Tuesday, July 9, 2013
Over at Balkinization, University of Maryland Law Prof Frank Pasquale (pictured) has a post about a recent article by Alana Samuels in the L.A. Times. Samuels' article begins with the now-familiar story of a janitor owed back wages who was forced into an arbitral forum that favored employers. His arbitration agreement, which was among the papers he signed without reading (and likely without being given the opportunity to read) on the first day of work, also included a class action waiver. Employers are also emboldened by the pro-business climate engendered by recent SCOTUS decisions to throw in attorneys' fees provisions, thus increasing the risks to employees who seek redress.
The story then proceeds to detail the plight of relatively low-wage workers, such as limo drivers and hair stylists, whose employers force them to sign non-compete clauses, even if they are part-time, meaning that they cannot find work with other businesses, even if they are not getting enough hours from their current employers. Pasquale reports that non-competes are now starting to kick in at the job application stage. He reports that at some job fairs, employers will not look at your application unless you sign a "letter of intent," which prevents the applicant from applying elsewhere whie the current application is pending.
It is not clear to me that such a letter would be or could be enforceable. What is the company's remedy if a potential employee violates the letter of intent? Presumably, the only remedy would be to refuse to hire, but if the employer is otherwise inclined to hire someone, would that person's failure to abide by the company's b.s. letter of intent really deter the company from hiring? And if the company does not decide to hire the person, there is obviously no harm to the company and so no way to enfore the letter of intent. The issue could arise, perhaps, if the company hired someone and then learned that the employee had violated the letter of intent. But since the employment is almost certainly at-will, what difference does the letter of intent issue make? The employer still is free to fire or not fire.
Monday, July 8, 2013
My colleague, David Herzig, called my attention to this weekend's New York Times Magazine, which featured an article about Jason Everman, who was briefly a member of two very successful bands, Nirvana (pictured) and Soundgarden. According to the article, Everman was too introverted to make it on tour, and he was fired from both bands for being moody. He bounced around with other bands for a while and eventually enlisted with the armed forces. He is now a decorated war hero and veteran of the Special Forces, where, according to the article, moodiness is not a big problem.
The part that piqued David's interest was early on, when Everman first joined Nirvana. According to the Times, Nirvana had just recorded its first album, Bleach, but they owed their producer money. Everman paid $606.17 to cover the debt, and the record eventually sold over 2 million copies. Kurt Cobain bragged that the band never even reimbursed Everman his $600. David thought maybe there would be some contractual angle that would lead to a recovery for Everman. The article suggests that Everman has moved on, and that's probably the right move both for the sake peace of mind and from the legal perspective, at least based on the facts as reported in the Times.
There is no suggestion in the article of a contract. It seems like Everman was just being a good guy and giving his friends some money. At best, he might have expected to be paid back, so a legal case would entitle him to $606.17 plus interest. Or he might have just been helping his bandmates in the expectation that the record's success would enable them to tour and to profit from being Nirvana, a privilege that Everman enjoyed for a while, before his bandmates discovered that he wasn't the person with whom they wanted to be stuck in a tour van.
Thursday, July 4, 2013
There have been a few articles over the past few days about Bobby Bonilla's contract with the New York Mets. Bonilla played for the Mets until he retired in 2001. At that point, he still had $5.9 million outstanding on his contract. Rather than giving Bonilla a lump sum payment, the Mets opted to pay him start paying him in 2011. The Mets are to pay Bonilla a total of $29.8 million over 25 years.
Cork Gaines of the Business Insider explains that this was a good deal for the Mets in terms of their bottom line on the Bonilla contract. Assuming an 8% rate of return, the long-term payout deal is worth $10 million less over time to Bonilla than would a one-time payout. And, because the Mets had the use for teny years of the $5.9 million that they owed Bonilla until the payouts began in 2011, they were able to invest that money, and the come out at the other end looking pretty good, assuming an 8% annual return on investment and ignoring all other issues, like the tax consequences of the transaction.
In the New York Times, Jeff Z. Klein and Mary Pilon are decidedly less positive about the Bonilla contract, but they dutifully report that all parties involved stil believe they acted in their own best interest. The Times provides some details missing from the Buinsss Insider report. The Mets needed to get Bonilla off their books and out of their clubhouse so that they could free up space under the MLB salary cap and free themselves from an underperforming player who had become a distraction.
We have expressed our view before that multi-million dollar, multi-year deals for veteran ballplayers are irrational. With baseball mania for statistics, it ought to be possible to fine-tune baseball contracts with incentives so that players actually get paid for performance (you know, like CEOs) rather than getting paid for hitting .250 when they are 35 because they hit .320 when they were 29.
Wednesday, July 3, 2013
Richard A. Bales & Matthew Miller-Novak, A Minor Problem with Arbitration: A Proposal for Arbitration Agreements Contained in Employment Contracts of Minors. 44 McGeorge L. Rev. 339 (2013)
Miriam A. Cherry, Cyber Commodification, 72 Md. L. Rev. 381 (2013)
Moshe Gelbard & David Elkins, The Remedy of Price Reduction in a Mixed Legal Environment, 42 Stetson L. Rev. 1398 (2012)
Alan J. Meese, The Market Power Model of Contract Formation: How Outmoded Economic Theory Still Distorts Antitrust Doctrine, 88 Notre Dame L. Rev. 1291 (2013)
Jan M. Michaels, Michael J. McNaughton & Sridevi R. Krishnan, The "Non-Cumulation" Clause: Policyholders Cannot Have Their Cake and Eat It Too, 61 U. Kan. L. Rev. 701 (2013)
Jon D. Michaels, Privatization's Progeny, 101 Geo. L.J. 1023 (2013)
Juliet M. Moringiello & William L. Reynolds, From Lord Coke to Internet Privacy: The Past, Present, and Future of the Law of Electronic Contracting, 72 Md. L. Rev. 452 (2013)
Robert J. Rhee, The Tort Foundation of Duty of Care and Business Judgment. 88 Notre Dame L. Rev. 1139 (2013)
Val Ricks, Assent Is Not an Element of Contract Formation, 61 U. Kan. L. Rev. 591 (2013)
Kurt S.Schulzke, Gerlinde Berger-Walliser & Pier Luigi Marchini, Lexis Nexus Complexus: Comparative Contract Law and International Accounting Collide in the IASB-FASB Revenue Recognition Exposure Draft, 46 Vand. J. Transnat'l L. 515 (2013)
Monica E. White, "Package Deal": The Curious Relationship between fiduciary duties and the implied covenant of good faith and fair dealing in Delaware limited liability companies, 21 U. Miami Bus. L. Rev. 111-181 (2013)
And one new book:
The NYT's (new) ethicist, Chuck Klosterman tackled the issue of non-disparagement clauses in last Sunday's magazine (you have to scroll down past the first question about the ethics of skipping commercials). Klosterman stated that, "(n)ondisclosure provisions that stretch beyond a straightforward embargo on business-oriented “trade secrets” represent the worst kind of corporate limitations on individual freedom — no one should be contractually stopped from talking about their personal experiences with any company." He adds, "You did, however, sign this contract (possibly under mild duress, but not against your will)." A non-disparagement clause, however, is quite different from a blanket nondisclosure provision - the ex-employee may presumably talk about her personal experiences, as long as she leaves out the disparaging remarks. "Mild duress" is an oxymoron since duress, by its definition, is not mild and if you sign something under duress, you are signing it against your will. Despite getting the nuances wrong, the advice -- which is basically to say nothing bad but say nothing good either -- is sound. Sometimes silence speaks volumes.
Non-disparagement clauses in settlement agreements are fairly common and I don't think they are necessarily outrageous (it is a settlement agreement afterall). That's not the case with this agreement, posted courtesy of radaronline and discussed at Consumerist. The agreement doesn't contain a non-disparagement clause but still manages to be overreaching. The agreement, purportedly from Amy's Baking Company , requires that its employees work holidays and weekends, and extracts a $250 penalty for no-shows. It also forbids employees from using cell phones, bringing purses and bags to work, and having friends and family visit during working hours. The contract also contains a non-compete clause, prohibiting employees from working for competitors within a 50 mile radius for one year after termination. What the agreement doesn't contain is a non-disparagement clause - and a clause prohibiting employees from sharing the terms of the agreement with others. My guess is that those clauses will probably show up in the next iteration of the contract....
Tuesday, July 2, 2013
Erwin Chemerinsky has an op-ed in today's New York Times about three pro-business decisions from the recently-concluded Supreme Court term. He devotes a couple of paragraphs to Concepcion and then talks a little bit at the end about Italian Colors.
The article draws on these three opinions as examples of the pro-business bent of the current Supreme Court. The cases are in the areas of employment discrimination, product liability and arbitration. In all three areas, the Court made it harder this term for plaintiffs who are trying to sue commercial enterprises to get past a motion to dismiss.
Chemerinsky picks up on Justice Ginsburg's call for a legislative solution, but very few people believe our elected representatives are capable of (or interested in) addressing these issues.
Monday, July 1, 2013
I was traveling this weekend and stayed at a hotel. As we were about to check in, I noticed this sign, which I would surely never have noticed if I did not teach contracts.
Look,much of this may be true whether or not the sign exists, but still I hope that I do not live in a world in which someone can plop down a sign on a parking lot and thereby bind me to whatever terms she chooses to impose. The troublesome word here, of course, is "irrefutable." Since this was an open parking lot that my hotel shared with a number of other hotels, there was no parking attendant. I could have written out a note certifying that my 2001 Camry is immaculate and handed to the people at reception. I expect that would have been flummoxed by such a note. Whether or not my note is accurate, I would regard it as a reasonable response to the sign. I would not want to run the risk of being on the wrong side of an irrefutable presumption, so better to state my claim as sweepingly as possible.
The wicked witch had it right. "What a world, what a world!"