In our recent discussion on his blog about the appropriate cost of legal documents for startups (which he argues is zero), Bill Carleton posed an interesting question about the role of lawyers in the early lives of startups.

Bill reasons in his post that startups are in a somewhat unique situation — at least compared to businesses in other contexts requiring legal services, such as acquisitions — because their legal needs are standard. According to Bill, “[E]ntrepreneurs do not want the relevant legal documents – charter, bylaws, stock subscriptions, assignments of invention – to be unique or to feel customized. They want them to read like everyone else’s.”

In fact, this attitude reflects a general “ecosystem of efficiency.” Commenting on the role of lawyers, Bill states that “lawyers need to participate in that ecosystem of efficiency; if they do not, entrepreneurs and the ecosystem will find ways to bypass them.” Then he asks “Is a startup ecosystem without lawyers a good thing or a bad thing?”

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Yesterday the U.S. Supreme Court vacated a decision by the Oklahoma Supreme Court, which held that the “existence of an arbitration agreement in an employment contract does not prohibit judicial review of the underlying agreement.” The Supreme Court disagreed and held that a dispute as to a contract’s enforceability was a question for the arbitrator, not a court.

The case, Nitro-Lift Technologies, L.L.C. (2012), involved two employment contracts that contained binding arbitration provisions. Alleging that two of its former employees had breached the confidentiality and noncompetition agreements they had signed, Nitro-Lift Technologies served a demand for arbitration on them. The employees filed suit in Oklahoma, asking the court to declare the restrictive covenants null and void. On review of the trial court’s dismissal of the case, the Oklahoma Supreme Court held that enforceability of the contracts was an issue for a court to decide, and it further held that the restrictive covenants violated Oklahoma’s public policy.

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One of my favorite memes from the interwebs is “You’re doing it wrong.” To quote the Urban Dictionary, it’s “what you would say to someone who is failing it miserably,” for example, a soccer player standing on his head (no hands!), a pickup driving down a boat ramp into the water head first, President Bush holding the phone upside down, carpooling, parenting, sunscreen, football, cycling, … well, you get the point.

I’ve had some interesting interwebs conversations about the law business, including one on my blog that included this comment from Ken Adams: “As I read the closing two paragraphs of your post, the final words of The Count of Monte Cristo came to mind: ‘Wait and hope.’ Not a particularly promising sentiment when it comes to law practice!” Here are the last two paragraphs he was talking about:

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Monday night I put the following question to Bill Carleton in a comment to an older piece on his blog:

Bill: I revisited this piece because I’ve been thinking about your discussion with Ken [Adams] about whether the benefit of contract standards lies in increasing quality vs. increasing transaction efficiency/lowering costs. Commoditizing contract drafting should drive down costs significantly, whether your aim is lowering costs or increasing efficiency.

But why does the cost of basic legal documents need to be zero, even for startups?

You can read Bill’s response here and my response to his response here.

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Earlier this year I wrote Can the Crowd Produce a Decent Contract? in response to some back and forth between Ken Adams and Bill Carleton about the topic on their blogs. In the comments to my post, Ken expressed skepticism, but another comment, by Max Mednik, suggests that crowd-sourcing can “up-vote” contracts with the best quality contract language.

Up-voting contract language. Now that sounds interesting. So I’d like to try an experiment in up-voting. Quora seems like a good platform to invite people to submit contract language for the crowd to vote on, so I’ve done just that. If you’d like to play, click on this link to go to my question “What’s the best anti-assignment provision in a contract ever?” and drop in a suggested clause. Then we’ll let the crowd decide whether it has the chops to be the best ever.

I’ve already taken the plunge and submitted a provision (which, truth be told, is probably lifted from Tina Stark’s awesome work, Negotiating and Drafting Contract Boilerplate). At least do me a solid and give me a jump on the competition!

I’ve written on occasion about the effectiveness of electronic communications to create binding contracts. For example, in Contracts Quiz: Is This Email Settlement Binding? I discuss a recent case in which a court found that an exchange of emails created a binding settlement agreement, and “NO LIMIT” + “Awesome!” = Contract Modification considers a pithy instant message conversation that modified a written contract. Not all electronic communications that purport to have legal consequences are effective, however.

Venkat Balalsubramani wrote about a recent case where an email exchange was held not to create a contract in Email That Says “Done … thanks!” Doesn’t Transfer Copyrights — MVP Entertainment v. Frost. Here’s an excerpt from Venkat’s description of the facts:

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I noticed via a post yesterday on the ADR Prof Blog that the Supreme Court has granted certiorari in an arbitration case that I characterized in a post earlier this year as probably the case most affected by the Supreme Court’s recent arbitration decisions (i.e., Stolt-Nielsen v. Animal Feeds and AT&T Mobility v. Concepcion). This will be the third time for the case to make its way to the Supreme Court.

My initial reaction to Concepcion was that it’s not a bad deal for consumers because the tradeoff AT&T had to make to ensure that it wouldn’t be subject to a class action was to provide consumers with better relief than they would likely receive in court. As a (rather cynical) consumer who would expect to receive very little in a class action suit, that seems like a fair tradeoff, as I noted in AT&T Mobility v. Concepcion: Is Class Arbitration Dead?.

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I read a fair number of Missouri contracts cases for the blog and to stay abreast of the law, and I’ve noticed that Missouri appellate judges often cite ITT Commercial Finance Corp. v. Mid-American Marine Supply Corp., 854 S.W.2d 371 (Mo. banc 1993), which has been referred to as the bible for summary judgment motions (a Shepard’s search shows it’s been cited over 2,000 times). Missouri Supreme Court Rule 84.04 is also cited frequently (about 1,400 times). References to ITT Commercial Finance Corp. are generally routine and are found in the standard of review section. Citations to Rule 84.04, however, are never good and the judges are often clearly irritated.

Rule 84.04 sets out the requirements for appellate briefs. The rule’s requirements seem simple enough, at least to the untrained eye (I don’t do appellate work), but parties often run afoul of the rule. Generally, the court merely notes the non-compliance, but then moves on with its analysis of the merits of the appeal: “Although Appellant fails to comply with the requirements of Rule 84.04 because … ” Other times, one of the parties is clearly trying to use the rule offensively and the court states something like, “Respondent asserts that Appellant’s brief should be stricken for failure to comply with Rule 84.04. Appellant’s brief will not be stricken because it sufficiently apprises this Court of his points on appeal.”

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Here’s a contracts quiz for you. Two parties, Southwest and Winterer, are attempting to work out an agreement about ownership of a couple of adjacent parcels of property and Southwest files a petition for partition. After mediation and other discussions, the attorney for Winterer sends the following email to the mediator:

Here is Winterer’s offer:

• Purchase Southwest’s interest in both parcels for $325,000.00;
• Southwest deliver clear marketable fee simple title to both parcels via warranty deed;
• Closing to take place at a title company of our choice within 30 days of signed Agreement;
• Both parties split the past due tax obligations and Southwest pays for ½ of the 2010 taxes, up to date of closing;
• Both parties dismiss their claims in the Partition suit with prejudice;
• Southwest and Winterer execute a document containing mutual releases, non-disclosures and nondisparagement agreements.

And, of course, both parties split your fee.

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