Retailers have always been protected from having to pay those kinds of damages to customers who have had their data stolen, but now there's a case going up before Maine's state Supreme Court that asks whether that should change.

The retailer in question is Hannaford Supermarkets, an east coast grocery chain. A year and a half ago they reported that 4.2 million customer credit card records had been intercepted by crooks and sent overseas. Some of those customers sued Hannaford for damages.

The lawsuit came to a halt last May, when U.S. District Court Judge D. Brock Hornby ruled that Maine's law "allows consumers to recover damages if the merchant's negligence caused a direct loss to the consumer's account," and since customers were protected from direct loss due to zero-liability coverage by banks, Hannaford was off the hook.

The plaintiffs asked Judge Hornby to consider letting the state Supreme Court weigh in on the law, to determine whether it can be interpreted to also cover things like time lost dealing with the breach, or future dings on credit scores. He agreed, and wrote that the question that needs to be answered is, "Do time and effort alone, spent in a reasonable effort to avert reasonably foreseeable harm, constitute a cognizable injury under Maine common law?"

If the state Supreme Court decides they do constitute a "cognizable injury," it would be a first for a retailer, and possibly open the way for other consumers to sue in civil court for damages that aren't directly covered by zero-liability protection. That would in turn make it a lot harder for retailers to get off with a simple, "oops, sorry!" the next time they don't adequately protect customer financial data.

"Retail Data Breach Liability Shield May Get Gutted" [StorefrontBacktalk via Wired Threat Level]
(Photo: Zach Klein)

The recently decided Wyeth v. Levine held that a patient who was harmed by a poorly labeled drug (in this case, an anti-nausea drug whose label specified several ways it could be administered, one of which could, and did, cause gangrene and amputation) could sue the drug maker for failing to warn medical staff of the dangers of the drug.

On the other hand, the Court in Riegel v. Medtronic held that a patient injured by a poorly designed and labeled medical device (in this case, a heart catheter that exploded and killed the patient) could not sue the device maker.

The question in both of these cases was whether the FDA's approval of a drug or device should be enough to shield (pre-empt) the manufacturer from liability, even when the manufacturer knew of the dangers. Considering how dysfunctional the FDA is, and how unscrupulous drug and device manufacturers can be, we're not comfortable leaving things entirely up to them.

Neither is Congress, which has introduced the Medical Device Safety Act. The MDSA simply reverses the Court's decision in Riegel and holds that state law regulating medical devices will be upheld. The bill has attracted bipartisan support and already has 69 cosponsors in the House. Now the New England Journal of Medicine has gotten involved and endorsed the MDSA in its latest issue:

Patients and physicians deserve to be fully informed about the benefits and risks of medical devices, and the companies making the devices should be held accountable if they fail to achieve this standard. We urge Congress to swiftly pass this legislation and to allow lawsuits by injured patients, which have been an important part of the regulatory framework and very effective in keeping medical devices safe, to proceed in the courts.

We agree. Injured consumers deserve justice, and that means being able to have their day in court. Here's how to contact your representative and senators to ask for their support.

(Photo: mjar81)

Wyeth's Phenergan is used to treat nausea and, according to its label, can be administered several different ways, including by IV push, in which the drug is injected directly into the vein. This carries the risk that the drug will instead be injected into an artery and cause gangrene, which is what happened here.

Levine argued that Phenergan's label should have warned of this risk and prohibited IV push, instead suggesting less risky methods, such as an IV drip. Acting under Vermont law, the lower courts agreed.

Wyeth argued that because the FDA had approved Phenergan's label, it had complied with all labeling requirements, and state law claims were pre-empted, despite subsequent information that IV push administration of Phenergan had caused gangrene in several cases. Even if it had wanted to include an IV push warning, Wyeth argued, it wouldn't be able to because it would differ from the label the FDA had approved.

The Supreme Court disagreed. "The very idea that the FDA would bring an enforcement action against a manufacturer for strengthening a warning . . . is difficult to accept—neither Wyeth nor the United States has identified a case in which the FDA has done so."

The decision is an important step in the fight against pre-emption, which, like binding mandatory arbitration, is designed to prevent injured consumers from getting their day in court. Although this decision bodes well for drug cases, the Supreme Court went the opposite way last year in Riegel v. Medtronic, which dealt with faulty medical devices. Congress introduced legislation last year that would forbid federal pre-emption of medical device cases, and the bill will likely be reintroduced soon.

Wyeth v. Levine [Supreme Court (PDF)]
(Photo: afagen)

We understand why Wyeth would pursue this line of reasoning—after all, if they win, then it will put an end to personal lawsuits against drug companies. But if Wyeth got its way, the result would require a huge expansion in the FDA's role in bringing drugs to market and monitoring them afterward, because the FDA would have to shoulder the burden of responsible drug testing and labeling. If the FDA took over this responsibility, it would have to balloon to an enormous and almost certainly unwieldy government agency, and it would likely slow down the time it takes to bring new drugs to market.

On the other hand, it's quite possible that the FDA would simply hobble along in an underfunded, understaffed state, paralyzed by bureaucratic jams and strangled by politicians and the lobbyists who feed them.

This is why we think Wyeth is being duplicitous, by arguing for one thing—greater federal regulation—while knowing that in reality, having only the FDA to answer to will mean less risk of being held responsible for mistakes, incomplete research, or inappropriate marketing.

We're sure Wyeth would love to have it both ways, with limited regulatory oversight combined with the protection of a federal agency that's largely toothless. We hope the Supreme Court tells Wyeth to pay the Vermont woman her $7 million—and to label its drugs more clearly if it wants to avoid such payouts in the future.

"Consumer Issues Top Supreme Court's Docket" [NPR]
"Plainfield Pianist's Case Could Affect Nation" [WCAX] (Thanks to Michael Belisle!)
(Photo: Getty)

The court noted that "were the 'Federalist Papers' just being published today via e-mail, that transmission by Publius would violate the [current Virginia] statute."

The real problem with the statute is that it's overbroad, said the court, and it can't simply be reworded. We assume this means the state legislature will have to start over, and this time limit the statute to "commercial or fraudulent e-mail, or to unprotected speech such as pornography or defamation."

This is one of those feel-bad judgments—ultimately we agree with the court that the law needs to be more specific in order to limit its power, but in the meantime this means that spam king Jeremy Jaynes, who had been sentenced to 9 years in prison in 2004 under the newly enacted law, is now free to resume spamming until a new, better worded statute can be drafted.

"Va. Supreme Court Strikes Down State's Anti-Spam Law" [Washington Post] (Thanks to Michael!)
(Photo: Getty)

Spherion had switched life insurance providers without informing Thomas. Under the new policy, employees had to work for one full day to activate their coverage. Spherion never mentioned this to Thomas, and repeatedly assured him that he didn't need to do anything to retain his coverage.

His widow said he easily could have worked a day if that was what it took to activate the new policy. Spherion could have waived the one-day-of-work provision, as it did for other employees but not for Amschwand.

When Thomas died, because the policy had never been formally activated, Spherion refunded his insurance premiums and told his widow she would receive nothing else.

The story has played out often under the federal Employee Retirement Income Security Act. Designed to protect employee benefits, the law has been used by employers as a shield against suits.

Federal appeals courts, interpreting Supreme Court decisions dating to 1993, consistently have said companies that offer health, life and retirement benefits under ERISA cannot be sued for large amounts of money, or damages. Instead, they can be sued only for typically smaller sums such as Amschwand's insurance premiums.

Several federal judges have bemoaned the unfairness even as they have felt constrained to rule in favor of employers.

"The facts ... scream out for a remedy beyond the simple return of premiums," Judge Fortunato Benavides of the New Orleans-based 5th U.S. Circuit Court of Appeals said in the Amschwand case. "Regrettably, under existing law it is not available."

The Supreme Court recently refused to hear Melissa's case. Congress has refused to act. Insurers continue scrape up lucre, and consumers are left to suffer.

Employers use federal law to deny benefits [AP]
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The California Public Utilities Commission and state officials believed that crisis-era pacts with San Diego-based Sempra Energy and others were costing consumers an extra $1.45 billion to $3.08 billion — an amount they had hoped to return to electricity customers, possibly by reducing or eliminating future charges.

A Washington utility had hoped to get relief from a nine-year power contract with Morgan Stanley Capital Group. Under that contract, the Snohomish County Public Utility District is paying $105 a megawatt-hour, well above the historic norm for the Pacific Northwest of $24 a megawatt-hour, but also well under the $3,300 a megawatt-hour hit at the peak of the energy crisis that spread beyond California's borders, according to the court's synopsis.

Justice Scalia scolded the states for whining about "buyer's remorse." Roger Berliner, a lawyer for Nevada utility Sierra Pacific Resources, applauded the Justice for his unrivaled ability to blind himself to reason:

"It was the failure of regulators to protect consumers from market manipulation" that caused the utilities to overpay for power. I don't think the court appreciated the extent to which the dysfunction in the market made it impossible for there to be just and reasonable contracts."

Supreme Court deals blow to states on electricity [Los Angeles Times]



(Photo: Getty)

In case you think $2.5 billion could bankrupt the company, The Salt Lake Tribune points out that Exxon Mobile's profit in the last quarter of 2007 was $11.7 billion, and that "the award represents less than three weeks' worth of Exxon profit." (Update: Consumerist reader oeolycus points out that several newspapers are misrepresenting Exxon's profit: "Their NET INCOME was $11 billion. Net profit is closer to $5 billion.") In this case, "excessive" seems to be related to what Exxon claims is appropriate under maritime law. Additionally, Exxon says it's already paid "$3.4 billion in criminal fines, cleanup costs and compensation payments."

The punitive damages would be dispersed to about 33,000 Alaskans, and Exxon is seeking to cut the per-person award from $75,000 to $30,000.

The New York Times' coverage of yesterday's argument is somewhat exciting to read, with Justice Ginsberg—who sympathizes with the plaintiffs—subjecting "Exxon's lawyer, Walter Dellinger, to a rapid-fire series of questions about his central arguments," and arguing with him about maritime law from as far back as 1818. By contrast, the Exxon-sympathetic Justice Breyer argued over how much culpability a company should accept for its employees' actions:

"This is a very dramatic accident. It involves oil spills, and they cause an enormous amount of trouble. But there are accidents every day, and ships are filled with accidents."

Given that punitive damages have not been the normal rule in maritime cases, Justice Breyer continued, "then it will be a new world for the shipping industry and for those who work on the ships" if the courts begin to impose them. "What principles do you have to suggest, if any," the justice asked Mr. Fisher, "for creating a fair system that isn't just arbitrary?"

"Exxon Valdez payout could be cut in half" [AP via Salt Lake Tribune]
"Justices Take Up Battle Over Exxon Valdez " [New York Times]
(Photo: Jack Smith/Associated Press)

The 8-1 decision came in a lawsuit by Alex E. Ferrer, a former Florida Circuit Court judge who decides minor civil disputes as a form of TV entertainment.

Ferrer refused to pay a management fee to Arnold Preston after the two men had signed a contract that called for arbitration of any disputes.

Ferrer says Preston is not a licensed talent agent as California law requires.

Preston sought the money by starting a proceeding with the American Arbitration Association in Los Angeles. Ferrer filed a complaint with the California Labor Commissioner, seeking to invalidate the contract for the fees. Ferrer went to court when the labor commissioner said she lacked the power to block the arbitration.

At issue was the reach of the Federal Arbitration Act.

"When parties agree to arbitrate all questions arising under a contract, the FAA supersedes state laws," wrote Justice Ruth Bader Ginsburg.

Minimum price agreements can benefit consumers, Kennedy wrote, by enabling retailers to invest in greater customer service without fear of being undercut by discount rivals. The agreements also could make it easier for new products to compete, he added, because a retailer could recoup the costs of marketing a new good by charging a higher price.

Under the old system, manufacturers could send pricing signals to retailers by way of a Manufacturer Suggested Retail Price (MSRP,) though retailers were free to compete by selling products below MSRP. Under the new system, championed by Justices who promised to respect stare decisis at their confirmation hearings, manufacturers can now use resale price maintenance (RPM) agreements to ban retailers from offering discounts.

Leegin is the 15th ruling this term that harms consumers by shielding businesses and corporations from lawsuits.

Justices End 96-Year-Old Ban on Price Floors [NYT]
Minimum-Price Accords May Be Allowed, Top Court Says [Bloomberg]
Leegin Creative Leather Products v. PSKS (PDF) [Supreme Court]
(Photo: takomabibelot)

The summary of the dispute is that Metabolite has sued testing company Laboratory Testing Company for violating their patent. What's the patent? It's this scientific fact: "The level of an amino acid called homocysteine is measured in a patient's blood or urine and, if elevated, it can be correlated with a deficiency of folic acid, or B12."

We got a little bit excited quoting that, because our girlfriends practically wrap their ankles around the nape of their neck every time we exhibit our anti-authoritative criminal streak. And we broke the law just by quoting that sentence, thereby sticking it to the man. Seems ridiculous? The question the court is deliberating today is even more absurd: if a doctor looks at a patient's test results and even thinks that sentence, has he broken the law?

It's an important case, because if the Supreme Court reigns in the insane Through-the-Looking-Glass logic of existing patent law, it is going to have huge repercussions on thousands of patents on drugs, computer software, medical devices and loads of other inventions. The sleazy hucksters who own 20% of your body will no longer be able to leech a living off of the Human Genome. Scientific and medical research will become cheaper and more efficient, coffers not constantly being drained by the bloodsuckers who patented a scientific fact.

We're really intrigued by what the Supreme Court will decide here... we'll keep our eye on it.

B Vitamin Case Reaches Supreme Court [Yahoo News]
Related: Michael Crichton On Companies Owning Products Of Nature

Most cell phone contracts give the provider permission to change service agreements at the drop of a pin. Furthermore, customers have no recourse: part of the contract also requires that a customer agree to not file suits, but instead submit to the arbitration of the provider to settle disputes.

Sounds a bit sleazy, a bit one-sided, right? Well, luckily, the Supreme Court's now been asked to weigh in on the issue. The proposed act being decided upon will require cell phone companies to provide their customers with copies of the contracts, inform customers of service agreement changes and, most importantly, get their consent. The cell phone companies aren't happy, but boo hoo... there's nothing fair about the current arrangement. We're pretty sure the Supreme Court will do the right thing here.

Supreme Court Asked to Rule on One-Sided Cell Phone Contracts [Consumer Affairs]