- “Prices may vary” disclaimer said too small: “A Couple Is Suing Taco Bell for Overcharging Them $2.18 for Chalupas” [Jelisa Castrodale, Vice] “Bronx man sues NBC Universal over ‘unlimited’ soda refills at theme park” [Emily Saul and Natalie O’Neill, New York Post]
- An old Florida law bans the use in alcoholic beverages of grains of paradise, a spice widely available online, resulting in a class action lawsuit against makers of a well-known British gin [Baylen Linnekin]
- Post-decision Federalist Society podcast on Frank v. Gaos (Supreme Court remands on standing issue without resolving issue of cy pres adequacy) with the eponymous Ted Frank;
- “FTC’s comprehensive study finds median consumer class action claims rate is 9%” [Alison Frankel, Reuters]
- A recent Ted Frank win: “U.S. appeals court voids Google ‘cookie’ privacy settlement that paid users nothing” [Jonathan Stempel, Reuters] “Zappos data breach settlement: users get 10% store discount, lawyers get $1.6m” [Catalin Cimpanu, ZDNet] “Worse, 10% code doesn’t stack w/ existing discounts.” [@tedfrank on Twitter]
- California privacy law fuels class actions over smart speakers such as Amazon’s Alexa, Google Home and Apple’s Siri [Alicia A. Baiardo & Christine M. Mastromonaco, Class Action Countermeasures]
My new piece at Cato, citing Carissa Byrne Hessick and Benjamin Levin at Slate, discusses Sen. Elizabeth Warren’s proposal to lower the standard for criminal culpability in many white-collar prosecutions to simple negligence. It begins:
Presidential candidate and Sen. Elizabeth Warren (D-Massachusetts) wants to see more business people behind bars, and she’s not fussy about how to make that happen. In a Washington Post op-ed last week she unveiled a new Corporate Executive Accountability Act, which in her words would expand “criminal liability to any corporate executive who negligently oversees a giant company causing severe harm to U.S. families.” She says she wants top executives to know that they can be (again in her own words) “hauled out in handcuffs for failing to reasonably oversee the companies they run.”
The civil courts already hear many thousands of cases seeking damages over claims that serious harm arose from industry conduct that falls short of being reckless or deliberately wrongful. Not infrequently – as with claims over supposed “sudden acceleration” in cars, cancer from Roundup, and autoimmune disease from silicone breast implants – large sums get paid even when science finds no basis for concluding the products caused the harms alleged, such is our legal system’s tendency to tilt against business defendants as unsympathetic. Under the Warren standard, complaints that driverless cars have gotten into avoidable accidents or vaccines have caused side effects – maybe even that cheeseburgers, supersize sodas, and margaritas have worsened the harms of obesity – will put business people at risk for long prison terms. To her backers, will this count as a bug? Or a feature?
Aside from the propriety of criminalizing simple negligence, the issue is not so much that individuals as such are the wrong target for white-collar prosecution — as Stephen Bainbridge has argued, holding them personally culpable will often make more sense than prosecuting the corporate entity — as that notions of collective guilt must not be used to impute criminal culpability to others within an organization not proved to have committed wrong acts or acted with wrong mind. While the Warren proposal would march off in the wrong direction, in the Cato Handbook for Policymakers two years ago,
I contributed a chapter on white-collar prosecution with the following recommendations:
Congress and state lawmakers (and where appropriate, the president and executive branch law enforcement officials) should
- review existing law with an eye toward rolling back overcriminalization and replacing criminal penalties with civil sanctions where feasible;
- enact reforms such as the model Criminal Intent Protection Act to bolster recognition of mens rea (punishment should ordinarily require a guilty state of mind, not inadvertent noncompliance) as well as the related mistake of law defense in criminal law;
- codify the common law rule of lenity (ambiguity in law should be resolved against finding guilt), as Texas joined other states in doing in 2015;
- devise safe harbor provisions that enable economic actors to avoid criminal liability by behaving reasonably and in intended compliance with the law;
- limit agency discretion to create new crimes without an act of the legislature;
- enact guidelines to strengthen judicial oversight of deferred prosecution agreements and nonprosecution agreements (explicit court approval, not the unilateral say-so of government prosecutors, should be required for appointment of corporate monitors or the extension of time under supervision);
- enact asset forfeiture reforms such as Rep. Jim Sensenbrenner’s (R-WI) Due Process Act, including requiring that conviction be a prerequisite for forfeiture; review and, where appropriate, reduce or coordinate per offense fines and sanctions to avoid levying penalties disproportionate to the gravity of misconduct;
- prohibit, as a proposed New Mexico law would do, the allocation of settlement moneys (cy pres) to charities, nonprofits, or advocacy groups not themselves injured;
- assign penalties, forfeitures, and settlement proceeds to the public treasury or, where appropriate in certain cases, to private parties who can show specific individual injury from the offense (penalties should not fund particular government agencies in ways that incentivize zealous enforcement or insulate the agencies from appropriations oversight);
- prohibit the payment of public lawyers and forensics experts on contingency, that is, in ways dependent on case outcome or the magnitude of penalties (this principle should apply alike to career prosecutors, other staff public lawyers, experts, and outside law firms); existing contingency arrangements should be terminated; and
- impose transparent principles of selection and payment on outside contracting for legal services.
- Waco biker prosecutions — a dragnet affair in which many bystanders were hit with charges, kept in jail on unaffordable bail, and lost their jobs — end after four years with all charges dropped; many deaths resulted from police fire [Brian Doherty, Reason; earlier and more]
- “Lawsuit: You did business with someone who did business with someone who committed a crime against me, so you’re also liable.” [Ted Frank describing suit against SalesForce alleging that its business management software assisted sexually oriented online business BackPage; Mike Masnick, TechDirt]
- “Our waterways policy is crony capitalism disguised as patriotism” [George Will, syndicated/Atlanta Journal Constitution] “The Jones Act Fleet: High Costs and Limited Capabilities” [Colin Grabow, Cato at Liberty] More on the maritime protectionism law, all from Grabow at Cato: Sen. Mike Lee introduces repeal bill; extending the law further? counting the costs for Puerto Rico; production of new ship no cause for celebration. And on East Coast freight traffic congestion [Dan Ikenson and Colin Grabow, New York Post]
- If you were born yesterday, you may be the target reader for a Gannett/USA Today and Arizona Republic piece attacking model state laws, the Goldwater Institute, and the American Legislative Exchange Council (ALEC) [critical threads by Julian Sanchez and Tim Sandefur]
- On attorneys’ fees, “The English Rule and the American Rule” [Federalist Society Policy Brief video with R. Hugh Lumpkin]
- Big Lawyers On Campus: “How Class-Action Lawyers Help Their Alma Maters” [James Copland, Bloomberg Opinion on cy pres practice; earlier here, here, etc.]
- “Arkansas Passes Bill to Prevent Sale of ‘Cauliflower Rice'” [Bettina Makalintal, Vice via Anthony M. Kreis (“Carolene Products of our time”, and more on that celebrated filled-milk case]
- Ted Frank has another case raising the cy pres issues the Supreme Court just sidestepped in Frank v. Gaos [Marcia Coyle on rewards-program class action settlement in Perryman v. Romero]
- Feds recommend 12 year sentence for copyright and ADA troll Paul Hansmeier [Tim Cushing, TechDirt]
- Didn’t realize New York City still had such a substantial fur industry – much of it in the district of an elected official who’s keen to ban it [Carl Campanile, New York Post]
- “Who’s Afraid of Big Tech?” Cato conference with Matthew Feeney, Alec Stapp, Jonathan Rauch, Julian Sanchez, Peter Van Doren, and John Samples, among many others [panels one (“Big Brother in Big Tech”), two (“Is Big Tech Too Big?”), three (“Free Speech in an Age of Social Media”)]
- Looking forward to this one, due out from New York lawyer James Zirin in September: Plaintiff in Chief: A Portrait of Donald Trump in 3,500 Lawsuits [St. Martin’s Press]
- Supreme Court remands Frank v. Gaos to lower court on standing issue, thus sidestepping cy pres question; dissenting from per curiam ruling, Justice Clarence Thomas writes that cy pres payments are “not a form of relief to the absent class members and should not be treated as such (including when calculating attorney’s fees)” [opinion; Ronald Mann, SCOTUSBlog]
- New Manhattan Institute report details problems with cy pres, including its use to support ideologically fraught groups and those advancing plaintiffs’-side interests [James Copland, Trial Lawyers Inc. Update 2019: Cy Pres]
- “Apricot scrub” product was marketed as an exfoliant, court recognizes, and abrasive properties of crushed walnut shells as ingredient are feature not bug [Eric Alexander, Drug and Device Law]
- Cough drop action could provide soothing relief for counsel’s bank account [David Andreatta, Rochester Democrat and Chronicle]
- “Don’t import US-style class action abuses – think-tank” [Law Society Gazette, Ireland]
- As part of its newly active stance on class action oversight, U.S. Department of Justice intervenes in cookie labeling settlement [Amanda Bronstad, Law.com; U.S. Statement of Interest in Cowen v. Lenny and Larry’s]
“Mr. Frank [former Overlawyered blogger Ted Frank] argued his own case on Wednesday, a rarity in the Supreme Court, and he exhibited comprehensive knowledge of the law and an only occasionally halting style.” [Adam Liptak, New York Times] The transcript of oral argument, in which several Justices expressed doubt that the lower court had adequately pinned down standing issues, is here. More on Frank v. Gaos and the cy pres issues it raises: Richard Wolf/USA Today, Daniel Fisher, Jim Copland, SCOTUSBlog, Federalist Society SCOTUSBrief video; earlier here, etc.
Congratulations to Ted Frank, profiled Oct. 15 by Adam Liptak at the New York Times for arguing his own case (Frank v. Gaos, on class action settlements) before the U.S. Supreme Court. The article does not mention one of Ted’s most salient public roles, namely co-blogging for years as my most inspired recruit at Overlawyered and at Point of Law.
Frank v. Gaos is a challenge to the cy pres elements of a privacy class action against Google [Federalist Society podcast with Ted, NLJ via CEI]. Ilya Shapiro at Cato (which has filed an amicus brief) describes some of the factual background:
Attorneys’ fees of $2.125 million were awarded out of the settlement fund, amounting to 25 percent of the fund and more than double the amount estimated based on class counsel’s actual hours worked.
But no class members other than the named plaintiffs received any money! Instead, the remainder of the settlement fund was awarded to six organizations that “promote public awareness and education, and/or…support research, development, and initiatives, related to protecting privacy on the Internet.” Three of the recipients were alma maters of class counsel.
This diversion of settlement money from the victims to causes chosen by the lawyers is referred to as cy pres. “Cy pres” means “as near as possible,” and courts have typically used the cy pres doctrine to reform the terms of a charitable trust when the stated objective of the trust is impractical or unworkable. The use of cy pres in class action settlements—particularly those that enable the defendant to control the funds—is an emerging trend that violates the due process and free speech rights of class members.
James Beck at Drug and Device Law writes that the settlement in question “features just about everything we don’t like about cy pres.” Quoting:
- Excessive counsel fees – class counsel stands to walk away with fully 38% of the settlement as fees. 869 F.3d at 747.
- Lack of classwide recovery – the court declared the entire settlement “non-distributable” because, even without opposition, neither the class members nor their damages could be determined. Id. at 742.
- Excessive cy pres – nothing is more excessive than 100% ? six uninjured charities took 100% of what class counsel left behind, and the 129 million supposedly injured class members took nothing. Id. at 743.
- Rampant conflict of interest? Three of the charities were law schools – and they all had ties to counsel in the case.
Litigation industry self-perpetuation – cy pres recipients were expected solicit more lawsuits by “educat[ing]” the public and “publiciz[ing]” privacy issues. Id. at 746-47.
Oral argument before the Court will be held Oct. 31.
- Due diligence? Prosecutors say $32 million staged slip-fall ring drew on services of litigation finance firm [Matthew Goldstein and Jessica Silver-Greenberg, New York Times]
- Federalist Society podcast previews Frank v. Gaos, Ted Frank’s case on cy pres in a Google settlement;
- Will public get to look at details of $75 million class action fee that has been subject to criticism? [John O’Brien, Legal NewsLine and Max Brantley, Arkansas Times on State Street Bank and Trust settlement] Update: special master said to find attorney misconduct and recommend substantial fee refund [Chris Villani, Law360 (sub)]
- “Recent developments have let the air out of slack-fill lawsuits” [Meghana Shah, Brittany Cambre and Amber Unwala, New York Law Journal, earlier on slack fill] Theater-box candy suit: “Don’t squash our Junior Mints” [Chicago Tribune editorial]
- Tales of the Food Court: California class-action climate encourages flimsy claims against beer and bean purveyors [Greg Herbers, WLF]
- Supreme Court of Canada: commercial garage not liable for injury suffered by teen while stealing car from lot [Rankin (Rankin’s Garage & Sales) v. J.J.]
The Supreme Court has agreed to review Frank v. Gaos, a case in which Ted Frank is objecting to a Google class action settlement. [Barbara Leonard, Courthouse News; Kieren McCarthy, The Register (U.K.)] From the latter piece:
Of the $8.5m that Google has agreed to pay out, not a single cent will go to the actual users whose privacy was violated. It will instead go to the lawyers that brought the case on behalf of those users ($2.125m, no less) and a group of seven organizations that the lawyers, along with Google executives, decided should become “cy pres” recipients.
Those recipients have been controversial from the moment they were named: three of them are law schools, and just so happen to be the same law schools that the lead lawyers went to; and the remaining four are organizations that Google has repeatedly given money to, in large part because they share the same values and goals as Google itself….
His position is quite clear: the use of cy pres – pronounced, fittingly, “sigh, pray” – should be a last resort, and if used, there should be no conflict of interests or even the appearance of a conflict, for those involved in drawing up the list for who gets the money.
Dubious use of cy pres has been a regular topic here at Overlawyered, even before the years when Ted blogged here:
“When you add up all the legal fees and costs, the lawyers would come out of the settlement with more money than the class members they represented. The payout to all the lawyers involved would be about $63 million.” More details on the Anthem data breach case discussed earlier here, and Ted Frank’s role in calling it into question [Bob Dorigo Jones]
Also, for those with access, Ted has written a piece for the Wall Street Journal on the need to rein in abuse of the cy pres doctrine in disbursing lawsuit proceeds, with a suitable vehicle on the horizon:
A bipartisan coalition of 16 state attorneys general is also urging the Supreme Court to hear Frank v. Gaos. They agree that the Ninth Circuit has created a standard that will make it far too easy for attorneys to siphon millions of dollars of consumers’ money into their own slush funds. Chief Justice John Roberts has previously expressed concern about cy pres abuses. We hope the Supreme Court will protect consumers who take part in class actions from being preyed upon by their attorneys.