Supreme Court Hears Argument in Stoneridge Securities Case

The Supreme Court heard argument Tuesday in the much-anticipated federal securities case, Stoneridge Investment Partners v. Scientific-Atlanta.  The case may help draw the dividing line between aiding and abetting a violation of the federal securities laws, which does not give rise to a private suit under those laws, and a primary violation, which, of course, does.  The question presented, more formally stated, is whether claims for deceptive conduct under Section 10(b) of the Securities Exchange Act of 1934 are barred by the Court's decision in Central Bank v. First International Bank (which rejected aiding-and-abetting liability), when the defendant engaged in fraudulent transactions designed to inflate a corporation's financial statements, but made no public statements concerning those transactions.

Linda Greenhouse at the New York Times reports here that the Justices appeared skeptical of the plaintiff's claim.  Make your own guess about where the Court is headed in the case by reading the oral argument transcript from Tuesday's argument.  Readers can also consult the Oyez Project for a concise discussion of the case and access to the briefs filed by the parties.

One quirky thing about the case:  When the Supreme Court agreed to hear the case, only 7 of the 9 Justices participated.  Chief Justice John Roberts and Associate Justice Stephen Breyer had recused, possibly because they owned stock in one of the parties (often the reason for a recusal).  But less than 3 weeks before oral argument, the Chief unrecused.  How often does that happen?

Hurricane Katrina's Effect on Foreclosures

A. Brook Overby of Tulane has written an article, Mortgage Foreclosure in Post-Katrina New Orleans, published in the Boston College Law Review, Vol. 48, No. 4, 2007.  Here's the abstract:

Hurricane Katrina, the largest disaster in the history of the United States, caused widespread property destruction throughout the Gulf Coast, but particularly in the city of New Orleans. Although the storm created an environment which facilitated increased mortgage defaults in the area, the Article analyzes data from the Orleans Parish Recorder of Mortgages Office and from the Orleans Parish Civil District Court and concludes that foreclosure filing rates in the year after Katrina in fact decreased significantly from the rates for the corresponding period in the year prior to the storm. This result is contrary to what would normally be expected in a usual mortgage lending market, where an increase in the rate of mortgage default would lead to an increase in the rate of foreclosure.

The Article evaluates in detail the legal and market responses to mortgage default after the storm that contributed to the reduction in foreclosure actions in Orleans Parish in the year after Katrina. Secondary mortgage market initiatives provided the principal means for mortgage relief, because Louisiana debtors received little in the way of formal legal relief. Even though secondary market responses were successful in protecting mortgage debtors after Katrina, their limitations in scope make them inadequate to address the years of financial distress that might likely follow any disaster of the magnitude of Katrina. Thus, while the Katrina experience demonstrates that secondary market interventions can effectively reduce debtor distress after a major disaster, such interventions should not been seen as a substitute for more traditional legal responses to address mortgage debtor distress after disasters or other economic crises.

Times Reports on Spam, Telemarketing, Credit Discrimination, Credit Card Legislation, and More

I've fallen behind on my reading of the Times, but here's an attempt to make up for that.  Today's "What's Online" column has several pieces relevant to consumer law.  The column opens  by noting that Symantec's monthly State of Spam report observed an increase in spam in September. The increase is due in part to spam offering loans and homes in response to the Fed's rate cut.  So much for CAN-SPAM.  The column goes on to describe something reported on consumerist.com (which occasionally picks up our postings and is listed on our blog roll at left): DirecTV claims the right to make "informational calls" to consumers on its Do-Not-Call list to give consumers "an opportunity to change [their] do-not-call preference."  Finally, according to Geoff Williams of Entrepreneur.com, telemarketing is among ten industries likely to die in the next decade.  That contrasts with earlier reports that telemarketing has grown since adoption of the Do-Not-Call rule.

In other recent stories, the Times reported here that the N.A.A.C.P. has filed suit against eleven mortgage lenders for steering African-Americans to subprime loans even though they could have qualified for prime rates.  The suit is founded on ECOA and the Fair Housing Act, and the plaintiffs are seeking to have it certified as a class action.  An editorial in yesterday's issue, titled "Common Sense and Credit Cards" praises bills that would outlaw universal default and limit credit card marketing to college students.  It calls for Congress to look at school-themed credit cards offered by alumni associations.  Finally, just to prove that identity thieves spare no one, here's a report on the victimization of the billionaire Mayor Bloomberg.

More on the Arbitration Trap

We recently posted here about a new report by Public Citizen's Congress Watch: The Arbitration Trap: How Credit Card Companies Ensnare Consumers.  Analyzing statistics on National Arbitration Forum cases in California, the report demonstrates that arbitrators rule for credit card companies and against their consumers in 94 to 97 percent of the cases.   

The report has gotten a good amount of attention in the past week, including an NPR Marketplace story by Helen Palmer that interviews Public Citizen president Joan Claybrook and law professor Elizabeth Warren, and lots of newspaper stories around the country.   Elizabeth Warren herself wrote a nice piece about the report, and the implications of the larger legislative battle, at TPM Cafe.

As we reported this summer, a comprehensive bill known as the Arbitration Fairness Act (H.R. 3010 and S. 1782) has been introduced in Congress; the proposed legislation would essentially gid rid of mandatory binding arbitration in consumer, employment, franchise, and civil rights disputes.  On the House side, the bill is gaining co-sponsors, including moderate and Republican members.  The legislation is also steadily attracting more news coverage -- though certainly not as much as it should be.  The Consumerists' coverage is also worth checking out.

Finally, co-blogger Richard Alderman has written law review article concluding that the Arbitration Fairness Act, or something along those lines, is the only realistic way out of the current morass -- The Future of Consumer Law in the United States: Hello Arbitration, Bye-Bye Courts, So Long Consumer Protection.

Don't Post This Cease-and-Desist Letter, Or Else

by Greg Beck

DirectBuy is a company that claims to offer a deal on furniture and home supplies by letting consumers buy directly from the manufacturer. Apparently, the company doesn't want you to hear from customers who don't think the deal is such a good one. The company's law firm, Dozier Internet Law (which specializes, among other things, in using copyright law to "get websites pulled down without notice") sent a strongly worded demand letter to the owner of InfomercialScams.com, claiming that consumer complaints on the website are defamatory because they refer to the company's direct-buy plan as a "scam" and a "nightmare."

CAFA Symposium

The University of Pennsylvania Law Review is having a symposium on November 30 and December 1 titled "Fairness to Whom? Perspectives on the Class Action Fairness Act of 2005."  The impressive list of speakers includes Geoffrey Hazard, Stephen Burbank, Ed Purcell, Stephen Subrin,  David Shapiro, Arthur Miller, Judith Resnik, Suzanna Sherry, Linda Silberman, John Coffee, Kevin Clermont, Theodore Eisenberg, and other legal luminaries.  The symposium website is here.

NYPIRG Launches Website To Protect Consumers From Online Scams

The New York Public Interest Research Group (NYPIRG) has launched CyberStreetSmart.org -- a website aimed at protecting consumers from on-line scams.  It advises consumers on how to protect themselves against phishing, on-line shopping and auction scams, and the hazards of on-line dating and social networking.  It also  provides information on how to report on-line scams to relevant governmental authorities.  Check it out.

2008 Yearbook of Consumer Law

The 2008 Yearbook of Consumer Law is about to be published.  Here's the table of contents:

Foreword; Part 1 Articles 2008: European consumer law: making sense, Jac G.J. Rinkes; The future of European contract law: some questions and some answers, Guido Alpa; The relationship between national and European consumer policy – challenges and perspectives, Hans-W. Micklitz; General clauses on fairness and the promotion of values important in services of general interest, Chris Willett; The statutory frameworks and general rules on unfair commercial practices in the 25 EU member states on the eve of harmonization . . .

September 2007 NHTSA Recalls

The September 2007 auto safety recalls from the National Highway Traffic Safety Administration are available here.

Mortgage Assistance Program For Home Buyers Who Lack Credit History

  Today's Washington Post has this story about CitiMortgage's $200 million pilot program in the Washington, D.C. area to provide mortgage assistance of about $100,000 each to 2000 home buyers who lack credit history, and would otherwise find the cost of credit unmanageable.  The program will be managed by a D.C. non-profit organization and has the support of the D.C. government.