by Michael Greve
Suppose (a well-worn but instructive hypothetical story runs) a gentleman intent on entering the horse trade were to ask his lawyer for advice on the legal landscape. Would a competent counsel perform a Westlaw search for every case with a mention of “horse”? Or would he advise the entrepreneur of the basics of contracts and torts, even at some risk of underinclusiveness (leaving out, say, some obscure precedent involving carcass disposal in Iowa) and overinclusiveness (such as bringing in liability precedents involving automobiles)? Not even close. The horse trader’s transactions are easily captured under the traditional doctrines of contracts and torts, and they are comprehensible only in the broader context of commercial law. The implied terms of contracts in the horse market will differ from those in the markets for airplanes or avocados, but the structural issues are the same. This explains why there is no distinct “law of the horse.”
The absurdity of equine law also explains why the call for some new, separate body of law typically rests on a claim that some transactions are wholly unlike those contemplated by the common law. Antitrust law has become an established body of law because we believe that certain contracts—those in restraint of trade—should not only be unenforceable but affirmatively prohibited. Other transitions to new legal arrangements break with common-law notions for overtly ideological reasons. In the 1930s, common-law doctrines governing relations between employers and employees were trumped by “labor law,” meaning the law of labor unions and collective bargaining, on the theory that individual workers were powerless against corporate employers. Three decades later, “employment law” was superimposed on preexisting layers of employment-at-will and collective bargaining rights—this time to empower minority workers against racist employers and unions. Those bodies of law cover the same transactions; they differ chiefly with respect to the underlying presumptions.
In the same fashion, “consumer law”—unknown before the 1970s—does not cover a single transaction that is not also covered by traditional common-law doctrines. Handbooks and treatises often define consumer law in contradistinction to commercial law—that is, the law governing transactions among merchants. The common law, of course, made no such distinction; it rested on a robust, across-the-board presumption in favor of freedom of contract. Even the Uniform Commercial Code treats, with rare exceptions, consumer transactions under the same rules that apply to comparable business transactions.
Consumer-law advocates, however, insist that the assumptions that underpin freedom of contract do not obtain in the context of consumer transactions. In often colorful language, consumer lawyers paint a picture of ignorant, impulsive consumers who stumble helplessly through a world of corporate monopolies. In soberer moments, they identify the characteristics that supposedly distinguish consumer markets: asymmetric information between producers and consumers (or wholesale consumer ignorance); unequal bargaining power; irrational consumer preferences. Consumer law attempts to redress these problems by imposing affirmative disclosure obligations; through outright prohibitions on abusive, extortionate, or unconscionable contract terms and sales practices; or through mandatory cooling-off or revocation periods.
Changed presumptions produce changed legal rules. Where tort law required an actual injury as an essential element of a cause of action, consumer law dispenses with that and related requirements. Where the common law matched the seller’s duty to steer clear of fraud and misrepresentation with the contractual principle of “buyer beware,” consumer law imposes a unilateral duty of disclosure on the seller.
Upon inspection, these rationalizations prove too much or too little to define a discrete field of “consumer law." Information is asymmetric in business as well as consumer transactions (the seller often knows more than the buyer); still, for good reasons, the general rule remains “buyer beware.” Bargaining power is often unequal in the business sector, but within the general framework of protections against fraud and monopoly, we let parties deal, or not deal, as they wish. (We do not enact statutes to protect Wal-Mart’s suppliers, for instance.) Modern behavioral economists have advanced considerably beyond the often crude and occasionally crackpot theories that informed the expansion of liability and the creation of consumer law four decades ago. Still, evidence of pervasive irrationality is far too conjectural to warrant careless paternalism. At most, it may justify circumspect interventions that protect the irrational from costly mistakes without, in the process, inflicting excessive costs on the rational. There is, then, no set of criteria or principles that reliably delineates a discrete consumer law.
This is the first half of a two-part excerpt. You can also view the full text of Dr. Greve's book online at this link.
Thanks for your terrific post. I'm curious: What circumstances, if any, do you think there should be recovery without injury? A recent 3rd circuit case, synopsized below courtesy of Findlaw, raises the prospect of massive liability with injury. What's your view on that case?
Huber v. Taylor (10/31/06 - No. 05-1757)
In a case involving class action plaintiffs' attorneys who were being sued for breach of fiduciary duty and related counts by a putative class that the attorneys themselves formed for asbestos personal injury litigation, summary judgment for defendants-attorneys and denial of class certification are reversed and vacated, respectively, where the district court erred in its choice of law analysis, which led it to require that plaintiffs demonstrate actual harm in a claim of breach of fiduciary duty when the remedy sought is disgorgement.
http://caselaw.lp.findlaw.com/data2/circs/3rd/051757p.pdf
Posted by: Brian Wolfman | Saturday, November 04, 2006 at 09:48 AM
One premise of Dr. Greve's argument is the assertion that "'consumer law' . . . does not cover a single transaction that is not also covered by traditional common-law doctrines." I question whether that's really true.
To take just one example, can one really say that the common law covered the same range of harassment by debt collectors as statutory consumer law? Sure, the common law recognized a tort for intentional or negligent infliction of emotional distress, but depending on the jurisdiction one had to show not just fault but that the plaintiff suffered some kind of physical impact or injury, or was particularly vulnerable, or had some kind of special contractual or fiduciary relationship with the defendant (a simple debtor-credit relationship wasn't enough).
Compare that with the Fair Debt Collection Practices Act, which erects a "least sophisticated consumer" standard and creates strict liability for "any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt," and, without limiting the application of that language, also specifically prohibits using threats of violence, or obscene or profane language, or publishing a list of "deadbeats," or using a telephone to annoy or harass someone.
Even leaving aside the different fault standards, can one really say that the common law covered the same range of transactions? Is this example an anomaly or part of a larger pattern?
Posted by: Public Citizen Litigation Group | Friday, November 03, 2006 at 11:38 AM