ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Friday, June 23, 2017

Trade Usage vs. Express Terms in Lawsuit Against Hardware Stores

Two by FourWhen I teach "usage of trade" (UCC § 1-303) in Contracts or in Sales, I inevitably bring up the example of  "two-by-four" lumber. The example is a good one in that most students either already know first hand that a two-by-four board is smaller than two inches by four inches, or else they readily grasp the concept that terms in a contract can come from a widespread meaning that is at variance with its literal meaning. For years, I thought the point of the example was non-controversial--or at least less convoluted than more famous interpretive questions like, "What is 'chicken'?" or "Is a burrito a 'sandwich'?"

At least one litigant would disagree with my characterization of the lumber example as being obvious. This story in the Des Moines Register describes a lawsuit in which hardware chains Home Depot and Menards are accused of deceiving buyers by selling "four-by-four" lumber that is not four inches by four inches in dimension:

HomeDepot_svgThe retailers say the allegations are bogus. It is common knowledge and longstanding industry practice, they say, that names such as two-by-four or four-by-four do not describe the width and thickness of those pieces of lumber.

 Rather, the retailers say, those are “nominal” designations accepted in government-approved industry standards, which also specify actual minimum dimensions — 1½ inches by 3½ inches for a two-by-four, for example, and 3½ inches by 3½ inches for a four-by-four.

“Anybody who’s in the trades or construction knows that,” said Tim Stich, a carpentry instructor at Milwaukee Area Technical College.

True enough, said Yevgeniy (Eugene) Turin of McGuire Law, the firm that represents the plaintiffs in both cases.

However, Turin and his clients dispute that the differences between nominal descriptions and actual dimensions are common knowledge.

 

“It’s difficult to say that for a reasonable consumer, when they walk into a store and they see a label that says four-by-four, that that’s simply — quote unquote — a trade name,” Turin said in an interview.

Turin said his clients don’t argue that the retailers’ four-by-fours (and, in the Menards’ case, a one-by-six board as well) are not the correct size under the standards published by the U.S. Department of Commerce. The product labels, however, should disclose that those are “nominal” designations and not actual sizes, Turin said.

With some of Menards’ lumber products, both the nominal and actual size are shown, a document Turin filed in the case against Menards says. But the lumber in question is labeled only with a nominal size — "4 x 4 — 10’," for example — that consists of numbers “arranged in a way to represent the dimensions of the products,” the document says. That leaves the “average consumer” to conclude that the pieces measure four inches by four inches, Turin said.

Some Menards customers aren’t buying it.

“They haven’t measured four inches by four inches since the ‘50s,” said Scott Sunila after loading purchases into his pickup.

“My God, that’s crazy,” the 60-year-old bulldozer operator said of the lawsuits. “Let me on the jury. They ain’t winning. And they’re gonna pay me extra for my time.”

But an unscientific survey of 18 Menards shoppers found that about a third were unaware that "four-by-four" doesn’t represent actual dimensions of that piece of lumber.

The problem with defining terms by usage of trade is that the term usage must have "such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question." UCC § 1-303(c). The existence of the trade usage is not a question of law, but a question of fact when (as here) it is not embodied in a trade code, such codes rarely being applicable to or ratified by consumers. If a party cannot establish the existence of trade usage terminology, then express terms will typically prevail over trade usage. UCC § 1-303(e).

My initial take was that this lawsuit was a clear loser, but the fact that the burden of proof lies with the hardware stores suggests that the plaintiffs at least have a chance. Now, would I take this case on a contingent fee basis?  Er... no.

June 23, 2017 in Current Affairs, In the News, True Contracts | Permalink | Comments (0)

Thursday, June 22, 2017

“Bachelor in Paradise” – Or Contractual Hell?

An article on CNN Media posted on June 21 reads, in part: “A contract for the current season of ‘Bachelor in Paradise,’ which CNNMoney … has confirmed as authentic, provides a rare window behind the scenes of reality shows, in the ‘Bachelor’ franchise and beyond, revealing how they are able to manipulate ‘reality’ and create drama where none actually exists….” Shocker! More surprising, perhaps, is the extent to which the companies producing these types of TV shows seek to avoid liability in potential legal proceedings. Unknown

Whereas the “Bachelor in Paradise” contract requires participants to “refrain from unlawful behavior or harassment” and to acknowledge that the producers “do not encourage intimate or sexual contact with other contestants on the show,” the contract also tries to free the producers from any responsibility if a contestant is injured, even if that injury comes from “unwelcome/unwanted sexual contact or other interaction among participants.” Participants will also have to agree that the producers are not liable for almost anything that happens to them in the course of filming, whether they are injured, suffer emotional trauma, or catch a sexually transmitted disease.

Furthermore, the producers of the show can do nearly anything they want to the participants and their reputation, including filming them naked, airing the details of any part of the life they think is relevant, or flat out lying about them and things they have done. Nicole Page, a New York-based entertainment attorney with Reavis Parent, said that the contract means, from the producers' perspective, "I can basically take your image and do whatever I want with it and I own it and you have no recourse." Contracts like these are common in reality TV, she said. They "have been around since reality TV began," she added. Needless to say, should participants wish to pursue civil legal action, they will have to arbitrate. Unknown-2

Why would contestants want to agree to such far-reaching contracts? For their chance at 15 minutes of fame, of course. If a contestant tries to renegotiate the contract, plenty of other people are ready to take their place.

The contracts, however, may be so broad that they are not legally enforceable, according to one CNN/HLN legal analyst. Another commentator says that these contracts are “so one-sided it seems absurd, but this is the price people are willing to pay to be on television for whatever it is.” “It's not a two-sided contract," the CNN/HLN attorney says. "A contract is supposed to be what they call 'at arms length,' which means there is leverage on both sides and it's freely entered into and freely negotiated. But this is clearly a contract that is one-sided.”

With all due respect to the CNN/HLN attorney, the mere argument that the contract is “one-sided” is, of course, not very strong unless the contracting procedure reaches the level of unconscionability. Yes, this might be a “take-it-or-leave-it” type of contract, but those are, as we all know, also widely used in numerous other industries and companies where courts have upheld them. I think it highly unlikely that contestants on a famous TV show will prevail on an argument that their contracts were so one-sided as to reach the level of unconscionability under contract law. After all, the TV contestants really don’t need to be on these shows at all; they choose to do so on their own free volition, typically for a rather vain chance at fame and fortune (I know that that is not a legal argument, but we all know what this would look like in court…).

Much worse are the alleged attempts by the companies to have the participants sign away their rights under criminal law. That they might very well not be able to do. "If the contract requires you to release any claims you have that you were sexually assaulted, which is a crime, then the contract may or may not be enforceable under the public policy of the state of California [where this contract was drafted]," said entertainment litigator Josh Schiller of Boies Schiller Flexner. "Law enforcement could get involved and bring charges ... would we want to enforce a contract that no one would be liable if they were filmed being sexually assaulted? That would create a real problem." No kidding. In other cases, contestants should closely consider what this type of deal really involves. Unknown-1

For the rest of us, we live in times when lines between fact and fiction are blurred significantly. It seems that an increasing amount of people are comfortable dismissing facts as “fake” when the converse is true. I’ve encountered that numerous times after the most recent presidential election myself, both in South Dakota and even “liberal California.” In addition to the usual climate change denial in the Midwest, I encountered a “crazy cat lady” in Los Angeles the other day claiming that highly established Audobon studies and Smithsonian studies demonstrating how feral cats kill numerous birds and other small wildlife is “not true”! Sigh.

We should consider how we best teach our students to account for this new reality in contract and other law. I think we also need to increasingly point out to them that what they see in the media is not necessarily true. Granted, with reality TV shows, that is obvious, but I have had to undertake rather serious discussions with my own students recently about what “news” really is and what it is not! What we have taken as granted as law professors even in recent years may no longer be the case or may be changing.

 

June 22, 2017 in Celebrity Contracts, Current Affairs, Film, In the News, Television | Permalink | Comments (0)

Monday, June 19, 2017

David Mamet's Last-Minute License Term

 

Puyallup High School Auditorium.jpg
Public Domain, Link

This story is a few weeks old, but I think it's an interesting one still deserving of discussion. Apparently, one of the terms of licensing one of David Mamet's plays to perform is that the theater not host any "talk backs" within two hours of the show. It's interesting to me first because talk backs are fairly common within the theater industry, and I'm not sure most theater companies would assume there were restrictions around them. This makes me wonder if other playwrights have similar policies and how much theater companies check into those specific terms. 

Another thing that struck me about this, though, was that apparently this talk-back-prohibiting term was not in the original terms of the license. The theater company detailed in the article received a new contract with the new licensing term just four hours before the show opened. Do we think that was a valid modification of the original license terms? There is no discussion of this in the article, but do you think that the theater company, threatened with fines of $25,000, felt compelled to agree to the new term after having sold tickets and invested time in rehearsing the play? Was the new term in that license enforceable? 

Finally, apparently Mamet's agent will ensure that the clause is included in license terms from this point on. Generally, parties can enter into any contractual terms they wish (within certain bounds of reason). Presumably if Mamet's no-talk-back provision is disliked by theater companies, Mamet's plays could fall out of fashion and the market could handle the situation. However, if other playwrights start demanding similar terms, then there might not be as much pushback from the theater companies. So far it seems that Mamet's clause just prohibits discussion within two hours of completion of the play, so that could allow an enterprising theater company to just hold a talk back two and a half hours later. It could be interesting to see what effect, if any, this situation has on theater talk backs going forward. Anyway, it was an interesting little contract story, so I thought I'd pass it along. 

(h/t to Rebecca for bringing the article to my attention!)

June 19, 2017 in Commentary, Current Affairs, In the News, True Contracts | Permalink | Comments (0)

Monday, June 12, 2017

Adding to Quatar’s Woes: Loss of FIFA Soccer Contract?

On Monday June 5, 2017, Saudi Arabia, Egypt, Bahrain, Yemen, Libya, the United Arab Emirates and the Maldives all severed diplomatic ties with Qatar. While only a small period of time has passed, the small Arab nation has been left with some pressing issues. Almost immediately the people of Qatar rushed to supermarkets to stock up on food. Many fear that with their only land border shut (that between Qatar and Saudi Arabia), food supplies will run short and prices will skyrocket. The Philippines have already begun restricting migrant workers from going to Qatar for fear that migrant workers will be more marginalized if food shortages become an issue in a country that does not produce any of its own food. Migrant workers have been a source of conflict in Qatar for years and this current crisis could worsen or better the landscape. Unknown

On December 2, 2010, Qatar became the first Middle Eastern country to win a World Cup bid. That World Cup is set for 2022. In preparation, massive construction projects have begun in Doha and the surrounding area, including building new stadiums, renovating old ones, building new ports and rail systems, and renovating current city areas to make Qatar appear a modern metropolis in the heart of a desert. While all of that sounds good, it has come at a steep humanitarian cost. Many migrant workers have died and many modern governments have reprimanded Qatar for its inhumane treatment of people. Unknown

However, the current climate of Qatar is one of isolation from its neighbors—Emirates and Etihad airlines have ceased all travel to Qatar. Migrant workers are already starting to lose jobs. While FIFA, the governing body of soccer worldwide, has stated that the World Cup will continue as planned, if construction materials and workers cannot enter the country, the small country cannot hope to continue hosting the World Cup. No country has ever lost a FIFA World Cup contract after being awarded the bid, but the consequences could be astronomical. Qatar is looking to spend almost $200 billion for the World Cup, and while not all or even most of that money will be recovered by hosting the event, there is an expectation of gain for local businesses and hopefully an increase in tourism following the event. Without the World Cup, Qatar would be out the money and potentially enter a massive contract suit with FIFA. Currently, we can only wait and see how the situation works itself out, but it will be at the forefront of many people’s minds until the current diplomatic situation is resolved.

June 12, 2017 in Commentary, Current Affairs, Sports | Permalink | Comments (0)

Monday, June 5, 2017

Prince's Music: More Contract Disputes

I've already blogged about the contractual disputes around the music that the late artist Prince left behind when he died unexpectedly. They continue with another case in the District of Minnesota, Paisley Park Enterprises, Inc. v. Boxill, Case No. 17-cv-1212 (WMW/TNL). In this dispute, Boxill, a consultant and sound engineer who worked with Prince, had announced that he would release five Prince recordings in his possession on the anniversary of Prince's death. Prince's estate sued, seeking a preliminary injunction against the release, which the court granted. One of the causes of action revolved around the Confidentiality Agreement that Boxill had entered into with Prince. Under the terms of the agreement, Boxill was allowed to enter Prince's home and work with Prince and disclaimed any property interest connected with this work. Yet when Prince's estate demanded return of the recordings in Boxill's possession, he refused to turn them over. This was sufficient to demonstrate a likelihood of success on the merits for breach of the contract. 

Boxill's main argument was that the Confidentiality Agreement only covered his work consulting on the remodel of Prince's music studio; the Confidentiality Agreement did not cover Boxill's work as a sound engineer recording music with Prince. Boxill's reasoning on this was that the Confidentiality Agreement prohibited him recording any of Prince's performances, but he was required to do so when he was working with Prince as a sound engineer. The Prince estate's response to this was that it had waived the recording portion of the Confidentiality Agreement but the rest stayed in force and covered all of Boxill's activities. The Court concluded that either interpretation was plausible, and that Prince's estate had a "fair chance" of prevailing on the merits. 

A motion to dismiss is currently pending in the case, so we'll see what happens!

June 5, 2017 in Celebrity Contracts, Current Affairs, In the News, Labor Contracts, Recent Cases, True Contracts | Permalink | Comments (0)

Friday, May 26, 2017

Ancestry.com Doesn't Want Your DNA Forever (At Least, Not Anymore)

Earlier this week, Stacey Lantagne wrote a post about Ancestry.com’s Terms and Conditions. Among other things, it gives Ancestry.com a perpetual license to use its customers' DNA for…well, pretty much anything.  Attorney Joel Winston wrote about the terms here and his post quickly went viral. The social media backlash was fast and furious – and Ancestry.com now claims that it didn’t really mean what it said in its terms. They also say that they will take out that provision (although as of this writing, it is still there). It seems that nobody reads wrap contracts – even the companies that draft them.

This is another example of how consumers often do care what’s in the TOS, even if they don’t read them. Not reading (and so not knowing what’s in the terms) is not the same as not caring that the terms apply. It’s also another encouraging example of a company responding to market demand for different contract terms. Shades of General Mills….

May 26, 2017 in Current Affairs, Miscellaneous, True Contracts, Web/Tech | Permalink | Comments (0)

Thursday, May 25, 2017

In Arizona, a Breach of Good Will Does Not Require Spite

A recent case out of Arizona, Russo and Steele, LLC v. Tri-Rentals, Inc., No. 1 CA-CV 16-0042, deals with breach of the covenant of good faith and fair dealing, which is read into every Arizona contract. In the case at issue, though, Tri-Rentals's behavior was not "self-dealing," and Tri-Rentals argued that self-dealing, or spite, or ill will was required to breach the covenant. Not so in Arizona, though. Arizona does not require self-dealing conduct. Rather, the covenant is breached if you prevent the other party from receiving the benefit of the bargain, whether or not you do so out of spite or some advantage to yourself. 

(The case itself is an interesting one, stemming out of collapsed tents at a car show that resulted in damage to several classic vehicles.)

May 25, 2017 in Current Affairs, In the News, Recent Cases, True Contracts | Permalink | Comments (0)

Wednesday, May 10, 2017

Doing Your Job Well to Benefit Your Employer Doesn't Result in Unjust Enrichment

In a recent case out of the Western District of Pennsylvania, Argue v. Triton Digital, Inc., Civil Action No. 16-133 (behind paywall), Argue, an engineer, brought suit alleging that his employer had been unjustly enriched by Argue's efforts. It's an interesting allegation. The court pointed out that what Argue was characterizing as "unjust enrichment" was really just him performing his job. He received a salary in exchange for his work, which included inventions, and his employer took that work and those inventions and used them to increase the value of its business. That wasn't unjust enrichment; the employer was entitled to do exactly what it did.  

Complicating this further? Argue had an employment agreement. The court pointed out that unjust enrichment is a doctrine that's supposed to be used only when no contract exists between the parties. Here there was a written agreement that provided Argue's employer with the right to Argue's inventions on the job. He could not, therefore, argue unjust enrichment at all. 

May 10, 2017 in Current Affairs, In the News, Labor Contracts, Recent Cases, True Contracts | Permalink | Comments (0)

Thursday, May 4, 2017

A Mistake Case Results in Rescission of a Contract

Sometimes rights can get passed along like a game of telephone. A recent case out of California, M.U.S.E. Picture Productions Holding Corp. v. Weinbach, B261146 (behind paywall), deals with a mistake that voids the original contract for those rights. 

Muse agreed to develop a film based on the book and screenplay "The Killer Inside Me," which Weinbach claimed to own the rights to. After about a decade during which Muse did not produce the film, Muse sold its rights to Windwings, and then Windwings sold its rights to Kim, who eventually produced a movie. In the meantime, Muse sued Weinbach for intentional misrepresentation during the original negotiation for the right, and Weinbach cross-claimed for breach of the agreement stemming from Kim's production of the movie. (Windwings and Kim were also involved in litigation with Weinbach, not relevant to this blog entry, but you can find a ruling from it here.)

Basically, Muse contended that Weinbach did not have the right to produce the film based on the novel at the time that he transferred those rights to Muse. Weinbach contended, however, that this was not a mistake of fact but rather one of judgment because it relied upon a later court interpretation of the extent of Weinbach's rights. The court agreed with Muse, however. Weinbach had repeatedly told Muse that he had the right to produce a movie from the book and never wavered from that, so it wasn't like Muse ever thought it was negotiating for a dubious right; Muse thought Weinbach had the right, because that's what Weinbach asserted. A later court ruling raised doubts, but Muse had had no reason to ever expect a later court ruling on the question. This mistake was material because Muse would not have entered into the contract if it had thought Weinbach didn't possess the right in question. And there was no evidence that Muse assumed the risk that Weinbach didn't have that right. Therefore, this mistake justified rescission of the contract. 

May 4, 2017 in Current Affairs, Film, In the News, Recent Cases, True Contracts | Permalink | Comments (0)

Wednesday, May 3, 2017

Forum non conveniens Doesn't Overcome Forum Selection Clauses

A recent case out of Delaware, SRL Mondani, LLC v. Modani Spa Resort, Ltd., C.A. No. N16C-04-010 EMD CCLD, deals with forum issues. In the case, the parties had entered into a number of contracts. The contracts at issue in the dispute between them both contained forum selection clauses that disputes should be brought in Delaware court. A third contract between the parties, not explicitly at issue in the dispute, had a forum selection clause that disputes should be brought in Israeli court. Modani argued that the Israeli forum selection clause should control, but SRL was seeking to enforce the Delaware agreements, not the Israeli one, and so the court found the Israeli forum selection clause didn't matter. 

In the alternative, Modani tried to argue that the action should be dismissed under forum non conveniens. Modani's argument was that the relevant documents were located in Israel. The court, however, noted that "modern methods of communication" meant it was relatively easy to get the documents over to Delaware. While Modani alleged that the relevant witnesses were located in Israel, it failed to explain exactly what testimony those witnesses might have and why they were relevant, so the court was not convinced. The court did acknowledge that Modani's principles were located in Israel and had no ties to Delaware but at all but the court also pointed out that the contracts at issue had resulted from negotiations between two sophisticated businesses with millions of dollars at stake, so it was unpersuaded by Modani's allegations of hardship. Because the dispute was about enforcement of contracts with clauses requiring the application of Delaware law, Delaware was the best forum. 

May 3, 2017 in Current Affairs, In the News, Recent Cases, Travel, True Contracts, Web/Tech | Permalink | Comments (0)

Tuesday, April 11, 2017

Flying the Friendly Skies after the Suffering Through the Violent Boarding Process?

Everyone is surely, by now, aware of the (most recent) United Airlines scandal.  Numerous questions abound: Was the airline racist in asking a non-white person to give up his seat or was the selection of which passenger to bump truly random? If the latter, was the airline racist in pursing this action after seeing that the selected passenger was not white whereas it might have given up taking such drastic action if it the passenger had been white? Equally importantly, what in the world is going on when law enforcement officers act as they did in this situation?! Is it fair to consider United Airlines responsible for actions that were, after all, not taken by its employees, but rather by the authorities?

While these questions are being addressed in many other locations, I find it interesting that several news sources correctly point out that United was legally entitled to bump a passenger, but that several sources seem to incorrectly state that under Department of Transportation rules, airlines may only pay passengers “up to a” $1,350 limit for delays of more than two hours. I have not had the time to fully research this rule, but as I read the rules, there is nothing saying that there is a limit to how much airlines may choose to pay, only what the DOT rules guarantee a pay-out (that one can, incidentally, insist on getting as payment, not a voucher) of $1,350, not more under the federal rules. The DOT guideline states as follows (from a website version only, admittedly):

“If the substitute transportation is scheduled to get you to your destination more than two hours later (four hours internationally), or if the airline does not make any substitute travel arrangements for you, the compensation doubles (400% of your one-way fare, $1350 maximum).”

If my understanding is correct, United could have chosen to voluntarily pay out a lot more than what they reportedly did ($800-1,000) and, as many correctly point out, most likely found some taker.  Surely, the rules do not prohibit this.  Instead, however, United chose to do what seems to increasingly be the order of the day: stand on their own rights and disregard the interests of their customers in the name of making a few extra dollars. Why am I not surprised?

April 11, 2017 in Commentary, Contract Profs, Current Affairs, Famous Cases, In the News, Travel | Permalink | Comments (0)

Thursday, April 6, 2017

Cyberattack liability

“Fees, fines or penalties” do not cover fraudulent charges incurred on commercial parties during a cyberattack. So ruled the Eight Circuit Court of Appeals in Schnuck Markets, Inc., v. First Data Merchant Serivces Corp., et al., (No. 15-3804, Jan. 13, 2017). 

Schnuck is a retail supermarket chain. First Data served as its credit card processor and Citicorp as its “acquiring bank.” Such a bank is one that pays the merchant and is reimbursed by the issuing bank. The acquiring bank sponsors the merchant into credit card association networks, in this case VISA and MasterCard. It also vouches for the merchant’s compliance with the associations’ rules. Unknown

Schnuck signed a contract with First Data and Citicorp for the credit card arrangement. Among other things, the agreement stated that liability under the relevant section of the contract “shall not apply to Schnucks’ liability for chargebacks, servicers’ fees, third party fees, and fees, fines or penalties … by the Association or any other card or debit card provide under this [agreement].”

In March 2013, a cyberattack against Schnucks compromised cardholder data. First Data and Citicorps subsequently withheld not only the fees and costs that MasterCard assessed against these corporations from payments to Schnucks, but also the fraudulent charges from the cyberattack itself. Schnuck filed suit, alleging breach of contract. At bottom, Schnucks agreed that it was liable for only actual fees and fines, but not the actual losses incurred by the issuing banks. Unknown-1

The court agreed. The payment of a “fee” is a payment for a service, not reimbursement for another party’s losses. Furthermore, since the contract does not mention anything about reimbursement for data compromise events, the banks were not in a legal position to get reimbursed for those. “Fines” and “punishment” describe, more narrowly, only sums imposed as a punishment and not data compromise losses.

Supermarket wins; banks lose. Good thing that the card holders were not involved here. The bigger loss is, of course, that shared by all of us; financiers, vendors, and card users when internet-based losses such as this happen. Another cost that undoubtedly will be built into the pricing scheme will result, but apparently, such is the nature of electronic transactions these days.

April 6, 2017 in Current Affairs, Web/Tech | Permalink | Comments (0)

Monday, April 3, 2017

University Decisions on Disciplinary Procedures Receive Deference; Cannot Be Arbitrary, Capricious, or in Bad Faith

A recent case out of the District of Nevada, Janati v. University of Nevada, Las Vegas School of Dental Medicine, Case No. 2:15-cv-01367-APG-CWH (behind paywall), discusses the leeway universities have in enforcing the policies in their student manuals. The student was suspended from UNLV Dental School for plagiarism, and, in addition to raising constitutional due process and First Amendment issues, she contended that UNLV breached its Student Policy Manual and as such was in breach of contract. UNLV agreed that the Student Policy Manual constituted a binding contract between the school and the student but contended that its decisions on disciplinary procedures under the manual were entitled to "significant deference." 

The court agreed. The standard for determining if the university had violated its disciplinary procedure was "arbitrary, capricious, or bad faith," "without any discernable rational basis." The university's actions did not rise to that level in this case. The complaint concerning the student's Honor Code violations was required by the manual to "include specifics" of the conduct at issue, including any witnesses to the conduct. The complaint against the student here neglected to name two of the faculty members involved and left off the names of some of the witnesses, but the student admitted that she knew who everyone involved with the complaint was, even prior to its filing. There was also some confusion about whether the university failed to solicit information from one of the witnesses during the first Honor Council proceeding, but all of the parties agreed that, to the extent that witness was overlooked, he did provide information during the second proceeding the parties held. 

The court found that none of those rose to the high bar of violation of the disciplinary procedures and therefore the student could not sustain a breach of contract claim. 

April 3, 2017 in Current Affairs, In the News, Recent Cases, Teaching, True Contracts | Permalink | Comments (0)

Friday, March 31, 2017

Prison Telephone Service Provider Continues to Lose on Enforcing Arbitration Provision

I have already blogged about a related case out of the Western District of Arkansas, in which the court concluded that prison inmates did not consent to arbitrate when they funded their telephone accounts to enable them to make calls. This case out of the Third Circuit, James v. Global Tellink Corp., No. 16-1555, affirms a similar conclusion by the District of New Jersey. To refresh your memory, GTL provides telephone services to prison inmates. Inmates sign up for accounts and deposit funds into the account, either through GTL's website or through its automated telephone service. When interacting with GTL's automated telephone service, users are alerted that their transactions are governed by the terms of use found online but they are not required to indicate their assent to those terms. Inmates have brought a class action alleging that GTL's charges are unconscionable. GTL moved to compel arbitration based on its online terms of use, but the district court found that those who used GTL's automated telephone service never agreed to be bound by those terms of use. 

The Third Circuit agreed with the district court's conclusion. The subject of how to form a binding contract through interactive telephone services was a new and different one, as most of these cases involve websites these days. GTL argued that the inmates manifested the requisite assent by continuing to use the telephone services after being notified there were terms of use. But the inmates never had to perform any affirmative act to indicate their assent, and they were never told that their continued use alone would constitute such assent. None of the inmates in question who used the automated telephone services had ever taken the necessary extra step to access GTL's website to see the terms of use, so they were never presented with the terms of use or the arbitration provision in question. The inmates simply never received the terms, and were never told that use of the telephone system would bind them to the terms. 

March 31, 2017 in Current Affairs, Government Contracting, In the News, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Monday, March 27, 2017

NDAs in the Sexual Assault Context

I've blogged a lot about NDAs on this blog, including in the context of allegations of domestic violence. So when I saw this recent essay on Inside Higher Ed discussing NDAs in the context of sexual assault investigations on university campuses, I thought it would be interesting to link to. Confidentiality provisions show up everywhere, and I think the essay is a thoughtful and important rumination on the effect they can have in some situations. 

March 27, 2017 in Commentary, Current Affairs, Law Schools, True Contracts, Weblogs | Permalink | Comments (0)

Sunday, March 19, 2017

The Oxford Comma is (Still) Important

In case you have not yet heard about the recent First Circuit Court of Appeals case discussing the legal importance of a comma, here goes: A Maine statute lists the following activities as not counting for overtime pay: Images

The canning, processing, preserving, freezing, drying, marketing, storing, packing for shipment or distribution of: (1) Agricultural produce; (2) Meat and fish products; and (3) Perishable foods.

Does that mean that drivers can get overtime because driving does count for overtime since “packing” covers both “shipment or distribution”? Or should the sentence be read as “packing for storage” as one thing and “distribution” another, thus precluding the drivers from earning overtime pay?

Circuit judge David J. Barron concluded that “the exemption’s scope is actually not so clear in this regard. And because, under Maine law, ambiguities in the state’s wage and hour laws must be construed liberally in order to accomplish their remedial purpose, we adopt the drivers’ narrower reading of the exemption.”

So, commas still matter. Consider too how “I love my parents, Lady Gaga and Humpty Dumpty” and “I love my parents, Lady Gaga, and Humpty Dumpty” are a little different. Language aficionados take note! Precise drafting still matters. Was this an outcome-oriented holding? Perhaps. But if so, a holding in favor of workers over a company in a case of interpretive doubt may, in today’s increasingly tough economy for middle and low-income earners, not be such a bad idea from a public policy point of view.

The case is O’Connor v. Oakhurst Dairy, No. 16-1901 (1st Cir. 2017).

March 19, 2017 in Commentary, Current Affairs, Famous Cases, In the News, Legislation, Miscellaneous, Recent Cases | Permalink | Comments (1)

Friday, March 17, 2017

No Lawsuit for Selling Suboptimally Sized Product

A group of plaintiffs suffering from glaucoma bought eye drops manufactured by six pharmaceutical companies. They claimed that the eye drops were unnecessarily large (no, let’s not go there this time): all drops sold by these manufacturers were larger than 16 microliters (equal to 10% of a tablespoon). The plaintiffs claim that unnecessarily large eye drops are wasteful because the human eye can only contain so much fluid. Anything in excess of that will simply overflow and be wasted, which is a waste of money.

The amount of fluid that the human eye can contain without overflowing varies from person to person. The defendants asserted that the amount often exceeds 16 microliters. Further, the active ingredient in each drop is only about 1% of the drop. The smaller the drop, the less therapeutic effect, they claimed (without explaining why, for example, two drops could not simply be applied by those with larger eyes…). Defendants also claimed that larger drops helps those with unsteady hands, such as the elderly, because “the smaller the drop, the likelier they are to miss.” Now, at least that makes sense… (not!).

As was said on the listserv, this is arguably not even a contract law case at all, especially because no allegation of misrepresentation, breach of contract, or the like was asserted. In the words of opinion author Judge Posner, this is merely a case of “you can do better by us” asserted by plaintiff consumers. “That is all they are arguing.” However, said Posner, “[o]ne cannot bring a suit in federal court without pleading that one has been injured in some way (physically, financially—whatever) by the defendant. That's what's required for standing. The fact that a seller does not sell the product that you want, or at the price you'd like to pay, is not an actionable injury; it is just a regret or disappointment—which is all we have here, the class having failed to allege ‘an invasion of a legally protected interest.’”

So, what do we have here? No contracts violation, perhaps. Consumer fraud under the respective state acts? Apparently not. What we seem to have, however, is another instance of Corporate America taking advantage of consumers with the consent of even the federal judicial appellate system. Of course any product that is larger than what is needed per “portion” is wasteful and thus arguably taking unnecessary advantage of consumers. Whether or not that can be framed as an actionable legal issue in our system is another story altogether, sadly. Even worse: companies do apparently not want to do right by their own customers, in this case often elderly folks going blind! Episode32

This is, of course, not the only instance of needless and blatant consumer fraud (for that is what these instances are, at least in the common, if not the legal, sense of the word). More examples:

  • When you buy lotion, it is next to impossible to get the last, oh, 20% out of those pump-type containers unless you unscrew the pump and pour out the lotion.
  • Almost all perishable food items are sold in much larger portions than what is needed for most of us – think cottage cheese, yoghurt, lunch meats (OK, apart from those itty bitty bags, those are great), milk, you name it. People needing more could just buy two items! (That’s how it’s done with great success in many European countries, but heaven forbid that we ever learn anything from other countries.) The rest of us often have to throw out much of the food as it doesn’t last that long.
  • How about packaging? Huge bags of chips that are only 1/2 full? Same for cereal boxes? Sun screen spray bottles that are also only 1/3 full?
  • OK, I’m in a crappy mood about companies and organizations today, I admit. Of course the capitalist model is the best one, etc. etc. But it would be nice if more companies would focus more on decency, less waste in packaging and eventual product usage, and consumer needs. This eye drop story really is one of forcing consumers to waste product and thus money. Let’s just call a spade a spade.

On an unrelated note: I apologize for being so inactive on this blog for so long. I have had a disappointing contractual work experience that has drained me and continues to do so, frankly. I am trying the hardest I can to find interesting cases to blog about. Should you hear of any, I’d be delighted to be notified. I also invite guest bloggers to blog here with us. As always: thanks to my co-bloggers for their hard and excellent work!

The case described above is Eike, et al. v. Allergan, et al., No. 16-3334 (Seventh Cir. 2017).

Hat tip to my colleagues on the Contracts listserv for discussing this case.

March 17, 2017 in Commentary, Contract Profs, Current Affairs, Miscellaneous, Recent Cases, True Contracts | Permalink | Comments (0)

Saturday, March 4, 2017

Inmates Didn't Consent to Be Bound to a Contract Every Time They Used the Telephone

Myanna has already blogged about the problem of inmate telephone rates being set unreasonably high. Myanna's blog post was about a dispute in California but a recent decision out of the Western District of Arkansas, In re Global Tel*Link Corporation ICS Litigation, Case No. 5:14-CV-5275 (behind paywall), deals with the same issue. (There are several of these litigations, as well as other government debates about regulation of these rates.) In the Arkansas decision, the court refuses to compel arbitration. 

Global Tel*Link's allegation was that the inmates consented to the terms of use when they funded their accounts to enable them to make phone calls, and the terms of use contained an arbitration clause. Every time the inmates put money on their accounts with Global Tel*Link, they heard a message similar to the following: 

Please note that your account, and any transactions you complete with GTL or any of its affiliates, are governed by the terms of use and the privacy statement posted at www.connectnetwork.com . The terms of use and the privacy statement were most recently revised on March 30, 2015.

The court determined, however, that a reasonable person would not have understood this message as referring to a contract and as constituting consent to be bound by that contract, since it never used any contract buzzwords like "contract," "consent," "agree," "assent," "offer," "accept," etc. The court said that, as far as the inmate listening to the message was concerned, the terms of use and privacy statements could have been just generally applicable legal rights imposed by regulators. The court characterized Global Tel*Link's behavior as basically hiding the contract ball: Global Tel*Link could have straightforwardly said the inmates were entering into a contract but instead "invite[d] [them] to visit a website where [they] might accidentally stumble across this fact." (I went to connectnetwork.com. The terms of use are located at the bottom of the page and required me to scroll to find them, and I just blogged about a case where the persistent location of the terms of use hyperlink at the bottom of the page didn't constitute enough notice.)

Because the inmates never signed anything, never clicked or punched any button signifying acceptance of contract terms, never had an opportunity to review the terms of use prior to using Global Tel*Link's services, and would not reasonably have understood the message to be referring to contractual terms, the inmates did not assent to the contract and thus are not bound by the contract's arbitration provision. 

March 4, 2017 in Current Affairs, Government Contracting, In the News, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Sunday, February 26, 2017

Iowa Bill Proposal: To Get Faculty Position, Must Have Correct Political Affiliation

Just when you think the political debacle in this country cannot get anymore grotesque, here's a recent proposal by Iowa State Senator March Chelgren: to counter the liberal slant at Iowa's three public universities, the job candidates' political affiliations would have had to be considered.   Why?  To ensure "balanced speech" and avoid the "liberal slant" in public universities these days. 

Under SF 288, the universities would use voter registration information when considering job applicants, and could not make any hire that would cause declared Democrats or Republicans on the faculty to outnumber the other party by more than 10%.

Demonstrating the very deep and logical (not!) argument, check this line of thinking: Chelgren said professors who want to be hired could simply change their party affiliation to be considered for the position.  "We have an awful lot of taxpayer dollars that go to support these fine universities," he said. "(Students) should be able to go to their professors, ask opinions, and they should know publicly whether that professor is a Republican or Democrat or no-party affiliation, and therefore they can expect their answers to be given in as honest a way possible. But they should have the ability to ask questions of professors of different political ideologies."

Duh!

February 26, 2017 in Commentary, Contract Profs, Current Affairs, Government Contracting, In the News, Labor Contracts, Legislation | Permalink

Thursday, February 23, 2017

No Deal, No Exchange of Money or Possession, No Ownership in Elvis Guitar

The National Music Museum (“NMM”), located in South Dakota, brought suit against Larry Moss and Robert Johnson asking the court to declare it the legal owner of a Martin D-35 guitar formerly owned by Elvis Presley. Images

Moss and Johnson, both interested in collectibles, have been friends for thirty-five years. In 2007, Johnson contacted Moss stating that he may be interested in acquiring three guitars previously owned by Elvis, which included the D-35. Johnson originally was going to negotiate a deal for Moss to buy all three guitars for $95,000 from a third-party seller. In 2007, a two-part contract for $120,000 was finally drafted stating that (1) Moss would pay Johnson $70,000 and take immediate possession of two of the guitars, and (2) that Johnson would deliver two remaining guitars – including the D-35 – in exchange for the remaining $50,000.

At trial, Moss testified about the 2007 interaction and said, “Well, we never had a deal. I never gave him the money. He never gave me any guitars. There was no deal.” Moss’s actions in 2007 and from 2008-2010 are consistent. Moss never asserted title of the Martin D-35 during either time period because Moss did not believe he had title to the guitar. Moss knew he would not own the Martin D-35 until Johnson delivered it and Moss paid him for it. Because delivery never occurred, Moss never acquired title to the Martin D-35.

Nonetheless, in 2013, Moss contacted a friend of Johnson's inquiring about the status of the D-35. Moss then contacted the NMM where the guitar was on display claiming that he owned the D-35. A lawsuit was filed and removed to federal court seeking declaratory judgment on who was the rightful owner of the guitar.

Under Article 2 of the Uniform Commercial Code, which is the governing law for Tennessee and South Dakota, “[u]nless otherwise explicitly agreed title passes to the buyer at the time and place at which the seller completes performance with reference to the physical delivery of the goods . . . .” Tenn. Code Ann. § 47-2-401(2) (2008); SDCL 57A-2-401(2). Here, Johnson never physically delivered the Martin D-35 to Moss. Moss never had physical possession of the Martin D-35. Because Johnson never delivered the guitar and Moss never had possession of it, Moss never acquired title to the Martin D-35. Peeps-with-guitar

Furthermore, in spite of Moss's attempt to seek specific performance under a breach of contract theory, the court did not find this persuasive because the contract specifically stated that Moss would not pay the $50,000 balance until there had been delivery of the guitar. Based on the plain text of the contract, delivery was set to be a future date. Additionally, Moss and Johnson exchanged emails for five years, but Moss never asked Johnson to deliver the guitar, nor did he claim to the owner of the guitar. As a result, the court found Johnson had the title to the D-35 guitar, and transferred it to the NMM. Thus, the NMM is the rightful owner of the guitar.

The case is National Shrine Museum; America’s Shrine to Music v. Robert Johnson and Larry Moss.

 

February 23, 2017 in Celebrity Contracts, Current Affairs, Famous Cases, In the News, Music | Permalink | Comments (0)