ContractsProf Blog

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Valparaiso Univ. Law School

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Thursday, April 26, 2012

Query: Why Is a Unilateral Contract to Seriously Injure Someone Not a Crime?

PaytonSorry, this story is a bit stale, but we've been occupied with the semester.  Last month, the New York Times reported that the head coach for the New Orleans Saints, Sean Payton (pictured) would be suspended without pay for one year "for his role in a bounty program that promised money to players if they injured opponents and knocked them out of games."

Upon learning this news, the Saints' quarterback, Drew Brees tweeted as follows:  “I am speechless. Sean Payton is a great man, coach, and mentor. The best there is. I need to hear an explanation for this punishment.”

Well, we are not likely the source that Drew Brees looks to for explanations of such things, but is it not obvious that we are talking about serious crime here and is it not equally obvious that, if the bounty program is as described above, the appropriate penalty is not a one-year suspension for Coach Payton but a criminal investigation that could lead to significant jail time and a lifetime ban from the sport for Payton and all other members of the staff or the team who conspired to commit these crimes?  We are talking about offering players money for attempting to intentionally injure other players.  How is that not simply felonious conduct?  And it's not as if the perpetrators in this case can claim, as Michael Vick more plausibly could do, that their criminal conduct is the product of some sub-culture in which outrageous, inhumane behavior is considered normal.  Payton and his staff are NFL insiders who rub shoulders with the very people who are disciplining them for their conduct.  

If the suspension is upheld, Payton will be deprived of $7 million in salary.  Perhaps the Saints can contribute that money to a fund for NFL players and their families who are suffering from the long-term effects of the brain injuries they suffered while playing.

[JT]

April 26, 2012 in Celebrity Contracts, Commentary, Sports | Permalink | Comments (0) | TrackBack (0)

Professor DeAngelis on Substantial Performance

Today, we bring to a provisional close (pending the composition and YouTube posting of more contracts-based songs) our series of posts featuring   Professor Mark DeAngelis's "Law Lessongs."  Previous posts have shared songs based on Raffles v. Wichelhaus, the UCC's Battle of the Forms (2-207),substantial performanceoffersmixed contracts, and the Mirror Image Rule from Professor DeAngelis's YouTube site.  

MdeangelisToday, we offer Professor DeAngelis's song on the Statute of Frauds, which he introduces as follows:

This is a "Law Lessong" - a law lesson in a song - that I wrote to help students remember the 6 categories of contracts that require a writing in order to be enforceable. 

The Statute of Frauds Song
Lyrics by M. DeAngelis
Melody based on "Jamaica Farewell"

Oh, I'm glad to say, that any day,
An oral contract is still OK.
But it's a fact, for 6 kinds of pacts,
The Statute of Frauds requires a written contract.

Please, oh please, won't you marry me?
I will give you riches and jewels that shine.
I'll say "I do" and marry you,
As soon as you sign on the dotted line!

Oh, I'm glad to say, that any day,
An oral contract is still OK.
But it's a fact, for 6 kinds of pacts,
The Statute of Frauds requires a written contract.

If one day, a party say
The debt of another she guarantees.
If no writing, there's no denying,
The contract lacks enforceability.

  

Ah, but don't forget, you may enforce it yet
If leading object of the debt
Was to benefit the one who said it
Then an oral contract the law will permit.

When an estate debt cannot wait
The executor pledges payment pers'nally 
That pledge is toast from coast to coast,
When the promise is made simply orally.

Oh, I'm glad to say, that any day,
An oral contract is still OK.
But it's a fact, for 6 kinds of pacts,
The Statute of Frauds requires a written contract.

If it appears that within a year,
The contract performance cannot be done.
Do not frown, just write it down
And the parties' intentions won't be undone.

Ah, but don't forget, you may enforce it yet
Even lifetime employment
Enforceability applies orally
Though long term sounding it appears to be.

If its land we understand 
That's the subject of an interest transferring
If money's spent even just for rent 
Of more than a year you need some scribbling.

Ah, but don't forget, you may enforce it yet
If a Buyer's made partial payment
And entered the land or built something grand
Or if promissory estoppel rules take command.

Finally, under the UCC, 
A sale of goods worth 500 or more.
The UCC treats writings differently
And a full written contract may not be in store.

Oh, I'm glad to say, that any day,
An oral contract is still OK.
But it's a fact, for 6 kinds of pacts,
The Statute of Frauds requires a written contract.

[JT]

April 26, 2012 in Music, Teaching | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 25, 2012

New in Print (including New Books and New Editions)

Pile of BooksRonen Avraham & Zhiyong Liu. Private Information and the Option to Not Sue: A Reevaluation of Contract Remedies. 28 J.L. Econ. & Org. 77 (2012)

Ian Ayres & Gregory M. Klass, Studies in Contract Law (8th ed. 2012)

Steven J. Burton, Priniples of Contract Law (4th ed., forthcoming May 2012)

Thomas Dietz, Contract Law, Relational Contracts, and Reputational Networks in International Trade: An Empirical Investigation into Cross-Border Contracts in the Software Industry. 37 Law & Soc. Inquiry 25 (2012)

Daniel W. Elfenbein & Josh Lerner, Exclusivity, Contingent Control Rights, and the Design of Internet Portal Alliances. 28 J.L. Econ. & Org. 45 (2012)

David G. Epstein, Hon. Bruce A. Markell & Lawrence Ponoroff, A Short and Happy Guide to Contracts (2012)

Daniel Markovits, Contract Law and Legal Methods (forthcoming June 2012)

William K. Sjostrom, Jr., An Introduction to Contract Drafting (2012)

[JT]

April 25, 2012 in Recent Scholarship | Permalink | TrackBack (0)

Clickwrap Isn’t Just for Consumers… Employee's Pattern-or-Practice Claim Does Not Trump Class Action Waiver

Bretta Karp sued her employer, CIGNA Healthcare, in the U.S. District Court of Massachusetts, alleging systematic gender discrimination.  She purported to bring the suit as a class action.  CIGNA moved to compel arbitration and argued that a class action and class-wide arbitration was waived under the company’s Dispute Resolution Policy.

In 1997, when Karp began her job with CIGNA she signed an acknowledgment of receipt of the dispute resolution policy in the Employee Handbook.  At that time, the policy did not mention class actions or arbitrations.  In 2005, CIGNA sent a company-wide e-mail informing employees that the Handbook had been updated to reflect changes in the policy.  The e-mail contained a link to the Handbook and instructed employees to complete an electronic receipt indicating that they had received the Handbook.  The e-mail indicated that failure to fill out the receipt could impact the employee’s future employment with the company.  After two follow up emails reminding Karp to acknowledge receipt of the policy changes, she clicked “yes” on the Employee Handbook acknowledgment.  The acknowledgment mentioned mandatory arbitration but did not mention the class arbitration waiver.  In fact, the Employee Handbook referenced the dispute resolution policy and stated that full details were contained on CIGNA’s website; on the website, the dispute resolution policy specifically waived class-wide arbitration.

The parties did not dispute that Karp knowingly agreed to arbitrate her claims of gender discrimination.  They disagreed, however, about whether Karp was entitled to bring a class-based pattern-or-practice claim.  Karp argued that she did not agree to the class arbitration waiver.  In an interesting contortion, the court held that CIGNA did not agree to permit class arbitration and could not be compelled to proceed on a class-wide basis.  Here’s the reasoning (some citations omitted; emphasis in original):

The Court can only compel class arbitration if there is a “contractual basis for concluding that [the parties] agreed to do so.” Stolt-Nielsen, 130 S. Ct. at 1775 (emphasis in original)… The Supreme Court has recently emphasized that “the ‘changes brought about by the shift from bilateral arbitration to class-action arbitration’ are ‘fundamental,’” and thus non- consensual, “manufactured” class arbitration “is inconsistent with the FAA.” AT&T Mobility, 131 S. Ct. at 1750 (quoting Stolt-Nielsen, 130 S. Ct. at 1776).

Class arbitration is thus permissible only if both parties agree. Put another way, a party cannot be compelled to arbitrate class claims unless something in the contract indicates, at least implicitly, that it agreed to permit class arbitration. See Stolt-Nielsen, 130 S. Ct. at 1776; Jock v. Sterling Jewelers Inc., 646 F.3d 113, 124 (2d Cir. 2011) (“Stolt-Nielsen does not foreclose the possibility that parties may reach an ‘implicit’—rather than ‘express’—agreement to authorize class-action arbitration.”).

Here, the Handbook is silent on the issue of class arbitration. However, it states: “[b]y accepting employment . . . you have agreed to arbitrate serious employment-related disagreements between you and the Company . . . using the Company’s Employment Dispute Arbitration Policy and Employment Dispute Arbitration Rules and Procedures.” The company policy and procedures unambiguously provide that “[n]o class-wide arbitrations are allowed under the CIGNA Companies’ Employment Dispute Arbitration Policy or the Rules and Procedures,” and that “[e]ach party seeking resolution of its, his or her claims pursuant to an agreement to arbitrate under these Rules and Procedures must proceed individually. There shall be no class or representative actions permitted.”

Plaintiff disputes whether, under the circumstances, she agreed to the bar on class arbitration, or agreed to waive her class arbitration rights. There is certainly some question whether defendant’s policies and procedures can be enforced against plaintiff simply because she agreed to the terms of the Handbook.  But there is no doubt that defendant did not agree to permit class arbitration. Indeed, its policies and procedures state clearly that class arbitration is not permitted. Accordingly, defendant cannot be compelled to submit to class arbitration. See AT&T Mobility, 131 S. Ct. at 1750 (stating that class arbitration must be consensual).

The court did state in a footnote that Karp may not have been provided with sufficient notice of the waiver because the Handbook incorporated the policies which were posted on the company’s website.  The court also held that, by agreeing to arbitration, Karp could not litigate her claims in court as a class action.

Karp argued that her pattern-or-practice claim could not be vindicated in a bilateral arbitration because (1) case precedent required it to be brought as a class action and (2) as a practical matter, discovery would be too limited in arbitration.  Plus, she could not obtain injunctive relief.  The court essentially said that the pattern-or-practice claim is “unusual” with a “peculiar genesis” and was only a method of proof, not a claim in itself.  The court broke from precedent requiring a pattern-or-practice to be established in a class action and held that Karp's substantive rights could still be vindicated in bilateral arbitration.

Karp v. Cigna, Case 4:11-cv-10361-FDS (D. Mass. April 18, 2012)  (Saylor, J).

[Meredith R. Miller]

April 25, 2012 in E-commerce, Labor Contracts, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 24, 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 24, 2012 to April 24, 2012

RankDownloadsPaper Title
1 352 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
2 276 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
3 216 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
4 174 The Effect of Bargaining Power on Contract Design 
Albert H. ChoiGeorge G. Triantis
University of Virginia School of Law, Stanford Law School
5 136 Does the Constitution Protect Economic Liberty? 
Randy E. Barnett
Georgetown University Law Center
6 109 Controlling Financial Chaos: The Power and Limits of Law 
Steven L. Schwarcz
Duke University - School of Law
7 91 'Offer to Sell' as a Policy Tool 
Lucas Osborn
Campbell University Law School
8 78 Why Courts Make Orders (and What this Tells Us About Damages) 
Stephen A. Smith
McGill University - Faculty of Law
9 77 The Perils of Social Reading 
Neil M. Richards
Washington University in Saint Louis - School of Law
10 67 Parallel Contract 
Aditi Bagchi
University of Pennsylvania - Law School - Faculty

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

February 24, 2012 to April 24, 2012

RankDownloadsPaper Title
1 559 A Legal Analysis of Romantic Gifts 
Ruth Sarah Lee
Harvard Law School
2 289 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
3 216 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
4 174 The Effect of Bargaining Power on Contract Design 
Albert H. ChoiGeorge G. Triantis
University of Virginia School of Law, Stanford Law School
5 136 Does the Constitution Protect Economic Liberty? 
Randy E. Barnett
Georgetown University Law Center
6 77 The Perils of Social Reading 
Neil M. Richards
Washington University in Saint Louis - School of Law
7 67 Parallel Contract 
Aditi Bagchi
University of Pennsylvania - Law School - Faculty
8 66 Errors of Fact and Law: Race, Space, and Hockey in Christie v. York 
Eric M. Adams
University of Alberta - Faculty of Law
9 62 The Unenforceable Corrupt Contract: Corruption and 19th Century Contract Law 
Zephyr Teachout
Fordham University - School of Law
10 53 Instructing Juries on Noneconomic Contract Damages 
David A. HoffmanAlexander Radus
Temple University - James E. Beasley School of Law, Temple University James E. Beasley School of Law

[JT]

April 24, 2012 in Recent Scholarship | Permalink | TrackBack (0)

Certified Insurance Law Question to the Nevada Supreme Court

9th CircuitWhile staying at the Casino West Motel, four people died from acute carbon monoxide poisoning when fumes from the motel’s pool heater leaked into their rooms.  Their estates’ subsequent wrongful death suit against the motel and its insurer, Century Surety Co. (Century), has raised questions of Nevada law of first impression, prompting the Ninth Circuit to certify two questions to the Nevada Supreme Court. 

In Century Surety Co. v. Casino West, the Ninth Circuit has asked the Nevada Supremes to interpret two pollution-related exclusions in the motel’s comprehensive general liability insurance policy, which Century has invoked in order to escape its obligation to either cover or defend against the estates’ suit.

After Century received the autopsy report indicating carbon monoxide poisoning as the cause of death, Century cited two exclusions in the policy, a pollution exclusion and an indoor air quality exclusion, and informed the motel that the policy did not cover the incidents at issue.  Century next sought a declaratory judgment in a federal district court stating that it has no duty to indemnify or defend the motel in the wrongful death actions.  The motel filled counterclaims for breach of contract, bad faith, and insurance unfair trade practices. 

In denying Century’s motion for summary judgment, the district court found that the exclusions were ambiguous and, therefore, did not prevent coverage.  The Ninth Circuit granted the parties’ joint request for an interlocutory appeal to review the district court’s denial of summary judgment.  In attempting to determine how courts have interpreted pollution exclusion clauses, the Ninth Circuit found that, although the issue has been heavily litigated, there are conflicting decisions throughout the country. 

Responding to Casino’s argument that the myriad outcomes reached by courts on the issue establishes the exclusion as ambiguous, the court noted that it could not find any Nevada case finding a pollution exclusion ambiguous.   In contrast, the court determined that indoor air quality exclusions have not been heavily litigated and could not find any published Nevada cases on point. 

The questions of law to be answered are:

(1) Does the pollution exclusion in Century's insurance policy exclude coverage of claims arising from carbon monoxide exposure?

(2) Does the indoor air quality exclusion in Century's insurance policy exclude coverage of claims arising from carbon monoxide exposure?

The Ninth Circuit has stayed further proceedings pending receipt of the answers to the certified questions. 

[JT and Justin Berggren]

April 24, 2012 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Monday, April 23, 2012

Contracts Issues in Tim Burton's "Big Fish" (2003)

Danny_DeVito_by_Gage_SkidmoreLast night, I watched Tim Burton's "Big Fish," a film that somehow escaped my notice when it first came out.  The film is a collection of tall tales told by the protagonist's father.  The father is a gifted raconteur, but the son is troubled by the fact that the autobiographical stories the father tells are all lies, and as the father nears death, the son despairs of knowing his real father.  

In any case, the film illustrates two means of entering into a contract, written and oral, in rapid succession.  The first contract is between Amos (played by Danny DeVito -- pictured left) and Karl (played rather hauntingly by the late Matthew McGrory).  The second is between Amos and the young father (Edward Bloom, played by Ewan McGregor).

Here are the contracts scenes from the script: 
                                      AMOS
                         Tell me Karl, have you ever heard of 
                         the term "involuntary servitude?"

               Karl shakes his head.

                                     AMOS
                         "Unconscionable contract?"

               Nope.

                                     AMOS
                         Great, great. That's fantastic.

Karl then signs the contract on the back of a clown, whom Amos introduces as his attorney, Mr. Soggybottom.  Meanwhile, Edward has caught sight of a beautiful woman, played as a young woman by the beautiful Allison Lohmann and played as an older woman by the even more beautiful Jessica Lange.  Amos knows who she is, but he at first refuses to help Edward find her.

                                    EDWARD
                         I'll work night and day, and you 
                         won't have to pay me. You just have 
                         to tell me who she is.

               Amos takes a long look at him. Ultimately, there's no way he 
               can say no. He shrugs. What the hell.

                                     AMOS
                         Every month you work for me, I'll 
                         tell you one thing about her. That's 
                         my final offer.

               Edward shakes Amos's hand before he can retract the offer. 
               We move into a MONTAGE:

Shockingly, DeVito plays an unscrupulous circus impressario.  But he honors his contract with Edward, even though it doesn't seem like something he would do.  Still, Edward has to work for three years before he discovers the identity of his true love.

Here's a trailer to give a better flavor of the film:

 

[JT]

April 23, 2012 in Film | Permalink | Comments (0) | TrackBack (0)

You Say Morals, I Say Conflict of Interest, Bobby Petrino, Let's Call the Whole Thing Off

PetrinoAccording to ESPN, on April 1st, the University of Arkansas's head football coach, Bobby Petrino (pictured) was in a motorcycle accident.  He suffered four broken ribs, a crcked vertebra in his neck and facial abrasions.  He failed to disclose that he was not alone on that motorcycle.  The married father of four was out on a joy-ride with his 25-year-old mistress (and employee).

On Apirl10th the University fired Petrino for conduct that violated the University’s conflict of interest policy and for refusing to admit, despite numerous chances to do so, to the nature of his relationship with his passenger. 

Petrino’s employment agreement with the University allows the University’s athletic director, Jeff Long, to suspend or fire the coach for conduct that “negatively or adversely affected the reputation of the University of Arkansas’s athletics programs.” 

Petrino's passenger was hired just four days before the motorcycle crash that exposed the couple's inappropriate relationship.  Petrino was in the middle of a seven-year contract with the University under which his salary averaged $3.53 million per year.  Petrino’s contract guaranteed him $18 million from the Razorback Foundation if the university terminated him for convenience.  However, because he was terminated for cause, he gets nothing.  According to ESPN, Petrino has apologized and, although he has the option, has said that he will not appeal his firing nor will he seek any of the $18 million buyout that would have been part of his contract had he not been terminated for cause.

[JT & Christina Phillips]

April 23, 2012 | Permalink | TrackBack (0)