Consumer Law & Policy Blog

Briefs in the Second Circuit Class-Action Collateral Attack Ruling

On Friday, we told you about the Second Circuit's decision in Hecht v. United Collection Bureau, which upheld a collateral attack on a class-action settlement because the notice (one ad in USA Today) to the class violated the absent class members' due process rights. If you want to read the Second Circuit briefs, go here, here, and here.

Federal and State Regulators Ramping Up Efforts Against Unlawful Debt Collection

Read about it here.

As Demand for Law School Drops, Prices Continue to Rise

We have covered the drop in demand for law schools over the last couple years. The number of people taking the LSAT has plummeted; the credentials of incoming classes at many schools have worsened; and some schools have reduced the size of their incoming classes (which in theory could keep the price higher than it would otherwise be, depending on what other schools do). Go, for instance, here, here, and here.

So, what has the effect been on the price of law schools? As Karen Sloan explains here, the price continues to go up despite lower demand. Here's an excerpt:

It's Supply and Demand 101: When demand for a product drops, prices fall to lure back buyers. But this fundamental law of economics doesn't apply to law schools. The number of applicants to U.S. law schools declined drastically during the past two years, yet the average tuition this fall will climb by more than double the rate of inflation. Average tuition and fees at private law schools will increase approximately 4 percent over last year to $40,585, according to an examination of published rates by The National Law Journal. That's the first time private-school rates have crossed the $40,000 threshold. In-state resident students at public law schools will see a 6 percent increase on average, to approximately $23,590. Inflation is running at about 1.7 percent.

Coming Soon to a Grocery Store Near You: Discrimination?

by Jeff Sovern

About nine days ago, the Times ran a front-page article Shopper Alert: Price May Drop for You Alone.  It pointed out that some supermarkets were now charging different prices to different consumers for the same items and raised questions about the practice; one shopper was quoted as calling the practice "a little bit creepy." But the practice also permits discrimination on the basis of ethnicity or gender, as I observed in this letter.  And if you think such discrimination is far-fetched, consider the studies on discrimination in lending (a leading study is Alicia H. Munnell et al., Mortgage Lending in Boston: Interpreting HMDA Data, 86 Amer.Econ. Rev. 25 (1996), but there are plenty of others, including some that claim that such discrimination doesn't occur; many are summarized in Stephen Ross & Ross Yinger, The Color of Credit (2002)) and by car dealers. See Ian Ayres, Fair Driving: Gender and Race Discrimination in Retail Car Negotiations, 104 Harv. L. Rev. 817 (1991). 

Second Circuit Upholds Collateral Attack on Class-Action Judgment

by Brian Wolfman

In this ruling issued today in Hecht v. United Collection Bureau, No. 11-1327 (2d Cir. Aug. 17, 2012), the Second Circuit allowed a collateral attack on a class action judgment. Chana Hecht had sued United Collection Bureau under the Fair Debt Collection Practices Act. The district court threw out the suit on res judicata grounds, holding that an earlier class-action settlement concerning the same claims barred the suit. The Second Circuit reversed, holding that because the class-action notice plan -- no personal notice and just one ad in USA Today -- did not provide constitutionally adequate notice to the class members, Ms. Hecht's claims are not barred by the class-action judgment. More on this decision later. (I was one of the lawyers for Ms. Hecht, along  with Lawrence Katz, a consumer-rights attorney in Cedarhurst, New  York.)

UPDATE: Read this article about the ruling by Alison Frankel.

The value of class actions

Using two recent posts of mine on this blog as a stepping off point, Paul Karlsgodt over at ClassActionBlawg.com has posted this short piece, which appears to appreciate that class actions are important tools for justice but asks "whether the idea of preventing [their] abuse through the application by the courts of common sense constraints, while pure in theory, is truly realistic in practice."

Australian Cigarette Logo Ban Upheld by Australia's Highest Court

As we've discussed (go, for instance, here and here), in the U.S., because of that pesky First Amendment, the legality of the FDA's new graphic cigarette labels is something about which federal judges may differ. But tobacco company speech is easily regulated elswhere. As explained in this AP article, "Australia's highest court upheld the world's toughest law on cigarette promotion [today], prohibiting tobacco company logos on cigarette packs that will instead show cancer-riddled mouths, blinded eyeballs and sickly children." The now-rejected legal challenge was based not on the tobacco companies' free-speech interests, but on the claim that "the value of their trademarks will be destroyed if they are no longer able to display their distinctive colors, brand designs and logos on packs of cigarettes." One of the labels required by Australian law appears to the right.

It’s only natural.

By Steve Gardner

As litigation director for the Center for Science in the Public Interest, I follow private lawsuits involving deceptive marketing claims for foods. I’ve noted the significant number of lawsuits that focus on food companies’ willy-nilly use of “natural” to describe food products that are anything but.

Although USDA has a definition of natural that’s pretty workable (the ingredient must be “minimally processed”), the FDA has long refused to adopt its own definition or even to adopt the USDA’s definition.

Thus, companies slap the “natural” claim on foods with completely unnatural — and heavily processed — ingredients like high-fructose corn syrup, trans fat oils, and (a relative newcomer to the food ingredients category) high-maltose corn syrup.

Companies like to say that these ingredients are natural because they come from corn or other plants. To me, that’s like saying that a plastic spoon is natural because it comes from dinosaur.

And this cavalier attitude has resulted in a number of lawsuits. CSPI has been part of a small fraction of these lawsuits (e.g., Nature Valley, 7UP, and Capri Sun).

While it warms my heart to see so many companies having to defend so many deceptions, my heart would be even warmer if the food companies stopped making these claims.

Thus, we need some kind of clear definition of “natural” by FDA.

The question then becomes how to define the word. I don't give a dang what a scientist or a lawyer thinks “natural” means, because the only thing that matters in the marketplace is what consumers think.

Going to the grocery store should not become a pop quiz of one’s scientific or legal acumen. From a consumer-protection standpoint, all that matters is what a consumer thinks “natural” means.

FTC’s policy is to act if a marketing practice is deceptive or unfair to a "reasonable consumer acting reasonably under the circumstances."

But completely reasonable consumers often act irrationally. That doesn't make them unreasonable. Just mistaken.

Consumers may think something is natural when it isn't, or that something is not natural when it is. But the bottom-line truth (i.e., what a scientist or a lawyer might think) doesn't matter.

All that matters, from a consumer-protection perspective, is what consumers understand a claim of “natural” to mean. Purchasing decisions are not made based on lengthy and deliberative thought. They are often far from rational decisions.

That’s fine. We aren't robots. Consumers are entitled to make non-rational decisions — most marketing efforts are indeed aimed at getting consumers to do so.

But this ongoing deception must stop.

C’mon FDA, earn your keep!

 

Sam Bagenstos on Spending-Clause Legislation After the Health Care Decision

In its recent health care ruling, National Federation of Independent Business v. Sebelius (NFIB), the Supreme Court held (7-2) that the Affordable Care Act's medicaid expansion unconsitutionally coerced the states to accept the expansion and thus offended the Constitution's so-called Spending Clause. Some observers think that the Court's Spending Clause holding calls into question the constitutionality of much existing Spending Clause legislation and takes off the table many federal-state programs that otherwise might  have been enacted in the future. (See, for example, Scott Michelman's August 1 post.)

Law professor Sam Bagenstos has written "The Anti-Leveraging Princple and the Spending Clause After NFIB", which takes a different view. Here is the abstract:

This article offers an initial assessment of the Supreme Court’s Spending Clause holding in National Federation of Independent Business v. Sebelius, which addressed the constitutional challenge to the Affordable Care Act. As Justice Ginsburg pointed out, NFIB marks “the first time ever” that the Court has held that a spending condition unconstitutionally coerced the states.  The implications of that holding are potentially massive, and some of the language in the decision, if read broadly, would seriously threaten the constitutionality of a broad swath of federal spending legislation. Notwithstanding some of the Court’s language, this article contends that the case is not best read as rendering federal spending conditions unconstitutional simply because they are attached to large amounts of federal money, change the terms of participation in entrenched cooperative programs, or tie together separate programs into a package deal. Rather, Chief Justice Roberts’s pivotal opinion is best read as adopting an “anti-leveraging principle” that will find coercion only where all three of these conditions are present at the same time. The anti-leveraging principle both makes the most sense of what the Chief Justice actually said in NFIB and does a better job of accommodating the relevant constitutional values than do alternative readings of the case. Although that principle threatens the constitutionality of far fewer conditional-spending laws than do those alternative readings, it raises challenging questions about the constitutionality of certain spending conditions. And it gives states an important new tool in negotiations with federal administrators.

Two More Arbitration Articles

Rhonda Wassermanof Pittsburgh has written Legal Process in a Box, or What Class Action Waivers Teach Us About Law-Making, forthcoming in 44 Loyola University Chicago Law Journal, (2012).  Here's the abstract:

The Supreme Court’s decision in AT&T Mobility v. Concepcion advanced an agenda found in neither the text nor the legislative history of the Federal Arbitration Act. Concepcion provoked a maelstrom of reactions not only from the press and the academy, but also from Congress, federal agencies and lower courts, as they struggled to interpret, apply, reverse, or cabin the Court’s blockbuster decision. These reactions raise a host of provocative questions about the relationships among the branches of government and between the Supreme Court and the lower courts. Among other questions, Concepcion and its aftermath force us to grapple with the relationship between law and politics, the role of legislative history in statutory interpretation, the meaning of legislative primacy, the influence of federal agencies on the development of the law, and competing conceptions of the relationship between the Supreme Court and the lower courts.

And Roger Perlstadt of Florida adds Article III Judicial Power and the Federal Arbitration Act, forthcoming in 62 American University Law Review.  Here's his abstract:

Arbitrators determine facts and apply law to those facts to bindingly resolve disputes between two or more parties, a task normally reserved for judges. The Federal Arbitration Act (FAA) makes agreements to arbitrate disputes enforceable, including disputes that would normally be heard by an Article III judge, such as those arising under federal law or between parties of diverse citizenship. Accordingly, disputes subject to an arbitration agreement brought before a federal court for adjudication must instead, pursuant to the FAA, be resolved by an arbitrator. Yet, while Article III mandates that such disputes be decided by life-tenured and salary-protected judges, arbitrators — selected and compensated by one or more of the parties — enjoy neither protection. A literal reading of Article III thus suggests that sending federal disputes to non-Article III arbitrators under the FAA is unconstitutional. Although courts and scholars have roundly rejected Article III literalism and have adopted various theories justifying non-Article III adjudication of Article III disputes, whether the FAA is consistent with Article III has received little analysis. This article addresses that gap by applying the leading judicial and scholarly theories of non-Article III adjudication to the FAA, ultimately determining that none of them justify arbitration. While a legislative change could remedy the tension between Article III and the FAA, this article suggests that the better approach is simply to acknowledge the fundamental inconsistency of the FAA with Article III while recognizing that parties may waive their constitutional right to an Article III forum. Given that arbitration is a waiver of Article III rights, however, this article concludes that consent to arbitration must be determined under the standards used to determine waiver of constitutional rights generally, a fundamental shift from current FAA jurisprudence.