Sunday, January 25, 2015
An Ohio appellate court upheld a $1.2 million breach of contract judgment against Kent State's men's basketball coach, Geno Ford. The judgment enforced a liquidated damages clause entitling Kent State to damages equal to Ford's annual salary ($300,000) multipled by the number of years remaining on his contract at the point of breach. In Kent State University v. Ford, Coach Ford tried to characterize the liquidated damages clause as a penalty. The court applied Ohio law to determine whether at the time the contract was entered into: 1) damages were uncertain; 2) the damages provided for in the contract were not unconscionable; and 3) the parties intended for damages to follow a breach. The court upheld the trial court's determination that the standard was satisfied in this case. Coach Ford can take consolation in the fact that his salary is short of Jim Harbaugh's by an order of magnitude.
PetaPixel.com reports on a wedding photographer who, after charging a couple $6000 to shoot a wedding album, sought an additional $150 for the album cover. The couple balked, so the photographer is refusing to hand over the photographs and is threatening to charge them an additional $250 "archive fee" if they do not pay up in a month. PetaPixel draws the following lesson from the story:
This all goes to show that as a photographer, you should never rely on verbal agreements when it comes to conditions and charges. Always get everything in writing.
Maybe. The photographer herself has an extremely lengthy blog post about the entire affair in which she claims that everything should have been clear from the written contract. PetaPixel's story makes it seem like an additional charge was added after the contract had been entered into, and if that's the case, the couple might well have balked whether or not the new terms were in writing.
Contracts Prof/Con Law Prof Randy Barnett, writing at the Volokh Conspiracy picked up by the Washington Post, muses interestingly on the applicability of the contractual duty of good faith to the President's duty to faithfully execute the laws in the Constitution's Take Care clause. This helps Barnett reconcile his empathy for the President's refusal to enforce federal drug laws in the face of permissive state laws permitting use of marijuana with his opposition to the President's new initiative on immigration. I've never been persuaded that the contractual analogy is particularly useful in Constitutional interpretation. Suggesting that the contracts doctrine of "good faith" provides a useful gloss on the Take Care clause strikes me as a stretch, but Professor Barnett is always stimulating.
Friday, January 23, 2015
We know that merchantability means passing without objection in the trade. If law review articles were goods, what would that trade be? For law professors, it seems like it is second and third year law students. At some level it would also reviewers of works when a professor is considered for promotion. Recently, though, a colleague of mine and I did a bit of research and began to wonder if acceptable in the trade -- as defined by law students and law professors -- is a meaningful strandard within the trade of academia.
Law professors who do research are generally spending the money of others. The actual buyers are, therefore, those who pay for the scholarship. Let's add that they have no idea what the standard is but would uniformly agree that every article should make someone or something better off and should reflect high quality research. Students and reviewers should be regarded as agents for those paying the bills.
If that is the measure of merchantability (and why wouldn't it be) then editors and reviewers should apply that standard in their own decisions. Clearly they do not and left to their narrow and inappropriate standard for merchantability we have massive amounts of scholarship that, let's face it, is written to justify being granted tenure. There is little verification that most, no matter how carefully done or clever, actually benefits anyone. Some of it -- a small percentage -- is cited but rarely for the substantive points made as opposed to piggy-backing on a fact asserted in the first work. Morever the research is often sloppy. Here is an example. I recently read an article that makes the claim that a certain area of law is now consistent with empirical studies. I looked at the cite and it was to another professor who had not actualy done any empirical work and did not quite say what was claimed. And the work cited by that professor was not on the point made in the first article. In fact the most frequent cite is the hearsay cite in which the author makes a claim because someone else made the same claim.
I expect readers of this will disagree but shouldn't the test of merchatability mean making someone or something (even if a fish) better off and shouldn't documentation be careful and accurate? Don't misunderstand, much of scholarship meets these standards. But much of what currently passes in the trade without objection does not.
Monday, January 19, 2015
I recently came across an article by Professor Sidney Kwestel that has many good and interesting things to say about the UCC's famous battle of the forms section, 2-207. However, Professor Kwestel suggests the UCC § 2-207(2)'s "knock out rule" cannot be right because it violates "a basic contract concept--that the offeror is the master of the offer."
I've always understood the "rule" that the offeror is the master of the offer to mean only that: (1) the offeror is free to revoke the offer at any time before acceptance; and (2) under the common law, the offeror can treat any purported acceptance that is not a mirror image of the offer as a rejection of the offer and a counteroffer. In my view, the notion is hardly a "basic concept." It's more like a slogan. You think you are the master of your offer. Big deal. I'll make you a counteroffer. Then I'm the master. Oooh la la.
Professor Kwestel thinks it absurd that an expression of assent could operate as assent to some terms but not others. However, the result is worse for the offeror under the common law. Under the last shot rule, the counterofferor's terms do not just knock out the offeror's terms, they replace them. Since the UCC's version of the battle of the forms eliminates both the mirror image rule and the last shot rule, it reduces the slogan to its first meaning -- it only permits revocation at any time before acceptance. The result is much more even-handed as to whose terms govern, and I count that as a win.
Certainly there are problems about what to do with different terms under § 2-207, and Professor Kwestel's article is very good about illuminating the difficulty navigating between the text of the section and the reporter's comments. While I can easily concede that it has its flaws, I think the problems with the knock-out rule are more textual than conceptual.
Thursday, January 15, 2015
Speaking of auctions (see Jeremy's blog below), how about a rug reading "In Dog We Trust" instead of the official motto of both the United States and Florida?
A sheriff's office in Florida has removed a mat featuring the miswoven lettering. There have reportedly been several offers to buy the misprinted rug after the error was discovered two months after having been placed at the entrance to the sheriff's office.
Spelling in this country is truly going to the dogs.
Tuesday, January 13, 2015
The effectiveness of disclosure is an ongoing discussion on this blog and not long ago we had an engaging online symposium on Omri Ben-Shahar and Carl Schneider's thought-provoking book, More Than You Wanted to Know: The Failure of Mandated Disclosure. Lauren Willis and Theresa Amato have written an op-ed in today's LA Times that gets to the heart of the failures of disclosures (and related informational problems) when it comes to consumer literacy - and they offer some solutions. I particularly like their suggestion that banks demonstrate that consumers understand the financial products offered. This shifts the burden of disclosure from the consumers to the banks. You can read more here.
Thursday, January 8, 2015
On January 7th, a federal judge struck down a ban on foie gras that had been in effect since 2012. The judge was of the opinion that the federal Poultry Products Inspection Act preempts the California ban. This Act gives the U.S. Department of Agriculture the sole jurisdiction over the “ingredients requirements” of poultry products.
The judge seems to have forgotten about the federal Animal Welfare Act’s requirements for the humane treatment of farm animals as well as states’ ability to ban the sale of the products of animal cruelty. The California Attorney General’s office is reviewing the decision for a possible appeal of the law, which was upheld in previous litigation.
Foie gras is, without a doubt, cruel to animals. To produce the alleged delicacy, geese and ducks are “force-fed a corn mash through a metal tube several times a day so that they gain weight and their livers become 10 times their natural size. Force-feeding sometime injures the esophagus of the bird, which may lead to death. Additionally, the fattened ducks and geese may have difficulty walking, vomit undigested food, and/or suffer in extreme confinement." Do we as consumers still have a right to buy such a product even if it tastes very good? No, according to at least California state law.
How anyone could make themselves eat this product is beyond my comprehension. I confess that I am an animal lover and environmentalist. I do personally believe in those core values. However, I am quite far from an extremist and respect, to a very, very far extent, the opinions of the vast majority of other people. Heck, I am not even a vegetarian (I try to at least buy free-range products). But under notions of both positive law – state and/or federal – and natural law, this is where the buck must stop. There must be limits to what we can do in the name of obtaining a gourmet experience, especially when it comes at such a high price of extreme suffering by our living, sentient creatures. And if consumers cannot draw such lines themselves, courts and legislatures must. In the words of Mahatma Gandhi, “the greatness of a nation and its moral progress can be judged by the way its animals are treated.” More than a dozen countries around the world have outlawed the production of foie gras. In this respect, the United States is not great. This case leaves a bad taste in my mouth and, I hope, in yours as well.
Tuesday, January 6, 2015
The U.S. Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. plans to create hurdles for lenders of payday and direct deposit advance loans. Both types of loans are short-term loans intended to help consumers through a rough patch. Payday loans are available at various storefront locations whereas direct deposit advance loans are for banks’ existing customers.
The problem with these types of loans is that they often trap people into cycles of mounting debt with annual interest rates of more than 500% and the need by some to take out an average of 10 loans a year amounting to a total of more than $3,000.
This is a crackdown on organizations that may be seen to pry on the already weak. But is it also a setback for financially underprivileged consumers? After all, if you need money now, you need money now. I think the new proposed regulations are a step in the right direction as consumer protection, but at the same time, more is needed. That “more” is a decent living wage so that so many people do not have to live not only paycheck to paycheck, but in fact pre-paycheck to pre-paycheck.
In his 2015 State of the Union address, President Obama is expected to highlight the nation’s economic growth and falling unemployment rate. However, as I have written here before, most people in the U.S. still do not see or feel the economic recovery. Perception is reality. Let’s hope that the economy soon improves so much that most people feel it.
Hat tip to Professor Miriam Cherry for alerting me to this story.
Friday, January 2, 2015
A few days ago, I blogged on the recent lawsuit by United Airlines and Orbitz against the developer of Skiplagged. One of the causes of action alleged is breach of contract for encouraging the purchase of a ticket to certain destinations only to get off at an interim point to save money.
The airlines themselves may be breaching their contracts with flyers. For example, when we buy tickets to be flown from point A to point B, that arguably implies being done so without undue delays and, in particular, possibly having to spend the night at your own cost and without your personal belongings in random cities around the world if connections are missed because of flight delays (unless, of course, you choose to spend the night sitting upright in the airport). Needless to say, if you seek to change your ticket, airlines will either charge extreme high fees and the “difference in price” for doing so or outright prohibit this practice. I’ve had to change tickets many times in the past, and it has typically only taken an agent about five minutes to do so. Unconscionabiliy, anyone?
Here’s what happened to me one cold winter night a few years back: On my way to Denmark from St. Croix, the airline was late taking off and got even more delayed when it “had to” make an unplanned “quick landing” for gas, which was cheaper at the interim airport than at the end destination, and… ice cubes for people’s drinks! I wish I was kidding, but I’m not. I missed the once-daily connection out of Atlanta to Copenhagen and had to spend the night in Atlanta in December. As I was living in tropical St. Croix at the time, I had some warm clothes with me on board the airplane to stay warm there, but had packed my winter gear in my suitcase. The airline paid for my hotel, but would, in spite of my desperate pleas, not let me have my suitcase back for the night. Result: I had to travel to and from the hotel, etc., in indoor clothes on what turned out to be an unseasonably cold winter day in Atlanta (yes, I should have brought a warmer jacket on board the plane, but planes to and from the Caribbean are often very small and I always try not to bring too much carry-on items).
Before 1978, U.S. airlines were required under “Rule 240” to offer seats on a competitor’s next flight if that would be the fastest way of getting the traveler to his or her destination. Airlines created after deregulation were never required to follow that rule, but older airlines such as Delta, United and Continental apparently still adhere to the rule. Funny that they never seem to mention that when they delay you significantly. Next time you fly, it may pay to scrutinize your contract of carriage more carefully to ascertain your rights in case of a delay.
It may be time for Congress to reintroduce a Rule 240-type requirement on airlines, especially as these have become extremely good at flying full – even at overcapacity - and thus often do not have extra space for passengers that have missed their flights. Good customer service often seems to have given way to airlines’ “me first” attitude in the name of hearing the highest profits possible by nickel-and-diming most aspects of airline travel on, at least, economy class.
Feeling empathetic towards the airlines? Don’t. Full or nearly full flights in conjunction with declining gas prices have enabled U.S.-based airlines to earn the highest profit margins in decades. One trade group estimates that airline made 6% profit margins in 2014, higher than the highest rates in the 1990s. Of course, the task of businesses is to make as much money as they can. But at least they should live up to their own contracts of carriage and other contracts principles just as they claim passengers and website developers should.
Here’s a hat tip to Professor Miriam Cherry and other contracts professors on a well-known industry list serve for news about this story. All opinion and thoughts above are my own.
Wednesday, December 31, 2014
Last month, United Airlines and Orbitz filed a by-now famous lawsuit against the 22-year-old computer specialist who created the website Skiplagged.com. This website helps consumers find the cheapest round-trip airfare possible by buying tickets to a destination to which the traveler does not actually intend to travel, but instead getting off at a layover point which is the truly intended destination and discarding the last portion of the ticket. Roundtrip tickets to certain popular destinations are often much cheaper than to other destinations sought by fewer passengers even though the more popular destinations are further away from one’s point of origin.
To not cause the airline and other passengers undue trouble and delays, this practice, of course, requires not checking in luggage which, it seems, fewer and fewer travelers do anyway (next time you fly, notice the rush to get on board first with suitcases often much bigger than officially allowed and airline personnel deliberately ignoring this for reasons of “competition”).
The cause of action for this lawsuit? “Unfair competition,” and breach of contract because of “strictly prohibited travel,” and tortuous interference with contract.
Unfair competition? I admit that I have not yet read the rather long complaint, but I look forward to doing so very soon. At first blush, however, how can “unfair” can it really be to assist consumers in finding airfare that they want at the best prices available? United Airlines recognizes that there is a discrepancy between its prices to very popular destinations and others on the way, but claims [cite] that if many people “take advantage” of that price differential, it could “hurt the airlines.” Come again? Does it really matter that a customer – with no checked-in luggage – pays whatever price the airline itself has set but simply decides not to use up the entire item purchased? Doesn’t that simply let the airline save gas and potentially give the empty seat to potential stand-by customers? Does it matter to a newspaper that I choose to not read the sports pages? Must I eat the heal of my bread even though I don't like it? What if I really don't like my bread and would rather eat a donut instead, as I thought might be the case?
The issue of breach of contract is arguably a closer one. If airlines “strictly prohibit” the practice of only using part of a ticket, it may be promissory fraud to buy a ticket if one intends at the time of purchase to only use part of it. This could also relate to the purchase of a round-trip ticket only to use it one-way as that too is often cheaper than a one-way ticket, as Justice Scalia found out himself recently.
The Skiplagged.com creator argues that he is only taking advantage of “inefficiencies” in airline travel that travelers have known about for a long time. To me, it seems that airline contracting should work both ways as other types of contracting: airlines take advantage of their bargaining positions as well as their sophisticated knowledge of current and future air travel supply and demand structures. They should do so! I applaud them for that. Jet travel has certainly made my personal and professional life much better than without relatively cheap air travel. But every first year contracts law student also knows (or should know!) that contracting is not and should not be a one-way street. Consumers too are getting more and more sophisticated when it comes to airline travel and other types of online contracting. Websites enable us to inform ourselves about what we wish to spend our money on. As long as consumers do not break the laws or violate established contracting principles, that does not strike me as “unfair competition,” that is simply informed consumerism in a modern capitalist society from which airlines and others have already benefited greatly.
Airlines, wake up: how about working with your customers instead of trying to fight them and modern purchasing trends? How’s this for a thought: start offering one-way tickets for about half of a round-trip ticket just like other transportation vendors (trains, buses, subways) do. Don’t you think that could set you apart from your competition and thus even earn you more customers? If you can fly for a certain amount of money to a certain city, let people pay that only and then simply sell a second ticket for the remaining leg to the more popular end destination where the same plane is headed anyway. Let people off the bus if they want to! Let some one else on instead. It doesn’t seem that hard to figure out how to work with current purchasing trends and your customers instead of resisting the inevitable.
For another grotesquely inappropriate lawsuit by United Airlines against its own customer, see Jeremy’s blog here.
I will blog more on this issue over the days to come. For now, I’m glad I don’t have to head to an airport. Happy New Year!
Monday, December 29, 2014
CNN reports that more and more restaurants are implementing no-tipping policies as, perhaps, a way of differentiating themselves from competitors. For example, one restaurant builds both tax and gratuity into menu prices, allegedly resulting in its servers averaging about $16.50 an hour. I have argued here before that it seems fair to me that the burden of compensating one’s employees should fall on the employer and not on, as here, restaurant patrons feverishly having to do math calculations at the end of a meal.
The law does not yet support employment contracts ensuring fair compensation of restaurant and hotel employees. For example, federal law requires employers to pay tipped workers only $2.13 an hour as long as the workers earn at least the federal minimum wage of $7.25 an hour. Talk about burden shifting…
But change seems to be on the way with private initiatives such as the restaurant no-tipping policy. In Los Angeles, the City Council has approved an ordinance that raises the minimum wage for workers in hotels of more than 300 rooms to $15.37 an hour. Of course, this will mainly affect large hotel chains, which predictably resisted the ordinance citing to issues such as the need to stay competitive price-wise and threatened circumventing the effect of the new law by laying off or not hiring workers to save money. Funny since many of these hotels have been making vast amounts of money for a long time on, arguably, overpriced hotel rooms attracting a clientele that does not seem overly concerned about paying extra for things that are free in most lower-priced hotels (think wifi) and thus probably could somehow internalize the cost of fairly compensating its blue-collar workers.
Much has been said about the “1%” problem and a fair living wage. No reason to repeat that here. However, it is thought-provoking that whereas the U.S. recession officially ended in June 2009 – five years ago - 57% of the U.S. population still believed that the nation was in a recession in March 2014.
Contracting and the economy is, of course, to a large extent a matter of seeking the best bargain one can obtain for oneself. But even in industrialized nations such as ours, there is something to be said for also ensuring that not only the strongest, most sophisticated and wealthiest reap the benefits of the improved economy. So here’s to hoping that more initiatives such as the ones mentioned above are taken in 2015. At the end of 2014, it’s still “the economy, s$%^*&.”
Monday, December 22, 2014
After years of conducting research on the genes of various animals, George Doe (a pseudonym), an accomplished biologist with a PhD in cellular and molecular biology, decides to have his own genes examined for fun and to discover whether he may be genetically predisposed to cancer. He buys a test kit online from one the many companies that provide such services these days. He is so excited about the process that he also buys a kit for his mother and father as gifts. They all have their genes tested. George finds out that he is not predisposed to cancer. But that’s not it. He also finds out that another male who has had his own genes tested and is thus registered with the same company is “50% related” to George. This can only mean one of three things: this other male is George’s grandfather, uncle or … half brother. After intense and testy family discussions, George’s father apparently admits that he had fathered this other male before marrying George's mother. George’s parents are now divorced and the entire family torn apart with no one talking to each other.
A very sad affair. Of course, nothing appears to be contractually wrong with this case: at the bottom of one’s profile with www.23andme.com, the company that provided the tests in this case, George and his family had checked a small box indicating for them to do so “if you want to see close family members in this search program.” The company is said to have close to one million people in its database. With modern science, close family members can easily be identified out of such data if opting into being notified.
Here, the company does not appear to have done anything wrong legally. Quite the opposite: if anything, the above shows that the buyers in these situations may not be sufficiently mentally prepared for the information they may discover through DNA testing. Arguably, they should be. After all, the old adage “watch out what you ask for, you may get it” still rings true.
But isn’t this situation akin to the various other situations we have blogged a lot about here this past year where customers buy various items online and click – or not – on various buttons, thus signaling at least alleged acceptance of, for example, terms of service requiring arbitration instead of lawsuits in case of disputes? As I have argued, many people probably just clicks such buttons without fully realizing what the legal or, in cases such as the above, factual results may be. Should online vendors be required either legally to make such check boxes or other online indicia of acceptance a lot more obvious? Or should they at least be required to do so for reasons of business ethics?
I think so. Most working people are exceptionally busy these days. Frankly, not many of us take the time to scrutinize the various implications - legal or otherwise – of the purchases we make online, especially because the agreements we accept in cyberspace are presented so very differently online, yet are so deceptively similar in legal nature that we probably feel pretty comfortable with simply clicking “I accept” as the vast majority of such transactions present no or only minor problems for us? And aren’t the vendors the party with the very best knowledge of some, if not most, of the problems that arise in these contexts? How hard would it really be for them to make sure that they use all the “bells and whistles” to truly put people on notice of what typical problems encountered may be, exactly to avoid legal problems down the road? One would think so, although, of course, customers also carry some of the burden of educating ourselves about what we buy and what that may mean. This is perhaps especially so when such delicate issues as the above are involved.
For George Doe, the above unfortunately turned out to be much more of a curse that kept on giving instead of a gift that kept on giving.
On behalf of your blogging team here at ContractsProfs Blog: Happy Holidays!
Thursday, December 18, 2014
This case arises out of a fact pattern with which many contracts profs may already be familiar. It's a new twist on Leonard v. PepsiCo., alas with the same result.
James Cheney Mason (Mason) represented defendant Nelson Serrano in a capital murder trial. Mason gave an interview on NBC news in which he pointed out that his client could not have committed murders in Bartow, Florida on the same day that he was on a business trip in Atlanta Georgia. Surveillance cameras from the La Quinta Inn in Atlanta established Serrano's presence at the hotel both before and after the murders. The prosecution claimed that Serrano flew to Orlando, drove to Bartow, committed the murders, drove to Tampa, and flew back to Atlanta in time to show up on the surveillance tapes once again. Serrano was convicted and sentenced to death.
Law student Dustin Kolodziej (Kolodziej) watched Mason's interview with NBC after it was edited for broadcast. In the edited version that Kolodziej saw, Mason seemed to be offering a million dollars to anyone who could get off a plane in Atlanta and make it back to the La Quinta Inn in 28 minutes. Kolodziej took this as a challenge and as a unilateral offer that he could accept by making the trip in 28 minutes or less. Kolodziej recorded himself making the trip and sent the recording to Mason with a demand for payment. Mason refused.
In Kolodziej v. Mason, the Eleventh Circuit upheld the grant of summary judgment to Mason. In the unedited version of Mason's interview, it is clear that his challenge was directed at the prosecution and not erga omnes. Moreover, the Eleventh Circuit found, no reasonable person could construe any statement that Mason made in either the edited or the unedited version of the interview as a serious offer to pay a million dollars to anybody who could travel from the airport to the hotel in 28 minutes. According to the Court, the context in which the words were uttered (an attempt to poke holes in the prosecution's theory) and the hyperbolic nature of the alleged offer, with its familiar overtones of schoolyard braggadocio, were insufficient to establish Mason's willingness to enter into a contract.
The Court distinguished this case from the classics, Lucy v. Zehmer and Carbolic Smoke Ball and other, equally entertaining cases. The Court was no more inclined to entertain Kolodziej's claim than it would be to declare Mason a monkey's uncle, if he had chosen that turn of phrase when attempting to illustrate the implausibility of the prosecution's timeline.
The Court suggested that the entire suit was a result of Kolodziej's inadequate understanding of contracts doctrine (hence the duncecap image above, which by the way, does not represent Kolodziej). The Court paraphrased Pope and suggested that a little legal knowledge is a very dangerous thing indeed. As the Court explained,
Kolodziej may have learned in his contracts class that acceptance by performance results in an immediate, binding contract and that notice may not be necessary, but he apparently did not consider the absolute necessity of first having a specific, definite offer and the basic requirement of mutual assent.
This seems more than a bit unfair. Kolodziej was wrong, but he may have thought it worth the gamble. He lost his case, but he had quite an experience. In any case, Judge Cardozo's remark in Allegheny College about how half-truths are sometimes mistaken for the whole truth seems more apposite.
A classic form of statement identifies consideration with detriment to the promisee sustained by virtue of the promise. Hamer v. Sidway, 124 N. Y. 538, 27 N. E. 256, . . . . So compendious a formula is little more than a half truth. There is need of many a supplementary gloss before the outline can be so filled in as to depict the classic doctrine.
Mistakes of law such as Kolodziej's are common, and learned judges (and even law professors) as well as law students can make them.
Friday, December 12, 2014
Sick of reading our posts (and other news reports) about Uber and Lyft?
I am compelled to add that while the concept is brilliant and the execution quite fine, the script missed some low-hanging fruit suggested by the "Jewish geography navigation system" at the opening. I humbly offer the following potential dialogues:
Driver: Where are you going in such a hurry?
Passenger: Elm and 17th.
D: Elm and 17th? The Weinsteins live right around the corner! Do you know them?
P: I don't think so . . .
D: Such a nice couple. Are you sure you don't know them? I think they had a daughter around your age. How old are you? Where did you go to school? And the Goldbergs live near there too -- surely you know them!
P: I'm just going to a dental appointment. I don't live around there.
D: Well, you should, it's a lovely neighborhood. Where do you live? I know a realtor who could find you a nice apartment. . .
Passenger: Excuse me, I was actually heading in the other direction . . .
Driver: Oh, I know, hon, but I can only find my way there from the JCC, so I thought we'd go there first. It's not far.
D: Or Solomon Schechter, is that closer? I know how to get places from there or from the Temple . . .
P: I can direct you if you want.
D: Relax! Enjoy the ride! You young people are always in such a hurry these days. Do you ever take the time to talk with your parents, I wonder? We can just chat and catch up -- the time will pass quickly
P: Catch up? But I don't even know you.
D: You're about my son's age. He just gave me my third grandchild. [Passing pictures back] Here, aren't they a lovely family?
I'm just sayin . . .
Wednesday, December 10, 2014
I read an interesting article the other day about parties to a contract agreeing to a broad arbitration provision and then carving out some issues that would be litigated should a problem arise. As with many others, I am involved in the International Commerical Arbitration Moot and, when I read the article, the issue seemed familiar. That is because this year's problem includes a contract with the following two provisions:
"Art. 20 All disputes arising out of or in connection with the present contract shall be finally settled
under the Rules of Arbitration of the International Chamber of Commerce by three arbitrators
appointed in accordance with the said Rules. The seat of arbitration shall be Vindobona,
Danubia, and the language of the arbitration will be English. The contract, including this clause,
shall be governed by the law of Danubia.
Art 21: Provisional measures
The courts at the place of business of the party against which provisional measures are sought
shall have exclusive jurisdiction to grant such measures."
As you would expect, one of the parties in the problem asks for interim relief from the ICC while the other says interim measures are for courts only. Very often, if not most of the time, the Moot problem is inspired by an actually case. Some years the students are able to find the case and, while it is never quite exactly on point, it can be helpful.
I could not help but wonder if this issue within this year's problem was inspired by a botched effort to carve interim relief out from the general provision. It would be pretty sloppy to draft something like the above but my hunch is that it has happened.
I am curious to know how other ICAM team coaches have dealt with the issue. In particular, does the word "finally" in Article 20 have any particular signficance?
Tuesday, December 9, 2014
In what seemed an inevitable turn of events, the Los Angeles and San Francisco district attorneys filed a consumer protection lawsuit on 12/9/2010 against Uber for making false and misleading statements about Uber’s background checks of its drivers. George Gascon, the district attorney for San Francisco, calls these checks “completely worthless” because Uber does not fingerprint its drivers. Uber successfully fought state legislation that would have subjected the company’s drivers to the same rules as those required of taxi drivers. Allegedly, Uber has also defrauded its customers for charging its passengers an “airport fee toll” even though no tolls were paid for rides to and from SFO, and charging a “$1 safe ride fee” for Uber’s background check process. California laws up to $2,500 per violation. There are “tens of thousands” of alleged violations by Uber. However, even that will likely put only a small dent in Uber’s economy as it is now valued at $40 billion (yes, with a “b”).
Lyft has settled in relation to similar charges and has agreed to submit information to the state to verify the accuracy of its fares (although not its background checks). It has also agreed to stop picking up passengers at airports until it has obtained necessary permits. Prosecutors are continuing talks with Sidecar.
Time will tell what prosecutors around the nation decide to do against these and similar start-ups such as airbnb and vrbo.com, which are also said to bend or outright ignore existing rules.
The Los Angeles Times comments that the so-called “sharing economy” companies face growing pains that “start-ups in the past didn’t – dealing with municipalities around the world, each with their own local, regional and countrywide laws.” It is hard to feel too sorry for the start-ups on this account. First, all companies obviously have to observe the law, whether a start-up or not. Today’s regulations may or may not be more complex than what start-ups have had to deal with before. However, these companies should not be unfamiliar with complex modern-day challenges as that is precisely what they benefit from themselves, albeit in a more technological way. Finally, there is something these companies can do about the legal complexity they face: hire savvy attorneys! There are enough of them out there who can help out. But perhaps these companies don’t care to “share” their profits all that much? One has to wonder. Sometimes, it seems that technological innovation and building up companies as fast as possible takes priority over observing the law.
As indicated in this story,* CNN.com is greatly invested in the story of Morten Storm, who claims that he is a Danish double-agent who infiltrated Al Qaeda in the Arabian Penninsula (AQAP) and thus helped the U.S. target and kill AQAP operative and U.S. citizen Anwar al-Awlaki.
Storm (and his CNN co-authors) have quite a story to tell. Among other things, he claims that the United States promised him $5 million for helping the U.S. in its al-Awlaki operation. Although Storm is clearly an international man of mystery, there is little mystery on the question of whether he would have any luck on a claim against the U.S. for breach of a promise to pay $5 million. The U.S. would undoubtdedly point to the Totten case, as updated in Tenet v. Doe, and courts will find the claim non-justiciable.
NB: When you click on this site, you will see the following browsewrap banner across the top:
If you do not want to spend an hour or two parsing CNN's terms and don't want to be bound to terms that you have not read or cannot understand, do not "continue to use" CNN's site (whatever that means).
Hat tip to my student, Brandon Carter.
Friday, December 5, 2014
In today’s “sharing economy,” more and more private individuals attempt to earn some (additional) money in untraditional ways such as selling various things on eBay, driving cars for alternative passenger transportation services such as Uber and Lyft, and providing lodging in private homes on sites such as airbnb. Not only do these services raise many regulatory, licensing, insurance zoning and other issues, they also present a real risk to many hopeful 1099 workers who – as the relevant companies themselves – can vastly misjudge the potential of new attempted products or services.
Take, for example, Lyft drivers. In May, the shared ride company introduced luxury rides via its Lyft Plus program. At least in San Francisco, the drivers had to pay $34,000 out of their own pockets for the large, “loaded” Ford Explorers required by Lyft for drivers to participate in the program. The idea was that passengers would pay twice the normal Lynx rate to get the extra space and perceived luxury of being whisked around town in a large SUV. A bit behind the curve, you think? Indeed. The program was an instantaneous fiasco in San Francisco (the company still advertises the program, but at “only” 1.5 times the price of a regular ride and touting the program as having space enough for six people). Soon, drivers were back to simply getting regular rides– often just at $5 or $6 – just to stay busy. This is obviously not viable in a city with expensive gasoline and cars that get only around $14 miles per gallon, not to mention the purchase price of the new SUVs.
Responding to drivers’ initial concerns, Lyft had promised that they should “not worry about demand, we have that covered.” Realizing that many of its drivers were upset about being stuck with a huge, new gas guzzler without a realistic return on investment, Lyft has offered their Plus drivers help selling the SUVs or a $10,000 bonus… subject to income tax, no less. None of these options, of course, will bring the drivers back to the pre-contractual position. Some drivers admitted to having borrowed money from family members, selling existing cars, even “forgoing other job opportunities for the chance to make more money with Lyft Plus.”
A sad story all the way around. Companies are continually trying to introduce new products and services to find the next “big thing.” This, of course, is laudable, but not so much so when they seemingly cross the line and make unfounded promises to the less savvy or financially strong. Of course, this also does not mean that workers or customers should not exercise a hefty dose of “caveat emptor” in connections such as this, but it is a somewhat concerning aspect of today’s sharing economy that failed product launches can simply be shared with “smaller fish” with less bargaining power and, apparently, a dangerously high risk-willingness bordering desperation in trying to make a dollar in these financially tough times. Whether in this case, the promise that the demand was “covered” could be a contractual misrepresentation or whether it was simply puffery is another story best left to another forum.
Monday, November 24, 2014
Friend of the blog Jeff Sovern, and his co-authors are creating quite a stir with their article that has been topping the charts on SSRN, 'Whimsy Little Contracts' with Unexpected Consequences: An Empirical Analysis of Consumer Understanding of Arbitration Agreements.
You can follow the discussion in the blogosphere at these sites:
Alan S. Kaplinsky and Mark J. Levin start things off on Ballard Spahr's CFPB Monitor. They make two main points. First, arbitration language is generally quite easy to understand. Second, it does not matter whether or not consumers know what they are getting into when they enter into a credit card agreement with an arbitartion clause if consumer arbitration is actually good for consumers.
Jeff Sovern responds on the Consumer Law and Policy blog to a number of the CFPB Monitor points, but on the main question of whether or not consumers benefit from arbitration, he concedes that the study did not attempt to answer that question Rather, the point is that the basis for such arbitration is consent, and his study shows that consumers do not give meaningful consent to arbitration.
Levin and Kaplinsky don’t actually address the core problem we address in our article–that citizens are being unwittingly and unwillingly forced to give up important (and constitutionally guaranteed) procedural rights. Their point–and it is the point arbitration advocates almost invariably make–is that arbitration can be better for consumers than litigation. That may very well be true, at least some of the time. (See my post on the benefits of limited consumer arbitration here.) But it doesn’t answer the right question.
Kaplinsky and Levin have filed their response on Ballard Spahr's CFPB Monitor. They reiterate their argument, citing numerous court opinions, that arbitration clauses can be readily understood by consumers. They remind readers that the purpose of the Federal Arbitration Act was to prevent courts from treating arbitration agreements differently from other agreements. An arbitration clause in an otherwise enforceable agreement ought to be enforceable just as any other term in the agreemnt would be.
My questions in these debates are always the same. If arbitration clasues are potentially beneficial to consumers, why make them mandatory? Provide for arbitration as an option and make clear that if a consumer chooses to arbitrate, she cannot also sue. In addition, what of class action waivers, which now often accompany arbitration provisions? Kaplinsky and Levin claim that some studies show that plaintiffs do better off in individual arbitrations than they do in class actions, but I don't know how studies could show that since (so the argument goes), in some cases plaintiffs won't file claims at all unless they can do so through class actions.
Friday, November 21, 2014
A student shared with me this flyer that her father received. I have provided a large reproduction so that readers can read the fine print, which is really the focus of this post.
On my reading, the meaning of this is as follows: if
- You made the mistake of having previously subscribed to the newspaper; and
- You have the temerity to continue living at the same address; and
- You do nothing else,
A newspaper will be delivered to you on Thanksgiving.
Regardless of what you do with it, your inaction will be deemed consent to future deliveries and you will be charged unless you call the newspaper and put a stop to it.
This "offer" is a turkey, and those receiving it should tell the newspaper to stuff it.
Meredith Miller started blogging here before I did. She holds the record for the contributing editor with the longest tenrue on the blog.
Her lively, quirky posts were one of the things that attracted me to this site and made it worthwhile to keep coming back. She has been a steady companion, sounding board and dedicated contributor to our blog, and we will miss her contributions.
But life moves on, and we can only thank Meredith and wish her well in her new endeavors. In her farewell e-mail to the rest of us, Meredith referenced her blogger's guilt. Blogs are like sharks; they either move or die. There have been many weeks when I despaired of finding the time and the content to keep this blog lively when Meredith would post a story that I knew would attract interest and buy the rest of us some time away from the blog. After nearly ten years of providing us stories and laughts, he has certainly earned her release from blogger's guilt.
I am hoping to compile a top ten list next week of my favorite Meredith posts. Please feel free to nominate your favorites in the comments.