Online Program: The Racial Wealth Gap: Lending, Credit, and Other Disparities

Cheryl Wade, author of Predatory Lending and The Destruction of the African American Dream, Sarah Ludwig, Executive Director, New Economy Project, and Cathi Kim, Director, Inclusiv/Capital will speak on Thursday, August 13 at 7 pm EDT. Attendance is free but registration is required. The registration link is at https://docs.google.com/forms/d/e/1FAIpQLScxTjViodwGaNG03Q1kEqD85DvhpkNxYbpp968QVzMD9mkrTQ/viewform.

Further pursuit of trolling by Higbee and Associates

by Paul Alan Levy

In past blog posts, I have discussed our efforts to persuade the copyright enforcement law firm headed by Mathew Higbee to concentrate its efforts to pursue copyright infringement claims on behalf of its photographer clients on cases where it has reasonable claims of infringement by actual Internet users who put up his clients’ photographs (and not against the hosts of interactive web sites where the claimed infringements were committed by third parties). I have also decried the firm’s tendency to demand excessive damages payments far above what could likely be recovered in litigation.  The Higbee firm plays on the legal ignorance of its targets as well as on the fact that, generally speaking, it costs more in legal fees to get sound advice, and to defend when defense is meritorious, than to simply pay the demanded ransom.

In several past cases, when the Higbee firm found that it would have to defend its claims against parties who could afford to defend themselves, it has dropped its claims rather than defending its demand letters. We have argued, as a result, that Higbee firm clients who had stood to profit from clearly unreasonable demand letter can be subjected to attorney fee awards when the target had to file a declaratory judgment action to silence the threats. One of the firm’s clients settled our attorney fees application for $10,000; our application for fees against two other Higbee clients is still pending.

In the course of discussing these fee applications, one tack taken by the Higbee firm to discourage us from pursuing attorney fees was to represent that it had taken to heart my criticism of their seeking damages, in the manner of Righthaven, from forum operators whose operators had failed to perfect their DMCA immunity by registering an agent for the receipt of DMCA takedown notices.  Because the requirement of "volition" before an alleged infringed can be held liable provides an alternate, although for less perfect, defense in such cases, the Higbee firm  claimed said that it was no longer pursuing claims against online hosts, based on their users’ alleged infringement. I suspected at the time that the claim about changed positions was false; and in the weeks after we received these assurances, several more hosts have reached out for help addressing Higbee firm demands over hosted photos or hosted deeplinks to photos. The lawsuit that we filed on Thursday against AdLife Communications and Marketing Co. is a case in point.

 

Neil Sobol's Survey of Law Schools Offering Consumer Law Courses

Guest post by Neil Sobol:

As part of an article in which I advocate for the incorporation of consumer law issues in first-year law classes, I requested my research assistant, Spencer Lockwood, to update the consumer law offerings chart reported in  Jeff Sovern's post in 2019. Spencer surveyed 201 ABA accredited law schools via their websites. He organized the data by category: (1) "consumer-related classes," which refers to courses that historically contain consumer law topics, (2) "consumer-specific classes," which refers to course offerings that have "consumer" in their names, and (3) two similarly named and defined consumer clinic categories.

He found that, in total, accredited law schools offer 705 consumer-related classes and 100 consumer-specific classes. In sum, about 48% of them offer at least one consumer-specific class. Moreover, about 10% of schools offer at least one consumer-specific clinic. Because it is likely that some course information is outdated on schools' websites, we request the assistance of the consumer law academy. Please send any corrections to nsobol@law.tamu.edu so that I can update the chart. Any input is greatly appreciated.

Download Neil Sobol Chart_Consumer Law Offerings-Aug 6 2020

 

 

The next coronavirus relief bill and tort deform

Law prof Daniel Hemel (@DanielJHemel) has posted a detailed series of tweets skewering the tort-deform provisions in the Republican-sponsored coronavirus relief bill. I recommend reading these tweets. Hemel begins with the statement that "[t]he liability provisions in McConnell’s 'HEALS Act' do not reflect a serious attempt to address problems with the tort system" and then goes on to demolish any justification for each provision. Go here to read Hemel's tweets.

I have a question. The readers of this blog will generally agree that the liability provisions in the Republican bill stink. But let's say there's a compromise bill that adopts all (or most) of the much more generous Covid relief measures that the House Democrats want but also includes the tort-deform proposals championed by the Republicans. The alternatives might be no bill at all (or no bill for quite a while) or a bill that has considerably less relief for people who desperately need it. Should the compromise bill be adopted?

MCConnell's Orwellian attempt to block a non-existent tidal wave of litigation by consumers against businesses by contributing to a tidal wave that does exist--of cases by businesses against consumers

by Jeff Sovern

Not only does McConnell's coronavirus bill make it much harder for consumers to sue businesses that carelessly infect them with the virus, it also makes it much easier for businesses to sue consumers suffering from COVID. Suppose a consumer sends a letter asking for help with medical bills to a business that infected her with the virus, and says she won't sue the business if she gets that help. If she wouldn't have been able to bring a valid case because she couldn't satisfy the draconian standards established by the bill, the business can sue the consumer for compensatory damages (would there be any?), collect attorney's fees, and in some cases punitive damages. The consumer would be liable even if she never sued, but only sent a letter. That's under section 164. That will certainly give businesses that cavalierly sicken consumers a weapon in case the consumers want to seek help from the companies that injured them. How Orwellian for Republicans to pretend to prevent a tidal wave of litigation that doesn't exist while contributing to another--suits by businesses against consumers--that does.

New study: Vaccines are "remarkably safe"

As the world races to find a safe and effective vaccine against COVID-19, note a study published today in the Annals of Internal Medicine. The study reviewed all vaccines approved by the Food & Drug Administration for the 20-year period ending December 31, 2015. The study's finding:

Over a 20-year period, vaccines were found to be remarkably safe. A large proportion of safety issues were identified through existing postmarketing surveillance programs and were of limited clinical significance. These findings confirm the robustness of the vaccine approval system and postmarketing surveillance.

Read the whole study here.

Online Event Open to All: Racism, Renting, and Redlining: A Conversation on Housing Discrimination & Its Impact on Economic Injustice

In solidarity with the protests that have initiated a national conversation on institutional racism, the St. John’s Law School Student Chapter of the National Association of Consumer Advocates is hosting a two-part online discussion on discrimination in the context of economic justice. Our first conversation will focus on the housing discrimination that continues to harm POC as it perpetuates structural inequality in education, financial services, and wealth-building. The conversation will include the following panelists:

• Fred Freiberg, Executive Director at the Fair Housing Justice Center

• Lisa Darden, Board Member and former undercover tester at the Fair Housing Justice Center; and

• Makedah K. Salmond, Esq., Supervising Attorney at the Tenants’ Rights Unit of NYLAG

Date: July 30th, 2020
Time: 7:00 pm
Co-sponsoring Organizations:
• Black Law Students Association
• Public Interest Center
• Dispute Resolution Society
• New York Real Property Law Journal
• Real Property Law Society
• Mattone Institute
• Coalition of Social Justice

Attendance is free but registration is required. Register at https://docs.google.com/forms/d/e/1FAIpQLSes7mRRGrhnAYsDaypgIyUkqGIfKr0RHGJ66J6xDimuTmhuIA/viewform

OT: Recommendations for Online Teaching

by Jeff Sovern

I served on a faculty committee this summer that prepared a report with tips for online teaching. The report, which may be useful to law professors, is available here. Here's the abstract:

This is a collection of recommendations drawn from a variety of sources, including our colleagues, students, webinars, books, articles, podcasts, and our own experimentation. It is not our expectation that any individual professor would adopt all of these suggestions and indeed no one of us intends to. Instead, we hope that some of these are helpful to you. Some suggestions deal with the nuts and bolts of teaching online while others with how to accomplish broader goals.

The general recommendations are broadly applicable to all courses taught online, while the individual class-type recommendations are intended to complement and augment the general recommendations. Additionally, these recommendations will be revised as we continue to learn from our experiences in online instruction.

The tidal wave of lawsuits is not consumers suing businesses--it's businesses suing consumers

by Jeff Sovern

The argument that businesses should not be liable to consumers whom they carelessly infect with the coronavirus is based on the claim that if Congress does not outlaw such cases, we will see a tidal wave of lawsuits. Thus far, that argument has no basis in reality. In fact, if anything, consumer claims are getting lost in the undertow. A recent Pew study found that the "[c]ivil caseloads dropped more than 18 percent from 2009 to 2017" even though "more than half of all U.S. households experienced one or more legal issues that could have gone to court. . . ."  But there is a tidal wave of litigation going on--only it's a tidal wave of businesses suing consumers. According to the same Pew study, the available data indicate that debt claims now "dominate" state courts, to the point that about a quarter of state civil cases consist of debt collection claims.  It looks as if businesses are winning the fight over access to courts while trying to create the illusion that they are losing.

NCLC warns that OCC proposal would allow banks to evade state usury laws

Today, the Office of the Comptroller of the Currency issued a proposed rule to overturns the “true lender” rule that courts have used since the early 1800s to prevent evasions of state usury laws. The deadline to submit comments on the OCC’s proposal is September 3, 2020.

In a statement, the National Consumer Law Center warned that the proposal would turn state usury laws into a "dead letter" and eviscerate power that states have had since the time of the American Revolution to protect people from high interest rates and predatory lending.

At least 45 states and the District of Columbia have interest rate caps on installment loans. Under the proposal, NCLC explained, "a payday lender or other nonbank lender could ignore state interest rate limits as long as either a bank ‘[i]s named as the lender in the loan agreement,’ or the bank ‘[f]unds the loan’ -- that is, the payday lender launders the loan through the bank. This proposal would allow payday lenders to resume the rent-a-bank schemes that were shut down by bank regulators in the mid-2000s, and would embolden today’s high-cost predatory rent-a-bank lending by online installment lenders.

“The proposed rule would purport to overturn the ‘true lender’ doctrine, which allows courts to prevent evasions of usury laws by looking beyond the technical form or fine print of a loan transaction to examine which party has the predominant economic interest in the loan. The true lender doctrine has long been used to prevent payday lenders and other high-cost lenders from laundering their loans through banks, which are not subject to state interest rate caps.

The OCC proposal is here. The NCLC statement is here.

McConnell bill would give businesses immunity from liability if they follow limited guidelines, all to avoid a flood of cases that don't exist

by Jeff Sovern

Politico has a summary of the McConnell bill here. It immunizes schools, colleges, charities, and businesses that follow public health guidelines from liability for negligently infecting consumers with the virus. But many public health guidelines are written in terms of what is feasible or possible, meaning that the entities subject to the bill could argue that protections are not possible or feasible (e.g., "Modify the alignment of workstations, including along processing lines, if feasible, so that workers are at least six feet apart in all directions . . . when possible . . . ."). Meanwhile, businesses justify the bill to prevent a flood of lawsuits that hasn't materialized. And it's not as if no one has been injured by the virus: more than 3.7 million Americans have caught the virus and more than 140,000 have died. Oh, and businesses have a long history of predicting floods of lawsuits that haven't materialized.  If businesses don't want to be liable for carelessness, they should simply be careful. For more specifically on immunity for universities, go here. 

Becher & Dadush paper on relationships as consumer products

Shmuel I. Becher of Victoria University of Wellington and Sarah Dadush of Rutgers have written Relationship as Product: Transacting in the Age of Loneliness. Here's the abstract:

Behavioral economists and social psychologists distinguish between two main types of relationships. One type is “exchange relationships,” which are based on mutual benefit and economics principles. The second type is “communal relationships,” which are based on caring, kindness, support, and affection.

The law has been slow to incorporate this imperative distinction. Importantly, it overlooks the reality in which businesses are selling consumers not only products or services, but also “communal” or “social” relationships. We dub this phenomenon “relationship as product.”

Relationship as product leads to various negative outcomes. It makes consumers more likely to behave emotionally rather than rationally, and to lower their guards. It encourages consumers to spend more money, time, and attention-energy on products and services. It can also contribute to a biased and unhealthy perception of human relationships. At a societal level, relationship as product damages trust and decreases overall well-being, and has negative effects on workers, the environment, and a competitive economy. By selling relationship as product, firms also undermine the solidarity ties that bind communities.

This Article marks a first attempt to explore the problematic aspects of relationship as product from a legal and policy perspective. Part I of this Article illustrates how firms have made relationships a product. Part II explains the forces that account for the rise of relationship as product, including loneliness and social isolation, deteriorating levels of trust, the pursuit of well-being, and exploitation of cognitive biases. Part III explains why relationship as product can be viewed as a defective product, which harms individual consumers and society at large. Part IV makes recommendations for expanding consumer law and policy to address these challenges.

More on the failure of disclosure laws: Chen paper explores how Australian payday lenders obscure mandatory warnings

Vivien Chen of the Monash University - Department of Business Law & Taxation has written Online Payday Lenders: Trusted Friends or Debt Traps? 43 University of New South Wales Law Journal (Advance 2020). Here's the abstract:

The recent Senate inquiry into credit and hardship underscored the prevalence of predatory conduct in the payday lending industry. The rise of digitalisation has increased consumer access to high-cost payday loans and the ensuing risk of debt spirals. The article examines the marketing strategies of online payday lenders, revealing that the effect of mandatory warnings on the risk of harm are often diminished through website layouts. At the same time, lenders commonly offer fast, convenient cash in tandem with blogs that provide advice on managing finances and living well on a budget, obfuscating the distinction between advertising and altruistism. The findings highlight the need for regulatory enforcement of laws aimed at safeguarding vulnerable financial consumers. Emerging challenges from the increasing digitalisation of payday lending and social media marketing raise the need for reforms to address gaps in the regulatory framework.

 

Interesting environmental-law-oriented nuisance case from the Third Circuit

I thought our readers might want to look at an interesting new decision from the Third Circuit about common-law nuisance under Pennsylvania law. The decision is Baptiste v. Bethlehem Landfill Company. The first two paragraphs of the opinion offer a synopsis:

Robin and Dexter Baptiste brought an action against the Bethlehem Landfill Company on behalf of a class of homeowner-occupants and renters claiming interference with the use and enjoyment of their homes and loss in property value caused by noxious odors and other air contaminants emanating from the Bethlehem landfill. They brought these claims under three state-law tort theories: public nuisance, private nuisance, and negligence.

The U.S. District Court for the Eastern District of Pennsylvania granted the company’s motion to dismiss the complaint. The District Court held that too many residents were similarly affected to sustain a private claim for public nuisance, that the odors affected too many people and the landfill was too far away from them to constitute a private nuisance, and that the plaintiffs had failed to identify a duty of care to maintain a negligence claim. We disagree, and therefore, we will reverse and remand.

Critique of the ALI's draft Restatement of the Law of Consumer Contracts

Law prof Mark Budnitz has written The Restatement of the Law of Consumer Contracts: The American Law Institute's Impossible Dream. Here is the abstract:

The American Law Institute has been attempting to write a Restatement of the Law of Consumer Contracts since 2012. The proposed Restatement has gone through ten drafts and has generated considerable controversy among the ALI membership as well as opposition from both consumer advocacy organizations and business associations. The project is an impossible dream. Companies continually take advantage of advances in technology to make major changes in the consumer marketplace. Consequently, any Restatement will be seriously out-of-date as soon as it is approved by the ALI. Furthermore, there is a paucity of relevant cases and a lack of consensus among the courts that have issued opinions. Consequently, if approved, a Restatement will significantly influence the future development of case law. This would be unfortunate because there are other factors contributing to the inadequacy of the draft that is currently under review. The Reporters' drafts are based on an incomplete description of the consumer marketplace that fails to reflect the reality in which consumers and businesses engage in online transactions. Scholars have questioned their collection and analysis of case law. The Reporters ignore the insights of social science. They have an unduly constricted view of the factors the ALI should consider in drafting a Restatement. A major flaw is the insistence on "black letter" rules that embody a "blanket consumer assent" approach that creates a presumption that consumers engaging in online transactions are bound to standard contract terms. Alternatives to a Restatement should be considered.

Court Denies Injunction to Enforce the Trump Family Nondisclosure Agreement

by Paul Alan Levy

The New York state trial judge who initially granted a temporary restraining order against both Mary Trump and Simon & Schuster declined late today to extend that order into a preliminary injunction. Faced with a welter of arguments put forward by both the defendants in the case as well as by the Reporters Committee for Freedom of the Press and by Public Citizen as amici curiae, Justice Greenwald appears to have accepted almost all of the reasons argued on the defense side of the case in denying the injunction. 

At several points in the opinion, he rules that the non-disclosure clause in the agreement settling the family will contest is far narrower than plaintiff Robert Trump had argued; while at other points he appears to say that, if the clause is as broad as Robert Trump had contended, it would be too broad to be enforced consistent with sound public policy. We filed our amicus brief because NDA’s have been getting more and more out of control; short of a legislative solution, judicial skepticism toward broad nondisclosure agreements, and the refusal of equity courts to issue injunctions simply because the NDA contains language endorsing injunctive relief as a remedy, provides welcome support for free speech as well as, we may hope, discouraging parties who hope to use such contracts them to keep the truth about their misconduct forever suppressed.

Read FDA's warnings on dangerous hand sanitizers

Lots of folks are using hand sanitizer these days. Sometimes it is hard to find hand sanitizers on the shelves or on-line, and there might be an inclination to buy any brand you find. Because there are a bunch of dangerous brands on the market containing methanol (which can  be toxic, even life-threatening when ingested), I thought I'd post the FDA's warnings about methanol-containing hand sanitizers. 

The impending eviction (and homelessness) crisis

This article by Renae Merle discusses in detail the impending eviction crisis as eviction moratoriums begin to expire. Something has to be done to help tenants in crisis, and it can't be extending the patchwork of moratoriums, which doesn't deal with the underlying problem: that people out of work can't afford the rent.

NCLC statement on CFPB's new rule rescinding payday loan protections

The Consumer Financial Protection Bureau today announced a final rule rescinding payday loans protections that had been issued in October 2017. Among the provisions rescinded are those limiting unaffordable loans that trap families in cycles of debt.

The CFPB also announced that it will implement the provisions of the payday loan rule that prevent lenders, including those offering high-cost longer term loans, from hitting people with repeated bounced payment fees.

The National Consumer Law Center's Lauren Saunders issued this statement:

“At this moment of health and economic crisis, the CFPB has callously embraced an industry that charges up to 400% annual interest and deliberately makes loans that put people in a debt trap. The CFPB has no basis for gutting the heart of common sense protections that merely required payday lenders to do what responsible lenders already do: ensure that the borrower has the ability to repay. The evidence to support the debt trap of payday loans is overwhelming and the CFPB’s flimsy excuses for repealing protections do not stand up.

“It is truly shocking that the CFPB, an agency created to protect families from financial abuses, is bending over backwards to side with the most scurrilous lenders over the consumers it is supposed to protect.

“The CFPB has not only repealed critical protections against dangerous payday loans, but its May template for no action letters for banks that make small dollar loans, together with bank regulator guidance that could open the door to single-payment bank loans, could be used to encourage banks to get back into the bank payday loan business. Bank payday loans were a debt trap, and banks should stay out of that business even with the CFPB inviting them back in.

“While the CFPB is allowing the payment provisions of the payday loan rule to go into effect – and the CFPB should immediately ask the Texas court to lift the stay of those provisions – that is cold comfort. The payment rules prevent predatory lenders from subjecting people to multiple fees when payments bounce. It is shocking that we even need rules to prevent that conduct, but curtailing just one dangerous impact of unaffordable loans over 100% APR does not make those loans safe.

“With the CFPB abandoning its role in protecting families, Congress must act now to extend to all families a national rate cap of 36% — which is broadly supported by Americans across the ideological spectrum. Congress should pass HR 5050/S.2833, the Veterans and Consumers Fair Credit Act, which would extend the Military Lending Act's 36% rate cap to veterans and all consumers.

“In the absence of reform by the federal government, states should adopt or strengthen their interest rate caps. States have had usury laws since the time of the American Revolution, and state interest rate caps are the strongest protection we have today against predatory lending.”

In light of the Supreme Court decision, CFPB ratifies earlier agency actions

As established by the Dodd-Frank Act in 2020, the Consumer Financial Protection Bureau was headed by a director who could the President could remove only for cause (inefficiency, neglect of duty, or malfeasance in office). The CFPB’s first director was appointed on January 4, 2012. On June 29, 2020, the Supreme Court held in Seila Law LLC v. CFPB that the Act’s removal provision violates the separation of powers but that it is severable from the rest of the statute. As a result, the Court ruled, “The agency may therefore continue to operate, but its Director, in light of our decision, must be removable by the President at will.” (See earlier blog post, here.)

The Court did not address whether a prior action taken by the CFPB could be invalidated on the basis that the agency, when the action was taken, was led by a director unconstitutionally protected from removal. The Court remanded the case for the lower courts to decide that issue in the Seila Law case; other cases raise the same issue. In an effort to avoid litigation and “to resolve any possible uncertainty,” the CFPB today issued a notice ratifying a number of actions from 2012 through the date of the Court’s decision. The agency cited case law holding that an agency, through ratification, may “purge[] any residual taint or prejudice left over from” a potential defect in an earlier action. The notice states that it is ratifying the earlier actions “out of an abundance of caution” and that the notice is not a concession that the actions would not be valid absent ratification.

The CFPB’s notice, including the list of ratified actions, is here.

Effort to Suppress Trump Niece's Book Shows the Need to Construe NDA's Narrowly

by Paul Alan Levy

The lawsuit filed by Robert Trump against his niece, Mary Trump, seeking to block her from publishing a book that apparently has several damning facts to disclose about Robert’s brother, and Mary Trump’s uncle, our Dear Leader Donald J. Trump, is based on a non-disclosure clause that was part of the global settlement of the Trump family's litigation over the estate of Fred Trump twenty years ago. Robert Trump obtained a TRO against Mary Trump and her publisher, Simon & Schuster; the latter part of the TRO was overturned on appeal the very day that it was entered; but the preliminary injunction hearing is set for Friday.  Simon & Schuster has moved up the publication date to Bastille Day.

 Simon & Schuster opposed the TRO, supported by amici from book publishing and media industries, which stressed the breadth of the NDA and argued that it is against public policy, not to speak of the doctrine against prior restraints, to issue injunctions enforcing such broad NDA’s. But looking at the settlement agreement itself, I was struck by how narrow the NDA really was. Consequently, Public Citizen has submitted our own amicus brief in the case, urging the Court to apply the general rule that waivers of constitutional rights should be construed narrowly, and that, so far as we can see, none of the disclosures of which the lawsuit complains appear to run afoul of the NDA as properly construed. We also argue that, because the plaintiff has proclaimed that he needs an injunction against Simon & Schuster to get effective relief (considering that Mary Trump has already fully disclosed her accusations to the publisher), the propriety of Robert’s proposed interpretation of the NDA turns on whether it can support a prior restraint against the publisher. (Mary Trump's brief is here).

"Severability" to the Rescue Again: A Further Note on Today's Supreme Court Robocalling Decision

Steve Gardner has given a great and succinct summary of todays decision in Barr v. AAPC. The Telephone Consumer Protection Act lives, minus its obnoxious exception for government debt collection robocalls. What's not to like about that bottom line?

I want to make an additional point about the significance of the decision. For the second time in a week, it is the Supreme Court's application of "severability" doctrine—the practice of invalidating only the specific part of a statute that creates a constitutional problem, rather than the whole statute—that has turned a potentially bad ruling into one that has an upside for consumers.

Last week’s example was the Seila Law decision, which held that the statutory provision protecting the CFPB director from being fired at will by the President was unconstitutional, but severed that provision from the rest of the laws giving authority to the CFPB. The result is that the agency remains intact, but the director can now be terminated by the President at any time.

In the long run, consumers would probably be better off with an independent CFPB, and consumer interests would be best served if Congress had the authority to structure regulatory agencies in ways that limit political interference with the agencies’ conscientious performance of their duties. But at least the decision may allow a pro-consumer President to unceremoniously rid the CFPB of a director who lacks commitment to the agency’s consumer-protection role—a scenario that could possibly play out next January.

This week, the Barr decision adopts a rigid view of the First Amendment that is likely to be less accommodating to legitimate, pro-consumer regulations of commercial speech and activity than the approach Justice Breyer advocates in his partial dissent. (Thankfully, however, Justice Kavanaugh’s opinion goes out of its way to emphasize that the Court’s approach does not condemn laws like the Fair Debt Collection Practices Act, which, as part of regulation of commercial activity, incidentally regulate the communications that are an inseparable part of that activity.)

But regardless of what one thinks about the debate between Kavanaugh and Breyer over the best reading of the First Amendment, the Court’s severability analysis has the effect of improving the protections offered by the TCPA by eliminating the loophole Congress ill-advisedly opened when it exempted government-debt-collection robocalls from the Act.

Looking ahead, both Barr and Seila Law give good reason for optimism about the result in the next major showdown over severability: California v. Texas, in which the Court will decide next Term whether the entire Affordable Care Act must fall if Texas, and the Trump Administration, are correct in arguing that its individual mandate became unconstitutional when Congress zeroed out the tax consequences for noncompliance.

Justice Kavanaugh’s emphasis in Barr on the strong presumption in favor of severability, and the Chief Justice’s focus in Seila Law on whether Congress would have preferred no law at all to one with an unconstitutional provision severed, both make it highly unlikely that the Court will toss out the entire ACA even if it concludes the individual mandate has become unconstitutional. If the ACA survives, consumers will again benefit enormously from the Court’s approach to severability.

As Justice Kavanaugh put it today: “[T]he tail (one unconstitutional provision) does not wag the dog (the rest of the codified statute or the Act as passed by Congress). Constitutional litigation is not a game of gotcha against Congress, where litigants can ride a discrete constitutional flaw in a statute to take down the whole, otherwise constitutional statute.” If that approach holds, the ACA should be safe.

So three cheers for severability! The government-debt-collection exception is dead; long live the TCPA!

Supreme Court bans debt collection robocalling to cellphones

by Stephen Gardner

Today, the Supreme Court held that collecting government debt by robocalling cellphones didn’t deserve special First Amendment treatment. In Barr v. American Assn. of Political Consultants, Inc., the Court held that a 2015 amendment to the Telephone Consumer Protection Act, which allowed cellphone robocalls to collect federal debts (such as student loans and mortgages), gave unconstitutionally favorable treatment to federal debt collection over other types of speech.

The provision was dead from the first sentence of Justice Kavanaugh’s opinion: “Americans passionately disagree about many things. But they are largely united in their disdain for robocalls. The Federal Government receives a staggering number of complaints about robocalls—3.7 million complaints in 2019 alone. The States likewise field a constant barrage of complaints.”

Justice Kavanaugh proceeded to answer two questions. First, was allowing debt collectors to make robocalls, but prohibiting all other types of robocalls, allowed by the First Amendment? Second, if not, could the debt collection provision be severed?

Answering the first question, Justice Kavanaugh found that the restriction on speech was content-based and thus subject to strict scrutiny. “The Government’s stated justification for the government-debt exception is collecting government debt. Although collecting government debt is no doubt a worthy goal, the Government concedes that it has not sufficiently justified the differentiation between government-debt collection speech and other important categories of robocall speech, such as political speech, charitable fundraising, issue advocacy, commercial advertising, and the like.”

Answering the second question, Justice Kavanaugh determined that the debt collection provision was easily severed. “With the government-debt exception severed, the remainder of the law is capable of functioning independently and thus would be fully operative as a law. Indeed, the remainder of the robocall restriction did function independently and fully operate as a law for 20-plus years before the government-debt exception was added in 2015.”

So good news for debtors, especially those in the throes of the COVID-45 pandemic.

AUTHOR’S NOTE:

In this summary, I say “Justice Kavanaugh” instead of “the Court” because this case resulted in four separate opinions, dissenting and concurring, with the ultimate result being that six justices (the CJ, the conservative four, and Justice Sotomayor) agreed that favoritism given federal debt collection was bad and that it could be severed.

For those keeping score, here’s the breakdown of the four opinions, from the Syllabus:

Kavanaugh, J., announced the judgment of the Court and delivered an opinion, in whichRoberts, C. J., and Alito, J., joined, and in which Thomas, J., joined as to Parts I and II.Sotomayor, J., filed an opinion concurring in the judgment. Breyer, J., filed an opinion concurring in the judgment with respect to severability and dissenting in part, in which Ginsburgand Kagan, JJ., joined. Gorsuch, J., filed an opinion concurring in the judgment in part and dissenting in part, in which Thomas, J., joined as to Part II.

CFPB Directors Now Under President's Thumb

The Supreme Court issued its ruling in Seila Law v. CFPB today, holding by a 5-4 vote that the Congress violated the principle of separation of powers by placing the Consumer Financial Protection Bureau under a single director removable by the president only for cause. Chief Justice Roberts wrote the majority opinion, with Justice Kagan dissenting on behalf of herself and Justices Ginsburg, Breyer, and Sotomayor.

By a different majority (the Chief Justice and Justices Alito and Kavanaugh, together with the four dissenters on the separation-of-powers issue), the Court held that the for-cause-removal provision was severable from the remainder of the statutory provisions conferring authority on the CFPB. Thus, the agency may continue its operations going forward, but the president will now have the authority to fire the director at will.

Even so, the Court held that the specific issue giving rise to the case—whether a civil investigative demand must be set aside because it was issued while the tenure-protection provision was in place—requires a remand for the lower courts to determine whether the agency’s current leadership has validly “ratified” it. Justices Thomas and Gorsuch disagreed with the majority’s severability analysis and would have held that the civil investigative demand could not be enforced, period.

Chief Justice Roberts’s opinion was issued the same day he joined the Court’s more liberal judges in holding that adherence to precedent required the Court to strike down a Louisiana abortion restriction that was identical to a Texas law the Court held unconstitutional four years ago, before Justice Kennedy’s retirement from the Court and his replacement by Justice Kavanaugh. The Chief Justice disagreed with the earlier ruling in the Texas case but today ruled that the principle of treating “like cases alike” required him to vote to strike down the Louisiana law.

In Seila Law, Chief Justice Roberts also had a lot to say about precedents, but his effort was devoted to devising grounds to distinguish them rather than follow them. He reasoned that because prior precedents upholding limits on presidential removal power did not specifically address the constitutionality of an agency headed by a single, tenure-protected principal officer (as opposed to an agency headed by a tenure-protected multi-member commission, or an office headed by a single, tenure-protected “inferior” officer), those precedents did not “resolve[] whether the CFPB Director’s insulation from removal is constitutional.”

Instead, he found direction in long-discredited dicta in an older case, Myers v. United States, which he read to adopt the broad rule that the president must have power to remove executive officers at will. The Court’s later opinions, in Roberts’s revisionist reading, created only two narrow exceptions to this rule for agencies headed by multi-member commissions and for inferior officers. Although the Chief Justice declined to “revisit” those precedents, at least not “today,” he also declined to extend them.

Justice Kagan’s dissent, by contrast, offered a completely different reading of the Court’s precedents. In her view, the Court’s past opinions do not establish a “‘general rule’ of ‘unrestricted removal power’ with two grudgingly applied ‘exceptions.’” Instead, they “give Congress wide leeway to limit the President’s removal power in the interest of enhancing independence from politics in regulatory bodies like the CFPB.”

Justices Thomas and Gorsuch, on the other hand, would have done what Chief Justice Roberts was unwilling to do “today,” and would have overruled the precedents allowing “exceptions” to the principle of unfettered presidential removal power.

As far as the CFPB is concerned, one thing is settled, at least for now: The president can now remove the CFPB’s director for any reason, or no reason. That result, in the long term, is not a good one for an agency that requires the independence to stand up to powerful financial forces in the interest of consumers. Repeatedly over the last four years we have seen how officials who can be fired without cause by the president—such as the Attorney General—abandon principle and the rule of law when they get in the way of the president’s own interests, or those he favors.

In the medium term, however, the first CFPB director likely to be fired without cause may be the one installed by President Trump, Kathy Kraninger—if the president is not reelected. Consumer advocates may cheer that result. But even if that happens, it will not be the only fallout from today’s opinion.

To begin with, the remand to determine whether the civil investigative demand in the Seila Law case must be enforced is likely to be the first of many cases in which parties argue over whether today’s opinion requires some action taken by the agency to be set aside. Such litigation is likely to become its own cottage industry.

In addition, we have seen in other areas how the approach of limiting precedents to their particular circumstances, treating them as never-to-be-extended “exceptions” to other principles, may eventually lead the Court to treat them as doctrinal orphans ripe for overruling because subsequent developments in the case law have undermined their rationales. Advocates of expanded presidential power, and industries that would perceive a benefit in eliminating independent regulators, are likely to press on for overruling of the Court’s decisions allowing independent multi-member commissions.

Whether they ultimately succeed may depend on how the Court’s composition changes in the next few presidential terms. In the long run, it may be Seila Law that turns out to be the orphan, but surely there will be plenty of litigation in the meantime.

 

A Shot Across the Bow for Copyright Trolls: Forcing Higbee Clients to Pay for Frivolous Demand Letters and Intimidation Tactics

by Paul Alan Levy

As I have discussed in several previous posts, Mathew Higbee has built up a significant copyright enforcement business that depends on the issuance of threatening demand letters that are followed up by a small army of “compliance resolution specialists” who nag and threaten large awards of damages, the issuance of judgment liens, imposing short deadlines before the matter will be “escalated” to “the litigation team.” In self-congratulatory interviews. Mathew Higbee brags about how successful these threats are, and based on a staff recruitment video, it appears that the Higbee staff operates under daily goals that may be as high as $100,000 per day (this image
appears at the 51 second time mark on the video linked above). Because the Higbee interviews reveal that his earnings are split evenly with this clients, the clients, too, have a substantial incentive to engage his services. Some of the claims the Higbee firm pursues are valid ones, although, even then, the firm tends to take advantage of its pro se targets by demanding payments far higher than it is likely to gain in litigation.

Generally speaking, the targets of this demand letter practice don’t know their rights under copyright law, and would likely have to pay so much in lawyer fees just to assess their potential exposure, not to speak of defending themselves in court, that it makes financial sense for them to simply pay what is demanded, to make the problem go away, then to stand up for their rights. I have concluded that the Higbee firm deliberately, and cynically, preys on the high cost of copyright lawyers to extract undeserved payments for itself and its clients. When the tactic is employed to threaten liability on grounds too unreasonable to succeed in litigation, these tactics provide a sound basis for invoking the “considerations of compensation and deterrence”  that support awards of attorney fees in copyright cases.