CL&P Blog

Alaska Supreme Court Rejects Debt Collectors' First Amendment Defense

by Deepak Gupta

With increasing frequency, debt collectors accused of engaging in abusive tactics in the context of consumer collection litigation have been raising a novel defense based on the Petition Clause of the First Amendment, which guarantees a right of access to the courts. They argue that their conduct constitutes protected petitioning activity and is thus completely immune from liability under the Petition Clause, and the Noerr-Pennington doctrine that developed out of it. In the last few weeks, I've seen new notices of constitutional challenges raised along those lines in several federal district courts.

In May, I flew out to Anchorage to argue the issue in the Alaska Supreme Court, on appeal from a lower-court decision dismissing a consumer's case on petition-clause grounds. (You can find our briefs here and here.)

I'm pleased to report that, on Friday, the Alaska Supreme Court ruled that debt collectors who employ unfair or deceptive tactics during collection lawsuits are not shielded by the First Amendment. The decision is the first appellate ruling on the issue by any court nationwide.  As I say in the Public Citizen press release about the case, "the Alaska Supreme Court’s ruling sends the message that debt collection companies can’t get away with abusive tactics simply by hiring lawyers. The court rejected a dangerous new immunity defense that would have created a gaping hole in consumer protection law."

Our case arose out of an attempt by an Anchorage collection agency to sue Robin Pepper, a mentally disabled woman, without providing her with proper notice. The agency sent papers to a nonexistent address, misrepresented to the court that Pepper was competent, and tried to get a default judgment against her. Pepper, represented by Alaska Legal Services, then brought a separate lawsuit, alleging that the collection agency’s practices violated the state Unfair Trade Practices Act. The collection agency asked the court to dismiss Pepper’s case on the theory that its litigation conduct was protected by the First Amendment, and the lower court agreed. Alaska Legal Services asked Public Citizen to handle the case on appeal.

The Alaska Supreme Court broadly rejected the debt collector’s immunity defense, ruling that the First Amendment’s petition clause does not extend to conduct that was unfair, deceptive, and in violation of the Unfair Trade Practices Act. Quoting our brief, the court ruled that debt collectors have “no legitimate interest in pursuing collection litigation without notifying debtors, or in seeking to default incompetent debtors without notice to their lawyers or guardians.”

Court to Greenmailers: Drop Dead

by Stephen Gardner

A bane of honest class action lawyers (and there are plenty of them, the vast majority) is the creature that I call a greenmailer -- a lawyer who objects to a good class action settlement only in hopes of getting some fees out of it, without a care for improving the settlement itself. (Some call these weasels "professional objectors," but I don't like that term because it suggests that outfits such as Public Citizen are "unprofessional" objectors. Quite the opposite, in fact.)

Today we see a federal court opinion that warms our hearts and brings goofy grins to our faces.

U.S. District Judge James M. Rosenbaum issued an order denying objectors' request for fees. In addition to being a substantively excellent decision, it is also one of the most entertaining and readable opinions to emit from the judiciary in some time.

You know it's not going to go well for objectors when the opinion starts out, "The remoras are loose again."

And it gets worse from there. (A personal note: While on a fishing boat, I saw a pelican that had lit on the transom of the boat in search of nibble -- because pelicans will eat damn near anything -- grab a remora that the captain had tossed to it, but immediately spit it out. Now, I'm not saying that a pelican would spit out these lawyers as well, although it's worth noting that it's possible.)

The Judge, in an "egregious paraphrase of Winston S. Churchill," noted that, "Seldom in the field of securities litigation was so little owed by so many to so few."

He goes on. Noting that the objector-remoras' request for fees was "a pleading which may charitably be described as disingenuous," the Judge found it "preposterous that any legitimate lawyer would charge $74,500 to prepare an eight-page submission, and submit it tardy to boot."

As the Judge also noted, "Objectors' request and their motion ill-befit attorneys admitted to the bar."

It ended no better for the objector-remoras than it began, with the Judge concluding that they "are entitled to an award equal to their contribution . . . nothing."

May it displease the Court, huh?

Chrysler Assumes Post-Bankruptcy Product-Liability Claims

by Adina Rosenbaum

In a reversal of its position in the bankruptcy proceeding, Chrysler has agreed to assume liability for people injured after the Chrysler bankruptcy by vehicles sold before the bankruptcy.

As background, in late May and early June, Public Citizen represented a bunch of consumer organizations in objecting to the Chrysler bankruptcy sale because the sale documents purported to sell Chrysler "free and clear" of product liability claims. We particularly got involved to represent the interests of future claimants -- that is, the claims of people who would be injured or killed in accidents that occurred after the bankruptcy but were caused by defects in Chrysler vehicles sold before the bankruptcy. The bankruptcy court approved the sale free and clear of such future claims, and I argued the issue in front of the Second Circuit. Within minutes after that argument ended, the Court announced that it was upholding the sale for substantially the same reasons as the bankruptcy court and that opinions would be forthcoming. Four days later, we filed a petition for certiorari.

Illinois sues Wells Fargo for Discrimination

Illinois Attorney General Lisa Madigan filed a Complaint on July 31 alleging that Wells Fargo violated state fair lending and consumer protection laws in its mortgage operations.  The 62-page complaint elaborates in great detail the compensation systems that induced Wells Fargo loan officers to steer prime borrowers to subprime loans.  The complaint also alleges that Wells Fargo engaged in marketing campaigns targeted at African-Americans to sell them subprime mortgages, and that foreclosures by Wells Fargo are now falling hardest on Blacks in Chicago and throughout Illinois. 

Meanwhile on July 2 Federal District Court Judge Benson Legg denied Wells Fargo's motion to dismiss the City of Baltimore's lending discrimination complaint, and discovery is now proceeding on that suit.

Senator Specter Introduces Bill to Overrule Twombly & Iqbal

by Brian Wolfman

Senator Arlen Specter has just introduced this bill to reestablish the notice-pleading standards of Federal Rule of Civil Procedure Rule 8 as interpreted by the Supreme Court in Conley v. Gibson, 355 U.S. 41 (1957). As plaintiffs' lawyers are aware, the Supreme Court overruled the relevant part of Conley in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and made its point more emphatically this past Supreme Court Term in Ashcroft v. Iqbal,  129 S.Ct. 1937 (2009). Many plaintiffs' lawyers, particularly civil rights and consumer rights lawyers, believe that Twombly and Iqbal will make it more difficult to stay in court at the motion-to-dismiss stage of a case before discovery can be taken. The operative portion of Senator Specter's bill is short and sweet:

Except as otherwise expressly provided by an Act of Congress or by an amendment to the Federal Rules of Civil Procedure which takes effect after the date of enactment of this Act, a Federal court shall not dismiss a complaint under rule 12(b)(6) or (e) of the Federal Rules of Civil Procedure, except under the standards set forth by the Supreme Court of the United States in Conley v. Gibson, 355 U.S. 41 (1957).

The Blog of the Legal Time has this nice write-up.

Denny's: Public Health Enemy # 1

by Steve Gardner

The Center for Science in the Public Interest filed suit today in the Superior Court of New Jersey in Middlesex County, seeking to compel Denny's to disclose on menus the amount of sodium in each of its meals and to place a notice on its menus warning about high sodium levels. CSPI is working with the New Jersey firms of Galex Wolf, LLC and Williams Cuker Berezofsky.

The great majority of Denny's meals is dangerously high in sodium, putting its customers at greater risk of high blood pressure, heart attack and stroke.

Most Americans should consume no more than 1,500 milligrams of sodium per day, according to the Centers for Disease Control and Prevention. But at Denny's, the great majority of its meals contain more, and in some cases, several times more. Some meals at Denny's provide more than 4,000 or 5,000 mg of sodium—more than most adults should consume in three days. Diets high in sodium are a major cause of high blood pressure, which in turn is a major cause of heart disease and stroke, the first- and third-leading causes of death in the United States.

As my boss (CSPI’s co-founder and Executive Director) Mike Jacobson put it, "Denny's is slowly sickening its customers. For those Americans who should be most careful about limiting their sodium, such as people middle-aged and older, African-Americans, or people with existing high blood pressure, it's dangerous to eat at Denny's. Denny's customers deserve to be warned about the considerable health risk posed by many of these meals."

The plaintiff, Nick DeBenedetto, is a 48-year-old resident of Tinton Falls, NJ, who has eaten for many years at Denny’s restaurants in East Brunswick and Brick, NJ. Nick takes a prescription medication to control his high blood pressure and at home does not cook with salt or use the salt shaker. Some of his favorite Denny's items, such as Moons Over My Hammy or the Super Bird turkey sandwich, contain far more than 1,500 mg of sodium—even without soup, salad, fried onion rings, or other side dishes.

"I was astonished—I mean, literally floored—to find that these simple sandwiches have more salt than someone in my condition should have in a whole day," Nick says. "It's as if Denny's is stacking the deck against people like me. I never would have selected those items had I known."

Public Citizen Releases Statistical Survey of Public Interest Cases in the Latest Supreme Court Term

  The Supreme Court's October 2008 Term ended June 29th, when the Court released the final opinions of the Term. In an attempt to quantify the Court's decisions, Public Citizen's Supreme Court Assistance Project has gone beyond its usual Watch List to conduct a statistical survey of the Court's treatment of public interest cases.

Our survey--prepared by Public Citizen's current Supreme Court Fellow Leah Nicholls--measures how often the Court and each of the Justices decided in favor of expanding individual and environmental rights versus contracting those rights. Via both text and graphs, it examines cases in four categories:

• Access to Courts and Remedies
• Civil Rights
• Constitutional Rights, and
• Environmental Claims.

The report concludes with a brief discussion of the opinion-drafting assignments in the Term's most important public-interest cases. We hope you find the survey interesting and useful.

Public Citizen Litigation Group Gets a New Director

On July 1, 2009, Allison Zieve became the new director of Public Citizen Litigation Group. Allison replaces Brian Wolfman, who had been with the group for nineteen years, five of them as its director. Brian moves on to the faculty of Georgetown University Law Center, where he will be co-director of the Institute for Public Representation clinic (a position recently vacated by David Vladeck, the new head of consumer protection at the FTC and himself a Public Citizen attorney for many years).

Allison's practice at the Litigation Group has focused on health and safety matters, federal preemption, open government, class action fairness, due process issues, and the first amendment. She has argued four cases before the United States Supreme Court, including two recent preemption cases—Riegel v. Medtronic, Inc., 128 S. Ct. 999 (2008), and Warner-Lambert v. Kent, 128 S.Ct. 1168 (2008)—and has spoken and published articles on the preemption of state-law damages actions, tobacco regulation, and the Freedom of Information Act, and taught courses as an adjunct professor of law.  Allison is also now the director of the Litigation Group’s Alan Morrison Supreme Court Assistance Project.

Allison joined the Litigation Group as a staff attorney in 1994, after practicing in California for several years. She received her undergraduate degree from Brown University in 1986 and her law degree from Yale Law School in 1989.

Massachusetts Supreme Court Strikes Class Action Ban, Rejects Texas Law

by Deepak Gupta

Just before the holiday weekend, the Massachusetts Supreme Judicial Court issued an opinion in Feeney v. Dell Inc., holding that a statutory right to participate in class action lawsuits may not be be foreclosed by a provision in a consumer contract compelling individual arbitration. The court reached that conclusion based not on unconscionabilty doctrine, but on Massachusetts public policy. It emphasized the strong state policy in favor of class actions and relied on cases such as the First Circuit's decision in Kristian v. Comcast Corp., 446 F.3d 25, 54 (1st Cir. 2006), which reject class action bans because of their interference with consumers' ability to vindicate statutory rights: "Allowing companies that do business in Massachusetts, with its strong commitment to consumer protection legislation, to insulate themselves from small value consumer claims creates the potential for countless customers to be without an effective method to vindicate their statutory rights, a result clearly at odds with our public policy."  The decision joins the rest of the state and federal appellate courts in holding that the Federal Arbitration Act does not preempt its holding, relying on the analysis of the Ninth Circuit and the Illinois Supreme Court.

The Feeney opinion is also noteworthy for its choice-of-law analysis. The Dell contract at issue specified that Texas law--which appears to allow class action bans--would apply.  The court held that Massachusetts' fundamental policy in favor of class actions for small-value consumer claims outweighed Texas's interest in blocking consumers' access to the courthouse doors.  As the court put it, "[w]e likewise have little trouble concluding that the interest embodied in this policy--the protection of large classes of consumers and the deterring of corporate wrongdoing--is materially greater than Texas's interest, which the defendants identify as 'minimizing its companies' legal expense.'"  Massachusetts joins a growing chorus of courts that reject corporate efforts to use choice-of-law clauses to enforce otherwise impermissible class bans.  Another recent example of this trend is the Third Circuit's decision in Homa v. American Express.

California's 17200: Have rumors of its death been greatly understated?

by Stephen Gardner

Yesterday, the California Supreme Court issued an opinion, Arias v. Superior Court, that seems to have gutted any hopes of a representative action under California Business & Professions Code § 17200, holding:

[W]e construe the statement in section 17203, as amended by Proposition 64, that a private party may pursue a representative action under the unfair competition law "only if the party complies with Section 382 of the Code of Civil Procedure" to mean that such an action must meet the requirements for a class action.

So, to bring a 17200 case, you must have suffered "injury in fact" and must have lost "money or property" (again, thanks to Prop. 64) and you have to bring it as a class action. Which means getting certified, giving notice, etc. The Court decided against a strict reading of Prop. 64, which would have required a rep plaintiff to meet the requisites of a class action without actually bringing the case as a class action.

Thus, I don't see that there is now a lick of difference between a representational plaintiff, who must also bring suit as a class rep, and any other class rep, except to the extent that the standing requirements as a rep plaintiff under 17200 are stricter than those for many class reps. Bummer.

The case was issued  with a companion case, Amalgamated Transit Union v. Superior Court, which holds that representational plaintiff status can't be assigned to another.

But, who would want that, since it confers effectively no benefit?

I gotta go sit shiva for consumer rights in California now.