Consumer Law & Policy Blog

Subpoenas to Identify Online Consumer Critics on the Ground That They Weren't Really Customers

by Paul Alan Levy

What sort of showing must a criticized business make when it wants to identify an anonymous online critic on the theory that the critic was never an actual customer and that, consequently, any criticisms are necessarily false?

Attorney Thomas P. Kelly III of Santa Rosa California

That issue has been presented in a couple of recent subpoena cases that we have handled. Probably the more significant of these two — because it is now pending in the California Court of Appeal — is Kelly v. Doe, where Thomas P. Kelly III, a lawyer in Santa Rosa, California, sued an anonymous critic who had complained on Yelp about alleged inadequacies in the legal service that the lawyer had provided to her. The review was fairly barebones:

California Supreme Court rejects strict class-certification "ascertainability" requirement

The California Supreme Court today issued its unanimous decision in Noel v. Thrifty Payless Inc., which rejected a strict class-certification "ascertainability" requirement sometimes associated with decisions of the U.S. Court of Appeals for the Third Circuit. This paragraph sums up the issue and the court's conclusion:

This case is a putative class action brought on behalf of retail purchasers of an inflatable outdoor pool sold in packaging that allegedly misled buyers about the pool’s size. We must decide whether the trial court abused its discretion when it denied the representative plaintiff’s motion for class certification on the basis that he had not supplied evidence showing how class members might be individually identified when the time came to do so. The Court of Appeal upheld this ruling. It reasoned that this evidence was necessary to ensure that proper notice would be given to the class, and that without it, the trial court could appropriately conclude that plaintiff had not satisfied the ascertainability requirement for class certification. We conclude that the trial court erred in demanding that plaintiff offer such evidence to satisfy the ascertainability requirement.

The Noel decision -- which interprets California's class action rule, not federal Rule 23 -- is a victory for consumers. Imposing a strict ascertainability requirement is part of the corporate effort to weaken consumer class actions by pushing various attributes or needs of class litigation -- such as identifying and notifying the class members -- to the beginning of the case as a prerequisite for certification. The California Supreme Court properly rejected that effort here.

UPDATE: As legal reporter Perry Cooper noted in her piece on Noel, "the Third Circuit appears to have backed off its strict interpretation of the [ascertainability] requirement."

Schwarcz Article on Discrimination in Insurance

Daniel Schwarcz of Minnesota has written Towards a Civil Rights Approach to Insurance Anti-Discrimination Law, 69 DePaul Law Review (Forthcoming). Here's the abstract:

Discrimination is fundamental to the business of auto and homeowners insurance. Yet state insurance law does remarkably little to police against the risk that this discrimination will unfairly harm minority or low-income communities. Not only do state insurance regulators completely ignore the prospect that facially-neutral insurance practices might disparately impact vulnerable populations, but they affirmatively suppress the production and dissemination of data that would advance a better understanding of this risk. Meanwhile, most states continue to cling to an antiquated, ineffective, and inefficient scheme of “public utility style” rate regulation that purports to prohibit “excessive, inadequate, or unfairly discriminatory” insurance rates. This scheme not only undermines the operation of efficient insurance markets, but also helps to shield the industry and state regulators from scrutiny regarding how insurance practices impact larger social goals, like facilitating socio-economic mobility. This Article argues that insurance law should scrap its regime of public utility style rate regulation in favor of a civil rights approach to anti-discrimination law. Such an approach should, at a minimum, promote the collection and public disclosure of company-specific, transaction-level data on insurance applications, purchases, losses, and policyholder membership in legally protected groups, much in the manner of the Home Mortgage Disclosure Act. Further paralleling modern anti-discrimination regimes in consumer finance, this civil rights approach should afford private parties a cause of action against insurers based on a modified disparate impact theory that reflects the important role of risk-based discrimination in insurance markets. This could be accomplished by recognizing that insurance discrimination based on factors that genuinely predict claim frequency or severity even after controlling for prohibited characteristics constitutes a “legitimate non-discriminatory” practice under the familiar burden-shifting scheme for disparate impact liability.

The conservative case for class actions

Professor Brian Fitzpatrick has a new book, set for release in October, called The Conservative case for Class Actions. Here is the summary:

Since the 1960s, the class action lawsuit has been a powerful tool for holding businesses accountable. Yet years of attacks by corporate America and unfavorable rulings by the Supreme Court have left its future uncertain. In this book published by the University of Chicago Press, Vanderbilt Law Professor Brian Fitzpatrick makes the case for the importance of class action litigation from a surprising political perspective: an unabashedly conservative point of view.

Conservatives have opposed class actions in recent years, but Fitzpatrick argues that they should see such litigation not as a danger to the economy, but as a form of private enforcement of the law. He starts from the premise that all of us, conservatives and libertarians included, believe that markets need at least some rules to thrive, from laws that enforce contracts to laws that prevent companies from committing fraud. He also reminds us that conservatives consider the private sector to be superior to the government in most areas. And the relatively little-discussed intersection of those two beliefs is where the benefits of class action lawsuits become clear: when corporations commit misdeeds, class action lawsuits enlist the private sector to intervene, resulting in a smaller role for the government, lower taxes, and, ultimately, more effective enforcement of the law.

The conflict between the increasingly restrictive due-process constraints on personal jurisdiction and substantive state products-liability law

That's the topic of The New Privity by law prof Alexi Lahav. I thought the article would be interesting to our readers, who (1) may be concerned about the Supreme Court's expanding due-process restrictions on where alleged corporate wrongdoers may be sued and (2) want products-liability law to remain robust and adaptable. Here is the abstract:

This Article describes and critiques the arc of judicial reasoning in personal jurisdiction doctrine over the last 100 years with respect to tort claims, from MacPherson v. Buick to J. McIntyre Machinery v. Nicastro. In the early 1900s, state courts rejected the privity doctrine, a step in the products liability revolution which rejected privity as a limitation on the ability of victims of defective products to sue manufacturers and allowed the exercise of jurisdiction over a distant manufacturer. Today, the Supreme Court is reinstating a privity doctrine through the due process clause, barring suits against foreign manufacturers in many cases. The reasoning of the Court’s recent personal jurisdiction decisions echoes those of the late 1800s when privity was the rule: a reliance on abstract categories and inductive logic, unmoored from reality. The narrowing of due process — what I describe as the new privity — is problematic as a substantive matter because it is in direct conflict with the structure of state products liability law. The way the Court has arrived there is problematic because of its poor legal reasoning. Understanding these developments both allows us to predict the outcome of cases likely to come before the Court in the near term, and to better understand the relationship between form and substance in common law constitutional interpretation.

Eleventh Circuit rejects class-action attorney's fee multiplier

In In re the Home Depot Customer Data Security Breach Litig.,the Eleventh Circuit has held that when a defendant agrees to pay class-action fees in a class-action settlement, in an amount to be determined by the district judge, separate from the fund set up by the settlement to compensate class members, the attorney's fee may not include a fee multiplier.

FTC imposes $5 billion penalty and new privacy restrictions on Facebook

The Federal Trade Commission announced this morning that it has reached a settlement with Facebook over the FTC's charges that the company violated a 2012 FTC order by deceiving users about their ability to control the privacy of their personal information. Under the settlement, Facebook will pay a $5 billion penalty and submit to new restrictions and a modified corporate structure that will hold the company accountable for the decisions it makes about its users’ privacy.

The FTC's press release is here. The court order entering the settlement as a stipulation is here.

Bill introduced to crack down on online hotel booking scams

A bipartisan group of lawmakers in both chambers has reintroduced a bill to combat online hotel booking scams. The Stopping Online Booking Scams Act would make it illegal for scammers to fool customers into thinking they are paying for hotel services when they are not. The bill had more than 40 co-sponsors in the Senate last year.

The Hill has the story, here.

What is the optimal structure for the Consumer Financial Protection Bureau?

That's the topic of Commissioning the Consumer Financial Protection Bureau by law prof Jolina Cuaresma. Here's the abstract:

There has been much debate over the Consumer Financial Protection Bureau’s lack of executive and congressional oversight: its single director removable only for cause and its operations are not subject to appropriations. This paper explains how this very leadership and accountability structure — intended to politically insulate the agency — had the perverse effect of politicizing it. Since Director Cordray’s departure, there has been increased regulatory uncertainty, discouraging financial innovation and harming consumer welfare. This paper recommends that Congress restructure the Bureau into a multi-member, bipartisan commission to provide industry regulatory predictability and ensure that consumer protection retains its independent seat in the financial regulatory system.

Watch these debt-defense videos from the National Association of Consumer Advocates

The National Association of Consumer Advocates has created this series of five videos on debt defense. The videos educate ordinary consumers on how to deal with debt collection. Click on the links or on the embedded videos below to watch all five videos. Consumers can get other debt-collection information from NACA here.

1. Dealing with debt collectors

2. I received notice of a lawsuit, what should I do?

3. Defending yourself in a lawsuit

4. Was I served legal papers properly?

5. I have a judgment against me. Money is being taken from my bank account.