Monday, April 2, 2018
Allow me to share some good “personal” news for once: I just received word that all levels of the USD administration has voted for granting me tenure! The Board of Regents will cast its final vote on this in early May.
As some of you will know, it has not been an easy process. I encountered several tiring and stressful procedural hurdles with the USD administration, but the law school was at all times supporting me intensely just as I only got excellent scholarship reviews, so it all ended well! I could also not have done this without the excellent, tireless, and creative legal assistance not to mention very highly encouraging support of David Frakt, Esq.
Sunday, March 11, 2018
I have the great honor and pleasure of posting the below guest blog written by noted environmental scholar Dan Farber, the Sho Sato Professor Of Law and the Faculty Director of the Center For Law, Energy, & The Environment at UC Berkeley.
There has been increasing interest in the environmental law community in the role that private firms can play in sustainability. For example, many major corporations bemoaned Trump’s withdrawal from the Paris Agreement and pledged to continue their own environmental efforts. In fact, as a recent book by Michael Vandenbergh and Jonathan Gillian documents, these firms already have their own programs to cut emissions. It’s worth thinking about the ways in which contracts between these companies could serve some of the same functions as government action.
Group action, based on contracting, could be a way of amplifying these efforts by individual firms. One possibility would stick pretty close to the structure of the Paris Climate Agreement. Under the Paris Agreement, nations agree to engage in certain types of monitoring and to implement emissions cuts that they set themselves. There are already ways that corporations can publicly register their climate commitments. The next step would be to
enter into contracts to engage in specified monitoring activities and report on emissions. The goal would be to make commitments more credible and discourage companies from advertising more emissions efforts than they actually undertake.
The contracts could be structured in different ways. One possibility is for each company to contract separately with a nonprofit running a register of climate commitments. The consideration would be the nonprofit’s agreement to include the company in the register and require the same monitoring from other registered companies. An alternative structure would be for the companies making the pledge to contract with each other, ensuring that there would be multiple entities with incentives to enforce the agreement against noncompliant firms. The biggest contract law issue is probably remedial. It would be difficult to prove damages, so a liquidated damage clause might be useful, assuming the court could be persuaded that significant liquidated damages are reasonable. An alternative set up would be to require representations by the company about compliance with monitoring protocols at they make their reports, providing a basis for a misrepresentation action.
We can also imagine something like a private carbon tax in which companies pledge to pay a nonprofit a fixed amount based on their carbon emissions. The nonprofit would use the funds to finance renewable energy projects, promote sustainability research, or fund energy efficiency projects such as helping to weatherize houses. Such pledges would probably be enforceable even without consideration under Cardozo’s opinion in Allegheny College. Damages would presumably be based simply on the amount of unpaid “taxes.”
It’s also possible to think in terms of a private cap-and-trade scheme, something like the ones used by California and by the Northeastern states. In these markets, governments set caps on total emissions and auction or otherwise distribution allowances, each one giving the owner the right to emit a single ton of carbon. In the contractual version, firms would agree to create a market in carbon allowances and to buy as many allowances as they need to cover their emissions. For instance, firms could agree to cut their emissions on a schedule of, say, 2% per year for five years. Every year, they would get allowances equal to their current target, which could be traded. Firms that were able to cut their emissions more than 2% could recoup the cost by selling permits to firms that found it too expensive to make their own cuts. Each firm would have to be bound contractually to pay for purchased allowances coupled with an enforceable obligation to achieve the target. If firms fail to buy the needed allowances, the measure of expectation damages seems to be the market price of the allowances the contract required them to purchase from other firms.
One advantage of government regulation is that the government can assess penalties, while contract law does not enforce penalties. For that reason, arguments for substantial compensatory damages will be crucial to provide an incentive for compliance. There will also be questions about how to structure the contracts (between firms or only between each firm and the nonprofit administering the scheme). And of course, all the usual issues of contract interpretation, materiality of breach, etc., will surface. (If nothing else, this could be the basis for an interesting exam question.)
Whether any of this is practical remains to be seen. There are also potential antitrust problems to contend with. But it is intriguing to think about ways that private contracting could be used to address societal issues such as climate change, particularly in situations where the government seems unlikely to act. There might be real gains from using private-law tools like contract to address public-law problems.
Monday, December 11, 2017
Were you aware of this? A first-of-its-kind study exploring the relationship between specific law school courses and components of the bar exam has identified Contracts as making the greatest contribution to performance on the Multistate Bar Examination among first-time takers. Most of the other MBE-subject courses showed no significant contribution to overall MBE performance. Austin, Christopher, and Dickerson, Will I Pass the Bar Exam?: Predicting Student Success Using LSAT Scores and Law School Performance, 45 Hofstra Law Review 753, 772 (2017), available here: http://www.hofstralawreview.org/wp-content/uploads/2017/06/BB.2.Austin-et-al.NEW_.pdf
Hat tip to Otto Stockmeyer for this story!
Tuesday, November 21, 2017
As widely reported elsewhere such as by David Frakt in The Faculty Lounge, law schools seem to be turning desperate to hide their student recruiting practices and ABA communications (see, e.g., Desperation Times at Thomas Cooley). That blog post was cited to by the ABA in its brief in opposition to a motion filed by the Cooley law school for a temporary restraining order and preliminary injunction in an attempt to prevent the ABA from publishing a letter online stating Cooley's noncompliance with at least one accreditation standard.
Of course, law students choosing to attend law school execute legally binding contracts with their schools. So do employees choosing to work for these schools, many of which seem to be on the brink of discontinuation of operations. For how much longer can we as law schools continue defending _not_ telling applicants the real truth about their prospects for passing the bar given our applicants' LSAT scores which are, we have to admit, highly determinative in predicting ultimate bar passage rates? Is what we do ethical and professional? Do we even follow contract laws against fraud in the inducement, or torts fraud laws, when we as schools have information that could and likely is crucial to applicants' decision-making?
David Frakt developed what he calls a "risk band" that correlates LSAT scores and students' risk of failing the bar. Taking that even further, shouldn't applicants be told their _individual_, percent-wise chance of passing the bar? If, for example, students know that with an LSAT score of 143 (this is just a random example), they have virtually zero chance of passing the bar, would they still execute a three-year contract with a law school that may cost them upward of $100,000? I doubt it. More honesty and transparency is clearly required in both the law school hiring and admissions world.
Sunday, October 29, 2017
As reported on The Hill and in several other national and international news outlets, tiny Montana energy company Whitefish Energy – located in Interior Secretary Ryan Zinke’s very small hometown – stands to profit greatly from its contract with the Puerto Rico Electric Power Authority. That’s fine, of course. However, highly questionable issues about the contract have surfaced recently. For example, Whitefish very famously prohibited various government bodies from “audit[ing] or review[ing] the cost and profit elements of the labor rates specified herein.”
What were those? The Washington Post reports that under the contract, “the hourly rate was set at $330 for a site supervisor, and at $227.88 for a ‘journeyman lineman.’ The cost for subcontractors, which make up the bulk of Whitefish’s workforce, is $462 per hour for a supervisor and $319.04 for a lineman. Whitefish also charges nightly accommodation fees of $332 per worker and almost $80 per day for food.” Another news source notes that “[t]he lowest-paid workers, according to the contract, are making $140.26 an hour. By comparison, the minimum wage in Puerto Rico is $7.25 an hour … [T]he average salary for a journeyman electrical lineman is $39.03 per hour in the continental U.S. However, a journeyman lineman on Whitefish Energy's Puerto Rico project will earn $277.88 per hour.”
Little wonder why the company did not want anyone to “audit or review” its labor rates. If it wasn’t for the apparent “old boy”/geographical connections that seemed to have led to this contract to have been executed in the first place, hopefully no Puerto Rican official would have accepted this contract in the form in which it was drafted.
But it doesn’t end there. When the San Juan mayor called for the deal to be “voided” and investigated, Whitefish representatives tweeted to her, “We’ve got 44 linemen rebuilding power lines in your city & 40 more men just arrived. Do you want us to send them back or keep working?”
To me, this entire contract to violate several established notions of contract law such as, perhaps, undue influence or duress (in relation to contract formation but perhaps also, if possible, to continued contractual performance), bad faith, perhaps even unconscionability, which is a alive and well in many American jurisdictions.
This could work as an interesting and certainly relevant issue-spotter for our contracts students. It also gives one a bad taste in the mouth for very obvious reasons. It will be interesting to see how this new instance of potentially favoring contractual parties for personal reasons will pan out.
Wednesday, October 25, 2017
Here is your classic Parol Evidence Rule and oral contracts case, diamonds, faulty translations, millions of dollars, and all.
In 2009, David Daniel invested $3.35 in a 50% ownership interest in the jewelry and coin business Continental Coin, thus co-owning it with Nissim Edri. The partnership agreement was oral only. In 2014, Daniel sought to sell his interest. Edri agreed to pay half of the initial contribution as well as some other amounts for a total of $4.2 million. Edri could not pay this amount and thus suggested Daniel taking approx.. 95 diamonds from the inventory instead. This time, the parties did get a writing that, however, was in Hebrew.
The problem with that was that Edri could not understand the first two pages and subsequently did not agree with the poorly translated version of the contract. This stated, among other things (my emphasis):
“We the undersigned, David Daniel and Nissim Edri, hereby declare, in full faith, that the merchandise to be collected today, Friday, 2/21/2014 from CONTINENTAL COIN & JEWLERY CO is and [sic] a payment in full complete repayment for David Daniel's investment in CONTINENTAL COIN & JEWELRY in the sum total of $4,000,000.
“This agreement is signed with a complete understanding that, in the event there are any adjustments to be made between David Daniel and Nissim Edri, they will be handled with good will and in complete consent by both parties.
“David takes from the partnership four million dollars in merchandise that was evaluated by the company while he was a partner[.]”
Of course, a dispute arose as to the true value of the 95 diamonds collected. Daniels claims they were worth less than $2 m. Edri responded that if Daniel was not satisfied with the diamonds, he could return the merchandise in its entirety whereupon Edri would sell them and pay Daniels as each was sold. Daniels brought suit, citing to their prior oral agreement to deliver diamonds worth $4m and to an agreement on the valuation method, which was to be settled in good faith.
As you can guess, the court made short shrift of Daniels’ attempt to bring in any prior oral agreements on what was to happen if the diamonds delivered were actually not worth $4 m. Said the court: “Daniel contends the merchandise he collected upon signing the written agreement was worth substantially less than $4 million under the valuation method specified in the parties' former oral agreement. In direct conflict with that claim, the written agreement provides that “the merchandise” he collected was “a payment in full complete repayment For David Daniel's investment in CONTINENTAL COIN & JEWELRY in the sum total of $4,000,000.” Because Daniel's claim was premised on a purported oral agreement that was inconsistent with the integrated terms of a final written agreement, the trial court properly rejected his breach of oral contract claim under the parol evidence rule.
So there. Perhaps out $2m. Goes to show that you can never really trust anyone in contractual processes, not even apparent friends.
The case is David Daniel v. Nissim Edri, et al., 2017 WL 4684347
Monday, October 2, 2017
A contract worth $11 b. Two such major parties as Yahoo!, Inc. and SCA Promotions, Inc. And still the contract does not specify precisely what the payments due are supposed to be for.
In 2014, Yahoo wanted to sponsor a perfect bracket contest in connection with the 2014 NCAA Men's Basketball Tournament, with a $1 billion prize for any contestant who correctly predicted the winner of all 63 games. SCA provides risk management for marketing and prize promotions. In return for a fee, SCA agreed to pay the $1 billion prize if any contestant won the contest.
Two invoices, dated December 27, 2013, were attached to the Contract with continuous pagination. According to the second invoice, the contract fee was $11 million. Yahoo owed an initial deposit of $1.1 million to SCA “[o]n or before December 31, 2013”; the remaining $9.9 million was due to SCA “[o]n or before February 15, 2014.”
The contract permitted Yahoo to cancel the contract with fees varying depending on when Yahoo cancelled. The relevant provision read as follows:
Cancellation fees: Upon notice to SCA to be provided no later than fifteen (15) minutes to Tip-Off of the initial game, Yahoo may cancel the contract. In the event the contract is cancelled, Yahoo will be entitled to a refund of all amounts paid to SCA subject to the cancellation fees set forth in this paragraph … Should the signed contract be cancelled between January 16, 2014 and February 15, 2014, a cancellation penalty of 50% of the fee will be paid to SCA by Sponsor (emphasis added).
Yahoo subsequently cancelled, but argued that it only owed SCA a cancellation fee of $550,000 because “50% of the fee” means 50% of the $1.1 million that Yahoo had already paid to Yahoo as an interim payment. SCA argued that the cancellation fee was $5.5 because “50% of the fee” means 50% of the $11 million total contract fee.
The Fifth Circuit Court of Appeals agreed with SCA: “The district court determined that the Contract's terms do not expressly set an $11 million fee. According to the district court, nowhere does the Contract specify or identify the invoices, when they will be paid, or otherwise provide that the fee is $11 million. But the Contract references invoices several times, and it provides that “this contract, including exhibits and attachments, represents the entire final agreement between Sponsor [Yahoo] and SCA, and supersedes any prior agreement, oral or written.” Although the Contract does not explicitly identify the invoices to which it refers, two invoices are attached to the Contract with pagination continuous with the rest of the Contract … It is clear from the Contract's terms that the invoices are part of the Contract. See In re 24R, Inc., 324 S.W.3d 564, 567 (Tex. 2010) (“Documents incorporated into a contract by reference become part of that contract.”). Accordingly, the district court's conclusion that the Contract does not specify an $11 million fee was in error.”
Once again, students and practitioners: be clear when you draft documents! Unambiguous language and specific references can be worth millions, if not billions, of dollars.
The case is SCA Promotions, Inc., v. Yahoo!, Inc., 868 F.3d 378 (Fifth Cir. 2017).
Friday, July 28, 2017
Our friend and esteemed colleague, Professor Charles Calleros, has kindly sent the following as a guest contribution to the ContractsProf Blog. Enjoy!
Recently Val Ricks has collected a number of essays from colleagues on best and worst cases for the development or application of contract law. In addition to participating in that project, Charles Calleros invites faculty to upload and post links to essays about their favorite cases as teaching tools (regardless whether the cases advance the law in an important way). He starts the ball rolling with this Introduction to his essay on "Why Pyeatte v. Pyeatte Might be the Best Teaching Tool in the Contracts Casebook":
Pyeatte v. Pyeatte, a 1983 decision of the Arizona Court of Appeals, did not break new ground in the field of contracts. Nonetheless, I assert that it is one of the best pedagogic tools in the Contracts casebook, for several reasons:
- * The facts are sure to grab the attention of first-semester law students: A law grad reneges on a promise to support his ex-wife through graduate school after she supported him through law school during their marriage;
* This 1980’s opinion is written in modern plain English, allowing students to focus on substance, while also learning a few necessary legal terms of art.
* After their immersion in a cold and rather unforgiving bath of consideration and mutual assent, students can finally warm up to a tool for addressing injustice: quasi-contract;
* The opinion’s presentation of background information on quasi-contract provides an opportunity to discuss the difference between an express contract, an implied-in-fact contract, and an implied-in-law contract;
* Although the wife’s act of supporting her husband through law school seems to beg for reciprocation or restitution, students must confront judicial reticence to render an accounting for benefits conferred between partners in a marriage, exposing students to overlap between contract law and domestic relations law;
* The appellate ruling of indefiniteness of the husband’s promise – presented in a later chapter in my casebook, but looming vaguely in the background of the discussion of quasi-contract – invites critique and perhaps even speculation that the appellate panel felt comfortable denying enforcement of the promise precisely because it knew it could grant restitution under quasi-contract; and
* The court’s admonition that expectation interest forms a ceiling for the calculation of restitution reveals a fascinating conundrum that brings us back to the court’s ruling on indefiniteness. . . .
You can find the whole essay here.
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?
Thursday, March 30, 2017
Teaching Spotlight: "Reflections on Teaching the First Day of Contracts Class" (Norman Otto Stockmeyer - Western Michigan)
We at ContractsProf Blog love to highlight recent scholarship by our readers, but we are fans of teaching, as well. If you are the author of a recent work of contracts or commercial law scholarship or of teaching-related materials that you have posted on SSRN, send me (Mark Edwin Burge) a copy of your abstract or summary along with an SSRN link, and we may spotlight your work here. Today's spotlight is on an essay by Otto Stockmeyer.
Reflections on Teaching the First Day of Contracts Class
Norman Otto Stockmeyer (Western Michigan University Cooley Law School)
A veteran of the law school classroom offers his thoughts on why Contracts is the most significant course in the first-year curriculum, why the study of contract law should begin with the subject of remedies, and why the “hairy hand” case of The Paper Chase fame makes an ideal starting point. The author also shares his first-day advice on how to succeed in law school. Along the way he explains why he prefers a problems-based casebook, opposes use of commercial briefs and outlines, and makes robust use of a course website.
SSRN link: https://ssrn.com/abstract=2927249
Wednesday, March 22, 2017
The conference is over but the scholarship lives on. This is one of a series of posts highlighting several KCON XII presenters who graciously provided me with abstracts or summaries of their presentations.
A PROPOSAL TO ELIMINATE UCC § 2-315
Robert Brain, Loyola Law School, Los Angeles
It is my contention that UCC § 2-315, the provision on the implied warranty of fitness for a particular purpose, is: (1) unnecessary; and (2) causes more problems than it solves. As such, I believe it should be eliminated from the UCC.
The implied warranty of fitness for a particular purpose is unnecessary because a fitness case is, in truth, an express warranty case and can be analyzed under § 2-312. The only difference from what the Code now recognizes as an express warranty situation and a fitness situation is that the attribute of the good comes initially from the buyer and not the seller. However, in both cases that parties are contracting based on a shared belief that the good has certain, specified (not implied) qualities. This can be seen by the two situations below:
Situation One: A scuba diver walks into a dive shop, looking for a watch that will be waterproof down to 200 feet. She tells the sales associate that she’s looking for a watch for a deep dive. The clerk says, “This one is guaranteed to be watertight down to 200 feet.” She buys the watch.
Situation Two: The same woman walks into the same shop and talks to the same associate. She says, “I’m doing deep diving, and am looking for a dive watch that will stay watertight down to 200 feet.” The associate picks up the same watch as before, and says, “Here you go.” The woman buys the watch.
If the watch starts leaking at 60 feet, under current law, the woman would sue for breach of express warranty under Situation One, but would have to sue for breach of the implied warranty of fitness under Situation Two. The legitimate expectation of the consumer is identical in the two situations and should be analyzed identically. If the words and actions of the associate in Situation Two are taken as affirming the 200 foot watertight attribute initially broached by the buyer, there is no difference between the two. As such, what are now fitness cases could, and should, be analyzed as breaches of express warranty.
Conceptually it is difficult to justify the fitness warranty as an “implied” warranty. In the merchantability cases under § 2-314, it is the attribute of the good – that it is of ordinary quality, for example – that is implied into the transaction. But under § 2-315, the attribute of the good is expressed; what is “implied” is some representation by the seller as to that expresses attribute, but as noted above, the words and actions of the seller can easily be viewed as communicating that the seller is warranting the attribute under existing law. It is an “implied” warranty in the same way we say a contract by conduct is an “implied-in-fact” contract. But we treat implied-in-fact contracts as if they were express contracts, and we should so the same for fitness.
Another issue is that courts have problems determining whether particular cases should be analyzed as a fitness or a merchantability case. For example, suppose the buyer asks for “heavy-duty hiking boots” and suppose the shoes come apart upon their first wearing. Is the proper claim that the boots are not fit as ordinary heavy-duty hiking boots (or even as just boots), or is it a fitness problem because they do not measure up as heavy-duty boots? Courts have struggled with this issue from the first English case in which the fitness warranty was birthed.
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.
Friday, March 10, 2017
The conference is over but the scholarship lives on. This is one of a series of posts highlighting several KCON XII presenters who graciously provided me with abstracts or summaries of their presentations.
Choosing “Choice” in the Age of ART: Designer Babies and the Case for Genetic Selection
Deborah Zalesne (City University of New York School of Law)
While rapidly developing Assisted Reproductive Technology (“ART”) such as in vitro fertilization, surrogacy, artificial insemination, IUI, fertility medication, intracytoplasmic sperm injection, cryopreservation, and pre-implantation genetic diagnosis, offer new pathways to parenthood, this capacity has challenged our collective notions about family. Ethical questions that arise require rethinking the traditional view of family as something “organic” and “natural” and as a “self-contained unit.”
New technologies allow for far-reaching reproductive decision-making that was not possible even a generation ago. Parents can now select the sex, race, or other characteristics of an embryo to be implanted. Parents can also choose to cryopreserve their embryos to allow for implantation in the future, or choose to terminate or reduce a pregnancy because of birth defects or multiples. With the opportunities presented by reproductive autonomy and choice come legal and ethical chaos of sorts, and a division that pits consent against state and public interest.
As these technologies develop, questions arise as to whether, as a society, we should allow market forces and private contracting to control their use – in effect allowing the market to decide what is right or wrong. Is leaving development of reproductive technology to the demands of the market equivalent to saying nothing is right or wrong – only efficient or inefficient, wealth maximizing, or not wealth maximizing? Or, rather, does the market represent the natural course of change and the inevitable direction of society, with regulation of technology in these areas simply inhibiting progress? There is no single answer to these questions that can be applied across the board to all the various existing and emerging technologies. I argue, however, that where there is tension between individual reproductive choice and other moral values, the use of reproductive technologies is most often best left to the choice of individuals and the innovation of the market.
My presentation highlights some of the ethical issues that arise from the reproductive capabilities that have developed over the past decades, focusing specifically on the unique ethical issues that arise from pre-implantation genetic testing. (I will also briefly discuss ethical issues surrounding gamete donation and surrogacy, which can result in more than two legal or biological parents; the creation, selection, freezing, and destruction of embryos; and prenatal testing, selective abortion and selective reduction.) Much of the resistance to these technologies stems from long-held and deeply ingrained beliefs about the purity of reproduction and motherhood. As technology continues to create reproductive possibilities that were once unheard of or considered fantasy, the purity of motherhood, pregnancy, reproduction, and family are threatened, creating controversy and debate. My talk examines some potentially troubling contract clauses that can give reproduction choices to intended parents that did not exist before technology facilitated it. I attribute some of the resulting ethical concern to societal hesitance to deviate from traditional family norms, looking specifically at the sacredness of motherhood and primacy of biology in definitions of parenthood.
Ultimately, I argue for emphasis on consent and market freedom, and for more rigorous and consistent enforcement of reproductive agreements. The law, by its nature, is slow to respond and slow to capture societal mood, which is constantly evolving. Artificial insemination, for example, was originally, over a century ago, thought to be scandalous, but opinions softened eventually. Since law necessarily lags behind social momentum, family law and regulation are often ill equipped to address adequately the myriad ethical issues that have arisen and are likely to arise as technology advances further. Even as family law adapts, it will never be able to keep pace with the rapid developments happening in reproductive technology and accommodate all possible non-normative relationships, ever growing based on cultural and social shifts, and made even more accessible through technology. Regulation of new technologies can thwart progress, inhibiting the development of important medical procedures. Consent, market forces, and contract law, on the other hand, which are based on individual needs, individual desires, and societal demand, are the best arena for dealing with rapid technological momentum.
People have a fundamental right, both morally and legally, to privacy and freedom when it comes to reproduction, so intervention where there are private reproductive agreements is not usually justified. Individual choice should guide reproduction (whether natural or artificially mediated), and a free market and private contracting are the best vehicles for delivering assisted reproductive services and for responding to individual choice. Assisted reproduction, like sexual reproduction, is not a social enterprise. Although it often involves more than two parties, it is still based on private arrangements and should be governed by rules of privacy and autonomy.
The SSRN link to the full paper is: http//ssrn.com/abstract=2930290
Wednesday, March 8, 2017
The conference is over but the scholarship lives on. This is one of a series of posts highlighting several KCON XII presenters who graciously provided me with abstracts or summaries of their presentations.
Orit Gan (Sapir College, School of Law)
Under Jewish law divorce occurs when the husband writes and delivers and the wife accepts a gett. Until wife is granted a gett she may not remarry or date. Some men use the gett as a bargaining chip to extort favorable economic divorce agreements. In other words men threaten women by refusing to grant them a gett unless they will succumb to their financial demands. This is gett abuse.
Women who pay for their gett resist enforcement of the divorce agreements by claiming duress, and U.S. courts usually accept such claims. However, based on anti-commodification theories I claim that trading the gett for money should be prohibited. I suggest that gett should be an inalienable right for two reasons. Women pay for a gett under conditions of severe inequality. They are coerced by the necessities of the situation. Moreover, this exchange has a degrading effect. Women's autonomy, dignity and freedom are corrupted and diminished by trading the gett. In an ideal world a gett should not be commodified.
However, we do not live in an ideal world. In today's reality, trading a gett also has advantages for women. Paying for a gett is their only way to break free from the marriage. The alternative is staying married against their will. Furthermore, women bring tort claims against their husbands in civil courts for gett refusal claiming emotional distress. Women then leverage the compensation that they are awarded to get a gett. They use the tort claim to improve their bargaining power and trade the damages awarded for a gett.
Therefore both commodification and non-commodification of gett have both advantages and disadvantages for women. A way out of this double bind dilemma is to recognize incomplete commodification.
The gett abuse analysis has broader implications. For example, the gett abuse analysis may be applicable to custody negotiations. Spouses bargain for their children's custody and maintenance upon divorce. Studies show that women are willing to waive financial rights in order to get custody. This transaction may have the corruption and coercion effects and therefore custody may also be an inalienable right.
Tuesday, March 7, 2017
Emotional Value and the Value of Emotions
Hila Keren, Ph.D. (Southwestern Law School)
American contract law has demonstrated an ongoing and long-lasting reluctance to award remedies to a party to a contract who suffered an emotional harm due to a breach by the other party. Such reluctance stands in clear contrast to the treatment of other harms coming from a breach of contract, namely economic and physical harms. In this paper I argue for equal treatment of all harms caused by a breach of contract and against the legal marking of emotional harms as unfit for the general effort of contract law to compensate injured parties.
For many decades legal theorists have debated the aptness of a special and tightfisted legal response to emotional harms, highlighting both aspects relating to the nature of law and the qualities of the emotions. For example: Is the law, with its rational logic, able to address affective problems? Are emotions uniquely easier to fake or inflate?
My paper brings to the debate a fresh set of arguments. Analyzing the issue from the perspective of the novel approach of law and emotions, I argue that the reluctance to award damages for emotional harms reflects and reinforces law’s “hyper-rationality,” i.e., the broader legal misunderstanding and mistreatment of emotions. More importantly, taking emotions seriously and in an interdisciplinary fashion, I contend that for the last four decades we have been subject to a rapidly increasing dominance of a neoliberal worldview that has operated to reconfigure the meaning of the emotions themselves. This significant shift, I submit, makes compensation for emotional harms more necessary than ever before.
In particular, I show how neoliberalism has made key positive emotions, such as happiness, an essential part of our human capital and thus has turned these emotions into economic assets—indistinguishable from those the law is eager to protect by contractual remedies. Similarly, neoliberalism has reframed negative emotions of the sort engendered by breach of contract—anxiety or anger for example—as a cause of depreciation of one’s human capital, making such harms impossible to tell apart from other contractual injuries. In a neoliberal world that constantly requires people to invest expensive resources in maintaining their emotional “portfolio,” I conclude, there is an urgent need to bring the conventional reluctance to compensate for emotional harms to an end.
WELLNESS PROGRAMS UNDER THE AFFORDABLE CARE ACT—A STATUTORY DEFINITION OF “VOLUNTARY”
Allen R. Kamp (John Marshall Law School - Chicago)
Can Congress force you to eat your broccoli? To the Supreme Court in NFIB v. Sibelius, the answer is no under the Commerce Clause, but yes under the Taxation Clause. But can your employer force you to eat it? The answer may well be yes.
An employer could have this ability under wellness programs.” Wellness program” is a defined term under the Affordable Care Act. Wellness programs may include monitoring of vital functions and activity that may report activity 24/7. A certain activity level may be required, for example, 5,500 steps a day. Wellness programs may also require meeting such goals as lowering body/mass ratio or cholesterol levels.
The ACA authorizes wellness programs if they are “voluntary.” The term is numerically defined, unlike legal definitions of duress and unconscionably, which may invalidate some contracts. Employers can reduce employees’ pay by 30% of the total amount of the insurance costs of the employee’s insurance and be “voluntary.” (The total cost includes both the employee and the employer’s contribution. Thirty percent of the average cost of insurance is more than $5,000 per year. For a low wage employee, this penalty is a high percentage of his income.
The Equal Employment Opportunity Commission has issued a regulation that adopts the ADA definition of “voluntary.” 
Although the definition of voluntary will probably not be decided for years, wellness programs starkly pose the issue of the limits of employer power under the employment contract Thanks to modern technology, such biometric data as activity level and pulse can be monitored 24/7. A blood test now can reveal he presence of nicotine, cholesterols, glucose, and a great amount of other data such as nicotine use. Should the employer be allowed to monitor employee behavior and vitals 24/7? Wellness programs can include exercise programs (for example, 5,500 steps a day), taking part in health improvement counseling (e.g., weight loss or smoking cessation), and attainment of certain goals, such as lower cholesterol and body/mass index. Should an employer be able to mandate an exercise regime? Should an employer be able to require either achievement of a change in an employee’s body with the threat of sanctions or firing if the change fails to take place?
The rule may well be that Congress cannot force one to eat one’s broccoli, at least under the Commerce Clause, but one’s employer may well be able to. One can, of course, find another job (one without a wellness program), while one cannot opt out of a federal law. But finding a new job for many is difficult and finding one without a wellness program could be harder.
We can engage in law professor speculation. Given that assesment to contract terms is found in the most extenuated contexts (See, e.g., Carnival Cruise). Does the ADA definition actually represent an advance towards a meaningful definition of consent?
This leads to my final point, which is a dig at my libertarian friends and colleagues. The libertarian premise is that if government power is limited, human freedom is increased. Is there, however, a Law of Conservation of Power in a society parallel to the Law of Conservation of Energy, that the amount of energy in a closed system remains constant? Does the amount of power in a society remain constant, so that if power is diminished in one place it just goes somewhere else?
 Nat’l Fed'n of Indep. Bus. v. Sebelius, 132 S. Ct. 2566, 567 U.S.___ (2012).
 Patient Protection and Affordable Care Act § 1201(4), 42 U.S.C. § 300gg-4(j)(1)(A) (2012).
 E.g., the Fitbit.
 Although many federal statutes regulate wellness, none deal with the problems of employee privacy or employer control over employees per se. Statutes which may apply to wellness programs in are the Affordable Care Act (ACA), The Americans With Disability Act (ADA), the Genetic Information Non-Disclosure Act (GINA), HIPPA, and Title VII. The main current legal controversies center around the ACA, the ADA and GINA.
 42 U.S.C. § 300gg-4(j)(3)(A) (2012).
 Letter from Congressional Members, Robert C. Scott, Elizabeth Warren, Patty Murray, Louis McIntosh Slaughter, Richard Blumenthal, Janice D. Schakowsky, and Sherrod Brown to Jerry R. Yang, Chair of the EEOC (Feb. 2, 2016), http://democrats.edworkforce.house.gov/sites/democrats.edworkforce.house.gov/files/2016-02-11%20Letter%20to%20EEOC%20Chair%20Yang%20re.%20GINA%20Proposed%20Rule.pdf
 This brings the ACA into conflict with at least two other federal acts, the ADA and GINA. Both prevent health information from being disclosed to the employer. Note that the ADA is a law designed to prevent discrimination against the disabled and focuses on that problem, not the privacy aspects of wellness programs. The ADA defines “voluntary” as not being based on any sanction for non-agreement to participation in a wellness program. GINA has a similar provision, with the non-disclosure extending to spouses. So which Act controls? At present it is open question. The ACA is the later act and following the ADA or GINA would make its voluntary section meaningless. But the ACA Regulations do say that the ACA does not limit the ADA. The AARP has sued the E.E.O. C., seeking to have the regulation invalidated. See Complaint, ww.aarp.org/content/dam/aarp/aarp_foundation/litigation/pdf-beg-02-01-2016/AARP-v-EEOC-complaint.pdf
 (3) Incentives offered for employee wellness programs. The use of incentives (financial or in-kind) in an employee wellness program, whether in the form of a reward or penalty, will not render the program involuntary if the maximum allowable incentive available under the program (whether the program is a participatory program or a health-contingent program, or some combination of the two, as those terms are defined in regulations at 26 CFR 54.9802-1(f)(1)(ii) and (iii), 29 CFR 2590.702(f)(1)(ii) and (iii), and 45 CFR 146.121(f)(1)(ii) and (iii), respectively) does not exceed:
(i) Thirty percent of the total cost of self-only coverage (including both the employee's and employer's contribution) of the group health plan in which the employee is enrolled when participation in the wellness program is limited to employees enrolled in the plan;
(ii) Thirty percent of the total cost of self-only coverage under the covered entity's group health plan, where the covered entity offers only one group health plan and participation in a wellness program is offered to all employees regardless of whether they are enrolled in the plan;
(iii) Thirty percent of the total cost of the lowest cost self-only coverage under a major medical group health plan where the covered entity offers more than one group health plan but participation in the wellness program is offered to employees whether or not they are enrolled in a particular plan; and
(iv) Thirty percent of the cost of self-only coverage under the second lowest cost Silver Plan for a 40-year-old non-smoker on the state or federal health care Exchange in the location that the covered entity identifies as its principal place of business if the covered entity does not offer a group health plan or group health insurance coverage.
29 C.F.R. 1630 (d) (2). Published 5/17/16, e-version.
 See webpage of Fitbit advertising the use of the device in wellness programs.
 My latest blood test showed that I drink too much water and consume too many saturated fats and sugars.
Monday, March 6, 2017
Copyright Survives: Rethinking the Copyright-Contracts Conflict
Guy A. Rub (The Ohio State University Michael E. Moritz College of Law)
Copyright law consists of legal norms that govern certain actions with respect to creative works fixed in a tangible medium of expression. Contracts allow individuals to create legal norms with respect to creative (and non-creative) works that are fixed (and those that are not fixed) in a tangible medium of expression. This potential overlap in legal norms can create tension between the two. This tension is typically discussed under the auspice of copyright preemption doctrine.
The leading decision on this matter is Judge Easterbrook’s 1996 decision in ProCD v. Zeidenberg. In that case, the Seventh Circuit held that a contract that restricted the use of factual information was not preempted by the Copyright Act and therefore enforceable. The reaction among copyright scholars was swift and passionate. In dozens of articles and books, spreading over two decades, scholars cautioned that if the ProCD approach is broadly adopted, the results would be dire. Through contracts, the rights of copyright owners would run amok, expand, and in doing so they would invade, shrink, and possibly destroy the public domain. Contracts, we were repeatedly warned throughout the years, would kill copyright law.
This Article challenges this scholarly consensus by studying the 288 court opinions that have dealt with the copyright-contract conflict over the past four decades. This examination reveals surprising facts: Notwithstanding the scholars’ warnings, ProCD’s approach won the day and was embraced by most federal circuit courts. However, the doomsday scenarios scholars warned against did not materialize. The overall effect of contracts on the size and scope of the public domain, or over copyright law as a whole, seems minimal. The Article explains this discrepancy and shows that contracts are an ineffective tool to control information because they are too weak of a device to threaten or replace copyright law. Indeed, to paraphrase Mark Twain, the reports of the death of copyright were greatly exaggerated.
The Article concludes by placing this analysis in context, as part of a broader ongoing discussion on the desirability and enforceability of standard-form agreements.
The Article is available for SSRN download here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2926253
The Statute of Limitations, Res Judicata, and Acceleration Clauses in Mortgage Foreclosures
Eric A. Zacks (Wayne State University Law School)
The high volume of foreclosures during and following the Great Recession in the United States has led to the revelation of many troubling lending practices. It also has led to problematic judicial decisions that erode borrower protection by curtailing or eliminating procedural requirements and substantive defenses with respect to foreclosure. My article examines the treatment of statute of limitation and related defenses after a loan has been accelerated following a default. In particular, one would expect the formalism that is used to justify strict enforcement of the loan instruments for foreclosure purposes would also be employed when mortgagors fail to comply with statutory, common law, or contractual requirements regarding mortgage assignment, enforcement, acceleration, or foreclosure. In each instance, however, mortgagors are often instead protected by a contextual or equitable approach that seeks to preserve their right to foreclose. Some courts have ignored the traditional rule that acceleration under a contract starts the clock for statute of limitation purposes or that acceleration consolidates the loan instrument into a single obligation as opposed to an installment obligation. Instead, these courts have permitted lenders to accelerate loans repeatedly without triggering the statute of limitations or res judicata defenses. Consequently, lenders are permitted to assert foreclosure claims with respect to the same underlying debt amount over and over again. Instead of being used as a last-resort, acceleration and the subsequent foreclosure process can now be wielded as a significant threat to borrowers throughout the life of their home loan. My article explores the tendency of, and justification for, adjudicators to liberalize the foreclosure process and provides a critique of this approach.
Friday, March 3, 2017
Michael P. Malloy, Ph.D. (University of the Pacific McGeorge School of Law)
Contracts in a Digital Age: My Teenaged Tech Advisors Rescue Dad
Contracting in a digital age isn’t just a change in time or place, it is in many respects potentially a change in orientation. Confronting that change initially involved improvising an assimilation of e-contracting into our unstated assumptions about the way contracts are created and the way they are performed, but some adjustment in the framework has been necessary as e-contracting has flourished. It has now been 25 years since the Third Circuit decided Step-Saver Data Systems, Inc. v. Wyse Technology, subjecting box top terms to those assumptions, and 20 years since the Seventh Circuit decided ProCD, Inc. v. Zeidenberg, distinguishing Step-Saver and embracing shrink wrap terms, leading the way to the easy application of click wrap terms. As we have moved from telex to facsimile, to e-mail, to texting, to direct communication between computers, and so on to as yet unknown methods – new technology almost always creates new challenges for contract law. My paper calls for the recognition of new analysis and adaptable principles for electronic contracting on its own terms, but without abandoning the objectives underlying contract law.
Pricing Methods, Marketing Techniques, and the Law of Consumer Contracts
Eyal Zamir (Hebrew University of Jerusalem, Faculty of Law)
(Based on a forthcoming book, Behavioral Law and Economics (co-authored with Doron Teichman, OUP))
Firms employ various marketing and pricing methods, which arguably exploit consumers’ heuristics and biases, to enhance their sales and profits. Some of these techniques are clearly illegitimate and even illegal. Others raise difficult questions regarding their legitimacy and the appropriate legal response to them. In my presentation I will describe a few pricing and marketing techniques that are not obviously illegitimate, and raise the question of whether they should be regulated. I intentionally use the language of “raise the question,” because I will not offer definitive answers.
The methodological perspective I use is commonly described as behavioral law and economics. A primary contribution of behavioral law and economics lies in the identification of behavioral market failures. In addition to traditional market failures, such as monopolies and information problems, markets may fail to promote social utility due to deviations from the assumption that all players in the market are rational maximizers of their utility.
However, I will not limit myself to the behavioral-economic perspective, as behavioral insights are equally relevant to non-economic perspectives that highlight other values in lieu of, or in addition to, maximizing aggregate human welfare. These include respect for autonomy, fairness, and distributive justice.
However, due to time limitations, I will neither be able to consider all of these perspectives, nor to delve into the choice between different regulatory measures: disclosure duties, compulsory interventions, and mere nudges. Some people identify the behavioral perspective with the use of nudges, but this is a mistake. Behavioral findings may justify more intrusive regulation. I believe that mandatory regulation is often warranted, and that paternalism—despite its bad PR—is often justified. But I will not go into these issues today.
Relatedly, the pricing and marketing techniques I will discuss are used not only in consumer transactions, but in commercial ones, as well. Hence, my discussion is not limited to the consumer sphere, although the normative considerations in commercial transactions may be different.