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Law professor Eric Goldman reports about a case from last week in which the suppliers of a weight-loss food product included a “thou shalt not post any neg­ative reviews” gag clause in their contracts with consumers. The Fed­eral Trade Commission sued the suppliers on grounds that the gag clause (plus other practices) were unfair, in violation of section 5 of the FTC Act. Last Fri­day a federal district court in Florida granted summary judgment against the sup­pliers, awarding the FTC a permanent injunction and disgorgement of the suppliers’ gross receipts minus refunds — with the suppliers’ owners to be per­sonally liable — in an amount to be determined.  FTC v. Roca Labs, Inc., No. 8:15-cv-2231-T-35TBM, slip op. (M.D. Fla. Sept. 14, 2018).

The gag clause does seem pretty obnoxious, judging by the court’s summary:

Since at least September 2012, Defendants have included a non-dis­par­age­ment clause, also known as a “gag clause,” in the Terms and Conditions that prohibited customers from publishing disparaging comments about Roca Labs products. The Terms and Conditions also indicated that the pur­ch­ase price [which was $480 with “valid insurance,” $640 otherwise] was “con­­di­tional,” “dis­count­ed,” or “subsidized” in exchange for the customer’s agree­ment to the gag clause and other provisions in the Terms and Con­di­tions. The Terms and Conditions stated that the purchaser agrees to pay the full price of the product, $1,580.00, if the purchaser breached the gag clause.

In the September 2012 version, the Terms and Conditions stated that cus­tom­ers would have to compensate Defendants $100,000 for talking “badly about the Formula.” In the August 2014 version of the Terms and Con­di­tions, customers were sub­ject to being sued for an injunction and being billed $3,500.00 for legal fees and court costs for publishing any negative com­ments about the De­fend­ants’ products, services, or employees.

That version also provided that Defendants could force purchasers to sign a notarized affidavit stating that the disparaging remarks were incorrect, con­­tained factually incorrect material, and breached the Terms and Conditions.

Slip op. at 7-8 (extra paragraphing added).

As Eric points out in a law-review article, Congress passed the Consumer Re­view Fairness Act of 2016; “[a]s the House Report explains, the law seeks ‘to pre­serve the credibility and value of online consumer reviews by prohibiting non-disparagement clauses restricting negative, yet truthful, reviews of prod­ucts and services by consumers.’ By doing so, the CRFA helps advance the effective functioning of marketplaces.”

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Some presentations cover a series of topics that don’t need to be taken in any particular order.  When that’s the case, the audience will ap­pre­ci­ate being able to vote for the order in which the speaker talks about the topics.

I’ve used the voting procedure below in a talk on startup law that I’ve done for several years for the busi­ness schools at Rice University and the University of Hous­ton. And just the other day I used the voting procedure in a pres­en­ta­tion on risk man­age­­ment as part of a one-day course on IP licen­sing basics for the Hous­ton chap­ter of the Licen­sing Execu­tives Society USA/Canada. Hesam Panahi, a faculty member at the Rice Uni­versity business school, de­scribes this voting procedure to his students as a “Choose Your Own Adventure” ap­proach, after the children’s gamebook series; the students usual­ly respond with chuckles of recognition.

(Incidentally, I’m not the first to think of this approach to doing presentations, as a Google search confirms.)

Show a slide with a menu of topics

First, after your introductory remarks, put up a “menu” slide with a list of topics that you can discuss. Here’s the menu slide for my startup-law talk; each topic is linked to the start of the cor­res­pon­ding sequence of slides in the deck:

Ask the audience to vote for which topic to cover FIRST

A menu of topics for a startup-law presentation

As we’ll see in another image below:  in some presentations, the audience could have a very-different idea of the sequence in which these topics should be addressed.

NOTE: You’ll want to be sure you know the slide number of the menu slide, so that you can quickly return to the menu during the actual presentation, as discussed later.

Do a show-of-hands: Which topic to cover first?

Next, ask for a show of hands about which topic to cover FIRST (with only one vote per person), and jot down the vote counts for each topic. This provides a rough but serviceable indication of the topic sequence that the audience col­lect­ive­ly prefers.

If you’re making a pitch to just one or two people, such as angel in­vest­ors or venture capitalists, you can ask them if they’d like to specify not just the first topic, but the entire sequence of topics. Of course, you’ll want to be ready with your own sequence if they demur.

Or: Use ranked-choice online voting

With a larger audience, you can get an even-better sense of the audience’s collective preference by asking attenders to use their phones to vote online. You can use a service such as PollEverywhere.com, which allows ranked voting and provides a nice bar-graph display in real time. (I have no re­la­tion­ship with PollEverywhere except as a customer.)

Here’s an example from a startup-law talk earlier this year — notice how the preferred sequence of topics, as voted on by this particular audience, is quite different from the sequence in the menu slide above:

The audience’s topic-order preferences for a startup-law presentation

Then proceed per the vote count

Finally, discuss the topics, in the sequence voted on by the audience.  In the “slideshow” mode of Powerpoint, do the following:

  • Click on the appropriate link in the menu slide to go to the corresponding slide sequence.
  • To get back to the menu slide, just type the number of the menu slide and press the Enter key.  (For example, in my start­up-law deck, the above menu slide is #29.) This is how it works in Powerpoint; presumably you can do much the same thing when using other presentation software.

Advantages

Letting your audience vote on your topic sequence offers several advantages for both you and the au­dience:

1. Often you won’t have enough time in your presentation to address all of the topics listed in your menu slide. That’s OK, because with this voting ap­proach, you can be smarter in allocating the time you do have — audiences seem to prefer speakers who dive deep into, and answer questions about, the topics that the attenders actually care about.

2. You won’t need to worry whether you have enough material to fill your time:  Just include extra material in your slide deck, and keep going until your time is up. (This not unlike the way newspaper reporters are trained to write stories in an inverted-pyramid form so that editors can cut from the bottom up to fit the available hard-copy space.)

And who knows: What you thought of as filler material might turn out to be quite important to your particular audience.

3. Sometimes a given topic might not get any votes at all. This isn’t a bad thing: It tells you that, with this audience, you can safely skip the zero-vote topic. Surely that’s better than blindly guessing which topic(s) to address and which to skip.

And again, who knows: With a different audience, your zero-vote topic might turn out to be the favorite.

4. By talking about your topics in the order that your audience prefers, you can safely end your presentation at the scheduled time. That will score points with your audience; it’ll also endear you to your moderator or other organizer, if there is one.

 

 

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More and more, instead of doing long-form summaries of interesting cases that catch my eye, I’m simply tweeting about them at @DCToedt.

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The Seventh Circuit provides a useful discussion of the limits of the waiver doc­trine:  As noted in another post, the buyer of an allegedly-defective rec­re­a­tion­al ve­hicle was unable to assert a warranty claim because he had arranged to take title in the name of an LLC that he controlled — and the contract’s lim­it­ed war­ran­ty ex­press­ly ex­clu­ded coverage in that situation.  The buyer tried arg­uing that the manu­fac­turer, by making efforts to fix the problems, had sup­posedly waived the cov­erage exclusion, but the Seventh Circuit was having none of it:

This supposed right of Jayco’s [to assert the warranty exclusion]—if it is a right at all—is not the kind read­ily subject to waiver; it gives Jayco no power to compel Knopick’s performance of a duty of any kind. The war­ranty exclusion instead clar­i­fies that Knopick and his LLC have no right to compel Jayco’s performance of duties that could other­wise be enforced against it under the manu­fac­tur­er’s warranty.

The exclusion clause serves as a defense, shielding Jayco from liability under the express warranty, based on Knopick’s (and perhaps the deal­er’s) choice about how to handle the purchase and title of the RV. Knopick’s waiver argument would turn the warranty and the rule of wai­ver on its head by transforming waiver’s limited role as a shield (ex­cu­sing non-performance) into a sword capable of compelling performance and creating new duties.

The effects of such a new rule would not be benign. Merchants and other contracting parties could not act as good business partners, go­ing beyond their strict contractual duties, without fear of obliging them­selves to perform new and broader duties, beyond the express terms of the contract.

The facts of this case illustrate the reasons for the rule. A seller that wants to do a good turn for a customer by undertaking $500 in repairs should be able to do so without putting itself on the hook for more than $50,000 in re­pairs. In business generally and in consumer markets, a contracting par­ty’s will­ing­ness to go beyond her strictly enforceable legal obligations is a key com­­mer­cial lubricant. It facilitates trust, long-term relationships, repeat cus­tom­ers, and referrals.

Attaching legal liability an order of magnitude or two beyond the cost of the “good-will” repairs, as Knopick would have us do, would discourage low-cost and amicable resolutions to minor commercial disputes.

Knopick v. Jayco, Inc., No. 17-2285, part II-B, slip op. at 8-9 (7th Cir. July 11, 2018 (emphasis and extra paragraphing added; footnote omitted).  In the om­it­ted footnote, the court pointed out that the disgruntled customer had not al­leged estoppel as a basis for its suit:

This case does not involve the doctrine of equitable estoppel. Knopick has not argued, and nothing in the record suggests, that Jayco performed the good-will repairs to lull him into sleeping on his legal rights under a “lemon law” or other consumer protection law and then stopped repairing the vehicle after those rights expired.

Id., slip op. at 9 n.1.

I imagine I’ll be adding this case to my contract-drafting course materials.

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The buyer of a recreational vehicle was given an expensive lesson in the im­por­t­ance of reading the sales contract:

In his telling, plaintiff Nicholas Knopick bought a $415,000 jalopy, but to be more precise, a limited liability company he controls bought the $415,000 jalopy. This factual shift determines the outcome of this case. Knopick has sued the manufacturer under the vehicle’s express limited warranty. That warranty does not cover the vehicle because the warranty excludes from coverage all vehicles purchased by business entities—like limited liability companies. The district court granted summary judgment to the manufacturer. We affirm.

Knopick v. Jayco, Inc., No. 17-2285, slip op. at 1-2 (7th Cir. July 11, 2018).

The RV allegedly was a real lemon, according to the unsuccessful plaintiff:

Almost immediately after purchasing the vehicle in July, Knopick discovered he had purchased a $415,000 lemon. According to Knopick, the RV leaked, smelled of sewage, had paint issues, and contained poorly installed fea­tures, including bedspreads screwed into furniture and staples protruding from the carpet.

After taking possession of the vehicle in Iowa, Knopick drove it to Jayco’s factory in Indiana for repairs. The following month, he picked up the RV in Indiana intending to drive it to his home in Texas. Concerned about con­tin­ued problems with the RV, Knopick dropped it off at a repair facility in Mis­souri, where a Jayco driver picked it up and drove it back to Indiana for fur­ther repairs. In December, Jayco had a driver deliver the coach to Knopick in Arkansas.

Knopick remained unsatisfied with the condition and requested a full refund later that month, which Jayco apparently refused.

Id., slip op. at 3 (extra paragraphing added).

It brings to mind a variation on a saying from the nuclear Navy:  RTFC — Read The [Fine] Contract.

But why did the buyer take title in his LLC? The court wondered that too:

The obvious question arises: why would a consumer structure such a large purchase in a way that strips him of the protection of the manufacturer’s stan­dard warranty? And what to make of Knopick using a Montana LLC des­pite his having no ties to the state discernible in the record? The un­sur­pri­sing answer is taxes. At oral argument, Knopick’s lawyer asserted: “Knop­ick purchased the recreational vehicle through the LLC solely for the purpose of sales tax advantage,” and the business entity serves “no other purpose whatsoever.”

Id., slip op. at 10.

(The court also rejected the plaintiff’s argument that the defendant had waived the limited warranty’s exclusion; that will be discussed in a separate post.)

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