Teaching Assistants: Krawiec & Oman on Specific Performance of Personal Service Contracts

A longer version of this blog post is forthcoming in the Iowa Law Review Online! Expect a jubilant post with a link when it goes up!

Courts do not order specific performance of personal service contracts. Seems a no-brainer. There’s the Thirteenth Amendment’s broad prohibition on involuntary servitude, there are enforcement challenges, there are autonomy concerns, and there is the sense that any such order would simply be kicking the litigation can down the road a piece. And yet, Kimberly Krawiec (below left) and Nate Oman (below right) argue in their new article,  The Case for Specific Performance of Personal Service Contracts, which is forthcoming in the Iowa Law Review, that the law ought to recognize certain exceptions to the per se rule.  These are two very skilled contracts experts who combine erudition with boldness.  They are not shy about treading on subjects that some might consider taboo.  In fact, it’s Professor Krawiec’s brand!

Their carve-out from the rule is limited to cases in which parties of relatively equal bargaining power agree in advance to the remedy.  Representation by counsel is an indicator of equality of bargaining power.  They illustrate their concept with three archetypes: the coach, the teacher, and the pop star.

They first note that most employment agreements are at-will, and so specific performance isn’t an option.  In the rare cases when a party has the market power to demand a contract for term, it is worth reconsidering our wonted hostility to specific performance, especially in light of a generation of scholarship that has argued that money damages are often insufficient and that we should consider expanding the availability of specific performance.

They would not replace a per se rule against specific performance with a per se rule in favor of it.  It would remain an extraordinary remedy, to be awarded in the court’s discretion and premised on a finding that money damages will not make the non-breaching party whole.

The Authors first enumerate the problems with the per se rule.  Money damages are often difficult to calculate and hence under-compensatory. Nor is it possible to approximate the effect of an order of specific performance (a positive injunction) with negative injunctions. The latter may reduce harms but do not fully compensate for lost performance.  The Authors further point out that damages are a zero-sum game that at best give the parties the benefit of their bargain — and they often don’t achieve even that. The option of specific performance opens up the possibility for post-breach negotiations.  In situations where a departing employee values the new position above the cost of buying out their contract, there is the possibility that the parties, with the help of an order of specific performance, will agree to an efficient breach.  The non-breaching party is made whole or can even negotiate a benefit.  The breaching party can be made better off, as is their new employer.

The Authors next take on certain Thirteenth-Amendment shibboleths.  While we all partake of smug pieties regarding involuntary servitude when contemplating specific performance of service contracts, the Authors think that the orders of specific performance that they are contemplating would not run afoul of the Thirteenth Amendment.  Their arguments are persuasive, but to be honest, I’ve always thought that the other, more situated arguments against specific performance of service agreements have more force.

They next address the autonomy arguments against specific performance. They make two main points here: First, high money damages can impose a greater burden on autonomy than the requirement that one perform a short-term contract.  Second, because orders of specific performance can lead to negotiation, they can be autonomy-enhancing compared to an order to pay money damages.  Concerns about workplace domination are misplaced because low-wage workers are almost always at-will, and thus could not be subject to the remedy of specific performance in any case.  There is the lingering problem of contract terms, such as non-compete provisions, that have a post-contractual afterlife, even if employment is at-will.  The Authors’ solution is simply not to enforce one-sided non-competes.  The remedy of specific performance should not be available where the parties do not have relative equality of bargaining power.

My main concern with the specific performance remedy is what the Authors call “monitoring concerns;” that is, the challenges involved in judicial enforcement of positive injunctions.  The “monitoring concern” is two-fold: parties forced to perform will do so half-heartedly or otherwise inadequately, and courts are not well-positioned to monitor or adjudicate the quality of performance.  The Authors respond that courts are frequently called upon to monitor the quality of performance, at times through the doctrine of good faith.  This response does not satisfy me because doing so is not cost-free, and it circles back to the Authors’ well-articulated concern with the adequacy of money damages to compensate for incomplete performance.  Yes, parties often dispute whether a contract has been adequately performed, but they are far more likely to do so if forced into a partnership at least one part  party no longer finds worthwhile.  And then, how does one determine the remedy for inadequate performance in cases like, to use the Authors’ examples, the coach, the teacher, or the pop star? Does one prove a coach’s inadequacy through the team’s won-loss record? Does one prove a teacher’s bad faith by the student’s grades?  Did that Bruce Springsteen performance leave you with the impression that he was just feeling “meh” about New Jersey?

The Authors say that courts have gotten far better at monitoring contractual performance, but there remains the concern that their specific performance remedy for a law suit may involve prolonged, expensive monitoring followed by another law suit that will either restart the cycle or return us to our wonted remedy of money damages, warts and all.  In sum, the Authors’ dismissal of monitoring concerns strikes me as overly hasty.  That said, I am not terribly bothered by their haste given the relatively narrow scope of their defense of the specific performance remedy.  

Finally, the Authors illustrate three scenarios in which on might think the per se rule against specific performance ought to be set aside.  They first address the instance of the successful college football coach who leaves before the end of his contractual term for a more lucrative and high-profile position.  In the actual case on which their hypo is based, the aggrieved university sought liquidated damages under the contract, and the parties eventually settled. The Authors think specific performance should be available here, and I have to say I disagree.

First, the Authors say that they want parties to be able to stipulate to specific performance ex ante.  In this case, they have not, and I believe they would not, even if they were confident that a court would enforce the provision.  The Authors take seriously contractual language about the importance to the university of stability in their football program, but I’ve seen my share of college football coaches come and go, and I don’t buy it. In fact, in the typical case, the university sacks the coach before the end of the contractual term, they pay outrageous liquidated damages, and there may be no duty to mitigate. The coach doesn’t want the protection of specific performance; nor does the school.  But even if they did, how does the coach perform when everyone knows he would rather be elsewhere and will leave at the earliest opportunity?  How does he recruit players for teams he will not coach? How does he get the players to believe that he is really committed to them, when they know for a fact that he is not. Freshmen and Sophomores will enter the transfer portal rather than wait around to see what mystery coach takes over.  And what would count as evidence of a breach of the duty of good-faith performance in this context?

The Authors’ next example is a specialized teacher, but here they just don’t seem committed to the bit.  They acknowledge that an order of specific performance against a teacher would rarely be appropriate.  I actually find it hard to imagine a scenario when I think it would be appropriate.  The Authors provide all sorts of reasons why specific performance would only in the most unusual circumstances apply to a teacher.

I think their most promising example is sui-generis pop-stars for whom no substitute performance would be adequate.  They provide the example of Jack Dempsey’s 1926 refusal to fight Harry Wills because, as he put it, in his charmingly pugilistic manner,

Entirely too busy training for my coming Tunney match to waste time on insurance representatives[. A]s you have no contract suggest you stop kidding yourself and me also.

Plaintiff did have a contract, but it had, the court held, only speculative damages.  The Authors think specific performance would be a good remedy in this case, and I think they may be right.  Whether or not Dempsey wanted to fight Wills, if ordered to, he would either do so or pay his way out of the contract.  If forced to fight, Jack Dempsey would fight, because his career depended on defending his heavyweight title.  But would Dempsey agree to a specific performance remedy ex ante?  I think his answer would be, “Stop kidding yourself.”

Whether one can make a pop star perform depends on the pop star.  I have heard tales of underwhelming performances by Bob Dylan, especially on the divorce tour.  I think Elvis Costello at his punkiest cut sets short when he got fed up with his audiences.  Try asking him to cover a “Pink Floyd” song.  His response will not be pretty.  I have never heard of anybody claiming that these artists did not perform in good faith.  [I have seen both in Oklahoma City in the last two years, and I have no complaints — quite the contrary!] But artists who trade on their connection to and devotion to their fanbase would not likely be willing to risk a perceivably lackluster performance.  There is some evidence that audiences have no idea whether the Riverdance performers they saw were yelling “do it for the lotto!” instead of their usual yipping and wooing 

Despite my criticisms, I agree with the Authors that we should consider an expanded specific performance remedy.  I am especially sympathetic to their view that orders of specific performance can lead to settlement discussions.  So, for example, I teach Fitzpatrick v. Michael, a case in which an elderly man reneged on a promise to leave his house and his cars to his live-in caregiver upon his death.  He also evicted her from his home without notice.  The court first noted that Ms. Fitzpatrick was entitled to a remedy, but then it found that it could not fashion one for her, in part because it could not order specific performance of a service agreement.  I say, go ahead and order them to live together.  He was a man of some means; he would have either acquiesced or paid her what she was owed. 

The Blum Examples and Explanations supplement that I use provides two additional instances where I think an order of specific performance would do the trick.  First, there is the case of a musician, “Harpo,” who agrees to perform for “the going rate” in a piano bar.  The proprietor learns that the going rate is too high and reneges. Money damages won’t make Harpo whole because his main motivation was exposure.  I saw specific performance as ideal here, because Harpo is very motivated, and the proprietor’s only obligation is to pay, which he certainly can do.  Similarly, Blum has a separate example (which serves a different purpose) where a young tenor is hired to play in a big-city opera house.  Tweaking Blum’s hypothetical, let’s imagine that the mitigation offer is to pay the young tenor the same to perform the same role at a smaller, up-state venue.  Performing at Glimmerglass is not the same as performing at the Met, so just as with Harpo, it’s not just about or even primarily about the money for the tenor.  On the other hand, there is no question that the young tenor will perform to the best of his ability if the court orders specific performance at the Met. The opera house will do nothing to undermine him, as its patrons pay a lot for those seats. Specific performance makes sense to me in this context as well.

I have gone on longer than usual, so I will end by recommending this piece. I find the ideas encouraging and challenging, even though I an pushing the Authors to think further about the contexts in which their expanded specific performance remedy should apply.

I will add only that Robert Hillman has also written a response to the piece, “The Case Against Static Contract Remedies,” on JOTWELL.