Chicago Business Litigation Lawyer Blog

Court Decertifies AriZona Ice Class Action Which Alleged All Natural Claims Were False

April 16, 2013 | Peter S. Lubin and James V. DiTommaso

Many food and beverage companies are labeling their products “Natural”, “100% Natural” or “All Natural” in order to attract more health-conscious consumers. Two such consumers are Lauren Ries and Serena Algozer. Ms. Ries claims she bought an “All Natural Green Tea” at a gas station because she was thirsty and looking for a healthy alternative to soda. Ms. Algozer claims she purchased several AriZona ice teas over the years, but neither plaintiff has a receipt for any of these purchases, nor can they remember the prices.

They filed a class-action lawsuit against AriZona Ice Tea in the U.S. District Court for the Northern District of California, alleging that the drinks contained ingredients such as high fructose corn syrup and citric acid. According to the lawsuit, these ingredients are man-made products rather than the natural flavorings they claim to be, thereby making the “natural” labels misleading.

AriZona Ice Tea though, was able to provide testimony from expert witnesses that said otherwise. Dr. Thomas Montville, for example, a Rutgers University food scientist, maintained that both these ingredients are natural substances. The beverage company was also able to provide declarations from their suppliers that both citric acid and high fructose corn syrup are natural ingredients.

The plaintiffs’ attorneys on the other hand, were unable to produce a single expert witness in the three years of the case, which had been scheduled to go to trial on May 13, 2013. They also failed to respond to contentions that the plaintiffs failed to support their claims for restitution or disgorgement. They pointed to the fact that patents existed for the production of high fructose corn syrup, but the judge refused to take “judicial notice” of the fact. The judge was also unconvinced by the deposition of Don Vultaggio, the owner of Hornell Brewing Company, which supported the plaintiffs’ claim that consumers are likely to be confused and misled by the “natural” labels on the ice tea containers.

The lawsuit sought restitution, disgorgement of profits, injunctive relief, and attorneys’ fees. They claimed these under California laws such as the False Advertising Law, the Unfair Competition Law, and the Consumer Legal Remedies Act.

Judge Richard Seeborg had partially certified the class for the injunction against the “natural” label, but had refused to certify a class for restitution. Recently, Judge Seeborg found in favor of the defendants and granted summary judgment against the plaintiffs. According to his 13-page order, the plaintiffs “offer not a scintilla of evidence from which a finder of fact could determine the amount of restitution or disgorgement to which plaintiffs might be entitled if this case were to proceed to trial”.

The judge also determined that the plaintiffs’ counsel could not adequately represent the class and, on those grounds, granted the request to decertify the class.

Illinois Supreme Court Hears Oral Argument in Junk Fax Insurance Case

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

The Federal Telephone Consumer Protection Act (TCPA) makes it illegal to send unsolicited advertisements to fax machines. The Act provides that damages in these cases will be equal to the actual monetary loss suffered by the plaintiff or $500 per fax, whichever is greater. In the event that violation of the Act is found to be knowing and willful, the penalty is tripled.
In Standard Mutual Insurance Co. v. Lay, the defendant, a real estate agency, had hired a “fax broadcaster” which allegedly assured that only people who had agreed to receive advertisements would get its blast fax. This turned out not to be the case though, and the subsequent class-action litigation sought the triple penalty of $1,500 for each of the 3,478 faxes, which had reportedly been sent. The case settled for more than $1.7 million.

Meanwhile, the insurer filed a declaratory judgment action, seeking a declaration of no coverage. After the underlying action settled, the class representative became involved with the declaratory judgment action. The Circuit Court ruled in favor of the insurer and the Appellate Court upheld that ruling, stating that the TCPA penalties could not be insured as a matter of public policy, since they were punitive damages.

The attorney for Lay argued that it was the nature of the conduct, rather than the nature of the penalty, which should determine insurability. He explained that the insured’s conduct was not willful or wanton and did not involve the type of intentional wrongdoing which public policy does not allow to be insured as it would encourage such conduct. The attorney argued that a point by point or “conduct by conduct” analysis is necessary when determining whether conduct is uninsurable as a matter of public policy because it involves willful and wanton misbehavior. The attorney argued that Valley Forge Insurance Co. v. Swiderski Electronics ruled that TCPA damages have the potential to be covered under an advertising injury policy, much like the one involved in the case currently before the Court and that no intentional wrongdoing was involved.

The attorney for the insurer argued that there was an issue of possible breaches by the insured of the policy. The insurer defended under a reservation of rights letter. About four months after the case was filed, the attorney that had been hired by the insurer was fired by the insured. A month or two later, the insured agreed to the $1.79 million settlement with a covenant not to execute against any of the insured’s assets. The insurer’s attorney thereby suggested that there were questions of a breach of the cooperation clause and a voluntary payment had been undertaken. Chief Justice Kilbride asked the attorney if the insurer knew about and objected to the insured’s settlement. The attorney responded that the insurer had not been aware of the settlement.

The attorney for the class representative counter-argued that the insured had the right to settle under the circumstances and that the insurer had certainly known about the settlement.
The Illinois Supreme Court heard these arguments on the final day of the March term and is expected to make a decision in the fall. You can watch the oral argument before the Supreme Court by clicking here.

Court Dismisses Libor Price Fixing Claims

April 10, 2013 | Peter S. Lubin and James V. DiTommaso

Although banks have not generally been looked upon favorably lately, U.S. District Judge Naomi Reice Buchwald decided to look favorably upon 16 banks seeking dismissal of antitrust allegations, racketeering, and state-law claims. The allegations come from leading suits which had been seeking class action certification and claimed that the banks broke federal antitrust laws by allegedly suppressing the London Interbank Offered Rate (otherwise known as Libor).
Libor is calculated on a daily basis for different currencies on estimated borrowing rates submitted by banks on panels. The lawsuits are targeting banks who sat on the panels used to work out US-dollar rates. Executives and traders at certain banks allegedly tried to manipulate Libor in order to increase trading profits or improve the banks’ image.

However, Judge Buchwald says in her 161-page ruling that, because the Libor-setting process is a “cooperative endeavor” and was “never intended to be competitive” the banks would have had no motivation to intentionally put in false numbers. Therefore, any losses suffered by investors and other plaintiffs would have resulted from the banks’ “misrepresentation, not harm from competition”. With this being the case, the banks can not be charged with breaking federal antitrust laws.

Banks have already been hit hard by federal regulators. So far, Royal Bank of Scotland Group PLC (RBS) has agreed to pay $612 million to U.S. and British authorities. UBS AG agreed to pay $1.5 billion, and Barclays agreed to pay $453 million. About a dozen firms still remain under scrutiny, including Citigroup, Inc., Credit Suisse Group AG, Duetsche Bank AG, HSBC Holdings PLC, WestLB AG, and Royal Bank of Canada, among others.

Judge Buchwald acknowledged that, because of these settlements to federal agencies, her ruling may be “unexpected”. She pointed out though that, unlike government agencies, private plaintiffs have many requirements to meet under the statutes to bring a case.
“Therefore, although we are fully cognizant of the settlements that several defendants here have entered into with government regulators, we find that only some of the claims that plaintiffs have asserted may properly proceed.” Among the claims that she did not dismiss are the allegations of breaching commodities laws.

Michael Hausfeld, chairman of Hausfeld LLP, which is representing the city of Baltimore as a plaintiff in one of the largest Libor class-action suits, says that his clients will now have to decide if they want to file an amended suit or appeal the judge’s ruling. Unless the plaintiffs successfully appeal the ruling, it will mean a significant reduction in the potential costs to the banks. The ruling is also likely to diminish the financial incentive for new plaintiffs to join the investors, cities, lenders, and other parties that have already filed suits.

Cass Sunstein Former Chief Regulator for the Obama Administration Discusses the Importance of Ensuring that Consumer Disclosures are Written in Plain English Which Consumers Understand

April 9, 2013 | Peter S. Lubin and James V. DiTommaso

Our Chicago autofraud and Lemon law lawyers near Aurora and Naperville, Illinois bring suit for auto dealer fraud and other car dealer scams such as selling rebuilt wrecks as certified used cars or misrepresenting a car as being in good condition when it is rebuilt wreck or had the odometer rolled back. Super Lawyers has selected our DuPage, Kane, Lake and Cook County auto-fraud, car dealer fraud, consumer fraud and lemon law attorneys as among the top 5% in Illinois. We only collect our fee if we win or settle your case. For a free consultation call us at our toll free number 630-333-0333 or contact us on the web by clicking here.

Chicago Federal Court Certifies Class Action Against comScore For Alleged Data Misappropriation

April 9, 2013 | Peter S. Lubin and James V. DiTommaso

Many people these days take for granted that nothing we do on the internet is private. However, most of us still expect our personal computers and smartphones to remain free from internet stalkers. A recent lawsuit against comScore however, has revealed that this is not always the case.

ComScore is a publicly traded company based in Reston, Virginia that collects internet user data. It monitors and measures what people do on the internet and turns that information into actionable data for its clients, which includes some of the largest e-commerce sites, online retailers, advertising agencies, and publishers. The company says that its more than 2,000 clients use the data for online marketing and targeted advertising.

ComScore uses the OSSProxy software. It is typically bundled with free software products such as screen savers and music sharing software and gets downloaded to the systems of end users that install them. It constantly collects and sends a wide range of data to comScore servers, including the names of every file on the computer, information entered into a web browser, and the contents of PDF files, among other things. ComScore insists that all of its data is stripped of all identifying information and personal data before it gets sold to clients.

However, a lawsuit filed in 2011 by two internet users, one from Illinois and the other from California, alleges that comScore violated the federal Stored Communication Act (SCA), the Electronic Privacy Communication Act (EPCA), and the Computer Fraud and Abuse Act (CFAA). The lawsuit alleges that comScore changed security settings and opened back doors on end-user systems, stole information from word processing documents, emails, and PDFs, redirected user traffic, and injected data collection code into browsers and instant messaging applications.

The lawsuit also alleges that the company secretly tracked and sold Social Security numbers, credit card numbers and passwords, along with other personal information.
In order to collect this data, comScore’s software allegedly modifies computer firewall settings, redirects internet traffic, and can be upgraded and modified remotely. The lawsuit also alleges that, contrary to comScore’s assertions, the company does not separate the personal information from the data it sells. The suit also alleges that comScore intercepts data that it has no business accessing.

Recently, District Judge James Holderman of the United States District Court for the Northern District of Illinois granted the two plaintiffs class action status. Any individual who downloaded and installed comScore’s tracking software on their systems after 2005 now has a claim against the company. The judge also certified a subclass, consisting of members of the primary class who downloaded comScore’s software during a specific time frame but were never provided a functional hyperlink to the user agreement, which describes how the software works.
Under the SCA and ECPA, each class member would be entitled to a maximum of $1,000 in statutory damages.

The judge denied certification of a third claim against comScore regarding unjust enrichment.

Court Denies Preliminary Injunction for Alleged Violation of a Covenant Not to Compete – Matter of Richard Manno & Co., Inc. v. Manno

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

A business sought to enforce a covenant not to compete against a former employee in Matter of Richard Manno & Co., Inc. v. Manno, requesting a preliminary injunction from the Supreme Court of Suffolk County, New York pending the outcome of arbitration. The agreement between the parties was part of the former employee’s severance agreement rather than a condition of his employment. The court denied the application, finding that a preliminary injunction was not an available remedy under the parties’ agreement.

The petitioner, Richard Manno & Co., Inc. manufactures and distributes steel fasteners and machined parts, with a market covering much of the United States. The respondent, Anthony Manno, was an employee of the petitioner until the two entered into a severance agreement in October 2010, in which the petitioner agreed to make various lump sum payments to the respondent in exchange for his resignation and other consideration. The agreement also included provisions for forfeiture of future payments from the petitioner upon certain acts deemed, in the sole discretion of the petitioner, to be in direct competition with the petitioner’s business. The respondent could not work with a domestic company that directly competed with the petitioner, nor could he solicit any person or business that he knew the petitioner was employing or soliciting.

The respondent allegedly formed his own business, Anthony Manno & Co., Inc., in January 2011 to engage in the same business as the petitioner. The petitioner alleges that this new company violated the non-compete agreement by engaging in direct competition in the U.S. market. It also alleged that the respondent’s new business, through such direct competition, interfered with its business relationships with its clients.

Supreme Court Doesn’t Require Expert’s Opinion to Meet Daubert Standard in Determining Class Certification

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

A highly anticipated Supreme Court ruling regarding class certification recently fell a little flat of expectations. While defense attorneys feared the Court’s decision would make it easier for class-actions to attain certification using any evidence at the certification stage, plaintiffs attorneys feared the opposite. They were afraid of the Court going in the other direction and making it more difficult to use expert testimony to justify class certification. In the end the Court’s ruling was so narrow as to justify none of the fears of the two sides.

The matter before the Court involved Comcast and a class action of Comcast table television subscribers who allege that Comcast “clustered” its operations in certain regions (including the Philadelphia area) by acquiring competitors’ cable systems in those areas and then selling the competitors its own cable systems in other regions. This led to Comcast allegedly participating in four different means of stifling competition in its operating regions. One of these practices was using its dominant marketing position to deter others (called “overbuilders”) from opening competing networks in its regions.

At the class certification stage, the plaintiffs presented evidence from an expert witness who used an econometrics model to show how much lower Comcast’s prices would have been without its anticompetitive practices. However, this model showed only the effect of all four anticompetitive practices taken as a whole. The district court, on the other hand, said it would only certify a class of Comcast subscribers pursuing the overbuilder-deterrent theory of antitrust liability. While the district court recognized that the expert’s model did not calculate the damages (if any) from that particular antitrust practices, it nonetheless decided that such an amount could be calculated on a class-wide basis and so decided to certify the class. It ruled that to delve further into the specifics of the plaintiffs’ evidence would be to prematurely determine the merits of the case, a matter the court said is for the trial after the class has been certified. The Third Circuit Court agreed.

When the Supreme Court agreed to review the Third Circuit Court’s ruling, it deviated from the normal proceedings and formulated the question it wanted the parties to address: “Whether a district court may certify a class action without resolving whether the plaintiff has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a class-wide basis.” The parties then debated whether the opinions of the plaintiffs’ expert witness were sufficient and whether they were even necessary to grant class certification.

The Supreme Court reversed the Third Circuit Court’s ruling in a 5-4 decision. According to the Supreme Court, Rule 23 (on class certification) must be satisfied. Rule 23 requires sufficient evidence that the class can prove a claim of damages in order to acquire certification. The Supreme Court ruled that this requirement must be met, even if it involves delving into the merits of the case. According to the Supreme Court’s decision, the district court’s ruling to refuse to consider any of the merit’s of the case “flatly contradicts” previous rulings on the matter by the Supreme Court, as well as Rule 23.

Despite the highly anticipated status of this ruling, it turned out to be rather disappointing as a narrow ruling, which applies to the unique context of this particular case. It is unlikely to affect most class action litigation.

Illinois Supreme Court Allows for More Type of Circumstances to Determine That Non-Compete Agreement is Enforceable in Reliable Fire Equipment Case — Our Chicago Business Lawyers Handle Non-Compete Lawsuits Throughout the Chicago Area

April 2, 2013 | Peter S. Lubin and James V. DiTommaso

When determining the legitimacy of restrictive covenants, it is important for judges to consider all requirements of legitimacy and to do so consistently.

In a recent case, two former employees of Reliable Fire Equipment, a company which sells, installs, and services portable fire extinguishers and fire suppression and alarm systems, allegedly violated the non-competition agreement they had signed with their employer. Rene Garcia had been hired by Reliable in 1992 as a systems technician and was later promoted to sales. In 1998, Arnold Arredondo was hired by Reliable as a salesperson. Both signed non-competition agreements in which they promised not to compete with Reliable, either during their employment or for one year after ceasing to be employed by Reliable.

In early 2004, while still employed by Reliable, Arredondo began forming a company which would supply engineered fire alarm and related auxiliary systems throughout the Chicago area. The new company was christened High Rise Security Systems, LLC and Arredondo and Garcia signed an operating agreement for the company in August of that year.

That same month, Reliable’s founder and chairman heard of the two employees’ movements and confronted them. They both denied it. Arredondo resigned in September and, on October 1, Garcia was fired on suspicion of competition. In December, Reliable filed a complaint against Arredondo, Garcia, and High Rise, alleging that they had violated their non-competition agreements.

Arredondo and Garcia filed a counterclaim, alleging that the restrictive covenant was unenforceable. The court ruled that Reliable had failed to prove the existence of a legitimate business interest to justify the enforcement of the non-competition agreements and therefore ruled for Arredondo and Garcia on their counterclaim. The appellate court upheld that decision and Reliable appealed, sending the case to the Illinois Supreme Court.

The Illinois Supreme Court has said that non-competition clauses in employment contracts are enforceable so long as consideration supports the agreements and the restraints are reasonable. To determine whether the restraints are reasonable, the court uses a three-pronged test: the restraint must be necessary to protect the legitimate business interest of the promisee; it must not impose undue hardship on the promisor or the public; and the scope of the restraint must be otherwise reasonable.

In putting forth this opinion, the Court corrected two recent opinions of the appellate court which did not require a test for legitimate business interest. In Sunbelt Rentals, Inc v. Ehlers, the 4th District Court of Appeals claimed that a court needed only to consider time and territory restrictions when determining for reasonableness in a restrictive covenant. It claimed that the Illinois Supreme Court had never accepted the legitimate business interest test but the Supreme Court said that was a mistaken assumption and that the appellate court had misinterpreted the Supreme Court’s opinion in Mohanty v. St. John Heart Clinic as well as other cases.

Having rejected the reasoning in Sunbelt, the Court clarified the proper standard for conducting the legitimate business interest test. According to the Court in Nationwide Advertising Service Inc v. Kolar, an employer will be considered to have a legitimate business interest subject to protection through non-competition employment agreements if two factors are present: the employees must have gained confidential information through their employment; and customer relationships must be near permanent as a result of the nature of the business.

The Illinois Supreme Court though, overturned the Kolar decision and instead put forth that, while those, as well as other factors might be helpful in determining the question of reasonableness and enforceability, any attempt to file a complete list of factors would be futile or would immediately become obsolete. Rather, the court maintained that determining the existence of a legitimate business interest will depend upon the totality of the circumstances of the individual case.

An employment attorney who represents management, said the decision is good for employers because it actually broadened the enforceability of non-competition agreements. Under the broader standard of considering “the totality of the facts and circumstances of the individual case”, employers could argue that the company’s reputation or goodwill are worth protecting with restrictive covenants.

Whirlpool Sued in Class-Action Over Cancer Cluster — Our Chicago Class Action Lawyers File Class Actions for Clients Throughout Illinois

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

With cancer being one of the biggest health scares in our country, it is frightening to think that something as seemingly innocent as a local park might be the cause of it. Whirlpool Park in Clyde, Ohio, so named because it was built by Whirlpool Corp. for its employees and their families, has been accused of being the cause of the numerous recent cancer cases which have led the Centers for Disease Control and Prevention to designate the eastern Sandusky County as a cancer cluster.

Tim Lagrou’s wife was diagnosed with non-Hodgkin’s lymphoma in 2005 and died in October 2006 at the age of 23, leaving Tim and their one-year-old son. Lagrou and two other families have now filed a $750 million class action lawsuit in Sandusky County Common Pleas Court against Whirlpool Corp., the original owner of the park, and Grist Mill Creek, the company which has owned the park since 2008. The lawsuit alleges negligence on the part of the two companies which allegedly handled, disposed, and concealed toxic waste.

The U.S. Environmental Protection Agency (EPA) tested soil in Whirlpool Park and found PCBs, carcinogenic toxins, buried under the basketball court and what used to be the tennis court.

The park closed in 2006 (the same year Lagrou’s wife died) as interest in the park waned. It was bought by Jonathan and Robert Abdoo of Grist Mills Creek in 2008 with the intention of building on the site.

Thomas Bowlus, an attorney for Grist Mills Creek, said the Abdoos were first made aware of toxic materials on the site after the EPA launched its investigation in 2012. According to the lawsuit though, Grist Mills Creek either already knew, or should have known about the toxic chemicals. The lawsuit alleges that the company breached its duty of ordinary care to neighbors by permitting the toxic materials to remain in the park.

The class action includes people who visited or used the park between 1953 and 2008 and anyone who owns property within 4,000 feet of the park. Information from Whirlpool is needed to determine the exact number of potential class members but the plaintiffs believe there could be as many as 1,000.

The lawsuit is seeking $25,000 for the named plaintiffs (the Ohio state maximum for compensatory damages) and $750 million in punitive damages for the entire class. Joseph Albrechta, who represents the plaintiffs in the suit, said that the $750 million number “was thought about very carefully”. According to Whirlpool’s website, they make $19 billion annually in sales, meaning the $750 million would comprise just two weeks of sales for them. For the families however, that amount would go a long way in helping them restore the financial losses incurred by the park’s toxicity.

The lawsuit is also seeking the instigation of a medical monitoring fund and a park cleanup fund.
Whirlpool has announced that it will further test the land in the spring.
At least 35 children within a 6.7 mile radius in eastern Sandusky County have been affected by cancer since 1996. Four of those children have died, although the Ohio EPA has been unable to determine a cause.

Audi Settles Class Action Claims for Allegedly Defective Transmission

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

Car manufacturers provide warranties for their vehicles, promising to pay for most repairs and replacements that the vehicle requires within a certain number of years of purchase of the car or up to a certain mileage. However, if enough cars experience failures of a particular variety after the warranty expires, the manufacturer could still find themselves in trouble.

Audi has found itself in that situation when a class-action lawsuit was filed against it on behalf of U.S.A. consumers who leased or bought a 2002-6 A4 or A6 model with a continuously variable transmission (CVT). The lawsuit, which was filed in January 2011, alleges that the CVTs had manufacturing and design flaws that caused them to fail and left owners with thousands of dollars in repair bills. The lawsuit also alleges that Audi knew about these flaws and intentionally concealed them from consumers.

In the preliminarily approved settlement, Audi denied the allegation that the CVTs were defective and insisted that it had “acted properly and in compliance with applicable laws and rules.” However, they also said that the expense of extended litigation “may not be in the best interests of their consumers.” Hence Audi’s settlement offer.

The settlement includes reimbursement “for certain C.V.T. transmission repairs” that occurred or will occur within 10 years or 100,000 miles of the original sale or lease of the vehicle. The original warranty covered only four years or 50,000 miles. The owners will be reimbursed for the replacement of various parts, depending on which model year they had.
The transmission control module is covered for 2003, 2004, 2005 and 2006 model year A4s and A6s. The valve body is covered for 2003-4 model A4 and A6. Replacement of the transmission without the valve body and transmission control module “is covered for the 2002, 2003, or 2004 model year Audi A4 or A6.” The settlement does not say whether it includes reimbursement of another transmission part or replacement of the entire transmission.

Some of the 2002 and 2003 models are probably beyond even the extended warranty by now, but the settlement will still reimburse the owners if the specified repair occurred within 100,000 miles or 10 years. The settlement further provides a “trade-in reimbursement cost” to make up for lost value of a 2002, 2003, or 2004 A4 or A6 that needed “a complete replacement of a C.V.T. transmission” after the normal warranty expired but the vehicle was sold or traded without repair.

The settlement does not specify whether owners in that group who had a major component fail, but did not need to replace the entire transmission, are eligible for reimbursement. It also did not indicate why the 2005-6 model year was not included in this part of the settlement.
The settlement, which covers about 64,000 Audi vehicles, was preliminarily approved on March 11 by Judge A. Howard Matz of the United States District Court for the Central District of California. The hearing for final approval has been scheduled for September.