Consumer Law & Policy Blog

Various studies indicate that the Affordable Care Act has made Americans healthier

This article by Amy Goldstein describes "an emerging mosaic of evidence that, nearly a decade after it became one of the most polarizing health-care laws in U.S. history, the ACA is making some Americans healthier — and less likely to die."

Frankel Article: Corporate Hostility to Arbitration

Richard Frankel of Drexel has written Corporate Hostility to Arbitration, 50 Seton Hall Law Review (forthcoming 2020). Here is the abstract:

In the last 30 years, corporations have aggressively and successfully pushed the Supreme Court to invalidate virtually all state regulation of mandatory arbitration clauses on the ground that the Federal Arbitration Act (FAA) preempts any state law that expresses “hostility” to arbitration. Under current doctrine, the FAA preempts any state law that is premised on the idea that arbitration is inferior to litigation for resolving disputes, or that treats arbitration clauses less favorably than other contracts.

Yet, at the same time corporations decry state-law hostility to arbitration, they frequently express their own hostility to arbitration in the way they draft their own arbitration provisions. By carving out specific claims from arbitration, adopting procedural rules that approximate litigation, or imposing restraints that make it difficult for their consumers and employees to bring disputes in arbitration, corporations have shown that they believe arbitration to be inferior to litigation in multiple ways.

Although scholars have widely debated the Supreme Court’s arbitration jurisprudence, “corporate hostility” to arbitration has gone largely unnoticed. This article examines the various methods by which corporations express hostility to arbitration and argues that this hostility carries significant implications for FAA preemption doctrine. Currently, contract drafters can exempt claims from arbitration because they believe that arbitration is inferior to litigation. But when states seek to regulate arbitration for those same reasons, they are barred from doing so by the FAA. Thus, corporations can exempt claims from arbitration to maximize their self interest, but states cannot exempt claims from arbitration to protect the public interest.

This dichotomy is anti-democratic and results in bad policy. This article proposes that corporate hostility to arbitration shows that not all hostility to arbitration is improper, and that states should have greater freedom to regulate arbitration clauses without violating the FAA.

How did ordinary people experience the foreclosure crisis?

That's the subject of a new book by Linda Fisher of Seton Hall and Judith L. Fox of Notre Dame, published by Cambridge Press, The Foreclosure Echo: How the Hardest Hit Have Been Left Out of the Economic Recovery. You can read the introduction here. Here's the abstract:

This paper includes the Table of Contents and Introduction to a book recently published by Cambridge University Press: It tells the story of the foreclosure crisis from a new perspective – that of ordinary people who experienced it. Using actual experiences – often examined through a legal lens – supplemented by economic, social science and legal research, The Foreclosure Echo explains how people experienced the crisis and how their lenders and public institutions let them down. The book also details the lingering effects of the crisis – such as vacant and abandoned buildings – and how these effects have magnified inequality. Finally, the book suggests reforms that could help avoid another crisis.

May a company get an injunction to block a defendant from invoking the Streisand Effect?

by Paul Alan Levy

The United States Court of Appeals for the Third Circuit recently upheld the rights of litigants to use public pressure to discourage companies from suing them. The issue arose in Bank of Hope v. Chon, when a bank sued one of its departed founders, after an employee who was fired for embezzlement implicated him in her crimes. The founder proclaimed his innocence and urged the CEO to drop the case, and when he did not, he warned that he would take his complaint to the bank’s shareholders. After he wrote letters to “dozens of institutional shareholders,” suggesting that the bank’s litigation strategy was doing to hurt the bank’s value. The bank then asked the district court to enjoin further such communications on the theory that the defendant was interfering with the "fairness and integrity” of the litigation process by “attempting wrongfully and unlawfully to coerce Bank of Hope into making a settlement payment.” After the trial court granted such an injunction, the defendant appealed.

The Third Circuit reversed. It held that there was no evidence that the gag order was needed, and that the blanket injunction was an impermissible restraint on the defendant's speech.  The defendant had argued that the injunction was an impermissible prior restraint; the bank argued that the founder's speech was "commercial" (because he had the economic motive of securing a better financial outcome from the litigation).  The panel expressed skepticism of that argument, but found it unnecessary to address that point because, it held, the order failed even under the Central Hudson scrutiny applied to constraints on commercial speech.

Some commentary on the case has suggested that it stands generally for the “rule . . .  that if somebody wants to talk about their case, it’s not for the courts to restrain them simply to protect the decorum or integrity of the litigation.”

I like that rule, but I am worried that it overstates the opinion,which was written narrowly. The Third Circuit panel described protecting the fairness and integrity of the litigation process as a sufficiently substantial government interest that could, in some circumstances, support a gag order directed to civil litigants; it even hinted, in dictum, that evidence such coercion was likely might be enough to justify an injunction against speech (that is, it faulted the trial court for issuing an injunction on this ground without evidence that the speech was being effective). And it faulted the trial judge for failing to consider a less restrictive injunction, such as barring specific criticisms.

So the result is the right one but some of the reasoning is troublesome. When a company pursues an individual, the defendant has every right to appeal to the court of public opinion to condemn the company for its litigation strategy – invoking the Streisand Effect, as it were- and thus give the company reasons to drop the litigation. Protecting the jury pool against tampering through overwhelming local publicity is one thing, but increasing the social and political costs of being a bullying plaintiff is a technique that ought to be available to unfairly sued defendants.  It is going to take further litigation in the Third Circuit to ensure that this is the governing rule.

House passes bill to end forced arbitration

The House just passed a bill that would restore legal rights to millions of workers and consumers. By a vote of 225-186, the House passed the Forced Arbitration Injustice Repeal (FAIR) Act, to ban companies from requiring workers and consumers to resolve legal disputes in private arbitration.

Arbitration is a process with no judge, no jury, and no public accountability,in which the parties have fewer rights than in the court system. Companies routinely require arbitration as a condition of doing business. For example, you have almost surely agreed to arbitrate any disputes through your credit card agreement, your cell phone agreement, or any agreement with a for-profit college.

Under the FAIR Act, people would still be permitted to arbitrate if they chose to, but companies could no longer force them to do so. 

Moral Rights and Copyright Claims about Che Guevara Parodies

by Paul Alan Levy

The personal and commercial heirs of the deceased photographer Korda, best known for the iconic photograph of Che Guevara that has adorned Tshirts and posters displayed by young admirers for fifty years, have issued a takedown demand to Liberty Maniacs over its sales of parody items that display the photo’s cap and hair but replace Guevara’s visage with, alternately, Donald Trump and Alexandria Ocasio-Cortez. Advancing claims both under the doctrine of moral rights and under copyright law, Randy Yaloz, a New York lawyer based in Paris who proudly identifies himself as "combative" (but wrote using an letterhead identifying himself as an adjunct professor at his alma mater, New York Law School, where he does not currently teach), demands both that the parodies be taken off the market and that the parodist pay damages.

Our federal financial regulators are busy defending predatory loans

Read this post by law prof Adam Levitin titled "FDIC and OCC Race to Court to Defend 120.86% Interest Rate Small Business Loan." It's not a pretty thing our federal regulators are doing. Here's an excerpt from Adam's post:

FDIC and OCC filed an amicus brief in the district court in an obscure small business bankruptcy case to which a bank was not even a party in order to defend the validity of a 120.86% loan that was made by a tiny community bank in Wisconsin (with its own history of consumer protection compliance issues) and then transferred to a predatory small business lending outfit. Stay classy federal bank regulators. FDIC and OCC filed the amicus to defend the valid-when-made doctrine that the bankruptcy court invoked in its opinion. FDIC and OCC claim it is "well-settled" law, but if so, what the heck are they doing filing an amicus in the district court in this case? They doth protest too much.

 

CFPB Abandons Defense of Its Own Constitutionality

For years, subjects of CFPB enforcement actions have challenged the constitutionality of the agency's structure, arguing that separation-of-powers principles forbid Congress to grant enforcement authority to an independent agency whose director is protected against being fired without cause by the President. Throughout that time, the agency has defended its own constitutionality, and has prevailed in the only two cases that have so far resulted in final decisions by federal courts of appeals: PHH Corp. v. CFPB, in which the U.S. Court of Appeals for the D.C. Circuit upheld the agency's structure, and CFPB v. Seila Law, in which the Ninth Circuit agreed with the D.C. Circuit. Now, even as challenges continue in two other circuits, the Second and Fifth, in which the agency has so far steadfastly defended itself, the agency has joined in a filing in the U.S. Supreme Court asking the Court to overturn the Ninth Circuit's decision in Seila Law and hold the agency's structure unconstitutional.

The Department of Justice had changed sides on the issue when the Trump Administration took office, and it argued strenuously against the position taken by the agency's own lawyers in PHH Corp. The CFPB, however, held its ground not only in PHH, which was briefed while Richard Cordray remained in place as the agency's director, but also in other appellate challenges briefed and argued after he stepped down and was replaced by Trump appointees--first Mick Mulvaney as Acting Director, and then Kathy Kraninger as Director.

However, after the agency prevailed in the court of appeals in the Seila Law case, the losing party filed a petition for a writ of certiorari asking the Supreme Court to hear the issue. The Solicitor General, after obtaining multiple extensions of time to respond to the petition, today filed a brief "acquiescing" in the request that the Court hear the case. The brief is signed not only by the Solicitor General and other DOJ attorneys, but also by attorneys for the CFPB, who join fully not only in the brief's request that the Supreme Court hear the case, but also in its argument that the Court should reverse the lower court's decision and hold the CFPB's structure unconstitutional. Also today, Director Kraninger sent a letter to congressional leaders informing them that the CFPB would no longer defend the constitutionality of the statutory provisions protecting its director from Presidential removal.

Because neither DOJ nor the CFPB will now defend the agency's structure, the Supreme Court will, if it takes the case, have to appoint someone else--a friend of the court--to argue in favor of the lower court's judgment.

More Responses to the Higbee Trolling Operation

by Paul Alan Levy

Back in June 2019, the last time I had occasion to write  about Mathew Higbee’s bullying pursuit of copyright claims against alleged infringers, he had just backed away from a confrontation on the part of one of the longtime members of his stable of clients, Quang-Tuan Luong, and had, indeed, suggested that he was reconsidering whether he would pursue future demands against the hosts of interactive web sites whose users were the ones to post allegedly infringing content.  Regrettably, it appears that the lure of illegitimate profit has led him not to take that path.

Consumer Law Professors Who Want to Read or Sign On to a Comment on the CFPB's Proposed Debt Collection Rule . . .

. . .  should get in touch with @daliejimenez.