Consumer Law & Policy Blog

Wasserman Article on Global Solutions to Mass Torts

Rhonda Wasserman of Pittsburgh has written Future Claimants and the Quest for Global Peace, Forthcoming in 64 Emory Law Journal (2014),  Here's the abstract:

In the mass tort context, the defendant typically seeks to resolve all of the claims against it in one fell swoop.  But the defendant’s interest in global peace is often unattainable in cases involving future claimants – those individuals who have already been exposed to a toxic material or defective product, but whose injuries have not yet manifested sufficiently to support a claim or motivate them to pursue it.  The class action vehicle cannot be used because it is impossible to provide reasonable notice and adequate representation to future claimants.  Likewise, non-class aggregate settlements cannot be deployed because future claimants will not have contacted attorneys whose participation is critical to those alternative methods of dispute resolution.

In lieu of class actions and non-class aggregate settlements, this Article proposes a hybrid public-private claims resolution process designed to provide many of the benefits of global peace, while preserving the constitutional rights of future claimants and ensuring them fair compensation as their injuries manifest.  Under this proposal, defendants would secure judicial approval of a fair and reasonable class action settlement of the current claims and then, through an extra-judicial process, make fair offers on comparable terms to future claimants as their claims mature, adjusted to take into account the time value of money and intervening changes in legal doctrine and medical advances.  Since the class action settlement would not purport to bind the future claimants, their constitutional rights would be protected.  And even though the future claimants would not be bound by the class action judgment nor obligated to accept the fair offers on comparable terms, they would have an incentive to accept them, rather than sue in tort, because they would be assured fair compensation without incurring the costs of litigation.

Paper on Privacy Harms and the Notice and Choice Framework

Joel R. Reidenberg, N. Cameron Russell, Alexander J. Callen, Sophia Qasir, and Thomas B. Norton, all of Fordham, have written Privacy Harms and the Effectiveness of the Notice and Choice Framework. Here is the abstract:

In the last fifteen years, the Federal Trade Commission and the White House have promoted notice and choice as the preferred mechanism for protecting consumers’ privacy online.  But law and policy scholars doubt the efficacy of this mechanism.  Research shows that consumers rarely read website privacy policies, that such policies are often too complex for users to understand, and that website policy statements do not match consumers’ privacy expectations.  Efforts to ameliorate theses issues through technological tools, such as privacy filters and do-not-track codes, have been unsuccessful.  Further, these tools do not address whether notice and choice theory aligns with the actual privacy harms that consumers experience. 

This alignment remains unexplored.  This article, thus, proposes to examine the relationship between the notice and choice theory and users’ actual privacy concerns.  The article takes a novel approach that examines privacy litigation and FTC enforcement actions.  This focus on the wrongs litigated in the real world reveals the most important harms that consumers experience and provides a better understanding of the efficacy of the notice and choice framework.

The data set compiled to support the research for the article consists of all federal class action complaints alleging online privacy violations filed during the last ten years and the Federal Trade Commission complaints and settlements addressing online privacy.  The article next addresses the roles that jurisdiction and competence play in framing claims and identifies a typology of the wrongful acts experienced by consumers.  The research shows that four types of claims appear in both private litigation and public enforcement with respect to personal information:  (1) unauthorized disclosure, (2) surreptitious collection, (3) failure to secure, and (4) undue retention.

The article then applies this typology to map “zones of effectiveness” for the notice and choice regime.  The article identifies which wrongs a proper notice and choice regime can and cannot address.   The research demonstrates that while some wrongful practices might be avoided by the inclusion of specific statements in a notice, others will be incurable through notice.  The latter set of wrongs is, thus, outside the “zone of effectiveness” of a notice and choice regime.  Lastly, the article concludes with a discussion of whether and how the harms that consumers experience match the outcomes of litigation and FTC settlement orders.

This research is supported by the National Science Foundation grant 1330214 “TWC SBE: Option: Frontier: Collaborative: Towards Effective Web Privacy Notice and Choice: A Multi-Disciplinary Prospective.”

Ron Elwood on Payday Lending

Ron Elwood has written The Verdict Is in: Payday Lending Is Guilty as Charged, Clearinghouse Review: the Journal of Poverty Law & Policy.  Here's the abstract:

The payday loan is symptomatic of the failure to provide access to reasonably priced credit. By understanding the fallacies in the arguments used to justify payday loans, advocates can help reform laws so that payday-loan borrowers do not fall into a debt trap. Advocates and policymakers might also set the stage for a new system that offers short-term, small-amount credit at reasonable terms.

(HT: Larry Kirsch)

Business Lawyer Update on Automotive Consumer Finance

Kevin M. McDonald of VW Credit, Inc. and Kenneth J. Rojc of Nisen & Elliott, LLC have written Automotive Finance: Shifting into Regulatory Overdrive, 69 Bus. Law. 599 (2014).  Here is the abstract:

As part of the Annual Survey of the American Bar Association Section on Business Law, this article examines the impact of the Dodd-Frank Act on the auto finance industry. Regulation of auto finance is being reshaped at the federal level by the Bureau of Consumer Financial Protection ("CFPB"), which has oversight over many of the activities, products, and services that auto finance companies offer. Other federal regulators, including the Federal Trade Commission ("FTC"), with its enforcement authority over deceptive trade practices and debt collection activities, and the Department of Justice ("DOJ"), which has increased enforcement of fair lending laws, also contribute to the reshaping. This year’s Annual Survey focuses on the most significant changes in the auto finance regulatory environment and review the impact of those changes on the life cycle of auto finance products from origination through servicing and collection.

Radin Essay on Ben-Shahar's & Schneider's Book on Disclosure

Last year, we posted a link to Omri Ben-Shahar's review of Margaret Jane Radin's Boilerplate. Now she returns the favor by comenting on More Than You Wanted to Know: The Failure of Mandated Disclosure, the book he co-authored with Carl Schneider in her essay, Dismissing Disclosure?  Here is the abstract:

This essay responds to a new book by Omri Ben Shahar and Carl E. Schneider, entitled MORE THAN YOU WANTED TO KNOW: THE FAILURE OF MANDATED DISCLOSURE (Princeton, 2014).  The book is an elaborate disclosure of why disclosure fails. It is hard to disagree with the fact that widespread deficits in consumer reading, understanding and decisionmaking undermine the efficacy of disclosures, and the book provides plenty of data to show this. But the authors do not much confront the fact that many mandates for disclosures are a response to what happens when firms are free to design their own fine print. The same consumer decisionmaking deficits the authors here elaborate exist when the disclosure (allegedly contractual) is created by private firms; and firms take advantage of those deficits. If mandated disclosure is abandoned, as the authors recommend, do the authors think recipients of bad boilerplate should just be on their own?  The authors did not consider that question as part of their project in this book.

Ching Paper: What We Consent to When We Consent to Form Contracts: Market Price

Kenneth K. Ching of Regent has written What We Consent to When We Consent to Form Contracts: Market Price. Here is the abstract:

Contracts require consent, yet no one reads form contracts. So what do we consent to when we consent to form contracts? Scholarly answers to this question range from “we consent to everything but the radically unexpected” to “we consent to nothing but the specifically negotiated.” This essay offers a new answer: when we consent to form contracts we consent to pay market price.

Part I of this essay discusses Randy Barnett’s argument that consent to form contracts is consent to be legally bound, which raises the question of whether there are any limits on what can be consented to via form contract. Part II discusses Carnival Cruise Lines v. Shute as illustrative of Barnett’s theory and argues that Carnival’s approach should be rejected. Part III of this essay argues that consent to form contracts should be construed as consent to pay market price.

Anne Fleming: The Rise and Fall of Unconscionability as the 'Law of the Poor'

Anne Fleming of Georgetown has written The Rise and Fall of Unconscionability as the 'Law of the Poor,' 102 Georgetown Law Journal No. 5 (2014). Here's the abstract:

What happened to unconscionability? Here’s one version of the story: The doctrine of unconscionability experienced a brief resurgence in the mid-1960s at the hands of naive, left-liberal, activist judges, who used it to rewrite private consumer contracts according to their own sense of justice. These folks meant well, no doubt, much like present-day consumer protection crusaders who seek to ensure the “fairness” of financial products and services. But courts’ refusal to enforce terms they deemed "unconscionable” served only to increase the cost of doing business with low-income households. Judges ended up hurting the very people they were trying to help. In the face of incisive criticism, judicial enthusiasm for the doctrine of unconscionability quickly faded. A new consensus emerged in favor of legislation requiring better disclosure of consumer contract terms ex ante, rather than ex post judicial review.

This Article presents a different narrative, one that is informed by extensive research in previously untapped archival sources. In this story, the wise legislature does not overrule the misguided courts. On the contrary, it reveals that lawmakers laid the groundwork for the judicial revival of unconscionability, and then rewrote statutory rules to codify the ensuing court decisions. In the District of Columbia, home to the famous Williams v. Walker-Thomas Furniture Co. litigation, the legislature revived unconscionability through the enactment of the Uniform Commercial Code (U.C.C.), which reintroduced the once-archaic doctrine into the legal vernacular. Just as the U.C.C. drafters intended, unconscionability review allowed courts to do openly what they had been doing covertly for years — refuse to enforce harsh, one-sided bargains as written. In 1965, the D.C. Circuit seized the opportunity unconscionability offered to prevent the loss of a poor woman’s furniture. But the Williams litigation also did something more. It drew public attention to the controversy before the court and alerted D.C. lawmakers to a recurring problem in need of a legislative fix. In response, local leaders set to work drafting consumer credit reform legislation. Lawmakers eventually adopted a firm set of rules to govern “installment” sales contracts in the District of Columbia, including a ban on the objectionable contract term at issue in Williams.

In this narrative, judges and legislators did not advance competing regulatory visions. They agreed on the need for substantive limits on installment sales to poor borrowers. Moreover, contrary to what some scholars might predict, litigation did not divert scarce resources down a dead-end path. Rather, it catalyzed the process of legislative change, raising public consciousness of problems in the low-income marketplace and fueling the drive for substantive reforms on the local level.

Appendix A provides the full text of the Walker Thomas Furniture Company contract.

CFP By International Journal on Consumer Law and Practice

The "INTERNATIONAL JOURNAL ON CONSUMER LAW AND PRACTICE, published by the  National Law School of India University (NLSIU), Bangalore, has issued a call for papers.  The deadline is September 1.  More information below the fold.

Nancy S. Kim on Wrap Contracts

Nancy S. Kim of California Western has written Exploitation by Wrap Contracts -- Click 'Agree', 39 California Bar IP Journal, no. 2, pp. 10-17 (2014). Here is the abstract:

A spate of news articles involving online agreements has made headlines recently.  They provide cautionary tales of the brave new world of wrap contracts where unwitting users can be exploited simply by clicking "agree." Wrap contracts — particularly digital ones such as clickwraps and browsewraps — govern most online activity, setting rules and giving companies broad enforcement discretion.  Despite their ubiquity on the Internet and their increasing importance in online interactions, consumers discount or ignore how wrap contracts affect their rights and leave them vulnerable. This essay explains why these recent examples mark a turning point in the role of wrap contracts in Internet governance — and why consumers should be very wary of clicking "agree."

 

Hartzog & Solove on the FTC and Data Protection

Woodrow Hartzog of Samford's Cumberland School of Law and Stanford's Center for Internet and Society and Daniel J. Solove of George Washington have written The Scope and Potential of FTC Data Protection, 83 George Washington Law Review (2015, Forthcoming).  Here is the abstract:

For more than fifteen years, the Federal Trade Commission (FTC) has regulated privacy and data security through its authority to police deceptive and unfair trade practices as well as through powers conferred by specific statutes and international agreements.  Recently, the FTC’s powers for data protection have been challenged by Wyndham Worldwide Corporation and LabMD.  These recent cases raise a fundamental issue, and one that has surprisingly not been well explored: How broad are the FTC’s privacy and data security regulatory powers?  How broad should they be?

In this article, we address the issue of the scope of FTC authority over privacy and data security, which together we will refer to as "data protection"  We  argue that the FTC not only has the authority to regulate data protection to the extent it has been doing, but it also has the authority to expand its reach much more.  Normatively, we argue that the FTC’s current scope of data protection authority is essential to the United States data protection regime and should be fully embraced to respond to the privacy harms unaddressed by existing torts, contracts, and statutes.  For example, the FTC can regulate with a much different and more flexible understanding of harm that one focused on monetary or physical injury. 

Thus far, the FTC has been quite modest in its enforcement, focusing on the most egregious offenders and enforcing the most widespread industry norms.  The FTC should push the development of the norms a little more (though not in an extreme or aggressive way).  We also discuss steps the FTC should take to change the way it exercises its power, such as greater transparency and more nuanced sanctioning and auditing.