Wednesday, September 2, 2015
Last year, Hastings Law hosted a conference in honor of Charles L. Knapp. The proceedings of that conference are now in print. Abstracts can be found here on the Hastings Law Journal homepage.
Contract Law Present and Future: A Symposium to Honor Professor Charles L. Knapp on Fifty Years of Teaching Law
Harry G. Prince
Volume 66, Issue 4, 871-878
Carol L. Chomsky
Volume 66, Issue 4, 879-898
Under the Sun: Casebooks and the Future of Contracts Teaching
Thomas W. Joo
Volume 66, Issue 4, 899-914
William J. Woodward, Jr.
Volume 66, Issue 4, 915-936
The Duty of Good Faith: A Perspective on Contemporary Contract Law
Jay M. Feinman
Volume 66, Issue 4, 937-950
Sketches of a Redemptive Theory of Contract Law
Emily M.S. Houh
Volume 66, Issue 4, 951-970
Contract as Evil
Volume 66, Issue 4, 971-1010
Curing the Infirmities of the Unconscionability Doctrine
Hazel Glenn Beh
Volume 66, Issue 4, 1011-1046
Volume 66, Issue 4, 1047-1082
Is There a “Duty to Read”?
Charles L. Knapp
Volume 66, Issue 4, 1083-1112
Monday, August 10, 2015
We shared with our readers Professor Robin Kar's views on the case a while back.
You can find Professor Kar's latest here.
Tuesday, August 4, 2015
A new Los Angeles Times investigation has revealed that nine out of ten students drop out of unaccredited law schools in California. Of the few students that graduate, only one in five ultimately become a lawyer. In other words, a mere 2% of the people that initially enroll in an unaccredited law school end up being attorneys. Shameful at best. One example of one person who did not make it as an attorney is former Los Angeles mayor Antonio Villaraigosa who went to “People’s College of Law” and took the bar four times, but never passed.
Unaccredited law schools are said to flourish in California. The state is one of only three in the nation that allow students from unaccredited law schools to take the bar test (the others are Alaska and Tennessee). Unaccredited schools in California are held to very few academic standards by regulatory bodies and, by their very nature, none by accrediting agencies.
Most of the unaccredited law schools are owned by small corporations or even private individuals. One, for example, is owned by a“Larry H. Layton, who opened his school in a … strip mall above a now-shuttered Mexican restaurant. He thought the Larry H. Layton School of Law, which charges about $15,000 a year, would grow quickly. But according to the state bar records, he has had six students since 2010.”
Experts again say that action must be taken. For example, Robert Fellmeth, the Price Professor of Public Interest Law at the University of San Diego School of Law, has stated that unaccredited schools “aren't even diploma mills, they are failure factories. They're selling false hope to people who are willing to put everything out there for a chance to be a lawyer."
As before, the problem goes beyond unaccredited law schools. Several ABA accredited law schools also demonstrate both poor employment and bar passage statistics, although the problem seems to be the most severe when it comes to unaccredited schools.
This story is not new to your or many others. However, it serves as a reminder of the continued importance of both insiders and outsiders taking a renewed look at regulations for (and broader expectations of) law schools in California and beyond. As always, purchasers of anything including educational “services” (which, as the above other and many other studies show, can all too easily turn out to be disservices) should be on the lookout for what they buy. A great deal of naivety by new students seems to be contributing to the problem. However, that does not justify the tactics and perhaps even the existence of some of these educational providers. Having said that, I also – again – cannot help ask myself what in the world some of these students are thinking in believing that they can beat such harsh odds. Hope springs eternal, it seems, when it comes to wanting to become a California attorney.
Thursday, July 23, 2015
You cannot say that we are boring you this week. Our blogs have included considerations on advertising on porn sites and having one’s illicit affairs forgotten contractually. Add to that the news that this week, Roman Catholic nuns, the archdiocese of Los Angeles, the formerly Jesuit student turned California Governor Brown and Pope Francis all had something to say about contracting about major and, admittedly, some minor issues.
To start with the important: Pope Francis famously issued his Encyclical Letter Laudato Si’ “On Care for our Common Home.” In it, he critiques “cap and trade agreements,” which by some are considered to be a mere euphemism for contractual permits to pollute and not the required ultimate solution to CO2 emissions. In the Pope’s opinion, “The strategy of buying and selling carbon credits can lead to a new form of speculation which would not help reduce the emission of polluting gases worldwide. This system seems to provide a quick and easy solution under the guise of a certain commitment to the environment, but in no way does it allow for the radical change which present circumstances require. Rather, it may simply become a ploy which permits maintaining the excessive consumption of some countries and sectors.” Well said.
Governor Brown, however, disagrees: Brown shrugged off Francis' comments. "There's a lot of different ways," he told reporters, "that cap and trade can be part of a very imaginative and aggressive program." Brown, however, does agree with the Pope that we are “dealing with the biggest threat of our time. If you discount nuclear annihilation, this is the next one. If we don’t annihilate ourselves with nuclear bombs then it's climate change. It’s a big deal and he’s on it.”
In less significant contractual news, Roar, Firework, and I Kissed a Girl and I Liked It singer Katy Perry is interested in buying a convent owned by two Sisters of the Most Holy and Immaculate Heart of the Blessed Virgin. Why? Take a look at these pictures. The only problem is who actually has the right to sell the convent to begin with: the Sisters or the archdiocese. When two of the sisters found out the identity of the potential buyer (Perry), they became uninterested in selling to her because of her “public image.” They now prefer selling to a local restaurateur whereas the archdiocese prefers to complete the sale to Perry, although she bid less ($14.5 million) on the property than the restaurateur ($15.5 million). Perry may be about to learn that image is indeed everything in California, even when it comes to the Divine. Perry is no stranger to religion herself as she was, ironically, raised in a Christian home by two pastor parents.
Thursday, July 16, 2015
Contracts Prof Kermit Mawakana (pictured) has sued the University of District Columbia (UDC) for breach of contract and employment discrimination in connection with his termination from UDC's David A. Clarke School of Law. Last week, the District Court for the District of Columbia issued an opinion in the case. On UDC's motion to dismiss the contract claim, the court found that UDC had breached no express contract but may have breached an implied contract, and it denied the motion.
According to the court, Professor Mawakana was hired in 2006 as an Assistant Professor and promoted to Associate Professor three years later. However when he came up for tenure, his application was denied because he had not met UDC's criteria for scholarship. Professor Mawakana alleged defects in his review process that amounted to a breach of contract. The court found that the review policies did not amount to a contract and thus found no breach of an express contract, but it did find that the complaint alleged sufficient facts "if just barely" for the claim for breach of an implied contract to proceed. The court similarly found that plaintiff had alleged sufficient facts to allow his claim for breach of the implied covenant of good faith and fair dealing to proceed.
The court did not rule on Professor Mawakana's non-contractual claims.
Monday, July 6, 2015
From the Southern University Law Center's Christopher Odinet (pictured) and newly published in the Banking Law Journal:
Payday Lenders, Vehicle Title Loans, and Small-Value Financing: The CFPB's Proposal to Regulate the Fringe Economy
You can find the article on SSRN here, where you can also find this abstract:
The market for payday lenders, businesses that provide vehicle title loans, and other small-value financing players is rife with controversy. Some see them as predatory lenders that weave a web of never-ending debt designed to capture the weakest and most economically vulnerable of society. However, advocates of these financial institutions argue that for many Americans who are otherwise shut out of the conventional lending market, these players provide the only viable source of credit in times of economic hardship. Whatever the view, these businesses, their borrowers, and the credit markets that they together comprise are often referred to in legal and economic research and literature as the "fringe economy." And interestingly, aside from a patchwork of state law rules, this area of the financial services sector is fairly unregulated.
However, on Thursday, March 26, 2015 the U.S. Consumer Financial Protection Bureau released a report outlining the agency's long heralded plans to impose nation-wide regulations on the fringe economy. The first part of this article gives an overview of the fringe economy, the types of services and products it provides, and gives a snapshot of existing, state-based regulations. The second part goes into the nuts and bolts of the proposed rules.
Monday, June 29, 2015
Martha Ertman's new book, Love's Promises: How Formal and Informal Contracts Shape All Kinds of Families (Beacon Press 2015) is the subject an online symposium over at Concurring Opinions.
And in other publication news . . .
Robert Bejesky, Mercenaries, Myrmidons, and Missionaries, 37 U. Ark. Little Rock L. Rev. 45 (2014)
Gregory Crespi, Agreements to Alter the Limitation Period Imposed by U.C.C. Section 2-725: Some Overlooked Complications, 46 St. Mary's L.J. 199 (2015)
Royce de R. Barondes, Frictions and the Persistence of Inferior Contract Terms. 9 Va. L. & Bus. Rev. 257 (2015)
Bob Wessels, Contracting Out of Secondary Insolvency Proceedings: The Main Liquidator's Undertaking in the Meaning of Article 18 in the Proposal to Amend the EU Insolvency Regulation, 9 Brook. J. Corp. Fin. & Com. L. 236 (2014)
Eric A. Zacks, Contract Review: Cognitive Bias, Moral Hazard, and Situational Pressure, 9 Entrepren. Bus. L.J. 379 (2015)
Monday, June 22, 2015
Here is the abstract:
This essay is a reflection on the gap between the real-life practice of contract law and some of the academic theory that tries to explain it. I define “lexical opportunism” as an adversary’s clever lawyering, using contractual text of a complex business arrangement, ironically as devoid of thoughtful drafting or close negotiation as the boilerplate in a consumer contract, but which, when turned into a legal theory, creates a potential for staggering liability beyond all common sense. A multi-billion lawsuit, recently settled, serves as an example, and triggers my discussion of (a) what it means to engage in theoretical assessment in contract law, (b) how the justification of contract law by way of inhibiting economic opportunism is based on the simplest examples, rather than the kind of contract discourse found in any real-world contract worth spending millions to litigate, and (c) how normative theory based on upholding the moral sanctity of promise keeping evaporates when the parties disagree about the meaning of their promises. I argue that both economic and moral theories about contract law fail to account for issues in the use of language and depend on the naïve adoption of the correspondence theory of truth. The nature of language permits opportunism, and the only check on it is the desire, from whatever motivation, not to be opportunistic. I conclude with what I hope are some constructive thoughts about the appropriate use of theory in lawyering, and thereby mitigate my skepticism whether any single theory or discipline is capable of meaningful explanation or prediction about lexical opportunism.
Monday, May 25, 2015
Law School Interactive, which provides podcasts for various purposes relating to law school, has a new podcast up featuring Frank Snyder (pictured left), the Zeus from whose head this blog sprung, and two friends of the blog, Brian Bix and Steven Schooner. It's always interesting to hear how colleagues introduce the topic of contracts law to prospective students. You can find the podcast here.
Law School Interactive summarizes the podcast as follows (slightly edited):
Frank Snyder starts his comments by defining contract law and explaining it as an unusual part of the legal system, and speaks of its practical aspects and the importance of being attuned to the client’s needs. Professor Snyder finishes his comments by likening the practice of contract law to business advising. He mentions that those who are good business advisers will likely enjoy and do well with contract law. He also advises students to investigate all areas of legal practice that they are interested in to find the one they would like to specialize in.
Steven Schooner [right] explains that contract law is a very different law practice than the more common practice areas of criminal, tort, or defense law. He underscores the fact that there seems to be no gray areas when it comes to students and contract law: Students either consider the field fascinating, or they don’t. He says that if you find business and bargains interesting, contract law might be the practice for you—and a love of math and numbers helps too.
Our final guest, Brian Bix [left], talks about contract law’s connection with many other specialties. Although undergraduate courses will not teach you much about the intricacies of contract law, Professor Bix tells budding law school student not to worry—law school will definitely give you the tools you need to succeed in the field. He ends his advice by saying that to be successful in this practice of law, face-to-face interaction and conversational skill are definitely a necessity.
Monday, May 18, 2015
Larry Cunningham of George Washington Law School (pictured) is preparing the second edition of his book, Contracts in the Real World. You may remember the first edition from prior posts such as the online symposium that we cross-posted here in 2012.
Larry is turning to the market to get ideas for the next edition. Via his twitter feed, he is now offering a copy of Contracts in the Real World to those who suggest a story that is chosen for inclusion in the next edition. More details on the book are at Cambridge University's webpage.
Monday, April 27, 2015
If it were up to General Motors, it may soon be illegal for you to tinker with your own car. That’s because the Digital Millennium Copyright Act (“DMCA”), an Act that started as anti-piracy legislation about a decade ago, now also protects coding and software in a range of products more broadly. Your car is one such product if it, as many cars do nowadays, it has an onboard computer. Vehicle makers promotes two arguments in their favor: first, that it could be dangerous and even malicious to alter a car’s software programming. Second, per the tractor maker John Deere, that “letting people modify car computer systems will result in them pirating music through the on-board entertainment system.” “Will”?! As the Yahoo article mentioning this story smartly pointed out, “[t]hat’s right— pirating music. Through a tractor.”
Isn’t that an example of a company getting a little too excited over its own products? Or am I just an incurable city girl (although one that occasionally likes country music)? Judging from the lyrics to a recent Kenny Chesney hit (“She Thinks My Tractor’s Sexy"), I see that opinions differ in this respect. To each her own.
Hat tip to Professor Daniel D. Barnhizer of the AALS listserve for sharing this story.
Thursday, April 23, 2015
As for the series on law school instruction and law schools in general that Jeremy started here recently: count me in!
I agree with Jeremy’s views that issue-spotting is very important in helping students develop their “practical skills,” as the industry now so extensively calls for. As Jeremy and Professor Bruckner do, I also never give up trying to have the students correctly issue spot, which in my book not only means spotting what the issues are, but also omitting from their tests and in-class analyses what I call “misfires” (non-issues). In my opinion, the latter is very necessary not only for bar taking purposes, but also in “real life” where attorneys often face not only strict time limits, but also word limits.
But I’ll honestly admit that my students very often fail my expectation on final tests. Some cannot correctly spot the issues at all. Many have a hard time focusing on those aspects of the issues that are crucial and instead treat all issues and elements under a “checklist” approach overwriting the minor issues and treating major issues conclusorily. Yet others seem to cram in as many issues as they can think of “just in case” they were on the test (yes, I have thought about imposing a word limit on the tests, but worry about doing so for fear of giving any misleading indication of how many words they “should” write, even if indirectly so on my part).
Maybe all this is my fault … but maybe it isn’t (this too will hopefully add to Professor Bruckner’s probably rhetorical question on how to teach issue-spotting skills). Every semester, I post approximately a dozen or so take-home problems with highly detailed answer rubrics. I only use textbooks that have numerous practice problems long and short. I review these in class. I also review, in class, numerous other problems that I created myself. I give the students numerous hints to use commercial essay and other test practice sources. Yes, all this on top of teaching the doctrinal material. All this is certainly not “hiding the ball.” Frankly, I don’t really know what more a law professor can realistically do (other than, of course, trying different practice methods, where relevant, to challenge both oneself and the students and to see what may work better as expectations and the student body change).
So what seems to be the problem? As I see it, it doesn’t help that at least private law schools at the bottom half of the ranking system have to accept students with lower indicia of success than earlier. But even that hardly explains the problem (who knows what really does). Some law schools have to offer remedial writing classes and various other types of extensive academic support to students in their first semesters and beyond. Some of the problem, in my opinion, clearly stems from the undergraduate-level education our students receive. In large part, this makes extensive use of multiple-choice questions for assessments and not, as future lawyers would benefit from, paper or essay-writing tests or exercises. Thus, undergraduate-level schools neither teach students how to spot "issues" from "scratch" nor do they teach them how to write about these. Numerous time have my students told me that they have not really written anything major before arriving in law school.
Why is that, then? Isn’t that problem one of time and resources; in other words, the fact that not just law professors, but probably most university professors, are required to research and write extensively in addition to teaching and providing service to their institutions? For example, see Jeremy’s comments on his busy work schedule here. Something has to give in some contexts. At the undergraduate level, maybe it’s creating and grading essays and instead resorting to machine-graded multiple-choice questions and not challenging students sufficiently to consider what the crux of a given academic problem is. Just a thought. I am, of course, not saying that we should not conduct research. I am saying, though, that I find it frustrating that lower-level educations, even renowned ones, cannot seem to figure out how to use whatever resources they do, after all, have to train their students in something as seemingly simple as how to write and how to think critically.
At the law school level, some “handholding” and various types of practical assistance is, of course, acceptable. But to me, the general trend in legal education seems to be moving towards a large extent of explaining, demonstrating, giving examples, setting forth goals, assessments, and so forth. I agree with what Jeremy said in an earlier post that we should at some point worry about converting the law school education process into one that resembles undergraduate-style (or high school style!) education.
Recall that the United States is not an island unto itself. Many studies show that our educational system is falling behind international trends. Where in many other nations in the world (developed and developing), students are expected to come up with, for example, quite advanced research and writing projects for their degrees, we are - at least in some law schools - teaching students just how to write, and what to write about. This is a sad slippery slope. Until the American educational sector as such improves, I agree that we should do what we can to motivate and help our students. But I also increasingly wish that our “millennial” students would take matters into their own hands more and take true ownership of learning what they need to learn for a given project or class with less handholding, albeit of course still some guidance. Nothing less than that will be expected from them in practice.
Monday, March 30, 2015
Earlier this month, Los Angeles-area media reported a somewhat humorous of a valet service that gave away a relatively expensive new car to a random guy claiming that he had "lost the [valet] ticket." Yup, the valet service actually just gave the car to the man who was sporting an Ohio state tattoo. (Of course, this story is not funny for the frustrated car owner).
But wait, the story gets weirder than that (it is, after all, LA, where we worry a lot about our cars...): the valet service sent the responsible employee home and referred the customer to his insurance company. Initial reports indicated that the insurance company did not want to pay for this loss as no theft had occurred... as is always the case, however, the media did not follow up on the end of this story, to the best of my knowledge.
Another valet contract that you must read and that was shared today on the AALS listserv for Contract Professors reminded me of this story. Hat tip to Professor Davis!
Valet companies may have to brush up on their contract writing skills soon...
Tuesday, March 24, 2015
The following guest post is from Tina Stark, a Professor in the Practice of Law (retired) and the Founding Executive Director of Emory's Center for Transactional Law and Practice. Tina is one of the pioneers of teaching transactional skills and the founder and first Chair of the AALS Section on Transactional Law and Skills. She is also the author of Drafting Contracts: How and Why Lawyers Do What They Do and the editor and co-author of Negotiating and Drafting Contract Boilerplate. Welcome, Tina!
When I speak about contract drafting, I often state that contract drafting sits at the intersection of law and business. Students can learn about style, organization, process, interpretation, ambiguity, and clarity, but if they don't know the law and understand the deal, the contract will be ripe for litigation.
In Buckingham v. Buckingham, 14335 314297/11, NYLJ at *1 (App. Div., 1st, Decided March 19, 2015), a well-known matrimonial lawyer botched the drafting of a prenuptial agreement. As drafted, the relevant provision stated that if the husband sold "MS or any of its subsidiaries or related companies," he was obligated to pay the wife a share of the proceeds. But the provision did not address the consequences of the husband's sale of any shares he owned in those businesses. Stated differently, the agreement gave the wife the right to proceeds from asset sales, but was silent about the right to proceeds from stock sales.
The couple married; time passed; and the marriage failed. Along the way, the husband sold shares of his business and the ex-wife wanted her share of the proceeds: about $950,000. The husband and the courts said "no." The court reasoned that the relevant language created a condition to the husband's obligation to pay sale proceeds to his ex-wife, but that language encompassed only asset sales. Therefore, because the husband's sale of shares did not satisfy the condition, the wife had no right to any proceeds. (Technically, there was a condition to an obligation and an obligation. The condition to the obligation was an asset sale, and the obligation was the husband's obligation to pay the wife a share of the proceeds. The husband's obligation to pay created the wife's reciprocal right to receive the proceeds.)
As the dissent points out, the business deal was almost undoubtedly that the wife was entitled to money if the husband received proceeds from a business disposition. But the court held the provision unambiguously applied only to business dispositions that were asset sales, and it refused to rewrite the provision. Bottom line: the wife’s lawyer didn’t know the law. She didn’t understand the difference between an asset sale or a stock sale and language embraced only the former. This is a classic case of a business issue driving the litigation, not unclear, ambiguous drafting. It was “bad” drafting, but not for reasons of style, lack of clarity, or ambiguity. It was “bad” because it didn’t memorialize the parties’ intent.
And that's why matrimonial lawyers need to understand business and business law and how drafting sits at the intersection of law and business.
Thursday, February 19, 2015
I never met Professor Chirelstein, but his book (at left) was a revelation to me. I read it while taking first year contracts. My first year contracts course was rigorous and stimulating, but Chirelstein's book gave me my first inkling that contracts law and lore could be entertaining and fun. I brought that edition with me to work, where it sat in my office until it went down with the World Trade Center. When I became a contracts prof, I started getting the new editions, and I was always happy to see how the book was updated. It still sits on my shelf as a trusted reference book that I recommend to students, hoping to kindle in them the same enthusiasm for the subject that it kindled in me.
A notice is available on the Columbia Law School website and in the New York Times.
Thursday, February 12, 2015
We just received the sad news of Chancellor John E. Murray's death, at age 82. An obituary can be found here in the Pittsburgh Post-Gazette. I met Chancellor Murray only once, at the International Conference on Contracts two years ago at which we honored him. That being the case, I am not well positioned to post a remembrance, and I hope our readers will avail themselves of the comments space to share their recollections.
But I will say this. Less than two weeks ago, Chancellor Murray chimed in on a thread on the Contracts Prof listserv. He shared a sober, scholarly rumination on the parol evidence rule and the CISG. Two weeks earlier, he posted a succinct and complete answer to a question that I had posed on the listserv. According to the Post-Gazette report, on the day he died, Chancellor Murray thought to get word to his law school Dean that he would need somebody to cover his classes the next day. From what little I know of him, I can say that he was absolutely dedicated to his students and his colleagues, and he died with his contracts law boots on.
Sunday, January 25, 2015
An Ohio appellate court upheld a $1.2 million breach of contract judgment against Kent State's men's basketball coach, Geno Ford. The judgment enforced a liquidated damages clause entitling Kent State to damages equal to Ford's annual salary ($300,000) multipled by the number of years remaining on his contract at the point of breach. In Kent State University v. Ford, Coach Ford tried to characterize the liquidated damages clause as a penalty. The court applied Ohio law to determine whether at the time the contract was entered into: 1) damages were uncertain; 2) the damages provided for in the contract were not unconscionable; and 3) the parties intended for damages to follow a breach. The court upheld the trial court's determination that the standard was satisfied in this case. Coach Ford can take consolation in the fact that his salary is short of Jim Harbaugh's by an order of magnitude.
PetaPixel.com reports on a wedding photographer who, after charging a couple $6000 to shoot a wedding album, sought an additional $150 for the album cover. The couple balked, so the photographer is refusing to hand over the photographs and is threatening to charge them an additional $250 "archive fee" if they do not pay up in a month. PetaPixel draws the following lesson from the story:
This all goes to show that as a photographer, you should never rely on verbal agreements when it comes to conditions and charges. Always get everything in writing.
Maybe. The photographer herself has an extremely lengthy blog post about the entire affair in which she claims that everything should have been clear from the written contract. PetaPixel's story makes it seem like an additional charge was added after the contract had been entered into, and if that's the case, the couple might well have balked whether or not the new terms were in writing.
Contracts Prof/Con Law Prof Randy Barnett, writing at the Volokh Conspiracy picked up by the Washington Post, muses interestingly on the applicability of the contractual duty of good faith to the President's duty to faithfully execute the laws in the Constitution's Take Care clause. This helps Barnett reconcile his empathy for the President's refusal to enforce federal drug laws in the face of permissive state laws permitting use of marijuana with his opposition to the President's new initiative on immigration. I've never been persuaded that the contractual analogy is particularly useful in Constitutional interpretation. Suggesting that the contracts doctrine of "good faith" provides a useful gloss on the Take Care clause strikes me as a stretch, but Professor Barnett is always stimulating.
Monday, January 19, 2015
Law in an Information Society
A Festschrift in Honor of Richard Craswell
We live in a time when information—about costs, parties, alternatives, and laws—is more important than ever before. This symposium brings together 25 leading scholars in law and economics, contracts, commercial law, antitrust law, and other topics relating to how litigants, regulators, and policymakers can use information to inform their decisionmaking.
The Stanford Law Review is pleased to present this symposium to celebrate Professor Craswell and his tremendous contributions across many areas of law. Articles will be presented by Ian Ayres and Barry Nalebuff, Louis Kaplow, Alan Schwartz, Christine Jolls, and Tess Wilkinson-Ryan and David Hoffman, and papers will be presented by Matthew Spitzer and Richard Brooks. Many other noted scholars from around the country will serve as discussants.
Attendance is free: See a full schedule and register HERE!
Friday, January 2, 2015
A few days ago, I blogged on the recent lawsuit by United Airlines and Orbitz against the developer of Skiplagged. One of the causes of action alleged is breach of contract for encouraging the purchase of a ticket to certain destinations only to get off at an interim point to save money.
The airlines themselves may be breaching their contracts with flyers. For example, when we buy tickets to be flown from point A to point B, that arguably implies being done so without undue delays and, in particular, possibly having to spend the night at your own cost and without your personal belongings in random cities around the world if connections are missed because of flight delays (unless, of course, you choose to spend the night sitting upright in the airport). Needless to say, if you seek to change your ticket, airlines will either charge extreme high fees and the “difference in price” for doing so or outright prohibit this practice. I’ve had to change tickets many times in the past, and it has typically only taken an agent about five minutes to do so. Unconscionabiliy, anyone?
Here’s what happened to me one cold winter night a few years back: On my way to Denmark from St. Croix, the airline was late taking off and got even more delayed when it “had to” make an unplanned “quick landing” for gas, which was cheaper at the interim airport than at the end destination, and… ice cubes for people’s drinks! I wish I was kidding, but I’m not. I missed the once-daily connection out of Atlanta to Copenhagen and had to spend the night in Atlanta in December. As I was living in tropical St. Croix at the time, I had some warm clothes with me on board the airplane to stay warm there, but had packed my winter gear in my suitcase. The airline paid for my hotel, but would, in spite of my desperate pleas, not let me have my suitcase back for the night. Result: I had to travel to and from the hotel, etc., in indoor clothes on what turned out to be an unseasonably cold winter day in Atlanta (yes, I should have brought a warmer jacket on board the plane, but planes to and from the Caribbean are often very small and I always try not to bring too much carry-on items).
Before 1978, U.S. airlines were required under “Rule 240” to offer seats on a competitor’s next flight if that would be the fastest way of getting the traveler to his or her destination. Airlines created after deregulation were never required to follow that rule, but older airlines such as Delta, United and Continental apparently still adhere to the rule. Funny that they never seem to mention that when they delay you significantly. Next time you fly, it may pay to scrutinize your contract of carriage more carefully to ascertain your rights in case of a delay.
It may be time for Congress to reintroduce a Rule 240-type requirement on airlines, especially as these have become extremely good at flying full – even at overcapacity - and thus often do not have extra space for passengers that have missed their flights. Good customer service often seems to have given way to airlines’ “me first” attitude in the name of hearing the highest profits possible by nickel-and-diming most aspects of airline travel on, at least, economy class.
Feeling empathetic towards the airlines? Don’t. Full or nearly full flights in conjunction with declining gas prices have enabled U.S.-based airlines to earn the highest profit margins in decades. One trade group estimates that airline made 6% profit margins in 2014, higher than the highest rates in the 1990s. Of course, the task of businesses is to make as much money as they can. But at least they should live up to their own contracts of carriage and other contracts principles just as they claim passengers and website developers should.
Here’s a hat tip to Professor Miriam Cherry and other contracts professors on a well-known industry list serve for news about this story. All opinion and thoughts above are my own.
Wednesday, December 31, 2014
Last month, United Airlines and Orbitz filed a by-now famous lawsuit against the 22-year-old computer specialist who created the website Skiplagged.com. This website helps consumers find the cheapest round-trip airfare possible by buying tickets to a destination to which the traveler does not actually intend to travel, but instead getting off at a layover point which is the truly intended destination and discarding the last portion of the ticket. Roundtrip tickets to certain popular destinations are often much cheaper than to other destinations sought by fewer passengers even though the more popular destinations are further away from one’s point of origin.
To not cause the airline and other passengers undue trouble and delays, this practice, of course, requires not checking in luggage which, it seems, fewer and fewer travelers do anyway (next time you fly, notice the rush to get on board first with suitcases often much bigger than officially allowed and airline personnel deliberately ignoring this for reasons of “competition”).
The cause of action for this lawsuit? “Unfair competition,” and breach of contract because of “strictly prohibited travel,” and tortuous interference with contract.
Unfair competition? I admit that I have not yet read the rather long complaint, but I look forward to doing so very soon. At first blush, however, how can “unfair” can it really be to assist consumers in finding airfare that they want at the best prices available? United Airlines recognizes that there is a discrepancy between its prices to very popular destinations and others on the way, but claims [cite] that if many people “take advantage” of that price differential, it could “hurt the airlines.” Come again? Does it really matter that a customer – with no checked-in luggage – pays whatever price the airline itself has set but simply decides not to use up the entire item purchased? Doesn’t that simply let the airline save gas and potentially give the empty seat to potential stand-by customers? Does it matter to a newspaper that I choose to not read the sports pages? Must I eat the heal of my bread even though I don't like it? What if I really don't like my bread and would rather eat a donut instead, as I thought might be the case?
The issue of breach of contract is arguably a closer one. If airlines “strictly prohibit” the practice of only using part of a ticket, it may be promissory fraud to buy a ticket if one intends at the time of purchase to only use part of it. This could also relate to the purchase of a round-trip ticket only to use it one-way as that too is often cheaper than a one-way ticket, as Justice Scalia found out himself recently.
The Skiplagged.com creator argues that he is only taking advantage of “inefficiencies” in airline travel that travelers have known about for a long time. To me, it seems that airline contracting should work both ways as other types of contracting: airlines take advantage of their bargaining positions as well as their sophisticated knowledge of current and future air travel supply and demand structures. They should do so! I applaud them for that. Jet travel has certainly made my personal and professional life much better than without relatively cheap air travel. But every first year contracts law student also knows (or should know!) that contracting is not and should not be a one-way street. Consumers too are getting more and more sophisticated when it comes to airline travel and other types of online contracting. Websites enable us to inform ourselves about what we wish to spend our money on. As long as consumers do not break the laws or violate established contracting principles, that does not strike me as “unfair competition,” that is simply informed consumerism in a modern capitalist society from which airlines and others have already benefited greatly.
Airlines, wake up: how about working with your customers instead of trying to fight them and modern purchasing trends? How’s this for a thought: start offering one-way tickets for about half of a round-trip ticket just like other transportation vendors (trains, buses, subways) do. Don’t you think that could set you apart from your competition and thus even earn you more customers? If you can fly for a certain amount of money to a certain city, let people pay that only and then simply sell a second ticket for the remaining leg to the more popular end destination where the same plane is headed anyway. Let people off the bus if they want to! Let some one else on instead. It doesn’t seem that hard to figure out how to work with current purchasing trends and your customers instead of resisting the inevitable.
For another grotesquely inappropriate lawsuit by United Airlines against its own customer, see Jeremy’s blog here.
I will blog more on this issue over the days to come. For now, I’m glad I don’t have to head to an airport. Happy New Year!