ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Wednesday, September 28, 2016

Remember, Fraudulent Inducement Requires Particularity

A recent case out of the District of Utah, HealthBanc International v. Synergy Worldwide, Case No. 2:16-cv-00135-JNP-PMW, reminds us all of this rule. Well, it definitely reminded the parties and now I'm blogging about it and reminding all of you!

This case revolves around "a recipe for a powder comprised of various grasses and other components." Apparently you can combine this powder with water to make a nutritional supplement. HealthBanc entered into a contract with Synergy whereby Synergy would distribute the powder and pay HealthBanc royalties for every bottle of powder it sold. After almost a decade of doing business together, the relationship between the two parties soured. HealthBanc sued first, and then Synergy counterclaimed, alleging that HealthBanc had led Synergy to believe that it owned intellectual property rights in the recipe for the power, which apparently turned out to be untrue. HealthBanc then moved to dismiss this fraudulent inducement claim based on lack of particularity in Synergy's pleadings. The court here grants the motion. 

Synergy's complaint just generally alleged that HealthBanc had made misrepresentations. Those general allegations are not enough for a fraudulent inducement claim. Synergy identified nothing about the misrepresentations: When did they happen? Where did they happen? Were they written? Oral? Who made them? Without any of this information, the court finds this cause of action can't survive. 

The contract between the parties did contain a clause where HealthBanc

represents and warrants that it is the sole and exclusive owner of the entire rights, title and interest, including without limitation all patent, trademark, copyright and other intellectual property rights,

and another clause where HealthBanc "represents and warrants" that it has exclusive rights to the recipe that it can provide to Synergy. But those clauses don't raise a valid fraudulent inducement claim. Synergy made no allegations about the drafting of those clauses, nor did it allege that those clauses caused it to falsely believe that HealthBanc owned IP rights in the recipe and that that false belief prompted Synergy to sign the contract. 

Likewise, Synergy failed to allege any particular way that it was harmed by the alleged misrepresentations. 

Therefore, on basically every single element Synergy made very general claims that failed to meet the particularity standards. The court does dismiss without prejudice, though, giving Synergy the opportunity to try to fix the deficiencies. Stay tuned!

*Note the first: Synergy Worldwide sounds vaguely like what a company would be called in a Marvel movie so I actually looked the company up to see what it does. It seems to be a company specializing in nutritional supplements: "Your source for ProArgi-9 Plus, the highest quality l-arginine supplement on the market, as well as Mistica acai supplement, Core Greens, and more."

*Note the second: I also looked up "greens formula," which is what the court here refers to the recipe as. Wikipedia just wants to tell me about mathematical theorems, which then sent me down the Wikipedia rabbit hole to learn about George Green, a self-taught mathematical genius who received only one year of formal schooling as a child and to this day no one really knows where or how he learned the form of calculus that his theorems advanced. 

September 28, 2016 in Commentary, Food and Drink, Recent Cases, True Contracts | Permalink | Comments (0)

Wednesday, September 14, 2016

The Great Nut Caper

 Blanched pistachios

I'm cheating a little because, while this case has a breach of contract claim in it, it doesn't really have anything interesting to say about contract law, mostly because the claim fails because the complaint didn't identify any contract, any terms to the contract, or any facts about the formation of the contract. 

But this case out of the Northern District of New York, Golub Corp. v. Sandell Transp., Inc., 1:15-CV-0848 (LEK/CFH) (behind paywall), has an amazing set of facts relayed by the judge in a playful way, and sometimes you just want to read about a good pistachio heist, you know? 

Because yes, that's what happened in this case. Golub in New York ordered some pistachios from Wonderful in California. Sandell was arranged to ship the pistachios. Sandell sought to subcontract out the job by posting on an industry job board and hiring a company called GM EXPRESS. In the court's words: 

But appearances can be deceiving, and it turns out that "GM EXPRESS" was not actually GM EXPRESS. Unknown to Sandell, the identity of GM EXPRESS had been stolen by criminals who were set on pilfering Golub's pistachio shipment. . . . In this shell game of trucking companies, the pistachio thieves provided Sandell with stolen yet still valid bona fides, including insurance information, tractor and trailer license plate numbers, and a driver's license number (which Sandell claims was valid despite its conspicuously sequential numbering of B7890123). . . . Through this scheme, Sandell and Wonderful would become the thieves' unwitting insiders, happily loading the nuts directly onto the getaway vehicle.

As I said, the breach of contract claim doesn't amount to much in this case, but I enjoyed reading this opinion nonetheless and felt I had to pass it on, so you too can now ponder the disappearing truck of pistachios whose fate remains unknown. 

September 14, 2016 in Commentary, Food and Drink, Recent Cases, True Contracts | Permalink | Comments (0)

Monday, September 12, 2016

Ordering Subject to Seller's Terms and Conditions Makes You Subject to Seller's Terms and Conditions (Even If You Claim You Never Saw Them)

 

Blueberries in market, close-up.jpg
By atul666 from Portland, USA - blueberries, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=4112199

A recent case out of Michigan, Naturipe Foods, LLC v. Siegel Egg. Co., No. 327172, affirmed a high six-figure jury verdict against Siegel Egg Co. in the case of an alleged breach of contract over blueberries. Naturipe sent Siegel an offer to sell Siegel blueberries. Siegel specified in writing on the received offer that the blueberries in question were to be Grade A. Siegel than signed the offer. Underneath the line provide for Siegel's signature (where Siegel in fact signed) was the pre-printed phrase, "Subject to Seller's Terms and Conditions." Naturipe sent Siegel two shipments of the blueberries ordered. The blueberries, according to Siegel, were not Grade A. Siegel therefore never paid for the blueberries it received nor did it ever order the rest of the blueberries that were supposed to be shipped under the contract. So Naturipe sued and won over $700,000 in damages, costs, and fees after a jury trial. 

On appeal here, Siegel's main argument centered around the trial court's decision that Naturipe's terms and conditions did indeed apply to the contract. The terms and conditions at issue specified that Siegel's only remedies for breach of the contract were replacement of the blueberries in question or a credit of the price paid for those blueberries. Furthermore, Siegel was required under the terms and conditions to provide Naturipe with thirty days' notice of any breach of contract. Siegel failed to provide notice and sought cancellation of the entire contract as its remedy, in violation of these terms and conditions. 

However, Siegel argued, Naturipe's terms and conditions should not have been considered part of the contract between the parties binding on Siegel because, according to Seigel, it was never given a copy of the terms and conditions, nor were they ever explained to Siegel. But, the court said, it was Siegel's duty to ask for an explanation and obtain a copy of the terms and conditions, because they were referenced in the offer Siegel signed. Therefore, Siegel was on notice that there were other contractual obligations in play and Siegel should have asked what those were. The court noted that Siegel had annotated the offer to require Grade A blueberries, and so was plainly capable of crossing out the "Subject to Seller's Terms and Conditions" phrase if it had so desired. Because it failed to, the court found that it was clear and unambiguous that the parties intended their contract to be subject to those terms and conditions. 

I'm sure Siegel probably never gave a second thought, either at the time it was ordering or the time it received the shipments, to Naturipe's terms and conditions. That said, this case stands as a lesson that it's probably always a good policy to call someone up when you're dissatisfied with the product they have provided you. You don't necessarily have to know the law to give people an opportunity to cure; sometimes it seems like it could, in most circumstances, be the most efficient first option. 

September 12, 2016 in Commentary, Food and Drink, Recent Cases, True Contracts | Permalink | Comments (1)

Monday, August 22, 2016

Microsoft Does Marijuana

In a move that demonstrates how contracts for various aspects of marijuana products and services are going mainstream, Microsoft Corp. has accepted a contract to make marijuana-tracking software available for sale on its cloud computing platform. The software is developed by “cannabis compliance technology” Kind Financial and allows regulators to track where and how much marijuana is being grown, sold or produced in real time. In turn, this lets the regulators know how much sales and other tax they should be collecting and from whom (maybe this is the beginning of the end of some growing marijuana plants in state and national parks to hide their activities from the government). Medical-marijuana-colorado

This contract – called a “breakthrough deal” because it is the first time that Microsoft ventures into the marijuana business - may end up enabling the software developer to capture as much as 60% of this very lucrative market. (Other companies with government contracts often end up with such a large market share.)

How did the company strike such a lucrative deal? You guessed it: by networking. Kind’s CEO was introduced by a board member to an inside contact in Microsoft.

Happy semester!

August 22, 2016 in Commentary, Current Affairs, Food and Drink, Government Contracting, In the News, Miscellaneous, True Contracts, Web/Tech | Permalink | Comments (0)

Tuesday, July 5, 2016

Donald Trump and the Covenant of Good Faith and Fair Dealing

Everyone else is talking about Donald Trump, so I guess why shouldn't we hop in, right?

This recent New Yorker Talk of the Town piece introduced me to an ongoing contract dispute involving Trump that I hadn't been paying attention to, even though now I see it's been widely reported by various news outlets, including food blogs, because it involves restaurants. So if you don't normally like to read political stuff but you consider yourself a foodie, this blog entry is also for you!

It turns out that Trump is embroiled in breach of contract lawsuits with a couple of famous chefs who pulled out of commitments to put restaurants into one of Trump's new developments. According to the reports, the impetus for pulling out of the business deal was Trump's anti-immigrant rhetoric during his presidential campaign. Jose Andres, himself an immigrant, was not too happy about Trump's statements. As seems to be the case with Trump, his business concerns don't necessarily track his political rhetoric when the bottom line is at issue. Faced with an immigrant refusing him rather than the other way around, Trump sued Andres for breach of contract. Andres counter-sued, alleging that Trump's many derogatory remarks about Hispanics rendered Andres's proposed Spanish restaurant "extraordinarily risky."

The chefs sought partial summary judgment, which a court recently denied, finding that material facts were still in dispute.

The crux of this lawsuit revolves around the covenant of good faith and fair dealing: Did Trump breach that covenant when he made his remarks, which would make him the one in breach of contract? Or were Trump's remarks not a breach of the covenant, either because they're not relevant to the contract or because they did not harm the prospects for success of Andres's restaurant? I don't know if the parties will continue to litigate this question but I'm curious what the result would be. In the current climate where rhetoric is frequently extremely inflammatory, could there be contract implications to such statements? How far, policy-wise, do we want the covenant of good faith and fair dealing to extend?

The case is Trump Old Post Office LLC v. Topo Atrio LLC, 2015 CA 006624 B (behind paywall), in District of Columbia Superior Court. 

July 5, 2016 in Celebrity Contracts, Commentary, Current Affairs, Food and Drink, In the News, Recent Cases, True Contracts | Permalink | Comments (0)

Wednesday, June 22, 2016

Is that Starbucks Grande Really Grande?..

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

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

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

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

Images

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

Monday, May 2, 2016

Watering Down Your Iced Coffee Drinks

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

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

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

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

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

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

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

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

Monday, January 11, 2016

Beware Insurance Policy Exclusions: Liquid Nitrogen Cocktails and Precious Metal Air Conditioning Units Edition

A pair of cases, Evanston Ins. Co. v. Haven South Beach, out of the Southern District of Florida, and Celebration Church v. United National Insurance Co., out of the Eastern District of Louisiana, reminds us that insurance policies can be tricky things. 

In Evanston, Barbara Kaufman went to the Ninth Annual Taste of the Garden at the Miami Beach Botanical Garden. Haven South Beach, one of the vendors there, sold her a drink containing liquid nitrogen. Mrs. Kaufman became ill after consuming the drink and sued Haven. Haven, in turn, tried to involve Evanston under its insurance policy. However, the insurance policy contained a clause stating that it didn't apply to situations involving the "dispersal" of "pollutants." So the debate, of course, was over whether the presence of the liquid nitrogen in the drink, added to give the drink a "smoking" appearance, was the introduction of a pollutant that disqualified the insurance policy from applying. The policy described a "pollutant" as, among other things, an "irritant," and the court concluded that the liquid nitrogen was an irritant, as a dangerous and hazardous chemical likely to cause at least some irritation. Therefore, its dispersal into the drink was a circumstance that excluded Mrs. Kaufman's injury from insurance coverage under the policy. 

In Celebration Church, the insurance policy in question excluded coverage for theft of precious metals. Celebration Church had a number of rooftop air conditioning units whose condensers were stolen. The condensers each contained coils made of one of the precious metals excluded from the insurance policy. Therefore, the insurance company refused to pay out under the policy. The court found the insurance company was justified in its reading of the contract. Although the theft of the air conditioning units extended to thievery beyond just a "precious metal," the court concluded that the only common sense reading of the clause was that the insurance policy did not apply to any damage caused by a theft of precious metals, and the court further concluded that the theft of the air conditioning condensers was to obtain the precious metal inside, so their entire theft was excluded. 

The lesson is clear: Those insurance policy exclusions can really come back to haunt you. 

(Also, avoid liquid nitrogen in your cocktails, I think.)

January 11, 2016 in Food and Drink, Recent Cases, Religion, True Contracts | Permalink | Comments (0)

Wednesday, October 21, 2015

Online Reviews – Are You Hot or Not?

Amazon is suing approximately 1,000 individuals who are allegedly in breach of contract with the Seattle online retailer for violating its terms of service.  Amazon is also alleging breach of Washington consumer protection laws.  

In April, Amazon sued middlemen websites offering to produce positive reviews, but this time, Amazon is targeting the actual freelance writers of the reviews, who often merely offer to post various product sellers’ own “reviews” for as little as $5.  (You now ask yourself “$5? Really? That’s nothing!”  That’s right… to most people, but remember that some people don’t make that much money, so every little bit helps, and numerous of the freelancers are thought to be located outside the United States.)  The product sellers and freelancers are alleged to have found each other on www.fiverr.com, a marketplace for odd jobs and “gigs” of various types.

There are powerful incentives to plant fraudulent reviews online. About 45 percent of consumers consider product reviews when weighing an online purchase.  Two-thirds of shoppers trust consumer opinions online.  For small businesses, it can be more economical to pay for positive reviews than to buy advertising. For example, a half-star increase in a restaurant's online rating can increase the likelihood of securing, say, a 7 p.m. booking by 15 to 20 percent. “A restaurateur might be tempted to pay $250 for 50 positive reviews online in the hopes of raising that rating.”

As law professors, we are not beyond online reviews and thus potential abuses ourselves. See, for example, www.ratemyprofessor.com.  There, anyone can claim that they have taken your course and rank you on your “Helpfulness,” “Clarity,” and “Easiness,” give you an overall grade as well as an indication of whether you are hot or not (clearly a crucial aspect of being a law professor…) To stay anonymous, people simply have to create a random anonymous sounding email address. Not even a user screen name appears to be required. Hopefully, that website does not have nearly as much credibility as, for example, Yelp or TripAdvisor, but the potential for abuse of online reviews is clear both within as well as beyond our own circles.

As shown, though, some companies are taking action.  TripAdvisor claims that it has a team of 300 people using fraud detection techniques to weed out fake reviews.  But fraudulent reviews aren't thought to be going away anytime soon. One source estimates that as many as 10-15% of online reviews are fake (to me, that seems a low estimate, but I may just be a bit too cynical when it comes to online reviews).

So, next time you are reading reviews of a restaurant online, I suppose the learning is that you should take the reviews with a grain of salt.

October 21, 2015 in Current Affairs, E-commerce, Food and Drink, In the News, Labor Contracts, True Contracts, Web/Tech | Permalink | Comments (0)

Wednesday, April 22, 2015

Tiered Water Pricing System Declared Unconstititional in California

On Monday, a California Appellate Court declared the tiered water payment system used by the city of San Juan Capistrano unconstitutional under Proposition 218 to the California Constitution.  The California Supreme Court had previously interpreted Prop. 218’s requirement that “no fees may be imposed for a service unless that service is actually used by, or immediately available to, the owner of the property in question” to mean that water rates must reflect the “cost of service attributable” to a particular parcel.

At least two-thirds of California water suppliers use some type of tiered structure depending on water usage.  For example, San Juan Capistrano had charged $2.47 per “unit” of water (748 gallons) for users in the first tier, but as much as $9.05 per unit in the fourth.  The Court did not declare tiered systems unconstitutional per se, but any tiering must be tied to the costs of providing the water.  Thus, water utilities do not have to discontinue all use of tiered systems, but they must at least do a better job of explaining just how such tiers correspond to the cost of providing the actual service at issue.  This could, for example, be done if heavy water users cause a water provider to incur additional costs, wrote the justices. 

The problem here is that at the same time, California Governor Jerry Brown has issued an executive order requiring urban communities to cut water use by 25% over the next year… that’s a lot, and soon!   Tiered systems are used as an incentive to save water much needed by, for example, farmers.  The California drought is getting increasingly severe, and with the above conflict between constitutional/contracting law and executive orders, it remains to be seen which other sticks and carrots such as education and tax benefits for lawn removals California cities can think of to meet the Governor’s order.  Happy Earth Day!

April 22, 2015 in Current Affairs, Famous Cases, Food and Drink, Government Contracting, In the News, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Thursday, March 26, 2015

Water Contracts and Adequate Assurances (to Continue Business as Usual)

Some weeks ago, I blogged here about water rights and shortages in drought-ridden California.  Of course, California is not the only state where contractual water rights interface with development and public health concerns. 

In Ohio, shale driller Gulfport Energy recently filed suit against the town of Barnesville for rights to extract water for Gulfport’s fracking operations.  Gulfport had a contract with Barnesville entitling it to draw water from a local reservoir at one cent per gallon.  Under the contract, Gulfport would be able to draw the water unless the village determined that such action would endanger public health.  Water rights were subsequently also issued to another driller.  In the fall of 2014, the village told Gulfport to stop drawing water from the reservoir because of too low water levels.  Gulfport’s suit now asks for adequate assurances of performance of the water contract to ensure that it can continue its fracking operations. 

Whether that is a good idea is another story.  From a short-term perspective: yes, we need energy preferably domestically sourced to avoid international supply interruptions and the geopolitical problems that are associated with importing energy raw materials.  But fracking and fossil fuel production in general are associated with other severe problems including heavy water usage in the case of fracking.  Such water, the argument goes, is better used for other things such as farming and household consumption. 

Business as usual for fracking companies may not be the best idea seen from a societal point of view.  Contracts rights are only a small part of this much bigger problem.  However, time seems to have come for governments to incorporate escape clauses not only for “public health concerns” into water contracts, but also for drought concerns.  This is not always done, as the above case shows, but such a relatively easy step could help solve at least some contractual disputes.  In times of increasing temperatures and decreasing rainfall in some areas, such contract drafting may well make sense.

March 26, 2015 in Commentary, Current Affairs, Food and Drink, Government Contracting, True Contracts | Permalink | TrackBack (0)

Saturday, March 14, 2015

International Price Fixing Scheme

Secret backroom deals conducted in hotels and private apartments.  Dedicated phone lines.  Market-sharing agreements and price fixing activities.  Million-dollar deals.  Thinking oil, diamonds, shares or foreign exchange?  Think again!  Eleven of the top … yoghurt makers in France, including American-owned Yoplait, were recently fined approx. $200 million for the above activities, which affected about 90% of the French yoghurt market and thus “seriously disturbed” it.  

Yoplait, the majority of which is owned by U.S.-based General Mills, Inc., actually revealed the cartel under a French law that allows companies to self-report their price fixing activities in exchanged for reduced punishment.  So far, the company has received no fines.

Apparently, the French competition authorities are cracking down on deals such as the above.  The French government has also recently started cleaning out, so to speak, the ranks among shampoo, toothpaste and various cleaning product manufacturers.

Price fixing does, of course, disturb the free market forces.  When shopping in this country, it is remarkable how close prices for various everyday items are.  However, that does not mean that prices have been set in any illegal way.  Retailers such as gas stations, which are well-known at least in the Los Angeles area to have almost the same prices all the time, could just stick the head out the window to see how the competitors price their products.  But if mere yoghurt is worth the above risk, one wonders what else may be going on behind the scenes in the global corporate world.  Perhaps it’s better not to know.

March 14, 2015 in Current Affairs, Food and Drink, In the News, Miscellaneous | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 11, 2015

Contractual Dispute over Pricey Airport Water

We all know the feeling of having to pay twice as much - or more - for food and drink in airports compared to most other places.  Two vendors at the Los Angeles International Airport (“LAX”) are now taking this practice to the next level: they are suing each other for alleged contracts violations and price gouging.

Boutique retailer Kitson Stores runs two stores at LAX.  It apparently charges around $2.55 for a liter of water (roughly a quart) at those stores.  Competitor Hudson Group charges $5 a bottle (size unknown, but presumably roughly the same and expensive at any rate).  Kitson is alleging that Hudson is gouging passengers with its “hugely inflated” water prices and is trying to force Kitson out of business at the airport.  Hudson is countering that Kitson is hardly concerned about consumer price protections, but that this lawsuit is really a diversion from Kitson’s alleged contractual violations. 

Whichever turns out to be the case, airport prices are well known to be very high for everything from chewing gum to dinner.  Perhaps higher-than-usual rent prices are to blame, at least in part.  Of course, airport retailers also enjoy a captive market (almost literally).  Consumers are, however, still allowed to bring an empty bottle to the airport and fill it with free water from, for example, the increasing number of “bottle filling stations” that are thankfully also appearing in more and more airports.  This does seem to be a case of fake altruism, but is nonetheless a lawsuit that may resolve an important issue.

March 11, 2015 in Food and Drink, Miscellaneous, Travel, True Contracts | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 3, 2015

Want a Class with that Barrista Job?

Last year, Starbucks announced a new corporate-supported educational program that one year later is still viable: Starbucks will reimburse its full-time workers for taking online classes with Arizona State University.  Partial tuition (58%) will be offered to freshmen and sophomores and full tuition for juniors and seniors as long as credits are earned within the past 18 months so as to keep students on track.  

As you may have noticed if you are a Starbucks customer, very many of its employees appear to be college-aged.  In fact, 70% of Starbucks’ workforce are either in school already or have had to drop out because of various personal difficulties.  

This program seems to be a benefit to employees who cannot afford to go to school full time (or even part time), but who desire and education.  What is remarkable is also how few “strings” are attached to the program.  For example, the employees do not even have to stay with Starbucks after the completion of their degree.  Said CEO Howard Schultz (still the CEO): "We want to attract and retain great people. We want to provide [our employees] with new tools and new resources to have advancements in the company.” 

What is in it for ASU?  This has been said to be a coup for the university, which already has one of the nation’s largest and most highly regarded online programs.   Of course, Starbucks has a large amount of employees with, presumably, many coming and going, so ASU now has access to a large database of potential students, something many universities – private and public - are craving in these competitive times.

For the students and the university, rates may be discounted.  This is normal in this type of situation.   What would truly make a difference would be if the rates could become so reduced for students that they would, in effect, have no out-of-pocket costs altogether. 

What, to me, is interesting about this situation is that a public university has found out workable model for online classes and cooperation with a private business venture when many private universities have not. 

The somewhat strange catch here is that ASU cannot enter into any other arrangement with a for-profit business for four years, but that Starbucks is free to advertise its partnerships with a few other schools.

See the contract at issue here.

See Starbucks’ description of the program here.

March 3, 2015 in Commentary, Current Affairs, E-commerce, Food and Drink, Labor Contracts, Teaching, True Contracts | Permalink | Comments (0) | TrackBack (0)

Thursday, February 26, 2015

California Port and Freshwater Disputes – From Citrus Fruits to Water-Stealing Nudists

Two contracts issues have reappeared recently and both greatly affect the earning abilities of California citrus farmers, among others: the ability to ship products and the ability to grow them in the first place.

The shipping situation was - and still is - affected greatly by the recent employment contract dispute between shipping companies and dockworkers.  Recently, the parties reached a tentative deal on a new five-year contract after months of discussions that ended with a roughly 3% wage increase each year, a hike in pensions and continued union jurisdiction over the maintenance of truck trailers.  While the dispute was going on, many oranges destined for Chinese New Year celebrations overseas rotted away as activities in and around the ports of Los Angeles and Long Beach were impacted.  The docks still aren’t expected to return to normal until well into the season for Valencia oranges and past the season for navel oranges.  Importers of cars, among other things, have also recently expressed their problems keeping up with the demand for imported cars (which is huge in California).

For citrus and other farmers, the shipping problem is exacerbated by the ongoing very severe drought that California is experiencing for the fourth year in a row and that so far has resulted in 41% of the state finding itself in the most severe category of water shortages. 

While farmers up and down California’s agricultural San Joaquin Valley vehemently protest  P1030121
regulations limiting their access to freshwater, others are taking matters into their own hands: they simply steal water.  From the apparently more and more typical situation of subcontractors using fire hydrants without permits to people driving away with water from fire hydrants in trucks, siphoning it off canals, or tinkering with the pipes of their neighbors or local water providers, farmers are not the only ones getting desperate for water. 

Since we are talking California, there has to be a “weird” twist to the story: in the Silicon Valley, a water district has removed irrigation pipes that rangers say allowed … a nudist colony to make unauthorized water diversions from a waterfall. 

There is even a phrase for thieves of this nature: “water bandits.”  This situation is only about to get worse as the drought is predicted at above 80% certainty to become the worst in 1,000 years.    Some cities such as Los Angeles are offering tax initiatives for removing residential lawns.  Nonetheless, Californians will still have to grapple with the contractual and other rights to access to water – saline or otherwise - for some time to come.

February 26, 2015 in Current Affairs, Food and Drink, In the News, Miscellaneous | Permalink | Comments (0) | TrackBack (0)

Monday, January 12, 2015

Weekly News Roundup

A misplaced comma (or something) cost an Oregon Ducks fan his premium seats to the college football championship game.  According to this report from The Oregonian, a University of Oregon alumnus found premium tickets to the game (which he knew were selling for $4000) for $400 on StubHub.  When, he placed his order, StubHub indicated that he would be charged $16,59.36, but his credit card was charged $16,059.36.  He protested, and StubHub refused to honor the purchase, removing the charge and offering $1600 in StubHub vouchers, which the angry Duck says he will not use.  He blows off some steam in a blog post, with observations about obnoxious terms and conditions.

In a sign of the times, MasterCard has filed suit in the Southern Distroct of New York against Nike, according to this report from Bloomberg.and Oregon Live (you have to go through a short survey to read it), for having poached a few of its cyber-security experts.  MasterCard is suing the employees for breach of contract and Nike for tortious interference.  Nike denies all wrongdoing.

We could not have made this up: The St. Louis Post-Dispatch reports that the Devin James Group (DLG), a public relations firm, is suing another public relations firm, Elasticity.  Apparently, Elasticity hired DLG to help represent the City of Ferguson in the aftermath of the shooting of Michael Brown.  Elasticity fired DLG when it discovered that DLG's owner had a criminal record.  Mr. James was convicted in 2006 for having shot an unarmed man.  He claims he did $50,000 of work for which he has not been paid. 

In another chapter in the dangers of state governments hiring private companies to handle public services, NJ.com reports that Hewlett Packard will refund New Jersey $7.5 million to get out of its contract to deliver a unifed system to administers the state's public assistance program.  The Christie administration and HP agreed last year to suspend work on the project and they entered into a separation agreement in which each side agreed not to sue the other for breach of contract.  The state is now looking for a new partner.  In the meantime, it "continues to hobble along on its 1980s-era mainframe system," according to NJ.com.

Finally, an interesting conflict between a franchise and a large franchisee.  Wendy's is requiring its franchisees to make technology upgrades and renovate stotes.  DavCo, which operates 152 Wendy's restaurants is refusing to do so, claiming that Wendy's lacks the authority to require the changes.  According to the Baltimore Sun, Wendy's has filed suit to terminate DavCo's franchises.

January 12, 2015 in Food and Drink, Government Contracting, In the News, Sports | 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)

Wednesday, November 5, 2014

Expensive Wine

Duff's Private ReserveAccording to this story from NJ.com, a customer in an Atlantic City restaurant bought a bottle of wine with dinner.  The server showed him a wine list and suggested a wine.  When he asked how much the wine cost, she said, "Thirty-Seven Fifty," which he understood to mean $37.50.  She meant $3,750, and the wine list so indicated, but the customer did not have his reading glasses with him.  It's an interesting fact pattern.

Fortunately, an episode of The Simpsons provides best practices in this area, as animated television sit-coms do in most areas.  In episode 8F09, Burns Verkaufen der Kraftwerk, Homer's stock in the Springfield nuclear plant went up for the first time in ten years.  He sells and makes a cool $25.  Soon thereafter, the value of Homer's stock rises to $5200, but that's another matter.

Homer conte1mplates his options and decides to buy beer.  The following conversation with Moe (of Moe's Tavern) ensues:

Moe: Want a Duff?

Homer (haughtily): No, I'd like a bottle of Henry K. Duff's Private Reserve.

Moe  (Gasping): Are you sure? 'Cause once I open the bottle, there's no refund.

See?  That's how it's done!

November 5, 2014 in Commentary, Food and Drink, In the News | Permalink | 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)

Tuesday, October 14, 2014

Want to make sandwiches? First, sign this non-compete...

Jimmy John's, a sandwich chain that frankly I had never heard of but which has over 2,000 franchise locations, apparently makes its employees sign pretty extensive confidentiality and non-compete agreements , as reported by Bob Sullivan and this Huffington Post article.  It's not clear to me what trade secrets are involved in making sandwiches, although I am a big fan of more transparency when it comes to what goes in my food and how it's made. As Bob Sullivan points out, in this economy, employment-related agreements for most employees are typically adhesion contracts. Making workers sign non-competes to get a job makes it much harder for them to get their next job.  In this case, the employee is prohibited from working for two years at any place that makes 10% of its revenue from any sandwich-type product (broadly defined to include wraps and pitas) that is within 3 miles of any Jimmy Johns location.  Given that there are 2,000 such locations, it could make it difficult for some food industry workers to find other jobs.

October 14, 2014 in Current Affairs, Food and Drink, Labor Contracts, Miscellaneous | Permalink | Comments (3) | TrackBack (0)