Tuesday, May 14, 2013
Boilerplate Symposium II: Theresa Amato on Remedies to the Problems Posed by Boilerplate
This is the second in a series of posts reviewing Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law.
Theresa Amato, a public interest lawyer, is the executive director of Citizen Works, and the director of the Fair Contracts Project (faircontracts.org).
Professor Radin’s masterpiece Boilerplate sets forth the intellectual underpinnings for an energetic movement to correct the imbalance of power between corporations and consumers in fine print contracts. Her explanations of the degradation of consent and the resulting diminishment of the rule of law should incite all those who read it to not merely nod in accord, but to take action.
Radin calls for a new legal way to analyze the boilerplate that she painstakingly shows fails to merit the term “contract” —and therefore should not be evaluated under contract law. Instead, she suggests we evaluate these mice-print monstrosities as a product itself that can cause harm. The boilerplate should be considered a potential inflictor of consumer harm through massive “rights deletion,” or “rights strip mining,” as Ralph Nader says, and thus should be addressed in tort, or under a new legal rubric altogether. This bold suggestion alone elevates the book to compulsory reading as most academic articles tend only to set forth descriptions and analyses of the epic failure of the disclosure regulatory paradigm, but then fall short on solutions and action.
In both academia and consumer advocacy, far too few people are focused on solving the problem—to create remedies beyond studying the problem or treating its symptoms in a legal aid, case-by-case manner. Though there may be disagreement on the exact contours or how to solve the problems of boilerplate, there does seem to be some movement in recognition, at least, that there is a problem in need of solution.
A survey of the academia and advocacy landscape reveals:
- The fine print qua fine print has grown longer and mutates more frequently, as NYU School of Law Professor Florencia Marotta-Wurgler has documented, for example, with on-line contracts;
- Businesses are not self-policing on boilerplate, or making market corrections for the consumer’s benefit. To the contrary, recent Supreme Court decisions have spurred rights-reducing action, by sanctioning, for example, mandatory arbitration and class action waivers;
- Consumer abuses in fine print will not be solved with financial literacy courses and by blaming consumers for not reading unilaterally-imposed contracts, which they cannot understand if they do, and then don’t necessarily use to make decisions, as Loyola Law School Los Angeles Professor Lauren Willis and others have ably documented;
- Despite decades of computer use, inadequate corporate transparency regulation means that in many industries terms of service are still not online; it is often difficult to obtain copies of the contracts—until after becoming a customer for the underlying product or service. This has the additional potential to skew academic research to on line industries, and not necessarily where some of the gravest rights-reducing behavior may exist, e.g., in harder-to-obtain nursing home or employment contracts.
- The judiciary applies antiquated tenets of contract law—in a legal fiction—that upholds abusive provisions in a case-by-case unconscionability analysis, primarily enforcing them by continuing to place the outdated “duty to read” on consumers, including those who patently cannot. Consumers face a curtailed potential for redress, especially when coupled with disappearing class action potential.
- Federal and state agencies to date have not allocated significant resources for a much needed focus on the corporate fine print—not even at the bully pulpit level—nor have they posited suitable alternatives.
- Instead of Congress doling out more regulatory authority to agencies (as they did with the CFPB and the SEC and as they should to help fix this), for example, members continue to contest the CFPB, have failed to grant the Federal Trade Commission Administrative Procedures Act rulemaking authority, leaving it hamstrung, and have failed to hold hearings on the widespread abuses of boilerplate affecting tens of millions of Americans daily.
We at Fair Contracts believe that there should be greater focus on seeking a systemic, upstream solution to boilerplate. Though some would hang their hats on piecemeal “improved disclosure” as a least invasive means of correction, such a course of action alone is tepid and wholly inadequate to the serious problems documented by Radin and others.
Nor must we only wait for the next glacial restatement of contract law, or a revolution of contract theory that reverses the legal presumption of enforcement of harmful contract terms, or a different way to analyze the legality of fine print contracts, including treating them as torts as all of these are definitely long, long, long-run solutions.
Intermediary, if admittedly only partial, remedial steps exist that we should explore for innovation that could lead to a better future for consumers, including:
- Dramatic elevation of public awareness of the rights removal hazards contained within the fine print, with a multi-pronged education and media campaign;
- Significant increases in data collection of contracts and scholarship across multiple industries, with more empirical research to ascertain the prevalence of harmful consumer provisions, their collusive origins, and their negative economic consequences, with examples of how consumer harm is caused to large categories of people who forfeit their rights without knowledge of doing so;
- Promulgation of a model set of principles for provisions within, and reform of, the fine print;
- Outright legislative and regulatory bans (or workarounds – through ombudsman consumer review boards) on contract provisions that undermine the rule of law, fair competition and democracy, including the deprivation of consumers of the civil justice system and their First Amendment rights, vendor assertions of no accountability (thus allowing contract law to eat tort law alive) and consumer disadvantageous unilateral modification powers;
- Development of model state and federal legislation to ensure a fair regulatory playing-field;
- Development of a “fair trade” or “hypoallergenic” or “green-star energy-efficient”-type seal that does not necessarily signal a “fair contract” but does signal the absence of a known set of provisions that reduce consumer rights for those consumers who care about them, which should be most if the educational goals were attained, and thus obviate the need to read through the fine print for at least that standardized set of terms symbolized by the seal. This would permit consumers an actual market within which to shop, should government fail to act to preserve their rights; and
- Studying the consequences from other countries which are ahead in consumer protection. There is a reason that the EU black and grey lists terms, as does Australia: They are unfair to consumers and their governments do not let corporations dictate all the terms, rewriting and undermining in a private ordering those public policies passed as legislation. In early April 2013, The Consumer Council of Hong Kong urged businesses to produce short and simple contracts that eliminate unfair terms and is starting to provide model contracts. See: http://www.consumer.org.hk/website/ws_en/competition_issues/policy_position/2012040301.print
We should be debating these matters in the United States. We need an organized consumer constituency to reverse the contract peonage so reform efforts may gain the momentum needed to create alternatives to the unilateral, corporate-dictated status quo.
[Posted, on Theresa Amato's behalf, by JT]
Monday, May 13, 2013
Boilerplate Symposium I: Peter Alces on Consent
This is the first in a series of posts reviewing Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law.
In this fine book, Margaret Jane Radin concludes that “consent” lacks a reality referent in contract. That is, somewhere between what she describes as “World A (Agreement),” the universe of enforceable promises negotiated “at arms’ length” by parties of similar relative sophistication, and “World B (Boilerplate),” where standard and oppressive terms effect normative and democratic degradation, consent is lost. This conclusion is not shocking; it is difficult to think of anyone (probably including even Randy Barnett) who honestly believes that real consent has very much to do with most (even virtually all) contracting these days. So we can all agree: where there is boilerplate, there is no “meaningful” consent, which is to say there is none of the consent that should matter to contract. From that premise, Professor Radin concludes that World B is not a contracts universe at all, but is instead a realm better understood by reference to tort principles (and it is even worse than Grant Gilmore ever imagined).
But once we acknowledge the death of consent, how much more new is there to say about boilerplate? You could despair with Professor Radin that political forces make it unlikely that the American justice system will respond as would the European Union; that consequentialist apologists rely on arm chair empirical assumptions without actually doing the necessary math; that by a 5-4 decision of the United States Supreme Court the Federal Arbitration Act has been contorted to undermine our justice system; that a curiously reasoned decision of the United States Court of Appeals for the Seventh Circuit has somehow become the prevailing (if not final) word on contract formation: but at the end of the day, it is difficult to identify certainly the extent of the harm or glimpse a viable cure. (Those troubled by boilerplate need to do the same math they complain form contracts proponents fail to do.)
While Professor Radin is right that there are distinguishable Worlds of contract, she does not make clear enough that the two Worlds are on a continuum; they are not so clearly dichotomous. Further, the contours of the continuum are obscure: many very sophisticated people know quite well what they are giving up when they sign a form contract or click “I agree," and yet do so willingly. That is generally the rational thing to do. Now Boilerplate does put boilerplate on a three dimensional matrix that would be sensitive to degrees of consent, alienability of the right in issue, and the size of the cohort prejudiced. But in describing Worlds A and B in dichotomous terms, the book may obscure the reasons why it remains rational to agree to form contracts, without reading their terms. So I think the book would have been stronger had it described Worlds A and B along a fourth dimension.
What Professor Radin has to say about consent is surely true, but what she says is really a truism: we know that consent is a conclusion rather than an analytical device, and that consent is also a term of art, largely divorced from the important normative work it can do in World A. What we do not know, though, is when World A becomes World B: it is not just the case that all form contracts are World B contracts. Whether a contract is World A or World B is a function of the very factors that contract doctrine could take seriously, if the composition of the Supreme Court were different, and if all Federal Courts of Appeal judges knew a bit more about the common law of contract and the UCC.[Posted, on Peter Alces's behalf, by JT]
Boilerplate Symposium: The First Five
We begin our online symposium on Margaret Jane Radin's book, Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law with five posts this week. This post will serve to introduce our guest bloggers.
Peter A. Alces is the Rollins Professor of Law and Cabell Research Professor of Law at the College of William & Mary School of Law, where he has taught since 1991. He is the author of A Theory of Contract Law: Empirical Insights and Moral Psychology; Commercial Contracting; The Law of Suretyship and Guaranty; Bankruptcy: Cases and Materials; Cases, Problems and Materials on Payment Systems; The Commercial Law of Intellectual Property; Sales, Leases and Bulk Transfers; The Law of Fraudulent Transactions; and Uniform Commercial Code Transactions Guide. He has also published articles in the Northwestern, Michigan, Minnesota, Illinois, North Carolina, Fordham, California, Texas, and William and Mary Law Reviews, and the Emory, Ohio State and Georgetown Law Journals.
Theresa Amato is the executive director Citizen Works which she started with Ralph Nader in 2001. After earning her degrees from Harvard University and the New York University School of Law, where she was a Root-Tilden Scholar, Amato clerked in the Southern District of New York for the Honorable Robert W. Sweet. She was a consultant to the Lawyers Committee for Human Rights (Human Rights First) and wrote an influential human rights report on child canecutters in Haiti and the Dominican Republic. She then became the youngest litigator at Public Citizen Litigation Group, where she was the Director of the Freedom of Information Clearinghouse in Washington D.C. In 1993, Amato founded the nationally-recognized, Illinois-based Citizen Advocacy Center and served as its executive director for eight years. She currently serves as its Board President. Most recently, she has launched Fair Contracts.org to reform the fine print in standard form contracts. In 2009, The New Press (New York) published her book, Grand Illusion: The Myth of Voter Choice in a Two-Party Tyranny. She also appears prominently in the Sundance-selected and Academy Awards short-listed documentary “An Unreasonable Man.”
Andrew Gold is a professor of law at the Depaul University College of law. His primary research interests address legal theory and the law of corporations. Following graduation from Duke University School of Law, he clerked with the Honorable Daniel Manion of the Seventh Circuit, and with the Honorable Loren Smith of the Court of Federal Claims. After his clerkships, he joined Skadden, Arps, Slate, Meagher & Flom, where he practiced corporate litigation. Professor Gold's article, "A Property Theory of Contract," was lead article in the 2009 volume of the Northwestern University Law Review. His recent publications also include articles in the William and Mary, U.C. Davis, and Maryland law reviews. In 2007, Professor Gold received the College of Law's Award for Excellence in Scholarship, and, in 2010, he received the Award for Excellence in Teaching. During the 2011-2012 academic year, Professor Gold was a Visiting Scholar at Harvard Law School, and in Fall 2011, he was an HLA Hart Visiting Fellow at the University of Oxford. His scholarship has focused on contract theory; private law theory; fiduciary duties in corporate law; and Section 10(b) of the Securities Exchange Act.
David Horton joined the UC Davis faculty in 2012, after three years at Loyola Law School, Los Angeles. He received his B.A. cum laude from Carleton College in 1997 and his J.D. from UCLA School of Law in 2004. At UCLA, he was elected to the Order of the Coif and served as Chief Articles Editor of the UCLA Law Review. He then practiced at Morrison & Foerster in San Francisco and clerked for the Honorable Ronald M. Whyte of the United States District Court for the Northern District of California. From 2007 to 2009, he taught legal research and writing at UC Berkeley School of Law. Horton’s research focuses on wills and trusts, federal arbitration law, and contracts. His recent work has appeared or will soon appear in the NYU Law Review, Northwestern University Law Review, Georgetown Law Journal, UCLA Law Review, Notre Dame Law Review, North Carolina Law Review, University of Colorado Law Review, and Virginia Law Review in Brief, among others. He also wrote an amicus brief on behalf of contracts professors in AT&T Mobility LLC v. Concepcion, the recent Supreme Court case.
Ethan J. Leib is a noted expert in constitutional law, legislation, and contracts. His most recent book, Friend v. Friend: Friendships and What, If Anything, the Law Should Do About Them (2011), explores the benefits of legal recognition of friendship and was published by Oxford University Press. He has three forthcoming articles on public law subjects: one in the Journal of Political Philosophy examining fiduciary principles in political representation; one in the California Law Review applying the fiduciary principle to the activity of judging within democracies; and one in The University of Chicago Law Review exploring whether elected judges should be interpreting statutes differently from their appointed colleagues. Leib's other academic writing has appeared in journals such as the Yale Law Journal, Northwestern University Law Review, UCLA Law Review, Constitutional Commentary, Election Law Journal, Journal of Legal Education, Law & Philosophy, and elsewhere. He has also written for a broader audience in the New York Times, USA Today, SF Chronicle, Policy Review,Washington Post, New York Law Journal, The American Scholar, and The New Republic. Before joining Fordham, Leib was a Professor of Law at the University of California–Hastings. He has served as a Law Clerk to Chief Judge John M. Walker, Jr., of the U.S. Court of Appeals for the Second Circuit and as an Associate at Debevoise & Plimpton LLP in New York.
We look forward to a stimulating fortnight of exchanges on this important new book.
Thursday, May 9, 2013
Plain Meaning Leads to Mood Indigo for Ellington Heir
Duke Ellington’s grandson brought a breach of contract action against a group of music publishers; he sought to recover royalties allegedly due under a 1961 contract. Under that contract, Ellington and his heirs are described as the “First Party” and several music publishers, including EMI Mills, are referred to as the “Second Party.” On appeal from the dismissal of the case, Ellington’s grandson pointed to paragraph 3(a) of the contract which required the Second Party to pay Ellington "a sum equal to fifty (50 percent) percent of the net revenue actually received by the Second Party from…foreign publication" of Ellington's compositions. Ellington’s grandson argued that the music publishers had since acquired ownership of the foreign subpublishers, thereby skimming net revenue actually received in the form of fees and, in turn, payment due to Ellington’s heirs.
The appellate court explained the contract and the grandson’s argument:
This is known in the music publishing industry as a "net receipts" arrangement by which a composer, such as Ellington, would collect royalties based on income received by a publisher after the deduction of fees charged by foreign subpublishers. As stated in plaintiff's brief, "net receipts" arrangements were standard when the agreement was executed in 1961. Plaintiff also notes that at that time foreign subpublishers were typically unaffiliated with domestic publishers such as Mills Music. Over time, however, EMI Mills, like other publishers, acquired ownership of the foreign subpublishers through which revenues derived from foreign subpublications were generated. Accordingly, in this case, fees that previously had been charged by independent foreign subpublishers under the instant net receipts agreement are now being charged by subpublishers owned by EMI Mills. Plaintiff asserts that EMI Mills has enabled itself to skim his claimed share of royalties from the Duke Ellington compositions by paying commissions to its affiliated foreign subpublishers before remitting the bargained-for royalty payments to Duke Ellington's heirs.
Ellington’s grandson asserted on appeal that the agreement is ambiguous as to whether "net revenue actually received by the Second Party" entails revenue received from EMI Mills's foreign subpublisher affiliates. The appellate court found no ambiguity in the agreement; the court stated that the agreement “by its terms, requires EMI Mills to pay Ellington’s heirs 50 percent of the net revenue actually received from foreign publication of Ellington’s compositions.” It reasoned:
"Foreign publication" has one unmistakable meaning regardless of whether it is performed by independent or affiliated subpublishers. Given the plain meaning of the agreement's language, plaintiff's argument that foreign subpublishers were generally unaffiliated in 1961, when the agreement was executed, is immaterial.
The court continued by stating that “the complaint sets forth no basis for plaintiff's apparent premise that subpublishers owned by EMI Mills should render their services for free although independent subpublishers were presumably compensated for rendering identical services.” Thus, dismissal of the suit was affirmed.
Ellington v. EMI Music, 651558/10, NYLJ 1202598616249, at *1 (App. Div., 1st, Decided May 2, 2013).
[Meredith R. Miller]
Foretaste of Our Online Symposium on Margaret Jane Radin's Boilerplate
Next week, we will begin an online sympsoium on Margaret Jane Radin's Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law. Here is a description of the book provided by the publisher's websit
Boilerplate--the fine-print terms and conditions that we become subject to when we click "I agree" online, rent an apartment, enter an employment contract, sign up for a cellphone carrier, or buy travel tickets--pervades all aspects of our modern lives. On a daily basis, most of us accept boilerplate provisions without realizing that should a dispute arise about a purchased good or service, the nonnegotiable boilerplate terms can deprive us of our right to jury trial and relieve providers of responsibility for harm. Boilerplate is the first comprehensive treatment of the problems posed by the increasing use of these terms, demonstrating how their use has degraded traditional notions of consent, agreement, and contract, and sacrificed core rights whose loss threatens the democratic order.
Margaret Jane Radin examines attempts to justify the use of boilerplate provisions by claiming either that recipients freely consent to them or that economic efficiency demands them, and she finds these justifications wanting. She argues, moreover, that our courts, legislatures, and regulatory agencies have fallen short in their evaluation and oversight of the use of boilerplate clauses. To improve legal evaluation of boilerplate, Radin offers a new analytical framework, one that takes into account the nature of the rights affected, the quality of the recipient's consent, and the extent of the use of these terms. Radin goes on to offer possibilities for new methods of boilerplate evaluation and control, among them the bold suggestion that tort law rather than contract law provides a preferable analysis for some boilerplate schemes. She concludes by discussing positive steps that NGOs, legislators, regulators, courts, and scholars could take to bring about better practices
But before we kick off the symposium, we have a timely new review of the book from Omri Ben-Shahar (pictured) that is forthcoming in the Michigan Law Review. The review is entitled Regulation through Boilerplate: An Apologia, and here is a description from SSRN:
This essay reviews Margaret Jane Radin’s Boilerplate: The Fine Print, Vanishing Rights, And The Rule Of Law (Princeton Press, 2013). It responds to two of the book’s principal complaints against boilerplate consumer contracts: that they modify people’s rights without true agreement to, or even minimal knowledge of, their terms; and that the provisions they unilaterally enact are substantively intolerable. I argue, counter-intuitively, that contracts with long fine prints are no more complex and baffling to consumers than any alternative boilerplate-free templates of contracting. Therefore, there is no alternative universe in which consumers enter simpler contracts better informed of the legal terms. In addition, I argue that any policy that mandates consumer-friendlier arrangements (such as ones that eliminate boilerplate arbitration clauses, warranty disclaimers, or data collection) would hurt consumers in an unintended but potentially costly way.
Harper Lee Sues to Recover Her Rights to To Kill a Mockingbird
For many lawyers, To Kill a Mockingbird (TKAM) is at the top of their list of "favorite books/movies about a lawyer." TKAM is about more than lawyering, of course. It's about racism, family, class and much more. This week, TKAM also is about "fraudulent inducement," "consideration" (a lack thereof) and "fiduciary duty." All of those subjects are in the complaint filed by TKAM author, (Nelle) Harper Lee, against her purported literary agent.
In the suit, Lee alleges that Samuel L. Pinkus (and a few other defendants) fraudulently induced her to sign her TKAM rights over to one of Pinkus's companies in 2007 and again in 2011. According to Lee, Pinkus, the son-in-law of Lee's longtime agent, Eugene Winick, transferred many of Winick's clients to himself when Winick fell ill in 2006. Pinkus then allegedly misappropriated royalties and failed to promote Lee's copyright in the U.S. and abroad.
For Contracts professors, the Lee v. Pinkus suit provides some interesting hypos to discuss when teaching fraud, consideration, and assignments of rights. Regarding fraud, Lee alleges that Pinkus lied to her about what she was signing at a time when she was particularly vulnerable due to a recent stroke and declining eyesight. Consideration is in play because there allegedly was no consideration from Pinkus to Lee in exchange for Lee's transfer of rights to Pinkus. Assignment issues arose because the many companies who owed Lee royalties reportedly struggled to figure out which company or companies they should pay given Pinkus's many shell companies. Overall, it's a sad story for Ms. Lee but one that students may find particularly engaging.
[Heidi R. Anderson]
p.s. Although there are many quote-worthy passages in TKAM, a favorite of mine (useful when advising students about their writing) is: “Atticus told me to delete the adjectives and I'd have the facts.” Please feel free to share your favorites in the comments.
Tuesday, May 7, 2013
Weekly Top Tens from the Social Science Research Council
RECENT HITS (for all papers announced in the last 60 days)
TOP 10 Papers for Journal of Contracts & Commercial Law eJournal
March 8, 2013 to May 7, 2013
CALL FOR PAPERS: CLASSCRITS VI: Stuck in Forward? Debt, Austerity & the Possibility of the Political
Stuck in Forward?
Debt, Austerity and the Possibilities of the Political
Southwestern Law School &
U.C. Davis School of Law
Keynote Speaker: Professor Akhil Gupta, Department of Anthropology
Director, Center for India and South Asia, University of California, Los Angeles
What are the possibilities and alternatives for a genuinely progressive economic project in an age of resurgent neoliberal policies and politics, worldwide shifts in population and demographics, and hegemonic economics?
How can we address the challenges of our age including, but not limited to: globalization; shifting power relationships between the developed world and formerly “third world” countries; massive intergenerational and upward transfers of wealth; abject poverty; staggering debt; wage stagnation; a declining middle class; an increasingly dysfunctional food system; and environmental and climate risks that will require concerted national and international efforts.
Stuck in Forward? Debt, Austerity and the Possibilities of the Political will address these questions by bringing together scholars, economists, activists, policymakers, and others to critically examine and take stock of who wins, who loses, how the law facilitates the hierarchical and spatial distribution of winners and losers, and how we may use law and politics to develop both real and utopian interstitial spaces of classlessness within the new post-recession global order.
We invite panel proposals and paper presentations that speak to this year’s theme as well as to general ClassCrits themes. In addition, we extend a special invitation to junior scholars (i.e., graduate students or any non-tenured faculty member) to submit proposals for works in progress . A senior scholar as well as other scholars will comment upon each work in progress in a small, supportive working session.
Please visit the ClassCrits website for more information about this year’s themes and topics.
For the full call for proposals, contact any member of the Conference Planning Committee:
Danielle Kie Hart, Southwestern Law School
Tonya Brito, The University of Wisconsin Law School
Athena Mutua, SUNY Buffalo Law School
Lucille Jewel, John Marshall Law School
Martha McCluskey, SUNY Buffalo Law School
Jessica Owley, SUNY Buffalo Law School
Matthew Titolo, West Virginia University College of Law
René Reich-Graefe, Western New England University School of Law
Lil Wayne Loses Endorsement Over Emmett Till Lyrics, But Don't Worry, Celebrating Violence Against Women Is Still Fine
As reported here in Rolling Stone, Mountain Dew has terminated its endorsement deal with Lil Wayne because of offensive lyrics in an unauthorized leak of a remix of Future's "Karate Chop." The offensive lyrics can be found here, except that the online version omits the reference to Emmett Till, a fourteen year old African-American boy who was tortured and killed in Mississippi in 1955, after allegedly having whistled at a white woman. Lil Wayne's lyrics brag that he will do to a woman's vagina what was done to Emmett Till.
Emmett Till's family was outraged by the reference. As noted in the New York Times, although Rolling Stone and others have characterized Lil Wayne's response as an apology, the family recognized that it was not an apology. Lil Wayne "acknolwedged" the family's hurt and pledged not to reference Emmett Till in his lyrics in the future.
What is really striking is the utter lack of comment on the rest of the lyrics. The reference to Emmett Till imay only be the most offensive thing about the song, but all of the lyrics in Lil Wayne's verse are absolutely vile. The Times reports that Al Sharpton has been called in to take advantage of this "teaching moment" to help young artists like Lil Wayne understand more about the civil rights movement.
Violence against women is also a civil rights issue.
Monday, May 6, 2013
Yogurt Deal Goes Sour
Interesting story here on the Wall Street Journal's Market Watch blog. Interesting because it seems like the case will be very difficult for plaintiff to prove and its damages will be a challenge to calculate with requisite specificity.
The facts, as also reported here on Food Navigator-USA are as follows:
In 2012, Tula Foods introduced its Better Whey of Life premium Greek yogurt line, which is now sold in over 400 stores. Tula contracted with the Kroger Co., which in addition to its retail stores owns and operate 37 manufacturing plants at which it produced, among other things, Tula's Better Whey of Life yogurts. According to the complaint, as summarized on the Market Watch blog, becasue Kroger did not produce the yogurt according to Tula's specification (and it allegedly did so knowlingly). Tula also brings claims against Weber Flavors, which Tula claims failed to properly "treat and process the vanilla bean base" in Tula's yogurt. As a result, Kroger released "poor-quality unappetizing yogurt on the market." If that isn't not specific enough for you, the complaint specifies that, as a result of the improperly processed vanilla bean base, Tula found mold growing in its finished yogurt, resulting in a recall.
Just an aside here, for fans of Slings and Arrows, doesn't that slogan (something like, "Tula provides only poor-quality unappetizing yogurt laced with mold") strike you as precisely the sort of ad campaign that Froghammer would have come up with if they were hired to market Better Whey of Life yogurts?
There is also a misappropriation claim, since Kroger allegedly used Tula's trade secrets to make a competing store brank of Greek yogurt -- but was it of equally poor quality and equally unappetizing? Surely a jury question there.
The theory of contract damages will be a challenge, because Tula will have to show that its product would have taken off were it not for the devastating effects on its reputation caused by the alleged breaches and resulting product recalls. Demonstrating defendants' failure (perhaps intentional failure) to adhere to Tula's specifications will also be a lot of work. But those allegations will also be very difficult to dismiss without a lot of discovery and perhaps a trial, so the settlement price should be high if the complaint adequately states a cause of action. Moreover, as Tula is also bringing claims for breach of express and implied warranties, a record of moldy yogurt ought to do the trick.
Friday, May 3, 2013
Teaching Sales: A Quandary
So, here's an interesting problem I'm facing. I taught sales for the first time this semester. I would say I devoted about 2/3 of class time to going over problems. In order to maximize active learning, I had the students hand in written answers to three of the problems each week, and that homework counted cumulatively for 40% of the grade).
My students were amazingly diligent, often looking up cases referenced in the questions and reading through the comments to Article 2 of the UCC. I don't know what all the students thought about the assessment system, but a few have told me that they appreciated the fact that they had no choice but to keep up with the material, even if answering the questions was time-consuming and often frustrating because of either ambiguities in the Code or tensions between the Code and the caselaw.
But here's the problem. I wasn't born yesterday. Now that there has been a group of students that has taken the course with me, their notes, including their answers to the homework problems, will circulate. I think it is unrealistic to expect students (especially 3Ls) to refrain from consulting such excellent authority when answering the questions. Unfortunately, the mystic chords of memory will swell when touched not by the better angels of our nature (as represented at left), but by a consultation with last year's students' answers, leading to idle minds with which devils (represented at right) are just as happy to play as with idle hands.
So how can I re-create this year's experience without coming up with my own original questions every time I teach the course?
Any suggestions -- from any perspective: law prof, student, interested practitioner -- would be most welcome.
Thursday, May 2, 2013
Ticketmaster and Those Pesky Bots
New in Print
David F. Eisenberg, Evolving with the Times: A Push to Legalize Surrogate Parenting Contracts in the State of New York, 33 Pace L. Rev. 302 (2013)
George R. La Noue, Defining Social and Economic Disadvantage: Are Government Preferential Business Certification Programs Narrowly Tailored? 12 U. Md. L.J. Race, Religion, Gender & Class 2749 (2012)
Wednesday, May 1, 2013
Opening at Ave Maria Law
Ave Maria School of Law invites applications for multiple faculty positions from entry-level and lateral candidates, pre- or post-tenure. Ave Maria particularly welcomes applications from candidates with teaching and research interest in Contracts, Business Organizations, Sales, Negotiable Instruments, Secured Transactions, and related commercial subjects. Applicants should have superior academic credentials; a record, or the promise, of excellence in teaching and legal scholarship; and an interest and commitment in exploring his or her teaching and research interests in an institution that strives to integrate the Catholic intellectual tradition into teaching, scholarship, and service. Entry-level applicants may demonstrate scholarly promise by publications in scholarly journals or scholarly works in progress. In the case of any applicant with tenure, a distinguished record of teaching and scholarship is required. Interested candidates should send their materials to Professor Patrick T. Gillen, current chair of the Appointments Committee. Applications can be e-mailed to Professor Gillen at firstname.lastname@example.org or can be mailed to his attention at 1025 Commons Circle, Naples, Florida 34119. Resume review will begin immediately and continue until the positions are filled.
Ave Maria School of Law, providing legal education enriched by the Catholic Faith, seeks employees whose education, experience and beliefs are consistent with its mission. Ave Maria School of Law is an EQUAL OPPORTUNITY/AFFIRMATIVE ACTION employer that values diversity, including diversity in religious affiliation, and strongly encourages applications from persons of diverse backgrounds willing to support the institutional mission; it requires compliance with all state and federal laws governing employment discrimination.
"Cop Killer" Reward Offer Leads to Breach of Contract Suit
We previously blogged about high-profile reward offers by Donald Trump, Bill Maher, a laptop-seeking music producer, and a Hong Kong businessman. Only one of those (the producer) led to an actual lawsuit. The latest reward offer in the news involves murder.
In February of this year, the City of Los Angeles and other entities collectively offered a $1 million reward for information regarding Chris Dorner. Dorner was the former policeman and Navy officer who (allegedly) killed four people, including two policemen. The manhunt for Dorner, labeled the "Cop Killer," reportedly was one of the largest in LA County's history.
One of the people claiming the reward, Rick Heltebrake, has filed a breach of contract suit in LA Superior Court (the complaint can be obtained here but only for a fee). Heltebrake is suing the City of Los Angeles, and supporting entities for $1 million and is suing three cities that offered separate $100,000 rewards related to Dorner. Heltebrake was a carjacking victim of Dorner's. After he escaped, Heltebrake called the police and told them where they could find Dorner. Because Dorner was found at the location Heltebrake identified, he is seeking the rewards.
The contract controversy is one of interpretation. The rewards reportedly were available for "information leading to the apprehension and capture of" Dorner, for the "identification and apprehension" of Dorner, for the "capture and conviction" of Dorner, and for "information leading to the arrest and conviction of" Dorner (I do not have the complaint so these excerpts are cobbled together from TMZ, Courthouse News Service, ABC and other sources). Police charged Dorner on February 11, 2013. Heltebrake called police on February 12. On February 25, after a shootout with police and structure fire, Dorner was found dead from an apparently self-inflicted gunshot wound.
Given the above facts, some of the intepretations questions are: (i) whether the authorities' shootout and recovery of Dorner's body qualifies as "apprehension" or "arrest," (ii) whether the "and" between "identification and arrest" or between "capture and conviction" means that both are required in order to collect, and many, many more. A complicating factor is that the $1 million reward was merely announced on TV; no written record was made. At least one reward offeror, the City of Riverside, has stated that the lack of a "conviction" means that it won't pay. Although this is a tragic story, I may mention it the next time I teach the Carbolic Smoke Ball case.
If anyone is able to find the complaint for free, please post a link in the comments.
[Heidi R. Anderson]
Tuesday, April 30, 2013
Movie Producers Sue Michael Keaton for Breach of Contract
We are grateful to the website Lexology.com and to Ellen D. Marcus of Zuckerman Spaeder LLP for this informative and interesting post about this complaint filed in the Northern District of Illinois by Merry Gentlemen, LLC against actor and director, Michael Keaton. According to the complaint, Keaton breached his contract to act in and direct a film called Merry Gentlemen by failing to deliver it on time and by marketing his own version of the film to the Sundance Film Festival. The film cratered, grossing only $350,000 at the box office. Moreover, the producers allege that Keaton's various breaches caused "substantial delays and increased expenses in the completion and release of the movie," thus causing the producers to suffer "substantial financial loss."
Ms. Marcus's post picks it up there, citing Restatement 2d's Section 347 on the elements of expectation damages and illustrating what sort of sums the producers might be looking to recover. Ms. Marcus has to speculate, as the producers cite no figures beyond those required to meet the amount-in-controversy requirement to get their diversity claim into a federal court.
Whether or not the allegations of the complaint are true, they paint a nice picture of the behind-the-scenes machinanations invovled in getting a film out to the viewing public. According to the complaint, Keaton produced a "first cut" that all agreed was unsatisfactory. There then followed both a "Chicago cut," edited by the producers and by Ron Lazzeretti, the screenwriter and the producers' original choice for director, as well as Keaton's second director's cut.
The producers then shopped the Chicago cut to the Sundance Film Festival, where they were awarded a prime venue. Keaton then allegedly threatened not to appear at Sundance unless his cut was screened. That was a dealbreaker for Sundance, so despite already having sunk $4 million in to the film, the producers claim they had no choice but to agree to screen Keaton's second cut at the festival. They did so through a Settlement and Release (attached to the complaint, but not to the online version) entered into with Keaton, which they now claim was without consideration, despite the recital of consideration in the agreement, and entered into under duress.
Despite all of this, the complaint alleges that the Sundance screening was a success, since the USA Today identified "Merry Gentlemen" as one of ten stand-out films screened that year. But the producers were unable to capitalize on this success, since Keaton's alleged continuing dereliction of his directorial duties resulted in dealys of the release of the film from October of November 2008 to May 2009. The producers allege that the film was a Christmas movie (or at least was set around Christmas time), so Keaton's delays caused the movie to premiere during the wrong season.
The producers allege that Keaton continued to refuse to cooperate with them after Sundance. Somehow, the movie nonetheless was released to some positive reviews:
The movie, as released (based upon Keaton’s second cut and numerous changes made by plaintiff), received substantial critical praise. Roger Ebert called the film “original, absorbing and curiously moving in ways that are far from expected.” The New York Times’ Manohla Dargis called it “[a]n austere, nearly perfect character study of two mismatched yet ideally matched souls.” David Letterman said on his Late Night talk show, “What a tremendous film . . . . I loved it.”
Note to the producers' attorneys: if you've got Roger Ebert and Manohla Dargis in your corner, you don't need Letterman (or The USA Today for that matter).
Nonetheless, the film did not succeed, grossing only $350,000, allegedly because of Keaton's failure to promote it. Indeed, some of the complaints allegations relating to Keaton's promotion efforts suggest some real issues. Upon being asked by an interviewer if she had accurately summarized the film's plot, Keaton allegedly responded that he had not seen it for a while.
We note also that Ms. Marcus's post is cross-posted on Suits by Suits, a legal blog about disputes between companies and their executives, a site to which we may occasionally return for more blog fodder.
Weekly Top Tens from the Social Science Research Council
Monday, April 29, 2013
En Banc Ninth Circuit Upholds Panel in Kilgore but Broughton-Cruz Survives
A little over a year ago, we reported on a Ninth Circuit case, Kilgore v. Key Bank. Here is a summary of the panel's opinion:
The issue in Kilgore was whether California’s public policy favoring the litigation (rather than arbitration) of claims seeking public injunctions could trump the [Federal Arbitration Act (FAA)] post-Concepcion as it did pre-Concepcion in two California Supreme Court cases, Broughton and Cruz. The Ninth Circuit reluctantly concluded that the Broughton-Cruz line of cases is no longer viable post-Concepcion. As the Supreme Court made clear in Marmet, about which we blogged last month, Concepcion’s reach is broad enough to preempt state public policies other than the specific one addressed in Concepcion. The fact that a state legislature specifically intended to avoid federal preemption under the FAA is irrelevant.
The Court then addressed the unconscionability of the arbitration clause. The Court noted that the arbitration clause at issue here was not buried in the contract and specified the rights that plaintiffs waived under arbitration. In addition, the contract contained clear instructions on how to opt-out. Finding no procedural unconscionability, the Court saw no need to address potential substantive unconscionability in the arbitration clause. The case was remanded to the District Court with instructions to compel arbitration.
On rehearing en banc, the Ninth Circuit held that the case does not fall within the "public injunction" exception to the FAA, recognized in Broughton, Cruz, and Davis v. O'Melveny & Myers, and thus the Ninth Circuit vacated the District Court's denial of the defendant's motion to compel arbitration and remanded with instructions to compel aribration. That exception only applies where the "benefits of granting injunctive relief by and large do not accrue to that party, but to the general public in danger of being victimized by the same deceptive practices as the plaintiff suffered.” The Ninth Circuit found that not to be the case in Kilgore and thus it was able to compel arbitration while leaving the Broughton-Cruz exception to the FAA intact for now.
Judge Pregerson dissented, finding the challenged arbitration clause unconscionable.
Thursday, April 25, 2013
What Do Assignments of Rights and Bad Opera Have in Common?
It's the end of the semester which means that I'm finally covering third parties. One of my favorite (and pretty simple) cases in this unit is Rumbin v. Utical Mutual Insurance, Co. Mr. Rumbin, who had settled a personal injury case, was due regular payments under an annuity purchased by Utica and issued by Safeco. When he faced foreclosure and other financial hardships, Rumbin sought a declaratory judgment approving his assignment of rights to J.G. Wentworth. After a student recites the facts, I often pause the class to ask, "How many of you have heard of Mr. Wentworth before?" Usually, about half of my class has heard of him while the other half is thinking, "J.G. who?" For those who haven't heard of him, I offer this clip, which sums up Mr. Rumbin's situation rather nicely and features Mr. Wentworth himself at the end as the conductor:
If you watch and later find a way to get the "877-CASH-NOW" earworm out of your head, please let me know. I've been stuck with it for nearly 24 hours now.
[Heidi R. Anderson]
Wednesday, April 24, 2013
Paperless Tickets and Licenses
The Sacramento Bee reports that a California legislative committee (if you really want to know, it’s called the Assembly Arts, Entertainment, Sports, Tourism and Internet Media committee) “gutted” a bill that would have illegalized “paperless” tickets. Paperless tickets are more (or is it less?) than what they sound like – they are a way for companies like Ticketmaster to sell seats without permitting purchasers to resell those seats. Purchasers must show their ID and a credit card to attend the show. The bill pitted two companies, Live Nation (owner of Ticketmaster) and StubHub, against each other.
This bill and the related issues should be of interest to contracts profs because it highlights the same license v. sale issues that have cropped up in other market sectors where digital technologies have transformed the business landscape. Like software vendors and book publishers, Ticketmaster is concerned about the effect of technology and the secondary marketplace on its business. Vendors, using automated software (“bots”), can quickly purchase large numbers of tickets and then turn around and sell these tickets in the secondary marketplace (i.e. at StubHub) at much higher prices. Both companies argue that the other is hurting consumers. Ticketmaster argues that scalpers hurt fans, who are unable to buy tickets at the original price and must buy them at inflated prices. Stub Hub, on the other hand, argues that paperless tickets hurt consumers because they are unable to resell or transfer their tickets.
The underlying question seems to be whether a ticket is a license to enter a venue or is it more akin to a property right that can be transferred. Or rather, should a ticket be permitted to be only a license or only a property right that can be transferred? The proposed pre-gutted legislation would have taken that decision out of the hands of the parties (the seller and the purchaser) and mandated that it be a property right that could be transferred. In other words, it would have made a ticket something that could not be a contract. Of course, given the adhesive nature of these types of sales, a ticket as contract would end up being like any other mass consumer contract – meaning the terms would be unilaterally imposed by the seller. In this case, that would mean the ticket would be a license and not a sale of a property right.
It’s not just the media giants who are feeling the disruptive effect of technology - we contracts profs feel it, too.
[NB: My original post confused StubHub with the vendors who use the site. StubHub is the secondary marketplace where tickets can be resold. Thanks to Eric Goldman for pointing that out].