Consumers Union is now Consumer Reports Advocacy

Consumer Union, the non-profit consumer-advocacy organization founded in 1936, has changed its name to Consumer Reports Advocacy. The new website is here. The well-known Consumer Reports magazine is the work of Consumers Union, and now the organization and the magazine will be more closely linked by name.

"Overbiffing" in debt collection

CBS News reports that "[o]verstating a debtor's balance — also called 'overbiffing' — is the latest outrage in unfair debt collection."

The article is here.

Dep't of Education sued for allegedly failing to comply with judge’s order to cancel student debt

The Hill reports that Secretary of Education Betsy DeVos was sued Tuesday for allegedly failing to cancel student debt for people whose for-profit colleges have shut down. Last month a court ruled that the Obama-era debt regulations had to be implemented after more than a year of delays by DeVos. Yesterday, however, a California legal service group called Housing and Economic Rights Advocates filed a lawsuit alleging that the Education Department is still collecting loans that it should have discharged.

The full story is here.

The ABA's wrongheaded goal of enabling lawyers "engaged in litigation activities" to ignore debt collection law

by Jeff Sovern

The federal Fair Debt Collection Practices Act provides consumers a variety of protections. Collectors, for example, are barred from making false statements and engaging in unfair practices, and are obliged to give consumers certain disclosures.  But the American Bar Association wants to excuse lawyers "engaged in litigation activities" from complying with the FDCPA.  In the ABA's view, state courts and ethical rules provide all the protection consumers need. The House Committee on Financial Services has already reported a bill, H.R. 5082, to accomplish the ABA's goals.

In my view, lawyers should not seek or obtain exclusions from the FDCPA.  The robo-signing scandal was only a few years ago, and lawyers did not exactly cover themselves in glory on that one. Robo-signing may have gone on for years, despite state courts and ethical rules.  The CFPB has brought a number of cases against lawyers behaving badly in debt collection matters.  In one case, for example, the CFPB complaint alleged (I reformatted the paragraphs and omit paragraph numbers for ease of reading):

Defendants, a law firm and its principal partners, have sued hundreds of thousands of Georgia consumers to collect debts that the consumers allegedly owe to others. To produce so many lawsuits, the Firm operates less like a law firm than a factory. It relies on an automated system and non-attorney support staff to determine which consumers to sue. The non-attorney support staff produce the lawsuits and place them into mail buckets, which are then delivered to attorneys essentially waiting at the end of an assembly line. The Firm’s attorneys are expected to spend less than a minute reviewing and approving each suit. Using high-volume litigation tactics, Defendants collect millions of dollars each year, often from consumers who may not actually owe debts or may not owe debts in the amounts claimed.

That case terminated in a consent order under which the firm agreed to pay a penalty of more than $3 million. That does not exactly suggest that we need fewer consumer protections against misbehaving lawyers. Will state courts force attorneys to compensate consumers when law suits allege the wrong amount of the debt? When lawyers sue the wrong consumer? When lawyers bring time-barred claims? Will consumers be told of their rights?  The ABA would do better to devote its energy to making sure attorneys behave appropriately in debt collection than to insulate attorneys from complying with existing debt collection laws.

Harvard law students boycott Kirkland & Ellis over forced arbitration of employment disputes and non-disclosure clauses

That's the topic of this article by Karen Sloan. Here's an excerpt:

A group of Harvard law students aims to pressure Kirkland & Ellis to drop its use of mandatory arbitration for employees by encouraging their classmates to boycott the firm during the upcoming summer associate recruiting cycle. Organizers of the boycott hope that starving the firm of summer associate prospects at a top law school will force Kirkland to rethink the mandatory arbitration and nondisclosure agreements employees must sign. Those agreements are designed to prevent employees from suing over a variety of matters, including harassment and discrimination. The #DumpKirkland campaign is the latest initiative from the Pipeline Parity Project—a student group at Harvard that seeks to end harassment and discrimination in the legal profession. The group exposed the widespread use of mandatory arbitration for summer associates by law firms last year, and this fall pushed Harvard Law to address its role in the elevation of Brett Kavanaugh to the U.S. Supreme Court amid allegations that he sexually assaulted a female acquaintance while in high school.

Go here to learn more about the Pipeline Parity Project.

Program to forgive student loans stalls under Betsy DeVos

The New York Times reports today:

The students attended institutions with pragmatic names like the Minnesota School of Business and others whose branding evoked ivy-draped buildings and leafy quads, like Corinthian Colleges. Tens of thousands of them say they are alike in one respect: They were victims of fraud, left with useless degrees and crushing debts.

Now the government program meant to forgive the federal loans of cheated students has all but stopped functioning.

No Education Department employees are devoted full time to investigating borrowers’ complaints, according to three people familiar with the agency’s operations. Instead, the agency’s staff has fought in court to reduce the amount of relief granted to some students and to halt a rule change intended to speed other claims along.

That has left more than 100,000 claims for relief in limbo, according to the Education Department’s most recent data.

The full article is here.

Study finds a disclosure that helps: text alerts

by Jeff Sovern

Regular readers of the blog know that we often write about the ineffectiveness of disclosures, and plenty of others have the same complaint.  But here's a bit of good news: a study by Michael Grubb, Paul Adams, Andrea Caflisch, Darragh Kelly, and Jeroen Nieboer, and Matthew Osborne, discussed at a recent FDIC Consumer Research Symposium, found that when consumers are told about an impending overdraft in an account (it was the British equivalent of a checking account), many take action.  The slides from the talk are here  and the audio is here.  Of course, texts warning of a problem are different from a sheaf of disclosures at the outset of a transaction, but it's nice to know that notice sometimes helps. A question raised in the Q&A does raise a concern, however: will consumers overlook the texts if they become too common?

Michael Hiltzik on the limits of the puffery defense

Read Wells Fargo says its promises to restore consumer trust were just ‘puffery.’ But now they look like lies by Michael Hiltzik. Here's an excerpt that sets the theme:

If you’ve ever wondered how businesses can get away with making transparently false or deceptive claims about themselves or their products — “The Best Tasting Juice in America,” Wrigley’s gum is “for whiter teeth, no matter what,” etc., etc. — the answer is an all-purpose legal dodge known as the “puffery” defense. Simply put, judges and regulators have ruled that when a business makes a claim that is either vague or so obviously inflated that people simply won’t believe it, that’s “puffery,” and not actionable in court. Wells Fargo, which is struggling to rebuild its reputation for integrity after a string of scandals involving consumer rip-offs, is testing the limits of the “puffery” defense. In a legal filing last week aimed at getting a shareholder lawsuit dismissed, the company asserted that statements that the bank was working to “restore trust” among its customers and “trying to be more transparent” about its scandals — statements made by its chief executive, Tim Sloan — were, well, just puffery.

Ann Burkhart Article: How to Fix Foreclosure

Ann M. Burkhart of Minnesota has written Fixing Foreclosure, 36 Yale Law & Policy Review (2018). Here is the abstract:

Since the American Revolution, mortgage foreclosures have consisted of a public auction of the mortgaged property. Judges and state legislators at the time believed that an auction was the best way to obtain a fair price for the land. Though that belief soon proved to be mistaken, the sale method remains unchanged.

Before the real estate and mortgage markets crashed in 2007, only two significant empirical studies of foreclosure sales existed, and they involved small numbers of foreclosures. Because the crash resulted in millions of home foreclosures, it has provided a rich data source. As a result, economists, social scientists, and others have produced a wealth of empirical studies on foreclosure sales and their effects both before and after the crash. Three lines of research now clearly establish that foreclosure by public auction is seriously flawed. These studies first prove that, in this country, even a voluntary real estate auction normally produces a lower sale price than a private sale. A second line of studies shows that foreclosure usually is harmful not just for the land owner, but also for the lender, neighboring property owners, and the community. The third line of studies proves that property sells for more when, rather than foreclosing after default, a lender allows a private sale of the property. These studies make a very powerful case for foreclosure reform.

Fortunately, an established and effective method for selling foreclosed land already exists — listing it for sale with a real estate agent. Currently, the lender conducts a foreclosure, frequently purchases at the sale, and then lists the property for sale with a real estate agent. This process is time consuming, expensive, and harmful. Initially listing the property for sale with a real estate agent, rather than first auctioning it, eliminates these problems, and the success of the process has been proven. England, Ireland, Wales, and some Canadian provinces use this method very effectively, and it could readily be implemented in the United States.

Watson Paper on History of and Problems with Federal Student Loans

Camilla E. Watson of Georgia has written Federal Financing of Higher Education at a Crossroads: The Evolution of the Student Loan Debt Crisis and the Reauthorization of the Higher Education Act of 1965. Here is the abstract:

Currently, there are 44.2 million Americans holding student loan debt collectively totaling $1.5 trillion. This massive debt has a profound effect, not only on the lives of the debtors, but also on the national economy because it prevents the debtors from buying homes and cars and creating new businesses. This debt is also speculated to be a likely trigger for the next housing bubble because student loans, like the subprime mortgage loans underlying the 2008 financial crisis, are securitized and sold to investors. But many of those with student loans struggle to find jobs that will enable them to pay off their debt. In some cases, they leave school before graduating because they perceive their debt as too overwhelming. When that happens, their lack of a degree exacerbates their struggle to find decent jobs. Moreover, fear of undertaking substantial debt leads some individuals to forego higher education altogether, thereby often condemning them to a lifetime of low-paying jobs. This article traces the development of federal student loans and examines the numerous problems comprising the student loan debt crisis, among them the high cost of postsecondary education, the crisis-level amount of debt undertaken by students, the difficulties of repayment, and the fraud and abuse perpetrated by proprietary institutions and predatory lenders. It attributes these problems to Congress, which it argues has both acted, and failed to act, due to misjudgments, as well as, at least sometimes an indifference, sometimes bordering on an animus, to students in need. This article also critiques proposed legislation to reform federal funding of higher education and questions whether the mistakes of the past will soon be repeated in the pending reauthorization of the Higher Education Act of 1965.

ND Cal issues procedural guidance for class-action settlements

The U.S. District Court for the Northern District of California has issued "Procedural Guidance for Class Action Settlements."

The guidance addresses items to include in a motion for preliminary approval, suggestions for class notice, and attorney fees. Among other things, the guidelines instruct lawyers to file an accounting of the distribution to the class and attorneys.

In light of the pending Supreme Court case Frank v. Gaos, which challenges the notion of cy pres awards, it is interesting to see this guidance, which reflects a common-sense approach to cy pres:

If the settlement contemplates a cy pres award, the parties should identify their chosen cy pres recipients, if any, and how those recipients are related to the subject matter of the lawsuit and the class members. The parties should also identify any relationship they or their counsel have with the proposed cy pres recipients. In general, unused funds allocated to attorneys’ fees, incentive awards, settlement administration fees and payments to class members should be distributed to the class pro rata or awarded to cy pres recipients.

The Guidance is here.

Many class actions are filed in ND Cal. It will be interesting to see whether other courts follow suit in issuing guidance.

"Trump Administration Spares Corporate Wrongdoers Billions in Penalties"

The New York Times reports:

Across the corporate landscape, the Trump administration has presided over a sharp decline in financial penalties against banks and big companies accused of malfeasance, according to analyses of government data and interviews with more than 60 former and current federal officials. The approach mirrors the administration’s aggressive deregulatory agenda throughout the federal government.

The New York Times and outside experts tallied enforcement activity at the S.E.C. and the Justice Department, the two most powerful agencies policing the corporate and financial sectors. Comparing cases filed during the first 20 months of the Trump presidency with the final 20 months of the Obama administration, the review found:

• A 62 percent drop in penalties imposed and illicit profits ordered returned by the S.E.C., to $1.9 billion under the Trump administration from $5 billion under the Obama administration;

• A 72 percent decline in corporate penalties from the Justice Department’s criminal prosecutions, to $3.93 billion from $14.15 billion, and a similar percent drop in civil penalties against financial institutions, to $7.4 billion;

• A lighter touch toward the banking industry, with the S.E.C. ordering banks to pay $1.7 billion during the Obama period, nearly four times as much as in the Trump era, and Mr. Trump’s Justice Department bringing 17 such cases, compared with 71.

The full article is here.

Is there a duty to reconsider a report after its subject claims it is false?

by Paul Alan Levy

A recent trial court decision from New York addresses a question about which I have long held a tentative opinion, albeit without having known of any direct precedent to back up my view: When speaker states facts in an online publication that are not subject to defamation liability when made (because the speaker lacked sufficient reason to suspect falsity to meet standards of negligence or actual malice), but after publication the person criticized tells the speaker that the accusations are false, can the speaker be held liable for failure to remove or retract the critical speech? It has long been my assumption that such a duty to retract is fundamentally at odds with the single publication rule, under which the act of defamation is complete at the time of first publication, and with the rule that the speaker’s mens rea is judged at that time of first publication (so, for example, evidence of truth that is obtained after publication cannot be used to support summary judgment on lack of actual malice).

The issue comes up for lawyers who represent or advise consumers who criticize businesses or political figures but then face a demand for removal, when the consumer receives an ultimatum saying that the alternative to removal is a motion for a preliminary injunction compelling removal. Should the client be advised to take down the allegedly defamatory matter while counsel evaluates the case (my general inclination is to say no, and that’s what I advise in my CLE course about online free speech litigation). But an 2011 blog post by Eugene Volokh  takes the position, based on an excerpt from the Restatement of Torts as well as a handful of decisions, that such a duty exists. I have been dubious, but Professor Volokh has a habit of being right in this area of the law.

Arbel Paper on Reputation and Markets

Yonathan A. Arbel of Alabama has written Reputation Failure: Market Discipline and Its Limits. Here is the abstract:

Free-market advocates seek to repeal broad swaths of tort, contract, and consumer law, trusting reputation to provide effective market-discipline. Their core belief is that reputation assures honest dealings because a seller reputed to sell inferior goods will lose business. Realizing that, the rational seller will behave honestly in order to maximize profits, thus obviating the need for costly, coercive, and uncertain legal interventions.

Despite their focus on rationality, these common accounts have glossed over a profound puzzle. Reputational information is a public good par-excellence, comprising myriad disparate decisions to gossip, share word-of-mouth, write online reviews, and rate products. Why, then, is it rational to produce reputational information? Who does it? To what effect?

This Article’s primary contribution is the introduction of the concept of a reputation failure, the systematic distortion of reputational information that jeopardizes the ability of reputation to discipline markets. Like the more familiar concept of market failure, reputation failure offers a new justification for legal interventions in markets. Moreover, fixing reputation failure offers a new program of regulation, one that would appeal to many free-market advocates.

Wells Fargo will not finish repaying customers until 2020

"Wells Fargo & Co will not finish paying back the estimated 600,000 customers it wrongly charged for auto insurance until at least 2020, the bank said in a letter to U.S. lawmakers. ... U.S. regulators slapped Wells Fargo with a $1 billion penalty in April when it admitted to wrongly forcing drivers into auto insurance policies. That agreement envisioned the customer payouts would finish within months."

The New York Times has the story, here.

Online student-loan refinance company settles FTC charges

Online student loan refinancer SoFi has agreed to stop misrepresenting how much money student loan borrowers have saved or will save from refinancing their loans with the company, in order to settle Federal Trade Commission charges that it deceptively advertised inflated figures for more than two years.

In a complaint against Social Finance, Inc. and subsidiary SoFi Lending Corp., the FTC alleged that since at least April 2016, they made prominent false statements about loan refinancing savings in television, print, and Internet advertisements.

The FTC alleges that the average savings SoFi touted in its ads inflated the actual average savings – sometimes even doubling it – by excluding large categories of consumers.

The FTC's press release, with links to the complaint and consent order, are here.

Sant'Ambrogio: Federal government filed only eight consumer protection cases in federal court in a recent year

by Jeff Sovern

According to Private Enforcement in Administrative Courts, 72 Vanderbilt Law Review,  (Forthcoming), by Michael Sant'Ambrogio of Michigan State, in the year ending March 31, 2017, the government filed only eight consumer protection cases in federal court, which contrasts with the 9,706 cases filed by private plaintiffs. Sometimes we see the argument that we don't need private enforcement of consumer laws because public enforcement is sufficient.  If the numbers Sant'Ambrogio reports are accurate, they make that claim harder to make; indeed, they make it ludicrous. To be sure, many government cases are resolved short of filing in federal court, some government cases are resolved in internal administrative proceedings, and state agencies--especially AG's offices--also file consumer protection cases, but those categories are unlikely to come close to solving underenforcement problems. 

CFPB issues statement regarding payday rule

The Consumer Financial Protection Bureau today issued a statement about its plans for its payday-loan regulation:

The Bureau expects to issue proposed rules in January 2019 that will reconsider the Bureau's rule regarding Payday, Vehicle Title, and Certain High-Cost Installment Loans and address the rule's compliance date. The Bureau will make final decisions regarding the scope of the proposal closer to the issuance of the proposed rules. However, the Bureau is currently planning to propose revisiting only the ability-to-repay provisions and not the payments provisions, in significant part because the ability-to-repay provisions have much greater consequences for both consumers and industry than the payment provisions. The proposals will be published as quickly as practicable consistent with the Administrative Procedure Act and other applicable law.

The statement is presumably intended to give payday lenders, some of whom have sued the CFPB to challenge the rule, see here, an indication of what's in store.

Update on NFL concussion class-action settlement

We've posted many times on the NFL concussion class-action settlement. Go here, for instance. Now there's this story in USA Today saying that some injured former players who qualify for payments under the settlement are getting little or nothing after the lawyers, health-care providers, and other (purported?) lien holders take what they say is theirs (and for other reasons).

Ideas about dealing with student-loan debt

We've posted here many times about the massive and growing student-loan debt in this country. Two new pieces might interest our readers.

First, Maine is so interested in getting educated people to move to Maine that it will refund most (and often all) student loan repayments through a state tax credit. The program applies to all Maine workers who graduated college in 2015 or later, even people who move to Maine after having gone to school outside the state. (The program originally applied only to Mainers who received their degrees from a Maine school.) This article explains the program in general terms. Maine's revenue department provides greater detail here.

Second, regarding law-school debt in particular, take a look at Curing the Cost Disease: Legal Education, Legal Services, and the Role of Income-Contingent Loans by law prof John Brooks. Here is the abstract:

The costs of both legal education and legal services have been rising steadily for decades. This is because they share a common root: the constant above-inflation growth in the cost of labor-intensive goods and services known as the “cost disease.” The cost disease story roots cost growth not in market failure or bureaucratic waste, but in natural, even healthy, economic forces—productivity and wage growth. Because the source of this cost growth is productivity growth, the nature of the cost disease is such that an economy as a whole can afford these rising costs. But in a world of deep income inequality, the costs must be socialized, to be shared collectively. In this article for a symposium on financing legal education, I argue that the Income-Driven Repayment program for student loans is a mechanism for partially socializing the costs of both legal education and legal services, while still maintaining the vital independence of both law schools and the bar. I also take a critical look at the Public Service Loan Forgiveness program, counter-intuitively arguing that it has serious flaws in its goal of serving the broader public interest.

DiLorenzo FinTech Article

by Jeff Sovern

My colleague, Vincent DiLorenzo, has written Fintech Lending: A Study of Expectations Versus Market Outcomes, Forthcoming in Review of Banking & Financial Law. Here is the abstract:

This paper documents the expectations for the fintech lending industry, which has emerged in this decade, and compares such expectations to market outcomes. It presents an evidence based analysis for policy making decisions. Part one of the paper explores expectations - possible benefits and risks of fintech lending - through large-scale surveys and interviews of industry, consumer and government stakeholders. Part two of the paper examines market outcomes – benefits and risks that have been realized or failed to materialize, as documented by studies of substantial data sets of various types of fintech loans. This includes examination of expanded access to credit, lower costs, predatory terms, fair lending risks, and lack of transparency. After comparing expectations and outcomes, the paper explores policy implications, particularly the implications for chartering of special purpose national banks by the U.S. Comptroller of the Currency.

Did Glass-Steagall's repeal matter?

That's the topic of as Glass-Steagall's Demise Inevitable and Unimportant? by law prof Arthur Wilmarth. Here's the abstract:

The demise of the Glass-Steagall Act was the result of affirmative policy decisions by federal regulators and Congress, and it was not the inevitable byproduct of market forces. Economic disruptions and financial innovations posed serious challenges to the viability of Glass-Steagall, beginning in the 1970s. However, federal regulators and Congress could have defended Glass-Steagall and made necessary adjustments to preserve its effectiveness. Instead, they supported efforts by large financial institutions to break down Glass-Steagall’s structural barriers, which separated commercial banks from securities firms and insurance companies.

Federal agencies opened a number of loopholes in Glass-Steagall’s barriers during the 1980s and 1990s. However, those loopholes were subject to many restrictions and did not allow banks to establish full-scale affiliations with securities firms and insurance companies. The largest banks needed two major pieces of legislation to achieve their longstanding goal of becoming full-service universal banks. First, big banks and their trade associations persuaded Congress to pass the Gramm-Leach-Bliley Act of 1999 (GLBA). GLBA authorized the creation of financial holding companies that could own banking, securities, and insurance subsidiaries. Second, the financial industry convinced Congress to adopt the Commodity Futures Modernization Act of 2000 (CFMA). CFMA insulated over-the-counter (OTC) derivatives from substantive regulation under both federal and state laws.

The campaigns that led to the enactment of GLBA and CFMA lasted two decades and cost hundreds of millions of dollars. The largest financial institutions and their trade associations would not have pursued those campaigns unless they believed that both statutes would have great importance.

GLBA and CFMA proved to be highly consequential laws. They enabled banking organizations to become much larger and more complex and to offer a far broader range of financial products. They transformed the U.S. financial system from a decentralized system of independent financial sectors into a highly consolidated industry dominated by a small group of giant financial conglomerates. GLBA and CFMA promoted explosive growth in shadow banking, securitization, and OTC derivatives between 2000 and 2007. All three of those markets played key roles in fueling the toxic credit boom and unstable financial conditions that led to the financial crisis of 2007-09.

CFPB expected to cut payday repayment tests in revised rule

Bloomberg reports: 

Payday lenders could escape tighter regulation as the Trump-led Consumer Financial Protection bureau considers eliminating a requirement that they first assess borrowers’ ability to repay loans.

The CFPB is expected to either propose eliminating the rule’s strict ability to repay standards or delaying their effective date so that they can undergo further review, according to multiple sources with knowledge of the rulemaking process.

The full article is here.

Rule to help federal student loan borrowers finally takes effect

We’ve covered before the Department of Education’s recent attempt to gut a rule adopted under the Obama administration to help student loan borrowers and rein in for-profit colleges. The regulation, commonly referred to as the borrower defense rule, was supposed to take effect on July 1, 2017. The Department issued a series of delays, which a D.C. federal court in September held were unlawful.

This week, that same judge rebuffed an industry request for a preliminary injunction against the rule, paving the way for the rule to take effect on Tuesday. Although the industry challenge remains pending, the agency now has a legal obligation to implement the rule, and because of technical requirements in the Higher Education Act, any replacement rule adopted by Secretary DeVos could not possibly take effect before July 2020.

That means borrowers around the country could benefit from the rule for nearly two years at least. The rule cuts off federal funding to schools that use forced arbitration and class-action waivers with their students. It also adopts a formal process for group-based loan discharges for students who attended predatory schools, and mandates automatic loan discharges for students who attend schools that close while they are enrolled and who do not reenroll in a covered program in the following three years.

The judge’s order is here, and coverage by the Associated Press is here.

Issacharoff & Marotta-Wurgler Paper on Trends Leading to Less State Court Caselaw on Electronic and Shrinkwrap Contracts

Samuel Issacharoff and Florencia Marotta-Wurgler, both of NYU, have written The Hollowed Out Common Law. Here's the abstract:

The electronic marketplace poses novel issues for contract law. Contracts created through browsewrap, clickwrap, and shrinkwrap (contracts whose embedded terms are only available after purchase) poorly fit doctrines that emerged from face-to-face offer and acceptance, the mutual execution of a common set of documents, or the rituals of mass market transactions involving physical fine print. Not surprisingly, these contracts of the new electronic marketplace require doctrinal elaboration.

Our Article asks not about the specific resolution of new doctrinal challenges, but about how the common law of contracts will be elaborated. Specifically, the Article begins with empirical observations about the domain of all electronic and shrinkwrap contract cases and makes four critical findings.

First, we document two shifts: One arises from a steady decline in the number of cases adjudicated in state court relative to federal courts, which by 2015 adjudicate the vast majority of cases. The other stems from a rise in class actions, which is intimately tied to the migration of cases to federal court. The result is that today the vast majority of cases are class actions brought in federal court. The increase in class actions is not surprising given the relatively small stakes of most transactions and the little incentive that creates for individual consumer litigation. The increased dominance of the federal forum is in part likely a reflection of the federalization of class action law under the Class Action Fairness Act (CAFA).

Second, the consequence of the dominance of the federal forum is that the common law is being elaborated in federal court in suits arising under diversity jurisdiction. In turn, those federal courts are largely bereft of any state law moorings as they develop the common law of the electronic marketplace. Erie Railroad v. Tompkins notwithstanding, the common law is driven by federal court decisions, building incrementally on each other rather than state law.

Third, the development of common law in federal court means that there is no apex court that can define conclusively the law of any jurisdiction. Diversity jurisdiction allows federal courts to predict how they believe state common law would develop, but binds no state courts in the affected jurisdiction, and does not even bind federal courts in the same Circuit putatively applying the law of another state. Rather than the law resolving hierarchically, we identify a “tournament effect” in which the law settles on one or a few influential decisions, regardless of the state law that the case may have arisen under. Finally, we conjecture that the use of contractual clauses compelling arbitration and forbidding claim aggregation may have affected the number of cases being adjudicated in court and, consequently, depressed the development of publicly-available law in this area.