Overlawyered: Chronicling The High Cost Of Our Legal System

Posts Tagged ‘class actions’

Hevesi and WorldCom

With comptroller Alan Hevesi in charge, the state of New York acted as lead plaintiff (via the New York State Common Retirement Fund) in the WorldCom securities case, but according to Forbes, the large settlement that resulted may not have been such a great deal for Hevesi’s client:

“Judging by a plaintiff expert’s own estimate of shareholder losses, New York’s claim of a $317 million hit would entitle it to 1.1% of the kitty, or a mere $11 million …. Hevesi’s suit cost New York’s pension fund by deflating the value of its investments in the banks it sued. The Hevesi fund owns stakes in J.P. Morgan, Citigroup and BofA. These three banks took aftertax charges totaling $3.2 billion for WorldCom settlement costs. The fund’s pro rata share of these losses, and those of smaller-fry defendants, totes up to $13 million.”

(Neil Weinberg, “Cui bono?”, Forbes, Apr. 25).

Hevesi’s campaign ties to the private lawyers who file these suits, which have come under scrutiny before (see May 14 and Dec. 10, 2004) are again a topic of criticism in parts of the press. Lyle Roberts of 10b-5 Daily (Apr. 13) rounds up the links, including a New York Sun editorial (“Hevesi by the letter”, Apr. 12).

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Batch of reader letters

We’ve just added four more entries to our stack of reader correspondence, which constitutes its own page with a blog-like format. Among topics this time are high-speed cop chases; a reader asks equal time to bash defense lawyers; step right up and grab your class action prizes, advises a garish GoogleAd; and a family’s pipe and valve distribution business gets caught in the asbestos-litigation snare.

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“A Suit That Makes More Cents for the Lawyers”

A check for 49 cents arrives in the mail, in settlement of a class action against Bank of America. A staff writer for the L.A. Times starts digging and finds that the lawyers who filed the suit are going to swallow half the $4.2 million settlement. As for residual unclaimed funds, they’re going to a charity, but one the parties are unwilling to name. (Doug Smith, Los Angeles Times, Apr. 11). On the Schwartz v. Citibank class action, filed by the same lawyer (Brian Strange) and involving the same issues, see our coverage of Dec. 14, 2003 (letter to the editor), Jan. 10 and Jan. 16, 2004.

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Gift card shenanigans and other Madison County follies

When one uses a Wal-Mart gift card for a purchase of less than the amount of the gift card, the remainder remains on the gift card for use in future purchases. This wasn’t enough for Ashley Peach, who used two $10 gift cards to buy $18.61 worth of stuff at Wal-Mart, and was upset that she wasn’t given $1.39 in cash as change. So she’s suing, demanding punitive damages, and seeking class action status in Madison County. Her lawyers: the Lakin Law Firm. Having found gift cards such a traumatic experience, you’d think Peach would avoid them, but she has two essentially identical suits pending against K-Mart and Fashion Bug for similar misunderstandings. (Steve Gonzalez, “$1.39? Wal-Mart next in line for Peach”, Madison County Record, Nov . 7).

The Peach family are frequent Madison County litigants, with at least five suits going in the system, including a very strange suit against Granite City, where Armettia Peach paid $68,900 (including $20,000 in cash) for a house she had never seen, sued Granite City and some bystanders for allegedly failing to inspect a leaky roof, sold the house for $40,000 to a LLC that then sold it to Granite City’s mayor’s sister-in-law for $57,000–and then received a $104,000 default judgment from Granite City (including $26,000 in legal fees to the Lakin Law Firm), when the town failed to respond to the complaint. Something fishy is going on here, but one doesn’t know what, and whether Granite City officials are victims or participants in something sinister. (Steve Korris, “Plaintiff Peach awarded windfall judgment against Granite City”, Madison County Record, Mar. 31; Steve Korris, “Anatomy of Peach v. Granite City”, Madison County Record, Mar. 31; Steve Korris, “Home repairman gets trapped in legal web”, Madison County Record, Mar. 31).

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“Reduced-sugar” cereals not healthier? Sue

A San Diego mother is suing the makers of such cereals as Trix, Cocoa Puffs and Froot Loops “seeking class-action status for all consumers in the state who bought the low-sugar cereals thinking they were healthier than full-sugar versions.” The manufacturers, her suit alleges, substitute other refined carbohydrates for the missing sugar, leaving calorie count and nutritional value little changed. (“Mother sues cereal makers over ‘lower-sugar’ slogan”, AP/Pasadena Star-News, Mar. 28; Greg Moran, “Mother sues over cereal nutrition”, AP/San Diego Union-Tribune, Mar. 29; “Mother sues over ‘deceiving’ cereal labels”, ABCNews.com, Mar. 30). Among those who wonder why she couldn’t have looked more closely at the nutrition label in the first place: Christine Hurt, GeoBandy, and commenters at DrudgeRetort. See also Mr. Sun.

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Pill-splitting lawsuit

Consumers Union, the publisher of Consumer Reports and prominent member of the Litigation Lobby, recommends that readers save money on prescription drugs by buying higher dosage pills and dividing them with a pill-splitter to get the correct dosage. They’re not the only ones who try to save money this way: many HMOs implement the same policy. There’s no evidence that this has injured anyone, but plaintiffs’ lawyers sued Kaiser, anyway, claiming it was consumer fraud, and seeking half a billion dollars. Kaiser disputes the contention that the policy is mandatory; they say their policy is voluntary, and applies only to a handful of “scored” pills where differences in dosage would not be critical. Lower courts granted summary judgment on the case, and this week the California Supreme Court gave it the final coup de grace by refusing to hear an appeal. While press coverage suggests that the retroactivity of Proposition 64 could have been decided by this case, the lower courts decided it without resort to the new law, which would’ve precluded the suit in the first instance. (Dan Walters, “Businesses win twice in tort battles, but …”, Sacramento Bee/Victorville Daily Press, Mar. 9; Vicki Lankarge, “Study: Pill-Splitting Saves Money, Is Safe”, Health Care News, Dec. 1, 2002; “Kaiser sued over pill splitting”, American Medical News, Dec. 25, 2000; CJAC press release, Mar. 8; Timmis v. Kaiser Permanente, No. A102962, 2004 Cal App Unpub Lexis 11553 (Dec. 21, 2004)). More: see Jun. 13.

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Update: Judge OKs cosmetics class action settlement

“A federal judge yesterday approved a massive giveaway of free makeup and perfume at cosmetics counters across the country as part of the settlement of an antitrust lawsuit against cosmetics makers and department stores…. She also awarded $24 million in attorney’s fees to plaintiffs’ lawyers involved in the case.” (Josh Gerstein, “Judge Approves Cosmetics Settlement”, New York Sun, Mar. 9). For earlier coverage of the controversial settlement, see Jul. 21, 2003, Apr. 14, May 19, and Dec. 3, 2004, and Jan. 14, 2005.

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Helping themselves to class action funds

Federal prosecutors say they’ve caught two men masterminding unrelated complex schemes to siphon off large sums from class action settlements by falsely posing as members of the class. Richard Lagerveld was charged with mail and wire fraud after settlement administrators in two class actions mailed $9.2 million to his stated address in San Diego, which was in fact a homeless shelter. Authorities said he had a long criminal record including aliases and stolen identities; in one of the class actions, he submitted forged brokerage records to document his claim that he’d owned $145 million worth of stock in Oxford Health Plans, the target of securities litigation. In a second case, he collected a check for $2.3 million after claiming to be an owner of a fictitious company that had purchased glass from companies settling a class action. In the other case, inmate Alan N. Scott, who resides in the Schuylkill federal correctional institution in Pennsylvania, is charged with orchestrating an $8 million assortment of false settlement claims of which about $200,000 had been received as of the time of his arrest. According to the U.S. Attorney’s office, Scott used co-conspirators to correspond with claims administrators in about 90 securities class actions, “and routinely sent directions and correspondence to his co-conspirators by falsely labeling the correspondence ‘legal mail.'” (Onell R. Soto, “Ploy paid man millions, authorities say”, San Diego Union-Tribune, Jan. 18; Department of Justice press release, Feb. 9; Robert E. Kessler, “Two are charged in separate scams”, Newsday, Feb. 10; Securities Litigation Watch, Jan. 18).

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Judge slashes “figurehead” class fee

“New York’s Bernstein Litowitz Berger & Grossman and Boston’s Berman DeValerio Pease Tabacco Burt & Pucillo had asked for 7.5 percent of the settlement amount, or around $22 million, for serving as co-lead plaintiffs’ counsel in a suit against pharmaceutical giant Bristol-Myers over its $2 billion investment in biotechnology company ImClone” and over a 2002 earnings restatement (see “Won Its Case, Still Paid $300M To Settle”, Aug. 2). But federal judge Loretta Preska of the Southern District of New York cut the allowed fee to $12 million, observing that the case piggybacked on an SEC enforcement action and on statements already in the public record: “Among securities class actions, this case as a whole was neither unique nor complex.” Moreover, it “is not thirty times more difficult to settle a thirty million dollar case as it is to settle a one million dollar case.” And in a footnote, Judge Preska wrote that the 7.5 percent fee negotiated between the lawyers and their clients should not be accorded a presumption of fairness because the lead plaintiffs — which included the Teachers’ Retirement System of Louisiana, the Louisiana State Employees’ Retirement System, the General Retirement System of the City of Detroit and the Fresno County Employees’ Retirement Association — had acted as “mere figureheads” for fee-seeking lawyers. Bernstein Litowitz partner Erik Sandstedt said the intimation that the pension funds served as mere figureheads “is completely untrue”. (Anthony Lin, “Judge Halves Fees Sought in Bristol-Myers Securities Class Action”, New York Law Journal, Feb. 28).

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Beating the clock in class-action-land

The scene in certain counties of Southern Illinois shortly before the signing of the Class Action Fairness Act: “Class-action business was busy last week in Madison and St. Clair counties in anticipation of the new law. Thirty-four class actions were filed in Madison County, and 51 in St. Clair County, with some lawyers making sure Friday morning to get their suits stamped before the Bush signing.” (Paul Hampel, “Where the suits are”, St. Louis Post-Dispatch, Feb. 20).

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