Consumer Law & Policy Blog

Vioxx MDL: Nationwide Class Certification Denied

    By Brian Wolfman

    Judge Eldon Fallon of the U.S. District Court in New Orleans, who is presiding over the Multidistrict Litigation of thousands of Vioxx injury cases, has denied the plaintiffs' request for nationwide class certification.  The plaintiffs argued for nationwide certification on the ground that the substantive law of New Jersey, where the defendant is located, should be applied to all plaintiffs' claims no matter where the plaintiffs lived or ingested Vioxx.  Judge Fallon rejected that argument, holding that the plaintiffs' home states (that is, all 50 states) had a greater interest in the litigation than did New Jersey alone.  (Some consumer class actions have been certified nationally on the theory that the law of the defendant's home state applied to the claims of all plaintiffs.)  One might expect the plaintiffs to try to certify class actions on a state-by-state basis, but Judge Fallon indicated that there are obstacles to any class certification because factual and legal differences predominate over common questions.  Note that in light of the Class Action Fairness Act (CAFA), Vioxx class actions brought in state court only by citizens of the forum state will likely end up in federal court (unless the defendant is a citizen of the forum).  And, if those cases end up in federal court, they will almost certainly be MDL'd to Judge Fallon.

UPDATE:  A commenter has made a point that I should have mentioned in my original post.  There are pre-CAFA state court class actions, and they will not be removable to federal court (at least not under CAFA).  My point about the removability of Vioxx class actions under CAFA applies, of course, only to actions filed after CAFA's effective date.

Senator Dodd on Credit Cards

by Jeff Sovern

  Today's New York Times has an interesting article about Senator Dodd, the incoming chair of the Senate Banking Committee.  Here's a quote:  "At a hearing this year, [Senator Dodd] said that credit cards increasingly were little more than 'pocket-sized predatory loans' and that he has proposed legislation that would curtail the ability of the companies to market credit cards to students who were not able to afford debt."   I can't remeber seeing credit cards compared to predatory loans before. 

Study: Bankruptcy filings spike in wake of hurricanes

by Christopher Peterson

Robert Lawless, a bankruptcy professor at the University of Illinois, recently released the results of an interesting new empirical study. The piece, entitled Bankruptcy Filing Rates After a Major Hurricane, tracks consumer and business bankruptcy filings for 36 months in states affected by hurricanes that caused over a billion dollars in damage. Among other results, Lawless finds that "[s]tates primarily affected by hurricanes have an average increase in filing rates that is around fifty percent larger than the increase in unaffected states: for every two new filings in an unaffected state, there are three new filings in the landfall state." Methodologically, I suspect it was difficult to find statistically comparable control groups for an affected state, given the economically significant differences between geographic regions. Lawless does try to deal with this problem by comparing affected bankruptcy districts to unaffected districts with similar historical filing rate patterns. While these results were not statistically significant, they did tentatively corroborate Lawless' statewide comparisons. Interestingly, Professor Lawless' data also appear to suggest that poorer areas have relatively greater post-hurricane bankruptcy filing rate increases than wealthy areas. This seems to make sense since we should expect that lower income communities would have less resources to absorb the financial shocks caused by natural disasters.

The paper is a quick read and promises to buttress common intuitions on the issue. The paper also highlights irony behind the national response to the Katrina disaster. Instead of borrowing money to buy thousands of worthless mobile homes (and give manufacturers a big windfall), the government would probably have been better off adopting reasonable consumer protection law including non-means tested access to the bankruptcy system.

In Time for the Holidays: U.S. PIRG Issues Its Annual "Trouble in Toyland" Report

by Brian Wolfman

I noticed at U.S. PIRG's blog that PIRG has issued its 21st Annual "Trouble in Toyland" Report.  This important report both alerts consumers to potential toy hazards in advance of the holidays and effectively pressures the Consumer Product Safety Commission to take action against dangerous toys.  As PIRG explains:  "The reports have resulted in well over 120 recalls and other actions by the Consumer Product Safety Commission (CPSC) and toy manufacturers. This year's report emphasizes toys that pose choking, excessive noise, acute and chronic toxic and magnetic ingestion hazards."  Check it out.

Advertising Food and Drinks to Children: New UK Rules

by Christine Riefa

The advertising of food and drinks products that are high in fat, salt and sugar on UK television screens is to be severly reduced from January 2007.  Whilst a total ban of all adverstising was not adopted, advertisers will not be able to promote their products in and around programmes targeted at a young audience (under 16).  In addition, for adverts targeted at an even younger audience (under 9) the use of cartoon characters, celebrities and other popular promotional claims such as free gifts will be restricted. The decision taken by OFCOM, the new UK broadcasting regulator, is based on a review of the revenue impact a total ban of advertising for food and drinks high in salt, sugar and fat would have had on the industry. Indeed, it is reported that the industry will loose the equivalent of £16 milllions with this partial ban. The biggest impact will of course be felt by dedicated children's channels where advertising of such products will be practically impossible. The loss here is evluated at 15% of revenue, whereas on general channels the loss is evaluated at around 0.7% of total revenue.  For more details on the new measures, see the OFCOM press release.

Photo copyright BBC.  See the BBC's full article on "Junk food ad crackdown announced" here.

Second Circuit Issues Class Action Fairness Act Ruling

    By Brian Wolfman

        In DiTolla v. Doral Dental, No. 06-2324 (Nov. 17, 2006), the Second Circuit established a couple precedents under the Class Action Fairness Act.  First, it held that the burden of proving CAFA's jurisdictional prerequisites ($5 million in controversy, minimal diversity, etc.) rests on the party seeking the federal forum.  (In DiTolla, as in most CAFA jurisdictional disputes, the party seeking the federal forum was the defendant who sought to remove the case from state court to federal court.)  Second, under CAFA, the court has 60 days (with some exceptions) to decide a permissive appeal from a district court's decision granting or denying a motion to remand.  If the court does not decide the appeal within the deadline, the appeal is deemed "denied."  The Second Circuit held that the 60-day period begins to run from the day the court of appeals agrees to hear the appeal, not the day that the application to appeal is filed.  The Second Circuit's decision in DiTolla follows the unanimous holdings of other circuits on both the burden-of-proof and appeal deadline issues.

    The Second Circuit ended up affirming the district court's decision to remand the case for lack of $5 million in controversy.  That analysis did not strike me as particularly important for future cases (though I'm sure it thrilled the plaintiffs).

Defending General Jurisdiction

by Deepak Gupta

Most lawyers don't give a lot of thought to the law of general personal jurisdiction--probably because the law, through a case-by-case analysis, has become pretty well-settled.  But if you stop and think about it, general jurisdiction,  in an increasingly complex and mobile society, is often necessary to preserve meaningful access to the courthouse for consumers.  That's why it's worth noting a recent cert petition, filed by R.J. Reynolds Tobacco Company, that asks the U.S. Supreme Court to radically scale back the doctrine.

When a consumer is defrauded or injured based on a transaction that takes place in Minnesota, for example, and decides to sue in the courts of Minnesota, it's perfectly fair to the defendant for the Minnesota courts to exercise jurisdiction.  That's known as specific personal jurisdiction; the jurisdiction is based on the specific transaction at issue in the case.

What about general jurisdiction?  What if the transaction takes place in Minnesota but the suit is in Florida? If it's a business with minimal Florida contacts, it would be unfair to sue in Florida. But what if the defendant is a behemoth with an office and warehouse space in Florida, employees in Florida, hundreds of millions of dollars of sales in Florida, advertising in Florida, political lobbying activity in Florida, and access to an army of lawyers in Florida?  Surely it would be absurd to say that suing them in Florida under those circumstances would be so unfair that it would violate the corporation's constitutional right to due process.

I'm oversimplifying a bit, but that's basically the position that R.J. Reynolds has taken in its cert petition.  Reynolds wants the Court to hold that any contacts that are "sales-related," no matter how extensive, can never support general jurisdiction.  Taken to its logical extreme, this would mean that consumers could only assert general jurisdiction over R.J. Reynolds in North Carolina, or over Wal-Mart in Arkansas.  Working with Los Angeles lawyer Jean-Claude Andre through the Supreme Court Assistance Project, we wrote this Brief in Opposition to Reynolds' petition.  Among other things, the brief points out that no court has ever adopted Reynolds' radical position and so there's no conflict among the courts and it's unclear how the proposed categorical exception for "sales-related" contacts would even work in practice.  A few days ago, Reynolds filed its reply.   A decision should be announced on December 4.  We'll keep you posted.

Cellphone Tracking and Privacy

by Jeff Sovern

An article in today's New York Times, "Cellphone as Tracker: X Marks Your Doubts," is noteworthy for at least two reasons: first, it reports on the use of cellphones to track and report people's locations for social purposes, and second, it describes how the cell phone industry petitioned the FCC to draft rules guaranteeing privacy protections, and the FCC refused.  Apparently the industry thought that consumers would feel more comfortable purchasing their services if regulations protected consumer privacy.  It's unusual for a business to ask government to protect its customers from the business.

Second Circuit Agrees to Hear Interlocutory Appeal of Judge Weinstein's Class Certification in Massive "Light" Tobacco Case

    By Brian Wolfman   

    The Second Circuit has granted the tobacco industry's request to hear an interlocutory appeal seeking reversal of Judge Jack Weinstein's September 2006 certification of a national class action challenging the industry's deceptive marketing of so-called "light" tobacco products.  (Basically, the plaintiffs allege that the tobacco industry deceived consumers into believing that "light" cigarettes are healthier than ordinary cigarettes.)  After the Wall Street Journal criticized Judge Weinstein's ruling and joked that the judge had been influenced by something he'd been smoking, CL&P contributor Steve Gardner responded, explaining why Weinstein's ruling was "the opposite of radical."

    The Second Circuit had earlier stayed the district court proceedings while it considered whether to hear the appeal, thus putting off the trial, which Weinstein had scheduled for January 2007.  An early trial is now impossible, as the Second Circuit will presumably get full briefing from the parties and amici and set the case for oral argument.

     As explained here, just last year, the Second Circuit overturned another Weinstein class action ruling in the Simon II case.  There, Weinstein had certified a national non-opt-out punitive damages class of people diagnosed with smoking-related disease.  There are significant differences between the "light" tobacco case and Simon II, and we will see if those differences are enough to lead to a different result this time around.

Sen. Tim Johnson (D-Citibank) Wants to Roll Back Landmark Law on Predatory Lending to Military Servicemembers

by Ira Rheingold

While many in the consumer advocacy community are excited about the recent change to leadership in Congress, we need to recognize that oftentimes there is not a dime’s (make that a corporate millions) bit of difference between Democrats and Republicans when it comes to the issues we care about.  Just check out these quotes, about the great legislation on predatory lending to the military (the Talent-Nelson amendment) that was passed just this October, from a leading Democrat on the Senate Banking Committee in Wednesday’s American Banker:

Sen. Tim Johnson said in an interview that a top priority is the military lending measure, which caps at 36% the annual percentage rate, including fees, that can be charged to service members and their dependents. The South Dakota Democrat warned that the provision--intended to curb payday lending--may interfere with the credit system.

The measure "may have a lot of unintended consequences that will go far beyond just the payday industry," he said. "We are going to have to revisit that issue and make sure that the end result of this legislation isn't to deny military members and their families access to banking services that they've always assumed would be there."