Measuring the stakes in King v. Burwell

The latest Obamacare challenge, now pending before the Supreme Court, could if successful cost the states a lot of money. How much? Read the Post's analysis, complete with a state-by-state breakdown and a discussion of its possible implications for the outcome of the case, here.

Should Macao Music Group Be Able to Identify Twitter Users Criticizing Its CEO?

We recently filed an amicus brief about the standards for subpoenas identifying anonymous Internet users accused of defamatory or otherwise wrongful communications in a surprising venue - the United States District Court for the Northern District of California.  The underlying case was filed in the Western District of Washington by Macao Music Group, an offshore conglomerate of companies making pro audio and music equipment, and by a Washington state subsidiary, against the anonymous authors of a pair of parody Twitter accounts named "FakeUli" and "NotUliBehringer," playing on the name of Macao's CEO, Uli Behringer.  

The complaint in the case asserts that various tweets accused Behringer of consorting with prostitutes, and accused the companies of making shoddy products and encouraging domestic violence and child abuse.  Plaintiffs then issued a subpoena in the Northern District of California.  Twitter, however, resisted the subpoena on the ground that there was no proof of wrongdoing, and plaintiffs moved to compel, telling the Court about the Dendrite line of cases (with emphasis on one of the cases, Salehoo v Doe, decided in the forum court, the Western District of Washington, and arguing that those standards were met because the statements were so plainly defamatory.  Twitter took no position on whether the standard had been met, but simply urged the Court not to compel compliance with the subpoena unless the Court was satisfied that the Dendrite standard had been satisfied.

Why the Northern District of California Needs to Get These Cases Right

ABA Consumer Protection Conference Focuses on Big Data, Internet of Things and Ad Substantiation Standards

By Dee Pridgen

The ABA Consumer Protection Conference held February 12 on the campus of the George Washington University in Washington, D.C., focused on the work of the Federal Trade Commission (FTC), as well as the work of advertising self-regulatory bodies, especially in the areas of big data and the “Internet of Things.”  FTC Chair Edith Ramirez kicked things off by summarizing the FTC’s consumer protection agenda.  She praised the recent DC Circuit Court opinion in the POM Wonderful case, stating that the decision shows that health claims need to be backed by “strong science.”  She also said that the FTC will focus on the growing sector of mobile payments, especially unauthorized billings, as well as privacy and data security issues.  She stated that the FTC wants to eliminate the common carrier exemption from the FTC Act so that it can better pursue issues like billing practices and “cramming” of unauthorized charges onto telephone bills.

This conference featured two “interactive oxford style debate” sessions, one of which was on the proper standards for advertising substantiation.  I debated Howard Beales (photo below), former FTC Bureau of Consumer Protection Director and currently an economics professor at George Washington.  The proposition to be debated was:  “Even in a world of evolving science and new products, the FTC’s traditional advertising substantiation standard of competent and reliable scientific evidence best maximizes consumer welfare.”  Beales argued in favor, stating among other things that requiring anything more than competent and reliable evidence would deter advertisers from disseminating truthful health and nutrition claims, and that otherwise safe food products did not need to be tested in the same way as drugs.  I argued against the resolution, saying that the traditional standard, while necessary, is not sufficient to protect consumers who pay more for certain products based on specific disease related claims that are said to be “proven.”  For these specific claims, as was the case in POM Wonderful, a higher level of substantiation may be required.  Before the debate, 79% of the audience was in favor of the resolution and 21% were against.  After the debate, 55% were in favor and 45% were against. 

Several sessions dealt with privacy.  Ilana Westerman, CEO of Create with Context, suggested that marketers persuade customers to want to give their data, due to the convenience and benefits, rather than just taking it for the marketer’s benefit.  An example was consumers who share a “wish list” of gifts they desire for special occasions with friends and relatives, and an app that alerts the consumer when he or she is in a store that has an item on their friend’s wish list.  This was well received by consumers, whereas an app that tells you in the store that you need to buy milk (because of prior buying patterns) would
feel “creepy.” 

Another panel discussed the “Internet of Things,” the subject of a just released FTC staff report, available here.  There are now over 25 billion devices that are interconnected and that collect personal information, such as in cars, “wearable” technology, and “smart” appliances.  The consensus at the FTC seems to be that there should be “privacy by design” incorporated into such devices to avoid security breaches and unauthorized access and misuse of personal information, and that consumers should have some notice and choice with regard to sharing their data.  No one advocated special regulations for this aspect of data sharing, but the FTC wants to have a general federal privacy statute that would be broad, flexible and not technology specific, that would allow the FTC to give guidance on data security and online tracking, among other things.

The packed agenda also featured a discussion of third party liability for fraud (e.g., payment processors), globalized privacy norms, and consumer protection in the direct selling industry. The conference closed with a panel on the advertising industry’s premier self-regulation body, the National Advertising Division of the Better Business Bureau. 

Sens. Warren and Brown: regulatory changes shouldn’t conflate small banks, large banks

At a hearing on Capitol Hill last week, lawmakers from both parties expressed interest in exempting small banks and credit unions from new financial rules, reported the Wall St. Journal.

But there must be a limit, warned two of the committee’s most pro-consumer voices:

Sens. Sherrod Brown of Ohio, the top Democrat on the powerful Senate Banking Committee, and  Elizabeth Warren of Massachusetts drew a line in the sand: Legislation targeted at helping truly small lenders is fine, but bills that scale back rules intended for larger, riskier banks have no chance.

“The big banks are going to keep using the small banks as a cover for their special rollbacks… we shouldn’t fall for that trick,” Ms. Warren warned her colleagues.

Read the full WSJ article here.

California announces settlement with CashCall over predatory lending practices

California law caps at 30% the interest rate on loans of $2500 or less. So what did lender CashCall do? It made every loan -- no matter how small -- into a loan of $2600 or more, by having low-dollar borrowers "prepay" the amount up to $2600 that they didn't want. And what interest rates did CashCall charge? In the neighborhood of 135% or more, according to California's Department of Business Oversight (DBO), which initiated administrative action against the lender last summer over this practice.

Earlier this month, the state announced a settlement "that requires the lender to provide restitution to thousands of California borrowers, reform its business practices, and pay the DBO $1 million in penalties and cost reimbursement."

Read the press release and get more details here.

Battle over Obamacare contraception coverage continues

That last summer's decision in Hobby Lobby wasn't the end of the legal fight over what health care coverage the government could require businesses asserting religious objections to provide for their employees became clear just three days after the Hobby Lobby was handed down. In a brief order that drew a sharp dissent from three justices, the Court enjoined enforcement of the government's procedure for accommodating colleges with religious objections to contraception coverage -- even though the Court majority had, in Hobby Lobby, appeared to endorse that very procedure. (For our previous coverage of Hobby Lobby, including the work-around the Court seemed to endorse, see here. For the order three days later enjoining the accommodation, in Wheaton College v. Burwell, see here.)

Last week, in Geneva College v. Sec'y of HHS, the Third Circuit addressed on the merits the argument raised in preliminary form before the Supreme Court in Wheaton College: that even filing a form to opt out of contraception coverage is a burden on the rights of an employer with religious objections to contraception coverage. The rationale is that the opt-out form is the "trigger" for employees to obtain coverage that the employer opposes for religious reasons (or, as the religious entities put it at oral argument, that "the accommodation requires them to be 'complicit' in sin"). In a case that drew significant amicus participation from government, religious and civil-liberties organizations, the Third Circuit rejected the religious school's argument, holding that filling out the exemption form simply doesn't burden the rights of the religious.

Although the court did not question the sincerity of the beliefs asserted, it nonetheless found itself obligated to assess objectively the effect of the accommodation procedure on those beliefs. Distinguishing Hobby Lobby, in which the challenged regulations required the plaintiffs to pay for the coverage to which they objected, the court held that filling out a form did not trigger the coverage. Rather, the coverage came about through the operation of federal law. “[S]ubmitting the self-certification form means only that the eligible organization is not providing contraceptive coverage and will not be subjected to penalties," the court explained. You can read the full opinion here.

Giving the court's order last summer in Wheaton College, I doubt this is the last we'll hear of this dispute over the scope of Obamacare. Stay tuned.

FDCPA Surveys

by Jeff Sovern

I'm looking into survey evidence to establish or defend against a claimed violation of the Fair Debt Collection Practices Act for a possible article.  If you have conducted such a survey in one of your cases or know someone who has, please email me at sovernj at stjohns dot edu.

 

Thanks!

 

How Italian Colors Guts Private Antitrust Enforcement by Replacing it with Ineffective Forms of Arbitration

That's the title of this article by law professor Einer Elhauge. Here's his to-the-point abstract:

The recent US Supreme Court decision in American Express v. Italian Colors Restaurant threatens to gut private antitrust enforcement in the United States by replacing it with ineffective forms of arbitration. The Court's logic that the right to pursue a claim does not include a right to prove it is incoherent. The notion that voluntary consent means arbitration provisions must benefit buyers ignores the fact that buyers have collective action problems that are what justify antitrust law in the first place.

Texas Real Estate Firm Cannot Compel Yelp to Identify Anonymous Critic

by Paul Alan Levy

A trial judge in Texas has turned down a motion to compel Yelp to comply with a subpoena seeking identifying information about an unhappy consumer who complained about alleged misconduct by a Texas real estate firm, the Rhodes Team, and its agent, one Jeremy Wages, who allegedly did not stay in touch with the consumer or give good information about how much his or her house was worth; the consumer claims that, as a result, the house was sold for too low a price.  The complete review is on page 3 of this brief.
        
Apparently trying to draw on the recent decision of the Virginia Court of Appeals in Yelp v. Hadeed Carpet Cleaning, currently pending on appeal before the Virginia Supreme Court, the complaint tried to set forth a cookie-cutter version of Hadeed’s claim, asserting in an exceptionally nonspecific way that plaintiffs had looked through their database of customers and could not identify the anonymous critic as being a real customer, and on that basis claimed that the review must contain false statements.  Representing Yelp, we presented the Dendrite argument, noting both that the plaintiffs had presented no evidence of falsity and that, in any event, they were suing on a criticism that was more than a year old (hence outside the statute of limitations for libel claims).  We also argued that plaintiffs had no right to pursue their subpoena in Texas because Yelp is not resident there and the Texas Rules of Civil Procedure, coupled with the Texas version of the Uniform Interstate Deposition and Discovery Act require subpoenas to an out-of-state witness like Yelp to be pursued in California, where it is based.  It was, indeed, remarkable the number of procedural rules plaintiffs had violated in bringing their motion to compel.

At the hearing, there was a great deal of bluster from the plaintiffs’ lawyer, Robert Wilson, about the proofs he could mount if the Court were to hold an evidentiary hearing on the sufficiency of his evidence supporting the subpoena. I found myself doubting what he said he could prove because his briefs and correspondence had been so full of hot air and misstatements — and besides, if his clients could prove these things, why didn’t they just submit affidavits? Wilson's briefs are here; readers can judge the quality of the lawyering for themselves.

However, the judge never got to the First Amendment anonymity issue, but went off on the jurisdictional issue, and in an unusual way. The judge noticed that the Texas rule on special appearances allows only “parties” or indeed “defendants” to file a special appearance, and he asked for supplemental briefing on whether a “special appearance” was the proper way for Yelp to object to the Court’s jurisdiction.  In the end, the judge went with the literal language of the rule and held that, as a nonparty, Yelp could not use the special appearance process, but at the same time he quashed the subpoena for improper service and denied the motion to compel.

Plaintiffs had the gall to seek sanctions against Yelp for objecting to the subpoena, but it strikes me that it is plaintiffs who ought to be worried, because Wilson made the remarkable claim to me that in Texas, the quashing of a subpoena means that Yelp now has to comply with it and provide evidence.  When I asked it he had supporting authority, he exclaimed that I was wasting his time and hung up the phone.

Jesse Eisenger at Times DealBook Pulls Together Disclosure Debate in One Column

Here.