Times Report: Automakers Push Back Against Consumer Protections

Here.  The story is about how car makers are using arbitration clauses to defeat consumer protections, including state lemon laws, and keep defects secret.

Alabama Supreme Court grants rehearing on whether brand-name drug co. can be held liable for inadequate labeling when patient's Rx was filled with generic drug

In a blog post last June, we noted an Alabama Supreme Court ruling that a patient who took a generic version of a drug may sue a brand-name drug manufacturer for failing to warn about a drug’s risks. The court had reasoned that the brand-name manufacturer could have foreseen that a physician prescribing the brand-name drug would rely on its product warning, even if the prescription were filled with the generic equivalent.

The January decision was issued on the briefs, without oral argument. Yesterday, the Alabama Supreme Court voted to hear argument in the case. In a brief order, the Court stated that it will hear argument in September.

New York City argues appeal of decision invalidating its ban on large sugary drinks

by Brian Wolfman

We posted in March when a state trial court in New York threw out New York City's ban on the sale of sugary drinks larger than 16 ounces. We have posted many times on the ban, including here, here, here, and here.

On Tuesday, New York's appeal was argued in the New York Supreme Court's Appellate Division (First Department). At the same time, the New York City Department of Health released two items worth reading: a "fact vs. fiction" flyer, which debunks myths about the ban, and a history of significant public health measures taken over the years by the city's health department, which helps put the large sugary drink ban in perspective.

In addition, New York City Health Commissioner, Thomas Farley, has penned this op-ed for Forbes. Here's an excerpt:

There’s been a lot of discussion about the nation’s epidemic of obesity, but not enough about a second epidemic riding its wake: diabetes. Like obesity, Type 2 diabetes is preventable. Here in New York City we are trying to fight this epidemic, and we hope the court system will allow us to do so. Diabetes is twice as common in those who are obese. In 2011, nearly 650,000 adult New Yorkers reported having diabetes; that’s 200,000 more than 10 years ago. Most of us know someone with diabetes, and many can attest to its painful, debilitating effects. In 2011, there were 5,695 deaths in New York City in which diabetes was either the main cause or a contributing cause – twice the number of deaths as from HIV, overdose, and homicide combined. Diabetes is also one of the largest drivers of increasing health care costs. One of the key factors leading to the epidemic of diabetes sits right in front of us: giant servings of sugary drinks like soda, fruit-flavored drinks, and so-called energy drinks. These drinks can pack loads of sugar per serving and are often served in mega-portions. One 64-ounce regular soda can have more than 200 grams of added sugar, over eight times the total daily amount the American Heart Association recommends for women. Sugary drink consumption can bring on obesity and diabetes, and drinking just one sugary drink per day increases a person’s risk of developing Type 2 diabetes.

Pew Trust Videos on Payday Loans

 

 

 

The Nation: The Student Debt Crisis is Everyone's Problem

Here.  Excerpt:

First and foremost, basic consumer protections, such as bankruptcy rights and  statutes of limitations on the collections of student debt must be restored.  There is no justifiable reason why student loans should be treated unlike any  other type of debt in America. Next, we must provide a right to borrowers to  refinance their loans to take advantage of historically low interest rates—a  move that would undoubtedly spur economic growth by putting more money into the  hands of people who will spend it on ailing sectors of the economy.

Finally, we must invest in our own people by implementing a fair and  equitable loan forgiveness program . . . .

What the rulemakers should do about class actions

In recent years, Supreme Court decisions have narrowed the circumstances in which class actions can be maintained under Federal Rule of Civil Procedure 23. In "Walking the Class Action Maze: Toward a More Functional Rule 23," law professor Robert Bone says that because these Supreme Court decisions are interpretations of the federal rule, the rule can be changed to make the Rule 23 more workable. Here's the abstract:

Over roughly the past fifteen years, the Supreme Court and lower federal courts have limited access to class actions. Many of the more restrictive decisions — such as Amchem Products, Inc. v. Windsor, Ortiz v. Fibreboard Corp., and Wal-Mart Stores, Inc. v. Dukes — are based on interpretations of Rule 23 and thus fall within the power of the Advisory Committee and rulemaking process to modify. This Article, which is a symposium contribution, proposes revisions to Rule 23 designed to deal with some of these decisions and to make the class action a more pragmatic and functional device. It focuses on two areas: (1) the constraints imposed by fairness to absentees and due process, and (2) the problem of strategic abuse associated with frivolous and weak class action filings. Responding in large part to concerns about fairness, due process, and legitimacy, the Supreme Court has adopted a vague class “cohesion” requirement (Amchem), an interpretive principle tethering the class action to outdated precedent (Ortiz), and a strong indivisibility condition for (b)(2) certification (Wal-Mart). The problem is that none of these limitations is based on a clear understanding of what fairness to absentees requires or how the individual day-in-court right can be reconciled with representative litigation. As a result, the Court’s decisions are poorly reasoned and its restrictions inadequately justified. The Advisory Committee should do what it can to correct these deficiencies, and this Article suggests a promising approach. Furthermore, in response to concerns about the strategic filing of frivolous and weak class action suits, federal judges have tightened the standard of proof for certification. But they have done so without general agreement on the normative stakes, and the result is a collection of inconsistent and relatively vague standards. The Advisory Committee should clarify the law in this area by specifying a standard of proof in the text of Rule 23. This Article suggests a useful framework for doing so. Finally, the Article briefly discusses some potential obstacles to Committee action, including the advisability of overruling recent Supreme Court decisions, potential constitutional problems, Rules Enabling Act constraints, transsubstantivity objections, and the ever-present risk of political controversy.

Massachusetts High Court Strikes Down Arbitration Class Action Ban

This morning, the Massachusetts Supreme Judicial Court (SJC) issued two opinions addressing whether there remain any circumstances in which an arbitration agreement that bans class actions can still be challenged after the Supreme Court's decision in AT&T Mobility LLC v. Concepcion. The SJC strongly aligned itself with the view that Concepcion does not make class action bans unassailable. The court held that if a class action ban in an arbitration agreement effectively prevents plaintiffs from obtaining a remedy under state law, it is unenforceable. The court struck down a class action ban under this standard in one of the two cases, Feeney v. Dell Inc.,finding that the plaintiffs had carried their burden of showing the class action ban would effectively prevent them from pursuing their claims. In the other case, Machado v. System4 LLC, the court held the arbitration agreement containing the class action ban was enforceable because the plaintiffs had not shown that their claims could not be pursued on an individual basis in arbitration.

In the lead opinion, Feeney, the SJC presented a comprehensive discussion of the Supreme Court's arbitration jurisprudence up to and including Concepcion, as well as case law and commentary in the wake of Concepcion. The court stated that, after Concepcion, a general public-policy-based prohibition on class-action bans could not be sustained. However, the court concluded that the principle that arbitration procedures must not effectively preclude plaintiffs from pursuing their claims survives Concepcion.

Importantly, the court rejected the suggestion that this principle applies only to federal statutory rights. The court reasoned that the objectives of the Federal Arbitration Act do not include denying remedies available under state law, and thus a state court does not erect any obstacles to the accomplishment of the FAA's aims when it strikes down provisions of an arbitration agreement that prevent the assertion of claims. Thus, according to the court, there is no "irreconcilable conflict between the FAA's interest in ensuring the enforceability of agreements to arbitrate and a State's
interest in voiding contracts that create de facto immunity from private civil liability for violations of State law merely because that immunity was procured through the device of an arbitration clause."

The court thus concluded that a "case-specific factual showing" that a class-action ban would preclude plaintiffs from obtaining remedies to which they were entitled under state law suffices to permit invalidation of an arbitration agreement. In Feeney, a consumer class action involving complex, small-dollar claims, the court found this burden had been met, but in Machado, involving more substantial monetary claims, it had not been.

The SJC joined the Missouri Supreme Court and the Second Circuit in recognizing that there are circumstances under which a class action ban is invalid. Of course, the Second Circuit’s decision in Amex that a class action ban that prevents vindication of federal-law rights is unenforceable is currently before the U.S. Supreme Court, and the decision in Amex may have much to say about whether reasoning like the SJC's is viable. But for various reasons, Amex may not fully resolve
these issues, and if so the SJC's decisions today will be a significant development.

More From Margaret Jane Radin on Boilerplate

Margaret Jane Radin of Michigan has written An Analytical Framework for Legal Evaluation of Boilerplate. Here's the abstract:

This chapter develops an analytical framework that could help legal analysts – especially common law judges – make better decisions about boilerplate in the context of rights deletions deployed by firms against consumers. It is based on one aspect of the author’s recent work, Boilerplate: The Fine Print, Vanishing Rights, and the Rule of Law (Princeton University Press, 2012). A great deal of mass-market boilerplate – such as hidden lists of terms that recipients have no idea exist – should not be treated as contractual, and should be regulated by other means.  But when courts insist on treating boilerplate as contractual, I encourage them to consider an improved analysis. That analysis takes into account three factors:  (1) the nature of the right of recipients deleted by the boilerplate; (2) the quality of consent to the boilerplate deletion; and (3) the extent of social dissemination of the deletion.  Two particular features of current doctrine should be improved. The procedural/substantive requirement in unconscionability doctrine is misapplied when a judge ignores the nature of the right once she concludes that the quality of consent is adequate, because some rights are market-inalienable, or partially market-inalienable. Market-inalienable rights tend to be rights that are constitutive of civil society, that are not salient to individual decision-makers, and/or that are important for the progress or well-being of the collective as a whole.  Also, the notion of reasonable expectation should be avoided because it engenders a truly mischievous positive/normative ambiguity, and seems to license a conclusion that the more something is imposed on people, no matter what it is, the more it is permissible. The approach taken here need not be interpreted as innovative, because it can be understood as a reinvigoration of principles of equity that have been corrupted.

New Study Finds Serious Shortcomings in New York Debt Collection Cases

The report, by the New Economy Project, is titled The Debt Collection Racket in New York: How the Industry Violates Due Process and Perpetuates Economic Inequality.  Some excerpts:

Over the past decade, the number of debt collection lawsuits filed in New York’s courts has exploded, with upwards of 200,000 cases filed in 2011 alone. Creditors and debt buyers engage in an array of fraudulent and deceptive debt collection practices that siphon billions of dollars from New York’s low-income neighborhoods and communities of color. Abusive debt collection falls along a continuum of discriminatory financial practices that pervade low-income neighborhoods and communities of color, long targeted by high-cost and predatory financial services providers.

The creditors and debt buyers that bring these lawsuits routinely engage in "sewer service" — falsely claiming to the courts that they have served people with court papers. They also engage in rampant "robo-signing" — mass-producing fraudulent documents that they then submit to the courts. Debt buyers — companies that buy old, charged-off debts for pennies on the dollar — file more than half of all debt collection lawsuits in New York, and systematically lie to the courts about key information that they do not in fact have.

Creditors and debt buyers engage in this fraud to obtain automatic, or "default," court judgments, which they then use to freeze people’s bank accounts or garnish their wages. The judgments also appear on people’s credit reports, blocking them from housing, employment, and credit access. Consequences have been especially dire for low-wage workers, elderly and disabled New Yorkers on fixed incomes, single mothers, and domestic violence survivors — and now also New Yorkers affected by last year’s hurricane.

Debt collection abuses stem largely from structural problems related to the buying and selling of old, charged-off debts. When selling the debts, creditors, including the country’s largest banks, disclaim virtually all liability for inaccuracies in the scant information they provide. When purchasing debts, debt buyers obtain only extremely limited information and cannot substantiate the debts in court.

The courts have long been on notice that debt buyers routinely fail to submit the legally-required documentation, and bear significant responsibility for allowing debt buyers to get away with fraud. Although New York City courts recently have taken some corrective measures, the courts continue to grant debt buyers hundreds of thousands of default judgments in violation of New York law.

And here are some claims from the report that are particularly interesting:

 

Debt buyers virtually never prevailed in contested cases, but relied on winning cases by default or by intimidating unrepresented people into making settlement agreements.  

In 9 out of 10 cases, an employee of the debt buyer — who had no connection to the original creditor — fraudulently testified to facts that only the original creditor could possibly know.

[N]o application by a debt buyer for a default judgment complied with New York law. The court nevertheless improperly granted default judgments on 97% of the applications.

[W]e observed significant differences in outcomes between lawsuits filed against New York City residents and those filed against New Yorkers outside New York City. New York City courts had a lower default judgment and higher answer rate than non- NYC courts. This difference is likely attributable to two key factors: First, people sued in New York City are more likely to receive notice due to an additional notice requirement that the New York City Civil Court adopted in 2008. Second, New York City residents benefit from a range of free programs — some offered by the court itself and some by the private bar or legal services offices — designed to assist unrepresented litigants sued by debt collectors. Unfortunately, few similar programs exist outside New York City.

This last finding suggests that consumer benefit from the consumer protection laws referred to in the paragraph.

CFPB issues study on bank and credit union overdraft practices

The Consumer Financial Protection Bureau has issued this study on bank and credit union overdraft practices. As explained in the agency's press release, the study

raises concerns about whether the overdraft costs on consumer checking accounts can be anticipated and avoided. The report shows big differences across financial institutions when it comes to overdraft coverage on debit card transactions and ATM withdrawals, drawing into question how banks sell this account feature. The report also finds that consumers who opt in for overdraft coverage [as required by 2010 legislation meant to benefit consumers] end up with more costs and more involuntary account closures. “Consumers need to be able to anticipate and avoid unnecessary fees on their checking accounts. But we are concerned that overdraft programs at some banks may be increasing consumer costs,” said CFPB Director Richard Cordray. “What is often marketed as overdraft protection may actually be putting consumers at greater risk of harm.”