Tuesday, January 13, 2015
The effectiveness of disclosure is an ongoing discussion on this blog and not long ago we had an engaging online symposium on Omri Ben-Shahar and Carl Schneider's thought-provoking book, More Than You Wanted to Know: The Failure of Mandated Disclosure. Lauren Willis and Theresa Amato have written an op-ed in today's LA Times that gets to the heart of the failures of disclosures (and related informational problems) when it comes to consumer literacy - and they offer some solutions. I particularly like their suggestion that banks demonstrate that consumers understand the financial products offered. This shifts the burden of disclosure from the consumers to the banks. You can read more here.
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Monday, January 12, 2015
A misplaced comma (or something) cost an Oregon Ducks fan his premium seats to the college football championship game. According to this report from The Oregonian, a University of Oregon alumnus found premium tickets to the game (which he knew were selling for $4000) for $400 on StubHub. When, he placed his order, StubHub indicated that he would be charged $16,59.36, but his credit card was charged $16,059.36. He protested, and StubHub refused to honor the purchase, removing the charge and offering $1600 in StubHub vouchers, which the angry Duck says he will not use. He blows off some steam in a blog post, with observations about obnoxious terms and conditions.
In a sign of the times, MasterCard has filed suit in the Southern Distroct of New York against Nike, according to this report from Bloomberg.and Oregon Live (you have to go through a short survey to read it), for having poached a few of its cyber-security experts. MasterCard is suing the employees for breach of contract and Nike for tortious interference. Nike denies all wrongdoing.
We could not have made this up: The St. Louis Post-Dispatch reports that the Devin James Group (DLG), a public relations firm, is suing another public relations firm, Elasticity. Apparently, Elasticity hired DLG to help represent the City of Ferguson in the aftermath of the shooting of Michael Brown. Elasticity fired DLG when it discovered that DLG's owner had a criminal record. Mr. James was convicted in 2006 for having shot an unarmed man. He claims he did $50,000 of work for which he has not been paid.
In another chapter in the dangers of state governments hiring private companies to handle public services, NJ.com reports that Hewlett Packard will refund New Jersey $7.5 million to get out of its contract to deliver a unifed system to administers the state's public assistance program. The Christie administration and HP agreed last year to suspend work on the project and they entered into a separation agreement in which each side agreed not to sue the other for breach of contract. The state is now looking for a new partner. In the meantime, it "continues to hobble along on its 1980s-era mainframe system," according to NJ.com.
Finally, an interesting conflict between a franchise and a large franchisee. Wendy's is requiring its franchisees to make technology upgrades and renovate stotes. DavCo, which operates 152 Wendy's restaurants is refusing to do so, claiming that Wendy's lacks the authority to require the changes. According to the Baltimore Sun, Wendy's has filed suit to terminate DavCo's franchises.
Thursday, January 8, 2015
On January 7th, a federal judge struck down a ban on foie gras that had been in effect since 2012. The judge was of the opinion that the federal Poultry Products Inspection Act preempts the California ban. This Act gives the U.S. Department of Agriculture the sole jurisdiction over the “ingredients requirements” of poultry products.
The judge seems to have forgotten about the federal Animal Welfare Act’s requirements for the humane treatment of farm animals as well as states’ ability to ban the sale of the products of animal cruelty. The California Attorney General’s office is reviewing the decision for a possible appeal of the law, which was upheld in previous litigation.
Foie gras is, without a doubt, cruel to animals. To produce the alleged delicacy, geese and ducks are “force-fed a corn mash through a metal tube several times a day so that they gain weight and their livers become 10 times their natural size. Force-feeding sometime injures the esophagus of the bird, which may lead to death. Additionally, the fattened ducks and geese may have difficulty walking, vomit undigested food, and/or suffer in extreme confinement." Do we as consumers still have a right to buy such a product even if it tastes very good? No, according to at least California state law.
How anyone could make themselves eat this product is beyond my comprehension. I confess that I am an animal lover and environmentalist. I do personally believe in those core values. However, I am quite far from an extremist and respect, to a very, very far extent, the opinions of the vast majority of other people. Heck, I am not even a vegetarian (I try to at least buy free-range products). But under notions of both positive law – state and/or federal – and natural law, this is where the buck must stop. There must be limits to what we can do in the name of obtaining a gourmet experience, especially when it comes at such a high price of extreme suffering by our living, sentient creatures. And if consumers cannot draw such lines themselves, courts and legislatures must. In the words of Mahatma Gandhi, “the greatness of a nation and its moral progress can be judged by the way its animals are treated.” More than a dozen countries around the world have outlawed the production of foie gras. In this respect, the United States is not great. This case leaves a bad taste in my mouth and, I hope, in yours as well.
Wednesday, January 7, 2015
Bonnie Spiro Schinagle, Considering the Individualized Education Program: A Call for Applying Contract Theory to an Essential Legal Document, 17 CUNY L. Rev. 195 (2013)
Gregory Scopino, Regulating Fairness: The Dodd-Frank Act's Fair Dealing Requirement for Swap Dealers and Major Swap Participants, 93 Neb. L. Rev. 31 (2014)
Eric A. Zacks, Shame, Regret, and Contract Design, 97 Marq. L. Rev. 695 (2014)
Tuesday, January 6, 2015
The U.S. Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. plans to create hurdles for lenders of payday and direct deposit advance loans. Both types of loans are short-term loans intended to help consumers through a rough patch. Payday loans are available at various storefront locations whereas direct deposit advance loans are for banks’ existing customers.
The problem with these types of loans is that they often trap people into cycles of mounting debt with annual interest rates of more than 500% and the need by some to take out an average of 10 loans a year amounting to a total of more than $3,000.
This is a crackdown on organizations that may be seen to pry on the already weak. But is it also a setback for financially underprivileged consumers? After all, if you need money now, you need money now. I think the new proposed regulations are a step in the right direction as consumer protection, but at the same time, more is needed. That “more” is a decent living wage so that so many people do not have to live not only paycheck to paycheck, but in fact pre-paycheck to pre-paycheck.
In his 2015 State of the Union address, President Obama is expected to highlight the nation’s economic growth and falling unemployment rate. However, as I have written here before, most people in the U.S. still do not see or feel the economic recovery. Perception is reality. Let’s hope that the economy soon improves so much that most people feel it.
Hat tip to Professor Miriam Cherry for alerting me to this story.
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Monday, January 5, 2015
Thanks to the Hattiesburg Patriot, we have a pdf of a decision from the Mississippi Chancery Court striking down a public contract as unconstitutional. In January 2014, the City of Hattiesburg (the City) entered into a $137 million contract with Groundworx, LLC (Groundworx) for a wastewater treatment system. In August, the City terminated the contract due to Groundworx's alleged failure to secure financing for the project. Thomas Blanton intervened, alleging that the contract violates Article VII, Section 183 of Mississippi's constitution, which prohibits the government from lending credit in aid of a private business, and the Due Process clauses of both the Mississippi constitution and the U.S. Constitution's 14th Amendment. The Chancellor held that the contract was tantamont to the City
lending its credit to Groundworx for a public project over which it had no effective control. It thus violated the Section 183 and both due process clauses and was void ab initio.
As if Alex Rodriguez (pictured at right) did not have enough troubles already, the New York Daily News is wishing him a "Happy Sue Year" and reporting that A-Rod's ex-wife's brother is suing A-Rod for breach of a partnership agreement relating to the sale of Miami real estate.
Our Uber-lawsuit coverage continues this week with this story from the St. Louis Post Dispatch. The story reports on a planned class action alleging that Uber breached a contract with consumers by advertising that it shares 20% of fares with drivers as tips when in fact Uber keeps far more than that for itself. The latest development is just a discovery battle that Uber lost. It will have to provide relevant e-mails from Uber's CEO, Travis Kalanick.
Friday, January 2, 2015
A few days ago, I blogged on the recent lawsuit by United Airlines and Orbitz against the developer of Skiplagged. One of the causes of action alleged is breach of contract for encouraging the purchase of a ticket to certain destinations only to get off at an interim point to save money.
The airlines themselves may be breaching their contracts with flyers. For example, when we buy tickets to be flown from point A to point B, that arguably implies being done so without undue delays and, in particular, possibly having to spend the night at your own cost and without your personal belongings in random cities around the world if connections are missed because of flight delays (unless, of course, you choose to spend the night sitting upright in the airport). Needless to say, if you seek to change your ticket, airlines will either charge extreme high fees and the “difference in price” for doing so or outright prohibit this practice. I’ve had to change tickets many times in the past, and it has typically only taken an agent about five minutes to do so. Unconscionabiliy, anyone?
Here’s what happened to me one cold winter night a few years back: On my way to Denmark from St. Croix, the airline was late taking off and got even more delayed when it “had to” make an unplanned “quick landing” for gas, which was cheaper at the interim airport than at the end destination, and… ice cubes for people’s drinks! I wish I was kidding, but I’m not. I missed the once-daily connection out of Atlanta to Copenhagen and had to spend the night in Atlanta in December. As I was living in tropical St. Croix at the time, I had some warm clothes with me on board the airplane to stay warm there, but had packed my winter gear in my suitcase. The airline paid for my hotel, but would, in spite of my desperate pleas, not let me have my suitcase back for the night. Result: I had to travel to and from the hotel, etc., in indoor clothes on what turned out to be an unseasonably cold winter day in Atlanta (yes, I should have brought a warmer jacket on board the plane, but planes to and from the Caribbean are often very small and I always try not to bring too much carry-on items).
Before 1978, U.S. airlines were required under “Rule 240” to offer seats on a competitor’s next flight if that would be the fastest way of getting the traveler to his or her destination. Airlines created after deregulation were never required to follow that rule, but older airlines such as Delta, United and Continental apparently still adhere to the rule. Funny that they never seem to mention that when they delay you significantly. Next time you fly, it may pay to scrutinize your contract of carriage more carefully to ascertain your rights in case of a delay.
It may be time for Congress to reintroduce a Rule 240-type requirement on airlines, especially as these have become extremely good at flying full – even at overcapacity - and thus often do not have extra space for passengers that have missed their flights. Good customer service often seems to have given way to airlines’ “me first” attitude in the name of hearing the highest profits possible by nickel-and-diming most aspects of airline travel on, at least, economy class.
Feeling empathetic towards the airlines? Don’t. Full or nearly full flights in conjunction with declining gas prices have enabled U.S.-based airlines to earn the highest profit margins in decades. One trade group estimates that airline made 6% profit margins in 2014, higher than the highest rates in the 1990s. Of course, the task of businesses is to make as much money as they can. But at least they should live up to their own contracts of carriage and other contracts principles just as they claim passengers and website developers should.
Here’s a hat tip to Professor Miriam Cherry and other contracts professors on a well-known industry list serve for news about this story. All opinion and thoughts above are my own.
Wednesday, December 31, 2014
Last month, United Airlines and Orbitz filed a by-now famous lawsuit against the 22-year-old computer specialist who created the website Skiplagged.com. This website helps consumers find the cheapest round-trip airfare possible by buying tickets to a destination to which the traveler does not actually intend to travel, but instead getting off at a layover point which is the truly intended destination and discarding the last portion of the ticket. Roundtrip tickets to certain popular destinations are often much cheaper than to other destinations sought by fewer passengers even though the more popular destinations are further away from one’s point of origin.
To not cause the airline and other passengers undue trouble and delays, this practice, of course, requires not checking in luggage which, it seems, fewer and fewer travelers do anyway (next time you fly, notice the rush to get on board first with suitcases often much bigger than officially allowed and airline personnel deliberately ignoring this for reasons of “competition”).
The cause of action for this lawsuit? “Unfair competition,” and breach of contract because of “strictly prohibited travel,” and tortuous interference with contract.
Unfair competition? I admit that I have not yet read the rather long complaint, but I look forward to doing so very soon. At first blush, however, how can “unfair” can it really be to assist consumers in finding airfare that they want at the best prices available? United Airlines recognizes that there is a discrepancy between its prices to very popular destinations and others on the way, but claims [cite] that if many people “take advantage” of that price differential, it could “hurt the airlines.” Come again? Does it really matter that a customer – with no checked-in luggage – pays whatever price the airline itself has set but simply decides not to use up the entire item purchased? Doesn’t that simply let the airline save gas and potentially give the empty seat to potential stand-by customers? Does it matter to a newspaper that I choose to not read the sports pages? Must I eat the heal of my bread even though I don't like it? What if I really don't like my bread and would rather eat a donut instead, as I thought might be the case?
The issue of breach of contract is arguably a closer one. If airlines “strictly prohibit” the practice of only using part of a ticket, it may be promissory fraud to buy a ticket if one intends at the time of purchase to only use part of it. This could also relate to the purchase of a round-trip ticket only to use it one-way as that too is often cheaper than a one-way ticket, as Justice Scalia found out himself recently.
The Skiplagged.com creator argues that he is only taking advantage of “inefficiencies” in airline travel that travelers have known about for a long time. To me, it seems that airline contracting should work both ways as other types of contracting: airlines take advantage of their bargaining positions as well as their sophisticated knowledge of current and future air travel supply and demand structures. They should do so! I applaud them for that. Jet travel has certainly made my personal and professional life much better than without relatively cheap air travel. But every first year contracts law student also knows (or should know!) that contracting is not and should not be a one-way street. Consumers too are getting more and more sophisticated when it comes to airline travel and other types of online contracting. Websites enable us to inform ourselves about what we wish to spend our money on. As long as consumers do not break the laws or violate established contracting principles, that does not strike me as “unfair competition,” that is simply informed consumerism in a modern capitalist society from which airlines and others have already benefited greatly.
Airlines, wake up: how about working with your customers instead of trying to fight them and modern purchasing trends? How’s this for a thought: start offering one-way tickets for about half of a round-trip ticket just like other transportation vendors (trains, buses, subways) do. Don’t you think that could set you apart from your competition and thus even earn you more customers? If you can fly for a certain amount of money to a certain city, let people pay that only and then simply sell a second ticket for the remaining leg to the more popular end destination where the same plane is headed anyway. Let people off the bus if they want to! Let some one else on instead. It doesn’t seem that hard to figure out how to work with current purchasing trends and your customers instead of resisting the inevitable.
For another grotesquely inappropriate lawsuit by United Airlines against its own customer, see Jeremy’s blog here.
I will blog more on this issue over the days to come. For now, I’m glad I don’t have to head to an airport. Happy New Year!
Tuesday, December 30, 2014
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Monday, December 29, 2014
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 $15.37 an hour. Of course, this will mainly affect large hotel chains, which predictably resisted the ordinance citing to issues such as the need to stay competitive price-wise and threatened circumventing the effect of the new law by laying off or not hiring workers to save money. Funny since many of these hotels have been making vast amounts of money for a long time on, arguably, overpriced hotel rooms attracting a clientele that does not seem overly concerned about paying extra for things that are free in most lower-priced hotels (think wifi) and thus probably could somehow internalize the cost of fairly compensating its blue-collar workers.
Much has been said about the “1%” problem and a fair living wage. No reason to repeat that here. However, it is thought-provoking that whereas the U.S. recession officially ended in June 2009 – five years ago - 57% of the U.S. population still believed that the nation was in a recession in March 2014.
Contracting and the economy is, of course, to a large extent a matter of seeking the best bargain one can obtain for oneself. But even in industrialized nations such as ours, there is something to be said for also ensuring that not only the strongest, most sophisticated and wealthiest reap the benefits of the improved economy. So here’s to hoping that more initiatives such as the ones mentioned above are taken in 2015. At the end of 2014, it’s still “the economy, s$%^*&.”
On December 18th, the District Court for the District of Minnesota ruled on defendant's motion to dismiss in In re: Target Corporation Customer Data Security Breach Litigation. The case relates to the hacking of 110 million Target customers last December. Plaintiffs allege violations of state consumer protection laws, negligence and breach of contracts, both express and implied, among other things. The court dismissed most claims with prejudice. The breach of an implied contract claim survived, as a jury will have to determine whether plaintiffs can establish the terms of an implied contract. The court dismissed the breach of an express contract claim without prejudice. Plaintiffs will be given an opportunity to specify what federal laws Target allegedly breach through its allegedly inadquate measures for safeguarding its customers' data.
And if you are looking for evidence that airlines really don't care what we think of them, look no further than United's motion to dismiss in Mamakos v. United Airlines, Inc. In the case, plaintiff alleges the following:
- She moved into that seat;
- Stewardesses informed her that she would have to pay a $109 premium for the seat;
- She did not want to pay and so moved back to her original seat;
- United then removed her from the aircraft and, when she resisted had her arrested; and
- United then cancelled her ticket and her return ticket.
United accepts the truth of these allegations for the purposes of its motion but maintains that it still did not breach its contract with plaintiff because of Rule 5(B) of United's Contract of Carriage (incorporated by reference into plaintiff's ticket), which permits United to cancel a reservation if the passenger refuses to pay for the applicable Ticket. Apparently, once plaintiff's behind made contact with a premium seat, she was bound to pay or be forcibly ejected form the aircraft. Sheesh.
Really United? Worth litigating?
Join Alliance for Justice at the Association of American Law Schools’ (AALS) Annual Meeting to celebrate the release of the new short documentary,
Lost in the Fine Print
Examining the Impact of Forced Arbitration
Saturday, January 3, 2015
MARRIOT WARDMAN PARK HOTEL
Buried in everyday agreements for products, services, and jobs is fine print saying when you are harmed, you can’t go before an impartial jury or judge. Instead, these forced arbitration clauses send you to a decision-maker picked by the company that wronged you. Not surprisingly, one study found that arbitrators rule for companies over consumers 94 percent of the time. And you’re stuck with their decision because there’s no appeal. It’s a rigged system that helps companies evade responsibility for violating anti-discrimination, consumer protection, and public health laws.
Narrated by former U.S. Secretary of Labor Robert Reich, AFJ’s new 20 minute documentary Lost in the Fine Print tells the story of three everyday people who found themselves trapped in the system of forced arbitration—and the impact of this system on their lives and livelihoods. The cocktail reception will feature a film screening and brief remarks.
Nan Aron, President, Alliance for Justice
Paul Kirgis, Professor, St. John’s University School of Law and Chair, AALS Section on Alternative Dispute Resolution
Nancy Kim, Professor of Law, California Western School of Law; Chair, AALS Section on Contracts and author, Wrap Contracts
Judith Resnik, Arthur Liman Professor of Law, Yale Law School
Michelle Schwartz, Director of Justice Programs, Alliance for Justice
Host Committee (in formation):
*All titles and university affiliations are listed for identification purposes only.
Theresa A. Amato, Distinguished Scholar in Residence, Loyola University Chicago
Frank Askin, Distinguished Professor of Law, Robert E. Knowlton Scholar, and Director of Constitutional Rights Clinic, Rutgers School of Law—Newark
Robin Bradley Kar, Professor of Law and Philosophy, University of Illinois College of Law
Raymond H. Brescia, Associate Professor of Law and Director of the Government Law Center, Albany Law School
Katherine S. Broderick, Dean and Professor of Law, University of the District of Columbia David A. Clarke School of Law
Sarah E. Burns, Professor of Clinical Law, NYU School of Law
Erwin Chemerinsky, Dean of the School of Law, University of California, Irvine
Liz Ryan Cole, Professor, Vermont Law School
James E. Coleman, Jr., John S. Bradway Professor of the Practice of Law; Director, Center for Criminal
Justice and Professional Responsibility and Co-Director, Wrongful Convictions Clinic, Duke University School of Law
Joshua P. Davis, Associate Dean for Academic Affairs & Director, Center for Law and Ethics, University of San Francisco School of Law
Peter Edelman, Professor of Law, Georgetown University Law Center
Catherine Fisk, Chancellor’s Professor of Law, University of California, Irvine School of Law
Celeste Hammond, Professor and Director, Center for Real Estate Law, John Marshall Law School
Ann C. Hodges, Professor of Law, University of Richmond School of Law
Michael Hunter Schwartz, Dean and Professor of Law, University of Arkansas at Little Rock William H. Bowen School of Law
Robert A. Katz, Professor of Law, Indiana University Robert H. McKinney School of Law
Amalia D. Kessler, Lewis Talbot and Nadine Hearn Shelton Professor of International Legal Studies, Stanford Law School
Peter Linzer, Professor of Law, University of Houston Law Center
Dennis O. Lynch, Professor and Dean Emeritus, University of Miami School of Law
Margaret L. Moses, Professor of Law and Director, International Law and Practice Program, Loyola University Chicago School of Law
David B. Oppenheimer, Clinical Professor of Law & Director of Professional Skills, UC Berkeley School of Law
Nancy Polikoff, Professor of Law, American University Washington College of Law
Margaret Jane Radin, Henry King Ransom Professor of Law, University of Michigan Law School and author of Boilerplate
Maritza Reyes, Associate Professor of Law, Florida A&M University College of Law
Daniel B. Rodriguez, Dean and Harold Washington Professor, Northwestern University School of Law and President, AALS
Florence Wagman Roisman, William F. Harvey Professor of Law and Chancellor’s Professor, Indiana University Robert H. McKinney School of Law
Kathryn Sabbeth, Assistant Professor of Law, University of North Carolina School of Law
Peter M. Shane, Jacob E. Davis and Jacob E. Davis II Chair in Law, Ohio State University Moritz College of Law
Shirin Sinnar, Assistant Professor of Law, Stanford Law School
Jean Sternlight, Director of the Saltman Center for Conflict Resolution and Michael and Sonja Saltman Professor of Law, University of Nevada Las Vegas William S. Boyd School of Law
Joan Vogel, Professor of Law, Vermont Law School
Adam Zimmerman, Associate Professor of Law, Loyola Law School, Los Angeles
PS: Lost in the Fine Print is a game-changer. It demystifies the concept of forced arbitration, and urges us to demand change. Nationwide, law professors are using the film as a resource to educate students about this issue. Click here to download or order your free copy of the film.
Friday, December 26, 2014
In Joca-Roca Real Estate, LLC v. Brennan, the First Circuit affirmed the District Court's denial of plaintiff's motion to compel arbitration after nine months of discovery, which involved 16 depositions and four telephone conferences with the District Court Judge to settle discovery disputes. As the learned court put it, plaintiff provided no explanation for its cunctation. The District Court denied to motion to compel arbitration, holding that plaintiff had waived its right to arbitrate. The First Circuit affirmed.
The First Circuit began its analysis with the standard for a finding of implied waiver by conduct:
In determining whether a conduct-based waiver has occurred, we ask whether there has been an undue delay in the assertion of arbitral rights and whether, if arbitration supplanted litigation, the other party would suffer unfair prejudice.
Although the sage court noted plaintiff's asseveration that the District Court had applied the wrong standard, the perspicacious court considered a salmagundi of factors in determining that the District Court had applied the correct standard in finding prejudice. The sagacious court, for example, noted that plaintiff gave no reason for its inital decision to eschew arbitration and that its motion to compel was not raised in a timeous manner. In fact, the timing suggested that plaintiff had decided to try arbitration because it was facing an impending motion for summary judgment and the sapient court would not "condone the use of an arbitration clause as a parachute when judicial winds blow unfavorably."
The standard for showing prejudice in cases such as this one is not terribly exacting. Defendant had to pay for nine months of discovery. Time is also a valuable commodity, and the transfer into a new forum would have caused additional delay. Delay itself does not constitute prejudice, but here, the erudite court noted, delay was protracted and the litigation-related activities were copious.
Tuesday, December 23, 2014
I recently saw the last Hobbit movie, The Battle of the Five Armies. I found it highly entertaining and was delighted to find a discussion about contracts between Bard, the leader of Laketown, and the King of the Dwarves, Thorin Oakenshield, during a pivotal moment in the movie. The two engage in a back-and-forth about the meaning of a bargain, contract defenses (coercion and duress), and the importance of keeping promises. In short, all the issues that come up regularly on this blog. This isn't the first time that contracts have come up in a Hobbit movie. The morality of promise-keeping is an important theme in the movie as it has been in the others.
Speaking of the Hobbit, the Weinstein brothers have lost their fight against Warner Bros. over the profits to the last two Hobbit movies. As discussed previously on this blog, the issue involved the meaning of "first motion picture" of each book but not "remakes." The Hobbit book was split into three movies and the Weinsteins argued that they should get a percentage from each movie; Warner Bros. claimed that they should only get royalties from the first Hobbit movie. Unfortunately for contracts enthusiasts, the matter was sent to arbitration against the wishes of the Weinstein Bros. who wanted it to play out in court so we may never find out the basis for the arbitrator's ruling.
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Really? This is a thing now? The District Court held that a company can bind a consumer to an arbitration provision and class action waiver in a rolling contract of adhesion. Fortunately, the Ninth Circuit didn't buy it, but why is it even a close call?
In November 2011, Erik Knutson bought a Toyota which came with a 90-day subscription to Siriux XM Radio (Sirius). About a month into his trial subscription, Sirius sent Knutson a "welcome kit." That welcome kit included a customer agreement with an arbitration clause and class action waiver. According to the customer agreement, its terms became binding if Knutson did not contract Sirius to cancel his 90-day trial within three business days. Knutson also received unsolicited phone calls from Sirius on his cell phone. He filed a putative class action suit against Sirius for violations of the federal Telephone Consumer Protection Act.
Sirius cited to the arbitration clause and moved to compel arbitration. The District Court granted Sirius's motion to compel. In Knutson v. Sirius XM Radio, Inc. The Ninth Circuit reversed. The opinion is unanimous and careful. The Court explains why Mr. Knutson never assented to any terms and was not bound in any way to Sirius. Knutson never bought anything from Sirius and never knew that he was entering into a contact.
Monday, December 22, 2014
After years of conducting research on the genes of various animals, George Doe (a pseudonym), an accomplished biologist with a PhD in cellular and molecular biology, decides to have his own genes examined for fun and to discover whether he may be genetically predisposed to cancer. He buys a test kit online from one the many companies that provide such services these days. He is so excited about the process that he also buys a kit for his mother and father as gifts. They all have their genes tested. George finds out that he is not predisposed to cancer. But that’s not it. He also finds out that another male who has had his own genes tested and is thus registered with the same company is “50% related” to George. This can only mean one of three things: this other male is George’s grandfather, uncle or … half brother. After intense and testy family discussions, George’s father apparently admits that he had fathered this other male before marrying George's mother. George’s parents are now divorced and the entire family torn apart with no one talking to each other.
A very sad affair. Of course, nothing appears to be contractually wrong with this case: at the bottom of one’s profile with www.23andme.com, the company that provided the tests in this case, George and his family had checked a small box indicating for them to do so “if you want to see close family members in this search program.” The company is said to have close to one million people in its database. With modern science, close family members can easily be identified out of such data if opting into being notified.
Here, the company does not appear to have done anything wrong legally. Quite the opposite: if anything, the above shows that the buyers in these situations may not be sufficiently mentally prepared for the information they may discover through DNA testing. Arguably, they should be. After all, the old adage “watch out what you ask for, you may get it” still rings true.
But isn’t this situation akin to the various other situations we have blogged a lot about here this past year where customers buy various items online and click – or not – on various buttons, thus signaling at least alleged acceptance of, for example, terms of service requiring arbitration instead of lawsuits in case of disputes? As I have argued, many people probably just clicks such buttons without fully realizing what the legal or, in cases such as the above, factual results may be. Should online vendors be required either legally to make such check boxes or other online indicia of acceptance a lot more obvious? Or should they at least be required to do so for reasons of business ethics?
I think so. Most working people are exceptionally busy these days. Frankly, not many of us take the time to scrutinize the various implications - legal or otherwise – of the purchases we make online, especially because the agreements we accept in cyberspace are presented so very differently online, yet are so deceptively similar in legal nature that we probably feel pretty comfortable with simply clicking “I accept” as the vast majority of such transactions present no or only minor problems for us? And aren’t the vendors the party with the very best knowledge of some, if not most, of the problems that arise in these contexts? How hard would it really be for them to make sure that they use all the “bells and whistles” to truly put people on notice of what typical problems encountered may be, exactly to avoid legal problems down the road? One would think so, although, of course, customers also carry some of the burden of educating ourselves about what we buy and what that may mean. This is perhaps especially so when such delicate issues as the above are involved.
For George Doe, the above unfortunately turned out to be much more of a curse that kept on giving instead of a gift that kept on giving.
On behalf of your blogging team here at ContractsProfs Blog: Happy Holidays!