Consumer Law & Policy Blog

Supreme Court Grants Review in Pay-for-Delay Settlement Case

by Brian Wolfman

In a pay-for-delay settlement, a brand-name drug company pays a generic company that has challenged the brand-name company's patent to stay out of the market. Some early antitrust challenges to these settlements succeeded, but later court of appeals' rulings gave them a green light. Then, as we discussed in this post last July, the Third Circuit sought to apply the brakes in In re: K-Dur Antitrust Litigation, and demanded serious antitrust scrutiny of those settlements. Earlier, we had posted (here, here, and here) about the FTC's efforts to police pay-for-delay settlements.

Today, the Supreme Court decided to review the issue in a case out of the 11th Circuit brought by the FTC, Federal Trade Commission v. Watson Pharmaceuticals. The cert-stage filings are here.

Second Circuit Says First Amendment Shields Sales Rep's Promotion of a Prescription Drug for Off-Label Use (that is, a use not approved by the FDA)

by Brian Wolfman

The FDA says it violates federal law for a drug company sales rep to promote a prescription drug for an off-label use (that is, a use not approved by the FDA). So, a rep is convicted of a misdemeanor in federal district court for promoting a prescription drug for an off-label use. But in United States of America v. Caronia, the Second Circuit has just held 2-to-1 that the rep "was convicted for his speech," which the First Amendment prohibits, and so it reversed the conviction. The majority stressed that the off-label use itself was lawful. David Lazarus criticizes the decision here.

Here's the beignning of the Second Circuit's opinion:

Defendant-appellant Alfred Caronia appeals from a judgment of conviction entered in the United States District Court for the Eastern District of New York (Eric N. Vitaliano, J.) on November 30, 2009, following a jury trial at which Caronia was found guilty of conspiracy to introduce a misbranded drug into interstate commerce, a misdemeanor violation of 21 U.S.C. §§ 331(a) and 333(a)(1). Specifically, Caronia, a pharmaceutical sales representative, promoted the drug Xyrem for "off-label use," that is, for a purpose not approved by the U.S. Food and Drug Administration (the "FDA"). Caronia argues that he was convicted for his speech -- for promoting an FDA-approved drug for off-label use -- in violation of his right of free speech under the First Amendment. We agree.

 

Dee Pridgen Paper on the CFPB and Recent Consumer Protection Statutes

Dee Pridgen of Wyoming has written Sea Changes in Consumer Financial Protection: Stronger Agency and Stronger Laws.  I read this one before it was posted and found it particularly useful in pulling together some recent themes in consumer law and explaining how the Dodd-Frank Act's anti-predatory lending rules are based on behavioral economics, as opposed to earlier statutes which partake more of traditional rational-person economics. Here is the abstract:

After the financial crisis of 2008, Congress responded by enacting new laws that changed the direction and theoretical underpinning of consumer protection in the financial sector. The Consumer Financial Protection Agency, formed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, is a new and stronger agency for consumers. Two pieces of legislation, the Mortgage Reform and Anti-Predatory Lending Act (Title XIV of Dodd-Frank), and the Credit Card Accountability, Responsibility and Disclosure Act (Credit CARD Act) of 2009, are stronger laws ensuring the safety of consumer financial products. These new legislative and regulatory developments mark a shift from the rational consumer theory that underlay the great disclosure statutes of the late 1960’s and early 1970’s, such as the Truth in Lending Act, and toward the rising influence of behavioral economics as a guiding force in consumer protection. This article examines the new agency and the new laws, explains how they differ from the prior governmental structure and precepts, compares and contrasts rational consumer theory and behavioral economics theory, demonstrates how the new developments are a reflection of the modern theory, and then analyzes the advantages and disadvantages of this new approach.

 

 

D.C. Circuit recess appointment case challenging NLRB has implications for CFPB

Many media outlets have reported on this week's D.C. Circuit hearing in a challenge to President Obama's three recess appointments to the National Labor Relations Board. You'll recall that the President used his recess appointment power at the beginning of the year to make several appointments during pro forma Senate sessions that were specifically designed to block the recess appointment power while Republicans were refusing to consider Obama nominees, including Richard Cordray for head of the Consumer Financial Protection Bureau.

Cordray was ultimately one of the recess appointees along with the NLRB appointments challenged in the D.C. Circuit case. So Cordray's fate is riding on the recess appointment issue too.

Defamation claims and Article III standing

by Paul Alan Levy

I am dealing with a case in which a company has sued investors for defamation, alleging statements made about shenanigans of some of the individuals employed by the company.  The "of and concerning" requirement under state law was federalized as a First Amendment requirement in New York Times v. Sullivan, but it occurs to me to think that Article III standing requirements might also be implicated, when the case has been filed in federal court.  Any thoughts by others?

Is There a Gene for Unwise Credit Card Borrowing?

Jan-Emmanuel De Neve of the London School of Economics and James Fowler of the University of California at San Diego Law School say yes in this article. Here's the abstract:

Economists have long realized the importance of credit markets and borrowing behavior for household finance and economics more generally. More recently, twin studies have shown that genetic variation plays a significant role in financial decision making. However, these studies have not identified which genes might be involved. Here we present the first evidence of a specific gene that may influence borrowing behavior. Using a discovery and replication sample from a U.S. representative data set (Add Health), we show that a functional polymorphism on the MAOA gene is associated with credit card borrowing behavior. For the combined sample of approximately 10,000 individuals we find that having one or both MAOA alleles of the less transcriptionally efficient type raises the average likelihood of reporting credit card debt by about 8%. These results suggest that behavioral models benefit from integrating genetic variation and that economists should consider the welfare consequences of possible discrimination by lenders on the basis of genotype. (emphasis added)

 

Suits Against Consumers Who Review Products on the Internet

This major article in today's Washington Post concerns what the author claims is

a growing number of defamation lawsuits over online reviews on sites such as Yelp, Angie’s List and Trip­Advisor and over Internet postings in general. They say the freewheeling and acerbic world of Web speech is colliding with the ever-growing importance of online reputations for businesses, doctors, restaurants, even teachers.

The claim by the Post reporter that the number of these suits is "growing" struck me as odd because the author does not cite any statistics to back up his claim. Moreover, he immediately goes on to say that "[n]o one keeps track of how many suits are filed over online reviews, and lawyers say the numbers are still small but are getting larger." (emphasis added)

We have posted many times here on the provision of the Communications Decency Act -- section 230 -- that generally immunizes the host of a site on which others post from suits about the content of posts. We have also posted many times on the need to protect anonymous posters. (Many people who post on online rating services, such as Yelp, post anonymously.) The idea there is that someone suing an anonymous poster over the content of her speech should have to meet certain thresholds about the validity of the suit on its merits before she can be identified. After all, we wouldn't want someone who doesn't like to be criticized to be able to use a lawsuit just for the purpose of outing an anonymous online critic with whom she disagrees. And we don't want to encourage people to bring "outing" suits just for the purpose of discouraging future criticism. Paul Levy posted again on this topic yesterday.

I wonder whether the Post article has identified what is really a significant trend about which free-speech and consumer advocates should be worried, or whether there's not much here but some interesting anecdotes. The Post article says that most of these suits are unsuccessful. But one of the cases described in the Post article is cause for some concern. The plaintiff in that defamation case -- a contractor accused of damaging the poster's home, not doing promised work, etc. -- is asking a Virginia state court for an injunction "to keep [the poster] from writing similar reviews." That doesn't sound like a good idea.

UPDATE: I had posted this entry shortly before Paul Levy posted a short piece on the Post story. I am reposting this now and linking to Paul Levy's post because Paul's post stresses a point I raised only obliquely at the end of my post about the defamation plaintiff's effort to obtain a prior restraint. Paul raises the issue directly and helpfully links to the plaintiff's motion for preliminary injunction.

More From Robert Hockett on Using Eminent Domain to Solve the Underwater Mortgage Debt Problem

Robert C. Hockett of Cornell has written Paying Paul and Robbing No One: An Eminent Domain Solution for Underwater Mortgage Debt that Can Benefit Literally Everyone. Here's the abstract:

This essay provides updated argumentation for and abbreviated specification of the municipal eminent domain plan for underwater mortgage loans that the author lays out in his earlier piece titled It Takes a Village. The nation's ungoing foreclosure crisis and economy-stifling mortgage debt deflation will not be arrested and reversed, the paper argues, until mortgage debt principal is written-down to post-bust home equity levels. Once that is done, however, literally everyone can benefit - from homeowners and bondholders to neighbors, communities, and local and regional economies.

Unfortunately, a host of classic collective action problems presently stand in the way of the 'win-win' solution here. Such problems require collective agents for their resolution, which is what private label securitization (PLS) trustees and even loan servicers are. But the pooling and servicing agreements (PSAs) pursuant to which many PLS trusts are formed, hurriedly drafted as they were during the bubble years when many pushed product and few apparently anticipated system-wide housing price crash, prohibit or effectively prevent even value-raising modifications or sales of sufficient numbers of underwater mortgage loans. This means that government alone - the sole entity able to sidestep dysfunctional contract rigidities, by use of the eminent domain authority - can serve as the requisite collective agent.

In theory, the essay continues, our federal government, through any number of instrumentalities, could play the appointed role. But political paralysis in Congress shows that it now faces collective action hurdles of its own. All that is left, then, is state and local government. But the latter, it happens, is happily best situated in any event to exercise the eminent domain authority to take underwater loans at fair value and modify them to benefit homeowners, bondholders, and third parties alike. For the nation's underwater mortgage loan problem is heavily localized in character, and municipalities in any event face the brunt of foreclosure-induced homelessness, tax base decline, and consequent blight wrought by ongoing defaults wrought by negative home equity - the makings of 'public use,' per our constitutional limits on eminent domain use, par excellence.

Libel suit over a Yelp review

My litigation plate is too full right now for a detailed analysis, but the Washington Post carries an interesting story today about a libel suit by a local contractor over a negative review of his business on Yelp.  The story says there is a preliminary injunction hearing today.  It will be interesting to see what testimony is adduced on truth versus falsity and whether the defendant's mental state can be shown to be below the applicable level of care, but we can also hope that the Court will raise an issue that is not mentioned in the plaintiff's preliminary injunction motion: how the request for an injunction before there has been a final trial on the merits about the allegedly actionable words can overcome the rule against prior restraints.

Did the Supreme Court's Decision in Citizens United Help Liberal/Progressive Causes in the 2012 Election Cycle?

That possibility is discussed in this article by Molly Ball. The idea is that the Supreme Court's decision in the Citizens United case unshackled the unions not only to spend, but to electioneer beyond its members to the public at large. (The article emphasizes that although unions did whatever they could to take advantage of Citizens United, political directors of key labor Super PACs dislike the decision and would love to see it overruled.)