ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Thursday, May 19, 2016

Weekly Top Ten SSRN Contracts Downloads (May 19, 2016)

TopTen Stamp-808x455

SSRN Top Downloads For SSRN Logo (small)
Contracts & Commercial Law eJournal

Rank Downloads Paper Title
1 423 Major League Soccer as a Case Study in Complexity Theory
Steven A. Bank
University of California, Los Angeles (UCLA) - School of Law
2 180 How Do LLC Owners Contract Around Default Statutory Protections?
Peter Molk
Willamette University - College of Law
3 167 Algorithmic Contracts
Lauren Henry Scholz
Yale University - Information Society Project
4 138 The Logic of Contract in a World of Treaties
Julian Arato
Brooklyn Law School
5 119 (Mis)perceptions of Law in Consumer Markets
Oren Bar-Gill and Kevin E. Davis
Harvard Law School and New York University School of Law
6 118 Contract as Empowerment
Robin Bradley Kar
University of Illinois College of Law
7 118 Illegality as a Defence in Contract
Andrew Burrows
University of Oxford - Faculty of Law
8 116 The Rise of the Platform Economy: A New Challenge for EU Consumer Law?
Christoph Busch, Hans Schulte-Nölke, Aneta Wiewiórowska-Domagalska and Fryderyk Zoll
University of Osnabrück - European Legal Studies Institute, European Legal Studies Institute Osnabrueck / Radboud University Nijmegen, Universität Osnabrück - European Legal Studies Institute and Universität Osnabruck
9 83 Understanding Privacy Policies: Content, Self-Regulation, and Markets
Florencia Marotta-Wurgler
New York University School of Law
10 78 (In)Efficient Breach of Contract
Daniel Markovits and Alan Schwartz
Yale Law School and Yale Law School

 

SSRN Top Downloads For SSRN Logo (small)
LSN: Contracts (Topic)

Rank Downloads Paper Title
1 412 Major League Soccer as a Case Study in Complexity Theory
Steven A. Bank
University of California, Los Angeles (UCLA) - School of Law
2 147 Algorithmic Contracts
Lauren Henry Scholz
Yale University - Information Society Project
3 136 The Logic of Contract in a World of Treaties
Julian Arato
Brooklyn Law School
4 125 Contracts Without Terms
Tess Wilkinson‐Ryan
University of Pennsylvania Law School
5 115 (Mis)perceptions of Law in Consumer Markets
Oren Bar-Gill and Kevin E. Davis
Harvard Law School and New York University School of Law
6 114 Contract as Empowerment
Robin Bradley Kar
University of Illinois College of Law
7 111 Illegality as a Defence in Contract
Andrew Burrows
University of Oxford - Faculty of Law
8 89 The Rise of the Platform Economy: A New Challenge for EU Consumer Law?
Christoph Busch, Hans Schulte-Nölke, Aneta Wiewiórowska-Domagalska and Fryderyk Zoll
University of Osnabrück - European Legal Studies Institute, European Legal Studies Institute Osnabrueck / Radboud University Nijmegen, Universität Osnabrück - European Legal Studies Institute and Universität Osnabruck
9 76 Farewell to Unjustified Enrichment?
Nils Jansen
University of Muenster
10 75 The Common Law of Contract and the Default Rule Project
Alan Schwartz and Robert E. Scott
Yale Law School and Columbia University - Law School

May 19, 2016 in Recent Scholarship | Permalink | Comments (0)

Wednesday, May 18, 2016

Overtime Pay Regulations Expanded

The Department of Labor is finalizing a rule that will extend overtime pay to 4.2 million more Americans currently not eligible for such pay under federal law. This is expected to increase wages for workers by $12 billion over the next ten years and thus contribute to the relatively stagnant wages experienced by the majority of American workers in spite of six years of continual job growth and, now, solid profits by many companies.

The earnings situation did not use to be so poor for so many people. In fact, in 1975, 62% of full-time workers qualified for overtime pay. Today, only a measly 7% do.

As Henry Ford and others knew a long time ago: more money to more people will boost the economy for everyone, including businesses.

Read more about the ruling here Unknown
.

May 18, 2016 in Labor Contracts, Legislation | Permalink

Tuesday, May 17, 2016

Materiality, Reliance and Causation All Intertwined Elements of Fraud

Jury instructions that cause a jury to answer questions indicating that a defendant has made a negligent misrepresentation, that the plaintiff reasonably relied on this statement, but that this did not cause harm to plaintiff are not so “hopelessly irreconcilable” as to be inconsistent under at least California law.

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In a breach of contracts case with a cross-complaint, the jury answered “yes” to whether a cross-defendant had negligently misled cross-plaintiff, further found that the misrepresentation was indeed material and that the cross-plaintiff had reasonably relied on the statements pertaining to incentive agreements and construction permits inducing the cross-plaintiff to enter into a gas station purchase and related agreements. However, the jury also found that the misrepresentation did not “substantially” influence the buyer to buy the gas station in the first place. Cross-defendant seller appealed, seeing to have the jury verdict set aside for inconsistency.

The court did not agree that the jury verdict was inconsistent to the point of being hopelessly irreconcilable. “Reliance and causation are intertwined concepts … Reliance must be thought of as the mechanism of causation in an action for breach.” However, by answering “no” to the question of whether the representations were “substantial factors” in causing harm to the cross-defendant, the jury “clearly must not have believed this to be the case,” said the court. Thus, no causation was found in spite of reliance on a fraud. In other words, the jury must have thought that the buyers would enter into the agreement anyway despite the misrepresentations.

Of course, clearer jury instructions would resolve a matter such as this in a more satisfactory way for clients than having courts of appeals second-guess what the jury must have thought. This case again shows the importance of careful linguistic drafting in the contracts context. Easier said than done, apparently…

The case also shows that contracts for pre-specified amounts of gas still exist.

The case is Anabi Oil Corporation v. fry’s 57 Freeway Investment LLC, 2016 WL 1749459.

May 17, 2016 in Recent Cases, True Contracts | Permalink | Comments (0)

Thursday, May 12, 2016

Scholarship Spotlight: The Role of The CISG in U.S. Contract Practice: An Empirical Study (John F. Coyle, UNC)

Cisg_logoOngoing globalization and increasing importance of international trade has led to calls for a greater international component to the Contracts curriculum in U.S. law schools. The United Nations Convention on the International Sale of Goods (CISG) has been one of the chief beneficiaries of those calls. CISG coverage in a Contracts course, after all, singlehandedly adds treaties, international trade, and comparative law perspectives to the traditional course materials. A fair question, however, is to what extent the CISG has become relevant to the actual businesses in America--future clients of many of our students. Fortunately, John F. Coyle of the University of North Carolina has analyzed and written about some enlightening empirical evidence on that question.  Here is the abstract:

JohnFCoyle (UNC)The United Nations Convention on Contracts for the International Sale of Goods (CISG) operates as an “international” version of UCC Article 2 — it supplies the governing law when a U.S. company enters into a contract for the sale of goods with a foreign counterparty. Scholars have long debated the role that the CISG plays in contract practice in the United States. Some argue that the CISG has come to be embraced, if slowly, by U.S. lawyers. Others contend that the CISG has yet to achieve widespread acceptance within the U.S. legal community. Prior studies have sought to resolve this debate by looking to surveys of practicing attorneys. This Essay seeks to shed light on this question by looking to actual contracts entered into by U.S. companies.

The Essay draws upon a hand-collected dataset of more than 5,000 contracts — along with interviews with several lawyers who had a hand in their drafting — in an attempt to better understand the role that the CISG plays in U.S. contract practice. The Essay shows that: (1) many U.S. companies reflexively exclude the CISG without inquiring as to whether it would apply of its own force, (2) U.S companies virtually never select the CISG as the law to govern their agreements, (3) there is no industry or geographic location within the United States where the CISG has been affirmatively embraced, (4) some U.S. companies that had selected the CISG in the past now have a policy of excluding it from their contracts, and (5) U.S. companies are frequently unaware that selecting the law of a U.S. state can result in the application of the CISG.

These findings suggest a number of important insights. First, they show that past surveys of U.S. lawyers dramatically overstate the extent to which the CISG has gained acceptance within the U.S. legal community. Second, they indicate that contract practice with respect to the CISG can and does vary from nation to nation. The dataset contracts show that Chinese solar companies, in contrast to their U.S. counterparts, have embraced the CISG. Third, and finally, they highlight the potential unfairness of requiring unsophisticated U.S. companies to litigate international contract disputes under a set of treaty rules that are routinely avoided by their more sophisticated brethren.

Professor Coyle's article, The Role of The CISG in U.S. Contract Practice: An Empirical Study is available as an SSRN download here and is forthcoming in the University of Pennsylvania Journal of International Law.

May 12, 2016 in Recent Scholarship | Permalink | Comments (0)

Removing Confidential E-Files When Quitting: Not a Good Idea

If you and I worked in an industry with highly sensitive information (assuming that we do not), it might be one thing if we thought we could email confidential information to our private email accounts and copy such information to a memory stick without finding out. But if a C-level employee at a high-tech company does so, does such conduct not rise to an entirely different level of at least naivety, if not deliberate contractual and employment misconduct?

A court will soon have to answer that question. Louis Attanasio, former head of global sales for an IBM cloud computing unit has been sued Seasonal-celebrations-lose-lost_property-name-identity-father_christmas-jdon16_low by IBM for breach of a contractual confidentiality clause, misappropriation of trade secrets, and violation of a non-compete agreement when he left – information in hand – to work for direct competitor Informatica.

In 2016, Attanasio allegedly started sending confidential information to his private email account, including draft settlement agreements between other IBM employees who had left to work for competitors. Before leaving IBM, Attanasio was asked to return a laptop to the company, which claims that he cpied files to a USB storage device.

Once again, the extent of the traceability of our electronic actions at work has become apparent. I continually remind my students of this to help them avoid “traps” such as the above or, frankly, simply to remind them that they should not spend much, if any, time on their computers not working (most seem to use their own electronic devices anyway these days, but still… and doing so is also very visual in an office setting.). Employers frequently complain about the work ethics of new college graduates, so it might be worthwhile to remind our students of what seems obvious to us.

May 12, 2016 in E-commerce, Famous Cases, In the News, Labor Contracts, True Contracts, Web/Tech | Permalink | Comments (0)

Weekly Top Ten SSRN Contracts Downloads (May 12, 2016)

Top-10 Scrolling

SSRN Top Downloads For SSRN Logo (small)
Contracts & Commercial Law eJournal

Rank Downloads Paper Title
1 418 Major League Soccer as a Case Study in Complexity Theory
Steven A. Bank
University of California, Los Angeles (UCLA) - School of Law
2 176 How Do LLC Owners Contract Around Default Statutory Protections?
Peter Molk
Willamette University - College of Law
3 160 Algorithmic Contracts
Lauren Henry Scholz
Yale University - Information Society Project
4 143 Contract, Consent, and Fiduciary Relationships
Lionel Smith
McGill University, Faculty of Law, Paul-André Crépeau Centre for Private and Comparative Law
5 137 The Logic of Contract in a World of Treaties
Julian Arato
Brooklyn Law School
6 117 (Mis)perceptions of Law in Consumer Markets
Oren Bar-Gill and Kevin E. Davis
Harvard Law School and New York University School of Law
7 117 Contract as Empowerment
Robin Bradley Kar
University of Illinois College of Law
8 115 Illegality as a Defence in Contract
Andrew Burrows
University of Oxford - Faculty of Law
9 95 The Rise of the Platform Economy: A New Challenge for EU Consumer Law?
Christoph Busch, Hans Schulte-Nölke, Aneta Wiewiórowska-Domagalska and Fryderyk Zoll
University of Osnabrück - European Legal Studies Institute, European Legal Studies Institute Osnabrueck / Radboud University Nijmegen, Universität Osnabrück - European Legal Studies Institute and Universität Osnabruck
10 79 Will-Substitutes and Creditors: Canada and the US
Lionel Smith
McGill University, Faculty of Law, Paul-André Crépeau Centre for Private and Comparative Law

 

SSRN Top Downloads For SSRN Logo (small)
LSN: Contracts (Topic)

Rank Downloads Paper Title
1 412 Major League Soccer as a Case Study in Complexity Theory
Steven A. Bank
University of California, Los Angeles (UCLA) - School of Law
2 147 Algorithmic Contracts
Lauren Henry Scholz
Yale University - Information Society Project
3 136 The Logic of Contract in a World of Treaties
Julian Arato
Brooklyn Law School
4 125 Contracts Without Terms
Tess Wilkinson‐Ryan
University of Pennsylvania Law School
5 115 (Mis)perceptions of Law in Consumer Markets
Oren Bar-Gill and Kevin E. Davis
Harvard Law School and New York University School of Law
6 114 Contract as Empowerment
Robin Bradley Kar
University of Illinois College of Law
7 111 Illegality as a Defence in Contract
Andrew Burrows
University of Oxford - Faculty of Law
8 89 The Rise of the Platform Economy: A New Challenge for EU Consumer Law?
Christoph Busch, Hans Schulte-Nölke, Aneta Wiewiórowska-Domagalska and Fryderyk Zoll
University of Osnabrück - European Legal Studies Institute, European Legal Studies Institute Osnabrueck / Radboud University Nijmegen, Universität Osnabrück - European Legal Studies Institute and Universität Osnabruck
9 76 Farewell to Unjustified Enrichment?
Nils Jansen
University of Muenster
10 75 The Common Law of Contract and the Default Rule Project
Alan Schwartz and Robert E. Scott
Yale Law School and Columbia University - Law School

May 12, 2016 in Recent Scholarship | Permalink | Comments (0)

Wednesday, May 11, 2016

Law Professors Letter in Support of CFPB Proposed Arbitration Regulation

Myanna Dellinger blogged about the proposed regulation here.  Jean Sternlight of UNLV is circulating this letter in support of the CFPB proposed regulation.  The letter is comprehensive and persuasive.  At least 140 law professors have signed it so far.  If you would like to add your name to the list, please email Jean Sternlight at jean.sternlight@unlv.edu no later than May 20.

May 11, 2016 in Commentary | Permalink

Banks and Class Action Prohibitions as “Contract Gotchas”

Contracts preventing consumers from filing class-action lawsuits against banks may soon be illegal if a proposed ruling by the Consumer Financial Protection Bureau takes effect. A hearing on the ruling will be held on Thursday, May 12, 2016.

For quite some time, clauses requiring consumers to arbitrate disputes with banks and banning class action lawsuits against banks in cases of disputes have been common. According to a prominent attorney to testify at Thursday’s hearing, one of the effects of required arbitration has been to make class action lawsuit highly unlikely.  Of course, a contractual clause outright prohibiting class action suits means that if a consumer wants to litigate the dispute and arbitration, he or she would have to do so in an individualized suit. Because of the low amounts typical at issue in bank-v-consumer disputes, such clauses have had the effect of preventing litigation. Even if it comes to litigation between banks and consumers, “consumers can easily be outgunned” by savvy banks who additionally are said to “like to drag things out,” a problem when consumers at the same time have to take time off from work to litigate.

The proposed rule would not ban arbitration clauses. Rather, it would prevent contract clauses from including language that bans consumers from joining class-action cases. Such bans are common, and they have become more widely enforced since the United States Supreme Court in 2011 held that the FAA requires state courts to honor bans even if state law prohibits them.

According to Consumer Bureau Director Richard Cordray, "signing up for a credit card or opening a bank account can often mean signing away your right to take the company to court if things go wrong." Cordray also calls the current practice a "contract gotcha that effectively denies groups of consumers the right to seek justice and relief for wrongdoing."  The U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness calls the proposed rules a “backdoor ban” on arbitration clauses, said to provide individual consumers the chance for “more financial relief than a class-action suit.” The Pew Charitable Trusts’ Consumer Banking Project states that it is probably true that banks will ditch arbitration clauses if the CFPB’s rules take effect, but “consumers will probably be just fine.”

May 11, 2016 in Current Affairs, In the News, Legislation, True Contracts | Permalink | Comments (0)

Tuesday, May 10, 2016

No "Safe Learning Environment" Term Implied in Enrollment Contract with a Private High School

A recent case out of New Jersey, Zelnick v. Morristown-Beard School, Docket No. L-1947-13, had some interesting things to say about the contractual relationship between a private high school and the students enrolled (and parents of those students). 

The case arose out of an alleged inappropriate sexual relationship between the plaintiffs' daughter, then a student at the school, and her teacher. The plaintiffs' daughter was a minor throughout the alleged sexual relationship; at present, however, the plaintiffs' daughter is an adult who is estranged from her parents and took no part in the case brought here. 

The court refused to get into the details of the relationship between the plaintiffs' daughter and the teacher, finding that the details were mostly irrelevant. It was sufficient to state that there seemed to be some knowledge on the part of the school of inappropriate behavior with other female students on the part of the teacher for a few months before a fateful school trip to Greece, which many of the accusations surrounded. At the time of the school trip, although the teacher violated the school's policy during the trip, the plaintiffs actually spoke up on his behalf, praising his assistance when their daughter fell ill on the trip. Apparently, it later was learned, at least part of the illness was faked, orchestrating "alone time" for the plaintiffs' daughter and the teacher apparently, and the plaintiffs did not know of the inappropriate relationship between their daughter and the teacher at the time that they spoke up on his behalf. 

Shortly after the Greece trip, the school was informed by multiple sources that the plaintiffs' daughter and the teacher had engaged in inappropriate conduct during the trip. The school delayed for months contacting the Division of Child Protection and Permanency (the "DCPP") regarding the persistent rumors surrounding the teacher. It's unclear how the DCPP got involved, although once they did, the teacher fled the country during the investigation into his behavior. At the time, the plaintiffs' daughter was in her senior year at the school, although she was not attending school physically due to assessment by a psychologist that the persistent rumors about her relationship with the teacher were causing her to suffer too much stress. 

Among other claims, the plaintiffs raised a breach of contract claim based on their daughter's enrollment contract with the school. The school argued that the terms of the contract were that they would provide the plaintiffs' daughter with an education in exchange for tuition. The plaintiffs argued that the contract implied that the learning environment provided to their daughter would be safe; the school rebutted that. The court agreed with the school: There was no "safe learning environment" requirement implied in the contract with the school. The plaintiffs' attempt to create one, the court said, was an attempt to convert tort claims into contract claims. 

This is an interesting ruling to me because, on the one hand, I think all of us would hope that the schools we send our children to are striving to provide a safe learning environment. Very few of us would agree to enter into bargains with schools without a belief that the students' best interests must be at the school's heart. On the other hand, while this isn't a school shooting case, I can see this being a complicated promise in an age where this country has grown to expect that our schools are basically under attack.

It does seem to me that, in the court's recitation of the facts, the school behaved poorly here. The school had notice of persistent reports from multiple sources, including other students, other parents, and other school employees, that the teacher's behavior had been personally witnessed to be inappropriate, and for months the school seems to have taken no action and, indeed, to have allowed the teacher in question to act as one of a few chaperones on an international trip. It reminded me of the case Myanna wrote up a few days ago about the contractual duty of good faith in Texas and the lack of fiduciary relationship between universities and students. Maybe we (or just me) place more trust in other people and entities' obligations toward us/me than we/I should. 

The plaintiffs, of course, did have tort claims here--gross negligence and negligent infliction of emotional distress--but the court ruled they did not have standing to pursue them. Those claims seem to have belonged to the plaintiffs' daughter, who, unfortunately, was no longer speaking to her parents, allegedly because of the parents' disapproval of her relationship with her teacher. 

May 10, 2016 in Recent Cases, Teaching, True Contracts | Permalink | Comments (0)

Monday, May 9, 2016

An "Administrative Mistake," or a Waiver of a Defense? (hint: it's a waiver)

 The situation in this recent case out of the District of Nebraska, Kermeen v. State Farm Fire & Cas. Co., No. 8:14-CV-416 (behind paywall), was possibly the result of lack of communication between departments at a large insurance company. But, even if the error was entirely innocent, it had very real consequences. Maybe a court might save you from clerical errors, but this alleged administrative mistake on the part of State Farm didn't win the court's sympathy at all. 

The Kermeens had a homeowner's insurance policy from State Farm. In March 2014, during the term of the policy, a fire damaged the Kermeens' house and they made a claim for their losses. State Farm claimed to have sent the Kermeens a letter the following month asserting that it appeared that the fire had been set on purpose and that such activity on the part of the Kermeens would void the policy as of the date of the fire. 

In June 2014, a couple of months later, a hail storm damaged some of the Kermeens' property. The Kermeens filed another claim with State Farm. State Farm never paid for the hail claim and instead continued investigating the circumstances of the fire. Finally, in November 2014, the Kermeens filed suit alleging that State Farm breached the homeowners policy by failing to pay the hail claim. State Farm responded in an answer in January 2015 that the Kermeens had intentionally set the March fire and that therefore the policy was void as of March 2014 and so didn't cover the hail damage in June. State Farm didn't formally reject either the fire or the hail claim until July 2015. 

The problematic thing for State Farm, however, was that it had been accepting premiums from the Kermeens on the homeowners policy this entire time. Even when State Farm finally formally declared the policy void as of March 2014, it failed to refund any of the premiums that the Kermeens had paid between March 2014 and July 2015. State Farm stated that it fully intended to refund those premiums in July when it denied the Kermeens' claims, and that its failure to do was "an administrative mistake." State Farm also continued to accept premiums on the homeowners' policy from the Kermeens after July, another thing that State Farm claimed was "an administrative mistake." So, altogether, State Farm accepted nearly two years' worth of premiums from the Kermeens before it finally refunded them in February 2016--after the summary judgment motion in question in this case had been filed, arguing that State Farm had waived its ability to rely on voidness due to its failure to refund the premiums. 

State Farm tried to argue that, by refunding the premiums eventually, it indicated that it was not waiving the voidness defense. State Farm also asserted that its other statements to the Kermeens, including telling the Kermeens in communications several times that the policy would be void as of the date of the fire and its answer filed in this case, further indicated that it had not waived the voidness defense. 

The court disagreed with State Farm. In contrast to the clerical error that was forgiven in the CitiMortgage case, the court wasn't inclined to overlook State Farm's "administrative mistake" here. The court stated that State Farm knew that it was going to declare the policy void as early as January 2015 when it answered the complaint and still failed to refund any premiums to the Kermeens for over a year. This failure to return any of the premiums was inconsistent with a stance that the policy was void and thus constituted a waiver of State Farm's ability to raise voidness as a defense. It didn't matter that State Farm may have repeatedly declared the policy void to the Kermeens if State Farm continued to retain the premiums under that policy--and, indeed, continued to accept further premiums. Therefore, the Kermeens were entitled summary judgment for the damages caused by the hail storm. 

May 9, 2016 in Recent Cases, True Contracts | Permalink | Comments (0)

Friday, May 6, 2016

Facebook Has to Face Illinois's Biometric Information Privacy Act

 Facebook in Laptop

Facebook was sued recently by a number of Illinois residents for its "Tag Suggestions" program. The complaint alleges that Facebook's facial recognition technology, employed to suggest to its users who they should be tagging in their uploaded photos, collected users' biometric data derived from their faces, secretly and without procuring informed consent, in violation of Illinois's Biometric Information Privacy Act ("BIPA"). Facebook moved to dismiss the complaint, in part on the fact that its Terms of Use require disputes with users to be governed by California law and therefore Illinois' BIPA was not applicable. But the recent decision by the Northern District of California in In re Facebook Biometric Information Privacy Litigation, Case No. 15-cv-03747-JD (behind paywall), found that Facebook has to contend with Illinois's BIPA. 

The court performed an analysis of whether or not Facebook's Terms of Use was a binding contract on the user plaintiffs. Before registration, each of the users was required to click a box or a button that clearly indicated that by doing so, they were stating that they had read and agreed to the Terms of Use. Therefore, the court found that the Terms of Use were binding on the users. In addition, every time Facebook updated its Terms of Use, it sent each user an e-mail informing them of modifications, as well as placed a "jewel notification" on their Facebook feeds. Therefore, there was no real dispute that each user had agreed to the current Terms of Use. There was also no dispute that the Terms of Use contained a California choice-of-law provision. 

Nevertheless, the court refused to enforce the provision. The court noted that part of the test in evaluating whether to enforce a choice-of-law provision is to consider whether California's law would be contrary to the "fundamental policy" of Illinois's law and, if so, whether Illinois would therefore have a "materially greater interest" than California in the case at issue. Here, Illinois is one of only a few states with a statute concerning biometrics; California has no such statute. The court found that Illinois's BIPA represented a fundamental policy of Illinois to protect its residents from unauthorized use of their biometrics, and that applying California law here instead of Illinois law would interfere with Illinois's policy. In fact, the court noted, enforcing the choice-of-law provision would effectively eliminate any effectiveness of BIPA whatsoever, because there would be no ability for Illinois residents to protect themselves against national corporations like Facebook. Therefore, the court found, Facebook has to deal with Illinois's BIPA, regardless of Facebook's attempts to limit the relevant laws of its service to only California's laws. 

This all leaves for another day whether the Tag Suggestions program actually does violate BIPA. 

May 6, 2016 in Current Affairs, In the News, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Thursday, May 5, 2016

Weekly Top Ten SSRN Contracts Downloads (May 5, 2016)

Top-10

SSRN Top Downloads For SSRN Logo (small)
Contracts & Commercial Law eJournal

Rank Downloads Paper Title
1 414 Major League Soccer as a Case Study in Complexity Theory
Steven A. Bank
University of California, Los Angeles (UCLA) - School of Law
2 150 Algorithmic Contracts
Lauren Henry Scholz
Yale University - Information Society Project 
3 146 How Do LLC Owners Contract Around Default Statutory Protections?
Peter Molk
Willamette University - College of Law 
4 142 Contract, Consent, and Fiduciary Relationships
Lionel Smith
McGill University, Faculty of Law, Paul-André Crépeau Centre for Private and Comparative Law
5 137 The Logic of Contract in a World of Treaties
Julian Arato
Brooklyn Law School
6 125 Contracts Without Terms
Tess Wilkinson‐Ryan
University of Pennsylvania Law School
7 116 (Mis)perceptions of Law in Consumer Markets
Oren Bar-Gill and Kevin E. Davis
Harvard Law School and New York University School of Law
8 114 Contract as Empowerment
Robin Bradley Kar
University of Illinois College of Law
9 113 Illegality as a Defence in Contract
Andrew Burrows
University of Oxford - Faculty of Law
10 98 The Culture of Private Law
Amnon Lehavi
Interdisciplinary Center Herzliyah - Radzyner School of Law

SSRN Top Downloads For SSRN Logo (small)
LSN: Contracts (Topic)

Rank Downloads Paper Title
1 412 Major League Soccer as a Case Study in Complexity Theory
Steven A. Bank
University of California, Los Angeles (UCLA) - School of Law
2 147 Algorithmic Contracts
Lauren Henry Scholz
Yale University - Information Society Project
3 136 The Logic of Contract in a World of Treaties
Julian Arato
Brooklyn Law School
4 125 Contracts Without Terms
Tess Wilkinson‐Ryan
University of Pennsylvania Law School
5 115 (Mis)perceptions of Law in Consumer Markets
Oren Bar-Gill and Kevin E. Davis
Harvard Law School and New York University School of Law
6 114 Contract as Empowerment
Robin Bradley Kar
University of Illinois College of Law
7 111 Illegality as a Defence in Contract
Andrew Burrows
University of Oxford - Faculty of Law
8 89 The Rise of the Platform Economy: A New Challenge for EU Consumer Law?
Christoph Busch, Hans Schulte-Nölke, Aneta Wiewiórowska-Domagalska and Fryderyk Zoll
University of Osnabrück - European Legal Studies Institute, European Legal Studies Institute Osnabrueck / Radboud University Nijmegen, Universität Osnabrück - European Legal Studies Institute and Universität Osnabruck
9 76 Farewell to Unjustified Enrichment?
Nils Jansen
University of Muenster
10 75 The Common Law of Contract and the Default Rule Project
Alan Schwartz and Robert E. Scott
Yale Law School and Columbia University - Law School

May 5, 2016 in Recent Scholarship | Permalink | Comments (0)

What Health Insurance Companies Write Binds Even In Spite of Interpretation Difficulties

An Eighth Circuit Court of Appeals case demonstrates the importance - even to health care services providers – of carefully scrutinizing contractual provisions in contracts with health insurance companies. In spite of some contractual interpretation difficulties, the Eighth Circuit has found that the contractual language binds. It favored the insurance companies, even on a motion for summary judgment. The case is 32nd Street Surgery Center (“32nd Street”) v. Right Choice Managed Care (“insurer”), No. 15-1727. https://www.courtlistener.com/opinion/3197844/32nd-street-surgery-center-v-right-choice-managed-care/

In this case, the health care provider 32nd Street contracted with the insurer to become a network provider, which ensures increased patient volume as well as marketing and promotion by the insurer. In exchange for these benefits, a network provider generally agrees to receive discounted reimbursement rates. The disputed contract stipulated that a network provider is one “designated to participate in one or more [of insurer’s] Networks.” Another contractual stipulation stated, in much legalese, that if 32nd Street’s participation was limited to a certain plan, which it was, it would only receive the discounted in-network reimbursement rates for services in relation to other plans of which it was not a member. In other words, even though 32nd Street had contracted for only one certain “stick” in the insurance provider’s overall bundle, the entire lower insurance bundle pricing applied to 32nd Street.

This is boiled down from many gobbledygook contractual stipulations that, to me, seemed to indicate at least some reasonable factual doubt and thus at a minimum not to be suitable for summary judgment. But the court found the contract provisions sufficiently clear for that standard. Claims of unjust enrichment and quantum meruit were also rejected because they sound in quasi-contract whereas Missouri law does not allow such remedies when an express contract exists.

In today’s health insurance company apparent strong-arming tactics and power grabs, this case again demonstrates the importance of making sure that one has read and truly understands all the contractual provisions in the health care context. However, that is, as this case and others demonstrate, difficult enough to do for corporations with, presumably, sufficient assistance of counsel. But where does such law and precedent leave private individuals encountering similar problems? Not in a good place. This area is ripe for abuse by the stronger contractual party, which in this context always seems to be the health care insurance company. Arguments of good faith and fair dealing are, as this case demonstrates, largely or entirely ignored. The court did in this case. Good luck to future patients encountering problems of this nature. Further regulations truly seem to be in order in the health care field.

May 5, 2016 in Recent Cases, True Contracts | Permalink | Comments (0)

Wednesday, May 4, 2016

Oops! Will That Typo Cost You?

According to a recent Eleventh Circuit case, Patterson v. CitiMortgage, Inc., No. 14-14636, the answer is no. 

Toby Breedlove (an additional plaintiff in the suit) had bought a house with a CitiMortgage loan. After falling behind in his payments and hoping to avoid a foreclosure, Breedlove sought to sell the house to Patterson in a short sale. Patterson and CitiMortgage negotiated over a price. Patterson offered $371,000, which was rejected; then $412,000, which was rejected; then $444,000. It is the response to the offer of $444,000 that is at issue here. 

CitiMortgage sent Patterson a letter that stated that it wished to receive a payoff of $113,968.45. This was not what CitiMortgage meant to communicate. That amount is clearly much lower than the amounts which the parties had been discussing. Nevertheless, Patterson received the letter and immediately agreed to go forward with the deal. Patterson did not confirm the amount of the deal; neither did CitiMortgage. On the date of closing, CitiMortgage received the payment of $113,968.45 and at that point realized its mistake. It contacted the closing attorney's assistant and stated that it was rejecting the funds and would be returning them. CitiMortgage then contacted Patterson and informed him that it had meant to accept the $444,000 offer, with a few tweaks. Patterson, however, demanded that CitiMortgage accept the $113,968.45 for the house, since that had been the amount stated in CitiMortgage's letter. 

For reasons that are never made clear, two years went by before CitiMortgage took any further action, moving to foreclose on Breedlove's house. That resulted in this lawsuit seeking to enforce the sale of the house for $113,968.45. 

The question in this case was whether CitiMortgage's unilateral clerical error in the letter to Patterson prevented the parties from forming a valid contract. Georgia courts (the law that applied) often do not save contracting parties from their own mistakes if due diligence would have prevented the error. However, Georgia courts also refuse to allow parties to take advantage of obvious mistakes made by the other side. When the other party should have known that there was a mistake involved, then that can be grounds for rescinding the contract. And here, CitiMortgage's mistake should have been obvious to Patterson. They had been discussing numbers in the $400,000s; he should have realized that a number in the $100,000s had to be a typo. Therefore, there was no contract between the parties. 

May 4, 2016 in Recent Cases, True Contracts | Permalink | Comments (2)

Tuesday, May 3, 2016

Announcement: Martin J. Katz and Phoenix Cai to Give Keynote Address at Emory Law’s Fifth Biennial Conference on Teaching Transactional Law and Skills (June 10-11)

At Emory University Law School’s upcoming June conference focused on the art and science of teaching transactional law and skills, the dynamic duo of Martin J. Katz and Phoenix Cai will deliver a keynote address entitled – “Encouraging this Particular Form of (Very Fun) Madness – Roles for Deans and Faculty Members.”

Marty Katz is Dean and Professor of Law at the University of Denver, Sturm College of Law. Under his leadership, Denver Law developed and implemented a major strategic plan that included initiatives in experiential learning and specialization. He is a founding board member of Educating Tomorrow’s Lawyers, a national consortium of law schools that serve as leaders in the experiential education movement. Dean Katz’s recent publications include “Facilitating Better Law Teaching – Now” (Emory Law Journal) and “Understanding the Costs of Experiential Legal Education” (Journal of Experiential Learning).    

Phoenix Cai is the founding director of the Roche International Business LLM Program and Associate Professor of Law at the University of Denver, Sturm College of Law. The Roche LLM in International Business Transactions is an intensive and experiential graduate program designed to train both U.S. and foreign lawyers in private transactional law. Prior to joining Denver Law, Professor Cai was a corporate lawyer specializing in both domestic and international mergers and acquisitions, banking, finance, and securities law.

Don’t miss this opportunity to hear Dean Katz and Professor Cai share their thoughts about how deans and faculty members can promote excellence in transactional law and skills education.

For more information about the Conference, including a list of the many other esteemed presenters and the topics they will cover, go to our conference website. If you would like to register for the Conference, please go here.

May 3, 2016 | Permalink

Arbitration Clauses in Legal Fee Agreements

We all know about arbitration clauses but a recent case out of California, East Coast Foods v. Kelly, Lowry & Kelley, LLP, No. B262679, had something to say about arbitration specifically in the case of legal fee disputes. Is the arbitration clause in an engagement agreement between lawyer and client enforceable? In this case, yes. 

East Coast Foods is perhaps best known through one of its businesses, Roscoe's House of Chicken 'N Waffles. There was a copyright dispute raised by ASCAP over allegedly unlicensed public performance of music. After being sued by ASCAP, East Coast Foods sought to retain counsel. After discussions, Kelly sent East Coast's general counsel a fee agreement. The fee agreement was three pages long and had eleven paragraphs. Paragraph 7 was an arbitration clause. Although there was disagreement over exactly when East Coast's president Herbert Hudson signed the fee agreement, it was undisputed that he did sign and return it to Kelly. 

Kelly represented East Coast throughout the course of the copyright litigation, which lasted three years and included an appeal to the Ninth Circuit. At the end of the litigation, which ended in a judgment for ASCAP, East Coast stopped paying Kelly for the legal fees incurred, even though Kelly alleged that East Coast still owed over $81,000. 

A few months after the end of the litigation, East Coast sued Kelly for malpractice. Kelly answered the complaint by asserting that the fee dispute was subject to mandatory binding arbitration pursuant to the terms of the fee agreement. East Coast, however, argued that the arbitration clause was unenforceable because it had not been adequately disclosed or explained to East Coast. 

While it's true that an attorney-client relationship is full of fiduciary obligations and ethical responsibilities, the court here found that that relationship does not relieve a party of its responsibility to read a contract before signing it. The fee agreement represents a negotiation of employment, basically, which a lawyer is allowed to treat as an arm's-length negotiation. Here, the arbitration provision was clear and conspicuous. The agreement was not a long one, and the provision was not buried in legalese. Indeed, the fee agreement was initially sent to East Coast's general counsel to review, so it wasn't as if East Coast didn't have an opportunity to have the agreement reviewed by an attorney. There was no indication that East Coast couldn't have asked questions or even attempted to negotiate the fee agreement's terms. The circumstances here raised no red flags of fraud or unconscionability. 

Therefore, this appellate court found, the trial court was correct in compelling arbitration and in confirming the arbitrator's award, which found in favor of Kelly to the tune of over $400,000. 

May 3, 2016 in Recent Cases, True Contracts | Permalink | Comments (0)

Monday, May 2, 2016

You Might Think City Buses Don't Have a System, But They Totally Do! (it just might be copyright infringing)

  MTA bus Nashville TN 2013-12-27 002

Entities and people come together, do business, have disagreements, go their separate ways. It happens all the time. But nowadays, since so many things have embedded software, these break-ups of business relationships have copyright implications. If you don't have a license to continue using the embedded software, when you break up with another business, that means you have to stop using whatever contains the software, too. Theoretically. 

A recent case out of the Middle District of Tennessee, ACS Transport Solutions, Inc. v. Nashville Metropolitan Transit Authority, 3:13-CV-01137, dealt with this issue. The Nashville Metropolitan Transit Authority ("MTA") had contracted with ACS to develop a system for MTA to manage its buses. The system ACS created contained copyrighted software that ACS expressly licensed to MTA. A few years after the development of the system, MTA discontinued its relationship with ACS, but it continued to use the system that contained the embedded software. ACS contacted MTA and told it that it was using the software without a license and infringing ACS's copyright. Nevertheless, MTA continued to use the system with the embedded software, and so ACS eventually brought this lawsuit. 

MTA argued that, when it terminated its relationship with ACS, it did not terminate the license to use the software, and so it was still properly licensed. However, MTA's relationship with ACS was governed by a contract, within which was the software license. Terminating the relationship set forth by that contract, the court found, necessarily terminated the software license also found in that contract. 

MTA additionally argued that it had paid for the system and that therefore it should be entitled to use the software within the system indefinitely. ACS did agree that MTA had paid for the system and would not have owed ACS any further payments...if ACS and MTA had fulfilled the rest of their contractual obligations. Instead, ACS argued, MTA breached its obligations. Therefore, ACS rescinded MTA's license to use the software. 

There was some slim hope for MTA. MTA argued that it had an implied license to use the software for a "reasonable" period of time while it transitioned to the new software of the company it hired to replace ACS. The court seemed skeptical that the length of time MTA had used ACS's software after terminating ACS (it ended up using the software for more than two years after terminating ACS) was reasonable; the court implied that, even if MTA had had an implied license to use the software while it transitioned, MTA's use had exceeded that implied license's scope. However, the court found this to be a material fact in dispute and so inappropriate to resolve at the summary judgment stage. 

Under the terms of its contract with ACS, MTA received only a non-exclusive, revocable license for the software. If MTA had wanted more protection, MTA should have negotiated better license terms. ACS, of course, might never have been amenable to granting better license terms. But let this case be a lesson: Many things are going to come with embedded software these days, and that software is copyrighted. You're going to need to dot your copyright i's and cross your copyright t's regarding this software; don't lose sight of that by focusing instead on the larger product you're buying. MTA may have thought of itself as buying a system, but it really needed to think of itself as buying the software within the system. 

May 2, 2016 in Commentary, Government Contracting, Recent Cases, Travel, True Contracts, Web/Tech | Permalink | Comments (0)

Has Bitcoin Creator "Satoshi Nakamoto" Revealed Himself?

The answer is a definite... maybe.

Bitcoin_logo1Bitcoin, of course, is the original--and many would say at this point, most successful--effort to create a "cryptocurrency," a digital store of value that can be traded electronically without the necessity of a bank intermediary yet can also avoid the problem of double-spending (i.e., digital counterfeiting) that would destroy an electronic currency's value. For purposes of contract law, Bitcoin is most notable because the aforementioned double-spending problem was solved by the creation and implementation of blockchain technology. Blockchain programming allows, among other things, for the maintenance of transactional records in a ledger distributed among numerous and otherwise unrelated computers across the internet rather than in a central location. Contract lawyers have particular reason to care about the blockchain because it raises the looming possibility of "smart contracts," contracts with the technical capability of enforcing themselves.

An enduring mystery of Bitcoin has been the identity of its 2008 creator, who to date has been identified only by the pseudonym "Satoshi Nakamoto." Efforts to identify Nakamoto have been largely unsuccessful, with the most notable misstep being Newsweek's debunked 2014 claim that Satoshi was Japanese-American physicist Dorian Nakamoto.

Craig-wright-inventor-satoshi-nakamotoThis rather enduring tech mystery may have been solved, though skeptics remain unconvinced. In an interview with the BBC and other media organizations, Australian tech entrepreneur Craig Wright claims to be the real Satoshi Nakamoto, and other prominent members of the Bitcoin community are backing his claim. The fact that Wright's claim arose on the eve of the digital currency and technology conference Consensus 2016 has allowed for the intriguing circumstance of people in the know reacting and the entire story being live blogged.

So is Craig Wright actually Satoshi Nakamoto? Opinion certainly may shift over the next several days and weeks, but at this point a majority seem to be accepting his claim or profess to be open to accepting it. All in all, an intriguing turn of events out on the periphery of contracts and commercial law. 

 

May 2, 2016 in Current Affairs, E-commerce, Web/Tech | Permalink | Comments (0)

Watering Down Your Iced Coffee Drinks

A class action lawsuit has been filed against Starbucks for negligent misrepresentation, fraud and unjust enrichment in the company’s sale of cold drinks.

The company makes a good deal of its money on cold coffee and tea drinks prepared in-store. In 2014, shaken iced tea drinks were the most profitable menu addition of the year, according the lawsuit. Unknown

The company offers three sizes of drinks — Tall, Grande, Venti and Trenta — which correspond to 12, 16, 24 and 30 fluid ounces, respectively. These fluid ounce measurements are advertised in the store. However, because of the large amounts of ice added to the drinks, customers actually receive much less (at a high price, as is well known).

The complaint claims that "[a] Starbucks customer who orders a Venti cold drink receives only 14 fluid ounces of that drink — just over half the advertised amount, and just over half the amount for which they are paying … In the iced coffee example, a Starbucks customer who orders and pays for a Venti iced coffee, expecting to receive 24 fluid ounces of iced coffee based on Starbucks' advertisement and marketing, will instead receive only about 14 fluid ounces of iced coffee."

A Starbucks spokesperson states that “[o]ur customers understand and expect that ice is an essential component of any ‘iced’ beverage,” adding that the company would remake any beverage if a customer is unsatisfied.

Maybe it would be a better idea to get a beer or a wine. They can’t water those down (I think...). Five Starbucks locations in the D.C. area have started serving booze and tapas as part of a nationwide effort to keep some of its stores open after typical coffee shop hours.

Going to a coffee shop for… tapas and alcohol in order to … what, stay loyal to an already huge brand? Avoid trying a local bar? If you think “only in America,” think again: Starbucks is also enjoying huge success in Europe, home of exquisite coffee shops with excellent pastries and snack. Talk about selling sand to Sahara…

May 2, 2016 in Current Affairs, Food and Drink, In the News, True Contracts | Permalink | Comments (1)

Thursday, April 28, 2016

No Contractual Duty of Good Faith in Texas

In spite of most jurisdictions reading a duty of good faith and fair dealing into all contracts, a Fifth Circuit Court of Appeals has held that it is unlikely that the Texas Supreme Court would find such a duty to exist in Texas. Wow. Additionally, the court found that no fiduciary relationship between a university student and his/her university faculty and other representatives.

Section 205 of the Restatement (Second) of Contracts states that “[e]very contract imposes upon each party a duty of good faith and fair dealing in its performance and enforcement.” See also Farnsworth, “Good Faith Performance and Commercial Reasonableness under the Uniform Commercial Code,” 30 U.Chi.L.Rev. 666, 670 (1963).

The seminal case in this area is Market Street Associates v. Frey, 941 F.2d 599 (7th Cir. 1991). In that case, Judge Posner held that in spite of the somewhat “moralistic overtones of good faith,” not every contract signatory is expected to be his “brother’s keeper.” Nonetheless, “the essentials of the modern doctrine [are] well established in nineteenth-century cases.” “This duty is … halfway between a fiduciary duty (the duty of utmost good faith) and the duty merely to refrain from active fraud. Despite its moralistic overtones it is no more the injection of moral principles into contract law than the fiduciary concept itself is.” “The office of the doctrine of good faith is to forbid the kinds of opportunistic behavior that a mutually dependent, cooperative relationship might enable in the absence of rule. “

In the new Texas case involving a student at SMU who got fired from his part-time job as a Community Adviser for misconduct toward students and faculty, the circuit court held that “Texas law does not impose a generalized duty of good faith and fair dealing and, in fact, rejects it” in all circumstances apart from when 1) a formal fiduciary relationships exists or 2) a “special or confidential relationship” exists. Examples of the former are attorney-clients, trustee-beneficiary, and principal-agents. In Texas, the latter apparently only includes the relationship between an insurer and an insured. That’s it! Texas courts have, found this panel, refused to impose the duty on, for example, employer-employees (not too surprising), lender-borrowers, medical provider-patients (double wow!), mortgagor-mortgagees, and franchisor-franchisees. The court in the described case also said that an “ordinary student-professor relationship is no different;” in other words, there is no fiduciary or even “confidential” or “special” relationship between students and faculty in Texas.

The case does not show how the student’s allegation that a duty of good faith existed between SMU and the student would really have helped the student on the merits. SMU seemed to have a very good case for firing the student from his job. Nonetheless, it is surprising that the court would so categorically reject that such a duty even exists apart from in traditional fiduciary relationships. While it may make sense that “a purely unilateral, subjective” sense of trust in one’s contractual counterpart and that the other party will have one’s interests at heart is not enough to create a fiduciary relationship, there is a vast difference between that and reading out the duty of good faith and fair dealings from most contracts law in general in Texas. Of course, as contracts law is state law, it is true that it is the Texas courts who must change this line of thinking, but doing so seems to be highly warranted given how courts in other parts of the nation rule on the issue.

The case discussed is Hux v. Southern Methodist University, 2016 WL 1621720 (no free online copy available yet).

April 28, 2016 in Labor Contracts, Recent Cases, Teaching, True Contracts | Permalink | Comments (2)