President Obama says law schools should ditch the third year to save students money

Beginning his remarks by saying that "[t]his is probably controversial to say, but what the heck, I'm in my second term so I can say it," President Obama said today that law school should probably be two years rather than the current three because that would save law students a lot of money. Read more about what he said here.

Excellent First Amendment whistleblower ruling from the Ninth Circuit

About a year ago, Public Citizen petitioned for rehearing in a case in which a three-judge panel of the Ninth Circuit affirmed the dismissal of a First Amendment retaliation claim brought by a police officer who courageously spoke out after he witnessed the abuse of suspects within his department. In a welcome development this week, the Ninth Circuit, having agreed to rehear the case, ordered the claim reinstated in a thorough and thoughtful opinion that not only gets the law right but lays out helpful guideposts for future whistleblower claims under the First Amendment.

In particular, the court noted that an employee's speech is likely to be protected where he has gone outside the chain of command, violated orders from his superiors in speaking, or is discussing "broad concerns about corruption or systemic abuse" (as opposed to making a "routine report").

The court also overruled a previous decision that had practically foreclosed, as a categorical matter, a First Amendment retaliation claim brought by any California police officer.

You can read more about the case from the L.A. Times and from our press release.

Good news from the courts of appeals on Comcast v. Behrend

As we've discussed several times since March, the Supreme Court's decision this spring in Comcast Corp. v. Behrend has provided fodder for a new and dangerous argument that a damages class cannot be certified whenever the damages must be calculated individually. District court decisions have been mixed on this question, but so far the response from the circuits has been good -- both the Sixth and Ninth Circuits have rejected the argument.

Now, two more encouraging signs. First, last week the Second Circuit granted a petition for leave to appeal the denial of class certification in a wage-and-hour case on behalf of workers at Applebee's restaurants in New York State; in the decision the court of appeals agreed to review, the district court squarely held based on Comcast that the need for individualized damages calculations defeats class certification. (Public Citizen is co-counsel for plaintiffs on appeal.)

Second, just yesterday the Seventh Circuit, in a forceful opinion by Judge Posner reaffirming its prior decision in favor of class certification in a design-defect case about front-loading washing machines, joined the growing chorus rejecting the defense bar's reading of Comcast. As Judge Posner colorfully explained:

It would drive a stake through the heart of the class action device, in cases in which damages were sought rather than an injunction or a declaratory judgment, to require that every member of the class have identical damages. If the issues of liability are genuinely common issues, and the damages of individual class members can be readily determined in individual hearings, in settlement negotiations, or by creation of subclasses, the fact that damages are not identical across all class members should not preclude class certification. Otherwise defendants would be able to escape liability for tortious harms of enormous aggregate magnitude but so widely distributed as not to be remediable in individual suits.

 

"Debt relief" company pushes back against CFPB

The Blog of LegalTimes reports:

When Morgan Drexen Inc. found itself in the Consumer Financial Protection Bureau's crosshairs, the company, which works with law firms to provide debt relief services to consumers, initiated a response that's proving to be both unusually aggressive and public.

The CFPB filed suit against the company earlier this week in California federal court, alleging that it charged illegal up-front fees and deceived consumers. But Morgan Drexen, which is represented by Venable partner Randall Miller, beat the agency to the punch, filing a suit in late July challenging the CFPB’s constitutionality.

It’s also launched an extensive website detailing the litigation, Morgandrexenvcfpb.com, including a timeline, blog, document demands, video footage and press clips.

Rutledge & Drahozal Paper on the Prevalence of Arbitration Clauses After Concepcion and Amex

Peter B. Rutledge of Georgia and Christopher R. Drahozal of Kansas have written 'Sticky' Arbitration Clauses?: The Use of Arbitration Clauses after Concepcion and Amex. Here's the abstract:

We present the results of the first empirical study of the extent to which businesses have switched to arbitration after AT&T Mobility LLC v. Concepcion. After the Supreme Court’s decision in Concepcion, commentators predicted that every business soon would use an arbitration clause, coupled with a class arbitration waiver, in their standard form contracts to avoid the risk of class actions. We examine two samples of franchise agreements:  one sample in which we track changes in arbitration clauses since 1999, and a broader sample focusing on changes since 2011, immediately before Concepcion was decided.  Our central finding is consistent across both samples of franchise agreements:  the use of arbitration clauses in franchise agreements has increased since Concepcion, but not dramatically, and most franchisors have not switched to arbitration. While our results necessarily are limited to franchise agreements and may not be generalizable to consumer and employment contracts, they nonetheless provide valuable evidence on how businesses are responding to Concepcion.

Given our finding that only a handful of franchisors have switched to arbitration clauses since Concepcion, the next question is “why not”?  We reexamine the assumptions underlying the predictions of a switch to arbitration ― that there is no reason for a business not to use an arbitral class waiver and that businesses readily and costlessly can and will modify their form contracts ― and find reason to question both. By using an arbitration clause, businesses do more than simply contract out of class actions:  they contract for a bundle of dispute resolution services, including, for example, a very limited right to appeal.  For businesses that perceive themselves as unlikely to be sued in a class action, these “bundling costs” may discourage them from using an arbitration clause.  In addition, even standard form contracts might be sticky ― i.e., resistant to change even if change might be in the business’s best interest.  We find empirical support for both possible explanations for why many franchisors have not begun using arbitration clauses after Concepcion.

Finally, we consider the potential implications of the Court’s subsequent decision in American Express Cos. v. Italian Colors Restaurant for the future use of arbitration clauses. To the extent bundling costs deter the use of arbitral class waivers, we still would not expect all or most businesses to switch to arbitration even after Amex.  Likewise, to the extent contract stickiness explains the limited switch to arbitration, Amex will have limited effect. In fact, Amex might actually make class action waivers that are not part of an arbitration clause more attractive than before.  Although on its facts Amex addresses the enforceability of arbitral class waivers, much of the Court’s reasoning applies as well to non-arbitral class waivers, which avoid the bundling costs of an arbitral class waiver. Of course, even after Amex much legal uncertainty remains about the enforceability of non-arbitral class waivers. But on this broad interpretation, Amex on the margin increases the attractiveness of non-arbitral class waivers and might result in some uptick in their use (an increase that was occurring even before Amex, at least in franchise agreements).

CFPB issues critical report on bank and non-bank mortgage servicing

The Consumer Financial Protection Bureau yesterday issued this report "detailing mortgage servicing problems at banks and nonbanks. The report also found that many nonbanks lack robust systems for ensuring they are following federal laws." (quoting press release) According to the CFPB's press release, the agency found

• Sloppy account transfers: The rights to manage a loan are frequently bought and sold among servicers. With these transfers among institutions, the CFPB discovered several risks that can cause consumers to miss payments, delay important processes, or affect the good standing of a mortgage borrower’s loan. For example, examiners found:
  • Disorganized and unlabeled paperwork, including important loss mitigation documents
  • Failures by mortgage servicers to tell consumers when the servicing of the loan is transferred to another company; and
  • A lack of protocols related to the handling of key documents, such as trial modification agreements.

• Poor payment processing: Servicers are responsible for processing loan payments and handling tax and insurance payments through escrow accounts. If they do not perform their duties correctly, it can result in extra costs and hassles for the consumer. In its exams, the CFPB found:
  • Inadequate notice to borrowers of a change in address to send payments, resulting in late payments;
  • Excessive delays in handling the cancellation of private mortgage insurance payments, resulting in late fees; and
  • Property taxes being paid later than expected, resulting in borrowers’ inability to claim a tax deduction for the year they planned.

• Loss mitigation mistakes: Servicers are also responsible for helping qualified struggling borrowers with alternative plans for repayments, if such plans are available. So when servicers fall short of their responsibilities, consumers can be sent to foreclosure unnecessarily. CFPB examiners discovered several problems, including:
  • Inconsistent communications with borrowers, giving them conflicting instructions for loss mitigation processes;
  • Inconsistent loss mitigation underwriting, waiving certain fees and interest charges for some borrowers but not others;
  • Long application review periods, making the loss mitigation process especially hard on consumers whose accounts are also dual-tracked for foreclosure;
  • Incomplete loan files, making it challenging for consumers to find out about their loan modification applications when they call the servicer for help;
  • Poor procedures for requesting missing or incomplete information from consumers, making it difficult for consumers to provide the correct documentation; and
  • Deceptive communications to borrowers about the status of loan modification applications, leading some consumers to faster foreclosure.

Danielle Doulgas at the Washington Post has more here.

U.S. income still down four years after end of recession

This article by Michael Fletcher discusses a new report showing that incomes in the U.S. haven't come close to recovering from the government-determined official end of the recession in mid-2009. Here's an excerpt and then two charts depicting income levels and unemployment over the last 12 and 1/2 years:

The buying power of Americans continues to be weaker than it was when the recession ended four years ago, underscoring the lasting damage wrought by the downturn, according to a report released Wednesday. Inflation-adjusted median household income has declined 4.4 percent, to $52,098, since June 2009, the official end of the recession, said the report by Sentier Research, an Annapolis data-analysis firm headed by two former Census Bureau officials. Although Americans’ average income has been recovering from its recent low point in August 2011, it remains 6.1 percent below where it stood when the country toppled into recession in December 2007.

Grandpa's coca-cola

by Brian Wolfman

We have covered the interaction between consumer protection law and efforts to stem the obesity epidemic, including NYC Mayor Michael Bloomberg's effort to ban large-sized sugary drinks (which has failed so far in the New York courts).

If that topic interests you, I think you'll want to watch two videos, which are linked here and here and can be viewed by clicking on the embedded videos below. The first  video is the latest in Coke's anti-obesity advertising campaign, which suggests that you should eat, exercise, and otherwise emulate "grandpa's" lifestyle a couple generations ago--that is, you should walk and bike (rather than drive everywhere) and eat sit-down balanced meals (rather than grab junk food on the run). The second video drives home a point that Coke's ad ignores: grandpa's coke was less than a third the size of today's average coke.

Bloomberg gets that (as do others, such as Richard Posner).

 

 

 

 

Litigation and national politics

At the end of the last century and the beginning of this one, one political party was anti-litigation, the other more friendly. Why? By last year's election, the issue had faded away, at least nationally. Why? These issues are taken up in "Unspoken Truths and Misaligned Interests: Political Parties and the Two Cultures of Civil Litigation" by law professor Stephen Yeazell. Here is the abstract:

During the last four decades the United States has witnessed first the emergence and then the disappearance of civil litigation as a topic of partisan debate in national politics. Following two centuries in which neither party thought the topic worth mention, in the last decades of the twentieth and first of the twenty-first century, both parties made it part of their agendas. Republican candidates and presidents denounced litigation as a blight; Democratic candidates and presidents embraced it as a panacea. This Essay traces the emergence of this issue, the apparent oddness of the two parties’ stances toward civil litigation, and the ways in which both parties chose to ignore salient characteristics of modern civil litigation — the unspoken truths of my title. Finally, I’ll tentatively suggest some reasons for the disappearance of this issue — at least temporarily — from the political scene.

Potential connections between plastic food packaging and diabetes and obesity in kids

As the Consumerist reports, "[b]ecause there are apparently not enough studies to convince the Food and Drug Administration that controversial chemical Bisphenol-A (BPA) should not be used in just about every form of food packaging, yet another study has been published linking BPA to childhood obesity. Meanwhile, a separate study released today showed a possible connection between a widely used plasticizer and diabetes." The studies, both to be published in the journal Pediatrics, can be found here and here.