ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Wednesday, June 22, 2016

Is that Starbucks Grande Really Grande?..

Here’s a case that shows you that size really does matter… in contract law at least. Of-course-size-matters-just-ask-that-poor-ex-planet-pluto-e3505

In Strumlauf et al. v. Starbucks Corp., No. 16-01306, a federal district court judge based in San Francisco just ruled that a class action lawsuit against Starbucks.The complaint alleges breach of express and implied warranties, unjust enrichment, negligent misrepresentation, fraud and violations of California's Consumer Legal Remedies Act, the California Unfair Competition Law, and the California False Advertising Law.

The company allegedly overcharged its customers by “systematically serving lattes that are 25% too small” in order to save milk. Baristas were allegedly required to use pitchers for heating milk with etched “fill to” lines that are too low. Further, they were told to leave ¼ inch of free space in drink cups. Said U.S. District Judge Thelton Henderson: "This is not a case where the alleged deception is simply implausible as a matter of law. The court finds it probable that a significant portion of the latte-consuming public could believe that a 'Grande' contains 16 ounces of fluid." Starbucks’ cups for “tall,” “grande,” and “venti” lattes are designed to hold exactly 12, 16 and 20 ounces.

Starbucks so far counters that “if a customer is not satisfied with how a beverage is prepared, we will gladly remake it.”  Right, but how many customers would really complain that their drink is .25 inch (6 mm) too small?... And does it really matter? Much of what one pays for with a Starbucks drinks is, arguably, the knowledge of what the retail outlets offer, the ambience, convenience, “free” wifi, etc. Having said that, I am certainly not one to promote consumer fraud and recognize that little by little, the alleged milk-saving scheme could, of course, bring even more money into the coffers of already highly profitable Starbucks.

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June 22, 2016 in Current Affairs, Famous Cases, Food and Drink, In the News, Recent Cases, True Contracts | Permalink | Comments (2)

Monday, June 20, 2016

Have You Designated a Legacy Contact on Facebook?

Facebook

Source: facebook.com

It isn't something we typically think about but as our world shifts to digital and as more and more of us leave behind large social media footprints, what happens to those accounts when we die? I have thought about it briefly, mostly in thinking that I should give my passwords to someone, so that, if something happens to me unexpectedly, someone will be able to get onto my social media to let my followers know. I have had social media friends vanish with no explanation, and it's always haunted me that maybe something happened to them and I had no way of knowing. 

Despite the fact that I'm a lawyer, it honestly never occurred to me that what happens to my social media accounts after my death might be governed by their terms of use...until I saw this story reported widely on the local news. There was a recent tragedy in a nearby town that resulted in the unexpected, untimely death of George Heath. George's widow, Rosemary, was accessing his Facebook account to send photos and videos to family and friends and share older memories. Given how long Facebook has been around now, there are potentially years' worth of memories built up on Facebook pages, and one could see how they would be of some comfort in a time of grief. 

However, Facebook's terms of use prohibited what Rosemary was doing. Someone notified Facebook that George had died and Facebook basically locked the account down. They call it "memorializing the page," but the effect of it is that it's locked and no one can access it, not even someone who has the password. Now, this makes sense in a way: People could do malicious and terrible things to a deceased person's Facebook page, theoretically, if Facebook didn't lock it down. But it's a harsh outcome when applied to people in Rosemary's situation. 

Facebook's terms of use inform you that you should designate a legacy contact. This was actually difficult for me to find in Facebook's policies and I eventually only found it by Googling "Facebook memorialized page," so it's not like this is very obvious on the website itself. And, anyway, not many of us think a whole lot about our unexpected deaths. And, if we do, not many of us think that we should read our social media terms of use about it. I looked it up, and Twitter also has a policy where you can lock down a Twitter account if the user dies, but Twitter seems to require a lot more proof than Facebook does

Also of concern to me is that, even if someone is designated as a legacy contact, it still might not allow the kind of access that Rosemary was looking for, or that you might want to grant to someone. Facebook limits what a legacy contact can do, meaning that your power over what happens to your Facebook account really ultimately lies with Facebook, not you or your wishes. Which is a reminder, of course, that our control over our Facebook accounts is limited to begin with and pretty much at the whim of Facebook

We tend not to read the terms of use of sites, as we all know. And we talk about that a lot in the context of agreeing to arbitration clauses and stuff like that. We don't often think about how that can have consequences for our loved ones after our deaths. I understand, of course, that Facebook and Twitter don't want to hand out log-in information, but if the user has given the log-in information to someone else--and, as I could foresee, if the user has given the log-in information to someone specifically for the purpose of managing the social media account if/when they die--it seems odd for Facebook to then react as if that person's actions are prohibited. On the other hand, I suppose, how would Facebook know otherwise? A conundrum.

 

June 20, 2016 in Commentary, Current Affairs, In the News, True Contracts, Web/Tech | Permalink | Comments (4)

Monday, June 13, 2016

Airlines Not Required to Honor Pricing Glitches

Stories such as this [https://www.washingtonpost.com/lifestyle/travel/i-flew-to-abu-dhabi-for-265-round-trip-heres-how-you-can-do-the-same/2016/06/07/fc33cbea-29a3-11e6-b989-4e5479715b54_story.html] about finding incredibly cheap airlines to both national and international destinations because of airline computer pricing mistakes (real or otherwise…) have become commonplace. In 2012, the Department of Transportation established clear rules against changing the price of a ticket after purchase.  But in a new decision by the U.S. Department of Transportation, that rule will no longer be enforced:

“As a matter of prosecutorial discretion, the Enforcement Office will not enforce the requirement of section 399.88 with regard to mistaken fares occurring on or after the date of this notice so long as the airline or seller of air transportation: (1) demonstrates that the fare was a mistaken fare; and (2) reimburses all consumers who purchased a mistaken fare ticket for any reasonable, actual, and verifiable out-of-pocket expenses that were made in reliance upon the ticket purchase, in addition to refunding the purchase price of the ticket.

Images

Travelers’ websites thus now recommend that people hold off making further travel plans until a ticket and confirmation number have actually been issued. Some have further said about the glitch fares that “[t]ravel is not something that is only for the elite or [people] from certain economic brackets.” Of course, it shouldn’t be, but with the deregulation of the airline industry and steadily increasing prices and fees, history seems to be repeating itself: air travel is, for many, becoming unaffordable. This in spite of record-breaking profits for the airline industry benefiting from low oil prices and, I want to say of course, fares increasing, holding steady or certainly not decreasing very much.  Airline executives say they are sharing the wealth with passengers by investing some of their windfalls into new planes, better amenities and remodeled terminals. They're also giving raises to employees and dividends to investors.  Right… And whereas some years have been marked by bust, many more have been booming for the airlines.

Given that, why would the DOT be amenable to help out the airlines, and not passengers? Under contract law, mistakes that are not easily “spottable” have, traditionally, not been grounds for contract revocation. If one considers the contract to have been executed when the airline accepts one’s online offer, why should the airline, absent a clear error or other mitigating factors, not be expected to follow the common law of contracts as other parties will, depending on the circumstances, of course, likely have to? That beats me.

Some airlines are, however, choosing the honoring the mistake fares. Others don’t. Bad PR, you say? That also does not seem to matter. The most hated airline in the U.S. a few years back – Spirit Airlines – was also (at least then) the most profitable.

Hat tip to Matt Bruckner of Howard University School of Law for bringing this story to my attention.

June 13, 2016 in Current Affairs, E-commerce, Legislation, True Contracts, Web/Tech | Permalink | Comments (0)

Thursday, June 9, 2016

Unilateral Contracts: “… Never Pay for Gas Again!”

Relying on the win-a-car-for-a-hole-in-one case where a Pennsylvania court found that a car dealership was obligated to honor its offer for a unilateral contract posted at the ninth tee when a golfer finally aced a hole-in-one despite the dealership’s subjective intent to end the promotional offer two days earlier, a Third Circuit Court of Appeals court found a unilateral contract to exist under the following circumstances.

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A brochure distributed to the customers of Giant Eagle – a chain of retail supermarkets, gas stations, etc. – promised its customers that they could “Earn free gas – it’s easy!” and “You may never pay for gas again!” as long as they spent $50 on supermarket purchases. (See the true images posted here in this blog). The brochure, however, also included fine print provided, among other things, that “discounted fuel cannot exceed 30 gallons and discounts must be used in full on one vehicle in one transaction,” “the promotion is valid for a limited time and may end at any time without prior notice,” and “fuelperks! discounts expire 3 months after the last day of the month in which they’re earned.” However, the court found that none of the published program parameters suggested that Giant Eagle reserved the right to retract rewards that customers had already accrued. In fact, in the entire history of the Giant Eagle fuel program, no such retroactive termination ever occurred.

Said the court, “[l]ike the golfer who teed off with a promise of reward in mind, a customer anticipated the promised fuel discounts when deciding to shop at Giant Eagle in the first place—and thus deciding not to shop at a different store. Because she was then aware that she could apply the discounts as advertised if she spent fifty dollars on supermarket purchases using her Advantage Card, she was indeed a party to a unilateral contract with Giant Eagle. Liability therefore attached upon her performance, i.e., at checkout.”

A fair win for consumers, it seems.

June 9, 2016 in Current Affairs, Miscellaneous, Recent Cases, Travel, True Contracts | Permalink | Comments (2)

Monday, June 6, 2016

"Facebook Addendums": Does Your Landlord Want to Be Your Friend?

I'm one of those apparently rare people who doesn't really use Facebook. But Facebook was evidently very important to City Park Apartments in Salt Lake City, whose management company presented all of the tenants with a "Facebook addendum" to their lease. The addendum allegedly stated that all residents had to befriend the complex on Facebook or be found in breach of their lease agreement. 

This seems like an alarming development that I hope is going to be very limited. Is a Facebook account going to start being like a telephone number or an e-mail address, something it's assumed by everyone that you have and should hand over access to in exchange for goods or services? The reason I stopped using Facebook was because of privacy concerns. I wouldn't be thrilled about being told that I'm required by my lease to make sure my landlord can watch my Facebook activities (which often correspond, as we all know, to our real-life activities; if your landlord asked to follow you around through your daily life, or to get e-mailed your vacation photos, I would think many people would consider that a weird request).

And, since I don't do anything on Facebook, does that mean that I wouldn't be allowed to rent an apartment there unless I opened an account? Many people have legitimate, important, in some cases necessary reasons to limit their online presence. Let's hope "Facebook addendums" don't start sweeping the nation. 

June 6, 2016 in Current Affairs, In the News, True Contracts, Web/Tech | Permalink | Comments (1)

Thursday, June 2, 2016

Trump “University” - Fraud in the Inducement?

Donald Trump is currently attacked on many fronts, one of which for the potential re-launch as President of his now-defunct for-profit real estate training classes. The “playbook” used by the corporate recruiters for the business unit required them, among other things, to use such arguably despicable and potentially fraudulent recruiting language as the following:

“As one of your mentors for the last three days, it’s time for me to push you out of your comfort zone. It’s time for you to be 100% honest with yourself. You’ve had your entire adult life to accomplish your financial goals. I’m looking at your profile and you’re not even close to where you need to be, much less where you want to be. It’s time you fix your broken plan, bring in Mr. Trump’s top instructors and certified millionaire mentors and allow us to put you and keep you on the right track. Your plan is BROKEN and WE WILL help you fix it. Remember you have to be 100% honest with yourself!”

and

“Do you like living paycheck to paycheck? ... Do you enjoy seeing everyone else but yourself in their dream houses and driving their dreams cars with huge checking accounts? Those people saw an opportunity, and didn’t make excuses, like what you’re doing now.”

(Can you imagine reading those statements allowed for a living?)

Does promising potential students too much constitute fraud in the inducement? In a not entirely dissimilar case in our own field, law student Anna Alaburda recently lost her lawsuit against Thomas Jefferson School of Law.  Ms. Alaburda had argued that the law school had committed fraud by publishing deceptive post-graduation employment statistics and salary data in order to bait new students into enrolling. Alaburda claimed that despite graduating at the top of her class and passing the California bar exam, she was unable to find suitable legal employment, and had racked up more than $150,000 in student loan debt. An attorney for the school rejected the claims and said Alaburda never proved them. The attorney also reminded jurors that she had turned down a job offer, and that many Thomas Jefferson alumni have had successful careers. The verdict in that case was 9-3 in favor of Thomas Jefferson.

The cases are of course not similar, yet similar enough to remind us of the importance of not promising too much in the for-profit educational field (in Thomas Jefferson’s case, the school won, but a dozen other lawsuits have allegedly been filed against other schools). This makes sense from both an ethical and business risk-avoidance angle.

What about the use of the very word “University”? The media seems to stubbornly – probably for “sound bite” reasons – continue using the phrase even though the business was, in effect, forced to change its name to “The Trump Entrepreneur Initiative” after government pressure around 2010.   The business was just that, and not a certified university.

If Trump decides to start up the business again, does the media not help him do so again by using a much too favorable term? It seems like it. Linguistics matter in the law and beyond. May media PR inadvertently (or not) contribute to a potential fraud? Comment below!

June 2, 2016 in Commentary, Current Affairs, Famous Cases, In the News, Law Schools, Recent Cases, Teaching | Permalink | Comments (0)

Wednesday, May 25, 2016

No Implied Warranty of Fitness for a Particular Purpose With Regard to Architectural and Design Services in Michigan...for Now

A recent case out of the Court of Appeals of Michigan, Albion College v. Stockade Buildings Inc., No. 322917 (behind paywall), gives us an example of a case where precedent was obeyed but one of the judges worried the precedent might provide the wrong result, setting up the potential for further examination by Michigan's Supreme Court. 

Plaintiff hired Defendant to build an equestrian facility. Defendant allegedly informed Plaintiff that it had "the necessary experience and expertise" to build the facility that Plaintiff required and promised it would be backed by a warranty. 

Because this is a case I'm writing up here, we all know that the story of this equestrian center does not go smoothly. The roof leaked badly. The problem was evident during construction and theoretically repaired but the roof continued to leak badly even after construction was completed. Reviews of the structure blamed the persistent problem on poor design of the facility by Defendant. 

The crux of the case was whether the agreement between Plaintiff and Defendant contained an implied warranty of fitness for a particular purpose. In Michigan, such an implied warranty is found in sales of goods governed by the UCC and sales of electricity. The court was reluctant to extend such a warranty to the architectural and design services at issue here. 

A concurrence, however, expressed hesitation with the conclusion. While reasonably correct as a matter of simple legal precedent, the concurrence had policy concerns and thought that Michigan's supreme court should review the case and extend the warranty to this situation because of the "egregious facts" of this case.  Stay tuned for what happens next!

May 25, 2016 in Current Affairs, Recent Cases, True Contracts | Permalink | Comments (0)

Monday, May 23, 2016

From a Colonial Cemetery to a World War II Factory to Condos and a Spa: Environmental Concerns, Contract Releases, and Secret Underground Containers Are Just the Latest Chapter

North Jersey

(Photo from northjersey.com)

I use a lot of hypos in my class based on undiscovered buried containers of environmental hazards, and I feel like sometimes my students wonder if this is a thing that actually happens. Unfortunately, yes, as a recent case out of New Jersey, North River Mews Associates v. Alcoa Corp., Civil Action No. 14-8129, proves. 

The case centers around a piece of land on which Alcoa had operated a manufacturing facility from 1917 to 1968, a facility once so central to East Coast industry that it had actually been placed on the National Register of Historic Places. The piece of land had been vacant since 1978 and became a popular site for people looking to photograph "modern ruins." It was eventually sold to North River Mews Associates and 38 COAH Associates (the Plaintiffs). Twenty years ago, the New York Times reported optimistically that the development deal would be a "win-win" the would help clean up the Hudson River shoreline. The site, however, has been plagued by a number of challenges and tragedies (several fires, workman injuries from freak accidents, etc.) that have led some people to talk about curses. (Well, it apparently had been built on an old graveyard dating back to colonial times.) The latest obstacle has now emerged in the form of, yes, previously undiscovered buried containers of environmental hazards.  

The parties were well aware that the land would have environmental contamination, as the Times article makes clear. But the Plaintiffs had worked with the New Jersey Department of Environmental Protection and believed that the property had been remediated. In 2013, however, the Plaintiffs discovered two previously unknown underground storage tanks filled with hazardous materials. The property around the tanks seemed to indicate that at one point the tanks had attempted to be burned instead of properly disposed of. The presence of these tanks, needless to say, was never disclosed by Alcoa to the Plaintiffs. 

Alcoa's stance, however, is that the purchase contracts for the land released them from liability for various claims brought against them. The court disagreed at this motion to dismiss stage, finding that the language was ambiguous. The release in the contract stated that the Plaintiffs waived the rights "to seek contribution from [Alcoa] for any response costs or claims." The court said that it was unclear whether the contribution language modified only response costs or whether it modified both response costs and claims. Was this a blanket release of all claims, or only a release of the right to seek contribution? This question, the court concluded, could not be determined on a motion to dismiss. 

At any rate, the Plaintiffs also alleged that Alcoa concealed the presence of the underground tanks, fraudulently inducing them to enter into the contracts, and the court concluded that, if true, that would be grounds for the release to be vitiated. 

This case is a great example of how long environmental issues, development deals, and contractual disputes can drag on. In 1997, the parties signed the purchase contract. Today, the parties are still trying to clean up the site and fighting over which of them ought to pay for it, with language drafted twenty years ago taking center stage. As the case continues, it will of course likely become relevant who knew about the storage tanks and when, and I am curious to see if the tanks can be dated. Since Alcoa apparently ceased using the site for manufacture in the 1960s, it will be interesting to see how much knowledge from that time period still exists. It's the latest chapter in the history of a plot of land that seems to have been a busy place for centuries. 

May 23, 2016 in Commentary, Current Affairs, In the News, Recent Cases, True Contracts | Permalink | Comments (1)

Thursday, May 19, 2016

Gasgate

Another one bites the dust. GM is the most recent car company having to admit Unknown that it has reported overly optimistic figures about the gas mileage of, in this case, some of its 2016 SUVs sold in retail trade. Before GM, there was obviously VW, but also Mitsubishi, Hyundai, and Ford, all in the span of the past two years.

GM is temporarily halting sales of about 60,000 new 2016 SUVs because the vehicles' labels overstated their fuel efficiency. The 1-2 miles per gallon mileage overstatement was the result of improper calculations, according to GM. The company plans to compensate owners for the difference in miles per gallon and announce the program in the coming week.

Does this suffice as a remedy? Arguably, no one buys an SUV because of its low gas mileage, so in this case in contrast to the VW “dieselgate,” an argument that a customer bought a car because of its fuel efficiency is less plausible. But should that let GM off the hook in this case simply by saying that it will compensate for the fuel difference? How can an accurate prediction of what that will be over the time the SUV owners keep the car even be made? - For presumably, GM is not only planning to compensate the owners for the past difference, thinking that owners can now simply sell the cars if they are no longer satisfied with them? That seems unfair to the buyers as it is common knowledge that one cannot recover the value paid for a brand new case as with these 2016 models. Should criminal liability lie? OK, perhaps not for the 1-2 mile difference, but what about the systematic fraud committed by VW? Shouldn’t someone be held criminally liable for that?

Of course, a class-action lawsuit has been brought by some buyers. Has time come for everyone – the EPA, car makers, and car buyers – to realize that there is really only so much that can be done with the fuel efficiency of regular-engine cars? After all, hybrids and now electric cars are widely available and will probably cover the needs of the vast majority of car buyers, few of whom really need an SUV. They get much better “fuel” mileage than cars with traditional engines. Still, extreme consumer fraud is committed by at least some (or one…) of these car makers. Reckoning time seems to have come.

May 19, 2016 in Current Affairs, Famous Cases, In the News, Legislation, Science | Permalink | Comments (0)

Wednesday, May 11, 2016

Banks and Class Action Prohibitions as “Contract Gotchas”

Contracts preventing consumers from filing class-action lawsuits against banks may soon be illegal if a proposed ruling by the Consumer Financial Protection Bureau takes effect. A hearing on the ruling will be held on Thursday, May 12, 2016.

For quite some time, clauses requiring consumers to arbitrate disputes with banks and banning class action lawsuits against banks in cases of disputes have been common. According to a prominent attorney to testify at Thursday’s hearing, one of the effects of required arbitration has been to make class action lawsuit highly unlikely.  Of course, a contractual clause outright prohibiting class action suits means that if a consumer wants to litigate the dispute and arbitration, he or she would have to do so in an individualized suit. Because of the low amounts typical at issue in bank-v-consumer disputes, such clauses have had the effect of preventing litigation. Even if it comes to litigation between banks and consumers, “consumers can easily be outgunned” by savvy banks who additionally are said to “like to drag things out,” a problem when consumers at the same time have to take time off from work to litigate.

The proposed rule would not ban arbitration clauses. Rather, it would prevent contract clauses from including language that bans consumers from joining class-action cases. Such bans are common, and they have become more widely enforced since the United States Supreme Court in 2011 held that the FAA requires state courts to honor bans even if state law prohibits them.

According to Consumer Bureau Director Richard Cordray, "signing up for a credit card or opening a bank account can often mean signing away your right to take the company to court if things go wrong." Cordray also calls the current practice a "contract gotcha that effectively denies groups of consumers the right to seek justice and relief for wrongdoing."  The U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness calls the proposed rules a “backdoor ban” on arbitration clauses, said to provide individual consumers the chance for “more financial relief than a class-action suit.” The Pew Charitable Trusts’ Consumer Banking Project states that it is probably true that banks will ditch arbitration clauses if the CFPB’s rules take effect, but “consumers will probably be just fine.”

May 11, 2016 in Current Affairs, In the News, Legislation, True Contracts | Permalink | Comments (0)

Friday, May 6, 2016

Facebook Has to Face Illinois's Biometric Information Privacy Act

 Facebook in Laptop

Facebook was sued recently by a number of Illinois residents for its "Tag Suggestions" program. The complaint alleges that Facebook's facial recognition technology, employed to suggest to its users who they should be tagging in their uploaded photos, collected users' biometric data derived from their faces, secretly and without procuring informed consent, in violation of Illinois's Biometric Information Privacy Act ("BIPA"). Facebook moved to dismiss the complaint, in part on the fact that its Terms of Use require disputes with users to be governed by California law and therefore Illinois' BIPA was not applicable. But the recent decision by the Northern District of California in In re Facebook Biometric Information Privacy Litigation, Case No. 15-cv-03747-JD (behind paywall), found that Facebook has to contend with Illinois's BIPA. 

The court performed an analysis of whether or not Facebook's Terms of Use was a binding contract on the user plaintiffs. Before registration, each of the users was required to click a box or a button that clearly indicated that by doing so, they were stating that they had read and agreed to the Terms of Use. Therefore, the court found that the Terms of Use were binding on the users. In addition, every time Facebook updated its Terms of Use, it sent each user an e-mail informing them of modifications, as well as placed a "jewel notification" on their Facebook feeds. Therefore, there was no real dispute that each user had agreed to the current Terms of Use. There was also no dispute that the Terms of Use contained a California choice-of-law provision. 

Nevertheless, the court refused to enforce the provision. The court noted that part of the test in evaluating whether to enforce a choice-of-law provision is to consider whether California's law would be contrary to the "fundamental policy" of Illinois's law and, if so, whether Illinois would therefore have a "materially greater interest" than California in the case at issue. Here, Illinois is one of only a few states with a statute concerning biometrics; California has no such statute. The court found that Illinois's BIPA represented a fundamental policy of Illinois to protect its residents from unauthorized use of their biometrics, and that applying California law here instead of Illinois law would interfere with Illinois's policy. In fact, the court noted, enforcing the choice-of-law provision would effectively eliminate any effectiveness of BIPA whatsoever, because there would be no ability for Illinois residents to protect themselves against national corporations like Facebook. Therefore, the court found, Facebook has to deal with Illinois's BIPA, regardless of Facebook's attempts to limit the relevant laws of its service to only California's laws. 

This all leaves for another day whether the Tag Suggestions program actually does violate BIPA. 

May 6, 2016 in Current Affairs, In the News, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Monday, May 2, 2016

Has Bitcoin Creator "Satoshi Nakamoto" Revealed Himself?

The answer is a definite... maybe.

Bitcoin_logo1Bitcoin, of course, is the original--and many would say at this point, most successful--effort to create a "cryptocurrency," a digital store of value that can be traded electronically without the necessity of a bank intermediary yet can also avoid the problem of double-spending (i.e., digital counterfeiting) that would destroy an electronic currency's value. For purposes of contract law, Bitcoin is most notable because the aforementioned double-spending problem was solved by the creation and implementation of blockchain technology. Blockchain programming allows, among other things, for the maintenance of transactional records in a ledger distributed among numerous and otherwise unrelated computers across the internet rather than in a central location. Contract lawyers have particular reason to care about the blockchain because it raises the looming possibility of "smart contracts," contracts with the technical capability of enforcing themselves.

An enduring mystery of Bitcoin has been the identity of its 2008 creator, who to date has been identified only by the pseudonym "Satoshi Nakamoto." Efforts to identify Nakamoto have been largely unsuccessful, with the most notable misstep being Newsweek's debunked 2014 claim that Satoshi was Japanese-American physicist Dorian Nakamoto.

Craig-wright-inventor-satoshi-nakamotoThis rather enduring tech mystery may have been solved, though skeptics remain unconvinced. In an interview with the BBC and other media organizations, Australian tech entrepreneur Craig Wright claims to be the real Satoshi Nakamoto, and other prominent members of the Bitcoin community are backing his claim. The fact that Wright's claim arose on the eve of the digital currency and technology conference Consensus 2016 has allowed for the intriguing circumstance of people in the know reacting and the entire story being live blogged.

So is Craig Wright actually Satoshi Nakamoto? Opinion certainly may shift over the next several days and weeks, but at this point a majority seem to be accepting his claim or profess to be open to accepting it. All in all, an intriguing turn of events out on the periphery of contracts and commercial law. 

 

May 2, 2016 in Current Affairs, E-commerce, Web/Tech | Permalink | Comments (0)

Watering Down Your Iced Coffee Drinks

A class action lawsuit has been filed against Starbucks for negligent misrepresentation, fraud and unjust enrichment in the company’s sale of cold drinks.

The company makes a good deal of its money on cold coffee and tea drinks prepared in-store. In 2014, shaken iced tea drinks were the most profitable menu addition of the year, according the lawsuit. Unknown

The company offers three sizes of drinks — Tall, Grande, Venti and Trenta — which correspond to 12, 16, 24 and 30 fluid ounces, respectively. These fluid ounce measurements are advertised in the store. However, because of the large amounts of ice added to the drinks, customers actually receive much less (at a high price, as is well known).

The complaint claims that "[a] Starbucks customer who orders a Venti cold drink receives only 14 fluid ounces of that drink — just over half the advertised amount, and just over half the amount for which they are paying … In the iced coffee example, a Starbucks customer who orders and pays for a Venti iced coffee, expecting to receive 24 fluid ounces of iced coffee based on Starbucks' advertisement and marketing, will instead receive only about 14 fluid ounces of iced coffee."

A Starbucks spokesperson states that “[o]ur customers understand and expect that ice is an essential component of any ‘iced’ beverage,” adding that the company would remake any beverage if a customer is unsatisfied.

Maybe it would be a better idea to get a beer or a wine. They can’t water those down (I think...). Five Starbucks locations in the D.C. area have started serving booze and tapas as part of a nationwide effort to keep some of its stores open after typical coffee shop hours.

Going to a coffee shop for… tapas and alcohol in order to … what, stay loyal to an already huge brand? Avoid trying a local bar? If you think “only in America,” think again: Starbucks is also enjoying huge success in Europe, home of exquisite coffee shops with excellent pastries and snack. Talk about selling sand to Sahara…

May 2, 2016 in Current Affairs, Food and Drink, In the News, True Contracts | Permalink | Comments (1)

Monday, April 25, 2016

Love It, List It, or Sue Over It

Love It or List It

(Source: hgtv.com)

My love for HGTV is real and enduring. It started as a House Hunters addiction when I was a practicing lawyer looking for something mindless to watch when I got home at night and it has seriously spiraled out of control. I find something soothing about the formulaic nature of the shows; their familiarity is like a security blanket to me. And I've also realized that I've actually learned a lot about my taste. For what it's worth, I do feel like HGTV has made me think more about how I decorate my house, even if I can't afford a professional decorator. 

So I gobbled up with interest every single article I could find on the recent "Love It or List It" lawsuit. If you don't know the show, it's one of my favorites for the snark between the competing real estate agent and designer. One half of a home-owning couple wants to renovate their existing home; the other half wants to give up and move away. Enter the "Love It or List It" team, showing the couple houses they could buy while simultaneously renovating their home. The theory is that the couple can then decide to love it, or list it. 

I entertain no illusions about the "realness" of reality television (really, mostly I've learned from reality television that apparently an enormous number of people are tremendously good actors - while others are decidedly not), but this recent lawsuit attacks not just the "realness" of reality television but practically the *definition* of it: "Love It or List It," the homeowners accuse, were much more interested in making a television show than they were in renovating this couple's home. On at least some level, this lawsuit seems to be a challenge to what "Love It or List It" is: a television show or a general contractor. 

As a general contractor, the homeowners weren't too happy with the show's performance. They allege shoddy work on their house, including low-quality product, windows that were painted shut, and holes big enough for vermin to fit through. (They also allege their floor was "irreparably damaged," although I think they can't possibly mean that in the true legal sense of "irreparably," because surely the floor can be repaired?)

It seems to me this is going to come down to the contract between the parties. What did "Love It or List It"'s production company promise? I would love to see what the contract said about the work that was to be performed, how that work was to be performed, and what the financial arrangements were (since part of the couples' allegations is that a large portion of their money was diverted away from the renovations). However, for some reason, I have had an incredibly difficult time locating a copy of the complaint (never mind the contract). None of the stories I've found linked to it, and I have had zero luck finding it through Bloomberg Law's docket search. 

April 25, 2016 in Commentary, Current Affairs, In the News, Recent Cases, Television, True Contracts | Permalink

Friday, April 15, 2016

Gilmore Girls, Netflix, Derivative Works, and Contracts in a Changing Television Landscape

Gilmore Girls

(image from IMDB)

Gilmore Girls fandom rejoiced when it was announced that the show would receive a revival on Netflix (and, even better, that it will include Sookie!). But, as often seems to be the case, developments that bring a fandom joy can come with legal entanglements. In this case, producer Gavin Polone's production company Hofflund/Polone has filed a lawsuit against Warner Bros., alleging breach of contract. The lawsuit, Hofflund/Polone v. Warner Bros. Television, Case No. BC616555 (behind paywall), was filed in the Los Angeles County, Central District, Superior Court of California. 

The case revolves around the agreement between the parties concerning the original production of Gilmore Girls. The parties agreed, according to Hofflund/Polone, to provide Hofflund/Polone with "$32,500 for each original episode of Gilmore Girls produced in any year subsequent to 2003," along with some percentage of the gross and with "executive producer" credit. With the news of the recent Netflix revival, Hofflund/Polone allegedly reached out to Warner Bros. seeking compensation under the agreement. According to the complaint, Warner Bros. took the position that the Netflix version of Gilmore Girls is a derivative work based on the original series, and so therefore does not trigger compensation to Hofflund/Polone. 

It's an interesting question that highlights one of the debates copyright scholars have: What, exactly, is a "derivative" work? Copyright owners have the exclusive right to reproduce their own works or works substantially similar to those works. They also have the right to produce derivative works based on those works, which, in the jurisprudence, has ended up using the same substantially similar standard to elucidate the "based on" language. Which means: what is the point of the derivative work right, if its standard seems the same as the reproduction right? This case has the potential to force confrontation with that problem: Where do we draw the line between infringement of the reproduction right and infringement of the derivative work right? When does a substantially similar work cross the line between reproduction and derivative work? 

One thing that's been noted about the derivative work right is it tends to be talked about when there's some kind of change in medium or other kind of adaptation different from the original form (book to film, or translation from one language to another). The definition in the statute points us to that focus.  Which raises the question: Is a Netflix revival more like a translation or adaptation of Gilmore Girls than it is like an exact copy of Gilmore Girls? Does this depend on how true it is to the original show? 

The "television" landscape has shifted dramatically since Gilmore Girls premiered. It'll be interesting to see how contracts formed pre-Netflix-and-Amazon-production-era function going forward. 

April 15, 2016 in Celebrity Contracts, Commentary, Current Affairs, In the News, Recent Cases, Television, True Contracts | Permalink | Comments (1)

Tuesday, April 5, 2016

Unconscionable “Out-of-Network” Medical Service Charges

I recently blogged here about the healthcare insurance problem of patients not knowing ahead of time for what they will ultimately be charged and by whom. California is now introducing a bill (“AB 533”) seeking to prevent the problem of patients being unexpectedly charged out-of-network charges at in-network facilities when the facility subcontracts with doctors that are (allegedly) out-of-network.

The practice is widespread, at least in California. Nearly 25% of Californians who had hospital visits since 2013 have been very unpleasantly surprised with unexpectedly high bills after the fact for “out of network” services. This even after inquiring about the contractual coverage ahead of time and ensuring – or attempting to – that their providers were in network. Th

I personally had the same experience once as described in my recent blog. I also recently encountered a similar problem in South Dakota when, after asking about billing prices from an emergency room, was assured of one relatively modest price, only to be billed roughly ten times that amount a couple of months later for various unrecognizable items on the bill that the service provider, to add insult to injury, subsequently did not want to even discuss with me. (Yes, that is right: sick and in the emergency room, I was leery of hospital pricing and asked, only to still not get correct information.)

The onus of information-sharing should be on doctors and other medical provider. They should tell their patients if they are not in network, patients shouldn’t have to jump through an almost endless row of hoops just to find out their ultimate contractual obligations. Doctors will know immediately once you swipe your health insurance card, whereas patients have no way of knowing, as these stories show. Making matters even worse: what are patients supposed to do when they often don’t even see all the involved doctors ahead of time? Wake up during anesthesia and ask, “Oh, by the way, are you in network”? This practice is unconscionable and must stop. It is arguably an ethical obligation as well.

Because some hospitals, for instance, only accept employer-provided plans and not individual ones, some patients will always be out of network, thus allowing doctors to bill full charge. “This is a market failure. It allows doctors to exploit the monopoly that they have.”

Although it seems ridiculous, patients may, for now, have to turn the tables on the providers and scrutinize as many providers and facilities as they get in touch with 1) what the prices charged to the patients will be, and 2) if the providers are truly, actually, really in network (!).

Contractually, would patients win if they informed providers that they will only pay for in-network providers and only up to a certain amount? What else can a reasonable patient do in situations of such blatant greed and ignorance as these stories depict? Comment below!

April 5, 2016 in Commentary, Current Affairs, In the News, Legislation | Permalink | Comments (2)

Monday, March 28, 2016

Assent in Healthcare Contracts

Here, Stacey Lantagne reports on a very sad story of what can happen if health care customers fail to follow accurate procedure and, at bottom, dot all the I’s and cross all the T’s when contracting for health care services.

For me, this speaks to the broader issue of whether or not patients can truly be said to have given consent to all the procedures and professionals rendering services to patients. I think this is often not the case. As you know, Nancy Kim is an expert on this area in the electronic contracting context. She kindly alerted me to this story in the health care field.  (Thanks for that.) The article describes the practice of “drive-by doctoring” whereby one doctor calls in another to render assistance although the need for this may be highly questionable. The NY Times article describes an instance in which one patient had meticulously researched his health care insurance coverage, yet got billed $117,000 by a doctor he did not know, had never met, and had not asked for. That doctor had apparently shown up during surgery to “help.”

Of course, this is a method for doctors to make end runs around price controls. Other methods are increasing the number of things allegedly or actually performed for patients. Other questionable practices include the use of doctors or facilities that all of a sudden turn out to be “out of network” and thus cost patients much more money than if “in network.” I personally had that experience a few years ago. I had to have minor surgery and checked my coverage meticulously. The doctor to perform the surgery was in network and everything was fine. She asked me to report to a certain building suite the morning of the surgery. All went well. That is, until I got the bill claiming that I had had the procedure performed by an “out of network” provider. This was because… the building in which the procedure was done by this same doctor was another one than the one where I had been examined! When I protested enough, the health care company agreed to “settle” in an amount favorable to me.

In these cases, patients typically have very little choice and bargaining power. In the emergency context, what are they going to do? There is obviously no time to shop around. You don’t even know what procedures, doctors, etc., will be involved. The health care providers have all the information and all the power in those situations. However, in my opinion, that far from gives them a carte blanche to bill almost whatever they want to, as appears to be the case, increase their incomes in times when insurance companies and society in general is trying to curb spiraling health care costs.

In the non-emergency context, how much of a burden is it really realistic and fair to put on patients who are trying to find out the best price possible for a certain procedure, only to be blind-sighted afterwards? That, in my opinion, far exceeds fair contracting procedure and veers into fraudulent conduct. Certainly, such strategies go far beyond the regular contractual duty to perform in good faith.

Of course, part of this is what health care insurance is for. But even with good health care insurance, patients often end up with large out-of-pocket expenses as well. The frauds in this context are well known too: most health care providers blatantly offer two pricing scheme: one (higher) if they have to bill insurance companies, and a much lower price if they know up front to bill as a “cash price.”

We have a long ways to come in this area still, sadly.

March 28, 2016 in Commentary, Current Affairs, Miscellaneous, Science, True Contracts | Permalink | Comments (1)

Friday, March 11, 2016

Can We Just Get J.K. Rowling to Arbitrate Everything?

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I bet we'd have a lot fewer people fighting arbitration clauses if arbitration = tweeting J.K. Rowling. 

As reported around the Internet, a student and her high school science teacher entered into a contract concerning whether Rowling would write another Harry Potter book. The contract called for the loser to declare the victor "Mighty" (a much more charming form of consideration than payment of a sum of money). 

The article (from last month) reports that there were two possible Harry Potter pieces of creativity to be contended with. One is the prequel movie Fantastic Beasts and Where to Find Them. Rowling wrote the original textbook (which already existed at the time the contract was entered into and so isn't part of the dispute) and also wrote the screenplay for the movie, which could have been in dispute. However, the article points out that Rowling wrote the screenplay to the movie, and the contract concerns a Harry Potter "novel." Even if you wish to make an argument that screenplays should have been included in the definition of the contractual term "novel," it seems like Fantastic Beasts would fail because it does not "feature the character Harry Potter as part of the main plotline," as required by the contract. (At least, so I assume from what I know about the movie so far.)

The other piece of Harry Potter creativity being debated under the contract, and the one for which Rowling was called in to arbitrate, concerned Harry Potter and the Cursed Child, a play focusing on Harry as an adult and his relationship with his children, especially his son Albus. Cursed Child raised issues: It was a play but it is being billed as "the eighth story," the script will be published in text form, and the website claims it's "based on an original story by J.K. Rowling, Jack Thorne and John Tiffany." It does seem as if, considering this is a "play," even its published script would not be considered a "novel" under the contact. However, the student who was a party to the contract sought further clarification from Rowling. 

Using the convenient method of Twitter, the student explained her contract to Rowling and asked for a decision on whether Cursed Child would fulfill the terms of the contract. Rowling responded, confirming that Cursed Child is a play and also noting that, while she had contributed to the story, Jack Thorne was the "writer" of the play. 

The student was pleased that her clear contractual terms meant that she was still the victor, but also noted that the term of the contract had not yet run. Since the publication of the article and the arbitration of the Cursed Child dispute, J.K. Rowling has announced a new set of stories to be collected under the title History of Magic in North America. So far, these stories also seem not to fulfill the terms of the contract, as they seem more like "extra books" rather than "an entirely new book," and they do not seem to feature Harry Potter at all. However, Rowling seems to be dancing right around the edges of this contract's terms. 

March 11, 2016 in Commentary, Current Affairs, Film, In the News, True Contracts | Permalink | Comments (0)

Tuesday, March 8, 2016

"Crowdwork" or How to Stiff Your Employees – Twice

Outsourcing work to locations where employees earn even less than many in the United States do has already become commonplace. Now comes the corporate idea of “taskifying” work to people eager to obtain some work, even if just in bits and pieces. “Crowdwork,” as it is known, lets companies use online platforms such as Amazon Mechanical Turk or www.fiverr.com to find people willing to do routine tasks such as drafting standardized reports, filing forms, coordinating events and debugging websites, but also much more complex ones such as designing logos, ghostwriting, etc. Many of today’s work tasks can be broken up into bits and farmed out online, and many employers are already doing so. Could this also come to encompass routine lawyerly work? Quite possibly so. Researchers at Oxford Univesity’s Martin Programme estimate that nearly 30% of jobs in the U.S. could be organized in a crowdwork format within just twenty years.

In this context where few regulations or laws yet govern the contracts, workers would no longer be either “employees” or “contractors,” (which has already proved to be troublesome enough for companies such as Uber), but rather “users” or “customers” of the websites that enable, well, workers and companies (“providers”) to find each other. These transactions would not be governed by employment contracts, but by online “user agreements” and “terms of service” that currently resemble software licenses more than employment contracts. There are few, if any, legal obligations towards employees in the current legal landscape that also offers employees very few means for obtaining and enforcing something so basic pay for the work performed.

Employers today require a flexible and eager workforce that is constantly on the ready and that can maybe even work 24 hours a day. Crowdworkers provide just such availability and demand very low salaries because the name of the game seems to be to compete on prices. The problem is that workers, to have a decent life, need the opposite: stability, higher salaries than what is often currently the case, retirement, salary, and medical benefits. Do these come with crowdwork tasks? Sadly, no.

What could go wrong? Consider this case: Mr. Khan, an Indian man living in India, was eager to make some money. He decided to try Amazon’s Mechanical Turk. On good days, he would make $40 in ten hours; more than 100 times what his neighbors made as farmers. He even outsourced some of his own work to a team that he supervised. This must have violated Amazon’s Participation Agreement as all of a sudden, Mr. Khan received the message that his account was closed and “could not be reopened.”Amazingly, Mr. Khan was also notified that “[a]ny funds that were remaining on the account are forfeited, and we will not be able to provide any additional insight or action.” Talk about lopsided contracts! Using a “Contact Us” link, Mr. Khan was eventually able to get through to Amazon, which simply referred him to a contractual clause stating that Amazon had the “right to terminate or suspend any Payment Account … for any reason in our sole discretion.”

ImagesWith these types of ad-hoc online agreements, people who should arguably at least have been classified contractors if not, as in some current cases, employees. Of course, this only pertains to U.S. law, but it is important to note that not all jobs are “taskified” to foreign workers. Thus, employees risk being “stiffed” twice: once for losing their jobs to cheaper folks willing to be crowdworkers and, if they chose to work under such contracts and don’t do exactly as the “provider” requires in their apparent almost exclusive discretion, not being paid and not having any effective means of enforcing their contracts. An undisputedly troublesome development both in this nation and beyond.

How could at least the issue with medical and other employee benefits be solved? It might via universal payment systems such as those typical in EU nations. There, when employees change jobs, their vacation time, medical and other benefits travel remain in a centrally administered pool (whether government administered or privately so with tough regulations in place), they do not become discontinued with the employment only to have to be restarted under other plans as typical in this country. This system could potentially be transferred to the crowdwork arena. A percentage of each job (sometimes even called “gigs”) could be centra lly administered in a more employee-centric version than the still American employer-centric solutions. Such systems are, of course, largely seen here in the U.S. as “socialist” and thus somehow inherently negative.

As if the employment situation for workers around the world is not already bad enough, add this new development, called “a tsunami of change for anyone whose routine work can be broken into bits and farmed out online.” Our students’ future work tasks may, at least in the beginning of their careers, constitute just such work. This is a worrying development as workers in our industry and in this country in general are not seeing improved working conditions in general. Crowdworking could add to that slippery slope.

March 8, 2016 in Current Affairs, E-commerce, Labor Contracts, Law Schools, True Contracts, Web/Tech | Permalink | Comments (1)

Friday, March 4, 2016

Did Trump University Peddle Degrees of Deception?

I am pleased to be able to post the following from guest blogger Creola Johnson of the Ohio State University Moritz College of Law:

“His promises are as worthless as a degree from Trump University,” said Mitt Romney during a speech denouncing Donald Trump’s candidacy for the presidency. This statement has prompted additional inquiries into lawsuits filed against Trump University by New York Attorney General Eric Schneiderman and others. (See Petition from New York v. The Trump Entrepreneur Initiative LLC.)

In a class-action lawsuit, many attendees of Trump University alleged that they paid as much as $35,000 to be personally mentored in learning how to earn millions investing in real estate. Despite numerous attempts by lawyers for the Trump defendants to get these lawsuits to dismiss, courts have given the green light for the lawsuits to continue against the Trump defendants. See, e.g., Makaeff v. Trump Univ., LLC, No. 10-CV-940-IEG (WVG), 2010 WL 3988684 (S.D. Cal. Oct. 12, 2010) (refusing to dismiss claims against the for-profit Trump program on educational malpractice grounds because the court was not convinced “Trump University” was “an educational institution to which this doctrine applies.”). For the most recent decision permitting Mr. Schneiderman’s case to proceed, go to: http://www.courts.state.ny.us/courts/AD1/calendar/appsmots/2016/March/2016_03_01_dec.pdf.

What can we say for sure at this juncture about the lawsuits? First, “Trump University” was not a university. There are numerous educational standards and laws that must be complied with for an institution to legitimately claim to be a university. The question then becomes: did the people running Trump’s real estate program (the Trump Program) make promises that arose to level of being a contract. For example, the consumer-plaintiffs alleged that the Trump Program promised that the instructors and mentors running the program would be “hand-picked by Donald Trump.” However, this promise was allegedly breached because most of the instructors and mentors were unknown to Mr. Trump and that they didn’t actually teach any real estate techniques.

We’ll have to wait for a court or jury’s finding regarding what promises were actually made by Donald Trump and the people running the Trump Program. The good news for the plaintiffs and Mr. Schneidermann is that they do not have to prove the existence of a contract. New York, along with every state, has laws that prohibit businesses from engaging in deceptive and unfair business practices.

Consumers should be leery of any language that appears to promise an educational outcome—e.g., “you will earn a six-figure salary after graduation.” While a state’s attorney general, such as Mr. Schneiderman, has the authority to make businesses stop deceptive practices, the attorney general may not be able to get back the money consumers have lost. If it sounds too good to be true, it probably is! For an in-depth discussion of deceptive degrees, see my article, Degrees of Deception: Are Consumers and Employers Being Duped by Online Universities and Diploma Mills?

Creola Johnson,

President’s Club Professor of Law,

The Ohio State University Moritz College of Law

Profile at http://moritzlaw.osu.edu/faculty/professor/creola-johnson/

(professor.cre.johnson@gmail.com)

March 4, 2016 in Commentary, Current Affairs, Famous Cases, In the News, Teaching | Permalink | Comments (0)