ContractsProf Blog

What Does the Cruise Contract Say?

CNN's Erin Burnett did some intrepid reporting and "went to book a cruise . . .  on Carnival so we could look at the contract..."  The contract apparently says that, even after 5 days of being stuck on a disabled ship with no electricity or plumbing, "you're out of luck": 

Shute v. Carnival Cruise Lines reprise?

[Meredith R. Miller]

The Contract that Neither Party Intends

I've just returned from a semester in New Zealand, teaching an advanced contracts course at the beautiful Victoria University of Wellington. One of the best things about teaching at the law school was having David McLauchlan as a colleague. As many contracts profs know, David is an impressive and prolific contracts scholar and a highly respected expert on contract law. Some of his writings can be found here. During my visit, I had the privilege of hearing David present a paper with the intriguing title, “The Contract That Neither Party Intends.” In his paper, he tackles the issues of interpretation and responded to a recent New Zealand case which endorsed our very own Holmes' strict views regarding the objective approach to contract formation and interpretation. Professor McLauchlan offers several compelling reasons why that view should be rejected in favor of (also our very own) Corbin’s less stringent version of objectivity. The paper is a spirited discussion of interpretation issues ("promisee objectivity" v. "detached objectivity" aka "fly on the wall" theory) and discusses cases that are classics in American casebooks (such as the Peerless case) as well as New Zealand and Australian cases that may be unfamiliar to U.S. contracts profs. It goes to show that while contract law may be local, contract law issues are universal.

[Nancy Kim]

How Does One Value One's Flying (or Waiting) Experience?

LAX Security

Moshe's post today got me thinking about a recent experience that I had not thought about in contracts terms.  I was returning from a conference in Las Vegas (don't ask!) on my favorite airline, Southwest.  Because it was Southwest, I know exactly why my flight was delayed.

There was a mechanical problem with a plane bound for San Franciscio.  Because that flight had some connections that gave it priority over our flight to Chicago, Southwest decided to pull our plane and give it to the good folks heading off for San Francisco.  At first, they told us there would be a two-hour delay while until they could find a replacement jet for us.

As two hours became three hours, passengers became upset.  They voiced their anger at the gate attendants who were incredibly patient professional, courteous, and firm.  They provided the limited information they had; they acknowledged that the information was incomplete and that the lack of complete information caused the passengers to be justifiably frustrated.  They accommodated the needs of passengers, including someone who had checked her medication thinking that she would not need it on a three-hour flight that now was going to take (at least ) six hours.  And then, as David Bromberg would put it, they did something so incredible that to this very day I indict my own susceptibilities and reject my own anachronisms.

They called passengers up in alphabetical order and gave us $100 vouchers.  Some rejected the offer, saying they would never fly Southwest again.  "Who you gonna fly?" I thought, but the Southwest employees, just confirmed that the passengers were rejecting the offer and apologized again for the inconvenience.  The passengers responded by complaining that this was the worst travel experience they had ever had.  "You don't fly much," I thought but the Southwest emplyoees just apologized again and assured the passengers that they would be departing soon.

Then we switched gates and eventually piled into a plane. 

Which wouldn't start.  Whatever machine was supposed to start it wasn't working, and then the cart holding the backup to the backup broke, and then the backup to the backup to the backup didn't have enough power.  Word.  It was 100 degrees outside of course, and without power in the aircraft, it was more than a little uncomfortable inside as well.  But there would be no second $100 voucher.

So, Moshe, is $100 a reasonable offer?  I mean, there wasn't a corpse next to me, and in fact I didn't expect to get even $100, because frankly getting a sincere apology from an airline is a coup these days.  But if Southwest is going to compensate passengers for inconveniences caused by their own faulty equipment, why stop at a $100 voucher?

[JT]

Moshe Gelbard: An Illustration of Price Reduction in a Service Contract

The remedy of price reduction derives from the action quanti minoris of Roman law. It allows the purchaser to reduce the contract price to what the parties supposedly would have agreed upon had the contract originally been for the purchase of the nonconforming goods.  The remedy can be found in most European legal systems today; e.g., Section 1664 of the French Code Civil or Section 441 of the German B.G.B. The remedy is also mentioned in Section 50 of the Convention on the International Sale of Goods.  Originally, price reduction was limited to sales contracts, but Section 9.401 of the Principles of European Contract Law proposed extending the remedy to any “tender of performance not conforming to the contract.”

Professor Moshe Gelbard

A footnote in my forthcoming article, co-authored with David Elkins, (The Remedy of Price Reduction in Mixed Legal Systems, Stetson L. Rev., forthcoming 2012) recounts the following hypothetical case (derived from Common Frame of Reference and Existing EC Contract Law (Reiner Schulze ed., 2008) 322-323) to illustrate how price reduction might be used in a service contract:

 

A flies with a ticket for business class. Unfortunately, an economy class passenger dies during the flight. As the economy class is fully booked, the crew decide to transfer the corpse to business class and to tie it to the seat next to the one occupied by A. A may ask for a reduction of price which he or she paid for the flight, because having to sit next to a corpse in business does not conform with the passenger’s legitimate expectations, even if the air operator had no alternative option to solve the problem. In such a case it is difficult to determine a value of the reduction, since there is no market for flights with a corpse placed next to your seat. Possibly the price should at least be reduced to the level of the price for economy class…

Although the case appears to be one of those detached-from-reality hypotheticals that only a law professor could come up with, here’s an excerpt from a recent news story:

Lena Pettersson had just boarded her Tanzania-bound flight at Amsterdam Airport Schiphol when she noticed a man in his 30s looking unwell, the Expressen daily reported. Ms Pettersson, a journalist with Sveriges Radio, told the broadcaster that the man "was sweating and had cramps [seizures]." After the Kenya Airways plane took off, the man died, the Expressen reported. Cabin crew laid out the dead man across three seats and covered him with a blanket - but left his legs and feet sticking out, Ms Pettersson said. For the remainder of the overnight flight, Ms Pettersson was forced to sit near the dead man, with just an aisle separating her and the corpse. "Of course it was unpleasant, but I am not a person who makes a fuss," Ms Pettersson said. After her holiday in Tanzania, Ms Pettersson lodged a complaint with Kenya Airways, eventually receiving a 5000-kronor ($700) refund, half the price of her plane ticket.

Indeed, truth is stranger than (or at least as strange as) fiction.

[Posted on behalf of Moshe Gelbard by JT]

How to Make a Safety Video People Will Actually Watch

Because the enforceability of online contracts depends upon "reasonable notice," I often wonder whether we've stretched the term "reasonableness" to unreasonable extremes. Is it really reasonable to expect website visitors to click on hyperlinks? Hyperlinks within hyperlinked text? Because my research focuses on notice of contract terms, I am always interested in how to provide better, more effective notice.

Companies can provide notice with words, but they can also use images or video. Unfortunately, images, like text, can also be ignored. For example, how many times have you actually watched an airline safety video? What most airlines do is put attractive crew members on the screen who recite the basics and hope that people will pay attention. I recently took an Air New Zealand flight that took a very different approach - comedy! The safety video starred Richard Simmons of 80's spandex fame leading the crew through an aerobicized safety routine. One segment had crew members wearing body paint (you need to watch carefully - the paint is very skillfully applied). Several members of the super-popular rugby team, the All Blacks, made appearances - because they appeal to a broad cross section of the population (men, women, children), more passengers were likely to be engaged. The video was very funny and I watched the entire thing, both to and from my destination. I wasn't the only one. It seemed that everyone on the plane was paying attention. The video was just the right combination of humor, safety, and annoying-in-a-good-way (Richard Simmons excels at that). Was it effective? Well, I remembered where the exit rows and my life jacket were. Watch it yourself and just try to tear your eyes away from the screen.

 

 

[Nancy Kim]

 

 

Markets on the Mekong

I have returned from an enriching 5 weeks in Southeast Asia, mostly in frenetic Ho Chi Minh City, where I taught a class titled "Workplace Law in Global Context." I blogged about my travels at Saigoner, which would be of interest only to those readers with curiosity about what I ate (e.g., spider).

I'll be back in the contracts blogging saddle next week.  In the meantime, I wanted to share some thoughts and pictures that might be of interest to ContractsProf readers.

We stayed in a government owned hotel in Ho Chi Minh City.  I was amazed by its efficiency - in the U.S., a hotel run by the government would operate like the post office.

I've shared a few pictures of a floating market in Can Tho on the Mekong Delta. The floating markets are the main tourist attraction in Can Tho and they start up early in the morning.  A guide took us to see the boats; from the boats, people were all selling fruit wholesale.  To the masts of their boats, the sellers tie the fruit they have for sale.  Pineapples, watermellons and bananas were the main offering that day.  There was a little boat that went around like a convenience store for the sellers, in it a lady offered the sellers coffee and hot bowls of pho.

The floating market was very interesting, but the postcards in town all show a much more bustling scene.  There was a lot of activity, just not as much as pictured in those postcards.  It turns out that recent road and bridge construction has significantly reduced the amount of commerce done on the waterway in this fashion.  In fact, we were told that, in Thailand, there is a floating market that exists only for tourists; no real commerce is actually done there anymore.  I can’t help but wonder if that is eventually the fate of the floating market in Can Tho.

Along the banks of the Mekong, people live in clapboard houses made of whatever they can find – mostly pieces of shipping containers and plastic tarps.  The houses are on log stilts.  One of the houses was partly constructed with a plastic advertisement for Kaplan University.  

In Can Tho we also stopped at a factory where they process rice grains.  The big machines at the rice
processing factory were wooden and dusty and it seemed improbable that they still functioned the way they did.  We were told that Vietnam is second to Thailand as the world's largest rice producer. 

The Vietnamese have a refreshing lack of anxiety about heavy machinery.  In the U.S., we would not have been able to get that close to those rickety rice machines, and certainly not without a helmet and a waiver form.  Same goes for firing automatic weapons (I fired an AK-47 and an M-16 at the Cu Chi tunnels) and renting or hitching a ride on a moto-bike.

Another eye-opening field trip was a garment factory
tour I arranged for my class.  After a presentation on the company, we were toured around the factory.  It had over 1000 workers in the Ho Chi Minh outpost. You really cannot picture a room of 600 people making jackets for Columbia and Izod in assembly lines until you see it.  After the tour, we asked a million questions through an interpreter.  Most of the factory's buyers are U.S. and European companies.  I found it interesting that (at least thelast time I checked), Vietnam is not a signatory to the CISG.  This is especially so given that their garment exports apparrently rose 14% in the first 4 months of 2012 (and their claim as the world's second largest rice producer).

Finally, I thought readers would appreciate this picture from outside the Ho Chi Minh Stock Exchange (oh, the irony).  Their statue (as compared to this) is arguably a more honest depiction of markets.

[Meredith R. Miller]

 

The Contracting of Everything - Not in NZ

I've realized that I don't have much more time in beautiful New Zealand and that I've not come close to fulfilling my promise to share my observations about how N.Z. contracts (and contracting styles) differ from those in the U.S.( I also realized I haven't come close to fulfilling my twice-a-week posting promise to our blogmeister, JT, so guilt is building, especially now that Meredith has taken unpaid leave).

As I've previously mentioned, I've been struck by how infrequently I've been forced - er, asked - to sign a form contract while here in NZ. The primary reason is probably that there is much less need to worry about tort liability (since it's already quite limited). One thing I have noticed, however, is that the merchants here check my signature when I use my credit card. As Alex Kuczynski notes in this amusing essay, merchants in the U.S. tend not to check that your signature matches the one on the back of the card. In New Zealand, however, it happens all the time. When it first happened, I was admittedly a little offended. Was it my shabby clothing? My scuffed up shoes? It turns out there was no need to be so sensitive - it apparently happens to everyone.

Another contracting practice that differs is that the few times I have had to sign a consumer contract, it was emailed to me in pdf form. Unlike receiving a hyperlink to terms which you don't read, receiving a pdf somehow made me read the contract. It made me feel as though the company (in this case, a camper van rental company) really did want me to read the terms. After making a reservation online, I got a confirmation letter with a pdf containing the contract terms. Since I made the reservation 2 weeks in advance, I had that much time to read the contract. When I picked up the camper van, they handed me the same contract and I signed it (I could have also printed it out, signed it, and brought it with me if I had been better organized). Yes, it was still a contract of adhesion, but at least I knew what I was getting myself into.

I've always suspected that the contracting of everything tends to make consumers disregard contracts - how could we function if we actually read all the legal terms that are thrust our way (online terms included)? Maybe if companies cut back on some of the legalese, consumers might start to take contracts a little more seriously. Here's hoping...

[Nancy Kim]

 

 

Postcard from New Zealand....The Case of the Missing SFC

In my first post about my observations of contracting culture in New Zealand, I mentioned the unusual lack of contracts that consumers are forced to sign compared to in the States. Why wasn't I forced to sign a scary, multi-page, fine print form before my family was carried away on (very) rocky waters to swim with sea creatures in the open ocean? (Where was the laundry list of potential hazards that the company was not liable for, e.g. jumping in before the propeller blades were shut off, drowning, shock from the freezing water, hypothermia, being suffocated by too tight wetsuit and rubbery head cover, getting kicked in the face by flippers worn by German tourist....) Why didn't our visit to a traditional Maorian village include a standard form releasing the village from all liability if we fell into a steam vent or ate one of the very alluring, perfectly round and unusually blue berries that were tradiitonally used for dye - and which are very poisonous?

And then I found out about New Zealand's tort reform law. Back in the early seventies (the heyday of consumer regulatory reform everywhere, it seems), New Zealand adopted the Accident Compensation Act which basically abolished the ability to sue for personal injuries (providing a comprehensive no-fault benefits and rehabilitation scheme instead). I found this article by Peter Schuck which does a great job of outlining the kiwi approach to tort reform (which is, incidentally, called "Tort Reform, Kiwi-Style).

The case of the missing SFC. Mystery solved!

 [Nancy Kim]

Greetings from New Zealand!

I am spending a semester in beautiful Wellington, New Zealand where I will be teaching a course in advanced contracts at Victoria University. During my time here, I plan to occasionally post observations about the contracting culture and make sweeping (i.e. lacking in empirical evidence, see earlier post about Zev Eigen's article) generalizations about what that might mean.

One thing that I have noticed is that I haven't had to sign any form contracts since I arrived. I am thinking hard about this, but I honestly can't think of any except maybe at hotels and even then, those forms don't seem to contain the frightening litany of all the things the hotel won't be responsible for that you too often find in US standard forms (you know, "You agree not to indemnify and hold us harmless from any loss of limb, maiming, mayhem, other horrific catastrophic incident arising from your participation in this activity even if it was entirely our fault....") True, I haven't gone bungee jumping or white water rafting (yet), but I did dive into the freezing cold open ocean to swim with dolphins with my two children. (The fun ended when a family of orca appeared). Guess what? The dolphin company didn't ask me to sign a form. Could this have something to do with the fact that New Zealand is a much less litigious country than the U.S.? Is it less litigious because it's smaller, everyone feels like they are "in it together"? Or is it something else? Fewer lawyers? (I don't know if there are fewer lawyers per capita actually but I warned you that my posts would be highly unscientific).

While there seem to be fewer form contracts thrust in people's faces, there are a great many more notices. I rather like these notices as they are eye-catching, amusing and sometimes mysterious. I particularly like the road signs that don't pussy foot around: "TEXT AND DRIVE, SOMEONE DIES," "SLOW DOWN, STAY IN MANTROL". Notices, of course, are not contracts but they can serve some of the same functions. I've blogged about this in the past, and will blog more about this in the future as it is something I have been working on for a while. For now, I'll leave you with this image.

[Nancy Kim]

Contracts Issues in the Costa Concordia Wreck

When I was a teenager, I used to read Mad Magazine (when I wasn't reading Dostoevsky, Kafka or Sartre, of course).  I retain very few memories of my childhood, but one Mad feature stuck with me, although only vaguely.  The idea was to take a story and present it as it would be presented in magazines with very different perspectives on the world.  The story that Mad worked with was a football game, so of course one version was just to report on the game.  Another version was a medical journal featuring an image of some bone that had been broken during the game.  Another version that I remember distinctly featured a photograph of a football taken at very close range.  The image was supposed to represent how the football game would be featured in a photography magazine.  It described all of the particulars of the way the photograph was taken -- film speed, lens type, etc., and then mentioned that the photograph was of the ball as it soared through the uprights for the winning field goal, just before it smashed the photographer's camera.  A nice touch, in the estimation of my 13-year-old mind.  

I've often thought that this blog plays out Mad Magazine's idea, as do many other blogs and even the lamestream media.  And so, we pick over the carcass of a human and environmental catastrophe for a tidbit of contracts doctrine.  But we are not alone.  As the New York Times reported yesterday, it will be very difficult for any victims of the Costa Concordia wreck to go after the ship's corporate parent, Carnival Cruise Lines, for reasons that will strike a chord with fans of the civil procedure chestnut, Carninval Cruise Lines, Inc. v. Shute.

According to the Times, at least 70 passengers of the ill-fated cruise ship have signed on to a class-action lawsuit, but their ability to get at the corporate defendant will be greatly hindered by the Convention on Limitation of Liability for Maritime Claims, characterized on the International Maritime Organization Website as “a virtually unbreakable system of limiting liability," and by the terms contained in the 6,400-word contracts attached to their cruise tickets. 

The contract could provide great fodder for a few sessions on contractual remedies.

[JT]

Judge Posner on Contracts Issues in ATA v. FedEx

After a jury trial, ATA Airlines (ATA) won a nearly $66 million verdict against Federal Express Corporation (FedEx).  FedEx appealed that ruling to the 7th Circuit, and ATA filed a cross-appeal on its promissory estoppel claim in the event that FedEx should succeed on its appeal.  The appeal was decided by Chief Judge Easterbrook, along with Judges Posner (picutured) and Wood.  Judge Posner's opinion for the court can be found here.  

The facts of the case are pretty complicated.  FedEx is a team leader in the Civil Reserve Air Fleet program.  That means that in the event of a national emergency, it and its junior team members, which icludes ATA, have agreed to make a certain number of aircraft for use by the Department of Defense.  In return to this pledge, team members are assigned points that permit them to bid to provide non-emergency services to the government.  It turns out, the little guys are more interested in these opportunities than are large carriers like FedEx, and they are willing to pay for the points, which are transferable within a team.  The FedEx team earned $600 million a year providing non-emergency services to the government.

The agreements that created the team are also complicated.  The contract at issue here was not really a contract at all but more of an agreement in principle about how the parties would divide up the non-emergency service contracts for the years 2007-2009.  Because the parties could not know in advance what the government’s non-emergency needs would be, it could not know which of the air carriers would have the ability to meet those needs. Nonetheless, the parties agreed in principle to a 50/50 division of the work between ATA and another small carrier, Omni.  But the following year, some of ATA’s work was siphoned off to Northwest Airlines, and then following Delta’s acquisition of Northwest, ATA was replaced on the team with Delta.  In 2008, upon receiving notice that it would be replaced by Delta in 2009, ATA withdrew from the team and filed for bankruptcy, lacking sufficient non-government business to keep itself aloft.

The district court treated this agreement as an enforceable contract, but the 7^th Circuit disagreed.  Even if a court could somehow fill in terms relating to the various contingencies regarding the government’s needs and how those needs would be met, Judge Posner noted, the agreement had no price term relating to FedEx’s compensation for serving as team leader.  That price had varied from 4.5% to 7%, and there was no set of facts or trade usage available which could provide a basis for a court-supplied price term.

In the alternative, ATA argued that it relied on FedEx’s promise to give it 50% of the non-emergency business and was thus entitled to $28 million in reliance damages incurred in purchasing aircraft need to provide non-emergency services to the government.  The district court had found this claim to be preempted under the Airline Deregulation Act.  The 7^th Circuit disagreed, but rejected ATA’s promissory estoppel claim on the merits, since it was not reasonable for ATA to rely on a conditional promise and FedEx could not have expected such reliance based on its non-promise.

“So,” Judge Posner, concludes on page 13 of the opinion, “ATA loses.”  There follows another 15 pages about expert testimony and regression analyses which, happily, are not our concern.  In sum though, Judge Posner was not impressed with ATA's expert.  His conclusion:

Morriss’s regression had as many bloody wounds as Julius Caesar when he was stabbed 23 times by the Roman Senators led by Brutus.

Ouch.

The district judge does not escape without a bloody wound or two:

We have gone on at such length about the deficiencies of the regression analysis in order to remind district judges that, painful as it may be, it is their responsibility to screen expert testimony, however technical; we have suggested aids to the discharge of that responsibility. The responsibility is especially great in a jury trial, since jurors on average have an even lower comfort level with technical evidence than judges. The examination and cross- examination of Morriss were perfunctory and must have struck most, maybe all, of the jurors as gibberish.

Beware the Feast Day of Trophimus of Arles

[JT]

 

Greetings from Netanya...

Greetings from Netanya Academic College, where I will enjoy this symposium tomorrow: Law of Contract or Laws of Contracts (here's the program: Download Symposium).  Come join us if you are in Israel!

[Meredith R. Miller]

 

9th Circuit Rejects Northwest/Delta's "Hock Mir Nisht Keyn Chainik" Defense

On August 5th, the Ninth Circuit issued its opinion, reinstating plaintiff's claim for breach of the covenant of good faith and fair dealing in Ginsberg v. Northwest, Inc.

Plaintiff, Rabbi, S. Binyomin Ginsberg had been a member of Northwest's frequent flyer program, WorldPerks, since 1999.  By 2005, he was such a macher, Northwest granted him Platinum Elite Status (oy, what nachas!).  In 2008, Northwest revoked his membership. Ginsberg claims that Northwest took this action because he was a kvetch. We weren't there, of course, but we can imagine that Ginsberg was vocal about the inadequacies of modern air travel. Northwest's customer service department no doubt took the usual approach of such departments, wondering why anyone would complain about the quality of service provided by U.S. domestic airlines. When Ginsberg persisted, the corporation threw up its hands, said "Hock mir nisht kein chainek," or words to that effect, and terminated his membership.

The official reason provided for the termination was that Northwest had discretion "in its sole judgment," to cancel a member's account due to abuse of the program. Apparently, such judgment includes the ability terminate a membership if complaints persist after the "Enough with the complaining already!" warning.   Ginsberg sued, asserting four causes of action, but Northwest moved for dismissal, arguing that the Airline Deregulation Act (ADA) preempted all of Ginsberg's claims.  The nichtgutkeit District Court dismissed all of Ginsberg's claims, which was a real shonda. The only issue on appeal was whether the ADA preempted Ginsberg's claim for breach of the implied covenant of good faith and fair dealing.

The Ninth Circuit reviewed the purposes behind the ADA's preemption clause and determined that prior precedents had given that clause a narrow reading. Claims for breach of contract do not seem to be preempted.  More specifically, the Ninth Circuit found that Ginsberg's "claim for breach of the implied covenant of good faith and fair dealing does not interfere with the [ADA's] deregulatory mandate."  Moreover, the Ninth Circuit rejected the Distrct Court's finding that Ginsberg's claim related to prices and services. The Ninth Circuit found the link to prices too tenuous and found that the preemption clause was only intended to prevent states from dirctly "regulating rates, routes or services."  Ginsberg claim was not within the narrow scope of the preemption clause and thus was reinstated.  Such a mechaya!

Fuhr gesunderheit, Rabbi Ginsberg!

[JT]

 

Off to the Hague

As frequent readers of the blog may have noticed, I have been in Cambridge since late June.  This weekend, I am taking my students to the Hague, so that we can visit the ICC, the ICJ and meet with one of Radovan Karadzic's attorneys.  We are flying Easyjet, which only permits passengers to take along a deck of cards, unless they are willing to pay to check bags.  As a result, I will be without my computer and out of commission for the rest of the week.

There might not be a whole lot going on in this space for the next few days, but you can look at these pictures and contemplate the wonders of . . . contracts.

[JT]

TSA and Private Screeners: The Difference?

As NPR reports here, the Transportation Security Administration does not want to hire private screeners to work at any more airports, although the private contractors will continue their work at the 16 airports at which they currently operate.  Florida Republican Representative John Mica (pictured right) protests, claiming that TSA is bloated and we would be better off with private screeners, given that "[n]early every positive security innovation since the beginning of TSA has come from the contractor screening program."

What innovations could Representative Mica be thinking of?  I wonder what the result would be if you asked airline travelers to name their favorite innovations in airport security in the past ten years.  Daniel Solove has been tracking these developments over at Concurring Opinions at some time.  Here is his post about standard TSA procedures.  How have things improved in the past few years?  Well, here is Solove's more recent post on the subject.  Is this the sort of innovation about which the good Congressman is crowing?

Not for nothing, NPR notes that Congressman Mica has received campaign donations from some of the private companies that are trying to win contracts to provide airport screeners.  A spokesman denies that such donations have played any role in the Congressman's position on this issue.  

The Kansas City Star now reports that Senator Roy Blunt (pictured left) is also sponsoring legislation that would encourage the use of private screeners.  The legislation is said to be a response to the TSA's denial of a request by the Springfield-Branson airport to switch to private screeners.  The request reportedly came after two reports of federal employees being neglectful of passengers at the airport, causing delays that resulted in people missing their flights.  

According to the TSA's website, the standards for screening are identical, whether the screeners are private or federal: "TSA sets the security protocols and standards for all commercial airports nationwide, to include airports participating in [the private screeners programs]."  That would suggest that one's experience of private screeners should not be significantly different from one's experience of federal screeners.  But perhaps the private screeners are cheaper?  No, according to TSA:

ATSA mandates private screening companies to provide compensation and other benefits to their screeners that are not less than the level of compensation and other benefits provided to comparable Federal Government personnel. TSA conducted an extensive review of the private contractors and found overall the private screening companies are providing pay and benefits that equal or exceed the pay and benefits provided by the Federal Government.

But since the TSA has to monitor the private screeners, and because there are transactions costs involved in negotiating the terms under which the private contractors serve, it seems likely that private screeners actually add costs, even if they are not better paid.  And then what of legal wrangling if there are allegations of misconduct by a private screener?   

So, the argument for private screeners must run something like this.  Private companies are preferable because competition leads to better efficiency and better customer service.  In addition, private companies might have more rigorous hiring practices that ensure a higher quality of personnel.  Is there any empirical basis to support such reasoning or are there other justifications for preferring private screeners?

[JT]

Travel Advisory: Prostitution Is Illegal in Las Vegas

Breaking news from the New York Daily News, which now seems to be little more than a front organization for the Onion News Network.  According to the Daily News, New York college student Hubert Blackman is suing an escort service for $1.8 million.  He was unhappy because the stripper who performed a lap dance and a sex act for him left after half an hour and he had paid for an hour.  Here we have a dramatic reconstruction of their interactions [please note, the actors have substituted the word "argument" for an unspecified sex act in order to retain our PG-13 rating]:

Mr. Blackman was traumatized by the incident, especially since, when he called the police to complain about this breach of contract, they threatened to have him arrested and insisted on calling him "John" even though his name is Hubert. 

[JT]

American Airlines Wins Favorable Ruling in Fight with Orbitz

Last week, Judge Martin Agran of the Cook County Circuit Court issued a ruling in Travelport, LP v. American Airlines, Inc. Case No. 10 CH 48028.  Unfortunately, I have been unable to find the opinion on the web, so I am relying on other reports that I have found on the web.  As reported in The Mercury here, American threatened to pull its flights from Orbitz's site on December 1st as a result of a dispute over American's attempts to provide information about its flights directly to Orbitz and thus to cut out middlemen known as global distribution systems which track the airlines and provide the information to travel sites such as Orbitz.  While Travelport, which owns 48% of Orbitz was initially granted an injunction forcing American to continue posting its flights on the travel site, Judge Agran now has ruled that no injunction is necessary, as American can simply pay damages if it is found to have breached its contract with Orbitz.

Apparently, under the current system, airlines such as American have to pay a fee to Orbitz when its customers book a flight with the airlines and also to the global distribution systems, which make flight information available.  As anyone who has paid to check a bag, or to have legroom or to have a snack or a drink on an American Airlines flight known, American prefers to charge money rather than spend it.  So it is now proposing to provide its own flight information and have Orbitz pay for access to that information.  Travel industry experts claim that cutting out the middlemen will make it harder for consumers to comparison shop and will create confusion.  

I checked on December 30th, and Orbitz does not seem to be offering flights on American Airlines right now. The short-term effect of Judge Agran's decision will thus make matters a bit more difficult for consumers.  The website Travelpulse.com reports that the Business Travel Coalition is unhappy with the ruling for that reason.  eTurboNews provides a quotation from BTC Chairman Kevin Mitchell here:

The stakes in this conflict are clear: either an improved airline industry and distribution marketplace centered around the consumer, or one that subordinates consumer interests to the self-serving motivations of individual airlines endeavoring to impose their wills on consumers and the other participants in the travel industry.  Single-supplier direct connect proposals, like the one advanced by American Airlines, can cause massive fragmentation of airfares and ancillary fees depriving consumers of the ability to compare the total cost of air travel options across all airlines.

The same article provides survey results indicating business travel managers' hostility to American's new strategy.  It appears that American is trying to learn from its more efficient rival, Southwest, which already has its own information distribution system.  

For reasons unexplored in the articles I found, American's flights are listed on Expedia.  In order to book with Southwest, you have to go to their website,  And that may be the future for American as well.

[JT]

Update: The New York Times, frustrated at having been scooped once again by this blog, has now published a full report with more information.  Among other things, the report notes that American has taken down its flights from Expedia.com as well now.  It looks as though Delta might follow American's lead.  The Times report is also the clearest I have thus far found about what is motivating this move, beyond the general observation that the big airlines are looking for ways to cut costs and increase revenues.

The (fairly) short goodbye . . . .

 
Well, not "goodbye," exactly, but after six years I'm stepping aside as the point dog on the ContractsProf sled.  Our esteemed limerickist (if that's a word), longtime contributor, and all-around good guy Jeremy Telman (Valparaiso) is taking over.

I've enjoyed helping to build the blog, and I expect to still frequently appear as a contributor, but I'm working on another web project that's going to be taking too much time to keep posting as often here.  (Details will follow in a month or two.)  But we have a bevy of new contributors who will be bringing a host of new perspectives, and I'm sure you'll enjoy their work.  Since I'm on vacation with the family (above, me with the boys cruising on the river in Tokyo) I'll let Jeremy introduce them in the near future.  You'll be happy to know that Meredith, Miriam, and Keith will be sticking around.

Thanks to all our regular readers and our visitors who've made this so much fun, and to LPBN Czars Paul Caron and Joe Hodnicki who invited me to do this.  Have a very Merry Christmas and a Happy New Year!

FGS