ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Thursday, August 11, 2016

Book: European Law on Unfair Commercial Practices and Contract Law

From Hart Publishing Co.: "This book examines the ambiguous relationship between the European law on unfair commercial practices and contract law. In particular, the manuscript demonstrates that the Directive 2005/29/EC on unfair commercial practices (UCPD) has had a major impact on contract law, despite the declaration concerning the formal independence between the two branches of law established by Article 3(2) UCPD. The insights and conclusions identified in the book contribute to a better understanding of European private law and the general process of Europeanisation of private law in the European Union, and in particular of contract law."

The book is written by Mateja Durovic who is an Assistant Professor at the School of Law of the City University of Hong Kong.

August 11, 2016 | Permalink

Wednesday, August 10, 2016

Weekly Top Ten SSRN Contracts Downloads (August 10, 2016)

This week's Top Ten lists come a day early due to travel tomorrow by yours truly. Enjoy!

Top-ten-green

SSRN Top Downloads For SSRN Logo (small)
Contracts & Commercial Law eJournal

Rank Downloads Paper Title
1 131 Optimal Defaults in Consumer Markets
Oren Bar-Gill and Omri Ben-Shahar
Harvard Law School and University of Chicago Law School
2 123 The Puzzle of PDVSA Bond Prices
Paolo Colla, Anna Gelpern and G. Mitu Gulati
Bocconi University - Department of Finance, Georgetown University Law Center and Duke University School of Law
3 117 The Moral Impermissibility of Efficient Breach
Adam Rigoni
Arizona State University (ASU) - Barrett, the Honors College
4 116 The Jurisprudence of Paper Clips
Robert A. James
Pillsbury Winthrop Shaw Pittman LLP
5 84 Enhancing Moral Relationships Through Strict Liability
Seana Shiffrin
University of California, Los Angeles (UCLA) - School of Law
6 76 Contractual Arbitrage
Stephen J. Choi, G. Mitu Gulati and Robert E. Scott
New York University School of Law, Duke University School of Law and Columbia University - Law School
7 76 Are Validation Notices Valid? An Empirical Evaluation of Consumer Understanding of Debt Collection Validation Notices
Jeff Sovern and Kate E. Walton
St. John's University - School of Law and St. John's University - Department of Psychology
8 69 The Art of Promise and Power of Contract
Robin Bradley Kar
University of Illinois College of Law
9 68 Form and Substance in Equitable Remedies
Stephen A. Smith
McGill University - Faculty of Law
10 60 Justice Scalia's Jiggery-Pokery in Federal Arbitration Law
David S. Schwartz
University of Wisconsin Law School


SSRN Top Downloads For SSRN Logo (small)
Law & Society: Private Law - Contracts eJournal

Rank Downloads Paper Title
1 117 The Moral Impermissibility of Efficient Breach
Adam Rigoni
Arizona State University (ASU) - Barrett, the Honors College
2 116 The Jurisprudence of Paper Clips
Robert A. James
Pillsbury Winthrop Shaw Pittman LLP
3 96 Does High Auditor Litigation Risk Discourage Corporate Innovation?
Mahfuz Chy and Ole-Kristian Hope
University of Toronto, Rotman School of Management, Students and University of Toronto - Rotman School of Management
4 84 Enhancing Moral Relationships Through Strict Liability
Seana Shiffrin
University of California, Los Angeles (UCLA) - School of Law
5 76 Contractual Arbitrage
Stephen J. Choi, G. Mitu Gulati and Robert E. Scott
New York University School of Law, Duke University School of Law and Columbia University - Law School
6 69 The Art of Promise and Power of Contract
Robin Bradley Kar
University of Illinois College of Law
7 68 Form and Substance in Equitable Remedies
Stephen A. Smith
McGill University - Faculty of Law
8 60 Justice Scalia's Jiggery-Pokery in Federal Arbitration Law
David S. Schwartz
University of Wisconsin Law School
9 56 The Behaviour of the Average Consumer: A Little Less Normativity and a Little More Reality In CJEU's Case Law? Reflections on Teekanne
Hanna Schebesta and Kai P. Purnhagen
Wageningen UR - Law and Governance Group and Wageningen UR - Law and Governance Group
10 56 The Fiduciary Gap
Kelli Alces Williams
Florida State University - College of Law

August 10, 2016 in Recent Scholarship | Permalink | Comments (0)

Here's a Case Finding Unconscionability

This recent case out of the Bankruptcy Court for the Northern District of California, Ow v. Oropeza, Case No. 15-41959 CN (behind paywall), has a nice example of unconscionability. Well, not that unconscionabilty can be called "nice." But I know my students are always attracted to the doctrine of unconscionability as an argument but it can be difficult to find good examples of it being successful. Here, however, is one.

The relationship between Ow and the defendants in this case begins with a house that Ow had owned that was damaged by fire and became uninhabitable. Ow began living with friends or in motel rooms, eventually defaulted on the note on the house, and later declared bankruptcy.

Ow did not have the money to fix the house or to catch up on the payments he owed on the house. Enter a man named Freeman who proposed that he would pay the $24,000 owed to the bank on the house and keep the payments current until Ow could sell the house. In exchange, Freeman would receive $105,000, to be paid out of the proceeds of selling the house. Freeman ended up paying almost $39,000 on the house, until the sale that Freeman had helped facilitate fell through. At that point, Freeman stopped paying on the house.

The court examined the arrangement between Ow and the defendants and found it to be unconscionable. Freeman's expectation to receive $105,000 only a few months after investing at most $39,000 in the house amounted to an interest rate in excess of 250%. This interest rate wasn't justified by the low risk of Freeman's behavior, because Freeman approached Ow with prospective buyers already in hand and so knew the house should be sold quickly.

Procedurally, Ow was homeless when he was approached by Freeman, and he was desperate to save the house, where he had grown up. He had tried to restructure the loan with the bank but was unsuccessful. Ow, the court found, had no other options.

I feel like I've grown used to many courts being reluctant to find that people had no options. Here's an example of a situation otherwise.

August 10, 2016 in Commentary, Recent Cases, True Contracts | Permalink | Comments (1)

"Meeting of the Minds” vs. Objective Theory of Contract Formation

The Tenth Circuit Court of Appeals has just reconfirmed the objective theory of contracts – that “what is important is what the language of the document conveys to reasonable people in the circumstances, not what a party to the agreement privately intended.” Unknown

Nonetheless, the court also runs with the parties’ arguments whether there was a “meeting of the minds” or not due to an alleged lack of consideration. (As for the latter, the court pointed out that no actual payment need be made for a contract to exist, a promise to pay suffices for consideration. Further, one party’s postcontractual attempt to “obtain a legal opinion about the status” of a lease under the contract does not vitiate the contract.).

It is somewhat surprising that while the court on the one hand states the correct rule – the objective communication theory – the court at the same time does not see that that is not the same as “meeting of the minds.” As long as reasonable third parties or “outsiders” could, under the circumstances, have believed that a contract was made, it does not matter that one party’s subjective intent – the “mind” – was not that of the other party. This case shows that and might function well as a reminder to our students on this point. Images

The case is Trans-Western Petroleum, Inc. v. United States Gypsum Company (Tenth Cir. 2016). Find it at http://law.justia.com/cases/federal/appellate-courts/ca10/13-4012/13-4012-2016-07-26.html

August 10, 2016 | Permalink

Tuesday, August 9, 2016

New Contract Book

From our friends at Hart Publishing on the publication of the second edition of "The Assignment of Contractual Rights" by Greg Tolhurst, a professor of commercial law at the University of Sydney: "This book explains the existence, meaning and application of the rules governing the assignment of contractual rights. The second edition is updated and retains the structure of the first edition, focusing on what is meant by ‘assignment’, the distinction between legal and equitable assignments, how an assignable contractual right is identified, what formalities apply to assignment, and what rights and remedies are available to the parties to an assignment. In reviewing the first edition, The Hon JD Heydon said ‘it is essential reading for … teachers, especially those who teach contract, equity and personal property. Above all, it should always be consulted—read carefully, slowly and repeatedly—by any practitioner facing an assignment problem. … It is not only the best book ever written on its subject, but among the best monographs dealing with legal doctrine published in recent years’ (2008) 30 Sydney Law Review 169."

See more at http://www.bloomsburyprofessional.com/uk/the-assignment-of-contractual-rights-9781849463324/

August 9, 2016 | Permalink

Thursday, August 4, 2016

Service Fees Are Annoying...But Not Bad Faith

A recent case out of the District of Connecticut, Singer v. Priceline Group, Inc., No. 15-cv-1090 (VAB), tackles an issue familiar to all who travel: service fees. The plaintiff, on behalf of a class, sued Priceline over the fact that service fees were added on to the price that he bid to pay for a hotel room. We've all been beset by service fees tacked onto the prices quoted for various travel-related items, from hotel rooms to flights, and to be honest I feel like I, to some extent, have just grown used to and resigned to them. The court seems to feel the same way about them here. The service fees weren't a breach of contract, since Priceline's Terms of Use explicitly stated that service fees might be charged above the quoted price, nor were they a breach of the covenant of good faith and fair dealing because, again, Priceline was upfront about the fact that Singer might owe more money in service fees from the hotel. Priceline never made any representation that it wouldn't provide Singer with quotes that might require further service fees and so did not act in bad faith when it did so in a way that the court found was open and reasonable.

I might wish that more places would just tell me the end price without the extra fees, but, for now, I think the widespread acceptance of these fees in the course of transactions indicates they're here to stay for the time being.

August 4, 2016 in Commentary, E-commerce, Recent Cases, Travel, True Contracts, Web/Tech | Permalink | Comments (3)

Weekly Top Ten SSRN Contracts Downloads (August 4, 2016)

Top10-speech bubble

SSRN Top Downloads For SSRN Logo (small)
Contracts & Commercial Law eJournal

Rank Downloads Paper Title
1 121 Optimal Defaults in Consumer Markets
Oren Bar-Gill and Omri Ben-Shahar
Harvard Law School and University of Chicago Law School
2 111 The Moral Impermissibility of Efficient Breach
Adam Rigoni
Arizona State University (ASU) - Barrett, the Honors College
3 109 The Jurisprudence of Paper Clips
Robert A. James
Pillsbury Winthrop Shaw Pittman LLP
4 82 The Legal Writer, Making Offers No One Can Refuse: Effective Contract Drafting — Part 5
Gerald Lebovits
Columbia University - Law School
5 72 Enhancing Moral Relationships Through Strict Liability
Seana Shiffrin
University of California, Los Angeles (UCLA) - School of Law
6 68 Contractual Arbitrage
Stephen J. Choi, G. Mitu Gulati and Robert E. Scott
New York University School of Law, Duke University School of Law and Columbia University - Law School
7 67 Are Validation Notices Valid? An Empirical Evaluation of Consumer Understanding of Debt Collection Validation Notices
Jeff Sovern and Kate E. Walton
St. John's University - School of Law and St. John's University - Department of Psychology
8 64 The Art of Promise and Power of Contract
Robin Bradley Kar
University of Illinois College of Law
9 58 Justice Scalia's Jiggery-Pokery in Federal Arbitration Law
David S. Schwartz
University of Wisconsin Law School
10 65 Form and Substance in Equitable Remedies
Stephen A. Smith
McGill University - Faculty of Law

 

SSRN Top Downloads For SSRN Logo (small)
Law & Society: Private Law - Contracts eJournal

Rank Downloads Paper Title
1 111 The Moral Impermissibility of Efficient Breach
Adam Rigoni
Arizona State University (ASU) - Barrett, the Honors College
2 109 The Jurisprudence of Paper Clips
Robert A. James
Pillsbury Winthrop Shaw Pittman LLP
3 88 Does High Auditor Litigation Risk Discourage Corporate Innovation?
Mahfuz Chy and Ole-Kristian Hope
University of Toronto, Rotman School of Management, Students and University of Toronto - Rotman School of Management
4 82 The Legal Writer, Making Offers No One Can Refuse: Effective Contract Drafting — Part 5
Gerald Lebovits
Columbia University - Law School
5 72 Enhancing Moral Relationships Through Strict Liability
Seana Shiffrin
University of California, Los Angeles (UCLA) - School of Law
6 68 Contractual Arbitrage
Stephen J. Choi, G. Mitu Gulati and Robert E. Scott
New York University School of Law, Duke University School of Law and Columbia University - Law School
7 65 Form and Substance in Equitable Remedies
Stephen A. Smith
McGill University - Faculty of Law
8 64 The Art of Promise and Power of Contract
Robin Bradley Kar
University of Illinois College of Law
9 58 Justice Scalia's Jiggery-Pokery in Federal Arbitration Law
David S. Schwartz
University of Wisconsin Law School
10 55 The Legal Writer, Making Offers No One Can Refuse: Effective Contract Drafting — Part 4
Gerald Lebovits
Columbia University - Law School

August 4, 2016 in Recent Scholarship | Permalink | Comments (0)

Wednesday, August 3, 2016

Leveling the Playing Field in the MA Job Market

Yesterday, Stacey noted how employers should be careful not to be too greedy when dealing with employees. Another example of the backlash – judicial or legislative – that may be the result if employers overstep what ought to be reasonable limits in interactions with their employees is a new law in Massachusetts that prohibits employers from asking job candidates about their salary history as part of the screening process or during an interview.

Why indeed should they be able to do so?! In a free market, freedoms cut both ways: just as an employee can, of course, not be sure to get any particular job at any particular salary, the employer also cannot be sure to be able to hire any particular employee! There is no reason why employers should enjoy financial insight about the employee when very often, employees don’t know about the salaries at the early stages of the job negotiation process. Both parties should be able to come to the negotiation table on as equal terms as possible, especially in this job market where employers already often enjoy significant bargaining advantages.

Massachusetts also requires Commonwealth employers to pay men and women equally for comparable work.

August 3, 2016 in Commentary, Current Affairs, E-commerce, Labor Contracts, Legislation | Permalink | Comments (0)

What Mobile Payments Can Learn from Debit Cards (circa 1995)

Contract-based payment systems have substantially supplanted the check-oriented payments contemplated by the Uniform Commercial Code over a half-century ago. Is there another commercial revolution waiting in the wings with mobile payments? In an insightful industry-focused piece at PYMNTS.com, Karen Webster shares observations on what enabled the mid-1990s success of debit cards and how those ingredients have not fallen into place (yet) today for mobile payment systems such as Apple Pay, Android Pay, and Samsung Pay.  Some of the key paragraphs:

Debit CardsDebit ignited by leveraging existing technologies that could be easily enabled at merchants – or that already existed at those merchants – to enable payment via a checking account using a plastic mag stripe card. Mastercard and Visa simply used the technology merchants already had and paid for while the EFTs subsidized the technology that merchants would need to use their cards. No one expected merchants to go sink money in a new technology out of their own pockets.

That has not been the case with NFC and mobile payments.

We’ve unfortunately spent the last 10 years forcing mobile payments into an in-store NFC technology mold that hasn’t knocked the socks off of consumers by simply substituting a tap for a swipe and asked merchants to foot the bill. We’ve let technology drive mobile payment’s ignition strategy, instead of the value created when a consumer with a mini computer in her hand encounters a merchant who’d like to use that computing power to help him sell more stuff to her.

NFC as an ignition strategy has also ignored the many, many dependencies that such a strategy requires to get the critical mass needed to achieve ignition: enough merchants with enough NFC-enabled terminals, enough consumers with enough of the right handsets or cards and enough of a value proposition for both to care. Absent all three, mobile payments ignition is left up to chance: the hope that one day *something* might happen to move things along, and at that point, there’d be infrastructure in place to support it.

This view of the payments market and place of innovation strikes me as largely correct, though I must admit some of my sympathy comes from having recently written here about what payments law can learn from its past.

Despite all the technological innovation sweeping the payments arena, past comparison of the law and the markets suggest that Solomon got it right with the observation that there really is "nothing new under the sun."

August 3, 2016 in Commentary, Current Affairs, Web/Tech | Permalink | Comments (0)

Tuesday, August 2, 2016

Covenants Not to Compete: Be Careful Not to Get Greedy

One of the things I caution my students about is the danger of being greedy in a covenant not to compete. If you are in a jurisdiction that enforces such covenants, you still must be aware that courts frequently subject them to close examination. It might be true that in many cases, the employee subject to the over-restrictive covenant might simply accept it without challenging it, but a recent case out of the Fourth Circuit, RLM Communications, Inc. v. Tuschen, No. 14-2351 (you can listen to the case's oral argument here), serves as a reminder that a court can knock a covenant not to compete out of a contract and leave no protection at all in its place.

Tuschen was an employee of RLM who had the following non-compete in her employment contract:

While I, the Employee, am employed by Employer, and for 1 years/months afterward, I will not directly or indirectly participate in a business that is similar to a business now or later operated by Employer in the same geographical area. This includes participating in my own business or as a co-owner, director, officer, consultant, independent contractor, employee, or agent of another business.

Tuschen eventually resigned from RLM and went to work for a competitor, eScience, and RLM alleged that Tuschen had thereby breached her non-compete.

The Fourth Circuit, however, found that the non-compete was overbroad and therefore unenforceable. First it noted that it prohibited direct and indirect participation, which the court found inherently problematic, because it theoretically prevented Tuschen from, say, acting as eScience's realtor, landscaper, or caterer. Nor was the only problem with the covenant its use of the word "indirectly," which RLM argued could just be struck from the clause, leaving the rest of the clause enforceable and in place. The breadth of prohibition on Tuschen's actions, including to businesses that might be operated by RLM in the future, wasn't justified by RLM's business concerns. The non-compete's focus on the identity of the new employer, rather than on Tuschen's behavior in the new employment, was misplaced: RLM should have been more concerned about the risk that Tuschen would use secret RLM knowledge detrimentally, rather than concerned about who she was working for (directly or indirectly).

An interesting case, with some interesting things to say about non-competes (and also trade secret misappropriation). When you read the case, it becomes clear that the court thought Tuschen was in many ways a good employee for RLM who was not engaging in sketchy behavior. In fact, in the court's characterization, one of the things RLM complains about was that Tuschen took steps to make the transition within RLM for her replacement easier and more streamlined without seeking permission first. This whole case stands as a warning not to be overly aggressive with enforcement in situations where a court will find it inappropriate.  

August 2, 2016 in Commentary, Labor Contracts, Recent Cases, True Contracts | Permalink | Comments (2)

Monday, August 1, 2016

Parties May Still Rescind from Contracts Based on Obvious Unilateral Mistakes

The Court of Appeals for the Eleventh Circuit just reconfirmed the traditional rule that when one of the parties to a contract has, without gross fault or laches on his or her part, made a mistake, the mistake was known, or ought to have been known, to the opposite party, and the mistake can be relieved against without injustice, a unilateral mistake may be a ground for rescinding a contract, or for refusing to enforce its specific performance.

In the case, two private persons bid a higher and higher amount to purchase a home via a short sale (first $371,000, then $412,000, then $444,000. After that, the hopeful buyer bid a disputed amount that would, at any rate, have resulted in a much lower net payout to the bank than any of the above total prices would have.).

Finding for the bank, the panel noted that the buyers “will not suffer an injustice under Georgia law because they will only be deprived of what Georgia law does not allow them to have—in [one person’s] case the opportunity to take advantage of another's obvious unilateral mistake; in [the other person’s] case the opportunity to retain mortgaged property after he defaulted on the underlying loan. The breach of contract claims fail.”

Property is considered unique, but not so unique as to overcome an apparent failure to be on the up-and-up in the bargaining process. It did seem like the buyers here were indeed trying to see if the bank would simply not notice its own mistake, which it in fact only did two years later, for some reason.

August 1, 2016 in Recent Cases, True Contracts | Permalink | Comments (0)

Thursday, July 28, 2016

Weekly Top Ten SSRN Contracts Downloads (July 28, 2016)

Top-ten-books

SSRN Top Downloads For SSRN Logo (small)
Contracts & Commercial Law eJournal

Rank Downloads Paper Title
1 191 Is Rule of Law an Equilibrium Without Private Ordering?
Gillian K. Hadfield and Barry R. Weingast
USC Law School and Department of Economics and Stanford University, Department of Political Science
2 133 On the Surprising Use of Unenforceable Contract Terms: Evidence from the Residential Rental Market
Meirav Furth-Matzkin
Harvard Law School
3 110 Optimal Defaults in Consumer Markets
Oren Bar-Gill and Omri Ben-Shahar
Harvard Law School and University of Chicago Law School
4 70 Enhancing Moral Relationships Through Strict Liability
Seana Shiffrin
University of California, Los Angeles (UCLA) - School of Law
5 64 Consent in Online Contracts - Mindless or Mindful?
Dasuni Wijayasriwardena
Queen Mary University of London
6 60 Are Validation Notices Valid? An Empirical Evaluation of Consumer Understanding of Debt Collection Validation Notices
Jeff Sovern and Kate E. Walton
St. John's University - School of Law and St. John's University - Department of Psychology
7 58 Contractual Arbitrage
Stephen J. Choi, G. Mitu Gulati and Robert E. Scott
New York University School of Law, Duke University School of Law and Columbia University - Law School
8 58 The Art of Promise and Power of Contract
Robin Bradley Kar
University of Illinois College of Law
9 58 Form and Substance in Equitable Remedies
Stephen A. Smith
McGill University - Faculty of Law
10 107 The Moral Impermissibility of Efficient Breach
Adam Rigoni
Arizona State University (ASU) - Barrett, the Honors College

 

SSRN Top Downloads For SSRN Logo (small)
Law & Society: Private Law - Contracts eJournal

Rank Downloads Paper Title
1 191 Is Rule of Law an Equilibrium Without Private Ordering?
Gillian K. Hadfield and Barry R. Weingast
USC Law School and Department of Economics and Stanford University, Department of Political Science
2 133 On the Surprising Use of Unenforceable Contract Terms: Evidence from the Residential Rental Market
Meirav Furth-Matzkin
Harvard Law School
3 107 The Moral Impermissibility of Efficient Breach
Adam Rigoni
Arizona State University (ASU) - Barrett, the Honors College
4 100 The Jurisprudence of Paper Clips
Robert A. James
Pillsbury Winthrop Shaw Pittman LLP
5 84 Does High Auditor Litigation Risk Discourage Corporate Innovation?
Mahfuz Chy and Ole-Kristian Hope
University of Toronto, Rotman School of Management, Students and University of Toronto - Rotman School of Management
6 78 International Investment Law and ISDS: Mapping Contemporary Latin America
Katia Fach Gómez and Catharine Titi
University of Zaragoza and French National Centre for Scientific Research (CNRS)
7 78 The Legal Writer, Making Offers No One Can Refuse: Effective Contract Drafting — Part 5
Gerald Lebovits
Columbia University - Law School
8 70 Private Law and the European Constitutionalisation of Values
Martijn W. Hesselink
University of Amsterdam - Centre for the Study of European Contract Law (CSECL)
9 70 Enhancing Moral Relationships Through Strict Liability
Seana Shiffrin
University of California, Los Angeles (UCLA) - School of Law
10 64 Consent in Online Contracts - Mindless or Mindful?
Dasuni Wijayasriwardena
Queen Mary University of London

July 28, 2016 in Recent Scholarship | Permalink | Comments (0)

Wednesday, July 27, 2016

Forum Selection Clauses in Moving Contracts

 Moving Mess

As anyone who's ever moved knows full well, it's a fraught process. Finding good movers can be challenging, and untangling the relationships between the parties involved in your move even more challenging: which company is storing, which company is packing, which company is renting the truck being used, which company owns the truck being used, which company employs the movers, etc. I've had moves go poorly enough that I've left a couple of scathing "beware!" reviews in places, but I've never gone to court, and so I never really thought through fully the challenges in litigating issues that might arise during a move.

A recent case out of Ohio, Nieman v. Moving Insurance, LLC, Appeal No. C-150666, made me finally consider them. Not a lot of details are given about what happened during the Niemans' move to prompt them to sue, but what we do learn is that they are suing about a move from Chicago to Cincinnati. The Niemans have sued multiple companies, probably because of how many companies get involved in a major interstate move like this. For instance, it seems to me that they're suing a moving company, a trucking company, and an insurance company (again, details aren't really given in the case). The Niemans signed contracts, of course, with each of these entities. Each of the contracts had a forum selection clause. One contract required that suit be brought in New Jersey. The other contracts required that suit be brought in Florida. The court here found that the Niemans were bound by the forum selection clauses. Therefore, rather than bringing suit in their current state and the place where the move concluded, the Niemans have to bring two suits, one in New Jersey, one in Florida.

I've blogged a lot about arbitration clauses, but I haven't blogged much about forum selection clauses. The court is dismissive here of the Niemans' arguments, which it characterizes as a matter of inconvenience rather than injustice. But surely there's a point where something becomes so inconvenient that it's no longer worthwhile, from a cost efficiency perspective, to pursue it, and in that case isn't some kind of injustice being wrought? I'm not saying necessarily that the Niemans deserve some kind of recovery from the moving companies. However, I could see how, if it was me, faced with a ruling that I had to bring two separate cases, procuring lawyers, etc., in states that aren't even in my time zone, I might decide it wasn't worth the effort and just drop it.  And I don't think this is laziness on my part; I think this is practicality regarding the best use of my time and money at that point. Which, of course, means this definitely depends on the amount of damages I believed that I was owed, and therefore underlines that enforcing a forum selection clause in these circumstances means that there is some amount of liability that, as a practical matter, will almost never be assessed, even if it should be, because the costs of procuring that assessment are too high.

This is, naturally, an ongoing problem in the court system in general. Maybe because I am in the process of coordinating yet another move, this one really stood out to me today!

July 27, 2016 in Commentary, Recent Cases, Travel, True Contracts | Permalink | Comments (0)

Monday, July 25, 2016

Non-Competes: An Internet Show Is Not a Radio Show

A recent case out of the Eastern District of Michigan, Burke v. Cumulus Media, Inc., Case No. 16-cv-11220 (behind paywall), has some interesting things to say about the impact of the Internet on non-competes you may be drafting.

In the case, the plaintiffs had a radio show on a Michigan radio station owned by Cumulus. Cumulus terminated the plaintiffs, and they sued alleging age discrimination. In response, Cumulus counterclaimed alleging that the plaintiffs were violating their non-compete clause because they were hosting an Internet-based radio show together.

Unfortunately for Cumulus, though, the non-compete prohibited the plaintiffs from doing various things related to "radio stations." It said nothing about any other medium, including the Internet. Because the plaintiffs had shifted their show to an Internet stream, it was not covered by the non-compete.

If you're drafting non-competes in this context, keep this ruling in mind. Of course, I have no idea if a non-compete that included the Internet would have been considered enforceable or if it would have restricted the plaintiffs' ability to earn a livelihood too much.

Another interesting facet of this case is that only one of the plaintiffs' non-competes was at issue here. The other non-compete by its terms was only enforceable if Cumulus paid the plaintiff for the period of time he was prohibited from competing. Cumulus chose not to pay that plaintiff and so did not (and could not) seek to enforce his non-compete. Whenever I talk to my students about covenants not to compete, we talk about how easily they can be broadly drafted to possibly intimidate less legally knowledgeable employees, and one of the things we bring up is that making them have some cost to the employer could help judge the seriousness of the necessity of the covenant. Here, it apparently wasn't worth it for Cumulus to pay to keep one of the plaintiffs from competing.

July 25, 2016 in Commentary, Recent Cases, True Contracts, Web/Tech | Permalink

Thursday, July 21, 2016

Weekly Top Ten SSRN Contracts Downloads (July 21, 2016)

Top10DeskSign


SSRN Top Downloads For SSRN Logo (small)
Contracts & Commercial Law eJournal

Rank Downloads Paper Title
1 610 What We Buy When We 'Buy Now'
Aaron Perzanowski and Chris Jay Hoofnagle
Case Western Reserve University School of Law and University of California, Berkeley - School of Information
2 163 Is Rule of Law an Equilibrium Without Private Ordering?
Gillian K. Hadfield and Barry R. Weingast
USC Law School and Department of Economics and Stanford University, Department of Political Science
3 144 Immoral Promises
Enrique Guerra-Pujol
University of Central Florida
4 120 On the Surprising Use of Unenforceable Contract Terms: Evidence from the Residential Rental Market
Meirav Furth-Matzkin
Harvard Law School
5 117 Current Trends in Consumer Junk Debt Buyer Litigation
Peter A. Holland
The Holland Law Firm
6 105 The Moral Impermissibility of Efficient Breach
Adam Rigoni
Arizona State University (ASU) - Barrett, the Honors College
7 98 Reining in the Big Promise of Big Data: Transparency, Inequality, and New Regulatory Frontiers
Philipp Hacker and Bilyana Petkova
Humboldt University of Berlin and European University Institute
8 96 Optimal Defaults in Consumer Markets
Oren Bar-Gill and Omri Ben-Shahar
Harvard Law School and University of Chicago Law School
9 94 The Jurisprudence of Paper Clips
Robert A. James
Pillsbury Winthrop Shaw Pittman LLP
10 94 Once Upon a Transaction: Narrative Techniques and Drafting
Susan Chesler and Karen J. Sneddon
Arizona State University (ASU) - Sandra Day O'Connor College of Law and Mercer Law School

 

SSRN Top Downloads For SSRN Logo (small)
Law & Society: Private Law - Contracts eJournal

Rank Downloads Paper Title
1 610 What We Buy When We 'Buy Now'
Aaron Perzanowski and Chris Jay Hoofnagle
Case Western Reserve University School of Law and University of California, Berkeley - School of Information
2 163 Is Rule of Law an Equilibrium Without Private Ordering?
Gillian K. Hadfield and Barry R. Weingast
USC Law School and Department of Economics and Stanford University, Department of Political Science
3 144 Immoral Promises
Enrique Guerra-Pujol
University of Central Florida
4 120 On the Surprising Use of Unenforceable Contract Terms: Evidence from the Residential Rental Market
Meirav Furth-Matzkin
Harvard Law School
5 105 The Moral Impermissibility of Efficient Breach
Adam Rigoni
Arizona State University (ASU) - Barrett, the Honors College
6 94 Once Upon a Transaction: Narrative Techniques and Drafting
Susan Chesler and Karen J. Sneddon
Arizona State University (ASU) - Sandra Day O'Connor College of Law and Mercer Law School
7 94 The Jurisprudence of Paper Clips
Robert A. James
Pillsbury Winthrop Shaw Pittman LLP
8 77 Does High Auditor Litigation Risk Discourage Corporate Innovation?
Mahfuz Chy and Ole-Kristian Hope
University of Toronto, Rotman School of Management, Students and University of Toronto - Rotman School of Management
9 75 The Legal Writer, Making Offers No One Can Refuse: Effective Contract Drafting — Part 5
Gerald Lebovits
Columbia University - Law School
10 74 International Investment Law and ISDS: Mapping Contemporary Latin America
Katia Fach Gómez and Catharine Titi
University of Zaragoza and French National Centre for Scientific Research (CNRS)

July 21, 2016 in Recent Scholarship | Permalink | Comments (0)

Wednesday, July 20, 2016

The MoneyGram Case: Commercial Law at the United States Supreme Court

MoneyGram LogoHow often do those of us in the contracts realm get to string together "commercial law," "U.S. Supreme Court," and "original jurisdiction" in the same sentence? If your answer is, "not nearly often enough!" then you may want to keep tabs on a lawsuit filed last month by Arkansas, Texas, and 19 other states against Delaware and MoneyGram.  At issue is the appropriate recipient of unclaimed property, the property in this case being the proceeds from unused MoneyGram payment instruments, which, after a time, are ultimately subject to escheat to the state.

The Dallas Morning News described basic facts in covering the rollout of the litigation by the Texas Attorney General:

Attorney General Ken Paxton today accused the state of Delaware of swiping up to $400 million in unclaimed checks that rightfully belong to Texas and the 48 other states.

Texas’ share, he said, would be about $10 million.

FTexas Shaped Flagor the last four or five years, Paxton said, announcing a lawsuit against Delaware that was filed directly at the U.S.  Supreme Court, Delaware has been requiring financial institutions incorporated under its laws — in particular MoneyGram – to turn over unclaimed funds only to Delaware.

But under a 1974 federal law, Paxton asserted, such funds belong to the state in which a transaction originated. MoneyGram lets people pay a fee to purchase a check they can send to someone else.

“The state of Delaware elected to begin playing by a different set of rules,” Paxton said, calling the practice both illegal and unfair. “Delaware has our money.”

He cited an audit released in February 2015 that found that Delaware had claimed more than $150 million in unclaimed checks that originated in 20 other states. Extrapolating to  the whole country, he said, the tally could be $400 million.

This group of 21 states is not the first to take issue with Delaware's appropriation of the unclaimed property. Wisconsin and Pennsylvania brought a similar lawsuit in federal district court in which defendant Delaware ultimately invoked the original jurisdiction of the Supreme Court to resolve disputes between states. SCOTUSblog provides some helpful detail on the legal background and procedural posture of these state-v.-state cases:

The core legal issue in each of the new filings is whether a 1974 law with an assignment of priority of state ownership for unclaimed tangible property applies to the new instrument, which some 1,900 banks or other institutions across the country are using instead of cashier’s or teller’s checks.  Delaware says the law does not apply; the other states disagree.

SCOTUSbuilding_1st_Street_SEThe Supreme Court has issued three rulings on competing state claims to unclaimed intangible property; Congress has overruled one of those, in a 1974 law known as the Disposition of Abandoned Money Orders and Traveler’s Checks Act.  That law is at the center of the cases that have reached the Court under its “original” jurisdiction — that is, its authority to decide, in the fashion of a trial court, a legal dispute not decided by a lower court.  This jurisdiction is often implicated in resolving disputes between states — as in the new filings over unclaimed property.

The Court has no binding obligation to take on such a case.  However, if it does, it customarily names a “special master” to act like a junior judge to gather facts and make a recommendation for a decision.  A special master’s report is not final unless it becomes the ruling of the Supreme Court.

The large dollar amount in dispute arises from an aggregation of small transactions that will be familiar to anyone who has studied the "money order" species of negotiable instrument:

While Delaware’s claims are at the center of this new financial fight between the states, the controversy actually turns on the specific financial instrument involved, and the Texas company that has been issuing those items, which it calls “official checks.”   That company, MoneyGram Payments Systems, Inc., has its main business office in Texas but it is incorporated in Delaware.  It does business in all fifty states.

Its main business is as a kind of financial partner to banks and other institutions that prefer not to issue cashier’s checks or teller’s checks in their own name.  MoneyGram does it for them, so it acts as the financial backer of its “official checks.”

That kind of transaction is conducted for some of the same reasons that stores do a business in money orders or traveler’s checks.  The idea is that, in the form of a money order or traveler’s check, the piece of paper is a guaranteed form of payment that works like cash; in other words, it won’t “bounce” for lack of sufficient funds behind it.  Typically, this kind of instrument is in fairly small amounts.

The Supreme Court does not frequently consider issues intersecting with commercial law in quite the way that this case does, so the outcome will certainly bear watching.

July 20, 2016 in Current Affairs, E-commerce | Permalink | Comments (0)

More Adventures in Leasing: Persistent Apartment Flooding Edition

Here is a good case for illustrating equitable estoppel in a way that students, frequently renters, will probably appreciate: Pinnacle Properties Development Group, LLC v. Daily, Court of Appeals Case No. 10A01-1512-SC-2275, out of Indiana.

You may recognize Pinnacle's name. I previously blogged about them here. I stated in that blog entry that the case seemed straightforward and not worth the money to appeal, but apparently they have a habit of appealing relatively small (here, $752.37) judgments against them.

In this case, Daily was a tenant at a Pinnacle property. About eight months after moving into his apartment, Daily's apartment flooded. He reported the flooding using Pinnacle's emergency telephone number, which Pinnacle told its tenants to use in such circumstances. When no one answered the emergency number, he left a message and then dealt with the flooding himself, borrowing a wet/dry vacuum and removing thirty gallons of water from his unit. 

In the month of July, the apartment flooded three more times. The first two times, Daily again called the Pinnacle emergency number. He was told that someone would be sent out to his apartment, but no one ever came. Daily continued to deal with the flooding himself, removing another fifty-two gallons of water using the borrowed wet/dry vacuum.

The third time in July that the apartment flooded, Daily went personally to the Pinnacle office, rather than calling the number. Pinnacle submitted a work order into the system but still no one came out to Daily's apartment. Daily bought himself his own wet/dry vacuum and continued to remove gallons of water from his apartment. A week later, he filed a complaint against Pinnacle and was awarded his rent for the month of July, the cost of the wet/dry vacuum he purchased, and some costs and interest. (The amount he was awarded was considerably less than the three-thousand-plus dollars he was originally seeking.)

Pinnacle's main argument on appeal was that the lease required Daily to give Pinnacle written notice of the flooding, which he never did. The court wasn't sure written notice was required under the lease but it stated that, even if that was true, Pinnacle was equitably estopped from asserting the written notice requirement because it was undisputed that Pinnacle had actual notice of Daily's flooding issue. It would be unjust under these circumstances to force Daily to pay rent for an apartment that was partially uninhabitable, where Pinnacle knew that Daily was suffering this problem and provided Daily with false assurances that it would deal with the problem, on which Daily relied, justifiably, to his detriment. As the court says, "We can hardly imagine a more appropriate application of the equitable estoppel doctrine." The court affirmed the award of the July rent, plus the cost of the wet/dry vacuum as a consequential damage.

July 20, 2016 in Commentary, Recent Cases, True Contracts | Permalink | Comments (0)

Tuesday, July 19, 2016

Scholarship Spotlight: "Custom in the Courts" as to UCC Trade Usage (Lisa Bernstein - Chicago)

Contract-InterpretationEmpirical analysis testing the desirability of norms of contract doctrine is a welcome thing, and an recent article by Lisa Bernstein (University of Chicago), "Custom in the Courts," draws upon an impressive quantity of data in contradicting one of the pillars of the received wisdom of Article 2 of the Uniform Commercial Code. As it happens, flexible contract interpretation relying on norms of trade usage is not necessarily beneficial.

Here is Professor Bernstein's abstract:

BernsteinLisa (Chicago)This Article presents an empirical study of the trade usage cases decided under the Uniform Commercial Code from 1970 to 2007. It then draws on the study’s findings to revisit the debate over the desirability of the trade usage component of the incorporation strategy — the interpretive approach that directs courts to look to course of dealing, course of performance, and usage of trade to interpret contracts and fill contractual gaps. Although the strategy is generally defended on the grounds that, as compared to a more formalistic adjudicative approach, it will reduce specification costs without unduly increasing interpretive error costs, the study reveals that the empirical assumptions on which this defense is based are highly questionable. More specifically, it shows that usages are not typically demonstrated through the introduction of the types of “objective evidence” that the strategy’s defenders suggest will reduce the risk of interpretive error — such as expert witness testimony, industry trade codes, or statistical evidence that a particular practice is widely observed. Rather, usages are most commonly established solely through the testimony of the parties or their employees. Expert testimony is introduced in at most 31.5% of the cases, the introduction of trade codes is rare, and there were no cases in the study in which the regularity with which a practice was observed was demonstrated through statistical evidence rather than the mere assertion of a witness.

After presenting the study’s findings, the Article reexamines the core justifications for the strategy in light of them. It concludes that because the strategy is likely to increase both specification costs and interpretive error costs, and has particularly negative effects on contracts between large multi-agent firms as well as on the types of outsourcing contracts and contracts for innovation that are increasingly important parts of the modern economy, it should be abandoned in favor of a more formalist approach to contract interpretation, at least in contracts between businesses.

Professor Bernstein's article is published in the Northwestern University Law Review at 110 Nw. U. L. Rev. 63 (2015) and is available for SSRN download here.

July 19, 2016 in Recent Scholarship | Permalink | Comments (0)

Registration Open for Central States Law Schools Association 2016 Scholarship Conference

CSLSA 2016 Conf

Registration is now open for the Central States Law Schools Association 2016 Scholarship Conference, which will be held on Friday, September 23 and Saturday, September 24 at the University of North Dakota School of Law in Grand Forks, ND. We invite law faculty from across the country to submit proposals to present papers or works in progress.

CSLSA LogoCSLSA is an organization of law schools dedicated to providing a forum for conversation and collaboration among law school academics. The CSLSA Annual Conference is an opportunity for legal scholars, especially more junior scholars, to present on any law-related topic in a relaxed and supportive setting where junior and senior scholars from various disciplines are available to comment. More mature scholars have an opportunity to test new ideas in a less formal setting than is generally available for their work. Scholars from member and nonmember schools are invited to attend. 

Please click here to register. The deadline for registration is September 2, 2016.   Hotel rooms are now available for pre-booking. The conference hotel is the Hilton Garden Inn in Grand Forks. The hotel phone number is (701) 775-6000. When booking, identify yourself as part of the “UND School of Law” block to receive a daily rate of $89. Please note that conference participants are responsible for all of their own travel expenses including hotel accommodations.

H/T: CSLSA

July 19, 2016 in Conferences | Permalink | Comments (0)

Monday, July 18, 2016

Contracts Law and the Case of the Super Bowl Jewelry Heists

 

Brillanten.jpg
By Mario Sarto - Self-photographed, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=1015397

Here's a case with some interesting facts: Jacobsen Diamond Center, LLC v. ADT Security Services, Inc., Docket No. A-1578-14T1, out of New Jersey.

The plaintiff in the case is a jeweler, who suffered two consecutive thefts on Super Bowl weekends in 2010 and 2011. The first Super Bowl theft involved cutting through the wall that bordered a retail store next door and removing a safe positioned against the wall. Because the thieves cut through the wall, they didn't set off the ADT alarm system linked to the jeweler's doors.  

After this robbery, the jeweler then moved its safes to the middle of the store, away from the walls. The second Super Bowl theft (perhaps by the same people, emboldened by their previous success?) involved the disabling of the ADT security system in place.

The Super Bowl thieves have never been apprehended, and the jeweler did not have any insurance on the stolen jewels, so the jeweler has sued ADT and a number of other companies that were involved with the jeweler's security systems, alleging various misrepresentations about the security, fraud, negligence, and breaches of contract. The jeweler lost on all of its claims, either by summary judgment or by jury verdict, and the jeweler now appeals.

Of special interest to this contracts law blog is the ruling on the limitation of liability clause in ADT's contract with the jeweler. This was a standard form contract used by ADT that limited its liability to $1,000 (far below the alleged worth of the stolen jewels). These limitations of liability clauses are enforceable and reasonable; the policy behind this stance is supposed to encourage the purchaser of the security system to maintain insurance coverage of its valuables, as it is the purchaser in the best position to know what the value is of the things it is seeking to protect. The court found that the jeweler knew it should have had insurance and it was not ADT's fault that the jeweler failed to obtain such insurance; therefore, ADT should not be held responsible for the jeweler's failure.

July 18, 2016 in Recent Cases, True Contracts, Web/Tech | Permalink