Thursday, August 31, 2023
Bitcoin Mining Company Bound By Arbitration Agreement It Never Signed
Faes & Co. (Faes), a UK company that engages in Bitcoin mining, contracted to purchase fifty Bitcoin mining machines from a U.S. company, Blockware Solutions, LLC (Blockware) for $525,000. The parties' relationship was governed by two agreements: a “Services Agreement” and “Co-Location Agreement.” The Services Agreement basically just provided for Blockware's obligation to procure mining systems for Faes once Faes had purchased them. The Co-Location Agreement covered Blockware's obligation to provide for the installation, maintenance, and operation of mining equipment, as well as electrical power and Internet. The Co-Location Agreement included an arbitration clause.
The machines didn't work right. I won't bore you with the technical details, and because of my limited understanding of these things, I couldn't if I tried. It seems like the machines did not operate at full capacity. There was a lot of down time, which cost Faes $5000/month. So Faes sued, and Blockware dutifully moved to dismiss for improper venue, which the court generously construed as a motion to compel arbitration.
In Faes & Co., Ltd. v. Blockware Solutions, LLC, the District Court for the Northern District of Illinois granted the motion to compel arbitration. Faes argued that it was not bound by the Co-Location Agreement's arbitration clause because it never signed it. That's just silly. It accepted the machines and used them. Their conduct rendered their signature unnecessary. If Faes did not think it was contractually bound, why did it pay in exact accordance with the terms of the agreement? Faes next argued that it was not bound by the Co-Location Agreement because it expressly rejected it. In fact, Faes had quibbled with one clause of the agreement, but upon receiving assurances from Blackware that the clause would not operate as Faes feared, it proceeded with the transaction. It never objected to arbitration.
The case is stayed pending arbitration.
August 31, 2023 in Recent Cases, Web/Tech | Permalink | Comments (0)
Wednesday, August 30, 2023
Third Circuit Dismisses Putative Class Action Against Jaguar for Flat Battery Problem
Plaintiff Victorya Manakin bought a used Land Rover LR2 in 2012. Since 2009, Jaguar had been aware of a problem with the cars, which it sells. According to the court,"if a driver turned off the ignition on an LR2 while using Bluetooth for a phone call and running the navigation system, the vehicle’s infotainment system would remain on and could drain the battery overnight." In 2011, Jaguar sent out a bulletin with an update so that dealers could address the problem should customers complain of a "flat battery."
Wondering what the difference is between a flat battery and a dead battery? Well, a flat battery is still a little bit alive. With a dead battery there's only one thing to do: go through its clothes and look for loose change. Cf Billy Crystal in The Princess Bride
Ms. Manakin experienced many problems with her LR2, including a dead battery, and she attributed these problems to the flat battery issue. She sued, purportedly on behalf of a class of similarly situated LR2 purchasers, alleging breach of express warranties, of the implied warranty of merchantability, and of the Magnusson Moss Warranty Act. To the extent that her claims were not covered by the express warranty, she claimed that the limitations on the warranty were unconscionable.
The district court dismissed her claims. In Manakin v. Jaguar Land Rover North America, LLC, the Third Circuit affirmed. As to unconscionability, the District Court correctly found that it was not unconscionable for Jaguar to fail to inform plaintiffs of a "potential defect that did not manifest in their vehicles during the warranty period." As to her claim that she did experience the flat-battery defect during the warranty period, the evidence simply did not support that claim. Her battery problems arose after the car had been running for fifteen minutes. And she complained about a noise that was not symptomatic of the flat battery problem.
While Manakin argued that matter was technical and proposed that expert testimony was needed, she provided no such testimony. Again, advice from The Princess Bride comes in handy, at least as a cf: If you have a wheelbarrow, you should list it among your assets.
August 30, 2023 in Film Clips, Recent Cases | Permalink | Comments (0)
Tuesday, August 29, 2023
Tuesday Top Ten - Contracts & Commercial Law Downloads for August 29, 2023
Top Downloads For:
Contracts & Commercial Law eJournalRecent Top Papers (60 days)
As of: 30 Jun 2023 - 29 Aug 2023| Rank | Paper | Downloads |
|---|---|---|
| 1. | 1,090 | |
| 2. | 355 | |
| 3. | 270 | |
| 4. | 199 | |
| 5. | 150 | |
| 6. | 141 | |
| 7. | 130 | |
| 8. | 128 | |
| 9. | 116 | |
| 10. | 99 |
Top Downloads For:
Law & Society: Private Law - Contracts eJournalRecent Top Papers (60 days)
As of: 30 Jun 2023 - 29 Aug 2023| Rank | Paper | Downloads |
|---|---|---|
| 1. | 1,090 | |
| 2. | 270 | |
| 3. | 223 | |
| 4. | 141 | |
| 5. | 116 | |
| 6. | 99 | |
| 7. | 91 | |
| 8. | 78 | |
| 9. | 75 | |
| 10. | 61 |
August 29, 2023 in Recent Scholarship | Permalink
First Circuit Finds Company's Termination of Its CEO Too Clever by Half
Valerie Sullivan began work as etectRX (the Company) as a contractor in 2019. On August 1, 2020, she entered into a one-year employment agreement with the Company as its CEO. Her employment agreement provided that the Company had to pay her one-year's severance benefits if she was terminated without good cause. However, the Company was permitted to terminate her without an obligation to pay severance by providing written notice of termination sixty days prior to the time for renewal of her one-year contract.
During a May 26, 2021 video call, two members of the Company's board notified Ms. Sullivan that she was terminated effective immediately, but they asked her to stay on as an at-will employee during the transition. She agreed to do so, but informed the Company that she would not stay on beyond August 1, 2021. In July, the Company notified Ms. Sullivan that she was to transfer her duties to a new CEO. On August 2nd, the Company sent her an e-mail notice that she had "abandoned her role." The Company then sent her a letter, reminding her of her one-year non-compete agreement and asserting that the company had not terminated her, given that it had invited her to stay on as an at-will employee. She sued seeking her severance benefits, alleging breach of her employment agreement and of the duty of good faith and fair dealing. A trial court dismissed her complaint.
In Sullivan v. etectRX, Inc., the First Circuit reversed. It rejected Ms. Sullivan's argument that she was entitled to severance benefits as a result of the non-renewal of her contract. But it accepted her argument that complaint alleges facts sufficient to entitle her to severance benefits because it plausibly establishes that etectRx terminated her employment without cause during the term of the Agreement. Accepting the facts as alleged for the purposes of the Company's dispositive motion, the complaint alleged that the Company "unilaterally and without cause and without prior notice ended Sullivan's employment under the Agreement and converted her employment status to at will." The company thereby effected a termination of the Sullivan's employment agreement which triggered her entitlement to benefits.
While the First Circuit upheld dismissal of her claims for breach of the duty of good faith and fair dealing and for violation of the Massachusetts Wage Act, it reversed dismissal. The Court tipped its hand in noting facts beyond the pleadings. The Court noted that, while the Company sought to characterize the facts as involving appropriate notice of its intent not the renew the contract, Ms. Sullivan presented a letter from the Company that supports her characterization of those facts.
August 29, 2023 in Recent Cases | Permalink | Comments (0)
Monday, August 28, 2023
Force Majeure Clause Litigated in South Texas
This case has potential as a teaching case, but I'm not sure what you would use it for. It has a little bit of everything -- interpretation, trade usage evidence, force majeure clauses, impossibility and impracticability, and UCC 2-615. I'm troubled by the court's reliance on dictionary-fueled textualism (or what Dave Hoffman and Yonathan Arbel have called "the most artisanal and articulated form of textualism available in late-stage Capitalism"). Ultimately, I think the court reached the right outcome through other interpretive methods, including considering negotiating history and evidence of trade usage provided through expert testimony. I'm curious to hear what other ContractsProfs think of this case as a teaching case.
LNG Americas., Inc., formerly Cailip Gas Marketing, LLC, (LNG) brought a breach-of-contract action against Chevron Natural Gas, a division of Chevron U.S.A., Inc. (Chevron). The claim arose in connection with a contract obligating Chevron to deliver 90,000 million British Thermal Units (MMbtus) of natural gas each day to Katy, Texas. In February, 2021, Chevron, citing "unprecedented low temperatures causing freezing or failure of wells, plants or lines of pipe" caused by Winter Storm Uri (pictured, right) did not deliver 628,913 MMbtus. Chevron invoked the contract's force majeure clause.
In April of this year, the U.S. District Court for the Southern District of Texas granted summary judgement to Chevron in LNG Americas, Inc. v. Chevron Natural Gas.
As presented by the court, the force majeure clause reads in relevant part:
Force Majeure" . . . means any cause not reasonably within the control of the party claiming suspension . . . includ[ing], but not limited to, the following: (i) physical events such as acts of God, landslides, lightning, earthquakes, fires, storms or storm warnings, such as hurricanes . .. floods, washouts . . . (ii) weather related events affecting an entire geographic region, such as low temperatures which cause freezing or failure of wells or lines of pipe . . . Neither party shall be entitled to the (Force Majeure provision] to the extent performance is affected by any or all of the following circumstances: . . . the party claiming excuse failed to remedy the condition and to resume the performance of such covenants or obligations with reasonable dispatch . . .
The clause was subject to three special conditions, including (#2) that Chevron's "delivery obligations under this Transaction Confirmation shall not be excused by a loss of, or fluctuations in, production from any particular Seller's, [sic] gas producing region or wellhead." In addition, excuse was only available (#3) "to the extent that such event or circumstance directly prevents or restricts delivery by Seller or receipt by Buyer of Gas at the applicable Delivery Point."
CC BY-SA 3.0
Citing these special conditions, LNG argued that Uri did not prevent Chevron from purchasing gas elsewhere and meeting its contractual obligations. In order to determine the scope of special condition #2, the court turned to a dictionary to look up what "any" means. Jesus wept. Textualism can be so pathetic. LNG's expert admitted that "any" and "any particular" essentially mean the same thing, and that violated that canon of construction against surplusage. We should assume that the word "particular" was in the contract for a reason. The parties' negotiating history clarifies that reason. LNG sought a broader exception to the force majeure provision:
Neither party shall be entitled to the benefit of the provisions of Force Majeure to the extent performance is affected by . . . (v) the loss or failure of Seller's Gas supply, including, without limitation, depletion of reserves or other failure of production
Chevron rejected that language. Not all loss-of-production events were subject to special condition #2.
With respect to special condition #3, the court once again relies on dictionaries to resolve the troubling meaning of ambiguous terms like "delivery" and "direct." It concludes that Uri directly restricted delivery at the applicable delivery point. From LNG's perspective, nothing restricted such delivery if Chevron could have procured gas from some source unaffected by Uri. The court is not interested. The court then reasons that, assuming Chevron's narrow reading of special condition #2 is correct, as it does, a broad reading of special condition #3 would render special condition #2 superfluous.
The court presents LNG as requiring delivery if at all possible. The court concludes that Chevron could invoke force majeure so long as its "reasonable efforts" could not remedy the problems with delivery. The court relied on expert testimony that suppliers did not generally assume responsibility for meeting contractual demands by purchasing replacement gas on the spot market. In any case, the spot market at the relevant times increased between 5200% and 12,800% over the contract price. Then, when the price on the spot market returned to reasonable levels, LNG mysteriously declined available gas. Finally, Chevron could also rely on Texas's version of UCC 2-615, which permits suppliers to allocate limited resources to buyers in a fair and reasonable manner.
The court concludes that Chevron's force majeure defense is unambiguously permitted by the contract. I wonder if generative interpretation would yield the same result. If so, I suspect it would not be based on the meaning of any of the terms that the court thought it needed to look up in the dictionary. Rather, I think the negotiating history and trade practices made clear that Chevron did not agree to limit its force majeure excuse to the extent LNG claimed.
August 28, 2023 in Recent Cases, Teaching | Permalink | Comments (0)
Friday, August 25, 2023
Orin Kerr on Terms of Service and Fourth Amendment Rights (Once More, with Feeling)
I flagged Orin Kerr's Terms of Service and Forth Amendment Rights as something I intended to read and write about back in February. I wasn't sure when I was going to get back to it, and today is the day. The article is now forthcoming in the University of Pennsylvania Law Review (congratulations all around!), but if you can't wait until then, you can find the draft on SSRN.
The article explores the possibility that Terms of Service (ToS) might allow large corporations to turn your personal data over to the government, thus providing the government with a ready alternative to the Fourth Amendment's warrant requirement. As Professor Kerr puts it, "What the Supreme Court has given, Terms of Service might take away."
Courts are divided. Some will not allow people to contract away their rights by agreeing to ToS; most treat use of the service as a waiver of Fourth Amendment rights. Professor Kerr argues that the courts that treat ToS as a waiver get things wrong. He looks at four doctrines where one might think that ToS might lead to lost privacy and concludes that none of them should affect Fourth Amendment rights. An essential step towards this conclusion is Professor Kerr's insistence that ToS clarify relationships relevant to Fourth Amendment doctrines, but those relationships, not particular terms, govern Fourth Amendment rights.
Professor Kerr analogizes breach of ToS to breach of a car- or apartment- rental agreement. A user's breach of those agreements has no impact on Fourth-Amendment rights. However, he acknowledges, ToS invite a difference line of reasoning: Fourth Amendment protections require rights; ToS define rights in online accounts; therefore, ToS define Fourth Amendment rights in online accounts. Actually there are two possible routes to the same conclusion, Professor Kerr notes. In addition to treating contracts rights as a waiver, in cases in which a private company voluntarily turns over incriminating evidence to the governments, courts sometimes avail themselves of the third-party doctrine. The search was not conducted by the government, and the Fourth Amendment does not protect against private searches.
Professor Kerr thinks that courts that think ToS largely irrelevant to the Fourth Amendment analysis get things right. The law has never recognized a diminishment of the reasonable expectation of privacy just because phone companies have access to user data, or landlords or cleaners have access to an apartment. The tough cases arise where the ToS have language clearly indicating that the provider will share incriminating information with the government. To some courts, such language renders the ToS distinguishable from a typical lease of a car, a hotel room, or an apartment.
Professor Kerr then makes four compelling arguments for why existing caselaw forecloses arguments that would permit the government to use ToS to get around the warrant requirement. First, the caselaw on shared spaces provides that agreeing to share an office or an apartment with others does not deprive one of a reasonable expectation of privacy vis a vis the government. Second, formalizing rules of access to private spaces, as one might do in a hotel, business, or apartment rental agreement does nothing to change one's expectation of privacy against the government. Third, this is so, even if the user violates a rental agreement. So, for example, police cannot carry out an illegal search of rental car driven by an unauthorized driver even if that amounts to a breach of the car rental agreement. The same is true in cases involving breaches of apartment leases and use of hotel rooms. Finally, the rule for shared space operates differently in government spaces, but Professor Kerr notes, that exception to the expectation of privacy has always been limited to government offices.
Professor Kerr then makes a remarkable discovery: the cases that treat agreement to ToS as carving out an exception to traditional Fourth Amendment doctrine rely on the government spaces cases! They mistake the exception for the general rule.
Finally, Professor Kerr discusses four doctrines where one might think that ToS could make a difference. They are the private search doctrine, third-party consent, direct consent, and abandonment. Professor Kerr thinks courts should treat ToS as irrelevant to all four doctrines.
Here, I must admit, the argument loses me. Either I don't understand it, or it gives me little comfort. With respect to private search doctrine, the case on which Professor Kerr relies, United States v. Rozenow, seems to allow Internet Service Providers (ISPs) to share information with the government when their motivation for investigating an account is violation of their ToS. Rozenow was treated as having no expectation of privacy in the material on his account because it was discovered through a private search motivated by his ISP's independent interest. It sure seems like the ToS very much matter in determining what actions an ISP might take, beyond suspending an account, including storing incriminating material or sharing it with law enforcement.
In discussing third-party consent, Professor Kerr acknowledges that ToS might be written so as to track the doctrine and allow private companies to share incriminating data or information with law enforcement. However, he argues that the inquiry hinges not on theToS but on the reality of shared access to a user's data. If the ISP doesn't actually access the information, the expectation of privacy survives. I would argue the opposite. Companies put language in their ToS about shared access to data because they use our data. That's whey they don't charge us; we pay by sharing our data with ISPs. Our data could not be shared with law enforcement if there were no ToS evidencing the users' consent for ISP access of and use of the data. It seems to follow that in many contexts, the third-party consent doctrine might provide a way around the Fourth Amendment's warrant requirement.
In discussing direct consent, Professor Kerr argues first that consent to ToS cannot be construed as consent to a government search. The connection is too attenuated. I am happy to defer to Professor Kerr's vastly superior knowledge of Fourth Amendment law here, and I find it entirely believable that a more stringent definition of consent should apply in the Fourth Amendment context than in the contractual context. His second argument is less convincing: ToS cannot bind users because nobody reads them. Isn't it pretty to think so?
Finally, his argument on abandonment references his earlier arguments. He makes the strong point that it is hard to construe registration of an account as an abandonment of the expectation of privacy in that account. That might be convincing but for the ToS that might provide that by using an account you are agreeing to share your data with the ISP and abandoning any expectation of privacy in that data.
Despite these critical comments, I hope that Professor Kerr's way of thinking about these things succeeds. Nancy Kim and I expressed our concerns about Internet Giants as quasi-governmental actors nearly a decade ago. We raised some of the same concerns about consent that Professor Kerr does. But we adopted a pessimistic tone. Professor Kerr's work could provide more grounds for optimism.
More generally, I have been posting in this space periodically about interactions between contracts and the First Amendment. My view of the caselaw is that courts in certain contexts have allowed people to contract away Fourth Amendment protections, but they sometimes treat First Amendment protections as ironclad, even when the expression at issue is not core political speech, notwithstanding contractual interests. Professor Kerr's approach would bring the jurisprudence on the relationship of contracts and the Fourth Amendment more in line with that on the relationship of contracts and the First Amendment.
August 25, 2023 in Commentary, Recent Scholarship, Web/Tech | Permalink | Comments (0)
Thursday, August 24, 2023
Reefer Brief: Dude, Where's My Lawyer?
It's been a while since we've had a good entry for our Reefer Brief feature. This one is a pretty typical Reefer Brief episode, and it provides a nice illustration of what a default looks like.
On or about April 25, 2018, Discover Growth Fund, LLC (Discover) bought 500 shares of Series A Convertible Preferred Stock in OWC Pharmaceutical Research Corp (OWCP) for $5 million. OWCP is an Israel company that conducts medical research and clinical trials to develop cannabis-based pharmaceuticals and treatments.
OWCP'S shares have been trading below once cent since April 2020 (currently trading at 0). Because OWCP failed to make certain required SEC filings, Discover was unable to convert its stock, rendering it illiquid. It retains 381 of the original 500 shares. Discover sued and was awarded a preliminary injunction in April 2020. In November, 2022, OWCP's lawyers withdrew and have not been replaced. In May, the District Court for the Southern District of New York entered a default judgment on Discover's breach of contracts claims in Discover Growth Fund, LLC v. OWC Pharmaceutical Research Corp.
The parties entered into two agreements relating to Discover's stock purchase and rights related thereto. Discover performed; OWCP did not. The only issue was damages. Discover sought $12 million in damages, but the court reasoned that damages in that amount would give Discover a windfall. Under the contracts, it was entitled to 20% of the stated value of its outstanding preferred shares, $4,572,000, plus accrued but unpaid dividends, $890,391.78, plus an additional 25% due to a contractual Liquidation Preference, $1,395,597.94. The total is about $6.8 million. The court subsequently tacked on $1.9 million in interest.
Good luck collecting.
August 24, 2023 in Recent Cases | Permalink | Comments (0)
Wednesday, August 23, 2023
Advice to 1Ls: Course Correction
I was listening to one of my favorite podcasts this morning, the National Security Law podcast, Episode 241, "Let's Barbie." The hosts, Bobby Chesney (below left) and Steve Vladeck (below right), started with some words of advice for new law students. I have my own version of this that I deliver to our 1Ls at OCU Law, and I was struck by the near-complete lack of overlap between when they said and what I say. These two are more than merely two professors with a podcast (and a Twitter account). They are serious scholars (see, and read! e.g., Steve's new book on the Supreme Court's Shadow Docket) who are committed to their institutions (Bobby is now Dean Bobby, but both evidence their commitment to teaching in every podcast).
So, they started with wise words about self-care: Check in weekly with family and close friends, they advise. Don't disappear into the four-month black hole of the first semester of law school. And then, they advised students not to panic if it seems like other students seem to be grasping the material more quickly. They are all there for a reason. Things tend to even out over the course of the first semester. This is great advice, and I said very little of it. That was an error, but I come by it honestly. We teach at different institutions, and I have different concerns about the dangers my students face.
I find that the students who get in the biggest trouble are students who do not realize, or whose lives do not allow them to address, how much more demanding law school is than college. I worry, because I have experienced this, about students whose parents think they can rely on them as back-up childcare providers or miss class to go for airport runs to pick up out-of-town relatives who are coming in for an anniversary celebration. I worry about students who live at home or are married with young children and cannot carve out daily a quiet space for extended periods of intense study. So my first bit of advice to my students is that they need to have frank conversations with family and close friends. They need to explain that they are not "just a student." They have a full time job and then some. Succeeding in law school will take their full time and attention, and family and friends need to accommodate that. My students who do poorly in law school do not lack intelligence or drive. They lack the time and freedom to give themselves the opportunity to succeed.
But listening to Steve and Bobby, I realize I need to temper my message. Law students need not be ascetics. Self-care is also important to student success. Fortunately, I have great colleagues, including staff, whom I trust communicated that message to our entering class. Nonetheless, I am sometimes told that my students for some reason take me very seriously. I need to let my students know that they can allow themselves some down time and enjoy the benefits of friends and family for support and companionship. They need not feel guilty about that or think that they would thereby be disappointing my expectations.
August 23, 2023 in Teaching, Web/Tech | Permalink | Comments (0)
Texas Supreme Court Addresses State Sovereign Immunity and Construction Contracts
In 2014, Texas Southern University (TSU) executed a contract with Pepper-Lawson/Horizon International Group (PLH) on a project to construct student housing. The contract required completion by August 31, 2015, subject to justified time extensions and equitable price adjustments for certain types of delays. PLH did not complete the project until February 2016, and then invoiced TSU for $7 million, $3.3 million due under the contract and plus $3.7 million for “additional direct costs” PLH had allegedly incurred due to “excusable delays.”
TSU refused to pay, and PLH sued. Both the facts and the interplay of contracts provisions involve multiple complexities. The issue on appeal was whether sovereign immunity barred the suit.
Although PLH’s pleadings expressly invoked the immunity waiver in Section 114.003 of the Texas Civil Practice and Remedies Code, TSU made a jurisdictional argument, asserting Section 114.003 was inapplicable because PLH failed to plead a claim covered by the waiver provision. TSU claimed that (1) PLH failed to plead facts showing “breach of an express provision of the contract”; (2) PLH failed to point to a contractual provision expressly allowing recovery of damages for owner-caused delays or attorney’s fees; and that remaining claims were moot. As a result, PLH was not entitled to enhanced interest or attorney's fees.
The trial court rejected TSU's arguments, but the Texas court of appeals, reversed on an interlocutory appeal. In Pepper Lawson Horizon International Group LLC v. Texas Southern University, the Supreme Court of Texas, without hearing or oral argument, found that the court of appeals erred. The issue was not whether the contract unambiguously established a waiver of sovereign immunity but whether the statute did so. PLH had adequately alleged that it did, and it adequately alleged a breach of contract entitling it to damages. Plaintiffs need not prove their case on a jurisdictional challenge. They only have to make allegations sufficient to establish jurisdiction.
The case was remanded to proceed to the merits.
August 23, 2023 in Government Contracting, Recent Cases | Permalink | Comments (0)
Tuesday, August 22, 2023
Tuesday Top Ten - Contracts & Commercial Law Downloads for August 22, 2023
Top Downloads For:
Contracts & Commercial Law eJournalRecent Top Papers (60 days)
As of: 23 Jun 2023 - 22 Aug 2023| Rank | Paper | Downloads |
|---|---|---|
| 1. | 1,041 | |
| 2. | 216 | |
| 3. | 186 | |
| 4. | 169 | |
| 5. | 139 | |
| 6. | 138 | |
| 7. | 136 | |
| 8. | 117 | |
| 9. | 115 | |
| 10. | 109 |
Top Downloads For:
Law & Society: Private Law - Contracts eJournalRecent Top Papers (60 days)
As of: 23 Jun 2023 - 22 Aug 2023| Rank | Paper | Downloads |
|---|---|---|
| 1. | 1,041 | |
| 2. | 200 | |
| 3. | 181 | |
| 4. | 169 | |
| 5. | 139 | |
| 6. | 138 | |
| 7. | 115 | |
| 8. | 94 | |
| 9. | 87 | |
| 10. | 77 |
August 22, 2023 in Recent Scholarship | Permalink
Teaching Assistants: Understanding Contracts by Jeffrey Ferriell
I have previously shared here general advice that I communicate to my students about outside materials. Part I of the advice is here; part II is here. The short version is as follows: you don't need to consult outside materials to do well in my course. I provide reading materials adequate for everything I cover in the course. In addition, I provide practice multiple choice, practice short answer questions and essay questions, including questions from past exams.
However, some students want more, and so they want me to recommend study guides. I don't use study guides, I tell them, so I don't know which to recommend. To the extent that I look into them, they all seem good, but they also organize the material differently from how I do, and they cover things that I don't cover. I worry that students working on their own might panic, thinking they missed some vital portion of the course, when in fact, the study guides tend to be more comprehensive than I can be or choose to be.
Jeffrey Ferriell's Understanding Contracts (5th ed.) is no exception. In fact, it is both a very serious work of scholarship and provides a great deal more coverage than students need for course purposes. But that is not a bad thing. It is a learned, comprehensive treatment of the material, a readable hornbook with narrative discussions of relevant caselaw and hypos. The publisher sent me the book and asked me to review it for the blog. Publishers take note: I am always happy to feature contracts books on the blog, and so I agreed, but it did take me eight months to get to it.
I could recommend this book to my students with the utmost confidence that they would learn a great deal from it, and it would help them to firm up their grasp of contracts doctrine. I would however caution them that it covers a lot of material that I don't cover or don't test on. They should, for example, read the book's introduction only when they are preparing for exams, as it references a lot of doctrine that they won't understand until they are near the end of the course. They can skip the very interesting part of the introduction about the history of contract law, unless they want to read it for their own edification. I will not be testing their knowledge of Roman law or of common law writs. A lawyer speaking in the presence of a judge, a supervising attorney, or a client usually wants to come off as the second-smartest person in the room, perhaps with some relevant specialized knowledge that the smartest person in room will easily grasp. Armed with all the knowledge that Professor Ferriell has to share, students might come off as, hands down, the smartest person in the room, and who wants that?
Topics are handled with scrupulous comprehensiveness. So, for example, Professor Ferriell does not treat the Restatement's approach to consideration as the only relevant approach. Courts, he observes, will still look for a benefit or a detriment to each party, even though the Restatement tells us that all we need for consideration is a bargained-for exchange. The book covers subject-matters that I don't but that may serve students well in their preparation for the bar exam. For example, it discusses accord and satisfaction, recitals, and guaranty contracts, as well as consideration in connection with topics like conditions that I would reserve for separate treatment. The result is a weighty sixty-page chapter on consideration. It's a great read for me. I would want to go through it with a student and highlight the parts they can skip. And if they tried to read it in connection with my very brief presentation of consideration, they would understand very little of it, but they could come back to it and profit at the end of the course. Similarly, I would advise my students that they can skip the first eight pages of the thirty page chapter on promissory estoppel.
Because the bar exam loves exploring the details of formation, the statute of frauds, and the parol evidence rule, the loving attention that Professor Ferriell lavishes on those topics in Chapters 4-6 repays careful reading. He also devotes some attention in Chapter 6 to other interpretive issues, including canons of construction. I spend a day on canons of construction in my contracts course, and many students struggle, in part because of their aversion to Latin. But they sometimes tell me that the introduction to the canons helped them when they took Legislation and Regulation, so I am glad that Professor Ferriell devotes six economical pages to that topic.
The fifty-plus page long chapter on warranties, including warranties of title and habitability suggests that this book can be used with Sales courses as well as with the first-year contracts course. Many standard casebooks for the first year course leave out warranties entirely and certainly don't cover title or habitability. Again, it is wonderful to have all of this material, well -organized and well-presented in one handy book. Students need to be able to distinguish topics they need to know for a course and topics they will want to know for a full life in the law.
The remainder of the book proceeds more or less as one would expect, with chapters on conditions, performance and breach, defenses, excuses, expectation damages, reliance and restitution damages, agreed-upon remedies and limitations on remedies, equitable remedies, third-party beneficiaries, and assignment and delegation. All of the chapters are comprehensive in scope; all are much more than a student would need to prepare for a standard contracts course.
None of this is meant as a criticism of the book. I read it both with admiration and with an eye to how my students could use it. From the perspective of a contracts teacher, I am happy to have the book in my library. In addition to being an excellent and detailed compendium of contracts doctrine, the book also provides useful examples, some drawn from case law, some hypothetical, and one can always use a fresh case or hypo to help illustrate some nook or cranny of a well-traveled doctrine.
August 22, 2023 in Books, Contract Profs, Recent Scholarship, Teaching | Permalink | Comments (0)
Monday, August 21, 2023
Blind Sided
On the first day of class each year, I tell my contracts students about the blog. They may or may not think that they are interested in contracts law, but I think it is good to introduce them to the idea that the whole of existence can be considered through the lens of contracts law, which is what we do here.
And then, without warning, on the second day of class, I was blindsided when OCU 1L Sydney Freshwater (left) asked me to blog about suit brought by Michael Oher (below right) challenging the conservatorship set up purportedly on his behalf in 2004.
I protested that I sat out the whole Britney Spears thing, and as a result, I know nothing about conservatorships. Sydney was unfazed and insistent. The world needs to read the contracts angle on all of this, she scolded. Well here goes.
According to Claudia Rosenbaum writing in Vulture, Mr. Oher was not adopted by the Tuohy family as he and millions of movie-goers believed. Rather the Tuohy's set up a conservatorship that provided, among other things, that Mr. Oher could not enter into any contracts without their direct approval.
Mr. Oher claims that he was told that the conservatorship was the legal equivalent to an adoption. Adoption itself was not an option, he was told (falsely, according to the article), as Mr. Oher was over 18 at the time the conservatorship was established. No conservatorship was necessary, he now claims, as he suffered from no disability, and he claims that the conservatorship cost him millions of dollars. He wants the conservatorship to be ended, and he seeks an accounting. The Tuohys were paid $225,000 each (it's not clear if that is for husband and wife alone or also for their two children) plus 2.25% of profits on the movie The Blind Side, which grossed over $300 million.
They respond to this suit by a man they "love as a son" by calling it "hurtful and absurd." They are absurdly rich. So rich, apparently, that their attorney thinks that hundreds of thousands in up-front payments from a movie studio plus perhaps millions in post-production profits amount to "a few thousand dollars in profit participation payments." It's easy to lose track of one's spare millions when you are just throwing them on the pile. They characterize his lawsuit as "ludicrous" and dismiss it as an attempt to drum up interest in his new book. Gosh, they are so loving! Imagine what they would say about him if they had actually adopted him.
Mind you, there is a lot going on here that doesn't add up. It seems odd that Mr. Oher has gotten this far in life without noticing that the Tuohys were necessary parties to his multiple contracts over the years. At no point did his agent tell advise him that he didn't need the Tuohys around? Does he need to check with them before he signed with multiple NFL teams? Closed on a house? Agreed through clickwrap to a website's Terms of Service? Bought a car?
With both parties here are well-resourced, one hopes that this case will be quickly resolved through mediation. Otherwise both sides might be blindsided and made worse off by attorneys fees.
August 21, 2023 in Current Affairs, In the News, Recent Cases, Sports, Teaching | Permalink | Comments (1)
Job Openings for ContractsProfs
Rutgers Law School invites applications from entry-level and lateral candidates for multiple tenure-track or tenured positions at the law school’s campuses in Camden and Newark.
We encourage applications and inquiries from candidates who would contribute to the diversity of our faculty, including, but not limited to people of color, people with disabilities, and members of the LGBTQ community.Rutgers Law School—with locations in Camden and Newark—offers a world-class faculty; a curriculum of exceptional breadth and depth in theory, practice, and interdisciplinary studies; a geographic presence that spans one of the nation’s 10 largest legal markets (New Jersey) while also offering immediate access to two of the five largest markets (New York City and Philadelphia); an alumni network with over 20,000 members; and a strong tradition of diversity and social impact. As the law school for a top public university, Rutgers Law School is committed to the highest standards of teaching, scholarship, and service to its host communities, the state of New Jersey, and the nation. These positions will be based on the both the Camden and Newark campuses.
The Mercer University School of Law invites applications from entry-level and pre-tenured lateral candidates (Assistant and Associate rank) for three tenure-track faculty positions to begin in the Fall of 2024. We welcome applications from candidates in all subject matter areas, especially in commercial law and legal writing. We also welcome candidates who are truly entry-level, with no prior law teaching experience, but who show significant promise for excellence in teaching and scholarship.
Founded in 1873, Mercer University School of Law has a long tradition of producing lawyers who are ready to practice and committed to service. The School has earned a reputation as an excellent provider of legal education with an intense focus on student and faculty interaction. With an enrollment of about 375 students, Mercer Law School is one of 12 schools and colleges of Mercer University, which has been listed among the top institutions of higher education in the nation. The School of Law is nationally recognized for its exceptional programs in legal writing, advocacy (moot court and mock trial), public service, and professionalism and ethics.
The School of Law is located in Macon, Georgia, a city of approximately 156,000. Macon is known for its strong musical heritage (e.g., Otis Redding, Little Richard, the Allman Brothers), its vibrant arts community, its recreational offerings (e.g., the Ocmulgee Mounds National Historic Park), and its affordable cost of living. Located 85 miles from Atlanta, Macon offers the livability of a smaller city with ready access to large city amenities.
Mercer University recognizes the power of a diverse community and encourages applications from individuals with varied experiences, perspectives, and backgrounds. Mercer University is an AA/EEO/Veteran/ADA employer.
Applicants should have a J.D. degree from an accredited university/college, a commitment to excellence in teaching, and demonstrated potential for excellence in research and scholarship. Interested applicants will need to complete the brief online application at https://merceruniversity.wd1.myworkdayjobs.com/en-US/external/details/Faculty--Law_F25-002 and attach a current CV with the names and contact information for three references. For information contact Professor Pam Wilkins, Chair, Appointments Committee, Mercer University School of Law, [email protected].
August 21, 2023 in Help Wanted, Law Schools | Permalink | Comments (0)
Friday, August 18, 2023
Weekend Frivolity: Who's Attacking Me Now?
Back when Stephen Colbert was heroically hosting The Colbert Report, he had a segment called "Who's Attacking Me Now." Here's an example. I would love to have a similar segment on the blog, but people don't attack the blog that often. Still, it happened recently (while I was on hiatus, the cowards!).
I gave an interview for an article about plain-language contract drafting. I had a long conversation with the reporter, in which I acknowledged that one should try to write contracts so that people can understand them and also acknowledged that most people who draft contracts work with forms, and changing the form is risky and takes longer, which makes the process more expensive. And then I segued to talk about what seems to me to be the more important problems with the world of contracting today. People don't read contracts because: (1) yes, they are incomprehensible, but also; (2) they are long; (3) they are contracts of adhesion, so even if you don't like something in the contract, you can't bargain for better language; and (4) life is short and the stakes in most contracts seem small ex ante. Omri Ben-Shahar (left) is cited in the same story for the proposition that "simplifying these contracts would do nothing to protect consumers, especially when they’re up against 'a powerful, well-advised, sophisticated company.'"
I was then attacked as a "proponent of tested contract language." Omri escaped unscathed! Well, I suppose the shoe fits, but I thought what I said was a little more nuanced than that. When I returned from hiatus, I went to the comments section of the blog in which I was attacked so that I could take one thing attributed to the author in a blogpost edited by someone else and treat it as the sum total of his essence. But first, being a cautious person, I checked out his website's privacy policy.
It is in pristine ordinary language. I cut and pasted it into a Word document. It consists of over 2500 words, which makes it ten pages long. It links to the privacy pages of three "partners." Here's what the privacy policy says about them:
We do not share your Personal Data with strangers. Personal Data about you is in some cases provided to our trusted partners in order to either make providing the service to you possible or to enhance your customer experience. We share your data with:
Our processing partners:
-
Akismet – Automattic, Inc.
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Disqus, Inc.
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MadMimi – GoDaddy
Hmm. They may be "trusted partners" to you, but they are strangers to me. Of course, by the time I read that far into the policy, the website was already sharing my information with its trusted partners. And even if I took the time to read the ten-page privacy policy with care as well as the privacy policies of the three partners, to which the privacy policy provided links, and any other vital document to which the privacy policy linked or which it referenced, the privacy policy ends as follows:
"We reserve the right to make change to this Privacy Policy."
If a user of the website read that far, they would have no difficulty understanding the words. But perhaps ease of understanding the contract's language is not its biggest problem.
August 18, 2023 in About this Blog, Commentary, Contract Profs, True Contracts | Permalink | Comments (0)
Will Artificial Intelligence Make Contract Interpretation Easier?
In case you've been on a Barbieheimer binge for the last few weeks and missed it, Yonathan Arbel (below, left) and David Hoffman (below, right) have posted Generative Interpretation on SSRN, and the early reviews, e.g. here, are glowing. A new land speed record has been established in that Jeff Lipshaw has already published his review on SSRN.
The thesis is that large language models (LLMs) can help us resolve the meaning of ambiguous contracts phrases. The authors start with the much-cited case arising out of flooding caused by levee breaches caused by Hurricane Katrina. The issue was whether the insurer's exclusion for damages caused by "floods" covered floods that resulted from human negligence. The Fifth Circuit determined that it did. It did so, say the Authors, employing "the most artisanal and articulated form of textualism available in late-stage Capitalism," a hodge-podge of dictionaries, encyclopedias, treatises, and caselaw. That sounds bad, but the alternative, say the Authors, was "kitchen-sink contextualism," which they say, has a foul odor. That odor is the stench of illegitimacy generated by suspicions that existing interpretive methods merely provide cover for motivated reasoning.
Well, the Authors offer an appropriate cleanser to address bad kitchen odors. It produces the reliability that purports to come with textualism's faux objectivism and the situation-specific accuracy that is squishy-minded contextualism's raison d'etre. Generative interpretation can be used to establish not only what the words most likely meant in context but also what the parties most likely meant. They deploy generative interpretation to show that "caused by flood" very reasonably could mean "caused by a flood that resulted from a levee break." So the Fifth Circuit got it right. But the model also usefully shows that Louisiana courts err in refusing to allow the flood exemption to cover floods that result from a failed water main, because ordinary language does connect floods with failed water mains and so the exemption arguably unambiguously exempts damage from such floods from coverage. Courts would be correct, however, to reject any argument that the exclusion covers floods caused by joy, language models tell us, should any such case arise.
The authors concede that even homely twentieth-century style textualism gets the right result with respect to flood exemptions. But LLMs do so more convincingly and more unassailably because of the vast amounts of data they incorporate. In this respect, they are like corpus linguistics, which has been with us for a while, but has not really changed the landscape much.
In a presentation that I witnessed and which made a lasting impression on me, Stanley Fish voiced his powerful skepticism with respect to corpus linguistics approach here. He poses for himself the rhetorical question, when will database-based approaches like corpus linguistics provide us with definitive answers to interpretive questions? He answers, quoting King Lear contemplating the body of his "poor fool," Cordelia, "Never, never, never, never, never!" This is so, because it usually tells us, as in the "flood" example, things we already know. The rest of the time, it tells us nothing definitive, because, while it can tell us both the ordinary language meaning of a term and the technical meaning of the term, and we have no way of knowing whether the speaker intended the words in their ordinary sense or their technical sense or in some idiosyncratic sense that we can only learn, if at all, from a deposition.
But modern AI takes us a step beyond mere corpus linguistics, the authors tell us, because LLMs have the ability to become context sensitive. They can consider not only the contract text but also relevant extrinsic evidence. In addition, the authors make two claims on behalf of use of LLMs for interpretation. First, because this technology makes textualism cheap, it provides access to justice to low-income litigants who might not otherwise have the resources to engage in the artisanal textualism of late-stage capitalism. Second, LLMs can cut through the opposition between textualism and contextualism. Parties inclined to trust the objectivity of textual approaches might well prefer contextualism when it comes with the data-driven precision of generative interpretation. And of course, the authors remind us, generative interpretation is not robot judging; it is a tool that serves as an aid to interpretation for real, flesh-and-blood attorneys to deploy in their arguments before real, flesh-and-blood adjudicators.
Contracts interpretation is about prediction. Yogi Berra is reputed to have said that it is hard to make predictions -- especially about the future. But contracts interpretation is about reconstructing what the parties would have said at the time of contracting about the meaning of a provision. Yogi Berra was wrong. What's really hard is making predictions about the past!
In Part I, the Authors paint portraits of textualism and contextualism, warts and all. They then discuss corpus linguistics as well as Omri Ben-Shahar and Lior Strahilevitz's proposal that courts supplement traditional textualist approaches with survey data to add context. Corpus linguistics is limited because it can only analyze small snippets of text; the value of survey data seems limited, at least thus far, to the trademark context.
In Part II, the Authors test drive their LLM model, applying it to some real-world contracts and situations. And those models provide some pretty clear indications of the most likely meanings of contested contracts. The authors claim to have established that LLMs can provide a stronger, cheaper, and more robust form of textualism. I think that sounds about right, given my view of the limitations of textualism.
Let me push back a bit. The authors are cautious, as my phrases in the previous paragraph, "pretty clear" and "most likely," suggest. So, if LLMs tell us that there is an 80% probability that the language has the insurer's meaning, does that mean the contract is unambiguous in the contra proferentem context? Is 85% enough? 90%? It seems like LLMs are most useful in establishing ambiguity in the face of an overconfident court (we're looking at you NY Court of Appeals!), but establishing the lack of ambiguity may not be LLMs' strong suit. They look at everything -- they are bound to find outlier usages, and so we still would need to supplement LLMs' with more conventional discovery tools.
As to cheaper, I think the Authors, who have great facility with the technology at issue, either underestimate the costs of designing, running, and explicating to a trier of fact the sorts of experiments involved in their work, or they tragically undervalue their unique talents. Let's assume that the cost of actually using LLMs is very low. Still, someone has to design the inputs, so the basis of the work will be an expert report. It will be interesting to see if parties do not end up coming to court with dueling versions of what the LLMs say the contract means. For example, when the Authors introduce extrinsic evidence to show the LLMs grappling with context, one model finds that a phone call moves the likelihood of a certain interpretation of the contract from 10% to 20%. The other finds that the same call moves the likelihood of the same interpretation from 10% to 75%. Results like this suggest that, at least with respect to some interpretation issues, investing in LLMs will yield nothing definitive.
The experts who generate findings using LLMs will have to explain those findings to the adjudicators in ways that make the material comprehensible. The Authors write with both clarity and flair, but I have to admit when they start talking about the "temperatures" of the various models, I cannot summon up a notion that maps onto how LLM models work. So there are challenges of translation when people who work with LLMs have to explain their findings to fact finders who don't. I concede that this is a better version of textualism, but is it cheaper than a judge, four dictionaries, the briefs, and prior case law construing the terms?
Part III begins by acknowledging that courts may already be making use of ChatGPT to assist them on interpretive issues, just as they may have used Google before. That fact does not fill me with confidence that courts will produce better works of contracts interpretation. As the Authors know, attorneys make unsupervised use of the technology at their peril. Courts do so at our peril, but they may also may be overturned by less adventurous courts of appeal. Still, the Authors are no doubt right that the technology will inevitably become yet another interpretive tool, and their work is highly suggestive of how it can be well-used.
But in Part III, the Authors also make their case that ease of access to LLMs addresses access to justice problems. They think that judges can now use generative interpretation to level the playing field in asymmetrical litigation. They also think that more cases will settle because LLMs will give the parties a better sense of the likely outcome of litigation. With admirable thoroughness and thoughtfulness, the Authors then lay out the roadblocks ahead -- all of the ways in which use of LLMs has gone wrong and may continue to go wrong.
But in the end, they are still quite optimistic about the future of generative interpretation. It has all of the advantages of old-time textualism, with the added advantages of contextualism, without the main disadvantage to contextualism, which is expense.
Criticisms aside, this is a great article. The premise is so obvious, one smacks one's head and exclaims, why didn't I think of that?!? But it would be hard to top the execution. The Authors deploy their understanding of LLMs so that they can not only assert but demonstrate their usefulness. They then deftly illustrate that understanding with well-chose examples and hypotheticals presented with scholarly rigor and narrative flare.
August 18, 2023 in Contract Profs, Recent Scholarship | Permalink | Comments (1)
Thursday, August 17, 2023
Brian Bix, How Do You Explain Contracts Theory to Advanced Beginners?
When I was young and danced, my first ballet class was for "advanced beginners?" Why? Well, I wasn't a beginner -- I taken a lot of dance classes before I took ballet. I had tights; I had slippers. All I need is a mask, and maybe Suzanne Farrell (right, with George Balanchine) would allow me the pleasure of a pas de deux. The class had everyone in it -- from people like me who had no business being there -- to borderline professionals who just took whatever class fit into their schedule so long as they liked the instructor or knew the instructor would leave them alone. It was a great level, and I stuck with it throughout my years as . . . well, let's just say, as someone who took ballet classes. Ten years in, and still an advanced beginner. No shame in it.
Despite my experience with advanced beginning, I wasn't sure what Brian Bix (left) had in mind with his Advanced Introduction to Contract Law and Theory. It very quickly became clear to me that I would recommend this book to my students at the end of the semester as they are preparing for the exam. It's not something you can read before you take a contracts course. It's not really the kind of hornbook, larded with hypos and examples from the caselaw that I would assign as a supplement. But it is a great, quick, efficient and reliable overview that one can use just at the point when you want to bring all of the concepts together in a coherent Gestalt.
The tone is conversational and direct. Professor Bix introduces a topic and then recounts the relevant rules. Then, in separate paragraphs, he explains exceptions to the rule or situations where the rule does not apply even though one might think it would apply. He assumes some familiarity with contract law -- you already have the shoes and the tights; you just need to improve your technique and refresh your recollection so that you can distinguish a pas de cheval from a pas de chat. Professor Bix makes the transitions between the doctrinal sections seem obvious, effortless, and natural, but anybody who has ever tried to put together a syllabus knows how easy it is to make a faux pas by introducing a doctrine that relies on another doctrine that you haven't yet explained.
Having accomplished a brisk and efficient summary of contracts doctrine in eighty pages, Professor Bix then devotes just over twenty pages to contracts theory. Contracts is a practical subject, and so Professor Bix notes, theoretical approaches to contract law tend to combine explanation, rational reconstruction, and justification. He then provides a nifty summary of the major approaches to contracts theory. I usually start my course with an overview of theoretical approaches to contracts law, and throughout the course, I remind students of those approaches as they inform the opinions that we read. The way Professor Bix organizes this material offers an opportunity to look at it afresh.
Professor Bix starts with Charles Fried's theory of contract as promise and critiques of that, which construe contracts as being more about consent or reliance. Next he reviews theories that think about contracts as creating property rights. He then moves on to relational contracts, efficiency perspectives on contracts rules, and critical approaches, which focus on modern contracts of adhesion and can transform the view of contract as being about consent into a tool for challenging the legitimacy of form contracting.
Professor Bix provides useful perspectives on contracts law and theory. It is a valuable book to have, as I suggested earlier, for students seeking to firm up their grasp of contracts law. It is also a good book for them to have on their shelves as they move into practice so that they can quickly brush up on areas of contracts doctrine as they arise. And for those of us who like to not only practice law but also to understand what ideas underlie it, the book is one to which one can return to remind oneself of the contending theories about what animates contracts law. And then one can make use of Professor Bix's footnotes and bibliography to explore matters further. In contracts, as in ballet, we can all use the occasional master class for advanced beginners.
August 17, 2023 in Books, Contract Profs, Recent Scholarship | Permalink | Comments (0)
Wednesday, August 16, 2023
Duncan Kennedy on Williams v. Walker-Thomas Furniture
I'm am always happy to have an opportunity to look at a familiar case with fresh eyes, and Duncan Kennedy's eyes are especially good when it comes to scanning a horizon and bringing objects near and far into focus. In The Bitter Ironies of Williams v. Walker-Thomas Furniture Co. in the First Year Law School Curriculum, newly published in the Buffalo Law Review, he sets out his aims clearly and directly.
The article is, Professor Kennedy tells us, part of a larger project which. . .
defends the range of legal initiatives that legal services lawyers and clinicians, with progressive lawyers and academic allies, have undertaken on behalf of poor Black neighborhoods against the perennial neoliberal accusation that they "hurt the people they are supposed to help.”
It does so while contributing to critical race theory, the Black capitalism critical approach, and the critical legal studies literature on law’s distributive role in economic and social life. This essay focuses on the teaching of Williams v. Walker-Thomas in first-year courses. First-year students who read Williams (and most do) get a large dose of the argument that progressives who challenged the cross-collateralization clause at issue in Williams actually make it harder for poor people to buy furniture. Professor Kennedy shows that litigating cases like Williams actually helps the residents of poor Black neighborhoods.
The article laments that progressives have not responded more robustly to the neo-classical law and economics critique of Williams. The argument is familiar to those of us who have been teaching Williams, and many casebooks incorporate it, at least in the notes. Walker-Thomas's cross-collateralization clause made it economically feasible for the store to provide goods to low-income populations lacking credit. If we allow activist judges like Skelly-Wright to deem such clauses unconscionable, the result will be that people without credit could only buy furniture at very high rates of interest or with other extremely onerous terms.
Professor Kennedy then provides the missing robust response to the neo-classical approach and argues that the litigation strategy and liberal judicial interventions from 1965-1980 were effective in improving living conditions in poor Black neighborhoods. He takes on the economics and law approach in its own terms, explaining that Walker-Thomas operated in an oligopolist market with a captive consumer group unable to shop for alternatives. Once one understands the economics of that particular market, one can argue based on economic principles was that the main effect of litigation like Williams is that businesses like Walker-Thomas will become a bit less profitable than they otherwise would be. The difference would not be significant enough to alter their basic business model.
The piece is filled with nuggets from the case that help flesh out the socio-economic setting in which Ms. Williams bought furnishings from Walker Thomas. Much of this information is gleaned from prior scholarship on the case, but Professor Kennedy reorganizes the material and repurposes it for deployment in his argument that poor neighborhoods benefit from litigation like Williams v. Walker Thomas. The effect of eliminating the cross-collateralization clause would be that poor consumers would have to pay a slightly higher price for their goods. However, Professor Kennedy concludes, "[T]he consequences of reducing the rate of blanket repossession, with its obvious material and psychological cost to the family affected, is I would say obviously worth the tiny price increase and the lost monopoly profits on the seller’s side of the bargain."
While eliminating the cross-collateralization clause might have hurt some small businesses, Walker-Thomas was not one of them. It had annual sales of $4 million, and it was exploiting its position in the oligopoly to make such high profits that it could easily absorb the cost of profits lost through the elimination of the clause.
But the cross-collaterization clause was just one component of a multi-pronged strategy that various businesses devised to extract surplus capital on exploitative terms from poor neighborhoods. The advocacy that resulted in the Williams decision led to legislative reforms that prohibited many of these predatory practices. But such practices arise in new forms all the time, and the argument that progressive advocacy "hurts the people it is trying to help" stifles attempts to address those new forms. Professor Kennedy capably deploys the methods of conventional neo-classical economics to show that progressive advocacy helps the people it is trying to help and only hurts the businesses that serve those people by reducing their profits but allowing them to continue to operate.
Careful readers might have noted that Professor Kennedy cites to Deborah Zelesne's guest post on the blog!
August 16, 2023 in Contract Profs, Famous Cases, Recent Scholarship, Teaching | Permalink | Comments (2)
Tuesday, August 15, 2023
Tuesday Top Ten - Contracts & Commercial Law Downloads for August 15, 2023
1Ls, 1Ls, as far as the eye can see! It must be a new academic year on law school campuses, and ContractsProf Blog wishes our academic readers the very best for the 2023-2024 year. Now, how about a few moments for the latest and greatest in contract and commercial law scholarship? I thought you might go for that.
Top Downloads For:
Contracts & Commercial Law eJournalRecent Top Papers (60 days)
As of: 16 Jun 2023 - 15 Aug 2023| Rank | Paper | Downloads |
|---|---|---|
| 1. | 971 | |
| 2. | 208 | |
| 3. | 180 | |
| 4. | 140 | |
| 5. | 136 | |
| 6. | 132 | |
| 7. | 126 | |
| 8. | 111 | |
| 9. | 96 | |
| 10. | 82 |
Top Downloads For:
Law & Society: Private Law - Contracts eJournalRecent Top Papers (60 days)
As of: 16 Jun 2023 - 15 Aug 2023| Rank | Paper | Downloads |
|---|---|---|
| 1. | 971 | |
| 2. | 136 | |
| 3. | 132 | |
| 4. | 132 | |
| 5. | 111 | |
| 6. | 82 | |
| 7. | 82 | |
| 8. | 77 | |
| 9. | 74 | |
| 10. | 56 |
August 15, 2023 in Recent Scholarship | Permalink | Comments (0)
The State Secrets Privilege, Contracts, Potential Fraud, and the First Circuit
Last week, I taught a one-week "premester" course on the state secrets privilege (SSP). I taught it last year, and my libertarian students are all delighted as their communitarian professor gives them new reasons to distrust the government. This year, we featured a guest appearance (via video conference) by the incomparable Dean Bobby Chesney as a special treat for our closing session.
We start with contracts material -- the Totten doctrine, a post-Civil War case which provides that allegations that the government breached a secret agreement are non-justiciable. The parties must know when they enter the contract that, with respect to it, their lips are "forever sealed." Forever? Over a century later courts were still applying Totten even to agreements with saboteurs. Seems like sabotage does not stay secret long if you're doing it right. Whatever.
We then move on to the SSP proper, which is an evidentiary privilege first recognized in United States v. Reynolds (1953). There, the Supreme Court recognized a privilege belonging only the the government. It excuses the government from its discovery obligations when disclosure of the material sought through discovery would pose a risk to national security. In Reynolds, plaintiffs' decedents were civilian engineers killed in the crash of an Air Force B-29. They sought a report on an investigation conducted by the Air Force. The Air Force withheld the report, asserting the SSP (tardily, but whatever). Without looking at the report (but whatever), which did not contain the sort of national security secrets the government claimed it did, SCOTUS upheld the SSP, and the case settled. Decades later, when the report was declassified and relatives discovered that the government had misled the courts as to the contents of the report, they brought a coram nobis claim, which the Third Circuit rejected. Even if the report contained nothing about the flight's secret mission, the Russkies might have learned from the report that B-29s fly in the air at a certain altitude. Claim denied. Whatever.
If the case cannot proceed without the material subject to the privilege, the case must be dismissed. More alarmingly, if the government cannot defend itself without being able to introduce evidence subject to the SSP, the case must be dismissed. More alarmingly still, if a plaintiff seeks recovery from a private contractor, the government may intervene and assert the privilege and shut down the case, sometimes even on a pre-Answer motion to dismiss. One such case made me so mad, I set aside my research agenda during a sabbatical and wrote a rage-fueled 90-page manuscript. The SSP marches on notwithstanding.
In Sakab Suadi Holding Co. v. Aljabri, we go a step further. I did not include this case in my course, and once I try to summarize the facts, I think you will understand why. Sakab Saudi Holding Company (Sakab) is a Saudi government entity. It alleged that Mr. Aljabri and his associates (collectively Aljabri) defrauded it of billions of dollars. It seems that Mr. Aljabri was an agent of Saudi Arabia's former Crown Prince Mohammed bin Nayef, who has removed form office in 2017 and has been in detention since 2020. In 2017 there arose a new Crown Prince over Saudi Arabia, which knew not Aljabri. Litigation followed.
Sakab first brought suit in Canada where Aljabri resides, and where the agreeable Canadians froze Aljabri's assets worldwide and appointed a receiver for certain assets. Sakab then filed a complaint in Massachusetts state court seeking to give effect to the Canadian order in the US. Big mistake.
Aljabri had the case moved to federal court. Once there, he had his own story to tell. He too operated as a Saudi official, and he lawfully used the funds he received from Sakab to engage in counterterrorism activities in partnership with the U.S. government.
To make a long story short, the U.S. government intervened, asserted the privilege, and shut down the U.S. litigation. It did not do so by demanding that the litigation come to a halt. Rather, it submitted in camera classified affidavits indicating that the U.S. government's interests would be endangered were Aljabri to seek to introduce evidence relating to "certain categories of information." The courts could not say much more about the nature of these affidavits without disclosing the very information they government was trying to protect.
Even thought the government did not ask for dismissal, that is what it got. Both the district court and the First Circuit concluded that there was no way for the case to proceed without the materials subject to the SSP, nor could the court grant Sakab any of the preliminary relief it requested.
To sum up: Sakab and Aljabri had a contractual relationship that may have involved transfers of billions of dollars. We don't know what Aljabri did for Sakab, but it seems to have related to Saudi counterterrorism efforts, which seem to have been coordinated with U.S. national security agencies. The U.S. government does not want any information relating to Mr. Aljabri and Sakab's joint activities to be disclosed in U.S. court proceedings because such disclosures would do harm to U.S. foreign relations -- in particular, the threatened harm is to the U.S. relationship with Saudi Arabia, one presumes. But it was a a Saudi entity that initiated the litigation. Seems to me that a sovereign state ought not to have its covert operations kept secret while also initiating litigation relating to those covert operations. And so, perhaps no harm done if Sakab can get no relief in U.S. courts because of the SSP.
Sometimes the secrets the government tries to protect through the SSP come out in foreign litigation. We'll see how the courts in Ontario proceed.
August 15, 2023 in Commentary, Government Contracting, Recent Cases, Teaching | Permalink | Comments (0)
Monday, August 14, 2023
Pennsylvania Court Finds Riders Not Bound by Uber's Browsewrap Arbitration Agreement
Shannon Chilutti, who is wheelchair bound, traveled by Uber in 2019. Her experience was not as whimsical as that recounted in Sarah Dooley's book (right). On the contrary, she was injured when her driver took an aggressive turn, causing her to fall out of her wheelchair, hitting her head and knocking her unconscious.
She attempted to sue for negligence in 2020, but Uber, citing the Terms of Service (ToS) associated with its ride-sharing app, moved to compel arbitration. The trial court granted Uber's motion, but a panel of the Superior Court of Pennsylvania reversed. Uber sought and was granted rehearing en banc. In Chilutti v. Uber Technologies, Inc., the en banc court addressed whether Uber's registration process and subsequent e-mails communicated an offer to arbitrate under Pennsylvania law.
After some procedural preliminaries, the court addresses whether Uber communicated their intent to enter into an arbitration agreement to Ms. Chilutti and her husband and co-plaintiff on the three occasions when the plaintiffs signed up for Uber services. In something of a throwback to the early 20th century, the court does so in the context of an inquiry into whether arbitration agreements deprive claimants of their right under the Pennsylvania constitution to a trial by jury.
The court notes that Pennsylvania has trimmed away at the edges of the general public policy favoring arbitration. In light of the constitutional right to trial by jury, Pennsylvania does not enforce arbitration agreements in the context of negligence claims in wrongful death actions against nursing homes. The court next contrasts the strict formal rules attendant enforcement of confessions of judgment in the commercial context, which also implicates a waiver of the right to a jury trial, with the breezy casualness with which we allow waiver of the same right in the context of arbitration.
Given that background, it is not surprising that the court regards Uber's ToS with a jaundiced eye. A person registering for Uber's services would gain access to the ToS by clicking on a hyperlink below the "create account" button. If one clicked on that link, one would be lead to a twelve-page agreement, with the arbitration provision beginning on page nine. One could create an account without clicking on the link. Stranger things have happened.
Because there is no requirement that a registrant click on a link or click a box labeled "I agree" in connection with Uber's ToS, the mechanism is considered browsewrap, the form of Internet contracting least likely to be enforced. Leaning heavily on a Ninth Circuit precedent, Berman v. Freedom Fin. Network, LLC, 30 F.4th 849 (9th Cir. 2022), the court concludes that "Uber’s website and application did not provide reasonably conspicuous notice of the terms to which Appellants were bound." This finding turned on the font size, location, and color of the link to Uber's ToS. The court also considered contextual factors, like how crowded with text the page was and how many screens one had to scroll through to reach the link.
In this case, unlike in Berman, Uber sent notices to plaintiffs that by registering they were agreeing to Uber's ToS, and those notices may have been conspicuous. However, given Pennsylvania's constitutional protection of the right to a jury trial, such notices after the fact are insufficient to cure the lack of notice at the time of contract formation. The court thus found unanimously that the district court erred in granting Uber's motion to compel arbitration, and plaintiffs are entitled to invoke their right under the Pennsylvania constitution to a trial by jury.
August 14, 2023 in Recent Cases | Permalink | Comments (0)
