Consumer Law & Policy Blog

Review of 2012 Class Actions Reported in Law360 Finds Benefits to Consumers

Gary E. Mason of Whitfield Bryson & Mason LLP has written The Proper Measure Of The Value Of Class Actions for Law360.  Excerpt:

Of the 118 cases initiated in 2012, 102 (or nearly 90 percent) had reached a final resolution by May 1, 2017, the date on which our study closed. Twenty-three of those cases (or nearly 20 percent of the resolved cases) were ended by a class action settlement.

Nine of the 23 class action settlements provided either a fund that did not revert to the defendant or an automatic payment to class members, distributing to class members more than $12 million.

One 2012 case resulted in a nationwide recall of a defective coffee maker, together with compensation for consumers who had already replaced the product, while another resulted in a four-year extension of a product warranty.

With one important exception, the remaining cases resulted in “claims-made” settlements that provided consumers with the opportunity to file a claim for monetary compensation. * * *

* * *

The only settlement that truly did not provide any benefit to the class members (not a single class member made a claim), was not approved by the court, demonstrating judges are in the best position to make sure attorneys do not benefit from settlements that fail to benefit class members.

 

 

Lauren Willis Article on Ordering Firms to Eradicate Their Own Fraud

Lauren E. Willis of Loyola of Los Angeles has written Performance-Based Remedies: Ordering Firms to Eradicate Their Own Fraud, 80 Law and Contemporary Problems 7-41 (2017). Here is the abstract:

In resolving cases of unfair, abusive, and deceptive acts and practices, consumer protection enforcement agencies often prospectively dictate—in great detail—the design of defendants’ marketing, websites, disclosures, sales processes, and products. However, advances in technology and analytics increasingly allow defendants to comply meticulously with these precise requirements while simultaneously continuing to deceive and injure consumers.

By trying to micromanage defendants’ conduct, enforcement agencies fail to protect consumers, squander precious enforcement resources, and create pointless compliance work for defendants. Defendants themselves are in the best position to ascertain how to cure the confusion and ill consequences they have wrought and they should bear ultimate responsibility for doing so.

To effectuate this, this article introduces two new performance-based remedies to consumer law enforcement: (1) confusion prohibitions and (2) consequences prohibitions. These injunctive remedies order defendants to eliminate the confusion and ill consequences induced by defendants’ fraud. To comply with these prohibitions, defendants would be required to reduce the confusion and ill consequences they inflicted on their customers to prescribed levels within a prescribed time period. Defendants would bear the costs of demonstrating, through independent third-party audits, their compliance.

Buckley Sandler Partners: Personnel Is Policy: Succession Possibilities At The CFPB

In Law360, by Andrew Sandler and Benjamin K. Olson  Here is an excerpt:

It is not entirely clear whether the Dodd-Frank Act or the [Federal Vacancies Reform Act] controls in these circumstances. The one thing that is clear is that there will be real and significant differences in the operation of the CFPB depending on which statute prevails. For that reason, the administration can be expected to conclude, if at all possible, that the president may appoint an acting director, and those who wish for the CFPB to continue business as usual may seek to challenge any such appointment.

* * *

[I]n the event that the two statutes were found to be in conflict, the Dodd-Frank Act’s specific provision on CFPB succession would arguably control over the FVRA’s more general provisions on vacancies at executive agencies.

Marcus Article on the History of Class Actions 1981-1994

David Marcus of Arizona has written The History of the Modern Class Action, Part II: Litigation and Legitimacy, 1981-1994,  Fordham Law Review (forthcoming 2018). Here is the abstract:

The first era of the modern class action began in 1966, with revisions to Rule 23 of the Federal Rules of Civil Procedure. It ended in 1980. Significant turmoil roiled these years. Policymakers grappled with the powerful device as advocates argued over its purpose, and judges struggled to create rules for the novel litigation the remade Rule 23 generated.

This article tells the story of the class action’s second era, which stretched from 1981 to 1994. At first blush, these were quiet years. Doctrine barely changed, and until the early 1990s, policymakers all but ignored the device.

Below this surface tranquility lurked important developments in what the class action, newly embroiled in fundamental debates over litigation and legitimacy, was understood to implicate. Critics castigated the civil rights class action as an emblem of the “imperial judiciary’s” rise and of courts’ inability to separate law from politics. To industries targeted by plaintiffs’ lawyers, the securities fraud class action exemplified the “litigation explosion” and challenged judicial competence to screen for meritorious lawsuits. The emergence of the mass tort class action as an alternative to legislative and administrative processes made a determination of litigation’s legitimate role particularly urgent.

These second era episodes deepened partisan divides over the class action and prompted new claims about what sort of private litigation could legitimately proceed. The three episodes drew new and influential participants into fights over the class action, and they eventually re-engaged policymakers with its regulation. Such developments made a third era, one of significant reform, all but inevitable.

Click! There goes your right to a jury trial.

Take a look at this image of a cell-phone displaying the registration page for the Uber ride-sharing app:

 

If you enter your credit card information and hit "REGISTER," have you given up your right to bring a class action against Uber if you think it has engaged in illegal price fixing? Yes, says the United States Court of Appeals for the Second Circuit in an opinion yesterday in Uber Technologies, Inc. v. Kalanick.

You see, if you had instead pressed the link for "TERMS OF SERVICE AND PRIVACY POLICY," and then pressed another link to yet another page, you would have reached what the district judge in the case (Jed Rakoff) described as "nine pages of highly legalistic language that no ordinary consumer could be expected to understand," and if you made it through seven pages of that gunk, at "the very bottom of the seventh page" you would find an agreement requiring you to settle any disputes with Uber through binding arbitration, and waiving your right to a jury trial and to participate in a class action.

Judge Rakoff had found that pressing "REGISTER" did not manifest assent to that agreement, but the Second Circuit held otherwise. Although in previous cases the Second Circuit has insisted that on-line agreements don't bind consumers unless terms of service are "reasonably conspicuous" and the action the user takes is unambiguously a "manifestation of assent" to those terms, the Court held, as a matter of law, that Uber's terms met those standards.

The court's opinion holds that assent can be unambiguously manifested even if the user does not check a box saying "I agree," and does not look at the terms or state that he has done so, as long as a link to the terms is conspicuous and the court thinks a reasonable user would understand that taking an action like pressing "REGISTER" consents to the unread terms.

The Second Circuit's past decisions show that if a company designs its user interface badly, a consumer may not be stuck with terms the court doesn't think she would have noticed. But the Uber decision shows how simple it is for a company to design an agreement page that will bind consumers to page after page of terms that everyone knows consumers will not read.

The Second Circuit's opinion says that reasonable smartphone users understand that they agree to terms when they use apps and that it is their choice if they don't bother to read them (as if any consumer had the time to read all the terms they are forced to agree to in order to conduct the transactions that have become routine in the digital age).

That same reasoning could be applied to provisions requiring consumers to turn over their children, or their immortal souls, to a company, but most courts would refuse to enforce such agreements (I hope!). But under the Federal Arbitration Act, giving up one's right to go to court is a different matter.

Let the buyer beware. 

 

 

"Net neutrality comments top 20 million"

From The Hill: The public has filed over 20 million comments to the Federal Communications Commission over its plan to scrap the net neutrality rules. It's a record for FCC comments and more than five times the number filed on the agency's previous net neutrality proposal in 2015. The comments on that plan held the prior record with nearly 4 million filed. Republican Chairman Ajit Pai's Restoring Internet Freedom proposal would roll back the Obama-era internet rules aimed at preventing broadband providers like Verizon and AT&T from discriminating against certain types of web content.

The article is here.

Third Circuit again addresses ascertainability and class certification

We have blogged before about the Third Circuit’s demanding “ascertainability” standard for class certification, which poses a class-action barrier unsupported by the rule. See here, here, and here. The Third Circuit yesterday issued another opinion on the topic, this time in a case brought under the Telephone Consumer Protection Act called City Select Auto Sales, Inc. v. BMW, available here.

Judge Scirica authored the opinion that established the Third Circuit’s current position on ascertainability, Carrera v. Bayer, and he authored City Select as well. His opinion for the court reiterates aspects of some of his earlier statements on the ascertainability standard, but yesterday's opinion makes clear that “[a]ffidavits, in combination with records or other reliable and administratively feasible means, can meet the ascertainability standard.”

Concurring, Judge Fuentes reiterated a statement made by Judge Rendell in an earlier case: that until the Third Circuit revisits the issue en banc, it will be administering “the ascertainability requirement in a way that contravenes the purpose of Rule 23 and, in [his] view, disserves the public.”

Uber settles with FTC over allegedly deceptive privacy and data security practices

Uber Technologies, Inc. has agreed to implement a comprehensive privacy program and obtain regular, independent audits to settle Federal Trade Commission charges that the ride-sharing company deceived consumers by failing to monitor employee access to consumer personal information and by failing to reasonably secure sensitive consumer data stored in the cloud.

In its complaint, the FTC alleged that the San Francisco-based firm failed to live up to its claims that it closely monitored employee access to consumer and driver data and that it deployed reasonable measures to secure personal information it stored on a third-party cloud provider’s servers.

The FTC’s complaint also alleges that despite Uber’s claim that data was “securely stored within our databases,” Uber’s security practices failed to provide reasonable security to prevent unauthorized access to consumers’ personal information in databases Uber stored with a third-party cloud provider. As a result, an intruder accessed personal information about Uber drivers in May 2014, including more than 100,000 names and driver’s license numbers that Uber stored in a datastore operated by Amazon Web Services.

The FTC alleges that Uber did not take reasonable, low-cost measures that could have helped the company prevent the breach. For example, Uber did not require engineers and programmers to use distinct access keys to access personal information stored in the cloud. Instead, Uber allowed them to use a single key that gave them full administrative access to all the data, and did not require multi-factor authentication for accessing the data. In addition, Uber stored sensitive consumer information, including geolocation information, in plain readable text in database back-ups stored in the cloud. 

Under the agreement with the Uber, which is subject to public comment for 30 days, Uber is:

• prohibited from misrepresenting how it monitors internal access to consumers’ personal information;
• prohibited from misrepresenting how it protects and secures that data;
• required to implement a comprehensive privacy program that addresses privacy risks related to new and existing products and services and protects the privacy and confidentiality of personal information collected by the company; and
• required to obtain within 180 days, and every two years after that for the next 20 years, independent, third-party audits certifying that it has a privacy program in place that meets or exceeds the requirements of the FTC order.

The FTC's press release is here.

CFPB investigating Zillow's ad practices

The Washington Post reports:

According to Zillow, the Consumer Financial Protection Bureau has concluded a two-year investigation into the company’s “co-marketing” arrangements that allow mortgage lenders to pay for portions of realty agents’ monthly advertising costs on Zillow websites. In exchange for the money, lenders are presented in agents’ ads to site visitors as sources of financing, which ultimately generates leads and new mortgage business. Consumers probably are in the dark about the lender’s financial relationship with the realty agent unless they know to click on a question-mark icon after the promotional words “ask these lenders about financing.”

Although the CFPB declined to comment for this column, Zillow confirmed that the bureau has threatened it with legal action if it does not agree to a settlement. The CFPB has not publicly detailed its specific reasons for pursuing Zillow, but the company says the allegations involve the Real Estate Settlement Procedures Act (RESPA) — which prohibits kickbacks in exchange for business referrals — and a section of the Consumer Financial Protection Act that prohibits “unfair, deceptive or abusive” practices.

The full article is here.

Fed Reserve vice chair calls plans to unwind banking rules "very, very dangerous"

Financial Times reports:

One of the Federal Reserve’s top policymakers has attacked attempts to reverse the post-crisis drive for tougher regulation, calling efforts to loosen constraints on banks “dangerous and extremely short-sighted”.

Stanley Fischer, the vice-chairman of the Fed’s board of governors, said in an interview with the Financial Times that 10 years after the crisis there are troubling signs of a drive to return to the status quo that preceded it. While he endorsed efforts to ease up on small banks, he said political pressure in Washington to curtail regulatory burdens on large institutions was very hazardous.

...

Mr Fischer said: “It took almost 80 years after 1930 to have another financial crisis that could have been of that magnitude. And now after 10 years everybody wants to go back to a status quo before the great financial crisis. And I find that really, extremely dangerous and extremely short-sighted.

The full article is here.