Archive for the 'Business Law' Category

No, You Can’t Sue a Movie Theater for Overpriced Popcorn

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In a lawsuit that I’m sure “tort reformers” will point to as being yet another example of how broken our legal system is, and why we desperately need to immunize wealthy defendants from compensating the victims of their wrongdoing save the economy from frivolous lawsuits, a moviegoer has decided to sue the owner of a movie theater for charging what he believes to be an unfair price for concessions. Yes, really.

This is an example of a lawsuit filed by someone who obviously has no idea how the American legal system (or economy) works. I’ll just get this out of the way: you don’t have a legal right to cheap popcorn, soda, Milk-Duds or Junior Mints at a movie theater. Are the prices on these items at movie theaters ridiculous? Yes, you could make that argument. But are you being forced at gunpoint to buy a $5 box of Sno-Caps? If your answer is “yes,” I suggest you leave that theater and call the police. Maybe there’s only one movie theater in your town, so you don’t have any basis for comparison; but I can assure you that the employees of normal theaters don’t behave that way.

But since this man’s lawsuit doesn’t allege that he was in any way forced to pay those high prices for candy, I’m going to go ahead and assume that that’s not the case. This lawsuit betrays a basic misunderstanding of both the law and simple economics. First, he claims that the high price of concessions at movie theaters violates the Michigan Consumer Protection Act, which is similar to the unfair competition laws that exist in the majority of U.S. states. These laws are meant to prohibit legitimately unfair business practices, such as false advertising, defamation of one’s business competitors, price fixing, and the like.

Most Michigan lawyers would probably say that the law in question doesn’t apply to this case, as the movie theater does not provide a vital service, does not misrepresent its prices, and many other reasons. What’s most surprising to me is the fact that this guy actually found a lawyer to take his case, and he isn’t just some crackpot representing himself (with the complaint hopefully written in crayon). According to this article, the plaintiff’s lawyer has publicly stated that the lawsuit is at least in part based on the fact that movie theaters charge far more for their food items than other stores charge for the same items. Last I checked, that’s not a legal wrong that warrants compensation.

But I’m most surprised by the fact that this guy actually found a lawyer to take his case. There’s really no question that the case is a loser. I hope for his sake that he’s not working on contingency.

But more importantly, cases like these, and the lawyers who take them, call the entire legal profession into question by cheapening and delegitimizing it.

This is because there are certain interests, most of them connected to business, who have a strong interest in changing tort law to their advantage. Because large corporations engage in the largest number of transactions with the general public, they’re subjected to the largest number of lawsuits. This is not a criticism of large corporations, mind you. It’s just an illustration of the simple fact that, in day-to-day life, a certain percentage of things go wrong.

And, sometimes, when a transaction goes wrong, whether one party breaches a contract, or a customer slips and falls in a grocery store on some oil that was spilled hours before and never got cleaned up, one party is clearly at fault. To deal with those cases, we have a legal system that compels culpable parties to compensate the victims for any harm directly caused by whatever culpable conduct they engaged in.

There are some plaintiffs who have abused this system, either by fabricating injuries or suing over injuries that were obviously nobody’s fault. And, occasionally, one of these lawsuits will fall through the cracks and a plaintiff will end up walking away with a significant judgment. Or, more often, the facts of a lawsuit will be misreported by the media, making the plaintiff’s case look ridiculous when it’s actually valid.

This has led to a movement that’s broadly referred to as “tort reform.” Tort reform largely involves making it more difficult for plaintiffs to recover for injuries they’ve sustained, through heightened burdens of proof, shorter statutes of limitations, damage caps, and other measures. The stated goal is always to protect the economy from being drained by nonsense lawsuits. And I don’t doubt that many people who advocate for tort reform are sincere in this goal and in their beliefs. But the simple fact is that many tort reform organizations are backed by large corporations, and engaged in significant political lobbying.

And one of the most powerful pieces of ammunition is lawsuits like this. I have no doubt that this lawsuit will be thrown out in its very early stages. However, it will almost certainly be used as “proof” that, in order to prevent absurd lawsuits like this one from happening is to prevent victims of medical malpractice from collecting more than $250,000 in damages, or something similar.

I hope the public, and our state legislatures, resist these calls. Cases like this are amusing, and can be dismissed with a laugh. But more importantly, they test our commitment to one of our society’s core values: access to the courts. Let’s hope that that value isn’t compromised any time soon.

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Is Online Gambling Legal? A Review of Current Laws and Government Enforcement

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When most of us hear the phrase “Online Gambling” or “Internet Gambling”, we usually picture the average websurfer casually placing a few bets on some rounds of Texas Hold’em.  Indeed, there are countless websites dedicated to online gambling and I’m sure we all know someone who visits them.  Some folks are genuinely addicted to online gambling, much like other forms of “digital afflictions” like video game addiction.

But what are the stakes involved with online internet gambling?  Is it legal?  Can you get in trouble for gambling online?

Here’s the deal: all gambling, including online gambling, is regulated by both state and federal laws.  Federal laws governing online gambling don’t really focus on the persons patronizing the website (i.e., the gamblers). Rather, they tend to provide penalties for the organizations that maintain online gambling websites.  Current statutes usually aim at the community concerns surrounding gambling operators, namely: money laundering, false advertising, and funding criminal enterprises.

The most prominent federal statute governing online gambling is the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA).  The UIGEA basically prohibits financial institutions and banks from handling transactions associated with online gaming accounts.  There are also various provisions regarding advertising for online gambling websites.  Most importantly, the UIGEA defines “unlawful internet gambling” as “placing, receiving, or otherwise knowingly transmitting a bet by means of the internet where such bet is unlawful under any law in the State where the bet is made”.

So the answer?  It basically depends on what state you’re in.  Now, most states have embraced the notion of online gambling.  But a few states have some form of “express internet prohibitions” on gambling, meaning it’s illegal in that state.  These states are:  Illinois, Indiana, Louisiana, Montana, Nevada, Oregon, and Washington.  For example, Washington has recently made online poker betting a felony.  So although prosecution is actually rare, you could get into trouble with state authorities for online gambling, but probably not federal authorities.

Another thing about online gaming law is that there are all kinds of different types of gambling games online.  Besides your normal poker sites, there are also bingo websites, lottery websites, casino-type games like roulette and blackjack, and now even online mobile apps for gambling.  But one type of online gambling that’s definitely illegal is interstate sports betting, which was outlawed by the Federal Wire Act (“Wire Wager Act”).

The recent shut-down of online gaming site Bodog.com is, in my opinion, an excellent example of the way online gaming regulation works.  Last February, the website Bodog.com was ordered to fold and shut down on various counts, including: conducting an illegal online sports gambling operation; money laundering; using banks to cover payout transactions to customers; and violating advertising regulations related to online gambling.  They are currently facing hefty criminal fines and have had their web domain name revoked (on an infringement issue).

So these Bodog guys apparently hit up nearly every violation in the books.  But note that none of the patrons of the website were targeted, only the website founders and operators.   And that’s basically how these laws tend to work in the real world of virtual gambling.  The Bodog.com bust follows on the heels of a major investigation last year in which three of the top U.S. poker sites were charged with fraud and forked up more than $3 billion in seized assets (U.S. v. Sheinberg, 2011).  Again, no real mention of consequences for online gamblers.

To me, these laws don’t really, truly address what I think is the main problem with online gambling- it’s easier to get addicted than your standard casino gambling.  Something called “instant gratification” is a major factor with online gambling, and the online competitor doesn’t need to travel anywhere except the nearest computer for a quick fix. So just like any addiction, online gambling can completely ruin a person’s life, maybe more so than in-person games.

But given the scope of the problem, and how new online gambling is, the current regulation scheme is somewhat understandable.  It’s very similar to the way drug laws are enforced- authorities would rather go after the major dealers (excuse the pun), instead of spending time and resources trying to track down individual users.  And there’s a lot to online gambling that’s still being debated in the legislatures.

So, all that being said, if you have your own online gambling itch, chances are you won’t get into trouble for your online activity, so long as you completely (and I mean completely) avoid online sports betting.  That’s one hand that’s just too risky to bet on.

On the other hand, if you’re currently operating an online gambling website, or are thinking about doing so, that’s where you need to start getting concerned.  After all the investigations within the last year, it looks like the gaming authorities are upping the ante and going after the operators, the online pit bosses, who are the real high rollers here.

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FTC Puts The Brakes On Deceptive Online Acai Berry Advertisements

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Man, and just when I pumped all my money into those acai berries.  Now how am I supposed to lose those extra pounds before swimsuit season?

Just kidding, we all know the key to weight loss is and always has been magic.

In all seriousness though, if you haven’t heard the news already about the latest Federal Trade Commission crackdown, then you might be surprised to hear that the FTC has just succeeded in permanently shutting down those annoying acai berry pop-up ads you see online.  The ads usually were fashioned to look like official news reports and contained logos from well-known news organizations including ABC, FOX News, CNN and so forth – an example to your right.  The advertisement exalted the miracles of the acai berry as a natural weight loss solution.

And looking at the ads, it’s easy to see how people would be fooled into thinking the claims in them were pure truth rather than puffery.  That, of course, was also the FTC’s problem with them and about nine months ago the agency began putting their plan to stop these deceptive practices into action.  Fast forward nine months later and the FTC has entered into settlement agreements with six acai berry marketers to stop the sneaky ads and also to pay damages of $500,000 under a federal false advertising statute.

Personally I’m quite glad to see these acai berry advertisers go down.  In all honesty, even I was fooled the first time one of these ads popped up on my screen.  The illusion was all the more convincing in my case since at the time I was also browsing through a legitimate news site and assumed the ad was a special report.  Thus you can probably see why they were probably a bad thing.

Though, interestingly enough some in the blogosphere seem to be opposed to the FTC’s actions.  Their main beef seems to be that they think the FTC’s restrictions on the acai berry advertisers violate the First Amendment’s freedom of speech protection.  As we all know, the First Amendment does indeed grant anyone, even businesses, the right to say what they want.  Therefore, this sub-group of people (who probably also hold stock in acai berries) believe that by the FTC cracking down on how these advertisers present their information, it in fact infringes upon their First Amendment rights.

Wow, some people can be real whack-jobs, huh?  Fortunately though, none of the comments I’ve read so far have been crazy enough to argue that the ads aren’t in violation of federal false advertisement laws, because for the reason that, well, they clearly are.

Under current federal law, false advertising comes in two flavors: fraudulent content, which is when the statements made in an ad are false beyond mere marketing puffery, and deceptive practices, which is when the ads are presented in a way that will trick consumers into think it’s something else other than an advertisement.

The acai berry ads clearly fall into the latter category, and arguably also the first, but let’s not split hairs about whether or not acai berries can really help a person lose weight.  The acai berry ads were designed to look like news articles.  The ads had headlines and even author bylines, the formatting and fonts look like they were ripped straight out of CNN, not to mention all the legitimate news organization logos all over the place.  To any objective person the ads at first blush would seem like real news stories and not advertisements.  Therefore, they’re deceptive ads.

But back to the original question, did the FTC violate these advertiser’s first amendment rights?  Well, the answer is still no.  This will be a good lesson to any people out there who are thinking about launch ad campaigns similar to the acai berries.  That’s because while it’s true the First Amendment protect one’s freedom of speech, when that speech is commercial in nature, than the speech may be regulated if it is found to be false or deceptive.

See the beautiful circle here?  Because the acai berry advertisements are clearly deceptive under federal law, then the ads aren’t afforded First Amendment protection.  But let’s just say for argument sake that they aren’t deceptive.  Even in that circumstance the government still has a right to restrict commercial speech if the government can prove that the restriction would serve a substantial government interest, directly advance that interest, and the restriction itself isn’t beyond what’s necessary to advance that government interest.

Now I won’t bore you with a long dissertation of what is a “substantial government interest”, but suffice to say that if you’re running a business, an easier way to think about how you advertise is that you better not say anything fraudulent or deceptive because it’s pretty easy for the government to restrict commercial speech.

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Supreme Court Continues Pro-Corporation Decisions By Enforcing Arbitration Clauses

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It’s time to take out the chalk board and score another victory for the corporations.  On top of somehow getting protection under the First Amendment, being able to pump as much money as they want into any politician, and possibly being able to vote one day despite the fact that they’re, you know, not a real human being, credit card corporations now have the undisputed power to bind you to arbitration.

In a landmark, and crazy, decision by the U.S. Supreme Court, the justices in an 8-1 vote held that arbitration clauses in credit card agreements do indeed bind consumers into settling their claims before an arbitrator and not a court of law.  Justice Ginsburg was the sole dissenter and thus the de facto voice of reason in this incredibly business-friendly decision.

If you haven’t been following this case (CompuCredit Corp and Synovus Bank v. Wanda Greenwood), the background is simple.  Back in the mid-1990s Congress passed the Consumer Credit Protection Act (CCPA) in response to the rampant predatory credit card business practices going on in the country.  Within the Act was a section titled the Credit Repair Organizations Act (CROA).  This law was meant to force credit card companies to stop deceptive advertising, give consumer full disclosure of a credit card terms, and allow cardholders to repair their credit rating if damages by the company.

But most importantly it also had a provision that limited the type of clauses that could be included in a credit card contract, chief among them was an ambiguous section about whether or not arbitration clauses were allowed.  That section served as the jumping off point for the case heard before the Supreme Court this week.

A number of credit cardholders who signed up for low-rate Aspire Visa credit cards from the defendants, CompuCredit and Synovus, accused the company of improperly charging them over $250 fees which the plaintiffs claimed was in violation of the contract they signed.  The plaintiffs tried to turn the case into a class action lawsuit, but the defendants stopped them by asserting they had to fight the case in arbitration as stated in the agreement they signed.  The plaintiffs then brought their case to court citing that arbitration clauses weren’t enforceable under CROA.  Though they initially won in both the federal district and appeals court, the Supreme Court overturned the case in favor of the corporations.

The ruling is simply bad news for consumers on a number of levels.  The first reason, which also happens to be the biggest irony of all, is that the defendants here are requesting that the courts respect the arbitration term laid out in their contract and force consumers to forgo their right to trial.  This is despite the fact that the only reason the defendants are in this pickle to begin with is because they allegedly violated the terms of their own contract, which they now want the court to enforce.  I imagine this is the same kind of logic you hear from a crazy hobo.

The second reason this is a bad decision is because now credit card companies know they have the upper hand.  Reports estimate that only about 116 CCPA cases have been filed since the law was first passed.  If you’re doing the math, that’s about seven cases a year.

Now some may argue that the reason credit cardholders aren’t suing under CCPA is because the Act is working and credit card companies and consumers have just been getting along dandily.

Realistically, the reason there were so few suits probably was because consumers felt powerless in their ability to win their cases against the rich credit card companies.  Or because most consumers know that the incredibly restrictive arbitration clauses in the contracts they sign put them in a real bad position should they lose their case.

Don’t believe me on how bad those arbitration terms can be?  Just pull out your credit card contract, if you can find it.  Many credit card companies, especially those in the market of lending to those with bad credit or little money, have arbitration terms that initially seem fair, but upon closer inspection are actually the opposite.  These terms usually shift most or all the expenses related to arbitration onto the losing party, which is usually much more expensive then the cost of filing a small claims action.  Costs can include paying for the arbitrator and potentially all the attorneys involved.

Many also require the arbitration itself to be held in a particular state, regardless of where the consumer is actually located.  Not to mention the fact that generally the dispute itself is likely to be one where the monetary incentive of winning far exceeds the cost of the whole arbitration procedure itself.  Does anyone really want to waste five grand and a couple days of their time just to get back a $200 overage charge?  That’s credit card company arbitration folks.  Small claims courts on the other hand will have you in and out with little more than a small filing fee and no lawyer requirement.

The third and the most important reason why the Supreme Court’s ruling is bad is that it allows credit card companies to circumvent the original protections that the CCPA was designed to give consumers.  Credit card companies make the vast majority of their money by charging you fees and interest.  It’s not a business of benevolence.  The catch is that they know that there will always be people out there who are poor, have bad credit, and/or are in generally need of immediate money.

For these reasons, short of an apocalyptic event that renders money worthless and reverts society into a Mad Max-esque existence, credit card companies know that they will always have a constant consumer because people always need cash.  Now that they know a good arbitration clause can keep their litigation risks and costs low by keeping them out of court, they’ll have no qualms with giving full disclosure of their credit card contractual terms.  People strapped for money will always need credit cards anyway, and being told that they’ll be paying an astronomical interest rate or missing a payment puts them in immediate default will likely do nothing to stem the tide of credit card seekers.

It’s a sad day for consumers everywhere.  You can thank the U.S. Supreme Court for that.

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Fighting Bad Mail Carriers and Holiday Package Thieves

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The holiday season can be tough on the wallet for a lot of people, especially during this terrible economy of ours.  Now unless you’re lucky enough to be in the one percent of society, chances are you’re probably looking at ways to scale back your gift-giving this year while at the same time still find presents that will light up the faces of intended recipients.  That’s why finding out about stories like this one really suck.

Is there no decency anymore?  I mean, stealing presents meant for Christmas gifts?  That’s straight out of Dr. Seuss, the only difference being that in all likelihood had the cops not intervened there probably wouldn’t had been a last minute change of heart to save Christmas on the part of the suspects.  Also I don’t think Kristen Casey and Manual Sheehan, the alleged thieves in question pictured to the left, stole the gifts out of a dislike for the townspeople, but rather for good old-fashioned money.  The couple was apparently found with over 100 pilfered packages crammed into their apartment.  Local Massachusetts police were tipped off after receiving an increased number of reports from citizen saying the packages they ordered were missing from their door steps.  Police eventually began tailing UPS and other local postal delivery trucks before spotting the suspects in a car filled with stolen delivery boxes, which in turn led them to the suspects’ apartment.

It’s an interesting story that appears to have a happy ending.  However, the one thing that I didn’t see in any news reports on it so far is any extensive mention on how the alleged thieves were able to get the delivered packages so easily.  They didn’t have to crack open mailboxes or bust into delivery trucks.  No, all they had to do was walk up to the front door of homes and pick up the boxes left out in the open by the mail carriers in charge of them.

For years internet complaint boards have been filled with stories of this type of lazy postal delivery practice.  UPS, USPS, FedEx, DHL, and so forth, have all fielded complaints from people for years that the deliverymen and women in charge of their packages were simply dumping them at their front door or in their backyards, leaving them exposed to the elements and often without so much as a sticky note to let the owner know they’re there.  And then somehow these delivery services are surprised when packages get stolen.  Gee, maybe it’s because you left them out in the middle of the day on a doorstep for everyone to see.

Anyway, mailmen and mailwomen stupidity aside, many times in life when one becomes the victim of mail theft and/or damage one must eventually move to rectify the situation, after all the cursing and complaining of course.  But fear not, having your postal goods lifted or harm isn’t as hopeless of a situation as it may initially seem to be.  Being a victim of this sort of egregious behavior, there are a few things that you can do to get your packages or at least the monetary value of it back.

1)      Document the scene

This is the most important first step.  If your package is damaged, take pictures of it right away.  Take a picture of how it was left, then zoom in and snap shots of the damaged parts.  Video recordings are good, as well.

2)      Keep all the packaging material that arrived with it and the tracking number

Many times, mail carriers won’t listen to your complaint if you can’t show that the package was damaged because of their ineptitude.  Keeping the packing material and tracking number will show the carrier that your mail was packed correctly and allow them to match your parcel with their service.

3)      Register a complaint with the mail carrier

It’s a coin toss as to whether missing/stolen mail or damaged mail is easier to recover, either way you’re going to have to tell your carrier about your issue.  Every carrier has a complaint system to navigate.  It’s a hassle, but generally one of the easiest first attempts to get some sort of recovery for a jacked parcel.

4)      File a police report

If your mail was stolen or intentionally damaged, telling the fuzz is a necessity to create a traceable complaint trail.  It also lets your carrier know that you mean business.

5)      Email the executives of your mail carrier and contact the local media and websites

No businessperson worth their salt wants bad press.  It costs them money and countless headaches.  So if you’re still not getting a satisfactory response from your mail carrier’s reps, then go over their heads and contact their superiors.  Keep beating your drum and don’t feel as if your story isn’t compelling enough to catch some press time.  Write, write, and write.  You’ll be surprised at what may result.

6)      Lawsuit time

If you’re still stuck holding the ball and you feel either the value of your missing or damage parcel is worth a legal fight, then you may want to consider suing your carrier for damages.  If you’ve documented your turmoil well, then a good lawyer may be able to advise you to victory.

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