by Stephen Gardner
In short, the article does a great job of articulating the problems a few folks see with cy pres distributions, but not so much in reflecting the many positives about cy pres.
(Disclosure time: My organization, the Center for Science in the Public Interest, has received a few cy pres awards, and I have as a class action lawyer given many hundreds of thousands of dollars to suitable charities. My long-held professional bias is strongly in favor of cy pres payments, and my more recent institutional bias complements that bias. I was also a primary author of the Class Action Guidelines issued by the National Association of Consumer Advocates, one chapter of which addresses and supports cy pres distributions.
(Thus, my long-held professional bias is strongly in favor of cy pres payments, and my more recent institutional self-interest complements that bias.
(But I’m right, regardless.)
First, a quick summary of cy pres, just in case you don’t want to read the Times article (which you really ought to do, as it is a very well-written summary of cy pres concepts, better than I am likely to achieve.
by Deepak Gupta
Another Class Action Ban Bites the Dust: Yesterday, a Florida appeals court struck down a class action ban in an auto lease agreement. Among other things, the ruling was based on the fact that attorneys' fees under the state's trade practices statute are limited based on the damages awarded: "Precluding class representation for holders of small claims whose attorney’s fees are limited by the amount of their individual damages," the court observed, would "dramatically undermine" the statute's "private enforcement mechanisms." Relatedly, a detailed new article in Lawyers USA surveys the ongoing battle over class action bans. The piece quotes not one, not two, but three of this blog's contributors--Paul Bland, Ira Rheingold, and Jon Sheldon.
More on Binding Mandatory Arbitration: Reporter Stephanie Mencimer has a terrific new story in Mother Jones on the evils of mandatory binding arbitration clauses, with a focus on used car sales; she recounts her own family's unsuccesful attempt to buy a used car without submitting to BMA and discusses the legislation pending in Congress. In a related blog post, she discusses how arbitration has hit one member of the military deployed to Iraq. In the field of arbitration fora stacked in favor of big business, the National Arbitration Forum is the worst of the worst; on Sunday, one NAF arbitrator posted a comment on this blog (scroll down) responding to a year-old post by Paul Bland discussing NAF bias. Judge for yourself.
"It might just be a good Christmas for books or movies": So says Senator Durbin, in response to questions about shopping for toys this season in the wake of scandals over toy recalls and lax Consumer Product Safety Commission enforcement. A broad consensus is emerging that something needs to be done about the CPSC. [via US PIRG and Consumerist]
A critical view of cy pres: In yesterday's Times, legal reporter Adam Liptak ran a column with a negative angle on the distribution of cy pres funds to charities. The column, which leans heavily on the views of NYU prof Sam Issacharoff, discusses these two opinions by Judge Harold Baer of the Southern District of New York--issued before and after reversal by the Second Circuit, respectively. The question before Judge Baer: When very few class members claim benefits, do you give those class members a share larger than their damages, or do you distribute the funds to related charities? Liptak is a good reporter, but this column may paint a somewhat unrepresentative picture of the use of cy pres in consumer class actions; look for a response here soon.
Yesterday, the Third Circuit issued a decision concerning the Class Action Fairness Act in Frederico v. Home Depot, No. 06-2266, __ F.3d __, 2007 WL 3310553 (Nov. 9, 2007). In Frederico, the plaintiff argued that certain fees imposed by Home Depot for the alleged late return of its rental trucks violated New Jersey law. The CAFA questions were whether the putative plaintiff class sought more than $5 million - - the amount necessary under 28 U.S.C. 1332(d)(2) to establish
federal jurisdiction - - and what the standard is for proving the jurisdictional amount when, as in Frederico, the complaint does not explicitly limit the amount being sought to $5 million or less.
On the latter question, to make a long story short, here's what the court held: "[W]here the plaintiff has not specifically averred in the complaint that the amount in controversy is less than the jurisdictional minimum[,] the case must be remanded [only] if it appears to a legal certainty that the plaintiff cannot recover the jurisdictional amount." Slip op. 18. The court distinguished its ruling from its prior decision in Morgan v. Gay, 471 F.3d 469 (3d Cir. 2006), where the complaint had expressly limited the value of the claim to $5 million. There, "the proponent of the federal subject matter jurisdiction [generally, in CAFA cases, the removing defendant] is held to a higher burden; that is, the proponent of jurisdiction must show, to a legal certainty, that the amount in controversy exceeds the statutory threshold." Slip op. 15. [We have previously blogged about that ruling in Morgan v. Gay here, and another ruling in Morgan v. Gay, concerning CAFA's appeal filing deadline, here.]
For what it's worth, the court then found that there was way more than $5 million in controversy, id. at 18-24, and affirmed dismissal on the merits, holding that the plaintiff had not stated a claim under New Jersey law. Id. 25-38. It appears that the class was never certified and that therefore only the named plaintiff and not the (putative) class is bound by the court's ruling on the merits.
by Deepak Gupta
A front-page article in the San Jose Mercury News earlier this week and a recent AP story both reported on a practice I've previously blogged about here: private debt collectors that rent out a prosecutor's name and authority, which they use to threaten consumers who have written bad checks with criminal prosecution and jail unless they pay exorbitant collection fees. The threats are made without regard to the facts of the case (in the vast majority of cases, there's no criminal intent), and the revenues are split with the prosecutors. Assuming they're subject to suit, these companies' practices violate virtually every section of the Fair Debt Collection Practices Act.
The threshold question, however, is whether these companies are above the law. They have argued that they're entitled to blanket immunity from suit--that they get derivative sovereign immunity by virtue of their contractual relationship with the government. In one case, a Florida federal district court bought that argument, extending the doctrine of state sovereign immunity far beyond previously existing law. In a second case, a California federal district court disagreed. In separate appeals, Public Citizen's Consumer Justice Project has been defending the California decision and urging reversal of the Florida decision.
Yesterday, the U.S. Court of Appeals for the Eleventh Circuit (a notably conservative court on immunity issues, and the only federal appeals court ever to have sustained a state sovereign immunity defense by any private corporation) reversed the Florida district court and rejected the immunity defense raised by a company called American Corrective Counseling Services (ACCS). In its decision, the appeals court found that attorneys in the prosecutors’ offices do not review cases before ACCS threatens consumers with prosecution, and that the prosecutors exercise virtually no control over ACCS. Sovereign immunity, the court said, “has never been held to apply simply because an independent contractor performs some government function.”
The decision has potentially far-reaching implications for holding all sorts of government contractors--from private prisons to Blackwater--accountable in the federal courts. And both in its analysis of the Eleventh Amendment issue and its characterization of the program itself, the decision in many ways provides a roadmap for arguing that these types of debt collectors should be held liable under both state and federal consumer protection law. [press release] [case info and briefs]
Judge Young Speaks Out on the Value of Jury Trials: Federal district judge William Young of Boston recently delivered a spirited speech to the Florida Bar on the role of the jury in American democracy. Judge Young explains that the American jury system is "dying" because of a combination of, among other things, extravagant federal preemption defenses, mandatory binding arbitration, an increase in the use of summary judgment to prevent cases from going to trial. No news there, perhaps, but it's rare to hear a sitting federal judge speak the truth about these things, and as candidly as Judge Young does. It's worth a read.