Consumer Fraud/Consumer Protection

AT&T Case Heard By Supreme Court and Most Media Outlets Predict Consumer Victory Based on State’s Rights Principles

November 11, 2010 | Peter S. Lubin and James V. DiTommaso

Slate published an excellent article handicapping that the Supreme Court in the AT&T case will vote in favor of consumer class actions continuing. The article explains in in plain English what is at stake in the case and the arcane legal issues on which the decision will turn. You can view the entire article by clicking here. This article like most of those written by the major newspapers, media outlets and blogs, such as the Wall Street Journal, New York Times, ADR Blog, predicts a consumer victory based on deference to state’s rights and California’s right to invalidate an unconscionable class action ban in an arbitration agreement.

The Slate article states:

In plain English, the Supreme Court needs to decide whether Corporate America can make ordinary slobs like us, who sign take-it-or-leave-it contracts, give up our right to file class-action suits. And in case you’re wondering why class-action suits matter to us ordinary slobs, consider this: Not a lot of lawyers are willing to take on AT&T for $30.32. Sometimes the only way to police misconduct—particularly small differentials in pay (based on, say, race or gender) or itsy bitsy fraudulent representations—is by pooling litigants together and suing together as a class.

Indiana Attorney General Warns About Extended Warranty Fraud

November 7, 2010 | Peter S. Lubin and James V. DiTommaso

Our Chicago automobile fraud attorneys focus on bringing suit for auto-fraud claims. We recently settled a suit involving purchase of $9,000 used car that was in reality 3 different cars welded together for $100,000. Our fees come from the recovery and we only get paid if we win or settle your case. We have has similar large six figure or near six figure settlements for clients who purchased certified used cars that in fact were rebuilt wrecks.

If you believe you purchased a motorcycle, car, rv or other product that is a lemon, have been a victim of auto fraud, auto dealer fraud, auto repair fraud or have been deceived into buying a flood car, rebuilt wreck or salvage vechicle DiTommaso Lubin may be able to help rectify the problem. We or experienced co-counsel are prepared to file suit in the right case in the Chicago area or anywhere in the country. For a free consultation on your rights as an employee, contact us today.

Our Auto Dealer Fraud, Auto Repair Fraud Auto Fraud, RV Fraud, Motorcycle Fraud and Boat Fraud private law firm and our affliated co-counsel handle individual and class action consumer rights, lemon law, and autofraud lawsuits that government agencies and public interest law firms may decide not pursue. Class action lawsuits our law firm has been involved in or spear-headed have led to substantial awards totalling over a million dollars to organizations including the National Association of Consumer Advocates, the National Consumer Law Center, and local law school consumer programs. DiTommaso Lubin is proud of our achievements in assisting national and local consumer rights organizations obtain the funds needed to ensure that consumers are protected and informed of their rights. By standing up to employee and consumer fraud and rip-offs, and in the right case filing employee or consumer protection lawsuits and class-actions you too can help ensure that consumers’ rights are protected from unscrupulous, illegal or dishonest practices.

Video on Extended Warranty Fraud

November 7, 2010 | Peter S. Lubin and James V. DiTommaso

Our Chicago lemon law attorneys focus on bringing suit for auto-fraud claims. We recently settled a suit involving purchase of $9,000 used car that was in reality 3 different cars welded together for $100,000. Our fees come from the recovery and we only get paid if we win or settle your case. We have has similar large six figure or near six figure settlements for clients who purchased certified used cars that in fact were rebuilt wrecks.

If you believe you purchased a motorcycle, car, rv or other product that is a lemon, have been a victim of auto fraud, auto dealer fraud, auto repair fraud or have been deceived into buying a flood car, rebuilt wreck or salvage vechicle DiTommaso Lubin may be able to help rectify the problem. We or experienced co-counsel are prepared to file suit in the right case in the Chicago area or anywhere in the country. For a free consultation on your rights as an employee, contact us today.

Our Auto Dealer Fraud, Auto Repair Fraud Auto Fraud, RV Fraud, Motorcycle Fraud and Boat Fraud private law firm and our affliated co-counsel handle individual and class action consumer rights, lemon law, and autofraud lawsuits that government agencies and public interest law firms may decide not pursue. Class action lawsuits our law firm has been involved in or spear-headed have led to substantial awards totalling over a million dollars to organizations including the National Association of Consumer Advocates, the National Consumer Law Center, and local law school consumer programs. DiTommaso Lubin is proud of our achievements in assisting national and local consumer rights organizations obtain the funds needed to ensure that consumers are protected and informed of their rights. By standing up to employee and consumer fraud and rip-offs, and in the right case filing employee or consumer protection lawsuits and class-actions you too can help ensure that consumers’ rights are protected from unscrupulous, illegal or dishonest practices.

Second District Voids Contractor’s Arbitration Clause Because Homeowners Never Signed It

November 3, 2010 | Peter S. Lubin and James V. DiTommaso

Our Illinois consumer protection attorneys were pleased to see a recent victory in an Illinois appeals court for consumers concerned about the effects of mandatory binding arbitration. In Artisan Design Build, Inc. v. Bilstrom, No. 2-08-0855 (Ill. 2nd Sept. 22, 2009), David and Jody Bilstrom of Hinsdale, Ill., hired Artisan Design Build of Wisconsin to remodel their home. Their contract provided, among other things, an arbitration clause saying disputes “shall be subject to and decided by mediation or arbitration.” The repairs required eight changes to the original contract, significantly increasing the overall price of the work. The Bilstroms paid the first six bills, but refused to pay the seventh despite multiple requests. On Sept. 20, 2006, they locked Artisan out of the project and told it they had hired someone else to finish the job. Artisan claimed they owed $208,695.69.

In April of 2008, Artisan sued the Bilstroms to foreclose its mechanic’s lien; for breach of contract; and for unjust enrichment. The Bilstroms filed a motion to dismiss, claiming Artisan had violated the Illinois Home Repair and Remodeling Act by failing to finish its work within the contracted time; failing to carry insurance; and failing to provide them with a consumer rights pamphlet. The parties continued the case several times while they tried without success to reach a settlement. When that proved fruitless, Artisan filed a complaint with the American Arbitration Association. The Bilstroms moved to stay the arbitration, saying Artisan had voided that part of the contract by suing first, and by violating the Home Repair and Remodeling Act. The trial court agreed with them, prompting an amended complaint from Artisan. The trial court dismissed that and Artisan appealed, arguing that it did not violate the Act or waive the arbitration clause.

On appeal, the Second District first considered whether Artisan had violated the Act by failing to furnish a consumer rights pamphlet. The Bilstroms had argued that the Act’s language makes any violation an unlawful act that nullifies the contract. Artisan countered that the Act does not require courts to dismiss an otherwise valid claim just because a contractor fails to provide the pamphlet. The appeals court agreed, finding that the plain language of the Act provides no remedy other than a Consumer Fraud Act lawsuit. Furthermore, the court wrote, the legislature could not possibly have intended to allow consumers to void contracts for failure to provide the pamphlet, because allowing this would allow consumers to essentially steal from contractors. Thus, the appeals court found that the trial court was wrong to dismiss Artisan’s amended complaint.

Artisan had less luck on the question of whether it had waived its right to arbitration by filing a lawsuit first. Section 15.1 of the Act also requires contractors to advise clients of binding arbitration and waiver of jury trial clauses, which consumers should be able to reject or accept.

Failure to advise, or to obtain acceptance, explicitly voids the clause. Artisan clearly failed to do so in this case, the Second District wrote, because there are no signatures or “accept” or “reject” notations in the appropriate place on the contract. This argument does not reach the issue of whether Artisan waived its right to binding arbitration, the court said, but it can affirm on any grounds in the record. It did affirm the trial court’s decision on the arbitration clause, and remanded the case for further proceedings on Artisan’s amended complaint.

Fifth District Enforces Mortgage Company Arbitration Agreement Except as to Class Actions

October 13, 2010 | Peter S. Lubin and James V. DiTommaso

Our Chicago alternative dispute resolution lawyers noted a recent Fifth District Court of Appeal ruling upholding an arbitration agreement but severing its class-action waiver. In Keefe v. Allied Home Mortgage Corporation, No. 5-07-0463 (Ill. 5th 2009) (PDF), Rosemary Keefe was the lead plaintiff in a proposed class action against her mortgage broker. She refinanced through Allied Home Mortgage Capital Corp. in 1999, and as part of that deal, she signed a rider requiring binding arbitration of most disputes. Five years later, she filed a proposed class action against Allied, accusing it of consumer fraud and other torts for charging third-party fees (such as credit check fees) in excess of their actual cost and failing to disclose this. Allied moved to compel arbitration. Without an evidentiary hearing, the trial court ruled that the arbitration agreement was illusory and procedurally and substantively unconscionable, and Allied filed an interlocutory appeal.

The Fifth District started by examining de novo whether the agreement was indeed illusory. An illusory promise is something that appears to be a promise but holds out no performance, or only an optional performance. The Fifth found that it was not illusory, because the arbitration rider specified that the borrower may request arbitration in any judicial proceeding started by Allied. Furthermore, it noted, the rest of the contract may be considered part of the consideration granted to the plaintiff.

It next looked at the finding that the agreement was both procedurally and substantively unconscionable. A contract is procedurally unconscionable when some impropriety during the signing of the contract — such as language that is difficult to find or understand — robs the signer of a reasonable choice. That was not the case here, the court said. The arbitration rider was not hidden by fine print, it wrote, nor was it difficult to read or understand. Rather, the arbitration rider “conspicuously” used bold capital letters to notify the plaintiff that she was signing a contract that gave away her right to a jury trial. Nor did she need to sign it to obtain the refinancing.

The court also rejected the plaintiff’s argument that the rider was unconscionable because it failed to notify her of the cost of arbitration. The Fifth noted that the arbitration rider did contain a provision notifying the plaintiff that she can get copies of rules and forms related to arbitration at any National Arbitration Forum office or by mail order. Under Kinkel v. Cingular Wireless LLC, 223 Ill. 2d 1, 22, 857 N.E.2d 250, 264 (2006), this is not enough by itself to render the contract unconscionable, the court wrote, but it may be considered along with findings on substantive unconscionability.

Finally, the Fifth looked at whether the arbitration rider was substantively unconscionable. A contract is substantively unconscionable when the contract terms are unfair, one-sided or create a large imbalance between price and cost. The plaintiff first argued that the rider is cost-prohibitive because it specifies that no claim may be brought by class action. The Fifth found some merit in this. In Kinkel, the Illinois Supreme Court found that class-action waivers are not per se unconscionable, but courts should look at their fairness as well as the cost of bringing an individual claim relative to the damages. Once again following that decision, the Fifth found the cost of pursuing an individual claim was high relative to the potential damages, especially including arbitration and attorney fees. Taking into account Allied’s failure to reveal the cost of arbitration, the court ruled that the class-action waiver was unconscionable. But rather than declare the entire contract unconscionable, the court simply severed the class-action clause, reversed the rest of the trial court’s decision and remanded the case with directions to enforce the remainder.

PR Newswire Reports: “Proposed Settlement in Class Action Suit Against Audi, Volkswagen Wins Judge’s Approval”

October 9, 2010 | Peter S. Lubin and James V. DiTommaso

Proposed Settlement in Class Action Suit Against Audi, Volkswagen Wins Judge’s Approval

The article states:

Volkswagen and Audi have agreed to pay sludge-related maintenance costs for nearly 480,000 vehicles as part of a proposed settlement conditionally approved in federal court. The order filed Thursday, September 23, 2010 by Judge Joseph L. Tauro in Boston, defined the group, or “class,” that can benefit from the settlement as all current and former owners and lessees of Audi’s A4 (model year 1997-2004) and Volkswagen’s Passat (model year 1998-2004) that were equipped with a 1.8 liter turbo engine.

Penalty Under Landlord Tenant Ordinance Is Statutory, Illinois Supreme Court Finds

October 6, 2010 | Peter S. Lubin and James V. DiTommaso

A recent ruling clarifying how Illinois state law applies to city ordinances caught the attention of our Chicago consumer protection attorneys. In Landis et al v. Marc Realty et al, Ill. Sup. Co. No. 105568 (May 21, 2009), tenants Ana and Ken Landis signed a lease for a Chicago apartment, starting June 1, 2001. They paid a security deposit of $8,400. However, they found a persistent leak in the apartment that the defendants, Marc Realty LLC and Elliott Weiner, were not able to fix. They came to a mutual agreement to vacate in exchange for being released from the lease and left in November of 2001. In April of 2006, they filed suit under Chicago’s Residential Landlord Tenant Ordinance, alleging that the defendants never paid back their security deposit.

Under the RLTO, landlords must repay security deposits, or the balance of such deposits, within 45 days of the date tenants move out or within seven days after the tenant gives notice. If they hold on to the deposits for more than six months, they must pay interest that accrues from the day the rental term began. If they fail to make either payment, tenants are entitled to sue for twice the security deposit plus interest. Neither party in this case disputed this. Instead, Marc Realty moved to dismiss the complaint as untimely under the two-year statute of limitations for a statutory penalty in Illinois. The plaintiffs argued that the RLTO did not provide a statutory penalty, but instead was governed by the five-year miscellaneous statute of limitations or the ten-year statute of limitations applied to contracts. The trial and appellate courts sided with defendants, and plaintiffs appealed.

The majority started by noting that the case rests on the proper interpretation of the phrase “statutory penalty.” It first took up the question of whether a city ordinance qualifies as a statute, which the plaintiffs argued that it did not. The appeals courts are split on this question, the Supreme Court wrote, and prior Supreme Court cases don’t quite apply. The court assumed that the Legislature intended the word “statutory” to take its ordinary dictionary definition, but found that dictionaries are also split on the issue. Applying the general principle that courts should give statutes their broadest possible meaning, the Supreme Court found that the Legislature intended “statutory” to encompass municipal ordinances as well as state law. It noted that this is most fair because it gives all claims for statutory penalties in Illinois the same statute of limitations.

The court next disposed of the plaintiffs’ arguments about the word “penalty.” Under McDonald’s Corp. v. Levine, 108 Ill. App. 3d 732 (1982), statutory penalties must impose automatic liability for violation; set forth a predetermined amount of damages; and impose damages without regard to actual damages. The plaintiffs concede that the RLTO meets the first test, but said the damages are not predetermined because a dollar amount isn’t specified. It doesn’t need to, the court wrote; the formula provided by the statute is sufficient to be counted as “predetermined.” It also dismissed the plaintiffs’ argument that they are seeking actual damages, noting that other areas of the RLTO specify actual damages, but this one does not. The ordinance also says nothing about the contractual obligations between landlords and tenants, the court said, despite plaintiffs’ argument that they were seeking to enforce contractual rights. Thus, the RLTO does impose a “statutory penalty” — and the lower courts’ judgments were affirmed.

In a dissent, Justices Kilbride and Karmeier disagreed with the majority on the question of whether the Legislature intended to include municipal ordinances in the definition of “statutory penalty.” Saying that courts must interpret laws according to the intent of drafters at the time, the justices wrote that “statutory” took only the state-law meaning in 1874, when the law was written. Furthermore, several Illinois Supreme Court precedents show that this interpretation was in use by courts of the time as well: “This court’s precedent could not be more clear.” And the result in this case contradicts a more recent ruling in Clare v. Bell, 378 Ill. 128 (1941), they wrote, which the majority mentioned but failed to adequately distinguish, leaving an inconsistent ruling. The justices also dissented from the majority’s denial of a rehearing.

Law.com reports: “3rd Circuit Overturns 8-Figure Settlement in Lending Class Action — Again”

September 23, 2010 | Peter S. Lubin and James V. DiTommaso

3rd Circuit Overturns 8-Figure Settlement in Lending Class Action — Again
By Shannon P. Duffy
Law.com reports:

For the second time, a federal appeals court has overturned an eight-figure settlement in a class action predatory lending suit on the grounds that the trial judge failed to follow the rigorous and precise steps involved in certifying a settlement class.

In its 100-page opinion in In re Community Bank of Northern Virginia, a unanimous, three-judge panel of the 3rd U.S. Circuit Court of Appeals overturned a $47.6 million settlement on the grounds that the trial judge applied the wrong legal standard in ruling on class certification.

The ruling is a stunning second setback for both the plaintiffs and the defendants whose prior settlement of $33 million was overturned by the 3rd Circuit in 2005. It’s a coup for a coalition of objectors, represented by lawyers from Alabama, North Carolina, Missouri, Maryland and Georgia, who have now succeeded twice in blocking settlements of claims they say are worth more than $3 billion.

You can read the full article here.

USA Today Reports: “Home Mortgage Modification Snags Spark Class-Action Lawsuits”

September 14, 2010 | Peter S. Lubin and James V. DiTommaso

USA Today Reports:

Permanent mortgage modifications, which lower mortgage payments have been given to only about a third of the 1.3 million borrowers.

The class-action lawsuits allege that the trial payment plans are contracts that obligateBank of America and other servicers to abide by them and to give permanent loan modifications to homeowners who otherwise can’t pay their mortgages and would face foreclosure and loss of their homes.