ContractsProf Blog

Alleging Medical Necessity Under a Health Insurance Contract

We are by now probably all familiar with the modern phenomenon of GoFundMes to cover medical care. Those funds likely aren't just to cover situations where the parties didn't have health insurance, but also situations where the parties did have health insurance and the health insurance refused to pay. Sometimes because of the terms of the particular health insurance policy, but also sometimes without adequate justification. A recent case out of the Southern District of Florida, Grewal v. Aetna Life Insurance Co., Case No. 17-cv-80318-MIDDLEBROOKS (behind paywall), seems like the latter situation, based on the allegations of the complaint. 

Grewal, who had Aetna health insurance, also had a six-year-old son, A., who became seriously and unexpectedly ill. He was eventually diagnosed with a rare and very dangerous condition that required long-term care and inpatient rehabilitation. A.'s doctors determined that he should be transferred to a different hospital that could properly treat A. The hospital where A. had been was unable to handle the specialized care A.'s condition required. (In fact, there were allegations the hospital had allowed A. to lay in his own vomit for long periods of time, which seems...alarming???)

Aetna refused to clear A.'s flight transfer, finding that it was not medically necessary, but A.'s condition grew increasingly serious, so A.'s father decided to go through with the flight. He then filed a claim with Aetna to pay for the flight, which Aetna refused within days, without examining A. or the hospitals in question. This refusal left A.'s father with a bill over $300,000. 

Aetna's motion to dismiss required the court to determine if the complaint had sufficient allegations that A.'s flight between hospitals was indeed "medically necessary." And the court determined that it did. The complaint alleged that, at the time that A. was transferred, ground transportation was unsafe because of the seriousness of A.'s condition. Therefore, if A. had to be transported, it had to be by flight. And the complaint further alleged that A.'s current hospital was so inadequate to treat A. that it was a life-threatening situation for A. Finally, the complaint alleged that A.'s doctors, those medical professionals most familiar with A.'s condition, recommended the flight transfer. Those allegations were all sufficient to establish that the transfer was "medically necessary" and thus covered by the health insurance policy. Therefore, taking the facts in the complaint as true, a breach of contract was alleged. 

We'll see how this case plays out, but I can't help but feel intense sympathy for A.'s father, having to make this decision. Imagine your six-year-old son being suddenly, unexpectedly, very seriously sick, and your son's doctors saying he needed to be transferred to have any chance at recovery. How rational do you think you would be dealing with your insurance company in your situation? Would you really consider it time to have a debate over contractual language? 

Circumstances Where a State-Owned Enterprise Can Declare Force Majeure Based Upon the Actions of Its Own State

In contract law, a party may be discharged from its obligations under a contract where an unforeseen event prohibits continued performance.  This is referred to as a force majeure or "Act of God."  My article, The Ability of a State-Owned Enterprise to Declare Force Majeure Based Based Upon Actions of the State, discusses the unique circumstances in private international law where a State-owned enterprise is able to avail itself of a force majeure clause in a contract by the actions of its own State.  Such a situation is not prohibited under the law as State-owned companies are generally treated as any other private entity.  

However, arbitration panels views these situations with circumspect, and will closely scrutinize the circumstances surrounding the events.  They weigh three factors to determine whether the State enterprise may be discharged from performance.  As discussed in the article, they are:

(1) the state enterprise must possess a legal identity distinct from that of the state in commercial transactions; (2) the state enterprise must not be in collusion with the host state to bring about the action that precipitated the force majeure; [or] (3) the action of the host state must be either an act of state or a political decision of national sovereignty outside of the state’s purely pecuniary interest in the commercial transaction.

The concern is that States will collude with their wholly owned companies to get out of unfavorable contract situations leading to inequitable results.  

Is Britain About to Exit Brexit?

A year ago, I took a non alarmist view on the European Union Referendum Act 2015, popularly known as "Brexit."  I wrote a piece entitled "Brexit Will Lead to Greater Unity, Not Disintegration" for the American Bar Association Section of International Law's European Committee Newsletter, Brexit Special Edition - Voices From the Divide.  I asserted that, because the Brexit vote was advisory, cooler heads would prevail, and the British Parliament would ultimately decline to leave the European Union.  

Here on ContractsProf Blog as well, I outlined an approach for an exit from brexit based on Article 50 of the Lisbon Treaty.  Following the Fixed Terms Parliament Act 2001, Parliament could elect to hold a snap election with Brexit as the flashpoint.  One year later, the UK Government appears poised for this very result.

In April, Prime Minister Theresa May called for the dissolution of Parliament, and a snap election to be held on June 8th.  Her stated intent was to increase the Conservative Party majority in Parliament.  Thus, making it easier to pass legislation to execute Britain's departure from the EU.  It would also strengthen her hand in negotiations with the other European powers.  

However, a funny thing happened on the way to Tory hegemony.  The Labour Party has been gaining in the polls.  In contrast to May's determination for a clean break from Europe, Labour are promising a more measured approach (a summary of the positions of the political parties can be found here).  While stating that it will honor the results of the referendum, Jeremy Corbyn and the Labour Party first promise to allow European citizens living in the UK to remain.  Labour also promises "a strong emphasis on retaining the benefits of the Single Market and the Customs Union – which are essential for maintaining industries, jobs and businesses in Britain."  See Labour Party Manifesto.  

With such a stark contrast between the parties, the UK public will have a de facto second referendum on Brexit in the form of a Parliamentary election.  

Your Mother-in-Law Pays Off Your Student Loans, Then You Divorce Her Son. Now What?

Here's another case for the "it's always better to get it in writing" file. Although here the failure to get the contract in writing doesn't doom recovery, it does just add an extra layer of analysis that might otherwise have been avoidable. 

The case, out of Alabama, is Julie Gerstenecker v. Janice Gerstenecker, 1160144, and you can probably guess immediately from the shared last name that doubtless the reason the contract wasn't in writing was because of the familial relationship between the parties. In fact, Julie was Janice's daughter-in-law. Janice, concerned about the interest rate on Julie's student loan, claimed to offer to pay off the loans in their entirety, in exchange for Julie paying her back interest-free at a rate of $700 a month (later to raise to $1,000 a month). Julie sent Janice an e-mail with the student loan information (including specific instructions as to how Janice could pay them off) and Janice thereafter paid the student loans off. Julie then paid Janice, as allegedly agreed, for four consecutive months. However, after that Julie and Janice's son divorced and Julie stopped making any further payments. Janice sued for breach of contract. 

Julie denied there had been any contract, although I think her credibility was undermined by her testimony in response to why, if there had been no contract, she had written the checks to Janice: Julie claimed not to be able to remember why she had written the checks at issue to Janice. At any rate, she tried to raise a statute of frauds defense, asserting that the contract could not have been completed in a year and that therefore it should have been in writing (which it was not). However, she raised the defense so late in the case that the court basically deemed she had waived it. 

The court then went on to address Julie's argument that there was not enough evidence of mutual assent. Julie agreed that she did e-mail Janice her student loan information and that she did give Janice the checks at issue, but argued that evidence was ambiguous and did not indicate that she had accepted Janice's offer. The court disagreed. Julie provided Janice with all of the information Janice needed to pay off the student loans, and then Julie began her performance in response by beginning to pay Janice (no other explanation for the checks, after all, had ever been offered). That was enough evidence that a contract had existed. 

The only thing left to debate was the measure of damages. The trial court had awarded Janice the entire repayment amount. However, the appellate court concluded that was incorrect because there was no evidence that the contract contained an acceleration clause. Therefore, Janice could only receive a judgment for the amount of money Julie already owed in missed payments. 

Ancestry.com Doesn't Want Your DNA Forever (At Least, Not Anymore)

Earlier this week, Stacey Lantagne wrote a post about Ancestry.com’s Terms and Conditions. Among other things, it gives Ancestry.com a perpetual license to use its customers' DNA for…well, pretty much anything.  Attorney Joel Winston wrote about the terms here and his post quickly went viral. The social media backlash was fast and furious – and Ancestry.com now claims that it didn’t really mean what it said in its terms. They also say that they will take out that provision (although as of this writing, it is still there). It seems that nobody reads wrap contracts – even the companies that draft them.

This is another example of how consumers often do care what’s in the TOS, even if they don’t read them. Not reading (and so not knowing what’s in the terms) is not the same as not caring that the terms apply. It’s also another encouraging example of a company responding to market demand for different contract terms. Shades of General Mills….

Weekly Top Ten SSRN Contracts and Commercial Law Downloads (May 25, 2017)

SSRN Top Downloads For
Contracts & Commercial Law eJournal

RECENT TOP PAPERS for all papers first announced in the last 60 days
26 Mar 2017 through 25 May 2017

Rank	Downloads	Paper Title
1	845	Surveying the Law of Emojis Eric Goldman Santa Clara University - School of Law
2	283	Contracts Ex Machina Kevin D. Werbach and Nicolas Cornell University of Pennsylvania, The Wharton School, Legal Studies & Business Ethics Department and University of Pennsylvania - The Wharton School, Legal Studies & Business Ethics Department
3	214	Directors’ Duties and Legal Safe Harbours: A Comparative Analysis Matthew Conaglen and Jennifer G. Hill The University of Sydney Law School and The University of Sydney Law School
4	212	A New Perspective on FRAND Royalties: Unwired Planet v. Huawei Jorge L. Contreras University of Utah - S.J. Quinney College of Law
5	191	Henry Maine's 'Modern Law': From Status to Contract and Back Again? Katharina Isabel Schmidt Princeton University - Department of History, Students
6	132	In Defense of the Restatement of Liability Insurance Law Tom Baker and Kyle D. Logue University of Pennsylvania Law School and University of Michigan Law School
7	126	Boilerplate's False Dichotomy James Gibson University of Richmond School of Law
8	109	Presiding Over Municipal Bankruptcies: Then, Now, and Puerto Rico Melissa B. Jacoby University of North Carolina (UNC) at Chapel Hill - School of Law
9	84	Complexity, Standardization, and the Design of Loan Agreements Bernhard Ganglmair and Malcolm Wardlaw University of Texas at Dallas - Managerial Economics and University of Texas - Dallas
10	168	What a Contract Has Joined Together Let No Court Cast Asunder: Abolishing Separability and Codifying the Scope of the Provisions of Arbitration Agreements Taylor Payne and Richard A. Bales Ohio Northern University, Pettit College of Law, Students and Ohio Northern University - Pettit College of Law

 

SSRN Top Downloads For
Law & Society: Private Law - Contracts eJournal

RECENT TOP PAPERS for all papers first announced in the last 60 days
26 Mar 2017 through 25 May 2017

Rank	Downloads	Paper Title
1	283	Contracts Ex Machina Kevin D. Werbach and Nicolas Cornell University of Pennsylvania, The Wharton School, Legal Studies & Business Ethics Department and University of Pennsylvania - The Wharton School, Legal Studies & Business Ethics Department
2	191	Henry Maine's 'Modern Law': From Status to Contract and Back Again? Katharina Isabel Schmidt Princeton University - Department of History, Students
3	168	What a Contract Has Joined Together Let No Court Cast Asunder: Abolishing Separability and Codifying the Scope of the Provisions of Arbitration Agreements Taylor Payne and Richard A. Bales Ohio Northern University, Pettit College of Law, Students and Ohio Northern University - Pettit College of Law
4	126	Boilerplate's False Dichotomy James Gibson University of Richmond School of Law
5	84	Complexity, Standardization, and the Design of Loan Agreements Bernhard Ganglmair and Malcolm Wardlaw University of Texas at Dallas - Managerial Economics and University of Texas - Dallas
6	77	Arbitration About Arbitration David Horton University of California, Davis - School of Law
7	71	The Many Faces of Contractual Consent Orit Gan Sapir Academic College - School of Law
8	69	What Did They Know and When Did They Know it? Pretesting and Assessing Learning Outcomes Jeffrey Lynch Harrison University of Florida - Levin College of Law
9	67	Delaware's Fall: The Arbitration Bylaws Scenario Lynn M. LoPucki University of California, Los Angeles (UCLA) - School of Law
10	59	Politicized Dispute Settlement in the Pre-Investment Treaty Era: A Micro-Historical Approach Jason W. Yackee University of Wisconsin Law School

In Arizona, a Breach of Good Will Does Not Require Spite

A recent case out of Arizona, Russo and Steele, LLC v. Tri-Rentals, Inc., No. 1 CA-CV 16-0042, deals with breach of the covenant of good faith and fair dealing, which is read into every Arizona contract. In the case at issue, though, Tri-Rentals's behavior was not "self-dealing," and Tri-Rentals argued that self-dealing, or spite, or ill will was required to breach the covenant. Not so in Arizona, though. Arizona does not require self-dealing conduct. Rather, the covenant is breached if you prevent the other party from receiving the benefit of the bargain, whether or not you do so out of spite or some advantage to yourself. 

(The case itself is an interesting one, stemming out of collapsed tents at a car show that resulted in damage to several classic vehicles.)

He Who Breaches First, Etc.

Here is just a quick straightforward case out of the Eastern District of Michigan, Pittman v. Pacifica Loan Pool, LLC, Case No. 15-13877 (behind paywall), about the effect of a breach of contract on the other party to the contract. In the case, Pittman alleged that Pacifica breached the agreement by failing to pay the required property taxes. However, Pacifica countered that Pittman breached the agreement first by failing to make his required monthly payments. The court noted that the party who commits the first substantial breach of contract cannot sue the other party for failing to perform. Pittman's failure to make his required payments was a substantial breach on his part, and predated Pacifica's behavior. Therefore, he could not maintain this cause of action.  

If You Hire a Home Inspector, Listen to the Inspector, Not the Sellers

A recent case out of Texas, Naquin v. Cellio, No. 14-04054-431, deals with "as-is" clauses and fraudulent inducement in the context of a real estate transaction. 

Naquin bought a home in 2012. The home purchase contract stated that she was buying the home "in its present condition." Naquin hired an inspector to look the home over, received a report, and decided to buy the house. Naquin then claims to have discovered, inter alia, plumbing issues caused by a toilet that had been added to a pool house on the grounds, and claims that she had been fraudulently induced to buy the house by the Cellios' misrepresentations. 

The court upheld the enforceability of the "as-is" clause. There was no disparity of bargaining power between the parties, and both parties were represented by real estate agents in the transaction. The parties specifically negotiated over the "as-is" clause and agreed to give Naquin the right to complete an inspection of the property before closing the transaction (which Naquin did). 

However, the "as-is" clause would not be enforceable of the Cellios made a fraudulent misrepresentation. It was true that the Cellios executed statements saying they were unaware of any issues with the plumbing and that they had not done anything to the home without the necessary permitting (although it also appeared to be true that the Cellios thought this statement was true when they made it). But, at any rate, it was also true that Naquin knew that there were plumbing issues and structural defects because those had come up in the inspection. The inspection report, the court held, should have trumped the Cellios' representations, and Naquin should have relied on that. In fact, when Naquin hired the inspector, it was an indication that she was not relying on the Cellios' word. Therefore, she couldn't prove that she had been fraudulently induced. 

Terms and Conditions on Your DNA: How Complicated Can It Get?

This is a long one, that I didn't expect to be long, but I decided the point is how long this is, and the questions it raises about all of those terms and conditions on websites. 

A friend of mine asked me recently about the terms and conditions of the Ancestry.com DNA service. The service, if you're not familiar with it, takes your DNA and breaks it down into ethnic backgrounds for you, based on analysis of genetic markers. Here's a video that talks about it some: 

So if you're using the DNA service, you're handing your DNA over to Ancestry.com, and maybe we should think: what does that mean? After all, who does our DNA belong to, and what can it be used to? The Supreme Court looked at this in the context of patents a few years ago, finding that DNA cannot be patented. So we know that no one can own a patent on your DNA. But that's not really what's at issue in the DNA service site. No one is trying to patent the DNA, but Ancestry.com is still using the DNA in certain ways.

Looking into the terms and conditions initially seemed to me like it would be straightforward. Several hours later...

I started with the actual terms and conditions (makes sense, right?). It has a license provision:  

"By submitting DNA to AncestryDNA, you grant AncestryDNA and the Ancestry Group Companies a perpetual, royalty-free, world-wide, transferable license to use your DNA, and any DNA you submit for any person from whom you obtained legal authorization as described in this Agreement, and to use, host, sublicense and distribute the resulting analysis to the extent and in the form or context we deem appropriate on or through any media or medium and with any technology or devices now known or hereafter developed or discovered."

That "we deem appropriate" language seems very broad to me. Appropriate for what? There isn't a lot of limitation there, and a lot of trust seems to be placed that your definition of "appropriate" will be the same as Ancestry's (and how likely is that, really?). I looked at some social media terms to compare (Facebook, Tumblr, Twitter), and none of their license grants had "we deem appropriate" language (and, in fact, Tumblr's license in particular was fairly narrow in its grant). Keep in mind, Ancestry has your DNA, not a random tweet about making a cup of tea in the morning. Also a point to think about: the social media is free, and I think we kind of expect that there's a trade-off for that. Ancestry costs money AND also takes a broad license grant in exchange. 

The terms and conditions also go on:

"You hereby release AncestryDNA from any and all claims, liens, demands, actions or suits in connection with the DNA sample, the test or results thereof, including, without limitation, errors, omissions, claims for defamation, invasion of privacy, right of publicity, emotional distress or economic loss. This license continues even if you stop using the Website or the Service."

So they can do whatever they deem appropriate, and you release them from any lawsuits in connection with it. 

Now, adding a complicating layer to all of this, though, is that the terms and conditions are supposed to be read in conjunction with the privacy statement, on a completely different webpage, that does appear to limit what they're doing with the DNA, I think, and also appears to give you the opportunity to cancel the service, although how that affects the license, which says that it survives termination of the service, is unclear to me. And in addition to that, there is another completely different webpage, called the Consent Agreement. I don't know when this comes up in the DNA process, because I didn't want to input my credit card, and before that point I only saw the terms and conditions and privacy statement referenced. But the Consent Agreement has to do with participation in scientific research, which seems cool, except that when you read further down into it, it says stuff like this: 

"If Data are obtained through these methods, it is possible that information about you or a genetic relative could be revealed, such as that you or a relative are carriers of a particular disease. That information could be used by insurers to deny you insurance coverage, by law enforcement agencies to identify you or your relatives, and in some places, the data could be used by employers to deny employment.

In the United States, a federal law called the Genetic Information Non-Discrimination Act (GINA) generally makes it illegal for health insurance companies, group health plans, and most employers to seek your genetic information without your consent, and to discriminate against you based on your genetic information. GINA does not protect you from discrimination with regard to life insurance, disability insurance, long-term care insurance, or military service. There may be state laws and laws outside the United States that prohibit discrimination against you based on genetic data."

Tl;dr: What I just want to say is that's the point. I spent all morning trying to piece together all the different clauses of all these different documents, and I'm still confused, and I'm an actual lawyer (theoretically). And then I wrote a blog entry about it that was also too long! How confused do you think consumers are? And how many of them do you think actually spent the amount of time I did to try to get through all of that? 

Show Cars, Wavering Owners, and Oral Contracts

We all know the importance of “getting it in writing.” At the same time, we also all know how hard it can be to actually implement that, especially when it comes to a party you trust. An appellate case out of California shows how even simple emails could probably have saved the parties a lot of agony, especially in a non-commercial context where tempers may flare.

In 2010, Richard Grace bought a classic 1967 VW bus from Drew Colome, who also specialized in restoring older vehicles to show standards. Indeed, Grace stated to Colome that he wanted the bus to be restored to become an “excellent to outstanding” bus that he could show or, no less, “the best bus in the world” (yes, alarm bells should be going off by now by anyone dealing with such a purchaser). Grace also sent an email to Colome asking for the “BEST original and correct bus in the world,” stating that he would like to enter the bus in “two or three of the BEST [car] shows.” Colome understood that to mean a car show in Irvine, California, where show cars are allowed to feature non-original car parts. Discussions had also included the Pebble Beach car show in which only original car parts can be used. Restoring a car to Pebble Beach standards can take three years or more. Colome testified that since Grace already knew a great deal about classic cars and car shows, he (Grace) would also understand the timelines involved in the restoration project.

A year and half into the project, Grace again stated in an email to Colome that Grace wanted “THE BEST” and did not want to rush the job. At that point in time, Grace apparently thought that the final restoration would take no more than two further months. Colome testified that it would take at least seven months longer. Half a year later, Grace told Colome that he wanted “to terminate the project” and would take the bus “regardless of where we [are] or what condition the bus was in.” At some point in time, Grace also mentioned the fact that he had hoped to have the restored bus in time for his birthday.

Colome then delivered the bus to Grace in a winery parking lot (yes, really), believing that Grace would not try to drive the bus and later testifying that the bus was in fact “ not safe to drive.” Grace did, however, drive the bus, but found it difficult to steer and the bakes to not function properly. Grace subsequently paid another mechanic $12,500 to put the bus in working condition and sold it for $98,000.

Grace then filed suit against Colome for breach of oral contract. Grace alleged that Colome breached the parties' contract by "[f]ailing to restore [Grace's] 1967 21-Window VW Bus to show condition." After a bench trial, the court entered judgment in favor of Colome on all issues. Among other things, the court found that Grace failed to establish that he contracted with Colome in June 2010 for the restoration of the bus to the standards of Pebble Beach, that Colome did not breach the agreement because Grace prevented his performance when he retrieved the bus in August 2012, that Grace did not reasonably communicate his intention to drive the bus upon retrieval, and that Grace failed to establish that Colome's failure to complete the restoration of the bus was a breach of reasonable expectations under the contract because no time for completion was specified in the contract and a reasonable time would have been approximately three years.

With this case, you have to ask yourself why Colome did not, especially with a buyer like this, make sure to at least send an email stating the details of the deal as he understood them. A simple “reply” with some details and questions as to the expectations of the buyer would have worked wonders, it seems. Of course, Colome won the case anyway, but is it really reasonable, as here, to expect that a private buyer has all the knowledge about timelines, etc., involved in a specialty project such as this when you consider the fact that Colome was the expert who had restored between 90 and 120 VW buses? Why in the world would the parties not have gotten this in some sort of writing? Why would Colome, with a seemingly hot-tempered buyer like this, not have communicated more details in a deal such as this in at least an email? This seems unusual, especially given the fact that car mechanics always seem to issue “estimates” or “contracts” when I take my cars in for repair.

It seems that there were several miscommunications of intent and misunderstandings in this case. Of course, the case is more unique than a regular car repair job because of the special purposes of the car. On balance, the outcome of the case does seem fair both legally and factually. But it does, I think, raise some questions about the reasonable expectations of parties and why the parol evidence rule was not raised given the long time horizon of this job (three years). At a minimum, it again shows the importance of “getting it in writing,” even if that “just” takes the form of emailed communications.

Airline Luggage Fees: “Timely” Delivery is Not a Day Late

The Ninth Circuit Court of Appeals has held that carriers may have to reimburse luggage fees to passengers whose luggage arrives late.

A passenger sued US Airways (which later merged with American Airlines) in 2010 after paying a $15 bag fee for checked luggage on a flight from Colorado to California (wow, that seems so “cheap” now, just seven years later). The bag was delayed by a day. The passenger filed suit for breach of contract, alleging that US Airways promised her timely delivery of her checked bag upon arrival in exchange for a $15 fee, and the passenger did not get her bag until the day after arrival. The passenger asked for a reimbursement of the fee. The airline declined, claiming that since the contract did not spell out a remedy for the delay of delivery of the luggage, there could be none. The passenger filed a class-action lawsuit, which was dismissed by a the district court. The Ninth Circuit Court of Appeals reversed. The panel held that plaintiff sufficiently alleged that the airline promised under the terms of transportation to deliver her bag when she landed. The panel held that because plaintiff’s claim was for breach of contract of a voluntarily assumed contractual undertaking, and she pleaded breach of contract, the claim was not preempted by the Airline Deregulation Act. The case can thus move forward on the merits.  

This case brings a bit of good news to passengers in times of incredibly strict action taken by airlines against their own passengers. I still personally doubt whether individual action such as this will have much effect on the industry at large. Regulation is warranted, in my opinion. But until that happens (or not), some legal opposition and court wins may ease the situation in this field a bit.

Weekly Top Ten SSRN Contracts and Commercial Law Downloads (May 18, 2017)

SSRN Top Downloads For
Contracts & Commercial Law eJournal

RECENT TOP PAPERS for all papers first announced in the last 60 days
19 Mar 2017 through 18 May 2017

Rank	Downloads	Paper Title
1	789	Surveying the Law of Emojis Eric Goldman Santa Clara University - School of Law
2	209	Contracts Ex Machina Kevin D. Werbach and Nicolas Cornell University of Pennsylvania, The Wharton School, Legal Studies & Business Ethics Department and University of Pennsylvania - The Wharton School, Legal Studies & Business Ethics Department
3	208	Directors’ Duties and Legal Safe Harbours: A Comparative Analysis Matthew Conaglen and Jennifer G. Hill The University of Sydney Law School and The University of Sydney Law School
4	204	A New Perspective on FRAND Royalties: Unwired Planet v. Huawei Jorge L. Contreras University of Utah - S.J. Quinney College of Law
5	185	Henry Maine's 'Modern Law': From Status to Contract and Back Again? Katharina Isabel Schmidt Princeton University - Department of History, Students
6	185	Massively Discretionary Trusts Lionel Smith McGill University, Faculty of Law, Paul-André Crépeau Centre for Private and Comparative Law
7	175	Once Upon a Car: A Tale of Three Ambiguities Mark Cooney Western Michigan University Cooley Law School
8	167	What a Contract Has Joined Together Let No Court Cast Asunder: Abolishing Separability and Codifying the Scope of the Provisions of Arbitration Agreements Taylor Payne and Richard A. Bales Ohio Northern University, Pettit College of Law, Students and Ohio Northern University - Pettit College of Law
9	120	Boilerplate's False Dichotomy James Gibson University of Richmond School of Law
10	114	In Defense of the Restatement of Liability Insurance Law Tom Baker and Kyle D. Logue University of Pennsylvania Law School and University of Michigan Law School

 

SSRN Top Downloads For
Law & Society: Private Law - Contracts eJournal

RECENT TOP PAPERS for all papers first announced in the last 60 days
19 Mar 2017 through 18 May 2017

Rank	Downloads	Paper Title
1	260	טעות בכדאיות העסקה: שווי האובייקט, התפתחויות עתידיות, נטילת סיכון ורשלנות הטועה (Mistake as to the Worthwhileness of the Transaction: The Object's Value, Future Developments, Assumption of Risk, and Negligence) Eyal Zamir Hebrew University of Jerusalem - Faculty of Law
2	209	Contracts Ex Machina Kevin D. Werbach and Nicolas Cornell University of Pennsylvania, The Wharton School, Legal Studies & Business Ethics Department and University of Pennsylvania - The Wharton School, Legal Studies & Business Ethics Department
3	185	Henry Maine's 'Modern Law': From Status to Contract and Back Again? Katharina Isabel Schmidt Princeton University - Department of History, Students
4	175	Once Upon a Car: A Tale of Three Ambiguities Mark Cooney Western Michigan University Cooley Law School
5	167	What a Contract Has Joined Together Let No Court Cast Asunder: Abolishing Separability and Codifying the Scope of the Provisions of Arbitration Agreements Taylor Payne and Richard A. Bales Ohio Northern University, Pettit College of Law, Students and Ohio Northern University - Pettit College of Law
6	120	Boilerplate's False Dichotomy James Gibson University of Richmond School of Law
7	113	Boilerplate and Default Rules in Wills Law: An Empirical Analysis David Horton and Reid K. Weisbord University of California, Davis - School of Law and Rutgers Law School
8	80	Zombie Religious Institutions Elizabeth Sepper Washington University in Saint Louis - School of Law
9	78	Complexity, Standardization, and the Design of Loan Agreements Bernhard Ganglmair and Malcolm Wardlaw University of Texas at Dallas - Managerial Economics and University of Texas - Dallas
10	73	Arbitration About Arbitration David Horton University of California, Davis - School of Law

 

Weekly Top Ten SSRN Contracts and Commercial Law Downloads (May 11, 2017)

SSRN Top Downloads For
Contracts & Commercial Law eJournal

RECENT TOP PAPERS for all papers first announced in the last 60 days
12 Mar 2017 through 11 May 2017

Rank	Downloads	Paper Title
1	241	Copyright Survives: Rethinking the Copyright-Contracts Conflict Guy A. Rub Ohio State University (OSU) - Michael E. Moritz College of Law
2	218	'No Money Down' Bankruptcy Pamela Foohey, Robert M. Lawless, Katherine M. Porter and Deborah Thorne Indiana University Maurer School of Law, University of Illinois College of Law, University of California - Irvine School of Law and Ohio University - Department of Sociology
3	198	Directors’ Duties and Legal Safe Harbours: A Comparative Analysis Matthew Conaglen and Jennifer G. Hill The University of Sydney Law School and The University of Sydney Law School
4	188	Contracts Ex Machina Kevin D. Werbach and Nicolas Cornell University of Pennsylvania, The Wharton School, Legal Studies & Business Ethics Department and University of Pennsylvania - The Wharton School, Legal Studies & Business Ethics Department
5	182	Self-Driving Contracts Anthony J. Casey and Anthony Niblett University of Chicago Law School and University of Toronto - Faculty of Law
6	182	Massively Discretionary Trusts Lionel Smith McGill University, Faculty of Law, Paul-André Crépeau Centre for Private and Comparative Law
7	174	Henry Maine's 'Modern Law': From Status to Contract and Back Again? Katharina Isabel Schmidt Princeton University - Department of History, Students
8	171	Once Upon a Car: A Tale of Three Ambiguities Mark Cooney Western Michigan University Cooley Law School
9	167	A New Perspective on FRAND Royalties: Unwired Planet v. Huawei Jorge L. Contreras University of Utah - S.J. Quinney College of Law
10	166	What a Contract Has Joined Together Let No Court Cast Asunder: Abolishing Separability and Codifying the Scope of the Provisions of Arbitration Agreements Taylor Payne and Richard A. Bales Ohio Northern University, Pettit College of Law, Students and Ohio Northern University - Pettit College of Law

 

SSRN Top Downloads For
Law & Society: Private Law - Contracts eJournal

RECENT TOP PAPERS for all papers first announced in the last 60 days
12 Mar 2017 through 11 May 2017

Rank	Downloads	Paper Title
1	260	טעות בכדאיות העסקה: שווי האובייקט, התפתחויות עתידיות, נטילת סיכון ורשלנות הטועה (Mistake as to the Worthwhileness of the Transaction: The Object's Value, Future Developments, Assumption of Risk, and Negligence) Eyal Zamir Hebrew University of Jerusalem - Faculty of Law
2	241	Copyright Survives: Rethinking the Copyright-Contracts Conflict Guy A. Rub Ohio State University (OSU) - Michael E. Moritz College of Law
3	188	Contracts Ex Machina Kevin D. Werbach and Nicolas Cornell University of Pennsylvania, The Wharton School, Legal Studies & Business Ethics Department and University of Pennsylvania - The Wharton School, Legal Studies & Business Ethics Department
4	182	Self-Driving Contracts Anthony J. Casey and Anthony Niblett University of Chicago Law School and University of Toronto - Faculty of Law
5	174	Henry Maine's 'Modern Law': From Status to Contract and Back Again? Katharina Isabel Schmidt Princeton University - Department of History, Students
6	171	Once Upon a Car: A Tale of Three Ambiguities Mark Cooney Western Michigan University Cooley Law School
7	166	What a Contract Has Joined Together Let No Court Cast Asunder: Abolishing Separability and Codifying the Scope of the Provisions of Arbitration Agreements Taylor Payne and Richard A. Bales Ohio Northern University, Pettit College of Law, Students and Ohio Northern University - Pettit College of Law
8	117	Boilerplate's False Dichotomy James Gibson University of Richmond School of Law
9	113	Boilerplate and Default Rules in Wills Law: An Empirical Analysis David Horton and Reid K. Weisbord University of California, Davis - School of Law and Rutgers Law School
10	100	'And/Or' and the Proper Use of Legal Language Ira P. Robbins American University - Washington College of Law

 

Doing Your Job Well to Benefit Your Employer Doesn't Result in Unjust Enrichment

In a recent case out of the Western District of Pennsylvania, Argue v. Triton Digital, Inc., Civil Action No. 16-133 (behind paywall), Argue, an engineer, brought suit alleging that his employer had been unjustly enriched by Argue's efforts. It's an interesting allegation. The court pointed out that what Argue was characterizing as "unjust enrichment" was really just him performing his job. He received a salary in exchange for his work, which included inventions, and his employer took that work and those inventions and used them to increase the value of its business. That wasn't unjust enrichment; the employer was entitled to do exactly what it did.  

Complicating this further? Argue had an employment agreement. The court pointed out that unjust enrichment is a doctrine that's supposed to be used only when no contract exists between the parties. Here there was a written agreement that provided Argue's employer with the right to Argue's inventions on the job. He could not, therefore, argue unjust enrichment at all. 

UCC Update: Missouri Adopts Revised Articles 1 and 7

Our friends at the Uniform Law Commission (better known by some as the National Conference of Commissioners on Uniform State Laws) sent out a press release today highlighting another adoption of revisions to the Uniform Commercial Code:

REVISED UCC ARTICLES 1 AND 7 ENACTED IN MISSOURI

 May 8, 2017 — Missouri has become the latest state to enact important provisions of the Uniform Commercial Code (UCC).  HB 34, which included the most recent versions of UCC Article 1 and UCC Article 7, was sponsored by Rep. Dean Plocher and signed into law today by Missouri Governor Eric Greitens.  *  *  *

The UCC is a comprehensive set of laws governing all commercial transactions between U.S. states and territories.  It is not a federal law, but a state law.  The UCC is organized into nine substantive articles, each article governing a separate area of the law.

UCC Article 1 provides definitions and general provisions that apply to transactions covered by other articles of the UCC.  Article 1 impacts every transaction governed by the UCC, including any sale of goods, any letter of credit, any warehouse receipt, or any transfer of an investment security.  It is important to have Article 1 up-to-date and consistent with the rest of the UCC.

UCC Article 7 deals with documents of title.  Documents of title – either bills of lading or warehouse receipts – are commonly used in the shipment and storage of goods.  Article 7 provides a framework for the further development of electronic documents of title and updates the article for modern usage.  To the extent possible, the rules for electronic documents of title are the same or as similar as possible to the rules for tangible documents of title.

The Uniform Commercial Code is a joint project of the Uniform Law Commission and the American Law Institute (ALI).  Revisions to various UCC Articles are part of an ongoing undertaking by the ULC and the ALI to modernize the UCC, originally promulgated in 1951 and enacted in every state, and keep it responsive to contemporary commercial realities.

Further information on the Uniform Commercial Code can be found at the ULC’s website at www.uniformlaws.org.

The Uniform Law Commission, now in its 126^th year, provides states with non-partisan, well-conceived and well-drafted legislation that brings clarity and stability to critical areas of state statutory law.  The organization comprises more than 300 lawyers, judges, and law professors, appointed by the states as well as the District of Columbia, Puerto Rico, and the U.S. Virgin Islands, to research, draft and promote enactment of uniform state laws in areas of state law where uniformity is desirable and practical.  Since its inception in 1892, the group has promulgated more than 200 acts, among them such bulwarks of state statutory law as the Uniform Commercial Code, the Uniform Probate Code, and the Uniform Partnership Act.

###

Enforcing a Non-Solicitation Agreement Regarding Personal Client Relationships

In a recent case out of the District of New Jersey, Saturn Wireless Consulting, LLC v. Aversa, Civ. No. 17-1637 (KM/JBC) (behind paywall), the court took a (light) "blue pencil" to a non-solicitation covenant in the parties' contract. 

Saturn hired Aversa and they entered into a non-solicitation clause that prohibited Aversa from contact with any entity connected with Saturn, for the purpose of diverting work from Saturn, for a period of one year following Aversa ceasing to work for Saturn. Aversa resigned from Saturn and set up his own business that was partly in competition with Saturn. Saturn sought a preliminary injunction prohibiting Aversa from these activities based on the non-solicitation clause of the employment contract. 

The court carefully interpreted the non-solicitation clause, noting that Aversa was restrained from doing some business with Saturn's customers but not restrained from doing any business with them. Rather, the non-solicitation said that the prohibited activities had to be "for the purpose of diverting work or business." If Aversa was working with some entities in some areas where Saturn was not operating--as he was--then those activities were permitted under the agreement. 

The court did not, however, buy Aversa's argument that he did not run afoul of the non-solicitation clause because he did not contact the customer; the customer contacted him. The court noted that the clause had been expansively worded to include any "contact," not just solicitation, and therefore Aversa's returning of the customer's phone calls qualified. 

Aversa also tried to argue that Saturn had not alleged any trade secrets or confidential information that Aversa knew that Saturn was trying to protect. Rather, Saturn's allegations were more generally about Aversa's relationships with the customer at issue. Aversa stated that Saturn was therefore trying to prevent him from using his general skills and know-how, which it could not do. However, the court found that Saturn had a legitimate interest in protecting customer relationships to some extent, independent of any trade secrets or confidential information. The evidence showed that Saturn invested resources to help Aversa build business relationships on Saturn's behalf. Aversa could not then turn around and use that investment to harm Saturn. However, the court made clear that this prohibition applied only to Aversa working with the same people he'd personally worked with while at Saturn. Otherwise, Aversa would be subjected to undue hardship in his chosen career field. 

An "Egregious" Breach, But No Damages...

I haven't done a damages case in a while so here's one for you out of California, Wiring Connection, Inc. v. Amate, B264113. 

The parties entered into a lease totaling 65 months at $6,252 per month. After signing the lease, though, Amate leased the property to someone else and Wiring then had to lease a different property, under a three-year lease for $7,500 a month. Wiring sued for breach of contract and won. The court then had to determine damages. The lower court stated that the proper measure of damages would be the fair market value of Amate's property, less the amount Wiring had agreed to pay for it in the breached lease. Amate called an expert witness who testified that $6,252 had been the fair market value of Amate's property. The lower court was skeptical of this expert testimony, but Wiring did not call any expert witnesses of its own. Rather, Wiring argued that the proper measure of damages was the difference between what it would have paid in rent over 65 months at Amate's property and what it would pay in rent over the same time period at the property it had had to rent instead once Amate breached the lease.

The lower court said that, based on the evidence in front of it, it could not calculate any difference between the fair market value of Amate's property and the amount Wiring was going to pay under the lease, and found that it therefore could not award any damages to Wiring. The lower court said it was unhappy with the result, since Amate's breach had been "egregious," but it felt its hands were tied on the matter.

The appellate court agreed with the lower court. The lower court's statement of the measure of damages was the correct one, and Wiring failed to prove that there had been any difference between the fair market value and what was in the lease. Therefore, Wiring got nothing.  

I find this case a little curious because I find it difficult to believe that Wiring wasn't damaged in some way. Wiring is now paying substantially more for rent than it would have if the agreement had never been breached, after all. But it also seems like Wiring could have met its burden based on how much the new tenant was paying for Amate's property? I assume the new tenant was paying more (otherwise it would seem odd for Amate to breach, unless there was a personal relationship involved), and that that new tenant's monthly rate could be used to establish damages for Wiring. Probably not as high as the damages Wiring was seeking but at least something. But there is no discussion in the case of what the new tenant was paying, that I could see, so it either was less than Wiring was going to pay and so unhelpful to Wiring or Wiring simply ignored it in favor of putting all of their eggs in the basket of being compensated for the difference between their more expensive second lease. 

Either way, this is a painful damages case from Wiring's perspective. A welcome one, of course, from Amate's perspective! 

Weekly Top Ten SSRN Contracts and Commercial Law Downloads (May 4, 2017)

SSRN Top Downloads For
Contracts & Commercial Law eJournal

RECENT TOP PAPERS for all papers first announced in the last 60 days
5 Mar 2017 through 4 May 2017

Rank	Downloads	Paper Title
1	236	Copyright Survives: Rethinking the Copyright-Contracts Conflict Guy A. Rub Ohio State University (OSU) - Michael E. Moritz College of Law
2	209	'No Money Down' Bankruptcy Pamela Foohey, Robert M. Lawless, Katherine M. Porter and Deborah Thorne Indiana University Maurer School of Law, University of Illinois College of Law, University of California - Irvine School of Law and Ohio University - Department of Sociology
3	179	Massively Discretionary Trusts Lionel Smith McGill University, Faculty of Law, Paul-André Crépeau Centre for Private and Comparative Law
4	177	Directors’ Duties and Legal Safe Harbours: A Comparative Analysis Matthew Conaglen and Jennifer G. Hill The University of Sydney Law School and The University of Sydney Law School
5	174	Self-Driving Contracts Anthony J. Casey and Anthony Niblett University of Chicago Law School and University of Toronto - Faculty of Law
6	168	Contracts Ex Machina Kevin D. Werbach and Nicolas Cornell University of Pennsylvania, The Wharton School, Legal Studies & Business Ethics Department and University of Pennsylvania - The Wharton School, Legal Studies & Business Ethics Department
7	164	Once Upon a Car: A Tale of Three Ambiguities Mark Cooney Western Michigan University Cooley Law School
8	163	What a Contract Has Joined Together Let No Court Cast Asunder: Abolishing Separability and Codifying the Scope of the Provisions of Arbitration Agreements Taylor Payne and Richard A. Bales Ohio Northern University, Pettit College of Law, Students and Ohio Northern University - Pettit College of Law
9	150	A New Perspective on FRAND Royalties: Unwired Planet v. Huawei Jorge L. Contreras University of Utah - S.J. Quinney College of Law
10	133	Henry Maine's 'Modern Law': From Status to Contract and Back Again? Katharina Isabel Schmidt Princeton University - Department of History, Students

 

SSRN Top Downloads For
Law & Society: Private Law - Contracts eJournal

RECENT TOP PAPERS for all papers first announced in the last 60 days
5 Mar 2017 through 4 May 2017

Rank	Downloads	Paper Title
1	260	טעות בכדאיות העסקה: שווי האובייקט, התפתחויות עתידיות, נטילת סיכון ורשלנות הטועה (Mistake as to the Worthwhileness of the Transaction: The Object's Value, Future Developments, Assumption of Risk, and Negligence) Eyal Zamir Hebrew University of Jerusalem - Faculty of Law
2	236	Copyright Survives: Rethinking the Copyright-Contracts Conflict Guy A. Rub Ohio State University (OSU) - Michael E. Moritz College of Law
3	175	Self-Driving Contracts Anthony J. Casey and Anthony Niblett University of Chicago Law School and University of Toronto - Faculty of Law
4	168	Contracts Ex Machina Kevin D. Werbach and Nicolas Cornell University of Pennsylvania, The Wharton School, Legal Studies & Business Ethics Department and University of Pennsylvania - The Wharton School, Legal Studies & Business Ethics Department
5	164	Once Upon a Car: A Tale of Three Ambiguities Mark Cooney Western Michigan University Cooley Law School
6	163	What a Contract Has Joined Together Let No Court Cast Asunder: Abolishing Separability and Codifying the Scope of the Provisions of Arbitration Agreements Taylor Payne and Richard A. Bales Ohio Northern University, Pettit College of Law, Students and Ohio Northern University - Pettit College of Law
7	133	Henry Maine's 'Modern Law': From Status to Contract and Back Again? Katharina Isabel Schmidt Princeton University - Department of History, Students
8	123	Thinking in Terms of Contract Defences Andrew D. Dyson, James Goudkamp and Frederick Wilmot-Smith University of Oxford - Faculty of Law, University of Oxford - Faculty of Law and University of Oxford - Faculty of Law
9	112	Boilerplate and Default Rules in Wills Law: An Empirical Analysis David Horton and Reid K. Weisbord University of California, Davis - School of Law and Rutgers Law School
10	110	Brief of 44 Law, Economics and Business Professors as Amici Curiae in Support of Respondent in Impression Products, Inc. v. Lexmark International, Inc. Jonathan Barnett and Ted M. Sichelman USC Gould School of Law and University of San Diego School of Law

 

A Mistake Case Results in Rescission of a Contract

Sometimes rights can get passed along like a game of telephone. A recent case out of California, M.U.S.E. Picture Productions Holding Corp. v. Weinbach, B261146 (behind paywall), deals with a mistake that voids the original contract for those rights. 

Muse agreed to develop a film based on the book and screenplay "The Killer Inside Me," which Weinbach claimed to own the rights to. After about a decade during which Muse did not produce the film, Muse sold its rights to Windwings, and then Windwings sold its rights to Kim, who eventually produced a movie. In the meantime, Muse sued Weinbach for intentional misrepresentation during the original negotiation for the right, and Weinbach cross-claimed for breach of the agreement stemming from Kim's production of the movie. (Windwings and Kim were also involved in litigation with Weinbach, not relevant to this blog entry, but you can find a ruling from it here.)

Basically, Muse contended that Weinbach did not have the right to produce the film based on the novel at the time that he transferred those rights to Muse. Weinbach contended, however, that this was not a mistake of fact but rather one of judgment because it relied upon a later court interpretation of the extent of Weinbach's rights. The court agreed with Muse, however. Weinbach had repeatedly told Muse that he had the right to produce a movie from the book and never wavered from that, so it wasn't like Muse ever thought it was negotiating for a dubious right; Muse thought Weinbach had the right, because that's what Weinbach asserted. A later court ruling raised doubts, but Muse had had no reason to ever expect a later court ruling on the question. This mistake was material because Muse would not have entered into the contract if it had thought Weinbach didn't possess the right in question. And there was no evidence that Muse assumed the risk that Weinbach didn't have that right. Therefore, this mistake justified rescission of the contract.