ContractsProf Blog

Teaching Assistants: Andrea Boyack on Abuse of Contract, with a Dash of Eric Goldman

It is always a pleasure to be able to use this blog as an excuse to prod me to read things I really ought to read and to promote the work of the dedicated contracts scholars I have come to know through decades of engagement with the subject.  You can find Andrea Boyack's work, Abuse of Contract: Boilerplate Erasure of Consumer Counterparty Rights, on SSRN.  It is forthcoming in the Iowa Law Review, so congratulations, Andrea, on a wonderful placement.

Professor Boyack  (right) starts with a straightforward explanation of why certain boilerplate provisions are bad.  They are not necessary to the parties' transaction. Rather, they erase default rights that benefit consumers with the sole purpose of shifting the risk onto the parties least well-positioned to protect themselves against that risk.  Peggy Radin laid the groundwork for Professor Boyack's work with her pioneering book on Boilerplate, to which we devoted a symposium in 2013. 

Both the common law and the new Restatement of Consumer Contracts Law allow for the enforcement of such terms.  Scholars are divided about how commonly corporations abuse their bargaining power to strip consumers of their legal rights in truly alarming ways. Professor Boyack dives in with her own study of the online terms and conditions (the T&C Study) of 100 companies.  Her findings are sobering. Here's the money quote from page 3 of the article:

Evidence from the T&C Study shows that the overwhelming majority of consumer contracts contain multiple categories of abusive terms. The existing uniformity of boilerplate waivers undermines the theory that competition and reputation currently act as effective bulwarks  against abuse (3).

The T&C Study tracked four broad categories of "destructive" terms:

• dispute resolution mandates,
• liability waivers,
• limitations on damages, and
• pre-authorization of unilateral modifications (5).

In a more granulated, way, it also tracked eleven rights-deleting terms

1. mandatory arbitration,
2. waiver of a jury trial,
3. waiver of the ability to participate in a class action,
4. forum selection,
5. limited time periods to bring a claim,
6. disclaimer of representations,
7. waiver of implied warranties,
8. privacy waivers,
9. limitations on types of damages,
10. caps on the amount of damages, and
11. authorization for unilateral modifications of terms (7).

Professor Boyack's findings are not exactly surprising, but it is very useful to have the data collected, and there are all sorts of interesting wrinkles and nuances.  Overall, going back to the original four categories of "destructive" terms, over 80% of the contracts reviewed included provisions that fell into all four categories, with nearly all of the companies, limiting remedies and reallocating liability, and  each and every one reserving the right to unilaterally modify the terms of the agreement (21).

The relative uniformity of these terms bolsters the arguments of legal scholars who have claimed that consumers do not give meaningful consent to boilerplate terms.  "If all transactions come bundled with virtually the same substantive terms that shift costs and risks away from companies, consumers can do nothing but acquiesce to these reallocations" (24).  Similarly, if you are inclined to think that competition will force companies to abandon obnoxious boilerplate terms, the T&C Study provides no support for that position (28-29).  

The Article concludes that the current state of contracting offers insufficient legal protection of and insufficient market choices for consumers.  Boilerplate waivers, disclaimers, and limitations are imposed on consumers who acquiesce to those terms rather than choose them, because they have no choice in the matter. As a result, corporations are able to exploit their contracting hegemony to systematically deny consumers their legal rights. 

That may all seem like a bummer, so let's end on a happy note.  Professor Boyack includes in her appendices a great deal of the data she collected, and it is color-coded in soothing pastels, allowing for relaxed contemplation (33-42).  She also includes a sampling of destructive terms (43-51) so that you can read them aloud to your children instead of "Goodnight Moon" and they will beg you to stop so that you all can go to sleep.  Finally, there is a score sheet at the end, grading the companies, so you can appropriately calibrate your resentment (52-55).

Meanwhile, this just in: Eric Goldman (left) reports here on a North Carolina Supreme Court case allowing modification of terms of service without notice.  Here's the core holding:

When parties have mutually agreed to a unilateral change-of-terms provision, said provision “must be enforced as it is written,” subject to certain limitations. Contrary to plaintiff’s assertions, the traditional modification analysis which requires mutual assent and consideration does not apply to changes stemming from a valid unilateral change-of-terms provision in an existing contract.

There are two exceptions: the modifications must not fall outside of the "universe of terms" that the original agreement governs and they must me be made in good faith.

In Memory of Barbara Ehrenreich, Reflections on the Professional Managerial Class

Barbara Ehrenreich (right) died in 2022, but it wasn't until I listened to the Know Your Enemy Podcast episode devoted to her legacy that I thought about her concept of the professional managerial class (PMC) in connection with my own professional identity and my politics.  I should note that the KYE episode was timely. This blog post, not so much.  Summers are when I catch up on things, and this will be one of many posts in which I ruminate on things past because I've only now discovered them in my reading or listening queue.

Barbara Ehrenreich and her husband at the time John started publishing about the PMC in 1977.  They introduced the topic in two articles that appeared in Radical America, "The Professional Managerial Class," and "A Case-Study in Professional Managerial Class Radicalism."  Those two essays and a 2019 interview that Alex Press conducted with Ms. Ehrenreich in 2019 and published in Dissent magazine are my source materials  I take a certain pleasure in revisiting the older material.  Even the fonts are outdated. Ehrenreich herself describes the material from Radical America as having been written in a "rather tedious" way. I am indebted to the KYE hosts, Matthew Sitman and Sam Adler-Bell and their guests on the Ehrenreich episode, Alex Press and Gabriel Winant, for giving me a framework in which to situate the Ehrenreichs' approach to the PMC. There's a lot to unpack here, so I will keep things brief, at the risk of oversimplifying.

Office Design, 1937

The Ehrenreichs developed their concept of the PMC in response to a crisis in leftist theory after the collapse of the student movement of the 1960s. The working class had not developed into a revolutionary force along the lines predicted by Marxist theory. The New Left embraced student revolts as presenting the possibility of a vanguard of a new revolutionary class -- radicalized university students. The revolution, which for the Ehrenreichs would have been a democratic, non-violent one, did not materialize. The question for the left was, why not?

The Ehrenreichs' answer was that students belong to neither of the class categories then available to Marxist theory.  They are neither a part of the bourgeoisie, nor are they part of the proletariat.  They also are not petty bourgeois.  Rather they are part of a fluid category, the PMC, which is caught in late-stage capitalism between those with genuine economic power and the working class.  The PMC consists of "salaried mental workers who do not own the means of production and whose major function . . . [is] the reproduction of capitalist culture and capitalist class relations."  As such, the PMC is a problematic vehicle for radical social change, and the path forward is an alliance between the PMC and the working class.

Office Design After the Crappification of Work

Members of the PMC are not manual laborers, and they can become part of the managing class. However, jumping ahead a few decades, they are increasingly subject to deskilling and proletarianization through what a friend of mine called the "crappification of work." At the turn of the 21st century, my friend was a computer programmer working for an investment bank.  It was a pretty good job, and then it was an okay job, and then it was a bad job that paid okay and had decent benefits, and then it slowly became a demeaning job, and then it evolved into a soul-crushing job that one would not wish upon one's bitterest foe.  Eventually, the investment bank outsourced her department, and she never again found rewarding work in her field.  Her politics grew emphatically leftist.

Teachers are the first category of workers associated with the PMC, according to the Ehrenreichs.  Their role is social control or the production and propagation of ideology.  I feel seen. 

Not really.  Either the Marxist categories associating socio-economic roles and relation to the mode of production from the 1970s do no map well onto current realities or I am no longer persuaded by the New Left reasoning that shaped my political identity in young adulthood.  In the alternative, perhaps after decades in the PMC, I have become blind to my role in reifying existing socio-economic hierarchies. That's what I'm trying to work out.

In any case, despite the Ehrenreichs' rhetoric assigning to teachers a role in developing and disseminating the ideology of late capitalism, with all the chauvinisms that entails, it is not as if they regard members of the PMC as ineluctably aligned with the forces of oppression.  After all, they have to account for their over-educated, bookish, skilled selves.  The relationship between the PMC and workers is "objectively antagonistic," but so is the relationship between the PMC and the capitalist class.  Ehrenreich rejects the use of PMC as a slur.  PMC members have a service ethic. They are genuinely committed to making positive contributions to their communities.  But workers are motivated by a version of the same ethic, and the fact that it is ever harder for members of both groups to take pride in their work should be a source of unity.

Workers earned some protections through unionization; the PMC used the jargon of professionalism to establish their monopolies in markets for services.  The KYE folks share an anecdote that illustrates both the difference in self-conception between PMC members and workers and the crappification of mental work. One of them (hard to keep four male voices straight when none of them are Ira Glass) shared a story of trying to organize graduate students into a union. They met resistance, in part because the graduate students did not feel like they needed unions to protect their interests in the same way that workers did. It felt false. The organizers pointed out that they had been sent by the university workers' union.  The union workers wanted the graduate students to join them.  And, the organizers added, the union workers got paid far better than the graduate students did.

Barbara Ehrenreich's consciousness of her status as a member of the PMC enabled her to write her greatest hit, Nickled and Dimed, from a unique perspective. While her sympathies were with the manual laborers whose ranks she joined, she was not one of them and could never be one of them. The interests of the PMC can be opposed to those of the workers, but the real unbridgeable gap between members of the two groups is better understood, to borrow a term from Pierre Bourdieu, as a matter of differences in habitus.  Ehrenreich learned a great deal from her co-workers. In a different context, they could have learned a great deal from her, but her knowledge could not change their lives. Her mode of being-in-the-world: her tastes in food, clothes, music, reading materials, her hobbies, her sense of humor, her ways of thinking about herself, and her ways of dealing with others were all fundamentally  or subtly-but-crucially different from those of her co-workers.  She could not bridge the difference in consciousness between her own PMC-class identity and her co-workers' sense of who they were and their role in relation to work and the economy. 

The KYE podcast recounts an incident where one of Barbara Ehrenreich's co-workers injures her ankle.  She was then working for a house-cleaning service.  The injured woman was also pregnant. She needed time off, but they were paid hourly.  Ehrenreich's solution is that the workers should organize and strike, demanding, among other things, paid time off for injuries sustained at the workplace.  Her c0-workers, exhibiting what to Ehrenreich must have seemed like a textbook example of false consciousness, protested that they could not let down their employer, who was counting on them to clean houses that day. Ah, the cooptation of the service ethic to benefit capital! True to her own habitus, Ehrenreich found a middle ground.  She advocated for her co-worker and persuaded the employer to give her a day off with pay so that she could recover from her ankle injury.  Reflecting on the incident, Ehrenreich might have been reminded of Bertolt Brecht's "A Bed for the Night." A more upbeat liberal might think of the starfish story. But after her grim slog through working-class misery, Ehrenreich's worldview likely was a more inclined towards Brecht.

Ehrenreich understood the importance of habitus (although she did not use the word) in ways that others on the left didn't.  She tells of "Twinkie wars," when PMC-types would try to unite with workers to form food co-ops. The workers wanted the co-ops to carry the sorts of processed foods that they were used to eating and found in their local groceries. The PMC-types took "principled" stands against unhealthy foods, and these differences led to genuine conflicts.

The limitations of the New Left and student radicalism became clear, say the Ehrenreichs, when students radicalized by their opposition to the Vietnam War attempted to combine forces with Black radicalism. While PMC students may have been prepared to embrace the calls of the Black working class to demolish elite institutions and return power to the people, older members of the PMC denounced student radicalism as misdirected and directionless post-adolescent rebellion or the harbinger of a new kind of leftist authoritarianism.

As a law professor, at least where I teach, I am a beneficiary of professionalization.  My status remains very high, even within the university, compared to that of staff and even legal writing or clinical professors, to say nothing of our own adjuncts, or the professors, adjuncts, and staff in the rest of the university. The crappification of work has eroded my quality of life at the margins. University bureaucrats treat me like a cog and are far more concerned about my how much revenue I generate for the university (measured in FTEs) than they are in either my scholarly output or the quality of my teaching. If it weren't for ABA accreditation requirements, law students would mostly be taught by adjuncts earning $1500/credit hour taught.  Other parts of the university are already crumbling under economic strain. I would not want the life of my colleagues in the humanities at small colleges and non-flagship state universities. When young people tell me that they want to be professors, I am inclined to advise them to do something else with their lives. But what?

Listening to the KYE episode in the context of renewed student protests and my own position as an un-reconstructed Jewish New Leftist with close familial ties to Israel made me think about my PMC status in connection with those student protests.  It's a theoretical matter for me, because there were no student protests at my law school, and as far as I know there were no student encampments or mass arrests of student protests anywhere in Oklahoma, my adopted home state.

Gaza Encampment at Columbia University (my alma mater),
Image by عباد ديرانية - Own work, CC0

This post has gone on too long, so this part will be brief.

My inclination has always been to admire radical protestors for calling attention to very important issues. But I've never felt comfortable joining them.  Part of the problem is the lack of fit between my own leftism, which is based on class analysis, and the identity politics that has come to dominate the left. Part of the problem is that I am a left-wing pragmatist. Political action has to be targeted and has to have clear goals in order to be effective. You have to have a strategy for winning and something tangible to show for it at the end of the day. Finally, I think people get caught up in the theater of acting out injustice in ways that draws attention away from addressing actual injustices. When you occupy a building on a college campus, your goal is to be arrested. The people who are arrested want it to be as ugly as possible. But once they are released with a few bruises, what is the next step?

I have multiple ambivalences about the pro-Palestinian protests even while I admire the courage, discipline, and sacrifice of the students involved. I think their efforts will come to nought. Nothing good, that is. Smart university administrations will play along, promising to look at investment strategies, but they won't stop investing in companies based in countries with horrible human rights records. But even if universities did divest from Israel, that would not help Palestinians. Meanwhile, the protests drive pro-Palestinian voters away from support for Biden and drive pro-Israel voters into the Trump camp, and my view is that a Trump Presidency will exacerbate the conflict and just bring more misery to the region.

For my part, if I have to choose between the self-defeating excesses of the Netanyahu government and a Palestinian movement led by Hamas, I choose neither. I am for peace, and peace means that everybody stops fighting, recognizes the other party's right to self-determination, and all that has to happen without pre-conditions and without delay.

I used to lead study abroad programs about the conflict. Students would come because they wanted to see "the Holy Land." We hired a "dual narrative" touring company that provided us with one Jewish Israeli and one Arab Israeli guide.  Students would tell me in their final evaluations that they emerged from the program confused about the conflict. I would consider that a win, because I've been immersed in the conflict since childhood, and I'm confused.

From my perspective as a member of the PMC, all I can do is teach about the conflict. But will students come willing to listen, not only to me but to each other, and learn?

LPE Blog on Universities' Exploitation of Their Tax-Exempt Status

Over on the Law & Political Economy Blog, Davarian L. Baldwin has a new post up about how universities exploit the tax-exempt status of their land.  It's a fascinating topic and it revisits topics that he explored in his book In the Shadow of the Ivory Tower.

The post highlights the fact that universities are major economic forces in their communities, and they don't always use their market power for the common good.  Professor Baldwin begins the post with a useful example of how Duke University vetoed a light-rail project that it had originally endorsed, prioritizing high-tech research facilities over the needs of the workers who cook, clean, and serve food in campus facilities.  Duke claimed that vibrations from the rail would interfere with scientific research, but that seems a rather lame excuse for terminating a project that would have made Duke's campus more accessible to low-income workers.

However, the main focus of the post is how universities exploit their tax-exempt status to extract excess profit out of land deals.  They take over properties, gentrify neighborhoods, and then build luxury dorm buildings in the place of affordable housing. They allow their property to be used by private corporations, such as Lily Pharmaceuticals (Princeton) and All-State Insurance (Arizona State).  The corporations get cheap graduate student workers as well as reduced leasing costs, as the price is discounted to account for the landlord's tax-exempt status.  

Professor Baldwin details various attempts to hold universities accountable, some of which have resulted in large payouts to communities that have been harmed by the universities' rapacious conduct. Some of these projects have uncovered new details about the role of  universities in the displacement of stable communities as part of the urban renewal movement after World War II, and so calls for universities to pay reparations for their exploitation of enslaved people are now supplemented with calls for reparations to the communities they displaced.

I wonder about the path forward.  Professor Baldwin seems focused on the restorative justice component of the problem, but I also would like to hear ideas about how universities can create better models going forward.  Given the collapse of government support for education and high tuition costs, small colleges especially may have no choice but to exploit their tax exempt status to seek income streams that reduce their reliance on tuition. 

Does the university want to strike a deal with Lily? Why not demand co-ownership of patents of innovations created on university property?  Why not further demand that graduate students who have a role in such innovations be appropriately compensated?  I don't know how to make a silk purse out of the sow's ear of allowing All-State to build a regional headquarters on tax-exempt property.  But I can imagine universities working with faculty and alumni to invest in neighborhood development, getting a return on their investments while also benefitting the communities of which they are a part. 

Universities should become a model for responsible, sustainable, economic development.  They have the resources, and they have the expertise, if they tap into their captive talent pool and their alumni.  Perhaps the sequel to Professor Baldwin's book can be not only about righting past wrongs but about mapping a path forward in which universities transition away from state funding to financial independence through cooperative, community building endeavor.

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

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

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

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

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

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

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

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

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

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

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

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

SCOTUS Takes Another FAA Case

Image by DALL-E

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.  

Back 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 ideal 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.

November'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?

I 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.

Finally, 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.

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 James D. Nelson, Elizabeth Sepper, & Kate Redburn 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.

Plaintiff 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.

Great News for Libelous Bloggers Everywhere!

Over at the Volokh Conspiracy, the man himself, Eugene Volokh (left), reports on Arthaud v. Fuglie, a 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!

LPE Project on the Proposed FTC Ban on Non-Competes

We 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!

 

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.

Quick Notes: A New Promises Promises Episode and a Jotwell

After 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.

I 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.

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

Review of the “Pepsi, Where’s My Jet?” Netflix Documentary
Eric Goldman
Technology and Marketing Law Blog

In 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).

The 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.

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.  

Now, 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.  

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) and 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.

Eugene 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.

The Dropout and Blawgs

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!

Contracts at the NRA Convention

As 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.

Hila Keren on Luguri & Strahilevitz on JOTWELL

From 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 Strahilevitz, Shining 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.

The 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.

Paul Horwitz on the Dwindling Prospects for Compromise

Over 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?

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?

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

As 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."

Over 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.  

But 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.

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!