Consumer Law & Policy Blog

Plaintiffs' Supreme Court Brief Filed in Important Federal Preemption Case

As CL&P blog readers may recall, on June 25, the Supreme Court agreed to hear an important federal preemption case involving a man allegedly injured by a defective medical device.  The case presents the question whether state-law damages suits seeking recovery for injuries caused by medical devices that received FDA pre-market approval are preempted by the Medical Device Amendments to the Food, Drug, and Cosmetic Act.  The plaintiffs recently filed their opening brief on the merits.  We have blogged about the case on five prior occasions, including in this post, which links to several other posts.  Public Citizen Litigation Group, lead counsel in the case, has collected other relevant materials here.

CL&P Roundup

• The Defense Perspective on the Rise in Class Arbitration:  An interesting new article by two big-firm defense lawyers in Metropolitan Corporate Counsel warns that the drafters of mandatory binding arbitration clauses should be careful what they wish for: "The pervasiveness of arbitration agreements that are silent on the issue of class proceedings . . . ensures that class arbitrations will occur with increased frequency, possibly resulting in large monetary awards or coerced settlement, and with little or no opportunities to obtain meaningful judicial or appellate review.  The widespread availability of class arbitration proceedings has eroded many of the traditional benefits of arbitration, making it a potentially time-consuming, expensive, and unpredictable process, and placing the continued popularity of arbitration as the 'preferred' method of dispute resolution at a critical and decisive point." 

• Two New Decisions Striking Class Arb Waivers.  Adding itself to the growing list of federal circuits, and distinguishing its own prior precedent, this week the Eleventh Circuit issued a great decision striking down a class action waiver in a case in which the plaintiff could not recover attorney's fees.  And the California Supreme Court, extending its landmark Discover Bank ruling considerably, issued a 4-3 ruling last week holding that class action bans may be unenforceable in the context of wage-and-hour claims and that a clause may be procedurally unconscionable even when the contract includes a 30-day "opt-out" provision.  The Eleventh Circuit decision is discussed in depth by Scott Nelson in the post below.

• 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.

Merck's Strategy in Vioxx Suits Working?

Today's New York Times has this article on the litigation over Vioxx, the painkiller made by Merck that was withdrawn from the market because of its association with strokes, heart attacks, and other cardiac problems. The article discusses Merck's litigation strategy: litigate each of the 45,000 lawsuits against the company individually, and don't pay a dime until a case is final and no longer appealable in any way. Merck's strategy differs from other mass-tort defendants who have sought relatively early mass settlements or bankruptcy solutions.  To date, Merck has not paid a single judgment, and, according to a source cited in the Times, original estimates of Merck's aggregate Vioxx liability at around $25 million are now at $5 billion. The article points out that at the current pace many Vioxx plaintiffs will be dead before their cases are tried.

David Adam Friedman Article on Reinventing Consumer Protection

Here's the abstract:

Consumer fraud presents a continual puzzle. We have significant enforcement and education mechanisms, yet we continue to endure ever-evolving consumer fraud. I contend that the incidence of consumer fraud can be reduced through creative, efficient, non-traditional instruments of deterrence.

This article proposes a plan for re-approaching consumer protection through selection of a protected group and a concentrated reallocation of resources. Specifically, I argue that enhancing sanctions for a vulnerable, reluctant-to-report consumer group will shift fraud perpetrators toward targets that are better able to defend themselves. Additionally, fraud perpetrators will have to operate with extra caution in their schemes to ensure that they will not inadvertently ensnare a member of the protected class. This measure would accomplish further protection of the selected group and moderately increase deterrence throughout the rest of the economy.

However, I argue that this measure should be supplemented with another initiative. If we create a group consisting of randomly selected consumers and provide the members of that group with significant extra protection through higher sanctions and concentrated consumer education, fraud incidence will drop even more significantly. The concealed nature of the randomly protected consumer creates a general aura of deterrence. In this environment, fraud perpetrators never know whether a potential victim carries specially protected status - this elevates the risk of detection and the expected sanction for all consumers.

Group protection enables enforcement to achieve deterrence without having to provide incremental, expensive protection to the entire population. Understanding how the perpetrators and consumers make decisions about engaging in transactions is the key to unlocking efficient methods, like those described, for achieving the objective of efficiently reducing incidence of consumer fraud.

The article is scheduled to appear in the Fall 2007 of the DePaul Law Review. Professor Friedman is on the faculty at Willamette University College of Law.  You can download the article at http://ssrn.com/abstract=984082.

Ninth Circuit Denies Rehearing in Exxon Valdez Oil Spill Litigation

We have previously blogged here, here, and here about the Ninth Circuit's December 2006 decision halving the punitive damages award in the Exxon Valdez oil spill litigation to $2.5 billion and Exxon's effort to obtain en banc rehearing.  Last week, 5 months after rehearing was sought, the Ninth Circuit denied the petition over two dissents, one arguing that punitive damages were not available at all under relevant maritime law principles and the other maintaining that the punitive damages award, even as reduced by the Ninth Circuit panel, was constitutionally excessive.  The en banc opinions are here.  It's on to the Supreme Court, presumably - - almost 2 decades after the Exxon Valdez ran aground.

Interesting Class Action Settlement Ruling from North Carolina

by Nick Pace

Nick Pace, a researcher at the RAND Institute for Civil Justice, kindly agreed to post his thoughts on a recent class action settlement decision.

I thought CL&P blog readers might find interesting the recent opinion in a North Carolina state court class action, Moody v. Sears, N.C. Superior Court, 02-CVS-4892 (May 7, 2007).  The opinion contains an fascinating discussion of the judge's role in overseeing consumer class action settlements. 

The decision by Judge Ben Tennille (Special Superior Court Judge for Complex Business Cases) came in the context of a class action against Sears for selling more expensive "four wheel" alignments to folks with rear wheel drives (they're only needed for four wheel or front wheel drive vehicles; I believe that a local repair shop here in L.A. once burned me on that little trick as well).  A nationwide class action was filed in Illinois four days after the N.C.-only suit was initiated.  Ultimately, a nationwide settlement, approved by a Cook County judge in December 2004, was supposed to provide the estimated class of 1,500,000 customers with either a $10 refund or a $4 coupon depending on the date of the alignment.  Sears also agreed to pay class counsel about $1 million in cash and $50,000 in coupons.  Notice of the settlement was effected through publication in 25 newspapers across the country as well as Parade and USA Weekend magazines.  Consumers learning of the settlement called or wrote in for a claim form.  All in all, this was a fairly standard notice and claiming plan.

Sixth Circuit slashes punitives in FCRA case

by Deepak Gupta 

Yesterday, the Sixth Circuit issued an opinion slashing a jury's punitive damages award in a Fair Credit Reporting Act case.  Bach v. First Union Nat'l Bank, No. 06-3660 (6th Cir. May 15, 2007).  The jury had awarded an elderly widow $400,000 in actuals plus $2,628,600 in punitives against a bank.  The district court, after an initial appeal and remand, ordered reduction of the $2,628,600 to $2,228,600.  In the second appeal, the Sixth Circuit held that the district court's subtraction of $400,000, although it "eliminated any concern regarding the potential duplication of compensatory damages and ultimately achieved a lesser ratio, of 5.57," was still not good enough because that the bank's actions were not reprehensible enough to justify the large punitive award--the only reprehensibility factor was the vulnerability of the victim.   So this time the Sixth Circuit took matters into its own hands and ordered the district court to cut the award down to no more than $400,000--the same amount as the actuals.

Times Articles on Certified Cars and Arbitration

Yesterday's New York Times had at least two articles that bear on consumer law issues.  The first, available here, reported on litigation and legislation involving certified cars.  The second described how Senators Leahy and Finegold have written to the S.E.C. to ask that it ban mandatory arbitration in claims brought by investors.  Many of the arguments for banning mandatory arbitration in the investor context apply with at least equal force to the consumer context.   

Fifth Circuit Issues Decision On CAFA's "Local Controversy" Provision

By Brian Wolfman

   

Last week, in Preston v. Tenet Healthsystem Memorial Medical Center, Inc., No. 07-30132, 07-30160 (Apr. 25, 2007), the Fifth Circuit issued a decision concerning the “local controversy” provision of the Class Action Fairness Act, 28 U.S.C. 1332(d)(4).  CAFA devotees ought to look at this one.  It’s actually readable: only 17 pages and in plain English.

    In the original class action complaint filed in Louisiana state court, the plaintiffs alleged injuries and deaths caused by unreasonably dangerous conditions at defendants’ medical facilities during Hurricane Katrina.  The defendants removed under CAFA, but the district court remanded under the local controversy provision.  The Fifth Circuit reversed, holding that the plaintiffs had failed to show that at least two-thirds of the proposed class members were domiciled in Louisiana when the class action was filed.  Under the local controversy provision, the district court “shall decline to exercise jurisdiction” if “greater than two-thirds of the members of all proposed plaintiff classes in the aggregate are citizens of the State in which the action was originally filed” and several other facts are present.

Watson v. Philip Morris Argued in the Supreme Court

Watson v. Philip Morris was argued today in the U.S. Supreme Court.  That's the case in which the 8th Circuit said, believe it or not, that Philip Morris could remove a class action challenging the marketing of "light" tobacco products from state to federal court because the tobacco giant was "acting under" a "federal officer" within the meaning of the federal officer removal statute, 28 U.S.C. 1442(a)(1).  Why, you ask?  Because, according to the 8th Circuit, the company's production and promotion of light cigarettes was heavily regulated by the FTC. We blogged about the case before, including here, here and here.

Now, read the transcript from today's argument.