ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Thursday, November 19, 2015

Numismatic Information is Worth How Much?!

Serious coin collectors still exist. Very serious ones.

In a recent case before the Ninth Circuit Court of Appeals, an individual expert coin collector had offered to sell his knowledge regarding a “Brasher Doubloon” to a rare coin wholesale company for $500,000. A Brasher Doubloon is a $15 dollar coin minted by goldsmith Ephraim Brasher in late eighteenth-century New York. These rare coins are extremely valuable today. (The case is Swoger v. Rare Coin Wholesalers, 803 F.3d 1045 (Ninth Cir. 2015).

The parties met at a trade show to further discuss the coin collector’s theory that the coin in question was “the first United States coin issued for circulation … under authority of an Act of Congress.” The Act in question was “An Act Regulating Foreign Coins, and For Other Purposes,” chapter 5, 1 Stat. 300 (1793). The Act provided that certain “foreign gold and silver coins shall pass current as money within the United States, and be a legal tender for the payment of all debts and demands.” The Act also specified which countries’ coins qualified, how much the coins were required to weigh, etc.

The coin collector believed the coin to qualify under this provision because Spanish and Spanish colonial coins qualified at 27.4 Image1
grains per dollar. By analogy, the expert thought, that would require a Brasher Doubloon to weigh 411 grains. The coin collector reasoned that because the coin in question weighed 410.5 grains (oh, so close), it must have been minted pursuant to the Act. The wholesale coin company, however, refused to pay the collector for his information, not believing it proved that the coin really was minted “pursuant to the Act.” The expert brought suit, alleging fraud, breach of contract, and asserting damages under a theory of quantum meruit, among other things.

The appellate court found that the collector could not recover because he did not provide the information required under the contract. The Act, said the court, pertains to foreign coins only, not American ones.

Appellant also asserted a new theory on appeal: that because the coin was struck to “conform” to the weight in the Act for Spanish coins, it was used in commerce; in other words, “passed current as money” under the Act. That argument got swift treatment as well: the collector had promised information showing that the coin was, under a Congressional Act, legal tender, not that it was merely used as such by members of society.

As always, exact statutory reading is key, even in today’s contractual disputes.

November 19, 2015 in Labor Contracts, Legislation, Miscellaneous, True Contracts | Permalink | Comments (0)

Wednesday, November 11, 2015

Arbitrating Rape

Must a rape be arbitrated if an employment contract calls for “any and all disputes” to be resolved by arbitration?

Thankfully not, at least in Ohio, according to a recent Court of Appeals decision (Arnold v. Burger King, No. 101465, 2015 WL 6549138).

When Ms. Arnold obtained employment with a Burger King franchisee, she signed a contract that, among other things, provided as follows:

Under this arbitration program, which is mandatory, Carrols [the franchisee] and you agree that any and all disputes, claims or controversies for monetary or equitable relief arising out of or relating to your employment, even disputes, claims, or controversies relating to events occurring outside the scope of your employment (“Claims”), shall be arbitrated before JAMS, a nation arbitration association.

Ms. Arnold alleged that she was harassed and sexually abused over an extended period of time by her supervisor who, among other things, forced Ms. Arnold to perform oral sex on him in the men’s restroom at the restaurant during working hours. Ms. Arnold brought suit, claiming sexual harassment; respondeat superior/negligent retention; emotional distress; assault; intentional tort, and employment discrimination. The franchisee sought to compel arbitration, arguing that Arnold's claims were subject to arbitration under the mandatory arbitration agreement because they “arose out of Arnold's employment.” (That’s right: the company wanted JAMS to resolve a serious rape case…) Ms. Arnold answered that her claims fell outside the scope of the arbitration agreement and that the agreement was, furthermore, unenforceable because it was unconscionable.

The court agreed with Ms. Arnold. “When claims may be independently maintained without reference to the contract or relationship at issue,” they do not have to be arbitrated. CITE. Clearly, a civil complaint can be brought for sexual assaults and harassment even without the existence of a contract. “Arnold's claims relating to and arising from the sexual assault exist independent of the employment relationship as they may be maintained without reference to the contract or relationship at issue.” Ms. Arnold thus did not have to arbitrate the claims for that reason alone.

As for unconscionability, the court found the agreement to be procedurally unconscionable because Arnold, a previously unemployed entry-level employee, signed the agreement, drafted by the employer, when it was presented to her as a condition for hiring her. “As for Arnold's bargaining power, the choice was either sign it or remain unemployed. There is no evidence that Arnold could alter any of its terms.” The court found the agreement substantively unconscionable as it sought to include “every possible situation that might arise in an employee's life” and because it failed to set forth the potentially high costs of arbitration.

What makes this case even more stunning is the fact that the franchisee was aware of the very troubled employment environment at its restaurants. This led to several other sexual harassment charges, including sexual assault allegations, filed by the EEOC and which were ongoing for more than a decade. One might have hoped that an employer such as this would want stricter measures, and not arguably more lenient ones, against those of its employees that have violated norms and rules of appropriate workplace behavior to signal that such behavior is unacceptable in 2015. Apparently, in at least some geographical and socio-economic locations, that is too much to hope for.

November 11, 2015 in Labor Contracts, True Contracts | Permalink | Comments (0)

Monday, November 9, 2015

Is Steve Irwin Really Dead?

California takes its laws against minors contracting seriously.  Very seriously.  Dancing with the Stars favorite Bindi Irwin, daughter of “Crocodile Hunter” Steve Irwin, must prove that her father was really killed in 2006 in order for her to get the earnings from the popular dancing show.  So far, Bindi Irwin has allegedly presented “insufficient proof” that her father has waived those earnings.  This despite worldwide shock that the beloved wildlife TV show stars was killed in a freak accident by a stingray in 2006.

California law requires underage entertainers to get court approval of their contracts to avoid the rampant abuses of minors in the industry of yesteryear. Parents of minors must now sign a quitclaim waiving any rights to the child's earnings.  Bindi's mother, Teri, has already signed, but Steve has not, for obvious reasons. 

The show’s owners, BBC Worldwide, is working with the court to work out the situation. 

Under her contract with BBC, Bindi earns a guaranteed salary of $125,000 as well as weekly sweeteners for each week she stays on the show.  So far, Bindi has done very well, even earning top scores one week.  The shows airs on Monday nights on ABC.

November 9, 2015 in Celebrity Contracts, In the News, Labor Contracts, Television, True Contracts | Permalink | Comments (0)

Wednesday, October 21, 2015

Online Reviews – Are You Hot or Not?

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

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

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

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

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

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

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

Friday, September 11, 2015

Weekly News Roundup

Richard_III_earliest_surviving_portraitVery excited to be able to report on a UCC case from Indiana, JMB Manufacturing, Inc. v. Child Craft, LLC decided by the 7th Circuit.  The opinion is long, but Judge Hamilton's introduction captures its spirit.

This case presents a merchant’s creative effort to avoid the limited remedies that contract law provides for a seller’s delivery of non-conforming goods. After the seller delivered about $90,000 worth of nonconforming wood products, the buyer sought recovery from both the seller and its president personally for tort damages on a tort theory, that they negligently misrepresented the quality of the delivered goods.

The district court ruled in favor of the buyer and awarded damages of more than $2.7 million on the theory that the non-conforming goods caused the complete destruction of the buyer’s business. This damages theory echoed the proverb of Poor Richard’s Almanack (“A little neglect may breed mischief; for want of a nail, the shoe was lost; for want of a shoe the horse was lost; for want of a horse the rider was lost; for want a rider the battle was lost.”), and Shakespeare’s story of Richard III [pictured], where the loss of a horse led in turn to the loss of a battle, the death of a king, and the loss of a kingdom. Cf. Hadley v. Baxendale, 9 Exch. 341, 156 Eng. Rep. 145 (1854) (damages for breach of contract limited to consequences reasonably contemplated by both parties when they made contract).

We reverse the award of damages against the seller and the seller’s president, but for reasons that do not depend on the flawed “want of a nail” theory. Under Indiana law, a buyer who has received non-conforming goods cannot sue a seller for negligent misrepresentation to avoid the economic loss doctrine, which limits the buyer to contract remedies for purely economic losses. See Indianapolis-Marion County Public Library v. Charlier Clark & Linard, P.C., 929 N.E.2d 722 (Ind. 2010). Second, there is no basis for transforming the buyer’s breach of contract claim into a tort claim for negligent misrepresentation to hold the seller’s president personally liable. See Greg Allen Construction Co., Inc. v. Estelle, 798 N.E.2d 171 (Ind. 2003). In all other respects, we affirm the judgment of the district court. 

The opinion includes a lengthy discussion of Indiana's economic loss doctrine.   

The Complete Colorado provides this report about a court's grant of a preliminary injunction empowering a teachers' union to continue in its role as sole entity empowered to negotiate a new contract with the local school board.  The ruling keeps the union's existing contract in force until its breach of contract claim can be heard, but the grant of the P.I. suggests the likelihood that the union will succeed on the merits of its claim.  But the ultimate remedy remains unclear.

And in news that will make you say, "What the . . .???" we learn from this article from the Washington Times that Ashley Madison claims that its new users are flocking to its website after news of its massive security breach, about which Myanna Dellinger has written herehere and here.   Other than quoting a spokesperson for the company who blathered about happy return customers, he Times does not speculate on the relationship between the scandal and the increase in users.  Knock yourself out.


September 11, 2015 in About this Blog, In the News, Labor Contracts | Permalink | Comments (0)

Friday, September 4, 2015

Uber's Employees: Employees or Independent Contractors?

Yesterday, we blogged here about important considerations regarding whether an employee will be seen as an employee or a contractor.

In O'Connor v. Uber Technologies, U.S. District Judge Edward Chen just ruled that Uber's drivers may  pursue their arguments that they were employees in the form of a class-action suit. One of the reasons was that Uber admitted that they treated a large amount of its drivers "the same."

Of course, millions of dollars may be at stake in this context.  Profit margins are much higher for companies such as Uber, Lyft, Airbnb and other so-called "on demand" or "sharing economy" companies. That is because the companies do not have to pay contractors for health insurance benefits, work-related expenses, certain taxes, and the like.  But seen from the driver/employee's point of view, getting such benefits if they are truly employees is equally important in a country such as the United States where great disparities exist between the wealthy (such as the owners of these start-up companies) and the not-so-wealthy, everyday workers.

Plaintiffs are represented by renowned employee-side attorney Shannon "Sledgehammer" Liss-Riordan who represented and won a major suit by skycaps against American Airlines some years ago, so sparks undoubtedly will fly in the substantive hearings on this issue.

September 4, 2015 in Current Affairs, E-commerce, Famous Cases, In the News, Labor Contracts, True Contracts, Web/Tech | Permalink | Comments (0)

Thursday, September 3, 2015

The NLRB and Independent Contractors

The National Labor Relations Board recently issued a decision , Browning-Ferris Industries of California, Inc., d/b/a/ BFI Newby Island Recyclery,  that establishes a new standard for determining who is a joint employer.  

BFI Newby Island Recyclery hired Leadpoint, a staffing services company, to provide some workers for its recyclery.  BFI and Leadpoint had signed a temporary labor services agreement which could be terminated by either party upon thirty days' notice.  The agreement stated that Leadpoint was the sole employer of the workers and that nothing in the Agreement shall be construed as creating an employment relationship between BFI and the personnel supplied by Leadpoint.  In other words, the agreement contained language that is pretty standard in independent contractor agreements.  The agreement also provided that Leadpoint would recruit, interview, test, select and hire personnel for BFI.  BFI was not involved in Leadpoint's hiring procedures.  BFI, however, had the authority to "reject any Personnel and...discontinue the use of any personnel for any or no reason."  Again, this is fairly standard language in independent contractor agreements.  In a departure from precedent, the NLRB ruled that a company that hires a contractor to provide workers may be considered a joint employer of those workers if it has the right to control them even if it does not actively supervise them. The dissenters were rather unhappy and their opinions are worth reading as they lay out the expected impact of the ruling.  

It's a significant decision and one that should make lawyers take another look at their clients' independent contractor agreements to see whether they contain language that indicates the potential to control the contractor's employees. While the language in the contract was not the only factor influencing the Board's decision, it was an important one.

September 3, 2015 in Current Affairs, Labor Contracts, Miscellaneous | Permalink | Comments (0)

Tuesday, September 1, 2015

Uber’s Safety Checks

Uber.  It just seems to always be in the news for one more lawsuit, doesn’t it.  In late August, the district attorneys for San Francisco and Los Angeles filed a civil complaint against the company alleging that it is making misrepresentations about its safety procedures.  The complaint, i.a., reads that Uber’s “false and misleading statements are so woven into the fabric of Uber’s safety narrative that they render Uber’s entire safety message misleading.” 

On its website, Uber promises that “from the moment you request a ride to the moment you arrive, the Uber experience has been designed from the ground up with your safety in mind” and that “Ridesharing and livery drivers in the U.S. are screened through a process that includes county, federal, and multi-state criminal background checks. Uber also reviews drivers’ motor vehicle records throughout their time driving with Uber.”

However, Uber does not use fingerprint identication technology, which means that the company cannot search state and federal databases, only commercial ones. 

The result? People with highly questionable backgrounds end up being on Uber’s payroll.  For example, one “Uber driver was convicted of second-degree murder in 1982. He spent 26 years in prison, was released in 2008 and applied to Uber. A background report turned up no records relating to his murder conviction. He gave rides to over 1,100 Uber customers.” Yikes.  Another “Another driver was convicted on felony charges for lewd acts with children. He gave over 5,600 rides to Uber customers.” 

Add this to the ongoing lawsuit about whether Uber’s drivers should be legally classified as “employees” or “contractors,” and Uber is in a mound of legal trouble.

Certainly, a misrepresentation seems to have been made if the company deliberately touts its safety and its “industry-leading background check process” yet only uses a commercial database that does not even necessarily ensure that its drivers are who they say they are.

Still, Uber remains one of the most valuable start-ups in the world.  It and similar “sharing economy” companies such as Airbnb have gained a good foothold on a market with a clear demand for new types of services.  So far, so good.  But initial success should not and does not equate with a “free-for all” situation just because these new companies are highly successful, at least initially.  It seems that they are learning that lesson.  Lyft, for example, already settled with prosecutors in regards to its safety.  Perhaps Uber will follow suit.

September 1, 2015 in Commentary, Current Affairs, E-commerce, In the News, Labor Contracts, Web/Tech | Permalink | Comments (0)

Monday, July 13, 2015

NY Times on the "Gig Economy"

Today's New York Times has an article about how Uber and Lyft are merely the latest incarnation of a decades-long trend towards replacing (or attempting to replace) employees with independent contractors.  According to the Times, Uber is a rather extreme version, officially employing only 4000 people, while 160,000 people make their living through Uber.  The Times attributes stagnating wages to this "gig economy," acknowledging that other forces, including the decline of unions and globalization, are also contributing factors.  As of 2014, 18% of all jobs held in the United States are occupied by independent contractors.

But the process has its roots in older trends, such as the move towards franchises that got going in the 1960s and has continued its steady expansion.  In the hospitality industry, hotel chains enter into franchise agreements with hotel operators, who in turn now increasingly turn to independent contractors to provide services within their hotels.  The results has been a decline in wages in the industry in the 21st century.  

As usual in Times articles these days, if you read on below the fold, you will learn the upside to the "gig economy."  Some people choose to be self-employed consultants to that they can work flexible hours and work from home.  But it's hard to find a silver lining here for ordinary workers.  Some can succeed as independent contractors, but their wages tend to be low, they have no job security, and the work may come in uncontrollable bursts followed by long, anxiety-producing lulls.  

July 13, 2015 in In the News, Labor Contracts | Permalink | Comments (0)

Monday, June 8, 2015

Congress Considering Federal Legislation on Non-Competes

Franken MurphyAs reported in the Washington Post here, Senators Al Franken (left) and Chris Murphy (right) have introduced the Mobility and Opportunity for Vulnerable Employees (MOVE) Act.  The purpose of the Act is 

To prohibit employers from requiring low-wage employees to enter into covenants not to compete, to require employers to notify potential employees of any requirement to enter into a covenant not to compete, and for other purposes. 

The bill would prohibit non-compete clauses in the contracts of workers who earn $15/hour or less, unless the minimum wage is higher in the relevant jurisdiction.   According to the Post, 12.3% of all workers' contracts include non-compete clauses, including some workers who make minimum wage or a bit more.  The non-competes trap such workers in their current low-wage jobs when they could build in their work experience to pursue higher-paying jobs in the same field.  California law already prohibits enforcement of non-competes.

There are counter-arguments,.  Non-compete clauses protect employers and thus incentivize them to invest in their employees and give them on-the-job training in their fields.  If that training becomes portable, employers might be less willing to provide it.  However, as the Post story suggests, California's ban on non-competes has not prevented Silicon Valley from becoming a synonym for success in innovative, high-tech industries.  No doubt Congress will weigh the pros and cons in a matter fitting the dignity we associate with that august institution and, after mature deliberation, take decisive action.

Hat tip to Rachel Arnow-Richman, one of many academics consulted in the drafting of the MOVE Act.

June 8, 2015 in Labor Contracts, Legislation | Permalink | Comments (0)

Tuesday, May 19, 2015

Employers Must Continually Monitor 401(k) Plans

Yesterday, I blogged here about a proposed Labor Department rule that would require investment brokers to contractually bind themselves as fiduciaries of their clients. 

Somewhat relatedly, the United States Supreme Court just issued an opinion finding employers to be fiduciaries in relation to the employment plans offered to their employees.  The petitioning employees argued that respondent employers acted imprudently by offering six higher priced retail-class mutual funds as 401(k) plan investments when materially identical lower-priced institutional-class mutual funds were available.  The higher-priced funds also carried higher fees.   The Ninth Circuit Court of Appeals applied the ERISA statute of limitations to the initial selection of funds without considering whether there is also a continued duty to monitor the funds.  There is.  The Supreme Court found that because the fiduciary duty can be traced to trust law, there is “a continuing duty of some kind to monitor investments and remove imprudent ones.  A plaintiff may allege that a fiduciary breached the duty of prudence by failing to properly monitor investments and remove imprudent ones. In such a case, so long as the alleged breach of the continuing duty occurred within six years of suit, the claim is timely.  The Ninth Circuit erred by applying a 6- year statutory bar based solely on the initial selection of the three funds.”

May 19, 2015 in Current Affairs, Famous Cases, Labor Contracts | Permalink | Comments (0) | TrackBack (0)

Friday, May 8, 2015

Victory at the Smelliest Place on Earth


Disney Tree of Life
Disney Tree of Life by Clavet

The Orlando Sentinel reported that an arbitrator has reinstated Disney workers who had refused to perform in a Disney Animal Kingdom Show, the Festival of the Lion King.  The workers refused to perform because the unitards they were expected to wear for the show were not clean and dry as required in the Collective Bargaining Agreement between Disney and Teamsters Local 385 of the Services Trade Council Union (Attachment 6, Part C).  

Disney was forced to cancel a performance of the show and then terminated the objecting workers.  Disney will have to pay the workers back-pay for the time they were out of work (minus what they earned at other jobs), and reprimands will be removed from their files.

May 8, 2015 in Labor Contracts, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Thursday, March 19, 2015

When Contractual Consent Isn't Enough

The problem with constructive consent, or substituting "manifestations of assent" for actual assent, in consumer contracts is that consumers often aren't aware what rights they've relinquished or what they have agreed to have done to them.  Too bad for consumers, right?  Well, it's also too bad for companies.  Companies that rely on contracts to obtain consumer consent may find that what suffices for consent in contract law just won't cut it under other law that seeks actual consumer consent.  Michaels, the arts and crafts store chain, found that out the hard way.  They were recently hit with two class action lawsuits alleging that their hiring process violates the Fair Credit Reporting Act (FCRA).  Job applications clicked an "I Agree" box which indicated "consent" to the terms and conditions which authorized a background check on the applicant.  As this article in the National Law Review explains, the FCRA requires that job applicants receive "clear and conspicuous" standalone notice if they are seeking consent from applicants to obtaining a background report.  A click box likely won't (and shouldn't) cut it.  Contracts that everybody knows nobody reads shouldn't be considered sufficient notice.  It would, of course, be much simpler if contractual consent were more aligned with actual human behavior....

March 19, 2015 in Commentary, Current Affairs, Labor Contracts, Legislation | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 3, 2015

Want a Class with that Barrista Job?

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

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

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

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

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

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

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

See the contract at issue here.

See Starbucks’ description of the program here.

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

Wednesday, February 11, 2015

Construction Contracts that Kill

Property development is often considered a way for local communities to earn more taxes and evolve with times in general.  But when construction and other development is approved in geologically risk areas such as flood zones and things go awfully wrong, is this a mere property and contracts issue, or may criminal liability lie?

In France, the answer is the latter.  The former mayor of the small French seaside town La Faute-sur-Mer  was just sentenced to jail for four years for deliberately hiding flood risks so that he and the town could benefit from the “cash cow” of property development, a French court has held.  His deputy mayor received a two-year sentence in the same plot.

In 2010, the cyclone Xynthia hit western Europe and knocked down seawalls in the French town, leading to severe floods and 29 deaths. 

Wait… a cyclone in France?  Yes.  Climate change is real and it’s here.  Unless we do something about it (which apparently we don’t), things will only get worse.  As on-the-ground steps that could prevent extreme results such as the above are often simply ignored or postponed while more and more research is done and money saved at various government scales, lawsuits will necessarily follow.  The legal disciplines, including contracts law, will have to conform to the new realities of a rapidly changing climate.  For starters, we need to seriously question the wisdom and continued desirability of constructing more and more homes in coastal and other flood prone areas.  Ignoring known risks is, well, criminal.

February 11, 2015 in Commentary, Current Affairs, Government Contracting, Labor Contracts, Science | Permalink | Comments (0) | TrackBack (0)

Monday, January 26, 2015

Supreme Court: Sixth Circuit Reasoning Incompatible with Contracts Principles

A group of retirees had worked for the Pleasant Point Polyester Plant.  They retired before Petitioner M&G Polymers (M&G) acquired the plant in 2000.  At the time of that acquisition, M&G entered into a collective bargaining agreement and a pension agreement with a union that represented retirees.  Those agreements created a right to lifetime, contribution-free health care benefits for the retirees, their surviving spouses, and their dependents.  However, in 2006, M&G  announced that it would begin requiring retirees to contribute to the cost of their health care benefits.   Retirees objected that their rights had already vested and could not be withdrawn.  

Retirees sued, but M&G claimed that the benefits expired with the termination of the earlier agreements.   The Sixth Circuit, relying on a 1983 precedent sided with the retirees, reasoning that retiree health benefits would not likely be subject to future negotiations.  Earlier precedent in similar cases had found that, even if the agreements at issue are ambiguous, the parties likely intended for them to apply in perpetuity for workers whose rights had vested and who, as retirees, would no longer be able to engage in collective bargaining.  In M&G Polymers USA, LLC v. Tackett, Justice Thomas, writing for the unanimous Court, reversed, finding the Sixth Circuit opinion inconsistent with ordinary principles of contracts law.  

In this and prior cases, the Court held, the Sixth Circuit had departed from contracts principles by placing a thumb on the scales in favor of retiree benefits.    The Sixth Circuit's "assessment of likely behavior in collective bargaining is too speculative and too far removed from the context of any particular contract to be useful in discerning the parties’ intention," the Court found.  In addition, the Sixth Circuit approach misapplies the presumption against illusory promises.  The Sixth Circuit  found that agreements such as the one at issue would be illusory if benefits could be withdrawn from some potential beneficiaries.  The Court pointed out that a contract cannot be partly illusory.  If it provides benefits some poetntial beneficiaries, that suffices to render the contract non-illusory.   Moreover, the Sixth Circuit ignoreed both the traditional contracts presumption that contractual rights usually terminate with the underlying agreement and the presumption against contracts rights that vest for life.  The Court remanded the case with instructions that the lower courts should apply ordinary contracts principles

Justices Ginsburg, Breyer, Sotomayor and Kagan concurred.  They agreed that ordinary contracts principles should govern the interpretation of the agreements at issue.  However, they rejected M&G's contention that the retirees need to show "clear and express" language that their rights had vested.  The concurring Justices pointed to provisions that might support the retirees' claims and joined the opinion of the Court in urging the lower courts to review the agreements in light of ordinary contracts principles and without a thumb on the scales in favor of a finding of vested rights.


January 26, 2015 in Labor Contracts, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Monday, December 29, 2014

No-tipping policies and increased minimum salaries

CNN reports that more and more restaurants are implementing no-tipping policies as, perhaps, a way of differentiating themselves from competitors.  For example, one restaurant builds both tax and gratuity into menu prices, allegedly resulting in its servers averaging about $16.50 an hour.  I have argued here before that it seems fair to me that the burden of compensating one’s employees should fall on the employer and not on, as here, restaurant patrons feverishly having to do math calculations at the end of a meal.

The law does not yet support employment contracts ensuring fair compensation of restaurant and hotel employees.  For example, federal law requires employers to pay tipped workers only $2.13 an hour as long as the workers earn at least the federal minimum wage of $7.25 an hour.  Talk about burden shifting…

But change seems to be on the way with private initiatives such as the restaurant no-tipping policy.  In Los Angeles, the City Council has approved an ordinance that raises the minimum wage for workers in hotels of more than 300 rooms to $15.37 an hour.  Of course, this will mainly affect large hotel chains, which predictably resisted the ordinance citing to issues such as the need to stay competitive price-wise and threatened circumventing the effect of the new law by laying off or not hiring workers to save money.  Funny since many of these hotels have been making vast amounts of money for a long time on, arguably, overpriced hotel rooms attracting a clientele that does not seem overly concerned about paying extra for things that are free in most lower-priced hotels (think wifi) and thus probably could somehow internalize the cost of fairly compensating its blue-collar workers. 

Much has been said about the “1%” problem and a fair living wage.  No reason to repeat that here.  However, it is thought-provoking that whereas the U.S. recession officially ended in June 2009 – five years ago - 57% of the U.S. population still believed that the nation was in a recession in March 2014.

Contracting and the economy is, of course, to a large extent a matter of seeking the best bargain one can obtain for oneself.  But even in industrialized nations such as ours, there is something to be said for also ensuring that not only the strongest, most sophisticated and wealthiest reap the benefits of the improved economy.  So here’s to hoping that more initiatives such as the ones mentioned above are taken in 2015.  At the end of 2014, it’s still “the economy, s$%^*&.”

December 29, 2014 in Commentary, Current Affairs, Labor Contracts, Legislation | Permalink | TrackBack (0)

Friday, December 5, 2014

Driven to Extreme Lengths to Earn a Dollar

In today’s “sharing economy,” more and more private individuals attempt to earn some (additional) money in untraditional ways such as selling various things on eBay, driving cars for alternative passenger transportation services such as Uber and Lyft, and providing lodging in private homes on sites such as airbnb.  Not only do these services raise many regulatory, licensing, insurance zoning and other issues, they also present a real risk to many hopeful 1099 workers who – as the relevant companies themselves – can vastly misjudge the potential of new attempted products or services.

Take, for example, Lyft drivers.  In May, the shared ride company introduced luxury rides via its Lyft Plus program.   At least in San Francisco, the drivers had to pay $34,000 out of their own pockets for the large, “loaded” Ford Explorers required by Lyft for drivers to participate in the program.  The idea was that passengers would pay twice the normal Lynx rate to get the extra space and perceived luxury of being whisked around town in a large SUV.  A bit behind the curve, you think?  Indeed.  The program was an instantaneous fiasco in San Francisco (the company still advertises the program, but at “only” 1.5 times the price of a regular ride and touting the program as having space enough for six people).  Soon, drivers were back to simply getting regular rides– often just at $5 or $6 – just to stay busy.   This is obviously not viable in a city with expensive gasoline and cars that get only around $14 miles per gallon, not to mention the purchase price of the new SUVs. 

Responding to drivers’ initial concerns, Lyft had promised that they should “not worry about demand, we have that covered.”  Realizing that many of its drivers were upset about being stuck with a huge, new gas guzzler without a realistic return on investment, Lyft has offered their Plus drivers help selling the SUVs or a $10,000 bonus… subject to income tax, no less.   None of these options, of course, will bring the drivers back to the pre-contractual position.  Some drivers admitted to having borrowed money from family members, selling existing cars, even “forgoing other job opportunities for the chance to make more money with Lyft Plus.”  

A sad story all the way around.  Companies are continually trying to introduce new products and services to find the next “big thing.”  This, of course, is laudable, but not so much so when they seemingly cross the line and make unfounded promises to the less savvy or financially strong.  Of course, this also does not mean that workers or customers should not exercise a hefty dose of “caveat emptor” in connections such as this, but it is a somewhat concerning aspect of today’s sharing economy that failed product launches can simply be shared with “smaller fish” with less bargaining power and, apparently, a dangerously high risk-willingness bordering desperation in trying to make a dollar in these financially tough times.  Whether in this case, the promise that the demand was “covered” could be a contractual misrepresentation or whether it was simply puffery is another story best left to another forum.

December 5, 2014 in Commentary, Current Affairs, E-commerce, Labor Contracts, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 14, 2014

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

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

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

Monday, August 25, 2014

Some additional thoughts about the Salaita case

As Jeremy Telman previously noted, the unhiring of Steven Salaita has caused quite a stir in academic circles.  There was even an article in the Chronicle of Higher Education briefly discussing the contractual issues, which included the arguments made by Prof. Michael Dorf and Prof. David Hoffman.  I think they both have good arguments but I tend to think  this is a real contract and not an issue of promissory estoppel.  The reason I believe this has to do with what constitutes a "reasonable interpretation" under these circumstances.  I think both parties intended a contract and a "reasonable person" standing in the shoes of Salaita would have believed there was an offer.  The offer was clearly accepted.  What about the issue regarding final Board approval? Does that make his belief there was an offer - which he accepted -  unreasonable?  I don't think so given the norms surrounding this which essentially act as gap fillers and the way the parties acted both before and after the offer was accepted.  I think the best interpretation - really, the only reasonable one given the hiring practices in academia - is that the Board approval was a rubber stamp but one that could be withheld if the hired party did something unexpected, like commit a crime.  In other words, I think there was an offer that was accepted and that the discretionary authority of the board to approve his appointment was subject to the duty of good faith and fair dealing - i.e. the Board would only withhold approval for good cause.  I don't think this was a conditional offer - the language would have to be much more explicit than it seemed to be and to interpret it that way would constitute a forfeiture (which courts don't like) - and yes, I considered whether it could be a condition to the effectiveness of a contract.  That question caused me some angst but I still don't think it was given the hiring norms in general, and the way the parties acted. 

There was, however, an implied term in the contract that Salaita would not do anything or that no information would come out that would change the nature of the bargain for the university.  For example, if it turned out that he didn't really have a PhD or that he plagiarized some of his work, that would be grounds for the Board to refuse to approve his appointment.  In that case, the Board could refuse to approve his hiring without breaching its good faith obligation.

The real dispute here is whether Salaita's tweets constituted a breach of that implied term (i.e. did it undermine the bargain that the university thought it was getting?)  I think that's really what the disagreement in the academic community is about and why the real contractual issue has to do with interpretation - and the meaning of academic freedom.


August 25, 2014 in Commentary, Current Affairs, Labor Contracts, Miscellaneous | Permalink | Comments (4) | TrackBack (0)