Posts Tagged ‘contracts of adhesion’

August 15 roundup

Supreme Court upholds workplace arbitration, and it’s Epic

My latest at Cato on this week’s decision upholding agreements to individually arbitrate wage and hour claims, in Epic Systems Corp. v. Lewis:

Yesterday’s 5-4 Supreme Court decision upholding agreements to individually arbitrate wage-and-hour claims was neither surprising nor novel as a legal matter. Nor – notwithstanding the variously breathless, furious, and apocalyptic reactions it has drawn from stage Left – is it objectionable as a matter of policy, or “anti-worker.” It is pro-liberty, pro-contract, and pro-respect for private ordering….

NPR, which really should know better, misreported on Twitter that “The Supreme Court in a 5-4 vote has delivered a major blow to workers, ruling for the first time that workers may not band together to challenge violations of federal labor laws,” of which the first eight words count as accurate reporting, the next half-dozen as erroneous opinion, and the remainder as merely false in fact….

…an oft-heard argument is that a contract presented as a take-it-or-leave-it matter, as is typical of employer handbook policies, credit card terms and the like, doesn’t count as a “real” contract and is entitled to no respect as a matter or law or, presumably, from libertarians. … Properly evaluating that claim is a task for another occasion, but my colleague Andrew Grossman is surely right when he points out that every hour of the day workers choose to accept overall employment packages including some terms they welcome (health insurance coverage, paid vacations) along with others they may not (some weekend hours required, don’t take staplers home) and that the lack of dickering over individual terms does not mean that they are not voluntary or have somehow been imposed by force.

Whole thing here. As I wrote after Italian Colors, millions of people “sign away their class action rights not because they are all hoodwinked or coerced, but because at some level they have rational grounds to recognize that” those rights are mostly of value to the class action industry.

Speaking of Italian Colors, the outcome in Epic Systems would surely have been no different had Scalia lived, since he led the way on the Court toward respecting contractual arbitration clauses and upholding the broad scope of the Federal Arbitration Act. More from Archis Parasharami and Dan Jones at SCOTUSBlog: “The best available empirical evidence shows that employees who arbitrate their claims are more likely to prevail than those who go to court, and to obtain awards that are the same as or larger than court awards in a shorter amount of time.” More: James Copland.

“Impenetrable legalese” and the push to regulate

The lead anecdote in a Bloomberg story on the evils of tech fine print is on PayPal deleting the accounts of persons who joined before age 18. Yet on its own internal evidence, this seemingly irrational action is pretty clearly a response to the risk of liability/regulatory exposures rather than some act of random malice. How many more instances of pointless runaround or “impenetrable legalese” are going to be occasioned by the ongoing push to regulate and assign new liability to data-intensive businesses? [Nate Lanxon, Bloomberg]

Before phone banking for Trump…

“If you want to make phone calls on behalf of Donald Trump’s presidential bid, you will have to agree to the terms of this contract…It’s a very peculiar document.” [David Post, Volokh] “The forms are extraordinarily broad, virtually prohibiting any volunteers from criticizing Trump or his family for the rest of their lifetimes, according to Rachel Sklar, a lawyer and CNN contributor.” [Jeff Stein, Vox] It also includes an “obligation to prevent your employees from demeaning or disparaging a Trump asset… That is surely not only absurd and unenforceable, it may well constitute abetting a violation of US labor law.” [Post] More on Trump and over-lawyering from Lawrence Cunningham (more), and generally. More on the recent Texas case in which a judge tossed a suit based on a nondisparagement clause proffered by a pet-sitting company, which then invoked it after a customer left a one-star Yelp review, from David Kravets at ArsTechnica.

November 4 roundup

  • “How to write an overlawyered email, in 4 easy steps!” [Inspired Law Blog]
  • Fifth Circuit upholds conviction of Texas lawyer Marc Rosenthal over pattern of fraud including but not limited to suborning of false witness testimony;
  • Emoticons/emojis begin arriving in court as evidence, a federal judge in Michigan having already been “asked to rule on the meaning of ‘:-P.'” [Amanda Hess, Slate]
  • Disabled access regulations as hobble-thy-competitor method: “AT&T says T-Mobile and Sprint Wi-Fi calling violates disability rules” [ArsTechnica]
  • From back in 2012, but missed: a law professor’s book assails fine print in contracts, and Scott Greenfield responds;
  • So strange how many expert witnesses say they have no idea how much they make [Brendan Kenny, Lawyerist]
  • Get those troops out of my house: “A symposium on the oft-neglected Third Amendment” [Ilya Somin]

New York Times blasts arbitration. What’s missing?

The New York Times, which can scarcely mention firearms policy without invoking the Gun Lobby, runs a big feature endorsing the claims of arbitration opponents that is curiously evasive about the role of the Litigation Lobby. Daniel Fisher, Forbes:

The writers who penned today’s New York Times Page One expose of arbitration clauses say they examined thousands of court documents and interviewed hundreds of lawyers, yet they fell for a rookie mistake: They confused class-action plaintiffs for the real thing….

The “article splayed across four pages of the Sunday Times” profiles the owner of the Italian Colors restaurant, the named plaintiff in a class action against American Express that went to the Supreme Court, as if he were typical of “plaintiffs [who] sprang up spontaneously and went out and hired lawyers to vindicate their rights?

Who were his lawyers? The Times doesn’t think you need to know. But here’s the main one: Gary B. Friedman, an attorney who specializes in suing credit-card companies. He recently suffered a bit of bad press when a federal judge in New York threw out a proposed settlement of another class action against Amex because Friedman had displayed “improper and disappointing conduct” by communicating sensitive information to a lawyer for the other side. The judge criticized Friedman for “blatant collusion” by negotiating a settlement with the defense that was “contrary to the wishes of the putative class.”

Now why couldn’t the enterprising Times reporters find room in such a large story for a mention of Friedman? Perhaps because he represents the real face of consumer class actions. These aren’t lawsuits by little guys like Carson trying to vindicate their rights against big corporations. Most are lawsuits by wealthy attorneys trying to get wealthier, by using the mechanism of the class action — originally developed to allow courts to declare classes of plaintiffs in civil-rights cases — to present companies with an offer they can’t refuse: Settle and pay us a rich fee, or risk a devastating loss in court.

Fisher summarizes: the Times “reports without skepticism the plaintiff-lawyer version of the story.” That’s a shame on a topic where even such a liberal figure as California Gov. Jerry Brown, who recently vetoed an anti-arbitration bill, acknowledges there are genuine concerns on both sides.

Our coverage of contractually agreed pre-dispute arbitration — including both the practical and the freedom-of-contract arguments for it — goes back to the early days of this site, including Coyote (“Here is how you should think about this proposed law: Attorneys are the taxi cartels, and arbitration is Uber. And the incumbents want their competitor banned.”), James Taranto on the Times as “two papers in one,” Andrew Pincus on arbitration as still pretty much the Litigation Lobby’s number one target. Much coverage also at Point of Law, including Ted Frank on a familiar-sounding law firm’s use of pre-dispute arbitration clauses.

P.S. I’ll bet he has: “Having worked extensively with Silver-Greenberg on this series over the past several months…” [Deepak Gupta, Public Citizen]

And: more thoughts at Cato at Liberty, including links to Cato work and discussion of why consumers so seldom switch from one provider to another in search of more favorable fine print on class action availability.

For real liability reform, try freedom of contract

Six months ago the Delaware Supreme Court upheld the right of an enterprise to include a loser-pays provision in its bylaws, specifying that losing shareholder-litigants would have to contribute reasonable legal fees to compensate what would otherwise be loss to other owners. Since then there’s been a concerted campaign to overturn the ruling, either in the Delaware legislature or if necessary elsewhere. But as I argue in a new Cato post, allowing scope for freedom of contract of this sort is one of the best and most promising ways to avert an ever-rising toll of litigation. Contractually specified alternatives to courtroom wrangling have played a vital role, and are under attack for that very reason, in curbing litigation areas like workplace and consumer arbitration, shrinkwrap and click-through disclaimers of liability, and risk disclaimers at ballparks and elsewhere. (& Stephen Bainbridge).

To the extent America has made progress in recent years in rolling back the extreme litigiousness of earlier years, one main reason has been the courts’ increased willingness to respect the libertarian and classical liberal principle of freedom of contract. Most legal disputes arise between parties with prior dealings, and if they have been left free in those dealings to specify who bears the risks when things go wrong, the result will often be to cut off the need for expensive and open-ended litigation afterward.

More on the Delaware bylaw controversy: D & O Diary (scroll), Andrew Trask on state of the merger class action, WSJ Law Blog first and second, Daniel Fisher, and ABA Journal in June, Alison Frankel/Reuters (forum selection bylaws).

October 23 roundup

  • I’m quoted by Nicky Woolf of Great Britain’s Guardian on the police militarization angle in Keene, N.H. civil disturbances (also: Van Smith, Baltimore City Paper). Also quoted regarding the ominous move to heavy armaments of Wisconsin prosecutors investigating their political opponents in the dawn-raids “John Doe” proceeding [Watchdog, and second post, earlier] Humor in The New Yorker from Bruce McCall [“Pentagon Cop Aid Hits Snags“] And here’s a previously unlinked Cato panel last month on cop militarization with David Kopel, Mark Lomax, and Cheye Calvo, moderated by Tim Lynch;
  • Australia prime minister declares “repeal day” with “bonfire” of regulations [Jeff Bennett and Susan Dudley, Cato Regulation mag; earlier on Minnesota legislative “unsession” to dump outmoded or pointless laws]
  • “After dawdling for a year, panel tosses bogus complaint against Judge [Edith] Jones” [@andrewmgrossman on Houston Chronicle via Howard Bashman, Richard Kopf, Tamara Tabo, earlier here, here, and here]
  • Making waves: Michelle Boardman review of Margaret Radin book on boilerplate, adhesion contracts, fine print [Harvard Law Review, SSRN]
  • Why litigation lobby could cost Democrats Senate majority this year [Tim Carney]
  • Online-services companies, better not do business in Maryland since the state has a very special law that one law professor believes sharply restricts your customer research [Masnick/TechDirt]
  • Picking Thomas Perez as Attorney General would (or should!) ignite firestorm of opposition. Is that why President’s waiting till after Nov. 4? [Washington Examiner]

American Express v. Italian Colors: arbitration waiver of class actions

Today’s Supreme Court decision in American Express Co. v. Italian Colors Restaurant is a victory for freedom of contract, a boost for arbitration as an alternative to litigation, and a step forward in the Court’s ongoing recognition that the class action is just one legal vehicle among many, not some priority express train to be favored over other traffic. The restaurant had agreed with American Express to settle disputes by way of arbitration, and to waive any rights to have future disputes handled through class actions. When a potential antitrust claim arose, it nonetheless sought to slip out of its contractual agreement and invalidate the waiver. Split along familiar ideological lines with Justice Sotomayor not participating, the court ruled 5-3 that the Second Circuit erred in striking down the waiver as inconsistent with the Federal Arbitration Act. While the Court has previously held that arbitration agreements must be construed to provide “effective vindication” of statutory claims, the class action format — which did not even exist for these purposes until decades after the Sherman Act’s passage — was not so crucial to the restaurant’s legal rights as to be unwaivable.

A dissent by Justice Kagan — both longer and more spirited than Justice Scalia’s majority opinion — seeks to extend the Court’s earlier rulings that arbitration clauses cannot thwart “effective vindication” of statutory rights by such devices as requiring overly high fees for entry into arbitration. Interestingly, the dissent outdoes the majority in claiming to favor the true spirit of arbitration as an alternative to litigation; in that respect, at least, it departs from the tone of much commentary from the Legal Left which treats arbitration as an evil corporate plot to deprive the world of the benefits of zealous litigation. It also proposes two paths of argument that the majority declines to pursue: 1) that skepticism toward contractual waivers might be especially appropriate in antitrust contexts because the alleged monopolist under scrutiny may use its putative market power to put across unfair contract terms; 2) that confidentiality clauses in Amex’s contract (not addressed by the majority) might fail the “effective vindication” test by preventing Amex customers from joining forces to collaborate on expert reports to use on their behalf in individualized assertion of their disputes.

For years, organized trial lawyers have been publicly campaigning against arbitration — which keeps money out of their pockets by diverting disputes from knock-down litigation — claiming that it is unfair and one-sided. But many studies support the view that disputants’ overall satisfaction in arbitration compares very favorably to that in litigation, in part because it is a speedier and less acrimonious process. And consumers and small businesses by millions sign away their class action rights not because they are all hoodwinked or coerced, but because at some level they have rational grounds to recognize that those class-action rights are very unlikely to pay off for them in durable future benefits (as opposed to benefits for participants in the litigation industry). Congress will be asked to overturn Supreme Court decisions like Amex v. Italian Colors and the earlier, related AT&T Mobility v. Concepcion. It should resist. (expanded from an earlier post at Cato at Liberty; and welcome SCOTUSblog readers.)