ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Saturday, October 22, 2011

Boyz N the Court

BoyzJohn Singleton, director, producer, writer, overall film extraordinaire, now may add "plaintiff in a breach of contract action" to his long resume.  Singleton's case and claims somewhat mirror those of a modern Contracts casebook staple, Locke v. Warner Bros, Inc.  Singleton, like the actress/director plaintiff in Locke, claims, inter alia, that a production company, Paramount Pictures, breached the implied duty of good faith and fair dealing (as well as some express promises) when it failed to finance at least two of Singleton's later-proposed film projects.  According to the complaint, Singleton previously had traded some of his rights to two highly acclaimed films, Hustle & Flow and Black Snake Moan, in exchange for cash and for Paramount's promise to finance two of his future projects, subject to some conditions.  Paramount's defense likely will be that those conditions were not satisfied.  And just for good measure, Singleton's complaint also includes an unjust enrichment claim, the basis of which is that he would have demanded more cash for his Hustle & Flow and Black Snake Moan rights had he known that Paramount would not finance the later pictures.  Thus, the case could be useful in illustrating various contract law concepts to a group of students, some of whom were not even born when Boyz N the Hood was released. 

[Heidi R. Anderson h/t (and it pains me to type this) TMZ]

October 22, 2011 in Celebrity Contracts, Film, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Thursday, October 20, 2011

Geek Love: Siri's EULA Doesn't Cover Marriage

A few days ago, we pondered whether the robots were coming for our jobs.  What's next?  Robot marriage? Well, apparently if you ask Siri to marry you, one of her (its?) responses is: "My End User Licensing Agreement does not cover marriage. My apologies."  How's that for private ordering?!  And, how romantic!

I learned of this via song (via the Atlantic) - the first duet with Siri that I've seen:

[Meredith R. Miller]

October 20, 2011 in In the News | Permalink | Comments (0) | TrackBack (0)

Wednesday, October 19, 2011

Interesting Fact Pattern out of Orleans Parish

According to a complaint filed by New Orleans attorney James L. Arruebarrena, his client Cherie Garman beautifully strung along him and his associate, getting them to represent her in a mediation and then refused to pay them.  The facts have enough wrinkles to hold out the prospect of an interesting dispute.

New Orleans

Views of New Orleans brought to you from Wikipedia's Creative Commons

According to this report in the Louisiana Record, the facts alleged are as follows:

  • Garman contacted Arruebarrena on May 9th to represent her in an EEOC-sponsored mediation on May 11th
  • Arruebarrena's associate, Rachel Martin-Deckelmann (M-D) sent Garman via e-mail a fee agreement and contract
  • Garman e-mailed relevant documents to the attorneys but claimed she could not open the files that M-D had sent
  • On May 10th, Garman represented that she had received the documents (now pasted into an e-mail) and would return them immediately
  • That same day, Arruebarrena contacted the EEOC and confirmed that he would represent Garman
  • But Arruebarrena had a medical emergency on May 11th, and so told M-D to represent Garman at the mediation
  • One hour before the mediation, M-D spoke with Garman and went over the litigation strategy.  At that point, Garman represented that she had executed and returned via fax the attorneys' contract
  • During a break in the mediation, M-D learned that the contract had not been received.  She notified Garman, who promised to re-fax the contract immediately after the mediation
  • After a five-hour mediation, the parties agreed to a $100,000 settlement
  • When it came time for the check to be issued, Garman claimed that she had never signed the contract and that all funds should go to her.

Arruebarrena has now sued for fraud and breach of contract, seeking reasonable attorneys' fees, costs and punitive damages.  

Our blogger Nancy Kim is no doubt all over the issues that arise from cases like this one, since her work is all about the perils of e-contracting, so perhaps this case is pretty humdrum, but one wonders if the sudden change of attorneys had something to do with Garman's refusal to pay.  There are interesting lacunae in the narrative set out in the complaint.


October 19, 2011 in In the News, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 18, 2011

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

August 17, 2011 to October 16, 2011

Rank Downloads Paper Title
1 293 The Reasonable Person
Alan D. Miller, Ronen Perry,
University of Haifa - Faculty of Law, University of Haifa - Faculty of Law
2 274 Managing Disputes Through Contract: Evidence from M&A
John C. Coates, IV,
Harvard Law School
3 161 The Foreign Corrupt Practices Act & Government Contractors: Compliance Trends & Collateral Consequences
Jessica Tillipman,
The George Washington University Law School
4 155 The Third Arbitration Trilogy: Stolt-Nielsen, Rent-A-Center, Concepcion and the Future of American Arbitration
Thomas Stipanowich,
Pepperdine University School of Law
5 115 Remoteness Re-Invented?
David McLauchlan,
Victoria University of Wellington - Faculty of Law
6 102 Lochner and Constitutional Continuity
David Bernstein,
George Mason University - School of Law, Faculty
7 94 To Perform or Pay Damages
Gregory Klass,
Georgetown University - Law Center
8 89 Why There is No Duty to Pay Damages: Powers, Duties, and Private Law
Nathan B. Oman,
William & Mary Law Schoolt 9, 2011
Last Revised: October 10, 2011
9 83 Analyzing Law - A Framework for Understanding Law of All Sorts and for All Purposes (Cases, Exercises and Commentary)
Neil K. Komesar,
University of Wisconsin - Madison
10 77 The Essence of Economics - Behavior, Choice and Comparison
Neil K. Komesar,
University of Wisconsin - Madison

RECENT HITS (for all papers announced in the last 60 days)
TOP 10 Papers for Journal of LSN: Contracts (Topic)

August 18, 2011 to October 17, 2011

Rank Downloads Paper Title
1 294 The Reasonable Person
Alan D. Miller, Ronen Perry,
University of Haifa - Faculty of Law, University of Haifa - Faculty of Law
2 274 Managing Disputes Through Contract: Evidence from M&A
John C. Coates, IV,
Harvard Law School
3 157 The Third Arbitration Trilogy: Stolt-Nielsen, Rent-A-Center, Concepcion and the Future of American Arbitration
Thomas Stipanowich,
Pepperdine University School of Law
4 95 To Perform or Pay Damages
Gregory Klass,
Georgetown University - Law Center
5 87 A New Tortious Interference with Contractual Relations: Gender and Erotic Triangles in Lumley v. Gye
Sarah Lynnda Swan,
Columbia University - Law School
6 60 The General Principles of Civil Law: Their Nature, Roles and Legitimacy
Martijn W. Hesselink,
University of Amsterdam - Centre for the Study of European Contract Law (CSECL)
7 57 The Law of Contract: An Introduction
Jan M. Smits,
Maastricht University Faculty of Law - Maastricht European Private Law Institute (M-EPLI)
8 55 Is Private Law Meaningless?
Steve Hedley,
University College Cork (UCC)
9 46 Classical Contract Law, Past and Present
Anat Rosenberg,
Hebrew University of Jerusalem, Faculty of Law
10 46 Arbitral Power and the Limits of Contract: The New Trilogy
Alan Scott Rau,
University of Texas at Austin School of Law


October 18, 2011 in Recent Scholarship | Permalink | TrackBack (0)

Monday, October 17, 2011

Layaway Plans, Personal Finance and Consumer Behavior

There was an op-ed by Louis Hyman (author of Debtor Nation: The History of America in Red Ink)in last week's NYTimes about the reappearance of the layaway plan. A layaway plan is where a shopper pays a small fee (about $5-$10) and a down payment (usually 10%) in order to make payments toward an item. The shopper can't take the item until the payments are made. The payments typically must be made within 2-3 months. If the shopper is unable to make all the payments, the store returns the money that has been paid, less the plan fee. Some plans, like Walmart's, will also charge a cancellation fee (of $10). Hyman notes that:

" a financing option, layaway is decidedly worse than most credit cards. Imagine a mother going to Wal-Mart on Oct. 17 and buying $100 worth of Christmas toys. She makes a down payment of $10 and pays a $5 service fee. Over the next two months she pays off the rest. In effect, she is paying $5 in interest for a $90 loan for two months: the equivalent of a credit card with a 44 percent annual percentage rate, a level most of us would consider predatory.

In comparison, even a card with an 18 percent A.P.R. would charge only half as much interest — and she could take those presents home the same day.

Then consider what would happen if she couldn’t finish all the payments. Wal-Mart would give her the money back, less $10. If she borrowed that $90 and paid $15 in interest for two months, she would have the equivalent of a jaw-dropping interest rate of 131 percent."

These are all very good points, but there are also good reasons why layaway plans may be a better option for some consumers. Unlike with credit cards, a consumer can't charge astronomical sums without being aware of it. It's easy to do that when you use credit --$20 bucks here, $5 bucks here -- the numbers add up, and it's the rare consumer who keeps a running, cumulative tally of their various credit purchases. While the interest rate might be high using Hyman's hypothetical, there is a limit on the hurt a consumer feels.  That's not necessarily the case with credit cards. A consumer who fails to pay the entire balance on a credit card gets charged a penalty. That, plus the balance on the credit card, plus interest on that new bigger balance, gets carried over until the following month. The consumer feels okay about it as long as minimum payments are being made -- even though the size of the debt may be growing.  And the size of the debt is likely to be growing because, even if the entire balance hasn't been paid off, additional purchases are likely being made, adding to the outstanding balance (upon which interest and fees are being added)....You get the picture. This is the debt rabbit hole that a layaway plan helps a consumer avoid.

The fact that the shopper can't take the item home that day is probably the biggest benefit to a layaway plan. Shoppers like shiny new things. They see them and want them now. If they pay for something knowing they don't get it right then, they might be less impulsive about their purchases. In addition, a layaway plan protects a shopper against his or her own cognitive limitations (and who doesn't have them?) You may not really need that new flat screen t.v., but you just won't listen to reason. You come to your senses a week later, but rather than being out a thousand dollars and stuck with an item you no longer want, you're out the service fee and the cancellation fee ($10-15 dollars usually). You haven't fallen into the rabbit hole of consumer debt over that bad purchase.

This is not an endorsement of layaway plans, just an acknowledgment that the reality of personal finance is not as simple as the numbers on the page. Personalities and circumstances affect whether a certain strategy is for you. Some people can't control their drinking, so they abstain. Some people know they can't control their spending, and so they cancel their credit cards and pay in cash if they have it, or put their items away on layaway. It's not just a financial plan, it's a financial and behavioral strategy.

Now for the contract's angle:

Read the fine print. Credit card companies nabbed many customers with their fine print. Customers interested in layaway plans should read and understand the terms of the plan. They should read the fine print. The cancellation fee for the WalMart plan is in very small letters and easy to miss.

Get the specifics. In writing. Information about layaway plans that are available on retailer websites are big on touting things you can buy but skimpy on the specifics of the plan. The Best Buy plan, for example, doesn't explain how much of your money is refunded in the event of cancellation. The consumer may expect all of it, but does that include the down payment? I think it does and hopefully if the retailer tries to argue that it doesn't, a court will interpret the provision against the drafter. But a consumer never wants to get involved in litigation over something like this. Anyway, there's probably a mandatory arbitration clause in the layaway contract so a consumer would be out of luck....The confusing nature of layaway plans is especially troubling where the consumer is not a native English speaker. Terms that deviate from the "standard" terms of a layaway plan (i.e. where the downpayment and all payments are not returned in the event of cancellation) should be scrutinized very carefully. (Language issues in consumer contracts require a standalone post, there's so much to say on that topic!)

Layaway plans make me think of Williams v. Walker Thomas, the famous unconscionability case. Although that case involved a payment installment - and not a layaway - plan, it raised the same issues regarding consumer wants and needs, behavior, fine print, bargaining power, and alternatives. Funny, whenever I bring up layaway plans in discussing the case in class, most of my students have no idea what they are. I wonder if that will change.

[Nancy Kim]

October 17, 2011 in Commentary, In the News | Permalink | Comments (3) | TrackBack (0)

Sunday, October 16, 2011

The Robots are Coming for Arbitration....

Is a robot going to steal your job?  About two weeks ago, I read that entertaining piece in Slate on what seemed like a hypothetical question.  Then I read about "cybersettle" in the WSJ.  Apparently commercial arbitration is no longer efficient enough.  A unit of GE has, therefore, required thousands of suppliers to agree to "cybersettlement" in "simple disputes" over no more than about $65,000.  From the article:

The company's system involves blind bidding online to see if the parties agree on a settlement amount. If that that doesn't pan out, an arbitrator rules, but communicates only online and without a hearing.

"We get a large number of claims that are simply about money and they can take up a lot of attorney time and costs," says Kenneth S. Resnick, general counsel of GE Oil & Gas, which is based in Florence. "This allows a cheap—and, most important, fast—way of solving them."

GE says 15 disputes over claims for €136,000 total were settled in a three-month look at the cybersettlement process this year. The company has faced resistance from employees and suppliers skeptical that their claims will get a fair shake. Another possible hitch: The system doesn't allow claimants a way to vent.

"Some people file claims because they see dollar signs. But many people who file claims are just totally upset and feel a sense of injustice," says New York City Comptroller John Liu, who last year axed a similar online dispute-resolution approach in the city.

"I can't get my arms around the lack of a human element," says Sanford Ring, general counsel of Hino Motors Manufacturing U.S.A. Inc., a Toyota Motor Corp. truck subsidiary. Without testimony or face-to-face interaction, it can be difficult to evaluate the credibility of either side of a business dispute, he says. "The credibility aspect is very important."

Nonetheless, GE is looking to use the system more broadly, including for disputes involving customers, as well as suppliers, Mr. Resnick says.

Here's more on the GE program:

GE's process begins with automated online double-blind bidding. After a claimant pays a $500 filing fee, the supplier and GE upload relevant documents, which the opposing side can read.

The parties also enter three settlement figures—in ascending or descending order, depending on whether the party would be paying or getting paid—that would be acceptable. The figures aren't disclosed to the opposing side. If an offer and demand in any round overlap, a settlement is reached. The $500 fee is then split equally.

Robert C. Ballou, the chief executive of Cybersettle Inc., whose technology is used by GE and was adopted by New York City, says that for parties using a three-round online negotiation process, the overall settlement rate is 65%. That is consistent with research on litigation in general, which shows that the majority of cases will settle before they reach the courtroom, GE says. Cybersettle is paid a fee for each dispute handled.

In GE's cybersettlement process, if no settlement is reached through automated bidding, the dispute gets bumped to online arbitration for an additional $1,000 paid by the claimant. GE asked the International Centre for Dispute Resolution, a division of the not-for-profit American Arbitration Association, to design the overall online process. The center found engineers to arbitrate cases.

A single engineer reviews the documents that were uploaded, determines a winner and tells the center, which communicates with both sides online—no lawyers, witnesses or hearing dates.

It didn't work out for New York City because, well, robots aren't exactly humans:

New York for several years used a Cybersettle process to settle small personal-injury and property-damage claims. The city's comptroller at the time said that by 2009, the system allowed the city to settle more than 4,000 personal-injury claims at an average cost of $11,662 each, compared with $23,379 achieved through litigation.

But Mr. Liu, who took office last year, concluded that the same work could be done less expensively with an in-house staff of claims adjusters who negotiated by phone. The city is now saving the $600,000 a year that it paid to Cybersettle, his office says.

"If someone is checking for account balances, perhaps a computer or phone system could more quickly give that information," he says. "But for a more complicated, interactive function, such as claims settlement—or settlement of any kind of dispute—it shouldn't be that surprising that a computer is not up to the task."

This was all essentially predicted decades ago:

[Meredith R. Miller]

October 16, 2011 in In the News | Permalink | Comments (1) | TrackBack (0)