This may be a hard truth to many of us: “Obtaining an award against a party that fails to appear in an arbitration may prove more costly and time-consuming than appearing in court.”
The backstory is that we represented a plaintiff in a breach action under a contract that called for binding arbitration. Shortly after the defendant filed its responsive pleading denying our allegations and laying out its defense, the defendant laid off all its staff, fired the lawyer representing it in the arbitration, and shut down all business operations. Soon the creditors swooped in and scooped up whatever assets remained.
While this was happening, we contemplated at least exploring the idea of securing an arbitral quasi-default judgment that could be used in any subsequent bankruptcy or other proceeding. However, we soon learned that given the arbitration rules we were operating under, the notion that we could swoop in with a quick default award turned out to be a fantasy. The arbitrator, as it happens, required an evidentiary hearing, affidavits, and briefs that would have cost nearly as much as a mini-trial. We were most decidedly worse off than had we been in state or federal court.
This has led us to ponder whether it’s worth including in standard arbitration clauses language that alters the operation of otherwise-default arbitration rules. The result of our pondering is Redline work product for binding arbitration provisions, intended for insertion after a standard mandatory binding arbitration clause. These new provisions mimic default judgment rules that apply in court.
Lawyers drafting online terms of use/service and privacy policies are well-advised to establish a record that allows the client to demonstrate the existence of such terms and the date they were in effect. Such a record will prove quite handy in future litigation. See, eg, Kinney v. YouTube, LLC (Cal. Ct. App. 2018) (YouTube forced to rely on sworn testimony of engineer responsible for posting YouTube terms of service to prove that plaintiff click-accepted a version of the YouTube terms that included a synthetic one-year statute of limitations).
The Wayback Machine is one way to establish just such a record. Launched in 2001 by the Internet Archive, a nonprofit based in San Francisco, California, the Wayback Machine is a digital archive of the entire Internet. At this site, one can upload or capture a webpage on a specific date and time, and then retrieve it to prove its existence on that date and time. Go here to see a copy of the affidavit that the Internet Archive manager uses for establishing an evidentiary foundation for archived webpages. Courts have upheld the admissibility of such evidence. See United States v. Gasperini (2nd Cir. 2018).
The Wayback Machine should be used, not just for preserving a record of clients’ terms, but for preserving a record of online terms that clients entered into, or of online documents that traditionally signed agreements reference in URLs embedded in the document. In fact, the best practice in this situation would be to create the Wayback Machine entry and email that to the contract counterparty after the deal concludes.
Clients with employees scattered far and wide pose challenges when it comes to selecting choice of law and forum in employee non-disclosure agreements or PIIAs (Proprietary Information and Inventions Agreements). Some clients may prefer to require arbitration for disputes governing the employment relationship (eg, wage and hour disputes, discrimination or retaliation claims, etc), while preserving the ability to go to court with respect to IP infringement claims, non-compete obligations, and breach of confidentiality.
Requiring a remote employee far from the state of your client’s HQ to litigate in the HQ state for such actions could prove problematic. One should expect a motion contesting jurisdiction on forum non conviens grounds. What’s more, juries may be sympathetic to an employee hauled in front of a court far from home at the behest of an employer’s one-sided contract of adhesion.
One possible workaround is to preserve the ability to sue in the employee’s home court. The lawyers of Redline have posted clauses and redlined variations for use in employee NDAs and PIIAs that attempts to walk this fine line.
Moral philosophers object to the ethic of zeal, also known as the fiduciary duty and the principle of partisanship, because it requires lawyers to ignore any adverse effects that lawful actions beneficial for clients may have on third parties. For example, when representing a landlord, a lawyer may not refrain from evicting a tenant family that is behind on the rent for fear that the children will wind up on the street. Because harms inflicted on third parties normally bear on moral assessments, philosophers contend that lawyers who ignore them are amoral, immoral, or morally stunted.
Critics of zealous representation have won important battles. Where the Model Code of Professional Responsibility once canonized the requirement “to represent [a] client zealously within the bounds of the law,” the Model Rules of Professional Conduct now addresses zeal in a brief comment on diligence which emphasizes that a lawyer need not press for every advantage. Zealous representation has acquired a bad name.
This article offers a defense of zealous representation that is grounded in the common law of agency. The central points are, first, that the requirement to promote clients’ interests exclusively disciplines the common law by ensuring that principals’ rights and obligations are changed only with their consent; and, second, that the requirement facilitates the division and specialization of labor by shoring up principals’ confidence in agents who possess specialized knowledge and skills. Critics of the ethic of zeal have neither recognized these functions nor taken proper account of them when encouraging lawyers to give non-clients’ interests greater weight. … The many lawyers and law professors who have written about the ethic of zeal bear more responsibility for the persistence of the debate than the philosophers who have criticized the profession from the outside. One cannot reasonably expect non-lawyers to have explored the ethic of zeal’s roots in agency law when lawyers and law professors, who should have known better, ignored them.
But philosophers do bear some responsibility for the widespread belief that a life spent helping people with legal problems cannot be fulfilling or morally justified. Scorn for lawyers comes through most clearly [by those] who accuse them of living in a simplified world, of refusing to grapple with moral dilemmas, or of being morally stunted. In fact, the fiduciary duty is the most morally demanding duty imposed by the common law. It requires lawyers to be altruistic. They must act solely for the benefit of clients, even to their own detriment if the need arises. Law is a helping profession, and the practice of law can be as worthwhile, fulfilling, and moral as any other line of endeavor which has the primary consequence of making people better off. It is by design, not by accident, that the virtues of agency—loyalty, obedience, diligence, and trustworthiness—are moral ones. To be a good lawyer, one must commit oneself to a code and be strong enough to do what the code requires, even when one would much rather do anything but.
Many lawyers take a belt-and-suspenders approach to clauses that are intended to transfer copyright ownership from the developer-vendor to the customer with respect to the customer’s deliverables it is paying for. “Let’s call it an assignment,” they say, and “let’s also call it a work for hire, just in case.”
The problem here is that in certain circumstances, it can be crucial to know with objective certainty whether copyright has been assigned, or whether ownership of it passed automatically via work-for-hire doctrine under applicable copyright law (such as the US Copyright Act’s definition of work made for hire in section 101).
If the former, post-termination rights may apply, giving the party assigning copyright the right to rescind the assignment and take it back for free (albeit only after a considerably long period of time). If the latter, the transfer of ownership is automatic and cannot be rescinded.
That said, it’s not always clear whether work for hire rules will apply. The key is preserving the transfer of title in a way that best protects the customer.
Solutions to this problem can be found here at Redline.
