Contract Law Meets Reality
From left: Rachel Arnow-Richman, Keith Rowley (Moderator), Eric Zacks, Thomas Joo, and Allen Kamp.
This after-lunch panel deals with a variety of contract law issues in specific settings–hence “reality.” Summaries follow, with the usual caveats about the possibility of scribal error.
Rachel Arnow-Richman (Denver): “Noncompetition, Good Faith, and the Bilateral Employment Contract.” As a body of law, noncompetition agreements follow a well-established framework for analysis, but courts are in fact dealing with particular fact patterns by analysis that occasionally explicitly–but often implicitly–utilizes a duty of good faith. Other times, the courts will use good faith language while not using the concept in its better known forms, as in the Restatement and the UCC. New Hampshire, for example, will not enforce an employment contract modification to add a noncompete agreement in an employment at will situation, not because it lacks consideration, but the modification is not in good faith. In other situations two otherwise enforceable terms will be seen as bad faith when enforced together even though the separate provisions could be enforceable. Explicit use of an implied duty of good faith in covenant not to compete cases would be a preferable approach for policing this public policy issue, both for employees and as a matter of coherence in contract doctrine.
Allen Kamp (John Marshall): “Wellness Programs and Consent.” The U.S. spends twice as much as other industrial countries on healthcare but do not get appreciably better results. Statistics show that Americans are frequently more out of shape than their international counterparts. The Affordable Care Act of 2009 introduced the concept of employer “Wellness Programs” to incentivize better healthy behavior, but these can be intrusive and reveal personal health information. One of Fitbit’s features, incidentally, is a tie-in to an employer wellness program. The ACA requires that a wellness program be “voluntary,” raising the concern of employers coercing employees into these programs by financial incentives, some of which could be quite large. The ACA itself does not define “voluntary,” thus raising the concepts of contract-law consent, duress, good faith, unconscionability, and other doctrines. These doctrines however, are as vague as the term that they are seeking to supplement. The employer wants the benefit of reducing its health insurance premiums, so there are very real incentives for employers to pressure their employees. Going forward, if the ACA is repealed, the Americans with Disabilities Act will be the controlling law.
Thomas Joo (UC-Davis): “The Law in the High Castle: Breach of Contract and Alternative History.” Professor Joo noted that his paper is actually contract law meeting unreality rather than reality. In seeking expectation damages, contract law seeks to construct an alternative version of history where the contract was performed, and that is the place where plaintiff’s damages are based. The discipline of history deals in counterfactuals, though these technically don’t qualify as history. Quantum physics does allow for alternate realities as a concept–one that actually can exist. Viewed in this light, benefit of the bargain from an alternative future is a more normatively defensible concept. In effect, the litigating parties are fighting over the properties of the quantum wave function. The court enforcing contract law makes an alternative world come into existence.
Eric Zacks (Wayne State): “The Statute of Limitations and Acceleration Clauses in Mortgage Foreclosure Cases.” This paper considers the effect of certain provisions in home mortgages. Acceleration and foreclosure can be wielded as a threat again and again because the means by which the statute of limitation operates from individual payments. Acceleration provisions are routine, as they both protect the lenders’ interests and serve to motivate the borrower to pay in an in terrorem sense. How should res judicata apply here? Subsequent claims could be barred based on the same earlier breaches of the contract. If a lender accelerates and loses the case, it arguably loses the right to sue on an acceleration again because the obligation is a single indivisible obligation for preclusion purposes. This approach encourages lenders to be judicious in enforcing acceleration clauses. Some courts and jurisdiction have chipped away at the “two dismissals” rule, finding that a voluntary dismissal works a constructive “de-acceleration” of the loan, despite the fact that deceleration clauses actually are not in the loan documents. The issue becomes one of framing and equity–deadbeat borrowers versus oppressive lenders, but lenders have frequently gotten the upperhand in story telling. Regular contract law and doctrine–if applied–would actually benefit the borrowers in these sloppy mortgage litigation cases. But the lenders are not treated like “regular” plaintiffs and extending equity to those lenders but not the borrowers.
