Monday, November 17, 2014
In The Blues Brothers, the band performs at Bob's Country Bunker. All things considered, the show goes rather well:
After the show, the Brothers ask to be paid. The owner offered to pay $200 for the performance, but the band owed $300 for beer. Elwood objects that they had been told that they would not have to pay for the first round, but the owner refuses to treat that as a waiver. A student asked me about the scene, and I'm not sure how it might be resolved. I would treat it as a matter of interpretation and expect that a court could hear expert testimony about the customary terms of contracts with bands at establishments such as Bob's Country Bunker.
But then there is a second issue (or third, if you think waiver is the second issue). The Brothers got the gig by pretending to be another band, The Good Ole Boys. So Bob has an argument that he was fraudulently induced to contract with Jake and Elwood. If that is so, they might be better off seeking to recover in quantum meruit, since Bob told them "that's some of the best goddam music we've had in the Country Bunker in a long time." The audience hurled what seemed like hundreds of bottles of beer at the band during the performance, so Bob must have made quite a bit in drink (or projectile) sales. On the other hand, I don't know what it costs to clean up that mess.
Hat tip to Valpo 1L Brandon Carter for calling my attention to the scene and to the fact that he is watching old movies when he should be studying law!
Wednesday, November 5, 2014
According to this story from NJ.com, a customer in an Atlantic City restaurant bought a bottle of wine with dinner. The server showed him a wine list and suggested a wine. When he asked how much the wine cost, she said, "Thirty-Seven Fifty," which he understood to mean $37.50. She meant $3,750, and the wine list so indicated, but the customer did not have his reading glasses with him. It's an interesting fact pattern.
Fortunately, an episode of The Simpsons provides best practices in this area, as animated television sit-coms do in most areas. In episode 8F09, Burns Verkaufen der Kraftwerk, Homer's stock in the Springfield nuclear plant went up for the first time in ten years. He sells and makes a cool $25. Soon thereafter, the value of Homer's stock rises to $5200, but that's another matter.
Homer conte1mplates his options and decides to buy beer. The following conversation with Moe (of Moe's Tavern) ensues:
Moe: Want a Duff?
Homer (haughtily): No, I'd like a bottle of Henry K. Duff's Private Reserve.
Moe (Gasping): Are you sure? 'Cause once I open the bottle, there's no refund.
See? That's how it's done!
Friday, October 17, 2014
The Alliance for Justice has released a documentary on forced arbitration called Lost in the Fine Print. It's very well-done, highly watchable (meaning your students will stay awake and off Facebook during a viewing), and educational. I recently screened the film during a special session for my Contracts and Advanced Contracts students. It's only about 20 or so minutes and afterward, we had a lively discussion about the pros and cons of arbitration. We discussed the different purposes of arbitration and the pros and cons of arbitration where the parties are both businesses and where one party is a business and the other a consumer. Many of the students had not heard about arbitration and didn't know what it was. Many of those who did know about arbitration didn't know about mandatory arbitration or how the process worked. Several were concerned about the due process aspects. They understood the benefits of arbitration for businesses, but also the problems created by lack of transparency in the process. I thought it was a very nice way to kick start a lively discussion about unconscionability, public policy concerns, economics and the effect of legislation on contract law/case law.
I think it's important for law students to know what arbitration is and it doesn't fit in easily into a typical contracts or civil procedure class so I'm afraid it often goes untaught. The website also has pointers and ideas on how to organize a screening and discussion questions.
Monday, October 13, 2014
We have posted previously about business entities that try to go after customers that give them negative reviews here and here. It seems, based on our limited experience, that threatening to sue customers for writing negative reviews is not a great business model.
Fortunately, there is a market solution. As reported in this weekend's column in The New York Times's "The Ethicist," businesses that recieve negative online reviews can just contact the reviewers and pay them to take down the review. According to the account in The Times, the author of a TripAdvisor review of a hotel entitled it "An Overpriced Dung Heap," but then accepted a 50% discount in return for removing the review. He should have bargained down to "Dung Heap," since the hotel probably was still a dung heap but perhaps was no longer overpriced.
The reviewer asked The Ethicist who was most unethical: himself, the hotel or TripAdvisor for hosting a system so easily corrupted. We don't get paid to weigh in on ethical matters. Actually, we don't get paid at all. But we do have opinions to vent, so here are some.
As The Ethicist acknowledged, what the hotel owner did was not illegal. An economist might reduce the question to one of efficiency. If the hotel owner thinks her money is well spent making bad publicity go away, rather than actually improving the quality of her hotel, that is a choice she can make as a business owner. The market may prove her wrong. The lack of negative reviews on TripAdvisor may not help if in fact one is greeted by a kickline of cockroaches and bedbugs when entering the guest rooms. The Ethicist dodges the stickier problem that TripAdvisor may contain only positive reviews of The Dung Heap Inn because the owners and their supporters flood the site with fake reviews. One would think that TripAdvisor's value would be correlated to its accuracy, but it is hard to see what measure TripAdvisor could take to insure that posts on its site are the real deal.
Friday, October 10, 2014
This is the fourth in a four-part post by Robin Kar that serves as a sort of coda to our virtual symposium on the new book by Omri Ben-Shahar and Carl E. Schneider, More Than You Wanted to Know: The Failure of Mandated Disclosure.
Part I, The Proverbial “Egg,” can be found here.
Part II, Breaking Out of the Shell, can be found here.
Part III, What Is This Emerging New Life? can be found here.
Part IV: Discarding the Last Remnants of the Old Shell
When reading More Than You Wanted to Know together with the reactions in the virtual symposium, I have been struck by two facts. First, we clearly know much more about how mandatory disclosure regimes work than ever before. Details aside, a consensus is emerging that these regimes do not always help consumers make better decisions. Second, despite this increase in knowledge and emerging consensus over the problem, there is even more uncertainty and even less consensus over how consumer protection should be reformed in light of these facts.
i. Diagnosing the Problem
How can more clarity about the empirical facts lead to less clarity about what the law should be? I believe that part of the reason is simple: many of the current debates over these issues are still insufficiently attentive to the rigorous types of argumentation needed to address the purely normative aspects of these questions. To be more specific, the third premise of the classical law and economics movement (see Part I) has not yet been replaced by rigorously developed lines of argumentation from the appropriate cognate fields—as has happened with the first two premises.
In saying this, I do not mean to suggest that rigorous argumentation on these topics is lacking. I mean to highlight a sociological fact about the current legal academy. I believe that the right lines of argument have not yet been sufficiently absorbed by contract law scholars who work in and around the law and economics paradigm. Because of the predominance and recent expansions of this paradigm within the study of contract law, this third premise is increasingly assumed or tacitly accepted by many other contract law scholars. This includes many scholars who do work predominantly in law and psychology or engage in straightforward empirical legal research.
In More Than You Wanted to Know, Ben-Shahar and Schneider are, for example, apparently willing to accept that the primary purpose of consumer protection law is to help consumers make better decisions. This is why they recommend better advice instead of more disclosure. But interestingly enough, almost all of the people who have responded critically in this symposium appear to accept—either explicitly or tacitly—either the same normative proposition or the alternative view that consumer protection laws should be set up to promote social welfare more generally. (The most notable exception is Aditi Bagchi’s response—though Steven Burton’s plea that the authors spend more time thinking about obligation may represent a similar thought.)
Hence, there is a normative assumption running through many of the current debates. The assumption is that consumer protection laws should be shaped to promote either better subjective choice or human welfare more generally. But is this normative premise true? And before we even get to that question: how might we determine whether it is true?
After the jump, I will pursue these questions. I will suggest that we cannot get clearer about the appropriate shape of consumer protection law, however, until we ask the right normative questions. And I will suggest that we are not yet doing that in major areas of contract law studies.
Thursday, October 9, 2014
This is the third in a four-part post by Robin Kar that serves as a sort of coda to our virtual symposium on the new book by Omri Ben-Shahar and Carl E. Schneider, More Than You Wanted to Know: The Failure of Mandated Disclosure.
Part I, The Proverbial “Egg,” can be found here.
Part II, Breaking Out of the Shell, can be found here.
Part III: What IsThis Emerging New Life?
In Part II, I described how More Than You Wanted to Know seeks to answer psychological and empirical questions relevant to consumer protection law based not on ungrounded psychological premises or the kind of abstract theoretical reasoning that is typically associated with the classical law and economics paradigm but rather on actual psychological and empirical research. I suggested that these methodological moves explain the power of the book to take us much closer to the truth about use and sufficiency of mandatory disclosure regimes to cure a host of problems in consumer contracting.
As someone interested in methodology and the sociology of knowledge production in the legal academy, I find developments like these incredibly interesting. I am fascinated by the fact that they are often viewed as developments internal to the law and economics movement—even though they essentially dispense with some of its early guiding premises and draw on methodologies from other cognate fields.
The movement to replace classical economic assumptions about human decision-making with psychological facts is, for example, sometimes called “behavioral economics”. But what is really happening is that classical economic assumptions about human psychology are being replaced with direct psychological research into the relevant facts. Similarly, the move to replace economic modeling with rigorous empirical research is sometimes called “econometrics”. But what is really happening—at least within the legal academy—is that fewer law and economics scholars are making predictions about legal rules based merely on theoretical modeling and more are engaging in genuine empirical research. When they do this, they typically use statistical and other methods developed in the social sciences more generally—and not methods specific to the field of economics.
In my view, one of the greatest virtues of some parts of the law and economics movement is that it has been willing to revise many of its early premises and adopt methodologies from other fields when necessary to make its scholarship better track the truth. This willingness is also one of its greatest sources of continuing strength. Because of this willingness, the field has essentially been able to absorb a broad range of criticisms, while continuing to broaden in influence and produce scholarship that better tracks the truth. More Than What You Wanted to Know is a wonderful example of this development—at least when it come to curing distortions caused by the first two premises of the classical law and economics paradigm. (For a description of these 3 premises, see here.)
Still, as far as I know, there is not yet any name for the move to replace ungrounded economic assumptions about how to assess normative arguments (i.e., premise 3 from Part I) with rigorous thought developed by experts in the appropriate cognate fields. These are the fields of moral, legal and political philosophy, along with the field of meta-ethics. Corresponding to this fact, there is not yet as robust an acknowledgment of the need for this move within many influential contract law circles.
When I say I believe significant new life may be emerging in the study of contract law, I am nevertheless referring to the possibility that all three of the classical law and economics premises be replaced with rigorous lines of evidence and argumentation drawn from the correct cognate fields. I am referring to a highly interdisciplinary research program that draws on (1) our best contemporary psychological findings into decision-making and how humans operate with legal rules when asking psychological questions relevant to contract law, (2) rigorous empirical research into the consequences of different legal rules when adopted by groups with real human psychologies, and (3) philosophically well-grounded argumentation and debate over the normative propositions that are most relevant to contract law.
I am describing a hope, not an expectation—because it is we, as a field, who will decide whether this new life fully emerges.
For a range of historically contingent reasons, the classical law and economics movement may just end up serving as the early vehicle (or the proverbial “egg”) for this transition within the legal academy. I believe that would be an incredibly good thing for the study of contract law because it would essentially allow the legal academy to adapt a ready-made set of social and academic networks that are already studying this subject matter intensively and in highly influential manners. But this would also require a much greater appreciation by scholars who work within this paradigm of the need for more rigorous philosophical input on normative questions.
The result would, moreover, not just be an expanded sub-field of law and economics. It would be better described as a fully informed search for the truth. The proverbial “egg” will have given birth to something much, much better.
But we are not yet there yet. There is still too large a disconnect between moral and political philosophers and economists within the legal academy. Hence, a great deal of highly influential work on contract law still risks producing distortion. In Part IV, I will show how this problem still affects many discussions of consumer protection law. I will also make a plea that we work together to breath the right new life into contract law studies going forward.
This is the second in a four-part post by Robin Kar that serves as a sort of coda to our virtual symposium on the new book by Omri Ben-Shahar and Carl E. Schneider, More Than You Wanted to Know: The Failure of Mandated Disclosure.
Part I, The Proverbial “Egg,” can be found here.
Part II: Breaking Out of the Shell
As we all know, the law and economics movement has proven a formidable force within the legal academy, especially in relation to subjects like contract law. As recently as 2012, even Charles Fried, the author of Contract as Promise, was forced to acknowledge that “the economic analysis of law may today be the dominant intellectual approach to legal institutions generally and contract law in particular.”
Because of Omri Ben-Shahar’s training and intellectual ties, many will view More Than What You Wanted to Know as a work that is partly internal to the law and economics movement. This affiliation should help the book because it will allow the book to speak credibly to a wide range of influential contract law scholars who currently share this affiliation. The book ultimately challenges one of the early dogmas of the classical law and economics paradigm, as described in my prior post, but—because of the book’s intellectual affiliations—the book can pose this challenge in an especially effective manner.
It should nevertheless be noted that the central insights in the book arise not from anything specific to the field of law and economics but rather from rejection of the field’s first two classical premises. With respect to human psychology (see premise 1 in Part I), Ben-Shahar and Schneider do not simply assume that consumers make more rational decisions whenever more facts are disclosed to them. Instead, they canvass a wealth of psychological evidence to the contrary. This evidence shows that consumers are especially likely to make poorer decisions as their choices become more complex and unfamiliar and when those terms are dictated by sophisticated contracting parties.
When determining the likely consequences of legal rules (see premise 2 in Part I), the authors similarly avoid abstract economic modeling and turn instead to direct empirical data. They draw this empirical data from a broad range of sources, and the facts suggest that mandatory disclosure regimes have increasingly begun to harm consumers in many contexts.
One reason for this is dynamic. Over time, mandatory disclosure regimes tend to lend increasing complexity and unfamiliarity to even the most banal of transactions. In one particularly poignant example, the authors describe the $.99 purchase of an iTunes song—which was accompanied by 32 feet of complex and often incomprehensible boilerplate (when printed out in a tiny font, as illustrated on the left). One of the underappreciated consequences of mandatory disclosure regimes is that they have increasingly begun to flummox consumers in even the simplest of transactions.
In highlighting facts like these, More Than You Wanted to Know takes us much closer to the truth about mandatory disclosure regimes than classical law and economics methodologies can. Speaking from a purely methodological perspective, it is able to do this because it is willing to abandon the first two premises of the classical paradigm and replace them with something better. It seeks to answer psychological and empirical questions relevant to consumer protection law based not on ungrounded premises but rather on actual psychological and empirical research.
This is an example of the emerging new life that I see in contract law studies. It is a better life because it is more likely to track the truth.
In my next post, I will nevertheless reflect more deeply on this new life. I will ask whether we have gone far enough as a field to make it really come to life. Have we—in other words—gone far enough yet to ensure that our collective research best tracks the truth?
Wednesday, October 8, 2014
This is the first in a four-part post by Robin Kar that serves as a sort of coda to our virtual symposium on the new book by Omri Ben-Shahar and Carl E. Schneider, More Than You Wanted to Know: The Failure of Mandated Disclosure.
When an egg hatches, new life emerges. But it often takes its first steps into the world with some remnants of its newly discarded shell.
I believe that significant new life may be emerging in the study of contract law, but that too much of an old shell remains. Rather than hide the ball, let me just say that the proverbial “egg” is the classical law and economics movement. And More Than What You Wanted to Know takes us part—though only part—of the way toward that emerging new life.
Jeremy Telman has been kind enough to let me post a late addendum to this symposium so that I can explain these perceptions. I want to use this review to prompt more scholars in the field—including Ben-Shahar and Schneider—to acknowledge what we need to do as a field to get further toward the right destination in the study of contract law.
As other contributors have noted, More Than You Wanted to Know is a full-throated attack on mandatory disclosure regimes. These regimes have been widely used and accepted in many contexts for some time now. It is therefore interesting to note that almost all of the commentators here have voiced some agreement with the basic thrust of the book—even while arguing that its thesis is overly general. We are witnessing the tail end of a shift from what once seemed to be common knowledge (i.e., about the usefulness and sufficiency of mandatory disclosure to cure a host problems in consumer contracting contexts) to a very different shared understanding.
But how has this shift occurred? As someone interested in the sociology of the legal academy and how different interdisciplinary methods can combine to produce (or distort) knowledge, I want to delve further into this question. I also want to ask whether we have gone far enough, in our collective studies of contract law, in the right direction. (I should probably apologize in advance to Carl Schneider that I will focus more on contract than informed medical consent in these posts, given the nature of this blog.)
The Proverbial “Egg”
If the “egg” is the classical law and economics movement, then that is where we should start.
Interdisciplinary studies of law can obviously produce enormous insight. When methods from cognate fields are applied to the law without sufficient reflection on the validity or applicability of their guiding premises, they can, however, also produce significant distortion. In this particular case, I believe that faulty premises associated with the classical law and economics movement are part of the cause of overblown intuitions concerning the use and value of mandatory disclosure regimes.
To analyze the source of this distortion more concretely, I ask you to consider an approach to studying contract law that might seem fanciful at first. This approach combines three basic elements:
- Human Psychology. The approach starts with certain assumptions about how human psychology and decision-makings works. These assumptions are intuitively plausible to some but are not rooted in any rigorous psychological research.
- Predictions about Legal Rules. The approach then generates predictions about the consequences of legal rules by modeling interactions among hypothetical people with the psychologies presumed in premise 1 under different hypothetical legal rules. The approach thus relies on theoretical modeling instead of rigorous empirical research to make empirical predictions.
- Normative Questions. The approach is skeptical of any kind of value that is not reducible to the value of some state of affairs. Proponents of this approach are thus impatient with normative arguments that do not fit easily into the consequentialist (and/or welfarist or cost-benefit) frameworks that they best understand. People who adopt this approach are not, however, typically trained in moral or political philosophy—which are the fields that deal most directly and rigorously with normative questions. Nor are they trained in the field of “meta-ethics”—which is the study of the status or objectivity of normative judgments. People who adopt this approach are thus largely unversed in the considerations that might legitimately ground (or respond) to their skepticism. This prevents them from knowing whether their grounds for skepticism are valid. It also prevents them from knowing whether their skepticism can be limited to concepts they reject (like “rights” and “fairness”), or whether it equally affects the values they accept (like “welfare” and a person’s “good”).
On its face, an approach like this would appear to be a recipe for disaster. It studies contract law and makes numerous recommendations for legal reform, but it employs a methodology that is unmoored in the specific classes of evidence and types of argumentation that are most relevant to its professed subject matter.
But as anyone reading this blog will know, this description is far from fanciful. To make it describe something real, one need only clarify that the psychology referenced in premise 1 is homo economicus—or the classical, “rational actor” model. Then these three premises provide a pretty good description of the heart of the classical law and economics approach to studying contract law.
These three premises can also seem to lend support to the value and sufficiency of mandatory disclosure regimes to cure a host of problems with consumer contracting. Mandatory disclosure regimes purport to produce the precise information needed for rational consumers to make better choices for themselves. If people are rational actors (see premise 1), then economic modeling (as described in premise 2) can thus be used to show that these regimes should simultaneously produce overall gains for consumers who contract, overall gains in social welfare and a more efficient allocation of resources. These regimes should also work relatively automatically, or “as by an invisible hand”, in the following sense: they should produce these results without the need for any centralized state planner to know in advance which exchanges are better for specific parties. There is, moreover, nothing else to value (as per premise 3). Hence, there is nothing else that legitimately speaks to the appropriate contours of consumer protection law.
There is no doubt about it: mandatory disclosure regimes work incredibly well in (classical economic) theory. The question is whether they work in reality. In the posts that follow, I will explore that question. I will suggest that More Than You Wanted to Know takes us further toward the truth—but cannot, as it stands, take us all the way there.
Tuesday, October 7, 2014
Introducing our Guest Blogger, Robin Kar's Coda to Our Virtual Symposium on More That You Wanted to Know
Professor Robin Kar is a professor of law and philosophy at the University of Illinois College of Law. He is a faculty affiliate of the Illinois Law and Philosophy Program, the Beckman Institute for Science and Technology (in the Cognitive Psychology Research Group), the Illinois Program in Law, Behavior and he Social Sciences, and the Illinois Network for Neurocultures. He is Director of the Illinois Center for Interdisciplinary and Comparative Jurisprudence, and a Project Leader for the Illinois Program on Cultures of Law in Global Contexts. He has a PhD in philosophy, with a special focus on moral psychology, moral, legal and social philosophy, meta-ethics, rational choice and game theory, and the foundations of economics and the social sciences. Some of his work on moral psychology, the psychology of obligation, and the nature of law and legal obligation can be found in pieces like The Deep Structure of Law and Morality, The Psychological Foundations of Human Rights, Hart’s Response to Exclusive Legal Positivism, and The Two Faces of Morality.
Readers of the blog are also likely already familiar with Professor Kar’s recent SSRN Top Ten hits on contract law and theory, Contract as Empowerment: A New Theory of Contract and Contract as Empowerment Part II: Harmonizing the Case Law, along with his piece The Challenge of Boilerplate. Kar teaches contract law and wide array of jurisprudence and legal theory courses, including seminars like morals, markets and the law.
Professor Kar’s posts serve as a sort of coda to our our virtual symposium on the new book by Omri Ben-Shahar and Carl E. Schneider, More Than You Wanted to Know: The Failure of Mandated Disclosure.
Professor Kar will present his argument in four parts:
Part I: The Proverbial “Egg” suggests that three ungrounded premises of the classical law and economics movement have often caused many people to think that mandatory disclosure regimes have an unwarranted degree of support.
Part II: Breaking Out of the Shell describes More Than You Wanted to Know as emerging from the classical law and economics paradigm but as able to challenge one of its central dogmas because it is willing to depart from two of the three core assumptions associated with that classical tradition. The book seeks to answer psychological and empirical questions based on real psychological and empirical research rather than ungrounded psychological premises and abstract theoretical modeling. This explains why the book is better able to track the truth about mandatory disclosure regimes.
Part III: What Is This Emerging New Life? outlines a better and even more broadly interdisciplinary paradigm that Professor Kar sees as potentially emerging from these developments. This research program would draw not only on psychological and empirical research to answer any psychological and empirical questions relevant to contract and consumer protection law but also on a broader range of philosophical methods of argumentation to answer any normative questions relevant to these topics. Part III argues that further development toward this interdisciplinary collaboration is needed for contract law studies to better track the truth.
Part IV: Discarding the Last Remnants of the Old Shell suggests that we still have a way to go in freeing ourselves from the limitations of the classical law and economics paradigm. It describes how this problem still causes many scholars to ask the wrong normative questions when asking how best to reform consumer protection law—as illustrated both by More Than You Wanted to Know and many of the responses to it in this symposium. This has led to an increase in knowledge about the psychological and empirical facts, but even more uncertainty and less consensus over how best to reform consumer protection law in light of them. This problem can only be fully addressed by attending better to the right normative questions.
So what are the right normative questions, you ask? Stay tuned to find out!
Thursday, October 2, 2014
As we learned from reading Michelle Meyer on The Faculty Lounge today, Facebook has issued a Press Release on Research at Facebook. As we discussed previously here, Internet-based companies have decided that they will self-regulate their own research programs. Here are the highlights:
- Guidelines: we’ve given researchers clearer guidelines. If proposed work is focused on studying particular groups or populations (such as people of a certain age) or if it relates to content that may be considered deeply personal (such as emotions) it will go through an enhanced review process before research can begin. The guidelines also require further review if the work involves a collaboration with someone in the academic community.
- Review: we’ve created a panel including our most senior subject-area researchers, along with people from our engineering, research, legal, privacy and policy teams, that will review projects falling within these guidelines. This is in addition to our existing privacy cross-functional review for products and research.
- Training: we’ve incorporated education on our research practices into Facebook’s six-week training program, called bootcamp, that new engineers go through, as well as training for others doing research. We’ll also include a section on research in the annual privacy and security training that is required of everyone at Facebook.
- Research website: our published academic research is now available at a single location and will be updated regularly.
Based on the New York Times article we cited in our last post on this subject, we hoped that Internet companies would at least subject research designs to outside review. It looks like Facebook's review process is going to be entirely in-house.
Monday, September 29, 2014
The NYT had an article about e-cigarette label warnings today that was eerily appropriate given our symposium on Omri Ben-Shahar and Carl Schneider's book, More Than You Wanted to Know: The Failure of Mandated Disclosure. The reporter must have been following our blog symposium and seems to have come up with an example that supports the arguments made by Ben-Shahar and Schneider. The article explains how big tobacco companies have been putting warning labels on their e-cigarette packages that are more extensive than those on their tobacco cigarettes. There are several possible explanations for why they are doing this, ranging from the least cynical (they want to be good corporate citizens) to the more cynical (they are trying to set up their smaller e-cigarette competitors for later regulation, possibly reduce demand for e-cigs to boost sales of tobacco cigs, and protect themselves from liability).
I tend to be in the more cynical camp. Big tobacco companies are both attempting to protect themselves from liability by setting forth as many potential dangers of their product as they can, and they are positioning e-cigarettes as "just as" dangerous, if not more, than plain old tobacco cigarettes. The article notes something that readers of the book and blog already know - the disclosures have little effect on consumer purchasing decisions because nobody reads them. The strategy of big tobacco supports the arguments made by Ben Shahar and Schneider that disclosure hurts rather than helps consumers except there's one crucial difference - the companies are putting these extensive disclosures on the labels themselves. They are not mandated. By voluntarily disclosing the harms of e-cigs, big tobacco companies both protect themselves from liability and avert regulation. Doing away with mandated disclosure wouldn't prevent this kind of strategic selective disclosure --selective and strategic in the sense that these companies are only forthcoming with certain products and with certain types of disclosure. It's revealing that one of the companies claiming that e-cigarettes warrant more extensive disclosure than their tobacco counterparts is RJ Reynolds, which succesfully sued the FDA to prevent mandated graphic warnings on cigarette packages.
So - the battle about disclosure continues to rage....
Monday, September 22, 2014
We interrupt our virtual symposium on the new book by Omri Ben-Shahar and Carl E. Schneider, More Than You Wanted to Know: The Failure of Mandated Disclosure, to bring you this news story about the dangers of non-disclosure. Sunday's New York Times, features a front-page article about people who discover that doctors unknown to them assisted in their surgeries. The doctors are sometimes out of network, and the costs can be astronomical.
For example, the Times story begins by telling of surgery performed on Peter Dreier. Most of the bills that followed were expected, but there was a $117,000 bill from an "assistant surgeon" of whose existence Dreier claims to have been unaware. It sounds like Mr. Dreier was the rara avis who actually took advantage of medical disclosure forms to eductate himself about his options and the costs. And so he was blindsided by the six-digit bill from an apparently undisclosed doctor.
[Just an aside here. $117,000 for three hours of work makes no sense in any context. It makes far less in this context, in which the "primary surgeon" accepted a negotiated fee of $6200.]
The Times also reports on Patricia Kaufman, who received bills totalling $250,000 from two plastic surgeons who sewed up an incision. She had had previous surgeries in which residents sewed up the incisions at a much lower cost. She and her husband claim that they had no idea who these doctors were until the bills started showing up.
According to the Times, insurance companies often pay the bills rather than fight, encouraging the practice. Some states, including New York, are now seeking to regulate such "drive by" surgeries. It is not clear why the insurance companies would pay for services that had not been disclosed in advance. Perhaps this is grist to the anti-disclosurite mill after all, if the out-of-network surgeons were in fact disclosed somehow in the stack of informed consent papers.
Monday, September 15, 2014
Last week, I was sitting in a waiting room while awaiting an oil change. CNN was on (too loudly and inescapably for my tastes, but I know my tastes are idiosyncratic). In urgent tones, the anchors repeatedly warned us that they had disturbing and graphic video that we might not want to watch. And then they played it. And then they played it again. They played it at actual speed; they played it in slow motion. They dissected it and discussed it, with experts and authorities, between commercial breaks and digressions into other "news," for the entire time I waited for the mechanics to finish with my car. It took over an hour, but that's another story . . .
The video showed a now-former NFL player hit a woman in an elevator, knocking her unconscious. The woman was his fiancee, Janay Palmer, and she is now his wife. What are we to conclude based on the grainy images that we watch because we can't bring ourselves to look away? My first conclusion is that Janay Palmer would not want us to be watching. My more tentative conclusion would be that every time we watch that video, we add to her humiliation and degradation.
At what point did Ms. Palmer give her consent to be videotaped, and at what point did she give consent to have this videotape used in this manner? Let's assume that the surveillance video had a useful purpose -- policing the premises to create a record in case a crime was committed. Let's also assume that we all are aware that when we are in public spaces, we know that video cameras might be present. If this video tape were shared with the police and used to prosecute a criminal, I think there would be strong arguments that Ms. Palmer gave implicit consent for the use of the surveillance video for such purposes. But how did the tape get to TMZ and then on to CNN? Did somebody profit from trafficking in the market for mass voyeurism?
It may be that we think that her consent is not required. We all know that we can be digitally recorded whenever we appear in public. That's just life in the big city in the 21st century. But perhaps we think that because we suffer from heuristic biases and believe that we and people we care about will never end up being the one being shown degraded and humiliated over and over again on national television and the Internet. Perhaps if we were less blinkered by such biases we would not ask whether Ms. Palmer has a right not to be associated with those grainy elevator-camera images. We would ask whether we have any right to view them.
Monday, September 8, 2014
In our first post about the Salaita case, we lamented how few posts really wrestled with the contractual (or promissory estoppel) issues in the case. Professor Kar’s post is the most detailed investigation of the contractual issues to appear to date. We also queried whether Salaita's potential constitutional claims against the University of Illinois might turn on the question of whether or not he had a contract with that institution, which is also the institution at which Professor Kar (pictured, at right) teaches. Kar notes:
Critics of the Chancellor’s decision argue that, even if there was no contract, Salaita’s rights to academic freedom vis-à-vis the University of Illinois should apply with equal force at the hiring as at the firing stage.
Professor Kar seems to disagree. He does not rule out entirely the possibility of constitutional and academic freedom claims in the absence of a contract, but he does note that "the existence of a contract should change the nature of the underlying arguments on both sides of this case."
Peofessor Kar's analysis is both passionate, in dealing with an issue that is creating genuine anguish at his institution, and dispassionate, in treating the Salaita case as a forum for the elaboration of his theory of contract law as empowerment. Based on the publicly-available facts, Professor Kar thinks Salaita's contractual claims are quite strong. As he puts it, "If the publicly known facts are all there is to know about this case, then I believe there very likely was a contract in this case, and that it may well have been breached." This is so because (in short), Salaita's offer letter incorporated by reference the American Association of University Professors' (AAUP) principles of academic freedom, and the AAUP interprets those principles to require (at least) warnings hearings before someone in Salaita's position can have his offer letter revoked. At this point, Professor Kar argues, his view of contract as empowerment becomes relevant to the analysis:
The power of the marketplace—in both academic and non-academic contexts—depends on parties’ capacities to make commitments that have certain objective elements to them. In this particular case, this means that the condition of Board of Trustee approval gave the Board some authority to refuse Salaita’s appointment—but not necessarily the authority it subjectively believes it has. If the Board’s unwillingness to approve this appointment reflects an undisclosed and idiosyncratic understanding of its authority, which diverges too sharply from the shared understandings of the national academic community, then there is likely a contract here. And it may well have been breached.
Professor Kar then proceeds to a discussion of the way out for the University of Illinois, which probably would involve a retreat. If the facts are as Professor Kar believes them to be, the Chancellor should "admit that the Salaita decision was in error and state that this matter is—properly speaking—outside of her hands."
I do not disagree with Professor Kar's analysis but I would like to push him on one point that I think is vital in this case and in his theory of empowerment generally. As a normative theory, I find Professor Kar's theory attractive, but I wonder about its applicability to situations of grossly unequal bargaining power, and I believe the Salaita case is such a situation. Professor Kar takes up this issue in earnest at the end of the second part of his work on contract as empowerment On page 73, Professor Kar acknowledges that parties "rarely enter into contracts from perfectly equal bargaining positions" and he notes that, "[i]t would therefore be significantly disempowering if parties were only bound by contracts negotiated in these circumstances."
But parties are routinely bound in circumstances when they have no real bargaining power. In such circumstances, even if Professor Kar is right that contracts law ought to be about empowerment, much of contract law (and this point has been made at great length by Peggy Radin, Nancy Kim, Oren Bar-Gill and others), is currently extremely disempowering for ordinary consumers and even for small businesses when (as in Italian Colors) they have to contract with corporate behemoths.
Professor Kar's assessment of Salaita's contractual claims turns on communal understandings of the contractual obligations that arise in such circumstances:
The University of Illinois is part of a much larger academic community, which extends well beyond the confines of Illinois. Its contractual interactions with other members of this community will thus be subjected to some tests for consistency with national understandings of how these interactions typically work. This includes national understandings about the appropriate relationship between government-appointed entities, like the Board of Trustees, and faculty decisions about hiring at academic institutions that aim to pursue knowledge impartially and in the absence of political influence.
As the conversation that has been taking place on the blogosphere thus far suggests, there may be no national consensus on the subject. Some contracts scholars will agree with Professor Kar; others, like Dave Hoffman, think that Salaita's contractual and promissory estoppel claims are weak, and they are weak precisely because Salaita lacked the bargaining power to protect himself. And if Salaita's case were to go before an adjudicatory body, it will not be decided based on whether contracts ought to be empowering but on whether the already empowered University of Illinois can escape any contractual obligation that might empower Professor Salaita.
Monday, August 25, 2014
As Jeremy Telman previously noted, the unhiring of Steven Salaita has caused quite a stir in academic circles. There was even an article in the Chronicle of Higher Education briefly discussing the contractual issues, which included the arguments made by Prof. Michael Dorf and Prof. David Hoffman. I think they both have good arguments but I tend to think this is a real contract and not an issue of promissory estoppel. The reason I believe this has to do with what constitutes a "reasonable interpretation" under these circumstances. I think both parties intended a contract and a "reasonable person" standing in the shoes of Salaita would have believed there was an offer. The offer was clearly accepted. What about the issue regarding final Board approval? Does that make his belief there was an offer - which he accepted - unreasonable? I don't think so given the norms surrounding this which essentially act as gap fillers and the way the parties acted both before and after the offer was accepted. I think the best interpretation - really, the only reasonable one given the hiring practices in academia - is that the Board approval was a rubber stamp but one that could be withheld if the hired party did something unexpected, like commit a crime. In other words, I think there was an offer that was accepted and that the discretionary authority of the board to approve his appointment was subject to the duty of good faith and fair dealing - i.e. the Board would only withhold approval for good cause. I don't think this was a conditional offer - the language would have to be much more explicit than it seemed to be and to interpret it that way would constitute a forfeiture (which courts don't like) - and yes, I considered whether it could be a condition to the effectiveness of a contract. That question caused me some angst but I still don't think it was given the hiring norms in general, and the way the parties acted.
There was, however, an implied term in the contract that Salaita would not do anything or that no information would come out that would change the nature of the bargain for the university. For example, if it turned out that he didn't really have a PhD or that he plagiarized some of his work, that would be grounds for the Board to refuse to approve his appointment. In that case, the Board could refuse to approve his hiring without breaching its good faith obligation.
The real dispute here is whether Salaita's tweets constituted a breach of that implied term (i.e. did it undermine the bargain that the university thought it was getting?) I think that's really what the disagreement in the academic community is about and why the real contractual issue has to do with interpretation - and the meaning of academic freedom.
Wednesday, August 13, 2014
Today's New York Times features an article aptly titled (in the print version) "Under the Microscope." The article describes researchers' attempts to grapple with the ethical issues relating to projects such as Facebook's experiment on its users, about which we have written previously here and here. According to the article, researchers both at universities and at in-house corporate research departments are collaborating on processes to formulate ethical guidelines that will inform future research that makes use of users' information.
The article states that Facebook has apologized for its emotion experiment, in which it manipulated users' feeds to see if those users' own posts reflected the emotional tone of the posts they were seeing. It's not really clear that Facebook apologized for experimenting on its users. As quoted on NPR, here is what Facebook's Sheryl Sandberg said on behalf of the company:
This was part of ongoing research companies do to test different products, and that was what it was; it was poorly communicated . . . . And for that communication we apologize. We never meant to upset you.
As the Washington Post noted, Sandberg did not apologize for the experiement itself. Seen in its full context, Sandberg's statement is more akin to OKCupid's in-your-face admission that it experiements on its users, about which Nancy Kim posted here.
But the Times article focuses on Cornell University's Jeffrey Hancock, who collaborated with Facebook on the experiment. He seems to have no regrets. For Hancock, researchers' ability to data mine is to his field what the microscope was to chemists. Or, one might think, what the crowbar was to people doing research in the field of breaking and entering. Hancock is now working with people at Microsoft Research and others to lead discussions to help develop ethical guidelines applicable to such research.
The Times quotes Edith Ramirez, Chair of the Federal Trade Commission on the subject. She says:
Consumers should be in the driver’s seat when it comes to their data. . . . They don’t want to be left in the dark and they don’t want to be surprised at how it’s used.
By contrast, here is the Times's synopsis of Professor Hancock's views on how the ethical guidelines ought to be developed:
Companies will not willingly participate in anything that limits their ability to innovate quickly, he said, so any process has to be “effective, lightweight, quick and accountable.”
If the companies are subject to regulation before they can experiment on their users, it does not really matter whether or not they willngly participate. And the applicable standards have already been established under Institutional Review Board (IRB) rules. Significantly, as reported here in the Washington Post, although Professor Hancock works at Cornell, his participation in the Facebook study was not subject to Cornell's IRB review. In our previous posts, we have expressed our doubt that the Facebook study could survive IRB review (or that it yielded the information that it was supposedly testing for).
The Times article does not indicate that any of the people involved in devising rules for their own regulation have any expertise in the field of ethics. Why is letting them come up with their own set of rules in which they will "willingly participate" any better than expecting the wielders of crowbars to design rules for their safe deployment?
Wednesday, August 6, 2014
Friday, August 1, 2014
Readers of this blog should already be familiar with the famous Harrier jet case in which plaintiff John Leonard attempted to treat a Pepsi commercial as an offer for the sale of a Harrier jet in exchange for 7 million Pepsi points or the equivalent in cash, which came to about $700,000. In Leonard v. Pepsico. (edited version available here), Judge Kimba Wood ruled in Pepsico's favor, finding that the commercial that Leonard mistook for an offer was actually a joke.
We have learned via the Contracts Prof listserv that a Harrier Jet was recently sold at auction for £ 105,800 -- that is under $200,000. In this case, the auctioneer specified that the jet was being sold "for display purposes only and is not currently airworthy." It doesn't even come with any weapons systems. Bummer. Still, although the Pepsi commercial suggests an operational Harrier (there is no indication of weapons capabilities), Leonard's offer of $700,000 actually turns out to be way too high for a non-functional jet. So, if instead of showing a kid landing a jet outside of his school, the commercial had shown the same kid impressing his friends with the grounded jet in his backyard, Judge Wood would have had a harder time construing the ad as a joke.
Since the notice of the jet for auction claims that this is the first time a Harrier has been sold at auction, Pepsico would have had a hard time getting its hands on a jet. Tthat would not have bothered Mr. Leonard, who more likely was interested in the difference in value between a functioning Harrier and the $700,000 he offered. However, if the court were able to discover the actual value of a non-operational jet, it would have awarded Mr. Leonard no damages for the breach.
Thursday, July 31, 2014
Imagine a world where specific performance of contracts is no longer a cause of action because the contracts themselves automatically execute the agreement of the parties. Or where escrow agents are replaced by rule- and software-driven technology. Imagine instantaneous recording of property records, easements and deeds. Imagine a world where an auto owner who is late on his payment will be locked out of his car. While these scenarios may seem to come from a futuristic fantasy world, innovations offered by the Bitcoin 2.0 generation of technology may create a world where these seeming marvels are an every-day occurrence, and technology renders some contract causes of action obsolete.
How could that be? Hinkes explains:
Bitcoin and other virtual currencies are powered by blockchain technology, which maintains and verifies all transactions in that virtual currency through a massive, publically available ledger. The transparency created by the blockchain eliminates the need for trusted third parties, like credit card processors or banks, to take part in these transactions. Because anyone can see the transactions, virtual currency cannot be transferred to more than one party, or “double spent,” which is a key feature that preserves the integrity of the blockchain system. This same blockchain technology can be purposed to facilitate, verify and enforce the terms of agreements automatically without the need for human interaction using what are termed “smart contracts.”
The blockchain, of course, cannot physically enforce a contract, or actually compel a person or entity to do anything. Instead, the blockchain can be used to enforce certain pre-determined rules that can move an asset from person to person by agreement. Ownership of goods could be associated with a specialized coin, which can be transferred between parties along with payment in a virtual currency system, or in a specialized implementation of blockchain technology.
Hinkes provides an example of how the technology can ensure performance:
Examining a simple real estate transaction can demonstrate how smart contracts could drastically alter the way business is conducted. Presently, Party A and Party B would enter into a contract that requires Party A to pay $200,000.00 to Party B in exchange for Party B agreeing to convey title to Party B’s condominium unit to Party A upon receipt of payment. If Party A pays the money, but Party B later refuses to convey title, Party A is required to hire an attorney to seek specific performance of that contract, or to obtain damages. The determination of the outcome will be made by a third party- a judge, jury, or arbitrator.
Using a smart contract, however, avoids the potential for one party to perform while the other refuses or fails to perform. Using a smart contract, Party A and Party B can agree to the same transaction, but structure it differently. In this scenario, Party A will agree to pay $200,000.00 worth of virtual currency to Party B, and Party B will agree to transmit the title to the condominium in a specialized type of coin on the blockchain. When Party A transfers the virtual currency to Party B, this action serves as the triggering event for Party B, which then automatically sends the specialized coin which signifies the title to the condominium at issue to Party A. The transfer is then complete, and Party A’s ownership of the condominium is verifiable through a publically available record on the blockchain.
Tuesday, July 29, 2014
Translation: That's just how it is. Get over it. It's your fault for being so naive - OKStupid?