With Random House having agreed to pay off lawyers who sued over the bogus memoir, Boston Globe columnist Alex Beam is wondering what other ways there might be to shake the class-action money tree over whoppers in the publishing world (“A Million Little Lawsuits”, May 28). Earlier: May 21, etc.
Posts Tagged ‘class actions’
CAFA: One plaintiff’s-side view
Victor M. Diaz, Jr., who has served as vice-chair of ATLA’s aviation section among other honors in representing the plaintiff’s bar, writes in Florida’s Daily Business Review taking issue with some of his colleagues’ doomsaying about the Class Action Fairness Act, which he says has proved “no calamity after all“:
More than two years after President Bush signed CAFA into law, these concerns are proving to be greatly exaggerated. CAFA should not be feared by the plaintiffs bar.
While the days of cases filed in remote, plaintiff-friendly state court venues may be over, CAFA has led to better representation of classes by plaintiffs attorneys and better outcomes for class members. On the whole, the potential shift of nearly all class actions to federal court has elevated the class action bar and meant better quality judicial review of corporate class-wide abuses.
As with Congress’s earlier reform of shareholder suits, the major effect seems to be not to choke off litigation, but to improve its average quality (cross-posted from Point of Law).
Ted on the SEC and Stoneridge
Our own Ted Frank has an op-ed in today’s Wall Street Journal. Excerpt:
…The plaintiffs’ bar is heavily lobbying the SEC to intervene in a pending Supreme Court case, Stoneridge v. Scientific-Atlanta, on the side of a gigantic expansion of private litigation.
The case’s facts are straightforward: Charter Communications purchased set-top cable boxes but got back some of the money in the form of advertising bought by the vendors. Charter executives recorded the outgoing money as a “capital expenditure” (to be depreciated over several years) but the incoming money as revenue recorded within a single year, thus falsely inflating operating cash flow. Three Charter executives went to prison over the shenanigans. Plaintiffs’ attorneys sued Charter and the executives, of course, but named as codefendants two of the vendors, Motorola and Scientific-Atlanta.
The suit makes little sense. The vendors had no say in how Charter accounted for or reported its transactions. Worse is the precedent it represents: How can a business function if it is potentially liable for hundreds of millions because those whom they trade with misreport a day-to-day transaction?…
Indeed, a 1994 Supreme Court decision on its face cuts off such “secondary liability” claims, but hope of reviving them springs eternal in the plaintiff’s bar — one reason for the P.R. campaign aimed at putting pressure on officials like SEC Chairman Chris Cox. (Ted Frank, “‘Arbitrary and Unfair'”, Wall Street Journal, May 31)(sub-only)(cross-posted from Point of Law). Plus: here’s the free AEI version.
Tax-fee class action: claimants get $75K, lawyers $538K
H.A. Berkheimer Inc., a tax-collection agency that collects revenue for hundreds of school districts and municipalities, assessed collection fees against delinquent taxpayers in addition to interest and penalties. A class-action suit challenged the fees as improper and in the resulting proposed settlement Berkheimer is slated to pay $75,700 to aggrieved customers — most of whom did not file for the $48.50 refunds — while “lawyers with Bernard M. Gross of Philadelphia would be entitled to about $538,000”. Most of a previous $2 million settlement pot will revert to Berkheimer if a judge approves the deal, while 25 percent will go to two charities, Mercer Museum’s capital campaign and the Network of Victim Assistance of Bucks County. (Jenna Portnoy, “Deal would settle case for tax collection agency”, PhillyBurbs.com, May 23).
Trial lawyers shut down customer service
One of the more subtle tricks in the plaintiffs’ bar’s arsenal is the use of the class action to shut down the customer relations of a consumer products company. A company acknowledges a problem, tries to work with its customers to resolve the problem—and lawyers whose only previous role in the case was to read newspaper headlines about the problem swoop in, file a class action, and demand that the defendant stop contacting “their clients,” nearly all of whom had no role in selecting the attorney. Later, the litigation lobby points to the role that the class action had in resolving the problem in defense of litigation as a solution, and no one remembers that the class action was what prevented the problem from being solved to consumers’ satisfaction in the first place.
A notice on the Menu Foods website posted May 24 suggests that precisely that has happened in their pet-food recall case, and Menu Foods, a victim of mislabeled food from a supplier, will not be able to compensate their customers without paying a gigantic commission to parasitic trial lawyers first.
Update: USA Today has a one-sided account reflecting a judge parroting the plaintiffs’ attorneys’ characterizations of the contacts. Without a full listing of the facts, we cannot tell whether the Menu Foods example is a good one; unfortunately, USA Today did not see fit to tell the whole story.
Update: A million little refunds
Or maybe a few thousand, depending on how many readers send in for them: a judge has approved a settlement between Random House and class action lawyers who claimed that consumers had suffered injury from purchasing writer James Frey’s fictional autobiography, A Million Little Pieces. Earlier: last April 19 and many previous posts. As Ted reported early on in the controversy, Random House long ago offered refunds to dissatisfied readers of the book. (Thomas Zambito, ” Author’s $2.3M lie”, New York Daily News, May 18; “New York Judge Tentatively Approves Refunds for Buyers of James Frey’s Fabricated Memoir”, AP/FoxNews.com, May 18).
P.S. Here’s more from WSJ Law Blog, as well as a post of theirs from when the settlement was announced.
Moody v Sears: Lawyers, $1M. Class, $2,402.
No, not $2,402 each. The $2,402 represents the total redemption of coupons by a 1,500,000-member class, or $0.0016 per class member. The Illinois state court (in the judicial hellhole of Cook County) awarded plaintiffs’ attorneys Gary K. Shipman of Shipman & Wright $1,000,000, presumably because they represented the face value of the unlikely-to-be-redeemed coupons to be in the millions of dollars. A North Carolina state judge was not impressed after he forced the forum-shopping attorneys (and defendants) to reveal the results of the settlement before dismissing a parallel lawsuit. (Moody v. Sears, Roebuck, & Co.) (via Nick Pace of RAND Institute at CL&P Blog).
Note that the widely-publicized Eisenberg/Miller class-action study, regularly cited for the proposition that state courts were no worse than federal courts in terms of awarding attorneys’ fees, would have erroneously calculated this attorney fee as 14% or so of the total settlement value, rather than the actual number of 100%. Garbage in, garbage out.
Pace mistakenly thinks that the class members were deprived of a remedy. Not really, though consumers are certainly worse off because of such litigation. Problems like this arise because a Sears is only willing to settle a frivolous consumer-fraud suit for nuisance amounts, and the plaintiffs’ attorneys just want a paycheck, so Sears is willing to pay the protection money to make the meritless lawsuit go away, since it will cost more in litigation expense to defend itself. When neither the plaintiffs’ attorneys nor the judge cares about the class members, plaintiffs’ attorneys can extract, as here, 99.9% of the settlement amount. If, on the other hand, a court ensures that the majority of a nuisance settlement must go to the ostensible plaintiffs, the plaintiffs’ attorneys will be less likely to find it profitable to bring the meritless suit and try to extort a settlement, because defendants will be more likely to find it worthwhile to defend against the suit, and the suit won’t happen in the first place. Which does make consumers better off, because then they realize a substantial part of the savings of doing business when there’s less protection money paid off to plaintiffs’ lawyers like Gary Shipman.
The Class Action Fairness Act fixes these matters—or at least it does in the cases where federal judges apply its rules and accept jurisdiction. First, CAFA effectively consolidates national class actions into a single federal jurisdiction, defendants are unable to play one plaintiffs’ attorney off of another, as happens when plaintiffs file several dozen identical and parallel class actions. Second, CAFA requires federal judges to apply meaningful scrutiny to class-action settlements and the award of attorneys’ fees, especially coupon settlements like this one. A $2402 coupon redemption with a million-dollar attorneys’ fee would have been impossible under CAFA.
When, however, judges misread the jurisdictional provisions of CAFA and remand legitimate removals back to the state courts that routinely approve such travesties, they undo the whole point of the legislation, and hurt consumers in the bargain. That Public Citizen regularly argues for such narrow readings of CAFA suggests their true interests lie with trial attorneys, rather than consumers, and that the true consumer advocates are those who support civil justice reform. (Cross-posted to Point of Law)
Clients: Lerach settled our case and never told us
That’s what three clients are alleging in court papers about Bill Lerach’s $10 million settlement in 2004 of a securities case called Yusty v. Tut Systems. Carlos Horacio Yusty, Andres Jaramillo, and Rodrigo Jaramillo say that by the time they got wind of the settlement two years later, all the proceeds had been distributed and Lerach and partner Darren Robbins of Lerach Coughlin had cashed a $2.5 million fee. The trio’s lawyer, Bruce Murphy of Vero Beach, Fla., also says he was done out of a referral fee. The class-action sultan’s (and Robbins’s) response to the charges isn’t known yet. Roger Parloff of Fortune has a full report (Legal Pad, May 13).
Turn those credit slips into gold
The Chicago law firm of Edelman, Combs, Latturner & Goodwin, LLC has some wonderful news for you:
We are looking for electronically generated credit / debit card receipts which show either (a) the card expiration date or (b) any digits of the credit/ debit card number other than the last five.
In order to protect consumers against identity theft, an amendment to the Fair Credit Reporting Act with a final effective date of December 4, 2006 requires merchants who accept credit/ debit cards and issue electronic receipts to program their machines to not show either the expiration date or more than the last 5 digits of the credit/ debit card number. The expiration date is important because a thief can use it together with the last four or five digits of the number to reconstruct the entire card number.
It is a violation to show either the expiration date or more than the last 5 digits of the card number. (We have seen some receipts where 4 or 5 other digits are shown, and that is a violation.) It is not necessary that any identity theft have actually occurred. Damages for a willful violation are $100 to $1,000 per receipt. The class representative may be able to obtain some additional compensation.
We have a number of pending cases alleging this violation and are interested in other merchants who are violating the law.
The burgeoning volume of entrepreneurial litigation over insufficiently blinded credit slips is the subject of a recent Wall Street Journal article: see Robin Sidel, “Retailers Whose Slips Show Too Much Attract Lawsuits”, Apr. 28, reprinted Cattle Network, Apr. 28. For more about name partner Daniel Edelman, see Nov. 15, 1999 (infamous BancBoston settlement), Feb. 7, 2000, and Dec. 11, 2006. The Edelman firm’s website has a long listing of notable case involvements which boasts of its role in mortgage escrow class actions, but does not mention BancBoston.
Penny for your thoughts
A common complaint about abusive class action litigation is that the lawyers rake in the big bucks while the class members walk away with pennies. Still, Overlawyered repeat offender Lakin Law Firm (many entries) may be taking it to a whole new level. The Madison Record reports:
Mark Brown of the Lakin Law Firm bargained a class action lawsuit down to a penny at a hearing before Madison County Circuit Judge Dave Hylla.
The suit alleges that in 1999, Old Kent Mortgage charged three borrowers $100 for a credit report, paid less than that for the report, and improperly retained the difference.
The problem with this theory at the hearing was that apparently Lakin didn’t have any idea how much the bank paid for the reports, couldn’t identify any fraudulent statements made by the bank, and couldn’t produce a contract that was breached. Other than that, the lawsuit seems fine, and I’m sure that each class member will be happy with his penny.
In all seriousness, given that just to bring the suit Lakin had to dig up as its client — the Stevens family — someone who had taken out a mortgage four years earlier (the mortgage was taken out in 1999, and Lakin did not bring the suit until 2003), I suspect that there won’t be a whole lot of other class members making claims anyway. What’s a little odd is that this suit was reportedly filed four years ago and apparently nothing has happened on the case yet.
Incidentally, the Stevens family seems to have very bad luck with banks and mortgages; they and the Lakin Law Firm filed another class action lawsuit against the bank over mortgage closing costs in 2004.