Consumer Law & Policy Blog

Why did Florida drop standards for infant heart surgery?

Ars Technica asks this question amid concerns that the move may have motivated by contributions from the healthcare company whose poor track record prompted the drafting of standards in the first place:

[A] 2014 medical review and a June 2015 report by CNN, which found that one particular medical facility, St. Mary’s Medical Center and Palm Beach Children’s Hospital, had an abysmal track record for pediatric open-heart surgery—a death rate more than three times the national average. And the two reports found that the facility was failing to meet the now-repealed standards, which include proficiency in performing the surgeries themselves.

The St. Mary’s facility is run by Tenet Healthcare, which coincidentally donated $200,000 to the state’s republicans between 2013 and 2014, including $100,000 to Republican Governor Rick Scott’s political action committee. Those donations were the highest of any Tenet gave to political groups in other states.

Medical professionals are strongly against the repeal of the standards, Ars reports.

Read more here.

Harvard Board of Overseers candidates: make Harvard free

A slate of five candidates running for Harvard's governing board thinks Harvard's endowment is big enough that it can afford to great free tuition for all undergrads. The candidates -- an interesting left-right alliance, including Ralph Nader on the left and four opponents of affirmative action on the right -- also raise the concern that the current admission policy shortchanges Asian-Americans.

The New York Times reports.

DOT to push development of autonomous vehicles

The Times reported last week:

With automakers and technology companies rushing to develop self-driving cars, the Obama administration on Thursday pledged to expedite regulatory guidelines for autonomous vehicles and invest in research to help bring them to market. ...

“We are bullish on autonomous vehicles,” [Transportation Secrecy Anthony] Foxx said. “The actions we are taking today bring us up to speed.”

Read more here. For our prior discussion considering some of the legal issues associated with driverless cars, see here and here.

Are Consumers Using the New CFPB Mortgage Disclosures to Shop Around?

Not so much, according to this story in the Boston Herald. Excerpt:

[Apparently [buyers are] not [using the disclosures] so much. Bill Emerson, chief executive of Quicken Loans, the country’s second highest volume mortgage lender, says his firm is seeing no surge in shopping by applicants using the Loan Estimate. “I don’t think consumers are changing the way they shop simply because” they have a new tool to do so, Emerson said in an interview. * * *

Paul Skeens, president of Colonial Mortgage Group in Waldorf, Md., says barely 5 percent of his clients are using the Loan Estimate to comparison shop, while 95 percent “are doing it the old way.” Seattle area mortgage banker Charley Murphey told me he has “heard of no borrowers walking away with a Loan Estimate in hand to go shopping for a better deal.’’

Joe Adamaitis, vice president and residential lending manager for Insignia Bank in Sarasota, Fla., says “buyers do not have the time to shop due to the pressures of meeting commitment and closing dates. Most lenders are priced the same and it comes down to which lender the Realtor referred them to.”

* * *

For its part, the CFPB is taking the long view and recognizes that changing consumer behavior takes time. * * *

Coverage of yesterday's Supreme Court decision

Over the past day, we have seen lots of articles on yesterday's decision in Campbell-Ewald v. Gomez. Our own coverage is here. Most simply describe the decision, but here are a few that add some commentary:

A nice editorial in The New York Times.

Coverage in The Wall Street Journal.

Analysis from Howard Wasserman at PrawfsBlawg.

Supreme Court Holds Offer of Judgment Does Not Moot a Class Action

In a much-anticipated ruling, the Supreme Court today held that a class-action defendant cannot moot a plaintiff’s case by making a pre-class-certification offer of judgment that would satisfy the individual plaintiff’s personal claims but not those of the class. The decision in Campbell-Ewald Co. v. Gomez, holds that such an offer does not moot the individual plaintiff’s claim because, if the plaintiff rejects it, the offer is a nullity and does not deprive the court of the ability to grant relief between the parties. In other words, the court can still award whatever damages, injunctive relief, and other relief the plaintiff seeks if the plaintiff proves his claims. Thus, the case does not meet the Supreme Court’s definition of mootness, under which a case is moot “only when it is impossible for a court to grant any effectual relief whatever to the prevailing party.” And if the individual plaintiff’s own claims are not moot, he can pursue class relief as well, because “a would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted.”

The decision will put an end to one of the most common gambits defendants have used to behead class actions before they are certified, especially actions seeking statutory damages that are readily determinable (such as the TCPA action that gave rise to Campbell-Ewald). After Campbell-Ewald, defendants will no longer be able to argue that an unaccepted offer of judgment or other settlement offer moots a case. A decision the other way would have made class actions very difficult to maintain in statutory damages cases and severely damaged their utility as a means of redressing wrongdoing that inflicts small losses on many people—exactly the kinds of cases to which class actions are most suited.

Defendants no doubt will turn to other tactics to support claims of mootness or otherwise attempt to "pick off" class representatives, but those possible stratagems are of dubious validity and carry greater risks to defendants than simply offering a nominal sum to the named plaintiff. The majority opinion in Campbell-Ewald leaves the possibility that defendants may have other ways of achieving the same goal to another day, in a case that actually presents that issue. For now, though, the opinion definitively rejects the one tactic that defendants have made wide use of over the past several years to moot class actions: the offer of judgment.

The opinion also rejects the claim that a government contractor is entitled to broad “derivative sovereign immunity,” which would have insulated contractors against statutory or common law claims, even when they in fact departed from the government’s instructions and engaged in unauthorized wrongful acts. Although that issue was in some ways the tail wagging the dog in the case, as it would not likely have independently persuaded the Court to grant certiorari had the mootness issue not been in the case, the Court’s opinion on it squelches another argument that defendants have attempted to use in a number of cases to avoid liability.

In sum, it was a good day in the Court for consumer class actions.

 

(Note: The author of this post was co-counsel in the case.)

Homo Lex? Will Law Make the Same Transition Economics Is?

by Jeff Sovern

Bear with me for a moment.  As is well-known, Richard H. Thaler and Cass R. Sunstein,in their important book Nudge, describe how classical microeconomics assumes that all people are rational. They call such rational people "Homo Economicus" or, for short, "Econs." But, as they also describe, and as Thaler elaborates on in his new and also excellent book, Misbehaving, real people are often not rational.  They make predictable errors, and the study of these errors has led to the development of behavioral economics.  Thaler, Sunstein, and many others have argued that economic models should be revised to take into account these discoveries to make the models more accurate in describing human behavior, and thus more useful in predicting that behavior. 

In Misbehaving, Thaler reports on how behavioral economics' model of the irrational person is winning the battle against classical microeconomics' Econs. Law has a similar war going on.  Classical legal rules also make assumptions about people that have been proved not to describe human behavior accurately. For example, contract law's duty to read--which usually holds people to their contract whether they have read the contract or understand it or not--assumes that people read contracts. Another example: in evaluating the 1692g validation notice debt collectors are obliged to provide to consumers, courts assume that the consumer has read that notice, and uphold the validity of the notice whether or not consumers have actually read it, as long as the notice is not overshadowed (by, for example, larger print demanding payment) or is not contradicted (by, for example,  demands for payment before the thirty days allotted for validation have expired.

But extensive literature, often referred to on this blog, makes clear that few people read contracts, and that many don't understand them when they do (I'll have more to say about consumer understanding of validation notices another time).  The law thus employs rules which appear to be designed for people who don't actually exist, rather than the people who do, just as the economics models did.  I've been trying to come up with a name for the imaginary humans the law assumes. Home Lex?  Lexons for short?  (Yes, I know "lexon" is not consistent with Latin, but "leges" doesn't have the right sound. And Lexis is taken.) If you have a better idea, please mention it in the comments.

This is a bit of an overstatement, but it seems to me that most common law consumer law rules are made for Lexons, while some statutes (but far from all) recognize that people are not always rational. The CFPB's rules partake of both. To the extent that the Bureau attempts to use disclosures to solve problems (e.g., the TILA/RESPA disclosures--and yes, I know the Bureau was commanded to do so by Congress), it is making rules for Lexons. To the extent that it prohibits self-destructive decisions (likely to be true of the forthcoming payday lending rules), it is making rules for real, fallible people.  We probably won't see a clear victory for either side across the board, but I predict one side or the other wins a victory in one area or another. I would love to see any comments people care to post on this.

Ben-Shahar & Chilton Study Finds Simplifying Privacy Disclosures Doesn't Help

Omri Ben-Shahar and Adam S. Chilton both of Chicago have written Simplification of Privacy Disclosures: An Experimental Test. Here's the abstract:

Simplification of disclosures is widely regarded as an important goal and is increasingly mandated by regulations in a variety of areas of the law. In privacy law, simplification of disclosures is near universally supported. To guide this simplification, various “Best Practices” presentation techniques have been recommended, aimed at transforming privacy notices into clear and accessible information aids for consumers. In addition, some have proposed “Warning Labels” designed to familiarize consumers with only a short list the least expected privacy practices. But do such simplifications actually inform consumers and prevent unwise behavior? Since this question has not been rigorously studied, we conducted a survey experiment designed to test whether simplifying privacy disclosures affects respondents: (1) comprehension of the disclosure; (2) willingness to disclose personal information; and (3) expectations about their privacy rights. Our results reveal that none of the simplification techniques help inform respondents or affect their behavior. They call into further question the wisdom of focusing much regulatory effort on improved disclosures.

Drahozal Article on Confidentiality in Arbitration

Christopher R. Drahozal of Kansas has written Confidentiality in Consumer and Employment Arbitration, 7 Yearbook on Arbitration & Mediation ___ (forthcoming 2015). Here is the abstract:

This article examines an apparent misperception among some commentators about the confidentiality of consumer and employment arbitration in the U.S. Arbitration is a private process—i.e., the public cannot attend an arbitration hearing—and arbitrators and arbitration administrators are (with some exceptions) required to keep information about arbitrations confidential. But the parties to the arbitration agreement are not subject to an obligation of confidentiality. Either party can disclose the existence of the dispute and any underlying facts, the existence of any arbitration proceeding, and any information about or provided in the arbitration proceeding, including the arbitral award. Only if the arbitration clause also includes a confidentiality provision are the parties subject to a confidentiality obligation, as set out in their agreement.

Accordingly, criticisms of the confidentiality of arbitration, and in particular that arbitration clauses enable businesses to hide wrongdoing, are at best overstated and at worst misguided. They are overstated because information about disputes remains available, not from the court system but from the parties themselves. When a dispute is subject to arbitration, interested persons are not able to obtain filings and other information from the court clerk like they could if the case was in court. In the rare case that would have gone to trial, the public is not able to watch. But the parties continue to be able to disclose the same information they can disclose without an arbitration clause. The criticisms are misguided because they direct attention toward arbitration clauses and away from confidentiality provisions, which seem to be the real source of many commentators’ complaints.

(HT: Gregory Gauthier)

"Goldman Sachs to pay $5 billion in mortgage settlement"

The Washington Post reports:

Goldman Sachs said Thursday it will pay roughly $5 billion to settle federal and state probes of its role in the sale of shoddy mortgages in the years leading to the housing bubble and subsequent financial crisis.

Coming nearly eight years after the crisis, the settlement is by far the largest the investment bank has reached related to its role in the meltdown. But the payment is dwarfed by those made by some of its Wall Street counterparts.

Goldman will pay $2.39 billion in civil monetary penalties, $875 million in cash payments and provide $1.8 billion in consumer relief in the form of mortgage forgiveness and refinancing.

The full article is here.