April 29, 2011
Depressing... But, Maybe an Opportunity
Other than AT&T v. Concepcion (which may or may not really be about contracts), it has been a pretty slow news week for the blog. While most people were focused on a birth certificate and/or a royal wedding, this important article about law student employment rates was published in The New Republic.
Prof. Paul Campos (Colorado) isn't a contractsprof, but he was nevertheless dead-on in exposing the smoke and mirrors that law schools use in reporting inflated employment numbers. I am sure that this is not news to most of us on law school faculties. Though, Prof. Campos summed up nicely something I have been struggling with lately:
If you’re a law professor and you want to get depressed, try to figure out how many of your recent graduates have real legal jobs that pay enough to justify the tuition that funds your salary, and also involve doing the kind of work they wanted to do when they went to law school.
This has given me the blues. It nags at me. Law schools are pumping out too many lawyers. And the ABA keeps approving more law schools. And tuition keeps increasing, entirely out of pace with inflation and stagnant/declining salaries. With law school applications down significantly, it may just be that the law school bubble has burst.
The legal market has changed. It doesn't take any special clairvoyance to predict that law schools will change too. They have to. While I definitely would not decline a raise, law school professor salaries may be too high and this market is an opportunity for correction. And, while I love contract theory as much as the next guy reading this blog, the academy has overvalued lofty, disconnected, highly theoretical scholarship that is of little use to the practice of law (and arguably comes with a very high price tag). This is the currency in academia but a joke to practitioners (which, once they hopefully find a job, our students will become). (And I say this even though I am just weeks away from my tenure vote with a file full of scholarship that just might fit this harsh description).
To serve our students and the bar, the academy needs to be reconnected to the actual practice of law. For so many years, I have heard about applying the medical school model to law schools. I am not an expert on this, but at least anecdotally, I have heard that most medical and dental school professors practice a few days a week. I think this could be the future of law schools. I am not suggesting that law schools should or will staff classrooms entirely with adjuncts (though, this is the trend in academia generally). This is an opportunity for law schools to hire full-time, dedicated teachers who also spend some time "in the field" (whether in law school clinics or outside the school). Law schools could, thus, pay professors less and take some of the tuition burden off of the students. Faculty scholarship would likely decline in quantity but would likely increase in its actual contribution beyond the ivory tower. It would likely be more grounded in practice, and so would the classroom discussion.
In that connection, for example, 3 out of 4 dental school graduates are self-employed in solo practices. There has been a lot of discussion lately about the values (and burdens) of solo and small firm law practice. In this market, I have seen this type of practice regain a dignity that may have been lost because it was too often (incorrectly) seen as a default for those graduates who could not get big law firm, public interest or government jobs.
Law appears to be returning to a "small" model, which gives attorneys more control over their work/workload ("work life balance," which is coincidentally of higher priority to Gen Y) and also makes legal services more affordable for the clients they serve. Like so many business models that looked to get bigger, bigger, bigger..., we have seen that the "big law" firm may not be a sustainable model. (An analogy to industrial farming comes to mind, but I digress). And, even if "big law" is sustainable, it is not a long-term employment situation for most young lawyers who land jobs there.
So, law schools need to ask themselves: how can we graduate students who are in a position to employ themselves (if they so choose) within 3 years of graduation? How can we do this at a lower cost to the students?
Depressing, maybe. But, I had a boss once who would have called it "an action opportunity."
[Meredith R. Miller]
April 28, 2011
Update: More Links to Commentary on AT&T Mobility v. Concepcion
Harvey Rosenfeld and Todd Foreman on Consumer Watchdog don't care for the opinion much.
Andrew Cohen weighs in in The Atlantic here with the following bottom line:
This AT&T Mobility decision marks another shoe dropped on the heads of individuals who have sought fair redress against corporate interests this Term. But the next shoe from the Court's conservatives, due by the end of June in Wal-Mart v. Dukes, isn't going to fall from the sky. Instead it's going to kick all those employment discrimination plaintiffs right in the ass. Just you watch.
For a sampling of what California class-action attorneys think of the ruling, there is this piece by Petra Pasternak in The Recorder
Daniel Fisher suggests on Forbes.com that the new consumer protection agency currently headed on an interim basis by Elizabeth Warren (pictured at left comforting a consumer facing mortgage foreclosure) will get medieval on this ruling's buttocks.
PCWorld's Nancy Gohring provides commentary here.
"Chris in Paris" concludes on the Americablog that "Corporate America wins again."
On Public Citizen's blog, Deepak Gupta calls the decision, "a crushing blow to American consumers and employees."
April 27, 2011
Another Supreme Court Decision on Arbitration
Today, the U.S. Supreme Court decided AT&T Mobility LLC, v. Concepcion. Here is the opinion. In a nutshell, the Court determined by a 5-4 majority that California's Discover Bank rule, which permits courts to strike as unconscionable any arbitration provision that prohibits class actions, was preempted by the Federal Arbitration Act. Take a guess which Justices were in the majority!
Lacking the expertise to delve into the Serbonian Bog of the Court's recent arbitration rulings, we refer our readers to the following sites:
SCOTUSblog does its usual reliable job providing background to the case here.
We will try to update the list as new responses are posted.
Supreme Court of Texas Decides Merger Clause Issue
One year after argument, the Supreme Court of Texas issued its opinion on April 15, 2011 in Italian Cowboy Parnters, Ltd. v. The Prudential Insurance Company of America. The Court's 6-3 majority concluded that a contract's merger clause does not prevent a party from bringnig a claim based on fraudulent inducement. The Court reversed teh judgment of the court of appeals and remanded. It also rendered judgment in favor of Italian Cowboy on its claim for rescission prmised on a breach of the implied warranty of suitability.
The case arose when Jane and Francesco Secchi (the Secchis) sought to rescind the lease on their "Italian Cowboy" restaurant because of a persistent sewer gas odor. The landlord, Prudential, counterclaimed for breach of contract. During the negotiations of the lease, representatives fro the property management company repeatedly told the Secchis that there was absolutely nothing wrong with the property. The lease agreement included standard clauses stating that the landlord and its agents had made no representations about the property other than those contained in the agreement and that the lease constitutes the entire agreement between the parties.
While the Secchis were renovating the property for their restaurant, they learned that the previous tenant had been a hamburger restaurant that was plagued by a "very, very bad odor." The representatives for the property manager denied any knowledge of an odor problem but eventually conceded that a sewage smell did now plauge the Italian Cowboy. The Secchis eventually learned from the previous tenants that the property manager's representatives were in fact well aware of the odor problems, which were the cause of the demise of the previous tenants' restaurant. The trial court thus found for Italian Cowboy on all of its claims, awarding over $600,000 on the lease, plus attorneys' fees, prejudgment interest and $50,000 in exemplary damages because "lyin's bad, mmkay?" The court of appeals reversed. It did not permit rescission and it found in favor of Prudential on its counterclaim for breach of cotnract.
The Supreme Court first held that the lease contract did not effectively preclude the Secchis from relying on Produential's representations and that the language in the lease could not negate Italian Cowboy's fraudulent inducement claim. The Court cited case law going back 50 years to the effect that a merger clause does not stand in the way of a fraudulent inducement claim. Because the court of appeals did not address all of the factual elements of that claim, the Court remanded Italian Cowboy's fraud claim back to the court of appeals.
The Court also found that nothing in the contract relieved Prudential from liability for breach of the implied warranty of suitability and that the sewage odor was a latent defect vital to Italian Cowboy's use of the premises. Accordingly, the Court rendered judgment in favor of Italian Cowboy on its claim asserting a breach of the implied warranty of suitability. The Court thus reinstated teh trial court's ruling on rescission and remanded to the court of appeals for additional consideration of the amount of damages owed to Italian Cowboy.
Three Justices dissented. While the majority treated the contractual provisions at issue as a standard merger clause, superceding any prior agreements, the dissenting Justices focused on what they viewed as a simple factual statement that the defendants had not made any representations about the property on which the Secchis had relied other than those contained in the written agreement. They were sophisticated parties and they signed an agreement that contained this factual statement. The dissenters would not permit them to now come into the court and make a different -- and self-interested -- factual claim that there had indeed been representations made and that they had relied on these representations to their detriment. The dissenters would also have ruled against Italian Cowboy on the implied warranty of suitability since, in the dissenters' view, the odor problem was covered under the lease which assigned to Italian Cowboy resopnsibility "for all repairs to the interior and non-structural components of the Premises, including . . . all . . . ventilating . . . systems."
New in Print: Casebooks, Monographs & Study Guides Included
Daphna Kapeliuk & Alon Klement, Contracting Around Twombly, 60 DePaul L. Rev. 1 (2010)
April 26, 2011
Weekly Top Tens from the Social Science Research Network
The Truth Behind Van Halen's Famous M&M's Rider
This may not exactly be news, but if you haven't read David Lee Roth's autobiography, it is likely news to you. We got this contracts story when we downloaded the most recent podcast of This American Life called "Fine Print 2011." More posts may follow once we finish listening to the entire show. Actually, it's not news to our Meredith Miller, who blogged about the earlier version of This American Life's "Fine Print" show.
The basic story is as follows: rumor had it that Van Halen insisted on a bowl of M&Ms backstage whenever they performed and that -- this is the crucial part of the infamous rider -- all brown M&Ms be removed from the bowl. As This American Life's Ira Glass explains, this story has usually been read as epitomizing the extent to which our celebrities demand that we pamper them. But David Lee Roth (pictured to the right) provides a different explanation in his aforementioned autobiography, helpfully excerpted on Snopes.com here:
Van Halen was the first band to take huge productions into tertiary, third-level markets. We'd pull up with nine eighteen-wheeler trucks, full of gear, where the standard was three trucks, max. And there were many, many technical errors -- whether it was the girders couldn't support the weight, or the flooring would sin in, or the doors weren't big enough to move the gear through.
The contract rider read like a version of the Chinese Yellow Pages because there was so much equipment, and so many human beings to make it function. So just as a little test, in the technical aspect of the rider, it would say "Article 148: There will be fifteen amperage voltage sockets at twenty-foot spaces, evenly, providing nineteen amperes . . ." This kind of thing. And article number 126, in the middle of nowhere, was: "There will be no brown M&Ms in the backstage area, upon pain of forfeiture of the show, with full compensation.
So, when I would walk backstage, if I saw a brown M&M in that bowl, well, line-check the entire production. Guaranteed you're going to arrive at a technical error. They didn't read the contract. Guaranteed you'd run into a problem. Sometimes it would threaten to just destroy the whole show. Something like, literally, life-threatening.
It's a nice story, but I don't buy it. If you are concerned about girders not being able to support the weight of your show, check the girders, not the M&Ms. Moreover, Meredith's earlier post links to the relevant page of the rider from TheSmokingGun.com, and it does not threaten forfeiture or anything else.
Another nice excerpt from the autobiography:
I came backstage. I found some brown M&Ms, I went into full Shakespearean "What is this before me?" . . . you know, with the skull in one hand . . . and promptly trashed the dressing room. Dumped the buffet, kicked a hole in the door, twelve thousand dollars' worth of fun.
Two problems. First, the rider does not seem to permit twelve thousand dollars worth of fun. That's not covered under the term "forfeiture." Second, Hamlet doesn't say anything like "What is this before me" when he contemplates Yorick's skull. I think Roth is thinking of Macbeth's dagger monologue, which begins, "Is this a dagger which I see before me?" And then in some productions he dumps the buffet and kicks a hole in the door.
April 25, 2011
No Independent Cause of Action for Breach of Good Faith and Fair Dealing in Arkansas
On April 14, 2011, the Supreme Court of Arkansas issued its opinion in Arkansas Research Medical Testing, LLC v. Osborne. William Jennings B. Osborne and Marie E. Osborne owned Arkansas Research Medical Testing Center, Inc., which performed tests for the pharmaceuticals industry. They sold it to defendants in 2004, who re-established the business as Arkansas Research Medical Testing, LLC (ARMT). Under the terms of the agreement, the Osbornes were to be paid $3 million per year for three years, so long as ARMT had gross revenues in excess of $7.5 million in each year. They got their $3 million payment in 2004, but ARMT failed to meet the gross revenue target in 2005 and 2006, so the Osbornes got nothing for those years.
They sued on every conceivable ground, but the jury awarded them $3 million in damages based only on a finding of breach of the duty of good faith and fair dealing. The jury found for the defendants on the Osbornes' breach of contract claim. The Supreme Court decided a pure issue of law: does Arkansas recognize an independent cause of action for a breach of the duty of good faith and fair dealing. The Supreme Court ruled that it does not. Accordingly, it reversed the verdict and remanded the case to the circuit court to set aside the judgment.
This seems a bit of an odd result, and perhaps it is just a matter of faulty pleading and jury instructions. The Supreme Court cites to Arkansas cases that seem to adopt R.2d s. 205, which considers the covenant of good faith and fair dealing an implied term in every contract. Thus while it is true that Arkansas law does not recognize an independent cause of action for breach of the duty of good faith and fair dealing, if the jury finds that such a breach has occurred, then it has found a breach of contract, its verdict to the contrary on the breach of contract claim notwithstanding. This is so even though, as the Supreme Court notes, there is no separate cause of action -- whether in contract or in tort -- for breach of the duty of good faith and fair dealing. The most likely reading of the jury verdict is that it found no breach of contract other than the breach of the duty of good faith and fair dealing. But that should have been breach enough.