March 10, 2012
How a Fictional Physicist Anticipatorily Repudiates
Anyone searching for an amusing example of anticipatory repudiation (or almost any other Contracts topic) need look no further than CBS sitcom, The Big Bang Theory. The show prominently features a "roommate agreement" between the two main characters, Sheldon and Leonard, physicists who struggle a bit in the romance department. I asked students to view this clip and then fill in the blanks in the following sentence: ________________ does not have to _____________ because ______________ repudiated when he ________________. It was a bit too easy, of course, but it did seem to help them remember the concept.
[Heidi R. Anderson]
NYT is on a roll with contracts....
This time, the contract is a lease for an apartment. The article, which can be found here, covers typical issues that may arise when trying to terminate leases early and basically reminds tenants to treat their leases seriously.
March 7, 2012
Arbitration Op-Ed in Yesterday's NYT
The standard historical account begins with the Federal Arbitration Act, but the practice of extrajudicial dispute resolution has a much longer history. Mid-19th century Americans across several territories and states — including Florida, California and New York — engaged in a nearly forgotten debate concerning “conciliation courts.”
Read the rest here.
[Meredith R. Miller]
March 6, 2012
Maybe my imagination isn't that imaginative....
At the wonderful contracts conference this past weekend at Thomas Jefferson (yes, thanks again, Eniola), I learned that, when they excavated to build the school's fabulous new building, remains of a wooly mammoth were discovered. Coincidentally, just this fall, my final exam concerned a contract for the sale of real property. After contract but before closing, the seller had sprinkler repairs done on the lawn and the repair company discovered the skeleton of a dinosaur. Neither buyer or seller was aware of the skeletal remains at the time of contract. Seller wants to rescind. Mutual mistake?
This semester we walked through a hypo about a lease that allows the tenants to keep one "household pet." "Household pet" is nowhere defined in the lease. Tenant obtains a kangaroo to keep as a pet. Our task was to discuss how a court would go about figuring out whether a kangaroo is a "household pet." I thought this imaginative until today, when this story came to my attention. It doesn't answer the question whether a kangaroo is a "household pet," but it does suggest that maybe my imagination isn't that imaginative.
[Meredith R. Miller]
Weekly Top Tens from the Social Science Research Network
Better Late than Never: No Bivens Action Available Against Government Contractors
Shortly after the New Year, the Supreme Court of the United States decided Minneci v. Pollard, regarding whether a plaintiff could bring a Bivens action (that is a claim for damages arising directly under the U.S. Constitution) against employees of a privately operated federal prison. In short, can government contractors be considered state actors for Bivens purposes?
Richard Lee Pollard filed his claim pro se in a California district court alleging that prison personnel employed by the Wackenhut Correctional Corporation, a private company operating a federal prison, deprived him of proper medical care. Pollard asserted that the prison violated his Eighth Amendment right to freedom from cruel and unusual punishment by failing to provide adequate medical care and subjected him to humiliating treatment after he fell, sustaining possible fractures to both elbows. The District Court dismissed Pollard’s complaint, concluding that there could be no Bivens action arising from the Eighth Amendment against a privately managed prison’s personnel. The Ninth Circuit reversed. We went out on a limb last June when the Court granted review and predicted that (echoing Lyle Denniston of SCOTUSblog) that the Supremes would reverse the Ninth Circuit.
In an 8 to 1 decision, the Court refused to apply Bivens on these fact, because state tort law provides an adequate alternative and thus deters prison official from engaging in tortious misconduct. The majority relied on Wilkie v. Robbins, 551 U.S. 537 (2007) In Wilkie, the Court developed a two-step process for determining whether to recognize a Bivens remedy: whether (1) there is an “alternative, existing process for the protection of constitutionally protected interests;” and (2) “any special factors [counsel] hesitation before authorizing a new kind of federal legislation.” Responding to Pollard’s argument that any available state tort law remedy is inadequate when compared to the federal remedy, the Court stated that state law remedies and federal remedies do not have to be congruent.
In his concurrence joined by Justice Thomas, Justice Scalia characterized Bivens as “a relic of the heady days in which [the] Court assumed common-law powers to create constitutional powers by implication.” The concurring Justices would limit Bivens to the narrow factual circumstances in which the Court has previously recognized its applicability.
Justice Ginsberg dissented, noting that private officials operating prisons on license from the federal government are agents of the federal government, and thus ought to be subject to Bivens actions. Whether or not a prisoner has a cause of action for certain conduct should not turn on whether the prison guards are government employees or government contractors, as state remedies may well be in adequate in any case.
[JT & Justin Berggren]
March 5, 2012
Thanks to Eniola Akindemowo!
The Spring Contracts Conference was a huge success, thanks largely to the hard work of our co-blogger Eniola Akindemowo. She was so busy dealing with logistics during the conference that she did not have enough time to hang out with many of the conferees, and we were remiss in failing to thank her properly. But it was a great event, and it ran very smoothly, despite the fact that, through no fault of Professor Akindemowo, we got a late start on planning the conference this year. As is always the case, the conference featured the usual heady mix of familiar faces, up-and-coming scholars, and practitioners with a scholarly bent. We delighted in the opportunity to recognize Mel Eisenberg with a lifetime achievement award and Omri Ben-Shahar for his award-winning article, Fixing Unfair Contracts.
San Diego was a great location for the conference, and the Thomas Jefferson School of Law did a great job of hosting. They have a truly magnificent new building, and rooms and tech support could not have been better for a conference such as ours. The conference ran on time from start to finish, we all received well-organied binder with short versions of the conference papers, and I don't think I've ever attended a conference at which all of the PowerPoint presentations came off without a hitch.
So thanks to Professor Akindemowo for all of her hard work in setting up and hosting the conference. Until next year.
An Unconscionable Final Panel at the Spring Contracts Conference
The last panel of the conference (well, one of two final panels, as the conference usually had two going at once) was dedicated to the doctrine of unconscionability. We regret that we could not do justice to all of the panels at the conference, as we had to choose in each case which of two panels to attend. Similarly, not all of the presentations lent themselves to blogging, so here we will just focus on one of the papers from the unconscionability panel.
Melissa Lonegrass, Associate Professor of Law at LSU's Paul M. Herbert Law Center, presented a version of her article, soon to be appearing (we hope) in a law review near you, "Finding Room for Fairness in Formalism: The Sliding Scale Approach to Unconscionability." She has noted courts' increasing use a sliding scale approach to unconscionability analysis. That is to say, rather than looking at the procedural and substantive prongs of unconscionability independently, courts view both elements in tandem. For example, even if there is little procedural unconscionability, a court might find a contract or a provision in a contract unconscionable if there is a great deal of substantive unconscionabiility (and theoretically vice versa).
Professor Lonegrass's research suggests that there has been relaxation of both prongs in the sliding scale analysis. So courts find procedural unconscionability satisfied whenever there are contracts of adhesion. Courts find substantive unconscionability when the terms are unreasonable. Nobody's conscience needs to be shocked these days.
Professor Lonegrass defends the sliding scale on the ground that it enables courts to be more sensitive to disparities of bargaining power that are inherent in consumer transactions. It also addresses formalist concerns regarding the doctrine of unconscionability and have prevented the doctrine from gaining wider currency. The sliding scale approach retains the procedural inquiry but better enables courts to identify evidence of the lack of genuine consumer assent. By setting aside unhelpful markers of deficient assent, the sliding scale actually makes the application of the unconscionability doctrine more predictable, thus answering concerns about the doctine's effect on the enforceability of commercial agreements.
She recommends a retention of the dual prong approach, but would de-emphasize consumer characteristics of markers of assent in favor of a focus on disaparities in bargaining power. Finally, she encourages courts to embrace a lower threshhold (reasonableness instead of "shocks the conscience") for substantive unconscionability.
Spring Contracts Live: Contractual Fairness
Professor Danielle Hart of Southwestern Law School presented her paper on Contract Law and Inequality. She would eradicate the public/private law distinction in an effort to shift the frame from the current free market, neo-liberal frame to one that focuses on the propensity of law to promote inequality. In particular, Professor Hart views contract law as public law because of the extent of state involvement in every aspect of contracting.
Her paper focuses on bargaining power, a term that we use all the time but rarely pause to define. Professor Hart supplements the realist view that bargaining power is a form of property with Pierre Boudieu's notion that capital is any form of power that can be used to obtain an advantage.
Professor Hart identifies three cardinal principles of barganing power. 1) Bargaining power has never been and never will be distributed equally; 2) bBargaining power is always "inerested" in the Bourdieuvian sense; and 3) finally (and depressingly) unequal bargaining power begets unequal bargaining power. Unequal bargaining power affects bargains all the time, but contracts law addresses it (and then inadequately) only in cases when there is both an actionable misuse of inequality of bargaining power and undue advantage taking.
Professor Hart presents a fully realized, theoretically complex approach to some fundamental contractual concepts, to which it is hard to do justice in 1/3 of a blog post. We'll have to look forward to the publication of her paper.
Professor Hila Keren, Professor Hart's colleague at Southwestern Law School, presented what she described as an example of Professor Hart's thesis, Consenting Under Stress. Her presentation focused on a 10th Circuit case, Gascho, in which a nurse with 35 years of experience agreed to a separation agreement with her employer, abandoning her Title VII claims, while under conditions of extreme stress. The stress was mostly the product of her husband, who beat her, raped her and then demanded a divorce, and who was also her boss and had fired her after having an affair with his (and her) co-worker. The court articulated the doctrine of stress as a ground for excusing a party's duties under a contract. The doctrine, so understood, is very limited, and for that, according to Professor Keren, we have Judge Posner's Selmer decision to thank. The 10th Circuit affirmed the District Court's dismissal of the suit, finding that Ms. Gascho had not presented evidence from which a reasonable jury could conclude that the agreement was valid.
Professor Keren then undertakes an analysis of our legal understanding of stress. Courts treat stress as a subjective feeling, but Professor Keren, drawing on a scientific understanding of stress, questions the accuracy of that description. Stress is actually a predictable human response to certain external events. She proposes a solution that would take stress a lot more seriously as a physiological response to external factors that could indeed negate a claim that a party had knowingly and willingly consented to an agreement. The paper has many more illustartions of the harsh consequences of courts' misunderstanding of stress.
Finally, our co-blogger, Meredith Miller presented her paper on Party Sophistication and Pluralism in Contract, building on her 2010 article that appeared in the Missouri Law Review. This paper grows out of last year's conference celebrating the 30th anniversary of the publication of Charles Fried's Contract as Promise. At that conference, Roy Kreitner delivered a paper on the new pluralism in contract theory.
Isaiah Berlin defines value pluralism as a recognition of the fact that human goals are many, not all of them are commensurable, and they are in potential conflict with one another. So it is with contract law, say pluralists. They disagree with monists who seek to elevate one value above all others in order to unify contracts theory. Identifying parties as sophisticated or unsophisticated provides an ordering mechanism that helps us to determine which contracts principles to prioritize in different contexts. When courts and scholars are trying to navigate a pluralist system, they ask whether parties are sophisticated, and they elevate certain principles or others depending on their conclusion as to sophistication. Those interested in Meredith's take on how courts should go about determining sophistication need to look to her Missouri Law Review piece linked to above.
More Live Blogging (but with Time Delay) Saturday Morning Arbitration Panel
Mark Burge, Associate Professor of Law at Texas Wesleyan University School of Law, presented a paper, “Too Clever by Half: A Cautionary Tale in Socio-Legal Legitimacy Starring the Uniform Commercial Code,” which focuses on the failure of the revised UCC Section 1-301 (relating to choice of law) to win adoption, despite the fact that 40 states have adopted the rest of the revisions to Article 1 of the UCC. In Professor Burge's view, Section 1-301 failed because it violated a fundamental social idea of the American legal and political system in that it undermined the principle that laws ought to be generally applicable.
Revised Section 1-301 would have created different standards for choice of law for consumer and commercial transactions. The proposed Section would have permitted parties in non-consumer transactions to choose the laws of any state to govern their transactions. The proposal seemed a logical extension of the tendency in the common law. While the First Restatement provided rules for choice of law from which the parties could not deviate, the Second Restatement allowed parties to choose which law will govern their agreement, so long as the forum jurisdiction bears some relation to the transaction. The revised Section extended that logic by removing the restrictions and justified this move by noting that parties are already free to choose governing law if they opt for arbitration under the Federal Arbitration Act.
Professor Burge’s thesis is that state legislatures rejected the revised Section because of a visceral abreaction to the possibility that parties would agree to have their agreements governed by the laws of an utterly random jurisdiction. The visceral reaction arises, Professor Burge suggests, from the Section’s “un-American” diversion from the traditional rule that there must be some connection between the transaction and the jurisdiction whose laws will govern the transaction.
Jack Graves, Professor of Law at the Touro College Jacob D. Fuchsberg Law Center, presented his paper, forthcoming the American Review of International Arbitration, “Court Litigation over Arbitration Agreements: Is It Time for a New Default Rule?” Professor Graves’ thesis is bold and simple: we need a new international convention making arbitration the default legal rule for the resolution of international commercial disputes, that is business-to-business international transactions. Such a convention is necessary because arbitration is far more efficient and effective, but those advantages are negated by parties’ ability to litigate arbitrability, turning one relatively fast and inexpensive legal process into two, one of which is expensive and protracted. At the heart of Jack's presentation was a wonderful extended metaphor of court proceedings torpedoing arbitration in a maritime case.
David Horton, currently a Professor at Loyola Law School – Los Angeles. Starting next year, he will join the faculty at the University of California, Davis, School of Law, who has guest blogged for us in the past (more than once!), presented a paper on the vindication of rights doctrine. For years, courts favored litigation over arbitration and held that federal statutory claims could not be adjudicated adequately in arbitral bodies. In the 1980s, things shifted, as courts abolished this non-arbitrability doctrine in favor of the vindication of rights doctrine, placing the burden plaintiffs to provide concrete proof that arbitration thwarts federal statutory rights.
Recent Supreme Court decisions seem to be moving us in the direction of universal enforcement of arbitration provisions. But Professor Horton introduces the notion of inalienable rights that cannot be waived and are thus not subject to the policy favoring freedom of contract. If one’s ability to vindicate one’s federal statutory rights is inalienable – that is, if one cannot agree ex ante to contract terms that would make it impossible for you to vindicate your rights – then certain arbitration provisions might be unenforceable on those grounds.
Professor Horton runs through traditional justifications of inalienability in terms of preventing certain negative externalities or promoting certain positive externalities. However, Professor Horton concludes that the most promising justification for the inalienability doctrine is the non-commodification theory, according to which permitting certain things to be sold would change the very nature of the thing.
History Repeats Itself in Ohio: The Kirksey v. Kirksey Tragedy Replayed as the Williams v. Ormsby Farce
Our colleagues on the Contracts Listserv have brought to our attention the very interesting case of Williams v. Ormsby, decided last week in the Supreme Court of Ohio. There has been some suggestion that this is a repeat of the great Kirksey v. Kirksey case. But as William Casto or Val Ricks would have told Amber Williams “I knew Antillico. Antillico was a friend of mine. You, madam, are no Antillico.”
In May 2004, Frederick Ormsby moved in with his on-again off-again girlfriend, appellee, Amber Williams. Subsequently, Ormsby paid off the mortgage and in return, Williams quitclaimed the title to the property. Off again, the couple separated and agreed in March 2005 to sell the house and allocate the proceeds. On again, they attempted to reconcile, but in return for moving back in, Williams demanded an undivided half interest in the property. In June 2005, they signed a second document, ostensibly making them “equal partners” in the house.
By September 2007, the couple was off again, and now they assumed an equal undivided interest in a lawsuit. Williams sought either specific performance of the June 2005 agreement or damages arising from Ormsby’s alleged breach of that agreement. Ormsby alleged causes of action for quiet title and unjust enrichment/quantum meruit and sought declaratory judgment that both the March 2005 and June 2005 documents were invalid for lack of consideration. The trial court ruled in Ormsby’s favor; the Ninth District Court of Appeals reversed, concluding that “moving into a home with another and resuming a relationship can constitute consideration sufficient to support a contract.” The Supreme Court of Ohio accepted jurisdiction to decide whether or not that proposition is in fact good law.
The court of appeals found that the June 2005 agreement was supported by valid consideration because “romantic relationships typically involve some sacrifice by each partner.” The majority on the Ohio Supreme Court disagreed. Unlike Antillico Kirksey, Williams suffered no detriment from the June agreement; she received only a benefit and so the June 2005 offered evidence only of Ormsby’s gratuitous promise to give Williams an interest in the property based solely on the consideration of her love and affection. Such consideration is no consideration, harrumphed the majority.
The record is replete with shadings and innuendo that there was no love and affection between the parties. The record includes statements that suggest or allege that Williams and Ormsby were searching for a way to continue living well without engaging in full-time work, that Williams was seeking to both delude and elude creditors, that Williams’s name may have been fraudulently signed on the quitclaim deed or that the person who notorized her signature did so without being present when Williams signed, that domestic violence charges had been filed, and that each had promised not to accuse the other of domestic violence. That Williams wouldn’t move back into the house until Ormsby signed the agreement, which he wrote, was not offered as consideration and was not consideration. It was a simple fact of life—a fact that is outside the contract and is of no relevance.
Justice Pfeifer points out that identical language concerning consideration was used in both the March and June agreements. If the first is to be enforced, the second should be as well. Moreover, by voiding the March agreement, which entitled her to specific rights, Williams gave valid consideration for the June agreement, which entitled her to different rights. Under the June agreement, Ormsby gained more control over the timing of any sale of the house and in gaining these benefits, forfeited some equity in the house. Justice Pfeifer would have found both agreements enforceable, but since the case is so idiosyncratic as to be useless as a precedent, Justice Pfeifer would have dismissed the case, review having been granted improvidently.
[JT & Christina Phillips, with a hat tip to Catherine Garcia-Feehan, Esq., Career Law Clerk to Hon. David A. Katz at the Northern District of Ohio, through whose good offices this came to the attention of the Contracts Listserv]