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Tuesday, January 27, 2015

A Contract to Kill but no Intent to

A young Norwegian man has been fined $1,300 for accepting a contract to kill without the intent to follow up on it.  Yes, you read that right: all the authorities could charge this man with was contractual fraud.  Another 21-year old man ordered the killing of a teenage girl who had rejected the man’s romantic advances.  The punishment for the “offeror”?  Two years in prison with most of the sentence suspended because the suspect confessed.

Good thing that these men were caught and convicted of something… sort of a gruesome twist on the old, classic Al Capone story (of course, Capone only pled guilty to tax evasion and prohibition charges).  I know that the Scandinavian countries do not believe in the rehabilitative effects of relatively severe sentences such as those often dished out in the USA, but still...  Two years and $1,300 for an attempted contract on a teenage girl’s head?  That seems too lenient to me. 

January 27, 2015 in Famous Cases, In the News, Miscellaneous, True Contracts | Permalink | TrackBack (0)

Wednesday, January 14, 2015

Your Chance to Own a Piece of Lady Duff

LadyDuffGordon-1919According to The Telegraph, a letter from Lucy, Lady Duff-Gordon (pictured at right) written shortly after her survival of the sinking of the Titanic is going up for auction in Boston on January 22nd.  It is expected to fetch as much as $6000 (but they don't know that we are considering putting the vast resources of the ContractsProf Blog in play).

The letter reads: 

How kind of you to send me a cable of sympathy from New York on our safety.  According to the way we've been treated by England on our return we didn't seem to have done the right thing in being saved at all!!!! Isn't it disgraceful.

Alas, Lady Duff is not referring to the less-than-respectful treatment she received from Judge Cardozo in the case that keeps the Duff name alive, nor is she referring to bad reviews for her 1912 prêt-à-porter show.  

She is referring to allegations that her husband, Cosmo, paid crew members extra to row away from survivors in Lifeboat #1, which held 12 people, although it was designed to hold 40.  An inquiry found no support for the allegations and cleared the Duff-Gordons.   Recently, as reported here in The Telegraph, more letters from the Duff-Gordons were discovered that tell their side of the story. 

January 14, 2015 in Famous Cases, In the News | Permalink | Comments (0) | TrackBack (0)

Thursday, January 8, 2015

A Bad Taste in One’s Mouth

On January 7th, a federal judge struck down a ban on foie gras that had been in effect since 2012.  The judge was of the opinion that the federal Poultry Products Inspection Act preempts the California ban.  This Act gives the U.S. Department of Agriculture the sole jurisdiction over the “ingredients requirements” of poultry products. 

The judge seems to have forgotten about the federal Animal Welfare Act’s requirements for the humane treatment of farm animals as well as states’ ability to ban the sale of the products of animal cruelty.  The California Attorney General’s office is reviewing the decision for a possible appeal of the law, which was upheld in previous litigation.

Foie gras is, without a doubt, cruel to animals.  To produce the alleged delicacy, geese and ducks are “force-fed a corn mash through a metal tube several times a day so that they gain weight and their livers become 10 times their natural size. Force-feeding sometime injures the esophagus of the bird, which may lead to death. Additionally, the fattened ducks and geese may have difficulty walking, vomit undigested food, and/or suffer in extreme confinement."  Do we as consumers still have a right to buy such a product even if it tastes very good?  No, according to at least California state law.

How anyone could make themselves eat this product is beyond my comprehension.  I confess that I am an animal lover and environmentalist.  I do personally believe in those core values.  However, I am quite far from an extremist and respect, to a very, very far extent, the opinions of the vast majority of other people.  Heck, I am not even a vegetarian (I try to at least buy free-range products).  But under notions of both positive law – state and/or federal – and natural law, this is where the buck must stop.  There must be limits to what we can do in the name of obtaining a gourmet experience, especially when it comes at such a high price of extreme suffering by our living, sentient creatures. And if consumers cannot draw such lines themselves, courts and legislatures must.  In the words of Mahatma Gandhi, “the greatness of a nation and its moral progress can be judged by the way its animals are treated.”  More than a dozen countries around the world have outlawed the production of foie gras.  In this respect, the United States is not great.  This case leaves a bad taste in my mouth and, I hope, in yours as well.

January 8, 2015 in Commentary, Current Affairs, Famous Cases, Food and Drink, In the News, Recent Cases | Permalink | Comments (1) | TrackBack (0)

Friday, January 2, 2015

Airlines and Calling the Kettle Black

A few days ago, I blogged on the recent lawsuit by United Airlines and Orbitz against the developer of Skiplagged.  One of the causes of action alleged is breach of contract for encouraging the purchase of a ticket to certain destinations only to get off at an interim point to save money.

The airlines themselves may be breaching their contracts with flyers.  For example, when we buy tickets to be flown from point A to point B, that arguably implies being done so without undue delays and, in particular, possibly having to spend the night at your own cost and without your personal belongings in random cities around the world if connections are missed because of flight delays (unless, of course, you choose to spend the night sitting upright in the airport).  Needless to say, if you seek to change your ticket, airlines will either charge extreme high fees and the “difference in price” for doing so or outright prohibit this practice.  I’ve had to change tickets many times in the past, and it has typically only taken an agent about five minutes to do so.  Unconscionabiliy, anyone? 

Here’s what happened to me one cold winter night a few years back: On my way to Denmark from St. Croix, the airline was late taking off and got even more delayed when it “had to” make an unplanned “quick landing” for gas, which was cheaper at the interim airport than at the end destination, and… ice cubes for people’s drinks!  I wish I was kidding, but I’m not.  I missed the once-daily connection out of Atlanta to Copenhagen and had to spend the night in Atlanta in December.  As I was living in tropical St. Croix at the time, I had some warm clothes with me on board the airplane to stay warm there, but had packed my winter gear in my suitcase.  The airline paid for my hotel, but would, in spite of my desperate pleas, not let me have my suitcase back for the night.  Result: I had to travel to and from the hotel, etc., in indoor clothes on what turned out to be an unseasonably cold winter day in Atlanta (yes, I should have brought a warmer jacket on board the plane, but planes to and from the Caribbean are often very small and I always try not to bring too much carry-on items).

Before 1978, U.S. airlines were required under “Rule 240” to offer seats on a competitor’s next flight if that would be the fastest way of getting the traveler to his or her destination.  Airlines created after deregulation were never required to follow that rule, but older airlines such as Delta, United and Continental apparently still adhere to the rule.  Funny that they never seem to mention that when they delay you significantly.  Next time you fly, it may pay to scrutinize your contract of carriage more carefully to ascertain your rights in case of a delay. 

It may be time for Congress to reintroduce a Rule 240-type requirement on airlines, especially as these have become extremely good at flying full – even at overcapacity - and thus often do not have extra space for passengers that have missed their flights.  Good customer service often seems to have given way to airlines’ “me first” attitude in the name of hearing the highest profits possible by nickel-and-diming most aspects of airline travel on, at least, economy class.

Feeling empathetic towards the airlines?  Don’t.  Full or nearly full flights in conjunction with declining gas prices have enabled U.S.-based airlines to earn the highest profit margins in decades.  One trade group estimates that airline made 6% profit margins in 2014, higher than the highest rates in the 1990s.  Of course, the task of businesses is to make as much money as they can.  But at least they should live up to their own contracts of carriage and other contracts principles just as they claim passengers and website developers should.

Here’s a hat tip to Professor Miriam Cherry and other contracts professors on a well-known industry list serve for news about this story.  All opinion and thoughts above are my own.

January 2, 2015 in Commentary, Contract Profs, Contracts Profs Weekly Spotlight, Current Affairs, Famous Cases, In the News, Recent Cases, Travel | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 31, 2014

Flying the Less Friendly Skies

Last month, United Airlines and Orbitz filed a by-now famous lawsuit against the 22-year-old computer specialist who created the website Skiplagged.com.  This website helps consumers find the cheapest round-trip airfare possible by buying tickets to a destination to which the traveler does not actually intend to travel, but instead getting off at a layover point which is the truly intended destination and discarding the last portion of the ticket.  Roundtrip tickets to certain popular destinations are often much cheaper than to other destinations sought by fewer passengers even though the more popular destinations are further away from one’s point of origin. 

To not cause the airline and other passengers undue trouble and delays, this practice, of course, requires not checking in luggage which, it seems, fewer and fewer travelers do anyway (next time you fly, notice the rush to get on board first with suitcases often much bigger than officially allowed and airline personnel deliberately ignoring this for reasons of “competition”).

The cause of action for this lawsuit?  “Unfair competition,” and breach of contract because of “strictly prohibited travel,” and tortuous interference with contract.

Unfair competition?  I admit that I have not yet read the rather long complaint, but I look forward to doing so very soon.  At first blush, however, how can “unfair” can it really be to assist consumers in finding airfare that they want at the best prices available?  United Airlines recognizes that there is a discrepancy between its prices to very popular destinations and others on the way, but claims [cite] that if many people “take advantage” of that price differential, it could “hurt the airlines.”  Come again?  Does it really matter that a customer – with no checked-in luggage – pays whatever price the airline itself has set but simply decides not to use up the entire item purchased?  Doesn’t that simply let the airline save gas and potentially give the empty seat to potential stand-by customers?  Does it matter to a newspaper that I choose to not read the sports pages? Must I eat the heal of my bread even though I don't like it?  What if I really don't like my bread and would rather eat a donut instead, as I thought might be the case?

The issue of breach of contract is arguably a closer one.  If airlines “strictly prohibit” the practice of only using part of a ticket, it may be promissory fraud to buy a ticket if one intends at the time of purchase to only use part of it.  This could also relate to the purchase of a round-trip ticket only to use it one-way as that too is often cheaper than a one-way ticket, as Justice Scalia found out himself recently.

The Skiplagged.com creator argues that he is only taking advantage of “inefficiencies” in airline travel that travelers have known about for a long time.  To me, it seems that airline contracting should work both ways as other types of contracting: airlines take advantage of their bargaining positions as well as their sophisticated knowledge of current and future air travel supply and demand structures.  They should do so!  I applaud them for that.  Jet travel has certainly made my personal and professional life much better than without relatively cheap air travel.  But every first year contracts law student also knows (or should know!) that contracting is not and should not be a one-way street.  Consumers too are getting more and more sophisticated when it comes to airline travel and other types of online contracting.  Websites enable us to inform ourselves about what we wish to spend our money on.  As long as consumers do not break the laws or violate established contracting principles, that does not strike me as “unfair competition,” that is simply informed consumerism in a modern capitalist society from which airlines and others have already benefited greatly.

Airlines, wake up: how about working with your customers instead of trying to fight them and modern purchasing trends?  How’s this for a thought: start offering one-way tickets for about half of a round-trip ticket just like other transportation vendors (trains, buses, subways) do.  Don’t you think that could set you apart from your competition and thus even earn you more customers?  If you can fly for a certain amount of money to a certain city, let people pay that only and then simply sell a second ticket for the remaining leg to the more popular end destination where the same plane is headed anyway.  Let people off the bus if they want to!  Let some one else on instead.  It doesn’t seem that hard to figure out how to work with current purchasing trends and your customers instead of resisting the inevitable.

For another grotesquely inappropriate lawsuit by United Airlines against its own customer, see Jeremy’s blog here.

I will blog more on this issue over the days to come.  For now, I’m glad I don’t have to head to an airport.  Happy New Year!

December 31, 2014 in Commentary, Contract Profs, Current Affairs, E-commerce, Famous Cases, Travel, True Contracts, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 9, 2014

California Goes after Shared Ride Companies

Jeremy Telman and I both recently blogged on the intense criticism of and focus on “shared economy” companies such as Uber, Lyft and airbnb.

In what seemed an inevitable turn of events, the Los Angeles and San Francisco district attorneys filed a consumer protection lawsuit on 12/9/2010 against Uber for making false and misleading statements about Uber’s background checks of its drivers.  George Gascon, the district attorney for San Francisco, calls these checks “completely worthless” because Uber does not fingerprint its drivers.  Uber successfully fought state legislation that would have subjected the company’s drivers to the same rules as those required of taxi drivers.  Allegedly, Uber has also defrauded its customers for charging its passengers an “airport fee toll” even though no tolls were paid for rides to and from SFO, and charging a “$1 safe ride fee” for Uber’s background check process.  California laws up to $2,500 per violation.  There are “tens of thousands” of alleged violations by Uber.  However, even that will likely put only a small dent in Uber’s economy as it is now valued at $40 billion (yes, with a “b”). 

Lyft has settled in relation to similar charges and has agreed to submit information to the state to verify the accuracy of its fares (although not its background checks).  It has also agreed to stop picking up passengers at airports until it has obtained necessary permits.  Prosecutors are continuing talks with Sidecar.

Time will tell what prosecutors around the nation decide to do against these and similar start-ups such as airbnb and vrbo.com, which are also said to bend or outright ignore existing rules.

The Los Angeles Times comments that the so-called “sharing economy” companies face growing pains that “start-ups in the past didn’t – dealing with municipalities around the world, each with their own local, regional and countrywide laws.”  It is hard to feel too sorry for the start-ups on this account.  First, all companies obviously have to observe the law, whether a start-up or not.  Today’s regulations may or may not be more complex than what start-ups have had to deal with before.  However, these companies should not be unfamiliar with complex modern-day challenges as that is precisely what they benefit from themselves, albeit in a more technological way.  Finally, there is something these companies can do about the legal complexity they face: hire savvy attorneys!  There are enough of them out there who can help out.  But perhaps these companies don’t care to “share” their profits all that much?  One has to wonder.  Sometimes, it seems that technological innovation and building up companies as fast as possible takes priority over observing the law. 

December 9, 2014 in Commentary, Current Affairs, E-commerce, Famous Cases, In the News, True Contracts, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Monday, October 20, 2014

After Twelve Years of Trying: No Enhanced Performance from Drinking Red Bull

Class action lawsuits can be a great way for consumers to obtain much necessary leverage against potentially overreaching corporations in ways that would have been impossible without this legal vehicle.  But they can also resemble mere litigiousness based on claims that, to laypeople at least, might simply seem silly.  Decide for yourself where on this spectrum the recent settlement between Red Bull and a class of consumers falls.  The background is as follows:

The energy drink Red Bull contains so much sugar and caffeine that it can probably help keep many a sleepy law professor and law student alert enough to get an immediate and urgent job done.  I admit that I have personally enjoyed the drink a few times in the past, but cannot even drink an entire can without my heart simply beating too fast (so I don’t). 

Red Bull’s marketing efforts promised consumers a “boost, “wings,” and “improved concentration and reaction speeds.”  One consumer alleges in the class action suit that he “had been drinking the product since 2002, but had seen no improvement in his athletic performance.” 

It strikes me as being a bad idea to pin one’s hopes on a mere energy drink to improve one’s athletic performance.  These types of energy drinks seem to be geared much more towards a temporary sugar high than anything else.  At any rate, if the drink doesn’t help, why continue drinking it for another 12 years? 

Nonetheless, a group of plaintiffs filed claim asserting breach of express warranty, unjust enrichment, and violations of various states’ consumer protection statutes.  The consumers claim that Red Bull’s deceptive conduct and practices mean makes the company’s advertising and marketing more than just “puffery,” but instead deceptive and fraudulent and thus actionable.  The company of course denies this, but has chosen to settle the lawsuit “to avoid the cost and distraction of litigation.” 

To me, this case seems to be more along the lines of Leonard v. Pepsico than a more viable claim.  Having said that, I am of course not in favor of any type of false and misleading corporate claims for mere profit reasons, but a healthy dose of skepticism by consumers is also warranted.

October 20, 2014 in Current Affairs, Famous Cases, Food and Drink, In the News | Permalink | Comments (0) | TrackBack (0)

Friday, August 1, 2014

Did Leonard Offer Too Much Money to Pepsi for the Harrier?

HarrierxvReaders of this blog should already be familiar with the famous Harrier jet case in which plaintiff John Leonard attempted to treat a Pepsi commercial as an offer for the sale of a Harrier jet in exchange for 7 million Pepsi points or the equivalent in cash, which came to about $700,000.  In Leonard v. Pepsico. (edited version available here), Judge Kimba Wood ruled in Pepsico's favor, finding that the commercial that Leonard mistook for an offer was actually a joke.  

We have learned via the Contracts Prof listserv that a Harrier Jet was recently sold at auction for  £ 105,800 -- that is under $200,000.  In this case, the auctioneer specified that the jet was being sold "for display purposes only and is not currently airworthy."  It doesn't even come with any weapons systems.  Bummer.  Still, although the Pepsi commercial suggests an operational Harrier (there is no indication of weapons capabilities), Leonard's offer of $700,000 actually turns out to be way too high for a non-functional jet.  So, if instead of showing a kid landing a jet outside of his school, the commercial had shown the same kid impressing his friends with the grounded jet in his backyard, Judge Wood would have had a harder time construing the ad as a joke.  

Since the notice of the jet for auction claims that this is the first time a Harrier has been sold at auction, Pepsico would  have had a hard time getting its hands on a jet.  Tthat would not have bothered Mr. Leonard, who more likely was interested in the difference in value between a functioning Harrier and the $700,000 he offered.  However, if the court were able to discover the actual value of a non-operational jet, it would have awarded Mr. Leonard no damages for the breach.

Hat tip to Eric Goldman and Gary Neustadter.

August 1, 2014 in Commentary, Famous Cases, In the News | Permalink | Comments (0) | TrackBack (0)

Friday, July 18, 2014

Overzealous or Legitimate Debt Collection Practices

By Myanna Dellinger

A woman owes $20 to Kohl’s on a credit card.  The debt collector allegedly started to “harass” the woman over the debt, calling her cell phone up to 22 times per week as early as 6 a.m. and occasionally after midnight.  What would a reasonable customer do?  Probably pay the debt, which the woman admits was only a “measly $20.”  What did this woman do?  Not to pay the small debt, telling the caller that they had “the wrong number,” and follow the great American tradition of filing suit, alleging violations of the 1991 Telephone Consumer Protection Act which, among other things, makes it illegal to call cell phones using auto dialers or prerecorded voices without the recipient’s consent.

Consumer protection rules also prohibit collection agencies from calling before 8 a.m. and after 9 p.m., calling multiple times during one day, leaving voicemail messages at a work number, or continuing to call a work phone number if told not to. 

Last year, Bank of America agreed to pay $32 million to settle claims relating to allegations of illegally using robo-debt collectors.  Discover also settled a claim alleging that they violated the rules by calling people’s cell phones without their consent.  Just recently, a man’s recorded 20-minute call to Comcast pleading with their representative to cancel his cable and internet service went viral online.

The legal moral of these stories is that companies are not and should, of course, not be allowed to harass anyone to collect on debt owed to them or refuse to cancel services no longer wanted.  However, what about companies such as Kohl’s who are presumably owed very large amounts of money although in the form of many small debts?  Is it reasonable that customers such as the above can do what she admits doing, simply saying “screw it” to the company and in fact reverse the roles of debtor and creditor by hoping for a settlement via a lawsuit on a questionable background?  Surely not. 

I once owned a small company and can attest to the difficulty of collecting on debts even with extensive accurate documentation.  The only way my debt collecting service or myself were able to collect many outstanding amounts was precisely to make repeat requests and reminders (although, of course, in a professional manner).  As a matter of principle, customers should not be able to get away with simply choosing not to pay for services or products they have ordered, even if the outstanding amounts are small.  If companies have followed the law, perhaps time has come for them to refuse settling to once again re-establish the roles of debtor and creditor.  This, one could hope, would lead irresponsible consumers to live up to their financial obligations, as must the rest of society.

July 18, 2014 in Commentary, Current Affairs, E-commerce, Famous Cases, In the News, True Contracts | Permalink | TrackBack (0)

Wednesday, July 9, 2014

Aereo Loses in Supreme Court and so do Consumers – for Now

By Myanna Dellinger

Recently, I blogged here on Aereo’s attempt to provide inexpensive TV programming to consumers by capturing and rebroadcasting cable TV operators’ products without paying the large fees charged by those operators.  The technology is complex, but at bottom, Aereo argued that they were not breaking copyright laws because they merely enabled consumers to capture TV that was available over airwaves and via cloud technology anyway. 

In the recent narrow 6-3 Supreme Court ruling, the Courts said that Aereo was “substantially similar” to a cable TV company since it sold a service that enabled subscribers to watch copyrighted TV programs shortly after they were broadcast by the cable companies.  The Court found that “Aereo performs petitioners’ works publicly,” which violates the Copyright Act.  The fact that Aereo uses slightly different technology than the cable companies does not make a “critical difference,” said the Court.  Since the ruling, Aereo has suspended its operations and posted a message on its website that calls the Court’s outcome "a massive setback to consumers."

Whether or not the Supreme Court is legally right in this case is debatable, but it at least seems to be behind the technological curve.  Of course the cable TV companies resisted Aereo’s services just as IBM did not predict the need for very many personal computers, Kodak failed to adjust quickly enough to the digital camera craze, music companies initially resisted digital files and online streaming of songs.  But if companies want to survive in these technologically advanced times, it clearly does not make sense to resist technological changes.  They should embrace not only technology, but also, in a free market, competition so long as, of course, no laws are violated.  We also do not use typewriters anymore simply to protect the status quo of the companies that made them.

It is remarkable how much cable companies attempt to resist the fact that many, if not most, of us simply do not have time to watch hundreds of TV stations and thus should not have to buy huge, expensive package solutions.  Not one of the traditional cable TV companies seem to consider the business advantage of offering more individualized solutions, which is technologically possible today.  Instead, they are willing to waste money and time on resisting change all the way to the Supreme Court, not realizing that the change is coming whether or not they want it. 

Surely an innovative company will soon be able to work its way around traditional cable companies’ strong position on this market while at the same time observing the Supreme Court’s markedly narrow holding.  Some have already started doing so.  Aereo itself promises that it is only “paus[ing] our operations temporarily as we consult with the court and map out our next steps.”

 

 

July 9, 2014 in Commentary, Current Affairs, E-commerce, Famous Cases, Film, In the News, Music, Recent Cases, Television, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Monday, July 7, 2014

23andMe's Wrap Contracts

H/T to Eric Goldman for sharing with the list a new case from Judge Lucy Koh of the federal district court of Northern California.  Tompkins v. 23andMe provides a detailed analysis of 23andMe's wrap contracts.  The case involves the same Terms of Service presented as a hyperlink at the bottom of the website's pages, and then later, post-purchase and at the time of account creation, as a hyperlink that requires a "click" in order to proceed (which I refer to as a "multi-wrap" as it's neither browsewrap nor clickwrap but a little of both).  The court says the former presentation lacks notice, but the latter constitutes adequate formation.  Eric Goldman provides a detailed analysis of the case here.  

Not surprisingly, the Terms contained a unilateral modification clause which was briefly discussed in the context of substantive  unconscionability.  It was not, however, raised as a defense to formation, i.e. to argue that the promises made by 23andme were illusory.  

July 7, 2014 in Commentary, E-commerce, Famous Cases, Miscellaneous, Web/Tech, Weblogs | Permalink | Comments (0) | TrackBack (0)

Sunday, May 18, 2014

More on the Structure of Cable Contracts

By Myanna Dellinger

Recently, Jeremy Telman blogged here about the insanity of having to pay for hundreds of TV stations when one really only wants to, or has time to, watch a few. 

Luckily, change may finally be on its way.  The company Aereo is offering about 30 channels of network programming on, so far, computers or mobile devices using cloud technology.  The price?  About $10 a month, surely a dream for “cable cutters” in the areas which Aereo currently serves. 

How does this work?  Each customer gets their own tiny Aereo antenna instead of having to either have a large, unsightly antenna on their roofs or buying expensive cable services just to get broadcast stations.  In other words, Aereo enables its subscribers to watch broadcast TV on modern, mobile devices at low cost and with relative technological ease.  In other words, Aereo records show for its subscribers so that they don’t have to. 

That sounds great, right?  Not if you are the big broadcast companies in fear of losing millions or billions of dollars (from the revenue they get via cable companies that carry their shows).  They claim that this is a loophole in the law that allows private users to record shows for their own private use, but not for companies to do so for commercial gain and copyright infringement.

Of course, the great American tradition of filing suit was followed.  Most judges have sided with Aero so far, the networks have filed petition for review with the United States Supreme Court, which granted the petition in January.

Stay tuned for the outcome in this case…

May 18, 2014 in About this Blog, Commentary, Current Affairs, E-commerce, Famous Cases, In the News, Recent Cases, Television, True Contracts, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Monday, May 12, 2014

No Frequent Complaining Allowed about Frequent Flyer Programs

By Myanna Dellinger

The United States Supreme Court recently held that airlines are allowed to revoke the membership of those of their frequent flyers who complain “too much” about the airline’s services (see Northwest v. Ginsberg).  Contracts ProfBlog first wrote about the case on April 3.

In the case, Northwest Airlines claimed that it removed one of its Platinum Elite customers from the program because the customer had complained 24 times over a span of approximately half a year about such alleged problems as luggage arriving “late” at the carousel.  The company also stated that the customer had asked for and received compensation “over and above” the company guidelines such as almost $2,000 in travel vouchers, $500 in cash reimbursements, and additional miles.  According to the company, this was an “abuse” of the frequent flyer agreement, thus giving the company the sole discretion to exclude the customer.  The customer said that the real reason for his removal from the program was that the airline wanted to cut costs ahead of the then-upcoming merger with Delta Airlines.  He filed suit claiming breach of the implied covenant of good faith and fair dealing in his contract with Northwest Airlines.

The Court found that state law claims for breaches of the implied duty of good faith and fair dealing are pre-empted by the Airline Deregulation Act of 1978 if the claims seek to enlarge the contractual relations between airlines and their frequent flyers rather than simply seeking to hold parties to their actual agreement.  The covenant is thus pre-empted whenever it seeks to implement “community standards of decency, fairness, or reasonableness” which, apparently, go above and beyond what airlines promise to their customers.

Really?  Does this mean that airlines can repeatedly behave in indecent ways towards frequent flyer programs members (and others), but if the members repeatedly complain, they – the customers – “abuse” the contractual relationship?!..  The opinion may at first blush read as such and have that somewhat chilling effect.  However, the Court also pointed out that passengers may still seek relief from the Department of Transportation, which has the authority to investigate contracts between airlines and passengers.

The unanimous opinion authored by J. Alito also stated that passengers can simply “avoid an airline with a poor reputation and possibly enroll in a more favorable rival program.”  These days, that may be hard to do.  First, most airlines appear to have more or less similar frequent flyer programs.  Second, what airline these days has a  truly “good” reputation?  Granted, some are better than others, but when picking one’s air carrier, it sometimes seems like choosing between pest and cholera.   

One example is the airlines’ highly restrictive change-of-ticket rules in relation to economy airfare, which seem almost unconscionable.  I have flown Delta Airlines almost exclusively for almost two decades on numerous trips to Europe for family and business purposes.  A few times, I have had the good fortune to fly first or business class, but most times, I fly economy.  Until recently, it was possible to change one’s economy fare in return for a relatively hefty “change fee” of around $200 and “the increase, if any, in the fare.”  - Guess what, the fares always had increased the times I asked for a change.  Recently, I sought to change a ticket that I had bought for my elderly mother, also using KLM (which codeshares with Delta) as my mother is also frequent flyer with Delta.  I was told that it was impossible to change the ticket as it was “deeply discounted.”   I had shopped extensively online for the ticket, which was within very close range (actually slightly more expensive than that of Delta’s competitors.  I asked the company what my mother could do in this situation, but was told that all she could do was to “throw out the ticket (worth around $900) and buy another one.”  Remember that these days, airfare often has to be bought months ahead of time to get the best prices.  In the meantime, life happens.  Unexpected, yet important events come about.  Changes to airline tickets should be realistically feasible, but are currently not on these conditions.

What airlines and regulators seem to forget in times of “freedom of contracting and market forces” is that some of us do not have large business budgets or fly only to go on a (rare, in this country) vacation.  My mother is elderly and lives in Europe.  I need to perform elder care on another continent and need flights for that purpose just as much as others need bus or train services.  Such is life in a globalized world for many of us.  In some nations, airlines feature at least quasi-governmental aspects and are much more heavily regulated than in the United States.  Here, airfare seems to be increasing rapidly while the middle (and lower) incomes are more or less stagnant currently.  I understand and appreciate the benefits of a free marketplace, but a few more regulations seem warranted in today’s economy.  It should be possible to, for example, do something as simple as to change a date on a ticket (if, of course, seats are still available at the same price and by paying a realistic change fee) without having to buy extravagantly expensive first class or other types of “changeable” tickets.   

Other “abuses” also seem to be conducted by airlines towards their passengers and not vice versa.  For example, if one faces a death in the family, forget about the “grievance” airfares that you may think exist.  Two years ago, my father was passing and I was called to his deathbed.  Not having had the exact date at hand months earlier, I had to buy a ticket last minute (that’s usually how it goes in situations like that, I think…).  The airline – a large American carrier - charged a very large amount for the ticket, but attempted to justify this with the fact that that ticket was “changeable” when, ironically, I did not need it to be as I needed to leave within a few hours.

In the United States, “market forces” are said to dictate the pricing of airfare.  In Europe, some discount airlines fly for much lower prices than in the United States (think round-trip from northern to southern Europe for around $20 plus tax, albeit to smaller airports at off hours).  Strange, since both markets are capitalist and offer freedom of contracting.  Of course, these discount airlines also feature various fees driving up their prices somewhat, although not nearly as much as in the United States.  A few years back, one discount European airline even announced that it planned to charge a few dollars for its passengers to use … the in-flight restrooms.  Under heavy criticism, that plan was soon given up.  In the United States, some airlines seem to be asking for legal trouble because of their lopsided business strategies.  Sure, companies of course have to remain profitable, but when many of them claim in their marketing materials to be “family-oriented” and “focused on the needs of their passengers,” it would be nice if they would more thoroughly consider what that means.

 

May 12, 2014 in Commentary, Current Affairs, Famous Cases, In the News, Recent Cases, Travel, True Contracts | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 30, 2014

Handling Shipping and “Handling” Charges

By Myanna Dellinger

A class-action lawsuit filed recently against Amazon asserts that the giant online retailer did not honor its promise to offer “free shipping” to its Prime members in spite of these members having paid an annual membership fee of $79 mainly in order to obtain free two-day shipping.

Instead, the lawsuit alleges, Amazon would covertly encourage third-party vendors to increase the item prices displayed and charged to Prime members by the same amount charged to non-Prime members for shipping in order to make it appear as if the Prime members would get the shipping for free.  Amazon would allegedly also benefit from such higher prices as it deducts a referral fee as a percentage of the item price from third-party vendors. 

The suit alleges breach of contract and seeks recovery of Prime membership costs for the relevant years as well as treble damages under Washington’s Consumer Protection Act.  Most states have laws such as consumer fraud statutes, deceptive trade practices laws, and/or unfair competition laws that can punish sellers for charging more than the actual costs of “shipping and handling."  In some cases that settled, companies agreed to use the term “shipping and processing” instead of “shipping and handling” to be more clear towards consumers. 

On the flip side of the situation is how Amazon outright prevents at least some private third-party vendors from charging the actual shipping costs (not even including “handling” or “processing” charges).  For example, if a private, unaffiliated vendor sells a used book via Amazon, the site will only allow that person to charge a certain amount for shipping.  As post office and UPS/FedEx costs of mailing items seem to be increasing (understandably so in at least the case of the USPS), the charges allowed for by Amazon often do not cover the actual costs of sending items.  And if the private party attempts to increase the price of the book even just slightly to not incur a “loss” on shipping, the book may not be listed as the cheapest one available and thus not be sold. 

This last issue may be a detail as the site still is a way of getting one’s used books sold at all whereas that may not have been possible without Amazon.  Nonetheless, the totality of the above allegations, if proven to be true, and the facts just described till demonstrate the contractual powers that modern online giants have over competitors and consumers. 

A decade or so ago, I attended a business conference for other purposes.  I remember how one presenter, when discussing “shipping and handling” charges, got a gleeful look in his eyes and mentioned that when it came to those charges, it was “Christmas time.”  When comparing what shipping actually costs (not that much for large mail-order companies that probably enjoy discounted rates with the shipping companies) with the charges listed by many companies, it seems that not much has changed in that area.  On the other hand, promises of “free” shipping have, of course, been internalized in the prices charged somehow.  One can hope that companies are on the up-and-up about the charges.  Again: buyer beware.

April 30, 2014 in Commentary, Current Affairs, E-commerce, Famous Cases, In the News, True Contracts | Permalink | Comments (0) | TrackBack (0)

Monday, March 17, 2014

“Strictly Confidential” Means Don’t Boast about Settlement on Facebook

An employee sues his employer for age discrimination and retaliation.  The parties reach an $80,000 settlement agreement pursuant to which the existence and terms of the settlement are to be kept “strictly confidential.”  The employee is only allowed to tell his wife, attorneys and other professional advisers about the settlement.  A breach of the agreement will result in the “disgorgement of the Plaintiff’s portion of the settlement payments,” although the attorney would, in case of a breach, be allowed to keep the separately agreed-upon fee for his services.  The employee tells his teenage daughter about the settlement and being “happy about it.”  Four days later, she boasts to her 1,200 Facebook friends:

“Mama and Papa Snay won the case against Gulliver.  Gulliver is now officially paying for my vacation to Europe this summer.  SUCK IT.”

The employer does not tender the otherwise agreed-upon settlement amount, citing to a breach of the confidentiality clause of the contract.  The employee brings suits, wins at trial, but loses on appeal.  The employee’s argument?  He felt that it was necessary to tell his daughter “something” about the agreement because, some sources state, she had allegedly been the subject of at least some of the retaliation against her father.

The appellate court emphasized the fact that the agreement had called for the employee not to disclose “any information” about the settlement to anyone either directly or indirectly.  Settlement agreements are interpreted like any other contract.  Thus, the unambiguous contractual language “is to be given a realistic interpretation based on the plain, everyday meaning conveyed by the words,” according to the court.  The employee did precisely what the confidentiality agreement was designed to prevent, namely advertise to the employer’s community that the case against them had been successful.

What could the employee have done here if he truly felt a need to tell his daughter about the deal?  Pragmatically, he could have made it abundantly clear to his daughter that she was not to tell anyone, obviously including her thousands of Facebook “friends,” about it.  Hopefully she would have abided by that rule...  The court pointed out that the employee could also have told his attorney and/or the employer about the need to inform his daughter in an attempt to reach an agreement on this point as well.  Having failed to do so, “strictly confidential” means just that.  As we know, consequences of breaches of contract can be ever so regrettable, but that does not change any legal outcomes. 

The case is Gulliver Sch., Inc. v. Snay, 2014 Fla. App. LEXIS 2595.

March 17, 2014 in Contract Profs, Current Affairs, Famous Cases, Labor Contracts | Permalink | Comments (0) | TrackBack (0)

Wednesday, February 19, 2014

“When I get the big money, I’ll take care of you.”

Do such words imply an enforceable promise to give an employee additional compensation both for work already performed and for work to be performed in the future if the speaker actually obtains a sizeable chunk of money?  (Does it matter to your answer if the words were uttered by Heather Mills, famous or infamous ex-wife of Sir Paul McCartney?..)

Your answer to the former question would probably be a resounding “of course not.”  In a recent decision, the United States Court of Appeals for the Ninth Circuit agrees (Parapluie v. Heather Mills, No. 12-55895).  The case resembles such Contracts casebook classics old and new as Kirksey v. Kirksey (1945), Ricketts v. Scothorn (1898) and Conrad v. Fields (2007).  One might have thought that promissory estoppel and, in this case, promissory fraud and intentional misrepresentation claims had generated enough case law to prevent an appeal.  Apparently not, much to the amusement of law students and law professors alike.

At bottom, the facts behind the case against Ms. Mills are as follows: In 2005, Ms. Mills hired Michele Blanchard to conduct PR work for her.  Ms. Blanchard was paid nothing for her work from 2005 to 2007.  In 2007, however, Ms. Mills and Ms. Blanchard agreed that Ms. Blanchard would be paid $3,000 per month because Mills couldn’t pay Blanchard’s usual fee of $5,000 per month.  The payments were made.  In 2008, the relationship between the two women soured.  Ms. Blanchard quit and sent Ms. Mills an additional invoice for $2,000 per month in arrears.  Ms. Blanchard claimed to be entitled to the greater amount because Ms. Mills allegedly misrepresented her financial situation when telling Ms. Blanchard that she could only pay $3,000 a month when she could, allegedly, afford to pay more.  In making this assertion, Ms. Blanchard relied on Ms. Mills having expressed an interest in renting a house for $80,000 per month, having bid $30,000 on a cruise at a charity auction, and having once stated about the fee to Ms. Blanchard, “I don’t know if I can pay the entire amount, but I’ll do something” and, after Ms. Blanchard askeed Ms. Mills if she might pay Ms. Blanchard “a little something,” allegedly agreeing that “I’ll take care of you when I get the big money.”  Ms. Blanchard claims that the latter statement was a promise to pay her regular fee of $5,000 both in the future and for the work already performed.  The court pointed out that Ms. Mills interest in renting expensive housing was just that; an interest.  She had in fact only rented “modest” properties via Ms. Blanchard for $2,000-3,000 per week for one week.  Perhaps most tellingly of Ms. Mills’ financial state of affairs at the time is the fact that when she attempted to pay for the cruise bid with a credit card, the payment was denied. 

Ms. Mills is reported to have obtained a nearly $50 million divorce settlement with a sizeable interim payment around the times listed above.  But as the court pointed out, when Ms. Mills did receive this interim payment, she also started paying Ms. Blanchard $3,000 a month, suggesting that her earlier statements about her inability to pay Blanchard were true, not false, when made.  Ms. Blanchard’s monthly invoices further stated “the total amount due” as $3,000, negating any inference that the contractual parties intended a retroactive or future payment for more than that amount.

Ms. Blanchard’s attorney may have wanted to read Baer v. Chase (392 F.3d 609, U.S. Ct. of App. for the Third Cir. (2004)).  In that case, Robert Baer, a former state prosecutor wishing to pursue a career as a Hollywood writer, similarly claimed that David Chase had promised to “take care of” Baer and “remunerate him in a manner commensurate to the true value of [his services]” should the project on which Baer worked for Chase become a success.  It did: the project was the creation and development of what turned out to be the hit TV series The Sopranos.  Baer received nothing for his services.  The court found that the alleged contract was unenforceable for vagueness because nothing in the record allowed the court to figure out the meaning of “success,” “true value,” and, in general, what it meant to be “taken care of” in this context.

Potentially starstruck employees be ware: if you think that your employer promises you a chunk of money, make sure you find out exactly what you have to do to earn that.  Now as well as hundreds of years ago: alleged promisors are unlikely to simply “take care of you” out of the goodness of their hearts.  And as always: get the promise in writing!

February 19, 2014 in Contract Profs, Famous Cases, In the News | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 18, 2013

New in Print

Pile of Books
Steven M.  Davidoff & Christina M. Sautter, Lock-up Creep, 38 J. Corp. L. 681 (2013)

Christopher M. Foulds, For Whom Should the Corporation Be Sold? Diversified Investors and Efficient Breach in Omnicare v. NCS, 38 J. Corp. L. 733 (2013) 

Sean J. Griffith, The Omnipresent Specter of Omnicare, 38 J. Corp. L. 753 (2013)

Hon. J. Travis Laster, Omnicare's Silver Lining, 38 J. Corp. L. 795 (2013)

Kate Litvak, Monte Carlo Simulation of Contractual Provisions: An Application to Default Provisions in Venture Capital Limited Partnership Agreements, 98 Cornell L. Rev. 1495 (2013)

Brian J.M. Quinn, Omnicare: Coercion and the New Unocal Standard, 38 J. Corp. L. 835 (2013)

Megan W. Shaner, Revisiting Omnicare: What Does Its Status 10 Years Later Tell Us? 38 J. Corp. L. 865 (2013)

Hon. E. Norman Veasey, Ten Years after Omnicare: The Evolving Market for Deal Protection Devices, 38 J. Corp. L. 891 (2013)

[JT]

December 18, 2013 in Famous Cases, Recent Scholarship | Permalink | TrackBack (0)

Thursday, October 31, 2013

On the Meaning of "Chicken"


Dear Judges Friendly and Traynor:

Upon reflection, Judge Traynor may have had it right when he wrote:

Words, however, do not have absolute and constant referents. "A word is a symbol of thought but has no arbitrary and fixed meaning like a symbol of algebra or chemistry, ..." * * * The meaning of particular words or groups of words varies with the "... verbal context and surrounding circumstances and purposes in view of the linguistic education and experience of their users and their hearers or readers (not excluding judges). ... A word has no meaning apart from these factors; much less does it have an objective meaning, one true meaning."

I say this because, today, I learned what "chicken" apparently means in one specific context in Suffolk County, New York.  You don't suppose that this is was what Frigaliment and B.N.S. meant by "chicken"?

Truly yours,

[Meredith R. Miller]

October 31, 2013 in Commentary, Famous Cases, In the News | Permalink | Comments (0) | TrackBack (0)

Monday, September 23, 2013

A Painting for Peerless

I get to teach Raffles v. Wichelhaus today, which is always a pleasure, as it is one of my favorite cases.  I am not alone.  One of my students, Justin Vining, was inspired by the case to make a representation of the case in the painting below:

Peerless

Peerless
I afraid my photo of the painting does not do it justice (because I have it under glass), but I hope you can see that Justin has captured the ship's voyage from India to Liverpool, and he has used as his model for the ship, the image of a ship called Peerless (right) that often accompanies the case, even though (I recently learned) that the Peerless in the picture is neither the October Peerless or the December Peerless featured in the case.  But I actually love the fact that there were (at least) three ships called Peerless.  That's what makes this case such a truth-is-stranger-than-fiction bonanza.

[JT]

September 23, 2013 in Famous Cases, Teaching | Permalink | Comments (1) | TrackBack (0)

Worst "The Ethicist" Column Ever?

ComicIn Sunday's New York Times Magazine, a reader posed the Wood v. Boynton dilemma for the Times "The Ethicist." Chuck Klosterman, as an ethical rather than a legal question.  The context is a bit different because we are dealing with a garage sale rather than a jeweler, but still we have a seller who is unaware of the value of the object being sold.  The reader's question is simple and straightforward: does a buyer who is aware of the value of the the thing being sold (a first-edition comic book worth $2000) have an ethical duty to tell the seller. 

For those of us who have been around the Wood v. Boynton, Laidlaw v. Organ block, this is familiar territory.  As a typical survey of students' responses to the cases indicates, it is a territory in which ethcial and legal duties do not coincide.  One might think that there is an obvious injustice when a person with superior knowledge takes advantage of a seller who unwittingly sells something of great value.  Wood v. Boynton comes out as it did precisely because the buyer did not know and had no reason to know that the stone at issue was an uncut diamond, as he had never seen one before.  If he knowingly took advantage of the seller, that would be grounds for rescision.  

This result in Wood is not so surprising.  Normally, a seller is in a better position to know the value of the thing she possesses than is the buyer, unless the buyer is an expert appraiser, and it makes sense to put the burden of discovery on the person better positioned to discover the item's worth.  One might think that a professional jeweler would be an expert appraiser, but in this case he wasn't.  I think it is reasonable for the law to place the burden on the seller at a garage sale to know the value of the things she sells.  People come to these things in search of surprises and bargains, so it stands to reason that, from a legal perspective, all sales are final.  Laidlaw v. Organ is similar and brings home the important point that sometimes we want to reward people for having taken the trouble to inform themselves of market conditions and spot a bargain.  

But the ethical perspective on these matters is potentially quite different.  It may be a common practice for people to pounce on garage sales in search of items significantly undervalued by the sellers, but that doesn't mean that it is an ethical practice.  The reader poses the hypothetical as taking place at a garage sale or a flea market.  I think the cases are different, because I do think a proprietor at a flea market (if, for example, she has a regular stall and or sells items regularly) can be charged with a duty to research the value of the items she sells.  Still, fleecing even merchants is not what I would call an ethical practice.  

I once unloaded about 200 books in advance of a move from Charleston, South Carolina to New York City.  A bookdealer came by to look at the books and kindly informed me that one of the books I was offering for sale was a first edition, likely worth fifty times as much as I was asking for it.  Perhaps he was not much of a businessman, but he did the right thing in telling me.  I later donated the book for a silent auction, which seemed a good way out of my ethical dilemma since I had unwittingly bought the book at a huge discount from some equally unwitting (and long forgotten) seller.  

I realize that the ethical standard I am proposing here is exacting, and Chuck Klosterman doesn't disagree in cases where an aggressive buyer initiates a sale from an unknowledgeble seller.  But what is irksome about his column is that he pretends that the word "value" has no conventional meaning.  

There is no “true value” for any object: it’s always a construct, provisionally defined by a capricious market and the locality of the transaction.

Well, thanks for the theoretical discourse, but that's all quite beside the point in this context.  The value of a thing is easily determinable if there is any market for it.  If two people are interested in buying it, then it is worth at least what the person who made the second highest bid for it is willing to pay.  When a reader says that a comic book is worth thousands of dollars, that is because there is an existing, stable market in which the comic can be sold for thousands of dollars.  Klosterman follows up with a silly hypothetical about a buyer who is willing to pay far in excess of a given price because an item has sentimental value to the buyer.  There is no ethical obligation on the part of the buyer to disclose the extent to which she values the item, but even if there were, it would make no difference.  The buyer could pull out $2000 to buy the item and remark to the seller, "I would have paid $5000 for this item, I want it so badly."  The seller could refuse to sell at $2000, mark the item up to $5000 and risk going home with no money at all, because there is only one person willing to buy the item at that price and that person has just been alienated by grasping sales tactics.

But if the marked price of an item is 25 cents and the market values it at $2000, there will be plenty of buyers, and the seller really is wronged if someone who knows of the item's true worth does not disclose that fact.  And such disclosure may not in the end preclude the transaction.  You can approach a seller at a garage sale and say, "You know, this comic book is a first edition worth much, much more than you are selling it for."  I think that, in most instances, the seller will say, "Well, that's a good find for you.  I've marked it 25 cents, so you can have it for 25 cents.  I wouldn't know where to sell it for more anyway."  

Thus commerce proceeds without unnecessary soul-soiling.

[JT]

 

September 23, 2013 in Commentary, Famous Cases | Permalink | Comments (0) | TrackBack (0)