ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Friday, July 4, 2008

Speaking of Unconscionability: New Mexico Supremes Refuse to Enforce Class Action Waiver

FlagAccording to the ABA Journal Online, last week, the New Mexico Supreme Court refused to enforce a class action waiver in consumer contracts with Dell Inc. (The consumers sued Dell alleging misrepresentation about the amount of memory contained in the computers). The New Mexico court held that the class action ban was unconscionable because it "essentially foreclosed" relief in a case where each consumer's damages amount was small.

The ABA Journal notes that, since 2006, the highest courts in Illinois, New Jersey, North Carolina and Washington have found that class action waivers in consumer contracts were unconscionable. Add California to that list, though Discover Bank v. Superior Court is a 2005 decision finding a class arbitration waiver unconscionable. The ABA Journal notes that many federal courts have upheld class action waivers.

I've written some about this in Contracting Out of Process, Contracting Out of Corporate Accountability: An Argument Against Enforcement of Pre-Dispute Limits on Process.

For some reason, I am having trouble locating the New Mexico decision. If you find a link or case cite, please leave it in the comments. Thanks!

[Meredith R. Miller]

July 4, 2008 in Recent Cases | Permalink | Comments (1) | TrackBack (0)

Now in Print

- Christina Bohannan, Copyright Preemption of Contracts, 67 Md. L. Rev. 616-671 (2008).
- Edith M. Brown and Charlene L. Smith, Match Point: All in the Timing, Luck, and Mutual Mistake, 32 Okla. City U. L. Rev. 263-277 (2007).
- Carl J. Circo, Placing the Commercial and Economic Loss Problem in the Construction Industry Context, 41 J. Marshall L. Rev. 39-115 (2007).
- Aaron R. Petty, The Reliance Interest in Restitution, 32 S. Ill. U. L.J. 365-401 (2008).

Happy 4th of July!

[Meredith R. Miller]

July 4, 2008 in Recent Scholarship | Permalink | TrackBack (0)

Thursday, July 3, 2008

Sonics to Move to Oklahoma; Seattle Grieves

Seattle_mayor_greg_nickels We reported earlier on a breach of contract action brought by the Seattle Sonics' former owner Howard Schultz against the new owners of the NBA basketball team, alleging that the new owners had planned all along to move the team to Oklahoma City.  The City of Seattle also filed suit, seeking to keep the hoopsters in a city better known for caffeinated hipsters.  Bowing to the inevitable perhaps, Seattle Mayor Greg Nickels (pictured) has reached a deal with the new owners.

According to the Seattle Times, the deal leaves the city in despair, but it allows Mayor Nickels to save face, as Sonics' the new owners have agreed to a $45 million payment, which will cover rent due and an earlier renovation of Seattle's KeyArena.  If Seattle cannot land a new NBA team by 2013, the new owners must pay an additional $30 million. 

Howard Schultz vows to fight on, hoping to have the Kevin Durant and co. back sipping ventes on their way to the Space Needle by the 2009-2010 season, according to the Post-Intelligencer.

[Jeremy Telman]

July 3, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)

Rush, You're No Howard Stern

Rush The Wall Street Journal reports that Rush Limbaugh (pictured) and Clear Channel have agreed to an eight-year $400 million contract, entailing a salary of $38 million/year plus a $100 million signing bonus.  Not bad, but still $100 million shy of Howard Stern's 2004 contract with Sirius Sattelite Radio, according to the WSJ.  The difference clearly reflects the bias of the liberal media.  Or perhaps it reflects a preference for tasteless sex jokes over tasteless political jokes. 

[Jeremy Telman]

July 3, 2008 in Celebrity Contracts, In the News | Permalink | Comments (1) | TrackBack (0)

Wednesday, July 2, 2008

An Interesting New Unconscionability Decision

Garvin_larryThanks to the Ohio State University Moritz College of Law's Larry Garvin for sharing with us details and commentary on Knudsen v. Lax, 842 N.Y.S.2d 341 (Co. Ct. 2007), a recent case in which tenants sued their landlord seeking to terminate their lease.  Professor Garvin provides the following synopsis:

The plaintiffs, tenants in an apartment building, sued the landlord in an attempt to terminate their lease.  The lease provided that if the tenants quit the leasehold before the end of the lease term, they would be liable for the balance of the rent due, whatever the reasons for their departure.  What makes this interesting is the reason the tenants wanted to move: A registered Level 3 sex offender moved into the adjacent apartment.  (The tenants had three young daughters.)  The landlord refused to let them abandon their lease without paying the full rent -- hence the suit.

The court found that this did not breach the statutory warranty of habitability, but that the abandonment clause was unconscionable and its enforcement in bad faith.  On unconscionability, the court did fairly routine adhesion contract analysis on the procedural side.  Without much discussion, it found the contract substantively unconscionable for not permitting the tenant to abandon the lease without paying the full rent, even for good cause.  On good faith, the court found that the possibility that a Level 3 sex offender might move next door could not reasonably have been within the contemplation of the parties at the time of contracting, so it would be appropriate to use the implied-by-law good faith covenant to create a good-cause exception to the abandonment clause.  This would be a reasonable approximation of what the parties would have agreed to had they taken it into account, and in any case was consistent with the warranty of peaceful and quiet enjoyment.

Professor Garvin adds the following questions on the policy issues raised by the decision:

Is a sex offender different in kind from other obnoxious or potentially obnoxious neighbors?  What obligations does a landlord owe to existing tenants to choose new tenants cautiously?  And should this obligation -- whatever it may be -- fall under the heading of the duty of good faith and fair dealing?  It seems unlikely that the landlord derived special profit from leasing to the sex offender or otherwise acted opportunistically.  (And could this have been addressed under the rubric of frustration?)  And, if we are playing with public policy, one imagines we want sex offenders who have served their time to be able to live somewhere and restart their
lives.  What landlord would be willing to rent to a sex offender if the result would be the free departure of other tenants?  But one comes back to the particular susceptibility of this neighbor, which could easily have been anticipated at the time of contracting (assuming the tenants had small children then), and the likelihood
that they would not have rented had they known that a sex offender lived next door, or their reasonable expectation that the landlord would not rent a neighboring apartment to a sex offender.

My two cents: I think Professor Garvin points out the problems with the court's opinion in this case.  As other commentators have suggested, the court's use of unconscionability and bad faith is troubling in this context.  The better solution might be the standard one: the landlord has a duty to mitigate damages.  It may be that it is hard to find a tenant willing to move in next to a registered sex offender.  That may mean that the landlord will have to offer a special deal in order to attract a new tenant.  The tenant can leave and has to bear any cost to the landlord but not the full cost of remainder of the lease.

[Jeremy Telman]

July 2, 2008 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 1, 2008

Nine-Year-Old in Football Contract Dispute

Football Brain_2One of the images at left is a human brain.  The other is a football.  Tony Mathis carries something like at least one of these objects in his skull at all times.  You be the judge as to which.

As Tulsa World reports, Mr. Mathis is suing the Indian Nations Football Conference for the third time in a year. This time, the suit alleges a breach of contract and seeks $10,000 in damages.  Why?  Because the Conference will not let Mathis's 9-year-old son, Brayden, play in its games this fall, apparently because the father is such a pill.  Tony Mathis was banned from games last season and, according to the Tulsa World, he continued to attend games after he was banned and had to be removed by police.  Mathis is apparently contending that the Conference's refusal to let Brayden play violates a prior agreement.  The Conference claims that it only agreed to let Brayden play for one season.  It made no commitment for the coming season.

[Jeremy Telman]

July 1, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)

Phil Spector's Continuing Legal Problems

When we last left Phil Spector, he was looking exceedingly creepy while being found not guilty (due to a hung jury) of murder charges in the 2003 death of actress Lana Clarkson in Spector's home.  Now, Half Life Source reports that the Westin Bonaventure Hotel and Suites is after Mr. Spector for an unpaid hotel bill of $104,000.  The money is allegedly owed on a written contract according to which Mr. Spector, along with his wife and agent, stayed at the hotel for the duration of his trial.  According to the report, Mr. Spector offered to pay the balance of his bill if the hotel offered him a discount.

[Jeremy Telman]

July 1, 2008 in Celebrity Contracts, In the News | Permalink | Comments (0) | TrackBack (0)

Monday, June 30, 2008

Limerick of the Week: Majestic Realty

Wrecking_ball This may not be the best Limerick I've ever composed, but I think it among my most useful.  It pretty much sums up the case and states the relevant exception to the rule that parties are generally not liable for the torts of their independent contractors.  The Limerick leaves out the court's interesting discussion of another exception -- hiring an incompetent  -- but that's dictum.

For those of you unfamiliar with the case, it involved the demolition of a building in a built-up area in Paterson, New Jersey.  The crane operator apparently swung his wrecking ball in the wrong direction, knocking the building to be demolished onto an adjacent building and causing damage.  When asked for a  explanation of his wrecking technique, the crane operator said, "I goofed."  The liability of the City of Paterson, which hired Toti, turned on whether demolition in a built-up area constituted nuisance per se, that is an "inherently dangerous activity," a question that need to be determined on remand.

Majestic Realty Assoc. v. Toti Contracting Co.

"I goofed," said the crane operator
And unwitting tort perpetrator.
The city must pay
If it's nuisance per se
To wreck first and ask questions later.

[Jeremy Telman]

June 30, 2008 in Famous Cases, Limericks, Teaching | Permalink | Comments (0) | TrackBack (0)

It Depends What You Mean By “Occupying” The Vehicle

Insurance disputes often provide the most interesting interpretation issues. Take for example this recent appellate case out of New York’s Third Department.

Plaintiff truck driver was struck by a hit-and-run driver while standing on the street in the City of Albany after unloading construction equipment from the tractor-trailer owned by his employer and insured by defendant American Home Assurance Company. Plaintiff filed a supplementary uninsured/underinsured motorist claim with American Home Assurance Co. (American) and also with defendant Nationwide Mutual Insurance Co. (Nationwide), which was his insurer. American denied the claim asserting that plaintiff was not covered by its policy because he was not "occupying" the vehicle at the time of the accident. Nationwide contended that plaintiff was covered by American and that its coverage was thus secondary.

The pertinent endorsement in American's policy provided coverage for an individual "occupying" a covered vehicle. The term "occupying" was further defined in American's policy to include "in, upon, entering into, or exiting from a motor vehicle.” The interpretation of the term “occupying” has apparently resulted in differing tests in various jurisdictions.

On cross-motions for summary judgment, the trial court determined that plaintiff was "occupying" the vehicle and, accordingly, among other things, declared that plaintiff’s injury came with in the coverage of American’s policy. American appealed. The appellate court reversed, holding that plaintiff was not occupying the vehicle at the time of the accident. The court reasoned:

Here, plaintiff was off-loading a 44,000 pound, 50-to-55 foot-long boom lift from a 70-foot tractor-trailer. The procedure involved many steps, including setting out safety cones, unchaining the boom lift, folding out and inserting pins in the jib, inspecting the basket, lowering the trailer, backing the machine off the trailer, and securing and extending axle shifts. Plaintiff had completed these steps, which he testified at his deposition typically took 20 to 30 minutes. He further testified that, after removing and readying the boom lift, he next trains the person renting it on the proper operation of the equipment, a procedure he estimated to take 30 to 35 minutes. He recalled during his testimony that, in the current situation, he had been training the person who was going to operate the equipment for 10 to 15 minutes when the accident occurred. Although the tractor-trailer reportedly remained running during the entire time and plaintiff's affidavit sets forth a more condensed time frame than his deposition for his activities at the site, it is inescapable that he was no longer vehicle-oriented. His absence from the vehicle was not intended to be brief and, at the time of the accident, he was engaged in instructing the lessee about the operation of the delivered equipment. Under such circumstances, he was no longer "occupying" his employer's vehicle.

Because American did not cover plaintiff, this meant that Nationwide was on the hook.

Faragon v. American Home Assur. Co., --- N.Y.S.2d ----, 2008 WL 2278093 N.Y.A.D. 3 Dept. (June 5, 2008).

[Meredith R. Miller]

June 30, 2008 in Recent Cases | Permalink | Comments (0) | TrackBack (0)