Sunday, September 22, 2019
A sexual investigation was launched against male student “John Doe” of Columbia College of Chicago (“Columbia”) after a female accused Doe of non-consensual sexual relations. A formal investigation and a hearing led to Doe being suspended from Columbia for an academic year. Doe then filed suit in federal court alleging, i.a., Title IX violations and that Columbia had breached its contract with him by not providing him with an impartial investigation and adjudication of the matter. He also asserted that he did not get access to the documentation relating to his hearing, that Columbia failed to discipline female individuals who engaged in similar conduct, and that the hearing panel’s decision was against the weight of the evidence.
The trial and appellate courts both pointed out that Illinois courts have expressed a reluctance to interfere with academic affairs and have held that a student’s breach of contract claim must involve decisions that were arbitrary, capricious, or made in bad faith. Thus, Columbia would not even have been liable if the court had found that it exercised its academic judgment unwisely; rather, it must have disciplined a student without any rational basis. This was not the case here.
Doe had had a chance to review the documentation, it was found. Further, Columbia was not arbitrary or capricious in its response to Doe’s complaints about female students: they responded quickly, investigated, handled his complaints, and encouraged him to inform the university if any further incidents occurred.
In other words, the burden in such cases is high. To find in the student’s favor, the courts must find that the university “did not exercise its academic judgment at all, instead acting arbitrarily or in bad faith in its treatment of plaintiff.”
This outcome was probably warranted in this case and the reaffirmation of the standard welcome to educational institutions. On the other hand, I find it slightly disturbing that, under better facts, a student’s contractual rights and arguments could not be given any weight even if the student could show that the university “exercised its academic judgment unwisely” or “at all”? Of course, as law professors, we are aware of the difficulty it can be to deal with students who may be complaining about something out of emotional issues with their grades or the like. However, just because a student is a student and, of course, protected by federal civil rights law does not mean that the student may not have a valid contractual argument. As we know from extensive media discussions about the expense of going to college modernly, does it make sense from a contracts law point of view to say that the students cannot prevail with a contract claim even if the university exercised its judgment unwisely? - Is the latter not exactly what you pay a university for?
Of course, these issues intersect with constitutional law, which must be followed. But the standard is somewhat troubling under some circumstances, I think.
The case is Doe v. Columbia College Chicago, 2019 WL 3796000.
Tuesday, September 3, 2019
U.S. District Judge William Orrick (ND CA) has just held that companies must still provide online customers with adequate notice of arbitration and other provisions. This is so in at least the Ninth Circuit after Nguyen v. Barnes & Noble(763 F.3d 1171 (Ninth Cir. Ct. of App.)). (I proudly note that Kevin Nguyen was a student in one of my 1L Contracts classes years ago!)
As reported by Reuters, it’s become standard operating procedure for companies to require online or mobile customers to agree to mandatory arbitration by clicking their assent to terms of service. But there’s still a roaring debate about exactly howcompanies can bind their customers (and employees, for that matter) to arbitration in other contexts. Do customers assent to arbitration merely by visiting a website or downloading a mobile app that provides a link to service terms mandating arbitration? Or must consumers specifically acknowledge that they’ve surrendered their right to litigate?
Courts have had to scrutinize websites and apps to decide whether they provide consumers with enough information to allow informed assent. Judges have come to be generally skeptical of so-called browse-wrap agreements, in which companies merely post mandatory arbitration conditions and contend that customers have consented by continuing to use their services. Click-wrap agreements – in which companies present consumers with their terms of service and specifically require assent – are generally deemed to be enforceable. In the case just resolved by J. Orrick, the arbitration provision fell into an in-between category known as a “sign-in wrap.” Beginning in February 2018, when customers registered at the company’s website, they were required to click their assent to Juul’s terms of service, which prominently mentioned mandatory arbitration. But to see those terms of service, consumers had to click on a separate link.
Juul did not prominently highlight the hyperlink to its terms of service. The link, said J. Orrick, was virtually indistinguishable from the surrounding text – no color change, underlining, capitalization or italicization signaled to consumers that they could click to read Juul’s specific terms and conditions. One of the plaintiffs registered via a subsequent log-in iteration in which Juul underlined the hyperlink to its service terms, but J. Orrick found even that notice to be inadequate.
The case is Bradley Colgate, et al. v. Juul Labs, Inc., et al.,2019 WL 3997459.
Monday, August 19, 2019
Looking for a quick little case demonstrating the ongoing importance of the Statute of Frauds? Look no further: Back v. Cheasepake Applachia, L.L.C. provides one (773 Fed.Appx. 294 (2019).
In 1940, Thomas Back’s family entered into an oil-and-gas-lease with the Inland Gas Corporation, Chesapeake’s predecessor. This called for a flat-rate royalty of 12 cents per thousand cubic feet of gas to be extracted from the Back property. However, the oil corporations started paying 12.5% of the market price instead. In 2016, no less, Back filed suit alleging, among other things, breach of contract and fraud for underpayment by deducting too many expenses from the royalty payments and by basing these payments on false market prices.
The district court held, sua sponte, that the statute of frauds barred Back from claiming that his agreement differed from the original 1940 lease. The court of appeals disagreed, pointing out that “all that was needed was one or more writings which together identify the parties to the lease, the property, and the modified royalty amount. At least one of those writings must also bear Back’s signature as the lessor” (as the party against whom the agreement could be held). Because Back had signed the royalty checks that came with the statements over time, the Statute was satisfied.
The court did not point out why the lease fell under the Statute of Frauds to begin with. (As oil and gas leases neither fall under Articles 2 or 2A, this was presumably because of land recording statutes in Kentucky, but this is subject to further research for which I currently do not have the time. Let me know if you know.)
Monday, August 12, 2019
Here's another case for the "periodic reminder" file, this one reminding you that you are entering into enforceable contracts all over the place, often without really registering that's what you're doing. This recent case out of the Southern District of Florida, Incardone v. Royal Caribbean Cruises, Ltd., Case No. 16-20924-CIV-MARTINEZ/GOODMAN (behind paywall), reiterates this lesson in the context of a cruise. The plaintiff argued that there was no binding contract between the parties because there was no evidence she had ever agreed to any such contract, but Royal Caribbean pointed out that every passenger is required to agree to terms and conditions during the online check-in, and that's the only way they're allowed to board the ship. Therefore, the court found, there was a binding contract. Granted, probably not one the plaintiff was really aware of when she checked in to go on vacation, but she clicked the button nonetheless.
Friday, August 9, 2019
Many contracts have arbitration clauses these days, and parties consistently challenge their enforceability, and consistently get told they have to arbitrate. The challenges make some sense in consumer contracts where we might not expect the consumer to grasp all of the ins and outs of the legalese. However, I'm always a bit confused by arbitration clauses being challenged by more sophisticated parties in contracts that were negotiated. They were part of those contract discussions, much more so than consumers ever are. If they didn't want to have to arbitrate, they didn't have to put that clause in. Once it's in, though, they're bound by it.
A recent case out of the District of Arizona, Gravestone Entertainment LLC, v. Maxim Media Marketing Inc., No. CV-19-03385-PHX-GMS (behind paywall), is yet another case reminding us of this. The plaintiff produces horror films and licensed the defendant to distribute those films. Eventually, the relationship between the parties deteriorated and the licensing agreement was terminated. The plaintiff, however, alleged that the defendant went on distributing the films, thereby infringing on the plaintiff's copyright.
The defendant moved to dismiss and arbitrate the claims, and the court agreed, based on the terminated licensing agreement's arbitration clause, which was worded broadly enough to cover these claims and to survive the termination of the agreement. Nor, the court found, was it unconscionable.
Wednesday, August 7, 2019
Oops! Writing the wrong corporate name on a contract doesn't necessarily excuse you from that contract
A recent case out of Texas, Austin Tapas, LP v. Performance Food Group, Inc., No. 03-18-00680-CV, refuses to let a party off on the technicality of having accidentally put the wrong corporate name on the contract. The proper corporate entity was Austin Tapas, LP. The contract had the name Austin Tapas, LLC. Austin Tapas, LP argued that this meant there had never been a contract between it and Performance Food Group. The court disagreed, though. There was no entity named "Austin Tapas, LLC" and the writing of that name on the contract was merely an error, as Austin Tapas itself admitted. Therefore, it was bound to the contract.
Wednesday, July 24, 2019
School handbook statements about civility, respect, diversity, and inclusiveness are aspirational, not contractually binding
A recent case out of the First Circuit, G. v. The Fay School, No. 18-1602 (behind paywall), has an ADA angle, but I'm focusing on the breach of contract claim, which was based on statements in the school handbook about respect, civility, and diversity. The court held, though: "Without diminishing the importance of these words, they are exactly the sort of generalized, aspirational statements that are insufficiently definite to form a contract." For a school handbook to form a binding contract, it has to consist of "well-defined procedures and policies," rather than just generalized statements such as those at issue in this case. The student and his parents failed to point to any statements in the handbook definite enough to form the basis of a contract, borne out by the fact that the school's enrollment contract, signed by the student's parents, specifically stated that the handbook was not a contract but rather just "general expectations."
The First Circuit decision is behind a paywall but you can read some reporting on the district court decision here.
Monday, July 22, 2019
You can watch the appellate arguments in the case here.
Thursday, July 18, 2019
What you should do if you want your Super Bowl party to be able to last until 4 a.m. (hint: not this)
A recent case out of New York, PJAM Prods., LLC v. M Light, LLC, 652409/2018, stems from a Super Bowl party. PJAM licensed M Light's venue to hold a party coinciding with Super Bowl weekend. There were discussions about the party being allowed to go on until 4 a.m., even though local law required the party to shut down by 2 a.m. PJAM claimed that M Light talked about being able to get permission from the city to keep the venue open until 4 a.m.
No such permission was ever received, however, and PJAM sued for breach of contract. The problem was there was nothing in the contract requiring M Light to get such permission. The contract required M Light to have the proper government permits for the party, but did not specify that those permits should allow the party to extend until 4 a.m., and PJAM acknowledged that the law in the city was to close by 2 a.m., so that's what the proper government permits would have said, too. There was nothing in the Agreement about M Light lobbying the city to keep the venue open until 4 a.m.
PJAM's fraudulent inducement claim also failed, because there was no allegation that M Light was lying about its intention to lobby the city when it said that it was going to. As for allegations the M Light led PJAM to believe its connections with the city were such that the lobbying would be successful, the court called those "mere puffery." The court said it was not justifiable for PJAM to rely on M Light's statements to believe that the 4 a.m. permission would definitely be obtained; rather, PJAM was taking a risk, and there was no indication that things would have turned out differently if M Light had lobbied harder or had better city connections.
Basically, if PJAM wanted M Light to bear the risk of the 4 a.m. permission not coming through, it should have been put in the contract, and it wasn't. The contract was integrated, with a merger clause, so the court did not allow parol evidence of this as an additional term.
The moral of the story is: If you're signing a written contract, don't rely on oral representations different from the contract.
Tuesday, July 16, 2019
A recent case out of California, Monster Energy Co. v. Schechter, S251392, concerns a settlement agreement imposing confidentiality obligations. The parties signed the settlement agreement. Their lawyers also signed the settlement agreement, under the preprinted notation "APPROVED AS TO FORM AND CONTENT." One of the lawyers then made public statements about the settlement and was sued for breach of contract. The lawyer argued that they were not personally bound by the confidentiality obligations and their signature meant only that they had approved that their client be bound.
The trial court disagreed with the lawyer's argument. The court of appeals reversed, finding that the attorneys were not personally bound based on the presence of the notation. This California Supreme Court ruling reversed again, concluding that the notation did not preclude a finding that the attorneys were personally bound. The agreement itself included counsel in its confidentiality provisions, and a signature on a contract usually indicates consent to be bound by that contract.
While it is true that the included notation is generally understood to mean that the attorney has read the document and recommends that their client should sign it, that does not mean that it also inevitably means that the attorney is not bound by the agreement. In this case, where the agreement expressly referenced the confidentiality obligations of counsel, a conclusion that counsel intended to be bound by their signature, even with the notation, was plausible.
(h/t to Eric Chiappinelli of Texas Tech for passing this case along!)
Thursday, July 11, 2019
Ja Rule mostly dismissed from Fyre Festival case, with the possibility of one pesky tweet coming back to haunt him
If you're not familiar with the debacle of Fyre Festival, you can watch two documentaries about it, or catch up on the Wikipedia page. The tl;dr version is: It was billed as a luxury music festival that would blow Coachella out of the water, and was canceled on the day it was to start, leaving attendees, who had paid thousands of dollars to attend, stranded with FEMA tents for accommodation. The festival had some big names associated with it, co-founded by Ja Rule and promoted on social media by people like Kendall Jenner and Bella Hadid. Ja Rule was sued, along with Billy McFarland, CEO of Fyre Media, who has already pleaded guilty to fraud in connection with the festival and has been sentenced to prison.
Now, there's a recent ruling out of the Southern District of New York in In re Fyre Festival Litigation, 17-cv-3296 (PKC) (see links at end of blog post), that might succeed in dismissing Ja Rule from the case. The plaintiffs have been granted a very limited leave to amend with respect to one specific tweet, so Ja Rule might stay in the case on the basis of that tweet.
The case has contract claims against Fyre Media, but this opinion focuses on individuals, Ja Rule and Grant Margolin, former Chief Marketing Officer for Fyre Festival. Neither Margolin nor Ja Rule was a party to the contract at issue in the case, so this decision doesn't take up the contract issues, but it is interesting on the fraud issue, so I'm blogging it anyway (also, how can you not blog a court opinion that has a footnote explaining what "FOMO" means?). Fraud requires pleading with particularity, and the plaintiffs fail to meet this burden. Although they allege many allegedly fraudulent statements, they fail to allege when many of those statements were made or whether the defendants knew at the time that the statements were untrue. After all, the defendants could have made the statements about Fyre Festival with every intention of delivering on their promises of an incredible festival.
The one exception to this is a particular tweet at issue by Ja Rule. The plaintiffs properly allege the date of that tweet, which was the day before the festival was scheduled to start (and instead was canceled). The tweet reads, "The stage is set!!! In less than 24 hours, the first annual Fyre Festival begins. #festivallife" The plaintiffs also allege that Ja Rule must at least have been reckless in continuing to encourage people to attend a festival whose stage was not at all set. The plaintiffs trip up when it comes to alleging reliance on their part on the tweet, but the court gives them leave to amend to try to fix this failure. The court does not give the plaintiffs leave to amend any of the other failings of the complaint because of delay on the part of the plaintiffs.
The court also discusses some negligence issues as well as tortious interference and unjust enrichment claims. When it comes to tortious interference, there were no allegations that Ja Rule or Margolin interfered with or caused Fyre Festival's inability to perform the contract, merely that they knew Fyre Festival would not be able to perform. As for the unjust enrichment claim, the court warns that this is not a catch-all cause of action and cannot be used to cure the defects in the other causes of action.
Monday, July 8, 2019
My students are always asking me about misdelivered packages, so I read this recent case out of the District of Oregon, Mansfield v. Leigh, Case No. 6:19-cv-00254-MK (behind paywall), with interest. It's a fairly straightforward case about a lost package, and a fairly straightforward analysis of your options for recovery if a package goes missing. The plaintiff was seeking over a thousand dollars in damages for the lost package, but the court finds that her recovery was limited to the fifty dollars of insurance she purchased (she actually received slightly more because the post office also refunded her service charge).
This case is a reminder to take the postal insurance seriously. I once had a package go missing and I had insured it but not nearly for the value of what went missing. That was all on me, and I've taken that insurance situation seriously ever since.
Saturday, July 6, 2019
A recent case out of the Southern District of Ohio, The Devine Group, Inc. v. Omni Hotels Corp., Civil Action No. 1:18-cv-186 (WOB) (behind paywall), is a fairly straightforward contract interpretation case with a good parol evidence discussion. The court finds that the contract is unambiguously worded and so refuses to look to any extrinsic evidence. If you're looking for a contract clause example to use in class, this might be a good one.
Monday, July 1, 2019
A recent case out of Texas, Bitter Creek Water Supply Corp. v. Sims, No. 11-17-00080-CV (behind paywall), talks about a lot of contract issues, but I found the ambiguity discussion most interesting. The contract at issue, signed in 1986, tied the purchase price to whatever price Bitter Creek was paying the City of Sweetwater for water. At the time, Bitter Creek had been buying water from the City for many years. However, Bitter Creek no longer buys water from the City. Therefore, there's a dispute over how to interpret the contractual purchase price now that there is no City purchase price to tie it to.
Sims contended that under the UCC he could opt to read a reasonable price into the contract, now that the City purchase price had failed. Bitter Creek, though, argued that the parties had agreed to an express fixed price that they no longer had agreement on. The court discusses the UCC's application and ambiguity and finds that the provision is ambiguous and the parties' intent needs to be examined, leading to a factual dispute that can't be resolved on summary judgment.
Wednesday, June 26, 2019
I had been paying attention to this case out of the Western District of Washington, Moi v. Chihuly Studio, Inc., Cause No. C17-0853RSL (behind paywall), because it raises interesting copyright authorship issues. The case is a lawsuit brought by a person who was one of Chihuly's assistants, who create artwork in Chihuly's name under Chihuly's supervision. The plaintiff worked for Chihuly in this way for fifteen years, until a falling-out between Chihuly and another of the assistants resulted in the deterioration of the plaintiff's relationship with Chihuly as well. The plaintiff filed this lawsuit alleging co-authorship of 285 artworks and requesting compensation for his work on them. You can read more about the lawsuit here.
As I said, I was paying attention to this case for the copyright authorship analysis, which follows the Aalmuhammed test and finds that, because the plaintiff did not exercise control, he is not an author of the artworks, despite his copyrightable contributions to the artworks. The authorship test analysis also considers the lack of contract between the plaintiff and Chihuly as indicating that Chihuly did not intend to share authorship with the plaintiff.
That same lack of contract dooms the plaintiff's attempt to seek compensation for his work. Because there's no contract, the plaintiff's cause of action is promissory estoppel, but Chihuly's promises over the years to compensate plaintiff by keeping track of which artworks plaintiff had contributed to were, in the court's view, too vague to constitute promises that the plaintiff could have relied on. The plaintiff confessed that he had no idea what his eventual compensation might be or when he would receive it, just that he trusted Chihuly to treat him "fairly." Promises forming the basis of promissory estoppel need to be clear and definite, and Chihuly's statements were simply too vague. Considering that plaintiff couldn't even say what they meant, the court refused to enforce them.
This is, once again, a lesson in making sure you have a clear and complete understanding with someone, and not just vague platitudes.
Monday, June 24, 2019
I just blogged about a consideration case last week, and now here's another one out of Illinois, Johnson v. Illinois Alcohol & Other Drug Abuse Professional Certification Association, Nos. 4-18-0562 4-18-0575 cons (behind paywall). This case concerns an at-will employment contract that was later modified to include a definite retirement date. The defendant argues that there was no consideration for this modification of the contract, and thus it's not binding. However, the court notes that Johnson gave up his ability to work for the defendant beyond the retirement date and that that served as consideration for the modification of the employment contract. There were also some changes in job duties and title as well as an additional agreement reached on how sick and vacation days would be used over the remainder of the employment term. All of this was sufficient to show that both parties bargained for things from the other in this new binding contract.
Wednesday, June 19, 2019
Continuing the theme of thinking about fall courses, a recent case out of the Western District of Washington, Phytelligence, Inc. v. Washington State University, Case No. C18-405 RSM (behind paywall), has a discussion about both extrinsic evidence and agreements to agree -- both topics my students often struggle with. Might be worthwhile to take a look at this recent analysis, especially if you teach in Washington.
Monday, June 17, 2019
If you've already started thinking about gathering examples for your courses this fall, here's a consideration case for you out of Ohio, Forbes v. Showmann, Inc., Appeal No. C-180325. Forbes was an employee of Showmann, and at a holiday party Showmann gave its employees, including Forbes, raffle tickets. One of the prizes was what sounds like a pretty sweet cruise package, and Forbes won the cruise. Showmann terminated Forbes's employment a few weeks later and informed Forbes that the cruise package was conditioned on Forbes still being a Showmann employee when she took the cruise.
Forbes sued for breach of contract but the problem was that it was undisputed that Forbes did not pay for the raffle ticket. Showmann simply distributed the raffle tickets for free to its employees. Therefore, there was no consideration with which to form a contract. Forbes tried to argue her employment by Showmann was the consideration for the ticket but Forbes's employment was not used to bargain for the raffle ticket in exchange, so therefore there was no contract.
If you feel bad for Forbes, which I admit I kind of did based on these given facts, her conversion claim does survive, so there is some hope for her.
Wednesday, May 29, 2019
Was Leaving Neverland a breach of contract by HBO based on its airing of a 1992 Michael Jackson concert?
HBO's Leaving Neverland documentary, detailing the allegations of sexual abuse leveled at Michael Jackson, has resulted in an interesting lawsuit in the Central District of California, Optimum Prods. v. Home Box Office, CV 19-1862-GW(PJWx) (behind paywall).
Because Jackson is dead, there is no defamation claim to be brought; therefore, this lawsuit is grounded in a contract between Jackson and Optimum's predecessor entity and HBO regarding televising one of Jackson's concerts from his Dangerous world tour, which HBO aired in October 1992. The contract contained a provision prohibiting HBO from making "any disparaging remarks concerning" Jackson. Optimum alleges that HBO has breached this provision by airing the Leaving Neverland documentary.
Naturally the contract also contained an arbitration provision, which provided that the parties would choose an arbitrator and, if they couldn't agree, eventually the Superior Court of the State of the California for the County of Los Angeles would select the arbitrator. Optimum initially filed its complaint in state court, but HBO removed it to federal court based on diversity jurisdiction. Optimum does not dispute the existence of diversity jurisdiction but argues that the arbitration provision also acts as a forum selection provision requiring the litigation be heard by California Superior Court in Los Angeles County.
The court declines to construe the arbitration provision as conferring exclusive jurisdiction to California state court. The arbitration provision does not discuss exclusive jurisdiction at all. The plain language of the provision only provides the state court with one responsibility: choosing an arbitrator if the parties can't agree on one. That is not a conferral of exclusive jurisdiction.
There is also a dispute between the parties over whether the suit needs to be arbitrated. The court is torn on that issue. The American Arbitration Association's rule that arbitrability of a contract be decided by the arbitrator came into effect after the parties had signed the 1992 contract, and the court is hesitant to apply it retroactively. There is precedent to support retroactive application but the court thinks it doesn't make sense to pretend that the parties "clearly and unmistakably" agreed to be bound by rules that did not even exist. None of the precedent provided to the court was binding, so the court requests that the parties discuss the issue further at an upcoming hearing.
Saturday, May 25, 2019
A recent case out of New York, Leakey v. The Setai Group LLC, 151298/2014, concerns a tragic event. The plaintiff, Leakey, was allegedly sexually assaulted during a massage.
Leakey sued several entities, including the owners and operators of the spa, on theories of negligence, intentional infliction of emotional distress, and breach of contract. The negligence claims failed because the massage therapist acted outside of the scope of his employment in sexually assaulting Leakey and there was no evidence the spa operators knew of any propensity by the therapist for inappropriate sexual conduct (this also doomed the intentional infliction of emotional distress claim). As for the breach of contract claim, there was no promise that the spa or its employees would be safe, so there was nothing to breach.
(You can read the complaint in the case here.)