David -

I don't believe the disclosure requirements omitted from the bankruptcy bill are as pro-consumer and unquestionably good as they appear.

The particular disclosure requirements in question would have required credit card companies to list, somewhere on your monthly statement, the total amount of "extra interest" you would pay by making only the minimum monthly payment.

There are a couple of problems with this that are specifically related to the nature of the requirement. First, it's likely to mislead consumers and handicap credit card companies. Since many or most credit cards come with a variable interest rate, this figure can only be supplied with respect to the current interest rate. If interest rates go up, many consumers will find that the disclosure really didn't tell them anything of value. Moreover, this seems to be an invitation for lawsuits when interest rates rise. I'm sure credit card companies anticipate consumer-protection lawsuits based on the theory that "you misled me/lied to me about how much interest you would charge." Although the bill could provide lenders some protection from this sort of scheme, Congress has had trouble insulating regulated parties in analogous situations in the past — activist judges can be pretty clever in statutory interpretation.

(On a related matter, this disclosure would have to be calculated individually on each statement — lenders already face liability for misstatements and miscalculations, and this would add another calculation that could potentially go wrong).

The second problem is a problem with disclosure requirements in general — their tendency to backfire by affecting consumer perceptions of what's important (i.e. if they're telling me this, it must be important), and by overloading consumers with information so that they become confused or tune it out. I think we already see the latter problem in lending, where most of the fine print that covers the back of every statement you receive, fills little booklets when you borrow, and comes in supplemental mailings (e.g. those annual privacy statement things). Is this one of the most important disclosures that we want consumers to be reading? Will consumers confuse this figure with the amount they actually owe? For that matter, what would this disclosure actually mean? Is "extra interest" defined as the total interest you would pay by making the minimum monthly payment? That would render the word "extra" surplusage. So is it the "extra" amount you would pay by paying it off at the minimum as opposed to one year? By paying the credit card interest rate as opposed to rolling it into your home mortgage? And so forth.

Ultimately, if I had to guess what credit card companies were most concerned about, however, I'd guess they envision the following scenario of altered perceptions:

People read this disclosure. They see a huge number for a small balance that they carry month-to-month. They confuse that number with the "total interest" they'll pay by carrying the balance, forgetting that they were planning to pay it off much more quickly than by paying the minimums. As a result, their credit-card borrowing drops dramatically.

Obviously this is bad for credit-card companies. But it's also bad for any consumer who responds that way, denying themselves the flexibility and ease-of-access to credit that credit cards provide.

(Comments enabled)

Bryan Killian points out that the Class Action Fairness Act also creates a new interpretation game for proceduralists. Alongside "CNOF" and "T&O," expect to learn a new, statutory "totality of the circumstances."

Under the Act, new Section 1332(d)3 permits a federal court to look at "the totality of the circumstances" to decide whether to exercise jurisdiction over certain class actions (those with "primary defendants" and 1/3 to 2/3 of the class members in the original forum state). It then spells out six considerations to be examined in the test:

`(A) whether the claims asserted involve matters of national or interstate interest;

`(B) whether the claims asserted will be governed by laws of the State in which the action was originally filed or by the laws of other States;

`(C) whether the class action has been pleaded in a manner that seeks to avoid Federal jurisdiction;

`(D) whether the action was brought in a forum with a distinct nexus with the class members, the alleged harm, or the defendants;

`(E) whether the number of citizens of the State in which the action was originally filed in all proposed plaintiff classes in the aggregate is substantially larger than the number of citizens from any other State, and the citizenship of the other members of the proposed class is dispersed among a substantial number of States; and

`(F) whether, during the 3-year period preceding the filing of that class action, 1 or more other class actions asserting the same or similar claims on behalf of the same or other persons have been filed.

As Bryan pointed out, and a search on Westlaw confirmed, this is the first incorporation of a "totality of the circumstances" test into the USC, aside from the federal sentencing guidelines.Given his preference for bright line rules, this will probably not be Justice Scalia's favorite section.

"Totality of the circumstances" has come a long way. We typically associate it with the pre-Miranda tests for the voluntariness of confessions; see, e.g., Blackburn v. Alabama, 361 U.S. 199. Never having looked before, I was surprised to learn that the phrase is not very old -- its first citation on Westlaw dates only to a 1937 Justice Cardozo bankruptcy decision. There, in one of the last decisions in the Butler/Sutherland/Van Devanter/McReynolds era (and just months after the "switch in time that saved nine"), Cardozo used it in statutory interpretation to define a debtor as a farmer and shield him from a Depression-era foreclosure on his mortgage.

Since then, of course, it has mushroomed, developing into a central concept in our modern understanding of the law. And now it closes the loop: from tool of statutory interpretation to statute itself.

I could write more, but it's late, and this is only the testing period for the new Ex Parte, so I'll end here.

The Senate today finally approved the class-action reform bill today, and it's a monster. Civil procedure students will learn a lot from studying its provisions and how they interact with Rule 23, Section 1332, Section 1407, etc. I should have looked at this before — it's great stuff!

Suffice it to say that there's plenty in this bill for lawyers to argue over and earn some dramatic fees.

A few of the interesting elements that caught my eye in reading through it:

New Section 1332(d)10:

"For purposes of this subsection and section 1453, an unincorporated association shall be deemed to be a citizen of the State where it has its principal place of business and the State under whose laws it is organized."

Readers will remember that for other purposes, an unincorporated association is deemed the citizen of any State in which it has members — in other words, all 50 states. Because 1332(d)2 now creates original jurisdiction in the federal courts for any class action with minimal diversity (and that meets the $5 million jurisdictional requirement), this prevents the use of a union or partnership to convert an otherwise-single-state class action into federal court. This is an unusual limiting element in the statute, and must have been motivated by some fear of abuse — I'm not thinking of the scenario right now, though.

Most of the news coverage of the Act refers to the new 1332(d)4, barring federal jurisdiction of cases in which 2/3 or more of the plaintiffs and the defendant are citizens of the state in which the case is filed. But wait — subsection A has a loophole, suggesting this bar will not apply if a case "asserting the same or similar factual allegations against any of the defendants on behalf of the same or other persons" has been filed in the previous three years. And it's not geographically limited, so that means anywhere.

But wait again! Check out the poorly-drafted subpart B, which appears to be a bar without all the conditions of subpart A. The only way subpart B makes sense as a disjunctive alternative to subpart A is to assume that it applies when 2/3 or more of the plaintiffs "in the aggregate, and [all] the primary defendants, are citizens of the State" in which the case is originally brought. So if there are multiple defendants, not all from the state in which the case is brought, then the conditions in subpart A must be met for federal jurisdiction to be barred. Whew!

Adding to the confusion is the fact that the section uses different language to mean the same thing: compare "greater than two-thirds of the members of all proposed plaintiff classes in the aggregate" with "two-thirds or more of the members of all proposed plaintiff classes in the aggregate." Not quite the same. Is that intentional? The phrase as a whole appears to mean that if multiple classes and subclasses are proposed, you count every individual plaintiff in the action together to decide whether the 2/3 rule is satisfied.

Other instances of poor drafting abound. Check out the juxtapositions of "the plaintiff class" with "proposed plaintiff classes," for example. How this will comport with
the new Section 1332(d)8, which permits removal either before or after certification should be interesting. (Obviously, since certification is such a major battleground, and federal courts are expected to be stricter than state courts about granting it, most defendants will seek removal before certification).

Section 11 extends federal jurisdiction to mass torts - but only those where joinder is not initiated by defendants, and extends beyond discovery. Interestingly, mass tort cases are not eligible for Section 1407 management by the Multi-District Litigation Panel.

In today's Wall Street Journal, Chris Edwards and Alan Reynolds highlight the "mixed message" presented by the president's allegedly-tough, actually-profligate budget:

Consider the spending levels that President Bush proposed for 2005 in his first budget four years ago. He proposed that spending on education would be $83 billion in 2005. The new budget says that 2005 education spending will be $96 billion. Similarly, estimated 2005 spending on agriculture jumped from $14 billion to $31 billion, transportation from $61 billion to $68 billion, and international affairs from $21 billion to $32 billion.

And that's even with the administration's [wise] suggestion to close loopholes and limit farm subsidies to big, corporate farmers. Another important observation:

What is particularly corrosive is how the administration keeps expanding the scope of federal power into state and private activities. For example, the budget includes another $100 million to "promote healthy marriages" and $1.5 billion for a "high school initiative,"...

That "promote healthy marriages" item is particularly obnoxious. There may be plenty of unhealthy marriages in America, but I have little confidence the federal government can spend money to solve that problem.

It's always interesting when a news organization uses headlines like Surge in Groping on Tokyo Trains, and then immediately offers a qualifier like this:

The rise is partly attributed to the increased willingness among women to report assaults.

The qualifier makes sense to me, especially paired with the following set of facts, reported in the same article and at Wikipedia:

• Reported incidents of groping (2003): 2,058
  
• Reported incidents of groping (2004): 2,201
  
• Population of metropolitan Tokyo: 33,750,000
  
• Percentage of women in their 20s and 30s who report having been groped on the Tokyo subway: 64%
  

Conservatively assuming that 15% of the population is in their 20s or 30s, and half of those are women, more than 1 million women report having been groped on the subway. If only 2,000 of them are reporting it each year, and no one over 40 is in our sample, the reporting rate remains well below 10%. It seems safe to say that "reported gropes" have nothing to do with the actual amount of groping on Tokyo trains.

In that context, to support a headline like "Surge in Groping," you'd think the story would contain some explanation of why it might be on the rise.

Nope.

But it does explain why reporting might be on the rise: "Reporting culprits has been made easier by the introduction of mobile phones with a camera facility, which allow the victim to take a photo of the molester."

Hmm. Camera phones helping to protect women? Might explain why Saudi Arabia has banned them, but it does defy the conventional wisdom that focuses on their abuse.

...(although I'd guess the fireworks outside are not in his honor)

On Friday, at the HLS/HBS Republicans event commemorating President Reagan's birthday, Professor Roger Porter of the Kennedy School mentioned Reagan's 1975-79 daily radio addresses. Professor Porter used them as an example of his writing to illustrate that, contrary to the media's portrayal, President Reagan was deeply engaged with formulating the policies he has come to represent.

Afterwards, I was surprised by how many people were unfamiliar with the radio broadcasts, let alone that President Reagan had written them himself.

As it happens, I've been reading Reagan in His Own Hand, the 2001 book publishing many of these broadcasts (often including images of the original, handwritten drafts). It is a terrific read, providing insight not only into his mind and his views, but into the daily policy debates of the late 1970s. Written at a time when liberty was not on the march, but in retreat, pressured by the advance of the Soviet Union abroad and big government at home, these accounts are spellbinding. And it's not just his unfailing way with words (although following his corrections as he improves each address is fascinating in itself). As he said in his farewell speech, "I won a nickname: the great communicator. But I never thought it was my style or the words I used that made a difference. It was the content..."

Happy Reagan's Birthday, and welcome back to Ex Parte. I hope that PowerBlogs proves more reliable than Blogspot did, and I look forward to hearing your thoughts.

-Eric Soskin, [returned] majordomo, Ex Parte