Wednesday, March 5, 2014
As a follow-up on Nancy's post from last week on Nutrition Labels and Wrap Contracts, I would like to call attention to a new paper posted on SSRN by my colleague Nicole Negowetti (pictured). The paper is called Defining "Natural" Foods: The Search for a "Natural" Law, and here is the abstract:
Because the FDA has refused to codify a uniform or enforceable definition of “natural” food, each food manufacturer determines its own standard for the term. Unlike the certified organic label, no government agency, certification group, or other independent entity ensures that “natural” claims have merit. Generally, the term “natural” means that a food has been minimally processed, contains no artificial ingredients or preservatives, is healthy and wholesome. However, food producers are not prohibited by law from using pesticides, genetically modified crops, fumigants, solvents, and toxic processing aids. Consumers and food producers are both disadvantaged by the inconsistent meanings and uses of the term. Recent surveys demonstrate that while consumers demand “natural” products, they are confused regarding the term’s meaning. A proliferation of consumer protection lawsuits against food producers has flooded the courts over the past two years. Food producers truly committed to producing “natural” products are competing with manufacturers who loosely interpret the term, produce and sell cheaper, inferior, and not-so-“natural” products. In light of the FDA’s reluctance to codify a “natural” definition, this Article will evaluate the recent decisions in the “natural” lawsuits and the attempts by courts, legislatures, the food industry, and retailers to establish a “natural” standard. The Article concludes that the search for an enforceable and comprehensive “natural” standard is futile. It predicts that the term “natural” has proven to be so confusing to consumers that the significance of the term has likely been diluted. Furthermore, because the claim has been so legally troublesome for food manufacturers, use of “natural” on food labels will surely be on the decline.
Monday, January 27, 2014
Severe Economic Disruptions from Climate Change
For many, climate change remains a far off notion that will affect their grandchildren and other “future generations.” Think again. Expect your food prices to increase now, if they have not already. Amidst the worst drought in California history, the United Nations is releasing a report that, according to a copy obtained by the New York Times, finds that the risk of severe economic disruptions is increasing because nations have so dragged their feet in combating climate change that the problem may be virtually impossible to solve with current technologies.
The report also says that nations around the world are still spending far more money to subsidize fossil fuels than to accelerate the urgently needed shift to cleaner energy. The United States is one of these. Even if the internationally agreed-upon goal of limiting temperature increases to 2° C, vast ecological and economic damage will still occur. One of the sectors most at risk: the food industry. In California, a leading agricultural state, the prices of certain food items are already rising caused by the current drought. In times of shrinking relative incomes for middle- and lower class households, this means a higher percentage of incomes going to basic necessities such as food, water and possible medical expenses caused by volatile weather and extreme heat waves. In turn, this may mean less disposable income that could otherwise spur the economy.
Disregarding climate change is technologically risky too: to meet the target of keeping concentrations of CO2 below the most recently agreed-upon threshold of 500 ppm, future generations would have to literally pull CO2 out of the air with machinery that does not yet exist and may never become technically or economically feasible or with other yet unknown methods.
Of course, it doesn’t help that a secretive network of conservative billionaires is pouring billions of dollars into a vast political effort attempting to deny climate change and that – perhaps as a consequence – the coverage of climate change by American media is down significantly from 2009, when media was happy to report a climate change “scandal” that eventually proved to be unfounded.
The good news is that for the first time ever, the United States now has an official Climate Change Action Plan. This will force some industries to adopt modern technologies to help combat the problem nationally. Internationally, a new climate change treaty is slated for 2015 to take effect from 2020. Let us hope for broad participation and that 2020 is not too late to avoid the catastrophic and unforeseen economic and environmental effects that experts are predicting.
Assistant Professor of Law
Western State College of Law
Tuesday, January 21, 2014
After a night on the town, you decide to hire not a traditional taxi company, but rather a new and similar service provider that uses third-party private drivers operating their individually owned, unmarked cars and smart application payment technology. The app says, “Gratuity is included.” Would you expect the tips you give to go in full to the drivers or for the tips to be shared with the taxi-like company? Probably the former, although tipping tactics and expectations seem to be changing.
The question of whether the drivers in the above situation have a viable claim to the full amount of the tips will soon be resolved in California in O’Connor v. Uber Techs, 2013 BL 338258 (N.D. Cal. Dec. 5, 2013). After determining that no implied-in-fact contract can be said to exist between the drivers and the taxi-like company “Uber,” the court so far determined that Uber and its passengers may have entered into an implied agreement regarding the tips from which the drivers were ultimately intended to benefit as third parties to the contract between Uber and passengers.
In the USA, tipping is widely considered a fair way for service personnel to earn a more decent living than if they had to rely on base salaries. This intersects with the current debate about whether the federal minimum wage should be increased. According to recent CNN TV news, if salaries reflected the productivity levels of United States workers, the minimum salary should be $28/hr. It is currently $7.25.
But what about consumers? Tipping seems to rising more rapidly than both salaries and inflation rates in general. Not long ago (ten years or so), tipping 10% in restaurants was considered the norm, at least in California and parts of the Western USA. Now, food servers, the drivers in the above case and undoubtedly others expect 20%; a 100% increase in ten years or so. Many Los Angeles restaurants have begun to automatically add this 20% gratuity to their guest checks (some still leaving an additional line open for tips…). In comparison, the average inflation rage was 2.5% per year over the past ten years. During the 12-month period ending November 2013, inflation was 1.2%. Of course, salaries may be a more accurate yardstick. According to the Social Security Administration’s Average Wage Index, salaries increased by approximately 33% over the past ten years (approx. 3% from 2011 to 2012).
To be sure, service personnel and other workers deserve a decent income for their efforts in a wealthy, industrialized nation such as the USA. The question is whether the burden of this should be placed on consumers in the form of more or less “hidden” costs such as tax and tips in somewhat uncertain amounts or whether the employers should be expected to more openly list the true bottom-line costs of their services as is the case in other nations. A better route may be to increase the federal minimum salary to the much-discussed (e.g., here) “living wage.” At a minimum, it would seem that all tips given should go to the workers and not be a mere way for companies to award themselves more money.
Assistant Professor of Law
Western State College of Law
Tuesday, November 26, 2013
Wednesday, November 13, 2013
Starbucks lost an arbitration fight with Kraft Foods and is being fined nearly $2.8 billion. Yes, you read that right - that's billion with a B. At the center of a dispute was a 1998 contract that required Kraft to distribute and market Starbucks brand coffee to U.S. retailers. The agreement was supposed to terminate in 2014 but Starbucks didn't want to wait that long. It complained that Kraft wasn't doing a good job promoting its coffee and offered Kraft $750 million to terminate the contract. Kraft rejected but Starbucks ended it in 2011 anyway (and entered into a deal with Green Mountain Coffee Roasters) which led Kraft to commence arbitration proceedings.
Another reminder to think carefully about those long durations in contracts - you can never predict how things will go and it's a good idea to really think about those termination provisions.
Thursday, October 31, 2013
According to this scary report from National Public Radio, children are not entirely rational. Well, perhaps we should not overstate the conclusions one can draw based on the relevant research. Children are only boundedly rational when it comes to Halloween candy.
A psychologist at Dartmouth College discovered that children were happier when they got a candy bar than they were when they got a candy bar and a piece of gum. This research calls into question our earlier assumption that more is better.
And it turns out that, according ot the same NPR report, Halloween candy is not the only realm in which people's responses to experiences can defy our expectations. It turns out that, while colonoscopies are bad, colonoscopies in which a tube is left inserted in the patient for a while, causing additional discomfort, are . . . (if you guessed worse, you're getting colder), at least according to a survey of patients on what they thought of the experience.
The trick (or treat) is to save the best (or the least bad) for last. If y0u are handing out candy tonight, and you don't want to get your house egged back into the stone ages, give the children some prunes, and then as they reach for their mace, offer a candy bar. They will leave happy and nominate you for a Nobel Prize. Similarly, if you are going to perform an invasive procedure on someone, make sure you have something less bad with which to follow it up.
Tuesday, October 29, 2013
Our Founding Editor Frank Snyder (pictured) sent us this story from the Fort Worth Business Press about a dispute over the "chef-inspired" offeerings at the three-store Texas Taco chain. Another chain, Torchy's Taco, is alleging that Texas Taco's menu is based on Torchy's "Taco Bible."
The alleged Edward Snowden of this taco thriller is an ex-Torchy's grill cook who is now working for Texas Taco. The employee allegedly attempted to steal Torchy's Taco Bible by slipping it under his shirt. Torchy's caught this on video camera and ordered the employee to return to Bible. He surrendered the Bible and was fired. Apparently, Torchy's neglected to confiscate the microfilm (or flash drive or whatever device the employee allegedly used to copy the recipes). Some months later, some of Torchy's descriptions of its tacos appeared on Texas Taco menus that gave the creations new names.
It is not entirely clear whether the employee is now being sued for beach of a covenant not to compete, for theft of trade secrets or both. Both the cook and Texas Taco deny any wrongdoing.
Monday, September 2, 2013
Being an observant type, I noticed that the Starbucks that I wandered into this weekend was festooned in pink. Breast cancer awareness? Nope. Starbucks has "partnered" with a San Francisco-based chain of bakeries called La Boulange, and since La Boulange's color is pink, Starbucks is celebrating its new "partnership" with a complementary color scheme. The barista who explained all this to me characterized the transaction as an acquisition rather than a partnership, and that seems more accurate, since that's what Starbucks called the transaction when it announced last summer that it acquired La Boulange for $100 million.
This is a very interesting transaction. La Boulange had about 20 cafes in the San Francisco area. How does La Boulange ramp up its operations to supply 8000 Starbucks outlets with its baked goods without degrading quality? Working all that out might have been the reason beyond the 14-month delay between the announcement of the partnership and the arrival of the chocolate croissants on my plate.
San Francisco's Business Times suggests that the creator of La Boulange, Pascal Rigo, still thinks there is a lot to sort out. His bakeries will continue to exist, and it seems that he plans to double the number of La Boulange outlets in the Bay area. Meanwhile, he hopes that Starbucks will become known as a cafe and bakery and that it could even become a lunch destination. That may be a challenge, since people are attracted to Starbucks becasue they can buy a coffee and a snack and spread out at a table for four for four hours while they work on their laptops. That use of space might not be optimal if Starbucks wants to pack in the lunch crowd.
The other thing about this transaction that interests me is why it took Starbucks, the company that realized that you can charge people $2 for a small coffee, so long to realize that people who like gourmet coffee also like high-quality baked goods, something the Viennese have known since the 17th century. Perhaps they were just waiting for the right parntner or perhaps they realized that people who are willing to pay $5 for a fancy coffee-based dessert drink do not want to pay $10 for a fancy coffee-based dessert drink plus a fancy dessert. Also, some regulars have to avoid the place entirely if it is going to tempt them with delicious desserts each time they enter.
Monday, October 29, 2012
At right is a drawing of the Ballantine brewery in Newark as it appeared in the late 19th century. Founded in 1840, the brewery grew to be one of the largest in the United States by the end of the 19th century. Recognizing that nobody without a gut full of beer could enjoy the American passtime, Ballantine cleverly partnered with the New York Yankees. Through its partnership of that storied team, Ballantine grew to become the third most popular beer in the United States.
Sadly, in the 1960s the brand declined. As Judge Friendly recounts in his opinion for the Second Circuit in Bloor v. Falstaff Brewing Corp., in 1969, the brewery suffered the indignity of acquisition by a real estate conglomerate with no experience in brewing. After bleeding money for a few years, the conglomerate sold Ballantine to Falstaff Brewing Corporation in return for some cash and a promise to use "its best efforts to promote and maintain a high volume of sales" of Ballantine beer. If it ceased to sell the beer entirely, the contract provided for liquidated damages.
Falstaff chose not to promote Ballantine beer. It's marketing strategy was summarized by Falsataff's controlling shareholder as follows: We sell beer, F.D.B. the brewery. You come and get it. That didn't work very well for Ballantine, and its volume of sales plummeted. The trustee of what remained of Ballantine sued alleging breach of the best efforst clause and seeking liquidated damages. Judge Friendly's conclusion is summarized below:
Bloor v. Falstaff Brewing Corp. Limerick
Falstaff had to adhere
To its deal to sell Ballantine beer.
Volume’s not killer
When there’s Bud, Coors and Miller.
Still, its efforts must be sincere.
Thursday, October 11, 2012
On the way in to work this morning, I heard on the radio that Pizza Hut is making an offer for a unilateral contract (okay, that’s not exactly the way the d.j. put it, but anyway…). The offer is free pizza for life to anyone who manages to ask either one of the presidential candidates during the town hall debate, “Do you prefer sausage or pepperoni on your pizza?” The debate will take place October 16 at Hofstra University. (It turns out that the offer is not actually “free pizza for life” it’s actually a $520/year gift card for up to 30 years). A silly contest, of course -- but a good example to illustrate the difference between a unilateral and bilateral contract and related issues having to do with effective offers and acceptances. Often, it doesn’t really matter if an offeree accepts by performing by by promising to perform– but in some cases (i.e. bets, dares), it really does. I used to refer to the bet in the book, HOW TO EAT FRIED WORMS to explain the difference between a unilateral and bilateral contract (15 worms in 15 days for $50). This year I might use the more election -season- friendly example of the Pizza Hut offer.
Thursday, May 24, 2012
Friday, February 17, 2012
The ABA Journal reports that The Cheesecake Factory will begin posting drink prices in Massachusetts after a lawyer threatened suit. According to the article, the lawyer "threatened to sue under the Massachusetts Consumer Protection Act on behalf of a friend who was charged $11 for a margarita at a Cheesecake Factory in Chestnut Hill. The price was not on the menu and the server was only able to provide a range of drink costs."
The ABA Journal looks to our very own founder, Franklin Snyder, for guidance. Previously, Frank had commented in a New York Times column about Nello. This Manhattan restaurant has (had?) a practice of not mentioning the price of a white truffle pasta lunch special. This practice shocked a recent diner when he turned over a bill charging $275 for the dish. To the New York Times, Snyder commented:
“You might be interested in letting your readers know that a restaurant meal is a ‘sale of goods’ under Article 2 of the Uniform Commercial Code,” he wrote. “The code provides that where the buyer and seller have agreed to a contract but have not agreed on the price, the price is not what the seller subsequently demands. It’s a reasonable price for the goods at issue. Thus a customer has no obligation to pay for anything more than the reasonable price of a pasta meal at a trendy restaurant.”
He continued: “In this circumstance, a customer should make a reasonable offer for the value of the meal, then walk out and wait to be sued for breach of contract. Be sure to leave the restaurant full contact information so they can’t claim that you’re trying to steal something.”
Thanks for the tip, Frank! I'm heading over to Nello for the truffle pasta dish. I hope there isn't a price listed on the menu.
[Meredith R. Miller]
Tuesday, June 28, 2011
In 2003, Jeffrey Yamin and others (Yamin) entered into an agreement with Moe's Southwest Grill (Moe's -- see official logo at left) to open up to three restaurants in Albany County by 2005. This establishment is not to be confused with Moe's Tavern, which has only one location in Springfield and is operated by the gentleman at right. After that agreement terminated, and only one restaurant had been established, the parties entered into a second agreement permitting Yamin to establish two more restaurants by the end of 2006. Moe's rejected one location, as it was permitted to do under the agreement, but a second restaurant opened in December 2006. Negotiations continued as to whether the parties would negotiate a new agreement.
Meanwhile, Moe's had entered into a separate agreement with Jonathan Trager permitting Trager to open restaurants nearby. In 2007, Moe's and Trager renewed their agreement, this time granting Trager exclusive rights to open restaurants within a five-mile radiius of his area of responsibility. Under this agreement, Trager opened a restaurant on the same street (although at a different place on that street) as the location Moe's had rejected when Yamin had suggested it. Yamin sued for breach of contract and for bad faith in refusing to approve his proposed location.
Applying Georgia law, the court had to determine what constituted "bad faith" in rejecting a proposed restaurant site where the agreement provided that the decision: 1) was in Moe's "sole discretion" and 2) was to be made in accordance with Moe's "then-current site selection policies and procedures." The court's gloss on this language is that Moe's retained discretion to reject a site based on virtually any reason. Moe's provided some factual justifications for its decision, and as those facts were undisputed, the trial court found no breach of the duty of good faith, and the Appellate Division affirmed.
The Appellate Division also affirmed the trial court's ruling that Moe's did not breach its agreement with Yamin by entering into an exclusive agreement with Trager because the former agreement had expired at the time that Moe's entered into the latter agreement.
The opinion is Yamin v. Moe's Southwest Grill, LLC.
[JT & Jared Vasiliauskas]
Wednesday, April 27, 2011
One year after argument, the Supreme Court of Texas issued its opinion on April 15, 2011 in Italian Cowboy Parnters, Ltd. v. The Prudential Insurance Company of America. The Court's 6-3 majority concluded that a contract's merger clause does not prevent a party from bringnig a claim based on fraudulent inducement. The Court reversed teh judgment of the court of appeals and remanded. It also rendered judgment in favor of Italian Cowboy on its claim for rescission prmised on a breach of the implied warranty of suitability.
The case arose when Jane and Francesco Secchi (the Secchis) sought to rescind the lease on their "Italian Cowboy" restaurant because of a persistent sewer gas odor. The landlord, Prudential, counterclaimed for breach of contract. During the negotiations of the lease, representatives fro the property management company repeatedly told the Secchis that there was absolutely nothing wrong with the property. The lease agreement included standard clauses stating that the landlord and its agents had made no representations about the property other than those contained in the agreement and that the lease constitutes the entire agreement between the parties.
While the Secchis were renovating the property for their restaurant, they learned that the previous tenant had been a hamburger restaurant that was plagued by a "very, very bad odor." The representatives for the property manager denied any knowledge of an odor problem but eventually conceded that a sewage smell did now plauge the Italian Cowboy. The Secchis eventually learned from the previous tenants that the property manager's representatives were in fact well aware of the odor problems, which were the cause of the demise of the previous tenants' restaurant. The trial court thus found for Italian Cowboy on all of its claims, awarding over $600,000 on the lease, plus attorneys' fees, prejudgment interest and $50,000 in exemplary damages because "lyin's bad, mmkay?" The court of appeals reversed. It did not permit rescission and it found in favor of Prudential on its counterclaim for breach of cotnract.
The Supreme Court first held that the lease contract did not effectively preclude the Secchis from relying on Produential's representations and that the language in the lease could not negate Italian Cowboy's fraudulent inducement claim. The Court cited case law going back 50 years to the effect that a merger clause does not stand in the way of a fraudulent inducement claim. Because the court of appeals did not address all of the factual elements of that claim, the Court remanded Italian Cowboy's fraud claim back to the court of appeals.
The Court also found that nothing in the contract relieved Prudential from liability for breach of the implied warranty of suitability and that the sewage odor was a latent defect vital to Italian Cowboy's use of the premises. Accordingly, the Court rendered judgment in favor of Italian Cowboy on its claim asserting a breach of the implied warranty of suitability. The Court thus reinstated teh trial court's ruling on rescission and remanded to the court of appeals for additional consideration of the amount of damages owed to Italian Cowboy.
Three Justices dissented. While the majority treated the contractual provisions at issue as a standard merger clause, superceding any prior agreements, the dissenting Justices focused on what they viewed as a simple factual statement that the defendants had not made any representations about the property on which the Secchis had relied other than those contained in the written agreement. They were sophisticated parties and they signed an agreement that contained this factual statement. The dissenters would not permit them to now come into the court and make a different -- and self-interested -- factual claim that there had indeed been representations made and that they had relied on these representations to their detriment. The dissenters would also have ruled against Italian Cowboy on the implied warranty of suitability since, in the dissenters' view, the odor problem was covered under the lease which assigned to Italian Cowboy resopnsibility "for all repairs to the interior and non-structural components of the Premises, including . . . all . . . ventilating . . . systems."
Monday, April 18, 2011
It is time to get into the Passover spirit by revisiting Fallsview Glatt Kosher Caterers v. Rosenfeld, 7 Misc.3d 557 (Civ. Ct. Kings County, NY, 2005), which gave us the opportunity to pause and consider: is a “Passover retreat” predominantly a good or service under the UCC? (Which, also came to be known as an added, fifth question for the youngest child at the seder).
Plaintiff Fallsview operated a retreat during Passover at Kutscher’s Country Club. (A Jewishy resort in the Catskills where, as a young child, I spent all of my grandmother’s laundry quarters on Ms. Pac-Man). For those that did not grow up going to B’nai Brith conventions in “The Country” (that’s what the NYC Jews called it), see this video, which comports with my memory.
Fallsview’s “retreat” included accommodations, entertainment and kosher food service. Willie Rosenfeld allegedly reserved spaces for 15 members of his family and agreed to pay $24,050 for the retreat. Fallsview made necessary arrangements, but Rosenfeld failed to appear at the hotel and did not remit the payment. Fallsview sued Rosenfeld for breach of contract.
Rosenfeld moved to dismiss, pointing to the statute of frauds. Rosenfeld argued that there was no agreement and, even if there was, it was oral and did not satisfy UCC 2-201, which requires that contracts for the sale of goods for the price of $500 or more be in writing. Fallsview’s response: the UCC does not apply because the Passover retreat is a service, not a good.
Because the alleged contract called for accommodations, entertainment and food, it was a hybrid transaction, and the court looked to whether goods or services predominated. Rosenfeld argued that the retreat was about food, a conclusion that he argued was “compelled by the very nature of the Passover holiday”:
The essential religious obligation during this eight day period- and the principal reason why people attend events similar to the Program sponsored by plaintiff- is in order to facilitate their fulfillment of the requirement to eat only food which is prepared in strict accordance with the mandate of Jewish law for Passover, i.e., food which is ‘Kosher for Passover’. It is the desire to obtain these ‘goods'-and not the urge for ‘entertainment’ or ‘accommodations'-that motivates customers to subscribe to such ‘Programs.’
But the court noted all of the possible daily activities at the retreat included “tennis, racquetball, swimming, Swedish massage, ‘make over face lift show,’ ‘trivia time,’ aerobics, bingo, ice skating, dancing, ‘showtime,’ ‘power walk,’ arts and crafts, day camp, ping-pong, Yiddish theater, board games, horse racing, horseback riding, wine tasting, and indoor bocci-and that is only through Wednesday.” There were also “ traditional and Orthodox religious services, lectures on religious and other subjects (presumably with a religious or cultural perspective), and a series of activities that are clearly designed to be of interest to families of observant Jews during a highly significant period in their calendar. “ The all-inclusive price covered these activities, as well as accommodations and food.
The court (Battaglia, J., who coincidentally, used to teach at my home institution), sided with Fallsview and decided the essence of the retreat was a “family and communal ‘experience’” and, therefore, was defined primarily by services and not by goods. Rodenfeld’s motion to dismiss was denied.
[Meredith R. Miller]
Monday, March 28, 2011
A Tennessee family is suing McDonald’s for breach of contract, promissory estoppel, negligence, and consumer protection violations for playing keep away with a chicken nugget. The case is Howell v. McDonald's Food Corp.
This bizarre case began when father and son went to McDonald’s for dinner and the boy order a chicken nugget happy meal. The 6-year old boy realized that last chicken nugget that looked “redish” and refused to eat it. The local McDonald’s offered a fresh chicken nugget- which the parents declined. That might have been because when their child glimpsed the nugget, he made the sign of the cross and began reciting the lyrics to Beatles' albums backwards. For some reason, the family preserved the crimson nugget. Over the next couple days the child was sick with various stomach ailments, and the parents became concerned. After notifying the local health department, they froze the suspect nugget until they could send it to a nugget testing facility.
McDonald's' insurer, Traveler’s Insurance, offered and the Howells agreed to send the nugget out for tests. The family was assured that they would be notified of the results. The nugget was sent for testing in November of last year. In January, defendants notified the Howells that defendants would not share the test results. Instead, the family received what remained of the nugget -- which was about 20% of the original nugget, now "ashy and charcoal-like" in appearance.
The Howells seek an order compelling McDonald’s to give them the results. They also seek pain and suffering damages, punitive damages, and treble damages for the consumer protection claim. The real damages to the family likely will not be known unless the court compels McDonald's to release the test results. Assuming that the chickens that went into the nugget were not free-range Chernobyl hens, there's probably no reason to think that the Howell's son will face serious long-term effects not already foreseeable from having consumed food.purchased at a McDonald's. One wonders what information defendants are trying to keep concealed.
[Katherine Freeman & JT]
Tuesday, January 11, 2011
Thanks to Michigan State University's Daniel Barnhizer and his student Christpher Anderson, we have the picture at right, which Mr. Anderson found taped to a local burger franchise while he was home in Texas for the holidays.
If you can't read the text, here it is in full:
"By entering these premises, you hereby agree to resolve any and all disputes or claims of any kind whatsoever, which arise from the products, services or premises, by way of binding arbitration, not litigation. No suit or action may be filed in any state or federal court. Any arbitration shall be governed by the FEDERAL ARBITRATION ACT, and administered by the American Mediation Association.
Further research by contracts profs provides further information regarding the aforementioned American Mediation Association on this website. Even as we speak, contracts profs are debating the effectiveness of this notice and of the counter-notice suggested by Ian Ayres here.
Thursday, November 25, 2010
On a day like today, when the first icy (45° F) blast of winter is coming down the verdant Brazos Valley, chilling the rattlesnakes and rattling the Mexican junipers at Château Snyder, it's nice to sit in front of a fire with a steaming Tom & Jerry and think about . . . chicken feet.
Why chicken feet? Because they (along with chicken skin) are prominent features of what I think is the only U.S. Supreme Court case about Thanksgiving turkeys. The case is M. Kraus & Bros., Inc. v. United States, 327 U.S. 614; 66 S. Ct. 705; 90 L. Ed. 894 (1946). It's a criminal case, but it does have something to do with contract law.
The case takes us back to Thanksgiving 1943, when wartime price controls have led to a serious shortage of meat (and lots of other things) in the U.S. Because turkeys are in short supply, prices naturally tend to rise. The Roosevelt Administration responds with the Emergency Price Control Act of 1942, which makes it a criminal offense to sell certain things (including turkeys) prices above a price "established" by the Office of Price Administration. Because that price is fairly low, demand for turkeys at Thanksgiving 1943 far exceeds the supply.
The defendant operates a wholesale meat and poultry business in New York City. In prior years it has usually received 100-150 rail cars of turkeys, but in 1943 it only gets one (1) car, and must decide how to divide that relative handful among its customers. Because it can't raise prices, it decides to bundle the turkeys with chicken feet, chicken skin, and chicken gizzards, so that its customers who buy turkeys must also buy the other products.
The defendant is indicted. The prosecution claims that by tying the turkeys to other products of dubious value the seller had violated the Price Administrator's regulations, which provided:
Price limitations set forth in this Revised Maximum Price Regulation No. 269 shall not be evaded whether by direct or indirect methods, in connection with any offer, solicitation, agreement, sale, delivery, purchase or receipt of, or relating to, the commodities prices of which are herein regulated, alone or in conjunction with any other commodity, or by way of commission, service, transportation, or other charge, or discount, premium, or other privilege or other trade understanding or otherwise.
The jury convicted and the Second Circuit affirmed. The Supreme Court -- perhaps still not as friendly and accomodating to economic regulations as it would later become -- reversed the conviction 5-3 (Jackson did not participate), although the justices issued four separate opinions. Relying heavily on the fact that the Administrator in other regulations had specifically mentioned "tying agreements" but did not do so in Regulation 269, Justice Murphy,Stone, Rutledge, Frankfurter, and Douglas all more or less agreed that a tying arrangement in which the goods had some value was not an "evasion" of the regulations, although Douglas and Rutledge (joined by Frankfurter) wrote concurrences as well. Black wrote the dissent, joined by Burton and Reed.
It's interesting that only ten ears after unanimously striking down poultry price regulations in A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 55 S. Ct. 837; 79 L. Ed. 1570 (1935), not a single justice even questioned the government's authority to set the price of every turkey in the United States. As Mr. Dooley noted, "No matther whether th' constitution follows th' flag or not, th' supreme coort follows th' iliction returns.”
P.S. In case you're wondering what value chicken feet would have, here's a tasty recipe..
Judge Frank Easterbrook may h as written the most famous article on The Law of the Horse, but ContractsProf blogger Meredith Miller (Touro) has no peer when it comes to the Law of the Turkey. Past Tanksgivings have featured her analysis of legal turkeys. Or rather, turkeys involved in legal disputes.
Here are some of her greatest hits from Turkey Days past. Enjoy!
The Law of the Turkey (2006)
ContractsProf Is Not Chicken (2008)
The Law of Turkey Leftovers (2008)
Monday, June 7, 2010
Friday, the Consumer Product Safety Commission(CPSC), in conjunction with fast-food giant McDonald’s®, voluntarily recalled about 12 million Shrek Forever After™ collectible drinking glasses (photo courtesy of the CPSC) sold or awaiting sale at McDonald’s® locations throughout the U.S. after someone in Representative Jackie Speier's(D-CA) office alerted the CPSC that the movie-character illustrations on the glasses contained cadmium, prolonged exposure to which may pose a serious long-term health risk.
Millville, NJ-based Durand Glass Manufacturing Co.(DGMC), a subsidiary of Arques, France-based Arc International, manufactured the movie-themed glasses, which another Arc International subsidiary, Millville-based Arc International North America, distributed exclusively to McDonald's. McDonald's locations nationwide sold the glasses in May and early June 2010.
McDonald's web site addresses the recall through a series of FAQs (and answers). (For the benefit of those with short attention spans, every answer to which the statement would be germane includes the statement "the CPSC has said the glassware is not toxic.") Arc International deployed a press release. Representative Speier posted a statement on her web site, which also includes a link to a Los Angeles Times article about the recall. Only DreamWorks™ appears to be mum on the subject -- so far, at least. (Perhaps the Shrek-iverse's creators didn't retain all of the product licensing-rights like George Lucas did, not so long ago and not so far away, with the original Star Wars™ trilogy or they made McDonald's pay a non-refundable lump sum to market the glassware.) Rumors of a replacement glass featuring an image of McDonald's CEO Jim Skinnerthat transmogrifies into a Shrek-alike when filled with any non-Coca-Cola® brand soft or sport drink appear to be completely unfounded.
So, what's the contract law angle on collectible glassware manufactured for and sold to McDonald's for resale to McDonald's retail customers?
It should go without saying that the most interesting legal issues arising out of this scenario involve (1) what express and implied UCC Article 2 warrantieseach seller in the chain from DGMC (or DGMC's ingredient supplier) to McDonald's made to anyone who purchased or used the glassware; (2) to what extent, if any, each seller in that chain may have disclaimed some or all of its warranty liability, limited the remedies available to the buyer, user, or other person affected by the glassware's use, or both; (3) whether one or more warranty-making sellers breached one or more warranties to one or more buyer, user, or other person affected by the glassware's use; and (4) what remedies Article 2 affords any person to whom any seller is liable for breach of warranty.
For those wanting to add some international flavor to the mix, the CBC reports here that the recall has spread to include all Canadian McDonald's restaurants. Information from the Associated Press and Reuters, reported here, indicates that recalling the glassware sent to Canadian McDonald's restaurants raises the total number of recalled glasses to 13.4 million. Both the U.S. and Canada are partiesto the U.N. Convention on Contracts for the International Sale of Goods (CISG). To the extent that the Canadian McDonald's restaurants purchased their Shrek Forever After™ collectible glassware from New Jersey-based DGMC or New Jersey-based Arc International North America, that transaction constituted a sale of specially-manufactured goods (CISG art. 3(1)), purchased for resale, rather than personal, family, or household use (CISG art. 2(a)), by a buyer located in one CISG "contracting state" from a seller located in a different "contracting state" (CISG art. 1(1)(a)). Therefore, unless the Canadian McDonald's buyers and New Jersey-based DGMC or New Jersey-based Arc International North America effectively opted out of the CISG (CISG art. 6), any breach of warranty claim the Canadian buyers might have (CISG art. 35), the extent to which any U.S. seller disclaimed any warranty or limited its liability for breaching any warranty (CISG arts. 6 & 35), and the available remedies (CISG arts. 45-52 & 74-78), will be matters for the CISG to resolve.
[Keith A. Rowley] (partially cross-posted on the Commercial Law blog)