ContractsProf Blog

Editor: Jeremy Telman
Oklahoma City University
School of Law

Wednesday, May 8, 2024

Teaching Assistants: Choi, Gulati, & Scott on Commercial Boilerplate & Landmines

Stephen ChoiStephen Choi (left), Mitu Gulati (below right), and Robert Scott (below left) have collaborated on Commercial Boilerplate: A Review and Research Agenda, which you can find on SSRN.  They aren't kidding about the research agenda thing, because they also have a book in the works about commercial boilerplate.  Mitu shared a draft of the introduction, and so I can offer some surmises in this post on the connections between the research agenda and the book.  The working title is The Contract Production Paradox.

Their scholarship is unique and exciting because, while a lot of us contracts scholars have been concerned with boilerplate contracting, we have focused on asymmetrical contracts in the consumer or employment context in which the dominant party dictates boilerplate terms to the counterparty, who accepts those terms with little or no ability to negotiate.  The Authors focus on commercial boilerplate, and their research turns up all sorts of surprises.

Mitu GulatiIt turns out that boilerplate is ubiquitous in large commercial transactions involving sophisticated parties. Here too, the lawyers do not review the boilerplate, nor do they negotiate over boilerplate terms. Why? Because they are in a hurry. The transactions are complex; the assets being traded may fluctuate in value, and like most of us, they either assume that the boilerplate terms are good enough or the costs of careful negotiation outweigh the litigation risk that perhaps-faulty boilerplate terms might entail. 

Their literature review covers the early discovery in the law and economics literature that even sub-optimal boilerplate terms could be sticky; that is, attorneys continued to use the terms, notwithstanding their faults.  But early scholarship assume that the terms that survived tended to approach optimality.  In complex loan transactions, standard terms meant that one could trade loan instruments quickly without reviewing terms, confident that the effect of the boilerplate provisions was well-understood and that their value had been priced.

A second generation of scholarship discovered that the reality departed from the model.  Sticky terms were used despite their sub-optimality and they were not in fact well-understood and could in fact be challenged by opportunistic litigants.  These provisions came to be known as "black holes," presumably because their meaning was impenetrable and yet they could not be easily removed without causing the surrounding deal structure to collapse.  But it gets worse.  The standard language turns out not to be standard after all, and so one cannot even assume that the standard boilerplate provisions, regardless of their opacity, have some accepted meaning that can be priced.

Robert_scott_0The Authors then turn their attention to the process whereby the boilerplate is made, and this part of the Review and Research Agenda introduces the main theme of the Authors' forthcoming book on commercial boilerplate.  Inattention to the mode of contract production transforms boilerplate "black holes" into "landmines." Transactional lawyers assume that boilerplate clauses are both fixed and well-understood. They are neither. And as slight changes slip into common boilerplate provisions, opportunistic lawyers can pounce.   

Still, the Authors note that there will always be a trade-off in contract design between the high production costs associated with bespoke contract drafting and the accidental inefficiencies associated with adopting boilerplate provisions, which might not be the right fit for the transaction (see related work on "alien vomit") or might be corrupted in ways that are not easily detectible in the hurly-burly of transactions negotiated under time pressure.  The more common the transaction, the more likely it is to be larded with landmine boilerplate provisions. 

The authors describe the process though which such landmines come into being in a context they have studied carefully, sovereign bond contracts.  They illustrate the effects of such landmines through a discussion of the impact of a misunderstood pari passu clause, a landmine triggered in 2011 in connection with the Argentinian debt crisis.  They have created a typology of landmines: historical holdovers, random errors, subversive accretions, and obsolete provisions.  They conclude with a list of eight emerging areas of research, followed by a dozen pages of references that will no doubt serve as a mandatory reading list for other scholars in this area.

It looks like the related book project will focus on the mechanics of commercial contract production.  The Authors argue that we need to improve our understanding of the tradeoffs between efficiency and tailored contract drafting in order to understand the provenance of boilerplate terms.  They illustrate problems with commercial boilerplate that have arisen in sovereign debt instruments.  They then provide evidence that similar landmines exist in other types of contracts dependent on commercial boilerplate.  The review and research agenda mentions interpretation issues that can arise in connection with boilerplate terms.  Knowing how a landmine got into a contract might indeed be important to a court looking beyond the text to the intentions of the parties. They return to that subject in the proposed book's concluding chapter.

Hoffman_David_Feb2023_Resized_v3I will note for the record to David Hoffman (right) has also posted about this article on Jotwell, and I wanted to complete my own assessment before reading his.  Having turned my attention to Professor Hoffman's piece after completing my own, I attach the following addendum.  You really should have read Professor Hoffman's take on this first.

In this post, I have refrained from commenting on the possible impact of AI on commercial boilerplate, assuming that one of the authors of Generative Interpretation would take up that challenge. Mere mortal that I am, I can only imagine that AI tools already at hand could now be deployed in a manner consistent with the Authors' work.  Transactional lawyers assume that commercial boilerplate is unchanging and and unchallenged.  It is neither.  Armed with that knowledge, they can use AI tools to efficiently police their boilerplate provisions for variations or even create a genealogy of the provisions and thus perhaps cull the alien vomit.  Following Hoffman and Arbel's work, one could also presumably use generative AI to predict the likely interpretation of boilerplate terms.

May 8, 2024 in Contract Profs, Recent Scholarship, True Contracts, Weblogs | Permalink | Comments (0)

Monday, February 26, 2024

SCOTUS Takes Another FAA Case

Arbitration
Image by DALL-E

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

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

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

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

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

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

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

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

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

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

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

Roberts_8807-16_CropJustice Kavanaugh worries that protecting employees from mandatory arbitration would be a major shift.  Indeed.  However, as SCOTUS recently recognized, sometimes a court has to revise its decisions when those decisions were "egregiously wrong from the start."  From that perspective, it should be very telling that the earliest cases that the employer's counsel can cite in support of their narrow understanding of the Section 1 exemption date from the 1970s.  To make matters worse, Chief Justice Roberts (right) asks where the test applied in those 1970s test came from.  He expresses his intuition, which seems spot on, that "they just kind of made [it] up."

February 26, 2024 in Labor Contracts, Legislation, Recent Cases, Weblogs | Permalink | Comments (0)

Wednesday, February 7, 2024

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

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

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

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

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

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

February 7, 2024 in Commentary, Current Affairs, In the News, Recent Cases, Weblogs | Permalink | Comments (0)

Wednesday, January 24, 2024

Catching up with JOTWELL

We have a semester's worth of JOTWELL's to report on.  Two of the five are about articles on which we have already posted.  

Williams v. Walker-ThomasBack in September, Dean Eboni Nelson posted on Duncan Kennedy's The Bitter Ironies of Williams v. Walker-Thomas Furniture Co. in the First Year Law School Curriculum, 71 Buff. Law Rev. 225 (2023).  Our post on the subject is here.  As Dean Nelson notes, Professor Kennedy has a twofold goal in the article.  First, he pushes back against critiques of Williams that claims that the cause lawyering that gives rise to such cases actually ends up hurting precisely the groups that the attorneys were trying to help.  Second, the article is just one part of Professor Kennedy's broader defense of progressive initiatives to protect Black neighborhoods that exist at the intersection of poverty and racism.  Neoliberal scholars have attacked decisions like Williams as counterproductive and paternalist.  Like Shawn Bayern's book, reviewed here recently, Professor Kennedy pushes back against law and economics critiques of Williams using the tools of law and economics.  The fact of the matter is, litigation designed to help poor communities succeeded in expanding the availability of credit to those communities without raising the cost of such credit.  That is not a surprising result when one considers the realities of that credit market.

In October, Professor Robert Hillman published his review of Yehonatan Givati, Yotam Kaplan, and Yair Listokin, Excuse 2.0, A Macroeconomic Model of Contract Excuse, __ Cornell L. Rev ___ (forthcoming), available at SSRN (June 1, 2023).  Often, when we subject common law doctrines to economic analysis, we discover the common law has meandered its way to something very close to the COVIDideal solution. So it is with excuse doctrine, notwithstanding its vagueness.  Professor Hillman notes the Authors' theme that "in systematic risk situations," such as pandemics or wars, "ambiguous excuse law promotes compromise and loss sharing that lessens economic havoc in the long-term, such as bankruptcies."  Uncertainty in the law promotes compromise and settlement, which is appropriate during systemic risk situations, where no party could bear the costs they might face if the excuse doctrine resulted in clear winners and losers.  In such circumstances, there is no party best positioned to avoid the loss.  In fact, the humble common law, with all its vagueness ends up allocating risk in a more targeted way than does legislative intervention, which tends to be reactive and leads to inflation.  While Professor Hillman congratulates the Authors on their counterintuitive thesis (ambiguity in excuse doctrine is good!), he notes that the evidence in support of the thesis is a bit thin.   Moreover, Professor Hillman wonders whether excuse doctrine is unique in its vagueness.  Perhaps the Authors will follow up with their global defense of common law doctrine Where Ambiguity Justly Reigns.  Notwithstanding some quibbles, Professor Hillman concludes that the Authors' article is well worth reading and that its thesis is worth pondering.

Omri Ben-ShaharNovember's contribution to JOTWELL was Omri Ben-Shahar's review of David A. Hoffman and Yonathan A. Arbel, Generative Interpretation, 99 N.Y.U L. Rev. __ (forthcoming, 2024); U of Penn L. Sch., Pub. L. Rsch. Paper, available at SSRN (Aug. 1, 2023), an article that we reviewed here.  Professor Ben-Shahar situates Generative Interpretation in the scholarly literature.  Ever since the contextualist revolution, legal scholars have deplored or ignored the "plain meaning" approach to contractual interpretation.  Few scholars wrote on the plain meaning approach to interpretation in the commercial context before the advent of corpus linguistics, and still there has not been much.  Now, Hoffman and Arbel take us a step beyond corpus linguistics, deploying large language models (LLMs) to resolve ordinary interpretive disputes.  Hoffman and Arbel show that LLMs can sometimes intervene usefully to establish the likely meaning of seemingly ambiguous texts or to establish ambiguity where courts have found clarity.  Professor Ben-Shahar asks where we go from here.  Will lawyers use LLMs to make sure that their contractual language is airtight?  Will clever lawyers bring out dueling LLM models to support their interpretive claims? Will judges get on board?

Lauren-ScholzI admit that I struggled with these next two through no fault of the authors.  Readers are encouraged to go straight the source, as I am not sure I did justice to their content.  

December's review was Lauren Scholz's post on Cary Coglianese & Erik Lampmann, Contracting for Algorithmic Accountability, 6 Admin. L. Rev. Accord 175 (2021).  State and federal agencies and the private sector use artificial intelligence (AI) to assist in their decision-making processes.  But how do we check to make sure that the AI algorithms are fair?  Government agencies do not have the expertise to design AI systems on their own. They contract with private entities to develop the AI, but then there has to be some system for assuring that the AI tools reflect the values of the government agencies.  Coglianese and Lampmann propose guidelines for public procurement of AI systems.  The  contracts should require "substantive privacy and security standards, mandatory audit processes, and transparency safeguards" in order to ensure the availability of public scrutiny and to guard against claims of trade secrets that might be used to avoid such scrutiny.  How does such a process proceed.  Likely through trial and error.  The public procurement process can become a laboratory in which to develop rules for promoting algorithmic accountability.  It is appropriate to allocate public dollars to the project of shaping rules for AI accountability and to subsidize the process of shaping the way AI is used for the public good.

Bagchi_AditiFinally, just last week, Aditi Bagchi posted her review of Abbye Atkinson, Borrowing and Belonging, 111 Cal. L. Rev. 1369 (2023).  Professor Atkinson's article seeks to restore dignity to the process of personal bankruptcy.  Our culture treats consumption as a fundamental feature of social belonging, and yet bankruptcy rules that mandate disclosure and restrict access to future credit ostracize the debtor from the consumption-based community.  Given that one must consume in order to participate in society, the conduct that led debtors into bankruptcy is both rational and reasonable, and yet the bankruptcy process is punitive.  It mandates disclosure of the debtor's financial situation and treats certain categories of debt as non-dischargeable.  These policies undercut the consumptive aspirations of debtors, depriving them of aspirational agency while also undercutting our broader goal of encouraging consumption as part of our communal ethos.  Professor Bagchi suggests that a less punitive bankruptcy regime might have the macro effect of increasing the costs of consumer goods, especially those typically bought on credit.  Such an outcome might be fine within the normative framework of Professor Atkinson's work.  It might just result in a general reduction in consumption without prejudice to any particular group's ability to participate.  However, Professor Bagchi also imagines that a more localized increase in prices, especially for consumer credit, affecting precisely the group that Professor Atkinson hopes to protect.  If such a localized rise in prices occurs, it would undercut Professor Atkinson's goal of allowing debtors full participation in consumer markets.

January 24, 2024 in Contract Profs, Recent Scholarship, Weblogs | Permalink | Comments (0)

Wednesday, April 12, 2023

LPE Project on Religious Accommodations for Postal Workers

We have been posting occasionally on the intersection of contracts rights and the First Amendment, with special focus on SCOTUS cases on that subject.  Links to various posts are provided in this post on Orin Kerr's work on contracts and the Fourth Amendment.  

But , & have done us one better posting How the Court is Pitting Workers Against Each Other on the Law & Political Economy Projects Blog.  The post anticipates what might lie ahead in the aftermath of a case, Groff v. Dejoy, that SCOTUS is due to hear next week.  The case addresses the rights of postal workers to accommodations for their religious beliefs.

LpePlaintiff Groff was a mail carrier working for the U.S. Postal Service (USPS).  USPS entered into an agreement with Amazon to provide delivery services, including on Sundays.  As an evangelical Christian, Mr. Groff requested an accommodation, but USPS could not always find other postal carriers to take his shift, and on more than twenty Sundays, he was expected to work.  He refused to do so and eventually quit in order to avoid being fired.  He claims that USPS violated his right to a reasonable accommodation under Title VII of the Civil Rights Act.

While Groff seems to offer the possibility of interest conversion between people seeking religious accommodations and workers' rights, the blog post points out that the cost of the reasonable accommodation of Mr. Groff's religious interest will fall on other workers, who will have to give up their Sundays to cover Mr. Groff's shifts.  As the LPE authors put it:

Interpreting Title VII to require employers to impose hardships on other workers to accommodate religion would threaten the preconditions for viable collective action. Workplaces and unions rely on a sense of reciprocity, mutual support, or solidarity. And labor agreements reflect that spirit of shared interest and mutual compromise among workers. But a religious accommodation doctrine that lets some employees foist the cost of their religious exercise onto others threatens to tip these delicate balances, cutting against worker interests rather than in their favor.

And once the door is open to requiring businesses to accommodate religious employees even if that accommodation comes at the expense of other employees, the authors predict that more cases will follow that will erode protections for vulnerable minorities both as customers and as employees.  Their focus is more on the broader societal impact of religious accommodations than on the intersection between employment law and First Amendment rights.

The post notes that the old standard under Trans World Airlines, Inc. v. Hardison called for accommodation of religious observance only if the accommodation does not impose an undue hardship on the employer.  An undue hardship could be anything more than a de minimis cost imposed on an employer or a union.  The post concedes that the Hardison standard does not provide adequate protections for employees seeking accommodations.  It provides no clear guidance as to how to accommodate religious observance without eroding workplace solidarity.

I wonder if there is not a way to preserve the part of Hardison that calls for imposing no more than a de minimis cost on other workers or on unions.  The employer itself could reasonably be expected to bear a cost that is greater than de minimis.  In this case, for example, USPS might hire additional workers for Sunday shifts so as to accommodate Mr. Groff's religious beliefs while not eroding worker solidarity.  In the alternative, the employer could be required to pay additional compensation (or grant extended vacation time) to workers willing to work Sundays up to the point where all the shifts are taken, so long as doing so does not eliminate the advantages of the contract with Amazon.

April 12, 2023 in Commentary, Current Affairs, Labor Contracts, Recent Cases, Weblogs | Permalink | Comments (0)

Tuesday, March 7, 2023

Great News for Libelous Bloggers Everywhere!

Screenshot 2023-03-07 at 7.19.12 AMOver at the Volokh Conspiracy, the man himself, Eugene Volokh (left), reports on Arthaud v. Fugliea case in which plaintiff alleged that he had been defamed by a blog post that was published in 2018.  Plaintiff did not discover the post until 2021 and sued within weeks of discovery.  North Dakota's Supreme Court ruled that the two-year statute of limitations had lapsed.  The statute of limitations runs from the time of publication, not from the time of discovery.

This is a boon to all bloggers, especially those whose posts are rarely discovered.  We feel newly empowered to remove the gloves!

March 7, 2023 in About this Blog, Recent Cases, Weblogs | Permalink | Comments (2)

Monday, January 23, 2023

LPE Project on the Proposed FTC Ban on Non-Competes

LpeWe posted last week on the proposed new FTC rule that would impose severe limits on non-compete provisions in employment contracts.  

The Law and Political Economy Project has posted eight perspectives on the proposed rule.  It's a great collection.  Recommended reading!

 

January 23, 2023 in Legislation, Weblogs | Permalink | Comments (0)

Friday, January 13, 2023

How to Lose Friends and Alienate People Using Contracts

I often tell my students that contracts are mutually beneficial transactions that make the world a better place.  If you really want to have a positive impact on the world, I tell them, become a transactional attorney.  But I recently had an experience of how contracts can become a roadblock preventing potentially mutually beneficial transactions.

A stranger reached out to me to invite me to appear on his yet-to-be-launched podcast.  I enjoy podcasts, and I have some experience doing interviews on podcasts and other news venues.  I followed up and asked for more information, and satisfied with the answers I received, I agreed to a time for a recording in a few days.  The podcaster told me that he would send me a contract, which I thought a bit odd, but I did not consider that a red flag. . . until I saw the contract.

The contract gave all rights in the recording to the podcaster with aggressive boilerplate about  how my consent was "irrevocable" and how his rights were "unfettered," applicable "throughout the world," and granted "in perpetuity."  His rights to "exploit and distribute" my voice and likeness were to be "sole and exclusive."  Well that was all a bit much.  I mean, I don't see any reason why I would want to exploit or distribute the recording here, there, or anywhere, but the sweeping nature of my contractual consent put me on my guard.  

And then there was the kicker: the contract also provided that I "release and discharge" the podcaster from any and all liability arising out of the podcast.  Nope.

I told the podcaster that I would not sign the release.  I told him I could send him a mark-up that would be acceptable to me, but then he would have to pay me for my time.  It wasn't a serious offer.  He responded that I didn't have to sign anything.  He just wanted to use the material as he saw fit.  Not helping.  The trust was gone.  I felt like I was being set up, and the risk outweighed the reward of appearing on a yet-to-be-launched podcast broadcast by someone I did not know personally or by reputation. 

Time will tell.  I told the podcaster that I would prefer not to be among his first guests, but that I would listen to the first episodes when they appear and consider appearing as a guest once I have a better sense of what he is up to.  It may be that this person is trying to get a new venture started, and he relied on a form agreement that is a bit more zealous in protecting his rights than the situation really calls for.  It is unlikely that there will be a movie treatment of his podcast episode featuring his interview of me.  But until proven otherwise, I am now open to the possibility that I just narrowly dodged a gotcha interview by someone from the Veritas Project.

January 13, 2023 in Commentary, True Contracts, Weblogs | Permalink | Comments (0)

Wednesday, December 7, 2022

Quick Notes: A New Promises Promises Episode and a Jotwell

HoffProf Wilkinson-RyanAfter a long hiatus,  David Hoffman (left) and Tess Wilkinson-Ryan (right) are back with a new episode of their podcast Promises Promises.  Welcome back!  This time, they discuss S.P. Dunham v. Kudra, and they have as their Zoom audience Mitu Gulati's UVA students.  The case illustrates the duress doctrine.  

Professors Hoffman and Wilkinson-Ryan puzzle entertainingly (as always) over how well this case fits into the law of duress and voice their general skepticism about the line-drawing involved in identifying an improper threat, a necessary element of duress.  I don't see it as a hard case, but I agree that the court does not do much to generate confidence in the clarity of the duress doctrine. 

S.P. Dunham (Dunham) was a department store that partnered with another business (Hurwitz) that stored and cleaned fur coats.  Hurwitz, which was in financial difficulties, partnered with Kudra and owed Kudra money when it went under.  With winter coming, Dunham's customers, who apparently did not know anything about Hurwitz, wanted their coats.  Kudra demanded that Dunham cover what Hurwitz owed on the Dunham's customer's coats (about $600) before he would return them.  Fair enough, I suppose, but Kudra then demanded an additional $3200 that Hurwitz owed on other coats that had nothing to do with Dunham.   Dunham paid and then sued to recover the $3200, claiming economic duress.

DelongI don't have any difficulty seeing Kudra's conduct as involving an improper threat that compelled Dunham to do something that it had no reason to do, but Professors Hoffman and Wilkinson-Ryan do make the fine point that Dunham doesn't really seem to be the proper plaintiff here.  Kudra is holding Dunham's customers' property hostage, and the customers, or perhaps Hurwitz's bankruptcy estate, acting on their behalf, should be bringing the challenge to Kudra's extortionate conduct.  Still, I think Sid DeLong's Coasean theory of duress makes sense of the case in a far more direct way and at least points the way towards addressing the line-drawing problem that vexed the Promises, Promises crew.  Kudra threatens to do harm to Dunham's good will value. Knowing that the value that Dunham places on that good will likely exceeds $3200, Kudra extorted payment, leaving him unjustly enriched.  Disgorgement of those ill-gotten gains is the proper remedy.

Also worth noting is Eyal Zamir's short review on Jotwell of Joanna Demaree-Cotton and Roseanna Sommers, Autonomy and the Folk Concept of Valid Consent, 224 Cognition 105065 (2022).  We have featured Roseanna Sommers' work on the blog before, and there seems to be some overlap between  Commonsense Consent, discussed previously and the article that Professor Zamir has reviewed.  But Professor Zamir brings to the topic his own expertise in empirical studies and in behavioral analysis of law, and so his review is an especially valuable contribution.

December 7, 2022 in Contract Profs, Famous Cases, Teaching, Weblogs | Permalink | Comments (0)

Monday, November 21, 2022

Re-Post: Eric Goldman Reviews Netflix's "Pepsi, Where's My Jet?"

Review of the “Pepsi, Where’s My Jet?” Netflix Documentary

Technology and Marketing Law Blog

Eric GoldmanIn the mid-1990s, at the height of the Cola Wars, Pepsi ran an ad to introduce its “Pepsi Stuff” loyalty program, including a featured prize of a Harrier Jet for 7M points–a ridiculously high number that was supposed to signal that it was a joke. Watch the ad. However, Pepsi also sold points for 10 cents each, putting a $700k price tag on a jet that was allegedly worth tens of millions of dollars (assuming it could be acquired at all–the US government frowns on individual citizens owning military equipment).

John Leonard, backed by a rich friend Todd Hoffman (who looks like George Carlin), tendered $700k and ordered 1 Harrier Jet. Pepsico declined; they sent him coupons for a couple of cases of Pepsi instead. Leonard retained a lawyer and made legal threats. Pepsi preemptively sued Leonard in its home court of SDNY. Judge Wood’s opinion concluded that the ad objectively did not communicate an offer due to its humor, so no contract ever formed and Leonard didn’t get his Harrier jet. Wood’s opinion is relatively dry, but it’s become a staple of the contracts law canon because of its fun facts and its precise analysis.

Because this case is so iconic, I was excited to see the new Netflix documentary, “Pepsi, Where’s My Jet?” The documentary interviews key figures in the case, many of whom are still alive, and it’s fabulous to hear them tell their stories in their own words.

Despite that, the documentary was disappointing overall. If you’re a contracts or advertising law nerd like I am, you’re going to watch it no matter what I say. But I had hoped the documentary might become a must-see pedagogical supplement for anyone reading the case, and I don’t think it gets there.

The documentary is framed around the cross-generational bromance between GenXer Leonard and his financial sponsor, Boomer Hoffman. Obviously that relationship is at the story’s heart because there was no case without Hoffman’s largesse. However, the filmmakers repeatedly steered the narrative into the bromance, such as seemingly irrelevant segments showing Leonard and Hoffman recently summitting Mt. Vinson in Antarctica (an impressive, but very expensive, accomplishment).

HarrierxvThe documentary was split into four episodes, totaling over 2.5 hours. It would have been much better packed into a single 90 minute episode, but instead it felt like the filmmakers padded the narrative with tangents and dead-ends to reach the target length.

Also, the documentary includes many historical reenactments, many of which were unnecessary and not compelling. I am not a fan of recreations in documentaries.

The actual legal ruling gets surprisingly little airtime in the back half of the fourth episode, and the filmmakers did a poor job of contextualizing it. For example, long-standing contracts law doctrine says that advertisements ordinarily are an invitation to make an offer and not an offer themselves, which the documentary doesn’t mention. The documentary repeatedly mentions that many consumers, especially teens, would have taken the ad seriously, but the documentary only offers Team Pepsi’s rebuttals and a few words from the opinion to counter this view. The filmmakers surely could have interviewed some independent experts in contracts law or the advertising industry to supplement the parties’ self-interested statements, and many of them would have sided emphatically with Team Pepsi. By omitting the independent voice, the filmmakers betrayed their normative agenda.

Similarly, the filmmakers styled the case as a David v. Goliath battle. Indeed, it was, but the filmmakers didn’t aggressively question Leonard’s motives. (Instead, the documentary spent a minute or two indulging in overly speculative conspiratorial theories about Pepsi malfeasance that should have been cut). Sure, Pepsi is the big bad company, and surely Pepsi could have easily made safer legal choices in how it presented the jet. At the same time, it’s impossible not to feel like Leonard was an opportunist who used the law, and then media pressure, to improperly seek something he knew he wasn’t really entitled to. For every story of big companies squashing little consumers, there’s another story of little consumers gaming the legal system to extract undeserved cash from big companies and subtracting social value. Leonard’s story really could be told either way. A different filmmaker might have included some counternarrative material that Leonard’s legal efforts were a wasteful and venal abuse of the legal system, along the lines of Harris v. Time. The documentary suffers by not offering that self-reflective/critical perspective.

Some other details I learned:

  • At one point, Pepsi considered sending Leonard a model of a Harrier jet. That reminded me of the Toyota/Toy Yoda case.
  • Leonard turned down a $1M settlement offer because he really, really wanted the jet. Ah, youthful exuberance. I was shouting at the screen for him to take the cash.
  • The ad designers had initially storyboarded a 700M point price tag for the Harrier jet, but during ad review, someone said that number was too hard to read, so two zeros got dropped to make it less cluttered. Oops.
  • Pepsi simultaneously ran the same ad in Canada and put a “just kidding” disclaimer on the 7M point price.
  • Now-disgraced lawyer Michael Avenatti was involved in the case, principally as a PR advisor/opposition researcher because he was still in law school at the time. Avenatti advised Leonard to launch an attack ad campaign against Pepsi that sounded similar to the scheme he deployed against Nike that sent him to jail. That part of the video was painful to watch.

Other things the documentary should have addressed but did not:

  • How much money Leonard/Hoffman spent on the case and why they repeatedly doubled-down despite the adverse developments.
  • Why they didn’t appeal the district court decision.
  • What, if any, life lessons Leonard took away from his experiences. Knowing what he knows now, would he have made the same choices? He did say he perhaps regretted not taking the settlement offer, but I would have liked to hear more about his meta-reflections after 25 years of life experience.
  • In 2014, a (non-functional) Harrier jet sold at auction for $200k. This datapoint makes Pepsi’s 7M point pricetag seem actually quite reasonable, not like a joke at all. Then again, if Leonard really wanted a Harrier jet, his $700k offer was above-market, and he could have fulfilled his dream at a lower cost. I’m disappointed the documentary filmmakers didn’t raise this development because it puts the case in a whole new light.

Though it was completely irrelevant to the story, the filmmakers had many of their interview subjects take the Pepsi Challenge. I won’t spoil the fun by revealing which soda won this completely nonscientific test, but I will note that both Coke and Pepsi have lost the war as consumer tastes have evolved and consumers now drink less sugary sodas overall.

November 21, 2022 in Commentary, Contract Profs, Famous Cases, Film, Food and Drink, Weblogs | Permalink | Comments (5)

Monday, September 12, 2022

Being Talked About . . .

Last week and the week before, I put up a three-part post (here, here, and here) on what I see as the major differences between teaching at top law schools, which I called "The Legal Academy," and teaching in the schools that I have taught at for most of my career, which I call "The Other Legal Academy."  The posts gathered quite a bit of attention on Twitter.  

According to Oscar Wilde, there is only one thing worse than being talked about and that is not being talked about.  But Oscar Wilde was never talked about on Twitter. . . . 

I joke.  People on Twitter had nice and interesting things to say.  There, and in private correspondence, people in the OLA thanked me for giving voice to their experience.  Other people in the OLA shared their very different experiences in the OLA.  As they say on Twitter, YMMV.  People in the LA reached out to try to bridge the gap between the LA and the OLA.  I appreciate their efforts, but I think they to some extent misconstrued my point.  

I set out as an academic hoping to have the kind of life that my professors had.  I do not have that life, but I love my professional life, and I don't know if I would be happy in the LA.  I also recognize that there are trade-offs.  As Joni Mitchell puts it, "Something's lost, but something's gained in living every day."  Moreover, the very different ways in which people in the LA and the OLA need to allocate their time steadily widens the gulf between my part of OLA and the LA.  Differences in resources and certain structural formations push us farther apart.  I wasn't writing in the hopes of sparking a reform movement.  I was just describing the situation as I have experienced it.  But the LA and the OLA will always overlap to some extent, and I am happy about that.  

Jeffrey-Lipshaw_960x860Now, over at Prawfsblawg, Jeff Lipshaw has more nice and interesting things to say about his very different experiences in the OLA.  His is an interesting perspective to compare with mine, as Jeff and I have crossed paths numerous times, in large part because of our overlapping interests in commercial law and German social theory.  He focuses on his life as a scholar.  He has not felt as cut off from the LA as I have.  

I started the series noting that there are "at least" two legal academies, and Jeff teaches at a school that is somewhere between where I teach and the LA of my youthful fantasies.  He teaches in a major city, home to plenty of other law schools.  But some of the differences just have to do with differences between Jeff and me.  Perhaps those differences have to do with our personalities or our professional drive, perhaps Jeff is a more talented scholar than I am.  Again YMMV.

The least talked-about part of my three-part post was the part about teaching.  Perhaps that is because that part came last and people were just tired of the topic and or my authorial voice, which was tendentious right from the start.  Perhaps it's because teaching is so personal and idiosyncratic.  But I think the differences in teaching in the OLA and the LA drive everything else.  

September 12, 2022 in About this Blog, Contract Profs, Law Schools, Weblogs | Permalink | Comments (0)

Tuesday, September 6, 2022

Court Spares Yale from Liability for Firing Medical School Professor

We have been distracted by armchair punditry.

Meanwhile, contracts law continues unimpeded.  As Debra Cassens Weiss reports in the ABA Journal, U.S. District Judge Sarah A.L. Merriam issued a forty-six-page opinion last week dismissing Bandy Lee's claims.  Dr. Lee sued under a Connecticut statute that incorporates constitutional protections from the U.S. and Connecticut Constitutions after Yale fired her from her position as an unpaid volunteer clinical professor for suggesting that Alan Dershowitz (left) Alan_Dershowitzand Donald Trump showed symptoms of psychiatric illness caused by contagion.  She had written one book and edited another about the threat to the country posed by Mr. Trump's mental condition.

According to Dr. Lee, Mr. Trump showed "definitive signs of severe pathology" that created a threat to public safety.  As a professional psychiatrist, she believed she had a duty to warn the public of these matters.  When Professor Dershowitz described his marriage as "perfect" in connection with evidence that he was connected to the sex offender, Jeffrey Epstein, Dr. Lee noted that Mr. Trump had described his allegedly coercive phone call with Ukrainian President Volodymyr Zelenskyy as "perfect."  Dr. Lee diagnosed Professor Dershowitz (via Twitter, natch) as suffering from a shared psychosis with the former President. The word choice was telling evidence.  Professor Dershowitz was not amused, and he wrote to Yale Law's Dean to request that Dr. Lee be disciplined.

A Yale review committee found that Dr. Lee had made her comments in her professional rather than a personal capacity and that in so doing she had violated a rule of psychiatry against diagnosing people without meeting them.  Ah, but what if you can't meet them because they have a contagious mental disorder?  Yale terminated her faculty appointment.

Giuliani and TrumpEugene Volokh provides full coverage over at the Volokh Conspiracy, with detailed excerpts from Judge Merriam's opinion.  Professor Volokh notes that the ruling is a narrow one.  Judge Merriam found that Dr. Lee, who was an unpaid volunteer, was not an "employee" for the purposes of the Connecticut statute, despite having served in her role at Yale for seventeen years.  Dr. Lee would have had a stronger claim were she a tenure-track employee.

Whew.  I'm glad that I have tenure so that I can offer my completely unprofessional opinion that the real source of the contagion is Rudy Giuliani, shown at right at a superspreader event.

September 6, 2022 in Current Affairs, Recent Cases, Science, Weblogs | Permalink | Comments (0)

Tuesday, May 31, 2022

The Dropout and Blawgs

William_H._Macy

Amanda_Seyfried_2019_by_Glenn_Francis
Photo by Glenn Francis (Toglenn, CC BY-SA 4.0, via Wikimedia Commons)

Hulu's The Dropout tells an amazing story.  I do not know if it is fair to the main characters or an accurate representation of how easy it is to scam angel investors and the Katy Perry and Angry Birds addicted aging executives who run corporate dinosaurs like Walgreens.  It's also hard to imagine getting top science and technology graduates from top programs to sign non-disclosure agreement after non-disclosure agreement and to work under 24-hour surveillance and conditions where they are prohibited from speaking to colleagues from other parts of the enterprise. But perhaps I am naive about work conditions in start-ups, or perhaps young graduates are naive about contracts.  Both are possible.

But I do know that it features stunning performances by great actors, including Amanda Seyfried (right), who does for Elizabeth Holmes what Johnny Depp did for Willy Wonka, and William H. Macy.  How many iconic roles can one actor create?  If I were Richard Fuisz, I don't know if being played by William H. Macy (left) would take the sting out of being portrayed as an obsessive, jealous, greedy, glorified patent troll.  

Which brings me to the justification for this post.  In episode 6 of The Dropout, about three minutes in, Fuisz is making his first contact with Wall Street Journal reporter John Kerryrou (played wonderfully by Ebon Moss-Bachrach -- every scene with him and LisaGay Hamilton as his editor Judith Baker is priceless).  Fuisz says that he read something by Adam Clapper who writes something called the Pathology Blawg and then he furrows his brown and mutters "I don't know why he spells it like that."  Well we do!

May 31, 2022 in Television, Weblogs | Permalink | Comments (0)

Monday, May 30, 2022

Contracts at the NRA Convention

Don_McLean_1976As reported here in The New York Times, a number of musicians who were slated to perform at the National Rifle Association (NRA) convention this weekend in Houston have pulled out.  The musicians include Don McLean (pictured. in 1976), best known for the iconic songs, "American Pie" and "Vincent," both from the early 1970s; Larry Gatlin, known, according to his Wikipedia entry, for country songs written in the 1970s and 80s; and Larry Stewart, who (also according to Wikipedia) had 18 top 40 hits with Restless Heart in the 80s and 90s.   Lee Greenwood (the singer-songwriter of “God Bless the U.S.A.”, also known as “Proud to Be an American”) and T. Graham Brown also cancelled appearances.

According to the CMT website, Mr. McLean issued the following statement:

[I]n light of the recent events in Texas, I have decided it would be disrespectful and hurtful for me to perform for the NRA at their convention in Houston this week.

Mr. Gatlin explained his decision to pull out as follows: 

I cannot, in good conscience, perform at the NRA convention in Houston this weekend.  While I agree with most of the positions held by the NRA, I have come to believe that, while background checks would not stop every madman with a gun, it is at the very least a step in the right direction toward trying to prevent the kind of tragedy we saw this week in Uvalde — in my beloved, weeping TEXAS.

Mr. Stewart posted the following on Facebook:

Due to the tragedy in Uvalde with the horrific school shooting and children who died, I want to honor the victims, families, the town and our friends in the great state of Texas the best I know how. So I have made the decision to pull out as a performer for the NRA convention this weekend, especially given the event is just down the road. I just believe this is best for me at this time. God Bless everyone involved!

Here on the ContractsProf Blog, our question is, what are the contractual consequences of doing so?  We have not seen the contracts, but it seems unlikely that the musicians had clauses allowing them to pull out in case of mass shootings on the eve of the convention.  Given that there have already been 27 school shootings and over 200 mass shootings in the U.S. this year, the event was hardly unforeseeable.  Nor did the Uvalde massacre render the musicians' performance commercially impracticable. 

However, it seems unlikely that the NRA would want to risk negative publicity and harm relationships that likely will soon return to normal by going after musicians for breach of contract.  Presumably the musicians will not be paid, and so, absent some argument that people flocked to Houston to hear performances by people they remember from their childhood rather than for the main attraction of an NRA convention, the damages from the breaches would likely be limited to inconsequential costs and unrecoverable deposits and the like.  Can the NRA book alternative acts on short notice?  Are other contracts affected (promoters, sound technicians, roadies, etc.)?  All interesting matters.  All likely to resolved through quiet negotiation and private settlement.

Of course, there is another option available to the NRA.  They could take a page out of David Kopel's book, as set out in this post over at the Volokh Conspiracy.  According to Kopel, those who link the NRA to mass shootings are hate groups carrying out a blood libel.  He denounced the "cowardly politicians" who canceled their appearances at the NRA convention held in Denver shortly after the Colombine shootings.  He concludes:

We say to each and every hate group, we reject your sick and twisted lies against us, for exactly the same reason we reject the blood libels against every race, every religion, and every other group: We reject Satan and all his works.

That sounds like a great conclusion to the NRA's opening brief in its case against the Satanic musicians.  And why not throw in suits against the cowardly politicians who once again pulled out from the convention this year?  Likely there are no damages when politicians fail to show up, but you can certainly hit them in the solar plexus of endorsements and campaign fund by alleging in court documents that they have abandoned the NRA in favor of Satan.

Ted Cruz, Donald Trump, and Kristi Noem need not worry.  They will not be sued.  They showed up.  As described here (with video), Mr. Trump enacted a scene from The Hunger Games, reading out the names of the dead as a bell tolled for each murdered child.  One hopes that the allusion was inadvertent, but given Mr. Trump's adoration of Hungarian strongman Viktor Orban, and his love affair with Kim Jong Un, who knows? 

Hat tip: Peter Gulia.

May 30, 2022 in Current Affairs, In the News, Music, True Contracts, Weblogs | Permalink | Comments (0)

Tuesday, May 24, 2022

Hila Keren on Luguri & Strahilevitz on JOTWELL

Hila Keren websiteFrom time to time, JOTWELL provides reviews by contracts profs on recent contracts law scholarship.   A recent example is an essay by Hila Keren (left), Vast Scale Undue Influence, reviewing Jamie Luguri & Lior StrahilevitzShining a Light on Dark Patterns, 13 J. Legal Analysis 43 (2021).  

As Professor Keren presents the article, Luguri (below, right) and Strahilevitz (below left; together, "the Authors") show the following: you do not want cookies, and yet web sites are designed ("dark patterns") to manipulate you into accepting intrusions on your privacy that you would not agree to but for the manipulation.  The Authors show that dark pattern manipulations are most likely to be effective when they are subtle and that better-educated consumers more successfully resist the dark patterns' siren song.  This is not particularly surprising, but the authors' proposed solution is very surprising.

Jamie.luguri Strahilevitz  Lior 2011-07-18The Authors suggests that undue influence might be the best legal tool for rendering unenforceable the promises extracted through the manipulative techniques that authors see embodied in the dark patterns.  The Authors duly acknowledge that the doctrine, traditionally conceived, is quite narrow, and some of the usual components of undue influence seem to be lacking.  Most obviously, undue influence usually involves special relationships between or among the parties, and here we are dealing with an individual's encounter with a website.  The nefarious designer of that website is a stranger to the consumer.  Nonetheless, the doctrine's basic purpose is to defeat contracts formed where a combination of one party's dominance and the other party's vulnerability leads to a contract whose terms effect harms to the vulnerable party.  So conceived, the doctrine serves nicely to tame the effects of dark patterns.

Professor Keren helpfully supplements the Authors' perspective with a dose of Martha Fineman's vulnerability theory.  Undue influence doctrine is narrow precisely because courts require an extreme level of vulnerability.  Vulnerability theory helps us to understand that all of us are on a path toward vulnerability, if we have not already arrived there.  Fineman's broad view of human vulnerability informs her understanding of the role of the state in safeguarding its vulnerable citizens.  In this instance, Professor Keren uses Fineman to support the Authors' narrower claim that courts are justified in intervening to protect the typical, vulnerable consumers without having to demonstrate a pathology.

May 24, 2022 in Contract Profs, Recent Scholarship, Weblogs | Permalink | Comments (0)

Friday, March 25, 2022

Paul Horwitz on the Dwindling Prospects for Compromise

Horwitz-PaulOver on Prawfsblawg, Paul Horwitz (right) has a long and insightful rumination on some more contractual fall-out from the Russian invasion of Ukraine, a topic we have already touched on here and here.  His post was inspired by the decision of the Vancouver Recital Society (VRS) to cancel a concert by Russian pianist Alexander Malofeev (below left).  VRS pursued Mr. Malofeev for six years, but then said that it could not support Russian artists unless they denounced the war.  

Perhaps in response, or sua sponte, Mr.  Malofeev wrote on Facebook,

The truth is that every Russian will feel guilty for decades because of the terrible and bloody decision that none of us could influence and predict.

Not good enough.  In a response that it described as "complex and nuanced," VRS explained why it was nonetheless cancelling Mr. Malofeev's performance.  

Professor Horwitz makes great points about how decisions like VRS's are exceptional.  In most situations, we swallow our moral scruples in order to get on with life.  It is obviously silly to demand that Mr. Malofeev denounce the war and then cancel the concert anyway.  It is obviously hypocritical to pretend that nobody knew that Putin was a war-mongering tyrant before February 2022.  But for our purposes, his most interesting point is that decisions like VRS's are business decisions, and institutions caught in the battles over "cancel culture" make such decisions all the time.  First Amendment principles might come into play, but how one wields the rhetorical force of constitutional rights might be overdetermined by basic math: will our bottom line look better or worse if we go forward with this event?

Malofeev
Image by Liumir, CC BY-SA 4.0, via Wikimedia Commons

And so it has ever been.  The world is tainted.  Unless, as Professor Horwitz put it, you are a saint or a recluse, we all weigh plusses and minuses and make compromises or simply choose not to inform ourselves of the full impact of our interactions with international markets.  While "cancel culture" makes surface waves, we swim in a sea of compromise culture.  Most of us have to work somewhere; we have to buy our goods somewhere, and everything is ultimately inter-connected.  

Okay, so Professor Horwitz covered the hard stuff, the deep stuff.  I want to know the surface stuff: Did VRS have a contractual right to cancel Mr. Malofeev's performance unilaterally.  If not, wouldn't VRS have to pay Mr. Malofeev his fee, and doesn't that figure into the  economic calculations relevant to the decision to cancel the concert?  Could there not also be downstream consequences beyond the decision to cancel this one concert?  After all, Russia has produced a great many talented musicians.  So has China.  So has Israel.  The list goes on.  No state is free from moral taint.  Must every artist now pin a Tweet or a post on Facebook denouncing their home state's latest atrocities?  If doing so might be deemed inadequate by the concernt promoter, aren't artists in high demand like Mr. Malofeev going to demand assurances of payment in case of cancellation by the concert promoter?

March 25, 2022 in Commentary, Current Affairs, In the News, Music, Weblogs | Permalink | Comments (1)

Wednesday, March 2, 2022

International Agreements Among States: The Montreux Convention and the Russian Invasion of Ukraine

UN FlagAs someone who teaches both contracts and international law, I have had a hard time focusing on contracts law this week.  Fortunately, treaties are international contracts, and the parties are states, so these thoughts do not seem entirely out of place here.

This seems like a bad week for those who believe in the efficacy of international law.  Russia has audaciously violated  the U.N. Charter's Article 2(4), which prohibits the use of force by state against state, and the U.N. Security Council is, as it so often is, paralyzed by the ability of any one of its five permanent members (Russia, in this case) to veto any substantive resolution.  It all seems like a reminder that international law is still in what Hans Kelsen called a "primitive" state and that H.L.A. Hart was correct to say that it was not law but "positive morality."

Oona-hathaway-1-cropped Shapiro_scott-2015Over at Just Security, Oona Hathaway (left) and Scott Shapiro (right) point out that Putin cannot destroy the international order all by himself.  They maintain that Putin's offenses may have the opposite effect by reaffirming the very rules that Putin violated.  I offer a slightly less optimistic take.  Over fifty years ago, my international law mentor Tom Franck (below left) asked, "Who Killed Article 2(4)?".  His answer, in a nutshell, was that states killed Article 2(4) by favoring the pursuit of short-term national interests over international legal norms.  Over thirty years later, Professor Franck posed his question again in the context of the 2003 U.S. invasion of Iraq.  

Thomas FrancjkBut Professor Franck was being intentionally histrionic in order to highlight the self-harm the United States was doing by undermining an international legal order that it helped establish and from which it richly benefits.  Article 2(4) is never killed, nor has it ever been consistently enforced. However, as Professor Franck notes in his essay on the U.S. invasion of Iraq, when powerful states act in violation of international law, they can stress, amend, or replace legal principles.  Putin has the power to create facts on the ground and precedents that other powerful states will cite when they want to test the limits of the international community to stand behind international legal norms.  And this is the middle ground that I would follow somewhere between Professor Franck's pessimistic pose and Hathaway and Shapiro's gritty optimism.  Actions like Putin's hack away at international legal norms.  The norms do not emerge with the same vigor that they had prior to the attack.  And the Trump administration did nothing to bolster faith in the binding power of international norms.

Shapiro and Hathaway point to the failure of the Trump impeachments as a failure to enforce municipal law, but one could spin out infinite variations on the theme of the enforcement gap in domestic law.  In the domestic context, it is not at all unusual for laws on the books to go unenforced. I can't drive to work without violating traffic laws.  Moreover, when domestic laws are violated, we often do not know the identity of the perpetrator.  By contrast, as I stress to my students, Louis Henkin found that almost all states abide by their international obligations almost all of the time.  Subsequent empirical studies confirm and strengthen Henkin's relatively rosy. 

I often begin my international law course by asking my students how many of them have been victims of a crime.  Usually 1/2 to 2/3 of the students put up their hands.  Then I ask whether the criminal justice system worked for them in connection with those crimes.  Usually, the unanimous response is that the perpetrator was never caught.  And yet my students do not conclude on that basis that domestic law has no efficacy.  By contrast, even in this era of state-sponsored cybercrime, we almost always know who violated international law. 

International law's enforcement mechanisms are more decentralized, subtle, and varied than enforcement mechanisms under domestic law.  And, of course, very few domestic actors, when accused of an unlawful act, respond by putting their nuclear forces on alert.  Nevertheless, there are powerful, long-term international responses to violations of international law.  Our assumptions about the efficacy of international law compared to domestic law need to be adjusted, if not reversed.

As Hathaway and Shapiro note, there has been an extraordinarily united international response to Russia's invasion of Ukraine.  The impact on Russia has been remarkable.  The ruble's value has plummeted, as has the Russian stock market.  The impact of international economic sanctions on the Russian economy is likely to increase as the full effect of those sanctions kick in, unless China is able to play the role of Russia's financial deus ex machina.

Turkish_Strait_disambig.svg
Image by Interiot, CC BY-SA 2.5 via Wikimedia Commons

But today I want to highlight the Montreux Convention in order to illustrate the idiosyncratic nature of enforcement mechanisms under international law.  The Dardanelles and the Bosporus straits connect the Mediterranean and Black Seas. Turkey controls the straits.  Historically, Russia has had a naval base on the Black Sea.  Without the ability to pass through the straits, the Russian Black Sea fleet would either be bottled up on the Black Sea, or it would be unable to return to its home port.  In 1936, ten states signed on to the Montreux Convention, through which Turkey guaranteed free passage through the straits for civilian vessels in peacetime.  Warships can pass through the straits subject to regulation and notice to the parties to the Convention.

On Sunday, Turkey's foreign minister announced that Turkey was asserting its authority under the Montreux Convention (the Convention) to limit passage of belligerent vessels between the Black Sea and the Mediterranean.  Although there are exceptions under the Convention that may limit the impact of Turkey's announcement, this was an example of a state risking real-world political consequences for invoking its legal rights under international law.  Turkey has placed itself first among nations willing to assert their commitment to the rule of law notwithstanding international politics.  Turkey's invocation of the Montreux Convention provides a helpful example of the independent valence of international legal norms.  While those who regard international law as nothing more than states abiding by voluntary obligations that advance states' self-interested goals can contrive explanations for Turkey's conduct, the argument for normative compliance pull seems stronger here.

The invocation of the Montreux Convention may have little effect.  According to US News, at least six Russian warships and a submarine entered the Black Sea in February, and the Convention does not permit Turkey to prevent ships from returning to their home base.  Still, in invoking the Convention, Turkey overcame its hesitancy to offend Russia, which no doubt resents the recognition of its invasion as a "war" that triggers Turkey's right to limit passage through the straits.  The movements of Russia Black Sea fleet will continue to be limited for however long Turkey considers the war to be on-going.  

85 years ago, ten states bound their wills through a written instrument.  Much has changed int the world since that time, and the Montreux Convention has been amended along the way.  But its basic provisions remain in force.  Even in times of crisis and war, pacta sunt servanda!

March 2, 2022 in Commentary, Current Affairs, In the News, Weblogs | Permalink | Comments (0)

Wednesday, January 19, 2022

The Private Law Podcast Features Liam Murphy

I started law school in the Fall of 1996, visions of social justice, constitutional, international, and comparative law dancing in my head.  I knew I would have to take torts and criminal law in the first semester.  That would be diverting, I thought.  There was also something called civil procedure.  I had no idea what that was, and based on my grades in that course, that had not changed by the the end of my first year.  Contracts was a course about transactional law, I supposed.  It was for people who became lawyers so that they could make money.  I had no interest in that.

Liam_B._Murphy_photo_horizontalDutifully, I showed up for class, and in walked Liam Murphy (right).  Liam was not what I had in mind when I imagined my contracts professor.  He was not a transactional lawyer.  He was a philosopher.  I don't know if he ever practiced law or even got a law license.  He was a pure academic, and he thought about contracts law the way I wanted to think about contracts law, at a time when I thought I would never want to think about contracts law.  He started in with the very basic premise that, at least in the United States, contracts law is about promises, and so we started talking right from the beginning about why we enforce some promises and not others. 

Suddenly, contracts law was not at all about commerce or transactional work.  It was about a very basic human interaction.  It was about obligations, moral and legal, and about why we think some promises entail moral obligations and why the law treats some of those moral obligations but not others as legal Private law podcastobligations.  Yes, we read cases and we learned doctrine, and yes, those cases mostly involved commercial transactions.  We also read a lot of economics and law literature about contracts.  But we never lost track of the basic questions with which we started.  For which promises should the law provide a remedy in case of breach, and what are our intuitions, moral, conventional, or pragmatic, about what those remedies should be?   

Oh, how I came to love my contracts class!  How happily I would return to that classroom and do it over again! 

Well, thanks to Felipe Jimenez's Private Law Podcast, I was able to bite into a madeleine and feel as though transported back through time and space into Vanderbilt Hall circa 1996-97.  The conversation begins with Liam's thoughts about tax law, moves to property, and then settles in on the nature of promise and contract.  

Highly recommended!

January 19, 2022 in Contract Profs, Weblogs | Permalink | Comments (1)

Friday, November 5, 2021

Kudos to Kim Krawiec, but . . .

KrawiecKim Krawiec (right) was, until recently, a friend of the blog.  And with good reason.  She does interesting work on contracts law.  Indeed, you can see some of her interesting work on contracts law here.  But note that "here" does not mean here.  Professor Krawiec has chosen to post contracts content on a rival blog.  Not even a contracts blog.  Does she not know that this blog, i.e., the ContractsProf Blog, is the world's premiere contracts law blog?

If you were to go over to that other blog, where Professor Krawiec posted her contracts law content, which you totally shouldn't do because it's not the premiere contracts law blog or even a contracts law blog at all, you might learn the following:

Two medical centers have brought suit against the National Kidney Register (NKR).  Both were being charged under their agreements with NKR for having a kidney deficit -- that is, they took more kidneys from the register than they added to it.  The agreement provides that NKR can charge medical centers $1000/kidney/month every month until they make up the deficit.  The case raises interesting questions about liquidated damages/penalty clauses.

We could tell you more, but we don't want to spoil it for you.  Actually,  we do.  The cases settled, so we'll never know how the court would have resolved the issue.  And that's all you would know if you had read Professor Krawiec's post, which you totally shouldn't do because we've told you everything you would get out of reading her post, which is excellent, by the way.  Unless you want the links that she provides to documents relevant to the cases.  

So, kudos to Professor Krawiec for a great post about contracts law.

Next time, post on the ContractsProf Blog.  

H/T John Wladis, still a friend of the blog.

November 5, 2021 in Commentary, Contract Profs, Recent Cases, Weblogs | Permalink | Comments (1)

Tuesday, October 26, 2021

We're #1

BCS LogoAccording to Feedspot, The ContractsProf Blog is the #1 contracts blog worldwide!

See you in the BCS, main contracts blog rivals!

Lighter blogging this week, cuz we're going to Disney World!

October 26, 2021 in About this Blog, Weblogs | Permalink | Comments (2)