Senate eliminates filibuster for judicial nominees

Big news with implications for many aspects of the law. The changes eliminate filibusters on most nominees, but preserve the filibuster for Supreme Court picks and legislation. Politico has the story.

CFPB Takes Enforcement Action Against Payday Lender

The CFPB yesterday announced an enforcement action against payday lender Cash America International Inc. According to the CFPB's press release, Cash America will pay up to $14 million in refunds to consumers for robo-signing court documents in debt collection lawsuits, and will pay a $5 million fine for the robo-sgning and for destroying records in advance of the CFPB’s investigation. The enforcement action is the CFPB's first against a payday lender.

CFPB Files Brief Opposing Tribal Lenders' Quasi-Preemption Argument

Last week, the CFPB filed an amicus brief in the Second Circuit in Otoe-Missouria Tribe of Indians et al. v. New York Department of Financial Services, a case in which online tribal payday lenders are challenging regulation by New York State. The CFPB's brief takes issue with the lenders' argument that Title X of the Dodd-Frank Act and Congress's creation of the Bureau indicates a federal interest in protecting tribal lenders from otherwise applicable state regulation. To the contrary, the brief explains, Section 1041 of the Act makes clear that Title X does not displace state law except to the extent that it is inconsistent with Title X and the Act defines “State” to include “federally recognized Indian tribe[s]." So if the court applies a balancing test, no federal interest favors the tribe's position.

Plaintiff-Side Appellate Advocacy at Yale Law School

For those in New Haven: I'll be giving a talk about plaintiff-side appellate advocacy at noon tomorrow (Thursday) at Yale Law School. Among other things, I'll discuss the advocacy imbalance facing consumers, workers, and other plaintiffs in the appellate courts and touch on the fate of class actions in the Roberts Court. Hope to see you there.

And a reminder for those who registered: Our webinar with the folks at Ballard Spahr on the future of disparate impact is at noon today. 

Another Unsung Hero of the Public Interest Movement

by Paul Alan Levy    

One of the sweetest things that Public Citizen does each year is recognize a long-time public interest staffer whose work is vital to that staffer's organization, but whose work is sufficiently behind-the-scenes that he or she receives no public recognition.  The award is named for Phyllis McCarthy, who started working for Public Citizen's Health Research Group shortly after I came to the Litigation Group, whose work was vital to HRG and indeed to Public Citizen as a whole (a book whose technical aspects she shepherded sold two million copies; the profits enabled us to buy our lovely headquarters in Dupont Circle and to move out of The Headquarters Building where we had been located for my first eighteen years at Public Citizen).  After she died suddenly a dozen years ago, Ralph Nader proposed the idea of an award in her name that would recognize other unsung heroes like herself.

This year, the Eleventh Phyllis McCarthy Award went to Catherine Jones, who has worked for the Center for Pogressive Reform here in DC for the past eight years.  You can read about the reasons for her award here.

Do your dietary supplements contain "speed"-like substances? You may want to check.

Dietary supplements often are taken for their drug-like effects, but, unlike drugs, they are subject to very little federal regulation because they are (supposed to be) made solely from "natural" substances. So, with that in mind, read this article by Alison Young. Here's an excerpt:

For the second time in recent weeks, scientists have found a "non-natural" amphetamine-like compound in dietary supplements – yet federal regulators have issued no warnings to consumers about the ingredient. Tests of 21 supposedly all-natural supplements by U.S. Food and Drug Administration scientists found nine products that contain the compound, according to their findings published in the Journal of Pharmaceutical and Biomedical Analysis.

NYT coverage of new Facebook terms of service

Implementing the settlement over its "Sponsoned Stories" program -- to which Public Citizen objected in May and has now appealed this fall -- Facebook has changed its privacy program to make more clear to users when it will use their images in advertising. As the Times put it, "If you post something on Facebook, let there be no doubt that it can end up as an ad shown to your friends and acquaintances." The Times notes that the FTC is investigating, and Sen. Markey of Massachusetts is promoting a bill to protect teenagers from being used in advertising.

Supreme Court grants review to reconsider "fraud-on-the-market" theory of reliance in class-action securities litigation

The Supreme Court has granted review in yet another class action, and this one has large implications for the future of securities-fraud litigation. In Haliburton v. Erica P. John Fund, the Court will decide whether to overrule or substantially modify the rule in Basic, Inc. v. Levinson (1988), which adopted the "fraud-on-the-market" theory of reliance in securities-fraud litigation.

Put simply, that theory says that stock prices of a publicly-traded company go up and down based on all the known relevant information about the company. So, in an open securities market, people can assume (and have a right to assume) that all material information is available to current and potential investors. The idea, then, is that when the company makes material misstatements about the company''s financial situation or expected course of conduct, it defrauds the entire market, and the company's stock price is affected for all shareholders. Basic therefore held that an individual shareholder was entitled to a presumption of reliance on the company's material mistatements, even if he or she did not knowingly rely on them. Among other things, that presumption greatly simplifies class certification in a securities-fraud case. On the other hand, imagine the difficulty if the law required a showing of individual actual reliance on material mistatements.

Only six justices participated in Basic. (The vote was 4 to 2.)  Of the three justices who did not participate, two (Justices Scalia and Kennedy) remain on the Court.

Here are the questions presented in Haliburton:

1. Whether this Court should overrule or substantially modify the holding of Basic Inc. v. Levinson, 485 U.S. 224 (1988), to the extent that it recognizes a presumption of classwide reliance derived from the fraud-on-the market theory.

2. Whether, in a case where the plaintiff invokes the presumption of reliance to seek class certification, the defendant may rebut the presumption and prevent class certification by introducing evidence that the alleged misrepresentations did not distort the market price of its stock.

The cert-stage Supreme Court briefs in Haliburton are here.

Knapp Chapter on Unconscionability

Charles L. Knapp of Hastings has written Unconscionability in American Contract Law: A Twenty-First Century Survey.  Here's the abstract:

The notion that a court tasked with enforcing a private agreement should be allowed  – or even, in some cases, required –  to withhold enforcement because of the unfairness of the agreement is not a new one; scholars have traced it back well beyond the earliest days of the Anglo-American legal system.  In the United States, the current formulation of that idea can be found principally in the doctrine of unconscionability, which has enjoyed since its incorporation into the Uniform Commercial Code a place in the menu of contract law doctrines, even if a somewhat insecure and sometimes disputed one. 

This Chapter summarizes with a few broad strokes the earlier story of modern unconscionability law in the U.S.   It then focuses on the history of that doctrine in American courts over the last two decades, identifying those situations in which it has been most frequently advanced, and those where it has been most likely to succeed.  This also entails exploring the interaction of that doctrine with the federal law favoring enforcement of private contractual agreements to submit future disputes to arbitration.  Finally, the Chapter considers generally the possible future development of unconscionability law, with particular regard to the continued utility of the “procedural/substantive” dichotomy, and the employment of unconscionability as a tool for policing contracts of adhesion.

Applebee's workers to Second Circuit: the Supreme Court's Comcast decision doesn't undermine wage-and-hour class actions

Today Public Citizen filed the opening brief in an appeal on behalf of a putative class of Applebee's workers throughout New York State. The workers sued their employer, T.L. Cannon, owner and operator of 53 Applebee's locations in New York, claiming various wage violations, including that the employer trained its supervisors and managers to manipulate time records to reflect rest breaks that the employees didn't actually take (resulting, obviously, in underpayment of wages).

As we've discussed before, the main legal issue on appeal is whether the district court here erred when it held that the Supreme Court's March 2013 decision in Comcast v. Behrend forecloses certification of a damages class action where damages for each class member have to be calculated individually. As our brief explains, that has never been the law. Moreover, if the district court is affirmed, class action law would be profoundly altered and most wage-and-hour class actions would be in jeopardy, because in most wage cases damages are individualized: workers in the class rarely have worked the exact same hours.

The facts of this case show why issues common to the class predominate over the individualized question of damages: the plaintiffs allege, and have evidence from the mouths of defendants' own restaurant managers to show, that Cannon had a practice of requiring managers and supervisors to "shave time" off employee time records and that Cannon had a policy of not paying other wages required under state law.

So far three other courts of appeals (the Sixth, Seventh, and Ninth) have rejected the district court's position that Comcast forecloses class certification where damages must be measured individually. Let's hope the Second Circuit agrees.