Consumer Law & Policy Blog

Will the proposed $10.10 per hour minimum wage provide a decent standard of living?

The Real News Network has produced Will a $10 Minimum Wage Get All Working Americans Out of Poverty?  As its title suggests, RNN's story addresses whether President Obama and the Democratic party's proposal to take the minimum wage to $10.10 per hour will provide a non-poverty-level wage. To watch the story, you can click on the link above or the embedded video below.

 

Writings on the Postal Service Offering Banking Services

by Jeff Sovern

There's been a lot of discussion recently about whether the Post Office should offer banking services.  The idea is that it could serve the unbanked, and that its many existing branches would cover the entire country (Disclosure: one of my brothers works for the Postal Service, though we haven't discussed this idea).  For example, Adam Levitin had something in the American Banker here. Other American Banking coverage of the proposal can be found here, here, here, and here (some behind paywall).   Now Mehrsa Baradaran of Georgia has written It’s Time for Postal Banking, forthcoming in the Harv. L. Rev. F.  Here's the abstract:

This essay makes the case that the USPS is in a unique position to provide much-needed financial services for the large population of unbanked or underbanked Americans. First, the post office can offer credit at lower rates than fringe lenders by taking advantage of economies of scale as well as their position in the federal bureaucracy.  Second, they already have branches in many low-income neighborhoods that have been long deserted by commercial banks.  And, third, people at every level of society, including the unbanked, have a level of familiarity and comfort with the post office that they do not have with more formal banking institutions.

This essay moves one step further by demonstrating why government support and even subsidies to enable the endeavor are appropriate and justifiable. First, banking-related subsidies are grounded in historical practice, as demonstrated by government support for credit unions, savings and loans, and student loans. Postal banking derives from these longstanding practices, but broadens the scope to include the poor and not just the middle class. Further, state support of banking throughout U.S. history has operated much like a social contract: the state supports the banking system in a variety of ways and in return, banks are to be credit intermediaries, providing the populace with access to loans and financial services. Thus subsidies for banking have been justified because they provide a benefit to all citizens. Mainstream banks have met a portion of their obligation, but a large portion of the population — the poor — have been left out. It is time, then, for the government itself to meet the demand for credit. 

Victory for whistleblower cop stands

Today the Supreme Court refused the City of Burbank's request to rehear Dahlia v. Rodriguez, in which the en banc Ninth Circuit reinstated the claim of a Burbank police officer who was suspended for reporting that his fellow officers were beating suspects -- a victory for the First Amendment and for public oversight of law enforcement. (Public Citizen co-authored Mr. Dahlia's brief in opposition to certiorari.)

Telecom consolidation/cooperation and net neutrality

Following up on our recent coverage of the FCC's efforts to promote net neutrality (see here and here), it's worth noting this Washington Post analysis of a recent deal between Comcast and Neflix. The headline is a good summary: "Comcast’s deal with Netflix makes network neutrality obsolete."

Supreme Court Denies Review in Moldy Washing Machine Cases

by Deepak Gupta

Despite an unusually full-throated public-relations campaign and amicus effort by the tort-reform lobby, the Supreme Court this morning turned aside three petitions for certiorari from the Sixth, Seventh, and Ninth Circuits concerning the propriety of class certification in cases alleging that moldy washing machines sold to consumers were defective.

Today's denial is a win for consumers and a temporary stay of execution for the wounded-but-still-kicking class action device (at least outside the securities context). If the Wall Street Journal's multiple editorials on the subject are to be be believed, these cases represent a threat to American business and an opportunity for the Justices to rein in frivolous suits. But Judge Posner, who wrote one of the three decisions below, pointed out that attacks on the merits of the case provide no basis for denying class certification. “Sears argues that most members of the plaintiff class did not experience a mold problem,” noted Posner. “But if so that is an argument not for refusing to certify the class but for certifying it and then entering a judgment that will largely exonerate Sears—a course it should welcome.”

The cases are Sears v. Butler, 13-430, Whirlpool Corp v. Glazer, 13-431 and BSH v. Cobb, 13-138. In a worrisome development, the three cases were considered at four of the Justices' private conferences, starting back in November, leading to widespread speculation that the Court was actively considering granting the petitions (or perhaps that one or more Justices were writing a dissent from denial). But today, all three were denied without comment.

Emily Bazelon, who's been covering these cases at Slate, has some thoughts on today's denial.

A cost-benefit analysis of New York City's (invalidated, for the time being) ban on large sugary drinks

We have covered extensively (for instance, here, here, and here) the ban on the sale of large, sugary drinks by New York City's health department. A state-law-based challenge to the ban by merchants and others succeeded in a New York trial court and an intermediate court of appeals. But last October New York's highest court (the New York Court of Appeals) agreed to hear former Mayor Bloomberg's appeal (which is pending).

As you wait for the court of appeals' decision, how about curling up with this cost-benefit analysis of the ban by law professor Shi-Ling Hsu? Here's the abstract:

New York City Mayor Bill de Blasio, who has been critical of the administration of his predecessor, Michael Bloomberg, has nevertheless committed to carry forward one Bloomberg initiative: the citywide size restriction on sales of "sugary drinks," or most commonly, carbonated sodas. The "Portion Cap Rule" would have prohibited the sale of sugary drinks in containers exceeding 16 ounces, had it not been enjoined by a State court. The New York State Court of Appeal will hear the case later this year. The Portion Cap Rule was motivated by public health concerns, and the growing obesity problem that stems in part from the consumption of sugary drinks. Criticism of the Portion Cap Rule came from many quarters, including a broad coalition of industry groups (plaintiffs in a lawsuit), and civil rights organizations and others apparently concerned with public health and communities of color. Objections included the complaint that the Portion Cap Rule deprived consumers of freedom of choice, that it was not effective enough, and that it discriminated against minority-owned businesses. None of these criticisms, however, attempted to ascertain any sense of proportionality of the health benefits of sugary drink regulation, as opposed to the costs of this infringement of liberty. Given the continuing importance of the obesity problem and related health disorders, some quantitative analysis would appear to be useful. This paper performs a very rough cost-benefit analysis of sugary drink regulations such as the Portion Cap Rule. This paper seeks to answer the question: would sugary drink regulation generate more monetizable health benefits than it cost sellers of sugary drinks? While this is clearly not the only criteria by which sugary drink regulation should ultimately be judged, it seems beneficial to estimate the costs and benefits as a way of illuminating some of the tradeoffs involved in sugary drink regulation. This analysis finds that the costs of sugary drink regulation, estimated in terms of lost profits, could be as high as $500 million. The potential health benefits, estimated in terms of avoided costs of obesity, related diseases such as type 2 diabetes and coronary heart disease, and the avoided costs of premature mortality due to these diseases, could range from about $3.2 billion to $13.2 billion. The extremely high benefit-to-cost ratios are driven by the relatively small number of premature deaths that can be statistically attributed to sugary drink consumption, through the causal pathways of obesity, diabetes, and coronary heart disease. Without premature mortality costs, the benefits and costs of sugary drink consumption appear to be of a comparable magnitude.

Mark Budnitz Article on Georgia's Primary Consumer Protection Statute

Mark Elliott Budnitz of Georgia State has written Buyer Beware: Georgia Consumers Can't Rely on the Fair Business Practices Act, 6 John Marshall Law Journal  507 (2013).  Here is the abstract:

In Novare Group, Inc. v. Sarif, the Georgia Supreme Court rejected the plaintiffs' claim that the defendant brokers and developers violated the Georgia Fair Business Practices Act ("FBPA"), Georgia's primary consumer protection statute. The author contends that the court's approach in Novare undermines the Georgia General Assembly's purpose in enacting the FBPA to protect consumers from unfair or deceptive practices. The article criticizes the court for treating claims under the FBPA the same as common law fraud claims. It also examines the court's treatment of reliance, parol evidence, merger clauses and legislative silence. Finally, the article discusses the implications for future actions seeking redress for FBPA violations.

(I don't normally post articles on the law of a single state, but Mark Budnitz articles always merit attention.)

Dropbox adds forced arbitration and a class-action ban

by Brian Wolfman

The popular "cloud" storage service Dropbox has added a forced, pre-dispute arbitration clause to its standard consumer contract. As explained by Adam Levitin over at Credit Slips, Dropbox's clause also bans class actions, both in court and in arbitration. What I like about Levitin's post is that it stresses that the problem with forced arbitration is not so much that individual consumer arbitration is unfair -- although often it may be -- but that individual arbitration is not cost-effective for the vast majority of consumers, and so mandatory arbitration, particularly when coupled with a class-action ban, means that wrongdoing will go unaddressed and unredressed. Again, the real problem is not unfair arbitration, but little or no access to justice and, thus, little or no deterrence.

Dropbox is allowing its customers to opt out. As I've explained in prior posts (go, for instance, here and here), the right to opt out of a forced arbitration clause is a public-relations gambit. In fact, Dropbox would like to deny court access to as many of its customers as possible, while using the opt-out to pretend that its agreement with consumers is consensual. If Dropbox really wanted to give its customers a choice, it would allow them to opt for arbitration (or court) and individual (or aggregated) resolution post-dispute.

Student loan debt in 2013

The Federal Reserve just issued its most recent quarterly report on household debt and credit. Though it reviews household debt and credit of all sorts, I was interested in what it had to say about student-loan debt:

• Outstanding student loan balances reported on credit reports increased to $1.08 trillion (+$53 billion) as of December 31, 2013, representing a $114 billion increase for 2013.
• About 11.5% of student loan balances are 90+ days delinquent or in default.

Note on page nine of the report the downward trend in 90-day delinquency rates for all loan types, except for student loans (which is trending upward).

A gag rule of a different sort

by Paul Alan Levy

Recently I had the pleasure of participating in a moot court at Georgetown Law Center’s Supreme Court Institute for the upcoming Supreme Court argument in Octane Fitness v. Icon Health & Fitness, in which the Court will have the opportunity to nix the very restrictive standard applied by the Federal Circuit in deciding whether losing patent lawsuits are “exceptional” and hence qualify for an award of attorney fees to the prevailing defendant.

I was less pleased, though, when a reminder of the upcoming moot court date, with a copy of the reply brief attached, included this paragraph:

The SCI has an absolute confidentiality rule that covers the moot court itself, and a more limited rule of reason regarding making adverse comments about the advocate's position in the case before it is decided. Thus, if you have attended or participated in a moot court, you should not, without the approval of the advocate, post an entry on a blog or publish an article in a newspaper, magazine, or other periodical publication while the case is pending in the Court if the entry or article could reasonably be regarded as contrary to the interests of the advocate.

I didn’t have any interest in blogging about this case before the decision comes out, but I thought long and hard about whether, as a matter of principle, I should withdraw as a moot court judge. In the end, I was filling in for a colleague on this moot court, and I felt it was inappropriate to dump the case back in my colleague’s lap at such a late date. So I went through with the moot court (and was glad I did).

Still, the publishing limit sticks in my craw (the SCI web site shows that the rule also applies to anyone who sits in the audience for the moot courts). The first clause of the first sentence causes me no problem – the moot court judges are given a preview of the advocate’s strategy, and insights into how she might respond to hard questions, and it would be an outrageous betrayal of confidence to reveal such matters.  I could even see asking moot court judges to refrain from commenting on the upcoming argument, between the time of the moot court and the actual argument. Speaking about those subjects, when the author was in the moot court, runs some risk of implicitly disclosing tactical discussions at the moot court.

But the final clause of that first sentence, and the entirety of the second sentence, seem to me to be more problematic. These moot courts draw some top Supreme Court practitioners, not to speak of experts in the specific areas of law at issue in the arguments, and it is hard to understand any legitimate reason to censor their post-argument public comments about the issues in the case, so long as they don’t reveal confidences about what happened during the moot court, or even play up the attention that their comments receive by alluding to the fact that they were in the moot court. And giving veto power to the advocate over publications about a recently completed Supreme Court argument strikes me as especially problematic.

I was curious about the origins of the rule, which was apparently adopted just this year, and learned that it was in response to an incident last year, in which an advocate who had presented his argument to a Georgetown moot court panel was incensed by a column authored by one of the moot court judges.  I inquired about the specific incident, and the column was described to me specifically enough that I was able to locate it, and read it.  Unfortunately, I have been asked not to reveal the column to avoid embarrassing the specific individuals involved as being the source of this bad rule; so readers will have to take my word for my characterization of the column: it contained a fairly gentle suggestion that the advocate had not been successful at persuading certain justices to the advocate’s point of view. If the author was upset about this column, this advocate must be exceptionally thin-skinned.  If you are going to argue at the Supreme Court, and especially if you are a public official as this advocate is, it just seems to be that you have to be willing to accept seeing criticisms of your argument in print.  Why has Georgetown adopted such an overbroad rule because one of its customers was an eggshell plaintiff?

Even worse, to my mind, is that this restriction has been imposed by a law school.  Why a law school would be in the business of limiting scholarly output about the major legal issues that are at issue in many Supreme Court arguments is beyond me.  If the operators of the Georgetown Supreme Court Institute feel that they have to impose such censorship rules to stay competitive in the field of hosting moot courts, then it seems to me they should go private instead of housing themselves at a top law school.

Not that I see any likelihood that Georgetown’s SCI needs this rule to stay in business. Getting accepted for the Georgetown moot is highly competitive, so much so that the SCI has special rules akin to the appellate first filing rules to determine which side in any Supreme Court case gets this plum; most advocates see it as a very valuable part of their preparation. Indeed, although Public Citizen’s Supreme Court Assistance Project also holds moot courts (only for the public interest side, as we see it!), we consistently recommend to advocates we are advising that they apply to the Georgetown program as soon as their case is granted so that they can, at least, get into a coin flip to decide which advocate gets the moot.  (The loser has to "settle" for one of the other law school SCOTUS moot court programs).

Consequently, if Georgetown were to decide that, as a law school, it is not part of its business to insist that moot court judges refrain from publishing non-confidential opinions and information, subject to the veto of the advocate, I find it hard to believe that it would lose top cases to the other law schools in the area that similarly run moot court programs for upcoming Supreme Court arguments.