ContractsProf Blog

“Forum Selection Bylaws” Statutorily and Contractually Valid: Shareholders Assented to Not Have to Assent

While the nation was preoccupied with SCOTUS decision days, the Delaware Chancery Court upheld the “forum selection bylaws” of FedEx and Chevron.  Those clauses in the corporations’ bylaws provided that litigation relating to the companies’ internal affairs should be conducted in Delaware, the state of incorporation of both companies.

First, the Chancery Court (Chancellor Strine) held that the bylaws were statutorily valid under the Delaware General Corporation Law (“DGCL”).  Second, the Chancery Court held that the bylaws were contractually valid even though they were adopted unilaterally by the boards of FedEx and Chevron rather than the shareholders of those corporations.  The court reasoned (citations and footnotes omitted):

Our corporate law has long rejected the so-called “vested rights” doctrine. That vested rights view, which the plaintiffs have adopted as their own, “asserts that boards cannot modify bylaws in a manner that arguably diminishes or divests pre-existing shareholder rights absent stockholder consent.” As then-Vice Chancellor, now Justice, Jacobs explained in the Kidsco case, under Delaware law, where a corporation’s articles or bylaws “put all on notice that the by-laws may be amended at any time, no vested rights can arise that would contractually prohibit an amendment.”

In an unbroken line of decisions dating back several generations, our Supreme Court has made clear that the bylaws constitute a binding part of the contract between a Delaware corporation and its stockholders.  Stockholders are on notice that, as to those subjects that are subject of regulation by bylaw under 8 Del. C. § 109(b), the board itself may act unilaterally to adopt bylaws addressing those subjects.  Such a change by the board is not extra-contractual simply because the board acts unilaterally; rather it is the kind of change that the overarching statutory and contractual regime the stockholders buy into explicitly allows the board to make on its own.  In other words, the Chevron and FedEx stockholders have assented to a contractual framework established by the DGCL and the certificates of incorporation that explicitly recognizes that stockholders will be bound by bylaws adopted unilaterally by their boards. Under that clear contractual framework, the stockholders assent to not having to assent to board-adopted bylaws. The plaintiffs’ argument that stockholders must approve a forum selection bylaw for it to be contractually binding is an interpretation that contradicts the plain terms of the contractual framework chosen by stockholders who buy stock in Chevron and FedEx. Therefore, when stockholders have authorized a board to unilaterally adopt bylaws, it follows that the bylaws are not contractually invalid simply because the board-adopted bylaw lacks the contemporaneous assent of the stockholders.

The court went on to hold that the forum selection clauses would be evaluated just as any other forum selection clauses under the standard enunciated by SCOTUS:

In Bremen, the [U.S. Supreme] Court held that forum selection clauses are valid provided that they are “unaffected by fraud, undue influence, or overweening bargaining power,” and that the provisions “should be enforced unless enforcement is shown by the resisting party to be “unreasonable.”  In Ingres, our Supreme Court explicitly adopted this ruling, and held not only that forum selection clauses are presumptively enforceable, but also that such clauses are subject to as-applied review under Bremen in real-world situations to ensure that they are not used “unreasonabl[y] and unjust[ly].”  The forum selection bylaws will therefore be construed like any other contractual forum selection clause and are considered presumptively, but not necessarily, situationally enforceable.

Boilermakers Local 154 Retirement Fund v. Chevron Corp., Del. Ch., Civil Action No. 7220-CS, 6/25/13; ICLUB Investment Partnership v. FedEx Corp., Del. Ch., Civil Action No. 7238-CS, 6/25/13.

[Meredith R. Miller]

 

NY Court of Appeals Invites Amicus Participation in UCC Article 4 Case

The New York Court of Appeals rarely requests amicus participation, but it has done so in a UCC artcle 4 case.  Here is an excerpt from the request for participation:

On June 4, 2013, the Court of Appeals granted plaintiffs Clemente Bros. Contracting Corp. and Jeffrey A. Clemente leave to appeal in Clemente Bros. Contracting Corp.. et al.. v Hafner- Milazzo. et al. Plaintiff Clemente Bros. Contracting Corp. (Contracting) was a customer of defendant bank CapitalOne, N.A.(CapitalOne). Contracting had three deposit and/or checking accounts with Capital One and also took out two loans from Capital One. The plaintiffs commenced this action against Capital One, asserting inter alia, that Capital One had failed to use ordinary care in paying on allegedly forged checks and failed to comply with its own regulations in handling Contracting's accounts. In its answer, Capital One interposed several counterclaims to recover amounts due under the loans. Insofar as pertinent to this appeal, Supreme Court granted summary judgment to defendant Capital One, dismissing plaintiffs' complaint and awarding it judgment on its counterclaims. The Appellate Division affirmed (100 AD3d 677).

Under New York's Uniform Commercial Code, a bank may be liable to its customer when it pays a check on a forged signature. The bank may avoid such liability, however, when it makes statements of the account and the allegedly forged items available to the customer, and the customer fails to report the alleged forgery to the bank within one year. Here, the parties, by agreement, shortened the one-year period to 14 days. One of the issues on appeal is whether a bank and its customer may shorten the statutory time period provided for in UCC 4-406 within which the customer must make a claim to its bank for payment o f an altered or forged item. 

More information is available here.  I am no expert on UCC article 4, but if you are considering a motion for leave to appear amicus curiae, I am happy to advise on New York Court of Appeals procedure.

Here is the Appellate Division decision from which the the appeal is taken.

[Meredith R. Miller]

 

Weekly Top Tens from the Social Science Research Council

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of Contracts & Commercial Law eJournal 
April 25, 2013 to June 24, 2013

Rank	Downloads	Paper Title
1	239	The Hague Principles on Choice of Law for International Contracts: Some Preliminary Comments  Symeon C. Symeonides,  Willamette University - College of Law
2	222	Regulation Through Boilerplate: An Apologia  Omri Ben-Shahar,  University of Chicago Law School
3	214	Can an Arbitrator Conduct Independent Legal Research? If Not, Why Not?  Paul Bennett Marrow,  New York Law School,
4	139	Contract Law in Europe and the United States: Legal Unification in the Civil Law and the Common Law  Hein D. Koetz,  Max Planck Institute for Comparative and International Private Law
5	130	Customary Law: An Introduction  Lisa Bernstein, Francesco Parisi,  University of Chicago Law School, University of Minnesota - Law School
6	122	On the Applicability of the Common European Sales Law to Some Models of Cloud Computing Services  Chris Reed, Clarice Castro, Ruy de Queiroz,  Universidade Federal de Pernambuco, Queen Mary University of London, School of Law, Centro de Informática - Univ Federal de Pernambuco,
7	96	Lochner, Liberty of Contract and Paternalism: Revising the Revisionists?  Harry G. Hutchison,  George Mason University - School of Law
8	94	The Information Privacy Law of Web Applications and Cloud Computing  Sebastian Zimmeck,  Columbia University - Department of Computer Science
9	71	Is Lex Mercatoria Jeopardizing the Application of Substantive Law?  Leonid Shmatenko,  Chair of German and Foreign Public Law, European Law and Public International Law
10	67	Avoiding Insult to Injury: Extending and Expanding Cancellation of Indebtedness Income Tax Exemptions for Homeowners  Dustin A. Zacks,  King, Nieves & Zacks PLLC

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of LSN: Contracts (Topic)  
April 26, 2013 to June 25, 2013

Rank	Downloads	Paper Title
1	239	The Hague Principles on Choice of Law for International Contracts: Some Preliminary Comments  Symeon C. Symeonides,  Willamette University - College of Law,  Date posted to database: April 27, 2013  Last Revised: April 27, 2013
2	223	Regulation Through Boilerplate: An Apologia  Omri Ben-Shahar,  University of Chicago Law School
3	140	Contract Law in Europe and the United States: Legal Unification in the Civil Law and the Common Law  Hein D. Koetz,  Max Planck Institute for Comparative and International Private Law
4	123	On the Applicability of the Common European Sales Law to Some Models of Cloud Computing Services  Chris Reed, Clarice Castro, Ruy de Queiroz,  Universidade Federal de Pernambuco, Queen Mary University of London, School of Law, Centro de Informática - Univ Federal de Pernambuco
5	96	Lochner, Liberty of Contract and Paternalism: Revising the Revisionists?  Harry G. Hutchison,  George Mason University - School of Law
6	95	The Information Privacy Law of Web Applications and Cloud Computing  Sebastian Zimmeck,  Columbia University - Department of Computer Science
7	65	Interpreting Investment Treaties as Incomplete Contracts: Lessons from Contract Theory  Wolfgang Alschner,  Graduate Institute of International and Development Studies
8	61	The No Reading Problem in Consumer Contract Law  Ian Ayres, Alan Schwartz,  Yale University - Yale Law School, Yale Law School
9	57	Do the Right Thing: Indirect Remedies in Private Law  Daphna Lewinsohn-Zamir,  Hebrew University - Faculty of Law
10	52	Disclosing Corporate Disclosure Policies  Victoria L. Schwartz,  Pepperdine University School of Law, University of Chicago - Law School

 

[JT]

Professor Horton on Italian Colors v. Amex

UC Davis School of Law Professor David Horton (pictured) has once again agreed to guest post for us on the Supreme Court's most recent arbitration case:

Jeremy was nice enough to ask me to write quick post reacting to American Express Co. v. Italian Colors Restaurants.  Because he’s already provided a good summary of the decision, I’m just going to launch in.

1.  The road not taken.  After oral argument, I expected Amex to be a 6-2 reversal, with Justice Breyer joining the majority.  I thought the rough gist of the decision was going to be something like this: “The plaintiffs argue that they can’t vindicate their antitrust rights without the class action device because the cost of an expert report dwarfs any individual plaintiff’s potential recovery.  But arbitration isn’t subject to the same evidentiary demands as litigation.  Indeed, it’s flexible and casual.  Perhaps each plaintiff can prove up its case without a full-fledged expert report.  Let’s compel bilateral arbitration and see what happens!”  For instance, Justice Breyer repeatedly referred to the prospect of the parties “getting it done cheap” in the extrajudicial forum.  Justice Kennedy also emphasized that arbitration doesn’t “involve the costs and formalities of litigation.”  (This actually prompted Paul Clement to respond, “God bless it, Justice Kennedy”—check out page 35 of the hearing transcript—which I can only imagine  the savvy litigator said with his hand o’er his heart).  But perhaps the anything-goes-in-arbitration approach seemed too dangerous to the majority.  After all, it raised the specter of anything going in arbitration—including antitrust plaintiffs vindicating their rights.      

2.  Does the vindication of rights doctrine survive exist?  Like AT&T Mobility LLC v. Concepcion, Amex’s long-term impact is hard to discern through the fog of results-oriented reasoning.  In Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. and Green Tree Financial Corp.-Ala. v. Randolph, the Court suggested—but did not squarely hold—that judges can invalidate arbitration clauses when plaintiffs prove that they can’t effectively vindicate their federal statutory rights in arbitration.  The primary way plaintiffs met this burden was by offering evidence of prohibitive costs: for instance, hefty filing or arbitrator’s fees.  However, in Amex, Justice Scalia calls the rule “dicta” and opines that “Mitsubishi Motors did not hold that federal statutory claims are subject to arbitration so long as the claimant may effectively vindicate his rights in the arbitral forum.”  According to Justice Scalia, if there is such a thing as the vindication of rights doctrine, it’s not about vindication of rights; instead, it hinges on the narrower inquiry of whether an arbitration clause is the functional equivalent of “a prospective waiver of a party’s right to pursue statutory remedies.”  That is, this mythical but perhaps not mythical rule only applies when a contract literally bars plaintiffs from even asserting a federal statutory claim and “would perhaps cover filing and administrative fees attached to arbitration that are so high as to make access to the forum impracticable.”  But it doesn’t include the mere “expense involved in proving a statutory remedy.”  That’s a lot of attention lavished upon a doctrine that might not even be real!        

3.  Distinguishing Amex.  I don’t know how much good this does, but I read Amex not to govern all arbitration clauses.  Although there seems to be some confusion about the specific provision in Amex, my understanding was that it didn’t just preclude class actions—it also barred plaintiffs from sharing information, consolidating claims, or recovering costs if they won.  In perhaps the most bizarre part of the majority opinion, footnote 4 (1) insists that the Amex clause doesn’t contain these features and then (2) limits its holding to identical provisions.  Arguably, this leaves a window open for future plaintiffs subject to strict arbitration clauses to show that they can’t engage in “other forms of cost sharing” and thus need the class action device to vindicate their federal statutory rights.        

4.  My new favorite Justice.  Something that has always bugged me about Concepcion is the blandness of Justice Breyer’s dissent.  So I was heartened by Justice Kagan’s sarcastic, point-by-point smackdown of the majority.  I know I’m biased, but I found it to be pretty devastating, and I’d be psyched if she became the go-to Justice on the left for arbitration issues.        

[Posted, on David Horton's behalf, by JT]

SCOTUS Issues Opinion in Italian Colors: No Surprises

In a 5-3 decision (Sotomayor, J., not participating), the U.S. Supreme Court today compelled arbitration in American Express Co. v. Italian Colors Restaurants.

We reported on the oral arguments in this case here, and UC Davis's David Horton provided an introduction for us to the case after cert. was granted here.  Things unfolded much as Professor Horton predicted. 

Justice Scalia, writing for the majority, accepts plaintiffs' premise that, given the costs of experts' fees necessary to prove plaintiffs' antitrust allegations, the costs to any American Express customer to bring an antitrust claim against American Express far exceeds any possible recovery, even assuming the availability of triple damages.  Plaintiffs argue that the class action waiver that they signed as part of their arbitration agreement with Amerrican Express is thus invalid because the waiver denies them of any meaningful opportunity to prosecute their antitrust claim.

According to the majority, that argument is foreclosed by the Federal Arbitration Act, which directs courts to enforce arbitration agreements, absent something like fraud or duress, which is not present in this case.  Justice Thomas specially concurred to say that in his view, such a finding followed inevitably from the Court's prior decision in AT&T Mobility LLC v. Concepcion. Justice Scalia pretty much agrees (at the bottom of page 8), but he first does a two part analysis, finding: 1) no clear congressional command that might trump the Federal Arbitration Act's command that courts enforce arbitration agreement and 2) that the judicially created "effective vindication" doctrine does not apply here.  That doctrine would set aside arbitration provisions that prevent a party from vindicating important statutory rights.  Here, however, parties can pursue their legal rights; they simply do not have a procedural mechanism (the class action suit) available to them, but that is what they agreed to when they signed the arbitration agreement.  

 Justice Kagan, writing for the three dissenting Justices summarizes the case as folllows:

The owner of a small restaurant (Italian Colors) thinks that American Express (Amex) has used its monopoly power to force merchants to accept a form contract violating the antitrust laws. The restaurateur wants to challenge the allegedly unlawful provision (imposing a tying arrangement), but the same contract’s arbitration clause prevents him from doing so. That term imposes a variety of procedural bars that would make pursuit of the antitrust claim a fool’s errand. So if the arbitration clause is enforceable, Amex has insulated itself from antitrust liability—even if it has in fact violated the law. The monopolist gets to use its monopoly power to insist on a contract effectively depriving its victims of all legal recourse.

And here is the nutshell version of today’s opinion, admirably flaunted rather than camouflaged: Too darn bad.

[JT]

Pay-to-Delay Agreements and the Supremes

On Monday, the U.S. Supreme Court  issued a ruling in Federal Trade Commission v. Actavis that permitted the Federal Trade Commission to sue pharmaceutical companies for potential antitrust violations when they enter into “pay-to-delay” agreements.  (Lyle Denniston of SCOTUSblog has a good analysis here ).  These agreements are a type of settlement agreement where a pharmaceutical company pays a generic drug company to keep the drug off the market for a certain period of time.  Lower court rulings had held that these agreements were valid as long as they did not exceed the term of the patent held by the pharmaceutical company.  This should be an interesting case for contractsprofs because it is a high profile "limits of contract" case.  In an era where judges have been notoriously reluctant to interfere with freedom of contract even when it hurts consumers, this case is a refreshing change. 

I’m curious though what will happen to the payments that were made to the generic drug companies – are the agreements rescinded and the payments returned?  (I haven’t read the decision thoroughly yet to see whether it’s indicated). That might be a problem for the generic drug companies.  It seems like some sort of restitution should be made - I wonder if the parties thought of putting a provision addressing what would happen in the event of illegality in their agreement?

[Nancy Kim]

Weekly Top Tens from the Social Science Research Council

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of Contracts & Commercial Law eJournal 
April 19, 2013 to June 18, 2013

Rank	Downloads	Paper Title
1	228	The Hague Principles on Choice of Law for International Contracts: Some Preliminary Comments  Symeon C. Symeonides,  Willamette University - College of Law
2	216	Regulation Through Boilerplate: An Apologia  Omri Ben-Shahar,  University of Chicago Law School
3	211	Can an Arbitrator Conduct Independent Legal Research? If Not, Why Not?  Paul Bennett Marrow,  New York Law School
4	131	Contract Law in Europe and the United States: Legal Unification in the Civil Law and the Common Law  Hein D. Koetz,  Max Planck Institute for Comparative and International Private Law
5	124	Customary Law: An Introduction  Lisa Bernstein, Francesco Parisi,  University of Chicago Law School, University of Minnesota - Law School
6	122	Merchant Law in a Modern Economy  Lisa Esther Bernstein,  University of Chicago - Law School
7	119	Preemption Without Borders: The Modern Conflation of Tort and Contract Liabilities  Max N. Helveston,  DePaul University - College of Law
8	119	On the Applicability of the Common European Sales Law to Some Models of Cloud Computing Services  Chris Reed, Clarice Castro, Ruy de Queiroz,  Universidade Federal de Pernambuco, Queen Mary University of London, School of Law, Centro de Informática - Univ Federal de Pernambuco
9	94	Lochner, Liberty of Contract and Paternalism: Revising the Revisionists?  Harry G. Hutchison,  George Mason University - School of Law
10	86	The Information Privacy Law of Web Applications and Cloud Computing  Sebastian Zimmeck,  Columbia University - Department of Computer Science

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of LSN: Contracts (Topic)  
April 19, 2013 to June 18, 2013

Rank	Downloads	Paper Title
1	228	The Hague Principles on Choice of Law for International Contracts: Some Preliminary Comments  Symeon C. Symeonides,  Willamette University - College of Law
2	216	Regulation Through Boilerplate: An Apologia  Omri Ben-Shahar,  University of Chicago Law School
3	131	Contract Law in Europe and the United States: Legal Unification in the Civil Law and the Common Law  Hein D. Koetz,  Max Planck Institute for Comparative and International Private Law
4	119	Preemption Without Borders: The Modern Conflation of Tort and Contract Liabilities  Max N. Helveston,  DePaul University - College of Law
5	119	On the Applicability of the Common European Sales Law to Some Models of Cloud Computing Services  Chris Reed, Clarice Castro, Ruy de Queiroz,  Universidade Federal de Pernambuco, Queen Mary University of London, School of Law, Centro de Informática - Univ Federal de Pernambuco
6	94	Lochner, Liberty of Contract and Paternalism: Revising the Revisionists?  Harry G. Hutchison,  George Mason University - School of Law
7	86	The Information Privacy Law of Web Applications and Cloud Computing  Sebastian Zimmeck,  Columbia University - Department of Computer Science
8	73	Good Faith and Reasonable Expectations  Jay M. Feinman,  Rutgers University School of Law, Camden
9	61	The No Reading Problem in Consumer Contract Law  Ian Ayres, Alan Schwartz,  Yale University - Yale Law School, Yale Law School
10	57	Interpreting Investment Treaties as Incomplete Contracts: Lessons from Contract Theory  Wolfgang Alschner,  Graduate Institute of International and Development Studies

[JT]

A Victory for Interns Everywhere!

I don't know if this recent case will help Hall's Mentho-Lyptus with the Triple-Colling Action Presents Jay the Intern, but it might help some of our law students.

As The Atlantic reports here, Federal District Judge William H. Pauley III ruled on June 11th in favor of two interns who sued Fox Searchlight studios for breaching New York and federal minumum wage laws in failing to pay them for their work on the studio's academy award winning film, "Black Swan."  The Atlantic helpfully links to this page from the U.S. Department of Labor that establishes a six-part test for when interns can go unpaid.  Here are the six criteria:The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;

1. The internship experience is for the benefit of the intern;
2. The intern does not displace regular employees, but works under close supervision of existing staff;
3. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
4. The intern is not necessarily entitled to a job at the conclusion of the internship; and
5. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Considering the totality of the circumstances, Judge Pauley concluded that the plaintiffs were employees and that Fox Searchlight had violated the Fair Labor Standards Act as well as New York law by not paying them minimum wage.  The court also allowed certification of a class of unpaid interns who worked for various Fox affiliates between 2005 and 2010.  

Fox Searchlight plans to appeal to the Second Circuit.

Judge Pauley's 36-page opinion can be found here.

[JT]

 

Scholarship Highlight: Sex* Matters

I just finished reading contracts prof Amy J. Schmitz's article, Sex Matters:  Considering Gender in Consumer Contracting, 19 CARDOZO J. LAW & GENDER 437 (2013) which I thought was particularly timely given all the interest in consumer contracts.  As Schmitz points out, too often discussions about "context" are left out of discussions about consumer contracts, especially from efficiency theorists who "mistakenly assume that market competition and antidiscrimination legislation address any improper biases in contracting."  Schmitz's article is a thoughtful and comprehensive work that canvasses and synthesizes existing research, including behavioral economics and consumer legislation, in this area.  She does a great job of highlighting ways in which existing legislation falls short of protecting against gender discrimination and incorporates a great deal of empirical and cognitive research regarding how gender affects both parties  in consumer contracting scenarios.  She notes that the available data suggests that women receive "less financially attractive sales and loan contracts, which may lead to higher debt loads for women." (at 447)  Schmitz also conducted her own survey and shares the results which indicated gender disparities in areas such as confidence in ability to negotiate terms and ability to get companies to change terms.  She argues in this article (as she has elsewhere) that context and "contracting culture" matters, and argues that gender be considered among the factors contributing to a contracting culture.  For those who think that the free market is a fair market, Schmitz's paper should provide food for thought (as should this article that discrimination in housing persists against non-whites).   

 

 

*Yes, I knew that putting "sex" in the title would increase traffic.

 

[Nancy Kim]

Jack Graves on The Supreme Court, Arbitration, and Implied Contract Terms

The United States Supreme Court rarely has occasion to opine on contract law, the contours of which are largely left to state courts. However, a couple of recent arbitration cases provided the court with a unique opportunity to point out the difference between contract terms implied-in-fact and contract terms implied-in-law. As any diligent first-year Contracts student should know, the former must rest upon the actual consent of the parties (even though not clearly expressed), while the latter are given effect through default legal rules, applied, as necessary, where the parties’ agreement is silent. This distinction between the two (and between contract “interpretation” and “construction”) is, of course, not always made clear in contract cases addressing one or both. However, these two recent opinions, Stolt-Nielsen v. Animal Feeds Int’l Corp., 130 S.Ct. 1758 (2010), and Oxford Health Plans, LLC v. Sutter, 2013 WL 2459522 (U.S.) (June 10, 2013) illustrate the difference quite nicely—whatever one may think about the content of the Court’s arbitration jurisprudence animating these decisions.

In Stolt-Nielsen, a panel of arbitrators had reasoned that an agreement permitted class arbitration, because it did not preclude it. Stolt-Nielsen at 1766. In effect, the parties’ silence required the arbitrators to supply an omitted essential term—a default rule—and they did so, thereby construing the agreement as allowing for class arbitration. Id. at 1768-69 and 1781. While acknowledging the power of arbitrators to craft procedural rules, generally, the Court explained that a “default rule,” allowing for class arbitration was sufficiently inconsistent with the fundamental nature of arbitration as to be beyond the power of arbitrators.  Id. at 1668-69, 1775-76 (referencing the Restatement (Second) of Contracts § 204 on default rules and relying on FAA § 10(a)(4) to hold that the arbitrators had exceeded their powers). After Stolt-Nielsen, some might have expected that class arbitration would require some sort of “clear and unmistakable” expression of party intent (as the Court purports to require for a “delegation” clause, assigning jurisdictional decisions to the arbitrator). This is not necessarily so, however, as we learned this week in Oxford Health Plans.

In Oxford Health Plans, a claimant sought to bring class arbitration claims, and respondent asserted they were not allowed under the arbitration agreement. Both parties agreed to submit the question to a sole arbitrator, who “interpreted” the parties’ agreement and determined that it impliedly allowed class arbitration. Id. In affirming the arbitrator’s decision, Justice Kagan explained that the arbitrator was merely interpreting the actual intent-in-fact of the parties—a task clearly assigned to the arbitrator by those same parties. Id. Therefore, the arbitrator’s decision was fully within his power, even if erroneous—in fact, even if “grievously erroneous.” Id.

Thus, the Court neatly distinguished between the power of an arbitrator to determine actual, factual party intent, when assigned that task by the parties, and the power of the arbitrator to craft legal default rules (at least beyond the scope of general arbitration procedures). This distinction is of course analogous to the distinction between contract interpretation—generally an issue for the jury, if in question—and contract construction—generally an issue for the court.

Perhaps of greater interest to those who follow the Court’s arbitration jurisprudence, Oxford Health Plans appears to continue the inexorable march towards a seemingly unreviewable form of contractual Kompetenz-Kompetenz, see Jack Graves & Yelena Davydan, Competence-Competence and Separability: American Style in, International Arbitration And International Commercial Law: Synergy, Convergence and Evolution (Kluwer 2011) (Part 2) and Jack Graves, Arbitration as Contract:  The Need for a Fully Developed and Comprehensive Set of Statutory Default Legal Rules, 2 William & Mary Bus. L. Rev. 225, 276-85 (2011), initially announced in First Options, Inc. v. Kaplan, 115 S.Ct. 1920 (1995), further expounded upon in Rent-A-Center, West, Inc. v. Jackson, 130 S.C t. 2772 (2010), and made even more seemingly absolute in Oxford Health Care. The Court had already made abundantly clear that a decision as to whether the parties had in fact agreed to arbitrate a dispute—when the decision was “delegated” to an arbitrator—was beyond court review, except as provided under FAA § 10(a). In Oxford Health Care, the Court further clarified the extraordinarily narrow scope of FAA § 10(a)(4).

[posted by Meredith R. Miller on behalf of Jack Graves]

 

Steven Feldman Reviews Boilerplate

For those of you who cannot get enough input on Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law, we have yet another review.  This one is from friend of the blog Steven Feldman.  Links to other contributions from our online symposium on the book can be found here.  

In her book, Boilerplate:  The Fine Print, Vanishing Rights, and The Rule of Law, Professor Margaret Jane Radin suggests the expansion of tort law as the centerpiece remedy for what she terms abusive mass market contract boilerplate. (Radin, p. 216).  As a complement to existing contract remedies, she posits a new tort, i.e., “intentional deprivation of basic legal rights.” (Radin, pp. 198, 211, 216). According to Radin, this intentional tort would cover abusive boilerplate, i.e., “a firm that imposed severe remedy deletions of rights that are at least partially market-inalienable, under circumstances of non-consent and mass market distribution . . . .” (Radin, p. 211).This intentional tort would be a companion to another new tort reconceptualizing abusive boilerplate as a defective “product” under the law of product liability. (Radin, pp. 198, 222-23).

Radin’s proposal to use the tort law system to remedy boilerplate abuse has attracted support from respected academic commentators.  Professor Omri Ben-Shahar in his review of the book calls Radin’s suggestion a “welcome new framework” and “an immensely creative idea, surely to become a legacy of the book, and it deserves careful attention . . . .”  Omri Ben-Shahar, Regulation Through Boilerplate: An Apologia, ___ Mich. L. Rev. ___ (2013) (forthcoming) (available at the SSRN Electronic Library).  Because I believe that Radin’s suggested tort remedies contradict numerous legal principles, my critique will explain why the chances are minimal that any U.S jurisdiction would accept her proposals to make a tort out of a contract dispute.

Radin: Precedent exists for the creation of new torts by common law courts, such as the torts involving invasion of privacy.  (Radin, p. 198).

Response: Radin is correct that the torts involving invasion of privacy were judicially created. What Radin omits is that although some courts claim the common law authority to create new torts, they characteristically “tread cautiously” in this area, Rees v. Smith, 301 S.W.3d 467, 471 (Ark. 2009), as they balance numerous legal and substantive considerations,  Burns v. Neiman Marcus Group, Inc., 93 Cal. Rptr. 3d 130, 136 (Cal. Dist. App. 2009)(listing considerations). Thus, for example, courts considering a new tort must balance the need to meet society's changing needs against the prospect of boundless claims in an already crowded judicial system. Rees, 301 S.W.3d at 471. In another policy, courts “[w]ill decline to recognize a new cause of action if there are sufficient other avenues, short of creating a new cause of action, that serve to remedy the situation for a plaintiff.”  Id.

 Radin fails to point out that the usual outcome is “countless refusals” by judges to create new torts. Anita Bernstein, How To Make A New Tort: Three Paradoxes, 75 Tex. L. Rev. 1539, 1546 n.38 (1997)(citing decisions).   Indeed, some courts decline altogether to create new actions in tort. Their rationale is that legislatures have better institutional capability to balance the competing public policy considerations attendant with new forms of liability.  Murphy v. American Home Products Corp., 448 N.E.2d 86, 89-90 (N.Y. 1983); Accent Store Design, Inc. v. Marathon House, Inc., 674 A.2d 1223, 1226 (R.I. 1996)(“We have long held … that the creation of new causes of action is a legislative function.”).  Radin does not mention this split of authority and does not make a convincing case that existing contract remedies, such as contract invalidation based on unconscionability, are inadequate to address meritorious consumer claims.

Estimates are that ninety-nine percent of all contracts are standard form adhesion contracts. Wayne R. Barnes, Toward A Fairer Model of Consumer Consent To Standard Form Contracts: In Defense Of Restatement Section 211(3), 82 Wash. L. Rev. 227, 233 (2007).  Because Radin’s new torts would conceivably cover a high percentage of these standardized mass distribution contracts nationwide, courts should think twice before hampering the use of a business tool that “[i]s essential to the functioning of the economy.”  See 1-1 Corbin on Contracts § 1.4. (Rev. ed. 1993). A real possibility also exists that Radin’s proposals would incite boundless claims in an already crowded judicial system. Thus, it is highly unlikely that any court would approve Radin’s proposals for expansive new tort liability. Also improbable is whether any state legislature--with many dominated by conservative representatives--would expand consumer rights beyond existing consumer protection statutes.

Continue reading

Weekly Top Tens from the Social Science Research Council

RECENT HITS (for all papers announced in the last 60 days)  TOP 10 Papers for Journal of Contracts & Commercial Law eJournal  April 11, 2013 to June 10, 2013 Rank Downloads Paper Title 1 214 The Hague Principles on Choice of Law for International Contracts: Some Preliminary Comments  Symeon C. Symeonides,  Willamette University - College of Law, 2 210 Can an Arbitrator Conduct Independent Legal Research? If Not, Why Not?  Paul Bennett Marrow,  New York Law School 3 206 Private Equity Firms as Gatekeepers  Elisabeth de Fontenay,  Harvard Law School 4 204 Regulation Through Boilerplate: An Apologia  Omri Ben-Shahar,  University of Chicago Law School 5 120 Contract Law in Europe and the United States: Legal Unification in the Civil Law and the Common Law  Hein D. Koetz,  Max Planck Institute for Comparative and International Private Law 6 118 Preemption Without Borders: The Modern Conflation of Tort and Contract Liabilities  Max N. Helveston,  DePaul University - College of Law 7 116 Merchant Law in a Modern Economy  Lisa Esther Bernstein,  University of Chicago - Law School 8 115 Customary Law: An Introduction  Lisa Bernstein, Francesco Parisi,  University of Chicago Law School, University of Minnesota - Law School 9 113 On the Applicability of the Common European Sales Law to Some Models of Cloud Computing Services  Chris Reed, Clarice Castro, Ruy de Queiroz,  Universidade Federal de Pernambuco, Queen Mary University of London, School of Law, Centro de Informática - Univ Federal de Pernambuco 10 108 Damages versus Specific Performance: Lessons from Commercial Contracts  Theodore Eisenberg, Geoffrey P. Miller,  Cornell University - Law School, New York University (NYU) - School of Law

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of LSN: Contracts (Topic)  
April 12, 2013 to June 11, 2013

Rank	Downloads	Paper Title
1	215	The Hague Principles on Choice of Law for International Contracts: Some Preliminary Comments  Symeon C. Symeonides,  Willamette University - College of Law,
2	205	Regulation Through Boilerplate: An Apologia  Omri Ben-Shahar,  University of Chicago Law School
3	121	Contract Law in Europe and the United States: Legal Unification in the Civil Law and the Common Law  Hein D. Koetz,  Max Planck Institute for Comparative and International Private Law
4	118	Preemption Without Borders: The Modern Conflation of Tort and Contract Liabilities  Max N. Helveston,  DePaul University - College of Law
5	113	On the Applicability of the Common European Sales Law to Some Models of Cloud Computing Services  Chris Reed, Clarice Castro, Ruy de Queiroz,  Universidade Federal de Pernambuco, Queen Mary University of London, School of Law, Centro de Informática - Univ Federal de Pernambuco
6	108	Damages versus Specific Performance: Lessons from Commercial Contracts  Theodore Eisenberg, Geoffrey P. Miller,  Cornell University - Law School, New York University (NYU) - School of Law
7	92	Lochner, Liberty of Contract and Paternalism: Revising the Revisionists?  Harry G. Hutchison,  George Mason University - School of Law
8	91	Arbitrating 'Arbitrability'  Alan Scott Rau,  University of Texas at Austin School of Law
9	80	Shame, Regret, and Contract Design  Eric A. Zacks,  Wayne State University Law School
10	80	The Information Privacy Law of Web Applications and Cloud Computing  Sebastian Zimmeck,  Columbia University - Department of Computer Science

[JT]

Dean Irma S. Russell, A Review of A Manual of Style for Contract Drafting

Irma S. Russell is Dean and Professor of Law at the University of Montana School of Law.

Kenneth Adams’ recently released third edition of A Manual of Style for Contract Drafting, is a hefty volume. When I opened the package containing this manual my first thought was: “Wow, this is bigger than expected.  It looks really time consuming.”  At 455 pages, the book is closer to Fowler’s than Strunk & White. It is worth the time to read it.  In fact, once you start reading, it is hard to put down.  The writing is clear and concise, the tone is engaging, and the range of usage addressed is impressive.  

This book provides far more than drafting tips. This author has considered language in a deep way and gives thoughtful and sometimes provocative assessments of the usages he endorses.  His discussion of the language of belief, the language of intention, the language of recommendation and the distinctions among the categories is notable for its logic and even philosophical assessment as well as for its authority of declaring a particular usage superior to other constructions.  (Be sure to look for his treatment of "between" and "among" in reference to multiple parties.  This discussion may also apply to my last sentence before this parenthetical.)

The manual is useful for all lawyers who draft agreements, and most do of course.  Indeed few lawyers can separate themselves from contract drafting or the need for precise language.  A plea arrangement in the criminal context is as subject to the risk of ambiguity as a lease agreement.  A tort settlement is in as great a need of careful word choice as a corporate merger.  The trap for the casual drafter can involve malpractice claims as well as disappointed expectations of clients. 

The author’s introduction makes clear the work’s goal of providing precise and consistent language in contracts.  He endorses consistency “because differences in wording can result in unintended differences in meaning.”  He notes the necessity of a manual of style “because traditional contract language needs a thorough overhaul.”  This point underscores the need for the point-by-point treatment provided in the book.

The goals the author sets for this work are indeed as worthwhile (and as hard to achieve) in today’s world as in Fowler’s.  Creating documents with few opportunities for confusion means that the careful drafter will not need to see his words in court and the client will not need to roll the dice of litigation in arguing for his belief or assumptions about the intentions of the parties.

The book delivers on its promise to serve to help its user find "greater clarity and consistency in written usages."  Though modest in its succinct statement, this is an ambitious promise, and one that the book fulfills.  The principle of Occam's razor is at work here despite the heft of the volume.  Each discussion of a phrase or word is brief and to the point.  The length of the book results from the number and scope of the issues addressed rather than from any drawn out discussions.  More elegant contract language is the result of the guidance offered here. While Strunk & White is certainly shorter, it does not take on the range of issues Adams reaches, and I am convinced both revered authors would approve of this manual of style.  

Opening this book was a Pandora-type move for me, and now I am hooked on the author’s blog: Adams on Drafting.  You can access it here but I warn you now: You can’t read just one.  The risk for the reader opening either the book or the blog is getting caught up in the fascinating world of contract drafting.  Even after you find the answer to the specific question that sent you to the book, you may be unable to stop reading.  I’m heading back to the blog now to look for more on “between” and “among.”

[Posted, on Irma Russell's behalf, by JT]

Daniel Barnhizer Reviews Ken Adams' Manual of Style for Contract Drafting (3d ed.)

Daniel D. Barnhizer is Professor of Law & The Bradford Stone Faculty Scholar, Michigan State University College of Law. 

Kenneth Adams’ third edition to the Manual of Style for Contract Drafting[1] (“Contract Drafting”) delivers invaluable advice to any attorney or professional who drafts contracts or contract terms. The book is also highly suitable for law school classroom use in drafting classes, business school, or undergraduate business courses. This book has found a permanent place on my shelf among my go-to style manuals.

 

Introduction

 

Contract Drafting is a style manual that goes well beyond explicating basic contract conventions, admonishing attorneys to use “plain English” and avoid “legalese,” and providing lists of awkward or ambiguous words and phrases to excise from the drafting lexicon. Adams does all of these things effectively and efficiently, but Contract Drafting delivers on many more levels.

 

Audience

 

Like previous editions, this book will be useful across a wide range of applications. As Adams notes in the introduction:

This manual should be of use to readers in every contract ecosystem—a solo or small-firm general practitioner handling a broad range of contracts . . ., a contract-management professional responsible for negotiating contracts with customers; a big-law associate drafting mergers-and-acquisitions contracts; an in-house lawyer overhauling the company’s template sales contract; a paralegal reviewing confidentiality agreements a company is asked to sign; a judge trying to make sense of a confusing contract provision.[2]

In this list, Adams omits another important audience – law students. Contract Drafting is a nearly ideal tool for teaching a contract drafting course. As discussed below, the content of the manual goes beyond listing blackletter principles and providing tables of words and phrases to avoid. In this most recent edition of Contract Drafting, Adams carefully walks the reader through detailed explanations of his drafting principles while at the same time presenting an extraordinarily complete manual that teaches the inexperienced and informs the senior practitioner. Any professional – lawyer or non-lawyer – or law student who deals with contracts in any manner should keep this book near at hand.

 

Continue reading

Cell phones, copyright and contracts

Ajit Pai, a commissioner of the Federal Communications Commission,wrote an interesting op-ed in yesterday's NYT.   He argues that consumers should be allowed to unlock their phone when they permissibly (i.e. not in breach of any contract) switch carriers. Some of you might be wondering - Huh?  Is that even illegal?  Don't I own my phone?  You're probably not alone.  As Pai notes, the Library of Congress decided that unlocking your phone violates the Digital Millenium Copyright Act of 1998.  (They basically removed an exception to the Act that permitted unlocking, as this article in the San Francisco Chronicle explains).  But, you might wonder, what does copyright have to do with what you can do with your cell phone?  A lot of people are wondering the same thing, but basically, software locks the cellphone to a specific network and the cell phone owner is a licensee of that software (and software is copyrightable).  Okay, now you understand what this has to do with copyright but what does this post have to do with contract?  Glad you asked.  Pai's op-ed argues, "Let's go back to the free market.  Let's allow contract law - not copyright or criminal law - to govern the relationship between consumers and wireless carriers."  It's interesting given that this blog has spent the last couple of weeks discussing the need for government intervention due to boilerplate - and yet, here's an example of government intervention into boilerplate that is not actually helpful to consumers.  Don't get me wrong - I'm not saying government intervention into boilerplate isn't a good thing sometimes (depends on what it is and how and why) - I just find it interesting that this example of government intervention is on an issue that protects businesses and hurts consumers.  Of course it shouldn't be surprising since lobbyists for carriers are way better organized and have more money and influence than consumer advocacy groups. And that gets to the heart of what's the matter with using contracts as the solution since the same dynamic is at play in the world of private ordering (see symposium on Boilerplate and the book itself, for more details).  Who knows what carriers might come up with in their contracts.  Would they try to "license" instead of sell their phones? In a perfect world, the free market might function, well, perfectly and private ordering would be the order of the day.  But we don't live in that world so an absolutist "no government intervention v. more government intervention" position doesn't work.

 

[Nancy Kim]

Coming Next Week: Two Guest Posts on Kenneth Adams' Contracts Drafting Style Manual

Next week, we will have two guests posts reviewing Kenneth A. Adams, A Manual of Style for Contract Drafting (3d ed.).

From the book's website:

With A Manual of Style for Contract Drafting, Kenneth A. Adams has created a uniquely in-depth survey of the building blocks of contract language. First published in 2004, it offers those who draft, review, negotiate, or interpret contracts an alternative to the dysfunction of traditional contract language and the flawed conventional wisdom that perpetuates it. This manual has become a vital resource throughout the legal profession, in the U.S. and internationally.

This is the third edition of A Manual of Style for Contract Drafting. One-third longer than the second edition (published in 2008) and in a larger format, it contains much new material and has otherwise been revised and supplemented, making it even more essential.

This manual's focus remains how to express contract terms in prose that is free of the archaisms, redundancies, ambiguities, and other problems that afflict traditional contract language. With exceptional analysis and an unmatched level of practical detail, Adams highlights common sources of confusion and recommends clearer and more concise alternatives. This manual is organized to facilitate easy reference, and it illustrates its analysis with numerous examples. Consult it to save time in drafting and negotiation and to reduce the risk of dispute.

Our reviewers are:

Daniel D. Barnhizer, Professor of Law & The Bradford Stone Faculty Scholar, Michigan State University College of Law.  

Professor Barnhizer graduated with honors from Harvard Law School, where he served as managing editor of the Harvard Environmental Law Review. After graduation, he was a judicial clerk for the Honorable Richard L. Nygaard, U.S. Court of Appeals for the 3rd Circuit, and for the Honorable Robert B. Krupansky, U.S. Court of Appeals for the 6th Circuit, sitting by designation on the U.S. District Court for the Northern District of Ohio. Professor Barnhizer has practiced as a litigator with the law firms of Hogan & Hartson and Cadwalader, Wickersham & Taft. Before joining the MSU College of Law faculty, he was an adjunct professor of law at American University - Washington College of Law, where he taught legal reasoning, research, and writing. At MSU Law, he teaches Contracts, Contract Theory, Business Enterprises, Securities Litigation, and Legal History.

Some of Professor Barnhizers scholarship can be found here.

Irma S. Russell, Dean and Professor of Law, University of Montana School of Law.

Prior to coming to Montana, Dean Russell was the NELPI Professor and Director of the National Energy-Environment Law & Policy Institute at the University of Tulsa College of Law.  She became Dean of the University of Montana School of Law in 2009.

Dean Russell is immediate past chair of the ABA Section of Environment, Energy and Resources and the immediate past chair of the AALS Section of Natural Resources and Energy Law.  She is a newly appointed member of the Board of Dividing the Waters, an organization of judges and lawyers focused on issues of water adjudication in the Western United States.  She has served as the chair of the Professionalism Committee of the ABA Section of Legal Education and Admission to the Bar and as a member of the ABA Standing Committee on Professionalism and the ABA Standing Committee on Ethics and Professional Responsibility.  She also has served as a member of the Executive Committee and Secretary of the AALS Natural Resources Section and as chair of chair of the AALS Section on Professional Responsibility, the AALS Section on Socio-Economics, and as a member of the Publications Committee of the Center for Professional Responsibility.

Dean Russell earned undergraduate degrees in liberal arts and education, a master’s degree in English literature, and her law degree at the University of Kansas. She clerked for The Honorable James K. Logan, United States Court of Appeals for the Tenth Circuit. Russell engaged in private practice for several years in Kansas, Missouri, and Tennessee.

We look forward to some stimulating reviews and hopefully some fans of the book (and Ken Adams' blog on legal drafting) will chime in as well.

[JT]

Weekly Top Tens from the Social Science Research Council

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of Contracts & Commercial Law eJournal 
April 4, 2013 to June 3, 2013

Rank	Downloads	Paper Title
1	206	Can an Arbitrator Conduct Independent Legal Research? If Not, Why Not?  Paul Bennett Marrow,  New York Law School
2	204	The Hague Principles on Choice of Law for International Contracts: Some Preliminary Comments  Symeon C. Symeonides,  Willamette University - College of Law
3	203	Private Equity Firms as Gatekeepers  Elisabeth de Fontenay,  Harvard Law School
4	200	Regulation Through Boilerplate: An Apologia  Omri Ben-Shahar,  University of Chicago Law School
5	128	Discretion  D. Gordon Smith, Jordan C. Lee,  Brigham Young University - J. Reuben Clark Law School , Brigham Young University - J. Reuben Clark Law School
6	114	Contract Law in Europe and the United States: Legal Unification in the Civil Law and the Common Law  Hein D. Koetz,  Max Planck Institute for Comparative and International Private Law
7	114	Preemption Without Borders: The Modern Conflation of Tort and Contract Liabilities  Max N. Helveston,  DePaul University - College of Law
8	110	Customary Law: An Introduction  Lisa Bernstein, Francesco Parisi,  University of Chicago Law School, University of Minnesota - Law School
9	108	Merchant Law in a Modern Economy  Lisa Esther Bernstein,  University of Chicago - Law School
10	107	On the Applicability of the Common European Sales Law to Some Models of Cloud Computing Services  Chris Reed, Clarice Castro, Ruy de Queiroz,  Universidade Federal de Pernambuco, Queen Mary University of London, School of Law, Centro de Informática - Univ Federal de Pernambuco

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of LSN: Contracts (Topic)  
April 5, 2013 to June 4, 2013

Rank	Downloads	Paper Title
1	205	The Hague Principles on Choice of Law for International Contracts: Some Preliminary Comments  Symeon C. Symeonides,  Willamette University - College of Law
2	202	Regulation Through Boilerplate: An Apologia  Omri Ben-Shahar,  University of Chicago Law School
3	131	Discretion  D. Gordon Smith, Jordan C. Lee,  Brigham Young University - J. Reuben Clark Law School , Brigham Young University - J. Reuben Clark Law School
4	116	Contract Law in Europe and the United States: Legal Unification in the Civil Law and the Common Law  Hein D. Koetz,  Max Planck Institute for Comparative and International Private Law
5	116	Preemption Without Borders: The Modern Conflation of Tort and Contract Liabilities  Max N. Helveston,  DePaul University - College of Law
6	107	Damages versus Specific Performance: Lessons from Commercial Contracts  Theodore Eisenberg, Geoffrey P. Miller,  Cornell University - Law School, New York University (NYU) - School of Law
7	107	On the Applicability of the Common European Sales Law to Some Models of Cloud Computing Services  Chris Reed, Clarice Castro, Ruy de Queiroz,  Universidade Federal de Pernambuco, Queen Mary University of London, School of Law, Centro de Informática - Univ Federal de Pernambuco
8	92	Lochner, Liberty of Contract and Paternalism: Revising the Revisionists?  Harry G. Hutchison,  George Mason University - School of Law
9	85	Arbitrating 'Arbitrability'  Alan Scott Rau,  University of Texas at Austin School of Law
10	78	Shame, Regret, and Contract Design  Eric A. Zacks,  Wayne State University Law School

 

[JT]

Nadvorney & Zalesne, Teaching to Every Student

Legal education is being transformed before our eyes.  In part, this transformation has been so gradual that it has gone unappreciated.  I routinely read critiques of legal education that seem to be based on the assumption that we all still teach like Professor Kingsfield.  I know of very few people who still use that sort of strict Socratic method.  Most doctrinal law teachers that I know teach through a mix of soft Socratic method, lecture, problems and discussion.  But a great deal of the curriculum at most law schools is now dedicated to skills training, externships, co-curricular activities (moot court competitions, trial advocacy, journals, etc.) and of course clinics.

In the face of blistering criticism of legal education, law schools have been striving to demonstrate a commitment to reform, often by bolstering, highlighting or simply re-packaging existing programs.  But to the extent that real change is occurring, it is often based on our intuitions about what ought to work for our students rather than on actual evidence of what works.  As Holmes tells Watson, “It is a capital mistake to theorize before one has data.  Insensibly one begins to twist facts to suit theories, instead of theories to suit facts.”  But the partnership that produced Teaching to Every Student: Explicitly Integrating Skills and Theory into the Contracts Class bridges the gap between theory and facts.  Deborah Zalesne is a contracts scholar at CUNY law and David Nadvorney is the director of academic support programs at CUNY.   They have worked together for years to make certain that their pedagogical strategies actually work for their students

Introducing new approaches to the legal curriculum involves teaching old dogs new tricks, because law schools have to work with the faculties they’ve got.  I consider myself a moderately old dog.  I cannot easily abandon my doctrinal/theoretical approach to focus in my doctrinal courses on skills training and bar preparation.  I need guidance to help me work on my approach. Nadvorney and Zalesne provide such guidance for contracts profs in Teaching to Every Student. The book is slim and affordable (under $30 on Amazon), and I think its approach is unique – or at least highly unusual – in that the authors insist on incorporating theoretical perspectives while also highlighting their very practical, skills-based approach to teaching first-year contracts.

Their approach to teaching contracts focuses on three areas of training: academic training, which includes everything from case briefing to exam preparation; legal reasoning, which includes the traditional skills set that enables students to learn how to issue spot and apply rules to unique factual situations; and theoretical perspectives, which encompasses learning theory, identifying and critiquing theoretical approaches, and integrating such approaches into advocacy. 

The book can be a wonderful supplement to any casebook (or whatever other materials one chooses to use).  It comes complete with in-depth sections on each of the three areas of training mentioned above, exercises, sample syllabi and some edited cases. 

Even if one chooses not to adopt the book, I recommend it to law professors interested in looking for new stimuli that will enable them to shake up their approaches to teaching

[JT]

Boilerplate Symposium Conclusion (for now): Peggy Radin Responds to Week Three

Although this is the last official post in the our online symposium on Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law, I have heard from a few scholars who would like to weigh in, so there will likely be a few more posts on Boilerplate appearing over the summer.

In today's post, our author, Margeret Jane Radin, responds to her reviewers from the third week of the Symposium

Response to Aditi Bagchi:

You are quite right to say that what I was trying to do in my book is bring to the fore what you label features (2) and (3): that boilerplate in effect forces consumers to give up important legal rights and that boilerplate effectively eliminates rights for large portions of the consumer population.  These features cause an inquiry into what we might label (4) in my intentions in the book:  there are background rights that are constitutive of civil society, or inherent in the social contract, and these are not within the purview of individuals to waive, one by one, even if they truly wish to, one by one.  In writing this book, I did feel it was necessary to rehearse the role of consent (the basis of justification for enforcement of contracts) in the context of how badly this rationale fits mass-market boilerplate deployment, akin to your feature (1).  Unfortunately, it appears that some readers seize on this as the book's main point, and are quick to say that this observation is old hat.  What is not old hat, at any rate, is what follows:  much that is called contract today should not be called contract, and should not be enforced as contract.

At least: We shouldn't be able to sell off certain rights, even if, as individuals, we want to.  (And it's quite possible that many of us, as individuals, want to, because we think we, as individuals, don't need them, and we don't, as individuals, find the needs of society as a whole to be salient for our decision making.)  We do need, now, to turn our attention to which rights these are, as indeed I believe you are saying.

You mention my copyright example: the purpose of rights that exist for the benefit of society as a whole is destroyed when individuals (in the millions) can waive them one by one.  The example I like to invoke is the right to be free of negligent harm inflicted by others.   As long as we believe that negligent harm-causing behavior is at least somewhat deterred by legal liability, tort law--even if flawed at present, and unless we replace it with some other legal regime--has to fill this role.  Service providers are the best party to hold responsibile for preventing harm to their customers:  they can investigate their employees, maintain their equipment, keep the premises sanitary, etc, etc, and their customers cannot.  If each of us has to be endlessly on guard against being harmed by others with whom we come into contact, we are back in the state of nature.

Response to Jean Braucher:

As a powerful and learned voice in consumer protection legislation, you should, or I certainly hope you will, expand what you have written here into a book that can be both helpful for contracts scholars and teachers and a much wider audience.  I certainly agree that contracts teachers should make consumer regulation known to students; and they should also make it known that boilerplate doesn't fit into the offer/acceptance/consideration paradigm.

In writing Boilerplate, I was trying to gather together many strands of thought and argument about it, so as to provide a platform from which further thought could commence.  As I mentioned in another of these replies, I had to go through the idea of consent (promises, agreement) because that is the basis of contract justification; that is what is supposed to justify enforcing these things.  And courts do enforce them; as contracts.  Unfortunately, some readers may think I am over-preoccupied with consent.  But rather I am preoccupied with the tragedy that deletion of important rights is routinely being enforced against citizens in the name of contract.  So, before making other suggestions, I tried to detach these things from the honorary title of contract. 

I would be great if the FTC would declare many of the clauses to be unfair methods of doing business (especially wholesale remedy avoidance or deletion).  It would be great if Dodd-Frank is not gutted, and if the CPFB manages to do away with arbitration clauses against financial consumers.  It would be great if the Supreme Court would not make it difficult for states to implement their consumer protection regulation. It would be great if insurance regulators would prevent insurers from forcing their insureds to shunt risk to the insureds' customers.  I think you are perhaps more hopeful than I am at this point, but I'd like to be more hopeful.  It's good to keep on fighting, and trying to gather support. (See the review by Theresa Amato.) 

Response to Charles Calleros:

I admire your sense of ethical obligation to educate both future lawyers and members of the general public about the features of citizenship.  Thank you.  I hope you will inspire us all.

 On the topic of reasonable expectations:  Although you clearly understand the problem caused by the normative/positive ambiguity, I am still very much concerned that many judges and other officials will just lapse into believing that the more something is prevalent the more we expect it, thus reinforcing "Everybody does it" as justification.  Whereas, of course, the more something unjust is being done, the worse is the injustice in society. 

Your solution to the "Everybody does it" justification would be comprehensive black listing of oppressive clauses on the European model.  I wish we could do this, but I'm a pragmatist, and I think we cannot (and it seems you agree).  So what might be possible for us?

You suggest that businesses should highlight potentially objectionable terms. Some businesses are already doing that. For example, there are now up-front solemn warnings about the presence of an arbitration clause. But I don't think that works either--consumers just sign or click "I agree" anyway--though we could use some empirical data on this.  And who gets to decide what is potentially objectionable?  Here you seem to come back to the idea of lying "outside the boundaries of what consumers should be held to reaonably expect," so we are back to the invitation to use the "Everybody does it" method of determing what is reasonably expectable.

Response to Peter Linzer:

Thank you for reminding us of the historical progression, and the great quote from Cardozo.  Indeed, as you say, courts, legislatures, and agencies should look not to the mechanics of contract but rather to the rights of the social system.

Indeed, in addition to fussing with the mechanics of contract, we should think more about the rights that cannot be disclaimed by individuals. There are some rights that cannot be disclaimed by individuals even with true consent:  what rights are those?  I contend that at least the right to viable legal remedy is one. 

Response to Cheryl Preston:  

I love the quote from Cole v. Goodwin! 

Is it a "stretch" to say that the democratic process has created protections that boilerplate deletes?  Copyright and class actions are examples where this is not a "stretch," I believe.  It is perhaps question-begging to say that after all, these are default rules; at least, I am trying to argue that they should not be, and that the judiciary could take some steps against too-easy waiver.

BUT it is certainly true that legislative bodies are "influenced" (i.e., bought)   "by the same business interests that control consumers by contract."  This is more true, I think, of federal than of state and local legislatures, perhaps because of the immense amount of money we allow to be spent in federal elections.  This is a sorry state for democracy.

The interesting thing about the copyright example is that the federal law was indeed written pretty much at the behest of the major business interests themselves.  So in this case it seems that what these interests "bought" was a coordination solution from which individual firms should be prevented from defecting.

To your last paragraph, I say "Hear, hear."  To your penultimate paragraph I say, let's support  Theresa Amato and her colleagues, and let's join the ALI and speak up.

Response to Guy Rub:

Thank you for engaging with me on the topic of market solutions.  I meant my chapter 10 to be suggestive, hoping it might be helpful to get thought about this going. I appreciate your having given this matter some of your time and thought, and I hope this will encourage others.

The prior posts can be found here: 

• Peter Alces on consent;
• Theresa Amato on proposed solutions to the problems posed by Boilerplate;
• Andrew Gold on the question of whether boilerplate is contractual;
• David Horton on mass arbitration and democratic degradation; 
• Ethan Leib on the fetishization of consent;
• Brian Bix on democratic degradation;
• Oren Bar-Gill on consent without reading;
• Daniel Schwarcz on a tort-based approach to standard form contracts;
• Kim Krawiec on contracts as disclosure, Part I and Part II;
• Margaret Jane Radin's responses, Part I and Part II;
• Aditi Bagchi on Boilerplate Waivers;
• Jean Braucher on the common law of contracts as residual law;
• Charles Calleros on the reasonable expectations of consumers;
• Peter Linzer, That Was No Contract, That Was My Lunch;
• Cheryl Preston on boilerplate and the role of courts; and
• Guy Rub on market solutions to the boilerplate problem

 Thanks to all of our participants.  

[JT]

Radin Meets Readers (and a Packed Audience) at Law & Society Annual Meeting

[Editor's note: We interrupt our Boilerplate Symposium to bring you this report from Shubhs Ghosh on another discussion of  Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law.

A panel of five contracts law scholars met to discuss Margaret Radin’s Boilerplate in front of an  audience of over thirty attendees at the annual Law & Society meeting in Boston on Saturday, June 1, 2013.  Tal Kastner of Princeton University did a great job moderating and raising a provocative discussion. Although scheduled to end at 6:15 pm, the attendees stayed until almost 7 pm.  What follows is a brief write-up of the discussion with my own comments interspersed.

The readers included Stewart Macaulay, David Campbell, Aditi Bagchi, Peter Benson, and Guy Rub, speaking in that order.  Stewart was positive about the book and began his comments with a reminder of the anti-lawsuit attitude given voice in tort reform. The restrictions on rights that occur through boilerplate, he suggested, is a further reflection of this attitude as boilerplate drafters limit remedies and rights of consumers and their access to courts.  As Stewart put it, advocates of court reform complain about money-chasing tort and class action attorneys but there is no mention of how much corporate lawyers make in drafting rights-limiting boilerplate clauses. Stewart ended his comments with skepticism about Radin’s proposals for top down reform from the legislature, whether federal or state.

David Campbell was more critical of the book, especially what he described as Radin’s idealized portrait of the contract bargain.  Not all terms are always deliberated by the parties, but nonetheless contract terms can be read into the contract by courts.  He was particularly skeptical that the solution lay outside contract.  Properly applied, doctrines like formation, unconscionability and other contract terms can limit the negative applications of boilerplate.  Unfortunately, some courts in the United States have not been enforcing the existing  law in a reasonable manner.

Aditi Bagchi emphasized Radin’s theme of democratic degradation, boilerplate’s role in limiting  key rights of citizenship through terms that remove rights of access to courts and compensation for injury. Although Aditi was less concerned with loss of procedural rights (such as class actions), she agreed that boilerplate terms should receive greater scrutiny when they involve limitations on compensation for personal injuries. Introducing the concept of a social wage, Aditi made the point that liberal society extols contractual freedom as part of a broader array of rights delineated in tort, property and other regimes.  What society deems to be waivable through contract rests on choices regarding what should be allocated through markets and what should be allocated through political processes. Boilerplate allows a shift of these choices without democratic deliberation.  The market de facto and de jure determines individual rights.

Peter Benson elaborated on some of the critical points raised by David Campbell.  Introducing a comparative perspective from Canada and the EU, where boilerplate terms are regulated, Peter emphasized doctrines within the United States that could also serve to limit the imposition of noxious terms through boilerplate. The challenge Peter posed is identifying a legal standard for what terms would be deemed noxious, or troublesome.  Commenting on Radin’s development of such standards subsequent to the publication of her book, Peter questioned whether such standards would be workable.  He described them as highly manipulable and indeterminate.

Guy Rub ended the formal comments with criticisms of Radin’s proposed market-based and state-based solutions. Disclosure-type solutions would not work even if disclosures were simplified and coded so that they could be readily digested. Consumers either would tune such information out or would be willing to trade off unfavorable terms for a lower price.  Similarly, any legislative solution would be subject to the same capture that gave rise to boilerplate.  Guy provided the example of federal legislation on arbitration as an example. Guy did suggest grass roots-like solutions involving activism through exposure of noxious terms through social media and blogs. Such activism could be more effective, he suggested, than top-down regulation.

The interactions continued with Peggy’s responses.  She took issue with some broad characterizations of her book, particularly her view of an idealized contract. Her concern is with overreaching by business entities in drafting terms that severely limit the rights of consumers.  As she pointed out, she never said that no rights can be waived or limited.  But some companies go too far in limiting their liability in the daycare and elder care contexts. Such noxious terms, she suggested, may have more to do with insurance companies than with the actual service providers.  Nonetheless, the market dynamics lead to a market failure that occurs through boilerplate terms that severely shift risks to consumers in market transactions. The world does not have to be that way.  Drawing a connection with her work on market inalienability, Peggy argued that boilerplate forces consumers to alienate fundamental attributes of citizenship through take it or leave it offers. Sympathetic to the comments on her proposed solutions, she tantalizingly suggested that a possible solution would be a return to an earlier common law of contract that existed before the law took a pro-business turn.  She appealed to an older generation of common law judges to offer a correction to this turn.  I wondered whether such judges actually exist anymore.

Discussion afterward was lively.  Tal Kastner emphasized points about democratic degradation and the decline of communication and deliberation.  Richard Lempert pointed out the betrayal of trust that occurs with boilerplate as consumers are invited to trust companies through the signing of boilerplate terms that are designed to “screw consumers.”  Richard suggested that government may be trustworthy than private businesses, contrary to contemporary rhetoric.  Amy Kastely raised a point about the drafting of the Restatement on Consumer Contracts that might exacerbate the problems with boilerplate. Robert Gordon questioned whether boilerplate should even be referred to as private ordering since it represented the imposition of terms by dominant players backed up by the sanctioning power of the state. Other points (which I could not attribute) were made about the regulatory approach to standard terms in the Netherlands and the possibilities of consumer activism to expose consumer-unfriendly terms that prominent companies impose through boilerplate.

The Author Meets Reader panel was a stimulating event.  My own thoughts are that in some instances boilerplate in contract is used to realign the rights of consumers without having to engage in the democratic process.  The consumer rights that companies may want to delimit could be imposed through legislation.  In many instances, such legislative efforts would fail.  Boilerplate provides a way to impose a change in underlying entitlements without having to engage the political process.  In such situations, there is a real threat to the democratic process as market processes dominate.

The discussion of private power, public power, and individual rights made me think of Shelly v. Kramer, the landmark case in which judicial enforcement of racially restrictive covenants were deemed to be state action for the purposes of the Equal Protection Clause. If boilerplate is substituting for legislation, then perhaps noxious terms should be the basis for a due process or other constitutional violation.  I raise this point to highlight the underlying issues as well as to pinpoint solutions.  No court would be likely to adopt such a broad reading of Shelly v Kramer, a case that has already been limited to its narrow facts. But where constitutional efforts invariably fail activism on the legislative and through market pressure serve as more effective alternatives.  Margaret Jane Radin’s Boilerplate is a great book about legal reform in a world where contracts and market processes have been used to displace democratic deliberation and legislation. 

[Posted, on Shubha Ghosh's behalf, by JT]