A modest proposal: Close your Umpqua Bank account

Great coverage here in today’s Oregonian by Brent Hunsberger regarding Umpqua Bank’s decision to cram mandatory arbitration down the throats of Umpqua customers. If you’re an Umpqua Bank customer, you might want to seriously consider moving your funds to a credit union.

By way of background, the U.S. Supreme Court decision last year in AT&T Mobility v. Concepcion touched off a race to the bottom. The Court gave corporations great power to require customers to take any disputes to arbitration, while banning class actions.

The Court fell for the old Lucy, Charlie Brown and the football argument that arbitration is cheaper, easier and better for consumers. Arbitration is none of those things to consumers–especially in small consumer cases. In those cases in which the amount at stake might be $20-200, arbitration filing fees, hearing fees and arbitrator payment fees effectively bar individual consumers from pursuing their claims.

When the likes of Umpqua Bank and ATT Mobility engage in small-dollar rip offs of many consumers, they earn large amounts of money. To put it concretely, if a bank illegally charges five dollars each year to a million customers, it earns $5 million per year in illegal profits. In the past, consumer lawyers have stopped that nickel and diming by pursuing class actions. If a class of a million consumers collects $5 per consumer plus attorney fees and costs, does anyone think the bank will continue the illegal practice?

Banks–and those who represent them–dislike class actions. They settled on a simple strategy. Ban class actions and require consumers to go to arbitration. Ending consumer class actions is a bit like filling the slop pit for a bunch of hungry swine. They’ll be all over that deal.

Once the Supreme Court decided ATT Mobility v. Concepcion, banks, cell phone providers, credit card companies–hell, almost any big business that sells things or services under a written contract–all rushed in for the feeding frenzy. So I guess it is no surprise that Umpqua wants to get in on the action.

So where are consumers in this? If you care about this issue and you are an Umpqua customer, the best response is to vote with your feet. Move it to a consumer-friendly credit union. Because if enough Umpqua customers move, I’m guessing they will get a little nervous. And if a lot of Umpqua customers move, I’m thinking they might get a lot of nervous.

So do it if you can. If they can’t treat us better than slops in a trough, seems to me they don’t deserve our business.

Reviving the plutocracy–U.S. Supreme Court ends consumer class actions

 

A win for the plutocracy*

Yesterday’s decision in AT&T Mobility LLC v. Concepcion represents a breathtakingly bad opinion that does profound harm to consumers. It’s a bit geeky, but the takeaway is that this is a huge win for the rich and powerful.

The problem-One of the favorite great business abuses of consumers is the nickel and dime charge. It’s no doubt happened to you. Your bank, credit card company, phone provider, utility, car dealer or cable company has incorrectly charged you a few bucks. Maybe it was a one-time $10 fee on your checking account, or maybe the cable TV company illegally collected a six dollar late fee. But of course, in this era of massive corporate sizing, you are one of a million customers. So at the same time you got billed ten bucks, so did a million other customers. And zotz…just like that…the bank has collected $10 million illegally from its customers.

Here is the tally for those keeping score at home: Bank illegally enriched $10 million. Consumers hosed. That’s why consumers have class actions. With capable counsel and a willing representative, consumers had the tools to fight the nickel and diming problem.

The ruling: The Court effectively ended future consumer class actions with yesterday’s decision. The Court broadly interpreted federal preemption under the Federal Arbitration Act. The Federal Arbitration Act requires courts to enforce valid arbitration agreements. State courts have been ruling that arbitration agreements that limit consumer remedies and ban class actions are not valid under state law. The U.S. Supreme Court decided that those state law rulings were entitled to no deference and were of no effect. Here is the bottom line: No state law may prevent a corporation from: 1) requiring arbitration of all disputes between the consumer and the business; and 2) from prohibiting class actions for those disputes.

What it means for consumers. The problem is that now there will be no class actions for nickel and diming cases, so when a bank, cable company, cell phone provider or car dealer illegally charges a million customers $10, their arbitration clause will be upheld, and consumers will not be able to band together into a class to recover the money.

This will take place soon with emails and letters from cable companies, credit card providers, banks, cell phone companies and the like. It will start with revisions to your credit card agreements, cell phone terms and conditions, and cable terms of service. Buried in that long document will be a change in terms that will add or change the arbitration clause. They will all contain class action bans. Thanks to the Supreme Court, they will likely be enforceable.

Consumers have now been stripped of their abilities to enforce state consumer laws by an over-zealous Supreme Court. Consumer protection will stand and fall on state regulation and state enforcement. Have you seen the state budget lately? I’m sure there’s plenty of extra cash available for consumer protection enforcement. Even with those states that can afford enforcement, the Supreme Court has forced states to increase regulation if states want to have consumer protection. Because God knows–or at least the Roberts Court knows–that private enforcement by consumer class action lawyers is bad for business.

We will either see more regulation, or–more likely–we will see no control. Most businesses operate rationally. If you tell someone that ripping off consumers for $10 million may subject them to a class action case that will cost them that much or more, they will act to avoid facing that liability. But if bending the rules gets you $10 million without consequences, we all know how it ends.

Load up the troughs and get out of the way. Those hogs are hungry!

It’s a win for the plutocrats.

____

*Plutocracy: “[Gk ploutokratia, fr. ploutos wealth] 1: government by the wealthy 2: a controlling class of rich men.” Webster’s New Collegiate Dictionary, p. 878 (1979)

 

Interesting: Souter takes on originalists at Harvard

For those who watch the U.S. Supreme Court, a theory of constitutional interpretation–so-called “originalism”–is now in vogue. The theory, which is often mouthed by politicians, suggests that the only way to interpret the U.S. Constitution is to look at what the founders wanted and thought and felt back when they wrote the document.

It’s got simplistic appeal, even if it’s a fairly goofy notion. It’s goofy, in that history is rarely anything if not subjective, such that anyone who claims to know what the founders thought centuries ago is necessarily guessing. Sometimes it’s an educating guess, but it’s a guess all the same. As well, it presumes that all should be set in stone, without considering the tremendous changes brought over the centuries by technology, population growth, culture and the like.

Maybe I can explain what I mean better by asking this simple question: What would Thomas Jefferson or James Madison have thought about Google? Originalists claim to be able to apply the founders’ intentions to free speech issues in the Google-era. I think that’s fanciful at best. “My answer, for what it’s worth, is, “Who knows?!”

Originalist thinking seems to go beyond constitutional adjudication. For that reason, the airy concepts are more important to consumers than we might realize.

So all of that is background for big props to CBS legal correspondent Andrew Cohen, a Twitter friend, who wrote this thoughtful piece on Justice Souter’s commencement speech at Harvard. Justice Souter, who retired recently, takes a reality-driven view of the constitution. He understands that much of work of constitutional interpretation is difficult because the values embodied in the constitution co-exist in tension. That tension creates ambiguity, which is necessarily at odds with originalists and sound-bite politicians whose world is black and white.

I’m a fan. If the U.S. Constitution and the Supreme Court matter to you, it’s worth a read. Hats off to Andrew Cohen for noting and explaining what many of us missed.

Addendum: Link to the text of the Souter speech…I would credit a particular Philadelphia rock star lawyer who passed it along, but that would be wrong for reasons I can’t begin to explain.

Up is down-Republican leaders call for judicial restraint from Obama Supreme Court nominee

It’s official. Justice Stevens announced his retirement from the U.S. Supreme Court effective the end of this term. Court watchers have been speculating for a while that this would happen.

Here is one of many news reports. I’m taken by this quote from the linked MSNBC report by Senator Mitch McConnell (R Ky):

“Americans can expect Senate Republicans to make a sustained and vigorous case for judicial restraint and the fundamental importance of an evenhanded reading of the law.”

This is great news, as the Senate Republicans are now ready to reign in the activist Roberts Court. This is the activist Court that brought us Citizens United.  And that’s only the most recent overreach.  Senator McConnell’s talking-point quote seems oddly ironic, given that he supported Justices Alito and Roberts and the rest of the activist wing of the Court. But then I suppose one could pointedly say that it’s all about whose ox is getting gored.

Here are a few thin suggestions from a simple consumer attorney toiling in the hinterland:

1. How about we jettison the labels? The reality is that Justice Stevens was hardly liberal by comparison to many of his predecessors. Labeling him as a leader of the “liberal wing” of the Court is media hype and talking-point noise. There is no liberal wing to the Court. And those who claim to be the conservative wing are pretenders. I can imagine Justices Frankfurter and Harlan turning over in their graves.

2. Let’s not forget history: Justice Stevens is one of many Supreme Court justices who proved to be different than presumed. Justice Stevens voted differently than expected on major issues.  Same was true of Justice Brennan.

3.  I suppose the posturing is inevitable. Still, is it too much to ask that you deal truthfully? If Sen. McConnell truly supports judicial restraint, where was he during the Roberts confirmation hearing? Meantime, maybe he can take steps to make it up to us by truly working for a non-activist majority on the Court.

Oh Yes he did: President Obama calls out Supreme Court

Much is being written about President Obama’s first State of the Union address. I didn’t hear the whole thing, but thanks to the miracle of the interwebs, video clips are up. One has already caught my eye.

First some background. Here is an overview of the Court’s stunningly activist decision in Citizens United, which struck down key components of campaign finance reform. As a result of the decision, corporations may directly give to campaigns from their treasuries because corporations have expansive First Amendment rights. It’s a bizarre ruling that attributes to fictional entities rights that were never intended.  The holding of Citizens United appears to give all corporations these overbroad First Amendment rights, even those controlled by foreign interests that might be hostile to our national interests.

So in the State of the Union, President Obama questioned the Court’s Citizens United ruling. Here is what he said:

“With all due deference to separation of powers, last week the Supreme Court reversed a century of law that I believe will open the floodgates for special interests, including foreign corporations, to spend without limit in our elections.”

This video clip gives a much better feel than the text.  The video cuts to the Court members sitting somberly as members of Congress give a standing ovation. Better, it shows Justice Alito shaking his head and quietly mouthing what looks like, “It’s not true.” To Justice Alito’s credit, he’s no Joe Wilson, as he didn’t shout or interrupt.

So what are we to make of this? Keep in mind that Obama was a law professor before he entered politics. He showed as much with his reference to separation of powers that acknowledges the fundamental constitutional roles of the three branches.  Take note, as well, that the State of the Union is a power and prerogative of the President. U.S. Constitution, Art. II, Sec. 3.

While I’m no pundit or close watcher of presidential pageantry, it seemed remarkable to me that he was using the State of the Union to call out the Court.  The words may look light and bland, but insitutionally, this is closer to the old Saturday Night Live Point-Counterpoint routine with Dan Ackroyd and Jane Curtin:

Nice to see that the President calling the Court out on this. It’s a dreadful decision by an activist majority hell bent on allowing corporations to run amok.

David Sugerman

This free speech case brought to you by….

This isn’t my usual gig. After all, to paraphrase one of my heroes, Senator Sam Ervin, I’m just a simple trial lawyer. I am no federal constitutional scholar. Nor am I ever likely to argue in the U.S. Supreme Court. I’m not even an expert on the First Amendment, though I’ve handled my share of speech-related cases.

Still, the stunning decision last week by the U.S. Supreme Court is mind-boggling. Now corporations are free to fund election campaigns out of their treasuries. You can expect this in the next electoral cycle: This seat brought to you by your friends at…. This Senate seat paid for by the Philip Morris…  Another Governor for KBR.

The Roberts Court showed its true colors last week when it issued its opinion in Citizen United v. Federal Election Commission, Case No. 08-205 (Jan. 21, 2010). Apologies for the slow-loading pdf format, but I wanted this tribute to intellectual dishonesty to come from the original source.

There are many reasons to be profoundly troubled by this decision.  Let’s start from the beginning with the Court’s overreaching. The case that came to the court involved a simple question about the limits on broadcast of a DVD critical of then-presidential candidate Hillary Clinton. But the conservative wing of the court–the one that espouses judicial restraint, loyalty to stare decisis and precedent–decided that this was the case to consider a corporation’s free speech rights and the continuing vitality of campaign finance reform.  As Justice Stevens–God bless him–explained in his dissent, the majority flatly ignored the posture of the case to reach the questions it wanted to answer.  That is not the stuff of conservatives.

I can imagine that the historic intellectuals of the Court’s conservative wing–giants like Justices Harlan and Frankfurter–are turning in their graves over this one. I suspect they would fairly spit at the notion that the majority of the Roberts Court is conservative as they understood that word.

It’s a comic moment in faux intellectualism. The majority consists of judges who purport to criticize activist judges. And here they are taking a case far outside of what was presented and using it as a vehicle to actively push the free speech rights of corporations.

And then there’s the underlying premise of a corporation’s first amendment rights. Last I checked, a corporation was a fictitious identity created for the protection of shareholders and preservation of capital.  The common law always viewed corporations as inert entities. I can recite the instructions given to juries in my sleep, “A corporation may act only through its officers and agents.”  But now we’re told that they have expansive free speech rights.

They are not people. They cannot act. Justice Stevens points out in his dissent that they can neither vote nor run for office, and they can be controlled by foreign entities whose interests may be hostile to our democracy. I would add that they can’t be imprisoned or executed, though on rare occasions, some deserve both.

I am reminded of this statement about the role of the Chief Justice of the United States Supreme Court:  “And I will remember that it’s my job to call balls and strikes and not to pitch or bat.” U.S. Senate Judiciary Committee, Opening Statement of Judge John Roberts (Sept. 12, 2005) (confirmation hearing for nomination to serve as Chief Justice), reprinted by CNN here.

Seasoned trial lawyers know that sometimes the court rules with you, and sometimes you lose. Those of us who believe in the rule of law acknowledge the authority of the court and do so with grace whether we have won or lost on any particular day. That professional grace is necessary. Still, this ruling marks a sad day for those of us who believe in the rule of law and who want to believe in the moral authority of the U.S. Supreme Court.

For those interested in a more pointy-headed discussion of the ideological demise of our current Supreme Court, here’s the link to a relatively short law review article by a law professor, David Strauss, that provides some thoughtful analysis on how far off the tracks the so-called conservative wing of the court has wandered.

For my part, I can only shake my head at the triumph of corporations running amok.

David Sugerman

Revised: 26 Jan 2010. See comment