Class-Action

Supreme Court Interprets Class Action Fairness Act to Prevent Class Representative to Limit Damages for the Class to Below $5 Million to Keep Case Out of Federal Court

March 25, 2013 | Peter S. Lubin and James V. DiTommaso

In class actions, the plaintiffs have long had the power to determine whether the case gets tried in state or federal court and they have most often chose to keep the cases in state courts. In 2005, Congress adopted the Class Action Fairness Act (CAFA) in order to limit the plaintiff’s power in that decision. CAFA imposed restrictions on the kinds of cases which the plaintiff would be able to prevent from getting moved to the federal courts. Among those restrictions are if the proposed class consists of at least 100 members, minimal diversities exist between the parties, and the aggregate amount involved in the dispute is at least $5 million.
In Standard Fire Insurance Co. v. Knowles, the lead plaintiff promised not to ask for more than $5 million in damages on behalf of the absent class in order to prevent the case being moved to federal court. The issue reached the U.S. Supreme Court, which then rendered its first decision on CAFA.

In the case of Standard Fire Insurance Co. v. Knowles, it is universally acknowledged that the claims of the putative class add up to more than $5 million. However, the lead plaintiff promised that the class will not ask for more than $5 million, in order to get around CAFA’s restrictions.

Although CAFA does not specifically prohibit artificially lowering the damages sought by a class action lawsuit in order to keep the case in the state courts, the Supreme Court still sided with the defendants. In its unanimous opinion, the Supreme Court reasons that, because the class had not yet been certified, the lead plaintiff was unable to make any promises regarding the value of the claims of the entire class. Until the class attains certification, the lead plaintiff can only make promises regarding the level of claims he, as an individual, seeks.
The Supreme Court pointed out that CAFA specifies that “to determine whether the matter in controversy exceeds the sum or value of $5,000,000,” the “claims of the individual class members shall be aggregated.”

The Supreme Court made sure to point out that it believed that this decision was in line with CAFA’s primary objective of ensuring “Federal court consideration of interstate cases of national importance.”

Prior Restraint on Lawyer’s Free Speech Right to Criticize Class Action Settlement Lifted But For the Wrong Reasons

March 18, 2013 | Peter S. Lubin and James V. DiTommaso

Facebook has long been an issue in the domain of free speech. People post whatever they want in view of the whole world. This time, an attorney was ordered by a judge to stop posting information about a case on his Facebook page even though he was addressing important public concerns regarding what he perceived to be an unfair class action settlement. This type of issue of public concern should receive the highest First Amendment Protection. Judges like any other public official should not be free to squelch criticism just because they don’t like it and believe it is inaccurate. Vigorous debate on issues of public concern in a community should be encouraged.

The case involves two McDonald’s locations in Detroit which serve McChicken sandwiches and Chicken McNuggets which are advertised as being halal. Halal is a form of preparing food in order to meet Islamic requirements. It includes invoking God’s name before slaughtering an animal which is to provide meat for consumption.

Two McDonald’s locations (13158 Ford Road and 14860 Michigan Ave.) are believed to be the only two McDonald’s locations to serve halal chicken. According to the suit, McDonald’s served non-halal chicken when it ran out of halal and failed to tell this to their customers. The class-action lawsuit, filed by Ahmed Ahmed of Dearborn Heights, includes anyone who ate non-halal chicken at one of the two McDonald’s locations since September 2005. The defendants are McDonald’s and franchise owner Finley’s Management Co.

On January 18, Wayne County Circuit Court Judge Kathleen Macdonald approved a settlement where McDonald’s and Finley must pay $700,000 to settle the suit. Ahmed was to receive about $20,000; the Health Unit on Davison Ave. in Detroit, also known as HUDA, was to get around $274,000; the Arab National Museum in Dearborn was to get about $150,000; and the attorneys were to get around $230,000.

Majed Moughni, an attorney who was not involved in the case before the settlement, posted on the Dearborn Area Community members Facebook page, which he runs, that he believed it was unfair that most of the money would go to those who ate the non-halal chicken. He asked for page members who had eaten the haram (or forbidden) chicken to leave contact information for themselves as well as for others who had eaten the meat
.
Kassem Dakhlallah, Ahmed’s lead attorney, filed a motion for injunctive relief against Moughni. Judge Macdonald ruled in Dakhlallah’s favor and order Moughni to remove information about the case from the Facebook page and to put her original class settlement and order against him on the page, which he did. She also forbade him to discuss the case with class members or the media without written permission from her and Jaafar & Mahdi Law Group, the firm representing Ahmed.

Moughni filed a motion to overturn the judge’s ruling against him, which she dismissed.
Paul Alan Levy of the Public Citizen’s Litigation Group of Washington D.C. filed a motion on behalf of Moughni to lift the order against him. They claimed that he was not acting as an attorney, but merely soliciting feedback and that his First Amendment rights had been violated.
Although the allegation that Moughni was soliciting clients through his Facebook page was never an issue when initially seeking the injunction, McDonald’s used it as a reason for the injunction to remain, as well as allegations that the comments about the case which he posted on the Facebook page were misleading.

Levy argued that Moughni was not soliciting clients, but merely speaking as a concerned member of the community. He pointed out that there was no evidence that Moughni looked to be paid for gathering the feedback, but was merely rallying the community against what he perceived to be an injustice.

Judge Macdonald said that Moughni can’t separate the fact that he’s an attorney but she did agree to dissolve the injunction and extend the settlement period. She said that Moughni can continue to identify himself as a class member, but not an attorney in the case.
While McDonald’s agreed to the removal of the injunction (having been satisfied that Moughni was not, in fact, soliciting new clients) they claimed that his misleading statements about the settlement were cause for reopening negotiations.

Levy is concerned however, that the fight may not yet be over. McDonald’s has been complaining about the added cost of reopening the settlement period. They estimate that around $30,000 will be lost from the Arab National Museum’s portion of the settlement, money which could finance ten scholarships through the charity. Levy worries that McDonald’s may be leveraging to sue Moughni for damages after the current case has settled.
This may not be the smartest move for McDonald’s, though. While Moughni’s comments might have gone largely unnoticed if left alone, McDonald’s has given the issue light by filing for the injunction. In the end, the company’s image may be damaged by flaunting their dirty laundry and airing the fact that they are trying to preclude a member of the community from someone speaking out against a settlement that gives money to charity but not to the damaged class members. Judges should not be shutting down valuable speech rights. There has been a long tradition in this country that the First Amendment precludes public officials including judges from silencing criticism they don’t like. It is particularly troublesome that the Court attempted to shut off criticism on a matter of public interest. Moughni should have been permitted to freely voice his criticism of the settlement. That could never have interfered with the Court rendering a fair decision to approve or disapprove the settlement. Having already preliminarily approved the settlement, the Court appears to have had an interest in having its ruling upheld and let that concern over ride the public’s right to vigorously debate the settlement and even make material errors in that debate. The remedy to cure any false or erroneous statements in the debate is more rather than less speech.

The settlement period has been extended for another 28 days, which all sides agree with.

Schwab Wins Beats Back Class Actions — Our Chicago Business Lawyers Defend Businesses in Class Action Lawsuits

March 3, 2013 | Peter S. Lubin and James V. DiTommaso

After the U.S. Supreme Court’s controversial decision in Concepcion, there has been much debate over the rising tendency of companies to forbid their customers from bringing class actions against them. Another company has recently won another round. Charles Schwab Corp. modified their account agreements last year, prohibiting class-action lawsuits and restricting the ability of consumers to consolidate arbitration cases. This decision came after settlements of class-action lawsuits in which Schwab agreed to pay $235 million for misleading marketing of its high-interest YieldPlus money market fund between May 2006 and March 2008.
The Financial Industry Regulatory Authority’s (FINRA’s) enforcement department charged Schwab with violating its rules by restricting consumers’ class-action and arbitration rights. The FINRA hearing panel agreed that it was against the rules of the private group, which regulates broker-dealers and administers arbitration panels. However, due to the Supreme Court’s recent interpretation of the Federal Arbitration Act, the panel found that those rules are unenforceable.
While FINRA does not actually make or enforce the law, it can tell broker-dealers that, if they want to remain members, they have to abide by its “fair-play” rules. The Securities and Exchange Commission requires all broker-dealers to be members and all brokers who sell securities to be licensed by FINRA.

Of the three actions FINRA brought against Schwab, it did win won. The hearing panel decided that Schwab had violated FINRA’s rules by limiting the powers of arbitrators to consolidate individual client claims in hearings and fined Schwab $500,000 for the violation. It also ordered the company to remove that condition from its customer agreements. A spokesman for Schwab said the language has already been removed.

A FINRA spokeswoman said it is currently reviewing the decision and cannot yet comment on whether they will appeal to the National Adjudicatory Council. Plaintiffs lawyers though, have speculated that an appeal is almost certain.

Schwab has said in a statement that it is pleased with the decision. “The company believes that customers are better served through the existing FINRA arbitration process and that class-action lawsuits are a cumbersome and less effective means of resolving disputes – for both parties.”

Officials in the securities industry anticipate that more firms will try to revise their customer agreements after this decision.

While some have called this a significant step backwards for customers, others are not so sure. While the ruling does threaten most securities class-actions, the panel does not make the law and so this decision is unlikely to affect far-reaching law.

Merrill Lynch Agrees to Pay $40M in Proposed Deferred Compensation Class Action Settlement

March 1, 2013 | Peter S. Lubin and James V. DiTommaso

The terms of a proposed class action settlement call for Merrill Lynch to pay $40 million to settle claims brought by approximately 1,400 brokers regarding deferred compensation that Merrill Lynch allegedly refused to pay the brokers after its merger with Bank of America.

Despite the large price tag, however, the proposed settlement may still leave claims with roughly 2,000 brokers unsettled, according to MSN Money. The brokers who are not party to the class action settlement would be left to privately pursue their claims against Merrill Lynch. The proposed settlement may still leave roughly 2,000 brokers to battle privately against the brokerage.

What is deferred compensation?

Class Action Lawsuits Filed Against Johns Hopkins Hospital Due to Doctor Secretly Video Taping Examinations

February 25, 2013 | Peter S. Lubin and James V. DiTommaso

Video News Report: Class Action Lawsuits Filed Against Johns Hopkins Hospital Due to Doctor Secretly Video Taping Examinations

BP Civil Class Action Trial set to Start

February 21, 2013 | Peter S. Lubin and James V. DiTommaso

FOX 8 WVUE New Orleans News, Weather, Sports

Chicago Class Action Attorneys Who Can Help You Decide if You Want to Bring a Class Action Lawsuit

February 15, 2013 | Peter S. Lubin and James V. DiTommaso

Class actions have become increasingly more common in recent years as attorneys are choosing to represent businesses in complex litigation on a contingent fee basis, whereby they do not collect any fees until the plaintiff is successful in its claim.

Contingency class action business litigation is common in massive civil lawsuits involving allegations of unsafe pharmaceuticals, medical malpractice, asbestos claims, trademark infringement, and consumer fraud, to name a few. Most recently class action lawsuits have been filed against a number of large banks and financial institutions regarding allegations of fraudulent benchmark interest rates.

Advantages of Class Action

Toyota Agrees to Settle Unintended Acceleration Class Action

January 23, 2013 | Peter S. Lubin and James V. DiTommaso

After two years, Toyota has finally agreed to settle the class-action lawsuit regarding unintended acceleration in its vehicles. If approved, the settlement, filed in a Federal District Court in California, would make cash payments for the loss of value on vehicles affected by the multiple recalls. The settlement also includes installing special safety features on about 3.2 million cars.
The suit was filed in 2010 after complaints were made to federal regulators that Toyota vehicles were accelerating suddenly and without the driver’s intent, causing accidents and injuries. Toyota has recalled more than eight million vehicles in the U.S. for problems related to pedals that could stick with the throttle open or get hampered by floor mats, which could get entangled in the pedals.

The class-action lawsuit alleged that Toyota’s electronics systems were at fault. A long investigation, conducted by government officials, found no evidence that faulty electronics contributed to the acceleration issues. However, a subsequent review of that investigation, conducted by a branch of the National Academy of Sciences, found that the federal regulators conducting the investigation did not have the expertise necessary to monitor electronic controls in automobiles.

The National Highway Traffic Safety Administration fined the car company more than $60 million for failing to inform regulators of the sudden acceleration issues. Toyota, on the other hand, has largely attributed these acceleration issues to driver error.

The proposed settlement includes a fund of $250 million to pay claims to former owners of cars affected by the acceleration recalls. Because of the large number of claimants though, each will receive a relatively small amount from the settlement. The company has also agreed to install brake override systems on cars whose pedals could stick or become trapped in floor mats. The installation of those systems is already under way, although about 550,000 cars have yet to receive the equipment.

The settlement also provides a customer support program for more than 16 million current Toyota owners who will be eligible for repairs on certain parts for up to 10 years. Additionally, Toyota will contribute $30 million to finance automotive safety research related to driver behavior and unintended acceleration.

The lead law firm for the plaintiffs estimated that the settlement could end up at a total around $1.2 – $1.4 billion. That makes it one of the largest settlements of its kind in automotive history.
One of the reasons people suspect Toyota made the offer is to prepare for the numerous individual personal-injury and wrongful death lawsuits, which are still currently pending in the courts. Of course, another reason to settle is to simply get past this. Before the acceleration issues, Toyota had enjoyed a pristine reputation of quality, safety, and reliability in their vehicles. Following these allegations, the company experienced a drop in sales, particularly in the United States. In 2012 though, the company’s sales in the U.S. rose about 28 percent, which is double the pace of growth for the overall market.

Facebook Settles Class Action Involving Alleged Improper Sale of Its Users Images

January 22, 2013 | Peter S. Lubin and James V. DiTommaso

Amid all the complaints against Facebook using private information, comes a story of success for Facebook users. Last year, five members of the social networking site filed a class action lawsuit against the company for allegedly using personal information, such as images of the users for sponsored stories. The users whose pictures were used did not give permission for Facebook to use their image, and they alleged they were not given the opportunity to opt out of having their image publicly used.

After the California judge informed the lawyers representing Facebook that they would not be able to dismiss the case they agreed to settle. The settlement includes up to $10 for each user who objected to having their image used, and a multimillion dollar donation to charity. Combined with legal fees, the total settlement will run the company about $20 million. Facebook has also said that it will add a tool which allows users to view any of their content which may have been used in sponsored stories and opt out of the process.

The settlement recently moved one step closer to resolution when the U. S. District Court judge in charge of the case determined that the settlement “has no obvious deficiencies” and “appears to be the product of serious” negotiations between the lawyers representing Facebook and the plaintiffs. The case has now been preliminarily approved by the judge.

However, the social networking site may not be finished with the court system just yet. The nonprofit Center for Public Interest Law argued that Facebook should be required to obtain consent before using the names or photos of Facebook users under the age of 18. Its attorney, Robert Fellmeth, has said that he would file a further objection and, if necessary, pursue the case in appellate court.

Regus Sued in Class Action

January 5, 2013 | Peter S. Lubin and James V. DiTommaso

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.