Monday, August 8, 2022
KCON XVI: It's On!!
We are so pleased to share that the 16th International Conference on Contracts -- a/k/a KCON XVI -- will be held at Texas A&M University School of Law in Fort Worth on Friday and Saturday, March 17-18, 2023. A Call for Papers will be forthcoming, but the organizers want to give you a chance to start planning.
Historically, the conference is highly inclusive. In particular, we have always especially encouraged junior scholars to participate by presenting papers and works-in-progress, by organizing panels on topics relating to their research interests, and by volunteering to help organize and promote the event. While most of the current organizers have aged some, nearly all of us got involved as relatively junior faculty members looking to expand our scholarly networks and showcase our work, and it’s part of our mission to keep that tradition alive. If you have an idea for a panel but want help lining up panelists or commentators, we can help.
The conference is intentionally broad. Proposals relating to any aspect of domestic or international contract or commercial law are welcome, including (but not limited to) doctrine, theory, legislation, history, pedagogy, practice, consumer issues, employment, and social issues. Proposals that cross traditional contract law boundaries are particularly encouraged.
If you have questions, feel free to contact any of the volunteer organizers:
Wayne Barnes wbarnes@law.tamu.edu
Mark Burge markburge@law.tamu.edu
Miriam Cherry mcherry3@slu.edu
Dan O’Gorman DOGorman@barry.edu
Jamie Fox fox@law.stetson.edu
Dani Hart dhart@swlaw.edu
Hila Keren hkeren@swlaw.edu
Michael Malloy mmalloy@pacific.edu
Colin Marks cmarks@stmarytx.edu
Jennifer Martin jmartin@STU.EDU
Val Ricks vricks@stcl.edu
Keith Rowley keith.rowley@unlv.edu
Frank Snyder fsnyder@law.tamu.edu
Ben Templin btemplin@tjsl.edu
Dov Waisman dwaisman@swlaw.edu
So mark the date and plan to join us for Bluebonnet season in Fort Worth in the spring.
August 8, 2022 in Conferences, Contract Profs | Permalink | Comments (0)
Help Wanted: Three(!) Positions at Stetson Law
POSITION: TENURE-TRACK PROFESSOR OF LAW
STETSON UNIVERSITY COLLEGE OF LAW seeks to fill at least three entry-level tenure-track positions. While our needs are flexible, we are particularly focused on Contracts, Torts, and Legal Research and Writing, as well as the areas of the Uniform Commercial Code, Professional Responsibility, Intellectual Property (emphasis on Patent Law), and Health Law. We may also have a need for Spring 2023 visitors in Legal Research and Writing and Torts.Other doctrinal areas may be considered depending on our developing institutional needs.
Located in Florida’s Tampa Bay area, the nation’s nineteenth largest metro area, Stetson was established in 1900 and is Florida’s oldest law school. Our main campus is in Gulfport, just outside St. Petersburg. We also have a part-time program with classes on both the main campus and our satellite campus in downtown Tampa. Stetson has earned a national reputation for its advocacy program, which is ranked #3 in U.S. News and World Report, and its elder law and higher education programs, with Centers for Excellence in Advocacy, Elder Law, and Higher Education Law and Policy. Stetson also has achieved a national reputation in legal writing, with its legal writing program also ranked #3 in the nation by U.S. News and World Report. Stetson is the home for the Institute for the Advancement of Legal Communication, the Institute for Biodiversity Law and Policy, and the Veterans Law Institute.
Stetson nurtures a vibrant intellectual community, situated on a beautiful campus. We encourage potential applicants to visit our website at https://www.stetson.edu/portal/law/ to learn more about our school, our community, and our programs. The law school is a part of Stetson University, which is located in DeLand, Florida, approximately three hours from the law school. The University features include a College of Arts and Sciences, a School of Music, and a School of Business Administration, the latter of which supports the law school’s JD/MBA program.
Stetson encourages applications from women, persons of color, LGBTQ+ candidates, and others who will contribute to our stimulating and diverse cultural and intellectual environment. Applicants must have a strong academic record and be committed to outstanding teaching and scholarship. Stetson’s Equal Employment Opportunity policy is available at https://www.stetson.edu/administration/human-resources/media/hotline/eeo-non-discrimination.pdf.
SALARY: Salary is competitive
STARTING DATE: August 2023
APPLICATION:
Applicants should send a cover letter indicating teaching and scholarly interests, a current curriculum vitae, and contact information for at least three professional references to Professors Jason Palmer and Rebecca Morgan at facultyappointments@law.stetson.edu or by standard mail to Professors Palmer and Morgan at Stetson University College of Law, 1401 61st Street South, Gulfport, FL 33707. The Faculty Appointments Committee will continue to review applications until positions are filled.
August 8, 2022 in Help Wanted | Permalink | Comments (0)
Tuesday, July 26, 2022
Tuesday Top Ten - Contracts & Commercial Law Downloads for July 26, 2022
Welcome to this week's ContractsProf Blog Tuesday Top Ten! It's time for our (mostly) weekly list of the hottest summer contract and commercial law downloads as of July 26, 2022, based on data from our friends at SSRN. Without further ado, let's roll the tape:
Top Downloads For:
Contracts & Commercial Law eJournalRecent Top Papers (60 days)
As of: 27 May 2022 - 26 Jul 2022| Rank | Paper | Downloads |
|---|---|---|
| 1. | 197 | |
| 2. | 161 | |
| 3. | 129 | |
| 4. | 87 | |
| 5. | 82 | |
| 6. | 81 | |
| 7. | 57 | |
| 8. | 56 | |
| 9. | 45 | |
| 10. | 43 |
Top Downloads For:
Law & Society: Private Law - Contracts eJournalRecent Top Papers (60 days)
As of: 27 May 2022 - 26 Jul 2022| Rank | Paper | Downloads |
|---|---|---|
| 1. | 161 | |
| 2. | 57 | |
| 3. | 56 | |
| 4. | 52 | |
| 5. | 45 | |
| 6. | 43 | |
| 7. | 43 | |
| 8. | 33 | |
| 9. | 30 | |
| 10. | 25 |
July 26, 2022 in Recent Scholarship | Permalink
Friday, July 22, 2022
Away
I will be traveling for the next two weeks, so don't expect much activity here. Time for a long-overdue and COVID-delayed trip to visit my mother and my brother, Muki (both pictured below). If you don't have a brother named Muki, you should consider getting one.
July 22, 2022 in About this Blog | Permalink | Comments (0)
Thursday, July 21, 2022
Teaching Critical Race Theory Without Mentioning Critical Race Theory
Inspired by Charles Calleros' post from a few years ago, I teach Barfield v. Commerce Bank, N.A., 484 F.3d 1276 (2007). Inspired by Charles's other post from that guest stint, I also teach Gregory v. Dillard's. Both of these cases are about Black people denied the ability to enter into contractual relations or commercial transactions. In one of the cases, a federal statute, 42 U.S.C § 1981, comes to the rescue. In the other, it doesn't. It's a nice pairing.
I introduce these cases early in the course, right after we cover freedom of contact, for three reasons. First, I want them to know that the common law of contracts is not the final word on legal obligations relating to contracts. Second, the difference in approach in the two cases illustrates the difference between judges who follow precedent and think that their power is limited to the application of a remedial statute as written and judges who think more broadly about remedial purposes and may be willing to go beyond the statutory text.* Third, and most importantly for the purposes of this post, I want them to help them to see right at the beginning of their legal careers that if you formulate seemingly neutral laws of general applicability but apply those laws in a racist society, the law can become a tool of structural racism.
I have had occasion on this blog before to highlight Will Baude's excellent podcast with Dan Epps, Divided Argument (most recently here). Today, I want to highlight Will's (that's Will, at right) other podcast, Dissenting Opinions, the second season of which is entirely devoted to a conversation with Khiara Bridges (left) about critical race theory. I recommend the entire series to anyone who wants to really understand the difference between critical race theory and the phantasm that goes by the same name and has become the subject of incoherent legislation across the country. Professor Bridges and Will discuss structural racism in Episode 2.
I recently came across a terrific illustration of structural racism on another beloved podcast, This American Life, Episode 773, The Longest Distance Between Two Points. Act I of that episode is about a part of the Mississippi constitution that disenfranchises certain categories of felons. The provision has a racist background, dating from 1890, when Whites in Mississippi were concerned that the state might become majority Black and that the Whites would lose control of the legislature. They wrote a number of measures into the 1890 constitution designed to disenfranchise Blacks, including the felony law. To this day, according to This American Life, 60% of those disenfranchised under this constitutional provision are Black, even thought Blacks account for only 39% of the population.
The episode follows the odyssey of one man, Gerald Laird, convicted of robbery in 2002, as he tries to get a private bill through the Mississippi legislature so that he can vote again. The process is complex and opaque. You need to be really determined to make it through and even then, the legislature passes only a handful of private bills each year. Gerald's private bill passed the House committee and the full House without any opposition. It was never presented in the Senate committee, because the chair of that committee, Joey Fillingane (right), exercised his discretion and never put Gerald's bill on the agenda. It died.
Why did it die? Mr. Fillingane explained that Gerald's crime was considered a violent offense, and when the lieutenant governor appointed Mr. Fillingane to the committee, he told Mr. Fillingane that there was a "general rule" that the committee does not consider private bills to return to franchise to violent felons. Gerald's crime did not involve violence, and Fillingane would have considered that fact, but it doesn't seem like he really looked at the application once he determined that it involved a violence offense.
The following exchange between This American Life's Johny Kauffman and Mr. Fillingane illustrates how structural racism works.
Johnny Kauffman
The historians that I've talked to about this to try to learn more about it said that it was this 1890 constitutional convention that met, and that the goal of that convention was to keep Black people from voting, and that these criminal disenfranchisement, these laws, were a part of that plan.
Joey Fillingane
I don't know if that's the case or not. I wasn't there. I've not studied the history of the 1890 constitution. And certainly, Mississippi has a very checkered past when it comes to race relations. We treated African-Americans very poorly in some parts of our history. And I'm certainly not going to sit here and defend that or even try to. I wouldn't want to. But if you're asking me, is the suffrage right being treated differently based on your race in 2022 as it relates to suffrage bills that we consider in the legislature, absolutely not.
I don't even know the race of the person. I'm sure I could probably try to find out by asking Department of Corrections to print me a social history, the person's age, and racial background, and all of that if I wanted to. I've never done that. I don't intend to start. But I mean, it's not obvious to me, just by looking at a bill, what racial background someone is a part of.
Mr. Kauffman raises a point about structural racism. Mr. Fillingane responds by defending himself against what he perceives as an accusation that he is racist. They are essentially talking past each other. Mr. Kauffman is not saying that Mr. Fillingane had a racist motive in killing Gerald's private bill. Because of structural racism, no such motive is necessary. When you apply a racist 1890 provision of the Mississippi constitution in a neutralm objective manner, you are doing the work of structural racism regardless of your personal views on race.
And now the ball should be in Mr Fillingane's court. He professes ignorance in the episode, but he is ignorant no longer. Or his ignorance is a choice.
For newcomers to the blog interested in this topic, we have had a number of contributions on critical theory, critical race theory, and feminism.
- Teaching Assistants: Dorothy A. Brown, Critical Race Theory, 3rd Edition
- Guest Blogger Marissa Jackson Sow on Whiteness as Contract and the Police, Part II
- Guest Blogger Marissa Jackson Sow on Whiteness as Contract and the Police, Part I
- Teaching Assistants: Marissa Jackson Sow, "Whiteness as Contract"
- Teaching Assistants: Threedy, Dancing Around Gender
- Guest Post by Alan White, Systemic Racism and Teaching Contracts
- Guest Post by Deborah Post on Williams v. Walker-Thomas
- Guest Post by Chaumtoli Huq, Part III: Counter-Hegemonic Narratives
- Guest Post by Chaumtoli Huq, Part II: Freedom to Contract and the Reasonable Man
- Guest Post by Chaumtoli Huq, Part I: The Decolonial Framework
- Guest Post by Deborah Zalesne, The (In)Visibility of Race in Contracts: Thoughts for Teachers
- What Should a Court Do in Response to Racist Contractual Threats? Wolf v. Marlton Corp.
- Guest Post by Charles Calleros: Raising Issues of Race, Ethnicity, and Culture in 1L Contracts: Language Barriers
- Guest Post by Charles Calleros, Talking about Race in the Contracts Course: Interface with Civil Rights Laws, Part II – Consideration
- Guest Post by Charles Calleros, Talking about Race in the Contracts Course: Interface with Civil Rights Laws, Part I – Mutual Assent
- Teaching Assistants, Emily Houh's Redemptive Theory of Contract Law
*Charles and I may differ on Commerce Bank. I think that case is about a simultaneous exchange and thus not about a contract. Nonetheless, I think the court's conclusion that Congress intended 42 U.S.C. § 1981 to cover such transactions is plausible. With my students, I make much of the interpretive stretch involved in order to make the contrast between Commerce Bank and Gregory as clear as possible.
July 21, 2022 in Teaching, Web/Tech | Permalink | Comments (3)
Tuesday, July 19, 2022
Tuesday Top Ten - Contracts & Commercial Law Downloads for July 19, 2022
Top Downloads For:
Contracts & Commercial Law eJournalRecent Top Papers (60 days)
As of: 20 May 2022 - 19 Jul 2022| Rank | Paper | Downloads |
|---|---|---|
| 1. | 992 | |
| 2. | 211 | |
| 3. | 190 | |
| 4. | 151 | |
| 5. | 122 | |
| 6. | 80 | |
| 7. | 79 | |
| 8. | 72 | |
| 9. | 71 | |
| 10. | 54 |
Top Downloads For:
Law & Society: Private Law - Contracts eJournalRecent Top Papers (60 days)
As of: 20 May 2022 - 19 Jul 2022| Rank | Paper | Downloads |
|---|---|---|
| 1. | 151 | |
| 2. | 80 | |
| 3. | 54 | |
| 4. | 50 | |
| 5. | 48 | |
| 6. | 44 | |
| 7. | 42 | |
| 8. | 41 | |
| 9. | 33 | |
| 10. | 28 |
July 19, 2022 in Recent Scholarship | Permalink
Help Wanted: Lewis & Clark Law School
Lewis & Clark Law School in Portland, Oregon invites applications from candidates for several positions to begin in the 2023-24 academic year. These positions will remain open until filled. We primarily seek candidates to teach property, torts, contracts, commercial law, copyright and other IP classes, employment law and related classes, health law, and lawyering/legal writing. Candidates with interests in constitutional law, criminal law, and wills & trusts may also receive consideration.
We will begin screening interviews in September, and campus callbacks will take place shortly thereafter. Applicants who receive an offer will have two weeks to consider the offer. In some cases, an applicant may need to make a decision before other law schools have completed callbacks. Applicants should have serious interest in Lewis & Clark Law School and living in the Pacific Northwest.
Interested persons should send a c.v., references, a writing sample, and an indication of specific teaching interests to Kerry Rowand, Executive Assistant to the Dean, at lawfacultyhire@lclark.edu. More information about the law school can be found at https://law.lclark.edu/.
Lewis & Clark College is an Equal Employment Opportunity employer. We value diversity at all levels. All individuals, regardless of personal characteristics, are encouraged to apply. All qualified applicants will receive consideration for employment with regard to sex, race, religion or religious creed, color, gender, gender identity, gender expression, national origin, physical or mental disability, marital status, age, sexual orientation, veteran status, or any other basis protected by federal, state, local law, ordinance, or regulation.
July 19, 2022 in Help Wanted | Permalink | Comments (0)
Monday, July 18, 2022
The New Yorker Reports on Pre-Nups
A recent article in The New Yorker reports that pre-nups are way up. According to the poll, a whopping 40% of married people between the ages of 18 and 34 have pre-nups. For people above 55, the figure is 5%. I am in the latter category, but my wife and I have a pre-nup. Most of its terms relate to her obligation to sit on the loveseat with me and watch things on television. Unfortunately, it was devised before I went to law school, and so I did not know that pre-nups have to be in writing. And they can't be fictional. Our prenup develops new provisions each time there is some show I want my wife to watch with me. "If you consult our prenup, I'll say, you'll see that you are contractually obligated to sit here." My wife considers it unenforceable. But she's not an attorney.
RTThere is a socio-economic reason why pre-nups are all the rage: debt. The stereotypical pre-nup is about some rich person trying to protect their pre-marital wealth. Pre-nups today are often about partners trying to protect themselves from their partner's debt. That debt might be student loans or it might be impending medical costs. The New Yorker article starts with the story of a couple that had been together for a while when the man was diagnosed with terminal cancer. He then asked his partner to marry him. She agreed, but conditioned the marriage on a pre-nup, as she did not want to be saddled with responsibility for medical costs that clearly would exceed his ability to pay.
The article then provides a nice history of pre-nups in the Americas, building on scholarship by Marcia Zug. Their enforceability was not a certainty until the 1970s or 80s, depending on the jurisdiction. The law of pre-nups is, to this day, littered with regulations intended to prevent the worst possible outcomes. The result is to make pre-nups harder to enforce and more expensive. For example, some states require that the pre-nups be entered into a certain period before the wedding, a response to occasions when men presented their betrotheds with "revised pre-nups" on the way to the rehearsal dinner. Some states also require that the parties each have their own attorneys. This is wise if the parties have asymmetrical means, but that is not always the case. LSU's Elizabeth Carter has argued that pre-nups should be standard for all married couples. There are lots of reasons why Professor Carter thinks people getting married need pre-nups, but pre-exiting debt seems to be one important one. In addition, a pre-nup also enables a party to tailor the division of marital property so as to avoid being stuck with the state legislature's one-size-fits-all default rules that might not actually fit.
But then at the end of the article, it turns out that pre-nups are still pretty expensive and mostly for the financially comfortable. Kim Kardashian reportedly had pre-nups in connection with two of her marriages. The cheapest of pre-nups cost thousands of dollars, and they are pricier if you don't know what you are doing. That means the people who really need pre-nups -- the people likely to be saddled with a departed spouse's unpaid debts -- can't afford them. The article mentions two TikTokers who share useful information about pre-nups on that platform, Kelly Chang Rickert and @yourrichbff. HelloPrenup, a start-up featured on Shark Tank, charges roughly $600 per couple. Even if you don't think you need a pre-nup, you might want to keep up with the Kardashians.
July 18, 2022 in Contract Profs, Current Affairs, In the News, Recent Scholarship, True Contracts | Permalink | Comments (0)
Friday, July 15, 2022
Guest Post 3: John Patrick Hunt on Alternatives to Specific Performance in Twitter v. Musk
John Patrick Hunt on Elon Musk and Twitter
Part III: Alternatives to the Specific Performance of Merger Agreements
As explored in the previous posts (1 & 2) in this series, Delaware law seems to provide for specific performance of merger agreements when the parties agree to it, which they often do. But, moving to the second major point of these posts, what if the court nevertheless decides not to order specific performance here? For example, commenters have suggested Musk might simply defy such an order, and that fear of that outcome might induce the court not to order specific performance in the first place. Setting aside any doubts about the plausibility of this scenario, we consider what would happen if the court actually did decline to order specific performance on the stated ground that damages are adequate or for other equitable reasons.
The conventional reading of the Musk-Twitter contract seems to be that any monetary damages would be capped at $1 billion, the amount of what the agreement calls the “Parent Termination Fee.” And the does say that in plain terms. For a “knowing and intentional” breach of the agreement, Twitter is “entitled to seek monetary damages, recovery, or award” from Musk or the acquiring companies “in an amount not to exceed the amount of the Parent Termination Fee, in the aggregate.” Agrmt. 8.3(c)(ii). In cases other than knowing and intentional breach, Twitter’s “right to receive payment from Parent of the Parent Termination Fee … shall constitute the sole and exclusive monetary remedy” of Twitter. Id. The same provision goes on to state that “in no event shall [Musk or the acquisition companies] be subject to an aggregate amount for monetary damages … in excess of an aggregate amount equal to the Parent Termination Fee.” Id. The specific-performance provision itself states, “in no event shall [Twitter] be permitted or entitled to receive aggregate monetary damages in excess of the Parent Termination Fee.” Agrmt. 9.9(b).
But these assertions have to be read against the general background assumption of the agreement that specific performance would be available. This assumption also appears repeatedly in the agreement, and it is stated emphatically: “[T]he parties hereto acknowledge and agree that the parties hereto shall be entitled to an injunction, specific performance, and other equitable relief … to enforce specifically the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity.” Agrmt. 9.9(a). Moreover, “Notwithstanding anything herein to the contrary, including the availability of the Parent Termination Fee or other monetary damages, remedy, or award, it is hereby acknowledged and agreed that [Twitter] shall be entitled to specific performance or other equitable remedy to enforce” the agreement against Musk and the acquisition companies, provided the conditions discussed above are met. Agrmt. 9.9(b). The word “acknowledge” seems significant here, as it communicates that each party not only agrees to be subject to specific performance, but also recognizes that each party contemplates that the remedy will in fact be granted -- that is, granted despite equitable considerations.
The contract documents do not address the case where a court denies specific performance for equitable reasons. A provision that Twitter can pursue specific performance and monetary relief simultaneously but cannot receive both, Agrmt. 9.9(b)(iii)(A), just appears to address the timing of election of remedies.
Assuming that the agreement does not cover the case where specific performance is unavailable, the “in no event” should also be interpreted not to cover that case, leaving a gap or omitted case in the contract. One possibility is that the gap is large enough to constitute a failure of assent, as in that 1L chestnut, the Peerless case, Raffles v. Wichelhaus, 159 Eng. Rep. 375 (1864) (or in the chicken case, Frigaliment Importing Co. v. B.N.S. Int’l Sales Corp., 190 F. Supp. 116 (S.D.N.Y. 1960), which has been interpreted as a modern analogue). Or perhaps the denial of specific performance on extrinsic grounds would be the failure of a basic assumption that the court would award the remedy, so that mistake doctrines would come into play. See Fortis Advisors LLC v. Johnson & Johnson, 2021 WL 5893997, at *17 (Del. Ch. Dec. 13, 2021). These outcomes threaten the enforceability of the merger agreement and thus would be bad news for Twitter.
More likely, however, the court would try to fill the gap by interpretation. Delaware courts would receive extrinsic evidence, such as evidence of the parties’ negotiations, given the contract’s ambiguity, see, e.g., United Rentals, 937 A.2d at 834-35. We of course don’t know what that extrinsic evidence might show, but unless it leads to a clear outcome, it seems likely that the default contract remedy of expectation damages would come back into play. See AB Stable VIII LLC v. Maps Hotels and Resorts One LLC, 2020 WL 7024929, at *100 (Del. Ch. Nov. 30, 2020) (“The common law has established a series of default rules governing the ability of a party to recover damages for a breach of contract. They form a backdrop to the negotiated provisions.”); Concord Real Estate CDO 2006-1, Ltd. v. Bank of America N.A., 996 A.2d 324, 332 (Del. Ch. 2010) (common law “provides a backdrop of standard default rules that supplement negotiated agreements and fill gaps when a contract is incomplete, whether by inadvertence of design. Parties can contract around virtually all common law rules. In a lengthy and sophisticated agreement … the terms of the agreement and not the common law will control many issues. But unless contradicted or altered by the parties’ agreement, the common law rules form an implied part of every contract.”).
Twitter’s expectation damages would be the amount needed to put the company in the financial position it would have been in if Musk had closed the transaction as agreed. They could vastly exceed the $1 billion termination fee, which, as Dean Afra Afsharipour (right) has noted, is a relatively small proportion of the deal price by M&A standards. This amount would certainly be litigated, but a reasonable candidate for an approximation would be the difference between the agreed acquisition price of its stock and the market price. The deal price is $54.20 per share, and at this writing, Twitter is trading at $34.28 per share and reportedly has 764 million shares outstanding. That works out to over $15 billion in expectation damages.
A counterargument could be that despite the contract language quoted above, the parties did not in fact assume that specific performance would be available. Instead, perhaps Twitter recognized that denial was a possibility, signed up for an undercompensatory $1 billion remedy in that circumstance, and lost its gamble. The strong Delaware precedents in favor of specific performance cut against this interpretation, but extrinsic evidence that the Twitter team recognized the possibility that specific performance would be denied despite the law could cut the other way. And Musk’s side would be able to take discovery and try to prove that, given Delaware’s rules on extrinsic evidence.
For example, if Twitter’s representatives discussed the possibility that a court would deny specific performance to avoid a confrontation with Musk out of fear that he would refuse to comply, that could weigh in favor enforcing the damages limitation should apply. But it raises a question: Should a powerful party be allowed to benefit from willingness to defy the law in this way?
**
The author gratefully acknowledges receiving excellent research assistance from Michaela Gines and Benjamin Ylo of the King Hall Class of 2024. Their work contributed significantly to these posts.
July 15, 2022 in Commentary, Contract Profs, Current Affairs, E-commerce, In the News, Recent Cases, Web/Tech | Permalink | Comments (5)
Thursday, July 14, 2022
Guest Post 2: John Patrick Hunt on Specific Performance in Delaware
John Patrick Hunt on Elon Musk and Twitter
Part II: Specific Performance of Merger Agreements
In yesterday’s post, I provided background on the availability of specific performance as a remedy in the context of acquisitions under Delaware law. In this post, we look at Delaware law in more detail.
Commenters have focused on In re IBP Shareholders Litigation, 789 A.2d 14, 82-84 (Del. Ch. 2001) (edted version available here) in which the court considered various equitable factors, including the adequacy of monetary remedies, before deciding to grant specific performance of a merger agreement to the seller. But, importantly, the opinion in IBP does not suggest that the parties agreed to specific performance. It would surprising if the parties had agreed to specific performance and the court simply decided not to mention it; the court did refer to the agreement’s choice-of-law provision in deciding the analogous question of what law to apply. Id. at 52-54. Thus, although IBP certainly stands for the proposition that the Court of Chancery is willing to order a buyer to go through with an M&A transaction, it may suggest more reluctance to do so than the court actually exhibits when the parties have agreed to specific performance.
When the parties do agree to specific performance, the Court of Chancery seems to give great weight to their choice. Indeed – again recognizing that the research for these posts has not been totally comprehensive – this author has found no merger or acquisition case in which the court denied on extrinsic grounds specific performance when it found that the parties’ agreement authorized the relief.
The Court of Chancery recognized the importance of respecting the parties’ choice to opt into specific performance in the related context of exercise of shareholder preemptive rights. Ordering specific performance per the parties’ agreement in Gildor v. Optical Solutions, Inc., 2006 WL 4782348 (Del. Ch. June 5, 2006), the court wrote, “If the Stockholder Agreement was silent as to the availability of specific performance, Gildor would bear the burden of showing that a legal remedy would be inadequate. … But, given Delaware’s policy of favoring freedom of contract, there is no need to make that inquiry. … Delaware courts do not lightly trump the freedom to contract and, in the absence of some countervailing public policy interest, courts should respect the parties’ bargain.” Id. at *11.
Moving to M&A cases, in Hexion Specialty Chemicals, Inc. v. Huntsman Corp., 965 A.2d 715 (Del. Ch. 2008), the court seems to have treated the parties’ agreement on specific performance as dispositive. It did not analyze the adequacy of damages or equitable factors that would favor or disfavor specific performance. Instead, it simply read the contract’s specific-performance provision and granted specific performance according to the contract’s express terms. Id. at 759-63. Although the court did not order the buyer to close the transaction, that was because it interpreted the contract’s specific-performance provision as not authorizing an order to perform that particular term. Id. at 759-61.
In last year’s Snow Phipps Group v. KCAKE Acquisition Corp., 2021 WL 1714202 (Del. Ch. April 30, 2021), now-Chancellor McCormick did order the transaction to close, basing the decision simply on the fact that the parties had agreed to that remedy: “The court has not hesitated to order specific performance in cases of this nature, particularly where sophisticated parties represented by sophisticated counsel stipulate that the specific performance would be an appropriate remedy in the event of breach.” Id. at *51. Again, the court did not address the adequacy of damages or other equitable factors.
Inversely, the Court of Chancery has also treated the parties’ decision to exclude specific performance as dispositive. When an agreement has been interpreted to bar specific performance, the court has denied the remedy. See Realogy Holdings Corp. v. SIRVA Worldwide, 2020 WL 4559519, at *1 (Del. Ch. Aug. 7, 2020) (claim for specific performance dismissed because “under the [purchase agreement], the unambiguous contractual conditions on that remedy failed”); United Rentals, Inc. v. RAM Holdings, Inc., 937 A.2d 810, 845 (Del. Ch. 2007) (claim for specific performance denied where plaintiff “failed to meet its burden of demonstrating that the common understanding of the parties permitted specific performance of the Merger Agreement”).
To be sure, in two recent cases in which the merger parties agreed to specific performance, the court has discussed equitable factors, suggesting that the parties’ decision is not dispositive. However, the court ordered the buyer to perform in both cases, and the opinions suggest that the agreement was the driving force. In Level 4 Yoga, LLC v. CorePower Yoga, LLC, 2022 WL 601862 (Del. Ch. March 1, 2022), the court twice mentioned Snow Phipps’s holding that Delaware typically “does not hesitate” to enforce merger parties’ specific-performance agreements, and it discussed equity only cursorily. It did not address adequacy of damages at all. See id. at *30-31.
In Channel Medsystems, Inc. v. Boston Scientific Corp., 2019 WL 6896462 (Dec. 18, 2019), the court’s lead reason for finding that the balance of equities favored the target was that “the parties expressly agreed that a failure to perform under the Agreement would cause irreparable harm for which the remedy of specific performance would be available.” Id. at *39. The court observed that the provision “does not tie the court’s hands in fashioning appropriate equitable relief,” but noted that the parties’ contract “reflect[ed] the parties’ understanding that specific performance would be available in this circumstance, which would be entirely consistent with past Delaware cases granting specific performance for failure to perform under a merger agreement,” id. at *39.
So, while there are strong reasons to believe that the Court of Chancery could order specific performance of Elon Musk’s agreement to acquire Twitter, that conclusion is not foreordained. Tomorrow’s post explores what damages would be available if specific performance is denied.
The author gratefully acknowledges receiving excellent research assistance from Michaela Gines and Benjamin Ylo of the King Hall Class of 2024. Their work contributed significantly to these posts
July 14, 2022 in Commentary, Contract Profs, Current Affairs, E-commerce, In the News, True Contracts, Web/Tech | Permalink | Comments (0)
Wednesday, July 13, 2022
Guest Post 1: John Patrick Hunt on Elon Musk and Twitter
John Patrick Hunt
Elon Musk and Twitter: Overview
Is Elon Musk is likely to be ordered to go through with his agreement to acquire Twitter if he unjustifiably fails to close the acquisition? This series of three posts analyzes the question and considers what damages might be awarded Twitter if specific performance is denied. The first post lays out the problem, the second addresses the issue of specific performance, and the third discusses damages in the absence of specific performance.
Although the Twitter merger agreement provides that Musk and his acquisition companies may be compelled to close the transaction, it’s been pointed out that the decision to grant such an order, one of “specific performance,” generally is a matter of judicial discretion rather than pure party choice. As Contracts teachers know, American courts generally will not order specific performance as a remedy for breach of contract if an award of damages provides “adequate” relief. See Rest. (2d) of Contracts § 359(1). Even if damages are inadequate, courts may weigh a variety of factors, such as the public interest and fairness between the parties, in deciding whether to grant the equitable remedy of specific performance. See Rest. (2d) of Contracts §§ 362-369. We will call the adequacy of damages and the application of these factors “equitable grounds” for denying specific performance or “equitable issues.”
The Restatement commentary specifically instructs that parties cannot simply opt into specific performance: “Because the availability of equitable relief was historically viewed as a matter of jurisdiction, the parties cannot vary by agreement the requirement of inadequacy of damages, although a court may take appropriate notice of facts recited in their contract.” Rest. (2d) of Contracts, § 359 cmt. a (1981).
These posts make two points. First, as M&A scholars know, the Delaware Court of Chancery has ordered specific performance of corporate merger agreements as a matter of course and has not extensively analyzed equitable factors as the Restatement suggests. Indeed, when merger parties address specific performance in their agreement, the court has treated the decision to grant specific performance or not primarily as a question of contract interpretation and has given little or no weight to equitable issues, including the adequacy of damages. Although the research for these blog posts has not been totally comprehensive, the author has located no case in which the court interpreted the parties’ contract to authorize specific performance but declined to order the remedy for equitable reasons.
Second, even in the apparently unlikely event that the Court of Chancery were to decide to exercise its equitable discretion not to grant Twitter specific performance, this particular merger agreement is drafted so that Twitter would have a reasonable argument for full expectation damages, which could far exceed the contract’s much-discussed $1 billion cap on monetary relief.
A note on assumptions. The agreement provides that specific performance is available only under particular conditions, as follows. Twitter’s shareholders must have approved the deal and regulatory conditions must be satisfied. Agrmt. 7.1. Debt financing (either the negotiated financing or an alternative) must be available. Agrmt. 9.9(b). Twitter must have materially performed its pre-closing obligations and confirmed that it will close if Musk is ordered to do so. Agrmt. 7.2(a), 9.9(b). Twitter must not have suffered a material adverse effect, Agrmt. 7.2(c). And its representations and warranties must be true (with some allowances for immaterial inaccuracies). Agrmt. 7.2(b).
Of course, Musk claims that Twitter has materially breached its obligations, made false and misleading representations, and is likely to suffer a material adverse effect. See Letter from Mike Ringler to Vijay Gadde, July 8, 2022. Twitter (and other commenters) have cast doubt on Musk’s claims, see, e.g., Matt Levine, Elon’s Out, Bloomberg, July 9, 2022, but these posts do not evaluate them. Instead, it assumes that the conditions for specific performance set forth in the agreement are met and addresses whether the court is likely to deny specific performance for equitable reasons.
The author gratefully acknowledges receiving excellent research assistance from Michaela Gines and Benjamin Ylo of the King Hall Class of 2024. Their work contributed significantly to these posts.
July 13, 2022 in Commentary, Contract Profs, Current Affairs, E-commerce, In the News, Recent Cases, True Contracts | Permalink | Comments (0)
Introducing our Special Guest, John Patrick Hunt
The rest of this week will be devoted to the Elon Musk/Twitter fight as explained by our guest John Patrick Hunt (right).
John Patrick Hunt’s area of scholarly interest is law and finance. His recent work focuses on student-loan bankruptcy; previously, his scholarship has addressed municipal bankruptcy, credit rating agencies, and mortgage securitization, transfer, and modification. Before joining the UC Davis faculty in 2009, John was Research Director of the Law and Finance Program at the Berkeley Center for Law, Business and the Economy. He has also worked as a regulatory lawyer and litigator at two major law firms and as a credit derivatives research analyst. He holds a J.D. from Yale Law School and a Master’s in Financial Engineering from the U.C. Berkeley Haas School of Business, and served as a law clerk to the Honorable Stephen F. Williams of the U.S. Court of Appeals for the D.C. Circuit.
We look forward to his posts on the prospects that the Delaware Court of Chancery will order Musk to specifically perform.
July 13, 2022 in About this Blog, Contract Profs | Permalink | Comments (0)
Tuesday, July 12, 2022
Tuesday Top Ten - Contracts & Commercial Law Downloads for July 12, 2022
Top Downloads For:
Contracts & Commercial Law eJournalRecent Top Papers (60 days)
As of: 13 May 2022 - 12 Jul 2022| Rank | Paper | Downloads |
|---|---|---|
| 1. | 931 | |
| 2. | 203 | |
| 3. | 183 | |
| 4. | 137 | |
| 5. | 115 | |
| 6. | 79 | |
| 7. | 79 | |
| 8. | 78 | |
| 9. | 66 | |
| 10. | 52 |
Top Downloads For:
Law & Society: Private Law - Contracts eJournalRecent Top Papers (60 days)
As of: 13 May 2022 - 12 Jul 2022| Rank | Paper | Downloads |
|---|---|---|
| 1. | 137 | |
| 2. | 79 | |
| 3. | 52 | |
| 4. | 50 | |
| 5. | 46 | |
| 6. | 41 | |
| 7. | 40 | |
| 8. | 38 | |
| 9. | 33 | |
| 10. | 28 |
July 12, 2022 | Permalink
Monday, July 11, 2022
Second Circuit Affirms Dismissal of Roy Moore's Suit against Sacha Baron Cohen
We have covered this case before, but it is a useful reminder of the power of releases.
In 2018, Roy Moore, former Chief Justice of the Alabama Supreme Court, former U.S. Senate candidate agreed to be interviewed by Sacha Baron Cohen. As is his wont, Baron Cohen misrepresented the purposes of the interview. He pretended to be an Israeli intelligence offer, and he lured Judge Moore into the interview by claiming that the purpose was to present the Judge with an award for his support of Israel. During the interview, Baron Cohen produced an instrument that he claimed Israel had developed to detect underground tunnels. Baron Cohen then claimed that it could also detect pedophiles, and, sure enough, it started beeping whenever help up close to Judge Moore's body. Judge Moore's alleged stalking of women as young as 14 had been an issue in his election campaign.
The interview did not go well, as you can see below, and the problems go well beyond Baron Cohen's mock unibrow:
In its opinion, the Second Circuit points out the Judge Moore signed a standard consent agreement, which provided in relevant part:
[Judge Moore] waives, and agrees not to bring at any time in the future, any claims against the Producer, or against any of its assignees or licensees or anyone associated with the Program, which are related to the Program or its production, or this agreement, including, but not limited to, claims involving assertions of . . . (h) infliction of emotional distress (whether allegedly intentional or negligent), . . . (m) defamation (such as any allegedly false statements made in the Program), . . . [or] (p) fraud (such as any alleged deception about the Program or this consent agreement).
Judge Moore crossed out other language in the Release, but the Second Circuit agreed with the District Court that he agreed to enough to bar his claims for defamation, infliction of emotional distress, and fraud.
Judge Moore claimed that the entire agreement was the product of fraudulent inducement, but any such claim was barred under New York law because, in the Release, Judge Moore also confirmed that he was not not "relying upon any promises or statements made by anyone about the nature of the Program or the identity, behavior, or qualifications of any other participants, cast members, or other persons involved in the program,” and that he was “signing this agreement with no expectations or understanding concerning the conduct, offensive or otherwise, of anyone involved in this Program.” The Second Circuit also agreed with the District Court's rejection of Judge Moore's arguments that New York law does not enforce general releases. This was not a general release. It specifically released the defendants from the very claims Judge Moore sought to bring.
Judge Moore's wife's claims of intentional infliction of emotional distress were barred under the First Amendment. Judge Moore is a public figure and, given his candidacy for public office, the subject matter of the segment was clearly of public concern. The court found that "no reasonable person" could have taken it seriously. Thus, while the representation that the "pedophile detector" was a reliable device was clearly false, in context, nobody would have thought otherwise.
We may have to revisit this doctrine in a world in which many people believe that "you can't trust the media." In our current environment, Sacha Baron Cohen is at least as reliable a source as George Stephanopoulos. I once was engaged in a political debate with a former student, and he pointed me to an article from the Babylon Bee. When I informed him his source was satire, and he might was well be citing The Onion, he responded, "What difference does that make?" At that point, I knew that I had lost. And that all was lost.
July 11, 2022 in Celebrity Contracts, In the News, Recent Cases, Television | Permalink | Comments (0)
Saturday, July 9, 2022
Weekend Frivolity Elon Musk Gets Legal Advice from Creed Bratton
As you all know, Elon Musk entered into an agreement to buy Twitter. Shortly thereafter, Twitter's stock price dropped, making the price Musk agreed to pay a bit high. As we covered here, he tried the poop emoji, then he learned that he had to allege a material breach in order to get out of the deal and avoid paying the $1 billion penalty fee.
Now, he has announced that he is "terminating" the deal. We have a recreation of how this came about, with Michael Scott recreating Musk's role and Creed Bratton playing the role of Musk's legal advisors (and Oscar Martinez playing his smarter advisors):
July 9, 2022 in Current Affairs, E-commerce, In the News | Permalink | Comments (2)
Friday, July 8, 2022
Help Wanted: California Western
California Western School of Law (CWSL) is seeking applications from lateral candidates for two tenure or tenure-track positions to begin on or about August 1, 2023. We are looking for candidates with strong academic backgrounds, a commitment to excellence in teaching, and demonstrated potential to be productive scholars. We specifically are interested in an experienced instructor to teach Contracts and Civil Procedure beginning in Academic Year 2023-24, and particularly welcome applications from individuals who would contribute to the vibrancy and diversity of our faculty.
Established in 1924, CWSL is an ABA accredited and AALS member, non-profit law school, and has the distinction of being San Diego’s oldest law school. At CWSL we pride ourselves on the diversity of our student body. This year, around 50% of our incoming students are from diverse cultural and ethnic backgrounds. We are committed to having a faculty that reflects our student body and our community. CWSL continues to rethink the status quo in legal education – balancing a rigorous practical education with cutting edge scholarship and community service. As a result, our graduates have a reputation for being uniquely practice-ready.
CWSL is located in downtown San Diego, literally overlooking the Pacific Ocean. A city of breathtaking beauty, we have perfect weather, miles of beaches, and nearby mountains. We are a family-friendly, diverse city with small city traffic and walkable neighborhoods.
Application materials should include a cover letter, C.V., research agenda, and a diversity statement that addresses how you will contribute to CWSL’s goal of creating a diverse faculty. Please direct application materials and questions to the chair of the Lateral Appointments Committee, Professor Erin Sheley, at the following email address: esheley@cwsl.edu. We will begin considering applications on August 12 2022.
July 8, 2022 in Help Wanted | Permalink | Comments (0)
Thursday, July 7, 2022
About that Chagall Most Recently Appraised at $100,000 . . .
As The New York Times reports here, Stephanie Clegg paid $90,000 for a watercolor that she bought at Sotheby's in 1994. More recently, in 2008, the painting was appraised at $100,000. It was sold in 1994 as a Marc Chagall (left), and that attribution was affirmed in 2008. In 2020, Sotheby's suggested to Ms. Clegg that it was time to put her Chagall up for auction, and she agreed, as she had downsized, and the painting was in storage. But first, the painting had to be sent to France where it was to be authenticated by a panel of Chagall experts.
The experts said "Non! Ceci n'est-ce pas un Chagall." Or words to that effect. These things happen. But there's more! Under French law, the experts can order the destruction of counterfeit paintings. The Times story says nothing more about this odd law. It's as though the French have never heard of the Takings Clause!
Sotheby's pulled an American Airlines, offering Ms. Clegg $18,500 in credit towards its fee on any future sales it handles for her. She responded with a demand for $175,000, perhaps representing what the painting would sell for if it were authentic. Sotheby's denies that Ms. Clegg has any claim against it. After all, the French are disposing of her property for free! She should take further advantage of this service and send all her old technology to France just in case Chagall designed her old PC and dot-matrix printer. No more anxiety about how to recycle that stuff!
Unlike those amateurs who tried to sell Tom Brady's "Final Touchdown Football," Sotheby's has protected itself against warranty claims, putting buyers on notice that its appraisals of authenticity are only good for five years. And look at you, New York Times, citing the UCC's four-year statute-of limitations on warranty claims! It would indeed take some doing for a court to find that the statute on Ms. Clegg's claim had not already run. Ms. Clegg is also alleging fraudulent misrepresentation, negligence, and breach of fiduciary duty.
Ms. Clegg is claiming that Sotheby's gave her false assurances that the committee very rarely ordered the destruction of artworks. Enter the parol evidence rule. Sotheby's now characterizes those statements as expressing only "expectations." In any case, Ms. Clegg "signed a release indemnifying Sotheby’s from any claims connected to that submission."
The French law calling for the destruction of counterfeit paintings seems a bit extreme. As an art price skeptic, I think if you like a painting, you should hang it on your wall. If you don't like a painting, you should sell it someone who wants to hang it on their wall. Okay, you experts say it's not a Chagall, but it's something that Ms. Clegg thought beautiful and hung on her wall for quite a few years. Why destroy something that someone finds beautiful?
In addition, as the Times article points out. Experts make mistakes. The death sentence is irreversible.
Ms. Clegg retained a copy of the original Sotheby's catalogue for the auction at which she purchased the putative Chagall, which included a number of specific representations about the painting's provenance. My advice, since this is the 21st century, is that Ms. Clegg should create an NFT of the image of the painting in the catalogue. Once the actual painting is destroyed, that NFT ought to fetch at least $175,000.
H/T to our former co-blogger Meredith Miller, who now delights in giving me stuff to write about while she gets to spend her summer days reading James Baldwin.
July 7, 2022 in In the News, True Contracts | Permalink | Comments (0)
Tuesday, July 5, 2022
Tuesday Top Ten - Contracts & Commercial Law Downloads for July 5, 2022
Top Downloads For:
Contracts & Commercial Law eJournalRecent Top Papers (60 days)
As of: 06 May 2022 - 05 Jul 2022| Rank | Paper | Downloads |
|---|---|---|
| 1. | 891 | |
| 2. | 200 | |
| 3. | 179 | |
| 4. | 129 | |
| 5. | 113 | |
| 6. | 108 | |
| 7. | 79 | |
| 8. | 75 | |
| 9. | 74 | |
| 10. | 70 |
Top Downloads For:
Law & Society: Private Law - Contracts eJournalRecent Top Papers (60 days)
As of: 06 May 2022 - 05 Jul 2022| Rank | Paper | Downloads |
|---|---|---|
| 1. | 129 | |
| 2. | 74 | |
| 3. | 70 | |
| 4. | 50 | |
| 5. | 50 | |
| 6. | 49 | |
| 7. | 46 | |
| 8. | 36 | |
| 9. | 35 | |
| 10. | 35 |
July 5, 2022 in Recent Scholarship | Permalink | Comments (0)
Should Contracts Profs Cheer for a Return to the Lochner Era?
Author of the majority opinion in Lochner
On the one hand, of course we should. Law reviews will beg us for submissions. All of their symposium issues will be dedicated to the fundamental right to freedom of contract, and we will stroke our beards our twirl our locks and consider whether intermediate or strict scrutiny is the best way to safeguard those rights. All of those fancy public law people will have to listen to us talk about offer, acceptance, consideration, and assent, and they will feel as inadequate as we do when they drone on about, e.g. the differences among original expected application, original public meaning, original methods, and original law. We will host the Con Law Podcast, and when people ask, "By 'Con Law,' do you mean constitutional law or contracts law?" we will smile roguishly and answer, "Yes!"
Why do I mention this? James B. Stewart, the grizzled veteran of The New York Times business pages (his 2005 Disney War was an important source for my article on the business judgment rule), warned on Saturday that we might be returning to the Lochner era. As I've been writing about the interaction of contracts and constitutional law for the past year (most recently here, with links to the other posts), this caught my eye. I feel compelled to write a separate opinion concurring in part.
Let me start with areas of agreement between me and Mr. Stewart. While Lochner itself invalidated a New York state labor regulation, the Lochner era was about the Court invalidating economic regulation generally. Lochner upheld freedom of contract over state attempts at implementing health and safety regulations, and a separate but related line of cases struck down federal attempts at similar regulation by reading the Commerce Clause narrowly. I agree with Mr. Stewart, and others cited in his article, that this is an anti-regulatory Court. However, in my view, the Court is unlikely to revisit Lochner itself, because it can achieve the same effect through other doctrinal routes for which it has already laid the groundwork.
Mr. Stewart's evidence that a return to Lochner flows from this paragraph:
The case for Lochner is plainly embedded in the Dobbs decision. Writing for the majority, Justice Samuel Alito said that rights not explicitly mentioned in the Constitution had to be “deeply rooted in this Nation’s history and tradition” and “implicit in the concept of ordered liberty.” Unlike a right to abortion, freedom of contract is widely believed to meet that definition.
The problem with that paragraph, in my view, is that the cited test relates to substantive due process protections for unenumerated rights. Freedom of contract is not an expressly-protected federal right. Under our jurisprudence, Justice Alito contends, abortion does not meet the test for substantive due process. Some version of freedom of contract might meet the test. However, this Court is not in the business of expanding substantive due process rights. It has to tread cautiously, because of the Second Amendment, which it also protected under substantive due process in McDonald. It will be very hard for the Court to whittle away, as it will no doubt continue to do, at the right to privacy in the context of its bedroom politics while expanding economic substantive due process protections in other areas. This is especially true because Justice Thomas (and perhaps Justice Gorsuch based on his concurrence in Timbs), and most originalists now writing on the topic, think that the Fourteenth Amendment's Privileges or Immunities clause, rather than substantive due process, should provide the basis for protections of individual rights vis a vis the states. Justice Thomas had to do some very fancy tap-dancing to write for the majority this term in Bruen, which applied McDonald, given that he wrote separately in McDonald rejecting the majority's substantive due process justification for making the Second Amendment applicable as to the states. So, I only count, at most, four votes for a new embrace of economic substantive due process rights. Could they get there through Privileges or Immunities? Anybody's guess, which is why the move to Privileges or Immunities is so unsettling.
As for the Court's animus towards federal regulation, it does not need to rely on Lochner to achieve its goals there. The anti-regulatory GOP has enough power in the Senate to prevent any significant new regulatory legislation. In any case, regulation almost always comes from the administrative state, not from the legislature, which lacks the expertise and the ability to respond fluidly to an evolving regulatory context. For that reason, Congress has traditionally delegated regulatory power to the agencies.
A few years back, in Gundy, Justice Gorsuch, writing for himself, the Chief, and Justice Thomas, was all for reviving the non-delegation doctrine and reducing Congress's power to delegate. Justice Alito wrote separately but called for the Court to re-visit the non-delegation doctrine with equal force. By the logic of the current Court, there could have been six votes to return us to the world of Schechter Poultry. Enter Julian Mortsenson and Nicholas Bagley, who have made extremely compelling originalist arguments that boil down to the following: there was no non-delegation doctrine at the Founding. And it's not even close. Using originalism to beat back the administrative state is not as easy as it seemed. Rather than fighting that battle, Justice Gorsuch, in his concurring opinion in this term's West Virginia v. EPA, declares it a tie because he can cite a bunch of law review articles in a footnote that have different perspectives on the non-delegation doctrine (never mind that half of them pre-date Mortenson & Bagley's sea-changing scholarship and so are unresponsive to their arguments). Ah for the days of judicial humility, when courts deferred to the political branches on close questions.
Disarmed of the non-delegation doctrine, the Court's majority has embraced the "major questions doctrine" like Hopper picking up that sword in the final episode of Season 4 of Stranger Things.
As West Virginia v. EPA and other cases this term illustrate, that's a potent enough weapon if you are looking to dismantle the federal regulatory state. And so, I concur, in part with Mr. Stewart, that the Court will embrace freedom of contract when it comes to pairing back federal regulation, but it hardly needs to rely on Lochner for that.
But I don't see a full-throated embrace of Lochner, because doing so would force the conservative majority to walk back a great deal of the federalism talk of the Rehnquist Court, and I don't see how they can do so while also singing the praises of the laboratories of democracy in Dobbs. You may think they just did so with respect to gun regulation in Bruen. Touché. But then there are other impediments to prioritizing contracts rights that were not at issue in 1905 (which should be telling if you think this is really an originalist Court). As my previous posts on this subject indicate, the Court has very little interest in contracts rights when they come up against rights that it cares about more, sometimes free expression rights, but mostly Free Exercise rights, both of which are entirely a product of 20th-century jurisprudence.
Mr. Stewart gives the last word to Yale's Akhil Amar, who doesn't see a return to Lochner on the horizon. Professor Amar cautions that, even though this last term was an earthquake, it was an originalist earthquake, not a libertarian earthquake. I'm more inclined to reverse that, but for me the main takeaways from this term are that this is a Court that has a legislative agenda, and the members of the conservative majority are ticking things off their to-do list. And as Bruen, West Virginia, Dobbs, and other cases illustrate, they are going to decide the issues they want to decide whether or not those issues arrive at the Court in the appropriate procedural posture. Abortion, guns, the administrative state, voting rights, Free Exercise, and the Establishment Clause all got their check marks this term. Protections for LGBTQ+, affirmative action, and the independent state legislature theory are already cued up for next term. If you are a litigant who wants to pare back the Commerce Clause, this is your moment!
Here's to the Court that can't pass the marshmallow test!
Thanks to the Strict Scrutiny podcast for the perfect analogy.
July 5, 2022 in Commentary, Famous Cases, In the News, Recent Cases | Permalink | Comments (1)
Thursday, June 30, 2022
That Other SCOTUS Arbitration Case: Viking River Cruises
We were ever so happy to report on the first two Supreme Court cases this term interpreting the Federal Arbitration Act (FAA), Morgan v. Sundance, Inc., and Southwest Airlines v. Saxon. They were short; they were unanimous; and they rejected motions by corporations to compel arbitration of their employees' claims. The third, Viking River Cruises, Inc. v. Moriana, is more involved, generating a majority opinion from Justice Alito (left), a confusing flurry of concurrences, including one for the ages from Justice Barrett, and a quick dissent from Justice Thomas.
The challenge in Moriana is the interaction between the FAA and California's Private Attorneys General Act (PAGA). California's legislature determined that its Labor and Workforce Development Agency (LWDA) lacked resources necessary to enforce California's labor laws. PAGA permits "aggrieved employees" to initiate actions against former employers on behalf of themselves and other current or former employees. They must first exhaust administrative remedies and give the LWDA an opportunity to act. If it does not do so, they may bring their claims. LWDA gets 75% of any award, and the employees split the remaining 25%. PAGA operates like a qui tam action. A PAGA suit is not a class action because the aggrieved employee is suing as an agent the state.
When Viking Cruises hired Moriana, you'll never guess what happened! She signed an arbitration agreement that included a class action waiver. After she left Viking, she sued under PAGA alleging that she had not received her final wages in a timely way but she also brought numerous PAGA claims on behalf of other current and former employees. Viking moved to compel arbitration of Moriana's claim brought on her own behalf and to dismiss her PAGA claims. The California courts refused to do so, relying on Iskanian v. CLS Transp. Los Angeles, LLC, in which California Supreme Court held that waivers of the right to bring "representative" PAGA claims violate public policy and are invalid. The specific issue in Moriana is which of her claims count as "representative."
As we have covered in earlier posts, the Supreme Court issued a number of pro-arbitration decisions, starting with Rent-A-Center and Stolt-Nielsen in 2010. The upshot of those and other cases was that courts must enforce class action waivers in arbitration agreements on the ground that "a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.” Viking, citing those cases, argued that California courts cannot rely on Iskanian to force them into class litigation to which they have not consented. The Court rejected that argument, because a PAGA claim is not a class claim. It is a claim brought on behalf of one party, the state, via a proxy.
Still there is a problem, from the perspective of the Court's decisions interpreting the FAA as requiring enforcement of class-action waivers in employment agreements. Iskanian does not permit the division of PAGA claims into individual actions (e.g., Moriana's claim brought on her own behalf) and non-individual claims (e.g., her claims brought on behalf of other current and former Viking employees). Justice Alito resolves the tension between the FAA and Iskanian using the severability provision in Viking's arbitration agreement. That agreement is invalid under Iskanian to the extent that it seeks to preclude Moriana's non-individual PAGA claims. However, she must arbitrate her individual PAGA claim.
As they did with their SMUGLER episode a few weeks back, Will Baude and Dan Epps' Divided Argument has again provided some helpful insights about the toughest aspects of the Moriana case in their COBRA episode. Justice Alito cannot cut through the Gordian knot that the case presents. PAGA claims must be brought by an "aggrieved employee." Once Moriana's individual claims are severed from her non-individual claims, she has no statutory standing to bring her non-individual claims, because she is not "aggrieved" by Viking's alleged misconduct that did not affect her. Not sure where to go from there, Justice Alito remands the case for "further proceedings not inconsistent with this opinion." Sucks to be that court.
Justice Sotomayor offers a little help in her concurrence. One option is that the California courts can offer a different interpretation of PAGA, perhaps somehow allowing non-individual PAGA claims to be brought after they have been severed from individual claims subject to arbitration. I'm not sure how they get there. The other option is that the state legislature can permit people other than "aggrieved workers" to bring PAGA claims. That seems like the more workable solution, if the California legislature has the will to actually fix a faulty statute.
And then comes the fun stuff. Justice Barrett wrote a concurrence, joined in full by Justice Kavanaugh. She joined only in Part III of Justice Alito's majority opinion. In her view, PAGA is just another means of aggregating claims, and those are all barred under the FAA if there is an arbitration agreement with a class action waiver. Stolt-Nielsen is right so let's compel arbitration. That's all the Court really needed to say. As to Parts II and IV, she wrote the following: "The discussion in Parts II and IV of the Court’s opinion is unnecessary to the result, and much of it addresses disputed state-law questions as well as arguments not pressed or passed upon in this case." Chief Justice Roberts joined up to there. Then, she dropped a footnote, saying that the same was true of Part I. That was too much for the Chief apparently, and it's quite comical, because Part I lays out the facts of the case. Visions of the Marx brothers.
It seems like a snide dissent, but it might not be as bad as it looks. If she were writing for herself, she could have just said that she signs on to Part III and nothing more. But it's late in the term, and CJ Roberts didn't want to have to write a separate concurrence about how I and III are fine, so we get what looks like the ultimate mean girl footnote. Justice Alito? He doesn't even go here!
And finally, we get a lone dissent from Justice Thomas, who, as he has explained before, does not think the FAA applies in state courts.
On the whole, this strikes me as progress. I would have predicted a 6-3 court reasoning along Justice Barrett's lines. At best, even if this case came through a federal court, she only has four votes. The Court seems willing to allow the people of California to rein in limitations on representative actions, and that seems to me a very good thing given the ubiquity of contracts of adhesion and gross disparities of bargaining power in the world of employment law.
June 30, 2022 in Recent Cases, Travel | Permalink | Comments (0)
