CL&P Blog

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Yesterday, in Johnson v. NPAS Solutions, the Eleventh Circuit held that so-called incentive or service awards to named class-action plaintiffs are unlawful. That is, in a class-action settlement, a named plaintiff may not be paid extra money (over and above money paid to all class members) as reimbursement/compensation for her efforts on behalf of the class or as an incentive to act as a representative plaintiff. Despite the near ubiquity of these awards in modern class-action practice, the court of appeals held that two Supreme Court decisions from the 1800 s demanded this result. See Trustees v. Greenough, 105 U.S. 527 (1882), and Central Railroad Banking Co. v. Pettus, 113 U.S. 116 (1885). The opinion addresses a couple other issues that arise frequently in class-action settlements. Worth reading. HT Mike Kirkpatrick Over the past several months, I have posted a number of articles about the campaign of intimidating copyright demand letters from Mathew Higbee, who tries to extract money from individuals, nonprofits and small businesses by threatening to file frivolous copyright lawsuits. This is the first in what I expect will be series of articles about a different sort of campaign of frivolous threats: companies that try to clean up their reputations by hiring lawyers to send frivolous threats of libel litigation. I m not sure which is worse.Today’s story begins with an article that ran in the Washington Post back in June, 2020, focusing on the role played by a small Miami-based pharmaceutical corporation, run by hedge fund managers and called Ridgeback Biopharmaceutics. The Post noted that Ridgeback had invested in a potential antiviral therapy, developed at Emory University with public financing, but that, when it failed to secure federal financing to develop the drug further, it made a killing by selling its rights to Merck. These facts, the reporter suggested, illustrate “the perception that companies are profiteering during a global medical crisis — especially in cases where inventions were funded by taxpayers.” The article also tied the situation to the revelations from BARDA whistleblower Rick Bright, who cited this as one of the examples of political pressure being applied to secure federal financing for private profit. by Jeff SovernThat s the title of my post over at the ContractsProf Blog virtual symposium on contracts and COVID. Here s an excerpt: The argument behind liability waivers as to normal risks is that people should be able to arrange their private affairs as they wish, but COVID liability waivers are not purely private. Virus liability waivers are very different from, say, a ski resort’s form disclaiming liability for negligently causing a skier a broken leg. A skier on crutches will not cause others to break their bones. When a business fails to take adequate precautions against infecting its customers with COVID, it increases the likelihood that not only the consumer but also others with whom the consumer comes into contact will be afflicted by the virus. Even if the consumer knowingly signed a waiver form—a dubious proposition that I discuss below--those others did not. Liability disclaimers that protect people in private contractual relationships in which others do not have an interest are a far cry from COVID liability waivers.I look forward to the forthcoming posts from other contributors to the virtual symposium. Christopher K. Odinet of Iowa has written Predatory Fintech and the Politics of Banking, Iowa Law Review (2021 Forthcoming). Here is the abstract:With American families living on the financial edge and seeking out high cost loans even before COVID-19, the term financial technology or “fintech” has been used like an incantation aimed at remedying everything that’s wrong with America’s financial system. Scholars and supporters from both the public and private sector proclaim that innovations in financial technology will “bank the unbanked” and open new channels to affordable credit. This exuberance for all things tech in finance has led to a quiet yet aggressive deregulatory agenda, including, as of late, a federal assault via rulemaking on the ability of states to police the cost and privilege of extending credit within their borders. This deregulation and the ethos behind it have made space for growth in high cost, predatory lending that reaches across state lines via websites and smart phones and that is aggressively targeting cash-strapped families. These loans are made using a business model whereby funds are funneled through a group of lightly regulated banks in a way designed to take advantage of federal preemption. Fintech companies rent out and profit from the special legal status of these bank partners, which in turn keeps the bank’s involvement in the shadows. Stripping down fintech’s predatory practices and showing them for what they really are, this Article situates fintech in the context of this country’s longstanding dual banking wars, both between states and the federal government and between consumer advocates and banking regulators. And it points the way forward for scholars and regulators willing to shake off fintech’s hypnotic effect. This means, in the short term, using existing regulatory tools to curtail the dangerous lending identified here, including by taking a more expansive view of what it means for a bank to operate safely and soundly under the law. In the long term, it means having a more comprehensive and national discussion about how we regulate household credit in the digital age, specifically through the convening of a Twenty-First Century Commission on Consumer Finance. The Article explains how and why the time is ripe to do both. As the current pandemic wipes out wages and decimates savings, leaving desperate families turning to predatory fintech finance ever more, the need for reform has never been greater. We ve received the following Call for Papers, which overlaps with consumer law issues:Racial Capitalism:An Elaboration in Legal ScholarshipAs a journal dedicated to social, racial, and economic justice, the Journal of Civil Rights Economic Development (JCRED) is soliciting articles for Racial Capitalism, an Elaboration in Legal Scholarship, our forthcoming symposium issue. This issue will explore the legal dimensions of our capitalist political economy and its systemically racist nature. We are in a moment which calls for a legal analysis that grapples with the reality of Racial Capitalism in our society. From the racially disparate harms of the COVID-19 pandemic to the calls from the Black Lives Matter Movement to #DefundPolice, the racialized nature of our capitalist political economy has become impossible to overlook.To advance this conversation in legal scholarship, the Journal seeks to publish the work of scholars, practitioners, and advocates, who creatively and incisively explore the legal dimensions of Racial Capitalism and what lies beyond its horizon.The deadline to submit an abstract for consideration is October 1st, 2020, with full length articles from selected authors to be due January 6th, 2021. Along with publication in this symposium issue, a handful of authors will be selected to each receive a $500 honorarium and participate in a virtual panel discussion on Racial Capitalism in the Spring. For additional details and instructions for submission, please visit https://www.jcred.org/news-and-events/racial-capitalism.If you have any questions about this call for papers or the Journal, please contact the Research Symposium Director, Jay Hedges, jay.hedges18@stjohns.edu. LA Times columnist Michael Hiltzik explains why the FDA just had the worst day in its history. Hiltzik says:During a White House event Sunday, FDA Commissioner Stephen Hahn stood by silently in the face of an unsupported attack on his agency from the worst threat to public health in the U.S. today, President Trump. The event was held to mark Hahn’s capitulation to a political directive from the Trump White House, in approving an emergency use authorization for the use of convalescent plasma to treat COVID-19 patients. In doing so, Hahn utterly misrepresented the findings of the Mayo Clinic trial of convalescent plasma treatment. Hahn, parroting Trump and Health and Human Services Secretary Alex Azar, said the study demonstrated a 35% reduction of mortality from the transfusion of convalescent plasma. That’s a gross misrepresentation of its results. Nevertheless, an inaccurate description of the results was repeated in a tweet by the FDA’s official spokesperson, Emily Miller, a former correspondent for the far-right, conspiracy-mongering One America News Network, OANN. Last Wednesday, the Ninth Circuit issued a 2-to-1 decision in Rittman v. Amazon, holding that Amazon last-mile delivery drivers are transportation workers engaged in interstate commerce under 9 U.S.C. § 1 and, therefore, are exempt from the Federal Arbitration Act s enforcement provisions. As law prof Adam Steinman explains here, Rittman follows a recent decision from the First Circuit, Waithaka v. Amazon. Eight state attorneys general today filed a lawsuit challenging a new Federal Deposit Insurance Corporation rule that creates a loophole allowing predatory lenders to evade state laws that forbid excessive interest-rate charges.From the California attorney general s press release: These caps on interest rates play a critical role in regulating payday loans and other high-cost lending throughout the state. Under existing federal law, federally insured state-chartered banks are exempt from state interest-rate caps. The FDIC’s final rule extends these exemptions to any non-bank lender that buys loans originated by an exempt bank. The final rule virtually invites predatory lenders to rent a bank — use a federally insured bank — to do its dirty work of issuing loans with interest rates that exceed state law which the bank then transfers to the predatory lender. The complicit bank washes its hands of the usurious loan, the predatory lender escapes the reach of state laws prohibiting such loans, and consumers pay the price. The complaint is here. Albert H. Choi of Michigan and Kathryn E. Spier of Harvard have written The Economics of Class Action Waivers. Here is the abstract:Many firms require consumers, employees, and suppliers to sign class action waivers as a condition of doing business with the firm, and three recent US Supreme Court cases, Concepcion, Italian Colors, and Epic Systems, have endorsed companies’ ability to block class actions through mandatory individual arbitration clauses. Are class action waivers serving the interests of society or are they facilitating socially harmful business practices? This paper synthesizes and extends the existing law and economics literature by analyzing the firms’ incentive to impose class action waivers. While in many settings the firms’ incentive to block class actions may be aligned with maximizing social welfare, in many other settings it is not. We examine conditions in which class action waivers can compromise product safety, facilitate anticompetitive conduct, and support harmful employment practices. Our analysis delivers a more nuanced, policy-based critique of the recent US Supreme Court cases, highlights several new unresolved issues, and identifies future challenges for legal scholarship. Cheryl Wade, author of Predatory Lending and The Destruction of the African American Dream, Sarah Ludwig, Executive Director, New Economy Project, and Cathi Kim, Director, Inclusiv/Capital will speak on Thursday, August 13 at 7 pm EDT. Attendance is free but registration is required. The registration link is at https://docs.google.com/forms/d/e/1FAIpQLScxTjViodwGaNG03Q1kEqD85DvhpkNxYbpp968QVzMD9mkrTQ/viewform. by Paul Alan LevyIn past blog posts, I have discussed our efforts to persuade the copyright enforcement law firm headed by Mathew Higbee to concentrate its efforts to pursue copyright infringement claims on behalf of its photographer clients on cases where it has reasonable claims of infringement by actual Internet users who put up his clients’ photographs (and not against the hosts of interactive web sites where the claimed infringements were committed by third parties). I have also decried the firm’s tendency to demand excessive damages payments far above what could likely be recovered in litigation. The Higbee firm plays on the legal ignorance of its targets as well as on the fact that, generally speaking, it costs more in legal fees to get sound advice, and to defend when defense is meritorious, than to simply pay the demanded ransom.In several past cases, when the Higbee firm found that it would have to defend its claims against parties who could afford to defend themselves, it has dropped its claims rather than defending its demand letters. We have argued, as a result, that Higbee firm clients who had stood to profit from clearly unreasonable demand letter can be subjected to attorney fee awards when the target had to file a declaratory judgment action to silence the threats. One of the firm’s clients settled our attorney fees application for $10,000; our application for fees against two other Higbee clients is still pending.In the course of discussing these fee applications, one tack taken by the Higbee firm to discourage us from pursuing attorney fees was to represent that it had taken to heart my criticism of their seeking damages, in the manner of Righthaven, from forum operators whose operators had failed to perfect their DMCA immunity by registering an agent for the receipt of DMCA takedown notices. Because the requirement of volition before an alleged infringed can be held liable provides an alternate, although for less perfect, defense in such cases, the Higbee firm claimed said that it was no longer pursuing claims against online hosts, based on their users’ alleged infringement. I suspected at the time that the claim about changed positions was false; and in the weeks after we received these assurances, several more hosts have reached out for help addressing Higbee firm demands over hosted photos or hosted deeplinks to photos. The lawsuit that we filed on Thursday against AdLife Communications and Marketing Co. is a case in point. Guest post by Neil Sobol:As part of an article in which I advocate for the incorporation of consumer law issues in first-year law classes, I requested my research assistant, Spencer Lockwood, to update the consumer law offerings chart reported in Jeff Sovern s post in 2019. Spencer surveyed 201 ABA accredited law schools via their websites. He organized the data by category: (1) consumer-related classes, which refers to courses that historically contain consumer law topics, (2) consumer-specific classes, which refers to course offerings that have consumer in their names, and (3) two similarly named and defined consumer clinic categories.He found that, in total, accredited law schools offer 705 consumer-related classes and 100 consumer-specific classes. In sum, about 48% of them offer at least one consumer-specific class. Moreover, about 10% of schools offer at least one consumer-specific clinic. Because it is likely that some course information is outdated on schools websites, we request the assistance of the consumer law academy. Please send any corrections to nsobol@law.tamu.edu so that I can update the chart. Any input is greatly appreciated.Download Neil Sobol Chart_Consumer Law Offerings-Aug 6 2020 Law prof Daniel Hemel (@DanielJHemel) has posted a detailed series of tweets skewering the tort-deform provisions in the Republican-sponsored coronavirus relief bill. I recommend reading these tweets. Hemel begins with the statement that [t]he liability provisions in McConnell’s HEALS Act do not reflect a serious attempt to address problems with the tort system and then goes on to demolish any justification for each provision. Go here to read Hemel s tweets.I have a question. The readers of this blog will generally agree that the liability provisions in the Republican bill stink. But let s say there s a compromise bill that adopts all (or most) of the much more generous Covid relief measures that the House Democrats want but also includes the tort-deform proposals championed by the Republicans. The alternatives might be no bill at all (or no bill for quite a while) or a bill that has considerably less relief for people who desperately need it. Should the compromise bill be adopted? by Jeff SovernNot only does McConnell s coronavirus bill make it much harder for consumers to sue businesses that carelessly infect them with the virus, it also makes it much easier for businesses to sue consumers suffering from COVID. Suppose a consumer sends a letter asking for help with medical bills to a business that infected her with the virus, and says she won t sue the business if she gets that help. If she wouldn t have been able to bring a valid case because she couldn t satisfy the draconian standards established by the bill, the business can sue the consumer for compensatory damages (would there be any?), collect attorney s fees, and in some cases punitive damages. The consumer would be liable even if she never sued, but only sent a letter. That s under section 164. That will certainly give businesses that cavalierly sicken consumers a weapon in case the consumers want to seek help from the companies that injured them. How Orwellian for Republicans to pretend to prevent a tidal wave of litigation that doesn t exist while contributing to another--suits by businesses against consumers--that does. As the world races to find a safe and effective vaccine against COVID-19, note a study published today in the Annals of Internal Medicine. The study reviewed all vaccines approved by the Food Drug Administration for the 20-year period ending December 31, 2015. The study s finding:Over a 20-year period, vaccines were found to be remarkably safe. A large proportion of safety issues were identified through existing postmarketing surveillance programs and were of limited clinical significance. These findings confirm the robustness of the vaccine approval system and postmarketing surveillance.Read the whole study here. In solidarity with the protests that have initiated a national conversation on institutional racism, the St. John’s Law School Student Chapter of the National Association of Consumer Advocates is hosting a two-part online discussion on discrimination in the context of economic justice. Our first conversation will focus on the housing discrimination that continues to harm POC as it perpetuates structural inequality in education, financial services, and wealth-building. The conversation will include the following panelists: • Fred Freiberg, Executive Director at the Fair Housing Justice Center• Lisa Darden, Board Member and former undercover tester at the Fair Housing Justice Center; and• Makedah K. Salmond, Esq., Supervising Attorney at the Tenants’ Rights Unit of NYLAGDate: July 30th, 2020Time: 7:00 pmCo-sponsoring Organizations: • Black Law Students Association• Public Interest Center• Dispute Resolution Society• New York Real Property Law Journal• Real Property Law Society • Mattone Institute• Coalition of Social JusticeAttendance is free but registration is required. Register at https://docs.google.com/forms/d/e/1FAIpQLSes7mRRGrhnAYsDaypgIyUkqGIfKr0RHGJ66J6xDimuTmhuIA/viewform by Jeff SovernI served on a faculty committee this summer that prepared a report with tips for online teaching. The report, which may be useful to law professors, is available here. Here s the abstract:This is a collection of recommendations drawn from a variety of sources, including our colleagues, students, webinars, books, articles, podcasts, and our own experimentation. It is not our expectation that any individual professor would adopt all of these suggestions and indeed no one of us intends to. Instead, we hope that some of these are helpful to you. Some suggestions deal with the nuts and bolts of teaching online while others with how to accomplish broader goals.The general recommendations are broadly applicable to all courses taught online, while the individual class-type recommendations are intended to complement and augment the general recommendations. Additionally, these recommendations will be revised as we continue to learn from our experiences in online instruction. by Jeff SovernThe argument that businesses should not be liable to consumers whom they carelessly infect with the coronavirus is based on the claim that if Congress does not outlaw such cases, we will see a tidal wave of lawsuits. Thus far, that argument has no basis in reality. In fact, if anything, consumer claims are getting lost in the undertow. A recent Pew study found that the [c]ivil caseloads dropped more than 18 percent from 2009 to 2017 even though more than half of all U.S. households experienced one or more legal issues that could have gone to court. . . . But there is a tidal wave of litigation going on--only it s a tidal wave of businesses suing consumers. According to the same Pew study, the available data indicate that debt claims now dominate state courts, to the point that about a quarter of state civil cases consist of debt collection claims. It looks as if businesses are winning the fight over access to courts while trying to create the illusion that they are losing. Today, the Office of the Comptroller of the Currency issued a proposed rule to overturns the “true lender” rule that courts have used since the early 1800s to prevent evasions of state usury laws. The deadline to submit comments on the OCC’s proposal is September 3, 2020.In a statement, the National Consumer Law Center warned that the proposal would turn state usury laws into a dead letter and eviscerate power that states have had since the time of the American Revolution to protect people from high interest rates and predatory lending.At least 45 states and the District of Columbia have interest rate caps on installment loans. Under the proposal, NCLC explained, a payday lender or other nonbank lender could ignore state interest rate limits as long as either a bank ‘[i]s named as the lender in the loan agreement,’ or the bank ‘[f]unds the loan’ -- that is, the payday lender launders the loan through the bank. This proposal would allow payday lenders to resume the rent-a-bank schemes that were shut down by bank regulators in the mid-2000s, and would embolden today’s high-cost predatory rent-a-bank lending by online installment lenders.“The proposed rule would purport to overturn the ‘true lender’ doctrine, which allows courts to prevent evasions of usury laws by looking beyond the technical form or fine print of a loan transaction to examine which party has the predominant economic interest in the loan. The true lender doctrine has long been used to prevent payday lenders and other high-cost lenders from laundering their loans through banks, which are not subject to state interest rate caps.The OCC proposal is here. The NCLC statement is here. by Jeff SovernPolitico has a summary of the McConnell bill here. It immunizes schools, colleges, charities, and businesses that follow public health guidelines from liability for negligently infecting consumers with the virus. But many public health guidelines are written in terms of what is feasible or possible, meaning that the entities subject to the bill could argue that protections are not possible or feasible (e.g., Modify the alignment of workstations, including along processing lines, if feasible, so that workers are at least six feet apart in all directions . . . when possible . . . . ). Meanwhile, businesses justify the bill to prevent a flood of lawsuits that hasn t materialized. And it s not as if no one has been injured by the virus: more than 3.7 million Americans have caught the virus and more than 140,000 have died. Oh, and businesses have a long history of predicting floods of lawsuits that haven t materialized. If businesses don t want to be liable for carelessness, they should simply be careful. For more specifically on immunity for universities, go here. Shmuel I. Becher of Victoria University of Wellington and Sarah Dadush of Rutgers have written Relationship as Product: Transacting in the Age of Loneliness. Here s the abstract:Behavioral economists and social psychologists distinguish between two main types of relationships. One type is “exchange relationships,” which are based on mutual benefit and economics principles. The second type is “communal relationships,” which are based on caring, kindness, support, and affection.The law has been slow to incorporate this imperative distinction. Importantly, it overlooks the reality in which businesses are selling consumers not only products or services, but also “communal” or “social” relationships. We dub this phenomenon “relationship as product.”Relationship as product leads to various negative outcomes. It makes consumers more likely to behave emotionally rather than rationally, and to lower their guards. It encourages consumers to spend more money, time, and attention-energy on products and services. It can also contribute to a biased and unhealthy perception of human relationships. At a societal level, relationship as product damages trust and decreases overall well-being, and has negative effects on workers, the environment, and a competitive economy. By selling relationship as product, firms also undermine the solidarity ties that bind communities.This Article marks a first attempt to explore the problematic aspects of relationship as product from a legal and policy perspective. Part I of this Article illustrates how firms have made relationships a product. Part II explains the forces that account for the rise of relationship as product, including loneliness and social isolation, deteriorating levels of trust, the pursuit of well-being, and exploitation of cognitive biases. Part III explains why relationship as product can be viewed as a defective product, which harms individual consumers and society at large. Part IV makes recommendations for expanding consumer law and policy to address these challenges. Vivien Chen of the Monash University - Department of Business Law Taxation has written Online Payday Lenders: Trusted Friends or Debt Traps? 43 University of New South Wales Law Journal (Advance 2020). Here s the abstract:The recent Senate inquiry into credit and hardship underscored the prevalence of predatory conduct in the payday lending industry. The rise of digitalisation has increased consumer access to high-cost payday loans and the ensuing risk of debt spirals. The article examines the marketing strategies of online payday lenders, revealing that the effect of mandatory warnings on the risk of harm are often diminished through website layouts. At the same time, lenders commonly offer fast, convenient cash in tandem with blogs that provide advice on managing finances and living well on a budget, obfuscating the distinction between advertising and altruistism. The findings highlight the need for regulatory enforcement of laws aimed at safeguarding vulnerable financial consumers. Emerging challenges from the increasing digitalisation of payday lending and social media marketing raise the need for reforms to address gaps in the regulatory framework. I thought our readers might want to look at an interesting new decision from the Third Circuit about common-law nuisance under Pennsylvania law. The decision is Baptiste v. Bethlehem Landfill Company. The first two paragraphs of the opinion offer a synopsis:Robin and Dexter Baptiste brought an action against the Bethlehem Landfill Company on behalf of a class of homeowner-occupants and renters claiming interference with the use and enjoyment of their homes and loss in property value caused by noxious odors and other air contaminants emanating from the Bethlehem landfill. They brought these claims under three state-law tort theories: public nuisance, private nuisance, and negligence.The U.S. District Court for the Eastern District of Pennsylvania granted the company’s motion to dismiss the complaint. The District Court held that too many residents were similarly affected to sustain a private claim for public nuisance, that the odors affected too many people and the landfill was too far away from them to constitute a private nuisance, and that the plaintiffs had failed to identify a duty of care to maintain a negligence claim. We disagree, and therefore, we will reverse and remand. 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Updates and ideas about consumer law and policy by lawyers and law professors. Sponsored by Public Citizen Litigation Group. Coordinated by Allison Zieve (Public Citizen Litigation Group); Jeff Sovern (St. John's University School of Law); and Brian Wolfman (Georgetown University Law Center).

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