ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Friday, May 25, 2018

Trump Seeks to Alter Post Office Contracts with Amazon

As widely reported in, for example, the Washington Post, whose owner founded Amazon, President Trump has pushed Postmaster General Megan Brennan to double the rate that the post office charges Amazon.com and some, but not all, similar online retailers.  

The contracts between the Postal Service and Amazon are secret out of concerns for the company's delivery systems.  They must additionally be reviewed by a regulatory commission before being changed.  That, perhaps unsurprisingly, does not seem to phase President Trump who appears to be upset at both Amazon and the Washington Post.   The dislike of the latter needs no explanation, but why Amazon?  Trump has accused it of pushing brick-and-mortar stores out of business.  Others point out that if it weren't for Amazon, it is the post office which may be out of business.

Aside from the political aspects of this, does Trump have a point?  Is Amazon to blame for regular stores going out of business?  I am no business historian, but it seems that Amazon and others are taking advantage of what the marketplace wants: easy online shopping.  Yes, it is very sad that smaller, "regular" stores are closing down, most of us probably agree on that.  But retail shopping and other types of business contracting will evolve over time as it has in this context.  That's hardly because Amazon was founded; surely, the situation is vice versa.  Such delivery services are fulfilling a need that arose because of other developments.

From an environmental point of view, less private vehicle driving (for shopping, etc.) is better.  Concentrating the driving among fewer vehicles (FedEx, UPS, USPS, etc.) is probably better, although I have done researched this statement very recently.  One fear may be the additional and perhaps nonexistent/overly urgent need for stuff that is created when it becomes very easy to buy, e.g., toilet paper and cat litter online even though that may in and of itself create more driving rather than just shopping for these items when one is out and about anyway, but that is another discussion.

Suffice it to say that Trump should respect the federal laws governing the Postal Service _and_ existing contracts. What a concept!  If the pricing structure should be changed, it clearly should not be done almost single-handedly by a president.  

Meanwhile, the rest of us could consider if it is really necessary to, for example, get Saturday snail mail deliveries and to pay only about 42 cents to send a letter when the price of such service is easily quadruple that in other Western nations (Denmark, for example, where national postal service has been cut back to twice a week only and where virtually all post offices have been closed).  Fairly simple changes could help the post office towards better financial health.  This, in turn, would help both businesses and private parties.  

 

May 25, 2018 in Commentary, Current Affairs, E-commerce, Government Contracting, In the News, Legislation | Permalink | Comments (0)

Thursday, May 24, 2018

In which we are cited as evidence in a case

The life of a blogger can sometimes feel like toiling sometimes in relative obscurity. And then there's the moment when you get cited as evidence in a case!

A recent decision out of the District of Columbia in Mawakana v. Board of Trustees of the University of the District of Columbia, 14-cv-02069-ABJ, referenced ContractsProf Blog. The case was a tenure dispute between the plaintiff professor and the defendant university. The plaintiff alleged he was denied tenure because of racial discrimination. The defendant moved for summary judgment, which was granted. 

Part of the plaintiff's evidence was a number of favorable comments on his scholarship, including "honorable mention from ContractsProf Blog." The court cites to the plaintiff's opposition, which is sealed, so I can't see exactly what was stated about the entry. I found the school's write-up of it, but the link the school provides to the blog entry doesn't work for me (maybe my computer is just being fickle and you'll have better luck). 

Despite the favorable comments, including the ContractsProf Blog entry, the court noted that there were also less favorable comments about the plaintiff's scholarship (the court actually noted in a footnote that one of the reviewers did not give the ContractsProf Blog honorable mention "any weight"). The court also found that the favorable comments did not mean that the plaintiff's denial of tenure must have been based on racial discrimination. The court eventually concluded, after much analysis (a great deal of it redacted), that the plaintiff wished for the court "to weigh in on the merits of the University's academic judgments in a manner that is contrary to the legal principles governing these disputes." 

The court also found the plaintiff's contract claims to be time-barred, but, even if not time-barred, not supported by evidence. 

(This is not, btw, the first time we blogged about this case.)

h/t to Prof. Eric Goldman at Santa Clara for sending this case to our attention!

 

May 24, 2018 in Contract Profs, Labor Contracts, Law Schools, Recent Cases, True Contracts, Weblogs | Permalink | Comments (0)

Wednesday, May 23, 2018

Banks Violating Federally Mandated Contract Law Provisions

PNC Bank, Wells Fargo and U.S. Bank have been sued for charging interest from homeowners paying off their mortgages early without disclosing how to avoid the charges in spite of HUD rules requiring the latter (and, in the case of one California plaintiff, the California Unfair Competition Law).  When do they ever learn, you ask yourself? - Not soon enough, seems to be the answer. 

This is how the most recent scandal went down (and might still be, so anyone wishing to pay off their mortgages before time, be aware): Homeowners paying off their mortgages ahead of schedule were charged “post-payment interest charges” for the entire month in which the loan was otherwise paid off.  What’s the big deal, you ask yourself?  Consider this: Lead California plaintiff Sandi Vare alleged that she asked PNC for a payoff statement when refinancing her home in July 2016.  She was charged $1,227.16 in interest for the entire month, despite the fact that her loan was paid off on July 16; roughly $600 too much.  Even for you and I, that’s a good chunk of change. Images-1

Banks, it seems, try whatever they can to fog and outright cheat their own clients in many contexts and certainly in the home financing/refinancing ones.  I am personally altering my home loan with Wells Fargo to 1) pay a chunk extra into the principal and 2) pay the loan off in a shorter timeframe than the current one.  The amount of fogging and, in effect, secret “code talk” one has to be subject to or use to achieve such a simple objective is amazing.  For example, if one does not mention the word “recast,” the bank representative may not mention this or may not outline the otherwise relatively advantageous terms of obtaining such a contractual amendment. If one does not very specifically ask for the interest rates and amounts per month, total loan period and interest vs. principal amount, etc. (you get it), the bank – at least Wells Fargo – does not seem to lay out all the details that could work in the borrower’s favor.  Granted, they do if one asks them to do so, but is this this amount of fogging, secrecy, and, in the case of the above-mentioned lawsuit, outright disregard of not only contractual ethics, but also state and federal law what we wish to accept as society just so that banks, who have repeated proved to not follow the law, ethics or even sound market-based risk principles, can continue to make money on services that their customers actively seek to avoid?  One would hope not, but as this case shows, more litigation is apparently needed to continue reigning in overly greedy banks. Images

The case is Vare et. al v. PNC Bank, U.S. District Court for the Northern District of California, 18-2988. The lawsuit is asking for a nationwide class for breach of contract.  Wells Fargo and U.S. Bank defeated nationwide class status last year as too many state-specific rules were involved in that case. 

May 23, 2018 in Commentary, Current Affairs, In the News, Legislation, True Contracts | Permalink

When Law Schools Sue to Continue Questionable Practices

The dream of becoming a practicing attorney still attracts many students to law school.  As we know, many will make it in the legal industry, but many will never get a chance as they will either be attrited from their law schools or, yet worse, never be able to pass the bar.  Still, many law schools continue contracting with students they know have a poor chance of ever making it.  From a contracts point of view, this is arguably at least bad faith in contracting if not worse.  See well-known bar passage analyst David Frakt's blog on the issue here.

 

May 23, 2018 in Contract Profs, Current Affairs, In the News, Law Schools | Permalink

Tuesday, May 22, 2018

Update: In Which Arbitration Reigns Supreme (Supreme Court Kind-Of Pun Intended)

I just blogged about the Ninth Circuit case of Morris v. Ernst & Young, and the Supreme Court has now come out with its decision, reversing the Ninth Circuit (shorter analysis here). Where the Ninth Circuit found that arbitration clauses prohibiting concerted actions by employees violated the National Labor Relations Act, the Supreme Court found that permitting concerted actions by employees where arbitration clauses existed would violate the Federal Arbitration Act. Justice Ginsburg wrote a long dissent; the majority opinion was written by Justice Gorsuch. The trend out of the Supreme Court has been that arbitration trumps every other policy. The Federal Arbitration Act is like the royal flush of statutes.

In a world where contracts with arbitration clauses govern almost every imaginable transaction, courts are forced into interesting decisions to press against the primacy of arbitration. So, for instance, on the same day the Supreme Court handed down its decision, the Western District of Pennsylvania declined to enforce an arbitration provision in Jones v. Samsung Electronics America, Case No. 2:17-cv-00571-MAP (behind paywall). Jones sought to bring a class action against Samsung based on alleged defects in its S3 cell phones. Samsung sought to arbitrate, citing the contract allegedly contained in the instruction booklet included with the phone. But the court disagreed that the arbitration clause was enforceable. It found that the clause was "tucked away" in a section entitled "Manufacturer's Warranty" contained in a 64-page booklet. The court agreed that the clause might possibly have been more inconspicuous, but found that

the degree of prominence of the Arbitration Agreement here seems calibrated with dual goals: on the one hand, just enough to persuade a court to smother potential litigation; on the other hand, not enough to make it likely that a consumer will actually notice the Agreement and perhaps hesitate to buy. It is one thing to hold consumers to agreements they have not read; it is another to hold them to agreements that, perhaps by design, they will probably never know about.

The court's decision here makes some sense, but it seems rooted in a somewhat fictional hypothetical. I don't know but I feel like Samsung could sell its phones with an instruction booklet with "ARBITRATION CLAUSE" in big, bold, red letters with exclamation points on the front of it, and I'm not sure it would in fact cause most consumers to "hesitate to buy," especially not if the majority of other cell phones contain similar arbitration clauses (the major cell phone carriers do).

But the bigger fiction at issue here is the idea that we're all "voluntarily" entering into these contracts. I mean, we are, to the extent that it's "voluntary" to have a cell phone in today's world. The answer to that question is: It is, to some extent, but not to the extent that we're willing to forego one entirely based on the mere possibility we might want to sue someday and can't. We all take risks, and maybe the court's view is this a risk that doesn't pay off for the consumer, oh, well, but it seems like the consumer has almost no power to take any other kind of risk. (This is, of course, not limited to cell phone contracts. So the real question is: is it "voluntary" to be a consumer in our capitalist society?) Likewise, is it "voluntary" to accept a job that require arbitrations, if you need a job to survive and jobs without arbitration clauses might be tough to come by?

There are statutory ways to shift the supremacy of arbitration, of course, as the Supreme Court's decision acknowledges. And at one point the FCC was contemplating doing something about the type of arbitration clause the court looked at in Jones. Maybe add it to your list of things to contact your representatives about, if you so desire.  

May 22, 2018 in Commentary, Labor Contracts, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Wednesday, May 16, 2018

The interplay between arbitration clauses in employment contracts and labor laws

A recent case out of the Southern District of California, Davis v. Red Eye Jack's Sports Bar, Inc., Case No.: 3-17-cv-01111-BEN-JMA (behind paywall), found an arbitration clause in an employment contract unenforceable because it contained a concerted action waiver. Such a waiver violates labor law policy protecting employees' right to concerted legal claims. The court found that the waiver rendered the entire arbitration agreement unenforceable. 

However, the Supreme Court has granted review in the Ninth Circuit case of Morris v. Ernst & Young, LLP, whose precedent this court followed in its ruling. Therefore, the court stayed the action pending the Supreme Court's decision in Morris, as a reversal of Morris would dictate a different outcome to this case. 

 

May 16, 2018 in Labor Contracts, Recent Cases, True Contracts | Permalink | Comments (0)

Monday, May 14, 2018

Secondary-market ticket brokers, "derivative works," and preliminary injunctions

In a copyright-ish case falling under the contract umbrella, Broker Genius, Inc. v. Volpone, 17-cv-8627 (SHS), a recent case out of the Southern District of New York, is a contract case where the likelihood of irreparable harm leads to the court granting a preliminary injunction. 

The case involves software used by secondary-market ticket brokers. Broker Genius owns a particular application, and those who use the application agree to terms of use that prohibited them from creating and distributing "derivative works" of the application. 

The court found that the defendants in this case agreed to be bound by the terms of use: They were required to expressly consent to the terms, which were readily viewable by hyperlink, in order to use the website. The defendants might not have had any memory of clicking their assent, but Broker Genius's evidence was sufficient to establish that the parties had entered into a contract. 

The parties agreed that the "derivative work" clause in the terms of use was not a noncompetition clause. Broker Genius's customers were allowed to compete against Broker Genius; they just couldn't develop a "derivative" software application. The parties agreed to use the dictionary definition of "derive" to interpret the contract: "something that originates from something else." 

The court concluded this meant that the products would be similar and that the similarities in the second product would be traceable to the first. The court found the defendants' software to be "extraordinarily similar" to Broker Genius's software, and those similarities were traceable to Broker Genius, due to the defendants' access to Broker Genius's software and the fact that the defendants' creation of their software happened "immediately" after accessing Broker Genius's software. The court acknowledged that some of the similarities predated Broker Genius's software, or were "logical or obvious," and that defendants had prior knowledge and experience in the industry. However, the weight of the evidence led to a finding that Broker Genius was likely to succeed on its breach of contract claim. 

The court also found that defendants' derivative product was causing Broker Genius to suffer a loss of reputation and good will, which could not be compensated with monetary damages. Therefore, the court issued a preliminary injunction. 

May 14, 2018 in Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Wednesday, May 9, 2018

Just to reiterate, fraudulent inducement claims go to arbitration, too

A recent case out of the Eastern District of Missouri, Schoemehl v. Unwin, No. 4:18-cv-00031-JAR, underlines the fact that arbitration is favored in this country, including to decide claims of fraudulent inducement to enter into the contract in the first place. The plaintiff tried to argue that he would not have agreed to the arbitration clause were it not for the alleged fraud committed by the defendant. However, the court noted that the Federal Arbitration Act requires fraud in the inducement of a contract to be submitted to arbitration. Fraud in the inducement of the arbitration clause specifically would be a different question, but the plaintiff was not alleging that. The fraud in plaintiff's allegations went to the substance of the entire contract, and there was nothing about the validity of the arbitration clause itself as separate from the rest of the contract. Therefore, the court stayed the action pending arbitration. 

May 9, 2018 in Recent Cases, True Contracts | Permalink | Comments (0)

Monday, May 7, 2018

When gyms are hazardous to your health

It's been a while since I blogged about release of liability clauses in the context of gyms. In case you were missing them, here's a recent one, again out of Pennsylvania, Vinson v. Fitness & Sports Clubs, LLC, No. 2875 EDA 2016

Vinson was a member of an L.A. Fitness gym. While using the gym, she tripped and fell on a wet floor mat and suffered injuries. She sued L.A. Fitness for negligence. L.A. Fitness pointed to its clause in its membership agreement releasing it from liability for, inter alia, "accidental injuries." The trial court granted L.A. Fitness's motion for summary judgment on the basis of this clause, and Vinson appealed, arguing that the clause was invalid as against public policy because her claims involved the maintenance of gym facilities, which was "a vital matter of public health and safety." L.A. Fitness argued that the membership agreement was merely a contract between two private parties and did not implicate public policy. 

The court sided with L.A. Fitness. The court noted that, in other cases, courts had upheld the identical clause in L.A. Fitness's membership agreement. There were no factual differences in Vinson's case that set it apart from these other cases. Vinson joined the gym voluntarily and went to the gym voluntarily. She chose to subject herself to the provisions of the membership agreement. Public policy did not point against its enforcement. 

May 7, 2018 in Recent Cases, True Contracts | Permalink | Comments (0)

Wednesday, May 2, 2018

Minor's disaffirmance of a contract frees them from the arbitration provision, too

I never spend a lot of time on minors and contracts, because I teach a one-semester Contracts course and it just has to keep moving, but this is an interesting case delving into the issue in much more detail than I can get around to, recently out of the Northern District of California, T.K. v. Adobe Systems Inc., Case No. 17-CV-04595-LHK (behind paywall). 

T.K. was a minor who was given a license to access Adobe's Creative Cloud Platform. In order to access the platform, T.K. agreed to the terms of service. The license auto-renewed after a year, and T.K. contacted Adobe to disaffirm renewal of the license. Adobe eventually (although apparently not immediately) refunded T.K.'s money for the renewal, but T.K. sued alleging injury because she was deprived for some time of use of the funds auto-debited by Adobe. T.K. alleged that Adobe initially refused to allow T.K. to disaffirm the auto-renewal, in contravention of law. (T.K. also alleged that Adobe's terms of service implied that users still had to pay even after cancellation, also in contravention of law. I'm not going to focus on that, but the allegation did survive the motion to dismiss.)

Adobe argued that T.K. was relying on the choice of law provision in the disaffirmed contract and so should also be held to the arbitration provision of that contract, because minors cannot cherry-pick which portions of a contract they disaffirm. The court, however, said that T.K. was not cherry-picking. Rather, T.K. had disaffirmed the entire contract. The reference to the choice of law provision was only to buttress her independent choice of California law to resolve the dispute between the parties. Therefore, T.K. was not bound by the arbitration provision. 

The opinion discusses lots more causes of action, if you're curious. 

 

 

May 2, 2018 in E-commerce, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (1)

Monday, April 30, 2018

Opting out of Facebook once you've opted in (or, you can check out anytime you like, but you can never leave)

In the earlier years of the twenty-first century, I did what now literally billions of people have done and opened a Facebook account. I didn't use it for very long, and in fact I stopped using it probably almost ten years ago at this point. I stopped for a variety of reasons, but I left the account up because of that rule about how bodies at rest tend to stay at rest, I suppose. I didn't use it, it was just a passively existing thing, and it seemed like effort to get rid of it. 

With everything coming out about Facebook and data, I started wondering why I still had that account sitting there. I didn't think Facebook had a whole lot of data on me since I'd stopped using it so many years ago, but I figured, What was the point of giving it any info on me at all? Why not just delete the account?

I don't know if you've ever tried to delete your Facebook account. There are two options: deactivation, which deactivates your account but continues its existence, or deletion, which actually deletes your account. I wanted the latter, which requires you to fill out a contact form saying you would like to delete your account. So, in January, I filled out the form and received a verification email saying that my account would be deleted within the next two weeks, and I moved on with my life. 

Except. No, I didn't. Because Facebook kept emailing me little updates about my friends on Facebook, even though I kept clicking the "unsubscribe" link to try to get out of the emails. And then an email came in saying that someone had sent me a message. Which seemed like something they shouldn't be able to do if my account was deleted. I asked a friend still on Facebook to check for me, and she said that yup, I was still on Facebook. My account had never been deleted. 

And now's where the confusion really started, because, well, after literally months of dealing with this, I have to admit: I have no idea how to contact Facebook without being on Facebook. It's so convoluted that in fact an entire scam has mushroomed up around it, taking advantage of people who just want to try to get in touch with Facebook.

Facebook's log-in page (if you're logged out of Facebook) has no real contact info on it. The "About" link takes you to Facebook's Facebook page (so meta!), which contains links to a "website" and "company" info, both of which take you to "Page Not Found" pages, which is kind of hilarious to me. It seems to recommend you use Facebook Messenger to contact them, but...I'm not on Facebook Messenger. That's the whole point.

When you click on the "Help" link, it takes you to a FAQ page divided by topics, some of which are about account deletion but it seems to just be a bunch of people complaining about how Facebook won't delete their accounts. Or, what's worse, suggesting you call a customer service number that seems to be a scam, as evidenced by complaints here and here; by the fact that NPR did a previous story on the fact that Facebook has no customer service number; and the fact that Facebook itself appears to say it's a scam, as the below Google snippet shows:

Facebook

That link looked to me like exactly what I'm trying to track down, so I clicked on it, but, alas, it's only available to me if I join Facebook. 

So it looks like, once you've opted into Facebook, there really is no opting out. I've tweeted at them  with no response and tried some general email addresses (info@facebook; support@facebook) with no response. The emails I keep trying to unsubscribe from give me a physical mailing address, so I guess I could send them a letter asking them to follow through and delete my account and also unsubscribe me from the email lists, but I'm not hopeful that will get a response, either. 

I am hardly the first person to realize that Facebook is nearly impossible to get in touch with (the Sikhs for Justice case seems to have kicked off based at least in part on an inability to get any substantive responses from Facebook), but it seems like, in the wake of a lot of questions about control over our own data, our first step might at least make it a requirement that websites provide contact info for discussions about that data -- contact info that doesn't require you to first "opt in" to their terms and conditions (which is exactly what I'm trying to get out of!). 

We've been doing a lot of talking about the terms and conditions we agree to without reading them, and I guess I always assumed that if I changed my mind, I could back out. Facebook's terms and conditions even allow for that, stating that I can delete my account at any time. But it has turned out not to be nearly so simple, and I am literally flummoxed as to what options I have, seeing as how I don't really feel like going to court in the State of California, as required by the terms and conditions. It looks like I have an account on Facebook, whether I like it or not, for the foreseeable future. You don't realize how much privacy you've already given up until you try to get just a bit of it back. 

April 30, 2018 in Commentary, Current Affairs, In the News, True Contracts, Web/Tech | Permalink | Comments (0)

Friday, April 27, 2018

Fun with renewal options, and waivers, and counteroffers!

A recent case out of the District of New Mexico, Bar J Sand & Gravel, Inc. v. Fisher Sand & Gravel Co., No. Civ. 15-228 SCY/KK (behind paywall), offers up a waiver fact pattern. The parties had a contract with a renewal option that stated that written notice of intent to exercise the renewal option had to be received within 120 days of the initial contract expiring. Fisher indisputably provided the written notice after the 120-day deadline. Fisher, no longer wanting to be in a contract with Bar J due to disputes over terms, argued that this meant its written notice was ineffective but Bar J argued that it had waived the 120-day requirement. 

The court agreed. Bar J and Fisher had discussions about the written notice and Bar J indicated to Fisher multiple times that it should send the written notice over even though it was 'technically" late. If Bar J had intended to enforce the 120-day requirement, it would not have asked Fisher to prepare and submit the late notice. Therefore, this operated as a waiver of the 120-day requirement, which Bar J was permitted to do.

However, the court found that the written notice Fisher sent was not in fact an exercise of the renewal option but rather, based on its language, some sort of counteroffer in which Fisher was requesting to renegotiate some terms. The parties did in fact discuss modification of their contractual terms and never reached an agreement on them (hence Fisher's stance in this case). Therefore, the court did not find that Fisher could be held to have renewed the agreement. 

April 27, 2018 in Recent Cases, True Contracts | Permalink | Comments (0)

Kick off the summer by celebrating excellence in the teaching of transactional law and skills

From our friends at Emory Law School:

At long last, the school year is winding down.  If you put off planning for the summer until you could catch your breath, now is the time.  Consider this:  Attending Emory Law School’s conference on the teaching of transactional law and skills on June 1st and 2nd would be a great way to kick off the summer!

Focused on fostering excellence, we’ll welcome Dean Michael Hunter Schwartz, whose keynote address on “Joy and Innovation in the Teaching of Transactional Law and Skills” is bound to energize us all.  Since the proposals are all in, you don’t have to do any work; you can come and be one of those most appreciated people – an active listener and a happy participant.

Information about registering for the conference is available here.  Please join us in Atlanta, where we’ll be celebrating all of our contributions to the field we love and paying special tribute to the first winner of the inaugural Tina L. Stark Award for Excellence in the Teaching of Transactional Law and Skills.  We look forward to welcoming you to Atlanta in June.

 

April 27, 2018 | Permalink

Wednesday, April 25, 2018

Lying about age in sports

I fell down a rabbit hole recently looking at athletes who had lied about their ages. You can find a flurry of pieces about this online, from lists purporting to gather names together (I found some here and here and here) to more in-depth examinations of the phenomenon (see here and here and here and here). I fell down the rabbit hole courtesy of stumbling across a Baseball Prospectus piece on Albert Pujols. I discovered that there had been a flurry of discussion around Pujols's age when the prospect of his next (and last) baseball contract was looming, as you can see here and here and here. I'd never paid much attention to this issue before but it's interesting to contemplate how it intersects with contract law. 

April 25, 2018 in Current Affairs, Labor Contracts, Sports, True Contracts, Weblogs | Permalink | Comments (0)

Saturday, April 21, 2018

In which we all learn a little bit about the business behind horse-drawn carriages in Nashville

A recent case out of Tennessee, Sugar Creek Carriages v. Hat Creek Carriages, No. M2017-00963-COA-R3-CV, lets us peek behind the scenes at the competition between horse-drawn carriage operators in Nashville, Tennessee. (You can listen to the oral argument here.) The defendant hired one of plaintiff's carriage operators, and the plaintiff sued based on the non-competition agreement that the employee had entered into. 

However, the court refused to enforce the non-competition agreement. The plaintiff's argument boiled down to training that it had provided to the employee, but the court warned the plaintiff that it couldn't protect itself against the employee's using general skills and knowledge learned on the job. There were no allegations of the employee having any confidential information and no allegations that any customers associated the employee with the plaintiff's business. And, in fact, the training that the plaintiff gave to the employee it actually made available to the public at large, encouraging them to use the training to go forth and start their own horse-drawn carriage businesses. So, having offered the training to others with explicit encouragement of competition, the court refused to allow the plaintiff to impose a non-competition restriction on the employee based on the same exact training. 

April 21, 2018 in Labor Contracts, Recent Cases, True Contracts | Permalink | Comments (0)

Wednesday, April 18, 2018

Assumption of risk stymies builder's impossibility argument

A recent case out of the District of Maryland, Green v. Jenkins Services, LLC, Case No. PWG-16-2572 (behind paywall), has something to say about impossibility and assumption of risk. In the case, Green hired Jenkins to demolish their fire-destroyed house and build them a new one. However, after demolition, Jenkins found that the land was unsuitable for an on-site sewage system, and therefore could not acquire the necessary permits for construction. As a result, Jenkins did not build the new house, and Green sued for breach of contract. 

Jenkins argued that it was excused from performance by impossibility, because it was not its fault that the land failed the tests the state required for building. But Green argued that Jenkins assumed the risk, since Jenkins had promised in the contract to obtain all the required permits. 

The court agreed with Green. Jenkins promised in the contract to obtain the proper permits, and Jenkins knew at the time it made this promise what the government regulations surrounding those permits were. Therefore, Jenkins assumed the risk that it might not be able to obtain the proper permits. If Jenkins had wanted to be excused from performance if the government refused to issue the permits, it should have provided so in the contract. Its failure to do meant it was in breach of contract. 

April 18, 2018 in Recent Cases, True Contracts | Permalink | Comments (0)

Tuesday, April 17, 2018

"Similar in concept" IHOP diner follow-up!

Thanks to Andy Feldstein of Huntington Technology Finance, who sent me an email after reading yesterday's IHOP post. Reading the opinion left me confused, but Andy points out that a visit to the Gunther Toody's website sheds a lot of light on the matter. Andy wrote that to the extent "similar in concept" has meaning, it's pretty clear IHOP and Gunther Toody's are two diners with extremely dissimilar concepts. Agreed. This was very helpful in clearing things up! 

April 17, 2018 in Commentary, Food and Drink, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Monday, April 16, 2018

Court answers the question: Is IHOP a diner?

I could not resist blogging this case out of the District of Colorado, Northglenn Gunther Toody's v. HQ8-10410-1045 Melody Lane, Civil Action No. 16-cv-2427-WJM-KLM (behind paywall), because it tackles these questions: "First, what is a diner? Second, is the IHOP restaurant a diner?"

I greatly enjoyed reading the court's definition of "diner," which, after evaluating expert testimony, settled on "a table service restaurant with a broad array of breakfast, lunch, and dinner offerings, most of which are perceived as American cuisine." The court then decided that IHOP qualifies as a diner. 

After that, though, things get a bit of a mess. The lease at issue prohibited the opening of "a diner similar in concept" to the one operated by the plaintiff. The court found that the parties provided it with no answer as to what that phrase meant. The court concluded it must be something more than just being "a diner," because otherwise there was no reason to include the "similar in concept" language. But plaintiff kept insisting that IHOP being a diner was enough to violate the clause. The court did not hold with that interpretation, since it left "similar in concept" with no work to do. The "concept," the court thought, had to refer to something more than just diners generally. The clause required the court to ask if IHOP was similar in concept to the plaintiff's restaurant, whereas plaintiff just kept arguing that the answer was yes, because they were both diners, without tackling the concept language (although I think the plaintiff was trying to argue that the concept was being a diner). Therefore, the court found that plaintiff offered no reasonable interpretation of the covenant and therefore there was no ambiguity. 

This ruling is confusing, because the "similar in concept" language was so slippery that no one seemed able to advance any meaningful definition of it at all...and that resulted in a finding that it was unambiguous. I would avoid this language in contracts, as I think this case proves it's actually pretty ambiguous. 

At any rate, the court went on to conclude that IHOP was not similar in concept to the plaintiff's restaurant, because the plaintiff failed to rebut the defendant's argument that they were different in concept. Which means that it sounds like there is some understanding of what "concept" means, after all...? I am confused by this case and have decided to mull it over at my local IHOP. 

April 16, 2018 in Commentary, Food and Drink, Recent Cases, True Contracts | Permalink | Comments (0)

Saturday, April 14, 2018

Settlement agreements don't release claims related to fraud around the settlement itself

A recent decision out of the Eastern District of Louisiana, In re Chinese-Manufactured Drywall Products Liability Litigation, MDL No. 09-2047 (behind paywall), stems from a multi-district litigation over the sale of Chinese drywall in the Southeast during rebuilding efforts after Hurricanes Rita and Katrina. Eventually, five individual class settlements were approved by the court. 

Later, the Burns realized that their house contained Chinese drywall that was causing a variety of problems. They filed suit and included among their claims a failure to be informed of the multidistrict litigation. InEx, the particular defendant who supplied the Chinese drywall at issue in the Burns situation, alleged that the Burns did not opt out of the settlement and thus their claims were barred. The court ruled that the settlement did bar the Burns claim against InEx; however, the Burns allegations against Livers, the particular construction company that had performed the installation of the Chinese drywall in the Burns house, were allowed to survive. 

Among other things, Livers argued that it, too, should be protected by the InEx settlement agreement. The settlement agreement, it argued, released "[a]ny further claims and/or liabilities arising out of, or otherwise relating to, the sale, supply, marketing, distribution, or use of Chinese [d]rywall." Livers argued that the Burns claims against it were included in this umbrella. The court disagreed, because the Burns claims contained allegations that Livers had fraudulently concealed the existence of the Chinese drywall MDL. That claim was not released by the settlement. In fact, it could not have existed until after the settlement was perfected. The court therefore allowed the Burns to to pursue "an action against Livers for allegedly preventing them from filing a claim in the settlement program." 

April 14, 2018 in Recent Cases, True Contracts | Permalink | Comments (0)

Tuesday, April 10, 2018

Bill O'Reilly's sexual harassment settlement agreements

In case you missed it in the onslaught of news we're subjected to these days, the agreements settling several of the sexual harassment claims against Bill O'Reilly have been made public, thanks to a federal judge overruling the contracts' confidentiality clauses ("Strict and complete confidentiality is the essence of this agreement," reads one). You can read about them all over, including the New York Times, CNN, ThinkProgress, and Vogue.

The contracts say the usual things that we have come to expect regarding the confidentiality of the accusations but at least one of them contains the added twist that, should any incriminating documents come to light, the woman settling the claim is required to declare them to be "counterfeit or forgeries." The truth of the statement is irrelevant; the contract evidently requires the woman to lie and say they're counterfeit and forgeries even if they're genuine. 

Another interesting part of that "counterfeit or forgeries" contract is that the accusing woman's attorney agrees not to cooperate in any other action against O'Reilly and, indeed, agrees to switch sides and advise O'Reilly "regarding sexual harassment matters." This sounds like it raises all sorts of ethical issues. They're brought up in the other articles I've linked, and Bloomberg has a rundown of the ethical issues as well. 

Things lurking in these confidential agreements...

April 10, 2018 in Celebrity Contracts, Commentary, Current Affairs, In the News, Recent Cases, True Contracts | Permalink | Comments (0)