ContractsProf Blog

Editor: D. A. Jeremy Telman
Valparaiso Univ. Law School

Thursday, March 5, 2015

Artistic license

Artistic License

The official portrait of former President Bill Clinton has been completed.  See it here.   It was painted in the “conservative realistic style” … maybe a little too realistic and not sufficiently conservative?

According to the artist, Nelson Shanks, the bluish shadow of a person that you see on the mantelpiece next to Clinton is that of Monica Lewinski in her infamous blue dress.  You got that right: the artist himself has admitted that he purposefully scarred the picture just as the Lewinsky scandal scarred Clinton’s second term.  The artist has apparently caught quite some flak for having done this.  Regardless of artistic freedom and setting aside all thoughts about the scandal per se, what is, after all, at issue here is a contract for artwork depicting a former President of the United States of America.  A bit more respect may have been in order.  This was not any regular client having a portrait done; it’s in effect the entire nation that commissioned this work.  Perhaps a subjective satisfaction clause would have been in order here.  Even if it had been any “regular” client, deliberately depicting one’s paying client in a highly controversial light seems to me to be in questionable taste. 

On the other hand, the argument has been made that if the artist had been held to certain contractual stipulations, the portrait of the 42nd President would have been “stiff and untrue.”  

That’s not the case?  Take a look and judge for yourself.  While much has been made of Clinton holding an actual, gash, newspaper – so retro – the strange positioning of his fingers on his hip looks more bizarre to me.  An indication of his alleged two-sided look at what constituted “the truth” in certain contexts?  To me, it looks more like the V sign for, perhaps, Clinton’s ultimate victory over at least some of the political and other challenges he faced.  




March 5, 2015 in Commentary, Government Contracting, In the News, True Contracts | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 3, 2015

Want a Class with that Barrista Job?

Last year, Starbucks announced a new corporate-supported educational program that one year later is still viable: Starbucks will reimburse its full-time workers for taking online classes with Arizona State University.  Partial tuition (58%) will be offered to freshmen and sophomores and full tuition for juniors and seniors as long as credits are earned within the past 18 months so as to keep students on track.  

As you may have noticed if you are a Starbucks customer, very many of its employees appear to be college-aged.  In fact, 70% of Starbucks’ workforce are either in school already or have had to drop out because of various personal difficulties.  

This program seems to be a benefit to employees who cannot afford to go to school full time (or even part time), but who desire and education.  What is remarkable is also how few “strings” are attached to the program.  For example, the employees do not even have to stay with Starbucks after the completion of their degree.  Said CEO Howard Schultz (still the CEO): "We want to attract and retain great people. We want to provide [our employees] with new tools and new resources to have advancements in the company.” 

What is in it for ASU?  This has been said to be a coup for the university, which already has one of the nation’s largest and most highly regarded online programs.   Of course, Starbucks has a large amount of employees with, presumably, many coming and going, so ASU now has access to a large database of potential students, something many universities – private and public - are craving in these competitive times.

For the students and the university, rates may be discounted.  This is normal in this type of situation.   What would truly make a difference would be if the rates could become so reduced for students that they would, in effect, have no out-of-pocket costs altogether. 

What, to me, is interesting about this situation is that a public university has found out workable model for online classes and cooperation with a private business venture when many private universities have not. 

The somewhat strange catch here is that ASU cannot enter into any other arrangement with a for-profit business for four years, but that Starbucks is free to advertise its partnerships with a few other schools.

See the contract at issue here.

See Starbucks’ description of the program here.

March 3, 2015 in Commentary, Current Affairs, E-commerce, Food and Drink, Labor Contracts, Teaching, True Contracts | Permalink | Comments (0) | TrackBack (0)

Monday, February 23, 2015

Contract Modifications – Differing Standards for Pop Stars?

2012 American Idol winner Phillip Phillips has lodged a “bombshell petition” with the California Labor Commissioner seeking to void contracts that Phillips now finds manipulative, oppressive, and “fatally conflicted.”  

Before winning season 11 of “American Idol,” Phillips signed a series of contracts with show producer “19 Entertainment” governing such issues as his management, recording and merchandising activities.  These contracts are allegedly very favorable to 19 Entertainment, for example allowing the company as much as a 40% share of any moneys made from endorsements, withholding information from Phillips about aspects of his contractual performance such as the name of his album before it was announced publicly, and  requiring Phillips to (once) perform a live show once without compensation.  19 Entertainment has also lined up such gigs for Phillips as performing at a World Series Game, appearing on “Ellen,” the “Today Show,” and “The View.”

It is apparently not unusual for those on successful TV reality shows to renegotiate deals at some point once their career gets underway.  Phillips claims that he too frequently requested this, but that 19 Entertainment turned his requests down.  Can he really expect them to agree to post-hoc contract modifications?

Very arguably not.  Under the notion of a pre-existing legal duty, a party simply cannot expect that the other party to a contract should have to or, much less, should be willing to change the contractually expected exchange of performances.  This seems to be especially so in relation to TV reality shows where the entire risk/benefit analysis to the producer is that the “stars” may or may not hit it big.  For hopeful stars, the same considerations apply: their contracts may lead them to fame and fortune… or not.  That’s the whole idea behind these types of contracts.  Of course, if industry practice is to change the contracts along the way and if both parties are willing to do so, they are free to do so.  Otherwise, the standards for contractual modifications are probably the same for entertainment stars as for “regular” contractual parties. 

Another issue in this case is whether an “agent” is a company or a physical person.  Under the California Talent Agencies Act (“TAA”), only licensed “talent agents” can procure employment for clients.   Phillips is attempting to apply the TAA to entertainment companies like 19 Entertainment.  If Phillips is successful, the ramifications may be significant for the entertainment industry in which companies very often negotiate deals with performers without taking the TAA into account.  In Citizens United v. Federal Election Commission, the United States Supreme Court famously gave personal rights to corporations, albeit only in the election context.   Time will tell how California looks at the issue of corporate personhood and responsibilities in the entertainment context.

Adjudications under the controversial TAA are notoriously slow and could leave contractual parites in “limbo” for a very long time.  Time and patience is not what Hollywood parties are known to have a lot of, so stay tuned for the outcome of this dispute.

February 23, 2015 in Celebrity Contracts, Current Affairs, In the News, Legislation, Television, True Contracts | Permalink | Comments (0) | TrackBack (0)

Tuesday, February 17, 2015

Submitting a Law Review Article about Wrap Contracts through a Wrap Contract

I've been away from the submission process for a few years.  In the meantime, Scholastica has entered the picture, which from an author's view is simply an expensive headache, and more journals are encouraging authors to submit directly through either e-mail or their own online submissions process. 

Having been a historian before becoming a law professor, I am still grateful for the advantages of student-edited law journals and authors' ability to submit to scores of journals simultaneously.  I still believe that this process is better for authors and not significantly less arbitrary that double-blind peer review.  Lots of scholarship gets published that does not end up getting used or cited under both systems, but the peer review process banishes lots of possibly meritorious scholarship to the dung-heap of history based on the opinions of two people whose reasoning might be insufficient to justify such a heavy penalty.

That said, I do find a new feature of online submission processes disquieting.  At least one journal that encourages authors to submit through their online submission form features a Submission Agreement that includes a link to a separate page containing the journal's "attribution and usage policies."  The latter are incorporated by reference, and thus one must agree to them in advance before submitting the article.  There is nothing particularly onerous in the Submission Agreement or the usage policies, but the problem is that authors submit to dozens or scores of journals.  The journals cannot really expect authors (or their administrative assistants who submit on their behalves) to read through boilerplate terms.  So there we have it -- forms that purport to bind law professors to terms to which they have not meaningfully consented.  This is especially ironic if, like me, you have been writing about the dangers of form contracts and the degraded version of "consent" in this context. 

The practice is especially irksome as the submission process does not otherwise involve a contract.  When I submit my article to multiple journals for publication, I am submitting an invitation for offers.  I have no obligation to the journals, and they have no obligation to me.  They don't even have to read my piece before rejecting it, nor do they have to respond in any way to me.  And if they do offer to accept my piece (which, note, is typically described as an "offer to publish" not as an "acceptance"), I can reject that offer and go merrily on my way.  

The introduction of form contracts at the submission state --  a point at which the parties have no legal relationship -- is simply unnecessary.

February 17, 2015 in Commentary, True Contracts | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 27, 2015

A Contract to Kill but no Intent to

A young Norwegian man has been fined $1,300 for accepting a contract to kill without the intent to follow up on it.  Yes, you read that right: all the authorities could charge this man with was contractual fraud.  Another 21-year old man ordered the killing of a teenage girl who had rejected the man’s romantic advances.  The punishment for the “offeror”?  Two years in prison with most of the sentence suspended because the suspect confessed.

Good thing that these men were caught and convicted of something… sort of a gruesome twist on the old, classic Al Capone story (of course, Capone only pled guilty to tax evasion and prohibition charges).  I know that the Scandinavian countries do not believe in the rehabilitative effects of relatively severe sentences such as those often dished out in the USA, but still...  Two years and $1,300 for an attempted contract on a teenage girl’s head?  That seems too lenient to me. 

January 27, 2015 in Famous Cases, In the News, Miscellaneous, True Contracts | Permalink | TrackBack (0)

Wednesday, December 31, 2014

Flying the Less Friendly Skies

Last month, United Airlines and Orbitz filed a by-now famous lawsuit against the 22-year-old computer specialist who created the website  This website helps consumers find the cheapest round-trip airfare possible by buying tickets to a destination to which the traveler does not actually intend to travel, but instead getting off at a layover point which is the truly intended destination and discarding the last portion of the ticket.  Roundtrip tickets to certain popular destinations are often much cheaper than to other destinations sought by fewer passengers even though the more popular destinations are further away from one’s point of origin. 

To not cause the airline and other passengers undue trouble and delays, this practice, of course, requires not checking in luggage which, it seems, fewer and fewer travelers do anyway (next time you fly, notice the rush to get on board first with suitcases often much bigger than officially allowed and airline personnel deliberately ignoring this for reasons of “competition”).

The cause of action for this lawsuit?  “Unfair competition,” and breach of contract because of “strictly prohibited travel,” and tortuous interference with contract.

Unfair competition?  I admit that I have not yet read the rather long complaint, but I look forward to doing so very soon.  At first blush, however, how can “unfair” can it really be to assist consumers in finding airfare that they want at the best prices available?  United Airlines recognizes that there is a discrepancy between its prices to very popular destinations and others on the way, but claims [cite] that if many people “take advantage” of that price differential, it could “hurt the airlines.”  Come again?  Does it really matter that a customer – with no checked-in luggage – pays whatever price the airline itself has set but simply decides not to use up the entire item purchased?  Doesn’t that simply let the airline save gas and potentially give the empty seat to potential stand-by customers?  Does it matter to a newspaper that I choose to not read the sports pages? Must I eat the heal of my bread even though I don't like it?  What if I really don't like my bread and would rather eat a donut instead, as I thought might be the case?

The issue of breach of contract is arguably a closer one.  If airlines “strictly prohibit” the practice of only using part of a ticket, it may be promissory fraud to buy a ticket if one intends at the time of purchase to only use part of it.  This could also relate to the purchase of a round-trip ticket only to use it one-way as that too is often cheaper than a one-way ticket, as Justice Scalia found out himself recently.

The creator argues that he is only taking advantage of “inefficiencies” in airline travel that travelers have known about for a long time.  To me, it seems that airline contracting should work both ways as other types of contracting: airlines take advantage of their bargaining positions as well as their sophisticated knowledge of current and future air travel supply and demand structures.  They should do so!  I applaud them for that.  Jet travel has certainly made my personal and professional life much better than without relatively cheap air travel.  But every first year contracts law student also knows (or should know!) that contracting is not and should not be a one-way street.  Consumers too are getting more and more sophisticated when it comes to airline travel and other types of online contracting.  Websites enable us to inform ourselves about what we wish to spend our money on.  As long as consumers do not break the laws or violate established contracting principles, that does not strike me as “unfair competition,” that is simply informed consumerism in a modern capitalist society from which airlines and others have already benefited greatly.

Airlines, wake up: how about working with your customers instead of trying to fight them and modern purchasing trends?  How’s this for a thought: start offering one-way tickets for about half of a round-trip ticket just like other transportation vendors (trains, buses, subways) do.  Don’t you think that could set you apart from your competition and thus even earn you more customers?  If you can fly for a certain amount of money to a certain city, let people pay that only and then simply sell a second ticket for the remaining leg to the more popular end destination where the same plane is headed anyway.  Let people off the bus if they want to!  Let some one else on instead.  It doesn’t seem that hard to figure out how to work with current purchasing trends and your customers instead of resisting the inevitable.

For another grotesquely inappropriate lawsuit by United Airlines against its own customer, see Jeremy’s blog here.

I will blog more on this issue over the days to come.  For now, I’m glad I don’t have to head to an airport.  Happy New Year!

December 31, 2014 in Commentary, Contract Profs, Current Affairs, E-commerce, Famous Cases, Travel, True Contracts, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 9, 2014

California Goes after Shared Ride Companies

Jeremy Telman and I both recently blogged on the intense criticism of and focus on “shared economy” companies such as Uber, Lyft and airbnb.

In what seemed an inevitable turn of events, the Los Angeles and San Francisco district attorneys filed a consumer protection lawsuit on 12/9/2010 against Uber for making false and misleading statements about Uber’s background checks of its drivers.  George Gascon, the district attorney for San Francisco, calls these checks “completely worthless” because Uber does not fingerprint its drivers.  Uber successfully fought state legislation that would have subjected the company’s drivers to the same rules as those required of taxi drivers.  Allegedly, Uber has also defrauded its customers for charging its passengers an “airport fee toll” even though no tolls were paid for rides to and from SFO, and charging a “$1 safe ride fee” for Uber’s background check process.  California laws up to $2,500 per violation.  There are “tens of thousands” of alleged violations by Uber.  However, even that will likely put only a small dent in Uber’s economy as it is now valued at $40 billion (yes, with a “b”). 

Lyft has settled in relation to similar charges and has agreed to submit information to the state to verify the accuracy of its fares (although not its background checks).  It has also agreed to stop picking up passengers at airports until it has obtained necessary permits.  Prosecutors are continuing talks with Sidecar.

Time will tell what prosecutors around the nation decide to do against these and similar start-ups such as airbnb and, which are also said to bend or outright ignore existing rules.

The Los Angeles Times comments that the so-called “sharing economy” companies face growing pains that “start-ups in the past didn’t – dealing with municipalities around the world, each with their own local, regional and countrywide laws.”  It is hard to feel too sorry for the start-ups on this account.  First, all companies obviously have to observe the law, whether a start-up or not.  Today’s regulations may or may not be more complex than what start-ups have had to deal with before.  However, these companies should not be unfamiliar with complex modern-day challenges as that is precisely what they benefit from themselves, albeit in a more technological way.  Finally, there is something these companies can do about the legal complexity they face: hire savvy attorneys!  There are enough of them out there who can help out.  But perhaps these companies don’t care to “share” their profits all that much?  One has to wonder.  Sometimes, it seems that technological innovation and building up companies as fast as possible takes priority over observing the law. 

December 9, 2014 in Commentary, Current Affairs, E-commerce, Famous Cases, In the News, True Contracts, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Friday, November 21, 2014

Happy Thanksgiving: Here's a Special Adhesion Contract Just for You

A student shared with me this flyer that her father received.  I have provided a large reproduction so that readers can read the fine print, which is really the focus of this post.


 On my reading, the meaning of this is as follows: if

  • You made the mistake of having previously subscribed to the newspaper; and
  • You have the temerity to continue living at the same address; and
  • You do nothing else,

A newspaper will be delivered to you on Thanksgiving.  

Regardless of what you do with it, your inaction will be deemed consent to future deliveries and you will be charged unless you call the newspaper and put a stop to it.  

This "offer" is a turkey, and those receiving it should tell the newspaper to stuff it.

November 21, 2014 in Commentary, True Contracts | Permalink | Comments (2) | TrackBack (0)

Friday, September 12, 2014

Introducing the Virtual Symposium on "More That You Wanted to Know"

We begin our upcoming virtual symposium with this introduction provided by the authors of the book that we are subjecting to strict scrutiny, Omri Ben-Shahar and Carl E. Schneider.

Morethan  MORE THAN YOU WANTED TO KNOW: The Failure of Mandated Disclosure 

When he famously wrote 100 years ago, “Sunlight is the best of disinfectants,” Justice Louis Brandeis began a century of disclosure law.  How do we protect borrowers and investors? Disclosure! How do we help patients choose safe treatments and good health plans? Disclosure! How do we regulate websites’ privacy policies? Disclosure!

In area after area, mandated disclosure is lawmakers’ favorite way to protect people facing unfamiliar challenges.  Truth in lending laws, informed consent, food labeling, conflicts-of-interests regulation, even Miranda warnings, all arose because lawmakers rightly worried that uninformed and inexperienced people might make disastrous choices.

Brandeis was wrong. True, these laws have a worthy goal – equipping us to make better decisions. But in sector after sector, studies steadily show that mandated disclosure has been almost as useless as it is ubiquitous. Financial crises have bred mandates for decades — the Securities Act of 1933, truth-in-lending laws in the 60s and 70s, Sarbanes-Oxley in 2002, and, after the 2008 crisis, the Dodd-Frank Act.  But each new crisis occurred despite the old elaborate disclosure requirements.

In our new book MORE THAN YOU WANTED TO KNOW: The Failure of Mandated Disclosure, we explain that mandated disclosure has become the regulatory default.  It is politically easy for legislatures and convenient for courts. 

Sunlight doesn’t disinfect because mandated disclosure is so ill-suited to address the problems it faces – and, in fact, can do more harm than good. Consider one of the most heroic efforts to get disclosure right. “Know Before You Owe” is a new regulation issued by the Consumer Financial Protection Bureau, the agency responsible to reform consumer credit markets. The Bureau recognized that people took bad mortgages because they misunderstood the terms. To prevent this, the Bureau heeded the Dodd-Frank mandate to promote “comprehension, comparison, and choice.” After much intelligent work, the Bureau has a new, simpler form that has done well in laboratory tests:

Bedsheet 1 Bedsheet 2





Gone are the tiny fonts and the overloaded lines of the old form (on right). The new form (on left) is a masterpiece of design, declaring the dawn of a new era of smart and simplified disclosure, designed by lawmakers schooled in decision sciences and cost-benefit analysis.

But mortgage disclosure has to work in the bank, not in the regulators’ lab. When borrowers arrive at a real-world loan closing, they will get the Bureau’s new form and almost 50 other disclosure forms about issues like insurance, taxation, privacy, security, fraud, and constitutional rights.  The new form is part of a stack more than 100 pages high, courtesy of many laws from many lawmakers over many years.  Nobody plows through all this. And no single agency has the authority to pare down the stack. 

Despite failures, disclosures are growing in number and in length. In health care, informed consent sheets now look like the fine print web users click “I Agree” to, thoughtlessly.  Just reviewing the privacy disclosures received in one year would take a well-educated fast reader 76 work days, for a national total of over 50 billion hours and a cost in readers’ time greater than Florida’s GDP. In banking law, to describe the many fees in a garden variety checking account, the average disclosure is twice as long (and quite as dismaying) as Romeo and Juliet (111 pages).

In internet commerce, if you want to buy an iTunes song you are told (as the law requires) to click the agreement to the disclosed terms.   Do you read before clicking?  Of course not.   Florencia Marotta-Wurgler and co-authors have showed that only one in a thousand software shoppers spend even one second on the terms page.  And if you do print out the iTunes terms, you confront 32 feet of print in 8-point font (See Ben-Shahar’s photo with the iTunes Scroll below).  Hard as you read, you can’t understand the words, what the clauses mean, or why they matter.

Omri 1

What about simplifying with just a few scores or letters, like A, B, and C grades for restaurant hygiene?  Alas, boiling complex data down to a manageable form usually eliminates or distorts relevant factors.  So a recent study by Daniel Ho at Stanford found that the volatility of restaurant cleanliness and the discretion given to inspectors make hygiene scores unreliable and even misleading – and do not detectably help public health.  There is almost no evidence that the simplest of all scores – the loan’s APR – has helped people make better loan decisions, and there is plenty of evidence that it didn’t. 

If disclosures are so futile, why do lawmakers keep mandating them?  Because disclosure mandates look like easy solutions to hard problems.  When crises occur, lawmakers must act.  Regulation with bite provokes bitter battles (often stalemate); mandated disclosure wins sweet accord (near unanimity).  Mandated disclosure appeals to both liberals (personal autonomy and transparency) and conservatives (efficient markets).   And as one financier admitted, "I would rather disclose than be regulated."  

But disclosures are not just inept. They can be harmful. Disclosure mandates spare lawmakers the pain of enacting more effective but less popular reforms.  Disclosures help firms avoid liability, even when they act deceptively or dangerously. Disclosures can be inequitable, for complex language is likelier to be understood by those who are highly educated and to overwhelm and confuse those who aren’t. Mandated disclosures can crowd out better information (time spent “consenting” patients cannot be spent treating them). 

We are often asked what should replace mandated disclosure.  If it does not work, little is lost in abandoning it.  And if it cannot work, the rational response is not to search for another (doomed) panacea, but to bite the bullet and ask which social problems actually require regulation and what regulation might actually lessen the problem. We do not envy lawmakers the hard work of helping people cope with the modern consumer’s life.  But persisting in mandating disclosures is, as Samuel Johnson said of second marriages, the triumph of hope over experience.

Ben-Shahar is Leo and Eileen Herzel Professor of Law, University of Chicago.

Schneider is the Chauncey Stillman Professor of Law and Professor of Internal Medicine, University of Michigan.

September 12, 2014 in About this Blog, Books, Recent Scholarship, True Contracts, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Wednesday, September 10, 2014

Craigslist’s Liquidated Damages Clause – Are Actual Damages Too Difficult To Calculate?

By Myanna Dellinger

Craigslist has decided to crack down on companies that use data from its websites to generate ads on competing websites. 

Technically, this can be and is done by various software programs (“spiders, “crawlers,” “scrapers” and the like) that look through craigslist and automatically cull information that can be reposted outside the Craigslist sites. 

Craigslists’ terms of use clearly state that “[b]y accessing our servers, websites, or content therefrom, you agree to these terms of use” and that “[r]obots, spiders, scripts, scrapers, crawlers, etc. are prohibited ….  You agree not to collect users' personal and/or contact information (‘PI’).”  Further, users are asked to pay Craigslist “for breaching or inducing others to breach the ‘USE’ section, not as a penalty, but as a reasonable estimate of our damages (actual damages are often hard to calculate): $0.10 per server request, $1 per post, email, flag, or account created, $1 per item of PI collected, and $1000 per software distribution, capped at $25,000 per day.”

Previously, a question may have been raised as regards whether this type of “click-through” acceptance would be valid or not.  However, as noted in another blog, online contracts are, modernly, not only valid, but also carry more force when the site requires a user to affirmatively click on an “I accept”-style button rather than when a site simply features the terms of use someplace on a website without any further action to be taken by the user as regards the contractual terms.

Courts broadly uphold liquidated damages clauses as long as they are not punitive in nature.   Some of the factors that play into this rule is whether actual damages would be difficult to calculate after the breach occurs and whether they are unreasonably large. 

In the Craigslist case, an issue may be whether actual damages would be difficult to calculate.  Craiglist’s statement in its terms of use that its liquidated damages are “not a penalty, but [] a reasonable estimate of our damages” is, of course, highly boot-strapping and thus won’t be given much, if any, weight in court.  But are damages easy to calculate in cases such as this?  For example, PadMapper is an apartment-finder site that allegedly uses data collected from Craigslist and similar sites.  But even if this can be proved (which would be easy if, for example, a user only posted his/her information to one site), what about the damages to Craigslist?  Since the company typically does not charge at least private users for posting “for rent” or “for sale” ads, and since its users arguably often cross-post listings anyway, how would Craiglist be able to trace damages for collecting “its” data to a specific, ultimate amount of damages?  Isn’t doing so in fact simply too speculative?  If so, liquidated damages seem to be in order.

With today’s many links to links to links, cross postings and machines retrieving data and using it for various purposes (not only commercial ones), contractual damages calculations may be too difficult and, for a court of law, too timeconsuming to be worth the judicial hassle.  Liquidated damages are known to, among other things, present greater judicial efficiencies, which is very relevant in these kinds of cases.  Perhaps Contracts Law needs to move towards an even broader recognition of such clauses and not be so concerned with the potential punitive aspect, at least as regards the “difficulty in calculation” aspect of the rule.  After all, damages also serve a deterrent function.  Sophisticated businesses operating programs specifically designed to retrieve data from other companies’ websites should - and logically must, in 2014 - be said to be on notice that they may be violating contractual agreements if they in effect just lift data from others without paying for it and without getting a specific permission to do so.

And what about consumer rights?  If a person for some reason only wants his or her information posted on one particular site, why should it be possible for other companies to override that decision and post the information on other sites as well? 

One thing is unavoidable technological change.  Quite another is violating reasonable consumer and corporate expectations.  Some measure of “stick” seems to be in order here.


September 10, 2014 in Current Affairs, E-commerce, True Contracts, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Friday, July 18, 2014

Overzealous or Legitimate Debt Collection Practices

By Myanna Dellinger

A woman owes $20 to Kohl’s on a credit card.  The debt collector allegedly started to “harass” the woman over the debt, calling her cell phone up to 22 times per week as early as 6 a.m. and occasionally after midnight.  What would a reasonable customer do?  Probably pay the debt, which the woman admits was only a “measly $20.”  What did this woman do?  Not to pay the small debt, telling the caller that they had “the wrong number,” and follow the great American tradition of filing suit, alleging violations of the 1991 Telephone Consumer Protection Act which, among other things, makes it illegal to call cell phones using auto dialers or prerecorded voices without the recipient’s consent.

Consumer protection rules also prohibit collection agencies from calling before 8 a.m. and after 9 p.m., calling multiple times during one day, leaving voicemail messages at a work number, or continuing to call a work phone number if told not to. 

Last year, Bank of America agreed to pay $32 million to settle claims relating to allegations of illegally using robo-debt collectors.  Discover also settled a claim alleging that they violated the rules by calling people’s cell phones without their consent.  Just recently, a man’s recorded 20-minute call to Comcast pleading with their representative to cancel his cable and internet service went viral online.

The legal moral of these stories is that companies are not and should, of course, not be allowed to harass anyone to collect on debt owed to them or refuse to cancel services no longer wanted.  However, what about companies such as Kohl’s who are presumably owed very large amounts of money although in the form of many small debts?  Is it reasonable that customers such as the above can do what she admits doing, simply saying “screw it” to the company and in fact reverse the roles of debtor and creditor by hoping for a settlement via a lawsuit on a questionable background?  Surely not. 

I once owned a small company and can attest to the difficulty of collecting on debts even with extensive accurate documentation.  The only way my debt collecting service or myself were able to collect many outstanding amounts was precisely to make repeat requests and reminders (although, of course, in a professional manner).  As a matter of principle, customers should not be able to get away with simply choosing not to pay for services or products they have ordered, even if the outstanding amounts are small.  If companies have followed the law, perhaps time has come for them to refuse settling to once again re-establish the roles of debtor and creditor.  This, one could hope, would lead irresponsible consumers to live up to their financial obligations, as must the rest of society.

July 18, 2014 in Commentary, Current Affairs, E-commerce, Famous Cases, In the News, True Contracts | Permalink | TrackBack (0)

Wednesday, July 9, 2014

CNN's Crossfire Almost Takes a Position on Sex Contracts on College Campuses

Friend of the blog, Kenneth Ching, shared this with us.

So I hadn't really thought about Crossfire since Jon Stewart shut them down.  It was the pinnacle of Stewart's career thus far.


But I guess it's just hard to keep a terrible idea down when you have 24 hours of time to kill every day.  

I don't know what CNN's little segment on sex contracts is supposed to accomplish.  I guess it is intended to introduce its audience to one of its contributors, S. E. Cupp   No doubt, Ms. Cupp has lots of interesting ideas and is telegenic and all that, but this segment reads like a Ms. America question gone wrong. "Ms. Louisiana, do you think colleges and universities ought to require written assent from both (or all) parties to any sexual act in which a student participates?"

Ms. Cupp starts, because her brand is "smart conservative," by lashing out at a culture that "disarms" students on college campuses.  Her claim is that women can't protect themselves with pepper spray because of weapons bans on campuses.  Of course, most of those bans do not include defensive weapons and anyway, if a woman used her pepper spary defensively in defiance of such a ban, she would 1) escape an assault and 2) perhaps face reprimand.  It's not clear that the disarmament has occurred, nor does Ms. Cupp address the very real possibility that women are safer when men can't carry weapons on campus, but I digress.

Then she seems to complain about resources going to crisis centers and hotlines rather than to rape prevention but she is careful to say that crisis centers and hotlines are a good thing (way to give a  balanced perspective, Ms. Louisiana!).  Then comes the segue to the University of California's consideration of sex contracts.   This is not news.  Antioch College did it for years.  Even we  blogged about the subject two years ago.

What's Cupp's take?  The idea is silly, but good for California for at least trying!  Alright audience.  Ms. Louisiana!  Isn't she a great sport?

Cupp actually makes me feel nostalgic for the days when Camille Paglia would not just strike provocative intellectual poses but would actually take provocative intellectual positions on the right.  I didn't agree with Paglia, but she expressed her original and outlandish ideas with verve and panache.  She challenged her readers to consider their positions and think things anew.  If anyone actually watches the new Crossfire, let me know if you see any signs of an ability to do so over there.


July 9, 2014 in Commentary, Television, True Contracts | Permalink | Comments (0) | TrackBack (0)

Thursday, July 3, 2014

About That Facebook User Manipulation Study

By now, most of you have probably heard about Facebook's study which tweaked users' news feeds to see whether doing so affected their moods.  The study was aparently conducted in response to reports that some FB users were getting bummed out by reading all the wonderful things happening to their shiny friends.  According to FB's study, this was not true.  They found that happy news led to happier posts and negative news resulted in more negative posts, leading the researchers to conclude that moods were contagious.  (My take on the results of that study below).  Facebook claimed that users consented to being part of this experiment when they agreed to the company's terms of service.  Public outrage ensued but even among the outraged, there was a consensus that Facebook "legally" had a right to do this because of the terms of use even if ethically, they should have refrained (or at least obtained active consent).

Such is the rhetorical power of a contract, even one that nobody reads.

I think it's at least questionable whether Facebook's terms of use gave it the right to conduct this user manipulation study and not just, as  Kashmir Hill of Forbes points out, because the word "research" didn't appear in their Data Use Policy until four months after the study took place.  As contracts profs know, the under-utilized and under-enforced implied covenant of good faith and fair dealing applies to contracts and is recognized under California law (which governs FB's Terms).  The broad language of the data usage policy makes it sound like Facebook will use data to improve its services, not to test whether their users get happy or sad if they manipulate news feeds.  Other provisions of FB's agreement with users make it reasonable to reach that conclusion (to keep its services "safe and secure"; to provide users with location features and services, "to make suggestions to you, for internal operations").  Even the language regarding research -- "for internal operations, including troubleshooting, data analysis, testing, research and service improvement" -- when read in context (which it should be), indicates that the purpose of using the data is to enhance the user experience, not to manipulate user behavior. 

They also say "your trust is important to us." 

Did Facebook act in bad faith by manipulating users' data feeds?  It's at least arguable that they did. 

Now, about the research results - as far as what the results showed, I'm not sure that the study did prove that positive posts enhanced users moods (and vice versa).  A user may have changed the nature of a post in order to conform to the prevailing mood, but that doesn't mean they actually felt happier.  Positive posts from others might have forced users to "fake it" by writing more positive posts and vice versa.  So I'm not convinced that the research refuted the claim that happy Facebook posts depressed some FB users...



July 3, 2014 in Current Affairs, True Contracts, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 2, 2014

Move over Uber; Make Room for BlaBlaCar

CarpoolToday's New York Times features a story about a new ride-sharing service called BlaBlaCar.  The idea is simple -- it's just an internet ride board.  Riders share with drivers the cost of travel between two cities.  Drivers are forbidden from profiting from the ride share; BlaBlaCar takes a 12% cut.  Cost savings over common carriers are significant, ranging according to the NY Times from 33% to 67%

The gimmick is the BlaBla part.  Riders can indicate how much they want to talk en route.  If you mark Bla, you want to ride in silence (or perhaps you want everyone to know that they can talk all they want but you will be hooked in to your iPod).  If you mark BlaBlaBla, other riders (and the driver) are on notice that you will not shut up for six straight hours.  

I don't think this would work for me.  It's a question of etiquette and signaling.  This might be useful if one could be more specific: e.g., BlaBla#WorldCup or BlaBlaBla#Kardashians or BlaBlaBla#MyElderlyMother'sHealthProblemsandMyRecentBreak-up would be useful to know in advance.  If I were being honest, I would proclaim BlaBlaBla#HansKelsen, but that would guarantee me a train ticket.  I might strategize and put Bla, because it seems more likely than not that I would not find all that much in common with my fellow passengers.  But what if they turn out to be interesting?  Can I BlaBlaBla, if I promised only Bla?  Then, the next time I use BlaBlaCar, I might regret my misanthropy and commit to BlaBlaBla.  Would I be a jerk if, after half an hour of conversations about pop stars or the best gear for rock climbing, I pulled out my iPod?  

Of course, the odds are that most users of BlaBlaCar are young and interesting (to me), but I am old and boring (to them).  So I should put BlaBlaBla because I am interested in hearing what 20- or 30-somethings are doing these days as they commute between European cities, but I would advise them to Bla me, because they likely do not want to hear about Hans Kelsen.  This is based on my recent visit with my niece and three nephews whose BlaBlaBla fascinated me (when I could follow it) but who found my Bla, well, blah, or even bleh, but certainly nothing above meh.

HitchhikersBut the question of legal liabilities does nag.  BlaBlaCar seems rather blithe about the issues.  The driver's insurance covers the possibility of injuries to passengers, and women who are wary of sharing cars with strange men can opt to ride only with other women.  As for the rest, riders can rely on reviews of drivers and steer away from those who seem sketchy.   This is all certainly an improvement over the level of risks assumed by, say, hitchhikers. 

BlaBlaCar's terms of service put passengers on notice that the site cannot guarantee that they will be insured:

However BlaBlaCar gives no warranty or assurance in this regard and it is the Driver’s responsibility to verify that their insurance provides adequate cover. 

As for other concerns, BlaBlaCar attempts to cover them under its Good Conduct Charter.

July 2, 2014 in Commentary, Travel, True Contracts, Weblogs | Permalink | Comments (0) | TrackBack (0)

Friday, June 27, 2014

Maybe That Non-Disparagement Clause Wasn't Such a Good Idea....

Several months back, I blogged about KlearGear's efforts to enforce a $3500 nondisparagement clause in their Terms of Sale against the Palmers, a Utah couple that had written a negative review about the company.  It was a case so bizarre that I had a hard time believing that it was true and not some internet rumor.  Even though the terms of sale most likely didn't apply to the Palmers --or to anyone  given the improper presentation on the website-- KlearGear reported the couple's failure to pay the ridiculous $3500 fee to a collections agency which, in turn, hurt the couple's credit score.  The couple, represented by Public Citizen, sued KlearGear and a court recently issued a default judgment against the company and awarded the couple $306,750 in compensatory and punitive damages.  Consumerist has the full story here

Congratulations to the Palmers and Scott Michelman from Public Citizen who has been representing the couple.  And let this be a warning to other companies who might try to sneak a similar type of clause in their consumer contracts....

June 27, 2014 in Current Affairs, In the News, Miscellaneous, True Contracts, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Thursday, June 19, 2014

Congrats to UC Irvine on a Great Consumer Class Action Outcome

This week, I received notice that I am a member of the plaintiff class in Schlesinger, et. al. v. Ticketmaster.  After ten years of litigation, the parties' proposed settlement is pending before the Superior Court in Los Angeles.  If you purchased tickets through Ticketmaster between 1999 and 2013, you most likely are also a part of the class.  The case alleges (in short) that Ticketmaster overcharged customers for fees.  Ticketmaster claims that its processing fees were necessary for it to recover its costs, while plaintiffs allege that those fees were actually a means of generating profits for Ticketmaster.  Shocking, no?

Image of U2 Concert uploaded by Dream out loud (talk)

The terms of the settlement are actually pretty sweet.  Class members will get a discount code that they can use on the Ticketmaster website entitling them to $2.25 off future Ticketmaster transactions.  Class members get to use the code up to 17 times in the next four years.  The value of the discount codes is about $386 million, and if the money is not used up, class members will be eligible for free ticket to Live Nation events.  Ticketmaster's website will also now include disclosures about how it profits from its fees.

But then there's THIS:

Ticketmaster will pay $3 million to the University of California, Irvine School of Law to be used for the benefit of consumers like yourself. In addition to the benefits set forth above, Ticketmaster will also make a $3 million cy pres cash payment to the University of California, Irvine School of Law’s Consumer Law Clinic. The money will establish the Consumer Law Clinic as a permanent clinic, and it will be used to: (i) provide direct legal representations for clients with consumer law claims, (ii) advocate for consumers through policy work, and (iii) provide free educational tools (including online tutorials) to help consumers understand their rights, responsibilities, and remedies for online purchases.

The settlement strikes me as masterly.  It gets a beneift to people who, if the allegations are true, were actually harmed by the alleged conduct, but it does so in a way that will generate more business for Ticketmaster going forward, and Ticketmaster may value that new business stream at around $386 million in any case.  Ticketmaster has had to make changes to its website to eliminate the risk of deception going forward.  And the world gets a consumer protection clinic funded the sort of business against whom consumers need to be protected.  

Congratulations to the attorneys who came up with this settlement and to the UC Irvine Conumser Protection Clinic on its new endowment.

June 19, 2014 in Commentary, In the News, Law Schools, True Contracts | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 17, 2014

Hardball Tactics by 7-Eleven or Franchisee Fraud?

Over the past few years, more than a dozen 7-Eleven franchisees have sued the company claiming that it operated in bad faith by untruthfully accusing the franchisees of fraud and by strong-arming them to “voluntarily” surrender their franchise contracts based on such false accusations.  The franchisees claim that the tactic, which is known in the franchise community as “churning,” is aimed at retaking stores in up-and-coming areas where the franchise can now be sold at a higher contractual value or from franchisees who are too outspoken against the company.

Franchisees split their gross profits evenly with 7-Eleven.  The chain claims that it has hours of in-store covert footage showing franchisees voiding legitimate sales and not registering others to keep gross sales lower than the true numbers in order to pay smaller profits to 7-Eleven.  Similarly, the chain uses undercover shoppers to spot-check the recording of transactions.  This level of surveillance is uncommon among similar companies, says franchise attorney Barry Kurtz.  A former corporate investigations supervisor for 7-Eleven calls the practice “predatory.”

Japanese-owned 7-Eleven asserts that a few of their franchisees are stealing and falsifying the sales records, thus depriving the company of its full share of the store profits.  It maintains in court records that its investigations are thorough and lawful.  It also complains that groups of franchisees often group together to create a “domino of lawsuits, pressuring the company to settle.”

It seems that a company installing hidden cameras to monitor not customers for safety reasons, but one’s own franchisees raises questions of whether or not these people had a reasonable expectation of privacy in their work-related efforts under these circumstances.  If not, the issue certainly raises an ethical issue: once one has paid not insignificant franchise fees and continue to share profits with the franchisor at no less than 50-50%, should one really also expect to be monitored in hidden ways by one’s business partner, as the case is here?  That has an inappropriate Big-Brother-is-Watching-You feel to it. 

In the 1982 hit Dire Straits song Industrial Disease, Mark Knopfler sings that “Two men say they're, Jesus one of them must be wrong.”  When it comes to this case, the accusations of “bogus” reasons asserted by the franchisees and returned fire in the form of theft accusations by 7-Eleven, somebody must not follow the contractual duty of good faith and fair dealings. 

This case seems thus to be one that could appropriately be settled… oh, wait, the company apparently perceives that to be inappropriate pressure.  Perhaps a fact finder will, then, have to resolve this case of mutual mud-slinging.  In the meantime, 7-Eleven prides its “good, hardworking, independent franchisees” of being the “backbone of the 7-Eleven brand.”  That is, until the company itself deems that not to be the case anymore, at which point in time it imposes a $100,000 “penalty” on those of its franchisees who do not volunteer to sign away their stores.  The company does not reveal how it imagines that its hardworking, but probably not highly profitable, franchisees will be able to hand over $100,000 to a company to avoid further trouble.


June 17, 2014 in Commentary, Food and Drink, In the News, Labor Contracts, True Contracts | Permalink | Comments (1) | TrackBack (0)

Thursday, June 12, 2014

Terms of Use as Entertainment

Miriam A. Cherry

(The next John Grisham?)

We here at the contracts prof blog are frequently in a lather over adhesive contracts.  Terms of use run amok, arbitration clauses are routinely enforced, and non-compete clauses prevent teenagers from seeking gainful employment.  Yet, where's the outrage from other quarters?  One problem, as John Oliver notes in this hilarious (and effective) bit on net neutrality, is that some things are just too BORING to grab consumers' attention.  Towards the end of the clip (about 10:10), he states this truth:  "If you want to do something evil, put it inside something boring."  He speculates that Apple could put the entire text of Mein Kampf inside its user agreement and we would just hit "Agree." 

That's really the problem with Terms of Use - they are just too boring that except for a few contracts profs, most people don't want to think about them.  They just want them to go away.  One solution is to make them more interesting.  John Oliver's approach to net neutrality - to make it ridiculously funny yet informative - is one way to awaken the sleeping consumer into righteous outrage.  Apparently the FCC's comment site temporarily shut down after he encouraged viewers to voice their displeasure.  Of course, South Park has already poked fun at the iTunes agreeement.  That didn't result in a boycott of Apple's products because there was no "call for action."  It did, however, raise the issue for many and has become a useful cultural reference point on the state of consumer helplessness in the face of TOS.

Another way to provoke interest in the subject might be to write an imaginative futuristic tale of a world controlled by EULAs, like Miriam Cherry has done here.  Her fast-paced story is a mashup of Girl with a Dragon Tattoo, Boilerplate and Ender's Game - beach reading for contracts profs!

June 12, 2014 in Miscellaneous, Recent Scholarship, True Contracts | Permalink | Comments (2) | TrackBack (0)

Wednesday, June 11, 2014

New York Times Editorial Board Weighs In on Non-Competes

Obviously persuaded by our coverage of their coverage, The New York Times today editorialized on the overuse of non-competes.  The Times makes strong economic arguments against non-competes:

  • they limit workers' opportunities to seek better jobs within their profession;
  • workers subject to non-competes change jobs less frequently and earn less money over time;
  • states like California that refuse to enforce non-competes create a better environment for entrepreneurship; and
  • low-level employees who are now being subjected to non-compete agreements have no bargaining power with which to challenge them and do not willingly consent to them.

There may be economic studies that dispute the first three bullet points.  On the blog, we have tended to emphasize the fourth bullet point.  The argument against that point is not empirical.  Rather, those who support the enforcement of one-sided boilerplate terms contend that it is generally more efficient to enforce such terms than to expect that each agreement will be negotiated on an individual basis.

As Nancy Kim has argued, that might be okay, so long as the creators of boilerplate contracts are subject to a duty to draft those agreements reasonably.  One interesting approach along similar lines is the solution proposed in Ian Ayres & Alan Schwartz, The No-Reading Problem in Consumer Contract Law, 66 Stan. L. Rev. 545 (2014).

June 11, 2014 in Commentary, In the News, True Contracts | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 10, 2014

Your Kids as a Free Facebook Marketing Tool Against Your Will

By Myanna Dellinger

What would you say if you found out that Facebook used your kids’ names and profile pictures to promote various third-party products and services to other kids?  Appalling and legally impossible as minors cannot contract?  That’s just what a group of plaintiffs (all minors) attempting to bring a class action lawsuit against Facebook argued recently, but to no avail. Here’s what happened:

Kids sign up on Facebook, “friend” their friends and add other information as well as their profile pictures.  Facebook takes that information and display it to your kids’ friends, but alongside advertisements.  The company  insists that they do “nothing more than take information its users have voluntarily shared with their Facebook friends, and republish it to those same friends, sometimes alongside a related advertisement.” How does this happen?  A program called “Social Ads” allows third parties to add their own content to the user material that is displayed when kids click on each other’s information. 

The court dismissed the complaint, finding no viable theory on which it could find the user agreements between the kids and Facebook viable.  In California, where the case was heard, Family Code § 6700 sets out the general rule for minors’ ability to contract: “… a minor may make a contract in the same manner as an adult, subject to the power of disaffirmance.”  The plaintiffs had argued that as a general rule, minors cannot contract.  That, said the court, is turning the rule on its head: minors can, as a starting point, contract, but they can affirmatively disaffirm the contracts if they wish to do so.  In this case, they had not sought to do so before bringing suit. 

Plaintiffs also argued that under § 6701, minors cannot delegate their power to, in effect, appoint Facebook as their agent who could then use their images and information.  Wrong, said the court.  Kids signing up on Facebook is “no different from the garden-variety rights a contracting party may obtain in a wide variety of contractual settings.  Facebook users have, in effect, simply granted Facebook the right to use their names in pictures in certain specified situations in exchange for whatever benefits they may realize from using the Facebook site.” 

In its never-ending quest to increase profits, Corporate America once again prevailed.  Even children are not free from being used for this purpose.  The only option they seemed to have had in this situation would have been to disaffirm the “contract;” in other words, to stop using Facebook.  To me, that does not seem like a difficult choice, but I imagine the vehement protests instantly launched against parents asking their kids to stop using the popular website.  Of course, kids are a highly attractive target audience.  Some already have quite a bit of disposable income.  They are all potential long-time customers for products/services not directed only at kids.  Corporate name recognition is important in connection with this relatively impressionable audience.  But is this acceptable?  After all, there is an obvious reason why minors can disaffirm contracts.  This option, however, would often require intense and perhaps undesirable parent supervision.  In 2014, it is probably unreasonable to ask one’s kids not to be on social media (although the actual benefits of it are also highly debatable). 

Although the legal outcome of this case is arguably correct, its impacts and the taste it leaves in one’s mouth are bad for unwary minors and their parents.

June 10, 2014 in Commentary, Current Affairs, E-commerce, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0) | TrackBack (0)