ContractsProf Blog

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

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Thursday, June 20, 2013

SCOTUS Issues Opinion in Italian Colors: No Surprises

In a 5-3 decision (Sotomayor, J., not participating), the U.S. Supreme Court today compelled arbitration in American Express Co. v. Italian Colors Restaurants.

SCOTUS 2010We reported on the oral arguments in this case here, and UC Davis's David Horton provided an introduction for us to the case after cert. was granted here.  Things unfolded much as Professor Horton predicted. 

Justice Scalia, writing for the majority, accepts plaintiffs' premise that, given the costs of experts' fees necessary to prove plaintiffs' antitrust allegations, the costs to any American Express customer to bring an antitrust claim against American Express far exceeds any possible recovery, even assuming the availability of triple damages.  Plaintiffs argue that the class action waiver that they signed as part of their arbitration agreement with Amerrican Express is thus invalid because the waiver denies them of any meaningful opportunity to prosecute their antitrust claim.

According to the majority, that argument is foreclosed by the Federal Arbitration Act, which directs courts to enforce arbitration agreements, absent something like fraud or duress, which is not present in this case.  Justice Thomas specially concurred to say that in his view, such a finding followed inevitably from the Court's prior decision in AT&T Mobility LLC v. Concepcion. Justice Scalia pretty much agrees (at the bottom of page 8), but he first does a two part analysis, finding: 1) no clear congressional command that might trump the Federal Arbitration Act's command that courts enforce arbitration agreement and 2) that the judicially created "effective vindication" doctrine does not apply here.  That doctrine would set aside arbitration provisions that prevent a party from vindicating important statutory rights.  Here, however, parties can pursue their legal rights; they simply do not have a procedural mechanism (the class action suit) available to them, but that is what they agreed to when they signed the arbitration agreement.  

 Justice Kagan, writing for the three dissenting Justices summarizes the case as folllows:

The owner of a small restaurant (Italian Colors) thinks that American Express (Amex) has used its monopoly power to force merchants to accept a form contract violating the antitrust laws. The restaurateur wants to challenge the allegedly unlawful provision (imposing a tying arrangement), but the same contract’s arbitration clause prevents him from doing so. That term imposes a variety of procedural bars that would make pursuit of the antitrust claim a fool’s errand. So if the arbitration clause is enforceable, Amex has insulated itself from antitrust liability—even if it has in fact violated the law. The monopolist gets to use its monopoly power to insist on a contract effectively depriving its victims of all legal recourse.

And here is the nutshell version of today’s opinion, admirably flaunted rather than camouflaged: Too darn bad.

[JT]

June 20, 2013 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 19, 2013

Pay-to-Delay Agreements and the Supremes

On Monday, the U.S. Supreme Court  issued a ruling in Federal Trade Commission v. Actavis that permitted the Federal Trade Commission to sue pharmaceutical companies for potential antitrust violations when they enter into “pay-to-delay” agreements.  (Lyle Denniston of SCOTUSblog has a good analysis here ).  These agreements are a type of settlement agreement where a pharmaceutical company pays a generic drug company to keep the drug off the market for a certain period of time.  Lower court rulings had held that these agreements were valid as long as they did not exceed the term of the patent held by the pharmaceutical company.  This should be an interesting case for contractsprofs because it is a high profile "limits of contract" case.  In an era where judges have been notoriously reluctant to interfere with freedom of contract even when it hurts consumers, this case is a refreshing change. 

I’m curious though what will happen to the payments that were made to the generic drug companies – are the agreements rescinded and the payments returned?  (I haven’t read the decision thoroughly yet to see whether it’s indicated). That might be a problem for the generic drug companies.  It seems like some sort of restitution should be made - I wonder if the parties thought of putting a provision addressing what would happen in the event of illegality in their agreement?

[Nancy Kim]

June 19, 2013 in Current Affairs, Recent Cases | Permalink | Comments (0) | TrackBack (0)

New in Print

Pile of BooksJustin DuClos, The Etiology of a Malfunction in Democratic Processes. 45 Ariz. St. L.J. 53 (2013)

Hilary Kao, Beyond Solyndra: Examining the Department of Energy's Loan Guarantee Program. 37 Wm. & Mary Envtl. L. & Pol'y Rev. 425 (2013)

Amy J. Schmitz, Sex Matters: Considering Gender in Consumer Contracting, 19 Cardozo J.L. & Gender 437 (2013) (and see Nancy Kim's discsusion of this article on this blog here)

Joseph A. Grundfest and Kristen A. Savelle, The Brouhaha over Intra-Corporate Forum Selection Provisions: A Legal, Economic, and Political Analysis. 68 Bus. Law. 325 (2013) 

Terri Matthews, Blueprint for Modernizing Built Environment Law: A View from the Budget, 6 Alb. Gov't L. Rev. 148 (2013)

Symeon C. Symeonides, Choice of Law in the American Courts in 2012: Twenty-Sixth Annual Survey. 61 Am. J. Comp. L. 217 (2013)

Mark Weidemaier, Robert Scott and Mitu Gulati. Origin Myths, Contracts, and the Hunt for Pari Passu, 38 Law & Soc. Inquiry 72 (2013)

[JT]

June 19, 2013 in Recent Scholarship | Permalink | TrackBack (0)

Tuesday, June 18, 2013

Weekly Top Tens from the Social Science Research Council

SSRNRECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of Contracts & Commercial Law eJournal 

April 19, 2013 to June 18, 2013

RankDownloadsPaper Title
1 228 The Hague Principles on Choice of Law for International Contracts: Some Preliminary Comments 
Symeon C. Symeonides
Willamette University - College of Law
2 216 Regulation Through Boilerplate: An Apologia 
Omri Ben-Shahar
University of Chicago Law School
3 211 Can an Arbitrator Conduct Independent Legal Research? If Not, Why Not? 
Paul Bennett Marrow
New York Law School
4 131 Contract Law in Europe and the United States: Legal Unification in the Civil Law and the Common Law 
Hein D. Koetz
Max Planck Institute for Comparative and International Private Law
5 124 Customary Law: An Introduction 
Lisa BernsteinFrancesco Parisi
University of Chicago Law School, University of Minnesota - Law School
6 122 Merchant Law in a Modern Economy 
Lisa Esther Bernstein
University of Chicago - Law School
7 119 Preemption Without Borders: The Modern Conflation of Tort and Contract Liabilities 
Max N. Helveston
DePaul University - College of Law
8 119 On the Applicability of the Common European Sales Law to Some Models of Cloud Computing Services 
Chris ReedClarice CastroRuy de Queiroz
Universidade Federal de Pernambuco, Queen Mary University of London, School of Law, Centro de Informática - Univ Federal de Pernambuco
9 94 Lochner, Liberty of Contract and Paternalism: Revising the Revisionists? 
Harry G. Hutchison
George Mason University - School of Law
10 86 The Information Privacy Law of Web Applications and Cloud Computing 
Sebastian Zimmeck
Columbia University - Department of Computer Science

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

April 19, 2013 to June 18, 2013

RankDownloadsPaper Title
1 228 The Hague Principles on Choice of Law for International Contracts: Some Preliminary Comments 
Symeon C. Symeonides
Willamette University - College of Law
2 216 Regulation Through Boilerplate: An Apologia 
Omri Ben-Shahar
University of Chicago Law School
3 131 Contract Law in Europe and the United States: Legal Unification in the Civil Law and the Common Law 
Hein D. Koetz
Max Planck Institute for Comparative and International Private Law
4 119 Preemption Without Borders: The Modern Conflation of Tort and Contract Liabilities 
Max N. Helveston
DePaul University - College of Law
5 119 On the Applicability of the Common European Sales Law to Some Models of Cloud Computing Services 
Chris ReedClarice CastroRuy de Queiroz
Universidade Federal de Pernambuco, Queen Mary University of London, School of Law, Centro de Informática - Univ Federal de Pernambuco
6 94 Lochner, Liberty of Contract and Paternalism: Revising the Revisionists? 
Harry G. Hutchison
George Mason University - School of Law
7 86 The Information Privacy Law of Web Applications and Cloud Computing 
Sebastian Zimmeck
Columbia University - Department of Computer Science
8 73 Good Faith and Reasonable Expectations 
Jay M. Feinman
Rutgers University School of Law, Camden
9 61 The No Reading Problem in Consumer Contract Law 
Ian AyresAlan Schwartz
Yale University - Yale Law School, Yale Law School
10 57 Interpreting Investment Treaties as Incomplete Contracts: Lessons from Contract Theory 
Wolfgang Alschner
Graduate Institute of International and Development Studies

[JT]

June 18, 2013 in Recent Scholarship | Permalink | TrackBack (0)

Monday, June 17, 2013

A Victory for Interns Everywhere!

I don't know if this recent case will help Hall's Mentho-Lyptus with the Triple-Colling Action Presents Jay the Intern, but it might help some of our law students.

As The Atlantic reports here, Federal District Judge William H. Pauley III ruled on June 11th in favor of two interns who sued Fox Searchlight studios for breaching New York and federal minumum wage laws in failing to pay them for their work on the studio's academy award winning film, "Black Swan."  The Atlantic helpfully links to this page from the U.S. Department of Labor that establishes a six-part test for when interns can go unpaid.  Here are the six criteria:The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;

  1. The internship experience is for the benefit of the intern;
  2. The intern does not displace regular employees, but works under close supervision of existing staff;
  3. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  4. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  5. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Considering the totality of the circumstances, Judge Pauley concluded that the plaintiffs were employees and that Fox Searchlight had violated the Fair Labor Standards Act as well as New York law by not paying them minimum wage.  The court also allowed certification of a class of unpaid interns who worked for various Fox affiliates between 2005 and 2010.  

Fox Searchlight plans to appeal to the Second Circuit.

Judge Pauley's 36-page opinion can be found here.

[JT]

 

June 17, 2013 in In the News, Recent Cases | Permalink | Comments (0) | TrackBack (0)