Articles Posted in Class Actions

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.”

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