Friday, March 18, 2016
Recently, I posted about an article-in-progress Lauren Henry Scholz, currently Resident Fellow and Knight Law and Media Scholar at the Information Society Project at Yale Law School. The article is now available on SSRN here. Algorithmic Contracts addresses topics that will be of great interest to many readers of this blog. She not only tackles the fiscally important development of technological automation of contracting processes, but she also wades into the significant implications of computer-facilitated formation for traditional contract doctrine. Here is her updated abstract accompanying the article:
Algorithmic contracts are contracts in which one or more parties use an algorithm as a negotiator to choose which terms to offer or accept, or as a gap-filler, allowing the parties to explicitly agree to the results of an algorithm as part of a contract. Such agreements are already an important part of today’s economy. Areas where algorithmic contracts are already common are high speed trading of financial products and dynamic pricing in consumer goods and services. However, contract law doctrine does not currently have an approach to evaluating and enforcing algorithmic contracts. This Article fills this significant gap in doctrinal law and legal literature.
This article provides a taxonomy of algorithmic contracts. This task is required because different types of algorithmic contracts present different challenges to contract law. While many algorithmic contracts are readily handled by standard contract doctrine, some require additional interpretive work. Algorithms can be employed in contract formation as either mere tools or artificial agents. This distinction is based on the predictability and complexity of the decision-making tasks assigned to the algorithm. Artificial agents themselves can be clear box, when inner components or logic are decipherable by humans, or black box, where the logic of the algorithm is functionally opaque. While courts and policy makers should be mindful of the specific characteristics of algorithmic contracts in their interpretation and enforcement, traditional contract law provides adequate tools to address most algorithmic contracts.
The algorithmic contracts that present the most significant problems for current contract law are those that involve black box algorithmic agents choosing contractual terms on behalf of one or more parties. The classical interpretation of contract doctrine, which justifies contract as an expression of human will, finds that these algorithmic contracts are not properly formed at law and thus cannot be enforced in contract. This is because where algorithms serve as quasi-agents to principals in making decisions the principals have not manifested the intent to be bound at the level of specificity that contract law requires. Algorithms are not persons, and so cannot consent beyond the scope of the principal’s manifested objectives, as true agents can. Furthermore, policy considerations of efficiency and fairness in light of technological trends also supports presumptive exclusion of black box algorithmic contracts from contract law.
However, even some black box contracts may be enforceable. This Article proposes a model for determining whether such agreements may be enforced. The approach evaluates the fit between the black box algorithm’s actions and the objectively manifested intent of the party using it to determine whether a contract can be implied. This approach draws inspiration from and contributes to the literature on artificial agents and implied-in-fact contract doctrine. Where a contract cannot be implied, restitution law and tort law allow justice to be done as between the parties. This offers a predictable approach to the enforcement of black box algorithmic contracts at law while promoting efficiency and fairness concerns in a manner traditional contract law cannot.
Common law courts and state legislatures should update their approach to algorithmic contracts. The American Law Institute and other groups that seek to promote best practices in state private law should update contract and commercial law statements to expressly address algorithmic contracts. Businesses should strengthen their positions in negotiations as well as in court by clarifying their objectives in using algorithms. Giving businesses the incentive to make their objectives clear will aid in ascribing liability in all areas of law and promote responsible use of algorithms.
Personally, I’m very sympathetic to the suggestion that the computer-enhanced contracts addressed by Scholz are ripe for their own variations on standard interpretive rules. Traditional doctrine did not contemplate and is not necessarily adaptable to the technological possibilities that are now upon us. This looks to be an exciting and relevant topic. You can view this article and Lauren Scholz’s other scholarship here.
Thursday, March 17, 2016
As more and more retail shopping seems to be shifting from brick-and-mortar stores to both well-known and perhaps more shady online retailers, the need to read the online terms and conditions very carefully is obvious. As we have discussed here before, this is hard enough to do when these are phrased in legally and linguistically challenging ways. But what to do when a company seemingly tries to come across in a lighthearted and funny way, but is still dead serious about the underlying legal messages? Some people have found out that this can present almost insurmountable obstacles.
Take, for example, outdoor clothing and gear provider 123Mountain in Colorado. (H/t to Professor Miriam Cherry of the Saint Louis University Law School for bringing this story to the attention of the Contracts Listserv.) Its linguistically very poorly drafted terms and conditions contains statements such as “[w]e love all of our Users, especially those that buy lots of stuff from us,” “[y]ou understand that 123mountain is good, but not perfect. Therefore, we cannot and do not guarantee that the Site will be free of [sic] infection from viruses or other mean computer stuff…,” “[y]ou acknowledge and agree that there are mean people in the internet world…,” “[y]ou are not allowed to resale [sic] our product as commercial activity 9 mean [sic] your Canada Goose, Nobis, Moose knuckle and Parajumper is for you not to resale at your Russian cousin) [sic],” and “[a]fter all, nobody, except my friend's cat Misse is perfect, and even she sometimes has an accident … 123mountain shall have the right to refuse or cancel any orders placed for that product(s)[sic] listed at the incorrect price. Sorry.” Or how about this one: “ We will accept pre-orders for Canada Goose, Nobis, Moose knuckle and Parajumper. Please keep in mind that it can take up to 24 months to fulfill a preorder for Canada Goose, Nobis, Moose knuckle and Parajumper.” See the complete terms and conditions here.
Two years for an item of clothing? I would personally not be sufficiently interested in waiting two years for any kind of clothing, and certainly not a mere sports jacket. Many other products are available that will do just fine, thank you.
As reported in detail here, a 123Mountain customer came to the same conclusion the hard way himself. In early November 2015, he placed an order for a jacket with “two-day shipping.” When he still had not received the jacket a week later, he contacted the company and was told that he could expect the jacket within slightly less than three weeks. When inquiring about the impression that he had gotten from the website that the item was in stock, he was told that the item was “available for order” rather than actually “in stock.” A full month later, he was told that the item would still ship no later than at the end of November …. 2017. Yes, you read that right: two years later. When not paying for the invoiced amount, 123Mountain sent a collection agent after the customer!
For good reason, it seems, 123Mountain only has one star on Yelp.com, the lowest possible ranking. The Lakewood, Colorado, Police Department, has apparently received nine other complaints against 123Mountain since 2013, but “the knotty terms and conditions that customers agreed to when making purchases online made it impossible to charge the couple with a crime.”
So, not only can some companies often get away with contractual arguments for years, but prosecutors also find it “impossible” to charge companies with crimes, even in cases such as the above. That’s a very sad state of affairs for online contracting, business ethics, and customer service. Greed and selfishness seem to be the order of the day in many cases.
Thankfully, major credit card companies seem more willing than before to help their customers in cases like this. The “fault” is not as readily placed on the buyer as before, at least judging from anecdotal evidence and personal experience. This, of course, does not guarantee an ultimately positive outcome for defrauded customers. Online review sites such as Yelp are also somewhat helpful in this context, but in times when online review websites are also known to suffer from their own credibility problems due to allegedly fake reviews, the situation is factually and legally troublesome for online buyers. This is even more so in times when people often resort to buying even such things as cat litter and kitchen towels online to, among other things, save the hassle of carrying bulky items home themselves. Online shopping is here to stay. Amazon has even announced plans to deliver packages by drones minutes after ordering. It seems that the law needs to rapidly develop to address the many legal issues that have arisen and continue to arise in the online contracting context.
Ideas on how to do so? Comment below!
Wednesday, March 16, 2016
Consent is a foundational concept in contract law and permits actions that might otherwise be illegal or legally questionable. Consent has also become a focal point in discussions about privacy and data collection. The boundaries of what’s acceptable when it comes to data collection are ill-defined. Generally, at least in the U.S., consent is used to mark those boundaries more clearly. Because consent is typically in the form of notice of a wrap contract (which nobody reads), it’s usually constructive and merely a formality. Two recent developments challenge the notion that contractual consent suffices in the context of data collection.
The first in in the Netherlands. (Can I just now take the opportunity now to say Thank you to the Europeans for trying to fight the data sucking coming from Silicon Valley?) The Netherlands’ Data Protection Authority recently ruled against two companies that wanted to use “wearables” for monitoring their employees, including to monitor their sleep patterns. The agency said that this was not allowed even with explicit permission. That seems to me a commonsense ruling given that few employees may feel free to decline to grant such permission and so any “explicit permission” might not be entirely voluntarily.
The second development is the Federal Communications Commission’s proposed rules to require internet service providers to get express consent (opt-in) before sharing information about consumer usage with third parties. The internet providers would still be able to share the information with affiliates for marketing purposes unless consumers opt-out. Expect the opt-out process to be so obscure that most consumers will be unaware of the option or so burdensome that few will bother.
Unfortunately, the FCC’s proposals won't cover the major data sucking companies like Google and Facebook. They will still be able to scan your emails and your contact lists – with your “consent” of course.
We now reach the last of our series of posts highlighting the proceedings at the KCON XI: The Eleventh International Conference on Contracts, with videos covering the final concurrent sessions held on Saturday, February 27, 2016. This ending is a worthwhile moment point to note that KCON XII is set for next February at Southwestern Law School in Los Angeles. I hope we will get to see many of you in southern California next year! Details will certainly show up in this space.
International Contract Law
- Moderator: Mark Burge, Texas A&M University
- Pablo Lerner, Ramat Gan School of Law, Constructive Trusts in Israeli Land Contracts – Contract as Key
- Dr. Lachmi Singh-Rodrigues, University of West of England, Avoidance of the Contract and the Seller’s Right to Cure Under the CISG
- Qi Gao, Beihang University School of Law, Consumer Protection under Chinese Contract Law
- Watch the panel video
Public Policy Considerations in Contract Law
- Moderator: David A. Grenardo, St. Mary’s University School of Law
- Wayne Barnes, Texas A&M University, Arrested Development: Rethinking the Age of Majority in the 21st Century
- Mayanna Dellinger, University of South Dakota, Contracts to Kill Endangered Species: Public Policy Arguments
- Joan MacLeod Heminway, The University of Tennessee College of Law, The LLC Operating Agreement and its Relation to Contract
- Hao Jiang, Tulane University, Freedom of Contract Under State Supervision
- Watch the panel video
Tuesday, March 15, 2016
Here, we continue our series of posts highlighting the proceedings at KCON XI, which are available courtesy of our friends at St. Mary's University School of Law. This set comes from the second concurrent sessions held on Saturday, February 27, 2016. You can view each video by clicking on the link following the applicable list of speakers.
- Moderator: Dov Waisman, Southwestern Law School
- Danielle Hart, Southwestern Law School, Contract Law & Ideology
- Creola Johnson, The Ohio State Univesity Moritz College of Law, Contractual Duplicity: Creditors Force Consumers into Arbitration While Exploiting the Criminal Justice System to Arrests Consumers Who Cannot Pay
- Hila Keren, Southwestern Law School, Scalia on Contracts: The Dissemination of Neoliberal Logic
- Matthew Titolo, West Virginia, Neoliberalism’s Fine Print
- Watch the panel video
- Moderator: Colin P. Marks, St. Mary’s University School of Law
- Daniel Barnhizer, Michigan State University College of Law, Contracts and Automation: Exploring the Normativity of Codability
- Stacy-Ann Elvy, New York Law School, The Internet of Things (IOT) and Bargaining Disparity
- Max N. Helveston, DePaul University, Regulating the Digital Marketplace
- Watch the panel video
Monday, March 14, 2016
H-2B visas provide for foreign citizens to work temporarily for American businesses in non-agricultural roles. However, these visas can sometimes lead to abuse of the foreign citizens working under them, as was alleged in a recent case out of the Eighth Circuit, Cuellar-Aguilar v. Deggeller Attractions, No. 15-1219. Also blogged about here from a workplace law point of view, the case involved a group of nineteen workers who had been employed in a traveling carnival. The workers alleged, among other things, that their employer had breached their employment contracts by paying them below the minimum wage.
The district court found that there had been no contract between the workers and their employer, basing its decision on the federal regulations governing the H-2B visa program. However, the appellate court said that was the incorrect place to look for guidance on whether a contract existed. Rather, the existence of a contract is governed by state common law, and in this case there was enough evidence of a contract to survive a motion to dismiss. The workers received offers of employment from Deggeller and then traveled to the United States in acceptance of those offers, which was enough to establish a contractual relationship. The court then used the federal regulations governing the H-2B visa program to fill in the particular terms of the contract, which included a requirement that the employer pay no less than the minimum wage. Therefore, the workers' allegations that the employer had breached this requirement established a valid contract cause of action.
Allowing the workers to proceed on a contract theory may seem like a positive development for similarly situated workers who might find themselves taken advantage of. However, I had the pleasure recently of hearing Prof. Annie Smith from the University of Arkansas School of Law speak on the prospect of mandatory arbitration clauses being applied to guestworkers. As we all know, mandatory arbitration clauses are currently in major vogue, and Prof. Smith expressed concern that mandatory arbitration would be detrimental to already vulnerable guestworkers. The decision here might encourage employers like Deggeller to enter into more formal contracts that would include arbitration clauses. If they're going to be found to be in a contractual relationship anyway, presumably the employers would want to exercise control over the terms of that contractual relationship.
Video recordings of most of the proceedings at KCON XI are available courtesy of our friends at St. Mary's University School of Law, and we are pleased to highlight and share those with you here. This set comes from the first concurrent sessions held on Saturday, February 27, 2016. You can view each video by clicking on the link following the applicable list of speakers.
- Moderator: Jennifer Martin, St. Thomas University
- Shawn Bayern, Florida State University, The Failure of Law and Economics
- Sidney DeLong, Seattle University, Jephthah’s Daughter and Morally -Efficient Breach
- Orit Gan, Sapir College, Peres Academic Center, The Many Faces of Contractual Consent
- Val D. Ricks, South Texas College of Law, Contract Doctrine as Contract Theory
- Watch the panel video
- Moderator: Nancy Kim, California Western School of Law
- Yehuda Adar, University of Haifa, Pre-Contractual Disgorgement
- Moshe Gelbard, Netanya Academic College School of Law, Pre-Contractual Disgorgement
- Roger Halson, University of Leeds, UK, Liquidated Damages and “Penalty” Clauses in the UK: A New Approach
Sunday, March 13, 2016
Video recordings of most of the proceedings at KCON XI are available courtesy of our friends at St. Mary's University School of Law, and we are pleased to highlight and share those with you here. This set comes from the presentation on Friday, February 26, 2016, of the conference's Lifetime Achievement Award to Professor Peter Linzer of the University of Houston Law Center. In keeping with the theme of honoring Professor Linzer, the presentation is paired with a panel that he moderated on Saturday, February 27, 2016 on the Consumer Financial Protection Bureau. You can view each video by clicking on the link following the applicable description.
Lifetime Achievement Award Ceremony Honoring Peter Linzer (held at the Plaza Club)
- Moderator: Peter Linzer, University of Houston
- Richard Frankel, Drexel University
- Ramona Lampley, St. Mary’s University School of Law
- Jean Sternlight, University of Nevada, Las Vegas
- Watch the panel video
Saturday, March 12, 2016
Video recordings of most of the proceedings at KCON XI are available courtesy of our friends at St. Mary's University School of Law, and we are pleased to highlight and share those with you here. This set comes from the third concurrent sessions held on Friday, February 26, 2016. You can view each video by clicking on the link following the applicable list of speakers.
- Moderator: Daniel Barnhizer, Michigan State University College of Law
- Mark Edwin Burge, Texas A&M University, Contract Law in Emerging Payment Systems
- Catherine Christopher, Texas Tech University, Virtual Currency
- Angela Walch, St. Mary’s University School of Law, Blockchains as Infrastructure
- Watch the panel video
- Moderator: Danielle Hart, Southwestern Law School
- Nadelle Grossman, Marquette University, Transactional Contracts and Textbook Simulation Discussion
- Russell Korobkin, UCLA School of Law, Bargaining with the CEO: The Case for “Negotiate First, Choose Second”
- Jane Winn, University of Washington, Framework Contracts and the New Managerial Revolution
- Watch the panel video
Friday, March 11, 2016
I bet we'd have a lot fewer people fighting arbitration clauses if arbitration = tweeting J.K. Rowling.
As reported around the Internet, a student and her high school science teacher entered into a contract concerning whether Rowling would write another Harry Potter book. The contract called for the loser to declare the victor "Mighty" (a much more charming form of consideration than payment of a sum of money).
The article (from last month) reports that there were two possible Harry Potter pieces of creativity to be contended with. One is the prequel movie Fantastic Beasts and Where to Find Them. Rowling wrote the original textbook (which already existed at the time the contract was entered into and so isn't part of the dispute) and also wrote the screenplay for the movie, which could have been in dispute. However, the article points out that Rowling wrote the screenplay to the movie, and the contract concerns a Harry Potter "novel." Even if you wish to make an argument that screenplays should have been included in the definition of the contractual term "novel," it seems like Fantastic Beasts would fail because it does not "feature the character Harry Potter as part of the main plotline," as required by the contract. (At least, so I assume from what I know about the movie so far.)
The other piece of Harry Potter creativity being debated under the contract, and the one for which Rowling was called in to arbitrate, concerned Harry Potter and the Cursed Child, a play focusing on Harry as an adult and his relationship with his children, especially his son Albus. Cursed Child raised issues: It was a play but it is being billed as "the eighth story," the script will be published in text form, and the website claims it's "based on an original story by J.K. Rowling, Jack Thorne and John Tiffany." It does seem as if, considering this is a "play," even its published script would not be considered a "novel" under the contact. However, the student who was a party to the contract sought further clarification from Rowling.
Using the convenient method of Twitter, the student explained her contract to Rowling and asked for a decision on whether Cursed Child would fulfill the terms of the contract. Rowling responded, confirming that Cursed Child is a play and also noting that, while she had contributed to the story, Jack Thorne was the "writer" of the play.
The student was pleased that her clear contractual terms meant that she was still the victor, but also noted that the term of the contract had not yet run. Since the publication of the article and the arbitration of the Cursed Child dispute, J.K. Rowling has announced a new set of stories to be collected under the title History of Magic in North America. So far, these stories also seem not to fulfill the terms of the contract, as they seem more like "extra books" rather than "an entirely new book," and they do not seem to feature Harry Potter at all. However, Rowling seems to be dancing right around the edges of this contract's terms.
If a recording artist enters into a personal services agreement with a record company that, among other things, contains a promise that the artist will “look solely to [a corporate version of the music band] for the payment of my fees and/or royalties … and will not assert any claim in this regard against [the record company],” has the artist then waived his/her right to sue under the contract if the band’s corporated version does not do so? Probably not, according to the Ninth Circuit Court of Appeals. At least this is a factual inquiry that cannot be resolved on a 12(b)(6) motion. The case is Dale Bozzio v. EMI Group Limited, et al.
In the 1980s, Dale Bozzio was the frontwoman of the band Missing Persons. The band incorporated as “Missing Persons, Inc.,” as is normal in the entertainment industry, so that any contracts with entertainment companies would be signed by one legal entity and not all the individual band members. The corporation, however, was suspended under California law. Bozzio recently sued Capital Records for royalties that she believed were still owed to her notwithstanding the suspension issue. Capitol Records argued that Bozzio waived any right to sue Capitol – including the right to sue as a third-party beneficiary – by signing the “look solely to” artist declaration mentioned above. This in spite of other contract clauses stating, for example, that if the band corporation should case to exist, the individual artists would assume the corporation’s contractual obligations. The contract also stated that Capitol Records had agreed to “pay Artist all royalties and advances required to be paid….” Bozzio argued that the “look solely to” clause was intended to prohibit an artist from asserting a claim against Capital Records only in cases of a dispute among individual band members over the internal allocation and distribution of royalties that have already been paid for by the record label.”
The court found that nothing in the record foreclosed this latter argument and that the issue should be resolved by a trier of facts. Under California law, third-party beneficiaries to a contract “made expressly for the benefit of a third party, may be enforced by him[/her] at any time before the parties thereto rescinded it.” This quite clearly seems to cover Bozzio’s case. The argument that artists should look to their own companies for royalty payments from the entertainment companies with which they have “signed” is not only highly circular, it also flies in the face of logic. This again goes to show the craftiness of litigating attorneys and their client’s willingness to try almost anything to win a case whether warranted or not.
Video recordings of most of the proceedings at KCON XI are available courtesy of our friends at St. Mary's University School of Law, and we are pleased to highlight and share those with you here. This set comes from the second concurrent sessions held on Friday, February 26, 2016. You can view each video by clicking on the link following the applicable list of speakers.
Innovations in Teaching and Mentoring
- Moderator: Robert D. Brain, Loyola Law School Los Angeles
- Keith A. Rowley, UNLV William S. Boyd School of Law
- Frank G. Snyder, Texas A&M University
- Ben Templin, Thomas Jefferson School of Law, The New Pedagogy: Here’s the ball. Let’s play catch
- Watch the panel video
Contract Law in an Administrative and Regulatory Context
- Moderator: James W. Fox Jr., Stetson University College of Law
- Hazel Beh, University of Hawai’i, Insurance as the AntiContract
- David Friedman, Willamette University College of Law, Refining Advertising Regulation
- Peter Marchetti, Texas Southern University, Thurgood Marshall School of Law, Bankruptcy “Clawback” Provisions: Congress Needs to Amend Section 546
- Chris French, Penn State Law, The Illusion of Insurance Contracts
- Watch the panel video
Thursday, March 10, 2016
Video recordings of most of the proceedings at KCON XI are available courtesy of our friends at St. Mary's University School of Law, and we are pleased to highlight and share those with you here. This set comes from the first concurrent sessions held on Friday, February 26, 2016. You can view each video by clicking on the link following the applicable list of speakers.
Professorial Professions: Creating a Student-centered Contracts Classroom
- Moderator: Hazel Beh, University of Hawai’i
- Charles Calleros, Arizona State University
- Myanna Dellinger, University of South Dakota
- Frank G. Snyder, Texas A&M University
- Adrian J. Walters, Chicago-Kent College of Law
- Deborah Post, Touro Law Center, Politically Conscious Pedagogy
- Watch the panel video
What You Thought You Knew About Remedies in Sales Transactions May Not Be True: Highlights in Article 2 Remedies and Contracting for Limitations
- Moderator: Mark Burge, Texas A&M University
- Sidney DeLong, Seattle University, The Notice of Breach Dilemma: Conflict and Cooperation in Eastern Airlines v. McDonnell Douglas
- Nancy Kim, California Western School of Law, Teaching UCC Remedies from Concept to Clause
- Colin Marks, St. Mary’s University School of Law, On-Line and As Is
- Jennifer Martin, St. Thomas University, Opportunistic Resales and the UCC
- Watch the panel video
The Weekly Top Ten returns after an administrative slippage last week. Thank you for your patience!
|1||548||Simplification of Privacy Disclosures: An Experimental Test
Omri Ben-Shahar and Adam S. Chilton
University of Chicago Law School and University of Chicago - Law School
|2||339||Contract Law and Ukraine's $3 Billion Debt to Russia
Mark C. Weidemaier
University of North Carolina (UNC) at Chapel Hill - School of Law
|3||165||Contracting for the ‘Internet of Things’: Looking into the Nest
Guido Noto La Diega and Ian Walden
Buckinghamshire New University, Department of Law and Queen Mary University of London, School of Law
|4||142||From Promise to Form: How Contracting Online Changes Consumers
David A. Hoffman
Temple University - James E. Beasley School of Law
|5||132||Beyond Relational Contracts: Social Capital and Network Governance in Procurement Contracts
University of Chicago - Law School
|6||123||The Nature of Vitiating Factors in Contract Law
University of Oxford – Faculty of Law
Shawn J. Bayern
Florida State University - College of Law
|8||92||Disgorgement of Profits in Canada
Lionel Smith and Jeff Berryman
McGill University, Faculty of Law, Paul-André Crépeau Centre for Private and Comparative Law and University of Windsor - Faculty of Law
|9||87||Global Commercial Law between Unity, Pluralism, and Competition: The Case of the CISG
Gralf-Peter Calliess and Insa Buchmann
University of Bremen - Faculty of Law and Max Planck Institute for European Legal History
|10||72||Contracting Out of Fiduciary Duties
University of Hong Kong - Faculty of Law
Tuesday, March 8, 2016
Outsourcing work to locations where employees earn even less than many in the United States do has already become commonplace. Now comes the corporate idea of “taskifying” work to people eager to obtain some work, even if just in bits and pieces. “Crowdwork,” as it is known, lets companies use online platforms such as Amazon Mechanical Turk or www.fiverr.com to find people willing to do routine tasks such as drafting standardized reports, filing forms, coordinating events and debugging websites, but also much more complex ones such as designing logos, ghostwriting, etc. Many of today’s work tasks can be broken up into bits and farmed out online, and many employers are already doing so. Could this also come to encompass routine lawyerly work? Quite possibly so. Researchers at Oxford Univesity’s Martin Programme estimate that nearly 30% of jobs in the U.S. could be organized in a crowdwork format within just twenty years.
In this context where few regulations or laws yet govern the contracts, workers would no longer be either “employees” or “contractors,” (which has already proved to be troublesome enough for companies such as Uber), but rather “users” or “customers” of the websites that enable, well, workers and companies (“providers”) to find each other. These transactions would not be governed by employment contracts, but by online “user agreements” and “terms of service” that currently resemble software licenses more than employment contracts. There are few, if any, legal obligations towards employees in the current legal landscape that also offers employees very few means for obtaining and enforcing something so basic pay for the work performed.
Employers today require a flexible and eager workforce that is constantly on the ready and that can maybe even work 24 hours a day. Crowdworkers provide just such availability and demand very low salaries because the name of the game seems to be to compete on prices. The problem is that workers, to have a decent life, need the opposite: stability, higher salaries than what is often currently the case, retirement, salary, and medical benefits. Do these come with crowdwork tasks? Sadly, no.
What could go wrong? Consider this case: Mr. Khan, an Indian man living in India, was eager to make some money. He decided to try Amazon’s Mechanical Turk. On good days, he would make $40 in ten hours; more than 100 times what his neighbors made as farmers. He even outsourced some of his own work to a team that he supervised. This must have violated Amazon’s Participation Agreement as all of a sudden, Mr. Khan received the message that his account was closed and “could not be reopened.”Amazingly, Mr. Khan was also notified that “[a]ny funds that were remaining on the account are forfeited, and we will not be able to provide any additional insight or action.” Talk about lopsided contracts! Using a “Contact Us” link, Mr. Khan was eventually able to get through to Amazon, which simply referred him to a contractual clause stating that Amazon had the “right to terminate or suspend any Payment Account … for any reason in our sole discretion.”
With these types of ad-hoc online agreements, people who should arguably at least have been classified contractors if not, as in some current cases, employees. Of course, this only pertains to U.S. law, but it is important to note that not all jobs are “taskified” to foreign workers. Thus, employees risk being “stiffed” twice: once for losing their jobs to cheaper folks willing to be crowdworkers and, if they chose to work under such contracts and don’t do exactly as the “provider” requires in their apparent almost exclusive discretion, not being paid and not having any effective means of enforcing their contracts. An undisputedly troublesome development both in this nation and beyond.
How could at least the issue with medical and other employee benefits be solved? It might via universal payment systems such as those typical in EU nations. There, when employees change jobs, their vacation time, medical and other benefits travel remain in a centrally administered pool (whether government administered or privately so with tough regulations in place), they do not become discontinued with the employment only to have to be restarted under other plans as typical in this country. This system could potentially be transferred to the crowdwork arena. A percentage of each job (sometimes even called “gigs”) could be centra lly administered in a more employee-centric version than the still American employer-centric solutions. Such systems are, of course, largely seen here in the U.S. as “socialist” and thus somehow inherently negative.
As if the employment situation for workers around the world is not already bad enough, add this new development, called “a tsunami of change for anyone whose routine work can be broken into bits and farmed out online.” Our students’ future work tasks may, at least in the beginning of their careers, constitute just such work. This is a worrying development as workers in our industry and in this country in general are not seeing improved working conditions in general. Crowdworking could add to that slippery slope.
Monday, March 7, 2016
As Stacey writes just below this post, much is happening in the arbitration arena currently.
In December, the United States Supreme Court ruled that the 1925 Federal Arbitration Act pre-empts state law. Thus, when parties have executed agreements calling for arbitration rather than court resolutions, the arbiration clause will be upheld. The case was DirectTV, Inc. v. Imburgia, No. 14-462.
In the case, Imburgia’s contract stated that “[i]f ... the law of your state would find this agreement to dispense with class arbitration procedures unenforceable, then this entire Section 9 [the arbitration section] is unenforceable.” http://www.supremecourt.gov/opinions/15pdf/14-462_2co3.pdf
The Supreme Court noted that when DIRECTV drafted the contract, the parties likely believed that the words “law of your state” included California law that then made class-arbitration waivers unenforceable. But the Court’s subsequent holding in AT&T Mobility LLC v. Conception found that the Federal Arbitration Act pre-empts state law on the issue. Thus, parties cannot contractually bind themselves to invalid state law. When they refer to “state law,” this means only valid state law.
These rulings favor businesses, not consumers. This is so particularly so in cases between consumers and banks or credit card companies. A 2007 report found that over four years, arbitrators ruled in favor of the financial institutions in no less than 94% of the cases. Of course, in the typical take-it-or-leave it style contract, consumers have the choice only of agreeing to arbitrate or not getting the desired service.
As for the belief that arbitration saves scarce judicial resources, it is noteworthy that businesses file four times as many lawsuits as individuals. “It is hard to imagine any company giving up its own right to sue another company in a business dispute.” Double standards abound here.
Meanwhile, in early February, Senators Leahy and Franken introduced the Restoring Statutory Rights Act. This would create an exception in the Arbitration Act for disputes involving individuals and small businesses. The only way individuals would enter into arbitration is if they agreed to do so after the dispute has been filed. That’s very different from the current process, which automatically shunts all customer disputes into binding arbitration.
The Consumer Financial Protection Bureau is also considering a ban in mandatory-arbitration provisions in contracts for credit cards and other financial services. The Centers for Medicare and Medicaid Services is looking to do the same in relation to nursing home contracts.
Acts and regulations are highly warranted in this context. We know where the Supreme Court currently stands on the issue. We do not know where it will go with a new justice soon to be appointed, but judicial branch action in this area may not be forthcoming any time soon.
People keep challenging arbitration provisions, and they keep losing. In this instance, a case out of Washington called Marcus & Millichap Real Estate Investment Services of Seattle, Inc. v. Yates, Wood & MacDonald, Inc., No. 73199-8-I.
This time, the parties were both voluntary members of the Commercial Broker's Association (the "CBA"), the bylaws of which contained a clause that CBA members agreed to arbitrate disputes with each other according to the CBA's arbitration procedure. Neither party ever signed any sort of membership agreement to belong to the CBA, which Marcus focused on in its argument that the arbitration provision therefore wasn't enforceable. Marcus argued that, without a signed agreement, there was no evidence that it had manifested assent to the arbitration provision. However, well-established Washington law held that membership in the voluntary organization was evidence enough that Marcus and Yates assented to abide by its bylaws. There was no requirement that there be a signed agreement.
Marcus didn't confine its arguments to just asserting that there should have been a signed agreement, however. Marcus then tried to argue that it wasn't even a member of the CBA, because of the fact that no one had been able to produce a membership agreement signed by Marcus. This was a bad move on its part and lost it a lot of credibility. The court pointed out that Marcus had paid all of the CBA's required fees and dues since 1993 and had in fact on two previous occasions taken advantage of the CBA's arbitration tribunal to resolve disputes, a procedure only available to CBA members. The court also pointed out that, despite testifying that he did not believe Marcus was a member of the CBA, Marcus's regional manager had routinely provided other brokers with Marcus's "CBA Office ID" number.
Marcus was willing to fight hard to keep this dispute out of arbitration, to the point of having to be scolded by the court for "prevaricating." At the point when that is happening, I'm not sure winning the case and staying in front of that judge is what you want!
Friday, March 4, 2016
I am pleased to be able to post the following from guest blogger Creola Johnson of the Ohio State University Moritz College of Law:
“His promises are as worthless as a degree from Trump University,” said Mitt Romney during a speech denouncing Donald Trump’s candidacy for the presidency. This statement has prompted additional inquiries into lawsuits filed against Trump University by New York Attorney General Eric Schneiderman and others. (See Petition from New York v. The Trump Entrepreneur Initiative LLC.)
In a class-action lawsuit, many attendees of Trump University alleged that they paid as much as $35,000 to be personally mentored in learning how to earn millions investing in real estate. Despite numerous attempts by lawyers for the Trump defendants to get these lawsuits to dismiss, courts have given the green light for the lawsuits to continue against the Trump defendants. See, e.g., Makaeff v. Trump Univ., LLC, No. 10-CV-940-IEG (WVG), 2010 WL 3988684 (S.D. Cal. Oct. 12, 2010) (refusing to dismiss claims against the for-profit Trump program on educational malpractice grounds because the court was not convinced “Trump University” was “an educational institution to which this doctrine applies.”). For the most recent decision permitting Mr. Schneiderman’s case to proceed, go to: http://www.courts.state.ny.us/courts/AD1/calendar/appsmots/2016/March/2016_03_01_dec.pdf.
What can we say for sure at this juncture about the lawsuits? First, “Trump University” was not a university. There are numerous educational standards and laws that must be complied with for an institution to legitimately claim to be a university. The question then becomes: did the people running Trump’s real estate program (the Trump Program) make promises that arose to level of being a contract. For example, the consumer-plaintiffs alleged that the Trump Program promised that the instructors and mentors running the program would be “hand-picked by Donald Trump.” However, this promise was allegedly breached because most of the instructors and mentors were unknown to Mr. Trump and that they didn’t actually teach any real estate techniques.
We’ll have to wait for a court or jury’s finding regarding what promises were actually made by Donald Trump and the people running the Trump Program. The good news for the plaintiffs and Mr. Schneidermann is that they do not have to prove the existence of a contract. New York, along with every state, has laws that prohibit businesses from engaging in deceptive and unfair business practices.
Consumers should be leery of any language that appears to promise an educational outcome—e.g., “you will earn a six-figure salary after graduation.” While a state’s attorney general, such as Mr. Schneiderman, has the authority to make businesses stop deceptive practices, the attorney general may not be able to get back the money consumers have lost. If it sounds too good to be true, it probably is! For an in-depth discussion of deceptive degrees, see my article, Degrees of Deception: Are Consumers and Employers Being Duped by Online Universities and Diploma Mills?
President’s Club Professor of Law,
The Ohio State University Moritz College of Law
Wednesday, March 2, 2016
This case out of California, Gilkyson v. Disney Enterprises, Inc., B260103, involves the song "The Bare Necessities," which, as you can see from the above, is readily available on YouTube. The song was written by Terry Gilkyson (this might come up in a trivia competition someday, you never know). His adult children are the plaintiffs in this case.
In the 1960s, Gilkyson wrote several songs for Disney pursuant to a work-for-hire contract under which Disney was deemed the author and owner of the songs and Gilkyson was paid $1,000 per song together with ongoing royalties for certain licensing. The contract specifically excluded royalties for use of the songs in "motion pictures, photoplays, books, merchandising, television, radio and endeavors of the same or similar nature." Disney has paid royalties on the song to Gilkyson and his heirs but Disney has never paid royalties for use of the songs in any audiovisual medium, including DVDs. The Gilkyson heirs disagree with Disney's interpretation of the contract and believe that they are entitled to royalties for use of the songs on VHS tapes and DVDs. Disney argues that the four-year statute of limitations on breach of contract actions bars all of the Gilkysons' claims, because all of the VHS tapes and DVDs complained about were first issued sometime prior to 2007. Therefore, according to Disney, Gilkyson should have brought this claim by 2011, not, as it did, in 2013.
Disney loses this argument, however, based on the continuous accrual doctrine: "[E]ach breach of a recurring obligation is independently actionable." Basically, California law interprets the contract with Disney as being divisible, with each breach of that contract actionable and subject to its own statute of limitation period. Therefore, the court concluded that the Gilkysons could seek recovery of the royalties that were due for a period beginning four years from the filing of their complaint (so, from 2009 onward). According to this court, the California state court jurisprudence on this appears to be clear (although note that, at the trial court level, this case was dismissed without applying the continuous accrual doctrine). Disney pointed to a Central District of California case from 2001 that rejected the plaintiff's continuous accrual doctrine argument, but this California state court noted that it did so without any citation to any California case and that this court disagreed with that case's conclusion.
So it's on to the next step for these parties: fighting over the interpretation of the contract. Or settlement.