Consumer Law & Policy Blog

Can Charles Harder’s Litigation Threats Still Be Taken Seriously?

by Paul Alan Levy

Shiva Ayyadurai is a computer scientist who insists that it was he who, as a child prodigy, invented email.  Although his claim has been widely derided by many of the major figures who were party to the technological advances that created the Internet as well as systems of direct communication such as email, and who place the invention of email at dates far earlier than Ayyadurai claims as his own “a-ha” moment, he has apparently determined to try to use libel litigation to intimidate others from repeating the criticism.  For example, he has been pointing to the settlement of a libel claim against Gawker to support the claim that failure to retract criticisms is animated by actual malice.  His current lawsuit against Techdirt, in response to which the online community had broadly risen to support Techdirt’s defense, might well rebound in his face, just as General Westmoreland’s lawsuit against CBS eventually brought Westmoreland’s reputation even lower by essentially establishing as historic fact that Westmoreland had “manipulated the estimates of enemy strength, apparently for political effect.”  

Ayyadurai has currently has the benefit of representation by Charles Harder, who has built a fearsome reputation as a plaintiffs’ lawyer against critical media publications by virtue of having brought down Gawker through his Peter-Thiel-funded lawsuit on behalf of Hulk Hogan.  But the latest salvo from Harder, a demand letter to the social media site Diaspora, casts neither Ayyadurai nor  Harder in a favorable light.

The demand letter seeks removal of some posts from one of the Diaspora site’s users, “Dr. Roy Schestowitz,” calling Ayyadurai a “troll,” a “fraud,” and a “liar” because of his public statements and his litigation and threats of litigation against those who disagree with him.  It is bad enough that Ayyadurai apparently cannot stomach the presence of even the most obscure criticisms in any corner of the Internet (I, for one, had never heard of Schestowitz’s criticism until I saw Harder’s letter).  Threatening litigation to quash a flea itself brings the veracity of Ayyadurai's claims into question.

Dee Pridgen, Christopher L. Willis, & I to Speak at Ballard Spahr Webinar on the Trump Administration and Consumer Protection

by Jeff Sovern

It's scheduled for February 8, 2017, from 12:00 pm to 1:00 pm ET. More information here. Alan Kaplinsky will moderate. Some of the questions we hope to address:

   *   What might prevent Consumer Financial Protection Bureau (CFPB) Director Richard Cordray from serving out his full term which expires in July 2018 and, if he does not serve his full term, what will be the effect on the CFPB?


  *   What is the likelihood of the CFPB finalizing regulations, including arbitration, small-dollar lending, and debt collection?


  *   Should the Democrats ultimately support a change in governance of the CFPB to a five-member commission and funding through congressional appropriations in order to avoid a sole director appointed by President Trump?


  *   What will be the impact on the Federal Trade Commission (FTC) after it is controlled by Republican commissioners and what possible legislative changes might be in store for the FTC?


  *   Will state attorneys general, departments of banking, and private civil litigation fill any void left by the CFPB?


  *   What should be the priorities of consumerists in 2017 and beyond?

 

The Atlantic on How the GOP Plans to Block Regulations, Including Consumer Protection Regs

by Jeff Sovern

The article is called The Quiet GOP Campaign Against Government Regulation.  The whole piece is worth reading, but here's an excerpt:

The shorter and easier-to-read of the two bills is called the “Regulations from the Executive in Need of Scrutiny Act of 2017,” or REINS Act, which passed the House in early January. If enacted, no agency could issue a new regulation unless it amended or repealed some other rule or rules “to completely offset any annual costs of the new rule to the American economy.” In other words, if implementing a new safety rule imposes costs on the economy of $10 million per year, then the agency would have to rescind enough existing rules to offset those costs fully. But—and this is significant—it must do so even if the social benefits of the new regulation, say, $50 million in annual savings from reduced health-care costs, far outweigh the costs of rule compliance. This is cost-benefit analysis without due attention to the benefits.

Arguably even more consequential is a requirement in the REINS Act that any regulation that falls under the category of a “major rule” would not go into effect at all unless Congress adopted a subsequent statute specifically approving the rule. In other words, before an agency could issue a rule that could result in “a major increase in costs or prices for consumers, individual industries, federal, state, or local government agencies, or geographic regions,” Congress would have to legislate twice—once to authorize an agency’s rulemaking process and once to approve its output.

Finally, and most radically, the law envisions that, every year, each agency that makes rules would designate 10 percent of its existing regulations to be treated under the REINS Act as if they were newly promulgated. Within 10 years, Congress would have to approve every major regulation currently on the books, and any rule not so approved would no longer be in effect. Even assuming a Congress intent on evaluating all existing regulations in good faith, there is not even a remote possibility that Congress would complete this work on time. Under its current procedures, Congress, for example, is supposed to enact just 12 appropriations bills by October 1 of each year. In the last four decades, it has managed to meet that deadline exactly four times.  It’s highly unlikely that Congress could or would conscientiously review all the major regulations of over 100 federal agencies on a timely basis.

This is obviously designed to make it as difficult as possible to issue regulations, and as easy as possible to eliminate them, without drawing voter attention.  The FTC seldom uses its power to issue regulations.  That's because Congress has made it so hard to do so. This law would make it even harder. And it would be hugely disruptive. What would happen if Congress didn't get to Regulation Z, implementing the Truth in Lending Act, for example?  Would lenders be willing to issue consumer loans without the guidance and protection that Reg Z provides? 

Politico: " Rumors continue to burn through the financial lobbyist community that the new Trump administration is ready to fire CFPB Director Richard Cordray"

by Jeff Sovern

Here, in Morning Money.  Excerpt:

THE POLITICS of firing Cordray would be tough for Trump. He could argue that the CFPB is an unaccountable agency lead by a too-powerful single director. Banking groups, especially those representing smaller and midsize institutions, would be would be thrilled.

But the CFPB polls pretty highly and the left would go absolutely berserk and the legal battle might not go well for the White House and could distract from broader efforts on tax, immigration and health care reform. Still, the betting line seems to be that Trump will do it.

Washington insiders famously "leak" trial balloons concerning what they want to happen, rather than about what they have inside information suggesting will happen, so perhaps these rumors are just such an attempt to influence the Trump administration, instead of informed statements.  But if the president actually fires Cordray, that act alone will convert him from someone standing up to a rigged system, to someone who personifies the rigged system.  For more, see here.  I realize that the nature of this game involves anonymous statements, but I wish we knew who the sources for these rumors are.

FTC and FL settle charges against companies engaged in illegal student-debt relief scheme

Under a settlement with the Federal Trade Commission and the State of Florida, the operators of an alleged student debt relief and credit repair scam will be banned from those lines of business.

The stipulated final order resolves charges the FTC and the State of Florida brought in April 2016, against Chastity Valdes and her companies, Consumer Assistance LLC, Consumer Assistance Project Corp., and Palermo Global LLC. The defendants allegedly lured borrowers with false promises of “eliminating” their student loan debts and repairing their credit and then charged illegal up-front fees, and posted positive online reviews of their services to appear as if customers wrote them.

The FTC's press release is here.

FTC report on cross-device tracking

The Federal Trade Commission has released Cross-Device Tracking: An FTC Staff Report that describes the technology used to track consumers across multiple Internet-connected devices, the benefits and challenges associated with it, and industry efforts to address those challenges. The report concludes by making recommendations to industry about how to apply traditional principles like transparency, choice, and security to this relatively new practice.

The report is linked above. and the press release is here.

David Dayen: Mnuchin Lied About His Bank’s History of Robo-Signing Foreclosure Documents

Here, in The Intercept.  Excerpt:

“Did OneWest ‘robo-sign’ documents relating to foreclosures and evictions?” Sen. Bob Casey, D-Penn., asked [Treasury Secretary Nominee Steven] Mnuchin as a “question for the record”.

Mnuchin replied that “OneWest Bank did not ‘robo-sign’ documents * * *

[Dayan reports on] a 2011 consent order issued by the federal Office of Thrift Supervision, which definitively stated that OneWest filed affidavits in state and federal courts “in which the affiant represented that the assertions in the affidavit were made based on personal knowledge or based on a review by the affiant of the relevant books and records, when, in many cases, they were not.”

* * *

* * * OneWest signed and agreed to the consent order, though it never admitted or denied the activity

However, in a Florida foreclosure case, a OneWest employee plainly admitted to robo-signing. On July 9, 2009 – four months after OneWest took over operations from IndyMac, with Mnuchin as CEO – Erica Johnson-Seck, a vice president with OneWest, gave a deposition in which she admitted to being one of eight employees who signed approximately 750 foreclosure-related documents per week.

“How long do you spend executing each document?” Johnson-Seck was asked. “I have changed my signature considerably,” Johnson-Seck replied. “It’s just an E now. So not more than 30 seconds.”

Johnson-Seck also admitted to not reading the affidavits before signing them, not knowing who inputted the information on the documents, and not being aware of how the records were generated. * * *

New York Supreme Court Judge Arthur Schack used the information provided by Johnson-Seck to invalidate OneWest foreclosure cases.

 UPDATE: Ted Frank has pointed out to me a Forbes article describing how Judge Shack has been reversed in two cases for abusing his discretion for relying on newspaper articles and the web on the matter of robo-signing. The article links to the cases in question.

 

FTC Commissioner Maureen Olhausen Designated Acting Chair

A statement appears on the FTC website here.

The Hill: Cordray: No change for consumer bureau under Trump

Here. Excerpt:

Cordray, who has helmed the CFPB as its first and only director, said Tuesday that he has no intention of stepping down early, despite pressure from Republicans eager to overhaul the 5-year-old agency.

“It really shouldn’t change the job at all,” said Cordray of Trump assuming power. “We have an independent mandate to do what we do and we’ll continue to work to protect consumers.”

* * *

“If we’re not going to enforce the law aggressively, then what are we saying?” he said. “Our pace needs to be steady and vigorous.”

NJ Assembly Passes Bill to Bar Out-of State Consumer Arbitration

Here is a report from the N.J.L.J. Excerpt:

The New Jersey Assembly has passed legislation that prohibits companies from inserting language in consumer contracts that requires arbitration of disputes in forums outside of the state.

The Assembly, on Monday, approved the bill, A1515, in a 49-20 vote. The vote was split along party lines, with Republicans opposing the bill.

The bill itself, as well as additional information, is linked to here. And here is Gregory Gauthier's comment:

I wonder whether, if the bill passes, businesses will attempt to argue that the FAA preempts New Jersey law as applied to an arbitration forum selection clause, following the (probably-now-discredited) Bradley v. Harris Research line of cases.  If those challenges are unsuccessful (as I expect them to be), I think the law will shine a light on arbitration forum selection clauses nationally, as any national business including a forum selection clause could become liable under New Jersey's TCCWNA.