Obama pushes for net neutrality, unlikely ally in Justice Scalia, predictable foe in Sen. Cruz, resistance from FCC

Wading into the the net neutrality debate this week, President Obama came out strongly for it, urging the FCC to reject its proposed "fast lane" approach to regulating the internet (which we've previously discussed here) and to ensure equal access.

Yesterday, the National Law Journal looked back and found support for the President's position in a 2005 Justice Scalia dissent.

Back in the present, Engaget covers FCC chair Tom Wheeler's resistance to Obama's overtures on the issue: "I am an independent agency," the chair declared. The same story notes that Sen. Ted Cruz calls net neutrality "Obamacare for the internet." (Really? Net neutrality is going to increase health insurance coverage? Amazing!)

Apps tracking kids

Check out PrivacyGrade.org, which analyzed over 1 million applications and ranked them based on how the extent of an application's collection of information about the user matched up with the user's expectations.

A key finding from the site, reports CNN Money, is that some of the worst apps in terms of privacy are apps aimed at kids. Some examples cited by CNN:

My Talking Tom is a game where you raise a virtual cat. The gimmick: You speak to him, and he repeats everything you say. But the app takes your voice recordings, and shares that data with advertisers. And if you connect your phone to a computer, it can delete or modify files on that computer -- for a reason CMU researchers can't yet figure out.

Fruit Ninja is a game of sword-wielding, vegetarian carnage. But the app insists on knowing your precise location, carrier and phone number -- sharing that with advertisers.

Also on the naughty list: The Holy Bible. It surreptitiously grabs your contact list, phone call history, phone number, carrier and tracks your location. Bible for Kids isn't much better: It got a C, because it follows children's movements.

Some versions of the popular Angry Birds game also track your location and find your social media accounts, the CNN story notes.

Read the whole story here.

FCC Order on Faxed Ads

The Federal Communications Commission has in recent years received several petitions concerning the Telephone Consumer Protection Act. Responding to some of them, the FCC last week issued an order confirming that all faxed advertisements must include an opt-out notice. The FCC's notice explains:

The FCC’s rules require that a “facsimile advertisement that is sent to a recipient that has provided prior express invitation or permission to the sender must include an opt-out notice that complies with the requirements” established by the FCC. The rules specify that the opt-out notice contained in fax ads must:

(1) be clear and conspicuous and on the first page of the ad;

(2) state that the recipient may make a request to the sender not to send any future ads and that failure to comply, within 30 days, with such a request is unlawful; and,

(3) contain a domestic contact telephone number and fax number for the recipient to transmit an opt-out request. Fax ads sent pursuant to an established business relationship must also contain this opt-out information.

Even if the fax sender places an opt-out notice on its fax ad, it will not comply with the law unless the opt-out notice satisfies each requirement contained in the rule.

Also today, the Commission recognized that a number of parties who have sent fax ads with the recipient’s prior express permission may have reasonably been uncertain about whether the requirement for an opt-out notice applied to such “solicited” faxes, or erroneously believed that this requirement did not apply to such faxes. As such, the Commission granted retroactive waivers of this requirement to these fax senders to provide them with temporary relief from any past obligation to provide opt-out notices to fax recipients as required by FCC rules. At the same time, the Commission denied several requests for declaratory ruling that sought a ruling that the Commission lacked the statutory authority to require opt-out information on fax ads sent with a consumer’s prior express permission or, alternatively, that section 227(b) of the Communications Act of 1934, as amended (the Act), was not the statutory basis of that requirement. The Commission also confirmed that such faxes must include a fully compliant opt-out notice.

The FCC's full order is available here.

Short essay on tolling (or not) in securities class actions

Law professor Linda Mullenix has written this short essay on the Supreme Court's aborted effort to decide whether the American Pipe tolling rule applies to certain securities class actions. Here is the abstract:

This article analyzes and comments on the Supreme Court appeal in Public Employees’ Retirement System v. IndyMac MBS, Inc., No. 13-640, which was scheduled to be argued to the Court on October 6, 2014. In this case, the Court was to consider whether the filing of a putative class action under Section 13 of the Securities Act of 1933, which contains a three year limitation on bringing actions under that statute, was tolled by the American Pipe rule which suspends time limitations on pursuing the claims of putative class members. In American Pipe & Construction Co. v. Utah (1974), the Supreme Court held that the commencement of a class action suspends the statute of limitations as to all class members. In IndyMac, the Court was to address whether the American Pipe tolling decision applies to suspend the three-year time limit in the Securities Act with regard to the claims of putative class members. The Court received full briefing on the issues involved in tolling in securities and non-securities class litigation. However, in the week before oral argument, the parties settled the litigation. Consequently, the Court requested additional briefing from the parties concerning whether the Court should hear oral argument. The Court subsequently withdrew the case from the Court’s opening-week oral argument docket. Nonetheless, the tolling issue under the Securities Act of 1933 remains an open issue as a consequence of the Court’s decision not to proceed with oral arguments in the case. The briefs on appeal provide a useful primer on the tolling issue and the arguments relating to the applicability - or non-applicability - of the longstanding American Pipe tolling rule for ordinary class actions.

The third edition of the National Association of Consumer Advocates' class-action guidelines

As reported earlier on this blog by Steve Gardner, the National Association of Consumer Advocates (NACA) has published the third edition of its Standards and Guidelines for Litigating and Settling Class Actions. Take a look at Steve's excellent post, which explains why the guidelines are worth reading.

I want to let our readers know that the guidelines have now been published in the Federal Rules Decisions at 299 F.R.D. 160 (2014). One reason to view the guidelines in F.R.D. on Westlaw is that all the class-action case law cited in the guidelines can be viewed immediately by clicking on the hyperlinks.

Airbag Reports

by Jeff Sovern

The Times reported yesterday Takata Saw and Hid Risk in Airbags in 2004, Former Workers Say.  Last weekend, the Philadelphia Inquirer's Jeff Gelles weighed in with Safety agency is failing the public on air bags. One sidenote: stories on air bags and more generally on product safety rarely if ever quote law professors. I suspect that's because few law professors study these areas. When I surveyed consumer law professors on the content of their courses, there was little interest in covering product safety issues in consumer protection courses, as a result of which we didn't addd materials on that to our casebook.  The existing consumer law curriculum is pretty broad, so I certainly understand that, but surely somewhere in the law school world there are academics who specialize in these issues. And if not, that would be a shame, given the importance of these issues.

(BREAKING) Supreme Court to hear case challenging key aspect of Obamacare

This afternoon, the Supreme Court decided to hear a case raising the question whether Obamacare subsidies to assist individuals in the purchase of health insurance apply to purchasers at all health care exchanges under the law or only those run by states instead of the federal government. The Fourth Circuit adopted the former interpretation, granting Chevron deference to the interpretation of the law by the IRS and finding the agency's interpretation to be most consonant with the purpose of the law. The issue is also pending before the en banc D.C. Circuit. There is currently no circuit split.

SCOTUSblog's coverage, here, notes that the case implicates the availability of subsidies in 34 states.

Richard Feynman and Arbitration

by Jeff Sovern

Some readers of our blog will no doubt be familiar with Nobel prize-winning physicist Richard Feynman from his popular books, What Do You Care What Other People Think? or Surely You're Joking, Mr. Feynman! Others will remember him from his service on the panel that investigated the Challenger disaster.  His relevance to arbitration stems from his quote about the difference between knowing the name of something, and actually knowing what that something is. See Richard P. Feynman, What Do You Care What Other People Think? 14 (1988)( “I learned very early the difference between knowing the name of something and knowing something.”). Unfortunately, that appears to describe many of the respondents to the St. John's Arbitration Study.

Here's what I mean.  After showing respondents a contract with an arbitration clause, we asked:

If you and the credit card company have a dispute that is too large to be brought in a small claims court, did the contract you just saw say you have agreed to arbitrate it?

43% said it did, though a majority either didn't know or said the contract did not provide for arbitration.  The contract had included a bold-face reference to the arbitration clause on page two, and the clause itself appeared in bold partly on page six and partly on page seven, so that in all, the arbitration clause was referred to or appeared in bold on three of the seven pages of the contract. In addition, some of its terms were printed in italics and ALLCAPS, making it even more conspicuous.  In light of all that, it may not be surprising that 43% of the consumers noticed the arbitration clause.

But as Feynman noted, that doesn't mean they know what it meant.  Of the 43% who said that the contract provided for arbitration, 61% also believed that consumers would have a right to have a court decide the dispute, despite the fact that the contract said in bold, italics, and ALLCAPS that they wouldn't.  Nearly a fifth of those who believed that the contract mandated arbitration checked “I don’t know” when asked if consumers would have a right to sue in court.  In short, only 59 respondents—less than 9% of the total—realized that the contract both provided for arbitration and precluded litigation in court.  Similarly, of the 43% who understood that the contract specified that disputes would be resolved through arbitration, only 80 realized that they could not obtain a jury trial, meaning than only 12% of the total understood both that the contract provided for arbitration and that it precluded a jury trial of disputes. An even smaller subset of the 43%, 46 (less than 7% of the total), recognized that the contract foreclosed participation in a class action. All this even though the contract instructed respondents in bold that “It is important that you read the entire Arbitration Provision section carefully.” In short, our study,  'Whimsy Little Contracts' with Unexpected Consequences: An Empirical Analysis of Consumer Understanding of Arbitration Agreements suggests some consumers may know the word arbitration, but few know what it means.

 

FTC settles its first consumer-protection case against patent trolls

As the New York Times reports,

The Federal Trade Commission said on Thursday that it had settled its first consumer-protection lawsuit against a company for using “deceptive sales claims and phony legal threats” to try to get unsuspecting companies to license patents.

At issue is the practice of a company called MPHJ Technology Investments, described by the Times as "a patent-assertion entity, a company whose sole business is the buying of patents for use in asserting infringement claims." MPHJ threatened thousands of small to mid-size businesses with lawsuits for their use of document scanners in conjunction with a computer network, but filed no lawsuits and had no intention to do so, according to the FTC complaint.

The settlement seems mild, though: it just prohibits false representatons asserting patent rights going forward.

Read the Times story here.

The administration versus Sen. Elizabeth Warren on student loan servicers

The U.S. Department of Education, drawing applause from the Treasury Department, has moved to increase funding for student loan servicers. The goal is to improve customer service for students, according to the administration. The catch? Servicers get the money anyway, whether or not service improves.

The Huffington Post explains the concern, and Senator's Warren's position:

In September, under withering questioning from Warren, a top Education Department official conceded that the companies will get more money regardless of any changes they make to their operations. At the time, the senator was incredulous.

“Let me get this straight: You break the law. You don't follow the rules. You treat the borrowers badly," Warren said of the loan servicers. "And you all just renegotiated the contracts to make sure that across the portfolio, [loan servicers] are going to make a little more money if nothing changes?"

Read the full story here.