Wednesday, July 12, 2017
I'm blogging this case because I had a whole conversation with non-lawyer friends about what the term "renovate" means, and I think maybe they changed my mind about what "renovate" means. I don't know. Upon first reading this case, I spent a lot of time reflecting on all the episode of "House Hunters Renovations" I've watched and what actually happens in them.
Anyway, if you want to go away and watch a marathon of "House Hunters Renovation" at this point, it's okay. I understand. This blog post will still be here for you to contemplate afterward.
The case in question (there is an actual case) is a recent case out of Pennsylvania, Blackburn v. King Investment Group, No. 2409 EDA 2016, and, as you may have guessed, the debate in the case was over the meaning of the word "renovate" in the contract. One party maintained that the term was ambiguous, because it could have required them to demolish the bathrooms at issue or merely to do what was necessary to bring them up to modern standards (which was less than full demolition). The other party argued that it was not an ambiguous term and clearly required demolition.
The court agreed that it was a clear and unambiguous term that required demolition and replacement, and this was what got me to thinking: Do I think that renovation requires demolition? At first my kneejerk reaction was like, "I don't know, I don't think it does." But after conversations with people, I decided maybe it does mean demolition? That doing something less than demolition wouldn't be called renovation but just updating? If you say you're going to renovate your kitchen, does that always imply that you're demolishing the entire kitchen? If you do less than that, is saying you renovated your kitchen misleading?
My struggling with the word leads me to believe maybe it's not clear and unambiguous but I often feel that way with these types of cases. What I find extra-striking about this case is that, while the court proclaimed the term "clear and unambiguous," it did so by relying entirely on parol evidence, and this parol evidence, in my view, just determined what the parties understood "renovation" to mean. I think finding what renovation meant in the context of this contract to these parties makes a lot more sense than declaring it to be a clear and unambiguous term generally.
Monday, July 10, 2017
When I teach my students rules of construction and we talk about contra proforentem, I feel like the standard examples I use with them are insurance contracts, where it's easy to identify who the drafter is. A recent case out of Indiana, Song v. Iatarola, Court of Appeals Case No. 64A03-1609-PL-2094 (thank to D.C. Toedt for the new non-paywall link!), involved an actual discussion of who was the "drafter" in a situation where both parties had input in the contract. The Iatarolas seemed to try to argue that Song should be considered the drafter and have the contract construed against him because he was the one who typed it into Microsoft Word. The court pointed out, though, that the rule of construction is about independent drafting, not a situation where both parties contributed to the contractual terms. Who physically types the contract up means nothing if both parties have helped to decide on the terms being typed up. I have never thought to discuss that with my students, but I think I might bring it up, just to be clear on what the rule is talking about.
Friday, July 7, 2017
If You Want to Hold Your Real Estate Development to Its Master Plan, Make Sure It's in Your Contract
A recent case out of Idaho, Swafford v. Huntsman Springs, Inc., Docket No. 44240, serves as a word of warning for those purchasing plots in real estate developments. As someone who recently purchased a plot of land in an in-progress real estate development, I read this case with interest.
The Swaffords bought a plot of land early on in the development's life, based on a master plan that they had viewed. Later, as the development continued underway, Huntsman Springs altered its plans, so that they way it turned out was not as it had been in the master plan the Swaffords had viewed. The Swaffords then sued for breach of contract.
The problem was that the "master plan" had never been part of the Swaffords' contract with Hunstman Springs. The contract did not incorporate the master plan and in fact the contract stated in several places that Huntsman Springs was bound by no other representations outside of the four corners of the contract and, in an integration clause, that the contract was the entire agreement. The contract was much less specific in Huntsman Springs's obligations to the Swaffords, but Huntsman Springs did comply with all of them. Therefore, there was no breach of contract.
Important lesson learned: If you want your developer bound by a master plan, make sure it's in your contract. (Of course, that's possibly easier said than done, depending on power differentials. But, if you allow for reasonable modifications of that master plan in some way, maybe you could accomplish it.)
Sunday, July 2, 2017
Monday, June 26, 2017
"As Is" Clauses Don't Grant You Immunity If You Commit Fraud -- and Parol Evidence Can Help Prove It
A recent case out of South Dakota, Oxton v. Rudland, #28070 (behind paywall), is another case involving alleged fraud during the sale and purchase of a house, this one with an explicit parol evidence debate.
As in the previous case I blogged about on this topic, the contract for the house contained an "as is" clause. The Oxtons agreed that the contract with this "as is" clause was unambiguous and fully integrated. However, they argued that the parol evidence rule never applies when a party is alleging fraud. Because they were alleging fraud, they wanted to be able to bring in parol evidence regarding that fraud.
The court agreed that the parol evidence rule does not apply in cases of fraud, which cannot be avoided by disclaimers in the contract. Therefore, the court looked at the Oxtons' evidence of fraud, which consisted of the fact that the Rudlands who sold them the house had just bought it a few months before and in the course of buying it had been told about "major settling" of the house (the problem at issue). The Rudlands, however, did not disclose that "major settling" when they sold to the Oxtons months later. The Rudlands countered that the disclosure statement that did not contain any language about "major settling" was largely irrelevant, and that the Oxtons were well aware they were purchasing the home "as is" and had the opportunity to obtain an inspection before finalizing the contract.
The court found that it could not resolve these questions of fact but that there was enough evidence to possibly support the Oxtons' fraud claim, such that summary dismissal of that claim was inappropriate. The court allowed the parol evidence to support the claim, and also explicitly pointed out that "as is" clauses do not provide "general immunity from liability for fraud." Therefore, the Rudlands could not rely on the "as is" clause alone as blanket protection for all of their behavior and statement, and the litigation over the alleged fraudulent inducement should continue.
It's interesting to contrast this with the Texas case I just blogged. There, the court held that getting an inspection was enough to prove that you were not relying on the sellers' statements. The Oxtons did obtain an inspection in this case but little attention is given to that fact. I wonder if it will gain more prominence as the debate over the alleged fraud goes forward, as at the moment the case was pretty focused on the parol evidence rule and the operation of the "as is" clause, not on the effect of the inspection.
Monday, June 19, 2017
Public Domain, Link
This story is a few weeks old, but I think it's an interesting one still deserving of discussion. Apparently, one of the terms of licensing one of David Mamet's plays to perform is that the theater not host any "talk backs" within two hours of the show. It's interesting to me first because talk backs are fairly common within the theater industry, and I'm not sure most theater companies would assume there were restrictions around them. This makes me wonder if other playwrights have similar policies and how much theater companies check into those specific terms.
Another thing that struck me about this, though, was that apparently this talk-back-prohibiting term was not in the original terms of the license. The theater company detailed in the article received a new contract with the new licensing term just four hours before the show opened. Do we think that was a valid modification of the original license terms? There is no discussion of this in the article, but do you think that the theater company, threatened with fines of $25,000, felt compelled to agree to the new term after having sold tickets and invested time in rehearsing the play? Was the new term in that license enforceable?
Finally, apparently Mamet's agent will ensure that the clause is included in license terms from this point on. Generally, parties can enter into any contractual terms they wish (within certain bounds of reason). Presumably if Mamet's no-talk-back provision is disliked by theater companies, Mamet's plays could fall out of fashion and the market could handle the situation. However, if other playwrights start demanding similar terms, then there might not be as much pushback from the theater companies. So far it seems that Mamet's clause just prohibits discussion within two hours of completion of the play, so that could allow an enterprising theater company to just hold a talk back two and a half hours later. It could be interesting to see what effect, if any, this situation has on theater talk backs going forward. Anyway, it was an interesting little contract story, so I thought I'd pass it along.
(h/t to Rebecca for bringing the article to my attention!)
Monday, June 12, 2017
On Monday June 5, 2017, Saudi Arabia, Egypt, Bahrain, Yemen, Libya, the United Arab Emirates and the Maldives all severed diplomatic ties with Qatar. While only a small period of time has passed, the small Arab nation has been left with some pressing issues. Almost immediately the people of Qatar rushed to supermarkets to stock up on food. Many fear that with their only land border shut (that between Qatar and Saudi Arabia), food supplies will run short and prices will skyrocket. The Philippines have already begun restricting migrant workers from going to Qatar for fear that migrant workers will be more marginalized if food shortages become an issue in a country that does not produce any of its own food. Migrant workers have been a source of conflict in Qatar for years and this current crisis could worsen or better the landscape.
On December 2, 2010, Qatar became the first Middle Eastern country to win a World Cup bid. That World Cup is set for 2022. In preparation, massive construction projects have begun in Doha and the surrounding area, including building new stadiums, renovating old ones, building new ports and rail systems, and renovating current city areas to make Qatar appear a modern metropolis in the heart of a desert. While all of that sounds good, it has come at a steep humanitarian cost. Many migrant workers have died and many modern governments have reprimanded Qatar for its inhumane treatment of people.
However, the current climate of Qatar is one of isolation from its neighbors—Emirates and Etihad airlines have ceased all travel to Qatar. Migrant workers are already starting to lose jobs. While FIFA, the governing body of soccer worldwide, has stated that the World Cup will continue as planned, if construction materials and workers cannot enter the country, the small country cannot hope to continue hosting the World Cup. No country has ever lost a FIFA World Cup contract after being awarded the bid, but the consequences could be astronomical. Qatar is looking to spend almost $200 billion for the World Cup, and while not all or even most of that money will be recovered by hosting the event, there is an expectation of gain for local businesses and hopefully an increase in tourism following the event. Without the World Cup, Qatar would be out the money and potentially enter a massive contract suit with FIFA. Currently, we can only wait and see how the situation works itself out, but it will be at the forefront of many people’s minds until the current diplomatic situation is resolved.
Wednesday, June 7, 2017
Insurance contracts often provoke disputes over language interpretation. A recent case out of West Virginia, Erie Insurance Property & Casualty Co. v. Chaber, No. 16-0490, overturns on appeal the lower court's finding of ambiguity, declaring that the language at issue was in fact unambiguous.
The Chabers had an insurance policy that excluded "earth movement," which was defined as including "landslide . . . whether . . . caused by an act of nature or . . . otherwise caused." Soil and rock slid down a hill behind the Chabers' property and damaged it. The insurance company refused to pay out, pointing to the exclusion of landslides. The Chabers alleged that the landslide was caused by improper excavation, not natural causes, and thus shouldn't have been excluded under the policy. The lower court found that the insurance policy was ambiguous, and that the Chabers might have expected that landslides caused by actions of humans were covered. The appellate court, however, disagreed.
The appellate court found that previous cases had found ambiguity in insurance policies that excluded events arising "from natural or external forces." In contrast, the Chabers' insurance policy language was the much more general "act of nature or . . . otherwise caused," losing the word "external" that had been considered ambiguous. The language in the Chabers' policy was relatively new but the few courts that had considered it had found it to be unambiguous. Therefore, the appellate court found the policy was unambiguous and covered landslides, whether human-triggered or naturally occurring.
I always find it interesting when courts disagree regarding ambiguity, because the very fact of courts disagreeing seems to indicate ambiguity! However, this policy does seem to be unambiguous in its breadth of exclusions. Possibly the lower court just felt bad for the Chabers.
Wednesday, May 31, 2017
We are by now probably all familiar with the modern phenomenon of GoFundMes to cover medical care. Those funds likely aren't just to cover situations where the parties didn't have health insurance, but also situations where the parties did have health insurance and the health insurance refused to pay. Sometimes because of the terms of the particular health insurance policy, but also sometimes without adequate justification. A recent case out of the Southern District of Florida, Grewal v. Aetna Life Insurance Co., Case No. 17-cv-80318-MIDDLEBROOKS (behind paywall), seems like the latter situation, based on the allegations of the complaint.
Grewal, who had Aetna health insurance, also had a six-year-old son, A., who became seriously and unexpectedly ill. He was eventually diagnosed with a rare and very dangerous condition that required long-term care and inpatient rehabilitation. A.'s doctors determined that he should be transferred to a different hospital that could properly treat A. The hospital where A. had been was unable to handle the specialized care A.'s condition required. (In fact, there were allegations the hospital had allowed A. to lay in his own vomit for long periods of time, which seems...alarming???)
Aetna refused to clear A.'s flight transfer, finding that it was not medically necessary, but A.'s condition grew increasingly serious, so A.'s father decided to go through with the flight. He then filed a claim with Aetna to pay for the flight, which Aetna refused within days, without examining A. or the hospitals in question. This refusal left A.'s father with a bill over $300,000.
Aetna's motion to dismiss required the court to determine if the complaint had sufficient allegations that A.'s flight between hospitals was indeed "medically necessary." And the court determined that it did. The complaint alleged that, at the time that A. was transferred, ground transportation was unsafe because of the seriousness of A.'s condition. Therefore, if A. had to be transported, it had to be by flight. And the complaint further alleged that A.'s current hospital was so inadequate to treat A. that it was a life-threatening situation for A. Finally, the complaint alleged that A.'s doctors, those medical professionals most familiar with A.'s condition, recommended the flight transfer. Those allegations were all sufficient to establish that the transfer was "medically necessary" and thus covered by the health insurance policy. Therefore, taking the facts in the complaint as true, a breach of contract was alleged.
We'll see how this case plays out, but I can't help but feel intense sympathy for A.'s father, having to make this decision. Imagine your six-year-old son being suddenly, unexpectedly, very seriously sick, and your son's doctors saying he needed to be transferred to have any chance at recovery. How rational do you think you would be dealing with your insurance company in your situation? Would you really consider it time to have a debate over contractual language?
Monday, May 29, 2017
Here's another case for the "it's always better to get it in writing" file. Although here the failure to get the contract in writing doesn't doom recovery, it does just add an extra layer of analysis that might otherwise have been avoidable.
The case, out of Alabama, is Julie Gerstenecker v. Janice Gerstenecker, 1160144, and you can probably guess immediately from the shared last name that doubtless the reason the contract wasn't in writing was because of the familial relationship between the parties. In fact, Julie was Janice's daughter-in-law. Janice, concerned about the interest rate on Julie's student loan, claimed to offer to pay off the loans in their entirety, in exchange for Julie paying her back interest-free at a rate of $700 a month (later to raise to $1,000 a month). Julie sent Janice an e-mail with the student loan information (including specific instructions as to how Janice could pay them off) and Janice thereafter paid the student loans off. Julie then paid Janice, as allegedly agreed, for four consecutive months. However, after that Julie and Janice's son divorced and Julie stopped making any further payments. Janice sued for breach of contract.
Julie denied there had been any contract, although I think her credibility was undermined by her testimony in response to why, if there had been no contract, she had written the checks to Janice: Julie claimed not to be able to remember why she had written the checks at issue to Janice. At any rate, she tried to raise a statute of frauds defense, asserting that the contract could not have been completed in a year and that therefore it should have been in writing (which it was not). However, she raised the defense so late in the case that the court basically deemed she had waived it.
The court then went on to address Julie's argument that there was not enough evidence of mutual assent. Julie agreed that she did e-mail Janice her student loan information and that she did give Janice the checks at issue, but argued that evidence was ambiguous and did not indicate that she had accepted Janice's offer. The court disagreed. Julie provided Janice with all of the information Janice needed to pay off the student loans, and then Julie began her performance in response by beginning to pay Janice (no other explanation for the checks, after all, had ever been offered). That was enough evidence that a contract had existed.
The only thing left to debate was the measure of damages. The trial court had awarded Janice the entire repayment amount. However, the appellate court concluded that was incorrect because there was no evidence that the contract contained an acceleration clause. Therefore, Janice could only receive a judgment for the amount of money Julie already owed in missed payments.
Monday, May 22, 2017
This is a long one, that I didn't expect to be long, but I decided the point is how long this is, and the questions it raises about all of those terms and conditions on websites.
A friend of mine asked me recently about the terms and conditions of the Ancestry.com DNA service. The service, if you're not familiar with it, takes your DNA and breaks it down into ethnic backgrounds for you, based on analysis of genetic markers. Here's a video that talks about it some:
So if you're using the DNA service, you're handing your DNA over to Ancestry.com, and maybe we should think: what does that mean? After all, who does our DNA belong to, and what can it be used to? The Supreme Court looked at this in the context of patents a few years ago, finding that DNA cannot be patented. So we know that no one can own a patent on your DNA. But that's not really what's at issue in the DNA service site. No one is trying to patent the DNA, but Ancestry.com is still using the DNA in certain ways.
Looking into the terms and conditions initially seemed to me like it would be straightforward. Several hours later...
I started with the actual terms and conditions (makes sense, right?). It has a license provision:
"By submitting DNA to AncestryDNA, you grant AncestryDNA and the Ancestry Group Companies a perpetual, royalty-free, world-wide, transferable license to use your DNA, and any DNA you submit for any person from whom you obtained legal authorization as described in this Agreement, and to use, host, sublicense and distribute the resulting analysis to the extent and in the form or context we deem appropriate on or through any media or medium and with any technology or devices now known or hereafter developed or discovered."
That "we deem appropriate" language seems very broad to me. Appropriate for what? There isn't a lot of limitation there, and a lot of trust seems to be placed that your definition of "appropriate" will be the same as Ancestry's (and how likely is that, really?). I looked at some social media terms to compare (Facebook, Tumblr, Twitter), and none of their license grants had "we deem appropriate" language (and, in fact, Tumblr's license in particular was fairly narrow in its grant). Keep in mind, Ancestry has your DNA, not a random tweet about making a cup of tea in the morning. Also a point to think about: the social media is free, and I think we kind of expect that there's a trade-off for that. Ancestry costs money AND also takes a broad license grant in exchange.
The terms and conditions also go on:
"You hereby release AncestryDNA from any and all claims, liens, demands, actions or suits in connection with the DNA sample, the test or results thereof, including, without limitation, errors, omissions, claims for defamation, invasion of privacy, right of publicity, emotional distress or economic loss. This license continues even if you stop using the Website or the Service."
So they can do whatever they deem appropriate, and you release them from any lawsuits in connection with it.
Now, adding a complicating layer to all of this, though, is that the terms and conditions are supposed to be read in conjunction with the privacy statement, on a completely different webpage, that does appear to limit what they're doing with the DNA, I think, and also appears to give you the opportunity to cancel the service, although how that affects the license, which says that it survives termination of the service, is unclear to me. And in addition to that, there is another completely different webpage, called the Consent Agreement. I don't know when this comes up in the DNA process, because I didn't want to input my credit card, and before that point I only saw the terms and conditions and privacy statement referenced. But the Consent Agreement has to do with participation in scientific research, which seems cool, except that when you read further down into it, it says stuff like this:
"If Data are obtained through these methods, it is possible that information about you or a genetic relative could be revealed, such as that you or a relative are carriers of a particular disease. That information could be used by insurers to deny you insurance coverage, by law enforcement agencies to identify you or your relatives, and in some places, the data could be used by employers to deny employment.
In the United States, a federal law called the Genetic Information Non-Discrimination Act (GINA) generally makes it illegal for health insurance companies, group health plans, and most employers to seek your genetic information without your consent, and to discriminate against you based on your genetic information. GINA does not protect you from discrimination with regard to life insurance, disability insurance, long-term care insurance, or military service. There may be state laws and laws outside the United States that prohibit discrimination against you based on genetic data."
Tl;dr: What I just want to say is that's the point. I spent all morning trying to piece together all the different clauses of all these different documents, and I'm still confused, and I'm an actual lawyer (theoretically). And then I wrote a blog entry about it that was also too long! How confused do you think consumers are? And how many of them do you think actually spent the amount of time I did to try to get through all of that?
Friday, May 5, 2017
I haven't done a damages case in a while so here's one for you out of California, Wiring Connection, Inc. v. Amate, B264113.
The parties entered into a lease totaling 65 months at $6,252 per month. After signing the lease, though, Amate leased the property to someone else and Wiring then had to lease a different property, under a three-year lease for $7,500 a month. Wiring sued for breach of contract and won. The court then had to determine damages. The lower court stated that the proper measure of damages would be the fair market value of Amate's property, less the amount Wiring had agreed to pay for it in the breached lease. Amate called an expert witness who testified that $6,252 had been the fair market value of Amate's property. The lower court was skeptical of this expert testimony, but Wiring did not call any expert witnesses of its own. Rather, Wiring argued that the proper measure of damages was the difference between what it would have paid in rent over 65 months at Amate's property and what it would pay in rent over the same time period at the property it had had to rent instead once Amate breached the lease.
The lower court said that, based on the evidence in front of it, it could not calculate any difference between the fair market value of Amate's property and the amount Wiring was going to pay under the lease, and found that it therefore could not award any damages to Wiring. The lower court said it was unhappy with the result, since Amate's breach had been "egregious," but it felt its hands were tied on the matter.
The appellate court agreed with the lower court. The lower court's statement of the measure of damages was the correct one, and Wiring failed to prove that there had been any difference between the fair market value and what was in the lease. Therefore, Wiring got nothing.
I find this case a little curious because I find it difficult to believe that Wiring wasn't damaged in some way. Wiring is now paying substantially more for rent than it would have if the agreement had never been breached, after all. But it also seems like Wiring could have met its burden based on how much the new tenant was paying for Amate's property? I assume the new tenant was paying more (otherwise it would seem odd for Amate to breach, unless there was a personal relationship involved), and that that new tenant's monthly rate could be used to establish damages for Wiring. Probably not as high as the damages Wiring was seeking but at least something. But there is no discussion in the case of what the new tenant was paying, that I could see, so it either was less than Wiring was going to pay and so unhelpful to Wiring or Wiring simply ignored it in favor of putting all of their eggs in the basket of being compensated for the difference between their more expensive second lease.
Either way, this is a painful damages case from Wiring's perspective. A welcome one, of course, from Amate's perspective!
Tuesday, April 25, 2017
On April 14, the Wall Street Journal reported that Universal Music Group has won the licensing rights to late pop/rock star Prince's music in the "vault" he apparently kept on his property. The price tag was $30 million. Now, however, Warner Music Group, the singer's first record label, claims that it has conflicting rights in the material.
That turn of events is hardly surprising, but what is is the fact that Universal "hadn't seen a copy of Prince's 2014 contract with Warner, so it asked [a relevant party] to clarify the details afters signing the deal and running into roadblocks as it tried to move forward."
Of course, legal disputes also arose as Prince did not leave a will, thus ceding his entire estate to his sister and five half-siblings.
Textbook lessons of what NOT to do in the contracts and wills and estates areas of the law.
Wednesday, April 12, 2017
It's by now common knowledge that United Airlines finally fessed up to its mistakes and promised not to use police to drag paying customers who held valid contracts and thus tickets with the airline off the planes anymore. That seems like, uhm, a reasonable policy.
Now, as I have said before: when are we as a society going to wake up to and thus call for, yes, REGULATORY change in relation to the clearly dysfunctional contractual relationship between the few remaining American airlines and paying customers? This recent debacle with the Asian doctor bloodied while being physically dragged away from a valid contractual situation (I know, I know, the airline had a right to oversell and so forth) shows the results of a clearly unequal bargaining position.
Let's call it what it is: unacceptable and abusively unequal commercial practice. What, for example, if YOU want to change your ticket? Good luck trying to do that unless you paid ten or so times what a regular ticket would be. As I have also mentioned before: how about price gouging, or whatever we as attorneys may label the following: buying an airline ticket from point A to B in Europe with some low cost carriers will cost you very, very little. Here, "low cost" carriers still charge you hundreds and hundreds of dollars. I agree, the market place and capitalist system is better than the alternative, but it is far from perfect. For what alternative do we have? Take the train? Drive?! Right... in a country of this size, you just cannot reasonably do that.
Or how about this: my elderly mother can fly to Los Angeles from Copenhagen and back on KLM/Delta Airlines for less than half of what I would have to pay on the VERY SAME AIRLINE, DATES, etc. Yes, I've checked it. Same route, you name it. That's not "market forces," then, that's cheating customers because one can.
Airlines are great and provide a great and necessary service to many of us. In fact, so necessary that they have, for all intents and purposes, become the "bus companies" or railroads of today. Just as railroad companies and bus service providers were and are, to the best of my non-native knowledge, subject to quite some regulations, so would it not be unreasonable to look into the modern practices of airlines today. Airlines around the world make a good living while facing quite a bit more regulation than American carriers do. We are often being played for fools here. We just put up with it too much.
Tuesday, April 11, 2017
Everyone is surely, by now, aware of the (most recent) United Airlines scandal. Numerous questions abound: Was the airline racist in asking a non-white person to give up his seat or was the selection of which passenger to bump truly random? If the latter, was the airline racist in pursing this action after seeing that the selected passenger was not white whereas it might have given up taking such drastic action if it the passenger had been white? Equally importantly, what in the world is going on when law enforcement officers act as they did in this situation?! Is it fair to consider United Airlines responsible for actions that were, after all, not taken by its employees, but rather by the authorities?
While these questions are being addressed in many other locations, I find it interesting that several news sources correctly point out that United was legally entitled to bump a passenger, but that several sources seem to incorrectly state that under Department of Transportation rules, airlines may only pay passengers “up to a” $1,350 limit for delays of more than two hours. I have not had the time to fully research this rule, but as I read the rules, there is nothing saying that there is a limit to how much airlines may choose to pay, only what the DOT rules guarantee a pay-out (that one can, incidentally, insist on getting as payment, not a voucher) of $1,350, not more under the federal rules. The DOT guideline states as follows (from a website version only, admittedly):
“If the substitute transportation is scheduled to get you to your destination more than two hours later (four hours internationally), or if the airline does not make any substitute travel arrangements for you, the compensation doubles (400% of your one-way fare, $1350 maximum).”
If my understanding is correct, United could have chosen to voluntarily pay out a lot more than what they reportedly did ($800-1,000) and, as many correctly point out, most likely found some taker. Surely, the rules do not prohibit this. Instead, however, United chose to do what seems to increasingly be the order of the day: stand on their own rights and disregard the interests of their customers in the name of making a few extra dollars. Why am I not surprised?
Wednesday, April 5, 2017
A recent case out of the District of Nevada, Greenstein v. Wells Fargo Bank, Case No. 2:14-cv-01457-APG-CWH (behind paywall), reminds us of the importance of the statute of frauds as a useful doctrine that can clarify when parties have entered into a contract and when they haven't. Greenstein contended that he and Wells Fargo had entered into an oral contract regarding modifying his existing home loan. However, Wells Fargo disputed that. The court agreed with Wells Fargo that there was no contract, because Greenstein at best had alleged that, during multiple telephone calls, Wells Fargo had represented that it "might" agree later to a modification. Wells Fargo did tell Greenstein that he needed to reduce his principal to qualify for a modification, but that was not the same thing as saying that he definitely would qualify for a modification if he paid down the principal (which, in any case, he did not do).
Greenstein apparently misinterpreted these conversations with Wells Fargo, none of which amounted to an offer or acceptance or even any material terms. This is precisely the sort of situation that the statute of frauds exists to try to alleviate: Because the contract involved land, it needed to be in writing. It never was, and surely any writing between the parties would have cleared up at least some of the misunderstanding between the parties. Oral contracts (alleged or existing) lend themselves easily to mistaken conclusions; making the land contract be in writing at least sometimes saves confusion and disagreement over these all-important terms.
Wednesday, March 29, 2017
This is a health insurance case, but it's also a case about implied contracts.
In a recent case out of the Eastern District of California, San Joaquin General Hospital v. United Healthcare Insurance Co., No. 2:16-cv-01904-KJM-EFB (behind paywall), the hospital sued the health insurance company after it refused to pay the entirety of the bills the hospital sent to it. The hospital alleged that it had contacted the insurance company to obtain authorizations for the medical services in question and that the insurance company had orally authorized such care. The hospital therefore argued that the two parties had an oral or implied-in-fact contract and the insurance company's refusal to pay the whole bill was a breach of that contract.
The insurance company moved to dismiss the claim but the court disagreed. It found that the complaint alleged the communications I outlined above, and also alleged that the insurance company had paid some of the bill and was refusing to pay the rest. The court found that this partial performance on the part of the insurance company was enough to indicate the presence of an implied-in-fact contract such that the hospital's claim could survive the motion to dismiss.
The hospital also pled a cause of action for quantum meruit, which the insurance company also moved to dismiss, partly on the grounds that the insurance company claimed to receive no benefit from the hospital's actions. The hospital argued in response that it performed services for the insurance company's customers, which thereby benefitted the insurance company. My favorite line of this decision comes during the analysis of this cause of action: "It is plausible on its face that the patients received a benefit from the Hospital's services." Ha. I get why it's phrased that way but it makes me laugh. Maybe. Maybe you got a benefit by being treated for illness or injury by a hospital. Maybe. Seems plausible, at least. Somewhat believable that going to a hospital when ill or injured and receiving services to treat your condition might benefit you in some way.
Monday, March 27, 2017
I've blogged a lot about NDAs on this blog, including in the context of allegations of domestic violence. So when I saw this recent essay on Inside Higher Ed discussing NDAs in the context of sexual assault investigations on university campuses, I thought it would be interesting to link to. Confidentiality provisions show up everywhere, and I think the essay is a thoughtful and important rumination on the effect they can have in some situations.
Sunday, March 19, 2017
In case you have not yet heard about the recent First Circuit Court of Appeals case discussing the legal importance of a comma, here goes: A Maine statute lists the following activities as not counting for overtime pay:
The canning, processing, preserving, freezing, drying, marketing, storing, packing for shipment or distribution of: (1) Agricultural produce; (2) Meat and fish products; and (3) Perishable foods.
Does that mean that drivers can get overtime because driving does count for overtime since “packing” covers both “shipment or distribution”? Or should the sentence be read as “packing for storage” as one thing and “distribution” another, thus precluding the drivers from earning overtime pay?
Circuit judge David J. Barron concluded that “the exemption’s scope is actually not so clear in this regard. And because, under Maine law, ambiguities in the state’s wage and hour laws must be construed liberally in order to accomplish their remedial purpose, we adopt the drivers’ narrower reading of the exemption.”
So, commas still matter. Consider too how “I love my parents, Lady Gaga and Humpty Dumpty” and “I love my parents, Lady Gaga, and Humpty Dumpty” are a little different. Language aficionados take note! Precise drafting still matters. Was this an outcome-oriented holding? Perhaps. But if so, a holding in favor of workers over a company in a case of interpretive doubt may, in today’s increasingly tough economy for middle and low-income earners, not be such a bad idea from a public policy point of view.
The case is O’Connor v. Oakhurst Dairy, No. 16-1901 (1st Cir. 2017).
Friday, March 17, 2017
A group of plaintiffs suffering from glaucoma bought eye drops manufactured by six pharmaceutical companies. They claimed that the eye drops were unnecessarily large (no, let’s not go there this time): all drops sold by these manufacturers were larger than 16 microliters (equal to 10% of a tablespoon). The plaintiffs claim that unnecessarily large eye drops are wasteful because the human eye can only contain so much fluid. Anything in excess of that will simply overflow and be wasted, which is a waste of money.
The amount of fluid that the human eye can contain without overflowing varies from person to person. The defendants asserted that the amount often exceeds 16 microliters. Further, the active ingredient in each drop is only about 1% of the drop. The smaller the drop, the less therapeutic effect, they claimed (without explaining why, for example, two drops could not simply be applied by those with larger eyes…). Defendants also claimed that larger drops helps those with unsteady hands, such as the elderly, because “the smaller the drop, the likelier they are to miss.” Now, at least that makes sense… (not!).
As was said on the listserv, this is arguably not even a contract law case at all, especially because no allegation of misrepresentation, breach of contract, or the like was asserted. In the words of opinion author Judge Posner, this is merely a case of “you can do better by us” asserted by plaintiff consumers. “That is all they are arguing.” However, said Posner, “[o]ne cannot bring a suit in federal court without pleading that one has been injured in some way (physically, financially—whatever) by the defendant. That's what's required for standing. The fact that a seller does not sell the product that you want, or at the price you'd like to pay, is not an actionable injury; it is just a regret or disappointment—which is all we have here, the class having failed to allege ‘an invasion of a legally protected interest.’”
So, what do we have here? No contracts violation, perhaps. Consumer fraud under the respective state acts? Apparently not. What we seem to have, however, is another instance of Corporate America taking advantage of consumers with the consent of even the federal judicial appellate system. Of course any product that is larger than what is needed per “portion” is wasteful and thus arguably taking unnecessary advantage of consumers. Whether or not that can be framed as an actionable legal issue in our system is another story altogether, sadly. Even worse: companies do apparently not want to do right by their own customers, in this case often elderly folks going blind!
This is, of course, not the only instance of needless and blatant consumer fraud (for that is what these instances are, at least in the common, if not the legal, sense of the word). More examples:
- When you buy lotion, it is next to impossible to get the last, oh, 20% out of those pump-type containers unless you unscrew the pump and pour out the lotion.
- Almost all perishable food items are sold in much larger portions than what is needed for most of us – think cottage cheese, yoghurt, lunch meats (OK, apart from those itty bitty bags, those are great), milk, you name it. People needing more could just buy two items! (That’s how it’s done with great success in many European countries, but heaven forbid that we ever learn anything from other countries.) The rest of us often have to throw out much of the food as it doesn’t last that long.
- How about packaging? Huge bags of chips that are only 1/2 full? Same for cereal boxes? Sun screen spray bottles that are also only 1/3 full?
- OK, I’m in a crappy mood about companies and organizations today, I admit. Of course the capitalist model is the best one, etc. etc. But it would be nice if more companies would focus more on decency, less waste in packaging and eventual product usage, and consumer needs. This eye drop story really is one of forcing consumers to waste product and thus money. Let’s just call a spade a spade.
On an unrelated note: I apologize for being so inactive on this blog for so long. I have had a disappointing contractual work experience that has drained me and continues to do so, frankly. I am trying the hardest I can to find interesting cases to blog about. Should you hear of any, I’d be delighted to be notified. I also invite guest bloggers to blog here with us. As always: thanks to my co-bloggers for their hard and excellent work!
The case described above is Eike, et al. v. Allergan, et al., No. 16-3334 (Seventh Cir. 2017).
Hat tip to my colleagues on the Contracts listserv for discussing this case.