Consumer Law & Policy Blog

Façonnable Decision Adopting Weak Standard for Subpoenas to Identify Anonymous Speakers Is Vacated

by Paul Alan Levy

In early June, I described a recent decision by a United States Magistrate Judge in Colorado who had been persuaded to adopt a weaker than normal standard to decide whether anonymous Internet posters should be identified when a plaintiff seeks to sue them becauce their speech allegedly violates the plaintiff’s rights.  That decision has now been vacated under the Munsingwear doctrine.

As previously reported, the ruling was stayed shortly after we entered the case to represent Skybeam and filed objections with the District Judge.  Façonnable promptly sought and, with our consent, was granted a lengthy extension of time to respond to our objections.  The day before its response was finally due, Façonnable offered the Doe a face-saving settlement — no apology, no payment of money, and no admission that the sued-on statements were false (in fact, as our objections pointed out, there was actually serious reason to think that the statements may have been true).  All that was required was a representation from counsel for the Doe that the poster was not one of Façonnable’s competitors.  Once that representation was provided, Façonnable dismissed its libel action with prejudice.

We then moved to vacate the order against Skybeam (including its supporting opinion), contending that Façonnable’s unilateral dismissal of its action had unfairly deprived Skybeam of the opportunity to have its objections to the ruling against it considered.  Interestingly, we were unable to find a single reported decision, or even an unreported but reasoned decision, addressing the application of United States v. Munsingwear, 340 U.S. 36 (1950), to a subpoena to a media or Internet host seeking to identify an anonymous sources or user.  Now there is such a case:  Judge Arguello ruled that Munsingwear applied; the decision appears at 2011 WL 3203125.

The sequence of events served to confirm the need for a strong standard for the identification of anonymous speakers.  It is apparent that, as soon as Façonnable was confronted with evidence supporting the truth of those statements, it was ready to drop the case.  In other words, Façonnable never had a winnable case.  Why, then, should the anonymity of its speaker be compromised?  Only by requiring evidence instead of mere allegations can we be confident that baseless claims that seek to identify critics for improper purposes will be sidetracked.

Arthur Alan Wolk Sues the Lawyers Whose Arguments Got His Libel Suit Dismissed As Untimely

by Paul Alan Levy

About a year ago, the blogosphere was alight  with discussion of an important statute of limitations decision from the federal court in Philadelphia, rejecting a libel suit brought by Arthur Alan Wolk, a well-known trial lawyer specializing in aviation accidents, against Walter Olson, a conservative blogger whose Overlawyered blog focuses on cases and lawyers that illustrate his support for the cause of tort deform and, indeed, his broad opposition to various forms of social legislation.  Not content to pursue his arguments against that ruling on appeal, Wolk has filed a new lawsuit naming not only the original defendants but their lawyers and several other individuals and organizations.

Jon Stewart on the Fate of Dodd-Frank . . . so far

The Daily Show - Dodd-Frank Update
Get More: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

 

Baseless Litigation Threat of the Week — “Adam Wins”

by Paul Alan Levy

As often discussed on this blog and elsewhere, decision after decision holds that Section 230 protects the hosts of message boards against liability for the content posted by the message board’s users.  Section 230 actually stands as a critical bulwark protecting consumers’ ability to have their say about abusive companies, because without its immunity, mere demands to remove content would serve as a “heckler’s veto” in that it always costs a host more to evaluate challenged content than it can possibly earn by keeping that content.

The unanimity of this legal protection doesn’t seem to be getting through to general practitioners, however, if we can judge from the curious case of Florida lawyer Joel Hirschhorn.   Although his law firm bio touts his past presidency of the “First Amendment Lawyers Association,” he is apparently not so keen on the free speech rights of others.  He wrote to 800Notes, complaining about messages hosted on its web page about the phone number 954-472-0141, which is apparently a number that Hirschhorn client Adam Meyer uses to cold-call consumers promoting his “Adam Wins” service; if Meyer is to believed, members of the public who buy his daily and monthly memberships can thereby “invest” their money effectively in winning bets on sporting events.  Some of the posts on 800Notes suggest that Meyer is not to believed, while others defend his record.

Hirschhorn’s message accused 800Notes of publishing “false and defamatory” content (referencing an exhibit that he did not provide) and demanded an immediate retraction and apology, citing a Florida statute that eliminates presumed and punitive damages if a retraction is issued.  The response from Julia Forte urged Hirschhorn’s client to respond on the message board itself, but drew Hirschhorn’s attention to Section 230 and told him that, if he felt that litigation is the best response, his only remedy would be against the posters themselves.  She warned that 800Notes seeks attorney fees against those who bring frivolous lawsuits in contravention of section 230 referring Hirschhorn to the page on the 800Notes site that discusses section 230.

Hirschhorn then slammed Forte for having said, in effect, “If you sue us, we will fight back and win.”  No lawyer "worth his/her weight would ever guarantee a win (you just did),” and by doing so, Forte had shown that “you must have graduated at the bottom of your class from a third world law school.”  Forte is of course not a lawyer, just a techie who had the idea for a reverse phone directory built by its users.

I then called Hirschhorn myself to try to discuss the law with him and to give him the names of cases from both the Florida Supreme Court and federal trial and appellate courts in Florida that support the immunity of Forte's company; I also hoped to explain the Dendrite process to him so that, assuming he  could prove falsity and damages, he could pursue the anonymous posters if that was his client's choice.  Hirschhorn bragged that he is not just a member but the founder of the First Amendment Lawyers Association, but acknowledged that he himself did not know anything about the law in this area; instead, he said, he hires others who know the law to help him.  But when I suggested that Forte’s confidence in the immunity of her hosting company is justified, and tried to explain where the law is on this topic, he abruptly hung up the phone.

Indeed, it is not so clear that Hirschhorn follows the advice he gave Forte. The domain name for his web site, aquitall.com, could be interpreted as a claim that he always obtains acquittals in all his criminal-defense cases (it also may suggest that he hopes to appeal to clients who can't spell).  The domain name may, in fact, violate the Florida Bar's advertising rules, which forbid lawyers to promise results; the Florida Bar has applied such restrictions to Internet domain names.  Public Citizen has challenged those rules under the First Amendment; we have also brought First Amendment challenges against similar advertising restrictions in other states like New York and Louisiana. 

As for Adam Wins – it is hard to see how hiring Hirschhorn to send empty threats is anything other than a losing proposition.

Times's "Deal Professor" Davidoff: "To Buttress Consumer Bureau, a Compromise"

Here.  The compromise: a self-financed commission, as opposed to a director.  An interesting excerpt about Cordray:

Mr. Cordray is a solid nominee for consumer advocates. As attorney general of Ohio, he brought a number of consumer protection suits — which his Republican successor, Mike DeWine, is continuing. This is a bipartisan endorsement if there ever was one. And for those who say Ms. Warren or no one, I suspect Mr. Cordray will not be much different from Ms. Warren.

If the confirmation of Mr. Cordray is the goal, then a compromise with the Republicans is probably the best for the bureau as well as Mr. Cordray’s own chances. The trick is to get such a compromise in the current mess that is Washington.

Meanwhile, WaPo reports Raj Date to replace Elizabeth Warren at consumer bureau

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http://www.washingtonpost.com/business/economy/raj-date-to-replace-elizabeth-warren-at-consumer-bureau/2011/07/26/gIQAHAvvbI_story.html?hpid=z12

Baltimore Sun Article: Maryland Law School Debt Collection Clinic and Debt Collection Reform

Here.  The article melds coverage of the clinic with discussion of reform of debt buyers' debt collection efforts.  An excerpt on the latter topic:

Maryland's highest court is about to consider a change in the rules that would make it clear that debt buyers cannot expect a judgment against a no-show defendant without presenting sufficient evidence to back up their claims.

A court committee recommended the move in June at the urging of the Maryland Attorney General's Office and the Department of Labor, Licensing and Regulation.

The chief judge of Maryland's District Court, where almost all these cases are filed, believes reform is urgently needed. Judge Ben C. Clyburn said small-claims courts sign off on more than 200,000 judgments in contract cases each year. Probably two-thirds, he said, are debt-collection matters.

The Haggler, Prompted by Ralph Nader, Reminds Us About the Importance of Small Claims Court

by Paul Alan Levy  

Very nice article in the Times by the Haggler, reminding us of the story of Ralph Nader's suit against Allegheny Airlines, and concluding with a pitch for the use of small claims court as a remedy for consumer abuses.  Ralph apparently had another tussle with US Airways, the corporate successor of Allegheny Airlines, when he was denied a requested refund recently; it was his threat to use small claims court that apparently induced the airline to settle up.

Two passages that I particularly liked:

"Now, if you supported Al Gore and are still furious about Mr. Nader’s role in the 2000 presidential election, the mere mention of his name may make you boil.

"Well, boil somewhere else.

"This, if you need a reminder, is not a column about politics. It’s about consumer justice, and it is hard to think of anyone who has worked more tirelessly and more effectively for that cause than Ralph Nader. For the Haggler, a parvenu in the field, hearing from this guy was like a weekend fiddler’s getting a call from Mozart.

And then this:

Now we come to the moral of the story.

“Small claims court is an unknown venue to most people,” Mr. Nader says.

In recent years, small claims courts have become the favorite places for collection companies to file for default judgments on an assortment of credit card and auto loan debts. But that was not their original purpose. When they blossomed in the 1960s, they were meant to be consumer-friendly places for disputes under a certain ceiling — today, $5,000 or so is typical.

“I read a lot of consumer books, and almost all of them completely ignore small claims court,” Mr. Nader says. “Few people know how simple the forms are, how accommodating the judges are. A lot of them are even open at night.”

 

Why the House Bill to "Improve" the CFPB Would Cripple It

by Jeff Sovern

H.R. 1315, the so-called Consumer Financial Protection Safety and Soundness Improvement Act passed by the House last week displays an extraordinary number of seemingly neutral "improvements" that would collectively have the effect of crippling the Consumer Financial Protection Bureau, or even tipping it over to an agency that would be more protective of banks than consumers.  Unfortunately, because of the complexity of the issues, explaining all that briefly in a way that can be easily understood is not easy.   That's probably the point. The bill is diabolically clever. 

Let's start with the commissioners.  Of the five commissioners, one has to be the Vice Chairman for Supervision of the Federal Reserve System.  That would be the same Fed that Congress gave the power to prevent predatory lending to in 1994 that the Fed didn't use until 2008, far too late to prevent the subprime fiasco.  It would also be the same Fed that sometimes seems unduly influenced by the banks it regulates.  So let's count that commissioner as a vote against consumer protection.  No more than two of the remaining four commissioners can be members of the same political party. If the president appoints two Democrats and two Republicans, say, that leaves us with a majority of the commissioners who are either Republicans or who work for the Fed.  Of course, it doesn't have to work that way. The president could appoint independents instead of Republicans.  But remember also that the Commissioners have to get through the Senate. It's easy to imagine the same 44 Senators who have opposed any nominee for director saying they will oppose nominees for the Commission unless two are Republicans.  So instead of a director who will protect consumers, we end up with a significant chance of an agency that protects banks, even with a democratic president.  You can also imagine combinations that end up replicating the same kind of partisan gridlock we have in Congress already.  For example, suppose we have four commissioners seated, split between pro-consumer and pro-bank factions, and the Senate refuses to confirm a fifth commissioner who would break the tie.  See how clever this is?

But that is far from all.  The bill also provides for staggered terms, so that in four out of every five years, a term ends and the president gets to nominate a new commissioner.  If President Obama loses in 2012, that will give the new president a nomination fairly quickly.  The president also gets to name the chair of the Commission, so once that nominee is confirmed, the president could designate that person the chair.  And voila: a Bureau that is supposed to protect consumers instead protects banks.

But, of course, President Obama could win re-election.  Perhaps the Bureau, despite the restraints described above, will propose a regulation to protect consumers that would reduce financial institution profits.  Banks still may avoid worry because the Financial Stability Oversight Council could overrule the regulations  Current law says such overruling requires a two-thirds majority, but the House bill would reduce that to a simple majority and take away the Bureau's vote.  Remember that the FSOC includes several bank regulators, including the Comptroller of the Currency, an agency that the banks essentially own.  The House bill also lowers the standard for the FSOC to overrule the Bureau by requiring it to overturn (currently, it's discretionary) Bureau regulations which are "inconsistent with the safe and sound operations of United States financial institutions"  (currently the standard is that it would put safety and soundness at risk).  So suppose the Bureau proposes a regulation which would have the effect of reducing bank profits.  Would that be inconsistent with the safety and soundness of banks? If so, no matter how wonderful the regulation, the FSOC would have to reject it. 

There's more.  Before adopting new regulations the Bureau has to conduct not one but two new analyses.  That can slow things down.

I have a feeling I haven't even found everything that would affect the Bureau's functioning.  As I say, it's diabolical.

Blue Cross / Blue Shield Objects to Having Its "Name and Brand" Identified in Study Without Its Permission

by Paul Alan Levy

Jay McQuaide, the Vice-President of Corporate Communications for Massachusetts Blue Cross Blue Shield, recently sent a stiff complaint to local doctors who published a study in the Annals of Emergency Medicine reporting how doctors on its mental health panel responded (or, more specifically, failed to respond) to calls from patients needing immediate appointments for treatment of depression.  McQuaide complained about the fact that the study mentioned Blue Cross Blue Shield in concluding that doctors on its network were not providing sufficient outpatient care to patients after their release from local emergency rooms.

Upon seeing a press release about the study, McQuaide dispatched the following complaint: “We are VERY concerned about the use of BCBSMA’s name and brand in a published study without BCBSMA authorization. We’d like to talk with you about that.” My colleague Sid Wolfe at Public Citizen’s Health Research Group recently took McQuaide to task for his censorship efforts.

Because McQuaide’s LinkedIn profile characterizes him as a “Seasoned communications professional”   it is surprising that he doesn’t understand that having a brand name does not mean that a company can prevent others from discussing the company or criticizing its products or services.  McQuaide apparently told a reporter who called to inquire about his warning that his company can actually use its rights in its brand name to protect itself from being studied or, at least, from being identified in the study.

But then, Massachusetts companies seem to have a thing for abusing trademark law to bully critics who calling public attention to their shortcomings.  We recently won summary judgment against Massachusetts software company Jenzabar which has been dragging some documentary filmmakers through hundreds of thousands of dollars in litigation expenses because they had the audacity to use Jenzabar’s name on a web page about Jenzabar.  Jenzabar has appealed.  Stay tuned.

Debt Settlement Under Fire

The Center for Public Integrity's iWatch News tells the story of a retired teacher who paid a "debt settlement" firm $7000—none of which went toward paying off her debts. West Virginia's attorney general sued the firm on behalf of her and 400 other consumers who paid up-front fees for debt-settlement services. The industry is also on the CFPB's rulemaking agenda.