ContractsProf Blog

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

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Tuesday, December 31, 2013

Ninth Circuit Denies Motion to Compel Arbitration Where There Is No Contract

9th CircuitThis case is fodder for Nancy Kim's work on wrap contracts.  

In 2008, Donovan Lee purchased an Internet background check and report from a company called Intelius.  Lee confirmed this purchase when he clicked "yes" on Itelius's webpage, where its name was the only company name to appear.  In fine print on that page, he was informed that by clicking yes and looking at the report he was seeking he was also agreeing to a seven-day free trial of a "Family Safety Report" for which he would be billed $19.95/month after the seven-day trial lapsed. Lee noticed the monthly charges, from a company called Adaptive Marketing, after the company had been charging his credit card $19.95 for about a year.   Lee and other named plaintiffs brought a state-law class action against Intelius, which impleaded Adaptive Marketing as a third-party defendant.  

Claiming that Lee had agreed to arbitrate any claims he would have against Adaptive Marketing when he clicked "agree" on Intelius's website, Adaptive Marketing moved to compel arbitration.  The District Court denied that motion, and on December 1th, the Ninth Circuit affirmed in Lee v. Intelius, Inc.  

The Court's description of the Intelius webpage's architecture is quite elaborate.  It seems that Lee was lured into his trial membership with Adaptive Marketing when he took a two-question survey in return for $10 cash back (which he claims he never received) should he try "Family Safety Report."  After taking the survey, it appears that Lee had the option of just seeing the background check that he was interested in or also getting the Family Safety Report on terms provided through another link.  The "yes" button was large and orange.  The "no" button was smaller and featured a smaller font.  Lee testified that he did not read the text of the smaller button, as his eye was drawn to the large orange button.  He also did not read Intelius's terms and conditions, which included an arbitration clause.

The District Court found that Lee had entered into a contract with Adaptive Marketing to purchase the Family Safety Report but had not entered into a arbitration agreement with that company.  The Ninth Circuit, applying Washington state law, found that Lee had entered into no contract with Adaptive Marketing, and therefore had no arbitration agreement with the company.  

The Ninth Circuit found no contract because it concluded that Intelius's webpage was "designed to deceive" Lee and others like him.  While a careful consumer would have read the entire webpage, the District Court had noted, Lee's conduct was not careful but also not unreasonable:

A less careful, but not unreasonable, consumer could conclude that providing Intelius with his email address and clicking the big [orange] “YES” button would reveal the report he had been trying to get for an undisclosed number of screens. Because the consumer never selects an additional product or service and is not asked for his account information, he could reasonably believe, based on his past experiences with internet transactions, that there would be no unpleasant surprises on his credit/debit account.

On this basis, the Ninth Circuit expressed skepticism regarding whether Lee had made an objective manifestation of consent to a contract with Adaptive Marketing.  But because that issue was uncertain, the Ninth Circuit ruled on other grounds.  Washington law requires that the "essential elements" of a contract be set forth in writing.  Identification of the parties to an agreement is one such essential element, and it was lacking in this instance, since Adaptive Marketing's name did not appear.  Even a cautious consumer would have thought she was contracting with Intelius.  

In addition, the Ninth Circuit agreed with the District Court that even if there were a contract between Lee and Adaptive Marketing, there was no agreement to arbitrate.  As the District Court put it:

Neither the text above the “YES” button nor the “Offer Details” themselves mention the “Privacy Policy” or the “Terms and Conditions.” By clicking the “YES” button, Lee objectively manifested his assent to be bound by the “Offer Details,” nothing more. The fact that there were additional hyperlinks on a webpage Lee reviewed does not establish assent to the terms embedded in those hyperlinks.

The Ninth Circuit agreed.

The Court noted as an aside that the federal government prohibited the so-called "data pass" method employed on Intelius's website in the 2010 Restore Online Shoppers' Confidence Act (ROSCA).

[JT]

December 31, 2013 in Recent Cases | 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 

October 31, 2013 to December 30, 2013

RankDownloadsPaper Title
1 747 The Paper Chase: Securitization, Foreclosure, and the Uncertainty of Mortgage Title 
Adam J. Levitin
Georgetown University - Law Center
2 296 Unsettledness in Delaware Corporate Law: Business Judgment Rule, Corporate Purpose 
Lyman Johnson
Washington and Lee University - School of Law
3 176 The No Reading Problem in Consumer Contract Law 
Ian AyresAlan Schwartz
Yale University - Yale Law School, Yale Law School
4 128 Protecting Consumers from Zombie-Debt Collectors 
Neil L. Sobol
Texas A&M University - School of Law,
5 117 The Concept of 'Vindication' in the Law of Torts: Rights, Interests and Damages 
Jason N. E. Varuhas
University of Cambridge - Faculty of Law
6 114 Deutsche Bank and the Use of Promises in Islamic Finance Contracts 
Jon M. TrubyKarim Ginena
Hamad Bin Khalifa University, Qatar University - College of Law
7 106 Boilerplate: A Threat to the Rule of Law?
Margaret Jane Radin
University of Michigan Law School
8 104 The Contract Management Body of Knowledge: Understanding an Essential Tool for the Acquisition Profession 
Steven L. SchoonerNeal J Couture
George Washington University - Law School, George Washington University - Law School
9 86 Market Reliance and Pledged Patents 
Jorge L. Contreras
American University - Washington College of Law,
10 79 Beyond International Commercial Arbitration? the Promise of International Commercial Mediation 
S.I. Strong
University of Missouri School of Law

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

November 1, 2013 to December 31, 2013

RankDownloadsPaper Title
1 114 Deutsche Bank and the Use of Promises in Islamic Finance Contracts 
Jon M. TrubyKarim Ginena
Hamad Bin Khalifa University, Qatar University - College of Law
2 106 Boilerplate: A Threat to the Rule of Law?
Margaret Jane Radin
University of Michigan Law School,
3 104 The Contract Management Body of Knowledge: Understanding an Essential Tool for the Acquisition Profession 
Steven L. SchoonerNeal J Couture
George Washington University - Law School, George Washington University - Law School,
4 65 Dissenting Statement Pertaining to the Name of an Individual Debtor on a Financing Statement — Appendix to Report on the Amendments to Article 9 of the Uniform Commercial Code 
Kenneth C. KetteringAmelia H. Boss
Temple University - James E. Beasley School of Law, University of Miami - School of Law,
5 63 The Practice of Promise and Contract 
Liam B. Murphy
New York University (NYU) - School of Law
6 58 Sovereign Pari Passu and the Litigators of the Lost Cause 
Joseph Cotterill
Financial Times
7 51 Expressive Remedies in Private Law 
Andrew S. Gold
DePaul University - College of Law
8 40 Protecting Reliance 
Victor P. Goldberg
Columbia Law School
9 33 Codification of Contract Law: Some Lessons from History 
Warren Swain
University of Queensland - T.C. Beirne School of Law
10 33 Lawmaking in the Shadow of the Bargain: Contract Procedure as a Second-Best Alternative to Mandatory Arbitration 
Charles W. Tyler
Yale Law School

[JT]

December 31, 2013 in Recent Scholarship | Permalink | TrackBack (0)

Monday, December 30, 2013

GLOBAL K: Socio-Economics Programs at the AALS Annual Meeting

As you may have read in Jeremy’s recent post, there are a number of programs at the AALS Annual Meeting in January 2014 that will be of interest to the Contracts-minded. I want to alert you to two unusual offerings that have a cross-over interest for Contracts scholars and teachers – (i) the day-long Annual Meeting of the Society of Socio-Economists (SOS) on the opening day of the AALS meeting on Thursday, 2 January 2014, from 9:00 a.m. to 5:30 p.m., at the New York Hilton Midtown; and, (ii) the extended program of the AALS Section on Socio-Economics on Sunday, 5 January 2014, from 9:00 a.m.to 5:00 p.m. One can drop in and out of sessions on either day.

 

I believe that the socio-economics approach to economic analysis enhances the understanding of the dynamics of contracts law and policy, and as a result I have become a member of SOS and expect to participate actively in these programs. The interdisciplinarity of the approach and its integration of economic analysis with other related methodologies make this approach particularly productive in the context of contracts. Socio-economics begins with the assumption that economic behavior and phenomena are not wholly governed or described by any one analytical discipline, but are embedded in society, polity, culture, and nature.  Hence, drawing in an integrated fashion on economics, sociology, political science, psychology, anthropology, biology and other social and natural sciences, and other disciplines, socio-economics regards competitive behavior as a subset of human behavior within a societal and natural context that both enables and constrains competition and cooperation.  Instead of assuming that individual pursuit of self-interest automatically or generally tends toward an optimal allocation of resources, socio-economics assumes that societal sources of order are necessary for people and markets to function efficiently.  People are not only rational actors pursuing only self-interest, and socio-economics seeks a more encompassing interdisciplinary understanding of economic behavior open to the assumption that individual choices are shaped not only by notions of rational action but also by emotive and humane expectations.

 

The following link leads to the SOS Annual Meeting web page and describes the Thursday program and provides an additional link that leads to a registration form (separate from the AALS Annual Meeting registration): SOS Annual Meeting.

 

To cover the expenses of the SOS Annual Meeting, there is a $75 registration fee ($10 for students). Registration allows the registrant and one additional person to attend. However, I understand that there is a partial reduction or complete waiver of the registration fee available, by making a request to  socioeconomics@aol.com (click or paste). The registration fee does not include the $15 cost of the box luncheon.  However, participants may attend the luncheon address without purchasing a box lunch.

 

For the Thursday SOS Annual Meeting, I would particularly direct your attention to certain topics introduced during the morning plenary session and then picked up in concurrent sessions later in the day: (i) Socio-Economic Theory; (ii) Sustainable Economic Recovery and Growth; and, (iii) Ownership and Wealth Distribution.

 

During the extended Section Program on Sunday, I would especially commend your attention to the following concurrent session from 9:50 - 10:50 a.m.: Exposing the Myth of Consent: Strictures from Neuroscience, Economics, and Relational Contracting, featuring Jennifer Drobac (Indiana - Indianapolis), Oliver Goodenough (Vermont), Robin Kar (Law and Philosophy, Illinois), Amanda Pustilnik (Maryland), and Margaret Ryzner (Indiana - Indianapolis).

 

 

Michael P. Malloy

 

December 30, 2013 in Conferences | Permalink | TrackBack (0)

Sessions of Interest at the AALS Annual Meeting This Week

AalslogoHere are some panels going on at the Annual Meeting in New York starting January 2nd that will be of interest to our readers:

Section on Jurisprudence, January 3, 3:30 PM:

Session Details 

Contract theorists have offered a number of different rationales to explain the central doctrines of contract law.  Contract law does not, however, operate in isolation: it interacts with other areas of the law (both public and private) to underwrite modern market activity, and thereby shapes larger economic relations and patterns of economic growth and decay.  Theorizing about contract thus inevitably invites deeper reflection on the place of public regulation in the private sphere.  

This session will discuss different approaches to contract theory, with special attention to their capacity to explain not only the simplest cases of classical contracting (i.e., where two parties of relatively equal bargaining power explicitly discuss and reach agreement on the complete terms of a bargain) but also the way modern contracting has developed in practice (i.e., where phenomena like form contracts, contracts of adhesion and boilerplate often dominate).  It will also discuss some of the outstanding problems for contract theory, including the declining role of voluntariness in modern contracting. What challenges do facts like these present for contract theory, and how might contract theory begin to address these challenges in a more holistic way?  Some new theories and emerging ideas will be discussed. 

 
Speaker: Aditi Bagchi, Fordham University School of Law 
Speaker: Robin B. Kar, University of Illinois College of Law 
Speaker: Avery W. Katz, Columbia University School of Law 
Speaker: Liam B. Murphy, New York University School of Law 
Speaker: Margaret-Jane Radin, The University of Michigan Law School 
Moderator: Ekow Yankah, Benjamin N. Cardozo School of Law 
 

  

NYC Panorama

Section on Commercial and Related Consumer Law and Section on Contracts Joint Program: The Future of Consumer Law, January 5, 9 AM

Session Details 

Consumer law is in the midst of rapid and probably substantial change, both in the U.S. and abroad. Stateside, we see change at every level of contract and commercial law, both in areas governed by thecommon law and in areas occupied by statutes and regulations. For the former, the largest recentdevelopment is the just-underway Restatement (Third) of Consumer Contracts, though to some degree other ALI projects have addressed particular aspects of consumer law (for example, the Principles of Software Contracts). NCCUSL similarly has taken up consumer contracting in the last decade or two, mainly with rather focused projects, but at time with broad-based ones (such as the attempts to revise and then amend Article Two of the UCC).  Federal law has likewise gone through upheaval in the aftermath of Dodd-Frank, in large part through the creation of the Consumer Financial Protection Bureau and the new activities of the Federal Trade Commission. Nor has the Supreme Court been silent, as its recent decisions on class arbitration attest. Outside the U.S., there have been many substantial attempts to rethink consumer contracting, of which recent European Union Directives on Consumer Rights and on

Alternative Dispute Resolution for Consumer Contracts are prominent examples.

In this joint session, a broad range of participants will discuss these developments from many perspectives—law reformers, academics (both legal and non-legal), regulators, the regulated, the courts. We anticipate many opportunities for give-and-take among panelists and between panelists and theaudience.

 .

Speakers
 
Speaker: Oren Bar-Gill, New York University School of Law 
Speaker: Omri Ben-Shahar, The University of Chicago, The Law School 
Co-Moderator: Amelia H. Boss, Drexel University School of Law 
Speaker: Ms. Julie Brill, Federal Trade Commission 
Co-Moderator: Larry T. Garvin, The Ohio State University, Michael E. Moritz College of Law 
Speaker: James Hawkins, University of Houston Law Center 
Speaker: Ms. Gail Hillebrand, Consumer Financial Protection Bureau 
Speaker: Florencia Marotta-Wurgler, New York University School of Law 
Speaker: David C. Vladeck, Georgetown University Law Center 

 

NYC Panorama
 

In addition, there will also be a concurrent session during the joint program on the morning of January 5, at 9:50 AM

Exposing the Myth of Consent: Strictures from Neuroscience, Economics, and Relational Contracting
Speaker: Jennifer A. Drobac, Indiana University Robert H. McKinney School of Law 
Speaker: Oliver R. Goodenough, Vermont Law School 
Speaker: Robin B. Kar, University of Illinois College of Law 
Speaker: Amanda C. Pustilnik, University of Maryland Francis King Carey School of Law 
Speaker: Margaret Ryznar, Indiana University Robert H. McKinney School of Law 

 

We look forward to meeting up in New York City!

[JT]

December 30, 2013 in Conferences | Permalink | Comments (0) | TrackBack (0)

Ninth Circuit Strikes Down Arbitration Clause that Renders Arbitral Decision Unappealable

I have been thinking a lot about Peggy Radin's book Boilerplate and her arguments about how boilerplate contacts threaten a democratic degradation (discussed elsewhere on the blog by Brian Bix, with Peggy Radin responding here, and by David Horton) because they permit private parties, powerful companies, to negate statutory or common law rights.  The Ninth Circuit has put its foot down and refused to permit a potential innovation in the direction of democratic degradation, but the odd thing about the case is that the arbitration agreement at issue here seems to have been among parties with fairly even bargaining power.  

9th CircuitOn December 17, 2013, the Ninth Circuit issued its opinion in In re Wal-Mart Wage & Hour Employment Practices Litigationaffirming the District Court's confirmation of an arbitration award and rejecting appellee's argument that the Court was without jurisdiction because the parties agreed to binding, non-appealable arbitration.

The dispute at issue arose in the aftermath of an $85 million settlement agreement between Wal-Mart and a class of employee-plaintiffs.  As part of that settlement, the parties agreed to have all disputes as to fees decided by an arbitrator.  The District Court awarded $28 million in attorneys' fees, but plaintiffs' counsel quarreled over the proper allocation of that fee award.  That dispute was submitted to "binding, non-appealable arbitration." 

The arbitrator divided the fee among three law firms, and one of them brought suit in District Court challenging the allocation.  The District Court found no grounds to vacate the arbitrator's award, and the law firm that challenged the award appealed.  The firm that got the lion's share of the fee award argued that there could be no appeal due to the "non-appealable" language in the arbitration agreement.

The Ninth Circuit found the language of the agreement ambiguous.  "Non-appealable" could just preclude courts from reviewing the merits of the arbitrator's decision, or it could mean that no federal court could exercise jurisdiction in the case.  The Ninth Circuit concluded that the second meaning would be unenforceable in any case, as inconsistent with the provision for judicial review of arbitration awards under Section 10 of the Federal Arbitration Act (FAA).  Citing Hall Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008), in which the Supreme Court rejected an arbitration agreement that expanded the grounds for judicial review of an arbitration award, the Ninth Circuit reasoned that "[j]ust as the text of the FAA compels the conclusion that the grounds for vacatur of an arbitration award may not be supplemented, it also compels the conclusion that these grounds are not waivable, or subject to elimination by contract."  As if the Court had the concept of democratic degradation in mind, the opinion continues:

Permitting parties to contractually eliminate all judicial review of arbitration awards would not only run counter to the text of the FAA, but would also frustrate Congress’s attempt to ensure a minimum level of due process for parties to an arbitration. . . .  If parties could contract around this section of the FAA, the balance Congress intended would be disrupted, and parties would be left without any safeguards against arbitral abuse.

Well, yeah.  

In a separate memorandum disposition, the panel affirmed the District Court's confirmation of the aribral award.

[JT]

December 30, 2013 in Commentary, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Thursday, December 26, 2013

Seller of Rothko Painting Wins Case Against Buyer and Dealers for Breach of Confidentiality Agreement

Untitled 1961In 2007, Marguerite Hoffman decided to sell a major painting by Mark Rothko, and the buyer and delers agreed to keep the sale confidential. Mrs. Hoffman's husband, soft-drinks bottling magnate Robert K. Hoffman, had died the year before, and she wanted to quietly raise money from a discreet buyer.  After a trial earlier this month, a jury in Dallas federal court found that two New York art dealers and a billionaire collector breached the confidentiality agreement, but also awarded plaintiff damages in an amount much less than she had sought.  According to the WSJ:

The 2007 sale, to Studio Capital, a Belize-registered company advised by Mexican-born financier David Martinez, was arranged by prominent New York art dealer Robert Mnuchin and his then-partner, Dominique Lévy. The transaction, in which Mrs. Hoffman received $17.6 million, involved a letter agreement that "all parties agree to make maximum effort to keep all aspects of this transaction confidential indefinitely."

But according to Mrs. Hoffman's lawsuit, the private transaction came to light three years later when Studio Capital turned around and sold the painting in a highly publicized auction at Sotheby's, where it fetched $31.4 million and indirectly revealed the Hoffmans' prior ownership in marketing materials.

Mrs. Hoffman sued Mr. Mnuchin's and Ms. Levy's art gallery, L&M Arts, and Mr. Martinez and Studio Capital, claiming breach of contract. She claimed she could have sold the painting at auction herself and received far more, had she not wanted secrecy. In closing arguments, her attorney, Roger Netzer of Willkie Farr & Gallagher, argued that damages should be between $12.4 million and $22.4 million, based on disputed expert testimony about the art market before the 2008 financial crash.

Jurors in U.S. District Court found all three defendants did breach the agreement, and the panel assessed two types of damages, one of $500,000 and another totaling $1.2 million. The judge ruled that Mrs. Hoffman will have to choose between the two sums, although it is conceivable her counsel may try to claim both types of damages, for a total of $1.7 million.

"I am elated," said Mrs. Hoffman after the verdict. "This case was always about something other than money. It was about justice and integrity and honesty and trust and friendship."

Jonathan Blackman, an attorney at Cleary Gottlieb Steen & Hamilton, who represented Mr. Martinez and Studio Capital, said the limited damages amount to a defense victory. "We feel very good," he said. "After three years and enormous legal expenses on the part of the plaintiff, the elephant labored and came forth with a mouse." He said his clients plan to challenge the damages and breach-of-contract findings.

Major transactions in the art world often involve secrecy, and confidentiality clauses of differing stripes have become common in recent years. Before the trial, some lawyers said a victory by Mrs. Hoffman could have broad implications for the art world by threatening to turn such confidentiality agreements into restrictions or even prohibitions of resales.

Bill Carmody, an attorney at Susman Godfrey who represented defendant L&M Arts in the case, said "it was obviously a huge win for us," because the "jury awarded her a mere fraction of the $20-plus million she wanted."

[Meredith R. Miller]

 

December 26, 2013 in In the News | Permalink | TrackBack (0)

Recent Scholarship: Steven Feldman on Brooks & Stremitzer

FeldmanFriend of the blog, Steven Feldman (pictured), has recently published his critique of Richard R.W. Brooks and Alexander Stremitzer's Remedies on and off Contract, which appeared in the Yale Law Journal in 2011.  Feldman's piece, Rescission, Restitution, and the Principle of Fair Redress: A Response to Professors Brooks and Stremitzer, appeared in the Valparaiso Law Review earlier this year.  Feldman characterizes Brooks and Stremitzer as arguing that current legal doctrine does not allow for rescission often enough and is too liberal in granting restitution.  They believe that these approaches to damages are based on an exaggerated estimate of the threat to contract stabilitiy posed by rescission.  They contend that parties would often bargain for broad rescission rights even if damages for breach were fully enforceable and costless to enforce.  Greater rights of rescission, they contend, would result in more efficient outcomes because rational parties would negotiate price to avoid breach.  

According to Feldman, Brooks and Stremitzer's argument is not based on a comprehensive survey of case law and relevant statutes.  Rather, Feldman contends, "[t]heir legal analysis consists mainly of isolated references to the U.C.C.," the CISG the Restatement (Third) of Restitution and Unjust Enrichment and the Restatement (Second) of Contracts.  By contrast, Feldman surveys case law and finds that courts follow a principle of "fair redress" that permits equitable remedies rather than rigid formulas for calculating damages.  Moreover, Brooks and Stremitzer's economic model ignores situational and relational considerations that often influence buyers' decisions to seek rescission or to breach.

Feldman's article sets out to show that existing precedent supports a status quo that adequately protects both buyers and sellers.  Based on his review of the case law and statutory authority, Feldman argues:

  • Courts are far more liberal in granting rescission than Brooks and Stremitzer suggest;
  • case law interpreting UCC Sections 2-601 and 2-608 is "decidedly "pro-buyer, allowing buyers to reject goods and to revoke acceptance, both of which are species of rescission that Brooks and Stremitzer overlook;
  • Brooks and Stremitzer ignore both federal statutes and regulations and state consumer protection laws that promote a broad right of consumer rescission;
  • the doctrine of material breach has always been a porous barrier against buyer's rescission rights;
  • merchants often allow customers to rescind in order to maintain good customer relations;
  • courts often allow buyers to rescind as an equitable remedy that accords with the principle of fair redress;
  • while Brooks and Stremitzer contend that allowing buyers to recover in restitution overcompensates them, the election of remedies doctrine generally prevents duplicate recovery for the promisee;
  • allowing both rescission and damages do not create a windfall but simply make the injured party whole; and
  • allowing redress in excess of the contract price in cases such as Boomer v. Muir, 24 P.2d 570 (Cal. Dst. Ct. App. 1933), has a sound legal, normative and economic basis.

In the concluding sections of the article, Feldman contends that Brooks and Stremitzer's approach neglects what Feldman terms "the moral imperative " that would permit recovery in excess of losses on the contract in order to protect the innocent victims of legal wrongs.  He then proceeds to attack their rational choice model by reminding readers of numerous criticisms of rational choice theory, especially of those sounding in relational contracts theory.

Feldman has undertaken a fundamental and multi-pronged critique of a very prominent article on contracts remedies that ought to be be considered by any scholar interested in Brooks and Stremitzer's model.

[JT]

December 26, 2013 in Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 25, 2013

New in Print, Christmas Edition

Ohansen_Viggo_-_Radosne_Boże_NarodzenieThis week's installment includes a new publication by one of our own.  Jeffrey Harrison provides an introduction to his article in a recent post.  

Shawn J. Bayern & Melvin A. Eisenberg, The Expectation Measure and Its Discontents, 2013 Mich. St. L. Rev. 1 

M. Neil Browne & Lauren Biksacky, Unconscionability and the Contingent Assumptions of Contract Theory, 2013 Mich. St. L. Rev. 211-255

Benjamin P. Cooper, Taking Rules Seriously: The Rise of Lawyer Rules as Substantive Law and the Public Policy Exception in Contract Law, 35 Cardozo L. Rev. 267 (2013) 

Jeffrey L. Harrison, A Nihilistic View of the Efficient Breach, 2013 Mich. St. L. Rev. 167

Manuel Willington, Hold up under Costly Litigation and Imperfect Courts of Law, 29 J.L. Econ. & Org. 1023 (2013)

[JT]

December 25, 2013 in Recent Scholarship | Permalink | TrackBack (0)

The Botched Obamacare Website Rollout and Government Contracts

It seemed unthinkable that the Obama administration could have so badly botched the rollout of the website associated with Obama's signature legislation, the Affordable Care Act (aka Obamacare).   However, as The New York Times reported here on Monday, and as we have already discussed here and here, the technological fumble may be a result of broader problems in the structures of government procurement systems which may finally get the attention they deserve because of the high-profile Obamacare rollout fiasco.  

SebeliusTo reduce the Times' report to its essence, the process of winning a government contract is very complex and daunting.  There are two problemmatic consequences of this structural element of government contracting.  First, it is hard for small companies or companies without expertise in the government procurement process to jump through all the hoops associated with that process.  Second, when the contracts are both long term and deal with technology, the government in some cases would be better served by working with smaller, more nimble contractors that can innovate and adapt as technology develops.  With technology improving at the rate at which it improves, the government cannot afford to get locked into multi-year contracts with entities that are not in a position to adapt as quickly as technology advances.  As the Times puts it:

Longstanding laws intended to prevent corruption and conflict of interest often saddle agencies with vendors selected by distant committees and contracts that stretch for years, even as technology changes rapidly. The rules frequently leave the government officials in charge of a project with little choice over their suppliers, little control over the project’s execution and almost no authority to terminate a contract that is failing.

“It may make sense if you are buying pencils or cleaning services,” said David Blumenthal, who during Mr. Obama’s first term led a federal office to promote the adoption of electronic health records. But it does not work “when you have these kinds of incredibly complex, data-driven, nationally important, performance-based procurements.”

A review of large-scale government contracts entered into over the past decade deemed only 4.6% successful, while 40% failed.  The rest were simply termed "challenged".  In what has become a familiar narrative (see, e.g., this Brennan Center report on the Obama administration's failed attempts to rein in overclassification), the Obama administration has taken steps to address the problem, but those steps are widely regarded as inadequate, in part because the administration is unable to overcome institutional resistance to change.  In this case, the standoff seems to be a result of resistance from the Office of Management and Budget to congressional legislation that would have exempted the Pentagon form the reform mandate. 
 
The solution for long-term projects involving technology seems to be to break up government contracts into small subcontracts and to partner with small companies that can focus on one task and make certain that the tecnology they employ is up-to-date throughout the life of the contract.
 
[JT]

December 25, 2013 in Government Contracting, In the News | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 24, 2013

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 

October 25, 2013 to December 24, 2013

RankDownloadsPaper Title
1 736 The Paper Chase: Securitization, Foreclosure, and the Uncertainty of Mortgage Title 
Adam J. Levitin
Georgetown University - Law Center
2 293 Unsettledness in Delaware Corporate Law: Business Judgment Rule, Corporate Purpose 
Lyman Johnson
Washington and Lee University - School of Law
3 208 Unconscionability in American Contract Law: A Twenty-First Century Survey 
Charles L. Knapp
University of California - UC Hastings College of the Law
4 175 Contract Law and Theory -- Three Views of the Cathedral 
Eyal Zamir
Hebrew University of Jerusalem - Faculty of Law
5 174 The No Reading Problem in Consumer Contract Law 
Ian AyresAlan Schwartz
Yale University - Yale Law School, Yale Law School
6 127 Protecting Consumers from Zombie-Debt Collectors 
Neil L. Sobol
Texas A&M University - School of Law
7 113 The Concept of 'Vindication' in the Law of Torts: Rights, Interests and Damages 
Jason N. E. Varuhas
University of Cambridge - Faculty of Law
8 111 Deutsche Bank and the Use of Promises in Islamic Finance Contracts 
Jon M. TrubyKarim Ginena
Hamad Bin Khalifa University, Qatar University - College of Law
9 105 Boilerplate: A Threat to the Rule of Law? 
Margaret Jane Radin
University of Michigan Law School
10 99 The Contract Management Body of Knowledge: Understanding an Essential Tool for the Acquisition Profession 
Steven L. SchoonerNeal J Couture
George Washington University - Law School, George Washington University - Law School,

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

October 25, 2013 to December 24, 2013

RankDownloadsPaper Title
1 207 Unconscionability in American Contract Law: A Twenty-First Century Survey 
Charles L. Knapp
University of California - UC Hastings College of the Law
2 175 Contract Law and Theory -- Three Views of the Cathedral 
Eyal Zamir
Hebrew University of Jerusalem - Faculty of Law
3 111 Deutsche Bank and the Use of Promises in Islamic Finance Contracts 
Jon M. TrubyKarim Ginena
Hamad Bin Khalifa University, Qatar University - College of Law
4 105 Boilerplate: A Threat to the Rule of Law? 
Margaret Jane Radin
University of Michigan Law School
5 99 The Contract Management Body of Knowledge: Understanding an Essential Tool for the Acquisition Profession 
Steven L. SchoonerNeal J Couture
George Washington University - Law School, George Washington University - Law School
6 70 Renegotiation of Work Contract and Work Agreement of Coal Mining Undertaking in Indonesia: Legal Aspect of Renegotiation vs Pacta Sunt Servanda Principle 
Ahmad Redi
University of Indonesia (UI) - Faculty of Law
7 63 Dissenting Statement Pertaining to the Name of an Individual Debtor on a Financing Statement — Appendix to Report on the Amendments to Article 9 of the Uniform Commercial Code 
Kenneth C. KetteringAmelia H. Boss
Temple University - James E. Beasley School of Law, University of Miami - School of Law
8 59 Formalizing Gratuitous and Contractual Transfers: A Situational Theory 
Adam J. Hirsch
University of San Diego
9 57 Sovereign Pari Passu and the Litigators of the Lost Cause 
Joseph Cotterill
Financial Times
10 55 The Practice of Promise and Contract 
Liam B. Murphy
New York University (NYU) - School of Law

[JT]

December 24, 2013 in Recent Scholarship | Permalink | TrackBack (0)

Seventh Circuit Compels Union into Arbitration by Ratification

Since I am getting ready to teach Business Associations for the first time in three years, it is nice to have a case that reviews basic agency principles:

On November 25, 2013, a panel of the Seventh Circuit issued a per curiam decision in NECA-IBEW Rockford Local Union 364 Health and Welfare Fund v. A & A Drug Co. and upheld a district court's grant of defendant's motion to compel arbitration.  Plaintiff (the Fund) provides health benefits to a Rockford union of electrical workers (Local 364).  In 2002, it negotiated an agreement (the Local Agreement) with Sav-Rx, a provider of prescription drug benefits.  In 2003, Sav-Rx also negotiated a different agreement (the National Agreement) with the International Brotherhood of Electrical Workers, with which Local 364 is affiliated.  The National Agreement offers locals reduced charges, but it, unlike the Local Agreement, contains an arbitration clause.

While the Fund's trustees never voted on the matter, the Fund accepted Sav-Rx services provided under the National Agreement between 2003 and 2011.  The process by which this occurred is unclear.  The Fund never actually signed the Local Agreement, but Sav-Rx began providing services under the agreement as of January 1, 2003.  After the National Agreement was announced at at a meeting attended by the Chair of the Fund's Board of Trustees, the Chair requested that Sav-Rx reduce its rates to comport with those of the National Agreement.  Sav-Rx did so effective April 1, 2003.  Sav-Rx included Local 364 in its annual audits under the National Agreement, and the Fund's administrative manager communicated with Sav-Rx about these annual audits.

7th CirThe Fund is now suing Sav-Rx for charges not authorized under either the Local or the National Agreements.  Sav-Rx moved to compel arbitration pursuant to the National Agreement.  The Fund claimed that it had never signed the National Agreement and should not be bound to its terms.  The district court found that the Fund had knowingly accepted benefits under that Agreement and had thereby ratified it, thus acceeding to its arbitration clause.  The Seventh Circuit affirmed.   

The Seventh Circuit noted that the Fund is bound to the National Agreement if the Fund or an agent with actual, implied, or apparent authority, assented to it, or if the Fund ratified it.  As the Fund's Trustees had never voted on the National Agreement, the Fund was not bound under actual authority.  Nor did the Chair of the Board of Trustees possess implied authority to bind the Fund to the National Agreement, which did not relate to ordinary day-to-day affairs but was an "extraordinary," "once-in-a-decade transaction" that also caused the Fund to forego an important right -- access to the courts.  Sav-Rx could not establish that the Chair of the Board of Trustees had apparent authority to bind the Fund to the National Agreement.  The Board had never held out the Chair as having such authority and Sav-Rx in fact knew that only the Board itself could bind the Fund.

Nevertheless, the Fund is bound by the National Agreement because it ratified that agreement through its conduct.  By imputation or direct knowledge, the Trustees knew of both the National and the Local Agreements and of their differences.  They also knew that the Fund was receiving discounted prices.  The Seventh Circuit concluded that "knowing that the Fund received the benefits of the National Agreement and never repudiating those benefits, the trustees ratified the National Agreement."

[JT]

December 24, 2013 in Labor Contracts, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Monday, December 23, 2013

GLOBAL K: MEET THE MICE

One of the unexpected benefits of global acquisitions and diversification of multinational enterprises is that the companies occasionally pop up in interesting contracts cases.  Such is the situation in Hoffman v. Daimler Trucks North America, LLC, a case from the Western District of Virginia involving the purchase of an RV that was such a lemon only the mice could love it. Daimler Trucks, a wholly owned subsidiary of Daimler AG, got itself entangled in this case through Freightliner Trucks, its U.S. truck division, and earned itself a quick education in U.S. warranty law.

 

Pedagogical considerations

 

The case offers some interesting reflections on the interrelationship and interactions between state and federal law with respect to the creation and disclaimer of warranties in the consumer purchase context, as well as the role played by specialized statutes like vehicle lemon laws. Too often, the basic Contracts course barely has time to deal with UCC warranty law and lore, and so the compact treatment of these issues can be a useful hand-off for students interested in exploring some of the implications of warranty law and policy.

 

On the federal side, we have the Magnuson–Moss Warranty Act — affectionately known as the Federal Trade Commission Improvement Act of 1975, 15 U.S.C. § 2301 et seq. Magnuson-Moss establishes federal minimum standards for warranties if and when a written warranty is offered. If a seller does offer a written warranty to a consumer, seller may not disclaim or modify any implied warranties. 15 U.S.C. § 2308(a). Any written warranties must be made available to the consumer prior to the sale. 15 U.S.C. § 2302(b)(1)(A).

 

On the state side, of course, we have substantive warranty law represented by the UCC. The UCC will be relevant even when Magnuson-Moss is not (i.e., when an oral, but not a written warranty is offered to the consumer). In contrast with federal law, the UCC permits disclaimer of express and implied warranties, but imposes requirements when a seller attempts to disclaim. UCC § 2-316. Hence, the applicability of Magnuson-Moss could make a substantial difference in a case where disclaimer of warranty is an important issue.

 

The story so far . . .

 

In the fall of 2010, Donald Kent Hoffman of Fishersville, Virginia, bought a Tuscany recreational vehicle from RV dealer Camping World. The RV had been manufactured by Thor Motor Coach and included a chassis built by Daimler Trucks North America and various component parts supplied by Drew Industries. To Mr. Hoffman’s deep disappointment, there were very few things about his RV that weren’t problematic, and so Hoffman and the RV spent nine out of their first ten months together off the road and in the shop. Indeed, the situation was so dire that, during one of the repair episodes at Camping World, the RV developed a mouse infestation because it was left outside for an extended period of time.

 

The mice were apparently untroubled by the flaws in the RV. Among other things, the automatic leveler and indicator lights did not work, nor did the water and waste water indicator lights. The aisle lights in the coach did not work. The deadbolt in the cabin did not work, but then the door didn’t lock from the inside anyway. The door did manage to leak water into the cabin when it rained, however, and the sprayer on the kitchen sink leaked. There was no heat in the vehicle. The front seat did not properly swivel or recline. The map light did not work. The airbags deflated. The driver's side mirror would not stay in place. The control panel did not function properly, nor did the window shades. The steps were installed improperly. The batteries died quickly. In addition, various features that Hoffman said he had been promised were absent from the RV – there was no GPS as promised, and no satellite television.

 

Daimler, trading as Freightliner, entered the story during the course of Hoffman’s tortuous attempts to coordinate warranty coverage. Camping World told Hoffman that the problem with the air bags would have to be addressed by Freightliner, but Hoffman reported back that Freightliner said it was “ok as per truck stand[a]rds.” Meanwhile, the general twelve-month warranty on the RV was set to expire on or about October 29, 2011. Before this happened, Hoffman attempted to revoke his acceptance of the RV by dropping it off at Camping World and seeking a refund of the purchase price. (The RV apparently remains at Camping World pending the outcome of the litigation, although there is no indication in the court’s opinion where the mice are at this point.)

 

In April 2012, the long-suffering, travel-deprived Mr. Hoffman brought suit in state court against Camping World, Daimler Trucks, Drew, and Thor for breach of express and implied warranties under Magnuson-Moss and the Virginia Uniform Commercial Code (VUCC), and against Thor under Virginia’s Motor Vehicle Warranty Enforcement Act, popularly known as the Virginia Lemon Law, Va. Code Ann. § 59.1–207.11 et seq. Thor and Camping World, the only defendants served at that point, managed to have the action removed to federal district court, since neither apparently was a Virginia resident.

 

At this juncture, the scope of the Virginia Lemon Law became an issue. There is some authority that the Virginia Lemon Law does not apply to a completed motor home, but only to the “self-propelled motorized chassis,” Va. Code Ann. § 59.1–207.11. Since Daimler Trucks manufactured the chassis, Hoffman amended his complaint to name Daimler Trucks as the correct defendant on the Lemon Law claim. At that point, the defendants filed motions to dismiss.

 

The retailer’s disclaimers

 

The interaction of the three relevant bodies of law – Magnuson-Moss, UCC § 2-316, and the Lemon Law – is critical to the motions to dismiss. The express warranties that Hoffman relied on in his claims against Camping World were not written, hence not covered by Magnuson-Moss, and Camping World argued that it had validly disclaimed any express warranties via a merger clause in the written contract of sale, and that it had disclaimed any implied warranties in a conspicuous manner as required by VUCC § 2-316(2).

 

Boldly going where most Contracts students have not gone before, Judge James C. Turk found that a merger clause in the contract of sale, coupled with the parole evidence rule embodied in UCC § 2-202, overcame Hoffman’s express warranty claim. As to the implied warranty, however, in a clear and succinct discussion Judge Turk found that the relevant disclaimer clause was not conspicuous for purposes of disclaiming the implied warranties, and he denied Camping World’s motion to dismiss as to the implied warranty claims.

 

The manufacturer’s disclaimers

 

Thor’s argument was that its written warranty reduced the limitation period to “90 days after the expiration of the [designated] warranty coverage period,” or in other words three months after the one-year warranty. However, Thor’s warranty language was ambiguous; the same page also referred to a two-year warranty on the vehicle frame, which might make the limitation period in question 27 months instead of 15 months. Rejecting the approach taken in the now-classic RV warranty case, Merricks v. Monaco Coach Corp., and relying on the limitation rules of UCC § 2-725, Judge Turk decided that “Hoffman could not accept the limitation period by passive acceptance of the RV without objection to the pertinent warranty provision.”

 

Daimler’s arguments

 

As to the two claims against Daimler Trucks – one for breach of express and implied warranties and the other for violation of the Lemon Law – Daimler Trucks argued that Hoffman had simply failed to state a claim for breach of warranty and that the Lemon Law claim was untimely. On the latter argument, which is somewhat beyond our scope, the court allowed relation back to the original filing date of the complaint in determining that the Lemon Law claim against Daimler Trucks in the amended complaint was not time-barred.

 

On the breach of warranty claim, Judge Turk agreed that Hoffman had failed to plead specific breaches attributable to Daimler Trucks, and hence dismissed the claim against the manufacturer with leave to amend. More importantly from a teaching perspective, the Daimler situation illustrates the impact of Magnuson-Moss clearly and succinctly. Daimler Trucks purported to disclaim all implied warranties in its written warranty, but that contravened Magnuson-Moss. Once the supplier gives a written warranty, it cannot wholly disclaim implied warranties. 15 U.S.C. § 2308. Hence, Hoffman’s implied warranty claims against Daimler Trucks would survive a disclaimer argument.

 

The supplier’s arguments

 

Drew, the components supplier, argued that Hoffman’s claims were untimely and that, in any event, its express and implied warranties applied only to Thor, not to the consumer. The timeliness argument neatly illustrates the difference between warranty periods and limitation periods, which, in the court’s view, Drew had confused. Drew had argued that the claims were untimely because they weren’t brought within the one-year warranty period. Judge Turk was quick to point out that “[t]he warranty and limitation periods, however, are not identical concepts. The warranty period covers the component parts for a specified period of time; in other words, it defines the time in which the warrantor has a responsibility to repair or replace the covered parts. The limitation period, however, places constraints on the time in which the buyer must sue.” Simply put, the parties had not agreed to reduce the limitations period “by the original agreement,” per UCC § 2-725(1), and so the UCC default four-year statute of limitations applied.

 

On the warranty issues, Drew was on stronger ground. Drew claimed that its limited express warranty extended coverage only to Thor, the initial purchaser, and not to the consumer. The Court agreed. Based on a Fourth Circuit warranty case, Buettner v. R.W. Martin & Sons, Inc., which involved a remote supplier who had not even given an express warranty to its immediate purchaser, Judge Turk argued that “an original seller is still free to disclaim warranties as to foreseeable users. . . . The Drew limited warranty plainly extended only to the initial purchaser and Hoffman is not entitled to enforce its protections.”

 

Drew also argued that it had effectively disclaimed all implied warranties in the text of its written express warranty, but Hoffman countered that this attempt was ineffective because Magnuson-Moss prohibits such disclaimers when the supplier provides a written warranty to a consumer. Here the court found that Magnuson-Moss was not applicable, because Drew did not offer Hoffman a “written warranty” as the term is understood by Magnuson-Moss, because the warranty was intended for the product manufacturer, not the ultimate consumer, per 16 C.F.R. § 700.3(c). Hence, the Magnuson-Moss limitation on disclaimers of implied warranties was inapplicable, and UCC disclaimer rules governed. The court found the disclaimer sufficiently conspicuous to pass muster under UCC 2-316, and it dismissed the claim against Drew.

 

Conclusion

 

I would recommend this case to anyone seeking an exemplary discussion of the interplay of federal, UCC, and consumer law with respect to warranties. Judge Turk is undeterred by the complexities of the overlapping issues and multiple defendants, and his analysis is clear, concise, and informative. Students looking for further guidance on these issues would benefit from a careful review of Hoffman.

 

 

Michael P. Malloy

December 23, 2013 in Recent Cases, Teaching | Permalink | TrackBack (0)

Motion to Compel Arbitration Granted in Part, Denied in Part in Antitrust Case v. Cable Providers and Sports Organizations

HockeyOn November 25, 2013, Judge Scheindlin of the Southern District of New York issued an opinion in Laumann v. National Hockey League, granting in part and denying in part a motion to compel arbitration brought by defendant Comcast and denying in full a similar motion brought by defendant DIRECTV.  Plaintiffs claim that defendants, including the National Hockey League and Major League Baseball, along with the major cable and satellite television service providers entered into "agreements to eliminate competition in the distribution of [baseball and hockey] games over the Internet and television [by] divid[ing] the live-game video presentation market into exclusive territories, which are protected by anticompetitive blackouts," and by "collud[ing] to sell the `out-of-market' packages only through the League [which] exploit[s] [its] illegal monopoly by charging supra-competitive prices."  These agreements allegedly violate the Sherman Antiturst Act.

At the heart of plaintiffs' beef, it seems, is that if one wants to view "out-of-market" games -- that is, games that do not feature the team from one's home city or the city where one is located -- one must purchase television packages which inculde all out-of-market games, even if one is only interested in the games of one out-of-market team.

BaseballBoth Comcast and DIRECTV have customer service agreements that feature arbitration clauses and so both defedants moved to compel arbitration.  Judge Scheindlin granted Comcast's motion with respect to one plaintiff who purchased an out-of-market package directly from Comcast and thus was clearly bound by the arbitration provision.  The remaining plaintiffs had a more complicated relationship to Comcast and claimed that their claims did not arise directly under their customer service agreements with Comcast.

Judge Scheindlin first ruled that any colorable dispute about the scope or validity of the arbitration clause must be referred to the arbitrator.  Plaintiffs colorfully objected that where the relationship between the agreements and the claims are too attenuated, granting Comcast's motion would be like compelling arbitration of a claim by a plaintiff who had been hit by a Comcast bus.  Judge Scheindlin agreed with respect to one plaintiff, where "the sole nexus between his claims and his Comcast service is the allegation that his DIRECTV package contained material produced by the Comcast" Regional Sports Networks.

Comcast also sought to compel arbitration of claims brought against it pursuant to arbitration clauses in plaintiffs' agreements with DIRECTV.  With respect to these claims, Judge Scheindlin noted that there was no clear intent to have questions of arbitrability between a signatory and a non-signatory decided by the arbitrator.  She then ruled that the arbitration clause in the DIRECTV agreements did not encompass plaintiffs' claims against Comcast.  She also rejected Comcast's claim that plaintiffs should be estopped from bringing a claim under the DIRECTV agreements through any mechanism other than arbitration.

DIRECTV's motion to compel arbitration against another plaintiff failed because the plaintiff is not a DIRECTV customer bound by its arbitration agreement.  The DIRECTV subscription is in the name of plaintiff's wife, and the court rejected any claim that he could be bound by admission or estoppel.

[JT]

 

December 23, 2013 in Recent Cases, Sports, Television | Permalink | Comments (0) | TrackBack (0)

Friday, December 20, 2013

$3.6 Million Seized from Starlin Castro's Bank Accounts for Breach of Contract

CastroChicago Cubs shortstop Starlin Castro (pictured) has reportedly had $3.6 million seized from his bank accounts in connection with an alleged breach of contract as reported here in the Chicago Tribune.  The seizure relates (although how is unclear) to an alleged contract that Castro's father entered into when Castro was 15 years old with a baseball training school in the Dominican Republic.  The alleged contract provided that the school was entitled to three percent of Castro's earnings as a professional ball player. 

According to the Tribune, the money has already been seized from several banks, but the Tribune also reports that Castro's former coach at the school is "planning" to sue Castro.  It is not clear why the school is able to seize funds based on a planned suit, but perhaps the coach is contemplating a separate law suit from that already initiated by the school.  Still, since the Tribune suggests that Castro will counterclaim and claims that the suit is baseless, it is hard to understand how the seizure could have taken place prior to adjudication on the merits.   Castro stole only nine bases last year (and was caught stealing six times).  He is not a flight risk.  

It is also not clear where the $3.6 million figure comes from.  The Tribune reports that Castro signed a $60 million deal with the Cubs in 2012.  So, he is due a bit under $7 million/year, which he has been paid for one year.  Even if the school is due to be paid for the full $60 million, three percent of $60 million is $1.8 million, but why would the school be entitled to be paid before Castro has been paid?

And just for those of you who have any interest in my occasional gripes about absurd sports salaries.  Castro was ranked 22nd among shortstops last year.  I'm not certain but I suspect that those rankings are based exclusively on offensive numbers, which is ridiculous when it comes to shortstops, who are key defensive players.  Castro's fielding percentage was 26th last year out of 28 shortstops who played more than 100 games.  While Castro's offensive numbers were way off last year, his defensive numbers were a bit better than prior years.  No shortstops near Castro in the rankings made even half of what he made.  But he is guaranteed nearly $7 million a year even if his defense never picks up, he hits a punchless .250 and is as big a threat to get picked off as he is to steal a base.  Baseball salaries are no more rational than CEO salaries and both are in need of reform.

[JT]

December 20, 2013 in Celebrity Contracts, In the News | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 18, 2013

Last Call for KCON 9 in Miami

Those who are considering proposals for presentation or who would like to serve as moderators  at  the 9th International Conference on Contracts to be held at St. Thomas University in Miami February 21-22, 2014 should send them to Jennifer Martin (jmartin@stu.edu) right away as nearly all panels are full at this point. 

The Call for Papers, as well as travel and registration information, is available at the Conference website.   The  St. Thomas Law Review is doing a Symposium around the Conference and still has a few spots for papers that it will consider for publication if received no later than January 15, 2012.  

Miami
This is going to be a really wonderful conference this year all-conference honoree is Linda Rusch. Prof. Robin West (Georgetown) will be giving the plenary speech on Saturday and Kingsley Martin (KM standards) will be giving the talk at Friday's luncheon. 

Confirmed Participants include:

Kristen Adams - Stetson University

Bader  Almaskari - University of Leicester, England

Rachel Arnow-Richman- University of Denver

Reza Baheshti - University of Leicester, England

Wayne Barnes - Texas A&M University

Daniel  Barnhizer - Michigan State University

Thomas Barton  - California Western School of Law

Shawn Bayern - Florida State University

Christopher Bisping - University of Warwick

Allen Blair   

Amy Boss -  Drexel University

Steve Callandryllo - University of Washington

Miriam Cherry - University of Missouri

Kenneth Ching - Regent University

Neil Cohen      - Brooklyn Law

Nicolas Cornell - University of Pennsylvania - Wharton

Gerrit De Geest - Washington University School of Law

Sidney Delong - Seattle University

Scott Devito - Florida Coastal School of Law

Xingyan Ding - University of Sydney

Timothy Dodsworth - University of Warwick

Pamela Edwards - CUNY School of Law

Zev Eigen  - Northwestern University School of Law

Seyed Reza Ektekhari - Islamic Azad University - Gonabad Branch

Jamie Fox - Stetson University

Caio Gabra  - Federal University of Rio de Janeiro

Larry Garvin - Ohio State University

Peter Gerhart - Case Western

Katie Gianasi - Husch Blackwell L.L.P.

Jim Gibson - University of Richmond

Suren Gomtsyan - Tilburg Law School - Netherlands

Jack Graves -  Touro Law Center

Ariela Gross - USC Gould

Danielle Hart -Southwestern Law School

Max Helveston - DePaul University

Catherine  Imoedemhe - University of Leicester, England

Lyn  K.L. Tjon Soel Len - University of Amsterdam

Hila Keren  - Southwestern Law School

Nancy  Kim -   Cal Western University

Charles Knapp  - UC Hastings College of Law

Christiina Kunz - William Mitchell College of Law

Lenora Ledwon - St. Thomas University

Peter Linzer  - University of Houston

Joasia Luzak  - University of Amsterdam

Colin Marks  - St. Mary's University

Kingsley Martin - KM Standards

Jennifer Martin - St. Thomas University

John     Mayer  - CALI

Meredith Miller - Touro Law Center

Juliet    Moringiello      - Widener University Scool of Law

Murat  Mungan - Florida State University

John     Murray - Duquense University

Masaki Nakabayashi - University of Tokyo

Marcia Narine - St. Thomas University

Wendy Netter Epstein - DePaul University

Karl Okamoto - Drexel University

Joe Perillo  - Fordham University

Amir Pichhadze - University of Michigan (SJD Student)

Michael Pinsof - Attorney

Lucille Ponte   - Florida A&M University, College of Law,

Deborah Post - Touro Law Center

Michael Pratt - Queens University

Cheryl Preston - Brigham Young University

Val Ricks - South Texas College of Law

Roni Rosenberg - Carmel Academic Center, Law School, Israel

Linda Rusch  - Gonzaga University

Amy Schmitz - University of Colorado

Mark Seidenfeld - Florida State University

Gregory Shill -   University of Denver

Frank Snyder - Texas A&M University

Jeremy Telman - Valaparasio University

David Tollen  - Adili & Tollen, L.L.P.

Manuel Usted - Florida State University

Robin West -Georgetown University

Alan White  - CUNY School of Law

Robert Whitman - University of Connecticut

Pat Williams - Columbia Law School

Monica Woodard - St. Thomas University

Eric Zacks   - Wayne State University

Dustin Zacks   - King, Nieves & Zacks

Deborah Zalesne - CUNY School of Law

Candace Zierdt - Stetson University

[JT]

December 18, 2013 in Conferences | Permalink | Comments (1) | TrackBack (0)

New in Print

Pile of Books
Steven M.  Davidoff & Christina M. Sautter, Lock-up Creep, 38 J. Corp. L. 681 (2013)

Christopher M. Foulds, For Whom Should the Corporation Be Sold? Diversified Investors and Efficient Breach in Omnicare v. NCS, 38 J. Corp. L. 733 (2013) 

Sean J. Griffith, The Omnipresent Specter of Omnicare, 38 J. Corp. L. 753 (2013)

Hon. J. Travis Laster, Omnicare's Silver Lining, 38 J. Corp. L. 795 (2013)

Kate Litvak, Monte Carlo Simulation of Contractual Provisions: An Application to Default Provisions in Venture Capital Limited Partnership Agreements, 98 Cornell L. Rev. 1495 (2013)

Brian J.M. Quinn, Omnicare: Coercion and the New Unocal Standard, 38 J. Corp. L. 835 (2013)

Megan W. Shaner, Revisiting Omnicare: What Does Its Status 10 Years Later Tell Us? 38 J. Corp. L. 865 (2013)

Hon. E. Norman Veasey, Ten Years after Omnicare: The Evolving Market for Deal Protection Devices, 38 J. Corp. L. 891 (2013)

[JT]

December 18, 2013 in Famous Cases, Recent Scholarship | Permalink | TrackBack (0)

Tuesday, December 17, 2013

The Online Scourge of Wrap Contracts

It's not just about privacy anymore. Companies are using wrap contracts to deprive users of other fundamental rights, such as free speech.  My thoughts on some recent cases here.

 

[Nancy Kim]

December 17, 2013 in Commentary | 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 

October 18, 2013 to December 17, 2013

RankDownloadsPaper Title
1 722 The Paper Chase: Securitization, Foreclosure, and the Uncertainty of Mortgage Title 
Adam J. Levitin
Georgetown University - Law Center
2 286 Unsettledness in Delaware Corporate Law: Business Judgment Rule, Corporate Purpose 
Lyman Johnson
Washington and Lee University - School of Law
3 200 Unconscionability in American Contract Law: A Twenty-First Century Survey 
Charles L. Knapp
University of California - UC Hastings College of the Law
4 171 Contract Law and Theory -- Three Views of the Cathedral 
Eyal Zamir
Hebrew University of Jerusalem - Faculty of Law
5 169 The No Reading Problem in Consumer Contract Law 
Ian AyresAlan Schwartz
Yale University - Yale Law School, Yale Law School
6 114 Protecting Consumers from Zombie-Debt Collectors 
Neil L. Sobol
Texas A&M University - School of Law
7 110 Deutsche Bank and the Use of Promises in Islamic Finance Contracts 
Jon M. TrubyKarim Ginena
Hamad Bin Khalifa University, Qatar University - College of Law
8 107 The Concept of 'Vindication' in the Law of Torts: Rights, Interests and Damages 
Jason N. E. Varuhas
University of Cambridge - Faculty of Law
9 99 Boilerplate: A Threat to the Rule of Law? 
Margaret Jane Radin
University of Michigan Law School
10 98 Contract and Property Law: Distinct, but not Separate 
Sjef van Erp
Maastricht European Private Law Institute, University of Maastricht - Faculty of Law

 

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

October 18, 2013 to December 17, 2013

RankDownloadsPaper Title
1 199 Unconscionability in American Contract Law: A Twenty-First Century Survey 
Charles L. Knapp
University of California - UC Hastings College of the Law
2 171 Contract Law and Theory -- Three Views of the Cathedral 
Eyal Zamir
Hebrew University of Jerusalem - Faculty of Law
3 110 Deutsche Bank and the Use of Promises in Islamic Finance Contracts 
Jon M. TrubyKarim Ginena
Hamad Bin Khalifa University, Qatar University - College of Law
4 99 Boilerplate: A Threat to the Rule of Law? 
Margaret Jane Radin
University of Michigan Law School
5 98 Contract and Property Law: Distinct, but not Separate 
Sjef van Erp
Maastricht European Private Law Institute, University of Maastricht - Faculty of Law
6 86 The Contract Management Body of Knowledge: Understanding an Essential Tool for the Acquisition Profession 
Steven L. SchoonerNeal J Couture
George Washington University - Law School, George Washington University - Law School
7 68 Renegotiation of Work Contract and Work Agreement of Coal Mining Undertaking in Indonesia: Legal Aspect of Renegotiation vs Pacta Sunt Servanda Principle 
Ahmad Redi
University of Indonesia (UI) - Faculty of Law
8 62 Dissenting Statement Pertaining to the Name of an Individual Debtor on a Financing Statement — Appendix to Report on the Amendments to Article 9 of the Uniform Commercial Code 
Kenneth C. KetteringAmelia H. Boss
Temple University - James E. Beasley School of Law, University of Miami - School of Law
9 58 Sovereign Immunity and Enforcement of Awards in International Commercial Arbitration 
Faizat Badmus-Busari
Tulane University - Law Schoo
10 58 Formalizing Gratuitous and Contractual Transfers: A Situational Theory 
Adam J. Hirsch
University of San Diego

[JT]

December 17, 2013 in Recent Scholarship | Permalink | TrackBack (0)

Broad Arbitration Clause in Employment Agreement Also Captures Dispute over Asset Purchase Agreement

  EDNYIn 2010, plaintiff James Palese (Palese) sold two companies to defendant Tanner Bolt & Nut, Inc. (Tanner), and Tanner hired Palese as the General Manager of its new Herman's Hardware Division, which included Palese's companies.  Palese entered into a five-year Employment Agreement with a broad  arbitration clause calling for arbitration of "all claims . . .in any way relating" to the Employment Agreement.   At the same time, he entered into two Asset Purchase Agreements, which provided that disputes should be settled in "any court of competent jurisdiction" in Kings County, New York.  The Employment Agreement and the Asset Purchase Agreement made refernence to one another and were part of what the court deemd "an integrated deal."  

In March, 2012, Tanner terminated Palese and then stopped payment on promissory notes relating to the Asset Purchase Agreement.  Palese filed charges of discrimination and retaliation with the EEOC and then brought suit in the Eastern District of New York.  Tanner moved to compel arbitration and dismiss the suit.  On December 5, 2013, the District Court granted Tanner's motion in Palese v. Tanner Bolt & Nut, Inc.

 There is no question that if Palese's only claim were breach of his employment agreement, the claim would be subject to the arbitration clause.  But what of his claim that Tanner also breached the Purchase Agreements.  As the District Court noted

[T]he essence of Palese's allegation is that Tanner retaliated against him in two ways—first by firing him, and second, in "further retaliation," by stopping payment on the promissory notes—in response to a single cause: Palese's objections to his employer's "constant racist, illegal and discriminatory" workplace conduct. 

So put, it seems clear that his claims relating to the Purchase Agreement relate to the Employment Agreement.  

The District Court also rejected Palese's further contention that the forum selection clause in the Asset Purchase Agreements vitiates the arbitration clause.  That argument was foreclosed by the Second Court's decision in Bank Julius Baer & Co., Ltd. v. Waxfield, Ltd., 424 F.3d 278, (2d Cir. 2005).  As in that case, the forum selection clause in the Asset Purchase Agreements could be read as complementary rather than contraditory to the arbitration clause in Palese's Employment Agreement.

The court thus granted Tanner's motion to compel arbitration of all of plaintiff's claims.

[JT]

December 17, 2013 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Monday, December 16, 2013

The Hobbit, the Weinstein Brothers and Contract Interpretation

I took a break from grading exams this weekend to see the second installment of "The Hobbit."  It was rather engaging and the special effects were amazing (although some of the scenes were, not surprisingly, rather gory and violent - which didn't seem to faze the little girl sitting behind me).  I previously blogged about the contract issues in the first Hobbit movie and while there were some in this one ("a favor for a favor," additional duties Bilbo is required to take on that, as my daughter pointed out , were not expressly written out in his contract, and a few other issues), the bigger contract dispute takes place off screen between the Weinstein brothers and Miramax, on one side, and Warner Bros and New Line Cinema on the other.

The Weinstein brothers and Miramax signed an agreement giving up the rights to the Hobbit and LOTR movies to WB in exchange for 5% of gross revenues for "the first motion picture" of each book but "not remakes." 

The problem?  The Hobbit book has been split up into three movies - the first one grossed more than a $1billion worldwide, so we're not talking about chump change here.  The Weinsteins and Miramax received $90 million dollars for the LOTR movies and $25 million for the first Hobbit movie. The Desolation of Smaug grossed over $73 million this past weekend

The issue then boils down to one of contract interpretation - what does "the first motion picture" of each book but not "remakes" mean? 

Based on the limited information I have, I think the Weinstein's got this one and here's why (although without reviewing the entire contract or being familiar with industry norms of interpretation - if there are any -- this is of course, just wild speculation).  First, let's start with the plain meaning of "first motion picture."  The second installment of "The Hobbit" is still the first motion picture made regarding the events in the book.  WB advertises this as the second in a trilogy - not the second movie made of the Hobbit.   "Trilogy" is a group of related works - not the same work. WB has turned the book into a trilogy - like the LOTR books (for which the Weinsteins got a cut from each movie). The colon here matters - the movie is not advertised as "The Hobbit" and "The Hobbit" it's "The Hobbit:  The Desolation of Smaug."  Supporting this interpretation is the language "not remakes" which clarifies what is meant by "first motion picture."  Remakes are not subject to the revenue share provisions but a new installment of a trilogy, IMHO, is.

Another issue has to do with good faith.  WB is quoted as saying that the Weinsteins basically just made "one of the great blunders in movie history."

I don't see it that way.  I think both parties have an obligation to carry out their obligations in good faith and WB seems to be trying to pull a fast one here.  The fact that they refer to this as a "great blunder" seems like they are trying to take advantage of the Weinsteins here, not that they seriously had a misunderstanding regarding the contract terms.  If this issue had come up at negotiation, the parties would likely have agreed the Weinstein's should get a cut. 

There is, of course, the pesky problem of whether the contract is subject to arbitration.  Hopefully not, because I would really like to see how this plays out in court.

[Nancy Kim]

December 16, 2013 | Permalink | Comments (1) | TrackBack (0)