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.
Wednesday, July 6, 2016
Yesterday, I blogged here about ticketscalping “ticketbots” outperforming people trying to buy tickets with the result of vastly increased ticket prices.
Now Ashley Madison – dating website for married people – has announced that some of the “women” featured on its website were actually “fembots;” virtual computer programs. In other words, men who paid to use the website in the hope of talking to real women were actually spending cash to communicate with computers (men have to pay to use the website, women don’t).
Why the announcement? The new leadership apparently wanted to air the company’s dirty laundry, so to speak.
Ashley Madison was hacked last year, revealing who was using the website to cheat on their husband, wife or partner. It was a devastating hack, ruining lives and even leading a pastor to commit suicide.
This seems to be a clear breach of contract: if you pay to communicate with real women, the contract must be considered breached if all or most of the contact attempts went to and/or from computers only. Perhaps even worse for Ashley Madison is the fact that the company is under investigation by the U.S. Federal Trade Commission. The FTC does not comment on ongoing cases, but “it could be investigating whether Ashley Madison properly attempted to protect the identity of its discreet customers -- which it promised to keep secret. Or it could be investigating Ashley Madison for duping customers into paying to talk to fake women. On Monday, the company also acknowledged that it hired a team of independent forensic accounting investigators to review past business practices around bots and the ratio of male and female U.S. members who were active on the site."
Thursday, June 9, 2016
Relying on the win-a-car-for-a-hole-in-one case where a Pennsylvania court found that a car dealership was obligated to honor its offer for a unilateral contract posted at the ninth tee when a golfer finally aced a hole-in-one despite the dealership’s subjective intent to end the promotional offer two days earlier, a Third Circuit Court of Appeals court found a unilateral contract to exist under the following circumstances.
A brochure distributed to the customers of Giant Eagle – a chain of retail supermarkets, gas stations, etc. – promised its customers that they could “Earn free gas – it’s easy!” and “You may never pay for gas again!” as long as they spent $50 on supermarket purchases. (See the true images posted here in this blog). The brochure, however, also included fine print provided, among other things, that “discounted fuel cannot exceed 30 gallons and discounts must be used in full on one vehicle in one transaction,” “the promotion is valid for a limited time and may end at any time without prior notice,” and “fuelperks! discounts expire 3 months after the last day of the month in which they’re earned.” However, the court found that none of the published program parameters suggested that Giant Eagle reserved the right to retract rewards that customers had already accrued. In fact, in the entire history of the Giant Eagle fuel program, no such retroactive termination ever occurred.
Said the court, “[l]ike the golfer who teed off with a promise of reward in mind, a customer anticipated the promised fuel discounts when deciding to shop at Giant Eagle in the first place—and thus deciding not to shop at a different store. Because she was then aware that she could apply the discounts as advertised if she spent fifty dollars on supermarket purchases using her Advantage Card, she was indeed a party to a unilateral contract with Giant Eagle. Liability therefore attached upon her performance, i.e., at checkout.”
A fair win for consumers, it seems.
Tuesday, June 7, 2016
This One Again: Handwritten Contracts Really Are Binding (but Mediation Transcripts Are Highly Recommended)
The Seventh Circuit just reconfirmed the fact that handwritten contracts are enforceable as long as they contain all the material terms of the contract.
In the relevant case,Martina Beverly brought suit against her former employer, Abbott Laboratories, for discrimination and retaliation against her because of her German nationality (not a lot of anti-German discrimination going on in this country these days, one might think, but that was nonetheless the allegation) as well as on the basis of her disabilities. The case went to mediation. A day before the mediation took place, Abbott’s attorney sent Beverly’s attorney a “template settlement agreement in order to avoid any surprises in the event that [the parties] are able to resolve the matter.” That document also stated that Beverly had twenty one days to review it and seven days to revoke any possible acceptance.
During the fourteen-hour mediation session the next day, both parties were represented by counsel. At the end of the session, both parties and their counsel signed a very brief handwritten agreement that, at bottom, stated that Abbott would pay the cost of mediation and “$200,000+” with Beverly demanding $210,000. The parties were probably and understandably tired after such a long session, but still: a quarter million-dollar settlement, and no one had the energy or took the time to type up one measly paragraph?...
Next day, Abbott emailed a typed agreement to Beverly’s specifying the amounts to be paid ($46,000 to Beverly and a relatively whopping $164,000 to her attorneys!). The emailed response from Beverly’s attorneys: “Oh happy days!.. You are a gem.”
Soon after that, Beverly – perhaps for good reason – got cold feet and sought to rescind from the deal, arguing that additional terms were needed for a contract to have been formed, that the twenty one days mentioned in the pre-meeting template (which was never used in its original form) were applicable to her settlement offer, and that a “more formal future writing” was anticipated.
The appellate court struck down each of these arguments. First, additional terms such as any future cooperation between the parties and Beverly’s future employment with the company were nonessential details. The language in the original template pertaining to a cool-down period was never actually used. The fact that parties anticipate a more formal writing does not nullify an otherwise binding agreement. The court found the happy exclamation by Beverly’s attorney dispositive of the parties’ intent to enter into a contract when they did (one might also say it was simply an indication of the attorneys’ happiness with a large payment, not their clients’ mood).
Perhaps most importantly, the court pointed out that “[i]t bears mentioning that a transcript (or some other recording) of the private mediation session here may have provided important clarity regarding the parties’ beliefs and intentions relating to the handwritten agreement and the draft proposal. We encourage future litigants to record any communications that directly relate to final settlement agreements.”
Sound advice in days of, apparently, little or no secretarial assistance even when relatively large sums of money are at stake. An assistant could have typed up the agreement in less than one minute. So could an attorney. In the end, though, the handwriting argument did not prevail, but having something in writing or at least an audio recording would have precluded even more costly lawyering.
Monday, April 18, 2016
I’ve recently finished writing a textbook on contract clauses which takes a different approach to teaching contracts. The book, to be published in September, uses contract clauses and case excerpts to introduce doctrinal concepts and to teach students how to problem solve. (I always thought it unfortunate that a typical 1L learns contract law without knowing what common contract clauses mean or how they relate to what they’ve been learning). One of the cases mentioned in my book is SIGA Technologies, Inc. v. PharmAthene, Inc., 67 A. 3d 330 (Del. 2013). I’ve been meaning to blog about this case for some time now because it’s an important one for readers of this blog and corporate lawyers everywhere and illustrates the importance of using the right words in a contract.
SIGA and PharmAthene signed a term sheet for an eventual license agreement and partnership to further develop and commercialize an anti-viral drug for the treatment of small pox. The term sheet was not signed and contained a footer on each page that stated “Non Binding Terms.” Subsequently, the parties drafted a merger term sheet that contained the following provision:
“SIGA and PharmAthene will negotiate the terms of a definitive License Agreement in accordance with the terms set forth in the Term Sheet…attached on Schedule 1 hereto. The License Agreement will be executed simultaneously with the Definitive [Merger] Agreement and will become effective only upon the termination of the Definitive Merger Agreement.”
The license agreement term sheet was attached as an exhibit to the merger term sheet. On March 10, 2006, the parties signed a merger letter of intent and attached the merger term sheet and the license agreement term sheet.
On March 20, 2006, the parties entered into a Bridge Loan Agreement where PharmAthene loaned SIGA $3million for expenses relating to the merger and for costs related to developing ST-246. It stated the following in Section 2.3:
“Upon any termination of the Merger Term Sheet….termination of the Definitive Agreement relating to the Merger, or if a Definitive Agreement is not executed…., SIGA and PharmAthene will negotiate in good faith with the intention of executing a definitive License Agreement in accordance with the terms set forth in the License Agreement Term Sheet …and [SIGA] agrees for a period of 90 days during which the definitive license agreement is under negotiation, it shall not, directly or indirectly, initiate discussions or engage in negotiations with any corporations, partnership, person or other entity or group concerning any Competing Transaction without the prior written consent of the other party or notice from the other party that it desires to terminate discussions hereunder.”
On June 8, 2006, the parties signed the Merger Agreement which contained a provision nearly identical to section 2.3 of the Bridge Loan Agreement and provided that if the merger was terminated, the parties agreed to negotiate in good faith to enter into a license agreement with the terms of the License Agreement term sheet. The Merger Agreement also stated that the parties must use their “best efforts to take such actions as may be necessary or reasonably requested by the other parties hereto to carry out and consummate the transactions contemplated by this Agreement.”
Shortly thereafter, SIGA terminated the Merger Agreement and announced that it had received a $16.5million NIH grant. SIGA also proposed different licensing terms from those contained in the term sheet and argued that the license agreement term sheet was not binding because of the “Non-Binding” footer. PharmAthene sued -- and won. SIGA appealed and the Supreme Court of Delaware found that the “express contractual language” obligated the parties to “negotiate in good faith with the intention of executing a definitive License Agreement” with terms “substantially similar” to the terms in the license agreement term sheet.
The damages to PharmAthene ended up being around $200million– in other words, expectation damages. In order to stop PharmAthene from enforcing the judgment while undergoing the appeals process, Siga filed for Chapter 11 bankruptcy. Siga subsequently lost its second appeal to the Delaware Supreme Court, which upheld the award of expectation damages.
Last week, the U.S. Bankruptcy Court for the Southern District of New York approved a reorganization plan that sets the stage for SIGA to exit from bankruptcy. The judgment is expected to be satisfied by October 20, 2016.
A long and expensive road for SIGA which could have been avoided by paying more attention to the language used in the contract.
Monday, March 28, 2016
Here, Stacey Lantagne reports on a very sad story of what can happen if health care customers fail to follow accurate procedure and, at bottom, dot all the I’s and cross all the T’s when contracting for health care services.
For me, this speaks to the broader issue of whether or not patients can truly be said to have given consent to all the procedures and professionals rendering services to patients. I think this is often not the case. As you know, Nancy Kim is an expert on this area in the electronic contracting context. She kindly alerted me to this story in the health care field. (Thanks for that.) The article describes the practice of “drive-by doctoring” whereby one doctor calls in another to render assistance although the need for this may be highly questionable. The NY Times article describes an instance in which one patient had meticulously researched his health care insurance coverage, yet got billed $117,000 by a doctor he did not know, had never met, and had not asked for. That doctor had apparently shown up during surgery to “help.”
Of course, this is a method for doctors to make end runs around price controls. Other methods are increasing the number of things allegedly or actually performed for patients. Other questionable practices include the use of doctors or facilities that all of a sudden turn out to be “out of network” and thus cost patients much more money than if “in network.” I personally had that experience a few years ago. I had to have minor surgery and checked my coverage meticulously. The doctor to perform the surgery was in network and everything was fine. She asked me to report to a certain building suite the morning of the surgery. All went well. That is, until I got the bill claiming that I had had the procedure performed by an “out of network” provider. This was because… the building in which the procedure was done by this same doctor was another one than the one where I had been examined! When I protested enough, the health care company agreed to “settle” in an amount favorable to me.
In these cases, patients typically have very little choice and bargaining power. In the emergency context, what are they going to do? There is obviously no time to shop around. You don’t even know what procedures, doctors, etc., will be involved. The health care providers have all the information and all the power in those situations. However, in my opinion, that far from gives them a carte blanche to bill almost whatever they want to, as appears to be the case, increase their incomes in times when insurance companies and society in general is trying to curb spiraling health care costs.
In the non-emergency context, how much of a burden is it really realistic and fair to put on patients who are trying to find out the best price possible for a certain procedure, only to be blind-sighted afterwards? That, in my opinion, far exceeds fair contracting procedure and veers into fraudulent conduct. Certainly, such strategies go far beyond the regular contractual duty to perform in good faith.
Of course, part of this is what health care insurance is for. But even with good health care insurance, patients often end up with large out-of-pocket expenses as well. The frauds in this context are well known too: most health care providers blatantly offer two pricing scheme: one (higher) if they have to bill insurance companies, and a much lower price if they know up front to bill as a “cash price.”
We have a long ways to come in this area still, sadly.
Thursday, March 24, 2016
Clipping coupons and bringing them to retail stores is passé, but online “couponing” is considered cool by consumers. 23% of consumers report that they use more coupons now than earlier because technology makes it easier to find and use them. 51% of the consumers who do use coupons say that they use them more than they did five years ago. Part of this may be a reflection of declining personal incomes, and part may be because the recession has demonstrated the value of savings to many people.
Former CEO of J.C. Penney Ron Johnson was famously ousted when he decided to eliminate the chain’s coupons and no less than 590 annual sale events (yes, almost twice per day!). JCP has now settled a lawsuit that alleged that the company falsely inflated its prices (showing “regular” and “original” prices that had never been in effect) in order to be able to have such sales. http://www.usatoday.com/story/money/2015/11/11/jcpenney-settles-lawsuit/75567958/
Where does a reasonable store draw the line between these two ends of the spectrum? With the truth, of course, and letting the chips fall where they may in a fiercely competitive marketplace. Needless to say, that is tough to do with shareholder expectations of endless growth and earnings. One thought might be for retailers to offer more items for sale that are actually appealing, unique and well fitting (when it comes to clothes) rather than the same boring outfits everyone else offers. Just a thought in times when vendors such as the Gap and Banana Republic, for example, are suffering from immense “product acceptance challenges” (read: boring stuff no one wants to buy).
Thursday, February 18, 2016
Friday, January 15, 2016
If a customer belongs to an airline’s frequent flyer program, but flies so often that one obtains an elevated status under that program, is the customer then also by implication governed by a separate contract with the airline and not just the “basic” version of the frequent flyer rules?
No, according to a Seventh Circuit Court of Appeals opinion in Hammarquist v. United Continental Holdings, Inc. (Nos. 15-1836 and 15-1845).
In the class action lawsuit against beleaguered United Airlines, plaintiffs were members of the airline’s “MileagePlus” program. Condition no. 1 of the program rules stated that the airline had the “right to change the Program Rules, regulations, benefits, conditions of participation or mileage levels … at any time, with or without notice ….” Plaintiffs, who had obtained “Premier” status argued that under the Premier Program, an alternative modification provision prohibited United from changing the benefits that had already been earned, but which could, per airline tradition and the basic program rules, only be enjoyed the following year. The court made short shrift of that: The plaintiffs did not dispute that the parties’ contractual relationship was governed by the Program Rules that, under precedent established in Lagen v. United Continental Holdings, the elevated status of some frequent flyers does not result in a free-standing contracts separate from the underlying frequent flyer program being established. United Airlines had not made any contractual representations that would render it unable to change the benefits under the basic contract.
Plaintiffs also argued that at the most, United Airlines should only be allowed to change the benefits once a year and not, as had apparently been the case, in the
middle of the year. Plaintiffs relied on the airline’s website, which had stated th at changes were possible “from year to year,” but also that “unless otherwise stated,” the basic Program Rules applied to the Premier Program. That, according to the plaintiffs, meant that the airline could not change the benefits “at any time” as had been stated in the frequent flyer rules. The court found that United Airlines had never “stated” that Condition no. 1 did not also apply to its very frequent flyers, and that the airline had never contractually promised that changes could only be implemented only from year to year.
Nice try, but in this case, a contractually fair enough outcome, it seems. United Airlines “cannot be liable for breaching a contract that it did not make.”
Monday, December 21, 2015
Shoplifting is a major problem to retailers. In 2014, for example, retailers lost $44 billion nationwide to theft by shoplifters, employees and vendors. But how about this for an apparently very popular “solution”: Retailers such as Bloomingdale’s, Wal-Mart, Burlington Coat Factory, DSW Inc. and even Goodwill Industries have signed up with CEC, a company that provides “restorative justice” for profit.
Here’s how it works: Retailers sign a contract with CEC under which CEC will provide “life skills” courses to shoplifters caught by the retailers. The retailers pay nothing for this “service.” Rather, shoplifters must pay the company $500 for a six-hour course and sign a confession. If they refuse to do so, they are threatened with criminal prosecution and allegedly intimidated in several other ways. According to CEC, “over 1 million individuals have gone through the core program.” Do the math (if you trust the company’s statement) and you’ll see that contracting to sell justice and self-help is apparently quite lucrative.
According to CEC, this is all a good thing. In a statement apparently now removed from the company’s website, but reported here, the company purports to give “low-level, first-time shoplifters a valuable opportunity to learn how to make better choices, while saving them a criminal record and sparing law enforcement resources.” According to CEC now [http://www.correctiveeducation.com/home/cec-restore]: “CEC’s Adult Educational Program focuses on developing practical skills that will help achieve social goals. The dual approach of addressing behavior while promoting provident living helps reinforce change.”
What’s the problem with this alleged win-win situation? According to at least the San Francisco city attorney, the conduct is a violation of the California Business and Professions Code. It also alleged to amount to extortion, false imprisonment, coercion and deception. The city attorney has filed suit. CEC defends, claiming that its “vision is to reinvent the way crimes are handled, starting with retail theft.” Indeed. Do we, however, trust companies to sell justice for us via private contracts? Comment below!
Thursday, December 10, 2015
Will the legal hiring and general business situation never change for the better? Maybe, but commentators still think that future change on the legal market will come from structural and innovative, rather than cyclical, change. For example, in addition to relatively simple steps such as hiring outside staffing agencies and sharing office centers, some firms are launching their own subsidiaries providing legally related services such as contract, data and cyber security management along with ediscovery.
Until recently, law firms offered these and other services. As outside service providers have proved to be able to provide certain key services more efficiently and cost effectively than traditional law firms, the latter have lost business that they are now desperately trying to recoup.
Imitation is still the most sincere form of flattery. It is not only on the market for legal services that copycats abound; this has also proved to be the case with, for example, many shared economy service websites such as Uber, Lyft, Airbnb, VRBO and others. As soon as one company idea and website turns out to be successful, others just like it seem to shoot up within weeks or months. However, instead of simply trying to do what others are already doing and doing well, it would be nice if companies – law firms among them – would try to think about how they could do things better instead of just trying to, as often seems the case, (re)gain business by taking market shares from others. Exactly how law firms should do so is, of course, the million-dollar question, but it seems clear that innovation is prized both within and beyond the legal field. That will benefit our students if jobs are created by actual law firms rather than by service providers not hiring people with JDs.
Wednesday, December 2, 2015
Do you need a three-minute break with some adhesion-contract humor? Want to restore your faith that there is some utility to the unconscionability doctrine? Watch the video linked at the end of the excerpt below from Elite Daily. Here is their lead-in:
How many times have you checked off “agree to terms and conditions” without reading said terms? The better question may be, have you ever read any terms and conditions before signing?
Many times, you’re signing away any right to the content you share, including photos and videos, while allowing big companies to make huge profits off your work. Often, you’re signing away your private data, addresses, friend’s information or more. You’re also usually signing away your right to ever take legal action against the company.
YouTuber Jena Kingsley wanted to prove just how quickly we will all sign away our information for the chance at gaining something for free. But, as the saying goes, you never get something for nothing.
Check out just how fast people will sign up to win a free iPad and the hilarious consequences that follow, in this video.
H/T: Miriam Cherry (St. Louis University)
Thursday, November 19, 2015
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
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.
Monday, November 2, 2015
Danish toy building brick maker Lego recently turned down an order for several million lego bricks that were to have been used in an art exhibit by Chinese artist and human rights activist Ai Weiwei in Melbourne. Why? Because Lego refrains from “actively engaging in or endorsing the use of Lego bricks in projects or contexts of a political agenda.”
The bricks would have been used for two projects, one of which would have consisted of mosaic portraits of twenty Australian advocates for human rights and for information and Internet freedom. Prominent lawyers such as Michael Kirby and Geoffrey Robertson would have been depicted as would have WikiLeaks founder Julian Assange.
Last year, Mr. Ai used Legos to create mosaic portraits of 176 political exiles and prisoners of conscience in an exhibit on Alcatraz Island in San Francisco. At that time, Mr. Weiwei bought the toys via a nonprofit helping him develop the Alcatraz exhibition.
This is apparently not the first time that the Lego Group is turning down otherwise valuable contracts for its popular bricks. Just this year, Lego rejected a proposal to make Lego figures of the female United States Supreme Court justices, also because such use was considered “political.” (Huh?!) Previously, Lego has tried to persuade a Polish artist to withdraw an installation that used Lego bricks to depict a Nazi concentration camp (Lego, in turn, withdrew that request after lawyers got involved.).
China’s reaction to the Ai Weiwei story? The state-run Chinese Global Times reported that “as China becomes more powerful, commercial organizations and national governments will become more well behaved and more scared to apply a double standard to China.” (Link to Global Times not available, but see here for coverage from NPR and the NY Times) Surely, at least part of that statement must be a mistranslation. If not, then let’s indeed hope that governments and corporations alike become better behaved (if not, could we give them time out?).
Does this case make sense from a business point of view? Perhaps, if the company wants to err on the extremely cautious side of avoiding negative PR in general. Or is this perhaps rather an issue of not risking to upset a very valuable and increasingly affluent country such as China? Should it matter to a manufacturer what its products are sold for? Said Weiwei: “A company that sells pens [also] cannot tell a writer that he or she can’t do political or romantic writing. It’s really none of their business.”
Having been born and raised in Denmark, Lego’s attitude surprises me somewhat. Danes – whether organizations or individuals – often weigh in on important social issues. Danes are often not afraid to speak their minds on important social issues. That is simply how “small talk” and opinion-making is formed in the nation. As a nation, Denmark often touts itself as a world leader when it comes to other complex issues such as comprising the environment, energy and health care even though those could also be seen as “political” in nature. On that backdrop, Lego’s attitude seems even more conservative from a PR point of view, but of course, it is a multi-million dollar company worried about the bottom line. Fair enough, but in a way, it would be refreshing if companies would take more responsibility for the ultimate effects of their products. Some are. For example, some companies are voluntarily reducing the sugar content in their products or at least providing less sugary alternatives to traditional products. Others are not (the gun industry, to mention one). But where, such as in the Lego case, companies decide to be overly cautious in relation to issues that do not seem all that controversial and that are not even funded or otherwise supported by the vendor itself, it seems that we are risking censorship via corporatism.
The future of Weiwei’s exhibits is unknown, but he is reported to be making use of Lego collection points after having received numerous offers of Lego donations on social media.
Monday, October 26, 2015
I expect that when I am retired I will have time to devote myself full time to the joy of dealing with the utility and telecommunications companies, because avoiding being ripped off by these monopolists is really a full-time job. Two recent examples:
I recently travelled to Europe, and I needed to make exactly one phone call when I arrived. There was no simple way to avoid making the phone call, and having a phone with which to place the call was easier than stealing an iPhone from an unsuspecting tourist. I called my service provider and asked if there was a simple and inexpensive way for me to use my phone for three days in Belgium. Three disconnections and over an hour later, I thought I had a way to do so FOR FREE! I was told that they would send me a new sim card. If I sent the card back within 30 days, there would be no charge. A $26 charge would show up on my credit card, but it would be removed once I returned the sim card. This sounded too good to be true. Had my call been re-routed to some scam artist? On the Internet, I checked and re-checked the number I had called while I was on hold (I had a lot of time to check), and I had the customer service person repeat himself several times to make certain I understood the terms.
Very long story short, my service provider did charge me $26, and then wanted to add something like $80/month for the new phone service I had allegedly ordered. After perhaps another two hours on hold/arguing with "customer service" people, the service provider did what they had repeatedly told me was impossible. They gave me a full refund (except for the original $26, which was a shipping and handling charge). I could live with that. I could console myself that being able to make that phone call was worth $26, even though I would never have agreed to that in advance.
One week later, I received a $50 refund from the telephone service provider. I have no idea how they arrived at that figure. I chalk it up to even more incompetence. I wanted to try to return the refund, to which I am not entitled (beyond the $26), but I know that doing so will take far more time than it is worth. I will consider the "refund" a partial payment for the extensive legal advice I offered about the fraud in which they had engaged by repeatedly telling me that the sim care would cost me nothing and then trying to charge me for it.
- Unannounced, guys from the cable company dig a hole in our backyard and leave us with an open cable box with cables shooting out of the top of it. They tell me they will be back in a day or two to close the box and bury the lines going across my yard and the yards of my neighbors on either side.
- We receive notice that we must upgrade our cable box, and we follow onscreen instructions to have it sent to us.
- We receive an invoice with a new charge for "additional outlets"
- We install the new cable box and while speaking with someone who activates it remotely, I set up a service call so that they can come back, close up the cable box, fill in the hole and bury the cable before the ground freezes.
- The next morning I receive a call confirming the cancellation of my service call.
- I call back immediately, outraged that I have to re-schedule a service call that I never cancelled, and I am able to get it rescheduled, although the cable company still says that they have a record indicating, that in the 12 hours since I scheduled the service call, I called them to cancel it.
- While on the phone, I ask them about the "additional outlet" charge, and they inform me that it is a shipping and handling charge for the new cable box (that they insisted that I needed).
I pointed out that it is misleading (to say the least) to call a shipping and handling charge an "additional outlet" charge. Because I was livid, or perhaps just because I bothered to ask, they agreed to remove the "additional outlet" charge. Similarly, we are now enjoying a $50 "discount" on our cable services because I threatened to switch to a satellite dish and because we "had not had a discount in a while."
It does now seem to be the policy of the monopolists that they will just keep raising the rates of loyal customers until they crack, and then they will lower them until they see an opportunity to start ratcheting up the price again. Last year, I got fed up with what we were being charged for garbage collection, placed a phone call, and got the bill reduced by 50%. I then told my neighbors that they should all do the same. And they did. And it worked.
How all of this slips below the radar and is not the subject of federal regulation or class actions is beyond me!
Thursday, October 22, 2015
The Law Review has achieved a top 80 ranking in Washington and Lee Law School's Student Edited General Journal Rankings based on journal cites and case cites. It has also achieved a top 100 ranking in the Expresso Law Review Rankings for 2014–15 and has featured articles in recent years from important and influential scholars such as Professor Larry Kramer, former Dean of Stanford Law School and Professor G. Edward White of the University of Virginia School of Law. Our students are eager to have submissions on contracts law and contracts-related subjects.
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23andme just issued a report that indicates that it has received 4 requests for customer information from law enforcement agencies and the FBI. The company was able to fend off those requests. Given that the company has over a million customers, that's not a large number, but the implications are chilling. As Jeremy Telman and I argue in a forthcoming article, the personal data collected by private companies may be used by the government in ways that may surprise us (and, in some cases, deprive of us basic constitutional rights....) 23andme extracts its customers consent by including the following in its TOS:
"Further, you acknowledge and agree that 23andMe is free to preserve and disclose any and all Personal Information to law enforcement agencies or others if required to do so by law or in the good faith belief that such preservation or disclosure is reasonably necessary to: (a) comply with legal process (such as a judicial proceeding, court order, or government inquiry) or obligations that 23andMe may owe pursuant to ethical and other professional rules, laws, and regulations; (b) enforce the 23andMe TOS; (c) respond to claims that any content violates the rights of third parties; or (d) protect the rights, property, or personal safety of 23andMe, its employees, its users, its clients, and the public. In such event we will notify you through the contact information you have provided to us in advance, unless doing so would violate the law or a court order."
Nevermind that this provision is not one that most customers would have bothered to read, hidden as it is behind a hyperlink and buried in the text. You can read more about the potential use of DNA test kits by law enforcement agencies here and here.
But wait - there's more! As I was scrolling through 23andme's terms, I found another provision that potentially affects even more customers:
"Genetic Information you share with others could be used against your interests. You should be careful about sharing your Genetic Information with others. Currently, very few businesses or insurance companies request genetic information, but this could change in the future. While the Genetic Information Nondiscrimination Act was signed into law in the United States in 2008, its protection against discrimination by employers and health insurance companies for employment and coverage issues has not been clearly established. In addition, GINA does not cover life or disability insurance providers. Some, but not all, states and other jurisdictions have laws that protect individuals with regard to their Genetic Information. You may want to consult a lawyer to understand the extent of legal protection of your Genetic Information before you share it with anybody.
Furthermore, Genetic Information that you choose to share with your physician or other health care provider may become part of your medical record and through that route be accessible to other health care providers and/or insurance companies in the future. Genetic Information that you share with family, friends or employers may be used against your interests. Even if you share Genetic Information that has no or limited meaning today, that information could have greater meaning in the future as new discoveries are made. If you are asked by an insurance company whether you have learned Genetic Information about health conditions and you do not disclose this to them, this may be considered to be fraud."
This is information that might be very useful to a potential customer. So why is this buried way down in the TOS? Maybe because it might make potential customers think twice about purchasing the kit? (Ya think?) Back in the good old days, companies posted potential dangers relating to the use of their products and services where you could see them. We used to call them notices and they had to be conspicuous. Now they bury them in the fine print and call them "contracts."
Wednesday, September 30, 2015
On a recent plane ride, I was fortunate enough to have brought along Kaiponanea Matsumura's article, "Binding Future Selves," 75 Louisiana L. Rev. 71 (2014) which tackles the very complicated issue of decision making in the context of agreements involving "intimate subjects" such as procreation and child-rearing. He raises a lot of issues that kept my mind engaged during the long flight. Here's the abstract:
"Courts traditionally treat a person entering an agreement as the same person at the time of enforcement notwithstanding the passage of time or an intervening change of mind. For certain agreements between intimates, however, courts have adopted the novel view that the enforcement of a person's earlier commitment would improperly constrain that person's will rather than serve as an expression of it. These cases rest on the assumption that an intervening change has created meaningful — and legally significant — differences between the later self (at the time of enforcement) and the earlier self (at the time of commitment), and that the later self deserves protection from the earlier self's choices.
This "different selves" rationale has arisen primarily in the context of agreements pertaining to matters like embryo disposition, surrogacy, and parentage. Courts and commentators appear to believe that the centrality of these types of choices to personhood justifies exceptions to general contract principles. But even assuming choices of this sort differ from choices embodied in "normal" contracts, the different selves rationale does not provide a principled basis for resolving a dispute between the selves; it does not explain why a choice central to personhood made at an earlier time is less central to that person than a choice made at a later time.
This Article contributes to the existing literature on several fronts. It reveals the increasing adoption by courts of the different selves rationale, which, until recently, was thought to be merely theoretical. It also exposes the ungrounded assumptions on which the rationale rests: that it applies only to a certain set of choices, that it can identify the proper choices to protect, and that it can actually protect those choices. Finally, this Article uses the different selves rationale as an occasion to examine the role of personal identity in contract law. Theories of personal identity emphasize the importance of self-continuity and future-regarding action, both of which are disserved by an approach that prizes a person's preference at the time of dispute rather than her earlier commitment."