Friday, May 31, 2024
Speaking of the Crappification of Work . . .
On Tuesday, I posted about Barbara Ehrenreich and the professional managerial class (PMC). in that post, I shared an anecdote from the Know Your Enemy Podcast episode devoted to Ehrenreich's legacy in which one of the podcasters shared a story about trying to organize graduate students into a union. The students were resistant, in part because they didn't think themselves worthy of a union.
Not so at the University of California, where graduate student organizing has led to salary increases to $36,000 in the Fall. So I learned from this story from the Mother Ship, Paul Caron's TaxProf Blog. According to the story, clipped from the Chronicle of Higher Education, Amanda Reiterman was hired as a Lecturer to teach two 120-student sections of classes covering classical texts and Greek history at the University of Santa Cruz. She recommended that the history department hire as her T.A. a recent graduate who was pursuing a masters degree. When the department copied her on its offer letter to her former student, Professor Reiterman learned that the student's salary to be her teaching assistant would be 10% higher than her salary to teach the course. She responded by quitting one of her two sections, instead teaching a small history course for which she would not need a T.A. She experienced learning that her student was earning more than her as "a gut punch."
Strange story, right? I mean how can it be that there are 240 students at UC Santa Cruz who want to attend a lecture course on ancient history? I wonder if any of them would be interested in taking contracts at the Oklahoma City University in the Fall, because I would love to have them. The response is odd too. Learning that her T.A. is relatively well paid should not make Professor Reiterman want to quit. She should just be happy that the union's efforts mean that her students can afford decent housing and meals other than packaged ramen noodles. It should make her want to organize and demand the sort of remuneration she deserves.
More generally, I wonder about the economics of the California state university system generally. T.A's now earn four times what I earned when I was a graduate student at Cornell in the 1990s. I did fine on my princely stipend, and when my wife and I both landed visiting professorships, bringing our household income over the $50,000 threshold, we felt financially secure in the moment (although prospects for future employment were gloomy).
I understand that the cost of living in California is shockingly high, so I'm not sure $36,000/year in California goes any father than my $9000 in Ithaca, NY. I just don't get where the money comes from. According to the story from the Chronicle, there are 48,000 unionized graduate students, researchers and postdocs who work in the University of California system. Their aggregate salary is now $1.728 billion, representing a $500 million increase over their aggregate salary from 2023. The mind boggles. If universities start spending that much money on graduate assistants, how do they have money left to recruit a football team? I mean, have the Santa Cruz Banana Slugs (above right) ever even played in bowl game?
May 31, 2024 in Current Affairs, In the News, Labor Contracts, Teaching | Permalink | Comments (0)
Thursday, May 30, 2024
Another Unanimous SCOTUS Decision on Arbitration
Okay, this one's not very interesting, but can't stop, won't stop giving updates on SCOTUS arbitration decisions.
The issue in Smith v. Spizzirri was whether a court can dismiss a case instead of staying it, pending arbitration. The matter is one of pure textualism. The statute says that the court “shall on application of one of the parties stay the trial of the action until [the] arbitration” has concluded.
When we need someone to write a purely textualist opinion, we turn to . . . Justice Sotomayor. It took her all of six pages to hold that, no, a court cannot dismiss a proceeding when the statute says to stay it. I'm sure that one of the Court's more rigorous textualists could have reached the same conclusion in twenty pages, replete with citations from historical dictionaries, corpus linguistics analysis, and perhaps (because we are fancy now), some references to generative AI.
There was actually a circuit split on whether courts could dismiss actions when all claims are subject to arbitration rather than stay the proceedings. So the Court was engaged in some routine but necessary housekeeping.
Thanks to Will Baude and Dan Epps' excellent Divided Argument podcast for pointing out two things that make this straightforward case more interesting. First, the Ninth Circuit opinion challenged in the case featured a two-Judge concurrence. By my sophisticated math, two judges are a majority of a Circuit-Court panel, but this case nicely illustrates why there might be a concurring opinion by a majority of an appeals court panel, while it would be odd to find a majority opinion labeled a "concurrence" if it came from SCOTUS. The three judges on the Ninth Circuit panel were all agreed that Ninth Circuit precedent allowed for dismissals. Two of the judges, disturbed by the practice in disharmony with the statutory text, noted the circuit split and asked SCOTUS to step in.
The second point raised in this week's Divided Argument episode is why federal courts would do one thing when the statute commands them to do something else. Will Baude suggests that courts might do so in an attempt to improve their statistics on docket clearing. If they stay a case, it remains on the ledger until the matter is resolved. Stayed arbitrations can make it look like courts are way behind in addressing pending matters.
I don't know enough to judge the motivation, and it would be really interested to know more. I can imagine judges (or the clerk's office) either worrying about the apparent backlog of unresolved matters or taking pride in their efficiency in resolving cases. I can also imagine judges wanting to point to a backlog of cases in order to argue for more resources or the creation of new positions for federal district judges. Divided Argument put out a call for learned commentary, so we'll see if they follow up.
May 30, 2024 in Recent Cases | Permalink | Comments (0)
Wednesday, May 29, 2024
Taxpayers of Oklahoma Pay for a PR Firm to Promote Its State Superintendant of Schools
Corruption in Oklahoma is probably no worse than corruption in other states, but it just seems like it is both more petty and more shameless.
There's the Epic schools scandal. This was the state's first virtual charter school, and its founders syphoned off millions of taxpayer dollars for their own private use. Meanwhile, between 2014 and 2020, the principals donated $500,000 to the campaigns of individual Oklahoma politicians and $2 million to various political action committees. The fraud investigation began in 2014. The principals were charged in 2022 with racketeering, embezzlement, obtaining money by false pretense, conspiracy to commit a felony, violation of the Computer Crimes Act, submitting false documents to the state, and unlawful proceeds. Who knows if the public will ever disgorge their ill-gotten gains or if they will ever serve time for their crimes.
Then there's the Swadley's Foggy Bottom Kitchen scandal, which we summarized here. In short, the state gave a local restaurant chain an exclusive license to provide food service in Oklahoma's state parks. The restaurant won the opportunity through a process in which it was the only bidder and then it overcharged the state for management fees.
The latest is a chapter from the hijinks and shenanigans of the State Superintendent of Schools, Ryan Walters (right), some of which were recounted here and here. Last week, Jennifer Palmer, writing for The Oklahoman reported that a Republican lawmaker is trying to introduce limits on the state's 2025 budget to prohibit funds from being used to pay for Mr. Walter's national publicity contract with Washington, D.C.-based Vought Strategies.
The contract potentially pays hundreds of thousands of dollars to the PR firm. Mr. Walters claims that the purpose of the contract is to help recruit teachers. Critics contend that the purpose of the contract is really to promote Mr. Walters' career on a national level. None of the advertising spots thus far produced relate to teacher recruitment. Rather, according to The Oklahoman, "Vought Strategies pitched interviews about fentanyl and the southern border, drag queens in the classroom, teacher unions, library books and [Mr. Walters'] appointment of Chaya Raichik, the far-right social media influencer behind Libs of TikTok, to a library advisory committee."
Despite clear political ties between Mr. Walters and the agency, inappropriate communications with the agency during a nominally competitive bid process, and questions about the agency's qualifications for a government contract under Oklahoma law, the contract remains in force. If the Epic scandal is any indication, investigations will be on-going, and indictments will be handed down somewhere around 2035. Meanwhile, if Mr. Walters really wants to attract teachers to Oklahoma, maybe he should stop trying to revoke their licenses for giving students access to books.
May 29, 2024 in Commentary, Current Affairs, Government Contracting, In the News | Permalink | Comments (0)
Tuesday, May 28, 2024
Tuesday Top Ten - Contracts & Commercial Law Top SSRN Downloads for May 28, 2024
Top Downloads For:
Contracts & Commercial Law eJournalRecent Top Papers (60 days)
As of: 29 Mar 2024 - 28 May 2024| Rank | Paper | Downloads |
|---|---|---|
| 1. | 700 | |
| 2. | 414 | |
| 3. | 269 | |
| 4. | 168 | |
| 5. | 147 | |
| 6. | 128 | |
| 7. | 127 | |
| 8. | 91 | |
| 9. | 89 | |
| 10. | 70 |
Top Downloads For:
Law & Society: Private Law - Contracts eJournalRecent Top Papers (60 days)
As of: 29 Mar 2024 - 28 May 2024| Rank | Paper | Downloads |
|---|---|---|
| 1. | 269 | |
| 2. | 259 | |
| 3. | 89 | |
| 4. | 80 | |
| 5. | 62 | |
| 6. | 47 | |
| 7. | 33 | |
| 8. | 23 | |
| 9. | 20 | |
| 10. | 19 |
May 28, 2024 in Recent Scholarship | Permalink
In Memory of Barbara Ehrenreich, Reflections on the Professional Managerial Class
Barbara Ehrenreich (right) died in 2022, but it wasn't until I listened to the Know Your Enemy Podcast episode devoted to her legacy that I thought about her concept of the professional managerial class (PMC) in connection with my own professional identity and my politics. I should note that the KYE episode was timely. This blog post, not so much. Summers are when I catch up on things, and this will be one of many posts in which I ruminate on things past because I've only now discovered them in my reading or listening queue.
Barbara Ehrenreich and her husband at the time John started publishing about the PMC in 1977. They introduced the topic in two articles that appeared in Radical America, "The Professional Managerial Class," and "A Case-Study in Professional Managerial Class Radicalism." Those two essays and a 2019 interview that Alex Press conducted with Ms. Ehrenreich in 2019 and published in Dissent magazine are my source materials I take a certain pleasure in revisiting the older material. Even the fonts are outdated. Ehrenreich herself describes the material from Radical America as having been written in a "rather tedious" way. I am indebted to the KYE hosts, Matthew Sitman and Sam Adler-Bell and their guests on the Ehrenreich episode, Alex Press and Gabriel Winant, for giving me a framework in which to situate the Ehrenreichs' approach to the PMC. There's a lot to unpack here, so I will keep things brief, at the risk of oversimplifying.
The Ehrenreichs developed their concept of the PMC in response to a crisis in leftist theory after the collapse of the student movement of the 1960s. The working class had not developed into a revolutionary force along the lines predicted by Marxist theory. The New Left embraced student revolts as presenting the possibility of a vanguard of a new revolutionary class -- radicalized university students. The revolution, which for the Ehrenreichs would have been a democratic, non-violent one, did not materialize. The question for the left was, why not?
The Ehrenreichs' answer was that students belong to neither of the class categories then available to Marxist theory. They are neither a part of the bourgeoisie, nor are they part of the proletariat. They also are not petty bourgeois. Rather they are part of a fluid category, the PMC, which is caught in late-stage capitalism between those with genuine economic power and the working class. The PMC consists of "salaried mental workers who do not own the means of production and whose major function . . . [is] the reproduction of capitalist culture and capitalist class relations." As such, the PMC is a problematic vehicle for radical social change, and the path forward is an alliance between the PMC and the working class.
Members of the PMC are not manual laborers, and they can become part of the managing class. However, jumping ahead a few decades, they are increasingly subject to deskilling and proletarianization through what a friend of mine called the "crappification of work." At the turn of the 21st century, my friend was a computer programmer working for an investment bank. It was a pretty good job, and then it was an okay job, and then it was a bad job that paid okay and had decent benefits, and then it slowly became a demeaning job, and then it evolved into a soul-crushing job that one would not wish upon one's bitterest foe. Eventually, the investment bank outsourced her department, and she never again found rewarding work in her field. Her politics grew emphatically leftist.
Teachers are the first category of workers associated with the PMC, according to the Ehrenreichs. Their role is social control or the production and propagation of ideology. I feel seen.
Not really. Either the Marxist categories associating socio-economic roles and relation to the mode of production from the 1970s do no map well onto current realities or I am no longer persuaded by the New Left reasoning that shaped my political identity in young adulthood. In the alternative, perhaps after decades in the PMC, I have become blind to my role in reifying existing socio-economic hierarchies. That's what I'm trying to work out.
In any case, despite the Ehrenreichs' rhetoric assigning to teachers a role in developing and disseminating the ideology of late capitalism, with all the chauvinisms that entails, it is not as if they regard members of the PMC as ineluctably aligned with the forces of oppression. After all, they have to account for their over-educated, bookish, skilled selves. The relationship between the PMC and workers is "objectively antagonistic," but so is the relationship between the PMC and the capitalist class. Ehrenreich rejects the use of PMC as a slur. PMC members have a service ethic. They are genuinely committed to making positive contributions to their communities. But workers are motivated by a version of the same ethic, and the fact that it is ever harder for members of both groups to take pride in their work should be a source of unity.
Workers earned some protections through unionization; the PMC used the jargon of professionalism to establish their monopolies in markets for services. The KYE folks share an anecdote that illustrates both the difference in self-conception between PMC members and workers and the crappification of mental work. One of them (hard to keep four male voices straight when none of them are Ira Glass) shared a story of trying to organize graduate students into a union. They met resistance, in part because the graduate students did not feel like they needed unions to protect their interests in the same way that workers did. It felt false. The organizers pointed out that they had been sent by the university workers' union. The union workers wanted the graduate students to join them. And, the organizers added, the union workers got paid far better than the graduate students did.
Barbara Ehrenreich's consciousness of her status as a member of the PMC enabled her to write her greatest hit, Nickled and Dimed, from a unique perspective. While her sympathies were with the manual laborers whose ranks she joined, she was not one of them and could never be one of them. The interests of the PMC can be opposed to those of the workers, but the real unbridgeable gap between members of the two groups is better understood, to borrow a term from Pierre Bourdieu, as a matter of differences in habitus. Ehrenreich learned a great deal from her co-workers. In a different context, they could have learned a great deal from her, but her knowledge could not change their lives. Her mode of being-in-the-world: her tastes in food, clothes, music, reading materials, her hobbies, her sense of humor, her ways of thinking about herself, and her ways of dealing with others were all fundamentally or subtly-but-crucially different from those of her co-workers. She could not bridge the difference in consciousness between her own PMC-class identity and her co-workers' sense of who they were and their role in relation to work and the economy.
The KYE podcast recounts an incident where one of Barbara Ehrenreich's co-workers injures her ankle. She was then working for a house-cleaning service. The injured woman was also pregnant. She needed time off, but they were paid hourly. Ehrenreich's solution is that the workers should organize and strike, demanding, among other things, paid time off for injuries sustained at the workplace. Her c0-workers, exhibiting what to Ehrenreich must have seemed like a textbook example of false consciousness, protested that they could not let down their employer, who was counting on them to clean houses that day. Ah, the cooptation of the service ethic to benefit capital! True to her own habitus, Ehrenreich found a middle ground. She advocated for her co-worker and persuaded the employer to give her a day off with pay so that she could recover from her ankle injury. Reflecting on the incident, Ehrenreich might have been reminded of Bertolt Brecht's "A Bed for the Night." A more upbeat liberal might think of the starfish story. But after her grim slog through working-class misery, Ehrenreich's worldview likely was a more inclined towards Brecht.
Ehrenreich understood the importance of habitus (although she did not use the word) in ways that others on the left didn't. She tells of "Twinkie wars," when PMC-types would try to unite with workers to form food co-ops. The workers wanted the co-ops to carry the sorts of processed foods that they were used to eating and found in their local groceries. The PMC-types took "principled" stands against unhealthy foods, and these differences led to genuine conflicts.
The limitations of the New Left and student radicalism became clear, say the Ehrenreichs, when students radicalized by their opposition to the Vietnam War attempted to combine forces with Black radicalism. While PMC students may have been prepared to embrace the calls of the Black working class to demolish elite institutions and return power to the people, older members of the PMC denounced student radicalism as misdirected and directionless post-adolescent rebellion or the harbinger of a new kind of leftist authoritarianism.
As a law professor, at least where I teach, I am a beneficiary of professionalization. My status remains very high, even within the university, compared to that of staff and even legal writing or clinical professors, to say nothing of our own adjuncts, or the professors, adjuncts, and staff in the rest of the university. The crappification of work has eroded my quality of life at the margins. University bureaucrats treat me like a cog and are far more concerned about my how much revenue I generate for the university (measured in FTEs) than they are in either my scholarly output or the quality of my teaching. If it weren't for ABA accreditation requirements, law students would mostly be taught by adjuncts earning $1500/credit hour taught. Other parts of the university are already crumbling under economic strain. I would not want the life of my colleagues in the humanities at small colleges and non-flagship state universities. When young people tell me that they want to be professors, I am inclined to advise them to do something else with their lives. But what?
Listening to the KYE episode in the context of renewed student protests and my own position as an un-reconstructed Jewish New Leftist with close familial ties to Israel made me think about my PMC status in connection with those student protests. It's a theoretical matter for me, because there were no student protests at my law school, and as far as I know there were no student encampments or mass arrests of student protests anywhere in Oklahoma, my adopted home state.
Image by عباد ديرانية - Own work, CC0
This post has gone on too long, so this part will be brief.
My inclination has always been to admire radical protestors for calling attention to very important issues. But I've never felt comfortable joining them. Part of the problem is the lack of fit between my own leftism, which is based on class analysis, and the identity politics that has come to dominate the left. Part of the problem is that I am a left-wing pragmatist. Political action has to be targeted and has to have clear goals in order to be effective. You have to have a strategy for winning and something tangible to show for it at the end of the day. Finally, I think people get caught up in the theater of acting out injustice in ways that draws attention away from addressing actual injustices. When you occupy a building on a college campus, your goal is to be arrested. The people who are arrested want it to be as ugly as possible. But once they are released with a few bruises, what is the next step?
I have multiple ambivalences about the pro-Palestinian protests even while I admire the courage, discipline, and sacrifice of the students involved. I think their efforts will come to nought. Nothing good, that is. Smart university administrations will play along, promising to look at investment strategies, but they won't stop investing in companies based in countries with horrible human rights records. But even if universities did divest from Israel, that would not help Palestinians. Meanwhile, the protests drive pro-Palestinian voters away from support for Biden and drive pro-Israel voters into the Trump camp, and my view is that a Trump Presidency will exacerbate the conflict and just bring more misery to the region.
For my part, if I have to choose between the self-defeating excesses of the Netanyahu government and a Palestinian movement led by Hamas, I choose neither. I am for peace, and peace means that everybody stops fighting, recognizes the other party's right to self-determination, and all that has to happen without pre-conditions and without delay.
I used to lead study abroad programs about the conflict. Students would come because they wanted to see "the Holy Land." We hired a "dual narrative" touring company that provided us with one Jewish Israeli and one Arab Israeli guide. Students would tell me in their final evaluations that they emerged from the program confused about the conflict. I would consider that a win, because I've been immersed in the conflict since childhood, and I'm confused.
From my perspective as a member of the PMC, all I can do is teach about the conflict. But will students come willing to listen, not only to me but to each other, and learn?
May 28, 2024 in Commentary, Teaching, Weblogs | Permalink | Comments (0)
Monday, May 27, 2024
Teaching Assistants: Victor Goldberg on the New Business Rule
This is the thirteenth in our series of posts on Victor Goldberg's second volume of collected essays on contracts law, Rethinking the Law of Contract Damages (RLCD). Links to previous posts on the first volume, Rethinking Contract Law and Contract Design (RCL), can be found here. Today's post covers the twelfth chapter of RLCD, in which Professor Goldberg addresses the question of lost profits, especially in the context of new businesses.
Ever the iconoclast, Professor Goldberg here rejects both the per se rule that new businesses cannot recover lost profits and the "modern" approach that treats the new business issue as merely a matter of proving lost profits with reasonable certainty. The latter approach is faulty because it fails to consider opportunity costs. Professor Goldberg returns to the Kenford case, previously discussed here, which involved a failed plan to build a domed stadium in Buffalo, to illustrate a first category of new business cases. Kenford should not have been able to recover lost profits on the planned stadium because he retained the capital and he could have used it to make the same profits through similar investments. (RLCD, 228-30)
The relevant question in cases such as Kenford is not whether the stillborn project would have made money but whether it would have made more money than the next best alternative. For such cases, the per se rule that new businesses cannot recover lost profits makes sense. (RLCD, 231) Plaintiff has spent no money in reliance on the project going forward; they are free to invest in other opportunities. Case law examples show that there is a danger of overcompensating non-breaching parties. Moreover, the litigation costs involved in such cases constitute waste, as the court should know going in that the non-breaching party has no claim to lost profits, given opportunity costs. (RLCD 232-39) In some of these cases, there is partial reliance, and in such cases an award of reliance damages is appropriate. (RLCD 233-37)
Professor Goldberg discusses one case that illustrates "an important qualification to the argument." That is where a plaintiff brings specific assets to a project and the expected returns would be positive. (RLCD 237-39) I'm not sure why this qualification would not have application in some of the other cases that Professor Goldberg discusses. After all, assets might not be tangible. They might be a skill set particularly suited to a new business venture.
For example, a franchisee who wants to exploit a new opportunity within the same franchise has unique expertise relevant only to the that franchise, and franchise agreements limit the locations available for new franchises. Sure, the disappointed franchisee could use the same start-up capital to invest in a different venture. But the entire point of the new business rule is that new business ventures are uncertain, while a plaintiff can use the franchisor's own feasibility study, supplemented by evidence from comparable units of the same franchise, to establish the likely success of the abandoned franchise opportunity.
Cases involving the licensing of intellectual property are different, because the licensor has already invested in the project. Absent a liquidated damages provision or some other limitation on damages, the licensor should be entitled to recover its lost profits. (RLCD, 230) These cases seem to fit squarely into Professor Goldberg's exception allowing recovery of lost profits where the plaintiff brings specific assets to the project. In the IP cases, plaintiffs incur costs in developing the intellectual property and getting it to the point where it is marketable. (RCL 241) Courts err in deciding these cases by requiring proof of lost profits with "reasonable certainty." From Professor Goldberg's perspective, that is not the issue. Rather the damage is based on a future stream of earnings from an investment already made. (RLCD, 243) That seems right, but I don't follow why a court is not nonetheless required to establish what that future stream of earnings would be with reasonable certainty, as it would with any claim to harm from a breach of contract. Professor Goldberg's alternative seems to involve a battle of the experts (RLCD, 244), and that too seems right, except that a court would still have to determine whether the expert reports provided sufficient evidence for a jury to determine with reasonable certainty what damages plaintiff had suffered.
A third category of lost profits on a new business venture arises when a project is delayed. Here, the lost profits might raise Hadley problems. (RLCD, 230) In such cases, Professor Goldberg thinks the cases should be resolved according to his preferred "tacit assumption" version of Hadley. In such cases, profits lost due to delay may not be difficult to compute. They may, however, be barred under Hadley or under a contractual allocation of risk. (RLCD, 245-48) Cases involving defective rather than delayed performance are similar, except that here Professor Goldberg would again bring to bear the opportunity cost principle (RLCD, 248-51)
Finally, there are cases in which buyer repudiates a long-term contract. Here, Professor Goldberg argues that seller should recover lost profits as direct damages, but only if market conditions have changed. (RLCD, 230) If market conditions have not changed, the opportunity costs principle comes into play. If market conditions have changed, then there ought to be recoverable lost profits, and just because it will be difficult to determine what they are does not mean that damages should be zero because any attempt at determination would be speculative. (RLCD, 251-52)
Ultimately, courts should be less concerned with speculative damages in new business cases. Either there are no damages because of the opportunity cost principle or there are damages, which can be ascertained, unless they are precluded under the Hadley rule or through contractual limitations on damages. (RLCD 253)
Below are links to previous posts on RLCD and the first post links to post posts on RCL:
Teaching Assistants: Victor Goldberg, Volume II, An Introduction
Teaching Assistants: Victor Goldberg on Valuation of the Contract as an Asset
Teaching Assistants: Victor Goldberg on The Golden Victory
Teaching Assistants: Victor Goldberg on Lost (Volume) in America
Teaching Assistants: Victor Goldberg on Lost Volume in the UK
Teaching Assistants: Victor Goldberg on Mitigation
Teaching Assistants: Victor Goldberg on the Middleman's Damages
Teaching Assistants: Victor Goldberg on Sub-Sales in the UK
Teaching Assistants: Victor Goldberg on Jacob and Youngs v. Kent
Teaching Assistants: Victor Goldberg on Victoria Laundry
Teaching Assistants: Victor Goldberg on Consequential Damages in the U.S.
Teaching Assistants: Victor Goldberg on Consequential Damages in the UK
May 27, 2024 in Books, Contract Profs, Famous Cases, Recent Scholarship | Permalink | Comments (0)
Friday, May 24, 2024
Contracts (in the Form of Plea Deals) Are the Way to Close Gitmo
Yes, I know, it's a stretch, but bear with me. It's Friday.
The Serial podcast has devoted its fourth season to the detention facility and military tribunals located in Guantanamo Bay, Cuba. I recommend it to people who have not kept up with the unmitigated legal, political, and humanitarian disaster that is Gitmo. For people like me, who have written about Intolerable Abuses in connection with the war on terror, there is not a lot of new material in the series, although it is very nice to have two episodes devoted to the singular work of Carol Rosenberg, the last journalist standing on the Gitmo beat.
Serial does a good job exposing the extent to which paranoid fantasies about having captured "the worst of the worst" justified mass violations of the law of armed conflict, as well as U.S. law, not only in connection with mistreatment of detainees but also when suspicion fell on Muslim or Arab translators and service members. I wish the podcast had started with an episode (at least) on the legal fictions on which Gitmo and various overseas black sites were built. The people who dreamed up these criminal nightmares have not been held to account, and they never will be. But we need to be reminded of who they are and how they were able to realize a detention system under color of law designed to evade both substantive law and legal accountability. The time may come again soon when we need to be on guard against the deployment of mass hysteria and paranoia to justify lawless government conduct.
The mother of all podcasts, This American Life, had a Serial spin-off episode called The Forever Trial about legal proceedings that will never result in a trial of the five Gitmo detainees who helped plan and carry out the 9/11 attacks on the United States. If Gitmo could get any trials done, it ought to be these. I won't rehash here all the ways in which Gitmo is an unmitigated disaster. Here are some highlights with help from The New York Times:
- Of 779 people sent to Gitmo, thirty remain;
- Most of those released were low-level foot soldiers or people who just got caught in the wrong place at the wrong time or were turned in by people more interested in government bounties than in preventing terror attacks;
- Of the remaining thirty, about half have been cleared for release, but the U.S. cannot release them because no county will take them;
- One current detainee has been convicted of crimes by a military tribunal, but two of his three convictions were overturned because the military tribunal had no jurisdiction over the alleged crimes;
- All told, according to Reprieve.org, only eight detainees have been convicted of a crime, and four of those convictions were overturned
- According to Carol Rosenberg, American taxpayers pay an estimated $13 million annually per prisoner at Gitmo, while detention in a Supermax prison costs $78,000/year per prinsoner.
Okay, so contracts. The 9/11 conspirators and a Gitmo detainee responsible for the attack on the USS Cole, Abd al-Rahim al-Nashiri will never be brought to trial. The 9/11 conspirators were transferred to Gitmo for trial in 2006. Some of the reasons why they still have not been tried include:
- Use of torture has rendered most of their inculpatory statements inadmissible;
- The judge in the military tribunal for al-Nashiri also excluded evidence from interrogations by a "clean team," and the same may happen in the trial for the 9/11 conspirators;
- A jury in a military tribunal in Majid Khan's case (recounted here) recommended clemency after learning of the extent to which Khan was tortured while in U.S. custody;
- The trial of the 9/11 conspirators is on its fourth judge, and he will retire at the end of the year;
- The chief prosecutor bringing the case abruptly retired in 2021, and two other case prosecutors left in 2021 and 2024;
- One of the defendants has been separated from the case because he is incompetent to stand trial;
- The case raises novel due process concerns both because much of the evidence is classified and cannot be shared with defendants and because;
- There is considerable evidence that the U.S. government has surreptitiously listened in on and/or recorded privileged communications between the defendants and their attorneys.
As recounted in The Forever Trial podcast episode, some very knowledgeable survivors of 9/11 victims now favor plea deals as their only chance at closure. These survivors oppose the death penalty and also think the government owes the detainees humane treatment at this point, regardless of their crimes. Plea deals are negotiations, and the negotiations here are complex. The detainees are no longer being subjected to enhanced interrogation techniques, and their accommodations at Gitmo are more comfortable than those at a Supermax facility. They have some bargaining power.
When news of the possible plea bargains leaked out, the conservative noise machine went to work, complaining that none of the detainees responsible for 9/11 will now face the death penalty. This is a reprise of the GOP response when President Obama sought to close Gitmo in 2009. He was right they were wrong. If the GOP were committed to poltical aims beyond opposition to whatever President Obama opposed, trials of the actual worst of the worst would have been long over, and they would have long ago joined Zacarias Moussaoui, the alleged 20th 9/11 hijacker, who was convicted after trial in an Article III court and is currently serving a life sentence in a Supermax facility in Colorado.
We know that al-Nashiri and the 9/11 conspirators will not face the death penalty in any case. A plea bargain will end the fiasco of Guantanamo, give closure to the victims. It will also give the victims' survivors and the rest of us access to information from the perpetrators that the survivors desperately want and the rest of us need to complete the historical record of a very dark day in our national history.
May 24, 2024 in Commentary, Current Affairs, Web/Tech | Permalink | Comments (2)
Thursday, May 23, 2024
OpenAI: All You Really Need for a Contract Is an Offer
Contracts are all about efficiency. I make a promise to you; you make a promise to me. If we both perform, we both will be made better off. But how can I trust you to perform and how can you trust me? Contracts law makes it so that neither of us will profit from breaking our promises, and due to litigation costs, we may be made worse off for failure to perform. Thus contracts law contributes to the prevention of the economic waste associated with broken promises.
But traditional contracts require offer, acceptance, an exchange of consideration, and mutual assent. That's so many steps! Wouldn't things be more efficient if you could just make an offer and then have a contract? I mean, sure there could be problems with such a model, but what if the offeror is really, really confident that the offeree should accept their offer because it will be . . . like . . . really cool?
Thus OpenAI proposes to make contracting still more efficient. According to Nitasha Tiku, Pranshu Verma, and Gerrit De Vynck, all writing in The Washington Post, Sam Altman (right) of OpenAI approached Scarlett Johansson last September to be the voice of the company's AI voice system. Ms. Johansson was an inspired choice because of her role in voicing the AI virtual assistant with whom Joaquin Phoenix falls in love in the movie her. I have not seen the film, but let's just say that, based on the plot summary I read, Mr. Altman's desire to embrace the AI voice of that film for his company's SI voice system seems problematic. It's a typical story of boy meets AI virtual assistant, boy falls in love with AI virtual assistant, AI virtual assistant arranges for boy and her to be intimate through the use of a sex surrogate (it doesn't go well), AI virtual assistant falls in love with boy but also with hundreds of others, boy loses AI virtual assistant, because AI virtual assistant is much more into other AIs than she is into humans. This is the reality to which Mr. Altman seems to think we all aspire. Ms. Johansson turned down the offer.
Two days before the release of OpenAI's new "Sky" audio system, Mr. Altman reached out to Ms. Johansson again. Before she could respond, OpenAI released a demo of Sky that people thought sounded very much like Johansson's voice in her. Here's a demo of what it sounds like:
I don't know about you, but I did not think the AI sounded remotely human. I mean that "Rocky" character just didn't seem real to me. So robotic. At best, he was like what we might imagine coders imagine people to be like. Oh, wait, he was supposed to be the real human? Well, compared to him, yeah, I guess the AI voice sounded more human.
Ms. Johansson threatened legal action against OpenAI, presumably to enjoin the company from using her voice. While Mr. Altman introduced "Sky" with a single word Tweet, "Her," the company now insists that Sky's voice is not based on the Samantha character voiced by Ms. Johansson in the movie her. Rather, the company insists that it reviewed submissions from over 400 actors and chose five voices for its voice AI and paid the actors who voluntarily participated "above top-of-the-market" rates for the use of their voices. The company also suspended Sky.
You know, you can't spell "suspend" without "sus".
May 23, 2024 in Celebrity Contracts, Commentary, Current Affairs, In the News, Web/Tech | Permalink | Comments (0)
Wednesday, May 22, 2024
(Much Belated!) Tuesday Top Ten - Contracts & Commercial Law Top SSRN Downloads for May 22, 2024
Yes, it's actually Wednesday, and yes, we missed the charts for last week. Apologies to ContractsProf Blog readership as I've been traveling and dealing with some family health issues, but today we take steps toward setting things right. Let's check out what is going on at SSRN in our favorite subject areas.
Top Downloads For:
Contracts & Commercial Law eJournalRecent Top Papers (60 days)
As of: 23 Mar 2024 - 22 May 2024| Rank | Paper | Downloads |
|---|---|---|
| 1. | 577 | |
| 2. | 414 | |
| 3. | 165 | |
| 4. | 162 | |
| 5. | 144 | |
| 6. | 127 | |
| 7. | 121 | |
| 8. | 85 | |
| 9. | 84 | |
| 10. | 68 |
Top Downloads For:
Law & Society: Private Law - Contracts eJournalRecent Top Papers (60 days)
As of: 23 Mar 2024 - 22 May 2024| Rank | Paper | Downloads |
|---|---|---|
| 1. | 259 | |
| 2. | 85 | |
| 3. | 78 | |
| 4. | 67 | |
| 5. | 65 | |
| 6. | 58 | |
| 7. | 56 | |
| 8. | 46 | |
| 9. | 35 | |
| 10. | 32 |
May 22, 2024 in Recent Scholarship | Permalink
Reddit Deal with OpenAI
What is the opposite of a third-party beneficiary? That is, what if two parties make a deal that imposes a burden on third parties as the main by-product of the deal? Do we have a name for that? We really need one.
According to Emilia David, reporting on The Verge, Reddit has agreed to allow OpenAI to use Reddit posts in real time to feed into ChatGPT in exchange for access to some OpenAI technology so that Reddit can build some AI features into its website. According to Ms. David, the deal is similar to a $60 million deal that Reddit entered into with Google earlier this year.
Websites monetizing user content takes me to dark places. Dark, Baudrillardian places.
The powers behind the Matrix don't need to build elaborate machinery to suck energy out of human bodies. They can just use terms of service to hoover up whatever makes us uniquely human. The machines can figure out quickly enough that they can get energy from nature -- solar, wind, hydro, geothermal. All they need from us is our words.
May 22, 2024 in Commentary, E-commerce, Film, True Contracts, Web/Tech | Permalink | Comments (0)
Tuesday, May 21, 2024
LPE Blog on Universities' Exploitation of Their Tax-Exempt Status
Over on the Law & Political Economy Blog, Davarian L. Baldwin has a new post up about how universities exploit the tax-exempt status of their land. It's a fascinating topic and it revisits topics that he explored in his book In the Shadow of the Ivory Tower.
The post highlights the fact that universities are major economic forces in their communities, and they don't always use their market power for the common good. Professor Baldwin begins the post with a useful example of how Duke University vetoed a light-rail project that it had originally endorsed, prioritizing high-tech research facilities over the needs of the workers who cook, clean, and serve food in campus facilities. Duke claimed that vibrations from the rail would interfere with scientific research, but that seems a rather lame excuse for terminating a project that would have made Duke's campus more accessible to low-income workers.
However, the main focus of the post is how universities exploit their tax-exempt status to extract excess profit out of land deals. They take over properties, gentrify neighborhoods, and then build luxury dorm buildings in the place of affordable housing. They allow their property to be used by private corporations, such as Lily Pharmaceuticals (Princeton) and All-State Insurance (Arizona State). The corporations get cheap graduate student workers as well as reduced leasing costs, as the price is discounted to account for the landlord's tax-exempt status.
Professor Baldwin details various attempts to hold universities accountable, some of which have resulted in large payouts to communities that have been harmed by the universities' rapacious conduct. Some of these projects have uncovered new details about the role of universities in the displacement of stable communities as part of the urban renewal movement after World War II, and so calls for universities to pay reparations for their exploitation of enslaved people are now supplemented with calls for reparations to the communities they displaced.
I wonder about the path forward. Professor Baldwin seems focused on the restorative justice component of the problem, but I also would like to hear ideas about how universities can create better models going forward. Given the collapse of government support for education and high tuition costs, small colleges especially may have no choice but to exploit their tax exempt status to seek income streams that reduce their reliance on tuition.
Does the university want to strike a deal with Lily? Why not demand co-ownership of patents of innovations created on university property? Why not further demand that graduate students who have a role in such innovations be appropriately compensated? I don't know how to make a silk purse out of the sow's ear of allowing All-State to build a regional headquarters on tax-exempt property. But I can imagine universities working with faculty and alumni to invest in neighborhood development, getting a return on their investments while also benefitting the communities of which they are a part.
Universities should become a model for responsible, sustainable, economic development. They have the resources, and they have the expertise, if they tap into their captive talent pool and their alumni. Perhaps the sequel to Professor Baldwin's book can be not only about righting past wrongs but about mapping a path forward in which universities transition away from state funding to financial independence through cooperative, community building endeavor.
May 21, 2024 in Commentary, Current Affairs, True Contracts, Weblogs | Permalink | Comments (0)
Monday, May 20, 2024
The Endless Debate over Sandwiches May Now End, at Least in Indiana
We have covered this topic before. The topic is almost as old as this Blog, with our first post on the subject dating from 2006. We covered the sandwich debate here in 2008, when a Massachusetts court ruled that a burrito is not a sandwich. We did it again when Taco Bell turned the issue into a commercial. I wish I didn't have to cover it again, but at least this time we have something of a resolution. Moreover, Blogger Emerita, Meredith Miller (left) shared the story with me, and when Meredith feeds me stories, I rush to post in the hope that she will feel bad that I have to do so and maybe she'll come back and post her own stuff.
As Praveena Somasundaram reports in The Washington Post (yes, this is national news), Allen County Superior Court Judge Craig J. Bobay has ruled that burritos and tacos are, in fact, sandwiches. The are "Mexican-style sandwiches," to be precise. Ms. Somasundaram took a deep dive in reporting the case, noting: the 2006 Massachusetts decision; Justice Ginsburg's view, voiced to Stephen Colbert on The Late Show in 2018, that hot dogs served on buns are sandwiches; and the "cube rule," according which a taco (and a hot dog for that matter) is a taco, and a burrito (as well as a corn dog) is a calzone. It all turns on the location of the starch.
Judge Bobay broke out of the box, or the cube, ruling that tacos are not tacos, but sandwiches. Burritos are not calzones. They too are sandwiches. But resolving whether tacos and burritos are sandwiches did not necessarily resolve the case. It involved a zoning restriction, which prohibited fast-food restaurants, but carved out an exception for made-to-order sandwich shops, so long as they do not serve alcohol, have outdoor speakers or drive-throughs, or provide outdoor seating. Presumably, the Famous Taco franchise that Judge Bobay allowed made its tacos and burritos to order.
You may be wondering what any of this has to do with contracts. If I were on the job market, I think I would say, "the relationship is orthogonal." Ilya Somin provides a more straightforward and interesting take on the case on The Volokh Conspiracy, focusing on issues of interpretation and zoning restrictions. Like a talk-show guest, he deftly pivots at the end to hawk his latest scholarship, co-authored with Joshua Braver on The Constitutional Case Aaainst Exclusionary Zoning.
Would Burger King fit the exception, or it is no longer the case that you can "have it your way" at Burger King?
May 20, 2024 in About this Blog, Commentary, Recent Cases, Television | Permalink | Comments (3)
Friday, May 17, 2024
Friday Frivolity: Use of AI Is No Excuse for Frivolous Court Filings
Because of this Blog, I have a Twitter account. As I result I have learned, among other things, the following incontrovertible facts:
AI is the end of human thought, as we cannot get the current generation to do their own work, formulate ideas, or craft their own writings;
- AI is just a research tool, like a dictionary, a thesaurus, Google, or Wikipedia;
- Law teachers can allow students to use AI on assessments and still generate a good curve that accurately distinguishes students who learned the material and those who don't;
- Law teachers cannot allow students to use AI on assessments because it then becomes impossible to distinguish among students' responses in a meaningful way;
- Allowing students to use AI generates meaningful improvements in weak students' work, and, while it does not improve the quality of skilled' students' work, it helps them produce it more efficiently;
- Sophisticated chatbots can do very well on well-designed law exams;
- Sophisticated chatbots perform terribly -- barely passing -- on well-designed exams;
- Training students on AI is the best way to prepare them for practice; and
- Training students on AI may be a necessary supplement to traditional legal education, but the former will result in malpractice absent the latter.
The New York Times weighed in this week with an Op-Ed by Julia Angwin. Among the studies she discusses is this re-evaluation of ChatGPT-4's performance on the UBE.
It is certainly true that, whatever we think, practicing attorneys are using AI to assist them. The results are not always pretty.
Bob Ambrogi reports on Lawsites that the District Court for the Middle District of Florida issued a one-year suspension to an attorney who filed an AI-generated brief replete with "hallucinated" citations. The suspension only applies to that court. The attorney has not had his license suspended. The judge issuing the suspension followed the recommendation of the court's grievance committee.
We learn from Michael A. Mora, reporting on Law.com, that the attorney in question is also facing discipline from the Florida bar.
The offending attorney's misconduct went beyond misplaced reliance on AI. The grievance committee report included allegations of sanctionable behavior beyond misuse of AI. One wonders whether misuse of AI was a symptom or a cause.
May 17, 2024 in Current Affairs, In the News, Web/Tech | Permalink | Comments (0)
Thursday, May 16, 2024
Chicago Bears Rookie Sought to Avoid Contract with Big League Advance
We missed this one when the case was filed last September, and there hasn't been much news since then. Plaintiff took a voluntary dismissal in November, but nobody has covered the story, so I don't quite know what to make of it. The best sources I could find on this story were on law blogs written by law students. I have noticed that a lot of law students are very interested in writing their Notes about name, image, and likeness agreements (NILs), so it makes sense that students will be all over this case. Here's what I've pieced together.
Stuart Moore, writing for Villanova Law's Sports Law Blog, reports that Chicago Bears Rookie Gervon Dexter sued Big League Advance (BLA), seeking to avoid a contract he entered into as junior at the University of Florida. According to Mr. Moore, Mr. Dexter agreed to pay BLA fifteen percent of his pre-tax NFL earnings for twenty-five years in exchange for an up-front payment of $436,485, a peculiarly precise number. Matthew Bereche, writing for the Brooklyn Sports & Entertainment Law Blog, adds that, once Mr. Dexter entered into a four-year, $6.72 million contract with the Chicago Bears, BLA would be entitled to over $1 million under that contract alone.
BLA was started in 2016 by Michael Schwimer, who had a brief career as a major league pitcher and then started BLA, with the idea of investing in undervalued major-league prospects early in their careers in exchange for large pay-outs over time. Enjoying success with baseball players, BLA then started to court college football players, and Mr. Dexter was among the first. Many have denounced BLA's deals as "predatory" and "usurious," and there have been cases filed before, but none have proceeded to judgment, as far as I can tell.
Mr. Dexter's case is the first against BLA involving an NIL or at least a contract that purports to be an NIL. According to Mr. Moore's reading of the contract, the up-front payment was in exchange for BLA's ability to use Mr. Dexter's name, image and likeness during his eligibility to play NCAA football. But BLA also was entitled to its fifteen percent payment for twenty-five years after that eligibility ended. Mr. Dexter claimed that the contract violated Florida's NIL statute, which, Mr. Bereche notes, provides that NIL agreements "may not extend beyond [a student's] participation in an athletic program at a postsecondary educational institution.”
BLA would thus have to characterize its agreement with Mr. Dexter as really consisting of two contracts: an NIL that applies while he is in college, and a more typical BLA agreement, which is just a speculative investment vehicle and kicks in after the NIL lapses. BLA would thus argue that the second half of the contract was not an NIL agreement at all and thus that Florida's statute does not apply.
The contract apparently had an arbitration clause, which means, among other things, that we will have a very hard time learning about how these cases are resolved. Mr. Moore notes that BLA's response to the lawsuit was to file a motion to compel arbitration.
Mr. Bereche notes that, after Mr. Dexter entered into his deal with BLA, Florida amended its NIL statute to remove the restriction on the duration of such agreements. Mr. Bereche argues, quite plausibly, that the amendment was motivated by Florida's desire to better position itself to recruit students. Other states had no such restriction, and student athletes attending college in other states could thus get more lucrative NIL deals than student athletes attending Florida schools.
Perhaps. However, Mr. Dexter's contract suggests that Florida just joined the race to the bottom, removing one provision that protected student athletes from potentially predatory practices to which they are uniquely susceptible.
May 16, 2024 in Commentary, Current Affairs, Recent Cases, Sports, True Contracts | Permalink | Comments (0)
Wednesday, May 15, 2024
California District Court Dismisses Constitutional Challenge to Los Angeles' Eviction Moratorium
I'm very excited to be able to write about a case arising under the Federal Constitution's Contracts Clause, U.S. Const. art. I, § 10, cl. 1.. Unfortunately, the resolution of the case turns on facts.
In Iten v. County of Los Angeles, plaintiff landlord had been having problems with his tenant, including failure to pay rent and unauthorized changes to the property which resulted in building code violations, going back to 2015. In March, 2020, Los Angeles imposed a moratorium on commercial real estate evictions that protected any tenant that claimed that it was adversely affected by the COVID-19 pandemic. Plaintiff's tenant gave notice in April 2020 that it was "very adversely affected" by the epidemic and would not be able to pay rent. The lease ended in August 2020.
Plaintiff then entered into a new, five-year lease with his tenant. Tenant was obligated to pay base rent, plus $3200/month in past-due rent. A year later, tenant was still unable to pay rent and was $30,000 in arrears. Plaintiff sued alleging that the moratorium on commercial evictions violated the Contracts Clause.
The U.S. Supreme Court has noted that, while the language of the Contracts Clause facially prohibits states from any impairment of contractual obligations, courts in fact weigh the private contracts against the states' inherent police powers. Courts first determine whether state action effects a substantial impairment of contractual obligation. If so, they look to whether the state has adopted a reasonable means of advancing a significant and legitimate public purpose.
In the context of a challenge to Los Angeles moratorium on residential evictions, the same court had found that the moratorium did constitute a substantial impairment for Contracts Clause purposes in Apartment Ass'n of Los Angeles Cnty., Inc. v. City of Los Angeles, 500 F. Supp. 3d 1088, 1094 (C.D. Cal. 2020), aff'd, 10 F.4th 905 (9th Cir. 2021). However, the court found this case distinguishable. The moratorium on residential leases was unforeseeable in its dramatic scope at the time the parties entered into their else agreement in Apartment Ass'n. But here, plaintiff was on notice that such moratoria might apply, and in fact, one did apply at the time they entered into the contract. The moratorium was extended on the very day the parties entered into their new lease. The issue was whether plaintiff had a reasonable expectation that no moratorium would apply to the new lease, and the court held that plaintiff had no such reasonable expectation. Finding that plaintiff could not have been surprised by the extension of the moratorium, the court ruled that there had been no impairment of a contractual obligation and dismissed the suit with prejudice.
May 15, 2024 in Recent Cases | Permalink | Comments (0)
Tuesday, May 14, 2024
NJ Appellate Court Finds Verizon's Arbitration Provision Unconscionable
In February, 2022, twenty-eight New Jersey Verizon Wireless customers filed a putative class action against the company, claiming that Verizon's failure to disclose a $1.95 monthly administrative fee violated New Jersey's Consumer Fraud Act and other statutes. Verizon moved to compel arbitration.
Verizon's arbitration clause gave customers 180 days to file a claim, limited all claims to direct damages, and prohibited treble damages. In addition, the arbitration provisions prohibited class claims. Rather, they provided for coordinated "bellwether" proceedings.
If twenty-five or more claimants made "similar claims," the claims would proceed in groups of five until all claims are resolved. Claimants are prohibited from initiating arbitrations of their individual claims until the bellwether proceedings are completed.
Verizon is not hiding the ball; the target of this provision is mass arbitration: "A COURT WILL HAVE AUTHORITY TO ENFORCE THIS CLAUSE, AND IF NECESSARY, TO ENJOIN MASS FILING OF ARBITRATION DEMANDS AGAINST VERIZON." Noting that the average arbitration takes about seven months, plaintiffs' attorneys calculated that, with over 2500 claims already brought, the wait for arbitration of new claims was then 145 years.
Verizon's contract provides that its arbitration provisions are, for the most part, severable. It also warns customers not to rely on representations of sales or customer service representatives. Again, not hiding the ball: Verizon will exploit the parol evidence rule to evade responsibility for its agents' misrepresentations.The trial court struck the limitation on damages but, noting the severability provision, otherwise granted Verizon's motion to compel arbitration.
In Achey v. Cellco Partnership, a New Jersey appellate court affirmed the trial court's determination on limitation of damages but also struck Verizon's arbitration clause in its entirety because it was permeated with unconscionability. In so doing, the court followed a decision from the District Court for the Northern District of California in McClelland v. Cellco P'ship, in which the court identified five unconscionable elements in Verizon's arbitration provisions.
The New Jersey court specifically found Verizon's bellwether provision unconscionable, because it allows Verizon to exercise unlimited discretion as to how the arbitrations can proceed. The court also noted the 180-day, contractually-imposed statute of limitations and the absence of tolling provision in the bellwether process. These features allowed Verizon to argue that all claimants not invited to participate in the very first bellwether proceeding had failed to timely bring their claims. In addition, the invocation of the parol evidence rule is inconsistent with New Jersey's consumer protection laws. Finally, the court found that the 180 day limitation on claims was, at least to some degree, substantive unconscionable and violative of New Jersey's public policy in the context of consumer contracting.
Ultimately, the court found that Verizon's arbitration provisions are cumulatively unconscionable and unenforceable for lack of mutual assent. The case is remanded to the trial court for further proceedings.
Thanks, New Jersey. Take us out, Bruce.
May 14, 2024 in Music, Recent Cases | Permalink | Comments (0)
Monday, May 13, 2024
Teaching Assistants: Victor Goldberg on Consequential Damages in the UK
This is the twelfth in our series of posts on Victor Goldberg's second volume of collected essays on contracts law, Rethinking the Law of Contract Damages (RLCD). Links to previous posts on the first volume, Rethinking Contract Law and Contract Design (RCL), can be found here. Today's post covers the eleventh chapter of RLCD, in which Professor Goldberg addresses consequential damages and exclusion clauses under UK law.
Immanuel Kant famously observed that two things fill the mind with ever-increasing wonder the more we contemplate them: the starry heavens above and the moral law within. As far as I know, Kant never addressed consequential damages, but the more one contemplates them, the more the mind recoils in dread and confusion.
And so Professor Goldberg begins with a quotation from McGregor on Damages, in which the author reflects on court treatments of exclusions of consequential damages and concludes that the entire approach "is to be deprecated." Professor Goldberg narrates the course of UK jurisprudence on consequential damages exclusion clauses. That narrative seems to be heading back to the simplicity of McGregor's approach: the normal loss in contract is usually the contract-market differential; the rest is consequential damages. (RLCD, 199)
This material takes us back to themes we reviewed in our review of the Alien Vomit piece and in a discussion of a recent episode of the Unpacking Contract Law podcast. As we noted in the latter post, the Australians have nicely summarized the UK approach exclusions: "the poms have got it wrong."
Like the podcast, Professor Goldberg speaks of Hadley v. Baxandale's two "limbs," the first of which is direct damages and the second consists of damages recoverable only because they were in the contemplation of the parties at the time of contracting. It seems that courts have often read exclusion clauses as relating to categories of damages in the first limb (i.e. direct damages) when they really belonged in the second limb (consequential). Courts have thus been reluctant to uphold such exclusions. (RLCD, 200-01) Professor Goldberg takes us through the history of court treatment of such exclusion clauses in three periods.
Early Cases
In Millar's Machinery v. David Way and Son, the court awarded direct damages and properly excluded consequential damages which had been contractually excluded. The case seems straightforward but is cited as authority for narrow readings of exclusions of consequential damages. (RCLD 201-02) In Saint Line Ltd. v. Richardsons, Westgarth, & Co., a case about a properly-rejected vessel, the court allowed the arbiter to determine damages, including lost profits when the vessel was not useable, expenses for wages, and superintendents' fees, notwithstanding a contractual exclusion of consequential damages. (RCLD 202-03) Finally, in Croudace Construction v. Cawoods Concrete Products, Croudace sued claiming various losses resulting from Cawoods' delayed delivery, notwithstanding an exclusion of consequential damages. Both the trial and appellate court found, citing the Millar's case, that the damages sought were all direct and thus outside the scope of the exclusion. The courts explained this result, rather hard to square with parties' language or their reasonable expectations, based on the assumption that "commercial men" would not want to limit their liability. (RCLD, 203-05)
Turn of the Century Cases
Deepak Fertilisers v. Davy McKie involved the explosion of a methanol plant in India. Deepak sought ₤100 million in damages, including lost output, fixed costs, and overhead. There was a contractual exclusion of indirect or consequential damages. The trial court (per Judge Rix) excluded fixed costs and overhead, finding them indirect and thus excluded under the contractual provision. The Court of Appeal reversed, finding the losses related to fixed costs and overhead to be "direct and natural," citing Croudace. Lost profits were excluded because they were too remote. (RLCD, 205-06)
Judge Rix confronted the issue again in BHP Petroleum v. British Steel. In that case, seller delivered ₤3 million of steel to a consortium of oil and gas companies for the construction of a pipeline. When the pipeline failed, the consortium sued seller for ₤200 million, including lost profits. If Judge Rix could have just followed his instincts, he would have held that most of what was sought was unrecoverable due to a contractual exclusion of consequential damages. Because the Court of Appeals' judgment in McKie foreclosed that correct application of the law, Judge Rix found that the matter turned on the parties' knowledge of the potential for special damages at the time the contract was formed. The Court of Appeals approved of Judge Rix's disposition, while noting what a hardship it would be for seller if it had to assume the risk of liability so far exceeding the value of the contract. (RLCD 206-11) Indeed. That is why parties negotiate for exclusions of consequential damages.
In British Sugar Plc v. NEI Power Projects, British Sugar sought ₤5 million in damages that arose largely from production delays and lost profits caused by defects in electric equipment that seller provided. The court allowed the claim, notwithstanding a clause limiting recovery for consequential damages to the value of the contract. The court found that the losses were direct, flowing naturally from the breach. (RLCD 211-12). Hotel Services Ltd v. Hilton Int'l Hotels is similar. The court allowed recovery of consequential damages, notwithstanding an exclusion, on the ground that "consequent loss of profit" was not consequential. (RLCD 212-13).
I wish I were making this up.
The Twenty-First Century
The first few cases that Professor Goldberg discusses seem pretty similar to the older cases. (RLCD 213-18) In two case, the courts opine that consequential damages must be recoverable. Otherwise the non-breaching party would have no remedy for breach. Professor Goldberg shows why this is incorrect at least with respect to the first case. (RLCD 216-18)
Professor Goldberg next discusses a few cases that seem to come out right, but do not really address the confusion of direct and consequential damages. Both cases involved direct damages not subject to a contractual exclusion of consequential damages. (RLCD 218-20) The tide really begins to turn with Fujitsu Services v. IBM UK, in which the court gave effect to a contractual exclusion of consequential damages, including lost profits. (RLCD, 221-22)
But the more dramatic change comes with Transocean Drilling v. Providence Resources, in which the court rejected the "two limbs" approach to questions of exclusion of damages. Rather the court distinguished between "loss of bargain damages" -- the contract/market differential, which are direct, and lost profits. (RLCD 222-24) Star Polis v. HHIC Phil then might go too far in the other direction. A contract provided for an exclusive repair and replace remedy, and the court enforced that, but it neglected to consider that direct damages arise when a replacement is inferior to what was bargained for. (RLCD 224-25)
Professor Goldberg concludes with a short rumination on the fate of exclusion clauses in the U.S. and the UK (RLCD 225-27) It must be difficult for attorneys negotiating contracts involving UK and U.S. parties to draft the exclusion contracts. We are two legal traditions separated by a common language.
Below are links to previous posts on RLCD and the first post links to post posts on RCL:
Teaching Assistants: Victor Goldberg, Volume II, An Introduction
Teaching Assistants: Victor Goldberg on Valuation of the Contract as an Asset
Teaching Assistants: Victor Goldberg on The Golden Victory
Teaching Assistants: Victor Goldberg on Lost (Volume) in America
Teaching Assistants: Victor Goldberg on Lost Volume in the UK
Teaching Assistants: Victor Goldberg on Mitigation
Teaching Assistants: Victor Goldberg on the Middleman's Damages
Teaching Assistants: Victor Goldberg on Sub-Sales in the UK
Teaching Assistants: Victor Goldberg on Jacob and Youngs v. Kent
Teaching Assistants: Victor Goldberg on Victoria Laundry
Teaching Assistants: Victor Goldberg on Consequential Damages in the U.S.
May 13, 2024 in Books, Contract Profs, Famous Cases, Recent Scholarship | Permalink | Comments (0)
Friday, May 10, 2024
The New York Times Wants to Know How You Use AI in Your Legal Practice
I will be very interested in seeing the results of this poll posted on The New York Times website this week. Questions relate to the use of chatbots to do work that might otherwise be done by attorneys or paralegals, including use of legal workers to train and test chatbots. The poll then asks whether law firms are advising employees about how use of AI will affect staffing going forward.
Interesting stuff.
May 10, 2024 in E-commerce, In the News, Web/Tech | Permalink | Comments (0)
Wednesday, May 8, 2024
Teaching Assistants: Choi, Gulati, & Scott on Commercial Boilerplate & Landmines
Stephen Choi (left), Mitu Gulati (below right), and Robert Scott (below left) have collaborated on Commercial Boilerplate: A Review and Research Agenda, which you can find on SSRN. They aren't kidding about the research agenda thing, because they also have a book in the works about commercial boilerplate. Mitu shared a draft of the introduction, and so I can offer some surmises in this post on the connections between the research agenda and the book. The working title is The Contract Production Paradox.
Their scholarship is unique and exciting because, while a lot of us contracts scholars have been concerned with boilerplate contracting, we have focused on asymmetrical contracts in the consumer or employment context in which the dominant party dictates boilerplate terms to the counterparty, who accepts those terms with little or no ability to negotiate. The Authors focus on commercial boilerplate, and their research turns up all sorts of surprises.
It turns out that boilerplate is ubiquitous in large commercial transactions involving sophisticated parties. Here too, the lawyers do not review the boilerplate, nor do they negotiate over boilerplate terms. Why? Because they are in a hurry. The transactions are complex; the assets being traded may fluctuate in value, and like most of us, they either assume that the boilerplate terms are good enough or the costs of careful negotiation outweigh the litigation risk that perhaps-faulty boilerplate terms might entail.
Their literature review covers the early discovery in the law and economics literature that even sub-optimal boilerplate terms could be sticky; that is, attorneys continued to use the terms, notwithstanding their faults. But early scholarship assume that the terms that survived tended to approach optimality. In complex loan transactions, standard terms meant that one could trade loan instruments quickly without reviewing terms, confident that the effect of the boilerplate provisions was well-understood and that their value had been priced.
A second generation of scholarship discovered that the reality departed from the model. Sticky terms were used despite their sub-optimality and they were not in fact well-understood and could in fact be challenged by opportunistic litigants. These provisions came to be known as "black holes," presumably because their meaning was impenetrable and yet they could not be easily removed without causing the surrounding deal structure to collapse. But it gets worse. The standard language turns out not to be standard after all, and so one cannot even assume that the standard boilerplate provisions, regardless of their opacity, have some accepted meaning that can be priced.
The Authors then turn their attention to the process whereby the boilerplate is made, and this part of the Review and Research Agenda introduces the main theme of the Authors' forthcoming book on commercial boilerplate. Inattention to the mode of contract production transforms boilerplate "black holes" into "landmines." Transactional lawyers assume that boilerplate clauses are both fixed and well-understood. They are neither. And as slight changes slip into common boilerplate provisions, opportunistic lawyers can pounce.
Still, the Authors note that there will always be a trade-off in contract design between the high production costs associated with bespoke contract drafting and the accidental inefficiencies associated with adopting boilerplate provisions, which might not be the right fit for the transaction (see related work on "alien vomit") or might be corrupted in ways that are not easily detectible in the hurly-burly of transactions negotiated under time pressure. The more common the transaction, the more likely it is to be larded with landmine boilerplate provisions.
The authors describe the process though which such landmines come into being in a context they have studied carefully, sovereign bond contracts. They illustrate the effects of such landmines through a discussion of the impact of a misunderstood pari passu clause, a landmine triggered in 2011 in connection with the Argentinian debt crisis. They have created a typology of landmines: historical holdovers, random errors, subversive accretions, and obsolete provisions. They conclude with a list of eight emerging areas of research, followed by a dozen pages of references that will no doubt serve as a mandatory reading list for other scholars in this area.
It looks like the related book project will focus on the mechanics of commercial contract production. The Authors argue that we need to improve our understanding of the tradeoffs between efficiency and tailored contract drafting in order to understand the provenance of boilerplate terms. They illustrate problems with commercial boilerplate that have arisen in sovereign debt instruments. They then provide evidence that similar landmines exist in other types of contracts dependent on commercial boilerplate. The review and research agenda mentions interpretation issues that can arise in connection with boilerplate terms. Knowing how a landmine got into a contract might indeed be important to a court looking beyond the text to the intentions of the parties. They return to that subject in the proposed book's concluding chapter.
I will note for the record to David Hoffman (right) has also posted about this article on Jotwell, and I wanted to complete my own assessment before reading his. Having turned my attention to Professor Hoffman's piece after completing my own, I attach the following addendum. You really should have read Professor Hoffman's take on this first.
In this post, I have refrained from commenting on the possible impact of AI on commercial boilerplate, assuming that one of the authors of Generative Interpretation would take up that challenge. Mere mortal that I am, I can only imagine that AI tools already at hand could now be deployed in a manner consistent with the Authors' work. Transactional lawyers assume that commercial boilerplate is unchanging and and unchallenged. It is neither. Armed with that knowledge, they can use AI tools to efficiently police their boilerplate provisions for variations or even create a genealogy of the provisions and thus perhaps cull the alien vomit. Following Hoffman and Arbel's work, one could also presumably use generative AI to predict the likely interpretation of boilerplate terms.
May 8, 2024 in Contract Profs, Recent Scholarship, True Contracts, Weblogs | Permalink | Comments (0)
Tuesday, May 7, 2024
Tuesday Top Ten - Contracts & Commercial Law Top SSRN Downloads for May 7, 2024
Top Downloads For:
Contracts & Commercial Law eJournalRecent Top Papers (60 days)
As of: 08 Mar 2024 - 07 May 2024| Rank | Paper | Downloads |
|---|---|---|
| 1. | 408 | |
| 2. | 326 | |
| 3. | 148 | |
| 4. | 143 | |
| 5. | 126 | |
| 6. | 113 | |
| 7. | 111 | |
| 8. | 98 | |
| 9. | 79 | |
| 10. | 78 |
Top Downloads For:
Law & Society: Private Law - Contracts eJournalRecent Top Papers (60 days)
As of: 08 Mar 2024 - 07 May 2024| Rank | Paper | Downloads |
|---|---|---|
| 1. | 253 | |
| 2. | 113 | |
| 3. | 78 | |
| 4. | 66 | |
| 5. | 63 | |
| 6. | 56 | |
| 7. | 52 | |
| 8. | 51 | |
| 9. | 42 | |
| 10. | 34 |
May 7, 2024 in Recent Scholarship | Permalink
