ContractsProf Blog

Can Terms of Use Stop Richard Prince?

According to this article, the photographer, Richard Prince, is ripping off using other people’s Instagram photos – and selling them for lots of money ($90,000)!  Arguably, he can do this because it’s fair use  -- he blows the images up and makes minor changes to them, like removing captions and adding comments.  (One could also argue that it’s not fair use because he doesn’t change them enough).  Putting aside the copyright related issue (fair use or not fair use) and the privacy issue (are there any privacy related claims when you post on Instagram for the world to see – but don’t mean to have your photos used in this way?) – what intrigues me are the contract related issues.  I took a quick peek at Instagram's latest terms of use and there’s nothing in there that would really help someone whose photos were being used by Richard Prince.   And while Instagram's Community Guidelines are thoughtful and cover a variety of topics, they don’t address this problem.  But could its TOU address this issue – and should it?  What if Instagram put in its Terms of Use a provision that forbade visitors to its site from using other people's photographs for any purpose?  If so, what could the company do if a user violated that term?  It could, of course, ban the offending user from Instagram.  Could it sue for breach of contract – and if so, what damages could it claim? If people started to copy users’ photographs from Instagram and use them for their own purposes that would likely hurt Instagram’s business.  Instagram should consider how its Terms of Use can be amended to protect their users from this type of unauthorized use.

Airbnb Update

We have previously blogged about “sharing economy” short-term rental company Airbnb at various times here.  Time for an update: The City of Santa Monica, California, just passed an ordinance that prohibits property owners and residents from renting out their places unless they remain on the property themselves.  This is estimated to prohibit no less than 80% of Airbnb’s Santa Monica listings (1,400 would be banned).  

The city plans to spend $410,000 in the first year to enforce the rule using three new full-time employees.  Violators may be fined by up to $500.  However, because Airbnb does not list addresses, staff will have to look at photos of the properties and drive around the city streets to try to identify the violators.   Doing so sounds awfully invasive and awkward, but that is nonetheless the plan.  Adds Assistant Planning Director Salvador Valles: “We can issue citations just based on the advertisement alone when we're using our business regulations.”  Other major cities are also trying to crack down on short-term rentals.

But why, you ask?  Good question.  In times when, as I have blogged about before and as is common knowledge, medium- and low-income earners are falling behind higher-income earners to a somewhat alarming extent, you would think the government could let people earn some additional money on what is, after all, their own property.  Cities, however, claim that short-term rentals drive up the rental prices by cutting into the number of residences that are available for long-term rentals.  “Even a study commissioned by Airbnb itself earlier this year found that Airbnb increases the price of a one-bedroom apartment in San Francisco by an average of $19 a month.”    Traffic concerns are also often mentioned in this context as are potential tax avoidance issues, although Airbnb has now started to deduct taxes from rental fees before transferring these to the landlords.

Airbnb’s end goal?  To go IPO.  The goal for at least some landlords?  Eighty-year-old Arlene Rosenblatt, for example, rents out her home in Santa Monica whenever she and her husband leave town to visit their seven grandchildren. She charges anywhere from $115 to $220 a night for her home, listing it on Airbnb and other sites and thus earning as much as $20,000 a year.  "I'm a retired schoolteacher," Rosenblatt says. "We don't get a lot of retirement income. My husband, all he has is his Social Security." 

Time will tell what happens in this latest clash between private property and contractual rights and government regulations. 

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	258	Loyalty Rebates after Intel: Time for the European Court of Justice to Overrule Hoffman-La Roche  Damien Geradin  George Mason University School of LawTilburg University - Tilburg Law and Economics Center (TILEC)
2	191	M&A Contracts: Purposes, Types, Regulation, and Patterns of Practice  John C. Coates, IV  Harvard Law School
3	158	The Validity of Restraints on Alienation in an Oil and Gas Lease  Luke Meier and Rory M. Ryan  Baylor University - Law School and Baylor University - Law School
4	119	Lex Mercatoria  Gralf-Peter Calliess  University of Bremen - Faculty of Law
5	115	Private Lenders’ Demand for Audit  Richard Baylis, Pete Burnap, Mark Clatworthy, Mahmoud Gad and Christopher K. M. Pong  Cardiff Business School, University of Wales System - Cardiff University, University of Bristol, Department of Accounting and Finance, University of Bristol, Department of Accounting and Finance and Heriot-Watt University - School of Management and Languages
6	112	Judicial Deregulation of Consumer Markets  Max N. Helveston  DePaul University - College of Law
7	103	Pluralistic Legal Theories: In Search of a Common Denominator  Ronen Perry  University of Haifa - Faculty of Law
8	101	Freedom to Tinker  Pamela Samuelson  University of California, Berkeley - School of Law
9	96	Other People's Contracts  Aditi Bagchi  Fordham University School of Law
10	84	The Forum Selection Defense  Stephen E. Sachs  Duke University School of Law

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

Rank	Downloads	Paper Title
1	119	Lex Mercatoria  Gralf-Peter Calliess  University of Bremen - Faculty of Law
2	115	Private Lenders’ Demand for Audit  Richard Baylis, Pete Burnap, Mark Clatworthy, Mahmoud Gad and Christopher K. M. Pong  Cardiff Business School, University of Wales System - Cardiff University, University of Bristol, Department of Accounting and Finance, University of Bristol, Department of Accounting and Finance and Heriot-Watt University - School of Management and Languages
3	112	Judicial Deregulation of Consumer Markets  Max N. Helveston  DePaul University - College of Law
4	103	Pluralistic Legal Theories: In Search of a Common Denominator  Ronen Perry  University of Haifa - Faculty of Law
5	96	Other People's Contracts  Aditi Bagchi  Fordham University School of Law
6	84	The Forum Selection Defense  Stephen E. Sachs  Duke University School of Law
7	80	A Crib Sheet for Contracts Profs  Victor P. Goldberg  Columbia Law School
8	69	Online Consumer Contracts: No One Reads, But Does Anyone Care?  Shmuel I. Becher and Tal Zarsky  College of Management (Israel) - School of Law and University of Haifa - Faculty of Law
9	62	Two Cheers for Corporate Experimentation: The A/B Illusion and the Virtues of Data-Driven Innovation  Michelle N. Meyer  Union Graduate College - Icahn School of Medicine at Mount Sinai Bioethics Program
10	52	The Influence of Comparative Law on the English Law of Obligations  Andrew Burrows  University of Oxford - Faculty of Law

 

Law School Interactive's New Podcast on Contracts Law

Law School Interactive, which provides podcasts for various purposes relating to law school, has a new podcast up featuring Frank Snyder (pictured left), the Zeus from whose head this blog sprung, and two friends of the blog, Brian Bix and Steven Schooner.  It's always interesting to hear how colleagues introduce the topic of contracts law to prospective students.  You can find the podcast here.

Law School Interactive summarizes the podcast as follows (slightly edited):

Frank Snyder starts his comments by defining contract law and explaining it as an unusual part of the legal system, and speaks of its practical aspects and the importance of being attuned to the client’s needs. Professor Snyder finishes his comments by likening the practice of contract law to business advising. He mentions that those who are good business advisers will likely enjoy and do well with contract law. He also advises students to investigate all areas of legal practice that they are interested in to find the one they would like to specialize in.

Steven Schooner [right] explains that contract law is a very different law practice than the more common practice areas of criminal, tort, or defense law. He underscores the fact that there seems to be no gray areas when it comes to students and contract law: Students either consider the field fascinating, or they don’t. He says that if you find business and bargains interesting, contract law might be the practice for you—and a love of math and numbers helps too.

Our final guest, Brian Bix [left], talks about contract law’s connection with many other specialties. Although undergraduate courses will not teach you much about the intricacies of contract law, Professor Bix tells budding law school student not to worry—law school will definitely give you the tools you need to succeed in the field. He ends his advice by saying that to be successful in this practice of law, face-to-face interaction and conversational skill are definitely a necessity.

Seventh Circuit Grants Motion to Compel Arbitration Where Underlying Contract Has Been Assigned

Ronald and Anna Andermann had had cell phone service through US Cellular since 2000.  Their service contract provided for arbitration of all claims.  The contract also provided that US Cellular could assign the contract without notice to the Andermanns.  The Andermanns renewed their contract every two years up until 2012.  In May 2013, they received notice that their contract had in fact been assigned to Sprint but that it could not be renewed because their phone was not compatible with Sprint's network.  Sprint called the Andermanns six times (three times each) to try to persuade them to purchase a new phone that would be compatible with Sprint's network, but the Andermanns decided to move to a different service provider instead.

They also decided to sue Sprint on behalf of a class of similarly situated consumers, alleging that the undesired calls violated the Telephone Consumer Protection Act (TCPA).  Sprint filed a motion to compel arbitration, which the District Court denied on the ground that the calls originated after the contract had terminated and thus the legality of the calls had no connection to the contract.  

In Andermann v. Sprint Spectrum L.P., the Seventh Circuit reversed and remanded with instructions to order arbitration.   Judge Posner an found intimate relation between the contract and the calls.  The case was an easy one according to Posner because the claims here clearly arose out of or related to the agreement.  Sprint was attempting to offer consumers a way to continue their services.  This case was thus easily distinguishable from other cases, more favorable to plaintiffs, in which the plaintiffs had agreements with defendants that were governed by arbitration provisions but plaintiffs' claims related to contracts that did not contain arbitration provisions.

Having quickly dispensed with plaintiffs' opposition to the motion to compel arbitration, Judge Posner then focused his attention on Sprint's effusive celebration of arbitration provisions as "a darling of federal policy" (Judge Posner's wording).  Judge Posner emphasized that language encouraging judges to enforce arbitration clauses was a corrective to an era when judges disfavored arbitration.  The aim of federal policy is neither to favor nor disfavor arbitration but to compel arbitration when the parties have agreed to arbitrate claims.  Fortunately for Sprint, this case was, in Judge Posner's view, not a close call.

Judge Posner then when on to note Sprint's motives in challenging the denial for arbitration when, in Judge Posner's view, the Andermanns will lose on the merits wherever their claim is decided.  Judge Posner pointed out that Sprint wants to avoid class action litigation, which is prohibited under the applicable arbitration provision.  He also noted that without the class action option, the claim is unlikely to be brought at all.   Judge Posner then explained the absurd results that would follow from a finding that Sprint had violated the TCPA, thus effectively deciding a claim that the Seventh Circuit ruling will prevent from ever being brought, before catching himself and noting that the decision is really for the arbiter and limiting the Court's ruling to the instruction that the claim be sent to arbitration.

Rising Minimum Wages

Should salary levels be regulated or mainly left to individual contractual negotiations between the employee and his/her employer?  The former, according to the Los Angeles City Council and governance entities in several other cities and states.  

On Tuesday, Los Angeles decided to increase the minimum salary to $15 an hour by 2020.  Other cities such as San Francisco, Chicago, New York, and Seattle have passed similar measures.  Liberal strongholds, you say?  Think again.  Republican-leading states like Alaska and South Dakota have also raised their state-level minimum wages by ballot initiative.  Some companies such as Walmart and Facebook have raised their wages voluntarily.

But the effect is likely to be particularly strong here in Los Angeles, where around 50% of the work force earn less than $15 an hour.  That’s right: in an urban area with super-rich movie studios, high-tech companies, hotels, restaurants, health companies and much more, half of “regular” employees barely earn a living salary.  In New York state, around one third of workers make less than $15 an hour.  Take into consideration that the cost of living in some cities such as Los Angeles and maybe even more so San Francisco and New York is very high.  In fact, studies show that every single part of Los Angeles is unaffordable on only $15 an hour if a person spends only the recommended one third on housing.  

“Assuming a person earning $15 an hour is also working 40 a week, which is rare for a minimum wage employee, and that they're not taking any days off, they'd be earning $31,200 a year.  An Economic Policy Institute study released in March found that a single, childless person living in Los Angeles has to make $34,324 a year just to live in decent conditions (and that was using data from 2013).”

Opponents, however, say that initiatives such as the above will make some cities into “wage islands” with businesses moving to places where they can pay employees less.  Others call the initiative a “social experiment that they would never do on their own employees” (they just did...)  But “even economists who support increasing the minimum wage say there is not enough historical data to predict the effect of a $15 minimum wage, an unprecedented increase.  A wage increase to $12 an hour over the next few years would achieve about the same purchasing power as the minimum wage in the late 1960s, the most recent peak.”  

Time will tell if the sky falls from the above initiative or if the system in a rich urban area such as Los Angeles can cope.  Said Gil Cedillo, a councilman who represents some of the poorest sections of the city and worries that some small businesses will shut down, “I would prefer that the cost of this was really burdened by those at the highest income levels.  Instead, it’s going to be coming from people who are just a rung or two up the ladder here.”

This is, of course, not only an issue of the value of low-wage work and fending for yourself to not end up at the bottom of the salary chain.  It is a matter of alleviating urban poverty and improving the nation’s overall economy for a sufficient amount of people to better get the economy back on track for more than the few.

Employers Must Continually Monitor 401(k) Plans

Yesterday, I blogged here about a proposed Labor Department rule that would require investment brokers to contractually bind themselves as fiduciaries of their clients. 

Somewhat relatedly, the United States Supreme Court just issued an opinion finding employers to be fiduciaries in relation to the employment plans offered to their employees.  The petitioning employees argued that respondent employers acted imprudently by offering six higher priced retail-class mutual funds as 401(k) plan investments when materially identical lower-priced institutional-class mutual funds were available.  The higher-priced funds also carried higher fees.   The Ninth Circuit Court of Appeals applied the ERISA statute of limitations to the initial selection of funds without considering whether there is also a continued duty to monitor the funds.  There is.  The Supreme Court found that because the fiduciary duty can be traced to trust law, there is “a continuing duty of some kind to monitor investments and remove imprudent ones.  A plaintiff may allege that a fiduciary breached the duty of prudence by failing to properly monitor investments and remove imprudent ones. In such a case, so long as the alleged breach of the continuing duty occurred within six years of suit, the claim is timely.  The Ninth Circuit erred by applying a 6- year statutory bar based solely on the initial selection of the three funds.”

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	385	Hello Barbie: First They Will Monitor You, Then They Will Discriminate Against You. Perfectly  Irina D. Manta and David S. Olson  Hofstra University - Maurice A. Deane School of Law and Boston College Law School
2	237	Loyalty Rebates after Intel: Time for the European Court of Justice to Overrule Hoffman-La Roche  Damien Geradin  George Mason University School of LawTilburg University - Tilburg Law and Economics Center (TILEC)
3	187	M&A Contracts: Purposes, Types, Regulation, and Patterns of Practice  John C. Coates, IV  Harvard Law School
4	151	The Validity of Restraints on Alienation in an Oil and Gas Lease  Luke Meier and Rory M. Ryan  Baylor University - Law School and Baylor University - Law School
5	109	Private Lenders’ Demand for Audit  Richard Baylis, Pete Burnap, Mark Clatworthy, Mahmoud Gad and Christopher K. M. Pong  Cardiff Business School, University of Wales System - Cardiff University, University of Bristol, Department of Accounting and Finance, University of Bristol, Department of Accounting and Finance and Heriot-Watt University - School of Management and Languages
6	109	Judicial Deregulation of Consumer Markets  Max N. Helveston  DePaul University - College of Law
7	108	Lex Mercatoria  Gralf-Peter Calliess  University of Bremen - Faculty of Law
8	92	Pluralistic Legal Theories: In Search of a Common Denominator  Ronen Perry  University of Haifa - Faculty of Law
9	91	Other People's Contracts  Aditi Bagchi  Fordham University School of Law
10	85	Social Justice, Social Norms and the Governance of Social Media  Tal Zarsky  University of Haifa - Faculty of Law

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

Rank	Downloads	Paper Title
1	109	Private Lenders’ Demand for Audit  Richard Baylis, Pete Burnap, Mark Clatworthy, Mahmoud Gad and Christopher K. M. Pong  Cardiff Business School, University of Wales System - Cardiff University, University of Bristol, Department of Accounting and Finance, University of Bristol, Department of Accounting and Finance and Heriot-Watt University - School of Management and Languages
2	109	Judicial Deregulation of Consumer Markets  Max N. Helveston  DePaul University - College of Law
3	108	Lex Mercatoria  Gralf-Peter Calliess  University of Bremen - Faculty of Law
4	92	Pluralistic Legal Theories: In Search of a Common Denominator  Ronen Perry  University of Haifa - Faculty of Law
5	91	Other People's Contracts  Aditi Bagchi  Fordham University School of Law
6	85	Social Justice, Social Norms and the Governance of Social Media  Tal Zarsky  University of Haifa - Faculty of Law
7	78	The Forum Selection Defense  Stephen E. Sachs  Duke University School of Law
8	67	Online Consumer Contracts: No One Reads, But Does Anyone Care?  Shmuel I. Becher and Tal Zarsky  College of Management (Israel) - School of Law and University of Haifa - Faculty of Law
9	64	A Crib Sheet for Contracts Profs  Victor P. Goldberg  Columbia Law School
10	49	Two Cheers for Corporate Experimentation: The A/B Illusion and the Virtues of Data-Driven Innovation  Michelle N. Meyer  Union Graduate College - Icahn School of Medicine at Mount Sinai Bioethics Program

 

Retirement Investment Brokers Contractually Bound to Act as Fiduciaries

Under a United States Labor Department plan, investment brokers may be required to bind themselves contractually as fiduciaries for their clients in the future.  Only a few states such as California and Missouri require brokers to act as fiduciaries at all times.  In others, brokers must simply recommend investments that are “suitable” for investors based on various factors, but are not required to adhere to the higher fiduciary “best-interest” standard.

The contemplated advantages are two-fold.  First, the rule is thought to better protect investors from broker recommendations that, if followed, would help the brokers earn more or higher fees, but fail to meet investors’ best interests.  A contractually stipulated duty would also help “deflate arguments that brokerages typically raise to deflect blame for bad advice, such as that an investor has in-depth financial know-how.  

Second, arbitration cases would be easier to prove.  This is so because arbitrators currently rely on state laws when determining the standard of conduct to be followed by the brokers, which is one of the threshold issues to be analyzed in investor cases.  A uniformly required fiduciary standard would, it is thought, be more investor-friendly.

Needless to say, there are also contrary views.  For example, some attorneys fear that investors’ lawyers will start or increase a hunt for more retirement account cases to represent.  Others worry about an increased amount of class action cases.

Regardless, given the complexity of today’s investment world, requiring brokers to act as fiduciaries for their clients does indeed seem like the “good step in the right direction” as the president of the Public Investors Arbitration Bar Association recently called the initiative. 

Opportunity to Contribute to Contracts in the Real World, 2d Ed.

Larry Cunningham of George Washington Law School (pictured) is preparing the second edition of his book, Contracts in the Real World.  You may remember the first edition from prior posts such as  the online symposium that we cross-posted here in 2012.

Larry is turning to the market to get ideas for the next edition.  Via his twitter feed, he is now offering a copy of Contracts in the Real World to those who suggest a story that is chosen for inclusion in the next edition.  More details on the book are at Cambridge University's webpage.

Seventh Circuit Parses "Generate" and "Receive" in an Attorney's Breach of Contract Suit

In 2001, Kanosky & Associates (now Kanosky Bresney) hired Lawrence Hess to handle medical malpractice suits.  In 2007, the firm fired Mr. Hess.  Under Mr. Hess's employment agreement, Hess was entitled to bonus pay in the amount of fifteen percent of all fees “generated over the base salary."   The employment agreement also stated that the “[b]onus shall increase” to twenty-five percent “on all fees received annually in excess of $750,000.00.”   

Mr. Hess conceded that he was not entitled to any additional fees "received," but he claimed that his work had "generated" fees for which he had not been compensated.  The District Court found that "generated" and "received" had the same meaning within the employment agreement, and in oral argument before the Seventh Circuit in Hess v. Kanosky Bresney, Mr. Hess conceded as much.  

 However, Mr. Hess pointed to a 2002 modification of his employment agreement that entitled him to 40% of all revenue "generated."  Both parties also relied on additional language in Section 8 of the original employment agreement:

[W]here the Corporation retains clients upon Employees [sic] termination that Employee has no proprietary interest in fees to be earned since the Employee is to be fully compensated through his salary and/or bonus for all work done while an Employee of the Corporation” (emphasis added). 

Mr. Hess read this provision to entitle him to compensation for revenues "generated" while he was an employee; the firm read the provision to bar him from any post-employment compensation.

The Seventh Circuit rejected Mr. Hess's arguments.  While implying that the employment agreement could have been more clearly drafted, the Court found that reading "generate" and "receive" as synonyms results in a simple, straightforward compensation scheme.  Reading generate as Hess would have it read, leads to headaches, as the contract does not specify (and doing so would be very difficult) how one is to determine any individual attorney's role in "generating" fees.  Hess's interpretation of the contract was "less plausible" than the firm's, and he produced no extrinsic evidence suggesting that his interpretation should be favored despite its facial implausibility.  Given the Court's presumption that the firms documents use "generate" and "receive" interchangeably, Mr. Hess's 2002 Modification did not avail him.  

Kmart Cannot Enforce Arbitration Agreement with Class of Infant (Minor) Plaintiffs

In 2013, Kmart hired Adrian Lopez, then age 16, as a cashier.  Before beginning work, Lopez received online training, and in order to do so, he had to acknowledge receipt of various Kmart forms, including an arbitration agreement.  One month after turning 18, Lopez filed a putative class action lawsuit against his employer for breaches of California's wage and hours laws. Kmart sought to compel arbitration.

Under California Family Code § 6710, minors (under the age of 18) may enter into contracts, but they have a right of disaffirmation "before majority or within a reasonable time afterwards."  In Lopez v. Kmart Corp., Magistrate Corley, of the Northern District of California, held that Lopez disaffirmed his arbitration agreement with Kmart by filing the lawsuit within one month of turning 18 and that one month was a "reasonable" time under § 6710.  

While California Family Code § 6712 excepts certain categories of contracts from the right of disaffirmation, Kmart did not argue that its contract with Lopez fell within any of those categories.  Instead, Kmart sought to argue that the contract could not be disaffirmed because California Family Code § 6711 removes the right of disaffirmation of any contract entered into "under the express authority or direction of a statute."  Magistrate Corley disagreed with Kmart, finding that § 6711 did not apply and that the argument was waived because first raised at oral argument.

Kmart next argued that §6710 only applies to contracts for goods or services and not to employment contracts.  Magistrate Corley simply noted that the statutory language contains no such limitation.  In any case, the contract was for services, as Lopez was to serve as a cashier.  

Finally, Kmart urged the court to deny the disaffirmation in the exercise of its equitable powers.  Magistrate Corley noted that she could not exercise such powers where the authority for disaffirmation was statutory.  Kmart cited to cases from other jurisdictions in which courts had exercised such equitable powers in the employment context, but Magistrate Corley noted that they did so in the context of common law, not statutory infancy doctrines.

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	373	Hello Barbie: First They Will Monitor You, Then They Will Discriminate Against You. Perfectly  Irina D. Manta and David S. Olson  Hofstra University - Maurice A. Deane School of Law and Boston College Law School
2	229	Loyalty Rebates after Intel: Time for the European Court of Justice to Overrule Hoffman-La Roche  Damien Geradin  George Mason University School of LawTilburg University - Tilburg Law and Economics Center (TILEC)
3	173	M&A Contracts: Purposes, Types, Regulation, and Patterns of Practice  John C. Coates, IV  Harvard Law School
4	134	The Validity of Restraints on Alienation in an Oil and Gas Lease  Luke Meier and Rory M. Ryan  Baylor University - Law School and Baylor University - Law School
5	103	Judicial Deregulation of Consumer Markets  Max N. Helveston  DePaul University - College of Law
6	102	Antitrust Arbitration and Merger Approval  Mark A. Lemley and Christopher R. Leslie  Stanford Law School and University of California, Irvine School of Law
7	101	Lex Mercatoria  Gralf-Peter Calliess  University of Bremen - Faculty of Law
8	100	Private Lenders’ Demand for Audit  Richard Baylis, Pete Burnap, Mark Clatworthy, Mahmoud Gad and Christopher K. M. Pong  Cardiff Business School, University of Wales System - Cardiff University, University of Bristol, Department of Accounting and Finance, University of Bristol, Department of Accounting and Finance and Heriot-Watt University - School of Management and Languages
9	83	Other People's Contracts  Aditi Bagchi  Fordham University School of Law
10	78	Social Justice, Social Norms and the Governance of Social Media  Tal Zarsky  University of Haifa - Faculty of Law

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

Rank	Downloads	Paper Title
1	103	Judicial Deregulation of Consumer Markets  Max N. Helveston  DePaul University - College of Law
2	102	Antitrust Arbitration and Merger Approval  Mark A. Lemley and Christopher R. Leslie  Stanford Law School and University of California, Irvine School of Law
3	101	Lex Mercatoria  Gralf-Peter Calliess  University of Bremen - Faculty of Law
4	100	Private Lenders’ Demand for Audit  Richard Baylis, Pete Burnap, Mark Clatworthy, Mahmoud Gad and Christopher K. M. Pong  Cardiff Business School, University of Wales System - Cardiff University, University of Bristol, Department of Accounting and Finance, University of Bristol, Department of Accounting and Finance and Heriot-Watt University - School of Management and Languages
5	83	Other People's Contracts  Aditi Bagchi  Fordham University School of Law
6	78	Social Justice, Social Norms and the Governance of Social Media  Tal Zarsky  University of Haifa - Faculty of Law
7	77	The Forum Selection Defense  Stephen E. Sachs  Duke University School of Law
8	69	Pluralistic Legal Theories: In Search of a Common Denominator  Ronen Perry  University of Haifa - Faculty of Law
9	67	Shareholder Litigation by Contract  Verity Winship  University of Illinois College of Law
10	59	Online Consumer Contracts: No One Reads, But Does Anyone Care?  Shmuel I. Becher and Tal Zarsky  College of Management (Israel) - School of Law and University of Haifa - Faculty of Law

 

 

Weekly News Roundup

According to Philadelphia Magazine, two men who paid to watch the Mayweather-Paaquiano fight on pay-per-view are suing on behalf of a class of viewers who did not get their money's worth because Paquino had an undisclosed shoulder injury.  The suit claims damages for  breach of contract, fraud conspiracy and violation of consumer protection laws. Viewers paid between $89 and $100 to watch the fight.  The suit alleges that the fight should have been cancelled or postponed.

The LA Times reports that a group of students who contracted Leishmaniasis, a parasitic disease that causes painful skin ulcers, while on a trip to Israel are suing the trip's organizers for failing to take adequate precautions to protect the students.  The illness is allegedly caused by sand fly bites.  The suit names the North American Federation of Temple Youth and the Union for Reform Judaism as defendants.  It alleges that the organizations failed to take precautions such as providing the students with insecticides or insect netting and that the organizations provided the students with bug-infested bedding.

The LA Times also reports on a new trend on the hot, new social media: suing your co-founder.  The report suggests that combining handshake deals undertaken in college dormitories, coupled with youthful hasted makes for a dangerous mix.  We are all familiar with the strife among the founders of Facebook, but it turns out that Snapchat, Tinder, Maker Studios and Beats Electronics have all also experienced co-founder difficulties sounding in allegations of breaches of founders' agreements.

Victory at the Smelliest Place on Earth

 

Disney Tree of Life by Clavet

The Orlando Sentinel reported that an arbitrator has reinstated Disney workers who had refused to perform in a Disney Animal Kingdom Show, the Festival of the Lion King.  The workers refused to perform because the unitards they were expected to wear for the show were not clean and dry as required in the Collective Bargaining Agreement between Disney and Teamsters Local 385 of the Services Trade Council Union (Attachment 6, Part C).  

Disney was forced to cancel a performance of the show and then terminated the objecting workers.  Disney will have to pay the workers back-pay for the time they were out of work (minus what they earned at other jobs), and reprimands will be removed from their files.

West Virginia Supreme Court of Appeals Refuses to Enforce Unethical Fee-Splitting Agreement

Gary Rich and Joseph Simioni met in connection with an asbestos case involving West Virginia University.  Rich is an attorney.  Simioni has a J.D. but was never admitted to the bar.  Starting in the 1990s, the two men collaborated on two additional asbestos cases and contracted with out-of-state law firms to help them class action litigation.  It appears that until 2002, the men agreed that they would split the proceeds of their work 50/50.  but then Rich announced there would be an 80/20 split in his favor. The parties then proceeded on this basis and committed their agreement to writing in 2005.  

Rich now contends that he was under the impression that Simioni was a licensed attorney, and he did not realize that Simioni was not licensed until 2000 or 2001.  He consulted with the former Chief Lawyer Disciplinary Counsel of the West Virginia State Bar, who told him that Sinioni “might not be able to get paid ethically."

Simioni eventually filed sued in District Court against the out-of-state law firms, seeking recovery based in quantum meruit, unjust enrichment and breach of an implied contract.  The District Court certified the following question to the Supreme Court of Appeals:

Are the West Virginia Rules of Professional Conduct statements of public policy with the force of law equal to that given to statutes enacted by the West Virginia State Legislature? 

The Supreme Court of Appeals answered in the affirmative, at least with respect to Rule 5.4 of the Rules of Professional Conduct. which prohibits fee-sharing between lawyers and non-lawyers..  The Court held for the first time (but based on numerous authorities) that fee-sharing agreements between lawyers and non-lawyers violate public policy.  The parties sought to persuade the court to find an alternative mechanism for compensating Simioni by setting aside the agreement to share fees and compensate Simioni in quantum meruit, but the Court rejected that as an attempt to circumvent the rule.

Unbridled Growth and Companies that Never Learn

This week, Los Angeles City Attorney Mike Feuer famously filed suit against Wells Fargo claiming that the bank's high-pressure sales culture set unrealistic quotas, spurring employees to engage in fraudulent conduct to keep their jobs and boost the company's profits.  

Allegedly (and in my personal experience as I bank with Wells Fargo), the bank would open various bank accounts against its customer’s wills, charge fees for the related “services,” and refuse to close the accounts again for various official-sounding reasons, making it very cumbersome to deal with the bank.  The bank’s practices often hurt its customers' credit rankings.

Employees have described “how staffers, fearing disciplinary action from managers, begged friends and family members to open ghost accounts. The employees said they also opened accounts they knew customers didn't want, forged signatures on account paperwork and falsified phone numbers of angry customers so they couldn't be reached for customer satisfaction surveys.”  

The city's lawsuit alleges that the root of the problem is an unrealistic sales quota system enforced by constant monitoring of each employee — as much as four times a day.  "Managers constantly hound, berate, demean and threaten employees to meet these unreachable quotas," the lawsuit claims.  Last year, 26% of the bank’s income came from fee income such as from fees from debit and credit cards accounts, trust and investment accounts.  The banking industry is currently set up in such a way that around 85% of institutions would go bankrupt if they do not have fee income.  

This comes only three years after Wells Fargo agreed to pay $175 million to settle accusations that its independent brokers discriminated against black and Hispanic borrowers during the housing boom and treated these borrowers in predatory ways.

All this in the name of “growth,” traditionally thought of as the sine qua non of industrialized economies, even in financially tough times where simply maintaining status quo – and not going out of business - would seem to be acceptable for now from at least a layman’s, logical standpoint. 

In recent years, more and more economists have advanced the view that unbridled growth or even growth per se may simply not be attainable or desirable.  After all, we live on a planet with limited resources – financial and environmental - and limited opportunities.  This especially holds true in relation to the “1% problem.”  Nonetheless, questioning growth has been said to be “like arguing against gasoline at a Formula One race.”  So I’m making that argument here, although I acknowledge that I am not an economist: by setting our national (and personal) economies up for ever-continuing growth, we are playing with fire.  There is only so much of a need for various things and services, as the above Wells Fargo suit so amply demonstrates.  Granted, the global population is growing, but much of that growth is in developing nations where people frankly cannot afford to buy many of the products and services often so angrily pushed by modern companies worldwide.  In the Global North, C-level managers are often rewarded via measurements of growth and if they cannot produce the expected growth results, they risk being fired.  Sometimes, simply doing the right thing by customers and employees may actually be enough as long as the company would remain sound and in business.  Of course, this requires a shift in thinking by shareholders who contribute greatly under our current investment models to the demand for never-ending growth.  Overconsumption and waste is a vast ecological problem as well.  It has been said that “we must reform economics to reflect ecological reality: nature is not, after all, just a pile of raw materials waiting to be transformed into products and then waste; rather, ecosystem integrity is a precondition for society's survival.”

Growth is, of course, good and desirable if possible.  But if, as seems to be the case, it’s coming to a point where we destroy our own chances of healthy long-term survival and wreck the emotional and financial lives of employees and clients in the meantime, something is seriously wrong.

The Blogosphere Responds to Our Series on Legal Education

Yesterday's post has inspired quite a bit of traffic here and elsewhere.  Over on Brian Leiter's Law School Reports, Michael Simkovic asks whether conditional scholarships are good for law students.  

Deborah Merritt responds on the Law School Cafe and answers the question in the negative.  She thinks conditional scholarships mostly help law schools, and they hurt students by creating a stressful competitive environment.

Michael Simkovic (again on Leiter) disagrees.  He argues that conditional scholarships motivate students to work hard in law school and cites to studies linking motivation and academic performance.

Deborah Merritt shoots back on the Law School Cafe.

And Michael Simkovic again responds on Leiter.  

It is hard for me to keep up with the pace at which these people blog.

I have only a few quick points to make in response to Professor Merritt, whose remarks are largely critical of the position I have taken here:

• It seems we are all agreed that the disclosure problems related to conditional scholarships have largely been addressed through the ABA website that enables students to comparison shop among scholarship offers from various schools and know their chances of retaining their conditional scholarships.  Some law schools routinely offer a lot of merit scholarships in the first year knowing that most students will not retain them thereafter.  But that information is now easily available, and we will see if students vote with their feet against such a model.
• Professor Merritt properly chastises me for treating Wikipedia's listing of normalization curves as authoritative.  I think Wikipedia is a good place to start, but my main point is that information about normalization curves should be readily available for each school a student is considering attending.
• I find the absence of curves in undergraduate grading perplexing, and I find it astonishing that anybody would think non-curves are better than curves.  I could easily design an exam that all my students would ace (above 90% correct) and an exam that all my students would fail (below 60% correct).  But there is nothing holy about base ten, and my aim should not be to design a test so perfectly calibrated that the difference between a 91% and an 89% is meaningful but the difference between 86% and 84% is not.  My aim in assessment is, among other things, to have a tool that helps me distinguish within a group of students who have had the same educational experience.  A curve helps me do that better than random divisions at every point at which the score passes a 0.  
• Professor Merritt points to a study in which the J.D. placed only sixth in a  ranking of the best graduate degrees.  As if that were a bad thing!  Three of the degrees that ranked more highly are Ph.D. programs likely to take twice as long as the J.D. and the others likely require higher math or computer programming skills.  This extremely high ranking for the J.D. is terrific news.  By the way, the MBA, a frequent alternative to the J.D., ranked 14th.
• Professor Merritt tells an anecdote about a student who decided not to pursue a J.D. when she learned of conditional scholarships.  She decided to take her graduate tuition dollars elsewhere, but where?  Unless she earned a Ph.D. in statistics, computer science or physics, or a Masters Degree in human computer interaction or  biostatistics, according to the study cited by Professor Merritt, she made a poor choice.

Professor Merritt's second post turns on an anecdote about teaching the same course (torts) the same way to different students and getting very different results.  As a consequence, she had to give students in the "smart section" who did better on the exam worse grades than some students who did worse on the exam in the weaker section.  Three thoughts:

First, one cannot step into the same river twice.  One semester when I taught history at the College of Charleston in the 1990s, I had four sections of Western Civ., all on a Tuesday/Thursday schedule (they were long days!).  Same readings, same outside materials, same assignments, same lecture notes.  Each section developed its own identity.  They were four different courses.

Second, in fifteen years of teaching at both the college and law school level, I have never had a similar problem.  An anecdote is not an argument.  No system of grading is perfect, and I can live with small injustices around the edges of grade normalization.  Whether or not a student retains a conditional scholarship is not determined by her performance in any one course.  

Third, consider the insight of Professor Merritt's plucky college student who decided against a J.D.  Knowing only undergraduate education, the student remarked, “It’s not like there’s a quota on the number of A’s or anything.”  In that world, the undergraduate professor gives A's to all of the students in the "smart section" who "earned" them according to some mysterious but fixed standard.  Outside of the STEM courses, the undergraduate professor can also give As to the best students in the weaker section, even though the same performance would have earned them a B in the "smart section."  Within the STEM courses, imagine the stampede of angry pre-med students from the weaker section who will decry the injustice that there were no A's in their section but eight in the other. I pity the department chair who has to sort out that mess.

Links to Related Posts:

The Current Series 

XI:Another Transparency Issue: Conditional Merit-Based Scholarships
X: Siloing: The Next Unneeded Import from Undergraduate Education
IX: Legal Education in the News and on the Blogosphere
VIII: Myanna Dellinger, Caveat Emptor and Law School Transparency
VII: Myanna Dellinger, On Issue-Spotting and Hiding the Ball
VI: Issue Spotting: A Response to a Comment
V: Did Legal Education Take a Wrong Turn in Separating Skills and Doctrine?
IV: What Is the Place of Core Doctrinal Teaching and Scholarship in the New Curriculum?
III: My Advice to Law School Transparency: Declare Victory and Move On
II: SLOs and Why I Hide the Ball (and Why You Don't Have To)
I: Why Is the Legal Academy Incapable of Standing Up for Itself? 

Related Posts form 2012:

Thoughts on Curricular Reform VI: Preparing the Academically Adrift for Practice
Thoughts on Curricular Reform V: A Coordinated Curriculum and Academic Freedom
Thoughts on Curricular Reform IV: The Place of Scholarship in the 21st Century Legal Academy
Thoughts On Curricular Reform III: The Costs of Change
Thoughts on Curricular Reform II: Teaching Materials
Thoughts on Curricular Reform I: The Problem

Welcome to the Blogosphere to New Private Law

John Goldberg (right top) and Henry Smith (right bottom) have launched a new law blog: New Private Law.

Contributors include:

Aditi Bagchi
Shyam Balganesh
Janet Freilich
Andrew Gold
John Golden
Keith Hylton
Daniel Kelly
Greg Klass
Daniel Markovitz
Tom Merrill
Anthony Sebok
Ted Sichelman
Benjamin Zipursky

You can read the introductory post here.

It's quite a line-up!  We look forward to some interesting posts.

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	365	Hello Barbie: First They Will Monitor You, Then They Will Discriminate Against You. Perfectly  Irina D. Manta and David S. Olson  Hofstra University - Maurice A. Deane School of Law and Boston College Law School
2	217	Loyalty Rebates after Intel: Time for the European Court of Justice to Overrule Hoffman-La Roche  Damien Geradin  George Mason University School of LawTilburg University - Tilburg Law and Economics Center (TILEC)
3	156	M&A Contracts: Purposes, Types, Regulation, and Patterns of Practice  John C. Coates, IV  Harvard Law School
4	103	Judicial Deregulation of Consumer Markets  Max N. Helveston  DePaul University - College of Law
5	100	Manufactured Consent: The Problem of Arbitration Clauses in Corporate Charters and Bylaws  Ann M Lipton  Duke University School of Law
6	99	Antitrust Arbitration and Merger Approval  Mark A. Lemley and Christopher R. Leslie  Stanford Law School and University of California, Irvine School of Law
7	96	Private Lenders’ Demand for Audit  Richard Baylis, Pete Burnap, Mark Clatworthy, Mahmoud Gad and Christopher K. M. Pong  Cardiff Business School, University of Wales System - Cardiff University, University of Bristol, Department of Accounting and Finance, University of Bristol, Department of Accounting and Finance and Heriot-Watt University - School of Management and Languages
8	84	The Validity of Restraints on Alienation in an Oil and Gas Lease  Luke Meier and Rory M. Ryan  Baylor University - Law School and Baylor University - Law School
9	80	Other People's Contracts  Aditi Bagchi  Fordham University School of Law
10	75	Social Justice, Social Norms and the Governance of Social Media  Tal Zarsky  University of Haifa - Faculty of Law

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

Rank	Downloads	Paper Title
1	103	Judicial Deregulation of Consumer Markets  Max N. Helveston  DePaul University - College of Law
2	100	Manufactured Consent: The Problem of Arbitration Clauses in Corporate Charters and Bylaws  Ann M Lipton  Duke University School of Law
3	99	Antitrust Arbitration and Merger Approval  Mark A. Lemley and Christopher R. Leslie  Stanford Law School and University of California, Irvine School of Law
4	96	Private Lenders’ Demand for Audit  Richard Baylis, Pete Burnap, Mark Clatworthy, Mahmoud Gad and Christopher K. M. Pong  Cardiff Business School, University of Wales System - Cardiff University, University of Bristol, Department of Accounting and Finance, University of Bristol, Department of Accounting and Finance and Heriot-Watt University - School of Management and Languages
5	80	Other People's Contracts  Aditi Bagchi  Fordham University School of Law
6	75	Social Justice, Social Norms and the Governance of Social Media  Tal Zarsky  University of Haifa - Faculty of Law
7	68	The Forum Selection Defense  Stephen E. Sachs  Duke University School of Law
8	64	Shareholder Litigation by Contract  Verity Winship  University of Illinois College of Law
9	63	Lex Mercatoria  Gralf-Peter Calliess  University of Bremen - Faculty of Law
10	59	Contractually Adopted Fiduciary Duty  D. Gordon Smith  Brigham Young University - J. Reuben Clark Law School