Deference to the Senate in Noel Canning

As Gerard Magliocca noted in October, he and I are the only commentators who’ve taken the position that the courts ought to defer to the Senate’s view of its own recess in NLRB v. Noel Canning. Given that, I was pleased that the notion of deferring to the Senate received so much attention at oral argument yesterday. I was disappointed, though, that the justices didn’t question the dominant view of the Senate’s wishes. Instead, they appeared to accept at face value the claim by a group of minority-party senators that the Senate, as a body, opposed the appointments.

Great summary of what's wrong with forced arbitration

Definitely read this op-ed in the L.A. Times by Nan Aron, president of the Alliance for Justice. Perfectly encapsulates the myriad problems with forced arbitration, and includes this pithy metaphor:

Imagine the Dodgers have just won the pennant and are going to play the Yankees in the World Series. But the rules have changed: All games will be played in Yankee Stadium. And there are new umpires, hired and paid by the Yankees. With rules like that, the Dodgers wouldn't stand much of a chance.

A state AG's parens patriae action is not a "mass action" under the Class Action Fairness Act

Says the Supreme Court this morning. No surprise there. Here's the first paragraph of Justice Sotomayor's unanimous opinion:

Under the Class Action Fairness Act of 2005 (CAFA or Act), defendants in civil suits may remove “mass actions” from state to federal court. CAFA defines a “mass action” as “any civil action . . . in which monetary relief claims of 100 or more persons are proposed to be tried jointly on theground that the plaintiffs’ claims involve common questions of law or fact.” 28 U. S. C. §1332(d)(11)(B)(i). The question presented is whether a suit filed by a State as the sole plaintiff constitutes a “mass action” under CAFA where it includes a claim for restitution based on injuries suffered by the State’s citizens. We hold that it does not. According to CAFA’s plain text, a “mass action” mustinvolve monetary claims brought by 100 or more personswho propose to try those claims jointly as named plaintiffs. Because the State of Mississippi is the only named plaintiff in the instant action, the case must be remanded to state court.

Class counsel in Facebook "Sponsored Stories" case seeks to impose $32,000 appeal bond on class-action objectors

In May, we told you about a privacy case against Facebook that was settled without much benefit to the class. The case involved Facebook’s practice (called “Sponsored Stories”) of featuring the names and images of its users in advertising without the users’ consent. As alleged in the complaint, when a user interacts with a company on Facebook (for instance, by clicking "Like"), the interaction is repackaged by Facebook into an ad for the company. Public Citizen represents objectors to the settlement, and in September, we filed an appeal on behalf of five parents who objected to the settlement's allowance of the use of their kids' images for marketing without parent consent, in violation of several state laws.

In general, appellate filing fees are unlikely to exceed a few hundred dollars. But late last week, class counsel filed a motion asking the court to require that each one of the parent-objectors post an appeal bond of $32,000, almost all of which would be to cover "administrative expenses" associated with administering the settlement during appeal. That's one expensive appeal!

The motion, which appears to be an attempt to intimidate objectors from appealing, was filed not by Facebook but by class counsel, The Arns Law Firm, which stands to gain millions of dollars in fees if the settlement is affirmed, and whose fees will be reduced by settlement administrative expenses. This motion is troubling for a number of reasons.

First, the motion seeks to hold class action objectors responsible for "administrative expenses" incurred by the settlement administrator during appeal. That position is not supported by the governing case law. And rightly not. Our system does not require objecting class members to cover any “administrative expenses” associated with their original objections; if they were responsible for such expenses on appeal, the threat of massive liability would deter all but the wealthiest and most confident objectors from obtaining appellate review. Objectors play an important role in ensuring that class action settlements are fair to absent class members; this role continues on appeal. Huge appeal costs would all but eliminate objectors’ appeals.

Second, although class counsel estimates the total costs will be $32,000, the motion seeks a bond in that amount against each of 15 objectors (Public Citizen's clients, plus all of the others who have appealed). The purpose of a bond is to make sure a party recovers its costs. Even assuming counsel is entitled to $32,000 in administrative expenses if the settlement is upheld on appeal, imposing a $32,000 on 15 different people secures 15 times the amount of money counsel could actually claim. It's hard not to draw the conclusion that the goal here is intimidation of the objectors.

Third, the appeal-bond motion casts aspersions on the motivations of the objectors -- "whose primary interest," class counsel intones (with no sense of irony), "is their own compensation." I can't speak for the motivations of anyone other than Public Citizen's clients, but the parents Public Citizen represents don't stand to gain a cent if their appeal is successful; the only issue they are raising on appeal is the privacy of their children.

Opponents of class actions denigrate them as a vehicle to enrich class counsel while providing little or no benefit to the class. Strong-arm tactics like trying to impose exorbitant bonds on objectors who assert their right to appeal are troubling not just because they hinder access to justice but also because they play into the negative stereotype about class actions and class counsel, distracting from the great good that class actions can do in helping to redress systemic wrongs that would be difficult or economically infeasible to tackle on an individual basis.

For a few examples illustrating the usefulness of the class action device, consider this case about illegal debt collection practices, this case about defective car brakes, and this case about deceptive marketing by a for-profit college.

Facebook retires name "Sponsored Stories," but will continue to display ads with users' images

We've written before about Facebook's "Sponsored Stories" program that repackages its users' interactions with companies as ads for those companies. (Public Citizen objected when the case was settled without much benefit to the class.)

Now Facebook is apparently retiring the "Sponsored Stories" name but not the general idea. According to Facebook's blog post last week, "marketers will no longer be able to purchase sponsored stories separately; instead, social context — stories about social actions your friends have taken, such as liking a page or checking in to a restaurant — is now eligible to appear next to all ads shown to friends on Facebook." So what's the next step for marketers, according to Facebook? Well (again quoting their blog), "we gave notice to our ad partners that this change relating to sponsored stories will start in the first quarter of this year so they can update their tools and continue supporting the marketers they work with." Sounds like business as usual to me.

Not sure it's much comfort when a parent sees an image of her daughter popping up in an ad on Facebook that it's just her daughter's "Social Context" rather than a "Sponsored Story."

Tobacco companies and DOJ agree on details of messages to correct companies' lies about smoking and health

Fifteen years ago, the Department of Justice sued the major cigarette companies, alleging that the companies conspired to mislead consumers about the risks of tobacco products. The US District Court for the District of Columbia ruled for DOJ, and the ruling was upheld on appeal. Among other things, to remedy the companies’ misleading statements, the court ordered them to put out advertisements correcting their lies and to stop marketing cigarettes as “light” or “low-tar.”

The court previously approved the text of the corrective messages, and that order is on appeal. On Friday, DOJ and the companies reached an agreement on the format and placement of the messages. They agreed that they will appear in the print and online editions of newspapers, on television, and on the companies’ websites. The agreement also provides that additional information on the adverse health effects of smoking will appear on cigarette packages.

The previously court-approved text of the messages will explain that a federal court found that the four companies “deliberately deceived the American public,” describe companies’ wrongdoing, and include correct public health information concerning the dangers of smoking and its addictiveness, second-hand smoke, and the truth about low-tar and light cigarettes.

Tobacco-control groups, which participated in the litigation as intervenors, issued a press release characterizing the agreement as an “important step forward.”

Lack of public awareness may be Affordable Care Act's biggest problem

The federal government's faulty Affordable Care Act (ACA) website -- and similar problems on some state-run ACA websites -- may not be the biggest problem facing the ACA's implementation. As this article by Jonathan Easley explains, a new survey conducted by Enroll America, "a nonprofit with close ties to the Obama administration that is aiming to sign people up, found seven out of 10 uninsured people in the United States haven’t visited an ObamaCare online exchange yet. ... 81 percent said they didn’t know March 31 is the open enrollment deadline, after which they would be subject to the individual mandate penalty, if they remain uninsured. Sixty-nine percent said they weren’t aware that tax subsidies and financial help might be available for them, and 59 percent said they didn’t know anything about plans that may be available in their state."

Ed Mierzwinski on the Target data breach

On his blog at U.S. PIRG, Ed Mierzwinski expounds on the Target data breach in a post entitled Target says "Oops, 70-110 million consumers hacked."  He points out that 70 to 100 million, "not the original 40 million customers, had their credit or debit card numbers hacked in December (or possibly at other times). Even worse, Target is admitting that the database stolen from the big-box retailer included a lot more than credit or debit card numbers and their associated security codes and expiration dates." Ed notes that federal law provides less protection to debit-card consumers than to credit-card consumers, but that, in either case, fraudulent use of your card can be a major headache even if it doesn't send you to the poorhouse. Ed warns consumers to be aware of phishing attacks based on information obtained by bad guys from Target. And he says consumers should not buy expensive credit-monitoring services, which he views as nearly worthless. Worth reading.

And while you're at it, take a look at our earlier post on this topic, which contains tips from the National Consumer Law Center, Consumer Action, and U.S. PIRG about how to limit damage from the Target data breach. That was posted back when we thought only 40 million customers were affected.

Times Article on the Possible Use of Eminent Domain to Deal with Underwater Homes

Here.  The article describes the opposition from the industry to the plan--which includes threats not to make mortgage loans in the future in communities that use eminent domain to seize underwater home--and also discusses what happened in 2002 when the industry made good on such threats in response to a different law:

In 2002, the Georgia Legislature passed the toughest predatory-lending law in the country. Hailed as a victory for consumers, it was intended to prevent abusive practices like steering customers to high-interest loans. Lenders immediately started trying to dismantle the law, warning that the “good guys” would no longer make loans to people with poor credit.

Some lenders did pull out of the state, and two of the three ratings agencies said they could no longer rate Georgia loans for resale to investors because they could be sued under the law. The state banking commissioner estimated that the mortgage market shrank by 15 percent. The following year, after a nasty fight, lawmakers gutted the statute.

[Securities Industry and Financial Markets Association] officials point to this affair as proof that messing with housing finance can have ruinous effects. But it is an example that offers other lessons, too.

The loans that disappeared from the market after the law was passed were the same kinds of subprime loans that set off the foreclosure wave; conventional 30-year mortgages were not affected. The lenders whose departure was met with such alarm included Countrywide Financial, whose practices during the housing boom have cost billions in legal settlements.

In an article in The Atlanta Journal-Constitution, experts concluded that had the law stayed intact, the housing crisis would have been less dire in the state, which became one of the hardest-hit. The article even implied that the whole country might have fared better, because “the Georgia drama also stemmed a tide of similar laws that were being considered in other states.”

The CFPB's Past, Present, and Near Future

WaPo has the article about the past and present, A watchdog grows up: The inside story of the Consumer Financial Protection Bureau, while the Times covers the future in Federal Consumer Agency Ponders Its Next Crusades.  Both are worth a read.  (HT: Ed Mierzwinski)