ContractsProf Blog

The Contracts LibGuide, Season 2

Last year, I started teaching my first-year contracts course with the aid of a LibGuide, as discussed in this previous post.   To review, here are the advantages of the LibGuide

• I have all the cases, as well as links to Restatement and UCC sections and exercises that I use in the class (and then some), edited to my tastes and available to the students whether or not they have their hard copies with them;
• Cuts the costs of buying course materials from $150-200 to $15;
• Enables me to change the readings for my course in ways that I choose rather than in ways that casebook editors choose;
• Much easier to deal with (for me and my students) than Blackboard (the Voldemort of educational technology); and
• Provides helpful links to CALI guides, other study aids, contracts videos, and old exams

The original curator of the LibGuide, whose name escapes me, has gone on to take a position at another law school.  Drat.

But the good news is that Debra Denslaw (pictured) is now helping us to keep the LibGuide up to date.

I would welcome suggestions for ways to improve the LibGuide.  If you have free materials that would be helpful for first year students to which we could link, please let me know, and we will try to find a place for them on the LibGuide.  Anyone who would like to use the LibGuide for their teaching is welcome to do so.  

For fans of the blog who find it hard to find those memorable blog posts relevant to the cases you can teach, we gone through the blog and placed below each case links to posts that relate to that case.

ADR Section’s Eighth Annual Works-in-Progress Conference

If you write about arbitration, dispute resolution in general, or related topics (mandatory arbitration clauses come immediately to mind), you may be interested in presenting your current research at the AALS ADR Section’s Eighth Annual Works-in-Progress Conference in November 2014 at .   Southwestern Law School 

The Conference:  The Conference has traditionally provided a welcoming and interactive forum where scholars from across the country can share their current research, obtain feedback, exchange ideas, reconnect with colleagues and build new collaborative working relationships.  At the conference, junior and senior dispute resolution scholars present their current work-in-progress, ranging from research ideas for a future article to full draft papers. Conference attendees share their insights about the presentation topic and offer constructive feedback to the presenter.

 

The Schedule:  The Conference will begin with a welcoming reception hosted by Southwestern on the evening of Thursday, November 6.  Friday, November 7 will feature a full day of presentations, along with continental breakfast, luncheon and dinner for all registrants hosted by Southwestern.  The Conference will conclude on Saturday, November 8 with a half-day of presentations, as well as continental breakfast and lunch hosted by Southwestern.  

 

Registration:  Registration is now open for this year’s Conference.  To register or to get more information, please go to www.swlaw.edu/adrwip.  There is no registration fee; attendees are responsible for their own travel and lodging expenses. 

To download an informational flyer about the Conference, click here. 

FedEx Drivers Are Employees, Ninth Circuit Finds

"Fedexgroundtruck" by Coolcaesar at en.wikipedia - 

According to FedEx, the people who drive up to your house in FedEx trucks, wearing FedEx uniforms and delivering FedEx packages are not FedEx employees.  They are independent contractors.  In Alexander v. FedEx Ground Package System, Inc. , a Ninth Circuit panel applying California law unanimously held otherwise, reversing an earlier multi-district court decision and remanding for an entry of summary judgment in favor of plaintiffs on the question of their employment status.

A class of 2300 drivers brought claims against FedEx claiming entitlement to expenses and overtime under California law.  They also brought claims under the federal Family and Medical Leave Act.  Their entitlment to relief turns on their status as employees.  

The opinion is long and detailed, but it basically comes down to this.  The drivers sign an Operating Agreement (OA) which has language suggsting that the drivers enjoy the sort of independence ordinarily associated with independent contractors.  The Ninth Circuit found that, notwithstanding the OA, FedEx controls the terms and conditions of its drivers' work the way it would for an employee.  

Under California law, a person is an employee if the alleged employer has a right to control the purported employee's on-the-job conduct: “The principal test of an employment relationship is whether the person to whom service is rendered has the right to control the manner and means ofaccomplishing the result desired.”  In addition, the right to terminate at will and without cause is a strong indicator of an employment relationship.  The court lists a number of additional factors as well.  The court carefully examined the nature of the relationship and found that FedEx clearly exercised a right to control the conduct of its drivers.

Intervening Illegality of Underlying Promises Does Not Cause Contract to Fail for Lack of Consideration; Does Not Breach Warranty

What happens when a party to an agreement terminates and begins to make quarterly termination (liquidated damage) payments as promised and then, while payments are being made, a law is past that makes the underlying promised performance illegal?  The parties are sorting this out in a case against Orbitz.

In 2005, Orbitz and Trilegiant entered into an agreement (“Master Service Agreement,” or “MSA”) for Orbitz to provide “DataPass” marketing services.  Pursuant to the MSA, Orbitz marketed Trilegiant’s services to Orbitz customers.  If a customer enrolled in Trilegiant’s services, Orbitz would transfer the customer’s billing and credit card info to Trilegiant and, thereafter, Trilegiant would charge the customer and pay Orbitz a commission.  As a result, customers were charged for Trilegiant’s services without ever affirmatively providing their credit card information to Trilegiant (though, they had arguably agreed to be charged when purchasing travel arrangements on the Orbitz site – I leave that part to Nancy Kim). 

Customers eventually complained about their credit cards being charged without their knowledge.  In 2007, Orbitz notified Trilegiant that it would be terminating the MSA.  The MSA allowed for early termination but required Orbitz to make a series of quarterly termination payments (totaling over $18 million) through 2016.

In 2010, Congress enacted the Restore Online Shopper Confidence Act (“ROSCA”), which made the DataPass marketing practice illegal.  Orbitz stopped making the quarterly termination payments to Trilegiant.  Trilegiant sued Orbitz in New York and a recent decision of the trial court (Supreme Court, New York County, Ramos, J.) granted Trilegiant summary judgment on 3 of Orbitz’s 17 affirmative defenses. 

First, the court rejected Orbitz’s defense of lack of consideration.  The court explained:

Orbitz contends that there had to be consideration for each quarterly termination payment and that Trilegiant's continued use of DataPass is necessary to its claim against Orbitz.  Orbitz argues that the consideration for the termination payments was supposed to be Trilegiant's forfeit of potential earnings, earnings that Trilegiant cannot forfeit if it is not in the business of DataPass (see Orbitz's Memorandum of Law at 8-9).

The law does not support Orbitz's argument. It is well settled that an agreement "should be interpreted as of the date of its making and not as of the date of its breach" (X.L.O. Concrete Corp. v John T. Brady and Co., 104 AD2d 181, 184 [1st Dept 2009]). Additionally, "[i]f there is consideration for the entire agreement that is sufficient; the consideration supports every other obligation in the agreement" (Sablosky v Edward S. Gordon Co., 73 NY2d 133, 137 [1989]).  A single promise "may be bargained for and given as the agreed equivalent of one promise or of two promises or of many promises. The consideration is not rendered invalid by the fact that it is exchanged for more than one promise" (2-5 Corbin on Contracts § 5.12).

Considerations of public policy also support this conclusion, because a promisor should not be permitted to renege on a promise either because that specific promise lacks textually designated consideration or because the promisor wants to avoid performance of multiple obligations when the promisee has already performed and has no further obligations concurrent with the promisor's performance (see 15 Williston on Contracts §45:7 [4th ed.]).

While Orbitz contends that Trilegiant has been unable to forfeit earnings from new DataPass customers since it ceased the practice in January 2010, that fact has no bearing on whether there was consideration for the termination payment provision in the MSA.  The termination payments were part of the original MSA (see MSA at Ex. B), and Trilegiant is correct when it asserts that the existence of consideration for the MSA itself, whether "consist[ing] of either a benefit to the promisor or a detriment to the promisee" (Weiner v McGraw-Hill, 57 NY2d 458, 464 [1982]), is not a disputed material fact in this case.

Additionally, courts do not look to the adequacy of consideration provided that there was consideration, "absent fraud or unconscionability" (Apfel v Prudential-Bache Sec. Inc., 81 NY2d 470, 476 [1993]). There are no allegations that the MSA was fraudulently agreed upon or that it is unconscionable.  Further, this Court has already held that the termination payments in the MSA do not constitute a penalty or unenforceable liquidated damages (see NYSCEF Doc. No. 97 at ¶5, Order entered 12/24/2013).

As this Court has previously stated, if these sophisticated parties to the original MSA wanted Orbitz's promise to pay each quarterly termination payment to be contingent on Trilegiant's continued use of DataPass and subsequent forfeiture of revenues, they could have so stipulated in the MSA (see NYSCEF Doc. No. 89 at p 6, Entered 10/7/2013).  This Court finds that Orbitz's promise to pay all quarterly termination payments is supported by the same bargained-for consideration given by Trilegiant in exchange for Orbitz's various promises in the MSA as a whole.

Second, the court rejected Orbitz’s argument that Trilegiant lacked standing because it could not show that it was “ready, willing and able” to perform its obligations.  The court reasoned:

Orbitz argues that its early termination in 2007 triggered the MSA liquidated damages remedy and that even though Trilegiant was relieved of its obligation to perform it still had to show it was able.  Orbitz further argues that Trilegiant has adduced "no evidence whatsoever to prove that it was ready, willing, and able to perform its obligations under the MSA as of the time Defendants stopped making payments in 2010" (Orbitz's Memorandum of Law at p 10).

Whether the remedy constitutes liquidated damages or a separate provision of the MSA that establishes new obligations for Trilegiant and Orbitz whereby Orbitz is obligated to make quarterly payments and Trilegiant essentially is obligated only to collect them, is irrelevant in light of the fact that Trilegiant claims only general damages, which "include money that the breaching party agreed to pay under the contract" (See Biotronik A.G. v Conor Medsystems Ireland, LTD 22 NY3d 799, 805, [2014] citing Tractebel Energy Marketing, Inc. v AEP Power Marketing, Inc., 487 F3d 89, 109 [2d Cir 2007]). 

Trilegiant is not required to show its ability to perform through September 30, 2016, the date of the final quarterly termination payment.  Even if, arguendo, Trilegiant was required to show it could have performed its obligations under the MSA, Orbitz's argument that those obligations would have included an ability to perform DataPass is unpersuasive.  Whether Exhibit B of the MSA constitutes liquidated damages or a separate provision of the contract, Trilegiant is not textually obligated to do anything except not market to Orbitz's customers.

Furthermore, liquidated damage clauses benefit both potential plaintiffs "who [are] relieved of the difficult, if not impossible, calculation of damage, item by item" and potential defendants "who [are] insulated against a potentially devastating monetary claim in the event" of a breach and "[t]hus, public policy is served by the implementation of such clauses" (X.L.O. Concrete Corp. at 186).

Finally, the court rejected Orbitz’s argument that Trilegiant violated a warranty provision in the MSA in which the parties promised that performance of the agreement did not violate any law.  The court reasoned:

While Orbitz contends that Trilegiant and similar DataPass practitioners "violated the rights of millions of Americans" (Orbitz's Response at 13), ROSCA does not refer to the violation of consumers' "rights" when it describes the actions of third party sellers, such as Trilegiant, who purchased consumers' credit card information (15 U.S.C. §8401 at Sec. 2).  ROSCA's findings instead refer to DataPass as something that undermined consumer confidence and "defied consumers' expectations" (id. at Sec. 2(7)).

This Court has already held that ROSCA does not make any violating contracts unenforceable and the MSA is enforceable despite DataPass being presently illegal (see NYSCEF Doc. No. 89 at p 5, Entered 10/7/2013). Moreover, as this Court has already explained, "the primary purpose of ROSCA was to protect consumers (15 U.S.C. §8401), not marketers that were using DataPass as a tool" (NYSCEF Doc. No. 89 at p 4, Order entered 10/7/2013, citing Lloyd Capital Corp. v Pat Henchar, Inc., 80 NY2d 124, 127 [1992]).

Orbitz claims that Trilegiant has failed to show that it was not in violation of Section 6.1 of the MSA, based on the concept that an "express warranty is as much a part of the contract as any other term" (CBS, Inc. v. Ziff-Davis Pub. Co., 75 NY2d 496, 503 [1990]).

A breach of warranty claim is established "once the express warranty is shown to have been relied on as part of the contract," and the claiming party then has "the right to be indemnified in damages for its breach [and] the right to indemnification depends only on establishing that the warranty was breached" (id. at 504).

Orbitz argues that there are disputed issues of fact as to Trilegiant's alleged breach of warranty, but Orbitz has not alleged damages for which it could be indemnified nor has it alleged any evidence of Trilegiant's breach of warranty that is not rooted in ROSCA's condemnation of DataPass. This Court has already held that ROSCA's enactment and findings do not relieve Orbitz from its obligations under the MSA, holding that "as a general rule also, forfeitures by operation of law are disfavored, particularly where a defaulting party seeks to raise illegality as a sword for personal gain rather than a shield for the public good" (NYSCEF Doc. No. 89 at p 4, Entered 10/7/2013, quoting Lloyd Capital Corp. at 128 [internal  quotations omitted]).

Orbitz tries to use ROSCA's findings that DataPass was bad for consumers and the economy and Trilegiant's cessation of DataPass activity as evidence of conduct that would violate the MSA Section 6.1. These allegations do not create a question of fact. This Court has already held that "ROSCA does not provide that any violating contracts are rendered unenforceable or that its provisions were intended to apply retroactively" (see NYSCEF Doc. No. 89 at p 5, Entered 10/7/2013), and Trilegiant ceased DataPass almost a year before ROSCA made the practice illegal.

A case worth watching.

Trilegiant Corp. v. Orbitz, LLC, 2014 NY Slip Op 24230 (Sup. Ct. N.Y. Cty. Aug. 20, 2014)(Ramos, J.).

Third Circuit Says that Courts Decide the "Gateway Question" of the Availability of Class Arbitration

The question before the Third Circuit in Opalinski v. Robert Half Int'l Inc. was whether a court or the arbitrator should decide on the availability of class arbitration.  The Court held that the issue was akin to the question of arbitrability itself and so, absent agreement to the contrary, the issue is one for the court.  

The posture of the case is interesting.  Robert Half International (RHI) had filed a motion to compel individual arbitration of David Opalinski's Fair Labor Standard Act claims.  The District Court granted the motion to compel but did not rule on RHI's demand for individual arbitration.  The arbiter issued a partial award in Mr. Opalinski's favor and permitted class arbitration.  At that point, RHI went back to the District Court and moved to vacate the partial award.  The District Court denied that motion, and RHI appealed.  The key issue on appeal was whether the District Court or the arbiter should decide the availability of class arbitration.

The Third Circuit resolves the issue as follows:

We read the Supreme Court as characterizing the permissibility of classwide arbitration not solely as a question of procedure or contract interpretation but
as a substantive gateway dispute qualitatively separate from deciding an individual quarrel. Traditional individual arbitration and class arbitration are so distinct that a choice between the two goes, we believe, to the very type of controversy to be resolved.

The court then went on to note that the Sixth Circuit, the only other Circuit to have ruled on the manner, resolved the issue in the same way.

 

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	262	Facilitating Mergers and Acquisitions with Earnouts and Purchase Price Adjustments  Albert H. Choi  University of Virginia School of Law
2	208	The Scope and Potential of FTC Data Protection  Woodrow Hartzog and Daniel J. Solove  Samford University - Cumberland School of Law and George Washington University Law School
3	159	Contract as Empowerment: A New Theory of Contract  Robin Bradley Kar  University of Illinois College of Law
4	146	What We Consent to When We Consent to Form Contracts: Market Price  Kenneth K. Ching  Regent University - School of Law
5	121	Governing Law on Forum-Selection Agreements  Kevin M. Clermont  Cornell Law School
6	117	The Rise and Fall of Unconscionability as the 'Law of the Poor'  Anne Fleming  Georgetown University Law Center
7	91	The Construction of Commercial Contracts  John Carter  University of Sydney - Faculty of Law
8	78	Alternative Entities in Delaware - Reintroduction of Fiduciary Concepts by the Backdoor?  Douglas M. Branson  University of Pittsburgh School of Law
9	78	Leases and Executory Contracts in Chapter 11  Kenneth Ayotte  University of California, Berkeley - School of Law
10	72	The Death of Contracts  Franklin G. Snyder and Ann M. Mirabito  Texas A&M University School of Law and Baylor University - Hankamer School of Business

SSRN Top Downloads For LSN: Contracts (Topic)
RECENT TOP PAPERS 

Rank	Downloads	Paper Title
1	159	Contract as Empowerment: A New Theory of Contract  Robin Bradley Kar  University of Illinois College of Law
2	146	What We Consent to When We Consent to Form Contracts: Market Price  Kenneth K. Ching  Regent University - School of Law
3	117	The Rise and Fall of Unconscionability as the 'Law of the Poor'  Anne Fleming  Georgetown University Law Center
4	91	The Construction of Commercial Contracts  John Carter  University of Sydney - Faculty of Law
5	78	Alternative Entities in Delaware - Reintroduction of Fiduciary Concepts by the Backdoor?  Douglas M. Branson  University of Pittsburgh School of Law
6	72	The Death of Contracts  Franklin G. Snyder and Ann M. Mirabito  Texas A&M University School of Law and Baylor University - Hankamer School of Business
7	71	Cognition and Reason: Rethinking Kelsen in the Context of Contract and Business Law  Jeffrey M. Lipshaw  Suffolk University Law School
8	67	Credible Threats  Saul Levmore and Ariel Porat  University of Chicago Law School and Tel Aviv University
9	56	Legal Regulation of Combating Corruption. Report of the LSGL's Research Group  Eduard Ivanov, Annette van der Merwe, Philip Stevens, Thiago Bottino, Lie Uema do Carmo,Paulo Clarindo Goldschmidt, Heloisa Estellita, Murat Onok, Laura Scomparin, Serena Quattrocolo, Michael Nietsch, Tunde Ogowewo, Dean Sudarshan and Maria Lúcia de Pádua Lima  National Research University Higher School of Economics, University of Pretoria, University of Pretoria - Faculty of Law, FGV Direito Rio, Fundacao Getulio Vargas (FGV-EESP), Fundacao Getulio Vargas (FGV-EESP), Fundacao Getulio Vargas (FGV-EESP), Koc University, University of Turin, University of Turin, EBS Universität für Wirtschaft und Recht, King's College London – The Dickson Poon School of Law, O.P. Jindal Global University (JGU) - Jindal Global Law School (JGLS) and São Paulo Law School of Fundação Getulio Vargas FGV DIREITO SP
10	43	Disclaimers of Contractual Liability and Voluntary Obligations  Michael G. Pratt  Queen's University (Canada) - Faculty of Law

 

Some additional thoughts about the Salaita case

As Jeremy Telman previously noted, the unhiring of Steven Salaita has caused quite a stir in academic circles.  There was even an article in the Chronicle of Higher Education briefly discussing the contractual issues, which included the arguments made by Prof. Michael Dorf and Prof. David Hoffman.  I think they both have good arguments but I tend to think  this is a real contract and not an issue of promissory estoppel.  The reason I believe this has to do with what constitutes a "reasonable interpretation" under these circumstances.  I think both parties intended a contract and a "reasonable person" standing in the shoes of Salaita would have believed there was an offer.  The offer was clearly accepted.  What about the issue regarding final Board approval? Does that make his belief there was an offer - which he accepted -  unreasonable?  I don't think so given the norms surrounding this which essentially act as gap fillers and the way the parties acted both before and after the offer was accepted.  I think the best interpretation - really, the only reasonable one given the hiring practices in academia - is that the Board approval was a rubber stamp but one that could be withheld if the hired party did something unexpected, like commit a crime.  In other words, I think there was an offer that was accepted and that the discretionary authority of the board to approve his appointment was subject to the duty of good faith and fair dealing - i.e. the Board would only withhold approval for good cause.  I don't think this was a conditional offer - the language would have to be much more explicit than it seemed to be and to interpret it that way would constitute a forfeiture (which courts don't like) - and yes, I considered whether it could be a condition to the effectiveness of a contract.  That question caused me some angst but I still don't think it was given the hiring norms in general, and the way the parties acted. 

There was, however, an implied term in the contract that Salaita would not do anything or that no information would come out that would change the nature of the bargain for the university.  For example, if it turned out that he didn't really have a PhD or that he plagiarized some of his work, that would be grounds for the Board to refuse to approve his appointment.  In that case, the Board could refuse to approve his hiring without breaching its good faith obligation.

The real dispute here is whether Salaita's tweets constituted a breach of that implied term (i.e. did it undermine the bargain that the university thought it was getting?)  I think that's really what the disagreement in the academic community is about and why the real contractual issue has to do with interpretation - and the meaning of academic freedom.

 

More New on SSRN from Robin Kar

A few weeks ago, we noted that University of Illinois' Robin Kar's new article, Contract as Empowerment: A New Theory of Contract was available on SSRN.  The article has since been recommended as the "Download of the Week" and praised by Larry Solum on his Legal Theory Blog as "deeply interesting and important."

In our last post, we alerted readers of more to come from Professor Kar, and here it is:  Contract as Empowerment II: Harmonizing the Case Law.  Here is the abstract from SSRN.

In Contract as Empowerment, at http://ssrn.com/abstract=2476148, I develop a new theory of contract, “Contract as Empowerment”. This article applies that theory to a broad range of doctrinal problems and argues that contract as empowerment offers the best general interpretation of contract law. 

The argument proceeds in two stages. First, I identify a core set of legal doctrines, which provide an especially suitable test for different interpretations of contract. Second, I argue that contract as empowerment has the unique capacity to explain this entire constellation of doctrines. Along the way, contract as empowerment offers (1) a more compelling account of the consideration doctrine than exists in the current literature; (2) a more penetrating account of the expectation damages remedy; and (3) a concrete framework to determine the appropriate role of certain doctrines like unconscionability, which limit freedom of contract. Contract as empowerment also explains key doctrines and answers central puzzles at each basic stage of contract analysis. When coupled with its other normative and explanatory advantages, contract as empowerment thus offers the best general interpretation of contract. 

The whole of this explanation is, moreover, greater than the sum of its parts. Because of its harmonizing power, contract as empowerment demonstrates how a broad range of seemingly incompatible surface values in modern contract law can work together — each serving its own distinct but partial role — to serve a more fundamental principle distinctive to contract. These surface values include the values of fidelity, autonomy, liberty, efficiency, fairness, trust, reliance and assurance, among others. The current theory suggests that many seeming conflicts between doctrines that serve these values are not, in fact, zero-sum games. So long as the complex interlocking rules of contract are fashioned in the right way, these doctrines can work together to serve a deeper and normatively satisfying principle of empowerment distinctive to contract. This framework can be used to guide legal reform and identify places where market regulation is warranted and needed in many different contexts of exchange — from those involving consumer goods to labor, finance, credit, landlord-tenant, home mortgages and many others.

There is also a deeper implication of contract as empowerment. Contract as empowerment reinterprets the basic nature of contract law and many related forms of economic activity. It suggests that contract law is not simply a set of rules that aim to maximize efficiency and promote personal consumption, rooted solely in competition and self-interest run wild. Contract law is instead a set of rules that produce genuine legal obligations in part because its rules are simultaneously personally empowering and reflective of a deeper moral ideal of equal respect for persons. If — as this article argues — this represents the best general interpretation of contract, then contracts and many related market activities have a distinctive moral fabric that has been running through them for some time now. This moral fabric has been obscured by classical economic interpretations but cannot be ignored in any true social science of these phenomena. Contract as empowerment seeks to cure these distortions. It can lead to a distinctive societal self-understanding, which better integrates economic activity into lives that brim with moral and civic virtue.

Browsewrap Decision out of the Ninth Circuit

http://www.flickr.com/photos/
traftery/5532966191/ 

Towards the end of 2011, Barnes & Nobles (B & N) decided to liquidate its inventory of HP Touchpads (left), by offering them for sale at deep discounts at a "fire sale."  Kevin Khoa Nguyen (Nguyen) acted quickly to take advantage of this opportunity and purchased two units through the B & N website.  He first received an e-mail confirmation of the transaction and then an e-mail cancellation of the transaction due to unexpectedly high demand.

Nguyen sued and attempted to do so on behalf of a class of plaintiffs who had had their HP Touchpad purchases cancelled.  B & N responded in the now-expected it manner.  Pointing to the link to its Terms of Use, visible on multiple pages visited by Mr. Nguyen, B & N moved to compel arbitration, which in accordance with its Terms of Use (the familiar story continues), requires that claims be adjudicated on an individual basis with no possibility of class actions or class arbitration.

Nguyen argued that he did not read or otherwise have notice of B & N's terms and did not assent to them.  The District Court agreed and denied B & N's motion to compel arbitration.  In Nguyen v. Barnes & Noble Inc., the Ninth Circuit affirmed.  In so doing, the Ninth Circuit began by explaining the difference between clickwrap and browsewrap contracts:

Contracts formed on the Internet come primarily in two flavors: “clickwrap” (or “click-through”) agreements, in which website users are required to click on an “I agree” box after being presented with a list of terms and conditions of use; and “browsewrap” agreements, where a website’s terms and conditions of use are generally posted on the website via a hyperlink at the bottom of the screen. 

Here, we are dealing with a browsewrap agreement, which the Ninth Circuit subjects to a more searching inquiry than clickwrap.  According to the Ninth Circuit, clickwrap requires consumers to affirmatively consent to an agreement, whereas with browsewrap, they are simply given notice that their transaction is subject to an agreement.  Whether or not that notice is effective, says the Court, depends on the facts of the case.  But in cases such as this one, where Nguyen never clicked on the links or otherwise had an opportunity to see B & N's terms of use, he had neither actual nor constructive notice of the terms and thus could not have agreed to them.  

Over on the Technology and Marketing Law Blog, Venkat Balasubramani has a great post on this case called "What's a Browsewrap? The Ninth Circuit Sure Doesn't Know -- Nguyen v. Barnes & Noble.  The post is less snarky than it might appear (or much more so), for as Eric Goldman's contribution to the post makes clear, nobody is able to draw sufficiently clear distinctions between clickwrap and browsewrap.  Goldman suggests that the time has come to retire the clickwrap/browsewrap language entirely.  Fortunately, our readers are far better informed than most courts about wrap contracts!

LA Dentist Gets $5000 for $1605 Default Judgment against Kim Kardashian

This story from the WSJ Law Blog falls right into the ContractsProf Blog sweet spot: 

In October 2002, Los Angeles dentist Dr. Craig D. Gordon won a $1,605.73 default judgment against a 22-year-old former patient who was allegedly fitted with porcelain fillings to replace silver ones but never paid the bill.

The patient was Kim Kardashian, and nearly a dozen years later, Dr. Gordon has finally gotten his money back – with interest and an extra $1,500 thrown in. The twist is the money didn’t come from the now (in)famous Ms. Kardashian but from a California attorney who bought the uncollected judgment for $5,000 in an online auction that ended Thursday.

JudgmentMarketplace.com, a three-year-old site that gives creditors a forum for hawking uncollected debts, said the transaction marked the first time in the company’s history that the selling price for a listed judgment exceeded the total value of the principal and interest.

“Judgments usually sell for only pennies on the dollar,” said the site’s founder, Shawn Porat, a Manhattan resident.

He said the Kardashian judgment may have commanded a premium because of its novelty value. In other words, for $5,000, you can tell people at a cocktail party that a Kardashian is indebted to you.

Ms. Kardashian’s attorney, Todd Wilson, told Law Blog that she “never sought or received treatment by Dr. Gordon of any kind.”

The buyer, said Mr. Porat, could also expect the judgment to increase in value as more interest accrues. Under California civil procedure code, judgments automatically expire after 10 years, but before time runs out, a creditor may file a request for a 10-year renewal with the original court. And there’s no limit to how many times you can extend it.

“Although I wish she had just paid her bill like most of my clients do, I’m really glad to finally have closure on this incident,” Dr. Gordon said in a statement.

Interested in purchasing some celebrity debt of your own?  WSJ Law Blog reports:

JudgmentMarketplace.com is also listing a $9 million wrongful death judgment against O.J. Simpson on behalf of Ronald Goldman’s mother, who is asking for at least $1 million. The 17-year-old judgment has accumulated more than $15 million in interest, according to the site.

Conference Announcement: Bill Whitford Conference at Temple

Unfortuantely, this conference, scheduled for October 24, 2014, conflicts with the conference in honor of Charles Knapp, about which we posted yesterday.  You will have to choose.  Killer line-ups for both.  

You can find details for the Bill Whitford conference here.

Here is the schedule:

9:00 - 9:15 Introductory Remarks

9:30 - 10:45 The Bankruptcy Research Database - Its Development and Impact

Speakers:

• Douglas Baird
• Bob Lawless
• Lynn LoPucki
• David Skeel

11:00 - 12:15 The Lifecycle of Consumer Transactions: Consumer Contracting, Protection, and Bankruptcy

Speakers:

• Melissa Jacoby
• Ethan Leib
• Angela Littwin
• Katherine Porter

12:30 - 1:45 Lunch Break

• Brief video-presentation from a special guest
• Talk: Bob Hillman on Teaching Contracts; Response by Bill Whitford

2:00 - 3:15 Mixed Methods: Comparative Law, Comparative Methods

Speakers:

• Stewart Macaulay
• Iain Ramsey
• Jay Westbrook
• Jean Braucher

3:30 - 4:00 Free for All: What Don't You Know That You Should Know?

 

Contracts and the Case of Steven Salaita

A lot of ink has been spilled over this subject, and I don't have much to add, except to note that I have not seen a very many good discussions of the contract issues.  

The very short version of the story, as best I can cobble it together from blog posts, is that the University of Illinois offered a position in its American Indian Studies program to Steven Salaita, who had previously been teaching at Virginia Tech.  According to this article in the Chicago Tribune, the U of I sent Professor Salaita an offer letter, which he signed and returned in October 2013.  Professor Salaita was informed that his appointment was subject to approval by the U of I's Board of Trustees, but everyone understood that to be pro forma.  In August 2014, Salaita the U of I Chancellor notified Professor Salaita that his appointment would not be presented to the Board and that he was no longer a candidate for a position.  According to the Tribune, the Board next meets in September, after Professor Salaita's employment would have begun.  The Chancellor apparently decided not to present Professor Salaita's contract for approval because of his extensive tweets on the Isreali-Palestinian conflict, which may or may not be anti-Semitic, depending on how one reads them.  

The main argument in the blogosphere is over whether or not the U of I's conduct is a violation of academic freedom. But there is also a secondary argument over whether Professor Salaita has a breach of  contract of promissory estoppel claim against the U of I.  The list of impressive posts and letters on the whole Salaita incident include:

Michael Dorf on Verdict: Legal Analysis and Commentary from Justia

Katherine Franke, et al. in a letter to the U of I Chancellor

Brian Leiter commenting on the Franke letter on Brian Leiter's Law School Reports

Michael Rothberg, in a letter to the U of I Chancellor

Steven Lubet at The Faculty Lounge here and here

Jonathan Adler on the Volokh Conspiracy here, here and here

Finally, Dave Hoffman stepped in on Concurring Opinions to address the promissory estoppel issues  and then answers Michael Dorf's response 

Hoffman makes strong arguments that there was no breach of contract here, because the offer was clearly conditional on Board approval.  There are arguments that the promise breached was a failure to present Salaita's employment to the Board, but the remedy for that breach would simply be presentment, at which point both the claim and the appointment would go away (unless U of I has a change of heart on the matter).  

We would have to know more about the process to make a more educated guess about whether or not a breach of contract claim here could succeed.  I think it is relevant that, at the point Salaita was informed that the offer was rescinded, the Board could not meet before his employment would have begun.  I suspect that his courses were already scheduled and that students had, at least provisionally, registered for them.  I wonder if there were any announcements on the U of I website crowing about their recent hires.  All of this would be relevant, it seems to me, to the state of mind of the parties regarding whether or not a contract had been made.  It would be very sad for all of us in academia if it turned out to be the case that our offer letters mean nothing until the Board has spoken, as acceptance of a position usually involves major life changes, including giving notice at current jobs, moving to a new city, selling and buying a residence, etc.

I have no doubt that Dave Hoffman is right that promissory estoppel claims rarely succeed.  I do think that some versions of the facts presented here suggest that this one might be a winner nonetheless or, as Hoffman suggests, is the kind of claim that is worth bringing at least in order to make the threat of discovery on the subject a strong inducement to the U of I to settle the case.  But the remedy for promissory estoppel is probably not really the remedy Salaita seeks.  

Professor Salaita's claims -- his academic freedom and constitutional claims -- go beyond the issues of contract and promissory estoppel.  A lot has been written on this situation, and I haven't had a chance to read everything carefully, but I have yet to see a clear discussion of whether those claims hinge on Professor Salaita's contractual claims.  It seems likely to me that if he had no contract, then he had no free speech or academic freedom rights vis a vis the U of I.  And I don't think a promissory estoppel claim would get him such protections either.  Or do people think that universities have a generalizable erga omnes duty to protect academic freedom?

ADDENDUM

Dave Hoffman has an additional post up on Concurring Opinions here.  

Save the Dates: Knapp Conference & KCON 10

The University of California Hastings College of the Law is sponsoring a symposium to honor Professor Charles L. Knapp (left) on the completion of his 50th year of law teaching. (He began his teaching career at NYU School of Law in fall 1964.)

The day-long program will take place on October 24, 2014  and will include four panels that will focus on areas that are of particular interest to Professor Knapp, but will also address topics with broad appeal to contract law scholars. 

8:15 - 8:45  Registration and Breakfast 8:45 – 9:00 Introduction & Welcome 9:00-10:30   Panel I -- The State of Contract Law Professor Jay Feinman, Rutgers University - Camden Professor William Woodward, Santa Clara University Professor Danielle Kie Hart, Southwestern Law School Moderator – Professor Harry G. Prince, UC Hastings College of Law 10:30-10:45  Break 10:45-12:15  Panel II -- The Role of Casebooks in the Future of Contract Law Professor Deborah Post, Touro Law Center Professor Carol Chomsky, University of Minnesota Professor Thomas Joo, UC Davis Moderator – Professor Nathan M. Crystal, University of South Carolina 12:15-1:15  Lunch:  Marvin Anderson Lecture – Professor Keith Rowley, UNLV  1:15-1:30  Break 1:30-3:00 Panel III -- The Politics of Contract Law Professor Peter Linzer, University of Houston Professor Judith Maute, University of Oklahoma Professor Emily M. S. Houh, University of Cincinnati Moderator – Professor Jeffrey Lefstin, UC Hastings College of Law 3: 15-4:45 Panel IV -- The Future of Unconscionability as a Limit on Contract Enforcement Professor David Horton, UC Davis Professor Hazel Glenn Beh, University of Hawaii Moderator – Professor William S. Dodge, UC Hastings College of Law 4:45-5:00  Concluding Remarks 5:00-5:30 Break 5:30 Reception and Dinner – UC Hastings Skyroom - [Limited space and requires separate registration with fee.] *Papers will be published in a symposium issue of the Hastings Law Journal.

Location Information: UC Hastings - Mary Kay Kane Hall  (View Map) 200 McAllister St  San Francisco, CA 94102 San Francisco Room: Alumni Center

Contact Information: Name: Roslyn Foy Email: [email protected]

The Marvin  Anderson Lecture will be presented during the luncheon by Professor Keith Rowley of UNLV (right).  Registration for the program is free except that the reception and dinner require a separate registration and payment of a fee.

And speaking of Keith Rowley, he has announced that UNLV's William S. Boyd School of Law will host the 2015 International Conference on Contracts (a.k.a. "KCON10") February 27 & 28, 2015.

The conference was held there in 2010, so we hope to return and win back all the money we lost at the craps tables five years ago.  

NJ Appellate Court Refuses to Enforce Exculpatory Clause that Waives Ordinary Negligence Claims

Plaintiff sued the YMCA for injuries sustained when he slipped and fell on stairs that he alleged were negligently maintained.  First, let’s get this out of the way: 

The YMCA argued that plaintiff was contractually barred from seeking damages against the YMCA because plaintiff had voluntarily signed an exculpatory clause in his membership agreement.   That clause provided:

I AGREE THAT THE YMWCA WILL NOT BE RESPONSIBLE FOR ANY PERSONAL INJURIES OR LOSSES SUSTAINED BY ME WHILE ON ANY YMWCA PREMISES OR AS A RESULT OF A YMWCA SPONSORED ACTIVITIES [SIC]. I FURTHER AGREE TO INDEMNIFY AND SAVE HARMLESS THE YMWCA FROM ANY CLAIMS OR DEMANDS ARISING OUT OF ANY SUCH INJURIES OR LOSSES.

A New Jersey trial court granted summary judgment dismissing the complaint.   An appellate court reversed.  The appellate court framed the issue as “whether a fitness center or health club can insulate itself through an exculpatory clause from the ordinary common law duty of care owed by all businesses to … invitees[.]”  The court held that it could not.

While the New Jersey Supreme Court upheld an exculpatory clause in Stelluti v. Casapenn Enters., Inc., 203 N.J. 286 (2010), that case was characterized as involving allegations of injury based upon risks inherent in the activity (bike riding in a spin class).  In Stelluti, the New Jersey Supreme Court did not specifically address or decide whether an exculpatory clause may waive ordinary negligence.

The appellate court declined to enforce the YMCA's exculpatory clause, reasoning that it was against the public interest:

Given the expansive scope of the exculpatory clause here, we hold that if applied literally, it would eviscerate the common law duty of care owed by defendant to its invitees, regardless of the nature of the business activity involved. Such a prospect would be inimical to the public interest because it would transfer the redress of civil wrongs from the responsible tortfeasor to either the innocent injured party or to society at large, in the form of taxpayer-supported institutions.

The appellate court also noted that the agreement was presumably a contract of adhesion.

This is a case worth following if appealed to the New Jersey Supreme Court.  And a good teaching case because it lays bare the tension between freedom to contract and overriding concerns about general public welfare.

 Walters v. YMCA, DOCKET NO. A-1062-12T3 (Superior Ct. of N.J. App. Div. Aug. 18, 2014).

Al Gore Sues Al Jazeera

Now there's a headline that will make Fox News chortle with glee.  The Al Jazeera news network purchased Al Gore's Current TV channel for $500 million.  Gore's suit alleges that Al Jazeera still owed $65 million on the purchase price.

According to this report on the Guardian Liberty Voice, Al Jazeera may be withholding the final payment in an attempt to negotiate a discount on the sale price.  According to the report, Al Jazeera has not garnered as many viewers as it hoped -- an anemic average of 17,000 during prime time, as compared with 1.7 million for Fox News and nearly 500,000 for CNN.  

But with new crises erupting daily in the Middle East, things are looking up for all three.

Hooray.

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	240	Facilitating Mergers and Acquisitions with Earnouts and Purchase Price Adjustments  Albert H. Choi  University of Virginia School of Law
2	173	The Scope and Potential of FTC Data Protection  Woodrow Hartzog and Daniel J. Solove  Samford University - Cumberland School of Law and George Washington University Law School
3	142	What We Consent to When We Consent to Form Contracts: Market Price  Kenneth K. Ching  Regent University - School of Law
4	112	Governing Law on Forum-Selection Agreements  Kevin M. Clermont  Cornell Law School
5	108	The Rise and Fall of Unconscionability as the 'Law of the Poor'  Anne Fleming  Georgetown University Law Center
6	84	The Construction of Commercial Contracts  John Carter  University of Sydney - Faculty of Law
7	77	Alternative Entities in Delaware - Reintroduction of Fiduciary Concepts by the Backdoor?  Douglas M. Branson  University of Pittsburgh School of Law
8	75	Leases and Executory Contracts in Chapter 11  Kenneth Ayotte  University of California, Berkeley - School of Law
9	68	The Death of Contracts  Franklin G. Snyder and Ann M. Mirabito  Texas A&M University School of Law and Baylor University - Hankamer School of Business
10	68	Cognition and Reason: Rethinking Kelsen in the Context of Contract and Business Law  Jeffrey M. Lipshaw  Suffolk University Law School

SSRN Top Downloads For LSN: Contracts (Topic)
RECENT TOP PAPERS 

Rank	Downloads	Paper Title
1	142	What We Consent to When We Consent to Form Contracts: Market Price  Kenneth K. Ching  Regent University - School of Law
2	108	The Rise and Fall of Unconscionability as the 'Law of the Poor'  Anne Fleming  Georgetown University Law Center
3	84	The Construction of Commercial Contracts  John Carter  University of Sydney - Faculty of Law
4	77	Alternative Entities in Delaware - Reintroduction of Fiduciary Concepts by the Backdoor?  Douglas M. Branson  University of Pittsburgh School of Law
5	68	The Death of Contracts  Franklin G. Snyder and Ann M. Mirabito  Texas A&M University School of Law and Baylor University - Hankamer School of Business
6	68	Cognition and Reason: Rethinking Kelsen in the Context of Contract and Business Law  Jeffrey M. Lipshaw  Suffolk University Law School
7	65	Credible Threats  Saul Levmore and Ariel Porat  University of Chicago Law School and Tel Aviv University
8	61	A Eulogy for the EULA  Miriam A. Cherry  Saint Louis University - School of Law
9	59	Consent and Sensibility: A Review of Margaret Jane Radin's Book, 'Boilerplate: The Fine Print, Vanishing Rights, and the Rule of Law'  Michelle Boardman  George Mason University School of Law
10	48	Legal Regulation of Combating Corruption. Report of the LSGL's Research Group  Eduard Ivanov, Annette van der Merwe, Philip Stevens, Thiago Bottino, Lie Uema do Carmo,Paulo Clarindo Goldschmidt, Heloisa Estellita, Murat Onok, Laura Scomparin, Serena Quattrocolo, Michael Nietsch, Tunde Ogowewo, Dean Sudarshan and Maria Lúcia de Pádua Lima  National Research University Higher School of Economics, University of Pretoria, University of Pretoria - Faculty of Law, FGV Direito Rio, Fundacao Getulio Vargas (FGV-EESP), Fundacao Getulio Vargas (FGV-EESP), Fundacao Getulio Vargas (FGV-EESP), Koc University, University of Turin, University of Turin, EBS Universität für Wirtschaft und Recht, King's College London – The Dickson Poon School of Law, O.P. Jindal Global University (JGU) - Jindal Global Law School (JGLS) and São Paulo Law School of Fundação Getulio Vargas FGV DIREITO SP

 

 

Arbitration Agreement Entered into during Pendency of FLSA Claim Ruled Enforceable

The named plaintiffs in Stevenson v. The Great American Dream, Inc. are former employees of Pin Ups Nightclub.  They brought suit claiming entitlement to minimum wage and overtime compensation under the Fair Labor Standards Act (FLSA).  They sought class certification in December 2012, which was granted in August 2013.   Kwanza Edwards attempted to join the class on October 2013.  Unfortunately for her, she had signed an arbitration agreement in February 2013.  On July 15, 2014, the District Court for the Northern District of Georgia granted defendants' motion to compel Edwards to arbitrate her claim.  

On motion for reconsideration, Edwards argued that the arbitration agreement was unconscionable, given that a FLSA action had already been filed, with class certification pending.  The Court found that the timing of the agreement did not affect its substantive terms.  

The Court was unimpressed with Edwards' citations to cases from other Circuits.  Plaintiff does not seem to have cited to Russell v. Citigroup, Inc., about which we previously posted here.  The case is probably distinguishable, but that was a case where the court refused to compel arbitration where a plaintiff signed an arbitration agreement after the class action litigation had already commenced.  The difference is that Russell was himself already a party to a class action when he signed the new arbitration agreement.  Edwards was not yet a party to the FLSA class when she signed her arbitration agreement.

Tour Riders [File this in: Rock 'n' Roll]

I love concert tour riders -- those sometimes lengthy contract terms that reveal all of a band's idiosyncratic  backstage requests.  The most famous rider term is, of course, Van Halen's requirement of no brown M&Ms.  And we've  blogged about the explanation for this peculiar request more than once: here and here. 

WNYC's John Schaefer hosted an extended discussion of tour riders on Soundcheck.  My favorite is Iggy Pop's request: "One monitor man who speaks English and is not afraid of death."  

The Brooklyn band Parquet Courts asked for:

• 1 bottle of communion grade red wine
• 1 bottle of white wine that would impress your average non-wine-drinking American
• 1 bottle of lower-middle shelf whiskey – cheap but still implies rugged masculinity
• Mixers for aforementioned mid-level whiskey, of slightly higher quality than the whiskey
• A quantity of “herbal mood enhancer”
• 1 copy of newspaper with the most interesting headline/front page picture (comic section must feature Curtis)

You can listen to the show here:

Researcher Behind Facebook's Emotions Experiment to Help Design Ethical Guidelines

Optical microscope nikon alphaphot +" by Moisey 

Today's New York Times features an article aptly titled (in the print version) "Under the Microscope."  The article describes researchers' attempts to grapple with the ethical issues relating to projects such as Facebook's experiment on its users, about which we have written previously  here and here.  According to the article, researchers both at universities and at in-house corporate research departments are collaborating on processes to formulate ethical guidelines that will inform future research that makes use of users' information.  

The article states that Facebook has apologized for its emotion experiment, in which it manipulated users' feeds to see if those users' own posts reflected the emotional tone of the posts they were seeing. It's not really clear that Facebook apologized for experimenting on its users.  As quoted on NPR, here is what Facebook's Sheryl Sandberg  said on behalf of the company:

This was part of ongoing research companies do to test different products, and that was what it was; it was poorly communicated . . . . And for that communication we apologize. We never meant to upset you.

As the Washington Post noted, Sandberg did not apologize for the experiement itself.  Seen in its full context, Sandberg's statement is more akin to OKCupid's in-your-face admission that it experiements on its users, about which Nancy Kim posted here.

But the Times article focuses on Cornell University's Jeffrey Hancock, who collaborated with Facebook on the experiment.  He seems to have no regrets.  For Hancock, researchers' ability to data mine is to his field what the microscope was to chemists.  Or, one might think, what the crowbar was to people doing research in the field of breaking and entering.  Hancock is now working with people at Microsoft Research and others to lead discussions to help develop ethical guidelines applicable to such research.

The Times quotes Edith Ramirez, Chair of the Federal Trade Commission on the subject.  She says:

Consumers should be in the driver’s seat when it comes to their data. . . . They don’t want to be left in the dark and they don’t want to be surprised at how it’s used.

By contrast, here is the Times's synopsis of Professor Hancock's views on how the ethical guidelines ought to be developed:

Companies will not willingly participate in anything that limits their ability to innovate quickly, he said, so any process has to be “effective, lightweight, quick and accountable.”

If the companies are subject to regulation before they can experiment on their users, it does not really matter whether or not they willngly participate.  And the applicable standards have already been established under Institutional Review Board (IRB) rules.  Significantly, as reported here in the Washington Post, although Professor Hancock works at Cornell, his participation in the Facebook study was not subject to Cornell's IRB review.  In our previous posts, we have expressed our doubt that the Facebook study could survive IRB review (or that it yielded the information that it was supposedly testing for).  

The Times article does not indicate that any of the people involved in devising rules for their own regulation have any expertise in the field of ethics.  Why is letting them come up with their own set of rules in which they will "willingly participate" any better than expecting the wielders of crowbars to design rules for their safe deployment?

John Oliver and Sarah Silverman Tackle Payday Loans

On HBO’s Last Week Tonight, John Oliver was joined by Sarah Silverman and they took on the payday loan industry.  Here's the clip (NSFW, especially Sarah Silverman's bit at the end):

From the pseudo PSA at the end of the clip: “Hi, I’m Sarah Silverman. If you’re considering taking out a payday loan, I’d like to tell you about a great alternative.  It’s called ‘anything else.’  The way it works is, instead of taking out a payday loan you literally do anything else.”

[Meredith R. Miller]