Wednesday, October 12, 2011

What is in a Name? Revised Article 9's Treatment of Individual Debtor Names

While Article 9 of the UCC is one of the most recently amended articles of the UCC having just undergone revision in 2001 (the “2001 Revision”), the complexity of the code and changing practices in commerce have necessitated further revision. The ALI and ULC have now approved amendments which the states will now adopt toward an effectiveness date of July 1, 2013 (the Revision). All is well on the adoption front, but what does this really mean on key issues? As I am teaching a Commercial Law Survey Spring 2012, I've started to think about what hurdles the the Revision will set up for our students and practicing attorneys.

One of the issues that led to the Revision was disagreement about how a creditor should best specify the name of the debtor on the financing statement, with states such as Texas passing non-uniform amendments to address the problems. See, e.g., TEX.. BUS. & COM. CODE ANN. § 9.503 (2011); TENN. CODE ANN. § 47-9-503 (2011). Section 9-503 generally provides that a financing statement is not seriously misleading if it lists the name of the debtor indicated on the public record or the debtor’s jurisdiction for organizations or simply the name of the individual debtor. The model form provided in section 9-521 added merely that this be the “exact full legal name.” While this might initially appear sufficient guidance, it became apparent that issues remained, such as the inclusion of trade names and how to identify an individual’s name where the individual is commonly known as more than one name. Creditors who incorrectly identified the debtor soon found that their financing statement was ineffective because it was seriously misleading. Quite simply, these name errors can be fatal to the creditor’s attempted filing of a security interest. See, e.g., Peoples Bank v. Bryan Bros. Cattle Co., 504 F.3d 549 (5th Cir. 2007)(Cornerstone Bank obtained a security interest in the cattle, but failed to file a financing statement in the legal name of the debtor, “Brooks L. Dickerson,” having instead named “Louie Dickerson” as the debtor on the financing statement.)

To alleviate this problem with respect to individuals, the rules of the Revision allow for two alternatives. Revision § 9-503(a)(4)-(5) (2011). Alternative “A” sets up a hierarchy for individual names which requires a creditor to use the name on the most recent driver’s license, if the debtor has one. In the event the debtor has no driver’s license, then the creditor can use the individual name or surname and first personal name. Alternative “B” allows the creditor more flexibility in listing the individual debtor’s name, allowing the creditor to identify the debtor on the financing statement by the individual name, the surname and personal name, or the name on the debtor’s most recent driver’s license. Under this alternative, no one name designation takes precedence. Comment 2(b) explains that when driver’s license is required, but contains an error, the creditor must still use the name on the license in full when it is required, despite the error. The challenge that creditors which operate in more than one state will now face with individuals is getting the rules correct such that if the state uses Alternative A, the creditor must use the driver’s license if the individual has one and should not rely on the other manners in which names might be equally acceptable in Alternative B states.

Irrespective of Alternatives A or B for individuals, the use of the most recent driver’s license in the state where the financing statement was filed does not eliminate the potential pitfalls for creditors. First, has the debtor indeed provided the most recent driver’s license, rather than a replaced or expired one? Will creditors be able to search the driver’s license records to make sure the name is the most recent? Second, the name on the driver’s license may not in fact even be the debtor’s correct name, such as errors on the driver’s records or in the case of persons who change their name for marriage or other reasons. This may lead to confusion when later creditors search records. Third, driver’s license names are changed from time to time by the individual. Tying debt records to driving status may not be the most hassle free solution for creditors. Will creditors have to inquire into the marital status of women frequently to guard against name changes that either have or have not been made in driving records? For individuals that don’t have driving records, the Revision has not really changed the rules to address nicknames and similar issues.

When it comes to individuals, it seems that Alternative A and B would pose a potential pitfall for creditors operating in more than one state, unless the creditor simply makes it a practice to use a driver’s license in all instances. The challenges of ensuring that the creditor has the debtor’s correct drivers licenses may pose problems to ensuring a valid filing. Even under Alternative B, determining the debtor’s name and surname can pose difficulties, particularly with surnames comprised of multiple names. Creditors should not attempt to automatically rely on the name on a birth certificate, as the debtor may have changed names and foreign birth certificates sometimes contain different ordering of names. Moreover, filings for unincorporated business entities that are debtors will have the same issues as those for individuals. The pitfalls for individuals is heightened here as creditors will have to get the name correct (often the driver’s license of multiple individuals). Choosing the correct name for a financing statement is not a mechanical task. See, Revision 9-503 cmt. d.

Whether the Revision will ultimately alleviate a substantial amount of litigation in this area over time is uncertain, but the new rules will help resolve some outstanding issues regarding debtor names. Despite any criticisms of the Revision regarding debtor names, the rules at least give some further guidance that should eliminate some of the litigation in this area.


Monday, October 10, 2011

Commercial Law has been nominated a top business law blog

The LexisNexis Business Law Community has nominated Commercial Law as one of its top 25 business law blogs for 2011. Commercial Law very much appreciates the nomination and hopes that its readers will post a comment in support of this honor.

Thursday, September 29, 2011

Time to Stop Using Your Debit Card Part II

In August, I wrote about the prospect of banks charging fees on debit cards that are used in non-ATM transactions (see Time to Stop Using Debit Cards). With several banks testing $3 fees, I predicted there was no way it would end at that. Bank of America has now jumped on the bandwagon announcing a $5 monthly fee beginning next year for all bank customers that use their debit card for purchases. There will be no fee for ATM use. Of course, this is in addition to any other fees already charged on the bank account. The discussion now suggests that debit card use fees are the industry "norm." Wow! Even before the banks implement these new fees, the media is reporting them as the new standard.

Way back when banks first rolled out debit cards as a replacement for the traditional ATM card, I asked to send mine back. My worry, of course, was that there would surely be fees associated with the cards. And, would I know the fee was coming before the bank charged me. Well, it has taken some time for the fees to hit directly on user accounts (rather than indirectly through interchange fees), but welcome to the new world.

NPR ran a piece this week about the ability of small banks to lure new customers as these new fees hit. See Smaller Banks Use Free Checking. My suspicion is that many bank customers will not even notice the new fees . . . at first, but will be unhappy when they find out. Others who keep lower balances at some times during the month will not notice the fees until they've overdrawn their account. Then the bank may collect a $35 additional fee if the customer is enrolled in the bank's debit card overdraft protection program.

As for me, when these fees hit, I will not use my debit card for over the counter purchases. I can write a check at the grocery store or use a credit card for gas. After all, do you really think it will stop at $5 a month?


Tuesday, September 6, 2011

Business Lawyer Seeks Additional Editors

The Business Lawyer (TBL) plans to appoint at least one additional editor beginning with Volume 67. The responsibilities of an editor will be to:

(i) edit approximately sixty manuscript pages of each of the four issues that TBL publishes in each volume;

(ii) ensure that each statement of fact has an accurate citation that supports it;

(iii) conform all citations to the Blue Book; and

(iv) make sure that manuscripts satisfy TBL Author Guidelines.

Over the course of a volume, each editor should expect to work on a combination of articles, reports, and surveys that are published in TBL.

Since Volume 64, Professor Gregory Duhl of the William Mitchell College of Law has been responsible for all style editing, cite-checking, and Blue-Booking of TBL. Professor Duhl is the current Associate Editor-in-Chief, and the editors would work in collaboration with him, the Editor-in-Chief, who rotates yearly, and the Production Manager, Diane Babal, to ensure that TBL maintains its high quality and timeliness. The editors would also work closely with the Associate Editor-in-Chief to update the TBL Author Guidelines to maintain consistency in the journal.

TBL seeks editors from all business law disciplines, who have experience editing an academic publication, a keen attention to detail, and an ability to meet deadlines. Each editor would receive an honorarium upon completion of his or her work for that issue. If interested in this position, please e-mail a resume to Diane Babal, at Any questions about the position can be addressed to Professor Duhl at


Wednesday, August 31, 2011

Chase and Wells Fargo Waiving Some Fees

In a world where bank fees are on the rise, Chase Bank and Wells Fargo are waiving overdraft, late payment and other fees for customers in states impacted by Hurricane Irene (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, Vermont and Virginia). For instance, customers who can no longer get to a Chase ATM might have to use one from another bank.

Nice customer move.


St. Thomas University Looking for Corporate/Commercial Faculty

ST. THOMAS UNIVERSITY SCHOOL OF LAW in Miami, Florida, invites applications from experienced and entry-level candidates for tenure-track positions beginning in the 2012/2013 academic year. The Law School especially seeks candidates in the areas of Wills & Trusts, Business Associations, Commercial Paper, Secured Transactions, Family Law, Constitutional Law, and Professional Responsibility. Applicants must possess a distinguished academic record, a dedication to excellence in teaching, and a demonstrated commitment to scholarship. Consistent with the Law School’s tradition of diversity, members of minority groups and women are especially encouraged to apply. Applicants should send a letter of application and a resume. CONTACT: Professor Tamara Lawson, Chair of the Faculty Recruitment Committee, St. Thomas University School of Law, 16401 NW 37th Avenue, Miami Gardens, Florida 33054. Email: Fax: (305)623-2390.

Friday, August 26, 2011

Practical Payments Tidbits

I like to give my first year contracts students a bit of practical knowledge about commercial transactions and consumer issues whenever possible. So, I've taken to putting up articles on the overhead screen at the beginning of class. Sometimes we have a little discussion, other times right onto contracts doctrine. Today, we began class with this little MSN news piece on 5 places to never use your debit card!

  • Rental or security deposits. This goes to the heart of what a debit card does, it takes money from your checking account. Using a credit card for car rental and similar transactions, these deposits are not charged so you are not out the money at the time.

  • Restaurants and bars. Just to much risk of fraud with so many people around. And, your card is likely to leave your presence leading to a greater possibility of card skimming. Again, the money comes out of your checking account, so harder to get it back in the event of theft compared to handling potential losses on credit cards. Or use cash . . .

  • Regular payments. What companies do you really want to have your financial information permanently on file with an ability to hit your checking account at will. Consumers have greater rights under the Truth in Lending Act if you use your credit card. Alternatively, pay them on an automated payment out of your checking account yourself. Of course, some businesses do demand the regular payment system and you might have to give in if it is the only way to secure a wanted service.

  • Wi-Fi hot spots. Quite simply, unsecured access to your account numbers.

  • Any retail outlet where you choose the "credit" option. This one doesn't bother me, but the article mentions the less rapid clearing and risk of overdrafts as reasons not to use the debit card.

For my part, it is always nice to see a little consumer education on a regular basis. The big reminder here is while debit cards look like credit cards, the attributes are not the same. Consumers are wise to keep this in mind.


Wednesday, August 24, 2011

What is a BitCoin? Where did Mybitcoin go?

On the way into St. Thomas University this morning, I heard an NPR piece about the Bitcoin. We live in a world where the value of money is uncertain, so some are looking for alternatives to the dollar, right? See, IMF Calls for Alternatives to the Dollar. The aim is to lessen volatility associated with the dollar as a currency and payment device, those economic and political. Some investors have rushed to gold as the easy alternative causing a rise in the value of gold, only to find that gold also has market swings tied to the dollar. See, WSJ, Gold Ends Lower on Dollar's Strength. I understand the goal. An electronic wallet, no intermediaries, completely anonymous.

So, what about the Bitcoin? A Bitcoin is simply a made up cash in an online universe. You use an online exchange in order to trade dollars for Bitcoins. Apparently, some restaurants in New York city will even accept Bitcoins in payment for lunch. Not so fast, though. "Hackers" allegedly hit MyBitcoin back in June, making off with $500,000 in funds. And now, MyBitcoin itself is processing claims to liquidate the remainder of the accounts. Apparently, that will be somewhere around 49% of their deposits. In the NPR piece, Ron Mann commented (correctly of course) that he would not expect Bitcoin to be around in 5 to 10 years. Well mostly correct, as at least mybitcoin was gone a mere months after the original interview. Perhaps others will take up the space left by mybitcoin, but how secure is any payment system?

Here is the story of one mybitcoin user who lost a substantial amount of money from his e-wallet:

As I advise my students, be wary about any new (or even existing) payment device . . . scammers . . .or anywhere you park your money for that matter. There are no quick fixes or easy roads to avoid market volatility and economic instability.


Wednesday, August 17, 2011

Time to Stop Using Debit Cards?

While my gripe about debit cards used to be the tricky overdrafts, apparently there is a new fee in town. . . . The debit card usage fee. Now that we've moved to a very cashless society, some banks are now looking to charge customers who want to use a debit card. Wells Fargo is now testing a $3 monthly debit card fee and JP Morgan has already tested the $3 fee! Ouch. Just $3 right? But overtime . . . And, we all know that $3 would just be the start. Surely, I am a cynic.

Banks argue that these new fees are in response to the Fed's cap on the fees they can charge retailers on card transactions. An Associated Press survey, though, says that 61% of consumers will find another way to pay if banks charge for using the debit card. Way to go consumers! I wonder, though, if this will turn out to be a tricky fee. For instance, do you get the monthly fee if you use your card in your own bank's ATM? In other ATMs?

At least at this point, Bank of America has not yet jumped on the debit card fee bandwagon.

Thursday, July 28, 2011

Enforcement of Intercreditor Agreements In Bankruptcy

Enforceability of pre-petition Intercreditor Agreements in bankruptcy has drawn more attention with the increase in restructurings in bankruptcy in the wake of a troubled business climate. Of course, both first priority lenders and second priority lenders both desire protection during a restructuring. Not surprisingly, many lending arrangements involving multiple lenders take into account the potential of disputes and bankruptcy. Section 510(a) of the Bankruptcy Code upholds these arrangements providing that "[a] subordination agreement is enforceable in a case under this title to the same extent that such agreement is enforceable under applicable nonbankruptcy law." When it comes to subordination agreements during bankruptcy reorganizations, though, this provision must be read alongside the power of the bankruptcy court to confirm plans under §1129, approve sales under §363(b) and the mandate that the court appoint examiners in certain cases under §1104(c). Accordingly, whether, and to what extent, an intercreditor agreement falls under the protections of 510(a) and the authority of the bankruptcy court under other provisions has been the subject of several recent cases illustrating the limits of parties’ abilities to make arrangements prior to bankruptcy.

In one recent case, the Bankruptcy Court for the Southern District of New York acknowledged that a second priority lender had standing to object to a proposed sale of assets despite the existence of an intercreditor agreement, but concluded that a secondary lender could not prevent a sale of assets that is supported by “good business reason[s].” In re Boston Generating, LLC, 440 B.R. 302 (Bankr. S.D.N.Y. 2010)(concerned a proposed sale of assets in bankruptcy of a power plant that provides electricity to the Boston, Massachusetts area to a buyer who would take the assets free and clear of creditors’ claims). See also, In re GMC, 407 B.R. 463, 498 (Bankr. S.D.N.Y. 2010)(“[t]his is hardly the first time that this Court has seen creditors risk doomsday consequences to increase their incremental recoveries, and this court – which is focused on preserving and maximizing value, allowing suppliers to survive, and helping employees keep their jobs – is not of a mind to jeopardize all of those goals.”). Ultimately, the court determined that “[t]he Debtors’ assets are simply being sold; the First Lien Lenders will receive most of the proceeds in accordance with their lien priority; and the remaining consideration will be subsequently distributed under a plan."

In another recent case, the the United States Bankruptcy Court for the District of New Jersey held that a court can irrespective of a prepetition subordination agreement confirm a nonconsensual bankruptcy reorganization plan that meets the requirements of §1129(a). In re TCI Holdings, LLC, 428 B.R. 117 (Bankr. D.N.J. 2010)(when “the requirements of section (a) and (b) of [1129] are met with respect to more than one plan, the court shall consider the preferences of creditors and equity security holders in determining which plan to confirm.”). Essentially, the bankruptcy judge acts as a tiebreaker where the parties to the dispute are unable to negotiate an agreement among the competing interests at stake.

The treatment of intercreditor agreements by courts has important implications for lenders when it comes to drafting these agreements. Basically, attorneys should be mindful that general contract principles control issues such as interpretation of agreements and waiver even in the context of bankruptcy. See, e.g., In re Erickson Ret. Cmtys., LLC, 425 B.R. 309, 316 (Bankr. N.D. Tex. 2010)(“Michigan Retirement System Entities are sophisticated commercial entities who knowingly waived all legal and statutory rights that would be in conflict with their obligation to "standstill" until the Ashburn and Concord Project Lenders' indebtedness is paid in full.”). The In re Boston Generating court’s holding that a second lien holder has standing to object to the sale of assets in bankruptcy is a reminder to counsel that if a waiver of such rights is desired, it should be expressly and clearly stated in the agreement. Notwithstanding this holding, bankruptcy courts will enforce waivers when clearly stated in the intercreditor agreement. In re Erickson Ret. Cmtys., LLC, 425 B.R. at 316.

These cases as a whole serve to remind us that these disputes during bankruptcy typically revolve around creditors seeking to enhance returns even in the face of an intercreditor agreement that states otherwise. Pre-bankruptcy lender agreements are typically designed to ensure that lenders obtain specified restructuring benefits. The cases demonstrate that despite the involvement of legal counsel, agreements between lenders are commonly ambiguous and create interpretation issues which can lead to the delay of reorganization plans of the debtor, sales of assets and other bankruptcy decisions that preserve the value of the debtor’s assets. As I remind my students often, clarity in contract language at the outset, when possible, will speed up the resolution of disputes later.


Thursday, June 30, 2011

FED Issues Final Debit Card Rules

The Dodd-Frank financial reform legislation required the Federal Reserve Board to regulate debit card merchant fees. Over the past year, the FED has taken comments, issued proposals, delayed the announcement of a final recommendation, and unsuccessfully sought to change or delay this difficult task. This week, the Board adopted a staff recommendation that is in the truest sense a compromise that like most successful compromises is unlikely to please any of the players involved. The result is also an example of administrative law making at its most creative, interpreting the statutory language to most effectively achieve Congressional intent while minimizing the economic risks that the Act's proponents likely did not understand or anticipate.

Section 920(a)(2) of the Act required the FED to limit debit card interchange -- the portion of merchant card acceptance fees that are paid to the card issuer -- to an amount that "shall be reasonable and proportional to the cost incurred by the issuer with respect to the transaction."

A fee meeting this standard, the Act asserted, should include "the incremental cost incurred by an issuer for the role of the issuer in the authorization, clearance, or settlement of a particular electronic debit transaction," but should not include "other costs incurred by any issuer which are not specific to a particular electronic debit transaction."

Early on the FED staff concluded that it should set the fee based on costs for a representative issuer and transaction. Basing fees on the actual costs of particular issuers would impose undue compliance burdens. The Board decided to set a fee cap based on the average per-transaction cost, excluding fraud losses, of the issuer at the 80th percentile based on a survey of the large banks covered by the statute. Each issuer would be permitted to receive interchange fees not exceeding the cap without demonstrating its actual per transaction costs.

Initially, the staff read the statute to permit the Board to take account only of variable per transaction costs. That led to the initially proposed fee cap of $.12 per transaction. Issuers objected that fees at that level would not come close to covering their actual costs of operating a debit card system. The staff responded to those concerns by creatively reinterpreting the statute to include a third type of cost that was neither an "incremental cost" of a debit transaction, nor a cost of the system that was "not specific to a particular transaction." This third type of cost, the staff reasoned, consisted of fixed costs of a debit program that are nonetheless specific to particular transactions. And since the statute did not explicitly require or prohibit including these costs in the regulated fee, the Board could exercise its discretion.

The staff concluded that prohibited costs of a debit system included corporate overhead (e.g., executive compensation, human resources, the issuer's branch network); establishing account relationships; general debit program costs (e.g., production and delivery); marketing; research and development; and network membership fees. Conversely, non-incremental costs that are specific to particular debit transactions -- and that could thus be included in the regulated fee at the Board's discretion -- included (1) network connectivity; (2) software and hardware for processing transactions; (3) operational labor; (4) network processing fees; (5) transaction monitoring costs; (6) reward programs; (7) handling cardholder inquires; and (8) non-sufficient funds handling.

Ultimately, the FED adopted a regulation including the first five of these costs, but not the last three, resulting in a cap of $.24 per transaction. In addition, the FED determined that transaction monitoring as a means of fraud protection also fell within the discretionary category of fixed costs attributable to specific transactions. Because losses vary with the size of the transaction, the regulation permits a fee of up to 5 basis points on top of the $.24 flat fee per transaction.

Finally with respect to fees, the legislation permitted an adjustment for investments in fraud prevention, and the Board included a 1 cent per transaction bonus for issuers that meet the FED's standards to help offset the costs of implementing activities that are effective at reducing fraud looses.

The legislation also required the FED to adopt regulations prohibiting network exclusivity so that merchants had choices with respect to the network on which to process a transaction. The FED required that each card provide access to at least two unaffiliated networks, but it did not require that each card link to multiple networks for both PIN and signature access.

The FED also excluded from the regulation three-party networks that did not have separate entities issuing cards and signing up merchants. American Express, for example, is not covered by the fee limit.

The fee regulation provisions are to go into effect on October 1, 2011, followed by the network exclusivity rules on April 1, 2012. You can read the Board's full report on the regulations here.

Tuesday, June 28, 2011

Are Larger Down Payment Requirements for Homes Needed?

This week's news reported another 4% drop in home prices in 20 U.S. cities from the prior year (See Bloomberg). With prices lower than we've seen in some time, shouldn't that necessarily translate into home purchases? Not necessarily so. Of course, even if homes are less expensive, one's ability to buy is not just tied to a credit score. It is tied to cash. Right now, cash buyers are the kings in the weak housing market (See USA Today). These cash buyers are primarily investors who account for about 30% of home purchases in the current market.

So, what is happening to the regular people? Well, credit is still tight. According to the Center of Responsible Lending, high down-payment requirements (20% generally) is enough to keep many who might be good bets on home mortgage repayment from buying a home. First time home buyers and minority home-buyers could be hardest hit At the root of some concern about down payment requirements are portions of D0dd-Frank that require lenders to retain a portion of mortgages they sell, but Qualified Residential Mortgages (QRM) are exempt from this rule. To the extent Congress sets the QRM at 20% down payment for residential mortgages, this rate would be expected to have an impact on how the market views risk on residential mortgages (See, Wall Street Journal). This could in turn affect what mortgages are available to home buyers and the cost of those mortgages.

Currently, the regulators have extended the comment period on QRMs until August 1, 2011 (See Federal Reserve). So, if you have an opinion . . .


Friday, June 24, 2011

Richard Nash Delivers Plenary Address

"Books are social glue."

Today's CALI Conference day began with Richard Nash delivering the Plenary address to the conference participants. For those not familiar with him, Nash is a publisher, having sold the successful Softskull Press to Counterpoint and since then beginning Cursor which promises to help independent publishers. Nash's view of the future of publishing involves a look to the past and the history of the development of printing.

Nash is dedicated to bring printing and publishing to all writers so that they can, in turn, connect with readers. More writers more readers, more readers more writers. . . . Basically, there should be wide access to publishing resources. Nash believes that we've arrived at a time when supply of writing is available widely. The next hurdle will be tackling issues surrounding matching the writings with those who need them. Classic demand issues in the marketplace. Accordingly, the way in which we connect people through the web and otherwise leads to a developing preeminence of readers.

Nash's theory is dependent on recongition that more than content, culture matters. Now that individuals can self publish and distribute materials on the internet through unlimited means of sharing, the emphasis for publishers should be on the connections. The gatekeeping power of publishers controlling the content that arrives at the marketplace is diminished. Material will arrive at the market. The question is how will we find it?

Interesting thoughts on the future of publishing. Surely, it is equally applicable to legal education where, for instance, CALI has Legal Education Commons where faculty can post all types of various educational materials in differing presentations and new E-Langdell e-text project which aims to make a limited number of law textbooks available to students for free. Access is surely present. Nash commented that textbooks help students harness information in a tangible format between class sessions when they need to engage in independent learning. The big question is how that format will change now that alternative materials are available in a widespread manner. The most important facet is simply that they read, not the format.

Nash recommends for summer reading . . . Lynne Tilman's Someday This Will Be Funny. Enjoy.


Thursday, June 23, 2011

CALI Conference in Milwaukee

For the next couple of days I am at the CALI Conference in Milwaukee. The theme of the conference is "Unbound," focusing on e-books, social media and electronic resources. I will be presenting tomorrow on Cali's E-Langdell program that is starting to make available electronic casebooks to law students that are free and available in a number of formats.

The first session is a mini-session with a group of speakers highlighting for 5-10 minutes the presentation they will make later. While many of us use social media in both personal and professional capacities, a session I will attend later was Rich Cure's pitch for student's use of social media to enrich their own learning when the classroom component fails to deliver or needs supplementation.

More later for sure. Hopefully, our students are using Facebook, Twitter and Youtube to enrich their commercial law studies, but I wonder . . .


Tuesday, June 21, 2011

New Twists on the Economic Loss Rule?

What most of us remember: Section 1-103(b) of the Uniform Commercial Code embraces liberal supplementation of the Code by directing that “[u]nless displaced by the particular provisions of this Act, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, Bankruptcy, or other validating or invalidating cause shall supplement its provisions.” What sometimes gets tricky is reading this premise of liberal supplementation alongside Article 2’s remedy provisions and the common law’s economic loss rule which precludes a plaintiff from recovering in tort, for purely economic losses. Even Section 2-721’s directives regarding fraud in the sales of goods that provides that remedies for fraud or misrepresentation under Article 2 include remedies for sales of goods that do not involve fraud is read to constrain non-breaching parties to contract remedies under Article 2 in most cases.

An interesting issue that courts are taking a closer look at is whether plaintiffs can bring client claims for tort damages is whether a second product commonly attached to another to make a whole product constitutes one product in terms of damages for purposes of the economic loss rule. In a decision that appears to expand the economic loss rule, the court in OneBeacon Ins. Co. v. Deere & Co., 2011 U.S. Dist. LEXIS 25156 (E.D. Mo. Mar. 11, 2011) considered the case of a combine that suddenly caught fire and destroyed the combine and damaged an attached cornhead. While the two formed an integrated harvesting unit, the plaintiff purchased the Deere & Co. combine and cornhead on separate occasions secondhand from a reseller with no warranty furnished by Deere & Co. The court reasoned that if the part of the whole could be considered part of the product, then the economic loss doctrine would bar the tort action. If the part of the whole was a separate product, then damage to the part would be “additional damage” and the economic loss doctrine would not apply. The court, examined the relationship of the combine and cornhead under three prevailing tests that look to whether the product is “integrated;” whether a commercial purchaser could foresee the risk of harm at the time of purchase; and whether the object of the bargain was for separate products. Ultimately, with electing any of the three tests, the court determined that because the cornhead could only be used with the Deere & Co. combine, the cornhead was not separate property and the economic loss rule precluded the tort claims.

Moreover, the plaintiff, as a secondhand purchaser of used equipment from another seller, did not have a warranty claim against Deere &Co., the manufacturer in tort. In concluding that the economic loss doctrine applies to secondhand purchasers, the court explained, “[p]laintiff’s reasoning- that the economic loss doctrine should not apply to secondhand purchasers because they cannot negotiate with the manufacturer- would apparently give secondhand purchasers a better warranty and more remedies than the party who originally purchased the equipment new. That cannot be the law.” Id.

The scope of the economic loss rule has important implications for buyers and sellers of goods. The traditional scope of cases governed by the economic loss rule to preclude recovery of tort damages would be those which are (1) governed by UCC Article two, and (2) where the only property damage (if any) is to the product that was purchased itself. But see, Lott v. Swift Transportation Co. Inc., F.Supp.2d 923, 931 (W.D. Tenn. 2010)(court declined to extend the economic loss doctrine, to cases “not involving UCC remedies, especially those concerning the provision of services”). In cases such as Tennis, the court did not apply the rule to damage to the property stored in the nearby warehouse that the vehicle fire destroyed. Yet, other courts such as Deere & Co. have expanded the doctrine when property might be seen as one product. Importantly, the Deere & Co. court observed that some courts have opened the door to allow for possible expansion of the doctrine even to “other nearby property of commercial purchasers who could foresee such risks at the time of purchase.” Deere & Co., supra, at *10 (emphasis supplied). See also, Travelers Indem. Co. v. Dammann & Co., Inc., 594 F.3d 238, 243-44 (3rd Cir. 2010)(tort claims barred “where a plaintiff could have contractually allocated the risk”). This is a potentially significant expansion of the doctrine, because it allows the economic loss doctrine to bar tort recovery even where there is additional harm or damage to other property, other than the product at issue in the lawsuit. As a result, this potential expansion of the doctrines’ application has important implications in the future of the doctrine and the sale of goods as a whole.


Wednesday, June 15, 2011

Consumer Financial Protection Bureau on the Move

The new Consumer Financial Protection Bureau (CFPB) has a website now that is running with the logo "Know Before You Owe" prominently displayed. Elizabeth Warren, Special Advisor to the Secretary of the Treasury for the Consumer Financial Protection Bureau, has a short video that doesn't speak directly to any particular changes the CFPB will make, but assures all that they are at work and listening to consumer responses.

Also on the website is Elizabeth Warren's testimony from May 24th before The Subcommittee on TARP, Financial Services, and Bailouts of Public and Private Programs Committee on Oversight and Government Reform in order to determine the accountability and oversight for the agency. You may remember the news about this hearing where Representative Patrick McHenry of North Carolina, accused Warren of lying during her March testimony, where Warren had previously appeared to answer questions concerning the CFPA and its function and power structure (See Decorum Breaks Down at House Hearing, New York Times).

Of course, both the CFPB and Warren herself have faced strong opposition from Republican lawmakers. It seems that this time around, the advances in consumer protections were not secured by simply passing the Consumer Financial Protection Act. Appropriations and confirming an official head of the CFPB remain open issues while the CFPB continues its organization. On the consumer front, I am pleased to note that the new website contains a number of consumer oriented videos and outreach to the banking community. Being a big fan of the power of information, it is a good sign that the CFPB has taken their first steps in reaching consumers in the electronic mediums. Oh, and you can even share the videos on Facebook or Twitter, for all you consumer rights junkies . . .


Tuesday, June 14, 2011

Debt Collectors Go on the Offensive

The New York Times this weekend ran a piece that caught my eye, "Debt Collectors Ask to Be Paid a Little Respect." While the article first laments the rise in business that our struggling economy has brought them and the often rude response debt collectors get from consumers, the debt collectors seem to be on the offensive legally. Like the banking industry, the article notes the concern the debt collectors have about coming under the auspices of the Consumer Financial Protection Bureau (CFPB). After all, the Federal Trade Commission did not concern the debt collectors as the FTC did not have regulatory authority. The CFPB would, though, be able to write regulations to police the industry.

So, the debt collectors want some updating of their own to the Fair Debt Collection Practices Act. After all, why not? Who says consumer protection has to be just for consumers? The debt collectors are asking for access to consumers emails, cell phones and to use auto-dialers. After all, don't consumer's prefer this? My word, don't we all get enough robo-calls already on our cell phones? A robo-call system would seem to violate Section 806(5)'s prohibition on causing a telephone to ring repeatedly in any event. With the coming political season, though, perhaps the debt collectors are right that we all better get used to robo-messages on our cell phones anyways.

ACA International, the trade union for collection agencies, posted a Blueprint for Modernizing Debt Collection on its website. The Blueprint does advocate that debt collectors be permitted to call consumer cell phones (despite the additional charges imposed by some carriers), text and email consumers and even leave pre-recorded messages on cell phones. The Blueprint expressly advocates that debt collectors be permitted to communicate by any method of communication available. How about a consumer's facebook page? Linked-In? What about email accounts that are accessible by a consumer's employer? Of course, there is more there in the Blueprint that troubles me, but this area is full of difficulty for protecting consumers.

Surely, I am skeptical about allowing debt collectors unfettered access to the digital mediums available for use by consumers. The risk and cost to consumers would surely increase, with little exposure to debt collectors who violate the law (currently up to $1000 in most cases). While I am sure that the debt collectors that the New York Times spoke with are genuinely the nicest of people, I had the experience last year of having one of the not so nice debt collectors call me erroneously about a medical bill that had long been paid. Of course, the hospital apologized for the mistake, and wasn't sure how the information even was referred to debt collector. Of course, the lack of documentation that persists the industry at present becomes the first issue to tackle before erroneous robo calls and auto-mated emails flood our accounts. Can I opt-out?


Thursday, June 2, 2011

Call for Papers: Fringe Economy

Call for Papers

Regulation in the Fringe Economy

The symposium Regulation in the Fringe Economy represents the most significant attempt to date by legal scholars to address the vexing legal and social issues created by lenders on the fringes of the economy who offer payday, auto title, for-profit college, and refund anticipation loans. A complete list of confirmed participants and their paper topics is available at the conference website:

The Frances Lewis Law Center and the Washington and Lee Law Review are delighted to sponsor this conference which will take place on November 11, 2011 at the Washington and Lee University School of Law in Lexington, Virginia. The Washington and Lee Law Review will publish a symposium issue featuring the conference papers in 2012.

The sponsors’ goal is to encourage and recognize excellent legal scholarship in this area. To advance their goal, the sponsors invite lawyers, judges, and scholars to submit papers on regulation in the fringe economy. Papers on related high-risk consumer financial products are also encouraged. An author should submit his or her manuscript in an exclusive submission on or before August 15, 2011. A submission should be no longer than 50 pages or 15,000 words. A limited number of submissions will be accepted. Authors will be notified of the acceptance of their paper and participation in the symposium no later than August 20, 2011.

Selected authors will present their papers at the November 11 conference. All participants are asked to provide their own travel expenses. Papers specifying the conference may be mailed to the Washington and Lee Law Review or sent electronically to The Law Review Articles Editors and Washington and Lee University School of Law Professor Margaret Howard will review the papers.

Even if you are not able to submit a paper, the sponsors invite you to attend the conference. There will be no charge for attending. The Frances Lewis Law Center is a licensed Virginia Continuing Legal Education provider which will supply Virginia CLE credit for those attending.

Mallory A. Sullivan
Symposium Editor, Washington and Lee Law Review

Christine M. Shepard
Editor in Chief, Washington and Lee Law Review


Tuesday, May 31, 2011

A Car Repossession Gone Awry: A Lender's Good Faith Obligation

In Engram v. Jpmorgan Chase Bank, 2010 Ariz. App. Unpub. LEXIS 885 (Ariz. Ct. App. 2010), the Arizona Court of Appeals considered a summary judgment granted in favor of the lender by the trial court. The Engrams borrowed $10,977 from the lender for the purchase of car. The security agreement provided for events of default including failure to pay and insecurity of the lender. Upon default the lender could repossess the automobile. The Emgrams were often late in paying the lender and eventually were some $908 in arrears and facing repossession. The lender told the Emgrams that they could avoid repossession if they brought the account current. Emgram went to the local branch and paid the amount owing and asked the tellers to confirm with the main office that the account was in order. The lender assured them it was. Nevertheless, the lender repossessed the car that evening. The lender’s collection department did not learn that the account had been brought current until the next day. The lender then called to check whether the insurance was current on the car, only to find the insurer cancelled for nonpayment. The lender did not have a practice of checking insurance unless they repossessed a car and the borrower wanted to redeem it. The lender sold the car and claimed a deficiency judgment, which the lower court granted.

Reversing the decision of the trial court, the court of appeals held that summary judgment was inappropriate as there were genuine issues of material fact as to whether Chase reasonably believed itself insecure. The court noted that the lender could only accelerate and repossess the car based on an insecurity in good faith (citing UCC 1-309) that future payments were impaired. Moreover, the lender did not discover the problems with the insurance until after it repossessed the car. Without deciding the issue, the court noted other jurisdictions are conflicted over whether lenders must exercise good faith after an event of default. Ultimately the court found that there was “evidence on which a jury could conclude that Chase three times assured Ms. Engram that if she and her husband brought the loan current, the bank would not repossess their car.” For those reasons, a jury could find the lender either estopped from repossession or had waived its right to do so for any events other than the failure to pay the outstanding arrears.


Tuesday, March 29, 2011

Final Rules Amending TILA and Consumer Leasing Act

The Federal Reserve just adopted final rules pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). The rules increase the protections of the Truth in Lending Act (TILA) by extending TILA protections from transactions under $25,000 to those under $50,000. The $50,000 threshold will now fluctuate with the consumer price index, rather than remain static.
The rules also increase disclosure required by lessors of large consumer goods, such as cars, from $25,000 to $50,000. The required disclosures for leases more than four months include information to consumers about the cost of leases.

These rules are effective July 21, 2011.


Saturday, February 19, 2011

Does Unconscionability Theory Lead to Greater Economic Problems?

Today is the second day of the International Contracts Conference hosted this year by Stetson University College of Law. Professor Xi George Zhou of the University of Sheffield presented his paper, An Economic Perspective on Legal Remedies for Unconscionable Contracts, where he argues that there are disincentives to trade created by unconscionability doctrine, precaution problems and potential abuse of rights. His paper asks whether a higher deterrence model leads to greater economic problems. He proposes that creating an effective remedy for unconscionable behavior may require a legal remedy that is lower, as a high sanction may result in less economic transactions due to precautions employed by traders. Thus, it is impossible to eliminate bad behavior through deterrence alone. In order to use any legal mechanism we need to focus on the effectiveness of the tactic. There are risks to all deterrence models.

Professor Zhou also presented a call for papers for the Society of Legal Scholars Conference September 5-8. This year's topic is Law in Politics, Politics in Law. All papers on any aspect of contract, commercial and consumer law are welcome, whether on topic or not. Paper proposals are due by March 4, 2011 to Professor Zhou at


Friday, February 18, 2011

Card Networks Attempting to Block Debit Card Merchant Fee Regulation

In a surprise late addition to the financial reform legislation, Congress required the Federal Reserve to regulate the fees that merchants pay to accept debit cards. The statute requires the regulated rate to include only per transaction costs and certain anti-fraud expenses. In December, the FED put out for comment a proposed rate of 12 cents per transaction, nearly 75% below the current average fee of 44 cents. Current rates are based on a percentage of the sale price.

Merchants were pleased with the FED's proposal. Banks were not, claiming that a fee that low would force them to lose money on debit card programs unless they charged their own customers. (Imagine that.) One bank has filed a constitutional challenge to the legislation, arguing that it constitutes a taking of bank property without just compensation and violates the equal protection clause because only the largest banks will have their rates regulated. The period for comment ends next Tuesday, February 22, and the FED must promulgate a final rate by April 21.

In recent testimony before the House Financial Services Committee, FED Governor Sarah Bloom Raskin explained that board members were "reserving judgment on the final rule" until they can consider all of the comments. Some lawmakers have expressed concern the FED has not adequately considered the cost of fraud prevention. Visa has ramped up a vigorous lobbying campaign, urging Congress to enact new legislation delaying the implementation of the regulation. Observers believe that changes at this point are unlikely. Representative Barney Frank, however, told the press that while he would not support the delay that Visa has requested, he would support instructing the FED to include more factors in the fee calculation.

Wednesday, February 16, 2011

2011 Sales Survey

I just put the draft of the Sales Survey up on SSRN. It will appear in the Business Lawyer in August or September, but there are some really great cases this year. Yes, some really good examination ideas as well!


Suffolk Law Visiting Position

Suffolk University School of Law is seeking potential visiting professors (assistant, associate, or full) to teach a 6 credit-hour Contracts course beginning Fall 2011. Candidates should have significant teaching experience and strong student evaluations. Suffolk University is conveniently located in the center of Boston. If anyone is interested, please feel free to contact Elizabeth Trujillo, Associate Professor, Suffolk University Law School, 120 Tremont Street, Boston, MA 02108-4977 Tel: 617-305-1672;


Tuesday, February 15, 2011

Specific Performance, Parol Evidence and the Naughty Monkey

Here is a great case about specific performance, parol evidence and a yacht named the "Naughty Monkey!"

U.C.C. section 2-716 provides a more liberal attitude toward the remedy of specific performance of contracts for the sale of goods than the common law traditionally does, and a concomitant broader view about when the goods are unique. In Naughty Monkey LLC v. Marinemax Northeast LLC, No. C.A. 5095-VCN, 2010 WL 5545409 (Del. Ch. Dec. 23, 2010, the court considered a request for specific performance based on language in a yacht sales contract providing “TRADE VALUE GUARANTEED TO 15% LOSS WITHIN 18 MONTHS (PER ANDREW SCHNEIDER) SUBJ. TO MARINE SURVEY AND FINANCING” (the “Buyer Protection Clause”). Michael Stock (“Stock”) contacted Marinemax Northeast LLC (“Marinemax”) about the purchase of a new boat after seeing their boats at the National Harbor Boat Show. Eventually, Stock purchased a 62-foot Azimut yacht, which he named the Naughty Monkey, for $1,825,000 through an entity he named the Naughty Monkey LLC (“Naughty Monkey”). Concerned about losses on a yacht of this price, Stock negotiated some down side price protection in the form of the Buyer Protection Clause. About a year later, Stock decided that he did not want the Naughty Monkey and proposed that he trade the boat back to Marinemax for a boat for $2900 and Marinemax would make a cash payment to him for $1,633.350, the difference under the contract. Marinemax refused this request, taking the position that the agreement only allowed Stock to trade the Naughty Monkey in toward the purchase of a more expensive yacht. Stock brought suit for specific performance on the contract, as well as damages related to financing, insurance and maintenance costs for the yacht.

The first issue the court considered was the meaning of the Buyer Protection Clause. Without any reference to section 2-202, the court instead initially referenced certain traditional notions of interpretation, namely to “effect to the clear terms of agreements, regardless of the intent of the parties at the time of contract formation” and to use the “customary, ordinary and accepted meaning of the language.” Nevertheless, the court considered extrinsic evidence to select a meaning of the Buyer Protection Clause that neither party argued: that Stock could trade in the Naughty Monkey to Marinemax, but not for cash, toward the purchase of any merchandise, not only boats of higher value.

Turning to the issue of specific performance under section 2-716, the court ruled that a “remedy at law would do complete injustice in this case.” The court observed that having Marinemax pay monetary damages would inevitably deprive it of the benefit of the bargain which would permit it to sell Stock another yacht at retail cost which it only paid wholesale. Similarly, if the court were to give Stock monetary relief then he would get a liquid asset, which is more than he would have received under the agreement. Accordingly, specific performance, was the appropriate remedy.


Thursday, February 10, 2011

Good Faith in the Termination of Sales Contracts

Courts in several cases addressed claims for breach of contract based on a party’s failure to act in good faith. So, what does good faith require under UCC section 1-304? In the following case, the court did a nice job of tying an arbitration panel's implication of a reasonability requirement in the application of a termination provision in an agreement with the obligation of good faith.

In Burton Corp. v. Shanghai Viquest Precesion Industries Co., Ltd., No. 10 Civ. 3163(DLC), 2010 WL 3024319 (S.D.N.Y. August 03, 2010), the court affirmed an arbitration award in favor of Shanghai Viquest Precesion Industries Co., Ltd. (“Viquest”) to recover for unpaid shipments of snowboard bindings made to Burton Corp. (“Burton”) for use in its snowboards and for wrongful termination of the sales agreement. The agreement permitted Burton to terminate if Viquest’s “financial position pose[d] a risk to Burton's business.” Additionally, the agreement provided that Viquest would, upon request, return Burton’s molds upon termination for any reason. During the term of the agreement and while Burton owed Viquest $1.8 million for unpaid shipments, Burton terminated, claiming financial concerns, and requested return of the molds.

When Viquest did not return the molds, Burton had to replace the molds and filed an arbitration to recover its cost of replacement as the agreement provided for arbitration of disputes. Viquest counterclaimed for its lost profits due to the early termination. The arbitration panel concluded that Burton could only terminate under the financial clause if it reasonably believed that Viquest’s financial position threatened its prospects, which Burton did not prove. Accordingly, the arbitration panel awarded Viquest its lost profits for the early termination and denied Burton’s request for the cost of replacing the molds as Burton was not itself in conformance with the agreement and owed Viquest substantial sums.

The District Court for the Southern District of New York denied Burton’s request to vacate the arbitration award against it, confirming the award in full. The court treated the reasonableness as derived from the covenant of good faith and fair dealing, citing to the U.C.C. section 1-304 obligation of good faith contained in every contract. The court observed that the obligation of good faith required Burton to have a reasonable basis for terminating the agreement. Moreover, Burton’s failure to pay Viquest for outstanding invoices put pressure on Viquest’s financial condition.


Wednesday, February 9, 2011

The Predominant Purpose Test Still Predominates Mixed Goods/Services Transactions

Here is another little bit from the upcoming Sales Survey in the business lawyer. Here are a couple of nice examples of recent mixed-goods/services transactions under UCC section 2-102. Use of the predominates test has been pretty consistent in cases I've seen of late.

In Blesi-Evans Co. v. Western Mechanical Service, Inc., 72 U.C.C. Rep. Serv. 2d (Callaghan) 115 (W.D.S.D. 2010), the court examined whether a contract for a boiler purchased for installation at the South Dakota School of Mines and Technology (SDSM&T) campus was one for the sale of goods. Western Mechanical Service (Western) had a contract for the replacement of the SDSM&T boiler that required it to pay $500 per day in liquidated damages if the installation was not substantially complete by October 13, 2006. Western ordered the boiler from Blesi-Evans (Blesi), which agreed to also provide start up and training for the boiler. When Blesi failed to deliver the boiler in time to meet the SDSM&T contract, Western installed a temporary boiler. Blesi brought suit for its contract price on the boiler and Western claimed the expense of the temporary boiler. The court correctly ruled that Article 2 governs transactions where goods and services are bundled if the “predominant purpose” of the contract was for the sale of goods and the services are merely incidental. The court noted that Blesi was to provide a boiler, something clearly movable. The court noted that some of the purchase documents failed even to mention the related services and the dispute that actually arose was one related to the provision of the good in a timely manner, not the services.

Similarly in Connie Beale, Inc. v. Plimpton, 2010 WL 398903 (Conn.Super. January 13, 2010), the court considered a claim for breach of an interior decorating contract. Applying the predominant purpose test, the court found a contract for interior design is predominantly one for services, even though the designer would present furniture, upholstery, window coverings, fabrics and flooring to the buyer for consideration. The court noted that “[a] transaction that requires the incorporation of materials does not make it an agreement for a sale . . . .” Moreover, the parties did not label the contract a sale of furnishings, even though decorating services would surely include some goods.

- jsm

Tuesday, February 8, 2011

2-204 Still Requires Contract Basics

It is the time of the year when I am working on the ABA's Sales Survey of Article 2 cases from 2010. So, I'll pass along a few nice ones here. Perhaps some of these will make good examination questions or just good basics. And the lesson of today's 2010 case, yes, an Article 2 contract still requires a basic agreement at least some definite terms.

While much litigation and scholarly attention surrounding contract formation under Article 2 centers on section 2 207, the decision in Teter v. Glass Onion, Inc., 723 F.Supp.2d 1138 (W.D. Mo. 2010) turned on the application of section 2 204. Gary Teter (“Teter”), an artist who paints historic scenes, met with the owners of the Glass Onion, Inc. (“Glass Onion”), the purchaser of a gallery with which Teter had done business in the past to discuss the continuation of the business relationship with the gallery under Glass Onion’s ownership. Thereafter, the parties had several sales transactions for original paintings by Teter where Glass Onion purchased the paintings and posted an image on its website. After some period of time, however, Teter’s agent advised that to continue the relationship, Glass Onion would need to execute a Dealership Agreement.
When Glass Onion did not become an authorized dealer, Teter’s agent requested that Glass Onion remove images from its web site and advertising. When Glass Onion did not remove the images, Teter brought suit against Glass Onion on various claims related to Glass Onion’s use of Teter’s works in its advertising. Glass Onion brought counterclaims on the grounds that Teter breached a contract to sell art to Glass Onion and provide it a geographic exclusivity. The court granted Teter’s motion for summary judgment on Glass Onion’s counterclaims. The court noted that while section 2-204 permits the making of a contract based on conduct of the parties, the basic elements of an agreement must still be present. While the eight purchases of artwork constituted contracts, the alleged ongoing agreement to sell artwork to Glass Onion for resale on the same terms as the predecessor owner of the gallery was too indefinite and lacked consideration to constitute a contract under section 2-204. Accordingly, Teter was under no firm obligation with Glass Onion or the previous gallery owner to continue selling artwork and could stop selling or refuse to sell paintings to the gallery without recourse.
For similar lines of reasoning, see Key Items, Inc. v. Ultima Diamonds, Inc., No. 09 Civ. 3729(HBP), 2010 WL 3291582 (S.D.N.Y. August 17, 2010) (companies related to buyer were not responsible on unpaid contract to which they were not a party); Harman Invs., Ltd. v. Shah Safari, Inc., No. C10-0216RSL, 2010 WL 3522517 (W.D. Wash. September 07, 2010)(financier was not party to contract for purchase of goods and not liable for non-payment thereon).


Friday, January 28, 2011

St. Thomas University Looking for Business Associations Faculty

A plug for my school. We are still looking for a new or lateral Business Associations faculty for next year. With Florida now also testing UCC Articles 3 and 9, I suspect there is more room for commercial law as well as traditional corporate subjects. Here is the ad from Fall. We've filled some slots, but are still looking in the business arena. If you are looking or would like to recommend anyone, please contact me directly at or hiring chair Tamara Lawson, below.

ST. THOMAS UNIVERSITY SCHOOL OF LAW in Miami, Florida, invites applications from experienced and entry-level candidates for tenure-track positions beginning in the 2011/2012 academic year. The Law School especially seeks candidates in the areas of Business Associations, Wills and Trusts, Constitutional Law, Securities Regulations, Property and Civil Procedure. Applicants must possess a distinguished academic record, a dedication to excellence in teaching, and a demonstrated commitment to scholarship. Consistent with the Law School’s tradition of diversity, members of minority groups and women are especially encouraged to apply. Applicants should send a letter of application and a resume. CONTACT: Professor Tamara Lawson, Chair of the Faculty Recruitment Committee, St. Thomas University School of Law, 16401 NW 37th Avenue, Miami Gardens, Florida 33054. E-MAIL: FAX: (305) 623-2390.


Thursday, January 13, 2011

Opportunity for Publishing for Commercial Law Profs

For those who didn't attend the Annual Conference in San Francisco or visit the CALI booth or simply haven't heard . . . CALI is also sponsoring fellowships in a program called ELangdell whereby professors submit proposals to CALI for law school text books and supplements and, if accepted, CALI publish the work as a digital e-book in multiple formats. CALI pays $500 per chapter to authors, but gives the books away for free to students. This is a great resource for students and professors in a time where book costs are very high and resources slim. CALI is hoping to both have a nice library of free books itself and, perhaps, to put market pressure on the main publishers regarding their pricing of e-books. Several books are in progress and the beta versions of Doug McFarland’s Civil Procedure text (6th edition) and a chapter on Ethics for Tax lawyers are already available. Other proposed texts are in process.

If you are interested in putting in a proposal for something in the Commercial Law area, contact Deb Quentel at CALI at The next round of proposals are due by February 2, 2011.


Wednesday, January 12, 2011

Arbitration by Door Posting?

Dan Barnhizer (Michigan State) posted yesterday on the Contracts list serve this photo sent to him from a student that saw it at a Whataburger. The text reads:

"Arbitration Notice"
"By entering these premises, you hereby agree to resolve any and all disputes or claims of any kind whatsoever, which arise from the products, services or premises, by way of binding arbitration, not litigation. No suit or action may be filed in any state or federal court. Any arbitration shall be governed by the FEDERAL ARBITRATION ACT, and administered by the American Mediation Association.
"Arbitration Notice"

Naturally, this raises many questions about consent to abitration, class action arbitrations and rules that might even apply to any such disputes. And, of course, Barnhizer asked "what they do for drive-through customers?"

AALS Section on Financial Institutions and Consumer Financial Services

The section program at the Annual Meeting of the Association of American Law Schools in San Francisco on January 7 this year focused on the "post-crisis" landscape. The Call for Papers panel featured papers by William Birdthistle, Jim Hawkins, Adam Levitin, Alan White and Sarah Woo.

One of my favorites on this panel was James Hawkins' (University of Houston) paper on Regulating the Fringe: Reexamining the Link Between Fringe Banking and Financial Distress forthcoming in the Indiana Law Review. Basically Jim argues that products like payday loans, pawn loans, and rent-to-own leases— might not cause as much financial distress to consumers because of the finality involved in these transactions and the amount. As such, perhaps we might reconsider whether regulators should lump these types of transactions with others. At the heart of this is what constitutes financial distress. While I am not a fan of the fringe banking products, Jim's argument that they might require differing treatment in terms of regulation is worth serious consideration. For my part, I part with him in some of the ideas regarding monetary valuation. I remain unconvinced that one person's financial distress is the same as another's due to relative economic means as a whole. For instance, a person of very limited means may experience serious financial distress when their $750 auto is repossessed and they cannot get to work, then loose their employment, etc. While the event of losing the car may have a finality in and of itself that does not continue to plague the consumer, even smaller dollar transactions can have great impact on the lives of many consumers. That aside, the finality of the transaction is worth further thought when considering regulation of fringe banking products, as is the differing impact of the size of these transactions.