Harvard Law Review to publish Wilf-Townsend article: Assembly-Line Plaintiffs

Daniel Wilf-Townsend of Chicago has written Assembly-Line Plaintiffs, Forthcoming in the Harvard Law Review. Here is the abstract:

Around the country, state courts are being flooded with the claims of massive repeat filers. These large corporate plaintiffs leverage economies of scale to bring tremendous quantities of low-value claims against largely unrepresented individual defendants. Using recently developed litigation-analytics tools, this article presents the first nationwide study of these “assembly-line plaintiffs,” examining millions of cases across hundreds of jurisdictions. It documents the pervasive nature of this litigation, finding that in many court systems just the top ten private filers account for between one fifth and one third of all civil litigation.

This pattern raises serious concerns. Drawing on existing empirical literature and a sample of 1,000 recent case dockets, the article describes how these cases turn state courts into near-automatic claims processors for large corporations, transferring assets from mostly absent defendants without significant scrutiny of the underlying claims. These defendants, moreover, are often particularly vulnerable low-income consumers or members of other marginalized groups. And although many concerns raised by this litigation overlap with those related to unrepresented litigants more broadly, the structural features of assembly-line litigation—its one-sidedness, high volume, and low claim value—present distinctive challenges. The article concludes by considering a few specific potential reforms designed to meet those challenges: assessing a surcharge on frequent filers as a form of congestion pricing; enabling common defenses to be asserted as affirmative causes of action to facilitate aggregation; and moving courts away from one-case-at-a-time adjudication toward a more investigative, administrative-agency-like model.

(Slow) Progress on nomination of Chopra for CFPB director

In February, President Biden nominated FTC Commissioner Rohit Chopra as director of the Consumer Financial Protection Bureau. Yesterday evening, the Senate voted 49-48 along party lines to advance his nomination to the Senate floor from the Senate Banking Committee. A confirmation vote could come next week.

Hawkins & Penner essay about advertising, racial steering, and lending

Jim Hawkins of Houston and Tiffany Penner have written Advertising Injustices: Marketing Race and Credit in America, 70 Emory Law Journal 1619 (2021). Here is the abstract:

Access to affordable credit played a central role in the Civil Rights Movement. But today, racial and ethnic minorities oversubscribe to high-cost lending products like payday loans and underuse more affordable credit options that traditional banks offer. These trends remain even when controlling for demographic variables like income, credit score, and education. While research verifies that these disparities exist, little work explains why.

This Essay argues that advertising entrenches these racial inequities. Two empirical studies we conducted of advertising by banks and payday lenders suggest that payday lenders steer African Americans and Latinos to their products while banks market to whites. For instance, though African Americans make up only 23% of payday lending customers, 35% of the “model” customers featured in advertising on these lenders’ websites depict African Americans. Meanwhile, almost 30% of mainstream bank websites featured no African American models. Almost 75% featured no Latino models. Only 3% did not feature a white model. Even after the outcry over racial injustice in 2020, banks did not appreciably increase the representation of people of color on their websites.

This needs to change. We argue that lenders themselves are the first and simplest source for racial justice in advertising credit. Both payday lenders and banks can easily ensure that their advertising reflects the communities they serve. Congress and the Consumer Financial Protection Bureau also have a role to play. Amendments we propose to the Equal Credit Opportunity Act, the Community Reinvestment Act, and the regulations that implement them call for advertising that welcomes people of color to affordable credit sources.

In consumer class action against Walmart, Eighth Circuit holds that right to enforce arbitration agreement was waived by Walmart's litigation conduct

Here's how the Eighth Circuit, in its brand-new decision, McCoy v. Walmart, described the merits of the consumer class action before it: "Debbie McCoy purchased Walmart gift cards as Christmas presents. The cards turned out to be worthless, however, because one had been deactivated and the other had no balance remaining. McCoy, seeking to represent a nationwide class of disgruntled gift-card purchasers, sued Walmart."

After many months of defending the case on its merits, Walmart then invoked an arbitration agreement, saying that, under the Federal Arbitration Act, the case didn't belong in court at all. The question was whether by “substantially invok[ing] the litigation machinery rather than promptly seeking arbitration," Walmart had waived any right it had to arbitrate. The answer, according to the Eighth Circuit, was "yes."

Our readership may find the opinion worth reading, as it contains a compact discussion of the considerations for determining waiver by litigation conduct. Note also that the Eighth Circuit's opinion cements that court's earlier rulings that the waiver question should be decided by the court not an arbitrator.

Finance Professor McNulty paper on consumer protection settlements

James E. McNulty a finance professor at Florida Atlantic University has written Consumer Protection Settlements: Theory and Policy. Here's the abstract:

Lawsuits have a deterrent effect, but this is mitigated if settlements are routine. Regulators and judges should consider that a firm contemplating predatory activity directed at financially unsophisticated individuals might have built an estimate of settlement costs into their analysis of the net present value of the “project.” This suggests that choosing not to settle to establish a precedent would be an appropriate regulatory policy, especially in cases involving egregious behavior. Hence, while private settlements may be Pareto optimal, this notion does not apply to public consumer protection class action settlements. Asymmetric information is a major factor in consumer protection litigation, but the consumer protection regulator has an information advantage; this can allow regulators to represent the class effectively. We develop these issues by considering theories of the settlement process in the context of a pivotal case. We provide suggestions for theoretical research on consumer protection class actions, an underdeveloped area of the literature.

John Oliver on Housing Discrimination

Here. As usual, he reports the facts in an engaging way.

New Ninth Circuit ruling on Federal Arbitration Act preemption

The Ninth Circuit issued a decision today in Chamber of Commerce v. Bonta. The Ninth Circuit write summaries of its opinions for public consumption. As the Ninth Circuit puts it, a summary "constitutes no part of the opinion of the court. It [is] prepared by court staff for the convenience of the reader." The following summary provides a synopsis of the majority opinion authored by Judge Charles Lucero (a Tenth Circuit judge sitting by designation) and a partial dissent authored by Judge Sandra Ikuta:

The panel reversed, in part, the district court’s conclusion that California Assembly Bill 51 is preempted by the Federal Arbitration Act; affirmed the district court’s determination that the civil and criminal penalties associated with AB 51 were preempted; vacated the district court’s preliminary injunction enjoining AB 51’s enforcement; and remanded for further proceedings.

AB 51, which added § 432.6 to the California Labor Code, was enacted with the purpose of ensuring that individuals are not retaliated against for refusing to consent to the waiver of rights and procedures established in the California Fair Employment and Housing Act and the California Labor Code; and to ensure that any contract relating to those rights and procedures be entered into as a matter of voluntary consent, not coercion. Other provisions of the California Code, specifically Labor Code § 433 and Government Code § 12953, render violations of § 432.6 a misdemeanor offense and open an employer to potential civil sanctions. The district court concluded that AB 51 placed agreements to arbitrate on unequal footing with other contracts and also that AB 51 stood as an obstacle to the purposes and objectives of the Federal Arbitration Act (“FAA”). The district court preliminarily enjoined enforcement of § 432.6(a)–(c) as to arbitration agreements covered by the FAA.

More on Alavaro Bedoya's nomination as an FTC commissioner

Following up on Jeff's post from yesterday about my colleague Alvaro Bedoya's nomination to the FTC, for more information go here and here. 

Bloomberg: Biden to nominate Georgetown prof and privacy expert Alvaro Bedoya for FTC

Here. Given the FTC's role as the leading federal agency on privacy issues, there is value in having a privacy advocate on the Commission. If confirmed, Bedoya would get Rohit Chopra's seat, assuming Chopra is in turn confirmed to lead the CFPB. 

Webinar: The Rise in Debt Collections Litigation and What States can Do

The Aspen Institute Financial Security Program and Pew will hold a webinar on Thursday, October 28 at 1:00 pm ET on the debt collections litigation system and ways to create better outcomes for people. Here is the description:

The system for collecting unpaid debts is broken. One in three American adults had debt in collections prior to the pandemic in 2019 -- and during the pandemic almost half of Americans reported facing serious financial problems. The leading cause for debt collectors to contact consumers for non-loan debt include medical bills, telecom bills, and utility bills -- and many times, people are unaware they owe a debt until a collector calls.

The consequences of burdensome debt are clear: consumer debt threatens people’s financial security by making it harder to stay housed, obtain credit, and build wealth. What is far less discussed is this: for 68 million people across America, the average amount in collections was less than $2,000.

Some states and advocates are pioneering ways of fixing the broken system of debt collections litigation. To do this, they must first understand the common ways the system fails individuals, and the state and federal solutions to ensure that debt is legitimate; that defendants know they are being sued; and that judgments do not permanently damage debtors’ financial security.

Register here.

Markup Study finds "loan applicants of color were 40%–80% more likely to be denied than their White counterparts"

Here, by Emmanuel Martinez and Lauren Kirchner and headlined "The Secret Bias Hidden in Mortgage-Approval Algorithms." Excerpt:

An investigation by The Markup has found that lenders in 2019 were more likely to deny home loans to people of color than to White people with similar financial characteristics—even when we controlled for newly available financial factors that the mortgage industry for years has said would explain racial disparities in lending.

Holding 17 different factors steady in a complex statistical analysis of more than two million conventional mortgage applications for home purchases, we found that lenders were 40 percent more likely to turn down Latino applicants for loans, 50 percent more likely to deny Asian/Pacific Islander applicants, and 70 percent more likely to deny Native American applicants than similar White applicants. Lenders were 80 percent more likely to reject Black applicants than similar White applicants. These are national rates.

* * *

We sent our complete analysis to industry representatives: The American Bankers Association, The Mortgage Bankers Association, The Community Home Lenders Association, and The Credit Union National Association. They all criticized it generally, saying the public data is not complete enough to draw conclusions, but did not point to any flaws in our computations.

Becher & Benoliel article: Dark Contracts

Samuel Becher of Victoria University of Wellington and Uri Benoliel of Ramat Gan Law School have written Dark Contracts. Here is the abstract:

Millions of consumers are routinely subject to non-transparent consumer contracts. Such contracts undermine fundamental contract law notions. They leave consumers uninformed and disempowered. They also encourage unethical behavior and undercut the ability of legal and meta-legal forces to discipline firms.

The legal treatment of non-transparent consumer contracts is undertheorized and partial in scope. This Article develops a new holistic framework for understanding these opaque consumer contracts. To conceptualize the various non-transparent ways in which firms use consumer contracts, the Article develops the notion of Dark Contracts.

Part I of this Article explains what Dark Contracts are. It documents multiple non-transparent contractual mechanisms and instruments that consumer contracts often incorporate. It delineates how firms design and employ non-transparent tools in almost every possible contractual juncture: from the nature, scope, and language to performance and change to dispute resolution, conflict management, and termination.

After documenting this non-transparency in action, Part II places the problem of Dark Contracts in a wider context. First, it argues that the sum of these non-transparent components is greater than its parts; Dark Contracts not only create pockets of non-transparency but also produce an in terrorem effect. Next, it opines that Dark Contracts harm not only consumers. Specifically, Dark Contracts emasculate the ability of legislatures, regulators, courts, and market watchdogs to scrutinize the ways firms exercise their power. Thereafter, it explains how Dark Contracts also interfere with the market’s ability to offer effective reputational systems that discipline firms. Subsequently, it maintains that Dark Contracts facilitate a moral wiggle room, enhancing firms’ unethical behavior.

Against this backdrop, Part III calls for introducing transparency-related concepts to the law of consumer contracts. It explicates the potential of and the limitations in utilizing transparency principles in the law of consumer contracts. It further argues that policymakers should design transparency-related principles to (1) better scrutinize firms’ practices, (2) empower consumers to make better-informed decisions, and (3) ensure that firm’s unethical contractual behavior is not the prevalent norm. Concluding remarks follow.

Tschider article on consent and privacy

Charlotte Tschider of Loyola of Chicago has written Meaningful Choice: A History of Consent and Alternatives to the Consent Myth, 22 N.C. J.L. & Tech. 617 (2021). Here is the abstract:

Although the first legal conceptions of commercial privacy were identified in Samuel Warren and Louis Brandeis’s foundational 1890 article, The Right to Privacy, conceptually, privacy has existed since as early as 1127 as a natural concern when navigating between personal and commercial spheres of life. As an extension of contract and tort law, two common relational legal models, U.S. privacy law emerged to buoy engagement in commercial enterprise, borrowing known legal conventions like consent and assent. Historically, however, international legal privacy frameworks involving consent ultimately diverged, with the European Union taking a more expansive view of legal justification for processing as alternatives to consent.

Unfortunately, consent as a procedural substitute for individual choice has created a number of issues in achieving legitimate and effective privacy protections for Americans. The problems with consent as a proxy for choice are well known. This Article explores the twin history of two diverging bodies of law as they apply to the privacy realm, then introduces the concept of legitimate interest balancing as an alternative to consent. Legitimate interest analysis requires an organization formally assess whether data collection and use ultimately result in greater benefit to individuals than the organization with input from actual consumers. This model shifts responsibility from individual consumers having to protect their own interests to organizations that must engage in fair data use practices to legally collect and use data. Finally, this Article positions the model in relation to common law, federal law, Federal Trade Commission activities, and judicial decision-making as a means for separating good-intentioned organizations from unethical ones.

Dep't of Education announces student-loan forgiveness of disabled borrowers

The Department of Education announced yesterday: "Over 323,000 borrowers who have a total and permanent disability (TPD) will receive more than $5.8 billion in automatic student loan discharges due to a new regulation announced today by the U.S. Department of Education. The change will apply to borrowers who are identified through an existing data match with the Social Security Administration (SSA). It will begin with the September quarterly match with SSA. The Department is also announcing two other policy items related to TPD today. First, the Department will indefinitely extend the policy announced in March to stop asking these borrowers to provide information on their earnings — a process that results in the reinstatement of loans if and when borrowers do not respond—beyond the end of the national emergency. Second, the Department will then pursue the elimination of the three-year monitoring period required under current regulations during the negotiated rulemaking that will begin in October."

The full press release is here.

Zimmerman article on appeals courts hearing class actions

Adam S. Zimmerman of Loyola of Los Angeles has written The Class Appeal, 89 University of Chicago Law Review (Forthcoming 2022). Here's the abstract:

For a wide variety of claims against the government, the federal courthouse doors are closed to all but those brought by powerful, organized interests. This is because hundreds of laws—colloquially known as “channeling statutes”—require disaffected groups to contest government bodies directly in appellate courts that hear cases individually. In theory, these laws promise quick, consistent, and authoritative legal decisions in appellate courts. In fact, without class actions, government bodies avoid judicial review by selectively avoiding claims brought by some of the most vulnerable claimants in the administrative state—from veterans and immigrants to coal miners, laborers, and the disabled.

This Article proposes a novel solution: courts of appeals should hear class actions themselves. In so doing, courts high in the judicial hierarchy would continue to authoritatively decide important legal questions involving government institutions, while ensuring groups of similar, unrepresented parties finally get their day in court. While appellate class actions might sound like a strange procedural innovation, appellate courts already have power do this. Relying on the All Writs Act, appellate courts long ago created ad-hoc procedures modeled after class actions to respond to systemic government harm.

This Article is the first to examine nascent experiments with appellate class actions. It shows that, contrary to popular belief, appellate courts can hear class actions and explains why they should do so. In cases challenging systemic abuse, this power has become vital not only to level the playing field between the government and the governed, but to protect courts’ core function in our separation of powers—to hear claims, interpret law, and grant meaningful relief. Without classwide judgments in such cases, courts risk ceding power to the executive branch to decide for itself when judicial decisions limit its own unlawful policies.

Covid-related tort claims against nursing homes

Law prof Betsy Grey Against Immunizing Nursing Homes about when nursing homes should be liable for covid-related tort claims. Here's the abstract:

Nursing homes and other long-term care facilities account for approximately one third of the over 500,000 Covid-19 deaths in the United States. Facing liability from that widespread harm, the facilities have sought immunity protection from tort liability. In particular, they have sought protection under the federal Public Readiness and Emergency Preparedness (PREP) Act, which is designed to extend immunity from liability claims arising from various Covid-19 countermeasures developed and used during the pandemic.

Importantly for this essay, the lawsuits filed against nursing homes have centered on their failure to take mitigation measures, rather than on harm from their affirmative use of mitigation measures. Initially, courts held that PREP Act immunity does not apply to these failure-to-act claims. In the waning days of the Trump Administration, however, HHS issued an opinion that (together with other HHS statements) interprets the statute otherwise, broadening immunity even to cover the failure to take mitigation measures. That interpretation has been followed by at least one federal district court. This essay questions the wisdom of HHS’s opinion. It argues that it misreads the words and purpose of the PREP Act’s immunity provisions, and undermines accountability of the nursing home industry, creates the wrong incentives for the industry, and may leave victims without any compensatory remedy. This issue should reach appellate courts soon. If the interpretation continues to be followed by the courts, then the Biden Administration should rescind the opinion so that tort law may continue to protect one of society’s most vulnerable populations.

Zoom settles lawsuit alleging privacy violations and "zoombombing"

Zoom has agreed to pay $85 million and bolster its security practices to settle a lawsuit claiming that it violated users' privacy rights by sharing personal data with Facebook, Google and LinkedIn, and letting hackers disrupt Zoom meetings

Reuters has the story, here.

Amazon adopts new policy for injuries caused by products of third-party sellers

Consumer Affairs reports: "Starting September 1, Amazon will pay customers who suffer injury or damages caused by products sold by its third-party sellers. It will not admit liability and will limit claims to $1,000. The policy is intended to head off lawsuits that consumers have filed over the years that seek to hold the multi-billion dollar company responsible for damages or injuries caused by small businesses that use its platform."

The full article is here.

American Prospect: lawyer offered $2K to get consumer client to sign already-written op-ed supporting arbitration

Here, by Amelia Pollard. Excerpt:

Conservative pro-business groups have hit upon a new tactic to protect its members’ interests: outright purchasing of grassroots support.

Late last week, David Chami, an Arizona attorney who specializes in consumer protection, received an email from Drew Johnson, who identified himself as working with the U.S. Chamber of Commerce. Johnson offered Chami $2,000 if he could get one of his clients to sign their name to an op-ed opposing the Forced Arbitration Injustice Repeal (FAIR) Act, a bill in Congress.

* * *

“My hope is to find a normal, everyday person who has benefitted from arbitration to sign on to the op-ed pasted below as the author,” Johnson wrote, * * * “If one of your clients is willing to sign on to the piece, I can offer you $2,000 for your time.”

In other words, Johnson offered the attorney a bribe.

* * *

When asked about the op-ed solicitation, Johnson denied having anything to do with the U.S. Chamber of Commerce, despite writing that he was “working on an effort with” the Chamber and a coalition of think tanks in his email to the Arizona attorney. In an email to me, he described the miscommunication as “poor wording.”

UPDATE: The Intercept has more here.

FTC announcements this week

FTC Sends Nearly $2.3 Million in Refunds to People who Lost Money to Credit Card Debt Relief Schemes (July 29)

FTC Obtains $450,000 Settlement in Tate’s Auto Group Case (July 29)

CFPB: Financial protections during the pandemic

The Consumer Financial Protection Bureau has created this web page describing a variety of programs and strategies for financial protection during the pandemic.

Two elite law reviews sneer at consumer law

by Jeff Sovern

I have started submitting my article, Six Scandals: Why We Need Consumer Protection Laws Instead of Just Markets, to law reviews and in hopes of winning the law review lottery, decided to try my luck at the Harvard Law Review and Yale Law Journal (as if, as my students said about twenty years ago). Anyway, both ask submitters to identify the subject area of the article and offer a list of legal subjects from which to choose. I am saddened to say that Harvard omits consumer law from the list, though it does include animal rights. Apparently animals have rights worth writing about but not consumers. Et tu, Brute? Yale also leaves out consumer law, though it at least includes a checkbox for "other." At Yale, both cyber law and military law exist but consumer law has been othered. At least I have one consolation: when they reject my submission, I can find comfort in the knowledge that they seem not to know consumer law exists. Oh, and if you are a law school professor, please urge your law review editors to make an offer for my piece, when I get past this blow and resume submitting it. And if the students at the Harvard Law Review or Yale Law Journal want to make it up to me, I can think of a way they could do that.

By the way, law reviews are edited by second and third year law students who cannot possibly be expected to know about the full range of legal subjects. (sob)

New article on the right of access to court records

Jordan Elias as written 'More Than Tangential': When Does the Public Have a Right to Access Judicial Records? Here is the abstract:

Public accountability requires open proceedings and access to documents filed with the courts. The strong policy favoring access to judicial records creates a presumption against sealing documents without a compelling reason. The Ninth Circuit Court of Appeals recently held that this presumption of access arises when a proceeding relates “more than tangentially” to the merits. This is a low standard under which many types of motions qualify for the compelling reasons test. With too much litigation occurring in secret, courts can use the “more than tangential” standard proactively to keep electronic case dockets available to citizens.

Learn about the enhanced child tax credit and its enormous benefits for consumers

The Tax Policy Center -- a project of the Urban Institute and Brookings -- has produced this informative paper on the new, expanded child tax credit, which is a part of the American Rescue Plan. The Tax Policy Center estimates that 92 percent of families with children will get an average child tax credit of 4,380 in 2021, far more than under prior law. 

This chart shows the benefits under the new law compared to prior law:

Sixth Circuit says that the Center for Disease Control's eviction moratorium is unlawful

The Sixth Circuit just ruled that the Center for Disease Control's eviction moratorium is unlawful because it lacks any basis in the statute that the government says authorizes it. Read the decision here.