Ralph Nader on Corporatism

The incomparable, determined, energetic, and radically incorruptible Ralph Nader has just put out a new book, Getting Steamed to Overcome Corporatism: Build It Together to Win. Here is Nader's intro:

This is an invitation to participate in an experiment to learn what, if anything, it takes to get you steamed* for action for a change.

Let’s start with a simple question. When you read about an injustice by a corporation against a patient, consumer, worker, taxpayer, or community, do you, like most people, recoil with dismay or disgust and then return to your workaday world? If that’s your reaction, is it because you do not have the power to do anything about it, don’t know how to do anything about it, don’t have the time to do anything about it or all of the above?

What do you think would happen to how you answer these questions if you read one after another about ten, twenty, one hundred or two hundred corporate abuses, harms and crimes, especially if you start saying, “This happened to my neighbor” or “my friend” or “my children” or “my co-worker” or “This could easily happen to me”?

Well, plunge into the following engrossing pages reporting the virulent misbehavior of big business in the pursuit of grotesque profits. The actions of these corporate outlaws are documented by mainstream media and well-regarded specialized publications. Even when these greedy over-reaching bullies are sometimes caught, the punishment is usually too little and too late. Moreover, their invidious practices often continue through other domestic or international companies in the same industry.

The aggregation of these outrages—all reported in just one year—2009—can spark your conscience and stiffen your resolve to speak out with other Americans or support much greater reforms and law enforcement against corporate crime. Or at least that is this experiment’s hypothesis. Each story helps you to recalibrate what is important to talk about with your friends, to think about and to challenge.

After all, the Wall Street orgy of crime, speculation, recklessness and self-enrichment looted or drained trillions of dollars from pensions and mutual funds, drove the country into a deep recession in 2009 that unemployed over 8 million workers. The repercussions continue to this day in insecurity, debt, deprivation, rising poverty, fifty million uninsured, and Wal-Mart-level wages for one out of three workers in the declining economy. Yet corporate profits hit record levels in 2010. Executive compensation for the corporate bosses has resumed its grotesque disparity with working Americans. Corporate lobbyists still dominate “our” federal government that bailed out the out-of-control companies big-time with your taxpayer money. There have been no apologies, no expressions of shame, just business as usual heading toward another climax of greed and abandon that will fall again on the taxpayers’ back. Cutbacks for necessities of the American people come before cutbacks for corporate welfare, while a bloated, corrupt military budget continues to nourish insatiable weapons contractors. A commercial culture runs roughshod over civic values and parental authority to expose their children to a 24/7 world of gross, often violent entertainment, harmful products and junk food.

Our country, our culture, our democratic heritage are all in decay, with no end in sight unless there is a sustained response from an aroused citizenry to stop the corporatists from blocking so many proven solutions for our country’s problems. First, we need to raise our expectations to realistically attainable levels so we can believe that a better country is possible soon.

Back in the 1950’s I, like many others in that era, lost several friends and classmates to motor vehicle crashes—horrific fatalities and injuries. At law school, I learned the truth about the auto industry bosses, who, in favor of styling priorities, restrained their safety engineers and scientists from installing long-known safety devices like seat belts, better brakes and tires, collapsible steering columns and interior padding. And, I got steamed. With the tragedy of so many people in preventable crashes and casualties always on my mind, I pressed the Congress month after month to pass the 1966 motor vehicle and highway safety laws, which have saved over a million lives and prevented many more injuries. What drove me and inspired my commitment was not just my knowledge of the industry’s cover-up, but an ample amount of informed indignation (the psychologists now call this ‘emotional intelligence’) and the best from America’s past.

Throughout our history, enough Americans finally became steamed against slavery, for women’s right to vote, for better treatment of workers and farmers, for protection of consumers and the ennvironment. That’s when conditions started changing for the better.

Did you ever see that movie NETWORK in which the leading actor got fed up enough to shout to all who would listen “I’M MAD AS HELL AND I’M NOT GOING TO TAKE IT ANYMORE?” The two times I saw this film in a movie theatre, the audience clapped vigorously after this line. Such is the built-up power of moral indignation conveyed to the viewers by the escalating frustration he was absorbing.

To get the full impact, don’t put this book down. Give yourself a chance to alter your mental routines and focus your energies. Read these jolting or jarring excerpts and comments through in as few sittings as possible.

After you finish, you may want to explore joining with others of like mind and sensibility for action that makes these big corporations (all brought into existence by state charters) our servants, not our masters. After all that is what is implied in our constitution’s preamble “We the People” (it’s not We the corporation) and implied in the free market’s slogan that “the customer is always right.” Thank you for taking this “test.”

Federal Judge Protects Anonymity of Blogger Despite the Allegedly Infringing Posting of a Copyrighted Teaching Manual

by Paul Alan Levy

Late last summer I described on this blog a disturbing decision by a federal magistrate judge that disregarded the consensus rule by which courts across the country have balanced the rights of plaintiffs claiming to have been wronged against the First Amendment right to speak anonymously in deciding whether to enforce subpoenas seeking identifying information.  In the decision, the magistrate judge held that the Dendrite / Cahill line of authority, requiring actual proof of wrongdoing rather than just allegations, does not apply when the plaintiff is claiming copyright infringement, and hence decided that the international religious cult Art of Living could identify a former member who had been publishing a blog criticizing the cult.

But in an important decision issued late yesterday, District Judge Lucy Koh overturned the magistrate judge’s decision, decisively rejecting the theory that copyright cases are different and holding that when an alleged infringement takes place in the context of a discussion of an issue of public interest, full First Amendment protection applies and the allegations of copyright infringement must be tested to enure that they support the existence of a compelling interest that overcomes the First Amendment right to speak anonymously.  Largely following arguments that we made in an amicus brief, joined by the ACLU and EFF as well as Public Citizen, as well as arguments by the Doe’s lawyer, Joshua Koltun, Judge Koh held that the reasons that support giving somewhat more limited scrutiny to subpoenas in mass copyright cases brought against alleged downloaders of copyrighted recordings or movies do not apply.  (Opinion pages 7-11)

The decision bristles with interesting features and raises significant questions for future proceedings over subpoenas to identify anonymous Internet speakers.   For example, Judge Koh warmly embraced the express balancing stage of the Dendrite analysis (pages 7, 8-9, 10-11), which some courts reject but which had previously been endorsed by a pair of decisions in the same district, the Northern District of California.   Unlike many of the decisions endorsing an explicit balancing stage, Judge Koh squarely rested the outcome of the subpoena decision on that stage of the test, while suggesting without squarely deciding that Art of Living had likely presented enough evidence to establish a prima facie case of copyright infringement  (pages 11-13).  Judge Koh decided, however, that there was a realistic concern about the danger of retaliation against the Doe, who lives abroad, and that Art of Living did not have a strong interest in identifying the Doe immediately because of an unusual feature of this case — the Doe had waived service, filed an answer, and even responded to written discovery.  In fact, Doe had moved for summary judgment in the case while at the same time seeking to quash the subpoena, and Judge Koh decided that there is no reason to identify the Doe at this time, while reserving the possibility that a different balance could well present itself if Doe were to lose on his summary judgment motion (page 15).

Another interesting aspect of the case is that Doe presented an anonymous affidavit in support of his motion to quash, and, at page 14 of her opinion, the district judge expressly gave consideration to the affidavit in deciding whether identification posed a danger of retaliation and would create a chilling effect.  The judge said that the affidavit’s evidence was “not particularly reliable,” but she did consider it along with the self-evident nature of the First Amendment interests that could be affected by disclosure in the circumstances of the case.

Some Recent Scholarship

Raymond H. Brescia 

of Yale and Albany has written The Iqbal Effect: The Impact of New Pleadings Standards in Employment and Housing Discrimination Litigation, forthcoming in the Kentucky Law Journal.  Though it's not a study of Iqbal's impact on consumer law cases, the study sheds some light on how Iqbal might affect consumer law cases.  Here's the abstract:

In May 2009, the Supreme Court issued its decision in Ashcroft v. Iqbal, a case brought by an immigrant of Pakistani descent caught up in the worldwide investigation that followed the horrific attacks of September 11, 2001. In that decision, the Court extended the “plausibility test” first introduced two years earlier, in Bell Atlantic v. Twombly, to all civil pleadings in federal court. That test requires that, in order to satisfy federal pleading requirements, a complaint must allege a plausible set of facts. But what is plausible in a given case may be in the eye of the beholder.

In the two years since the Court reached its decision in Iqbal, that opinion has been cited roughly 25,000 times. The empirical analysis contained in this study attempts to gauge the impact of Iqbal on civil rights cases, specifically cases involving allegations of employment and/or housing discrimination. While several other studies have attempted to answer similar questions, to date, no study has analyzed this impact with reference solely to motions based on the specificity of the pleadings: which is, of course, the central issue in Twombly and Iqbal. In addition, other studies looked exclusively at quantitative results, with no assessment of the manner in which the plausibility standard was being applied by the lower courts. This empirical study attempts to fill that gap in the empirical research.

This study identified over 1850 reported decisions on motions to dismiss in employment and housing discrimination cases filed in federal district court covering the years prior to and after the Court’s decision in Twombly. From this group of cases, a smaller sub-set, totaling 634 cases, was identified by excluding those decisions — included in previous studies — that bore no relation to the issue of the specificity of the pleadings. Furthermore, despite this winnowing process, the sample size for this study was still considerably larger than those analyzed in previous studies.

This detailed study yielded the following results. Surprisingly, the dismissal rate in this class of cases during a set time-period immediately prior to the Twombly decision was actually slightly higher than the dismissal rate of decisions issued in the time period between issuance of the Twombly and Iqbal decisions, but then the rate increases considerably after Iqbal. The dismissal rates for all cases pre-Twombly was 61%; between Twombly and Iqbal, it was 56%; but then after Iqbal, it was 72%, an 18% increase from the pre-Twombly period analyzed.

In addition, even more troubling, plaintiffs were far more likely after Iqbal than either before Twombly or immediately thereafter to face a motion to dismiss challenging the sufficiency of the pleadings in the cases analyzed. Indeed, decisions on such motions were generated only 12 times in the first quarter of 2004 (the first quarter analyzed in this study), but then 61 times in the third quarter of 2010 (the last full quarter analyzed): a greater than 500% increase.

Moreover, when it comes to the substance of these decisions, something else appears to be happening. Despite the increased dismissal rate following Iqbal, oddly, in a class of cases analyzed for this study, courts rarely invoked the plausibility standard in the same manner it was utilized by the Court in Twombly and Iqbal; that is, courts rarely found that dismissal was warranted if there was an arguably more plausible, and entirely legal, basis for the challenged conduct. Finally, and similarly, judges rarely, if ever, appear to invoke their own “experience and common sense,” as urged to by the Court, when ruling on motions to dismiss in these cases.

These outcomes yield three conclusions. First, district courts are using the Iqbal precedent, though not necessarily Twombly, to dismiss employment and housing discrimination cases at an accelerated rate. Second, although courts may be invoking the Twombly/Iqbal plausibility standard in assessing the sufficiency of the pleadings in employment and housing discrimination cases, they are certainly not relying on or utilizing the plausibility standard as articulated in these two precedents. This suggests that the subjective elements of the plausibility standard may be infecting these outcomes. That is, if district court judges are dismissing cases at a higher rate post-Iqbal, yet are not relying on the guidance the Court has given such lower courts in how to deploy the plausibility standard, it would seem that such courts may feel emboldened to dismiss cases that might have survived such a motion had that motion been decided pre-Iqbal. Finally, regardless of whether there is a dramatic Twombly or Iqbal effect on outcomes, motions to dismiss challenging the sufficiency of the pleadings are much more common since Iqbal, which means that even if some plaintiffs are defeating such motions, it still comes at a price: it increases transactions costs in these cases, and may, as a result, have a chilling effect on lawyers contemplating bringing them in the first place.

Meanwhle, Jim Hawkins of Houston has been busy writing Credit on Wheels: The Law and Business of Auto Title Lending, forthcoming in Washington and Lee.  That abstract reads:

Despite the fact they are used by millions of Americans, auto title loans have received little attention in the legal literature about consumer credit. Friends and foes of title lending make confident statements about their net welfare effects, but we still lack empirical data on many of the central policy questions that title lending raises.

This Article offers new evidence about the title lending transaction, paying special attention to the risks borrowers face when they use their vehicles as collateral for the loan. I gathered this evidence by obtaining new reports from state regulators about the title lending industry, examining public disclosure statements by title lenders, interviewing title lenders, and surveying a small group of title lending customers.

Additionally, this Article organizes the different legal responses to title lending, creating a taxonomy of regulatory approaches. Based on the new data uncovered by my research, I offer tentative evaluations of these diverse regulatory strategies.

 Finally Lea Krivinskas Shepard of Loyola University Chicago has penned Creditors' Contempt, which will appear in Brigham Young.  Here's that abstract:

This Article takes a fresh look at the power of courts and creditors to force debtors to repay their obligations through in personam collection techniques. Variously known as “debtors’ examinations,” “turnover orders,” “citations to discover assets,” “supplementary proceedings,” “proceedings supplementary,” and “proceedings in aid of execution,” in personam remedies force the debtor, under threat of the court’s contempt authority, to turn over money or property directly to a creditor. Because the exercise of the court’s contempt authority can result in a debtor’s imprisonment, in personam techniques have long been regarded as a critical but potentially very coercive arrow in a debt collector’s quiver.

Recently, the Federal Trade Commission and others have endorsed major changes to a debt collection system labeled as “broken.” These reform proposals, however, have overlooked key problems in in personam proceedings, where excessive creditor leverage and insufficient protection of debtors’ procedural rights risk validating a view that the judicial system is functioning as creditors’ private collection arm.

Following the transfer of power to a newly established Bureau of Consumer Financial Protection, this Article resurrects a subject that has received virtually no attention in the scholarly literature for over a decade. It analyzes the particular features of in personam proceedings and debtor behavior that contribute to a longstanding imbalance in the leverage asserted by creditors over debtors. The Article recommends specific changes to the way courts conduct in personam proceedings to ensure that the in terrorem effects of these remedies do not upend important social policies, including the protection of exempt property and the adjudicative fairness of the collection process.

Debt collection is a fundamental component of the consumer credit system. The strength and legitimacy of its procedures, however, depend on maintaining a difficult balance between the state’s and creditors’ interest in rigorous judgment enforcement and debtors’ interest in imposing reasonable limitations on the coerciveness of debt collection.

 

 

Not that it matters but . . . D.C. Circuit Upholds Challenge to Health Care Reform Law

The U.S. Court of Appeals for the District of Columbia Circuit today upheld the Affordable Care Act against a challenge that Congress lacked power under the Commerce Clause to pass the Act's insurance mandate. The opinions in the case are here. The two-judge 37-page majority opinon was written by Judge Laurence Silberman. Judge Harry Edwards concurred in that opinion and added one paragraph of his own. Judge Brett Kavanaugh dissented in a 65-page opinion arguing that the federal courts lacked jurisdiction over the case under the tax anti-injunction act, 26 U.S.C. 7421(a), which bars many (though not all) pre-enforcement suits seeking to restrain the assessment or collection of a federal tax.

None of this may matter if the Supreme Court grants review on the petitions currently before it.

Federal Court Issues Injunction Against Graphic Tobacco Warning Labels

U.S. District Judge Richard Leon has today issued a preliminary injunction barring the Food and Drug Administration from requiring the tobacco industry to include new, graphic warnings on their cigarette packages. Leon said that requring the labels is compelled speech that violates the First Amendment. We blogged about the lawsuit when it was filed. We also blogged about the new labels several times, including here. The labels are supposed to go into effect in September 2012.

Matt Myers, the head of the Campaign for Tobacco Free Kids, responded this way to today's decision:

Judge Leon’s ruling ignores the overwhelming scientific evidence about the need for the new cigarette warnings and their effectiveness. It also ignores decades of First Amendment precedent that support the right of the government to require strong warning labels to protect the public health. Given the overwhelming evidence of the need for these warnings and the tobacco industry’s own admission of the factual accuracy of the warning statements, we are confident that this decision will not be the last word on the new warnings. It is but one decision in a long legal battle that could end up before the U.S. Supreme Court, and another federal judge has already upheld the law’s requirement for large, graphic cigarette warnings.  Studies around the world and evidence presented to the FDA have repeatedly shown that large, graphic warnings, like those adopted by the FDA, are most effective at informing consumers about the health risks of smoking, discouraging children and other nonsmokers from starting to smoke, and motivating smokers to quit . . . . Because of that evidence, at least 43 other countries now require large, graphic cigarette warnings.

 

Glaxo Reportedly Settles Charges of Advertising Fraud for $3 Billion; But Is That Enough?

This Washington Post article describes a reported settlement between GlaxoSmithKline and the U.S. government over charges that the drug company fraudulently advertised a number of its drugs, including the diabetes drug Avandia, which has been linked to increased risk of heart attack and stroke. Among other things, the government probe reportedly concerned Medicaid fraud and Glaxo's unlawful pushing of its drugs for off-label uses (that is, uses not approved by the FDA). Although $3 billion isn't pocket change, what if the company makes more money than that from its illegal conduct, and, so, the fine (even with the other negative consequences of the settlement) may not be enough to deter similar conduct in the future? Consider this:

"The size of the penalties, although large, are not as large as the money [the drug companies] make and so they keep doing it over again,” said Sidney M. Wolfe, director of Public Citizen’s health research group. “The only way this is going to stop, or get reversed, is to greatly increase the size of the penalties or to start sending some of the executives to jail, if appropriate.”

 

The Banks Change Their Mind: No Monthly Debit Card Fees

This article explains that even Bank of America and Suntrust, the banks that seemed insistent on imposing monthly debit card fees, have backed off, and it speculates that the Occupy movement has something to do with it. More here.

Gagging Provisions in Settlement Agreements

Plaintiffs in civil rights and consumer cases often agree when they settle not to talk about the underlying facts of the case and/or the settlement amount. These gagging provisions may induce settlement (or bigger settlements than there would be without those provisions), but they can impede the free flow of information on matters of public concern. For instance, Herman Cain now admits that when he headed the National Restaurant Association the Association paid money to one of its employees to settle the employee's claim that Cain had sexually harrassed her. Cain is speaking out. He says there was no sexual harrasment. But according to this Washington Post article, the employee's lawyer says his client would like to speak out, too, but can't because the settlement agreement with the Association gags her. Her lawyer has called on the Association to free the employee to speak about her claims against Cain. We'll see.

HT to Leah Nicholls.

UPDATE (10/3/2011): The employee referred to in this blog entry has decided that she does not want to go public.

Halloween Costumes, Foreclosure, and Making Fun of People Who Have Lost Their Homes

UPDATED WITH EXPANDED PHOTO (ORIGINALLY POSTED ON 10/29/2011)

In this New York Times op-ed entitled "What the Costumes Reveal," Joe Nocera describes the conduct of employees of the New York law firm Steven J. Baum, P.C., at last year's firm Halloween bash. To be blunt, the conduct described is disgusting. Nocera writes that Baum employees wore costumes making fun of people who have lost their homes to foreclosure. In the image below, for instance, a dirty "foreclosure victim" is holding a wine bottle wrapped in a brown paper bag, while another, dressed in rags and with her belongings in a shopping cart, displays a "Will Worke for Food" sign.

Here's an excerpt from the op-ed:

On Friday, the law firm of Steven J. Baum threw a Halloween party. The firm ... is what is commonly referred to as a “foreclosure mill” firm, meaning it represents banks and mortgage servicers as they attempt to foreclose on homeowners and evict them from their homes. ...[A] former employee of Steven J. Baum recently sent me snapshots of last year’s party. In an e-mail, she said that she wanted me to see them because they showed an appalling lack of compassion toward the homeowners — invariably poor and down on their luck — that the Baum firm had brought foreclosure proceedings against. When we spoke later, she added that the snapshots are an accurate representation of the firm’s mind-set. “There is this really cavalier attitude,” she said. “It doesn’t matter that people are going to lose their homes.” Nor does the firm try to help people get mortgage modifications; the pressure, always, is to foreclose.  * * * These pictures are hardly the first piece of evidence that the Baum firm treats homeowners shabbily — or that it uses dubious legal practices to do so. It is under investigation by the New York attorney general, Eric Schneiderman. It recently agreed to pay $2 million to resolve an investigation by the Department of Justice into whether the firm had “filed misleading pleadings, affidavits, and mortgage assignments in the state and federal courts in New York.” (In the press release announcing the settlement, Baum acknowledged only that “it occasionally made inadvertent errors.”)

In response to an inquiry from Nocera about the photographs, Nocera says that a Baum firm spokesperson asserted: “It has been suggested that some employees dress in ... attire that mocks or attempts to belittle the plight of those who have lost their homes. Nothing could be further from the truth.” Huh? Was the Baum spokesperson looking at photos other than the ones that accompany Nocera's piece?

Baum's employees have the right to wear these costumes at their firm's Halloween party or most anywhere else. But I wonder: How many of Baum's employees have read paragraphs 6 and 7 of the preamble to the Model Rules of Professonal Conduct?

HT to Tom McSorley.

Did You Hear the One About the Bankers?

Thomas Friedman's editorial in the Sunday N.Y. Times, discusses a recent $285 million fine imposed on Citigroup, and the relationship between the financial services industry and Congress. He concludes with some free advice for the industry, "Stick to being bulls. Stop being pigs." Here is an excerpt:

Our financial industry has grown so large and rich it has corrupted our real institutions through political donations. As Senator Richard Durbin, an Illinois Democrat, bluntly said in a 2009 radio interview, despite having caused this crisis, these same financial firms “are still the most powerful lobby on Capitol Hill. And they, frankly, own the place.”

Our Congress today is a forum for legalized bribery. One consumer group using information from Opensecrets.org calculates that the financial services industry, including real estate, spent $2.3 billion on federal campaign contributions from 1990 to 2010, which was more than the health care, energy, defense, agriculture and transportation industries combined. Why are there 61 members on the House Committee on Financial Services? So many congressmen want to be in a position to sell votes to Wall Street.

We can’t afford this any longer. We need to focus on four reforms that don’t require new bureaucracies to implement. 1) If a bank is too big to fail, it is too big and needs to be broken up. We can’t risk another trillion-dollar bailout. 2) If your bank’s deposits are federally insured by U.S. taxpayers, you can’t do any proprietary trading with those deposits — period. 3) Derivatives have to be traded on transparent exchanges where we can see if another A.I.G. is building up enormous risk. 4) Finally, an idea from the blogosphere: U.S. congressmen should have to dress like Nascar drivers and wear the logos of all the banks, investment banks, insurance companies and real estate firms that they’re taking money from. The public needs to know.