Does Serving a Summons Trigger the FDCPA's Validation Notice Obligation?

by Jeff Sovern

Earlier this month, Richard Alderman blogged about the amendments to the Fair Debt Collection Practices Act that have since been signed into law.   In particular, he noted that one of the provisions amends § 1692g, the validation provision, to add a new subsection(d) which provides that a “communication in the form of a formal pleading in a civil action shall not be treated as an initial communication for purposes of subsection (a).”  The effect  is to provide that attorneys serving a complaint need not provide the validation notice because the obligation to supply the validation notice is triggered by “the initial communication.”  OK, that's it for complaints.  But complaints are often accompanied by a summons.  Does the exception include a summons?  A summons is not usually thought of as a pleading, much less a “formal pleading,” and the definition of “pleadings” in Federal Civil Rule 7(a) does not include a summons.  The FDCPA does not define “pleadings.”  It would make little sense to have an exception for complaints and not a summons, and yet that seems to be where the text of the statute takes you.

The issue arises only if a summons is an initial communication.  Before the recent amendment, courts had split on whether a complaint qualified as an initial communication.  Compare Vega v. McKay, 351 F.3d 1334 (11th Cir. 2003) with Thomas v. Law Firm of Simpson & Cybak, 392 F.3d 914 (7th Cir. 2004).   Communication is defined in the statute as “the conveying of information regarding a debt directly or indirectly to any person through any medium.”  A plain meaning interpretation would, it seems to me, regard a summons as a document that communicates information.  I suppose it could be argued that the summons in a suit based on a debt conveys the information that a case has been commenced rather than information about a debt, but this strikes me as a stretch, especially given the word "indirectly."   

If an attorney did include a validation notice with the summons, might the summons overshadow the validation notice?  See In re Martinez, 266 B.R. 523 (B.S.D.Fla.), aff’d, 271 B.R. 696 (S.D.Fla. 2001), aff’d 311 F.3d 1272 (11th Cir. 2002).  Another interesting feature of the statute is that it codifies the overshadowing rule, in a new last sentence of § 1692g(b).

Comparing Predictions to Outcomes

by Jeff Sovern

Proposals for changes in consumer laws often elicit predictions about the effect of the proposals. An interesting pastime is to compare the predictions with what actually happens after the proposal is adopted. Here are two examples drawn from the Thomson/West casebook on consumer law that I'm currently working on with John Spanogle, Ralph Rohner, and Dee Pridgen:

First, before the Federal Reserve Board adopted regulations lowering the APR trigger for coverage under the Home Owners Equity Protection Act (HOPEA), see Regulation Z, 12 C.F.R. § 226.32(a)(1)(i), a banking industry association predicted that the regulation would drive legitimate lenders from the subprime market. See Sandra Fleishman, Fed Favors Tougher Loan Rules; Abuses in Subprime Lending Are Targeted, Wash. Post., Dec. 14, 2000 at E01. In fact, subprime lending appears to have increased substantially after the regulations went into effect, though it is impossible to know whether the increase would have been greater still in their absence. See, e.g., Subprime Lenders Shatter Records in ’03 and Get Set for More in ’04, Inside B&C Lending, Feb. 9, 2004 at 1.

Consumer Protection and ADR in Nigeria

by Felicia Monye

This post is part of a continuing series on Nigeria's efforts to construct a system of basic consumer protection. The previous post, on the government's attempt to establish of a social compact with its citizens, can be found here.

The enforcement of consumer rights is a serious problem in Nigeria. Consumers are often reluctant to enforce their rights for a variety of reasons, including ignorance of their rights, poverty, and the judiciary's rigid adherence to strict legal rules that make it very difficult for consumers to prevail.

CAFA Jurisdiction: More on Judge Posner's Decision in Santamarina v. Sears

    By Brian Wolfman

    On October 23, 2006, I blogged briefly about Judge Richard A. Posner’s Class Action Fairness Act (CAFA) decision in Santamarina v. Sears, Roebuck & Co.  I described dicta in that case that Judge Posner had offered to his readers “for future reference,” and I suggested that, under his view, federal courts might assume federal jurisdiction under CAFA where none existed.  My earlier post was opaque, so I am writing now to elaborate.   

    Santamarina noted that an erroneous decision not to remand to state court a case removed under CAFA is not “jurisdictional.”   As Judge Posner put it, that kind of error “would not be so grave a mistake—so usurpative an assumption of federal jurisdiction withheld by Congress—that we would have an independent duty to correct it even if no party complained.”  Judge Posner cited no authority for that proposition, and it struck me as unusual.  If “federal jurisdiction is withheld by Congress,” doesn’t that mean that it’s, well, withheld by Congress?  And, if it has been withheld, doesn’t that mean a federal court cannot exercise it?  Let’s explore this a bit.

California District Court Trashes CAFA's "Legislative History"

  by Scott Nelson

The Class Action Fairness Act has, in the 20 months since its passage, been the subject of a large number of reported federal decisions at both the trial and appellate levels, and many of the opinions have relied in interpreting the statute on the Senate Judiciary Committee Report (S. Rep. No. 109-14), which did not appear until after the statute was passed by both houses of Congress and signed by the President.  Some of us have been using every available opportunity to question the authority of such post hoc legislative history.  Now Judge Stephen G. Larson of the U.S. District Court for the Central District of California has picked up on the issue and published an opinion, Lao v. Wickes Furniture Co., _ F. Supp. 2d _, 2006 WL 2879763 (C.D. Cal. Oct. 4, 2006), that strongly suggests that the Senate Report is, as legislative history, not worth the paper it's printed on. 

Significantly, the opinion goes on to disagree with three courts of appeals (the Fifth, Eleventh, and Seventh) on the issue of who bears the burden of proof of establishing the applicability of CAFA's so-called "home state" and "local controversy exceptions."  According to Lao, when a defendant removes under CAFA and is faced with a motion for remand, the defendant has the burden of establishing that federal jurisdiction is not barred by the "home state" and "local controversy" provisions, just as it bears the burden of establishing other elements of CAFA jurisdiction.

Both for its discussion of legislative history and its holding on the burden of proof, the decision may have significant influence on how some of the key CAFA issues percolating through the courts are ultimately resolved.  Moreover, the case itself may be a vehicle for the Ninth Circuit to weigh in both on the legislative history question and the burden of proof, because the defendants have sought leave to appeal within the statutory 7-day deadline.

FTC to Look Into Food Marketing to Kids

by Stephen Gardner

On October 25, the Federal Trade Commission announced its plans to issue "compulsory process orders to major food and beverage manufacturers and quick service restaurant companies in order to obtain information from those companies concerning, among other things, their marketing activities and expenditures targeted toward children and adolescents."

This is a significant development in the regulation of food marketing to kids. Of course, the proof of this pudding is in the eating, so it remains to be seen what the FTC does with the information it obtains.

In 2005, Congress directed the FTC "to prepare a report on food industry marketing activities and expenditures targeted to children and adolescent."  Pub. L. No. 109-108.

In March 2006, the FTC asked nicely for information, but the food industry failed to provide "information, especially empirical data, on the nature and extent of marketing activities and expenditures targeted to children and adolescents."

My organization, the Center for Science in the Public Interest (CSPI), filed a comment in response to the March 2006 proposal, urging the FTC to obtain "information on the nutritional quality of products marketed to children."

The FTC now proposes to do something akin to that — to demand information from about 50 companies about food advertised to children, including fast foods, breakfast cereals, snack foods, candy and gum, carbonated and noncarbonated beverages, frozen and chilled desserts, prepared meals, and dairy products, including milk and yogurt. Specifically, the FTC announced its need to obtain data about:

• The types of foods marketed to children and adolescents.
• The media techniques used to market products to children and adolescents.
• The amounts spent to market to children and adolescents.
• The amount of commercial advertising time that results from this marketing.

The FTC continued talking tough, cautioning that anyone who destroyed responsive data might be prosecuted criminally.  But at the same time, it indicated a willingness to second-guess itself, by asking for comments "whether the proposed collections of information are necessary for the proper performance of the functions of the FTC, including whether the information will have practical utility."

Since the FTC in the New Millennium has moved from being the "National Nanny" (as it was called in the 70's) to the Chicken Guarding the Foxhole, one must wonder what engendered this tough squawk from the FTC.  It might be the desire to come to the rescue of the food industry, to prevent it being sued, in light of recent developments.

CL&P Roundup

by Deepak Gupta

• Banks to try to undo landmark military predatory lending law:  Can we have a do-over?Banks, lenders, and their lobbyists in D.C. aren't thrilled about the newly-passed federal legislation limiting predatory lending to soldiers--which, among other things, institutes a hard usury cap and an unprecedented ban on arbitration clauses.  Their game plan?  As this article explains in detail, they're going to use the upcoming lame-duck session of Congress to try to water down the bill.   These, and other issues relating to the lame-duck session of Congress, are being tracked by Public Citizen's interesting new Lame Duck Hunt blog.  CL&P has previously covered the military lending issue here, here, here, and here.

• "Private student loans pose greater risk." USA Today reports that "Private loans are the fastest-growing sector of the multibillion-dollar student loan industry . . . At a time when the cost of college is surging and financial aid is shrinking, private loans make it possible for many students to attend colleges they couldn't otherwise afford. But consumer advocates and student groups worry that the growth of these loans could prove disastrous for borrowers who don't understand the risks."

• More press on the surge in debt collection complaints: The Buffalo News reports that the New York legislature is holding hearings:  "Consumers are increasingly being dunned, their wages seized and their bank accounts frozen for supposed debts that turn out to be disputed or even bogus, consumer advocates testified Tuesday at a state legislative hearing.   'The number-one complaint we get on the hotline is from people whose bank accounts have been frozen, and they never had notice of the debt,' said Claudia Wilner, staff attorney at the Neighborhood Economic Development Advocacy Project, a New York City anti-poverty group."

• Groups launch Digital Freedom Campaign:  A group of technology firms, consumer advocacy groups and artists on Wednesday announced the launch of the Digital Freedom Campaign, "a national effort to fight back against efforts by the big record labels and movie studios to ban new digital technologies."  The Consumer Electronics Association, Public Knowledge, Electronic Frontier Foundation, Media Access Project, Computer and Communications Industry Association (CCIA) and New America Foundation are among groups supporting the campaign. The group said it seeks to "educate policy makers, innovators, parents, students and other consumers about the lawsuits and legislation that threaten to revoke individuals' rights to use digital technology."

• "How milk soured Quebec on class actions":   The Globe and Mail reports that, in a case hailed by corporate defence lawyers, Quebec's Court of Appeal effectively banned the controversial practice of "multiple-defendant" class actions, in which plaintiffs seek damages from entire industry sectors, not just the companies with which they have done business.   The decision is seen as a boon, especially to companies that deal in major consumer products such as automobiles, as well as insurance, securities and pharmaceuticals -- sectors that have borne the brunt of such lawsuits.

• Welcome to the Blogosphere, "The Tortellini":  Veteran journalist Stephanie Mencimer has started a new blog on the law and politics of access to civil justice.  The blog is designed to complement her forthcoming book, Blocking the Courthouse Door, which will be released by Simon & Schuster in December.

• Court rules state may may block automated telephone calls delivering political speech:  Just days before the election, a federal judge in Indiana has ruled that the state may constitutionally ban automated interstate calls to the state's residents, even if the message involved is political and non-commercial:

Real ADR

by Richard Alderman

For several decades, alternative dispute resolution (ADR) has been viewed as the savior of the American civil justice system.  ADR is viewed as providing a voluntary, cheaper, quicker, and more efficient alternative to our slow, expensive justice system.

Like most, I support the notion of ADR.  How can anyone argue with an alternative system that is cheaper, quicker and more efficient?  I have long had problems, however, with what currently passes for ADR. Arbitration, especially in the context of consumers, is fast becoming the norm, rather than an alternative, and it is anything but voluntary or cheaper, not to mention the problems of unfairness and the elimination of precedent and stare decisis.  Mediation, while better in theory, is often used only late in the civil justice process and simply adds another expense and formal process.  When I graduated from law school, we were told most cases settle “on the courthouse steps.”  Today, students are told they settle in formal mediation, and that your client must pay the fees of the mediator.

This is not to say I don’t support an alternative way of resolving disputes. In fact, I think arbitration, when truly voluntarily agreed to, can be an excellent forum, and mediation, if pursed early in the litigation process, can often result in a prompt settlement, without much of the cost and hostility of litigation.

Perhaps we should be thinking outside of the box when it comes to consumer ADR.  For example, how about compulsory mediation held promptly after the dispute arises, allowing the parties to try to work out their differences?  What about allowing the parties to make a post-dispute decision to utilize an informal consumer court that conducts hearings in the evening or on the weekend, and promptly issues a binding judgment for parties who agreed to use it?  Could we create a less expensive, truly voluntary, form of arbitration?  Or, maybe trade associations could form tribunals to resolve disputes, settling claims through a common fund.  Like worker’s compensation, members’ fees could be based on the past history of complaints.  Finally, how about authorizing designated consumer organizations to act as “private attorney generals,” and maintain litigation on behalf of aggrieved consumers, limiting relief to restitution or repair?

Alternatives to our current form of ADR do exist, and should be considered. Can they work?  To see a truly innovative way of dispute resolution, take a look at the Tokyo Tuna Court, discussed in Eric Feldman’s article, The Tuna Court: Law and Norms in the World's Premier Fish Market, 94 Cal. L. Rev. 313 (2006) (describing how "Tokyo's tuna merchants make use of a highly specialized court created by the state--the Tuna Court--that follows formal rules and procedures that are contained in a government ordinance. The supposed disadvantages of legal rules are nowhere apparent. The Tuna Court is fast and inexpensive, and the process of articulating and resolving claims serves to strengthen individual relations and the cohesion of the market community.").

Wal-Mart Symposium Recap

by Orly Lobel

Last weekend I participated in an excellent symposium organized by the University of Connecticut Law Review: "Wal-Mart Matters". The symposium was intense, a day and a half of full panels with speakers from the legal academy, from other disciplines, including history, economics, business, and from practice, including journalists, activists, and both the plaintiff’s and the defendant’s lawyers from the biggest employment discrimination class action to ever been certified – 1.6. million women working at Wal-Mart - currently on appeal before the 9th Circuit: Dukes vs. Wal-Mart.

I plan to post later a synopsis of my own talk called Wal-Mart’s Benefits: The Targeting of Giants in a National Campaign to Improve Work Conditions. But in the meantime, I thought I would share a few notable quotes from some of the panels, to give you a sense of the debates:

Bob Ortega, Author of In Sam We Trust: The Untold Story of Sam Walton and Wal-Mart, the World's Most Powerful Retailer, Journalist, and Journalism Professor: “You can put lipstick and string pearls on a pig, but the pig remains a pig” (on Wal-Mart’s PR attempts to improve its image by hiring civil rights spokesmen).

Vijay Prashad, Professor of International Studies: “They had Saliva on their faces, when they learned the statistic that India’s middle class is the size of  France” (about management contemplating entering the Indian retail market).

Joseph M. Sellers, Partner, Cohen, Milstein, Hausfeld, & Toll, PLLC, representing the plaintiffs in the Dukes discrimination class action "(Wal-Mart management had a fetish of controlling every single aspect of Wal-Mart stores, from to music, but they forgot to guide promotion and personnel decisions at the floor level".

Seventh Circuit Takes Hard Look at "Coupon" Settlements, Citing CAFA

  by Scott Nelson

As far as I can tell, there are not yet any reported federal decisions that apply the settlement provisions of CAFA, which are found at 28 U.S.C. 1711 - 1715.  (If I'm wrong, I'd love to hear about it.)  But in its recent decision in Synfuel Technologies, Inc. v. DHL Express (USA), Inc., 463 F.3d 646 (7th Cir. 2006), the Seventh Circuit cited what it considered to be CAFA's policy of "heightened scrutiny" of coupon settlements in support of a decision striking down a non-CAFA settlement because the district court did not adequately evaluate its fairness.  The opinion is interesting in a number of respects, a few of which I'll discuss.