Friday, July 26, 2013
Next week might be a bit slower than usual on the blog. As you read this, I am pedaling my way (for the second time) from Chicago to Michigan. It's not that long a ride for a serious bike rider, but I'm a law prof. . . . If I survive, my posts should start showing up again some time in the middle of the week.
Thursday, July 25, 2013
In Pettigrew v. State of Oklahoma, the Tenth Circuit addressed the issue of whether "a settlement agreement between Thomas Trent Pettigrew (Pettigrew) and the Oklahoma Department of Public Safety (DPS) waived the state’s 'Eleventh Amendment' right not to be sued in federal court." The Court found that it did, for reasons to be explaned below, but first we note the scare quotes around "Eleventh Amendment" in the quotaiton from the Court.
We can only assume that the scare quotes denote the Court's awareness that the Eleventh Amendment protects states only against suits commenced of prosecuted in federal courts by "Citizens of another State" or by Citizens or Subjects of any Foreign State." Pettigrew, presumably, is neither. Still, courts have held that state sovereign immunity also protects states from suits by their own citizens. The scare quoates may indicate that, in the Court's view, that outcome is a product of a customary rule of state sovereignty and does not derive directly from the Eleventh Amendment itself. But if that were so, one would think that Congress could, pursuant to its Article I powers, override state sovereign immunity with respect to federal suits brought by a state's own citizens. Post Seminole Tribe, it cannot do so. So, if we read the scare quotes correctly, and we may not, what we have here is a very understated (and irrelevant to the case at hand) protest against incoherent Eleventh Amendment jurisprudence, to which we say, Amen. OVERRULE HANS!
Now back to the matter at hand. Pettigrew believed that he was improperly passed over for a promotion at DPS in 2009. He filed administrative grievances, and in October of that year, he was placed on administrative leave on suspicion of unauthorized leaks to the media in an unrelated claim against DPS. He filed suit in 2010 alleging that DPS had retaliated against him in violation of Title VII of the 1964 Civil Rights Act and had negligently trained and retained employees. The parties settled in December 2010. They entered into a settlement agreement that provided that any litigation relating to the settlement agreement "will be brought in the appropriate Oklahoma court having jurisdiction, either state or federal . . . "
By 2012, the partis were back in court. Pettigrew alleges that DPS has retaliated against him in various ways. He alleged new Title VII violations as well as breach of the agreement. DPS moved to dismiss Pettigrew's breach claim, as well as his claim for declaratory judgment, as barred by sovereign immunity doctrine. As Title VII was enacted pursuant to Congress powers under § 5 of the 14th Amendment, it is not subject to a sovereign immunity defense. The District Court denied the motion.
The Tenth Circuit noted that, but for the sovereign immunity defense, a court could exercsie supplementary jurisdiction over the claims subject to DPS's motion to dismiss. Although the language of the settlement agreement suggests that suit could be brought in a federal court, DPS stressed that suit must be brought in an "appropriate" court, and if sovereign immunity bars a suit from being brought in federal court, then such a court is not "appropriate." The Tenth Circuit rejected this reading of the settlement agreement on the ground that no rational drafter would have written the agreement that way if she meant to bar, on Eleventh Amendment grounds, suits in federal court to enforce the agreement. The Tenth Circuit's reasoning largely followed that of the Supreme Court in Port Auth. Trans-Hudson Corp. v. Feeney, 495 U.S. 299 (1990).
Wednesday, July 24, 2013
The Ninth Circuit recently decided an interesting case involving video on demand – or is the Hopper a DVR? That was one of the questions at the heart of Fox Broadcasting Company v. Dish Network. (Jeremy Telman had previously blogged about the case when the complaint was first filed a year ago). At issue was the Dish Network’s PrimeTime Anytime service which only works with the Hopper, a set top box with digital video recorder and video on demand functionalities. PrimeTime Anytime records Fox (and other) network shows and stores the recordings for a certain number of days (typically eight) on the Dish customer’s Hopper. Dish does not offer video on demand from Fox (but see discussion below). Dish started to offer a new feature called “AutoHop” that allows users to skip commercials on shows recorded on PrimeTime Anytime (although it doesn’t delete the commercials, the user can press a button to skip them). Fox sued Dish for copyright infringement and breach of contract and sought a preliminary injunction. The Ninth Circuit upheld the district court’s denial of the motion. The copyright issues are interesting, but I’m going to skip over them using this blog’s virtual AutoHop feature and get right to the contract issues, which are much more interesting to readers of this blog.
There were two agreements at issue here. There was a 2002 license agreement and a subsequent 2010 letter agreement (there were others but these were the two relevant ones). Pursuant to the 2002
agreement, Fox granted Dish a limited right to retransmit Fox’s broadcast signal to Dish’s subscribers. It also contained several restrictions and conditions and prohibited video on demand. A 2010 letter agreement, however, agreed to video on demand provided that Dish agreed to certain conditions, the primary one being that it couldn’t show the content without commercials.
So the basic questions (overly simplified for blog purposes) were – did Dish distribute Fox video on demand content? If so, did it comply with the terms of the 2010 letter? (Okay, that’s not exactly how the court or the parties put it, but those were the issues stripped down to their essence).
Fox argued that Dish breached this provision of the 2002 contract:
“EchoStar acknowledges andagrees that it shall have no right to distribute all or any portion of the
programming contained in any Analog Signal on an interactive, time-delayed, video-on-demand
or similar basis; provided that Fox acknowledges that the foregoing shall not restrict EchoStar’s practice of connecting its Subscribers’ video replay equipment.”
The district court construed the word “distribute” as requiring a copyright work to “change hands” (analogous to under the Copyright Act). Because the copies remained in users’ homes,they did not change hands and there was no distribution. Fox challenged this construction and argued that the prohibition against distribution meant that Dish would not make Fox programming available to its subscribers on the aforementioned basis. The Ninth Circuit found both Fox’s and the district court’s constructions plausible (yes I realize there’s a distinction between interpretation and construction but I don’t want to go there right now, although you may).
The Ninth Circuit withheld judgment on which construction was better but stated that “in the proceedings below, the parties did not argue about the meaning of ‘distribute.’ We express no view on whether, after a fully developed record and arguments, the district court’s construction of ‘distribute’ will prove to be the correct one.”
The court did, however, express skepticism that PrimeTime Anytime was not “similar” to video-on- demand (remember, the 2002 contract prohibited “video-on-demand or similar basis”)(emphasis added by yours truly). The “distribution” of that, therefore, would violate the 2002 contract. Dish argued that its service was not “identical” to VOD but, as the Ninth Circuit noted, did not explain why it was not “similar.” (Note: I hope all you contracts profs are feeling ever more relevant! And our students thought we were just making mountains out of molehills when we focused on the importance of contract language). The addition of that word “similar” might just save Fox when the case goes to trial. Especially since, as even the district court held, if PrimeTime Anytime is VOD, then Dish clearly breached the contract which prohibited skipping commercials. The district court, however, wasn’t convinced that it was VOD. Rather, the district court concluded that it was a hybrid of DVR and VOD and “more akin” to DVR than VOD.
In other words, the district court’s analysis went along these lines – the 2002 contract was not breached because there was no distribution of VOD (or similar) content. The 2010 contract was not breached because this was not VOD but DVR. In short, this was not VOD and there was no distribution of a VOD-like service.
Query if the 2010 amendment had adopted the “VOD or similar” language instead of just “VOD”; in other words, what if it permitted Dish to offer Fox’s programming as VOD or “similar” service? My guess is that they specifically drafted it narrowly to include just “VOD” to limit the scope of the license – but that it ended up backfiring to exclude the conditions on “similar” services. Funny how drafting rules of thumb can sometimes come back to bite you. Note the problem was created because the definitions were not consistent in the 2002 and 2010 agreements – it created a gap regarding a service (a “VOD similar service”) which required judicial construction. Distribution of VOD or similar services was prohibited under the 2002 contract but VOD was permitted under the 2010 provided commercials were not skipped. And what happens to showing (not distributing) "similar services to VOD"? Mind the gap!
There was a final issue regarding a “good faith” in performance type clause. The Ninth Circuit concluded that there was no evidence that Dish launched PrimeTime Anytime “because it was unwilling to comply with the requirements to offer Fox’s licensed video on demand service, rather than because Dish lacked the technological capability to do so.” Frankly, I’m not sure why this was not a bigger issue since it seems, at least to me, that Dish is trying to get around the “no commercial skipping” restriction in the 2010 agreement by using the Hopper.
The Ninth Circuit noted a few times that it was applying a “deferential standard of review” given the request for a preliminary injunction so I don’t think Dish can rest easy just yet. I think Fox’s case will eventually hinge upon how the contract issues are resolved. What is the meaning of “distribute”? (I don’t know enough about how Dish technology works to determine whether distribution occurred. Even under the district court’s definition, could it have occurred? Does rebeaming signals constitute distribution? Is the service analogous to a lease? I think there’s room here). Is the PrimeTime Anytime service VOD or not? And isn’t that 2002 agreement relevant in determining what the meaning of VOD is under the 2010 amendment? Finally, why did the court give the “good faith in performance of contract” such short shrift?
I didn't get to review the actual agreements, but I would look at what exactly is being licensed under the 2002 agreement. Does it exclude the VOD-like service or include it? The gap seems odd to me - it must be addressed in one of the agreements. What exactly does Dish have the right to do? That seems to me one of the keys to unlocking the "correct" interpretation of the contract - and help determine whether the obligation of good faith is being fulfilled.
The real hammer here is going to be contract renewal - if Dish pisses off Fox and the other networks then it may kiss its business goodbye if they don't renew their contracts. (As I mentioned, I haven't seen the contracts so don't know what the terms are).
As the court notes, the parties probably didn’t contemplate a hybrid DVR and VOD (this is the old “anticipating the future and new technologies” problem that contract drafters have to which I’ve previously referred) I think the copyright issues weigh more heavily in favor of Dish whereas Fox has the better argument re the contract issues. Of course, the much larger policy issue is how to strike the balance between contract and copyright – a recurring issue since the late eighties…Generally, it's been advantage contracts.
That headline is not a typo! The Eleventh Circuit has actually issued a ruling favorable to plaintiffs in an arbitration case. Earlier this month, the Eleventh Circuit issued its opinion in Southern Communications Services, Inc. v. Thomas in which it upheld a District Court's order denying a motion by Southern Communications Servcies (Southern) to vacate two arbitration awards, one construing the arbitration clause so as to allow for class litigation, the other certifying a class.
Thomas contracted for three lines of service with Southern, covering cell phones for him, his wife, and his son. With respect to each line, he agreed to Southern's terms of service which included a $200 termination fee per line and an arbitration clause. Thomas eventually cancelled all three lines and was charged three termination fees. Southern excused the first fee; Thomas paid the second fee, and the third he challenged. He filed a demand for class arbitration, alleging that Southern's fees were unlawful penalties under Georgia law The arbitrator certified the class.
Southern challenged the certification, and then challenged it again after the Supreme Court decided Stolt-Nielsen. The arbitrator reconsidered but found that his original decision was consistent with Stolt-Nielsen becasue it was based "on a rule of law or rule of decision as Stolt-Nielsen requires.”
But perhaps the got that wrong. Once again, there is a SCOTUS decision on point. In Sutter, the Court held that a court must uphold an arbitrator's decision, even if clearly erroneous, so long as the arbitrator is even arguably construing the parties' agreement. Under that standard, the arbitral award could be vacated only if it lacks any contractual basis. The Eleventh Circuit found that the arbitrator engaged with the contract's language and the parties' intent and thus did not stray from his delegated task fo interpreting the parties' agreement.
Finding that the arbitrator had not exceeded his authority, the Eleventh Circuit affirmed the decision of the District Court.
For those interested in learning more about Stolt-Nielsen and Sutter, we recommend Jack Graves' post from June.
Tuesday, July 23, 2013
|1||159||A Psychology of Choice of Laws
Singapore Management University - School of Law, Maastricht European Private Law Institute,
|2||87||Contracts as Technology
Kevin E. Davis,
New York University (NYU) - School of Law
|3||77||Interpreting Investment Treaties as Incomplete Contracts: Lessons from Contract Theory
Graduate Institute of International and Development Studies
|4||61||The No Reading Problem in Consumer Contract Law
Ian Ayres, Alan Schwartz,
Yale University - Yale Law School, Yale Law School
|5||61||Disclosing Corporate Disclosure Policies
Victoria L. Schwartz,
Pepperdine University School of Law, University of Chicago - Law School
|6||56||Dispute Resolution in Public Contracts: Lessons from Select International Best Practices
Ministry of Defence, Government of India
|7||52||Sex Matters: Considering Gender in Consumer Contracts
University of Colorado at Boulder - School of Law
|8||50||An Analytical Framework for Legal Evaluation of Boilerplate
Margaret Jane Radin,
University of Michigan Law School
|9||49||Mediation at the Intersection with Contract Law: The Settlement Agreement
Anna Giordano Ciancio,
Unaffiliated Authors - Independent
Gus De Franco, Florin P. Vasvari, Regina Wittenberg Moerman, Dushyantkumar Vyas,
University of Toronto - Rotman School of Management, London Business School, University of Toronto - Rotman School of Management, University of Chicago - Booth School of Business
Monday, July 22, 2013
Hart Publishing has asked us to share the following book announcement with our readers:
Rethinking Enrichment by Transfer
By Helen Scott
Conventional thinking teaches that the absence of liability-in particular contractual invalidity - is itself the reason for the restitution of transfers in the South African law of unjustified enrichment. However, this book argues that while the absence of a relationship of indebtedness is a necessary condition for restitution in such cases, it is not a sufficient condition. The book takes as its focus those instances in which the invalidity thesis is strongest, namely, those traditionally classified as instances of the condictio indebiti, the claim to recover undue transfers. It seeks to demonstrate that in all such instances it is necessary for the plaintiff to show not only the absence of his liability to transfer but also a specific reason for restitution, such as mistake, compulsion or incapacity. Furthermore, this book explores the reasons for the rise of unjust factors in South African law, attributing this development in part to the influence of the Roman-Dutch restitutio in integrum, an extraordinary, equitable remedy that has historically operated independently of the established enrichment remedies of the civilian tradition, and which even now remains imperfectly integrated into the substantive law of enrichment. Finally, the book seeks to defend in principled terms the mixed approach to enrichment by transfer (an approach based both on unjust factors and on the absence of a legal ground) which appears to characterise modern South African law. It advocates the rationalisation of the causes of action comprised within the condictio indebiti, many of which are subject to additional historically-determined requirements, in light of this mixed analysis.
Helen Scott is an Associate Professor in the Department of Private Law at the University of Cape Town.
July 2013 250pp Hbk 9781849462235
RSP: £55 / €71.50 / US$110
20% DISCOUNT PRICE: £44 / €57.20 / US $88
Order Online in the US
If you would like to place an order you can do so through the Hart Publishing website (link below). To receive the discount please mention ref:‘CONTRACTSPROFBLOG’ in the special instructions field. Please note that the discount will not be shown on your order but will be applied when your order is processed.
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If you would like to place an order you can do so through the Hart Publishing website (link below). To receive the discount please type the reference‘CONTRACTSPROFBLOG’ in the voucher code field and click ‘apply’.
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