Articles Posted in Class Actions

A groundbreaking three-part series published last week by the New York Times has drawn much-needed attention to a problem threatening almost everyone in America despite the fact that many people are not even aware that it impacts them directly.

As the paper reports in part one of the series: “Over the past few years it has becomes increasingly difficult to apply for a credit card, use a cellphone, get cable or Internet service, or shop online without agreeing to private arbitration. The same applies to getting a job, renting a car or placing a relative in a nursing home.” As the series goes on to detail, while arbitration may originally have been conceived as a way for businesses to resolve disputes among themselves more quickly and cheaply than by using our courts it has become a more-or-less routine way for corporations to tilt the field in their favor in any dispute with their customers. The newspaper quotes a federal judge in Boston who aptly describes this development as “among the most profound shifts in our legal history… Ominously, business has a good chance of opting out of the legal system altogether and misbehaving without reproach.”

What makes the new realities outlined in the Times so scary is how widespread they have become in the years since 2011 when a Supreme Court ruling opened the way for wider use of arbitration clauses and made filing class action lawsuits more difficult. The system is particularly lopsided because the growing class of professional arbitrators who administer it generally rely on large corporations to bring them repeat business (an arbitrator must be approved by both sides to a dispute, but large companies have far more knowledge of who they are agreeing to, and can make it clear they will not pick a given individual again if he or she rules against the company) – a conflict of interest that the Times examines at length and which strips away even the thin façade of impartiality that surrounds the arbitration process.

Oregon took a big step forward today in protecting the rights of consumers and holding bad corporate citizens to account when Governor Kate Brown signed legislation to strengthen consumer rights in class action suits. The new law will also help fund legal aid for our less fortunate neighbors. The bill was the first to be signed into law by the Governor, who took office only last month.

As outlined in a news release issued by Oregon Senate Democrats, “Oregon is one of only a handful of states in the country that allows corporate wrongdoers to keep unclaimed settlement funds. (This law ends) that practice by giving the judge in the case discretion to send up to 50 percent of the unclaimed funds to a non-profit service addressing the damage done in a specific case. The remainder of the money would go to Legal Aid Services of Oregon, providing critical access to civil legal services for those most in need.”

A statement issued by Gov. Brown’s office said, in part, “This law makes Oregon’s class-action laws fair for all Oregonians and ensures that corporations who are responsible compensate for the harm they have caused.” It also, she said “helps support our critically underfunded legal services.”

An article that appeared this week in the New York Times detailed the legal struggles of some of the victims of General Motors’ corporate negligence – struggles made worse by misguided laws designed to protect corporate bottom lines at the expense of public health and safety.

As I have written about many times this year, the giant auto maker is in serious legal trouble as evidence has emerged that it knew for years about defects in its cars’ ignition switches but did little to fix them. As the Times notes, “Today, at least 42 people are known to have died in crashes linked to the defective ignition switch, and both GM and federal safety regulators have come under fire for allowing the danger to linger for more than a decade.”

What could make a situation like this even worse? A legal system that limits the damages a bereaved family can collect. The Times article details the struggle of two Wisconsin families. Both lost loved ones to the GM defect, but neither was able to get any Wisconsin attorney to take their case because of a state law capping damage awards at $350,000. Every law firm approached by both families eventually decided that the limit on potential damages made it impossible for them to fight a huge company like GM without ultimately losing money.

Last month I wrote about the spreading scandal relating to potentially lethal airbags installed in millions of vehicles from nearly a dozen carmakers over more than a decade. The airbags have a defect that can cause the steel cylinders used to inflate them to fragment, sending shrapnel into the bodies of the people the bags are meant to protect. Car accidents involving the defective airbags, manufactured by an auto parts supplier named Takata, are believed to have resulted in at least four deaths.

This week, however, the story became even more serious when the New York Times reported that as far back as 2004 “Takata secretly conducted tests on 50 airbags it retrieved from scrapyards, according to two former employees involved in the tests.” The paper goes on to report that when the tests confirmed the defect in the airbags “instead of alerting federal safety regulators to the possible danger, Takata executives discounted the results and ordered the lab technicians to delete the testing data from their computers and dispose of the airbag inflaters in the trash.”

“Today, 11 automakers have recalled more than 14 million vehicles worldwide because of the rupture risks,” the Times notes. In addition to the four fatalities linked to the defective products “complaints received by regulators about various automakers blame Takata airbags for at least 139 injuries, including 37 people who reported airbags that ruptured or spewed metal or chemicals.” The newspaper adds that Takata is the world’s largest airbag company “accounting for about one-fifth of the global market.”

A recent article in Slate highlighted an important but little noticed executive order signed by President Obama on the last day of July. According to the online magazine, the “Fair Play and Safe Workplaces” order, as it is formally known, “requires companies bidding for federal contracts worth more than $500,000 to make previous violations of labor law public, if they have any to report.” A less well-publicized, but potentially further-reaching, provision “says that companies with federal contracts worth more than $1 million can no longer force their employees out of court, and into arbitration, to settle accusations of workplace discrimination.”

As the article goes on to note, arbitration clauses buried deep in the fine print have been spreading widely since a Supreme Court ruling (focused on cellphone contracts) upheld them in 2011. The result has been a loss of court access for many Americans. This trend reached both absurd and frightening proportions earlier this summer when food giant General Mills tried to contend that by ‘liking’ any one of its many products on Facebook or other social media sites, or simply by purchasing an item, customers would surrender the right to sue the company ever, over anything.

General Mills later retreated in the face of a storm of public criticism, but the incident highlighted a trend in corporate America that is little-noticed but deeply disturbing: efforts to use ‘terms of service’ to force ordinary Americans to surrender our constitutional right to a trial by jury, as guaranteed by the 7th Amendment. Slate, citing figures compiled by the watchdog group Public Citizen, notes that since that 2011 Supreme Court decision “at least 139 class action suits have died” including cases “brought by consumers who said they’d been stung by predatory lenders, or misleading mortgages, or false promises by vocational schools. And also on the line are complaints by employees of discrimination on the job.”

An article this week in The New York Times highlights the extraordinary measures some companies will take to avoid responsibility for their own actions. According to the newspaper, “General Mills, the maker of cereals like Cheerios and Chex as well as brands like Bisquick and Betty Crocker, has quietly added language to its website” that strips consumers of their right to sue the company for actions as simple as downloading a coupon or ‘liking’ the company or its products on Facebook.

Even more extraordinary, the paper reports: “In language added on Tuesday after The New York Times contacted it about the changes, General Mills seemed to go even further, suggesting that buying its products would bind consumers to those terms.”

The website language requires disputes with the company to be settled through arbitration rather than in the courts. Arbitration clauses have been common in the financial industry for decades but have steadily crept into other areas of American life in recent years. Large companies prefer arbitration because, unlike a trial, it is not open to the public and because the process, while supposedly fair, tends to favor deep-pocketed businesses. Since a 2011 Supreme Court ruling upholding the use of arbitration clauses in cellphone contracts this legal device has spread rabidly through the corporate world.

An effort in Salem to close a striking loophole in Oregon’s laws regulating class action lawsuits is attracting attention across the country as legislators seek both to bring Oregon into accord with practice in most of the rest of the United States and to help poor Oregonians overcome the challenges they face when protecting their rights through our legal system.

For many people the words “class action” conjure images of high profile national cases involving prescription drugs or unsafe cars, or of working conditions most of us can barely imagine (e.g. coal miners in West Virginia). A recent case here in Oregon, however, illustrates just how high the stakes can be in seemingly simple cases. As Portland TV station KOIN notes in a web report, a Multnomah County jury ruled earlier this month “that BP was wrong to charge 35 cents extra for people using their debit cards at Arco gas stations in Oregon.” That may not seem like a lot of money but, according to the station, the overcharging effected “nearly 3 million people” just in the two and a half years between January 2011 and August 2013 (the period covered by the suit). The verdict amounts to an estimated $200 per customer – $600 million in all.

Unless they have kept very good banking records, however, many Oregonians won’t see any of that money. Arco’s parent company, BP, says it has not retained the relevant records. Drivers who can document the number of times they used debit cards at Oregon Arco stations may be able to get some money back – but the vast majority of the “class” covered by the settlement is unlikely ever to see anything. This is where politics comes into play: the question of what happens to any unclaimed damages. Oregon is one of only two states where a company in BP’s position can put the unclaimed money back into its corporate pocket (the other state is New Hampshire).

A recent issue of Inside Higher Education calls attention to a little-known battle that American consumers have been losing more and more frequently. Few of us realize the extent to which we are signing away hard-won consumer protections. Worse still, even people who are aware of the situation often find that they have no real option. Choice, if one can call it that, often comes down to surrendering rights or doing without some crucial good or service.

The article focuses specifically on for-profit colleges, describing how Career Education Corporation defrauded both investors and its own students. In 2011 it emerged that the company “cooked the books on the job placement rates they were disclosing to prospective students and regulators.” A settlement was eventually reached but, as the magazine details, the $27.5 million in relief it offered went entirely to CECO’s investors. The students who wasted their money on degrees of little value and for which they paid under false pretenses did not get their money back and, indeed, remained on the hook for student loans (student loans are often the primary revenue stream at for-profit colleges and universities).

As Inside Higher Education explains: “What accounts for this disparity? The answer is that investors in for-profit colleges have access to the courts for filing their grievances, while most of the sector’s students do not.” This, in turn, is because the small print legalese those students had sign off on to attend CECO’s colleges included a clause in which students surrendered their right to sue the schools and their parent company and, instead, required them to submit to binding arbitration.

Earlier this month news broke of a head-spinningly large fraud settlement involving the pharmaceutical giant GlaxoSmithKline. According to ABC News the company “agreed to an unprecedented $3 billion settlement with the US government over allegations that the company advertised drugs for uses not approved by the Food and Drug Administration.”

Over the years we have all become a bit numb to horror stories about the health care industry. One of the few things both sides in the debate surrounding the Affordable Care Act appear to agree on is that the US healthcare system is in need of significant reform (exactly what sort of reform is a subject of far more debate).

Cases like this are the sort of thing that not only give an entire industry a bad name, but make reasonable people wonder how much deeper, and broader, corporate fraud is in the health care and pharmaceutical industry. To what extent are other companies putting their own profits ahead of patient and consumer safety?

A class action lawsuit filed in Salem is taking aim at a perhaps surprising target. According to area television station KDRV the lawsuit alleges that a major insurance company has been “fraudulently denying claims after car crashes.”

The target? USAA, a banking and insurance giant that deals exclusively with current and former members of the military and their families. Because of its focus on the military community USAA has long cultivated a customer-friendly, service-oriented image far removed from that of most commercial banks and insurance companies.

The Oregon suit, however, charges the company with “using medical reports by physicians to say treatment for injuries suffered in car crashes were not medically necessary. Plaintiffs allege in their suit that the insurance medical reviewers of their cases never even talked or consulted with them.” The station’s report said USAA “declined to comment on the lawsuit.”