Friday, July 11, 2025
Guest Post: A New Open-Source Casebook
Introducing the Contracts Open-Source Casebook Project
Guy A. Rub & Ethan J. Leib
We’re excited to release a project we’ve been working on (with our co-authors: Matthew Bodie, Pamela Bookman, Tal Kastner, and Jake Linford) for some time: The Open-Source Contract Law Casebook. If you teach contracts and are looking for more affordable materials for your students or are simply seeking a more customizable way to structure the course, we hope you’ll take a close look.
We know there are already many contract law casebooks out there, and many of them are excellent. So why launch this project? Not because we had nothing better to do. But two core motivations made us feel this was worth our time.
First, the rising costs of legal education. We became increasingly uncomfortable asking our students to spend hundreds of dollars on casebooks, especially when most of the core content (judicial opinions) is in the public domain. Moreover, we were often asking students to pay for material there was no way we could cover as our teaching credits got trimmed in curricular reforms. On top of the price, the commercial options often come with strings attached, including limitations on access, usage, and formatting.
Second, like many professors, we’ve developed our own distinct ways of teaching contract law. Over time, we found ourselves assigning commercial casebooks with lengthy editorial notes, often skipping chapters, rearranging content, and supplementing them heavily with our own materials. The traditional casebook model made it hard to align the text with our teaching goals, priorities, and style. It also got messy for the students as materials from many different places had to be collated and read out of order.
The open-source casebook aims to address these issues. It’s free, customizable, modular, and flexible. It is thus designed to meet the evolving needs of our diverse community of contract law professors and students. Inspired by a similar initiative in property law, we believe legal education, especially in core courses like contract law, can be rigorous without being expensive, and collaborative without being one-size-fits-all.
That’s how this project began: we wanted a casebook that could be tailored to different teaching priorities, and we wanted to share it freely so others could do the same. On our website, we outline the ways you can use the open-source casebook. Here are a few highlight features of this project:
Modularity: The casebook is composed of discrete units that can, with minor exceptions, be covered in any order (or skipped entirely). You can tailor the text to fit your syllabus and preferences. Want to start with remedies (or consideration or offer and acceptance or something else)? Emphasize the UCC or the common law? Skip excuses? Go ahead. The project is built for it.
: Use the casebook as-is or remix it. Add your own notes, swap in cases, create new hypotheticals, or emphasize the themes that matter most to you. Because it’s published under a Creative Commons license, you can do all of this (legally and freely).
Freedom from the external constraints: This isn’t just about saving money for students or having more pedagogical control. It’s also about avoiding a host of irritating, time-consuming, and, at times, harmful limitations. There are no convoluted platforms, no logins (other than for the teacher’s manuals and proposed slides, which we make available behind a password-protected part of the website), no DRMs, no proprietary formats. Just simple PDF and Word files. Consider, for example, a recent challenge: many professors now
restrict internet access during exams due to generative-AI concerns, but then find that their students can’t access their digital casebooks. While this problem might (or might not) be solvable, it, and similar ones, are completely irrelevant when the casebook is free and available to download in unrestricted, straightforward formats.
If any of this sounds useful, we encourage you to take a deeper dive. On our site, you can browse individual units or explore full casebook builds. You can adopt them as-is or adapt them however you like. If you are anxious about whether the book treats some of your favorite cases, you can look at the Table of Principal Cases on the website to make sure we have you covered. We also hope to foster a growing community of teachers who share resources. If you’ve developed your own materials, we’d love for you to contribute (with credit, of course). This project has given us not just new tools, but also new ideas and connections, and we’d love to build on that momentum with your involvement.
If you’re intrigued, check it out: https://contractscasebook.org/.
July 11, 2025 in Contract Profs, Recent Scholarship, Teaching | Permalink | Comments (0)
Tuesday, July 8, 2025
Tuesday Top Ten - Contracts & Commercial Law Top SSRN Downloads for July 8, 2025
Top Downloads For:
Contracts & Commercial Law eJournalRecent Top Papers (60 days)
As of: 09 May 2025 - 08 Jul 2025Rank | Paper | Downloads |
---|---|---|
1. | 521 | |
2. | 261 | |
3. | 188 | |
4. | 170 | |
5. | 134 | |
6. | 109 | |
7. | 109 | |
8. | 92 | |
9. | 81 | |
10. | 76 |
Top Downloads For:
Law & Society: Private Law - Contracts eJournalRecent Top Papers (60 days)
As of: 09 May 2025 - 08 Jul 2025Rank | Paper | Downloads |
---|---|---|
1. | 170 | |
2. | 76 | |
3. | 74 | |
4. | 56 | |
5. | 54 | |
6. | 53 | |
7. | 39 | |
8. | 38 | |
9. | 38 | |
10. | 37 |
July 8, 2025 in Recent Scholarship | Permalink
Tuesday, July 1, 2025
Tuesday Top Ten - Contracts & Commercial Law Top SSRN Downloads for July 1, 2025
Top Downloads For:
Contracts & Commercial Law eJournalRecent Top Papers (60 days)
As of: 02 May 2025 - 01 Jul 2025Rank | Paper | Downloads |
---|---|---|
1. | 483 | |
2. | 251 | |
3. | 232 | |
4. | 215 | |
5. | 187 | |
6. | 161 | |
7. | 134 | |
8. | 104 | |
9. | 101 | |
10. | 101 |
Top Downloads For:
Law & Society: Private Law - Contracts eJournalRecent Top Papers (60 days)
As of: 02 May 2025 - 01 Jul 2025Rank | Paper | Downloads |
---|---|---|
1. | 274 | |
2. | 161 | |
3. | 70 | |
4. | 67 | |
5. | 61 | |
6. | 50 | |
7. | 50 | |
8. | 41 | |
9. | 40 | |
10. | 38 |
July 1, 2025 in Recent Scholarship | Permalink
Quiet July
Expect for things to be quieter in July. I have exiled myself from the Blog for one month in order to finally shove a piece of scholarship over the finish line.
I hope to be back in August with new-found verve and wiles.
July 1, 2025 in About this Blog | Permalink | Comments (0)
Monday, June 30, 2025
Update on Academic Freedom and Professor Maura Finkelstein
I wrote last year about the case of Maura Finkelstein. Here is a lightly edited version of the story as we had it back then:
Maura Finkelstein (left) was, until recently, a tenured anthropology professor at Muhlenberg College. She is Jewish, but she is also fierce critic of Israel and a supporter of Palestinians. Her Twitter and BlueSky accounts are about little else. As far as I can tell, her scholarship is about other things, but she taught courses at Muhlenberg College on Palestine, so her commitment to Palestine did not prevent her advancement, even at a college whose student body is 20% Jewish.
According to Ryan Quinn, writing for Inside Higher Education, in May, Professor Finkelstein became the first professor to be fired for pro-Palestinian speech since October 7th. She is appealing the decision and is still being paid by the College. The speech occurred on Professor Finkelstein's Instagram page in January. She reposted the following statement by a Palestinian poet:
Do not cower to Zionists. Shame them. Do not welcome them in your spaces. Why should these genocide loving fascists be treated any different than any other flat out racist. Don’t normalize Zionism. Don’t normalize Zionists taking up space.
There seems to have been a coordinated campaign against Professor Finkelstein. The College came under pressure from multiple directions. A complaint, referencing Professor Finkelstein, was filed against the College with the Department of Education. The College and media outlets were deluged with thousands of automated e-mails about Professor Finkelstein.
Sarah Viren has a lengthy update in The New York Times. The case encapsulates much the challenges of teaching in the current socio-political environment. Professor Finkelstein made clear that she does not support Hamas and condemns violence. She denounced the October 7th attacks. Nonetheless, students came away with the impression that she thought that Hamas was doing work necessary to the goal of liberating Palestine from its colonial occupation. The students alleged that she made students uncomfortable in her classroom. Students on campus who did not have any personal contact with Professor Finkelstein expressed concern that she was “brainwashing” students with anti-Zionist propaganda.
It is a hard thing to say in the current environment, but we used to recognize the value in making students feel uncomfortable. Educators used to challenge students’ unquestioned assumptions. And students used to actively seek out classes that would force them to confront challenges to their belief systems. When I was in college, I took a Hebrew class in which the professor and I were the only people who were critical of Israel’s government. I knew this, because the professor would often encourage us to talk about contemporary affairs to develop our skills in spoken Hebrew. She voiced her views, which favored territorial compromise and the need for a Palestinian state. My classmates did not feel “brainwashed.” They had brains, and they used them to make counterarguments. That’s what college is for. You think a professor is brainwashing your classmates? Argue with her. If you think you don’t know enough to argue with her, hear her out and then go to the library. Maybe she has some points; maybe it’s all nonsense. You are in college to learn how to tell the difference.
When I taught at the Valparaiso University Law School (RIP), I organized a study abroad course called “The Law of Armed Conflict in Israel and Palestine.” I worked with an Israeli law professor. Our students included American Jews, Israeli Jews, Palestinian Americans, Israeli Palestinians, American Christians, and American Muslims. We hired a "dual narrative" touring company, which provided us with one Jewish Israeli and one Arab Israeli guide. The program was fabulous for my American students. Some of them have continued to reach out to me since the program ended to tell me how profoundly affected they were by it. Their reactions included great enthusiasm for what the state of Israel has accomplished and profound alarm about the plight of the Palestinians.
Working with the Israeli Jews was a challenge for me. They regarded me with skepticism when I lectured on the history of Zionism, a topic they thought they knew, and on the history of the Palestinian national movement, a topic in which they had no interest. I noticed that my American students asked me questions because they wanted to learn the answer. My Israeli students asked me questions to see whether I knew the answer. Some simply refused to read the materials written by Palestinian authors and muttered or talked to one another when we heard from Palestinian guest speakers. They could not tolerate having to learn a new perspective on their national history
I have had experiences on the other side as well. I once had a student complain to my law school administration about how I taught the question of Palestinian statehood. It’s a really great case study in the recognition of new states under international law. There are two tests, and arguably one could arrive at different results depending on which test one applies. The student wasn’t interested in the tests. They were outraged that I was presenting arguments for why one might arrive at the conclusion that, as a matter of international law, Palestine was not a state. I also presented arguments for why, as a matter of law, Palestine was a state, but that did not register.
Some of my American students on the study-abroad program told me that they came on the trip thinking they were pro-Israel, and after the trip, they just didn’t know where they stood. I considered that an educational coup. It’s not that I want to dissuade people from Zionism or from being pro-Palestinian. I just want them to appreciate the complexity of the conflict and to appreciate that all involved have bases in history and personal experience for their perspectives. The situation is complicated, and we as outsiders should not think we know all the answers. I’ve been struggling with these issues all my life and my views continue to evolve.
Sarah Viren’s New York Times story picks up Professor Finkelstein’s story where we left off. It does not have a happy outcome for academic freedom or for the power of contracts and tenure to protect people who work at the United States’ colleges and universities from viewpoint discrimination. The AAUP intervened and provided a report advocating that Professor Finkelstein be reinstated. Bot the AAUP and an outside investigation firm hired by Muhlenberg College faulted the College for whipping up student animus towards Professor Finkelstein. A faculty committee unanimously recommended that Professor Finkelstein be reinstated.
She has not been. She resigned. At the time she did so, The Times reports, Muhlenberg’s president was prepared to reject the recommendations of the faculty committee and the AAUP. I expect that the combined pressure of the current administration’s campaign against the pro-Palestinian movement on college campuses and threats from donors was a factor. The AAUP has censured the College for its handling of the matter.
It may be a happy outcome for Professor Finkelstein, who can continue to do the work she loves outside of the academic setting. She is a brave person with extreme anti-Zionist views, and this is not an easy environment in which to be that person. More generally, it is not an easy environment in which to teach on any topic about which students might have passionate views, and if we cannot teach such subjects without threats to our careers, those views will just become increasingly passionate and increasingly ill-informed.
June 30, 2025 in About this Blog, Commentary, Current Affairs, In the News, Recent Cases, Teaching | Permalink | Comments (0)
Friday, June 27, 2025
Yahoo Has Released the New Terms of Service with the Most Confusing Arbitration Provision Yet!
Yahoo released its latest terms of service (ToS), dated May 15, 2025. For arbitrations initiated in the U.S., the ToS provide for individual arbitration through National Arbitration and Mediation (NAM), applying New York law. Claims below $10,000 are, for the most part, to be decided on the documents alone. Arbitrations are private and confidential and their results are sealed, except for the purposes of getting a court to enforce the arbitral award. Filing and hearing fees can be capped at $250 if the claimant can prove that costs would otherwise be prohibitive, but that cap will be lifted if the arbiter determines that the claim is frivolous.
The ToS provides for batch arbitration in case 25 or more “similar arbitration demands” are filed. If I am reading this correctly, the ToS empower NAM to change (reduce) the fee structure for batch arbitrations, which clearly removes a weapon from the arsenal of the plaintiffs’ bar. Forcing the vendor to pay arbitration fees up front gives the plaintiffs’ attorneys a lot of leverage in forcing vendors to the negotiating table.
The batched demands are to be arbitrated in groups ranging from 25 to 100 at a time, and no fees on a particular demand are due until that demand is included in a batch arbitration. The batch arbitration provision is not severable. If a court invalidates the batch arbitration provision, the entire arbitration agreement is invalid. In other words, the FAA, which is supposed to facilitate individual arbitrations, will now be used, if Yahoo’s ToS are upheld, to force claimants to choose between batch arbitration, which is not individual arbitration, or a class-action lawsuit, which is also not individual arbitration. In short, Yahoo is trying to use courts’ interpretation of the FAA to prevent exactly the adjudicative procedure that the FAA was designed to facilitate.
After the first batch arbitration is completed, the rest of the demands are to proceed to mediation. If mediation is ineffective, claimants can either go to court on an individual basis or continue with the batch procedures. It seems that the selected mediator will be informed of the outcome of the original batch mediation. It is not clear whether that information is shared with the remaining claimants or how doing so would be consistent with the earlier provisions for confidentiality. If it is not provided to them, it is hard to understand how they could engage in mediation on a level playing field with Yahoo, which knows the outcome of the batch arbitration. Note that a seemingly similar information asymmetry was one of the reasons why the Ninth Circuit concluded that LiveNation’s batch arbitration scheme was unconscionable “to an extreme degree.”
Reasonable consumers of Yahoo’s services who does not want to be bound by its arbitration provision can just avail themselves of the 30-day opt-out provision within 30 days of notice of the updated terms or within 30 days of use of the services. That opt-out is handily located in Paragraph 14(2)(b)(ix). You can’t miss it. But make sure you keep up-to-date on the ToS because they can be changed at any time and without provision of notice under Paragraph 14(2)(b)(x). You would accept any changes by continuing to use the services.
Thanks to Stephen Ware for alerting me to these terms.
June 27, 2025 in Current Affairs, True Contracts, Web/Tech | Permalink | Comments (0)
Thursday, June 26, 2025
A Brilliant Scam Based on the Structure of Spotify’s Revenue Streams and Contracts
As in yesterday’s post, I learned of this case from listening to the Money Stuff Podcast with Matt Levine and Katie Greifeld. Like yesterday’s post, this case is mostly about alleged criminal misconduct, but it’s a great story, and there is a contracts hook. In the Calm Knuckles episode of the podcast, Matt and Katie discuss the case of Michael Smith, who figured out a way to mess with Spotify’s system for paying artists and generated over $10 million of royalties for himself based on AI-generated music.
Kate Knibbs did a deep dive on the story for Wired. In order to understand Mr. Smith’s scam, you have to know something about how Spotify and other streaming services work. The streaming services provide a platform that connects artists to listeners. And since the artists create all of the content that is what listeners to the sites, obviously, the artists keep 95% of the revenues generated by monthly membership fees.
Psych! No, that’s not how it works. the streaming services keep most of the revenue they generate and give the artists the remainder.
Psych! No, that not how it works. The streaming services keep most of the revenue they generate for themselves, and they give most of what remains to the record labels, leaving artists with pennies per stream. So, unless your name rhymes with Sailor Drift, you aren’t going to make much money by getting your songs streamed. Unless of course you could produce your own music to cut out the middleman. But still you would need hundreds of millions of streams to make millions of dollars, and few people have that many fans. Mr. Smith, it is alleged, figured out how to get billions of streams without any fans.
Now, as the streaming services generate revenues from subscriptions, their take does not depend on how much content is streamed or which content is streamed. They don’t care if you subscribe but never download any content. They are going to grab their share of the pie, and they should be relatively ambivalent as to how the remaining crumbs get divided up. So streaming services are not incentivized to police streams all that carefully. They have to police things somewhat. Otherwise, no successful artists would want to be on streaming services because the crumbs would go to the people who had best rigged the system to pay them for streams, whether the listeners are fans or bots.
So, you could program a bot to play your songs over and over again, but the streaming service will be on to that game, and they would catch you. You would have to program lots of bots to stream your music. Nope, the services would notice that the bots were all streaming the same songs or multiple songs by the same artist, and so they would be on to you again. What you would have to do if create a lot of music by a lot of different artists and then have a lot of bots that would randomly stream the songs of the multiple artists all the time. Then you would have to figure out how to make sure that all of the revenue that the bots thus generated by listening to all of this music you created to yourself without tipping off the streaming services that all of these different musical artists are actually just you. And that is what Mr. Smith allegedly did, using AI to compose the songs and then accumulating a huge inventory of fake music for his fake listeners to stream.
The practice is not unknown. Ms. Knibbs' Wired story describes Mr. Smith as “the tip of the iceberg.” It is not illegal to make AI music, so long as one does so without infringing on copyright, but Mr. Smith is alleged to have used bots and fake accounts, which is a violation of the Spotify’s terms of service. Ms. Knibbs also reports that in some circles, Mr. Smith is seen as a hero, because he is a real musician, and the streaming services are seen as the enemies. But that doesn’t make any sense, at least as I understand the revenue structure. Mr. Smith isn’t alleged to have stolen any money from the streaming services. Their royalties payments to artists are capped at a certain percentage of revenues. The money that went to him would otherwise have gone to other artists. So he steals from the poor to give to himself. Not exactly Robin Hood.
Reading the indictment, it at first appears that Mr. Smith is alleged to have done nothing more than violate the rules of the streaming services and two performance rights organizations (PROs), which work with the streaming platforms to distribute royalties. At least one of the PROs has some quasi-governmental status, and federal regulations provide that the PROs may not distribute royalties for manipulated streams. The PROs discovered Mr. Smith’s alleged fraud and halted payments, and he responded by denying any wrongdoing, challenging the authorities to provide proof of manipulation. He got his proof in the form of an indictment alleging wire fraud conspiracy to commit wire fraud, and money laundering conspiracy.
All of this went down last September. Ms. Knibbs reported last month that Mr. Smith is out on bail. According to his attorney, “Mike Smith is a successful songwriter, musical artist, devoted husband, and father to six children. He looks forward to responding to the charges against him in court.” Ms. Knibbs also reports that Mr. Smith and his co-defendants in another case paid a $900,000 settlement in a lawsuit brought by staffers at his medical offices (music is his side-hustle, apparently) who alleged Medicaid and Medicare fraud. So this is not Mr. Smith’s first brush with allegation of illegal conduct. Stay tuned.
June 26, 2025 in Music, Recent Cases, Web/Tech | Permalink | Comments (0)
Wednesday, June 25, 2025
"Constructive Tuesday" Top Ten - Contracts & Commercial Law Top SSRN Downloads for June 25, 2025
We are occasionally a day late, but never a dollar short! Welcome to this belated edition of the Tuesday Top Ten, falling on a Wednesday but otherwise chock full of all the current content you've come to expect from ContractsProf Blog. Of special note this week is a brewing dispute between #1 and #10 on the Private Law - Contracts chart. Does the form know best, or it is completely ignorant? Let's see what hot there and elsewhere in summer contract and commercial law scholarship:
Top Downloads For:
Contracts & Commercial Law eJournalRecent Top Papers (60 days)
As of: 26 Apr 2025 - 25 Jun 2025Rank | Paper | Downloads |
---|---|---|
1. | 336 | |
2. | 246 | |
3. | 222 | |
4. | 194 | |
5. | 183 | |
6. | 151 | |
7. | 134 | |
8. | 124 | |
9. | 102 | |
10. | 88 |
Top Downloads For:
Law & Society: Private Law - Contracts eJournalRecent Top Papers (60 days)
As of: 26 Apr 2025 - 25 Jun 2025Rank | Paper | Downloads |
---|---|---|
1. | 336 | |
2. | 271 | |
3. | 151 | |
4. | 124 | |
5. | 86 | |
6. | 71 | |
7. | 70 | |
8. | 59 | |
9. | 58 | |
10. | 57 |
June 25, 2025 in Recent Scholarship | Permalink
Crazy Like a Jaguars Employee Who Stole $22 Million to Bet on FanDuel?
This is the first of two posts this week on subjects that I learned of though the Money Stuff Podcast. In the Men’s Haircuts Episode, Matt Levine and Katie Greifeld discuss the case of Amit Patel, who stole $22 million from his employer to bet on FanDuel. It’s bad to steal from your employer. It’s worse to steal from your employer to feed your gambling addiction. It’s worse still if your employer is a sports team, in this case the Jacksonville Jaguars. Oh, and this is the best: he used his corporate credit card to place bets on FanDuel. But wait there’s more! Now, Mr. Patel is suing Fan Duel for $250 million. Do we have a new definition of chutzpah? But all of that is what makes this situation so irresistibly blogworthy. Here is the complaint. He’s got some serious claims.
For those of you who don't want to listen to the podcast, Amos Morales III has the story in The New York Times’ The Athletic. Mr. Patel alleges that he was an addicted gambler from 2019 to 2023. He was diagnosed with a severe gambling disorder in 2023 and has not placed a bet since then. Given that he was sentenced to 6 1/2 years in prison in March 2024, one assumes that his opportunities to gamble are more limited now. He alleges that FanDuel knew of his addiction and yet used its VIP status program to entice him to gamble over $20 million during that time. According to the complaint, FanDuel engaged in a predatory gambling practice by "intentionally ignoring its own responsible gaming protocol,” knowingly avoiding knowledge of the illegal sources of the money that Mr. Patel used to gamble, and circumventing "its own Know Your Customer (KYC), anti-money laundering (AML), and customer due diligence (CDD) standards and requirements."
The factual allegations are pretty jaw-dropping. Mr. Patel and a FanDuel employee would exchange up to 100 texts daily, and on days when Mr. Patel did not gamble, the employee would reach out to him to find out why. According to the complaint, FanDuel’s enticements to get Mr. Patel to continue gambling were not subtle. They extended over $1 million in credit, they sent him to a Grand Prix event in Miami, to an NCAA championship football game, and to two PGA Masters Tournaments. The thirty-two page complaint provides much more detail.
Although Mr. Patel is making no contractual claims, contracts defenses lurk interestingly in the shadows. He cannot unwind the transactions based on illegality. Doing so would not help him recover his losses. However, he is claiming that his relationship with Fan Duel was illegal and that, because of that illegality, FanDuel violated certain statutory obligations, was negligent, and inflicted emotional distress on Mr. Patel. He also is claiming a form of volitional incapacity due to his gambling addition. I’m not offering legal advice, of course, but it seems to me that he would have an argument for restitution based on an incapacity defense to his obligation to pay his gambling debts to FanDuel. Perhaps that ship has sailed.
Rather than making those arguments, Mr. Patel contends that FanDuel may not legally take money from illegal sources. Because he was gambling with his corporate credit card (did I mention that the corporation he works for is a sports team and he was begging on sports?), Fan Duel should have known that he was engaged in illegality and should have cut off his VIP gambling account. Instead, they enticed him to continue gambling in violation of Florida’s Deceptive and Unfair Practices Act. The same conduct gives rise to claims for negligence, intentional infliction of emotional distress, and conspiracy to commit a tort. Mr. Patel seeks $250 million in damages and not just the recovery of the $22 million he was enticed to gamble away.
I don’t know if he’ll ever see any of that $250 million, but he does have some serious arguments to which FanDuel will have to respond. The case is proceeding, and we will look for updates if anything crosses our path. Don’t bet on it.
June 25, 2025 in Commentary, Recent Cases, Sports, Web/Tech | Permalink | Comments (0)
Tuesday, June 24, 2025
The ContractsProf Blog Vlog #4: Employment Law with Rachel Arnow-Richman
This edition of the Contracts Stuff Vlog will proceed in two parts.
As you will see, Vlog co-host Dan Barnhizer has discovered a series of videos about employment law, starring a fictional “Veronica” who says what office workers want to say. We then ask Professor Rachel Arnow-Richman of the University of Florida School of Law whether Veronica can get away with it, both as a matter of law and as a matter of relational contracts.
Here’s Part I of the video:
Here’s Part II:
You can find all of Veronica’s video’s here.
And here are links to past editions of the Contracts Stuff Vlog:
Our first Vlog was on the impact of AI on teaching.
Our second was about blogging about scholarship.
In our third Vlog, I interviewed casebook authors about their craft.
June 24, 2025 in About this Blog, Commentary, Labor Contracts, True Contracts | Permalink | Comments (0)
Monday, June 23, 2025
Reporters of the Restatement of Consumer Contracts Provide a Guide
In 2012, the American Law Institute (ALI) invited Oren Bar-Gill (left), Omri Ben-Shahar (below , right) , and Florencia Marotta-Wurgler (below left) to serve as Reporters for a new Restatement of Consumer Contracts Law (the Restatement). Now, three years after the ALI adopted the Restatement and one year since its publication, they have posted on SSRN A Companion Guide to the Restatement of Consumer Contracts. As the Reporters note in their conclusion, what they provide is not a guide to the text of the Restatement; rather they provide a guide to its subtext, both literally and figuratively. They articulate the methodological and social scientific apparatus that they brought to their work and explain what they tried to achieve through their Reporters’ Notes.
They begin by explaining three methodological innovations that they brought to the project. First, they used data and replicable statistical methods to identify the most influential precedents in areas of conflicting decisions. Second, they relied on scholarship, including their own, to prioritize rules that protect consumers. In particular, the Reporters were skeptical of mandated disclosure rules. Omri Ben-Shahar and Carl Schneider long ago explained convincingly that disclosure regimes are ineffective in a book that was subject to one of our online symposia. Instead of mandatory disclosure regimes, the Reporters instead favor doctrines like unconscionability and prohibitions on deceptive practices. However, they concede that courts still make limited use of unconscionability doctrine and more often strike down clauses that the courts regard as inadequately disclosed. Finally, they elucidated causes of harm in consumer markets relying on social science literature and behavioral economics.
Many of the insights derived from the Reporters’ methodological interventions reside in their Notes to the Restatement and do not represent the ALI’s official position. The Companion Guide foregrounds the perspectives that the Reporters hope will guide courts in the 21st century. They waded into a challenging legal environment as technology and innovation got out in front of the law. Businesses were quick to adapt to the new world of electronic contracting. They experimented with form contracting in ways that enabled them to impose increasingly one-sided terms on the consumers whose data they were harvesting. Previous ALI attempts to guide courts towards more consumer protection had minimal impact.
Rather than try to correct problematic precedents, the Reporters instead found and described the wide variety of decisions by surveying not only high courts and leading opinions but all court rulings that touched on consumer issues. Their project was more challenging than similar Restatement projects. There was plenty of precedent, but, as they put it, “the dust had not settled,” necessitating "subjective and perhaps ideological judgment calls.” They sought to limit subjectivity through quantitative measures designed to identify the most influential precedents.
For example, prior to the Restatement, it was received wisdom in the academy that privacy policies, which set out business’s data collection practices, should not be treated as contracts. The Reporters found that outcome difficult to square with basic principles of contract formation. Sure enough, their empirical methods disclosed that courts were overwhelmingly enforcing privacy policies as contracts. They discovered similarly surprising patterns in other areas of law, including the finding that federal courts often set the tone for establishing rules for the law of consumer contracts. State courts followed the federal courts, often years later.
The Reporters discuss disclosure rules at length in the context of pay-now-terms-later (PNTL) contracts. Judge Easterbrook’s influence looms over this area, and despite the objections of a few courts and the vast majority of the academy, he has won the day. PNTL contracts are enforceable, so long as there is notice that terms are coming and consumers have a reasonable period to reject the goods without penalty. Based on their review of the caselaw, the Restatement § 2(b) reflects that practice for PNTL contracts, even though the Reporters know that (a) the notice that terms are coming will not be effective and (b) the consumers will not read the terms during the period when they could return the goods without penalty. But notice provisions allow courts to refuse to enforce one-sided terms by finding that the notice was faulty. The Reporters note that businesses will learn how to navigate disclosure requirements. Worse, as we discussed earlier this month, businesses can flip the tables and require that consumers provide written notice of complaint or forfeit their claims.
Finally, the Reporters provide two examples of what they call their social science realism — their attempt to use the tools of psychology and economics to inform the doctrines of procedural unconscionability and deception. The hallmarks of procedural unconscionability are lack of meaningful choice and unfair surprise. The Reporters used the tools of social science to pinpoint when courts would exercise their discretion to determine there was a “meaningful” lack of choice or an “unfair” surprise. Because consumers do not read form contracts, all terms that are not bargained for are surprises, subjectively speaking. However, for the Reporters, market forces can correct for some surprises. The doctrine of unconscionability is only needed when the terms are so non-salient to the consumers that there is no market trade-off when a business includes such terms. For example, consumers understand that they can get a lower monthly price in exchange for early termination fees, and they calculate the trade-off to which they are agreeing. Consumers do not know how to price an arbitration clause and so it, and many other “non-salient" standard terms are procedurally unconscionable, according to the Reporters.
Salience is also key to the Reporters’ take on deception. The situation is a familiar one — a seller makes oral representations that are then either not included or disclaimed in the integrated, written sales agreement. Courts are already quite adept at finding ways to allow evidence of such warranties to be introduced notwithstanding the parol evidence rule. However, the Reporters offer a justification for the admission of the evidence that does not rely on an allegation of misrepresentation. Misrepresentation can be tricky, because one has to establish intent. Salience is a better way to handle the situation. Courts should reverse the usual hierarchy and give priority to oral statements over written statements because the former are more salient to consumers than the latter. Similarly, courts should refuse to enforce contracts in which consumers are induced into bad deals through other forms of deception such as manipulative contract design or obfuscation that prevents consumers from noticing salient terms.
The guide is a very valuable and brief synopsis of the methodological innovations of the Restatement. I appreciate the work of the Reporters and their methodological commitments. I just want to sound two notes of caution. One criticism of the Restatement was that it was premature. As the Reporters acknowledge, "the dust had not yet settled." Neither courts nor scholarship had caught up to business innovations in the realm of electronic consumer contracting. As our co-blogger Nancy Kim argued here, there was a danger that the Restatement could "stunt the development of the law of consumer contracts at this very dynamic period.” Critics of the Restatement questioned whether they had gotten the case law right. My concern is a little different: The case law was informed by old common law approaches that evolved for a world of negotiated contracts and was not suitable for the world of electronic contracting. Judge Easterbook’s influence on PNTL contracts imports two erroneous statements about contract law — that there can be no battle of the forms when there is only one form and (more shockingly) that the “vendor is the master of the offer.” The Reporters’ methodology is commendable; the timing of its deployment is questionable, because it can freeze the doctrine at a time when it needs flexibility.
I also want to highlight a tension between the Reporters’ commitment to having the Restatement reflect actual caselaw and their aspirational social scientific interventions. They make a strong argument for why procedural unconscionability should be re-conceived, but their arguments there do not seem to be reflected in the caselaw. They note that they have confined their social scientific pronouncements to the non-binding Reporters Notes, but the point of such notes ought to be to move the law, and I see no reason to think courts will be more inclined to adopt social scientific models presented in non-binding Notes to a non-binding Restatement than they would be to adopt the same ideas presented in traditional legal scholarship. Of course, the Reporters have their platform, and they are free to use it, but I think the most successful Restatements use Notes to favor interpretations of doctrine that have some foundation in the caselaw. They seem to be on firmer ground with their social scientific take on deception, in that courts do refuse to enforce contracts entered into through deceptive practices. I’m just not sure that courts adopt their focus on salience. More helpful than more law review article or Reporters notes would be model legislation to jolt courts away from their common-law preference for unread, one-sided boilerplate terms and towards giving effect to oral promises.
That said, the Reporters took up a thankless task and executed it with social scientific rigor and candor. Their work has already had an impact, and I think it has focused the attention of the legal profession on consumer contracts in a way that could not have been achieved without their work. For that, we do owe them thanks and continued productive engagement.
June 23, 2025 in Contract Profs, Recent Scholarship | Permalink | Comments (0)
Friday, June 20, 2025
Law Professor Sues After Being Disciplined for Racially Insensitive Use of Language
For at least ten years, Professor Jason Kilborn (left) of the University of Illinois Chicago Law School included on his exam for Civil Procedure a question involving a woman who quit her job after her co-workers addressed her using profane expressions for African Americans and women. In the exam, only the first letters of each profane word was used, but the context made it clear what words were used in the fact pattern. In 2020, for the first time, students were so upset by the references that they complained to the dean.
Professor Kilborn seems to have done his best to make amends. He sent a letter of apology to the class, exchanged e-mails with students, and participated in a four-hour zoom call with representatives from the Black Law Student Association (BLSA), which the Court describes as “cordial” and “constructive.” However, early in that conversation Professor Kilborn joked that the dean had not shared information with him because he might “become homicidal.” When the BLSA students reported this to the administration, Professor Kilborn was placed on administrative leave and banned from campus. He was allowed to return a few days later, after submitting to a medical examination and drug testing.
The administration’s investigation into the matter turned up other instances in which Professor Kilborn’s choices might have been racially insensitive. He was deemed ineligible for a 2% raise, and he was required to take an eight-week diversity training program before he would be allowed to return to teaching. Professor Kilborn believed the punishments unjustified and that the administration had gone into the investigation determined to discipline him. He sued, based on 42 U.S.C § 1983 and alleging violations of due process and free speech rights protected under the 1st, 5th, and 14th Amendments, as well as state law claims.
A District Court dismissed Professor Kilborn’s federal claims with prejudice and then declined to exercise jurisdiction over his remaining claims. In Kilborn v. Amiridis, the Seventh Circuit reversed the dismissal of Professor Kilborn’s First Amendment claim and vacated the dismissal of his state law claims.
In the context of public employees, the First Amendment analysis is set out in Connick v. Myers and Pickering v. Bd. of Education. The court must first ask whether the employee was speaking on a matter of public concern. If so then the interests of the employee and the government must balanced. However, under Garcetti v. Ceballos, employees do not speak on matters of public concern when they make statements pursuant to their official duties. While all of this seems a bit off in this context — is an instructor making a statement when they create a hypothetical fact pattern? — the Court focused on whether Garcetti applied on this facts. Fortunately, there is a simple answer to that question, because Garcetti does not apply to scholarship and teaching. This case is a good illustration of why that must be the rule. Nor are the university administrators entitled to qualified immunity on the issue, because the carve-out from Garcetti for teaching and scholarship is clearly-established law.
Turning to the pubic-concern question, the Court held that the District Court erred in its analysis in two respects. Because the First Amendment guarantees “unfettered” interchange of ideas, the District Court gave inadequate weight to the academic context in which Professor Kilborn’s expression took place. The Seventh Circuit found that all of the speech that got Professor Kilborn in trouble was academic speech addressing "matters of public concern, notwithstanding the limited size of Kilborn’s audience." That seems to me clearly to be so in the context of the exam question. I don’t know how we can teach students how to handle sensitive matters if we can be threatened with disciplinary action when we present them with fact patterns that replicate the sort of uncomfortable situations that are the very stuff of civil rights law suits. Professor Kilborn had used that question without incident for ten years. If I were him, I would not use it in the future, but I can easily see why he did not foresee the students’ objection. Second, the District Court focused on individual words and, in connection with another student complaint, his imitation of a distinct accent when quoting a Jay-Z song, rather than on the “overall thrust and dominant theme” of his speech.
Finally, the Court weighed Professor Kilborn’s interest in his speech against the university’s interest. The university undoubtedly has an interest in a safe learning environment, one in which students do not feel intimidated or subject to harassment. But factual disputes need to be resolved through the litigation process; the Court could not rule at this stage in the proceedings whether the university’s interest outweighed Professor Kilborn’s interest in free expression.
Professor Kilborn also alleged that the eight-week diversity training in which he was compelled to participate was compelled speech. His factual allegations were insufficient to support that claim, but in any case the university officials would be protected by qualified immunity from any such claim.
Professor Kilborn also argued that his suspension with pay and the university’s refusal to pay him a two percent salary increase constituted deprivations of procedural due process. The Seventh Circuit rejected both claims. It rejected the first because non-pecuniary harms do not give rise to procedural due process claims. It rejected the claim relating to the pay increase because that award was based on merit, and the university had discretion to award or withhold it. Professor Kilborn had no entitlement to the benefit. I’m not sure why that is the right outcome. If Professor Kilborn could show that he was denied his pay increase for an impermissible reason, then he could show that the university exercised its discretion in an arbitrary manner. Surely the fact that a university has discretion cannot mean that it can exercise that discretion to exact retribution for a professor’s exercise of protected speech rights.
The Seventh Circuit also rejected Professor Kilborn’s challenge to the university's nondiscrimination policy as unconstitutionally vague. In short, the Court did not find the policy vague. However, if the university stretched its definition of harassment unreasonably, that could be the basis of a retaliation claim, such as the one that Professor Kilborn has alleged with his First Amendment claim. Professor Kilborn’s state law claims survive.
June 20, 2025 in Commentary, Current Affairs, Recent Cases | Permalink | Comments (1)
Thursday, June 19, 2025
Eighth Circuit Affirms $5 Million Deferred Compensation to Former Executive
When I was a practicing attorney, we had a case in which our client was sued by the fired CEO of one of its subsidiaries. The former CEO had managed to destroy the business in eighteen months, but his contract provided for a generous severance package. This was the Go-Go 90s, and executive compensation packages were on generous terms. This one provided that the former CEO could sue our client if he thought his severance had been miscalculated, and the client would pay his attorneys’ fees.
The former CEO did sue, and it fell to me to draft the motion to dismiss the complaint. I had no problem explaining to the court that the contract was clear, that our reading of it was the only reasonable way of reading it, and that the plaintiff’s construction of the contract was not a reasonable way of reading it. On his reading, he made more as a fired employee than he would have made had he remained in his position. The only place where I stumbled was trying to figure out how to persuade the court to dismiss his claim for attorneys' fees. After all, we had invited him to sue us and promised to pay his attorneys’ fees. The partner pushed me to move for dismissal of that claim as well because the client was in a NOPE (not one penny ever) state of mind.
We won dismissal on all counts. The court was persuaded that his reading of his entitlement was unreasonable. In fact, the court found that his arguments were not colorable, and thus he was not entitled to attorneys’ fees. Lesson learned. I thought his reading was slightly less reasonable than our clients’ offer that he could sue us for free. The court decided to leave the bandits where it found them.
But now we have entered a new Gilded Age that would make all but the boldest surfers of the dot-com wave blush. Crain Automotive Holdings, LLC (Crain) hired Barton Hankins in 2019 to be its chief operating officer. Four years later, he resigned and sought compensation under Crain’s deferred compensation plan. When Crain refused, Mr. Hankins brought suit under the Employee Retirement Income Security Act of 1974 (ERISA). The District Court awarded him $5 million plus pre-judgment interest and attorneys' fees. Crain appealed.
In Hankins v. Crain Automotive Holdings, LLC, the Eighth Circuit affirmed. When Mr. Hankins joined Crain, he signed up for a deferred compensation package (DCP) that offered him up to 5% of Crain’s fair market value. In order for Mr. Hankins’ entitlement to fully vest, he had to stay for five years. As he stayed for four years, he should have been entitled to 80% of his potential payout under the DCP. Crain refused to pay on the ground that Mr. Hankins had not signed two important agreements referenced in Article 4 of the DCP.
Mr. Hankins never signed because the two agreements did not exist. They did not exist, according to Crain, because Mr. Hankins, as COO, was supposed to have created them, and he failed to do so. The District Court concluded that Mr. Hankins had no duty to create the agreements, and so there was no basis for denying him his payout under the DCP. Moreover, the District Court found that Mr. Hankins was entitled to recover his attorneys’ fees.
On appeal, Crain’s main argument was that the DCP provided that Mr. Hankins could be terminated for cause if he breached either of the two non-existent agreements. Because they did not exist, Crain could not determine whether he was in breach. We usually only get arguments this ludicrous in our Reefer Brief feature. The parties knew at the time of the DCP that the two referenced agreements did not exist. The Eighth Circuit reasoned that the reference to those two agreements created a condition subsequent. Should those agreements come into existence, Mr. Hankins could be terminated for violating them. They did not come into existence and so there was no failure of the condition subsequent.
The Court rejected Crain’s suggestion that the reference to the two agreements created a condition precedent. Mr. Hankins could not be bound by terms of non-existent agreements. To so construe the DCP would turn it into an agreement to agree. The Court also refused to consider Crain’s arguments in reliance on extrinsic evidence. Because the DCP was unambiguous and Crain’s reading of that document was implausible, there could be no recourse to extrinsic evidence. The District Court did not abuse its discretion in awarding attorneys’ fees to Mr. Hankins.
This is clearly the right result in the case. As in the case I handled, it seems like the original mistake was the up-front commitment to an absurdly generous back-end payout. Perhaps that downside protection made sense based on Mr. Hankins past experience. Its reasons for denying the payment were borderline farcical. Fortunately for Crain, the weakness of its arguments made the loss on attorneys’ fees relatively painless, as attorneys fees amounted to only $20,000. Still, that was an expense that Crain could have saved itself.
June 19, 2025 in Recent Cases | Permalink | Comments (0)
Wednesday, June 18, 2025
Reefer Brief: Illegality and Conditions Precedent in the Sale of Marijuana Business
J&J&D Holdings LLC (J&J&D) entered into an agreement to purchase a medical and adult-use marijuana cultivation business operated by Central Coast Horticultural, LLC (CCH) for $5 million. The transaction was subject to two conditions precedent. First, Donovan Wade, a party affiliated with J&J&D had to receive approval from the Michigan Cannabis Regulatory Agency (the “Agency”) for “prequalification status as a medical and adult use marihuana license holder in Michigan.” Second, J&J&D had to be satisfied after a due diligence review of the premises, the inventory, and the books.
This is pretty exciting stuff. I have struggled to make conditions interesting for my students. Here, we have a condition precedent and another condition precedent which is also a condition of satisfaction. And it’s about the sale of a pot farm. That all seems promising.
Unfortunately, in CCH Acquisitions, LLC v. J&J&D Holdings, LLC, U.S. Magistrate Judge Kimberly "Buzzkill" Jolson decided the case based on illegality. The reasoning is straightforward, but the world of commerce in marijuana is confusing. CCH’s business was legal under Michigan law, but it was illegal under the federal Controlled Substances Act of 1970 (CSA). The only tough issue for the court was whether plaintiff could obtain any relief notwithstanding the agreement's fundamental illegality.
CCH first argued that the Court should order specific performance, but that avenue was foreclosed here. An order of specific performance would entail ordering J&J&D to purchase $500,000 worth of marijuana plants, which are a controlled substance, the sale of which would amount to a felony under federal law. In the alternative, CCH asked for damages, but the Court found that it could not disentangle any part of the transaction from the illegal business at its heart. This case is sort of the opposite of Carroll v. Beardon. There, the court treated the sale of a brothel as an on-going business as an ordinary and enforceable real estate deal. Here, the Court refused to disaggregate the lawful parts of the transaction from its core unlawful purpose.
CCH raised claims other than breach of contract, but it did not answer any of J&J&D’s arguments for why those claims should be dismissed and thus forfeited them. If it were to reach the merits, the Court noted, it still could not "order specific performance or otherwise get in the weeds of Plaintiffs’ marijuana business without transgressing the CSA.” I see what you did there, Judge Jolson.
I suppose this means that people in the industry have to operate on the basis of gentlemen’s agreements. No court will enforce their agreements if they are not performed, so you want to operate at all times with the understanding that, if your counterparty breaches, courts will leave you where they find you. Imagine how bad things would look for CCH if J&J&D had insisted on taking possession of the inventory for the purposes of exercising due diligence before announcing that the entire contract was illegal and unenforceable.
June 18, 2025 in Recent Cases, Teaching | Permalink | Comments (0)
Tuesday, June 17, 2025
Tuesday Top Ten - Contracts & Commercial Law Top SSRN Downloads for June 17, 2025
Top Downloads For:
Contracts & Commercial Law eJournalRecent Top Papers (60 days)
As of: 18 Apr 2025 - 17 Jun 2025Rank | Paper | Downloads |
---|---|---|
1. | 329 | |
2. | 240 | |
3. | 195 | |
4. | 190 | |
5. | 168 | |
6. | 134 | |
7. | 128 | |
8. | 122 | |
9. | 110 | |
10. | 91 |
Top Downloads For:
Law & Society: Private Law - Contracts eJournalRecent Top Papers (60 days)
As of: 18 Apr 2025 - 17 Jun 2025Rank | Paper | Downloads |
---|---|---|
1. | 329 | |
2. | 260 | |
3. | 122 | |
4. | 81 | |
5. | 71 | |
6. | 69 | |
7. | 68 | |
8. | 57 | |
9. | 57 | |
10. | 52 |
June 17, 2025 in Recent Scholarship | Permalink
District Court Grants Non-Party’s Motion to Compel Arbitration Two Years After Complaint Was Filed
Despite my attention-grabbing header, I think this case is likely correctly decided under our current system, where just about everything goes to arbitration. FCA (Fiat Chrysler Automobiles) likely could not have brought its motion to compel arbitration any earlier, and whether or not it has standing to bring its motion goes to the scope of arbitration, a matter that the parties delegated to the arbiter.
In February, 2023, plaintiffs bought FCA vehicles and allege that the hybrid engines in the vehicles were faulty. Plaintiffs bought from dealerships, not from FCA directly. Each sales contract included arbitration provisions, but those arbitration provisions differed, except that they all provided that the arbiter would decide issues of arbitrability. In July, 2023, FCA moved to dismiss the action for failure to state a claim. It also moved to compel arbitration. The latter motion was not based on the sales contract but on the written warranties that came with plaintiffs’ vehicles. At a hearing on that motion, FCA represented that it did not yet have access to the dealers’ contracts with plaintiffs, contracts to which it was not a party.
Plaintiffs voluntarily dismissed their warranty claims. In February, 2024, FCA sought discovery from its dealers to establish the parameters of the arbitration clause in the sales agreements. Now in possession of those sales agreements, FCA moved to compel arbitration. Plaintiffs argued that FCA, through its delay, had waived its right to arbitration and that FCA had no standing to invoke the arbitration clause in sales agreements to which it was not a party. In the alternative, plaintiffs asked the court to decide the issue of arbitrability and to answer it in the negative.
In Fisher v. FCA US, LLC, the U.S. District Court for the Eastern District of Michigan rejected plaintiffs’ arguments and compelled arbitration. Ordinarily, a party would be held to have waived its right to arbitrate once it has filed a motion to dismiss. Here, however, FCA persuaded the Court that it brought its motion to compel based on the arbitration provisions in the sales agreements as soon as it got access to those agreements. Another court in the Eastern District had found otherwise, writing that it “taxe[d] credulity to posit that FCA was not aware of the standard sales documents [containing arbitration provisions] its dealers were using.” While the Court acknowledged the strength of the argument, in this case, it was persuaded that FCA could not have brought its motion earlier as it really did not know the terms of its dealers’ arbitration agreements. They are not uniform. In any case, nothing in FCA’s conduct suggested any intention to waive its right to compel arbitration.
As to standing, the Court forthrightly acknowledges that FCA’s standing to invoke an arbitration clause in an agreement to which it is not a party is a serious question. However, here, the arbitration provision delegates questions of arbitrability to the arbiter. The language at issue in these arbitration agreements has been construed before in the Sixth Circuit. The Court cites precedential opinions at length. The Court addresses each of plaintiffs’ counterarguments attentively, but it really just comes down to the fact that the relevant agreements clearly and unambiguously delegate questions of arbitrability to the arbiter, and our law sends such issues to the arbiter even when a party has a colorable argument that no arbitration agreement exists between the parties.
June 17, 2025 in Recent Cases | Permalink | Comments (0)
Monday, June 16, 2025
Students' COVID Claims Against Colorado State University Dismissed
After their university shut down its campus temporarily in March 2020, necessitating the completion of the semester through distance learning, students brought suit on behalf of a purported class against Colorado State University (CSU) for breach of contract and unjust enrichment. A state trial court dismissed the breach of contract claims, finding that CSU had statutory authority to shut down its campus in the event of unforeseen calamities. Moreover, because the students did have a contract with CSU, they could not sue for unjust enrichment in connection with a matter covered by the contract. An appeals court reversed the dismissal of the students' unjust enrichment claims.
In Board of Governors of the Colorado State University v. Alderman, the Colorado Supreme Court remanded with instructions to reinstate the judgment of the trial court dismissing all claims. In so doing, the Court clarified that there was an enforceable contract between the students and CSU. However, the contract incorporated CSU’s statutory authority to shut down its campus, and thus there was no breach. The substantive portion of the Court’s opinion is quite brief. There was no breach of contract because CSU did what it was statutorily permitted to do, and that statutory authority was part of its implied contract with its students. The unjust enrichment claim was barred because it covered the same subject matter as the contract.
This is just the latest in a long series of such cases that we have been covering from time to time. Their disposition often turns on the unique facts and on unique verbiage in the schools’ promotional materials. Two recent posts on the topic can be found here and here.
June 16, 2025 in Recent Cases | Permalink | Comments (0)
Friday, June 13, 2025
Friday Frivolity: A Use for Meme Coins?
As dedicated readers may recall, we posted last November about parody newspaper The Onion’s attempt to buy Alex Jones’ Infowars in an auction held in connection with Mr. Jones’ bankruptcy. That bankruptcy followed a $1.4 billion judgment against Mr. Jones in a suit brought by the families of victims of the mass shooting at the Sandy Hook Elementary School. Mr Jones promoted the theory that the event was a fabrication, and he defamed the families whose children had been killed as purveyors of a complex ruse designed to create anti-gun hysteria.
The idea behind The Onion’s purchase of the website and news source, previously devoted to crank, right-wing conspiracy theories, would be to run Infowars in a manner consistent with the wishes of the families who won the judgment that led to Mr. Jones’ bankruptcy. In short, Infowars would now promote the reasonable regulation of firearms. Alas, as and reported in The Business Insider, the judge overseeing Mr. Jones’ bankruptcy proceedings would not enforce the results of the auction. There were improprieties with the original auction. However, as Tovia Smith reports for National Public Radio, the Bankruptcy judge also decided not to proceed with a new and improved auction, because Infowars' parent company is no longer in bankruptcy. An auction can proceed on the sale of Mr. Jones’ stake in that company. However, the judge cautioned, "If there's going to be a sale of assets, cash will be king."
Enter a highly atypical knight in shining armor: a meme coin may save the day. As Matt Levine reported in his “Money Stuff” column for Bloomberg back in February, an entity called WOW.AI is planning to bid on Mr. Jones’ stake, putting up $3.5 million plus a 51% stake in the $WARS meme coin. In order to establish a valuation for the coin, WOW.AI will sell 10% of the $WARS supply, and Matt Levine says that the trade in the available meme coins suggests that the value of the 51% stake in the coin will be around $11 million, well in excess of the $8 million bid put forward by Alex Jones himself (through his backers). The idea is that the 51% stake in the coin will then be transferred to the plaintiffs who put Mr. Jones in bankruptcy, and they can use their majority interest in the coin to dictate the direction that Infowars takes from here.
It is a brilliant strategy. Matt Levine explains why. In the olden days, you could have financed this venture through launching a company, but then people would ask questions, like how does this venture make money? But with a memecoin, everybody knows that there is no value underlying the venture other than hype (see chart at left, which illustrates the price curve of a typical memecoin). In this case, there actually might be some value, depending on what happens with Infowars after the takeover. In addition, if the venture involved selling shares in a company, the SEC would definitely ask questions, because you are offering federally regulated securities. In short, Matt Levine concludes, "Crypto is a way to issue securities (stock) without following securities laws. (Not legal advice!)"
June 13, 2025 in Current Affairs, In the News, Web/Tech | Permalink | Comments (0)
Thursday, June 12, 2025
Twitter (X) Found Liable for Over $8 Million in Unpaid Rent for Office Space
We have had a series of posts now on attempts to “cancel” contracts. When NBC claimed to have “canceled” its contract with former Republican National Committee Chair, Ronna McDaniel, she sued for the value of her two-year, $600,000 contract. Elon Musk claimed to “cancel” a contract with Don Lemon to livestream the latter’s show on Twitter (a/k/a X). I don’t know if that resulted in a lawsuit. If it didn’t, perhaps there was no real contract in the first place.
Mr. Musk boasted about all of the contracts that he was canceling when he took over Twitter. He made similar boasts with respect to contracts “canceled” by the so-called Department of Government Efficiency. But contracts generally can’t be “cancelled;” that is, cancellation of a valid, enforceable agreement can give rise to a claim for breach.
That is what happened when Twitter attempted to cancel its lease on office space in Boulder, Colorado. The transaction is complicated — with Exhibits, it comes to 192 pages — but basically Lot 2 SBO, LLC (Lot 2) was to build office space to Twitter’s specifications in exchange for rent payments commencing in 2022. Twitter ceased rent payments in December 2022, claiming that it was entitled to a $5.76 million Tenant Improvement Allowance (TIA), and that it didn’t have to pay rent until that TIA was exhausted. Lot 2 responded that the conditions precedent to Twitter’s entitlement to the TIA had not been met and so it was obligated to continue to pay rent. Lot 2 sued for detainer and breach of the lease. Twitter counterclaimed for breach of contract, wrongful eviction, and breach of the covenant of good faith and fair dealing.
The dispute came down to two paragraphs in a Work Letter, Exhibit E to the lease. After a four-day bench trial, the Boulder trial court ruled in Lot 2’s favor in Lot 2 SBO, LLC v. Twitter, Inc. Both parties asserted that the relevant paragraphs were unambiguous. The Court agreed that the contract is unambiguous, and it found that it could only mean what Lot 2 understood it to mean.
Specifically, Paragraph 4b, which the Court found to be foundational, provides that Twitter would only be entitled to the TIA if it were to complete certain tenant work and that no event of default has occurred. Paragraph 4c sets out Twitter’s right to draw on the TIA to cover rent payments, but the Court, reasonably enough, found that Paragraph 4c cannot be decoupled from Paragraph 4b. Twitter cannot use the TIA to offset its rent obligations when it is not entitled to the TIA in the first place. That was the Court’s view on the plain meaning of the contract.
Evidence that was presented at trial and could be considered on appeal corroborated the Court’s understanding of the parties' intentions with respect to the TIA. Testimony from Twitter employees confirmed that their understanding of the contract was the same as the Court’s understanding. However, once Twitter made the transition to X Corp., it adopted a deliberate strategy of not paying rent as a negotiating strategy to save money. Ugh.
The Court then establishes that, as a matter of fact, Twitter did not fulfill its obligations under Paragraph 4b and thus was not entitled to the TIA. It follows that it could not use the TIA to offset its rent obligations. The Court rejected testimony from an X Corp. witness setting out a contrary interpretation as not credible.
The Court found in favor of Lot 2 on all of its claims and rejected all of Twitter’s counterclaims. Lot 2 was entitled to just under $8 million in rent due, a small amount for repairs, damage, and marketing costs, and $350,000 in rent abatement. Twitter argued that Lot 2 had failed to mitigate its damages because it exclusively sought to replace Twitter with another tenant that would occupy the entire building. Considering the testimony of qualified real estate experts from both sides, the Court concluded that Lot 2’s strategy was not unreasonable, and thus it had not failed to mitigate damages.
June 12, 2025 in Commentary, In the News, Recent Cases, Web/Tech | Permalink | Comments (0)
Wednesday, June 11, 2025
The Short-Term Future of College Athletics
As Becky Sullivan reported for National Public Radio last week, a judge has now approved a $2.7 billion settlement in a class action, House v. NCAA. The class was certified back in 2023. The settlement provides that colleges and universities can now pay student athletes directly, subject to a salary cap of $20.5 million, rising to $33 million by 2035. The settlement also creates of a pool of $2.75 billion to be distributed among former college athletes who played before 2021 and could not be paid under then-existing rules. With 390,000 members in the class, the median payout would be just over $7000.
Many questions remain. So many questions. The parties (or some parties) were apparently dissatisfied with the current regime for establishing Name, Image, and Likeness (NIL) deals with college athletes, which led to some athletes (almost exclusively male) earning millions of dollars to play mostly football and basketball. The new settlement is supposed to create a clearinghouse that will review licensing agreements to test whether they represent “fair market value.” What a concept! I have no idea how it would work, but why wouldn’t the price of the contract represent the fair market value? And as to the $2.75 billion, there is no information in the reporting I have seen that indicates how the money is to be allocated. Is a professional football player, who was drafted in the fourth round bus has since has earned millions over a professional career entitled to more money than a star women’s soccer player who now gets paid $80,000 to coach a college team?
The other question that lingers in my mind is what becomes of the collectives, about which we have written here and here and here? The settlement caps what colleges and universities can pay directly to students. Does it limit what the collectives can pay? We have been in terra incognita since 2021. I suspect there will be more bumps in the road. Colleges and universities are facing perhaps unprecedented financial challenges. Can they continue to support very expensive athletics programs while being forced to cut academic programs? Time will tell.
June 11, 2025 in Commentary, Current Affairs, In the News, Recent Cases | Permalink | Comments (0)