Consumer Law & Policy Blog

Paper on Private Enforcement

Stephen B. Burbank of Pennsylvania, Sean Farhang of Berkeley' s Goldman School of Public Policy, and Herbert M. Kritzer of Minnesota have written Private Enforcement, 17 Lewis & Clark Law Review 637 (2013).  Here's the abstract:

Our aim in this Article is to advance understanding of private enforcement of statutory and administrative law in the United States and to raise questions that will be useful to those who are concerned with regulatory design in other countries.  To that end, we briefly discuss aspects of American culture, history, and political institutions that reasonably can be thought to have contributed to the growth and subsequent development of private enforcement.  We also set forth key elements of the general legal landscape in which decisions about private enforcement are made, aspects of which should be central to the choice of an enforcement strategy and, in the case of private enforcement, are critical to the efficacy of a private enforcement regime.  We then turn to the business of institutional architecture, describing the considerations — both in favor of and against private enforcement — that should affect the choice of an enforcement strategy.  We lay out choices to be made about elements of a private enforcement regime, attending to the general legal landscape in which the regime would operate, particularly court access, as well as how incentives for enforcement interact with the market for legal services, which has important implications for private enforcement activity.  We situate these legislative choices about private enforcement in the context of institutions that shape them.  Finally, we seek to demonstrate how general considerations play out by examining private enforcement in two policy areas: legislation proscribing discrimination in employment, and laws protecting consumers from unfair and deceptive practices.

Big pharma, small government: why the public lacked acetaminophen warnings for decades

This revealing podcast from This American Life tells the story of the acetaminophen warning that should have been -- but wasn't. For decades. According to the show, fairly small overdoses of this popular pain medicine (the active ingredient in Tylenol) could be quite dangerous to a patient's liver, or even fatal. But the public remained largely unaware of the danger because of government inaction and industry advertising.

A summary of the show explains:

Reporter Sean Cole tells the history of getting warning labels onto acetaminophen bottles. In 1977 an FDA advisory panel recommended a warning about liver damage. It took 32 years before the FDA took their advice and mandated a label. As Cole notes: "The drug approval process is usually slow but not usually this slow. The FDA began with acetaminophen over 40 years ago in 1972. In that time, science has mapped the human genome, eradicated smallpox, we’ve cloned a sheep. And yet we still have not come up with final rules for safe usage and labeling of one of the most popular drugs in the country, of which more than 20 billion doses are sold each year."

It's an hour-long radio show, but gripping, and worth a listen.

Full court rehearing sought for controversial 3rd circuit class-action decision

A little while ago Allison posted on the Third Circuit's recent decision in Carrera v. Bayer, explaining that

the court ... held that, if the defendant does not have purchase records, a consumer class action cannot be certified based on sworn customer affidavits. The court stated the "rigorous analysis" requirement for class certification "appl[ies] to the question of ascertainability," which the court called an "essential prerequisite of a class action." (Where is ascertainability found in Rule 23? It is not.) Defense-side lawyers have been rightly touting the decision as a huge win (see here and here, for example), and an article in Law 360 noted that the Third Circuit has adopted [an] “Unheard-Of Consumer Class Action Hurdle.”

On Friday, the plaintiff filed a petition for rehearing en banc. Worth reading.

"Not All Republicans Embrace Big Business All The Time"

...is the title of this insightful NPR story yesterday from political correspondent Don Gonyea, who investigates a salient divide -- highlighted by the current government-shutdown debate -- between the populist/tea party wing and the business wing of the Republican Party.

Which wing of the GOP should consumers root for in the shutdown debate? The tea partiers make some appealing points about the importance of focusing on Main St rather than Wall St, and take issue (as consumer advocates often do) with the positions of the U.S. Chamber of Commerce. But is the outcome the tea partiers seem to be pushing for -- a federal government shutdown, with its implications for federal workers, its disruption to the work of federal regulators, and its overall effect on the economy -- in the best interest of consumers?

The NPR piece is worth a listen.

Questioning charitable payouts from tech-privacy settlements

Settlements of privacy-based legal challenges to practices of big tech companies often include as one component a contribution by the offending tech giant (e.g. Facebook) to various privacy groups. This thought-provoking article from gigaom asks: is that money well-used, well-planned for? Do these settlements do any good?

The article explains:

In [several prominent privacy cases], the class action system appeared, on the surface, to be doing its job: punishing companies through a legal process more powerful than what a single citizen could muster on his or her own. In theory, every user who suffered a privacy violation received a bit of compensation while the tech companies learned to be more careful about privacy.

Unfortunately, it hasn’t worked out that way. As with the first version of the “Sponsored Stories” settlement, users in the other privacy cases didn’t get any of the millions paid out in their name; instead, the deals paid money to lawyers and to privacy groups for undefined work.

Make sure to check out the chart at the bottom, in which the reporter documents what he learned when he asked some of the recipients of one recent such award (in the Facebook Sponsored Stories case, which we've been litigating here at Public Citizen and have now appealed) what they are going to do with the money. Some eye opening responses there, including one foundation that says it did not ask for the money and will decline it.

Sovern Paper: Cost-Benefit Analysis and Consumer Protection

by Jeff Sovern

I've posted a paper on SSRN, Can Cost-Benefit Analysis Help Consumer Protection Laws? Or at Least Benefit Analysis?, forthcoming in the University of California-Irvine Law Review.  Here's the abstract:

Cost-benefit analysis is often troubling to consumer advocates. But this article argues that in some circumstances it may help consumers. The article gives several examples of supposed consumer protections that have protected consumers poorly, if at all. It also argues that before adopting consumer protections, lawmakers should first attempt to determine whether the protections will work. The article suggests that because lawmakers are unlikely to adopt multiple solutions to the same problem, one cost of ineffective consumer protections is a kind of opportunity cost, in that ineffective consumer protections might appear to make unnecessary adoption of effective ones. Ironically, such an opportunity cost is unlikely to be taken account of in cost-benefit analysis. Among the protections that especially risk failing to benefit consumers are laws that require consumers to perform certain tasks, such as disclosure laws that presuppose consumers will pay attention to and act on the disclosures; if consumers instead generally ignore the disclosures, the consumer protection will be largely illusory. Accordingly, before adopting measures that depend on consumers to do something, lawmakers should try to verify that consumers will in fact undertake those actions. The article also makes some suggestions for ascertaining whether consumer protections will work—i.e., benefit consumers--and concludes with a brief critique of the proposed Independent Agency Regulatory Analysis Act.

Class action attacks broken D.C. tax lien system

As we've discussed previously, D.C.'s tax-lien program can result in homeowners losing their homes because of liens bought by private companies where the delinquency was only a few hundred dollars. The Post published a fabulous investigative piece (this link is to the first of the three-part series), and the D.C. officials have promised reform.

Now, as the Post reports, the prominent D.C. law firm Boies, Schiller & Flexner has filed a class action lawsuit on behalf of Bennie Coleman, one of the homeowners profiled in the Post series who was victimized by the tax-lien system. Mr. Coleman, a retired Marine sergeant, had his home foreclosed on because of an unpaid $134 tax bill that snowballed after the D.C. government hit him with $183 in penalties, and a private company, Embassy Tax Services, bought the lien from D.C. and demanded Mr. Coleman pay an additional $5000 in penalties, interest, and fees, according to the complaint filed this week in federal court here in D.C. The suit explains how Embassy obtained the deed to the house via court order and sold it for $71,000 (the complaint estimates the fair market value of the home at $200,000) -- none of which Mr. Coleman received.

The class action asserts that the D.C tax lien system amounts to an unconstitutional taking of Mr. Coleman's property in violation of the Fifth Amendment.

This could be an influential test case to determine how far governments and corporations can go to enforce a tax lien and whether there are constitutional protections for homeowners. In this case, not only did Embassy turn a $300 problem into a $5000 problem but, worse, D.C. let Embassy pocket the difference between the amount it asserted Mr. Coleman owed and the value of the home -- a huge windfall for the company, all at Mr. Coleman's expense.

What's going on with the Wal-Mart sex discrimination case?

by Brian Wolfman

We have posted (for instance, here and here) about efforts to push forward in various ways with the massive Title VII employment disrimination class action thrown out by the Supreme Court in Wal-Mart v. Dukes on the ground that the nationwide class did not meet the requirements of the federal class-action rule (Rule 23). The plaintiffs in the nationwide case were present and former female employees of Wal-Mart. They alleged systematic sex discrmination in pay, promotions, and other benefits.

Because the Supreme Court threw out the nationwide class action, the efforts to litigate the plaintiffs' claims after Wal-Mart have included regional or state-based class actions. That effort hit a road block on Monday when a Florida district court ruled in Love v. Wal-Mart that a class limited to the southeast region of the U.S. was time barred (that is, had been filed too late, years after the plaintiffs were harmed). The court acknowledged longstanding Supreme Court precedent holding that the statute of limitations on class members' claims are tolled (that is, does not run) while a class action is pending (at least until class certification is denied). But relying on 11th circuit precedent, the court said that this tolling principle does not apply to a subsequent class action:

Although the limitations period is tolled for individual claims while a class action suit is pending, in the Eleventh Circuit “the pendency of a previously filed class action does not toll the limitations period for additional class actions by putative members of the original class.” Griffin v. Singletary, 17 F.3d 356, 359 (11th Cir. 1994) (emphasis in original) (quoting Andrews v. Orr, 851 F.2d 146, 149 (6th Cir. 1988)). The Eleventh Circuit categorically refuses to toll the limitations period for subsequent class actions by members of the original class once class certification is denied in the original suit. Id. As it explained, the Eleventh Circuit was loath to “adopt any rule that has the potential for prolonging litigation about class representation even further.” Id. So, while an individual may file a new suit once previously filed class claims are rejected, the individual “may not piggyback one class action onto another.” Griffin, 17 F.3d at 359 (internal quotations omitted); Mitchell v. Osceola Farms Co., 408 F. Supp. 2d 1275, 1278 (S.D. Fla. 2005) (Cohn, J.) (“tolling does not . . . apply to a subsequent class action that merely attempts to correct deficiencies in a previous class action.”). The Eleventh Circuit is not alone; other Circuits have adopted similar “no piggybacking” rules for class claims. Andrews v. Orr, 851 F.2d 146 (6th Cir. 1988); Salazar-Calderon v. Presido Valley Farmers Ass’n, 765 F.2d 1334 (5th Cir. 1985). Plaintiffs’ class claims run afoul of the no-piggybacking rule. Plaintiffs were members of the original Dukes class. And Plaintiffs now assert class claims for a regional subclass that was part of the nationwide class certified, and then decertified, in Dukes. Plaintiffs’ class claims are time-barred -- the limitations period for class claims was not tolled, and Plaintiffs cannot assert class claims that were previously asserted and rejected in Dukes.

The plaintifs argued, among other things, that the "no piggybacking" rule was inconsistent with two recent Supreme Court class-action decisions (the Shady Grove and Smith v. Bayer cases), the latter of which allowed a second class action to go forward after a first one was rejected. But the district court in Love did not agree. So, if the district court is right, the plaintiffs in Love presumably can sue individually, but not as a class.

Giving Warnings in Ads May Increase Sales

Pharmalot has an interesting story this afternoon about the effect of including warnings in advertisements for products like drugs and cigarettes. The study found that, shortly after the ads run, consumers who see an ad with warnings are less likely to buy the product than consumers who see an ad without warnings. But with the passage of time, the outcome was reversed. The study’s authors report that “With temporal distance (product to be delivered 3 months later, or 2 weeks after the ad was viewed), however, participants who had seen an ad noting the benefits of the product but warning of risky side effects bought more than those who had seen an ad noting only benefits.”

Pharmalot describes some of the experiments and their findings:

For instance, 34 men with a mean age of 58 years were divided into two groups and shown an ad for erectile dysfunction medication. Those who were told the launch was a year away found the ad to be more trustworthy than the men who expected imminent availability. And concern over side effects was less among the men who did not expect the product to become available for a year.

In another experiment, 71 people, mostly men, were shown an for a brand of cigarettes, but one version of the ad included a warning that smoking causes lung cancer, heart disease and emphysema, while another version did not include the warning. Those who had a chance to buy the cigarettes shortly afterwards bought less after seeing the ad with the warning. But those who were given an opportunity to buy the cigarettes a few days later bought more if the ad included the warning.

The study would seem to offer important lessons for companies and regulators.

Coalition of parents and safety groups sue DOT over stalled auto safety rule to protect children

        One night in 2002, Dr. Greg Gulbransen was backing up his SUV in his driveway when his two-year-old son Cameron darted out into the driveway behind the vehicle. Too small to be seen by his dad using any of the vehicle’s rearview or sideview mirrors, Cameron was struck by the moving car and killed. Dr. Gulbransen’s tragedy is not an isolated case; each week, fifty children are injured, two fatally, in these “backover” crashes, that is, collisions in which a vehicle moving backwards strikes a person (or object) behind the vehicle. Each year on average, according to the U.S. Department of Transportation (DOT), backovers kill 292 people and injure 18,000 more — most of whom are children under the age of five, senior citizens over the age of seventy-five, or persons with disabilities. Backovers generally occur when the victim is too small to be seen in the rearview mirror of the vehicle or too slow to move out of the way of the vehicle, even one moving at slow speed.

        To prevent the injuries and deaths caused by backovers, in 2008 Congress passed and the President signed the Cameron Gulbransen Kids Transportation Safety Act. The Gulbransen Act directed DOT to revise an existing federal motor vehicle safety standard to expand the area that drivers must be able to see behind their vehicles. The Gulbransen Act mandated that DOT issue the final rule within three years of the law’s enactment — i.e., by February 28, 2011. The Act also allowed DOT to establish a new deadline for the rulemaking, but only if the otherwise-applicable deadline “cannot be met.”

        When it prepared a draft final rule in 2010, DOT estimated that the proposed rule, which specified an area immediately behind each light vehicle that a driver must be able to see when the car is in reverse gear, would prevent between 95 and 112 deaths and between 7,072 and 8,374 injuries each year. the agency has extended the timetable for promulgation of a final safety standard four separate times.

        DOT failed to meet the February 2011 deadline. Instead, DOT has repeatedly set a new “deadline,” failed to meet it, and then set yet another “deadline.” Although DOT has never made a showing that the statutory deadline could not be met, DOT has informed Congress that it currently plans to issue the rule in January 2015. Assuming DOT does not again delay yet again, the backover rulemaking will have taken nearly seven years — more than twice as long as Congress envisioned for the rulemaking — at a significant cost in human lives.

        In light of the extent of the delay, the repeated self-granted extensions, and the hundreds of preventable deaths and thousands of preventable injuries that will occur while the public waits for the final rule, Public Citizen today filed a petition with the United States Court of Appeals for the Second Circuit seeking a writ of mandamus compelling DOT to issue the rule within 90 days. The petition was filed September 25, 2013 on behalf of Dr. Gulbransen, Sue Auriemma (another parent who backed into her own child), and the consumer safety groups Advocates for Highway and Auto Safety, KidsAndCars.org, and Consumers Union.

        An op-ed by Dr. Gulbransen appeared in today's Washington Post, and our petition was covered today on the Today Show and in Bloomberg, Reuters, and the New YorkTimes (albeit under a somewhat misleading headline in the last one).