Articles Posted in Class-Action

Although renters usually expect to pay through the owner of the property for utilities, they usually only expect to do so if it is specifically included in the lease. According to a recent class action lawsuit against Regus PLC and its subsidiaries, the company allegedly charged fees to its renters for kitchen amenities, use of the telephones, telecom handsets, and internet activation and access.

According to the complaint, each plaintiff was provided with an “Office Agreement” which listed the location of the office, the duration of the client’s entitlement to the office, the amount of the “Initial Payment”, the amount of the security deposit, and the monthly payment from that point forward. The agreement allegedly did not “disclose any goods, services, penalties, and/or taxes for which Regus assesses charges and the amounts or methods of calculation of Regus’ charges associated with such goods, services, penalties, and/or taxes.”

However, once the plaintiffs received their bills, they found charges for things which were never mentioned in the lease. These charges included “amounts for one or more of the following …: i) ‘Kitchen Amenities Fee;’ ii) ‘Telephone Lines;’ iii) ‘Telecom Handset;’ iv) ‘Local Telephone;’ v) Internet activation and access charges; vi) taxes; and vii) penalties”. The lawsuit refers to these charges collectively as the “Unauthorized Charges”. Because of these Unauthorized Charges, the monthly payments made by clients was regularly in excess of what the Office Agreement had provided. However, if clients failed to pay these extra charges, they were allegedly subjected to penalties by Regus.

The lawsuit further alleges that Regus had clients make payment via an automated system in which the charges were automatically applied to the clients’ debit card or credit card. This meant that customers frequently got charged by Regus before even seeing a bill or having a chance to dispute the charges.

According to the complaint that was filed, Regus is also guilty of false advertising. Contrary to the experiences of the plaintiffs, the advertisements that Regus put on its website included the following:

“With Regus, you only pay for what you need when you need it”; “No up front capital expenditure required”; and “Flexible terms and one-page agreements.”
The complaint alleges that the additional fees the plaintiffs were charged directly contradict, not only the leases which were signed by the plaintiffs, but also the advertisements provided by Regus. For example, regarding the kitchen amenities, the lawsuit alleges that “Regus assessed a $30 per person monthly charge to Plaintiff … in excess of the monthly office payment amount indicated in the Office Agreement. Neither Regus’s practice of assessing this charge nor the amount of the charge is disclosed in the Office Agreement or the Fine Print. The charge was assessed regardless of whether any kitchen amenities were used.”

As far as the use of the telecom handset for which some plaintiffs were charged, the complaint alleges that

“the retail value of the two handsets provided by Regus does not exceed $99.00, yet Regus charged … a total of $222.75 (including purported taxes) per month for the use of the handsets during the term of the Office Agreement.”

The lawsuit seeks to bring a class action which would include everyone who had an Office Agreement or similar agreement for one of Regus’s locations in California and who paid one or more of the Unauthorized Charges between May 8, 2008 and the time that the complaint was filed. The lawsuit is also petitioning for a second New York class which would consist of similarly situated renters in the state of New York. The plaintiffs are currently unaware of just how many people qualify to participate in the classes, but they believe that each class could consist of more than 100 members.

You can view the complaint in the lawsuit here
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When the Supreme Court agrees to hear a case, the decision that the Court reaches in that case can have long-standing consequences for future rulings in similar cases made by courts all over the country. In recent years, class action lawsuits have been particularly contentious in the courts. In order to attain class certification, a class of plaintiffs is generally required to fulfill four requirements:

1. The class must be large enough to justify combining all of the claims into one lawsuit, generally, this means at least 100 class members;
2. The class must have questions of law or fact in common;
3. The claims of the representative parties must be sufficiently similar to the claims of the rest of the class; and
4. The representative parties must fairly and adequately protect the interests of the class.
Despite these clear requirements, various courts have ruled to certify classes of plaintiffs while other courts have denied certification based on a lack of ability to fulfill the above requirements.
Securities class actions in particular have faced an increasing number of challenges in recent years, leaving shareholders who have been the victims of fraud with little or not outlet for redress.

Halliburton Co. v. Erica P. John Fund

In this case, investors filed a lawsuit against the publicly traded energy company by claiming that it misled them about key information, including its liability in a recent asbestos investigation. The investors allege that such misinformation affected the company’s stock prices and ultimately harmed the company’s shareholders.

Halliburton is challenging the Supreme Court’s decision in 1988 in Basic v. Levinson, in which the Court determined the fraud-on-the-market theory, which has been the basis for most securities class actions ever since. The theory states that, when a public company makes a misrepresentation in an efficient market, that misinformation is carried through the market and affects the company’s stock price. An investor purchasing a security is thus presumed to have relied on that misinformation. However, the concept of an efficient market, while largely uncontested in the 1980s, has since come under scrutiny and has recently been questioned by some of the current justices of the Supreme Court. If the Court overturns its decision in Basic v. Levinson, each class member will have to prove that they relied on the misinformation when purchasing or selling company stock.

Plaintiffs’ attorneys fear that such a requirement will render class certification for such cases nearly impossible. Some of them have claimed that it could have consequences beyond just securities class actions. Consumer class actions, for example, might also be affected.

The “Washing Machine” Cases

Two separate consumer class actions alleging defective washing machines have made their way through the court system and are currently being petitioned to be heard by the Supreme Court. The defendants in the lawsuit, Whirlpool Corp, and Sears Roebuck & Co., are asking the Supreme Court to overrule the decisions made by lower courts to certify classes of consumers. The plaintiffs against Whirlpool allege that 21 different models of the company’s high-efficiency, front-loading Duet clothes washers sold since 2001 have a design defect that results in mold.
Both Whirlpool and Sears argue that the classes fail to meet the predominancy requirements of class certification and that most of the class members were not harmed.

If the Supreme Court agrees to hear the case and rules in favor of the defendants, the decision could have serious consequences on all issue-based class actions. It has the potential to severely limit consumers’ ability to bring their grievances against a company.

Securities Litigation Uniform Standards Act (SLUSA)

While rulings made by the Supreme Court can sometimes mean drastic changes in the law, it also frequently means simply clarifying older laws. For example, the SLUSA was enacted in 1998 as a way to prevent shareholders from evading the pleading standards of federal litigation by filing suit in state court, whose pleading standards are usually less rigorous. Specifically, SLUSA prohibits state-based suites alleging fraud “in connection with the purchase or sale” of covered securities.

The current lawsuit arose when investors bought securities which were not covered under SLUSA directly, but were certificates of deposits which were backed by SLUSA-covered securities.

When Robert Allen Standford’s $7 billion Ponzi scheme was revealed to the public, the shareholders filed a class action lawsuit alleging fraud. The law firms Proskaur Rose LLP and Chadbourne & Parke LLP were included as defendants in the lawsuit for allegedly aiding the Ponzi scheme.

A Texas federal judge ruled that the investors’ claims were precluded by SLUSA. The decision was appealed and went to the Fifth Circuit Court, which found that the claims were only “tangentially related” to SLUSA-covered securities trades. The attorneys representing the law firms are appealing the decision, arguing that the Fifth Circuit Court’s decision allows plaintiffs to avoid SLUSA.

If the Supreme Court decides to rule in favor of the defendants, the result could have far-reaching implications on shareholders’ ability to file claims.

Mississippi ex rel. Hood v. AU Optronics Corp.

Consumers who have suffered as a result of fraud are not the only ones capable of bringing a lawsuit against a company for violating consumer rights. State attorneys general also have the option of bringing a lawsuit to recover damages on behalf of consumers. These are known as parens patriae cases. At issue in this lawsuit is whether a parens patriae case in which the attorney general is seeking to represent 100 or more consumers should be treated as a class action.

Mississippi’s attorney general, Jim Hood, filed a lawsuit against a group of electronics companies for allegedly fixing the price of liquid crystal display panels.
If the Supreme Court rules that parens patriae lawsuits count as class actions, it could give defendants the option of moving such cases to federal court. If the Court rules that these lawsuits cannot be treated as class actions, then the state attorneys’ general can keep them in their home courts, which are often more disposed to be favorable to the attorney general.

Carrera v. Bayer Corp. et al.

This lawsuit was filed against Bayer by a consumer who alleges that the pharmaceutical company engaged in deceptive practices by claiming that its One-A-Day WeightSmart could enhance metabolism. Since Bayer does not sell its products directly to consumers, the company has no records of who purchased the vitamin. The defendants therefore claim that the class cannot be certified because the plaintiffs have no way of finding every single class member, despite such a limitation never having been a requirement for class action certification.
The district court certified the class, but the Third Circuit Court of Appeals reversed that decision, saying that the difficulty in determining consumers who belong to the class rendered it ineligible for certification.

If the Supreme Court agrees to hear the case and makes a ruling in line with that of the Third Circuit Court, the decision could affect consumers’ ability to file claims. The plaintiffs in the case also argue that such a decision could encourage companies like Bayer not to keep a record of customer purchases.

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When class actions are filed, courts need to consider all aspects of the class before determining whether or not it can be certified. This includes whether class members from other states have claims similar enough to the class members of one state, particularly in cases where the lawsuit is filed under a state law. The Seventh Circuit Court of Appeals recently handled a case in which the status of the class was disputed for this reason.

Gwendolyn Phillips was sued by Asset Acceptance, LLC for some outstanding debt that she still had with the company. However, Phillips argued that the lawsuit was invalid because the statute of limitations on the debt had already passed.

Few debtors are aware that a statute of limitations on their debt exists. Even those who do know frequently find that it is cheaper and easier to simply settle the debt rather than try to fight it in court. To try and mitigate these effects, Phillips moved to certify a class action of plaintiffs consisting of debtors who have been sued by Asset Acceptance for debts resulting from the sale of natural gas who have been sued after the statute of limitations has expired. According to the records currently available, the class that Phillips is proposing can consist of as many as 793 members if they all choose to participate. 343 of which are eligible to file claims in the state of Illinois.

Which Illinois statute of limitations applies to this was case disputed between the parties. One statute gives four years as the limitation while the other statute gives five. Phillips claims that the applicable statute is the one that lasts for four years while Asset insists that the five-year statute is the proper one. Regardless, Asset sued Phillips more than five years after her debt had accrued.

The district court ruled that, because Phillips had been sued by Asset after five years, she was an inadequate representative for members of the class who had been sued after only four years. The court therefore shrunk the eligible class members down to less than thirty members, which the judge ruled was too small to justify the numerosity requirement of a class action. The judge therefore dismissed Phillips’s motion for class certification.

Phillips appealed the decision and the case went to the Seventh Circuit Court of Appeals. The appellate court rejected the lower court’s reasoning that the difference of one year was sufficient to disqualify Phillips as an adequate representative. Rather, the appellate court found that Phillips had no ulterior motive for insisting that the relevant statute lasted for only four years, as she had been sued after five. Therefore, the court found no reason that she should not be an adequate representative for the class.

Further, even if the court had found a significant difference between class members who had been sued after four years as opposed to members who had been sued after five, the court found that certifying a subclass with a second representative made more sense than decertifying the entire class.

In examining the case, the appellate court found that the relevant statute was for only four years, and as a result, Phillips is eligible to represent the entire class of 343 Illinois plaintiffs. Whether or not plaintiffs in other states can be included in the class or subclasses will need further evidence to determine. In the mean time, the appellate court remanded the case back to the district court.

You can view the entire decision here.

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Many consumers frequently rely on important information provided by the manufacturer of a product in order to determine whether or not to buy that product. If a product does not list a particular ingredient, such as gluten, which is a protein found in many processed foods, consumers will frequently assume that the protein is not present in that product. Only recently have food producers begun to label their products as specifically gluten-free.
Walmart has recently encountered a lawsuit by consumers who purchased jewelry from their stores with Miley Cyrus’s brand. The jewelry, which is made by BCBG Max Azria Group Inc., and sold in Walmart stores, allegedly contained cadmium.

Cadmium is a soft metal which is frequently used to stabilize plastics and to prevent corrosion. However, cadmium has been found to have toxic properties and it is included on the European Restriction of Hazardous Substances. This Restriction bans certain hazardous substances in electrical and electronic equipment, although it does allow for certain exemptions and exclusions. Some studies have linked cadmium with lung cancer and prostrate cancer and some people have theorized that the soft metal imitates estrogen and causes breast cancer.

In the past few years, jewelry sold at Walmart and collectible drinking glasses sold at McDonald’s have been recalled when it was discovered that these products contained cadmium. In 2010, reports of high levels of cadmium in children’s jewelry led to an investigation by the U.S. Consumer Product Safety Commission. Despite the fact that there appears to be little hard evidence available that cadmium is dangerous, there have been enough scares and warnings to make consumers wary of the metal.

The plaintiffs of the current lawsuit against Walmart regarding the Miley Cyrus-brand jewelry say that they never would have purchased the jewelry if they had known that the product contained cadmium. A settlement has been reached in the case, but the defendants continue to deny having done anything wrong and any liability. Anyone who purchased Miley Cyrus-branded jewelry from a Walmart retail store after July 1, 2005 is eligible to participate in the class. Class members have four options:

TO REMAIN IN THE SETTLEMENT: In order to remain in the settlement, purchasers of the jewelry must submit a claim form in order to receive a payment from the settlement. They must also agree to the terms of the settlement which include forfeiting their right to sue the defendants in the future.

TO GET OUT OF THE SETTLEMENT: If class members do not wish to
remain as part of the settlement, they can choose to exclude themselves from the class.

TO REMAIN IN THE SETTLEMENT AND OBJECT: Those who decide to remain in the settlement will have the opportunity to object to the settlement.

APPEAR AND SPEAK AT THE FINAL APPROVAL HEARING: Just because a settlement has been reached between the two parties does not mean that it has yet been finalized. A judge must first grant the settlement court approval. If members of the class choose to do so, they can appear at the approval hearing and speak, or they can have an attorney appear and speak on their behalf. Should they chose one or both of these options, it would be entirely at their own expense.

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Class action status is an important tool for plaintiffs in many different types of lawsuits. It gives plaintiffs strength in numbers when filing lawsuits against large corporations. It also allows plaintiffs to collect claims which would normally be too small to justify filing a lawsuit if the plaintiff were left to do so on her own. It is the number of plaintiffs and the subsequently larger claim against the defendant which makes it possible for these plaintiffs to seek redress against defendants.

Many companies utilize illegal business practices and rely on people determining that the small claims are not worth a lawsuit in order to continue those practices. Even if a customer or investor loses a small amount of money, a company that uses the same practice with hundreds of thousands of similarly situated people could potentially rake in millions of dollars illegally.

Despite the fact that class action status is a necessary tool which is provided to plaintiffs in the laws of the United States, the Supreme Court has recently displayed a pattern of ruling against class actions. Such rulings are making it increasingly difficult for plaintiffs to file class action lawsuits which can be upheld in court. As a result of the Supreme Court’s recent rulings, lower courts have had to consistently deny plaintiffs class action status in cases which would normally have been allowed to move forward as class action lawsuits.

The Supreme Court has agreed to hear another case in which the parties are disputing whether or not the case can continue as a class action lawsuit. The lawsuit was brought against Halliburton, a publicly traded energy company, by a class action of the company’s share holders. The shareholders allege that Halliburton misrepresented its potential liability in asbestos litigation, revenue from construction contracts, and benefits from a merger. According to the lawsuit, shareholders allegedly lost money after the company’s stock prices dropped after news about one or more of these factors was revealed.

The plaintiffs in the case are relying on a landmark decision which was made in 1988 in the case of Basic v. Levinson. In that case, the court determined that shareholders have the right to know about a potential merger, even before it happens. The ruling also determined that shareholders don’t have to prove that they made investment decisions based on a company’s misstatement of facts. Instead, the ruling upheld the concept of “fraud on the market,” which assumes that misleading corporate assertions are reflected in a company’s stock price.

Halliburton is hoping that the court will overturn the 1988 ruling in their favor, arguing that “Real-world experience has crippled the theoretical underpinnings of Basic”. The shareholders, on the other hand, argue that “A reversal of Basic v. Levinson would represent the most radical change in the private enforcement of the federal securities law in a generation and would be a severe blow to investors’ rights.”

According to Halliburton, even in a well-developed securities market, “stock prices do not efficiently incorporate all types of information at all times.” Because of this, the energy company argues, shareholders should not be able to sue a company based on price fluctuations alone.

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Generally, when filing a lawsuit, the plaintiff has one of two aims: to reap payment for damages incurred; or for the court to order an injunction against the defendant. Many plaintiffs seek both. In the current case against the NCAA regarding the rights of student athletes, the plaintiffs have managed to gain court approval to move forward as a class to seek one of these goals, but not the other.

U.S. District Judge Claudia Wilken ruled that the plaintiffs can move forward as a class in their lawsuit against the NCAA regarding what student athletes receive in exchange for playing sports for their colleges. However, Wilken denied the motion to certify a class which sought billions of dollars in damages from the NCAA in exchange for improper use of the athletes’ names and likenesses in several forms, including live television broadcasts. According to Wilken, the plaintiffs had failed to identify a legitimate method to calculate damages for former players and that was her reason for refusing to certify a class to seek damages.

Sonny Vaccaro had mixed feelings about the ruling. Vaccaro is the form sneaker marketing executive who convinced O’Bannon, a former UCLA basketball star, to file the lawsuit against the NCAA. Vaccaro was disappointed that the class won’t be able to pursue damages, but he was optimistic about moving the case forward to elicit changes from the NCAA. According to Vaccaro, O’Bannon said of the ruling, “This is what I wanted … They’ll have rights. I never had rights. I didn’t think I would ever have rights.” The goal in this lawsuit now is to prevent the NCAA from taking advantage of student athletes in the future and using their names and likenesses, not only on television, but also in things like video games for EA.

Vaccaro also said that the plaintiffs “won in the sense we’re going forward, … Those damages, whatever they would have been, if we win, going forward, there’s no limit to what the numbers are in the future.

Vaccaro and O’Bannon aren’t the only ones who are pleased with the court’s ruling. Michael Hausfeld, one of the attorneys for the plaintiffs, released a statement saying that, “The court’s decision is a victory for all current and former student-athletes who are seeking compensation on a going forward basis. While we are disappointed that the court did not permit the athletes to seek past damages as a group, we are nevertheless hopeful that the court’s decision will cause the NCAA to reconsider its business practices.”

Another attorney for the plaintiffs, Hilary Sherrer, said, “There is a growing public recognition that the NCAA’s business practices are unfair and must be changed. The court’s ruling is a giant leap in the effort to end these unfair practices.”

The NCAA also claimed that the ruling was a victory for their side. They released a statement which says, “We have long maintained that the plaintiffs in this matter are wrong on the facts and wrong on the law. This ruling is one step closer to validating that position”.

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Some companies might want to make sure to be very careful before making large acquisitions. Otherwise they might find themselves fighting a legal battle for something the company being acquired did years ago. Such is the case for HSBC Holdings Plc, a British bank, which has recently been hit with the largest judgment yet made in U.S. courts. The judgment, a record breaking $2.46 billion, was made against HSBC by U.S. Judge Ronald Guzman following a jury trial in a class action against Household International, which is now a division of HSBC.

According to the class action lawsuit, Household International’s chief executive, chief financial officers, and head of consumer lending all made false and misleading statements about the company in order to artificially inflate the company’s share price. The lawsuit further alleges that Household International engaged in predatory lending and intentionally concealed the quality of its loan portfolio.

Reports of Household International’s lending practices began to reach the public in 2001, which resulted in the company’s share prices sinking to the lowest it had been in seven years. The class action lawsuit was filed against Household International in 2002, the same year that HSBC bought out the U.S. lender. Now HSBC is stuck dealing with the lawsuit. A spokesman for the company sounded confident however, saying that HSBC plans to appeal and believes that it has a strong case. Despite its embroilment in the current legal battle, HSBC seems not to regret the purchase of the U.S. lending company. On the contrary, it appears to be eager to continue the battle against the class action lawsuit. The spokesman did add, however, that the matter has been noted in HSBC’s regulatory filings. It might affect future acquisitions made by the British bank after all.

The case is notable because securities fraud class actions almost always settle before reaching a jury. Defendants frequently prefer to settle outside of court to avoid the negative media attention as well as to avoid the extremely high judgments. When a class is certified by a judge, it frequently puts pressure on the defendant to settle the case outside of court, given that class action status gives the plaintiffs greater leverage.

Plaintiffs in securities fraud class action lawsuits generally rely on the “fraud on the market” theory as a key tool in their litigation. This is the theory that the price of a security trading in an efficient market reflects all publicly available information about that security. Working on that premise, the theory assumes that investors rely on material misrepresentations which are reflected in market prices at the time that the security is traded. Like most securities fraud class action lawsuits, the one against Household International also relied on evidence that investors and the market relied on unreliable statements provided by high-level executives at Household International. Because of the misrepresentations of the company and its lending practices, investors were led to buy shares which they would not have otherwise purchased, or were led to buy them at a higher price than that at which they would normally have bought them.

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