Recently in Class Actions II Category

According to the would-be class action on behalf of Take Five ticket buyers, those supposed chances of "winning" are inflated by counting a free play as a win. "The lawsuit says merchants who sell the tickets should be held liable since they were in on the fraud." (Thomas Zambito, "A lotto nonsense, says $5M lawsuit", New York Daily News, May 6; Kati Cornell, "You've Gotta Sue To Win", New York Post, May 6; Lottery Post).

I never thought I'd be involved in a hot-coffee lawsuit, but Gamepolitics covers my intervention and objection to the Grand Theft Auto: San Andreas class action settlement, which I predicted before the suit was even filed.

(I corrected a mistake in the earlier post; I said I purchased GTA:SA for the Xbox 360 when, of course, I purchased it for the Xbox. Fortunately, my affidavit to the court was correctly phrased.)

Grand Theft Auto IV debuts at midnight tonight to spectacular reviews, and the litigation is sure to follow...

• Overlawyered favorite Jack Thompson (Mar. 21; Feb. 22; Sep. 27, etc., etc.), whose antics could fill an entire sub-blog, has sent an obnoxious letter to the mother of Rockstar's boss, Strauss Zelnick, accusing it of being pornography and training for murder. A new book, Grand Theft Childhood, as documented by WaPo's Mike Musgrave, suggests that the fears of corrupted childhood are overblown, though Lord knows I wouldn't let any teenage kids I was responsible for play this game.
• As someone who purchased Grand Theft Auto:San Andreas the first day it was out for the Xbox 360 original Xbox, I am a member of a plaintiff class in a class action settlement over the Hot Coffee mod where players can access the Internet and voluntarily modify the game to make it slightly more offensive to the easily offended. (To imagine that one can find p0rnography on the Internet!) In the settlement, I get, well, nothing, and the attorneys will ask for about a million dollars; worse, individual "representative" class members who suffered no injury will get $5000 that could have been used to buy more music rights for Grand Theft Auto IV. We're frequently asked what we can do if we're unhappy with a class action settlement where we're a member, but this settlement was sufficiently appalling that I actually retained an attorney and he served an objection on my behalf on Friday. Further updates to come.

Update: I incorrectly said I bought San Andreas for the Xbox 360. Of course, San Andreas was never available for the 360. I bought the June 2005 release for the original Xbox.

Update: More.

Updating a Feb. 28 post:

The Supreme Court of Georgia has said "no deal" to a team of Columbus lawyers representing a proposed class of people seeking to recover money they spent participating in a feature of the NBC hit show "Deal or No Deal."

The suit filed in federal court had contended that the Lucky Case Game -- in which viewers, like the contestants on "Deal or No Deal," try to pick a lucky suitcase -- ran afoul of Georgia law because participants were charged 99 cents to play through their cell phones. The plaintiffs based their suit on a colonial-era Georgia statute that allows gamblers to recover their losses through lawsuits.

(Alyson M. Palmer, "Luck Runs Dry for 'Deal' Plaintiffs in Lawsuit Against NBC", Fulton County Daily Report, Apr. 22).

Entrepreneurial lawyers have launched a thriving industry of class actions demanding statutory damages of $100-$1000 per violation (times the number of customers) from businesses that continue printing too much credit card information on receipts despite a federal law requiring them to stop that practice, the Fair and Accurate Credit Transaction Act (FACTA). Kings Family Restaurants, a Western Pennsylvania chain, has agreed to distribute coupons, as well as very non-couponic attorney's fees, in one such case (WSJ law blog, Apr. 25). "Coffee Bean Tea & Leaf, a Los Angeles-based coffee-shop chain, agreed to give customers free drinks and pay customer lawyers $110,000." On the other hand, judges have not always gone along with demands for class certification: "Costco, the largest U.S. warehouse-club chain, might have to pay as much as $17 billion without having harmed anyone, U.S. District Judge A. Howard Matz said in January, refusing to certify a class action. That's 15 times the Issaquah, Washington-based company's 2007 profit." (Cynthia Cotts, "Costco, Kinko's Battle Trial Lawyers Over Credit-Card Receipts", Bloomberg, Apr. 5). One tactic, used in suits against U-Haul and In-N-Out Burger, is to limit the scope of the class action to a few stores or locations, on the theory that a court that might not let a class action with "annihilating" damages go forward might yet approve one inflicting a nonfatal though large shark-bite. (Matthew Hirsch, "Plaintiffs Attorneys Think Globally, Act Locally in Financial Privacy Cases", The Recorder, Aug. 27, 2007). Among the 300+ defendants in receipt suits is 1-800-FLOWERS, whose attorney David E. Block expresses outrage:

"In 22 years, I have never had a plaintiff sit across the table from me and say, 'I have no damages. My identity hasn't been stolen. I'm just bringing this lawsuit because I can,'" said Block of the Miami office of Jackson Lewis. "There's something inherently wrong with a lawsuit where the plaintiff has no injury."

(Tresa Baldas, "Landslide of Suits Over Data on Receipts", National Law Journal, Apr. 7). "Receipts" needn't actually be printed out in a shop or public place to trigger the act; those that flash on a customer's home computer screen count too. (WSJ law blog, Apr. 8). Our earlier coverage: May 10 and Oct. 31, 2007, and Apr. 4 of this year.

I'm objecting to a class action settlement in the Southern District of New York (stay tuned for lurid details), and my attorney needs a member of the federal bar of the Southern District of New York in good standing to sponsor him for a pro hac vice motion. Please e-mail me.

We've been critical of would-be class action lawsuits claiming that Coca-Coca violates consumers' rights by sweetening its fountain version of Diet Coke with a mixture of aspartame and saccharin, rather than aspartame alone as in the supermarket version. Now the Missouri Supreme Court has rejected class-action status for such a lawsuit, reversing a lower court; it "said the classification was overly broad, because it could have covered an indefinite number of people, many of whom did not really care how their Diet Coke was sweetened." (AP/Kansas City Star, Apr. 15).

The purported class action on behalf of unharmed (and even un-inconvenienced) customers is looked on askance at Maryland Injury Lawyer Blog ("It is just far beyond silly.") and by many readers at Consumerist (via P&S)(earlier).

Because it's not as if you actually have to have been, like, harmed or anything to get a class action going (AP/USA Today, Apr. 16). Birmingham, Ala. lawyer Lew Garrison is representing four passengers on "claims that include breach of contract, unjust enrichment, and negligent and reckless operation of an aircraft".

John Stossel has a WSJ op-ed and tv special tonight on the problem of extortionate attorneys. Overlawyered previously discussed the Selbin case and I've written about Bill Lerach's extortion of banks in the Enron case.

The National Law Journal gets around to discussing the problem of FACTA lawsuits in the April 7 issue; Overlawyered readers are well ahead of the curve. See also my Liability Outlook on the subject.

WSJ: "Melvyn Weiss, the onetime powerhouse shareholders lawyer, has struck a deal to agree to plead guilty in a case alleging improper kickbacks, according to a person familiar with the investigation." We've been covering the Milberg Weiss scandals on this site since they broke; my WSJ op-ed "Inside Milberg's Credenza" is here. More:

According to a statement released Thursday by the defense lawyer, Benjamin Brafman, Mr. Weiss will plead guilty to participating in a criminal conspiracy to pay a share of legal fees to plaintiffs in shareholder suits brought by Milberg Weiss. Such kickbacks are improper because they give plaintiffs representing a class of all shareholders an incentive to accept a deal that might not be best for the class.

Under the terms of the plea agreement, Mr. Weiss faces a sentence of up to 33 months in prison. Mr. Weiss has also agreed to pay a total of $10 million in fines and penalties, according to the statement.

(Jonathan Glater, NYT). More at WSJ law blog (Weiss: "I deeply regret my conduct") including a copy of the plea agreement and government statement, both PDF.

The firm of Milberg Weiss, formerly Milberg Weiss Bershad & Schulman LLP, famous for shedding indicted names as an ecdysiast sheds clothes on stage, is now down to plain old Milberg LLP, and will presumably be able to stop there, the Milberg after whom it was named being nearly twenty years deceased. (Bumped 1:50 p.m.)

And: World-class chutzpah morsel from the NYLJ: "If Mr. Weiss had proceeded to trial, his defense was expected to argue that he was so preoccupied with humanitarian and charity work during the charged period that Messrs. Bershad and Schulman had been able to carry on the kickback scheme without his knowledge." In the plea agreement, Weiss stipulates that he was in effective control of the firm and its operations and party to the conspiracy, and agrees to forfeit a sum of nearly $10 million which he acknowledges is less than what he gained from the illegal conduct.

Plus: Portfolio:

Weiss made staggering profits from the kickback scheme. According to the indictment, his share of the law firms profits from 1983 to 2005 amounted to more than $209 million. ...

Sanford Dumain, a member of the Milberg L.L.P. executive committee, said, "Having previously believed former leaders' assurances of their innocence, the firm is now seeking to find a fair and appropriate resolution of remaining issues so that we can continue to work on behalf of injured investors and consumers."

The firm added in a statement: "Milberg L.L.P. apologizes to all judges, lawyers, clients, and class members, who deserve full and complete adherence to all legal and ethical norms."

Portfolio also reports that the Milberg firm is intent on obtaining a deferred prosecution agreement: "If the firm pleaded guilty to a federal criminal offense, it is highly unlikely that a judge would approve the law firm to serve as lead counsel for the plaintiff in a class action." More on the firm's renaming: Lat. And Carter Wood at NAM notes the silly encomia with which Weiss's lawyer is still attempting to gild his crooked client.

New Mexico in recent years has been the scene of a little cottage industry in class-action settlements over insurance companies' allegedly inadequate disclosure of charges on installment payments. Settlements often involve pledges to inform consumers more fully, modest coupons, and impressively large legal fees to the circle of law firms that file the cases. According to the U.S. Chamber of Commerce, nearly every large insurer selling life and disability coverage has been hit with a New Mexico class action in the past decade. Now, for the first time, the state high court is set to review one such settlement, in a case against First Colony/Genworth. The "settlements have not been free of controversy, with even some policyholder-plaintiffs describing the lawsuits as frivolous and the attorney fees as excessive"; cumulatively they have brought the class counsel more than $41 million in fees. (Thomas J. Cole, "New Mexico's Supreme Court to Review Award of $6.5 Million in Attorney Fees in Suits Against Insurer", Albuquerque Journal, Feb. 14 courtesy NM Legal Reform; earlier).

Eugene Anderson, of Anderson Kill & Olick, on the Business Week website:

Personal experience has forged my attitude about class actions. Forty years ago, I represented a financier claimant in a lawsuit against a major financial scam operation. Our financier’s case was consolidated with a class action against the same scam. I cooperated with the class action lawyers and thought that we were brothers. Their part of the arrangement was that the class action lawyers would keep all the case files. After several years of litigation, I learned that the class action lawyers had settled their case with the defense lawyer. (I still suspect that there was a symbiotic relationship there.)

All discovery files, documents, etc., had been returned to the defendant. These included my firm’s detailed notes regarding the documents and somewhat less detailed notes about witnesses. I never suspected that the defendant would ask for the files, and was completely confounded when I learned that the class action lawyers had agreed.

At the next hearing the judge was furious at me and so was my client. Eventually my client settled for peanuts. My firm got the crumbs on the floor.

Forty years later, I am a happy lawyer, and the class action attorney is living at government expense in a low-security Federal prison. Somehow I can’t help but believe our disparate attitudes toward class actions account for the differences in our respective epilogues.

Do they often do business this way? The law firm of Coughlin Stoia, known as Lerach Coughlin before the departure of now-disgraced Bill Lerach, has been vying for lead counsel status in a shareholder class action against Coca-Cola. Now Roger Parloff at Fortune "Legal Pad" (Feb. 28) reports that a special master on the case has recommended that the firm be disqualified for "extremely troubling" conduct which it then defended after exposure using "pretextual" arguments. It seems two former Coke executives approached the law firm of Milberg Weiss (predecessor before its split of Coughlin Stoia), one of them in possession of more than 3,000 company documents he'd taken on departure, many stamped "confidential". The law firm then agreed to pay the execs at least $75,000 to serve as "consultants", part of the deal consisting of access to the documents, which it then used in its complaint.

When the consulting agreement came to light more than a year ago, Coughlin Stoia lawyers backed [Greg] Petro’s claim that neither he nor they had thought he was taking Coke documents without authority because, among other things, Petro had been ordered, when terminated, to “clean out his office.” Special Master [Hunter] Hughes found that such a command could not “rationally be construed to authorize Petro to walk off with company documents, any more than it authorized him to take the company’s desk, chairs, and computer.”

Hughes also rejected arguments that the firm was not really buying the documents, just entering into a consulting agreement, and a public-policy style argument that Petro’s conduct should be condoned because he was a whistleblower trying to expose corporate wrongdoing.

In a footnote, Hughes found that public policy arguments weighed in the other direction: “On a very practical level, for the Court to give Plaintiffs’ counsel a pass on this conduct, would simply invite terminated employees, particularly of public companies, to on a wholesale basis remove company documents following their termination in hopes they can sell them should the company be sued.”

More: San Diego Union-Tribune, ABA Journal, WSJ law blog (where several comments defend the law firm's conduct).

This looks pretty major, pattern-and-practice-wise:

John B. Torkelsen, a former expert witness for Milberg Weiss, has agreed to plead guilty to perjury, admitting he lied to a federal court judge in a securities class action case about how he was getting paid.

Prosecutors in the Milberg Weiss case have been eyeing Torkelsen for years.

I wonder whether this will put a crimp in the image rehabilitation op-ed stylings of Bill "My Only Sin Was To Love the People Too Much" Lerach. The implications could ripple out to other class-action firms as well: "In an announcement about the plea agreement on Thursday, prosecutors claim that Torkelsen was retained by several firms" and that the other firms engaged in misbehavior akin to that of Torkelsen's handlers at Milberg. (Amanda Bronstad, "Former Milberg Weiss Expert Witness Agrees to Plead Guilty to Perjury", National Law Journal, Feb. 29). Our earlier coverage of Torkelsen is here.

Lawyers purporting to act on behalf of Verizon Wireless customers are seeking $1 billion, and an arbitrator says the claim can go forward as a class action. Wait a minute, aren't we always hearing that arbitration is set up so this sort of action would never stand a chance? (Jeffrey Silva, "Verizon Wireless faces class action over ETFs", RCR Wireless News, Jan. 28; Jason Mick, DailyTech, Jan. 30).

Associated Press:

The Supreme Court has refused to offer help to Hurricane Katrina victims who want their insurance companies to pay for flood damage to their homes and businesses.

As David Rossmiller notes,

As if the choice in a case is simply going where your sympathies lie, and when the court decided not to take the appeal, the halls rang with evil laughter and mocking statements such as this: "We will extend no help to Katrina victims because we love to see them suffer and we love to support our evil twins, the insurance companies who steal from them."

The Fifth Circuit, of course, simply enforced the insurance policies as written, and noted that the word "flood" included a flood caused by the breach of the levees in New Orleans, reversing a district court that disingenuously held otherwise. And the Supreme Court simply refused to make the appeal of that obvious decision one of the 1% of petitions for certiorari that it grants.

Update: Mark Obbie, while also critical of the lede, writes:

Stephanie Mencimer (via NAMblog) writes in Mother Jones Feb. 14:

Large corporations have long argued that class action lawyers are nothing more than extortionists who shake down big companies every time their stocks fall, forcing them to settle or risk fiscal ruin from a big jury verdict. Given what’s known now about how Lerach operated his law firm, it's hard to say that the perception is only spin.

Mencimer, though, gives too much credit to Lerach's self-serving "corporate crime fighter" identity. Lerach sued indiscriminately. To the extent that a small proportion of the defendants in Milberg Weiss cases were actual wrongdoers, it was a function of a stopped clock being right twice a day. It was because Lerach sued so often without actual evidence of wrongdoing that his early suit against Enron was dismissed: when faced with the biggest corporate scandal in history, Lerach couldn't actually make the case until after the fact. Given that the decades of jail time Enron and WorldCom executives are facing, and the fact that a Lerach suit was at least as likely to be against the innocent as the guilty, it's hard to say that the Lerachs of the world added much in the way of deterrence of corporate wrongdoing, as opposed to the deterrence of corporate investment. All Milberg Weiss and its successors accomplished was to transfer wealth from investors to their own pockets, with a taste for the politicians like Bill Clinton and other Democrats who helped weaken or block efforts to reform the securities laws. Ken Lay raised a fraction as much money for Republicans without any sort of quid pro quo, yet his relationship to Bush has gotten far more attention than Lerach's relationship to the Democrats and the favors they did for him at the expense of everyday investors.

Over decades, the class-action titan paid secret kickbacks to pliant "representative" plaintiffs, then systematically falsified the nature of his relations to those plaintiffs the better to deceive judges, opponents, competing class action lawyers, and class members. He and his defenders are now portraying his offenses -- even the systematic lying to courts -- as minor and victimless. For some indications of why our legal system takes a very different view, see my WSJ op-ed of a year and a half back. Per Peter Lattman's story/interview in today's WSJ, "Mr. Lerach has requested, and the judge will recommend, that he be sent to Lompoc, a low-security federal penitentiary in Southern California often called a 'country-club prison' or 'Club Fed.'"

Yesterday's L.A. Times piece by Molly Selvin takes note of Lerach's "trademark vitriol -- he famously threatened to "destroy" companies that balked at settling". Selvin also quotes NYU legal ethicist Stephen Gillers expressing concern that the spate of Milberg Weiss prosecutions "has to worry [lawyers] even if they're doing nothing wrong because the Justice Department has shown its willingness to look into how they do business". Gillers offers no examples of any Milberg lawyers who have been prosecuted despite "doing nothing wrong", nor does he explore the question of how lawyers might exploit the impunity they would enjoy if the Justice Department permanently refused to "look into how they do business". Indeed, if Lerach is right when he says kickbacks to named plaintiffs were industry practice in the class-action biz, it would seem that DoJ should have started "looking into how they do business" long before it did.

With fine understatement, Andrew Perlman at Legal Ethics Forum observes that it would "send the wrong message to students" for Lerach to be permitted to set up teaching legal ethics to law students at the University of Pittsburgh as part of his sentence. And taking a contrarian view, Larry Ribstein (via Bainbridge) says an appropriate comparison for Lerach would be to Michael Milken (Drexel Burnham) or Jeff Skilling (Enron) -- but in the good sense.

More: This morning's New York Times, a paper in whose columns Milberg Weiss long enjoyed cordial if not deferent coverage, buries the Lerach sentencing on an inside page of the business section. The paper's "Dealbook" blog covers the story here. And The Economist recalls a "shouting match" in 2006 between Lerach and a leading British corporate governance advocate over whether litigation was the best way to address shareholder/manager conflicts. Plus: Charles Cooper, CNet.