April 2009 Product Recall Information

April 2009 vehicle recalls conducted by the National Highway Traffic Safety Administration are here, and product safety recalls by the Consumer Product Safety Commission are here.

Consumers Union on the Credit Card Bill in the U.S. Senate

To learn about the credit card reform legislation in the U.S. Senate, go to this nice post by Consumers Union.

ABA Antitrust Section's Consumer Protection Conference

The ABA's Section on Antitrust Law has scheduled its Consumer Protection Conference for June 18-19 in Washington, D.C.  Here's an excerpt from the announcement:

The conference will open with remarks by David Vladeck, in his first public appearance as the Director of the Federal Trade Commission's Bureau of Consumer Protection. Other panelists and speakers will include former FTC Chairmen Robert Pitofsky and Timothy Muris and nearly every Director of the Bureau of Consumer Protection dating back to the mid-1980s. Officials in charge of consumer protection for the Attorneys General of Florida, North Carolina and New Jersey will address states' issues. Leading academics, in-house counsel, and representatives from the National Advertising Review Counsel, National Advertising Division, and U.S. District Court Judge Thomas Selby Ellis, III, among others, also will speak on current hot topics and the Honorable Henry Waxman, Chairman, House Committee on Energy & Commerce, has been invited to present a luncheon address on the Obama administration's consumer protection agenda.

More information can be found here.

Duties to absent class members--maybe not so much, says NY's highest court

by Steve Gardner

The New York Court of Appeals (top NY court) issued an opinion last week, discussing the effort by a class member to discover internal documents of class counsel, for use in a subsequent class action against class counsel.

Wyly had sought the "right to review documents reflective of Class Counsel's pre-trial investigations related to the Class Actions; all the discovery produced or taken in the Class Actions; and all requests for discovery, indices, summaries, or other materials created by Class Counsel in relation to the Class Actions."

The court said that "the class counsel-absent class member relationship is simply too unlike the traditional attorney-client relationship to support extending the Sage Realty presumption to absent class members."

And then held that "where an absent class member brings a CPLR article 4 special proceeding seeking access to class counsel's litigation files after termination of the representation, Supreme Court must first consider how much the absent class member has at stake. If (as the parties do not dispute here) the absent class member has a substantial financial interest in the class action's outcome, the court must then decide whether the absent class member has demonstrated a legitimate need for the requested documents."

Distinguishing a class counsel's relationship to absent class members from a traditional attorney-client relationship troubles me, because it takes away from the duties we should always impose on ourselves and, in fact, makes us vulnerable to defense efforts to get us to short-change absent class members.

In fact, the very nature of the absent member's relationship to the class counsel makes that counsel's duty all the more important, because the relationship is essentially a confluence of attorney-client and fiduciary duties.

Let me stress that, in this case, I'm not sympathetic to Sam Wyly, who might not have been acting just in the interest of other class members.

So I'm talking theory and not the morally just result in this case.

Texas Legislature Considers Ban on Transfats in Restaurant Foods

State and local governments have been take the legislative lead in the fight against obesity and its pernicious health consequences. We've reported, for instance, on New York City's ordinance requiring fast-food restaurants to disclose the calorie content of their foods. Now, the Texas legislature is considering legislation to ban restaurants from selling food containing transfats. Go here to read the bill and committee reports and analyses.

Can a Section 230 Immunity Defense Be Raised on a Motion to Dismiss?

by Paul Alan Levy

We've previously blogged here about the important role that Section 230 of the Communications Decency Act plays in protecting consumer commentary on the Internet.  Several commentators have discussed (for example, here and here) the recent decision of the Ninth Circuit in Barnes v. Yahoo!, which held that, although Section 230 protects Yahoo! from being be sued for negligent failure to remove fraudulent postings made in her name by Barnes’ former boyfriend, Yahoo! could be sued for promissory estoppel on the ground that one of its managers allegedly promised Barnes that the postings would be removed, but then failed to do so while Barnes relied on Yahoo! promise.  The decision is carefully written to allow an ISP to avoid liability by hedging any assurances with an explicit denial that the promise is binding or enforceable. Most of the commentary has focused on this issue, reminding ISP’s (including bloggers who allow comments) to be careful about making unconditional promises to remove material. 

A possible sleeper issue in the decision, however, appears early in the opinion (Part II, at pages 5317-5318), where the Ninth Circuit faults the district court for allowing Yahoo! to file a motion to dismiss under Rule 12(b)(6), which asserts that the complaint does not state a claim on which relief can be granted.  The court notes that Section 230 immunity is an affirmative defense, and that affirmative defenses must be presented in an answer, followed by a motion for judgment on the pleadings.   In the future, district courts are to treat section 230 as an affirmative defense.

Law students, lawyers, the economy—A silver lining for consumers?

by Richard Alderman

It’s clear that the ongoing economic crisis is affecting job markets in every city and every profession – and the consequences for the legal profession and graduating 3L’s are profound and troubling. Jobs are difficult to find, offers are being rescinded, and start dates are being pushed back.

To assist our students, the University of Houston Law Center has initiated a program providing up to $500,000 to support the newest graduates. Foremost among the new proposals is an expansion of our Public Interest Fellowship program that was launched in 2006. For a period of three months following the bar exam, the Law Center will provide a stipend of $6,000 to any new graduates selected for a Public Interest Fellowship. We are also offering three-month Research Fellowships to members of the Class of 2009 who assist our faculty with research projects. In addition, new graduates will receive a 50% scholarship for Fall Semester if they are admitted to our LL.M. degree program, and they can register without cost for specialized classes and UH continuing legal education courses.

And there may be a silver lining for consumers in all of this. The Center for Consumer Law recently held a free CLE program entitled, “How to Start and Manage a Successful Consumer Law Practice.” I expected 30 people; we had over 85, including several graduating third-year students. It seems that as jobs get harder to find, and new clients become more important, lawyers are discovering consumers. The fact that most consumer law statutes have fee shifting provisions does not hurt either. It's too bad that it takes an event like the economic downturn to get lawyers thinking about consumers, but I won’t complain about the result.

More on Arbitration Opt-Outs and Opt-Ins

by Jeff Sovern

Earlier this week, my co-coordinator Deepak Gupta suggested that instead of adopting a so-called compromise providing that consumers agree to arbitration unless they affirmatively opt out, Congress should provide that litigation is the default choice, and consumers should have the opportunity to opt in to arbitration after receiving notice.  I imagine this was a tongue-in-cheek suggestion designed to indicate that the compromise was no compromise at all, but I thought it worth pointing out how changing from an opt out to an opt in changes the incentives for businesses.  In most opt-out scenarios, businesses fare better if consumers stay with the default, which means businesses have an incentive to reduce the likelihood that consumers opt out.  That in turn gives businesses an incentive to present opt-out notices in a way that is likely to get them overlooked.  Accordingly, as I noted in an earlier post, businesses write dull, lengthy opt-out notices filled with as much legalese as they can fit in, print them in one color, and adopt other strategies to reduce the likelihood that consumers notice or plow through them.  But with opt ins, such as Deepak suggested, businesses benefit if consumers depart from the default. As a result, instead of conveying the information in a way that reduces the chances that consumers will actually take it in, businesses present the information in a fashion that will maximize the likelihood that consumers notice it and opt in.  Here's an example I wrote about in 1999:

After the FCC ruled that phone companies seeking to use phone-calling patterns for marketing purposes must first obtain the consumer's permission, the telephone company in my area attempted to secure that permission.  Its representatives called and sent mailings to subscribers. The company also set up a toll-free number for consumers with questions.  The mailing I received was brief, printed in different colors, and written in plain English. . . . A postage-paid envelope and a printed form were included for consumers to respond.  Consumers who accept the offer need only check a box, sign and date the form, and print their name.

Opting In, Opting Out, or No Options at All: The Fight for Control of Personal Information, 74 Washington Law Review 1033, 1102 (1999). The point is that switching from an opt out to an opt in increases the likelihood that businesses will present the information in a way that gets consumers' attention, which in turn increases the likelihood that consumers will make decisions that reflect their actual preferences, rather than blindly doing what businesses want them to do.

Opt in systems do have costs, though. One is the cost to businesses of getting consumer attention and providing a system for the opt in. U.S. West claims that when it tried to get permission from its customers to use their calling patterns, the cost per positive response from consumers reached over the phone was $20.66 while the cost per positive response of consumers reached via direct mail was over $29.  And that was back in 1997.  The reality, of course, is that probably businesses wouldn't even try to persuade consumers to opt in to pre-dispute arbitration clauses.  Not only would they have to incur those costs, but they don't have a persuasive story to tell consumers about why pre-dispute arbitration is in their best interests.  And if that's so, then why would anyone ever think an system that imposes arbitration on consumers---whether through an opt out or the current system--serves consumer interests?

Gerardi & Willen on Subprime Mortgages, Foreclosures, and Urban Neighborhoods

Kristopher Gerardi and Paul Willen, both of the Boston Fed, have written Subprime Mortgages, Foreclosures, and Urban Neighborhoods. Here's the abstract:

This paper analyzes the impact of the subprime crisis on urban neighborhoods in Massachusetts. The topic is explored using a dataset that matches race and income information from HMDA with property-level, transaction data from Massachusetts registry of deeds offices. With these data, we show that much of the subprime lending in the state was concentrated in urban neighborhoods and that minority homeownerships created with subprime mortgages have proven exceptionally unstable in the face of rapid price declines. The evidence from Massachusetts suggests that subprime lending did not, as is commonly believed, lead to a substantial increase in homeownership by minorities, but instead generated turnover in properties owned by minority residents. Furthermore, we argue that the particularly dire foreclosure situation in urban neighborhoods actually makes it somewhat easier for policymakers to provide remedies.

News Flash: Lawyer Jobs Available at Public Citizen Litigation Group

    For the first time in five years, Public Citizen Litigation Group is hiring staff lawyers -- two in fact. If you are interested in doing cutting-edge consumer and other public interest litigation, take a look at the job announcement. And pass the announcement along to anyone you think may be interested. To learn more about the Litigation Group, go here.