Consumer Law & Policy Blog

Auto safety and other consumer groups petition the FTC to take action against CarMax for claiming its used cars are safe, but failing to fix safety recalls before marketing them

Eleven auto safety and other consumer groups have petitioned the Federal Trade Commission (FTC), asking the agency to take enforcement action against the major national used-car seller CarMax. The groups say that CarMax claims its cars go through a rigorous safety inspection but that, in fact, CarMax does not fix defects that are the subject of regulatory safety recalls. The petitioners include Consumers for Auto Reliability and Safety, the Center for Auto Safety, Consumer Federation of American, Consumers Union, the National Association of Consumer Advocates, the National Consumer Law Center, and U.S. PIRG. The beginning of the groups' petition provides a nice summary:

The non-profit consumer organizations listed above submit this petition, seeking enforcement action by the Federal Trade Commission, to curb CarMax's deceptive advertising and sales practices, which endanger the lives of their customers, their families, other passengers, and everyone who shares the roads. CarMax is the nation's largest retailer of used vehicles. According to CarMax, it has sold more than 4 million cars. CarMax advertises on its website, on television, in newspapers, and at its dealerships that each of the used vehicles it offers for sale are “CarMax Quality Certified” and has undergone a rigorous, “125+ point inspection.” However, CarMax fails to ensure that safety recalls are performed prior to selling used cars to consumers. The New York Times recently reported that “CarMax, the nation's largest seller of used cars, offers a “Certified Quality Inspection,” which does not include fixing [safety] recalls."

Here is what the groups ask the FTC to do:

[I]nvestigate CarMax's advertising and sales practices and take all appropriate and necessary action in order to curb CarMax from selling unsafe, recalled used cars to the public. In addition to any other remedies or penalties that may be appropriate, we also urge the FTC to:

[1] Obtain VIN-specific information regarding the safety recall status of vehicles CarMax has already sold to the public, and release that information to the public

[2] Notify the owners of vehicles sold by CarMax that had safety recalls pending at the time of sale

[3] Enjoin CarMax from engaging in such irresponsible and reckless practices in the future

Read the groups' press release, the New York Times article discussed in the petition, and an article by LA Times reporter Jerry Hirsch.

Auto recalls hit all-time high for a year

As Jerry Hirsch explains, the number of vehicles recalled this year for safety problems has reached an all-time high (breaking the previous high established in 2004). It's June.

Arbitration in the Supreme Court and error correction

Law professor Christopher Drahozal has written Error Correction and the Supreme Court's Arbitration Docket. Here is the abstract:

Supreme Court Justices from William Taft to Stephen Breyer have repeated the maxim that the “Supreme Court is not a court of error correction.” When it comes to arbitration law, however, a number of the Court’s cases do little more than correct errors by lower courts. So why has error correction played such a significant role in the Court’s arbitration docket? One important factor is ongoing resistance to the Court’s arbitration decisions in the lower courts, to which a number of the Court’s error correcting decisions are a direct response. Another is that cases involving standards rather than rules necessarily require fact-based determinations, and the nature of the Court’s case selection process can result in the Court reviewing cases with one-sided facts that make little law. But, in addition, the generalist legal background of Supreme Court Justices (and their law clerks) leads them to overlook important nuances in the facts of arbitration cases before the Court on certiorari. These nuances give rise to several simple steps the Court could take to avoid some of its more limited decisions, including: (1) reviewing state court cases only when the issue presented does not also arise in cases in federal courts; (2) avoiding cases arising out of post-dispute arbitration agreements; and (3) choosing cases with typical arbitration clauses, not atypical ones.

Satirist John Oliver on Dr. Oz's Endorsement of Magic Weight Loss Pills

Here.  A TV comic excursion into the law of supplements (HT: Charles Shafer).

Supreme Court rules in key securities case

The Supreme Court held this morning in Halliburton Co. v. Erica P. John Fund, No. 13-317 (June 23, 2014), that the presumption of shareholder reliance in private securities-fraud class actions established by the Court in Basic Inc. v. Levinson, 485 U.S. 224 (1985), should not be overruled. It agreed, however, with the defendant Haliburton that the presumption of reliance may be rebutted with evidence that the alleged misrepresentation did not affect the stock price at the class-certification stage (as well as at the merits stage, as Basic had held).

For more on what was at stake in Halliburton, read our earlier post on the case.

Sharkey on Agency Coordination in Consumer Protection

Catherine M. Sharkey of NYU has written Agency Coordination in Consumer Protection, 2013 University of Chicago Legal Forum 329. Here's the abstract:

The federalization of consumer protection has created thorny issues of agency coordination.  When multiple federal agencies interpret and enforce the same statute, should a single agency’s interpretation be accorded Chevron deference? Should it matter whether it is in synch, or at odds, with its fellow agencies?  This Article explores two agency coordination strategies that point in opposite directions. The first, a balkanization strategy, attempts to overcome the overlapping agency jurisdiction problem by urging agencies to create separate, non-overlapping spheres of authority to thereby regain Chevron deference due the agency that reigns supreme. We can expect “agency self-help measures” that stake out respective turfs to emerge from this strategy.  Courts have accepted the balkanization approach — carving out discrete fiefdoms from spheres of overlapping agency jurisdiction — and may accept it more readily as the jurisprudence after City of Arlington develops with regard to agency interpretations of jurisdiction. 

The second (and more novel) strategy, a model of judicial review as agency coordinator, exploits (rather than constrains) overlapping agency jurisdiction. Under this model, when faced with an interpretation by an agency that operates in shared regulatory space, courts would solicit input from the other relevant agencies. And, to the extent that there is agreement among the different agencies, Chevron deference would be especially warranted (regardless of whether all of those agencies were parties before the court), in sharp contrast to certain courts’ blanket stance that Chevron deference is inappropriate when multiple agencies interpret the same statute.

Supreme Court reinstates First Amendment claim of public employee fired for court testimony

In a unanimous opinion today in Lane v. Franks, the Court held that an employee who was fired by a public employer for giving subpoenaed judicial testimony about his state-funded program could maintain a claim for First Amendment retaliation. The key issue in the case was whether testifying was part of the employee's job responsibilities (and therefore not a viable basis for a First Amendment claim) or whether the employee, in testifying, was speaking "as a citizen" (and therefore entitled to First Amendment protection). Emphasizing the importance of truthful testimony to the judicial system, the Court held the latter:

Truthful testimony under oath by a public employee outside the scope of his ordinary job duties is speech as a citizen for First Amendment purposes. That is so even when the testimony relates to his public employment or concerns information learned during that employment. . . . Sworn testimony in judicial proceedings is a quintessential example of speech as a citizen for a simple reason: Anyone who testifies in court bears an obligation, to the court and society at large, to tell the truth.

This is an important victory for whistleblowers and a narrowing of a prior decision in the area of public employee speech claims, Garcetti v. Ceballos. Some courts had interpreted Garcetti to preclude First Amendment retaliation claims based on speech regarding one's employment. The Court made clear today that for a public employee's speech to be outside First Amendment protection, it must be uttered as part of the ordinary duties of the job, not merely pertaining to the job:

The mere fact that a citizen’s speech concerns information acquired by virtue of his public employment does not transform that speech into employee—rather than citizen—speech. . . . [S]peech by public employees on subject matter related to their employment holds special value precisely because those employees gain knowledge of matters of public concern through their employment.

Unfortunately, the Court also held that the employee in this case cannot recover damages because the First Amendment right was not clearly established (at least in his judicial circuit) before today's decision.

Still, a welcome interpretation of the First Amendment that will benefit both public employees and the judicial process.

Wilkinson-Ryan Article: A Psychological Account of Consent to Fine Print

Tess Wilkinson‐Ryan of Penn has written A Psychological Account of Consent to Fine Print, 99 Iowa Law Review 1745 (2014). Wilkinson-Ryan has a Ph.D in psychology as well as a law degree, and so brings to bear a different perspective in evaluating consumer reactions to fine print. I found this article useful in the research I'm doing this summer, and it seems likely that anyone looking into fine print would also find the piece valuable. Here's the abstract:

The moral and social norms that bear on contracts of adhesion suggest a deep ambivalence.  Contracts are perceived as serious moral obligations, and yet they must be taken lightly or everyday commerce would be impossible.  Most people see consent to boilerplate as less meaningful than consent to negotiated terms, but they nonetheless would hold consumers strictly liable for both.  This Essay aims to unpack the beliefs, preferences, assumptions, and biases that constitute our assessments of assent to boilerplate.  Research suggests that misgivings about procedural defects in consumer contracting weigh heavily on judgments of contract formation, but play almost no role in judgments of blame for transactional harms.  Using experimental methods from the psychology of judgment and decision-making, I test the psychological explanations for this disjunction, including motivated reasoning and reliance on availability heuristics.  Many commentators have argued that even though it is true that disclosures are probably ineffective, they “can’t hurt.”  I conclude with a challenge to that proposition — I argue that the can’t-hurt attitude may lead to overuse of disclosures that do not affect consumer decision-making, but have implicit effects on the moral calculus of transactional harms.

Unions and NCAA football

For those of you who haven't been following the fight to unionize NCAA football players, spearheaded by Northwestern players, this Daily Show piece is a great summary of the issue.

(Here is ESPN's summary of the state of affairs: players have voted on whether to unionize -- results not yet known. An NLRB regional office ruled that the players could unionize; Northwestern's appeal to the NLRB is pending.)

When tribes team up with payday lenders, who profits?

...is the subtitle of this Al Jazeera America piece on the use of tribal sovereign immunity to shield payday lenders from the reach of consumer protection laws (while, incidentally, providing little benefit to the tribes themselves).

As the article explains:

Tribal sovereignty allows the rancherias’ businesses to claim immunity from state usury laws, making them convenient shelters for lenders who want to evade regulators.

Yet little of the revenue that flows through these tribal businesses ends up in the rancheria or benefiting tribal members, as attested by the cluster of rundown houses nearby, where some members of the tribe live. They don’t look like villainous tycoons preying on low-income Americans. They look more like those cash-strapped loan customers themselves.