ContractsProf Blog

Fridgewrap Rides Again!

Back in 2021, we reported on LG's charming habit of putting notice of mandatory arbitration inside its refrigerators. 

As you can see, the arbitration provision requires individual arbitration, meaning that each consumer dissatisfied with the product has to go one-on-one against a huge corporation.  And the corporation is not playing nice, as described in this piece by Chris Chmura, Stephanie Lucero, Alyssa Goard and Camille Lopez Rodriguez, reporting for NBC in the Bay Area.

It now appears that over 100 LG buyers are trying to bring a class action against LG for its faulty products. They allege that LG has sent out people to repair the refrigerators, but nothing works, as there is a faulty part that cannot be repaired.  Members of the purported class are done trying to get LG to repair the appliances.  They seek refunds and rescission.  They allege that LG is trying to use arbitration to avoid creating a public record of discovery, as they believe that such discovery will reveal that LG has long been aware of the problems with the faulty part and has tried to conceal that knowledge. 

LG claims that it provides notice to consumers of its arbitration provision in three ways.  First, the notice of arbitration is in the box in which the refrigerator is delivered.  Second, it is in the owners' manual, and third, fridgewrap. 

The problem with the notice in the box is that workers unbox the refrigerators before moving the appliances into homes.  Buyers never see the notice unless delivery people think it is their job to share that information with the end-user.  According to the NBC report, they don't do so.  Anna Han of the Santa Clara University School of Law suggests that the notice in the manual and in the refrigerator may provide adequate notice to consumers and thus that LG may not be able to establish that purchasers of LG products consented to arbitration.  Stay tuned.

Hat tip to my former student, Todd Williams!

The Best People Leave

When I got my first teaching job at Valparaiso University Law School, there was a core of people who were on the hiring committee and also became my close friends almost immediately upon my arrival.  Because they were at Valparaiso, I knew that it would be a good fit for me, They were dedicated teachers, innovative scholars, and colleagues devoted to helping our students learn and thrive as professionals and people.  They were committed to the place in the same ways as I was.  There were also great people at the university, so I had an interdisciplinary community of colleagues.

One of my law school colleagues was Alex Geisinger, who became a mentor and a friend.  He was on the committee that hired me.  He took the lead in helping me to understand the dynamics of the small community I had joined.  One of Alex's valuable assets was his honesty, and so he warned me about Valparaiso University (Valpo): "The best people leave."  

Of my close friends at Valpo, Alex was the first to leave.  He left to help Drexel gets its law school off the ground.  I had to be happy for Alex.  It was a great move for him and his family, but it was a bitter blow.  Not only had Alex been a great mentor for me in my teaching and scholarship, he was someone I could have a coffee with regularly, and his son, Michael, exactly one year older that my daughter, Sophie, was among Sophie's most regular playmates.  Alex always called Michael, "The Boy," and I still call Sophie, "The Child."  The Boy and The Child would play, while Alex and I would talk about teaching, and behavioral economics, and law school politics, and university politics, and politics politics, and life/work balance, and living in the Midwest when you don't really feel like you belong in the Midwest.  

I wrote previously about my commitment to community and how I felt that I belonged to a community when I started teaching at Valpo.  Alex was at the heart of that community, and he continued the connection after leaving.  When I got a one-semester sabbatical, Alex got me a visiting position at Drexel so that I could have full year away from Valpo, which was not always a happy place for me.  I had a wonderful experience teaching at Drexel and spending three days a week in the heart of Philadelphia.  Alex came back to Valpo to visit, we met up at conferences at every opportunity, and he kept in touch with our colleagues even after we all dispersed, making sure that we were all up to date on each other's lives.

I learned last night that Alex died this week while traveling with his family in Malaysia.  We lost colleagues at Valpo before, but among my small circle of close friends, Alex was once again the first to leave.  It is the bitterest of blows.

Tuesday Top Ten - Contracts & Commercial Law Top SSRN Downloads for February 27, 2024

Top Downloads For:

Contracts & Commercial Law eJournal

Recent Top Papers (60 days)

As of: 29 Dec 2023 - 27 Feb 2024

Rank	Paper	Downloads
1.	Debt Tokens Diane Lourdes Dick, Christopher K. Odinet and Andrea Tosato The University of Iowa College of Law, University of Iowa - College of Law and University of Nottingham, School of Law	3,108
2.	Decentralised Autonomous Organizations: Targeting the Potential Beyond the Hype Oscar Borgogno and Edoardo D. Martino Bank of Italy and University of Amsterdam - Amsterdam Center for Law & Economics (ACLE)	194
3.	Innovation, Disruption and Consumer Harm in the Buy Now Pay Later Industry: An Empirical Study Lucinda O'Brien, Ian Ramsay and Paul Ali University of Melbourne, Melbourne Law School - University of Melbourne and University of Melbourne - Law School	157
4.	Case Note: Time as Essence and Liquidated Damages Clauses: A Critique of Welspun Specialty v ONGC Badrinath Srinivasan and Seema Yadav Independent and Galgotias University	135
5.	The Smart Contracts Trilemma Bahadir Köksal and Roee Sarel University of Hamburg - Institute of Law and Economics and Institute of Law and Economics, University of Hamburg	127
6.	The Predilection for Contract in Governing Digital Networks: Micro-Management’s Face Off with Accountability Lee A. Bygrave Norwegian Research Center for Computers and Law - Law Faculty, University of Oslo	116
7.	On the Scales of Private Law: Nano Contracts Yonathan A. Arbel University of Alabama - School of Law	115
8.	Introduction to The Cambridge Handbook of Private Law and Artificial Intelligence Ernest Lim and Phillip Morgan National University of Singapore (NUS) - Faculty of Law and University of York - York Law School	111
9.	Income Pools for Superstar Markets Timothy Chan, Ningyuan Chen and Craig Fernandes University of Toronto, Mechanical and Industrial Engineering Department, University of Toronto - Rotman School of Management and University of Toronto, Mechanical and Industrial Engineering Department	107
10.	The Homebuyers Conundrum in Real Estate Insolvency Arjya B. Majumdar and Mehreen Garg O.P. Jindal Global University and Insolvency Law Academy	98

 

Top Downloads For:

Law & Society: Private Law - Contracts eJournal

Recent Top Papers (60 days)

As of: 29 Dec 2023 - 27 Feb 2024

Rank	Paper	Downloads
1.	Debt Tokens Diane Lourdes Dick, Christopher K. Odinet and Andrea Tosato The University of Iowa College of Law, University of Iowa - College of Law and University of Nottingham, School of Law	3,108
2.	Wearable AI, Bystander Notice, and the Question of Privacy Frictions Zahra Takhshid University of Denver Sturm College of Law	143
3.	The Smart Contracts Trilemma Bahadir Köksal and Roee Sarel University of Hamburg - Institute of Law and Economics and Institute of Law and Economics, University of Hamburg	127
4.	The Inequality of Bargaining Power Principle Rebecca Stone University of California, Los Angeles (UCLA) - School of Law	88
5.	Private Law's Choice of Private Law Andrew S. Gold Brooklyn Law School	65
6.	Legal strategy for commercial hostage-taking and business exit bans Jack Wroldsen California Polytechnic State University, San Luis Obispo	61
7.	What's The Use? The Structural Flaw Undermining Warhol v. Goldsmith Peter Karol UNH Franklin Pierce School of Law	48
8.	High-Status Versus Low-Status Stakeholders H. Justin Pace Western Carolina University - College of Business	36
9.	Smart Contracts in Blockchain Technology: A Critical Review Hamed Taherdoost Hamta Group	33
10.	The CISG: Facilitating International Trade Through Uniform Sales Law Achih Mahamadou Jallo University of Buea	33

SCOTUS Takes Another FAA Case

Image by DALL-E

A couple of years ago, we wrote about the Arbitration for All approach to the Federal Arbitration Act (FAA), which was given extreme expression in a recent Judge Easterbrook opinion.  That opinion builds on a series of SCOTUS cases from a decade ago (we barely took notice of Stolt-Nielsen; here's a guest post on Rent-A-Center; here's our post on Concepcion, and here's our post on Italian Colors).  Now, arbitration is in retreat on a number of fronts.

First, the Consumer Finance Protection Bureau attempted to prohibit class-action waivers in consumer lending agreements.  That regulation was nixed by the Republican-controlled Congress soon after Donald Trump took office.  Second, mass arbitration has lead some companies to remove compulsory arbitration from the their terms and conditions, a development that we most recently covered here.  Finally, SCOTUS recently issued two unanimous opinions limiting business entities' ability to compel arbitration on employees once the litigation has progressed for a while or if the employees are transportation workers.

The Supreme Court will now take another crack at the latter issue, having granted cert. in Bissonnette v. LePage Bakeries.  That case is a putative class action by people who deliver baked goods.  They are suing the company that makes those goods.  Defendant LePage Bakeries moved to dismiss the suit and compel arbitration.  Like the plaintiffs in Saxon, which SCOTUS decided in 2022, plaintiffs claimed that they are exempt from the FAA, because Section 1 of the FAA exempts workers involved in interstate commerce.  The district court granted the motion to compel.  A panel of the Second Circuit first decided the case in 2022 and affirmed over a dissent from the late Judge Rosemary Pooler (right).  

The majority opinion kept things simple.  Following the Supreme Court precedent of Circuit City Stores v. Adams, the Court noted that only "transportation workers" come within the Section 1 exemption from the FAA.  The Second Circuit agreed with the district court that delivery workers are not "transportation workers."  Then, after SCOTUS decided Saxon, the panel reconsidered its opinion but arrived at the same conclusion.   

The Second Circuit first elected not to take the off-ramp available through arbitration under state law because the availability of arbitration under Connecticut law in this instance is unsettled.  Turning to the FAA, the majority noted that not everybody who works in the transportation industry is a transportation worker, but more to the point, just because you drive a truck to deliver baked goods does not mean that you are in the transportation industry.  Judge Pooler, citing courts from other jurisdictions, drew a different conclusion, "“[A] trucker is a  transportation worker regardless of whether he transports his employer’s goods or the goods of a third party.”  She sprinkled citations from Saxon liberally throughout her opinion, and she makes a compelling case that, if people who merely load baggage onto planes are "transportation workers," clearly a truck driver is a "transportation worker."  

In February, 2023, the Second Circuit denied rehearing en banc over the dissents of three judges.  Judge Jacobs, who wrote for the majority in the panel decision, and Judge Pooler take the gloves off in their statements regarding the denial of rehearing.  SCOTUS granted cert. back in September 2023.  The issue is "Whether, to be exempt from the Federal Arbitration Act, a class of workers that is actively engaged in interstate transportation must also be employed by a company in the transportation industry."

According to Ronald Mann, writing on SCOTUSblog, Justice Kavanaugh (left) took the lead in oral argument, making the case for a narrow reading of Section 1.  Somehow, Justice Kavanaugh believes that the Congress that passed the FAA didn't want anybody to be outside of arbitration.  Workers in the transportation industry were exempt because there was a separate arbitration scheme for them.   But look, if Congress intended for employees to be exempt from the FAA for any reason, including another arbitration scheme, then it intended them to be exempt from the FAA.  If Congress changed its mind about that, it is for Congress to amend the FAA to make it applicable to employees.  It is not for the courts to revise legislation.  SCOTUS should not update the non-delegation doctrine in the guise of the "major questions doctrine" while arrogating to itself the power to decide major questions of statutory interpretation through reference to non-textual sources. 

Moreover, I'm not sure what arbitration scheme he is referring to.  Counsel for the employees, Jennifer Bennett, ably showed that Justice Kavanaugh was just wrong about why seamen and transportation workers were exempted from Section 1. The arbitration schemes that he references were nothing like the FAA.  They provided only an option for arbitration as an alternative to litigation after a dispute arises.  She then goes on to argue that the FAA has no requirement that "transportation workers" be employed in the "transportation industry."

I have a different take.  On my reading of the legislative history of the FAA, the drafters expected it to apply exclusively among business people.  They never wanted it to apply to employment agreements and they never expected arbitration agreements to come in the form of contracts of adhesion.  As the drafters explained the purposes of the FAA to the Senate, “It is purely an act to give the merchants the right or the privilege of sitting down and agreeing with each other as to what their damages are, if they want to do it.  Now, that is all there is in this.”

Justice Kavanaugh is right that the drafters of the FAA assumed that there would be an alternative arbitration scheme for employment agreements.  It was state arbitration statutes such as Connecticut's.  Congress had no power in the 1920s to legislate on the subject of employment agreements that did not implicate interstate commerce as that phrase was understood at the time.  At the time, it was quite narrow.  So the exemption in Section 1 was not meant to protect employees in the transportation industry from arbitration in unique ways.  It addresses the only category of workers whose employment agreements might be subject to arbitration and provides that they are exempt.  Nobody thought in 1925 that the FAA would apply to other employment agreements.  That was a matter for state arbitration statutes.

However, if, as may be the case here, the employer has not properly provided for arbitration consistent with the state statute, well then, litigation it is!  Even if arbitration under state law is appropriate, not all states permit employers to ban class representation through arbitration clause bootstrapping, so a return to the original public meaning of the FAA (see what I did there!) could effect a substantive change in the arbitration law landscape.

Justice Kavanaugh worries that protecting employees from mandatory arbitration would be a major shift.  Indeed.  However, as SCOTUS recently recognized, sometimes a court has to revise its decisions when those decisions were "egregiously wrong from the start."  From that perspective, it should be very telling that the earliest cases that the employer's counsel can cite in support of their narrow understanding of the Section 1 exemption date from the 1970s.  To make matters worse, Chief Justice Roberts (right) asks where the test applied in those 1970s test came from.  He expresses his intuition, which seems spot on, that "they just kind of made [it] up."

Friday Frivolity: Offer to Enter into a Unilateral Contract from John Oliver

Image by Neil Grabowsky / Montclair Film Festival, CC BY 2.0 via Wikimedia Commons

Offers to enter into unilateral contracts provide frequent blog fodder.  Elon Musk offered Wikipedia $1 billion if it would change its name.  He did something similar, offering to pay legal fees for people who faced adverse employment decisions for posts on Twitter.  James Corden gave us food for thought here.  Celebrities offer very high rewards for the return of their lost or stolen pets. Burma Shave offered a trip to Mars.  In all of these cases, the offeror seems to have made the offer for non-contractual reasons.  They never intended to make good on their offer.  They were just trying to make some point unrelated to mutually beneficial transactions. 

John Oliver (left) seems to be doing something very different. On his show last week, John Oliver produced a document that he described as "a contract," in which he, in his personal capacity, offered to pay Justice Clarence Thomas $1 million/year for the rest of his (or John's ) life if Justice Thomas would agree to step down from the U.S. Supreme Court.  To sweeten the deal, John also threw in a luxury motor coach worth $2.4 million.  He gave Justice Thomas thirty days to accept the offer.  He said repeatedly that his was a serious offer, and I think he meant it.

Unlike other unilateral offers discussed in this space, John Oliver's offer seems genuine.  He seems like he actually wants Justice Thomas to take the offer.  Paying Justice Thomas $1 million a year might be painful for John, but I suspect he will make it back by having cemented his reputation for the rest of his life as a legend of political comedy.

Gina Carano Strikes Back!

Image by Gage Skidmore
CC BY-SA 3.0

This case was brought to my attention by our blog's Founder and Editor Emeritus Frank Snyder.  He posted a link to the case on the AALS Listserv for contracts professors, and discussion ensued.  I acknowledge that what follows is indebted to that discussion, and I thank my colleagues for alerting me to the issues raised in the litigation.  

ADDENDUM:  Just learned via Riddhi Setty writing on Bloomberg.com that Gina Carano's suit is being funded by Elon Musk.  This makes sense, given Mr. Musk's earlier offer to pay the legal bills of anyone who claims that they were unfairly treated by an employer due to Twitter posts.  Musk v. Disney seems like a good match-up.

On February 6th, mixed martial arts fighter, actor, and professional bad-ass Gina Carano (Ms. Carano, right) filed her complaint against The Disney Company (Disney) and others.  The case is of interest not only because of Ms. Carano's success in her role in the Star Wars/Disney series, The Mandalorian, among other boundary-breaking performances, but also because of the interesting legal issues raised by her complaint.

The Complaint alleges that Disney wrongfully terminated Ms. Carano based on the political content of her social media posts made while away from work.  She further alleges that Disney discriminated against her as a woman, as men who posted similar things on social media did not suffer the same adverse employment decisions.

According to the Complaint, Ms. Carano's character, Cara Dune, was a key element in the success of The Mandalorian.  Undoubtedly, she had more rizz than the faceless protagonist, but nobody on that show could compete with the adorable muppet, Grogu, known to fans as "Baby Yoda" (below left).  She was paid only the applicable minimum salary of $25,000 per episode.  Late in 2020, Jon Favreau, who created The Mandalorian, allegedly represented to Ms. Carano that she would be featured in a new spinoff series, for which her compensation would increase as much as tenfold.

Then, in February 2021, Defendant Lucasfilm made the following announcement:

Gina Carano is not currently employed by Lucasfilm and there are no plans for her to be in the future. Nevertheless, her social media posts denigrating people based on their cultural and religious identities are abhorrent and unacceptable.

Carano characterizes this and other statements by defendants as calculated, malicious, false, and knowingly in violation of California statutes that protect employees from persecution for their political beliefs.  She alleges that, based on such false allegations, Disney not only terminated her but also refused to hire her for additional projects. 

Issues:

Was Ms. Carano an Employee?

Ms. Carano's first cause of action is for wrongful discharge under California Labor Code §§ 1101, et seq, which prohibits employers from "[c]ontrolling or directing, or tending to control or direct the political activities or affiliations of employees."  One issue that may arise in the case is whether she comes within the ambit of the statute.  She may have not have been an employee at the time that Disney announced that her "termination."  After all, according to the Complaint , in announcing Ms. Carano's termination, defendant Lucasfilm said that she was not "currently employed." 

While her employment status might be relevant to her first cause of action, her second cause of action is for both wrongful discharge and refusal to hire.  So even if Ms. Carano was not an employee for the purposes of here §1101 claim, she would not need to be for her claim under California Labor Code § 98.6.  That section prohibits adverse employment actions against "any employee or applicant for employment" for conduct protected under §§ 1101 et seq.  

Ms. Carano cites to various projects of which she was going to be a part.  The problem is that, with the possible exception of a Mandalorian movie, the projects she mentions do not seem to ever have been made.  I think that might move her alleged harm into the realm of speculation.  If I had a dime for every time someone has approached me with a movie treatment based on this blog, well . . . you can do the math yourself.

Her third claim is sex discrimination, because male employees who engaged in expression similar to hers were not subject to termination.  I think the challenge here will be to show that the other expression is similar in legally relevant ways and to show that Disney had no non-discriminatory ground for deciding to end its relationship with Ms. Carano.  Ms. Carano cites to a social media post by Mark Hamill in which he linked to something from J.K. Rowling and "liked" it.  When people objected to the allegedly transphobic content of Ms. Rowling's post, Mr. Hamill issued a retraction of his "like" to the extent that it extended to that message.  Ms. Carano, by contrasts, insists that she has never, ever engaged in expression that was remotely objectionable.  To a company that cares about its image and disagrees with Ms. Carano's characterization of her social media posts, her refusal to acknowledge poor judgment may be a ground for treating her differently from those willing to recognize error.

Was Her Speech Covered by the Statute?

Disney may claim that her conduct was not "political activity" in the sense of the statute.  Here, the Complaint has to walk a rather narrow line.  On the one hand, Ms. Carano insists that her social media posts did not have the meaning ascribed to them by her detractors.  She insists that there was nothing in her posts that was racist, anti LBGTQ+, or transphobic.  On the contrary, she communicated only messages of love and support for people who are targeted for bullying.  Based on her own account of the events, it is a little hard to identify her political activities. 

She notes that other Disney employees engaged in more overt political statements and suffered no adverse employment effects.  But that may be a product not of whether Ms. Carano or her co-workers were people who were associated with the Star Wars brand were engaging in political activity but whether they were engaging in speech that the audience for Star Wars found objectionable.  Which brings us to our next topic . . . .

If Her Contract Has a Morals Clause, What Impact Does that Have on the California Statute at Issue?

This was the topic that Frank Snyder first broached on the AALS Contracts Listserv, and I, having no expertise in employment law, admit that I do not know the answer.  One would think that a morals clause would have to be interpreted in a manner consistent with California's Labor Code.  My hunch is that the case should turn on whether Disney's interest in enforcing its morals clause involved reasons unrelated to the allegation that Ms. Carano was engaged in political activity.  She was attracting a lot of negative attention on social media at the same time as she was emerging as the human face of The Mandalorian. The series' eponymous character (right) never shows his face (except for that one time when he did).  He is, according to the actor who plays him, "of questionable moral character." We don't even learn his name until episode 8.  Grogu is cute and all, but he's not human.  Ms. Carano's notoriety on social media may just be bad for business, bad for the brand, and they may have distracted attention from the heartwarming story of an isolated intergalactic mercenary with an inexplicable attachment to a child of an alien species with potentially gnarly powers but, if his predecessor is any indication, no hope of ever mastering standard English usage.

The Style of the Complaint

The Complaint's Introduction begins as follows:

A short time ago in a galaxy not so far away, Defendants made it clear that only one orthodoxy in thought, speech, or action was acceptable in their empire, and that those who dared to question or failed to fully comply would not be tolerated. And so it was with Carano. After two highly acclaimed seasons on The Mandalorian as Rebel ranger Cara Dune, Carano was terminated from her role as swiftly as her character’s peaceful home planet of Alderaan had been destroyed by the Death Star in an earlier Star Wars film. 

I have two problems with this way of introducing legal claims to a court.  First, the lame jokes and references to Star Wars themes undermine the seriousness of the document and of Ms. Carano's claims.  Of course, this blog is not above lame jokes and references, but we're a blog.  There's a time and a place.  Second, by casting the defendants in the role of the evil "empire "seeking to enforce "orthodoxy in thought, speech, or action" Ms. Carano risks having this lawsuit dismissed (by the public, if not by the court) as a chapter in the culture wars rather than an attempt to vindicate her legal rights.

The problems go beyond the introduction.  Pages 10-25, 28-30 of the Complaint consist of long-winded  detours into alleged online harassment of Ms. Carano by people other than defendants.  As far as I can tell, all of this information serves only to show why Disney might have had apolitical concerns about Ms. Carano's activities on social media.  It is not clear that any of this is otherwise relevant to the legal narrative Ms. Carano is trying to tell if she is seeking to vindicate her legal rights. It is highly relevant to the narrative she is trying to tell if she is attempting to burnish her credentials as a victim of the culture wars.  I don't think it is helpful in a Complaint to make the court feel like it is a platform for an agenda.

What's Not in the Complaint

Given the allegations in the Complaint, I'm not sure why there aren't more causes of action.  It seems like Ms. Carano thinks that the defendants have said and published statements about her that she believes are malicious lies.  That seems like a claim right there.  She also alleges that defendants not only wrongfully terminated her and refused to hire her for future projects; they also interfered with her efforts to procure other employment in the industry, including perhaps by pressuring her agents to sever ties with her.  That too, seems like a claim.  Perhaps an amended complaint is coming.  Perhaps I don't know what I'm talking about.

Damages in Occidental Petroleum v. Wells Fargo

In May, 1995, the predecessor of Occidental Petroleum Corp. (Occidental) established a rabbi trust through the predecessor of Wells Fargo Bank (Well Fargo).  The parties in December 2019 or January 2020 agreed that Wells Fargo would sell 381,420 shares each day from January 6 until January 10, 2020.  For typical too-big-to-fail reasons, this did not occur.  The people responsible for Occidental's account did not really understand the transactions that they were to oversee (and I don't blame them!),  and there was miscommunication or non-communication between Wells Fargo and its transfer agent, Equiniti.  As a result, most of the shares did not get liquidated until March 20th, by which time the value of the shares had declined by eighty percent.

In a prior opinion, the District Court for the Southern District of Texas had granted summary judgment for Occidental on its breach of contract claim and denied Wells Fargo's motion for summary judgment on the quite reasonable ground that "Wells Fargo ha[d] not recited the elements of its affirmative defenses, nor pointed to evidence supporting its affirmative defenses."  Ouch.  To big to bother with elementary pleading standards.  

In May, 2023 (yes, I'm that far behind!), the same court ruled on damages in Occidental Petroleum Corp. v. Wells Fargo Bank.  Occidental sought $38 million in damages, representing the difference between what it would have gotten had Wells Fargo done what it promised to do and what it got for its shares when Wells Fargo finally got around to selling them.  Wells Fargo estimated damages at between $ 9.764 and $18.5 million.  Guess what!  The court once again sided with Occidental, awarding it just over $38 million in damages.

Given that we recently posted on new scholarship on consequential damages, I thought it interesting that Wells Fargo's main argument in its brief on damages was that "Occidental failed to identify whether the damages it seeks are direct or consequential."  The Authors of the piece we discussed last week find evidence that transactional lawyers do not really know the difference between direct and consequential damages, but they expect litigators to be able to make that distinction.  Not so, apparently.  Wells Fargo argued that the damages arose as a consequence of a sharp and unforeseeable decline in stock prices (thanks once again, COVID-19!).  Very clever, said the court. However, "Damages can directly and foreseeably flow from a breach, even if the exact amount cannot be foreseen."  I may use this case to teach damages, because it does a great job clarifying, for the benefit of Wells Fargo's learned counsel, how to calculate expectation damages.

The court also rejects a more serious but still erroneous argument from Wells Fargo.  Wells Fargo wanted damages to be adjusted to reflect Occidental's obligation to reinvest the proceeds of the sales.  Had Occidental done so, whatever it bought also would have declined in value, because everything declined in value in March 2020.  The facts did not support Wells Fargo's contention; Occidental was permitted and did retain the funds as cash.  However, even if it had been obligated to reinvest, the consequences of that reinvestment were speculative and could not be taken into consideration when calculating expectation damages.

In August, 2023, the parties were back before the District Court for a ruling on attorneys fees.  it is not clear what Occidental asked for, but it looks like it pretty much got everything.  The court awarded $1.5 million in attorneys fees.

Tuesday Top Ten - Contracts & Commercial Law Top SSRN Downloads for February 20, 2024

Top Downloads For:

Contracts & Commercial Law eJournal

Recent Top Papers (60 days)

As of: 22 Dec 2023 - 20 Feb 2024

Rank	Paper	Downloads
1.	Decentralised Autonomous Organizations: Targeting the Potential Beyond the Hype Oscar Borgogno and Edoardo D. Martino Bank of Italy and University of Amsterdam - Amsterdam Center for Law & Economics (ACLE)	177
2.	Innovation, Disruption and Consumer Harm in the Buy Now Pay Later Industry: An Empirical Study Lucinda O'Brien, Ian Ramsay and Paul Ali University of Melbourne, Melbourne Law School - University of Melbourne and University of Melbourne - Law School	145
3.	Case Note: Time as Essence and Liquidated Damages Clauses: A Critique of Welspun Specialty v ONGC Badrinath Srinivasan and Seema Yadav Independent and Galgotias University	126
4.	The Predilection for Contract in Governing Digital Networks: Micro-Management’s Face Off with Accountability Lee A. Bygrave Norwegian Research Center for Computers and Law - Law Faculty, University of Oslo	114
5.	On the Scales of Private Law: Nano Contracts Yonathan A. Arbel University of Alabama - School of Law	112
6.	Introduction to The Cambridge Handbook of Private Law and Artificial Intelligence Ernest Lim and Phillip Morgan National University of Singapore (NUS) - Faculty of Law and University of York - York Law School	102
7.	The Smart Contracts Trilemma Bahadir Köksal and Roee Sarel University of Hamburg - Institute of Law and Economics and Institute of Law and Economics, University of Hamburg	94
8.	The Homebuyers Conundrum in Real Estate Insolvency Arjya B. Majumdar and Mehreen Garg O.P. Jindal Global University and Insolvency Law Academy	93
9.	The Inequality of Bargaining Power Principle Rebecca Stone University of California, Los Angeles (UCLA) - School of Law	79
10.	Book and Claim System for Sustainable Aviation Fuels Christine Kranich and Sarah Joanna Haas Arnecke Sibeth Dabelstein and Arnecke Sibeth Dabelstein	76

 

Top Downloads For:

Law & Society: Private Law - Contracts eJournal

Recent Top Papers (60 days)

As of: 22 Dec 2023 - 20 Feb 2024

Rank	Paper	Downloads
1.	The Smart Contracts Trilemma Bahadir Köksal and Roee Sarel University of Hamburg - Institute of Law and Economics and Institute of Law and Economics, University of Hamburg	94
2.	The Inequality of Bargaining Power Principle Rebecca Stone University of California, Los Angeles (UCLA) - School of Law	79
3.	Private Law's Choice of Private Law Andrew S. Gold Brooklyn Law School	62
4.	Legal strategy for commercial hostage-taking and business exit bans Jack Wroldsen California Polytechnic State University, San Luis Obispo	58
5.	What's The Use? The Structural Flaw Undermining Warhol v. Goldsmith Peter Karol UNH Franklin Pierce School of Law	43
6.	Smart Contracts in Blockchain Technology: A Critical Review Hamed Taherdoost Hamta Group	31
7.	Economic Duress in U.S. Employment Jonathan F. Harris LMU Loyola Law School	31
8.	The CISG: Facilitating International Trade Through Uniform Sales Law Achih Mahamadou Jallo University of Buea	31
9.	The Unbearable Narrowness of Undue Influence Hila Keren Southwestern Law School	26
10.	The FAA Should Not Cover Consumer Claims Jeff Sovern University of Maryland Francis King Carey School of Law	25

Air Canada Bound by Its Chatbot

Hooray for Canada!  First you gave us the emoji-as-signature case; now this!

Just last week, I was complaining to my students that I don't like the way the Restatement lays out the elements of misrepresentation.  It says that misrepresentation has to be either fraudulent or material, but it is hard to come up with a fact pattern in which a plaintiff could establish the requisite scienter for a misrepresentation that was not fraudulent.  Air Canada, can you prove me wrong?

Plaintiff Jake Moffat, who apparently uses "Mr." but also they/them pronouns, went onto Air Canada's website to book a flight.  They were looking for a bereavement fare, and Air Canada's chatbot told them not to worry.  They could get the ticket recategorized as a bereavement fare retroactively so long as they applied to do so within ninety days of travel.  Air Canada's human employees were less accommodating, and Mr. Moffat sued to recover the difference between the fare they paid and the bereavement fare; a difference of $880 (Canadian, I assume). 

In Moffat v. Air Canada, the Civil Resolution Tribunal (CRT) allowed Mr. Moffat's claim for negligent misrepresentation.  The claim is brought in tort, but that's only a product of a factual variable.  Mr. Moffat had paid for his ticket and was seeking a refund.  Had they not paid, Air Canada would be going after them for breach of contract, and they would be alleging negligent misrepresentation as an affirmative defense to their obligation to pay.  The elements of the claim seem to be same, except that Mr. Moffat had to establish that Air Canada owed him a duty.  No problem here.  In addition, Mr. Moffat had to show an untrue, inaccurate or misleading representation, negligence, reasonable reliance, and damages.  

The chatbot indicated that Mr. Moffat could fly first, provide evidence of bereavement later.  However, it also provided a hyperlink to Air Canada's bereavement policy, which does not allow for requests for bereavement fares after travel.  The rest follows as expected.  Mr. Moffat traveled.  Mr. Moffat sought a bereavement fare.  This being Air Canada, they said "sorry" about the misinformation provided by the chatbot and thanked Mr. Moffat for allowing them the opportunity to address the problem.  Air Canada did not offer a refund, instead it offered Mr. Moffat a $200 coupon towards future flights.  Mr. Moffat refused.

Mr. Moffat was able to how by a preponderance of the evidence that all elements of a claim for negligent misrepresentation were met.  The CRT rejected Air Canada's affirmative defense based on the terms and conditions of the applicable tariff because Air Canada described those terms and conditions but did not provide evidence of them.  Seems odd that Air Canada would bother to fight this claim but then not bother to provide evidence necessary to its defense.  as a result of Air Canada's half-hearted litigation strategy, we can't know whether other plaintiffs could follow in Mr. Moffat's path.  It may be that Air Canada has a powerful defense.  However, when a big corporation goes up against a pro se litigant, the CRT is not inclined to cut it any slack.  The CRT engaged in a careful and detailed calculation of damages and ordered Air Canada to pay Mr. Moffat $812.02, plus post-judgment interest.  

Now I know what you are thinking.  It's easy to blame the overworked chatbot for messing up.  But I asked a chatbot its opinion about what could have caused the negligent misrepresentation in question.  It sent me a before and after picture of the chatbot in question, who apparently started its career as "cht boot?" but then decided to take on the moniker "CHBoT?", which like BONG HiTs 4 JESUS, just seems right to me.  At left we have the Air Canada chatbot pictured the day that it started work.  At right, we have it three weeks into its new career.  Images generated by DALL-E.  As you can see, like most airline employees, it was attracted by the allure and mystique of air travel.  Like some, it quickly learned that it was a glorified server on a greyhound bus trip to hell.  I'm not saying that all of the airlines' customer service people end up hitting the sauce hard.  I'm just saying I would not blame them for doing so.

Hat tip to my former student, Don Dechert, who shared the case with me!

Hiring at the University of Arkansas Little Rock Bowen School of Law

William H. Bowen School of Law

University of Arkansas at Little Rock

POSITION ANNOUNCEMENT FOR VISITING PROFESSORS OF LAW

            The William H. Bowen School of Law at the University of Arkansas at Little Rock announces a search for two (2) Visiting Professors of Law. One of the positions will be asked to teach first-year Civil Procedure; the other will be asked to teach first-year Contracts. Other classes sought to be taught by these visitors may include Administrative Law, Employment Law, Legislation, Professional Responsibility, and Sales.

            A search to fill both positions as tenure-track hires will commence in August 2024; the visitors will be eligible to apply.

Visitors will be encouraged to participate in the intellectual life of Bowen, as well as to integrate themselves into the life of the bench, bar and close-knit local legal community. Mentorship and support for scholarship will also be available to the extent visitors wish.

            Bowen is a student-focused and welcoming school of law located downtown in Arkansas’ capitol city, providing ready access to the state courts, legislative and administrative agencies, and in one of the most affordable and pleasant small cities in the country. Bowen’s three core values are to advance access to justice, public service, and professionalism. To that end, the School of Law’s rigorous curriculum balances theory, skill development and extensive experiential learning opportunities. Students have numerous options to assist faculty – including visitors – with academic research and public service, including in one of Bowen’s seven legal clinics, or with its new Bowen Center for Racial Justice and Criminal Justice Reform.

The positions begin in August, 2024. The search to fill them will continue until satisfactory candidates are hired. Candidates are encouraged to apply early. Before May 1, 2024, interested individuals should send a statement of interest and current C.V. to Professor Aaron Schwabach, Chair, Faculty Hiring Committee, by email: [email protected]. After May 1, 2024, applications should be sent to Professor and Associate Dean for Academic Affairs Lindsey Gustafson, [email protected].

A New Take on Consequential Damages

I am always on the lookout for a fresh take on familiar material, and I must admit, it had never occurred to me that the rule from Hadley v. Baxandale might be either alien vomit or intelligent design, as I had come to understand those terms.  Tara Chowdhury, Faith Chudkowski, Amanda Dixon, Rishabh Sharma, Madison Sherrill, Hadar Tanne, Stephen J. Choi, and Mitu Gulati (the Authors) have made me rethink that position.  They suggest that we should re-imagine contractual limitations on consequential damages as either one or the other in Consequential Damages: Alien Vomit or Intelligent Design, available for download now on SSRN.

Hadley, of course, provides nothing but a default rule, around which the parties can freely contract.  The Authors reviewed over 1300 contracts and interviewed over 100 practitioners.  They discovered that negotiated consequential damages provisions "are often hopelessly ambiguous and that their inclusion in contracts is sometimes more habit than intention."  The Authors begin with a real classroom exercise.  Students were presented with a typical no consequential damages (NCD) clause from a contract negotiated between sophisticated parties.  The provision was in ALLCAPS, which shows you right off the bat that the parties aren't as sophisticated as they think they are.  The students quickly remarked that the provision was "incomprehensible gibberish."  And so a research project was launched.

At the heart of the matter is a puzzlement.  The Hadley default rule is that you cannot get consequential damages unless they were within the contemplation of the parties at the time the contract was formed.  If the default is no consequential damages, what is there to contract around?  Perhaps sophisticated parties want to specify the consequential damages that they do contemplate.  Nope.  Time constraints and inertia lead to the retention of boilerplate provisions that nobody pays attention to.  NCD clauses do not reflect any careful consideration or negotiation by the parties.  Once again, even the lawyers don't know what the contracts they draft and negotiate say.  Practitioners and scholars fall into two camps on NCD clauses.

The Alien Vomit Theory

Image by DALL-E

A prominent practitioner, Glenn West, traced how NCD clauses found their way into M&A transactions.  He concluded that the clauses were borrowed from construction and supply contracts.  Hence, I suppose, alien vomit.  In the M&A context, they either protect against irrelevant risks or just create confusion by importing undefined language about "special," "indirect," "consequential," or "unnatural" damages.  The obscurity of these clauses introduces risk, as it is unclear to courts what they are intended to exclude.  

Alien vomit is especially dangerous to buyers in M&A transactions.  The categories of damages potentially excluded through NCD clauses represent precisely the value one is trying to achieve through an acquisition.  That is, the sale price of a business entity is linked to its potential to generate future profits.  If such profits are excluded from recovery, what is there left for buyers to recover?

I must admit that I am part of the problem.  The Authors identify terms that practitioners have found to be in need of definition.  I expect my students to know the difference between direct, incidental, and consequential damages.  Last year I used a casebook for Sales that had exercises in which students were supposed to name the category into which different types of damages fell.  The casebook authors' answers all made sense to me, and thus I was under the illusion that it was possible to distinguish among the categories. 

For example, it seems to me that future profits to be generated from the acquisition of a business entity are direct damages, not consequential.  They may be problematically speculative, but they would arise directly from a breach.  Experienced attorneys apparently think otherwise.  It would be nice if we had some evidence of how courts treat such NCD clauses, but it may just be that nobody gives much thought to alien vomit, because it, like much boilerplate, never generates disputes that result in litigation.  If the disputes arise in such transactions, the parties might agree to walk away from the deal, or the transactional attorneys can just iron our the wrinkles themselves rather than leaving things to the really scary aliens, litigators.  

Similarly, practitioners see no need to exclude "exemplary," "punitive," or "treble," damages, none of which would be recoverable for breach of contract in any case.  But that also doesn't seem right to me.  Why aren't these clauses useful to prevent, e.g., exemplary damages that would arise from a fraud claim or a breach of fiduciary duty claim in connection with a breach of contract, or statutory damages that might allow for punitive or treble damages?  When I taught Remedies, I learned that punitive damages are more often awarded on contracts claims than on torts claims because there are hundreds of statutes that provide for punitive damages for certain kinds of breach of contract.

Optimal Design

Image by DALL-E

Meanwhile, academics writing in the tradition of law and economics have argued that NCD clauses are the product of parties that have carefully considered the matter and negotiated the most efficient allocation of risk.  They have rejected Hadley in favor of an allocation of exposure to liability tailored to the needs of their clients in connection with this particular transaction.  The Authors' research calls this theory into question.  

An aside: I have devoted some time to working through Victor Goldberg's work on contracts damages (I need to get back to that project!).  He seems to have a foot in both camps.  He certainly sometimes speaks the language of optimal design theory, but he also notes how often fuzzy contract terms get the parties in trouble.  However, I think Professor Goldberg is inclined to blame courts for the confusion, at least in part.  At least sometimes, the parties have made very clear that they intend to contract around default rules, but the courts resist, often in a misguided effort to promote what they think are the efficiency and fairness goals best achieved through adherence to common-law defaults.

The Authors' review of NCD clauses in three categories of commercial contracts indicates that use is steady, even in the face of determined warnings from experienced M&A attorneys like Glenn West about their dangers.  They are less common in M&A for public deals, perhaps because of federal statutory regimes that make NCD clauses unnecessary.  However, given the Authors' thesis that NCD clauses are largely unnecessary, inertia seems the more likely explanation.  That is, for whatever reason, NCD clauses did not make their way into the standard boilerplate of these types of transactions.  Alien vomit has spread to 10%-20% of such transactions, but in most cases, either the aliens are vomiting elsewhere or some keen-eyed lawyers is saying, "Ew, that's alien vomit!  We've got plenty of our own vomit in this deal without borrowing language from a different transaction!"

The Authors break down the problematic clauses into three categories: deadly, redundant, and ambiguous.  While there are ups and downs over time, all three categories have enjoyed remarkable staying power since 2010.  That is, while their use fluctuates over time, and while some terms are more likely to appear in one category of transactions rather than another, there is no general trend of decline in use. 

When questioned on the meaning of consequential damages, one set of lawyers gave confident '"incorrect" answers.  Given that the Authors' argument seems to be that the term has no fixed meaning, this seems a tad unfair to the respondents. What is a correct answer? A second set consisting of junior lawyers mostly shamelessly admitted that they had no idea and that it didn't matter because NCD clauses are meaningless boilerplate that never get litigated.  A third set, consisting of more senior lawyers had more specific ideas about consequential damages, but nobody thought that NCD clauses achieve anything beyond Hadley.  

When M&A gurus are interviewed on the subject, they give very different answers.  It seems that the only reason NCD clauses get negotiated is that some gurus want them out, and when they ask for them to be taken out, out they go.  Nobody cares, because liability caps and insurance render them irrelevant anyway.  As it turns out, this too is incorrect.  If a buyer allows a limitation on lost profits to survive the negotiation, that buyer may not be able to recover anything, and insurance and liability caps won't even come into play, assuming, contrary to argument above that lost profits are not direct damages or have been expressly excluded.  In any case, careful attention to caselaw establishing the contractual default provisions is not a factor.  Transactional attorneys look at other transactions, not at case law, when deciding what language to include in the agreement.

This article is a delightful read and has given me a great deal to think about beyond its catchy title, so congratulations to the Authors!  It is very encouraging to see a project that begins in the classroom, goes out into the world of empirical legal scholarship and that can return to the classroom by giving contracts professors new insights into dealmaking.

Gigi Tewari: A TEDx Talk on Financial Independence & Lucy v. Zehmer

Widener University Law's Geeta (Gigi) Tewari presents her personal journey toward financial independence and links it to a favorite contracts case.

 

Delaware Supreme Court Ruminates on Freedom of Contract

What could be more fitting on this Valentine's Day than a love letter from the Delaware Supreme  Court to the doctrine of freedom of contract.  Here is how Justice Traynor begins his opinion in Cantor Fitzgerald, L.P. v. Ainslie:

The courts of this State hold freedom of contract in high—some might say, reverential—regard. Only “a strong showing that dishonoring [a] contract is required to vindicate a public policy interest even stronger than freedom of contract” will induce our courts to ignore unambiguous contractual undertakings.

Justice Traynor then proceeds to the nature of the case.  Plaintiffs, as partners at Cantor Fitzgerald (Cantor), entered into a  partnership agreement, which included a forfeiture-for-competition clause (the Clause).  The Clause bound partners for four years after leaving the partnership.  Pursuant to that clause, Cantor demanded forfeitures from six partners, ranging from under $100,000 to over $5 million.  The Chancery Court applied a test akin to those for covenants not to compete.  By that standard, the Chancery Court found the Clause unreasonable and refused to enforce it.

In keeping with its reverence for freedom of contract, the Supreme Court reversed.  The Delaware Partnership Act, the court noted, is expressly designed “to give maximum effect to the principle of freedom of contract and to the enforceability of partnership agreements.”  These partners went into the agreement with eyes open and enforced it against other departing partners.

The discussion begins with a seven-page summary of the operative provisions of the Limited Partnership agreement.  Basically, if departing partners worked for a competitor, they forfeited the contents of the Capital Accounts that would otherwise be paid out over four years after their departure from the firm.  The departing partners must have thought that the Clause was unenforceable, because when they resigned from Cantor, they notified Cantor that they were taking up employment with a competitor.  

Two findings, one factual/conceptual, one legal, seem to me crucial to the Supreme Court's ruling in favor of Cantor.  First, the contracts at issue here were among partners, not between an employer and an ordinary employee.  Under Delaware law, restrictive covenants with employees are tested for reasonableness, but when it comes to the Clause, the public policy interests are weighed differently, with principles of freedom of contract counseling more deferential treatment to the parties' reciprocal agreement.  Freedom of contract is not absolute.  It is constrained by public policy.  But simply attaching economic penalties to a decision to compete does not offend public policy.  The departing partners are free to compete against Cantor.  Having done so, they forfeit their Capital Accounts.

While there might be situations in which a Delaware court would refuse to enforce a provision like the Clause, notwithstanding freedom of contract, this was not such a case: "[T]he plaintiffs voluntarily entered into the partnership and the Agreement, elected to compete with the partnership upon their departure, and thereby assumed the risk of the forfeiture."

Teaching aside: I use Valley Medical Specialists v. Farber to teach covenants not to compete.  The case similarly involves a departing partner who might well be enforcing the covenant were the stethoscope around another neck.  I like the case because, even if we might not think the equities favor Farber, who presumably went into the agreement with eyes open, public policy disfavors enforcement of a covenant not to compete that stands between a doctor and his patients with specialized needs or between a doctor and potential patients in a region that might lack specialists in the doctor's area.  It's a nice illustration of when judges need to intervene in the interests of public policy even in the absence of legislation or regulation.

Hat tip: Eric Chiapinelli

Tuesday Top Ten - Contracts & Commercial Law Top SSRN Downloads for February 13, 2024

The Tuesday Top Ten returns today after a brief illness-induced hiatus last week. Apologies to any who missed their regular download fixes, but we are back and—as traditional puffery requires me to say—BETTER THAN EVER! Now, let's check the SSRN download charts to see what's happening.

Top Downloads For:

Contracts & Commercial Law eJournal

Recent Top Papers (60 days)

As of: 15 Dec 2023 - 13 Feb 2024

Rank	Paper	Downloads
1.	Decentralised Autonomous Organizations: Targeting the Potential Beyond the Hype Oscar Borgogno and Edoardo D. Martino Bank of Italy and University of Amsterdam - Amsterdam Center for Law & Economics (ACLE)	161
2.	Innovation, Disruption and Consumer Harm in the Buy Now Pay Later Industry: An Empirical Study Lucinda O'Brien, Ian Ramsay and Paul Ali University of Melbourne, Melbourne Law School - University of Melbourne and University of Melbourne - Law School	131
3.	Case Note: Time as Essence and Liquidated Damages Clauses: A Critique of Welspun Specialty v ONGC Badrinath Srinivasan and Seema Yadav Independent and Galgotias University	119
4.	The Predilection for Contract in Governing Digital Networks: Micro-Management’s Face Off with Accountability Lee A. Bygrave Norwegian Research Center for Computers and Law - Law Faculty, University of Oslo	110
5.	On the Scales of Private Law: Nano Contracts Yonathan A. Arbel University of Alabama - School of Law	108
6.	Introduction to The Cambridge Handbook of Private Law and Artificial Intelligence Ernest Lim and Phillip Morgan National University of Singapore (NUS) - Faculty of Law and University of York - York Law School	96
7.	The Homebuyers Conundrum in Real Estate Insolvency Arjya B. Majumdar and Mehreen Garg O.P. Jindal Global University and Insolvency Law Academy	89
8.	The Law of Loyalty: Table of Contents and Chapter 1 Lionel Smith Downing Professor of the Laws of England	72
9.	Speech, Complicity, Scarcity, and Public Accommodation Christopher R. Green University of Mississippi - School of Law	70
10.	The Mass Tort Claimants' Bargain Daniel J. Bussel University of California, Los Angeles (UCLA) - School of Law	70

 

Top Downloads For:

Law & Society: Private Law - Contracts eJournal

Recent Top Papers (60 days)

As of: 15 Dec 2023 - 13 Feb 2024

Rank	Paper	Downloads
1.	The Inequality of Bargaining Power Principle Rebecca Stone University of California, Los Angeles (UCLA) - School of Law	63
2.	Legal strategy for commercial hostage-taking and business exit bans Jack Wroldsen California Polytechnic State University, San Luis Obispo	54
3.	Private Law's Choice of Private Law Andrew S. Gold Brooklyn Law School	45
4.	What's The Use? The Structural Flaw Undermining Warhol v. Goldsmith Peter Karol UNH Franklin Pierce School of Law	32
5.	Smart Contracts in Blockchain Technology: A Critical Review Hamed Taherdoost Hamta Group	31
6.	The CISG: Facilitating International Trade Through Uniform Sales Law Achih Mahamadou Jallo University of Buea	31
7.	Economic Duress in United States Employment Jonathan F. Harris LMU Loyola Law School	28
8.	The Unbearable Narrowness of Undue Influence Hila Keren Southwestern Law School	25
9.	Amici Curiae Brief in Support of Henrietta Lacks Estate [v. Ultragenyx] Caprice L. Roberts and Doug Rendleman Louisiana State University, Baton Rouge - Paul M. Hebert Law Center and Washington and Lee University - School of Law	21
10.	The FAA Should Not Cover Consumer Claims Jeff Sovern University of Maryland Francis King Carey School of Law	20

The Importance of Ordinary Acts of Kindness

Two years ago, I got a prize in my cereal.  I don't have much use for toys, and my daughter was away at college.  I decided I would give the toy to a student as a prize for a successful Socratic exchange.  I don't remember what prompted the award, but I gave it to a student, and she beamed.  As I recall, she attached the trinket to her computer as a badge of honor.  Happy with the exchange, I looked around my office for other small tokens with which I could happily part, and I occasionally gave out prizes to students.  Eventually, I found ways to hold mini review sessions in which everybody got the opportunity to win a prize.  In general, the prizes are random appreciations for successful responses to cold calls.  I don't want to be singling out students for excessive praise.  Once one student gets a prize, they should all get rewarded eventually.  

The exception was that I gave two students cara cara oranges in Sales last year.  One because the student successfully remonstrated with me that there may have been two correct answers to one of my multiple choice questions.  The other was because the student corrected my reading of a UCC section.  I wrote on the peels, "You were right; I was wrong."  And I signed it.  I think one of them said, "I'm showing this to my mom!"  I do want to highlight and reward vigorous advocacy.  On the whole, my students need to practice respectful disagreement with authority figures, starting with me, and hopefully working their way up to zealously advocating for their clients.   

I have neglected the gift-giving tradition this year.  I just haven't gotten my act together to gather the prizes, but a recent exchange with the original award winner persuaded me that I need to revive it.  And I know just the thing.  Last year, we gave students fidget toys around finals, and they were a huge hit.  You can get a big pack of them (left), they are cheap, and students, I have learned, have very particular and individualized preferences when it comes to fidget toys.  I thought everyone would fight over what I thought were the best toys, but everyone has their own itch to scratch, and so the toys found their way into the right hands.  Very few toys went unclaimed.  A few found their way to my desk, and now students have fidget toys to play with which they talk to me.  For some reason, only my Associate Dean tends to my Zen litter box (below right), and that's fine, because she keeps it looking its best.  When we are chatting in my office and I point out that the litter box needs tending. She gets this intense look in her eyes as she surveys and strategizes.  Then she sets to work as we continue our conversation.

I was reminded that I have been remiss about gift-giving because I did a little quiz bowl session with my Sales students and I gave out candy for correct answers.  The topic of gift-giving came up, and I remembered that the one of my Sales students was the student to whom I gave my little cereal trinket.  I asked her if my memory was correct, and she said, "Oh, yeah, I still have it!" (top right)  I told her I remembered it because I was surprised by how happy she was to get the little prize.  She told me (and the class, and she has given me permission to share the story here) that she had been going through a rough patch in law school, and she was not feeling confident about speaking in class.  That little affirmation was just the thing she needed.  It turned out that my small gesture helped my student get over a hump.  It cost me nothing, but it had great value for her.  And that's a reason to keep engaging in ordinary acts of kindness.

When I asked the student for permission to share her story, she reminded me that there was a time that I told her a variation of something that I often tell students whom I suspect are suffering from imposter syndrome.  It is something I say to students regularly, and I always believe it when I say it.  I don't say it if I don't believe it.  Fortunately, we admit very few students to whom I could not deliver a version of the following:

We admitted to you because we think you belong here.  Now you're here, and we still think you belong here.  You are exactly where you ought to be, so don't let a disappointing Socratic exchange or a marked-up legal writing draft make you think otherwise.  Most of your peers  are experiencing the same roller-coaster ride that you are.  And nobody, including me, thinks twice about anything you say in response to Socratic questioning.  Your classmates are too worried about what they are going to say, and I am satisfied so long as you manage to produce words that are arguably responsive to my question.  Keep working at it, and it comes more easily.

I have come to believe that we law professors sometimes take ourselves too seriously, e.g., when we think that a well-placed law review article will be the lever with which we can move the world.  But I have also come to realize that we don't take ourselves seriously enough when it comes to how important it can be to students to receive encouragement and affirmation from us.

The Deadline for Submissions for KCON XVII Approaches!

17th Annual International Conference on Contracts (KCON XVII)
20 June 2024, 8.30 AM - 21 June 2024, 4.30 PM
Clifton Hill House, BS8 1BT
Call for Papers and Abstracts

We cordially invite your submissions for the conference. The conference theme is intentionally broad. Proposals relating to any aspect of contract law are welcome. Presentations at past conferences have included studies from doctrinal, theoretical, empirical, historical, economic, critical, international, comparative, pedagogical and interdisciplinary perspectives. All are welcome once again. We also welcome papers and presentations comparing civil law and common law treatment of contract issues. Papers that focus on a single civil law jurisdiction should be put in a wider context.

Expressions of interest in presenting, along with draft titles and abstracts should be submitted to [email protected]. The deadline to submit an abstract is Thursday 15th Feburary 2024. Proposals submitted earlier will be accepted on a rolling basis. Speakers whose papers are accepted will be expected to present in personand to pay the conference fee of £160.

Conference Lifetime Achievement Award to honour Professor Mindy Chen-Wishart

We are pleased to announce that Professor Mindy Chen-Wishart will receive the conference’s Lifetime Achievement Award at the conference dinner on June 20, 2024. The Award honours individuals whose careers have been spent in legal academia and who have made major contributions to legal education, contract law scholarship, and the practice of commercial law. Professor Chen-Wishart is the fifteenth person to be so honoured.

Mindy Chen-Wishart is a Professor of Law at the National University of Singapore, an Emeritus Professor of the Law of Contract at Oxford University and an Emeritus Fellow in Law at Merton College, Oxford. She was the Dean of the Faculty of Law of the University of Oxford until 30 September 2023. She was formerly a Senior Lecturer at Otago University in New Zealand and Rhodes Research Fellow at St Hilda’s College, Oxford. She is the author of Contract Law (7th ed), an editor of Chitty on Contracts (currently in its 35th ed), and is leading a six-book series on the Contract Laws of Asia published by Oxford University Press. Her article on ‘Legal Transplant and Undue Influence’ was named the best article in the International and Comparative Quarterly in 2013. She has lectured to the Judicial College in the UK, Hong Kong and Taiwan. Over her career, she has taught a wide range of private and public law subjects.

More information is available here.

Bad-Ass Employee Refuses to Sign Arbitration Agreement & Lives to Tell the Tale

Arbitration, in the Style of Edward Gorey
Imagined by Dall-E

Suppose an employer provides notice in its application for employment and its offer letter than employees will be required to sign arbitration agreements in connection with their hiring.  Suppose further that when it comes to sign such arbitration agreement, plaintiff instead signs "No Refused."  That is what Natalie Ragland did.  On that basis,  the District Court denied the motion of her former employer, IEC US Holdings (IEC), to compel arbitration. 

In Ragland v. IEC US Holdings, Inc., the Eleventh Circuit affirmed.  IEC's HR representative testified  that when Ms. Ragland wrote "No Refused" on the signature line of the arbitration agreement, she took it to say "Na Ragland."  That is believable.  The problem for IEC is that Ms. Ragland's scrawled refusal looks nothing like her actual signature (which also looks nothing like her name, to my untrained eye).  Both are reproduced in the opinion.  IEC argues that Ms. Ragland engaged in some deception, seeming to sign the arbitration agreement.  The courts were unmoved.  It was IEC's burden to produce evidence that the parties entered into a valid arbitration agreement, and it could not do so.  It could only truthfully state that its subjective understanding was that Ms. Ragland had signed her name.  But our approach to formation is objective, and objectively speaking, Ms. Ragland had not signed her name.

Ms. Ragland did sign other documents, but those documents did not create an arbitration agreement.  The arbitration agreement itself included a merger and integration clause, and the employment application expressly provided that it was not contract.  The offer letter is signed, but the arbitration agreement also need to be signed in order to be binding, and Ms. Ragland did not sign the arbitration agreement.  Nor did Ms. Ragland accept the arbitration agreement through conduct.  She did not work knowing that she had thereby agreed to arbitration.  She thought that she had refused to so agree to arbitration, and she was right!

This case makes me gleeful because, like Gerard Manley Hopkins (left), I delight in

All things counter, original, spare, strange;

Who knows why Ms. Ragland did not want to be bound by an arbitration agreement.  Who knows why she thinks litigation is the better route for her.  It is sweet to see the duty to read used by an employee to the detriment of her employer and it is especially sweet to see a merger/integration clause used to benefit the non-drafting party.

H/t Tamar Meshel.

Et tu, Trader Joe's?

SpaceX-Man, Image by DALL-E

We posted recently about an attempt by SpaceX (represented at left) to perpetuate its union-busting activities by throwing a hissy fit in a Texas District Court and screaming at the National Labor Relations Board (NLRB) and its administrative law judges (ALJs), "You're not the boss of me!"  Now, we learn, via Josh Eidelson, writing for Bloomberg News, that Trader Joe's has adopted SpaceX's arguments at an NLRB hearing in Connecticut. 

So first, I just can't believe that Trader Joe's is in a labor dispute.  I go to Trader Joe's to shop, sure, but mostly I go to hang out with the young, diverse, tattooed and pierced young people who work there.  The cashiers engage me in conversation.  The people stocking shelves are always happy to help me find stuff and to tell me how much they like the product I'm looking for and to recommend others.  The real happiest place on earth is a Trader Joe's at 8 AM on a Saturday morning.  Nobody is shopping then, so the workers have the store all to themselves, and they are loving it!  The tunes are cranked up, EVERYBODY in the building is wearing tie-dye, and they are working and gabbing, gabbing and working, talking about whatever young people talk about in their dialect that a boomer like me has little chance of following.  They are the happiest work force I have ever seen anywhere outside of Disneyland, but in this case I didn't think the Trader Joe's people were putting on an act.  Now I don't know what to think.  Does the store force them to pierce and color their hair in festive colors not found in nature?  Is that store-issued tie-dye? Are those even real tattoos?  Will I re-visit the childhood trauma of watching Micky Mouse remove his head the next time I visit my local Trader Joe's?

It turns out that Trader Joe's United has organized unions at four Trader Joe's stores.  Its attorney is quoted in Bloomberg as follows: “Customers of Trader Joe’s would have serious problems with a company that has rejected the New Deal.”  You got that right.  Trader Joe's concedes that the NLRB is unlikely to find itself unconstitutional.  The company is just preserving the argument for later proceedings.  Let's hope that the company comes to its senses and drops this nonsense.  It's fine.  I'll just shop at Sprouts.

Delaware Chancery Court Rescinds Elon Musk's $51 Billion Pay Package! TL;DR from Ann Lipton

Over on our sister blog, The Business Law Prof Blog, Ann Lipton (right) provides a handy synopsis of and commentary on Chancellor Kathaleen McCormick's 200-page opinion in Tornetta v. Musk. We are all grateful.

I taught Business Associations for roughly the first decade of my law teaching career.  Some of my early articles were on corporate law, and my very first law review publication as a law professor was on executive compensation.  It appeared in the law review of Professor Lipton's home institution, Tulane, which now seems so appropriate!

We learn from Professor Lipton's synopsis that the Chancery Court applied the "entire fairness" test rather than the business judgment rule to the decision of Tesla's Board to Directors to pay Elon Musk $51 billion.  She suggests that the Delaware Supreme Court might narrow the circumstances in which the fairness test will apply, but even if narrowing occurs, the fairness test will likely still apply to Mr. Musk's situation.  The most Mr. Musk can realistically hope for is a remand for further proceedings, unless he decides to re-incorporate in Texas.  Matthew Bultman, reporting on Bloomberg Law, suggests that litigation in a Delaware court would likely follow should Musk attempt to move Tesla to Texas.  Professor Lipton supplements here original post with thoughts on Texas here.

In my writing, and still today, I would go in the opposite direction from that contemplated in Delaware with respect to total fairness.  I argued that the business judgment rule should never apply to executive compensation schemes.  Board members are always motivated to overcompensate executives.  They are themselves corporate titans, and their compensation is determined by comparison to how other corporate titans are compensated.  As a result, they always have a situational conflict of interest, and they often have a more concrete conflict of interest. 

Fairness analysis should always apply.  What is fair?  My view is that corporate executives, like all workers, are entitled to a living wage.

OCU Law Seeks Executive Director of the Tribal Sovereignty Institute and Professor of Law

I am very excited to announce that my law school is creating a new Tribal Sovereignty Institute.  As Chair of the Faculty Appointments Committee, I get to lead the search.  Applicants with an interest in contracts law are welcome, but then again, so are applicants with other interests in addition to expertise American Indian Law.

OKLAHOMA CITY UNIVERSITY SCHOOL OF LAW (OCU Law) invites applications to fill a tenured or tenure-track 12-month position in American Indian Law.  The successful applicant, in addition to being a faculty member, will also be the inaugural Executive Director of the Oklahoma City University Tribal Sovereignty Institute (the Institute), which will be housed at OCU Law.  We welcome candidates whose approaches in research will add to the scope and depth of our faculty scholarship.

Applicants should have a lengthy history of scholarship in the area of American Indian Law and/or Tribal Law.  The successful applicant will teach classes at OCU Law and produce scholarship commensurate with the expectations for a tenured professor.  The Executive Director will help build a vital new institution serving tribal communities in Oklahoma and throughout the United States.   The Institute will provide support for academic research, teaching and advocacy, education, training, and cultural preservation.  The Executive Director will be expected to share the Institute’s scholarship on a state and national level, support fundraising efforts to expand the Institute’s mission, guide the planning and implementation of the Institute as it grows, supervise future staff additions to the Institute, and oversee existing activities at the University related to Native and Indigenous communities, including the American Indian Wills Clinic, the Sovereignty Symposium, and efforts in language preservation, cultural preservation and economic development.    

The Executive Director will work closely with the Dean of OCU Law, the University President, and other senior leaders in the institution.  The salary for the position will be that of a law professor of appropriate rank, supplemented with the salary associated with the Executive Director.

Candidates should have an excellent academic background, demonstrated ability as a productive and innovative scholar, a strong commitment to the practice of inclusion, and a strong commitment to engaged classroom teaching.  In addition, candidates should have administrative experience, as well as experience in leadership roles and in public outreach, including outreach through communications directed at both the legal community and lay people.  Candidates must have either (1) a J.D. degree from an ABA-accredited law school or (2) the combination of a foreign law degree and either a U.S. LL.M. or S.J.D. degree.

OCU Law is located in downtown Oklahoma City and is deeply engaged with the legal, business, and governmental communities.  Oklahoma City has been named “American’s Most Livable Community” and is consistently ranked among the most affordable and prosperous cities, among the top cities for entrepreneurs and small businesses, and among the best-run large cities.  

Oklahoma City University is an equal opportunity employer and affirms the values and goals of diversity.  We encourage applications from candidates of all backgrounds, particularly members of groups underrepresented in the teaching or practice of law.  For the university’s complete nondiscrimination policy, please see:  https://www.okcu.edu/admin/hr/eeoc.

To apply, please submit a cover letter, curriculum vitae, and job-talk paper to the Chair of the OCU Law Faculty Appointments Committee, Professor Jeremy Telman, [email protected].  Review of applications will begin immediately and continue until the position is filled.