Consumer Law & Policy Blog

FCC issues proposal addressing unwanted robocalls and robotexts

Unwanted calls and texts are the number one consumer complaint to the FCC.

Now, the FCC has announced a "proposal to protect Americans from unwanted robocalls, spam text messages, and telemarketing calls. The proposal addresses two dozen petitions that sought clarity on how the Commission enforces the Telephone Consumer Protection Act."

The FCC says that the proposal will close loopholes and strengthen existing consumer protections. The FCC Commissioners will vote on the proposal at an open meeting on June 18, 2015.

An FCC fact sheet about the proposal is here.

Court dismisses challenge to Dep't of Education's "gainful employment" rule

A federal district court in New York has dismissed a lawsuit filed by a group of for-profit colleges challenging regulations issued by the Department of Education to limit student debt.

The Department adopted the “Gainful Employment” rule in 2014 to address overwhelming evidence that some postsecondary career training programs, particularly at for-profit institutions, were failing to prepare students for jobs that would enable them to repay their federal student debt, thus endangering the federal government’s investment in these schools by way of federal student aid and leaving some students worse off than they would have been had they never pursued postsecondary education. The rule imposes new accountability and disclosure requirements for certain career training programs, and make the colleges' access to federal financial aid contingent on their ability to demonstrate that their graduates earn enough money to repay their loans.

In his opinion, the judge noted the Department's “strong interest in ensuring that students – who are, after all, the direct (and Congress’s intended) beneficiaries of federal aid programs – attend schools that prepare them adequately for careers sufficient for them to repay their taxpayer-financed student loans.”

On behalf of 25 groups (advocates for students, consumers, civil rights, and veterans), Public Citizen had filed an amicus brief in support of the rule.

A similar lawsuit is pending in a district court in DC. (See Public Citizen's amicus brief here.) The court heard oral argument in that case last week.

Scholars show support for Dodd-Frank's too-big-to-fail authority

by Deepak Gupta

One of the most important but under-appreciated features of the Dodd-Frank Act was its establishment of the Financial Stability Oversight Council—a new entity with a clear statutory mandate to identify and respond to systemic risks to the entire U.S. economy. The authority was inspired by the failures of entities like the insurance giant AIG, which had to be rescued by taxpayers to prevent catastrophic effects on the U.S. (and world) economy.

But when FSOC designated MetLife as a systemic risk (in common parlance, "too big to fail"), MetLife fired back with a lawsuit challenging FSOC’s authority, among other things, to designate a nonbank insurance company in this manner. MetLife is represented by Gene Scalia—a Washington lawyer who's made a cottage industry of challenging financial-reform regulation. Earlier this month, FSOC moved to dismiss the case (or in the alternative, for summary judgment). On the eve of the Memorial Day holiday weekend, several groups of distinguished scholars filed amicus briefs in support of FSOC. 

• Our firm serves as counsel to a group of prominent insurance-regulation scholars, led by Daniel Schwarcz of the University of Minnesota Law School, who filed a brief arguing that the patchwork of state-insurance regulations—on which MetLife urges the court to rely—is insufficient to regulate the systemic risk posed by massive financial conglomerates such as MetLife.

• A distinguished group of scholars of financial regulation and administrative law, led by Robert Jackson and Gillian Metzger of Columbia and Kate Andrias and Michael Barr of the University of Michigan, filed a brief arguing that Congress had intended to give FSOC broad powers to regulate nonbank financial firms, subject only to limited judicial review.

• Viral Acharya and a group of other distinguished NYU economists filed a brief arguing that, as a matter of economic reality (drawing on the group's considerable research in this area), insurance companies such as MetLife can pose systemic risk to the entire economy. 

• Finally, Better Markets, a non-profit organization focusing on financial regulation, submitted a brief arguing that Congress gave FSOC wide latitude to designate risky financial firms and that Congress chose not to require a “cost-benefit analysis” before any designation.

The case is now before U.S. District Judge Rosemary Collyer, who's expected to hold argument on the motion to dismiss. But it's unlikely that the district court will have the last word; the case has clearly been set up as a test case of Dodd-Frank's systemic-risk authority over nonbanks. No matter what happens, it's safe to say that the case is headed upstairs.

Krugman on trade and intellectual dishonesty

Read this Paul Krugman column in the New York Times from this past weekend. He exposes how the defenses of the TPP offered by its supporters don't answer the charges made against it by its opponents:

The administration’s main analytical defense of the trade deal came earlier this month, in a report from the Council of Economic Advisers. Strangely, however, the report didn’t actually analyze the Pacific trade pact. Instead, it was a paean to the virtues of free trade, which was irrelevant to the question at hand. . . .

Instead of addressing real concerns . . . the Obama administration has been dismissive, trying to portray skeptics as uninformed hacks who don’t understand the virtues of trade. But they’re not: the skeptics have on balance been more right than wrong about issues like dispute settlement . . . .

 

Challenge to sealed information in court decision on trademark suit vs. Amazon

Today, Professor Rebecca Tushnet of Georgetown Law (and of 43(B)log fame), represented by Public Citizen, filed motions to intervene and unseal court documents in a trademark dispute in which two companies claim that Amazon infringed their trademark by advertising the companies' product (a dietary supplement called SeroVital) even when the product wasn't available on Amazon -- thereby diverting plaintiffs' customers to Amazon.

The district court’s decision denying summary judgment on the trademark infringement claim relied heavily on the numbers of ads Amazon ran, the number of customers who clicked on them, and the percentage of those customers who bought products from Amazon. But all of these numbers are blacked out from the court's opinion, so neither the public nor future litigants can know what the threshold is for a valid claim of this kind. This information and more (including, inexplicably, the plaintiffs' damages demand, among other things) is also blacked out of the parties' summary judgment moving papers and exhibits, which each party moved to file under seal without objection from the other side. The district court granted all the sealing motions within days of filing and without specific findings as to the necessity of sealing.

The First Amendment and common law rights to access court records exist, of course, so that the public can know the law and see how courts arrive at their decisions. Sealing the key facts on which the court relies is clearly inappropriate under both of these rationales, and several circuits have disapproved of sealing judicial opinions (including in Company Doe v. Public Citizen, as we've discussed). Many circuits apply the First Amendment standard (which is more protective of access than the common law) to civil cases and several federal appellate decisions have emphasized the importance of public access in particular to motions for summary judgment, which serves as a substitute for trial. Even when such motions don't dispose of a case entirely, they can drive the resolution of a case: here, within three weeks of the court's summary judgment decision (and on the day the court released the redacted version of the opinion to the public), the case settled.

Although any member of the public has the right to see the unredacted documents we are seeking, Prof. Tushnet, as an intellectual property law expert, has a particular interest in understanding how the law is being applied -- and indeed, what the law is. With redactions in place, all she can see are sentences like this one, from the court's opinion: “[T]he focus is ... on the [redacted] percent rate that consumers were lured to Amazon’s website. [Redacted] percent, although a relative[ly] small number, is not so insufficient to suggest that there was no likelihood of confusion.”

The case is SanMedica Int'l v. Amazon.com in the District of Utah. Our co-counsel is intellectual property attorney Marian Furst of Salt Lake City.

Kudos to Prof. Tushnet for spotting this case on her blog and for stepping forward to challenge excessive court secrecy.

You can read our motions here and press release here.

Boston Globe Op-Ed: Arbitration clauses for credit cards cost consumers

Here. 

Major Gift to Montana Law to Fund Consumer Law Programs and Chair

by Jeff Sovern

The University of Montana Law School (where my colleague and co-author of the St. John's Arbitration Study, Paul Kirgis, is heading to take up the deanship) has just announced a $10 million gift by alum Alexander "Zander" Blewett and his wife, Andy, part of which will fund a chair in consumer law and programs in consumer protection and access to justice. I am told that the gift provides that the holder of the chair must have  "significant practical experience in representing and/or advocating for consumers.” More here.  While several professors who have made their mark in consumer law hold chairs, this is the first chair I can think of that is specifically designated for consumer law and protection.  If readers know of another, please note that in the comments.

UPDATE: Richard Alderman of Houston reports that Houston has such a chair, the Bobby Wayne Young Professor of Consumer Law, and the current holder is Richard F. Dole. Anyone know of any other such chairs?

Lauren Willis Article on the CFPB and Consumer Comprehension

Lauren E. Willis of Loyola Los Angeles has written what looks like another important article,  The Consumer Financial Protection Bureau and the Quest for Consumer Comprehension.  Here is the abstract:

To ensure that consumers “understand [financial products’] costs, benefits, and risks,” the CFPB has been redesigning mandated disclosures, primarily through iterative lab testing. But no matter how well disclosures perform in experiments, firms will run circles around them when studies end and marketing begins. To meet this challenge, the Bureau should require firms to demonstrate that their customers understand the products they buy. Comprehension rules would induce firms to educate consumers and to simplify products, tasks that firms are better equipped than the Bureau to perform. Such performance-based regulation is crucial for adaptive management of the dynamic twenty-first century consumer financial marketplace.

Another Important Win for Online Free Speech: Even Good Groups Bring Oppressive Trademark Lawsuits

The Court of Appeals for the Fourth Circuit has issued an important decision at the intersection of First Amendment and trademark law, marking the second time in two days that free speech has triumphed over expansive intellectual property claims.  On Monday it was the Ninth Circuit’s en banc decision in Garcia v. Google, rejecting an effort to use adventurous copyright theories to vindicate the plaintiff’s interest in protecting her reputation; the next day came the Fourth Circuit decision in Radiance Foundation v. NAACP, a ruling that bristles with excellent discussions of the boundaries between trademark law and the freedom of expression protected by the First Amendment.  

Both cases arose from lawsuits over the expression of extremists: in the first case, film-makers who seemed to delight in creating a provocation against adherents of Islam; in the second, a group of wingnuts who attack the NAACP for its supposed support for abortion by merely associating itself in some respect with Planned Parenthood.

Today’s blog post is about the second case, in which the Fourth Circuit comes close to holding, as several other circuits have done, that the use of a trademark for the purpose of non-commercial discussion of public issues is beyond the reach of the trademark laws.   The court’s discussion of this issue, as well of the danger to First Amendment rights of expanding the trademark laws into non-commercial terrain, will be cited for years to come.  Similarly, the court recognizes the need to construe the “likelihood of confusion” requirement narrowly when critical expression is at issue, and equally important for purposes of trademark doctrine, the court ultimately finds no likelihood of confusion without any slavish analysis of the “likelihood of confusion” factors.  The only disappointing part of the opinion is its treatment of the NAACP’s dilution claim, although, in the end, the panel roundly dismissed that claim based on a solid analysis of the fair use and non-commercial use defenses.  (Other blog posts about the case by EFF, Volokh Conspiracy, and Techdirt.)

FTC halts debt collection operations for threatening and deceiving consumers via texts

According to the Federal Trade Commission, federal courts in New York and Georgia, acting on an FTC motion, have temporarily halted three debt collection operations that the FTC alleges have violated federal law by threatening and deceiving consumers via text messages, emails, and phone calls. The FTC's press release explains:

[T]he defendants used text messages, emails, and phone calls to falsely threaten to arrest or sue consumers. They also unlawfully contacted friends, family members, and employers, withheld information consumers needed to confirm or dispute debts, and did not identify themselves as debt collectors, as required by law.

The defendants in the law enforcement sweep called “Messaging for Money” are known as Unified Global Group, Premier Debt Acquisitions, and The Primary Group.

The FTC's full press release is here.