June 14, 2013
Scholarship Highlight: Sex* Matters
I just finished reading contracts prof Amy J. Schmitz's article, Sex Matters: Considering Gender in Consumer Contracting, 19 CARDOZO J. LAW & GENDER 437 (2013) which I thought was particularly timely given all the interest in consumer contracts. As Schmitz points out, too often discussions about "context" are left out of discussions about consumer contracts, especially from efficiency theorists who "mistakenly assume that market competition and antidiscrimination legislation address any improper biases in contracting." Schmitz's article is a thoughtful and comprehensive work that canvasses and synthesizes existing research, including behavioral economics and consumer legislation, in this area. She does a great job of highlighting ways in which existing legislation falls short of protecting against gender discrimination and incorporates a great deal of empirical and cognitive research regarding how gender affects both parties in consumer contracting scenarios. She notes that the available data suggests that women receive "less financially attractive sales and loan contracts, which may lead to higher debt loads for women." (at 447) Schmitz also conducted her own survey and shares the results which indicated gender disparities in areas such as confidence in ability to negotiate terms and ability to get companies to change terms. She argues in this article (as she has elsewhere) that context and "contracting culture" matters, and argues that gender be considered among the factors contributing to a contracting culture. For those who think that the free market is a fair market, Schmitz's paper should provide food for thought (as should this article that discrimination in housing persists against non-whites).
*Yes, I knew that putting "sex" in the title would increase traffic.
June 13, 2013
Jack Graves on The Supreme Court, Arbitration, and Implied Contract Terms
The United States Supreme Court rarely has occasion to opine on contract law, the contours of which are largely left to state courts. However, a couple of recent arbitration cases provided the court with a unique opportunity to point out the difference between contract terms implied-in-fact and contract terms implied-in-law. As any diligent first-year Contracts student should know, the former must rest upon the actual consent of the parties (even though not clearly expressed), while the latter are given effect through default legal rules, applied, as necessary, where the parties’ agreement is silent. This distinction between the two (and between contract “interpretation” and “construction”) is, of course, not always made clear in contract cases addressing one or both. However, these two recent opinions, Stolt-Nielsen v. Animal Feeds Int’l Corp., 130 S.Ct. 1758 (2010), and Oxford Health Plans, LLC v. Sutter, 2013 WL 2459522 (U.S.) (June 10, 2013) illustrate the difference quite nicely—whatever one may think about the content of the Court’s arbitration jurisprudence animating these decisions.
In Stolt-Nielsen, a panel of arbitrators had reasoned that an agreement permitted class arbitration, because it did not preclude it. Stolt-Nielsen at 1766. In effect, the parties’ silence required the arbitrators to supply an omitted essential term—a default rule—and they did so, thereby construing the agreement as allowing for class arbitration. Id. at 1768-69 and 1781. While acknowledging the power of arbitrators to craft procedural rules, generally, the Court explained that a “default rule,” allowing for class arbitration was sufficiently inconsistent with the fundamental nature of arbitration as to be beyond the power of arbitrators. Id. at 1668-69, 1775-76 (referencing the Restatement (Second) of Contracts § 204 on default rules and relying on FAA § 10(a)(4) to hold that the arbitrators had exceeded their powers). After Stolt-Nielsen, some might have expected that class arbitration would require some sort of “clear and unmistakable” expression of party intent (as the Court purports to require for a “delegation” clause, assigning jurisdictional decisions to the arbitrator). This is not necessarily so, however, as we learned this week in Oxford Health Plans.
In Oxford Health Plans, a claimant sought to bring class arbitration claims, and respondent asserted they were not allowed under the arbitration agreement. Both parties agreed to submit the question to a sole arbitrator, who “interpreted” the parties’ agreement and determined that it impliedly allowed class arbitration. Id. In affirming the arbitrator’s decision, Justice Kagan explained that the arbitrator was merely interpreting the actual intent-in-fact of the parties—a task clearly assigned to the arbitrator by those same parties. Id. Therefore, the arbitrator’s decision was fully within his power, even if erroneous—in fact, even if “grievously erroneous.” Id.
Thus, the Court neatly distinguished between the power of an arbitrator to determine actual, factual party intent, when assigned that task by the parties, and the power of the arbitrator to craft legal default rules (at least beyond the scope of general arbitration procedures). This distinction is of course analogous to the distinction between contract interpretation—generally an issue for the jury, if in question—and contract construction—generally an issue for the court.
Perhaps of greater interest to those who follow the Court’s arbitration jurisprudence, Oxford Health Plans appears to continue the inexorable march towards a seemingly unreviewable form of contractual Kompetenz-Kompetenz, see Jack Graves & Yelena Davydan, Competence-Competence and Separability: American Style in, International Arbitration And International Commercial Law: Synergy, Convergence and Evolution (Kluwer 2011) (Part 2) and Jack Graves, Arbitration as Contract: The Need for a Fully Developed and Comprehensive Set of Statutory Default Legal Rules, 2 William & Mary Bus. L. Rev. 225, 276-85 (2011), initially announced in First Options, Inc. v. Kaplan, 115 S.Ct. 1920 (1995), further expounded upon in Rent-A-Center, West, Inc. v. Jackson, 130 S.C t. 2772 (2010), and made even more seemingly absolute in Oxford Health Care. The Court had already made abundantly clear that a decision as to whether the parties had in fact agreed to arbitrate a dispute—when the decision was “delegated” to an arbitrator—was beyond court review, except as provided under FAA § 10(a). In Oxford Health Care, the Court further clarified the extraordinarily narrow scope of FAA § 10(a)(4).
[posted by Meredith R. Miller on behalf of Jack Graves]
May 24, 2013
Dollar Rent a Car and the Borat Problem
Given all the excitement over boilerplate on this blog, I thought it would be a good time to remind readers of problems that might arise that don't exactly involve (just) boilerplate, It's not just the words in the contract -- the way the contract is presented can create problems, too. I've been meaning for a while to discuss this NYT article about a lawsuit against Dollar Rent a Car. According to the article and the complaint, the plaintiffs were customers who specifically declined the insurance coverage that car rental companies are always pushing (and which is often covered by customers’ personal auto insurance policy and/or credit card). They were then handed a tablet and asked to sign electronically. When they returned the car, they were surprised with a much larger-than-expected bill that included a “loss damage waiver” which, like insurance, “waives” the customer’s liability for loss or damage to the car.
I planned to blog about this last month, but just as I was about to, I received a reprint of Russell Korobkin’s article, recently published in the California Law Review. The title, The Borat Problem in Negotiation: Fraud, Assent and the Behavioral Law and Economics of Standard Form Contracts, sounded intriguing and as I started to read it, I realized that the article addressed a lot of the issues raised by the car rental form contract/electronic signature situation. I thought it might be fun (er, contracts prof style-fun) to view the Dollar Rent a Car problem through the lens of Korobkin’s proposed Borat solution.
According to the article, the Dollar-Rent-A-Car plaintiffs explicitly told the car rental agent that they were declining insurance coverage yet unknowingly signed for it on an electronic tablet. This illustrates one way that contracting form matters –I suspect it was easier for customers to be misled by the “loss damage waiver” language because they didn’t have an easy way to read the surrounding language. While paper consumer contracts are generally adhesive, customers do have the option of declining insurance coverage. While many customers may still have overlooked the meaning of the language, others may have scanned the few sentences immediately before the signature line (this seems particularly true of the plaintiffs, who one of whom is an insurance lawyer).
Sales agents are typically paid a commission to upsell the insurance coverage and each of the plaintiffs paid a hundred to several hundred dollars more than they expected to pay.
I tried to get a copy of Dollar’s rental agreement off their website. While their general policies are posted, which references their rental agreement, the agreement itself is not available. That’s already a strike against them in my book – why not post the rental agreement on your website since you’re going to have your customer sign it anyway? I think it’s because the company doesn’t really expect anyone to read the agreement. Most people don’t read, but that doesn’t mean they wouldn’t if the company made more of an effort to make the agreement accessible and readable.
Without a copy of Dollar’s actual rental agreement, I can only make assumptions about what it contains but my guess is that it contains an integration clause and a no-oral modification or “NOM” clause. The latter may not be enforced but the former brings the contract into the grip of the parol evidence rule. The PER rule won’t effectively block a fraud claim, but fraud claims may be difficult to prove in this context. The other avenue for redress is under a consumer protection statute claiming unfair or deceptive trade practices. But what about contract law – can it do anything here to help the consumers?
Korobkin’s article doesn’t specifically address consumer actions, but he tackles the “Borat Problem” which often occurs in consumer contracting situations. According to Korobkin, the Borat Problem occurs when two parties “reach an oral agreement. The first then presents a standard form contract, which the second signs without reading or without reading carefully. When the second party later objects that the first did not perform according to the oral representations, the first party points out that the signed document includes different terms or disclaims prior representations and promises.”
As readers of this blog are well aware, contractsprofs went through a slight obsessive period with the Borat contract when it first arose. To quickly summarize, several people who were in the 2006 movie, Borat: Cultural Learnings of America for Make Benefit Glorious Nation of Kazakhstan sued the producer, Twentieth Century Fox, claiming that they were misled into appearing in it. Korobkin states that these plaintiffs claimed that the studio obtained their consent using a two part strategy, “false representations followed by standard form contracts that included language designed to contradict or disclaim those representations.”
Sound similar to the Dollar situation? Although the Dollar agent didn’t expressly make false representations, they allegedly acted in a way that misled the plaintiffs into believing they were acting consistent with their wishes, and that the contract they were signing reflected their understanding. Korobkin discusses existing legal remedies to the Borat problem and concludes they are not so satisfying for various reasons. He then discusses the risk of “bilateral opportunism,” meaning that a “pure duty to read” rule leaves nondrafting parties vulnerable to exploitation by drafters and a “no-exploitation rule” leaves drafters vulnerable to opportunistic behavior (i.e. bad faith claims) by nondrafters. He discusses the different ways that each party might take advantage of the other under either rule and throws in a good amount of behavioral economics to back up his arguments – for example, “confirmation bias” makes it difficult for even sophisticated nondrafters to notice when a contract term contradicts a prior representation made by the drafter. Korobkin also discusses the role of trust, specifically that reading a contract may signal that the nondrafter doesn’t trust the drafter. I think trust plays a role (even if small) in the Dollar scenario – afterall, nobody wants to be that jerk in line who challenges the smiling service rep. There's also social pressure in that nobody want to be that jerk holding up the line of foot tapping customers by asking questions about fine print (believe me, I know).
Korobkin’s “Borat Solution” would require specific assent to written terms that are inconsistent with prior representations. This effectively puts the burden on drafters to include a “clear statement” that the particular provision takes precedence over prior representations and “realistic notice” which would generally mean that the parties actively negotiated the term. I like this proposal (and have proposed something very similar to it in the context of online agreements) because it recognizes that drafters have the power to make terms more salient. The notion of blanket assent puts too much of a burden on the nondrafting party instead of the party that has the power to actually communicate the terms more effectively.
So would the Borat solution have changed anything in the Dollar scenario? I think so, but for a different reason than the actual Borat scenario. A clear statement and realistic notice would preclude having customers sign on an electronic tablet without also making immediately visible the relevant provision. In other words, the customer wouldn't be asked to sign without being able to read the waiver provision. Although it's not expressly stated, it seems implied from the NYT article that the contract provision was not viewable on the tablet. If that's the case, that provision would not be enforceable.
So, for those of you planning to research the consumer contracts conundrum this summer, in addition to Margaret Jane Radin’s book, Boilerplate: The Fine Print, Vanishing Rights, and the Rule of Law and Oren Bar-Gill’s book, Seduction by Contract, I recommend that you add Korobkin’s article to your summer reading list.
May 13, 2013
Boilerplate Symposium I: Peter Alces on Consent
This is the first in a series of posts reviewing Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law.
In this fine book, Margaret Jane Radin concludes that “consent” lacks a reality referent in contract. That is, somewhere between what she describes as “World A (Agreement),” the universe of enforceable promises negotiated “at arms’ length” by parties of similar relative sophistication, and “World B (Boilerplate),” where standard and oppressive terms effect normative and democratic degradation, consent is lost. This conclusion is not shocking; it is difficult to think of anyone (probably including even Randy Barnett) who honestly believes that real consent has very much to do with most (even virtually all) contracting these days. So we can all agree: where there is boilerplate, there is no “meaningful” consent, which is to say there is none of the consent that should matter to contract. From that premise, Professor Radin concludes that World B is not a contracts universe at all, but is instead a realm better understood by reference to tort principles (and it is even worse than Grant Gilmore ever imagined).
But once we acknowledge the death of consent, how much more new is there to say about boilerplate? You could despair with Professor Radin that political forces make it unlikely that the American justice system will respond as would the European Union; that consequentialist apologists rely on arm chair empirical assumptions without actually doing the necessary math; that by a 5-4 decision of the United States Supreme Court the Federal Arbitration Act has been contorted to undermine our justice system; that a curiously reasoned decision of the United States Court of Appeals for the Seventh Circuit has somehow become the prevailing (if not final) word on contract formation: but at the end of the day, it is difficult to identify certainly the extent of the harm or glimpse a viable cure. (Those troubled by boilerplate need to do the same math they complain form contracts proponents fail to do.)
While Professor Radin is right that there are distinguishable Worlds of contract, she does not make clear enough that the two Worlds are on a continuum; they are not so clearly dichotomous. Further, the contours of the continuum are obscure: many very sophisticated people know quite well what they are giving up when they sign a form contract or click “I agree," and yet do so willingly. That is generally the rational thing to do. Now Boilerplate does put boilerplate on a three dimensional matrix that would be sensitive to degrees of consent, alienability of the right in issue, and the size of the cohort prejudiced. But in describing Worlds A and B in dichotomous terms, the book may obscure the reasons why it remains rational to agree to form contracts, without reading their terms. So I think the book would have been stronger had it described Worlds A and B along a fourth dimension.
What Professor Radin has to say about consent is surely true, but what she says is really a truism: we know that consent is a conclusion rather than an analytical device, and that consent is also a term of art, largely divorced from the important normative work it can do in World A. What we do not know, though, is when World A becomes World B: it is not just the case that all form contracts are World B contracts. Whether a contract is World A or World B is a function of the very factors that contract doctrine could take seriously, if the composition of the Supreme Court were different, and if all Federal Courts of Appeal judges knew a bit more about the common law of contract and the UCC.[Posted, on Peter Alces's behalf, by JT]
Boilerplate Symposium: The First Five
We begin our online symposium on Margaret Jane Radin's book, Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law with five posts this week. This post will serve to introduce our guest bloggers.
Peter A. Alces is the Rollins Professor of Law and Cabell Research Professor of Law at the College of William & Mary School of Law, where he has taught since 1991. He is the author of A Theory of Contract Law: Empirical Insights and Moral Psychology; Commercial Contracting; The Law of Suretyship and Guaranty; Bankruptcy: Cases and Materials; Cases, Problems and Materials on Payment Systems; The Commercial Law of Intellectual Property; Sales, Leases and Bulk Transfers; The Law of Fraudulent Transactions; and Uniform Commercial Code Transactions Guide. He has also published articles in the Northwestern, Michigan, Minnesota, Illinois, North Carolina, Fordham, California, Texas, and William and Mary Law Reviews, and the Emory, Ohio State and Georgetown Law Journals.
Theresa Amato is the executive director Citizen Works which she started with Ralph Nader in 2001. After earning her degrees from Harvard University and the New York University School of Law, where she was a Root-Tilden Scholar, Amato clerked in the Southern District of New York for the Honorable Robert W. Sweet. She was a consultant to the Lawyers Committee for Human Rights (Human Rights First) and wrote an influential human rights report on child canecutters in Haiti and the Dominican Republic. She then became the youngest litigator at Public Citizen Litigation Group, where she was the Director of the Freedom of Information Clearinghouse in Washington D.C. In 1993, Amato founded the nationally-recognized, Illinois-based Citizen Advocacy Center and served as its executive director for eight years. She currently serves as its Board President. Most recently, she has launched Fair Contracts.org to reform the fine print in standard form contracts. In 2009, The New Press (New York) published her book, Grand Illusion: The Myth of Voter Choice in a Two-Party Tyranny. She also appears prominently in the Sundance-selected and Academy Awards short-listed documentary “An Unreasonable Man.”
Andrew Gold is a professor of law at the Depaul University College of law. His primary research interests address legal theory and the law of corporations. Following graduation from Duke University School of Law, he clerked with the Honorable Daniel Manion of the Seventh Circuit, and with the Honorable Loren Smith of the Court of Federal Claims. After his clerkships, he joined Skadden, Arps, Slate, Meagher & Flom, where he practiced corporate litigation. Professor Gold's article, "A Property Theory of Contract," was lead article in the 2009 volume of the Northwestern University Law Review. His recent publications also include articles in the William and Mary, U.C. Davis, and Maryland law reviews. In 2007, Professor Gold received the College of Law's Award for Excellence in Scholarship, and, in 2010, he received the Award for Excellence in Teaching. During the 2011-2012 academic year, Professor Gold was a Visiting Scholar at Harvard Law School, and in Fall 2011, he was an HLA Hart Visiting Fellow at the University of Oxford. His scholarship has focused on contract theory; private law theory; fiduciary duties in corporate law; and Section 10(b) of the Securities Exchange Act.
David Horton joined the UC Davis faculty in 2012, after three years at Loyola Law School, Los Angeles. He received his B.A. cum laude from Carleton College in 1997 and his J.D. from UCLA School of Law in 2004. At UCLA, he was elected to the Order of the Coif and served as Chief Articles Editor of the UCLA Law Review. He then practiced at Morrison & Foerster in San Francisco and clerked for the Honorable Ronald M. Whyte of the United States District Court for the Northern District of California. From 2007 to 2009, he taught legal research and writing at UC Berkeley School of Law. Horton’s research focuses on wills and trusts, federal arbitration law, and contracts. His recent work has appeared or will soon appear in the NYU Law Review, Northwestern University Law Review, Georgetown Law Journal, UCLA Law Review, Notre Dame Law Review, North Carolina Law Review, University of Colorado Law Review, and Virginia Law Review in Brief, among others. He also wrote an amicus brief on behalf of contracts professors in AT&T Mobility LLC v. Concepcion, the recent Supreme Court case.
Ethan J. Leib is a noted expert in constitutional law, legislation, and contracts. His most recent book, Friend v. Friend: Friendships and What, If Anything, the Law Should Do About Them (2011), explores the benefits of legal recognition of friendship and was published by Oxford University Press. He has three forthcoming articles on public law subjects: one in the Journal of Political Philosophy examining fiduciary principles in political representation; one in the California Law Review applying the fiduciary principle to the activity of judging within democracies; and one in The University of Chicago Law Review exploring whether elected judges should be interpreting statutes differently from their appointed colleagues. Leib's other academic writing has appeared in journals such as the Yale Law Journal, Northwestern University Law Review, UCLA Law Review, Constitutional Commentary, Election Law Journal, Journal of Legal Education, Law & Philosophy, and elsewhere. He has also written for a broader audience in the New York Times, USA Today, SF Chronicle, Policy Review,Washington Post, New York Law Journal, The American Scholar, and The New Republic. Before joining Fordham, Leib was a Professor of Law at the University of California–Hastings. He has served as a Law Clerk to Chief Judge John M. Walker, Jr., of the U.S. Court of Appeals for the Second Circuit and as an Associate at Debevoise & Plimpton LLP in New York.
We look forward to a stimulating fortnight of exchanges on this important new book.
March 04, 2013
Victor Goldberg on Columbia Nitrogen
We posted earlier in the semester about the baffling case Columbia Nitrogen v. Royster. Victor Golberg (pictured) wrote to us to recommend his book chapter on the subject in his Framing Contract Law (2007). Professor Goldberg names Columbia Nitrogen, together with Nanakuli Paving as a "Terrible Twosome," that should render law professors apoplectic. That is so because when courts use course of dealing or custom to set aside fied price terms, contracting parties can have "little confidence in their ability to predict the outcomes if their disputes do end up in litigation" (p. 162).
John Murray, writing in 1986, praised the decision for evidencing "a sophisticated judicial understanding of the major modifications in contract law" and for its "sophistication with respect to [UCC §] 2-207." But Professor Goldberg sees a darker story, in which CNC's counsel attempted to undo, by whatever means necessary, what had turned out to be a bad bargain." As a result, says Professor Goldberg, the court "converted a straightforward agreement into an incoherent mess" (p. 187).
Happily, according to Professor Goldberg, Columbia Nitrogen is not followed. Contractual relationships are governed by two complementary systems: legal enforcement, which has strict rules, and social enforcment, which is governed by informal norms. The mistake of the court and the "potential cost of Columbia Nitrogen" is to infer legal rules from social rules in a way that allows legal rules to hamstring informal social norms (p. 188).
It is a nice piece of wisdom to pull out of a troublesome opinion. The full details of the case, going well beyond what is available in the published opinion, can be found in PRofessor Goldberg's book.
December 03, 2012
Some Valuable Advice from a Reliable Source
Professor Emeritus Douglas Whaley (whose casebook I have just adopted for my first attempt at a sales course) offers this advice on exams.
November 15, 2012
Court Grants Certiorari in American Express Co. v. Italian Colors Restaurant
[When we learned that SCOTUS had granted cert. in this case, since David Horton (pictured) has guest blogged for us before, repeatedly, we threatened to hold him hostage until we could complete our science fiction fanstasy movie called Argo unless he could supply a post on the case. Beacuse of the following post, it looks like the film will never be made. Can someone get John Goodman and Alan Arkin out of our blog offices?]
Jeremy has kindly asked me to say a few words about the U.S. Supreme Court’s cert grant in American Express Co. v. Italian Colors Restaurant, No. 12-133, 2012 WL 3096737 (U.S. Nov. 9, 2012) (“Amex”). For years, scholars like Jean Sternlight and Myriam E. Gilles have warned that the Court’s expansive interpretation of the Federal Arbitration Act (“FAA”) will kill off the consumer and employment class action. Amex may drive the final nail into this coffin. In fact, as I’ll explain, the case has the potential to sweep even further.
As many readers of this blog know, Amex comes hot on the heels of AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011). Before Concepcion, courts routinely held that class arbitration waivers were unconscionable when applied to numerous, low value, state law claims. The idea was that these small-dollar grievances—which usually invoked state consumer protection statutes—would either be pursued as a class action or not at all. However, Concepcion (arguably) held that section 2 of the FAA preempts this line of authority. (I say “arguably” because Concepcion’s precise holding remains contested, and to plug my forthcoming article, which urges courts to read Concepcion narrowly). Justice Scalia’s majority opinion reasoned that using the unconscionability doctrine to mandate class arbitration—which is slower and more formal than two-party arbitration—violated the FAA’s purposes and objectives. Justice Scalia then dismissed concerns about deterring small claims by declaring that “[s]tates cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons.”
Yet the unconscionability defense wasn’t the only tool that judges employed to invalidate class arbitration waivers. In Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79, 90 (2000), the Court suggested (but did not hold) that plaintiffs don’t have to arbitrate if they prove that they can’t effectively vindicate their federal statutory rights in the arbitral forum. Specifically, the Court cited high arbitral costs as a reason to strike down an arbitration clause for thwarting federal statutory rights. Since then, many lower courts have applied the vindication of rights doctrine to nullify class arbitration waivers in situations where individual lawsuits are cost-prohibitive. Because Concepcion dealt with state unconscionability principles and section 2 preemption, its effect on the vindication of rights doctrine—a matter of federal common law—is unclear.
Amex falls into this gap. The plaintiffs, a group of merchants and a trade association, claim that American Express violated the Sherman and Clayton Acts. Although the parties’ agreements contain a class arbitration waiver, the plaintiffs claim that the expense of proving their allegations (between several hundred thousand and a million dollars) dwarfs any individual’s potential recovery (a maximum of $38,000, even if trebled under the antitrust statutes). Thus, the Court (minus Justice Sotomayor, who sat on a Second Circuit panel that considered an earlier iteration of the case) will decide whether Concepcion’s rhetoric about the evils of class arbitration extends to negative-value federal statutory claims.
From reading the petition for certiorari—which was supported by amicus briefs from the usual defense-side suspects—it seems that the vindication of rights doctrine itself will come under fire. Of course, it’s unlikely to be the flagship argument. I think American Express et al. will first try to stretch Concepcion as far as possible and then distinguish the plaintiff’s costs (which are mostly expert fees) from other vindication of rights holdings (which tend to involve expenses that wouldn’t normally be incurred in litigation, such as arbitrator’s fees). But at least some of the briefs are already challenging Green Tree as dicta. If the Court takes the bait and throttles back on the vindication of rights doctrine, it would affect the entire sprawling institution of arbitration—not just class actions. Even plaintiffs with righteous, non-class claims under important federal statutes wouldn’t be able to challenge egregious arbitration clauses under federal law. (To be sure, the unconscionability defense might still prune away the worst provisions, but it (1) is notoriously unreliable and (2) also hangs by a thread in the arbitration arena). Thus, Amex could be another large step toward a proposition that the Court seems increasingly willing to embrace: claims must be sent to arbitration even if they can’t or won’t be arbitrated.
[Posted on David's behalf, by JT]
November 05, 2012
Contracts Limerick of the Week: Special Guest Poet, Chris Osborn
This week we have a guest blogger, Chris Osborn (pictured), a relative newcomer to the world of contracts profs, but already setting cases to Limericks. Below is Chris's summary of Hooters of America v. Phillips, 173 F.3d 933 (4th Cir. 1999).
In Phillips, a waitress employed at a Hooters restaurant in Myrtle Beach, SC reported to her manager that she had been sexually harassed by the local franchise owner’s brother. Ms. Phillips claimed that the manager responded that she should “let it go,” whereupon she resigned and retained counsel. When her attorney contacted the franchisor, Hooters of America, Inc. (Hooters), and gave notice of the claim, Hooters invoked an arbitration clause in an employment agreement that the claimant had signed several years after she was hired. Hooters then filed a declaratory judgment action in federal district court and a motion to enjoin the plaintiff from filing suit (which was treated as a motion to compel arbitration).
In opposing the motion, Ms. Phillips contended that the arbitration clause was not entered knowingly and voluntarily, was unconscionable, and was not supported by consideration. The U.S. District Court for the District of South Carolina found the arbitration clause unenforceable, holding inter alia that since the clause was not contained in her initial employment contract, it had to be supported by some additional consideration. The court then examined the mutual promise to arbitrate unenforceable. In particular, the court found that the arbitration Rules & Procedures bound the employee but gave the employer alone the right to terminate the agreement to arbitrate at any time on 30 days’ notice. Moreover, the Rules and Procedures also held the employer to significantly less onerous pleading, discovery, and trial procedures. Accordingly, the court ruled that Hooters’ promise to arbitrate was illusory (which makes it reminiscent of another case recently reduced to a Limerick, Vassilkovska), and thus it could not serve as consideration for the employee’s promise to submit her claims to arbitration.
The Fourth Circuit affirmed.
Here are the (three!) Limericks:
When Miss Phillips, crying conduct discriminatory
Sought redress for her boss’ tomfoolery
Her employer said, “Wait,
You made a promise to arbitrate!”
But the court ruled the whole thing illusory.
“When harassed on the job (wouldn’t ya know?)
A young Hooter’s girl could not “let it go….”
When the restaurant stalled,
The court was appalled
“Was there any consideration here? No. “
When a harassed young waitress brought suit
Her employer did not give a hoot
It tried to stay litigation
And demand arbitration
But the court ruled the sham clause was moot.
October 22, 2012
Cross-Postings from Concurring Opinions: Online Symposium on Contracts in the Real World
Last week, the Concurring Opinions blog hosted an online symposium on Larry Cunningham's new book Contracts in the Real World: Stories of Popular Contracts and Why They Matter. An introduction to the symposium can be found here. With the permission of the authors, we are cross-posting the commentaries here. Here is a listing of the posts:
Miriam Cherry, Post I
Miriam Cherry, Post II
Miriam Cherry, Post III
Ronald K.L. Collins
Larry Cunningham, Post I
Larry Cunningham, Post II
Larry Cunningham, Post III
Susan Schwab Heyman
Law Student Umo Ironbar
Donald C. Langevoort
Jennifer S. Taub
Those of you in the teaching world, we hope that you will have a look at Larry's book and give serious consideration to the possibility of adopting it for your courses or recommending it to your students. To our student readers, this is a really fun book that will enhance your enjoyment of and appreciation of the law of contracts.
Tom Lin: Contracts in the Real World and Contracts in Law School
The following post is cross-posted from an online symposium that previously appeared on Concurring Opnions. The original post can be found here.
The title of Larry’s new book is Contracts in the Real World. Intentionally or not, the title suggests that there may exist another realm for contracts other than the real world, a realm that is perhaps more theoretical and not completely real. The alternate universe that most readily comes to mind is law school. Contracts in the real world exist in partial contrast to contracts in law school.
Contracts in the real world bind parties and counterparties to one another. Contracts in law school bind students to casebooks and laptops. Contracts in the real world frequently revolve around compensation, obligations, and duties. Contracts in law school frequently revolve around precedents, arguments, and defenses. Contracts in the real world are about contracts. Contracts in law school are about cases about contracts. Needless to say more, there exists a meaningful and significant gulf between contracts in the real world and contracts in law school.
Larry’s book serves a bridge across this gulf. Through wide-ranging popular stories about the prominent and the pedestrian crafted in accessible language yet not devoid of legal doctrine, the book connects contracts in law school with contracts in the real world. Law school concepts like offer, acceptance, mitigation, and assignment are illuminated by real world stories of popular contracts involving Pepsi ads, Dateline NBC, Redskins tickets, and Haagen-Dazs ice cream.
The conceptual meditations of contract scholars like Cardozo, Corbin, and Williston are expressed and explained in contract controversies involving well-known figures such as Michael Jordan, Maya Angelou, and Lady Gaga, and through common experiences like purchasing lottery tickets, signing mobile phone agreements, and buying football tickets online. Given the accessible language and popular stories, it is easy for the reader to be lulled into forgetting that they are reading and learning about the law, much in the same way that Tom Sawyer lulled his friends into whitewashing a fence by making it seem more like a treat than a chore.
Through stories, common and classic, Larry reminds us that contracts are not pacts chiseled in stone that bind parties to one another in an empty, static, and monochromatic world without regard for reason or sense. Rather, contracts are dynamic communions between parties that exist in a colorful world filled with complications, change, and consequence. This means that contracts manifest agreements that are frequently honored as intended, but it also means that contracts are sometimes modified, breached, and enforced against another’s preferences because these agreements exist in a dynamic world.
Throughout the book, Larry advocates for a thoughtful, balanced view of contract law; this balanced view departs from heedless, extreme views of contract law based on rigid and impractical notions of freedom of contracts or social justice that frequently find root in irreconcilable moral, political perspectives. Likewise, contracts in law school and contracts in the real world should strive to find what Larry calls a “sensible center.”
Scholars, students, and practitioners of contract law can all greatly benefit from finding this balanced core as well because contract law is perhaps most enjoyable, most thoughtful, and most useful, when theory and pedagogy meets experience and practice, when there is a meeting of the minds between contracts in law school and contracts in the real world.
Larry’s book is a much welcomed addition to the literature on contract law. It will be enjoyed by many who deal with contract law, be it in law school, the real world, or somewhere in between.
[Posted by JT]
July 19, 2012
The Contract that Neither Party Intends
I've just returned from a semester in New Zealand, teaching an advanced contracts course at the beautiful Victoria University of Wellington. One of the best things about teaching at the law school was having David McLauchlan as a colleague. As many contracts profs know, David is an impressive and prolific contracts scholar and a highly respected expert on contract law. Some of his writings can be found here. During my visit, I had the privilege of hearing David present a paper with the intriguing title, “The Contract That Neither Party Intends.” In his paper, he tackles the issues of interpretation and responded to a recent New Zealand case which endorsed our very own Holmes' strict views regarding the objective approach to contract formation and interpretation. Professor McLauchlan offers several compelling reasons why that view should be rejected in favor of (also our very own) Corbin’s less stringent version of objectivity. The paper is a spirited discussion of interpretation issues ("promisee objectivity" v. "detached objectivity" aka "fly on the wall" theory) and discusses cases that are classics in American casebooks (such as the Peerless case) as well as New Zealand and Australian cases that may be unfamiliar to U.S. contracts profs. It goes to show that while contract law may be local, contract law issues are universal.
July 03, 2012
Guest Post by Professor Moshe Gelbard
We are always delighted to post contributions from Contracts Profs not currently associated with the blog. Today we are pleased to introduce Moshe Gelbard, whose work may be familiar to some of our readers because of his presentations at the annual Contracts Law spring conferences.
Professor Gelbard teaches at the Netanya Academic College, where he is a Senior Lecturer in the School of Law. This past Spring Semster, he was a Visiting Professor at Touro College's Jacob D. Fuchsberg Law Center. He has two publications forthcoming in U.S. Law Reviews. His co-authored piece with David Elkins, The Remedy of Price Reduction in Mixed Legal Systems, is forthcoming in the Stetson Law Review, and his Pre-dispute Arbitration Clauses in Consumer Contracts, is forthcoming in the Touro Law Review.
His guest post will appear later today.
May 31, 2012
New in Print
Barbara A. Atwood, Marital Contracts and the Meaning of Marriage, 54 Ariz. L. Rev. 11 (2012)
Robert Luther, III, The Business of "Procuring Cause" in Virginia. 3 Wm. & Mary Bus. L. Rev. 181 (2012)
Nicolas Suzor, Order Supported by Law: the Enforcement of Rules in Online Communities, 63 Mercer L. Rev. 523 (2012)
The volume of the Arizona Law Review containing Barbara Atwood's article on marital contracts also contains a very fine tribute to Professor Atwood (pictured) on the occasion of her retirement. I don't think I ever crossed paths with Professor Atwood, and Professor Massaro's tribute makes me regret that. Fortunately, it is not too late, since retirement from teaching can provide great opportunities for continued involvement in the intellectual community.
April 17, 2012
Welcome to the Blogosphere (again): Frank Snyder's Lawyer Apocalypse
This blog reflects the thoughts of Frank Snyder, a law professor and former Big Law partner, on the massive changes that law schools and the legal profession are facing in the decades ahead, and on the larger role of lawyers in society. Plus some other things, from time to time.
And here's what Frank has to say about Frank and his views:
I'm a law professor who has taught at law schools in each quartile of the USNews rankings, been a partner at an AmLaw 20 firm, and owned a couple of independent mionor league baseball teams.
You can find my current school on a Google search, but I'm not putting it here because I want to emphasize that this blog reflects my personal observations on legal education, the profession of law, and the vast changes (the "Apocalypse") that are looming on the horizon for each. I claim no special expertise in these topics, except for having practiced law for nearly 15 years and taught in law schools nearly as long.
Unlike some other critics, I believe that the law is the greatest of the secular professions It has played a critical role in American life. Law school is not a scam. Law has offered, and continues to offer, incredibly rewarding careers to thousands of new lawyers. My view of the American law school is like that of reforming 15th-century Catholics to abuses in the Church -- a deep love for an institution but a strong concern that it has fallen under some very bad influences.
Unless attributed and linked to specific others, all of the thoughts here are mine, unless I unconsciously stole them, in which case I apologize. None of them should be taken as the opinions of my employer, my publishers, my students, or any other person or institution
As always, we wish Frank all the best in this new venture.
March 15, 2012
University of Wisconsin Law School and the Contracts Community Mourn the Loss of John Kidwell
We learned yesterday from the University of Wisconsin Law School website that Professor Emeritus John Kidwell died last week. Here is the text from the Wisconsin website.
The University of Wisconsin Law School is deeply saddened by the loss of Professor Emeritus John Kidwell, who passed away in Madison last week.
Professor Kidwell was born in Denver, Colorado and grew up in Custer, South Dakota. After high school he attended the South Dakota School of Mines and Technology for two years, contemplating a degree in physics, but changed plans when, in his own words ". . . I encountered The Calculus, and The Calculus won." He transferred to the University of Iowa and majored in English, receiving his B.A. from the University of Iowa in 1967 (With Distinction, Honors Program, Phi Beta Kappa). He then attended Harvard Law School and received his J.D. in 1970 (cum laude). He took a job as an associate with the Denver, Colorado law firm of Dawson, Nagel, Sherman & Howard.
Professor Kidwell joined the University of Wisconsin Law Faculty in 1972 as an assistant professor, and except for a year as a Fellow in Law and Humanities at Harvard University in 1976-77, was here continuously. He served as Associate Dean for Academic Affairs from 2002-2005 before retiring from the full-time faculty in June 2005.
Professor Kidwell regularly taught courses dealing with the law of contracts, remedies, copyrights, and trademarks. He was the recipient of the Emil H. Steiger award for teaching excellence, and had been chosen Teacher of the Year by the Wisconsin Law Alumni Association. He was a co-author of Wisconsin Law School’s
signature “Contracts: Law in Action,” a casebook published by Lexis/Nexis, as well as a co-author of "Property: Cases and Materials," published by Aspen. Among his many service activities, he served as a member, and ultimately Chair, of the Wisconsin Board of Bar Examiners. He was a member of the Testing Policy Committee of the National Conference of Bar Examiners, and continued working on bar examination issues for that body up until the very last weeks before his death.
John Kidwell leaves behind his wife and son, Jean and Ben Kidwell. A man of broad and eclectic interests, he characterized his interests and activities as “reading, listening to music, idle conversation and the game of poker.”
March 02, 2012
Lifetime Achievement Panel: Mel Eisenberg
Keith Rowley has put together a panel consisting of Shawn Bayern, Omri Ben-Shahar, and Mark Gergen to honor Melvin Eisenberg, who is the fourth honoree for Lifetime Achievement at the Spring Contracts Conference.
Professor Bayern stressed Professor Eisenberg's fundamental refusal to reduce contracts law to any one unifying principle. Law must be justified by relevant social propositions: including morality, policy and experiential propositions. Not meaning to criticize theorists who view contracts as promise, or as plan, etc., Professor Beyern regards such views as undoubtedly useful but incomplete when considered from the perspective of Professor Eisenberg's appreciation of contracts as contracts. In addition, Professor Bayern highlighted Professor Eisenberg's contributions to and critiques of the field of law and economics. Professor Bayern notes that Professor Eisenberg's work is often not categorized under the rubric as law and economics because although Eisenberg utilizes economic theory, he reaches conclusions that are not usually associated with law and economics. But Professor Bayern challenges more traditional L&E types to attempt to refute any of Professor Eisenberg's arguments, which he (Professor Bayern) summarized as showing that, while economic models might make sense in the abstract world of rational actors, they do not help us understand the real world of contractual relations.
Omri Ben Shahar again stressed Mel Eisenberg's contributions in the realm of law and economics, recognizing Eisenberg as law and economics pioneer. Eisenberg's approach to L&E enables economic analysis to improve in resolution. Because Eisenberg focuses not on generating new theoretical models but on applying them in concrete situations, he can test and refine economic models and help them achieve greater clarity and specificity. Professor Ben Shahar elaborated on Professor Eisenberg's substantive contributions in refining our understandings of disgorgement, the bargain theory of consideration and procedural unconscionability doctrine.
Mark Gergen celebrated Mel Eisenberg as the best exemplar of his generation of the great pragmatic tradition in contracts scholarship. Professor Gergen illustrated this by comparing and contrasting Professor Eisenberg's work with that of last year's honoree, Stewart Macauley. After noting the extent of overlap between the two scholars, Professor Gergen identified the key distinction that Mel Eisenberg more clearly sees the limitations of contracts doctrine. Contracts may be about relationships, but it cannot repair such relationships when they are broken. There may be damages, but often the parties just must go their separate ways. Professor Gergen also contrasted Mel Eisenberg's work with that of another giant of Mel's generation of conracts scholars, Professor Robert Scott, especially in their estimation of the value of litigation and their faith in courts.
Ultimately, all agreed that Mel Eisenberg's scholarship defies easy categorization but is always characterized by lucidity, clarity and persuasiveness. The pleasure of reading Mel Eisenberg's scholarship is that you always learn by reading him and emerge either persuaded or knowing, because of the clarity of Eisenberg's writing and his transparency in identifying his assumptions, exactly why you disagree.
As expected, Professor Eisenberg was gracious in his remarks, noting that he is currently at work on a book on contracts, and indicating that there is still some "open texture" in his work that he can work on with the help of the comments he received on his work.
February 17, 2012
Snyder on How to "Dine and Ditch" Under the UCC
The ABA Journal reports that The Cheesecake Factory will begin posting drink prices in Massachusetts after a lawyer threatened suit. According to the article, the lawyer "threatened to sue under the Massachusetts Consumer Protection Act on behalf of a friend who was charged $11 for a margarita at a Cheesecake Factory in Chestnut Hill. The price was not on the menu and the server was only able to provide a range of drink costs."
The ABA Journal looks to our very own founder, Franklin Snyder, for guidance. Previously, Frank had commented in a New York Times column about Nello. This Manhattan restaurant has (had?) a practice of not mentioning the price of a white truffle pasta lunch special. This practice shocked a recent diner when he turned over a bill charging $275 for the dish. To the New York Times, Snyder commented:
“You might be interested in letting your readers know that a restaurant meal is a ‘sale of goods’ under Article 2 of the Uniform Commercial Code,” he wrote. “The code provides that where the buyer and seller have agreed to a contract but have not agreed on the price, the price is not what the seller subsequently demands. It’s a reasonable price for the goods at issue. Thus a customer has no obligation to pay for anything more than the reasonable price of a pasta meal at a trendy restaurant.”
He continued: “In this circumstance, a customer should make a reasonable offer for the value of the meal, then walk out and wait to be sued for breach of contract. Be sure to leave the restaurant full contact information so they can’t claim that you’re trying to steal something.”
Thanks for the tip, Frank! I'm heading over to Nello for the truffle pasta dish. I hope there isn't a price listed on the menu.
[Meredith R. Miller]
February 10, 2012
Law Suit Over a "D" in Contracts
As the ABAJournal reports here, two students have elected not to go gently into that good night but to sue their law school for dismissing them after they failed to maintain a 2.0 GPA at the end of their first year in law school. The culprit, the students allege, was their contracts course, in which they were awarded grades of "D." The kicker -- the course was taught by an adjunct professor.
The offending course was Contracts II, a 3-credit course which accounted for precisely 10% of the students' aggregate GPA for the first year. It is very hard to imagine that this "D" was a significant departure from the students' performance in their other first-year courses.
This brings to mind once again Professors Amar and Ayres' proposal that Law Schools offer to rebate 50% of first-year students' tuition if they will quit after the first year. These two students would benefit from such a system, although one might doubt that bounded rationality would enable the students who, in the long term, would benefit most from such an offer would actually take it.
January 23, 2012
More on the Blood Contract
A few years ago, the story of a "blood contract" between two Korean businessmen caught the attention of contracts profs. In that case, one of the men made a promise to the other to repay money -- and made the promise on a cocktail napkin in blood. The court ruled the promise was unenforceable because it lacked consideration. I wrote about the case for the Wake Forest Law review here and last year, the Wake Forest Law Review Online posted responses by Professor Scott Burnham here and Professor David Epstein here. I recently posted a reply to those responses here. Deborah Post, Associate Dean for Academic Affairs and Faculty Development and Professor of Law at Touro Law, has now added her thoughtful perspective to the discussion here.