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Editor: D. A. Jeremy Telman
Valparaiso Univ. Law School

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Monday, April 16, 2012

New York Convention and Jones Act Do Not Overcome Motion to Compel Arbitration in the 11th Circuit

11thCircuitSealOn April 10, 2012, the Eleventh Circuit Court of Appeals issued an unpublished opinion addressing the types of defenses a party contesting enforcement of an arbitration agreement can make and at what times those arguments can be raised under The United Nation Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention).  In Castillo-Arauz v. Carnival Corp., the court affirmed per curiam, the District Court’s order to compel arbitration.  The plaintiff, a seaman asserting negligence claims under the Jones Act against his employer, Carnival Cruise lines, will now have to arbitrate those claims. 

The seaman, Roy David Castillo Arauz, suffered an injury while working aboard the Carnival ship “Destiny.”  His employment agreement calls for arbitration in Panama City under Bahamian law.  Nevertheless, Arauz filed his claim in Florida state court, and Carnival removed to the Southern District of Florida, where it moved to compel arbitration. 

Cruise ShipArauz contended that the arbitration provision is unenforceable because it violates the public policy of the United States.  For support, Arauz cited Thomas, a 2009 decision of the 11th Circuit, which held unenforceable an arbitration agreement that called for the application of foreign law in a foreign venue.  

In response, Carnival stipulated that it agreed to allow for the application of U.S. law to Arauz’s Jones Act claim.  This, the District Court found, eliminated the public policy concerns contemplated by the court in Thomas, and justified compelling arbitration, which it did. 

After the District Court issued its order to compel the arbitration but before Arauz filed his appeal, the Eleventh circuit decided another arbitration clause case, Lindo. In Lindo, the court held that only standard breach of contract defenses “that can be applied neutrally on an international scale” can invalidate an arbitration agreement during the arbitration-enforcement stage. The court cited its 2005 decision in Bautista and noted that Thomas- decided in 2009- violated the precedent that Bautista had established.

Arauz argued that a public policy defense does exist during the arbitration-enforcement stage pursuant to the New York Convention.  The Court stated that Arauz had acknowledged that his argument is foreclosed by Lindo and that the Court is not in a position to overrule the case.  

The Court declined to consider Arauz’s alternative claim that the agreement is unconscionable and that unconscionability is a standard breach of contract defense since he did not raise the issue in the District Court.  In any case, the Court indicated that the argument would fail since the Bautista court rejected the same argument, reasoning that the doctrine of unconscionability cannot be uniformly applied across the member countries to the New York Convention.  

[JT & Justin Berggren]

April 16, 2012 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Thursday, April 12, 2012

Didn't See This One Coming. . . . Yes We Did.

Keith_OlbermannKeith Olbermann (left) and Al Gore's (right) Current TV have filed suit against each other in Los Angeles Superior Court.  Olbermann claims Current TV violated his contract and owes him up to $70 million in unpaid compensation. Olbermann’s complaint specifies that he was publically terminated without cause, and he is suing for breach of contract, sabotage and disparagement.  Current TV’s cross-complaint seeks a declaratory judgment on the grounds that it acted within its contractual rights when it terminated Olbermann, as well as a determination that it no longer has to pay Olbermann, having already paid him handsomely while receiving a “pauper’s performance” in return.  As reported by FoxNews.com, Current TV claims that Olbermann was too often an absentee anchor and simply did not live up to the terms of his contract, especially in terms of ratings.  Yet, Olbermann alleges that the subpar broadcast facilities at Current TV made it difficult for him to produce good ratings. 

Algore
As chronicled in the Santa Francisco Examiner, this is just the latest episode in the picaresque story of broadcaster Olbermann.  He anchored for ESPN until his unauthorized 1997 appearance on the “Daily Show” during which he referred to Bristol, CN, ESPN’s headquarters, as a “godforsaken place.”  In the words of ESPN spokesman, Mike Soltys, when Olbermann left he did not merely burn his bridges; he napalmed them.  From there, Olbermann went to MSNBC, but by 1998, he was so sick of reporting on the Monica Lewinsky scandal (who can blame him?), he left MSNBC, and joined Fox Sports.  He soon returned to MSNBC to host “Countdown with Keith Olbermann.”  As we have previously reported here, MSNBC agreed to pay him $7.5 million a year through the 2012 presidential election.  However, as we reported here, Olbermann called it quits in the middle of that contract—while on the air--for reasons that remain unclear. 

Which brings us to the current lawsuit.  In a statement reported by businessweek.com, Current TV spokeswoman, Laura Nelson characterized the lawsuit as follows: ‘when the law is on your side, you argue the law.  When the facts are on your side, you argue the facts.  When neither the law nor the facts are on your side, you pound the table. . . It is well established that over his professional career, Mr. Olbermann has specialized in pounding the table.”  On April 3, in an appearance on CBS’s “Late Show,” Olbermann said, “I screwed up really big on this.”  “It’s my fault it didn’t succeed in the sense that I didn’t think the whole thing through.”  Current TV quoted these comments in the first paragraph of its cross-complaint.

[JT & Christina Phillips]

April 12, 2012 in In the News, Recent Cases, Television | Permalink | Comments (0) | TrackBack (0)

The Trouble with Totten

Lincoln HeadAt the Spring Contracts Conference last month, I presented the contracts law portion of my article, Intolerable Abuses: Rendition for Torture and the State Secrets Privilege.  That article is now in print, 63 Alabama Law Review 429 (2012), but as the electronic version has not yet appeared on the Law Review website, you can get the draft version (which is substantively the same as the print version) on SSRN.

The portion that I presented at the conference, "The Trouble with Totten" is about an 1875 case brought by the estate of William Lloyd a Civil War spy. As I summarized the case previously:

In Totten, the administrator for the estate of William A. Lloyd brought a claim against the government, seeking to recover for the breach of an espionage contract.   He alleged that Lloyd had entered into an agreement with President Abraham Lincoln in which Lloyd infiltrated enemy territory during the Civil War in order to provide the U.S. Government with vital information relating to the military forces and fortifications of the Confederacy.   For these services, Lloyd was to be paid $200/month plus expenses.  Honest Abe allegedly paid Lloyd only expenses.  

Justice Field, writing in 1875, found that the subject matter of the contract was a secret and that both parties must have known at the time of their agreement that their lips would be “for ever sealed respecting the relation of either to the matter.”  In order to protect the public interest in having an effective arm of the government that could engage in secret services, the Court ruled that there could be no claim for breach of a secret contract because the existence of the contract was itself a secret that could not be disclosed.

I have subsequently learned more details about Mr. Lloyd's exploits on behalf of President Lincoln (he was Lincoln's personal spy) and about why President Lincoln stiffed him (Lincoln was dead by the time Lloyd returned from his assignment).  The source of the information is Douglas E. Markle's book, Spies and Spymasters of the Civil War.  The information provided in the book is also available online here.  Unfortunately, Mr. Markle's book contains a bibliography but no citation apparatus, so I cannot identify or further explore his sources.  A letter to his publisher went unanswered and I have no other contact information for him. 

As I would like to pursue the matter further -- I think the case would be a great subject for a Law Story -- I would appreciate any suggestions our readers might offer about how I might get further information about the life of William A. Lloyd, personal spy to Preisdent Lincoln.

[JT]

April 12, 2012 in Conferences, Famous Cases, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 11, 2012

A Song About Offers

We have already posted links to Professor Mark DeAngelis's "Law Lessongs" on Raffles v. Wichelhaus, the UCC's Battle of the Forms (2-207), and substantial performance.

Once more unto the breach: today we offer this number on offers from Professor DeAngelis's YouTube site .  Here is his explanation of the lessong:

This is a "Law Lessong" - a law lesson in a song - that I wrote to help students consider the issues surrounding the making of a contract offer. When does negotiation coalesce into an offer that may be accepted? This view looks to language, surrounding circumstances and certainty and definiteness as factors to consider in finding an outward manifestation of present intent to be bound to a contract. I hope that it is useful to you.

MdeangelisThe Offer's Real
Lyrics by Mark DeAngelis
Tune: based on St. Anne's Reel (public domain)

Paul went off to work today,
Unaware of what might come his way,
Through e-mails, calls and letters and texts,
He wondered if he'd make a deal.

Communication constantly;
Negotiation seeming endlessly,
How can he tell when the offer's made
To step in and seal the deal? Manifestation of a present intent, To perform a contract in any event, Look at the language that was sent, To determine if an offer's real. I offer, I promise, I covenant to Render contract performance direct to you This is the language that will do To determine that an offer's real

A court of law with objective bent
Will not unearth subjective intent
Read the signs from what's been shown
To determine if the offer's real.

An advertisement it's been said
Is often not an offer, but instead
An invitation to make offers to buy
If the seller wants to seal a deal Manifestation of a present intent, To perform a contract in any event, What circumstances are present To determine if an offer's real. Language expression may hold the key, Along with what circumstances there may be, Definiteness and certainty Will determine if an offer's real.

 

With our terms now there must be
Sufficient definiteness and certainty
On each and every of the law's demands
For a contract to made for real.

Sufficiently certain, sufficiently clear
With evidence for the court to hear
To grant relief in the event of breach
Will determine if the offer's real. Manifestation of a present intent, To perform a contract in any event, Sufficiently certain and definite To determine if an offer's real. Language expression may hold the key, Along with what circumstances there may be, Definiteness and certainty Help determine if an offer's real. I offer, I promise, I covenant to Render contract performance direct to you This is the language that will do To determine that an offer's real

[JT]

April 11, 2012 in Music, Teaching | Permalink | Comments (0) | TrackBack (0)

New in Print

Pile of BooksIan Ayres, Freedom. Using Commitment Contracts to Further Ex Ante Freedoms: the Twin Problems of Substitution and Ego Depletion, 62 Ala. L. Rev. 811 (2011)

Larry A. DiMatteo, Robert C. Bird and Jason A. Colquitt, Justice, Employment, and the Psychological Contract. 90 Or. L. Rev. 449 (2011)

Michael Feit, Attribution and the Umbrella Clause -- Is There a Way Out of the Deadlock? 21 Minn. J. Int'l L. 21 (2012)

Mary L. Heen, From Coverture to Contract: Engendering Insurance on Lives, 23 Yale J.L. & Feminism 335 (2011)

Alan Reed, The Rome I Regulation and Reapprochement of Anglo-American Choice of Law in Contract: A Heralded Triumph of Pragmatism over Theory. 23 Fla. J. Int'l L. 359 (2011)

Glenn D. West, and Natalie A. Smeltzer, Protecting the Integrity of the Entity-Specific Contract: The "No Recourse against Others" Clause-Missing or Ineffective Boilerplate? 67 Bus. Law. 39 (2011)

[JT]

April 11, 2012 in Recent Scholarship | Permalink | TrackBack (0)

Tuesday, April 10, 2012

Weekly Top Tens from the Social Science Research Network

SSRNRECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of Contracts & Commercial Law eJournal 

February 10, 2012 to April 10, 2012

RankDownloadsPaper Title
1 257 Emerging Policy and Practice Issues (2011) 
Steven L. SchoonerDavid J. Berteau
George Washington University - Law School, Center for Strategic and International Studies, Defense - Industrial Initiatives Group
2 235 Empirical Studies of Contract 
Zev J. Eigen
Northwestern University School of Law
3 232 The Impact of the Broker-Dealer Fiduciary Standard on Financial Advice 
Michael S. FinkeThomas Patrick Langdon
Texas Tech University, Unaffiliated Authors - affiliation not provided to SSRN
4 209 A License is Not a 'Contract Not to Sue': Disentangling Property and Contract in the Law of Copyright Licenses 
Christopher M. Newman
George Mason University - School of Law, Faculty
5 138 The Effect of Bargaining Power on Contract Design 
Albert H. ChoiGeorge G. Triantis
University of Virginia School of Law, Stanford Law School
6 123 Boomer-Ang Eldercare: Deductible Claim? 
Wendy C. Gerzog
University of Baltimore - School of Law
7 102 Does the Constitution Protect Economic Liberty? 
Randy E. Barnett
Georgetown University Law Center
8 95 What is Securitization? And for What Purpose? 
Steven L. Schwarcz
Duke University - School of Law
9 76 The Impact of Directive 2011/83/EU on Consumer Rights 
Anca Daniela Chirita
Durham University - Department of Law
10 76 The Consumer Rights Directive Adopted 
Caroline Cauffman
Universities of Maastricht and Antwerp

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

February 10, 2012 to April 10, 2012

RankDownloadsPaper Title
1 496 A Legal Analysis of Romantic Gifts 
Ruth Sarah Lee
Harvard Law School
2 238 The Common European Sales Law and the CISG - Complicating or Simplifying the Legal Environment? 
Nicole KornetNicole Kornet
Maastricht University - European Private Law Institute (M-EPLI), Maastricht University - METRO Institute
3 235 Empirical Studies of Contract 
Zev J. Eigen
Northwestern University School of Law
4 208 A License is Not a 'Contract Not to Sue': Disentangling Property and Contract in the Law of Copyright Licenses 
Christopher M. Newman
George Mason University - School of Law, Faculty
5 137 The Effect of Bargaining Power on Contract Design 
Albert H. ChoiGeorge G. Triantis
University of Virginia School of Law, Stanford Law School
6 106 The Psychology of Contract Precautions 
David A. HoffmanTess Wilkinson-Ryan
Temple University - James E. Beasley School of Law, University of Pennsylvania Law School
7 102 Does the Constitution Protect Economic Liberty? 
Randy E. Barnett
Georgetown University Law Center
8 96 The Case for a Common European Sales Law in an Age of Rising Nationalism 
Martijn W. Hesselink
University of Amsterdam - Centre for the Study of European Contract Law (CSECL)
9 59 Parallel Contract 
Aditi Bagchi
University of Pennsylvania - Law School - Faculty
10 57 The Unenforceable Corrupt Contract: Corruption and 19th Century Contract Law 
Zephyr Teachout
Fordham University - School of Law

 

[JT]

April 10, 2012 in Recent Scholarship | Permalink | TrackBack (0)

Monday, April 9, 2012

Professor DeAngelis on Substantial Performance

We have already posted links to Professor Mark DeAngelis's "Law Lessongs" on Raffles v. Wichelhaus and the UCC's Battle of the Forms (2-207).  

Today we have raided his YouTube site for this number on Substantial Performance.  Here is his explanation of the song:

MdeangelisThis is a "Law Lessong" - a law lesson in a song - that I wrote to help students consider the issues regarding substantial performance of a service contract. This song follows a hypothetical where a contractor builds a new dormitory at a college. At some point, the job is "done." But is a construction job ever really "done?" There are always punch list items to be completed. The song and example hopefully allow you to explore what level of performance is acceptable and what constitutes a breach. (In the heating work, the breach is material; in the case of the malfunctioning locks, the breach is likely minor depending on how many locks are involved.) Also, there is the opportunity to distinguish between substantial performance under the contract and the performance of substantial work under the contract.

The melody is based on "The Ship That Never Returned" written by Henry Clay Work in 1865. (This melody may also be recognizable as the tune that the Lettermen used in their 1959 hit song, "Charlie on the MTA"):

The Substantial Performance Song
Words by Mark DeAngelis
Tune: Ship That Never Returned (Work, H.C.)

Refrain:
Did he substantially perform?
Can the college use the dorm,
To keep the students safe and warm?
Look at substance over form,
Minor or material harm?
To determine if he substantially performed.

A builder's bid was won
A job was to be done
To build a brand new college dorm
Excavators dug the land
Subcontractors followed plans 
And soon substantial work they all performed
"We're done!" the builder said,
"Let's put this job to bed"
And the college inspectors came to see.
Though the structure did impress, 
There were problems to address,
Before the college paid the final fee. Refrain

 

The inspectors checked the halls,
The plumbing, lights and walls,
And mostly they were satisfied and glad.
But when they checked the rooms for heat,
The work and standards did not meet, 
The heating and the boiler work were bad.

Besides the heating ills
Leaving students with the chills,
A problem with security was found.
The college was appalled 
When the locks that were installed, 
In the students' rooms were junk and broken down. Refrain x2

[JT]

April 9, 2012 in Music, Teaching | Permalink | Comments (0) | TrackBack (0)

If You Think Class Action Waivers Are Unconscionable, You Have No Concepcion of the State of the Law

In Coneff v. AT&T Corp., AT&T Wireless customers brought a class action suit against AT&T Wireless, Cingular Wireless LLC (“Cingular”) and related companies.   As recounted in the District Court opinion (what is this new trend in the Circuit Courts to provide no recitation of the facts of the case?!?), plaintiffs alleged that, after Cingular bought out AT&T, the company deliberately degraded AT&T Wireless’s network in order to induce AT&T Wireless customers to transfer their plans to the more expensive and less favorable Cingular plans.  Customers who refused to agree to the “upgrade” had to either complete their contract term with a degraded AT&T Wireless service or pay a $175 termination fee to cancel service. 

9th CircuitPlaintiffs asserted claims under the Consumer Protection Acts of 14 different states, the Federal Communications Act, unjust enrichment and breach of contract.  Plaintiffs also sought a declaratory judgment that an arbitration provision contained in their contracts, which included a class-action waiver, was unconscionable and therefore unenforceable.  In response, AT&T filed a motion to compel arbitration, which the District Court denied, finding the class action waiver was substantively unconscionable and therefore unenforceable.  Because the arbitration provision stated that it would be unenforceable in its entirety if the class-action waiver were struck, the District Court invalidated the entire arbitration agreement.   AT&T then appealed to the United States Court of Appeals for the Ninth Circuit. 

At the time the District Court denied AT&T’s Motion to Compel arbitration, the Ninth Circuit had held that the Federal Arbitration Act (“FAA”) did not preempt state unconscionability law pertaining to class-action waivers in arbitration clauses.  However, the Supreme Court reversed that holding in AT&T Mobility LLC v. Concepcion (about which we’ve blogged before), holding that the FAA preempts state, in that case, California’s, rules banning class-action waivers. 

Plaintiffs unsuccessfully attempted to distinguish Concepcion in four ways. 

  1. Concepcion rejected the argument that the cost of arbitration could preclude a litigant from effectively vindicating federal statutory rights in the arbitral forum, and given the various fee-shifting and pro-consumer provisions in the arbitration agreement, this case was not distinguishable from Concepcion in that regard.
  2. The Court rejected plaintiffs’ claim that the Washington’s rule that some class action waivers are unconscionable is distinguishable from the California class-action waiver rule at issue in Concepcion
  3. Plaintiffs attempted to argue that Washington’s class action waiver rule narrowly targeted such waivers that would make it economically absurd for plaintiffs to bring tiny claims via arbitration But, Concepcion specifically forecloses this argument, since it rejected the dissent’s position that “class proceedings are necessary to prosecute small-dollar claims that might otherwise slip through the legal system.”  The Ninth Circuit followed the Eleventh Circuit’s approach in Cruz v. Cingular Wireless, LLC (about which we blogged here) which concluded that the argument “goes only to substantiating the very public policy arguments that were expressly rejected by the Court in Concepcion—namely, that the class action waiver will be exculpatory, because most of these small-value claims will go undetected and unprosecuted.” 
  4. The Ninth Circuit also rejected Plaintiffs’ to distinguish Washington’s law on the ground that it would invalidate not only the class action waiver but the entire arbitration agreement observing that “by invalidating arbitration agreements for lacking class action provisions, a court would be doing precisely what the FAA and Concepcion prohibit—leveraging ‘the uniqueness of an agreement to arbitrate’ to achieve a result that the state legislature cannot.”

Some hope remains for Plaintiffs.   The Ninth Circuit remanded the case to the District Court to apply Washington’s choice-of-law rule to Plaintiffs’ claim of procedural unconscionability.  If, under some state  laws, a showing of procedural unconscionability would result in success for those plaintiffs, the District Court must complete a conflict-of-laws analysis and decide which Plaintiffs, if any, may benefit.

[JT & Chrissy Phillips]

April 9, 2012 in Recent Cases | Permalink | TrackBack (0)

Friday, April 6, 2012

UCC 2-207 Set to Music

MdeangelisHere's another law lessong from Professor Mark DeAngelis of the University of Connecticut's School of Business:

Here is Professor DeAngelis's intro:

This is a "Law Lessong" - a law lesson in a song, that summarizes some of the legal principles applicable under the Uniform Commercial Code for formation of sales contracts. In my experience, the Battle of Forms issue under the UCC seems to give students dreadful problems. The rules under the UCC can be confusing because there is a general rule for non-merchants, a different rule for merchants and then exceptions to the rule. So, you end up with "if this then that but if this then that but if this, this or this, then something else." I think that the song helps!

And here are the lyrics:

This Form is Your Form

Words by M. DeAngelis
Tune: This Land is Your Land

Refrain: This form is your form, that form is my form.
They show a contract for us to perform.
You sent and order, I sent an invoice.
What terms are binding on you and me?

I am a merchant. I am a seller.
You're not a merchant, just a regular fella'.
And my invoice is an acceptance.
But additional terms aren't binding on you and me.

If you're a merchant, our forms do battle.
It isn't merely, idle prattle.
We have a contract, and the invoice terms are added in,
Unless it's an exception, and there are three.

 

This form is your form, that form is my form.
They show a contract for us to perform.
You sent and order, I sent an invoice.
What terms are binding on you and me?

Between merchants, new terms are binding,
Unless you find them, quite surprising.
If unexpected, then material alteration you'll claim,
And the new terms will not bind you and me.

Perhaps your offer expressly stated,
Contract terms could not be annotated,
Or perhaps you previously objected to the invoice terms,
Or you raised your objection, timed reasonably.

This form is your form, that form is my form.
They show a contract for us to perform.
You sent and order, I sent an invoice.
What terms are binding on you and me?

[JT]

April 6, 2012 in Music, Teaching | Permalink | Comments (1) | TrackBack (0)

Thursday, April 5, 2012

University of Chicago to Host Conference on European Contract Law

The conference will be hosted by the Institute for Law and Economics and the University of Chicago Law School and held April 27-28, 2012. 

Here is a list of the participants and the topics of their presentaions.

Conference Program

UofC LawThomas Ackermann, Ludwig-Maximilians University, Munich
Public Supply of Optional Standardized Consumer Contracts: A Rationale for the Common European Sales Law?

Douglas Baird, University of Chicago Law School
Precontractual Disclosure and the European Sales Law

Omri Ben-Shahar, University of Chicago Law School, and Oren Bar-Gill, New York University Law School
Regulatory Techniques in Consumer Protection: A Critique of the Common European Sales Law

Lisa Bernstein, University of Chicago Law School
Custom and the CESL

Fabrizio Cafaggi, European University Institute, Florence
CESL and precontractual liability from a status to a transaction based approach

Horst Eidenmuller, University of Munich
What can be wrong with an Option? The proposal for an Optional Common European Sales Law

Richard Epstein, New York University Law School, Hoover Institution, University of Chicago Law School
Harmonization, Heterogeneity, and Regulation: Why the Common European Sales Law Should Be Scrapped

Fernando Gomez, Universidad Pompeu Fabra, Barcelona
Optional Law for Firms and Consumers: An Economic Analysis of Opting into the Common European Sales Law

Stefan Grundmann, Humboldt Universitat, Berlin
The Desirability of an Optional European Contract Law—and the Impact of a Particular Code Design on this Question

William Hubbard, University of Chicago Law School
Another Look at the Eurobarometer Contract Law Survey Data

Saul Levmore, University of Chicago Law School
Harmonization, Preferences, and Convergence

Ariel Porat, University of Chicago Law School and Tel Aviv Law School
Mistake under the Common European Sales Law

Eric Posner, University of Chicago Law School
The Questionable Basis of the Common European Sales Law: The Role of an Optional Instrument in Jurisdictional Competition

Jan Smits, Maastricht University
Contract Law as Optional Law: On the Potential and Limits of Choice

Gerhard Wagner, Universitat Bonn
Buyers' Remedies under the CESL: Rejection, Rescission, and the Seller's Right to Cure

Simon Whittaker, Oxford University
Identifying Legal Costs of the Operation of the Common European Sales Law:  Legal Framework, Scope of the Uniform Law and National Judicial Evaluations

More details are available here.

[JT]

April 5, 2012 in Conferences | Permalink | TrackBack (0)

Court to HuffPo Writers: A Deal's a Deal

A group of unpaid bloggers brought a class action against AOL, the Huffington Post (HuffPo) and its founders, including the eponymous Arianna Huffington (pictured) in the Southern District of New York on the ground that HuffPo unjustly and deceptively denied the bloggers compensation for their submissions and promotion of that website’s content.  Last week, Judge Koeltl granted the defendants’ motion to dismiss the action, styled Tasini v. AOL, Inc.

Arianna_HuffingtonPlaintiffs are “professional or quasi professional” writers who contributed to HuffPo’s success.  It was/is a spectacularly successful enterprise, attracting 26 million unique visitors per month (even the ContractsProf Blog cannot rival those numbers).  HuffPo made clear from the start that, rather than monetary compensation, the writers/bloggers would get exposure—namely visibility, promotion, and distribution, for themselves and their work.  All went along swimmingly until 2011, when AOL bought HuffPo for $315 million.  The  bloggers then sued, claiming a violation of New Yorks General Business Law § 349 (deceptive business practices) and that HuffPo was unjustly enriched, and sought at least $105 million in compensatory damages. 

Judge Koeltl began by setting out New York’s law on unjust enrichment: Under New York law, a plaintiff must establish: “(1) that the defendant benefitted; (2) at the plaintiff's expense; and (3) that equity and good conscience require restitution.”  Noting that the bloggers “entered into their transactions with the defendants with full knowledge of the facts and no expectation of compensation other than exposure,” Judge Koeltl concluded that “equity and good conscience counsel against retroactively altering the parties’ clear agreements.” He then dismissed both the unjust enrichment claim and the § 349 claim with prejudice.  

Some see an injustice in that the plaintiffs were committed to a certain sort of institution -- they may have seen HuffPo as a not-for-profit enterprise with a clear political mission -- and that institution was then swallowed by a soulless corporation associated with the noise an old-fashioned dial-up modem makes.  Plaintiffs did not make that argument, perhaps because they did not want to seem like starry-eyed idealists who never noticed that HuffPo is a full-service content aggregator that, according to Wikipedia "covers politics, business, entertainment, technology, popular media, life & style, culture, comedy, healthy living, women's interest, and local news."  Rather, as there was no question that HuffPo benefitted from the bloggers' contributions, the legal issue at the heart of the case is whether New York law ever supports a claim for restitution when there is no initial expectation of payment.     

Plaintiffs presented the court with a number of cases in which plaintiffs successfully brought restitution claims even without a clear initial expectation of payment.  The heart of the court's reasoning on this matter runs as follows:

At best, these cases stand for the proposition that plaintiffs who are unsure of whether they will be compensated if their services are not used may still sue if the services they render do ultimately benefit a defendant who then denies compensation. . . .   Stated in other terms, the plaintiffs in these cases expected compensation but the exact terms of the compensation were unclear. These cases therefore fail to support the plaintiffs’ argument that unjust enrichment does not require an expectation of compensation. Indeed, in this case, the plaintiffs expected only exposure rather than monetary compensation if their submissions were used, and those terms were clear from the outset.

In the court's view, this was a case in which the parties initial expectations were clear and the plaintiffs sought a "do over" when they learned that the price that AOL was willing to pay HuffPo for the privilege of access to the services that HuffPo writers were giving away. 

[JT and Christina Phillips]

April 5, 2012 in In the News, Recent Cases, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 4, 2012

More Contracts Cases Set to Music: Raffles v. Wichelhaus

A few months back, we ran a series of contracts songs YouTube videos created by Professor Richard Craswell.  But the market is not saturated.  Noting that Professor Craswell has no song about the good ship Peerless, Professor Mark DeAngelis, of the University of Connecticut School of Business (pictured), rushed to fill the gap. 

Professor DeAngelis introduces his material as follows: Mdeangelis

This is a "Law Lessong" - a law lesson in a song - that I wrote to help students consider the issues of mistake in contract formation. This song chronicles the story of the case of Raffles v Wichelhaus: establishing the rule of mutual mistake in contract law.

The Bonnie Ships Peerles
By Mark DeAngelis

Sing Ho! For the mighty Peerless as through the waves she steers
A bonnie name for a bonnie ship that surely has no peer.
Can there be another like her cargo-bound for Britain's shore
On her treacherous journey into contract lore?

In America the cotton states were subject to blockade
For the fate of worldwide commerce other plans had to be made
In the colony of India English merchants solace found
Though treacherous be the journey the Cape round

And the halls of British commerce saw negotiations bold
A hundred and a quarter bales of Surat cotton to be sold
And bound to "arrive ex Peerless" from the port of far Bombay
A cargo of great value to convey

Sing Ho! For the mighty Peerless as she plows the briney main
A gallant bark no match for her we'll likely see again
Her name being inked upon the page had given the call for
Her treacherous journey into contract lore?

 

In October's balmy weather it was she first set sail
Her hold was brimmed with goods the merchants contracted for sale
And owing to the faithfulness and skill of her fine crew
Along the docks of Liverpool she drew.

The merchant halls received the word she'd arrived from far Bombay
And the buyer with expectancy made haste unto the quay
As the Peerless spilled her cargo down upon the dock below
No cotton would be found to buyer's woe

Sing Ho! For the mighty Peerless as she rolls upon the seas
With sails aloft and Britain bound she harnesses the breeze
But naught one bale of cotton could be found from aft to fore
On her treacherous journey into contract lore.

But lo and hark the Peerless sits embarking for to sail
Holding precious cotton bound up in a hundred and a quarter bales
A fine Bombay December morn saw her mainsail full unfurled
As she sought to journey halfway 'round the world

The Peerless tossed and pitched so hard as 'round the Cape she flew
When another ship was spied and hailed by her intrepid crew
So, now as peers they plowed the swells bound for opposing shores
Peerless once, now peerless nevermore.

And once again in Liverpool the word passed with all speed
The Peerless had arrived and all with business should take heed
And the Seller stood upon the dock full satisfied and bold
As bail on bail poured from the Peerless' hold.

But alas the buyer ne'er appeared, seller's tender was in vain
For the Buyer'd long since covered other cotton for his skeins
The Seller's suit was filed and for contract breach he claimed
And the case went on to earn them legal fame

Sing Ho! For the mighty Peerless now her voyage it is done
Her seafaring o'er but in the law her legacy's begun.
Though the merchants both invoked her name it left the seller sore
O'er her treacherous journey into contract lore.

Peerless? Nay the gallant ship was equaled by one more
For two ships by name "Peerless" sailed the brine to Britain's shore
On the merchants' fateful term to "arrive exl Peerless" they'd agreed
But no contract formed that either one must heed.

The words were fraught with meaning neither party could foresee
That each had meant a different ship to sail the rolling seas
Like two ships passing in the night, each one to the other blind
Though words agreed, no meeting of their minds.

Sing Ho! For the mighty Peerlesses as through the waves they steer
A bonnie name for bonnie ships that surely have no peers.
Can there be another like them cargo-bound for Britain's shores
On their treacherous journey into contract lore?

It's a treacherous journey into contract lore!

 Professor DeAngelis's other Law Lessongs can be accessed here.

[JT]

April 4, 2012 in Famous Cases, Music, Teaching | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 3, 2012

Breaking: NY Ct of Appeals Dismisses Husband's Claim in Maddoff Mutual Mistake Case

We've blogged a great deal about Simkin v. Blank and even live blogged the Valentine's Day oral argument.  Today the New York Court of Appeals unanimously reversed and dismissed the husband's case.  Judge Graffeo reasoned:

Even putting the language of the agreement aside, the core allegation underpinning husband's mutual mistake claim --that the Madoff account was "nonexistent" when the parties executed their settlement agreement in June 2006 -- does not amount to a "material" mistake of fact as required by our case law. The premise of husband's argument is that the parties mistakenly believed that they had an investment account withBernard Madoff when, in fact, no account ever existed. In husband's view, this case is no different from one in which parties are under a misimpression that they own a piece of real or personal property but later discover that they never obtained rightful ownership, such that a distribution would not have been possible at the time of the agreement. But that analogy is not apt here. Husband does not dispute that, until the Ponzi scheme began to unravel in late 2008 -- more than two years after the property division was completed -- it would have been possible for him to redeem all or part of the investment. In fact, the amended complaint contains an admission that husband was able to withdraw funds (the amount is undisclosed) from the account in 2006 to partially pay his distributive payment to wife. Given that the mutual mistake must have existed at the time the agreement was executed in 2006 (see Gould, 81 NY2d at 453), the fact that husband could no longer withdraw funds years later is not determinative.

This situation, however sympathetic, is more akin to a marital asset that unexpectedly loses value after dissolution of a marriage; the asset had value at the time of the settlement but the purported value did not remain consistent. Viewed from a different perspective, had the Madoff account or other asset retained by husband substantially increased in worth after the divorce, should wife be able to claim entitlement to a portion of the enhanced value? The answer is obviously no. Consequently, we find this case analogous to the Appellate Division precedents denying a spouse's attempt to reopen a settlement agreement basedon post-divorce changes in asset valuation.

Simkin v. Blank (NY April 3, 2012).

[Meredith R. Miller]

April 3, 2012 in In the News, Recent Cases, Teaching | Permalink | Comments (0) | TrackBack (0)

Binding Consent for Rough Sex?

Over at the Koncision blog, Ken Adams has a post about a novel called "Fifty Shades of Grey" in which bondage is a theme.  He analyzes the language of the fictional contract for a bondage relationship.  He does quite a number on it.  But we don't see the need to get all tied up in knots about a fictional agreement when there one could be bound and gagged by a real world contract that covers the same ground.  It is the notorious Antioch College Sexual Offense Protection Policy.


We do not have access to the actual policy, but according to the Foundation for Individual Rights in Education's website (the FIRE), the policy defines consent as follows:

Consent:
 
Consent is defined as the act of willingly and verbally agreeing to engage in specific sexual conduct. The following are clarifying points:
  • AntiochConsent is required each and every time there is sexual activity.
  • All parties must have a clear and accurate understanding of the sexual activity.
  • The person(s) who initiate(s) the sexual activity is responsible for asking for consent.
  • The person(s) who are asked are responsible for verbally responding.
  • Each new level of sexual activity requires consent.
  • Use of agreed upon forms of communication such as gestures or safe words is acceptable, but must be discussed and verbally agreed to by all parties before sexual activity occurs.
  • Consent is required regardless of the parties’ relationship, prior sexual history, or current activity (e.g. grinding on the dance floor is not consent for further sexual activity).
  • At any and all times when consent is withdrawn or not verbally agreed to, the sexual activity must stop immediately.
  • Silence is not consent.
  • Body movements and non-verbal responses such as moans are not consent.
  • A person can not give consent while sleeping.
  • All parties must have unimpaired judgement (examples that may cause impairment include but are not limited to alcohol, drugs, mental health conditions, physical health conditions).
  • All parties must use safer sex practices.
  • All parties must disclose personal risk factors and any known STIs. Individuals are responsible for maintaining awareness of their sexual health.
These requirements for consent do not restrict with whom the sexual activity may occur, the type of sexual activity that occurs, the props/toys/tools that are used, the number of persons involved, the gender(s) or gender expressions of persons involved.

The FIRE hates this stuff, but it seems a perfectly reasonable way to educate college students about the perils of date rape, which may be why Gettysburg College has adopted a simlar policy.  But that is not to say the definition of consent could not use Ken Adams's touch.  Ken, give it your best shot!

In the meantime, while the FIRE celebrates Antioch's demise, Wikipedia reports that it reopened in October 2011.

[JT]

April 3, 2012 in Commentary, True Contracts | Permalink | Comments (0) | TrackBack (0)

Weekly Top Tens from the Social Science Research Network

SSRNRECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of Contracts & Commercial Law eJournal 

February 3, 2012 to April 3, 2012

RankDownloadsPaper Title
1 248 Emerging Policy and Practice Issues (2011) 
Steven L. SchoonerDavid J. Berteau
George Washington University - Law School, Center for Strategic and International Studies, Defense - Industrial Initiatives Group
2 223 Empirical Studies of Contract 
Zev J. Eigen
Northwestern University School of Law
3 203 A License is Not a 'Contract Not to Sue': Disentangling Property and Contract in the Law of Copyright Licenses 
Christopher M. Newman
George Mason University - School of Law, Facult
4 199 A Numbers Game – The Legal Basis for an Optional Instrument in European Contract Law 
Gary Low
Maastricht European Private Law Institute
5 156 The Impact of the Broker-Dealer Fiduciary Standard on Financial Advice 
Michael S. FinkeThomas Patrick Langdon
Texas Tech University, Unaffiliated Authors - affiliation not provided to SSRN
6 130 The Effect of Bargaining Power on Contract Design 
Albert H. ChoiGeorge G. Triantis
University of Virginia School of Law, Stanford Law Schoo
7 123 Regulating Shadow Banking 
Steven L. Schwarcz
Duke University - School of Law
8 122 Boomer-Ang Eldercare: Deductible Claim? 
Wendy C. Gerzog
University of Baltimore - School of Law
9 88 Does the Constitution Protect Economic Liberty? 
Randy E. Barnett
Georgetown University Law Center
10 86 What is Securitization? And for What Purpose? 
Steven L. Schwarcz
Duke University - School of Law

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

February 3, 2012 to April 3, 2012

RankDownloadsPaper Title
1 439 A Legal Analysis of Romantic Gifts 
Ruth Sarah Lee
Harvard Law School
2 223 Empirical Studies of Contract 
Zev J. Eigen
Northwestern University School of Law
3 212 The Common European Sales Law and the CISG - Complicating or Simplifying the Legal Environment? 
Nicole KornetNicole Kornet
Maastricht University - European Private Law Institute (M-EPLI), Maastricht University - METRO Institutey
4 203 A License is Not a 'Contract Not to Sue': Disentangling Property and Contract in the Law of Copyright Licenses 
Christopher M. Newman
George Mason University - School of Law, Faculty
5 199 A Numbers Game – The Legal Basis for an Optional Instrument in European Contract Law 
Gary Low
Maastricht European Private Law Institute
6 130 The Effect of Bargaining Power on Contract Design 
Albert H. ChoiGeorge G. Triantis
University of Virginia School of Law, Stanford Law School
7 101 The Psychology of Contract Precautions 
David A. HoffmanTess Wilkinson-Ryan
Temple University - James E. Beasley School of Law, University of Pennsylvania Law School
8 88 The Case for a Common European Sales Law in an Age of Rising Nationalism 
Martijn W. Hesselink
University of Amsterdam - Centre for the Study of European Contract Law (CSECL),
9 88 Does the Constitution Protect Economic Liberty? 
Randy E. Barnett
Georgetown University Law Center
10 58 Parallel Contract 
Aditi Bagchi
University of Pennsylvania - Law School - Faculty

[JT]

April 3, 2012 in Recent Scholarship | Permalink | TrackBack (0)

Monday, April 2, 2012

CBS Squashes Production of Original Series Star Trek Episode: "He Walked Among Us"

As reported in The New York Times, the discovery of a lost episode of Star Trek has sparked a, so far, non-litigious debate over CBS’s decision to enforce its right in the material and to prohibit the online airing of an amateur production based on the episode’s script. 

Norman Spinrad wrote the episode, He Walked Among Us,” in 1967 after the show’s producers approached him with a four-day deadline and a box of no-doze.  The producers thought the episode might provide an opportunity for comedian Milton Berle to work a dramatic role.  Tragically, the episode never aired, and Spinrad’s script ended up getting donated to the archives at Cal State Fullerton, where it sat unnoticed for decades.

Trekkies
Years later, Spinrad was approached at a convention by a Trekkie (depicted in the image above) who asked Spinrad to sign a copy of “He Walked Among Us.”  Spinrad later teamed up with James Cawley to discuss the possibility of finally producing “He Walked Among Us.”  Cawley is senior executive producer for “Phase II,”  a web-based production studio that uses unpaid amateur actors to act out Trekkies’ favorite episodes.  In these productions, Cawley plays Captain Kirk, which is a bit like putting together a Shakespeare company so that you can play Hamlet.  But still . . . .

CBS sent Cawley an email, asking him to cease production of the episode.  CBS has been consistently buying merchandising, television and online rights to Star Trek.  Cawley and Spinrad apparently have good relations with CBS and want to keep things that way.  As Spinrad puts it on his website,

I and CBS have agreed to resolve our disputes concerning the ownership of the Work; as part of the settlement between the Parties, the Parties have agree that there will be no further comment; and CBS is considering opportunities to offer licensed copies of the Work.

Because of the above, I can no longer comment on the He Walked Among Us screenplay myself.

It is uncertain exactly why CBS has allowed Phase II to produce other unaired Trek projects but has decided to stonewall this project.   Here are the leading theories:

  • The subject matter of “He Walked Among Us” has been mined so thoroughly in other Star Trek episodes, CBS is concerned that further probing in this area could open up a rift in the time/space continuum;
  • Due to a holodeck malfunction, the person calling himself Norman Spinrad is really Kirk’s arch-nemesis, Khan, returned to destroy the good name of the Star Trek franchise;
  • After consulting with its resident half-Betazoid advisor, CBS concluded that there was something not quite right about the episode – some sort of deception may be involved, or not;
  • William Shatner was insisting on playing the Milton Berle part and that the part include a fist-fight;
  • CBS producers thought the episode's lower decks discussion of why Star Fleet could mandate health care coverage but not require that all replicators be programmed to synthesize broccoli when receiving requests for "junk food" was too dated; and
  • A crucial element in the plot is the possibility of traveling at speeds in excess of light speed, and now that the faster-than-light neutrinos theory has been debunked, CBS thinks viewers will be unable to suspend disbelief

[JT and Justin Berggren]

April 2, 2012 in Current Affairs, In the News, Television, Web/Tech | Permalink | Comments (2) | TrackBack (0)

Arbitration Provision Not Unconscionable under PA Law, Says Third Circuit

3d CirJanice Quilloin (“Quilloin”) is a nurse employed by a hospital owned by Tenet Healthsystem (“Tenet”).  She was hired in 2006, quit, and was rehired in 2008.  Both times that she was hired, Quilloin signed the “Employee Acknowledgement” form (EA), acknowledging receipt of the “Fair Treatment Process” brochure (FTP).  The EA provided for arbitration of all but a few enumerated “excluded issues.”  The FTP sets out the steps an employee would need to take to resolve a dispute and provides an approximate time in which Tenet would take to respond to each step. 

In 2009, Quilloin filed a collective action suit against Tenet in the District Court for the Eastern District of Pennsylvania under the Fair Labor Standards Act of 1938, as well as several state-based class action and common law claims. Although the Third Circuit inexplicably declines to say so, the District Court opinion notes that the basis of her suit is that Tenet allegedly makes her and her co-workers work through their meal breaks without pay.

Tenet moved to compel arbitration.  Quilloin responded that the arbitration agreement was unconscionable.  The District Court found that genuine disputes of material fact remained as to whether the arbitration agreement was enforceable, and denied Tenet’s Motion to Compel.  In Quilloin v. Tenet Healthsystem Philadelphia, Inc., the Third Circuit reversed and remanded with instructions to stay litigation proceedings and compel arbitration.    

Tenet contended that because Quilloin did not direct her challenge at a specific clause within the agreement, the District Court could not inquire into arbitrability issues.  However, the Third Circuit disagreed, stating that the Federal Arbitration Act (FAA) places arbitration agreements on “an equal footing with other contracts.”  Therefore a plaintiff may challenge an arbitration agreement, like any other contract, by claiming fraud, duress, or unconsionability.  Tenet, relying on Rent-A-Center v. Jackson, about which we blogged extensively in April 2010, attempted to argue that Quilloin’s claim had to go to arbitration because she was attempting to challenge the arbitration agreement as a whole.  The Third Circuit was not persuaded, finding Rent-A-Center inapposite as that case only applied where the parties specified that the agreement to arbitrate was itself arbitrable.  There was no such provision in the EA.

The Court then proceeded to the merits of Ms. Quilloin’s claim that the arbitration provision was unconscionable.  Under Pennsylvania law, a party must show a contract to be both substantively and procedurally unconscionable.  The District Court found three bases on which the arbitration agreement might be substantively unconscionable: (1) a potential prohibition against recovery of attorney’s fees and costs, (2) potential inclusion of a class action waiver, and (3) the possibility that Tenet could “run out the clock” on the statute of limitation, because the FTP provides internal steps and procedures that Tenet could drag out until Quilloin’s claim expired.   While the Court found the arbitration agreement ambiguous on the first two issues, Supreme Court precedent clearly establishes that the arbitrator can resolve such ambiguities.  As to the Quilloin’s run-out-the clock argument, the Court found that Quilloin could prevent Tenet from doing so by filing a motion to compel arbitration.

Furthermore, the Court found no procedural unconscionability. While Quillion is the weaker party to the agreement, she did not lack meaningful choice.  She has a college degree, and twice agreed to the arbitration agreement. 

[JT and Christina Phillips]

April 2, 2012 in Recent Cases | Permalink | Comments (0) | TrackBack (0)