ContractsProf Blog

Labor and Human Rights Law Protects the Right to Be Abstemious

Going by the headline to Rachel Pannett's reporting in The Washington Post, you might conclude that a French court recognized a right to refuse to be "fun at work."  Was the court trying to establish that the French can be every bit as dour as the Scots?.  Hardly.  The plaintiff, referred to in court documents as Mr. T., alleged that he was fired for refusing to participate in seminars and weekend social events that, in his view, involved excessive alcohol and "promiscuity."  

Reading the headline, for which Ms. Pannett is certainly not responsible, one might get the impression that Mr. T is a killjoy.  Given the timing of the ruling, one imagines that the "fun activity" was something like this . . . 

Image by Miguel Discart
CC BY-SA 2.0 via Wikimedia Commons

. . . and that Mr. T could not manage to be more joyful that he is in the picture at right.

But the story here is not really about refusing to be fun at work.  It is about refusing to bullied into the sort of alcohol-fueled conviviality that often provides the context for sexual harassment and other forms of workplace harassment. 

According to WaPo, plaintiff alleged that the firm's idea of "fun" involved “'humiliating and intrusive practices'” including mock sexual acts, crude nicknames and obliging him to share his bed with another employee during work functions."  

The Court of Cassation ruled that, in refusing to participate in such activities, Mr. T. was engaged freedom of expression, a fundamental freedom  protected under labor and human rights law.  He could not be fired for exercising that right.  The WaPo story then goes on to catalogue other recent cases involving forced merriment at white-collar firms that have resulted in hazing rituals and conduct on which the #MeToo movement has shone light.

Elon Musk Performs Magic on Twitter: Makes Advertisers Disappear!

According to a report from Media Matters for America, Twitter has lost half of its top 100 advertisers in the last month.  The 50 advertiser that have flown the bird coop account for $2 billion in revenue since 2020 and $750 million in revenue in 2022.  Another seven advertisers, accounting for $255 million in 2020 and $118 million in 2022, have reduced their ad buys to a trickle.  What once was a cash cow for Mr. Musk's fledgling business, is now mere chicken feed (pardon my mixed metaphor, but I'm trying to keep the bird theme going).  Most of the departed advertisers are "quiet quitters," but seven have either issued statements that they were leaving the site or were publicly reported to have done so and those reports were confirmed.  

How do we explain this?  Here's how Media Matters explains it:

Elon Musk (who acquired the platform in late October) has continued his rash of brand unsafe actions — including amplifying conspiracy theories, unilaterally reinstating banned accounts such as that of former President Donald Trump, courting and engaging with far-right accounts, and instituting a haphazard verification scheme that allowed extremists and scammers to purchase a blue check. This last move, in particular, opened the platform up to a variety of fraud and brand imitations.

Halisia Hubbard, reporting on NPR adds that Eli Lilly stopped its ads on Twitter after a fake account purporting to be the pharmaceutical company tweeted on an account that featured a purchased "blue check" verification, "We are excited to announce insulin is free now."  Eli Lilly asked that the post be removed, but Twitter is short on staff, and the post remained up for hours and garnered hundreds of retweets and thousands of likes.  Eli Lilly's stock price took a hit as a result. 

Some, citing its status as something like a public forum (an argument I don't buy) are calling for governmental regulation of Twitter.  But private legislation can also do the trick.  If enough advertisers exercise their free expression rights by withholding their money (money = speech, another argument I don't buy), perhaps that will discipline Musk and help save Twitter.

This blog does not account for very much of Twitter's revenue.  Still, we prefer not to have our attention monetized to enhance Mr. Musk's unseemly wealth.  You can find us over on Mastodon for now.  It's actually a fun site, once you figure out how to connect to people over there.  You can find us at this address. 

The Buffalo Billion Case in SCOTUS: Ciminelli v. United States

Once again, Will Baude and Dan Epps' Divided Argument podcast has alerted me to a SCOTUS case with contract implications of which I was previously unaware.  Those of you who are not interested in a listener's phone message featuring a song set to the tune of "Old McDonald" that alleges that Will Baude engages in "unpersuasive scholar trolling" or in the latest news about Justice A-leako (thanks for that one Strict Scrutiny Podcast) can skip to minute 36.  

The SCOTUS case is styled Ciminelli v. United States.  My recitation of the facts is indebted to the Second Circuit opinion in the case, which is styled United States v. Percoco.  The case should be of interest to those of us who cover the bid cases in first-year contracts courses.  The students can really understand those cases only if they understand a little bit about how bids on public construction projects operate.  In order to make it impossible for parties to bid shop, bid chop, or otherwise rig bids on public contracts, subcontractors (subs) are required to submit sealed bids to general contractors (GCs).  The GCs open the bids and often on the same day use the unsealed bids to put together their own bids, which are also sealed.  Bid cases arise when the subs try to retract erroneous bids that the GCs have relied on in putting together their bids.  Following Justice Traynor in Drennan v. Star Paving, unless the bid is obviously the product of a mistake, the Restatement approach treats the subs' bids as irrevocable based on the GC's reliance.  

Did I say that sealed bids make cheating impossible?  Apparently not.  I blogged recently about Victor Goldberg's work, showing that parties can contract around the common law option created by Drennan.  But Ciminelli involves a must more creative (and probably fraudulent) scheme.  Simplifying the facts, the defendants in Ciminelli/Percoco allegedly colluded to rig the bid materials so that preferred contractors would win bids.  The main author of the scheme set up intermediaries that were not a part of the scam.  He then contacted preferred contractors and gathered information about their businesses.  The requests for proposals, (RFPs) one for Syracuse and one for Buffalo (known as the "Buffalo Billion") were then tailored so that only the preferred contractors would qualify.  The scheme worked.  In both Syracuse and Buffalo, the innocent intermediary entity awarded lucrative contracts to the preferred contractors.  

The issue before the Court is whether defendant can be liable for fraud when the state has not proven that it was harmed by the defendant's conduct.  That is, defendants claim that they were indeed the most qualified bidder, and there is no allegation that the state overpaid for the work done or that the work was not competently completed.  The Second Circuit found criminal liability based on defendants' fraudulent interference with the state's "right to control."  Right to control violations occur whenever a scheme denies the victim the right to control its assets by depriving it of information necessary to make discretionary economic decisions.

In his Petition for Certiorari, Ciminelli attempts a frontal assault of on the right to control theory:

Whether the Second Circuit’s “right to control” theory of fraud—which treats the deprivation of complete and accurate information bearing on a person’s economic decision as a species of property fraud— states a valid basis for liability under the federal wire fraud statute, 18 U.S.C. § 1343.

In the appeal to the Second Circuit, defendants argued that the issuer of the RFP was not harmed "because the rigged RFPs merely awarded [defendant-controlled entities] preferred developer status, and did not affect the terms of the separate, subsequently negotiated development contracts."  Defendants also claimed that the government had not identified other parties offering "lower prices, better quality, or better value would have applied and been selected for either the Syracuse or the Buffalo contracts."

As to the first argument, the Second Circuit found that being named preferred developers made it much more likely that they would be awarded contracts, and so the fraud was relevant to an "essential element of the bargain."  That element of the fraud claim is thus satisfied.

As to the second argument, the "right to control" theory requires no showing of economic harm.  The deprivation of the right to control itself entails a violation of a property right.  As the Second Circuit held in Lebedev, "Since a defining feature of most property is the right to control the asset in question, . . . property interests protected by the wire fraud statute include the interest of a victim in controlling his or her own assets." In Finazzo, the Second Circuit clarified that the right-to-control theory requires proof only that "misrepresentations or non-disclosures can or do result in tangible economic harm" (emphasis mine).  

According to Will Baude and Dan Epps, nobody is defending the Second Circuit's "right to control" theory of fraud.  The case is likely to be remanded to see if the government can find an alternative basis for a fraud conviction.

I haven't looked into the law or the briefs on the case, but my instinct is to think that's a shame.  Based on the facts below, fraud has clearly occurred.  Determining whether anybody was harmed would require speculation about what might have happened had the RFPs not been rigged.  The state may have been harmed because there might have been lower bidders.  There is no way to prove that.  Other bidders might have been harmed because, but for the rigged RFPs, they might have bid and won.  But none of them bid, so it is unclear how any of them would have legal standing to allege that they were the victims of defendant's fraudulent misconduct. 

In an era less hamstrung by the Court's commitment to blinkered legal formalism, the government could make the case that, absent a "right to control" theory, there will be no remedy for the kind of fraudulent conduct alleged in this case. Perhaps the Court's expansive view of property rights will motivate it to embrace "right to control" theory sua sponte.   This case clearly involves a fraudulent scheme.  It was successful, and the perpetrators profited substantially.  The public likely paid too high a price for the services provided, but the extent of the harm is not provable with reasonable certainty.  Defendants' competitors were harmed, but they cannot prove it because the carefully crafted RFPs deterred them from bidding.  Who cares? Prophylactic rules may be over-inclusive in order to deter bad behavior.  The Court could uphold a broad rule intended to capture intentional cheating in the competition for public contracts.

 

GM to Pay $3.5 Million to Settle Claims Arising Under Servicemembers Civil Relief Act

Jordyn Grzelewski reports in The Detroit News that GM Financial has agreed to pay U.S military personnel $3.5 million to address breaches of lease agreements in violation of the Servicemembers Civil Relief Act (SCRA).  The SCRA prohibits auto financing and leasing companies from repossessing the vehicles of service members without a court order if the service members have made even one payment before entering the military.  It also allows service members to terminate their leases under certain conditions.

The Department of Justice began an investigation in 2018 and discovered that GM Financial had violated the SCRA in over 1000 cases, including 71 in which it unlawfully repossessed service members' vehicles.    

Tuesday Top Ten - Contracts & Commercial Law Downloads for November 22, 2022

Happy Thanksgiving week here in the U.S.! And we of a certain academic bent can be thankful for interesting new scholarship. Why not download a few titles for discussion around the family dinner table? (Your mileage may vary on that last suggestion...)

Top Downloads For:

Contracts & Commercial Law eJournal

Recent Top Papers (60 days)

As of: 23 Sep 2022 - 22 Nov 2022

Rank	Paper	Downloads
1.	Enforcing Comparable Treatment in Sovereign Debt Workouts Lee C. Buchheit and Mitu Gulati Center for Contract and Economic Organization and University of Virginia School of Law	300
2.	The Obsolescence of Blue Laws in the 21st Century Ira P. Robbins American University - Washington College of Law	265
3.	Understanding Private Law Felipe Jiménez USC Gould School of Law	202
4.	Unbundling Business Bankruptcy Law Melissa B. Jacoby University of North Carolina School of Law	163
5.	The Privity of Contract: Third Party Rights Under Maldivian Contract Law Husnu Al Suood Maldives Law Institute	158
6.	Zauderer and Compelled Editorial Transparency Eric Goldman Santa Clara University - School of Law	153
7.	Fake and Real People in Bankruptcy Melissa B. Jacoby University of North Carolina School of Law	144
8.	Foreseeability Conventions Morgan Savige and John Fabian Witt Yale Law School and Yale University - Law School	140
9.	Contract Law and Financial Regulation in China: An Illegality Perspective Chao Xi The Chinese University of Hong Kong	123
10.	Party Autonomy and the Challenge of Choice of Law Perry Dane Rutgers, The State University of New Jersey - Rutgers Law School	110

 

Top Downloads For:

Law & Society: Private Law - Contracts eJournal

Recent Top Papers (60 days)

As of: 23 Sep 2022 - 22 Nov 2022

Rank	Paper	Downloads
1.	Deconstructing Smart Contracts Eliza Mik and Eliza Mik The Chinese University of Hong Kong (CUHK) - Faculty of LawTILT	231
2.	Understanding Private Law Felipe Jiménez USC Gould School of Law	202
3.	Unbundling Business Bankruptcy Law Melissa B. Jacoby University of North Carolina School of Law	163
4.	The Privity of Contract: Third Party Rights Under Maldivian Contract Law Husnu Al Suood Maldives Law Institute	158
5.	Contract Law and Financial Regulation in China: An Illegality Perspective Chao Xi The Chinese University of Hong Kong	123
6.	Party Autonomy and the Challenge of Choice of Law Perry Dane Rutgers, The State University of New Jersey - Rutgers Law School	110
7.	The Corporate Contract and Shareholder Arbitration Mohsen Manesh and Joseph Grundfest University of Oregon School of Law and Stanford University Law School	102
8.	A New Theory of Impossibility, Impracticability, and Frustration Yehonatan Givati and Yotam Kaplan Hebrew University of Jerusalem - Faculty of Law and Bar-Ilan University - Faculty of Law	91
9.	Against Corporate Social Responsibility Jonathan C. Lipson Temple University - James E. Beasley School of Law	82
10.	The Other Hand Formula Maytal Gilboa and Yotam Kaplan Bar-Ilan University - Faculty of Law and Bar-Ilan University - Faculty of Law	74

More News from the World Cup of Contracts

The New York Times provides two separate stories that those inclined towards conspiratorial thinking might think are linked.  First, Adam Crafton reports in the Times curated collection of longish-form sports journalism, The Athletic, that Lionel Messi signed a "lucrative deal" to promote Saudi Arabia as the host of the 2030 edition of the World Cup.  

In the same paper, Rory Smith reports on Saudi Arabia's shocking upset of Argentina, lead by their star -- you guessed it -- Lionel Messi in the team's first match in the 2022 World Cup.  As Rory Smith puts it,

Messi, a being seemingly hewn from pure, uncut poise, seemed afflicted, rushing his passes, missing his beats, fading from the game as the clock ticked rather than bending it to his will. 

All is not lost, Argentina.  The team just has to prevail over Mexico and Poland, and it can still emerge from its group.  But people will be left to wonder: is contractual obligation the one thing that can overcome Messi's competitive drive?

2022 Amendments to the UCC

The Uniform Law Commission (ULC) has unveiled its new amendments to the UCC on it website.  I am happy to report that the revisions to Articles 1, 2, and 2A seem to be quite modest.  Here are some that might matter to teaching:

• Conspicuousness is now to be determined by a totality of the circumstances, a highly sensible revision, especially since we now know that ALLCAPS are not helpful;
• The term "money" is now defined to exclude "an electronic record that is a medium of exchange recorded and transferable in a system that existed and operated for the medium of exchange before the medium of exchange was authorized or adopted by the government," which seems to cover cryptocurrencies but could also encompass broader technologies not yet in existence;

Shockingly, the ULC has not seen fit to change the Statute of Frauds threshold from the $500 amount that made sense when the UCC was drafted to something that makes sense today.  It is less shocking that the ULC did not see fit to eliminate the Statute of Frauds entirely, but its failure to do so remains disappointing.  

The most significant revision, it seems to me, from the perspective of teaching contracts and sales, is the following innovation in the realm of the predominant purpose test for hybrid transactions:

 

(2) In a hybrid transaction:

                        (a) If the sale-of-goods aspects do not predominate, only the provisions of this Article which relate primarily to the sale-of-goods aspects of the transaction apply, and the provisions that relate primarily to the transaction as a whole do not apply.

                        (b) If the sale-of-goods aspects predominate, this Article applies to the transaction but does not preclude application in appropriate circumstances of other law to aspects of the transaction which do not relate to the sale of goods.

            (3) This Article does not:

                        (a) apply to a transaction that, even though in the form of an unconditional contract to sell or present sale, operates only to create a security interest; or

                        (b) impair or repeal a statute regulating sales to consumers, farmers, or other specified classes of buyers. 

The revisions to Article 9 are more extensive.  Sucks to be people who teach Secured Transactions, but I've always thought that to be true.  The dramatic innovation of the revisions is a new Article 12 on Controllable Electronic Records.

Re-Post: Eric Goldman Reviews Netflix's "Pepsi, Where's My Jet?"

Review of the “Pepsi, Where’s My Jet?” Netflix Documentary
Eric Goldman
Technology and Marketing Law Blog

In the mid-1990s, at the height of the Cola Wars, Pepsi ran an ad to introduce its “Pepsi Stuff” loyalty program, including a featured prize of a Harrier Jet for 7M points–a ridiculously high number that was supposed to signal that it was a joke. Watch the ad. However, Pepsi also sold points for 10 cents each, putting a $700k price tag on a jet that was allegedly worth tens of millions of dollars (assuming it could be acquired at all–the US government frowns on individual citizens owning military equipment).

John Leonard, backed by a rich friend Todd Hoffman (who looks like George Carlin), tendered $700k and ordered 1 Harrier Jet. Pepsico declined; they sent him coupons for a couple of cases of Pepsi instead. Leonard retained a lawyer and made legal threats. Pepsi preemptively sued Leonard in its home court of SDNY. Judge Wood’s opinion concluded that the ad objectively did not communicate an offer due to its humor, so no contract ever formed and Leonard didn’t get his Harrier jet. Wood’s opinion is relatively dry, but it’s become a staple of the contracts law canon because of its fun facts and its precise analysis.

Because this case is so iconic, I was excited to see the new Netflix documentary, “Pepsi, Where’s My Jet?” The documentary interviews key figures in the case, many of whom are still alive, and it’s fabulous to hear them tell their stories in their own words.

Despite that, the documentary was disappointing overall. If you’re a contracts or advertising law nerd like I am, you’re going to watch it no matter what I say. But I had hoped the documentary might become a must-see pedagogical supplement for anyone reading the case, and I don’t think it gets there.

The documentary is framed around the cross-generational bromance between GenXer Leonard and his financial sponsor, Boomer Hoffman. Obviously that relationship is at the story’s heart because there was no case without Hoffman’s largesse. However, the filmmakers repeatedly steered the narrative into the bromance, such as seemingly irrelevant segments showing Leonard and Hoffman recently summitting Mt. Vinson in Antarctica (an impressive, but very expensive, accomplishment).

The documentary was split into four episodes, totaling over 2.5 hours. It would have been much better packed into a single 90 minute episode, but instead it felt like the filmmakers padded the narrative with tangents and dead-ends to reach the target length.

Also, the documentary includes many historical reenactments, many of which were unnecessary and not compelling. I am not a fan of recreations in documentaries.

The actual legal ruling gets surprisingly little airtime in the back half of the fourth episode, and the filmmakers did a poor job of contextualizing it. For example, long-standing contracts law doctrine says that advertisements ordinarily are an invitation to make an offer and not an offer themselves, which the documentary doesn’t mention. The documentary repeatedly mentions that many consumers, especially teens, would have taken the ad seriously, but the documentary only offers Team Pepsi’s rebuttals and a few words from the opinion to counter this view. The filmmakers surely could have interviewed some independent experts in contracts law or the advertising industry to supplement the parties’ self-interested statements, and many of them would have sided emphatically with Team Pepsi. By omitting the independent voice, the filmmakers betrayed their normative agenda.

Similarly, the filmmakers styled the case as a David v. Goliath battle. Indeed, it was, but the filmmakers didn’t aggressively question Leonard’s motives. (Instead, the documentary spent a minute or two indulging in overly speculative conspiratorial theories about Pepsi malfeasance that should have been cut). Sure, Pepsi is the big bad company, and surely Pepsi could have easily made safer legal choices in how it presented the jet. At the same time, it’s impossible not to feel like Leonard was an opportunist who used the law, and then media pressure, to improperly seek something he knew he wasn’t really entitled to. For every story of big companies squashing little consumers, there’s another story of little consumers gaming the legal system to extract undeserved cash from big companies and subtracting social value. Leonard’s story really could be told either way. A different filmmaker might have included some counternarrative material that Leonard’s legal efforts were a wasteful and venal abuse of the legal system, along the lines of Harris v. Time. The documentary suffers by not offering that self-reflective/critical perspective.

Some other details I learned:

• At one point, Pepsi considered sending Leonard a model of a Harrier jet. That reminded me of the Toyota/Toy Yoda case.
• Leonard turned down a $1M settlement offer because he really, really wanted the jet. Ah, youthful exuberance. I was shouting at the screen for him to take the cash.
• The ad designers had initially storyboarded a 700M point price tag for the Harrier jet, but during ad review, someone said that number was too hard to read, so two zeros got dropped to make it less cluttered. Oops.
• Pepsi simultaneously ran the same ad in Canada and put a “just kidding” disclaimer on the 7M point price.
• Now-disgraced lawyer Michael Avenatti was involved in the case, principally as a PR advisor/opposition researcher because he was still in law school at the time. Avenatti advised Leonard to launch an attack ad campaign against Pepsi that sounded similar to the scheme he deployed against Nike that sent him to jail. That part of the video was painful to watch.

Other things the documentary should have addressed but did not:

• How much money Leonard/Hoffman spent on the case and why they repeatedly doubled-down despite the adverse developments.
• Why they didn’t appeal the district court decision.
• What, if any, life lessons Leonard took away from his experiences. Knowing what he knows now, would he have made the same choices? He did say he perhaps regretted not taking the settlement offer, but I would have liked to hear more about his meta-reflections after 25 years of life experience.
• In 2014, a (non-functional) Harrier jet sold at auction for $200k. This datapoint makes Pepsi’s 7M point pricetag seem actually quite reasonable, not like a joke at all. Then again, if Leonard really wanted a Harrier jet, his $700k offer was above-market, and he could have fulfilled his dream at a lower cost. I’m disappointed the documentary filmmakers didn’t raise this development because it puts the case in a whole new light.

Though it was completely irrelevant to the story, the filmmakers had many of their interview subjects take the Pepsi Challenge. I won’t spoil the fun by revealing which soda won this completely nonscientific test, but I will note that both Coke and Pepsi have lost the war as consumer tastes have evolved and consumers now drink less sugary sodas overall.

The Beer Breach: Qatar and the World Cup

In a sobering development, Qatar has announced that it will not allow for beer sales at the World Cup.  As Simone Foxman and Adveith Nair report on Bloomberg here, this decision might entail a breach of not one but two contracts!  First, in banning beer from football stadiums, Qatar seems to be violating its agreement with FIFA, the entity responsible for organizing the World Cup.  In addition, Anheuser-Busch InBev NV is the official beer of the World Cup and paid millions to be exclusively available at World Cup venues.  Now beer sales will be relegated to "fan zones" outside stadiums. 

According to Tariq Panja reporting in The New York Times, FIFA President Gianni Infantino responded to criticisms of the decision to hold the World Cup in Qatar, criticisms that have  focused not so much on beer but on the working conditions of foreign laborers who built the stadiums and on Qatar's human rights record.  Comparing his experience as a redheaded child of immigrants to Switzerland to the plight of homosexuals in the Middle East, he decried the hypocrisy of human rights organizations and invited his audience to crucify him.  Nobody in the audience seemed inclined to do so, and FIFA is such a deeply corrupt organization, I don't think anybody thinks much will come from repeating the obvious.

According to Wikipedia, the following organizations have criticized Qatar for human rights abuses in connection with treatment of workers involved in constructions projects for the World Cup: Human Rights Watch, the International Trade Union Confederation, Amnesty International, the International Labor Organization, the UK Daily Mirror, the UK Guardian, Equidem, and FIFA.  Yup.  Hypocrites.

Will the result of the beer ban in major league baseball be replicated?  In 1961, the Milwaukee Braves attempted to ban carry-ins at their baseball stadium  As reported here, in the Milwaukee Journal Sentinel, the ban did not go well.  Fans noticed, for the first time, that baseball is an incredibly boring sport.  There was a 26% drop in attendance.  Angry, sober fans burned down the stadium, killed and roasted the mascot, and renamed the team the Brewers.  Some of the details provided here might go beyond the accounts in the lamestream media, but we just report; you decide.

Moved to Mastodon

Dear Readers,

I have paused the Blog's Twitter account to see try to resist and wait out the Elon Musk experiment. I've moved the Blog's social media presence to Mastodon in case any of you are there and want to follow: @KProfsBlog@vivaldi.net

This is why we can't have nice things. Billionaires buy them and ruin them by inviting insurrection-inciting former Presidents back on the platform. Happens every time.

Weekend Frivolity Revisited: Are You a Swiftie . . .or Just a Bot?

As Ben Sisario and Madison Malone Kircher report in The New York Times here, Ticketmaster has had to cancel its plans for public sales of tickets to the upcoming Taylor Swift tour.  Confusion reigns.  Are there tickets left?  When will they go on sale?  Can I get three seat together that are not partially obstructed for under $1000?  Will my students have to spend hours waiting in virtual queues rather than mastering the Statute of Frauds and the parol evidence rule in time for exams?

According to the Times, Ticketmaster's Verified Fan program was supposed to make Taylor Swift tickets available only to 1.5 million committed fans.  The site was overrun by 14 million "people," including bots, which suggests that the vast majority of accounts trying to get access to Taylor Swift tickets were actually bots.  I've always suspected as much.  

So, for the benefit of my students who are diehard Swifties, I once again offer the following simple test so that you can determine whether you are a bot:

 

Yale and Harvard Leave USNews Rankings: A View from the Other Legal Academy

As reported by Anemona Hartocollis in The New York Times here, Yale Law School and Harvard Law School have announced that they are no longer going to cooperate in the US News and World Report law school rankings process.  Dean Heather Gerken (right) of Yale explains Yale's reasons here.  Dean John Manning (Left) of Harvard explains Harvard's reasons here.  Their reasons are good, solid, and in my view commendable.  If you have not already done so, you should read their brief explanations of their reasons.  I have a few quick thoughts.

First, it is not clear that this decision will have any impact on the rankings.  Yale is #1 and has been #1 since the 1990s.  Harvard is currently #4, and that must suck, but Harvard is likely to retain its status as a top-ten law school even if US News should continue to resist the reforms to its algorithms that the Deans are demanding.  The bulk of the information that US News uses to compile its rankings is publicly available.  That's why low-ranked law schools that are unhappy with their rankings cannot simply pull out.  US News will still rank them, just a little more sloppily and without giving the low-ranked law schools a chance to plead their case. 

Moreover, according to US News, 40% of the its ranking score is based on reputational surveys.  According to Sarah Lawsky, somewhere between 1/3 of 2/5 of entry-level hires at law schools got their J.D.'s from either Yale or Harvard.  Surveys of law professors account for 25% of the US News ranking.  Advantage: Yale and Harvard.  No doubt, Yale and Harvard grads are overrepresented among the other legal professionals surveyed.  If US News stands its ground and continues to include Harvard and Yale in its surveys, its graduates are still likely to rank their alma maters very highly.  And they are not alone.  I've never been to either Yale or Harvard law school. Still, knowing many academics who earned their law degrees at Yale and Harvard, and knowing the writings of current and past faculty at those institutions, I would also rank them at the top.  I can't say the same for the University of Mississippi Law School (a school chosen more or less at random).  I'm sure it's a fine law school, with fine faculty members and fine graduates, but off the top of my head, I can't name any.  And I'm confident the good people at that law school would say the same about my law school.  

Over on the Twitter, someone from The Legal Academy opined that, without USNews, law schools are unregulated, and "predatory" law schools would just take every applicant without any consequence, even if the admitted students are incapable of becoming lawyers.  Once again, when really smart people say things about my work environment that are so obviously wrong, I conclude that they must be working in a completely different environment.  Down here in the Other Legal Academy, we give little or no thought to USNews rankings.  We are unranked and will remain so.  Every once in a while an unranked school might jump up to number 130 or so, but the reasons for the change are mysterious, and often the boost is fleeting.  Absent a deus ex machina, such as an eight-figure donor or a state university that wants to adopt a private, non-profit law school, not much changes near the bottom.

It may well be that folks in The Legal Academy can scoff at ABA regulators, but here in The Other Legal Academy, deans sweat, administrative assistants work overtime, and even faculty members toil over planning documents, inspections, and follow-ups, because ABA sanctions are an existential threat.  My former law school was shut down in the aftermath of ABA discipline.  The USNews rankings remained unchanged, and that institution had long since given up on trying to move that needle.  I have been at my new institution for over two years, and I don't recall any conversations with colleagues, staff, administrators, or students about US News.  Compliance with ABA regulations comes up all the time.  If I even mention the ABA to my Associate Dean, she flies into a rage.  In fact, last month, her face turned green and she took to carrying a broomstick (as illustrated at right, where she is pictured with our dapper Dean), and I can only assume it had something to do with the ABA.

So, no, the very institutions that people in the Legal Academy think ought to be regulated by USNews are largely indifferent to it.  It ignores us, and we reciprocate.  We are instead regulated by . . . our regulators, the ABA.  US News matters to The Legal Academy.  And it may well be that the law schools at the top of the heap have the market power to regulate their regulator.  US News does not have a lot going for it other than its rankings.  If Yale and Harvard can get their chief competitors to stop cooperating with US News, they may be able to force some changes in US News's approach.  And that would be all to the good.  Either way, Yale will remain #1, and Harvard will stay in the top five, if not the top three.

District Court Finds that Minor Plaintiffs Did Not Consent to Ancestry.com's Terms and Conditions

Putative class-action plaintiffs allege that Ancestry.com ("Ancestry") disclosed their confidential information to third parties without their consent in violation of the Illinois Genetic Information Privacy Act, 410 Ill. Comp. Stat. Ann. 513/1, et seq. ("GIPA").  Ancestry sought to compel arbitration, and in Coatney v. Ancestry.com DNA, LLC, the District Court denied that motion.

Plaintiffs are minors whose guardians (the Guardians) submitted their DNA for testing.  The Guardians signed up to use Ancestry's website as early as 2006, and Ancestry's terms and conditions of service were updated at least ten times before the suit was brought.  The most recent update dates from 2019, and those terms bind both Ancestry and the Guardians, but it is not clear that those terms apply to the Plaintiffs.

The court found that the Guardians agreed to delegate the determination of "gateway issues," including the question of whether an arbitration agreement exists, to the arbiter.  But the Plaintiffs have no agreement with Ancestry, and so the court had to determine whether they were subject to the same arbitration provisions as the Guardians.  

Ancestry argued that the Plaintiffs were bound by its terms and conditions either because their consent to those terms and conditions was implied by their use of Ancestry's services to submit their DNA tests or because they authorized their Guardians to execute the relevant consent forms on their behalf.  The court found that whether or not the Plaintiffs could give legally cognizable consent to the submission of their DNA samples, they did not consent to be bound by Ancestry's terms and conditions.  The court similarly found no evidence that the Plaintiffs had agreed to be bound by the consent forms that the Guardians submitted.  The Plaintiffs did not sign such forms and the forms, on their face, bind only the Guardians.

The court also rejected Ancestry's arguments that the Plaintiffs were bound by its terms in equity because they benefitted from the Guardians' submission of the DNA through Ancestry's website.  But Plaintiffs contend that they neither used nor benefitted from Ancestry's services.  Rather, the Guardians acted unilaterally in submitting Plaintiffs' DNA. Plaintiffs deny that they ever used Ancestry's website or any of its services.  Rather, their genetic information was provided to the Guardians and not to them.  There was thus no equitable basis to hold that Plaintiffs were bound by Ancestry's terms and conditions.

Accordingly, the court denied Ancestry's motion to arbitrate.

Tuesday Top Ten - Contracts & Commercial Law Downloads for November 15, 2022

Top Downloads For:

Contracts & Commercial Law eJournal

Recent Top Papers (60 days)

As of: 16 Sep 2022 - 15 Nov 2022

Rank	Paper	Downloads
1.	Enforcing Comparable Treatment in Sovereign Debt Workouts Lee C. Buchheit and Mitu Gulati Center for Contract and Economic Organization and University of Virginia School of Law	276
2.	The Obsolescence of Blue Laws in the 21st Century Ira P. Robbins American University - Washington College of Law	244
3.	Understanding Private Law Felipe Jiménez USC Gould School of Law	195
4.	Unbundling Business Bankruptcy Law Melissa B. Jacoby University of North Carolina School of Law	161
5.	The Privity of Contract: Third Party Rights Under Maldivian Contract Law Husnu Al Suood Maldives Law Institute	156
6.	Zauderer and Compelled Editorial Transparency Eric Goldman Santa Clara University - School of Law	149
7.	Fake and Real People in Bankruptcy Melissa B. Jacoby University of North Carolina School of Law	140
8.	Foreseeability Conventions Morgan Savige and John Fabian Witt Yale Law School and Yale University - Law School	136
9.	Contract Law and Financial Regulation in China: An Illegality Perspective Chao Xi The Chinese University of Hong Kong	118
10.	Party Autonomy and the Challenge of Choice of Law Perry Dane Rutgers, The State University of New Jersey - Rutgers Law School	108

 

Top Downloads For:

Law & Society: Private Law - Contracts eJournal

Recent Top Papers (60 days)

As of: 16 Sep 2022 - 15 Nov 2022

Rank	Paper	Downloads
1.	Deconstructing Smart Contracts Eliza Mik and Eliza Mik The Chinese University of Hong Kong (CUHK) - Faculty of LawTILT	222
2.	Understanding Private Law Felipe Jiménez USC Gould School of Law	195
3.	Unbundling Business Bankruptcy Law Melissa B. Jacoby University of North Carolina School of Law	161
4.	The Privity of Contract: Third Party Rights Under Maldivian Contract Law Husnu Al Suood Maldives Law Institute	156
5.	Contract Law and Financial Regulation in China: An Illegality Perspective Chao Xi The Chinese University of Hong Kong	118
6.	The NIL Glass Ceiling Tanyon Boston Northern Kentucky University	117
7.	Party Autonomy and the Challenge of Choice of Law Perry Dane Rutgers, The State University of New Jersey - Rutgers Law School	108
8.	The Corporate Contract and Shareholder Arbitration Mohsen Manesh and Joseph Grundfest University of Oregon School of Law and Stanford University Law School	95
9.	Against Corporate Social Responsibility Jonathan C. Lipson Temple University - James E. Beasley School of Law	73
10.	A New Theory of Impossibility, Impracticability, and Frustration Yehonatan Givati and Yotam Kaplan Hebrew University of Jerusalem - Faculty of Law and Bar-Ilan University - Faculty of Law	72

More from the Pot Spot: 11th Circuit Finds Text Message Is a Personal Guaranty

Today in the Pot Repot, the Cannitabloid, the Joint Joint, Reefer Brief, the Leaves of Grass (still working on the name for this new regular feature), we learn from the Eleventh Circuit that a hasty text message can be given legal effect as a personal guaranty for a business obligation.

In 2108, 3 Delta Inc. (3D) contracted with BrewFab LLC (BrewFab) for the construction of a machine that would extract cannibidiol oil.  The parties had no written agreement; rather BrewFab invoiced 3D as the work progressed.  3D paid three such invoices and then stopped.  BrewFab, understandably, suspended work on the extraction machine late in 2019.  I was unaware of the existence of cannibidiol oil extraction machines, and given my general sense that medical marijuana businesses often involve some chicanery, I did some research and discovered that they are definitely a thing. The remaining question is why it would take over a year to construct such a machine.

Be that as it may, in January 2020, 3D really wanted BrewFab to re-commence work, and so the parties had a BrewFab confab.  Afterwards, George Russo, a 3D principal, sent the following text to a BrewFab principal:

As per our conversation on Jan 30th 2020 I george Russo from 3 Delta do promise to pay brew fab in full all outstanding bills as of this date and all agreed upon work done for 3 delta future forward. I thank you for your patience. 

Thereafter BrewFab recommenced its work, but neither 3D nor Russo paid, and within a fortnight, 3D instructed BrewFab to stop all work

In BrewFab LLC v. 3 Delta Inc., the Eleventh Circuit affirmed summary judgment on behalf of BrewFab.  The District Court had found that the text message was both a writing sufficient to satisfy the Statute of Frauds and a personal guaranty.  The Court noted that Mr. Russo's writing was ambiguous because in that it does not clearly establish whether the "outstanding bills" referenced in the text are personal debts or the debts of 3D.  However, evidence from discovery cleared up that factual ambiguity, as Mr. Russo conceded that the debts in question were 3D's unpaid invoices.  With that additional information, the Court had no difficulty construing Mr. Russo's text as a personal guaranty.  

Mr. Russo had a stronger argument in maintaining that by identifying himself as "george Russo from 3 Delta," he made clear that he was operating in his capacity as an officer of the company.  Unfortunately, Florida law requires a more precise descriptio personae.  In order to avoid personal liability, Mr. Russo would have had to have identified himself as holding a specific office within the corporation.  Not having done so, he was operating in a personal capacity.  The Court treated his statement as though he were Troy McClure saying, "I'm Troy McClure.  You may remember from such uncomfortable encounters as -- that meeting we just had in which we acknowledged that we owed you money and promised to pay."  The Court found that Mr. Russo's text was a personal guaranty.

Mr. Russo next argued that his text message did not satisfy the Statute of Frauds.  Under Florida law, promises to pay the debts of another must be evidenced by a signed writing.  In this case, Mr. Russo maintained, his text message was insufficient to satisfy the Statute of Frauds because it was not signed and omitted an essential term; viz, consideration given in exchange for Mr. Russo's promise.  

The Court found that the language “I george Russo from 3 Delta” constituted an electronic signature under Florida law.  As to consideration, the Court found (through an IMHO unnecessary excursion in the unilateral contracts theory) that "Russo’s promise became a binding guaranty agreement when BrewFab accepted Russo’s promise by resuming work and sending 3 Delta additional equipment, after Russo sent the text message."

Update: early results from our Twitter Poll suggest that the name for this occasional feature on cases arising from the burgeoning legal marijuana industry will be: the Reefer Brief.

Seventh Circuit: It Is Possible to Make a Contract with a Fictitious Entity

I've been coming across a lot of cases involving marijuana businesses.  The cases often have facts that are odd or peculiar, as though the people running these businesses are not natural businesspeople or are perhaps engaged in somewhat shady enterprises that border on fraud or illegality.  Rock Hemp Corp. v. Dunn is a relatively mild example. 

Rock Hemp contracted to purchase 6000 hemp seeds from CBDINC, a fictitious business name used by three individuals.  Their agreement included an arbitration clause, but because CBDINC was not a real entity, Rock Hemp, unhappy with the quality of the seeds, chose to sue the three individuals rather than the fictitious entity.

After a lot of boring civ pro stuff, the Seventh Circuit address the issue of whether a fictitious entity could enforce an arbitration clause.  Under Wisconsin law, it can, because a d/b/a is treated as legally identical to the legal actor behind the fictitious name.  The cases cited by the Seventh Circuit do not seem to me to be as clearly on point as the court seems to think, as they involve actual business entities that operate under aliases.  Here, there is no business entity.  It's just three guys who pretended to be a corporation.  However, Rock Hemp did not claim to have been deceived; it knew who it was dealing with.

But then there's just some funny stuff that suggests that Rock Hemp was very familiar with its product.  Rock Hemp alleged that the contract was not binding because it was not signed by any of CBDINC's purported principals.  Rather it was signed by Matt Kahn.  However, as the Court explains, "Kahn’s signature does not appear on the contract. Rather, his name and email address are listed as the person who created the seed order form (which is part of the contract) on behalf of CBDINC."  This is the kind of mistake that only makes sense if the complaint was heavily dusted with bright orange Doritos' detritus. 

Rock Hemp also attempted to argue that it should escape arbitration because the entire contract was a product of fraudulent inducement.  However, it did not allege that it was fraudulently induced into arbitration, and under Prima Paint v. Flook & Conklin Manufacturing, a party cannot avoid arbitration by contending that the entire contract was fraudulently induced.  That is an issue that an arbiter can address.  Bummer.

Weekend Frivolity: Only Danny de Hec Can Save Us!!!

David Segal of The New York Times reports here on a YouTube influencer for the aging Pepsi generation struggling to keep up with the world of cryptocurrency.  As I struggle to understand the collapse of the FTX Crypto Exchange, a company I had never heard of, I decided to just let Mr. de Hec explain how crypto scams work.  Brought to you straight from New Zealand!

 

Uh-Oh. Perhaps We Were Too Optimistic About Twitter

This morning, we posted about Kate Klonick's intuition that Twitter would be okay because Elon Musk doesn't want to lose money for his investors and he can't keep Twitter afloat if his only tool is the smite button.  

But then today, Joseph Menn and Cat Zakrzewski of The Washington Post dropped this.   In short, key people are quitting, compromising privacy protections on the site.  Twitter is subject to a consent order with the FTC and now nobody is home to assure compliance with Twitter's obligations.  The FTC is not well pleased.  

The Digging a Hole Podcast: Kate Klonick on the Twitter Mess

Kate Klonick (right) dropped in on David Schleicher and Digging a Hole, the legal theory podcast, to talk about Elon Musk's acquisition of Twitter.  I highly recommend listening to this episode.  Kate knows people, including people who know people, and she provides incomparable insights into what is going on at Twitter and why, most likely, Twitter will not change all that much, despite Mr. Musk's mercurial affect and incendiary Tweets.

David and Kate seem to take it as a given that Elon Musk never wanted to buy Twitter, but now he's stuck with it.  Kate provides the hopeful insight that the one thing that Mr. Musk actually might at some point feel bad about is losing other people's money.  As a result, he will not run Twitter into the ground, as he mostly bought it with other people's money.  The thought occurs to me that, if he ends up losing money for his investors, he could just pay them back with some of his surplus billions, but I don't suppose you get to be a billionaire if that is your attitude.  Anyhoo, Twitter will likely remain much as it is now, which is a relief, since I have become a regular user of the site.  Mr. Musk would like to make it more profitable, but he doesn't really have any good ideas about how to do so.  Maybe he should have thought more about that before he acquired the company.

Kate notes that Mr. Musk's skills set does not really match up well when it comes to solving Twitter's problems.  There is no way to engineer his way into the right decision-making path about content moderation.  The models he is floating for generating revenue, such as turning it into a subscription service or making people pay monthly fees for premium features, are all antithetical to Twitter's core concept, which is unwalled space in which all meet all.  On Facebook and other social media platforms, you interact with your friends.  Twitter you expose yourself erga omnes.   

David makes the case for having a favorable opinion of Mr. Musk as compared with the other Internet Titans.  Electric cars are a good thing, and rockets are, in David's view, "cool." I agree about electric cars, but I thought Tesla existed before Mr. Musk.  I'm not sure what he did to make that company better.  If you want an electric car, you can get a Nissan or a Chevy for $20,000 less than the cheapest Tesla, so I don't know how you save the planet by selling cars to the one percent.  As for rockets, let's revisit this issue in thirty years, when I expect that we will all still be living on earth, not Mars, and we may have some regrets about all the space junk circling our planet.  I consider it a colossal failure that our government lost control over rocket technology, and we are now dependent on a private person to launch what seems to be vital infrastructure into space.

Ultimately, Mr. Musk's goal with SpaceX is manned space flight.   When I was in practice, a fellow associate was a former marine who idolized astronauts.  He had signed copies of their memoirs in his office.  After admiring them, I told him that I thought manned space flight was fine in the 1960s, but now it is just an unconscionable waste of resources.  He did not hesitate  to say, with as much self control as he could muster, "Dude, you're going to have to leave my office now."  We remained good friends, and we steered away from the topic in future encounters.  Nonetheless, whenever I encounter somebody with Mr. Musk's enthusiasm for manned space flight, my inner monologue has not changed: "Grow up," is what I think and sometimes what I write on a blog or somewhere.

It will be a relief if Twitter survives the Musk takeover.  Yesterday, this Blog reached a new Twitter milestone, and we have come to count on Twitter as a mechanism for drawing eyes to the Blog.

The Digging a Hole website for the Kate Klonick eipsode links to the following recommended readings.  I was pleased to hear that David Schleicher's opinion of Matt Levine accords with mine exactly: national treasure.  

• “Elon Musk’s Management Style Is a Threat to Global Democracy,” by Kate Klonick 

• “Elon Musk, Plus a Circle of Confidants, Tightens Control Over Twitter,” by Mike Isaac, Ryan Mac, & Kate Conger 

• “Twitter, Once a Threat to Titans, Now Belongs to One,” by Kevin Roose 

• “Elon Musk is Busy With Twitter,” by Matt Levine 

• “Inside the Making of Facebook’s Supreme Court,” by Kate Klonick

• “Implications of Revenue Models and Technology for Content Moderation Strategies,” by Yi Liu, Pinar Yildirim, & Z. John Zhang

Another Chicken Case: Is a Chicken Finger Chicken?

Chickens (fingers not pictured)

Thanks to OCU 1L Lacy Kelly, I have learned of a food fight near my old stomping grounds in Indiana.  As Joseph S. Pete, of the Northwest Indiana Times reports, Raising Cane's (RC) a fast-food chain, wanted to open a new location in Hobart, Indiana.  It entered into a fifteen-year lease with the owner of a strip mall near a major shopping center.  The owner did not disclose that its predecessor had granted McDonald's the exclusive right to sell chicken products at the shopping center.  

RC is alleging that it was fraudulently induced into the lease, and it has brought suit in the jurisdiction where its corporate headquarters are located, Dallas, Texas.  RC points out that its entire business model is built on selling chicken fingers.  It claims that it first learned of McDonald's exclusive chicken deal eight-months after the lease was executed and after RC had already expended over one million dollars on restaurant development.  According to the complaint, a 1994 lease agreement with a nearby McDonald's prohibits the owner from leasing or selling property to any rival “fast good or quick service restaurant which prepares, serves, or sells de-boned chicken products."  RC alleges that the owner knew of the McDonald's deal and nonetheless represented to RC that it could operate a chicken-finger based restaurant at the location.  RC's theory is that the owner did this in order to secure RC as an anchor tenant so that it could attract additional tenants to the location.  

The owners would have to be some dumb clucks to perpetrate such an obvious fraud, but there it is.  Under the Restatement approach, there should be liability, even if the misrepresentation was negligent but material, so somebody's head could be on the chopping block even if the nondisclosure or misrepresentation was the result of inattention, as seems likely in this case.  But I do wonder whether RC had a due diligence obligation in this context.  Surely the Hobart/Merrillville McDonald's is not the only one that has negotiated a restrictive covenant relating to chicken.  This restrictive covenant came to light when Chipotle wanted to open a restaurant, and the owner asked McDonald's to waive its exclusive chicken deal.  McDonald's refused and also pointed out that an RC franchise was right out.  Why did Chipotle know to ask when RC didn't?  Also, I know for a fact that there is a Chipotle in that shopping center, and I think it's been there since around the time we moved there in 2004.  Did Chipotle want to move?  Set up yet another location?  Would the RC franchise be okay if it were just on the south side of Route 30?  So many questions!

I have never eaten at an RC and do not expect to do so in this lifetime.  I suppose it would not be good for their brand to argue that chickens don't have fingers and that a chicken finger is really mostly breading, and so arguably RC would not really be selling chicken at all.