Consumer Law & Policy Blog

New Second Circuit Decision Protects Homeowners

by Brian Wolfman

    The Second Circuit today issued a major decision regarding the rights of homeowners whose homes are seized by local authorities for failure to pay taxes without giving the homeowners constitutionally adequate notice.

    In Lussenhop v. Clinton County, the Second Circuit did two important things.  First, the court held that the Tax Injunction Act, 28 U.S.C. 1341, does not bar a plaintiff from challenging in federal court  notice procedures employed by state and local governments prior to seizing tax delinquent property.  Second, in remanding the three cases before it to the district court, the court indicated that it would vigorously protect the notice rights established in Jones v. Flowers, 126 S. Ct. 1708 (2005).  Jones held that when the government knows that its initial notice that it plans to seize a home has not reached the homeowner, due process requires the government to take reasonable additional steps to notify the owner prior to the taking.  As the first major post-Jones ruling, the Lussenhop decision is definitely worth a read.

    [Disclosures: Michael Kirkpatrick and Deepak Gupta of my office, Public Citizen Litigation Group, filed an amicus brief in Lussenhop.  The Litigation Group also represented the homeowner in Jones v. Flowers.]

Caveat Proletarius: The ALEC Model Consumer Protection Law

by Ira Rheingold

It's recently been announced in the press that the American Legislative Exchange Council or ALEC, an organization of "conservative state lawmakers" has created a "model state consumer protection law" that will be introduced in statehouses across the nation in 2007.  (CL&P has previously mentioned this development here and here; the proposal's full text can be found in an appendix to this law review article.)

As an organization that claims to be interested in the "Jeffersonian principles of free market, limited government, federalism and individual liberty," one might expect that their model law would promote a marketplace that rewards honest behavior, promotes fair competition, and supports a private incentive-driven regulatory scheme that would offset the need for more heavy-handed government regulation.  Unfortunately, those expectations would be very wrong.

Class Action Fairness Act: More on the New FJC Data

    by Brian Wolfman

    I am surprised that, as noted in Deepak Gupta's recent post, Tom Willging is surprised that The Federal Judicial Center (FJC) preliminary data on the Class Action Fairness Act (CAFA) show that CAFA had its intended effect of moving class actions of the kind previously litigated in state court to federal court (either via original filing or removal).  That result seemed inevitable because, under CAFA, in most substantial consumer class actions where there’s a diverse defendant, there’s nothing a plaintiff can do to keep the case out of federal court.  So, I wouldn't have expected it to take much time for the law to kick in; one would expect to see its effect almost immediately.  The more important question, I think, is whether the law will affect case outcomes (class certification, settlements, other legal rulings). On that question, it’s too early to tell, and the empirical evidence will be tougher to collect and evaluate.  It seems like difficult research, among other reasons, because seemingly there will be no significant group of similar post-CAFA state court cases to which the post-CAFA federal cases can be compared.  I look forward to seeing what Tom and his colleagues at the FJC produce in that regard.

Still More on Contributions to Judges

by Brian Wolfman

    Jeff Sovern's new post on contributions by lawyers to judges before whom they practice, and Deepak Gupta's interesting response highlighting the Avery v. State Farm cert. petition, implicate the question whether current judicial procedures for litigating recusal questions are up to the task.  A consumer plaintiff seeking the recusal of a judge who has received contributions from the defendant faces serious difficulties making a record and obtaining a neutral decision maker.  My former colleague Amanda Frost has written an intriguing article highly critical of current procedures and suggesting reforms.  See "Keeping  Up Appearances: A Process-Oriented Approach to Judicial Recusals," 53 Kan. L. Rev. 531 (2005). 

A Bit More on Consumer Law Cases and Contributions to Judges

by Jeff Sovern

As my co-blogger Deepak Gupta pointed out to me, Ted Frank at Point of Law.com criticized the Times article I blogged about on Sunday.   Frank, who states that he "billed a handful of hours to Ford Motor on the [lemon law] case" my posting referred to, defends the court's decision on the merits and reports that the three dissenting judges received contributions from "the plaintiffs' bar." Even assuming for the sake of argument that Frank is right that the court reached the correct result (and in response to the comment from "Ted" on the original posting asking if it matters that the judges in the majority were correct), it seems to me that there is a problem with the appearance of impropriety when judges accept contributions from anyone with litigation before them.  Once that happens, it becomes difficult to tell whether the court's decision was correct on the merits, as Frank argues, or whether it was motivated by other factors.  That uncertainty can be especially damaging when it comes to consumer litigation, because non-lawyer consumers may become aware of the litigation but lack the training to evaluate the merits of the arguments.

Important FDCPA Ruling: Brown v. Card Service Center

    By Brian Wolfman

    The Third Circuit has issued an important Fair Debt Collection Practices Act (FDCPA) decision in Brown v. Card Service Center , __ F.3d __,  2006 WL 2788476 (Sept. 29, 2006).  I should mention at the outset that the plaintiff's case was argued by CL&P Blog contributor, Cary Flitter.  Noted Philadelphia consumer lawyer David Searles served as Cary’s co-counsel.

    Brown begins with two key general holdings of a kind not seen too often these days.  First, the court noted that because the FDCPA is a remedial statute, it should be construed “broadly” to achieve its ambitious consumer protection purposes.  Second, because of the Act’s remedial purpose, whether a debt collector has engaged in deception or misrepresentation must be judged from the perspective of the “least sophisticated debtor,” not merely a “reasonable debtor.”  This standard has been adopted by many other courts, but it has come under attack in some quarters in recent years.  Congress’s point, the Third Circuit explained, was to protect naive, trusting, and even gullible consumers from unscrupulous debt collectors.  Now for a bit more detail . . . .

Consumer Law Cases and Campaign Contributions to Judges

by Jeff Sovern

Today's New York Times has an article on the relationship between campaign contributions to judges and litigation outcomes.  The Times studied the Ohio Supreme Court.  One case discussed in the article involved a lemon law class action decided in favor of the defendant car manufacturers by a four-to-three vote.  Affiliates of the defendants reportedly contributed $15,000 to the four justices in the majority in the five years before the case was decided; the last contributions were made just days before the decision was announced.  According to the article,

[The] named plaintiffs gave no money to the justices. While the case proceeded, their lawyers contributed about $12,000 to five of the seven justices in the case, dividing their money roughly evenly between a justice who voted for them and several who voted against them. The law firms representing the companies gave only to the justices in the majority, for a total of more than $115,000.

While the article quotes people who believe that contributions to judicial campaigns do not affect votes, it also contains the following:

“It’s pretty hard in big-money races not to take care of your friends,” said Richard Neely, a retired chief justice of the West Virginia Supreme Court of Appeals. “It’s very hard not to dance with the one who brung you.”

Tackling the FDA's Preemption Arguments

by Deepak Gupta

Suits by injured consumers against drug companies and the regulation of drugs by the Food and Drug Administration have peacefully co-existed for many decades.  But since the Bush Administration came to Washington, the FDA has taken the position that consumers should not be able to sue drug companies for harm caused by medications.  Without citing any instance in which a verdict for a plaintiff has undermined federal regulation, the agency contends that lawsuits conflict with federal regulation by asking jurors to second-guess the FDA’s assessment of the safety of a drug and the adequacy of its label.  Emboldened by the FDA’s new view that federal regulation of drug labels preempts a broad range of personal injury claims, drug companies have been making motions to dismiss or for summary judgment in cases throughout the country.

Today, a group of public interest organizations filed this amicus brief, written by my colleague Allison Zieve, opposing a drug company's preemption arguments in a case before the U.S. Court of Appeals for the Third Circuit. The case, Colacicco v. Apotex and GlaxoSmithKline, was brought by a man whose wife committed suicide a few weeks after she began to take an SSRI antidepressant. He claims that the defendants failed to warn of the risk of suicide associated with the drug. (The drug’s label now carries such a warning.)

The American Pipe Rule and Successive Class Actions

by Brian Wolfman

    University of Pittsburgh law professor Rhonda Wasserman has written an interesting article on the question whether the American Pipe and Crown, Cork class action tolling rules apply to successive class actions.  The article, “Tolling: The American Pipe Tolling Rule and Successive Class Actions,” 58 U. Fla. L. Rev. 803 (2006), is available here.

    Assume that a class action is timely filed on behalf of the named plaintiff and all of the absent class members.  May an absentee pursue an individual action if class certification is denied without worrying about whether the limitations period is blown?  Generally, yes.  In American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), the Supreme Court held that the statute of limitations is tolled from the filing of the class action complaint to the denial of class certification for an absentee who thereafter seeks to intervene in the action to pursue her individual claims.  And, in Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983), the Court applied the same tolling rule for absentees who, after certification is denied, file separate actions rather than seeking to intervene in the original action.

    But what is the rule where, after certification is denied, the absentee initiates another class action?  Generally, Professor Wasserman concludes that tolling is appropriate in two circumstances:

CL&P Roundup

by Deepak Gupta

• "Tort Deform": That’s the snappy and provocative title of a new blog on civil justice issues produced by the Drum Major Institute for Public Policy, a progressive think tank in New York. They’ve already assembled an impressive and interesting lineup of contributors (including CL&P co-bloggers Paul Bland and Brian Wolfman). Here’s their mission statement. Highlights so far include a piece on preemption by Alan Morrison; an item by Linda Andros on the junk food bill (on which Steve Gardner also posted here last week); and a discussion by the blog’s coordinator, Cyrus Dugger, on the book Distorting the Law.

• Victor Schwartz's Common Sense: Philosophers warn us to be wary of appeals to 'common sense'. In a recent Kansas Law Review article, Victor Schwartz presents his case for “Common-Sense Construction of Consumer Protection Acts.” Although he assures the reader that he's not advocating the complete “elimination of private rights of action,” Schwartz's proposal would come as close to that goal as might be thought politically feasible; the article bristles with hostlity to modern statutory consumer protection law and urges a return to common law principles. Schwartz advocates model legislation that would require proof of objectively reasonable reliance and actual injury, strict limitations on treble damages and awards of attorneys’ fees, a complete prohibition on class actions wherever statutory damages are available, modifications to statutes of limitations, and extreme restrictions on the circumstances under which class certification could be granted. As we discussed earlier in this post, Schwartz's article isn't mere theory; it's the blueprint for legislation that will soon be introduced in state legislatures across the country.

• Ban on Consumer Class Actions Held Unconscionable: Wading into the growing battle over the enforceability of class action bans in arbitration agreements, a California appellate court this week said DirecTV could not require its customers to give up their right to class actions and held that a waiver buried in a “bill stuffer” was both procedurally and substantively unconscionable. California's 2d District was not persuaded by DirecTV's argument that the possible amount of recovery could be as high as $1,000. While "$1,000 is not an insignificant sum, many consumers of services such as those offered by DirecTV may not view that amount as sufficient to warrant individual litigation.” The court explained that “the class action device remains, in our view, the only practicable way for consumers of services such as DirecTV's to deter and redress [such] wrongdoing.” The ruling builds on the California Supreme Court's landmark Discover Bank decision last year.

• Debt Collectors and Bankruptcy Filings: Elizabeth Warren suggests that last year’s bankruptcy legislation may have emboldened debt collectors to intimidate consumers out of filing for bankruptcy.