Product Recalls for December 2009

The last set of product recalls for the decade: Go here for December 2009 motor vehicle recalls from the National Highway Traffic Safety Administration and here for December 2009 product safety recalls from the Consumer Product Safety Commission.

Study Shows That Spending in Economic Stimulus For Transportation Has Had Virtually No Effect on Local Unemployment

A study conducted by the Associated Press and reviewed independently by five economists shows that conomic stimulus projects approved by Congress for transportation (that is,for building and repairing roads and bridges) has had virtually no effect in bringing down local unemployment rates. Read about it here.

The Right of Publicity Takes a Hit

by Paul Alan Levy

Two controversies about the use of images of the Obama family received attention this week, with resulting recognition that possible right of publicity claims would not only be unwarranted but would offend the First Amendment.  Given the frequency with which bogus right of publicity claims are used to try to suppress truthful commentary, this slap at the right of publicity is welcome.

The first controversy involves the portrayal of Michele Obama in a line of lesser celebrities — Oprah Winfrey, Tyra Banks, and Carrie Underwood  — with the headline, “Fur-free and Fabulous.”  Michele Obama did not appear physically in the line to be photographed (she was photo-shopped into the lineup), but the ad is based on the truthful statement that not only in the image, but also more generally, she does not wear furs.  Although public opinion seems to vary about whether it is ethical or tasteful for PETA to use her image without her consent, nobody seems to dispute that the First Amendment would protect PETA’s right to use the photo without her consent, even though it effectively aligns her with PETA’s policy positions and, indeed, with PETA itself.

A related controversy, resulting perhaps in a more interesting limit on the right of publicity, relates to a new ad from Weatherproof, a maker of jackets, that portrays Barack Obama standing at the Great Wall of China wearing one of their jackets.  Apparently, the company spotted a photo showing him in its garment, bought the rights to the photo, and is now using the photo to sell its jacket by showing that Obama is one of the fashionable people who wear it.  As in the Michele Obama case, the White House complained, but everybody seems to agree that Obama won’t sue, not just because presidents don’t trifle with such litigation, but because Obama has no legal leg to stand on.   He is a public figure and the ad is truthful — Obama did, in fact, wear its jacket standing near the Great Wall (nor could China sue, despite what the Mexican Government might think).  (Ht colleague Greg Beck for pointing to this earlier example of a marketing campaign using Bill Clinton’s image with a milk mustache.

Carfax Class-Action Settlement Rejected

by Deepak Gupta

Way back in May 2007, we posted here about objections by Public Citizen and the Center for Auto Safety to a nationwide-class action settlement involving Carfax. The underlying suit alleged that Carfax deceived customers by concealing the limits of the information contained in its popular vehicle history reports. Under the proposed settlement, Carfax would get a complete release of all claims, the plaintiffs' lawyers would get fees, and consumers nationwide would get the option to receive coupons for more free Carfax reports. The case was a poster-child for a bad coupon settlement. Nevertheless, a state trial court in Ohio approved the settlement over our objections.

In September 2009, I flew out to Ohio to argue the case before the state appeals court. We had three straightforward arguments for why the settlement was defective: (1) Carfax did not even attempt notice to the vast majority of the class, (2) the trial court approved the settlement without considering information concerning the actual value of the coupons to the class (as revealed by the number of claims made) and (3) the trial court inexplicably denied a request that Carfax turn over the relevant claims information. Although the state court does not get many class actions, let alone nationwide class-action settlement objections, the judges seemed surprisingly well prepared and had pointed questions for the settling parties' lawyers.

I'm pleased to report that the Ohio Court of Appeals handed us a victory over the holidays, ruling in our favor on all three grounds. Beyond the importance of this ruling for consumers in the vehicle history context, it's significant for several reasons. Ohio has a remarkably sparse class-action-fairness jurisprudence, and we're hopeful that this case will set some minimum standards, including an individual-notice requrement as a constitutional floor for notice. In addition, the insistence on the discovery of coupon-redemption information is also quite significant in its own right. When that kind information is revealed -- for example, when people find out that far less than 1% of the class is likely to claim the coupons -- it becomes really hard to defend a bad coupon settlement. 

Good coverage of our Carfax victory appeared this week in the New York Times, the Cleveland Plain Dealer and Consumer Affairs.

In related vehicle-history-information news, the National Motor Vehicle Title Information System -- a long-overdue public alternative to Carfax that was launched in response to our successful lawsuit against the Justice Department -- continues to proceed toward full implementation. Here's an update on some of the latest.

Rethinking the Foreclosure Plan

By Alan White

This story in the New York Times paints a grim picture of the Obama/Geithner foreclosure crisis response.  The main theme is correct:  without reducing principal balances, no plan will keep homeowners in their homes.  A kind of standoff has resulted from the banks' insistence that principal reduction be paid for by taxpayers, and the understandable reluctance of the Administration and Congress to pay for losses banks would otherwise bear anyway if they just continue foreclosing. 

In the twelve years before the crisis, total mortgage debt in the US tripled, from about 3.5 trillion to more than 10 trillion, reaching its peak of 10.5 trillion at the end of 2007.  The good news is that it is now going down.  The bad news is that it is still at 10.3 trillion as of the third quarter of 2009.  The economy cannot recover until we realign this debt hanging over American families with lower, sustainable home values.

This central issue of the crisis calls for leadership.  It calls for the President and the Treasury Secretary to end the impasse between banks and bailout opponents, to craft a reasonable plan that maximizes debt reduction through modification rather than foreclosure, with the minimum necessary taxpayer subsidy.  In my view, the plan will require considerably more stick, and perhaps only a tad bit more carrot.  Enacting bankruptcy stripdown of mortgages to property values wouldn't hurt either.

A Negative Growth Decade

As this article explains, the decade that we just completed was the first since the relevant data have been kept in which the economy did not grow and personal income and wealth did not rise.

Class Action Brought in Debt Collection Sewer Service Scandal

Last summer we blogged about the New York State Attorney General's suit to vacate 100,000 debt collection cases in which the defendants had allegedly never been served because of fraud by process servers.  The Times now reports that a class action has been brought on behalf of the defendants who were never served.  An excerpt about the defendants:

The class-action lawsuit filed on Monday goes after an entire debt collection chain, starting with the debt-buying companies, the law firm they hired to collect the debt, and the process-serving firm used to notify debtors. The suit names five debt-buyer firms with variations of the names L-Credit and LR Credit. All are subsidiaries of Leucadia National, a $6 billion publicly traded holding company engaged in various businesses, including timber and manufacturing. The company, which is also named as a defendant, declined comment on the suit.

2010 Will Bring New Laws and Rules for Consumer Credit

This article in yesterday's Washington Post provides a nice synopsis of the new laws and regulations that will take effect in 2010 concerning credit cards, credit reports, and bank overdraft protection. All of it is supposed to benefit consumers over current law.

Corey Ciocchetti Paper on the Future of Privacy Policies

Corey Ciocchetti has written The Future of Privacy Policies: A Privacy Nutrition Label Filled with Fair Information Practices, 26 John Marshall Journal of Computer and Information Law.  Here's the abstract:

E-commerce continues to blossom as evidenced by online retail sales in excess of $33 billion over the first quarter 2008. This growth helps spur the staggering economy but also magnifies the serious threats surrounding personally identifying information (PII) submitted during e-commerce transactions. The most common threats, such as identity theft and aggregated data files, do the most damage when companies are careless (i.e., losing laptops filled with unencrypted data) or callous (selling data on the open market) with the PII they collect. The first line of defense against these threats is the electronic privacy policy. In theory, privacy policies are supposed to force companies to analyze and strengthen their privacy practices and then provide Web surfers with a detailed picture of what happens to their information upon submission. Privacy policies are most effective when Web site visitors can locate, read and comprehend their terms. Armed with this knowledge, individuals are supposed to make accurate privacy assessments before submitting information online. Problematically, contemporary privacy policies fail to live up to their promise because they are posted inconspicuously, purposefully vague and filled with legalese. This inaccessibility leads Web surfers to ignore privacy practices completely while they continue to submit PII blindly.

Privacy policies can be effective if companies clearly and conspicuously discuss how their privacy terms relate to fair information practices (FIPs). FIPs are widely agreed upon guidelines covering the most important areas of the data trade - PII collection, use, storage and dissemination. The Federal Trade Commission has designated the five core FIPs to be notice, choice, access, integrity and enforcement. This article argues that a standardized privacy nutrition label - similar to the labels required by the Nutrition Labeling and Education Act - posted conspicuously on all e-commerce homepages can increase policy effectiveness. These federally mandated labels require companies to discuss their privacy practices in relation to each Key FIP. Although companies need not adopt specific policy terms or run their practices through a governmental clearinghouse, they must honestly disclose their practices. This is true of even the most unpopular practices such as external PII dissemination. Over time, consumers will become aware of these standardized labels, begin to understand FIPs, differentiate between privacy-protective and privacy-invasive practices and make better decisions before submitting PII.

Is "ambush marketing" a form of trademark infringement?

by Paul Alan Levy

Another example of trademark law getting too big for its britches is provided by a lawsuit by Major League Soccer and “Soccer United Marketing”, MLS’s affiliated marketing arm.  They claim that Black & Decker has infringed the trademarks of MLS and other soccer teams playing in games that MLS and SUM were promoting.  These games involved Mexican teams (and thus were of interest to Mexican-American consumers to which Black and Decker wanted to sell its tools).  Black and Decker was not overtly claiming any endorsement by the Mexican teams in question, but was offering tickets and soccer jerseys that Black and Decker had purchased in order to encourage fans to buy its DeWalt line of power tools, and was setting up its logo-laden tents and placing its logo-laden trucks in the stadium parking lots.   Apparently, MLS and the Mexican National Team already have an “official power tool” (Makita), and MLS objects to Black and Decker’s effort to use its games to market a different set of tools.

This is not the first time that companies have used “ambush marketing” to promote themselves, but calling that trademark infringement seems to be a dangerous stretch.  If Black and Decker has bought the tickets and the jerseys, why shouldn’t it be allowed to give them out on their own terms?