Consumer Law & Policy Blog

A Class Action Notice Complaint

by Jeff Sovern

Some of my students tell me they have received the following class action notice:

IF YOU RECEIVED A CALL THROUGH THE USE OF AN AUTOMATIC TELEPHONE DIALING SYSTEM AND/OR A PRERECORDED VOICE FROM DISCOVER TO YOUR CELLULAR TELEPHONE BETWEEN NOVEMBER 30, 2007 AND SEPTEMBER 10, 2013, THIS NOTICE DESCRIBES YOUR RIGHTS IN CONNECTION WITH SETTLEMENT OF A LAWSUIT AND YOUR POTENTIAL RECOVERY.

You may be entitled to a payment under a proposed class action settlement. In the lawsuit entitled Andrew Steinfeld v. Discover Financial Services, et al., U.S.D.C., Northern District of California Case No. 3:12-cv-01118-JSW (the “Action”), Plaintiffs claim that Discover Financial Services or related parties (including Discover Bank, The Student Loan Corporation and Discover Home Loans) (“Discover”) violated the Telephone Consumer Protection Act, 47 U.S.C. § 227, et seq. (the “TCPA”), by placing calls on or after November 30, 2007 to cellular telephones through the use of an automatic telephone dialing system or an artificial or prerecorded voice without the prior express consent of Plaintiffs and the putative class members. Discover denies these claims and denies any claim of wrongdoing. The Court has not decided who is right. However, in settlement of the Action, Discover has agreed to implement practice changes and establish a settlement fund of $8.7 million. This notice is only a summary. Details of the settlement, including information on how to file a claim, are available at www.SteinfeldTCPASettlement.com or by writing to or calling the Claims Administrator at the address or toll-free number below.

Discover’s records indicate that you may be a member of the Settlement Class because Discover may have placed a call to your cellular telephone number using an automatic telephone dialing system or an artificial or prerecorded voice at some time between November 30, 2007 and September 10, 2013. Settlement Class Members may (1) submit Revocation Request Forms requesting that Discover cease making calls to their cellular telephone numbers using an automatic telephone dialing system or an artificial or prerecorded voice, (2) submit Claim Forms requesting money from the settlement in the form of a check or in the form of a one-time credit against the balance of their Discover credit card account, (3) exclude themselves from the settlement, (4) object to the settlement, and/or (5) do nothing. Class Counsel estimate that settlement payments or credits will be between $20 and $40, but could be more or less based on factors including the number of claims submitted.

You cannot receive a payment unless your claim is received by February 25, 2014. In addition to payments to the Settlement Class Members, the settlement provides for not more than $2,175,000 in attorneys’ fees and costs and $2,000 in service awards for the two representative plaintiffs to be sought from the Court by counsel for the Settlement Class. In the event that there are any remaining monies from uncashed checks totaling $50,000 or less, such monies will be paid to charity.

If you do not want to be legally bound by the settlement, you may opt out of the settlement by sending a request for exclusion to the Claims Administrator postmarked no later than January 13, 2014. If you exclude yourself from the settlement, you will not receive any money or other benefits from the settlement. If you stay in the settlement (i.e. do not exclude yourself from the settlement), you may object to the settlement by explaining in writing why you do not like the settlement postmarked no later than January 13, 2014. You will be bound by the settlement if your objection is rejected. If you do nothing (i.e. submit no claim or request for exclusion) you will not receive any benefits from the settlement but will nevertheless be bound by the settlement. All Settlement Class Members who do not exclude themselves will be bound by any judgment approving the settlement and will give up any right to sue Discover or related parties for any known or unknown claims relating to calls made to their cellular telephone numbers, including alleged violations of the TCPA.

TO OBTAIN FULL INSTRUCTIONS FOR EXCLUDING YOURSELF, FILING AN OBJECTION, SUBMITTING A REVOCATION REQUEST FORM, OR SUBMITTING A CLAIM FORM, GO TO WWW.STEINFELDTCPASETTLEMENT.COM, OR WRITE OR CALL THE CLAIMS ADMINISTRATOR AT STEINFELD TCPA CLAIMS ADMINISTRATOR, P.O. BOX 43209, PROVIDENCE, RI 02940-3209 OR 1-800-248-1796 (TOLL-FREE).

THIS IS ONLY A SUMMARY OF THE SETTLEMENT AND YOUR RIGHTS. DO NOT CALL OR WRITE TO THE COURT OR THE CLERK OF THE COURT. DO NOT CONTACT DISCOVER ABOUT THE SETTLEMENT. TELEPHONE REPRESENTATIVES ARE NOT AUTHORIZED TO CHANGE THE TERMS OF THE SETTLEMENT OR THIS NOTICE.

I find this kind of notice very troubling.  How likely is it that many consumers will actually wade through it?  Will consumers understand it (for example, do they know what it means to be "legally bound"?)? Will consumers bother to submit a claim when the disclosure is silent as to how much money they might get paid?   I think notices like this really let class members down and fuel claims by industry lawyers that consumers don't benefit very much from class action suits.  Such notices should be written in much easier to understand language and should be much shorter. Have you ever seen an ad that looks like this? If the experts in getting consumer attention don't use something like this when they are trying to get consumers' attention, why would anyone think that this would do the trick?  How about an opening line like: "You may be entitled to $X (or a range of the amounts) from a settlement of a case if you received Discover telemarketing calls on your cell phone." and then no more than three additional short sentences?

Online shopping advice in time for the holiday shopping season

Here is a helpful (and entertainingly written) catalogue of various nasty consumer practices to watch out for, along with some basic advice about protecting yourself as a consumer (to the extent you can). Courtesy of the Consumer Law Center of Neighborhood Legal Services of Greater Cleveland. (HT: Mark Wiseman.)

Bank failure and consolidation

Chris Morran explains in this article that the number of U.S. banks has hit its lowest point since the federal government began counting in 1934. The number has dropped precipitously since 1985 (going from about 18,000 to 6,800), which may mean fewer options for bank services and greater costs for consumers.

Cole Paper on the Federalization of Consumer Arbitration

Sarah Rudolph Cole of Ohio State haas written The Federalization of Consumer Arbitration: Possible Solutions.  Here is the abstract:

Over the past fifteen to twenty years, businesses dramatically increased the use of arbitration clauses in contracts with consumers.  Although commentators criticize the use of arbitration to resolve consumer disputes because arbitration lacks the due process protections inherent in traditional litigation, efforts to regulate or eliminate the use of arbitration in this context have failed miserably.  This failure to due in large part to the Supreme Court’s embrace of arbitration and the corresponding lack of federal legislative interest in addressing this issue.  The Supreme Court’s arbitration jurisprudence, particularly as it applies to consumer disputes, is the surest example of the “federalization” of an area of law that federalism principles dictate traditionally belong to the states.  Interpreting the Federal Arbitration Act (FAA), the Court routinely applies a preemption doctrine that effectively precludes states from regulating the use of arbitration to resolve consumer disputes.  As a result, enforcement of state laws regulating the use of arbitration to resolve consumer disputes has become the exception rather than the rule.

This Article will focus on the Supreme Court jurisprudence that led to the current situation in which state law plays a minimal role in arbitration doctrine.  While state legislatures traditionally regulate contract law issues, the Supreme Court’s interpretation of the FAA has resulted in an anomalous situation in which federal law routinely trumps state laws attempting to reform arbitration.  The Article will also explain how the Court’s Stolt-Nielsen (2010) and Concepcion (2011) decisions took the anti-federalism approach a step further – by permitting preemption in areas the FAA does not address.  This expansion of the preemption doctrine further undermines the states’ ability to substantively regulate arbitration by defining arbitration in a very specific way and then declaring preempted any regulation or decision that is not consistent with the definition.  Moreover, this expansion, together with Congress’ lack of interest in regulating arbitration, makes it quite likely that private dispute resolution providers will be the only institutions able to reform the arbitration process.  Recognizing that arbitration law is largely federalized, this Article will then identify a number of possible reforms private dispute resolution providers could implement and review one of the more promising avenues of reform – arbitrator opinion-writing – in greater depth.  This reform would have a number of beneficial effects.  It would provide transparency in the arbitration process, address problems perceived to exist in the arbitrator selection process, make clear whether the parties received due process during the arbitration, and ensure that awards are carefully considered and evidence properly balanced.

NYT editorial on banks and "deposit advances" that work like payday loans

"New guidelines issued by the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency for banks they oversee stop short of completely disallowing deposit advances. But the guidelines should reduce the banks’ profits while making the loans less onerous to borrowers." The Times urges the Fed to follow suit in regulating banks' lending practices.

Read the full piece here.

 

 

Save the Date--Teaching Consumer Law Conference – Santa Fe, New Mexico, May 30-31, 2014

The Center for Consumer Law at the University of Houston Law Center, in cooperation with the University of New Mexico School of Law and the National Association of Consumer Advocates, is organizing its seventh semi-annual Teaching Consumer Law Conference. The subject this time is “Teaching Consumer Law in a Digital Borderless World.”  The Conference will be held in Santa Fe, New Mexico, the “City Different,” one of the most interesting cities in the United States.

 The Conference will focus on traditional issues of consumer law, as well as how, if at all, the teaching of consumer law should be affected by changes in the marketplace and the globalization of law. The Conference is directed at those currently teaching or interested in teaching consumer law at the law school or college level.

 The 2014 conference will have close to 25 presenters, discussing numerous issues, such as:

• How should we integrate recent economic developments into a consumer law course?
• What innovations can we bring to the consumer law classroom?
• Does the U.S. need additional consumer regulation, or less? What might be the impact of the Consumer Financial Protection Bureau?
• Are there innovative ways to resolve consumer problems?  What's new with consumer arbitration? What are other countries doing?
• How can we teach the multitude of subjects encompassed within the term “consumer law”?
• International consumer law developments.
• The view from the trenches—what the lawyers are discussing.
• How do we deal with intra-state and intra-national consumer transactions?

 If you are interesting in making a presentation at the Conference, please directly contact me at, alderman@uh.edu. Anyone who simply wants to be kept up-to-date about the conference and is interested in receiving a registration form should register at http://www.uhccl.org, under “Conferences and CLE.”

I look forward to seeing you in Santa Fe next May.

Fifth Circuit Decides D.R. Horton, Overturns NLRB's Ruling that Class-Action Bans are Unfair Labor Practices

by Deepak Gupta

In a much-anticipated decision, the Fifth Circuit held today that the National Labor Relations Board overstepped its authority when it ruled that an employer violated federal labor law by requiring its employees to sign an arbitration agreement containing a class-action ban. Judge Leslie Southwick, joined by Judge King, isssued the opinion for the court. Here's the court's summary:

The National Labor Relations Board held that D.R. Horton, Inc. had violated the National Labor Relations Act by requiring its employees to sign an arbitration agreement that, among other things, prohibited an employee from pursuing claims in a collective or class action. On petition for review, we disagree and conclude that the Board’s decision did not give proper weight to the Federal Arbitration Act. We uphold the Board, though, on requiring Horton to clarify with its employees that the arbitration agreement did not eliminate their rights to pursue claims of unfair labor practices with the Board. 

The court began its decision by deciding that it did not need to decide the validity of the recess appointments to the NLRB--the question now before the Supreme Court in Noel Canning. On a separate quesiton--whether one of the Board member's recess appointments had expired--the court relied to a limited extent on the "de facto officer" doctrine and concluded that no timely challenge to the appointment had been preserved.

As to the FAA question, the court analyzed the issue in terms of two exceptions to the FAA's general rule that arbitration agreements are enforced according to their terms: the Act's savings clause (which preserves generally applicable defenses to a contract) and the rule that other federal statutes may trump the FAA. "The Board clearly relied on the FAA’s saving clause," the court explained, "Less clear is whether the Board also asserted that a contrary congressional command is present." On the first point, the court held that the NLRB's ruling could not be reconciled with the Supreme Court's decision in AT&T Mobility v. Concepcion: "Like the statute in Concepcion, the Board’s interpretation prohibits class- action waivers." As to the second point, the court held that nothing in the text or legislative history of the NLRA "contains a congressional command to override the FAA."

Judge Grave dissented. He would have affirmed the NLRB's decision "in toto." Specifically, he disagreed with the majority's conclusion that the NLRB's ruling conflicts with the FAA. Tracking the NLRB's ruling, he would have reasoned as follows:

• The purpose of the FAA was to prevent courts from treating arbitration agreements less favorably than other private contracts. To find that an arbitration agreement must yield to the NLRA is to treat it no worse than any other private contract that conflicts with federal labor law.

• The Supreme Court’s jurisprudence under the FAA makes clear that the agreement may not require a party to ‘forgo the substantive rights afforded by the statute. The right to engage in collective action – including collective legal action – is the core substantive right protected by the NLRA and is the foundation on which the Act and federal labor policy rest.

• Nothing in the text of the FAA suggests that an arbitration agreement that is inconsistent with the NLRA is nevertheless enforceable. To the contrary, Section 2 of the FAA provides that arbitration agreements may be invalidated in whole or in part upon any ‘grounds as exist at law or in equity for the revocation of any contract.'

• Even if there were a direct conflict between the NLRA and the FAA, there are strong indications that the FAA would have to yield under the terms of the Norris-LaGuardia Act.

Judge Graves would also have agreed with the Board that D.R. Horton violated the NLRA. "The Board made it clear that it was not mandating class arbitration in order to protect employees’ rights under the NLRA," he explained, "but rather was holding that employers may not compel employees to waive their NLRA right to collectively pursue litigation of employment claims in all forums, judicial and arbitral." 

KB Home Sues for Trademark Violations, but Isn’t IT the Real Cybersquatter?

by Paul Alan Levy

KB Home has built new homes in several major markets throughout the United States, but its construction projects have left a trail of unhappy homeowners complaining about shoddy construction in several of those locations, such as here, here, here, and here.  The problem is broadly portrayed by a number of links from a web site at thekbhome.com.  This site was created by Tampa-area resident Andrew Smith after he and his neighbors found so many problems in their own development, the Willowbrook subdivision of Lakewood Ranch, that they decided to work together to find mutual solutions.  KB Home eventually admitted that the problems were serious enough to require an extensive repair problem, but Smith and many of his neighbors decided that having to live in an ongoing construction site was not what they bargained for, and that rather than simply paying for repairs, KB Home should accept responsibility by buying back their homes for the full purchase price plus interest.   Smith and his neighbors conducted a letter-writing campaign to this end, and Smith advocated this result on the web site itself.  State officials have been investigating the problems, and several lawsuits over the construction defects are pending already.

It is not unusual for companies facing strong public criticism to try to make a statement by filing suit against their detractors.  KB Home recently tried this tactic, filing suit in federal court in Tampa, and apparently alerting the press about the litigation.  The suit did not include a claim for libel, mind you, because to be libelous the criticisms would have to include false factual statements.  Instead, KB Home is invoking the trademark laws, and particularly the cybersquatting amendment to the Lanham Act, which forbids the use of domain names that are “confusingly similar” to a trademark with a “bad faith intent to profit.”  KB Home’s argument appears to be that, by using the web site to campaign for a buyback agreement that would benefit himself personally, along with the rest of his community, Smith’s use of its trademark was tantamount to extortionate use of the domain name.

Barely living on minimum wage

This article by Alan Feuer explains the difficulty of living on the minimum wage and follows a worker who must work two low-wage jobs to barely keep afloat. Here is an excerpt:

On a recent Friday evening, Eduardo Shoy left work at 6 p.m. Mr. Shoy, a deliveryman for KFC and Pizza Hut, was coming off an eight-hour shift of driving three-cheese pies and crispy chicken fingers, in an automotive blur, to private homes and businesses in central Queens. * * * If Mr. Shoy were differently employed, he might have remained that way till morning. But as a fast-food worker paid the minimum wage — $7.25 an hour in New York — he didn’t have the luxury. At 10 p.m., he was up again and back in his car, this time driving to his second job, as a forklift operator at Kennedy International Airport, where he makes $13 an hour. Having worked all day, he was about to work all night: from 11 p.m. until 7:30 a.m. At 3 that afternoon, he would return to his deliveries at the restaurant. Then, at 11, he would once again drive to the airport. Altogether, on the weekend before Thanksgiving, Mr. Shoy would sleep for 13 hours and work for 44. “Tired?” he asked, sounding puzzled by the question. “I’m too busy to be tired.”

Be extra careful with dietary supplements because there's little consumer protection

As we have previously noted (go here, for instance), dietary supplements are like drugs--that is, they are claimed to treat or prevent disease and have a physiological effect on the human body. And they are marketed like drugs--that is, they are marketed for their claimed beneficial physiological effects on the human body.

But because they are made from "natural" substances, they are not regulated as drugs. The most imporant loophole is that the manufacturer doesn't have to show that a dietary supplement is safe and effective for its intended use before it can be mass marketed (as is generally the case for a drug). So, it is useful for consumers to remember that dietary supplements can be harmful and that they can't rely on the government for protection from those harms.

This article by Dr. Janani Rangaswam provides some consumer-protection information. Here's an excerpt:

I recently cared for a patient with worsening kidney failure. After a full investigation, I could find no cause but a coincidence that he had used "Kangaroo," a sex-enhancing supplement, around the time he got sick. While there is no way to prove or disprove the link between the pill and the ailment, it made me consider how little we know about the toxicity of supplements despite how common they are, and the significant number of deaths and life-threatening events they cause each year. Americans today spend about $30 billion directly on supplements such as vitamins, minerals, amino acids, and herbal remedies. The Food and Drug Administration received more than 6,000 adverse-event reports involving supplements from 2008 to 2011, with about 2 to 3 percent linked to deaths. In the same period, poison control centers nationally received 145,000 supplements-related queries, of which about 4,800 were believed to be major adverse events.