Thursday, February 23, 2017
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.
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.
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.
Sunday, January 22, 2017
In times with enough serious and often depressing news, I thought I would bring you this little neat story (with profuse apologies to everyone, including my co-bloggers, for my virtual absence for a few months):
An Apollo 11 bag used to protect moon rocks samples was stolen by Max Ary, a former curator convicted in 2006 of stealing and selling space artifacts that belonged to the Cosmosphere space museum in Hutchinson, Kansas. Mr. Ary subsequently served two years in prison and was sentenced to pay more than $132,000 in restitution. Space artifacts found in his home, including the Apollo 11 bag, were forfeited to meet that debt. However, the Apollo 11 bag was incorrectly identified as Ary's and subsequently sold to Nancy Carlson for $995 in February 2015 at a Texas auction held on behalf of the U.S. Marshals Service.
The government petitioned the court to reverse the sale and return the lunar sample bag to NASA, alleging that due to a mix up in inventory lists and item numbers, the lunar sample bag that was the subject of the April 2014 forfeiture order was mistakenly thought to be a different bag and that no one, including the United States, realized at the time of forfeiture that this bag was used on Apollo 11. The government cited cases where federal courts vacated or amended forfeiture orders, including where inadequate notice was provided to a property owner, as a justification for the bag's return to NASA.
Judge J. Thomas Marten ruled in the U.S. District Court for Kansas that Ms. Carlsen obtained the title to the historic artifact as "a good faith purchaser, in a sale conducted according to law." With her title to the bag now ordered by the Kansas court, Carlson needs to file a motion in the U.S. District Court for Texas for its return from NASA's Johnson Space Center in Houston. However, “[t]he importance and desirability of the [lunar sample] bag stems solely and directly from the efforts of the men and women of NASA, whose amazing technical achievements, skill and courage in landing astronauts on the moon and returning them safely [to Earth] have not been replicated in the almost half a century since the Apollo 11 landing," the judge wrote … Perhaps that fact, when reconsidered by the parties, will allow them to amicably resolve the dispute in a way that recognizes both of their legitimate interests," J. Marten wrote.
H/t to Professor Miriam Cherry for bringing this story to my attention.
Friday, October 14, 2016
This week, while teaching parol evidence, I taught the case of Mitchill v. Lath, which involves an oral agreement between the parties to tear down an ice house on land to the land their sales agreement was about. A student asked what the deal was with the guy who owned the land the ice house was on, and I admit I didn't know the deal, so I went and looked it up, and here's the deal:
He was George Richard Lunn, a clergyman who was born in Iowa but settled in Schenectady, where he was elected mayor on a Socialist ticket and later served in the House of Representatives and as Lieutenant Governor of New York. I had no idea who Lunn was and thought it was interesting that he turned out to have a Wikipedia page. The Wikipedia page doesn't mention his role in Mitchill v. Lath but his Prabook entry does.
Tuesday, September 6, 2016
Vast Majority of Consumers Prefer Court Procedure over Arbitration
We have discussed arbitration clauses in this blog several times. Now, a Pew Charitable Trust survey of more than 1,000 individuals shows that 95% of consumers prefer judge or jury trials regarding questionable bank fees and similar practices over arbitration clauses. 89% want to be able to join a class action lawsuit. At the same time, no less than 93% of banks include jury (but not bench) trial waivers in their checking account agreements.
What about the argument that the only thing that consumers get out of this is higher fees and fewer services to cover increased litigation costs? First, consumers are not prohibited from choosing arbitration, it’s the option to have class action suits that is at issue here. And as the Los Angeles Times reported, “if banks keep their noses clean, they won’t end up in court” in the first place. Besides, it’s not so much consumers that choose to litigate, businesses file four times as many lawsuits as individuals. Maybe this is for good reason: arbitrators ruled in favor of banks and credit card companies 94% of the time in disputes with California consumers. Maybe it is not: since banks are the ones who pay for the arbitration process, a recurring concern is that arbitrators may be reluctant to find against the banks.
Of course, class action lawsuits is the only feasible way for consumers to have their legal rights vindicated because of the small individual amounts involved. For the banks, however, this is big business – literally: In April, the Supreme Court let stand a decision that Wells Fargo had deliberately arranged checking-account payments in order to “maximize the number of overdrafts” resulting in fees of $25-35. http://www.scotusblog.com/wp-content/uploads/2016/03/13-16195.pdf
Monday, August 29, 2016
Allow me to highlight my most recent article on the questionable ecosystem viability and contractual common law validity of so-called “trophy hunting” contracts. With these contracts, wealthy individuals in or from, often, the Global North contract for assistance in hunting rare animals for “sport.” Often, these hunts takes place in the Global South where targeted species include giraffes, rhinos, lions, and other vulnerable if not outright threatened or endangered species.
A famous example of this is Minnesota dentist Walter Palmer killing “Cecil the Lion” in 2015 causing widespread outcry in this country and around the world. Trophy hunting also takes place in the USA and Canada, where targeted animals include polar bears, grizzly bears, and big horn sheep.
Trophy hunting should be seen on the background of an unprecedented rate of species extinction caused by several factors. Some affected species are already gone; others are about to follow. Western black rhinoceroses, for example, are already considered to have become extinct in 2011. The rest of the African rhinoceros population may follow suit within the next twenty years if not sufficiently protected. In the meantime, more than 1.2 million “trophies” of over 1,200 different kinds of animals were imported into the United States just between 2004 and 2015. In addition to the extinction problem, the practice may also have ecosystem impacts because, among many other factors, the trophies often stem from or consist of alpha animals.
Of course, no one is arguing that rare species should be driven to extinction, in fact, quite the opposite: both trophy hunters and those opposing the practice agree that such species should be conserved for the future. However, the question lies in how to do so. Some argue that trophy hunting creates not only highly needed revenue for some nations, but also brings more attention to the species conservation issue.
I argue that at least until there is much greater certainty than what is currently the case that the practice truly does help the species in the long run (and we don’t have much time for “the long run”!), legal steps must be taken against the trophy hunting. Even when positive law such as hunting laws and/or the Endangered Species Act (“ESA”) do not address the issue (yet), common law courts may declare contracts that have proved to be “deleterious effect upon society as a whole,” “unsavory,” “undesirable,” “nefarious,” or “at war with the interests of society” unenforceable for reasons of public policy.
In the case of Cecil, African lions had been proposed for listing under the ESA when the animal was killed, but the listing did not take effect until a few months later. The case, others like it, and several studies demonstrate that a sufficient and sufficiently broad segment of the population have come to find the killing of very rare animals so reprehensible that common law courts can declare them unenforceable should litigation on the issue arise. This has been the case with many other contracts over time. The same has come to be the case with trophy hunting. As long as doubt exists as to the actual desirability of the practice from society’s point of view – not that of a select wealthy individuals – the precautionary principle of law calls for nations to err on the side of caution. The United States prescribes to this principle as well.
The article also analyzes how different values such as intrinsic and existence values should be taken into account in attempts to monetize the “value” of the practice. Instead of the here-and-now cash that may contribute to local economies (much revenue is also lost to corruption in some nations), other practices such as photo safaris are found by several studies to contribute more, especially in the long term. (Note that Walter Palmer paid a measly USD 50,000 for his contract with the landowner and local hunting guide).
Trying to save rare animals by shooting them simply flies in the face of common sense. It also very arguably violates notions of national and international law.
Sunday, August 28, 2016
The Second Circuit just ruled in a case involving Amazon that "reasonable minds could disagree on the reasonableness of the notice" of the arbitration agreement provided by Amazon.
In 2013, the plaintiff, Dean Nicosia, bought diet pills on Amazon containing the ingredient sibutramine, a controlled substance that was withdrawn from the market by the FDA in 2010 because of concerns over severe health risks. Mr. Nicosia stated that the presence of sibutramine was not disclosed to him and that he was never notified nor offered a refund, even after Amazon stopped selling the product. Amazon moved to dismiss on the grounds that Nicosia's claims were covered by a mandatory arbitration provision. The district court granted that motion, finding that Nicosia had constructive notice of the arbitration clause.
When Nicosia bought the product, the final checkout screen stated “Review your order” and “[b]y placing your order, you agree to Amazon.com’s privacy notice and conditions of use.” The words “conditions of use” were hyperlinked to the actual text of the terms including the arbitration agreement, but were “not bold, capitalized, or conspicuous in light of the whole webpage.” Proximity to the top of a webpage also does not necessarily make something more likely to be read in the context of an elaborate webpage design. Additionally, said the court, “[a]lthough it is impossible to say with certainty based on the record, there appear to be between fifteen and twenty‐five links on the Order Page, and various text is displayed in at least four font sizes and six colors (blue, yellow, green, red, orange, and black), alongside multiple buttons and promotional advertisements. Further, the presence of customers’ personal address, credit card information, shipping options, and purchase summary are sufficiently distracting so as to temper whatever effect the notification has.”
The court made the further analogy:
“It is as if an apple stand visitor walks up to the shop and sees, above the basket of apples, a wall filled with signs. Some of those signs contain information necessary for her purchase, such as price, method of payment, and delivery details, and are displayed prominently in the center of the wall. Others she may quickly disregard, including advertisements for other fruit stands. Among them is a sign binding her to additional terms as a condition of her purchase. Has the apple stand owner provided reasonably conspicuous notice? We think reasonable minds could disagree.”
The Amazon case raises some interesting questions, I think. First and as always: is an online customer – a consumer in this case - truly put on notice just because of a hyperlink on a website? The Second Circuit will now get a chance to resolve that issue. Second, and perhaps much more troubling here is the weight the district court gave to the mere fact that Mr. Nicosia had “signed up for an account” with Amazon. In today’s day and age, we all sign up for numerous accounts to conduct all sorts of life matters from the simple to the complex. I, for one, don’t like to shop or conduct much other business online, but I have an entire spreadsheet full of usernames and passwords to various websites that I have used or still sometimes use. In and of itself, that hardly means that I am aware of any contractual terms contained anywhere on those websites. In my opinion, holding users to such “notice” is unreasonable and unrealistic in today’s busy world (it is simply too time-consuming to study all possible legal requirements listed on all these website in detail to do by far most of the things I do online, and I am sure many other consumers are in my situation.). Even worse, the district court seemed willing to hold consumers to the very high burden of having to familiarize themselves with perhaps frequently changing terms online after having created an online account with a certain company. Again, that is just not realistic with the modern barrage of necessary and/or required website usage. Finally, the court found that users do not actually have to read the terms to be bound by them. It is apparently enough that they could have “inquired” of these terms. That’s giving an online company tremendous legal weight and, arguably, presents split authority in comparison with that of the Ninth Circuit.
The case is Nicosia v. Amazon.com, Inc.
Hat tip to Matthew Bruckner of Howard Univesity School of Law for bringing this story to my attention. http://www.law.howard.edu/1831
Wednesday, July 6, 2016
Yesterday, I blogged here about ticketscalping “ticketbots” outperforming people trying to buy tickets with the result of vastly increased ticket prices.
Now Ashley Madison – dating website for married people – has announced that some of the “women” featured on its website were actually “fembots;” virtual computer programs. In other words, men who paid to use the website in the hope of talking to real women were actually spending cash to communicate with computers (men have to pay to use the website, women don’t).
Why the announcement? The new leadership apparently wanted to air the company’s dirty laundry, so to speak.
Ashley Madison was hacked last year, revealing who was using the website to cheat on their husband, wife or partner. It was a devastating hack, ruining lives and even leading a pastor to commit suicide.
This seems to be a clear breach of contract: if you pay to communicate with real women, the contract must be considered breached if all or most of the contact attempts went to and/or from computers only. Perhaps even worse for Ashley Madison is the fact that the company is under investigation by the U.S. Federal Trade Commission. The FTC does not comment on ongoing cases, but “it could be investigating whether Ashley Madison properly attempted to protect the identity of its discreet customers -- which it promised to keep secret. Or it could be investigating Ashley Madison for duping customers into paying to talk to fake women. On Monday, the company also acknowledged that it hired a team of independent forensic accounting investigators to review past business practices around bots and the ratio of male and female U.S. members who were active on the site."
Wednesday, June 22, 2016
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.
Tuesday, June 21, 2016
Today's dive into the long and storied ContractsProf Blog archives takes us to December 4, 2005. Enjoy this post from Emeritus Editor-in-Chief Frank Snyder about everyone's favorite fashion case:
On this date, December 4, 1917, the New York Court of Appeals handed down its decision in Wood v. Lucy, Lady Duff Gordon, 222 N.Y. 88 (1917). The opinion by Judge Cardozo is a milestone for several areas of contract law, including consideration, implied terms, and the duty of good faith. And the personality of the defendant, Lady Duff Gordon (the Martha Stewart of her day) hasn't hurt its popularity. Here's an interesting take on the case from Victor Goldberg (Columbia) and some info and pictures involving Lady Duff Gordon from Jim Fishman (Pace). (Image: Lady Duff Gordon, courtesy Randy Bryan Bigham.)
Not so well-known as Cardozo's innovation, however, is the that the reasoning for which the opinion is famous -- that an exclusive license contains an implied clause that the licensee will use its best efforts -- wasn't Cardozo's idea. That theory, and the key cases that Cardozo cites in the opinion, were provided for him in the brief of the plaintiff's lawyer, John Jerome Rooney (1866-1934).
Rooney was a minor celebrity in his own right. He was born in Broome County, New York. His father, a small merchant in Binghamton, died when John was a child, and the family moved to Philadelphia. He attended Mount Saint Mary's College in Emmitsburg, Maryland, graduating in 1884. After service as a Naval officer, he became a lawyer in New York City. A staunch Democrat, he became a leader of the Catholic bar and a power behind the scenes in city politics. He served as President of the Catholic Club of New York, received considerable attention for his work on behalf of the persecuted Armenians in Turkey, and for his pro-Irish nationalist writing. His political service was later rewarded with a job as Presiding Judge of the New York Court of Claims. His wife was president of the Civic Education League and was active in the battle against narcotics in New York City.
But Rooney is best remembered today not for his legal work, but for his poetry. An ardent patriot, his poems about America's military and the Irish struggle for independence earned him great popularity. He was best known for such works as The Men Behind the Guns, Joined the Blues, and Ave Maria.
Thursday, June 2, 2016
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!”
“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!
Thursday, May 19, 2016
Another one bites the dust. GM is the most recent car company having to admit 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.
Thursday, May 12, 2016
If you and I worked in an industry with highly sensitive information (assuming that we do not), it might be one thing if we thought we could email confidential information to our private email accounts and copy such information to a memory stick without finding out. But if a C-level employee at a high-tech company does so, does such conduct not rise to an entirely different level of at least naivety, if not deliberate contractual and employment misconduct?
A court will soon have to answer that question. Louis Attanasio, former head of global sales for an IBM cloud computing unit has been sued by IBM for breach of a contractual confidentiality clause, misappropriation of trade secrets, and violation of a non-compete agreement when he left – information in hand – to work for direct competitor Informatica.
In 2016, Attanasio allegedly started sending confidential information to his private email account, including draft settlement agreements between other IBM employees who had left to work for competitors. Before leaving IBM, Attanasio was asked to return a laptop to the company, which claims that he cpied files to a USB storage device.
Once again, the extent of the traceability of our electronic actions at work has become apparent. I continually remind my students of this to help them avoid “traps” such as the above or, frankly, simply to remind them that they should not spend much, if any, time on their computers not working (most seem to use their own electronic devices anyway these days, but still… and doing so is also very visual in an office setting.). Employers frequently complain about the work ethics of new college graduates, so it might be worthwhile to remind our students of what seems obvious to us.
Monday, March 7, 2016
As Stacey writes just below this post, much is happening in the arbitration arena currently.
In December, the United States Supreme Court ruled that the 1925 Federal Arbitration Act pre-empts state law. Thus, when parties have executed agreements calling for arbitration rather than court resolutions, the arbiration clause will be upheld. The case was DirectTV, Inc. v. Imburgia, No. 14-462.
In the case, Imburgia’s contract stated that “[i]f ... the law of your state would find this agreement to dispense with class arbitration procedures unenforceable, then this entire Section 9 [the arbitration section] is unenforceable.” http://www.supremecourt.gov/opinions/15pdf/14-462_2co3.pdf
The Supreme Court noted that when DIRECTV drafted the contract, the parties likely believed that the words “law of your state” included California law that then made class-arbitration waivers unenforceable. But the Court’s subsequent holding in AT&T Mobility LLC v. Conception found that the Federal Arbitration Act pre-empts state law on the issue. Thus, parties cannot contractually bind themselves to invalid state law. When they refer to “state law,” this means only valid state law.
These rulings favor businesses, not consumers. This is so particularly so in cases between consumers and banks or credit card companies. A 2007 report found that over four years, arbitrators ruled in favor of the financial institutions in no less than 94% of the cases. Of course, in the typical take-it-or-leave it style contract, consumers have the choice only of agreeing to arbitrate or not getting the desired service.
As for the belief that arbitration saves scarce judicial resources, it is noteworthy that businesses file four times as many lawsuits as individuals. “It is hard to imagine any company giving up its own right to sue another company in a business dispute.” Double standards abound here.
Meanwhile, in early February, Senators Leahy and Franken introduced the Restoring Statutory Rights Act. This would create an exception in the Arbitration Act for disputes involving individuals and small businesses. The only way individuals would enter into arbitration is if they agreed to do so after the dispute has been filed. That’s very different from the current process, which automatically shunts all customer disputes into binding arbitration.
The Consumer Financial Protection Bureau is also considering a ban in mandatory-arbitration provisions in contracts for credit cards and other financial services. The Centers for Medicare and Medicaid Services is looking to do the same in relation to nursing home contracts.
Acts and regulations are highly warranted in this context. We know where the Supreme Court currently stands on the issue. We do not know where it will go with a new justice soon to be appointed, but judicial branch action in this area may not be forthcoming any time soon.
Friday, March 4, 2016
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?
President’s Club Professor of Law,
The Ohio State University Moritz College of Law
Tuesday, February 9, 2016
Classic Case Corner is an occasional series of posts highlighting staples of the Contracts curriculum and resources related to them. Our motto for CCC is, "If it's new to you, then it's new... even if it's old."
Some cases owe their fame in the law school curriculum, in part, to unusual factual details--consider the hairy hand of Hawkins v. McGee as one prominent example. Today's highlight, Kirksey v. Kirksey, 8 Ala. 131 (Ala. 1845), in contrast, became famous despite, or more likely because of, its factual obscurity.
In less than 550 words, Kirksey tells the story of the widowed "Dear Sister Antillico" who was invited by her brother-in-law to abandon her home based on this promise: "If you will come down and see me, I will let you have a place to raise your family, and I have more open land than I can tend; and on the account of your situation, and that of your family, I feel like I want you and the children to do well.” Two years later, the brother-in-law "notified ['Sister Antillico'] to remove, and put her in a house, not comfortable, in the woods, which he afterwards required her to leave." The Alabama Supreme Court reversed the trial court's verdict for the widow, holding that the brother-in-law's promise was "a mere gratuity, and that an action will not lie for its breach." The brief opinion sheds no great light on the facts beyond the few stated, and it ultimately allows for a great deal of pedagogical flexibility in discussing the doctrine of consideration or the modern availability of promissory estoppel as a substitute.
Professors William Casto (Texas Tech) and Val Ricks (South Texas) filled the information gap and dispelled the much of the surface mystery in their fantastic article, 'Dear Sister Antillico . . .': The Story of Kirksey v. Kirksey, which covers not only the historical background of the case and its litigation, but also the story of how Samuel Williston catapulted a little-known case to its current prominence.
Casto and Ricks' abstract elaborates more on the treasure-trove of facts to be found in the 77-pages of their 2006 Georgetown Law Journal article:
Second, Kirksey is so ordinary - why is it taught at all? It announces no new doctrine. It explains no doctrine. It's author's style is not impressive, and his reputation is obscure. Today courts might reach the opposite result. Few courts have cited Kirksey, and none since 1949.
We resolve these puzzles. First, we answer all the questions raised by the facts. We were surprised by the answers and suggest that no one who has taught the case has had any idea what actually happened. Second, we explain how Kirksey gained fame. Briefly, Williston changed his mind about the case ("right" to "wrong"), and in the process talked about Kirksey so much that it became embedded in his teaching, his treatise, his mind, and his students' minds - until the case became one of contract law teaching's primary sources. Ironically, Williston's change of mind, the reason for the case's rise to fame (the second puzzle), was made possible by the case's ambiguity (the first).
Friday, January 29, 2016
The class action lawsuit against Uber for allegedly misclassifying its drivers as “independent contractors” instead of regular “employees” is growing in scope and importance. (O’Connor v. Uber Technologies Inc., 13-cv-03826, Northern District of California). It now covers more than 100,000 drivers. If Uber loses, the case could mean the end of the so far highly lucrative business ride share model that is currently valued at a whopping $60 b worldwide. http://www.bloomberg.com/news/articles/2015-12-18/uber-faulted-by-judge-for-confusing-drivers-with-new-contract
A recent contractual twist developed as follows: Judge Chen had previously found certain contractual language between Uber and its drivers to be unconscionable and unenforceable. Uber claims it tried to fix those issues in a new set of contracts prohibiting its drivers from “participating in or recovering relief under any current or future class action lawsuits against the company.” (Link behind a sign-in request). The drivers were, instead, required to resolve potential conflicts via arbitration. The new contract did, however, purport to give drivers 30 days to opt out of the arbitration provision.
Judge Edward Chen stated about this contractual language that “it is likely, frankly, to engender confusion.” The potential for confusion stems from the fact that numerous drivers have, obviously, already joined the class action lawsuit just as many still may want to do so. Hundreds of drivers are said to have called the plaintiffs’ lawyer, Shannon Liss-Riordan, to find out whether they have to opt out of the new contract to join the lawsuit. Ms. Liss-Riordan called the updated contract an attempt to “trick her clients into relinquishing their rights to participate in the class action.”
Uber, however, claimed that it was just trying to fix previous problematic contractual language and that it would “not apply the new arbitration provisions to any drivers covered by the class action.” The contractual language, though, does not say so.
Whether this is an example of deliberate strong-arming or intimidating the drivers into not joining the lawsuit or simply unusually poor contract drafting may never be known. Judge Chen did, however, order Uber to stop communicating with drivers covered by the class action suit and barred the company from imposing the new contract on those drivers.
The saga continues with trial set for June 30.
Meanwhile, Lyft settled a very similar lawsuit by its drivers in the amount of $12 million. Under that settlement, Lyft will still be able to classify its drivers “independent contractors.”
Thursday, January 21, 2016
On Thursday, the U.S. Circuit Court of Appeals for the D.C. Circuit heard arguments about whether a clothing company illegally fired three retail store employees for their Facebook posts criticizing the employer. The case involves the as-of-yet little developed area of how labor law applies to social media usage as well as other complex issues of contracts and employment law. The case is Design Technology Group v. NLRB, Case Number 20-CA-035511. The case also demonstrates the issue of poor workplace conditions and how little employees can do under contracts law or other bodies of law against this, which I have blogged about before (most recently here). I am not an employment law expert. I simply find this case very interesting from the point of view of how social media law is developing in relation to what is, after all, also an employment contract.
In the case, three employees repeatedly brought various safety concerns to the attention of the store manager. Among other things, the employees felt that the area of San Francisco where the store was located was relatively unsafe at certain times of the evening and that, perhaps, store hours could thus be changed to alleviate this problem. Homeless people would also gather in numbers outside the store to watch a burlesque video that the store played on a big TV screen right inside a window, thus potentially also attracting various (other) unsavory characters.
Allegedly, the store manager did not respond to these safety concerns and treated the employees in an immature and unprofessional way. The three employees discussed the events not at the water cooler, which is so yesteryear, but on Facebook. These posts included messages such as
- “It’s pretty obvious that my manager is as immature as a person can be and she proved that this evening even more so. I’m am unbelieveably [sic] stressed out and I can’t believe NO ONE is doing anything about it! The way she treats us in NOT okay but no one cares because everytime [sic] we try to solve conflicts NOTHING GETS DONE!!... “
- “800 miles away yet she’s still continues to make our lives miserable. phenomenal!”
- “hey dudes it’s totally cool, tomorrow I’m bringing a California Worker’s Rights book to work. My mom works for a law firm that specializes in labor laws and BOY will you be surprised by all the crap that’s going on that’s in violation 8) see you tomorrow!”
One of the employees did bring the California worker’s rights book—which covered issues such as benefits, discrimination, the right to organize, safety, health, and sanitation—to work and put it in the break room where other employees looked through it, noticing that they were entitled to water and sufficient heat.
This same employee also (naïvely) sent resumes from the company computer in spite of company rules allowing only sporadic computer access (the store manager had allegedly set a bad example by using the store computer for personal purposes herself). The company discovered this as well as the Facebook posts, and fired the three employees.
The company argues that the workers commented on Facebook only in order to create a pretext for filing a claim with the NLRB. The smoking gun, according to the company, is the following exchange of (select, but most salient) Facebook postings:
- “OMG the most AMAZING thing just happened!!!! J”
- “What … did they fire that one mean bitch for you?”
- “Nooooo they fired me and my assistant manager because “it just wasn’t working out” we both laughed and said see yaaah and hugged each other while giggling ….Muhahahahaha!!! “So they’ve fallen into my crutches [sic].”
The use of the expression “Muhahaha” is, according to the company, the smoking gun indicating the employee’s desire to get fired. It does indeed seem to indicate _some_ reveling in the turn of events, but arguably not a desire to be fired. The “top definition” of the phrase on the user-created online “Urban Dictionary” is, today, “supost [sic] to be an evil laugh when being typed in a game.” Case briefs list it as “An evil laugh. A laugh one does when they are about to do something evil. Such as when a villain has a plot to take over the world, he does this laugh right before it goes into effect. Also a noise made by people who have just gotten away with an evil deed or crime….” The “evil laughter” entry on Wikipedia describes the phrase Muhahaha as being “commonly used on internet Blogs, Bulletin board systems, and games. There, [it is] generally used when some form of victory is attained, or to indicate superiority over someone else.”
The company appeals a ruling from the National Labor Relations Board (“NRLB”) finding the terminations unlawful because the employees’ discussions of working conditions were protected concerted activities under the National Labor Relations Act. The company claims that the comments were not legally protected because they were part of a scheme to manufacture an unfair labor practice claim.
It will be interesting to see how the Court of Appeals will address the social media aspect of this case. One the one hand, it does seem exceptionally naïve to expect to be able post anything in writing on the internet – Facebook, no less – without it potentially being seen by one’s current or future employer. I’m sorry, but in 2016, that should not come as a surprise to anyone (note that the company also used email monitoring software to discover whether its employees applied for jobs with competitors, which at least one of the employees here did). Note to employees who may not have a home computer or internet access: use a library computer.
On the other hand: does it really matter what employees post to their “friends” about their jobs, absent torts or other clear violations of the law (not alleged here)? Isn’t that to be expected today just as employees previously and still also talk in person about their jobs? Isn’t the only difference in this case that the posts are in writing and thus traceable whereas “old-fashioned” gossip was not? If employees merely state the truths, as seem to have been the case in this instance perhaps apart from the last “Muhahaha” comment, isn’t it overreaching by the employer to actually _fire_ the employees if they, of course, otherwise provided good services? Even if the employees are exaggerating, boasting, or outright lying, should employers be able to fire employees merely because of private comments on Facebook posted to one’s online “friends”?
An alternative idea might be to consider whether the employees were actually on to something that (gasp!) could help improve a poor work situation for the better.
The National Federation of Independent Business’ Small Business Legal enter has filed an amicus brief in support of the company, alleging that the NLRB decision “allow[s] employees regardless of their motive or actual misconduct to become termination-proof simply by making comments relating to their employment online.”
That’s hardly what the employees are arguing here. They do, however, argue a right to discuss their employment situation online without a snooping employer terminating them just for doing so. In this case, the employees had, noticeably, tried to improve highly important workplace issues in a fruitful way. The situation did, however, escalate. In and of itself, however, the “fallen into my clutches” comment, although of admittedly debatable intent, does not seem to indicate that the employees were attempting to manufacture an unfair labor practice claim. The employees seemed to have been primarily concerned with safety issues and working conditions, but were fired in retaliation for their critical online arguments. That, to me, seems like a fair argument.
Stay tuned for the outcome of this case!
Thursday, January 7, 2016
Recently, Stacey blogged here about whether tenure is a contract. Yesterday, the news broke that a tenured associate political science professor at Wheaton College, a private Christian university, may soon get to test that theory.
Shortly after the San Bernadino, California, shooting massacre, Professor Larycia Hawkins stated on her Facebook account (which listed her profession and employer) that she “stand[s] in religious solidarity with Muslims because they, like me, a Christian, are people of the book. And as Pope Francis stated last week, we worship the same God." She elaborated that “we are formed of the same primordial clay, descendants of the same cradle of humankind--a cave in Sterkfontein, South Africa that I had the privilege to descend into to plumb the depths of our common humanity in 2014.” She also wore a hijab in “embodied solidarity” with Muslim women.
The response by the College is, for now, the equivalent of “You’re fired.” The College placed Professor Hawkins on administrative leave in December "to explore significant questions regarding the theological implications of her recent public statements, including but not limited to those indicating the relationship of Christianity to Islam." Further, "Wheaton College faculty and staff make a commitment to accept and model our institution's faith foundations with integrity, compassion and theological clarity. As they participate in various causes, it is essential that faculty and staff engage in and speak about public issues in ways that faithfully represent the college's evangelical Statement of Faith." According to Wheaton College President Ryken, however, the College also “support[s] the protection of all Americans including the right to the free exercise of religion, as guaranteed by the Constitution of the United States." Professor Hawkins’ legal team is, according to televised news statements on 1/6, exploring the possibility of a lawsuit should the professor’s preferred solution – mediation and an amicable solution – turn out to be impossible.
This case raises serious questions about the academic freedom of tenured professors – even untenured ones - with which we as law professors are also very familiar. This is perhaps even more so in the cases of private colleges. It seems to me that with a message along the lines of what even Pope Francis uttered along with a reasoned (meta)physical explanation of her views and the College’s self-professed acceptance of freedom of religion, Professor Hawkins did not act in a way that should, under notions of academic freedom, get her fired. If we as law professors do not agree with or wish to challenge certain traditional or even untraditional legal views, are we not allowed to do so because the institutions we work for or the majority of our colleagues hold another view? One would hope so. Most of us can probably agree that academic freedom is exactly all about being able to, within reason at least, provoke deeper thought in relation to what we teach. Note that Dr. Hawkins did not teach religious studies, but political science. With the current embittered debate about Muslims and terrorism around the world, Dr. Hawkins arguably raised some interesting points even if one does not agree with her statements from a Christian point of view.
Stay tuned for more news on this case!
Sunday, January 3, 2016
Exactly one year ago, I blogged here about United Airlines and Orbitz suing a 22-year old creator of a website that lets travelers find the cheapest airfare possible between two desired cities. Travelers would buy tickets to a cheaper end destination, but get off at stopover point to which a ticket would have been more expensive. For example, if you want to travel from New York to Chicago, it may be cheaper to buy one-way airfare all the way to San Francisco, not check any luggage, and simply get off in Chicago.
The problem with that, according to the airline industry: that is “unfair competition” and “deceptive behavior.” (Yes, the _airline industry_ truly alleged that.) Additionally, the plaintiffs claimed that the website promoted “strictly prohibited” travel; a breach of contracts cause of action under the airlines’ contract of carriage.
It seems that the United Airlines attorneys may not have remembered their 1L Contracts course well enough, for a contracts cause of action must, of course, be between the parties themselves or intended third party beneficiaries. The website in question was simply a third party with only incidental effects and benefits under the circumstances. Without more, such a party cannot be sued under contract law. (This may also be a free speech issue.)
Orbitz has since settled the suit. Recently, a federal lawsuit was dismissed for lack of personal jurisdiction over the now 23-year old website inventor. United Airlines has not indicated whether it plans further legal action.
Along these lines, cruise ship passengers are similarly not allowed to get off a cruise ship in a domestic port if embarking in another domestic port unless the cruise ship is built in the United States and owned by U.S. citizens. This is because the Passenger Vessel Services Act of 1866 – enacted to support American shipping – requires passengers sailing exclusively between U.S. ports to travel in ships built in this country and owned by American owners. Thus, cruise ships traveling from, for example, San Diego to Alaska and back will often stop in Canada in order not to break the law. But if the vessel also stops in, for example, San Francisco and you want to get off, you will be subject to a $300 fine which, under cruise ship contracts of carriages, will be passed on to the passenger. See 19 CFR 4.80A and a government handbook here.
Convoluted, right? Indeed. Necessary? In this day and age: not in my opinion. As I wrote in my initial blogs on the issue, if one has a contract for a given product or service, pays it in full, and does not do anything that will harm the seller’s business situation, there should be no contractual or regulatory prohibitions against simply deciding not to actually consume the product or use the service one has bought. Again: if you buy a loaf of bread, there is also nothing that says that you actually have to eat it. You don’t have to sit and watch all sorts of TV channels simply because you bought the channel line-up. In my opinion, United Airlines and Orbitz were trying to hinder healthy competition and understandable consumer conduct. What is still rather incomprehensible to me in this context is why in the world airlines would have anything against passengers getting off at a midway point. It’s less work for them to perform and it gives them a chance to, if they allowed the conduct openly, resell the same seat twice. A win-win-win situation, it seems, for the original passenger, the airline, and the passenger that might want to buy the second leg at a potentially later point in time at whatever price then would be applicable. The same goes for the typically unaffordable “change fees” applied by most airlines: if they charged less (a change can very easily be done by travelers on a website with no airline interaction) and the consumer was willing to pay the then-applicable rate for the new date (prices typically go up, not down, as the departure dates approach), the airlines might actually benefit from being able to sell the given-up seat. Of course, they don’t see it that way… yet.
In many ways, traveling in this country seems to be going full circle in that it is becoming an expensive luxury. Thankfully, new low-cost airlines also appear on the market to provide much needed competition in this close-knit industry that, in the United States, seems to be able to carefully skirt around anti-trust rules without too many legal allegations of wrongdoing. (See here for allegations against United, American, Delta and Southwest Airlines for controlling capacity in order to keep airline prices up).
Happy New Year and safe travels!
Monday, December 21, 2015
Shoplifting is a major problem to retailers. In 2014, for example, retailers lost $44 billion nationwide to theft by shoplifters, employees and vendors. But how about this for an apparently very popular “solution”: Retailers such as Bloomingdale’s, Wal-Mart, Burlington Coat Factory, DSW Inc. and even Goodwill Industries have signed up with CEC, a company that provides “restorative justice” for profit.
Here’s how it works: Retailers sign a contract with CEC under which CEC will provide “life skills” courses to shoplifters caught by the retailers. The retailers pay nothing for this “service.” Rather, shoplifters must pay the company $500 for a six-hour course and sign a confession. If they refuse to do so, they are threatened with criminal prosecution and allegedly intimidated in several other ways. According to CEC, “over 1 million individuals have gone through the core program.” Do the math (if you trust the company’s statement) and you’ll see that contracting to sell justice and self-help is apparently quite lucrative.
According to CEC, this is all a good thing. In a statement apparently now removed from the company’s website, but reported here, the company purports to give “low-level, first-time shoplifters a valuable opportunity to learn how to make better choices, while saving them a criminal record and sparing law enforcement resources.” According to CEC now [http://www.correctiveeducation.com/home/cec-restore]: “CEC’s Adult Educational Program focuses on developing practical skills that will help achieve social goals. The dual approach of addressing behavior while promoting provident living helps reinforce change.”
What’s the problem with this alleged win-win situation? According to at least the San Francisco city attorney, the conduct is a violation of the California Business and Professions Code. It also alleged to amount to extortion, false imprisonment, coercion and deception. The city attorney has filed suit. CEC defends, claiming that its “vision is to reinvent the way crimes are handled, starting with retail theft.” Indeed. Do we, however, trust companies to sell justice for us via private contracts? Comment below!