A high-profile lawsuit that could have increased consumer protections was shot down by the Supreme Court. “The justices by a 6-3 vote overturned a state ruling and threw out a class-action lawsuit against DirecTV over its termination fees for customers who canceled its service,” the Los Angeles Times reported. “The high court said the Federal Arbitration Act calls for honoring arbitration agreements that are written into company contracts, regardless of whether there are more consumer-friendly protections set by states such as California.”

The case against the El Segundo-based company had been working its way up the judicial ladder for years. “The dispute began in 2008 when a former DirecTV customer sued the satellite TV provider in Los Angeles Superior Court, alleging it had violated several California laws when it charged cancellation fees,” the Los Angeles Business Journal noted.

Unlikely divide

Justices split along highly unorthodox lines, with dissents penned by Clarence Thomas and Ruth Bader Ginsburg (Sonia Sotomayor joining). While Ginsburg and Sotomayor challenged the notion that arbitration agreements such as DirecTV’s could be treated as contractual agreements between equals, Thomas insisted, as he has in the past, that the Federal Arbitration Act does not apply in state disputes.

Remarkably, Justice Steven Breyer — known as one of the court’s most liberal justices — wrote the decision for the majority, drawing swift fire from anti-corporate crusaders. “What SCOTUS essentially said today is whenever ‘arbitration’ is mentioned by a corporation — whether it defies state jurisprudence, fundamental fairness, or what the state’s courts rule — the Federal Arbitration Act will shield them,” wrote Consumer Watchdog president Jamie Court at The Huffington Post.

The majority’s decision reinforced recent rulings. “The action continues the court’s string of rulings that cut back on class-action suits and strengthens the power of companies to insist that consumer complaints must be settled by arbitration, which is generally seen as more advantageous for businesses,” the Washington Post reported.

Legal twists

The fees charged by DirecTV had drawn sharp criticism and scrutiny. In an extraordinary move, the company had slapped consumers with “cancellation fees” of up to $480, often seizing the money by charging it to a credit card or even withdrawing it directly from a bank account, all without the customer’s permission, according to Consumer Watchdog, a plaintiff in the case.

“The ruling surprised the lawyers who brought the litigation because DirecTV’s contract left it to ‘the law of your state; to decide whether the arbitration clause applied, and the California Court of Appeal had ruled in this case that DirecTV’s arbitration clause was illegal and therefore unenforceable under California contract law,” Consumer Watchdog noted in a release.

“Indeed, DirecTV initially acknowledged in the California court that its arbitration clause did not apply to the lawsuit,” Consumer Watchdog added, “but later changed its mind after the U.S. Supreme Court issued a 2011 ruling, Concepcion v. AT&T, that requires American courts to honor virtually all arbitration clauses that corporations insert into the fine print of lengthy contracts most consumers never read.” That case was closely divided, with four justices — including Breyer himself — dissenting.

Notably, DirecTV was recently acquired by AT&T for nearly $50 billion, with the telecom giant planning to phase out the DirecTV brand, according to the Wall Street Journal. DirecTV’s business practices have gotten it into trouble before. Its recent “creepy Rob Lowe” ad campaign “ran afoul of the National Advertising Review Board as being misleading,” the Journal observed. Critics have also noted that DirecTV has hiked rates “on the heels of AT&T raising prices for AT&T U-Verse customers,” as DSL Reports noted.

“Several DirecTV users this week wrote in to say they’ve been receiving emails from DirecTV directing them to this memo and pricing detail sheet posted to the DirecTV website. The website and email note that most base packages, channel bundles, and premium channels will be seeing price hikes ranging from $2 to $8 per month.”

“After surpassing its first year goal by 400,000 — signing up 1.1 million people in private plans — Covered California’s enrollment climbed to only 1.3 million this year, wildly off its 1.7 million target for 2015,” the San Jose Mercury News reported, calling the situation a “crossroads.”

“Experts are watching carefully because the financial health of the exchange depends on growing its number of enrollees. If that doesn’t continue — or even backslides — shrinking dollars could threaten the way the exchange now operates. Finally, provisions of the law designed to offset possible losses for health insurers will expire in 2017. That could also impact premiums — and enrollments — even further.”

The rocky road recalled to mind warnings from early Obamacare critics who raised the specter of a so-called “death spiral” brought on by insufficient enrollment to even out insurance risk across pools of beneficiaries. But according to the Mercury News, “Peter Lee, Covered California’s relentlessly upbeat executive director, remains unfazed.”

Lee has invested much of his time and reputation in the exchange’s success, at least relative to other, ailing setups in states around the country. Steeling his nerve, Covered California recently “awarded its executive director a $65,000 bonus,” just “four months after giving him a 24 percent raise,” as the Los Angeles Times observed. That brought Lee’s annual salary to $333,120, according to California Healthline. (Meanwhile, Deputy Director Yolanda Richardson saw her yearly pay rise over 11 percent to $265,668; all told, the exchange’s top 14 most highly-paid executives all cleared five figures in income per month.)

Rising rates, unknown figures

One explanation for the handsome compensation packages would be familiar to advocates of high pay for CEOs in the private sector: retaining talent. Some consumer advocates, according to the Times, “have credited Lee with securing lower-than-expected rates from health insurers the last two years and reaching substantial enrollment of nearly 1.4 million people.”

But California Insurance Commissioner Dave Jones dismissed that claim. In an interview with State of Reform, Jones characterized California’s health insurance providers as a virtual monopoly, “attributable in part to decisions made by Covered California and unchecked rate increases as top issues.”

Inside and outside the exchange, he said, “you have an extraordinary concentration of the market going to a handful of carriers. As a result, they function in a classical economic sense as monopolists or oligopolists who are able to dictate prices for what is an essential good that people desperately need and are willing to pay just about anything to get.”

Jones has raised hackles among Democrats for challenging Covered California’s effectiveness and propriety. But activists further to his left have created bigger headaches. Not all consumer groups have been kind to Covered California executives. In a letter to Lee, Santa Monica-based Consumer Watchdog demanded that Covered California release its planned rate increases for next year. California “has successfully lobbied the federal government to delay public disclosure of qualified health plan rate change proposals for 2016,” the organization noted, becoming the only state in the nation to do so.

“Citizens of every other state now have access to proposed rate hikes, except the people of California, who are already disadvantaged by the absence of rate regulation in this state,” the letter warned.

Privacy worries

Complicating the picture of Covered California’s health, the exchange has spread unease among would-be allies by forging ahead with a controversial centralized data plan.

“Exchange officials say they’re planning to create a large database with information on patients’ doctor and hospital visits, and prescription drugs. The information could be used to determine whether patients are getting appropriate care,” KPBS reported, but “privacy rights experts are raising some questions.”

Concerns have extended to the prospect of a further leveling off in enrollment. “We’re very concerned that it’s going to chill people from getting health care,” said World Privacy Forum executive director Pam Dixon.

Routinely critical of state regulators for failing to protect consumers, the consumer advocacy group has been criticized by an independent oversight panel for presenting “incorrect” and “misleading” information to the public.

A 2013 Consumer Watchdog expose was titled, “Golden Wasteland: Regulating Toxics, or Toxic Regulations?” It slammed the state Department of Toxic Substances Control for jeopardizing public safety by “allowing serial polluters to cut deals with the department” and “levying wrist-slap penalties instead of applying maximum fines.”

“We have some of the toughest environmental laws in the nation, and some of the weakest enforcement,” Consumer Watchdog concluded, based on its 2013 Golden Wasteland report.

A new report by the California State Senate’s Office of Oversight and Outcomes, “Fact Check: Despite Failures By State’s Toxics Regulator, Many Recent Criticisms are Unfounded,” analyzed claims made by Consumer Watchdog.

State Senate report: Golden Wasteland claims “incorrect, misleading or lacking in context”

Consumer Watchdog’s claims, which generated headlines across the state, concerned state Sens. Kevin de León, Ellen Corbett and Ricardo Lara. De Leon is the Senate’s president pro tem. In July 2013, the Democratic lawmakers tasked the state Senate’s independent research arm with investigating Consumer Watchdog’s allegations.

Led by former Sacramento Bee reporter John Hill, the Senate investigative unit conducted a line-by-line review of Golden Wasteland. They “found that the report was incorrect, misleading or lacking in context.”

“Golden Wasteland includes opinions and proposals in addition to factual assertions,” the Senate’s investigative unit found. “In some cases, we were able to confirm its assertions. In many others, we found that the report was incorrect, misleading or lacking in context.”

One example of a misleading claim cited by Senate investigators involved whether the Department of Toxic Substances Control had jeopardized the public by failing to shut down an oil-recycling facility in Newark, California.

“One private environmental attorney says that the California Legislature never intended for the DTSC to allow serial violators like Evergreen Oil to stay in business,” Consumer Watchdog argued in its report. “In fact, the law does not require a specific level of harm to be determined before revoking or denying permits. … Thus, DTSC has every right – indeed a duty – to shut down this serial environmental polluter.”

Senate investigators found that Consumer Watchdog’s account of the Evergreen Oil case omitted key information.

“It’s true that DTSC had the legal authority to become more involved in the Evergreen case,” the Senate report states. “But Golden Wasteland fails to mention that California’s regulatory scheme calls for a local entity, a Consolidated Unified Program Agency, to take the lead in the section of the Evergreen plant where accidents occurred. … And the report misleads by omitting any mention of the Alameda CUPA’s lead role in overseeing the re-refining part of the facility, making it seem to an uninitiated reader that DTSC was the obvious candidate to respond to problems at the facility.”

Consumer Watchdog defends report

Consumer Watchdog responded with a rebuttal to the state Senate’s investigation: Criticizing the Legislature’s past performance in oversight, while defending the report for verifying some of its claims.

“The Legislature has historically done a terrible job of overseeing an agency that has gotten so much wrong, ending up hurting the very people that it is supposed to protect,” said Consumer Watchdog’s Liza Tucker, the author of the original Golden Wasteland report. “The report by this Senate office underlines that lack of oversight.”

She added, “Its report verified a dozen allegations in Golden Wasteland, which made the case the agency is dominated by the companies it regulates.”

Coming to Consumer Watchdog’s defense is a group of housing advocates organized by a project of the Center on Race, Poverty & the Environment.

“For residents of Autumnwood, who reached out to DTSC for relief and received none, this report is a disappointment,” Xonia Villanueva, a member of the People’s Senate, said in a recent press release. “It’s as if the Senate investigator was tasked with discrediting communities in California that are crying out for help.”

Senate report adds to past criticism

Steve Maviglio, a Democratic strategist and frequent critic of Consumer Watchdog, pointed to the state Senate’s findings as validation of his extensive research into the nonprofit.

“The critique isn’t coming from an ideological foe of Consumer Watchdog,” said Maviglio, who has published his research at the cleverly named, ConsumerWatchdogWatch.com. “It’s coming from the research arm of perhaps the most progressive state Senate in the nation.”

In Maviglio’s view, Consumer Watchdog’s research has been biased by funding sources, most of which it refuses to disclose.

One funding source that has been well-documented is revenue that the group receives from policing the government regulations it helps write. Founded by consumer advocate Harvey Rosenfield, the author of Proposition 103, which increased state insurance regulation, Consumer Watchdog has benefited from provisions in state law that allow it to act as an “intervenor.”

“‘Intervenors’ can get paid hundreds of dollars an hour (paid by insurance companies) in fees to monitor the rate process, supposedly on behalf of the public,” wrote UT San Diego columnist Steven Greenhut. “No surprise, Consumer Watchdog is the most proficient intervenor and has received millions of dollars in its challenges under Proposition 103.”

That leaves some critics deeply suspicious of any claims made by the organization.

“Consumer Watchdog’s name should be Trial Lawyers’ Helper,” CalWatchdog.com contributor Chris Reed wrote in a blog, late last year. “The organization aggressively works on many fronts to increase the ease with which trial lawyers can take money from people.”

Don’t expect Consumer Watchdog to be slowed down by the recent criticism. Last month, it published a new report, “Inside Job,” which, in the group’s words, looks into how “Boeing and its influential fixers derailed the cleanup of a partial nuclear meltdown site in greater Los Angeles.”

(You can read the report by the state Senate Office of Oversight and Outcomes here: “Fact Check: Despite Failures by State’s Toxics Regulator, Many Recent Criticisms are Unfounded”.)

“No attorney sues under the state’s main environmental quality law more than him.

“These lawsuits all tend to follow a formula: A local City Council approves a big-box development, like a Wal-Mart. A nonprofit with a watchdoggy name sues, with Briggs as its attorney. The developer settles the case and pays Briggs for his trouble. It’s often unclear who is against the project other than Briggs himself.

“To Briggs, a 45-year-old who grew up in San Bernardino County, this relentless string of court cases has made countless developments in California better for the environment. Solar panels gleam from the roofs of Wal-Marts and hundreds of new trees have been planted because of his lawsuits. …

“Briggs’ $1.25 million home sits near the top of a hill in Sunset Cliffs. In the front, it has a big garden with a wide view of the Pacific Ocean. Briggs’ friends jokingly refer to the place as ‘The House That Wal-Mart Built.'”

The hunt for a proper plaintiff

The article dispassionately lays out how Briggs operates. I think most people will consider his approach to be’ fundamentally corrupt:

“The nonprofits Briggs has represented over the years share some striking similarities. First, take their names. His clients have included: Smart Growth Adelanto, Build Barstow Smart, Grow Victorville Smart, Concerned Citizens of Vista, Murrietans for Smart Growth, Blythe Citizens for Smart Growth, Indio Citizens for Smart Growth, Menifee Citizens for Smart Growth, Riverside Citizens for Smart Growth, Rialto Citizens for Responsible Growth and Redlands Good Neighbor Coalition.

“Then there’s how the organizations are set up. The groups aren’t what you typically think of when you hear the word nonprofit.

“Most don’t receive donations. If they did, the money wouldn’t be tax-exempt because the organizations haven’t filed anything with the IRS. Those that have sent tax returns to the state attorney general’s office often don’t list any income, assets or expenses. Many are currently facing fines for not completing proper paperwork. All registered with the state through Briggs’ law office in the Inland Empire.”

There oughta be a law

How Consumer Watchdog-y. How Bill Lerach-y. It’s amazing that there aren’t state laws against being a legal remora.

But Briggs does have his good points. He was a sharp critic of then-San Diego Mayor Bob Filner’s 2013 attempt to condition permit approvals on donations to Filner’s causes.

There’s a right way and a wrong way, you see, to take money from developers.

Every single time Consumer Watchdog is in the news, this shadiness should be mentioned. Instead, the media often passively and pathetically accept the group’s claim to be first and foremost a “consumer watchdog.” The latest example is from the Sacramento Bee:

“A prominent California consumer advocacy group is actively tying a tonsillectomy gone horribly awry to a planned ballot initiative.

“Alameda County Superior Court Judge Evelio Grillo ruled on Tuesday that 13-year-old Jahi McMath, who fell into a coma after complications in tonsillectomy surgery, was brain dead and could be taken off life support. The McMath family secured a restraining order to keep the child alive and reportedly spent Christmas in the hospital, by Jahi’s bedside.

“For Consumer Watchdog, engaged in the latest skirmish of a years-long battle over medical damages payments, McMcath’s case provided fodder for a fundraising pitch.”

Incredibly enough, Bee reporter Jeremy B. White never mentions “trial” or “lawyer” or “trial lawyer” in his 600-word story.

Hey, Jeremy: Context is a good thing!

Sheesh.

“A 2014 initiative advanced by Jones, a Sacramento Democrat, and Consumer Watchdog would give the insurance commissioner the authority to deny health insurance rate increases his department deems excessive. …

“‘The health insurers and HMOs will do everything in their power to crush this, including attacking me and attacking the initiative,’ he said. ‘This is the last thing in the world they want to see happen.’

“Others say the health overhaul should be given an opportunity to work before imposing what they see as potentially costly new regulations that could undermine it. They say it would create more bureaucracy that would reduce access to care and drive up rates. Kim Stone, president of the Civil Justice Association of California, said the measure would be a bonanza for organizations that intervene in rate cases and increase costs.

“’This initiative isn’t about improving health care for millions of Californians,’ said Tom Scott, executive director at California Citizens Against Lawsuit Abuse. ‘It’s really about putting money in the pockets of trial lawyers who could file costly legal challenges that will end up ultimately costing patients and consumers more money.”

Another way to look at the initiative is yet another expansion of government power over the private sector. In a state with the highest effective poverty rate in the nation, why would we want to make the status quo even harder on a big segment of the private economy?

Trial lawyers, Latino Dems should be like oil and water

Cadelago’s excellent analysis has lots of interesting details on Jones’ background, including plenty of evidence that not just Republicans but fellow Dems in Sacramento see him as a publicity-seeking stunt man.

But there’s one point about Jones’ key political ally — California’s trial lawyers — that can never be brought up enough. Just as it’s absurd for Latino Democrats to see the California Teachers Association — enforcers of the anti-Latino education status quo — as an ally, it’s absurd for Latino Democrats to see trial lawyers as an ally. Indeed, it’s absurd for any Democrat who actually believes in “social justice” and doesn’t just use the term as camouflage.

Why? The Trevor law firm scandal of a decade ago. Here’s my account from earlier this year:

“Consider what happened in 2003.  Early that year, a series of sickening media reports detailed how several L.A. area law firms, especially the Trevor Law Group, filed thousands of frivolous suits against small businesses such as restaurants, dry cleaners and car repair shops, many run by immigrants or minorities with a poor grasp of English and a lack of awareness of their legal rights. The suits, which were allowed under the state’s Unfair Competition Law, would allege minor technical infractions of various state codes and demand payments from $6,000 to $26,000 to drop the suits.

“Attorney General Bill Lockyer probed the scam, corroborated the media reports and denounced the suits as a despicable extortion scheme. L.A.-area Latino Democrats, especially Lou Correa of central Orange County, pushed hard for reforms.

“But the trial lawyers pushed back. And fearful of offending a key source of Democrats’ campaign funds, Democrats didn’t just cave and block reform measures. They actually offered a bill that would have exposed the small businesses being sued to even bigger court judgments — in other words, giving the extortionist law firms an even bigger club to threaten business owners.

“The Unfair Competition Law only ended up being fixed by a 2004 initiative.”

Preying on immigrants not social justice

The trial lawyers wanted the right to prey on poor English speakers. Oh, yeah, they’re natural allies for Latino Democrats.

I understand why people say Republicans are an uneasy and unnatural coalition. Social conservatives and libertarians have little to agree on nowadays besides the idea that big government is scary.

But the California Democratic Party is every bit as odd a coalition. Its richest backers — teachers unions and trial lawyers — have agendas that are inimical to the interests of its biggest voting bloc.

But among Latino Democrats, only former state Sen. Gloria Romero ever bothers to point this out.