Re: Penalty Clauses Are Against Public Policy

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See also early termination fees in wireless phone agreements, which have frequently been challenged under a similar theory, with some tentative success (though adverse rulings have I think been headed off by settlements). The litigation has certainly put pressure on carriers to reduce the fee over the life of the contract (though I don't think they've all gone that route, yet).


Posted by: potchkeh | Link to this comment | 10- 9-09 6:23 AM
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So my lease has a clause that if we're late on payment twice over the year then we lose our free 13th month. That seems to have a similar overall effect (1 free month in a year comes out per month, in your hypothetical, to lowering the rent from 1700 to 1560ish), but somehow seems less like a "penalty."


Posted by: Unfoggetarian: "Pause endlessly, then go in" (9) | Link to this comment | 10- 9-09 6:34 AM
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2: I'm picturing you have a punch card with spaces for each month, like at TCBY.


Posted by: Moby Hick | Link to this comment | 10- 9-09 6:40 AM
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Wait, this is hilarious-- so the main way ordinary people in the US come in contact with the law, that is, the mouseprint on a lease or a phone contract or buying a car, this way of learning about rule of law through lived experience, this is illegal and in favor of the phone company?

That's fantastic, certainly puts self-righteous speeches about rule of law and corrupt government or broken systems in lesser nations into perspective.


Posted by: lw | Link to this comment | 10- 9-09 6:53 AM
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4: Have you ever seen the paperwork to buy a house with a mortgage? I think the idea is that you have to complete as much paperwork as you would have to if you'd signed 30 one-year leases.


Posted by: Moby Hick | Link to this comment | 10- 9-09 7:00 AM
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4 is right, and a big problem. IMO there ought to be significant legal penalties for anyone who drafts a consumer contract (I'd include a residential lease in that) in a manner that reasonably should have been expected to be unenforceable (perhaps with certain exceptions for unsophisticated drafters who are unaided by counsel). As it is, many (most?) consumer contracts have unenforceable clauses in them that are unenforceable, and the only penalty merchants/landlords generally face is that, if challenged, the provisions are not enforced. And considering that most people don't challenge them, don't know their rights, and just comply with the agreements as written, a lot of people get screwed.


Posted by: Brock Landers | Link to this comment | 10- 9-09 7:05 AM
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By reading this comment, you, the reader, hereby agree to pay the commenter a comment reading fee in the sum of $50 payable within 30 days. By continuing to read the comment you also agree to forgo any legal remedies to paying the reading fee and agree to binding arbitration in the jurisdiction of the commenter's choice.


Posted by: SP | Link to this comment | 10- 9-09 7:10 AM
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While we're on the topic, somebody should mention EULAs. For all I know, I've agreed to mow Bill Gate's lawn in perpetuity.


Posted by: Moby Hick | Link to this comment | 10- 9-09 7:12 AM
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Have you ever seen the paperwork to buy a house with a mortgage?

I read every single line of my mortgage re-finance paperwork, and I still missed the critical fact that they had sneakily miscalculated my escrow withholdings to make it look like my monthly payment was going to be lower.

My old bank withheld my homeowner's insurance as well as my taxes, while the new bank just escrows the taxes. So I expected the monthly withholding to be different, but I didn't actually re-do their math to see if they had lied about what $taxes / 12 equaled. (Maddeningly, I did check all of the other math.)

I only found out about it last week, when I got my first annual escrow statement and it says the payments go up by $60/month in November. (Taxes are the exact dollar amount that they were last year, so the price is not going up for any legitimate reason.) I've been furiously making a list of every place I can complain to, but in the end that will only help others in the future. There's nothing I can do about this loan, and I don't want to switch banks a mere 5 months into my re-finance.

My sister told me that her husband caught a similar "error," amounting to several hundred dollars a month, in their refinance. I wonder why these people's consciences don't bother them.


Posted by: Witt | Link to this comment | 10- 9-09 7:19 AM
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"Rent discounts" were explicitly illegal in Chicago leases -- at least in the mid-90s. But of course they were all over the place anyway. The form they generally took was "Your rent is $1050, but if you pay it by the 5th of the month, you get a $50 discount." Late fees, you see, were illegal too.

(Chicago had a very robust set of laws protecting tenants that got eviscerated by the state court at some point, but I don't quite remember the details.)


Posted by: oudemia | Link to this comment | 10- 9-09 7:21 AM
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They don't have consciences. These people are corporations. And they don't even have Three Laws of Corporationics.


Posted by: Crispix Attacks | Link to this comment | 10- 9-09 7:22 AM
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9: Yes, we read all of ours also. We had to threaten to pull-out in order to get the docs with enough time to actually read them.


Posted by: Moby Hick | Link to this comment | 10- 9-09 7:25 AM
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They had something like this in my old apartment building, but they referred to it as "concessionary" rent and it didn't apply to me; I had the impression it was related to the set-asides for low-income people. I don't think it was nearly as punitive - something like having a stricter deadline for paying the rent.


Posted by: Minivet | Link to this comment | 10- 9-09 7:25 AM
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Hey, corporations are people too!


Posted by: Minivet | Link to this comment | 10- 9-09 7:26 AM
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LB, everybody knows there's no such thing as Penalty Clause.


Posted by: JRoth | Link to this comment | 10- 9-09 7:27 AM
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How about employment contracts? I've definitely had employment contracts that had illegal, unenforceable clauses there to scare people (and that's without even getting into the can of worms that is non-compete agreements).


Posted by: Nathan Williams | Link to this comment | 10- 9-09 7:44 AM
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9- We had the same thing happen in the opposite direction- they calculated our escrow based on taxes before the residential exemption, so we're overpaying into the escrow each month by about $125 each month. I caught it before closing but they wouldn't modify it, so essentially it's a 1 year forced savings account until the first adjustment when they realize they're idiots and send me a check.


Posted by: SP | Link to this comment | 10- 9-09 7:47 AM
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I think contracts for normal transactions - apartments, employment, credit cards, etc. - should be positively standardized, i.e., they can contain provisions X, Y, and Z, no more. Of course they'd howl about outlawing innovation, but I think "innovation" regarding contract provisions is an illegitimate concept, pretty much always equivalent to screwing over the party without a legal team.


Posted by: Minivet | Link to this comment | 10- 9-09 8:18 AM
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18: and if both parties have legal teams?


Posted by: Sifu Tweety | Link to this comment | 10- 9-09 8:20 AM
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Also, I'm shocked that existing law allows people to waive their rights to press criminal charges. With civil suits it's more debatable; criminal law seems meaningless if people can be coerced into opting out of it.


Posted by: Minivet | Link to this comment | 10- 9-09 8:21 AM
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19: Then why should we care?


Posted by: Minivet | Link to this comment | 10- 9-09 8:22 AM
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IMO there ought to be significant legal penalties for anyone who drafts a consumer contract (I'd include a residential lease in that) in a manner that reasonably should have been expected to be unenforceable

I think contracts for normal transactions - apartments, employment, credit cards, etc. - should be positively standardized

The Texas Apartment Association offers a standard lease contract used by pretty much all leasers in the state, and the unenforcable language is in there.

One more thing I wanted to talk about in this thread: It seems like a *lot* of apartments around here don't offer month-to-month leasing until after your first lease is up. (And perhaps not even then for more than a couple months.) This seems shady. Wouldn't it be better for society to require apartment owners to offer non-lease rental? After all, there's really not much stability in society any more--it seems like few people are in a situation to be able to commit to a long lease, and given how very expensive breaking out of them is, and how little choice in the matter renters have (given the standardization of contracts in the state), that requiring that would greatly improve the situation. Now, of course, apartments will change a considerably higher month-to-month rate, but it seems like having that choice is important, because it allows people to weigh the option *up front*, instead of hiding the cost of uncertainty into lease-breaking clauses.


Posted by: paranoid android | Link to this comment | 10- 9-09 8:41 AM
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Wouldn't it be better for society to require apartment owners to offer non-lease rental?

Who would want to be a landlord under such circumstances? Many fewer, I'd think.


Posted by: redfoxtailshrub | Link to this comment | 10- 9-09 8:42 AM
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So what's the cheapest way to challenge an illegal provision? The default seems to be unpredictably many hours of phone-bank hassle, or hours of hassle and expense to what, hire an attorney to do something administrative?

There's an online FCC complaint form 2000, but I'd hate to throw my credit rating in the air waiting for that. Basically, unless there's an administrative avenue that costs the phone company/landlord money for BS clauses, I do not see this changing, ever.

Whoever is biggest wins, in the US as in Uzbekistan or Somalia, and there is no good way to get city hall on your side unless you are connected. The big difference here is that the system does not leak, in that bribery and theft are only tolerated at the tip of the pyramid. Also, low unemployment means low crime away from the poorest neighborhoods. This is a huge advantage, maybe the lack of bribes is what people mean by "rule of law."


Posted by: lw | Link to this comment | 10- 9-09 8:43 AM
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So what's the cheapest way to challenge an illegal provision?

Arson.


Posted by: Sifu Tweety | Link to this comment | 10- 9-09 8:44 AM
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Back inna dawn of time there was a legal doctrine which said that contract clauses that were "unconscionable" were also unenforceable. That doctrine, unfortunately, seems to have disappeared. Those were the days when consumer protection laws were passed, another fond (if distant) memory.

I got a flu shot at costco. The guy who gave me the consent form didn't point out that it required a waiver of all rights to recover damages for most anything. He didn't draw my attention to this. I crossed out the word "waive" before I signed it, and gave it back. I didn't draw his attention to the change. I got my shot.

Unfortunately I didn't die from their gross negligence in administering the shot, so we won't find out the legal effect of the modification.


Posted by: Michael H Schneider | Link to this comment | 10- 9-09 8:48 AM
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23: Yes, given turn-over costs, all that would happen is you'd see rents rise by quite a bit.


Posted by: Moby Hick | Link to this comment | 10- 9-09 8:50 AM
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Crispix Attacks is an excellent pseud.


Posted by: Sir Kraab | Link to this comment | 10- 9-09 8:51 AM
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Unfortunately I didn't die from their gross negligence in administering the shot, so we won't find out the legal effect of the modification.

And the cause of Justice takes another blow.


Posted by: JRoth | Link to this comment | 10- 9-09 8:59 AM
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That doctrine, unfortunately, seems to have disappeared.

It hasn't. I spend a lot of my time dealing with unconscionability challenges, and they're by no means futile, especially against consumer contracts with certain common provisions. It's fairly narrowly defined in most states, but it's a viable doctrine.


Posted by: potchkeh | Link to this comment | 10- 9-09 9:00 AM
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It seems like a *lot* of apartments around here don't offer month-to-month leasing until after your first lease is up.

Out of curiosity, where is here? In my 11 years of experience in MA, you never get offered month-to-month; when your one-year lease is up, you get offered another one-year lease or get shown the door. This is particularly annoying right now as I'm doing some househunting, and clearly can't plan on timing house-closing with the end of the lease. I did manage to negotiate my way into a positive right to sublease the place this year, which will help, but it's still not as good as month-to-month.


Posted by: Nathan Williams | Link to this comment | 10- 9-09 9:01 AM
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This is all kind of weird to me, because the real estate market in NY has been so tight every time I've rented that breaking a lease has been no big thing -- any apartment gets filled that month. (Actually, IME it's fairly common among people I know in NY to know someone who wants the apartment they're moving out of, and to just pass them along to the landlord -- I did that once, and I know other people who have.) So even if you have a lease, it's effectively month-to-month.

So what's the cheapest way to challenge an illegal provision? The default seems to be unpredictably many hours of phone-bank hassle, or hours of hassle and expense to what, hire an attorney to do something administrative?

Honestly, I don't know. I'd be tempted to write a stiff letter with my reasons for thinking the clause was unenforceable, and threaten to go to the state Attorney General if there was an attempt to enforce. But "illegal" in this context just means that a court won't enforce it, and once you're in court, you're already out a lot of money.


Posted by: LizardBreath | Link to this comment | 10- 9-09 9:06 AM
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And the cause of Justice takes another blow.

My roadside memorial is going to say "gave blow to Justice"

30: that's good news, thanks. Of course, that's a legal remedy, which as everyone has pointed out is only remedial if you can afford the legal. There's a lot to be said for prior regulation. But I'm repeating points well hammered.


Posted by: Michael H Schneider | Link to this comment | 10- 9-09 9:08 AM
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23: Huh? To clarify, I meant only to require it as an option. Landlords would change higher prices for them to make up for the inconvenience, and profits would remain the same. I don't see how that would discourage people from owning/managing apartments.


Posted by: paranoid android | Link to this comment | 10- 9-09 9:12 AM
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Out of curiosity, where is here?

Austin. My one experience with going month-to-month was when my lease was up and I planned to move out, but didn't give them the required 60 days notice. They probably would have required me to either sign a new lease or give my 60 days notice if I had asked. As it was, I payed 15% more rent for those two months.


Posted by: paranoid android | Link to this comment | 10- 9-09 9:17 AM
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An interesting case study in employment law is Eric Falkensteins's dispute with his former employer who basically claimed to own his ideas, and tried to prevent him from using them when he struck out on his own. They fought dirty; had he not been rich himself as well as determined, he would have been crushed as was at least one of his colleagues.

Biggest guy wins seems like a pretty good rule of thumb.

I don't know what to make of Falkenstein's portfolio ideas (for equities, risk does not correlate with return, contra Fama+French).


Posted by: lw | Link to this comment | 10- 9-09 9:18 AM
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Yeah, unconscionability exists as a doctrine (it's even codified into the Uniform Commercial Code), but I imagine our current judiciary is very hesitant to use it commensurate with how appropriate it's become in so many cases.


Posted by: Minivet | Link to this comment | 10- 9-09 9:18 AM
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charge charge charge


Posted by: paranoid android | Link to this comment | 10- 9-09 9:18 AM
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Small landlords, it would discourage. My mother owns a house near the beach. For a while, she was living it in the summers, and renting it during the school year. The biggest hassle was finding tenants -- someone who wants a ten month rental is probably a fairly unstable, transient kind of person, and identifying the sort of unstable, transient person who wouldn't burn the place down or piss off the neighbors was tricky. She doesn't rent the place out at all anymore, because finding decent tenants was such a hassle. If she had to rent the place out month to month, she wouldn't have ever rented it at all.

For someone renting a number of units, the hassle factor probably evens out in the long haul, but not for a landlord of one or two units.


Posted by: LizardBreath | Link to this comment | 10- 9-09 9:19 AM
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22: Yeah, drafted by someone other than the landlords themselves.


Posted by: Minivet | Link to this comment | 10- 9-09 9:20 AM
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34: What's to stop landlords from doubling the rent for the month-to-month "option"?


Posted by: Minivet | Link to this comment | 10- 9-09 9:21 AM
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I need to stop using "Yeah" as a prefix


Posted by: Minivet | Link to this comment | 10- 9-09 9:21 AM
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41: Demand.


Posted by: paranoid android | Link to this comment | 10- 9-09 9:22 AM
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31: Nathan, I was in the exact same position, and obviously also in the Boston area. I managed to sell my landlord on the standard 12-month lease, but with a right for me to break the lease at any time on 60 days advance notice. If I exercise my right to break the lease early there's a fee of one-month's rent.

Not sure that's better or worse than a positive right to sublease, but I slept better knowing my liability was capped at a manageable amout.


Posted by: Brock Landers | Link to this comment | 10- 9-09 9:23 AM
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43: Depends on how loose or tight the market is, surely.


Posted by: Minivet | Link to this comment | 10- 9-09 9:24 AM
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If she had to rent the place out month to month, she wouldn't have ever rented it at all.

Hmm. This is a good point. Maybe the reg could only be applied to people managing more than X units.


Posted by: paranoid android | Link to this comment | 10- 9-09 9:24 AM
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An interesting case study in employment law is Eric Falkensteins's dispute with his former employer who basically claimed to own his ideas, and tried to prevent him from using them when he struck out on his own.


I thought your employer owned everything you do while employed by them.


Posted by: heebie-geebie | Link to this comment | 10- 9-09 9:25 AM
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44: That "60 days" thing seems to be standard around here, though a lot of places frown on subleasing. Some allow it with their approval of the new tenant and a fee. (My apartment manager actually advised me to sublease under-the-table rather than get their approval. That was pretty surprising, for a company that owns a few thousand units over the country.)


Posted by: paranoid android | Link to this comment | 10- 9-09 9:27 AM
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They generally own everything you do for them while you're employed by them. (Which obviously isn't always an easy line to draw, hence: lots of litigation.)


Posted by: Brock Landers | Link to this comment | 10- 9-09 9:28 AM
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49 to 47.


Posted by: Brock Landers | Link to this comment | 10- 9-09 9:29 AM
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46: Or if it *really* wasn't worth it to her, like Minivet suggests, she could have just changed a really huge rent for month-to-month--something that *would* make it worth her while.


Posted by: paranoid android | Link to this comment | 10- 9-09 9:29 AM
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The problem is defining the outer limits of "everything you do". I've learned stuff about being a lawyer at every job I've ever had. That doesn't mean that when I leave a job, my old employer can require me to leave the skills and knowledge I developed working for them behind -- if they could, I'd be unemployable. (Given my work habits, I'm surprised I'm not unemployable as it is, but that's a separate matter.)


Posted by: LizardBreath | Link to this comment | 10- 9-09 9:29 AM
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That's why the Swiss patent office doesn't own the theory of special relativity.


Posted by: Brock Landers | Link to this comment | 10- 9-09 9:31 AM
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One time I had to break my lease, and they claimed that the penalty exceeded the remaining time on my lease. When I realized this, I told them I'd just keep it then, and use it as storage. They'd already re-rented the place out, and so waived the fee. SUCKERS!


Posted by: heebie-geebie | Link to this comment | 10- 9-09 9:32 AM
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SUCKERS!

Thieves. They rerented it immediately, and were still going to charge you a penalty? Thieves.


Posted by: LizardBreath | Link to this comment | 10- 9-09 9:35 AM
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55: hardly mutually exclusive categories.


Posted by: Sifu Tweety | Link to this comment | 10- 9-09 9:39 AM
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Yeah, at the time I was both pleased with myself and outraged with them.


Posted by: heebie-geebie | Link to this comment | 10- 9-09 9:42 AM
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47: I thought your employer owned everything you do while employed by them.

Work for hire, the rules for which were modified a lot by the DMCA. So, in many circumstances yes, but it depends on the contract. Unless they specifically claim all your time, they cannot claim copyright on a book you wrote on your offhours, for instance.

2: So my lease has a clause that if we're late on payment twice over the year then we lose our free 13th month. That seems to have a similar overall effect (1 free month in a year comes out per month, in your hypothetical, to lowering the rent from 1700 to 1560ish), but somehow seems less like a "penalty."

In that case, you lose something you have no received yet, whereas, with the contract LB is talking about, they retroactively dun you. So, if you got popped at the beginning of month eight, you would immediately owe for TWO months rent. That's a huge penalty, compared to having to pay one month's rent you were originally going to be able to skip.

FTR, I've seen or heard of such a contract in Texas. They may be using them now.

max
['Usually, in Dallas, they require prepayment of first and last month, so if they boot you, they get their money anyways.']


Posted by: max | Link to this comment | 10- 9-09 9:43 AM
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I just asked my apartment about the whole 60-day thing. What they mean is that if you move out, and they re-rent the apartment before those 60 days are up, they still charge you for the whole 60 days, while still charging the new tenant for whatever remains of those days.


Posted by: paranoid android | Link to this comment | 10- 9-09 9:44 AM
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||

Can I ask for another iteration of the Chopper Effect? I have a second interview in a couple hours, and would appreciate any positive vibes sent my way.

Thanks.

|>


Posted by: Chopper | Link to this comment | 10- 9-09 9:45 AM
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Also, anybody here a hunchback? If so, I need to rub your hump.


Posted by: Chopper | Link to this comment | 10- 9-09 9:45 AM
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I got a letter from the landlords the other day
I opened and read it, it said they were suckers.


Posted by: redfoxtailshrub | Link to this comment | 10- 9-09 9:45 AM
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Unless they specifically claim all your time

But isn't that technically (if not practically) unenforceable?


Posted by: paranoid android | Link to this comment | 10- 9-09 9:46 AM
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Brock: I offered that notice window to my landlord in our negotiations (with 90 days, even) and he didn't go for it; his concern was that I'd exercise it in October and that it would be basically impossible for him to rent it out again in January. The positive right to sublease was his counteroffer, which I didn't like as much, but it was good enough.

Of course, given the way MA landlord-tenant law works, I have something like that option by default, since he's not allowed to just let it sit empty and continue to (try to) collect rent from me until the lease ends, and I don't think his probability of failure to rent it out in 2-3 months is very high.


Posted by: Nathan Williams | Link to this comment | 10- 9-09 9:48 AM
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The broken scansion on 62 is kind of killing me. *falls on sword*


Posted by: redfoxtailshrub | Link to this comment | 10- 9-09 9:48 AM
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20- Are you sure that article is referring to criminal and not civil charges? I don't think you can waive criminal charges because technically you're not the plaintiff- the whole "People vs. defendant" thing, in criminal charges it's technically society that's been wronged by someone breaking the law, and society didn't sign no damn arbitration clause. In this case the problem with criminal charges is that they were in another country so which jurisdiction charges them?
My whole industry has noncompete clauses, etc., but I've heard that no one ever tries to enforce them because they're afraid they'll be ruled illegal. Better to keep your lawyer's mouth shut to keep some people scared than to open it and remove all effectiveness. Technically, going to any other company could be seen as going to a competitor, people usually just avoid working on the exact same project.


Posted by: SP | Link to this comment | 10- 9-09 9:55 AM
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They wanted me to pay extra or whatever
Picture me giving a damn, I said never


Posted by: Chopper | Link to this comment | 10- 9-09 9:55 AM
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I got a letter from the landlords the other day
I opened and read it, it said they were suckers.

They tried to tell me that my lease was suspended. I got offended for a minute, tried to tell them that I never even got the damn letter.

It's 11:00, on the dot, so I think I'd better scoot off to teach.


Posted by: heebie-geebie | Link to this comment | 10- 9-09 9:56 AM
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You have a good idea while working for someone, use it to develop software with other employees, possibly while learning stuff using your employer's data. Employer owns the software, of course; if you publish the idea though, who owns the idea, or more specifically, your right to subsequently apply the idea?

Reading noncompete clauses that I've been presented with, you cannot change employers within the same field if you sign on the dotted line.

OK, the clasues are "unenforceable," but foot-dragging and the incurring of unnecessary expenses are no-brainer tactics for the deeper pocket, and that's before discovery.

By the way, Einstein examined patents having to do with the synchronization of train signals in the course of his work. Synchronization arguments are prominent in his exposition of special relativity. The patents were confidential when he examined them. Does this give the Swiss an interest in SR? Could they trade this interest for Roman Polanski?


Posted by: lw | Link to this comment | 10- 9-09 9:57 AM
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66: That's possible - I saw "rape" and assumed "criminal," but even murder can become a tort. And maybe US prosecutors couldn't bring charges in this case since it was technically on foreign soil?


Posted by: Minivet | Link to this comment | 10- 9-09 10:00 AM
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One time I had to break my lease, and they claimed that the penalty exceeded the remaining time on my lease. When I realized this, I told them I'd just keep it then, and use it as storage. They'd already re-rented the place out, and so waived the fee.

I bet all landlords have horror stories about people who use the places for storage. Once in a place I was looking to rent, the guy showing us around thought there would be stuff strewn all over because it was still being rented. So we were surprised when it was completely clean and empty. Then we were further surprised when we opened the kitchen door and found a dog and a huge bag of dog food.


Posted by: Cryptic ned | Link to this comment | 10- 9-09 10:00 AM
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64: that was my landlord's concern, too, hence the fee (which is arguably unenforceable in the event that he *does* manage to rent it out within the notice period, since it could in that case be characterized as a penalty instead of a fee paid in exchange for a break right). And, lo and behold, I'll be giving him notice at the end of the month and sticking him with an empty apartment on January 1. So I guess his concern was well-founded.

One of my primary concerns was that he would give me shit about the return of my security deposit, which, with my being out of state after I move, would be difficult for me to do anything about. Since I'll now technically owe him money, I'll just won't be paying the fee until after he returns my deposit, or at least what I consider to be a fair percentage of it (which would be almost all of it). Which I think puts me in a much stronger position.

Probably none of this is relevant to you; I'm just babbling. I'm more-than-usually interested in commenting today, since I've got a lot of work to do.


Posted by: Brock Landers | Link to this comment | 10- 9-09 10:00 AM
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I bet all landlords have horror stories about people who use the places for storage.

Why would they care?


Posted by: heebie-geebie | Link to this comment | 10- 9-09 10:03 AM
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70: It's been way too many years, but I think legislative jurisdiction allows a country to extend the reach of its law to acts committed by its own citizens on foreign soil.


Posted by: Di Kotimy | Link to this comment | 10- 9-09 10:03 AM
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Datapoint: Quite common here for leases to be formal for the first year, then to run indefinitely beyond that. Mostly a factor of demand - Pgh is a slack RE market, and so tenants can generally walk from dickhead landlords.

That said, I have no idea what it's like in big, formal apartment situations - I'm talking about how family landlords (including people who own dozens of units) operate.

I think there's a general sense that the landlord has a certain amount of power by being able to kick out a renter with little notice, which balances the potential flakiness of a renter leaving with little notice. Seems like part and parcel of the city's small town mindset.


Posted by: JRoth | Link to this comment | 10- 9-09 10:03 AM
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I think there's a general sense that the landlord has a certain amount of power by being able to kick out a renter with little notice, which balances the potential flakiness of a renter leaving with little notice.

This is no doubt true, and at least partly explains why it's very difficult to get anything less than a 12-month lease in MA: it's very difficult to kick renters out on short notice--it's usually an extended process. (2 months, minimum. 3-4 is more typical. 6+ is not unusual.)


Posted by: Brock Landers | Link to this comment | 10- 9-09 10:08 AM
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that was my landlord's concern, too, hence the fee (which is arguably unenforceable in the event that he *does* manage to rent it out within the notice period, since it could in that case be characterized as a penalty instead of a fee paid in exchange for a break right)

I think that fee is on stronger grounds than the concessions, because it costs them to advertise and show the empty apartment more than if you had stayed your lease. But it probably doesn't cost them near as much as the fee is in most cases.


Posted by: paranoid android | Link to this comment | 10- 9-09 10:11 AM
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I just asked my apartment about the whole 60-day thing. What they mean is that if you move out, and they re-rent the apartment before those 60 days are up, they still charge you for the whole 60 days, while still charging the new tenant for whatever remains of those days.

Which, when I think about it, is probably illegal too. Of course, the tenant already has the incentive to notify them well beforehand when breaking a lease, since they won't have to pay as much while waiting for it to be released.


Posted by: paranoid android | Link to this comment | 10- 9-09 10:16 AM
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78: But the 60-day policy can help tenants in the case where the apartment *isn't* rented within those 60 days, because it limits how much more they have to pay.


Posted by: paranoid android | Link to this comment | 10- 9-09 10:19 AM
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63: But isn't that technically (if not practically) unenforceable?

Ah. But if you make a lot of money 'in your field' after having left your old company, then they sue your ass for everything. Or at least a percentage. They did that to some guy about 5-6 years ago, if I recall correctly. Something to do with converting old mainframe code to Java or something like that.

Oy. I forgot. Texas is easy on evictions. They can eject you starting 30 days after a missed payment. Which means if they misfiled your check when you gave it to them on time, they'll surprise you with a 3 day eviction notice. Happened to my ex-. When she proved she had paid the check, they demanded (and eventually got) a late fee.

max
['Renters in Texas have a very few rights.']


Posted by: max | Link to this comment | 10- 9-09 10:22 AM
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80: That's what I meant by "if not practically". "If not" seems to have to opposite meanings.


Posted by: paranoid android | Link to this comment | 10- 9-09 10:25 AM
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70, 66: These were civil claims. And, incidentally, arbitration agreements which, like this one, require confidentiality and/or giving up remedies otherwise available are very frequently held unconscionable in a number of states. In fact in this case the judge held that the plaintiff did not have to go to arbitration on the tort claims related to the sexual assault in the first place (though for reasons other than unconscionability), but he did stay the case pending resolution of other, arbitrable claims.


Posted by: potchkeh | Link to this comment | 10- 9-09 10:26 AM
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You're generally not allowed to impose a penalty for breach of contract -- contract damages are limited to putting you in the position you would have been if the contract hadn't been breached (oversimplified, but that's good enough for a sentence). ...

If this is true how do banks get away with large overdraft fees, bounced check fees and the like?


Posted by: James B. Shearer | Link to this comment | 10- 9-09 10:32 AM
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31: Nathan, my landlord in Arlington will let you go month to month if you don't sign a new lease.


Posted by: Bostoniangirl | Link to this comment | 10- 9-09 10:32 AM
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83: Those aren't penalties for breach of contract.


Posted by: LizardBreath | Link to this comment | 10- 9-09 10:34 AM
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39: I thought that a lot of people rented vacation location properties out this way by charging less in the off season. There are even property management people who will do it for you.


Posted by: Bostoniangirl | Link to this comment | 10- 9-09 10:36 AM
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83: in that case, no one has breached a contract. The fees aren't a breach of contract, they are the contract. You've agreed to pay the bank [x] usurious fee in exchange for their overdraft loans.

And if you do breach, and don't pay them the money, and they take you to court abuot it, they don't collect any additional penalty--tehy only collect the usurious fee they were owed under the contract (plus potentially interest and expenses, etc., but not penalties).


Posted by: Brock Landers | Link to this comment | 10- 9-09 10:36 AM
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83: I have to say, my two biggest surpises during my semester abroad in England were that British students didn't pay for school and that British banks would let you write checks that you couldn't cover without any real penalty for a very long time.


Posted by: Moby Hick | Link to this comment | 10- 9-09 10:37 AM
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re: 88

They do now [pay for college].


Posted by: nattarGcM ttaM | Link to this comment | 10- 9-09 10:40 AM
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I do love the "If this is true" at the beginning of 83, though. Always remain skeptical, Shearer, especially about things said by liberals. Or lawyers. LB's got 2 strikes from the get-go.


Posted by: Brock Landers | Link to this comment | 10- 9-09 10:42 AM
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I wondered if you were buying, Brock, but it sounds like you're moving moving. I hope you found a good job.


Posted by: Bostoniangirl | Link to this comment | 10- 9-09 10:47 AM
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80: Shit, I'd be sending everything by certified mail.


Posted by: Bostoniangirl | Link to this comment | 10- 9-09 10:50 AM
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89: I was there in 1992 and haven't followed it since. On the banks, do you still get a letter saying, basically, please come deposit something, if you overdraw your account?


Posted by: Moby Hick | Link to this comment | 10- 9-09 10:52 AM
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85 87

I don't understand the distinction. If the fees are part of the contract then why aren't the lease breaking fees also part of the contract?


Posted by: James B. Shearer | Link to this comment | 10- 9-09 10:54 AM
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If the parties really did agree to some sort of discount below market rate, could the "penalty" be enforced as simply a lump sum that the tenant has agreed to pay -- contingent upon leaving early -- in consideration for the reduced rent?

Or, disregarding the discount fiction, what if the parties just agreed to a higher rate for the final month in the event that the tenant left early? The payment wouldn't, under the wording of the contract, at least, be a penalty, but a variable rate, contingent on a change in circumstance.

I wonder, in more complex contracts, how often what is effectively a penalty for breach is snuck in through the back door. Probably often.


Posted by: text | Link to this comment | 10- 9-09 10:59 AM
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93: in the mid-to-late 90s they started adding on big charges for overdrafts. Now it turns out they were probably illegal and the banks have been paying them back. Unlikely the same will turn out to be true about student fees though.


Posted by: Abelard | Link to this comment | 10- 9-09 11:00 AM
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94: One way to think about it is that in the case of the overdraft fees, the action that triggers the fees is not the end of the contractual relationship.

A lease is an agreement to rent something for a defined amount of time. When you move out early, you're breaking that contract, and bringing it to an end. The damages for breaking the contract can't be more than it takes to restore the landlord to a position as good as they one they'd have been in if you hadn't breached. (Roughly).

In an overdraft fee situation, the contract is ongoing. Taking more money out of the bank than you had wasn't a breach of the contract, it was something that the contract allows you to do for a fee. The fee is a payment for a service, not a penalty for breach. (As Brock says, there are usury problems, but not contractual damages problems.)


Posted by: LizardBreath | Link to this comment | 10- 9-09 11:01 AM
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94: the distinction is penalty for breach v. a loan that you are automatically given. So long as you don't call something a penalty, and give consideration for it, it isn't usually a penalty. And when you write a bad check, you haven't breached a contract with the bank; you've committed minor fraud, and the bank is helping you out on the terms that you have agreed to ex ante.


Posted by: text | Link to this comment | 10- 9-09 11:02 AM
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95: Those would both, I think, be unenforceable as penalties. Consideration doesn't matter -- you can't enforce a penalty clause even if it was negotiated for consideration.


Posted by: LizardBreath | Link to this comment | 10- 9-09 11:03 AM
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95: I wonder, in more complex contracts, how often what is effectively a penalty for breach is snuck in through the back door.

The way you sneak it in is through liquidated damages clauses. If you can show that it would be genuinely difficult to estimate what your actual damages from breach would be, you can put in a clause saying "in the event of breach, my damages will be deemed to be [X]". That's enforceable if the real damages really would be hard to measure, and X is a reasonable estimate of what they might be.

But people put in clauses like that where the damages would be measurable, or where X is unreasonably high, all the time.


Posted by: LizardBreath | Link to this comment | 10- 9-09 11:06 AM
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Right, but often clauses operate as penalties in a real world sense without actually being penalty clauses. Like late fees. The classic penalty clause is some fee you must pay for breach that isn't an attempt to predict damages. But if there's no contractual breach, just a payment under the contract contingent on some event, it's not, under the language of the contract, a penalty.


Posted by: text | Link to this comment | 10- 9-09 11:08 AM
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80: One time I got a late notice a day after the late deadline after having left my check in the drop box. I went and told them, and they double-checked the box, and it was wedged in a crack.


Posted by: paranoid android | Link to this comment | 10- 9-09 11:10 AM
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And that sort of thing is why my ilk (and yours? I can't remember if you're a lawyer too) have jobs -- there's always some way to make a contingent fee act a little more like a penalty, and someone ends up in court arguing that it really is a penalty, or that it really isn't. Residential leases are easy, because it's very clear what the contract is 'really' for. But in a more complicated situation, it can be hard.


Posted by: LizardBreath | Link to this comment | 10- 9-09 11:13 AM
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103 to 101.


Posted by: LizardBreath | Link to this comment | 10- 9-09 11:13 AM
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yeah, same ilk


Posted by: text | Link to this comment | 10- 9-09 11:17 AM
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97

A lease is an agreement to rent something for a defined amount of time. When you move out early, you're breaking that contract, and bringing it to an end. The damages for breaking the contract can't be more than it takes to restore the landlord to a position as good as they one they'd have been in if you hadn't breached. (Roughly).

Still don't see the distinction. The lease could easily say you can move out early as long as you pay a certain amount. Then you haven't breached until you don't pay.

In an overdraft fee situation, the contract is ongoing. Taking more money out of the bank than you had wasn't a breach of the contract, it was something that the contract allows you to do for a fee. The fee is a payment for a service, not a penalty for breach. (As Brock says, there are usury problems, but not contractual damages problems.)

I could be wrong but I don't think my contract with my bank allows me to bounce checks.


Posted by: James B. Shearer | Link to this comment | 10- 9-09 11:19 AM
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I could be wrong but I don't think my contract with my bank allows me to bounce checks.

Sure it does. And there's a fee for doing so.

They want you to bounce as many checks as possible, as long as you can pay the fees. That should be obvious.


Posted by: Cryptic ned | Link to this comment | 10- 9-09 11:24 AM
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James, it treats your bounced check as a request for a loan, which is granted. You learned something new today.


Posted by: text | Link to this comment | 10- 9-09 11:25 AM
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Still don't see the distinction. The lease could easily say you can move out early as long as you pay a certain amount.

The lease doesn't keep you from moving out -- it allows you to use the apartment for a monthly rent whether or not you live there. So the breach on any lease isn't moving out, it's not paying the rent. At that point, it's clear that a fee for failing to pay the rent is a penalty for breach, not a fee for service -- there's no service provided for that fee.


Posted by: LizardBreath | Link to this comment | 10- 9-09 11:37 AM
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yeah, same ilk

Ah, no wonder you were so down on creativity. They killed your soul, too, huh?


Posted by: Di Kotimy | Link to this comment | 10- 9-09 11:40 AM
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it allows you to use the apartment for a monthly rent whether or not you live there

Not always, actually, though I'm not sure why, how, or if it's ever enforced.


Posted by: paranoid android | Link to this comment | 10- 9-09 11:48 AM
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Huh. I suppose I could imagine reasons why you wouldn't want a house to sit empty, and so you'd treat moving out as a breach. Not so much an apartment, but a single-family house, I could see it.

Still, 'allowing the tenant to move' isn't a service that the landlord is providing the tenant for a fee. "Agreeing not to move", if there were a lease requiring residence, rather than just paying the rent, would be part of the consideration the tenant was providing the landlord for use of the apartment under the lease. So moving out would be a breach of the tenant's obligations, but still not a service provided by the landlord.


Posted by: LizardBreath | Link to this comment | 10- 9-09 11:54 AM
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99: wait, LB, you sound like you know more about this than I do. So is the fee I described in 44 actually unenforceable if my landlord is able to re-rent immediately upon my moving out?

I mean, I'd pay it anyway, because that's what we agreed, and I thought it was fair. But it would be nice to know if he doesn't actually have a legal right to collect it, in case he ends up being an asshole about something in the move-out process.


Posted by: Brock Landers | Link to this comment | 10- 9-09 11:55 AM
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113: That one, I'd have to see the Mass caselaw (not that I know the NY caselaw on this in detail either). That sounds reasonable enough that I bet it would be enforceable, but I'm not coming up with a good rationale for why it's not a penalty. (I was toying with the idea that you accepted the penalty in return for a limitation on the maximum possible damages due under the lease, and that made it okay, but I can't think of a way to state the rule that wouldn't include a bunch of situations that would be clearly unenforceable penalties.) I dunno, but I wouldn't count on that being unenforceable.


Posted by: LizardBreath | Link to this comment | 10- 9-09 12:04 PM
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That sounds reasonable enough that I bet it would be enforceable, but I'm not coming up with a good rationale for why it's not a penalty is roughly my thinking on it, too. But I haven't bothered to research the question.


Posted by: Brock Landers | Link to this comment | 10- 9-09 12:14 PM
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They killed your soul, too, huh?

yup, gone. The black souls of associates are poured into a giant chalice at the partner retreats, so I'm told.

I'm somewhat ashamed of my behavior in the creativity thread.


Posted by: text | Link to this comment | 10- 9-09 12:20 PM
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The difference might be that one month's rent is a reasonable effort to calculate real damages.


Posted by: text | Link to this comment | 10- 9-09 12:21 PM
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I was trying to figure out something along those lines, but the problem is that actual damages are trivial to calculate -- don't you need after-the-fact uncertainty to justify a liquidated damages clause? Not just that you're not sure how much damages will be, but that once it happens it's hard to tell how much they were?


Posted by: LizardBreath | Link to this comment | 10- 9-09 12:25 PM
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I don't remember. It would seem that if you could perfectly predict the damages, you wouldn't need uncertainty to justify the liquidated damages clause -- it saves everyone the effort of litigation. While if they are harder to predict, a wider variation of the damages alloted would be permitted.


Posted by: text | Link to this comment | 10- 9-09 12:29 PM
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but I'm not coming up with a good rationale for why it's not a penalty

I'd enforce it becase it's acting more like a liquidated damages provision. Actual damages are hard to know in advance (how long will it take to re-rent?) and each side is running an equivalent risk. Landlord is risking not being fully compensated if it takes a long time, tenant is risking overpaying if it rents right away. Each side also gets the benefit of certainty of risk. It's not the something-for-nothing that penalties look like.

On preview:
on't you need after-the-fact uncertainty to justify a liquidated damages clause?

That's not my recollection, but I'm probably wrong. I thin all you need is uncertainty at the time of execution


Posted by: Michael H Schneideer | Link to this comment | 10- 9-09 12:29 PM
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I think all you need is uncertainty at the time of execution

But, enough about Texas.


Posted by: Moby Hick | Link to this comment | 10- 9-09 12:32 PM
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My memory is that you need the actual damages to be difficult to determine with certainty, not merely to predict, but if I'm wrong about that then text and Schneider are right -- it's legit as liquidated damages.


Posted by: LizardBreath | Link to this comment | 10- 9-09 12:34 PM
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I'm somewhat ashamed of my behavior in the creativity thread.

Good. Very good. Embrace the shame, feel it course through your veins. This is the only way to fully surrender to the Dark Side.


Posted by: Di Kotimy | Link to this comment | 10- 9-09 12:41 PM
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I only feel a little ashamed. To get to the Dark Side I'll have to do something worse.


Posted by: text | Link to this comment | 10- 9-09 12:59 PM
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122: I think what you need is a reasonable expectation at the time of the agreement that, in the event of breach, damages will be difficult to determine with certainty. You don't actually need damages to be difficult to determine--it could turn out they're trivially easy, but it there was good reason to think that might not be the case when you signed up the agreement, that's good enough. Of course, the lease case fails this test. So I don't think it's a good liquidated damages clause.

This strikes me as something that might vary by state, though.


Posted by: Brock Landers | Link to this comment | 10- 9-09 12:59 PM
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I offer a CLE called 'Justifying why you do what you do: Reasons besides "I enjoy being able buy food"'.


Posted by: Moby Hick | Link to this comment | 10- 9-09 1:00 PM
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The only context in which I've ever heard liquidated damages is in construction contracts, in which there's a daily charge is the contract isn't completed by the deadline (usually something like $100 or $1000/day, depending on the scope of things).

What's interesting is that we architects, as a general rule, recommend against putting them in contracts because "the contractor'll just build that into his price." IOW, he'll budget for a certain amount of lateness/damages unless the schedule is reasonable. Big institutions like them, however, and there are certainly cases, like highway construction or classrooms, where you really want to penalize the contractor for failure to complete in a timely fashion. Interestingly (maybe), DOTs have found that they get much better results from putting in contractual incentives to finish early rather than penalties for finishing late. Some of this is no doubt behavioral econ, but I think some of it relates to scheduling matters - if I'm the foreman and I can argue that adding crew in Week 12 will result in bigger invoices in Week 18, plus no expenses in Week 19, then I'll get that crew if possible; in contrast, the argument that I need more crew in Week 12 to avoid a penalty in Week 19... well, shouldn't we just get the work done on time with the crew we have? Gotcha, Boss.


Posted by: JRoth | Link to this comment | 10- 9-09 1:01 PM
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90

I do love the "If this is true" at the beginning of 83, though. Always remain skeptical, Shearer, especially about things said by liberals. Or lawyers. LB's got 2 strikes from the get-go.

I am skeptical when bleeding heart liberal lawyers claim common commercial practices are actually illegal yes.


Posted by: James B. Shearer | Link to this comment | 10- 9-09 1:01 PM
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I think what you need is a reasonable expectation at the time of the agreement that, in the event of breach, damages will be difficult to determine with certainty. You don't actually need damages to be difficult to determine--it could turn out they're trivially easy, but it there was good reason to think that might not be the case when you signed up the agreement, that's good enough.

This, while not what I said in 122, is what I meant, or would have meant if I'd thought harder. A++++. Would buy from this commenter again.


Posted by: LizardBreath | Link to this comment | 10- 9-09 1:02 PM
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common commercial practices are actually illegal

Illegal's a slippery word in the civil context. The contractual terms we're talking about are unenforceable, but putting them in a contract isn't criminal, and the worst thing that would happen to a landlord would be that they couldn't enforce the term if it got to court.


Posted by: LizardBreath | Link to this comment | 10- 9-09 1:04 PM
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108

James, it treats your bounced check as a request for a loan, which is granted. You learned something new today.

Let us suppose hypothetically that instead they refuse to honor the check and charge me a fee. Is this fee limited to what it actually costs them to refuse my check?


Posted by: James B. Shearer | Link to this comment | 10- 9-09 1:05 PM
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130: which is a damn shame; see 6.


Posted by: Brock Landers | Link to this comment | 10- 9-09 1:05 PM
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130: Well, in the case of a huge mass of companies participating in the same fraudulent contract practices, perhaps it ought to be illegal, possibly under antitrust-style laws. The standard would be that they knowingly put it in with the intent to materially harm the other party and the knowledge that it's unenforceable. Or maybe that's what class-action suits are for.


Posted by: paranoid android | Link to this comment | 10- 9-09 1:08 PM
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Pwnd.


Posted by: paranoid android | Link to this comment | 10- 9-09 1:09 PM
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118

I was trying to figure out something along those lines, but the problem is that actual damages are trivial to calculate ...

How are they trivial? The landlord is going have expenses on top of lost rent which are a little ill-defined. And if the place sits empty for a while whose fault was it? Or if the new tenant causes some problem?


Posted by: James B. Shearer | Link to this comment | 10- 9-09 1:10 PM
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James, if you prefer to live in a world in which you can be charged penalties for breaching a contract that are completely unrelated to the damages, live in that world. Someone out there is willing to enter into such an agreement with you and will be happy to collect exorbitant payments from you that would not be enforced by any court.

Btw, it's not a liberal concept, but one that arises out of a desire to make entering into (and breaking, if necessary) commercial transactions easy. Efficient breach didn't get invented by the ACS, though it does, unfortunately, sometimes, help out tenants.


Posted by: text | Link to this comment | 10- 9-09 1:12 PM
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131: That's a fair question. I'm speculating here, but I think a substantial fee there could be justified by saying that the the damage to the bank due to your bouncing one of their checks isn't limited to their processing cost -- there's the risk that they'll screw up and pay it, there's reputational damage to the bank, I'm sure I could think of something else.


Posted by: LizardBreath | Link to this comment | 10- 9-09 1:13 PM
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135: They're trivial to calculate because they consist of the amount of rent lost before the apartment could be re-rented, plus expenses to re-rent. If the landlord does normal accounting, they should be able to look at their books and come up with an exact answer without doing too much work.

And if the place sits empty for a while whose fault was it?

You can litigate that. The landlord's responsible to try to mitigate their damages by rerenting; while you'd generally assume the tenant was liable, if the tenant can show the landlord didn't try to rerent, then their damages would be reduced by the landlord's failure to mitigate.


Posted by: LizardBreath | Link to this comment | 10- 9-09 1:17 PM
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The landlord's responsible to try to mitigate their damages by rerenting

Is this a national principle?


Posted by: paranoid android | Link to this comment | 10- 9-09 1:25 PM
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138

They're trivial to calculate because they consist of the amount of rent lost before the apartment could be re-rented, plus expenses to re-rent. If the landlord does normal accounting, they should be able to look at their books and come up with an exact answer without doing too much work.

Suppose the new rent isn't the same as the old rent? Suppose the apartment is painted in between?


Posted by: James B. Shearer | Link to this comment | 10- 9-09 1:29 PM
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136

James, if you prefer to live in a world in which you can be charged penalties for breaching a contract that are completely unrelated to the damages, live in that world. Someone out there is willing to enter into such an agreement with you and will be happy to collect exorbitant payments from you that would not be enforced by any court.

I prefer not to enter into unfair contracts on the chance they will be held to be unenforcible.


Posted by: James B. Shearer | Link to this comment | 10- 9-09 1:32 PM
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Suppose the new rent isn't the same as the old rent?

Not actually hard to figure out. If I have a year left on my lease at $1000/month, the maximum damages are $12,000. If it's rerented immediately at $8000/month, those damages are reduced by $9600, making the damages $2400. If repainting is a normal expense between tenants, you'd have to amortize it to figure out what part of the cost could be attributed to repainting one year early. And so on. This is all a solved problem.


Posted by: LizardBreath | Link to this comment | 10- 9-09 1:35 PM
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Is this a national principle?

It's not even a landlord-specific principle. People are always obligated to mitigate damages if they want to sue somebody for damages. If you break my window in June and I never repair it - or even cover it in plastic - I don't get to sue you for the damage caused by drifting snow in January. If there's water damage caused immediately after the breakage, then you can sue for that, but you've got a reasonable amount of time to mitigate.


Posted by: JRoth | Link to this comment | 10- 9-09 1:35 PM
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139: I hate to say national, there are some weird states out there, but as close to it as anything is.


Posted by: LizardBreath | Link to this comment | 10- 9-09 1:35 PM
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141: Wouldn't we all. But that doesn't make the contracts actually on offer unenforceable.


Posted by: LizardBreath | Link to this comment | 10- 9-09 1:36 PM
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145: un


Posted by: LizardBreath | Link to this comment | 10- 9-09 1:37 PM
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I hate to say national, there are some weird states out there, but as close to it as anything is.

I just spent a few minutes googling with little luck, but I don't think this is quite right. I think it's the default rule everywhere (or just about everywhere), but my recollection is that a disturbing number of states have an "unless the lease says otherwise" exception, which in practice of course means that landlords have no duty to mitigate and can just sit on an empty apartment.


Posted by: Brock Landers | Link to this comment | 10- 9-09 1:46 PM
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139, 144: I didn't think it was national. Historically it wasn't as a matter of common law, and many states have adopted mitigation statutes, but not all; New York among them (and the general duty to mitigate damages for breach of contract, per 143, apparently doesn't apply there because leases aren't contracts at common law, they're transfers of estates, which is something I swore I'd never think about again after the bar exam).


Posted by: potchkeh | Link to this comment | 10- 9-09 1:50 PM
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Actually, LB, it appears that as of last year, you're wrong even about NY: Rios v. Carrillo held that residential landlords have no duty to attempt to re-rent, if that's what the lease says.


Posted by: Brock Landers | Link to this comment | 10- 9-09 1:53 PM
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Well fuck.


Posted by: Brock Landers | Link to this comment | 10- 9-09 1:54 PM
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apparently doesn't apply there because leases aren't contracts at common law, they're transfers of estates,

Did I mention Property was my worst grade? I wasn't even thinking of a lease as anything but a contract in this context.


Posted by: LizardBreath | Link to this comment | 10- 9-09 2:13 PM
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They're trivial to calculate because they consist of the amount of rent lost before the apartment could be re-rented, plus expenses to re-rent.

Agreed, But. At the moment of breach, there's no way to tell how much rent will be lost before the apartment could be re-rented. Damages are trivially easy to calculate either (a)after the expiration of the term of the lease; or (b) after re-renting, but not until one of those contingencies has occurred. I'm assuming a duty to mitigate.


Posted by: Michel H Schneider | Link to this comment | 10- 9-09 2:16 PM
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To be clear to the non-lawyers, the absence of a duty to mitigate in this context means that the landlord doesn't have to try to re-rent. If they do, however, actually re-rent, you'd still take the amount of the new rent off the damages.


Posted by: LizardBreath | Link to this comment | 10- 9-09 2:17 PM
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they're transfers of estates,

In which case the dmages must be fixed before the expiration of a lease in being plus eighteen years.

Note to normal people: you don't even want to know why I think this is funny, nor why it really isn't.


Posted by: Michael H Schneider | Link to this comment | 10- 9-09 2:27 PM
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If contractural damages can be voided as penalties does this work both ways? If the contract provides for damages of $x and I breach and pay $x can the other party sue for his actual damages?


Posted by: James B. Shearer | Link to this comment | 10- 9-09 2:42 PM
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155: no.


Posted by: Brock Landers | Link to this comment | 10- 9-09 2:44 PM
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156

What does an obligation to relet amount to in an apartment complex? Can the landlord let all his other vacancies before trying to relet breached leases?


Posted by: James B. Shearer | Link to this comment | 10- 9-09 2:46 PM
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157

The reference to 156 is an error.


Posted by: James B. Shearer | Link to this comment | 10- 9-09 2:47 PM
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155 156

How can a contract provision be void one way and enforcible the other way?


Posted by: James B. Shearer | Link to this comment | 10- 9-09 2:48 PM
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155, 156: Actually, I'm not sure how that would work. It's one of those things that never comes up, because you don't put a liquidated damages/penalty clause in a contract unless the non-breaching party thinks it's advantageous.

Puzzling it out, I'm with Brock in any realistic case. The actual damages logically have to be difficult to estimate ex ante, or they wouldn't be significantly different from the contract amount. Your possibilities are (1) the contract amount is way more than the actual damages, so it's an unenforceable penalty clause. But no one who got the contractual damages would sue in that situation. (2) the contract amount is a reasonable estimate, ex ante, of what actual damages would be. That makes it an enforceable liquidated damages clause, and enforceable means enforceable both ways.

But it's a weird angle -- while I can't think of how it would work, I wouldn't be wildly shocked if someone came up with a freak case where the non-breaching party would prefer actual damages to the contractual amount in an case where the contractual amount was unambiguously an unenforceable penalty clause.


Posted by: LizardBreath | Link to this comment | 10- 9-09 2:58 PM
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But it's a weird angle -- while I can't think of how it would work, I wouldn't be wildly shocked if someone came up with a freak case where the non-breaching party would prefer actual damages to the contractual amount in an case where the contractual amount was unambiguously an unenforceable penalty clause.

But in that case it would certainly be treated as liquidated damages. There's zero chance a judge would allow a party to get out of what the judge believed were unlawful penalties because that party's actual damages were higher than the penalty that was unlawfully in the contract.

It's routine for people to agree to liquidated damages (call it a "break fee", or whatever), experience actual damages higher than the liquidated amount, and then sue on the grounds that the liquidated damage clause was unenforceable. (Which it might be, depending on the facts.) But again, that's a liquidated-damages analysis; it would never be applied to something that a judge determined was a penalty. (The very fact that actual damages ended up higher than the contractual amount might even as a matter of law mean the contractual amount wasn't a penalty.)


Posted by: Brock Landers | Link to this comment | 10- 9-09 3:06 PM
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160

Actually, I'm not sure how that would work. It's one of those things that never comes up, because you don't put a liquidated damages/penalty clause in a contract unless the non-breaching party thinks it's advantageous.

Doesn't that depend on who draws the contract? Or the non-breaching party could have put it in knowing it was unenforcible.


Posted by: James B. Shearer | Link to this comment | 10- 9-09 3:08 PM
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161

But in that case it would certainly be treated as liquidated damages. There's zero chance a judge would allow a party to get out of what the judge believed were unlawful penalties because that party's actual damages were higher than the penalty that was unlawfully in the contract.

Not even if party is sympathetic little guy and contract was drawn by big evil corporation?


Posted by: James B. Shearer | Link to this comment | 10- 9-09 3:16 PM
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Look, Shearer, I'm not about to do case research on this, but Black's defines a penalty clause as "a contractual provision that assesses against a defaulting party an excessive monetary charge unrelated to actual damages". My hunch is that if it's not excessive, then it's not a penalty. (Even if it's written in a way such that if it were excessive it would clearly be a penalty.) And if actual damages are greater than the contractually specified damages, then it's not excessive. And if the non-breaching party is suing in order to have the contractually specified damages thrown out, that means that actual damages are greater than contractually specified damages. Hence, 156.


Posted by: Brock Landers | Link to this comment | 10- 9-09 3:22 PM
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164 was an answer to 163. To rephrase: what you're really asking in 163 is can liquidated damage clauses be thrown out, and the answer is 'yes, happens all the time.' But those aren't penalty clauses.


Posted by: Brock Landers | Link to this comment | 10- 9-09 3:26 PM
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164

So it is misleading to say such clauses are "void" or "unenforceable" as they will be enforced one way. Which means it is in fact dangerous to put them in contracts because they can hurt you but can not benefit you.


Posted by: James B. Shearer | Link to this comment | 10- 9-09 3:31 PM
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So it is misleading to say such clauses are "void" or "unenforceable" as they will be enforced one way. Which means it is in fact dangerous to put them in contracts because they can hurt you but can not benefit you.

Well, no, it's not dangerous, because you're playing with ridiculous hypotheticals instead of reality. Look again at the penalty provision LB highlights in the post. Realistically, there's near-zero chance that actual damages could ever end up higher than the penalty amount. And there generally aren't fines or criminal sanctions or civil liability for putting these illegal provisions into agreements--worst case scenario, they're just ignored. So they provision is not likely to 'hurt' the landlord. And even though it's technically unenforceable, many tenants won't know that, or won't have money to talk to a lawyer, or will be intimidated, etc. So the landlord can end up pocketing a lot of extra money. (It's quite common for landlords to try to present themselves as "good guys" when people complain about these sorts of provisions by offering to knock off 50% of the penalty, or whatever. That gets a lot of people to pay up. When of course the landlord is entitled to $0 beyond actual damages.) That's the 'benefit.'


Posted by: Brock Landers | Link to this comment | 10- 9-09 3:39 PM
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Actually, unless I'm just having a failure of imagination, for the penalty described in the post, there's zero chance that actual damages could ever end up higher than the penalty amount--not near-zero. Which is probably typically true of penalty clauses.


Posted by: Brock Landers | Link to this comment | 10- 9-09 3:45 PM
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165: To rephrase: what you're really asking in 163 is can liquidated damage clauses be thrown out, and the answer is 'yes, happens all the time.' But those aren't penalty clauses.

This, I'm confused by. What would you throw out a liquidated damages clause for, other than deciding it was really a penalty clause? Are there circumstances where a court would say "This is definitely an LD clause, not a penalty, but it's unenforceable for some other reason"?

166: This is really confused, and to the extent I understand it, entirely wrong. The basic problem is that you're ignoring the odds, and treating the chance that actual damages will be greater than those specified in a penalty clause, which is possible but really unlikely, as if it were just as plausible as things working out the other way around. There are other problems with it, but that'll do to start with.


Posted by: LizardBreath | Link to this comment | 10- 9-09 3:49 PM
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169.2 pwned by 167, and unless I'm having a failure of imagination as well 168 is right about the particular situation in the post.


Posted by: LizardBreath | Link to this comment | 10- 9-09 3:50 PM
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169.1: that's the usual case, and I guess my "happens all the time" was a stretch, now that I'm thinking more about it. But one of the factors courts use in decided whether a liquidated damage clause is enforceable is "whether such an imbalance of bargaining power existed between the parties at the time of the contract, that one party effectively dictated the terms of the contract". Another is "whether the sum is a genuine pre-estimate of the losses that would be sustained". I could imagine cases where liquidated damages were grossly inadequate to cover actual damages (and could have been expected to be grossly inadequate), and where an imbalance of power existed between the parties (with the powerful party trying to enforce the liquidated damages)--I'd think courts would be inclined to throw the clause out.


Posted by: Brock Landers | Link to this comment | 10- 9-09 4:01 PM
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171 (cont.): I think part of the problem here is that the terminology shifts again. In the situation I'm describing, courts don't talk about throwing out "inadequate liquidated-damages clauses", they talk about ignoring "improper limitations on liability".


Posted by: Brock Landers | Link to this comment | 10- 9-09 4:04 PM
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I could imagine cases where liquidated damages were grossly inadequate to cover actual damages (and could have been expected to be grossly inadequate), and where an imbalance of power existed between the parties (with the powerful party trying to enforce the liquidated damages)--I'd think courts would be inclined to throw the clause out.

Yeah, that's the same sort of thing I'd was thinking of as a possible "freak case" in my 160.3. Honestly, while I haven't done the research on this, I'd bet that's a rare enough situation that there's not clear caselaw on it. I'd guess that you're probably right about what a court would do, but I'm not sure how they'd describe what they'd done.


Posted by: LizardBreath | Link to this comment | 10- 9-09 4:05 PM
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173: I think 160.3 was wrong mostly as a matter of terminology--it's just weird to describe that situation as "unambiguously an unenforceable penalty clause". It's an attempted limitation on liability, is what it is.

Terminologically, contractually-specified damages fall on a range of penalties-->liquidated damages-->limitations on liability, depending on the relationship between the amounts of the contractually-specified damages, the expectable damages and the actual damages.


Posted by: Brock Landers | Link to this comment | 10- 9-09 4:13 PM
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Shearer playing at Socrates is really annoying.


Posted by: Minivet | Link to this comment | 10- 9-09 4:23 PM
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174: Huh. I suppose you're right, but it's weird to me to think of that as a continuum -- I can see being unsure whether a clause was a penalty or a liquidated damages clause, but an contractual limitation on liability would, I'd think, be drafted as the sort of thing you couldn't possibly mix up with the other two (and the standard for enforceability of that kind of limitation clause I couldn't tell you offhand). The kind of thing I'm thinking of where you'd see a contractual limitation on liability for breach (rather than negligence) is lost luggage - we're liable up to $250/bag for losing your luggage, regardless of whether the Crown Jewels were in there. That's very clearly not an estimate of the actual damages from losing your luggage, but a recognition of the fact that the airline has no control over the possible magnitude of actual damages, because they can't control what you put in your luggage.

What I was thinking of was a weird case where you had a clause that looked like an LD clause, but was unenforceable because the damages could be expected to be easily ascertainable (which would make it a penalty clause rather than LD) but where the estimated contractual damages were too low rather than too high. That'd be very unlikely, but if it somehow happened, I could imagine the clause getting thrown out and the non-breaching party getting actual damages. But I'd be surprised if the situation ever came up.


Posted by: LizardBreath | Link to this comment | 10- 9-09 4:33 PM
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167

... And there generally aren't fines or criminal sanctions or civil liability for putting these illegal provisions into agreements--worst case scenario, they're just ignored. So they provision is not likely to 'hurt' the landlord. ...

In the example given in the article linked in the post, the presence of the questionable clause in the agreement allowed the defaulting tenant to avoid any penalty at all.


Posted by: James B. Shearer | Link to this comment | 10- 9-09 5:00 PM
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168 170

Tenant's default on lease causes landlord to default on mortgage causes massive damages.


Posted by: James B. Shearer | Link to this comment | 10- 9-09 5:02 PM
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177: Huh? Which example are you talking about? In the main example, it never went to court. And do you mean avoiding penalty or avoiding damages?


Posted by: LizardBreath | Link to this comment | 10- 9-09 5:05 PM
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That is, penalty, in contract law, means "something you don't have to pay". Once you get a court to call it a penalty, you've avoided it. The woman in the example didn't contest the two months rent between when she left and when it was rerented, and didn't contest the $824 'reletting fee' (it's not clear what she actually paid, but if she didn't pay that amount, it wasn't by virtue of crafty legal argument, just by, you know, not paying.)


Posted by: LizardBreath | Link to this comment | 10- 9-09 5:10 PM
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178: Mmmmmaybe. I'd have to actually do some work to figure out if there was a causation problem there.


Posted by: LizardBreath | Link to this comment | 10- 9-09 5:12 PM
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178: no


Posted by: text | Link to this comment | 10- 9-09 5:17 PM
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182 seconded. The tenant would never be responsible for those damages.* So the presence or absence of the penalty there makes no difference. The tenant wouldn't be trying to enforce the penalty while the landlord was arguing that it should be ignored (so that he could collect the losses on his forclosed house), which was the hypo you were looking for. No, the tenant would still (rightly) argue that the penalty was unenforceable, and he'd be liable only for the lost rent.

*I hate to say never, but.


Posted by: Brock Landers | Link to this comment | 10- 9-09 5:25 PM
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180

That is, penalty, in contract law, means "something you don't have to pay". Once you get a court to call it a penalty, you've avoided it. The woman in the example didn't contest the two months rent between when she left and when it was rerented, and didn't contest the $824 'reletting fee' (it's not clear what she actually paid, but if she didn't pay that amount, it wasn't by virtue of crafty legal argument, just by, you know, not paying.)

She didn't pay any damages and then when collection attempts were started her lawyer invoked the federal Fair Debt Collection Practices Act (and similar Texas laws) leading to the collection attempts being dropped.


Posted by: James B. Shearer | Link to this comment | 10- 9-09 5:31 PM
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183

... The tenant would never be responsible for those damages.* ...

Even if the tenant also held the landlord's mortgage?


Posted by: James B. Shearer | Link to this comment | 10- 9-09 5:34 PM
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185: congratulations. I'm tempted to say that I think the answer is "no, not even then"--the tenant/mortgagee would possibly be found liable, but I bet it would be on some theory other than his liability as a tenant under the lease. But I think instead I'll just hang up the gloves and let you have this round.


Posted by: Brock Landers | Link to this comment | 10- 9-09 5:39 PM
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182, 183: Yeah, when I think about it reasonably that's right. Damages for failure to pay a sum of money are that sum of money (plus interest, depending). Consequences of a messed-up cashflow don't come into it.

184: But the FDCPA doesn't have anything to do with the penalty clause. There's no relationship between the penalty clause and her not in the end paying actual damages -- the penalty clause didn't do the landlord any harm, or result in a legal finding that she didn't owe the actual damages.

185: That's impressively convoluted. You know, I've always wondered what prima facie tort is for. If I had facts like that, I'd be tempted to plead it just for the hell of it.


Posted by: LizardBreath | Link to this comment | 10- 9-09 6:40 PM
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187

But the FDCPA doesn't have anything to do with the penalty clause. There's no relationship between the penalty clause and her not in the end paying actual damages -- the penalty clause didn't do the landlord any harm, or result in a legal finding that she didn't owe the actual damages.

Her lawyer was claiming damages from violations of FDCPA presumedly consisting of trying to enforce an illegal clause in the contract.


Posted by: James B. Shearer | Link to this comment | 10- 9-09 7:33 PM
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presumedly consisting of trying to enforce an illegal clause in the contract

No - the article doesn't say that. Reread it if you're unclear. The FDCPTA addresses methods of collecting debts, like harassing phone calls, not debts that are illegitimate in themselves.


Posted by: LizardBreath | Link to this comment | 10- 9-09 7:38 PM
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T


Posted by: LizardBreath | Link to this comment | 10- 9-09 7:39 PM
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||

(What does it mean to pause an inactive thread?)

I'm working for the a client-corporation that is far and away the most vile client I've ever had. Their entire business model, which earned them over $2 billion last year, ought to be criminal. (And a number of states are currently considering whether to prohibit it; evaluating that "risk" is one of the tasks for which we've been engaged.)

It's horrible. I realized that, while I don't actively like most of my clients, I don't really dislike them either--they're parasites, but not evil parasites. But this client is evil. I'm really having trouble doing my job well; I can't stand helping them. I definitely couldn't work like this long-term.

Sorry. Just had to get that out.

|>


Posted by: Brock Landers | Link to this comment | 10- 9-09 7:40 PM
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Well, what the hell do you know--the thread's no long inactive. I guess my pause symbol was useful after all.


Posted by: Brock Landers | Link to this comment | 10- 9-09 7:41 PM
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You rang, says the ex-tobacco lawyer?

I feel much better now that I work for the most annoying bits of the state government.


Posted by: LizardBreath | Link to this comment | 10- 9-09 7:42 PM
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How did you live with yourself?


Posted by: Brock Landers | Link to this comment | 10- 9-09 7:46 PM
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(For the record, I think tobacco companies are providing a valuable service. I enjoy cigarettes, occasionally. Sure, they've had some transparency problems, but no one's perfect.

But this company is evil.)


Posted by: Brock Landers | Link to this comment | 10- 9-09 7:49 PM
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191: Can you think of it as arguing on behalf of certain legal principles (which incidentally happen to benefit Evil)?


Posted by: Di Kotimy | Link to this comment | 10- 9-09 7:52 PM
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Tobacco companies do provide a valuable service by making me think more clearer and relieving the pain in my fingers...


Posted by: Di Kotimy | Link to this comment | 10- 9-09 7:54 PM
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I'm not a litigator, Di. Defending Evil after the fact is one thing--you're just uphoading due process and blah blah blah. But I'm helping Evil plot and scheme. Vomit.


Posted by: Brock Landers | Link to this comment | 10- 9-09 7:55 PM
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upholding


Posted by: Brock Landers | Link to this comment | 10- 9-09 7:56 PM
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But I'm helping Evil plot and scheme

Look at the bright side. At least you get to play for the winning team.


Posted by: CJB | Link to this comment | 10- 9-09 7:56 PM
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Oh. Well I guess you're going to Hell then. Do you consider yourself creative when you plot and scheme?


Posted by: Di Kotimy | Link to this comment | 10- 9-09 7:57 PM
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Speaking of Evil and winning, anyone else just watch the worst Yankee-aiding call in the history of post-season baseball? No wonder everyone in Minneapolis is an anarchist.


Posted by: JP Stormcrow | Link to this comment | 10- 9-09 8:20 PM
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I joke about it, but the tobacco work actually didn't really bother me- at this point, there's full disclosure. (And the case I worked on was goofy. Plaintiffs weren't seeking damages for injuries to their health, they wanted refunds for the light cigarettes they'd bought.)

If you think what you're doing is directly doing harm? Um, IIRC you have a job offer in pocket. Normally, I wouldn't suggest anything like this, and it's not what I'd think of as morally obligatory now. But if you wanted to get principled and lecture your boss about the rights and wrongs of it all, you're in a pretty good spot to do it.


Posted by: LizardBreath | Link to this comment | 10- 9-09 9:11 PM
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189

No - the article doesn't say that. Reread it if you're unclear. The FDCPTA addresses methods of collecting debts, like harassing phone calls, not debts that are illegitimate in themselves.

The article was unclear but that was the impression I got from this:

The collection company also responded to the Martins' demand for damages under the federal Fair Debt Collection Practices Act and similar Texas laws.4 Specifically, the collection company inquired how an attorney could possibly be making claims on behalf of people who did not pay debts. The answer, of course, is that the Martins had an obligation to pay the landlord's actual damages, but not a penalty. The fact that the Martins might be at fault did not entitle the landlord to a $1400 penalty. ...


Posted by: James B. Shearer | Link to this comment | 10-10-09 12:13 AM
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LB, don't kid yourself. The tobacco companies are evil, and your case was evil. Why shouldn't folks who paid money for "light" cigarettes based on false representations get some of that money back?

Of course it can be OK as a lawyer to represent an evil client.

Also, this case might be interesting to anyone (4-5 people?) interested in the legal issues discussed above. Some class action lawyers sued Sprint for the early termination fees Sprint put in its cell phone contracts. They argued that under California contract law the early termination fees were unenforceable because they were effectively penalties unrelated to actual contractual damages.

Sprint took the case to trial. Sprint's main argument at trial was that it actually lost massive amounts of money on the termination fees -- that is, that based on a regular contract-law analysis, it lost far more when customers broke their contracts than it gained from the termination fees.

The Court, in essence, accepted Sprint's evidence. But then it said, basically, "well, but all right Sprint, liquidated damages provisions aren't only unenforceable if they're excessive, they're also unenforceable if they're too low compared to ordinary contract damages. And you've already admitted that the termination fees were designed to be low and to be unrelated to contractual loss. Therefore they're unenforceable." The Court then ordered Sprint to reimburse the entire class of plaintiffs for the early termination fees, or about $70 million.So, Sprint's contracts were ruled illegal based on exactly the same factual theory that Sprint's lawyers undoubtedly had spent years and millions of dollars developing.

But then, to make it even weirder, the Court allowed Sprint to offset the money it should have gotten back from the customers for breaking their contract. That left the total amount of damages for the class at zero, even though the early termination fees were deemed unenforceable.

You can imagine the WTF faces of everyone involved in the case after reading that decision. The law is strange.


Posted by: Robert Halford | Link to this comment | 10-10-09 12:43 AM
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205

But then, to make it even weirder, the Court allowed Sprint to offset the money it should have gotten back from the customers for breaking their contract. That left the total amount of damages for the class at zero, even though the early termination fees were deemed unenforceable.

The really weird thing was that the jury was instructed to determine Sprint's actual damages but arrived at an amount that just happened to be equal to the amount of uncollected contract damages. The judge assumed this was just a coincidence.


Posted by: James B. Shearer | Link to this comment | 10-10-09 2:11 AM
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If she had to rent the place out month to month, she wouldn't have ever rented it at all.

I don't quite understand this. You're not going to get many takers at 10 months because that's a weird time period, with the exception of students on an academic year. So lots of normal people will be put off by that.

Month to month, especially near a beach, would probably be quite popular. Although I guess "by the month" is more likely what people would be looking for, and that's not quite the same thing. It would be a lot of work screening people, but the available pool would almost certainly include most normal people than a 10-month period would get.

But I'm biased, as I've never been on a lease outside of student housing. And I've always been in high-activity markets like NY, DC or the Bay Area. Talking to my landlords - who've pretty much all been roommates, so that's different then just renting a place to a single person alone - they've all worked out various methods of judging based on initial e-mails/in-person visits that have worked out for them so far. But they've been swamped with replies too.


Posted by: eb | Link to this comment | 10-10-09 4:00 AM
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most s/b more


Posted by: eb | Link to this comment | 10-10-09 4:00 AM
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Why shouldn't folks who paid money for "light" cigarettes based on false representations get some of that money back?

Because the argument is disingenuous. People didn't buy light cigarettes because they thought they were less carcinogenic. They bought them because they had a lighter flavor. It's been at least 35-40 years since anybody believed cigarettes were anything but cancer sticks.


Posted by: apostropher | Link to this comment | 10-10-09 5:45 AM
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204: That's badly drafted, but what I understand to be going on there is that the collection company was trying to guilt-trip the Martins' attorney -- "How can you be objecting to our tactics when your client isn't paying their just debts," and the Martins' attorney's response was "We object to your tactics, and she doesn't owe the whole amount, just the actual damages."

205: What made the case bullshit was trying to figure out what the purported overcharge was. Lights have always cost the same as regulars (and, as apo said, haven't been advertised as healthier than regulars for decades -- not within the statute of limitations period by twenty years or so.) So, you've got a bunch of people who think lights are healthier based on no explicit representations by the tobacco companies, paying the same price for lights that they would have paid for regulars. How are you going to figure out what they would have paid for lights if they didn't think lights were healthier?

(And, you know, not that I'm opposed in general to class actions, it's not as if the damages would actually have flowed to the particular smokers who the class counsel purported to have been overcharged.)

The tobacco companies are evil generally, so random bad shit happening to them is generally deserved, but a loss on that case would have been random bad shit, not the law operating in a manner that would have made sense in any non-tobacco context.


Posted by: LizardBreath | Link to this comment | 10-10-09 7:11 AM
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206: No, that's not what happened. The class sued Sprint for the return of the liquidated damages. Sprint made a cross-claim for the actual damages, but represented to the court that it wasn't going to seek recovery of any amount of the actual damages over what the class members had already paid. The judge invalidated the LD clause (this is pretty much exactly the freak case I was thinking of in 160.3 and 176.2), but the jury found actual damages in an amount much greater than the liquidated damages, and on the basis of Sprint's representations, the judge awarded actual damages in an amount sufficient to offset the LS that Sprint would otherwise have had to pay back.


Posted by: LizardBreath | Link to this comment | 10-10-09 7:20 AM
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I've thought for a while that we really need a AAA-like organization for renters. Benefits would include: a lobbying arm for renters, a place to catalog bad landlords, and discounts for rental cars.


Posted by: Unfoggetarian: "Pause endlessly, then go in" (9) | Link to this comment | 10-10-09 7:34 AM
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Oh right, relevance to this thread, such an organization would have lawyers that could write letters for you about bad contracts. Landlords would be afraid of getting their ratings lowered and would thus follow the law without the need for expensive litigation (which the organization could afford occasionally).


Posted by: Unfoggetarian: "Pause endlessly, then go in" (9) | Link to this comment | 10-10-09 7:37 AM
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I quit tobacco several years ago and it was very difficult. I still feel stronger positive affect toward tobacco companies than I do to most of the new anti-smoking groups. Smug little clean-cut 20 year-old telling me not to smoke make me want a cigarette more than any cowboy riding into the sunset ever did.


Posted by: Moby Hick | Link to this comment | 10-10-09 7:41 AM
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People didn't buy light cigarettes because they thought they were less carcinogenic. They bought them because they had a lighter flavor. It's been at least 35-40 years since anybody believed cigarettes were anything but cancer sticks.

Within the category of "cancer sticks", there can't be degrees of more or less carcinogenic?


Posted by: Es-tonea-pesta | Link to this comment | 10-10-09 7:43 AM
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They bought them because they had a lighter flavor.

I buy them because they don't hit me as hard.


Posted by: Di Kotimy | Link to this comment | 10-10-09 7:50 AM
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215: This is one of those things where there's no way to avoid getting weird about the meaning of 'belief'.

If you do surveys, you really don't find many people who say they think lights are safe, or less carcinogenic. And lights really haven't been advertised as safer since sometime in the 60s.

Is it possible that people had an irrational feeling that they don't come out with when you ask them straightforwardly about whether lights are safe that they really must be safer somehow? That the word 'light' makes them think there's less cancer in the box? That's not impossible, and I find it plausible. But that doesn't get you to the price of light cigarettes being a fraudulent overcharge -- start thinking that way about food advertising, and see where it gets you.


Posted by: LizardBreath | Link to this comment | 10-10-09 7:53 AM
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Within the category of "cancer sticks", there can't be degrees of more or less carcinogenic?

I suppose, but it's like saying taking a punch to the jaw from a heavyweight boxer will hurt more than taking a punch to the jaw from a middleweight boxer. Perhaps technically true, but you're probably going to the ER one way or the other.

Does 216 count as pwning this comment?


Posted by: apostropher | Link to this comment | 10-10-09 7:59 AM
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Is it possible that people had an irrational feeling that they don't come out with when you ask them straightforwardly about whether lights are safe that they really must be safer somehow? That the word 'light' makes them think there's less cancer in the box?

And further, that this irrational feeling was explicitly identified by tobacco companies and provided the impetus behind offering a "light" version of cigarettes in the first place?


Posted by: Sifu Tweety | Link to this comment | 10-10-09 8:13 AM
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I'm not talking about being decent people, I'm talking about fraud law. Think about food labeling -- would it make sense to put every food manufacturer on the hook for fraud if their packaging might be such as to give rise to an impression that the food was better for you than it is?

That's the problem with talking about tobacco cases, and with litigating them. The tobacco companies are completely evil, everything they do is evil, they wiil be burning in hell if there's any justice, they enjoy death and pain and suffering. But 'being evil' isn't a source of legal liability. If you're going to claim to have been defrauded, you have to show that someone told you a lie, and in any context outside of tobacco, using language that makes people feel good about a product doesn't count as lying.


Posted by: LizardBreath | Link to this comment | 10-10-09 8:29 AM
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But 'being evil' isn't a source of legal liability.

Well, shoot.


Posted by: Sifu Tweety | Link to this comment | 10-10-09 8:54 AM
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Just thinking of my own habits, the damages issue in that case might not have been based on price per pack but on total packs purchased. I smoke more Camel Lights than I would straight Camels because my body can tolerate it better. (My lungs might disagree in 20 years...) So Light smokers who went that route because they thought they were getting less cancer per pack probably bought more packs, thereby incurring financial damages. You'd probably still win, LB, because figuring our how many more packs would likely be speculative. But I can imagine Joe Marlboro testifying that he used to smoke a pack a week, but went to a pack-and-a-half when he switched to lights. A plausible damage calculation could be made.

They did a similar thing on Food Detectives with snack crackers and low-fat snack crackers. Two groups of volunteers, each told they were screening some pilot episode, each provided identical bags of crackers -- but the bags were marked "low-fat crackers" for one group and just "crackers" for the other. The low-fat group ate something like 50% more crackers than the people who thought they were eating full-fat.

Also, I don't buy that the impression that "Light" means "safer" is somehow "irrational." That's what it implies on most food and beverage labels (excepting things like "light brown sugar" or "light corn syrup"). Just because the cigarette companies quit saying "Lighter is healthier" doesn't mean they weren't intentionally deceiving consumers. If they knew the reasonable perception and did not provide a disclaimer ("Lights are lower in [nicotine?], but have just as much arsenic and tar"), then I can see a perfectly sound fraud claim. I know I handled a criminal case once -- I think federal -- where fraud was proven despite literally true statements to consumers where it was clear from the totality of the circumstances that the defendant intended to mislead and the consumers were in fact misled.


Posted by: Di Kotimy | Link to this comment | 10-10-09 9:13 AM
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My vague memory of some pop. science articles I read on tobacco consumption is that 'lights' smokers tend to inhale deeper, and smoke more. So it's swings and roundabouts re: consumption of tar and other carcinogens.


Posted by: nattarGcM ttaM | Link to this comment | 10-10-09 9:39 AM
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"Made Specially to Prevent Sore Throats."


Posted by: JP Stormcrow | Link to this comment | 10-10-09 9:48 AM
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IANAL and I have missed most of this thread. However, as much as I appreciate the practical necessity of not forcing companies to defend lawsuits based on things they haven't claimed, it seems a shame that companies can deceptively free ride on the generally-accepted definitions of words even when they are not making the claim.

Not really related.


Posted by: Witt | Link to this comment | 10-10-09 10:01 AM
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211

No, that's not what happened ...

Check out footnote 7 on page 24 of the decision.


Posted by: James B. Shearer | Link to this comment | 10-10-09 10:04 AM
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"Ladies' handbag size" seems a strange come-on. As opposed to what?

"Will just about fit in a large suitcase."
"Best hire a pantechnicon."

I can still just remember the cigarette case at my gran's house in the mid-60s: a rather nicely accoutred wooden container, which sat on the book-case. It was kept well-stocked: guests were allowed to help themselves. I used to tip them out and play with them -- I liked the tobacco smell -- but was not really supposed to as this knocked them out of shape. I imagine this practice -- as well as being a good host -- was a way to dodge the vulgarity of the packaging?


Posted by: tierce de lollardie | Link to this comment | 10-10-09 10:08 AM
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222

Also, I don't buy that the impression that "Light" means "safer" is somehow "irrational." That's what it implies on most food and beverage labels ...

I think it means less calories not safer.


Posted by: James B. Shearer | Link to this comment | 10-10-09 10:08 AM
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they enjoy death and pain and suffering

This is false and potentially libelous. The tobacco companies are merely indifferent to others death and pain and suffering. There is no indication that they enjoy it for themselves or others.


Posted by: peep | Link to this comment | 10-10-09 10:11 AM
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I think it means less calories not safer.

Which is of concern for generally health related reasons. People don't buy Light potato chips because they are looking for a lighter flavor. They are expecting the product to have less of something undesirable.


Posted by: Di Kotimy | Link to this comment | 10-10-09 10:25 AM
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On the fraud point, you have to show reasonable reliance on a misrepresentation. You really can't find many people who will claim to believe lights were safer -- I was saying 'irrational' not to impugn people's good sense in relying on 'light' as an implicit representation of healthiness, but to describe someone who will tell you "I don't think lights are safer" but might still have a feeling that they are safer affecting their behavior. It's hard to say someone like that was relying on misrepresentations.


Posted by: LizardBreath | Link to this comment | 10-10-09 10:31 AM
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230

Which is of concern for generally health related reasons. People don't buy Light potato chips because they are looking for a lighter flavor. They are expecting the product to have less of something undesirable.

But it isn't any safer if you end up eating more and getting the same total calories.


Posted by: James B. Shearer | Link to this comment | 10-10-09 10:32 AM
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227: It was kept well-stocked: guests were allowed to help themselves.

I was listening to a radio show hosted by an ex-Steeler and he told one of those ubiquity of smoking stories that are a bit shocking by today's standards. They were talking about the old Three Rivers Stadium and he pointed out that the lockers were all equipped with ashtrays until the early 80s. He said that at halftime Jack Lambert and a few other players would have a smoke. Supposedly they removed them when Lambert retired.


Posted by: JP Stormcrow | Link to this comment | 10-10-09 11:36 AM
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But it isn't any safer if you end up eating more and getting the same total calories.

You mean to say that it isn't any safer if you reduce the risk of a dangerous activity and then increase the incidence of that activity such that your total risk reaches the same level as before? In a moment I'll link to a fascinating post on the concept of a = a.

On the broader issue, I don't think it was unreasonable for people to think that the light cigarettes had less, you know, tobacco, in which case they would be, per cigarette, safer.


Posted by: text | Link to this comment | 10-10-09 11:45 AM
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234

On the broader issue, I don't think it was unreasonable for people to think that the light cigarettes had less, you know, tobacco, in which case they would be, per cigarette, safer.

Less tobacco, less nicotine so people smoked more to get their nicotine fix. Light food, less calories so people eat more to get their calorie fix.


Posted by: James B. Shearer | Link to this comment | 10-10-09 12:12 PM
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222

... If they knew the reasonable perception and did not provide a disclaimer ("Lights are lower in [nicotine?], but have just as much arsenic and tar"), then I can see a perfectly sound fraud claim. ...

This is silly. Since many people have the false belief that organic food is healthier it is fraud to sell organic food without a disclaimer? Or since many people have the false belief that Macs are better than PCs it is fraud to sell Macs without a disclaimer?


Posted by: James B. Shearer | Link to this comment | 10-10-09 12:16 PM
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235: I suspect I'm being trolled, but fine, a reversal of roles. If it turned out that the light chips weren't actually reduced in calorie per chip, that would be an issue right? The perception being, sure, you might eat more chips, but, per chip, the lighter ones are, well, lighter.

Same goes for cigarettes. If the lights are equally harmful per cigarette, that is the issue. Obviously if you smoke more of them, they are more harmful, but that isn't the issue, and I suspect you are being deliberately obtuse here and so fine, you win at that game.


Posted by: text | Link to this comment | 10-10-09 12:35 PM
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Same goes for cigarettes. If the lights are equally harmful per cigarette, that is the issue. Obviously if you smoke more of them, they are more harmful, but that isn't the issue, and I suspect you are being deliberately obtuse here and so fine, you win at that game.

One of the arguments in the lawsuits is that smokers respond to light cigarettes by smoking more. See here for example:

The actions allege that smokers receive the same dose of tar and nicotine from light and low-tar cigarettes as from regular cigarettes because of a universal phenomenon known as "compensation," in which smokers unconsciously adapt their smoking behavior. These behavioral adaptations include inhaling the smoke more deeply, holding it in for a longer period of time, and smoking more cigarettes.


Posted by: James B. Shearer | Link to this comment | 10-10-09 12:52 PM
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inhaling the smoke more deeply, holding it in for a longer period of time

And this goes to the point that, per cigarette, they weren't less harmful. By taking this part out and stating the argument as solely "I smoke more because they're lighter," you mischaracterize it.


Posted by: text | Link to this comment | 10-10-09 1:01 PM
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231 -- I don't know anything about your case specifically, and you probably don't want to talk about it, but most of the light cigarette, low-tar, etc., cases against the tobacco companies weren't based on the common law tort of fraud (for the reasons you point out, fraud can be hard to show on a class-wide basis) but on various unfair competition, false advertising, and deceptive practice statutes. Those statutes are largely designed to prevent deceptive marketing or advertising (even if the marketing isn't exactly strictu sensu fraud, i.e., intentionally false statements explicitly relied upon) of exactly the kind that the tobacco companies engaged in for years. I mean, it's perfectly obvious that the tobacco companies profited for years on the ambiguity between the different meanings of "light" (less heavy, healthier), and it's not unreasonable to think that some of those profits should be disgorged.

On the general issue of the morality of suing the tobacco companies, the elephant in the room is that the "indirect" class actions against the tobacco companies -- fraud, deceptive marketing, etc. -- were developed because the cigarette companies were so successful for so many years at defending against litigation that was more directly related to killing people. So it's not really like there was some other, better, virtuous litigation against the tobacco companies that was more related to health issues and was out there. Nor was there any real legislative attempt to deal with the tobacco problem until the tort lawyers (and some State AGs) pushed the issue. Which isn't to say that the plaintiffs' lawyers involved were saints.

I'm personally totally fine with lawyers defending evil actions. I've done it myself for fun and profit, and I really do think that the law is bigger than the facts of any individual case, and that even very bad defendants can have very good legal arguments that are worth supporting. It's the self-deception that grates on me after a while, even if that self-deception is sometimes psychologically necessary for good lawyering.


Posted by: Robert Halford | Link to this comment | 10-10-09 1:06 PM
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Calling it 'self-deception' is kind of grating as well. I can believe both that the tobacco companies are evil, evil people and that tobacco should be regulated out of profitability, and that a particular action against them was bullshit as a matter of law. Not feeling bad about defending a tobacco case where they were right on the facts (in that the same facts wouldn't have sufficed to support a cause of action against a non-evil defendant) doesn't entail being deceived about their moral qualities globally.


Posted by: LizardBreath | Link to this comment | 10-10-09 1:18 PM
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(And the action I was working on came down to common-law fraud -- it was RICO, mail and wire fraud, which both include the elements of common-law fraud.)


Posted by: LizardBreath | Link to this comment | 10-10-09 1:20 PM
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241 -- Yeah, LB, on reading that again, that sounded like a personal attack on you or your personal situation, which it wasn't meant to be. I do think that there's a fairly serious problem of the liberal law student turned corporate defender that involves a ton of self-deception (hey, I feel good because I just did a pro bono case in landlord-tenant court where I saved a poor guy $300, while spending most of my time working on protecting EvilBehemothCorp from having to pay $300,000,000), but I agree that you can feel good about having a good legal case for a shitty defendant.


Posted by: Robert Halford | Link to this comment | 10-10-09 1:31 PM
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Yeah. The tobacco work was an anomaly for me -- most of what I did was commercial litigation which was one sleazy company wrestling with an equally sleazy company, where I consoled myself by thinking that everyone involved in the litigation sucked equally. But if I'd done more products work, I'm sure I would have talked myself into thinking it wasn't so bad.


Posted by: LizardBreath | Link to this comment | 10-10-09 1:35 PM
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(And thanks for 243 -- my feathers were definitely a little ruffled there.)


Posted by: LizardBreath | Link to this comment | 10-10-09 1:36 PM
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It's the self-deception that grates on me after a while

Notwithstanding the example in 243 I am not sure I see your self-deception point. Is it that you feel that there are liberal law students who think they are public interest lawyers because they do the occasional pro bono case? I suppose there are such people (and since few would describe me as a liberal, I can't speak from person experience). But it seems to me that most young lawyers know what they are doing and are not that self-deluded. And, as you say the law is bigger than the facts of any individual case and this is enough to make it something even liberals are content to do for fun and profit. That's why I am content to do it. While I do not share the view that all corporations are evil (indeed, in my experience, I generally see much more reprehensible actions from individuals acting for their own interests than as agents of corporations), I certainly have represented my share of clients--corporate and individul--who did crummy things. Doesn't mean that they are not entitled to a defense, including a defense to claims unrelated to whatever bad things they have done.


Posted by: Idealist | Link to this comment | 10-10-09 1:46 PM
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I think the self-deception takes a couple of forms. First, there's a tendency to live with, rather than examine, the psychological coping mechanism that develop in representing bad folks. I mean, in cases that are of any significance and don't settle instantly, it's possible to come up with a legal and factual story as to why your client wasn't really that bad. If you're a defense lawyer, that's your job. And in any given case you might be right. But if you're a self-described progressive in the situation of representing corporate actors in their worst possible moments (which is what much of corporate defense litigation is) I think it's important to be self-aware about the underlying contradictions of what you're doing, and that maybe, just maybe, there is a contradiction between your work and progressive values. That doesn't mean you need to stop doing the work, but just to be self aware about it.

Second, I think there's something of a tendency among liberals who become corporate defense lawyers to downplay the importance of the civil legal system (especially the tort system) in checking corporate misconduct. I.e., I'm a good liberal, but that class action lawyer is just sleazy, so I feel good about representing BehemothCorp. The tort system is surely very imperfect, but in many cases it's the only avenue that's realistically open in the United States for checking really bad corporate behavior.

With that said, I don't think that corporations are by any means necessarily evil, not entitled to a defense, or anything like that.


Posted by: Robert Halford | Link to this comment | 10-10-09 2:17 PM
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239

And this goes to the point that, per cigarette, they weren't less harmful. By taking this part out and stating the argument as solely "I smoke more because they're lighter," you mischaracterize it.

My point was the argument in 238 can just as easily be applied to light food.


Posted by: James B. Shearer | Link to this comment | 10-10-09 2:39 PM
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240

... I mean, it's perfectly obvious that the tobacco companies profited for years on the ambiguity between the different meanings of "light" (less heavy, healthier), and it's not unreasonable to think that some of those profits should be disgorged.

Seems unreasonable to me.


Posted by: James B. Shearer | Link to this comment | 10-10-09 2:43 PM
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It's not perfectly parallel -- pretty close, but there's a difference. Lights really do have less of all the bad stuff per cigarette if you smoke them exactly the same way (like, using the FTC standard smoking machine, which is how you measure tar and nicotine). The problem is that, as ttaM said above, people don't just compensate by smoking more cigarettes, they sometimes compensate by smoking the same cigarettes differently -- they drag harder, and hold the smoke in their lungs longer.

So someone eating 'light' food can keep track of how much they're eating by counting cookies and multiplying by the calorie count in each. Someone smoking 'light' cigarettes couldn't necessarily keep track of what they're smoking in the same way, because how much tar they get depends on the manner in which they smoke.

It's complicated, because different people react differently, but the light food analogy isn't perfect.


Posted by: LizardBreath | Link to this comment | 10-10-09 2:48 PM
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246

Notwithstanding the example in 243 I am not sure I see your self-deception point. ...

I think most good lawyers aren't objective about their cases. It is easier and more convincing to make arguments you actually believe.


Posted by: James B. Shearer | Link to this comment | 10-10-09 2:48 PM
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That's true in terms of the merits of your legal arguments -- if you've done a decent job arguing, it's hard not to convince yourself. On the merits of your clients globally, it's easier to maintain some distance.


Posted by: LizardBreath | Link to this comment | 10-10-09 2:51 PM
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250

It's complicated, because different people react differently, but the light food analogy isn't perfect.

Of course it isn't perfect, no anology is perfect. But I don't see a plausible legal rule that says selling light cigarettes is fraud but selling light food is ok.


Posted by: James B. Shearer | Link to this comment | 10-10-09 2:56 PM
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252

That's true in terms of the merits of your legal arguments -- if you've done a decent job arguing, it's hard not to convince yourself. On the merits of your clients globally, it's easier to maintain some distance.

Some distance isn't the same thing as complete objectivity. It seems like in criminal cases many prosecutors convince themselves the defendants are pure evil and have trouble accepting evidence that exonerates them. And I don't think that sort of thing is unique to prosecutors.


Posted by: James B. Shearer | Link to this comment | 10-10-09 3:09 PM
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Maybe light beer is a better comparator.


Posted by: apostropher | Link to this comment | 10-10-09 3:09 PM
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248: and your point was inapt, as shown.


Posted by: text | Link to this comment | 10-10-09 3:18 PM
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I dunno if it works for light beer either. People buy light beer because it's less caloric than its regular counterpart. And isn't that always the case, per beer? Excluding Amstel light; I don't know what to do with that.

People might buy light beer thinking that it's less alcoholic, when that isn't always true. But in that case, bonus.


Posted by: text | Link to this comment | 10-10-09 3:32 PM
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254: From the inside, it's hard not to start disliking the other side of a litigation (often unfairly, I'm sure), but that doesn't mean you think well of your clients, who are often going to be personally difficult. The prosecutor is in the position of being able to get a hate on for the defendants, without having a client whose unreasonableness she's annoyed by (she has a boss, but not a client, other than conceptually).


Posted by: LizardBreath | Link to this comment | 10-10-09 3:44 PM
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Have I mentioned that I don't like anyone?


Posted by: LizardBreath | Link to this comment | 10-10-09 3:46 PM
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256

and your point was inapt, as shown

As shown by whom?


Posted by: James B. Shearer | Link to this comment | 10-10-09 3:47 PM
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259

Have I mentioned that I don't like anyone?

A desirable quality in lawyers and assassins.


Posted by: James B. Shearer | Link to this comment | 10-10-09 3:53 PM
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Text is talking about his 239, as expanded in my 250. The importance of the distinction may make more sense if you focus on the disclosure issue -- someone who wants to eat 200 calories worth of cookies can eat two full-fat cookies, or four Snackwells, and be sure of the calorie count. Someone who wants to ingest no more than 10 mg. of tar can't reliably choose between one 10 mg (as measured by the FTC) cigarette and two 5 mg (as measured by the FTC) cigarettes and know the two options are equivalently damaging, because they'll probably smoke the lighter cigarettes harder and get more tar out of them than the FTC rating would suggest.


Posted by: LizardBreath | Link to this comment | 10-10-09 3:54 PM
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261: I don't usually say LOL, because I rarely do actually laugh audibly while reading. But I did on this one.

I have been thinking about a career change...


Posted by: LizardBreath | Link to this comment | 10-10-09 3:57 PM
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From the inside, it's hard not to start disliking the other side of a litigation

I found myself detesting pretty much everyone. Both sides, and all the lawyers (including myself), and the judges.

One of the first (and last) people I represented was being sued on a contract which plaintiff's attorney knew perfectly well was unenforceable. yeah, the unenforeability was an affirmative defense which we could have waived (through incompetence) but I thought 'is this what law is all about? An effort to use the mechanisms and procedures to try to achieve a result you know is unjust?'. I was working with another, older attorney on another case, and I remember him reminiscing fondly about how he'd used procedural delays and bad faith interpretations of things to avoid producing things which he himself thought were discoverable.

Now, between Scalia's claim that the cross is not a religious symbol, and the custom of knowingly putting unenforceable provisions in contracts simply as a way of gaining an unfair advantage over those with less knowledge and resources and power, I can't say I'm terribly impressed with our legal system.

Okay, I'll stop ranting and shut up again.


Posted by: Michael H Schneider | Link to this comment | 10-10-09 4:32 PM
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Huh. I didn't realize you were an attorney, Schneider.


Posted by: apostropher | Link to this comment | 10-10-09 5:00 PM
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a way of gaining an unfair advantage over those with less knowledge and resources and power

This is as good a definition as I've seen. Ideally you could take these tools and use them against the meanies. But the truth is, it's a slog, difficult and tedious, and rarely is the effort undertaken properly by people who are good at it except where huge bags of money and thus powerful-people-potentially-angry-at-you are involved.


Posted by: text | Link to this comment | 10-10-09 5:03 PM
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I have been thinking about a career change...

Try grad school—it's a foolproof route to happiness.


Posted by: Otto von Bisquick | Link to this comment | 10-10-09 5:07 PM
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They have assassin grad school? Excellent.


Posted by: LizardBreath | Link to this comment | 10-10-09 5:11 PM
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I hear the attrition rate is awful, though.


Posted by: eb | Link to this comment | 10-10-09 5:23 PM
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265: only in the sense that I have a license and degree. I haven't actually done anything in the field for near 30 years.

I hear the attrition rate is awful, though.

Killer exams.


Posted by: Michael H Schneider | Link to this comment | 10-10-09 5:31 PM
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Killer exams.

Whatever you do, do not join a study group to prepare yourself.


Posted by: eb | Link to this comment | 10-10-09 5:34 PM
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Whatever you do, do not join a study group to prepare yourself.

Yes, the moral equivalent of moot court really isn't equivalent at all. It's also important to note the distinction between 'to intern' and 'to inter'


Posted by: Michael H Schneider | Link to this comment | 10-10-09 6:04 PM
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After that soup I just made, I think poisoning might be a fruitful area of study.


Posted by: LizardBreath | Link to this comment | 10-10-09 6:05 PM
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