Wednesday, November 30, 2016
The lease for the Trump International Hotel, housed in Washington’s historic Old Post Office Pavilion owned by the federal General Services Administration (“GSA”), contains a clause forbidding elected officials from involvement. Trump, as president, essentially would be both landlord and tenant.
That may be an ethical problem as well as a federal contract law violation. Trump would oversee the GSA and appoint its administrator ― a conflict of interest with his hotel interest. GSA officials are looking into the matter.
Steven Schooner and Daniel Gordon, former government officials who specialize in federal contract law, have recommended that GSA “immediately end the hotel lease relationship, before Trump becomes president” to avoid ethics problems. Of course, if GSA terminates the lease contract, it risks litigation potentially with… Trump as a winner.
However, says Schooner, that’s a risk worth running. “In the end, it’s just a frigging lease.” It would also be a president heavily involved in private business affairs over which he would exercise significant power, real and perceived. But that may just be how our country is developing these days. We frown on similar behaviors in relation to other countries, but when it comes to our own, we are apparently either becoming accepting of unacceptable behaviors or powerless to do much about them.
Thursday, November 24, 2016
As our friends on the Faculty Lounge just announced, Dean Schwartz was just forced to step down as Dean of the University of Arkansas, Little Rock, School of Law. Why? After the recent presidential election, he sent an email to students offering counseling to those upset by the results. Similar initiatives were undertaken around the nation in places so politically and geographically different as the University of South Dakota and Occidental College in Los Angeles.
Apparently, what really cost Dean Schwartz his position was his personal opinion given in the email, namely that the services would be offered to students who “feel upset” following the “most upsetting, most painful, most disturbing election season of my lifetime.”
A colleague of Schwartz's, Robert Steinbuch, who previously tussled with Schwartz over diversity in admissions, explained [cite to FL]: “If you tell people every time they lose they’re entitled to counseling, you elevate the perceived level of wrong beyond what it is. Most assuredly, Democrats are disappointed a Republican won. I recall when the Democratic Party won the Presidency twice each of the previous two elections. I knew plenty of people who were disappointed at that time, but I didn’t know anybody that needed grief counseling. I think when we tell people that they need some form of grief counseling we are normalizing hysteria and suggesting there’s something immoral or wrong about our democratic process.”
How incredibly misunderstood and off point. First, there really is something wrong about our democratic process when repeatedly, the person winning most of the popular votes in an election does not become the president. Similarly, our two-party only, “winner takes it all” system is arguably not a sufficiently faceted system that can be considered to be a true representative, deliberative democracy. But I get that, the system should then be changed before the next election. That won’t happen, just like time after time, mass shooting episodes don’t cause a change to our gun laws or the mass murder situation in general. Such is our country, and so be it, apparently.
What is incredible to me in relation to the above is not Schwartz’ alleged normalization of “hysteria” (read: justified outrage), it is attempts to make this particular election appear normal. It simply was not. Everyone seems to agree on that, Democrats and Republicans alike. In fact, note that many Republicans were outraged as well – and for good reason. Should it be acceptable that we now have a President who, for example, is proud that he “grabs women by the pussy” and “just start[s] kissing them” whether or not they want it? Someone who claims that he is “smart” for not paying taxes for, apparently, many years to a country that he wants to lead, even though he could easily afford doing so? A person who, in spite of sound science proving otherwise until at least yesterday claimed that climate change is a “hoax made up by the Chinese”?
I would hope not. But as we see, apparently that is what we just have to put up with and not even opine about, even in legal academia, in the form of a sentence as innocuous as one that refers to simple, but honest, feelings shared by millions of other people as well.
Throughout history, censorship has never proved particularly effective. As a nation, if we seek to revert to such strategies, we are truly in trouble. Schwartz’ comments may well have upset Republican law students, but maybe that in and of itself would have had some value, especially in an academic setting where thoughts are valued for being just that; thoughts that just might help improve our nation.
On an up note: Happy Thanksgiving, and thanks to Michael Schwartz for being a such a courageous, thoughtful dean and legal scholar!
Greetings from Berlin.
November 24, 2016.
Monday, November 21, 2016
My love for the British car show "Top Gear" over the past few years was deep and abiding, despite the fact that I am not interested in cars at all. Like most of the people I know, I watched Top Gear for the hosts, Jeremy Clarkson, Richard Hammond, and James May--a trio of men whose friendly and hilarious chemistry was, I thought, a little like capturing lightning in a bottle; it comes around so infrequently that it's striking when it does.
For a taste of what this version of Top Gear was like, please enjoy my personal favorite, one of the caravan episodes:
Or maybe you would prefer one of the boat-car episodes:
The Top Gear Wikipedia entry details that the show's popularity resulted in consistently high ratings, a waiting list for tickets to the stage-filmed portion of the show that numbered in the hundreds of thousands, and a Guinness World Record for the world's most widely watched factual television show.
There have been a number of high-profile Top Gear events over the years that I could document here, from Richard Hammond's terrifying crash while filming the show to the fascinating contractual dispute over the Stig, the show's famously anonymous racing driver, revealing his true identity.
But what I'm really focusing on in this entry is the fact that the Top Gear hosts have a new show, "The Grand Tour," that looks a whole lot like their old show, and it made me wonder what their contracts looked like.
The hosts left Top Gear over controversially. The BBC declined to renew Jeremy Clarkson's contract in March 2015, following an attack by Clarkson on one of the producers on the show (later the subject of a lawsuit that Clarkson settled for a hundred thousand pounds and a formal apology). The other two presenters, Hammond and May, also had contracts up for renewal and chose not to re-sign with the BBC, instead following Clarkson to Amazon, where the trio have launched a show called The Grand Tour.
I didn't know what to expect from The Grand Tour but it turns out to be Top Gear by a different name. Where Top Gear had a Stig, The Grand Tour has "the American" -- and they tell us who he is right off the bat, rather than get embroiled in that kind of controversy again. Top Gear had a segment called, simply, "The News"; The Grand Tour launched a similar segment called "Conversation Street." Top Gear had a segment called "Star in a Reasonably Priced Car"; The Grand Tour...well, you should watch the show for its take on that segment. This review does a nice job running down all the similarities between the old show and the new.
This all fascinated me from a contract perspective. I knew that Clarkson had previously co-owned the commercial rights to Top Gear. He sold them to the BBC in 2012 for fourteen million pounds. So, having given up those rights and left the BBC, Clarkson clearly couldn't keep making "Top Gear." But he is making a motoring show that is almost identical in every cheeky winking respect to the one he left behind (right down to a simple title highlighting a prominent "T" and "G").
I do think, from an IP point of view, the new show seems safe: they've been careful to avoid any trademarks and only seem to resemble Top Gear in the uncopyrightable idea level, i.e., being a playful show about cars. But I assumed that Clarkson, Hammond, and May had to have had a non-compete with the BBC, so I went looking for it, and I did find evidence that there was one. It apparently prohibited the three from presenting a competing car program for a period of two years. The two years aren't up yet, leaving lawyers to speculate that a conclusion was drawn that the non-compete only applied to terrestrial broadcast stations and not to Amazon's streaming Internet television. The entertainment industry is changing so quickly, it doesn't surprise me that the contracts are having trouble keeping up.
Surely the BBC would have preferred to keep Clarkson, Hammond, and May from kicking a rival car show into production so quickly, especially while the BBC's relaunched Top Gear has reportedly struggled. But apparently their contracts failed to give them sufficient protection to save them from the result.
I will leave for another day the issues of contracts made during the filming of Top Gear itself; like, for instance, the time Clarkson offered to save Hammond from a sinking boat in exchange for a bucket...that turned out to have holes.
And instead I will leave this entry with an acknowledgment that Jeremy Clarkson is a problematic and controversial figure who is not a stranger to making offensive statement. That's beyond the scope of this article about the BBC's contracts, but this review, I think, does a decent job of capturing the internal tension of a former Top Gear fan contemplating the new Grand Tour.
Wednesday, November 2, 2016
Thanks to InsideHigherEd, I became aware of this recent case out of the First Circuit, Walker v. President and Fellows of Harvard College, No. 15-1154, and seeing as it involved JOLT, the Harvard Journal of Law and Technology that I was an executive editor of when I was in law school there, I couldn't resist digging into the case.
And I'm glad I did, because it's a really interesting case about the lingering effect of honor code violations and the wording of school academic policies.
The plaintiff graduated from Harvard Law School in 2009. During her time at Harvard, she was a member of JOLT. In that capacity, she drafted a student note. However, when she sent the note to senior editors at JOLT, they became concerned about plagiarism issues and referred the note to the HLS Administrative Board. The Board concluded that the plaintiff's note contained plagiarism that violated the school's Handbook of Academic Policies and a notation was placed on her transcript. The plaintiff still graduated from HLS but had a "lucrative" offer of employment withdrawn after the notation was placed on her transcript. So the plaintiff sued to have the notation on her transcript removed. HLS won summary judgment at the district court level and this appeal followed.
The court affirmed the judgment of the district court. The parties agreed that the Student Handbook constituted a contract between the plaintiff and HLS. (The court noted that this was not actually obvious under Massachusetts law but that it would treat the handbook as a contract because the parties did not dispute it.) Therefore, the court focused its review on whether the plaintiff's behavior violated the stated plagiarism policy in a way that the plaintiff should have reasonably expected.
The Handbook stated: "All work submitted by a student for any academic or non-academic exercise is expected to be the student's own work." The plaintiff's main argument was that the student note she sent to the JOLT editors was just a draft that she planned to edit in the future, and the Handbook policy should be read as only applying to completed work that was not expected to undergo further editing. The court disagreed, however. The wording of the Handbook was extremely broad, referring to "all work." A student in the plaintiff's position should reasonably have expected that any student note submitted to the editors, whether a draft or in final form, would be held to the standards of the policy. Nothing about "all work" would make a student think that drafts were omitted from the definition, according to the court.
Saturday, October 22, 2016
A friend of mine asked me the other day about the ongoing controversy over all of that unaired Apprentice footage that is apparently sitting around somewhere. MGM and Mark Burnett have both claimed that they are not allowed to release the tapes due to confidentiality provisions in their contracts with Donald Trump. (Fortune has an article about this here, as does the New York Times.) My friend's question basically boiled down to this: Yeah, sure, maybe that deal made sense when the contract was signed with a New York self-professed billionaire but now he's running for President of the United States, and shouldn't that mean something?
Other people have raised this issue. What seems to me unique about the Donald Trump situation isn't necessarily the confidentiality provisions over the Apprentice tape, but how often, during this political campaign, we've been debating the secrecy Trump requires from all of those around him. The Apprentice contract is just the latest example of this. Over the summer, several news outlets reported on the unusually broad terms of the NDA Trump required his staffers to sign. To be fair, NDAs are not unusual during a Presidential campaign and Hillary Clinton has allegedly had her staffers sign them as well. But Trump's apparently are unusually broad, and he requires them even of volunteers who show up to make calls for Trump's campaign and presumably never even really meet Trump? What confidential information could these volunteers even know? Well, Trump is the one who gets to tell them that. And he's not afraid to sue on the NDAs: We know of at least one arbitration filed against a former staffer, alleging damages of $10 million.
Two things I take away from this:
(1) Donald Trump seems to be obsessed with controlling his image, which makes total sense, as he's made an entire career out of Being Donald Trump and it could even make him President. Trump is so fond of restricting what those around him can say about him that he's even said he'll make his federal employees sign NDAs if he does become President. At the same time, of course, Trump himself doesn't appear to feel restrained in any way to say any thought that comes into his head. So we seem to have a situation where part of the advantage of being rich is being able to say absolutely anything you want and also control to some degree what the people around you get to say, even once your relationship with them has been terminated.
(2) Despite this, however, we all know more about Donald Trump than I think he wants us to know. In the relentless glare of a Presidential campaign, no matter how many NDAs you leave in your wake, is it just impossible to keep secrets forever? And, maybe, is there something comforting about that? My friend wants to see the Apprentice tapes, but we don't know what's in the Apprentice tapes, and we don't know who even has time to review them. But we do know a great deal, maybe not Apprentice-related, but maybe enough?
P.S. This is not the first time I've blogged about Donald Trump's contracts. If you're curious, that case hasn't really progressed since that blog entry.
Wednesday, October 12, 2016
'Tis the season!
No, not that season--yet--although last week I was shopping and noticed that the shelves are full of Christmas merchandise already so maybe it is that season.
But the real season is Halloween! Now I enjoy Halloween well enough but I'm not much of a haunted house person (or even a scary movie person), so I don't know much about them, and I was fascinated to learn that there are several haunted houses around the country that require attendees to sign waivers. In the words of this Cosmo article, "A 'if you're so scared that you actually die, your family won't sue us into oblivion' type of waiver." (Some haunted houses even involve electric shocks, I was told. Electric shocks!! I had no idea.)
I was able to locate a couple of these haunted house waivers online. Here's one that acknowledges risk of animal bites and contacts with poisonous plants (yikes!). Here's another one (with I have to admit a fair amount of typos) that contains a little clause down at the bottom acknowledging that you've been offered safety glasses.
At least one article queries whether this practice is entirely legal. The article asks, "Is it okay to mentally and even physically abuse individuals if they sign a waiver? Is there a limit to what should be legally acceptable?" and notes that few people are able to complete the experience and that it frequently leaves participants bruised, cut, and apparently shivering with shock. The haunted house they're talking about in the article requires guests to go through a health check first, I guess to try to minimize the possibility that they will suffer any lasting harm--either physically or mentally--from whatever crazy thing is going on in there. While this might sound terrifying to me, it apparently just sounds like an awesome time to a bunch of people. According to this article, there's a 17,000-person waiting list to get into this haunted house.
Another interesting thing I learned while researching this stuff (peering at the scary descriptions from between my fingers) is that apparently some of the haunted houses also make the guests sign confidentiality provisions? I guess to preserve the surprise for others. At any rate, now I've creeped myself out just looking at this stuff and I need to go watch some HGTV just to stop shuddering!
Btw, if you are a haunted house person and you're curious if one of these extreme you-would-have-to-pay-me-a-million-dollars-to-go-in-here experiences is near you, I found lists here and here. Or feel free to leave your personal favorite in the comments! Happy haunting!
Monday, October 3, 2016
In 2003, 50 Cent released the song "P.I.M.P." The song was a huge top-ten hit for the hip-hop artist, achieving gold status in sales.
The problem is that Brandon Parrott alleges that the song contains, without his prior consent, a track he wrote called "BAMBA."
The parties had apparent discussions about this in 2003, entering into a settlement agreement under which Parrott received some royalties on "P.I.M.P." in exchange for Parrott licensing the pieces of his song that were used in "P.I.M.P." and agreeing to release all of his remaining claims. According to the defendants, the contract between the parties contained a clause in which Parrott represented "that no promise, representation, or inducement not expressed herein" was made in connection with the contract.
The parties are back in court, though, with Parrott alleging in a pro se complaint filed in the Central District of California, Parrott v. Porter, #2:16-cv-04287-SJO-GJS (behind paywall), that that the settlement agreement is invalid because he was basically tricked into signing it "under false and fraudulent pretenses." Parrot argues that he thought the defendants acted in "Good Faith" and used "BAMBA" in "P.I.M.P." entirely accidentally. However, Parrott claims that he has now realized that the defendants knew that "P.I.M.P." contained Parrot's music and deliberately released "P.I.M.P." without attempting to contact Parrot for permission beforehand. In addition, Parrott appears to contend that there are inconsistencies with the royalty statements he's been sent under the settlement agreement that he has been unable to reconcile due to the defendants' lack of cooperation.
The defendants have now responded to the complaint with a motion to dismiss, apparently resting mainly on the fact that the settlement agreement is valid and governs the situation between the parties, under which Parrott has been collecting royalties for years.
Where is 50 Cent in all of this? Preoccupied with his own ongoing bankruptcy proceedings.
(Hollywood Reporter article on all this here.)
Tuesday, September 20, 2016
New York Attorney General Eric Schneiderman has launched an investigation into whether now-notorious EpiPen manufacturer Mylan inserted potentially anticompetitive terms into its EpiPen sales contracts with numerous local school systems.
EpiPens are carried by those of us who have severe allergies to, for example, bee stings. The active ingredient will help prevent anaphylactic shocks that can quickly result in death. In 2007, a two-pack of EpiPens sold for $57. Today, the price is $600. The company touts various coupons, school purchase programs and the like, but in my experience, at least the coupons are mere puffery unless you are very lucky to fit into a tiny category of users that I have not been able to take the time to identify.
However, there is finally hope for some real competition in this field: Minneapolis doctor Douglas McMahon has created an EpiPen alternative that he is trying to market. This doctor claims that Mylan and companies like it have lost sigh of patient needs and are catering to investors. In his opinion, that is the true reason for the skyrocketing prices. Well said.
The doctor is even resorting to something as unusual as a fundraising website to raise money for the required FDA testing and other steps.
Another contractual issue seems to be why customers have to buy at least two Epipens at a time. The active ingredient only lasts for one year. Those of use who carry EpiPens hope never to have to use them, but if we will, it is extremely unlikely that we will have to do so twice in a year! But alas, in the United States at least, you have to buy this product in a two-pack (EpiPens are sold individually in countries such as Canada and the UK). It may be a regulatory and not a pure contractual issue, but if the company truly sticks to its current story that it is on the up-and-up in all respects in this context, they should at least enable people to offer to buy only what they need, which in many cases would be only one EpiPen at a time.
Hat tip to Professor Carol Chomsky of the University of Minnesota School of Law for the information on the Minnesota doctor.
Monday, September 19, 2016
An interesting recent case out of Texas, Deuell v. Texas Right to Life Committee, Inc., No. 01-15-00617-CV (behind paywall), deals with political advertisements, cease-and-desist letters, First Amendment free speech rights, and yes, contract.
In the case, Deuell was a candidate for state senate. Texas Right to Life Committee (TRLC) ran some radio ads stating, among other things, "Bob Deuell sponsored a bill to give even more power to . . . hospital panels over life and death for our ailing family members. Bob Deuell turned his back on life and on disabled patients." Deuell's lawyers sent cease-and-desist letters to the radio stations stating that the ads were defamatory and "respectfully demand[ing]" that the radio stations cease airing the ads. The radio stations, upon receipt of the letters, contacted TRLC and told it they were suspending the ads. TRLC then produced a new advertisement that the radio stations found acceptable to air, and also contracted "for additional airtime to compensate for the lost advertising time." TRLC then sued Deuell for tortious interference with contract and sought recovery of the amount it expended to produce the new ad and buy more airtime. Deuell moved to dismiss, arguing that the Texas Citizens Participation Act (TCPA) protected his cease-and-desist letter as free speech and that TRLC's allegations were not sufficient to overcome this.
The court disagreed and denied the motion to dismiss. The court found that TRLC had adequately alleged the existence of contracts with the radio stations and that the cease and desist letters were "clear and specific evidence" (the relevant standard under the TCPA) that Deuell had intentionally and willfully interfered with these contracts that proximately caused TRLC to suffer the damages it alleged. The TCPA and Deuell's free speech rights therefore did not operate to prohibit TRLC's cause of action.
Deuell did attempt to argue other things, including that TRLC's ads were illegal under the Texas Election Code, rendering TRLC's contracts with the radio stations to run the ads illegal contracts that could not result in tortious interference, as "a defendant cannot be held liable for tortiously interfering with an illegal contract." The court concluded, however, that there was no basis for declaring the contract illegal because the section of the Texas Election Code at issue had actually been declared unconstitutional.
There was a dissent in this case that would have held that Deuell's cease-and-desist letter implicated free speech rights under the TCPA and that TRLC did not provide the "clear and specific evidence" that would permit its case to survive in the face of those free speech implications.
Friday, September 16, 2016
A British start-up company called Luminance, which is also the name of its flagship due diligence analysis, “promises” to read documents and speed up the legal process around contracting, “potentially cutting out some lawyers.” (See here and here).
Luminance says that its software “understands language the way humans do, in volumes and at speeds that humans will never achieve. It provides an immediate and global overview of any company, picking out warning signs without needing any instruction.” Really? When I was working in the language localization things more than a decade ago, I heard the same promises then… but they never come to fruition. We’ll see how this program fares.
The software is said to be “trained by legal experts.” Talk about personification of an almost literary-style. We see the same trend in the United States, though. Just think about phone and internet programs that pretend to be your “assistant” and use phrases such as “Hi, my name is [so-and-so], and I’m going to help you today…”
Meanwhile, if a law firm used software to analyze documents, would it not be subject to legal malpractice if it did not discover contracting or other issues that a human would have, in this country at least? It would seem so… and for that reason alone perhaps also be a breach of contract unless clients were made aware that cost-cutting measures include having computers analyze documents that attorneys normally do.
Saturday, September 10, 2016
In an 8/27 article, the New York Times (paid access only) reports how Payless Car Rental, owned by Avis Budget, basically forces at least some of its customers to buy personal liability insurance whether or not they want it. Here’s how the story reports it done – well worth repeating on this website to show the blatant disregard for contract law displayed by Payless Car Rental:
A client states repeatedly to the car rental company that he or she does not want insurance. When returning the car after the rental period is over, guess what shows up on the receipt: of course, the declined insurance – in one case $222. When the renter complains, the car rental agency representative snatches the contract that had been initialed by the renter, who apparently thought he or she indicate that they did not want the insurance. Instead, although orally and repeatedly stating that, the initials indicated that he or she did want the insurance (fine print probably not read by renter at airport counter).
After not getting the reimbursement requested, he or she disputed the charge with credit card provider American Express. The amount was refunded, the renter thought… until Payless sent a letter titled “Debit notice” which indicated that the amount would now be sent to collection by a company located on, I kid you not, “32960 Collection Center Drive, Chicago, Ill.” The problem with that is that no such address exists! Try in Google Maps. At least I and the New York Times reporter could not bring it up.
Payless also told the renter that if he or she did not react, his/her “rental privileges” would be suspended(!). Not sure why they would think that their renter would ever want to rent from that company again…
A Payless PR representative did not, when contacted about this incident, offer any explanation or apologies. She simply stated that the issue had been resolved and that “we will reinforce with our associates … the importance of ensuring that our customers clearly understand which services and options they are selecting.” It seems like they should also train their associates to accept the contractual choices then made by the customers.
Tuesday, September 6, 2016
Vast Majority of Consumers Prefer Court Procedure over Arbitration
We have discussed arbitration clauses in this blog several times. Now, a Pew Charitable Trust survey of more than 1,000 individuals shows that 95% of consumers prefer judge or jury trials regarding questionable bank fees and similar practices over arbitration clauses. 89% want to be able to join a class action lawsuit. At the same time, no less than 93% of banks include jury (but not bench) trial waivers in their checking account agreements.
What about the argument that the only thing that consumers get out of this is higher fees and fewer services to cover increased litigation costs? First, consumers are not prohibited from choosing arbitration, it’s the option to have class action suits that is at issue here. And as the Los Angeles Times reported, “if banks keep their noses clean, they won’t end up in court” in the first place. Besides, it’s not so much consumers that choose to litigate, businesses file four times as many lawsuits as individuals. Maybe this is for good reason: arbitrators ruled in favor of banks and credit card companies 94% of the time in disputes with California consumers. Maybe it is not: since banks are the ones who pay for the arbitration process, a recurring concern is that arbitrators may be reluctant to find against the banks.
Of course, class action lawsuits is the only feasible way for consumers to have their legal rights vindicated because of the small individual amounts involved. For the banks, however, this is big business – literally: In April, the Supreme Court let stand a decision that Wells Fargo had deliberately arranged checking-account payments in order to “maximize the number of overdrafts” resulting in fees of $25-35. http://www.scotusblog.com/wp-content/uploads/2016/03/13-16195.pdf
Monday, September 5, 2016
A few days ago, I posted a blog here on Amtrak raising the rent on backyard lots neighboring Amtrak's railroad lines in New York. The rent in some cases went up by 100,000% (!) according to the website of Congressman Joseph Crowley.
Professor Bruckner posed the relevant question of whether the now hotly contested leases are truly new leases or the renegotiation of existing ones. I've been trying to find out, but not having seen the actual letter from Amtrak (yet), I've dug through news reports and website of legislators. This is the upshot as best as I can find out right now: It looks like Amtrak is upping the price on _existing_ leases after having had very low prices for years. See, e.g., these statements: "For decades, Amtrak has leased the property underneath the trusses to homeowners for a nominal fee which releases the agency from the burden of maintaining the premises. Residents were given a 30-day notice to accept an unconscionable annual rent increase – in some cases as much as 100,000 percent or tens of thousands of dollars" and "[i]n a letter addressed to homeowners, Amtrak argues that a review of the lease and the premises it covers, indicates the lease is substantially undervalued. For some, the rent will go up from $25 annually to over $26,000 annually. Failure to approve the new rental amount would result in the termination of the lease 30 days from the notice."
To me, that does indeed seem if not outright unconscionable, then certainly in violation of reasonable contractual expectations and the contractual terms what appears to be an already existing contract.
As mentioned, Amtrak does have a good argument in its prices having been exceptionally low for decades, but perhaps market prices should be introduced over time as the lessees get replaced over time with the existing leases somehow being grandfathered in? Granted, the turnover in the NYC real estate market may not be high in the case of lucrative deals, but on the other hand, nobody lives in any home forever. Underlying this story does seem to be the fact that Amtrak got upset not so much about the low rents per se, but the fact that some renters were making profits off them.
Saturday, September 3, 2016
You heard about Epipen, the “price of which has climbed sixfold over the last several years. At drug price-comparison website GoodRx, the cheapest price today is $614 for a package containing two, or more than $300 per EpiPen, up from about $100 for two.”
Now there’s Amtrak. The company just raised the prices for renting backyard spaces underneath the Hell Gate Bridge in New York from, in one case, $25 to $25,560 a year (that’s not a typo) and, in another, from $50 to $45,000 a year.
The homeowners that rent these “additional” spaces have been given 30 days to accept the new leases or else give up the land. Some use it for recreational purposes but others rent it out as parking lots, which has allegedly caused Amtrak to reconsider these contracts. The company has confirmed the rent hikes, stating that “some lease holders have not seen an increase in more than 70 years” and that renters can still expect to pay only “a fraction (less than 1 percent) of the fair market rental rates.” Amtrak will be “working with each person individually to determine the exact terms of their lease.”
Is this fair? Many of the renters have decks, pools, and established plants on the land. They also clear snow, remove falling bricks and other debris from the land. They’ve been able to enjoy the land for years, perhaps creating a reasonable “course of performance” expectation that the rents would not be increased to such a high extent.
On the other hand, the rent is exceptionally low for New York and has not been increased for many decades. Then again, if the intent of these contracts was for them to serve mainly recreational purposes, what about people that now convert the land into commercial use (parking lots, of all things)? Does that matter?
This case raises interesting issues of contract interpretation, unilateral contract modification, good faith obligations by both parties, etc. It seems to me that Amtrak might, depending on the wording of these contracts, be able to now increase the rent somewhat, but to the extent done here, the intent seems to be an arguably contractually impermissible penalty rather than, perhaps, a good-faith renegotiation of contract terms.
Hat tip to Shubha Ghosh for alerting my attention to this issue.
Monday, August 29, 2016
Allow me to highlight my most recent article on the questionable ecosystem viability and contractual common law validity of so-called “trophy hunting” contracts. With these contracts, wealthy individuals in or from, often, the Global North contract for assistance in hunting rare animals for “sport.” Often, these hunts takes place in the Global South where targeted species include giraffes, rhinos, lions, and other vulnerable if not outright threatened or endangered species.
A famous example of this is Minnesota dentist Walter Palmer killing “Cecil the Lion” in 2015 causing widespread outcry in this country and around the world. Trophy hunting also takes place in the USA and Canada, where targeted animals include polar bears, grizzly bears, and big horn sheep.
Trophy hunting should be seen on the background of an unprecedented rate of species extinction caused by several factors. Some affected species are already gone; others are about to follow. Western black rhinoceroses, for example, are already considered to have become extinct in 2011. The rest of the African rhinoceros population may follow suit within the next twenty years if not sufficiently protected. In the meantime, more than 1.2 million “trophies” of over 1,200 different kinds of animals were imported into the United States just between 2004 and 2015. In addition to the extinction problem, the practice may also have ecosystem impacts because, among many other factors, the trophies often stem from or consist of alpha animals.
Of course, no one is arguing that rare species should be driven to extinction, in fact, quite the opposite: both trophy hunters and those opposing the practice agree that such species should be conserved for the future. However, the question lies in how to do so. Some argue that trophy hunting creates not only highly needed revenue for some nations, but also brings more attention to the species conservation issue.
I argue that at least until there is much greater certainty than what is currently the case that the practice truly does help the species in the long run (and we don’t have much time for “the long run”!), legal steps must be taken against the trophy hunting. Even when positive law such as hunting laws and/or the Endangered Species Act (“ESA”) do not address the issue (yet), common law courts may declare contracts that have proved to be “deleterious effect upon society as a whole,” “unsavory,” “undesirable,” “nefarious,” or “at war with the interests of society” unenforceable for reasons of public policy.
In the case of Cecil, African lions had been proposed for listing under the ESA when the animal was killed, but the listing did not take effect until a few months later. The case, others like it, and several studies demonstrate that a sufficient and sufficiently broad segment of the population have come to find the killing of very rare animals so reprehensible that common law courts can declare them unenforceable should litigation on the issue arise. This has been the case with many other contracts over time. The same has come to be the case with trophy hunting. As long as doubt exists as to the actual desirability of the practice from society’s point of view – not that of a select wealthy individuals – the precautionary principle of law calls for nations to err on the side of caution. The United States prescribes to this principle as well.
The article also analyzes how different values such as intrinsic and existence values should be taken into account in attempts to monetize the “value” of the practice. Instead of the here-and-now cash that may contribute to local economies (much revenue is also lost to corruption in some nations), other practices such as photo safaris are found by several studies to contribute more, especially in the long term. (Note that Walter Palmer paid a measly USD 50,000 for his contract with the landowner and local hunting guide).
Trying to save rare animals by shooting them simply flies in the face of common sense. It also very arguably violates notions of national and international law.
Sunday, August 28, 2016
The Second Circuit just ruled in a case involving Amazon that "reasonable minds could disagree on the reasonableness of the notice" of the arbitration agreement provided by Amazon.
In 2013, the plaintiff, Dean Nicosia, bought diet pills on Amazon containing the ingredient sibutramine, a controlled substance that was withdrawn from the market by the FDA in 2010 because of concerns over severe health risks. Mr. Nicosia stated that the presence of sibutramine was not disclosed to him and that he was never notified nor offered a refund, even after Amazon stopped selling the product. Amazon moved to dismiss on the grounds that Nicosia's claims were covered by a mandatory arbitration provision. The district court granted that motion, finding that Nicosia had constructive notice of the arbitration clause.
When Nicosia bought the product, the final checkout screen stated “Review your order” and “[b]y placing your order, you agree to Amazon.com’s privacy notice and conditions of use.” The words “conditions of use” were hyperlinked to the actual text of the terms including the arbitration agreement, but were “not bold, capitalized, or conspicuous in light of the whole webpage.” Proximity to the top of a webpage also does not necessarily make something more likely to be read in the context of an elaborate webpage design. Additionally, said the court, “[a]lthough it is impossible to say with certainty based on the record, there appear to be between fifteen and twenty‐five links on the Order Page, and various text is displayed in at least four font sizes and six colors (blue, yellow, green, red, orange, and black), alongside multiple buttons and promotional advertisements. Further, the presence of customers’ personal address, credit card information, shipping options, and purchase summary are sufficiently distracting so as to temper whatever effect the notification has.”
The court made the further analogy:
“It is as if an apple stand visitor walks up to the shop and sees, above the basket of apples, a wall filled with signs. Some of those signs contain information necessary for her purchase, such as price, method of payment, and delivery details, and are displayed prominently in the center of the wall. Others she may quickly disregard, including advertisements for other fruit stands. Among them is a sign binding her to additional terms as a condition of her purchase. Has the apple stand owner provided reasonably conspicuous notice? We think reasonable minds could disagree.”
The Amazon case raises some interesting questions, I think. First and as always: is an online customer – a consumer in this case - truly put on notice just because of a hyperlink on a website? The Second Circuit will now get a chance to resolve that issue. Second, and perhaps much more troubling here is the weight the district court gave to the mere fact that Mr. Nicosia had “signed up for an account” with Amazon. In today’s day and age, we all sign up for numerous accounts to conduct all sorts of life matters from the simple to the complex. I, for one, don’t like to shop or conduct much other business online, but I have an entire spreadsheet full of usernames and passwords to various websites that I have used or still sometimes use. In and of itself, that hardly means that I am aware of any contractual terms contained anywhere on those websites. In my opinion, holding users to such “notice” is unreasonable and unrealistic in today’s busy world (it is simply too time-consuming to study all possible legal requirements listed on all these website in detail to do by far most of the things I do online, and I am sure many other consumers are in my situation.). Even worse, the district court seemed willing to hold consumers to the very high burden of having to familiarize themselves with perhaps frequently changing terms online after having created an online account with a certain company. Again, that is just not realistic with the modern barrage of necessary and/or required website usage. Finally, the court found that users do not actually have to read the terms to be bound by them. It is apparently enough that they could have “inquired” of these terms. That’s giving an online company tremendous legal weight and, arguably, presents split authority in comparison with that of the Ninth Circuit.
The case is Nicosia v. Amazon.com, Inc.
Hat tip to Matthew Bruckner of Howard Univesity School of Law for bringing this story to my attention. http://www.law.howard.edu/1831
Friday, August 26, 2016
I have witnessed with interest the evolving story of what exactly happened in Rio involving Ryan Lochte the morning of August 14. Initially Lochte claimed he had been robbed at gunpoint. I later heard through the gossip mill that that story was untrue and that Lochte had in fact beat up some security guards. That turned out, it seems, just to be rumor-mongering, but the story has continued to evolve from there, with both Lochte and the Rio police making statements that later seem untrue, or only partially true, or exaggerated. Slate has a good run-down of the changing versions of Lochte's story, although it's from a week ago. Now Lochte has been charged with filing a false police report, since it does seem clear at this point that no robbery happened. Even that, however, is confusing to parse if you read a lot of articles about it: It seems like the crime is more accurately making a false communication to police, as some articles have eventually stated, since there are conflicting reports about whether a police report was ever filed.
In the wake of this whole mess, Lochte has lost several of his sponsorship deals (although he's also picked one up). It's unclear, because the contracts don't seem to be public, whether this is a choice of just not renewing the contract (apparently that's the case with Ralph Lauren) or if a violation of a morals clause is being invoked to allow cancellation of the contract (which might be what's going on with Speedo). All of this provokes an interesting morals-clause conversation to me, and we had a bit of discussion about it on the Contracts Professors listserv. It seems clear that Lochte engaged in some sort of inappropriate behavior, and it seems also clear that whatever that behavior was, even the most minor version of the story is arguably a violation of any morals clause out there.
What is most clear is that, no matter what really happened, this has definitely served to tarnish his reputation, and that's is what's striking to me. This story has taken on an enormous life of its own, with many differing versions of it floating around the Internet. This situation has been caused, of course, by Lochte's many differing stories, together with some apparent conflicting statements by the Rio police, coupled with reporting that may have been less than precise itself in describing what was going on. One online story details all the conflicting information and asks the individual reader what they believe about the story.
While this particular maelstrom seems to have some basis in fact, it's not difficult to imagine something like this getting out of control without such justifying behavior at the root of it. Morals clauses tend to be about perception, but does that mean you can manipulate the perception of someone, through no real fault of their own? Take, for instance, the "Ted Cruz is the Zodiac Killer" meme that was popular on the Internet earlier this year. Ted Cruz wasn't born until after some of the Zodiac killings had happened, so he obviously could not have been the Zodiac Killer, and in fact some people interviewed about the meme noted that was the point: what they were saying was impossible. Nevertheless, it was reported that polls indicated 38% of those surveyed thought he might, in fact, be the Zodiac Killer, despite the impossibility. If a substantial number of people start thinking you did something you absolutely did not do, is that enough for a morals clause to be violated, because of the perception that you did it?
Thursday, August 25, 2016
The New York Times reports here (paid access) on the increasing use of so-called “rent-to-own” housing contracts. Under these contracts, companies from big Wall Street giants to a slew of small landlords hoping to strike it rich lend or, should I say, purport to sell homes to tenants who contractually commit to make all repairs on the homes no matter how major or minor (yes, you read that right: all repairs… and it gets more extreme than that, read on!). Typically, tenants under such contracts are not told what repairs are needed, yet face a contractual deadline for making sure that the houses in question are brought up to local code. Unlike most typical home purchases, rent-to-own contracts do not require the tenant/buyer to obtain an independent home inspection.
We probably all know how many things can go wrong with older homes, even newer ones. Examples of how bad things can go in this context thus abound. One tenant moved into a home not having been told that it had several unresolved building code violations and had to remain vacant by city order. Another moved into a home that had no heat, no water, and major problems with its sewage system that led to nearly $10,000 in repairs (many of these homes have been purchased by the lender for less than $10,000 and are not worth very much more than that, if any). A third example describes a woman moving into a home with her three children and partner in Michigan, living in the house during cold winter with the only heat sources being one electric heater and a wood-burning stove in the kitchen, only to be evicted and charged $3,100 in overdue rent after she stopped paying rent because of the heat issue.
People who accept these kinds of contracts often do not qualify for mortgages. Banks have virtually stopped making mortgages on homes worth less than $100,000, which leaves millions of people with few options for - now or one day - owning their own homes.
One company that rents homes on a rent-to-own basis does so “as is,” calling the contracts “hybrid leases” that allow people to build up “implied equity.” If tenants are evicted during the contract (typically of a seven-year-duration), they get no credit for money spent on repairs or renovations. Neither do they receive any equity unless they actually end up buying the home at the end of the contract term. At that point, they still need financing for the home which, as mentioned, many people just cannot obtain.
A number of legal questions arise in this context, among them several contractual ones such as the role of caveat emptor vs. the violation of a possible duty to disclose. If the landlords know of the problems from which many of these houses suffer, should they disclose this knowledge? On the other than, shouldn’t these potential (long-term) buyers be presumed to have at least enough savvyness to not promise to bring a home that they do not own outright up to Code by a certain deadline? Then again, are landlords fraudulent in their dealings with these folks when the landlords require such potentially extensive repairs when, as the owners of the homes, they presumably if not actually have actual knowledge of the problems from which these houses suffer? What about the statement that renters get “implied equity?” What in the world does that mean, if anything? Do low-income folks that may never have been homeowners truly understand what it means to bring a home “up to Code” and buying “as is?” Does it matter? And what about the doctrine of unconscionability, which is alive and well in some states such as California? If nothing else, this case seems to smack of both procedural and substantive issues.
In some states, landlords are required to keep homes and apartments in habitable condition. But rent-to-own contracts have, for good reason, been said to reside in a gray area of the law: are they rental contracts? - Or purchase contracts? Or something else?
Further, rent-to-own contracts may, to some extent, resemble contracts for deeds. However, the latter are subject to basic consumer-lending regulations such as the Federal Truth in Lending Act.
The housing market again seems to host highly questionable practices. This story almost reads as a contract or property law issue-spotting exam. Meanwhile, housing sharks seem to be swimming relatively freely in some areas of the nation.
For further information, see Alexandra Stevenson and Matthew Goldstein, Rent-to-own Homes: A Win-Win for Landlords, a Risk for Struggling Tenants, the New York Times, Aug. 21, 2016.
Monday, August 22, 2016
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).
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.
Thursday, August 11, 2016
Which is exactly what Australia's swimming sisters Bronte and Cate Campbell have tried to do. Apparently after their father gave a number of effusive interviews to the press, the sisters turned to contract law in an attempt to protect them from further such events. As this article reports, the sisters entered into a contract with their father in which he promised, "to the best of [his] ability," "not to embarrass [his] daughters on national television."
No word on what their father received in exchange for this promise.