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Posts Tagged ‘consumer class action’

In response yesterday’s entry discussing Daniel Fisher’s article on the potential impacts of Concepcion, I got one of the best comments that I’ve ever received on this site.  It comes from Portland complex injury and consumer class action attorney David Sugerman, who blogs at www.davidsugerman.com.  Of course, I disagree with just about every word of it, but with imagery like a bunch of corporate fat cats “fixing to celebrate the opening of the all-you-can-eat trough of greed,” I could not help but re-post it here:

I’m amused. As I said to defense counsel at a large multi-national firm, I guessed that midway through the second glass of champagne, the defense bar realized it had a real problem. He is apparently looking for a new job or to transition into other areas of practice.

Your one concrete example–retail sales–is, as you know, a less viable class because of problems of ascertainment, notice, locating the class, providing notice and obtaining and distributing relief. And not all retail sales cases survive. You likely recall the Gateway case some years ago with the forced mandatory arbitration clause in the paperwork in the box that was deemed accepted upon registration?

I love the concerted talking points in the defense bar that these cases are not done. Those of us who represent consumers know better.

We also know the torrent about to be unleashed when consumers can no longer take concerted action to stop nickel and diming on high-volume, small amount claims. AT&T, Comcast, banks, utilities, credit card companies are fixing to celebrate the opening of the all-you-can-eat trough of greed.

The argument that Congressional or Executive action *might* change things proves too much. Absent such action, consumer class cases are pretty much done. The argument also illustrates the crass overreaching in SCOTUS’ opinion, with views on federalism and statutory construction that are as breathtaking as the Citizens United case.

This is really not a problem for me because I handle a wide range of consumer and plaintiff problems. But my colleagues in high-priced defense firms who defend consumer class actions for a living are likely to have problems.

So no, if I were a high end defense attorney, I wouldn’t take much comfort in Forbes view or the talking points. It’s going to get bleak out there.

Lest you doubt my dire predictions, let’s set a wager for 12 months from the decision on how many consumer class actions have been filed, how many layoffs in the defense industry, or some other agreed-upon metric that we can revisit next year.

Ok, David, friendly banter on.

First, I must say that I don’t know a single defense lawyer who owns a private jet, but I know several plaintiffs’ lawyers who do, so all this talk about “high-priced” defense firms rings a little hollow to me.

Second, defense lawyers will have jobs for as long as there are plaintiffs’ lawyers around to file lawsuits, and somehow I don’t see the plaintiffs’ bar throwing in the towel this easily.  What you may see is simply a shift in the kinds of class actions that get filed in the future, or the industries that are targeted.  I say “targeted” because in my experience trends in consumer class actions are more often driven by the creativity of the entrepreneurial trial bar than by any epidemic of corporate greed.  Don’t get me wrong, I’m not saying there aren’t well-publicized scandals involving an epidemic of corporate greed (See Enron), but they tend to generate securities or ERISA class actions, not consumer class actions.

Finally, I’ll wager you, although not for money.  Only for pride.  (I’m not made of money after all, I’m just a defense lawyer).  I’ll bet that not only don’t we see a decrease, but we’ll actually see an increase in consumer class actions over the next year.  Sort of like the rash of class actions filed just before CAFA took effect.  I’m not sure at this moment how we’ll measure this, but I’d imagine that there’s a consulting firm out there (no doubt worried about the effect Concepcion is going to have on its own bottom line) planning just the kind of research we need.

So, if you’re a consulting firm looking for a project, we’ve got a job for you (pro bono, of course)…

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Daniel Fisher, who writes the Full Disclosure blog at Forbes.com, posted an article last Friday titled Has Scalia Killed the Class Action?  Fisher’s article one of the best I’ve seen in discussing the potential practical impact that the Supreme Court’s recent class arbitration waiver decision in AT&T Mobility v. Concepcion may have on future consumer class action litigation.  I highly recommend it. 

Although much remains to be seen about Concepcion‘s long-term impact, from a practitioner’s point of view, two things are clear to me. 

First, the consumer class action is far from dead.  As Fisher’s article points out, there are many cases that won’t implicate arbitration clauses in consumer contracts at all, such as those involving retail products.  Moreover, even setting aside the prospect of executive branch or Congressional action in effectively overruling Concepcion, there are a variety of legal arguments that are sure to be raised for invalidating or avoiding enforcement of class arbitration waivers in the lower courts, notwithstanding the Supreme Court’s decision.  There are countless theories, many of which have yet to be dreamed up by enterprising plaintiffs’ lawyers, for why a consumer class action in a particular case should be allowed to go forward in court notwithstanding an arbitration provision.

Second, the fact that future legislative or executive action or lower court judicial gloss may water down or limit Concepcion‘s ultimate impact should not keep companies from taking advantage of what is now, at minimum, an enhanced tool for protection against the significant cost of defending against class action litigation.  In the short term, any in-house or outside counsel charged with advising corporate clients should be considering ways to incorporate class arbitration waivers or similar provisions into the client’s form contracts and terms of use.  While it may not be failsafe protection from class actions, a well-drafted, reasonably limited class arbitration waiver, has an exponentially greater chance of being enforced than it did before the Concepcion decision was announced.

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Two op-eds published today highlight the philosophical debate over the impact of the Supreme Court’s recent decision in AT&T Mobility v. Concepcion.

The first, published by the New York Times, argues that the decision is a “devastating blow to consumer rights” because it makes it practically impossible for many consumers to seek vindication of their rights in any forum.

In response, Forbes contributor Daniel Fischer argues that Concepcion’s limitation on consumer class actions does not really harm consumers because consumer class actions really only benefit lawyers.  As a prime example, he points to the controversial proposed settlement in a class action involving DirectBuy to which 36 attorneys general and a consumer rights organization have objected.

I would recommend reading both articles for anyone interested in the possible social and legal implications of the Court’s recent decision.

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UC Irvine Law School Dean and noted constitutional scholar Erwin Chemerinsky authored an op-ed in today’s Los Angeles Times critical of the Supreme Court’s recent decision in AT&T Mobility v. Concepcion titled Supreme Court: Class (Action) Dismissed.  Dean Chemerinsky argues that Concepcion is part of an alarming trend in decisions by the Supreme Court’s conservative bloc that blatantly favor business interests over the rights of consumers and prevent access to justice to injured persons. 

Although Dean Chemerinsky’s article is worth a read, perhaps even more interesting are the user comments to the article, which frame the debate as being as much about business interests versus trial lawyers as it is about business interests versus consumers.

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According to this February 8, 2011 article from Lee Ann Schultz of the Twin Cities Daily Planet, the Minnesota legislature is considering a bill that, according to its sponsors, would curtail consumer class action litigation in the state.  The bill, HF211, has three key provisions of interest, which would:

  1. limit private actions under three consumer protection statutes to actions filed by “natural persons who purchase or lease goods, services, or real estate for personal, family, or household purposes”;
  2. require proof of personal loss of money in order to support a cause of action for damages under the consumer protection statutes; and
  3. make class certification orders immediately appealable and imposes an automatic stay of proceedings at the trial court while the appeal is pending.

All three measures are similar to class action reform measures passed or at least considered by various states over the past decade or so.  However, there are at least three aspects of the proposed reforms that would make consumer protection actions in Minnesota more restrictive than in other states.

First, this bill appears to limit consumer protection actions to actual consumers.  Some state statutes broadly construe who is a “consumer” for the purposes of enforcing the consumer protection law, so that small businesses and other non-natural “persons” can sometimes qualify. 

Second, while most states have some sort of requirement that there be proof of causation of injury in a consumer protection case, HF211 would require a specific kind of injury:

No award of damages in an action covered by this subdivision may be made without proof that the person or persons seeking damages suffered an actual out-of-pocket loss. The term “out-of-pocket loss” means an amount of money equal to the difference between the amount paid by the consumer for the good or service and the actual market value of the good or service that the consumer actually received.

This language appears to restrict consumer protection claims to only those situations in which the named plaintiff and other would-be class members suffered a loss of value to the product or service purchased.  So, a claim that deceptive marketing or advertising practice caused consumers to suffer financial losses other than loss of value to the product itself would apparently be foreclosed.  The specific language may be intended to avoid the kinds of uncertainty that has plagued litigants in California following the passage of Proposition 64 in 2005, a voter-approved reform that requires proof that the named plaintiff “lost money or other property” in order to pursue a class action under the state’s Unfair Competition Law (UCL).

Curiously, the bill makes reference to a requirement that this injury be proved on an “individual” basis, even in a class action:

Each such person seeking to recover damages for violations of these sections, either in an individual action, a class action, or any other type of action, is required to plead and prove on an individual basis that the deceptive act or practice caused the person to enter into the transaction that resulted in the damages.

It is unclear whether this language, if adopted, would a) effectively prevent any consumer protection claim from being pursued on a class basis because all consumer protection claims would require individual proof of injury, b) be interpreted only as a threshold matter to insure that the class representative (but not absent class members) has standing before the case is allowed to proceed, or c) somehow introduce a new requirement of “individual” proof for all class actions, even while still allowing class actions to be pursued in some form.

Third, this bill would allow appeals of class certification decisions as of right and would create an automatic stay.  By contrast, federal rule 23(f), and the similar rules of many states allow interlocutory appeal of class certification orders only in the discretion of the appellate courts and do not mandate an automatic stay of proceedings at the trial court level while the appeal is pending.

The Bill was introduced in the state House on January 24.  It is not clear what the Bill’s chances of passage are.  Only one of the Bill’s 12 authors is a Democrat (or, for my Minnesota friends who want to be picky, DFL).

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While doing research for another article today, I came across a terrific resource that could come in handy to any lawyer who handles consumer class actions.   It is a 2005 article from Alan S. Brown and Larry E. Hepler entitled Comparison of Consumer Fraud Statutes Across the Fifty States, 55 Fed’n Def. & Corp. Couns. Q. 263 (2005).  A copy is available for download for free at the FDCC website.  In an appendix at pages 290-308, the authors included a chart comparing key aspects of each state’s consumer protection statute. 

Although the article is now several years outdated (so it would be prudent to shepardize), it at least provides a good starting point for any attorney researching state consumer protection or “little FTC” laws.  I only wish I had come across this little gem sooner.

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The filed rate doctrine is an important concept that comes into play in many consumer class actions, including those against public utilities, telecommunications providers, and insurers, that challenge the amounts charged by a regulated provider for its services.  In its broadest sense, the doctrine holds that a regulated entity cannot be sued for charging allegedly excessive rates if those rates were filed with a federal or state regulator.

Last fall, in MacKay v. Superior Court, 188 Cal. App. 4th 1427 (2010), a panel of the the California Court of Appeal expressly applied the filed rate doctrine to bar a consumer protection claim based on an insurance companies act of charging allegedly excessive insurance premiums.  This past week, on January 12, 2011, the California Supreme Court denied a motion to depublish the decision, confirming its status as citable authority. 

Here is a key excerpt from the original decision, entered on October 6, 2010:

The filed rate doctrine provides that rates duly adopted by a regulatory agency are not subject to collateral attack in court. Numerous state courts have applied the filed rate doctrine to approved insurance rates. (E.g., Anzinger v. Illinois State Medical Inter-Ins. Exchange (1986) 144 Ill.App.3d 719, 721, 723 [98 Ill.Dec. 533, 494 N.E.2d 655]; Commonwealth v. Anthem Ins. Companies, Inc. (Ky.Ct.App. 1999) 8 S.W.3d 48, 51-52; City of New York v. Aetna Casualty & Surety Co. (N.Y.App.Div. 1999) 264 A.D.2d 304 [693 N.Y.S.2d 139, 140].) Indeed, one such case noted that while the filed rate doctrine originated in federal courts, “it `has been held to apply equally to rates filed with state agencies by every court to have considered the question.'” (Commonwealth v. Anthem Ins. Companies, Inc., supra, 8 S.W.3d at p. 52.) We thus must disagree with Fogel v. Farmers Group, Inc. (2008) 160 Cal.App.4th 1403, 1418 [74 Cal.Rptr.3d 61], to the extent that it rejected the application of the filed rate doctrine to California insurance rates. The Fogel court noted that the parties before it had identified no cases in which the filed rate doctrine had been applied in the context of a rate approved by a state regulatory agency.  Thus, the filed rate doctrine supports our conclusion that there is no tort liability for charging a rate that has been approved by the commissioner.
 
We note, however, the limited nature of our holding. Insurance Code section 1860.1 protects from prosecution under laws outside the Insurance Code only “act[s] done, action[s] taken [and] agreement[s] made pursuant to the authority conferred by” the ratemaking chapter. It does not extend to insurer conduct not taken pursuant to that authority. 
Id. at 1448-49 (internal footnotes omitted).

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