ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Monday, February 29, 2016

Arbitration Provisions and Exotic Dancers

Are arbitration provisions binding against exotic dancers? Well, if you're wondering, in this Connecticut case, Horrocks v. Keepers, Inc., CV156054684S (behind a paywall), the answer is yes. 

The plaintiffs here filed the lawsuit alleging that they were employees, not independent contractors as the gentleman's club maintained, and as such the club had violated plaintiffs' legal rights as employees, including failing to pay minimum wage. The club moved to stay the proceedings arguing that it had signed an entertainment lease agreement with all of the dancers that required binding arbitration to resolve disputes. 

The plaintiffs' main argument was that the entire entertainment lease agreement was void because it had an illegal purpose in seeking to implement the club's violation of labor laws as alleged in the plaintiffs' complaint. Because the entire agreement was void, the argument went, the arbitration clause wasn't enforceable. In the alternative, the plaintiffs argued that the arbitration provision was unconscionable. 

On the plaintiffs' first point, the court concluded that the legality of the overall entertainment lease agreement was a matter for the arbitrator to decide. According to Connecticut precedent, the courts' job is only to determine if the arbitration clause is valid; every other issue is left to the arbitrator. Therefore, all of the arguments about the illegality of the entertainment lease agreement were left to the arbitrator, and the court focused its analysis on the alleged unconscionability of the arbitration provision. 

We've seen this story before. And, in fact, courts have seemed pretty determined to find arbitration provisions enforceable, even when other parts of the contract were unconscionable (or, as here, where it was questionable whether the contract was enforceable at all). There was actually Connecticut precedent about another set of exotic dancers suing another gentlemen's club with similar allegations, and in that case, D'Antuono v. Service Road Corp, 789 F. Supp. 2d 308 (D. Conn. 2011), the court upheld the arbitration provision against attacks of unconscionability. The court in this case follows the precedent, finding this case indistinguishable from D'Antuono.  

The court here allows for the possibility that this arbitration clause was part of an unenforceable adhesion contract presented in bad faith with a knowing illegal purpose, but says that alone isn't enough to deny enforcement of the arbitration clause, because that would only be procedural unconscionability. As far as substantive unconscionability went, the cost and fee shifting provisions provided in the arbitration clause weren't unreasonable, and the class action waiver included in the arbitration provision was also not unconscionable according to precedent: "Requiring the plaintiffs to pursue their claims individually is not an ineffective vindication of their rights." 

I admit that I'd never really given a lot of thought to class action waivers, but it does seem odd to assert that class action waivers do not harm the plaintiffs' ability to vindicate their rights. After all, class actions are frequently understood to exist to correct the problem that, sometimes, individual pursuit of claims isn't effective. 

At any right, individual pursuit through arbitration is what these plaintiffs are left with. 

February 29, 2016 in Commentary, Recent Cases, True Contracts | Permalink

Wednesday, February 24, 2016

Arbitration Provisions, Unconscionability, and Employment Contracts

We've looked at arbitration provisions and unconscionability before. In this recent case out of California, Yeotis v. Warner Pacific Insurance Services Inc., No. B245770, the agreement in question was found to be unconscionable in places, but that didn't doom the arbitration provision contained within it. 

There was an element of procedural unconscionability to the contract. The court concluded that the contract was an adhesion contract, because the plaintiff was required to sign it in order to keep her job. There was, therefore, some procedural unconscionability attached to the formation of the contract. Additionally, there was some substantive unconscionability in the contract's provisions that gave the court pause. The wording of the contract required the plaintiff to pay fees in arbitration that she wouldn't have had to pay in a court of law. The defendant tried to argue that that was only the impression given and that the plaintiff would never have had to pay those fees in reality, but the court was concerned that the plaintiff would assume, under the contract's language, that she would be responsible for the fees and therefore might hesitate to pursue her remedy against the employer. 

So the court directed the costs provision to be severed from the contract, but it found that the rest of the contract was enforceable. The procedural unconscionability was slight, it thought, and did not permeate the whole contract. The plaintiff's allegation that she had never been provided with the relevant arbitration rules prior to signing the contract was unpersuasive to the court as a more serious procedural unconscionability problem because the court thought she could have found the rules herself very easily and there was no contention otherwise. As for the rest of the arbitration procedures as explained in the contract, the court found that they were not substantively unconscionable and so could be enforced. 

 

February 24, 2016 in Labor Contracts, Recent Cases, True Contracts | Permalink | Comments (0)

Monday, February 15, 2016

Negligence Liability Releases, Pennsylvania Gold's Gym Edition

Gold's Gym, 3910 Wilson Blvd (Arlington, Virginia)

As a companion piece to the Delaware Planet Fitness case I discussed a few days ago, here's another case about negligence liability releases and gyms, this one involving a Gold's Gym in Pennsylvania: Hinkal v. Pardoe, No. 165 MDA 2014 (behind paywall).

In this case, the plaintiff was a member of Gold's Gym who used the personal trainer services offered by the gym. She was injured while working with weights under the direction of her Gold's Gym personal trainer. (Here, unlike in the Planet Fitness case, we get some details about her injury. It was a serious neck injury and required two separate surgeries, and it was alleged the injury resulted from there being too much weight on the equipment she was instructed to use and that she was told to continue using even after she complained of injury, because the personal trainer, it was alleged, didn't recognize the seriousness of the injury.) As in the Planet Fitness case, the Gold's Gym membership agreement that the plaintiff signed contained a release from liability for negligence. 

The court went through an analysis of whether this release was enforceable, noting that in Pennsylvania such releases are enforceable where they do not contravene public policy, they entirely concern two private individuals and their private affairs, and both parties bargain freely and the contract is not one of adhesion. Here, the court found that this contract was between a private individual and an entity concerning the individual's private affairs, and it was not against public policy because it did not concern any matter of public interest, which the court defined as "employer-employee relationship, public service, public utilities, common carrier, and hospitals." In addition, the court found that the plaintiff was not required to enter into a membership with Gold's Gym, so the plaintiff could not complain that she did not have bargaining power, because her decision to sign the membership agreement was purely voluntary and she could have walked away. 

Interestingly, the plaintiff didn't really seem to argue against any of those conclusions on the part of the court. What the plaintiff seemed to argue was that the release wasn't valid because she never read it and Gold's Gym never mentioned it to her or explained to her that she was exposing herself to the risk of being unable to sue based on negligence. She asserted that she signed the contract without reading it (as, let's face it, we almost all do) and without any in-depth discussion of it with Gold's Gym and that therefore the clause couldn't be enforced against her. The court, however, was unsympathetic. It pointed out that she had a duty to read the contract before she signed it and that her signature not only indicated that she knew she should have read it but also appeared directly after a line directing her to make sure she read both sides of the agreement. The release was written in ambiguous and straightforward language and she would have understood it had she read it, according to the court. 

There was, however, a dissent in this case, and while that dissent wasn't on the plaintiff's side with regard to not reading the contract, it did believe that allowing a release of liability for negligence in this situation was against public policy. As far as the dissent was concerned, gyms "implicate health and safety concerns," and so should therefore be a matter of public concern in the same way hospitals are. In fact, there was precedent that Pennsylvania had refused to allow a waiver of negligence liability in a case involving health treatments at a spa under the reasoning that it involved health and safety, and the dissent thought this case should fall under the same umbrella. Because Gold's Gym purported to provide for the physical health of its members, the dissent thought the public had an interest in ensuring that the services offered by Gold's Gym were qualified and held to a duty of care. The dissent also pointed out that other states would reach this same public policy conclusion, pointing specifically to New York as a state that would have held this release invalid, which we just saw in the trampoline park case

So there you have it: Another gym case, and another opinion supporting the release of liability for negligence, but this one with a dissent raising the question that such releases might be against public policy. 

February 15, 2016 in Recent Cases, Sports, True Contracts | Permalink | Comments (0)

Wednesday, February 10, 2016

Negligence Liability Releases, Delaware Planet Fitness Edition

 Planet Fitness, Revere, Massachusetts

On the subject of, again, releases for liability for negligence, a recent Delaware case, Ketler v. PFPA, LLC, No. 319 2015, examined one in the context of a Planet Fitness gym. The plaintiff was a member at Planet Fitness and had signed a membership agreement that contained a release for liability from negligence. The plaintiff was later injured while working out at Planet Fitness when the rowing machine he was using broke. He tired to argue that the release from liability for negligence was unenforceable. The court disagreed. 

Under Delaware law, a release is enforceable if it is unambiguous, not unconscionable, and not against public policy. Here, the language of the release was straightforward and unambiguous. Furthermore, the court found the release wasn't unconscionable. It was true that the plaintiff had no opportunity to negotiate the terms of the contract but that wasn't enough on its own to find unconscionability. The court noted that the plaintiff was free to not join Planet Fitness so the release wasn't unconscionable. Finally, the release wasn't against public policy because the Delaware legislature has never spoken on the issue of releases of liability and it is the legislature that establishes public policy. So the release was enforceable and the plaintiff's claims were barred. 

February 10, 2016 in Recent Cases, Sports, Weblogs | Permalink | Comments (0)

Monday, February 8, 2016

Arbitration Provisions and Unconscionability

This case is a lesson in: Do what the judge tells you to do. 

Ruiz v. Millennium Square Residential Association, Civil Action No. 15-1014 (JDB), out of the U.S. District Court for the District of Columbia, is a fairly staid dispute over whether a condominium owner complied with the condominium association bylaws when he made changes to his unit. The bylaws contained an arbitration provision for disputes like this, which the plaintiff argued was unconscionable. 

The court didn't seem to think much of the unconscionability argument. First of all, procedurally, it was unpersuaded by the plaintiff's allegation that, because he had to accept the bylaws as they were and couldn't negotiate them, they were unconscionable. The court pointed out that this would make all condominium bylaws everywhere unconscionable, which the court termed "at odds with common sense." The court pointed out that some very powerful buyers might in fact have the ability to negotiate condominium bylaws (which would seem to me to present a different case altogether, and so not very relevant to this case at all). The court also pointed out that the plaintiff could have chosen to buy real estate elsewhere if he didn't like the bylaws at Millennium Square. 

As for substantive unconscionability, the plaintiff raised three separate problems with the arbitration structure set forth in the agreement: (1) it didn't require a written decision; (2) it didn't provide for discovery; and (3) it didn't allow the plaintiff to participate in selecting the arbitrators. The court was dismissive of the first two arguments, saying that precedent doesn't require arbitration to have those characteristics, so there was no reason to find a clause not requiring them to be unconscionable. 

The third argument is where the defendant dropped the ball in this litigation, apparently. The defendant tried to argue that the plaintiff did have a role in selecting the arbitrators under the agreement. This argument hinged on reading together two separate provisions of the agreement. The court, however, was unconvinced by this reading. The court then specifically requested that the defendant address whether the arbitration procedure would be unconscionable if the defendant's reading was wrong and the plaintiff didn't have a role. The court actually invited supplemental briefing on that issue. The defendant, however, declined to make that argument. Maybe the precedent was really bad for the defendant, but it's generally a good idea to give the court supplemental briefing when it requests it, I think. The court concluded that the defendant's behavior was a concession that the clause was unconscionable. Faced with a failure to argue by the defendant, the court concluded that the defendant's reading of the contract was wrong; plaintiff had no role in selecting the arbitrators under the agreement; and that was unconscionable because the court had been given no ability to rule otherwise. 

The court therefore severed the unconscionable arbitration procedure in the arbitration clause but upheld the rest of the clause. It requested that the parties work together to arrive at new, detailed, acceptable arbitration procedures. 

February 8, 2016 in Commentary, Recent Cases, True Contracts | Permalink | Comments (0)

Wednesday, February 3, 2016

Liability Releases for Negligence, New York Trampoline Park Edition

A recent case out of New York, Gosh v. RJMK Park LLC, No. 155024/2015 (thanks to reader Frank for the non-paywall link!), tackled the familiar issue of negligence liability release provisions, this time in the context of a trampoline park that the plaintiffs' child was injured at while playing "trampoline dodgeball." I had no idea what this was, so I looked it up. Here's a video: 

It mainly looks like something people who don't get motion-sick should play (i.e., people who are not me). 

The plaintiffs had signed an agreement with the trampoline park with a clause under which they waived all claims against the trampoline park arising out of negligence. Under New York law, such a clause is unenforceable when "a place of amusement or recreation" with an entry fee is involved as against public policy. 

However, that didn't mean the plaintiffs got everything they wanted in this case. The plaintiffs' argument was that the presence of the negligence liability release clause rendered the entire agreement with the trampoline park unenforceable, including the venue provision that required them to bring suit in Westchester County. The court disagreed: Just because that one provision was unenforceable didn't mean the entire agreement got thrown out. Rather, the court severed the negligence liability release provision as "unrelated" to the main goal of the agreement. It didn't actually clarify what the main objective of the agreement was, just dismissed the release provision as being related to "legal stuff," basically. At any rate, the agreement had contained the standard boilerplate provision stating that any illegal clause should be severed from the agreement and the rest of the agreement enforced, which also supported the court's conclusion. So venue was transferred to Westchester County. 

February 3, 2016 in Commentary, Games, Recent Cases, Sports, True Contracts | Permalink | Comments (2)

Monday, February 1, 2016

How Much Does It Cost to Have an IMAX Theater in Your Own Home?

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Okay, there's actual contract stuff to talk about in this case, but mostly I was fascinated to learn that IMAX theaters rent the movie-showing equipment from IMAX and, in 2004 at least, the cost was $41,400 in annual maintenance fees plus the greater of $75,000 or 7% of the box office receipts in annual rent. So, if you win the lottery and want an IMAX theater in your house, there's a rough idea of the kind of costs you're looking at. 

And now that we've learned that fascinating tidbit of information, what happens when you get into a fight with IMAX about whether the equipment it's leased you is capable of playing "Hollywood" movies? 

That's what happened in a recent case out of the Middle District of Pennsylvania, IMAX Corp. v. The Capital Center, Civ. No. 1:15-CV-0378. In that dispute, Capital Center alleged that it told IMAX it wanted to rent its equipment so it would be able to show "Hollywood" movies. In 2004, it entered into a fifteen-year lease of IMAX's movie-showing equipment/software/etc. Apparently around 2014, IMAX announced that it had developed new technology that rendered the equipment Capital Center had rented obsolete, interfering with Capital Center's ability to play "Hollywood" movies. (I keep putting "Hollywood" in quotation marks because it's in quotation marks in the opinion. Clearly Capital Center considered it a direct quote and an important characterization.)

In reaction to the new technology, Capital Center stopped paying rent on the old technology, apparently because it felt its equipment was now valueless. IMAX pointed out that Capital Center had therefore breached the contract and IMAX was entitled to the remainder due under the lease in liquidated damages (a clause in the contract). Capital Center gave the equipment back to IMAX, and IMAX sued to collect the money it claimed it was due under the contract. Capital Center raised in response defenses of mutual mistake and frustration of purpose. It also claimed IMAX had no right to demand the further rent amounts because Capital Center no longer had possession of the equipment. Finally, it claimed that IMAX had not properly disclaimed its warranty that the equipment was fit for a particular purpose, i.e., playing "Hollywood" movies. Unfortunately for Capital Center, none of these defenses succeeded. 

Capital Center's mutual mistake defense centered on the "mistake" that both parties made that the equipment that was the subject of the lease would still be capable of playing "Hollywood" movies fifteen years later. However, the mutual mistake defense exists to vindicate mistakes of fact, not errors in predicting the future; this situation was the latter. There was no "fact" that IMAX thought it knew that the equipment would still be valid in fifteen years. And, in fact, the agreement itself contemplated as much, because the agreement contained a clause noting that IMAX might upgrade its equipment and setting forth the terms by which Capital Center could receive the improved equipment. Difficult for Capital Center to argue that the parties were mistaken about the future viability of the equipment in question when the agreement itself noted that the equipment in question might not be viable in the future. 

The frustration of purpose defense failed for a similar reason. Here, the purpose of the contract might have been to play "Hollywood" movies but there was no unforeseen event that occurred after the signing of the contract that frustrated that purpose. The agreement itself predicted that the equipment might not continue to be viable for the showing of "Hollywood" movies. Therefore, the continued viability of the equipment could not be said to have been a basic assumption of the contract. 

As for the argument that IMAX shouldn't be entitled to future rent payments because IMAX was in possession of the equipment, under Pennsylvania law, IMAX was entitled to choose either future rent payments or repossession of the equipment. However, IMAX didn't seek to repossess the equipment; Capital Center gave the equipment back to IMAX of its own volition. Therefore, IMAX wasn't seeking repossession, only the future rent payments: a choice it was allowed to make. 

Finally, the contract between the parties had contained a clause in which IMAX disclaimed all of the usual warranties, including suitability to a particular use, i.e., showing "Hollywood" movies. Under Pennsylvania law, such a disclaimer is valid as long as it is "conspicuous." Capital Center tried to argue that the disclaimer in question wasn't conspicuous, but it was the only clause in the seven-page Schedule B of the agreement that was in bold font, which, according to the precedent, rendered it "sufficiently conspicuous." 

February 1, 2016 in Commentary, Film, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (2)

Wednesday, January 27, 2016

Binding Arbitration Clauses, Educational Training Materials Edition

No, it's not legal-education-related, but rather real-estate-education-related. Which, according to the plaintiff, didn't actually teach her what it promised to teach her. So she sued. The defendant, however, noted that she'd signed a contract with an arbitration clause and so they shouldn't be in court. And the court agreed, in Kane v. Yancy, CIVIL ACTION NO. H-15-1861 (behind paywall), a recent case out of the Southern District of Texas. 

Arbitration clauses are, of course, generally looked upon favorably by courts. In this case, there was no dispute that the contract contained an arbitration clause and that the plaintiff signed the contract. Rather, the plaintiff argued that the arbitration clause was unconscionable. The plaintiff claimed the arbitration clause was on the back of the piece of paper that she signed and she never saw it. She further claimed that the arbitration clause required each party to bear their own costs and attorneys' fees, which made the cost of arbitration unconscionably prohibitive for her.

All of the plaintiff's arguments failed. Texas precedent indicated that the question of whether the costs and attorneys' fees portion of the arbitration clause was enforceable was a question for the arbitrator to decide, not the court. At any rate, the court didn't feel that the fees were so exorbitant as to cause concern. 

In addition, the court didn't really care about her allegation that she had never seen the arbitration clause because the plaintiff's signature was under a statement indicating that she had read everything on the back of the piece of paper she signed. As we all know, on virtually a daily basis we attest that we've read terms and conditions that we have maybe only barely glanced at, if that. Clearly, that's what the plaintiff in this case did, too. This court didn't care from a legal unconscionability standpoint. 

The plaintiff made a couple of other interesting arguments. She tried to argue that, by answering her complaint in court, the defendant had waived its right to arbitration. The court, unsurprisingly, didn't buy it. She also tried to argue that the defendant's breach of the contract excused her from being bound by the arbitration clause. The court, however, noted that the defendant's alleged breach of the contract had nothing to do with the arbitration clause itself, and thus that clause was not excused by the defendant's alleged conduct. 

The defendant actually moved for sanctions but the court said that the plaintiff's actions weren't frivolous or intended to harass. So the plaintiff may have lost everything else, but at least she didn't get sanctioned. Hashtag-finding-a-silver-lining. 

January 27, 2016 in Recent Cases, Teaching, True Contracts | Permalink | Comments (0)

Monday, January 25, 2016

Is a Dollar Movie in This Day and Age Still Feasible?

Cinemaaustralia

The average price for a movie ticket in the United States is apparently $8.61. A recent case out of Ohio, Capital City Community Urban Development v. Columbus City, Case No. 13CVH-01-833 (behind a paywall), dealt with the question of whether a dollar movie is still feasible when most movies cost more than $8.00. 

The contractual provision at issue was: "The Buyer agrees to provide Saturday movies for children once the theater is operational, and for as long as feasible. The cost is to be $1.00 or less for a double feature." (So, in fact, it was fifty cents a movie.) The clause actually wasn't that old (from what I could discern from the facts, it seems to have only been written in 2002), so it wasn't as if the dollar price was intended to be profitable, which both parties acknowledged. However, the issue was that the defendant had sought donations to offset the cost of the features and been unsuccessful. That meant that the theater would suffer a loss of $100,000 a year to fulfill the contractual provision, which would have been a substantial hardship to the theater. Moreover, the double feature wasn't very popular in the community. In a theater with a capacity of 400, it usually only attracted a few dozen patrons. 

The parties fought over whether the definition of feasibility included a consideration of the economics of the issue. There was some precedent that feasibility required looking at the finances of the situation. Also, compellingly in the court's view, feasibility had to take into account the finances or else it had no meaning. The argument that "feasible" meant "capable of being done" without looking to the finances meant that it would be "feasible" basically as long as the theater was open, i.e., as long as the theater had a projection. That would mean that it would be "feasible" until the theater closed down entirely. If that was the meaning of the word "feasible," there was really no reason to have that specification in the contract: it would have just been a clause in effect until the theater closed. 

This all makes sense to me, especially considering that there didn't seem to be much public interest in having the double feature continue. However, what's really striking to me about this opinion is the statement that "Columbus never showed a Saturday children's movie." So apparently Columbus's argument was really that it was never feasible to have the double feature. This meant Columbus agreed to a provision in the contract that it apparently never intended to comply with? That's not a wrinkle that gets introduced in this case--in fact, the line that no double feature had ever been shown is basically a throwaway line--but I found it to be the most striking detail. 

January 25, 2016 in Commentary, Film, Recent Cases, True Contracts | Permalink | Comments (0)

Wednesday, January 20, 2016

The Enforceability of Liability Releases for Negligence in Colorado

When I was in law school, I remember starting to be really struck by how often I had to sign liability releases: going to play paintball, renting skis, etc. A recent case out of the Tenth Circuit, Espinoza v. Arkansas Valley Adventures, had to deal with just such a release in the context of a tragic whitewater rafting accident. 

The plaintiff's mother drowned when her raft capsized during a rafting trip organized by the defendant. She had signed a contract that released the defendant from liability for negligence. The plaintiff agreed that his mother had signed the release but tried to argue that the release was unenforceable. As a matter of Colorado law, though, he lost. The court found the release enforceable both as a matter of public policy and under the particular circumstances of the mother's signing. 

The court explained that Colorado uses four facts to determine whether a release of liability for negligence is enforceable: 

(1) the existence [or nonexistence] of a duty to the public; (2) the nature of the service performed; (3) whether the contract was fairly entered into; and (4) whether the intention of the parties is expressed in clear and unambiguous language.

The court concluded that, while other states were free to disagree on this, Colorado had decided that corporations providing recreational activities are allowed to protect themselves from liability for negligence. The court stated that this is a valid policy choice for Colorado to make because it arguably encourages the active, outdoorsy lifestyle that the state of Colorado cherishes and wants to protect and promote. Without such ability to protect themselves, companies might be discouraged from offering recreational activities like horseback riding, snowboarding, or whitewater rafting. And in fact other courts in Colorado had explicitly found that companies offering whitewater rafting trips can protect themselves from liability for negligence using a contractual release. The court stated that the Colorado legislature was free to introduce a statute that would change this legal precedent, but, as it stood, the court was bound to follow the precedent. 

Having decided that the release was not against public policy according to the first two factors of the balancing test, the court then further decided that the plaintiff's mother had fairly entered into the contract with full knowledge of the risks at stake. The court dismissed the plaintiff's expert testimony that the rapids his mother was exposed to were too advanced for a beginner (in contrast to what the defendant had assured her) by pointing to the fact that the defendant had expert testimony that the rapids were suitable for beginners. Finally, the court noted that the release had the typical all-caps language that you see on these sorts of contracts. You know:  "HAZARDOUS AND INVOLVES THE RISK OF PHYSICAL INJURY AND/OR DEATH" and "THIS IS A RELEASE OF LIABILITY & WAIVER OF LEGAL RIGHTS." The truth is, seldom does any consumer seeing that stuff really take it a serious communication of a great risk of death, I think. Especially not when there was some evidence that the consumer has been assured the trip in question was suitable for families with children. Nonetheless, the court found that the language of the release unambiguously informed the plaintiff's mother of the risks of the activity and the fact that she was releasing the defendant from liability should those risks come to pass. 

There was a dissent in this case, however, who agreed that the release wasn't against public policy but disagreed on the conclusion that the contract had been fairly entered into. In the dissent's view, the contradictory testimony about the level of difficulty of the rapids meant that the question should have gone to the jury. 

I don't spend a lot of time in my Contracts class talking in detail about liability releases for negligence, but this case made me think that I should talk about them more, because they really do seem to arise in the context of so many activities. 

January 20, 2016 in Commentary, Recent Cases, Sports, Teaching, Travel, True Contracts | Permalink | Comments (4)

Monday, January 18, 2016

What Happens If Your YouTube Channel Suddenly Disappears?

 Logo YouTube

A recent case out of California, Lewis v. YouTube, continues on my terms and conditions theme from earlier

The plaintiff in this case had a bunch of videos on YouTube. One day, she found that YouTube had deleted them. The videos had had close to 500,000 views at the time YouTube deleted them. The plaintiff claimed that she spent a lot of time and money promoting them but there was no commercial aspect to the videos; she didn't make any money off of them. 

Upon realizing YouTube had deleted her videos, she sent YouTube an e-mail asking what had happened and if her videos could be restored. She received in response what appeared to be a form e-mail informing her that she'd violated YouTube's terms and conditions but not giving any truly specific information. The best that I can discern is that YouTube thought she was a spammer. 

The plaintiff replied to the e-mail from YouTube saying that she had not engaged in any behavior violating the terms and conditions. She received another response from YouTube identical to the first. She filed a formal appeal with YouTube, and received another identical response. 

So that brings us to the lawsuit in question, in which the plaintiff was alleging that YouTube violated the covenant of good faith and fair dealing implicit in its terms and conditions when it deleted her videos unjustifiably and without any notice. 

To be honest, I see the plaintiff's point and I'm kind of on her side. It's frustrating when you have no idea what you've done wrong and you can't get a website to explain anything to you and you just feel kind of powerless. The good news is that at some point she did get YouTube's attention enough that it did restore her videos. I don't know if that happened before or after the lawsuit was filed.

It seems, therefore, like the plaintiff got what she wanted, which was restoration of her videos. The lawsuit appears to have really been about trying to get damages, but the court pointed out that YouTube's terms and conditions (which, let's face it, none of us reads) contained a limitation of liability clause that is valid in California, so the plaintiff couldn't seek any damages. 

I think this is a situation where the court just thought that plaintiff had what she wanted and was just being greedy. I would be curious to see another case challenging the limitation of liability clause where the plaintiff could prove actual damages that might sway a sympathetic judge. But, for now, YouTube's terms and conditions do act to protect YouTube from having to pay out damages. If you find yourself a victim of YouTube's apparently aggressive anti-spamming patrol, you might just have to settle in for a bit of a fight in getting YouTube's attention, without much hope of compensation for any of that time and effort. 

January 18, 2016 in Commentary, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Friday, January 15, 2016

Very, Very Frequent Flyers Do Not Have Separate Contracts with Airlines

If a customer belongs to an airline’s frequent flyer program, but flies so often that one obtains an elevated status under that program, is the customer then also by implication governed by a separate contract with the airline and not just the “basic” version of the frequent flyer rules?

No, according to a Seventh Circuit Court of Appeals opinion in Hammarquist v. United Continental Holdings, Inc. (Nos. 15-1836 and 15-1845).

In the class action lawsuit against beleaguered United Airlines, plaintiffs were members of the airline’s “MileagePlus” program. Condition no. 1 of the program rules stated that the airline had the “right to change the Program Rules, regulations, benefits, conditions of participation or mileage levels … at any time, with or without notice ….” Plaintiffs, who had obtained “Premier” status argued that under the Premier Program, an alternative modification provision prohibited United from changing the benefits that had already been earned, but which could, per airline tradition and the basic program rules, only be enjoyed the following year. The court made short shrift of that: The plaintiffs did not dispute that the parties’ contractual relationship was governed by the Program Rules that, under precedent established in Lagen v. United Continental Holdings, the elevated status of some frequent flyers does not result in a free-standing contracts separate from the underlying frequent flyer program being established. United Airlines had not made any contractual representations that would render it unable to change the benefits under the basic contract.

Plaintiffs also argued that at the most, United Airlines should only be allowed to change the benefits once a year and not, as had apparently been the case, in the
middle of the year. Plaintiffs relied on the airline’s website, which had stated th That changes were possible “from year to year,” but also that “unless otherwise stated,” the basic Program Rules applied to the Premier Program. That, according to the plaintiffs, meant that the airline could not change the benefits “at any time” as had been stated in the frequent flyer rules. The court found that United Airlines had never “stated” that Condition no. 1 did not also apply to its very frequent flyers, and that the airline had never contractually promised that changes could only be implemented only from year to year.

Nice try, but in this case, a contractually fair enough outcome, it seems. United Airlines “cannot be liable for breaching a contract that it did not make.”

January 15, 2016 in Current Affairs, Miscellaneous, Recent Cases, Travel, True Contracts | Permalink | Comments (1)

Wednesday, January 13, 2016

The Tricky Question of Whether Minds Met

Ourasi

A recent case out of Ohio, Oryann, Ltd. v. SL & MB, LLC, highlights how complicated it can be to determine whether a contract ever existed in the first place. 

This case involved the sale and purchase of a horse farm that was being operated as a horse-boarding business. The parties agreed on a price of $640,000, and in all of their communications back and forth, that price was always stated as being the price for the real estate of the farm. There was no written reference to purchase of the business and its assets until the parties were through with their negotiations and signing the final papers. Those final papers indicated that the buyer was buying real estate for $350,000 and the business for $290,000. The business sale contract referenced "Exhibit A" as listing the assets that were being transferred, but Exhibit A was never completed.  

A disagreement arose between the parties, and the trial court found that there was never any meeting of the minds with respect to the sale of the business and it was illusory because it didn't have enough specificity to show that anyone was bound to do anything due to the fact that there was never any enumeration of the assets to be transferred (given the blank Exhibit A). While the trial court enforced the real estate contract in the amount of $350,000, it threw the business sale contract out as unenforceable. 

The appellate court, however, disagreed with the trial court's conclusion. To the appellate court, it was obvious from the language of the contracts and the behavior of the parties that there was a meeting of the minds with respect to the sale of the business and that the parties were bound by the contract. The appellate court noted that the two contracts were intended to be read as one entire deal, not two separate deals the way the trial court was reading it. The appellate court thought that if the parties intended to be bound by the real estate contract (as the trial court had found), then it had to follow that they intended to be bound by the business sale contract as well, as the contracts' language expressly referenced each other and the fact that they were one deal. And, as the appellate court noted, the trial court's ruling on the contracts meant that the trial court was ignoring was ignoring the fact that, at all times, the amount of money the parties were discussing was $640,000. It didn't make sense to then pretend that the parties had only intended to pay half of that. 

The appellate court was untroubled by the blank Exhibit A. The business sale contract's language explicitly stated that "all" of the business would be transferred; the purchasing party took possession and ran the business for over a year without complaining about a lack of specificity in the contract because of the missing Exhibit A; and the evidence showed that the parties did indeed transfer over their business assets. The appellate court thought it was therefore clear from the parties' behavior that they understood what the business sale contract achieved, even without the Exhibit A. 

So, where the trial court had seen questionable conduct, the appellate court found an enforceable contract. 

The key to the trial court's ruling might actually be in the parties' testimony as to why they ended up executing two separate contracts: They wished to lessen the amount of real estate tax paid in the transaction. I think the trial court thought that the parties clearly thought the real estate was worth $640,000, didn't want to pay the taxes owed on that, and so pretended the real estate was only worth $350,000 in order to avoid those taxes. In fact, it appears from the parties' testimony that that's exactly what they did. I think the trial court disapproved of that and that its ruling probably reflects its unwillingness to endorse the parties' behavior. 

January 13, 2016 in Commentary, Recent Cases, True Contracts | Permalink | Comments (0)

Monday, January 11, 2016

Beware Insurance Policy Exclusions: Liquid Nitrogen Cocktails and Precious Metal Air Conditioning Units Edition

A pair of cases, Evanston Ins. Co. v. Haven South Beach, out of the Southern District of Florida, and Celebration Church v. United National Insurance Co., out of the Eastern District of Louisiana, reminds us that insurance policies can be tricky things. 

In Evanston, Barbara Kaufman went to the Ninth Annual Taste of the Garden at the Miami Beach Botanical Garden. Haven South Beach, one of the vendors there, sold her a drink containing liquid nitrogen. Mrs. Kaufman became ill after consuming the drink and sued Haven. Haven, in turn, tried to involve Evanston under its insurance policy. However, the insurance policy contained a clause stating that it didn't apply to situations involving the "dispersal" of "pollutants." So the debate, of course, was over whether the presence of the liquid nitrogen in the drink, added to give the drink a "smoking" appearance, was the introduction of a pollutant that disqualified the insurance policy from applying. The policy described a "pollutant" as, among other things, an "irritant," and the court concluded that the liquid nitrogen was an irritant, as a dangerous and hazardous chemical likely to cause at least some irritation. Therefore, its dispersal into the drink was a circumstance that excluded Mrs. Kaufman's injury from insurance coverage under the policy. 

In Celebration Church, the insurance policy in question excluded coverage for theft of precious metals. Celebration Church had a number of rooftop air conditioning units whose condensers were stolen. The condensers each contained coils made of one of the precious metals excluded from the insurance policy. Therefore, the insurance company refused to pay out under the policy. The court found the insurance company was justified in its reading of the contract. Although the theft of the air conditioning units extended to thievery beyond just a "precious metal," the court concluded that the only common sense reading of the clause was that the insurance policy did not apply to any damage caused by a theft of precious metals, and the court further concluded that the theft of the air conditioning condensers was to obtain the precious metal inside, so their entire theft was excluded. 

The lesson is clear: Those insurance policy exclusions can really come back to haunt you. 

(Also, avoid liquid nitrogen in your cocktails, I think.)

January 11, 2016 in Food and Drink, Recent Cases, Religion, True Contracts | Permalink | Comments (0)

Monday, January 4, 2016

Apple, Publishers, E-book Price Fixing -- and Effective Assignments of Claims

Apple Headquarters Sign ByDay

The antitrust ruling finding Apple engaged in anticompetitive behavior with regard to the e-book industry has resulted in a number of follow-up suits by parties allegedly harmed by Apple and its co-conspirator publishers' price-fixing scheme. Now, one of the first cases to be filed has reached the end of its line, derailed by the lack of an assignment clause with sufficiently explicit wording.  

In the Southern District of New York, DNAML Pty, Ltd. v. Apple Inc., 13cv6516 (DLC) (behind a paywall), the plaintiff's claims were rooted in antitrust, but it was ultimately contract law that decided the case. The problem arose because the DNAML who sued Apple and the publishers here is actually "new" DNAML. "New" DNAML is not the same entity that was damaged by the anticompetitive conduct here; that was "old" DNAML.  

In 2010, "old" DNAML entered into the agency agreement with the publisher Hachette that gave rise to the cause of action here. That agency agreement, according to the allegations, was disastrous for "old" DNAML, as the anticompetitive measures adopted by Apple and the publishers did their job and eliminated "old" DNAML's ability to effectively compete by requiring that Hachette strictly control all e-book pricing. Consequently deprived of distinguishing itself from all of the other sellers of e-books in any way, "old" DNAML got out of the e-book business a few months after signing the agreement, in September 2010. 

Over a year later, on December 23, 2011, "old" DNAML executed a contract under which it transferred all of its assets to "new" DNAML. Under the agreement, "new" DNAML purchased the "Business and Assets" of "old" DNAML. "Business" was defined as "the business carried on" by "old" DNAML, "being the business of owning and operating eBook technologies, including the sale of eBooks." "Assets" was defined as "all of the assets" owned by "old" DNAML and "used in connection" with its business, "including its cash, the Book Debts, the DNAML UK Shares, the Business Agreements, Leasehold Property interest, Equipment, Intellectual Property, and the Goodwill." After the execution of the agreement, "old" DNAML allegedly still existed but had no active business. 

In July 2013, Apple was found liable for antitrust violations in the e-book market. In September 2013, DNAML filed this lawsuit. Apple and the publishers argued that summary judgment should be entered in their favor because "new" DNAML lacked the standing to pursue the antitrust claims, which were inflicted upon "old" DNAML. The court agreed. 

"New" DNAML agreed that it could not sue Apple and the publishers absent an assignment of the antitrust claims from "old" DNAML. The court found that the antitrust claims could have been assigned, but that the agreement here failed to do so: 

To effect a transfer of the right to bring an antitrust claim, the transferee must expressly assign the right to bring that cause of action, either by making specific reference to the antitrust claim or by making an unambiguous assignment of causes of action in a manner that would clearly encompass the antitrust claim.

No such express assignment existed here, either of antitrust claims or of claims in general. The definitions of "Business" and "Assets" did not include claims. A transfer merely of assets is not sufficient to act as an assignment of antitrust claims.

"New" DNAML tried to argue that the purchase of "old" DNAML's "Business" "unambiguous[ly]" included an assignment of the antitrust claims because of the reference to "old" DNAML's sale of e-books. "New" DNAML argued that should be read to include any claims arising out of that business. But the court stated that was not the express assignment of claims that the law requires. 

"New" DNAML also tried to introduce extrinsic evidence to support its argument that the agreement was intended to include antitrust claims, but the court, having found the agreement unambiguous on its face, refused to use extrinsic evidence to alter its interpretation.

As a result, "new" DNAML never acquired "old" DNAML's standing to bring the suit, and the court dismissed DNAML's claims with prejudice.  

The moral of the story: Mention "claims" explicitly in your asset purchase agreements.  

January 4, 2016 in Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Sunday, January 3, 2016

Legal Rights to Give up Your Travel Tickets

Exactly one year ago, I blogged here about United Airlines and Orbitz suing a 22-year old creator of a website that lets travelers find the cheapest airfare possible between two desired cities. Travelers would buy tickets to a cheaper end destination, but get off at stopover point to which a ticket would have been more expensive. For example, if you want to travel from New York to Chicago, it may be cheaper to buy one-way airfare all the way to San Francisco, not check any luggage, and simply get off in Chicago.

The problem with that, according to the airline industry: that is “unfair competition” and “deceptive behavior.” (Yes, the _airline industry_ truly alleged that.) Additionally, the plaintiffs claimed that the website promoted “strictly prohibited” travel; a breach of contracts cause of action under the airlines’ contract of carriage.

It seems that the United Airlines attorneys may not have remembered their 1L Contracts course well enough, for a contracts cause of action must, of course, be between the parties themselves or intended third party beneficiaries. The website in question was simply a third party with only incidental effects and benefits under the circumstances. Without more, such a party cannot be sued under contract law. (This may also be a free speech issue.)

Orbitz has since settled the suit.  Recently, a federal lawsuit was dismissed for lack of personal jurisdiction over the now 23-year old website inventor. United Airlines has not indicated whether it plans further legal action.  

Along these lines, cruise ship passengers are similarly not allowed to get off a cruise ship in a domestic port if embarking in another domestic port unless the cruise ship is built in the United States and owned by U.S. citizens. This is because the Passenger Vessel Services Act of 1866 – enacted to support American shipping – requires passengers sailing exclusively between U.S. ports to travel in ships built in this country and owned by American owners. Thus, cruise ships traveling from, for example, San Diego to Alaska and back will often stop in Canada in order not to break the law. But if the vessel also stops in, for example, San Francisco and you want to get off, you will be subject to a $300 fine which, under cruise ship contracts of carriages, will be passed on to the passenger. See 19 CFR 4.80A and a government handbook here.

Convoluted, right? Indeed. Necessary? In this day and age: not in my opinion. As I wrote in my initial blogs on the issue, if one has a contract for a given product or service, pays it in full, and does not do anything that will harm the seller’s business situation, there should be no contractual or regulatory prohibitions against simply deciding not to actually consume the product or use the service one has bought. Again: if you buy a loaf of bread, there is also nothing that says that you actually have to eat it. You don’t have to sit and watch all sorts of TV channels simply because you bought the channel line-up. In my opinion, United Airlines and Orbitz were trying to hinder healthy competition and understandable consumer conduct. What is still rather incomprehensible to me in this context is why in the world airlines would have anything against passengers getting off at a midway point. It’s less work for them to perform and it gives them a chance to, if they allowed the conduct openly, resell the same seat twice. A win-win-win situation, it seems, for the original passenger, the airline, and the passenger that might want to buy the second leg at a potentially later point in time at whatever price then would be applicable. The same goes for the typically unaffordable “change fees” applied by most airlines: if they charged less (a change can very easily be done by travelers on a website with no airline interaction) and the consumer was willing to pay the then-applicable rate for the new date (prices typically go up, not down, as the departure dates approach), the airlines might actually benefit from being able to sell the given-up seat. Of course, they don’t see it that way… yet.

In many ways, traveling in this country seems to be going full circle in that it is becoming an expensive luxury. Thankfully, new low-cost airlines also appear on the market to provide much needed competition in this close-knit industry that, in the United States, seems to be able to carefully skirt around anti-trust rules without too many legal allegations of wrongdoing. (See here for allegations against United, American, Delta and Southwest Airlines for controlling capacity in order to keep airline prices up).

Happy New Year and safe travels!

January 3, 2016 in Commentary, Current Affairs, E-commerce, Famous Cases, In the News, Legislation, Recent Cases, Travel, True Contracts, Web/Tech | Permalink | Comments (0)

Wednesday, December 30, 2015

Is Tenure a Contract?

Budapesti Corvinus Egyetem - 2014.06.12 (20)Here's one for all the professors out there: Smith v. Board of Supervisors for the University of Louisiana System, Civil Action Case No. 13-5505 Section: "G" (3), out of the Eastern District of Louisiana.

Steven Smith was a tenured professor at the University of New Orleans ("UNO"). Smith alleged a series of disagreements / misunderstandings that eventually led to Smith being committed to teaching the spring 2012 semester at both UNO and a Brazilian university, the Federal University of Bahia ("UFBA"). Smith attempted to resolve the conflict by pushing his start date at UFBA to the last two weeks of his semester at UNO. He had his students at UNO use the final two weeks to work on final projects, which would be submitted to him electronically while he was in Brazil at UFBA. Smith alleged that there was further miscommunication between him and UNO administration about Smith's schedule and whether or not it was acceptable. As a result, Smith stated that he was threatened numerous times with termination. Eventually, he was encouraged to resign and did so.

Smith sued asserting several causes of action, including breach of contract. The Board responded by arguing that Smith and the Board never entered into a contract at all.

Smith first pointed to the faculty handbook and UNO bylaws as the contract between himself and the Board. However, the faculty handbook explicitly stated that it "should not be construed as a formal contractual agreement between the University and its faculty." The court therefore found that the handbook did not constitute a contract.

That was not the end of Smith's contract claims, however, and that's where the tenure issue comes in. Smith argued that his tenure provided him with "a contractual right to continued employment." To support his argument, Smith pointed to the definition of "tenure" in Black's Law Dictionary as well as a number of statements made to Smith when he was granted tenure. The Board made no argument in opposition, leading the court to conclude that, "[a]lthough there was no specific written tenure contract, the parties appear to agree that Smith's achieving tenure meant that he was no longer an at-will employee." Accordingly, the court found that tenure was a contract between Smith and the Board. Whether or not this contract had been breached was a genuine issue of material fact precluding summary judgment.

December 30, 2015 in Labor Contracts, Law Schools, Recent Cases, Teaching, True Contracts | Permalink | Comments (0)

Wednesday, December 23, 2015

Parking Sagas, Part II

I'm probably going to develop a personal expertise in the limited field of Parking Sagas; be forewarned. 

24 Hour Fitness Super-Sport, San Mateo

This case, Gietzen v. Goveia, B255925, out of the Second Appellate District of the Court of Appeal of California, concerned a shopping center that leased spaces to several businesses. One of these businesses was a restaurant called Yolanda's and another of these businesses was a gym called 24 Hour Fitness. When Gietzen, the owner of Yolanda's, entered into negotiations with the developers of the shopping center, he asked who the other tenants of the shopping center were going to be. Apparently, Amy Williams, one of the developers' agents, told him that the anchor tenant was likely to be a marine hardware company. In fact, negotiations with the hardware company eventually fell through and the anchor tenant ended up being 24 Hour Fitness. 

Apparently, in California at least, it is fairly well known among real estate-related business people that gyms can "cause major parking congestion problems." Here is where I betray that I do not belong to a gym, so I have no first-hand experience of this. But apparently very many people are much more dedicated to working out than I realized, because the gym in this case ended up utilizing around 95% of the available parking spaces. Williams had apparently known this was likely to happen based on previous similar experiences with gyms in shopping centers she'd helped develop, and Gietzen also said that he knew gyms caused such issues and would never have leased space in the shopping center if he'd known a gym was going to be an anchor tenant. 

Amid evidence that potential Yolanda's patrons were actually eating at other restaurants because they didn't want to deal with the lack of parking at the Yolanda's shopping center, Gietzen complained, as did other tenants having similar problems. Eventually, several solutions were attempted, but the parking lot still remained almost entirely full of gym patrons to the detriment of the other tenants. So, eventually, Gietzen sued, alleging, among other things, breach of contract and breach of the covenant of good faith and fair dealing. 

The relevant clause of the contract was Article 9.1: "The Common Area shall be available for the nonexclusive use of Tenant during the full term of this Lease or any extension of the term hereof . . . ." The Common Area included the parking lot. The court interpreted that clause to mean that the common area had to actually be available for the tenant to use; the availability could not be hypothetical. Because 95% of the common area was being monopolized by the anchor tenant gym, the court found that Gietzen had been denied use of the common area in breach of the contract. The shopping center developers tried to argue that this interpretation implied that gyms can never be allowed to be shopping center tenants because of their propensity to take up so many parking spaces at all times. The court found, however, that no such implication was required. 

As far as the breach of covenant of good faith and fair dealing, the shopping center developers pointed to a clause in the lease that said no covenants were implied. But the court said that good faith is required of all contracts, and that courts would not allow a contract to permit a party to act in bad faith based on a statement as vague as the one this contract contained: "The good faith of the parties is essential to all contracts. No agreement, no matter how finely crafted, will protect a party if the other party is not acting in good faith. If indeed [the developer] is contending that the lease allows it to act in bad faith, it must point to a clause more specific than a general clause against implied covenants."

Mainly I felt like I had to share this case so that I can spread around my guilt over not being one of those many people parked at the gym. 

December 23, 2015 in Commentary, Recent Cases, True Contracts | Permalink | Comments (2)

Monday, December 21, 2015

In Which I Freak Out About Parking and Towing (But It's Case-Related, I Swear)

Fortreno de aŭtoj, DE FR, 2

Once, when I lived in a city, my car got towed. I was properly, legally parked at the time I parked the car. Unfortunately, after I parked the car, the city came by and put up a sign saying they were cutting down a tree the next day and my car needed to be moved. Unfortunately, the car wasn't parked on the street where I lived (that's city living for you) and also unfortunately, I didn't go back to my car for a few days (also city living for you). When I went to retrieve my car for a driving errand and found it missing, I had a moment of utter panic that it had been stolen. Then I noticed the bedraggled sign and realized it must have been towed. Thus commenced a long, involved saga. My license plate number was not reported online as having been towed, so I had to take two separate buses across the length of the city to a police station, where I waited in a very long line of people doing various police business to be told yes, it had been towed, but no, it wasn't in the system, and I had to go another opposite side of the city (I was making a triangle) to retrieve it and I had to BRING CASH (I was told this many times, in oral all-caps). Which meant that first I had to locate an ATM in an area of the city with which I was unfamiliar, and then take more buses to the tow company location. This entire ordeal (which I maintain wasn't entirely my fault, considering I think it was unrealistic of the city to provide so little notice of the tree issue, because the vast majority of us city-dwellers don't go to our cars on a daily basis) took the better part of my day and cost hundreds of dollars but, at the end of it, at least I got my car back (and then afterward I had to keep making out-of-my-way trips on a daily basis to make sure that my car hadn't become subject to any weird new towing orders). 

I tell all of you this saga because when I started reading the fact pattern of Parham v. Cih Properties, Civil Case No. 14-1706 (RJL), out of the District Court for the District of Columbia, I had flashbacks. In that case, the plaintiff lived in an apartment complex that had a parking lot. (There is a prior Parham v. Cih Properties case, involving a plaintiff with a different first name, possibly the plaintiff's mother.) She alleged that her car was towed from the lot. After allegedly having to engage in a complicated search, the plaintiff determined that the car had been ticketed for having "dead tags" and had been sent "to be crushed for scrap metal." The plaintiff alleged that her car did not have dead tags and also that the tag number she was given on the ticket wasn't even the tag number of her car. At any rate, the plaintiff has never actually been able to locate the man who allegedly towed the car and so has never actually located her car and so never received her car back. So, she's sued. 

Why, you might wonder, am I talking about all these parking sagas in the ContractsProf Blog? Well, there was a breach of contract aspect to this case, in that she alleged that she had a contract with the apartment complex that the complex breached when it authorized the towing of her car. However, the only contract between the plaintiff and the apartment complex was a thirty-year-old lease agreement that explicitly stated that parking was not covered by the agreement. Therefore, the court found there was no breach of any contract.

CARS WERE JAMMED INTO EVERY SPARE SPACE AT A DOWNTOWN COMMERCIAL PARKING LOT DURING A BUS STRIKE IN WASHINGTON... - NARA - 556721

I understand the court's analysis but I'm incredibly perplexed and wish I had more information. Was there never any updating of the lease agreement in the ensuing thirty years? Surely the rent had been increased, at least? And, honestly, under what authority was she parking in the parking lot? Whenever I have had parking in a city lot, it came with tags or cards or permits or something, so that the parking could be managed. And never, in a city situation, has the parking been free. The parking here was apparently located in Washington, D.C. (see above photo for an only-slightly-out-of-date depiction of parking in Washington, D.C.), so I wish knew more about the circumstances under which the parking lot was being governed. I just find it difficult to believe that there wasn't some sort of agreement somewhere between the plaintiff and someone about what the parking situation was, even if the agreement was only oral in nature, or even if we had to turn to promissory estoppel to get there. But am I thinking about this from a completely wrong angle somehow? 

The plaintiff in this case was proceeding pro se, which might have contributed to the fact that there wasn't enough evidence for the plaintiff to survive summary judgment. Indeed, none of the plaintiff's claims (which included fraud and consumer protection claims) survived summary judgment. 

This case made me think of my own parking saga because, well, what would I have done if I'd just never been able to locate my car again? Even though I thought it was unfair that I was forced to inconveniently traipse all over the city and produce hundreds of dollars in cash based on what I considered a "surprise" towing sign, I think I also vaguely thought that probably one of the "terms" of my agreement with the city under which it had given me a street parking permit was that I would check on the car at least every twenty-four hours. So, although I was annoyed during my saga, I put most of the blame on myself. I have no idea what I would have done if I'd never found my car, though. 

December 21, 2015 in Commentary, Recent Cases, True Contracts | Permalink | Comments (4)

Wednesday, December 16, 2015

So You Want to Write a Best-Selling Video Game, Huh?

If so, it's always better to be precise in your negotiations. 

Of course, the flip side of this is that you frequently don't feel like you have the power to demand precision. 

In Bubble Pony v. Facepunch Studios, Civil No. 15-601(DSD/FLN) (sorry, I can only find versions behind paywalls for now), out of the District of Minnesota, Patrick Glynn was a computer programmer in need of a job. He e-mailed Facepunch looking for one, highlighting his abilities (as one does when job-hunting). Facepunch's majority owner, Garry Newman, responded to Glynn's e-mail positively, describing what he was looking for in a new employee and adding:

I want to eventually be in a position where you'd be making games for Facepunch Studios, which we'd sell on Steam, or the apple appstore, or whatever, but once that game makes what we've paid you so far back, you'd get something like a 60% cut of all the profits (probably more, that's kind of TBD). So we'd kind of be investing in your, kind of.

Does that sounds [sic] like the kind of situation you'd like to be in?

Glynn replied that yes, he was interested, and that his "only concerns" were "making rent, paying bills, and buying groceries." Eventually, the parties agreed on compensation of $1,900 per month, to be increased by $100 per month until they reached $3,000. At the time, Glynn's responsibilities were going to be things like fixing bugs and otherwise optimizing Facepunch's existing code. The parties did not further negotiate what would happen if/when Glynn started creating games for Facepunch. They did, however, agree that Glynn was an independent contractor and not an employee. 

Eventually, Glynn began creating games for Facepunch, producing more than 75% of the source code for a game called RUST. RUST was a huge success that "has generated at least $46 million in sales." Facepunch paid Glynn bonuses totaling around $700,000. Facepunch also asked Glynn, after RUST's major success had been established, to draft a document explaining how the RUST programming worked. Once it received the document, Facepunch terminated its relationship with Glynn, pulled RUST off the market, and announced a new "experimental game" based on RUST. 

As you might imagine, Glynn has sued for a number of causes of action, and there are other issues in this case, including an issue of personal jurisdiction, because Facepunch and Newman are both British (the court found personal jurisdiction to exist). However, to focus on the contract issue, the court found that the parties' e-mails on the subject of 60% of the profits if Glynn started developing games never rose to the level of an agreement. The court said that the terms about the compensation were "vague and indefinite," pointing to the words "eventually" and "something like 60%" and "TBD." Therefore, Glynn's breach of contract claims here were dismissed. The court also dismissed his promissory estoppel claims, finding that Newman's e-mail statements were too "vague and indefinite" to constitute promises. 

Glynn should have been sure to clarify his compensation before embarking on developing games for Facepunch. Of course, from Glynn's perspective, he was probably happy just to get a job, and, by the time he started developing games, he might have developed enough of a relationship with Facepunch that he didn't feel it necessary to rock the boat, so to speak. 

Glynn isn't completely out of luck, however. Although the court dismissed most of his claims, the lack of definite terms actually works in his favor in the copyright context. Because the parties were allegedly clear that Glynn was an independent contractor and not an employee, and because there was allegedly no agreement anywhere otherwise (so far, at this early stage), Glynn's claim for joint copyright ownership of RUST (and its associated causes of action) survived the motion to dismiss. So to be continued on the copyright question...

December 16, 2015 in Games, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)