April 29, 2019 HUD Brings Housing Discrimination Charge Against Facebook

By Emily A. Bruemmer

HousingOn March 28, 2019, the US Department of Housing and Urban Development (HUD) filed a Charge of Discrimination against Facebook, alleging that Facebook violated the Fair Housing Act “by encouraging, enabling, and causing housing discrimination through the company’s advertising platform.”  This is an administrative action filed by the Secretary of HUD, on behalf of complainant Assistant Secretary for Fair Housing and Equal Opportunity, before the Office of Administrative Law Judges at HUD.  Unless any of the parties chooses to have the case heard in federal district court, an administrative law judge will hear the charge and may award damages, in addition to injunctive or other equitable relief, attorney fees, and fines.  HUD previously announced a formal complaint, initiated by the Secretary of HUD, against Facebook in August 2018.  The formal complaint was the first step in a process that then moved to a fact-finding investigation.  Last month’s charge indicates that the investigation resulted in a determination that there was reasonable cause to believe that Facebook violated the Fair Housing Act.

The Fair Housing Act prohibits making, printing, or publishing (or causing to be made, printed, or published) notices, statements, or advertisements related to the sale or rental of a dwelling that indicate “any preference, limitation, or discrimination based on race, color, religion, sex, handicap, familiar status, or national origin, or an intention to make any such preference, limitation, or discrimination.”  Here, HUD has alleged that Facebook violated that prohibition by allowing advertisers not only on its social media platforms but also across the Internet through its advertising services to select or exclude categories of recipients of housing-related advertising by making distinctions based on race, color, religion, sex, familial status, national origin, disability, and/or zip codes.  According to the charge, advertisers could use a map tool to exclude people who lived in specific areas by drawing red lines, evoking historical discrimination through “redlining.”

This enforcement action came just ten days after Facebook settled five lawsuits related to allegedly discriminatory advertising practices, including one by fair housing groups the National Fair Housing Alliance, Fair Housing Council of Greater San Antonio, Fair Housing Justice Center of New York, and Housing Opportunities Project for Excellence, Inc. of Miami related to Facebook’s housing advertisement practices, and one by the ACLU, the Communications Workers of America, and Outten & Golden LLP related to sex discrimination in employment advertisements.

As HUD General Counsel Paul Compton stated in the press release: “Fashioning appropriate remedies and the rules of the road for today’s technology as it impacts housing are a priority for HUD.”  Further, that HUD’s lawsuit follows Facebook’s settlements with private parties provides a reminder that settling lawsuits with private plaintiffs is no guarantee that a federal or state regulator will not bring its own, separate enforcement action.  The case will be an important one to watch.

CATEGORIES: Privacy Data Security

April 29, 2019 HUD Brings Housing Discrimination Charge Against Facebook

By Emily A. Bruemmer

HousingOn March 28, 2019, the US Department of Housing and Urban Development (HUD) filed a Charge of Discrimination against Facebook, alleging that Facebook violated the Fair Housing Act “by encouraging, enabling, and causing housing discrimination through the company’s advertising platform.”  This is an administrative action filed by the Secretary of HUD, on behalf of complainant Assistant Secretary for Fair Housing and Equal Opportunity, before the Office of Administrative Law Judges at HUD.  Unless any of the parties chooses to have the case heard in federal district court, an administrative law judge will hear the charge and may award damages, in addition to injunctive or other equitable relief, attorney fees, and fines.  HUD previously announced a formal complaint, initiated by the Secretary of HUD, against Facebook in August 2018.  The formal complaint was the first step in a process that then moved to a fact-finding investigation.  Last month’s charge indicates that the investigation resulted in a determination that there was reasonable cause to believe that Facebook violated the Fair Housing Act.

The Fair Housing Act prohibits making, printing, or publishing (or causing to be made, printed, or published) notices, statements, or advertisements related to the sale or rental of a dwelling that indicate “any preference, limitation, or discrimination based on race, color, religion, sex, handicap, familiar status, or national origin, or an intention to make any such preference, limitation, or discrimination.”  Here, HUD has alleged that Facebook violated that prohibition by allowing advertisers not only on its social media platforms but also across the Internet through its advertising services to select or exclude categories of recipients of housing-related advertising by making distinctions based on race, color, religion, sex, familial status, national origin, disability, and/or zip codes.  According to the charge, advertisers could use a map tool to exclude people who lived in specific areas by drawing red lines, evoking historical discrimination through “redlining.”

This enforcement action came just ten days after Facebook settled five lawsuits related to allegedly discriminatory advertising practices, including one by fair housing groups the National Fair Housing Alliance, Fair Housing Council of Greater San Antonio, Fair Housing Justice Center of New York, and Housing Opportunities Project for Excellence, Inc. of Miami related to Facebook’s housing advertisement practices, and one by the ACLU, the Communications Workers of America, and Outten & Golden LLP related to sex discrimination in employment advertisements.

As HUD General Counsel Paul Compton stated in the press release: “Fashioning appropriate remedies and the rules of the road for today’s technology as it impacts housing are a priority for HUD.”  Further, that HUD’s lawsuit follows Facebook’s settlements with private parties provides a reminder that settling lawsuits with private plaintiffs is no guarantee that a federal or state regulator will not bring its own, separate enforcement action.  The case will be an important one to watch.

April 26, 2019 Facebook Announces Potential $5 Billion FTC Fine

By Emily A. Bruemmer

Facebook-privacyOn April 24, 2019, Facebook announced in its Q1 earnings release that it had set aside $3 billion and estimates that it may pay up to $5 billion in a fine related to the FTC’s ongoing inquiry into its “platform and user data practices.” Facebook entered into a settlement with the FTC related to its privacy practices in 2011, which has reportedly been re-opened. This would be the largest fine ever imposed by the FTC on a technology company. The possibility of a “multi-billion dollar fine” was first reported this February by The Washington Post.

CATEGORIES: Privacy Data Security

April 26, 2019 Facebook Announces Potential $5 Billion FTC Fine

By Emily A. Bruemmer

Facebook-privacyOn April 24, 2019, Facebook announced in its Q1 earnings release that it had set aside $3 billion and estimates that it may pay up to $5 billion in a fine related to the FTC’s ongoing inquiry into its “platform and user data practices.” Facebook entered into a settlement with the FTC related to its privacy practices in 2011, which has reportedly been re-opened. This would be the largest fine ever imposed by the FTC on a technology company. The possibility of a “multi-billion dollar fine” was first reported this February by The Washington Post.

CATEGORIES: Privacy Data Security

April 22, 2019 Online Lender Agrees to Pay $3.85 Million to the FTC

By Corinne M. Smith

Cash-walletOn April 15, 2019, the FTC Bureau of Consumer Protection announced a settlement with online personal-loan lender Avant LLC for $3.85 million.  The FTC had accused Avant of engaging in a pattern of deceptive and unfair conduct regarding consumers’ payments and payment information, including falsely advertising that it would accept payment by credit or debit cards and then rejecting those forms of payment; withdrawing money from consumers’ accounts and charging their credit cards without authorization; improperly withdrawing consumers’ monthly payments twice or more in one month—in one instance, 11 times in a single day; and refusing to provide refunds and continuing to charge consumers without authorization following consumer complaints.  The FTC further accused Avant of impermissibly requiring borrowers to agree to recurring automatic debits of their bank accounts as a condition of obtaining a loan.  The FTC alleged violations of the following statutes and regulations: Section 5(a) of the FTC Act, 15 U.S.C. § 45(a); Section 310.4(a)(9) of the Telemarketing Sales Rule, 16 C.F.R. § 310.4(a)(9); Section 913(1) of the Electronic Fund Transfer Act, 15 U.S.C. § 1693k(1); and Section 1005.10(e)(1) of the Consumer Financial Protection Bureau’s Regulation E, 12 C.F.R. § 1005.10(e)(1).  The settlement order, filed in the Northern District of Illinois, permanently enjoins Avant from engaging in these unlawful practices, and it requires that the $3.85 million be returned to consumers who were harmed. 

April 22, 2019 Online Lender Agrees to Pay $3.85 Million to the FTC

By Corinne M. Smith

Cash-walletOn April 15, 2019, the FTC Bureau of Consumer Protection announced a settlement with online personal-loan lender Avant LLC for $3.85 million.  The FTC had accused Avant of engaging in a pattern of deceptive and unfair conduct regarding consumers’ payments and payment information, including falsely advertising that it would accept payment by credit or debit cards and then rejecting those forms of payment; withdrawing money from consumers’ accounts and charging their credit cards without authorization; improperly withdrawing consumers’ monthly payments twice or more in one month—in one instance, 11 times in a single day; and refusing to provide refunds and continuing to charge customers without authorization following customer complaints.  The FTC further accused Avant of impermissibly requiring borrowers to agree to recurring automatic debits of their bank accounts as a condition of obtaining a loan.  The FTC alleged violations of the following statutes and regulations: Section 5(a) of the FTC Act, 15 U.S.C. § 45(a); Section 310.4(a)(9) of the Telemarketing Sales Rule, 16 C.F.R. § 310.4(a)(9); Section 913(1) of the Electronic Fund Transfer Act, 15 U.S.C. § 1693k(1); and Section 1005.10(e)(1) of the Consumer Financial Protection Bureau’s Regulation E, 12 C.F.R. § 1005.10(e)(1).  The settlement order, filed in the Northern District of Illinois, permanently enjoins Avant from engaging in these unlawful practices, and it requires that the $3.85 million be returned to consumers who were harmed. 

March 20, 2019 Facebook Announces New Privacy Initiative

By Emily A. Bruemmer

Smartphone computerOn March 6, 2019, Facebook CEO Mark Zuckerberg announced via an interview and a Facebook blog post a planned shift to “building a privacy-focused messaging and social networking platform.”  Characterizing this shift as a “privacy-focused vision,” Zuckerberg said that this change in focus meant that Facebook and Instagram would not only function as “the digital equivalent of a town square” but also “the digital equivalent of the living room.”  This shift was billed in part as a response to user demand: according to the post, the “fastest growing areas of online communication” were private messaging, “ephemeral stories,” and small group communication. 

According to the blog post, Facebook’s “privacy-focused platform” will be based on six principles: private interactions, encryption, reducing permanence, safety, interoperability, and secure data storage.  “Interoperability” refers to Facebook’s plan to integrate its messaging services across Facebook Messenger, WhatsApp, and Instagram Direct.  The blog post did not provide much detail on what these principles would mean in practice or what changes users would see from an experiential perspective, but rather qualified its efforts as being in the “early stages.”  

The blog post acknowledged Facebook’s reputation for not building “privacy protective services.”  In 2011, Facebook entered into a consent decree with the Federal Trade Commission (FTC) related to its privacy practices and has continued to face criticism for its privacy and data protection practices.  Indeed, just a few days prior to the announcement, news reports circulated regarding the ability to look up individuals on Facebook based on their telephone numbers, despite Facebook’s statements to users when they provided their telephone numbers that the number would be used for two-factor authentication.  Reports last year led to Facebook’s confirmation that the telephone numbers are also used for advertising. 

Some legislators and regulators have expressed concerns about information sharing between Facebook’s services. Last month, the German antitrust regulator issued a decision restricting Facebook from sharing information between services in the absence of users’ voluntary consent.  Facebook announced that it planned to appeal the decision.

CATEGORIES: Privacy Data Security

March 20, 2019 Facebook Announces New Privacy Initiative

By Emily A. Bruemmer

Smartphone computerOn March 6, 2019, Facebook CEO Mark Zuckerberg announced via an interview and a Facebook blog post a planned shift to “building a privacy-focused messaging and social networking platform.”  Characterizing this shift as a “privacy-focused vision,” Zuckerberg said that this change in focus meant that Facebook and Instagram would not only function as “the digital equivalent of a town square” but also “the digital equivalent of the living room.”  This shift was billed in part as a response to user demand: according to the post, the “fastest growing areas of online communication” were private messaging, “ephemeral stories,” and small group communication. 

According to the blog post, Facebook’s “privacy-focused platform” will be based on six principles: private interactions, encryption, reducing permanence, safety, interoperability, and secure data storage.  “Interoperability” refers to Facebook’s plan to integrate its messaging services across Facebook Messenger, WhatsApp, and Instagram Direct.  The blog post did not provide much detail on what these principles would mean in practice or what changes users would see from an experiential perspective, but rather qualified its efforts as being in the “early stages.”  

The blog post acknowledged Facebook’s reputation for not building “privacy protective services.”  In 2011, Facebook entered into a consent decree with the Federal Trade Commission (FTC) related to its privacy practices and has continued to face criticism for its privacy and data protection practices.  Indeed, just a few days prior to the announcement, news reports circulated regarding the ability to look up individuals on Facebook based on their telephone numbers, despite Facebook’s statements to users when they provided their telephone numbers that the number would be used for two-factor authentication.  Reports last year led to Facebook’s confirmation that the telephone numbers are also used for advertising. 

Some legislators and regulators have expressed concerns about information sharing between Facebook’s services. Last month, the German antitrust regulator issued a decision restricting Facebook from sharing information between services in the absence of users’ voluntary consent.  Facebook announced that it planned to appeal the decision.

CATEGORIES: Privacy Data Security

March 15, 2019 CFPB Releases Winter Supervisory Highlights Report

By Alexander M. Smith

AutoEarlier this month, the Consumer Financial Protection Bureau (CFPB) released the latest iteration of its Supervisory Highlights report, which summarizes some of the CFPB’s recent supervisory examinations and provides guidance to industry about practices to avoid.  The CFPB’s Supervisory Highlights report notes that the CFPB has recently examined the following practices:

  • Automobile Loan Servicing.  The CFPB has recently conducted examinations of captive automotive finance companies for unfair and deceptive acts and practices (UDAAPs) involving rebates for extended automobile warranties.  Typically, when a lessee purchases an extended warranty for a leased car and the car is a total loss, the lessee is entitled to a pro-rated rebate of the premium amount for the un-used portion of the warranty; the rebate is applied first to any deficiency balance on the lease, and the balance is returned to the lessee.  The CFPB found that some automotive finance companies had engaged in UDAAPs by (1) failing to apply the rebate to the deficiency balance or artificially deflating the value of the rebate (for instance, by overstating the number of miles on the car) and then (2) attempting to collect on the inflated deficiency balance.
  • Bank Debiting Practices.  The CFPB found that some banks had inaccurately represented that debits made through an online bill-pay service would occur on a given date, even though they might occur earlier than the stated date (for instance, if a payee only accepted a paper check).  In some instances, this caused consumers to suffer overdraft fees because there was insufficient money to cover the debit on the earlier date.
  • Mortgage Servicing.  The CFPB found that some mortgage servicers had unlawfully charged consumers fees that were not authorized by their mortgage loans, failed to cancel private mortgage insurance when the loan-to-value ratio dipped below 80%, failing to exercise “reasonable diligence” in processing loss mitigation applications, and failed to provide necessary documentation to the successors-in-interest to borrowers who obtained a home equity conversion mortgage (a type of HUD-insured reverse mortgage).

The CFPB also noted that it had brought five public enforcement actions against payday lenders and other financial institutions relating to a variety of unlawful practices, including debiting consumers’ bank accounts without authorization, furnishing inaccurate information to credit reporting agencies, failing to make required disclosures to consumers, and improperly threatening to initiate debt collection actions.

PEOPLE: Alexander M. Smith

February 18, 2019 Proposed Federal Privacy Legislation and the Year Ahead

Data securityIn a recent Corporate Counsel article, Jenner & Block Partner Jeffrey A. Atteberry examines the current federal privacy legislative proposals and the impact potential data privacy and cybersecurity legislation could have on businesses.  Mr. Atteberry explains that several recent high-profile data breaches and questions about how social media platforms share consumers’ personal data are contributing to increasing demand for passage of federal data privacy legislation.  He explains that the bills and proposals that have circulated in the last year are the best indicator of what lies ahead in terms of any potential federal privacy regime.  To help corporate counsel anticipate changes that may arise, Mr. Atteberry breaks down the current congressional proposals and provides key takeaways for in-house counsel.

To read the full article, please click here.

February 14, 2019 Jenner & Block’s Food and Beverage Practice Once Again Named a “Practice Group of the Year” by Law360

PGotY-B-Linkedin-Single-1400x800For the third consecutive year, Jenner & Block’s Food and Beverage Practice is recognized as a Law360 Practice Group of the Year for successfully leading a diverse array of matters for the titans of the food and beverage industry.  Law360 notes that the firm fended off claims against our clients that include household names such as Hain Celestial, Kraft and Mondelēz and led Snyder’s-Lance in its $6 billion sale to Campbell Soup.  In addition, Partner Dean N. Panos highlights that the group is handling cases in many areas, including commercial litigation, supplier, distributor, joint venture disputes, M&A, insurance coverage, antitrust and investigations and enforcement.  He adds that the practice is not “totally a litigation practice: it is transactional, litigation, and…a counseling practice.”  He explains that because of the group’s experience and knowledge, “we understand, as best as an outside counsel can, the business pressures our clients face and how these businesses are run so that we are being a net positive to their work environments.”

To read Law360’s profile, please click here.

February 7, 2019 Businesses Express Concerns with CCPA at Public Forum

ConsumerIn an article published by the Daily Journal, Jenner & Block Partner Jeffrey A. Atteberry discusses the recent public forum that was hosted by the California attorney general’s office regarding the California Consumer Privacy Act of 2018 (CCPA).  The forum was held in order to seek public comment on the CCPA as the attorney general moves forward with the initial phase of the rulemaking process.  Mr. Atteberry summarizes the concerns that businesses expressed at the forum, including a request to clarify the scope and meaning of the word “sell” as it relates to the sale of personal information, the need for guidance relating to the calculation of the revenue threshold in the CCPA, and the data security risks associated with the CCPA’s verification requirements, among others.

To read the full article, please click here.

February 4, 2019 En Banc Ninth Circuit Rejects Compelled-Commercial Speech Ordinance on First Amendment Grounds

By: Gabriel K. Gillett

Beverage1Last week the en banc Ninth Circuit unanimously struck down San Francisco’s ordinance requiring warnings on ads for certain sugary beverages as a violation of the First Amendment.  In American Beverage Ass’n v. City and County of San Francisco, No. 16-16072, the court held that the Ordinance is an “unjustified or unduly burdensome disclosure requirement[] [that] might offend the First Amendment by chilling protected commercial speech.”  Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 651 (1985).  (Jenner & Block filed an amicus brief in the case, on behalf of the Retail Litigation Center.) 

Four of the eleven judges who participated joined three special concurrences, however, explaining why they believed the majority had erred even though it reached the right result.  Those three concurrences highlight a number of issues related to commercial speech for courts to address in the wake of the Supreme Court’s decision in National Institute of Family & Life Advocates v. Becerra (NIFLA), 138 S. Ct. 2361 (2018).   
 

San Francisco’s “Sugar-Sweetened Beverage” Ordinance

The American Beverage Association v. City and County of San Francisco centers on a 2015 ordinance that required ads for certain “Sugar-Sweetened Beverages” to include the following:  “WARNING: Drinking beverages with added sugar(s) contributes to obesity, diabetes, and tooth decay. This is a message from the City and County of San Francisco.”  Slip op. 8.

  • “Sugar-Sweetened Beverages” were defined as “any Nonalcoholic Beverage sold for human consumption, including, without limitation, beverages produced from Concentrate, that has one or more added Caloric Sweeteners and contains more than 25 calories per 12 ounces of beverage.”  Id. at 9.  The definition did not include “drinks such as milk, plant-based milk alternatives, natural fruit and vegetable juices, infant formulas, and supplements.”  Id.
     
  • The warning, which was required to take up 20% of the ad space, was mandated on “any advertisement, including, without limitation, any logo, that identifies, promotes, or markets a Sugar-Sweetened Beverage for sale or use that is any of the following: (a) on paper, poster, or a billboard; (b) in or on a stadium, arena, transit shelter, or any other structure; (c) in or on a bus, car, train, pedicab, or any other vehicle; or (d) on a wall, or any other surface or material.”  Id.  The warning was not required on: “periodicals; television; electronic media; SSB containers or packaging; menus; shelf tags; vehicles used by those in the business of manufacturing, selling, or distributing SSBs; or logos that occupy an area of less than 36 square inches.”  Id.

Plaintiffs challenged the ordinance, arguing that it was misleading, placed an undue burden on commercial speech, and was not rationally related to a substantial government interest.  Id. at 10.  The district court rejected the challenge and denied a preliminary injunction.  A panel of the Ninth Circuit reversed.  Then the full court agreed to hear the case en banc.  Id. at 10-11. 
 

The En Banc Court Unanimously Holds That The Ordinance Is An Undue Burden On Commercial Speech.

In a decision by Judge Susan Graber, the en banc court unanimously agreed with the panel and reversed the district court’s denial of a preliminary injunction.  The court relied heavily on National Institute of Family & Life Advocates v. Becerra (NIFLA), 138 S. Ct. 2361 (2018), where the Supreme Court provided a framework for analyzing First Amendment challenges to government-compelled speech.

In the majority opinion, the court held that:

  • Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626 (1985) “provides the appropriate framework to analyze a First Amendment claim involving compelled commercial speech—even when the government requires health and safety warnings, rather than warnings to prevent the deception of consumers.”  Slip Op. 14.
    • To pass scrutiny under Zauderer, compelled disclosure notice must be “(1) purely factual, (2) noncontroversial, and (3) not unjustified or unduly burdensome.”  Id.
    • “Defendant has the burden,” including to prove “that the warning is neither unjustified nor unduly burdensome.”  Id. at 15.
       
  • The court’s decision in CTIA–The Wireless Ass’n v. City of Berkeley, 854 F.3d 1105 (9th Cir. 2017), which had been vacated and remanded in light of NIFLA, had been correctly decided.
    • Rational-basis review, not intermediate scrutiny, applies “for situations in which speech is restricted or prohibited.”  Slip op. 12-14.
    • Zauderer provides the appropriate framework to analyze a First Amendment claim involving compelled commercial speech—even when the government requires health and safety warnings, rather than warnings to prevent the deception of consumers.”  Id. at 14.
       
  • The requirement that the warning cover 20% of the advertisement “is not justified when balanced against its likely burden on protected speech” because the record showed that “a smaller warning—half the size—would accomplish Defendant’s stated goals.”  Id. at 15-16.
    • The court stressed that it did “not hold that a warning occupying 10% of product labels or advertisements necessarily is valid, nor … that a warning occupying more than 10% of product labels or advertisements necessarily is invalid.”  Id. at 16-17.
    • Rather, the court held “only that, on this record, Defendant has not carried its burden to demonstrate that the Ordinance’s requirement is not ‘unjustified or unduly burdensome.’”  Id.
       
  • Having found that Defendants could not show that the “Ordinance’s requirement is not ‘unjustified or unduly burdensome,’” the court opted not to “decide whether the warning here is factually accurate and noncontroversial.”  Id. at 16-17.
     

Three Concurrences, Joined By Four Judges, Highlight Sharp Disagreement About How To Evaluate Compelled Commercial Speech After NIFLA.

Disagreement lurked behind the unanimous en banc decision.  Three special concurrences, joined by four of the eleven judges, explained why the majority had erred even though it had reached the right result.

  • Judge Sandra Ikuta concurred in the judgment but dissented from “most of the reasoning” because she believed the “majority fails to follow [NIFLA’s] analytical framework and makes several crucial errors.”  Slip op. 18.
    • Judge Ikuta argued that the court misapplied NIFLA by not first determining whether Zauderer applied (which she found it did not because the warning was not factual or uncontroversial and was unduly burdensome) and then striking down the ordinance under heightened scrutiny.  Id. at 18, 24-29. 
    • Judge Ikuta also argued that the majority should not have created “a First Amendment exception for government-compelled health and safety warnings,” because in her view NIFLA held only the “‘health and safety warnings long considered permissible’ would be excepted.”  Id. at 25-26.
       
  • Judge Morgan Christen, joined by Chief Judge Sidney Thomas, concurred in part and concurred in the judgment.
    • Judges Christen and Thomas agreed “that Zauderer’s framework applies to the government-compelled speech at issue” and “that the district court’s decision must be reversed.”  Id. at 29.
    • Judges Christen and Thomas would have held that San Francisco could not show that the speech it sought to compel was “purely factual”—because it was not literally accurate and could be misconstrued—rather than “jump[ing] straight to asking whether the proposed warning is ‘unjustified or unduly burdensome.’”  Id. at 29-36.
    • Judges Christen and Thomas emphasized that “[w]hen the government takes the momentous step of mandating that its message be delivered by private parties, it is exceptionally important that the compelled speech be purely factual.”  Id. at 36.
       
  • Judge Jacqueline Nguyen concurred in the judgment but “disagree[d] with the majority’s expansion of Zauderer’s rational basis review to commercial speech that is not false, deceptive, or misleading.”  Id. at 38.
    • Judge Nguyen would have held that Zauderer’s rational-basis test applies only to deceptive or misleading speech, not all regulations requiring public health disclosures.  Id. at 38-40.

CATEGORIES: Decisions of Note

PEOPLE: Gabriel K. Gillett

January 28, 2019 What’s In Your Baby Powder? New York Proposes Stringent New Disclosure Requirements on Cleaning and Personal Care Products

By Alexander M. Smith

Personal-Care-ProductsLast week, New York Governor Andrew Cuomo announced the Consumer Right to Know Act (“Act”) as part of his proposed executive budget.  The Act would authorize the New York Department of Environmental Conservation, along with the New York Department of Health and the New York Department of State, to promulgate regulations requiring product manufacturers to disclose the presence of potentially hazardous substances on their product labeling.  Among other things, the Act would require these agencies to assess the feasibility of on-package labeling; develop regulations establishing a labeling requirement for designated products; develop a list of more than 1,000 substances that must be labeled; and identify the types of consumer products that will be subject to these new labeling requirements.  The Act would also extend the Department of Environmental Conservation’s disclosure requirements for household cleaning products to encompass all cleaning products sold in New York, and it would empower the Department of Health to require similar disclosures for personal care products like shampoo, deodorant, or baby powder.  Needless to say, these disclosure requirements would be among the most stringent—if not the most stringent—in the United States. 

Governor Cuomo’s announcement is available here.  We will keep our readers updated on the progress of Governor Cuomo’s proposal. 

PEOPLE: Alexander M. Smith

January 7, 2019 Top 10 of 2018: The Best Consumer Law Round-Up Posts of the Year

2018 was another busy year for the Consumer Law Round-Up. Launched by the firm’s Consumer Law Practice, the blog updates readers on key developments within consumer law and provides insights that are relevant to companies and individuals that may be affected by the ever-increasing patchwork of federal and state consumer protection statutes. In 2018, the Consumer Law Round-Up featured posts by approximately 20 different authors on a wide array of topics. 

Below is a list of the Top 10 most popular posts of 2018. 


#1 SDNY Rules CFPB Unconstitutional, Creating Split of Authority and Raising New Questions

Since its inception, the Consumer Financial Protection Bureau (CFPB) has faced controversy over its structure as an independent agency headed by a single director who can be removed by the President only for cause. Critics have invoked the unitary executive theory to argue that the Constitution permits an agency to enjoy independence from at-will termination by the President only if the agency is headed by multiple commissioners, directors, or board members...Read more

#2 SEC Take on Tokens Clarifies Some Crypto Community Quandaries

In a June 14 speech, William Hinman, the SEC’s Director of the Division of Corporate Finance, began to place additional definition around the raging debate over whether digital assets, including tokens, are securities. Until that speech, much commentary had focused on the repeat statements by SEC officials that digital assets distributed in initial coin offerings (ICOs) are almost always securities in the SEC’s view, with the possible exception of widely disseminated cryptocurrencies like Bitcoin...Read more

#3 The Supreme Court Reaffirms the Reach and Force of the Federal Arbitration Act, This Time in Employment Cases

On May 21, 2018, the Supreme Court issued its long-awaited decision in the consolidated cases Epic Systems Corp. v. Lewis, No. 16-285; Ernst & Young LLP v. Morris, No. 16-300; and NLRB v. Murphy Oil USA, No. 16-307. In a 5-4 opinion by Justice Gorsuch, the Court held that courts must enforce arbitration agreements requiring employees to bring employment-related claims in individualized arbitration proceedings, and barring them from pursuing those claims...Read more

#4 Congress Upends CFPB’s Indirect Auto Lending Guidance, Spares Payday Lending Rule

On May 21, 2018, President Trump signed into law a resolution disapproving the CFPB’s guidance on Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act. In that guidance, the CFPB expressed the view that certain indirect auto lenders—that is, lenders that coordinate with dealerships to provide auto loans to consumers—are subject to the Equal Credit Opportunity Act...Read more

#5 Recent Activity Brings Further Clarity to Cryptocurrency Enforcement

September saw a flurry of activity that will help further define the cryptocurrency regulatory landscape. The Financial Industry Regulatory Authority (FINRA) brought its first-ever crypto-fraud case and a court ruling by the US District Court for the Eastern District of New York gave backing to the view that digital assets will be viewed as securities. And, in two enforcements actions, the SEC branched out beyond actions against fraudulent crypto-schemes and went after crypto companies for...Read more

#6 Ninth Circuit Reaffirms Narrow Scope of Restitution Under California Consumer Protection Statutes

In the last three years, the Ninth Circuit and the California Court of Appeal have issued a pair of decisions clarifying that restitution under California’s consumer protection statutes is limited to the difference between the price a consumer paid for the product and the value the consumer received from that product—i.e., the “price premium” attributable to the defendant’s conduct...Read more

#7 Supreme Court to Examine Cy Pres Remedy in Google Privacy Case

In April, the Supreme Court granted certiorari to review a decision of the Ninth Circuit approving an $8.5 million class action settlement in which the majority of the settlement proceeds took the form of a cy pres award. Cy pres—which comes from a French expression meaning “as near as possible”—is an equitable doctrine that allows a court to direct unclaimed or non-distributable funds awarded as part of a class action settlement “to an entity whose interests lie ‘as near as possible’ to that group”...Read more

#8 October Term 2018 Preview: The Supreme Court’s Class Action Docket

The US Supreme Court’s new term kicked off in October when the court re-convened for its first oral argument since last April. The Supreme Court term features four cases of interest to the consumer law and class action bar. In Lamps Plus, Inc. v. Varela, a divided panel of the Ninth Circuit construed a provision stating that “arbitration shall be in lieu of any and all lawsuits or other civil legal proceedings relating to my employment” to authorize class arbitration...Read more

#9 SDNY Extends RD Legal Funding Dismissal to the NYAG; CFPB Appeals

On September 12, 2018, Judge Loretta Preska of the District Court for the Southern District of New York dismissed the New York State Attorney General’s suit against RD Legal Funding, LLC, and related entities for allegedly defrauding individuals awaiting payouts from two separate funds—the September 11th Victim Compensation Fund of 2011 and the fund arising out of the NFL Concussion Litigation Settlement Agreement. The Court’s ruling demonstrates the potentially far-reaching...Read more

#10 Crypto Winter Continues With Ongoing Enforcement

Several recent “first of kind” enforcement proceedings continue the flurry of enforcement activity by regulators. In two settled proceedings, the SEC brought two cases for failure to register digital tokens as securities in connection with ICOs, without allegations of fraud. With such enforcement actions now commonplace, a “crypto winter” has clearly set in...Read more

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