ContractsProf Blog

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

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Monday, July 28, 2014

Not Everything Is Arbitrable Says 2-1 Majority of the Fifth Circuit

5th CircuitIn 2002, Shirley Douglas opened a checking account with Union Planters Bank.  In connection with that account, which she closed in 2003, Ms. Douglas signed a signature card that provided for binding arbitration and delegated the issue of arbitrability to the arbiter.  

That bank merged into Regions Bank (Regions) in 2005.

In 2007, Ms. Douglas was injured in a car accident.  She alleges that her attorney embezzled her $500,000 settlement, and she sued Regions and another bank at which the attorney maintained accounts.  Regions moved to compel arbitration based on Ms. Douglas's agreement with Union Planters Bank.  The District Court found that there was no ground for arbitration.

On appeal, in Douglas v. Regions Bank, two judges affirmed, while noting that the District Court had applied the wrong law.  While the District Court apparently believed that Regions had never become a party to the arbitration provision at issue, the Circuit Court found that it had, but that the arbitration provision is irrelevant because Ms. Douglas's claims do not relate to her account with Union Planters Bank.  As the Court noted:

The mere existence of a delegation provision in the checking account’s arbitration agreement, however, cannot possibly bind Douglas to arbitrate gateway questions of arbitrability in all future disputes with the other party, no matter their origin.

 

Mr_Bumble
Mr. Bumble

In rejecting Regions' argument that the delegation clause in Ms. Douglas arbitration agreement with Union Planters Bank meant that the question of arbitrability had to be sent to an arbiter, the Fifth Circuit adopted the Federal Circuit's position, which is that the issue of arbitrability does not have to be sent to the arbiter when  the assertion of arbitrability “wholly groundless.” 

That seems like a reasonable rule, and dissenting Judge Dennis seemed to agree, except that Judge Dennis thought it impermissible for the Fifth Circuit to adopt the Federal Circuit's reasonable position when the Supreme Court adopted a less reasonable position in Rent-A-Center W. v. Jackson.   Indeed, in AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643 (1986), the Supreme Court made clear that when an issue is reserved for the arbiter, courts may not pronounce on the merits of the issue.  Thus a court must send the issue of arbitrability to an arbiter even when all are agreed that the arbitration agreement is inapplicable.

As Mr. Bumble might have put it, f the law supposes that the parties' interests are served by sending a claim to arbitration when there is no colorable claim that the parties have agreed to have the claim arbitrated, the law is a ass -- a idiot.

July 28, 2014 in Commentary, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Thursday, July 24, 2014

The ContractsProf Blog Welcomes Mirror of Justice to the LPBN Family

LPBNAs Blog Emperor Paul Caron announced here on the Mother of All Blawgs, the TaxProf Blog, Mirror of Justice, a blog dedicated to the development of Catholic legal theory edited by Rick Garnett (Notre Dame) and 19 other prominent law professors of faith, has joined the Law Professor Blogs Network.  

Rick Garnett announced the move on MoJ here.

We are delighted to welcome this well-established and tremendously interesting blog to the LPBN family, and we marvel at Paul's remarkably expanding empire.

July 24, 2014 in About this Blog, Weblogs | Permalink | TrackBack (0)

Wednesday, July 23, 2014

The MOOC

Cow_female_black_white

Several of us have participated in a MOOC of one kind of another.  I concede that I was a doubter. In fact, I may still be.  The attrition rates are huge and, at least in my case, the material presented at a fairly elementary level. My job was to give 25 ten minute lectures on contract law as a part of an 8 week course prepared by the UF College of Law. My colleages covered con law, criminal law, and a number of other basic topics.

I was surprised at how rewarding the experience was. We started with well over 10,000 students and ended up with a small fraction of that but it was fun in many ways. There were discussion groups and, in our case, groups sprouted up in several countries oftimes chatting with each other in their native language. Professors could join the groups, answer questions, pose new questions, or just listen in. Watching hundreds of students interact who would otherwise have no contract with each other was, from my standpoint, worth all the effort involved. I was even able to put aside my concerns about whether my lectures were making any sense.

At one point I told then about the history of Sherwood v. Walker. Many found it mind-boggling. How could a court just decide that it would have decided  the case differently a century later? It was a pleasure to see US contract law through the eyes of bright and curious people who were there voluntarily and not asking "what is the take away point."  

 

July 23, 2014 | Permalink | Comments (0) | TrackBack (0)

New in Print

Pile of BooksKenneth A. Adams, Adrian J. Walters & Robert L. Eisenbach III, Termination-on-Bankruptcy Provisions: Some Proposed Language, Business Law Today 1 (June 2014)

Mark Anderson, The Enigma of the Single Entity, 16 U. Pa. J. Bus. L. 497 (2014) 

Richard Frankel, The Arbitration Clause As Super Contract, 91 Wash. U. L. Rev. 531 (2014)

Barbara A. Lee, Student-Faculty Academic Conflicts: Emerging Legal Theories and Judicial Review, 83 Miss. L.J. 837 (2014)

Ganesh Sitaraman, Contracting around Citizens United, 114 Colum. L. Rev. 755 (2014)

Tess Wilkinson-Ryan, A Psychological Account of Consent to Fine Print. 99 Iowa L. Rev. 1745 (2014)

Perry A. Zirkel, Procedural and Substantive Student Challenges to Disciplinary Sanctions at Private--As Compared with Public--Institutions of Higher Education: A Glaring Gap? 83 Miss. L.J. 863 (2014) 

July 23, 2014 in Recent Scholarship | Permalink | TrackBack (0)

Tuesday, July 22, 2014

Weekly Top Tens from the Social Science Research Network

SSRNSSRN Top Downloads For Contracts & Commercial Law eJournal
RECENT TOP PAPERS 

RankDownloadsPaper Title
1 250 The Privatization of Compliance 
Scott Killingsworth 
Bryan Cave LLP 
2 186 Beauty and Ugliness in Offer and Acceptance 
Kenneth K. Ching 
Regent University - School of Law
3 178 A Psychological Account of Consent to Fine Print 
Tess Wilkinson‐Ryan 
University of Pennsylvania Law School 
4 128 Bankers and Chancellors 
William W. Bratton and Michael L. Wachter 
Institute for Law and Economics, University of Pennsylvania Law School and University of Pennsylvania Law School - Institute for Law and Economics 
5 106 Ending Class Actions as We Know Them: Rethinking the American Class Action 
Linda S. Mullenix 
University of Texas School of Law 
6 85 Bylaws Mandating Arbitration of Stockholder Disputes? 
Claudia H Allen 
Katten Muchin Rosenman LLP 
7 68 'Gap Filling' by Arbitrators 
Alan Scott Rau 
University of Texas at Austin School of Law 
8 66 The Costs of Corporate Bankruptcy: How Little We Know 
Stephen J. Lubben 
Seton Hall University - School of Law 
9 66 Fraud and Abuse in Mesothelioma Litigation 
Lester Brickman 
Yeshiva University - Benjamin N. Cardozo School of Law 
10 60 Governing Law on Forum-Selection Agreements 
Kevin M. Clermont 
Cornell Law School

SSRN Top Downloads For LSN: Contracts (Topic)
RECENT TOP PAPERS

 

RankDownloadsPaper Title
1 186 Beauty and Ugliness in Offer and Acceptance 
Kenneth K. Ching 
Regent University - School of Law 
2 178 A Psychological Account of Consent to Fine Print 
Tess Wilkinson‐Ryan 
University of Pennsylvania Law School 
3 68 'Gap Filling' by Arbitrators 
Alan Scott Rau 
University of Texas at Austin School of Law 
4 67 'Selling Out' and the Impact of Music Piracy on Artist Entry 
Joshua S. Gans 
University of Toronto - Rotman School of Management 
5 58 Of Priors and of Disconnects 
Margaret Jane Radin 
University of Michigan Law School 
6 55 Behavioral Trade-Offs 
Yuval Feldman and Orly Lobel 
Bar-Ilan University - Faculty of Law and University of San Diego School of Law
7 53 Between Property Law and Contract Law: The Case of Securities 
Matthias Haentjens 
Leiden University - Leiden Law School 
8 53 Alternative Entities in Delaware -- Reintroduction of Fiduciary Concepts by the Backdoor? 
Douglas M. Branson 
University of Pittsburgh School of Law 
9 52 A Eulogy for the EULA 
Miriam A. Cherry 
Saint Louis University - School of Law 
10 51 Good Faith and Fair Dealing as an Underenforced Legal Norm 
Paul MacMahon 
London School of Economics - Law Department 

 

July 22, 2014 in Recent Scholarship | Permalink | TrackBack (0)

Monday, July 21, 2014

Fifth Circuit Sends Case to Arbitration 2 1/2 Years After Litigation Begins

5th CircuitIn Al Rushaid v. Nat'l Oilwell Varco, Inc., plaintiffs sued eight entities for breach of contract.  The District Court found that the disputed contracts could result in damages in the hundreds of millions of dollars.  Discovery would have to take place on several continents.  Accordingly, although plaintiffs served all defendants except National Oilwell Varco Norway (NOV Norway) in August 2011, the District Court set a trial date in June 2013.

In August 2012, plaintiffs served NOV Norway, which invoked an arbitration clause in September 2012.  The District Court denied NOV Norway's motion to compel arbitration, finding that the dispute was not within the scope of the arbitration clause and that NOV Norway had waived its right to arbitrate.  

The Fifth Circuit rejected both the District Court's conclusion that there was no agreement to arbitrate and its conclusion that NOV Norway had waived its right to arbitrate.  On the first issue, the District Court's ruling was based on its finding that plaintiffs' claims against NOV Norway related to an NOV Norway price quotation that did not include an arbitration clause.  The Fifth Circuit concluded that the price quotation was merely a supplement to terms provided in a general agreement called the ORGALIME.  The Fifth Circuit concluded that the relationship between the two documents was sufficiently established so that the ORGALIME's arbitration clause should apply to disputes relating to the price quotation.

Under Fifth Circuit precedent, a party waives its right to arbitrate if it (1) “substantially invokes the judicial process” and (2) thereby causes “detriment or prejudice” to the other party.  The District Court found that this standard was met because NOV Norway's co-defendants engaged in extensive discovery and because all co-defendants are jointly owned and controlled and were represented by the same legal counsel.  The extent to which NOV Norway's codefendants' conduct could be imputable to it in a context such as this raised a question of first impression for the Fifth Circuit.  In this case, the Court found that, although NOV Norway might have benefitted from the discovery conducted by its co-defendants, it had not thereby invoked the judicial process, as this occurred before NOV Norway was served.  After it was served, discovery continued but NOV Norway did not participate.  

The District Court's denial of NOV Norway's motion to compel arbitration was vacated.  NOV Norway is the only defendant that may avail itself of arbitration.  The case was remanded for a determination of whether there should be a stay of proceedings in the District Court pending the outcome of arbitration between plaintiffs and NOV Norway.

July 21, 2014 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Supreme Court of Ohio Rules in Condition Precedent Case

BettmanThis is a edited version of a longer post from the Legally Speaking Ohio blog, written by Marianna Brown Bettman (pictured), a law professor at the University of Cincinnati College of Law, where she teaches torts, legal ethics, and a seminar on the Supreme Court of Ohio.  She is also a former Ohio state court of appeals judge.  

Professor Bettman's full blog post can be found here.

On July 17, 2014, the Supreme Court of Ohio handed down a merit decision in Transtar Elec., Inc. v. A.E.M. Elec. Servs. Corp.Slip Opinion No. 2014-Ohio-3095. In a 5-2 opinion authored by Justice Kennedy, the Court held that a contract for work performed by a subcontractor for a general contractor which contains a provision that payment by the project owner to the general contractor is a condition precedent to payment by the general contractor to the sub is a pay-if-paid provision. Such a provision clearly and unequivocally shows the intent of the parties to transfer the risk of the owner’s nonpayment from the general contractor to the subcontractor.  Justice O’Neill dissented, for himself and Justice Pfeifer.  The case was argued November 5, 2013.

Case Background

A.E.M was the general contractor on the construction of a swimming pool at a Holiday Inn. A.E.M. entered into a subcontract with Transtar to perform electrical work on the project. Transtar fully performed the work under the contract, and was paid $142,620. A.E.M. did not pay Transtar the remaining balance of $44,088 because A.E.M. contended the owner failed to pay it for Transtar’s work.

Section 4 of the subcontracting agreement included this provision, which was in bold and in capital letters: “Receipt of payment by contractor from the owner for work performed by subcontractor is a condition precedent to payment by contractor to subcontractor for that work.”

. . .

Analysis of Merit Decision

Definitions: Pay-when-Paid versus Pay-if-Paid

The Court explains there are two types of contract provisions between general and subcontractors.  A pay-when-paid provision is one in which a general contractor makes an unconditional promise to pay the subcontractor, within a reasonable period of time to allow the general contractor to be paid.  A pay-when-paid provision is not affected by the owner’s nonpayment.

By contrast, a pay-if-paid provision is a conditional promise to pay that is enforceable only if a condition precedent has occurred.  Under this type of contract, the general contractor is only required to pay the subcontractor if the owner pays the general contractor.  Under a pay-if-paid contract, the risk of the owner’s nonpayment is shifted to the subcontractor.

The issue in the case is which kind of contract provision was this one? Short answer: pay-if-paid.

. . .

Application of the Rule to the Contract in this Case

The Court held that Section 4 of the contract between A.E.M. and Transfer is a pay-if-paid provision, and clearly and unequivocally shows that the parties intended to transfer the risk of the owner’s nonpayment from A.E.M. to Transtar.

Conclusion

The court of appeals is reversed and the judgment of the trial court granting summary judgment to A.E.M. is reinstated.

Dissent

Justice O’Neill, joined by Justice Pfeifer in dissent, would find the language in this particular contract inadequate as a matter of law to transfer the risk of nonpayment by the owner from A.E.M. to Transtar.  He would find the ambiguities in the wording create genuine issues of material fact that make summary judgment inappropriate.

 . . .

July 21, 2014 in Recent Cases, Weblogs | Permalink | Comments (0) | TrackBack (0)

Friday, July 18, 2014

Overzealous or Legitimate Debt Collection Practices

By Myanna Dellinger

A woman owes $20 to Kohl’s on a credit card.  The debt collector allegedly started to “harass” the woman over the debt, calling her cell phone up to 22 times per week as early as 6 a.m. and occasionally after midnight.  What would a reasonable customer do?  Probably pay the debt, which the woman admits was only a “measly $20.”  What did this woman do?  Not to pay the small debt, telling the caller that they had “the wrong number,” and follow the great American tradition of filing suit, alleging violations of the 1991 Telephone Consumer Protection Act which, among other things, makes it illegal to call cell phones using auto dialers or prerecorded voices without the recipient’s consent.

Consumer protection rules also prohibit collection agencies from calling before 8 a.m. and after 9 p.m., calling multiple times during one day, leaving voicemail messages at a work number, or continuing to call a work phone number if told not to. 

Last year, Bank of America agreed to pay $32 million to settle claims relating to allegations of illegally using robo-debt collectors.  Discover also settled a claim alleging that they violated the rules by calling people’s cell phones without their consent.  Just recently, a man’s recorded 20-minute call to Comcast pleading with their representative to cancel his cable and internet service went viral online.

The legal moral of these stories is that companies are not and should, of course, not be allowed to harass anyone to collect on debt owed to them or refuse to cancel services no longer wanted.  However, what about companies such as Kohl’s who are presumably owed very large amounts of money although in the form of many small debts?  Is it reasonable that customers such as the above can do what she admits doing, simply saying “screw it” to the company and in fact reverse the roles of debtor and creditor by hoping for a settlement via a lawsuit on a questionable background?  Surely not. 

I once owned a small company and can attest to the difficulty of collecting on debts even with extensive accurate documentation.  The only way my debt collecting service or myself were able to collect many outstanding amounts was precisely to make repeat requests and reminders (although, of course, in a professional manner).  As a matter of principle, customers should not be able to get away with simply choosing not to pay for services or products they have ordered, even if the outstanding amounts are small.  If companies have followed the law, perhaps time has come for them to refuse settling to once again re-establish the roles of debtor and creditor.  This, one could hope, would lead irresponsible consumers to live up to their financial obligations, as must the rest of society.

July 18, 2014 in Commentary, Current Affairs, E-commerce, Famous Cases, In the News, True Contracts | Permalink | TrackBack (0)

Wednesday, July 16, 2014

American Apparel and Arbitration Clauses

It's been hard for me to avert my eyes from the train wreck happening at American Apparel.  Yes, I heard the rumors about the shocking behavior of its former CEO, but the revelations of some of the past accusations by former employees are news to me.  But, as Steven Davidoff Solomon points out in today's NYT, it's not surprising that the public didn't hear about the most egregious employee claims.  American Apparel required all its employees to sign agreements containing arbitration clauses.  Davidoff Solomon writes:

"The purpose of these clauses was clear: to ensure that any dispute was kept quiet and protect the company from excessive damages. It certainly didn’t appear to benefit employees.

American Apparel required that the entire proceeding — including the outcome — be kept confidential. Employees were also contractually barred from disparaging or otherwise say anything bad about Mr. Charney or American Apparel. As if this were not enough, employees also were required to agree not to speak to the news media without the approval of American Apparel."

It wasn't just employees - models had to sign egregious, one-sided contracts, too. These contracts also contained arbitration clauses and very broadly worded non-disparagement clauses. 

As Davidoff Solomon notes, American Apparel's board could ignore their CEO's misconduct because there was not much public outcry about it, and there was not much public outcry because the employees and models who brought claims, couldn't discuss what happened to them - their contracts prohibited it.  My guess is that these "contracts" were also "at will." 

All from a company whose public image was based, at least in part, on fair pay for workers

 

July 16, 2014 in Current Affairs | Permalink | Comments (0) | TrackBack (0)

New in Print

Pile of BooksJuana Coetzee, The Interplay between INCOTERMS and the CISG, 32 J.L. & Com. 1 (2013).

Robert W. Emerson & Jason R. Parnell, Franchise Hostages: Fast Food, God, and Politics, 29 J.L. & Pol. 353 (2014)

Daniel Goller & Alexander Stremitzer, Breach Remedies Inducing Hybrid Investments, 37 Int'l Rev. L. & Econ. 26 (2014)

Daniel B. Kelly, The Right to Include, 63 Emory L.J. 857 (2014)

Lea-Rachel Kosnik, Determinants of Contract Completeness: An Environmental Regulatory Application, 37 Int'l Rev. L. & Econ. 198 (2014) 

Robert T. Miller, The Coasean Dissolution of Corporate Social Responsibility, 17 Chapman L. Rev. 381 (2014)

Joel D. Hesch, The False Claims Act Creates a "Zone of Protection" that Bars Suits against Employees Who Report Fraud against the Government, 62 Drake L. Rev. 361 (2014)

July 16, 2014 in Recent Scholarship | Permalink | TrackBack (0)

Tuesday, July 15, 2014

Warning: Burning Gasoline May Kill You

By Myanna Dellinger

The city of Berkeley, California, may become the first in the nation to require that gas stations affix warning stickers to gas pump handles warning consumers of the many recognized dangers of climate change.  The stickers would read:

Global Warming Alert!  Burning Gasoline Emits CO2

The City of Berkeley Cares About Global Warming

The state of California has determined that global warming caused by CO2 emissions poses a serious threat to the economic well-being, public health, natural resources, and the environment of California.  To be part of the solution, go to www.sustainableberkeley.com

Consumers not only in California, but worldwide are familiar with similar warnings about the dangers of tobacco.  The idea with the gas pump stickers is to “gently raise awareness” of the greenhouse gas impacts and the fact that consumers have alternatives.  In their book “Nudge,” Richard Thaler and Cass Sunstein addressed the potential effectiveness of fairly subtly encouraging individual persons to act in societally or personally improved ways instead of using more negative enforcement methods such as telling people what not to do.  Gas pump stickers would be an example of such a “nudge.”

But is that enough?  World scientists have agreed that we must limit temperature increases to approximately 2° C to avoid dangerous climate change.  The problem is that we are already headed towards a no less than 5° C increase.  To stop this tend, we must reduce greenhouse gas emissions by 80% or more (targets vary somewhat) by 2050.  Stickers with nudges are great, but in all likelihood, the world will need a whole lot more than that to reach the goal of curbing potentially catastrophic weather-related calamities.

Of course, the oil and gas industry opposes the Berkeley idea.  The Western States Petroleum Association claimsthat the labels would “compel speech in violation of the 1st Amendment” and that “far less restrictive means exist to disseminate this information to the public without imposing onerous restrictions on businesses.”  Why this type of sticker would, in contrast to, for example, labels on cigarette packaging, be so “onerous” and “restrictive” is not clear.  Given the extent of available knowledge of climate change and its potential catastrophic effects on people and our natural environment, the industry is very much behind the curve in hoping for “less restrictive means.”  More restrictive means than labels on dangerous products are arguably needed.  Even more behind the curve is the Association’s claim that the information on the stickers is merely “opinion” that should not be “accorded the status of ‘fact’”.   The Berkeley city attorney has vetted the potential ordinance and found the proposed language to be not only sufficiently narrow, but also to have been adopted by California citizens as the official policy of the state. 

It seems that instead of facing reality, the oil and gas industry would rather keep consumers in the dark and force them to adopt or continue self-destructive habits.  That didn’t work in the case of cigarettes and likely will not in this case either.  We are a free country and can, within limits, buy and sell what we want to.  But there are and should be restrictions.  In this case, the “restriction” is actually not one at all; it is simply a matter of publishing facts.  Surely, in America in 2014, no one can seriously dispute the desirability of doing that.

The Berkeley City Council is expected to address the issue in September.

July 15, 2014 in Commentary, Current Affairs, In the News, Legislation, Science | Permalink | Comments (0) | TrackBack (0)

Ninth Circuit Finds that Nordstrom Gave Sufficient Notice of Its Class-Action Waiver

9th CirThis is just a bad time to be an employee of a major department store on the West Coast.  In Davis v. Nordstrom, Inc. the same panel that decided Johnmohammadi v. Bloomingdale's, Inc., about which we blogged yesterday, granted Nordstrom's motion to compel individual arbitration, overturning the District Court's denial for that motion.  

In August 2011, Faine Davis filed a purported class action against Nordstrom, alleging nonpayment of wages, failure to provide meal periods and rest breaks, and unfair competition.  Nordstrom, in reliance on its employee handbook, moved to compel individual arbitration of Davis's claims.  Nordstrom had revised that handbook earlier in 2011 in response to the Supreme Court's decision in AT&T Mobility LLC v. Concepcion to prohibit employees from bringing most class action lawsuits.  

Davis had received a copy of the employee handbook when she was first employed by Nordstrom, and she acknowledged that she received notice each time that handbook was subsequently amended.  In June 2011, ahe was notified that Nordstrom would henceforth preclude most class action lawsuits.  Under California law, Nordstrom is permitted to amend the terms of its agreement with its employees upon due notice.  Since Davis received notice and continued to work for Nordstrom, she accepted the modified terms.  California law requires only reasonable notice, but Nordstrom's handbook specified that 30-days' advance notice is required.  

The District Court found Nordstrom's notice insufficient because the notice described the policy as the "current version," leading employees to believe that it was immediately effective.  The Ninth Circuit rejected this finding.  While noting that Nordstrom's notice was not a "model of clarity," it was sufficient to meet California's standards because Nordstrom did not seek to enforce the policy against any employees until at least 30 days after notice was given.

The District Court also found the notice insufficient because it did not inform Davis that her continued employment constituted acceptance of the new terms.  The Ninth Circuit found that California law imposes no requirement that employers notify employees that continued employment constitutes acceptance.  This seems a bit odd, since one would think that an offeree ought to be informed when conduct would be construed as acceptance.

But all is not lost for Ms. Davis.  The District Court did not rule on her claim that the class action waiver is unconscionable, and the Ninth Circuit refused to rule on the issue.  That part of the case was remanded for a determination by the District Court.

July 15, 2014 | Permalink | Comments (0) | TrackBack (0)

Weekly Top Tens from the Social Science Research Network

SSRNSSRN Top Downloads For Contracts & Commercial Law eJournal
RECENT TOP PAPERS

RankDownloadsPaper Title
1 235 The Privatization of Compliance 
Scott Killingsworth 
Bryan Cave LLP 
2 177 Beauty and Ugliness in Offer and Acceptance 
Kenneth K. Ching 
Regent University - School of Law 
3 171 A Psychological Account of Consent to Fine Print 
Tess Wilkinson‐Ryan 
University of Pennsylvania Law School 
4 124 Bankers and Chancellors 
William W. Bratton and Michael L. Wachter 
Institute for Law and Economics, University of Pennsylvania Law School and University of Pennsylvania Law School - Institute for Law and Economics 
5 123 Personal and Proprietary Remedies for Breach of Confidence: Nearer to Breach of Fiduciary Duty or Breach of Contract? 
Graham Virgo 
University of Cambridge - Faculty of Law 
6 82 Bylaws Mandating Arbitration of Stockholder Disputes? 
Claudia H Allen 
Katten Muchin Rosenman LLP 
7 78 The First Sale Doctrine and the Economics of Post-Sale Restraints 
Ariel Katz 
University of Toronto - Faculty of Law 
8 65 'Gap Filling' by Arbitrators 
Alan Scott Rau 
University of Texas at Austin School of Law 
9 62 The Costs of Corporate Bankruptcy: How Little We Know 
Stephen J. Lubben 
Seton Hall University - School of Law 
10 61 Ending Class Actions as We Know Them: Rethinking the American Class Action 
Linda S. Mullenix 
University of Texas School of Law 

SSRN Top Downloads For LSN: Contracts (Topic)
RECENT TOP PAPERS 

RankDownloadsPaper Title
1 177 Beauty and Ugliness in Offer and Acceptance 
Kenneth K. Ching 
Regent University - School of Law 
2 171 A Psychological Account of Consent to Fine Print 
Tess Wilkinson‐Ryan 
University of Pennsylvania Law School 
3 123 Personal and Proprietary Remedies for Breach of Confidence: Nearer to Breach of Fiduciary Duty or Breach of Contract? 
Graham Virgo 
University of Cambridge - Faculty of Law 
4 66 'Selling Out' and the Impact of Music Piracy on Artist Entry 
Joshua S. Gans 
University of Toronto - Rotman School of Management
5 65 'Gap Filling' by Arbitrators 
Alan Scott Rau 
University of Texas at Austin School of Law 
6 57 Of Priors and of Disconnects 
Margaret Jane Radin 
University of Michigan Law School 
7 53 Behavioral Trade-Offs 
Yuval Feldman and Orly Lobel 
Bar-Ilan University - Faculty of Law and University of San Diego School of Law 
8 53 Between Property Law and Contract Law: The Case of Securities 
Matthias Haentjens 
Leiden University - Leiden Law School 
9 49 A Eulogy for the EULA 
Miriam A. Cherry 
Saint Louis University - School of Law 
10 49 Good Faith and Fair Dealing as an Underenforced Legal Norm 
Paul MacMahon 
London School of Economics - Law Department

 

July 15, 2014 in Recent Scholarship | Permalink | TrackBack (0)

Monday, July 14, 2014

Ninth Circuit Enforces Class-Action Waiver Despite Federal Statutes

9th CirFatemeh Johnmohammadi was an employee of Bloomingdale's, Inc. (Bloomingdale's).  She sought to bring a state class-action claim alleging that she and others, similarly situated, were owed overtime wages.  Bloomindale's removed the case to federal court and then filed a motion to compel arbitration of Johnmohammadi's claims.  The District Court granted the motion and dismissed the case without prejudice.  Johnmohammadi appealed to the Ninth Circuit.

In Johnmohammadi v. Bloomingdale's, Inc., the Ninth Circuit affirmed the District Court's decision.  The Court found that there is no question that Johnmohammadi voluntarily agreed to Bloomingdale's arbitration agreement, which also included a class action waiver.  The arbitration agreement included an opt-out option of which Johnmohammadi did not avail herself.

On appeal, Johnmohammadi argued that the class-action waiver is unenforceable because its enforcement would violate the Norris-LaGuardia Act and the National Labor Relations Act both of which protect the rights of employees to engage in "concerted activities."  While the Court noted that there is some support for Johnmohammadi's position, the cases she cited applied only where an employer forces employees to waiver their rights as a condition of employment.  Here, because of the opt-out option, Johnmohammadi was held to have voluntarily agreed to Bloomingdale's terms.  

 

July 14, 2014 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Court Finds that Party Who Signed "Flounder" Is Not Bound to New Employment Agreement

FlounderIn Random Ventures, Inc. v. Advanced Armament Corp., the District Court for the Southern District of New York found that a party that wrote the word "flounder" on a signature line was not bound by the document on which he scribbled that word.

For the full context, you would have to read the 117-page District Court opinion.  Our highly-consdensed summary is as follows:

Kevin Brittingham formed a company, Advanced Armament Corp. (AAC) that designed and manufactured silencers for firearms.  AAC thrived and in 2009, a large firearms manufacturer, Remington Arms Company (Remington) acquired it.  Remington paid $10 million up front, and Brittingham was to get another $8 million if he was still around as an AAC employee (now Remington's subsidiary) in 2015.  He was terminated at the end of 2011 and his partner from the original business, Lynsey Thompson, was terminated one month later.  Both Brittingham and Thompson sued for breach of contract and breach of the covenant of good faith.  

The Court noted that Brittingham socialized with his clients by riding dirt bikes, engaging in aerial pig hunts and attending strip clubs.  He ran a successful business but, as the Court observed, he is nobody's idea of a perfect fit for a corporate culture.  Tensions arose in the relationship over AAC's compliance with federal regulations relating to the handling of firearms.  The Court concluded unequivocally that Remington (not Brittingham) bore responsibility for the compliance failures.  Nontheless, Remington suspended Brittingham and Thompson over compliance issues.

Remington offered Brittingham a new employment agreement.  The agreement was really an ultimatum: either sign this acknowledgment that we have grounds to terminate you for cause and then you can return to work on a probationary basis or consider yourself terminated for cause right now.  Of course, termination for cause would cost Brittingham $8 million.  The court characterized this document as an $8 million hold-up (with or without a silencer?), which Brittingham "consistently refused to execute."  Eventually Brittingham (or someone) scribbled "Flounder" on the signature line and faxed the agreement to Remington.   The Court seems to have found that the scribble did not bind Brittingham, since a sophisticated party like "Remington could not reasonably have been duped into believing Brittingham had adequately executed the proposed amended EA based on the scribbling on the last page."  But it is not clear that such a finding is necessary to the Court conclusion, since Remington never executed the new agreement.

It seems that the Court's finding that the agreement was not enforceable did not actually turn on the issue of signature.  The Court refused to enforce an agreement that Brittingham could be terminated for cause when, in fact, no grounds for termination for cause existed.  

To the extent that Brittingham and Thompson did agree to amended employment terms, however, the Court finds as a factual matter that they did so under false pretenses – as determined above, defendants did not have Cause to terminate either plaintiff at the time of their suspensions.

The Court rejected Remington's argument that by writing "Flounder" and by returning to work, Brittingham had waived any objection to the amended employment agreement.  The Court construed Brittingham's act as one of defiance rather than as one of waiver.  

Thanks to Professor Royce de Rohan Baronedes who blogged about the case here and alerted us to its existence.

Interesting aside related to Nancy Kim's post from February about Rocket from the Crypt and acceptance by tattoo.  Before it was acquired, Brittingham's company ran a promotion promsing a free silencer to anyone bearing a tattoo with his company's logo.  The promo cost the company $250,000.

July 14, 2014 in Contract Profs, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 9, 2014

Aereo Loses in Supreme Court and so do Consumers – for Now

By Myanna Dellinger

Recently, I blogged here on Aereo’s attempt to provide inexpensive TV programming to consumers by capturing and rebroadcasting cable TV operators’ products without paying the large fees charged by those operators.  The technology is complex, but at bottom, Aereo argued that they were not breaking copyright laws because they merely enabled consumers to capture TV that was available over airwaves and via cloud technology anyway. 

In the recent narrow 6-3 Supreme Court ruling, the Courts said that Aereo was “substantially similar” to a cable TV company since it sold a service that enabled subscribers to watch copyrighted TV programs shortly after they were broadcast by the cable companies.  The Court found that “Aereo performs petitioners’ works publicly,” which violates the Copyright Act.  The fact that Aereo uses slightly different technology than the cable companies does not make a “critical difference,” said the Court.  Since the ruling, Aereo has suspended its operations and posted a message on its website that calls the Court’s outcome "a massive setback to consumers."

Whether or not the Supreme Court is legally right in this case is debatable, but it at least seems to be behind the technological curve.  Of course the cable TV companies resisted Aereo’s services just as IBM did not predict the need for very many personal computers, Kodak failed to adjust quickly enough to the digital camera craze, music companies initially resisted digital files and online streaming of songs.  But if companies want to survive in these technologically advanced times, it clearly does not make sense to resist technological changes.  They should embrace not only technology, but also, in a free market, competition so long as, of course, no laws are violated.  We also do not use typewriters anymore simply to protect the status quo of the companies that made them.

It is remarkable how much cable companies attempt to resist the fact that many, if not most, of us simply do not have time to watch hundreds of TV stations and thus should not have to buy huge, expensive package solutions.  Not one of the traditional cable TV companies seem to consider the business advantage of offering more individualized solutions, which is technologically possible today.  Instead, they are willing to waste money and time on resisting change all the way to the Supreme Court, not realizing that the change is coming whether or not they want it. 

Surely an innovative company will soon be able to work its way around traditional cable companies’ strong position on this market while at the same time observing the Supreme Court’s markedly narrow holding.  Some have already started doing so.  Aereo itself promises that it is only “paus[ing] our operations temporarily as we consult with the court and map out our next steps.”

 

 

July 9, 2014 in Commentary, Current Affairs, E-commerce, Famous Cases, Film, In the News, Music, Recent Cases, Television, Web/Tech | Permalink | Comments (0) | TrackBack (0)

CNN's Crossfire Almost Takes a Position on Sex Contracts on College Campuses

Friend of the blog, Kenneth Ching, shared this with us.

So I hadn't really thought about Crossfire since Jon Stewart shut them down.  It was the pinnacle of Stewart's career thus far.

 

But I guess it's just hard to keep a terrible idea down when you have 24 hours of time to kill every day.  

I don't know what CNN's little segment on sex contracts is supposed to accomplish.  I guess it is intended to introduce its audience to one of its contributors, S. E. Cupp   No doubt, Ms. Cupp has lots of interesting ideas and is telegenic and all that, but this segment reads like a Ms. America question gone wrong. "Ms. Louisiana, do you think colleges and universities ought to require written assent from both (or all) parties to any sexual act in which a student participates?"

Ms. Cupp starts, because her brand is "smart conservative," by lashing out at a culture that "disarms" students on college campuses.  Her claim is that women can't protect themselves with pepper spray because of weapons bans on campuses.  Of course, most of those bans do not include defensive weapons and anyway, if a woman used her pepper spary defensively in defiance of such a ban, she would 1) escape an assault and 2) perhaps face reprimand.  It's not clear that the disarmament has occurred, nor does Ms. Cupp address the very real possibility that women are safer when men can't carry weapons on campus, but I digress.

Then she seems to complain about resources going to crisis centers and hotlines rather than to rape prevention but she is careful to say that crisis centers and hotlines are a good thing (way to give a  balanced perspective, Ms. Louisiana!).  Then comes the segue to the University of California's consideration of sex contracts.   This is not news.  Antioch College did it for years.  Even we  blogged about the subject two years ago.

What's Cupp's take?  The idea is silly, but good for California for at least trying!  Alright audience.  Ms. Louisiana!  Isn't she a great sport?

Cupp actually makes me feel nostalgic for the days when Camille Paglia would not just strike provocative intellectual poses but would actually take provocative intellectual positions on the right.  I didn't agree with Paglia, but she expressed her original and outlandish ideas with verve and panache.  She challenged her readers to consider their positions and think things anew.  If anyone actually watches the new Crossfire, let me know if you see any signs of an ability to do so over there.

 

July 9, 2014 in Commentary, Television, True Contracts | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 8, 2014

Weekly Top Tens from the Social Science Research Network

SSRNSSRN Top Downloads For Contracts & Commercial Law eJournal
RECENT TOP PAPERS

RankDownloadsPaper Title
1 215 The Privatization of Compliance 
Scott Killingsworth 
Bryan Cave LLP 
2 157 A Psychological Account of Consent to Fine Print 
Tess Wilkinson‐Ryan 
University of Pennsylvania Law School 
3 144 Beauty and Ugliness in Offer and Acceptance 
Kenneth K. Ching 
Regent University - School of Law
4 128 A Study of the Risks of Contract Ambiguity 
Preston M. Torbert 
University of Chicago Law School 
5 121 Personal and Proprietary Remedies for Breach of Confidence: Nearer to Breach of Fiduciary Duty or Breach of Contract? 
Graham Virgo 
University of Cambridge - Faculty of Law 
6 118 Bankers and Chancellors 
William W. Bratton and Michael L. Wachter 
Institute for Law and Economics, University of Pennsylvania Law School and University of Pennsylvania Law School - Institute for Law and Economics 
7 83 Review Essay: Reading the Dream Machine: The Untold Story of the Notorious V-22 Osprey, by Richard Whittle, in Light of the Defense Acquisition Performance Study 
Steven L. Schooner and Nathaniel E. Castellano 
George Washington University - Law School and George Washington University - Law School 
8 77 Bylaws Mandating Arbitration of Stockholder Disputes? 
Claudia H Allen 
Katten Muchin Rosenman LLP
9 75 The First Sale Doctrine and the Economics of Post-Sale Restraints 
Ariel Katz 
University of Toronto - Faculty of Law 
10 63 'Gap Filling' by Arbitrators 
Alan Scott Rau 
University of Texas at Austin School of Law 

SSRN Top Downloads For LSN: Contracts (Topic)
RECENT TOP PAPERS 

RankDownloadsPaper Title
1 157 A Psychological Account of Consent to Fine Print 
Tess Wilkinson‐Ryan 
University of Pennsylvania Law School 
2 143 Beauty and Ugliness in Offer and Acceptance 
Kenneth K. Ching 
Regent University - School of Law 
3 128 A Study of the Risks of Contract Ambiguity 
Preston M. Torbert 
University of Chicago Law School 
4 121 Personal and Proprietary Remedies for Breach of Confidence: Nearer to Breach of Fiduciary Duty or Breach of Contract? 
Graham Virgo 
University of Cambridge - Faculty of Law 
5 64 'Selling Out' and the Impact of Music Piracy on Artist Entry 
Joshua S. Gans 
University of Toronto - Rotman School of Management 
6 63 'Gap Filling' by Arbitrators 
Alan Scott Rau 
University of Texas at Austin School of Law 
7 57 Of Priors and of Disconnects 
Margaret Jane Radin 
University of Michigan Law School 
8 50 Between Property Law and Contract Law: The Case of Securities 
Matthias Haentjens 
Leiden University - Leiden Law School 
9 50 Behavioral Trade-Offs 
Yuval Feldman and Orly Lobel 
Bar-Ilan University - Faculty of Law and University of San Diego School of Law 
10 48 A Eulogy for the EULA 
Miriam A. Cherry 
Saint Louis University - School of Law 

 

 

July 8, 2014 in Government Contracting, Recent Scholarship | Permalink | TrackBack (0)

Monday, July 7, 2014

23andMe's Wrap Contracts

H/T to Eric Goldman for sharing with the list a new case from Judge Lucy Koh of the federal district court of Northern California.  Tompkins v. 23andMe provides a detailed analysis of 23andMe's wrap contracts.  The case involves the same Terms of Service presented as a hyperlink at the bottom of the website's pages, and then later, post-purchase and at the time of account creation, as a hyperlink that requires a "click" in order to proceed (which I refer to as a "multi-wrap" as it's neither browsewrap nor clickwrap but a little of both).  The court says the former presentation lacks notice, but the latter constitutes adequate formation.  Eric Goldman provides a detailed analysis of the case here.  

Not surprisingly, the Terms contained a unilateral modification clause which was briefly discussed in the context of substantive  unconscionability.  It was not, however, raised as a defense to formation, i.e. to argue that the promises made by 23andme were illusory.  

July 7, 2014 in Commentary, E-commerce, Famous Cases, Miscellaneous, Web/Tech, Weblogs | Permalink | Comments (0) | TrackBack (0)

Eighth Circuit Upholds Constitutionality of Civility Clause in Termination of Professor

University_of_South_DakotaChristopher Keating was a tenure-track professor of physics at the University of South Dakota.  He did not get along with the only other full-time physics professor at the university.  Keating filed a grievance against her with their department head.  She responded with an accusation of sexual harrassment against Keating.  After two heated exchanges with Keating, the department head rejected Keating's claims.   Some time later, having been reprimanded for not seeking approval from either his colleague or the department chair for something that required such approval, Keating explained in an e-mail that he would not seek approval from his colleague because "she is a lieing [sic], back-stabbing sneak."

After that academic year ended, Keating was informed that his employment contract would not be renewed, because his e-mail violated Appendix G to the university's employment policy, which reads:

Faculty members are responsible for discharging their instructional, scholarly and service duties civilly, constructively and in an informed manner. They must treat their colleagues, staff, students and visitors with respect, and they must comport themselves at all times, even when expressing disagreement or when engaging in pedagogical exercises, in ways that will preserve and strengthen the willingness to cooperate and to give or to accept instruction, guidance or assistance.

Keating challenged his termination, alleging that the "civility clause" was unconstitutionally vague in violation of the U.S. Constitution's Due Process Clause.  The District Court granted Keating the declaratory relief he sought.  In Keating v. University of South Dakota, the Eighth Circuit reversed.  

In the public employment context, the Eighth Circuit noted, the standard for vagueness is not as stringent as in the criminal context.  "Standards are not void for vagueness as long as ordinary persons using ordinary common sense would be notified that certain conduct will put them at risk of discharge.”   The Eighth Circuit found that the civility clause was neither facially void for vagueness nor impermissibly vague as applied to Keating.  The Court read the offending e-mail in the broader context of Keating's refusal to work with his colleagues or to even communicate with his immediate superiors.  So seen, the Court had little difficulty finding that Keating had failed to comport himself in ways that "preserve and strengthen willingness to cooperate."

Arthur_LeonardProfessor Arthur Leonard, of New York Law School (pictured),  posted a link to this case and queried whether the civility clause could pass contractual (as opposed to constitutional) tests for vagueness.   One wonders what sort of evidence either party would have to put forward to persuade the court as to the meaning of "civil" in this context.  Those of us in the academy can likely come up with plenty of examples of interactions with colleagues in which one or more university employees can be said to have acted in ways that were not civil.  Still, it is rare to see someone put in writing his principled opposition to cooperation and communication with his one disciplinary colleague and his department chair.  Could Keating show contractual vagueness by pointing to rampant and unpunished incivility on the part of other university employees, or does the university have discretion to terminate any given professor who, in its determination, crossed the line of incivility?

In short, if universities are free to point to a civility clause whenever they want to terminate a professor, tenure means nothing.  Keating was not yet tenured, but as to the constitutional and contractual issues, I don't think tenure would change the outcome of the case.  On the other hand, a civility clause might be a useful tool that university administrators can use in extreme cases when a faculty member -- even a tenured faculty member -- is so unprofessional as to degrade the working environment for his or her colleagues.  In this case, the fact that Keating called his colleague a lying, back-stabbing sneak" may be less significant than his statement that he would not trust his department chair or communicate with the university's only other full-time physics professor.

July 7, 2014 in Commentary, Contract Profs, Recent Cases | Permalink | Comments (0) | TrackBack (0)