Consumer Law & Policy Blog

Important Decision from the Illinois Supreme Court Protecting Consumer Privacy

Can a consumer sue if a company took that consumer’s biometric information without first getting the consumer’s informed consent? Yes, said the Illinois Supreme Court in a January 25, 2019 unanimous opinion in Rosenbach v. Six Flags Entertainment Corporation. This decision is a clear win for consumer privacy. (Disclosure: I served as co-counsel on an amicus brief filed in the case on behalf of Illinois PIRG Education Fund, the ACLU, the ACLU of Illinois, the Center for Democracy & Technology, the Chicago Alliance Against Sexual Exploitation, the Electronic Frontier Foundation, and Lucy Parsons Labs.)

At issue in the case was how to interpret the word “aggrieved” in Illinois’ Biometric Information Privacy Act (BIPA). The statute creates an express private right of action for “[a]ny person aggrieved by a violation of this Act.” The law prohibits private entities from collecting a person’s biometric information (like a fingerprint) unless it first informs the individual in writing that biometric information will be collected, the specific purpose for the collection, the length of time that the information will be stored, and receives a written release from the individual. In Rosenbach, there was no question that Six Flags had collected the plaintiff’s thumbprint without getting informed consent, but the plaintiff did not allege any harm beyond the violation of his statutory privacy rights.

BIPA does not define “aggrieved,” so the court looked to the definition that was “embedded in [Illinois’] jurisprudence when the Act was adopted”—to be “aggrieved . . . simply ‘means having a substantial grievance; a denial of some personal or property right.” In the court’s opinion, this definition is consistent with the “plain and ordinary meaning” of “aggrieved,” which one dictionary defined as “suffering from an infringement or denial of legal rights.”

According to the court, the Illinois legislature, when it passed BIPA, “codified that individuals possess a right to privacy in and control over their biometric identifiers and biometric information.” The court found that arguing that such violations of the law are merely “technical” in nature “misapprehends the nature of the harm [the Illinois] legislature is attempting to combat through this legislation.” The loss of the individuals’ right to maintain his or her biometric privacy is a “real and significant” injury and is not a mere “technicality.”

In addition, the court concluded that its reading of the statute was also supported by the legislature’s identification of the “risks posed by the growing use of biometrics by businesses and the difficulty in providing meaningful recourse once a person’s biometric identifiers or biometric information has been compromised.” Thus, the strategy pursued by the legislature was to “head off such problems before they occur.”

Importantly, the court noted that subjecting private entities that fail to follow the statute’s requirements to “substantial potential liability” is integral to the implementation of the legislature’s objectives. Other than a private right of action, no other enforcement mechanism is available. Thus, “[i]t is clear that the legislature intended for this provision to have substantial force.”

This passage highlights the court’s reasoning particularly well:

When private entities face liability for failure to comply with the law’s requirements without requiring affected individuals or customers to show some injury beyond violation of their statutory rights, those entities have the strongest possible incentive to conform to the law and prevent problems before they occur and cannot be undone. Compliance should not be difficult; whatever expenses a business might incur to meet the law’s requirements are likely to be insignificant compared to the substantial and irreversible harm that could result if biometric identifiers and information are not properly safeguarded; and the public welfare, security, and safety will be advanced. That is the point of the law. To require individuals to wait until they have sustained some compensable injury beyond violation of their statutory rights before they may seek recourse, as defendants urge, would be completely antithetical to the Act’s preventative and deterrent purposes.

The full opinion is available here. Additional commentary from the Electronic Frontier Foundation is available here and from the Center for Democracy & Technology is available here.

New article on class-action "ascertainability"

Law prof Rhonda Wasserman has written Ascertainability: Prose, Policy, and Process. "Ascertainability" is a judge-made doctrine about, among other things, whether a would-be class representative must prove that there is an administratively feasible means of identifying class members before the court may certify a case as a class action. Here's the abstract:

One of the most hotly contested issues in class action practice today is ascertainability – when and how the identities of individual class members must be ascertained. The courts of appeals are split on the issue, with courts in different circuits imposing dramatically different burdens on putative class representatives. Courts adopting a strict approach require the class representative to prove that there is an administratively feasible means of determining whether class members are part of the class. This burden may be insurmountable in consumer class actions because people tend not to save receipts for purchases of low-cost consumer goods, like soft drinks and snacks and have no other objective proof of their membership in the class. Thus, in circuits adopting the strict approach, class certification may be denied, whereas in other circuits, the same class may be certified. Notwithstanding the circuit split on this critical issue, the Supreme Court has denied several petitions for writs of certiorari raising the issue; the Senate has failed to act on a bill passed by the House to address it; and the Advisory Committee has placed the issue on hold. Given the current state of disuniformity and the resultant inequitable administration of the laws, the time is ripe to address the issue. 

Ascertainability is not only of great practical importance, but it is interesting on three different levels. First, there is a question of prose – whether the text of the Rule supports the implication of the strict ascertainability requirement. Second, there is a question of policy – whether concern for the class action defendant, the absent class members, or the trial court overseeing the action justifies imposition of the strict requirement, notwithstanding its harsh impact on consumer class actions. Third, there is a process question: which governmental actor – the lower courts, the Supreme Court, the Advisory Committee on Civil Rules, or Congress – has the greatest institutional competency to resolve the policy issue and establish a uniform approach to ascertainability. This Article addresses each of these questions in turn.

 

Bayer supplement class action headed for jury trial in under a month

By Stephen Gardner

The Bayer case (for Bayer's widespread deceptions about One-A-Day vitamins), where I was lead counsel until I left private practice (to set up an expert consulting practice), is set for jury trial February 19.

As far as I know, this is one of the few (if not the only) supplement fraud class actions to make it to trial, and it’s a doozy. For background on the case, see this CSPI press release.

In a Minutes Order issued on January 22, 2019, the Court ruled on several pending motions, most of them specious efforts by Bayer to avoid trial.

In this order the Court recognizes that “[g]iven the structure and requirements of the consumer protection claims at issue in this case, utilizing a presumption of reliance based on materiality and the need (for some of the claims only) to show reliance, there is no disconnect with the 'full refund' damages model and no Comcast problem.”

It is very significant that the Court agrees that it’s possible to presume reliance because the claims are material. And Court’s acceptance of the “full refund” damages model is also very good. This avoids needing an expert to parse out class damages, because the product is effectively worthless for most people.

Congratulations to Plaintiffs’ counsel at Stanley Law Group (my old firm), Tillotson Law, and Kaplan Fox on their victory in getting this case to trial!

Benoliel & Becher Paper on the Unreadability of Web Site Sign-In Wrap Contracts

Uri Benoliel of the College of Law and Business - Ramat Gan Law School and Shmuel I. Becher of the Victoria University of Wellington have written The Duty to Read the Unreadable. Here's the abstract:

The duty to read doctrine is a well-recognized building block of U.S. contract law. Under this doctrine, contracting parties are held responsible for the written terms of their contract, whether or not they actually read them. The application of duty to read is especially interesting in the context of consumer contracts, which consumers generally do not read. 

Under U.S. law, courts routinely impose this doctrine on consumers. However, the application of this doctrine to consumer contracts is one-sided. While consumers are excepted to read their contracts, suppliers are generally not required to offer readable contracts. This asymmetry creates a serious public policy challenge. Put simply, consumers might be expected to read contracts that are, in fact, rather unreadable. This, in turn, undermines market efficiency and raises fairness concerns. 

Numerous scholars have suggested that consumer contracts are indeed written in a way that dissuades consumers from reading them. This Article aims to empirically test whether this concern is justified. The Article focuses on the readability of an important and prevalent type of consumer agreements: the sign-in-wrap contract. Such contracts, which have already been the focal point of many legal battles, are routinely accepted by consumers when signing up for popular websites such as Facebook, Amazon, Uber, and Airbnb. 

The Article applies well-established linguistic readability tests to the 500 most popular websites in the U.S. that use sign-in-wrap agreements. We find, among other things, that effectively reading these agreements requires, on average, more than 14.5 years of education. This result is troubling, given that the majority of U.S. adults read at an 8th-grade level. These empirical findings hence have significant implications for the design of consumer contract law.

Do really high prescription drug prices violate the antitrust laws?

Our readers might be interested in Excessive Drug Pricing as an Antitrust Violation by law prof Harry First. Here is the abstract:

It is nearly four years since Martin Shkreli bought an off-patent drug named Daraprim and raised its price overnight by nearly 5500%. Public outcry was intense and Shkreli became the poster-child for excessive drug pricing. But his drug was not the only example of excessive price increases. Indeed, the excessively high prices of numerous pharmaceutical drugs has become a matter of intense public policy debate. High prices have been condemned by presidential candidates, by members of congress, by the President, and by federal bureaucrats. Effective federal action has not materialized, so states have tried to fill the gap. So far, though, either the proposals have made little sense or, even if sensible and adopted, have had little effect.

One might think that antitrust would be on the list of public policy tools to wield against high pharmaceutical prices, but it's not. This is because of the conventional wisdom that the antitrust laws do not forbid high prices simpliciter. In this Article I argue that we are not condemned to that result. Closer examination of prior efforts to deal with excessive prices in other areas of the economy shows a willingness to take on excessively high prices, at least where the seller is exploiting what might be a temporary power to raise prices of much-needed products. Further, closer examination of antitrust case law shows that there is no direct precedent barring the courts from finding that raising prices to an excessive level is conduct that violates Section 2 of the Sherman Act. Indeed, decisions in the area of licensing of standard essential patents come close to condemning such pricing.

 

Unconventional mortgages make a comeback

The Wall Street Journal reports today that "[l]enders are turning to borrowers with harder-to-document finances, helping growth in the kind of home loans panned for role in housing meltdown." The article is here. (Subscription may be required.)

More Americans without health insurance

Reporter Sarah Kliff explains that "[u]nder Trump, the number of uninsured Americans has gone up by 7 million," while Gallup has found that the "U.S. Uninsured Rate Rises to Four-Year High," at least in part because of Trump Administration policy changes.

State attorneys general urge FDIC to protect consumers from predatory loans

Today, 14 state attorneys general submitted a comment to the Federal Deposit Insurance Corporation in response to the FDIC's request for comment on small-dollar lending. The attorneys general urged the FDIC to ensure consumers are protected from high-interest predatory small dollar loans.

The letter is here.

Shutdown's effects on finances of federal workers

Politico reports that on the effects of the government shutdown on federal workers, some of whom are turning to installment loans, car title loans, and payday cash advances, which charge exorbitantly high interest. Others are making payments late, risking long-term damage to their credit scores. The article is here.

California payday lender settles predatory lending allegations

In a consent order with California's Department of Business Oversight, a payday lender called California Check Cashing Stores agreed to refund about $800,000 to consumers, to settle allegations that it steered borrowers into high-interest loans and engaged in other illegal practices. It also agreed to pay $105,000 in penalties and other costs. The settlement involves alleged violations regarding administration of payday loans, which are capped at $300, and the steering of borrowers into consumer loans of more than $2,500 to avoid the state rate caps.

The Los Angeles Times article is here.