Consumer Law & Policy Blog

President Obama to Appoint Elizabeth Warren Today; Warren Says She'll Put an End to Financial "Tricks and Traps" Aimed at Consumers

Read about it here.

Putting a Human Face on Foreclosure

Yesterday we told you the cold stastics: Foreclosures are at their highest point since the mortgage meltdown began.  But here's a real story, which begins like this:

Mike and Kathy Wales don't know how long their 10-year-old son, Alex, has to live. Last year, they learned he has cerebral adrenoleukodystrophy, a terminal neurological disorder that has left him unable to see or walk. Now the family faces one more crisis: the foreclosure of its Prince William County home. Just days after the Waleses were told by banking giant Chase that they had been approved for a mortgage modification, the company foreclosed, selling the three-bedroom townhouse in Bristow to Fannie Mae and imperiling the family's place in a community that has rallied around Alex at every turn. Mike Wales, who retired from the Air Force in 2004 after 21 years to take a civilian intelligence post within the service, said he and his wife were overwhelmed by the emotional and financial toll of Alex's illness and fell behind on their monthly mortgage payments.

HuffPo: Dodd Says Congress Could "De-Fund" CFPB if President Appoints Warren

Here.  It seems improbable that Congress would enact a new law to take away the CFPB's funding if Elizabeth Warren ends up heading the CFPB, especially since such a law would require either presidential approval or a veto override, but that's what Senator Dodd said.

Foreclosure News

Lenders foreclosed on more homes in August than in any month since the mortgage meltdown began.

Should The Constitution Authorize The States To Repeal Federal Law?

This blog has frequently covered federalism issues, most notably addressing whether federal law preempts state-law claims for damages involving products or services subject to federal regulation. It's fair to say that on those questions the bloggers here, myself included, generally see an advantage in the co-existence of state and federal law (and little evidence of the kind of conflict that the Supremacy Clause demands be resolved in favor of federal law). The Supremacy Clause does, of course, operate when Congress has expressly ousted state law, or the Constitution or federal law by design (or otherwise impliedly) has left no room for 50-state interference.

So, how about giving states the authority to repeal federal law? At The Volokh Conspiracy, Georgetown law prof Randy Barnett talks about his proposed constitutional amendment that would allow 2/3rds of the states to band together to repeal any federal law or regulation. Would this be a line-item repeal power -- that is, would the states be authorized to repeal only, say, 22 U.S.C. 2222(a)(4)(i) or 99 C.F.R. 897(a)(7)(C), leaving the remainder of the provision in place? It would seem so, as long as the provision is described with particularity in the constitutional amendment (which seems easy enough in most cases). Here's Prof. Barnett's proposed language:

Any provision of law or regulation of the United States may be repealed by the several states, and such repeal shall be effective when the legislatures of two-thirds of the several states approve resolutions for this purpose that particularly describe the same provision or provisions of law or regulation to be repealed.

I suppose that Congress would be free to reenact a statutory provision repealed through this process (with the state legislatures free to rerepeal under the terms of the constitutional amendment). But what about a regulation? Would a federal agency's legislative regulation, repromulgated after its repeal by the states, have the force of law? Would that depend on whether the legislation that had authorized the repealed regulation had also been repealed (at least to the extent that it had authorized the repealed regulation)?

President Obama to Appoint Elizabeth Warren to Treasury Department Position

ABC is reporting that President Obama will appoint Elizabeth Warren to a special position at the Treasury Department. Warren will be charged with getting the new Consumer Financial Protection Bureau up and running. As we discussed yesterday, the move is aimed at getting Warren involved in setting up the CFPB without having to go through the nomination process (which would likely be messy and time consuming and might not end in confirmation).

Addition: The New York Times is explicit in expressing the view that this appointment is an end run around the confirmation process. In an article entitled "Warren to Unofficially Lead Consumer Agency," the author notes that "[t]he decision . . .would allow Ms. Warren ... to effectively run the new agency without having to go through a potentially contentious confirmation battle in the Senate." 

Obama Administration Trying to Find Consumer Protection Role for Elizabeth Warren

According to this article in the Washington Post, the Obama Administration has a "genuine dilemma" on its hands: It wants Elizabeth Warren to head the new Consumer Financial Protection Bureau, but it is concerned her nomination would be delayed and possibly fail. Here's an excerpt:

For weeks now, administration officials have weighed various options for how to place Warren at the center of shaping the new watchdog, a role she covets and one that President Obama and others have hinted she will play in one way or another. The latest news to stoke the blogosphere and ignite passions on both sides of the aisle is that the White House is considering giving Warren an "interim" role at the Treasury Department. Such an approach would allow her to oversee the creation of the consumer bureau while circumventing a potentially nasty and prolonged Senate confirmation process. ... [G]oing that route poses its own risks, a fact of which White House officials are keenly aware. For starters, dozens of far less controversial nominees than Warren already have languished in the Senate for months.

Nevyas Lasik Surgeons Resort to Trademark Law to Suppress Criticisms

by Paul Alan Levy

For several years, Dominic Morgan and the principals of the Nevyas Eye Clinic have been jousting over Morgan’s contention that, by performing inappropriate lasik surgery on him in 1998, and overlooking indications that he was not a good candidate for such surgery, the Nevyases are responsible for making him legally blind.  The Nevyases filed a Lanham Act false advertising suit, claiming that Morgan’s “sucks” web site would mislead consumers about the quality of their services; that action was promptly dismissed.  They also sued in state court for defamation, and obtained an injunction against the maintenance of his “sucks” web site.  Public Citizen represented Morgan on appeal from the injunction, arguing that the injunction was an unconstitutional prior restraint; the appellate court reversed on state law grounds.  The libel case continues to wend its way through the Pennsylvania state courts; most recently it is the Nevyases who plan to appeal, from the determination that they are limited purpose public figures who, therefore, have to prove that Morgan’s comments were posted with knowledge of their falsity or reckless disregard of a likelihood of falsity.

More recently, however, the Nevyases upped the ante by pursuing another trademark claim, this time invoking an infringement theory.  The basis for this claim is that by creating web sites that use the Nevyas name in the domain name – anitanevyaslasik.com, herbertnevyaslasik.com, and nevyaslasik.com — Morgan is likely to confuse consumers into believing the web sites that announce “Why I do not recommend [the Nevyases’ services]” are sponsored by the Nevyases themselves.  Apparently, what got the Nevyases really upset was that Morgan’s gripe sites rank in the first few hits on Google when users search for information about the Nevyases and their lasik clinic.  So far as we can tell, they gave no consideration to the possibility that a silly claim of trademark infringement might just bring more attention to Morgan’s gripes.

Has Vision Media TV Group assumed a new name – World Progress Report?

by Paul Alan Levy

Over the past year, several sources have discussed the deceptive solicitation techniques used by Vision Media TV Group, a Boca Raton TV production company, to drum up business from unsophisticated non-profit groups by promising to get them free air time on public television stations for a series hosted by Hugh Downs.  Vision Media sued  to force the telemarketing commentary site 800Notes.com to take down critical comments and identify its critics – that lawsuit was ultimately dismissed.   One interesting fact that emerged during the litigation was that Vision Media was itself a new incarnation of a decade-long operation that formerly operated under different names and offered public television exposure associated with names like Walter Cronkite, Morely Safer and Aaron Brown.  Each time the light of publicity shone on this scam, the operators would change names and find a new former respected newscaster to use as its lure.  Vision Media tried to change its name to Great America HD,  but eventually Hugh Downs disassociated himself from the operation when its nature was divulged. 

Now come indications that the group behind Vision Media may have adopted yet another new name, the World Progress Report, using the reputation for former Good Morning America newscaster Joan Lunden as the lure.  Explanatory text on the World Progress Report web site is lifted word-for-word from the Great America HD site (which at this writing is no longer online), and as with Great America HD, the World Progress Report web site features a long list of what appear to be paid placements on commercial cable programs over the past few years (including programming that Vision Media TV claimed it had placed), but no evidence of airing on public television stations.  It appears that someone has even gone to the trouble of creating an apparent exchange among admirers on the pages of 800Notes.com.

Update: 

Irony alert: World Progress report has "A Series To Help Consumers Identify Scams"  This press release has been widely publicized by other bloggers who assumed, from the references to public television, that the report is being shown on PBS.  Because PBS has disclaimed any relationship with Vision Media and its ilk, the World Progress Report includes a disclaimer of affiliation with PBS, taken verbatim from the old Great America HD web site.

Ninth Circuit says consumers may not own their software

by Greg Beck

Most people outside the software industry probably assume that when they pay money in exchange for a package of software, they have just purchased that software. In Vernor v. Autodesk, the Ninth Circuit today cast that assumption into doubt. The court held that Timothy Vernor, who purchased authentic, second-hand copies of software at garage and office sales to sell on eBay, did not own that software and thus had no right to resell it.

Public Citizen represented Vernor in his case against software-publisher Autodesk, which claimed that reselling the software on eBay was copyright infringement. The district court agreed with Vernor and rejected Autodesk’s copyright argument, holding that Vernor had a right to resell the software under copyright’s first-sale doctrine. The first-sale doctrine holds that the “owner of a particular copy” of a copyrighted work has the right to resell that work without permission of the copyright owner. The doctrine dates from a 1908 Supreme Court decision in which the Court held that a book publisher could not restrict the price at which its books were sold on the secondary market, and Congress subsequently added the doctrine to the Copyright Act as one of the law’s crucial consumer-protection provisions. Here, the district court held that Vernor was the “owner” of the software, and thus entitled to the doctrine’s protection, because Autodesk had distributed the software in exchange for a one-time payment and had no expectation that the software would ever be returned. In other words, because the transaction looked like a sale, it was a sale.

The Ninth Circuit disagreed, relying on the “license agreement” that Autodesk packages with its software. The license stated that Autodesk retained title in the software, restricted redistribution, and imposed some other terms that are pretty typical in the software industry, such as a prohibition on reverse engineering. The Ninth Circuit held that these terms were restrictive enough that anyone in possession of the software could not be considered its actual owner. Although Vernor never installed the software or agreed to its terms, the court held that license effectively bound him anyway because Autodesk, as the software’s legal owner, could dictate the terms on which it was used.

If standard fine-print license terms like Autodesk’s are enough to withhold ownership, it is safe to assume that most people do not own the software they believe they have bought. And, unfortunately, there is no obvious reason why other publishing industries couldn’t begin imposing the same terms. If they do, it may be the end of ownership of books and music.

The Ninth Circuit acknowledged the seriousness of some of these concerns, but held that its hands were tied by prior circuit decisions. Hopefully, the en banc court will be willing to reconsider those decisions.