Tuesday, January 14, 2014
$350,000. That’s the value an anonymous American big game hunter is willing to pay to shoot one of the world’s last 5,000 black rhinoceroses. 1,700 of these live in Namibia, which recently auctioned off a permit to kill an old bull through the Dallas Safari Club.
Contracts are meant to assign market values to various items and services in order to facilitate commercial exchanges of these. But does this make sense with critically endangered species?
Namibia and the Safari Club tout the sustainability of the sale claiming that the bull is an “old, geriatric male that is no longer contributing to the herd.” All $350,000 will allegedly go to conservation measures. That is, of course, unless some of the funds disappear to corruptness, not unheard of in the USA and perhaps not in Namibia either. Although the male may no longer be contributing to his herd, he does contribute to the enjoyment of, just as one example, people potentially able to see him and his likes on safari trips as well as to a much greater number of people around the world who simply enjoy the rich diversity of nature as it still is even if unable to personally see the animals.
Conservationists thus decry the sale, claiming that it is “perverse” to kill even one of a species that is so rapidly becoming extinct. The argument has been made that critically endangered species should not be valued more dead than alive. If humans cull the aging, natural predators will have to go one step “down the ladder” for the next one; a healthier one. Who are we to continually mess with nature in these ways? Counterarguments are made that poachers are the real problem, not a “single sale.” And so it goes.
At bottom, the irony in killing such an animal to “increase” the population is, indeed, great. This particular contract was not.
Monday, January 13, 2014
Over the past year, there has been an explosion of interest – and a frenzied up-swing in trading – in bitcoins. Writing in The New York Times in late December 2013, in an article called Into the Bitcoin Mines, Nathaniel Popper noted that “The scarcity — along with a speculative mania that has grown up around digital money — has made each new Bitcoin worth as much as $1,100 in recent weeks.” From a socio-economic perspective, this offers an unusual opportunity to observe the emergence and development of an entirely new, and so far unregulated, kind of market. Scholars like Wallace C. Turbeville interested in the law and policy of financial services regulation are now presented with an important opportunity to test assumptions we often blithely make about the ways in which regulation interacts with business and commercial activity.
Policymakers may confront a moment of truth – to regulate or not to regulate, and when, and how. Earlier this month, National Taxpayer Advocate Nina Olson argued that the IRS should give taxpayers clear rules on how it will handle transactions involving bitcoin and other digital currencies accepted as payment by vendors. The Senate Homeland Security and Governmental Affairs Committee held hearings on bitcoins and other “cryptocurrencies” several weeks ago, and may have a report on the situation early next year after further consideration, but Committee Chair Sen. Thomas Carper (D-Del.) seems to be taking a “wait and see” attitude. Meanwhile, the People’s Republic of China has already banned banks from using bitcoins as a currency, while U.S. regulators have not addressed the use of virtual currencies, even as an increasing number of vendors – including Overstock.com – have announced that they will accept them in payment for transactions.
One basic problem is the difficulty in determining what is involved in bitcoin creation and trading. Unfortunately, we are as yet at the mercy of metaphors. For example, within the first six paragraphs of his NYT piece, Popper refers to bitcoins as “virtual currency,” “invisible money,” “a speculative investment,” “online currency,” and “a largely speculative commodity.” In point of fact, bitcoins are book-entry tokens awarded for successfully solving highly complex algorithms generated by an open-source program, The program is disseminated by a mysterious, anonymous sponsor or group known only as Satoshi Nakamoto – the digital world’s version of Keyser Söze.
Determination of the proper legal characterization of bitcoins is essential if we are to choose appropriate transactional and regulatory approaches. For example, if bitcoins really are a “virtual currency” – a meaningless phrase, a glib metaphor – then fiscal supervision by the Federal Reserve might be the most appropriate approach to regulating bitcoin activity. Further, if they are in any significant sense “currency,” then treatment under the U.S. securities regulation framework would be problematic, since “currency” is excluded from the statutory definition of “security” in section 3(a)(10) of the Securities Exchange Act. Similarly, if bitcoins are viewed as some sort of currency, they would then likely be an “excluded commodity” under section 1a(19)(i) of the Commodity Exchange Act. On the other hand, if bitcoins are viewed as derivatives of currency or futures contracts in currency, then they may be subject to securities regulation, or possibly commodities regulation, depending upon the basic characteristics and rights of the financial product itself. The exact delimitation between treatment as a security and treatment as a commodity is currently the subject of study and proposed rulemakings by the SEC and the CFTC.
Recent news reports have noted that bitcoins are beginning to be accepted by more and more vendors as a form of payment. If in fact it becomes a commonplace that bitcoins operate as a payment mechanism, then we must deal with the possibility that they should be subject to transactional rules of the UCC and the procedures of payment clearance centers. It is at this point that the contractual aspects of bitcoins become critical features of our analysis.
Conceivably, we might go further and argue that bitcoins are functionally a type of note – relatively short-term promises to pay the holder – in which case, they would be subject to UCC article 3, exempt or excluded from securities registration requirements, but possibly still subject to securities antifraud rules. This is an attractive alternative, since it would give us some definite transactional rules to work with, plus antifraud protection against market manipulation – if we could figure out what “manipulation” should mean in the strange new world of cryptocurrencies.
Long-time readers may notice that we now have by-lines. This is a product of our editor finally getting around to providing our contributing editors with their own individualized log-ins. So, no more hunting around at the bottom of posts for an abbreviated by-line.
The New York Times reported last week on what it called The Consumer Financial Protection Bureau's (CFPB) next "crusades." That would not be my preferred term, but yes, the regulatory agenda is ambitious.
As the story recounts, The CFPB has already fined major companies, including American Express, GE Captial Retail Bank and Ocwen Financial for misleading business practices. Last Friday, it issued new regulations for the mortgage industry.
The CFPB's agenda in the coming year includes the following areas:
- Arbitration (see our earlier blog post on the CFPB's preliminary report);
- Bank overdraft fees;
- Student loans;
- Debt collection;
- Credit report disputes; and
- Prepaid cards
It is an ambitious agenda. Let's see if it will have much of an impact on consumer financial protection.
Thursday, January 9, 2014
Only one article this week:
But also a new book:
Contract Law and Contract Practice: Bridging the Gap Between Legal Reasoning and Commercial Expectation
By Catherine Mitchell
An oft-repeated assertion within contract law scholarship and cases is that a good contract law (or a good commercial contract law) will meet the needs and expectations of commercial contractors. Despite the prevalence of this statement, relatively little attention has been paid to why this should be the aim of contract law, how these 'commercial expectations' are identified and given substance, and what precise legal techniques might be adopted by courts to support the practices and expectations of business people. This book explores these neglected issues within contract law. It examines the idea of commercial expectation, identifying what expectations commercial contractors may have about the law and their business relationships (using empirical studies of contracting behaviour), and assesses the extent to which current contract law reflects these expectations. It considers whether supporting commercial expectations is a justifiable aim of the law according to three well-established theoretical approaches to contractual obligations: rights-based explanations, efficiency-based (or economic) explanations and the relational contract critique of the classical law. It explores the specific challenges presented to contract law by modern commercial relationships and the ways in which the general rules of contract law could be designed and applied in order to meet these challenges. Ultimately the book seeks to move contract law beyond a simple dichotomy between contextualist and formalist legal reasoning, to a more nuanced and responsive legal approach to the regulation of commercial agreements.
Catherine Mitchell is a Reader in Law at the University of Hull.
December 2013 308pp Hbk 9781849461214 RSP: £50 / €65
Discount Price: £40 / €52
Hart Publishing is delighted to offer you 20% discount.
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Wednesday, January 8, 2014
As noted here on the TaxProf Blog, the mother of all LPBN Blogs, the Law Professor Blogs Network enjoyed a record-setting 2013, with traffic up 87.5% over 2012 as total network page views topped 18 million. Eighteen of the network's blogs are among the 50 most popular blogs edited by law professors. Four network blogs were named to the ABA Blawg 100 ("the 100 best Web sites by lawyers, for lawyers, as chosen by the editors of the ABA Journal"), and one network blog was named to the ABA Blawg 100 Hall of Fame.
- Appellate Advocacy Blog, edited by David R. Cleveland (Valparaiso), Kendall D. Isaac (Appalachian), Tonya Kowalski (Washburn) & Todd Bruno (Charleston)
- Business Law Prof Blog, edited by C. Steven Bradford (Nebraska), Joshua P. Fershee (West Virginia), Marcia L. Narine (St. Thomas), Stefan J. Padfield (Akron) & Anne Tucker (Georgia State)
- Civil Rights Law & Policy Blog, edited by Andrew M. Ironside
- Education Law Prof Blog, edited by Derek Black (South Carolina), LaJuana Davis (Cumberland) & Areto Imoukhuede (Nova)
- Elder Law Prof Blog, edited by Kim Dayton (William Mitchell), Rebecca C. Morgan (Stetson) & Katherine C. Pearson (Penn State)
- Gender and the Law Prof Blog, edited by by John Kang (St. Thomas) & Tracy A. Thomas (Akron)
- Law Deans on Legal Education Blog, edited by I. Richard Gershon (Mississippi), Paul E. McGreal (Dayton) & Cynthia L. Fountaine (Southern Illinois)
- Marijuana Law, Policy & Reform, edited by Douglas A. Berman (Ohio State)
- Securities Law Prof Blog, edited by Eric C. Chaffee (Toledo)
Tuesday, January 7, 2014
We have perviously posted examples of government contracting difficulties relating to technology contracts and websites. Saturday's New York Times featured this op-ed by Georgetown Law Professor David A. Super (pictured), which chronicles technology contracting problems that have disproportionately affected the poor.
Some recent technology contracts gone wrong that did not make the headlines:
- 66,000 Georgia food stamp recipients and about half that many Medicaid recipients had their benefits terminated for failing to respond to renewal notices that, through a contractor's error, had never been sent;
- A Massachusetts contractor deactivated food stamp cards because new ones had been sent without seeking any confirmation that the new ones had been received; and
- A contractor's errors made food stamps unavailable to people in 17 states.
Properly supervised contractors can use technology to improve the delivery of government services. But attention, oversight and willingness to act decisively to remedy fiascoes seem to depend on the wealth and clout of those who are affected. As Obamacare regains its footing, that lesson shouldn’t be forgotten.
Monday, January 6, 2014
As reported here in The New York Times, Boeing's machinists union has agreed to a new eight-year labor contract in which the union sacrificed some benefits in order to guarantee that Boeings 777X aircraft will be built at is Washington State plant. The union local's leaders opposed the new contract, but the national union urged them to hold a vote, and 51% of those participating voted to accept the contract.
According to the Times, Washington state was the logical choice for the construction of Chicago-based Boeing's 777X. However, the company sought tax breaks and a new union contract before agreeing to use its existing infrastructure on the new project. The state legislature quickly approved tax breaks that will be good through 2040 and save the company an estimated $9 billion, but when the machinists originally rejected the new contract offer, Boeing began shopping around for a new location for its plant.
Sunday, January 5, 2014
The recent discussion of the December 2013 decision by the Ninth Circuit in In re Wal-Mart Wage & calls to mind the contrast in attitudes between international and domestic practice. Mention “arbitration” among international practitioners and profs, and you are likely to get a bit of a swoon from most – arbitration, properly structured, rescues us from the risks and uncertainties of unfamiliar legal systems and provides a comfort level in terms of predictability of process if not outcome. Mention "arbitration" in domestic circles, particularly with respect to consumer protection issues, and you encounter a growing skepticism if not outright hostility about the imposition of arbitration as an exclusive contract remedy.
There are delicate ironies in these contrasting attitudes. Many would say that the contrast – to the extent it actually exists – simply reflects the difference between complex disputes at the “wholesale” level, between commercial actors with more or less equal bargaining power, and consumer disputes in which arbitration is imposed by the dominant party on the “retail” party. However, In re Wal-Mart itself undermines that neat dichotomy, since it involves parties with, presumably, more or less equal bargaining power. In any event, there is certainly nothing in principle or in text that suggests a wholesale-retail split in the approach to deciding arbitration challenges. (Consider, for example, the Supremes’ 2011 AT & T Mobility LLC v. Concepcion, upholding an arbitration provision in a class-action consumer suit, and the Ninth Circuit’s own 2003 en banc decision in Kyocera Corp. v. Prudential–Bache Trade Servs., Inc., upholding arbitration in what was ostensibly a “wholesale” transaction between commercial parties.) It is nevertheless clear that there is a growing conception – or preconception – that arbitration clauses may be hostile to, or at least incompatible with, consumer interests.
This conception does have textual support in the 2010 enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Section 1414(a) of the Act added a provision to the Truth in Lending Act, 15 U.S.C. § 1639c(e)(1), that prohibits the inclusion in any home mortgage or home equity loan of “terms which require arbitration or any other nonjudicial procedure as the method for resolving any controversy or settling any claims arising out of the transaction.” However, as with so many of the provisions of the Dodd-Frank Act, § 1639c contained a special delayed effective date, namely, the date on which final regulations implementing the prohibition took effect, or a date 18 months after the transfer of authority to the new Consumer Financial Protection Bureau, whichever is earlier. Nevertheless, in the November 2013 case State ex rel. Ocwen Loan Servicing, LLC v. Webster, the Supreme Court of Appeal of West Virginia found that the delayed effective date “only applies to those portions of Title XIV that require administrative regulations to be implemented.” Accordingly, the effective date of this prohibition was the general effective date of the act, July 22, 2010. Good for us, not so good for the consumer plaintiffs suing the mortgage servicer, since their mortgage agreement containing an arbitration clause was entered into several years prior to the enactment of the Dodd-Frank Act. The West Virginia court refused to apply the Dodd-Frank Act retroactively, and proceeded to decide that it was compelled to enforce the arbitration clause in light of the mandate of the Federal Arbitration Act, which generally favors the application and enforcement of such clauses, despite the plaintiffs’ claims that the arbitration clause was procedurally and substantively unconscionable. Ocwen Loan Servicing is worth a careful read, particularly in light of its consideration of the interplay among emerging statutory policy with respect to consumer protection, general federal policy in favor of arbitration, and the contract doctrine of unconscionability.