Consumer Law & Policy Blog

Seventh Circuit Judge Richard Posner on coupon settlements

As explained in this article by Daniel Fisher, Seventh Circuit judge Richard Posner recently had some tough questions for proponents of a class-action settlement in which the plaintiff-consumers got coupons (that's right, $10 coupons to purchase the defendant's products!) and the plaintiffs’ lawyers got cash (a million bucks in fees). That's nothing new -- that's what coupon settlements always do -- but you may want to listen to the Seventh Circuit argument just for the entertainment value.

Update: Judge Posner also said at argument that the plaintiff in a class action should not be "pals" with (or a former colleague of) the plaintiff's lawyer.

[HT - Jon Taylor]

California bans non-disparagement clauses

We've written extensively about the problem of non-disparagement clauses in consumer contracts, and we've discussed the possibility of a legislative fix in California, proposed by former Assembly Speaker John A. Pérez. Public Citizen has supported and assisted in this and other ongoing legislative efforts to address the problem.

I'm pleased to report today that the bill we helped craft and promote in California passed the legislature over the summer and was signed into law yesterday by Gov. Brown. It bans non-disparagement clauses in consumer contracts, and imposes a $2,500 fine for threatening or seeking to enforce one or for otherwise penalizing a consumer for speech about a business. The fine rises to $5,000 for subsequent violations, plus an additional $10,000 fine for willful, international or reckless violations. Enforcement is allowed both by public authorities and by consumers themselves.

You can read the text here.

The Washington Post takes note with the clever headline, "California protects the right to Yelp without penalty," and observes that the bill was inspired by our case against KlearGear.

Levitt v. Yelp: Business Claims of Yelp Extortion Rejected

Late last week, the Court of Appeals for the Ninth Circuit upheld the dismissal of a class action against Yelp by four local merchants who claimed that Yelp employees were themselves writing false and defamatory reviews, and removing positive reviews, to coerce the merchants into buying the advertising that provides Yelp with its main source of revenue.  Such claims are frequently reported in the mainstream media, but this is the first time the claim has been addressed at the federal appellate level.  

New article on the role of tort law by Judge Calabresi

Second Circuit judge Guido Calabresi has written A Broader View of the Cathedral: The Significance of the Liability Rule, Correcting a Misapprehension. Here is the abstract:

Recent years have seen a resurgence of Torts viewed as a purely private legal arrangement: whether described in terms of compensatory justice — the right of an injured party to be made whole — or of redress for civil wrongs — the right of an injured person to get back at the one who injured him. These positions reject the approach of the system builders (to use Izhak Englard’s felicitous phrase), those who see torts as part of a legal-political-economic structure of a polity. This latter, “public,” view of torts has been dominant, at least since my first article, and Walter J. Blum and Harry Kalven’s answer to it, aptly titled "Public Law Perspectives on a Private Law Problem." It is of the relationship between these approaches, and of the inevitability of the public-law (and hence, in part, economic) view of torts that I wish to write today. In doing so, however, I mainly want to correct an error that many system builders have made: that is, of viewing the liability rule (in torts and in its cognates) as a “second best” way of mimicking markets when markets “will not work,” or “are not available.” I want to claim a more significant economic role for the liability rule, and hence for torts, than that. For reasons that will be clear in due course, I call this "A Broader View of the Cathedral."

Legal and Public Health Problems of the Wireless Age

Guest post by Deborah Kopald

[Deborah Kopald (BA, Harvard; MBA, MIT Sloan School of Management) is an environmental health and public policy consultant and author who has developed and overseen the passage of legislative initiatives and has served as a guest expert at various media outlets.  In 2013, she organized and moderated The Conference on Corporate Interference with Science and Health in New York City.  The conference proceedings were published in Reviews on Environmental Health.]

The use of Wi-Fi and other wireless technologies has created problems.  “An Open Letter to Phillips Exeter Academy about Wi-Fi”, which I wrote to my alma mater, details the public health problem Wi-Fi has created and some legal ramifications of its use.

Some people who lived too close to TV broadcast and radar towers developed symptoms of Microwave Sickness, a condition observed in military and industrial occupational settings during the Cold War.  The next wave of microwave-emitting infrastructure, cell towers, lived up to the billing of their military and industry-owned cousins with subsequent studies (none were commissioned in the United States) showing elevated numbers of people within 1,500 feet experiencing symptoms of Microwave Sickness.  (Twenty-one years ago, the California Public Utilities Commission (CPUC) had recommended siting towers away from schools and hospitals; some municipalities used their zoning rights under the 1996 Telecom Act to create setbacks from these institutions as well as residences, places of worship and recreation areas in the name of protecting property values.)

Today, Microwave Sickness is known as Electro-hypersensitivity (EHS).  Symptoms can include but are not limited to extreme pounding headaches, blood pressure and heart rate changes, and muscular weakness in the presence of Wi-Fi and commensurate exposures.  In Sweden, the government acknowledges that the problem, which it terms a functional impairment, is affecting 3% of its population and provides accommodation in the form of hospitals without Wi-Fi, wireless-free transport, schools and workplaces and wired and shielded housing to accommodate people.

Microwave Sickness accelerated as warnings and recommendations were ignored and transmitters were placed closer to living and working environments; radiation exposure is driven more by proximity to the transmitter than by its total power output which is why a Wi-Fi’ed area can expose people to more radiation than if there were a cell tower on the premises.  (If being certain distances from a cell tower created problems, obviously getting even higher radiation doses continuously would be more problematic.) People used to be able to move away from a cell tower or shield their homes to an extent; not so with Wi-Fi, which is ubiquitously indoors…and increasingly outdoors in the public square with rollouts in parks and city streets.  Therefore, what was formally a problem of geography has turned into one of public health.  Wi-Fi has a much shorter range than a cell tower, but someone who is sensitive to microwave radiation must keep a wide berth from the routers.

Wasserman Article on Global Solutions to Mass Torts

Rhonda Wasserman of Pittsburgh has written Future Claimants and the Quest for Global Peace, Forthcoming in 64 Emory Law Journal (2014),  Here's the abstract:

In the mass tort context, the defendant typically seeks to resolve all of the claims against it in one fell swoop.  But the defendant’s interest in global peace is often unattainable in cases involving future claimants – those individuals who have already been exposed to a toxic material or defective product, but whose injuries have not yet manifested sufficiently to support a claim or motivate them to pursue it.  The class action vehicle cannot be used because it is impossible to provide reasonable notice and adequate representation to future claimants.  Likewise, non-class aggregate settlements cannot be deployed because future claimants will not have contacted attorneys whose participation is critical to those alternative methods of dispute resolution.

In lieu of class actions and non-class aggregate settlements, this Article proposes a hybrid public-private claims resolution process designed to provide many of the benefits of global peace, while preserving the constitutional rights of future claimants and ensuring them fair compensation as their injuries manifest.  Under this proposal, defendants would secure judicial approval of a fair and reasonable class action settlement of the current claims and then, through an extra-judicial process, make fair offers on comparable terms to future claimants as their claims mature, adjusted to take into account the time value of money and intervening changes in legal doctrine and medical advances.  Since the class action settlement would not purport to bind the future claimants, their constitutional rights would be protected.  And even though the future claimants would not be bound by the class action judgment nor obligated to accept the fair offers on comparable terms, they would have an incentive to accept them, rather than sue in tort, because they would be assured fair compensation without incurring the costs of litigation.

Goldman & Tushnet Casebook Chapter on Advertising Featuring People

Eric Goldman of Santa Clara and Rebecca Tushnet of Georgetown have written Featuring People in Ads (2014 Edition) from Advertising & Marketing Law: Cases and Materials (2014 edition). Here's the abstract:

This is a book chapter from the 2014 edition of a casebook, Advertising & Marketing Law: Cases and Materials, by Rebecca Tushnet and Eric Goldman. This chapter examines the legal issues arising from featuring people in advertisements, including publicity rights and endorsement/testimonial guidelines.

The Supreme Court and big business

That's the topic of Alan Morrison's wide-ranging article entitled Saved by the Supreme Court: Rescuing Corporate America.

Google pays $19 million to settle claims that it deceived kids into buying Android apps

Yesterday, Google agreed with the Federal Trade Commission to pay $19 million to consumers whose children allegedly were misled into making purchases in the Android "app store." As this article by Cecilia Kang explains:

Google made it too easy for children to use Android phones to buy items ranging from 99 cents to $200 in kids-oriented games without a parent's permission. The settlement is the latest in the FTC's three-year investigation into so-called "in-app purchases" on devices running software by Apple, Amazon and Google. The enforcement agency has said the purchases are deceptive and particularly harmful for children. Apple agreed to a $32.5 million settlement last January. Amazon in July said it would fight similar charges brought by the FTC.

Read the FTC's press release, and take a look at what the agency calls its 4 tips that app sellers should take away from the Google settlement:

1)  Get consumers’ express consent before billing them.  It’s hardly a novel concept, but it bears repeating:  It’s illegal to place charges on consumers’ accounts without their permission.  That was the law before the advent of mobile apps and we’ll go out on a limb and say the same principle will apply to The Next New Thing.  Regardless of what you sell or how you sell it, get people’s informed OK before billing them.

2)  Read – and heed – your mail.  According to the complaint, Google started to get flak from consumers almost as soon as it introduced in-app purchases in kids’ apps.  The FTC’s complaint cites just a few of the thousands of communications from parents that should have made it crystal-clear to Google that it had a problem on its hands.  What’s the message for marketers?  One insightful – and free – gauge of what’s going on in the marketplace is what your customers are telling you.

3)  Listen to your staff.  It wasn’t just parents who expressed concerns.  In a 2012 email, one Google product manager warned higher-ups that:

“friendly fraud” (unauthorized purchases by individuals you know) is the lead cause of chargebacks.  For example, parents realize their kids have made a series of purchases and call the credit card company claiming those were unauthorized.  Risk estimates that close to 80% of current chargebacks are driven by this specific issue.

Another in-house communication referred to a “high number of canceled orders for in-app billing” and explained that “these usually tend to be family fraud (kids takes phone and buys lots of food for virtual fish).”  Remember:  Those weren’t quotes from someone with an axe to grind.  It’s what Google’s own people were saying about problems with the payment process.

4)  Nix the trick fix.  Once you know there’s a problem, commit your company to correct it pronto.  It’s unlikely that half-hearted measures will do the trick.  As the complaint in this case alleges, the changes Google implemented didn’t solve the problem.

Pounding Student Loan Borrowers: The Heavy Costs of the Government's Partnership with Debt Collection Agencies

That's the name of this new report by the National Consumer Law Center. Here's the Center's overview:

The U.S. Department of Education refers every eligible defaulted student loan debt to private debt collection agencies. Collectors are hired not only to collect money, but also to communicate with borrowers about options to resolve their debt, creating a conflict of interest. Promoting paths to success for these borrowers is ultimately less costly for taxpayers, yet the Department hammers borrowers with draconian collection tools.The government must balance the need to collect loans with the need to assist borrowers. Yet, the current system favors high pressure collection tactics and private company profits. The system fuels widespread violations of consumer protection laws and prevents borrowers from assessing their rights.

Read the executive summary after the jump. You can also read the entire report, the report's various charts and tables, and the Center's press release. And read this story on the report by journalist Jonnelle Marte.