ContractsProf Blog

Handling Shipping and “Handling” Charges

By Myanna Dellinger

A class-action lawsuit filed recently against Amazon asserts that the giant online retailer did not honor its promise to offer “free shipping” to its Prime members in spite of these members having paid an annual membership fee of $79 mainly in order to obtain free two-day shipping.

Instead, the lawsuit alleges, Amazon would covertly encourage third-party vendors to increase the item prices displayed and charged to Prime members by the same amount charged to non-Prime members for shipping in order to make it appear as if the Prime members would get the shipping for free.  Amazon would allegedly also benefit from such higher prices as it deducts a referral fee as a percentage of the item price from third-party vendors. 

The suit alleges breach of contract and seeks recovery of Prime membership costs for the relevant years as well as treble damages under Washington’s Consumer Protection Act.  Most states have laws such as consumer fraud statutes, deceptive trade practices laws, and/or unfair competition laws that can punish sellers for charging more than the actual costs of “shipping and handling."  In some cases that settled, companies agreed to use the term “shipping and processing” instead of “shipping and handling” to be more clear towards consumers. 

On the flip side of the situation is how Amazon outright prevents at least some private third-party vendors from charging the actual shipping costs (not even including “handling” or “processing” charges).  For example, if a private, unaffiliated vendor sells a used book via Amazon, the site will only allow that person to charge a certain amount for shipping.  As post office and UPS/FedEx costs of mailing items seem to be increasing (understandably so in at least the case of the USPS), the charges allowed for by Amazon often do not cover the actual costs of sending items.  And if the private party attempts to increase the price of the book even just slightly to not incur a “loss” on shipping, the book may not be listed as the cheapest one available and thus not be sold. 

This last issue may be a detail as the site still is a way of getting one’s used books sold at all whereas that may not have been possible without Amazon.  Nonetheless, the totality of the above allegations, if proven to be true, and the facts just described till demonstrate the contractual powers that modern online giants have over competitors and consumers. 

A decade or so ago, I attended a business conference for other purposes.  I remember how one presenter, when discussing “shipping and handling” charges, got a gleeful look in his eyes and mentioned that when it came to those charges, it was “Christmas time.”  When comparing what shipping actually costs (not that much for large mail-order companies that probably enjoy discounted rates with the shipping companies) with the charges listed by many companies, it seems that not much has changed in that area.  On the other hand, promises of “free” shipping have, of course, been internalized in the prices charged somehow.  One can hope that companies are on the up-and-up about the charges.  Again: buyer beware.

New York Times Report on Litigation Challenging an Allstate Waiver Agreement

According to this article in today's New York Times, 6,200 Allstate employees, who joined its Neighborhood Agents Program in the 1980s and 1990s, were called into meetings in 1999 at which they were told that they would now proceed as independent contractors, forfeiting health insurance, their retirement accounts or profit-sharing, and terminating the accrual of their pension benefits.   If they wanted to continue to sell Allstate insurance, they had to sign waivers in which they agreed not to sue the insurer.  Thirty-one agents signed but have now sued nonetheless, alleging age discrimination and breach of contract.

They sued thirteen years ago, but the case is still far from over.  They are still seeking class certification.  The Times article indicates that cases such as this one are hard to win, but the judge in this case has already stated that those that signed the waivers were made substantially worse off, that Allstate's claimed corporate reorganization was actually a disguised staff reduction, and that Allstate's conduct was "self-serving and, from most perspectives, underhanded."  In addition, Allstate seems to have misrepresented to the agents the consequences of not signing the waiver, having told the agents that they would be barred for life from soliciting business from their former customers.  Allstate has already paid $4.5 million to settle an age-discrimination claim brought by the EEOC on behalf of 90 of the agents.

Weekly Top Tens from the Social Science Research Network

SSRN Top Downloads For Contracts & Commercial Law eJournal

RECENT TOP PAPERS 

Rank	Downloads	Paper Title
1	745	Aftermarketfailure: Windows XP's End of Support  Andrew Tutt  Yale University - Information Society Project
2	335	Will Ticket Scalpers Meet the Same Fate as Spinal Tap Drummers? The Sale and Resale of Concert and Sports Tickets  Gregory M. Stein  University of Tennessee College of Law
3	199	Soft Law in the Organization and General Conduct of Commercial Arbitration Proceedings  Thomas Stipanowich  Pepperdine University School of Law
4	159	A Draft Australian Law of Contract  Ted Wright, M P Ellinghaus and D StL Kelly  University of Newcastle (Australia) - Faculty of Business and Law, University of Newcastle (Australia) - Faculty of Business and Law and University of Newcastle (Australia) - Faculty of Business and Law
5	148	Killing Conscience: The Unintended Behavioral Consequences of 'Pay For Performance'  Lynn A. Stout  Cornell Law School - Jack G. Clarke Business Law Institute
6	146	The Futility of Cost Benefit Analysis in Financial Disclosure Regulation  Omri Ben-Shahar and Carl E. Schneider  University of Chicago Law School and University of Michigan Law School
7	145	Intuitions About Contract Formation  Tess Wilkinson‐Ryan and David A. Hoffman  University of Pennsylvania Law School and Temple University - James E. Beasley School of Law
8	125	Sovereign Bonds and National Relativism: Can New York Law Contracts Safely Cross the Atlantic?  Mathias Audit  University of Paris Ouest Nanterre La Defense
9	108	Document Appreciation: Some Characteristics of Legal Documents (and Talking with Students About Them)  Jay A. Mitchell  Stanford Law School
10	106	Introduction to Philosophical Foundations of Contract Law  Gregory Klass  Georgetown University Law Center

SSRN Top Downloads For LSN: Contracts (Topic)

RECENT TOP PAPERS for all papers first announced in the last 60 days  
28 Feb 2014 through 29 Apr 2014

Rank	Downloads	Paper Title
1	148	Killing Conscience: The Unintended Behavioral Consequences of 'Pay For Performance'  Lynn A. Stout  Cornell Law School - Jack G. Clarke Business Law Institute
2	145	Intuitions About Contract Formation  Tess Wilkinson‐Ryan and David A. Hoffman  University of Pennsylvania Law School and Temple University - James E. Beasley School of Law
3	129	Coasean Keep-Away: Voluntary Transaction Costs  Jordan M. Barry, John William Hatfield and Scott Duke Kominers  University of San Diego School of Law, University of Texas at Austin and Harvard University
4	125	Sovereign Bonds and National Relativism: Can New York Law Contracts Safely Cross the Atlantic?  Mathias Audit  University of Paris Ouest Nanterre La Defense
5	113	The Evolving Private International Law/Substantive Law Overlap in the European Union  Ronald A. Brand  University of Pittsburgh - School of Law
6	109	Public Lands and the Federal Government's Compact-Based 'Duty to Dispose': A Case Study of Utah's H.B. 148 — The Transfer of Public Lands Act  Donald J. Kochan  Chapman University School of Law
7	108	Document Appreciation: Some Characteristics of Legal Documents (and Talking with Students About Them)  Jay A. Mitchell  Stanford Law School
8	106	Introduction to Philosophical Foundations of Contract Law  Gregory Klass  Georgetown University Law Center
9	77	The Utopian Promise of Private Law  Hanoch Dagan  Tel Aviv University - Buchmann Faculty of Law
10	75	Democratic Contract Law  Martijn W. Hesselink  University of Amsterdam - Centre for the Study of European Contract Law (CSECL)

 

No Retroactive Application to Arbitration Agreement Says Sixth Circuit

The Sixth Circuit held that an employee does not have to arbitrate a claim that was already pending in court when he entered into an arbitration agreement with his employer.  The facts of the case, Russell v. Citigroup, Inc.,  are as follows:

Keith Russell was employed at a Citicorp call center from 2004 to 2009.  In 2012, he brought a class action lawsuit against the bank, alleging that he and other employees were not paid for time spent logging in and out of the Citicorp computer system.  While there was an arbitration agreement in place covering this first period of employment, it did not reach class action claims, and so Russell was permitted to proceed in court.

Then, rather bizarrely, Russell applied to be rehired at the same call center and, more bizarrely still, Citicorp rehired him.  He began work again in 2013.  He signed a new arbitration agreement that does cover class claims.  Citicorp thus sought to compel arbitration in the suit, which had by then proceeded to discovery.

The District Court denied Citicorp's motion to compel.  The Sixth Circuit reviewed the language of the new arbitration agreement and found that it clearly applied only prospectively.  Russell clearly did not intend for the new arbitration agreement to apply to his old claim, and Citicorp also seemed to have no such intention.  If its legal department did intend to bind Russell through the second arbitration agreement to drop his class action claim, then it would have violated ethical rules by sending the second agreement to Russell rather than to his attorney.  The Sixth Circuit found that Citicorp had no such intention, and so neither party intended for the second arbitration agreement to apply to Russell's class action claim.  As the Federal Arbitration Act requires courts to enforce the intent of the parties, the Sixth Circuit affirmed the District Court's denial of Citicorp's motion to compel arbitration. 

The Social Function of Contract

 

                                                                                             

In the last few years I have been fortunate enough to teach law and economics in Rio. My students are generally other professors, graduate students, and attorneys. One of them,  Luciano Timm, a contracts professor, alerted me to the idea of the social function of contracts and an article he had written on the subject.  The subject is important because under the Brazilian Civil Code , "The freedom to contract shall be exercised by reason and within the limitations of the social function of the contract”.

This naturally leads to the question of what is the social function of contract. The notion of balancing the idea of freedom of contract with the social function of contract is an interesting one if one knows what the social function of contract is. I can think of many social functions of contract law but I am not sure what social functions would be inconsistent with freedom of contract. My best quess would be something consistent with a Rawlsian view of contract law which would advance his Difference Principle.  Or perhaps that all contracts should result in true Pareto Superior outcomes. By "true" I mean not what the parties expect when making the contract but how they actually feel after experiencing the contract. (Much more on this later.)

In any case, it is a puzzle evidently now being worked through by Brazilian courts. As usual, comments are welcome.

Two New Additions to the Law Professor Blogs Network

First, as announced on the TaxProf Blog here, The Right Coast, edited by Thomas A. Smith (San Diego), has joined the Law Professor Blogs Network.  

Second, as announced on the TaxProf Blog here, the Law Professor Blogs Network is thrilled to announce the launch of Clinical Law Prof Blog, edited by Jeff Baker (Pepperdine) with these contributing editors:

• Bryan Adamson (Seattle)
• Kim Bart (Duke)
• Kelly Behre (UC-Davis)
• Warren Binford (Willamette)
• Kristina Campbell (UDC)
• Tanya Cooper (Alabama)
• Meta Copeland (Mississippi College)
• Jill Engle (Penn State)
• Carrie Hagan (Indiana)
• D’lorah Hughes (Arkansas (Fayetteville))
• Robert Lancaster (LSU)
• Inga Laurent (Gonzaga)
• Kelly McTear (Faulkner)
• Kelly Olson (Arkansas (Little Rock))
• Brittany Stringfellow Otey (Pepperdine)
• Danny Schaffzin (Memphis)
• Kelly Terry (Arkansas (Little Rock))
• Virgil Wiebe (St. Thomas)

From Jeff's inaugural post:

We hope to amplify and magnify the work of clinical law professors, to share resources and ideas and to collaborate with our colleagues online and in social media who are serving our community.  We write to advance the twin causes of good teaching and justice.   

Welcome, and happy blogging.

Interesting Australian High Court Damages Decision

I just stumbled upon an interesting damages decision from the Australian High Court in December. In a thouroughly modern context (sale of frozen sperm), it raises the age-old question of how to measure expectation damages when the buyer is able to recoup the costs of replacement in a forward contract.

Plaintiff and Defendant are doctors specializing in “assisted reproductive technology services.” For just over $380,000 (AUD), Plaintiff agreed to buy the assets of a company operating a fertility clinic, a company controlled by Defendant. The asset sale included a stock of frozen sperm. The company warranted that the identification of the donors of that sperm complied with specified regulatory guidelines. (Defendant guaranteed the company’s obligations under the contract).

The stock of sperm delivered contained 1,996 straws that were in breach of warranty. Specifically, it did not comply with regulatory requirements concerning consents, screening tests and identification of donors. For this reason, the sperm was unusable by Plaintiff. Plaintiff was unable to find suitable replacement sperm in Australia and eventually found only one alternative source of sperm from a U.S. supplier for over $1.2million (AUD). Plaintiff “accepted that ethically she could not charge, and in fact had not charged, any patient a fee for using donated sperm greater than the amount [she] had outlaid to acquire it.”

The question before the High Court: how should Plaintiff’s damages for breach of warranty be calculated? The primary judge assessed the damages as the amount that the Plaintiff would have had to pay the U.S. company (at the time the contract was breached) to buy 1,996 straws of sperm. On appeal, the Court of Appeal held that the Plaintiff should have no damages because the Plaintiff was able to pass on the increased costs to her patients. The Court of Appeal held that the Plaintiff had thus avoided any loss she would otherwise have sustained.

The parties did not dispute damages should be "that sum of money which will put the party who has been injured ... in the same position as he [or she] would have been in if he [or she] had not sustained the wrong for which he [or she] is now getting his [or her] compensation or reparation.” Nor did they dispute that the Plaintiff was entitled to be put in the position she would have been in had the contract been performed. The parties disputed how these principles should be applied to this particular case.

Justice Hanye of the High Court identified the difficulty as stemming from a failure to identify what “loss” was being compensated. He identified three different forms of “loss”:

First, there might be a loss constituted by the amount by which the promisee is worse off because the promisor did not perform the contract. That amount would include the value of whatever the promisee outlaid in reliance on the promise being fulfilled. Second, the loss might be assessed by looking not at the promisee's position but at what the defaulting promisor gained by making the promise but not performing it. Third, there is the loss of the value of what the promisee would have received if the promise had been performed. Subject to some limitations, none of which was said to be engaged in this case, damages for breach of contract must be measured by reference to the third kind of loss: the loss of the value of what the promisee would have received if the promise had been performed.

After a nod to Fuller and Purdue, Justice Hayne explained how to value what Plaintiff should have received:

Under the contract which the [Plaintiff] made, she should have received 1,996 more straws of sperm having the warranted qualities than she did receive. The relevant question in the litigation was: what was the value of what the [Plaintiff] did not receive? The answer she proffered in this Court was that it was the amount it would have cost (at the date of the breach of warranty) to acquire 1,996 straws of sperm from [the U.S. company]. That answer should be accepted.

The answer depends upon determining the content of the unperformed promise. The answer does not depend upon whether the contract can be described as one for the sale of goods or for the sale of a business. How much the [Plaintiff] paid for the benefit of the promise is not relevant. It does not matter whether the value of what she did not receive was more than the price she had agreed to pay under the contract or (if it could have been determined) the price she had agreed to pay for the stock of sperm. The extent to which the [Plaintiff] could have turned the performance of the promise to profit would be relevant only if the [Plaintiff] had claimed for loss of profit. She did not. She sought, and was rightly allowed by the primary judge, the value of what should have been, but was not, delivered under the contract.

As for mitigation, the Justice wrote:

As already noted, however, the Court of Appeal concluded that the [Plaintiff] had mitigated her loss by buying replacement sperm from [the US. Company]. In respect of "the loss of each straw of replacement sperm actually sourced from [the U.S. company]" before the date of assessment of damages, Tobias AJA concluded that the chief component of the [Plaintiff’s] "loss" would be "the sum (if any) representing that part of the overall cost of acquisition of that straw not recouped from a patient". And in respect of "the residue of the 'lost' 1996 straws over and above those in fact replaced by [U.S.] sperm up to the date of trial", Tobias AJA concluded that "the appropriate course would have been to assume that [the Plaintiff] would continue to source straws of donor sperm from [the U.S. company] at a cost consistent with that which had prevailed since August 2005, and that she would continue to recoup from patients the same proportion of that cost as she had done in the past". On this footing, Tobias AJA concluded that the [Plaintiff’s] damages in respect of straws not "replaced" would be "the aggregate of the discounted present value of the un recouped balances (if any) of that cost as at the date of their assessment" (emphasis added).

Two points must be made about this analysis. First, the calculations described would reveal whether, and to what extent, the [Plaintiff] was, or would be, worse off as a result of the breach of warranty. That is, the calculations of the net amount which the [Plaintiff] had outlaid, and would thereafter have to outlay, would reveal the amount needed to put the [Plaintiff] in the position she would have been in if the contract had not been made. The calculations would not, and did not, identify the value of what the [Plaintiff] would have received if the contract had been performed. Second, the reference to mitigation of damage was apt to mislead. In order to explain why, it is necessary to say something about what is meant by "mitigation" of damage.

For present purposes, "mitigation" can be seen as embracing two separate ideas. First, a plaintiff cannot recover damages for a loss which he or she ought to have avoided, and second, a plaintiff cannot recover damages for a loss which he or she did avoid. * * *

The [Plaintiff’s] subsequent purchases and use of replacement sperm left her neither better nor worse off than she was before she undertook those transactions. In particular, * * * the [Plaintiff] obtained no relevant benefit from her subsequent purchases of sperm. The purchases replaced what the vendor had agreed to supply.

The purchase price paid for the replacement sperm revealed the value of what was lost when the vendor did not perform the contract. But the commercial consequences flowing from the [Plaintiff’s] subsequent use of those replacements would have been relevant to assessing the value of what should have been supplied under the contract only if she had obtained some advantage from their use, or if she had alleged that the replacement transactions had left her even worse off than she already was as a result of the vendor's breach. If she had obtained some advantage, the value of the advantage would have mitigated the loss she otherwise suffered. If she had been left even worse off (for example by losing profit that otherwise would have been made), that additional loss may have aggravated her primary loss. But the [Plaintiff] was not shown to have obtained any advantage from the later transactions and she did not claim that they had left her any worse off. Those transactions neither mitigated nor aggravated the loss she suffered from the vendor not supplying what it had agreed to supply. The value of that loss was revealed by what the [Plaintiff] paid to buy replacement sperm from [the U.S. company].

Showing that the [Plaintiff] had charged, or could charge, third parties (her patients) the amount she had paid to acquire replacement sperm from [the U.S. company] was irrelevant to deciding what was the value of what the vendor should have, but had not, supplied. If the contract had been performed according to its terms, the [Plaintiff] would have had a stock of sperm having the warranted qualities which she could use as she chose. She could have stored it, given it away or used it in her practice. In particular, she could have used it in her practice and charged her patients nothing for its supply. But because the vendor breached the contract, the [Plaintiff] could put herself in the position she should have been in (if the contract had been performed) only by buying replacement sperm from [the U.S. company]. Whatever transactions she then chose to make with her patients are irrelevant to determining the value of what should have been, but was not, provided under the contract.

Thus, Justice Hayne, joined by Justices Crennan and Bell, allowed Plaintiff’s appeal and ordered the she receive damages on the terms she sought. Justice Keane agreed with the result. Justice Gageler did not.

Justice Gageler would have dismissed the appeal. He wrote:

The appropriate measure of [the Plaintiff’s] loss is so much of the cost to [the Plaintiff] of sourcing 1,996 straws of replacement sperm for the treatment of her patients as she had been, and would be, unable to recoup from those patients. That measure, adopted by the Court of Appeal, is appropriate because it yields an amount which places [the Plaintiff] in the same position as if the contract had been performed so as to provide her with the expected use in the normal course of her practice of 1,996 straws of the frozen sperm delivered to her by the company.

To [the Plaintiff’s] protest that adoption of that measure leaves her without an award of damages in circumstances where the company has been found to have breached its warranty, the answer lies in the way she has chosen to put her case. She has made a forensic choice to eschew the measure which, together with the Court of Appeal, I would hold to be the appropriate measure. 

Clark v. Macourt, [2013] HCA 56 (Dec. 18, 2013).

A Respite from after-hours Work Email

In France, two labor unions and two corporate business groups have signed an agreement guaranteeing managers eleven consecutive hours of “rest” per day.  During these eleven hours, managers are not to “check or feel pressured to check” their email after hours. http://www.wired.co.uk/news/archive/2014-04/11/france-work-emails-out-of-hours, the New York Times, April 12, 2014. Companies must develop their own specific policies on how to implement the agreement, which is yet to be approved by the Labor Ministry.  They could, for example, do so by shutting down servers entirely for the required amount of time or instructing managers not to check their email or communicate with their associates after hours.  In 2013, the German Labor Ministry similarly ordered its supervisors not to contact employees outside of office hours.  This is supposed to have a positive spill-over effect on non-managers whose bosses will have to leave them alone because of these no-email rules.  The rules are considered necessary in times of much around-the-clock global business communication.

In many northern European countries, including France, employees already typically enjoy labor and vacation laws mandating five to six weeks of paid vacation leave per year and work weeks of around 37 hours.  In Denmark, women get a year off for maternity leave.  Men have a right to paternity leave as well.  In France, the workers’ rights rules have been criticized for being a significant impediment to economic growth, a problem in times with unemployment there hovering around 10%.

In the United States, on the other hand, both daily and yearly work requirements are largely up to individually negotiated employment contracts between employers and employees.  The Fair Labor Standards Act (FLSA) does not limit the number of hours per day or per week that employees aged 16 years and older can be required to work.  The United States is the only advanced economy in the world that does not guarantee its workers any paid leave. The gap between paid time off in the United States and the rest of the world is even larger if legally mandated paid public holidays are included as the United States offers none whereas most of the rest of the world's rich countries offer between five and 13 paid public holidays per year.

In fact, the International Labour Office has found that after passing the Japanese as the world’s most overworked population in the mid-1990s, Americans have pulled way ahead of the pack. Americans now work an average of 1,979 hours a year, about three-and-a-half weeks more than the Japanese, six-and-a-half weeks more than the British and about twelve-and-a-half weeks more than their German counterparts.   A 2008 Harvard Business School survey of a thousand professional-level employees found that 94% worked fifty hours or more a week, and almost half worked in excess of sixty-five hours a week.

In certain industries such as the legal field, the system can reward workers for working longer, not smarter, via billable hour requirements. Seen from a company’s point of view, it may, at first blush, be considered to be cheaper to pay one person to work a hundred hours a week than two people to work fifty hours apiece, even if the overworked person is less productive. 

But does that hold true?  It seems obvious that an overworked, tired employee is not as productive as a rested employee and that quality of the work product may also suffer.  A Stanford study demonstrated that an employee who works 60 hours is actually a third less productive overall than an employee who puts in only 40 hours.  In other words, productivity during 60-hour weeks is, in total, less than two-thirds of what it is when only 40-hour weeks are worked.   This dramatic decrease in average productivity can be explained by the fact that due to the stress, fatigue and lack of sleep commonly associated with working too many hours, a worker’s average productivity becomes substantially less than what it is during normal working hours.  “Normal,” in this case, is considered 40, still hours more than what is considered a normal work week in Europe where productivity levels in several nations with such “low” weekly work hours exceed those in the USA.

The facts seem clear: overwork is inexpedient seen from both employers’ and employees’ point of view.  Nonetheless, the state of these affairs is unlikely to change in the foreseeable future in the United States.  Why is that?  In contrast to Europe, labor unions are, for the most part, frowned upon here, making it largely up to each individual employee to negotiate his/her employment contract.  Of course, the bargaining powers in that respect are very often highly unequal, especially in times of high unemployment.  That makes it hard to ask for more vacation and shorter work weeks.  Culture plays a role too: in Europe, there is not only more focus on employees’ rights and welfare than what is the case in many American work environments, but also much value placed on taking vacations.  In the United States, many employees do not even take the vacation they have earned, whether to appear more beneficial to the employer and thus avoid getting laid off or because work flows in this country may be expected to proceed so completely uninterruptedly that it is simply impossible for employees to be away from work for more than a few days at a time without client dissatisfaction.  The American work/life imbalance ought to be addressed for the benefit of the employees, the employers, and the future productivity of our nation in general.  Now, back to my email…

Weekly Top Tens from the Social Science Research Network

SSRN Top Downloads For
Contracts & Commercial Law eJournal

RECENT TOP PAPERS 

Rank	Downloads	Paper Title
1	723	Aftermarketfailure: Windows XP's End of Support  Andrew Tutt  Yale University - Information Society Project
2	331	Will Ticket Scalpers Meet the Same Fate as Spinal Tap Drummers? The Sale and Resale of Concert and Sports Tickets  Gregory M. Stein  University of Tennessee College of Law
3	198	Soft Law in the Organization and General Conduct of Commercial Arbitration Proceedings  Thomas Stipanowich  Pepperdine University School of Law
4	156	A Draft Australian Law of Contract  Ted Wright, M P Ellinghaus and D StL Kelly  University of Newcastle (Australia) - Faculty of Business and Law, University of Newcastle (Australia) - Faculty of Business and Law and University of Newcastle (Australia) - Faculty of Business and Law
5	142	Intuitions About Contract Formation  Tess Wilkinson‐Ryan and David A. Hoffman  University of Pennsylvania Law School and Temple University - James E. Beasley School of Law
6	131	Text and Context: Contract Interpretation as Contract Design  Ronald J. Gilson, Charles F. Sabel and Robert E. Scott  Stanford Law School, Columbia University - Law School and Columbia University - Law School
7	125	Killing Conscience: The Unintended Behavioral Consequences of 'Pay For Performance'  Lynn A. Stout  Cornell Law School - Jack G. Clarke Business Law Institute
8	123	Sovereign Bonds and National Relativism: Can New York Law Contracts Safely Cross the Atlantic?  Mathias Audit  University of Paris Ouest Nanterre La Defense
9	119	The Futility of Cost Benefit Analysis in Financial Disclosure Regulation  Omri Ben-Shahar and Carl E. Schneider  University of Chicago Law School and University of Michigan Law School
10	106	Document Appreciation: Some Characteristics of Legal Documents (and Talking with Students About Them)  Jay A. Mitchell  Stanford Law School

SSRN Top Downloads For
LSN: Contracts (Topic)

 

RECENT TOP PAPERS for all papers first announced in the last 60 days  
21 Feb 2014 through 22 Apr 2014

Rank	Downloads	Paper Title
1	142	Intuitions About Contract Formation  Tess Wilkinson‐Ryan and David A. Hoffman  University of Pennsylvania Law School and Temple University - James E. Beasley School of Law
2	130	Text and Context: Contract Interpretation as Contract Design  Ronald J. Gilson, Charles F. Sabel and Robert E. Scott  Stanford Law School, Columbia University - Law School and Columbia University - Law School
3	126	Coasean Keep-Away: Voluntary Transaction Costs  Jordan M. Barry, John William Hatfield and Scott Duke Kominers  University of San Diego School of Law, University of Texas at Austin and Harvard University
4	125	Killing Conscience: The Unintended Behavioral Consequences of 'Pay For Performance'  Lynn A. Stout  Cornell Law School - Jack G. Clarke Business Law Institute
5	123	Sovereign Bonds and National Relativism: Can New York Law Contracts Safely Cross the Atlantic?  Mathias Audit  University of Paris Ouest Nanterre La Defense
6	106	Document Appreciation: Some Characteristics of Legal Documents (and Talking with Students About Them)  Jay A. Mitchell  Stanford Law School
7	99	Introduction to Philosophical Foundations of Contract Law  Gregory Klass  Georgetown University Law Center
8	95	The Political Economy of Regulating Contract  Aditi Bagchi  Fordham University School of Law
9	84	Public Lands and the Federal Government's Compact-Based 'Duty to Dispose': A Case Study of Utah's H.B. 148 — The Transfer of Public Lands Act  Donald J. Kochan  Chapman University School of Law
10	74	The Utopian Promise of Private Law  Hanoch Dagan  Tel Aviv University - Buchmann Faculty of Law

Blog 1, General Mills 0

On Thursday, we posted about General Mills' new arbitration policy.  

On Friday, the blog was disabled by a series of Denial of Service attacks.

Coincidence?

Certainly.

Still, on Saturday, the New York Times reported that General Mills has retracted its new arbitration policy.  In short, we win.  A company spokesman was quoted in the Times saying, “Because our terms and intentions were widely misunderstood, causing concerns among our consumers, we’ve decided to change them back to what they were . . . .”  

In a blog post, General Mills strikes a slightly different tone  The company still claims that its terms were "misread."  The company's lawyers state: 

At no time was anyone ever precluded from suing us by purchasing one of our products at a store or liking one of our Facebook pages. That was either a mischaracterization – or just very misunderstood. 

I have to admit that I am one of the parties who "misunderstood" their terms as having been broadly drafted so as to be reasonably construable to cover just about any interaction with General Mills, its websites and its products.  So I (and everyone else who looked at the policy) may have been mistaken in its meaning.  Still, in short, we win.

In any case, the company acknowledges that its new policies went over like a lead balloon.  General Mills claims to have listened to the firestorm of criticism and therefore apologizes.  It's a real apology too -- none of this "I'm sorry if you were upset by your misunderstanding of our intent" or "I'm sorry if I unintentionally hurt anyone in any way."  The company states that it is sorry that it "even went down this path."  

However, having issued the apology, the company can't quite let it go.  The blog post points out that arbitration clauses are widespread and simply provide a cost-effective means of resolving legal claims.  

As Bob Sullivan points out," if arbitration is so great, why not make it voluntary instead of mandatory?"  I suspect that the answer has a lot to do with the class action waivers that now routinely accompany binding arbitration clauses.

UPDATE: A very insightful blog post on Concurring Opinions from Temple's Dave Hoffman (pictured).

Update on General Mills' Forced Arbitration Clause

Jeremy Telman's post yesterday provided a nice overview of General Mills' mandatory arbitration clause.  But wait - now there's more.  GM is apparently providing an "opt-out," but you have to read the fine print.  Bob Sullivan has an update of the controvery here and Fair Contracts.org has suggestions on how to address this problem through the political process.

Making the Fine Print Fair Symposium

For those of you unable to attend the "Making the Fine Print Fair" Symposium, hosted by the Georgetown Consumer Law Society and Citizen Works -Fair Contracts.org, here is a link to a Livestream of the program.  It was an absolutely terrific event with a great mix of academics, consumer advocates, regulators and practitioners.  The amazing line-up of speakers, included FTC Chair Edith Ramirez, consumer advocate Ralph Nader and NYT bestselling author Bob Sullivan. 

General Mills Leads the Way (Into Compelled Arbitration)

According to this article in today's New York Times, General Mills has added language to its website designed to force anyone who interacts with the company to disclaim any right to bring a legal action against it in a court of law.  If a consumer derives any benefit from General Mills' products, including using a coupon provided by the company, "liking" it on social media or buying any General Mills' product, the consumer must agree to resolve all disputes through e-mail or through arbitration.

The website now features a bar at the top which reads:

We’ve updated our Privacy Policy. Please note we also have new Legal Terms which require all disputes related to the purchase or use of any General Mills product or service to be resolved through binding arbitration. For more information on these changes, please click here. 

The Legal Terms include the following provisions:

• The Agreement applies to all General Mills products, including Yoplait, Green Giant, Pillsbury, various cereals and even Box Tops for Education;   
• The Agreement automatically comes into effect "in exchange for benefits, discounts," etc., and benefits are broadly defined to include using a coupon, subscribing to an e-mail newsletter, or becoming a member of any General Mills website;
• The only way to terminate the agreement is by sending written notice and discontinuing all use of General Mills products;
• All disputes or claims brought by the consumer are subject to e-mail negotiation or arbitration and may not be brought in court; and
• A class action waiver.

The Times notes that General Mills' action comes after a judge in California refused to dismiss a claim against General Mills for false advertising.  Its packaging suggests that its "Nature Valley" products are 100% natural, when in fact they contain ingredients like high-fructose corn syrup and maltodextrin.  The Times also points out that courts may be reluctant to enforce the terms of the online Agreement.  General Mills will have to demonstrate that consumers were aware of the terms when they used General Mills products.  And what if, when they did so, they were wearing an Ian Ayres designed Liabili-T?

Weekly Top Tens from the Social Science Research Network

SSRN Top Downloads For Contracts & Commercial Law eJournal

RECENT TOP PAPERS 

Rank	Downloads	Paper Title
1	328	Will Ticket Scalpers Meet the Same Fate as Spinal Tap Drummers? The Sale and Resale of Concert and Sports Tickets  Gregory M. Stein  University of Tennessee College of Law
2	196	Soft Law in the Organization and General Conduct of Commercial Arbitration Proceedings  Thomas Stipanowich  Pepperdine University School of Law
3	152	A Draft Australian Law of Contract  Ted Wright, M P Ellinghaus and D StL Kelly  University of Newcastle (Australia) - Faculty of Business and Law, University of Newcastle (Australia) - Faculty of Business and Law and University of Newcastle (Australia) - Faculty of Business and Law
4	135	Intuitions About Contract Formation  Tess Wilkinson‐Ryan and David A. Hoffman  University of Pennsylvania Law School and Temple University - James E. Beasley School of Law
5	121	Killing Conscience: The Unintended Behavioral Consequences of 'Pay For Performance'  Lynn A. Stout  Cornell Law School - Jack G. Clarke Business Law Institute
6	120	Sovereign Bonds and National Relativism: Can New York Law Contracts Safely Cross the Atlantic?  Mathias Audit  University of Paris Ouest Nanterre La Defense
7	109	Text and Context: Contract Interpretation as Contract Design  Ronald J. Gilson, Charles F. Sabel and Robert E. Scott  Stanford Law School, Columbia University - Law School and Columbia University - Law School
8	102	The Futility of Cost Benefit Analysis in Financial Disclosure Regulation  Omri Ben-Shahar and Carl E. Schneider  University of Chicago Law School and University of Michigan Law School
9	101	Boilerplate Shock  Gregory H. Shill  University of Denver Sturm College of Law
10	99	Document Appreciation: Some Characteristics of Legal Documents (and Talking with Students About Them)  Jay A. Mitchell  Stanford Law School

SSRN Top Downloads For LSN: Contracts (Topic)

RECENT TOP PAPERS 

Rank	Downloads	Paper Title
1	135	Intuitions About Contract Formation  Tess Wilkinson‐Ryan and David A. Hoffman  University of Pennsylvania Law School and Temple University - James E. Beasley School of Law
2	120	Sovereign Bonds and National Relativism: Can New York Law Contracts Safely Cross the Atlantic?  Mathias Audit  University of Paris Ouest Nanterre La Defense
3	120	Killing Conscience: The Unintended Behavioral Consequences of 'Pay For Performance'  Lynn A. Stout  Cornell Law School - Jack G. Clarke Business Law Institute
4	120	Coasean Keep-Away: Voluntary Transaction Costs  Jordan M. Barry, John William Hatfield and Scott Duke Kominers  University of San Diego School of Law, University of Texas at Austin and Harvard University
5	109	Text and Context: Contract Interpretation as Contract Design  Ronald J. Gilson, Charles F. Sabel and Robert E. Scott  Stanford Law School, Columbia University - Law School and Columbia University - Law School
6	99	Document Appreciation: Some Characteristics of Legal Documents (and Talking with Students About Them)  Jay A. Mitchell  Stanford Law School
7	94	The Political Economy of Regulating Contract  Aditi Bagchi  Fordham University School of Law
8	94	Introduction to Philosophical Foundations of Contract Law  Gregory Klass  Georgetown University Law Center
9	73	The Utopian Promise of Private Law  Hanoch Dagan  Tel Aviv University - Buchmann Faculty of Law
10	71	Anti-Herding Regulation  Ian Ayres and Joshua Mitts  Yale University - Yale Law School and Sullivan & Cromwell LLP

 

 

Call For Papers: AALS Section on Agency, Partnerships LLCs, and Unincorporated Associations

Bringing Numbers into Basic and Advanced Business Associations Courses:

How and Why to Teach Accounting, Finance, and Tax

2015 AALS Annual Meeting

Washington, DC 

          Business planners and transactional lawyers know just how much the “number-crunching” disciplines overlap with business law.   Even when the law does not require unincorporated business associations and closely held corporations to adopt generally accepted accounting principles, lawyers frequently deal with tax implications in choice of entity, the allocation of ownership interests, and the myriad other planning and dispute resolution circumstances in which accounting comes into play.  In practice, unincorporated business association law (as contrasted with corporate law) has tended to be the domain of lawyers with tax and accounting orientation.  Yet many law professors still struggle with the reality that their students (and sometimes the professors themselves) are not “numerate” enough to make these important connections.  While recognizing the importance of numeracy, the basic course cannot in itself be devoted wholly to primers in accounting, tax, and finance.

            The Executive Committee will devote the 2015 annual Section meeting in Washington to the critically important, but much-neglected, topic of effectively incorporating accounting, tax, and finance into courses in the law of business associations.  In addition to featuring several invited speakers, we seek speakers (and papers) to address this subject.  Within the broad topic, we seek papers dealing with any aspect of incorporating accounting, tax, and finance into the pedagogy of basic or advanced business law courses.

             Any full-time faculty member of an AALS member school who has written an unpublished paper, is working on a paper, or who is interested in writing a paper in this area is invited to submit a 1 or 2-page proposal by May 1, 2014 (preferably by April 15, 2014).  The Executive Committee will review all submissions and select two papers by May 15, 2014.  A very polished draft must be submitted by November 1, 2014.  The Executive Committee is exploring publication possibilities, but no commitment on that has been made.  All submissions and inquiries should be directed to Jeff Lipshaw, Chair.

AALS Section on Commercial and Related Consumer Law Call for Papers

Emerging Scholars in Commercial and Consumer Law

The AALS Section on Commercial and Related Consumer Law is pleased to announce a Call for Papers for its program during the AALS 2015 Annual Meeting.  The Annual Meeting is currently scheduled to take place in Washington, DC from January 2-6, 2015. 

As we all know, no area of the law is ever static.  New cases and issues arise that inform and challenge our thinking about existing laws and policies.  Such is the case for commercial and consumer law.  Whether concerning issues related to financial products, secured lending, arbitration, and the like, commercial and consumer law continue to evolve.  Central to this evolution is the emergence of new scholars who contribute their voices and perspectives to these areas of the law.  This panel will provide the valuable opportunity for pre-tenured professors to present and discuss their work with others in the field.  Panelists are welcome to discuss any topic related to commercial and/or consumer law.  Program and eligibility details are below.     

Moderator:

Professor Tracie R. Porter, Western State College of Law

Speakers:

Professor Andrea Freeman, University of Hawaiʻi at Mānoa William S. Richardson School of Law

Professor Dalié Jiménez, University of Connecticut School of Law

Professor David Min, University of California, Irvine School of Law

Two speakers to be selected from a call for papers

Submission requirements:

Format:  There is no formal requirement as to the form or length of proposals.  Preference will be given to proposals that are substantially complete and to papers that offer novel scholarly insights.  A paper may have already been accepted for publication as long as it will not be published prior to the Annual Meeting.  The Section does not have plans to publish the papers, so individual presenters are free to seek their own publishing opportunities.

Eligibility:    Since the goal of the program is to provide opportunities for pre-tenured professors, panelists selected from the Call for Papers must not have received tenure at their institution by January 15, 2015.  Per AALS rules, only full-time faculty members of AALS member law schools are eligible to submit a paper to a Section’s call for papers.  Fellows from AALS member law schools are also eligible to submit a paper but must include a CV with their proposal.  Faculty at fee-paid law schools, visiting faculty with no full time appointment at a member school, international and adjunct faculty members, graduate students, and non-law school faculty are not eligible to submit.  All panelists, including speakers selected from this Call for Papers, are responsible for paying their own annual meeting registration fee and travel expenses.

Deadline:  AUGUST 15, 2014.  Please email submissions, in Word or PDF format, to the Program Committee c/o Eboni Nelson at [email protected] with “CFP Submission” in the subject line. 

First Circuit Grants Verizon's Motion to Compel Arbitration in a Fraud Suit

Last month, the First Circuit decided Grand Wireless, Inc. v. Verizon Wireless, Inc.  In 2002, Grand Wireless (Grand) entered into an Agreement to serve as an exclusive agent for Verizon Wireless (Verizon) within a defined geographic area.  The Agreement had a five-year term, after which it became month-to-month, terminable on thirty days' written notice.  The Agrement also provided for arbitration of all disputes by the American Arbitration Association (AAA).  

Verizon gave notice of its intention to terminate the relationship on July 19, 2011.  At Grand's request, the relationship was extended until October 31, 2011 so that Grand could sell its stores to another Verizon agent.  Grand alleged that, during the month of October 2011, Verizon employee Erin McCahill sent out a postcard to Grand's customers notifying them that Grand's stores had closed and directing them to the nearest Verizon dealers.  Grand alleged that McCahill knew that this information was false when she sent it out. Grand further alleged that this mailing caused its business to collapse as the mailing caused its negotiations with T-Mobile to fail.  Grand filed an action in state court against McCahill and Verizon alleging fraud and federal RICO violations.

Verizon removed the case to federal court and then moved to compel arbitration.  The District Court denied the motion without opinion, simply adopting the arguments in Grand's memorandum of law.  So the District Court agreed with Grand that its claims were not covered by the arbitration clause and that McCahill, a non-party, could not rely on the arbitration clause.

The First Circuit reversed.  As to the first issue, the First Circuit found it "clear that Grand’s claims 'arise out of or relate to' the Agreement and therefore fall within the scope of the arbitration clause."  Even if it were a close call, the Court noted, the presumption in favor of arbitration would apply.

As to the second issue, Verizon argued that because "Ms. McCahill was acting as an agent of Verizon and the claims against her 'relate solely to her performance as an employee,' she is entitled to invoke the arbitration clause."  The First Circuit agreed: "Verizon and Grand certainly wished to have their disputes settled by arbitration. Since Verizon could operate only through the actions of its employees, it would have made little sense to have agreed to arbitrate if the employees could be sued separately without regard to the arbitration clause."  

This ruling is consistent with those of other Circuit Courts that have addressed the issue.  However, in Arthur Andersen LLP v. Carlisle, 556 U.S. 624 (2009), the U.S. Supreme Court held that state law controls whether a non-party to an arbitration agreement seek protection under  that agreement.  But Carlisle did not address whether employees could avail themselves of the arbitration agreements entered into by their employers, and the case indicated no intention to overrule the Circuit Court rulings indicating that employees could avail themselves of such agreements.   In any case, the Court found that Grand had identified no principle of New York state law indicating that McCahill should be prohibited form enjoying the protections of her employer's arbitration agreement.  

 

We're #35! Readership up 80%

Six months ago, we reported that our blog is ranked #41 in the top 50 law blogs (or blawgs) and that we had experienced a healthy 9% growth in our readership over the previous 12-month period.

Today, Paul Caron announced on the TaxProf Blog that we have climbed to #35, with a 79.9% increase in our readership.  

Thanks to all of our contributors and to our readers.  We hope the upward trend continues.

CALL FOR PROPOSALS - AALS ANNUAL MEETING 2015

The AALS Contracts Section has issued its call for papers for the 2015 AALS Annual Meeting in Washington, D.C. - please see below:

 

 

CALL FOR PROPOSALS

ASSOCIATION OF AMERICAN LAW SCHOOLS (AALS)

SECTION ON CONTRACTS

2015 ANNUAL MEETING

JANUARY 2-5, 2015

 

MIND THE GAP!  -- CONTRACTS, TECHNOLOGY AND LEGAL GAPS

 

The AALS Contracts Section solicits proposals for presentations at the Section’s Annual Meeting program, Mind the Gap!  - Contracts, Technology and Legal Gaps, to be held in Washington, D.C. on January 2-January 5, 2015.

Technological innovation has created new challenges for the law.  New technologies often create legal and ethical questions in areas such as privacy, employment, reproduction and intellectual property.   Who owns the data collected by embedded medical devices?  Can employers wipe departing employees’ phone data?  To what extent are companies liable for harms created by their inventions, such as driverless cars?  Who owns crowd sourced content? 

Courts and legislatures are often slow to respond to these issues.  To fill this legal gap created by rapid advancements in technology, businesses and individuals attempt to reduce their risk and uncertainty through private ordering.  They limit their liability and allocate rights through contractual provisions.  Technology affects the way contracts are used as well.  Employers may have employees agree to remote phone wiping policies in their employment agreement or through click wrap agreements that pop up when they connect to the network server.  Through contracts, businesses establish norms that can be hard to undo.  The norm of licensing instead of selling software, for example, was established through contract and has become entrenched as a business practice.  The collection of online personal information through online contracts is another example. 

The Section seeks two or three speakers to join our panel of invited experts to discuss how technology has affected the use of contracts.  How have parties used contracts to address the risks created by technologies?  In what ways have contracts been used to privately legislate in the gap created by technological advancements? What concerns are raised when private ordering is used to fill the legal gap created by technology?  What are, or should be, the limits of consent and contracting where emerging technologies are involved? 

Drafts and completed papers are welcome though not required, and must be accompanied by an abstract.  Preference will be given to proposals that are substantially complete.  Please indicate whether the paper has been published or accepted for publication (and if so, provide the anticipated or actual date of publication).  There is no publication requirement, but preference will be given to papers that will not have been published by the date of the Annual Meeting.

We particularly encourage submissions from contracts scholars who have been active in the field for ten years or less, especially those who are pre-tenured, as well as more senior scholars whose work may not be widely known to members of the Contracts Section.  We will give some preference to those who have not recently participated in the Section’s annual meeting program. 

DEADLINE:  August 15, 2014.  Please e-mail an abstract or proposal to section chair, Nancy Kim ([email protected]) with “AALS Submission” in the title line by 5:00pm (Pacific Time) August 15, 2014.  Submissions must be in Word or PDF format. 

 

Sour Grapes: Wine Snob's Lawsuit is Dismissed

I opened the box of wine for this case out of N.Y. Civil Court (where else?!):

In January 2013, defendants sent plaintiff, via email, an advertisement advising plaintiff of the availability for purchase of up to 240 bottles of 2009 Cune Vina Rioja Crianza wines. The advertisement stated:

Yesterday, we sampled the 2009 Cune Vina Real Crianza and we were very impressed. The old world style of Rioja is on a roll. Much to the chagrin of Jorge Ordonez and Eric Solomon. Even Robert Parker [ed note: wikipedia bio] could not hide his approval of this wine, blasting out a 91 point score on this one. I am not sure what 91 points means these days, but you probably do…

The rest of the advertisement contained a WA score of 91 and a quotation from Robert Parker describing the wine and the $12.99 per bottle price of the wine. Based upon this advertisement and believing that the 2009 Cune Vina Rioja Crianza was the equivalent of a Marquis Riscal, plaintiff purchased six bottles of the offered wine. After receiving the wine, plaintiff did not like the wine, found it mediocre and to be of poor quality and determined based upon his own opinions that the wine was worth no more than seven dollars per bottle. Plaintiff then demanded a refund for the six bottles he purchased. Citing store policy, defendants refused to refund plaintiff but offered to allow plaintiff to return the five unopened bottles for store credit.

After an email exchange of name calling, plaintiff then commenced a lawsuit alleging, among other things, that defendants fraudulently induced plaintiff into purchasing the wine.  The court dismissed plaintiff's claim as flabby and austere, with hints of barnyard:

In order to plead a prima facie case of fraud, a plaintiff must allege each of the elements of fraud with particularity and must support each element with an allegation of fact (Fink v. Citizens Mortg. Banking Ltd., 148 AD2d 578 [2nd Dept 1989]). To plead a prima facie case of fraud the plaintiff must allege representation of a material existing fact, falsity, scienter, deception and injury (Lanzi v. Brooks, 54 AD2d 1057 [3rd Dept 1976]). Plaintiff has not made out a prima facie case on several of the elements. Plaintiff has focused his fraud claim on the fact that defendant represented the wine as a 91 point wine. The advertisement states that even Robert Parker rated this as a 91 point wine and continued that defendants were not sure what a 91 point wine wasanymore. Plaintiff alleges that this advertisement fraudulently induced him into buying the wine. However, plaintiff does not provide even a scintilla of evidence that the advertisement contained any fraud at all. Plaintiff does not allege that Robert Parker did not rate this wine 91 points and plaintiff has acknowledged that defendants did not themselves give the wine a rating. Rather, plaintiff assumed on his own that the wine was "even better than a Marquis de Riscal" and decided to purchase the wine based upon this. When the wine did not measure up to his subjective tastes, he decided that the wine was not as advertised. However, plaintiff has not demonstrated at even the minimum prima facie level that any deception took place, that there was any falsity or anything other than plaintiff's assumptions were incorrect. Thus, the second cause of action is dismissed.

This makes a fun fact pattern if you change the claims to breach of express or implied warranties.  In particular, is a 91 wine score (whatever that means) a statement of opinion or fact?

Cheers!

Seldon v. Grapes, CV-20953/13-NY, NYLJ 1202650165299, at *1 (Civ., NY, Decided March 20, 2014).