ContractsProf Blog

Classic COVID Force Majeure Case: Commvault v. Marriott

Commvault Systems, Inc (Commvault) is in the business of hosting large-scale conference events.  It entered into three contracts with Marriott Hotel Services, Inc. (Marriott) to hold various events at Marriott venues starting in 2018 and continuing through 2026.  Each contract contained an impossibility/force majeure clause, as well as a clauses providing that the parties would cooperate to comply with all applicable laws.  

In October 2020, Commvault purported to cancel all three contracts, citing the COVID pandemic and the "impossibility, illegality and/or impracticality of using" Marriott's facilities.  It sought a declaratory judgment of its right to do so, and Marriott responded with counterclaims, seeking liquidated damages, among other things.  Marriott noted that some of the cancellations related to events that were still years away and nothing that occurred had rendered performance illegal, impractical, or impossible.  Commvault responded by claiming that it acted within its rights and that Marriott had not yet suffered any damages and that it had a duty under the contract to mitigate any losses it might suffer due to cancellation.

In April, the The U.S. District Court for the District of New Jersey issued a ruling on Commvault's motion to dismiss Marriott's counterclaims both on ripeness grounds and for failure to state a claim.  The court rejected Commvault's argument that Marriott's claims as to contracts relating to events that had not yet take place were not ripe.  Rather, the court noted, a party may immediately bring suit upon its counterparty's anticipatory repudiation.  Any recovery can be offset by later mitigation.

As to Commvault's argument that Marriott's counterclaims ought to be dismissed because Commvault acted within its rights pursuant to the contracts' force majeure provisions, the court withheld judgment.  It noted that courts across the country had counseled against deciding the applicability of force majeure clauses in the COVID context based on the pleadings alone.  A "more fulsome record" is needed. 

Pedantry sidebar: Yuck.  Just use "complete" or "capacious" or "ample" or "extensive" or any of the myriad words that are available for this humdrum purpose.  Can we not save "fulsome" for its primary (and unique!) meaning ("excessive"), so as to avoid the confusion that arises when a word means both one thing and the very opposite.  Feel free to peruse other posts for a plethora of complaints about other instances of semantic confusion.

The court did not make Commvault go away empty handed, dismissing two of Marriott's counterclaims as duplicative of other claims. 

Curious About What the Bar Exam Will Look like in 2026?

You can get a sense of what it will look like here.  Contracts coverage is specified on pages 16-20.  I don't see very many surprises here.   Comparing the topics now covered to my syllabus, I would only need to make sure to discuss the Uniform Electronic Transactions Act, but I cover that in Sales, so perhaps that suffices.  Joshua Silverstein, who shared the document with the Contracts Listserv, points out that the exam designers have removed "indefiniteness and absence of terms" from the list of topics covered, but the outline does have a section on ambiguity and omitted or implied terms. Will "ambiguity" be stretched to entail all indefiniteness?  What of inchoate agreements like letters of intent or memoranda of understanding?  

I may be reading too much into this, but perhaps the outline provides hints of the way the examiners think about particular topics.  For example, I teach students that the statute of frauds is broad but has lots of exceptions.  By contrast, the parol evidence rule is narrow, and it is best just to learn the very limited scenarios it covers rather than learn all the things that it doesn't cover.  I have come to accept that my approach is not very effective, as even I talk about exceptions for misrepresentation or conditions.  I try to train my students to say things like, because this relates to interpretive issues, the parol evidence rule does not apply.  But they mostly still think in terms of exceptions.  Perhaps it would be more helpful to my students to talk about the parol evidence rule the way the bar does, with a short list of prominent exceptions and then a list of discrete areas where there is a "difference of application" relating to evidence proffered to "supplement, explain, or contradict" a written agreement.

Every year, as the bar exam approaches, I get students asking me about practice bar questions about accord and satisfaction, a subject I do not cover in the first-year course.  Now I note a section devoted to "discharge of duties: accord and satisfaction, substituted contract, novation, rescission, and release."  I will have to chat with Steven Foster, our Director of Academic Achievement to see what I can do to forestall such puzzlement in the future.

Recharged: Another Bankruptcy Court Says Electricity Is NOT a Good

In February, we posted about an Oregon bankruptcy court that had concluded that electricity is not a good.  Last week, a New York bankruptcy court followed suit in an unpublished opinion in In re Sears Holdings Corp., which cites to the Oregon case but fails to cite to the blog.  No good.

As in the previous case, the issue is whether electricity qualifies as a good under § 503(b)(9) of the Bankruptcy Code.   If a good, then electricity expenses incurred by a debtor are accorded priority status as an administrative expense.  If not, the electricity provider is left with a general, unsecured claim.

Bankruptcy Courts receive little guidance from federal law, because the term "goods" is not defined in the Bankruptcy Code, and definitions provided elsewhere in the U.S. Code provide little guidance.  As a result, Bankruptcy Courts look to the U.C.C. for a definition of "goods."  The UCC is universally adopted, and given the uniformity interests of having a federal bankruptcy system, it makes sense to follow the uniform law on this matter.  And yet, courts have reached different conclusions on the status of electricity.  However, statutory priority status is to be construed narrowly.  Because Congress did not make it clear that electricity is a good, it should not be treated as one.  So reasoned the New York court.

In the prior post, I suggested that the Uniform Law Commission and the American Law Institute should intervene and settle the matter definitionally, as did the CISG in Article 2(f).  Stephen Sepinuck responded in the comments with the view that because of the small number of cases, mostly in the bankruptcy context, the issue lacks the urgency that would call for a response from the ULC or the ALI.  I think this case provides fodder for the contrary conclusion.  The court both notes the value of uniformity in the treatment of electricity in the bankruptcy context and uses ambiguity as a ground for not treating electricity as a good.  But it also acknowledges that, where a contract specifies that the laws of a particular jurisdiction apply and those laws treat electricity as a good, it will also be treated as a good for the purposes of the Bankruptcy Code.  The status quo thus does not produce uniformity -- undermining a goal of both the UCC and the Bankruptcy Code.  

I'm also just ticked off because I think electricity is a good.  Does it move?  Does it ever!  Is it tangible?  Well, I wouldn't recommend touching it to find out!  In his comment, Professor Sepinuck provides additional good reasons for treating it as a good.  That said, I'm also a positivist and so would be perfectly fine with not treating it as a good, so long as there is a definition of good that excludes electricity.  

Hat tip to my fellow Oklahoma transplant Kara Bruce.

Guest Post: Spencer Williams, Generative Contracts

Spencer Williams (right) is an Associate Professor at the Golden Gate University School of Law, where he researches and teaches at the intersection of business law and innovation. He writes on topics such as AI contracting, smart contracts, quantitative modeling, complex systems theory, algorithmic price gouging, and the venture capital industry. Prior to teaching at GGU, he was a fellow at Stanford Law School in the Program on Corporate Governance and Practice. Earlier in his career, he practiced corporate and securities law at Wilson Sonsini Goodrich & Rosati in Silicon Valley and served as the General Counsel of a Y Combinator-backed technology startup. He received a JD from Stanford Law School and a BS from MIT.

Generative Contracts
How consumers and small businesses can use generative AI to write their own contracts.

Since the public release of ChatGPT last year by OpenAI, generative artificial intelligence (a form of AI that can generate text, images, and other content) has quickly made its way into knowledge-based industries such as law. In the context of contracting and transactional law, most of the attention thus far has been focused on using generative AI to improve the process of reviewing, negotiating, and managing contracts for medium and large-sized businesses. Examples include BlackBoiler, ContractKen, Evisort, Genie, Ironclad, Lexion, Ontra, and Robin.

Less attention has been given to using generative AI to write entire contracts. This is mostly due to the fact that contracts for medium and large-sized businesses are often too long, complicated, and complex to be generated by currently available AI models. An underexplored area of opportunity, however, is to use generative AI to write shorter, simpler, and less complex contracts for consumers and small businesses. This is particularly appealing from an access to justice perspective because most consumers and many small businesses cannot afford to pay commercial lawyers to write basic contracts.

To explore this possibility, I engaged in a proof-of-concept hypothetical in which two consumers, Alice Brown and Carl Delmonte, use ChatGPT to write a contract for Alice to buy Carl’s used car. A few notes about the hypothetical. First, in an attempt to represent how consumers might engage with such a product, I used prompts that required no prior knowledge of contract or commercial law. Second, I did not use prompt engineering. Third, I did not fine-tune the underlying model (OpenAI’s GPT 4.0) for contract-specific applications. A real-world consumer contracting AI product would likely use prompt engineering and fine-tuning, particularly given that fine-tuning has become substantially cheaper and faster due to the use of low-rank adaptation (LoRA). I plan to examine prompt engineering and fine-tuning with LoRA in future posts.

For the hypothetical, I began with the following prompt:

“Write a basic car sale contract in California for Alice Brown to purchase Carl Delmonte's 2014 Honda Civic with VIN# 12345ABCDE for $5,000.”

In a matter of seconds, the model produced the following contract:

BILL OF SALE AND PURCHASE AGREEMENT

THIS AGREEMENT, made this 16th day of May, 2023 (the "Effective Date") by and between Carl Delmonte (the "Seller"), and Alice Brown (the "Buyer").

1. DESCRIPTION OF THE VEHICLE

   Make: Honda

   Model: Civic

   Year: 2014

   VIN: 12345ABCDE

2. TERMS OF SALE

   The Seller agrees to sell and the Buyer agrees to buy the above-described vehicle (the "Vehicle") for the purchase price of Five Thousand Dollars ($5,000.00), payable as follows: full payment upon the execution of this Agreement.

3. AS IS SALE

   The Seller expressly disclaims any implied warranty as to fitness for a particular purpose and any implied warranty as to merchantability. The Vehicle is sold in "as is" condition. The Buyer acknowledges that the Buyer has had an opportunity to inspect the Vehicle, and is not relying on any representations or warranties of any kind whatsoever, express or implied, from the Seller as to any aspects or characteristics of the Vehicle, other than as expressly stated in this Agreement.

4. TRANSFER OF TITLE AND DELIVERY

   The Seller shall endorse the proper documentation for the transfer of the Vehicle and deliver it to the Buyer at the time of sale. The Buyer is responsible for registering the Vehicle in their name.

5. GOVERNING LAW

   This Agreement shall be governed by and interpreted in accordance with the laws of the State of California.

6. ENTIRE AGREEMENT

   This Agreement constitutes the entire agreement between the parties with respect to the sale of the Vehicle and supersedes all prior discussions, negotiations, and agreement, whether oral or written.

SELLER:

Carl Delmonte

Signature: _______________________

Date: ___________________________

BUYER:

Alice Brown

Signature: _______________________

Date: ___________________________

NOTARY ACKNOWLEDGEMENT

State of California

County of ___________________

On ____________, 2023, before me, a Notary Public, personally appeared Carl Delmonte and Alice Brown, known to me (or satisfactorily proven) to be the persons whose names are subscribed to the within instrument and acknowledged that they executed the same for the purposes therein contained.

Notary Public: ___________________

My Commission Expires: ____________

DISCLAIMER: This is a simplified car sale contract for illustrative purposes and may not be legally sound or complete. It's always recommended to consult with a legal expert or attorney when drafting or entering into a legal agreement.

--

A few observations about this contract. First, while not perfect, it is a completely functional and enforceable contract. Second, GPT 4.0 now uses standard contract structure principles such as sections, numbering, and definitions which were not always used by previous versions of the model. Third, ChatGPT now includes a disclaimer at the bottom of any legal documents it generates, though this disclaimer can easily be removed with the prompt, “Modify the above contract to remove the disclaimer at the end.”

One of the main advantages of generative contracts relative to other consumer-facing contract products such as templates (e.g. LegalZoom), which are fixed and static, is that generative contracts are incredibly flexible and customizable using simple prompts. For example, Alice and Carl can easily modify the contract using prompts such as, (1) “Modify the above contract to clarify that Alice can pay via Venmo,” (2) “Modify the above contract to say that Carl has to bring the car to Alice's house located at 1234 Main Street, Faketown, California,” and (3) “Modify the contract to include a section for Carl to write in the odometer reading on the day of the contract.” The model seamlessly incorporated all of these requests into the contract.

Beyond basic modification, a generative product such as ChatGPT can also answer questions about the contract and then make modifications based on the answers it provides. For example, if Alice and Carl don’t want to bother with the hassle of getting the contract notarized, but are unsure if this is a requirement in California, they can ask, “Does a bill of sale for a car in California have to be notarized?” The model provided the following answer:

As of my knowledge cutoff in September 2021, a bill of sale for a car in California does not need to be notarized. California does not require a notary for a car title or bill of sale. The most important aspect is that the document includes necessary information about the seller, buyer, and the vehicle, and that both parties sign it.

However, laws and regulations can change, and it's always a good idea to check with the local Department of Motor Vehicles (DMV) or a legal professional for the most current information.

--

If they are satisfied with this answer, Alice and Carl can remove the notary section with the prompt, “Modify the above contract to remove the notary section.” This example demonstrates a weakness of generative contracts (and all generative AI products): their knowledge is time-limited based on the model’s data cutoff date (in this case September 2021).

As another example of dynamic modification, assume Alice and Carl are uncertain about how the contract handles repair costs incurred after the sale. They could ask a clarifying question such as, “If the car breaks down the day after Alice buys the car, does Carl have to pay for the repairs?”, which returns the following answer:

According to the terms of the contract provided, the car is being sold "as is," which means the Seller, Carl, disclaims any implied warranties. This usually includes the condition of the car after the point of sale. Therefore, if the car breaks down the day after Alice buys it, Carl would generally not be responsible for the repair costs under the terms of this contract.

However, this can also depend on the specific laws of the state in which the sale occurred. Some states have "lemon laws" that could potentially provide some protection to the buyer in such a situation. It's always a good idea for both the buyer and the seller to understand their rights and responsibilities under the law before entering into such a contract.

It should be noted that this response is based on the given contract and general principles and may not account for all possible legal considerations. It's recommended to seek advice from a legal professional for specific situations.

--

If Alice is unhappy with the “as is” nature of the contract, they could modify the contract with a prompt such as, “Modify the contract to say that if the car experiences any problems beyond regular wear and tear within the first month after Alice buys the car, then Bob has to pay for any repairs up to $1,000.” In response, the model replaces the “As Is” clause with a “Limited Warranty” clause that reads:

The Seller provides a limited warranty covering any problems beyond regular wear and tear that the Vehicle may experience within the first month following the Effective Date. If such problems occur, the Seller agrees to pay for any necessary repairs up to a maximum of One Thousand Dollars ($1,000.00). Beyond this amount, the Buyer is responsible for the cost of any additional repairs.

--

This hypothetical only begins to scratch the surface of what generative AI can do for consumers and small businesses. In addition to this car sale contract, I have used simple, consumer-accessible prompts to create contracts such as an employment agreement, a consulting agreement, a services agreement, a nondisclosure agreement, a residential lease, a commercial lease, a procurement contract, a partnership agreement, a limited partnership agreement, an LLC operating agreement, a software licensing agreement, and a mobile app terms of service agreement.

I’ll be continuing to explore the application of generative AI to contracting in the coming months. If you are interested, please reach out to me at [email protected]

In the meantime, if you are looking to sell a Honda, you might try something like this:

 

(Return of the) Tuesday Top Ten - Contracts & Commercial Law Downloads for May 23, 2023

The Tuesday Top Ten returns after a summer-travels off week. Let's see what's hot on the charts at SSRN for our favorite subjects, shall we?

Top Downloads For:

Contracts & Commercial Law eJournal

Recent Top Papers (60 days)

As of: 24 Mar 2023 - 23 May 2023

Rank	Paper	Downloads
1.	How ChatGPT and Generative AI Systems will Revolutionize Legal Services and the Legal Profession Rupert Macey-Dare St Cross College - University of Oxford	644
2.	From Cannabis to Crypto: Federal Reserve Discretion in Payments Julie Andersen Hill University of Alabama - School of Law	249
3.	Privately Policing Dark Patterns Gregory M. Dickinson St. Thomas University - School of Law	165
4.	China Data Flows and Power in the Era of Chinese Big Tech W. Gregory Voss, Emmanuel Pernot-Leplay and Emmanuel Pernot-Leplay TBS Business School and Tilburg University - Tilburg Institute for Law, Technology, and Society (TILT)Shanghai Jiao Tong University (SJTU) - KoGuan Law School	147
5.	Smart Contracts and the 'Oracle Problem' in the Context of InsurTech Eliza Mik The Chinese University of Hong Kong (CUHK) - Faculty of Law	121
6.	An Information-Production Theory of Contract Law Roy Shapira, Assaf Jacob and Yotam Kaplan Stigler Center, University of Chicago Booth School of Business, The Interdisciplinary Center Radziner School of Law and Bar-Ilan University - Faculty of Law	116
7.	Intent to Create Legal Relations and the Nature of Contractual Consent Nathan B. Oman William & Mary Law School	114
8.	Unjust Enrichment by Algorithm Ayelet Gordon-Tapiero and Yotam Kaplan Georgetown University and Bar-Ilan University - Faculty of Law	109
9.	Exit Engineering Rachel Landy Yeshiva University - Benjamin N. Cardozo School of Law	106
10.	Bankruptcy's Identity Crisis David A. Skeel University of Pennsylvania Carey Law School	97

 

Top Downloads For:

Law & Society: Private Law - Contracts eJournal

Recent Top Papers (60 days)

As of: 24 Mar 2023 - 23 May 2023

Rank	Paper	Downloads
1.	Beyond Trade Secrecy: Confidentiality Agreements That Act Like Noncompetes Camilla Alexandra Hrdy and Christopher B. Seaman University of Akron School of Law and Washington and Lee University School of Law	329
2.	Privately Policing Dark Patterns Gregory M. Dickinson St. Thomas University - School of Law	165
3.	Fractionalizing Investment Securities: Using FinTech to Expand Financial Inclusion Steven L. Schwarcz and Robert Bourret Duke University School of Law and Duke University School of Law	135
4.	An Information-Production Theory of Contract Law Roy Shapira, Assaf Jacob and Yotam Kaplan Stigler Center, University of Chicago Booth School of Business, The Interdisciplinary Center Radziner School of Law and Bar-Ilan University - Faculty of Law	116
5.	Reexamining Enron's Regulatory Consequences Steven L. Schwarcz Duke University School of Law	89
6.	Mythical Adverse Effect Naveen Thomas New York University School of Law	89
7.	Damages Without Loss Sandy Steel University of Oxford	77
8.	Agreement N. W. Sage London School of Economics - Law Department	67
9.	Unifying Status and Contract Kaiponanea T. Matsumura Loyola Law School Los Angeles	53
10.	Consent and Disagreement Aditi Bagchi Fordham University School of Law	52

 

Paramount's South Park Counterclaims

In March, based on a tip from OCU 1L Austin Manley, we reported that HBO's parent company, Warnermedia Direct is suing Paramount and others for breach of a 2019 deal in which HBO claims it won an intense bidding war by offering  $500 million for an exclusive license to stream episodes of the South Park animated television series, including three seasons' worth of new episodes.  The earlier post concludes, "Expect counterclaims alleging that HBO has failed to pay the licensing fees."  Austin Manley, having completed his first year of law school, followed up, providing me with those very counterclaims, which Paramount filed on April 19th.

As readers may recall, HBO Max bought an exclusive license to stream episodes of the South Park animated television series.  According to HBO, that license covered existing content plus three seasons consisting of ten new episodes each season.  It alleges that Paramount delivered only fourteen of the promised new episodes while also entering into a separate deal with South Park's creators giving Paramount + exclusive rights to air new South Park content, including movies and specials.

In its counterclaims, Paramount answers in the manner of Officer Barbrady (left): "Nothing to see here, people!  Move along!"  Two sophisticated parties entered into a deal with specific terms.  All of those terms have been complied with, but for some reason, HBO Max is refusing to pay the licensing fees!  

Crucially, Paramount claims that the terms did not specify a number of episodes to be included in each South Park season and then boasts of its delivery for fourteen episodes despite the production challenges caused by the COVID epidemic and the creators' desire to experiment with different formats for the presentation of new South Park material.  Moreover, although HBO Max is refusing to pay for the South Park material that has been delivered and which it is continuing to stream, it has not been charged for the non-existent episodes to which it claims entitlement. 

From Parmount's perspective, COVID had two effects on the production of South Park episodes.  First, COVID restrictions made it impossible for the shows staff to create new 22-minute episodes at their usual breakneck speed.  They could not come together to work as they usually did.  Second, COVID provided ample new material that cried out for South Park's unique brand of social commentary.  The South Park team adapted by creating "supersized" pandemic-related episodes that were wildly popular and gave a tremendous boost to the value of the licenses that HBO Max was already enjoying.  

Paramount therefore seeks $52 million owed under the license agreement on its breach of contract claim.  It also seeks a declaratory judgment upholding its interpretation of the parties' obligations.

Supreme Court Strikes Another Blow Against Prosecuting Corruption in the Buffalo Billions Case

Inspired by Will Baude and Dan Epps' Divided Argument podcast, we wrote about a pending SCOTUS case Ciminelli v. United States last November.  Now, thanks are due to Leah Littman, Melissa Murray, and Kate Shaw, and the Strict Scrutiny Podcast's "You Can Crime if You Want To" episode, for reminding me of the case and alerting me to the two opinions that SCOTUS has now issued.

Justice Thomas (left) wrote for the Court in Ciminelli v. United States.  As we noted in our prior post, the operative legal theory at the District Court and in the Second Circuit was the so-called "right of control," a property-based fraud theory that permits conviction where the defendant through wire fraud (18 U. S. C. §1343) deprives victims of valuable economic information necessary to make discretionary decisions.  The Court unanimously rejected the "right of control" theory as a basis for criminal liability under 18 U. S. C. §1343.

That's too bad, because the opinion outlines what clearly seems to be a criminal conspiracy to rig government contracts by using businesses as front companies so as to direct very large construction contracts to politically-connected insiders.  The Court based its ruling on the statutory text as well as prior case law in which the Court held that the statute does not create a general federal power to police integrity or punish deception.  The crime must involve money or property and not intangible interests such as "honest services."   

You don't need a Weatherman to know that the winds at SCOTUS are blowing in the direction of tighter scrutiny of white-collar criminal convictions, and so the government abandoned the "right of control" theory in its briefing.  Rather, the government tried to persuade the court that there was sufficient evidence in the record to sustain the conviction on a more traditional theft-of-money-or-property theory.  The Court remanded the case to let an actual jury make that determination.  Justice Alito filed a concurring opinion in which he hinted that, if he were on the jury, he knows what he would find . . . .

Justice Alito wrote for the Court in Percoco v. United States, except that Justice Jackson did not join Part II-C-2.  That part is a bit substantive chunk of the opinion, so I am not sure what it means for her to concur except for that part.  Criminal law.  Sheesh.

Joseph Percoco was convicted of mail and wire fraud for having deprived the public of its intangible right to honest services.  The Court noticed in Ciminelli that intangible offenses such as "honest services" violations cannot provide a basis for conviction under 18 U.S.C. § 1843, but Percoco was convicted under 18 U.S.C. § 1846, which Congress enacted in response to a SCOTUS decision and which specifically encompasses a "scheme or artifice to deprive another of the intangible right of honest services.”

Percoco was a close associate of Governor Cuomo.  During a brief time when he was not an official state employee, but was still an informal advisor to the Governor and was employed by the Governor's campaign, he took $35,000 to operate as a political fixer.  On appeal, he argued that an honest services violation can only occur when the defendant is a public official.  The Court rejected that argument as too sweeping.  Nonetheless, the Court found that the jury instructions in Percoco's case were incorrect.  As in Ciminelli, the government did not defend those instructions but argued that the error was harmless.  Unsurprisingly, the Court disagreed and remanded the case for further proceedings consistent with the opinion.  The instructions on what constitutes an honest services violation were too vague.  The Court did not indicate whether the government's alternative grounds for upholding the conviction could provide a basis for a conviction if actually presented to a jury, nor did it provide clear guidance on what instructions would survive its vagueness analysis.

Justice Gorsuch, joined by Justice Thomas, concurred but would go one step further.  As currently written, 18 U.S.C. § 1836 does not provide private citizens with adequate notice of what constitutes a violation.  The Justices could put their heads together, Justice Gorsuch confidently predicts, and draft a better version of the statute, but that is not their job.  The Court "should decline further invitations to invent rather than interpret this law."  And anyway, the Court's invention workshop is already working overtime on new wrinkles to the major questions doctrine, the history-and-tradition approach to the Fourteenth Amendment, the alternative to Smith in the Free Exercise context, a new version of the dormant commerce clause, and a version of standing flexible enough to allow pro-life doctors with no connection to mifepristone to challenge 20+-year-old FDA rulings.

But I digress.

Weekend Frivolity: One Way for a Court to Deal With an Illegal Contract

Found this on Twitter.  That site still has its uses.

The court treats the transaction as a gift, but it seems obvious that there was a legal quid for an illegal quo.  The court cannot bring itself to acknowledge the illegality looming over what the court decorously calls a "date."  And perhaps that's just as well.

DP World Tour Wins Arbitral Decision Allowing It to Punish Golfers Who Defected to LIV

Unfortunately, I have not been able to locate a digital copy of the arbitral decision.  I will make do with reporting from Ewan Murray in The Guardian.  A dozen professional golfers (none of whom are included in the painting at left) played in a tournament sponsored by the LIV Golf Circuit.  The DP World Golf Tour sanctioned the players with fines of up to £100,000.  The players denied that they had violated their agreement with the DP World Tour by playing for the rival organization.

Last month, an arbitral panel ruled that DP World Tour had acted within its rights in fining the players and had in fact reacted reasonably in the circumstances.  DP World Tour issued a statement, noting that 26 players are now subject to sanctions for playing in LIV Golf events, with fines ranging from £12,500 to £100,000 as well as suspensions.  The statement notes that players who have resigned from the DP World Tour will not be reinstated until they pay their fines.  According to SkySports, as of December 2022, Henrik Stenson, Lee Westwood, Ian Poulter, Sergio Garcia and Richard Bland had resigned their memberships.

As of three days ago, it seems that all fined golfers other than Sergio Garcia had paid their fines. Ankita Yadav, writing in Sportskeedasuggests that LIV Golf paid the fines for seven golfers and provides the following list of golfers who have paid.

• Ian Poulter
  Lee Westwood
• Richard Bland
• Laurie Canter
• Branden Grace
• Justin Harding
• Sam Horsfield
• Martin Kaymer
• Pablo Larrazabal
• Graeme McDowell
• Shaun Norris
• Wade Ormsby
• Adrian Otaegui
• Patrick Reed
• Charl Schwartzel
• Bernd Wiesberger

Interesting international developments as the U.S. tightens rules on non-compete clauses.

Boston University Succeeds in Thwarting a Class-Action COVID Suit Through Impracticability

It's been a few months since we last reported on a COVID case against a university.  On April 7th, the U.S. District Court for Massachusetts granted a motion for summary judgment by Boston University (BU -- East Campus pictured at right) in In re: Boston University COVID-19 Refund Litigation 

The court first addressed BU's Daubert challenge to plaintiffs' expert witness.  Without casting aspersions on the expert's testimony, the court granted BU's motion to exclude the testimony.  The expert adhered to the instructions provided him by plaintiffs' attorneys, but those instructions were based on faulty legal premises.  Garbage in; garbage out.

Based on its resolution of the Daubert challenge, it is not surprising that the court found that plaintiffs had not made out a claim for harm due to BU's decision to move classes online in response to the COVID-19 pandemic.  BU had sought to raise an impracticability defense to liability.  The court rejected that defense on an earlier motion.  BU now sought reconsideration in light of the Supreme Judicial Court’s decision in Le Fort Enterprises, Inc. v. Lantern 18, LLC, 491 Mass. 144 (2023), in which the court clarified that summary judgment can be granted based on impracticability if material facts are not in dispute.

Under Massachusetts law, a party seeking to defend against contractual liability based on impracticability must show

(1) an event occurring after the execution of the contract makes the contract’s performance impossible or impracticable; (2) nonoccurrence of the event was a basic assumption on which the contract was made; and (3) the party who seeks to have his or her performance excused did not cause the event.

Plaintiffs did not challenge prongs 1 or 3.  But the court made short work of plaintiffs' arguments that the nonoccurrence of the  COVID pandemic was not a basic assumption.  Performance in this case was not just impracticable; it was impossible due to a Governor's emergency order rendering the continuation of in-person education not merely unsafe but illegal.  Here the court's reasoning is a bit slippery, as it conflates the basic assumption analysis with the question of who bears the risk of the occurrence of the unforeseen event.  But the court acknowledges that plaintiffs might still be entitled to recover in restitution, if they could only establish the difference between what they paid for and what they received.  Unfortunately, because the court excluded their expert report, plaintiffs provided no basis for recovery in restitution. 

I'm not sure if this is the end of the matter.  There's no discussion of whether plaintiffs are permitted to submit an alternative calculation of damages which could be a basis to allege entitlement to some recovery.

While we're on the topic of COVID litigation against colleges and universities, we note that UVA law's John Setear has just posted a new article on SSRN on the subject.  The article, COVID, Contracts, and Colleges is forthcoming in the West Virginia Law Review.

Here's the abstract:

This Article examines the legal issues underlying hundreds of lawsuits, claiming unjust enrichment or breach of contract, brought by students who paid full tuition to institutions of higher education but who, because of COVID, did not receive the full complement of in-person instruction.

The Article advances three fundamental conclusions. First, the law governing liability favors students, especially because of the starkness of the breach or deprivation visited upon them. Second, the law governing damages favors the educational institutions, especially because COVID caused colleges to unbundle certain aspects of their services that they have historically only provided simultaneously with high-quality faculty and plentiful opportunities for students to interact intellectually. The recency of that unbundling hinders a market-oriented evaluation of the component values and thus reduces the chances of an award of damages to the students. Third, this rapid unbundling reveals a difficulty—which can extend beyond the specifics of colleges offering education in a time of COVID—in the law’s pervasive use of market-oriented measures of damages even when change in the marketplace is rapid and improvisational.

The Article hopes to bring clarity to an area where courts have not ruled consistently and no trials have occurred, and where scholars have examined the effects of COVID on contracts only at a much more general level.

Reefer Brief: Ignite International in Contract Dispute with Consulting Firm

FILMORA NEWS, CC BY 3.0, via Wikimedia Commons

According to Law360 (behind a paywall), a Nevada District Court has ordered Instagram Celebrity and CBD oil entrepreneur Dan Bilzerian (left) to pay $1.6 million and dismissed a breach of contract claim.  Prior to that decision, the case generated a lot more heat than light. 

There are some larger-than-life characters involved.  Dan Bilzerian is the son of Paul Bilzerian.  According to Wikipedia, Paul was a successful entrepreneur and takeover specialist until he ran into trouble with the SEC and was jailed in the early 199os.  After his release from prison, Paul launched a Utah-based software company, Cimetrex, but the government confiscated his ownership interest in that company in 2002.  Paul declared bankruptcy in 1991 and again 2001, but, according to Dan Bilzerian's Wikipedia entry, the government alleges that he concealed assets, passing some of them on to his two sons.  It is unclear whether Dan used those funds or his poker winnings to fund his companies, Ignite International Brands and affiliated entities (collectively Ignite).  Paul played a role in the negotiations between Ignite and a consulting firm, Consulting by AR (AR) .

Piecing together the nature of the dispute from redacted pleadings found on Westlaw, Alan Richardson, AR's principal, reached out to Dan Bilzerian in January 2021 to offer his consulting services in assisting Ignite in gaining a marketing foothold in Las Vegas.  Ignite, in case you were wondering, markets vaping products, spirits, apparel for people who prefer not to leave much to the imagination (based on the website), and at least at one point, a CBD-infused lip balm (hence its presence on the Reefer Brief).  AR hoped to link Ignite's products with Las Vegas's newest casino and resort, Resorts World Las Vegas (Resorts World, below right)).  The parties entered into a letter agreement in March 2021, providing that AR would be compensated with stock in Ignite should an agreement with Resorts World be completed by July 1, 2021.  

Problems arose according to AR's counterclaims, with Dan Bilzerian demanding a better deal than the one originally negotiated. AR claims that it successfully negotiated terms more generous to Ignite than those in the original letter agreement.  In April, 2021, the parties entered into a Letter of Intent, the terms of which provided for a strategic partnership between Ignite and Resorts World.  Dan Bilzerian then appeared at Resorts World's grand opening in June 2021, as required under the letter agreement.  Afterwards, AR claims that it facilitated an updated letter agreement, with terms still more favorable to Ignite than previous iterations had been.  

Logan Frick, CC BY-SA 4.0, via Wikimedia Commons

Thereafter, AR alleges that Ignite ceased to cooperate with AR, refused to pay any compensation to AR, and accused AR of poisoning its relationship with Resorts World.  After an exchange of letters relating to the possibility of arbitration, AR sent a demand letter.  Paul Bilzerian wrote to Alan Richardson, urging settlement.  Here are some excerpts from that letter as cited in AR's counterclaims;

Hi Alan, I understand that your lawyer sent a letter to Ignite that essentially said either Ignite accedes to your demands or suit will be filed next week. I know Ignite will not be happy with this response so it is pretty clear where this is headed at the moment. . . .  Of course your lawyer will tell you that you have a great case and can't lose. I have heard that speech so many times over the past 43 years I lost count decades ago. . . .  You do have some goodwill left on the Ignite side which is why Paul Holden [Ignite's general counsel] suggested binding arbitration. . . .  All you need to do is choose the path you want to follow: prompt, cost effective settlement or bitter, costly, scorched earth litigation with the only winners being the lawyers. I hope you make a good choice.

Notwithstanding this letter, it was Ignite that filed suit, seeking a declaratory judgement.  AR counterclaimed.  The parties have spent much of the intervening period in discovery disputes.  It did not go well for Ignite.  Here, for example is an August 2022 decision of the District Court ordering Ignite to file under seal 65 documents allegedly subject to claim of privilege.  Here is a March 2023 order, finding Ignite in contempt for its failure to do so.  The $1.6 million judgement followed just weeks later.  We will see if the Bilzerians pay for a quick end to the matter or, take Paul Bilzerian's road oft-traveled road of scorched-earth litigation with the only winners being the lawyers.  Either way, he will have been proven correct.

Ignite filed its appeal with the Ninth Circuit on April 28, 2023.  Perhaps they did so, like King Croesus, based on the advice of the Delphic oracle, who said, "If Ignite makes war upon AR Consulting, it will destroy a great empire." 

Teaching Assistants: Victor Goldberg on Lost Volume in the UK

This is the fifth in our series of posts on Victor Goldberg's second volume of collected essays on contracts law, Rethinking the Law of Contract Damages (RLCD).  Links to previous posts on the first volume, Rethinking Contract Law and Contract Design (RCL), can be found here.  Today's post covers the fourth chapter of RLCD, which is about the lost volume problem as handled in courts in the United Kingdom.

This short chapter does not really break new ground in terms of Professor Goldberg's larger arguments.  He merely provides more examples of the outrageous results that proceed from courts in two separate jurisdictions making what he regards as the same mistake.  Paraphrasing Lord Hoffman in The Achilleas, Professor Goldberg posits that damages in contracts cases ought not yield absurd results.  Requiring parties to pay damages well in excess what they would have paid for the option to breach, as lost volume profits often do, renders the resulting contract absurd (RLCD, 69-70).  For this reason, sophisticated parties frequently contract around the lost volume remedy (RLCD, 70).

Professor Goldberg discusses three cases involving car sales.  The basic rule, as discussed in the cases and the treatises, is that a dealer can collect lost profits when it had adequate inventory to meet demand.  In such cases, the courts reason, but for the breach, the dealer would have sold one more car and so it is entitled to its lost profits.  It recovers nothing when it had just enough cars to meet demand such that the breach made no difference.  In Professor Goldberg's view, "The lost volume seller framing gets it backward. It sets the option price high the the market is slack and low (or zero) when the market is tight" (RLCD 71-72)  This is so because in a tight market, the dealer would not be able to get cars from the manufacturer and so could not recover lost profits.  In the end, in this context the lost volume remedy sets an option price that is unknown to the buyer, almost certainly too high and "perverse" because backwards.  The alternative would be to make the option  price explicit by asking the buyer to pay a non-refundable deposit (RLCD, 77).

In B2B cases, lost profits are harder to calculate -- they should be the difference between the contract price and the but-for costs.  Lost volume damages can result in ridiculous amounts of damages.   In a research-intensive business, lost profits could exceed 50% of the contract price.   Imagine that a software developer offers a just-completed product for sale for $100,000.  The buyer reneges, and the software developer finds a new buyer.  If the product is delivered electronically, but-for costs approach zero, and lost volume damages would be $100,000, more or less.  Again, this is an absurd result (RLCD, 69-70).  But it is the result ordered in a number of English cases.  In In re Vic Mill, and Hill & Sons v. Edwin Showell & Sons, Lim., cases from the World War I era, courts awarded lost volume profits so long as seller had the capacity to meet all demand (RLCD, 78-80).  

English courts also applied the lost volume doctrine in the equipment rental context.  Both cases involved liquidated damages provisions.  In one case, the damages provision was set aside as a penalty, but on appeal, the court imposed lost profits damages calculated as the liquidated damages adjusted for depreciation and other costs.  In the second case, the court upheld a liquidated damages provision set at 50% of the contract price because it was not excessive in relation to damages based on a lost-volume theory (RLCD, 81-84).  Professor Goldberg would have struck the latter liquidated damages clause because it was in a consumer lease, and it seems unlikely that the defendant was on notice of the clause.  I'm surprised that Professor Goldberg does not delve into potential conceptual problems in applying the lost volume sales concept in the context of leases.  

Finally, in Sony Computer Entertainment UK Ltd. v. Cinram Logistics , UK, Ltd, there was no breach.  Rather, defendant was responsible for warehousing and distributing memory cards for Sony's Playstation.  It conceded liability for allowing the memory cards to be diverted.  The question was whether damages should be the cost to Sony of the lost cards (£56,246) or or the lost profits Sony could have gotten had it been able to sell not only these cards but other cards that it had in inventory sufficient to meet demand (£187,989).  Professor Goldberg argues that the lost volume analysis make no more sense in this context than it does its "natural habitat".  The smaller figure is the only one that makes any sense (RLCD, 84-86).

Concluding his section on lost volume profits, Professor Goldberg pleads to put this wayward doctrine out of its misery.  His argument for why it is wrong may also explain its longevity: courts impose lost profits damages because they think that the breaching party ought to pay for the harm that they caused.  This is the wrong way to approach contracts damages.  Rather, courts can and should ask what a buyer would pay for the option to breach.  Parties sometimes provide an easy answer to that question through liquidated damages clauses or through non-refundable deposits.  But courts, enamored of lost profits, too often ignore such devices, resulting in penalties that can be far harsher than the ones they routinely strike down (RLCD 86-87).

Below are links to previous posts on RLCD and the first post links to post posts on RCL:

Teaching Assistants: Victor Goldberg, Volume II, An Introduction

Teaching Assistants: Victor Goldberg on Valuation of the Contract as an Asset

Teaching Assistants: Victor Goldberg on The Golden Victory

Teaching Assistants: Victor Goldberg on Lost (Volume) in America

Claim of Warranties Failing Their Essential Purpose in LOT v. Boeing

In August, 2021, Polskie Linie Lotnicze LOT S.A. (LOT) filed its 143-page complaint against The Boeing Company (Boeing).  There were twelve claims, most of which were dismissed on an earlier motion.  In February, the U.S. District Court for the Western District of Washington ruled on a motion to dismiss the claims relating to implied warranties of merchantability and fitness for a particular purpose. 

Image by Aka The Beav from Seattle, Washington, CC BY 2.0 via Wikimedia Commons

LOT leased fourteen Boeing MAX 737 aircraft.  Five were delivered before the Boeing MAX 737 was grounded because two of the jets crashed.  Boeing represented that the main advantage of the new jet was fuel efficiency.  According to the complaint, it failed to disclose that the new design would "change the aircraft's center of gravity; decrease aircraft stability; negatively affect flight handling characteristics to make the aircraft more susceptible to the catastrophic risk of aerodynamic stall; and create inherent safety risks."   There were allegedly faulty disclosures both to the FAA and to operators such as LOT relating to the aircraft's Maneuvering Characteristics Augmentation System ("MCAS"), problems with which may have contributed to the two crashes.  In a deferred prosecution agreement, Boeing admitted to having conspired to defraud the FAA.  The MAX 737 was not re-certified for flight until January 2021.

LOT claims that it suffered $250 million in damages due to the aircrafts' grounding.  It claims that the losses continue.

 The Aircraft General Terms Agreement  entered by Boeing and LOT's lessor, included an "exclusive" express warranty that the aircraft would be delivered free from defects in material or design. It appears that Boeing provided as the exclusive remedies available to the lessor the ability to return the planes for repair.  Boeing disclaimed consequential damages relating to warranties associated with the planes. 

LOT argued that the limitation caused the warranties to fail of their essential purpose because of how long the planes were grounded and because of Boeing's misrepresentations regarding MCAS.  In addition, LOT claimed that the limitations were unconscionable because Boeing's "gross negligence" caused the planes to be grounded for two years.  All of this follows from UCC §2-719(2) and (3), but the court mentions the UCC only in passing, and it doesn't mention §2-719(3) at all, which is troubling.   

There are some wrinkles here that the court does not acknowledge, perhaps because they are not relevant in this jurisdiction.  Some courts require that both tests in §2-719 be met -- that is, a warranty cannot be limited if the limitation both causes a remedy to fail of its essential purpose and enforcement would be unconscionable.  In addition, some jurisdictions treat §2-719 as relating to limitations on warranties but not to exclusions of consequential damages (see, e.g., Sheehan v. Monaco Coach Corp, footnote 4).  If that is true, a disclaimer of consequential damages can survive even if the warranty otherwise fails of its essential purpose.

The court rejected Boeing's argument that LOT should not be permitted to create a warranty claim by alleging fraud.  At this point in the litigation, it is unclear whether LOT will succeed on its warranty claim.  It ought be be permitted to plead in the alternative and retain its warranty action in case the fraud claim does not succeed. 

The court rejected LOT's unconscionability argument, finding that the parties engaged in extensive negotiations, and there were insufficient facts alleged t0 prove substantive unconscionability.  I find the court's discussion confusing, as the extent of the parties' negotiations has nothing to do with substantive unconscionability, but it would seem to negate any claim to procedural unconscionability.  The court defers judgment on the exclusion of consequential damages, which suggests that it may be open to an argument that the exclusion is unenforceable.  On what grounds?  

Well, perhaps on the ground that the remedy would fail of its essential purpose if Boeing were permitted to give operators such as LOT repeated assurances that the aircraft would soon be useable while disclaiming any damages resulting from any reliance of those assurances.  The court found the complaint's allegations "debatable but plausible" and allowed the warranty claims to go forward on that basis.  

While Boeing claimed that implied warranties did not run to LOT, Washington law "activates" implied warranties when an express warranty fails.  As a result, LOT's claims for breaches of implied and express warranties both survive.  The court does not detail the nature of the claim for a breach of an implied warranty of fitness for a particular purpose, and I would have been interested to see what about LOT's use of the planes was "particular" as opposed to ordinary.  

Detroit Institute of Art Settles Dispute over Provenance of a Van Gogh

When I was in practice, one of the partners in my firm was a prominent art lawyer.  His cases were fascinating.  One involved a well-known art dealer who was given a painting to show at various galleries but then sold it and fled the country.  I can't remember whether he was covering gambling debts or paying for a divorce.  It was one of those.  The partner told me, in essence, "These things happen."  Even though the works of art are worth millions, people's livelihoods depend on their reputations, and so transactions are done based on handshakes and relationships.  The players all know each other, so the danger of conversion is thought to be small.  Until it isn't. 

When I teach Sales, I sometimes come across such cases, and they implicate the doctrine of entrustment under UCC § 2-403(2), which provides:  "Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in ordinary course of business."  I suspect there was an entrustment issue involved in the controversy between Brazilian collector Gustavo Soter and the Detroit Institute of Art (DIA) over Vincent Van Gogh's painting, Une liseuse de roman (above).   

Claire Voon reported for The Art Newspaper in January that the painting was on loan to DIA.  Mr. Soter alleged that the painting had been stolen from him.  Mr. Soter claimed that he had bought the painting for $3.7 million and then transferred it to an unnamed third party without relinquishing title to it.  That unnamed third party then allegedly absconded with the painting and its whereabouts were unknown for years. U.S. District Court Judge George Caram Steeh found that the museum was blameless but encouraged the parties to settle their dispute, and ordered DIA not to allow the painting to be moved until the matter was settled. The exhibit of which the painting is a part was set to close at the end of January, and so the court ordered DIA to hold onto the painting until the matter could be resolved

The museum took the position that, under the federal Immunity from Seizure Act, no court could tell it what to do with the painting, as it had exercised due diligence before accepting the painting for exhibition.   It argued that the complaint should be dismissed.  Otherwise, the argument goes, foreign lenders would not send their paintings to be exhibited in the United States.  Courts could issue injunctions, and the paintings could be held in limbo.  

Fortunately, as Ed White reported in Fortune, in March Mr. Soter and Brokerarte Capital Partners LLC, his sole-owned company, reached a deal with the unnamed entity that transferred the painting to DIA.  Now the painting can be released from captivity, but the details of the deal are otherwise unknown.  While Mr. Soter dropped his claim for injunctive relief.  However, as of March, DIA did not consider the matter resolved.  It wanted the District Court vacate its decision granting the injunction so as to deprive it of precedential value.  

Universal Studios Settles Lawsuit over Jimmy Fallon Ride

There's not a lot of law here because the parties settled.  I'm just struck by the strangeness of the idea.  An amusement park ride based on The Tonight Show?  I mean, amusement parks are mostly for kids, right?  Kids who go to sleep on school nights before The Tonight Show, right?  I can imagine one kid seeing the signs for the attraction and asking an older sibling "What's The Tonight Show?"  A common answer, it seems to me, would be, "That's the show that Mom and Dad fall asleep in front of."  I don't think the next line would be "Awesome!  Let's wait in line for that!"

Anyhoo, Katie Rice, writing for The Orlando Sentinel, reports that Universal entered into an agreement in April 2014 with an Austrian company known as DyMoRides.  The two parties had previously worked together on another proposed project that fell through.  Wait, there was an even lamer idea than a Tonight Show ride?  

DyMoRides was to construct the Jimmy Fallon ride, but the parties very quickly started squabbling.  Universal terminated the contract in October 2015, because it alleged that DyMoRide was not completing the project on schedule.  DyMoRide, for its part, claimed that Universal was responsible for the delays, because it insisted on changes once the project was begun, and in March 2021, it sued Universal for breach of contract.  In addition, Universal engaged another company to complete the project but incorporated DyMoRide's proprietary "Flyboard" ride technology without paying for a license.  DyMoRide claimed that it was owed $5 million for its work plus an unspecified amount for the use of its intellectual property.  The ride opened in April 2017.

Universal filed counterclaims in August, 2022, claiming the DyMoRides breached, because the work that it performed had significant deficiencies, requiring an additional $10 million investment from Universal to complete the ride.  Moreover, Universal claimed that it was given a perpetual, irrevocable license to use DyMoRide's technology.  

Well, that's all highly interesting.  It gives an interesting peek into the logistics of amusement park attraction contracts.  Unfortunately, the parties settled in March, and the terms of the settlement were not disclosed. 

Tuesday Top Ten - Contracts & Commercial Law Downloads for May 9, 2023

Welcome to KProf Blog's weekly report on who's knocking it out of the park on SSRN downloads in our favorite subject areas. Let's roll the tape, shall we?

Top Downloads For:

Contracts & Commercial Law eJournal

Recent Top Papers (60 days)

As of: 10 Mar 2023 - 09 May 2023

Rank	Paper	Downloads
1.	How ChatGPT and Generative AI Systems will Revolutionize Legal Services and the Legal Profession Rupert Macey-Dare St Cross College - University of Oxford	484
2.	Emerging Technology's Unfamiliarity with Commercial Law Carla Reyes Southern Methodist University - Dedman School of Law	420
3.	Law and Courts in an Age of Debt Jared A. Ellias and Elisabeth de Fontenay Harvard Law School and Duke University School of Law	264
4.	From Cannabis to Crypto: Federal Reserve Discretion in Payments Julie Andersen Hill University of Alabama - School of Law	233
5.	Privately Policing Dark Patterns Gregory M. Dickinson St. Thomas University - School of Law	158
6.	Non-Fungible Tokens (NFTs), Smart Contracts and Contracts: The Need for Legal and Technology Assurances Joshua Ellul and Ioannis Revolidis University of Malta and University of Malta, Centre for Distributed Ledger Technologies and Department of Media, Communications & Technology Law	141
7.	China Data Flows and Power in the Era of Chinese Big Tech W. Gregory Voss, Emmanuel Pernot-Leplay and Emmanuel Pernot-Leplay TBS Business School and Tilburg University - Tilburg Institute for Law, Technology, and Society (TILT)Shanghai Jiao Tong University (SJTU) - KoGuan Law School	130
8.	When Private Law Theory Is Close Enough Andrew S. Gold Brooklyn Law School	122
9.	Smart Contracts and the 'Oracle Problem' in the Context of InsurTech Eliza Mik The Chinese University of Hong Kong (CUHK) - Faculty of Law	114
10.	An Information-Production Theory of Contract Law Roy Shapira, Assaf Jacob and Yotam Kaplan Stigler Center, University of Chicago Booth School of Business, The Interdisciplinary Center Radziner School of Law and Bar-Ilan University - Faculty of Law	104

 

Top Downloads For:

Law & Society: Private Law - Contracts eJournal

Recent Top Papers (60 days)

As of: 10 Mar 2023 - 09 May 2023

Rank	Paper	Downloads
1.	Beyond Trade Secrecy: Confidentiality Agreements That Act Like Noncompetes Camilla Alexandra Hrdy and Christopher B. Seaman University of Akron School of Law and Washington and Lee University School of Law	315
2.	Privately Policing Dark Patterns Gregory M. Dickinson St. Thomas University - School of Law	158
3.	When Private Law Theory Is Close Enough Andrew S. Gold Brooklyn Law School	122
4.	Fractionalizing Investment Securities: Using FinTech to Expand Financial Inclusion Steven L. Schwarcz and Robert Bourret Duke University School of Law and Duke University School of Law	117
5.	An Information-Production Theory of Contract Law Roy Shapira, Assaf Jacob and Yotam Kaplan Stigler Center, University of Chicago Booth School of Business, The Interdisciplinary Center Radziner School of Law and Bar-Ilan University - Faculty of Law	104
6.	Specific Performance Felipe Jiménez USC Gould School of Law	92
7.	A Genealogy of Private Law Epistemologies Marietta Auer Max Planck Institute for Legal History and Legal Theory	90
8.	Agreement N. W. Sage London School of Economics - Law Department	60
9.	Mythical Adverse Effect Naveen Thomas New York University School of Law	55
10.	Covid, Contracts, and Colleges John K. Setear University of Virginia School of Law	42

 

Nifty Fact Pattern with a Consideration Issue!

On December 26, 2019, William Stephens completed an application for car insurance through Progressive.  He paid the initial premium, but his check was returned for insufficient funds.  On January 3, 2020, Progressive sent him notice that his policy would be canceled unless he paid by January 12th, which he did not do.  On January 14th, Progressive sent Mr. Stephens notice that the policy was rescinded as of December 26, 2019.  Meanwhile, on January 3, 2020, Mr. Stephens allegedly hit a pedestrian, Franscisco Ball-Rodriguez with his car.  Unable to recover from Mr. Stephens, Mr. Ball-Rodriguez went after Progressive, and Mr. Stephens joined the action, alleging bad faith refusal to pay the claim.

The trial court granted Progressive summary judgment.  On appeal in Ball-Rodriguez v. Progressive Premier Insurance Company of Illinois, the Georgia Court of Appeals affirmed.  Plaintiffs argued that Progressive had waived its right to rescind the policy when it sought to collect premiums from Mr. Stephens.  That argument was foreclosed by clear language in the policy, giving Progressive the right to rescind for non-payment of premiums.  There was no "clear and unmistakable" waiver.

In addition, Plaintiffs made various arguments for why Mr. Stephens had given consideration.  His personal data provided to Progressive was consideration.  His attempt to send a check was consideration.  The court made short work of these arguments.  The provision of personal information was not understood by either party at the time of contracting as consideration for the policy.  Payment was the consideration, and payment was never made.  The insurer should not be punished for granting Mr. Stephens extra time to pay his premium.

At first, it struck me that, at the time of the accident, Mr. Stephens likely did not have notice of his bounced check, and so there might be an argument that he should be covered so long as he paid the premium at some point thereafter.  But it occurs to me that making such allowances would open the way for Better Call Saul-style scams.  Not that I have any reason to think that anything like that was going on in this case.

 

Supreme Court Justices and the Other Legal Academy

I was listing to  Will Baude and Dan Epps' excellent Divided Argument podcast, where they discussed the recent controversies involving Supreme Court Justices receiving gifts or other emoluments.  The opening hymnal setting of Justice Scalia's Morrison v. Olson dissent alone justifies the cover price.  I wish they had titled their episode "Supreme Court Ethics Controversy: Fooferaw or Argle-Bargle?  That would have been a fitting homage to Justice Scalia's colorful diction.  Instead, they named it Creator of the Stars at Night. 

But most of the episode was devoted to discussions about the various Justices and the ethical controversies arising out of their acceptances of gifts from various quarters.  As is well known, ProPublica provided extensive reporting on Justice Thomas's relationship with a wealthy conservative donor Harlan Crow.  There followed reporting from Politico about an undisclosed land deal involving Justice Gorsuch.  And then, there have been stories from FoxNews about Justice Sotomayor's failure to recuse herself from cases involving her publisher.  Finally, The New York Times did a story on efforts by George Mason University's Scalia School of Law and the Notre Dame Law School to cozy up to the conservative Justices.  

Will Baude had pointed out in an earlier episode that if we are going to question the ethics of Justices receiving gifts from private parties and institutions, looking at the gifts they receive from universities, which are sometimes parties in cases before them, is a good place to start.  That seems a stretch to me.  The Justices, except for Justice Barrett, all attended either Harvard or Yale law schools.  They recruit their clerks from those and other top law schools, and their clerks then disperse to prestigious law schools around the country.  It would be bizarre if they did not maintain ties with their schools and with the people they know at those schools.  And there are myriad ways to distinguish guest lectures and even guest teaching gigs at summer program in Europe from lavish gifts from private donors.  But that is a topic for a different blog.

Still, keeping on brand as a faculty member at what Justice Scalia called a "lesser law school" when he last visited my former lesser law school, the Valparaiso University School of Law, let me propose a way forward.  Despite recent criticisms of the Court, especially from the left, the Court continues to be a very important, if not the most important institution in our legal system.  It makes sense that the Justices should go out to meet with, converse with, and inspire young lawyers-in-training.  But -- and I know you saw this coming -- Harvard, Yale, and the other elite schools need them far less that we do out in the Other Legal Academy.  Our students need to see them as models of professional success.  They need to hear how judges and Justices think about law, the legal profession, and the legal academy.   Getting to meet in person with the people who write the opinions they study in their courses will generate new enthusiasm for the study of law and heighten commitment and grit in students who could use some inspiration at a time when bar passage rates are plummeting in most states.  

Since the Early Republic, the Justices have resisted and resented riding circuit.  But in these times when the reputation of the Court is at its lowest since surveys of such matters first appeared, the Justices, as well as other members of the Federal Judiciary, need to get out and show their faces to students whom they will otherwise never meet.  And they need to deliver a message to those students that will bolster those students' faith and confidence in the profession that they so avidly hope to join.  

Food Delivery Giants Cannot Compel Arbitration of Antitrust Claims Based on Terms of Service on Their Apps

Davitashvili v. Grubhub is a putative class action brought by customers against Uber Eats, Grubhub and Postmates,  They allege that the three food delivery services entered into agreements with restaurants that restricted them through a "no price competition clause" (NPCC) from charging lower prices either when selling directly to customers or when using an alternative food delivery service, like Doordash.  Plaintiffs seek damages and injunctive relief under Section 1 of the Sherman Act in connection with direct purchases from restaurants and purchases through platforms other than defendants.  Defendants filed a motion with Judge Lewis Kaplan in the U.S. District Court for the Southern District of New York to compel arbitration based on arbitration clauses included in the terms of service on defendants' platforms.  

With respect to Uber and Postmates, which was acquired by Uber in December 2020, the terms of service did not put users on constructive notice of an agreement to arbitrate prior to the December 2021 terms of service.  The court thus concluded that Uber had failed to meet its burden of "demonstrating that an agreement to arbitrate was made" between itself or Postmates and the plaintiffs who sued the platform, except with respect to the December 2021 terms of service.  Because Grubhub's checkout page does not require users to click on or otherwise indicate assent to an arbitration agreement, and because Grubhub supplied no other evidence that plaintiffs were on notice, the court found that Grubhub could not demonstrate that an agreement to arbitrate was made between it and plaintiffs.  

Although Uber's terms of service provided that all threshold issues of arbitrability were to be decided by the arbitrator, plaintiffs raised fundamental challenges to arbitration clause itself.  In such cases, it is for a court to decide whether the dispute is arbitrable.  Grubhub's terms of service provided that decisions as to arbitrability were for a court to decide.  

Citing David Horton's Infinite Arbitration Clauses and Judge Posner's decision in Smith v. Steinkamp, Judge Kaplan (right) noted the defendants' ambitious aspirations for the reach of their arbitration clause. 

If enforced according to their terms, they would require arbitration of any claims between defendants and the Platform Plaintiffs, including claims without any nexus to the agreements containing the clauses — i.e., defendants' terms of use.

Judge Kaplan found no nexus in this case between the arbitration clauses at issue and the allegations of the complaint, and so he refused to enforce them against any plaintiffs.  In the alternative, Judge Kaplan ruled that it would be unconscionable to enforce the arbitration provisions "with respect to claims untethered to defendants' respective terms of use."  Finally, Judge Kaplan ruled that defendants' expansive class action waivers were no more enforceable against these plaintiffs with respect to these claims than were their infinite arbitration clauses.   

Defendants' motion to compel arbitration were denied.  Uber's motion to stay the action was denied as moot.

. . . And Forty Pages Later, We Know What "From" Means in Texas

As a graduate student, I learned that, because of imperfections in the human mind and in language, we usually fail to express any one true meaning in words.  As litigators trying to win for my client on a motion to dismiss, my colleagues and I often tried to persuade courts that contractual language had only one true meaning.  We often succeeded.  In my work on constitutional law, I reverted to my graduate-student approach to language, with a helping hand from James Madison (right):

Besides the obscurity arising from the complexity of objects, and the imperfection of the human faculties, the medium through which the conceptions of men are conveyed to each other adds a fresh embarrassment. The use of words is to express ideas. Perspicuity, therefore, requires not only that the ideas should be distinctly formed, but that they should be expressed by words distinctly and exclusively appropriate to them. But no language is so copious as to supply words and phrases for every complex idea, or so correct as not to include many equivocally denoting different ideas. Hence it must happen that however accurately objects may be discriminated in themselves, and however accurately the discrimination may be considered, the definition of them may be rendered inaccurate by the inaccuracy of the terms in which it is delivered. And this unavoidable inaccuracy must be greater or less, according to the complexity and novelty of the objects defined. When the Almighty himself condescends to address mankind in their own language, his meaning, luminous as it must be, is rendered dim and doubtful by the cloudy medium through which it is communicated.

I would belatedly attach as Exhibit A to Federalist #37 a recent 40-page opinion.  In Apache Corporation v. Apollo Exploration, LLC, the Supreme Court of Texas ably rendered the word "from" intelligible.  It began by recalling the common law rule that, in a contractual context, if the parties say that that are bound for one year, beginning from June 30th, they are bound until June 30th the following year, not until June 29th.  Because of the complex factual context, however, it does indeed take forty page to establish that, in this context, in this jurisdiction, unless altered by the parties, the common-law meaning of "from" is fixed, or at least, as Madison put it farther up the same paragraph, "liquidated."

Well, maybe it doesn't take quite 40 pages to work out what "from" means.  The facts of the case are pretty complicated.  But there is a part of the opinion that will definitely have you humming "What a difference a day makes."  In this case, because of wildly fluctuating prices and land values, "according to Apache, approximately $180 million of potential damages rides on the answer to whether the North Block portion of the lease expired on New Year’s Eve or New Year’s Day." 

Because the lease's primary term end date was January 1, 2010, after various extensions, under the common law rule, the lease at issue would terminate on January 1, 2016.  The parties could have departed from the common law rule; however, the lease in question manifested no intention to do so.

Thanks to members of the AALS Contracts Listserv, from which I learned that New York addressed this in a statute, NY General Construction Law § 20. 

A number of days specified as a period from a certain day within which or after or before which an act is authorized or required to be done means such number of calendar days exclusive of the calendar day from which the reckoning is made.  If such period is a period of two days, Saturday, Sunday or a public holiday must be excluded from the reckoning if it is an intervening day between the day from which the reckoning is made and the last day of the period.  In computing any specified period of time from a specified event, the day upon which the event happens is deemed the day from which the reckoning is made.  The day from which any specified period of time is reckoned shall be excluded in making the reckoning.

New York's Court of Appeals then made clear that the rule in § 20 applies in contractual as well as statutory contexts.  Messina v. Lufthansa German Airlines, 390 N.E.2d 758 (N.Y. 1979).