Chicago Class Action Attorneys and Consumer Fraud Lawyers at DiTommaso-Lubin and ChicagoLemonLaw.com Prevail in Beating Back a Summary Judgment Motion in Long Running Alleged RV Fraud Lawsuit
In a long running alleged RV fraud case, the Chicago lemon law and autofraud attorneys at DiTommaso-Lubin and ChicagoLemonLaw.com prevailed in beating back Defendant's summary judgment motion. After years of litigation in federal and state court which resulted in discovery sanctions being imposed on the RV dealer defendant for withholding a smoking gun email, the case is finally headed for a jury trial where we hope to vindicate our client's rights and obtain a substantial judgment. You can click here to obtain a copy of the full opinion:
This cause is before the Court on Defendants Barrington Motor Sales RV (“Barrington”), Bryan Bransky, and Sean Bransky’s motion for summary judgment on Plaintiff IWOI, LLC’s complaint under section 2-1005 of the Illinois Code of Civil Procedure.
The Plaintiff alleges that the Defendants sold the Plaintiff an RV that purportedly contained material defects. In addition, the Plaintiff alleges that the Defendants knew of the defects at the time of sale and omitted disclosure of the defects and actively concealed the defects from the Plaintiff. The Plaintiff filed an eight-count complaint alleging claims for (1) violation of the Illinois Consumer Fraud Act (count I – Barrington; count II – Sean Bransky; count III – Bryan
Bransky); (2) Action to Recover the Price under 810 ILCS 5/2-711(1) (count IV – Barrington); (3) common law fraud (count V – Barrington; count VI – Sean Bransky; count VII – Bryan Bransky); and (4) revocation of acceptance (count VIII – Barrington). The Court notes that the parties, by agreement and with the consent of this Court, submitted complete copies of briefs and related statements that the parties previously filed in the matter of IWOI, LLC v. Monaco Coach Corp, et al., Case No. 07 C 3453 (N.D. Ill. 2007).
Summary judgment is proper when the pleadings, affidavits, depositions, admissions, and exhibits on file, when viewed in a light most favorable to the nonmovant, fail to establish a genuine issue of material fact, thereby entitling the movant to judgment as a matter of law. 735 ILCS 5/2-1005(c); Adames v. Sheehan, 233 Ill. 2d 276,. 295-96 (2009). A genuine issue of material fact precluding summary judgment exists where the material facts are disputed, or if reasonable persons might draw different inferences from undisputed facts. Adames, 233 Ill. 2d at 296. However, summary judgment is a drastic means of disposing of litigation and should be granted only when the right of the moving party is clear and free from doubt. Adams v. N. Ill. Gas Co.; 211 Ill. 2d 32, 43 (2004). A party opposing a summary judgment motion is not required to prove their case; but, it is under a duty to present a factual basis which would arguably entitle it to judgment in their favor, based on the applicable law. Soderlund Bros. v. Carrier Corp., 278 Ill. App. 3d 606, 615 (1st Dist. 1995).
Barrington moves for summary judgment on count VIII arguing that the Plaintiff’s purported acceptance of the RV, with knowledge of the alleged defects, bars the Plaintiff’s revocation claim. In contrast, the Plaintiff contends that material facts exist as to Barrington’s (1) knowledge of all of the RV’s purported defects; (2) knowledge regarding the severity of the defects; and (3) that acceptance was based on the assurances of Barrington that the defects were cured.
Section 2-608(1) of the Illinois Uniform Commercial Code states that: “[t]he buyer may revoke his acceptance of a ... commercial unit whose non-conformity substantially impairs its value to him if he has accepted it: (a) on the reasonable assumption that its non-conformity would be cured and it has not been seasonably cured; or (b) without discovery of such non-conformity if his acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller’s assurances.” 810 ILCS 5/2-608(1). Whether revocation is justified is ordinarily a question of fact to be determined by the circumstances of the particular case. Boysen v. Antioch Sheet Metal, Inc., 16 Ill. App. 3d 331, 332 (2nd Dist. 1974). The Plaintiff attached the affidavit of Robert Woischke, the Plaintiffs manager who
was involved in purchasing the RV on behalf of the Plaintiff. The affidavit lists the purported defects that Mr. Woischke was allegedly unaware of at the time he “accepted” the RV. Therefore, the Court finds that questions of fact exist as to whether the Plaintiff was justified in revoking his acceptance.
Barrington also argues that the under the purchase agreement, the Plaintiff purchased the RV “AS IS,” and therefore, because Barrington delivered the good described in the contract, the good can neither be deemed nonconforming nor can there be grounds for the Plaintiff to revoke acceptance. “When the evidence unequivocally demonstrates that the substantially defective nature of the vehicle clearly impaired its value to the Plaintiffs ... revocation of acceptance is appropriate even if the dealer has properly disclaimed all implied warranties.” Blankenship v. Northtown Ford, Inc., 95 Ill. App. 3d 303, 305-07, 420 N.E.2d 167, 50 Ill. Dec. 850 (4th Dist. 1981).
The Court finds that questions of fact exist regarding Barrington’s argument for the following reasons. First, the the trier of fact must determine whether the alleged defects in the goods caused substantial impairment to the buyer. See GNP Commodities, Inc. v. Walsh Heffernan Co., 95 Ill. App. 3d 966, 978 (1st Dist. 1981) (substantial impairment is measured in terms of the particular needs of the buyer). Specifically, the Court finds that questions of fact exist regarding whether or not the evidence demonstrates that the purported defects in the RV substantially impaired its value to the Plaintiff. Similarly, factual question of whether the attempted revocation of acceptance was timely or whether delay in buyer’s attempted revocation of acceptance was reasonably induced by the seller’s continued assurances that repairs would be successful must also be resolved. See Id. at 974 (the reasonable time for revocation of acceptance may be extended if the seller gives continuous assurances). The Court finds that because factual questions regarding whether or not the defects had a substantial impairment on the Plaintiff’s value must first be determined, the Court is unable to determine, as a matter of law, whether or not the disclaimer precluded the Plaintiff’s ability to revoke his acceptance.
Secondly, the Court finds that questions of fact exist regarding whether or not Barrington delivered the RV as required under the purchase agreement because presumably, the purchase agreement required Barrington to tender a fully conforming RV, which based on the allegations within the Plaintiff’s complaint, Barrington did not. Therefore, Barrington’s motion for summary judgment on count VIII of the Plaintiff’s complaint is denied.
The Plaintiff argues that the Defendants are not entitled to summary judgment on counts I-III because questions of material fact exist as to what the
Defendants purportedly concealed and failed to disclose to the Plaintiff, including
(1) the existence of unfixable defects on the RV and (2) improper modifications made in an attempt to mask the defects. In order to state a cause of action under the Illinois Consumer Fraud and Deceptive Business Practices Act (“Consumer Fraud Act”), a plaintiff must show: (1) that the defendant engaged in a deceptive act or practice; (2) that the defendant intended the plaintiff to rely on the deception; (3) that the deception occurred in the course of conduct involving trade or commerce; and (4) actual damage to the plaintiff; (5) proximately caused by the deception. Capiccioni u. Brennan Naperville, Inc., 339 Ill. App. 3d 927, 933 (2nd Dist. 2003). An omission or concealment of a material fact in the conduct of trade or commerce constitutes consumer fraud. Connick v. Suzuki Motor Co., Ltd., 174 Ill. 2d 482, 501 (1997). Concealment is actionable where it is employed as a device to mislead. First Midwest Bank, N.A. v. Sparks, 289 Ill. App. 3d 252, 257 (2nd Dist. 1997). A car dealer that “conceals, suppresses, or fails to disclose a material fact to a consumer violates section 2 of the [Consumer Fraud Act] if the dealer intended the consumer to rely upon the concealment, suppression, or omission.” Totz v. Cont’l Du Page Acura, 236 Ill. App. 3d 891, 903 (2nd Dist. 1992).
The Court finds that questions of material fact exist regarding whether the Defendants knew that the RV had unfixable defects. In addition, the Court finds that if the Defendants knew of unfixable defects, questions of material fact exist regarding whether the Defendants concealed and failed to disclose them to the Plaintiff. Further, the Court finds that questions of fact exist regarding Defendant Bryan Bransky’s liability under the Consumer Fraud Act because it is unknown whether, at the time he prepared and signed an inspection report stating that there were no defects to the RV, he knew that unfixable defects existed on the RV. Therefore, the Defendants’ motion for summary judgment on counts I - III of the complaint is denied.
The Court notes that the Defendants moves for summary judgment on counts V – VII by including a one sentence citation, without a supporting argument, to an Illinois Appellate Court opinion regarding the element of justifiable reliance. The Court finds that the Defendants failed to meet their burden of establishing that no questions of material fact exist regarding counts V –VII. Therefore, the Defendants’ motion for summary judgment on counts VI – VII of the complaint is denied.
For the foregoing reasons, it is hereby ORDERED:
(1) Barrington’s motion for summary judgment on count VIII of the Plaintiff’s complaint is DENIED;
(2) Defendants’ motion for summary judgment on counts I - III of the Plaintiff’s complaint is DENIED;
(3) Defendants’ motion for summary judgment on counts VI - VII of the complaint is DENIED;
(4) The parties have until February 22, 2013 to pick up the unmarked courtesy copies tendered to the Court, otherwise they will be discarded;
(5) This case is continued for a case management date of March 1, 2013 at 9:30 a.m. without further notice.
DiTommaso-Lubin's Chicago Class Action Attorneys Will Fight Against Unethical Confidentiality Provisions -- CBA Advisory Opinion Concludes That Confidentiality Provision Used By Car Dealer Attorneys in the Chicago Area May Be Unethical
Under the First Amendment to the Constitution and lawyers' ethics rules, the public and litigants have a right to know about about matters that are resolved in our court and litigation system. For instance a car dealer who repeatedly engages in consumer fraud, bait and switch and false advertising or who regularly sells lemon cars should not be able to hide litigation about its misconduct from the public though use of confidential settlement agreements. This is particularly true because the Supreme Court has allowed contracts of adhesion to force consumers to arbitrate claims in secret forums against big business such as car dealers and other businesses such as cell providers and cable television companies. The combination of secret arbitration proceedings and of defendants using confidentiality clauses in settlement agreements to hide misconduct that has been exposed through litigation is keeping misconduct by many businesses secret.
In a recent case our firm litigated a so called pro-consumer rights law firm that regularly litigates consumer fraud cases on behalf of consumer victims used such a confidentiality clause to refuse to cooperate and force us to go to court to uncover the details of repeated false advertising engaged in by a business whose pattern of misconduct had already been exposed through extensive litigation. These so called pro-consumer rights law firm had documents that were not publicly available which put the lie to false testimony provided by the owners of the deceptive business. These lawyers in this firm, who have a practice that should make them sympathetic to protecting consumer rights and freedom to obtain information about public lawsuits, participated in trying to hide the very misconduct that they had litigated to expose. This type of conduct according to a recent Chicago Bar Association ethics advisory opinion violates lawyer ethics rules.
At the request of DiTommaso-Lubin's long time co-counsel Dmitry Feofanov of ChicagoLemonLaw.com , the Chicago Bar Association just issued the below ethics advisory opinion concluding that use of certain confidentiality provisions in consumer rights, class action and other important litigation are unethical under Illinois attorney ethics rules. These same rules apply in many other states. There has been a recent trend among defendants to demand these confidentiality provisions.
You can click here for a copy of the opinion.
Below is the full text of this important advisory opinion in full:
Chicago Bar Association
Informal Ethics Opinion 2012-10
Committee on Professional Responsibility
The Professional Responsibility Committee of the Chicago Bar Association has issued the following informal legal ethics opinion as a public service to aid the inquiring lawyer in interpreting the Illinois Rules of Professional Conduct. The opinion represents the judgment of a member or members of the Committee and does not constitute an official act of the Chicago Bar Association. The opinion is not binding upon the Attorney Registration and Disciplinary Commission or on any court and should not be relied upon as substitute for legal advice.
The Committee has received the following inquiry:
(1) Is the confidentiality provision of the proposed settlement agreement attached
hereto as Exhibit A ethical under Illinois Rule of Professional Conduct 3.4(f)?
(2) Is the confidentiality provision of the proposed settlement agreement attached
hereto as Exhibit A ethical under Illinois Rule of Professional Conduct 5.6(b)?
(3) May a defendant's lawyer, as part of settlement discussions, demand that the
settlement agreement include a provision that prohibits plaintiffs counsel
from disclosing publicly available facts about the case on plaintiffs counsel's
website or through a press release?
Inquiry 1: Settlement Agreement Non-Cooperation Provisions and Rule 3.4(f)
Illinois Rule of Professional Conduct 3.4(f) states that a "lawyer shall not. . . request a person
other than a client to refrain from voluntarily giving relevant information to another party" unless
that person is a relative or agent of the client and the lawyer reasonably believes that the person's interests will not be adversely affected by refraining from disclosure. I I I . R. PROF'L CONDUCT R. 3.4(f) (2010). As the comments to Rule 3.4 explain, the rule is based on the belief that "[fjair competition in the adversary system is secured by prohibitions against destruction or concealment of evidence, improperly influencing witnesses, obstructive tactics in discovery
procedure, and the like." Id. cmt. 1.
Settlement agreements are not exempt from Rule 3.4(f). S.C Ethics Advisory Comm. Op. 93-20
(1993). Therefore, when negotiating a settlement agreement, a lawyer cannot ethically request
that the opposing party agree that it will not disclose potentially relevant information to another
party. Id. The Committee believes that "another party" in Rule 3.4(f) means more than just the
named parties to the present litigation. Rather, it should be interpreted more broadly to include
any person or entity with a current or potential claim against one of the parties to the settlement
agreement. A more narrow interpretation would undermine the purpose of the rule and the proper functioning of the justice system by allowing a party to a settlement agreement to conceal important information and thus obstruct meritorious lawsuits.
Here, the defendant has proposed a settlement provision that would prohibit the plaintiff from,
among other things, disclosing the "existence, substance and content of the claims" and "all
information produced or located in the discovery processes in the Action" unless "disclosure is
ordered by a court of competent jurisdiction, and only if the other party has been given prior
notice of the disclosure request and an opportunity to appear and defend against disclosure . . ."
That proposed settlement provision therefore precludes the plaintiff from voluntarily disclosing
relevant information to other parties. As a result, it violates Rule 3.4(f) and a lawyer cannot
propose or accept it. I I I . R. PROF'L CONDUCT R. 3.4(f); S.C. Ethics Advisory Comm. Op. 93-20 (1993).
Inquiry 2: Settlement Agreement Confidentiality Provisions and Rule 5.6(b) llinois Rule of Professional Conduct 5.6(b) states that a "lawyer shall not participate in offering or making . . . an agreement in which a restriction on the lawyer's right to practice is part of the settlement of a client controversy." I I I . R. PROF'L CONDUCT R. 5.6(b).There are three main public policy rationales for Rule 5.6(b): (i) to ensure the public will have broad access to legal representation; (ii) to prevent awards to plaintiffs that are based on the value of keeping plaintiffs' counsel out of future litigation, rather than the merits of plaintiffs case; and (iii) to limit conflicts of interest.
By its own terms, Rule 5.6(b) plainly applies to direct restrictions on the right to practice law.
Moreover, certain indirect restrictions on the right to practice law violate Rule 5.6(b) as well,
namely, a lawyer agreeing not to bring future claims against a defendant, and a number of ethics
authorities have determined that some confidentiality provisions in settlement agreements violate
According to the American Bar Association's Ethics Opinion 00-417, a provision in a settlement
agreement that prohibits a lawyer's future "use" of information learned during the litigation
violates Rule 5.6(b), because preventing a lawyer from using information is no different than
prohibiting a lawyer from representing certain persons. ABA Standing Comm. on Ethics &
Prof 1 Responsibility, Formal Op. 00-417 (2000). That same opinion further determined that a
settlement provision that prohibits a lawyer's future "disclosure" of such information generally is
permissible, because without client consent the lawyer already generally is foreclosed from
disclosing information about the representation. Id.
However, not all limitations on the disclosure of information are ethical. Rather, as several
authorities have stated, whether a settlement provision restricting a lawyer's "disclosure" of
information violates Rule 5.6(b) depends on the nature of the information. Numerous ethics
authorities have determined that settlement provisions may prohibit a party's lawyer from
disclosing the amount and terms of the settlement (provided that information is not otherwise
known to the public), because that information generally is a client confidence and consequently
is required by the rules of professional conduct to be kept confidential absent client consent.
D.C. Bar Ethics Op. 335 (2006); N.Y. State Bar Ass'n Comm. on Prof 1 Ethics Op. 730 (2000);
N.D. State Bar Ass'n Ethics Comm Op. 97-05 (1997); Col. Bar Ass'n Ethics Comm. Op. 92 (1993); N.M. Bar Ass'n Advisory Ops. Comm. Op. 1985-5 (1985). On the other hand, ethics
authorities have found that a settlement agreement may not prohibit a party's lawyer from disclosing information that is publicly available or that would be available through discovery in
other cases. D.C. Bar Ethics Op. 335 (2006); N.Y. State Bar Ass'n Comm. on Prof 1 Ethics Op.
730 (2000); N.D. State Bar Ass'n Ethics Comm. Op. 97-05 (1997).
Based on the foregoing authority, the Committee believes that under Rule 5.6(b), a settlement
agreement may not prohibit a party's lawyer from using information learned during the instant
litigation in the future representation of clients. The Committee agrees with the American Bar
Association that prohibiting a lawyer from using such information essentially is no different than
prohibiting a lawyer from representing certain clients in the future, and thus such a settlement
provision is an impermissible restriction on the practice of law in violation of Rule 5.6(b).
In addition, the Committee believes that pursuant to Rule 5.6(b) a settlement agreement may not
prohibit a party's lawyer from disclosing publicly available information or information that
would be obtainable through the course of discovery in future cases. The Committee agrees with
the District of Columbia Ethics Committee, and other ethics authorities cited above, that drawing
such a line strikes an appropriate balance between the genuine interests of parties who wish to
keep truly confidential information confidential and the important policy of preserving the
public's access to, and ability to identify, lawyers whose background and experience may make
them the best available persons to represent future litigants in similar cases.
Applying those principles here, the Committee believes that the settlement provision as currently
drafted does not comply with Rule 5.6(b). While it is permissible for the settlement agreement to
prohibit the disclosure of the "substance, terms and content of the settlement agreement
(assuming that information is not otherwise publicly known), the settlement agreement violates
Rule 5.6(b) because it broadly forecloses the lawyer's disclosure of information that appears to
be publicly available already, such as the fact that a lawsuit was filed and certain claims were
asserted, as well as other information that could be obtained (and in fact was obtained) in
discovery. The settlement agreement therefore should be re-written to permit the lawyer's use of
information learned during the dispute and to permit the lawyer's disclosure of publicly available
information and information that would be available through discovery in other litigation.
Inquiry 3: Settlement Agreement Restrictions on Attorney Advertising and Rule 5.6(b)
Based on the principles discussed above, the Committee believes that under Rule 5.6(b), a
settlement agreement may not prohibit a party's lawyer from disclosing publicly available facts
about the case (such as the parties' names and the allegations of the complaint) on the lawyer's
website or through a press release. See, e.g., D.C. Bar Ethics Op. 335 (2006).
Dated: February 12,2013
CHICAGO BAR ASSOCIATION
PROFESSIONAL RESPONSIBILITY COMMITTEE
EXHIBIT A - Proposed Confidentiality Provision in Settlement Agreement
8. Plaintiff and his counsel agree that the existence, substance and content of the
claims of the Action, as well as all information produced or located in the discovery processes in
the Action shall be completely confidential from and after the date of this Agreement. Similarly,
the existence, substance, terms and content of this Agreement shall be and remain completely
confidential. Plaintiff shall not disclose to anyone any information described in this paragraph,
except: (a) if disclosure is ordered by a court of competent jurisdiction, and only if the other
party has been given prior notice of the disclosure request and an opportunity to appear and
defend against disclosure and/or to arrange for a protective order; (b) Plaintiff may disclose the
contents of this Agreement to his attorneys, accounting and/or tax professionals as may be
necessary for tax or accounting purposes, subject to an express agreement to become obligated
under and abide by this confidential and non-disclosure restriction; and (c) Plaintiff may disclose
that the Action has been dismissed.
As consumers, we are all familiar with the boilerplate language at the end of a standard form contract. Whether it is a cell phone agreement, real estate contract, or a car loan document, all form contracts include boilerplate fine print. Although consumers skim over these provisions, paying little attention to their significance, the fine print boilerplate provisions are actually quite important. It is important that consumers understand the legal significance of boilerplate provisions, so that they can understand their legal rights and obligations.
The following is a list of 5 common boilerplate provisions and their legal significance:
1. Choice of law. Most contracts include a provision that stipulates which laws will apply in the event that there is a dispute between the parties. Often times, state law will dictate that a contract should be determined according to the laws of the place where it was performed or executed, but given our reliance on electronic communications and document execution, it is often unclear where a contract was executed or where it is performed. Accordingly, the boilerplate language will stipulate which state or country’s law will be used to interpret the contract.
2. Jurisdiction. This boilerplate provision will stipulate the jurisdiction in which a lawsuit may be brought in the event that a dispute arises.
3. Venue. The fine print provision regarding venue governs which courts have the authority to hear and decide any business disputes regarding the contract. For instance, just because a contract dispute is to be governed according to Illinois law, the case may not necessarily be heard in an Illinois court depending on the circumstances of the contract and the dispute. The venue boilerplate language makes clear which state or federal court(s) have the authority to hear any disputes regarding the contract.
4. Attorney fee clauses. In some states, boilerplate provisions allowing for unilateral attorneys are allowed. Other states apply reciprocity for unilateral attorney fee provisions so that if one party is allowed to recover attorney fees in a successful claim, the other party is allowed to recover attorney fees, as well. Although attorney fee provisions are relatively common boilerplate language, there is no “one-size-fits-all” approach to attorney fee provisions.
5. Arbitration. Many form contracts include arbitration clauses that require parties to submit to arbitration in the event of a dispute. Arbitration clauses can become particularly complex when claims are brought as part of a class action and the boilerplate language provides that the parties must submit to arbitration. The U.S. Supreme Court recently decided in the landmark decision AT& Mobility v. Concepcion that the terms of an arbitration provision cannot be invalidated as unconscionable because the provision contained a class action waiver. The extent to which the AT&T Mobility decision is applicable is still in flux, however, so it is advisable to seek legal counsel regarding the practical effects of a particular arbitration provision if you have any doubts.
The Chicago consumer protection attorneys at DiTommaso-Lubin focus on representing clients in a wide variety of business law disputes, including disputes regarding the application of consumer contracts and boilerplate fine print language. Contact our office at (877) 990-4990 or (630) 333-0000 to schedule an appointment with one of our knowledgeable Chicago consumer protection attorneys.
While this blog frequently discusses issues regarding consumer rights in the event the consumers purchase a faulty product, it is equally important for companies to provide their consumers with full disclosure regarding their return policies. This is the issue at hand in a class action lawsuit against Toys “R” Us for allegedly failing to provide customers with full refunds on items purchased with promotional gift cards or discounts.
Allegedly, Toys “R” Us customers who purchased items from the store that offered free gift cards, buy-one-get-one-50-percent-off discounts or other benefits received less money than the full purchase price when they went to return the items.
Laura Maybaum, the lead plaintiff in the case, purchased $75 worth of Toys “R” Us products and received a $10 gift card. When she later returned one of the toys, the toy company allegedly refused to pay the full purchase price.
Under California law, retailers must give no less than full cash or credit refunds unless a more restrictive policy has been announced.
A California judge has recently approved a $1.1 million settlement in the case. Under the settlement, Class Members will receive a voucher for $10 off a purchase of $50 or more. The toy company has also agreed to provide more disclosure of its return policy for merchandise bought as part of a promotion. One of the ways they intend to do this is by putting the disclosure on point-of-sale displays.
Class Members include all California consumers who purchased toys from Toys “R” Us since January 1, 2008 that qualified for a promotion and then returned one or more items.
As consumers become increasingly health-conscious, we see more lawsuits against food manufacturers who label their products as “natural” when, in fact, they may have highly processed ingredients.
Such is the case in a lawsuit currently facing the Northern District of California. Two consumers, Lauren Ries and Serena Algozer have filed a class action on behalf of all similarly situated consumers against AriZona iced tea. They argue that the “natural” label on the beverages is deceptive, because they allegedly contain high fructose corn syrup and citric acid.
Ms. Ries claims she purchased an “All Natural Green Tea” at a gas station because she was thirsty and was looking for an option which would be healthier than soda. Ms. Algozer says she purchased several AriZona iced teas over the years, but neither plaintiff remembers the prices, nor do they have receipts.
Ms. Ries and Ms. Algozer filed for a class action under the Federal Rule of Civil Procedure 23(b)(2). This Rule is a little more lenient than Rule 23(b)(3), under which the commonality hurdle would have been much higher. As it is, potential class members only need to satisfy “minimal commonality” in order to qualify.
While this works in favor of the plaintiffs towards attaining class certification, it prevents them from collecting any monetary damages. The lawsuit was filed seeking an injunction against using the word “natural” on the product’s packaging, as well as restitution for their purchases of the mislabeled iced tea. However, the same “minimal commonality” requirements which allow this class to gain certification also prevent the class from claiming any monetary damages. Therefore, Judge Seeborg of the Northern District of California has partially certified the class for an injunction, but refused to certify the class to seek restitution for their purchases.
California Federal Court Dismisses Class Action Lawsuit Claiming Unpaid Commissions - Park v. Morgan Stanley & Co., Inc.
The United States District Court for the Central District of California dismissed a class action claim brought by a financial advisor employed by a major financial services company. In Park v. Morgan Stanley & Co., Inc., the plaintiff claimed breach of contract and violation of California’s Unfair Competition Law (UCL), based on allegations that the defendant failed to pay commissions owed to plaintiff and other employees. The court ruled that the plaintiff failed to plead sufficient facts to support his claim for breach of contract, and that the UCL claim lacked support as a result.
The plaintiff was employed by the defendant as a financial advisor by Morgan Stanley & Co., Inc. Part of his job involved the sale of financial products to investors. He received commission payments from the defendant as compensation for sales, in amounts based on an “applicable commission grid.” This grid was allegedly contained in a “written agreement” between the plaintiff and the defendant that the court described in its order as “unspecified.” According to the plaintiff, the defendant said that it would base commissions on the full amount of revenue received for the financial products sold. The plaintiff alleged that the defendant took a portion of the revenue received before applying the commission grid, thus reducing the total amount of the commissions paid to the plaintiff and other employees.
The plaintiff filed a federal class action lawsuit on November 15, 2011, claiming breach of contract and violations of the UCL. The lawsuit alleged that the defendant’s policies knowingly denied earned compensation to certain employees, resulting in breach of contract and unjust enrichment to the defendant. The defendant filed a motion to dismiss the claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure, asserting that the plaintiff had not stated a cause of action on which the court could grant relief. The court cited precedents from the U.S. Supreme Court and the Ninth Circuit Court of Appeals to establish that, in order to defeat the defendant’s motion, the plaintiff needed to demonstrate enough allegations of fact to make his claims facially plausible. The court found that the plaintiff did not meet this standard, and it granted the defendant’s motion to dismiss.
The Seventh Circuit Federal Court of appeals in a succinct and simply worded opinion by Judge Posner blew much needed fresh air into class action litigation by approving certification of class actions against Sears for front loading washing machines which are allegedly prone to mold or which had an allegedly defective controller. Judge Posner correctly concluded that machines with these type of uniform alleged defects are worth less than machines in correct working order and that consumers are therefore entitled to pursue refunds or other compensation for their alleged damages. Judge Posner correctly noted that class actions make sense to rectify consumer rights involving mass product defects which are essentially uniform but the damage recoveries to individual consumers would be too small to justify litigation. He made short shrift of the parade of claimed individual issues that defendants always claim exist to defeat class certification.
The class action suits which Posner considered involved alleged defects in Kenmore-brand Sears' washing machines sold in periods beginning in 2001 and 2004. One asserted a defect that causes mold; the other asserted a defect that stops the machine inopportunely. The district court denied certification of the class complaining of mold and granted certification of the class complaining of sudden stoppage. The Seventh Circuit affirmed certification of the stoppage claims and reversed denial of certification for the mold claims. Rule 23(b)(3) conditions maintenance of a class action on a finding “that the questions of fact or law common to class members predominate over any questions affecting only individual members.” The basic question in the litigation is: were the machines defective in permitting mold to accumulate and generate noxious odors? The question is common to the entire mold class, although the answer may vary with the differences in design. The individual questions are the amount of damages owed particular class members. It is more efficient for the question whether the washing machines were defective to be resolved in a single proceeding than for it to be litigated separately in hundreds of different trials.
You can read the full opinion here.
This opinion should swing the pendulum towards the middle again and end trial courts from reflexively finding hypothetical individual issues to destroy the chances of cases that truly justify class action treatment from proceeding which has been occurring all too frequently in recent years. It should breathe new life into class actions which can help protect consumers from mass wrongdoing where the damages are too small to justify individual consumer lawsuits. Without the threat of class actions, business entities have far less incentive to correct mass product defects if a cost benefit analysis would make it easier for them to ignore resolving the issues in a fair manner. However, the Supreme Court's recent decision to allow businesses, including disreputable ones, to force consumer to sign arbitration agreements eliminating consumer rights to bring class actions allows for an escape hatch from this decision which will continue to harm consumer rights unless Congress acts to prevent forced arbitration of consumer claims. Such congressional action is very unlikely.
Forced arbitration precludes class actions and also forces consumers to arbitrate their individual cases outside of court sometimes in front of rigged or biased arbitration outfits that retain unqualified arbitrators and favor their repeat business customers. While JAMS and American Arbitration Association ("AAA") are extremely reputable arbitration organizations that provide forums, which in our opinion can be equal or superior to courts, our firm is now seeing sleazy businesses such as used car dealers forcing consumers to arbitrate claims in front of unfair business oriented arbitration organizations that provide kangaroo courts where consumers rights are trampled on and the business firms that pay these organizations are rewarded with unfair and favorable verdicts in cases where the evidence of misconduct is clear cut. Lawyers will avoid taking cases when these incompetent and pro-business arbitration organizations are selected in adhesion contracts created by used car dealers and other disreputable businesses. Without lawyers to represent them, consumers will not only have lost the protection of the court system but they will not be able to retain counsel to even bring their cases. Legislatures need to act to police these private court systems run by disreputable and biased organizations and to ensure that arbitration organizations that hear consumer claims are all legitimate outfits like the AAA and JAMS.
Since so many businesses are forcing consumers to opt out of class actions and to arbitrate claims on an individual basis, the full benefit of Judge Posner's efficiency analysis for allowing class actions to proceed will unfortunately be lost. Our state and federal legislative bodies need to act to reopen the courthouse doors for vindicating consumer rights by ending mandatory arbitration in consumer contracts or at least to create government oversight bodies to drive out disreputable arbitration outfits that businesses are using to deny consumer rights. The government regulates lawyers and judges, but these disreputable and incompetent arbitration organizations lack the same regulation, which oftentimes means unjust results for consumers.
A U.S. District judge in Pennsylvania dismissed a woman’s products liability claim due to a lack of sufficient facts in her pleadings to support her claims. In Osness v. Lasko Products, Inc., an Illinois woman brought a putative class action against a company for several consumer rights causes of action. The plaintiff alleged that the company knew about certain defects in a line of box fans it manufactured, but failed to warn consumers. The company’s motion to dismiss argued that the plaintiff failed to allege facts that supported any of her claims.
Lasko Products (“Lasko”), a Pennsylvania-based company, manufactures box fans for home use. In 2006, the Consumer Product Safety Commission (CPSC) announced a recall of about 5.6 million Lasko fans. The recalled fans would have been sold to the public from September 2000 until February 2004. The CPSC announced the recall after receiving reports of fires caused by electrical problems with the fan’s motor.
The plaintiff, Deborah Osness, alleged that Lasko continued to produce fans with the same defect. This led to a second recall of fans by the CPSC in March 2011, covering fans sold to consumers from July 2002 until December 2005. Both recalls occurred after the fans’ two-year warranties expired, according to the plaintiff, so Lasko did not offer a refund. Instead, it offered a “cord adapter” that eliminated the risk of fire but, according to the plaintiff, did not fix the underlying electrical problem. The electrical defect could cause the fan to blow a fuse, allegedly making it unusable.
The Justice Department is threatening to sue Apple and five major publishers for allegedly colluding to raise the price of digital books. Apple persuaded publishers, including Harper Collins, Penguin and Simon and Schuster, to change how they price their e-books before the launch of the first iPad, according to The Wall Street Journal.
"Location, location, location" isn't just a mantra for real estate agents and house hunters. When it comes to litigation, venue is an important issue to consider for both plaintiffs and defendants alike. In Westwood Apex v. Contreras, the Court of Appeal for the Ninth Circuit explains an important federal law bearing on venue and, in particular, a class action defendant's ability to change it.
Westwood Apex, a subsidiary of the for-profit higher-education institution Westwood College (Westwood) which operates campuses in 14 states including California, filed a breach of contract action against Jesus Contreras in state court, seeking to recover roughly $20,000 in unpaid student loan debt. In response, Contreras filed a class action counterclaim on behalf of all current and former Westwood students against the school as well as a number of affiliated entities alleging fraud as well as unfair and deceptive business practices in violation of various California consumer protection laws.
All of the counterclaim defendants except Westwood filed a notice of removal, transferring the action to a federal court, the District Court for the Central District of California. The Defendants asserted that removal was appropriate under a federal law called the Class Action Fairness Act (CAFA). The law grants federal courts jurisdiction over class action lawsuits where the amount in controversy exceeds $5 million and the opposing parties are minimally diverse (at least one plaintiff must live in a different state than one defendant).
After issuing an order to show cause as to why the case should not be removed, the District Court remanded the case back to the state court, ruling that CAFA does not permit a counterclaim defendant to remove an action to federal court. On appeal, the Ninth Circuit upheld this decision and the underlying reasoning.
Enacted in 2005, CAFA - codified at 28 U.S.C. § 1453 - was intended to fight perceived abuses (so-called "junk lawsuits") in the class action litigation process. Although the statute allows "any defendant" to remove a qualifying class action, the Court held that it does not extend the removal power to counterclaim defendants. "[A] counterclaim defendant who is also a plaintiff to the original state action may not remove the case to federal court," the Court ruled, citing the Supreme Court's 1941 decision in Shamrock Oil & Gas Corporation v. Sheets as well as the Ninth Circuit's more recent opinion in Progressive West v. Preciado (2007). As a result, the Court upheld the District Court's ruling, leaving the action in state court.
Chicago Class Action Attorneys at DiTommaso-Lubin Obtain Certification of a Class Action Against Abercrombie & Fitch For Refusing to Honor Promotional Cards Which Say on Their Face They Have No Expiration Date
The law firm of DiTommaso-Lubin on behalf of a class of Abercrombie & Fitch customers recently obtained certification of a class-action against Abercrombie regarding $25 promotional cards with no expiration date on the face of the cards. Abercrombie will not honor the cards any longer. Customers obtained the cards in a promotion which required a $100 purchase to receive the $25 cards. The cards came in a paper sleeve which stated a short use period of just a few months. However, the card itself stated that it had no expiration date.
The Federal District Court for the Northern District of Illinois certified a nationwide breach of contract class action based on the Class's position that the card is a contract. It is the Class's position that contractual term of no expiration date on the card itself trumps the sleeve either because the sleeve is mere advertising or because when two terms in a contract conflict the contract should be construed against the entity that drafted it -- in this case Abercrombie & Fitch. The Court has not yet made a decision on the merits of the case. You can read the Court's decision by clicking here. The 7th Circuit Federal Court of Appeals rejected Abercrombie's request to hear an immediate appeal on the class-certification decision.
DiTommaso-Lubin is also representing a consumer of Abercrombie's sister company Hollister in an identical putative class action lawsuit involving the same promotion. The Court has not yet certified a class in that case.
If you are a member of the class alleged in Hollister case, you can contact DiTommaso-Lubin for additional information about participating as a class representative.
Claims for trademark infringement and false advertising under the Lanham Act do not apply to allegedly false assertions of “authorship of a creative work,” according to the U.S. District Court for the Northern District of Illinois. In M. Arthur Gensler, Jr. & Associates, Inc. v. Jay Marshall Strabala, the court dismissed a Lanham Act suit based on claims of authorship of architectural designs, but suggested that a copyright claim might be more appropriate.
The plaintiff, M. Arthur Gensler, Jr. & Associates, Inc. (“Gensler”) is a design firm with offices in multiple countries. It employed the defendant, Jay Marshall Strabala (“Strabala”) as an architect from 2006 to 2010. Gensler sued Strabala under the Lanham Act and two Illinois deceptive trade practice statutes. Strabala moved the court to dismiss Gensler’s suit for failure to state a claim for which relief may be granted, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The court agreed and dismissed the case.
In considering a 12(b)(6) motion, a court must consider all of a plaintiff’s “well-pleaded factual allegations” as true. While Strabala was an employee of Gensler, he worked on multiple high-profile projects, including the Shanghai Tower in China and multiple buildings in Houston, Texas. Strabala left Gensler in February 2010 and began practicing under an assumed business name, 2DEFINE Architecture. While based in Chicago, he advertised offices in Shanghai, China and Seoul, South Korea. Strabala set up a website and a page on the photo-sharing site Flickr to market his business. His Flickr site included claims that he designed the Shanghai Tower and several of Gensler’s Houston buildings. Gensler sued to stop Strabala from claiming primary responsibility for the design of these buildings.
Gensler alleged that Strabala’s claims constituted “false designation of origin” and “false advertising” under the Lanham Act. The court considered whether a claim of authorship of a creative work could be considered a “false designation of origin,” and concluded that it cannot. In Dastar Corp. v. Twentieth Century Fox Film Corp., a 2003 Supreme Court case involving a film studio and a video publisher, the Supreme Court considered whether “origin of goods” included the author/producer of the films themselves, or just the actual physical videotapes. It specifically interpreted the “origin of goods” provision to refer to actual tangible goods, not creative works. Because Gensler could not cite any authority that overruled the Dastar holding, the Illinois district court found its claim unpersuasive. The court did note, however, two federal appellate cases that applied Dastar but allowed the possibility of copyright claims.
For a person seeking to sue for car fraud, it's not enough to know who swindled you and how they did it. You also need to know what claims to raise in order to recover your losses. In Martin v. Ford Motor Co., the district court for the Eastern District of Pennsylvania explains that fraud claims may not always do the trick.
Plaintiff Aaron D. Martin filed a Complaint against Defendant Ford Motor Company, including class action claims brought "on behalf of himself and other similarly situated." He claims that Ford failed to disclose a known defect in its 1999-2003 Ford Windstar model cars. Specifically, Plaintiff argues that although Ford expressly warranted that the 2001 Windstar that Plaintiff purchased from an authorized dealer was free of defects, the car's rear axle is allegedly unsealed, causing it to rust and corrode over time before ultimately cracking. The defect is allegedly widely known and much discussed in the automotive industry, according to Plaintiff, and therefore Ford should have been aware of it. Three months after the complaint was filed, Ford recalled all Windstars manufactured between 1998 and 2002 in order to fix the rear axle problem.
Plaintiff's many claims against Ford include a general fraud claim as well as those for intentional misrepresentation or omission, false statements and violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law. Defendants countered by arguing that these claims are barred by the "economic loss" doctrine, which in Pennsylvania prohibits a Plaintiff from recovering economic losses in a tort claim where the entitlement to the money is based in contract. In other words, because Plaintiff's right to recover any losses from Ford is based on the parties' contract, the company argued that he cannot seek to recover these losses in tort (i.e., via the fraud claims).
While the court noted that the economic loss doctrine does not apply to intentional misconduct, such as fraud, it also held that this exception is not available where the intentional misconduct alleged concerns the quality of a good being sold. In this case the intentional misconduct - Ford's alleged misrepresentations - concerned the quality of the vehicle, a good offered for sale. As a result, the economic loss doctrine barred Plaintiff's fraud claims under state law, which the court dismissed.
The ruling does not mean, however, that Plaintiff cannot recover damages against Ford. The court refused to dismiss Plaintiff's fraud claims raised under the laws of various states other than Pennsylvania. Nor did it dismiss his claim for unjust enrichment. Plaintiff also retains the right to sue for breach of contract.