Monday, December 15, 2014
The ABA has embraced the idea of student learning outcomes (see Standard 302). I have no objection to the rule as stated. If law schools are not striving to graduate students who are competent in the areas identified by the ABA, they deserve to lose their accreditation.
But I am hearing noises of a much more aggressive version of student learning outcomes (SLOs) which entails identifying in one's syllabus specific SLOs for each class session. I see great potential in this version of the SLO movement for tension with my pedagogical approach (illustrated at left).
I already provide a great deal of guidance to my students on my syllabus. On the day that the word "consideration" appears on the syllabus, I expect them to learn the substantive law of consideration. On the day "promissory estoppel" appears on the syllabus, I expect them to forget everything they learned about consideration and think that all promises that are relied on ential contractual obligations. And by the end of the course, I expect that everything will fall back into place, and that they will be able to deploy the reading comprehension, analytical, and analogical skills that they have been developing all semester (in my course and others) to answer MBE-style final exam questions and essay questions in which I will ask them to apply substantive doctrines to a fact pattern with which they could not possibly be familiar because I have invented it as a test of the skills identified above.
Apparently, some think I need to go further and identify on the syllabus precisely what skills and doctinal areas will be covered in each 50-minute hour. There's just one problem.
I don't wanna.
And it's not just because I am a typical academic who begrudges anyone or anything that might force me out of my Socratic comfort zone. Telling students what they are looking for undermines the basic premise of my pedagogical approach, which I think is a common pedagogical approach because it is a very good, legitimate approach to legal education.
Yes, I hide the ball.
If I show my students the ball every day, they will fetch it. But I am not trying to train spaniels; I'm trying to train attorneys, and attorneys need to be able find things when nobody tells them in advance what they are looking for. They also need to know that this is something that they can do (or learn to do) with nothing more than their own internal resources. Every teaching day, in every Socratic exchange with a student, I try to get the student to a question she thinks she cannot answer and then, through a series of prodding questions, none of which provide the student with facts or information she did not already have from reading the text, I try to bring her to a place where she can formulate the answer that she thought she did not have. When the method works, the student has learned both doctrine and a skill -- and hopefully she has gained a great deal of confidence in her own native abilities.
Or, when I ask the student a question, she could just consult the SLOs in the syllabus and recite the learning objective for the day, and one of us would leave the class under the impression that she had learned something valuable.
I am not really afraid that the aggressive SLO movement augurs the end of legal education as we know it, because I know that students pay very little attention to what is on the syllabus (and they'll pay even less if it contains 10-12 pages of detailed SLOs). I just resent the drain on pedagogical resources that could be spent innovating rather than figuring out how best to march in lock step.
Saturday, December 13, 2014
In the UK, two sections of the Statute of Marlborough are facing repeal after being in force for 747 years. That’s right: the Statute was passed in 1267 and is thus older than the Magna Carta, which – although having been drafted in 1215 – was not copied into the statute rolls to officially become law until 1297. Two sections, however, still remain good law.
Why the suggested repeal? The two potentially obsolete sections address the ancient British power of “distress,” which allowed landlords to enter a debtor’s property and seize his/her goods. However, distress was abolished by new legislation this past March.
But don’t worry, our British colleagues are not about to do anything rash or unpopular. Although the Law Commission has proposed the repeal, a public consultation has been initiated to make sure that no one actually uses the two sections anymore.
Other newer, but nonetheless obsolete, laws are also being earmarked for removal. One is from the 1990s and was drafted to regulate the “increasing popularity of acid house parties.” Apparently, acid house parties are not in anymore and thus, the law is no longer needed.
In spite of the above, two sections of the Statute of Marlborough still remain in effect. One forbids individuals from seeking revenge for debt non-payment without being sanctioned to do so by the court (you gotta love the fact that in the UK, one can apparently get courts to approve one seeking revenge against one’s debtors). Another prevents tenants from ruining or selling off the landlord’s land. Fair enough…
Friday, December 12, 2014
Sick of reading our posts (and other news reports) about Uber and Lyft?
I am compelled to add that while the concept is brilliant and the execution quite fine, the script missed some low-hanging fruit suggested by the "Jewish geography navigation system" at the opening. I humbly offer the following potential dialogues:
Driver: Where are you going in such a hurry?
Passenger: Elm and 17th.
D: Elm and 17th? The Weinsteins live right around the corner! Do you know them?
P: I don't think so . . .
D: Such a nice couple. Are you sure you don't know them? I think they had a daughter around your age. How old are you? Where did you go to school? And the Goldbergs live near there too -- surely you know them!
P: I'm just going to a dental appointment. I don't live around there.
D: Well, you should, it's a lovely neighborhood. Where do you live? I know a realtor who could find you a nice apartment. . .
Passenger: Excuse me, I was actually heading in the other direction . . .
Driver: Oh, I know, hon, but I can only find my way there from the JCC, so I thought we'd go there first. It's not far.
D: Or Solomon Schechter, is that closer? I know how to get places from there or from the Temple . . .
P: I can direct you if you want.
D: Relax! Enjoy the ride! You young people are always in such a hurry these days. Do you ever take the time to talk with your parents, I wonder? We can just chat and catch up -- the time will pass quickly
P: Catch up? But I don't even know you.
D: You're about my son's age. He just gave me my third grandchild. [Passing pictures back] Here, aren't they a lovely family?
I'm just sayin . . .
Wednesday, December 10, 2014
I read an interesting article the other day about parties to a contract agreeing to a broad arbitration provision and then carving out some issues that would be litigated should a problem arise. As with many others, I am involved in the International Commerical Arbitration Moot and, when I read the article, the issue seemed familiar. That is because this year's problem includes a contract with the following two provisions:
"Art. 20 All disputes arising out of or in connection with the present contract shall be finally settled
under the Rules of Arbitration of the International Chamber of Commerce by three arbitrators
appointed in accordance with the said Rules. The seat of arbitration shall be Vindobona,
Danubia, and the language of the arbitration will be English. The contract, including this clause,
shall be governed by the law of Danubia.
Art 21: Provisional measures
The courts at the place of business of the party against which provisional measures are sought
shall have exclusive jurisdiction to grant such measures."
As you would expect, one of the parties in the problem asks for interim relief from the ICC while the other says interim measures are for courts only. Very often, if not most of the time, the Moot problem is inspired by an actually case. Some years the students are able to find the case and, while it is never quite exactly on point, it can be helpful.
I could not help but wonder if this issue within this year's problem was inspired by a botched effort to carve interim relief out from the general provision. It would be pretty sloppy to draft something like the above but my hunch is that it has happened.
I am curious to know how other ICAM team coaches have dealt with the issue. In particular, does the word "finally" in Article 20 have any particular signficance?
Myanna posted yesterday about an L.A. Times story about Uber. Today's New York Times has more news about attempts to regulate companies like Uber and Lyft. The issue is the quality of the companies' background checks on their drivers. In a sidebar, the Times notes that three states and seven foreign jursdictions have taken legal action against Uber. But the ride sharing companies are energetic lobbyists and often have been successful in blocking regulation.
In a related story, the Times reports that an Uber driver in India is facing allegations that he raped a passanger. Today's Times reports that the driver was wanted on other crimes as well.
he AALS Contracts Section is sponsoring/co-sponsoring the following two programs at the AALS 2015 Annual Meeting.
The Contract Section annual meeting program will be on Saturday, January 3, 2015 at 1:30-3:15pm
Mind the Gap! – Contracts, Technology and Legal Gaps
Technological innovation has created new challenges for the law. New technologies often create legal and ethical questions in areas such as privacy, employment, reproduction and intellectual property.
Courts and legislatures are often slow to address these questions. To fill the legal gap created by rapid advancements in technology, businesses and individuals attempt to reduce their risk and uncertainty through private ordering. In what ways have contracts been used to privately legislate in the gap created by technological advancements? What are, or should be, the limits of consent and contracting where emerging technologies are involved? What are some of the concerns? Our panel of experts will address these and other issues.
Eric Goldman, Professor, Santa Clara University School of Law
Woodrow N. Hartzog, Associate Professor, Samford University Cumberland School of Law (topic: “The Unique Role of Contracts and Design in Mediated Environments")
Nancy S. Kim (moderator), California Western School of Law
Corynne McSherry, Intellectual Property Director, Electronic Frontier Foundation
Jane Winn, Professor, University of Washington School of Law (topic: “Llewellyn Has Left the Building: The Growing Irrelevance of the UCC to 21st Century American Sales")
Deborah Zalesne, Professor, CUNY School of Law (topic: “The Contractual Family: Modern Solutions for Modern Day Families”).
In addition, and new this year, the Contracts Section and the Section on Consumer and Commercial Law will hold a joint program aimed at pedagogy and new law teachers.
Saturday, January 3, 2015 at 5:15pm-6:30pm
Teaching in the Contracts/Commercial/Consumer Law Curriculum: Challenges and Innovations
This program addresses the many issues faced by new law teachers the areas of contracts commercial and consumer law. Because of the overlapping nature of these three subject areas, new law teachers in any one of these subject areas may often teachin on one or both of the other subject areas. Each of these areas, however, has its unique challenges. Experienced law teachers in contracts, commercial law and consumer law will discuss the techniques, strategies and tools they use to teach their students, and the relevance and value of bringing and eliciting diverse perspectives into the classroom.
Emily E. Kadens, Northwestern University School of Law
Jennifer S. Martin (moderator) St. Thomas University School of Law
Deborah Waire Post, Touro College, Jacob D. Fuchsberg Law Center
M. Dee Pridgen, University of Wyoming College of Law
Anthony Eudelio Varona, American University, Washington College of Law
We look forward to seeing you next month!
The AALS Contracts Section Executive Committee
Danielle K. Hart
Emily M.S. Houh
Nancy S. Kim
Val D. Ricks
Tuesday, December 9, 2014
In what seemed an inevitable turn of events, the Los Angeles and San Francisco district attorneys filed a consumer protection lawsuit on 12/9/2010 against Uber for making false and misleading statements about Uber’s background checks of its drivers. George Gascon, the district attorney for San Francisco, calls these checks “completely worthless” because Uber does not fingerprint its drivers. Uber successfully fought state legislation that would have subjected the company’s drivers to the same rules as those required of taxi drivers. Allegedly, Uber has also defrauded its customers for charging its passengers an “airport fee toll” even though no tolls were paid for rides to and from SFO, and charging a “$1 safe ride fee” for Uber’s background check process. California laws up to $2,500 per violation. There are “tens of thousands” of alleged violations by Uber. However, even that will likely put only a small dent in Uber’s economy as it is now valued at $40 billion (yes, with a “b”).
Lyft has settled in relation to similar charges and has agreed to submit information to the state to verify the accuracy of its fares (although not its background checks). It has also agreed to stop picking up passengers at airports until it has obtained necessary permits. Prosecutors are continuing talks with Sidecar.
Time will tell what prosecutors around the nation decide to do against these and similar start-ups such as airbnb and vrbo.com, which are also said to bend or outright ignore existing rules.
The Los Angeles Times comments that the so-called “sharing economy” companies face growing pains that “start-ups in the past didn’t – dealing with municipalities around the world, each with their own local, regional and countrywide laws.” It is hard to feel too sorry for the start-ups on this account. First, all companies obviously have to observe the law, whether a start-up or not. Today’s regulations may or may not be more complex than what start-ups have had to deal with before. However, these companies should not be unfamiliar with complex modern-day challenges as that is precisely what they benefit from themselves, albeit in a more technological way. Finally, there is something these companies can do about the legal complexity they face: hire savvy attorneys! There are enough of them out there who can help out. But perhaps these companies don’t care to “share” their profits all that much? One has to wonder. Sometimes, it seems that technological innovation and building up companies as fast as possible takes priority over observing the law.
As indicated in this story,* CNN.com is greatly invested in the story of Morten Storm, who claims that he is a Danish double-agent who infiltrated Al Qaeda in the Arabian Penninsula (AQAP) and thus helped the U.S. target and kill AQAP operative and U.S. citizen Anwar al-Awlaki.
Storm (and his CNN co-authors) have quite a story to tell. Among other things, he claims that the United States promised him $5 million for helping the U.S. in its al-Awlaki operation. Although Storm is clearly an international man of mystery, there is little mystery on the question of whether he would have any luck on a claim against the U.S. for breach of a promise to pay $5 million. The U.S. would undoubtdedly point to the Totten case, as updated in Tenet v. Doe, and courts will find the claim non-justiciable.
NB: When you click on this site, you will see the following browsewrap banner across the top:
If you do not want to spend an hour or two parsing CNN's terms and don't want to be bound to terms that you have not read or cannot understand, do not "continue to use" CNN's site (whatever that means).
Hat tip to my student, Brandon Carter.
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Monday, December 8, 2014
Yet another non-disparagement case, this time for WTOC.com. This time, it was a woman who cancelled an agreement with a wedding photographer within the contractually created cancellation period, and then went online to explain why she had done so. The photographer threatened legal action claiming that she had violated a non-disparagement clause in the now-cancelled contract.
There was an interesting story last week on the International Business Times about Yo-Yo car sales. Apparently, there are many variations to the practice, but the basic scheme runs as follows: car dealer sells a car to person with bad credit, who is happy to be able to buy a car on any terms. Then, the dealer tries to sell the loan to a third party. If it cannot do so, it calls the buyer back in and demands either a change in the loan terms or the return of the car. The IBT story focuses on a buyer whom the dealer claimed committed felony auto theft and fraud. The buyer filed a civil suit against the dealer, with claims ranging from violations of the Truth in Lending Act to defamation and deceptive trade practices. The dealer has counterclaimed for fraud and breach of contract.
According to an AP story posted here in the UK's Daily Mail, California is wrangling with investors in a $2.3 billion deal for the sale and lease back of state properties. The deal was conceived in the Schwarzenegger administration, but Governor Brown has determined that the deal will cost the state $1.5 billion. California alleges that the investors failed to make an initial $50 million payment, triggering the State's rights to terminate the contract. The investors are seeking a forced sale of the properties. My students have their exam this week, so they might want to think about what we have here: partial breach? material breach? total breach? failure of a condition? did California seek adequate written assurances? The AP story does not clarify these highly testable issues.
Finally, we are happy to report that the law has saved hockey! At least in Erie, Pennsylvania, according to this story on GoErie.com (Warning! This site has lots of annoying popups!). Apparently, the Edmonton Oilers sought to enforce a judgment against the Otters' General Manager Sherry Bassin through a forced sale of the team. The Oilers' scheme then involved buying the Otters through a subsidiary and moving them to Hamilton, Ontario. But U.S. District Court Judge David Cercone blew the whistle and checked the Oilers when he set aside a judgment against Bassin The Oilers would have to proceed through a breach of contract claim if they want to penalize Bassin for misconduct. In the meantime, the good people of Erie can enjoy their Otters.
Following up on Myanna Dellinger's post from last week, we noticed this story about Airbnb and Uber. Both companies are leaders of the so-called new sharing economy, but what they really love to share (unequally) is risk. The article explains how insurance works for both companies, and the clear message is: it isn't clear that it will, at least not for the Uber drivers or people who use Airbnb to rent out their homes or apartments for days or weeks at a time. Actually, the article has very little to say about Uber, which doesn't really share risk at all -- it tells its drivers to self-insure, and then the drivers run into trouble (if they run into things) because their insurance does not cover commercial activities.
According to the Times article, regular homeowners' insureance will not cover Airbnb renters because most standard homeowners' insurance policies do not cover harms caused by commercial activities. Airbnb thus has taken out a secondary insurance policy that will cover up to $1 million in liability for the renters who use its site, and Airbnb is offering this policy to its users for free. For reasons that are not really clear in the article, its author Ron Lieber suggests that Airbnb might not really provide insurance to its renters. He points to Airbnb's checkered history of encouraging renters to ignore local ordinances and not being there for its renters who then ran afoul of the law. He suggests that Airbnb's secondary insruance scheme might not cover the sorts of liabilities that renters might face, and it is clear that some primary homeowners' policies would also exclude liabilities arising out of commercial activiities.
And, as long as we are piling on Uber, Saturday's New York Times also featured an opinion piece by Joe Nocera. According to Nocera, it is impossible to reach Uber by phone because, according to Nocera, Uber says having a phone center or customer service line is not in Uber's business model. If you try to call the listing for Uber in New York City, you get another company, über, a New York design firm. The owner of über claims that she fields between 1 and 10 calls a day from Uber customers seeking assistance. She has even had to go to court to explain to the judge that the plaintiff sued the wrong Uber, or the wrong über.
Saturday, December 6, 2014
Forced arbitration clauses are in all sorts of consumer contracts. Even though readers of this blog know what they are, this case (Johnson v. Rent-a-Center) might surprise you. An 88 year- old man, Kenneth Johnson, leased a refrigerator from Rent-A-Center under a Rental-Purchase Agreement which contained an arbitration agreement. The arbitration agreement contained a provision which provided that an arbitrator should decide any dispute relating to the "interpretation, applicability, enforceability, or formation" of the arbitration agreement. Rent-A-Center sent an employee, Eric Patton, to Johnson's home to service the refrigerator on several previous occasions. Patton then showed up at Johnson's house, in uniform, to service the leased appliance. This time, Patton seriously beat and robbed Johnson. Johnson sued Rent-A-Center claiming negligence in their hiring and supervision of Patton. Rent-a-Center filed a Motion to Compel Arbitration and Stay Action. Johnson argued that under Missouri law, his claims were not arbitrable because they did not have a meaningful relationship to the Rental-Purchase Agreements. Johnson did not, however, address the delegation issue. The circuit court agreed with Johnson and denied the motion to compel arbitration, finding that the tort claims were independent of the contract terms.
The Missouri Court of Appeals, however, reversed and found that the threshold issue regarding arbitrability was for the arbitrator. Citing to the U.S. Supreme Court decision in Rent-A-Center West, Inc. v. Jackson, the court stated that the issue will go to the arbitrator "unless the party challenges the particular sentences that delegate such claims to the arbitrator, on some contract ground that is particular and unique to those sentences." Because Johnson did not assert "specific challenges to the delegation provisions contained within the Arbitration Agremeents," the court stated that the threshold issues should be determined by the arbitrator.
This is one of the times when I can't help but think - Wait a minute, how is this right? Does this mean that if an arbitration agreement contains a clause delegating arbitrability to the arbitrator that, even if the consumer is arguing that she never entered into the contract, that the arbitrator makes that determination -- unless the plaintiff argued specifically that the delegation clause was not formed? And what would be "particular and unique" to those sentences - if the issue is lack of formation, wouldn't that apply to the entire contract including the delegation clause? This all seems to make contesting arbitration a game of choosing precisely the right words. Furthermore, as Paul Bland notes in this post discussing the case, because an arbitrator has financial incentives, there may be moral hazard issues in having the arbitrator make this threshold determination.
(H/T to John Crabtree for pointing me to the case and blog post).
Friday, December 5, 2014
In today’s “sharing economy,” more and more private individuals attempt to earn some (additional) money in untraditional ways such as selling various things on eBay, driving cars for alternative passenger transportation services such as Uber and Lyft, and providing lodging in private homes on sites such as airbnb. Not only do these services raise many regulatory, licensing, insurance zoning and other issues, they also present a real risk to many hopeful 1099 workers who – as the relevant companies themselves – can vastly misjudge the potential of new attempted products or services.
Take, for example, Lyft drivers. In May, the shared ride company introduced luxury rides via its Lyft Plus program. At least in San Francisco, the drivers had to pay $34,000 out of their own pockets for the large, “loaded” Ford Explorers required by Lyft for drivers to participate in the program. The idea was that passengers would pay twice the normal Lynx rate to get the extra space and perceived luxury of being whisked around town in a large SUV. A bit behind the curve, you think? Indeed. The program was an instantaneous fiasco in San Francisco (the company still advertises the program, but at “only” 1.5 times the price of a regular ride and touting the program as having space enough for six people). Soon, drivers were back to simply getting regular rides– often just at $5 or $6 – just to stay busy. This is obviously not viable in a city with expensive gasoline and cars that get only around $14 miles per gallon, not to mention the purchase price of the new SUVs.
Responding to drivers’ initial concerns, Lyft had promised that they should “not worry about demand, we have that covered.” Realizing that many of its drivers were upset about being stuck with a huge, new gas guzzler without a realistic return on investment, Lyft has offered their Plus drivers help selling the SUVs or a $10,000 bonus… subject to income tax, no less. None of these options, of course, will bring the drivers back to the pre-contractual position. Some drivers admitted to having borrowed money from family members, selling existing cars, even “forgoing other job opportunities for the chance to make more money with Lyft Plus.”
A sad story all the way around. Companies are continually trying to introduce new products and services to find the next “big thing.” This, of course, is laudable, but not so much so when they seemingly cross the line and make unfounded promises to the less savvy or financially strong. Of course, this also does not mean that workers or customers should not exercise a hefty dose of “caveat emptor” in connections such as this, but it is a somewhat concerning aspect of today’s sharing economy that failed product launches can simply be shared with “smaller fish” with less bargaining power and, apparently, a dangerously high risk-willingness bordering desperation in trying to make a dollar in these financially tough times. Whether in this case, the promise that the demand was “covered” could be a contractual misrepresentation or whether it was simply puffery is another story best left to another forum.
Wednesday, December 3, 2014
Yale/Stanford/Harvard Junior Faculty Forum
June 16-17, 2015, Harvard Law School
Yale, Stanford, and Harvard Law Schools announce the 16th session of the Yale/Stanford/Yale Junior Faculty Forum to be held at Harvard Law School on June 16-17, 2015 and seek submissions for its meeting.
The Forum’s objective is to encourage the work of scholars recently appointed to a tenure-track position by providing experience in the pursuit of scholarship and the nature of the scholarly exchange. Meetings are held each spring, rotating at Yale, Stanford, and Harvard. Twelve to twenty scholars (with one to seven years in teaching) will be chosen on a blind basis from among those submitting papers to present. One or more senior scholars, not necessarily from Yale, Stanford, or Harvard, will comment on each paper. The audience will include the participating junior faculty, faculty from the host institutions, and invited guests. The goal is discourse on both the merits of particular papers and on appropriate methodologies for doing work in that genre. We hope that comment and discussion will communicate what counts as good work among successful senior scholars and will also challenge and improve the standards that now obtain. The Forum also hopes to increase the sense of community among American legal scholars generally, particularly among new and veteran professors.
TOPICS: Each year the Forum invites submissions on selected topics in public and private law, legal theory, and law and humanities topics, alternating loosely between public law and humanities subjects in one year, and private law and dispute resolution in the next. For the upcoming 2015 meeting, the topics will cover these areas of the law:
- Civil Litigation and Dispute Resolution
-Contracts and Commercial Law
- Corporate and Securities Law
- Intellectual Property
- International Business Law
- Private Law Theory and Comparative Private Law
- Property, Estates, and Unjust Enrichment
A jury of accomplished scholars, again not necessarily from Yale, Stanford or Harvard, with expertise in the particular topic, will choose the papers to be presented. There is no publication commitment, nor is published work eligible. Yale, Stanford, or Harvard will pay presenters’ and commentators’ travel expenses, though international flights may be only partially reimbursed.
QUALIFICATIONS: There is no limit on the number of submissions by any individual author. To be eligible, an author must be teaching at a U.S. law school in a tenured or tenure-track position and must not have been teaching at either of those ranks for a total of more than 7 years. American citizens teaching abroad are also eligible provided that they have held a faculty position or the equivalent, including positions comparable to junior faculty positions in research institutions, for less than seven years, and that they earned their last degree after 2005. International scholars are not eligible for this forum, but are invited to submit to the Stanford International Junior Faculty Forum. We accept co-authored submissions, but each of the coauthors must be individually eligible to participate in the JFF. Papers that will be published prior to the forum in June are not eligible.
PAPER SUBMISSION PROCEDURE:
Electronic submissions should be sent to Jennifer Minnich ( jminnich at law.harvard.edu), with the subject line “Junior Faculty Forum.” The deadline for submissions is March 1, 2015. Remove all references to the author(s) in the paper. Please include in the text of the email and also as a separate attachment a cover letter listing your name, the title of your paper, your contact email and address through June 2015, and which topic your paper falls under. Each paper may only be considered under one topic. Any questions about the submission procedure should be directed both to Adriaan Lanni ( adlanni at law.harvard.edu) and her assistant, Jennifer Minnich ( jminnich at law.harvard.edu).
FURTHER INFORMATION: Inquiries concerning the Forum should be sent to Gabby Blum ( gblum at law.harvard.edu) or Adriaan Lanni ( adlanni at law.harvard.edu) at Harvard Law School, Richard Ford ( rford at stanford.edu) at Stanford Law School, or Christine Jolls ( christine.jolls at yale.edu) or Yair Listokin ( yair.listokin at yale.edu) at Yale Law School.
Plaintiffs in Nashimua v. Gentry Homes, Ltd., are a class of persons who believe that the defendant corporation built their homes without adequate high wind protection. Gentry Homes, Ltd. (Gentry) moved to compel arbitration. The arbitration provision at issue provided in relevant part:
The arbitration shall be conducted by Construction Arbitration Services, Inc., or such other reputable arbitration service that PWC shall select, at its sole discretion, at the time the request for arbitration is submitted.
By the time the case was filed, Construction Arbitration Services was no longer available, which left the choice of arbiter in Gentry's sole discreation. The issue before Hawaii's Supreme Court was whether plaintiffs could claim that the provision was fundamentally unfair and therefore unenforceable or if they had to await the selection of an arbiter and then show actual bias.
Following the Sixth Circuit's approach, he Court held that plaintiffs need not wait: "'Actual bias' need not be proven in a pre-arbitration challenge to an arbitrator-selection provision, where . . . the mere fact of one party’s 'exclusive control over the pool of potential arbitrators from which the arbitrator is selected' renders the arbitrator-selection process fundamentally unfair." Applying the fundamental unfairness standard to the provision at issue, the Court found it fundamentally unfair.
The Circuit Court had orderd the parties to confer and agree upon an arbitral forum. If they could not do so, the Circuit Court would select an appropriate arbitral forum. The Supreme Court deemded this solution appropriate.
Tuesday, December 2, 2014
Ilya Shapiro at the Cato Institute posted last week about Century Exploration v. United States, decided by the Federal Circuit on March 14, 2014. Century Exploration (Century) acquired a lease for an oil field in the Gulf of Mexico. It paid $23 million up front, plus $50,000 per year of the lease. Century sought to protect itself against possible changes in applicable laws governing such leases through a contractual provision that no changes in law, other than reulgations created pursuant to the Outer Continental Shelf Lands Act (OCSLA), would affect Century's rights under the lease.
In the wake of the Deepwater Horizon fire, Congress passed the Oil Pollution Act (OPA), which required oil exploration companies to develop worst case scenarios and certify that they have reserves adequate to address such worst cases. Using a methodology required by the Interior Department, Century would have to have $1.8 billion on hand to deal with such a worst case. When Century could not prove that it had such funds, the government sought to cancel the lease. Century brought suit, relying on the contractual provision that protected it against regulatory changes, such as those promulgated pursuant to the OPA. Ilya Shapiro questions whether the directives from the Interior Department even qualify as government regulations, as they were sent via e-mail by "a civil servant in the Interior Department." The government filed for summary judgment, and both the Court of Federal Claims and the Federal Circuit sided with the government.
The Federal Circuit acknowledged that this case involves a lease provision nearly identical to that at issue in Mobil Oil Exploration & Producing Southeast, Inc. v. United States, 530 U.S. 604 (2000). However, in this case, the Federal Circuit found that the new regulations were actually promulgated pursuant to the OCSLA rather than the OPA. As such, they were within the carve-out to the contractual provision protecting Century against regulatory changes. In short, the Federal Circuit found this case distinguishable from Mobil Oil because of the nature of the regulations at issue.
To see in detail why the Cato Institute disgrees with that holding, you can have a look at its amicus brief. Ilya Shapiro provides the following summary:
First, it is vital to the smooth operation of the government and the health of the economy that private entities are confident that the government will honor its contractual promises. Federal spending on contracts has totaled roughly $500 billion annually since 2008—or 15% of the federal budget. If businesses and individuals have no reason to believe that the government will live up to its business obligations, they’ll have no reason to work with it. The Federal Circuit’s decision, which condoned the government’s flagrant breach of its contract with Century, sets a bad example and must be reversed.
Second, and quite simply, words have meaning—in the Constitution, in statutes, and yes, in contracts. A “regulation” is a formal rule adopted and issued by an authorized agency, in accordance with strict procedural protocols. It’s not a casual email. Giving informal government policy documents created by civil servants the full weight of the law is unconstitutional, undemocratic, and unsustainable.
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Monday, December 1, 2014
We start this week with international news: According to a report from Ghanaweb, Ghana is suing Nigeria for breach of a contract to supply natural gas. Under the West African Pipeline Project, Nigeria is to supply Ghana, Togo and Benin with gas, but it has supplied only about 40% of the gas contracted for. While the report is a bit vague, it seems that the agreement at issue has a $20 million liquidated damages clause, which Ghana thinks is far too low and does not provide an adequate incentive for Nigeria to perform.
In music industry news, the Daily Record informs us that songwriter Wendy Starland won a $7.3 million jury verdict against producer Rob Fusari, who had entered into a settlement with Lady Gaga in 2010. Fusari had claimed entitlement to $30.5 million for helping to launch Lady Gaga's career and contributing to her break-out hit album (are they still called that?). We reported about that suit here. Lady Gaga testified at the trial, at which Starland claimed that she and Fusari had a deal for splitting proceeds from Lady Gaga's career.
And yet another non-disparagement case: this one in the context of realtors. San Diego's ABC's affiliate, 10news.com reports that a realtor sought to arbitrate its breach of contract claim against a homeowner who posted a negative review on Yelp. The homeowner claims that the realtor demanded $8000 and the removal of the Yelp review in order to settle the claim. As Nancy Kim has pointed out, California has a law that will go into effect Jan. 1, 2015, such non-disparagement clauses will be unenforceable. There can also be fines of up to $10,000 for contractual provisions that violate the new law.
Cyanotech Corporation and Valensa International are competitors. They nonetheless entered into two agreements under which Cyanotech was to sell algae to Valensa so that it could extract from said algae an antioxidant compound. Both agreements were governed by arbitration provisions, except for carve-outs for litigation relating to breaches of confidentiality. Valensa sued Cyanotech for tortious interference and breach of a confidentiality agreement. The suit relates to the two parties' dealings with a third company, Mercola. In short, Valensa was selling antioxidant to Mercola, and when Cyanotech found out, it offered to provide its antioxidant at a lower price. Finding that the dispute fell within the carve-out, the District Court denied Cyantotech's motion to compel arbitration.
In U.S. Neutraceuticals, LLC v. Cyanotech Corp., the Eleventh Circuit reversed. Citing its decision in Terminix Int’l Co. v. Palmer Ranch Ltd. P’ship, 432 F.3d 1332 (11th Cir. 2005), the Eleventh Circuit held that the question of arbitrability must be determined by the arbiter. The District Court determined that the case was not arbitrable under the second of the two contracts between the parties. In so doing, said the Eleventh Circuit, the District Court decided an issue (which contract governs or do both govern) that only the arbiter could decide.
Judge Wilson dissented, agreeing with the District Court that the later agreement clearly governed because the later agreement is the one cited to in the complaint. Although there is a general presumption in favor of arbitration, that presumption does not apply to the qeustion of which agreement governs. Judge Wilson then carefully reviewed the terms of the later agreement and found that the District Court had correctly denied the motion to compel arbitration.
Friday, November 28, 2014
Jean Braucher was a giant in our field, and she has been a great friend to this blog, helping us launch our virtual symposium on Stewart Macaulay and contributing to our virtual symposium on Margaret Jane Radin's book, Boilerplate.
Bill Whitford posted the notice provided below on the Contracts Listserv, and he has given us permission to share it here. We will also share any comments that people might want to post with Bill, who will then pass them along to Jean's family.
It is my very sad obligation to inform the contracts community of the death of Professor Jean Braucher of the Arizona College of Law. Jean passed away on Tuesday, Nov. 25th. The cause of death was uterine cancer. Jean was 64 at her death. She was the daughter of the late Professor and Justice Robert Braucher, of the draftpersons of the Restatement, Second, of Contracts. She is survived by her husband and two children, among others.
Jean's academic career was outstanding. She was a prodigious scholar, writing most about contracts, consumer protection and consumer bankruptcy. She did original empirical work, many times, among other things. She was also an activist in many different venues. As a member of the American Law Institute, she took great interest in revisions of the Uniform Commercial Code and the Restatements, particularly as they impact consumer and software contracts. Here is a link to her CV:
Jean was a close friend, a fellow co-editor of the Macaulay et al. casebook (Contracts: Law in Action), my co-author on several other publications, and an intellectual collaborator and colleague for many years. I sometimes felt that we shared a brain, since we so often viewed issues similarly, but that was obviously not the case since over the years I learned a great deal from her work. And she also made many suggestions that helped me improve my own work. No words can adequately express my sense of personal loss at this untimely death.
Update: Bob Lawless has posted In Memoriam on Credit Slips, and quite a few people have added their own words of remembrance for Jean there.