Consumer Law & Policy Blog

Hockett on Using Eminent Domain to Save Underwater Mortgages in NYC

Robert C. Hockett of Cornell has written 'We Don't Follow, We Lead': How New York City Will Save Mortgage Loans by Condemning Them, 124 Yale Law Journal Forum 131 (2014).  Here is the abstract:

This brief invited essay lays out in summary form the eminent domain plan for securitized underwater mortgage loans that the author has been advocating and helping to implement for some years now.  It does so with particular attention in this case to New York City, which is now actively considering the plan.  The essay's first part addresses the plan's necessity.  Its second part lays out the plan's basic mechanics.  The third part then systematically addresses and dispatches the battery of remarkably weak legal and policy arguments commonly proffered by opponents of the plan.

Arbitration now covers claims for assault?

The state of the law on arbitration is undeniably titled against consumers, workers, and really anyone who is wronged by a corporation (including, sometimes, even smaller corporations). We've discussed on this site for years how arbitration undermines disputants' rights and favors the big repeat players. And we've discussed how far arbitration has extended under recent Supreme Court jurisprudence. (I won't inundate you with links.)

Even in light of all this, a recent case from Missouri still has the power to shock: an arbitration agreement in a refrigerator-rental contract was held to cover an elderly customer's lawsuit against an employee of the rental company for a home invasion and savage beating. Read more here from our friend Paul Bland.

Asset forfeiture reforms in D.C.

As Forbes discusses, the D.C. city council has just passed a law to combat the abuses associated with civil asset forfeiture, the law enforcement practice of taking people's money or property and asking questions (such as whether they had the authority to do it) later.

The Washington Post summarizes what asset forfeiture is:

Civil forfeiture laws permit local and state police to take cash, cars, homes and other property from people suspected of involvement in drug trafficking or other wrongdoing without proving a crime has occurred. Police can make seizures under state or federal laws.

In practice, as this in-depth New Yorker article chronicles, forfeitures can be unjustified, leave victims stranded, and put the burden on innocent owners to recover their money or property. And who benefits? Often the very law enforcement agency taking the property.

To combat these abuses, the D.C. law will "raise the threshold of proof required for a forfeiture, bolster the rights of individuals whose property has been taken and require that proceeds from seizures under federal law go into the city general fund, rather than directly to the police department." The Post's coverage is here.

 

 

NY Adopts New Debt Collection Rules

by Jeff Sovern

The press release is here.  The rules themselves are here.  Law360's Evan Weinberger reports here on whether they might become a model for the CFPB or other states.  I am very curious to see how effective the new rules will be. They will surely help some consumers.  Because the rules require disclosures, and evidence is increasingly calling into question how much consumers take advantage of disclosures, some--perhaps many--consumers who could benefit from the new rules may not avail themselves of the protections they provide.  I hope a way is found to monitor the rules' effectiveness to see if more needs to be done.

In praise of Honda on safety

Our site does its share (we hope!) of calling attention to dangerous and/or exploitative corporate practices, so it's only fair that we also mention when a company seems to be looking out for its consumers.

Brian's post earlier today discussed a looming showdown over airbag recalls, with the manufacturer, Takata, refusing NHTSA's demand to broaden the scope of a previous recall over defective airbags. But Honda decided to act on its own and extend the recall nationwide for its own cars with potentially defective equipment, reports the Associated Press.

Earlier this year, DOT promulgated a safety standard requiring rearview cameras in all new cars by 2018. Even before DOT issued the long-delayed rule, Honda announced it would meet that goal by 2015, reported Auto News.

This is not to endorse every decision Honda makes (to read about a 2012 consumer-unfriendly move in litigation, for instance, see here). But it's worth pointing out these two laudatory examples of a company taking voluntary measures to enhance its customers' safety.

Facebook has a new privacy policy

With Privacy Basics, the social network site provides a sleek, interactive guide to your privacy options. Whatever you think of Facebook's record on privacy, the new policy seems to reflect a recognition on Facebook's part that their users do care about it.

I don't know all the details of how the policy has changed over time so as to be able to analyze whether and to what extent the current options are more privacy-protective than before, or whether it's a lot of graphics and not a lot of substance.

But this much seems clear: Facebook is still going to use your information in ads. Facebook is upfront about this, saying (in an email sent to users): "People sometimes ask how their information is shared with advertisers. Nothing is changing with these updates[.]" And Facebook's page about ads (available here) explains, "Your profile picture or name may be paired with an ad to show your activity on Facebook (ex: if you follow the Starbucks Page). Keep in mind that your name and profile picture will only appear to the people who have permission to view your Page likes." This practice is particularly problematic regarding minors, as we've discussed (litigation on this issue is pending).

Takata tells NHTSA to take a hike on its demand for a national air-bag recall

The National Highway Traffic Safety Administration recently told Takata Corp. to expand its regional defective-airbag recall (in states that have high "absolute" humidity) to vehicles in the entire country. Takata just said no. Most recalls are voluntary -- that is, the manufacturer agrees to do what the agency demands. Here, however, NHTSA will have to go after Takata legally if it wants a national recall.

For more details, read this AP story. Here's an excerpt:

Japan's Takata Corp. rejected federal regulators' demand Wednesday for an expanded, nationwide recall of millions of air bags, setting up a possible legal showdown and leaving some drivers to wonder about the safety of their cars. Amid the standoff, Honda Motor Co. decided to act on its own and recall cars with the potentially defective equipment in all 50 states. But other automakers have yet to make a decision. At issue are air bags whose inflators can explode with too much force, hurling shrapnel into the passenger compartment. At least five deaths and dozens of injuries have been linked to the problem worldwide.

Eleventh Circuit: Attempt to Pick Off a Class Representative Doesn't Moot the Class Action

by Deepak Gupta

The Eleventh Circuit issued issued a very comprehensive and well reasoned opinion this week on a hot issue in consumer class-action practice: Can a defendants' attempt to "pick off" a class representative moot the class action?  Or, as the opinion puts it: "This case presents the question whether a defendant may moot a class action through an unaccepted Federal Rule of Civil Procedure 68 offer of complete relief to the named plaintiffs—but not to class members—before the named plaintiffs move to certify the class. In the circumstances of this case, the answer is no." Here, the issue arose in a Telephone Consumer Protection Act case (Stein v. Buccaneers Ltd. P'ship.); it's a recurrent issue in cases under the Fair Debt Collection Practices Act and other consumer laws that authorize statutory damages.

1. Individual mootness. Here's the heart of the court's analysis on the threshold question of individual mootness:

Giving controlling effect to an unaccepted Rule 68 offer—dismissing a case based on an unaccepted offer as was done here—is flatly inconsistent with the rule. When the deadline for accepting these offers passed, they were “considered withdrawn” and were “not admissible.” See Fed. R. Civ. P. 68(b). The plaintiffs could no longer accept the offers or require the court to enter judgment. In short, the plaintiffs still had their claims, and [the defendant] still had its defenses. [The defendant] had not paid the plaintiffs, was not obligated to pay the plaintiffs, and had not been enjoined from sending out more faxes. The named plaintiffs’ individual claims were not moot.

That's the same common-sense approach sketched out by Justice Kagan's dissenting opinion in Genesis Healthcare Corp. v. Symczyk (joined by three other Justices and contradicted by none), which offered this "friendly suggestion" to the lower court that had found the case moot: "Rethink your mootness-by-unaccepted-offer theory. And a note to all other courts of appeals: Don’t try this at home." The defendant in the TCPA case, the Eleventh Circuit noted, "invites us to try this at home. We decline." On this point, the Eleventh Circuit joins the Ninth Circuit's opinion last year in Diaz v. First Am. Home Buyers Prot. Corp., 732 F.3d 948, 954-55 (9th Cir. 2013).

2. Class mootness. The Eleventh Circuit also went on to hold that, "[e]ven if the individual claims are somehow deemed moot, the class claims remain live, and the named plaintiffs retain the ability to pursue them." On this point, the court relied on a precedent of the Old Fifth Circuit, binding in the Eleventh, and a tour of the Supreme Court's class-action mootness jurisprudence going back to the '70s. Here's the upshot of that analsysis: "In the Third, Fifth, Ninth, and Tenth Circuits, as now in the Eleventh, a Rule 68 offer of full relief to the named plaintiff does not moot a class action, even if the offer precedes a class-certification motion, so long as the named plaintiff has not failed to diligently pursue class certification." Only the Seventh Circuit's decision in Damasco v. Clearwire stands apart, and the panel's opinion includes some nice criticism of the bizarre practical consequences of the Damasco regime.

The panel didn't deny that there may appear to be "tension" between its opinion and a bit of the Genesis majority's dicta -- particularly the Court's distinction between "inherently transitory" claims mooted by the passage of time and damages claims. But the panel explained that (1) Genesis doesn't conflict with the panel's analysis of individual mootness, (2) Genesis emphasized differences between Rule 23 class actions and the FLSA collective action at issue there, and (3) a contrary approach "would prove too much. It would mean that a named plaintiff could not represent a class if the defendant sufficiently proffered full relief at any time before the class was certified, not just before the plaintiff filed a motion to certify." Even the Seventh Circuit doesn't take that approach, and nobody is seriously suggesting it.

David Lazarus in the Los Angeles Times on Debt Collectors Renting Out Prosecutor Letterhead

by Deepak Gupta

In today's Los Angeles Times, consumer columnist David Lazarus takes a look at the practice of for-profit debt collectors renting out the seal and letterhead of local California prosecutors -- the target of a new class-action lawsuit that our firm filed yesterday in federal court in San Francisco. The practice was condemned in a scathing ethics opinion released by the American Bar Association a few weeks ago -- an opinion we blogged about here.

Here's Lazarus's take:

These programs are hinky from the get-go. Prosecutors are allowing private debt collectors to misrepresent themselves as official entities, and consumers are unfairly being threatened with bogus charges.

If these programs focused solely on making the legal system more efficient, fine. But they seem to exist primarily to do the dirty work for merchants who believe they're owed some cash.

These companies should do their own debt collecting. Prosecutors should concentrate on enforcing the law.

And if prosecutors can't tell the difference, they should, as the American Bar Assn. suggested, sign up for some remedial ethics training.

I admit, I had to look up the word "hinky" in the dictionary. But it seems quite apt.

American Banker Op-Ed on the St. John's Consumer Arbitration Study

Here.