FDA: Weight-loss products are often ineffective and/or dangerous

Here's what the Food and Drug Administration just said about so-called dietary supplements and foods claimed to promote weight loss:

If you find yourself making this common New Year’s resolution, know this: many so-called “miracle” weight loss supplements and foods (including teas and coffees) don’t live up to their claims. Worse, they can cause serious harm, say FDA regulators. The agency has found hundreds of products that are marketed as dietary supplements but actually contain hidden active ingredients (components that make a medicine effective against a specific illness) contained in prescription drugs, unsafe ingredients that were in drugs that have been removed from the market, or compounds that have not been adequately studied in humans.

If you want detailed information on the topic, the FDA has webpage for you.

Mary Heen Paper Asks: Should Insurers Be Able to Discriminate

Mary L. Heen of Richmond has written Nondiscrimination in Insurance:  The Next Chapter, 49 Georgia Law Review (2014-2015).  Here is the abstract:

For nearly 150 years, American insurance companies have engaged in race and gender pricing practices that would be illegal if followed today by any other major commercial enterprise.  The insurance industry has defended its long-standing practices, first for race and now for gender, based on ideas about insurance “equity” developed in the nineteenth century. The continued application of these ideas, and the practices that have resulted from them, conflict with fundamental civil rights principles and should not be tolerated as exceptions to our national civil rights laws.  As that history shows, classifications used by insurers to determine rates and benefits raise complex distributional, financial, and political issues that cannot be resolved simply as technical questions of actuarial risk or economics.  This Article proposes comprehensive federal civil rights legislation to ban discrimination based on race, color, religion, national origin, and sex in insurance coverage, rates, and benefits. It explains why previous reform efforts have failed and why recent developments, including the adoption of unisex insurance rates in Europe, could make consideration of such legislation in the United States timely once again.

Privacy/technology litigation round up

A couple of significant pro-consumer, pro-privacy rulings over the last two weeks of 2014:

First, a federal district court in Minnesota rejected the argument that putative class of Target consumers harmed by the retail giant's data breach lacked standing to sue over the breach. As Law360 reports, the court "concluded that the plaintiffs' assertions that the breach had caused them to pay unlawful charges, restricted or blocked access to their bank accounts, made them unable to pay other bills, and caused them to pay unfair late charges and new card fees were sufficient to allow them to proceed with their claims at this early stage in the litigation." Read the story here. For a relevant discussion of the harms caused by data breaches, read Public Citizen's amicus brief in FTC v. Wyndham, pending in the Third Circuit.

Second, a federal district court in California rejected a motion to dismiss a class action against Facebook for intercepting the content of users' electronic messages in order to determine if users "like" a webpage (for purposes of Facebook's "like" counter) and in order to help Facebook send users targeted advertising. The putative class in the case, Campbell v. Facebook, alleges violations of both state and federal privacy law. Judge Hamilton's thoughtful opinion rejected the argument that Facebook's snooping into its users' messages is part of its "ordinary course of business" and therefore exempt from privacy protections: “An electronic communications service provider cannot simply adopt any revenue-generating practice and deem it ‘ordinary’ by its own subjective standard. The court instead finds that any interception falling within the exception must be related or connected to an electronic communication provider’s service, even if it does not actually facilitate the service.” Coverage in the Recorder is here, and the opinion is here.

CFPB bars "long-distance lawsuits" against servicemembers

Let's kick off the new year with some good news on the CFPB enforcement front:

We've been following for a few months now the story of Virginia retail chains that take advantage of servicemembers' transience to trap them in a cycle of debt. (See here for my original discussion and here for a discussion of the CFPB's first enforcement action against one of the companies -- a fine for misleading consumers.)

Now the CFPB has taken another, more significant enforcement action: it has settled a lawsuit against two of the companies (Freedom Furniture and Electronics and Military Credit Services) under terms that require the payment of millions of dollars in restitution and bar the companies from using Virginia courts to sue out-of-state consumers. Although a third company (USA Discounters, which was the target of the earlier fine) was not involved in this settlement, it appears to be softening its practices: as Pro Publica reports, "It still plans to file lawsuits in Virginia against out-of-state borrowers, but now will notify them that they can elect to be sued closer to home if they default on their payments."

Read the full Pro Publica story on the CFPB settlement here.

Key test in Fourth Circuit for sovereign immunity of state-affiliated loan entities

Today, Public Citizen filed the opening brief in Pele v. Pennsylvania Higher Education Assistance Agency, a Fourth Circuit appeal testing whether and in what circumstances state-affiliated loan entities can qualify as "arms of the state" and so partake of a state's sovereign immunity from suit.

The appeal arises out of the case of Lee Pele, a Fairfax County, Va., resident who sued PHEAA under the federal Fair Credit Reporting Act, alleging that PHEAA had failed to correct inaccurate reports stating that Pele had defaulted on tens of thousands of dollars in student loans – loans that were not, in fact, his. PHEAA sent those erroneous reports to credit agencies, threatening to hamper Pele’s plans to finish graduate school. Pele was denied a home loan and had his credit damaged for approximately two years.

PHEAA, one of the largest student-loan servicers in the nation, sought and won summary judgment against Pele on based on sovereign immunity. Representing Pele, Public Citizen is now appealing that ruling, pointing out that:

• PHEAA’s operations are financially independent of state funding;

• The state is not legally or functionally liable for a judgment against PHEAA;

• More than two-thirds of PHEAA’s loan guarantee and loan servicing businesses (which together account for more than 90 percent of PHEAA’s business) consist of non-Pennsylvania loans;

• PHEAA’s own legal filings in 2010 and 2011 identified it as a “citizen of Pennsylvania,” a status that is legally incompatible with being an arm of the state;

• The Fourth Circuit in United States ex. rel. Oberg v. PHEAA held earlier this year that PHEAA was not an arm of the state.

The outcome of the case could affect the legal remedies available to thousands of student borrowers and their families, and in fact any individual wronged by state-affiliated loan servicing entities like PHEAA. Little case law exists addressing the question of whether most state loan guarantee agencies have sovereign immunity. Meanwhile, in addition to Pele’s lawsuit, PHEAA is defending a separate case claiming that it defrauded the federal government and another case claiming that it violated its employees’ rights under federal and state wage-and-hour laws. In each of these cases, PHEAA has asserted that sovereign immunity requires dismissal or judgment in its favor.

PHEAA was created in 1963 by the Pennsylvania Legislature. In 2008, it stopped lending directly to students; now it primarily services and guarantees loans for students nationwide. It also operates under the names American Education Services and FedLoan Servicing, and in fiscal year 2013 its portfolio of loans it held, guaranteed or serviced was worth more than $100 billion.

You can read our press release here, and our opening brief here.

NYT article about partnerships between AGs and plaintiff-side lawyers

A recent New York Times story about the relationships between consumer-friendly state attorneys general and plaintiffs' lawyers that serve as outside counsel on enforcement cases that the outside lawyers themselves have recommended is worth a read -- and a big caveat.

The article is informative about how state AGs often need to turn to outside counsel for help enforcing consumer protection laws, and the piece rightly notes the potential conflict of interest present when outside counsel who have contributed to officials' campaigns also recommend enforcement actions and stand to benefit financially from being engaged as outside counsel to bring the actions. But the article, ominously entitled "Lawyers Create Big Paydays by Coaxing Attorneys General to Sue" and focusing an unexplained amount of attention on the details of how outside attorneys contact attorneys general (as if these were nefarious secret meetings), insinuates that these arrangements are mainly inside dealing while downplaying the important public purpose served by contingency arrangements with outside counsel to bring enforcement actions on behalf of the state.

Here is how the Times summarizes the practice:

The lawsuits follow a pattern: Private lawyers, who scour the news media and public records looking for potential cases in which a state or its consumers have been harmed, approach attorneys general. The attorneys general hire the private firms to do the necessary work, with the understanding that the firms will front most of the cost of the investigation and the litigation. The firms take a fee, typically 20 percent, and the state takes the rest of any money won from the defendants.

Well, what's wrong with that? Hiring outside counsel to do consumer protection work that many AG offices are understaffed to handle expands the enforcement power of those offices. The state can better enforce its laws, protect its citizens, and potentially reap financial benefits by recovering money it wouldn't have otherwise. And the contingent nature of the fees for the outside counsel ensure that (a) the state is not out any money if the suits are unsuccessful, and (b) the outside counsel have a strong incentive to find and bring meritorious cases, an incentive that decreases the chance that the AGs are lending the state's name to unjustified suits.

To be fair to the Times, the story does note (eventually) that AGs' offices often don't have the capacity to handle these suits. And the conflict-of-interest point is one worth taking into account. But ultimately, the arrangements do not seem to be an example of big money or personal relationships corrupting the system but rather instances of private ambition being put to work for public gain. (More Madison than McCutcheon.)

The real problem, which the article notes briefly at the end (without apparently seeing it as a problem), is that the large corporations are seizing on relationships between attorneys general and plaintiff-side outside counsel and using them as campaign fodder against officials engaging in a practice that seems mostly to benefit the public. The business community has also successfully pushed legislation in a number of states to restrict the practice. This Times article is likely to aid those anti-consumer efforts, unfortunately, by fueling the perception that attorneys general should not be working with the plaintiffs' bar to help expand their capacity to enforce the law.

You can read the article here.

NPR on aggressive hospital collection practices

The title of this piece, "When Nonprofit Hospitals Sue Their Poorest Patients," sums it up. The story raises important questions about nonprofit hospitals' social responsibility to low-income patients and highlights the harsh practices of one Missouri hospital that seizes more money from its patients than any other hospital in the state. The results are lawsuits, wage garnishments and unbreakable cycles of debt.

Listen to the story (a collaboration between NPR and ProPublica) here.

Department of Justice looking for lawyers to enforce U.S. consumer laws

The Department of Justice's Consumer Protection Branch is looking to hire lawyers to enforce the Nation's consumer laws. And because enforcement of those laws is a frequent topic of this blog, it seemed sensible to post the announcements here. The deadline to apply for these jobs is January 2, 2015.

One job announcement is for experienced litigators. The other is for for a newly created position heading up a consumer policy department. The first appears immediately below; the latter appears after the jump.

Civil Division (CIV)

Consumer Protection Branch

Attorney

Washington, DC 20530

United States

 

About the Office: The Consumer Protection Branch is responsible for protecting the health, safety, and economic security of the American consumer.  The Consumer Protection Branch leads the Justice Department's efforts to enforce federal consumer protection statutes throughout the United States. The Branch's affirmative litigation  - criminal and civil  - includes enforcement actions involving adulterated and misbranded food, drugs, and devices; hazardous and unsafe consumer products; unfair and deceptive advertising and franchising practices; unfair consumer credit and debt collection practices; deceptive and fraudulent internet and mail order sales; all types of financial  fraud; and unlawful practices that target vulnerable consumer populations.  This litigation typically involves consumer protection matters of national significance.  The Branch's defensive litigation  includes actions challenging federal policies, initiatives, and regulatory actions relating to foods, drugs, devices, and other consumer products.  Much of the litigation handled by the Branch brings Congressional and media interest and scrutiny.  The Branch works closely with the Food and Drug Administration, the Federal Trade Commission, the Consumer Product Safety Commission, and the National Highway Traffic Safety Administration.

 

Job Description: The Consumer Protection Branch is seeking experienced attorneys to represent the United States in a broad range of civil and criminal litigation. More than one position may be filled from this announcement.

 

Qualifications: Applicants must possess a J.D. degree, be duly licensed and authorized to practice as an attorney under the laws of any State, territory of the United States, or the District of Columbia, and be an active member of the bar in good standing. Applicants must have at least two years of post J.D. experience to qualify at the GS-13 level; at least three years of post J.D. experience to qualify at the GS-14 level; and at least four years of post-J.D. experience to qualify at the GS-15 level.

Applicants must have excellent writing, negotiation, and interpersonal skills, exhibit good judgment, and have experience in trial work. Judicial clerkship experience is desirable.

Salary: The salary for these positions will be at the GS-13 to GS-15 level ($89,924.00 to $157,100.00 per year). Salary level will be determined by a candidate's qualifications and experience.

 

Travel: Occasional travel.

 

Application Process: Applicants must submit a resume or current OF-612 (Optional Application for Federal Employment), a cover letter (highlighting relevant experience), and a writing sample (not more than 15 pages in length) to: Consumer.Protection@usdoj.gov

Email links icon

Please specify in the subject line of the e-mail that the application is for a " CPB Trial Attorney" position. No telephone calls, please. Application materials must be received by January 2, 2015.

Application Deadline: Friday, January 2, 2015

Relocation Expenses: Not authorized.

Number of Positions: FEW

 

Non-disparagement clause hall of shame -- businesses behaving badly

In a must-read for consumers who value their right to criticize companies they do business with, Techdirt has compiled this list of businesses that employ contract language to try to silence criticism from customers. These companies threaten fines from $2,500 up to a mindboggling $100,000 for customer criticism.

Earlier this year, as we've discussed, a Utah couple won a judgment of more than $300,000 against online retailer KlearGear.com for this nefarious practice and the company's ensuing revenge on the couple via a bogus credit report, and California banned the use of non-disparagement clauses.

Kudos to Techdirt for this valuable research.

Citing new study, New York bans fracking statewide

In a victory for consumers and the environment, the administration of New York Gov. Andrew Cuomo will impose a statewide ban on the controversial technique known as hydraulic fracturing or "fracking" for gas.

Reuters quotes state health commissioner Howard Zucker: "The potential risks are too great, in fact not even fully known, and relying on the limited data presently available would be negligent on my part."

New York will become the second state to ban fracking, joining Vermont.

Read the full story here.