Consumer Law & Policy Blog

Want to Know What a Data Broker Knows About You?

by Jeff Sovern

Acxiom is about to let you find out some of what it knows about you, as this Times story by Natasha Singer reports. Other data brokers should emulate Acxiom and enable consumers to learn what they know about them  And if they refuse to do so, Congress should pass legislation requiring them to tell us what they know about us.  Interestingly, the report indicates that Acxiom's file on its chief executive includes several errors, including the number of children he has, whether he has a mortgage, and his ethnic background. 

Pottow Paper (with others) Compares Canadian and US Arbitrabilty Rules

John A. E. Pottow of Michigan, and two recent graduates, Jacob Brege and Tara J Hawley, have written A Presumptively Better Approach to Arbitrability, 53 Canadian Business Law Journal (2013).  Here's the abstract:

One of the most complex problems in the arbitration field is the question of who decides disputes over the scope of an arbitrator’s purported authority. Courts in Canada and the United States have taken different approaches to this fundamental question of “arbitrability” that necessarily arises when one party disputes the contractual validity of the underlying “container” contract carrying the arbitration clause. If arbitration is a creature of contract, and contract is a product of consensual agreement, then any dispute that impugns the underlying consent of the parties to the container contract implicates the arbitration agreement itself (i.e., no contract, no arbitration agreement).

The U.S. approach of “separability” dates back a half-century to a Supreme Court case that was controversial when it was decided and remains so today. The Supreme Court has added several more decisions trying to clarify its arbitrability rules within just the past few years. The Canadians too have tried to sort out this mess, seizing upon the hoary legal distinction between law and fact, also offering recent Supreme Court pronouncements. Neither country’s approach is normatively or functionally satisfying.

After discussing and critiquing the two approaches comparatively, we offer our own proposal. We too deploy legal presumptions, but in our case we focus on what we contend are the two most relevant criteria: (1) the nature of the legal challenge to the underlying container contract, and (2) the type of contract at issue. Challenges to consent in contract formation and contracts involving adhesion should be specially scrutinized by the courts before carting parties off to arbitration, whereas commercial agreements between sophisticated actors should presumptively be for arbitral resolution, even for “constitutive” challenges to the underlying contract.

APWU Attacks on Its Members’ Democratic Rights — One Down, One to Go

by Paul Alan Levy

Over the course of more than twenty years of representing union members in litigation over issues of union democracy, before my main focus switched to Internet law and IP issues, I found that in some unions, the leaders think nothing of spending other peoples’ money – the union treasury that is funded by members’ dues—to cling to power by suppressing opposition.  And because the union’s lawyers treat the leadership and not the union entity as their client, they are all too happy to defend any legal position their real clients — the ones who decide to hire them — want them to take, no matter how lacking in merit.   As I discussed in a blog post  earlier this month, it appears that the American Postal Workers Union is no different.

In a decision issued last night, District Judge Colleen Kollar-Kotelly decided that the APWU is obligated to comply with a request from the APWU Members First slate of candidates to have their campaign literature distributed by email to each of the 27,00 email addresses that the union has accumulated for its members.  Granting a preliminary injunction in a lawsuit in which Public Citizen represented three of the rank-and-file candidates (papers can be found here), she held that the fact that the APWU claims to have philosophical disagreements with the use of email, instead of postal mail sent with a stamp, does not give this union a free pass to deem requests for email distribution unreasonable.  She also found the union’s claimed opposition to email “disingenuous” because the union sends out weekly email newsletters to two separate groups of members (we have been identifying other uses of email that the union appears to have hidden from the judge in its affidavits). 

The APWU’s leadership are apparently gluttons for punishment because, even after being called on the carpet for to denying its members the right to use 21st Century communications methods, they have also threatened rank-and-file candidates over use of the union’s initials, APWU, in their campaign buttons, flyers and web site to identify the union that they are trying to reform through their campaign. We have explained the legal errors in their claim but an “appeals committee” reaffirmed the union’s position in a Star-Chamber-like ruling, addressing an “appeal” about which the rank-and-filers learned only when the ruling was issued.  

We expect to file a declaratory judgment action over that issue next week.

Nathan Cortez Asks if Graphic Tobacco Warnings Violate the First Amendment

Nathan Cortez of SMU has written Do Graphic Tobacco Warnings Violate the First Amendment? 64 Hastings L. J. (2013).  Here's the abstract:

When Congress passed the nation’s first comprehensive tobacco bill in 2009, it replaced the familiar Surgeon General’s warnings, last updated in 1984, with nine blunter warnings. The law also directed the U.S. Food and Drug Administration ('FDA') to require color graphics to accompany the textual warnings. By law, the warnings would cover the top fifty percent of the front and back of tobacco packaging and the top twenty percent of print advertisements, bringing the United States closer to many peer countries that now require graphic warnings. Tobacco companies challenged the requirement on First Amendment grounds, arguing that the compelled disclosures violated their free speech rights. In 2012, the Sixth Circuit Court of Appeals treated the challenge as a facial attack and upheld the law in Discount Tobacco City & Lottery v. United States; five months later, the D.C. Circuit vacated the graphic warnings selected in the FDA’s final rule in R.J. Reynolds v. FDA. Although many expected the Supreme Court to resolve the apparent circuit split, the government withdrew the rule and opposed Supreme Court review. As such, the FDA will reinitiate the lumbering rulemaking process and propose new graphic warnings. And when it does, the tobacco industry most likely will challenge the graphic warnings again on First Amendment grounds. This Article considers several ambiguities that these cases have left unresolved and suggests how the FDA and courts should confront these questions during the next round of rulemaking and litigation. The Supreme Court will probably have another chance to resolve these ambiguities and its decision could have significant consequences for future government efforts to catch our attention at the point of sale.

Another day, another decision wiping away consumer claims on alter of forced arbitration

by Paul Bland, Senior Attorney, Public Justice, Of Counsel, Chavez & Gertler 

On Twitter @PblandBland

In Kennedy v. Wells Fargo, Judge King of the Southern District of Florida enforced another arbitration clause that tosses out consumer claims in the multi district litigation involving checking overdraft claims.  The plaintiffs had several arguments that the particular arbitration clause at issue in this case was unconscionable, but the district court batted those aside. 

Under the U.S. Supreme Court's decision in Rent-A-Center v. Jackson, 130 S. Ct. 2772 (2010), if an arbitration clause has a provision stating that challenges to the enforceability of the arbitration clause (such as unconscionability arguments) are delegated to the arbitrator, then (with a few exceptions, none apparently applicable here) courts are not to consider such challenges but just compel arbitration and let the arbitrator consider them.  I have used the old cliche of such clauses creating a Fox Guarding the Henhouse situation, as arbitrators VERY rarely (if ever) strike down arbitration clauses.  Not to be overly cynical, but one reason for arbitrators not to do this is that if they strike down the arbitration clause, then they can no longer bill the file by the hour for work done arbitrating the dispute.  In any case, the empirical experience of the many consumer lawyers with whom I have spoken is pretty clear about what happens where courts have enforced these so-called "delegation clauses."  I have heard of a few cases where arbitrators re-wrote the clauses somewhat, but I have yet to learn of a case where an arbitrator tossed out the entire clause, as many courts have done in the past.

In this case, Judge King noted that the arbitration clause contained a so-called "delegation clause" leaving unconscionability challenges to the arbitrator, and that was the end of the matter.

This is just another example of how harmful mandatory arbitration clauses are for consumers.  This case is one of a host of cases against banks involving a shady practice whereby banks manipulate the order in which they cash checks in a way that dramatically maximizes the number of hefty late fees their customers will end up paying.  In cases where banks did not have arbitration clauses, or the arbitration clauses were defeated for various reasons, a number of lenders who engaged in this practice were forced to refund tens and sometimes hundreds of millions of dollars to rooked consumers.  In cases such as this one, where the forced arbitration clause is enforced, the consumers have gotten and will get NOTHING back from the banks.

There are a lot of cases like this. I recently wrote a posting at the Public Justice blog documenting another situation where consumers did very well where they defeated forced arbitration clauses and were wiped out when they did not.

 This is the type of case that legislators and appropriate regulatory officials should be notcing.

Elizabeth Renuart Paper on Foreclosure

Elizabeth Renuart of Albany has written Uneasy Intersections: The Right to Foreclose and the UCC, forthcoming in 48 Wake Forest law Review.  Here's the abstract:

Historically, the practice of real property and foreclosure law was routine and noncontroversial. This legal landscape significantly altered during the spectacular growth of securitization deals involving trillions of dollars of residential mortgage loans. The National Conference of Commissioners on Uniform State Laws (NCCUSL) was a driving force behind one of these changes. It adopted amendments to Article 9 of the Uniform Commercial Code in 1998, at least in part, to facilitate securitization. These modifications included extending coverage to the sale of (not merely to a security interest in) promissory notes, declaring that the sale of the note also constitutes a sale of the mortgage without the need for a written assignment of the mortgage, and providing for automatic perfection of interests in both the note and the accompanying mortgage without the need to file.

Meanwhile, the behavior of a number of mortgage lending and securitization participants or their agents generated additional legal complications.  Examples include the mishandling of loan notes and mortgages, the forging of indorsements or the submitting of fraudulent affidavits to courts in support of their purported right to foreclose, and the pressing of foreclosures without the necessary documentation. 

Confusion about the roles of and intersections among Articles 3 and 9 of the UCC and the right to foreclose under state real property law followed in the wake of these changes. These misunderstandings spawned volumes of judicial rulings, many of which appear to be at odds with each other. In an effort to reduce the ensuing legal confusion about the intersections between the right to foreclose and the UCC, this Article provides a roadmap of the relevant rules in Articles 3 and 9 and the right to foreclose in state real property law. Further, it explores the tension developing over the last decade among Articles 3, 9, and the right-to-foreclose concept in state real property law.

This Article advances the literature concerned with the right to foreclose by categorizing recent state appellate court decisions that address this right by the type of analysis applied by those courts. The rulings from Arizona, California, and Georgia fall into one category and are the subject of special scrutiny because they dismiss the role of the UCC outright. Moreover, these three states have experienced some of the worst foreclosure rates in the nation and permit foreclosures to proceed nonjudicially. Hence, these decisions will affect a broad swath of homeowners in danger of losing their homes. The Article then applies statutory construction principles to determine whether those courts ruled out the UCC unnecessarily, proffering that foreclosure laws in those states could be harmonized with the UCC.

Finally, the Article concludes that where inconsistencies arise between the UCC and state real property law, applying statutory construction principles likely will result in creating a more uniform legal landscape throughout the nation, in protecting homeowners from unjustified foreclosures, and in reducing litigation costs and judicial resources in a distraught foreclosure system.

Are Manhattan Lasik Center’s discount coupons worth buying?

by Paul Alan Levy

The Manhattan Lasik Center secures customers, in part, by offering discounts through Groupon and similar online marketing programs.  For a $1795 Groupon, for example, a customer can get lasik treatment for both eyes.  Several reviews posted on Yelp, however, suggest that it is not at all unusual for patients to appear with the Groupon or some similar deal only to be told that they are not candidates for lasik treatment but only for other, more expensive services for which additional payments must be made.

Michael Linden faced this treatment when he came to one of Manhattan Lasik’s five offices, and complained about it on Yelp.   Manhattan Lasik did not take kindly to this criticism, and hired a lawyer named Frederic Abramson to send a demand letter asserting that Linden had made “a series of unwarranted and defamatory attacks,” and that “the statements made in reference to are utterly false and without merit.”  Abramson demanded that Linden take down his Yelp review and pay Manhattan Lasik’s attorney fees and costs. 

Yelp, which is increasingly concerned about companies that create false images about their business by posting false positive reviews, or by intimidating its users into withdrawing fair criticism, referred Linden to us for possible assistance.

Wyoming Consumer Issues Conference: Navigating the New Health Care Market

Wyoming's 13^th Consumer Issues Conference has the theme of “Navigating the New Health Care Market. "  It will feature speakers on major consumer healthcare issues across three tracks: Innovative Directions in Healthcare; Legal Horizons in Healthcare; and Consumer Compass to Healthcare.  Early registration ends September 23. 

Keynote Speakers:

- Steven Brill, author of Time Magazine Article “Bitter Pill: Why Medical Bills Are Killing Us” by videoconference

- Elaine Ryan, AARP Vice President of State Advocacy & Strategy Integration on “Affordable Care Act:  State of State Implementation”

- Stephen Feldman, University of Wyoming Law Professor, “Justice Roberts’ Marbury Moment:  The Affordable Care Act Case”

- Bonnie Braun, University of Maryland Family Science Professor, “Healthcare Literacy” 

Location:  Wyoming Union on the campus of the University of Wyoming, Laramie, Wyo.

 Conference Highlights Include:

October 2 - evening viewing of the documentary film  "Escape Fire" followed by discussion

October 4 & 5 - Sessions Include

• Telehealth Panel
• Student Health Issues
• Medicaid Expansion
• Patient-Centered Medical Homes
• Minority and LGBT Health Care Issues
• Innovative Healthcare, including use of Information Technology
• Planning for the Home Stretch – End of Life Panel
• Obstacles to Making Healthy Choices
• Interactive Health Exhibits 

Frivolous Libel Threats – the Reality Show

by Paul Alan Levy

Last October, blogger Christina Garner posted an introspective article reflecting on media coverage of a lawsuit in which Tonya Cooley, a reality-show participant, alleged that two fellow participants had assaulted her sexually in a sequence that did not appear in the broadcast, including inserting a toothbrush into her while she was passed out on the floor.  Cooley also sued MTV and the production company claiming that the camera operators continued to film while the act was perpetrated, and also that MTV and its Viacom parent not only failed to take strong action against the perpetrators but, indeed, gave them more work.  Quoting a long post by one of her Facebook friends, Garner reflected on how easy it is to blame the victim, even though the actors in question — Kenny Santucci and Evan Starkman — had apparently made a number of crude remarks about women and behave improperly toward women even on camera. She noted that the media reports on the controversy all featured photographs of the victim but none of the accused perpetrators, a flaw that she corrected by including their photographs.  She ended her analysis by arguing that the blame should be placed where it belongs – on the alleged rapists.  She concluded by urging her readers to communicate their outrage both to MTV and to Santucci and Starkman themselves.  Although the article did not use the word “alleged” every time it referred to the rape, the article made fairly clear that Garner was relying on Cooley’s litigation claims and not making her own judgment that the individual defendants were guilty as charged.  For example, she said “Whether you believe the men guilty of rape or not, you can let @MTV know that you don’t find their frequent sexist and misogynistic actions to be entertaining.”

Nearly a year later, Usman Shaikh, a lawyer who apparently represents Santucci and Starkman in their entertainment contract negotiations, sent Garner a stiff threat of litigation for having taken Cooley’s side in the lawsuit even though, he claimed,

    the facts revealed that her claims were without merit as to Mr. Santucci and Mr. Starkman. The court ordered Ms. Cooley to dismiss Mr. Santucci and Mr. Starkman from her lawsuit on April 18, 2012. Accordingly, Mr. Santucci and Mr. Starkman were dismissed as parties to the lawsuit without any liability or wrongdoing having been established and without having to pay a dime to Ms. Cooley.

Although the threat never expressly stated that the dismissal occurred because Cooley could not substantiate her accusations, that was the implication.       

Tribal lender Western Sky getting out of payday loan business

Yesterday, we told you about declaratory judgment suits by Native American tribes against New York regulators seeking the right to make otherwise usurious payday loans on the ground that the tribes' sovereign immunity allows them to operate free from state usury laws. Now comes word that another payday lender, Western Sky, owned by a Cheyenne River Sioux member and operated on the tribe's reservation in South Dakota, is going out of the payday loan business. It claims sovereign immunity, too, but says it just can't afford to defend suits by states claiming usury. Read about it in this article by Danielle Douglas.