JUL 9 4979

I've conferred with a variety of peuple knowledable
about consumer law. Among them are the chief of litigation
of San Francisco Neighborhood Legal Assistance Foundation,
a former member of Mayor Lindaay's consumer affairs staff,
ci present legislative assistant to Senator Tydings
and two persons who have worked with Tydings (kak all
lawyers), a lawyer who helped draft the Eckhardt-Tydings
bill (with Professor Black of Yale, a close friend of
Eckhardt's), and indirectly (i.e. through some of the above
peopte) the California Rural Legal Asistance expert's
on consumer law and kke full-time consumer law people
in New Yokk.

All of these people AXE BHXEKEXESHSHMEKXRIREX
share a propconsumer point of view. All feel that
the balance of advantage between consumers and producers
should be readdressed. Furthermore, all have been to some
extent involved in the negotiations on the shape of the
Echkardt-Tydings bill. xk Thus, to some extent, all
may have reasons to be slightly wedded to that bill. At
the same time, the central concern of each was the practical
advancement of consumer interests. All were ready to make
political compromises if that seemed necessarv to defeat
the Administration bill. And all were intrigued with
the possibility of providing funds for consumer research

and education groups.
Here, quickly summarized, are the reactions to
the proposal cs allow non-profit consumer groups to
initiate consumer class action suits:

Problems and Disadvantages:

1. In rural or less sophisticated, less politically
aware, and less liberal areas, it may be difficult to form
consumer groups. Thus many regional and local consumer
abuses might be shielded from suit.

Related to this is the comment from the
San Francisco Neighborhood Legal Assistance lawyer that
it has been their experience that consumer groups
are very difficult to ogganize and practically impossible
to organize among lower-income minority groups. The problem,
he reports, is primarily that the dramatic consumer abuses
happen only once in a great while to most people. So

that, unlike for example rent, maintenance of continuing

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Vitality and inmteraust in a consumer grcup is
to achieve.

2. Similarly, the proposal would probably
have the effect of largely taking the ordinary general
practitioner of law out of the consumer field. There are
mixed reactions to this effect, but several people feel
that the ordinary neighborhood lawyer does stumble across
a number of significant consumer problems and that his ability
to bring class suits would be significant for consumers.
The other side of the coing is that the proposal would probably
tend, even more than the Eckhardt-Tydinas bill, to create
ar promote the develppment of a highly specialized
consumer's bar. None of the people I talked with objects
to this, of course, but many felt that this is the sort
of thing that the NAM, Rexwnx J.C. Penney's, General Electric
and the other big lobby interests against the bill are
really worried about. So the proposal, if thés were true,
would muxkXxkkiex probably fail to Initigtte their opposition.

See below,
3. In thinking about the definition of
the groups which would have the right of initiating
class actions, a number of persons were concerned that
political consumer groups not be excluded, as they are

under the tax ememption standards. Good dr

fu

fting might

allay these objections. The primary thing most

persons felt consumer groups ought to be able to do

in the realm which is now considered political is

draft legislation and give opinions as to the merits of
proposed legislation or other proposed government action. (e.g.
proposed rules or acts by the FTC). Under the present
definition of "political";-roughly, attempting to influence
legislation, such work could not be carried out by

non-profit consumer groups.

4, At the same time, defining a consumer group
broadly would présumably not at all appease the opponants
of the Eckhardt-Tydings bill. Thus, for examplem SFNLAF
(San Francisco....Legal Assistance) would not object
to the proposal simply because in their primary litigation
(and any class action is major litigation) they represent
only groups now. They represent regularly 114 groups in
the Bay Area and whenever an individual plaintiff walks
into their office with a grievance, they simply refer
him to one of the groups which then may in turn ask
the Foundation to represant the gfoup in an action based
on that grievance. The N.A.M. would of course be quick
to charge that a broad definition does them no good at all
because anyone energetic enough to bring a class action
would have little trouble either attaching himself to
an established group or putting together a number of names

x

for his own group. (#he charter flight group problems

comes to mind.) Of course, the larger the minimum membership

of a qualifying group the more difficult this would be to
do, but the impediment might not bexxBakkx amount to much
if the minimum size were, say, 500 persons. ° For example,
the group might be Berkely Students Against X or subscribers
to I F. Stones Weekly or Mayday xx or, now, the National
Welfare Rights Organization. |

I might note here a related issue we discussed.
The question of how many members (or what percentage) of
the group would itself have to be directly affected by
the abuse at issue to initiate the action. At the pkk outer
limits this would be a problem of standing and reach esRrxwxEex
constitutional proportions to the extent it raised
questions of whether there was an actual "case or controversy"
within the Meaning of Article III. This would, of course,
be primarily a drafting problem, but at the same time
it does suggest that the most natural group in many cases
Might be dne that formed around a particular abuse
and had no other raison d'etre and thus was really very little
different from the class brought by individual plaintiffs
under the Eckhardt-Tydings bill.

5. $everal persons consulted were bothered

by the notion of giving the right to bring suits to a
particular group of private plaintiffs. Some felt that
the uneasiness about ths resulted primarizty from the lack
of precedent for it; others felt that such a proposal would
face a strong constitutional challenge. The constitutional
argument might be roughly that the right to access to
the federal constitutional courts is a privileged rights
(like, for example, voting, travel...) and imposing
impediments on certain classes of persons in exercising
that right can’ only be justified under kke Equal Protection
by a compelling interest in so classifying people. ‘(This
is the argument the Supreme Court employed in striking

down the state welfare requirement that persons have lived
within the state for a certain period of time before
they became eligible for welfare). In any event, .

we were hard pressed to think of a truly analagous
precedent for extending such a privilege to only certain

groups,

6. Another possible problem with the proposal is simply

its timing. The Eckhardt-fydings bills has been work Sig over
with a fine-tooth comb by everyone. Senator RBydings office
feels that an acceptable and winning compromise

position has been found, (Lie. Strike suiters are stopped

by the possibility of a preliminary hearing into the merits
of their claim and the statutory empdiwering of a judge

to assess punitive damages against plaintiffs who he
concludes are strike suiters; each member of the class

must have a claim af at least $1; no suit may be settled
without the approval of the assigned judge) Thus,

gm some persons feel that the proposal would only slow

things dene down and might offer a tactical excuse for

delay to the opponents of a strong Econsumer class action
bill.

8. Finally, some persons were concerned about the solicitation
of legaa=business problem. Under the canons of ethics lawyers
are not allowed to solicit their own busness. A layman
middleman soliciting for them has traditionally been considered
even more objectionable. Consumer groups might be seen

as a middleman solicitor of business, I'm inclined to think
this problem exists in all class action suits and is not

too substantial because there has been an easing of these

rules for groups like the NAACP Legal Defense Fund.
9. Related to the point that this proposal would not

satisfy the opponants was the conclusion of many versons
consulted that there are many more effective ways to stop
strike suiters. In addition to thdsCin the Tydings bill which
are mentioned above are bonding requirements, a percentage
limitation on attorney's fées, and (less to the point) an

aggregate minimum of clamms amounts.

RBcovery to Consumer Groups

The objective of providing funds for a variety
of non-profit priwate consumer groups is excellent.

The means are somewhat difficult to work out and the
political feasibility of any such scheme is doubtful.

The means which seem most practical as the earmarking
of unclaimed recoveries for consumer research{and possibly
consumer education). Even if the disposition of the
monies was controlled by the FTC, the proposal would
have some merit. Another possibility would be go
give such funds to consumer groups who brought the suits.

The notion of allowing consumer groups who initiate
actions to take a percentage of the recovery conflicts
somewhat with the objectior of full compensation of
individuals for damage done. This kxkepxekxemkxproblem
might however be resolved on the theory that the consumer
group was recovering (as dees a lawyer) for a service done.
The groups’ service would be a sort of finder's fee for
identifying the problem, getting the class together,
finding the lawyer etc. In fact, it even seems possible
that such a solution could be achieved without legislating

it. Further thought on this possibility might be fruitful.
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There are problems of conflict of interest which
arise in this situation that are worthy of consideration.
If the lawyer represented the group, he might in certain
situations not be the best representative of the individual's
interests, For example, to enlarge group membership certain
dramatic events might be desirable, whereas the largest
recoveries for individuals might be secured through
quiet negotiation and settlement.

Problems of which defendants were represented
through the group and which weren't would arise. The
labor union problem of some riding the coattails of
the group's efforts would need to be considered.

But of course none of thése details are insuperable.
The biggest problem is political. Mmxzk The people
I talked with seriously doubt that anyxpxspex bill designed
at promoting the development of consumer groups could

BkEXMEKE be passed.
Status of Tydings Bil)

My friend in Tydings office, Dan Lewis, reports
that the Senate Commerce Committeexxkx has completed
action on the consumer class part of the Federal Trade
Bill. The rest of the Bill will require about two more
meetings and probably will be reported out in a month.

There has been a request that the Judiciary Committee
also be given the opportunity to consider the bill. This
request will probably be acceded too, but the current hope
is that there will be astipulation that the bill must
be reported out within 30 days. The stipultion would
prevent the Committee from killing the bill by letting
it die in Committee. It is expected that Administration
BPEBpE supporters, especially Sen&aor Hruska, will
take Swipes at the bill while it is with the Judiciary

Committee,