine print contracts. Her explanations of the degradation of consent and the resulting diminishment of the rule of law should incite all those who read it to not merely nod in accord, but to take action.
Radin calls for a new legal way to analyze the boilerplate that she painstakingly shows fails to merit the term “contract” —and therefore should not be evaluated under contract law. Instead, she suggests we evaluate these mice-print monstrosities as a product itself that can cause harm. The boilerplate should be considered a potential inflictor of consumer harm through massive “rights deletion,” or “rights strip mining,” as Ralph Nader says, and thus should be addressed in tort, or under a new legal rubric altogether. This bold suggestion alone elevates the book to compulsory reading as most academic articles tend only to set forth descriptions and analyses of the epic failure of the disclosure regulatory paradigm, but then fall short on solutions and action.
In both academia and consumer advocacy, far too few people are focused on solving the problem—to create remedies beyond studying the problem or treating its symptoms in a legal aid, case-by-case manner. Though there may be disagreement on the exact contours or how to solve the problems of boilerplate, there does seem to be some movement in recognition, at least, that there is a problem in need of solution.
A survey of the academia and advocacy landscape reveals:
- The fine print qua fine print has grown longer and mutates more frequently, as NYU School of Law Professor Florencia Marotta-Wurgler has documented, for example, with on-line contracts;
- Businesses are not self-policing on boilerplate, or making market corrections for the consumer’s benefit. To the contrary, recent Supreme Court decisions have spurred rights-reducing action, by sanctioning, for example, mandatory arbitration and class action waivers;
- Consumer abuses in fine print will not be solved with financial literacy courses and by blaming consumers for not reading unilaterally-imposed contracts, which they cannot understand if they do, and then don’t necessarily use to make decisions, as Loyola Law School Los Angeles Professor Lauren Willis and others have ably documented;
- Despite decades of computer use, inadequate corporate transparency regulation means that in many industries terms of service are still not online; it is often difficult to obtain copies of the contracts—until after becoming a customer for the underlying product or service. This has the additional potential to skew academic research to on line industries, and not necessarily where some of the gravest rights-reducing behavior may exist, e.g., in harder-to-obtain nursing home or employment contracts.
- The judiciary applies antiquated tenets of contract law—in a legal fiction—that upholds abusive provisions in a case-by-case unconscionability analysis, primarily enforcing them by continuing to place the outdated “duty to read” on consumers, including those who patently cannot. Consumers face a curtailed potential for redress, especially when coupled with disappearing class action potential.
- Federal and state agencies to date have not allocated significant resources for a much needed focus on the corporate fine print—not even at the bully pulpit level—nor have they posited suitable alternatives.
- Instead of Congress doling out more regulatory authority to agencies (as they did with the CFPB and the SEC and as they should to help fix this), for example, members continue to contest the CFPB, have failed to grant the Federal Trade Commission Administrative Procedures Act rulemaking authority, leaving it hamstrung, and have failed to hold hearings on the widespread abuses of boilerplate affecting tens of millions of Americans daily.
We at Fair Contracts believe that there should be greater focus on seeking a systemic, upstream solution to boilerplate. Though some would hang their hats on piecemeal “improved disclosure” as a least invasive means of correction, such a course of action alone is tepid and wholly inadequate to the serious problems documented by Radin and others.
Nor must we only wait for the next glacial restatement of contract law, or a revolution of contract theory that reverses the legal presumption of enforcement of harmful contract terms, or a different way to analyze the legality of fine print contracts, including treating them as torts as all of these are definitely long, long, long-run solutions.
Intermediary, if admittedly only partial, remedial steps exist that we should explore for innovation that could lead to a better future for consumers, including:
- Dramatic elevation of public awareness of the rights removal hazards contained within the fine print, with a multi-pronged education and media campaign;
- Significant increases in data collection of contracts and scholarship across multiple industries, with more empirical research to ascertain the prevalence of harmful consumer provisions, their collusive origins, and their negative economic consequences, with examples of how consumer harm is caused to large categories of people who forfeit their rights without knowledge of doing so;
- Promulgation of a model set of principles for provisions within, and reform of, the fine print;
- Outright legislative and regulatory bans (or workarounds – through ombudsman consumer review boards) on contract provisions that undermine the rule of law, fair competition and democracy, including the deprivation of consumers of the civil justice system and their First Amendment rights, vendor assertions of no accountability (thus allowing contract law to eat tort law alive) and consumer disadvantageous unilateral modification powers;
- Development of model state and federal legislation to ensure a fair regulatory playing-field;
- Development of a “fair trade” or “hypoallergenic” or “green-star energy-efficient”-type seal that does not necessarily signal a “fair contract” but does signal the absence of a known set of provisions that reduce consumer rights for those consumers who care about them, which should be most if the educational goals were attained, and thus obviate the need to read through the fine print for at least that standardized set of terms symbolized by the seal. This would permit consumers an actual market within which to shop, should government fail to act to preserve their rights; and
- Studying the consequences from other countries which are ahead in consumer protection. There is a reason that the EU black and grey lists terms, as does Australia: They are unfair to consumers and their governments do not let corporations dictate all the terms, rewriting and undermining in a private ordering those public policies passed as legislation. In early April 2013, The Consumer Council of Hong Kong urged businesses to produce short and simple contracts that eliminate unfair terms and is starting to provide model contracts. See: http://www.consumer.org.hk/website/ws_en/competition_issues/policy_position/2012040301.print
We should be debating these matters in the United States. We need an organized consumer constituency to reverse the contract peonage so reform efforts may gain the momentum needed to create alternatives to the unilateral, corporate-dictated status quo.
[Posted, on Theresa Amato's behalf, by JT]
Monday, May 13, 2013
Boilerplate Symposium I: Peter Alces on Consent
This is the first in a series of posts reviewing Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law.
In this fine book, Margaret Jane Radin concludes that “consent” lacks a reality referent in contract. That is, somewhere between what she describes as “World A (Agreement),” the universe of enforceable promises negotiated “at arms’ length” by parties of similar relative sophistication, and “World B (Boilerplate),” where standard and oppressive terms effect normative and democratic degradation, consent is lost. This conclusion is not shocking; it is difficult to think of anyone (probably including even Randy Barnett) who honestly believes that real consent has very much to do with most (even virtually all) contracting these days. So we can all agree: where there is boilerplate, there is no “meaningful” consent, which is to say there is none of the consent that should matter to contract. From that premise, Professor Radin concludes that World B is not a contracts universe at all, but is instead a realm better understood by reference to tort principles (and it is even worse than Grant Gilmore ever imagined).
But once we acknowledge the death of consent, how much more new is there to say about boilerplate? You could despair with Professor Radin that political forces make it unlikely that the American justice system will respond as would the European Union; that consequentialist apologists rely on arm chair empirical assumptions without actually doing the necessary math; that by a 5-4 decision of the United States Supreme Court the Federal Arbitration Act has been contorted to undermine our justice system; that a curiously reasoned decision of the United States Court of Appeals for the Seventh Circuit has somehow become the prevailing (if not final) word on contract formation: but at the end of the day, it is difficult to identify certainly the extent of the harm or glimpse a viable cure. (Those troubled by boilerplate need to do the same math they complain form contracts proponents fail to do.)
While Professor Radin is right that there are distinguishable Worlds of contract, she does not make clear enough that the two Worlds are on a continuum; they are not so clearly dichotomous. Further, the contours of the continuum are obscure: many very sophisticated people know quite well what they are giving up when they sign a form contract or click “I agree," and yet do so willingly. That is generally the rational thing to do. Now Boilerplate does put boilerplate on a three dimensional matrix that would be sensitive to degrees of consent, alienability of the right in issue, and the size of the cohort prejudiced. But in describing Worlds A and B in dichotomous terms, the book may obscure the reasons why it remains rational to agree to form contracts, without reading their terms. So I think the book would have been stronger had it described Worlds A and B along a fourth dimension.
What Professor Radin has to say about consent is surely true, but what she says is really a truism: we know that consent is a conclusion rather than an analytical device, and that consent is also a term of art, largely divorced from the important normative work it can do in World A. What we do not know, though, is when World A becomes World B: it is not just the case that all form contracts are World B contracts. Whether a contract is World A or World B is a function of the very factors that contract doctrine could take seriously, if the composition of the Supreme Court were different, and if all Federal Courts of Appeal judges knew a bit more about the common law of contract and the UCC.[Posted, on Peter Alces's behalf, by JT]
Boilerplate Symposium: The First Five
We begin our online symposium on Margaret Jane Radin's book, Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law with five posts this week. This post will serve to introduce our guest bloggers.
Peter A. Alces is the Rollins Professor of Law and Cabell Research Professor of Law at the College of William & Mary School of Law, where he has taught since 1991. He is the author of A Theory of Contract Law: Empirical Insights and Moral Psychology; Commercial Contracting; The Law of Suretyship and Guaranty; Bankruptcy: Cases and Materials; Cases, Problems and Materials on Payment Systems; The Commercial Law of Intellectual Property; Sales, Leases and Bulk Transfers; The Law of Fraudulent Transactions; and Uniform Commercial Code Transactions Guide. He has also published articles in the Northwestern, Michigan, Minnesota, Illinois, North Carolina, Fordham, California, Texas, and William and Mary Law Reviews, and the Emory, Ohio State and Georgetown Law Journals.
Theresa Amato is the executive director Citizen Works which she started with Ralph Nader in 2001. After earning her degrees from Harvard University and the New York University School of Law, where she was a Root-Tilden Scholar, Amato clerked in the Southern District of New York for the Honorable Robert W. Sweet. She was a consultant to the Lawyers Committee for Human Rights (Human Rights First) and wrote an influential human rights report on child canecutters in Haiti and the Dominican Republic. She then became the youngest litigator at Public Citizen Litigation Group, where she was the Director of the Freedom of Information Clearinghouse in Washington D.C. In 1993, Amato founded the nationally-recognized, Illinois-based Citizen Advocacy Center and served as its executive director for eight years. She currently serves as its Board President. Most recently, she has launched Fair Contracts.org to reform the fine print in standard form contracts. In 2009, The New Press (New York) published her book, Grand Illusion: The Myth of Voter Choice in a Two-Party Tyranny. She also appears prominently in the Sundance-selected and Academy Awards short-listed documentary “An Unreasonable Man.”
Andrew Gold is a professor of law at the Depaul University College of law. His primary research interests address legal theory and the law of corporations. Following graduation from Duke University School of Law, he clerked with the Honorable Daniel Manion of the Seventh Circuit, and with the Honorable Loren Smith of the Court of Federal Claims. After his clerkships, he joined Skadden, Arps, Slate, Meagher & Flom, where he practiced corporate litigation. Professor Gold's article, "A Property Theory of Contract," was lead article in the 2009 volume of the Northwestern University Law Review. His recent publications also include articles in the William and Mary, U.C. Davis, and Maryland law reviews. In 2007, Professor Gold received the College of Law's Award for Excellence in Scholarship, and, in 2010, he received the Award for Excellence in Teaching. During the 2011-2012 academic year, Professor Gold was a Visiting Scholar at Harvard Law School, and in Fall 2011, he was an HLA Hart Visiting Fellow at the University of Oxford. His scholarship has focused on contract theory; private law theory; fiduciary duties in corporate law; and Section 10(b) of the Securities Exchange Act.
David Horton joined the UC Davis faculty in 2012, after three years at Loyola Law School, Los Angeles. He received his B.A. cum laude from Carleton College in 1997 and his J.D. from UCLA School of Law in 2004. At UCLA, he was elected to the Order of the Coif and served as Chief Articles Editor of the UCLA Law Review. He then practiced at Morrison & Foerster in San Francisco and clerked for the Honorable Ronald M. Whyte of the United States District Court for the Northern District of California. From 2007 to 2009, he taught legal research and writing at UC Berkeley School of Law. Horton’s research focuses on wills and trusts, federal arbitration law, and contracts. His recent work has appeared or will soon appear in the NYU Law Review, Northwestern University Law Review, Georgetown Law Journal, UCLA Law Review, Notre Dame Law Review, North Carolina Law Review, University of Colorado Law Review, and Virginia Law Review in Brief, among others. He also wrote an amicus brief on behalf of contracts professors in AT&T Mobility LLC v. Concepcion, the recent Supreme Court case.
Ethan J. Leib is a noted expert in constitutional law, legislation, and contracts. His most recent book, Friend v. Friend: Friendships and What, If Anything, the Law Should Do About Them (2011), explores the benefits of legal recognition of friendship and was published by Oxford University Press. He has three forthcoming articles on public law subjects: one in the Journal of Political Philosophy examining fiduciary principles in political representation; one in the California Law Review applying the fiduciary principle to the activity of judging within democracies; and one in The University of Chicago Law Review exploring whether elected judges should be interpreting statutes differently from their appointed colleagues. Leib's other academic writing has appeared in journals such as the Yale Law Journal, Northwestern University Law Review, UCLA Law Review, Constitutional Commentary, Election Law Journal, Journal of Legal Education, Law & Philosophy, and elsewhere. He has also written for a broader audience in the New York Times, USA Today, SF Chronicle, Policy Review,Washington Post, New York Law Journal, The American Scholar, and The New Republic. Before joining Fordham, Leib was a Professor of Law at the University of California–Hastings. He has served as a Law Clerk to Chief Judge John M. Walker, Jr., of the U.S. Court of Appeals for the Second Circuit and as an Associate at Debevoise & Plimpton LLP in New York.
We look forward to a stimulating fortnight of exchanges on this important new book.
Thursday, May 9, 2013
Plain Meaning Leads to Mood Indigo for Ellington Heir
Duke Ellington’s grandson brought a breach of contract action against a group of music publishers; he sought to recover royalties allegedly due under a 1961 contract. Under that contract, Ellington and his heirs are described as the “First Party” and several music publishers, including EMI Mills, are referred to as the “Second Party.” On appeal from the dismissal of the case, Ellington’s grandson pointed to paragraph 3(a) of the contract which required the Second Party to pay Ellington "a sum equal to fifty (50 percent) percent of the net revenue actually received by the Second Party from…foreign publication" of Ellington's compositions. Ellington’s grandson argued that the music publishers had since acquired ownership of the foreign subpublishers, thereby skimming net revenue actually received in the form of fees and, in turn, payment due to Ellington’s heirs.
The appellate court explained the contract and the grandson’s argument:
This is known in the music publishing industry as a "net receipts" arrangement by which a composer, such as Ellington, would collect royalties based on income received by a publisher after the deduction of fees charged by foreign subpublishers. As stated in plaintiff's brief, "net receipts" arrangements were standard when the agreement was executed in 1961. Plaintiff also notes that at that time foreign subpublishers were typically unaffiliated with domestic publishers such as Mills Music. Over time, however, EMI Mills, like other publishers, acquired ownership of the foreign subpublishers through which revenues derived from foreign subpublications were generated. Accordingly, in this case, fees that previously had been charged by independent foreign subpublishers under the instant net receipts agreement are now being charged by subpublishers owned by EMI Mills. Plaintiff asserts that EMI Mills has enabled itself to skim his claimed share of royalties from the Duke Ellington compositions by paying commissions to its affiliated foreign subpublishers before remitting the bargained-for royalty payments to Duke Ellington's heirs.
Ellington’s grandson asserted on appeal that the agreement is ambiguous as to whether "net revenue actually received by the Second Party" entails revenue received from EMI Mills's foreign subpublisher affiliates. The appellate court found no ambiguity in the agreement; the court stated that the agreement “by its terms, requires EMI Mills to pay Ellington’s heirs 50 percent of the net revenue actually received from foreign publication of Ellington’s compositions.” It reasoned:
"Foreign publication" has one unmistakable meaning regardless of whether it is performed by independent or affiliated subpublishers. Given the plain meaning of the agreement's language, plaintiff's argument that foreign subpublishers were generally unaffiliated in 1961, when the agreement was executed, is immaterial.
The court continued by stating that “the complaint sets forth no basis for plaintiff's apparent premise that subpublishers owned by EMI Mills should render their services for free although independent subpublishers were presumably compensated for rendering identical services.” Thus, dismissal of the suit was affirmed.
Ellington v. EMI Music, 651558/10, NYLJ 1202598616249, at *1 (App. Div., 1st, Decided May 2, 2013).
[Meredith R. Miller]
Foretaste of Our Online Symposium on Margaret Jane Radin's Boilerplate
Next week, we will begin an online sympsoium on Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law. Here is a description of the book provided by the publisher's websit
Boilerplate--the fine-print terms and conditions that we become subject to when we click "I agree" online, rent an apartment, enter an employment contract, sign up for a cellphone carrier, or buy travel tickets--pervades all aspects of our modern lives. On a daily basis, most of us accept boilerplate provisions without realizing that should a dispute arise about a purchased good or service, the nonnegotiable boilerplate terms can deprive us of our right to jury trial and relieve providers of responsibility for harm. Boilerplate is the first comprehensive treatment of the problems posed by the increasing use of these terms, demonstrating how their use has degraded traditional notions of consent, agreement, and contract, and sacrificed core rights whose loss threatens the democratic order.
Margaret Jane Radin examines attempts to justify the use of boilerplate provisions by claiming either that recipients freely consent to them or that economic efficiency demands them, and she finds these justifications wanting. She argues, moreover, that our courts, legislatures, and regulatory agencies have fallen short in their evaluation and oversight of the use of boilerplate clauses. To improve legal evaluation of boilerplate, Radin offers a new analytical framework, one that takes into account the nature of the rights affected, the quality of the recipient's consent, and the extent of the use of these terms. Radin goes on to offer possibilities for new methods of boilerplate evaluation and control, among them the bold suggestion that tort law rather than contract law provides a preferable analysis for some boilerplate schemes. She concludes by discussing positive steps that NGOs, legislators, regulators, courts, and scholars could take to bring about better practices
But before we kick off the symposium, we have a timely new review of the book from Omri Ben-Shahar (pictured) that is forthcoming in the Michigan Law Review. The review is entitled Regulation through Boilerplate: An Apologia, and here is a description from SSRN:
This essay reviews Margaret Jane Radin’s Boilerplate: The Fine Print, Vanishing Rights, And The Rule Of Law (Princeton Press, 2013). It responds to two of the book’s principal complaints against boilerplate consumer contracts: that they modify people’s rights without true agreement to, or even minimal knowledge of, their terms; and that the provisions they unilaterally enact are substantively intolerable. I argue, counter-intuitively, that contracts with long fine prints are no more complex and baffling to consumers than any alternative boilerplate-free templates of contracting. Therefore, there is no alternative universe in which consumers enter simpler contracts better informed of the legal terms. In addition, I argue that any policy that mandates consumer-friendlier arrangements (such as ones that eliminate boilerplate arbitration clauses, warranty disclaimers, or data collection) would hurt consumers in an unintended but potentially costly way.