Consumer Law & Policy Blog

NJ Assembly Passes Bill to Bar Out-of State Consumer Arbitration

Here is a report from the N.J.L.J. Excerpt:

The New Jersey Assembly has passed legislation that prohibits companies from inserting language in consumer contracts that requires arbitration of disputes in forums outside of the state.

The Assembly, on Monday, approved the bill, A1515, in a 49-20 vote. The vote was split along party lines, with Republicans opposing the bill.

The bill itself, as well as additional information, is linked to here. And here is Gregory Gauthier's comment:

I wonder whether, if the bill passes, businesses will attempt to argue that the FAA preempts New Jersey law as applied to an arbitration forum selection clause, following the (probably-now-discredited) Bradley v. Harris Research line of cases.  If those challenges are unsuccessful (as I expect them to be), I think the law will shine a light on arbitration forum selection clauses nationally, as any national business including a forum selection clause could become liable under New Jersey's TCCWNA.

My Times Dealbook Op-Ed: Trump Faces Stark Choice: Protect Consumers or Banks

Here.  Here's the beginning and the end:

 

President-elect Donald J. Trump will soon face a stark choice: whether to protect consumers, the ordinary Americans he pledged to defend against a system he criticized as rigged — or to side with that system.

* * *

If Mr. Trump chooses not to preserve a strong, independent bureau that protects consumers, he will have enabled his opponents in four years to attack him not only for failing to live up to his rhetoric, but for having become the leader of what he once condemned.

Does the Access to Justice Restoration Act Offer a Way Around Arbitration Clauses?

Stanford Law Professor Janet Cooper Alexander believes that it does.  The basic idea is that states and localities would empower private attorneys general to bring actions on behalf of the governmental entity (which would not be subject to arbitration clauses) for injured consumers, etc.

Here's an excerpt from the web page at the link above:

The Access to Justice Restoration Act works by:

1. Allowing people who have been harmed by unlawful behavior to report that behavior to the state’s attorney general or city attorney;
2. Upon receiving a report, granting the state or city itself a claim for relief over violations of antitrust, civil rights, consumer, or employment protections available to its residents;
3. Authorizing people who have reported misconduct to file a civil lawsuit on behalf of the state or city to collect any money owed to the government, and to ask for other appropriate court orders, if the state attorney general or city attorney does not have the resources or desire to file a case himself or herself;
4. Reducing the need for taxes while supporting public services by providing half of any money to the state or city;
5. Assisting all of the people who have been harmed by violations by providing half of any collected money to them; and
6. Allowing the courts discretion in each case to provide punitive damages of up to 100% of the actual damages caused by the wrongful behavior.

HT: Gregory Gauthier

Adam Levitin: Calls to Fire Cordray are About Shilling for the Financial Industry and to Block Arbitration, Payday Lending Regs

by Jeff Sovern

In a characteristically terrific post at Credit Slips, Georgetown's Adam Levitin explains the real reasons for calls to fire CFPB Director Cordray.  A worthy companion to Adam's recent op-ed at American Banker (free content), What the CFPB 'Commission' Debate Is Really About.   Both worth a read. 

Times Article on a Consumer Movement to Injure Breitbart, Fake News

Here (behind paywall).  Excerpt:

In mid-November, a Twitter group called Sleeping Giants became the hub of the new movement. The Giants and their followers have communicated with more than 1,000 companies and nonprofit groups whose ads appeared on Breitbart, and about 400 of those organizations have promised to remove the site from future ad buys.

* * *

[A] a new consumer movement is rising, and activists believe that where votes failed, wallets may prevail. This struggle is about much more than ads on Breitbart News — it’s about using corporations as shields to protect vulnerable people from bullying and hate crimes.

Drahozal Article Examines Arbitral Issue Preclusion as a Substitute for Class Actions

Christopher R. Drahozal of Kansas has written The Issue Preclusive Effect of Arbitration Awards, Proceedings of the NYU 69th Annual Conference on Labor: Mediation and Arbitration of Employment and Consumer Disputes, Forthcoming.  Here's the abstract:

Courts in the United States have two primary means (in addition to individual adjudication) by which to resolve disputes in which numerous claimants have claims against a defendant that raise the same or similar issues. The first is the class action, in which the class representative brings suit on behalf of similarly situated but absent plaintiffs. A judgment in the class action (assuming that a class has been certified) binds the defendant and the absent class members. Since the Supreme Court’s decisions in Concepcion and Italian Colors, however, businesses can reduce if not avoid the risk of class actions by using arbitration clauses with class arbitration waivers in their standard form contracts with consumers and employees. When businesses use such contract provisions, disputes are to be resolved in individual arbitration, with no aggregation of claims either in arbitration or in court.

The second primary means of resolving duplicative litigation of similar claims is the doctrine of issue preclusion (also referred to as collateral estoppel). Issue preclusion bars a party from relitigating an issue that was resolved in a prior case involving the same party or parties. The issue must have been fully and fairly litigated and actually decided in the prior case, and only a party to the prior litigation or one in privity with a party is bound by the prior judgment. But a non-party to the prior case can, in appropriate circumstances, rely on issue preclusion against a party to the prior case (what is called “nonmutual issue preclusion”) and preclude relitigation of the issue — i.e., hold the other party bound by the resolution of that issue in the prior case.

This paper examines the extent to which arbitration awards have issue preclusive effect, such that issue preclusion might substitute for class actions when businesses use arbitration clauses with class waivers. It further suggests that the law governing issue preclusion in arbitration might develop in ways parallel to the law governing class actions and arbitration: with businesses using “issue preclusion waivers” to avoid the issue preclusive effect of awards, consumers and employees challenging such waivers as unenforceable, and businesses relying on FAA preemption in response.

HT: Gregory Gauthier.  I haven't posted lately because I'm swamped with a tight deadline for grading exams ("Make America Grade Again!"), but I hope to be back posting soon.

House "Freedom Caucus" Asks Trump to Kill CFPB Proposed Arbitration Rule; Is Freedom Just Another Word for Tricking/Trapping Consumers?

WSJ report here (behind paywall). The Caucus consists of 40 members.  The article reports that they seek rollback of 200 rules, but they anticipate that the number will rise. 

Progressive Magazine Tackles Arbitration Clauses

Here. Excerpt:

On Monday, September 12, Fultz was summoned to a meeting with the human resources manager at her company, EGS Customer Care. She was given a form and told she needed to sign it. The form, titled “Agreement to Arbitrate,” bore the name of EGS’s parent company, Alorica. It pledged employees to resolve all workplace claims and disputes through arbitration and not “class action, collective action, and representative action procedures.” 

Fultz says she asked to see a lawyer and was denied. Instead, she was given thirty minutes to sign or else be deemed to have voluntarily resigned. What happened next highlights both the casual contempt companies like Alorica have for the rights of their workers and the extraordinary courage of Jennifer Fultz, who took a stand on principle rooted in her own family’s experience. * * *

* * * Jennifer Fultz * * * left work that day escorted by police, with a box of belongings the company had retrieved from her desk. She was fired and lost her health insurance. Her former employer initially fought her efforts to obtain unemployment benefits. She went from living paycheck to paycheck to struggling day by day.

(HT: Gregory Gauthier)

 

While Country Focuses on Thanksgiving, Wells Fargo Invokes Arbitration, that Consumers Agreed to Without Understanding, to Block Consumers Injured by Its Fraud From Suing

by Jeff Sovern

Here is the report in the NY Times (behind a paywall).  Wells filed its arbitration motion on Wednesday, the day before Thanksgiving.  So Wells is using a secret system for adjudicating claims, agreed to by consumers who didn't understand what arbitration clauses mean, and invoked it at a time when people are less likely to be focused on news.  So much for former CEO John Stumpf's pledge to make things right. The fact that arbitration is usually private means that the country may never learn whether Wells Fargo fully compensates injured consumers.

Will the CFPB Issue the Arbitration Rule Soon?

That's one of the questions addressed by the Wall Street Journal in an article headlined Financial Regulators Scramble to Complete Postcrisis Rules. (behind paywall). Excerpt:

“This type of ’midnight rulemaking’ is neither conducive to sound policy nor consistent with principles of democratic accountability,” Texas Rep. Jeb Hensarling, chairman of the House Financial Services Committee, told SEC Chairman Mary Jo White at a Nov. 15 hearing.

* * *

Regulators deny they are rushing to finish initiatives ahead of the transfer of power and say they are merely working through their normal process to finish rules that were targeted for completion this year.

* * *

After rules are published, it can be time-consuming for future administrations to try to unravel them. They have to follow the Administrative Procedure Act, which requires an extensive public-comment process, and changes may be subject to legal challenge. Republican lawmakers are now talking about dusting off the little-used Congressional Review Act, which would allow them to try to uproot any regulation completed after May 2016 if they can get a majority vote in each chamber on the question before mid-2017.

At the Consumer Financial Protection Bureau, Richard Cordray, the agency’s director, has instructed staff to continue moving ahead with rulemaking at its current rapid pace,according to people familiar with the situation. That means the CFPB will try to complete its major pending rules, particularly the proposal to restrict arbitration clauses in consumer financial contracts.

* * *

[T]he CFPB may run out of time to complete rules designed to rein in the high interest, small-dollar payday lenders that cater to about 12 million Americans.