The 9th Circuit just blew up mandatory arbitration in consumer cases

From today’s Reuter’s Online News:

In a trio of rulings on Friday, the 9th U.S. Circuit Court of Appeals blessed a tactic that will allow plaintiffs lawyers litigating California consumer class actions to defeat defense motions to compel arbitration. If appellate rulings in the three cases – Blair v. Rent-A-Center, Tillage v. Comcast and McArdle v. AT&T Mobility – hold up, they represent a dramatic twist in corporations’ long-running, and mostly successful, campaign to force employees and consumers to arbitrate their claims individually instead of banding together in class actions.

If you don’t believe me, just ask the U.S. Chamber of Commerce and the National Association. In an amicus in one of the cases, the pro-business groups warned that under the theory the 9th Circuit just adopted, plaintiffs lawyers will be able to evade arbitration in “virtually every case” invoking California consumer protection statutes.

“It’s a very big deal,” said Michael Rubin of Altshuler Berzon, who represents consumers in the 9th Circuit’s Rent-A-Center case. And not just in California, according to Rubin. The three 9th Circuit decisions, as I’ll explain, involved consumers’ rights under several California statutes to seek injunctions forcing corporations to change their conduct. But Rubin told me the 9th Circuit’s analysis may just as well apply to other states’ consumer and employment statutes that include injunctive rights.

AT&T Mobility, which is represented at the 9th Circuit by Andrew Pincus of Mayer Brown, said in a statement that it is considering its options: “We respectfully disagree with the court’s decision, which we believe is inconsistent with the arbitration provision agreed upon by the parties, the Federal Arbitration Act and United States Supreme Court precedent.” Comcast counsel Mark Perry of Gibson, Dunn & Crutcher declined to provide a statement. Rent-A-Center’s lawyer, Robert Friedman of Littler Mendelson, did not respond to my email requesting comment.

The three appeals called upon the 9th Circuit to review the California Supreme Court’s 2017 ruling in McGill v. Citibank. In McGill, the state justices held that as a matter of California public policy, corporations cannot require consumers to waive their right to seek a public injunction. The California Supreme Court also held, without engaging in deep analysis, that California’s policy is not pre-empted by the Federal Arbitration Act.

Read the complete article here.

Comcast faces $9.1 million penalty for violating consumer protection laws

From today’s Seattle Times:

Comcast violated Washington’s Consumer Protection Act by charging nearly 31,000 residents without their knowledge for a service-protection plan, a King County Superior Court judge ruled Thursday.

But the order by Judge Timothy Bradshaw also rejected parts of what started as a $100 million lawsuit alleging “deceptive” practices surrounding repair fees and credit checks brought against the Philadelphia-based company by state Attorney General Bob Ferguson in 2016.

Ferguson in late 2017 expanded that complaint to include allegations about the service-protection plans. Those plans — which at that time cost $5.99 per month — are intended to cover repairs for customer-owned wiring related to Xfinity voice, TV and internet service.

In Thursday’s order, Bradshaw imposed $9.1 million in civil penalties against Comcast. He directed the company to pay additional money in restitution to the affected customers within 60 days, according to a news release from the Attorney General’s Office.

The ruling found that Comcast had signed up 30,946 Washington residents to the plan without their consent, according to the news release. Additionally, the company did not reveal the true cost of the plan to another 18,660 state residents.

Read the complete article here.

Clarence Thomas Voted With Liberals in a Big Consumer Rights Case. Why?

From today’s Slate Magazine:

On Tuesday, the Supreme Court issued a surprising 5–4 decision in Home Depot v. Jacksonthat progressive advocates view as a win for consumers and class actions. The lineup in Home Depot was unusual: Justice Clarence Thomas wrote the majority opinion, joined only by the liberals; the other conservatives dissented. Home Depot marked the second time this term that Public Justice, a public interest advocacy firm, has triumphed at SCOTUS. Earlier this year, the firm won a unanimous victory in New Prime v. Oliveira, an important labor rights case. How did it nab Thomas’ vote this time around?

The story of Home Depot is a tale of greed, grift, and civil procedure. It centers on a scheme that involved three companies: Home Depot, Citibank, and Carolina Water Systems Inc. Here’s how it allegedly worked. Representatives from Home Depot or CWS called homeowners and claimed that “contaminants” were found in nearby tap water. They urged homeowners to let them perform a test for “contaminants,” which was really just a test for water hardness; almost all tap water tested positive, even if it was perfectly safe. But CWS told homeowners the positive result proved their water was unsafe and required a $9,000 water purification system that other companies sell for $1,400. The company then told homeowners they had been approved for a Home Depot–branded Citibank credit card, which they could use to pay for the system with deferred interest.

George Jackson got suckered into this alleged scam and, like many others, couldn’t afford to pay off the charges he put on the credit card to pay for the overpriced water purification system. A company representative allegedly told Jackson the Citibank card had zero interest for two years—but in fact, the interest rate jumped to 25.99 percent after one year. Jackson couldn’t afford to pay, so Citibank sued him in state court to collect the debt. Eventually, he secured the representation of consumer protection lawyers who filed a counterclaim against Citibank, as well as class-action claims against Home Depot and CWS on behalf of about 290 other homeowners targeted by the alleged scam. He claimed that the companies, working together, had violated North Carolina laws prohibiting unfair and deceptive trade practices.

Home Depot promptly tried to move the case from North Carolina court to federal court—a typical corporate tactic, since federal courts are widely considered to be more business-friendly than state courts. F. Paul Bland, the executive director of Public Justice who argued Home Depot at the Supreme Court, told me that there’s a strong perception among most corporations that “federal courts are more hostile to consumer class action.” Federal judges “are overwhelmingly former prosecutors, corporate lawyers, and law professors,” and “very few ever represented a consumer or worker against a corporation.” By comparison, “about 40 percent of state court judges were plaintiffs’ lawyers.” State courts, as a result, are considered much friendlier to consumer class actions, hence Home Depot’s desire to get the case before a federal judge instead.

Republican lawmakers also think state courts are too favorable toward class actions, which is why the GOP-controlled Congress passed the Class Action Fairness Act in 2005. CAFA was designed to expand the kinds of class actions that corporations could move from state to federal court. It has, Bland said, “been a great boon to corporate America.” And predictably, in response to Jackson’s claims, Home Depot argued that CAFA allowed it to move the entire case out of North Carolina court and get it before a federal judge.

But Home Depot had a problem. Under a long line of cases going back to the 1940s, only a defendant can move a case from state to federal court. And a defendant is defined as the party sued by the original plaintiff. Here, Jackson is the defendant; remember, Citibank sued him to collect the debt he owed—that’s how the whole case started. Under the usual rules, then, Home Depot can’t escape North Carolina court.

Read the complete article here.

Google workers want to end mandatory arbitration—Here’s why this matters

From today’s Washington Post:

Employees at Google recently organized a phone drive to lobby Congress to end the practice of mandatory or forced arbitration, in which an arbitrator — typically designated by the company — resolves a legal dispute, rather than a judge.

Over the last three decades, more and more corporations have forced their employees or customers to sign these contracts, agreeing to take their disputes to private arbitration instead of to court. A recent studyestimates that currently more than 60 million U.S. workers signed these mandatory arbitration agreements when they were hired. Anotherfound that, last year, consumers signed almost three times as many consumer arbitration agreements as there are people living in the U.S.

Arbitration’s spread has become controversial. Many on the left criticize it, while many conservatives support it. So it may be surprising that liberal reformers were the first to make arbitration popular. Here’s how the Supreme Court and Congress helped change arbitration from a liberal cause to conservative rallying cry.ADVERTISING

Businesses win — and employees lose — more often in arbitration than in court

Arbitration produces clear winners and losers. Employees win less frequently and receive lower damages in arbitration than in litigation. Employers win more frequently, especially if they use the same arbitrators repeatedly. That’s hardly surprising, given that the employers typically choose the arbitrators. Given recent public criticism, many prominent companies have discontinued mandatory arbitration requirements for sexual harassment claims.

The Supreme Court has helped expand private arbitration. Just last week, in Lamps Plus, Inc. v. Varela, conservatives decided that workers cannot join to bring similar complaints against a company through class arbitration unless their contracts specifically allow it. The 5-4 majority opinion relied heavily upon a controversial case from last term, Epic Systems Corp. v. Lewis.

These cases are just the latest in a three decades-long trajectory toward disallowing anything that discourages private arbitration, as part of a larger political strategy employed by business-friendly conservatives in Congress, the courts, and the private sector to constrict both access to courts and class-action lawsuits.

Read the complete article here..

Facebook Halts Advertising Targeting Cited in Bias Complaints and Lawsuits

From today’s New York Times:

After years of criticism, Facebook announced on Tuesday that it would stop allowing advertisers in key categories to show their messages only to people of a certain race, gender or age group.

The company said that anyone advertising housing, jobs or credit — three areas where federal law prohibits discrimination in ads — would no longer have the option of explicitly aiming ads at people on the basis of those characteristics.

The changes are part of a settlement with groups that have sued Facebook over these practices in recent years, including the American Civil Liberties Union, the National Fair Housing Alliance and the Communications Workers of America. They also cover advertising on Instagram and Messenger, which Facebook owns.

“We think this settlement is historic and will go a long way toward making sure that these types of discriminatory practices can’t happen,” Sheryl Sandberg, the company’s chief operating officer, said in an interview.

The company said it planned to carry out the changes by the end of the year and would pay less than $5 million to settle five lawsuits brought by the groups.

Read the complete article here.

Op-Ed: Consumer rights are worthless without enforcement by the state

From today’s San Francisco Chronicle:

57 years ago, President John F. Kennedy made an impassioned pitch for stronger consumer rights.

“If consumers are offered inferior products, if prices are exorbitant, if drugs are unsafe or worthless, if the consumer is unable to choose on an informed basis, then his dollar is wasted, his health and safety may be threatened, and the national interest suffers.”

Kennedy offered these words of warning on March 15, 1962, a date now celebrated as World Consumer Rights Day. He then called on Congress to enact legislation to protect four fundamental consumer rights: the right to safety, the right to be informed, the right to choose and the right to be heard.

The address has become known as the “consumer bill of rights.” But Kennedy also discussed an equally important issue: how such rights would be enforced. After all, without enforcement, consumer rights are just empty promises.

Consumer rights flourish

The idea of consumer rights was nothing new in 1962.

As I describe in my research on the history of consumer credit regulation, the states took an early interest in protecting ordinary Americans against abuse by lenders and debt collectors, beginning in the earliest days of the republic. Most adopted usury laws limiting the price of credit in the colonial period, exemption laws shielding property from seizure by creditors in the 19th century and more tailored consumer credit regulations in the early and middle 20th century.

What was noteworthy about Kennedy’s address was not his push for more consumer rights, but rather his call for the federal government – “the highest spokesman for all the people” – to act on behalf of consumers instead of ceding the role of consumer protector to the states.

Congress heeded Kennedy’s call and passed a flurry of consumer legislation.

In the 1960s and ‘70s, it required lenders to clearly disclose loan terms through the Truth in Lending Act, mandated fair credit reporting and debt collection practices, created safety standards for cars and other consumer products, and banned discrimination in housing and consumer lending. More recently, in 2010, Congress created the Consumer Financial Protection Bureau and tasked the agency with guarding consumers against unfair, deceptive or abusive acts and practices in financial services.

The states also reinforced their decades-old consumer laws in the 1960s and ’70s by banning unfair and deceptive acts and practices under state “UDAP” laws.

Accordingly, consumer rights today are far more robust than they were when JFK gave his speech. To be sure, new business practices regularly require that existing laws be updated to address unanticipated threats.

But the biggest challenge today is not the need for new consumer rights. Rather, it is ensuring that existing rights are enforced.

Legal fee recovery and class actions

There are basically two ways to enforce a consumer right: privately with a lawsuit or publicly via regulators.

The biggest barrier to effective private enforcement is financial. First of all, the harm to an individual consumer from a rights violation is often small, reducing the economic incentive to sue. Secondly, to sue in court, a consumer generally requires the assistance of an attorney, who must be paid. Finally, even if the individual goes to court and wins, the damage award is frequently too insignificant to deter the violator from engaging in profitable but illegal practices in the future.

Fortunately, two legal innovations have helped consumers overcome some of these hurdles.

One, rules allowing prevailing plaintiffs to recover attorneys’ fees, expanded with the raft of consumer rights legislation of the late 1960s. These provisions gave consumers the right to recover the costs of their legal representation along with any actual damages for some rights violations.

The other was the birth of the modern class action lawsuit in 1966, which allowed consumers who suffer similar monetary harms to aggregate their claims into a single large lawsuit, leading to multimillion dollar settlements.

Public enforcement

The other way to give consumer rights teeth is through public enforcement. And besides the potential for monetary awards, this method opens the door to other types of remedies for consumers.

For example, the New Jersey attorney general recently sued two auto dealerships, alleging that they sold damaged vehicles at unaffordable prices to “financially vulnerable” customers who were then left stranded when the dealers repossessed the cars without advance warning. The complaint seeks to ban the violators from selling car in the future, in addition to monetary relief.

Enforcement shortfalls

Recent developments, however, raise concerns about the future of consumer rights enforcement through both public and private channels.

The strength of public enforcement is subject to the whims of state and federal officials, who may reduce enforcement resources or refuse to bring enforcement actions.

A prime example is the weakening of the Consumer Financial Protection Bureau, which from 2011 through 2017 helped millions of consumers receive nearly $12 billion back from misbehaving financial institutions. A recent study found that CFPB enforcement activity has declined significantly since the end of 2017, when Richard Cordray, its first director, stepped down.

Paper tigers

Compared with 1962, when President Kennedy put consumer concerns on the national agenda, ordinary Americans now have far more robust rights to safety, to information, to choice and to a fair hearing.

But consumer rights do not enforce themselves. Public enforcement requires funding and willing leaders. Private enforcement requires legal devices that allow consumers to pay attorneys for their work.

Without an ongoing commitment to enforcement, consumer rights may become paper tigers, offering the appearance of protection without any teeth.

Read the complete article here.

FICO Plans Big Shift in Credit-Score Calculations, Potentially Boosting Millions of Borrowers

From today’s Wall Street Journal:

Credit scores for decades have been based mostly on borrowers’ payment histories. That is about to change.

Fair Isaac Corp. FICO -4.72% , creator of the widely used FICO credit score, plans to roll out a new scoring system in early 2019 that factors in how consumers manage the cash in their checking, savings and money-market accounts. It is among the biggest shifts for credit reporting and the FICO scoring system, the bedrock of most consumer-lending decisions in the U.S. since the 1990s.

The UltraFICO Score, as it is called, isn’t meant to weed out applicants. Rather, it is designed to boost the number of approvals for credit cards, personal loans and other debt by taking into account a borrower’s history of cash transactions, which could indicate how likely they are to repay.

The new score, in the works for years, is FICO’s latest answer to lenders who after years of mostly cautious lending are seeking ways to boost loan approvals.

This is occurring at the same time the consumer-credit market appears relatively healthy. Unemployment is low and consumer loan balances—including for credit cards, auto loans and personal loans—are at record highs, and lenders are looking for ways to keep expanding loan volume.

Borrowers currently have little control over what is in their credit reports, save for the ability to contest information they believe is inaccurate. Lenders, collections firms and other parties feed payment-history data to the major credit-reporting firms, Experian PLC,Equifax Inc. and TransUnion, and that information determines consumers’ FICO scores.

Read the complete article here.

Now for Rent: Email and Phone Numbers of Millions of Trump Supporters

From today’s New York Times:

Early in his presidential campaign, Donald J. Trump dismissed political data as an “overrated” tool. But after he won the Republican nomination, his team began building a database that offers a pipeline into the heart of the party’s base, a comprehensive list including the email addresses and cellphone numbers of as many as 20 million supporters.

Now, consultants close to the Trump campaign are ramping up efforts to put that database — by far the most sought-after in Republican politics — to use, offering it for rent to candidates, conservative groups and even businesses.

It is an arrangement that has the potential to help the Republican Party in key midterm races, while providing a source of revenue for President Trump’s campaign and the consultants involved.

It has also set off concerns about diluting the power of one of Mr. Trump’s most potent political assets, while raising questions about whether his team is facilitating the sort of political profiteering that he disparaged during his campaign.

It is not unusual for candidates to rent supporter data to — or from — other campaigns. The new effort by Mr. Trump’s team, however, appears to be the first time the campaign of a sitting president facing re-election has opted to market its list.

Federal election law allows campaigns and political action committees to sell or rent their lists, provided that the payments received are fair market value.

In recent weeks, Mr. Trump’s campaign, which is not known for its adherence to political norms, quietly signed a contract with a newly formed Virginia-based company called Excelsior Strategies to market the emails and cellphone numbers — what is known in the political industry as first-party data.

Read the complete article here.

Senate approves measure assuring airline passengers of consumer rights

From today’s ABC News Online:

The Senate passed a measure Wednesday that would give airline passengers new rights and should help make an often frustrating experience easier.

But the bill, which authorizes funding for the Federal Aviation Administration for the next five years, doesn’t tackle those pesky airline baggage fees — a big win for the airlines.

No bumping passengers who have already boarded

This is a direct result of the April 2017 incident when United Airlines passenger David Dao was bloodied and dragged off an aircraft after refusing to give up his seat on an overbooked flight. Shortly after the highly-publicized incident, domestic carriers put an end to the practice of asking already-seated passengers to give up their seats. This bill would make that policy change federal law.

No mid-flight cell phone calls

Just because the flight has Wi-Fi, doesn’t mean passengers are allowed to make that business call. The bill would order the Department of Transportation to prohibit customers from making voice calls between takeoff and landing.

Accommodations for pregnant and breastfeeding mothers

Gate agents have long allowed pregnant women to board early along with families with small children, but this bill orders DOT to make that the law. In addition, it requires large and medium-sized airports to provide clean, accessible private rooms for nursing mothers. Changing tables will also have to be in both men’s and women’s bathrooms. The Department of Transportation will provide grants to help airport make the changes.

Orders seat size minimums

The measure, which now goes to the president for his signature, orders the FAA to establish minimum seat standards in pitch (the distance between rows of seats) and width within of year of the president’s signature. Consumer advocates have long argued that shrinking seats create a safety issue, but the FAA presented evidence that evacuating passengers end up waiting in the aisle anyway and current seat sizes have no effect on whether a plane can be emptied in 90 seconds as regulations require.

Read the complete article here.

Freezing Credit Will Now Be Free. Here’s Why You Should Go for It.

From today’s New York Times:

Consumers will soon be able to freeze their credit files without charge. So if you have not yet frozen your files — a recommended step to foil identity theft — now is a good time to take action, consumer advocates say.

Security freezes, often called credit freezes, are “absolutely” the best way to prevent criminals from using your personal information to open new accounts in your name, said Paul Stephens, director of policy and advocacy with Privacy Rights Clearinghouse, a consumer advocacy nonprofit group.

Free freezes, which will be available next Friday, were required as part of broader financial legislation signed in May by President Trump.

Free security freezes were already available in some states and in certain situations, but the federal law requires that they be made available nationally. Two of the three major credit reporting bureaus, Equifax and TransUnion, have already abandoned the fees. The third, Experian, said it would begin offering free credit freezes next Friday. To be effective, freezes must be placed at all three bureaus.

Read the complete article here.