The Hazards of Suing a Consumer Review Website

by Paul Alan Levy

After Lifestyle Lift sued Justin Leonard for allowing putting its name in the “path” for pages on his infomercialscams.com web site where consumers commented on the merits of Lifestyle’s product, claiming trademark infringement and dilution, Leonard issued a warning that the case was so lacking in merit that attorney fees could be awarded if the suit proceeded.  When Lifestyle persisted in its suit, the district court ruled from the bench dismissing its lawsuit.  Lifestyle Lift then coughed up $17,500 rather than face a motion for fees under both Rule 11 and the Lanham Act.  Other documents in the case can be found here.

Lifestyle has shown a habit of filing suits against its critics, dragging them to the Eastern District of Michigan in the expectation that the high cost of defending will quash criticism.  It is to be hoped that Leonard’s successful resistance serves as a lesson – both to companies that get bad legal advice telling them how easy it is to suppress criticism through phony trademark claims (they should ask skeptical questions), and to the critics who receive such threats and face such suits (it is worth standing up to trademark bullies).

Business Week: "Banks vs. Consumers"

Spoiler alert: the banks win.

It's Bad Out There

Highlights of the First Quarter National Delinquency Survey
By Alan White

For the third quarter in a row, foreclosures and mortgage defaults are rocketing upwards, according to the Mortgage Bankers Association report on foreclosures and delinquent mortgages as of March 31, 2008. Not surprisingly, delinquencies and foreclosures are up dramatically in almost all categories, compared with the December 31, 2007 report, which already had record numbers.

As of March 31, MBA counted 1.12 million mortgages in a pending foreclosure, in its sample of about 80% of the market. This extrapolates to 1.4 million American homes that were in foreclosure at the end of the first quarter (up a quarter of a million from December 31, 2007.) About 53% of pending foreclosures are on subprime mortgages. Adding 60- and 90-day delinquencies brings the total to nearly 3 million homes. Even allowing for some investors, this crisis is directly affecting more than 5 million people.

New York City Consumer Debt Working Conference

The Feerick Center for Social Justice and the New York County Lawyers Association Justice Center are sponsoring a free conference on Consumer Debt in New York City on Thursday, June 19, 2008 from 8:30 AM to 5:00 PM at the Fordham Law School, 140 West 62nd Street (at Columbus Avenue), NY, NY-McNally Amphitheatre.  This working conference will bring together policy makers, consumer law experts, community-based service providers, court personnel, and other key stakeholders to problem solve around issues related to consumer debt and low income New Yorkers.

Conference goals include identifying concrete and achievable reforms and strategies focused on the Civil Court of the City of New York, the community, and the marketplace.  Plenary sessions will focus on the Credit Card, Debt Consolidation, and Debt Collection Industries, and the Civil Court while breakout sessions will explore Arbitration and Consumer Debt, the Intersection of Bankruptcy and Consumer Debt. Civil Court Reform and Practice, Financial Literacy and Credit Counseling, Credit Reporting, Medical Debt, and Post-Judgment Enforcement and Bank Policies and Practice  (disclosure: I'm a discussion leader for a breakout session, but despite that it sounds like an excellent conference).

Click here for more information and to register (the deadline for registration is June 12)

The Content of Consumer Law Classes

Want to know what is taught in consumer protection classes?  I've now posted to SSRN "The Content of Consumer Law Classes," which will appear in 12 Journal of Consumer and Commercial Law, No. 1.  The piece reports on the survey we conducted at Richard Alderman's Teaching Consumer Law Conference, under the auspices of the University of Houston Law Center.  The results in the paper are somewhat different from what I reported at the Conference because the paper includes more responses.  Here's the abstract:

Attendees at the University of Houston Law Center Conference titled Teaching Consumer Law: The Who, What, Where, Why, When and How were surveyed to determine what topics they covered in consumer law classes. Twenty-five responses were received, representing fourteen survey classes, five clinics, and six miscellaneous responses. The responses indicated considerable diversity in the topics covered. No topic was covered by more than 21 professors and each of the 32 topics listed on the survey instrument was discussed by at least four professors. Under the circumstances, it seems difficult to claim that consumer protection classes have a canon agreed upon by those who teach them. The responses, including those in survey courses, indicate that coverage is not static; many professors taught subjects that arose only recently, such as the subprime lending meltdown and statutes enacted since 1999.

Los Angeles to Sue Time Warner Cable for Poor Service

The Los Angeles City Attorney is suing Time-Warner Cable today for making false and misleading statements to subscribers and violating the terms of its franchise agreement with the city. The complaint alleges that, despite promises to "fix . . . problem[s] fast," the company left callers to its customer service line on hold for hours and excessively delayed repair work.

Correction: This post initially misidentified the defendant as Comcast. Los Angeles is actually suing Time-Warner Cable.

[via Consumerist]

Fed staff reads behavioral economics literature

For you law (or economics) professors out there writing about behavioral economics, take heart. Sometimes people who write regulations are listening (and reading.) The new credit card unfair practices rule proposed jointly by the Federal Reserve, OTS, and NCUA makes reference to hyperbolic discounting in discussing the practice of charging penalty rates on existing credit card balances. (See fn 47 of the proposed rule, citing among others, Angela Littwin's article.) The context: the proposed rule prohibits charging an increased, penalty APR on balances owed before the event causing the APR increase (such as a late payment.) The regulators contend that consumers cannot reasonably avoid this practice, and it is therefore unfair, in part because of hyperbolic discounting. I would argue that overconfidence bias and disregarding nonsalient terms are also behavioral tendencies that support the argument for the new rule.

Jean Sternlight on Governmental Imposition of Arbitration on Companies in Consumer Disputes

Jean R. Sternlight of UNLV, a frequent critic of binding arbitration clauses, discusses whether it would be acceptable and constitutional for the government to impose arbitration on companies in consumer disputes in "In Defense of Mandatory Arbitration (If Imposed on the Company)," 8 Nevada L. J. 82 ((2007), Here's the abstract:

Having spent much of her academic life battling companies' mandatory imposition of binding arbitration on consumers and employees, the author now switches gears. This Article contemplates whether mandatory binding arbitration is acceptable if imposed by the government on companies (governmental mandatory arbitration) rather than by companies on their employees and consumers (private mandatory arbitration). Specifically, the Article considers the possibility of statutes that would provide little guys (consumers and employees) with an opportunity to take their disputes to binding arbitration rather than litigation. If the little guys chose arbitration over litigation, post-dispute, companies would have to agree to such arbitration, and the results of the arbitration would then be binding on both little guy and company. If on the other hand the little guys preferred to litigate their disputes, they would reserve that right. After first examining the policy implications of this approach, and finding some reasons to favor the proposal, the Article next considers the constitutional arguments that would likely be raised in opposition to such statutes. Specifically, it considers the legitimacy of governmentally imposed mandatory arbitration in light of Article III, the Seventh Amendment, and the Due Process Clause. The Article finds that it may be possible to governmentally impose mandatory arbitration in some situations without violating the Constitution. Nonetheless, the Article concludes that trying to introduce such legislation is probably unwise, as a matter of realpolitik. At a minimum, however, the Article should discourage companies and their lobbyists from insisting, as they often do, that privately imposed binding arbitration is the best way to ensure little guys get access to arbitration. Instead, if such companies and lobbyists truly believe arbitration is better for little guys than litigation they should favor the governmental imposition of arbitration on companies, as discussed in this Article.

Technical Difficulties

We appear to be experiencing a problem due to Typepad's recent software upgrade, leading to the disappearance of our sidebars and headlines.  We are currently working to resolve the issue and apologize for any inconvenience. Thank you for your patience.

UPDATE - The problem appears to have been resolved.

The Dangers of "Standard" Terms

An interesting post by David Giacalone explains how used car dealers use "standard" sales contracts to avoid competition on the terms of their warranties. The use of standard terms is one reason why some things, like lawyer contingency fees, seem to be immune from the pressure of competition.