Justice Stevens on gun violence and revising the Second Amendment

With poignant timing (as Kansas City mourns three deaths yesterday from a shooting spree by a KKK-linked gunman at a Jewish community center, and the nation this week marks the anniversaries of the Boston Marathon bombing and the Oklahoma City bombing), the Washington Post has a thought-provoking opinion piece from Justice Stevens, one of the long-serving justices in the Supreme Court's history (1975-2010), about how to revise the Second Amendment to bring it into conformity with its original meaning and address what he describes as the "ongoing national tragedy" of gun violence in the United States.

Citing the "the roughly 88 firearm-related deaths that occur every day," Justice Stevens expresses concern that "[a]s a result of the rulings in Heller and McDonald" -- from which Justice Stevens dissented when he was on the Court -- "the Second Amendment, which was adopted to protect the states from federal interference with their power to ensure that their militias were 'well regulated,' has given federal judges the ultimate power to determine the validity of state regulations of both civilian and militia-related uses of arms." Justice Stevens proposes that this "anomalous result can be avoided by adding five words to the text of the Second Amendment to make it unambiguously conform to the original intent of its draftsmen. As so amended, it would read: 'A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms when serving in the Militia shall not be infringed.'"

Read the entire essay here.

Call for papers on commerical and related consumer law from the Association of American Law Schools

The Association of American Law Schools (AALS) is calling for papers from scholars in commercial and consumer law for presentation at its annual meeting in January 2015. The "call" is reproduced after the jump.

Budget cuts mean tax cheaters get away with their cheating

We've told you before about the mammoth "tax gap"-- the difference between what Americans ought to pay in federal taxes and the amount that they actually pay:

The IRS even publishes a tax gap map, which identifies the sources of the missing revenue.

We've posted about the federal budget sequester and the craziness of cutting the IRS budget if you're a deficit hawk. Now, on the eve of the federal tax filing deadline, the Associated Press reports that taxpayers "chances of getting audited are lower than they have been in years." Why? Budget cuts. Go here to see your chances of getting audited last year (less than 1% for most taxpayers). And IRS commissioner John Koskinen says that the number of audits will go down this year. Automated systems catch the most obvious cheating by wage earners, but, as Koskinen says, “We keep going after the people who look like the worst of the bad guys, But there are going to be some people that we should catch, either in terms of collecting the revenue from them or prosecuting them, that we’re not going to catch.”

Rhonda Wasserman on cy pres in class actions

Law professor Rhonda Wasserman has written Cy Pres in Class Action Settlements. Here is the abstract:

Monies reserved to settle class action lawsuits often go unclaimed because absent class members cannot be identified or notified or because the paperwork required is too onerous. Rather than allow the unclaimed funds to revert to the defendant or escheat to the state, courts are experimenting with cy pres distributions – they award the funds to charities whose work ostensibly serves the interests of the class “as nearly as possible.” Although laudable in theory, cy pres distributions raise a host of problems in practice. They often stray far from the “next best use,” sometimes benefitting the defendant more than the class. Class counsel often lacks a personal financial interest in maximizing direct payments to class members because its fee is just as large if the money is paid cy pres to charity. And if the judge has discretion to select the charitable recipient of the unclaimed funds, she may select her alma mater or another favored charity, thereby creating an appearance of impropriety. To minimize over-reliance on cy pres distributions and to tailor them to serve the best interests of the class, the Article makes four pragmatic recommendations. First, to align the interests of class counsel and the class, courts should presumptively reduce attorneys’ fees in cases in which cy pres distributions are made. Second, to ensure that class members and courts have the information they need to assess the fairness of a settlement that contemplates a cy pres distribution, class counsel should be required to make a series of disclosures when it presents the settlement for judicial approval. Third, to inject an element of adversarial conflict into the fairness hearing and to ensure that the court receives the information needed to scrutinize the proposed cy pres distribution, the court should appoint a devil’s advocate to oppose it. Finally, the court should be required to make written findings in connection with its review of any class action settlement that contemplates a cy pres distribution.

Tidmarsh Article on Auctioning Class Settlements

Jay Tidmarsh of Notre Dame has written Auctioning Class Settlements, forthcoming in the William & Mary Law Review. Here's the abstract:

Although they promise better deterrence at a lower cost, class actions are infected with problems that can keep them from delivering on this promise. One of these problems occurs when the agents for the class (the class representative and class counsel) advance their own interests at the expense of the class. Controlling agency cost, which often manifests itself at the time of settlement, has been the impetus behind a number of class-action reform proposals.

This Article develops a proposal that, in conjunction with reforms in fee structure and opt-out rights, controls agency costs at the time of settlement. The idea is to allow the court, once a settlement has been achieved, to put the class’s claims up for auction, with the settlement acting as  reserve  price. An entity  that outbids  the settlement becomes owner of the class’s claims, and may continue to pursue the case against the defendant. A successful auction results in more compensation for the class. On the other hand, if no bids are received, the court has evidence that the settlement was fair. The prospect of a settlement auction also deters class counsel and the defendant from negotiating a sweetheart deal that sells out the class.

The Article works through a series of theoretical and practical issues of settlement auction, including the standards that a court should use to evaluate bids, the limitations on who may bid, and the ways to encourage the emergence of an auction market.

Bob Adler, Acting Chair of the CPSC, speaks at Public Citizen

A fascinating talk here today from Acting Chairman Adler, who displayed a wide range of expertise and institutional memory about the CPSC's history, jurisdiction, and actions. Although his outlook is generally pro-regulatory, he also pointed to the importance of protecting small businesses from overly onerous regulations; he came across as neither inflexible nor one-sided in his perspective on the costs and benefits of regulation.

Among some of Adler's particularly salient points about the Consumer Product Safety Commission:

-The CPSC is often hamstrung by the extensive procedural requirements Congress has imposed on its rulemaking, requirements that are more stringent than those imposed by the White House's anti-regulatory gatekeeper, OMB.

-Cost-benefit analyses are often skewed to overstate the costs associated with regulation because the focus of the analysis is on short-term costs. Over time, however, in Adler's experience, businesses quickly adapt to regulations and costs both to businesses and to consumers drop precipitously.

-Addressing the argument that safety regulations impose costs on society, Adler observed that the hazards regulations are designed to ameliorate or prevent are already imposing costs on society in terms of deaths and injuries (and concomitant health care and insurance costs). Adler sees safety regulations not as imposing costs but rather reallocating existing costs by requiring that the businesses that make, and the consumers that use, potentially dangerous products internalize the costs rather than imposing them solely on the consumers or on innocent bystanders or the public at large.

Two of the most interesting questions from the audience concerning the future direction of the CPSC were how the CPSC would respond to international trade agreements that might force the U.S. to adapt to less protective safety standards in force in other countries, and how the CPSC would address new technologies such as 3D printers that change the way products are manufactured.

In a political climate in which regulators are often demonized, I think we'd all benefit from hearing more from thoughtful and experienced regulators like Bob Adler.

Hadeed Carpet Cleaning’s Manipulation of Its Appearance on Angie’s List

by Paul Alan Levy

When I was pulling together my recent analysis of Hadeed Carpet Cleaning’s assertion that its negative reviews had appeared on Yelp only after it pulled its advertising from Yelp, I figured that it might be helpful if I ran a cross-check against how Hadeed is portrayed on other web sites that address the quality of local businesses.  As the blog post makes clear, Hadeed’s portrayal on the Better Business Bureau web site, and in the pages of the Washington Consumer Checkbook, was comparable to the reviews found on Yelp.  The pervasiveness of these adverse consumer reviews make it hard to credit Hadeed's claim, which the Wall Street Journal published uncritically, that it was a handful of negative reviews on Yelp, from posters whom Hadeed claims may not really have been its customers, that drove Hadeed's business down by thirty percent.  And not only has Hadeed not accused these sources of extortion, but neither one sells advertising to businesses, so it seems quite likely that Hadeed’s problem is neither malevolence on Yelp’s part, nor fake reviews from non-customers, but uneven service from Hadeed that produces genuinely discontented consumers.  

I was a bit surprised, though, not to have been able to find any reviews about Hadeed on Angie’s List.  Given Hadeed's claim to have had 30,000 customers per year, its absence from Angie's List was remarkable.  I asked Angie’s List about the absence, but unfortunately I did not hear back until after I put up my article.  An email from its customer service pointed me to this listing, which notes that Hadeed has asked  Angie’s List to remove it from the database altogether.  When I saw the listing, I could see why Hadeed wanted out – its average grade is C, and fully half of its member reviews give Hadeed an F.  

My working assumption was that Hadeed must have wanted to get itself out of the database because it didn’t want to be subjected to any further consumer reviews.  This conclusion would be consistent with the possibility that Hadeed's lawsuit against the anonymous Yelp reviewers was similarly designed to chill future consumer reviews.  I was concerned, however, that Angie’s List might be unwitting facilitating Hadeed’s coverup about how consumers really feel about its services, by making it too hard for its own members to find out how other members had reviewed Hadeed.

I followed through by consulting with the Angie’s List customer service representative, who explained to me how other consumers could best search for information about Hadeed; I was therefore able to discover that Hadeed actually has three separate pages on Angie’s List, one of which was apparently created in November 2013, shortly after Hadeed’s October 18, 2013 request to have its original page removed from Angie’s List.  (The third page was created in 2007, but was put in the Angie’s List “penalty box” when Hadeed failed to respond to a customer complaint in 2009).  So perhaps the reason for removal was just to try to reinvent itself on Angie’s List, eliminating from view the many harsh reviews of its business over the past several years.  And by allowing the creation of multiple listings, while removing Hadeed’s original page from full accessibility, Angie’s List may be unwittingly facilitating this strategy.

I tried to contact Hadeed, through its counsel, to ask about its request for removal from Angie’s List, but Hadeed was unwilling to respond.

FTC settles FCRA cases against two data brokers

From the FTC’s press release:

Two data brokers have agreed to settle Federal Trade Commission charges that they violated the Fair Credit Reporting Act (FCRA) by providing reports about consumers to users such as prospective employers and landlords without taking reasonable steps to make sure that they were accurate, or without making sure their users had a permissible reason to have them.

In separate cases, the two companies – Instant Checkmate, Inc., and InfoTrack Information Services – have agreed to pay civil penalties and will be prohibited from continuing their alleged illegal practices.

Suing your bank? Prepare to pay up

...is the title of this informative story from WSJ's MarketWatch about a new study from the Pew Charitable Trusts released today. The takeaway is that although most consumers don't read banking-contract fine print (the median length of which is 44 pages),

more banks are adding verbiage to their checking account fine print that prevents customers from suing the bank individually or as part of a class-action lawsuit, a study released Wednesday by The Pew Charitable Trusts reveals. What’s more, some banks require consumers who pursue a claim against the bank to pay the bank’s expenses — regardless of the outcome of the dispute.

Among the chief dangers, as always, are mandatory arbitration clauses, which the study found were included in the fine print for 70% of checking accounts.

Check out the study itself here.

CFPB Monitor's Story on Fine Print Conference

I don't usually link to posts on Ballard Spahr's CFPB Monitor on the theory that our readers also read their blog (and if you don't, you should), but just in case that theory is incorrect as to some of our readers, here is the the story.