ContractsProf Blog

Editor: D. A. Jeremy Telman
Valparaiso Univ. Law School

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Wednesday, October 8, 2014

New in Print

Guest Post: Robin Kar, The Emerging New Life of Contract Law Studies, Part I

KarThis is the first in a four-part post by Robin Kar that serves as a sort of coda to our virtual symposium on the new book by Omri Ben-Shahar and Carl E. SchneiderMore Than You Wanted to Know: The Failure of Mandated Disclosure 

Introduction

When an egg hatches, new life emerges. But it often takes its first steps into the world with some remnants of its newly discarded shell.

I believe that significant new life may be emerging in the study of contract law, but that too much of an old shell remains. Rather than hide the ball, let me just say that the proverbial “egg” is the classical law and economics movement. And More Than What You Wanted to Know takes us part—though only part—of the way toward that emerging new life.

Jeremy Telman has been kind enough to let me post a late addendum to this symposium so that I can explain these perceptions. I want to use this review to prompt more scholars in the field—including Ben-Shahar and Schneider—to acknowledge what we need to do as a field to get further toward the right destination in the study of contract law.

As other contributors have noted, More Than You Wanted to Know is a full-throated attack on mandatory disclosure regimes. These regimes have been widely used and accepted in many contexts for some time now. It is therefore interesting to note that almost all of the commentators here have voiced some agreement with the basic thrust of the book—even while arguing that its thesis is overly general. We are witnessing the tail end of a shift from what once seemed to be common knowledge (i.e., about the usefulness and sufficiency of mandatory disclosure to cure a host problems in consumer contracting contexts) to a very different shared understanding.

But how has this shift occurred? As someone interested in the sociology of the legal academy and how different interdisciplinary methods can combine to produce (or distort) knowledge, I want to delve further into this question. I also want to ask whether we have gone far enough, in our collective studies of contract law, in the right direction. (I should probably apologize in advance to Carl Schneider that I will focus more on contract than informed medical consent in these posts, given the nature of this blog.)

The Proverbial “Egg”

If the “egg” is the classical law and economics movement, then that is where we should start.

Interdisciplinary studies of law can obviously produce enormous insight. When methods from cognate fields are applied to the law without sufficient reflection on the validity or applicability of their guiding premises, they can, however, also produce significant distortion. In this particular case, I believe that faulty premises associated with the classical law and economics movement are part of the cause of overblown intuitions concerning the use and value of mandatory disclosure regimes.

To analyze the source of this distortion more concretely, I ask you to consider an approach to studying contract law that might seem fanciful at first. This approach combines three basic elements:

  1. MoreHuman Psychology. The approach starts with certain assumptions about how human psychology and decision-makings works. These assumptions are intuitively plausible to some but are not rooted in any rigorous psychological research.

  2. Predictions about Legal Rules. The approach then generates predictions about the consequences of legal rules by modeling interactions among hypothetical people with the psychologies presumed in premise 1 under different hypothetical legal rules. The approach thus relies on theoretical modeling instead of rigorous empirical research to make empirical predictions.

  3. Normative Questions. The approach is skeptical of any kind of value that is not reducible to the value of some state of affairs. Proponents of this approach are thus impatient with normative arguments that do not fit easily into the consequentialist (and/or welfarist or cost-benefit) frameworks that they best understand. People who adopt this approach are not, however, typically trained in moral or political philosophy—which are the fields that deal most directly and rigorously with normative questions. Nor are they trained in the field of “meta-ethics”—which is the study of the status or objectivity of normative judgments. People who adopt this approach are thus largely unversed in the considerations that might legitimately ground (or respond) to their skepticism. This prevents them from knowing whether their grounds for skepticism are valid. It also prevents them from knowing whether their skepticism can be limited to concepts they reject (like “rights” and “fairness”), or whether it equally affects the values they accept (like “welfare” and a person’s “good”).

On its face, an approach like this would appear to be a recipe for disaster. It studies contract law and makes numerous recommendations for legal reform, but it employs a methodology that is unmoored in the specific classes of evidence and types of argumentation that are most relevant to its professed subject matter. 

But as anyone reading this blog will know, this description is far from fanciful. To make it describe something real, one need only clarify that the psychology referenced in premise 1 is homo economicus—or the classical, “rational actor” model. Then these three premises provide a pretty good description of the heart of the classical law and economics approach to studying contract law. 

These three premises can also seem to lend support to the value and sufficiency of mandatory disclosure regimes to cure a host of problems with consumer contracting. Mandatory disclosure regimes purport to produce the precise information needed for rational consumers to make better choices for themselves. If people are rational actors (see premise 1), then economic modeling (as described in premise 2) can thus be used to show that these regimes should simultaneously produce overall gains for consumers who contract, overall gains in social welfare and a more efficient allocation of resources. These regimes should also work relatively automatically, or “as by an invisible hand”, in the following sense: they should produce these results without the need for any centralized state planner to know in advance which exchanges are better for specific parties. There is, moreover, nothing else to value (as per premise 3). Hence, there is nothing else that legitimately speaks to the appropriate contours of consumer protection law.

There is no doubt about it: mandatory disclosure regimes work incredibly well in (classical economic) theory. The question is whether they work in reality.  In the posts that follow, I will explore that question.  I will suggest that More Than You Wanted to Know takes us further toward the truth—but cannot, as it stands, take us all the way there. 

 

October 8, 2014 in Books, Commentary, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 7, 2014

Introducing our Guest Blogger, Robin Kar's Coda to Our Virtual Symposium on More That You Wanted to Know

KarProfessor Robin Kar is a professor of law and philosophy at the University of Illinois College of Law. He is a faculty affiliate of the Illinois Law and Philosophy Program, the Beckman Institute for Science and Technology (in the Cognitive Psychology Research Group), the Illinois Program in Law, Behavior and he Social Sciences, and the Illinois Network for Neurocultures.  He is Director of the Illinois Center for Interdisciplinary and Comparative Jurisprudence, and a Project Leader for the Illinois Program on Cultures of Law in Global Contexts.  He has a PhD in philosophy, with a special focus on moral psychology, moral, legal and social philosophy, meta-ethics, rational choice and game theory, and the foundations of economics and the social sciences.  Some of his work on moral psychology, the psychology of obligation, and the nature of law and legal obligation can be found in pieces like The Deep Structure of Law and Morality, The Psychological Foundations of Human Rights, Hart’s Response to Exclusive Legal Positivism, and The Two Faces of Morality

Readers of the blog are also likely already familiar with Professor Kar’s recent SSRN Top Ten hits on contract law and theory, Contract as Empowerment: A New Theory of Contract and Contract as Empowerment Part II: Harmonizing the Case Law, along with his piece The Challenge of Boilerplate.  Kar teaches contract law and wide array of jurisprudence and legal theory courses, including seminars like morals, markets and the law.

Professor Kar’s posts serve as a sort of coda to our our virtual symposium on the new book by Omri Ben-Shahar and Carl E. SchneiderMore Than You Wanted to Know: The Failure of Mandated Disclosure 

Professor Kar will present his argument in four parts:

Part I: The Proverbial “Egg” suggests that three ungrounded premises of the classical law and economics movement have often caused many people to think that mandatory disclosure regimes have an unwarranted degree of support. 

Morethan Part II: Breaking Out of the Shell describes More Than You Wanted to Know as emerging from the classical law and economics paradigm but as able to challenge one of its central dogmas because it is willing to depart from two of the three core assumptions associated with that classical tradition.  The book seeks to answer psychological and empirical questions based on real psychological and empirical research rather than ungrounded psychological premises and abstract theoretical modeling. This explains why the book is better able to track the truth about mandatory disclosure regimes.   

Part III: What Is This Emerging New Life? outlines a better and even more broadly interdisciplinary paradigm that Professor Kar sees as potentially emerging from these developments. This research program would draw not only on psychological and empirical research to answer any psychological and empirical questions relevant to contract and consumer protection law but also on a broader range of philosophical methods of argumentation to answer any normative questions relevant to these topics. Part III argues that further development toward this interdisciplinary collaboration is needed for contract law studies to better track the truth.      

Part IV: Discarding the Last Remnants of the Old Shell suggests that we still have a way to go in freeing ourselves from the limitations of the classical law and economics paradigm.  It describes how this problem still causes many scholars to ask the wrong normative questions when asking how best to reform consumer protection law—as illustrated both by More Than You Wanted to Know and many of the responses to it in this symposium. This has led to an increase in knowledge about the psychological and empirical facts, but even more uncertainty and less consensus over how best to reform consumer protection law in light of them.  This problem can only be fully addressed by attending better to the right normative questions. 

So what are the right normative questions, you ask?  Stay tuned to find out!

October 7, 2014 in About this Blog, Books, Commentary, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

DC Circuit Allows Class Action against American Psychological Association to Proceed on Unjust Enrichment Claims

Very interesting case!  The American Psychological Association (APA) listed as "mandatory" an optional assessment that members paid annually with their dues.  The additional fees went to support the lobbying efforts of an affiliated organization, jthe American Psychological Association Practice Organization (APAPO).

GrouptherapyUpon discovery that the fee was optional, members of the APA experienced a range of emotions consistent with symptoms of outrage and moral indignation and filed a class action lawsuit to recover the fees.  The complaint stated three causes of action, but we are here concerned only with the first, unjust enrichment and constructive trust.  The District Court opined that the plaintiffs were unreasonable, if not delusional, if they thought the fees lobbying fees were mandatory, and it dismissed the suit.  Diagnosed as crazy, Plaintiffs asked for a second option, to which the District Court replied, "Okay, you're ugly too!"

*Rimshot*

But seriously folks, Plaintiffs sought their second opinion in the D.C. Circuit.

In In re: APA Assessment Litigation, the D.C. Circuit disagreed with District Court and reversed in part.  The District Court had dismissed the quasi-contract claim on the ground that such a claim cannot exist where there is an actual contract on the same subject matter.  The D.C. Circuit agreed with the District Court's statement of the law but disagreed with its application to these facts.  The special assessment to support APAPO formed no part of the plaintiffs' contractual agreement with the APA.  As the Court noted, citing the Restatement (Third) of Restitution & Unjust Enrichment, mistaken payment of money not due is one of the core cases of restitution.  It typically applies in a contractual context in which one party negligently or fraudulently charges the other excessive fees for services that exceed the sope of the contract.

The Court was unmoved by the APA's arguments that it was not unjustly enriched because the plaintiffs benefited from APAPO's lobbying efforts.  The plaintiffs had no interest in APAPO's functions.  They were induced to make the payments because they wanted to retain their APA membership, not because they wanted to support APAPO.  Finally, the Court found that it was not unreasonable for Plaintiffs to believe that the payments were mandatory.

Nor were they ugly.

October 7, 2014 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Weekly Top Tens from the Social Science Research Network

SSRNSSRN Top Downloads For Contracts & Commercial Law eJournal
RECENT TOP PAPERS 

RankDownloadsPaper Title
1 229 Contract as Empowerment: A New Theory of Contract 
Robin Bradley Kar 
University of Illinois College of Law 
2 186 Rolling Back the Repo Safe Harbors 
Edward R. MorrisonMark J. Roe and Christopher S. Sontchi 
Columbia Law School, Harvard Law School and United States Bankruptcy Courts, District of Delaware 
3 157 Featuring People in Ads (2014 Edition) 
Eric Goldman and Rebecca Tushnet 
Santa Clara University - School of Law and Georgetown University Law Center 
4 123 Contract as Empowerment Part II: Harmonizing the Case Law 
Robin Bradley Kar 
University of Illinois College of Law 
5 81 Three Models of Promissory Estoppel 
Andrew Robertson 
Melbourne Law School 
6 80 Unbundling Efficient Breach 
Maria BigoniStefania BortolottiFrancesco Parisi and Ariel Porat 
University of Bologna - Department of Economics, University of Bologna - Department of Economics, University of Minnesota - Law School and Tel Aviv University 
7 73 Say the Magic Word: A Rhetorical Analysis of Contract Drafting Choices 
Lori D. Johnson 
University of Nevada, Las Vegas, William S. Boyd School of Law 
8 67 Contract Law and Regulation 
Giuseppe Bellantuono 
University of Trento - Faculty of Law 
9 62 Performance-Based Consumer Law 
Lauren E. Willis 
Loyola Law School Los Angeles 
10 58 Does a Promise Transfer a Right? 
David Owens 
University of Reading 

SSRN Top Downloads For LSN: Contracts (Topic)
RECENT TOP PAPERS 

RankDownloadsPaper Title
1 229 Contract as Empowerment: A New Theory of Contract 
Robin Bradley Kar 
University of Illinois College of Law 
2 157 Featuring People in Ads (2014 Edition) 
Eric Goldman and Rebecca Tushnet 
Santa Clara University - School of Law and Georgetown University Law Center 
3 123 Contract as Empowerment Part II: Harmonizing the Case Law 
Robin Bradley Kar 
University of Illinois College of Law 
4 73 Say the Magic Word: A Rhetorical Analysis of Contract Drafting Choices 
Lori D. Johnson 
University of Nevada, Las Vegas, William S. Boyd School of Law 
5 53 Disclaimers of Contractual Liability and Voluntary Obligations 
Michael G. Pratt 
Queen's University (Canada) - Faculty of Law 
6 51 Post-Private Law? 
Martijn W. Hesselink 
University of Amsterdam - Centre for the Study of European Contract Law (CSECL) 
7 45 Some Features of Promises and Their Obligations 
Michael G. Pratt 
Queen's University (Canada) - Faculty of Law 
8 41 Wolves of the World Wide Web: Reforming Social Networks’ Contracting Practices 
Michael L. Rustad and Thomas H. Koenig 
Suffolk University Law School and Northeastern University 
9 39 From Contract to Status: Collaboration and the Evolution of Novel Family Relationships 
Elizabeth S. Scott and Robert E. Scott 
Columbia University - Law School and Columbia University - Law School 
10 38 The Grand Unified Theory — Methods of Contract Interpretation and Result Oriented Surplus Maximization 
Kyle Chen 
Notre Dame Law School

 

October 7, 2014 in Recent Scholarship | Permalink | TrackBack (0)

Monday, October 6, 2014

Online Contracting Still Confusing for the Ninth Circuit

We earlier blogged on Nguyen v. Barnes and Noble in which the Ninth Circuit Court of Appeals among other things found that where consumers do not affirmatively consent to online agreements by, for example, checking off an “I agree” button, “something more” than a mere hyperlink to the vendor’s Terms of Service is required to make sure that consumers have at least constructive notice of the agreement.  Said the Court: “Where a website makes its terms of use available via a conspicuous hyperlink on every page of the website but otherwise provides no notice to users nor prompts them to take any affirmative action to demonstrate assent, even close proximity of the hyperlink to relevant buttons users must click on – without more – is insufficient to give rise to constructive notice.”

This opinion is striking for a number of different reasons.  First, in this digital age, couldn’t online shopping in and of itself be said to constitute constructive notice of the online vendor’s terms of use?  In other words, online shoppers today must be said to have come to expect that when they buy from at least well-established vendors such as, here, Barnes and Noble, there will necessarily be terms to which the parties are bound (presuming, of course, that there is a contract to begin with).  This is especially so with the younger group of consumers.

Conversely, given the above and similar confusion, why in the world wouldn’t companies simply use an “I agree” box to be on the safe side?  Even after the case came out, the Barnes and Noble website does, granted, not feature its “TOS” hyperlink as conspicuously as other links on its website and certainly not as obviously as one would have thought the company would have learned to do after the case (see very bottom left-hand corner of website).

What is more, normally a failure to read a contract before agreeing to its terms does not relieve a party of its obligations under the contract.  In the case, however, the court said that in online cases, “the onus must be on website owners to put users on notice of the terms to which they wish to bind consumers … they cannot be expected to ferret out hyperlinks to terms and conditions to which they have no reason to suspect they will be bound.”  This is similar to a case we blogged about here.

However, it would probably be hard to find an online shopper in today’s world who would truly not expect that somewhere on the website, there is likely a link with terms that the corporation will seek to enforce.  The duty to read should arguably be extended to reading websites carefully as well.  Another medium is at stake than the paper contracts of yesteryear, but that doesn’t necessarily change the contents.  But that is not the law in the Ninth Circuit as it stands today, as evidenced by this case, which unfortunately fails to clarify exactly what the courts think would be enough to constitute constructive notice.  So for now, “something more” is the standard.  Perhaps this is an issue of “millenials” versus a slightly older generation to which some of the judges deciding these cases belong.

October 6, 2014 in Current Affairs, E-commerce, Web/Tech | Permalink | Comments (2) | TrackBack (0)

New Jersey Supreme Court Finds Arbitration Agreement Unenforceable for Lack of Notice

The New Jersey Supreme Court rendered a decision on September 23 that found an arbitration provsion unenforceable because the language was insufficient to alert a reasonable consumer that she was surrendering a constitutional or statutory right.  The plaintiff, Patricia Atalese, entered into a contract with U.S. Legal Service Group, L.P. (USLSG) for debt adjustment services.  Atalese paid USLSG approximately $5,000  for its services.  She alleged that USLSG did very little for her and further, that it failed to mention that it was not a licensed debt adjuster in New Jersey.  She sued, alleging that USLSG violated the Consumer Fraud Act and other consumer law.

The contract contained the following provision:

Arbitration: In the event of any claim or dispute between Client and the USLSG related to this Agreement or related to any performance of any services related to this Agreement, the claim or dispute shall be submitted to binding arbitration upon the request of either party upon the service of that request on the other party. The parties shall agree on a single arbitrator to resolve the dispute. The matter may be arbitrated either by the Judicial Arbitration Mediation Service or American Arbitration Association, as mutually agreed upon by the parties or selected by the party filing the claim. The arbitration shall be conducted in either the county in which Client resides, or the closest metropolitan county. Any decision of the arbitrator shall be final and may be entered into any judgment in any court of competent jurisdiction. The conduct of the arbitration shall be subject to the then current rules of the arbitration service. The costs of arbitration, excluding legal fees, will be split equally or be born by the losing party, as determined by the arbitrator. The parties shall bear their own legal fees.

 The NJ Supreme Court found that despite arbitration's "favored status," not every arbitration clause, "however phrased," will be enforceable.  NJ consumer law required that consumer contracts be written in a "simple, clear, understandable and easily readable way."  Arbitration clauses, like other contractual clauses, must also be phrased in "plain language that is understandable to the reasonable consumer."

Here, the arbitration clause was on page 9 of a 23 page contract.  It provided no explanation that the plaintiff was waiving her right to sue in court for breach of her statutory rights.  The provision also did not explain the meaning of arbitration or indicate how it differed from a court proceeding.  Finally, the court found that it was not written in plain language that would be "clear and understandable to the average consumer that she is waiving statutory rights."  The court concluded:

"In the matter before us, the wording of the service agreement did not clearly and unambiguously signal to plaintiff that she was surrendering her right to pursue her statutory claims in court.  That deficiency renders the arbitration agreement unenforceable."

Very nice work, Supreme Court of New Jersey, for recognizing that "reasonable consumers" should not be expected to sift through fine print and make sense of legal mumbo jumbo.

Arbitration: In the event of any claim or dispute between Client and the USLSG related to this Agreement or related to any performance of any services related to this Agreement, the claim or dispute shall be submitted to binding arbitration upon the request of either party upon the service of that request on the other party. The parties shall agree on a single arbitrator to resolve the dispute. The matter may be arbitrated either by the Judicial Arbitration Mediation Service or American Arbitration Association, as mutually agreed upon by the parties or selected by the party filing the claim. The arbitration shall be conducted in either the county in which Client resides, or the closest metropolitan county. Any decision of the arbitrator shall be final and may be entered into any judgment in any court of competent jurisdiction. The conduct of the arbitration shall be subject to the then current rules of the arbitration service. The costs of arbitration, excluding legal fees, will be split equally or be born by the losing party, as determined by the arbitrator. The parties shall bear their own legal fees. - See more at: http://caselaw.findlaw.com/nj-supreme-court/1678725.html#sthash.yAibodjp.dpuf
Arbitration: In the event of any claim or dispute between Client and the USLSG related to this Agreement or related to any performance of any services related to this Agreement, the claim or dispute shall be submitted to binding arbitration upon the request of either party upon the service of that request on the other party. The parties shall agree on a single arbitrator to resolve the dispute. The matter may be arbitrated either by the Judicial Arbitration Mediation Service or American Arbitration Association, as mutually agreed upon by the parties or selected by the party filing the claim. The arbitration shall be conducted in either the county in which Client resides, or the closest metropolitan county. Any decision of the arbitrator shall be final and may be entered into any judgment in any court of competent jurisdiction. The conduct of the arbitration shall be subject to the then current rules of the arbitration service. The costs of arbitration, excluding legal fees, will be split equally or be born by the losing party, as determined by the arbitrator. The parties shall bear their own legal fees. - See more at: http://caselaw.findlaw.com/nj-supreme-court/1678725.html#sthash.yAibodjp.dpuf

October 6, 2014 in Miscellaneous, Recent Cases | Permalink | Comments (2) | TrackBack (0)

Vis Problem Is Up

                                                                                             640px-Riesenrad_Vienna

The problem is up for the 22nd Annual International Commerical Arbitration Moot. Between now and early December, teams will write the brief for the Claimant.  In mid January the brief for the Respondent is due. And then, in March,  200-300 teams from law schools around the world will gather in Vienna for the competition. 

There is no limit to the  number of students on a team but they must argue in pairs. Typically one student handles the procedural issues and one the substantive or the CISG issues. There are 4 rounds to start with the 64 highest scoring teams moving on to a single elimination tournament.

The problems  identify an actual arbitration agency whose rules govern the procedures, This year the procedural issues center around whether the Claimant the right to make an emergency appeal to the arbitration agency and whether the Respondent may join the parent company of the Claimant for purposes of its counterclaim.  In one of those puzzles that charactizes the Moot, the parent company "endored" the contract at issue but claims not to be a party do it.

The substantive issue concerns a letter of credit which does not conform (or does it?) to what was called for in the contract. The buyer attempts to "cure" in a sense but the seller says "too late, we have already avoided the contract." Thus, it raises avoidance and cure isssues under the CISG.

This is, at best, a first cut on the problem. As the weeks pass, the problem will reveal itself as the layers are peeled off. 

I am happy to trade notes and views with other interested profs.   

[In the meantime, try to find the third man.]

 

 

October 6, 2014 in Conferences, Contract Profs, Film, Help Wanted, Law Schools, Meetings, Teaching | Permalink | Comments (0) | TrackBack (0)

Seventh Circuit Rejects Steak n Shakes' Motion to Stay n Compel

While we were busy with the virtual symposium, we got a bit behind on reporting on cases.  This one is from late August.

Steak n shake

Three Steak n Shake (SNS) franchisees brought suit against SNS seeking a declaratory judgment that, under the terms of their franchise agreements, they may set their own prices and are not required to participate in corporate promotions.  The case resulted from a corporate takeover in 2010, after which SnS initiated new pricing policies that plaintiff franchisees claim adversely affected their businesses.

The franchisees' agreements with SNS provided that the latter “reserve[d] the right to institute at any time a system of nonbinding arbitration or mediation.” One month after plaintiffs filed suit, SNS introduced an arbitration policy requiring franchisees to engage in nonbinding arbitration at SNS's request.  Pursuant to that policy, SNS filed a motion in the District Court to stay proceedings and compel arbitration.  The District Court denied the motion, finding the arbitration agreement "illusory" because one-sided and unenforceable.  In addition, the District Court found that the new arbitration policy could not apply retroactively to claims that had already been filed and that the Federal Arbitration Act (FAA) did not apply to non-binding arbitration.

In Druco Restaurants, Inc. v. Steak N Shake Enterprises, Inc., the Seventh Circuit agreed with the District Court's first ground for decision and did not reach its alternative grounds.  Applying Indiana law, the Seventh Circuit found the arbitration agreement illusory.  The Court noted that SNS was free to exercise or not exercise its right to arbitration at whim.  The company also retained complete discretion to determine venues where and procedures under which arbitration would take place.  Where so much is uncertain, the Seventh Circuit noted, the agreement is vague, indefinite and unenforceable.

 

October 6, 2014 in Food and Drink, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Help Wanted: UMKC

    The University of Missouri-Kansas City School of Law anticipates hiring two entry level or early career tenured or tenure-track faculty members with a strong commitment to educating lawyers for the twenty-first century, a lifetime of scholarship, and being part of a collegial, collaborative community. We are particularly interested in candidates with research and teaching interests in the following areas: property, environmental law, real estate, land use, contracts, business and entrepreneurship. Additional areas of interest may include professional responsibility, criminal law, and civil litigation.

    UMKC is the urban law school of the University of Missouri System and is located on a beautiful landscaped campus in the Country Club Plaza area of Kansas City, Missouri.  It is the only law school in a diverse and vibrant metropolitan area of more than two million people and offers courses leading to J.D. or LL.M. degrees for approximately 500 students.  It benefits from its metropolitan location, a large and academically talented pool of student applicants, a strong university with opportunities for interdisciplinary collaboration, a dedicated faculty and staff, and strong community and alumni support.

    UMKC is an equal access, equal opportunity, affirmative action employer that is fully committed to achieving a diverse faculty and staff. The university will recruit and employ qualified personnel and will provide equal opportunities during employment without regard to race, color, religion, national origin, sex, sexual orientation, age, status as a protected veteran or status as a qualified individual with a disability. To request ADA accommodations, please call the Director of Affirmative Action at 816-235-1323.

    Application Process: The School of Law will review the Faculty Appointments Registry maintained by the AALS. In addition letters of inquiry and resumes may be sent to:

Nancy Levit, Chair

Faculty Appointments Committee

UMKC School of Law

500 E. 52nd St.

Kansas City, MO 64110

levitn@umkc.edu

            Applications for the position go through the University athttps://myhr.umsystem.edu/psp/tamext/KCITY/HRMS/c/HRS_HRAM.HRS_CE.GBL?SiteId=8

October 6, 2014 in Help Wanted | Permalink | TrackBack (0)

Thursday, October 2, 2014

Moving at the Speed of Facebook to Improve Experimentation on Consumers

As we learned from reading Michelle Meyer on The Faculty Lounge today, Facebook has issued a Press Release on Research at Facebook.  As we discussed previously here, Internet-based companies have decided that they will self-regulate their own research programs.  Here are the highlights:

  • The_Anatomy_LessonGuidelines: we’ve given researchers clearer guidelines. If proposed work is focused on studying particular groups or populations (such as people of a certain age) or if it relates to content that may be considered deeply personal (such as emotions) it will go through an enhanced review process before research can begin. The guidelines also require further review if the work involves a collaboration with someone in the academic community.
  • Review: we’ve created a panel including our most senior subject-area researchers, along with people from our engineering, research, legal, privacy and policy teams, that will review projects falling within these guidelines. This is in addition to our existing privacy cross-functional review for products and research.
  • Training: we’ve incorporated education on our research practices into Facebook’s six-week training program, called bootcamp, that new engineers go through, as well as training for others doing research. We’ll also include a section on research in the annual privacy and security training that is required of everyone at Facebook.
  • Research website: our published academic research is now available at a single location and will be updated regularly.

Based on the New York Times article we cited in our last post on this subject, we hoped that Internet companies would at least subject research designs to outside review.  It looks like Facebook's review process is going to be entirely in-house.  

October 2, 2014 in Commentary, Web/Tech, Weblogs | Permalink | TrackBack (0)

Wednesday, October 1, 2014

Undercover Informant Sues DEA for Breach Contract for Injuries Sustained After Kidnapping

In a recently unsealed ruling, the U.S. Court of Claims has awarded $1.1 million in damages for breach of contract to a former undercover Drug Enforcement Administration ("DEA") informant who was kidnapped in Colombia and held captive for more than three months.

Here's a flavor from the opening paragraphs of the 52-page decision:

This breach-of-contract action comes before the Court after a trial on damages. In its decision addressing liability, the Court determined that the Drug Enforcement Administration (“DEA”) breached an implied-in-fact contract and its duty of good faith and fair dealing by failing to protect Plaintiff, an undercover informant. During an undercover operation in Colombia, Plaintiff, known as “the Princess,” was kidnapped and held captive for more than three months. Plaintiff claims that her kidnapping and prolonged captivity caused the onset of her multiple sclerosis and seeks compensatory damages in the amount of $10,000,000 for financial losses, inconvenience, future medical expenses, physical pain and suffering, and mental anguish arising from Defendant’s breach.

Because Plaintiff demonstrated that Defendant’s breach of contract was a substantial factor in causing the Princess’ kidnapping and captivity, and triggering her multiple sclerosis, the Court awards the Princess the value of her life care plan, $1,145,161.47.  Plaintiff failed to prove any other damages.

The decision covers a number of issues related to damages.  For example, the court holds that it was reasonably foreseeable at the time of contracing that a DEA informant would be kidnapped in Colombia and suffer resulting health issues:

The inquiry under foreseeability in this case is whether Plaintiff's damages, namely her multiple sclerosis and the ensuing costs of her medical care, were reasonably foreseeable at the time of contract formation. Anchor Sav. Bank, FSB, 597 F.3d at 1361; Pratt v. United States, 50 Fed. Cl. 469, 482 (2001) (“Whether damages are foreseeable is a factual determination made at the time of contract formation.”) (citing Bohac v. Dep't of Agriculture, 239 F.3d 1334, 1340 (Fed.Cir.2001)). Hence, Plaintiff must show that both the kidnapping, her ensuing health problems, and consequential financial costs of medical care constituted the type of loss that was reasonably foreseeable when the parties formed their implied-in-fact contract.

Plaintiff has established that her kidnapping was reasonably foreseeable at the time the contract was entered into. From the outset ASAC Salvemini voiced concerns for the Princess' safety, and DEA moved her family because of the dangers of her operation as part of her agreement to work with DEA. Evidence revealed that kidnappings were not uncommon in Colombia at the time. 2007 Tr. 270 (Princess); 2007 Tr. 1523 (Warren) (“[W]e got the report [the Princess] had been abducted. That was not an unusual report in Colombia then or now unfortunately.”). Plaintiff established that harm to undercover informants, including injury and death, were reasonably foreseeable consequences of a breach at the time of contract formation.

Knowing, as DEA did, of the dangers inherent in undercover operations aimed at highechelon Colombian traffickers, especially kidnapping in Col ombi a–a “hot spot”–the Princess' kidnapping and resultant harm to her health was a reasonably foreseeable type of injury at contract formation. The Court recognizes that DEA likely did not specifically foresee that the injury would be multiple sclerosis, but this is not a requirement for a showing of foreseeability. Anchor Savings Bank, FSB, 597 F.3d at 1362–63 (noting that “the particular details of a loss need not be foreseeable,” as long as the mechanism of loss was foreseeable) (quoting Fifth Third Bank v. United States, 518 F.3d 1368, 1376 (Fed.Cir.2008)).

Not the ordinary intrigue of the average contracts case.

SGS-92-X003 v. U.S., No. 97-579C (Ct. of Fed. Claims, filed Aug. 30, 2014)(republished Sept. 26, 2014).

October 1, 2014 in Government Contracting, In the News, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 30, 2014

Ben-Shahar & Schneider Symposium: One-Stop Shopping

Weekly Top Tens from the Social Science Research Network

SSRNSSRN Top Downloads For Contracts & Commercial Law eJournal
RECENT TOP PAPERS 

RankDownloadsPaper Title
1 228 Contract as Empowerment: A New Theory of Contract 
Robin Bradley Kar 
University of Illinois College of Law 
2 181 Rolling Back the Repo Safe Harbors 
Edward R. MorrisonMark J. Roe and Christopher S. Sontchi 
Columbia Law School, Harvard Law School and United States Bankruptcy Courts, District of Delaware 
3 151 Featuring People in Ads (2014 Edition) 
Eric Goldman and Rebecca Tushnet 
Santa Clara University - School of Law and Georgetown University Law Center 
4 123 Contract as Empowerment Part II: Harmonizing the Case Law 
Robin Bradley Kar 
University of Illinois College of Law 
5 92 Cognition and Reason: Rethinking Kelsen in the Context of Contract and Business Law 
Jeffrey M. Lipshaw 
Suffolk University Law School 
6 87 Credible Threats 
Saul Levmore and Ariel Porat 
University of Chicago Law School and Tel Aviv University 
7 80 Three Models of Promissory Estoppel 
Andrew Robertson 
Melbourne Law School 
8 80 Unbundling Efficient Breach 
Maria BigoniStefania BortolottiFrancesco Parisi and Ariel Porat 
University of Bologna - Department of Economics, University of Bologna - Department of Economics, University of Minnesota - Law School and Tel Aviv University 
9 64 Contract Review: Cognitive Bias, Moral Hazard, and Situational Pressure 
Eric A. Zacks 
Wayne State University Law School 
10 57 Performance-Based Consumer Law 
Lauren E. Willis 
Loyola Law School Los Angeles 

SSRN Top Downloads For LSN: Contracts (Topic)
RECENT TOP PAPERS 

RankDownloadsPaper Title
1 228 Contract as Empowerment: A New Theory of Contract 
Robin Bradley Kar 
University of Illinois College of Law 
2 151 Featuring People in Ads (2014 Edition) 
Eric Goldman and Rebecca Tushnet 
Santa Clara University - School of Law and Georgetown University Law Center 
3 123 Contract as Empowerment Part II: Harmonizing the Case Law 
Robin Bradley Kar 
University of Illinois College of Law 
4 92 Cognition and Reason: Rethinking Kelsen in the Context of Contract and Business Law 
Jeffrey M. Lipshaw 
Suffolk University Law School 
5 87 Credible Threats 
Saul Levmore and Ariel Porat 
University of Chicago Law School and Tel Aviv University 
6 64 Contract Review: Cognitive Bias, Moral Hazard, and Situational Pressure 
Eric A. Zacks 
Wayne State University Law School 
7 53 Say the Magic Word: A Rhetorical Analysis of Contract Drafting Choices 
Lori D. Johnson 
University of Nevada, Las Vegas, William S. Boyd School of Law 
8 52 Disclaimers of Contractual Liability and Voluntary Obligations 
Michael G. Pratt 
Queen's University (Canada) - Faculty of Law 
9 45 Post-Private Law? 
Martijn W. Hesselink 
University of Amsterdam - Centre for the Study of European Contract Law (CSECL) 
10 40 Some Features of Promises and Their Obligations 
Michael G. Pratt 
Queen's University (Canada) - Faculty of Law 

 

 

September 30, 2014 in Recent Scholarship | Permalink | TrackBack (0)

Monday, September 29, 2014

Smoking and the Dangers of Disclosure

The NYT had an article about e-cigarette label warnings today that was eerily appropriate given our symposium on Omri Ben-Shahar and Carl Schneider's book, More Than You Wanted to Know:  The Failure of Mandated Disclosure. The reporter must have been following our blog symposium and seems to have come up with an example that supports the arguments made by Ben-Shahar and Schneider.  The article explains how big tobacco companies have been putting warning labels on their e-cigarette packages that are more extensive than those on their tobacco cigarettes.  There are several possible explanations for why they are doing this, ranging from the least cynical (they want to be good corporate citizens) to the more cynical (they are trying to set up their smaller e-cigarette competitors for later regulation, possibly reduce demand for e-cigs to boost sales of tobacco cigs, and protect themselves from liability). 

I tend to be in the more cynical camp.  Big tobacco companies are both attempting to protect themselves from liability by setting forth as many potential dangers of their product as they can, and they are positioning e-cigarettes as "just as" dangerous, if not more, than plain old tobacco cigarettes.  The article notes something that readers of the book and blog already know - the disclosures have little effect on consumer purchasing decisions because nobody reads them.  The strategy of big tobacco supports the arguments made by Ben Shahar and Schneider that disclosure hurts rather than helps consumers except there's one crucial difference -  the companies are putting these extensive disclosures on the labels themselves.   They are not mandated. By voluntarily disclosing the harms of e-cigs, big tobacco companies both protect themselves from liability and avert regulation.  Doing away with mandated disclosure wouldn't prevent this kind of strategic selective disclosure --selective and strategic in the sense that these companies are only forthcoming with certain products and with certain types of disclosure.  It's revealing that one of the companies claiming that e-cigarettes warrant more extensive disclosure than their tobacco counterparts is RJ Reynolds, which succesfully sued the FDA to prevent mandated graphic warnings on cigarette packages.

So - the battle about disclosure continues to rage....

 

September 29, 2014 in Books, Commentary, Contract Profs, Current Affairs, Miscellaneous | Permalink | Comments (0) | TrackBack (0)

Ben-Shahar & Schneider Symposium, Finale: The Authors Respond

Ormi 3 SchneiderAfter reading our book and the blogs about it, you are surely in danger of hearing more than you want to know and even more surely apprehensive about a response in which we battle and bicker point by point.   Our critics have described our thesis accurately:  More Than You Wanted To Know does argue that mandated disclosure is the most common and least successful form of regulation today, that it cannot be fixed, and that it does more harm than good.  But our critics puzzle us in some basic ways we will briefly explore. 

 Our objection to mandated disclosure is not an objection to information. People need information, seek it, and commonly use it wisely, especially when they want and even enjoy it.  Advertising would not thrive were people indifferent to information, nor would libraries, newspapers, universities, or Google.  But mandated disclosure is not just about information; it is a regulatory technique that directs quite particular kinds of information at quite particular times in quite particular ways.  It aspires to give people information they did not seek and do not like to use.  Information they often find irrelevant to their decision.  Information that is often repellently complex and baffling.   Information that thus requires training to use well.  All this while people are contending with counterparties who are well informed and have interests of their own. 

Morethan Our critics in this symposium and elsewhere widely acknowledge the strength of our core arguments that mandated disclosure’s record is poor and its challenges great.  In area after area, mandated disclosure’s history is the same:  high hopes that people will be liberated from ignorance, made at last truly autonomous, and led to improved decisions.  In area after area, able and thoughtful people have labored decade after decade to realize these hopes.   After all these years, those hopes are still thwarted.  One might have expected, then, that all this thought and effort and ability would be turned to seeking better regulatory methods and persuading law-makers to use them.  Instead, two responses are common:  One is to argue that disclosure will work if only we can at last learn to do it better; the other is to shift the goals of disclosure from helping people make choices to more general benefits more indirectly achieved.

For example, immense creativity has been harnessed to solve the problem of conveying complex information to people ill-situated to interpret it.   We devote a chapter in the book to arguing that simplification—the deus ex machina of contemporary disclosurism—has not only disappointed its advocates’ eager hopes, it has barely budged the meter.   True, there are always more techniques to try, like Ryan Calo’s “visceral” disclosures, Bar-Gill’s “use pattern” disclosure, or Porat-Strahilevitz’ “personalized” disclosures.  These might succeed where others failed, but let’s make sure we understand how formidable their task is and how discouraging the history of such efforts has been.

Take Lauren Willis’ example of the CARD Act’s simplified disclosure, a payment “nudge” invented in the era of “smart” disclosure to prompt debtors to pay balances faster. Willis—one the most sophisticated critics of disclosures in consumer law—calls this regime successful even while recognizing that its benefits are not “dramatic.” How undramatic can benefits be before we stop advocating simplified disclosure? A recent study based on government data finds few cardholders responded to this nudge, that those who did saved only $24 on average, and that the total effect of this disclosure reform was $71 million annualized savings. In a $750 billion market, this benefit is so undramatic that we doubt it’s worth its design costs. (Luckily, the CARD Act did more than simplify disclosure.  It also limited fees and saved consumers—especially lower income people—many billions of dollars.)

Can disclosure serve other goals than improving people’s decisions? Can it “improve accountability”? Can firms be deterred from bad conduct even if disclosures go unread?  If disclosure helps the government improve enforcement actions, then the answer is yes.  But now we are talking about a different regulatory animal, where information is reported to the government and used as a baseline for command and control, like enforcing emission standards or collecting taxes. When, instead, disclosure is targeted at the public, does it improve accountability? Hospital report cards have almost no detectable effect on the quality of medical care, but hospitals worried for their reputation seem to be sending high-risk patients (especially minorities) away.  How is that for accountability?  What evidence is there that campaign-finance disclosure reduces money’s corruption of politics?  Or that Miranda stops police coercion?   Instead of sanitizing public life, disclosure is often a fig leaf to make disreputable behavior acceptable.  The rich buy influence—and file their disclosures.  Police, as Stuntz shows, use abusive tactics—and recite Miranda warnings.  Lenders lure gullible borrowers into disastrous debt—and making everything kosher with their neat stack of disclosures. 

While our critics are rich in new refinements on disclosure and in new purposes for disclosure to serve, they are not rich in responses to one of our central concerns:  that mandated disclosure is incompatible with basic features of human nature, with the way that people live their lives and make their decisions.  Unless human nature changes or people live differently, refinements in mandated disclosure can do little and new purposes for mandated disclosure will be increasingly peripheral.

So what do we propose instead? We propose a moratorium on mandated disclosure because we want real problems to be addressed with real solutions. Are credit card fees obnoxious?  Regulate them.  Are medical charges unconscionable? Face up to the perplexities of medical costs.  Do firms cheat customers?  Punish them.  Do conflicts of interest distort incentives?  Decide whether the distortion is great enough to justify prohibiting the conflict.  All these solutions are politically hard, and some of them may be politically unattainable.  But is that a good reason to encourage law-makers to persist in solutions that, while politically feasible, don’t work?

September 29, 2014 in About this Blog, Books, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Thursday, September 25, 2014

Cross Post from Legally Speaking Ohio on Specific Performance of an Employment Agreement

BettmanThis is a edited version of a longer post from the Legally Speaking Ohio blog, written by Marianna Brown Bettman (pictured), a law professor at the University of Cincinnati College of Law, where she teaches torts, legal ethics, and a seminar on the Supreme Court of Ohio.  She is also a former Ohio state court of appeals judge.  

Professor Bettman's full blog post can be found here.

Cedar Fair, L.P. v. Falfas

Case Background

Jacob Falfas worked continuously for Cedar Fair for nearly thirty five years. In 2005 he was promoted to Chief Operating Officer, pursuant to a written employment agreement. Falfas reported directly to Richard Kinzel, Cedar Fair’s Board Chair, President, and CEO.

In June of 2010 Falfas became aware of Kinzel’s dissatisfaction with certain aspects of his work. The two men had a 94 second telephone call on June 10, 2010. It is undisputed that after this phone call, Falfas’ employment with the company ended, but Kinzel believed that Falfas had quit, and Falfas believed he had been fired.

Arbitration

The employment agreement between the parties contained a binding arbitration provision. The parties arbitrated their dispute, resulting in a finding that Falfas had not resigned, but was terminated for reasons other than cause. The arbitrators found that equitable relief was needed to restore the parties to the positions they held prior to the breach of the employment agreement, and ordered Cedar Fair to reinstate Falfas to his former position.

Judicial Review of Arbitration Award

On appeal to the Erie County Common Pleas Court, the trial judge found that the arbitration panel’s order of reinstatement exceeded its authority under the employment agreement.  The Sixth District Court of Appeals reversed, finding that the trial court erred in refusing to order reinstatement.

Executive Summary

Specific performance is not a remedy in this breach of an employment agreement case.

Arbitration Fundamentals

An arbitrator’s authority to interpret a contract is drawn from the contract itself. The statutory authority of courts to vacate an arbitrator’s award is very limited. Arbitrators act within their authority to craft a remedy as long as the award “draws its essence” from the contract, but an award departs from the essence of a contract when the award conflicts with the express terms of the agreement or cannot rationally be supported by the terms of the agreement.

In this case the court found that the arbitration panel exceeded its powers in ordering Cedar Fair to reinstate Falfas.

Case Syllabus

Specific performance is not an available remedy for breach of an employment contract unless it is explicitly provided for in the contract or by an applicable statute. (Masetta v. Natl. Bronze & Aluminum Foundry Co., 159 Ohio St. 306, 112 N.E.2d 15 (1953), applied.)

September 25, 2014 in Recent Cases, Weblogs | Permalink | Comments (0) | TrackBack (0)

Ben-Shahar & Schneider Symposium Part XI B: David Vladeck, Living in a Post-Disclosure World, Part B

This is the eleventh in a series of posts that are part of a virtual symposium on the new book by Omri Ben-Shahar and Carl E. SchneiderMore Than You Wanted to Know: The Failure of Mandated Disclosure Biographies for the second week's contributors can be found here.  The authors' introduction to the symposium can be found here.  

VladeckDavid C. Vladeck is a Professor of Law at Georgetown University Law Center, where he teaches federal courts, civil procedure, administrative law, and a seminar on First Amendment litigation. Professor Vladeck recently returned to the law school after serving for nearly four years as the Director of the Federal Trade Commission’s Bureau of Consumer Protection.

This is the second of a two-part post.  The first can be found here.

My commentary on More Than You Needed to Know picks up where Ben-Shahar and Schneider’s critique of mandatory disclosure leaves off; that is, how to reform the process to move to less bad disclosure regimes. 

I have three modest points:  In yesterday’s post, I argued that there are disclosure regimes that work.  We should explore them to see why.   In today’s post, I will argue that there are tools that can be used to address some of the flaws that Omri and Carl rightly identify and criticize.  They must be employed.  Finally, my tenure at the FTC taught me that mandatory disclosures are often an effective way to ensure accountability.  That virtue is worth exploiting. 

2.  Fix disclosures.  As Omri and Carl point out, disclosures often fail because they are designed to fail.  True, but that state of affairs is not inevitable.   Legislatures and regulatory agencies can mandate that disclosures do just that:  Convey important information to consumers concisely, in plain English, and at the right moment, and nothing more. 

Let’s do a thought experiment with privacy policies, which are rightly the poster child for disclosures that go unread.  Let’s assume that companies were forced to abide by the following simple rules:

(1) Get rid of Orwellian names for mandatory disclosures.   The name “privacy Morepolicy” is itself an oxymoron.   It deceives consumers by assuring them that the company takes privacy seriously because it has a privacy policy.  But these policies abrogate privacy.   Imagine instead if the disclosure were entitled “All the things we will do with your personal information, regardless of whether those uses are harmful to you.”   There is a chance that it would be read.  That might be true even if the title of the disclosure was “What we do with your personal data.” 

(2) Tell consumers what they need to know and nothing else.  Next, imagine that the policies stated clearly and concisely the uses to which one’s personal data would be put.  No other statement would be permitted, especially the long prefatory comments about how much the company really “cares” about your privacy.  And no prevarication would be permitted.  If the data will be given or sold to a third party, that fact – along with the identity of the third parties (and affiliates) and the uses the third party would put the data – would have to be disclosed.   If the company wants to reserve the right to sell the data as it sees fit, the company would have to disclose in bold letters:  “We reserve the right to sell your personal data to whomever we want!”    

(3) Make the legal disclaimers and boilerplate a separate “disclosure”.    Most privacy policies are incomprehensible because they are written by lawyers expert in what Senator Elizabeth Warren calls the art of “wordbarf” (her term, not mine) and focus mainly on disclaiming legal liability, not on “disclosing” the key information. 

(4) Require that the disclosure be made prominently each time a consumer is asked to provide personal information.   At the moment, finding a privacy policy is often like playing “hide and seek” against a determined and smart twelve year old.   If disclosures are going to work, they must be both conspicuous and delivered at the right time. 

(5) Make sure that there is a robust default.    Disclosure regimes are too often stand-alone efforts to regulate, employed as a sop to beat back efforts to impose more stringent regulation.   Default rules are often needed so that if the disclosure fails, the presumption should be that the default rule remains in place.             

I could go on.  But you see my point.  Today most disclosures are carefully engineered by lawyers and experts on human behavior not to be read, or to be discounted because of other claims more prominently displayed.  If you want to see how sophisticated these obfuscation efforts can be, take a look at FTC v. Commerce Planet, Inc., 878 F. Supp. 2d 1048, 1068-72 (C.D. Cal. 2012), a fraud case involving the adequacy of buried disclosures that were contradicted by other far more prominent claims. 

If we are going to reclaim disclosures, those techniques will have to be reined in by more than enforcement cases by the FTC and state agencies.  More important, we must focus on making disclosures comprehensible and addressing the “indifference” problem that Omni and Carl describe.   Professor Oren Bar-Gill’s book, Seduction by Contract, argues that more effective disclosures could be designed to enhance consumer welfare.  And the FTC’s work on disclosures holds some promise.  Look at, for example, the FTC’s work on Dot.Com disclosures available here

3.  Disclosures to ensure accountability.  There is a long history of mandatory disclosures in the United States.   For instance, even before there was an FDA, Congress mandated that food labels identify the name of the food, the food’s ingredients, the net weight of the food, and the name and address of the manufacturer.  The requirement was intended to aid consumers in making purchasing decisions.  But more than that, the requirement was intended to give law enforcement agencies a hook to bring enforcement cases in the event that the food was misbranded.  When Congress passed the Food, Drug and Cosmetic Act in 1938, it carried forward these requirements, and they remain in force today. 

The same of course is true with the Federal Trade Commission Act’s longstanding prohibition on deceptive acts and practices.  Without disclosure regimes, many mandated by law, the FTC’s enforcement authority would be a shell of what it is today, as would be the case for State Unfair and Deceptive Acts and Practices statutes.    

My point here isn’t to claim that disclosure regimes should ordinarily be imposed to serve only as accountability mechanisms.  How to inject greater accountability into the marketplace is an issue that extends far beyond the scope of Omri and Carl’s wonderful book.  Instead, it is to make the more modest claim that even if, as Omri and Carl demonstrate, disclosure regimes generally fail to inform, they often serve the collateral purpose of enabling law enforcement agencies, and at times private parties, to hold sellers accountable for their claims.

                                    *                                  *                                  *

Let me end where I began.   The Failure of Mandated Disclosure is a must-read book for anyone who cares about consumer protection, contract law, and an informed marketplace.  To me, the book throws down the gauntlet to anyone who is willing to defend the status quo.    I doubt that anyone will pick that gauntlet up.  But if we agree that the status quo is indefensible, we need to figure how either to live in a post-disclosure world or how to improve disclosures to the point that some of Omri and Carl’s criticisms no longer stick.  That is our challenge.  I for one am not ready to surrender to a post-disclosure marketplace, especially when we have not yet really focused on designing and enforcing effective disclosure mandates.   

September 25, 2014 in About this Blog, Books, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Wednesday, September 24, 2014

Ben-Shahar & Schneider Symposium Part XI A: David Vladeck, Living in a Post-Disclosure World, Part A

This is the eleventh in a series of posts that are part of a virtual symposium on the new book by Omri Ben-Shahar and Carl E. SchneiderMore Than You Wanted to Know: The Failure of Mandated Disclosure Biographies for the second week's contributors can be found here.  The authors' introduction to the symposium can be found here.  

Vladeck-david_1David C. Vladeck is a Professor of Law at Georgetown University Law Center, where he teaches federal courts, civil procedure, administrative law, and a seminar on First Amendment litigation. Professor Vladeck recently returned to the law school after serving for nearly four years as the Director of the Federal Trade Commission’s Bureau of Consumer Protection.

This is the first of a two-part post.

Living in a Post-Disclosure World?:  The Challenge of The Failure of Mandated Disclosure

 The title of Omri Ben-Shahar and Carl Schneider’s new book, More Than You Wanted to Know:  The Failure of Mandated Disclosure, is perfectly apt; the book did tell me far more about the failings in mandated disclosures than I wanted to know.   But to be fair, I was warned.  The “disclosure” in the title put me on notice that I would learn “more than I wanted to know,” and the authors kept their promise, proving, perhaps in tension with their title, that disclosures sometimes work.

This is a book worth reading.  The authors ably stake out and defend their thesis.  They carefully, cogently, and at times, ardently make the argument that mandated disclosure regimes are destined to fail.   Too many disclosures lead to overload.  Too many disclosures are incomprehensible - written in leaden language, laden with disclaimers, and comprehensible only by people with multiple doctorate degrees.  But what really dooms disclosures is indifference – a curse for which there is no cure.   While improvements around the margins may be possible, the authors contend that engaging in the quixotic effort to fix unfixable mandated disclosure regimes is a fool’s errand.   Instead, we should move to better and more effective regulatory regimes in those instances where they are really needed.   

Make no mistake; Omri and Carl are not corporatists who want to leverage corporate power over consumers.  Their intentions are pure and good.  They care deeply about promoting consumer welfare.  But, in their view, our current disclosure regime does the opposite:  It is a ruse that promises consumer protection but delivers nothing more than an illusion.       There is, of course, a great deal of truth in the authors’ critique of mandatory disclosure regimes.  Few, if anyone, will defend the status quo.   I certainly will not.  I share most, if not all, of the criticisms that the authors rightly train on mandatory disclosure regimes.   And I wholeheartedly endorse their view that disclosure and more disclosure, as a politically expedient compromise, often prevents needed regulation.  

But I do not accept the pessimism that runs through the book.   Reading it, I was reminded of the quip about democracy –  which “ is the worst form of government, except for all those other forms that have been tried from time to time.”   In some respects, disclosure mandates are the worst form of consumer protection tools.  But for some things, disclosures serve important interests.   Disclosures cannot simply be abandoned; we need to preserve them where appropriate, we certainly need to figure out how to do them better, and we need to stop using disclosure regimes as a substitute for needed regulation.  For this reason, I’ll pick up where the book leaves off; that is, how to reform the process to move to less bad disclosure regimes. 

I have three modest points:  In today’s post I will argue that there are disclosure regimes that work.  We should explore them to see why.   In my second post, I will argue that there are tools that can be used to address some of the flaws that Omri and Carl rightly identify and criticize.  They must be employed.  Finally, my tenure at the FTC taught me that mandatory disclosures are often an effective way to ensure accountability.  That virtue is worth exploiting.  

Morethan 1.  Success stories:   There is no question some mandatory disclosure schemes work.  A number of health warnings have succeeded.   For instance, no one would seriously challenge the success of the Food Allergen Labeling and Consumer Protection Act of 2004 in substantially reducing life-threatening allergic reactions to foods.   Nor would one take issue with the success of poison-prevention programs that rely on Skull and Crossbones warnings.   Perhaps the most dramatic success story is the virtual elimination of Reye’s syndrome in children in the United States as a result of mandatory labeling of aspirin-containing products.   Reye’s syndrome is a rare and potentially fatal condition affecting children and adolescents.  The syndrome attacks the brain and liver, and about half of those afflicted die, with many more suffering severe and irreversible brain damage.  By the late 1970s, strong evidence emerged that there was an association between Reye’s syndrome, and children and teenagers taking aspirin-containing products to treat flu like symptoms and chicken pox.   I was a lawyer at Public Citizen Litigation Group when we brought suit to compel the FDA in 1986 to amend the labeling of all aspirin-containing products to warn parents of the association.  The litigation took a few years, but ultimately succeeded in forcing the FDA to put this warning on aspirin-containing products:  “Children and teenagers who have or are recovering from chicken pox or flu-like symptoms should not use this product.  When using this product, if changes in behavior with nausea and vomiting occur, consult a doctor because these symptoms could be an early sign of Reye’s syndrome, a rare but serious illness.”    The statistics are striking.   “In 1977, 454 cases of Reye’s syndrome were reported in the United States.  Of the 373 cases with follow-up, 42% of these patients died, and 11% survived with residual neurologic damage. Incidence was increased with viral epidemics, especially influenza B and varicella. Reye’s syndrome cases in the U.S. numbered 555 in 1980, but they have fallen drastically.  From 1994 until 1997, identified cases in the U.S. were fewer than two per year.” Lisa Degnan,  Reye’s Syndrome: A Rare But Serious Pediatric Condition, U.S. Pharmacist.

To be sure, there are a number of factors that one could argue make these examples aberrational:  they involve matters of life and death; they generally involve young children or other vulnerable populations; and with the food allergen legislation and the Reye’s syndrome warning, the risks were conveyed not just by warnings, but by broader publicity and public education.  And the industry has become more sensitive to these risks.  For instance, most children’s pain relievers no longer contain aspirin (although some do), and some manufacturers have reformulated their products to reduce the use of food dyes, nuts, and other known allergens.   All fair points.  But the publicity surrounding Reye’s syndrome has disappeared over the past thirty years, as has the buzz surrounding children’s allergies.  Yet Reye’s syndrome has been virtually eliminated, and the risk of allergic reactions triggered by food allergens has been driven down.    

Why did these disclosure schemes work?  I think that there are a number of reasons.   First, people are not indifferent to immediate life-threatening health issues, especially for their children.  Second, these disclosures were just that - disclosures written in short, highly directive language, geared to people with no more than an elementary school education.  Third, the disclosures were not drowned in a sea of disclaimers, which is often the fatal flaw.  Fourth, the disclosures were properly labeled – the disclosure did in fact convey important health information.   Fifth, the disclosures were provided just in time – just when the consumer is making a purchase, and not in a pile of paper in the box to be viewed at some point after the purchasing decision.  And sixth, the disclosures were part of a broader education campaign and were backed up by a strong regulatory scheme.      

Tune in tomorrow for Part B. 

September 24, 2014 in About this Blog, Books, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

New in Print

Pile of BooksKen Adams, Banishing Shall from Business Contracts: Throwing the Baby Out with the Bathwater, The Australian Corporate Lawyer (September 2014)

Joost Blom, Regulation of Contracts in Canadian Private International Law, 31 Ariz. J. Int'l & Comp. L. 21 (2014)

Christopher R. Drahozal, FAA Preemption after Concepcion. 35 Berkeley J. Emp. & Lab. L. 153 (2014)

September 24, 2014 in Recent Scholarship | Permalink | TrackBack (0)