ContractsProf Blog

Putting Our Computing Might to Good Work: Does AI Think a Burrito Is a Sandwich?

Tracy L. M. Norton, Associate Professor of Professional Practice at Louisiana State University's Paul M. Herbert Law Center, has run a very useful and up-to-the-moment comparison of the leading generative AI products. Given our continuing coverage of the burrito controversy, and our recent Contracts Stuff Vlog on using generative AI in teaching, this seems like content we ought to share.

Here are her findings, which are not intended as an endorsement of any product:

Comparing Different Generative AI Models

The world of generative AI gets more crowded with each passing season as existing models upgrade and new models enter the chat. This document is a quick comparison of how some popular models respond to the same prompt. It's not a deep technical analysis, just a fun way to see how they stack up against each other as of September 15, 2024.

For this experiment, we're looking at:

1. ChatGPT-4 (one of the most effective models even 6 months ago)
2. ChatGPT-4o (one of the most effective models until a few days ago)
3. Chat GPT-o1 and ChatGPT-o1 mini (OpenAI's newest models)
4. Claude 3.5 Sonnet (generally agreed to have better reasoning than ChatGPT-4o
5. Perplexity AI (integrates web searching)

To keep things simple and fair, we're using a single prompt for all models, and all responses were cut-and-paste with minimal additional formatting. 'Is a burrito a sandwich?

Read through to the end to see what adding integrated web searching does for the answers Perplexity gives.

ChatGPT-4

Image by DALL-E

A burrito isn't typically considered a sandwich. While both are portable meals that include fillings encased in a bread product, there are key differences:

1. Bread Type: Sandwiches use two slices of bread or a split roll, whereas a burrito uses a single, soft flour tortilla that's wrapped and enclosed.
2. Cultural Origins: Sandwiches have a broad and varied origin story, often linked back to Europe, while burritos are a traditional part of Mexican cuisine.
3. Preparation and Presentation: Sandwiches are generally open on the sides and can be customized with a variety of toppings visible from the outside. In contrast, burritos are fully enclosed with the ingredients not visible.

These distinctions generally keep burritos out of the sandwich category in culinary and cultural discussions.

Image by DALL-E

ChatGPT-4o

No, a burrito is not a sandwich. A burrito involves a tortilla wrapped around its fillings, while a sandwich typically consists of ingredients placed between two slices of bread or inside a split roll. Cultural, structural, and culinary distinctions keep them as separate categories of food.

ChatGPT-o1

The classification of a burrito as a sandwich is a subject of debate that touches on culinary definitions, legal interpretations, and cultural perceptions.

Definitions:

• Sandwich: Traditionally, a sandwich consists of ingredients like meat, cheese, or vegetables placed between two slices of bread or within a split roll or bun.
• Burrito: A burrito is a dish from Mexican cuisine that involves wrapping a flour tortilla around fillings such as beans, rice, meat, and cheese, fully enclosing the contents.

Arguments That a Burrito Is Not a Sandwich:

1. Structural Differences:
• Enclosure: Burritos are fully enclosed by the tortilla, whereas sandwiches are typically open on the sides.
• Bread vs. Tortilla: Sandwiches use leavened bread, while burritos use unleavened flatbread (tortilla).
2. Cultural and Culinary Distinctions:
• Burritos are part of Mexican cuisine and have distinct preparation methods and flavor profiles compared to sandwiches.
• The eating experience and customary accompaniments differ significantly.
3. Legal Precedents:
• In a 2006 Massachusetts court case, White City Shopping Center, LP v. PR Restaurants, LLC, a judge ruled that burritos are not sandwiches in a dispute over a non-compete clause in a lease agreement.

Arguments That a Burrito Could Be Considered a Sandwich:

1. Broad Definitions:
• Some definitions of a sandwich include any food where ingredients are "sandwiched" between or wrapped in bread or a bread-like substance.
• For tax or regulatory purposes, some jurisdictions categorize burritos along with sandwiches.
2. Functional Similarities:
• Both are handheld foods that can contain similar types of fillings like meats and vegetables.

Conclusion:

While a burrito shares some similarities with a sandwich—such as containing fillings and being handheld—the differences in ingredients, preparation, and cultural origins generally place it in a separate category. Most culinary experts and legal interpretations maintain that a burrito is not a sandwich. So, in common usage and culinary contexts, a burrito is considered its own distinct type of food.

Image by DALL-E

ChatGPT-01 mini

The question of whether a burrito qualifies as a sandwich is an interesting one that touches on definitions, cultural perspectives, and culinary classifications. Here's a comprehensive look at the topic:

Definitions

• Sandwich: Traditionally, a sandwich consists of one or more fillings (such as meat, cheese, vegetables) placed between two slices of bread, a split roll, or within a bun.
• Burrito: A burrito is a Mexican dish that involves a flour tortilla wrapped or folded around a variety of fillings, which can include beans, rice, meat, cheese, and vegetables. The tortilla is typically fully enclosed around the fillings.

Arguments Against a Burrito Being a Sandwich

1. Structural Differences:
• Enclosure: Burritos are usually fully wrapped and sealed, whereas sandwiches are generally open on the sides.
• Type of Bread: Burritos use flour tortillas, which are unleavened flatbreads, while sandwiches typically use leavened bread.
2. Cultural and Culinary Distinctions:
• Cuisine Origin: Burritos are a staple of Mexican cuisine with specific preparation methods and flavor profiles that distinguish them from sandwiches.
• Eating Experience: The way burritos are consumed and the typical accompaniments (like salsa, guacamole, or sour cream) differ from those of sandwiches.
3. Legal Precedents:
• In certain legal contexts, such as the 2006 Massachusetts court case White City Shopping Center, LP v. PR Restaurants, LLC, burritos were not classified as sandwiches, highlighting distinctions in business and regulatory settings.

Arguments That a Burrito Could Be Considered a Sandwich

1. Broad Definitions:
• Some definitions of a sandwich include any food where fillings are enclosed within some form of bread or bread-like substance, which could technically encompass burritos.
2. Functional Similarities:
• Both sandwiches and burritos are handheld, portable meals that contain various fillings, making them functionally similar as convenient food options.

Conclusion

While there are superficial similarities between burritos and sandwiches—such as containing fillings and being handheld—the differences in their structural composition, cultural origins, and culinary contexts generally place them in separate categories. Most culinary experts, cultural perspectives, and legal interpretations treat burritos as distinct from sandwiches. Therefore, in common usage and culinary contexts, a burrito is not considered a sandwich.

However, it's worth noting that definitions can vary, and in casual conversations or certain regulatory frameworks, the classification might differ. Ultimately, whether a burrito is labeled a sandwich can depend on the criteria and context being considered.

Claude 3.5 Sonnet

Image by DALL-E

This is a contentious question without a clear consensus. There are arguments on both sides:

Arguments for a burrito being a sandwich:

• It consists of fillings between or wrapped in bread/grain-based exterior
• Shares similarities with other wrapped sandwiches like gyros or wraps

Arguments against:

• Burritos use a single tortilla rather than separate pieces of bread
• Culturally and culinarily distinct from what's typically considered a sandwich

Ultimately, it depends on how strictly one defines "sandwich." Many food experts and culinary associations don't classify burritos as sandwiches, but there's room for debate. What's your view on this?

Thanks, Professor Norton!

Beating Cubs' Arbitration Clause Is Easier in Illinois than Tennessee

Yesterday, we covered a journalist's defeat of the Chicago Cubs' attempt to compel arbitration of his negligence claims. The Illinois court found, as it had found in the 2021 case, Zuniga v. Major League Baseball, that the Cubs did not put people on notice of arbitration terms by referencing their website, which links to an arbitration agreement, on the back of tickets or press credentials.

A Tennessee court reached the opposite conclusion based on very similar facts involving the Cubs' Double-A affiliate, the Tennessee Smokies. Deborah Roberts attended a Smokies game on April 22, 2022 and sat in the front row near the third-base dugout. She was hit by a foul ball and injured, requiring a three-day hospitalization and further treatment. Her husband immediately met with team representatives, but the Robertses claim that they only learned of the Smokies' arbitration clause when the team filed a motion to compel arbitration. As in Zuniga, the motion to compel was based on notice on the back of Ms. Roberts' ticket. The court provides the added particulars that the notice was in part in bold and in part in ALLCAPS, and it referenced arbitration, as well as a class-action waiver to be found on the team website.  To me, the most relevant fact is that all of the print on the back of the ticket was in 4-point font [this is eight-point because our platform knows that going small than that is absurd], which would make it completely illegible to me and likely to any potential reader over the age of forty. Moreover, the court does not seem to read this blog, because if it did it would know Yonathan Arbel and Andrew Toler's work showing that people are actually less likely to read and understand ALLCAPS text than they are to read and understand ordinary text. 

Applying Tennessee law, the District Court in Roberts v. Boyd Sports, LLC found that the parties had formed an arbitration agreement.  It's reasoning is summarized as follows:

. . . [A] reasonable onlooker or objective observer would conclude that the parties mutually intended to assent to the terms on the tickets by Plaintiffs' acceptance of the tickets and subsequent entry into the stadium. Plaintiffs were provided with ample opportunity to read, investigate, and understand the provisions on their tickets, both when received, and certainly in the 7 days afterward when they were investigating their options to resolve the injury that occurred. According to the undisputed facts here, they never inquired as to the terms or indicated confusion or lack of understanding. Simply failing to read the terms does not present a party with the ability plead ignorance to or reject the terms after the fact. 

The seven-day period is relevant because, had plaintiffs during that time found the arbitration agreement on the team website and worked through its terms, they would have seen that ticketholders have an option to opt-out of the arbitration provision within seven days.  To do so, plaintiffs would have had to know their account number, which they did not have.  While

Image by DALL-E

the Zuniga court found the seven-day period substantively unconscionable because it is so short, the Tennessee court declined to follow non-binding precedent.  As to the account number, given that the Roberts claim that they did not even know of the arbitration clause, their lack of an account number was irrelevant.  The team represented that it would have honored the opt-out even without such a number.

I find the opinion infuriating, in part because it treats four-point font as notice and in part because unconscionability relates to formation.  A contract that provides for an opt-out but requires an account number that the team does not actually provide is unconscionable at the time of formation.  It is of no matter that the team later proffers self-serving assurances that it would not stand by the terms of its unconscionable arbitration provision.  

In the case discussed in yesterday's post, Arbogast v. Chicago Cubs Baseball Club, LLC, the court held a summary hearing into arbitrability.  Such a hearing could have been useful in this case.  A judge ought to want to hear from the parties about what was going on during those seven days.  Were the plaintiffs not actively exploring their legal options based on conversations or assurances that the team had given in discussions with Mr. Roberts about Ms. Roberts' injury? If I were not a contracts professor and my spouse were hospitalized for three days with facial injuries, my first instinct would not be to try to decipher the four-point font on the back of her ticket stub.  But perhaps I am not the "reasonable and objective observer" that the court is looking for.

As usual, I say all this without quite grasping why plaintiffs prefer litigation over arbitration.  In Arbogast, the arbitration was to take place in New York.  If the same is true in this case, that might be a reason to opt out. But I would think such a remote venue would also be a basis for a claim of substantive unconscionability, so perhaps this arbitration clause allowed for arbitration in Tennessee.

New Feature! The ContractsProf Blog's ContractsProf Vlog: Contracts Stuff

Here is the first installment of what we hope will become a regular feature of the blog. Michigan State University College of Law Professor Daniel Barnhizer.

In our first session, we discuss generative AI and its potential uses in law teaching.  Our production values can only go up!

 

Colorado Supreme Court Prohibits Firms from Charging Per-Client Fee to Departing Partners

Attorney Grant Bursek left his practice with Johnson Family Law (JFL).  Eighteen clients went with him, preferring to retain him as their attorney.  JFL sought  to enforce an agreement that required departing attorneys to pay $1052 for each departing client.  Refusal to pay would result in interest charges at a rate of 18% per annum.  Mr. Bursek challenged this provision as violating Colorado's Rule of Professional Conduct 5.6(a), which prohibits firms from making agreements that “restrict[] the right of a lawyer . . . to practice after termination of the relationship.”

After departing, Mr. Bursek refused to pay the nearly $19,000 he owed under his agreement with JFL.  He sued, and a trial court found the provision unenforceable.  A intermediate appellate court subjected the provision to a multi-factor test and found that this provision was unreasonable and therefore enforceable, but it severed other parts of the agreement and found that those parts were enforceable.  The Colorado Supreme Court granted certiorari to determine whether (1) a firm may ever contractually require a departing lawyer to pay a per-client fee for each client the lawyer takes with them and (2) if so, how to determine the reasonableness of such an agreement.

In Johnson Family Law P.C. v. Bursek, the Colorado Supreme Court agreed with Mr. Bursek.  While a firm can require departing attorneys to reimburse certain costs associated with clients that are following the attorney out of the firm's practice, they may not charge a fixed cost without interfering with the attorney's right to practice and the clients' right to the attorney of their choice.  In so ruling, Colorado noted the majority rule that Rule 5.6(a) "bars any contractually imposed financial burden on an attorney’s professional autonomy."  The minority rule, adopted in California and Arizona, evaluates "agreements for whether they represent a reasonable balance between client choice and attorney autonomy on the one hand and a firm’s interest in financial and practice stability on the other."

Colorado Supreme Court
Image by Jeffrey Beall - CC BY 3.0

The intermediate appellate court Hhad adopted the minority approach.  While the Supreme Court agreed that a reasonableness approach is generally appropriate, the undifferentiated fee assessed here constituted a per se  violation of Rule 5.6(a).  Such fees force a departing attorney to make individualized determinations as to whether each client is "worth" keeping, given the costs involved.  It seems that the court will countenance no blanket liquidated damages provision in this context.  Rather, the burden will always be on the firm to show costs associated with each departing client.  

The court also reversed the intermediate appellate court's ruling on severability.  Because JFL's agreement imposed fees on departing attorneys in violation of Rule 5.6(a), the entire agreement was in violation of public policy.  As such, it is unenforceable in its entirety.

I'm not sure how I feel about this ruling.  I'm no expert in professional ethics, so this is just one contracts prof's take: On first glance, the challenged provision strikes me as a liquidated damages clause like any other liquidated damages clause.  It is hard for the firm to know in advance what losses it will have suffered when a departing attorney takes clients with them.  And so, the enforceability of the clause turns on the reasonableness of the estimate of just over $1000 per client.  The court undertakes no such analysis, rejecting the premise that such costs are very difficult to determine.  

Its reason for doing so has to do with the pressure it puts on the departing attorney to decide whether keeping a client is "worth it," but that, it seems to me, is wrongheaded for two reasons.  First, the attorney would face that determination whether or not the cost is fixed or established at the time of departure.  Second, it mistakes the unique public policy at issue here, which is not about the departing attorney's interest in continuing to represent a client but about the client's interest in keeping the attorney of their choice.  Notwithstanding that public policy interest, we allow firms to recover their costs incurred in connection with client recruitment, and so the only question should be the reasonableness of those costs.

District Court Enforces Hyundai's Clickwrap Arbitration Clause Rolled Out in an Update

John Tamburo sought to bring a class action against Hyundai Motor America Corporation (Hyundai) in connection with Blue Link and connected services.  When he bought his Hyundai vehicle in 2017, Mr. Tamburo agreed to certain terms and conditions relating to a Connected Services Agreement (CSA).  According to those terms, Mr. Tamburo agreed to the CSA by using the connected services in his car.  Nobody mentioned an arbitration agreement to him.

Image by DALL-E

His subscription to Hyundai's connected services lapsed in 2021, and Mr. Tamburo re-subscribed using Hyundai's web portal, again clicking boxes indicating that he agreed to terms and conditions, which included an arbitration provision.  He logged into the portal again in 2022 and once again agreed to updated terms and conditions.  In 2023, Mr. Tamburo initiated a putative class action against Hyundai.

In Tamburo v. Hyundai Motor Am. Corp., the District Court for the Northern District of Illinois addressed only Hyundai's motion to compel arbitration.  Mr. Tamburo made three arguments.  First, he claimed that he never agreed to arbitrate claims against Hyundai.  Second, Mr. Tamburo alleged that his agreement to Hyundai's terms was procured through duress.  Finally, he claimed that Hyundai's arbitration provision is unconscionable.

As to whether he agreed to Hyundai's terms, the court ignored Mr. Tamburo's arguments regarding his initial agreement in 2017, as it had unrebutted evidence that he had agreed to Hyundai's updated terms in 2021.  He agreed to the CSA, the court found, on three separate occasions through clickwraps.  That is, confronted with webpages that offered him hyperlinks through which he could read terms, he repeatedly clicked on boxes saying that he agreed to those terms.  That suffices as manifestations of assent, whether or not he clicked on the hyperlinks or read the terms.

The court spent very little time on Mr. Tamburo's duress claim.  He claimed that it was duress for Hyundai to require Mr. Tamburo to either agree to new terms or lose service.  The court found no unlawful threat that deprived Mr. Tamburo of his ability to exercise free will.  He could have elected to forego Hyundai's connected services. 

Similarly, because Mr. Tamburo was free to refuse Hyundai's connected services, there was nothing substantively unconscionable about requiring him to agree to arbitration should he elect to use the services.  The fact that Hyundai can change its terms at any time also does not render the CSA unconscionable, given that a buyer can cancel the service within thirty days of notice of changes.  It is not clear to me why the court is treating these matters as relating to substantive unconscionability rather than procedural unconscionability.  Without knowing more about the nature of the complaint, it is hard to know what allegations Mr. Tamburo is making as to the substantive unconscionability of the CSA.

The court granted Hyundai's motion and stayed the case pending arbitration.  At no point in the opinion does the court indicate the nature of Mr. Tamburo's claims, nor does the court discuss any changes in Hyundai's terms between the time that Mr. Tamburo bought the car and the time he accepted the updated terms.  There is nothing legally wrong with the opinion, but given the court's failure to recount potentially relevant facts, its scope is potentially alarmingly broad.  

What I would like to see in an opinion like this is an acknowledgment that there could be circumstances in which it would be unconscionable for a company providing services to change those services through terms that provide for acceptance of the changes through continued use.  The court could then explain why, in this case, the changes to the terms were not sufficiently substantial nor was it substantively unconscionable in these circumstances to treat continued use as acceptance of terms.

Two District Courts Weight in on the FTC's Ban on Non-Competes

Back in April, we posted about the new Federal Trade Commission (FTC) rule that bans most non-competes and may also ban some other restraints on the ability of employees to leave their jobs.  The response was quick and predictable.  Ryan, LLC v. Federal Trade Commission was filed pretty much immediately in the Northern District of Texas.  ATS Tree Services, LLC (ATS) filed its claim in the Eastern District of Pennsylvania two days after the new rule was promulgated.

The Ryan court struck first, issuing a preliminary injunction in early July.  The Eastern District denied ATS's motion for a preliminary injunction in ATS Tree Services, LLC  v. Federal Trade Commission in late July.  Then, on August 20th, the District Court in the Ryan case granted Ryan's motion to set aside the non-compete rule and enjoined it from going into effect on its effective date of September 4th or thereafter.

In the Pennsylvania case, ATS claimed that it would be irreparably harmed if it could not require that its employees sign non-compete clauses prohibiting them from working for rival tree-trimming services for one year after leaving ATS.  ATS claimed that is non-compete clause is necessary to enable ATS to recoup its investment on the specialized training that its employees receive.  ATS argued that the FTC either lacked regulatory power to ban non-competes or exceeded that power.  In the alternative, ATS argued that the ban was arbitrary and capricious.  If none of those things are true, ATS maintained that the FTC Act is an unconstitutional delegation of legislative power to the agency under the major questions doctrine.

In denying ATS's motion for a preliminary injunction Judge Hodge (left) first found that ATS would suffer no irreparable harm from the non-compete ban.  Moreover, she concluded that ATS had not established that it would likely win on the merits.  ATS could not establish irreparable harm because its alleged losses were either de minimis or in any case insufficient to amount to irreparable harm.  Moreover, ATS  failed to make a credible factual  allegation that there was any danger that it would lose employees once the ban goes into effect. 

Judge Hodge was no more impressed with the somewhat exotic argument that the rule would strip ATS of its contractual rights.  She did not find any binding caselaw endorsing the argument that loss of contractual rights amounts to irreparable harm. To the extent that the harm related to employees using their ATS training to benefit rival businesses, she did she not see why ATS could not protect its contractual rights through the less onerous mechanism of non-disclosure agreements.

On the merits, Judge Hodge was satisfied that the FTC had power to enact the law and that doing was was not arbitrary and capricious.  She also found that the FTC had previously issued equally sweeping rules without implicating the major questions doctrine and that this situation was thus distinguishable from recent cases in which SCOTUS invoked that doctrine.  Finally, Judge Hodge rejected ATS's argument based on Schechter Poultry  because it's not 1935, or at least not yet.

Things went differently before Judge Brown (right) in the Northern District of Texas.  Having already granted the motion for a preliminary injunction, it is hardly surprising that Judge Brown went ahead and granted the full injunction.  Unlike her preliminary injunction, however, which applied only to the named plaintiffs and intervenors, this injunction is nationwide.

She granted the motion for an injunction on multiple grounds.  First, she concluded that the FTC  lacked substantive rule-making authority with respect to unfair methods of competition and thus lacked authority to create the non-compete ban. In addition, Judge Brown found that the FTC acted arbitrarily and capriciously in creating the ban.  She found that the ban was "based on inconsistent and flawed empirical evidence," and that the FTC failed to consider the upside of non-compete agreements, disregarding substantial evidence supporting such agreements.  Just as Judge Hodge chided ATS for failing to consider how it might use devices other than its sweeping non-compete to protect its investment in its employees, Judge Brown faults the FTC for failing to consider less sweeping alternatives to the ban it imposed.  Having ruled on statutory grounds, Judge Brown did not address Ryan's constitutional claims.

Both opinions are persuasive in their own terms and they reach their conclusions categorically and without acknowledgment that the case is a close one.  It is challenging for a non-expert in administrative law to know which judge got it right.  My hunch is that this challenge would have been dismissed without much fanfare in the period between Schechter Poultry and the Roberts Court, and I suspect that an opinion like Judge Brown's would have been hard to imagine before Gundy. It may also be that executive agencies have gotten much more ambitious in this era of Congressional gridlock.  And so perhaps rules like this one were relatively rare before, say 2009.

Update from St. Thomas University School of Law

Two weeks ago, we reported on an attempt to dismiss a tenured law professor in a manner that did not accord with the procedural rights created by the university's faculty handbook.  She sued for wrongful termination.

Last Thursday, Julianne Hill, writing for the ABA Journal reported that St. Thomas University has now reinstated Professor Lauren Gilbert but also has initiated termination proceedings against her.  In its reinstatement letter, the University reiterated its view that Professor Gilbert's acts of "insubordination" justified termination, and it added a new, unspecified charge of an "inappropriate relationship" with a student.  In response, Professor Gilbert's attorney has promised to add a defamation claim to her suit against the university.

The University seems to have handled this episode with unique incompetence. The original termination letter cited a university handbook for staff that it claimed governed its relationship with Professor Gilbert in relevant part. Its decision to reinstate her and to follow the procedures set forth in the faculty handbook suggests a total abandonment of that position, which ought to be a matter of considerable embarrassment to university counsel or outside counsel or both. 

The charges added to the reinstatement letter are extraordinarily odd.  Her termination letter cited Professor Gilbert's failure to attend graduation (with notice but without permission) as another "act of insubordination by you."  If the University was going to cite petty offenses, it might have mentioned conduct that, standing alone, would justify for-cause termination.  If, as Professor Gilbert contends, there is no basis for the allegation, the University has, at the very least, created another legal issue that will increase its costs or perhaps increase what it will have to pay to settle the matter.  

Meanwhile, because Professor Gilbert has been reinstated, she will continue to draw her salary and benefits.  However, because of the University's rather outré claim that she constitutes a threat to endanger the community and/or students, she cannot teach or even set foot on campus.  Assuming that the grounds in the original termination letter were the best justifications that the University could concoct for the summary dismissal of a tenured professor, Professor Gilbert deserves a better academic home.  But because the University has now conceded that she is entitled to full salary and benefits until the appropriate termination process is completed, she has some time to find one.

Reviewing Larry DiMatteo and Irma Russell and Barbara K. Bucholtz, Part III

This is the third post in my series on  Larry Di Matteo's Principles of Contract Law and Theory (Principles) and Irma Russell and Barbara K. Bucholtz's Mastering Contract Law (Mastering).  The aim is to all some attention to these two books while using them to stimulate my thinking as I once again consider how to teach contracts law to first-year students.  The two books are very different.  Principles is a scholarly textbook addressing advanced topics at a very high level of sophistication.  Mastering is a study-guide for first-year students.  They both have their charms, but they are very different.  Each entry in this series will cover a chapter in each book, with some splitting of chapters because the books don't have the same number of chapters.  Most weeks, the chapters will not cover corresponding subject-matters.  So be it.

The third chapter of Principles begins with a discussion of freedom of contract, which it splits into negative and positive freedom.  Positive freedom is the freedom of individuals to contract without state interference in the form of required terms; negative freedom is freedom from state interference in the form of prohibited terms.  And yet Principles notes that, at least in the context of asymmetrical bargaining, which is ubiquitous, some limitations on freedom of contract are unavoidable. (58)

Editorializing here, this is a highly libertarian presentation of positive and negative freedom. The tradition of positive freedom rooted in continental liberalism acknowledges the role of states in creating spheres in which individuals can exercise their freedom. That is, from the perspective of central Europeans prior to German and Italian unifications and the collapse of the Habsburg Empire, it was hard to imagine freedom without a strong state to create a realm in which freedom could develop and nourish. 

From this perspective, the two freedoms that Principles describes are simply two sides of the same negative conception of freedom.  What is left out is the, in my view, necessary intervention of the state, through, to give just one obvious example, the provision of a court system facilitating the enforcement of contractual obligations.  We will soon be posting reviews of recent works by Hanoch Dagan (above left) and Rebecca Stone (right) on freedom of contract, and suffice to say that both of them articulate theories of freedom of contract capacious enough to accommodate much more forceful interventions than contemplated in Principles. That said, the difference may come down to Principles regarding freedom of contract as a relatively narrow principle subject to external limitations, while Professors Dagan and Stone, especially the former, see freedom of contract itself as the source of the limitations.

The next section of the chapter explores five tensions that contracts law seeks to balance.  First, Principles acknowledges that while contract law needs to project stability in order to promote confidence in the enforceability of binding promises, the law evolves, usually slowly but sometimes jarringly, in response to exogenous impulses like the arrive of the New Deal or electronic contracting. (58-59)   In the next section, Principles veers away from the libertarian perspective discussed above and acknowledges the role of default terms and gap fillers in facilitating contract formation.  Regulation might seem in tension with facilitation. In fact, they are symbiotic. (60-61) Third, Principles identifies a tension in theories of enforcement.  Classical doctrine enforces based on promises; modern doctrine also enforces based on estoppel. (62-63) Principles next explores a tension between formal and substantive rules. The former may at times prevent the effectuation of the latter, as when a statute of limitation lapses or a contract cannot be enforced for wont of a wax seal. The abandonment of the writ system and a more capacious concept of consideration have eased some of these tensions, but they persist. (64-65) Finally, Principles notes that the seeming tension between the civil law tradition, which favors  specific performance and the common law preference for expectancy damages is not as pronounced as it seems.  The common law embraces specific performance when unique goods or property are involved, and Article 2 provides for an expansion of the availability of the remedy.  Civil courts encourage settlement in lieu of specific performance, because the latter requires potentially costly monitoring  (65-66) 

In the final section of the chapter, Principles explores tensions in contracts theory as opposed to contracts doctrine. Freedom of contract is tempered by concerns over justice in asymmetrical contracts of adhesion.  One-sided terms can be enforced only if reasonable (68-69) or meaningful consent can be guaranteed through disclosure requirements. (70) There follows a discussion of how relational contract theory and the doctrine of good faith result in shifts in contracts doctrine. (71-73) I would add that relational contract theory is especially important in understanding a tension mentioned earlier in the chapter (59) between the law on the books and the law in action.  Non-breaching parties may forgive the breach in order to preserve the relationship, or the parties might renegotiate the present deal to adjust for changed circumstances.

Chapter 3 of Mastering is about interpretation.  This strikes me as a surprising choice and not the only organizational idiosyncrasy of the book. I would treat formation before getting to interpretation.  I suppose the justification for starting with interpretation is that it permits the Authors to foreground the principle that what courts ought to enforce is the intentions of the parties.  So even before we learn about formation, we are thinking ahead to the end game of expectation damages.

An additional benefit of foregrounding rules of interpretation is that many of them have applications beyond the realm of contracts law. (20)  They begin with Williston's distinction between interpretation and construction (21), on which see Gregory Klass's work, reviewed here.  They then proceed to a discussion of interpretation in the statutory context, beginning with the "no vehicles in the park problem" and discussing the role of statutory definitions, legislative history,  explication through case law, and public policy as a tool of interpretation. (22-24)

The Authors next discuss canons of construction, mostly focusing on contractual construction, but occasionally referencing statutory construction as well.  (24-28) This is valuable material and it is well presented. I just think about how a first-year student would use this book.  I have never seen a casebook or treatise that discusses interpretation before formation.  The Restatement begins with formation.  And so, if I were assigning or recommending Mastering to my students as a supplement, I would tell then to skip chapter 3 and return to it after we have completed formation.  By that time, they will have read enough case law so that we could draw from that material to give examples of how the cannons might be deployed.

After a very short section on treatment of extrinsic evidence under the common law (29), the chapter next covers extrinsic evidence under Article 2, which they say is similar to common law rules on extrinsic evidence. (29-31) The chapter concludes with a brief section on the parol evidence rule (32), which certainly makes sense in connection with the discussion of extrinsic evidence, but is a bit odd, given that the authors say the parol evidence rule is not a rule of interpretation (19) and is covered separately in Chapter 9.  I teach the parol evidence rule in the section of my course devoted to interpretation, but I agree that it is not a rule of interpretation.  However, I would say the same about rules relating to the admissibility of extrinsic evidence. 

Again, I have reservations about organization and scope of treatment.  Chapter 9 provides a thorough treatment of the parol evidence rule but no further discussion of extrinsic evidence. Again, thinking about this book as something for first-year students, I think the discussion of extrinsic evidence is misplaced here and too cursory, given the importance of the subject matter and its conceptual difficulty.  The Authors lay out the relevant UCC rules relating to extrinsic evidence clearly enough, but they provide only one concrete example, and even there they do not cite to a case but just describe it.  Absent an opportunity to see how these rules play out in the case law, I don't think students can appreciate the dramatic effects of the UCC's rules on extrinsic evidence in cases like Nanakuli and Columbia Nitrogen.  But those are pretty complex cases, best introduced after students have gained some familiarity with the material.

The first post in this series can be found here
Part II is here.

Sidney DeLong on Contracts in Moby Dick -- Warning: Thar Be Spoilers!

Ahab’s Doubloon: A Contracts Analysis

Sidney W. DeLong

As he showed in Billy Budd, Herman Melville (right) knew his way around the law of the sea. Moby Dick is not generally thought of as a text on the common law but upon whales and whaling. Yet one of its central episodes invites a contract analysis.

Whaling Wage Contracts. Early in the novel Moby Dick, the narrator, Ishmael, describes the contract (“articles”) that a crew member of a whaling vessel signed with the owners of the vessel before beginning the voyage,

I was already aware that in the whaling business they paid no wages; but all hands, including the captain, received certain shares of the profits called lays, and that these lays were proportioned to the degree of importance pertaining to the respective duties of the ship’s company. I was also aware that being a green hand at whaling, my own lay would not be very large; but considering that I was used to the sea, could steer a ship, splice a rope, and all that, I made no doubt that from all I had heard I should be offered at least the 275th lay—that is, the 275th part of the clear net proceeds of the voyage, whatever that might eventually amount to. 

The lay of a crewmember was often so little that after two or three years voyage, it might not cover the cost of liquor and other articles purchased on credit from the ship.

Shortly after the Pequod had set sail, Captain Ahab appeared on deck and addressed the assembled crew, beginning with a sort of catechism:

“What do ye do when ye see a whale, men?”

“Sing out for him!” was the impulsive rejoinder from a score of clubbed voices. . . .

“And what do ye next, men?”

“Lower away, and after him!”

“And what tune is it ye pull to, men?”

“A dead whale or a stove boat!” . . . .

These answers faithfully recited the duties undertaken by all the crew, in return for which they were to be paid their modest lays.

Ahab then made his offer:

“All ye mast-headers have before now heard me give orders about a white whale. Look ye! d’ye see this Spanish ounce of gold?”- holding up a broad bright coin to the sun- “it is a sixteen-dollar piece, men. D’ye see it? Mr. Starbuck, hand me yon top-maul.”

. . . Receiving the top-maul from Starbuck, he advanced towards the main-mast with the hammer uplifted in one hand, exhibiting the gold with the other, and with a high raised voice exclaiming: “Whosoever of ye raises me a white-headed whale with a wrinkled brow and a crooked jaw; whosoever of ye raises me that white-headed whale, with three holes punctured in his starboard fluke- look ye, whosoever of ye raises me that same white whale, he shall have this gold ounce, my boys!”

“Huzza! huzza!” cried the seamen, as with swinging tarpaulins they hailed the act of nailing the gold to the mast . . . .

As things turned out, it was Ahab himself who first sighted Moby Dick. But then, to keep the crew motivated, he enlarged his offer:

“[A]dvancing toward the doubloon in the main mast – ‘Men, this gold is mine, for I earned it; but I shall let it abide here till the white whale is dead; and then, whosoever of ye first raises him, upon the day he shall be killed, this gold is that man's; and if on that day I shall again raise him, then, ten times its sum shall be divided among all of ye! Away now!’”

Suppose it was not Ahab but a crew member who first raised Moby Dick: Could he have enforced the promise of the doubloon upon returning safely to port? Or suppose the conditions of the second promise had been fulfilled: Could the crew enforce the second promise of ten times the sum?

Alas, Melville made sure that we will never know whether the promises Ahab made to the crew of the Pequod would have stood up in a Nantucket courtroom at the end of the voyage. Moby Dick was “raised” but never killed. Ahab’s doubloon went to the bottom nailed to the main mast of the Pequod , while Ahab’s fate was to die affixed to the curse´d whale, entangled in his harpoon line, leaving the contracts questions unanswered.

Until now.

The Pre-Existing Duty Rule, Then and Now. There is a good reason that older contracts casebooks illustrate the law of contract modification with cases drawn from the 19^th century history of seafaring. After the crew members signed their employment contracts (“articles”), they embarked on a journey that could, in the case of whaling vessels, last for years. Once at sea, the parties were locked in a bilateral monopoly: the crew could not quit their jobs and the shipowner could not hire replacements. Under these conditions, a sea captain’s promise to raise the crew’s wages became especially suspect when they returned to port.

In The Death of Contract, Grant Gilmore discussed the law of contract modification, duress, and the pre-existing duty rule citing Harris v Watson 170 Eng. Rep. 94 (1791) and Stilk v Myrick 170 Eng. Rep. 851 (1809). Each decision refused to enforce a captain’s unsolicited offer to pay extra wages to crew members who were unexpectedly forced to work short-handed or in dangerous circumstances. The English courts cited both the pre-existing duty rule and grounds of public policy: The crew had a contractual duty to work under all conditions and so gave no additional consideration for the promised wage increase. More importantly, permitting crews to enforce promises for extra wages would tempt the crew, once at sea, to make extortionate demands or even threaten mutiny. For an empire built on control of the sea, public policy demanded that their claims receive no judicial support.

In America, judicial hostility to mid-course modifications of seamen’s wages continued into the 20^th Century and applied even when the crew was not at sea but only at a remote land location. In the familiar case of Alaska Packers Ass’n v Domenico, 117 F. 99 (9^th Cir. 1902) the court refused to enforce a contract modification raising the crew’s rate of compensation for salmon fishing after the crew complained of bad nets. Law and economics scholars later justified Alaska Packers by its tendency to forestall the “hold-up game” otherwise made possible in locations remote from labor markets. As an added bonus, the mechanical pre-existing duty rule was far less costly to administer than a rule requiring a finding of duress or bad faith as a condition to non-enforcement.

Alaska Packers also found seamen’s wage claims under modified contracts to be unenforceable under agency law. The captain or master of the ship did not have actual or apparent authority to make promises binding on the owners. The captain himself was only a higher-paid employee of the owners.

Thus, under the common law in effect when the Pequod sailed, Ahab’s promise of the doubloon was unenforceable because it was not supported by consideration: the Q&A that preceded the offer showed that the crew were already committed to raise and hunt any whale to the death. Ahab offered them a gift, a bonus for doing what they were legally obliged to do.

The crew might argue that their duty was owed to the Pequod’s owners, but the offer came from Ahab, to whom the crew owed no pre-existing duties. The doubloon represented a side deal. But this argument might have outraged the court even more than the modification argument and for stronger public policy reasons. McDevitt v Stokes 192 S.W. 681 (Ky. 1917) refused to enforce a bettor’s promise of extra pay to a jockey if his horse won a race. Kentucky judges didn’t fancy enforcing bribes of jockeys by racing touts. Likewise, a Nantucket court concerned with protecting the whaling industry would have refused enforcement of a captain’s promise of extra wages to achieve a personal vendetta as tending to divert the crew from their primary mission, as it disastrously did in the case of the Pequod.

The Pre-Existing Duty Rule Today.

The strong public policies associated with marine commerce that led courts to refuse enforcement of promises of extra pay made on the high seas did not persist into land-based commercial contracts in the 20^th Century. Employers’ fears of employee duress have been replaced by employers’ need for flexibility in the rapid modification of ongoing employee contracts. Employers now value the ability to make binding promises of extra compensation in circumstances in which they have a need to increase employee incentives. 

The application of the pre-existing duty rule to modifications was modified in Restatement (Second) of the Law: Contracts. Retrospectively applying modern law to Moby Dick, if the bonus offers had been made by the owners, they might well have passed muster as modifications of the crew’s articles.

Section 89 Modification of executory contract.

A promise modifying a duty under a contract not fully performed on either side is binding

1. a) If the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made; or
2. b) to the extent provided by statute; or
3. c) to the extent that justice requires enforcement and view of material change of position in reliance on the promise.

The crew might have argued that, even though killing Moby Dick was within the literal definition of their duties, nevertheless the additional reward for raising Moby Dick was fair and equitable in light of the extraordinary risk involved, a risk that was not anticipated when they signed on. Indeed, Ahab’s mad quest for the whale destroyed the Pequod and cost the crew their lives. Moreover, once the Pequod had given chase to the deadly whale, the men had indeed incurred a “material change” in their safety in reliance on the promise of the doubloon.

Their reliance might also make Ahab’s later promise of ten times the original bonus enforceable as a gift promise under the modern principle of promissory estoppel, Their reliance was both foreseeable and detrimental. Refusal of enforcement would have been unjust in light of the risks the crew incurred in reliance on the promise.

The crew would still face the agency argument, however. But the claim for the doubloon against its owner, Ahab, should have been enforceable both as a unilateral contract and under the promissory estoppel principle. The crew foreseeably endangered themselves, as they were intended to do, in reliance on the promise and justice surely requires that their reliance made the promise enforceable.

But even if by some rationale the crew (or their survivors) should be deemed to have earned the doubloon, the problem would remain of collecting their bounty. In the literary undersea world, the doubloon remains forever affixed the mast of the Pequod.

Samsung's Chutzpah Rewarded in the Seventh Circuit

We blogged about the District Court ruling in this case, in one of our first ventures into the realm of mass arbitration.  The relevant facts, which have nothing to do with the merits of plaintiffs' claims, are pretty straightforward.  Paula Wallrich and thousands of others filed arbitrations claims against Samsung with the American Arbitration Association (AAA).  For what it's worth, they alleged that they had purchased Samsung devices and that those devices unlawfully collected and stored sensitive biometric data in violation of the Illinois Biometric Information Privacy Act, 740 ILCS 14/1 et seq.   While plaintiffs paid their arbitration fees, Samsung refused to pay its $4,1250,000 arbitration fees.  The AAA gave plaintiffs the option of fronting Samsung's fees.  When plaintiffs refused, the AAA responded by terminating the arbitration proceedings.  In a role reversal, plaintiffs went to the District Court seeking an order compelling arbitration.  The District Court granted that motion and then stayed the case pending arbitration.

Having rejected Samsung's challenges to its jurisdiction, the District Court addressed Samsung's remaining claims, as we discussed in the following terms:

Samsung's remaining arguments smack of chutzpah.  Having prevented the arbitrations mandated by its terms of service from taking place by refusing to pay fees, Samsung now argues that the federal courts lack the authority to compel it to arbitrate or to pay the fees.  No problem, Samsung insists, either because the plaintiffs can now just proceed in court, or better still, plaintiffs cannot proceed either in arbitration or in court because the federal courts lack the power to second-guess the AAA's refusal to reopen the arbitration proceedings.

In Wallrich v. Samsung Electronics America, Inc., the Seventh Circuit agreed with Samsung.  The court first found that plaintiffs had not met their burden of proving the existence of an arbitration agreement.  Moreover, even if there were an agreement, it would be governed by the AAA, which empowers arbiters, not courts, to determine fee disputes.  

The court first addressed some jurisdictional issues.  Plaintiffs claimed that the Seventh Circuit could not hear an interlocutory challenge to stay a proceeding pending arbitration under §§ 16(a)(3) and 16(b)(1) of the Federal Arbitration Act (FAA).  The court pointed out that the limitation on appellate courts' jurisdiction to review interlocutory orders relates to orders under Section 3 of the FAA, but the challenged order relates to Section 4.  This may be a fair reading of the statue and is consistent with the holdings of two other Circuit Courts, or it may be yet another instance of the federal courts' new-found formalism.  It's not clear why the FAA would prohibit interlocutory appeals from Section 3 motions to compel but not Section 4.

Turning to the merits, the Seventh Circuit held that plaintiffs had not met their burden to establish an enforceable arbitration agreement.  Why?

• Plaintiffs' arbitrations demands, attesting to the fact that they bought Samsung products were signed by plaintiffs' counsel and not by plaintiffs themselves;
• Samsung's terms and conditions, which clearly create an arbitration agreement are not evidence of an arbitration agreement between Samsung and the class members -- anybody could have pulled those terms off the Web; and 
• The AAA's determination that plaintiffs had met the AAA's filing requirements also does not prove that they agreed to arbitrate 

Okay.  Fine.  The AAA was satisfied.  The District Court was satisfied.  Let's remand and give plaintiffs another show to supplement the record. As the court acknowledges, anything will do -- receipts, order numbers, confirmation numbers, declarations signed by the plaintiffs, anything.  Nope.  Too late.  Plaintiffs got their bite at the apple, and they blew it. 

Samsung, however, gets multiple bites at the apple. The District Court took a very different approach.  Plaintiffs attorneys compiled a list of claimants.  Samsung compared that list to its own list of consumers and challenged some of the names.  Plaintiffs lawyers removed some names from the list and Samsung made no further challenges.  The District Court treated that failure as a concession that the remaining claimants were indeed Samsung customers subject to Samsung's arbitration agreement.

In any case, even if plaintiffs could prove an arbitration agreement, the parties agreed to play by the AAA's rules.  Those rules grant the AAA discretion over fee disputes.  Plaintiffs had the option to arbitrate by paying millions of dollars in fees up front.  Why on earth did they refuse to do so? [sarcasm]

Judge Easterbrook (right) was on the panel.  I owe Judge Easterbrook an apology.  Reflecting on Judge Easterbrook's decision in Campbell, I accused him of inaugurating a regime of "Arbitration for All," including an employee subject to an arbitration agreement permeated with unconscionability.  I concede that I misjudged Judge Easterbrook.  He does not favor arbitration for all in situations when Bartleby's defense is available to a well-resourced defendant.

Hat tip to Tamar Meshel for alerting me to the case and for additional engagement.

Continued Incredulity Over Snyder v. United States

I blogged about this case after oral argument, and SCOTUS produced the predicted 6-3 party-line endorsement of public corruption.  The opinion by Justice Kavanaugh amply illustrates just how inept this Court is at recognizing corruption.

James E. Snyder was elected Mayor of Portage, Indiana in 2011.  In 2014, Mr. Snyder accepted a $13,000 check from a company, Great Lakes Peterbilt (Peterbilt).  Federal prosecutors concluded that this payment was an illegal gratuity, paid to reward Mr. Snyder for steering a $1.1 million garbage truck purchasing contract to the company.  Mr. Snyder contended that the payment was for consulting services.  A federal jury believed the government's version of events, and a District Court sentenced Mr. Snyder to 21 months in prison.  The Supreme Court took the case in order to determine whether the relevant federal statute, 18 U. S. C. §666(a)(1)(B) covers gratuities, paid as a reward, as well as bribes paid in advance of some benefit that the recipient, a government official, provides to the payor.

Justice Kavanaugh (right), writing for the majority, considers "text, statutory history, statutory structure, statutory punishments, federalism, and fair notice," and concludes that the statute applies only to bribes, not to gratuities.  Indiana law may very well prohibit Mr. Snyder's conduct, but he was never prosecuted under Indiana law.  Nothing to see here, folks.

Justice Kavanaugh does provide cogent reasons for a narrow reading of the statute.  Two of the six Circuit Courts to confront the issue also concluded that § 666 is only about bribery and not about acceptances of gratuities.  He could have just gone with text, statutory history, and statutory structure, and the opinion would have been okay.  Justice Gorsuch briefly concurred, arguing that the scope of the statute is unclear, and in such cases, the rule of lenity counsels forbearance of prosecution.  

Instead Justice Kavanaugh engages in a meandering discussion of what he calls fair notice.  He is concerned about the possible overbreadth of the statute and its use to punish innocuous gifts, such as $100 gift cards at Dunkin' or students taking their college professors out for Chipotle or buying them tickets to a sporting event.  

Here my incredulity kicks in.  First, of course, the problem is not in taking gifts but in accepting them as a gratuity for some wrongful purpose.  I'm not sure politicians should be accepting giftcards from businesses if there is any connection between the gift card and public affairs in over which the politician has influence or decision-making power.  But if they engaged in such conduct, it would be the government's burden to convince a jury that a politician engaged in an act of official corruption in exchange for a $100 gift card at Dunkin'.  All Mr. Snyder had to do was show that he did some actual work in exchange for his $13,000 gratuity.  As the dissent points out, he made no such showing.  

It would not be a wrongful act if all of the students in a particular course or section bought their professor a meal or some other gift, so long as there were no connection between the gift and the grade.  

But I don't accept gifts from individual students.  First, I am comfortably situated, and my students are students. I would not want to contribute to a culture in which students think it appropriate to transfer wealth or resources upwards. I wouldn't want students to think that there were some expectation that they buy gifts for their professors.  I make an exception when student organizations give me small gifts for participating as a panelist or moderator for their events.  I make this exception as a cultural accommodation because they give the same gifts to all faculty members or outside speakers who participate.  I wish they wouldn't give me the gifts, but it would be awkward and churlish were I to reject the gifts that the students selected for me and which my colleagues accept.  However, I usually re-gift these things because otherwise I will forget about them, and they will collect dust in my office until I re-discover them years later.

Perhaps I would feel differently about these things if, like Justice Kavanaugh, I had attended elite private schools all my life in which many of my peers were far better off financially than their teachers.  But I think that says more about the lack of socio-economic diversity on the Court than it does about the ethics of the situation.

This isn't hard. I am well-compensated, and my power relations with my students are asymmetrical.  Students can't afford to buy me gifts, and I can't afford the appearance of impropriety that would arise should I accept their gifts.  

Not for nothing, on the subject of fair notice, it seems worth pointing out that Justice Kavanaugh joined the majority opinion in Campos-Chaves v. Goya, an immigration case decided less than two weeks before Snyder.  The issue in that case was whether immigrants can be ordered removed from the United States in absentia when they were not provided with the statutorily required "notice to appear."  That case actually was actually about notice and the stakes were higher than in Snyder.  After all, is it even plausible to think that Snyder, whose conduct could have been punished under state law, took a gratuity because he thought the federal statute only covered quid pro quo graft?  But in Campos-Chayes, Justice Kavanaugh agreed with the Majority that a later "notice of hearing" sufficed, even though the latter was to be provided only as a supplement to the required "notice to appear" in case of change or postponement in the time or place of removal proceedings. So, forgive me for thinking that Justice Kavaugh's commitment to the principle of notice is selective.

In any case, Justice Jackson, writing for the three dissenting Justices, has the better textualist reading of the statute, which punishes corruption, whether the improper payments involve quid pro quo influencing or post hoc rewards.  Her reading of the statutory history and the relationship of the statutory language at issue to other federal statutes covers material in depth where the Majority opinion barely scratches the surface.

Justice Kavanaugh expresses concerns about federalism, but Congress addressed those concerns when it passed the statute.  Yes, states are expected to police their own corrupt politicians.  However, when state entities accept federal funds, Congress  recognized a need (evident from this very case) for a federal supplement to state anti-corruption measures.  

Justice Kavanaugh worries about where to draw the line between corrupt and innocent gratuities.  That, Justice Jackson responds, is a question for another day, because Mr. Snyder is not arguing that what he did was innocent. He argues that the federal statute does not reach his conduct, even if it was corrupt.  Justice Jackson then proceeds to illustrate the statutory guardrails already in place to address the danger about which Justice Kavanaugh worries.  Nobody is going to jail for accepting a gift card, unless they do so "corruptly." Prosecutors, courts, and juries do pretty well distinguishing corrupt from innocent gifts. 

Finally, Justice Kavanaugh cites to evidence that bribery is a much more serious crime than taking gratuities corruptly.  He may be right that courts and statutory schemes make it so, but Justice Jackson points out that the two forms of corruption can be quite similar.  In this case, Mr. Snyder apparently shepherded a contract to Peterbilt and then showed up at their offices demanding a $15,000 payment because he needed money.  He got $13,000.  He characterized that payment as a consulting fee, but he also called it other things.  Peterbilt said that he never provided any services to them.  A jury likely concluded that Mr. Snyder was lying.  How is what he did any better than demanding the payment up front?  Should the law care whether I demand that you pay me $13,000 in order to steer a contract your way or demand that you pay me $13,000 once I have successfully steered a contract your way?

So, bottom line;  As a matter of federal law, it is not a crime for a state politician to accept after-the-fact gratuities in exchange for political favors.  In related news, as a matter of federal law, states and localities can make it is a crime to sleep in public.

Golden Gate University Law Students Sue Over Law School's Closing

As a member of the Valparaiso University Law School diaspora, I am always intrigued by stories about closing law schools.  As Christine Charnosky reported for Law.com in March, the ABA has approved a teach-out plan for Golden Gate University Law School (the Law School), which has shuttered its J.D. program. Financial struggles and low bar passage brought down the law school. My heart goes out to faculty and staff, whose fine qualities often do not translate into financial viability or professional success for students, especially in California, given its notoriously difficult bar exam.  I know how it feels to try to keep a law school alive in such circumstances, and I hope that everyone finds a happy new home.  If it's any consolation, almost all of my colleagues from Valpo landed great jobs, while others are enjoying their retirements -- a few years ahead of schedule.  Golden Gate will continue to offer law courses for its graduate and undergraduate programs.  It's not clear how many faculty members it will retain for those purposes.

Students will be able to finish their legal training at the University of San Francisco Law School or at the Mitchell-Hamline Law School.  But not all students are accepting the offer.  In February, four students and the Golden Gate University Alumni Association filed a suit in state court alleging claims for breach of contract and fiduciary duty, promissory estoppel, fraud, and unlawful business practices.  They sought injunctive relief and the appointment of a receiver.  They followed up in June with a motion for injunctive relief.

The allegations of the complaint are based on the fact that the Law School's Dean announced the closure of the Law School at a time when the ABA had not yet approved the Law School's teach-out plan.  Doing so, the complaint alleges was a breach of a contract, embodied in the Law School's Student Handbook.  The complaint further alleges an implied contract under California law that educational institutions will not close prior to students' graduation.  As we learned from the COVID cases, whether or not a Student Handbook constitutes a contract, or whether one can be implied usually involves more than blanket allegations that, e.g., the Handbook "undoubtedly" constitutes a contract.

The Promissory Estoppel claim is based on a promise to the student-plaintiffs of a three-year full-tuition scholarship.  If, as I expect, Golden Gate plans to pay the tuition for the students so that they can complete their educations at other law schools, it is hard to see how the students suffer monetary harm.  In their motion for injunctive relief, the students allege that they will be harmed by being required to move to Minnesota, so maybe that's right.  But Mitchell-Hamline offers a blended-learning program, which may have been the reason why it was chosen as a partner for the teach-out.  While the Law School has yet to detail its plans for reimbursing students for travel to Minnesota, that does seem to be the plan, as acknowledged in the brief in support of the plaintiffs' request for injunctive relief.

The remaining causes of action seem to me a stretch, but I can't claim sufficient familiarity with the relevant bodies of law to comment beyond that.  But the bigger challenge it seems to me is the appropriate remedy even if they do succeed on their claims.  The ABA has now approved the Law School's teach-out plan, so the alleged improprieties that were the original basis for the complaint seem to have been remedied, at least in part.  They seem to want the court to order Golden Gate University to allow them to complete their degrees.  But there are only four of them.  I can't see a court ordering a J.D. program to remain open because four students don't want to travel to Minnesota.  One plaintiff is foregoing her scholarship and transferring to a different law school because Mitchell-Hamline does not have a robust enough program in her desired field. 

According to Julianne Hill reporting for the ABA Journal, the court has set a hearing on the request for injunctive relief for September 13th.  By then, students will be well into their first semesters at the partner law schools.  That seems like something like a pocket denial of the injunction, and then the only question would be whether students are entitled to damages.

Disney, Contracts of Adhesion, and Arbitration-Clause Bootstrapping

Disney is in the news this week, and not in a good way.  For the truly awful facts of the case, you can't do better than Emily Crane's and Alexandra Steigrad's reporting in the New York Post here and here.  In short, Dr. Kanokporn Tangsuan had severe allergies.  She ate in a Disney restaurant.  She informed the restaurant of her allergies and the restaurant staff gave repeated assurances that her food was allergen-free.  Soon after her meal, she was dead, and an autopsy revealed that her death was caused by allergens. 

Okay, those are terrible facts. But what's going on with arbitration clauses in contracts of adhesion is, perhaps less dramatic, but still highly concerning.  Christopher Leslie has described what he terms "arbitration bootstrapping."  Professor Leslie defines bootstrapping as the corporate practice of loading "mandatory arbitration clauses with unconscionable contract terms."  Richard Frankel has published a thoughtful response here.  Increasingly, we are seeing a new form of arbitration bootstrapping; let's call it "arbitration-clause bootstrapping."  Once a consumer has "agreed" to an arbitration provision through one interaction with a business entity, that entity then tries to apply that same arbitration provision to some completely unrelated interaction with the entity.  I've been stockpiling posts all summer, and I keep on coming across these situations.  Earlier in the summer, we wrote about Andrea Boyack's scholarship on abuse on contract, and there's plenty more where that came from.

Image by DALL-E

So, getting back to the case, when Dr. Tangusuan's husband, Jeffrey Piccolo, sued Disney for negligence, Disney responded with a motion to compel arbitration.  It did so on two grounds.  First, Mr. Piccolo years ago signed up for a trial subscription to Disney +, and when he did so he "agreed" that all disputes should go to arbitration.  Second, one month before his wife's death, Mr. Piccolo bought tickets to the Epcot theme park using the "My Disney Experience" app, which also has an arbitration provision.  So, Disney's argument seems to be if you "agree" to arbitration with respect to one transaction with the company, you are agreeing to arbitration with respect to all interactions with the company.  And, as Christopher Leslie's scholarship suggests, that arbitration provision can be used to bootstrap additional terms, that otherwise might not be enforceable, into the parties' "agreement."  As Andrea Boyack's scholarship illustrates, consumers do not read the boilerplate terms of contracts of adhesion, hence the scare quotes bracketing forms of the word "agree" throughout this post.  

You might wonder what's so bad about arbitration.  Substantively, there might not be any difference in this case.  Still, I can think of at least two reasons why Mr. Piccolo and his attorneys might prefer litigation.  First, they might trust a jury rather than an arbitral panel to appropriately value their claim.  Second, they might want the publicity associated with litigation to shine a spotlight on Disney's conduct.  Of course, Disney's arbitration-clause bootstrapping has not helped it to avoid publicity in this case.  Nonetheless, both of those reasons to prefer litigation are also reasons why the threat of litigation enhances the settlement value of the claim.

None of this might matter in this case.  Even if the court allows Disney to engage in arbitration-clause bootstrapping, it might not think that the arbitration clause applies in this case, given that the suit is being brought on behalf of Dr. Tangusan's estate, which never "agreed" to arbitration.

UPDATE: David Horton (left), who is either maddeningly youthful or really needs to update his website, has provided a link to Disney's motion to compel.  My post noted that the estate is not a party to an arbitration provision.  David adds that neither is the defendant in the case, Walt Disney Parks and Resorts, U.S., Inc.  David's forthcoming article Accidental Arbitration, which was on my summer reading list but is now on my urgent reading list, covers the subject matter that I have called arbitration-clause bootstrapping.  He speaks of it in terms of defendants attempts "to enforce ultra-broad arbitration agreements that nobody at the time of contracting could have foreseen would be relevant to the lawsuit."  It is a topic that he also addressed in his already-published article Infinite Arbitration Clauses.

Oklahoma Supreme Court Finds Contract for Catholic Charter School Violates the Establishment Clause

I mean, is anybody really surprised? This case was brought by Oklahoma's Attorney General, Gentner Drummond (right), a conservative Republican, who believes in the rule of law.  That quality has caused a series of clashes between the Attorney General and the more committed cultural warriors in his party. 

In this case, Oklahoma's Virtual Charter School Board (the Board) has exclusive authority to form virtual schools. In October, 2023, the Board voted 3-2 to approve a charter contract with St. Isidore, a charter school formed by the Catholic Archdiocese of Oklahoma City and Catholic Diocese of Tulsa. St. Isidore describes itself as an instrument of the Catholic Church committed to the Church's evangelizing mission.

The contract entered into between the Board and St. Isidore departed in key ways from the standard contract that the Board entered into with other charter schools.  While a typical  charter school must warrant that it is not affiliated with a sectarian school or religious institution, the contract with St. Isidore states that St. Isidore is affiliated with a sectarian school or religious institution.  Other charter schools have to be non-sectarian.  St. Isidore's contract specifically recognizes its right to freely exercise its religious beliefs and practices consistent with its religious protections.

On June 25th, in Drummond v. Oklahoma Statewide Virtual Charter School Board, by a vote of 7-1, with one Justice recused, Oklahoma's Supreme Court found that the Board's plan to allow for a publicly-funded Catholic charter school violates Oklahoma's constitution.  Six Justices also found that the contract violated the federal Constitution's Establishment Clause.  

The Supreme Court first concluded that the Board's contract with St. Isidore violates Article II, Section 5 of the Oklahoma Constitution, which reads:

No public money or property shall ever be appropriated, applied, donated, or used, directly or indirectly, for the use, benefit, or support of any sect, church, denomination, or system of religion, or for the use, benefit, or support of any priest, preacher, minister, or other religious teacher or dignitary, or sectarian institution as such.

That seems pretty clear, and Oklahoma courts have repeatedly construed this provision as prohibiting state funding for sectarian schools.  Consistent with the state constitution, the Act allowing for the creation of charter schools also requires that they be non-sectarian.

The Supreme Court next finds that St. Isidore is a state actor because of its reliance on state funding.  I'm not sure why this holding is even necessary to the outcome of the case, as the suit is brought in mandamus against the Board.  St. Isidore intervened.  The point of the case is that the Board should be enjoined from contracting with St. Isidore.  I suspect that finding St. Isidore to be a state actor is relevant to the Court's Free Exercise discussion, which I summarize in the next paragraph.

Finally, the Court turns its attention to the U.S. Constitution.  It first finds that the contract with St. Isidore also fails under the U.S. Constitution's Establishment Clause.  It next finds no violation of the Free Exercise Clause, notwithstanding the recent trilogy of SCOTUS cases allowing for public funding to flow to private sectarian schools for certain purposes.  The difference here is that St. Isidore would be a public school.

The ability to admit that one is wrong about the law has been excised from the DNA of many Republican politicians.  And so, Oklahoma's Superintendent of Schools, Ryan Walters, previously discussed on this blog here and here and here, without the benefit of any legal training, doubles down on his commitment to state-funded religious eduction, writing on Twitter:

It’s my firm belief that once again, the Oklahoma Supreme Court got it wrong. The words ‘separation of church and state’ do not appear in our Constitution, and it is outrageous that the Oklahoma Supreme Court misunderstood key cases involving the First Amendment and sanctioned discrimination against Christians based solely on their faith.

Mr. Walters cites to the lone dissenting Justice (whose opinion can be found here), who found that because St. Isidore is not a state actor, denying it the opportunity to run a virtual charter school violates the U.S. Constitution's Free Exercise clause.  Because the dissent finds that St. Isidore is not a state actor, the relationship between the Board and the school is purely contractual, and there is nothing unconstitutional about the state contracting with sectarian entities.  Moreover, following on recent SCOTUS cases allowing state funds to flow to sectarian schools, the dissenting Justice finds that the Majority's order that the Board rescind its contract with St. Isidore violates the Free Exercise Clause.

This is a cutting-edge argument and an opportunity to petition SCOTUS for review.  SCOTUS has gone quite far in eliminating the "play in the joints" that once characterized its understanding of the First Amendment's religion clauses.  It used to be that states could allow funds to flow to sectarian educational institutions, either to be used for non-sectarian purposes or indirectly by allowing students or parents to direct state fellowships or education vouchers to the schools of their choice.  Recently, SCOTUS has held that where public education funds are available to private non-sectarian schools, they also must be available to private sectarian schools. Will SCOTUS be willing to take the next step and allow for the creation of public sectarian schools?  Stay tuned.

Reviewing Larry DiMatteo and Irma Russell and Barbara K. Bucholtz, Part I

Students often ask me to recommend study aids.  I give them two bits of contradictory advice. First, I tell them they don't need any study aids for my course and that such aids might panic or confuse them.  Then I tell them that I've never found a bad one.  They all provide reliable, insightful, interesting takes on the material.  The dangers is only that they contain more wisdom than first-year students can digest.  The only thing I don't recommend is the thing they are most likely to use -- Quimbee videos.

But you know who does benefit from reading study aids, hornbooks, and treatises?  Contracts Profs.  I volunteered some time ago to review a book by Larry Di Matteo (right) and another by Irma Russell (below left) and Barbara K. Bucholtz (below right).  It has taken me a while to get to it, but I have decided to review them side-by-side, and chapter by chapter as I use them to help me refresh my approach to teaching contracts.  I should add that, while Professor DiMatteo's book is still quite new, having been published in 2023, Irma Russell and Barbara Bucholtz's book dates from 2011.  

After a short preface, Professor DiMatteo's book, Principles of Contract Law and Theory (Principles) begins with an introduction, covering history, law and equity, justifications for contract law, rules principles, and standards, specialized rules, and boundaries of contract.  As the preface makes clear, unlike most American books on the subject, Principles devotes equal time to UK and American law.  The book could serve as a textbook for "intermediate students" but also as a reference for scholars and practitioners looking for an introduction that will situate contracts doctrine in a theoretical frame. (xviii)

Indeed, this is not material that I would recommend to first-year students. Principles delves briefly and deftly into topics, like the relationship between canon law and common law (4-6), that are not usually the stuff of contracts hornbooks.  The subject-matter is interesting and leaves the reader wanting more.  The work is lightly footnoted.  For one used to the obsessive footnoting of law reviews, this makes for comfortable reading, but at times I wished I knew the sources in case I wanted to learn more about, say the role of late-19th century treaties in "developing a more rational and comprehensive system of rules and principles" (13) or how prior to the nineteenth century "much of contract theory was anchored in the Aristotelian idea of contract as commutative justice." (15)

There is a great deal that could be unpacked in the way Principles approaches justifications, drawing clear-cut lines between English law's preference for certainty and predictability, which yields formalist, bright-line rules, and the U.S. preference for justice in the particular case, which makes American law more open to squishy principles like good faith, unconscionability and good faith. (17-18) I assume these contracts get fleshed out in later chapters.  There is a richness in this opening chapter to which I cannot do justice in this space.  Suffice to say that it sets the table in way that leaves the reader hungry to learn more about literally dozens of subjects. 

In the introduction to their book, Mastering Contract Law (Mastering), Professors Russell and Bucholtz make clear that their book aims to provide an overview of topics covered in the first-year contracts course. However, it supplements its organization built on proving elements of a contract claim with an exploration of some of the transactional aspects of contracts law. (xxv)

The first chapter addresses  some preliminary matters before they move into the substance of doctrine.  Some of these matters, like seriousness of intention (2) and the UCC (7), are addressed briefly in just a paragraph, with indications of more to come in later chapters, while other topics, like the interests protected under contract law (2-4) and the movement towards uniform law (7-9) get lengthier, through still introductory treatment.  The discussion of the interests protected under contract law covers expectation, reliance, and restitution. The section on the movement towards uniformity focuses on the American Law Institute's Restatements and covers the history of the two Restatements of contracts law and the status of the Restatements as persuasive authority.

I'm a bit troubled by their section on implied-in-law and implied-in-fact contracts.  I don't think it's a good idea to link these ideas in students minds, as the former are not contracts, while the latter are contracts every bit as much as express agreements.  I am also a bit miffed that Mastering uses Wood v. Lady Duff-Gordon to illustrate implied-in-fact contracts.  That case involved an express agreement.  Judge Cardozo did not imply a contract in that case; he implied a term.  Similarly, the discussion of Sullivan v. O'Connor seems misplaced in this section, as Mastering uses that case to illustrate different measures of damages rather than implied contracts, whether in law or in fact.

These quibbles aside, the opening chapter provides clear guidance on a number of topics.  It begins with five basic questions that one can ask of a typical contracts problem (1-2), and it concludes with six "checkpoints" that provide a quick overview of the first chapter's themes.

Workers Allege Fraudulent Inducement After Disney Asked Them to Move to Florida

According to Mike Schneider writing for the Associated Press, The Disney Company asked 2000 of its employees to relocate from Southern California to Florida, as Disney was planning to build a new company campus near its theme park in Orlando.  The employees allege that Disney encouraged them to move through incentives and with the threat that their employment would be terminated if they did not move.

Even though some employees resisted the move, sometime between late 2021 and June 2022, when Disney announced that the move was delayed, plaintiffs sold their California homes and relocated to Florida.  They allege that, even after Disney announced that its new campus would not open until 2026, it encouraged workers to move by 2024.  

Enter a certain Florida governor (right), who started a culture war against Disney.  In 2023, Disney announced that it had scrapped plans for a relocation.  According to Mike Schneider's reporting, it instructed workers who had already moved to Florida that they could head back to California.  

But with Disney's decision to cancel its planned construction in Florida, the housing market there declined, while housing prices in California continued to climb.  Although employees worried about losing their jobs if they stayed in Florida, they also did not think they could afford to return to California.  They are suing Disney, alleging fraudulent inducement.

Seems like a tough claim to win on, especially against a very well-resourced company.  But all may still work out for the best in the Happiest Place on Earth.  Mike Schneider also reports for The Associated Press that The Disney Company and the Governor entered into a fifteen-year development agreement in May in which Disney committed to pump $17 billion into the local economy over the next two decades.  It is not clear what concessions Disney got in exchange for continuing its investment in the state.  It seems like the Governor  caused, or at least exacerbated, a lot of disruption in peoples' lives.  Suing him is not an option, and of course, he too can argue that much of his conduct was fraudulently induced.  He thought he was going to be President.

Recent scholarship by Jonathan Harris (left) suggests that there might also be an economic duress angle in cases like this.  Such cases are hard to win.  However, like a promissory estoppel claim, such a claim might improve the settlement value of the claim.  If the employment at issue is at will, damages might be limited to expenses incurred, which might not even cover the attorneys' fees involved in suing a company like Disney.  Hence, the need for a lawsuit that will be expensive enough for Disney to defend that it will be brought to the bargaining table.  Other recent work by Rachel Arnow-Richman (above right) and J.H. Verkerke (right) on Deconstructing Employment Law is also of note here on the problems with conceptualizing at-will employment as a form of contract under current doctrine.

As is so often the case, there was a flurry of media interest in this case back in June and now . . . crickets.  I was hoping to be able to provide an update, but I guess the reporters have all moved on to the next story.

News From New Zealand: Whan a Man Disappoints a Woman, Is It Breach?

Six years into their relationship, which included periods of co-habitation, a man promised to take his girlfriend to the airport and look after her dogs while she was on holiday.  When the day of travel arrived, he didn't show or return her calls.  She missed her flight, rescheduled, and paid to put her dogs in a kennel. 

Moreover, the two had planned to go on holiday together in December, 2023.  The woman had bought a ferry ticket for the man, but again, he had stopped taking her calls, and she was stuck with a presumably non-refundable ticket.

The dogs and the ferry ride complicate matters, of course, but airport rides are high-stakes promises. When I lived in Valparaiso, Indiana, airport rides could be at least two hours round trip (Midway) or three or more (O'Hare). One was lucky to have one friend willing to take you to the airport.  My beloved colleague, Rebecca Huss (right), treated airport driving as the highest level of friendship.  I can easily imagine that Rebecca would have treated a six-year relationship as a probationary period during which she still was not obligated to driver her partner to the airport.  That would be level-jumping. Once, when we thought our law school was going to relocate to Tennessee (long story), a bunch of us went down for a publicity shoot. I volunteered to use my car to ferry myself and some colleagues to O'Hare.  When Rebecca said that she would come with me, I said, "Okay, but now you owe me a ride to the airport!"  I did that because I knew that Rebecca would get steamed and shout "I'M NOT DRIVING YOU TO THE AIRPORT!!!" She didn't disappoint.

In the case at issue, the woman, identified as CL, decided to sue the man, identified as HG, for breach of contract in New Zealand's Disputes Tribunal.  In a charmingly poorly-written order, perfect for the first day of teaching, the tribunal found that CL had not stated a claim for breach of contract.  A good thing too, because had the tribunal found otherwise, it's not clear that anyone would have been able to reach HG to get him to pay up.  He was invited to participate in a hearing by telephone, but "HG sent an email that he would not attend the hearing by answering his phone." Subsequent calls from the tribunal went unanswered.  This man is one unfriendly ghost.

The tribunal found that there was no contract here because the parties never intended to be legally bound.  "Although a promise was made, it falls short of being a contract. It forms part of the everyday family and domestic relationship agreements that are not enforceable in the Disputes Tribunal."

That strikes me as all there is to say, at least with respect to HG's promise to take CL to the airport. Airport rides are an act of Grace.

The order does not separately address the ferry ticket, and there might be a viable claim of promissory estoppel there.  The tribunal's neglect of that issue may be a product of a pleading failure.  CL might not have known of the doctrine. In the alternative, it may be that New Zealand law does not award damages for breach of a social promise, regardless of reliance.  

Input on that last point would be welcome.

Contracts (Plea Deals) May Finally Resolve Some of the 9/11 Cases

Seems fitting to ease in to blogging again with some breaking news, even if it is not your typical contracts law fare.  More like Lawfare fare.

Back in May, I suggested that contracts, in the form of plea deals, were the best way to finally end the national shame of the detentions at Guantanamo Bay and the travesty of justice that ought to bring resolution to the cases against the people responsible for the attacks on the United States on September 11, 2001.  Now, Carol Rosenberg (right), the last reporter standing in Gitmo, brings us news in The New York Times that some of the 9/11 defendants have entered into plea deals. 

Khalid Shaikh Mohammed (KSM), Walid bin Attash, and Mustafa al-Hawsawi, who have been in U.S. custody since 2003, agreed to plead guilty to the murder of 2.976 people in exchange for a promise that they will be spared the death penalty.  They were supposed to stand trial in the military tribunals set up at Guantanamo Bay.  The defendants had been held there since 2006, but their trial has been mired in pretrial proceedings for ten years.  It was unclear whether they were ever going to be tried.  We know, for example, that KSM was waterboarded 183 times, and Carol Rosenberg suggests the possibility that the military judge might throw out their confessions, which would have been a key piece of evidence.  

As expected, relatives of some of the defendants' victims are upset that the death penalty will be taken off the table.  Others are relieved that there will be some resolution.  While there will not be a trial, there will be hearing, which will provide an opportunity for the victims' families and the public at large to get all of the information they might want to learn from the perpetrators. KSM (left) had previously bragged about having been the "mastermind" behind 9/11.  Unless he has changed his ways, we can expect that he will be happy to have a forum in which to explain his thought processes and the techniques he used to perpetrate mass murder.  It seems unlikely that he will have much to add to what he has already told his interrogators.  We will also learn from the defendants about their treatment while in custody.  What we hear will be ugly but again it seems unlikely that people who have been following the story of US treatment of detainees in the war on terror will be surprised by what they hear.  But who knows? Some of my students were probably in kindergarten when we learned about crimes perpetrated by Americans against detainees at the Abu Ghraib prison.  The hearing may revive interest and educate the public about this chapter of our recent history.

There were originally five defendants in the case.  One has been found unfit to stand trial due to mental illness.  A fifth, Ammar al Baluchi, might have to stand trial alone.  Carol Rosenberg reports that he conditioned his agreement to a plea on a demand that the U.S. set up a civilian-run torture treatment facility for the defendants in prison.  The government may not have been willing to commit to that, but perhaps the government has more leverage now that Mr. Baluchi stands alone.

This may be a farewell gift from the Biden administration.  These talks have been going on for over two years.  The Biden administration originally would not accept the defendants' terms.  Now that President Biden is not seeking a second term, perhaps he feels emboldened to shut down as much of Gitmo as he can so that future administrations will not have to deal with the continued embarrassment of  the indefinite detention of mass murderers who cannot be tried because the U.S. found compliance with legal norms inconvenient and thus tainted all of the evidence that might have been marshaled so that they could be convicted of their crimes. 

Some American Reflections on KCON XVII

How was this year's KCON different from other KCONs?  I've been reflecting on that question in the aftermath of the conference.  The conference was large.  There were usually three concurrent sessions going at once.  I can't replicate Nick Mouttotos's feat in yesterday's post by providing an overview of the conference as a whole. Rather, this post is impressionist.

I will highlight three main differences that made this years KCON unique.  They correspond roughly to the conference's three plenary sessions, and then a fourth difference -- a focus on relational contracts theory that really took me by surprise.  The plenary themes were respectively: Hugh Beale on the drivers of difference among national contracts law regimes; Mindy Chen-Wishart on the tendency of asymmetrical contracts towards self-destruction; and Aditi Bagchi on contracts law theory.  In short, the themes were comparative contracts law, regulating consumer contracts and other contracts of adhesion, and theory -- broadly construed.

The conference organizer, Dr. Katarzyna Kryla-Cudna (Kasia), chose well in inviting Hugh Beale (right) to open the conference. After the obligatory apologies for his lack of expertise in comparative law, Professor Beale provided some keen observations not only on his proposed topics -- the drivers of diversity in legal systems -- but also on the ways in which we measure such diversity.  Adopting a functional approach, Professor Beale first noted that, setting aside terminological differences, one finds that contracts law across jurisdictions will often yield the same results in cases arising from similar facts.

That said, there are areas of striking non-uniformity.  One area of concentration during the conference was the doctrine of "good faith" and the related obligations of disclosure and fraud through non-disclosure or concealment.  Beyond Professor Beale's presentation, I learned at the conference there is some movement in the UK to adopt American approaches to the concept of good faith, but European perspectives on the subject persuaded to me that our doctrine of good faith is simultaneously well-developed and under-theorized.  Our courts invoke various good faith doctrines in all sorts of contexts, but we lack an systematic understanding of the doctrine, which perhaps explains a lot of variation in how the doctrine applies in our different jurisdictions. 

Professor Beale also touched on the most foundational differences between common-law and French approaches to formation.  In principle, Professor Beale said, the French take a subjective approach to formation.  At least at the panels I attended, the conference did not return to this theme, and I am glad.  I think my head would have exploded had I tried to work out all the consequences of such an approach to formation.

Professor Beale also introduced the comparative theme of the interaction between contracts doctrine and regulation.  This subject also was explored in multiple panels.  Professor Beale's paper focused on B2B transactions, but many papers explored the realm of consumer contracts. My general sense is that, as a regulatory matter, European approaches are far more protective of consumer interests in the context of contracts of adhesion than is the U.S. But my sense is that relational contracts theory explains why things end up about the same.  Our law allows for some pretty sharp contracting practices, but our service-oriented commercial culture and our class-action mechanism combine to discourage companies from insisting on their legal rights.  Relatedly, Professor Beale touched on the very different role of judges in the common-law and civil-law traditions.  He provided us with a wealth of themes, which were explored in greater depth, and often with an appreciative nod in Professor Beale's direction throughout the conference.  Professor Beale was also active in the sessions providing illustrations and anecdotes from his experience as a Law Commissioner, delivered with the obligatory self-deprecation one expects from UK academics.

Mindy Chen-Wishart's work was at the center of the conference both literally and figuratively.  She presented her work just after lunch on the first day of the conference, just shy of the conference's midpoint and was also the event's honoree, and so her work was also a theme at the conference dinner.  References to her work in other papers throughout the conference make clear that, once again, Kasia made an inspired choice.

Professor Chen-Wishart's theme was consumer contracting and the disconnect between our theories of contracting, whether based in will theory, promise, or assent, and the reality of contracts of adhesion.  Much like Peggy Radin's division of the universe of contracts into World A of negotiation and World B of boilerplate (you can gather links from our dedicated symposium here), Professor Chen-Wishart noted that contract theory assumes negotiations between parties of relatively equal bargaining power.  The reality is nothing like that.  Moreover, Professor Chen-Wishart's presentation focused on the ways in which modern contracts law is self-cannibalizing.  One-sided contractual terms negate the principles that contract theory posits as the reasons why contracts are binding.

Professor Chen-Wishart's presentation interacted with many of the presentations that followed, perhaps because engagement with her work is unavoidable for UK and comparative scholars.  Panelists addressing conference themes of consumer contracting, adhesion contracting, defenses to enforcement of one-sided terms, and regulation of consumer contracts all referenced Professor Chen-Wishart's work and the frameworks she has created for addressing these issues.

The final plenary session featured Aditi Bagchi's work on contract as exchange, a tour de force, piece of scholarship with which future scholarship on the theory of contracts will have to engage.  Professor Bagchi would replace theories of contract sounding in will theory or promise with a focus on the actual work that contracts do in bringing about material exchange. 

Professor Bagchi's conference presentation was stimulating and accessible.  She ably identified the elements of actual contracting left unaddressed by traditional theories of contract sounding in will theory, promise, or agreement.  She then offered an overview of the comparative advantages of her theory of contract as exchange.  It was a stimulating talk that left me wanting more.

Professor Bagchi circulated a draft of her paper which is far deeper, richer, and more philosophically challenging than the conference presentation.  It is also dauntingly complex.  I won't try to say more beyond recommending that readers look out for the paper when it makes its appearance on SSRN or in print.  This is very weighty scholarship, obviously the product of decades of reflection on the subject.  Professor Bagchi's scholarship contains multitudes but then synthesizes that material into a challenging reconceptualization of contracts theory.  She renders the familiar strange and then re-familiarizes it in striking ways.

I can't say that the panels engaged with Professor Bagchi's theories directly.  More so than the other plenary papers, Professor Bagchi was striking out in new directions, building on her prior scholarship but staking out new territory.  Nonetheless, her work is ambitious enough to touch on the conferences major themes beyond contracts theory.  Foundational as it is, it can apply to any national tradition, and her work is intensely engaged in the sorts of problems that arise in a world where the law of contracting has moved from negotiation to adhesion. 

While this year's iteration of the conference supplemented the usual KCON subject matter, there were also some themes missing or downplayed.  The first was pedagogy.  KCON usually includes multiple panels on teaching contracts law.  That subject went unaddressed.  Second, while two panels on innovation addressed the intersection of contracts law and technology, they seem to have focused  on smart contracts and blockchain.  I did not attend either session, so I'm not sure what else they covered.  In any case, I expect that when we return to the U.S. next year for KCON XVIII, the impact of AI on contract drafting and contract interpretation/enforcement will be a pervasive theme.

I hope that we can continue to pursue some of the unique themes of this year's conference next year.  While we have a favored candidate for next year's venue, place and date are yet to be determined.  Stay tuned.

11th Circuit Grants Injunction 42 USC § 1981 Against Venture Capital Support for Black Women

Early in my contracts course, I cover freedom of contract.  I teach a case about the common law right to refuse to enter into a contract if you don't want to do so.  I follow that up with two cases, Barfield v. Commerce Bank & Gregory v. Dillard's, Inc., both discussed in this guest post by Charles Calleros. Those two cases are about 42 U.S.C. § 1981, which provides that “[a]ll persons . . . shall have the right to make and enforce contracts . . . as is enjoyed by White citizens.” 

Thanks to Melissa Murray and Kate Shaw and last week's episode of the Strict Scrutiny Podcast, I just learned of a new case out of the Eleventh Circuit interpreting §1981 in a new context. The case is American Alliance for Civil Rights v. Fearless Fund Management, LLC, and it involves a § 1981 challenge to the Fearless Strivers Grant Contest (the Contest), an entrepreneurship funding competition open only to businesses majority-owned by black women.  The Contest awards winners $20,000, plus access to digital tools and mentorship.  The plan was to run the Contest four times, with each iteration of the Contest open to applicants for one month.

The Eleventh Circuit panel determined first that the plaintiffs had standing and second that the Contest is substantially likely to violate § 1981. The panel remanded the case with instructions to the District Court that it preliminarily enjoin the Contest. The standing issue is an important one and the basis for an eloquent dissent in the case.  In order to claim that one was denied opportunity to "make and enforce a contract" under § 1981, a plaintiff has to show that they were "able and ready" to enter into a contract.  

Plaintiffs presented evidence that they were willing and able to enter the contest.  The unnamed plaintiffs were business owners that could use $20,000 and specified how they would use the grants if successful.  However, they never entered the contest because they are not majority-owned by Black women.  The Dillard's case is interesting because the plaintiffs there had their claims dismissed because they left the store (after being surveilled, harassed, insulted, or denied counter service) without attempting to buy something.  The court required them to take the next step, despite the fact that it may have been impossible to them buy anything if, for example, the employee at the jewelry counter wouldn't show how them anything.  Here, the plaintiffs had not in fact attempted to enter the Contest. 

Moreover, while anonymity is not a bar to recovery under § 1981, it seems to me that it raises certain issues of redressability not addressed in the opinion.  In order for plaintiffs to have a redressable injury, they need not merely have a right to enter the Contest but have a reasonable shot at winning it.  Unless we know more about the corporations and their suitability as applicants, how can the court determine whether they suffer any injury by not entering the contest. There wasn't any doubt that, but for Dillard's alleged discriminatory conduct, plaintiffs were able and ready to make purchases there.  Enter. Lose. Sue.  Why don't these corporations have to jump through the same hoops as natural persons? 

Moreover, there is a recognized exception non-discrimination laws in the affirmative action context.  The majority breezily concludes that the Contest does not fall within the exception because it creates an "absolute bar" to applicants other than Black women.  That seems a bit much, as it would prohibit all grants and awards that target a particular racial group.  As the dissent notes in a footnote, "Black women received only .0006% of [venture capital] funding raised by startups between 2009 and 2017.” That vital information is nowhere acknowledge in the majority opinion.  Viewed in context, the Contest is very far an "absolute bar" to people other than Black women receiving venture capital funding.  In fact, initiatives like the Contest may be the only way that Black women entrepreneurs may have access to capital.

The Fearless Fund (Fearless) contended that its Contest was not a contract. That argument was pretty weak, given that the Contest rules specified "“BY ENTERING THIS CONTEST, YOU AGREE TO THESE OFFICIAL RULES, WHICH ARE A CONTRACT.” Rather clumsily, Fearless tried to amend its rules after getting sued, but a rose by any other name . . . .  Fearless next attempted to argue that it was engaged in expressive conduct protected by the First Amendment, an argument to which the Eleventh Circuit was unsympathetic. I too would be concerned if the First Amendment could become a justification for race-based discrimination.

This seems like it might be a nice case to teach with Barfield  and Gregory. The challenging issue here, which is not really a contracts issue, is whether a remedial statute such as § 1981 can be used to enjoin a Contest designed to give Black women, the very people § 1981 was passed to protect, the opportunity to compete for venture capital funding.  As it turns out, the Supreme Court determined long ago that § 1981 prohibits all discrimination based on race, including  discrimination against white people.  The opinion made that determination was authored by Justice Thurgood Marshall (right)!

My instinct is not to try to apply a statute that expressly states that its about race in a color-blind way, but Justice Marshall provided a discussion of the legislative history behind the statute and is quite convincing that it was designed to protect all people from discrimination on the basis of race.  In any case, the Eleventh Circuit is bound by his decision.  The concurring opinion from Judge Rosenbaum (left) points towards a way out, at least in this case.  Her introduction is worth quoting at length:

No one doubts the sincerity of an Arsenal (soccer) player’s desire to beat Tottenham. But he can’t be allowed to try to win by flopping on the field, faking an injury near Tottenham’s goal. . . . Referees’ vigilance prevents players who have a sincere desire to defeat their opponents—but who try to do so through manufactured fouls— from commandeering referees to improperly exercise their adjudicatory authority to award unwarranted penalty kicks. . . .

Here, no one doubts the sincerity of American Alliance for Equal Rights’s desire to challenge what it views as “distinctions and preferences made on the basis of race and ethnicity.” . . .  But as American Alliance has portrayed its members’ alleged injuries, it has shown nothing more than flopping on the field. Although three of American Alliance’s members pay lip service to the idea they are “ready and able” to participate in Fearless’s Contest, their declarations show, in context, that none has a genuine interest in actually entering the Contest. Indeed, not one has established that she is, in fact, able and ready to enter the Contest and would do so in the upcoming period if the Contest were open to non-Black women. So American Alliance’s alleged injuries don’t show “a real controversy with real impact on real persons” among its membership. . . . Rather, they reflect an attempt to manufacture an “injury” to allow American Alliance to challenge the Contest. That is not enough for standing. 

There was an nteresting lone concurrence from Justice Thomas in last week's mifepristone case indicating his skepticism about associational standing generally.  He specifically references last term's Students for Fair Admissions case, brought by the law firm that brought this one.  Justice Thomas has got me thinking about why associational standing is appropriate here.  Why can't these injured parties bring the case on their own with the law firm acting as counsel of record rather than party of record?