Monday, June 27, 2016
As technology continues to evolve, so does the law, and a recent case out of Massachusetts, St. John's Holdings, LLC v. Two Electronics, LLC, MISC 16-000090, proves it. Addressing what the court termed a "novel" question in the Commonwealth of Massachusetts, the court concluded that the text messages at issue in the case constituted writings for statutes of frauds purposes.
I have often thought that we communicate much more in writing these days than people did, say, twenty years ago. I know that it is now much more common for me to text the people I want to speak with than actually call them to speak orally. It will be interesting to see how the statute of frauds continues to develop.
(Thanks to Ben Cooper for sending this case my way!)
Monday, June 20, 2016
It isn't something we typically think about but as our world shifts to digital and as more and more of us leave behind large social media footprints, what happens to those accounts when we die? I have thought about it briefly, mostly in thinking that I should give my passwords to someone, so that, if something happens to me unexpectedly, someone will be able to get onto my social media to let my followers know. I have had social media friends vanish with no explanation, and it's always haunted me that maybe something happened to them and I had no way of knowing.
Also of concern to me is that, even if someone is designated as a legacy contact, it still might not allow the kind of access that Rosemary was looking for, or that you might want to grant to someone. Facebook limits what a legacy contact can do, meaning that your power over what happens to your Facebook account really ultimately lies with Facebook, not you or your wishes. Which is a reminder, of course, that our control over our Facebook accounts is limited to begin with and pretty much at the whim of Facebook.
Monday, June 13, 2016
Stories such as this [https://www.washingtonpost.com/lifestyle/travel/i-flew-to-abu-dhabi-for-265-round-trip-heres-how-you-can-do-the-same/2016/06/07/fc33cbea-29a3-11e6-b989-4e5479715b54_story.html] about finding incredibly cheap airlines to both national and international destinations because of airline computer pricing mistakes (real or otherwise…) have become commonplace. In 2012, the Department of Transportation established clear rules against changing the price of a ticket after purchase. But in a new decision by the U.S. Department of Transportation, that rule will no longer be enforced:
“As a matter of prosecutorial discretion, the Enforcement Office will not enforce the requirement of section 399.88 with regard to mistaken fares occurring on or after the date of this notice so long as the airline or seller of air transportation: (1) demonstrates that the fare was a mistaken fare; and (2) reimburses all consumers who purchased a mistaken fare ticket for any reasonable, actual, and verifiable out-of-pocket expenses that were made in reliance upon the ticket purchase, in addition to refunding the purchase price of the ticket.
Travelers’ websites thus now recommend that people hold off making further travel plans until a ticket and confirmation number have actually been issued. Some have further said about the glitch fares that “[t]ravel is not something that is only for the elite or [people] from certain economic brackets.” Of course, it shouldn’t be, but with the deregulation of the airline industry and steadily increasing prices and fees, history seems to be repeating itself: air travel is, for many, becoming unaffordable. This in spite of record-breaking profits for the airline industry benefiting from low oil prices and, I want to say of course, fares increasing, holding steady or certainly not decreasing very much. Airline executives say they are sharing the wealth with passengers by investing some of their windfalls into new planes, better amenities and remodeled terminals. They're also giving raises to employees and dividends to investors. Right… And whereas some years have been marked by bust, many more have been booming for the airlines.
Given that, why would the DOT be amenable to help out the airlines, and not passengers? Under contract law, mistakes that are not easily “spottable” have, traditionally, not been grounds for contract revocation. If one considers the contract to have been executed when the airline accepts one’s online offer, why should the airline, absent a clear error or other mitigating factors, not be expected to follow the common law of contracts as other parties will, depending on the circumstances, of course, likely have to? That beats me.
Some airlines are, however, choosing the honoring the mistake fares. Others don’t. Bad PR, you say? That also does not seem to matter. The most hated airline in the U.S. a few years back – Spirit Airlines – was also (at least then) the most profitable.
Hat tip to Matt Bruckner of Howard University School of Law for bringing this story to my attention.
Monday, June 6, 2016
I'm one of those apparently rare people who doesn't really use Facebook. But Facebook was evidently very important to City Park Apartments in Salt Lake City, whose management company presented all of the tenants with a "Facebook addendum" to their lease. The addendum allegedly stated that all residents had to befriend the complex on Facebook or be found in breach of their lease agreement.
This seems like an alarming development that I hope is going to be very limited. Is a Facebook account going to start being like a telephone number or an e-mail address, something it's assumed by everyone that you have and should hand over access to in exchange for goods or services? The reason I stopped using Facebook was because of privacy concerns. I wouldn't be thrilled about being told that I'm required by my lease to make sure my landlord can watch my Facebook activities (which often correspond, as we all know, to our real-life activities; if your landlord asked to follow you around through your daily life, or to get e-mailed your vacation photos, I would think many people would consider that a weird request).
And, since I don't do anything on Facebook, does that mean that I wouldn't be allowed to rent an apartment there unless I opened an account? Many people have legitimate, important, in some cases necessary reasons to limit their online presence. Let's hope "Facebook addendums" don't start sweeping the nation.
Monday, May 30, 2016
Watching terms and conditions litigations continue to play out is an interesting exercise. One of the things we learn is that the terms and conditions mean what they say, which should be obvious, but of course ignores the fact that basically nobody reads what they say. Consumers seem to be consistently caught off-guard by some of the terms. A recent Ninth Circuit decision, Geier v. M-Qube Inc., No. 13-36080, reinforces this (you can watch the oral argument here).
Geier sued m-Qube based on a mobile game it marketed called Bid and Win. m-Qube was not the provider of the game; rather m-Qube merely marketed the game. The other defendants in the case were all similarly removed from the actual content of the game, serving as "intermediaries" and "gateways." The game's actual content provider, Pow! Mobile, was not sued by Geier.
The dispute in the case was over whether m-Qube and the other defendants were third-party beneficiaries of the terms and conditions of the game. Allegedly, when signing up for the game, subscribers, under the terms and conditions, waived all claims against Pow! Mobile's "suppliers." Despite this clause, Geier was attempting to sue m-Qube, et al., over text message abuses in violation of Washington law. (Geier, incidentally, was not alone in suing over this. A class action in the District of Nebraska was complaining about the same behavior.)
The Ninth Circuit's decision in this case is a matter of straightforward contract law: If you are an intended third-party beneficiary of the contract, you can enforce the contract. There is no real surprise there, except maybe to the consumer here, because it may sink Geier's entire case, which now hinges on whether m-Qube and the other defendants are Pow! Mobile's "suppliers." If they are, then they are intended third-party beneficiaries of the terms and conditions' waiver clause and can seek to enforce it. We may not be reading those terms and conditions, but we may be waiving lots of our rights nonetheless.
Thursday, May 12, 2016
If you and I worked in an industry with highly sensitive information (assuming that we do not), it might be one thing if we thought we could email confidential information to our private email accounts and copy such information to a memory stick without finding out. But if a C-level employee at a high-tech company does so, does such conduct not rise to an entirely different level of at least naivety, if not deliberate contractual and employment misconduct?
A court will soon have to answer that question. Louis Attanasio, former head of global sales for an IBM cloud computing unit has been sued by IBM for breach of a contractual confidentiality clause, misappropriation of trade secrets, and violation of a non-compete agreement when he left – information in hand – to work for direct competitor Informatica.
In 2016, Attanasio allegedly started sending confidential information to his private email account, including draft settlement agreements between other IBM employees who had left to work for competitors. Before leaving IBM, Attanasio was asked to return a laptop to the company, which claims that he cpied files to a USB storage device.
Once again, the extent of the traceability of our electronic actions at work has become apparent. I continually remind my students of this to help them avoid “traps” such as the above or, frankly, simply to remind them that they should not spend much, if any, time on their computers not working (most seem to use their own electronic devices anyway these days, but still… and doing so is also very visual in an office setting.). Employers frequently complain about the work ethics of new college graduates, so it might be worthwhile to remind our students of what seems obvious to us.
Friday, May 6, 2016
Nevertheless, the court refused to enforce the provision. The court noted that part of the test in evaluating whether to enforce a choice-of-law provision is to consider whether California's law would be contrary to the "fundamental policy" of Illinois's law and, if so, whether Illinois would therefore have a "materially greater interest" than California in the case at issue. Here, Illinois is one of only a few states with a statute concerning biometrics; California has no such statute. The court found that Illinois's BIPA represented a fundamental policy of Illinois to protect its residents from unauthorized use of their biometrics, and that applying California law here instead of Illinois law would interfere with Illinois's policy. In fact, the court noted, enforcing the choice-of-law provision would effectively eliminate any effectiveness of BIPA whatsoever, because there would be no ability for Illinois residents to protect themselves against national corporations like Facebook. Therefore, the court found, Facebook has to deal with Illinois's BIPA, regardless of Facebook's attempts to limit the relevant laws of its service to only California's laws.
This all leaves for another day whether the Tag Suggestions program actually does violate BIPA.
Monday, May 2, 2016
You Might Think City Buses Don't Have a System, But They Totally Do! (it just might be copyright infringing)
Entities and people come together, do business, have disagreements, go their separate ways. It happens all the time. But nowadays, since so many things have embedded software, these break-ups of business relationships have copyright implications. If you don't have a license to continue using the embedded software, when you break up with another business, that means you have to stop using whatever contains the software, too. Theoretically.
A recent case out of the Middle District of Tennessee, ACS Transport Solutions, Inc. v. Nashville Metropolitan Transit Authority, 3:13-CV-01137, dealt with this issue. The Nashville Metropolitan Transit Authority ("MTA") had contracted with ACS to develop a system for MTA to manage its buses. The system ACS created contained copyrighted software that ACS expressly licensed to MTA. A few years after the development of the system, MTA discontinued its relationship with ACS, but it continued to use the system that contained the embedded software. ACS contacted MTA and told it that it was using the software without a license and infringing ACS's copyright. Nevertheless, MTA continued to use the system with the embedded software, and so ACS eventually brought this lawsuit.
MTA argued that, when it terminated its relationship with ACS, it did not terminate the license to use the software, and so it was still properly licensed. However, MTA's relationship with ACS was governed by a contract, within which was the software license. Terminating the relationship set forth by that contract, the court found, necessarily terminated the software license also found in that contract.
MTA additionally argued that it had paid for the system and that therefore it should be entitled to use the software within the system indefinitely. ACS did agree that MTA had paid for the system and would not have owed ACS any further payments...if ACS and MTA had fulfilled the rest of their contractual obligations. Instead, ACS argued, MTA breached its obligations. Therefore, ACS rescinded MTA's license to use the software.
There was some slim hope for MTA. MTA argued that it had an implied license to use the software for a "reasonable" period of time while it transitioned to the new software of the company it hired to replace ACS. The court seemed skeptical that the length of time MTA had used ACS's software after terminating ACS (it ended up using the software for more than two years after terminating ACS) was reasonable; the court implied that, even if MTA had had an implied license to use the software while it transitioned, MTA's use had exceeded that implied license's scope. However, the court found this to be a material fact in dispute and so inappropriate to resolve at the summary judgment stage.
Under the terms of its contract with ACS, MTA received only a non-exclusive, revocable license for the software. If MTA had wanted more protection, MTA should have negotiated better license terms. ACS, of course, might never have been amenable to granting better license terms. But let this case be a lesson: Many things are going to come with embedded software these days, and that software is copyrighted. You're going to need to dot your copyright i's and cross your copyright t's regarding this software; don't lose sight of that by focusing instead on the larger product you're buying. MTA may have thought of itself as buying a system, but it really needed to think of itself as buying the software within the system.
The answer is a definite... maybe.
Bitcoin, of course, is the original--and many would say at this point, most successful--effort to create a "cryptocurrency," a digital store of value that can be traded electronically without the necessity of a bank intermediary yet can also avoid the problem of double-spending (i.e., digital counterfeiting) that would destroy an electronic currency's value. For purposes of contract law, Bitcoin is most notable because the aforementioned double-spending problem was solved by the creation and implementation of blockchain technology. Blockchain programming allows, among other things, for the maintenance of transactional records in a ledger distributed among numerous and otherwise unrelated computers across the internet rather than in a central location. Contract lawyers have particular reason to care about the blockchain because it raises the looming possibility of "smart contracts," contracts with the technical capability of enforcing themselves.
An enduring mystery of Bitcoin has been the identity of its 2008 creator, who to date has been identified only by the pseudonym "Satoshi Nakamoto." Efforts to identify Nakamoto have been largely unsuccessful, with the most notable misstep being Newsweek's debunked 2014 claim that Satoshi was Japanese-American physicist Dorian Nakamoto.
This rather enduring tech mystery may have been solved, though skeptics remain unconvinced. In an interview with the BBC and other media organizations, Australian tech entrepreneur Craig Wright claims to be the real Satoshi Nakamoto, and other prominent members of the Bitcoin community are backing his claim. The fact that Wright's claim arose on the eve of the digital currency and technology conference Consensus 2016 has allowed for the intriguing circumstance of people in the know reacting and the entire story being live blogged.
So is Craig Wright actually Satoshi Nakamoto? Opinion certainly may shift over the next several days and weeks, but at this point a majority seem to be accepting his claim or profess to be open to accepting it. All in all, an intriguing turn of events out on the periphery of contracts and commercial law.
Monday, April 4, 2016
CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=39855 (Harvard Science Center)
It's a very common thing, to be provided with a "policy" as opposed to a "contract." A recent case out of the District of Massachusetts, Charest v. President and Fellows of Harvard College, Civil Action No. 13-11556-DPW, addresses that exact issue, and concludes, as you might expect, that what you call something isn't as important as how you behave.
Dr. Mark Charest was a chemistry graduate student at Harvard University. While he was there, he and his supervisor (also a defendant in this lawsuit) and other scientists developed a "novel and valuable method for creating synthetic tetracyclines," important for commercial antibiotics. Universities have lots of valuable things being created by their employees and students, so it's not surprising that Harvard had a policy in place for this sort of situation. Harvard had Dr. Charest, as a student, sign the Harvard University Participation Agreement, which contained a clause that Dr. Charest "ha[d] read and  under[stood] and agree[d] to be bound by the terms of the 'Statement of Policy in Regard to Inventions, Patents, and Copyrights,'" referred to in this case as the IP Policy. A lot of things happen from that point on, but the important thing to know for purposes of this blog entry is that Dr. Charest maintained that Harvard had breached the IP Policy. Harvard, in response, maintained (among other things) that the IP Policy was not a contract.
Other than being called a "policy," you might think this an odd argument for Harvard to try to make, considering that having Dr. Charest sign an agreement to be bound by the IP Policy sounds pretty contract-y. A 1988 Massachusetts Supreme Judicial Court decision, Jackson v. Action for Boston Community Development, had held that an employer's personnel manual was not a contract, and so Harvard relied heavily on that precedent, trying to cast its IP Policy as similar to the personnel manual in that case.
Jackson established a number of factors for its decision, and, while some of those factors did weigh in favor of Harvard, others weighed in favor of Dr. Charest. For instance, Harvard maintained the ability to unilaterally modify the IP Policy and there were no negotiations between Harvard and Dr. Charest over the IP Policy, two factors Jackson said support a conclusion that the IP Policy does not impose contractual obligations. However, Harvard called special attention to the IP Policy and Dr. Charest's agreement to it, required Dr. Charest's signature acknowledging the IP Policy, and the IP Policy spoke in mandatory terms rather than suggestive terms, all of which made it seem more like a binding contract.
In the end, the court found that, as the Jackson precedent has developed, the really important thing is whether Dr. Charest understood himself to have to agree to the terms of the IP Policy in order to continue as a student researcher at Harvard, and that Harvard was likewise agreeing to be bound. The court concludes that yes, this was true. The IP Policy sounded as if it was being very clear about Harvard's obligations, because of its unambiguous language. Harvard itself consistently referenced the IP Policy as governing its actions when questioned by Dr. Charest and when communicating with its students. Therefore, Harvard could not pretend now that it had not been behaving as if it was bound by the terms of the IP Policy.
(Nevertheless, the court went on to dismiss most--but not all--of Dr. Charest's claims. The facts are too complicated to get into in the scope of this blog entry, but if you're interested in the relationship between research universities and their graduate students, it's an interesting read.)
UPDATE: This case has now settled. Dr. Charest released the following statement:
"Harvard University and I have settled our ongoing litigation regarding the allocation of royalties related to the license with Tetraphase Pharmaceuticals on mutually agreeable terms. In light of my claims and goals in bringing this litigation, I am very pleased to accept terms I view as equitable.”
You can read more here.
(Thanks to Brian O'Reilly at www.oreillyip.com for the update!)
Wednesday, March 30, 2016
Have you ever been frustrated with seeming endless and practically unreadable scroll-down window that accompany many internet contracts? Or maybe you don't even think about them enough to be frustrated. The dozens of pages of scroll text typically end with a checkbox stating, "I have read and understood the foregoing agreement." All but the most unusually focused among users will check the box without having read the verbose digital boilerplate, and both sides surely recognize the untruth of the "read and understood" certification.
A court has recently refused to enforce an arbitration provision because it was buried at the bottom of the lengthy scroll able window. And the decision came from not just any court, but from the United States Court of Appeals for the Seventh Circuit--known for present purposes as the founder of the ProCD and Hill v. Gateway 2000 line of shrinkwrap arbitration-clause cases.
Over at the National Law Review, attorney Eric G. Pearson describes the facts of in Sgouros v. TransUnion Corp., No. 15-1371 (7th Cir. March 25, 2016), an opinion by Chief Judge Diane Wood applying Illinois law:
Sgouros purchased a “credit score” package from TransUnion, and he later brought suit, alleging that TransUnion had provided him with a number that was erroneously high and thus useless to him in his negotiations with a car dealer. TransUnion filed a motion to compel arbitration, which the district court denied.
The crux of the dispute concerned the webpage for “Step 2” in Sgouros’s purchase, which asked him for an account username and password and for his credit-card information. See slip op. at 4. Below these fields were two bubbles to answer whether a user’s home address was the same as the user’s billing address (“yes” or “no”), and below that was a scrollable window in which only the first two-and-a-half lines of a “Service Agreement” were visible. Had he read to page 8 of the 10-page agreement, Sgouros would have found the arbitration clause. Below the scrollable window was a hyperlink to a printable version of the agreement and a bold-faced paragraph memorializing an “authorization” to obtain credit information. Rounding out the bottom of the page was a button labeled “I Accept & Continue to Step 3.”
Judge Wood's opinion itself begins, for those of us who admire persuasive storytelling, with an excellent example of framing the story around the ultimate result:
Hoping to learn about his creditworthiness, Gary Sgouros purchased a "credit score" package from the defendant, TransUnion. Armed with the number TransUnion gave him, he went to a car dealership and tried to use it to negotiate a favorable loan. It turned out, however, that the score he had bought was useless: it was 100 points higher than the score pulled by the dealership.Believing that he had been duped into paying money for a worthless number, Sgouros filed this lawsuit against TransUnion. In it, he asserts that the defendant violated various state and federal consumer protection laws. Rather than responding on the merits, however, TransUnion countered with a motion to compel arbitration. It asserted that the website through which Sgouros purchased his product included (if one searched long enough) an agreement to arbitrate all disputes relating to the deal.
- The arbitration clause was not visible in the window.
- The site did not call the user’s attention to the arbitration provision in any other way.
- The site did not require the user to scroll to the bottom of the window or to first click on the scroll box.
- It was not clear that the purchase “was subject to any terms and conditions of sale.”
- The term “Service Agreement” said nothing “about what the agreement regulated.”
- The bold-faced paragraph was merely an authorization, and the button labeled “I Accept” actually misled the consumer to thinking that this was an acceptance of only the authorization’s terms. “No reasonable person would think that hidden within that disclosure was also the message that the same click constituted acceptance of the Service Agreement.”
All in all, an interesting turn of events from an important court on issues of clickwrap terms and arbitration.
Thursday, March 24, 2016
Clipping coupons and bringing them to retail stores is passé, but online “couponing” is considered cool by consumers. 23% of consumers report that they use more coupons now than earlier because technology makes it easier to find and use them. 51% of the consumers who do use coupons say that they use them more than they did five years ago. Part of this may be a reflection of declining personal incomes, and part may be because the recession has demonstrated the value of savings to many people.
Former CEO of J.C. Penney Ron Johnson was famously ousted when he decided to eliminate the chain’s coupons and no less than 590 annual sale events (yes, almost twice per day!). JCP has now settled a lawsuit that alleged that the company falsely inflated its prices (showing “regular” and “original” prices that had never been in effect) in order to be able to have such sales. http://www.usatoday.com/story/money/2015/11/11/jcpenney-settles-lawsuit/75567958/
Where does a reasonable store draw the line between these two ends of the spectrum? With the truth, of course, and letting the chips fall where they may in a fiercely competitive marketplace. Needless to say, that is tough to do with shareholder expectations of endless growth and earnings. One thought might be for retailers to offer more items for sale that are actually appealing, unique and well fitting (when it comes to clothes) rather than the same boring outfits everyone else offers. Just a thought in times when vendors such as the Gap and Banana Republic, for example, are suffering from immense “product acceptance challenges” (read: boring stuff no one wants to buy).
Sunday, March 20, 2016
A recent California appellate court case, Long v. Provide Commerce, Inc., found that a browsewrap agreement containing an arbitration clause failed to provide notice sufficient for assent. The case is likely to be significant in shaping wrap contract doctrine because it is the first California appellate court decision which addresses “what sort of website design elements would be necessary or sufficient to deem a browsewrap agreement valid in the absence of actual notice.”
This case is another in a line of cases coming out of California and the Ninth Circuit which is making a long overdue correction to contract law doctrine -- doctrine which veered dangerously off course with ProCD and its ilk. As I’ve previously noted, the law in this area is still working itself out, and my guess is that other jurisdictions will start reevaluating the meaning of “assent” when it comes to wrap contracts (and start following the Ninth Circuit’s more reasonable understanding of reasonableness).
(Disclosure and fun fact: I am the recipient of a chair funded from a class action settlement involving ProFlowers).
Thursday, March 17, 2016
As more and more retail shopping seems to be shifting from brick-and-mortar stores to both well-known and perhaps more shady online retailers, the need to read the online terms and conditions very carefully is obvious. As we have discussed here before, this is hard enough to do when these are phrased in legally and linguistically challenging ways. But what to do when a company seemingly tries to come across in a lighthearted and funny way, but is still dead serious about the underlying legal messages? Some people have found out that this can present almost insurmountable obstacles.
Take, for example, outdoor clothing and gear provider 123Mountain in Colorado. (H/t to Professor Miriam Cherry of the Saint Louis University Law School for bringing this story to the attention of the Contracts Listserv.) Its linguistically very poorly drafted terms and conditions contains statements such as “[w]e love all of our Users, especially those that buy lots of stuff from us,” “[y]ou understand that 123mountain is good, but not perfect. Therefore, we cannot and do not guarantee that the Site will be free of [sic] infection from viruses or other mean computer stuff…,” “[y]ou acknowledge and agree that there are mean people in the internet world…,” “[y]ou are not allowed to resale [sic] our product as commercial activity 9 mean [sic] your Canada Goose, Nobis, Moose knuckle and Parajumper is for you not to resale at your Russian cousin) [sic],” and “[a]fter all, nobody, except my friend's cat Misse is perfect, and even she sometimes has an accident … 123mountain shall have the right to refuse or cancel any orders placed for that product(s)[sic] listed at the incorrect price. Sorry.” Or how about this one: “ We will accept pre-orders for Canada Goose, Nobis, Moose knuckle and Parajumper. Please keep in mind that it can take up to 24 months to fulfill a preorder for Canada Goose, Nobis, Moose knuckle and Parajumper.” See the complete terms and conditions here.
Two years for an item of clothing? I would personally not be sufficiently interested in waiting two years for any kind of clothing, and certainly not a mere sports jacket. Many other products are available that will do just fine, thank you.
As reported in detail here, a 123Mountain customer came to the same conclusion the hard way himself. In early November 2015, he placed an order for a jacket with “two-day shipping.” When he still had not received the jacket a week later, he contacted the company and was told that he could expect the jacket within slightly less than three weeks. When inquiring about the impression that he had gotten from the website that the item was in stock, he was told that the item was “available for order” rather than actually “in stock.” A full month later, he was told that the item would still ship no later than at the end of November …. 2017. Yes, you read that right: two years later. When not paying for the invoiced amount, 123Mountain sent a collection agent after the customer!
For good reason, it seems, 123Mountain only has one star on Yelp.com, the lowest possible ranking. The Lakewood, Colorado, Police Department, has apparently received nine other complaints against 123Mountain since 2013, but “the knotty terms and conditions that customers agreed to when making purchases online made it impossible to charge the couple with a crime.”
So, not only can some companies often get away with contractual arguments for years, but prosecutors also find it “impossible” to charge companies with crimes, even in cases such as the above. That’s a very sad state of affairs for online contracting, business ethics, and customer service. Greed and selfishness seem to be the order of the day in many cases.
Thankfully, major credit card companies seem more willing than before to help their customers in cases like this. The “fault” is not as readily placed on the buyer as before, at least judging from anecdotal evidence and personal experience. This, of course, does not guarantee an ultimately positive outcome for defrauded customers. Online review sites such as Yelp are also somewhat helpful in this context, but in times when online review websites are also known to suffer from their own credibility problems due to allegedly fake reviews, the situation is factually and legally troublesome for online buyers. This is even more so in times when people often resort to buying even such things as cat litter and kitchen towels online to, among other things, save the hassle of carrying bulky items home themselves. Online shopping is here to stay. Amazon has even announced plans to deliver packages by drones minutes after ordering. It seems that the law needs to rapidly develop to address the many legal issues that have arisen and continue to arise in the online contracting context.
Ideas on how to do so? Comment below!
Tuesday, March 8, 2016
Outsourcing work to locations where employees earn even less than many in the United States do has already become commonplace. Now comes the corporate idea of “taskifying” work to people eager to obtain some work, even if just in bits and pieces. “Crowdwork,” as it is known, lets companies use online platforms such as Amazon Mechanical Turk or www.fiverr.com to find people willing to do routine tasks such as drafting standardized reports, filing forms, coordinating events and debugging websites, but also much more complex ones such as designing logos, ghostwriting, etc. Many of today’s work tasks can be broken up into bits and farmed out online, and many employers are already doing so. Could this also come to encompass routine lawyerly work? Quite possibly so. Researchers at Oxford Univesity’s Martin Programme estimate that nearly 30% of jobs in the U.S. could be organized in a crowdwork format within just twenty years.
In this context where few regulations or laws yet govern the contracts, workers would no longer be either “employees” or “contractors,” (which has already proved to be troublesome enough for companies such as Uber), but rather “users” or “customers” of the websites that enable, well, workers and companies (“providers”) to find each other. These transactions would not be governed by employment contracts, but by online “user agreements” and “terms of service” that currently resemble software licenses more than employment contracts. There are few, if any, legal obligations towards employees in the current legal landscape that also offers employees very few means for obtaining and enforcing something so basic pay for the work performed.
Employers today require a flexible and eager workforce that is constantly on the ready and that can maybe even work 24 hours a day. Crowdworkers provide just such availability and demand very low salaries because the name of the game seems to be to compete on prices. The problem is that workers, to have a decent life, need the opposite: stability, higher salaries than what is often currently the case, retirement, salary, and medical benefits. Do these come with crowdwork tasks? Sadly, no.
What could go wrong? Consider this case: Mr. Khan, an Indian man living in India, was eager to make some money. He decided to try Amazon’s Mechanical Turk. On good days, he would make $40 in ten hours; more than 100 times what his neighbors made as farmers. He even outsourced some of his own work to a team that he supervised. This must have violated Amazon’s Participation Agreement as all of a sudden, Mr. Khan received the message that his account was closed and “could not be reopened.”Amazingly, Mr. Khan was also notified that “[a]ny funds that were remaining on the account are forfeited, and we will not be able to provide any additional insight or action.” Talk about lopsided contracts! Using a “Contact Us” link, Mr. Khan was eventually able to get through to Amazon, which simply referred him to a contractual clause stating that Amazon had the “right to terminate or suspend any Payment Account … for any reason in our sole discretion.”
With these types of ad-hoc online agreements, people who should arguably at least have been classified contractors if not, as in some current cases, employees. Of course, this only pertains to U.S. law, but it is important to note that not all jobs are “taskified” to foreign workers. Thus, employees risk being “stiffed” twice: once for losing their jobs to cheaper folks willing to be crowdworkers and, if they chose to work under such contracts and don’t do exactly as the “provider” requires in their apparent almost exclusive discretion, not being paid and not having any effective means of enforcing their contracts. An undisputedly troublesome development both in this nation and beyond.
How could at least the issue with medical and other employee benefits be solved? It might via universal payment systems such as those typical in EU nations. There, when employees change jobs, their vacation time, medical and other benefits travel remain in a centrally administered pool (whether government administered or privately so with tough regulations in place), they do not become discontinued with the employment only to have to be restarted under other plans as typical in this country. This system could potentially be transferred to the crowdwork arena. A percentage of each job (sometimes even called “gigs”) could be centra lly administered in a more employee-centric version than the still American employer-centric solutions. Such systems are, of course, largely seen here in the U.S. as “socialist” and thus somehow inherently negative.
As if the employment situation for workers around the world is not already bad enough, add this new development, called “a tsunami of change for anyone whose routine work can be broken into bits and farmed out online.” Our students’ future work tasks may, at least in the beginning of their careers, constitute just such work. This is a worrying development as workers in our industry and in this country in general are not seeing improved working conditions in general. Crowdworking could add to that slippery slope.
Tuesday, February 23, 2016
American Airlines has nonsuited (i.e., dismissed without prejudice to refilling the lawsuit) its declaratory judgment claim against Gogo. American had recently asked a Texas state court to determine whether the provision of the availability of "better service" (or some similar term) in its 2012 contract had been triggered such that American could force Gogo to submit a competitive bid to retain its service.
As discussed in a previous post, American's negotiating leverage arose as much from the publicity surrounding it filing of a lawsuit as it did from the actual contract term. The term was apparently vague enough that Gogo could (and did) take the position that its rights as American's exclusive in-flight service provider had not been called into question by American's request for a new proposal. Upon American's filing of a declaratory judgment lawsuit in Texas state court, however, Gogo's stock price dropped 27 percent.
Today, the word is out that Gogo has changed its position and accepted American's interpretation of the contract. The Fort Worth Star-Telegram reports:
[American Airlines had said] that its contract with Gogo allowed it to renegotiate or terminate its agreement if another company offered a better service. Gogo had disputed that clause in the contract, but Friday agreed to the contract provision and said it would provide a competitive bid within 45 days.
“American is a valued customer of Gogo, and Gogo looks forward to presenting a proposal to install 2Ku, our latest satellite technology, on the aircraft that are the subject of the AA Letter,” Gogo said in a government filing Friday. “We acknowledge the adequacy of the AA Letter and that our receipt of the AA Letter triggered the 45 day deadline under the agreement for submission of our competitive proposal.”
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Once American reviews Gogo’s proposal, if it does not beat out a competitor’s proposal, American can terminate Gogo’s contract with 60 days’ notice.
Shares of Gogo [ticker: GOGO] jumped on the news of the dropped lawsuit, up almost 10 percent....
The swift manner in which this episode had played out emphasizes the extent to which contract doctrine and interpretation it frequently not the principal driver of business relationships. Gogo could have marshalled a team of lawyers and stood on its interpretation of the contract up to final judgment--likely a summary judgment based on a question of law. But what would be the reputational and business cost? Eventually, the marketplace won't allow contract rights to serve as a substitute for proof of the quality of a product.
A challenge I find in teaching future transactional lawyers is to ensure that they do not become enamored with legal rights as being the be-all and end-all of deal making. Law is important, but a business lawyer must employ practical wisdom, as well. That wisdom includes the fact that law itself is only one part of practicing law... and it sometimes isn't even the most important part.
Sunday, February 21, 2016
Recently, I had the good fortune to interact with Lauren Henry Scholz, currently Resident Fellow and Knight Law and Media Scholar at the Information Society Project at Yale Law School. Scholz’s in-progress article, Algorithmic Contracts, addresses topics that will be of great interest to many readers of this blog. She not only tackles the fiscally important development of technological automation of contracting processes, but she also wades into the significant implications of computer-facilitated formation for traditional contract doctrine. The draft is not yet available on SSRN, but Lauren graciously granted me permission to share her current abstract:
Algorithmic contracts are an important part of today's society. Areas where algorithmic contracts are already common are high speed trading of financial products and dynamic pricing. However, contract law doctrine does not currently have an approach to evaluating and enforcing algorithmic contracts. This Article fills this significant gap in doctrinal law and legal literature.
There are two types of algorithmic contracts. Agent algorithmic contracts are contracts in which one or both parties use an algorithm as an agent to determine terms in a contract, that is, to choose which terms to offer or accept. Term algorithmic contract are contracts in which all parties agree to the results of an algorithm as a contractual term, prior to knowing exactly what the algorithm will yield.
The classical interpretation of contract doctrine, which justifies contract as an expression of human will, finds that some algorithmic contracts are not properly formed at law and thus cannot be enforced in contract. This is because where algorithms serve as quasi-agents to principals in making decisions the principals have not manifested the intent to be bound at the level of specificity that contract law requires. Algorithms are not persons, and so cannot consent beyond the scope of the principal’s manifested objectives, as true agents can. Furthermore, policy considerations of efficiency and fairness in light of technological trends also supports relaxing the contract law’s presumption against considering evidence of intent outside the contract in the interpretation of and provision of remedies for algorithmic contracts.
I propose that approaching algorithmic contracts as implied-in-fact contracts in contract law, supported by restitution law and tort law where a contract cannot be implied in fact, offers a predictable approach to the enforcement of algorithmic contracts at law while promoting efficiency and fairness concerns in a manner traditional contract law cannot.
Common law courts and state legislatures should update their approach to algorithmic contracts accordingly. The American Law Institute and other groups that seek to promote best practices in state private law should update tort, contract, and commercial law statements to expressly address algorithmic contracts. Businesses should strengthen their positions in negotiations as well as in court by clarifying their objectives in using algorithms. Giving businesses the incentive to make their objectives clear will aid in ascribing liability in all areas of law and promote responsible use of algorithms.
Personally, I’m very sympathetic to the suggestion that the computer-enhanced contracts addressed by Scholz are ripe for their own variations on standard interpretive rules. Traditional doctrine did not contemplate and is not necessarily adaptable to the technological possibilities that are now upon us. This looks to be an exciting and relevant topic, so I look forward to seeing the final product. Although Algorithmic Contracts is itself still in development, you can in the meantime view Lauren Scholz’s other scholarship here.
Saturday, February 20, 2016
Speaking of contract law and Bitcoin, my colleague William Byrnes over at our sister blog, International Financial Law Prof Blog, reports on recent activity by the Federal Trade Commission in this area:
Butterfly Labs and two of its operators have agreed to settle Federal Trade Commission charges that they deceived thousands of consumers about the availability, profitability, and newness of machines designed to mine the virtual currency known as Bitcoin, and that they unfairly kept consumers’ up-front payments despite failing to deliver the machines as promised.
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“Even in the fast-moving world of virtual currencies like Bitcoin, companies can’t deceive people about their products,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “These settlements will prevent the defendants from misleading consumers.”
Read the entire post here. While the federal interest in regulating in the virtual currency space has most prominently been in the area of financial crimes, consumer protection is certainly not off the table as agencies like the FTC and (potentially more prominently) the Consumer Financial Protection Bureau explore their reach.
Friday, February 19, 2016
At any given time, the Uniform Law Commission/NCCUSL is engaged in many important and useful state-law drafting projects, but one of the more interesting ones for me is its current work in drafting a proposed Regulation of Virtual Currency Businesses Act. I have had the fantastic opportunity to act as an observer to the drafting committee and watch the stakeholders and commissioners navigate disparate policy perspectives and try find as-common-as-possible ground, while Chair Fred Miller keeps the group on task and Reporter Sarah Jane Hughes assimilates an incredible amount of debate into a rapidly evolving draft. The experience is a wonder that I would recommend to anyone with a serious interest in legislative policymaking. It also, for present purposes, helps illustrate both the benefits and limits of contract law in a nascent market-space.
The current drafting project arose out of the phenomenon of Bitcoin, the first technologically viable means of electronically transmitting value without the possibility of double spending or the need for a financial intermediary, like a bank. While the use cases for virtual currency technology are still in their relative infancy, states began to consider and enact disparate regulatory schemes, with New York's BitLicense regulatory framework being the most prominent example. While federal regulators and law enforcement have understandably focused on preventing the use of pseudonymous cryptocurrency to advance criminal enterprises and finance international terrorism, the state concerns have tended more toward protection of consumers and other users engaged in perfectly legal transactions. While Bitcoin does not require an intermediary any more than paper cash requires use of a bank, intermediaries--like digital wallet services--have arisen to fill the convenience role analogous to bank accounts. These virtual currency intermediaries are, for the most part, the principal target of state-law regulation and current work of the Uniform Law Commission.
What is the contract law angle here? It's this: In the absence of specially-crafted law of the sort now under consideration, the common law of contracts fills the void to enable some degree of enforceable private ordering. The flexibility of contract law is such that it can allow for the birth of business models no one contemplated as recently as the eve of Bitcoin's creation in 2008. The flexibility of such a legal regime is amazing. Contract law can, nonetheless, only facilitate business so far. Public-protective regulation is necessary to achieve widespread market acceptance beyond the universe of early-adopters and risk takers. Regulation carries its own risks, however, as a heavy-handed approach can stifle innovation and create anti-competitive barriers to market entry.
That--in many different flavors--is the policy question being grappled with in the Regulation of Virtual Currency Businesses Act, and the question is relevant in any other space where rapidly developing technology exceeds the capacity of existing law. Where do we apply protective public law, and what do we keep within the realm of private contracts?
Thursday, February 18, 2016