ContractsProf Blog

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

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Monday, June 8, 2015

Congress Considering Federal Legislation on Non-Competes

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

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

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

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

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

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

Friday, June 5, 2015

Follow-up on Andermann v. Sprint Spectrum

We posted about this case last week.

It was an easy decision for Judge Posner; he granted Sprint's motion to compel arbitration without too much difficulty, leaving him time to ruminate more generally on the purposes of the Federal Arbitration Act.  We summarized his views as follows:

Having quickly dispensed with plaintiffs' opposition to the motion to compel arbitration, Judge Posner then focused his attention on Sprint's effusive celebration of arbitration provisions as "a darling of federal policy" (Judge Posner's wording).  Judge Posner emphasized that language encouraging judges to enforce arbitration clauses was a corrective to an era when judges disfavored arbitration.  The aim of federal policy is neither to favor nor disfavor arbitration but to compel arbitration when the parties have agreed to arbitrate claims.  Fortunately for Sprint, this case was, in Judge Posner's view, not a close call.

Judge Posner then when on to note Sprint's motives in challenging the denial for arbitration when, in Judge Posner's view, the Andermanns will lose on the merits wherever their claim is decided.  Judge Posner pointed out that Sprint wants to avoid class action litigation, which is prohibited under the applicable arbitration provision.  He also noted that without the class action option, the claim is unlikely to be brought at all.   Judge Posner then explained the absurd results that would follow from a finding that Sprint had violated the TCPA, thus effectively deciding a claim that the Seventh Circuit ruling will prevent from ever being brought, before catching himself and noting that the decision is really for the arbiter and limiting the Court's ruling to the instruction that the claim be sent to arbitration.

BagchiFordham Law Professor Aditi Bachi (pictured) now has a post up over at the New Private Law blog in which she uses Judge Posner's opinion as an occasion to ruminate on the need for a federal arbitration policy.  As she puts it:

Putting aside for the moment what stance federal courts should take (and which Congressional statutes might speak to the question), arbitration is too substantial a public policy issue for courts to approach these terms with ostensible neutrality.  In the absence of an articulated policy, we are likely to end up with courts that are in practice either friendly or hostile but march under the banner of neutrality.

We look forward to the ensuing policy debate, which is long past due.

June 5, 2015 in Commentary, Recent Cases, Weblogs | Permalink

Thursday, June 4, 2015

Important Wrap Contracts Decision from Judge Weinstein (EDNY)

JackbweinsteinPlaintiff Adam Berkson,  alleges that the defendant, Gogo, misled him and a putative class of similarly situated consumers, who signed up for in-flight wifi service through Gogo's website. Plaintiffs allege that the website led them to believe that they were signing up for a one-month subscription.  Gogo claims that its site clearly provides for automatic renewal, as well as mandatory arbitration and choice of venue.  Plaintiffs allege breach of the implied covenant of good faith and fair dealing, unjust enrichment, and violations of consumer protection statutes.  Gogo responded with a motion to transfer venue, compel arbitration and dismiss for lack of standing.  As the first two parts of Gogo's motion related to its terms of use, Judge Weinstein had to address plaintiffs' claim that they were not bound by hidden terms.  

In an 83-page memorandum and order of the case, available hereJudge Weinstein denied all three parts of Gogo's motion.  Judge Weinstein identifies three policy questions raised by the suit.  We are most interested in the first: 

[H]ow should courts deal with hybrid versions of “browsewrap” and “clickwrap” electronic contracts of adhesion (referred to in this memorandum as “sign-in-wraps”) that do not provide internet users with a compelling reason to examine terms favoring defendants?

We note in passing that in defining his terms and throughout the opinion, Judge Weinstein relies on Nancy Kim's book, Wrap Contracts.  He also takes note of other excellent work by scholars whose work has been featured on this blog, such as Oren Bar-Gill, Woodrow Hartzog Juliet Moringiello and Tess Wilkinson-Ryan, among others.

Judge Weinstein concluded that, in the circumstances present in the case, "the average internet user would not have been informed. . . that he was binding himself to a sign-in-wrap" and that the wrap contract thus "does not support the venue and arbitration clauses relied upon by defendants."  The relevant facts are a bit different for the two named plaintiffs, but the basic gist is that they would have to click on the words "terms of use" in order to gain access to them, and they could agree to those terms of use without clicking on the words.  In addition, Gogo's arbitration and venue provisions were not added until after plaintiffs signed up for the service.

After a truly impressive survey of the caselaw and the scholarly literature, Judge Weinstein emerges with some general principles:

  • “terms of use” will not be enforced where there is no evidence that the website user had notice of the agreement;
  • “terms of use” will be enforced when a user is encouraged by the design and content of the website and the agreement’s webpage to examine the terms clearly available through hyperlinkage; and
  • “terms of use” will not be enforced where the link to a website’s terms is buried at the bottom of a webpage or tucked away in obscure corners of the website where users are unlikely to see it.

Applying these principles, Judge Weinstein concludes that Gogo could not establish that the named plaintiffs knowingly bound themselves to Gogo's terms of use.  Along the way, Judge Weinstein notes that some of the wrap contract cases are not correctly decided and do not accurately apply precedent.  He also makes clear that the design and presentation of the contract matter in determining whether a consumer has had an opportunity to give meaningful consent to terms in a wrap contract.

A hearing on class standing is scheduled for July.  Stay tuned.

June 4, 2015 in Recent Cases, Travel, Web/Tech | Permalink | Comments (0)

Wednesday, June 3, 2015

Online Conference on Technology in International Arbitration

The Virtual Arbitration: Undesirable or Inevitable (or both)?
A Live Online Conference on Technology in International Arbitration
June 11, 2015 – 9:00 AM to 12:00 noon EDT (U.S.)


Cisco TelePresence (the arbitration community will gather at multiple facilities around the globe)
Webstream (the academic community may attend free of charge via live streaming video)


Join us for a live online conference designed to explore the use of modern videoconferencing technology to hold arbitration hearings online, thereby reducing many of the costs and logistical challenges often associated with international arbitration proceedings. The conference will include a mock arbitration proceeding (a witness examination), followed by a panel discussion of its effectiveness (or lack thereof), and concluding with questions from attendees around the globe. Both the mock arbitration and subsequent panel include prominent members of the global arbitration community, so each should be uniquely valuable in exploring both the challenges and opportunities presented by virtual online arbitration proceedings.

The arbitration community will gather at Cisco TelePresence sites around the world for a fully immersive state-of-the-art experience (most of these sites are already sold out). However, the conference is also being delivered live via Webstream, and the academic community (faculty, students, and others interested in learning more about the potential for online arbitration hearings) is invited to attend at no charge. While the Webstream will only allow one-way video, a Chat function will be included to allow for interactivity and moderated by Professor Jack Graves (Touro Law Center, NY, USA, and a member of the JTIA editorial board). Selected chat questions may also be forwarded to panelists as part of the conference Q&A process.

The conference announcement, including the agenda, can be found here:
http://www.jurisconferences.com/2015/technology-and-international-arbitration-june-11-2015/

The Webstream of the conference (including the Chat function) will be available here:
http://www.ustream.tv/ciscotv3

Questions regarding academic community participation in the conference via Webstream may be directed to Jack Graves at: jgraves@tourolaw.edu<mailto:jgraves@tourolaw.edu>.

June 3, 2015 in Conferences | Permalink

Tuesday, June 2, 2015

Weekly Top Tens from the Social Science Research Network

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

RankDownloadsPaper Title
1 269 Loyalty Rebates after Intel: Time for the European Court of Justice to Overrule Hoffman-La Roche 
Damien Geradin 
George Mason University School of LawTilburg University - Tilburg Law and Economics Center (TILEC) 
2 200 M&A Contracts: Purposes, Types, Regulation, and Patterns of Practice 
John C. Coates, IV 
Harvard Law School 
3 167 The Validity of Restraints on Alienation in an Oil and Gas Lease 
Luke Meier and Rory M. Ryan 
Baylor University - Law School and Baylor University - Law School 
4 134 Lex Mercatoria 
Gralf-Peter Calliess 
University of Bremen - Faculty of Law 
5 116 Private Lenders’ Demand for Audit 
Richard BaylisPete BurnapMark ClatworthyMahmoud Gad and Christopher K. M. Pong 
Cardiff Business School, University of Wales System - Cardiff University, University of Bristol, Department of Accounting and Finance, University of Bristol, Department of Accounting and Finance and Heriot-Watt University - School of Management and Languages 
6 115 A Crib Sheet for Contracts Profs 
Victor P. Goldberg 
Columbia Law School 
7 114 Pluralistic Legal Theories: In Search of a Common Denominator 
Ronen Perry 
University of Haifa - Faculty of Law 
8 114 Freedom to Tinker 
Pamela Samuelson 
University of California, Berkeley - School of Law 
9 98 Other People's Contracts 
Aditi Bagchi 
Fordham University School of Law 
10 89 The Influence of Comparative Law on the English Law of Obligations 
Andrew Burrows 
University of Oxford - Faculty of Law 

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

RankDownloadsPaper Title
1 134 Lex Mercatoria 
Gralf-Peter Calliess 
University of Bremen - Faculty of Law 
2 116 Private Lenders’ Demand for Audit 
Richard BaylisPete BurnapMark ClatworthyMahmoud Gad and Christopher K. M. Pong 
Cardiff Business School, University of Wales System - Cardiff University, University of Bristol, Department of Accounting and Finance, University of Bristol, Department of Accounting and Finance and Heriot-Watt University - School of Management and Languages 
3 115 A Crib Sheet for Contracts Profs 
Victor P. Goldberg 
Columbia Law School 
4 114 Pluralistic Legal Theories: In Search of a Common Denominator 
Ronen Perry 
University of Haifa - Faculty of Law 
5 98 Other People's Contracts 
Aditi Bagchi 
Fordham University School of Law
6 89 The Influence of Comparative Law on the English Law of Obligations 
Andrew Burrows 
University of Oxford - Faculty of Law 
7 87 The Forum Selection Defense 
Stephen E. Sachs 
Duke University School of Law 
8 82 Facilitating Incomplete Contracts 
Wendy Netter Epstein 
DePaul University - College of Law 
9 75 Two Cheers for Corporate Experimentation: The A/B Illusion and the Virtues of Data-Driven Innovation 
Michelle N. Meyer 
Union Graduate College - Icahn School of Medicine at Mount Sinai Bioethics Program 
Date posted to database: 14 May 2015 
Last Revised: 14 May 2015
10 73 Online Consumer Contracts: No One Reads, But Does Anyone Care? 
Shmuel I. Becher and Tal Zarsky 
College of Management (Israel) - School of Law and University of Haifa - Faculty of Law 

June 2, 2015 in Recent Scholarship | Permalink

Monday, June 1, 2015

Opt-out arbitration provisions

As I mentioned in a previous post, I recently took a look at Instagram's terms of use.  I found it interesting that it contained an opt-out provision for arbitration.  A clause at the top of the page states the following in bold:

ARBITRATION NOTICE: EXCEPT IF YOU OPT-OUT AND EXCEPT FOR CERTAIN TYPES OF DISPUTES DESCRIBED IN THE ARBITRATION SECTION BELOW, YOU AGREE THAT DISPUTES BETWEEN YOU AND INSTAGRAM WILL BE RESOLVED BY BINDING, INDIVIDUAL ARBITRATION AND YOU WAIVE YOUR RIGHT TO PARTICIPATE IN A CLASS ACTION LAWSUIT OR CLASS-WIDE ARBITRATION.

(Side note - I found it rather lazy for Instagram not to include section numbers in its TOU.  One of the reasons to have an opt-out provision is to guard against claims of unconscionability as in Hey, they had a choice!  They could have opted out!  It doesn't make sense then to make the user scroll through the entire agreement and try to find the arbitration clause instead of just referring to it). 

The arbitration clause itself permits the user to opt-out "within 30 days of the date that you first became subject to this arbitration provision."  Furthermore, the user has to provide written notice and send it to Instagram's offices. 

Of course, very few users will opt-out.  First of all, very few people read TOU.  Second, a lot of people don't know what arbitration is so they don't know to opt-out.  Finally, Instagram puts a "hurdle" in the user's way - they have to send a written notice.  The last time I had to mail a card, it took me several days.  I had to find an envelope, for one thing.  Then I had to find some stamps.  I don't even know where the post office is near my house and when I asked the cashier at the grocery store, he looked at me as though I were Rip Van Winkle --stamps?  

Contrast the written notice requirement to opt-out with how Instagram updates its TOU: 

"You agree that we may notify you of the Updated Terms by posting them on the Service, and that your use of the Service after the effective date of the Updated Terms (or engaging in such other conduct as we may reasonably specify) constitutes your agreement to the Updated Terms."

So, Instagram only has to post changes to its website but the user has to mail a notice to its headquarters in order to opt-out of arbitration? Why not have all notices be effective if sent via email?  Maybe because some people might actually choose to opt-out of arbitration then.

Instagram's opt-out clause is not unusual - in fact, it's quite common.  The CFPB recently issued  its report on the use of arbitration clauses .  It found that a  fair number of banking and credit card agreements contained provisions allowing consumers to opt-out of arbitration clauses but that very few consumers chose to opt-out.  There were a number of other interesting findings and the report is well worth reading although the report is rather long.  Professor Jean Sternlight of University of Nevada - Las Vegas summarized some of the key findings here

 

 

 

 

June 1, 2015 in Miscellaneous, True Contracts, Web/Tech | Permalink | Comments (0)

Thursday, May 28, 2015

Can Terms of Use Stop Richard Prince?

According to this article, the photographer, Richard Prince, is ripping off using other people’s Instagram photos – and selling them for lots of money ($90,000)!  Arguably, he can do this because it’s fair use  -- he blows the images up and makes minor changes to them, like removing captions and adding comments.  (One could also argue that it’s not fair use because he doesn’t change them enough).  Putting aside the copyright related issue (fair use or not fair use) and the privacy issue (are there any privacy related claims when you post on Instagram for the world to see – but don’t mean to have your photos used in this way?) – what intrigues me are the contract related issues.  I took a quick peek at Instagram's latest terms of use and there’s nothing in there that would really help someone whose photos were being used by Richard Prince.   And while Instagram's Community Guidelines are thoughtful and cover a variety of topics, they don’t address this problem.  But could its TOU address this issue – and should it?  What if Instagram put in its Terms of Use a provision that forbade visitors to its site from using other people's photographs for any purpose?  If so, what could the company do if a user violated that term?  It could, of course, ban the offending user from Instagram.  Could it sue for breach of contract – and if so, what damages could it claim? If people started to copy users’ photographs from Instagram and use them for their own purposes that would likely hurt Instagram’s business.  Instagram should consider how its Terms of Use can be amended to protect their users from this type of unauthorized use.

May 28, 2015 in Commentary, Current Affairs, Miscellaneous, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Wednesday, May 27, 2015

New in Print

Tuesday, May 26, 2015

Airbnb Update

We have previously blogged about “sharing economy” short-term rental company Airbnb at various times here.  Time for an update: The City of Santa Monica, California, just passed an ordinance that prohibits property owners and residents from renting out their places unless they remain on the property themselves.  This is estimated to prohibit no less than 80% of Airbnb’s Santa Monica listings (1,400 would be banned).  

The city plans to spend $410,000 in the first year to enforce the rule using three new full-time employees.  Violators may be fined by up to $500.  However, because Airbnb does not list addresses, staff will have to look at photos of the properties and drive around the city streets to try to identify the violators.   Doing so sounds awfully invasive and awkward, but that is nonetheless the plan.  Adds Assistant Planning Director Salvador Valles: “We can issue citations just based on the advertisement alone when we're using our business regulations.”  Other major cities are also trying to crack down on short-term rentals.

But why, you ask?  Good question.  In times when, as I have blogged about before and as is common knowledge, medium- and low-income earners are falling behind higher-income earners to a somewhat alarming extent, you would think the government could let people earn some additional money on what is, after all, their own property.  Cities, however, claim that short-term rentals drive up the rental prices by cutting into the number of residences that are available for long-term rentals.  “Even a study commissioned by Airbnb itself earlier this year found that Airbnb increases the price of a one-bedroom apartment in San Francisco by an average of $19 a month.”    Traffic concerns are also often mentioned in this context as are potential tax avoidance issues, although Airbnb has now started to deduct taxes from rental fees before transferring these to the landlords.

Airbnb’s end goal?  To go IPO.  The goal for at least some landlords?  Eighty-year-old Arlene Rosenblatt, for example, rents out her home in Santa Monica whenever she and her husband leave town to visit their seven grandchildren. She charges anywhere from $115 to $220 a night for her home, listing it on Airbnb and other sites and thus earning as much as $20,000 a year.  "I'm a retired schoolteacher," Rosenblatt says. "We don't get a lot of retirement income. My husband, all he has is his Social Security." 

Time will tell what happens in this latest clash between private property and contractual rights and government regulations. 

May 26, 2015 in Current Affairs, E-commerce, Famous Cases, In the News, Legislation, Travel, Web/Tech | 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
1 258 Loyalty Rebates after Intel: Time for the European Court of Justice to Overrule Hoffman-La Roche 
Damien Geradin 
George Mason University School of LawTilburg University - Tilburg Law and Economics Center (TILEC) 
2 191 M&A Contracts: Purposes, Types, Regulation, and Patterns of Practice 
John C. Coates, IV 
Harvard Law School 
3 158 The Validity of Restraints on Alienation in an Oil and Gas Lease 
Luke Meier and Rory M. Ryan 
Baylor University - Law School and Baylor University - Law School 
4 119 Lex Mercatoria 
Gralf-Peter Calliess 
University of Bremen - Faculty of Law 
5 115 Private Lenders’ Demand for Audit 
Richard BaylisPete BurnapMark ClatworthyMahmoud Gad and Christopher K. M. Pong 
Cardiff Business School, University of Wales System - Cardiff University, University of Bristol, Department of Accounting and Finance, University of Bristol, Department of Accounting and Finance and Heriot-Watt University - School of Management and Languages 
6 112 Judicial Deregulation of Consumer Markets 
Max N. Helveston 
DePaul University - College of Law 
7 103 Pluralistic Legal Theories: In Search of a Common Denominator 
Ronen Perry 
University of Haifa - Faculty of Law 
8 101 Freedom to Tinker 
Pamela Samuelson 
University of California, Berkeley - School of Law 
9 96 Other People's Contracts 
Aditi Bagchi 
Fordham University School of Law
10 84 The Forum Selection Defense 
Stephen E. Sachs 
Duke University School of Law 

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

RankDownloadsPaper Title
1 119 Lex Mercatoria 
Gralf-Peter Calliess 
University of Bremen - Faculty of Law 
2 115 Private Lenders’ Demand for Audit 
Richard BaylisPete BurnapMark ClatworthyMahmoud Gad and Christopher K. M. Pong 
Cardiff Business School, University of Wales System - Cardiff University, University of Bristol, Department of Accounting and Finance, University of Bristol, Department of Accounting and Finance and Heriot-Watt University - School of Management and Languages 
3 112 Judicial Deregulation of Consumer Markets 
Max N. Helveston 
DePaul University - College of Law 
4 103 Pluralistic Legal Theories: In Search of a Common Denominator 
Ronen Perry 
University of Haifa - Faculty of Law 
5 96 Other People's Contracts 
Aditi Bagchi 
Fordham University School of Law 
6 84 The Forum Selection Defense 
Stephen E. Sachs 
Duke University School of Law 
7 80 A Crib Sheet for Contracts Profs 
Victor P. Goldberg 
Columbia Law School 
8 69 Online Consumer Contracts: No One Reads, But Does Anyone Care? 
Shmuel I. Becher and Tal Zarsky 
College of Management (Israel) - School of Law and University of Haifa - Faculty of Law 
9 62 Two Cheers for Corporate Experimentation: The A/B Illusion and the Virtues of Data-Driven Innovation 
Michelle N. Meyer 
Union Graduate College - Icahn School of Medicine at Mount Sinai Bioethics Program 
10 52 The Influence of Comparative Law on the English Law of Obligations 
Andrew Burrows 
University of Oxford - Faculty of Law 

 

May 26, 2015 in Recent Scholarship | Permalink | TrackBack (0)

Monday, May 25, 2015

Law School Interactive's New Podcast on Contracts Law

SnyderLaw School Interactive, which provides podcasts for various purposes relating to law school, has a new podcast up featuring Frank Snyder (pictured left), the Zeus from whose head this blog sprung, and two friends of the blog, Brian Bix and Steven Schooner.  It's always interesting to hear how colleagues introduce the topic of contracts law to prospective students.  You can find the podcast here.

Law School Interactive summarizes the podcast as follows (slightly edited):

Frank Snyder starts his comments by defining contract law and explaining it as an unusual part of the legal system, and speaks of its practical aspects and the importance of being attuned to the client’s needs. Professor Snyder finishes his comments by likening the practice of contract law to business advising. He mentions that those who are good business advisers will likely enjoy and do well with contract law. He also advises students to investigate all areas of legal practice that they are interested in to find the one they would like to specialize in.

Steven Schooner [right] Schoonerexplains that contract law is a very different law practice than the more common practice areas of criminal, tort, or defense law. He underscores the fact that there seems to be no gray areas when it comes to students and contract law: Students either consider the field fascinating, or they don’t. He says that if you find business and bargains interesting, contract law might be the practice for you—and a love of math and numbers helps too.

BixOur final guest, Brian Bix [left], talks about contract law’s connection with many other specialties. Although undergraduate courses will not teach you much about the intricacies of contract law, Professor Bix tells budding law school student not to worry—law school will definitely give you the tools you need to succeed in the field. He ends his advice by saying that to be successful in this practice of law, face-to-face interaction and conversational skill are definitely a necessity.

May 25, 2015 in Contract Profs, Weblogs | Permalink | Comments (0) | TrackBack (0)

Seventh Circuit Grants Motion to Compel Arbitration Where Underlying Contract Has Been Assigned

7th Circuit SealRonald and Anna Andermann had had cell phone service through US Cellular since 2000.  Their service contract provided for arbitration of all claims.  The contract also provided that US Cellular could assign the contract without notice to the Andermanns.  The Andermanns renewed their contract every two years up until 2012.  In May 2013, they received notice that their contract had in fact been assigned to Sprint but that it could not be renewed because their phone was not compatible with Sprint's network.  Sprint called the Andermanns six times (three times each) to try to persuade them to purchase a new phone that would be compatible with Sprint's network, but the Andermanns decided to move to a different service provider instead.

They also decided to sue Sprint on behalf of a class of similarly situated consumers, alleging that the undesired calls violated the Telephone Consumer Protection Act (TCPA).  Sprint filed a motion to compel arbitration, which the District Court denied on the ground that the calls originated after the contract had terminated and thus the legality of the calls had no connection to the contract.  

PosnerIn Andermann v. Sprint Spectrum L.P., the Seventh Circuit reversed and remanded with instructions to order arbitration.   Judge Posner an found intimate relation between the contract and the calls.  The case was an easy one according to Posner because the claims here clearly arose out of or related to the agreement.  Sprint was attempting to offer consumers a way to continue their services.  This case was thus easily distinguishable from other cases, more favorable to plaintiffs, in which the plaintiffs had agreements with defendants that were governed by arbitration provisions but plaintiffs' claims related to contracts that did not contain arbitration provisions.

Having quickly dispensed with plaintiffs' opposition to the motion to compel arbitration, Judge Posner then focused his attention on Sprint's effusive celebration of arbitration provisions as "a darling of federal policy" (Judge Posner's wording).  Judge Posner emphasized that language encouraging judges to enforce arbitration clauses was a corrective to an era when judges disfavored arbitration.  The aim of federal policy is neither to favor nor disfavor arbitration but to compel arbitration when the parties have agreed to arbitrate claims.  Fortunately for Sprint, this case was, in Judge Posner's view, not a close call.

Judge Posner then when on to note Sprint's motives in challenging the denial for arbitration when, in Judge Posner's view, the Andermanns will lose on the merits wherever their claim is decided.  Judge Posner pointed out that Sprint wants to avoid class action litigation, which is prohibited under the applicable arbitration provision.  He also noted that without the class action option, the claim is unlikely to be brought at all.   Judge Posner then explained the absurd results that would follow from a finding that Sprint had violated the TCPA, thus effectively deciding a claim that the Seventh Circuit ruling will prevent from ever being brought, before catching himself and noting that the decision is really for the arbiter and limiting the Court's ruling to the instruction that the claim be sent to arbitration.

May 25, 2015 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Wednesday, May 20, 2015

New in Print

Pile of BooksCarl J. Circo, A Case Study in Collaborative Technology and the Intentionally Relational Contract: Building Information Modeling and Construction Industry Contracts, 67 Ark. L. Rev. 873 (2014)

Tal Kastner, How 'bout Them Apples?: The Power of Stories of Agreement in Consumer Contracts, 7 Drexel L. Rev. 67 (2014)

Eric A. Zacks & Dustin A. Zacks, Not a Party: Challenging Mortgage Assignments, 59 St. Louis U. L.J. 175 (2014)

May 20, 2015 in Recent Scholarship | Permalink | TrackBack (0)

Rising Minimum Wages

Should salary levels be regulated or mainly left to individual contractual negotiations between the employee and his/her employer?  The former, according to the Los Angeles City Council and governance entities in several other cities and states.  

On Tuesday, Los Angeles decided to increase the minimum salary to $15 an hour by 2020.  Other cities such as San Francisco, Chicago, New York, and Seattle have passed similar measures.  Liberal strongholds, you say?  Think again.  Republican-leading states like Alaska and South Dakota have also raised their state-level minimum wages by ballot initiative.  Some companies such as Walmart and Facebook have raised their wages voluntarily.

But the effect is likely to be particularly strong here in Los Angeles, where around 50% of the work force earn less than $15 an hour.  That’s right: in an urban area with super-rich movie studios, high-tech companies, hotels, restaurants, health companies and much more, half of “regular” employees barely earn a living salary.  In New York state, around one third of workers make less than $15 an hour.  Take into consideration that the cost of living in some cities such as Los Angeles and maybe even more so San Francisco and New York is very high.  In fact, studies show that every single part of Los Angeles is unaffordable on only $15 an hour if a person spends only the recommended one third on housing.  

“Assuming a person earning $15 an hour is also working 40 a week, which is rare for a minimum wage employee, and that they're not taking any days off, they'd be earning $31,200 a year.  An Economic Policy Institute study released in March found that a single, childless person living in Los Angeles has to make $34,324 a year just to live in decent conditions (and that was using data from 2013).”

Opponents, however, say that initiatives such as the above will make some cities into “wage islands” with businesses moving to places where they can pay employees less.  Others call the initiative a “social experiment that they would never do on their own employees” (they just did...)  But “even economists who support increasing the minimum wage say there is not enough historical data to predict the effect of a $15 minimum wage, an unprecedented increase.  A wage increase to $12 an hour over the next few years would achieve about the same purchasing power as the minimum wage in the late 1960s, the most recent peak.”  

Time will tell if the sky falls from the above initiative or if the system in a rich urban area such as Los Angeles can cope.  Said Gil Cedillo, a councilman who represents some of the poorest sections of the city and worries that some small businesses will shut down, “I would prefer that the cost of this was really burdened by those at the highest income levels.  Instead, it’s going to be coming from people who are just a rung or two up the ladder here.”

This is, of course, not only an issue of the value of low-wage work and fending for yourself to not end up at the bottom of the salary chain.  It is a matter of alleviating urban poverty and improving the nation’s overall economy for a sufficient amount of people to better get the economy back on track for more than the few.

May 20, 2015 in Commentary, Current Affairs, In the News, True Contracts | Permalink | Comments (9) | TrackBack (0)

Tuesday, May 19, 2015

Employers Must Continually Monitor 401(k) Plans

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

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

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

Weekly Top Tens from the Social Science Research Network

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

RankDownloadsPaper Title
1 385 Hello Barbie: First They Will Monitor You, Then They Will Discriminate Against You. Perfectly 
Irina D. Manta and David S. Olson 
Hofstra University - Maurice A. Deane School of Law and Boston College Law School
2 237 Loyalty Rebates after Intel: Time for the European Court of Justice to Overrule Hoffman-La Roche 
Damien Geradin 
George Mason University School of LawTilburg University - Tilburg Law and Economics Center (TILEC) 
3 187 M&A Contracts: Purposes, Types, Regulation, and Patterns of Practice 
John C. Coates, IV 
Harvard Law School 
4 151 The Validity of Restraints on Alienation in an Oil and Gas Lease 
Luke Meier and Rory M. Ryan 
Baylor University - Law School and Baylor University - Law School 
5 109 Private Lenders’ Demand for Audit 
Richard BaylisPete BurnapMark ClatworthyMahmoud Gad and Christopher K. M. Pong 
Cardiff Business School, University of Wales System - Cardiff University, University of Bristol, Department of Accounting and Finance, University of Bristol, Department of Accounting and Finance and Heriot-Watt University - School of Management and Languages 
6 109 Judicial Deregulation of Consumer Markets 
Max N. Helveston 
DePaul University - College of Law 
7 108 Lex Mercatoria 
Gralf-Peter Calliess 
University of Bremen - Faculty of Law 
8 92 Pluralistic Legal Theories: In Search of a Common Denominator 
Ronen Perry 
University of Haifa - Faculty of Law 
9 91 Other People's Contracts 
Aditi Bagchi 
Fordham University School of Law 
10 85

Social Justice, Social Norms and the Governance of Social Media 
Tal Zarsky 
University of Haifa - Faculty of Law 

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

RankDownloadsPaper Title
1 109 Private Lenders’ Demand for Audit 
Richard BaylisPete BurnapMark ClatworthyMahmoud Gad and Christopher K. M. Pong 
Cardiff Business School, University of Wales System - Cardiff University, University of Bristol, Department of Accounting and Finance, University of Bristol, Department of Accounting and Finance and Heriot-Watt University - School of Management and Languages 
2 109 Judicial Deregulation of Consumer Markets 
Max N. Helveston 
DePaul University - College of Law 
3 108 Lex Mercatoria 
Gralf-Peter Calliess 
University of Bremen - Faculty of Law 
4 92 Pluralistic Legal Theories: In Search of a Common Denominator 
Ronen Perry 
University of Haifa - Faculty of Law 
5 91 Other People's Contracts 
Aditi Bagchi 
Fordham University School of Law 
6 85 Social Justice, Social Norms and the Governance of Social Media 
Tal Zarsky 
University of Haifa - Faculty of Law 
7 78 The Forum Selection Defense 
Stephen E. Sachs 
Duke University School of Law 
8 67 Online Consumer Contracts: No One Reads, But Does Anyone Care? 
Shmuel I. Becher and Tal Zarsky 
College of Management (Israel) - School of Law and University of Haifa - Faculty of Law 
9 64 A Crib Sheet for Contracts Profs 
Victor P. Goldberg 
Columbia Law School 
10 49 Two Cheers for Corporate Experimentation: The A/B Illusion and the Virtues of Data-Driven Innovation 
Michelle N. Meyer 
Union Graduate College - Icahn School of Medicine at Mount Sinai Bioethics Program 

 

May 19, 2015 in Recent Scholarship | Permalink | TrackBack (0)

Monday, May 18, 2015

Retirement Investment Brokers Contractually Bound to Act as Fiduciaries

Under a United States Labor Department plan, investment brokers may be required to bind themselves contractually as fiduciaries for their clients in the future.  Only a few states such as California and Missouri require brokers to act as fiduciaries at all times.  In others, brokers must simply recommend investments that are “suitable” for investors based on various factors, but are not required to adhere to the higher fiduciary “best-interest” standard.

The contemplated advantages are two-fold.  First, the rule is thought to better protect investors from broker recommendations that, if followed, would help the brokers earn more or higher fees, but fail to meet investors’ best interests.  A contractually stipulated duty would also help “deflate arguments that brokerages typically raise to deflect blame for bad advice, such as that an investor has in-depth financial know-how.  

Second, arbitration cases would be easier to prove.  This is so because arbitrators currently rely on state laws when determining the standard of conduct to be followed by the brokers, which is one of the threshold issues to be analyzed in investor cases.  A uniformly required fiduciary standard would, it is thought, be more investor-friendly.

Needless to say, there are also contrary views.  For example, some attorneys fear that investors’ lawyers will start or increase a hunt for more retirement account cases to represent.  Others worry about an increased amount of class action cases.

Regardless, given the complexity of today’s investment world, requiring brokers to act as fiduciaries for their clients does indeed seem like the “good step in the right direction” as the president of the Public Investors Arbitration Bar Association recently called the initiative. 

May 18, 2015 in Current Affairs, Legislation, True Contracts | Permalink | TrackBack (0)

Opportunity to Contribute to Contracts in the Real World, 2d Ed.

Cunningham_2009Larry Cunningham of George Washington Law School (pictured) is preparing the second edition of his book, Contracts in the Real World.  You may remember the first edition from prior posts such as  the online symposium that we cross-posted here in 2012.

Larry is turning to the market to get ideas for the next edition.  Via his twitter feed, he is now offering a copy of Contracts in the Real World to those who suggest a story that is chosen for inclusion in the next edition.  More details on the book are at Cambridge University's webpage.

May 18, 2015 in Contract Profs, Recent Scholarship | Permalink | Comments (2) | TrackBack (0)

Seventh Circuit Parses "Generate" and "Receive" in an Attorney's Breach of Contract Suit

7th Circuit SealIn 2001, Kanosky & Associates (now Kanosky Bresney) hired Lawrence Hess to handle medical malpractice suits.  In 2007, the firm fired Mr. Hess.  Under Mr. Hess's employment agreement, Hess was entitled to bonus pay in the amount of fifteen percent of all fees “generated over the base salary."   The employment agreement also stated that the “[b]onus shall increase” to twenty-five percent “on all fees received annually in excess of $750,000.00.”   

Mr. Hess conceded that he was not entitled to any additional fees "received," but he claimed that his work had "generated" fees for which he had not been compensated.  The District Court found that "generated" and "received" had the same meaning within the employment agreement, and in oral argument before the Seventh Circuit in Hess v. Kanosky Bresney, Mr. Hess conceded as much.  

 However, Mr. Hess pointed to a 2002 modification of his employment agreement that entitled him to 40% of all revenue "generated."  Both parties also relied on additional language in Section 8 of the original employment agreement:

[W]here the Corporation retains clients upon Employees [sic] termination that Employee has no proprietary interest in fees to be earned since the Employee is to be fully compensated through his salary and/or bonus for all work done while an Employee of the Corporation” (emphasis added). 

Mr. Hess read this provision to entitle him to compensation for revenues "generated" while he was an employee; the firm read the provision to bar him from any post-employment compensation.

The Seventh Circuit rejected Mr. Hess's arguments.  While implying that the employment agreement could have been more clearly drafted, the Court found that reading "generate" and "receive" as synonyms results in a simple, straightforward compensation scheme.  Reading generate as Hess would have it read, leads to headaches, as the contract does not specify (and doing so would be very difficult) how one is to determine any individual attorney's role in "generating" fees.  Hess's interpretation of the contract was "less plausible" than the firm's, and he produced no extrinsic evidence suggesting that his interpretation should be favored despite its facial implausibility.  Given the Court's presumption that the firms documents use "generate" and "receive" interchangeably, Mr. Hess's 2002 Modification did not avail him.  

May 18, 2015 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Friday, May 15, 2015

Kmart Cannot Enforce Arbitration Agreement with Class of Infant (Minor) Plaintiffs

InfantIn 2013, Kmart hired Adrian Lopez, then age 16, as a cashier.  Before beginning work, Lopez received online training, and in order to do so, he had to acknowledge receipt of various Kmart forms, including an arbitration agreement.  One month after turning 18, Lopez filed a putative class action lawsuit against his employer for breaches of California's wage and hours laws. Kmart sought to compel arbitration.

Under California Family Code § 6710, minors (under the age of 18) may enter into contracts, but they have a right of disaffirmation "before majority or within a reasonable time afterwards."  In Lopez v. Kmart Corp., Magistrate Corley, of the Northern District of California, held that Lopez disaffirmed his arbitration agreement with Kmart by filing the lawsuit within one month of turning 18 and that one month was a "reasonable" time under § 6710.  

While California Family Code § 6712 excepts certain categories of contracts from the right of disaffirmation, Kmart did not argue that its contract with Lopez fell within any of those categories.  Instead, Kmart sought to argue that the contract could not be disaffirmed because California Family Code § 6711 removes the right of disaffirmation of any contract entered into "under the express authority or direction of a statute."  Magistrate Corley disagreed with Kmart, finding that § 6711 did not apply and that the argument was waived because first raised at oral argument.

Kmart next argued that §6710 only applies to contracts for goods or services and not to employment contracts.  Magistrate Corley simply noted that the statutory language contains no such limitation.  In any case, the contract was for services, as Lopez was to serve as a cashier.  

Finally, Kmart urged the court to deny the disaffirmation in the exercise of its equitable powers.  Magistrate Corley noted that she could not exercise such powers where the authority for disaffirmation was statutory.  Kmart cited to cases from other jurisdictions in which courts had exercised such equitable powers in the employment context, but Magistrate Corley noted that they did so in the context of common law, not statutory infancy doctrines.

May 15, 2015 in Recent Cases | Permalink | Comments (3) | TrackBack (0)