Consumer Law & Policy Blog

Virginia Appellate Court Rejects Dendrite / Cahill Approach to Online Anonymity

by Paul Alan Levy

In a decision issued yesterday morning, the Virginia Court of Appeals parted company with appellate decisions in eleven other states and held that the First Amendment allows a court to compel the identification of a company’s anonymous online critics even though the company has done no more than claim that it “suspects” that the statements were false, and then represent that the suspicion is based on an “investigation” of its customer database.  

Until recently, there was broad unanimity among state courts, following the analysis of New Jersey’s Appellate Division in Dendrite International v. Doe, or the analysis of the Delaware Supreme Court in Doe v. Cahill, about the substance of the analysis governing a would-be plaintiff that hoped to identify online critics so that it could sue them for defamation, or for other tortious speech.  These states recognize that the First Amendment protects the right to speak anonymously, that overcoming such First Amendment right requires a compelling state interest, and whether as a matter of First Amendment obligation or as a matter of state procedural rules, that the interests favoring enforcement of the subpoena cannot prevail unless the court is presented with evidence supporting the allegation that the speech was tortious or otherwise illegal.

Coupled with the somewhat conflicting results recently reached by two different panels of the Michigan Court of Appeals over the past few months (in the Thomas Cooley Law School and Ghanam cases), that unanimity no longer exists, although the majority rule still requires an evidentiary showing of merit before a Doe can be identified.

CFPB training on mortgage servicing regulation

The CFPB’s mortgage servicing rule will take effect on January 10. That same day, the Bureau will host a training for housing counselors, legal aid attorneys, and other advocates on the new rule. The training, called  “Protecting homeowners: New tools for empowering consumers and advocates,” will be held in Phoenix. You can watch live at 11 am Mountain time (1 p.m. Eastern) on the Bureau’s website, consumerfinance.gov.

Tips for consumers to deal with security breaches

In light of the Target Stores security breach -- the theft of around 40 million credit and debit card records from Target -- the National Consumer Law Center, Consumer Action, and U.S. PIRG  have issued these tips for consumers about dealing with security breaches. It includes reminders that (1) consumers' liability for unauthorized credit-card and (in many cases) debit-card charges is very limited under federal law; (2) potentially affected consumers should check their credit reports and relevant account statements; (3) consumers should not pay for commercial credit-monitoring and anti-fraud services; and (4) placing a "security freeze" on a credit report is the best medicine against serious harm to the consumer's credit.

Sen. Franken on the Arbitration Fairness Act

If you missed the Senate hearing held in mid-December by Sen. Al Franken on the Arbitration Fairness Act, view it here or by clicking on the embedded video below. Go to approximately 1:54:30 (1 hour, 54 minutes, and 30 seconds) to watch a powerful exchange between Franken and one of pro-arbitration witnesses.

 

Your Guide To Proposed Laws & Regulation That Could Help Consumers In 2014

That is the name of this article by Kate Cox over at the Consumerist. Among the items Cox discusses is the Student Loan Borrowers' Bill of Rights and the Arbitration Fairness Act, which generally would negate pre-dispute agreements that require arbitration of employment, consumer, civil rights, or antitrust disputes. Cox notes that the Act now has 22 co-sponsors in the Senate. That's not nearly enough.

Times: Loan Monitor Is Accused of Ruthless Tactics on Student Debt

Here.  An excerpt:

[W]hile there has been attention to aggressive student debt collectors hired by the federal government, the [Educational Credit Management Corporation] does something else: it brings legal challenges to those few who are desperate enough to seek bankruptcy relief.       

* * *       

Founded in 1994, just after the largest agency backstopping federal student loans collapsed, Educational Credit is now facing concerns that its tactics have grown ruthless. A review of hundreds of pages of court documents as well as interviews with consumer advocates, experts and bankruptcy lawyers suggest that Educational Credit’s pursuit of student borrowers has veered more than occasionally into dubious terrain. A law professor and critic of Educational Credit, Rafael Pardo of Emory University, estimates that the agency oversteps in dozens of cases per year.       

Others have also been highly critical.       

A panel of bankruptcy appeal judges in 2012 denounced what it called the agency's "waste of judicial resources," and said that Educational Credit's collection activities "constituted an abuse of the bankruptcy process and defiance of the court’s authority."

Representative Steve Cohen, a Tennessee Democrat who has introduced a bill to limit predatory tactics, said, "The government should hold its agents to the highest standards, and I don’t know that we’ve been doing that."

CFPB seeks information on the mortgage closing process

As part of what the Consumer Financial Protection Bureau terms its "continu[ing] efforts to make mortgages safer and with fewer surprises along the way," the agency today issued a request for information from the public about how to improve the mortgage closing process. Here's the agency's summary:

This notice requests information from the public about mortgage closing. Specifically, the Consumer Financial Protection Bureau (CFPB) seeks information on key consumer “pain points” associated with mortgage closing and how those pain points might be addressed by market innovations and technology. The CFPB seeks to encourage the development of a more streamlined, efficient, and educational closing process as the mortgage industry increases its usage of technology, electronic signatures, and paperless processes. The next phase of CFPB's Know Before You Owe initiative aims to identify ways to improve the mortgage closing process for consumers. This project will encourage interventions that increase consumer knowledge, understanding, and confidence at closing. This notice seeks information from market participants, consumers, and other stakeholders who work closely with consumers. The information will inform the CFPB's understanding of what consumers find most problematic about the current closing process and inform the CFPB's vision for an improved closing experience.

Comments are due by February 7, 2014.

Progress on backover rule, but not done yet

In September, a group of auto safety advocates and parents represented by Public Citizen sued the Department of Transportation over its failure to issue a congressionally-mandated regulation to address the problem of 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 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.

In November, the court ordered DOT to respond to our petition, which it did two weeks ago. DOT also did something else that the court had not ordered: as the Detroit News reported yesterday, DOT sent a proposed final rule back to the Office of Management and Budget for final review (a step required by executive order before a rule is issued). This means that the regulatory process is moving again, and sooner than expected -- six months after DOT withdrew the rule from OMB, now it's back, and that's not a very long time to overhaul the proposal (but, to be clear, we don't know what rule the agency is now proposing). We're pleased the administration appears to be moving forward in response to our lawsuit.

But before getting too excited, remember that we've reached this stage before -- DOT sent a proposed rule to OMB back in November 2011, only to have it languish for 19 months before being withdrawn. So progress is not enough: we need the administration to finish the job.

Meanwhile, our lawsuit is still pending. If the administration doesn't follow through and issue the final rule this time, hopefully the court will order it to do so.

Michigan Court of Appeals Again Protects Anonymous Criticism

by Paul Alan Levy

A decision yesterday by a panel of the Michigan Court of Appeals shows that First Amendment protections, and particularly protection for online anonymity, is alive and well in Michigan.  Ruling in Ghanam v. Doe, the Court held that when discovery is sought to identify anonymous defendants so that they can be sued for defamation, the Court must first ensure that the plaintiff has taken reasonable steps to notify the defendants of the threat to their anonymity, and must then evaluate the litigation to make sure that the claims are sufficient to survive a motion for summary disposition.  Applying that standard, the Court held that each of the statements over which plaintiff Gus Ghanam had sued was a rhetorical expression of opinion protected by the First Amendment.

The panel agonized about the fact that it was bound by a ruling last year of another panel of the Court of Appeals in Thomas Cooley Law School v. Doe, which reversed an order allowing identification of the anonymous defendant in that case (who was represented on appeal by Public Citizen), but based only on Michigan law.  In Thomas Cooley, the Court refused to rule as a matter of First Amendment law that evidence be presented in support of elements of a defamation claim that a plaintiff can reasonably be expect to prove without knowing the identity of his detractors, such as falsity and damages.  The Cooley court had decided that these conditions could be met by applying Michigan’s own court rules providing for  a protective order against discovery pending ruling on a motion for summary disposition based either on the face of the complaint or based on affidavits. 

The panel in Ghanam felt it was constrained by the Cooley holding not to adopt the standards of Dendrite International v. Doe or Doe v. Cahill as a matter of First Amendment requirement, even though it made clear that it would have preferred to have gone that route.  However, the panel urged the Michigan Supreme Court or legislature to consider adopting those requirements.

Accessories Store: A Nondisparagement Clause Even Worse than Kleargear

by Paul Alan Levy

    In the wake of recent coverage of an attempt by the online trinket company Kleargear.com to ruin the credit of a customer whose wife complained about Kleargear’s failure to send an order of Christmas gifts, in violation of a non-disparagement clause inserted into later versions of the online sales contract, we have heard from other consumers victimized by non-disparagement clauses, including one that is even more offensive than Kleargear's.