Overlawyered: Chronicling The High Cost Of Our Legal System

Posts Tagged ‘contracts’

From the FedSoc archives: “The Death of Contract and the Rise of Tort”

What good is sitting alone in your room without catching up on your video watching? This newly released panel discussion from the 1991 (!) Federalist Society National Lawyers Convention tackles the then-afoot trend to diminish the domain of traditional principles of contract in favor of prescribed duties under tort law, a trend I had discussed in my book The Litigation Explosion in that year. That particular trend, like some of the others I criticized, was to turn around in later years; contract did not die and in fact came back strong as it remains today.

It was quite a line-up that day:

Featuring:

Walter Olson, Manhattan Institute
Hon. Joseph R. Grodin, University of California Hastings College of Law and former Associate Justice, California Supreme Court
Prof. Randy E. Barnett, Chicago-Kent College of Law
Prof. E. Allan Farnsworth, Columbia Law School
Moderator: Hon. Robert Bork, American Enterprise Institute and former Supreme Court nominee

A direct YouTube link is here.

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Constitutional law roundup

  • “North Dakota legislators attempt to retroactively change the terms of contracts between manufacturers and dealers of farm equipment. Well, crack open your Con Law casebook because that violates the Contract Clause of Article I, Section 10. So holds the Eighth Circuit (over a dissent), treating the reader to a history of the clause from 1789 to the New Deal and beyond.” [IJ “Short Circuit” on Association of Equipment Manufacturers v. Burgum]
  • Subsidies conditioned on, and meant to promote, an official orthodoxy: California moves to approve $50 million state fund for film and TV production earmarked for producers who “share” state’s “values” on reproductive rights [Eugene Volokh]
  • Not your usual combination: Cato Institute, Brennan Center, and Sierra Club join in amicus brief to challenge President’s powers under National Emergencies Act to divert funds appropriated for other purposes to construction of U.S.-Mexico wall [David Post]
  • Judge Diarmuid O’Scannlain on textualism and the future of the federal judiciary [Federalist Society]
  • “No person shall be disturbed in his private affairs, or his home invaded, without authority of law,” declares the constitution of Arizona. While judges in Washington have developed a distinctive jurisprudence based on the similar clause in their state’s constitution, the Arizona judiciary as yet has not [Timothy Sandefur]
  • Does the Commerce Clause really empower the U.S. Congress to criminalize acts of animal cruelty “affecting” interstate commerce, whatever that means? [Jacob Sullum]

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PayPal says U.K. customer breached her contract by dying

“You are in breach of condition 15.4(c) of your agreement with PayPal Credit,” the letter said, “as we have received notice that you are deceased.” Not only that, it continued, “[t]his breach is not capable of remedy.” Despite the recipient’s status as no longer living, the letter included an instruction to “READ THIS NOTICE CAREFULLY.” [Kevin Underhill, Lowering the Bar; Leo Kelion, BBC]

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Supreme Court roundup

  • After oral argument, case challenging agencies’ use of in-house administrative law judges (Lucia v. SEC) remains hard to predict [Ilya Shapiro, Cato; earlier]
  • In dissent from cert denial: “Justices Thomas and Gorsuch Argue for Rejecting Deference to Agency Interpretation of Agency Regulations” [Eugene Volokh, Ilya Shapiro and Matthew Larosiere on Garco Construction, Inc. v. Speer]
  • High court still gun shy [Trevor Burrus and Matthew Larosiere on refusal to review Maryland felon gun possession ban] Ninth Circuit ruling on zoning exclusion of firearms business deserves cert review [Shapiro and Larosiere on Teixeira v. Alameda County] Court denies cert in widely watched Defense Distributed First Amendment case on dissemination of plans for 3-D printed weapon [Smith Pachter, earlier] A historical look: “The American Indian foundation of American gun culture” [David Kopel]
  • “The Supreme Court’s grant of a Contracts Clause case for the first time in a quarter-century reminds me that a certain John G. Roberts wrote a student note on the Clause back in 1978 (available at 92 Harv. L. Rev. 86).” [Aditya Bamzai on Twitter]
  • University of Chicago Law Review special issue on Justice Scalia [Will Baude; other recent Scalia scholarship includes articles on his influence in implied rights of action and standing]
  • Case on cert petition before SCOTUS could clarify law on distribution of property after church schisms [Samuel Bray on Protestant Episcopal Church in the Diocese of South Carolina v. Episcopal Church]

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New Jersey high court: uninjured complainants can’t enforce consumer law

An unusually strong New Jersey law, the Truth-in-Consumer Contract, Notice and Warranty Act (“TCCWNA”), “prohibits consumer documents from containing provisions that violate clearly established rights or responsibilities,” whether or not the business that distributed the document then acts on the provision. Businesses that imprudently employ standard-form contracts available from office-supply stores, for example, may violate the law if the language deviates (as it often will) from more pro-consumer New Jersey doctrines. The law carries a $100 per-infraction fee that can be multiplied to large numbers applied across a range of transactions. A cottage industry of entrepreneurial suit-filing has grown up under the statute but now, in the case of Spade v. Select Comfort, a unanimous New Jersey Supreme Court has ruled that only consumers who have suffered actual damage can sue under the law, though damages can be non-monetary. The decision is likely to cut back on entrepreneurial uses of the law and in particular class actions where no evidence can be shown that a document’s improper wording harmed many members of a putative class. [Ryan P. Phair and Emily K. Bolles (Hunton & Williams), Lexology; earlier here, here, and related]

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The not-so-rapid implosion of the Contracts Clause

In conventional legal histories of the New Deal-era Supreme Court, the 1934 case of Home Building Association v. Blaisdell symbolizes the overthrow of the courts’ willingness to enforce the Constitution’s language providing that “No State shall…pass any…Law impairing the Obligation of Contracts.” The Court by a 5-4 margin upheld as lawful a Minnesota law enforcing a moratorium on many mortgage obligations. But in fact, argues David Forte at the Federalist Society Review, the decline and fall of the Clause was more complicated. Blaisdell or no, the Court for years continued to strike down many state laws that impaired contracts, and the justices of the Court’s liberal wing sometimes joined, as in Worthen v. Thomas, a unanimous case disallowing Arkansas’s impairment of certain contract rights. It was not until 1945 that Justice Felix Frankfurter retrospectively contrived to interpret Blaisdell as a sweeping repudiation of the older Constitutional order, ushering in the modern era in which few state laws are struck down. It was effectively an act of will by the then Court — and one that could be reversed should there develop will to the contrary.

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Law of the Nursery

‘It’s my toy’ – property law
‘You promised me’ – contract law
‘He hit me first’ – criminal law
‘Daddy said I could’ – constitutional law

— the late Harold Berman of Harvard Law School, via John McGinnis, Law and Liberty.

Some others, via social media:

‘Mama said NO’- Supreme Court decision — Cathy Maddox on Twitter
‘Last week you said’ – case law — Dave Ferguson on Twitter
‘Stop repeating everything I say’ – copyright law — John Althouse Cohen
‘Make him turn it down’ — nuisance law

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Decline and fall of the Contracts Clause

George Leef reviews James W. Ely, Jr., book The Contract Clause: A Constitutional History. The clause, part of Article I, prescribes that no state shall pass any law “impairing the obligation of contracts”:

By the end of the Marshall era, the Contract Clause provided a firm defense against legislative interference for rights under public and private contracts. That would be its high-water mark. Soon state and federal courts began to whittle away at it….

The 1934 Supreme Court case of Home Building and Loan v. Blaisdell is often cited as a turning point in the clause’s demotion, but the stripping away of protection against such laws has continued into more modern times.

Thus, state governments now have nearly unlimited power to tamper with contractual obligations and the reliability of a contract depends upon how judges might weigh several vague factors. Where the Founders wanted certainty, we now have a great deal of uncertainty.

Ely concludes by taking us into recent cases where the clause has been resurrected in efforts by public employee unions to prevent legislatures from whittling away any of their promised benefits through efforts to lower budget deficits.

These may sometimes prevent even laws aimed at reducing “unearned” future benefits arising from public-sector work that has not yet been performed. Even as some courts render such benefits provisions constitutionally binding on subsequent legislatures, they show little interest in reviving the clause’s old scope so as to bar legislation that impairs the obligation of existing private contracts.

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California: please reconsider Traynor’s parol evidence mistake

The traditional parol evidence rule reduces the scope of litigation by providing that unless a completed contract is uncertain or ambiguous, courts will not entertain extrinsic evidence, such as allegations of contrary oral representations, to alter its interpretation. In the 1968 case of Pacific Gas & Elec. Co. v. G. W. Thomas Drayage Co., the California Supreme Court and Justice Roger Traynor adopted a much more liberal alternative rule in which extrinsic evidence could be brought in to create ambiguity even when at variance with clear provisions. In a 1988 case, Judge Alex Kozinski, obliged to apply the doctrine in a diversity case, noted that the confusion created by PG&E and subsequent opinions “casts a long shadow of uncertainty over all transactions negotiated and executed under the law” of California.

In the case of Jibe Audio, LLC v. Beats Electronics, LLC, the Washington Legal Foundation is urging the California Supreme Court to hear the case and use it as an occasion to reconsider its approach to the subject: “California’s conception of the parol evidence rule creates uncertainty for people and businesses engaging in commercial transactions. Allowing this rule to persist will just allow the mass exodus of business from California … to continue,” said WLF’s Richard Samp. [case detail, press release, brief, background (James C. Martin and Benjamin Shatz)]

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Why most American businesses pay their vendors, even without loser-pays

As has often been noted, the so-called American Rule on fees in litigation (prevailing party has no right to recover fees from loser) creates an incentive for businesses to refuse to pay the full sums they owe suppliers, since it would appear rational for a vendor to accept, say, 70 cents on the dollar rather than embark on the substantial cost of litigating over nonpayment. And yet deliberate vendor-stiffing (“selling out your good will”) remains uncommon in our system, rather than being the rule. Roger Parloff at Fortune, drawing on the work of the late contracts scholar Arthur Leff, explains why.

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