The New Yorker’s “Talk of the Town” has a look at that class action against Bed Bath & Beyond over misleading bedding thread counts which resulted in “a series of refunds and discount certificates” to consumers — coupons from Bed Bath & Beyond, imagine that! — $2,500 for the named client, and up to $290,000 for the plaintiff’s counsel, led by Edith M. Kallas (formerly of Milberg Weiss), the whole contretemps summed up as a “dry goods Enron”. (Lauren Collins, “Splitting Threads”, Jan. 28). See also Michael Krauss at PoL; and Peter Lattman got to it first.
Posts Tagged ‘class actions’
4,896 opt-outs in Sears tippy-stove class action
An extraordinary number of consumers asked to be excluded from the class action settlement over Sears kitchen stoves that are allegedly too prone to tip when an opened oven door is leaned on. With humor quaint, the Chamber-backed Madison County Record reports on the reaction of class action lawyer Stephen Tillery:
At a Jan. 15 settlement hearing, Tillery interpreted the widespread rejection as a sign that he drafted a successful class notice.
“People read their mail,” he told Circuit Judge Barbara Crowder. “There was no problem with notice.”
(Steve Korris, “Consumer groups ‘ecstatic’ over Sears settlement, despite opt out of 4,896 stove owners”, Madison County Record, Jan. 24).
Plaintiff’s attorneys are slated to pocket $17 million in fees, which Tillery describes as modest compared to “the fund of monies made available to the class” by the troubled retailer, which he estimates at $500 million. “Made available” is of course a term of art, and it is anyone’s guess as to how many class members will actually take the time and trouble to file for refunds of up to $100 on old stoves. Inevitably, however, last year’s Sears wheel alignment class settlement comes to mind (see May 17 and Jul. 31, 2007). In that settlement the lawyers projected that consumers would redeem millions of dollars in coupons (and used that as the basis for their fee calculations), but the actual sum redeemed turned out to be $2,402.
“IBM responds to overtime lawsuits with 15% salary cuts”
The fastest-growing area of employment litigation in recent years has been wage-and-hour class actions, perhaps the biggest subset of which are lawsuits charging that white-collar employees have been misclassified as exempt from hourly wage and overtime calculations. Like many big employers, IBM has been hit with such suits from lawyers seeking to represent thousands of its employees. Information Week:
The good news for those workers is that IBM now plans to grant them so-called “non-exempt” status so they can collect overtime pay. The bad news: IBM will cut their base salaries by 15% to make up the difference, InformationWeek has learned.
The plan has been greeted with howls of protest from affected workers.
The payroll restructuring goes into effect Feb. 16 and applies to about 8,000 IBM employees classified as technical services and IT specialists, according to internal IBM documents reviewed by InformationWeek and sources at the computer maker.
The plan calls for a “15% base salary adjustment down across all units with eligibility for overtime,” the documents state. The move is a direct response to the employee lawsuits — at least one of which has apparently been settled.
“To avoid protracted litigation in an area of law widely seen as ambiguous, IBM chose to settle the case — and to conduct a detailed review of the jobs in question,” the documents state.
The giant tech company also intends to lobby for modernization of New Deal era wage-and-hour laws which might allow it to restore the previous compensation methods. Good luck with that — even if it can show that most of the workers involved would themselves favor salaried rather than hourly status, the political clout of unions and trial lawyers has stymied efforts at legislative reform in the past. (Paul McDougall, Information Week/EETimes.com, Jan. 23).
Yogurt marketing class action
Plaintiff Trish Wiener “believes Dannon misled her, and she wants to milk it for all it’s worth”, reports the Los Angeles Times. The paper’s reporter seems almost disrespectful of this very serious legal action, which claims the bacterial cultures in Activia and DanActive yogurt aren’t really as salubrious as the ad puffery would have you believe. Most dramatic-irony-freighted quote, from a lawyer with the California firm of Coughlin Stoia, which is representing Wiener: “Companies are getting more and more aggressive in their advertising claims. They end up playing off people’s general fears and concerns.” Just to clarify, that’s a quote by a lawyer from Coughlin Stoia, and not a quote about that law firm, which is best known for until recently (in its Lerach Coughlin incarnation) being the home base of disgraced felon William Lerach. (Alana Semuels, “Yogurt maker sued for claims”, Jan. 24).
Meanwhile, Michael Krauss at Point of Law (Jan. 24) discusses the recent settlement of a class action against Bed Bath and Beyond over disputed bedding thread counts.
Enron cert denial
My op-ed on the Supreme Court’s denial of cert in the Enron class action is in today’s New York Sun.
Damages: $0 settlement; Attorneys’ fees: $9.5 million
The lead plaintiff had claimed losses of $25 million, but settled for zero plus some corporate-governance changes that, as a Rutgers professor notes, probably would have happened anyway. But a settlement approved by a New Jersey federal judge in a shareholder suit against Schering-Plough awarded $9.5 million in attorneys’ fees, even applying a multiplier to lodestar hourly rates. [New Jersey Law Journal/law.com; In re Schering-Plough Corp. Securities Litigation, Case No. 2:01cv829 (D.N.J.)] Paying for those fees: shareholders, who also paid for what were likely multi-million dollar defense costs of litigation. Judge Katharine Sweeney Hayden, when certifying a single class in 2003, rejected arguments that there was an inherent conflict between class members that had already sold their stock and class members who continued to hold stock; she was appointed by Clinton in 1997.
Sears website privacy class action
The retailer quickly modified its managemyhome.com web site after it was pointed out that unauthorized users might get it to cough up records of homeowners’ past purchases. The law firm of KamberEdelson LLC quickly hopped on the case with a class action demanding millions, saying bad guys might use the information on past lawn mower purchases and the like to trick homeowners into divulging more serious financial data, though its complaint cited no instances where anything of the sort had actually happened. (“Sears Accused Of Violating Consumer Fraud Law”, Reuters/New York Times, Jan. 7; BenEdelman.org). Chicago lawyer/blogger David Fish isn’t impressed with the turn to legal action, asking, “Are you legally damaged because your nosy neighbor found out how much your washing machine cost?” (Jan. 10).
Racially “targeting” predatory subprime loans? The NAACP and Baltimore suits
Cross-posted from Point of Law.
Says the NAACP complaint: “In 2004, African-American homeowners who received subprime mortgage loans from Defendants were over 30% more likely to be issued a higher-rate loan than Caucasian borrowers with the same qualifications.” (¶ 1.) Thus, it concludes, the disparity “result[s] from a systematic and predatory targeting of African-Americans.” (¶ 6.)
Similarly, Baltimore’s suit argues that Wells Fargo is more likely to foreclose in African-American neighborhoods—and that suit does not even attempt to adjust for similar qualifications or finances, just alleging racial disparity.
Of course, there is a difference between being targeted for a subprime mortgage loan and accepting a subprime mortgage loan. And I don’t believe that African-American homeowners were targeted for subprime mortgage loans because they were African-American. They were targeted because they were homeowners.
Between 2001 and 2005, I was a law-firm associate, high-income, making multiples of what I make today at a thinktank. And, like I am today, I was also white. And the minute my adjustable-rate mortgage was registered in the title books in 2001, I got several solicitations a week in the mail from fly-by-night mortgage brokers offering to refinance my mortgage with ludicrous financial products. (And when I made the mistake of investigating on-line options for switching to a fixed-rate mortgage in 2004, I also got several e-mails a day and phone-calls a month on the same basis to the point that I switched e-mail providers.)
Somehow, I resisted refinancing with a mortgage that was not favorable to me in the long run—I took a 5.25% fixed-rate instead. But I sure was targeted with subprime opportunities, especially as the real-estate prices in my neighborhood skyrocketed about 10% a year. And if, with my skin-color, income, education-level, and impeccable credit-score, I was targeted, so was every homeowner and their grandmother.
To the extent a statistical study says minorities were, ceteris paribus, more likely to receive unfavorable mortgages than whites, the study reflects a specification error, perhaps in failing to account for different levels of consumer education. Another possibility: there is a lot of state-by-state regulation of the mortgage industry. Are subprime mortgages more likely in states with high minority populations, for example? Are subprime mortgage brokers more likely to be aggressive in urban areas in states on the coasts where real estate prices were increasing faster than average, and those states correspond to states with high minority populations?
Note that the CRL study that has been driving the debate and highlighted in the NAACP suit finds that for many types of loans, whites were “disadvantaged” relative to Hispanics, which would seem to count against a racial explanation (unless one believes that bankers hold a racial animus against whites and towards Hispanics) and more towards a geographic explanation.
Note also the irony that these same defendants were accused of failing to offer loans to African-Americans just a few years ago. (See also Apr. 1.)
Finally, note that the NAACP complaint is legally frivolous in at least one respect because of the lack of standing in a federal court. Domino’s Pizza, Inc. v. McDonald, 546 U.S. 470 (2006) (no § 1981 standing for third parties). (Baltimore brings no § 1981 claim.) Fair Housing Act standing is questionable, too, given the lack of allegation of injury to NAACP in particular, though that could be fairly easily rectified by an amended complaint, especially in the Ninth Circuit. Cf. Spann v. Colonial Vill., Inc., 899 F.2d 24 (D.C. Cir. 1990) (“[a]n organization cannot, of course, manufacture the injury necessary to maintain a suit from its expenditure of resources on that very suit”) (R. Bader Ginsburg, J.); Fair Housing of Marin v. Combs, 285 F.3d 899, 902 (9th Cir. 2002). N.B. that there is an amended version of the NAACP complaint that may already fix these issues. NAACP v. Ameriquest Mortgage Co., No. 8:07-cv-00794-AG-AN (C.D. Cal.). For some reason, this is not available on PACER, so I haven’t seen it.
Related: Jan. 8 (Krauss on Baltimore suit); Apr. 25 (me on third-party liability for subprime lending).
(Disclosure: I own less than $15,000 in stock in Citigroup, one of the defendants in the case.)
AGs: Don’t count sale as class-action remedy
Retailer TJX (Marshall’s, Bob’s, TJ Maxx, etc.), facing lawsuits following its exposure of more than 45 million customer records in a gigantic credit-card security breach, has agreed with class-action lawyers to a settlement that includes, among other concessions, the holding of “Customer Appreciation” sale events at its stores. Ten state attorneys general have now objected to the deal, pointing out that store sale events can and routinely do work to the benefit of the retailer and not just the buyer. Massachusetts AG Martha Coakley’s “objection was not so much with the sale itself, but with having it included as a part of the official settlement. The difference? If it’s in the official settlement, it increases how much money the consumer lawyers involved in the case get for their fee.” (Evan Schuman, “Massachusetts AG Slams TJX Consumer Settlement Sale”, EWeek, Nov. 19; Mark Jewell, “Coakley not excited about TJX’s plan for repayment”, AP/Worcester Telegram, Nov. 21; John O’Brien, “Ten AGs don’t want class action attorneys fees boosted by sale”, LegalNewsLine, Nov. 20; Keith Regan, “TJX to Shell Out $41M in Data Breach Settlement”, E-Commerce Times, Nov. 30).
The Do Not Sue list
Practically everyone likes the Do Not Call list, which instructs pesky telemarketers to stay away. Why can’t we sign up for a list of people who don’t want to be included in class actions? (Owen Lam/Blended Musings, Dec. 2).