Thursday, May 16, 2019
Very few of us actually read the terms and conditions of the many, many, many services we register for every day. It's not like we can negotiate them, anyway, so I think, as a matter of sheer efficiency, most of us just grin and bear it. We want or need the particular service in question, it comes with conditions we can't get out of, so we just click "OK" and move on with our lives. I think a lot of people think, well, how bad can it be?
But these terms and conditions often give the licensor a great deal of power, leaving end users with very few rights to whatever they want to gain access to. A perfect illustration of this: As many outlets have reported (here's a link to just one), Adobe has told its users that it's discontinuing older versions of popular programs like Photoshop, and so users are no longer allowed to use those versions under the licenses they agreed to years ago when they gained access to the program. We've gotten blase about the lack of ownership we have over many things in our current economy, but this action is exposing the fact that, when you rent everything instead of owning it, then there's very little we can do to keep the things we like; all of the control over them always continues to rest with the original licensor, and we possess them only so long as the original licensor lets us. You might have preferred the older version of Photoshop, but that doesn't matter; Adobe's terms of service let Adobe choose when you are allowed access to Photoshop.
Sunday, February 17, 2019
There's a lot of really interesting things at stake in this recent case out of the Northern District of California, Batra v. POPSUGAR, Inc., Case No. 18-cv-03752-HSG, including a contract angle. The case concerns an alleged class of influencers suing POPSUGAR for altering their postings in various ways. In addition to copyright and publicity right violations, the purported class alleges contract interference, because influencers can enter into contracts to receive a cut of the revenue generated by the links on their sites, but POPSUGAR's alleged alterations stripped the monetized links from the postings. Therefore, the class alleged that POPSUGAR was interfering with their contracts with the website linked to. The court found that the class's allegations on this count (and every other count in the complaint) were sufficient to survive a motion to dismiss.
I'm fascinated by this case and can't wait to see where it goes, especially as we get further into the class action allegations. (But probably it'll settle before we get to the good stuff.)
Wednesday, January 9, 2019
In a recent case out of the District of Arizona, Brittain v. Twitter Inc., No. CV-18-01714-PHX-DG (behind paywall), a court finds Twitter's terms enforceable as neither illusory nor unconscionable. The plaintiffs admitted that they agreed to Twitter's terms of service, but they argued the terms were illusory and unconscionable.
The illusory argument depended on the assertion that Twitter could unilaterally modify the terms at its discretion. But, unlike other cases where the terms were found to be illusory, Twitter did not try to retroactively modify the terms, and it mutually bound itself to the forum selection clause.
Brittain's unconscionability argument weirdly revolved around the fact that Twitter's terms don't contain an arbitration provision. I found this curious because I've read lots of cases where people want to get out of arbitration clauses, so complaining that the lack of one means the terms are unconscionable isn't an argument I quite follow. Neither did the court, which found that Twitter was not required to include an arbitration clause in its terms and that the terms weren't otherwise unconscionable.
Monday, December 3, 2018
Sorry for being absent lately. Blame exam season! So this is slightly old news but I plan to bring it up in my Entertainment Law class in the spring, so I was doing a sprint through the news reporting on it: Taylor Swift and her new contract.
Thursday, November 8, 2018
Here's one for exam review.
A recent case out of the District of Oregon, Reed v. Ezelle Investment Properties Inc., Case No. 3:17-cv-01364-YY, contains an application of the mirror image rule.
The parties in the case were embroiled in a copyright infringement dispute. They had settlement discussions as follows:
- Reed's counsel sent Ezelle a cease and desist letter that included a settlement agreement proposing to settle the matter for $5,000.
- Negotiations followed.
- Ezelle's counsel sent Reed's counsel a thousand dollar check (stating that it was not a settlement offer, although that doesn't seem important to the analysis here).
- Reed's counsel responded saying that Reed accepted the thousand dollar offer and sending Ezelle's counsel a new proposed settlement agreement.
- Ezelle's counsel crossed out the proposed agreement's confidentiality clause and sent it back.
- Reed's counsel said the confidentiality clause was non-negotiable.
- There were further negotiations that fell apart, leading eventually to this lawsuit.
Ezelle argued that the parties had settled the case through the above series of events, but the court found there was never a binding settlement because Ezelle never accepted the settlement agreement. Under the mirror image rule, when Ezelle's counsel crossed out the confidentiality clause, that operated as a counteroffer that Reed would have needed to accept. Reed never did. Rather, Reed informed Ezelle that the proposed modification of the settlement agreement was unacceptable. Therefore, there was no binding settlement agreement between the parties.
Ezelle argued that the confidentiality clause should be classified as immaterial or unconscionable, so that the settlement agreement should be enforced just with the confidentiality clause struck, as Ezelle had desired. However, the court found no reason to strike the confidentiality clause.
The court went on to find copyright infringement and awarded $1500 in statutory damages, as well as attorneys' fees and costs.
Tuesday, October 16, 2018
As the Hollywood Reporter reports, the license agreement expired between Dish Network and Univision more than three months ago, and the parties are fighting it out in federal court, pointing fingers at which of them (if any, I suppose) breached the license agreement, and whether there are any additional IP claims in play. It's a high-profile case with a real impact for Hispanic viewers, who probably just would like to get Univision back on Dish. Given the litigation, that might take a while.
Friday, September 28, 2018
If you're looking for a recent accord and satisfaction case, look no further! I've got one for you out of the Northern District of California, TSI USA LLC v. Uber Technologies, Inc., Case No. 17-cv-03536-HSG (behind paywall). In the case, Uber and TSI had a contract that Uber terminated. TSI received a termination notice and a check for a little over $200,000. TSI responded to Uber with outstanding invoices Uber owed payment on, amounting to more than $1.4 million. TSI eventually sued Uber for, inter alia, breach of contract, and Uber moved to dismiss the claim, arguing that that TSI's cashing of the $200,000 check operated as an accord and satisfaction, prohibiting TSI's breach of contract claim.
The court disagreed. Accord and satisfaction requires that the check be presented in good faith and with a conspicuous statement that it is meant to satisfy the entire debt. Construing the facts in the light most favorable to TSI, Uber could not establish that its check of $200,000 met "reasonable commercial standards of fair dealing," given that TSI alleged Uber owed over $1.4 million. In addition, while the termination notice stated "by executing below you acknowledge and agree that such payment constitutes full and final payment," it was followed by a line for signature labeled "Chief Executive Officer." TSI asserted that it thought the signature of the CEO was required for the payment to constitute full and final payment, not that the cashing of the check by itself. The court agreed with TSI that the language was not so "explicit and unequivocal as a matter of law so as to preclude TSI from asserting its breach of contract claim." Therefore, the breach of contract claim survived.
Wednesday, August 29, 2018
A recent case out of the Western District of Texas, May v. Expedia, Inc., No. A-16-CV-1211-RP (behind paywall), examines the enforceability of HomeAway.com's online contract. HomeAway is a website that offers vacation rental properties. Property owners can buy one-year subscriptions to HomeAway to list their properties for rent on the website. May was a property owner who had purchased successive annual subscriptions to HomeAway, and who now sues based on several breach of contract and fraud allegations, together with related state claims. HomeAway moved to compel arbitration, pointing to its terms and conditions. Specifically, in July 2016 HomeAway amended its Terms and Conditions to include a mandatory arbitration clause. May allegedly agreed to this clause when he renewed his HomeAway subscription in September 2016, and again when he booked his property through the website in October 2016.
May argued that he did not agree to the terms and conditions when he renewed his annual subscription because he changed the name on the account to his wife's name in an effort to avoid being bound by the new terms, but the court found that had no effect on the effectiveness of the terms and conditions and that May bound himself when he renewed his subscription, regardless of changing the name on the account. May was trying to take advantage of the benefits of the subscription without binding himself to the terms, and the court found that to be inequitable.
The court already found May to be bound but for the sake of completeness also analyzed May's argument that he was not bound when the property was booked because he did not receive sufficient notice of the terms and conditions, which gives us further precedent on how to make an enforceable online contract. The HomeAway site required the clicking of a "continue" button, and wrote above the button that the user was agreeing to the terms and conditions if they clicked the button, with a hyperlink to the terms and conditions. The court found this to be sufficient notice of the terms and conditions.
Monday, August 27, 2018
Revitch received an automated advertising call from DirecTV to his cell phone, and sued alleging violations of the Telephone Consumer Protection Act. Revitch was a wireless customer of AT&T, so DirecTV moved to compel arbitration under its sibling corporation's wireless service contract with Revitch. This recent case out of the Northern District of California, Revitch v. DirecTV, LLC, No. 18-cv-01127-JCS, denied the motion, finding that the arbitration clause did not cover claims with DirecTV completely unrelated to the wireless services provided under the AT&T contract.
It was true that the arbitration provision covered affiliates, and it was also true that DirecTV was an affiliate of AT&T, having become sibling companies a few years after Revitch entered into the contract with AT&T. But the court characterized the establishment of this relationship as a "completely fortuitous fact." The court noted that the intention for wording the clause broadly and including affiliates was typically to cover situations regarding assignments or successors. Nothing of the sort had happened here. No benefits under the contract had been assigned to DirecTV, nor had DirecTV undertaken any obligations under the contract. The calls Revitch was complaining about had nothing at all to do with the wireless service covered by the contract. So the precedent DirecTV tried to rely on was all distinguishable in the view of the court: "The Court concludes that Adams and Andermann, at most, support the conclusion that an entity may become an affiliate subject to the arbitration contract after the time of contracting where that relationship arises from an assignment of the underlying agreement or a related entity becomes a successor to the original contracting entity. That is not the case here."
The court interpreted the arbitration clause of the contract according to ordinary rules of contract interpretation that required the avoidance of absurd results and also that contracts be construed against the drafter. DirecTV argued that the presumption in favor of arbitration established by the Federal Arbitration Act meant that arbitration clauses should trump such rules of contractual interpretation, but the court disagreed. The court stated that, according to Ninth Circuit precedent, the FAA requires arbitration agreements to be placed on equal footing with other contracts. Allowing the suspension of ordinary contract rules of interpretation when arbitration agreements were involved would be placing arbitration agreements on favored footing; on equal footing, the same rules ought to apply to arbitration agreements as apply to all other contracts. Arbitration, the court emphasized, "is a matter of consent."
This is an interesting case. Due to the consolidation of most of our forms of communication under massive umbrella corporations, a relationship with one subsidiary can be used to assert a relationship with all companies under the same corporate umbrella, as DirecTV tried to do here. This court's view feels rooted in a common-sense understanding that the arbitration agreement Revitch entered into when he decided to sign up for AT&T wireless service shouldn't also cover completely unrelated television services provided by a company that hadn't been affiliated with AT&T when Revitch entered into the contract. Only a few months ago, though, the Supreme Court reversed the Ninth Circuit for refusing to enforce an arbitration clause, re-affirming the trump-card nature of the Federal Arbitration Act over many other public policies. This case seems like another display of Ninth Circuit courts' skeptical views toward arbitration clauses -- which the Supreme Court has just reminded the Ninth Circuit it doesn't share.
Monday, August 20, 2018
California warranty case against Google illustrates the work the covenant of good faith and fair dealing does for consumers
A recent case out of the Northern District of California, Weeks v. Google LLC, Case No. 18-cv-00801 NC (behind paywall), involves Google's Pixel phones, which the plaintiffs allege are defective. The phones were covered by a warranty that permitted Google to either repair, refund, or replace the phones, at its discretion. When the plaintiffs complained about the defective phones, Google offered to replace the phones, but the plaintiffs weren't happy with that result: Their allegations are that their defective phones would just be getting replaced with more defective phones, until the point when the warranty expired.
The court agreed with Google that, under the terms of the warranty, Google had every right to do exactly that: "The Court understands plaintiffs' outrage at Google's being able to replace a defective Pixel with another defective Pixel for 365 days straight. . . . It beggars reason and would appear to make hash of the spirit of the warranty. But the warranty provided a remedy, and as far as the Court can tell, Google abided by its remedy. . . . The question of whether it was valid under the express warranty to replace a defective Pixel with another defective Pixel must be answered in the affirmative based on a plain reading of the Limited Warranty."
However, all was not lost for the plaintiffs, because the court then turned to allegations that Google had breached the covenant of good faith and fair dealing, a claim which the court allowed to survive Google's motion to dismiss. The court found that, while Google's conduct might not have been in violation of the terms of the contract, its conduct was not "expressly permitted" under the contract, nor did it meet "reasonable expectations" as to what its behavior would be. Therefore, the covenant of good faith and fair dealing acted as a backstop here against the dismissal of the breach of warranty claims.
(The court also allowed fraudulent concealment and California consumer protection law claims to survive.)
Friday, August 3, 2018
Watch out for relevant statutes when entering into contracts (but also, read your own contract language)
A recent case out of the Eastern District of Virginia, K12 Insight LLC v. Johnston County Board of Education, Civil Action No. 1:17-cv-1397, is a cautionary tale for being aware of how statutes can affect contracts. But, also, it could have been decided just on the contractual language alone.
In the case, the Board of Education signed an Order Form with K12 Insight that provided for an annual fee for three one-year terms. After signature, the school district realized that it could not afford the final two years of the subscription to K12's software and so attempted to terminate the subscription. K12 sued for breach of contract, alleging that the school district was obligated to maintain its subscription for the full three years.
The court declared the Order Form contract to be void. First, there was a statute that required a pre-audit certification to be affixed to the Order Form in order to ensure that there would be funding for the school district's contract. This contract lacked the pre-audit certification (which maybe explains why there wasn't funding). The court found that the contract was also outside the scope of the superintendent's authority.
But, finally, even if the contract had been properly made, the Board was permitted under the contract's own terms to terminate it if it didn't have sufficient funds. That was exactly what happened here, so the termination was proper.
Friday, July 27, 2018
23andMe, one of the services that takes your saliva and analyzes your DNA for you, has announced a partnership with GlaxoSmithKline to use its DNA database to develop targeted drugs. I've written before about the fairly broad consent Ancestry.com's similar home DNA service elicited under its terms and conditions, which 23andMe also enjoyed. According to the article, 23andMe considers itself to have gained consent from its users, and is allowing users to opt out if you wish.
I think most of us have little problem with our DNA being used to find cures for terrible diseases and afflictions. If my DNA could be used to cure cancer, I am happy to line right up. (And, in fact, when my father had cancer, we did provide express consent to his doctors for us to assist in their DNA research.) But I think most of us, if asked, would have said something like, "I want my DNA to be used to cure cancer so people with cancer can be cured."
However, the way the pharmaceutical industry works in this country, that's not exactly what happens. The cure, as we know because we talk about health insurance A LOT, is then available to those who can afford it. Many of Wikipedia's drug entries keep track of the cost of pharmaceuticals in the U.S. against the cost of producing the drug, as can be seen here. So I don't want to sound like a terrible person trying to stall progress, but, well, the users in the database paid to use 23andMe, and now their DNA is being sold to a pharmaceutical company, so 23andMe has now made money off of the DNA twice, and then it's going to get used to develop into medications that will then be sold again, back to the people who need the medications, who may be the same people whose DNA was used to develop the drug. At that point your DNA has been profited off of three times, and never by you, and possibly twice at your own personal expense. And, if history is anything to go by, that pharmaceutical is your DNA coming back to you at a tremendous mark-up. So you could find yourself in a position where you paid to have a pharmaceutical company take your DNA, turn it into the drug that could save your life, and then ask you to pay, again, much more money than you have, to gain access to the drug. You paid to donate your DNA so they could charge you for the benefits it provides. And, according to the terms and conditions, you consented to that.
Monday, July 2, 2018
An "exceedingly rare" case where a court discounted testimony, relying in part on the witness's admitted "habit of routinely lying" in the course of business
A recent case out of Michigan, Strategy and Execution Inc. v. LXR Biotech LLC, No. 337105, speaks to the perils of not putting agreements in writing (or doing so and subsequently losing the writing). The parties had a written contract that stated that they would arrive at performance criteria at a later time. But the parties disputed ever entering into a later agreement over the performance criteria. No party produced any written document. LXR's principal testified that the parties reached an oral agreement that he memorialized in writing but the writing was later lost. However, this testimony was not corroborated by any other witness except for one who gave "conflicting testimony" regarding the document. LXR's principal had admitted to "routinely lying" because he apparently thought it to be "good business practice." Furthermore, none of the "voluminous" emails exchanged between the parties ever referenced any agreement on the performance criteria. The court therefore agreed that "this is one of the exceedingly rare cases in which a witness's testimony is insufficient to find a jury question." Despite the testimony, the court was permitted to enter a directed verdict on the breach of contract claim.
Written contracts are not always required, but this case is an example of why they are often desirable to have, and to keep safe!
(There were other points of appeal in the case relating to other clauses of the contract and some jury instruction issues.)
Friday, June 29, 2018
A recent case out of the Second Circuit, Ortho-Clinical Diagnostics Bermuda Co. Ltd. v. FMC, LLC, No. 17-2400-cv (behind paywall), is another case about interpretation of contract terms -- twice over. Because here the parties entered into a contract, fought over breach of that contract, and then entered into a settlement agreement, which they were also fighting over. The moral is that, if you want something specific, you should ask for it rather than relying on unspoken industry practices.
The initial agreement between the parties was about an IT operating system. Although the system was going to cost $70 million, the contract wasn't very detailed, with no technical specifications or description of building methods. The parties' relationship deteriorated and they eventually entered into a Settlement Agreement to terminate the project. Under these new terms, FCM would be released from its obligation to provide the system to Ortho, while providing assistance while Ortho transitioned to a different contractor. After execution of the Settlement Agreement, Ortho apparently realized that FCM was not as far along as Ortho had thought and had not prepared certain items that Ortho had assumed it had prepared, and so Ortho claimed that as a result the IT system cost more and took longer.
The court, however, noted that there was nothing in the contract requiring FCM to produce the certain deliverables Ortho had been looking for. Ortho claimed it was "standard practice in the industry," but the court said that wasn't the equivalent of it being a contractual obligation. FCM was contractually required to provide assistance -- no more, no less. There was nothing in the contract about the job having to be at a particular stage of completion, or that any particular deliverables or documentation had to exist.
The court also pointed out that Ortho had released its claims regarding the original agreement in the Settlement Agreement. Ortho tried to argue that it had released claims but not damages but the court called that "a nonsensical reading."
Wednesday, June 27, 2018
A recent case out of the Southern District of New York, Treasure Chest Themed Value Mail, Inc. v. David Morris International, Inc., 17 Civ. 1 (NRB), deals with a digital marketing contract, presenting a variety of straightforward interpretation questions that could be helpful for basic examples for some things to look out for in contract drafting.
The parties entered into a contract in which Treasure Chest was required to provide "greater than 300,000 follow up weekly digital impressions." The first dispute was over whether "digital impressions" was too ambiguous to be enforced. The court, however, easily defined "digital impression" with reference to investopedia.com. The court distinguished "digital impression" from "email," saying if the parties had meant "email" they would have used the word "email." A lesson in just using what you wish to say if that's indeed what you want; fancier terms are not always necessary and might just leave some room open for arguments about ambiguity and interpretation.
There was also a dispute over whether it was ambiguous that compensation was "up to" a certain amount. But the court disagreed, saying it was clear that this simply meant the contract would not exceed a certain amount.
Therefore, the court found there was a valid contract, that Treasure Chest fulfilled all of its obligations under the contract, and David Morris did not, so Treasure Chest was entitled to damages. Treasure Chest also sought attorneys' fees, but the court found that the contract was not clear enough to justify attorneys' fees. The contract said that "costs necessary to collect" past due balances could be awarded, but the court said that did not satisfy the "high standard" for collection of attorneys' fees via contract. Again, if attorneys' fees are what you want, attorneys' fees are probably what you should say.
Wednesday, June 20, 2018
Recently a video went viral showing a 2016 altercation around an umpire ejecting Mets pitcher Noah Syndergaard after he threw a fastball behind the Dodgers' Chase Utley. Umpires wear microphones during Major LeagueBaseball games, and the resulting (often loud and profane) discussions with Mets players and especially Mets manager Terry Collins was recorded.
The video recently surfaced in an apparent leak, because MLB has announced its intention to try to scrub the video from the internet. MLB's reason for this is that it violates a "commitment" that "certain types of interactions" involving umpires during baseball games would not be made public, claiming it was "in the collective bargaining agreement" and that there was "no choice" but to scrub the video from the internet. Indeed, according to one report it had already been scrubbed.
Not so fast, though, because I found it still embedded in news reports about it. It's hard to get anything to vanish from the internet, especially once it's gone viral, but it's not that difficult to locate this video at all.
And it's not hard to see why it went viral. It's a fascinating glimpse into a part of the game fans seldom get to see. As others have pointed out, the umpire does a fantastic job in the clip, so it's hardly like he's being cast in a bad light. The manager doesn't even come across all that poorly. In fact, in my opinion, the party that comes out of the clip looking the worst is Major League Baseball and its confusing way of handling the explosive Chase Utley situation.
It's unclear what "interactions" were agreed to be withheld from the public, but this one is certainly an interesting one. I'd love to know what the contract terms actually are.
Monday, June 18, 2018
A recent case out of the District of Arizona, Colocation America Corporation v. Mitel Networks Corporation, No. CV-17-00421-PHX-NVW (behind paywall - h/t to reader D.C. Toedt for the non-paywall link!), is, in its own words, "a poster child for the rule of Section 201(2) of the Restatement."
The dispute was over whether or not an agreement between the parties to transfer a domain name also involved the transfer of IP addresses. The section at issue was ambiguously worded: "Mitel hereby agrees to quit claim . . . the goodwill of the business connected with and symbolized by [the] Domain Name and the associated IPv4 18.104.22.168/16 and any associated trade dress . . . ." Mitel claimed this required it to quit claim the goodwill of the business associated with the IP addresses. Colocation contended Mitel was required to quit claim the goodwill AND the IP addresses AND the trade dress.
The court found that the wording was ambiguous but that the rest of the contract supported Mitel's interpretation, since the contract did not mention the IP addresses anywhere else. At every other point the contract discussed the transfer only of the domain name. There were no clauses about the transfer of the IP addresses other than that one mention in the clause quoted.
Furthermore, the court found that Mitel had no reason to know Colocation thought it was acquiring the IP addresses. By contrast, though, Colocation did have reason to know that Mitel thought the agreement was not about the IP addresses. In fact, evidence showed that Colocation "intentionally misled" Mitel by pretending to wish to buy only the domain name and keeping all discussions domain-name focused, while "nebulously" slipping the IP addresses into the contract. The IP addresses were worth far more than the amount the parties agreed on for transferring the domain name, and the court found that this was further proof Colocation knew that Mitel only intended to transfer the domain name, not the IP addresses.
As the court summarized,
"Colocation's objective from the outset was to acquire the IPv4 addresses. But it purported to negotiate only for a domain name without ever leveling with Mitel Networks. Colocation not only had 'reason to know' Mitel Networks attached a 'different meaning' to their agreement, it created and promoted that different meaning on the part of Mitel Networks. Thus, the Domain Name Assignment Agreement must be interpreted in accordance with the meaning attached by Mitel Networks, that is, as an agreement to assign a domain name and goodwill and not as an agreement to transfer IPv4 addresses."
Monday, June 4, 2018
Here's a parol evidence case if you're looking for a recent example for teaching purposes. It's out of the Northern District of Illinois, Eclipse Gaming Systems, LLC v. Antonucci, 17 C 196.
The case concerned licensing agreements for source code for casino gaming software. The court found that the written agreement was facially unambiguous and complete and contained an integration clause. Nonetheless, the counter-plaintiffs argued that evidence of a contemporaneous oral agreement should be permitted. But the court refused, finding that Illinois law, which governed the contract, required the parties to put any contemporaneous oral agreements into the four corners of their unambiguous integrated contract if they wished them to be enforced. The counter-plaintiffs argued that they should be allowed to present their parol evidence to show the contract was in fact ambiguous, but the Illinois Supreme Court had rejected that approach where the contract contained an explicit integration clause, as was the case here.
Counter-plaintiffs claimed that their parol evidence would establish that no contract was ever formed between the parties but the court found that such evidence would contradict the terms of the contract, which contained explicit terms regarding its effectiveness, and parol evidence was inadmissible to "contradict the clear written provisions of an integrated contract." The written licensing agreement, the court found, was not equivalent to a letter of intent that provided some question on the parties' intent to be bound, but instead was clear on the parties' intent to be bound.
Counter-plaintiffs tried to turn to promissory estoppel but the court noted that promissory estoppel should be used to rescue promises that didn't rise to the level of an enforceable contract. The counter-plaintiffs were instead trying to use the doctrine to vary the terms of their written contract.
There were other allegations and analyses, including pertaining to mutual mistake and unconscionability, but these also failed.
Tuesday, May 22, 2018
I just blogged about the Ninth Circuit case of Morris v. Ernst & Young, and the Supreme Court has now come out with its decision, reversing the Ninth Circuit (shorter analysis here). Where the Ninth Circuit found that arbitration clauses prohibiting concerted actions by employees violated the National Labor Relations Act, the Supreme Court found that permitting concerted actions by employees where arbitration clauses existed would violate the Federal Arbitration Act. Justice Ginsburg wrote a long dissent; the majority opinion was written by Justice Gorsuch. The trend out of the Supreme Court has been that arbitration trumps every other policy. The Federal Arbitration Act is like the royal flush of statutes.
In a world where contracts with arbitration clauses govern almost every imaginable transaction, courts are forced into interesting decisions to press against the primacy of arbitration. So, for instance, on the same day the Supreme Court handed down its decision, the Western District of Pennsylvania declined to enforce an arbitration provision in Jones v. Samsung Electronics America, Case No. 2:17-cv-00571-MAP (behind paywall). Jones sought to bring a class action against Samsung based on alleged defects in its S3 cell phones. Samsung sought to arbitrate, citing the contract allegedly contained in the instruction booklet included with the phone. But the court disagreed that the arbitration clause was enforceable. It found that the clause was "tucked away" in a section entitled "Manufacturer's Warranty" contained in a 64-page booklet. The court agreed that the clause might possibly have been more inconspicuous, but found that
the degree of prominence of the Arbitration Agreement here seems calibrated with dual goals: on the one hand, just enough to persuade a court to smother potential litigation; on the other hand, not enough to make it likely that a consumer will actually notice the Agreement and perhaps hesitate to buy. It is one thing to hold consumers to agreements they have not read; it is another to hold them to agreements that, perhaps by design, they will probably never know about.
The court's decision here makes some sense, but it seems rooted in a somewhat fictional hypothetical. I don't know but I feel like Samsung could sell its phones with an instruction booklet with "ARBITRATION CLAUSE" in big, bold, red letters with exclamation points on the front of it, and I'm not sure it would in fact cause most consumers to "hesitate to buy," especially not if the majority of other cell phones contain similar arbitration clauses (the major cell phone carriers do).
But the bigger fiction at issue here is the idea that we're all "voluntarily" entering into these contracts. I mean, we are, to the extent that it's "voluntary" to have a cell phone in today's world. The answer to that question is: It is, to some extent, but not to the extent that we're willing to forego one entirely based on the mere possibility we might want to sue someday and can't. We all take risks, and maybe the court's view is this a risk that doesn't pay off for the consumer, oh, well, but it seems like the consumer has almost no power to take any other kind of risk. (This is, of course, not limited to cell phone contracts. So the real question is: is it "voluntary" to be a consumer in our capitalist society?) Likewise, is it "voluntary" to accept a job that require arbitrations, if you need a job to survive and jobs without arbitration clauses might be tough to come by?
There are statutory ways to shift the supremacy of arbitration, of course, as the Supreme Court's decision acknowledges. And at one point the FCC was contemplating doing something about the type of arbitration clause the court looked at in Jones. Maybe add it to your list of things to contact your representatives about, if you so desire.
Monday, May 14, 2018
In a copyright-ish case falling under the contract umbrella, Broker Genius, Inc. v. Volpone, 17-cv-8627 (SHS), a recent case out of the Southern District of New York, is a contract case where the likelihood of irreparable harm leads to the court granting a preliminary injunction.
The court concluded this meant that the products would be similar and that the similarities in the second product would be traceable to the first. The court found the defendants' software to be "extraordinarily similar" to Broker Genius's software, and those similarities were traceable to Broker Genius, due to the defendants' access to Broker Genius's software and the fact that the defendants' creation of their software happened "immediately" after accessing Broker Genius's software. The court acknowledged that some of the similarities predated Broker Genius's software, or were "logical or obvious," and that defendants had prior knowledge and experience in the industry. However, the weight of the evidence led to a finding that Broker Genius was likely to succeed on its breach of contract claim.
The court also found that defendants' derivative product was causing Broker Genius to suffer a loss of reputation and good will, which could not be compensated with monetary damages. Therefore, the court issued a preliminary injunction.