Consumer Law & Policy Blog

Appellate court holds that TCPA does not preempt state ban on robocalls

The US Court of Appeals for the Seventh Circuit yesterday held that the federal Telephone Consumer Protection Act (TCPA) does not preempt Indiana’s state robocall ban. The TCPA regulates various telemarketing behavior and regulates the use of autodialers. The federal regulations allow robocalls for non-commercial purposes, but the Indiana law bans all robocalls made without the consent of the person called.

The suit was brought against the state by Patriotic Veterans, Inc., “a not‐for‐profit Illinois corporation whose purpose is to inform voters of the positions taken by the candidates and office holders on issues of interest to veterans.” The Seventh Circuit looked to the language of the TCPA and determined that “the plain language of the statute decrees that state laws that prohibit autodialers are not preempted by the statute.”

The court of appeals’ opinion in Patriotic Veterans, Inc. v. State of Indiana is here.

The case will now return to the district court for consideration of the plaintiff's alternative argument that the Indiana law violates the First Amendment.

A Bogus DMCA Takedown from Apple

by Paul Alan Levy

In response to aggressive reporting on the blog Digital Music News about the contract terms that Apple has imposed on independent labels that lack the economic clout to negotiate their own specific deals  regarding iTunes Radio, Apple sent a DMCA takedown notice to Scribd, where the blog had posted the contract so that readers could form their own judgment about the blogger’s criticisms.

In a letter to Apple’s counsel sent today, I have explained why the posting of the contract was fair use, thus why the takedown not was just a violation of the DMCA but also a form of copyright misuse in that the apparent purpose was not to preserve the market value of the copyrighted work but, rather, to impede unfavorable coverage.   Rather than sue for wrongful takedown, however, Digital Music News has written a new story about the contract and posted the contract to its own servers.  It remains to be seen whether Apple is ready to litigate the fair use issues by repeating its takedown notice.

Senate eliminates filibuster for judicial nominees

Big news with implications for many aspects of the law. The changes eliminate filibusters on most nominees, but preserve the filibuster for Supreme Court picks and legislation. Politico has the story.

CFPB Takes Enforcement Action Against Payday Lender

The CFPB yesterday announced an enforcement action against payday lender Cash America International Inc. According to the CFPB's press release, Cash America will pay up to $14 million in refunds to consumers for robo-signing court documents in debt collection lawsuits, and will pay a $5 million fine for the robo-sgning and for destroying records in advance of the CFPB’s investigation. The enforcement action is the CFPB's first against a payday lender.

CFPB Files Brief Opposing Tribal Lenders' Quasi-Preemption Argument

Last week, the CFPB filed an amicus brief in the Second Circuit in Otoe-Missouria Tribe of Indians et al. v. New York Department of Financial Services, a case in which online tribal payday lenders are challenging regulation by New York State. The CFPB's brief takes issue with the lenders' argument that Title X of the Dodd-Frank Act and Congress's creation of the Bureau indicates a federal interest in protecting tribal lenders from otherwise applicable state regulation. To the contrary, the brief explains, Section 1041 of the Act makes clear that Title X does not displace state law except to the extent that it is inconsistent with Title X and the Act defines “State” to include “federally recognized Indian tribe[s]." So if the court applies a balancing test, no federal interest favors the tribe's position.

Plaintiff-Side Appellate Advocacy at Yale Law School

For those in New Haven: I'll be giving a talk about plaintiff-side appellate advocacy at noon tomorrow (Thursday) at Yale Law School. Among other things, I'll discuss the advocacy imbalance facing consumers, workers, and other plaintiffs in the appellate courts and touch on the fate of class actions in the Roberts Court. Hope to see you there.

And a reminder for those who registered: Our webinar with the folks at Ballard Spahr on the future of disparate impact is at noon today. 

Another Unsung Hero of the Public Interest Movement

by Paul Alan Levy    

One of the sweetest things that Public Citizen does each year is recognize a long-time public interest staffer whose work is vital to that staffer's organization, but whose work is sufficiently behind-the-scenes that he or she receives no public recognition.  The award is named for Phyllis McCarthy, who started working for Public Citizen's Health Research Group shortly after I came to the Litigation Group, whose work was vital to HRG and indeed to Public Citizen as a whole (a book whose technical aspects she shepherded sold two million copies; the profits enabled us to buy our lovely headquarters in Dupont Circle and to move out of The Headquarters Building where we had been located for my first eighteen years at Public Citizen).  After she died suddenly a dozen years ago, Ralph Nader proposed the idea of an award in her name that would recognize other unsung heroes like herself.

This year, the Eleventh Phyllis McCarthy Award went to Catherine Jones, who has worked for the Center for Pogressive Reform here in DC for the past eight years.  You can read about the reasons for her award here.

Do your dietary supplements contain "speed"-like substances? You may want to check.

Dietary supplements often are taken for their drug-like effects, but, unlike drugs, they are subject to very little federal regulation because they are (supposed to be) made solely from "natural" substances. So, with that in mind, read this article by Alison Young. Here's an excerpt:

For the second time in recent weeks, scientists have found a "non-natural" amphetamine-like compound in dietary supplements – yet federal regulators have issued no warnings to consumers about the ingredient. Tests of 21 supposedly all-natural supplements by U.S. Food and Drug Administration scientists found nine products that contain the compound, according to their findings published in the Journal of Pharmaceutical and Biomedical Analysis.

NYT coverage of new Facebook terms of service

Implementing the settlement over its "Sponsoned Stories" program -- to which Public Citizen objected in May and has now appealed this fall -- Facebook has changed its privacy program to make more clear to users when it will use their images in advertising. As the Times put it, "If you post something on Facebook, let there be no doubt that it can end up as an ad shown to your friends and acquaintances." The Times notes that the FTC is investigating, and Sen. Markey of Massachusetts is promoting a bill to protect teenagers from being used in advertising.

Supreme Court grants review to reconsider "fraud-on-the-market" theory of reliance in class-action securities litigation

The Supreme Court has granted review in yet another class action, and this one has large implications for the future of securities-fraud litigation. In Haliburton v. Erica P. John Fund, the Court will decide whether to overrule or substantially modify the rule in Basic, Inc. v. Levinson (1988), which adopted the "fraud-on-the-market" theory of reliance in securities-fraud litigation.

Put simply, that theory says that stock prices of a publicly-traded company go up and down based on all the known relevant information about the company. So, in an open securities market, people can assume (and have a right to assume) that all material information is available to current and potential investors. The idea, then, is that when the company makes material misstatements about the company''s financial situation or expected course of conduct, it defrauds the entire market, and the company's stock price is affected for all shareholders. Basic therefore held that an individual shareholder was entitled to a presumption of reliance on the company's material mistatements, even if he or she did not knowingly rely on them. Among other things, that presumption greatly simplifies class certification in a securities-fraud case. On the other hand, imagine the difficulty if the law required a showing of individual actual reliance on material mistatements.

Only six justices participated in Basic. (The vote was 4 to 2.)  Of the three justices who did not participate, two (Justices Scalia and Kennedy) remain on the Court.

Here are the questions presented in Haliburton:

1. Whether this Court should overrule or substantially modify the holding of Basic Inc. v. Levinson, 485 U.S. 224 (1988), to the extent that it recognizes a presumption of classwide reliance derived from the fraud-on-the market theory.

2. Whether, in a case where the plaintiff invokes the presumption of reliance to seek class certification, the defendant may rebut the presumption and prevent class certification by introducing evidence that the alleged misrepresentations did not distort the market price of its stock.

The cert-stage Supreme Court briefs in Haliburton are here.