ContractsProf Blog

Brad Stevens Not Going to Ball State

As reported in the Los Angeles Times, Butler University basketball coach Brad Stevens has agreed to a lengthy extension of his contract.  Although most reports suggest that this is a 12-year deal, the truth is that the contract will run for 12 years or until Mr. Stevens needs to shave, whichever comes last. 

This puts an end to speculation that Mr. Stevens might take Dave Letterman up on his offer (or was it a joke?) to pay Mr. Stevens his (that is, Letterman's) salary for one year if Mr. Stevens would agree to coach at Ball State.  The full interview, with an annoying ad, is below.

The excitement about Butler's performance in the NCAA basketball tournament was quite intense here in Valparaiso.  You might think that folks around here would be hostile to Butler, our Horizon League rival.  Not so.  I asked a random colleague what her connection to Butler was.  Her answer was reminiscent of Marisa Tomei's response in My Cousin Vinny when asked why she was qualified to testify about cars: "My brother went to Butler, my sister went to Butler.  My uncle and three of my cousins went to Butler.  Two of my nephews are at Butler now, and I'm not saying we're avid Butler Basketball fans, but the only kind of dog anybody in my family has ever owned so long as I can remember is a bulldog."

[Jeremy Telman]

Rent-A-Center West v. Jackson I: Petitioner's Brief

This month is arbitration month on the ContractsProf Blog, as we focus on Rent-A-Center West v. Jackson, currently pending before the U.S. Supreme Court.  As we noted in an earlier post, Antonio Jackson brought an action again Rent-A-Center (RAC) claiming racial discrimination and retaliatory termination.  RAC sought to compel arbitration and the District Court granted its motion to dismiss.  The Ninth Circuit reversed,  finding that where a party asserts that there was no reasonable assent to an arbitration agreement because that agreement is both substantively and procedurally unconscionable, the question of unconscionability is for the court.

The Supreme Court granted cert., and Petitioner RAC has filed its opening brief, seeking the Supremes’ view on the following issue:

Whether a district court or an arbitrator should decide claims that an arbitration agreement under the Federal Arbitration Act (“FAA”) is unconscionable, when the parties to the agreement have clearly and unmistakably assigned this “gateway” issue to the arbitrator for decision. 

Today, we summarize RAC’s opening brief.  Next week, we will summarize Jackson’s response.  Nine amicus briefs have been filed in the case.  Two support Petitioner; seven support Respondent.  

RAC relies primarily on two Supreme Court holdings, First Options of Chicago, Inc. v.Kaplan, 514 U.S. 938 (1995) and AT&T Technologies, Inc. v. Communications Workers, 475 U.S. 643 (1986) which stand for the proposition that where the parties “clearly and unmistakably” agree to delegate the issue of arbitrability to the arbitrator, their agreement must be honored.  According to RAC, when the Ninth Circuit refused to enforce the clear language of the arbitration agreement in question,  “it created a rule that the whim of a party opposing arbitration was sufficient to erase the words contained in the arbitration agreement,” an approach evidencing the very  “hostility to arbitration” that the FAA was enacted to remedy.  The Ninth Circuit’s position is inconsistent, according to RAC not only with Supreme Court precedent but also with decisions of the First, Eighth and Eleventh Circuit Courts of Appeals.

In a final section, RAC takes on a public policy argument articulated in Jackson’s brief in opposition to cert., in which he contends that arbiters should not be permitted to decide unconscionability challenges to the exercise of their jurisdiction because they have a financial incentive for asserting jurisdiction.   If accepted, this argument would have devastating consequences for arbitration, RAC argues, because parties would always have recourse to an interlocutory appeal to a supervising court.

[Jeremy Telman]

Weekly Top Tens from the Social Science Research Network

RECENT HITS (for all papers announced in the last 60 days)  TOP 10 Papers for Journal of Contracts & Commercial Law eJournal  February 5, 2010 to April 6, 2010 Thanks, no doubt, to the ContractsProf Blog bump, two papers that we have celebrated here on the blog  have come in at #! and #2. Rank Downloads Paper Title 1 415 The Ethics of Contract Drafting  Gregory M. Duhl,  William Mitchell College of Law, 2 223 The Shadow of State Secrets  Laura Donohue,  Georgetown University Law Center 3 194 The Low-Profit LLC (L3C): Program Related Investment by Proxy or Perversion?  Carter G. Bishop,  Suffolk University Law School 4 186 The Single Member Limited Liability Company as Disregarded Entity: Now You See it, Now You Don’t  Daniel S. Kleinberger, Carter G. Bishop,  William Mitchell College of Law, Suffolk University Law School 5 138 Regulatory Arbitrage  Victor Fleischer,  University of Colorado at Boulder - School of Law 6 114 International Sale of Goods  Gregory M. Duhl,  William Mitchell College of Law 7 111 Regulating on the Fringe: Reexamining the Link Between Fringe Banking and Financial Distress  Jim Hawkins,  University of Houston Law Center 8 111 A Critical Theory of Private Equity  Lee Harris,  University of Memphis - Cecil C. Humphreys School of Law 9 96 The Principles of the Law of Software Contracts: At Odds with Copyright, Consumers, and European Law?  Hannibal Travis,  Florida International University College of Law 10 94 Consent to Retaliation: A Civil Recourse Theory of Contractual Liability  Nathan B. Oman,  William & Mary Law School

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of LSN: Contracts (Topic) 
February 6, 2010 to April 7, 2010

Rank	Downloads	Paper Title
1	236	Private and Public Construction in Modern China  Gregory M. Stein,  Associate Dean for Faculty Development & Woolf, McClane, Bright, Allen & Carpenter Distinguished Professor of Law, University of Tennessee College of Law
2	199	The Low-Profit LLC (L3C): Program Related Investment by Proxy or Perversion?  Carter G. Bishop,  Suffolk University Law School
3	199	The Single Member Limited Liability Company as Disregarded Entity: Now You See it, Now You Don’t  Daniel S. Kleinberger, Carter G. Bishop,  William Mitchell College of Law, Suffolk University Law School
4	132	Veil-Piercing  Peter B. Oh,  University of Pittsburgh - School of Law
5	76	The Venn Diagram of Business Lawyering Judgments: Toward a Theory of Practical Metadisciplinarity  Jeffrey M. Lipshaw,  Suffolk University - Law School
6	64	The Right to Withdraw in Contract Law  Omri Ben-Shahar, Eric A. Posner,  University of Chicago Law School, University of Chicago - Law School
7	60	The Scope of Fiduciary Obligations: How Contract Informs, But Does Not Determine, the Scope of Fiduciary Obligations  Mark Leeming,  University of Sydney - Faculty of Law
8	54	Principles of the Law of Software Contracts: Some Highlights  Robert A. Hillman, Maureen A. O'Rourke,  Cornell Law School, Boston University School of Law
9	50	The Lottery of Contractual Risk Allocation and Proportionate Liability  Barbara McDonald, John Carter,  University of Sydney - Faculty of Law, University of Sydney - Faculty of Law
10	49	A Jurisdictional & Governing Law Quagmire: LLC Charging Orders  Carter G. Bishop,  Suffolk University Law School

[Jeremy Telman]

Love and Sex and Contracts [File this in: Stuff Even a Contracts Professor Couldn't Make Up]

I have to interrupt the high brow arbitration talk with this story from the Chicago Sun-Times:

A north suburban attorney is suing his former son-in-law for more than $1 million, alleging the man -- who allegedly contracted sexually transmitted diseases while at sex clubs -- was unfaithful to his daughter after he paid for the couple's lavish wedding.

Carey M. Stein, of Riverwoods, alleges the Chicago man -- who is now divorced from his daughter -- committed "fraud and breach of contract" when he had unprotected sex with women in sex clubs during his marriage after making repeated promises to Stein to "care for, protect and be sexually faithful" to his daughter as the costs of the pair's wedding ballooned to more than $75,000, according to a lawsuit filed in Cook County Circuit Court.

Despite the daughter's desire for a "very small, private wedding," Stein claims his former son-in-law insisted he needed to invite several business associates from around the world to the wedding at a downtown Chicago hotel on July 12, 2008, the suit said.

Shortly after the pair were married, the man, whom the Chicago Sun-Times is not identifying, engaged in unprotected sex with women in sex clubs in various cities, including Toronto, Long Beach, Calif. and Seattle, according to the suit.

As a result of at least one of these sexual encounters with prostitutes, the man contracted one or more sexually transmitted diseases, resulting in "numerous batteries to her person" as the couple were attempting to conceive a child, the suit said.

I can't get this tune out of my head: "I bet I can make you believe in love and sex and contracts..."

[UPDATE: I just realized that the story is dated April 1.  Yet, I see no indication that it was an April Fool's Day joke.]

[Meredith R. Miller]

Court Enforces Forum Selection Clause in Tradecomet.com v. Google

 Back in 2008, we reported on how Curtis Bridgeman and Karen Sandrik think a lot of business-to-consumer form contracts are “bullshit,” which is a technical philosophical term referring to illusory promises.   I often begin my contracts course by walking my students through Google’s Terms of Service agreement in order to alert them to the hazards of click-through agreements.  Tradecomet.com LLC v. Google, Inc. reveals that things are not very different in the B2B context.  In a March 5, 2010 opinion, Judge Stein of the Southern District of New York dismissed Tradecomet’s action, ruling that the parties were bound by a forum selection clause in their August 2006 agreement.  Tradecomet will have to bring its antitrust claims in California. 

The forum selection indicates Google’s vast advantages in terms of bargaining power.  Not only does it specify that the agreement will be governed by California law and that all disputes must be litigated in Santa Clara County, California, it also specifies that “THE AGREEMENT MUST BE CONSTRUED AS IF BOTH PARTIES JOINTLY WROTE IT.”  Obviously, both parties did not write it, and presumably Google insists on this whopper in order to avoid legal consequences such as claims of procedural unconscionability and contra proferentem construction. 

That forum selection clause was added to the parties agreement in August 2006 and Tradecomet argued that it should not govern because the alleged antitrust violations occurred when the parties were operating under earlier versions of their agreement, dated April 19, 2005 and May 23, 2006.   Both earlier versions contained language providing that “Google may modify the Program or these Terms at any time without liability and your use of the Program after notice that the Terms have changed indicates acceptance of the Terms.”  The August 2006 Agreement also provides that it “supersedes and replaces any other agreement, terms and conditions applicable to the subject matter hereof.” 

The court found that Tradecomet accepted the terms of August 2006 by clicking through text.  Tradecoment contended that enforcement of the forum selection clause would be unconscionable, but the court found that doing so would be neither unreasonable nor unjust. 

Wait a minute, shouldn't the case be renamed Tradecomet.com v. Topeka?

[Jeremy Telman]

Government Contracting and the State Secrets Privilege

Like Meredith Miller, I have recently had the experience of seeing a new piece of scholarship appear that I had in mind to write myself one day.  Meredith wanted to write on the ethics of contract drafting.  She has chosen to be philosophical about the fact that Gregory Duhl has swiped her research agenda.  Laura Donohue (picture) has now done the same to me, and I’m bitter.  Her article, The Shadow of State Secrets, is forthcoming with the University of Pennsylvania Law Review (2010).   It’s one of the best articles I never wrote.  It was #6 on last week's Top Ten, but it is rising fast and could go all the way to #1.

Although there have been, by Donohue’s count, over 120 law review articles published on state secrets since 2001 (the full list will be made available on Georgetown’s Center for National Security and the Law website), hers is the first to take up the vital nexus of contracts and state secrets.  That’s the part of her project that overlaps with mine.

However, Donohue’s article is unique in other ways as well, and with respect to these other aspects of Donohue’s work, I am envious rather than bitter.  The existing scholarship on the state secrets privilege (SSP) focuses on published judicial opinions.  As a result of this narrow focus, we do not really understand how the SSP works and what its affect is on litigation.  Donohue systematically searches dockets for further information about the deployment of the SSP in early stages of litigation and in litigation that does not result in a published opinion.  The results reveal significant problems with existing scholarship on the SSP.

First, we do not really know the mechanisms whereby the privilege is invoked or who invokes it.  Second, we do not know very much about how the SSP affects the course of litigation in unpublished cases or in stages of published cases that are not addressed in written opinions.  Third, by focusing on published cases, existing scholarship misses about 80% of even appellate courts’ caseloads.  Finally, existing scholarship treats the SSP has having sprung fully formed from the head of, not Zeus, but United States v. Reynolds, 345 U.S. 1 (1953), thus missing a significant portion of the SSP’s history.

Donohue’s research uncovers over 400 SSP cases after Reynolds, a number significantly higher than earlier research suggested, plus hundreds of other cases in which the SSP played a significant role.  Donohue thus intervenes in a debate among scholars about the use of the SSP during the Bush administration. Her docket-search method shows that the Bush administration invoked the SSP more often and more aggressively than has previously been appreciated.

Donohue looks at the SSP in the context of four different types of litigation and draws different lessons in each context.  Her first section deals with suits against government contractors who either invoke the SSP or pressure the government to do so.  Next, Donohue analyzes the 50 cases in which the government has invoked the SSP in connection with the National Security Agency’s warrantless wiretapping program.  Third, she addresses a wide range of cases in which the government has used to SSP to shield itself from potential liability in connection with violations of the 4^th and 5^th Amendments.  Finally, she claims – and this is shocking – that the SSP has been invoked in the criminal context by courts when the executive did not even assert that the SSP applied.

Donohue concludes that the SSP “has become intimately connected to the military-industrial complex, undermining contractual obligations and perverting tort law, creating a form of private indemnity for government contractors in a broad range of areas.”

Outstanding!

[Jeremy Telman]

 

Insurer May Compel Non-Party to Arbitrate

 As we gear up for oral argument before the U.S. Supreme Court in Rent-a-Center West, Inc. v. Jackson, we are turning this into arbitration month on the blog.  Later this month, we will have a roundtable discussion of Jackson both before and after oral argument.  And so, it seems appropriate to discuss a recent arbitration decision out of the Fifth Circuit.

Anthony Todd was injured while working as a chef aboard the steamship American Queen.  Although Todd won his suit against the American Queen's owner, the company was unable to pay.  Todd thus availed himself of a Louisiana statute that permits direct suits against insurers of insolvent tortfeasors.  The insurer removed the suit to federal court and then moved to stay the proceedings and compel arbitration under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (The New York Convention).  The District Court denied the motion without a written opinion, saying that it would be a waste of trees when the insurer's argument was foreclosed under Fifth Circuit precedent, Zimmerman v. International Companies & Consulting Inc., 107 F.3d 344 (5^th Cir. 1997).

In Todd v. Steamship Mutual Underwriting Association (Bermuda) Limited, the Fifth Circuit reversed.   After the District Court denied Steamship’s motion to compel, the U.S. Supreme Court decided Arthur Andersen LLP v. Carlisle, 129 S.Ct. 1896 (2009), which the Fifth Circuit found overruled Zimmerman in relevant parts.  In Carlisle, the Supreme Court held that nonsignatories to arbitration agreements may sometimes be compelled to arbitrate; for example, state law might permit a contract to be enforced by or against nonparties through assumption, veil-piercing, alter ego theory, incorporation by refernce, third party beneficiary theories, waiver and estoppel. 

The Fifth Circuit therefore remanded the case with instructions for the District Court to decide Steamship’s motion in a world in which Zimmerman is no barrier to compelled arbitration. 

[Jeremy Telman]