ContractsProf Blog

Editor: D. A. Jeremy Telman
Valparaiso Univ. Law School

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Thursday, December 18, 2014

Eleventh Circuit Rejects Claim for a Million Dollar Unilateral Contract

This case arises out of a fact pattern with which many contracts profs may already be familiar.  It's a new twist on Leonard v. PepsiCo., alas with the same result.

James Cheney Mason (Mason) represented defendant Nelson Serrano in a capital murder trial.  Mason gave an interview on NBC news in which he pointed out that his client could not have committed murders in Bartow, Florida on the same day that he was on a business trip in Atlanta Georgia.  Surveillance cameras from the La Quinta Inn in Atlanta established Serrano's presence at the hotel both before and after the murders.  The prosecution claimed that Serrano flew to Orlando, drove to Bartow, committed the murders, drove to Tampa, and flew back to Atlanta in time to show up on the surveillance tapes once again.  Serrano was convicted and sentenced to death.

Dunce_cap_fLaw student Dustin Kolodziej (Kolodziej) watched Mason's interview with NBC after it was edited for broadcast.  In the edited version that Kolodziej saw, Mason seemed to be offering a million dollars to anyone who could get off a plane in Atlanta and make it back to the La Quinta Inn in 28 minutes.  Kolodziej took this as a challenge and as a unilateral offer that he could accept by making the trip in 28 minutes or less.  Kolodziej recorded himself making the trip and sent the recording to Mason with a demand for payment.  Mason refused.

In Kolodziej v. Mason, the Eleventh Circuit upheld the grant of summary judgment to Mason.  In the unedited version of Mason's interview, it is clear that his challenge was directed at the prosecution and not erga omnes.  Moreover, the Eleventh Circuit found, no reasonable person could construe any statement that Mason made in either the edited or the unedited version of the interview as a serious offer to pay a million dollars to anybody who could travel from the airport to the hotel in 28 minutes.  According to the Court, the context in which the words were uttered (an attempt to poke holes in the prosecution's theory) and the hyperbolic nature of the alleged offer, with its familiar overtones of schoolyard braggadocio, were insufficient to establish Mason's willingness to enter into a contract.

The Court distinguished this case from the classics, Lucy v. Zehmer and Carbolic Smoke Ball and other, equally entertaining cases.  The Court was no more inclined to entertain Kolodziej's claim than it would be to declare Mason a monkey's uncle, if he had chosen that turn of phrase when attempting to illustrate the implausibility of the prosecution's timeline.  

The Court suggested that the entire suit was a result of Kolodziej's inadequate understanding of contracts doctrine (hence the duncecap image above, which by the way, does not represent Kolodziej).  The Court paraphrased Pope and suggested that a little legal knowledge is a very dangerous thing indeed.  As the Court explained,

Kolodziej may have learned in his contracts class that acceptance by performance results in an immediate, binding contract and that notice may not be necessary, but he apparently did not consider the absolute necessity of first having a specific, definite offer and the basic requirement of mutual assent.

This seems more than a bit unfair.  Kolodziej was wrong, but he may have thought it worth the gamble.  He lost his case, but he had quite an experience.  In any case, Judge Cardozo's remark in Allegheny College about how half-truths are sometimes mistaken for the whole truth seems more apposite.  

A classic form of statement identifies consideration with detriment to the promisee sustained by virtue of the promise. Hamer v. Sidway, 124 N. Y. 538, 27 N. E. 256, . . . . So compendious a formula is little more than a half truth. There is need of many a supplementary gloss before the outline can be so filled in as to depict the classic doctrine.

Mistakes of law such as Kolodziej's are common, and learned judges (and even law professors) as well as law students can make them.

 

December 18, 2014 in Commentary, In the News, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Saturday, December 13, 2014

Out with the Old… the Really Old

In the UK, two sections of the Statute of Marlborough are facing repeal after being in force for 747 years.  That’s right: the Statute was passed in 1267 and is thus older than the Magna Carta, which – although having been drafted in 1215 – was not copied into the statute rolls to officially become law until 1297.  Two sections, however, still remain good law.

Why the suggested repeal?  The two potentially obsolete sections address the ancient British power of “distress,” which allowed landlords to enter a debtor’s property and seize his/her goods.  However, distress was abolished by new legislation this past March.

But don’t worry, our British colleagues are not about to do anything rash or unpopular.  Although the Law Commission has proposed the repeal, a public consultation has been initiated to make sure that no one actually uses the two sections anymore.

Other newer, but nonetheless obsolete, laws are also being earmarked for removal.  One is from the 1990s and was drafted to regulate the “increasing popularity of acid house parties.”   Apparently, acid house parties are not in anymore and thus, the law is no longer needed.

In spite of the above, two sections of the Statute of Marlborough still remain in effect.  One forbids individuals from seeking revenge for debt non-payment without being sanctioned to do so by the court (you gotta love the fact that in the UK, one can apparently get courts to approve one seeking revenge against one’s debtors).  Another prevents tenants from ruining or selling off the landlord’s land.  Fair enough…

December 13, 2014 in Current Affairs, In the News, Legislation | Permalink | Comments (0) | TrackBack (0)

Friday, December 12, 2014

Still More on Ride Shares

Sick of reading our posts (and other news reports) about Uber and Lyft?

Try Schlep!

 

I am compelled to add that while the concept is brilliant and the execution quite fine, the script missed some low-hanging fruit suggested by the "Jewish geography navigation system" at the opening.  I humbly offer the following potential dialogues:

Driver: Where are you going in such a hurry?
Passenger: Elm and 17th.
D: Elm and 17th?  The Weinsteins live right around the corner! Do you know them?
P: I don't think so . . .
D: Such a nice couple.  Are you sure you don't know them?  I think they had a daughter around your age.  How old are you?  Where did you go to school?  And the Goldbergs live near there too -- surely you know them!
P: I'm just going to a dental appointment.  I don't live around there.
D: Well, you should, it's a lovely neighborhood.  Where do you live?  I know a realtor who could find you a nice apartment. . . 

-cut-

Passenger: Excuse me, I was actually heading in the other direction . . .
Driver: Oh, I know, hon, but I can only find my way there from the JCC, so I thought we'd go there first.  It's not far.
P: Umm
D: Or Solomon Schechter, is that closer?  I know how to get places from there or from the Temple . . .
P: I can direct you if you want.
D: Relax!  Enjoy the ride!  You young people are always in such a hurry these days.  Do you ever take the time to talk with your parents, I wonder?  We can just chat and catch up -- the time will pass quickly
P: Catch up?  But I don't even know you. 
D: You're about my son's age.  He just gave me my third grandchild. [Passing pictures back] Here, aren't they a lovely family?

-cut-

I'm just sayin . . .

December 12, 2014 in Commentary, E-commerce, In the News | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 10, 2014

More in Our Continuing Coverage of Uber/Lyft Lawsuits

Myanna posted yesterday about an L.A. Times story about Uber.  Today's New York Times has more news about attempts to regulate companies like Uber and Lyft.  The issue is the quality of the companies' background checks on their drivers.  In a sidebar, the Times notes that three states and seven foreign jursdictions have taken legal action against Uber.  But the ride sharing companies are energetic lobbyists and often have been successful in blocking regulation.

In a related story, the Times reports that an Uber driver in India is facing allegations that he raped a passanger.  Today's Times reports that the driver was wanted on other crimes as well.

December 10, 2014 in E-commerce, In the News | 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)

Morten Storm and the Totten Case

DroneAs indicated in this story,* CNN.com is greatly invested in the story of Morten Storm, who claims that he is a Danish double-agent who infiltrated Al Qaeda in the Arabian Penninsula (AQAP) and thus helped the U.S. target and kill AQAP operative and U.S. citizen Anwar al-Awlaki.

Storm (and his CNN co-authors) have quite a story to tell.  Among other things, he claims that the United States promised him $5 million for helping the U.S. in its al-Awlaki operation.  Although Storm is clearly an international man of mystery, there is little mystery on the question of whether he would have any luck on a claim against the U.S. for breach of a promise to pay $5 million.  The U.S. would undoubtdedly point to the Totten case, as updated in Tenet v. Doe, and courts will find the claim non-justiciable.

NB: When you click on this site, you will see the following browsewrap banner across the top:

Our Terms of Service and Privacy Policy have changed.
By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

If you do not want to spend an hour or two parsing CNN's terms and don't want to be bound to terms that you have not read or cannot understand, do not "continue to use" CNN's site (whatever that means).

Hat tip to my student, Brandon Carter.

December 9, 2014 in Commentary, Current Affairs, Government Contracting, In the News | Permalink | Comments (0) | TrackBack (0)

Monday, December 8, 2014

Weekly New Roundup

Wedding PhotoYet another non-disparagement case, this time for WTOC.com.  This time, it was a woman who cancelled an agreement with a wedding photographer within the contractually created cancellation period, and then went online to explain why she had done so.  The photographer threatened legal action claiming that she had violated a non-disparagement clause in the now-cancelled contract.

There was an interesting story last week on the International Business Times about Yo-Yo car sales.  Apparently, there are many variations to the practice, but the basic scheme runs as follows: car dealer sells a car to person with bad credit, who is happy to be able to buy a car on any terms.  Then, the dealer tries to sell the loan to a third party.  If it cannot do so, it calls the buyer back in and demands either a change in the loan terms or the return of the car.  The IBT story focuses on a buyer whom the dealer claimed committed felony auto theft and fraud.  The buyer filed a civil suit against the dealer, with claims ranging from violations of the Truth in Lending Act to defamation and deceptive trade practices.  The dealer has counterclaimed for fraud and breach of contract.

According to an AP story posted here in the UK's Daily Mail, California is wrangling with investors in a $2.3 billion deal for the sale and lease back of state properties.  The deal was conceived in the Schwarzenegger administration, but Governor Brown has determined that the deal will cost the state $1.5 billion.  California alleges that the investors failed to make an initial $50 million payment, triggering the State's rights to terminate the contract.  The investors are seeking a forced sale of the properties.  My students have their exam this week, so they might want to think about what we have here: partial breach? material breach? total breach? failure of a condition?  did California seek adequate written assurances? The AP story does not clarify these highly testable issues.

ErieottersFinally, we are happy to report that the law has saved hockey!  At least in Erie, Pennsylvania, according to this story on GoErie.com (Warning! This site has lots of annoying popups!).  Apparently, the Edmonton Oilers sought to enforce a judgment against the Otters' General Manager Sherry Bassin through a forced sale of the team.  The Oilers' scheme then involved buying the Otters through a subsidiary and moving them to Hamilton, Ontario.  But U.S. District Court Judge David Cercone blew the whistle and checked the Oilers when he set aside a judgment against Bassin  The Oilers would have to proceed through a breach of contract claim if they want to penalize Bassin for misconduct. In the meantime, the good people of Erie can enjoy their Otters.

December 8, 2014 in In the News, Sports | Permalink | Comments (0) | TrackBack (0)

New York Times Casts a Gimlet Eye on the New Sharing Economy & Insurance

Following up on Myanna Dellinger's post from last week, we noticed this story about Airbnb and Uber.  Both companies are leaders of the so-called new sharing economy, but what they really love to share (unequally) is risk.  The article  explains how insurance works for both companies, and the clear message is: it isn't clear that it will, at least not for the Uber drivers or people who use Airbnb to rent out their homes or apartments for days or weeks at a time.  Actually, the article has very little to say about Uber, which doesn't really share risk at all -- it tells its drivers to self-insure, and then the drivers run into trouble (if they run into things) because their insurance does not cover commercial activities.

ApartmentsAccording to the Times article, regular homeowners' insureance will not cover Airbnb renters because most standard homeowners' insurance policies do not cover harms caused by commercial activities.  Airbnb thus has taken out a secondary insurance policy that will cover up to $1 million in liability for the renters who use its site, and Airbnb is offering this policy to its users for free.  For reasons that are not really clear in the article, its author Ron Lieber suggests that Airbnb might not really provide insurance to its renters.  He points to Airbnb's checkered history of encouraging renters to ignore local ordinances and not being there for its renters who then ran afoul of the law.  He suggests that Airbnb's secondary insruance scheme might not cover the sorts of liabilities that renters might face, and it is clear that some primary homeowners' policies would also exclude liabilities arising out of commercial activiities.

NYC_Taxi_in_motion
Photo by The Wordsmith

And, as long as we are piling on Uber, Saturday's New York Times also featured an opinion piece by Joe Nocera.  According to Nocera, it is impossible to reach Uber by phone because, according to Nocera, Uber says having a phone center or customer service line is not in Uber's business model.  If you try to call the listing for Uber in New York City, you get another company, über, a New York design firm.  The owner of über claims that she fields between 1 and 10 calls a day from Uber customers seeking assistance.  She has even had to go to court to explain to the judge that the plaintiff sued the wrong Uber, or the wrong über. 

December 8, 2014 in Current Affairs, E-commerce, In the News | Permalink | Comments (0) | TrackBack (0)

Monday, December 1, 2014

Weekly News Roundup

Ghana-flag-2We start this week with international news:  According to a report from Ghanaweb, Ghana is suing Nigeria for breach of a contract to supply natural gas.  Under the West African Pipeline Project, Nigeria is to supply Ghana, Togo and Benin with gas, but it has supplied only about 40% of the gas contracted for.  While the report is a bit vague, it seems that the agreement at issue has a $20 million liquidated damages clause, which Ghana thinks is far too low and does not provide an adequate incentive for Nigeria to perform.  

In music industry news, the Daily Record informs us that songwriter Wendy Starland won a $7.3 million jury verdict against producer Rob Fusari, who had entered into a settlement with Lady Gaga in 2010.  Fusari had claimed entitlement to $30.5 million for helping to launch Lady Gaga's career and contributing to her break-out hit album (are they still called that?).  We reported about that suit here.  Lady Gaga testified at the trial, at which Starland claimed that she and Fusari had a deal for splitting proceeds from Lady Gaga's career. 

And yet another non-disparagement case: this one in the context of realtors.  San Diego's ABC's affiliate, 10news.com reports that a realtor sought to arbitrate its breach of contract claim against a homeowner who posted a negative review on Yelp.  The homeowner claims that the realtor demanded $8000 and the removal of the Yelp review in order to settle the claim.  As Nancy Kim has pointed out, California has a law that will go into effect Jan. 1, 2015, such non-disparagement clauses will be unenforceable.  There can also be fines of up to $10,000 for contractual provisions that violate the new law.  

December 1, 2014 in Celebrity Contracts, In the News, Music | Permalink | Comments (0) | TrackBack (0)

Tuesday, November 25, 2014

More on Non-Disparagement Clauses

According to this story in the Mirror, a couple was charged an extra £100 for posting a review on TripAdvisor describing the Broadway Hotel in Blackpool as a "rotten, stinking hovel."  According to the report, the hotel believes that it is permitted to charge guests up to a maximum of £100 for negative comments, as the hotel's booking document so states.

According to the Mirror, this policy may violate unfair trade practices regulations.

For those of you curious about the hotel, you can find it TripAdvisor site here.

November 25, 2014 in In the News, Travel | Permalink | Comments (1) | TrackBack (0)

Monday, November 24, 2014

Weekly News Roundup

EbolaFile this under "Nice!"  According to this report in the Durham Herald Sun, the parents of a child who has been prohibited from attending his private school, the Mount Zion Christian Academy, are suing the school for breach of contract.  The allegations of breach are based on the fact that the child's parents are paying tuition, but their son is forbidden to attend his school.  

And what has the child done to earn this suspension?  Nothing!  His parents were informed that the child would not be permitted to attend school becasue his father had traveled to Nigeria, and the school did not want to risk the spread of ebola.  The school took these precautions despite the fact that:

  • there is no ebola in Nigeria;
  • the father had no contact with anyone with ebola;
  • the father was screened at the airport and cleared.

The superintendent of schools failed to appear at a hearing and a judge ordered the school to allow the child to return

According to this story from the Spokane Spokesman Review, an Idaho judge has thrown out as invalid a $60 million contract that the state entered into with Education Networks of America (ENA) and Qwest to provide a broadband network that would link every Idaho high school.  The plaintiff in the case, Syringa, had partnered with ENA on one of the two bids on the contract, but when the state awarded the contract to ENA, it cut Syringa out of the allocation of work in the contract.  The court found this a violation of state procurement law.

Sandra Troian a physicist at CalTech, has filed a complaint against the school, alleging violations of the California whistleblower protection statute and breach of contract, among other things.  Troian alleges that she had reported that the school had been infiltrated by a spy who was sending classified information to the Israeli government.  Troian alleges that the school ignored her because it did not want to endanger a large contract with Jet Propulsion Laboratories.  She further alleges that the school has retaliated against her for blowing the whistle.  

November 24, 2014 in Government Contracting, In the News, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Monday, November 10, 2014

Weekly News Roundup

According to this report on the International Business Times website, two children, through their mother, are suing Malaysia Airlines for breach of contract and negligence in connection with their father's death on Flight MH370.  Plaintiffs allege that the airline breached a safety agreement that it entered into with their father and the other passengers on the flight.  

Epstein-wendy-tAs reported here in the Bellingham Herald, the Indiana Supreme Court heard arguments on October 30th about the state's contract with IBM to privatize its welfare services.  The state was so disappointed with IBM's performance that it cancelled the contract three years into a $1.3 billion, ten-year deal.  Friend of the blog, Wendy Netter Epstein (pictured), has written about this case in the Cardozo Law Review.

Sunday's New York Times Magazine has a cover story pondering whether lawyers are going to do to football what they did to tobacco.  As an example of what this might look like we have this case filed on October 27, 2014 on behalf of Julius Whittier and a class of plaintiffs who played NCAA football from 1960-2014,  never played in the NFL, and have been diagnosed with latent brain injury or disease.  Mr. Whittier suffers from early-onset Alzheimer's.  The complaint alleges, among other things, breach of contract, based on NCAA documents requiring each member instittuion to look after the physical well-being of student athletes.  

November 10, 2014 in Government Contracting, In the News, Recent Cases, Sports, Travel | Permalink | Comments (0) | 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, November 3, 2014

Recent Contracts News

As reported on JDSupra here, the Florida District Court of Appeal for the Fourth District, sitting en banc, held that while an insurer’s liability for coverage and the extent of damages must be determined before a bad faith claim becomes ripe, the insured need not also show that the insurer is liable for breach of contract before proceeding on the bad faith claim.

We have also learned from JD Supra of Piedmont Office Realty Trust v. XL Specialty Ins. Co., 2014 U.S. App. LEXIS 20141 (11th Cir. Oct. 21, 2014), in which the United States Court of Appeals for the Eleventh Circuit, elected to certify to the Supreme Court of Georgia the question of whether an insured’s payment obligations under a judicially approved settlement agreement qualify as amounts that the insured is “legally obligated to pay,” and if so, whether the insured’s failure to have obtained the insurer’s consent to settle resulted in a forfeiture of coverage.

FootballAccording this this report on Yahoo! Sports, Oklahoma State is suing the former Offensive Coordinator of its football team, Joe Wickline (who now is a coach for the University of Texas), and Wickline has countersued.  According to the report, Wickline's contract with Oklahoma State require that he pay the balance of his contract ($593,478) if he left for another position and was not his new team's play-caller. Wickline claims that he is calling plays at Texas.  What a bizarre thing to put in a contract.  It's a reserve non-compete!  In effect, Oklahoma State is saying that it would pay Wickline to call plays for a rival.

According to this report from the Courthouse New Service,  Ted Marchibroda Jr., the son of NFL Football coach Ted Marchibroda, filed a $1 million malpractice lawsuit against Sullivan, Workman & Dee and trial lawyer Charles Cummings , alleging breach of contract, professional negligence and breach of fiduciary duty.  In a 2011 lawsuit, Marchibroda accused sports agent Marvin Demoff of breaching an agreement to share the proceeds of NFL contracts for linebacker Chad Greenway. He claims that he is also owed money for recruiting center Alex Mack. 

McIlroy
Uploaded by Mark Schierbecker 

And continuing our sports report, Golf.com notes that golfer Rory McIlroy is taking a break from the "sport" to pursue his legal claims against his former management company, Horizon Sports Management.  McIlroy claims that Horizon took advantage of his youth to extract an unconscionable 20% fee for McIlroy's off-the-course income.  Horizon is claiming $3 million in breach-of-contract damages.

In a simpler companion case to the Sharpe v. AmeriPlan Corp. case about which we blogged earlier today, the Eighth Circuit affirmed the District Court's denial of a motion to compel arbitration in Quam Construction Co., Inc. v. City of Redfield.  As reported here on Law.com, the case was relatively easy, since the contract at issue contained permissive language: "the parties may submit the controversy or claim to arbtiration."  Given such language, the Eighth Circuit agreed with the Distrcit Court that arbitration could not be compelled.

November 3, 2014 in In the News, Recent Cases, Sports | Permalink | TrackBack (0)

Friday, October 24, 2014

The New York Times's "The Upshot" Column on Wrap Contracts

Yesterday's New York Times included a "The Upshot" column by Jeremy B. Merrill.  The print version was entitled Online, It's Easy To Lose Your Right to Sue [by the way, why can't the Times be consistent in its capitaliziation of "to"?], but the online version's title tells us how easy, One-Third of Top Websites Restrict Customers' Right to Sue.   The usual way they restrict the right is through arbitration provisions and class-action waivers.  They do so through various wrap mechanisms so that consumers are bound when they click "I agree" to terms they likely have not read and perhaps have not even glanced at.  

Some websites attempt to bind consumers by stating somewhere on their websites that consumers are bound to the website's and the company's terms simply by using the company's website or its products (I'm looking at you, General Mills).  The only thing surprising about this, given the Supreme Court's warm embrace of binding arbitration and class action waivers, is that two-thirds of websites still do not avail themselves of this mechanism for avoiding adverse publicity and legal accountability.

As I was reading this article, it started to sound very familiar -- a lot like reading this blog.  And just as I was beginning to wonder why the Times was not ' quoting our own Nancy Kim, the article did just that:

Wrap Contracts“Courts have been very reluctant to say that browsewrap is not enforceable,” said Nancy S. Kim, a professor at the California Western School of Law and the author of a book about online contracts.

When courts decide whether a website’s terms can be enforced, they look for two things, Ms. Kim said: First, whether the user had notice of the site’s rules; and second, whether the user signaled his or her agreement to those rules. Courts have ruled that simply continuing to use the site signals agreement. When browsewrap agreements have been thrown out, as in the Zappos case, courts have said that the site’s link to the terms wasn’t displayed prominently enough to assume visitors had noticed it.

Congratulations to Nancy on such prominent notice of her scholarship!

And congratulations to the Times for paying attention!

 

October 24, 2014 in About this Blog, Contract Profs, In the News | Permalink | Comments (1) | 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)

Monday, October 13, 2014

Don't Want Negative Reviews? Pay to Have Them Removed

We have posted previously about business entities that try to go after customers that give them negative reviews here and here.  It seems, based on our limited experience, that threatening to sue customers for writing negative reviews is not a great business model.

Fortunately, there is a market solution.  As reported in this weekend's column in The New York Times's "The Ethicist," businesses that recieve negative online reviews can just contact the reviewers and pay them to take down the review.  According to the account in The Times, the author of a TripAdvisor review of a hotel entitled it "An Overpriced Dung Heap," but then accepted a 50% discount in return for removing the review.  He should have bargained down to "Dung Heap," since the hotel probably was still a dung heap but perhaps was no longer overpriced.

The reviewer asked The Ethicist who was most unethical: himself, the hotel or TripAdvisor for hosting a system so easily corrupted.  We don't get paid to weigh in on ethical matters.  Actually, we don't get paid at all.  But we do have opinions to vent, so here are some.

As The Ethicist acknowledged, what the hotel owner did was not illegal.  An economist might reduce the question to one of efficiency.  If the hotel owner thinks her money is well spent making bad publicity go away, rather than actually improving the quality of her hotel, that is a choice she can make as a business owner.  The market may prove her wrong.  The lack of negative reviews on TripAdvisor may not help if in fact one is greeted by a kickline of cockroaches and bedbugs when entering the guest rooms.  The Ethicist dodges the stickier problem that TripAdvisor may  contain only positive reviews of The Dung Heap Inn because the owners and their supporters flood the site with fake reviews.  One would think that TripAdvisor's value would be correlated to its accuracy, but it is hard to see what measure TripAdvisor could take to insure that posts on its site are the real deal. 

October 13, 2014 in Commentary, In the News, Travel | Permalink | Comments (0) | TrackBack (0)

Wednesday, October 1, 2014

Undercover Informant Sues DEA for Breach Contract for Injuries Sustained After Kidnapping

In a recently unsealed ruling, the U.S. Court of Claims has awarded $1.1 million in damages for breach of contract to a former undercover Drug Enforcement Administration ("DEA") informant who was kidnapped in Colombia and held captive for more than three months.

Here's a flavor from the opening paragraphs of the 52-page decision:

This breach-of-contract action comes before the Court after a trial on damages. In its decision addressing liability, the Court determined that the Drug Enforcement Administration (“DEA”) breached an implied-in-fact contract and its duty of good faith and fair dealing by failing to protect Plaintiff, an undercover informant. During an undercover operation in Colombia, Plaintiff, known as “the Princess,” was kidnapped and held captive for more than three months. Plaintiff claims that her kidnapping and prolonged captivity caused the onset of her multiple sclerosis and seeks compensatory damages in the amount of $10,000,000 for financial losses, inconvenience, future medical expenses, physical pain and suffering, and mental anguish arising from Defendant’s breach.

Because Plaintiff demonstrated that Defendant’s breach of contract was a substantial factor in causing the Princess’ kidnapping and captivity, and triggering her multiple sclerosis, the Court awards the Princess the value of her life care plan, $1,145,161.47.  Plaintiff failed to prove any other damages.

The decision covers a number of issues related to damages.  For example, the court holds that it was reasonably foreseeable at the time of contracing that a DEA informant would be kidnapped in Colombia and suffer resulting health issues:

The inquiry under foreseeability in this case is whether Plaintiff's damages, namely her multiple sclerosis and the ensuing costs of her medical care, were reasonably foreseeable at the time of contract formation. Anchor Sav. Bank, FSB, 597 F.3d at 1361; Pratt v. United States, 50 Fed. Cl. 469, 482 (2001) (“Whether damages are foreseeable is a factual determination made at the time of contract formation.”) (citing Bohac v. Dep't of Agriculture, 239 F.3d 1334, 1340 (Fed.Cir.2001)). Hence, Plaintiff must show that both the kidnapping, her ensuing health problems, and consequential financial costs of medical care constituted the type of loss that was reasonably foreseeable when the parties formed their implied-in-fact contract.

Plaintiff has established that her kidnapping was reasonably foreseeable at the time the contract was entered into. From the outset ASAC Salvemini voiced concerns for the Princess' safety, and DEA moved her family because of the dangers of her operation as part of her agreement to work with DEA. Evidence revealed that kidnappings were not uncommon in Colombia at the time. 2007 Tr. 270 (Princess); 2007 Tr. 1523 (Warren) (“[W]e got the report [the Princess] had been abducted. That was not an unusual report in Colombia then or now unfortunately.”). Plaintiff established that harm to undercover informants, including injury and death, were reasonably foreseeable consequences of a breach at the time of contract formation.

Knowing, as DEA did, of the dangers inherent in undercover operations aimed at highechelon Colombian traffickers, especially kidnapping in Col ombi a–a “hot spot”–the Princess' kidnapping and resultant harm to her health was a reasonably foreseeable type of injury at contract formation. The Court recognizes that DEA likely did not specifically foresee that the injury would be multiple sclerosis, but this is not a requirement for a showing of foreseeability. Anchor Savings Bank, FSB, 597 F.3d at 1362–63 (noting that “the particular details of a loss need not be foreseeable,” as long as the mechanism of loss was foreseeable) (quoting Fifth Third Bank v. United States, 518 F.3d 1368, 1376 (Fed.Cir.2008)).

Not the ordinary intrigue of the average contracts case.

SGS-92-X003 v. U.S., No. 97-579C (Ct. of Fed. Claims, filed Aug. 30, 2014)(republished Sept. 26, 2014).

October 1, 2014 in Government Contracting, In the News, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 23, 2014

Planet Money Episode 570: The Fine Print

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The folks over at NPR's PlanetMoney have a new episode titled "The Fine Print." And it delivers!  By their description:

On today's show, we read our homeowners insurance policy.

The details are amazing. Lava! Vermin! Falling objects! And, hiding in all the fine print, the story of how insurance works — and what makes it break.

The episode happens to have relevance to our ongoing symposium and even features a conversation with Daniel Schwarcz, one of the symposium contributors.  If you listen, you'll hear Prof. Schwarcz admit that, to be sexy, insurance law might just need a little airbrushing.

Definitely worth listening - Enjoy!

September 23, 2014 in In the News, Miscellaneous, Teaching, Weblogs | Permalink | Comments (0) | TrackBack (0)

Monday, September 22, 2014

The Problem of Undisclosed Doctors

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"Africa Partnerships Hamlin Fistula 9 (10665497754)" by Lucy Perry/Hamlin Fistula Relief and Aid Fund Australia 

 

We interrupt our virtual symposium on the new book by Omri Ben-Shahar and Carl E. SchneiderMore Than You Wanted to Know: The Failure of Mandated Disclosureto bring you this news story about the dangers of non-disclosure.  Sunday's New York Times, features a front-page article about people who discover that doctors unknown to them assisted in their surgeries.  The doctors are sometimes out of network, and the costs can be astronomical.

For example, the Times story begins by telling of surgery performed on Peter Dreier.  Most of the bills that followed were expected, but there was a $117,000 bill from an "assistant surgeon" of whose existence Dreier claims to have been unaware.  It sounds like Mr. Dreier was the rara avis who actually took advantage of medical disclosure forms to eductate himself about his options and the costs.  And so he was blindsided by the six-digit bill from an apparently undisclosed doctor.

[Just an aside here.  $117,000 for three hours of work makes no sense in any context.  It makes far less in this context, in which the "primary surgeon" accepted a negotiated fee of $6200.]

The Times also reports on Patricia Kaufman, who received bills totalling $250,000 from two plastic surgeons who sewed up an incision.  She had had previous surgeries in which residents sewed up the incisions at a much lower cost.  She and her husband claim that they had no idea who these doctors were until the bills started showing up.  

According to the Times, insurance companies often pay the bills rather than fight, encouraging the practice.  Some states, including New York, are now seeking to regulate such "drive by" surgeries.  It is not clear why the insurance companies would pay for services that had not been disclosed in advance.  Perhaps this is grist to the anti-disclosurite mill after all, if the out-of-network surgeons were in fact disclosed somehow in the stack of informed consent papers.  

September 22, 2014 in Commentary, In the News, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)