Tuesday, March 12, 2013
Monday, March 11, 2013
My co-blogger, Meredith Miller has already commented on the ways in which Martha Stewart is the modern Lady Duff. It really is extraordinary. Martha Stewart is, of course, far more diverse and perhaps more ambitious in terms of the range of products that her company produces, but Lady Duff was quite the force in her day. Remember that Mr. Wood sued her because her agreement to endorse merchandise sold in Sears Roebuck stores allegedly violated their agreement that he was to be her exclusive marketing agent.
As reported in the New York Times, Martha Stewart was in court last week testifying in a showdown between Macy's and J.C. Penney over which company gets to carry Martha Stewart products in its stores. Alas, the facts in this case are much more complicated than the straightforward Wood v. Lady Duff-Gordon. However, the kernel of the dispute is very much reminiscent of the older case.
Martha Stewart's company, now called Martha Stewart Living Omnimedia (MSLO), entered into an agreement with Kmart in 1997 permitting Kmart to sell the company's products in its stores. Ten years later, MSLO entered into a similar agreement with Macy's, and when the agreement with Kmart expired in 2009, Macy's became "the only retailer to sell [MSLO] products in categories like home décor, bedding and bath," according to the Times. In 2011, J.C. Penney started attempting to woo Ms. Stewart into a deal to sell MSLO products in its stores as a mechanism for bolstering its shaky financial performance. James B. Stewart's column in last week's New York Times indicates that, since its new CEO has come on board, J.C. Penney has reported a $4.28 billion loss in sales and laid off 2200 workers, while its share price has dropped 60%.
Upon learning that Ms. Stewart was in bedding with J.C. Penney, Macy's was not well-pleased. In her testimony, Ms. Stewart did not seem to see the problem. When asked if a consumer was likely to buy the same product, say a knife, at two different stores, Ms. Stewart gamely answered that the consumer might have two houses and need one knife for each kitchen. This might explain why she no longer sells her goods at Kmart. What's the point of selling to a demographic that includes renters? She might have added, "I like to keep an extra knife handy for back-stabbing," but her talents for self-mockery (in response to a question about how she spends her time, she responded "I did my time," to the delight of the courtroom audience), do not extend quite that far.
In today's New York Times, David Carr presents an apt anaology: the conflict is like a schoolyard fight between two boys over the most popular girl on the playground. And Carr succinctly explains why Martha Stewart is so popular. Ms. Stewart, he reminds us, "altered the way that people live by decoupling class and taste. . . . When you go into Target or Walmart and see a sage green towel that is soft to the touch, it may not carry her brand, but it reflects her hand. Her tasteful touch — in colors, in cooking, in bedding — is now ubiquitous. . . ." Here too, there are echoes of Lady Duff.
Ms. Stewart expressed surprise that a simple contract dispute would end up in court. It should be possible for the parties to come to an understanding of words written on a page. New York Supreme Court Justice Jeffrey K. Oing may agree, since he sent the case to mediation, but according to James Stewart, he might have arrived at that result through a reasoning process that Ms. Stewart would not endorse. According to James Stewart, the meaning of the contract is clear:
[T]he contract itself seems straightforward, with numerous clauses giving Macy’s exclusive rights to Martha Stewart products in various categories, including “soft home,” like sheets and towels, as well as housewares, home décor and cookware, and specifically limits her rights to distribute her products through any other “department store.”
He adds that there is no question that J.C. Penney is a department store. Justice Oing appeared to agree, since he repeatedly said that the contract is clear, and he granted an earlier injunction. J.C. Penney may have hoped to get around the exclusive contract by setting up a MSLO boutique within its own stores, but James Stewart gives a number of reasons, both legal and factual, and citing to the authoritative Charles Fried on the law, for why that argument is unlikely to fly.
What might fly would be a giant Martha Stewart balloon at the next Macy's Thanksgiving Day Parade. According to James Stewart, Ms. Stewart still asks for and receives free tickets for herself and her grandchildren to that event. Last year, James Stewart reports, she complained that she did not get to sit with the other celebrities who are seated with Macy's CEO, Terry Lundgren. Time for Macy's to show Martha Stewart the love. After all, Macy's does need her products in its stores.
In In re: Wholesale Grocery Products Antitrust Litigation, five retail grocers sought to bring anti-trust class action suits against two wholesale grocers. Each retail grocer did business with and had an arbitration agreement with only one of the two wholesalers.
According to the Eighth Circuit's opinion, "[i]n an effort to avoid arbitration, each Retailer brought claims only against the Wholesaler with whom they did not have a supply and arbitration agreement." At the District Court level, the wholesalers argued that the doctrine of equitable estoppel permitted the non-signatory wholesalers to invoke the arbitration agreements and moved to have the retailers' claims dismissed and arbitration compelled. The District Court granted the wholesalers' motion.
On appeal, the Eighth Circuit reversed holding that parties cannot invoke the doctrine of equitable estoppel in order to enforce arbitration agreements to which they are not signatories. The Court noted that
[E]quitable estoppel applies when a complaint involves "allegations of prearranged, collusive behavior demonstrating that the claims are intimately founded in and intertwined with the agreement at issue.” In contrast, merely alleging that a non-signatory conspired with a signatory is insufficient to invoke equitable estoppel, absent some “intimate . . . and intertwined” relationship between the claims and the agreement containing the arbitration clause. [citations omitted]
Here, the Eighth Circuit found that the retailers' claims were not intertwined with the agreement containing the arbitration clause.
The Eighth Circuit remanded the case to address the wholesalers' claim, left unresolved by the District Court, that some of the arbitration agreements are enforceable by non-signatories as successors-in-interest. It did not address the retailers' arguments that the arbitration agreements are unenforceable as against public policy, as that argument will only be relevant should the District Court resolve the successor-in-interest argument in the wholesalers' favor.
Judge Benton dissented.
Friday, March 8, 2013
Survey in Connection with Upcoming Symposium on Contracts Casebooks
The Washington Law Review is preparing to host a print symposium in December 2013 on the exciting new contracts book, Contracts in the Real World: Stories of Popular Contracts and Why They Matter, by Prof. Lawrence A. Cunningham of George Washington University (published by Cambridge University Press in 2012). This innovative text embraces a modern, narrative approach to contract law, exploring how cases ripped from the headlines of recent years often hinge on fundamental principles extracted from the classic cases that appear in contracts casebooks. Such an approach suggests new ways to imagine modern casebooks.
In addition to an article by Professor Cunningham, the WLR will also publish pieces in the December 2013 issue of the Washington Law Review by, among others:
Before the symposium, participants are interested in learning from contracts professors around the country. The purpose of this survey is to gather information about the material being taught in contracts classes, and the advantages and/or deficiencies of the approaches taken by current contracts textbooks.
The WLR would be grateful if you would complete our online survey by April 15.
The information (in both aggregate form and by individual response) will be distributed to the symposium’s participants, and may be reprinted in the Washington Law Review. Although the survey can be completed anonymously, the WLR invites you to leave your name for attribution if your responses are included in our symposium issue.
Thank you very much for your thoughts,
Thursday, March 7, 2013
The full proceedings of last month's conference in Fort Worth are now available for your viewing pleasure here. Both picture and sound quality are very high. It's a beautiful thing to see and hear!
Wednesday, March 6, 2013
Frank O. Brown, Jr., Construction Law, 64 Mercer L. Rev. 71 (2012)
Jennifer Camero, Two Too Many: Third Party Beneficiaries of Warranties under the Uniform Commercial Code. 86 St. John's L. Rev. 1 (2012)
Omar M. Dajani, Contractualism in the Law of Treaties, 34 Mich. J. Int'l L. 1 (2012)
Royce de R. Barondes, Side Letters, Incorporation by Reference and Construction of Contractual Relationships Memorialized in Multiple Writings, 64 Baylor L. Rev. 651 (2012)
Jennifer S. Martin, Applying Economic Loss Eoctrine to Article 2 Transactions: A Doctrine at a Loss. 25 St. Thomas L. Rev. 19 (2012)
Tuesday, March 5, 2013
LeBron James participated in this year's NBA All-Star game but one former player, Magic Johnson, was not happy. Magic, like many fans, would like to see the league's star players participate in the fun events leading up to the game, such as the slam dunk contest. Apparently, Magic would like that so much that he's willing to offer $1 million to the winner of next year's slam dunk contest if the contest includes LeBron James. He made that offer on ESPN's show, NBA Countdown:
When I first learned of this, I suspected that Magic's statement was an offer to James himself. However, in the video, Magic appears to say that the money would go to the winner of the contest, LeBron or not (OK, sure, the winner likely would be LeBron but you never know--underdogs can win, too).
Jalen Rose, Magic's co-host of the show NBA Countdown, stated that another player, Blake Griffin, would have to participate, too. Magic's verbal agreement with Rose seems to indicate a modified offer--one in which the $1 million payout is now conditioned on the participation of James and Griffin. From the video, it also appears that Magic is bargaining for performance versus promise but I'm not 100% sure.
For professors looking for a modern-day reward-style offer, this could serve as a less political alternative to the recent reward-style offers by Donald Trump and Bill Maher, about which we previously blogged.
[Heidi R. Anderson]
After a surrogate refused to abort a fetus with abnormalities, a tangled legal battle ensued. The surrogacy contract provided that the surrogate would have an abortion "in case of severe fetus abnormality" but the surrogate refused the biological parents' pleas (and offer of $10,000) to have an abortion. Here's some of the story from CNN.com:
On February 22, 2012, six days after the fateful ultrasound, Kelley received a letter. The parents had hired a lawyer.
"You are obligated to terminate this pregnancy immediately," wrote Douglas Fishman, an attorney in West Hartford, Connecticut. "You have squandered precious time."
On March 5, Kelley would be 24 weeks pregnant, and after that, she couldn't legally abort the pregnancy, he said.
"TIME IS OF THE ESSENCE," he wrote.
Fishman reminded Kelley that she'd signed a contract, agreeing to "abortion in case of severe fetus abnormality." The contract did not define what constituted such an abnormality.
Kelley was in breach of contract, he wrote, and if she did not abort, the parents would sue her to get back the fees they'd already paid her -- around $8,000 -- plus all of the medical expenses and legal fees.
Fishman did not return phone calls and e-mails from CNN.
Kelley decided it was time to get her own attorney.
Michael DePrimo, an attorney in Hamden, Connecticut, took the case for free. He explained that no matter what the contract said, she couldn't be forced to have an abortion.
DePrimo sent an e-mail to Fishman, the parents' lawyer, stating that Kelley was not going to have an abortion.
"Ms. Kelley was more than willing to abort this fetus if the dollars were right," Fishman shot back.
"The not-so-subtle insinuation that Ms. Kelley attempted to extort money from your clients is unfounded and reprehensible," DePrimo responded. "If you wish to propose a solution to this unspeakable tragedy, I will listen and apprize (sic)my client accordingly."
"However, as I mentioned in my previous correspondence, abortion is off the table and will not be considered under any circumstance," he said.
The entire story is here.
[Meredith R. Miller]
Monday, March 4, 2013
This case is part of a very unfortunate trend in this Court's docket. Generally speaking, the fact pattern tends to be as follows: A person goes into a store and contemplates making a purchase for an amount of money that is beyond his or her means. The store offers to set him or her up with financing and induces the purchaser to enter into the deal. Any attempt to back out of the deal either before the goods are delivered or immediately thereafter is rebuffed by the store as the store now claims that all sales are final. The financing company pays the store and, when inevitably the poor quality, shoddily constructed furniture, appliances, or whatnot, begin to break, the buyer calls the store — unhelpful since they were already paid — and the financing company which argues that it is merely a lender and has no obligations as to the merchandise. These conversations, unfortunately, seem to happen long before the credit payments are complete and the purchaser often defaults. The financing company sues the buyer and the Court is faced with a quandary. On one hand, the financing company did pay the store for the goods and the buyer got some use of the same. On the other hand, the purchaser is getting charged interest at a high rate for goods that were never worth the purchase price and, often, has no recourse against the store which, even if it is still in business, rarely is impleaded in the case.
Capitol Discount does business with furniture stores in the NYC metro area, financing the customers’ purchases. Anna Rivera went to Universal Furniture to purchase a couch and the financing was from Capital Discount. Capital Discount sued Rivera for $3292.01 plus interest. Rivera answered pro se and the court dismissed the complaint, holding that no contract was formed and, in any event, is was unconscionable.
The uncontradicted story (record citations omitted):
In August of 2007, Anna Rivera, then working for New York City Housing, went to Universal Furniture looking to purchase furniture for her living room. According to her version of events, she expressed potential interest in certain couches and was told that they would do a credit check and, if approved, they would call her. Under the impression that she was applying for a credit check, she signed a document entitled "Security Agreement — Retail Installment Contract". At that point the various blanks on the form — the store's information, her information, the articles purchased, the prices, and payment terms — were not yet filled in and she did not read the document before signing it. Plaintiff's Vice President (and part-owner), Adam Greenberg, suggested that the rest was filled out by the store since Plaintiff received a completed contract from the store. That is a logical supposition, but speculation nonetheless in the absence of any representative from the store. Contemporaneously, Defendant also signed a Credit Application, according to her, filling out only the section seeking her references. The top portion of that document clearly was filled out in a different handwriting, Plaintiff's counsel admitting that portion could easily have been filled out by the store.
Thereafter, Defendant got a call that the furniture was going to be delivered. Even following delivery, no one told Defendant how much the furniture cost nor the payment terms. It was one week afterward that she received a filled-in copy of Plaintiff's Exhibit 1 in the mail reflecting a base cost of $3500, $3300 of which were financed at 24.9 percent, and a total outstanding balance of $4463.10 to be paid in 30 monthly installments of $148.77. Once she saw the amount that they intended to charge her, Defendant called the store and told them to take back the furniture since, now that they provided a price, she thought that the furniture was too expensive. The store refused to comply with her request telling her that all sales are final. Having made only one payment to Plaintiff and a $200 down payment to the store, Defendant defaulted.
The court held that there was no contract:
In this case, Defendant's uncontradicted testimony makes it clear that, when she was in the store, there was no offer to sell the furniture or at a minimum no price was given, she did not accept an offer to sell the furniture, she did not assent to the terms of the contract, and she did not intend to be bound. It is undisputed that she received consideration — the furniture. Nonetheless, no contract was formed in the absence of most of the elements for forming a contract. By accepting the furniture, Defendant still did not enter into a contract to pay. Material terms, most notably the price, were still not agreed upon and, when she learned what they were thereafter, Defendant called the store and expressed her unwillingness to enter into the agreement.
Even so, the court also held that it was both procedurally and substantively unconscionable:
With respect to the first prong, examples of procedural unconscionability include "high pressure commercial tactics, inequality of bargaining power, deceptive practices and language in the contract, and an imbalance in the understanding and acumen of the parties" (Emigrant Mortg. Co., Inc. v. Fitzpatrick, 95 A.D.3d 1169, 1170 [2d Dept 2012][citations omitted]). Crediting Defendant's testimony in the absence of a witness from the store to rebut her account, such elements appear to be present here. Steps were taken by the store to force her into the deal — she left the store without any intention of getting the furniture, they called her and delivered the furniture without her agreeing to acquire it, they failed to give her a price repeatedly until a week after delivery, and then they refused to take back the furniture when she promptly complained. The store and financing company certainly had greater bargaining power, understanding, and acumen than someone of limited means who could not easily get credit elsewhere and who is a stranger to this sort of transaction. Further, the agreement itself is difficult to read and understand. The front contains various provisions in different areas of the paper and in different size fonts. The terms on the rear are printed in light ink and are virtually unreadable. Thus, the procedural unconscionability prong is certainly met here.
The substantive unconscionability requirement, that is unconscionable terms within the contract, is also met. "Examples of unreasonably favorable contractual provisions are virtually limitless but include inflated prices, unfair termination clauses, unfair limitations on consequential damages and improper disclaimers of warranty" (Emigrant Mortg. Co., 95 A.D.3 at 1170 [citations omitted]). As Defendant herself noted, to pay $3500 for a couch and loveseat, especially for furniture of a quality that lasted barely two years, is ridiculous. Further, there is a clause limiting liability on behalf of the seller to the amount paid by the buyer. This too is unreasonably favorable to one party. Thus, the substantive prong is also met and the alleged agreement is unconscionable.
Capitol Discount Corp v. Rivera, CV-6114-12, NYLJ 1202590031804, at *1 (Civ., KI, Decided February 25, 2013).
[Meredith R. Miller]
( H/T to Ben Davis -and his student - for posting about the article to the Contracts Prof list serv).
This article indicates that the average Internet user would need 76 work days in order to read all the privacy policies that she encounters in a year. (Unfortunately, the link to the study conducted by the Carnegie Mellon researchers and cited in the article doesn’t seem to be working). But you don’t need a study to tell you that privacy policies are long-winded and hard to find. That’s one of the reasons you don’t read them. Another is that they can be updated, often without prior notice, so what’s the point in reading terms that are constantly changing? Finally, what can you do about it anyway? Don’t like your bank’s privacy policies – good luck finding another bank with a better one.
So, what’s the difference between a contract and a notice? The big difference is that the enforceability of a notice depends upon the notice giver’s existing entitlements, i.e. property or proprietorship rights whereas a contract requires consent.
If I put a sign on my yard that says, Keep off the grass, I can enforce that sign under property and tort law. As long as the sign has to do with something that is entirely within my property rights to unilaterally establish, it’s enforceable. If the sign said, however, ‘Keep off the grass or you have to pay me $50” – well that’s a different matter entirely. That would require a contract because now it involves your property rights.
Privacy policies are more like notices – and should be treated as such even if they are in the form of a contract (such as a little clickbox that accompanies a hyperlink that says TERMS). If a company wants to elevate a notice to a contract, it should require a lot more than that simple click. Because the fact is, contract law currently does require the user to do more than click – it requires the user to read pages and pages of terms spread across multiple pages – at a cost of 76 days a year. The standard form contract starts to look a lot less efficient when viewed from the user’s perspective.
We posted earlier in the semester about the baffling case Columbia Nitrogen v. Royster. Victor Golberg (pictured) wrote to us to recommend his book chapter on the subject in his Framing Contract Law (2007). Professor Goldberg names Columbia Nitrogen, together with Nanakuli Paving as a "Terrible Twosome," that should render law professors apoplectic. That is so because when courts use course of dealing or custom to set aside fied price terms, contracting parties can have "little confidence in their ability to predict the outcomes if their disputes do end up in litigation" (p. 162).
John Murray, writing in 1986, praised the decision for evidencing "a sophisticated judicial understanding of the major modifications in contract law" and for its "sophistication with respect to [UCC §] 2-207." But Professor Goldberg sees a darker story, in which CNC's counsel attempted to undo, by whatever means necessary, what had turned out to be a bad bargain." As a result, says Professor Goldberg, the court "converted a straightforward agreement into an incoherent mess" (p. 187).
Happily, according to Professor Goldberg, Columbia Nitrogen is not followed. Contractual relationships are governed by two complementary systems: legal enforcement, which has strict rules, and social enforcment, which is governed by informal norms. The mistake of the court and the "potential cost of Columbia Nitrogen" is to infer legal rules from social rules in a way that allows legal rules to hamstring informal social norms (p. 188).
It is a nice piece of wisdom to pull out of a troublesome opinion. The full details of the case, going well beyond what is available in the published opinion, can be found in PRofessor Goldberg's book.
GW's Government Procurement Law Program is hosting a symposium focusing on the intersection of competition policy and procurement law. The event features two keynote addresses as well as panels, chaired by Professors William E. Kovacic, Steven L. Schooner, and Christopher R. Yukins, that explore the way competition and anti-trust concerns play out in the procurement arena.
Attendance is free, but space is limited. Reserve a seat by emailing Jessie Pierce at email@example.com.
Full details can be found here.
In other GW law news, the latest edition of their Government Contracting newsletter is available here.