ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Wednesday, June 20, 2018

Is the viral umpire video a breach of contract?

Recently a video went viral showing a 2016 altercation around an umpire ejecting Mets pitcher Noah Syndergaard after he threw a fastball behind the Dodgers' Chase Utley. Umpires wear microphones during Major LeagueBaseball games, and the resulting (often loud and profane) discussions with Mets players and especially Mets manager Terry Collins was recorded. 

The video recently surfaced in an apparent leak, because MLB has announced its intention to try to scrub the video from the internet. MLB's reason for this is that it violates a "commitment" that "certain types of interactions" involving umpires during baseball games would not be made public, claiming it was "in the collective bargaining agreement" and that there was "no choice" but to scrub the video from the internet. Indeed, according to one report it had already been scrubbed

Not so fast, though, because I found it still embedded in news reports about it. It's hard to get anything to vanish from the internet, especially once it's gone viral, but it's not that difficult to locate this video at all. 

And it's not hard to see why it went viral. It's a fascinating glimpse into a part of the game fans seldom get to see. As others have pointed out, the umpire does a fantastic job in the clip, so it's hardly like he's being cast in a bad light. The manager doesn't even come across all that poorly. In fact, in my opinion, the party that comes out of the clip looking the worst is Major League Baseball and its confusing way of handling the explosive Chase Utley situation. 

It's unclear what "interactions" were agreed to be withheld from the public, but this one is certainly an interesting one. I'd love to know what the contract terms actually are. 

June 20, 2018 in Commentary, Current Affairs, Film, In the News, Labor Contracts, Sports, Television, True Contracts, Web/Tech | Permalink | Comments (0)

Monday, June 18, 2018

A warning against trying to "nebulously" slip in language that would change an agreement's meaning

A recent case out of the District of Arizona, Colocation America Corporation v. Mitel Networks Corporation, No. CV-17-00421-PHX-NVW (behind paywall), is, in its own words, "a poster child for the rule of Section 201(2) of the Restatement." 

The dispute was over whether or not an agreement between the parties to transfer a domain name also involved the transfer of IP addresses. The section at issue was ambiguously worded: "Mitel hereby agrees to quit claim . . . the goodwill of the business connected with and symbolized by [the] Domain Name and the associated IPv4 134.22.0.0/16 and any associated trade dress . . . ." Mitel claimed this required it to quit claim the goodwill of the business associated with the IP addresses. Colocation contended Mitel was required to quit claim the goodwill AND the IP addresses AND the trade dress. 

The court found that the wording was ambiguous but that the rest of the contract supported Mitel's interpretation, since the contract did not mention the IP addresses anywhere else. At every other point the contract discussed the transfer only of the domain name. There were no clauses about the transfer of the IP addresses other than that one mention in the clause quoted. 

Furthermore, the court found that Mitel had no reason to know Colocation thought it was acquiring the IP addresses. By contrast, though, Colocation did have reason to know that Mitel thought the agreement was not about the IP addresses. In fact, evidence showed that Colocation "intentionally misled" Mitel by pretending to wish to buy only the domain name and keeping all discussions domain-name focused, while "nebulously" slipping the IP addresses into the contract. The IP addresses were worth far more than the amount the parties agreed on for transferring the domain name, and the court found that this was further proof Colocation knew that Mitel only intended to transfer the domain name, not the IP addresses. 

As the court summarized,

"Colocation's objective from the outset was to acquire the IPv4 addresses. But it purported to negotiate only for a domain name without ever leveling with Mitel Networks. Colocation not only had 'reason to know' Mitel Networks attached a 'different meaning' to their agreement, it created and promoted that different meaning on the part of Mitel Networks. Thus, the Domain Name Assignment Agreement must be interpreted in accordance with the meaning attached by Mitel Networks, that is, as an agreement to assign a domain name and goodwill and not as an agreement to transfer IPv4 addresses."

June 18, 2018 in Recent Cases, True Contracts, Web/Tech | Permalink | Comments (1)

Monday, June 4, 2018

Why you should take that integration clause seriously

Here's a parol evidence case if you're looking for a recent example for teaching purposes. It's out of the Northern District of Illinois, Eclipse Gaming Systems, LLC v. Antonucci, 17 C 196

The case concerned licensing agreements for source code for casino gaming software. The court found that the written agreement was facially unambiguous and complete and contained an integration clause. Nonetheless, the counter-plaintiffs argued that evidence of a contemporaneous oral agreement should be permitted. But the court refused, finding that Illinois law, which governed the contract, required the parties to put any contemporaneous oral agreements into the four corners of their unambiguous integrated contract if they wished them to be enforced. The counter-plaintiffs argued that they should be allowed to present their parol evidence to show the contract was in fact ambiguous, but the Illinois Supreme Court had rejected that approach where the contract contained an explicit integration clause, as was the case here. 

Counter-plaintiffs claimed that their parol evidence would establish that no contract was ever formed between the parties but the court found that such evidence would contradict the terms of the contract, which contained explicit terms regarding its effectiveness, and parol evidence was inadmissible to "contradict the clear written provisions of an integrated contract." The written licensing agreement, the court found, was not equivalent to a letter of intent that provided some question on the parties' intent to be bound, but instead was clear on the parties' intent to be bound. 

Counter-plaintiffs tried to turn to promissory estoppel but the court noted that promissory estoppel should be used to rescue promises that didn't rise to the level of an enforceable contract. The counter-plaintiffs were instead trying to use the doctrine to vary the terms of their written contract. 

There were other allegations and analyses, including pertaining to mutual mistake and unconscionability, but these also failed. 

June 4, 2018 in Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Tuesday, May 22, 2018

Update: In Which Arbitration Reigns Supreme (Supreme Court Kind-Of Pun Intended)

I just blogged about the Ninth Circuit case of Morris v. Ernst & Young, and the Supreme Court has now come out with its decision, reversing the Ninth Circuit (shorter analysis here). Where the Ninth Circuit found that arbitration clauses prohibiting concerted actions by employees violated the National Labor Relations Act, the Supreme Court found that permitting concerted actions by employees where arbitration clauses existed would violate the Federal Arbitration Act. Justice Ginsburg wrote a long dissent; the majority opinion was written by Justice Gorsuch. The trend out of the Supreme Court has been that arbitration trumps every other policy. The Federal Arbitration Act is like the royal flush of statutes.

In a world where contracts with arbitration clauses govern almost every imaginable transaction, courts are forced into interesting decisions to press against the primacy of arbitration. So, for instance, on the same day the Supreme Court handed down its decision, the Western District of Pennsylvania declined to enforce an arbitration provision in Jones v. Samsung Electronics America, Case No. 2:17-cv-00571-MAP (behind paywall). Jones sought to bring a class action against Samsung based on alleged defects in its S3 cell phones. Samsung sought to arbitrate, citing the contract allegedly contained in the instruction booklet included with the phone. But the court disagreed that the arbitration clause was enforceable. It found that the clause was "tucked away" in a section entitled "Manufacturer's Warranty" contained in a 64-page booklet. The court agreed that the clause might possibly have been more inconspicuous, but found that

the degree of prominence of the Arbitration Agreement here seems calibrated with dual goals: on the one hand, just enough to persuade a court to smother potential litigation; on the other hand, not enough to make it likely that a consumer will actually notice the Agreement and perhaps hesitate to buy. It is one thing to hold consumers to agreements they have not read; it is another to hold them to agreements that, perhaps by design, they will probably never know about.

The court's decision here makes some sense, but it seems rooted in a somewhat fictional hypothetical. I don't know but I feel like Samsung could sell its phones with an instruction booklet with "ARBITRATION CLAUSE" in big, bold, red letters with exclamation points on the front of it, and I'm not sure it would in fact cause most consumers to "hesitate to buy," especially not if the majority of other cell phones contain similar arbitration clauses (the major cell phone carriers do).

But the bigger fiction at issue here is the idea that we're all "voluntarily" entering into these contracts. I mean, we are, to the extent that it's "voluntary" to have a cell phone in today's world. The answer to that question is: It is, to some extent, but not to the extent that we're willing to forego one entirely based on the mere possibility we might want to sue someday and can't. We all take risks, and maybe the court's view is this a risk that doesn't pay off for the consumer, oh, well, but it seems like the consumer has almost no power to take any other kind of risk. (This is, of course, not limited to cell phone contracts. So the real question is: is it "voluntary" to be a consumer in our capitalist society?) Likewise, is it "voluntary" to accept a job that require arbitrations, if you need a job to survive and jobs without arbitration clauses might be tough to come by?

There are statutory ways to shift the supremacy of arbitration, of course, as the Supreme Court's decision acknowledges. And at one point the FCC was contemplating doing something about the type of arbitration clause the court looked at in Jones. Maybe add it to your list of things to contact your representatives about, if you so desire.  

May 22, 2018 in Commentary, Labor Contracts, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Monday, May 14, 2018

Secondary-market ticket brokers, "derivative works," and preliminary injunctions

In a copyright-ish case falling under the contract umbrella, Broker Genius, Inc. v. Volpone, 17-cv-8627 (SHS), a recent case out of the Southern District of New York, is a contract case where the likelihood of irreparable harm leads to the court granting a preliminary injunction. 

The case involves software used by secondary-market ticket brokers. Broker Genius owns a particular application, and those who use the application agree to terms of use that prohibited them from creating and distributing "derivative works" of the application. 

The court found that the defendants in this case agreed to be bound by the terms of use: They were required to expressly consent to the terms, which were readily viewable by hyperlink, in order to use the website. The defendants might not have had any memory of clicking their assent, but Broker Genius's evidence was sufficient to establish that the parties had entered into a contract. 

The parties agreed that the "derivative work" clause in the terms of use was not a noncompetition clause. Broker Genius's customers were allowed to compete against Broker Genius; they just couldn't develop a "derivative" software application. The parties agreed to use the dictionary definition of "derive" to interpret the contract: "something that originates from something else." 

The court concluded this meant that the products would be similar and that the similarities in the second product would be traceable to the first. The court found the defendants' software to be "extraordinarily similar" to Broker Genius's software, and those similarities were traceable to Broker Genius, due to the defendants' access to Broker Genius's software and the fact that the defendants' creation of their software happened "immediately" after accessing Broker Genius's software. The court acknowledged that some of the similarities predated Broker Genius's software, or were "logical or obvious," and that defendants had prior knowledge and experience in the industry. However, the weight of the evidence led to a finding that Broker Genius was likely to succeed on its breach of contract claim. 

The court also found that defendants' derivative product was causing Broker Genius to suffer a loss of reputation and good will, which could not be compensated with monetary damages. Therefore, the court issued a preliminary injunction. 

May 14, 2018 in Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Wednesday, May 2, 2018

Minor's disaffirmance of a contract frees them from the arbitration provision, too

I never spend a lot of time on minors and contracts, because I teach a one-semester Contracts course and it just has to keep moving, but this is an interesting case delving into the issue in much more detail than I can get around to, recently out of the Northern District of California, T.K. v. Adobe Systems Inc., Case No. 17-CV-04595-LHK (behind paywall). 

T.K. was a minor who was given a license to access Adobe's Creative Cloud Platform. In order to access the platform, T.K. agreed to the terms of service. The license auto-renewed after a year, and T.K. contacted Adobe to disaffirm renewal of the license. Adobe eventually (although apparently not immediately) refunded T.K.'s money for the renewal, but T.K. sued alleging injury because she was deprived for some time of use of the funds auto-debited by Adobe. T.K. alleged that Adobe initially refused to allow T.K. to disaffirm the auto-renewal, in contravention of law. (T.K. also alleged that Adobe's terms of service implied that users still had to pay even after cancellation, also in contravention of law. I'm not going to focus on that, but the allegation did survive the motion to dismiss.)

Adobe argued that T.K. was relying on the choice of law provision in the disaffirmed contract and so should also be held to the arbitration provision of that contract, because minors cannot cherry-pick which portions of a contract they disaffirm. The court, however, said that T.K. was not cherry-picking. Rather, T.K. had disaffirmed the entire contract. The reference to the choice of law provision was only to buttress her independent choice of California law to resolve the dispute between the parties. Therefore, T.K. was not bound by the arbitration provision. 

The opinion discusses lots more causes of action, if you're curious. 

 

 

May 2, 2018 in E-commerce, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (2)

Monday, April 30, 2018

Opting out of Facebook once you've opted in (or, you can check out anytime you like, but you can never leave)

In the earlier years of the twenty-first century, I did what now literally billions of people have done and opened a Facebook account. I didn't use it for very long, and in fact I stopped using it probably almost ten years ago at this point. I stopped for a variety of reasons, but I left the account up because of that rule about how bodies at rest tend to stay at rest, I suppose. I didn't use it, it was just a passively existing thing, and it seemed like effort to get rid of it. 

With everything coming out about Facebook and data, I started wondering why I still had that account sitting there. I didn't think Facebook had a whole lot of data on me since I'd stopped using it so many years ago, but I figured, What was the point of giving it any info on me at all? Why not just delete the account?

I don't know if you've ever tried to delete your Facebook account. There are two options: deactivation, which deactivates your account but continues its existence, or deletion, which actually deletes your account. I wanted the latter, which requires you to fill out a contact form saying you would like to delete your account. So, in January, I filled out the form and received a verification email saying that my account would be deleted within the next two weeks, and I moved on with my life. 

Except. No, I didn't. Because Facebook kept emailing me little updates about my friends on Facebook, even though I kept clicking the "unsubscribe" link to try to get out of the emails. And then an email came in saying that someone had sent me a message. Which seemed like something they shouldn't be able to do if my account was deleted. I asked a friend still on Facebook to check for me, and she said that yup, I was still on Facebook. My account had never been deleted. 

And now's where the confusion really started, because, well, after literally months of dealing with this, I have to admit: I have no idea how to contact Facebook without being on Facebook. It's so convoluted that in fact an entire scam has mushroomed up around it, taking advantage of people who just want to try to get in touch with Facebook.

Facebook's log-in page (if you're logged out of Facebook) has no real contact info on it. The "About" link takes you to Facebook's Facebook page (so meta!), which contains links to a "website" and "company" info, both of which take you to "Page Not Found" pages, which is kind of hilarious to me. It seems to recommend you use Facebook Messenger to contact them, but...I'm not on Facebook Messenger. That's the whole point.

When you click on the "Help" link, it takes you to a FAQ page divided by topics, some of which are about account deletion but it seems to just be a bunch of people complaining about how Facebook won't delete their accounts. Or, what's worse, suggesting you call a customer service number that seems to be a scam, as evidenced by complaints here and here; by the fact that NPR did a previous story on the fact that Facebook has no customer service number; and the fact that Facebook itself appears to say it's a scam, as the below Google snippet shows:

Facebook

That link looked to me like exactly what I'm trying to track down, so I clicked on it, but, alas, it's only available to me if I join Facebook. 

So it looks like, once you've opted into Facebook, there really is no opting out. I've tweeted at them  with no response and tried some general email addresses (info@facebook; support@facebook) with no response. The emails I keep trying to unsubscribe from give me a physical mailing address, so I guess I could send them a letter asking them to follow through and delete my account and also unsubscribe me from the email lists, but I'm not hopeful that will get a response, either. 

I am hardly the first person to realize that Facebook is nearly impossible to get in touch with (the Sikhs for Justice case seems to have kicked off based at least in part on an inability to get any substantive responses from Facebook), but it seems like, in the wake of a lot of questions about control over our own data, our first step might at least make it a requirement that websites provide contact info for discussions about that data -- contact info that doesn't require you to first "opt in" to their terms and conditions (which is exactly what I'm trying to get out of!). 

We've been doing a lot of talking about the terms and conditions we agree to without reading them, and I guess I always assumed that if I changed my mind, I could back out. Facebook's terms and conditions even allow for that, stating that I can delete my account at any time. But it has turned out not to be nearly so simple, and I am literally flummoxed as to what options I have, seeing as how I don't really feel like going to court in the State of California, as required by the terms and conditions. It looks like I have an account on Facebook, whether I like it or not, for the foreseeable future. You don't realize how much privacy you've already given up until you try to get just a bit of it back. 

April 30, 2018 in Commentary, Current Affairs, In the News, True Contracts, Web/Tech | Permalink | Comments (0)

Tuesday, April 17, 2018

"Similar in concept" IHOP diner follow-up!

Thanks to Andy Feldstein of Huntington Technology Finance, who sent me an email after reading yesterday's IHOP post. Reading the opinion left me confused, but Andy points out that a visit to the Gunther Toody's website sheds a lot of light on the matter. Andy wrote that to the extent "similar in concept" has meaning, it's pretty clear IHOP and Gunther Toody's are two diners with extremely dissimilar concepts. Agreed. This was very helpful in clearing things up! 

April 17, 2018 in Commentary, Food and Drink, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Sunday, April 1, 2018

The Disney/Redbox dispute's contract angle

Lots of people have been discussing the recent Central District of California ruling, Disney Enterprises v. Redbox Automated Retail, Case No. CV 17-08655 DDP (AGRx) (those links are a random selection), a lawsuit brought by Disney against Redbox's resale of the digital download codes sold within Disney's "combo pack" movies, which allow instant streaming and downloading of the movie. There is an obvious copyright component to the dispute, but I thought I'd highlight the breach of contract portion of the decision. 

The DVD/Blu-Ray combo packs were sold with language on the box reading "Codes are not for sale or transfer," and Disney argued that Redbox's opening of the DVD box formed an enforceable contract around that term, which Redbox breached by subsequently selling the codes. However, the court found no likelihood of success on the breach of contract claim, based on the fact that the language on the box did not provide any notice that opening the box would constitute acceptance of license restrictions. The court distinguished other cases that provided much more specific notice. Redbox's silence could not be interpreted as acceptance of the restrictions. This was especially so because the box contained other language that was clearly unenforceable under copyright law (such as prohibiting further resale of the physical DVD itself). Therefore, the court characterized the language as "Disney's preference about consumers' future behavior, rather than the existence of a binding agreement." 

The court ended up denying Disney's motion for preliminary injunction. 

April 1, 2018 in Current Affairs, E-commerce, Film, In the News, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Friday, March 16, 2018

Yahoo!'s damages limitation provision in its terms of service might be unconscionable

There's a class action going on over data breaches at Yahoo! between 2013 and 2016, and a recent decision in the case in the Northern District of California, In re: Yahoo! Inc. Customer Data Security Breach Litigation, Case No. 16-MD-02752-LHK (behind paywall), finds that Yahoo!'s limitation-of-liability provisions have been adequately pled to be unconscionable. 

The provision at issue was found in Yahoo!'s terms of service and attempted to limit Yahoo!'s liability. The class action sought consequential damages, and Yahoo! moved to dismiss the claims for those damages, citing the provision. However, the plaintiffs argued that the provision was unconscionable, and the court agreed that they had sufficiently pled their argument to survive the motion to dismiss. 

In terms of procedural unconscionability, Yahoo!'s terms of service were a non-negotiable adhesion contract, and the limitation-of-liability provision was found near the end of its twelve pages. The fact that the plaintiffs could have chosen other email services did not bar a finding of procedural unconscionability. 

As far as substantive unconscionability goes, the plaintiffs alleged that the limitation-of-liability provision was one-sided and acted to block the plaintiffs from achieving adequate relief. The provision prohibited nearly every type of damages claim, virtually guaranteeing that the plaintiffs would not be able to be made whole in the event of a breach. In this case, consequential damages generally follow from data breaches, so the plaintiffs argued that consequential damages were necessary for their case. Finally, the plaintiffs argued that the only party in a position to guard against data breaches was Yahoo!, yet the limitation-of-liability provision placed the risk on the plaintiffs should Yahoo! fail to maintain adequate security. 

March 16, 2018 in Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Sunday, March 11, 2018

Using Contract Law to Address Climate Change

I have the great honor and pleasure of posting the below guest blog written by noted environmental scholar Dan Farber, the Sho Sato Professor Of Law and the Faculty Director of the Center For Law, Energy, & The Environment at UC Berkeley.


There has been increasing interest in the environmental law community in the role that private firms can play in sustainability. For example, many major corporations bemoaned Trump’s withdrawal from the Paris Agreement and pledged to continue their own environmental efforts. In fact, as a recent book by Michael Vandenbergh and Jonathan Gillian documents, these firms already have their own programs to cut emissions. It’s worth thinking about the ways in which contracts between these companies could serve some of the same functions as government action.

Group action, based on contracting, could be a way of amplifying these efforts by individual firms. One possibility would stick pretty close to the structure of the Paris Climate Agreement. Under the Paris Agreement, nations agree to engage in certain types of monitoring and to implement emissions cuts that they set themselves. There are already ways that corporations can publicly register their climate commitments. The next step would be to Images
enter into contracts to engage in specified monitoring activities and report on emissions. The goal would be to make commitments more credible and discourage companies from advertising more emissions efforts than they actually undertake.

The contracts could be structured in different ways. One possibility is for each company to contract separately with a nonprofit running a register of climate commitments. The consideration would be the nonprofit’s agreement to include the company in the register and require the same monitoring from other registered companies. An alternative structure would be for the companies making the pledge to contract with each other, ensuring that there would be multiple entities with incentives to enforce the agreement against noncompliant firms. The biggest contract law issue is probably remedial. It would be difficult to prove damages, so a liquidated damage clause might be useful, assuming the court could be persuaded that significant liquidated damages are reasonable. An alternative set up would be to require representations by the company about compliance with monitoring protocols at they make their reports, providing a basis for a misrepresentation action.

We can also imagine something like a private carbon tax in which companies pledge to pay a nonprofit a fixed amount based on their carbon emissions. The nonprofit would use the funds to finance renewable energy projects, promote sustainability research, or fund energy efficiency projects such as helping to weatherize houses. Such pledges would probably be enforceable even without consideration under Cardozo’s opinion in Allegheny College. Damages would presumably be based simply on the amount of unpaid “taxes.”

It’s also possible to think in terms of a private cap-and-trade scheme, something like the ones used by California and by the Northeastern states. In these markets, governments set caps on total emissions and auction or otherwise distribution allowances, each one giving the owner the right to emit a single ton of carbon. In the contractual version, firms would agree to create a market in carbon allowances and to buy as many allowances as they need to cover their emissions. For instance, firms could agree to cut their emissions on a schedule of, say, 2% per year for five years. Every year, they would get allowances equal to their current target, which could be traded. Firms that were able to cut their emissions more than 2% could recoup the cost by selling permits to firms that found it too expensive to make their own cuts. Each firm would have to be bound contractually to pay for purchased allowances coupled with an enforceable obligation to achieve the target. If firms fail to buy the needed allowances, the measure of expectation damages seems to be the market price of the allowances the contract required them to purchase from other firms. Unknown

One advantage of government regulation is that the government can assess penalties, while contract law does not enforce penalties. For that reason, arguments for substantial compensatory damages will be crucial to provide an incentive for compliance. There will also be questions about how to structure the contracts (between firms or only between each firm and the nonprofit administering the scheme). And of course, all the usual issues of contract interpretation, materiality of breach, etc., will surface. (If nothing else, this could be the basis for an interesting exam question.)

Whether any of this is practical remains to be seen. There are also potential antitrust problems to contend with. But it is intriguing to think about ways that private contracting could be used to address societal issues such as climate change, particularly in situations where the government seems unlikely to act. There might be real gains from using private-law tools like contract to address public-law problems.

March 11, 2018 in Commentary, Contract Profs, Current Affairs, In the News, True Contracts, Web/Tech | Permalink | Comments (0)

Monday, March 5, 2018

What does an Uber ride worth over $1,600 look like?

To the New Jersey native it happened to, well, a very costly mistake through several states. 

According to this article, the man called an Uber after going out with friends in West Virginia. He was staying near West Virginia University, but he apparently requested an Uber to drive him to his home...which is in New Jersey. The drive was 300 miles, and problematically the man was drunk and so passed out upon getting into the car. He didn't wake up until two hours into the drive.

The news article is unclear as to the status of the trip. Uber claims the man has agreed to pay the fare; the man says he's contesting the fare because he never requested the Uber drive him to his home. It is true that Uber allows you to store a home address and also pulls up recent destinations when you request a ride, so one could foresee how such a mistake could happen. 

It seems to me from the story that this was more likely user error, as the man was admittedly fairly drunk at the time he ordered the Uber. This also means that the man was probably too intoxicated to comprehend what he was doing as he entered into the agreement with Uber to order the car to take him home, but how was the anonymous Uber app to know? One could, however, foresee a separate confirmation page being necessary if the ride is going to cost more than, say, a thousand dollars (at least), but it's unclear that would have avoided the mistake, as the man may have been too drunk to grasp the import of the message. What should Uber do to try to avoid this sort of mishap? Anyone else have similar Uber mistakes? 

h/t to reader Timothy Murray of Murray, Hogue & Lannis for sending this story to our attention!

March 5, 2018 in Commentary, Current Affairs, In the News, True Contracts, Web/Tech | Permalink | Comments (3)

Thursday, March 1, 2018

New York court rewrites auction house non-compete provision, applying Texas law

A recent case out of New York, Heritage Auctioneers & Galleries, Inc. v. Christie's, Inc., 651806/2014, deals with the world of luxury auctions. The plaintiff alleged, inter alia, that the defendant Rubinger breached the non-compete provision of his employment agreement when he resigned his position and went to work for Christie's Hong Kong office. The opinion is behind a paywall but the many points of contention between these companies has been documented in several places, including here, here, and here.

The employment agreement was governed by Texas law, so the court applied Texas law to determine that the non-compete provision was overly broad. The non-compete prohibited Rubinger from providing services for any business that participated, either directly or indirectly, in auctioning collectibles in North America in a manner competitive to the plaintiff's auction business. The problem was that the non-compete tried to prohibit Rubinger from providing any services for such business. As the court noted, Rubinger could have violated the agreement by working as a janitor at Sotheby's or in the mailroom at Christie's. The court therefore concluded that the non-compete was unreasonable. 

However, under Texas law, the court reformed the provision to be enforceable, rewriting the provision to prevent Rubinger from providing services to competitors identical to those he provided to the plaintiff. Because that was exactly what Rubinger was doing, he was in violation of this rewritten non-compete provision. 

The court found the time and geographic scope of the non-compete to be reasonable, and then found that the question of whether Rubinger's activities in Hong Kong violated it was a factual determination that could not be resolved. 

Rubinger's employment agreement also contained a non solicitation covenant. When Rubinger resigned from the plaintiff to move to Christie's, two of Rubinger's staff resigned on the same day to make the identical move. The court found the non solicitation covenant enforceable, but nevertheless dismissed the claim because the non solicitation covenant, by its terms, prohibited Rubinger from soliciting the plaintiff's employees after termination of his employment. Because Rubinger's solicitation of his staff took place prior to termination of his employment, it was not prohibited by the terms of the contract. 

There were many other claims in this complaint, including trade secret allegations and unjust enrichment. I focused on Rubinger's alleged breach of contract in this blog entry, but there were other aspects to the court's decision. 

March 1, 2018 in Current Affairs, In the News, Labor Contracts, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Tuesday, January 23, 2018

Noncompete in the online-auction industry found unenforceable

A recent case out of Minnesota, Oberfoell v. Kyte, A17-0575, reminds all of us that noncompete agreements need to have a justification. Kyte worked for Oberfoell's online-auction business and signed a contract that contained a noncompete clause. He later left to start his own online-auction business and Oberfoell sued.

The lower court found the noncompete agreement to be unenforceable and this appellate court agreed. Oberfoell simply couldn't justify its necessity because he failed to assert a legitimate business interest protected by the noncompete clause. Oberfoell made general allegations that Kyte had personal relationships with many of Oberfoell's customers and thus possessed goodwill belonging to Oberfoell. But Oberfoell never identified any customers who he was worried about, nor did he ever introduce any evidence that Kyte had used any of Oberfoell's customer lists improperly. The court concluded that Kyte did not seem to be the "face" of the business nor was he the exclusive contact the customers had with the business. There was no evidence that any of Oberfoell's customers were concerned about Kyte leaving and no evidence that any of them followed Kyte to his new business. Therefore, Oberfoell failed to prove that the noncompete was protecting a legitimate business interest. 

Oberfoell also tried to assert that his customer lists and other materials were taken by Kyte and qualified as a violation of the noncompete. The court pointed out that the customer lists weren't secret and weren't treated as secrets by Oberfoell, and so couldn't qualify as trade secrets. The other materials suffered from the same lack of confidential protection. 

Finally, the noncompete also failed on the basis of reasonableness. It prohibited Kyte from competing in a radius of 150 miles for five years. The court found the 150-mile restriction to be "arbitrary," and Oberfoell produced no evidence justifying his choice of such a large radius. The five-year restriction was also unreasonable because the evidence showed Oberfoell could have replaced Kyte easily and quickly, so there was no reason to keep Kyte from competing for so long (in fact, Oberfoell apparently never hired anyone to replace Kyte, delegating his responsibilities to already-existing employees). There was no evidence that Kyte had received any extensive training that gave him an advantage in establishing his business, which took him a few months to get started. 

January 23, 2018 in E-commerce, Labor Contracts, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Thursday, January 18, 2018

But what does the HQ stand for????

Everyone is talking about HQ Trivia right now, it seems. I'll be honest, though: Last week was the first time I've ever heard of the app. "It's a live trivia show," I was told. "You play twice a day with hundreds of thousands of your closest friends and try to win money." 

I downloaded the app because I was curious, and everything about it was an odd, surreal experience. I hadn't expected there to be a live host making uncomfortable one-sided banter to fill time while the start of the game was delayed. Then, when the questions started up, I...had no idea what to do, because nothing about my screen ever changed. I was just staring at the host the whole time. I couldn't figure out how to answer a question. 

I found out later that the question is supposed to pop up on your screen. It didn't on my screen, an issue that I saw other people online complaining about, so I know it at least wasn't my own incompetence. I didn't really stick around for more, though. I deleted the app, thinking it was just something that didn't seem to be my kind of thing. 

While I was Googling my app experience, though, I came across this pretty wild article from The Daily Beast and it made me think about a thought exercise I like to make my contracts students engage in at the very beginning of the semester: What does each party to a transaction want from the relationship they're about to enter into, and how will that translate into the contract? The article recounts an interview the Daily Beast conducted with the app's main host, and then their interactions with the app's CEO. At the end, it's revealed that the app is in a negotiation for a long-term contract with the main host. The rest of the article provides a lot of meat for speculation as to how those negotiations might go, based on the comments of both the main host and the CEO. The CEO appears to be very worried about the app's trade secrets being revealed, so one can assume that the contract would be very strict about the host's interactions with the media. Doubtless the parties will discuss a non-competition clause as well.  And how much will the negotiations be impacted by the newness of the HQ app phenomenon; the uniqueness of its setup; and the fuzziness of its future plans? All interesting things to consider. 

January 18, 2018 in Commentary, Current Affairs, E-commerce, Games, In the News, True Contracts, Web/Tech | Permalink | Comments (0)

Wednesday, January 17, 2018

A decision to make you think twice before tweeting your idea to a celebrity

Those posting ideas to the internet, in tweets or YouTube trailers or other websites: take note. This is an older decision, but one worth recounting on this blog I think. Out of the Central District of California, Alexander v. Metro-Goldwyn-Mayer Studios, Inc., CV 17-3123-RSWL-KSx, warns you that making your ideas available for free can mean that you forfeit the right to pursue compensation if someone else uses them. 

The case concerns the movie "Creed," which the plaintiff Alexander alleged he came up with. He sued the defendants for misappropriation of his idea, breach of implied contract, and unjust enrichment. The misappropriation of idea claim fails in California, so the court moves on to the breach of implied contract claim, where Alexander also faltered because he failed to allege that he ever offered the "Creed" idea for sale. In tweeting the idea at Sylvester Stallone, the court read the allegations as portraying a gratuitous offer of the idea to Stallone. 

Alexander argued that he thought he would be paid for the idea based on industry custom, and that the defendants understood that he tweeted the idea at them with the expectation of payment. But the court disagreed. All Alexander did was tweet the idea at Stallone and post it all over the internet; those actions were not compatible with expecting compensation, since the idea was widely available for free. There was never any communication between Alexander and the defendants, so the court found that it "strain[ed] reason" to imply an agreement for compensation from an unanswered tweet and the posting of the idea in other places on the internet.  

Finally, the unjust enrichment claim also failed. Alexander could not allege how the defendants benefitted from his idea, since he never alleged how the defendants accepted the idea. At any rate, since the idea was available for free all over the internet, the court stated that it was "unclear" why the defendants should be expected to compensate Alexander. 

January 17, 2018 in Celebrity Contracts, Commentary, Film, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Monday, January 15, 2018

In which I arrive at a comic strip idea Marvel wouldn't approve of

I would say this is the time of year when I am perpetually behind, except that that is every time of year, so it's not surprising that it's taken me a bit to blog about Marvel's Create Your Own platform. As the article here makes clear, the terms and conditions require those uploading to the site to provide to Marvel the right to do almost anything it wishes with the material, without limit, notice, attribution, or payment. You can read all of the terms and conditions here.

In addition, the terms and conditions contain a long list of prohibited content, including such vague terms as "sensationalism" (defined as "killer bees, gossip, aliens, scandal, etc." which is one of my favorite collections of nouns ever) and "alternative lifestyle advocacies" (who is deciding what an alternative lifestyle is?), "misleading language" (misleading as to what?), and a catch-all "other controversial topics." (Incidentally, it also includes what I assume is a typo, as it prohibits "suggestive or revealing images" which it defines as "bare midriffs, lets, etc." I assume that's meant to be "legs.")

...Am I the only one who now wants to read a comic strip about aliens who advocate alternative lifestyles and raise killer bees, sharing scandalous gossip and double entendres (also prohibited) with their other alien alternative-lifestyle friends over a couple of glasses of wine (ditto) during their weekly high-stakes poker game (yup), all while baring their midriffs? 

(All of the prohibitions are blanket prohibitions except for graphic violence, which might be approved on a case-by-case basis.)

January 15, 2018 in Commentary, Current Affairs, In the News, True Contracts, Web/Tech | Permalink | Comments (0)

Tuesday, January 2, 2018

Here's one for any of us who have ever felt frustrated by Internet speeds

A class action brought in the Western District of Tennessee over Internet service speeds, Carroll v. TDS Telecommunications Corp., No. 1:17-cv-01127-STA-egb (behind paywall), recently survived a motion to dismiss. Among the claims was a breach of contract claim based on the plaintiff's procurement of a high-speed Internet service plan. The plaintiff agreed to pay between $120 and $150 a month for access to service of a particular speed, which she alleged she did not receive, rendering her Internet incapable of supporting the uses, such as Netflix and YouTube, that she had been told the Internet plan would support. The court found these to be sufficient allegations of a breach of contract to survive the motion to dismiss. The plaintiff's other causes of action, including for fraud, unjust enrichment, and civil conspiracy, also survived the motion. 

January 2, 2018 in Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Monday, December 18, 2017

Facebook's terms of use have gaps that leave consumers powerless

Venkat Balasubramani over on Technology and Marketing Law Blog has a piece on the defeat of a recent lawsuit against Facebook based on Facebook's tracking of logged-out users on third-party websites. The court had previously rejected other claims, which left only contract-based claims, which the court also rejected in this most recent ruling. Basically, Facebook's statements about not tracking logged out users could not be found in the terms of service. Instead, Facebook made them in other documents, like data use policies and help center pages. Therefore, the court found there was no contractual provision governing Facebook's behavior. 

As the blog notes, "Ouch." It takes the court a long time to wade through Facebook's voluminous documents to determine what is and is not a contractual promise, an act that we surely can't expect the typical consumer (even if a lawyer) to engage in. This ruling seems to allow Facebook to be a little bit coy about where it makes its statements in order to avoid certain claims. The gap on tracking logged-out users in the terms of use seems to leave consumers without a cause of action here, and to make it difficult for consumers to piece together all of the documents to determine Facebook's true stance on the issue. 

December 18, 2017 in Commentary, True Contracts, Web/Tech | Permalink | Comments (0)

Monday, December 4, 2017

As long as an idea is new to you, New York court finds it can serve as consideration

If you're looking for fact patterns involving consideration, a recent case out of the Northern District of New York, West v. eBay, Inc., 1:17-cv-285 (MAD/CFH) (behind paywall), has one for you. 

The following allegations appeared in the complaint: West worked as a consultant for eBay. As a consultant, West told eBay about a business plan he had which represented a "unique business model" for virtual marketplaces. West said he was cautious about sharing his business plan, and eBay promised to keep the business plan confidential. West then sent the business plan to eBay. eBay subsequently promised to compensate West if it used the business plan. eBay then developed a mobile app that West alleged used the business plan. eBay, however, stated that the app was "independently conceived" by other eBay employees. This lawsuit followed, and eBay moved to dismiss West's complaint. 

One of eBay's asserted grounds for dismissal was a lack of adequate consideration for the contract alleged in West's complaint. eBay claimed that the business plan was not "novel" and so had no value and could not serve as consideration. The court noted that under New York law, a not-novel idea can be adequate consideration if it was novel to the party to whom it was being disclosed. This requires a fact-specific inquiry. At the motion to dismiss stage, West had asserted enough facts that the business plan was idea was novel to eBay, meaning that it could serve as adequate consideration for the contract. 

There were other causes of action and arguments involved that I'm not going to get into here, but the complaint also contained promissory estoppel and unjust enrichment claims that also survived the motion to dismiss, if you're interested. 

December 4, 2017 in E-commerce, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)