Steven Feldman Reviews Boilerplate
For those of you who cannot get enough input on Margaret Jane Radin‘s Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law, we have yet another review. This one is from friend of the blog Steven Feldman. Links to other contributions from our online symposium on the book can be found here.
Radin: Precedent exists for the creation of new torts bycommon law courts, such as the torts involving invasion of privacy. (Radin, p. 198).
Response: Radin is correct thatthe torts involving invasion of privacy were judicially created. What Radinomits is that although some courts claim the common law authority to create newtorts, they characteristically “tread cautiously”in this area, Rees v. Smith, 301S.W.3d 467, 471 (Ark. 2009), as they balance numerous legal and substantiveconsiderations, Burns v. Neiman Marcus Group, Inc., 93 Cal. Rptr. 3d 130, 136 (Cal. Dist. App. 2009)(listingconsiderations). Thus, for example, courts considering a new tort must balancethe need to meetsociety’s changing needs against the prospect of boundless claims in an alreadycrowded judicial system. Rees, 301 S.W.3d at 471. In another policy, courts “[w]ill decline to recognize a new cause of action if there aresufficient other avenues, short of creating a new cause of action, that serveto remedy the situation for a plaintiff.” Id.
Radin fails to point out that the usualoutcome is “countless refusals” by judges to create new torts. Anita Bernstein, How To Make A New Tort: ThreeParadoxes, 75 Tex. L. Rev. 1539, 1546 n.38 (1997)(citing decisions). Indeed, some courts decline altogether tocreate new actions in tort. Their rationale isthat legislatures have better institutional capability to balance the competingpublic policy considerations attendant with new forms of liability. Murphy v. American Home Products Corp., 448 N.E.2d 86, 89-90 (N.Y. 1983); AccentStore Design, Inc. v. Marathon House, Inc., 674 A.2d 1223, 1226(R.I. 1996)(“We have long held … that the creation of new causes ofaction is a legislative function.”). Radin does not mention this split of authorityand does not make a convincing case that existing contract remedies, such ascontract invalidation based on unconscionability, are inadequate to addressmeritorious consumer claims.
Estimatesare that ninety-nine percent of all contracts are standard form adhesion contracts. Wayne R. Barnes, Toward A Fairer Model of Consumer Consent To Standard Form Contracts:In Defense Of Restatement Section 211(3), 82 Wash. L. Rev. 227, 233 (2007). Because Radin’s new torts wouldconceivably cover a high percentage of these standardized mass distribution contractsnationwide, courts should think twice before hampering the use of a businesstool that “[i]s essentialto the functioning of the economy.” See 1-1 Corbin on Contracts § 1.4. (Rev.ed. 1993). A real possibility also exists that Radin’s proposals would incite boundlessclaims in an already crowded judicial system. Thus, it is highly unlikely that anycourt would approve Radin’s proposals for expansive new tort liability. Also improbable is whetherany state legislature–with many dominated by conservative representatives–wouldexpand consumer rights beyond existing consumer protection statutes.
Radin: A tort remedy for intentional deprivation of basiclegal rights is a better conceptual fit than contract law to addressboilerplate abuse. (Radin, pp. 198, 222, 248, 253 n.11)
Response: Radin barelyacknowledges settled doctrine (see Radin, p. 209) that, as a matter of policy,the law disallows parties from using tort law to alter or avoid theircontractual obligations. Inre Consolidated Vista Hills Retaining Wall Litigation, 893 P.2d 438, 446 (N.M. 1995). “Acontractual obligation, by itself, does not create a tort duty.” Jones v. Hyatt Ins. Agency, Inc., 741 A.2d 1099, 1106 (Md. 1999). The reasons stem from thesubstantive differences between tort and contract. Tort actionsstem from the breach of duties imposed as a matter of public policy whereascontract actions stem from the breach of duties imposed by mutual consent. E.g., Goldstein v. Elk Lighting, Inc., 2013 WL 790765 at*3 (M.D. Pa. 2013). This standard preserves the “important” boundarybetween tort and contract. See Ashall Homes Ltd. v. ROK Entertainment Group Inc., 992 A.2d 1239, 1253 (Del. Ch. 2010); Deli v.University of Minnesota, 578 N.W.2d 779, 782 (Minn. Ct. App.1998).
Radin also never discusses theestablished line of authority that the gist or gravamen of the cause of actionis determinative for deciding whether the action lies in contract or tort. 1A C.J.S. Actions§ 136 (2013). Put another way, the prevailing test for tort liability when theparties have a contract is whether the wrongdoer also breaches an independentduty to the injured party owed separately from the contract. Textron Fin. Corp. v. Nationwide Mut. Ins. Co., 684 N.E.2d 1261, 1270 (Ohio Ct. App. 1996). Thus,where the defendant has harmed the person or property of the plaintiff, butwhere these parties also have a contract, the contract must be collateral tosupport a tort liability. Goldstein, 2013 WL 790765 at*3.
With the proposed cause ofaction in tort for intentional deprivation of basic legal rights, the contractis not collateral. The supposed tort liability arisessolely from the contractual relationship between the parties and the allegedduties breached are grounded in the contract itself. Id. at **3-4. Anotherimportant consequence of Radin’s aggressive merger of contract and tort is thatthe consumer suing in tort would be entitled to seek extensive relief notgenerally available under contract, namely, expanded consequential damagesalong with punitive and emotional distress damages. (See Radin,p. 206). Courts should not allowplaintiffs to obtain such a windfall. SeealsoKailinv. Armstrong, 643 N.W.2d 132, 144n.19 (Wis. Ct. App. 2002) (“If a[contracting party] is permitted to sue in tort when a transaction does notwork out as expected, that party is in effect rewriting the agreement to obtaina benefit that was not part of the bargain.”). Granting plaintiffs greatercommon law rights and remedies against defendants is the exception, and not therule, in the current conservative judicial climate.
Regarding the distinction betweentort and contract, Radin merely comments that (1) she disagrees with the above standard,(2) several torts, such as fraud or misrepresentation, constitute anindependent duty from the contract, (3) the line between tort and contract isnot hard and fast, and (4) an abusive boilerplate contract is only a “purported contract” (even though no court subscribes to this lastassertion) (Radin, pp. 9-11, 14-15, 197-209). While she has a point that adefendant’s tortious conduct may arise in contract cases, Radin’s proposed newtort of intentional deprivation of basic legal rights consistently disregards thefundamental principle that contracts, by themselves, do not create duties intort.
Radin: Tort law has a developedinfrastructure for dealing with mass torts whereas contract law has no suchinfrastructure for dealing with mass contracts. (Radin, p. 198)
Response: Radin overlooks thatcourts routinely certify class actions involving consumers claims on formcontracts. See, e.g., SacredHeart Health Systems, Inc. v. Humana Military Healthcare, 601F.3d 1159, 1171 (11th Cir. 2010) (“It is the form contract,executed under like conditions by all class members, that best facilitatesclass treatment”); Duplerv. Costco Wholesale Corp., 249 F.R.D. 29, 37 (E.D.N.Y.2008)(collecting cases for the proposition that class certification is typicallyappropriate in cases involving form contracts). Because contract law is just asadaptable as tort law in accommodating collective lawsuits, Radin’s critique isnot persuasive.
Radin: Unfair boilerplate contractsqualify as a defective product under the law of product liability. (Radin, pp.101, 198)
Response: Under the law of product liability, a “product”is “tangible personal property distributed commercially for use orconsumption.” Restatement (Third) of Torts: ProductsLiability, § 19(a) (1998). A written contract does not meet thisdefinition; it is only a document that memorializes an intangible, which is theagreement of the parties. Although a document delivers the information,the plaintiff’s grievance in such case is with the content of the document, notwith the tangible medium itself. See id.at cmt. d.
Evenif a contract with unfair boilerplate were a “product” for the above purposes,it is not “defective” as a basis for tort liability. “A product is defective when, at the time ofsale or distribution, it contains a manufacturing defect, is defective indesign, or is defective because of inadequate instructions or warnings.” Restatement(Third) of Torts: Prod. Liab. § 2 (1998). See also Birmingham v. Fodor’s Travel Publications, Inc., 833 P.2d 70, 76, 79 (Haw. 1992)(no cause of action inproduct liability for defective ideas) . Abusive contract boilerplateis not defective under the Restatement definition. Because Radin’s new tort cannot meetthese important pre-requisites of product liability law—“product” and “defect”—herproposal must be found wanting.
Radin: Abusive boilerplateterms support the proposed intentional tort of deprivation of basic legalrights because they improperly deprive consumers of numerous rights granted bythe polity, for example (1) waivers of the right to a jury trial with asubstitution of mandatory arbitration, (Radin, pp. 16, 108, 131), and (2)imposition of overly inclusive exculpatory clauses for seller negligence. (Radin, pp. xiv, 138-140, 184-85).
Response: Radin is correct thatmany boilerplate contracts broadly favor the seller in the cited areas. On thefirst point, what Radin leaves out is that a contractual jury trial waiver mustbe knowing and voluntary; therefore, it is strictly construed. Debra T. Landis,Annot., Contractual jurytrial waivers in federal civil cases, 92 A.L.R. Fed. 688 (1989). See also United States v. Cal. Mobile Home Park Mgmt. Co., 107 F.3d 1374, 1378 (9th Cir.1997)(noting the “strong presumption” against the waiver of this fundamental right).
Courts assessing these jurytrial waivers focus on the conspicuousness of the provision,the parties’ relative bargaining power, the sophistication of the partychallenging the waiver, and whether the terms of the contract were negotiable. Martorella v. Deutsche Bank Nat. Trust Co., 2013 WL 1136444 at *2 (S.D. Fla. 2013)(citingdecisions). No single factor is conclusive and the court is not boundby the number of factors that have been satisfied. Rather, the court askswhether, in light of all the circumstances, is the waiver unconscionable,contrary to public policy, or simply unfair. Martorella, 2013 WL 1136444 at *2 (citing cases). Twocircuits even hold that agreements to resolve disputes by bench trials areenforceable only if extra evidence of negotiation or consent supports thatclause. See NationalEquipment Rental, Ltd. v. Hendrix, 565 F.2d 255, 257-58 (2dCir.1977); K.M.C.Co. v. Irving Trust Co., 757 F.2d 752, 755-57 (6th Cir.1985). Based on theabove guidelines, courts are not as unduly disposed toward approvingcontractual jury waivers as Radin would have the reader believe. (See Radin, pp. xiv, 131).
Onthe second point, Radin contends that broad exculpatory clauses for seller negligenceshould be outlawed unless consumers are given a choice to tradeoff rights for alower price. (Radin, pp. 184-85). Radin fails to point out thatcontracts exonerating one party from acts of future negligence are disfavoredand strictly construed against the benefiting party. Additionally, the courtssay that clear, unambiguous, unmistakable, and conspicuous language is requiredto release a party from his or her future negligence. There must be “no doubt”that a reasonable person agreeing to an exculpatory clause actually understands what future claims he or she iswaiving. Indeed, the word “negligence” must be clearlystated in a release of future negligence. E.g., Guthrie v. HiddenValley Golf and Ski, Inc., —S.W.3d —, 2013 WL 2181247 at *4 (Mo. Ct. App. 2013); see also AviationEng’g Co. v. Bd. of Clark Cnty. Comm’rs, 794 P.2d 710, 712–13(Nev.1990). Anotherimportant consideration in some jurisdictions is that “[e]ach party must be a free bargaining agent to the agreement so that thecontract is not one of adhesion.” ToppCopy Products, Inc. v. Singletary, 626 A.2d 98, 99 (Pa. 1993). As can be seen, the actual state of the law on exculpatoryclauses differs materially from the law Radin depicts on the supposed inadequatejudicial oversight of these provisions.
Radin: The persons who draw upand deploy offensive boilerplate are parties to the tort of intentionaldeprivation of basic legal rights and specifically intend adverse effects.(Radin, p. 215)
Response: Radin would automaticallyimpute the supposed bad intent of the drafter of abusive boilerplate to theseller of goods or services who uses those boilerplate contracts. Radin doesnot appreciate that the alleged bad intent of the drafter and the seller usingthose forms is a factual question and that such persons do not necessarily actin concert. See Jordan v. Wilson, 5So. 2d 442, 451 (Miss. Ct. App. 2008)(intent in law of torts is a question offact). In many cases, the proof would undoubtedly show that the drafter, theseller, or both act in good faith as they seek to advance what are perceived tobe valid business interests.
In the end, Radin’s proposal to transform abusivemass market boilerplate contracts into a fount of tort liability in favor ofthe consumer is actually counterproductive. Her proposal can have adverseconsequences for the same individuals that Radin strives mightily to protect. Theexpanded liability of sellers arising from Radin’s suggested reforms would onlycause price increases to account for this added seller legal exposure, all tothe detriment of consumers and to the general economy with a corresponding likelyreduction in sales activity. In Original Great American ChocolateChip Cookie Co. v. River Valley Cookies, Ltd., 970 F.2d 273, 282 (7th Cir. 1992), thecourt observed:
Theidea that favoring one side or the other in a class of contract disputes canredistribute wealth is one of the most persistent illusions of judicial power.It comes from failing to consider the full consequences of legal decisions.Courts deciding contract cases cannot durably shift the balance of advantagesto the weaker side of the market; they can only make contracts more costly tothat side in the future, because [the other side] will demand compensation forbearing onerous terms.
Forall the above reasons, I respectfully contend that Radin’s radical expansion oftort law into the realm of contract is without merit.
[Posted, on Steven Feldman’s behalf, by JT]