Consumer Law & Policy Blog

The rule of law in multi-district litigation

I think our readers might be interested in The Rule of Law in Multidistrict Litigation by law prof David Noll. Here's the abstract:

From the Deepwater Horizon disaster to the opioid crisis, multidistrict litigation -- or simply MDL --- has become the preeminent forum for devising solutions to the most difficult problems in the federal courts. MDL works by refusing to follow a regular procedural playbook. Its solutions are case-specific, evolving, and ad hoc. This very flexibility, however, provokes charges that MDL violates basic requirements of the rule of law. 

At the heart of these charges is the assumption that MDL is simply a larger version of the litigation that takes place every day in federal district courts. But MDL is not just different in scale than ordinary litigation; it is different in kind. In structure and operation, MDL parallels programs like Social Security where an administrative agency continuously develops new procedures to handle a high volume of changing claims. Accordingly, MDL is appropriately judged against the "administrative" rule of law that emerged in the decades after World War II, and which underpins the legitimacy of the modern administrative state. 

When one views MDL as an administrative program instead of a larger version of ordinary civil litigation, the real threats to the legitimacy of its model of aggregate litigation come into focus. The problem is not that MDL is ad hoc. Rather, it is that MDL lacks guarantees of transparency, public participation, and judicial review that administrative agencies have operated under since the middle of the twentieth century. The history of the administrative state suggests that MDL's continued success as a forum for resolving staggeringly complex problems depends on how it addresses these governance deficits.

 

Supreme Court decides Class Action Fairness Act removal case, Home Depot v. Jackson

The Supreme Court decided Home Depot v. Jackson, No. 17-1471, this morning about whether a third-party counterclaim defendant can remove a case to federal court under general federal removal provisions or under the Class Action Fairness Act's removal provision, 28 U.S.C. § 1453. The Court held, in a 5-4 opinion by Justice Thomas, that removal is not appropriate in that circumstance. The first paragraph of Justice Thomas's opinion sums it up:

The general removal statute, 28 U. S. C. §1441(a), provides that “any civil action” over which a federal court would have original jurisdiction may be removed to federal court by “the defendant or the defendants.” The Class Action Fairness Act of 2005 (CAFA) provides that “[a] class action” may be removed to federal court by “any defendant without the consent of all defendants.” 28 U. S. C. §1453(b). In this case, we address whether either provision allows a third-party counterclaim defendant—that is, a party brought into a lawsuit through a counterclaim filed by the original defendant—to remove the counterclaim filed against it. Because in the context of these removal provisions the term “defendant” refers only to the party sued by the original plaintiff, we conclude that neither provision allows such a third party to remove.

Reassessing strict-liability standards in prescription-drug injury cases

Law prof Mary J. Davis has written Time For a Fresh Look at Strict Liability for Pharmaceuticals. Here's the abstract:

Over the ensuing 50 years from the promulgation of § 402A, products liability in general has seen a retrenchment from strict liability. The Restatement (Third) of Torts: Products Liability openly adopted negligence principles for design and warning claims, and created an entirely new provision to protect pharmaceutical manufacturers even more robust than 402A's comment k. Regarding pharmaceutical liability, the trend away from any liability at all has been remarkable. In the face of this legal history, and in spite of it, this Article proposes taking a fresh look at strict liability for pharmaceutical injuries. What has changed since the adoption of the Products Liability Restatement, which endorsed a virtual immunity from liability for pharmaceuticals? Such a suggestion is likely to be met with cries of “absolute liability” and concern for a chilling effect on innovation for much needed therapeutic treatments. There are three primary reasons this Article proposes a reassessment for strict tort liability in this context. First, the expansive federal preemption doctrine that the United States Supreme Court has fashioned in the last decade defeats almost all state tort liability for pharmaceuticals, particularly for generic pharmaceuticals which comprise over 85 percent of the prescriptions in this country. Second, both the pre-marketing approval process and the post-marketing risk assessment regulatory structures fundamentally cannot adequately identify, communicate, and reduce adverse drug events and, consequently, those events are increasing and likely to continue to do so. Third, the structure of pharmaceutical marketing, increasingly unregulated, has influenced prescribing practices in ways that compound the likelihood and severity of adverse drug events.

These trends in pharmaceutical marketing practices, coupled with the systemic limitations on information-gathering and response in the regulatory system, has created a demand for pharmaceuticals that increases the likelihood of adverse drug events with no meaningful mechanism to identify and reduce the risks presented. While the legal landscape has become barren to the use of tort liability to compensate for the inevitable risk of adverse drug effects, the medical care landscape has become more fertile for those side effects to occur. The convergence of these trends supports a reevaluation of the use of strict, non-fault liability on producers of pharmaceuticals for the harms their products cause.

D.C. Circuit rejects arguments from the federal and D.C. governments that would have weakened fee-shifting statutes

In a 2-1 decision in DL v. District of Columbia, No. 18-7004 (May 21, 2019), authored by Judge David Tatel, the D.C. Circuit has rejected the federal and D.C. governments' efforts to cut the hourly rates payable for a lawyer's legal work under federal fee-shifting statutes. (Senior Judge David Sentelle dissented.) Here is Judge Tatel's explanation of the issue and summary of the court's holding: 

When plaintiffs prevail in a civil rights case, the law usually entitles them to recover reasonable attorney’s fees. Federal district judges, whom Congress has tasked with tabulating those fees, frequently find themselves whipsawed between two seemingly discordant instructions: (1) ascertain the hourly rate for lawyers performing similar work “with a fair degree of accuracy” using “specific evidence,” National Association of Concerned Veterans v. Secretary of Defense, 675 F.2d 1319, 1325 (D.C. Cir. 1982), but (2) do so without turning fee calculations into “a second major litigation,” Hensley v. Eckerhart, 461 U.S. 424, 437 (1983). To reconcile those directives, district courts often turn to a fee matrix—that is, a chart averaging rates for attorneys at different experience levels. For decades, courts in this circuit have relied on some version of what is known as the Laffey matrix. Created in the 1980s, that matrix is based on a relatively small sample of rates charged by sophisticated federal-court practitioners in the District of Columbia. Litigants have updated the matrix for inflation using an assortment of tools. Recently, however, the United States Attorney’s Office sought to replace this standby with a new default matrix based on data for all types of lawyers—not just those who litigate complex federal cases—from the entire metropolitan area—not just the District of Columbia.

In this case, after plaintiffs prevailed in a long-running Individuals with Disabilities Education Act class action, the district court accepted the District of Columbia’s invitation to rely on the USAO’s new matrix in awarding fees. But as we explain below, the new matrix departs from the statutory requirement that reasonable fees be tethered to “rates prevailing in the community” for the “kind and quality of services furnished.” 20 U.S.C. § 1415(i)(3)(C). We therefore vacate the award and remand for the district court to recalculate the hourly rate based on evidence that focuses on fees for attorneys practicing complex federal litigation in the District of Columbia.

Sometimes Professors Providing Letters of Recommendation Have to Comply with the Fair Credit Reporting Act

by Jeff Sovern

It may seem bizarre, but it appears that recommendations that contain information that goes beyond the transactions or experiences of the person writing the letter are subject to the Fair Credit Reporting Act.  For example, if a law professor writes a letter that points out that a student has job experience in a particular practice area that the recipient of the letter values (assuming that the professor was not the employer or a co-worker),  the FCRA probably applies to the letter.  That means that the student would have a variety of protections under the FCRA and be entitled to certain notices--which makes no sense, but that's where the law takes you.

Let me explain. The FCRA applies to consumer reports issued by consumer reporting agencies (not just credit reports issued by credit bureaus). The statute defines “consumer report” as any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s . . .  character, general reputation, personal characteristics, . . . which is used or expected to be used or collected in whole or in part for the purpose of serving as  a factor in establishing the consumer’s eligibility for . . . employment purposes." 15 USC § 1681a(d)(1). When professors provide recommendations for a job, as we often do for clerkships, for example, what we say bears on the student's character, personal characteristics, etc., so that fits the definition. But there's an exception in § 1681a(d)(2)(A)(i) for reports "containing information solely as to transactions or experiences between the consumer and the person making the report." So if a professor limits the letter to the student's performance in class, it's not a consumer report. But professors sometimes (often?) want to sell a student and present a more complete view and so will include items in the letter that they think will aid the student that go beyond the professor's personal experience with the student. Those letters are consumer reports if the letter is from a consumer reporting agency.

A consumer reporting agency is defined in 15 USC § 1681a(f) as "any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports." Schools receive tuition, which presumably covers the cost of writing recommendations, so that probably covers the monetary fee part of the definition. But even if it doesn't, law schools act on a cooperative nonprofit basis when they recommend students in exchange for which students get jobs, enabling schools to brag about their employment statistics.  Students are consumers of the law school's services (the FCRA defines consumer as "an individual" in 15 USC § 1681a(c)). The law school assembles information on students to furnish consumer reports to third parties, and surely uses interstate commerce in doing so.  Accordingly, the FCRA seems to regulate recommendations that go beyond the recommender's personal experiences with the student. This was in fact the conclusion of a May 15, 1974 informal FTC staff opinion from Robert W. Russell. 

What do all this mean as a practical matter? Because the FCRA was designed to protect consumers from misconduct of credit bureaus and users of their information, it contains various protections that don't fit well in the world of law school recommendations. For example, under 15 USC § 1681e, law schools would have to ask recipients of the recommendations (judges?) to certify certain things about their use of the information. Employers who based a decision at least in part on a recommendation would have to provide certain notices to the student, 15 USC § 1681m, after which students could obtain certain information from the school under 15 USC § 1681g.  And so on.  

Of course, professors and schools could avoid this problem by limiting their letters to their own experiences with students, but why is that in anyone's interest? It would limit the ability of schools to put students in the best light possible and tell a more complete story about the student.  There might be some value in subjecting recommendations to the accuracy requirements of the FCRA if recommendations were balanced attempts to appraise students and even warn employers away from students.  But, in my experience, at least, that's not what they are: the author is recommending the student for a job, which is why they're called recommendations. This issue is ripe for attention from Congress. I hope anyone who has a different view of the FCRA will say so in the comments.

 

College Board Says It is LOOKING INTO How It MIGHT Make the Adversity Score Available to Students

by Jeff Sovern

On Saturday, I blogged about the College Board's adversity score.  Today, in response to my inquiry, I received an email from the College Board which contained the following:

We have received questions about whether students and schools can see the content of the Dashboard, and we’re looking into how we might make it available to them. The tool is currently being piloted for use by admissions officers. The Dashboard aggregates publicly available information about schools and neighborhoods. More details can be found here. Again, there is no information specific to individual students, except their SAT score.

The email also included another link to a page headed What You Need to Know About the Environmental Context Dashboard. If you read the links, you will see that the College Board objects to the phrase "adversity score" and prefers that its new product be called Environmental Context Dashboard.

A couple of comments: first, if the College Board can provide the information to colleges, I don't see why it is "looking into" how it "might" make the information available to students. Why not simply commit to providing it to students and say it is looking into how it will make it available to students? Second, I stand by my original view that the College Board ought to commit to meeting at least the standards of the FCRA for providing students an opportunity to make corrections.

Here's an updated letter from state AGs opposing the draft Restatement of the Law of Consumer Contracts

State attorneys general have updated their letter opposing the draft Restatement of the Law of Consumer Contracts. The letter has now been signed by twenty-four AGs. Read the letter here. For our earlier post, on the AG letter, go here.

Supreme Court strongly reaffirms 2009 no-preemption decision in Wyeth v. Levine

The Supreme Court issued its decision today in Merck Sharp & Doehm v. Albrecht. Justice Breyer wrote the controlling opinion, representing the views of six Justices. Justice Alito wrote an opinion concurring in the judgment, representing the views of three justices.

Justice Breyer described the issues this way:

We stated in Wyeth v. Levine that state law failure-to warn claims [regarding prescription drugs] are pre-empted by the Federal Food, Drug,and Cosmetic Act and related labeling regulations when there is “clear evidence” that the FDA would not have approved the warning that state law requires. 555 U. S., at 571. We here decide that a judge, not the jury, must decide the pre-emption question. And we elaborate Wyeth’s requirements along the way.  

This ruling thus reverses the Third Circuit, which held the "clear evidence" question was a factual one for the jury. But, more importantly in my mind, the Court forcefully reaffirmed that impossibility preemption is a demanding defense under Wyeth v. Levine. Under today's decision, plaintiffs will continue to be able to pursue the vast majority of state-law damages claims alleging that a prescription drug manufacturer failed to warn of hazards associated with the drug. That is, preemption will rarely be a barrier to state-law failure-to-warn claims leveled against the manufacturers of prescription drugs.

Here are Merck's key takeaways on that score (all direct quotes from today's majority decision, except the bracketed material):

We then said [in Wyeth] that, nonetheless, “absent clear evidence that the FDA would not have approved a change to Phenergan’s label [the label at issue in Wyeth], we will not conclude that it was impossible for Wyeth to comply with both federal and state requirements.” Ibid. (emphasis added [by Justice Breyer]). *** 

In a case like Wyeth [and like this one], showing that federal law prohibited the drug manufacturer from adding a warning that would satisfy state law requires the drug manufacturer to show that it fully informed the FDA of the justifications for the warning required by state law and that the FDA, in turn, informed the drug manufacturer that the FDA would not approve changing the drug’s label to include that warning. ***

[A]s we have cautioned many times before, the “possibility of impossibility [is] not enough.” PLIVA, Inc. v. Mensing, 564 U. S. 604,625, n. 8 (2011) (internal quotation marks omitted). Consequently, we have refused to find clear evidence of such impossibility where the laws of one sovereign permit an activity that the laws of the other sovereign restrict or even prohibit. See, e.g., Barnett Bank of Marion Cty., N. A. v. Nelson, 517 U. S. 25, 31 (1996); Michigan Canners & Freezers Assn., Inc. v. Agricultural Marketing and Bargaining Bd., 467 U. S. 461, 478, and n. 21 (1984). ***

We do note, however, that the only agency actions that can determine the answer to the pre-emption question, of course, are agency actions taken pursuant to the FDA’s congressionally delegated authority. The Supremacy Clause grants “supreme” status only to the “the Laws of the United States.” U. S. Const., Art. VI, cl. 2. And preemption takes place “‘only when and if [the agency] is acting within the scope of its congressionally delegated authority, . . . for an agency literally has no power to act, let alone pre-empt the validly enacted legislation of a sovereign State, unless and until Congress confers power upon it.’” New York v. FERC, 535 U. S. 1, 18 (2002) (some alterations omitted). Federal law permits the FDA to communicate its disapproval of a warning by means of notice-and-comment rulemaking setting forth labeling standards, see, e.g., 21 U. S. C. §355(d); 21 CFR §§201.57, 314.105; by formally rejecting a warning label that would have been adequate under state law, see, e.g., 21 CFR §§314.110(a), 314.125(b)(6); or with other agency action carrying the force of law, cf., e.g., 21 U. S. C. §355(o)(4)(A). The question of disapproval “method” is not now before us. And we make only the obvious point that, whatever the means the FDA uses to exercise its authority, those means must lie within the scope of the authority Congress has lawfully delegated.

Justice Breyer's opinion was joined by Justices Thomas, Ginsburg, Sotomayor, Kagan, and Gorsuch. Justice Alito's opinion concurring in the judgment was joined by Chief Justice Roberts and Justice Kavanaugh.

UPDATE: If you have any doubt that the drug industry actually lost today and that the industry's principal objective was to make it easier for drug-company defendants to win impossibility-preemption defenses -- and to weaken Wyeth -- that doubt will be erased by reading Merck's cert petition. 

 

 

  

Former CFPB director Richard Cordray opposes the draft Restatement of the Law of Consumer Contracts

Yesterday, former Director of the Consumer Financial Protection Bureau Richard Cordray wrote to the Director of the American Law Institute Richard Revesz opposing the controversial draft Restatement of the Law of Consumer Contracts. The Restatement will be voted on tomorrow by the ALI's membership. Here are excerpts from Cordray's letter:

I write to express deep concerns about the American Law Institute’s Tentative Draft Restatement of the Law, Consumer Contracts.  I write as former Director of the U.S. Consumer Financial Protection Bureau and former Ohio Attorney General, two positions where I was tasked with protecting consumers.  In my view, the Tentative Draft would endorse principles of law that would facilitate malefactors in mistreating and harming individual consumers. *** The Tentative Draft Restatement is deeply troubling because it undermines contract as a meaningful protection for consumers.  It would bind consumers to all of a business’s “standard terms”—that is, to all the terms of a contract of adhesion if the consumer: (1) had notice of and opportunity to review the terms of the contract and (2) indicated assent to transact, though not necessarily assent to the particular terms.  Under the Tentative Draft’s rule, a consumer could readily be bound to terms the consumer does not comprehend and to which the consumer would never knowingly consent, such as unilateral modifications; class action waivers; commitment to resolve disputes through binding mandatory arbitration; and broad privacy waivers allowing tracking of consumers’ internet browsing, the use of facial recognition technology, and the further sale or distribution of the resulting personal information. The Tentative Draft’s approach is inconsistent with the fundamental basis of contract law, namely that contracts are enforced by law because they are presumed to result in mutual gains from trade and thereby enhance social welfare.  Such mutual gains can only be assumed to exist if the parties knowingly agree to the terms of the deal.

Read Cordray's entire letter here. For some of this blog's recent coverage of the controversial restatement, go here, here, and here. 

The SAT Adversity Score Should Be Subject to the Fair Credit Reporting Act Protections

by Jeff Sovern

The Wall Street Journal has reported that the College Board, providers of the SAT tests, will give colleges an adversity score for each applicant who takes the SAT to aid college in admissions decisions.  As the Journal explains:

This new number, called an adversity score by college admissions officers, is calculated using 15 factors including the crime rate and poverty levels from the student’s high school and neighborhood. Students won’t be told the scores, but colleges will see the numbers when reviewing their applications.

In light of reports that SAT scores tend to correlate with the income and education of the parents, this score could be useful to colleges. But it is troublesome that the College Board won't tell students their score.  As Bob Sullivan has asked, what if the College Board gets the score wrong? That isn't a fanciful notion. The FTC's years-long study of credit report accuracy found that one in five credit reports contain an error even though credit bureaus have decades of experience obtaining and compiling credit records. It is easy to imagine that some student adversity scores would also be based on erroneous information, especially as the score itself is a new creation and so may still have some bugs, despite the College Board's testing.   Consumers have a right to examine their credit reports, and that provides some--albeit weak--measure of accountability. They also have rights to seek the correction of erroneous information. Why should the College Board adversity score be any different? Given the importance of college admissions to many applicants, the adversity score should be subject to the same disclosure and correction mechanisms that credit reports are.  The College Board's decision not to disclose the scores reduces the likelihood that any errors it makes will be caught. It also make me wonder why it fears having students know their adversity score. If the FCRA doesn't already apply to the adversity score (something I hope to explore in a later post if my schedule permits), I hope Congress will amend the FCRA to extend its protections the the adversity score. [Disclosure: I have a child who expects to apply to colleges in the fall.]