Consumer Law & Policy Blog

Becher & Benoliel article: Dark Contracts

Samuel Becher of Victoria University of Wellington and Uri Benoliel of Ramat Gan Law School have written Dark Contracts. Here is the abstract:

Millions of consumers are routinely subject to non-transparent consumer contracts. Such contracts undermine fundamental contract law notions. They leave consumers uninformed and disempowered. They also encourage unethical behavior and undercut the ability of legal and meta-legal forces to discipline firms.

The legal treatment of non-transparent consumer contracts is undertheorized and partial in scope. This Article develops a new holistic framework for understanding these opaque consumer contracts. To conceptualize the various non-transparent ways in which firms use consumer contracts, the Article develops the notion of Dark Contracts.

Part I of this Article explains what Dark Contracts are. It documents multiple non-transparent contractual mechanisms and instruments that consumer contracts often incorporate. It delineates how firms design and employ non-transparent tools in almost every possible contractual juncture: from the nature, scope, and language to performance and change to dispute resolution, conflict management, and termination.

After documenting this non-transparency in action, Part II places the problem of Dark Contracts in a wider context. First, it argues that the sum of these non-transparent components is greater than its parts; Dark Contracts not only create pockets of non-transparency but also produce an in terrorem effect. Next, it opines that Dark Contracts harm not only consumers. Specifically, Dark Contracts emasculate the ability of legislatures, regulators, courts, and market watchdogs to scrutinize the ways firms exercise their power. Thereafter, it explains how Dark Contracts also interfere with the market’s ability to offer effective reputational systems that discipline firms. Subsequently, it maintains that Dark Contracts facilitate a moral wiggle room, enhancing firms’ unethical behavior.

Against this backdrop, Part III calls for introducing transparency-related concepts to the law of consumer contracts. It explicates the potential of and the limitations in utilizing transparency principles in the law of consumer contracts. It further argues that policymakers should design transparency-related principles to (1) better scrutinize firms’ practices, (2) empower consumers to make better-informed decisions, and (3) ensure that firm’s unethical contractual behavior is not the prevalent norm. Concluding remarks follow.

Tschider article on consent and privacy

Charlotte Tschider of Loyola of Chicago has written Meaningful Choice: A History of Consent and Alternatives to the Consent Myth, 22 N.C. J.L. & Tech. 617 (2021). Here is the abstract:

Although the first legal conceptions of commercial privacy were identified in Samuel Warren and Louis Brandeis’s foundational 1890 article, The Right to Privacy, conceptually, privacy has existed since as early as 1127 as a natural concern when navigating between personal and commercial spheres of life. As an extension of contract and tort law, two common relational legal models, U.S. privacy law emerged to buoy engagement in commercial enterprise, borrowing known legal conventions like consent and assent. Historically, however, international legal privacy frameworks involving consent ultimately diverged, with the European Union taking a more expansive view of legal justification for processing as alternatives to consent.

Unfortunately, consent as a procedural substitute for individual choice has created a number of issues in achieving legitimate and effective privacy protections for Americans. The problems with consent as a proxy for choice are well known. This Article explores the twin history of two diverging bodies of law as they apply to the privacy realm, then introduces the concept of legitimate interest balancing as an alternative to consent. Legitimate interest analysis requires an organization formally assess whether data collection and use ultimately result in greater benefit to individuals than the organization with input from actual consumers. This model shifts responsibility from individual consumers having to protect their own interests to organizations that must engage in fair data use practices to legally collect and use data. Finally, this Article positions the model in relation to common law, federal law, Federal Trade Commission activities, and judicial decision-making as a means for separating good-intentioned organizations from unethical ones.

Dep't of Education announces student-loan forgiveness of disabled borrowers

The Department of Education announced yesterday: "Over 323,000 borrowers who have a total and permanent disability (TPD) will receive more than $5.8 billion in automatic student loan discharges due to a new regulation announced today by the U.S. Department of Education. The change will apply to borrowers who are identified through an existing data match with the Social Security Administration (SSA). It will begin with the September quarterly match with SSA. The Department is also announcing two other policy items related to TPD today. First, the Department will indefinitely extend the policy announced in March to stop asking these borrowers to provide information on their earnings — a process that results in the reinstatement of loans if and when borrowers do not respond—beyond the end of the national emergency. Second, the Department will then pursue the elimination of the three-year monitoring period required under current regulations during the negotiated rulemaking that will begin in October."

The full press release is here.

Zimmerman article on appeals courts hearing class actions

Adam S. Zimmerman of Loyola of Los Angeles has written The Class Appeal, 89 University of Chicago Law Review (Forthcoming 2022). Here's the abstract:

For a wide variety of claims against the government, the federal courthouse doors are closed to all but those brought by powerful, organized interests. This is because hundreds of laws—colloquially known as “channeling statutes”—require disaffected groups to contest government bodies directly in appellate courts that hear cases individually. In theory, these laws promise quick, consistent, and authoritative legal decisions in appellate courts. In fact, without class actions, government bodies avoid judicial review by selectively avoiding claims brought by some of the most vulnerable claimants in the administrative state—from veterans and immigrants to coal miners, laborers, and the disabled.

This Article proposes a novel solution: courts of appeals should hear class actions themselves. In so doing, courts high in the judicial hierarchy would continue to authoritatively decide important legal questions involving government institutions, while ensuring groups of similar, unrepresented parties finally get their day in court. While appellate class actions might sound like a strange procedural innovation, appellate courts already have power do this. Relying on the All Writs Act, appellate courts long ago created ad-hoc procedures modeled after class actions to respond to systemic government harm.

This Article is the first to examine nascent experiments with appellate class actions. It shows that, contrary to popular belief, appellate courts can hear class actions and explains why they should do so. In cases challenging systemic abuse, this power has become vital not only to level the playing field between the government and the governed, but to protect courts’ core function in our separation of powers—to hear claims, interpret law, and grant meaningful relief. Without classwide judgments in such cases, courts risk ceding power to the executive branch to decide for itself when judicial decisions limit its own unlawful policies.

Covid-related tort claims against nursing homes

Law prof Betsy Grey Against Immunizing Nursing Homes about when nursing homes should be liable for covid-related tort claims. Here's the abstract:

Nursing homes and other long-term care facilities account for approximately one third of the over 500,000 Covid-19 deaths in the United States. Facing liability from that widespread harm, the facilities have sought immunity protection from tort liability. In particular, they have sought protection under the federal Public Readiness and Emergency Preparedness (PREP) Act, which is designed to extend immunity from liability claims arising from various Covid-19 countermeasures developed and used during the pandemic.

Importantly for this essay, the lawsuits filed against nursing homes have centered on their failure to take mitigation measures, rather than on harm from their affirmative use of mitigation measures. Initially, courts held that PREP Act immunity does not apply to these failure-to-act claims. In the waning days of the Trump Administration, however, HHS issued an opinion that (together with other HHS statements) interprets the statute otherwise, broadening immunity even to cover the failure to take mitigation measures. That interpretation has been followed by at least one federal district court. This essay questions the wisdom of HHS’s opinion. It argues that it misreads the words and purpose of the PREP Act’s immunity provisions, and undermines accountability of the nursing home industry, creates the wrong incentives for the industry, and may leave victims without any compensatory remedy. This issue should reach appellate courts soon. If the interpretation continues to be followed by the courts, then the Biden Administration should rescind the opinion so that tort law may continue to protect one of society’s most vulnerable populations.

Zoom settles lawsuit alleging privacy violations and "zoombombing"

Zoom has agreed to pay $85 million and bolster its security practices to settle a lawsuit claiming that it violated users' privacy rights by sharing personal data with Facebook, Google and LinkedIn, and letting hackers disrupt Zoom meetings

Reuters has the story, here.

Amazon adopts new policy for injuries caused by products of third-party sellers

Consumer Affairs reports: "Starting September 1, Amazon will pay customers who suffer injury or damages caused by products sold by its third-party sellers. It will not admit liability and will limit claims to $1,000. The policy is intended to head off lawsuits that consumers have filed over the years that seek to hold the multi-billion dollar company responsible for damages or injuries caused by small businesses that use its platform."

The full article is here.

American Prospect: lawyer offered $2K to get consumer client to sign already-written op-ed supporting arbitration

Here, by Amelia Pollard. Excerpt:

Conservative pro-business groups have hit upon a new tactic to protect its members’ interests: outright purchasing of grassroots support.

Late last week, David Chami, an Arizona attorney who specializes in consumer protection, received an email from Drew Johnson, who identified himself as working with the U.S. Chamber of Commerce. Johnson offered Chami $2,000 if he could get one of his clients to sign their name to an op-ed opposing the Forced Arbitration Injustice Repeal (FAIR) Act, a bill in Congress.

* * *

“My hope is to find a normal, everyday person who has benefitted from arbitration to sign on to the op-ed pasted below as the author,” Johnson wrote, * * * “If one of your clients is willing to sign on to the piece, I can offer you $2,000 for your time.”

In other words, Johnson offered the attorney a bribe.

* * *

When asked about the op-ed solicitation, Johnson denied having anything to do with the U.S. Chamber of Commerce, despite writing that he was “working on an effort with” the Chamber and a coalition of think tanks in his email to the Arizona attorney. In an email to me, he described the miscommunication as “poor wording.”

UPDATE: The Intercept has more here.