Last Friday the Sacramento Beereported on the terms of the settlement in the Ford case (Ford Explorer Cases, JCCP nos. 4266 & 4270):
Under the proposal, Ford would provide vouchers worth up to $500 each toward the purchase of a new Explorer or $300 toward another Ford vehicle to owners of Explorers purchased in the 1990s.
During a trial that began in June in Sacramento's downtown courthouse, plaintiffs' lawyers argued that Ford had misled car buyers by falsely claiming the Explorers built in the 1990s were safe, all-purpose family vehicles.
"They were peddling it as a safe vehicle that you could run up and down the highway at 70 mph," said lead plaintiffs' attorney Tab Turner. "But this vehicle does not perform as a safe and stable soccer mom kind of vehicle."
Ford knew the Explorer's high, narrow build made it prone to rollover in emergency maneuvers at highway speeds, the lawyers claimed.
When the dangerous defects came to light after a nationwide recall of the Explorers' Firestone tires in August 2000, each Explorer lost about $1,000 in value, the plaintiffs' lawyers argued.
They sued under California's false-advertising and unfair-competition laws, asking a judge to order Ford to disgorge more than $2 billion in profits.
"People are stuck with these vehicles after the value has dropped and cannot use them safely," Turner said Wednesday.
Turner said he'd agreed to the settlement in part because Ford's current financial weakness made it unable to afford a large cash payout. .... "Ford's not in a position to write a check for $500 million."
In another development Wednesday affecting the insurance industry, the state Supreme Court agreed to hear Fairbanks v. Superior Court, S157001, a case that could limit plaintiffs' ability to challenge insurers under the Consumers Legal Remedies Act.
In August, the 2nd District Court of Appeal held that insurance is neither a "good" nor a "service" as defined and regulated by the CLRA. Since Proposition 64 made private claims under California's Unfair Competition Law more difficult to file, the CLRA has become a more attractive vehicle for consumer lawsuits, some lawyers have suggested.
While the Fairbanks case "is tied very closely to the issue of insurance," said Horvitz & Levy partner Lisa Perrochet, "it may be that [generally] people are focusing more on CLRA claims. This may be a harbinger of more aggressive use of those claims."
The CLRA provides for injunctive relief, punitive damages, attorney fees and other remedies, Perrochet said. The Unfair Insurance Practices Act, by contrast, only allows claims under a more narrow scope of circumstances, and it offers far fewer remedies than the CLRA, she said.
I think the better way to characterize Fairbanks would to say that it might confirm (not limit) plaintiffs' ability to challenge insurers under the CLRA (given the Court of Appeal's holding).
On Wednesday, the Los Angeles Times ran an editorial pointing out that finding one bad apple in the barrel doesn't meant there aren't plenty of good, shiny red ones left:
Famous -- or make that infamous -- class-action attorney William S. Lerach pleaded guilty Monday to one count of conspiracy, admitting his role in a $11.3-million kickback scandal that has upended his former law firm, the pathbreaking shareholder advocacy firm of Milberg Weiss.
As part of his plea, Lerach will pay $8 million to the federal government, and could spend up to two years in prison. Responding to news of the deal, tort reform advocates seized the easy opportunity to make sport of Lerach's downfall. But for those tempted to argue that his crimes make the case for curtailing class-action suits sharply, we'd like to offer the objection that such an argument overstates the evidence. Paying plaintiffs to sue is illegal and should be. Zealously representing injured clients is not and shouldn't be.
To the contrary, it's a necessary calling that benefits victims and society. ....
.... The best outcome of Lerach's fall wouldn't be the demise or even the curtailing of the class-action lawsuit. It would be weeding out lawyers who abuse the system. Such action would assure that legitimate class-action suits get their fair hearing in court.
Tuesday's Daily Journal reported that a settlement may be in the offing in the Ford case:
Ford Motor Co. and lawyers for more than 414,000 California owners of Explorers announced Monday that they have reached a tentative settlement in the nation's first consumer class action to go to trial over the sport-utility vehicle. Sacramento County Superior Court Judge David De Alba met with lawyers for a half hour before announcing he had canceled closing arguments in the non-jury case because the parties had reached an apparent resolution.
The Sacramento County Superior Court judge is in the midst of overseeing a three-month long, potentially multibillion-dollar class action against Ford Motor Co. The counsel tables are teeming with lawyers, the briefs are thick, the exhibits are many, and the lengthy testimony about the Ford Explorer's alleged rollover danger can be technical, if not tedious.
And after the plaintiffs surprised everyone by waiving their right to a jury on the first day of trial, De Alba became the center of attention.
"It's a fascinating trial," the judge said recently, declining to say more, given the trial's ongoing status.
De Alba will face another new challenge soon. Chief Justice Ronald George has assigned him to a "strike team" of retired and active judges that will temporarily relocate to Riverside County courts to try to whittle away at the backload of cases there. De Alba will leave when the Ford class action ends.
Yesterday's Sacramento Bee had an interesting update on the Ford Explorer trial now pending in Sacramento County Superior Court. As I previously reported, this case is a class action involving UCL and CLRA claims. According to the Sacramento Bee article, the trial court is considering whether the UCL or CLRA empowers it to order Ford to disgorge its ill-gotten profits:
The plaintiffs' lawyers have argued that Ford rushed the Explorer to market in 1990 to beat the competition and marketed it as a safe family vehicle, even though Ford engineers knew that its tall, narrow design made it prone to rolling over.
Ford then reaped $2.135 billion in ill-gotten profits, the plaintiffs claim. They argue that Judge David De Alba, who is hearing the case without a jury, has the power to order Ford to give back the money.
The plaintiffs' case relies in part on the testimony of Dr. Alan Goedde, an economist and hired expert on damage awards.
He analyzed Ford documents and determined the company made hundreds of millions of dollars because it did not take another year or more to fix the Explorer's safety problems.
Goedde was scheduled to testify Wednesday, but Ford's lawyers objected that his evidence was irrelevant because it concerned profits that De Alba could not order Ford to relinquish.
Ford lawyer Peter Herzog of St. Louis said the plaintiffs could offer evidence only about their claim that Explorers sold in the 1990s had lost value once problems with defective Firestone tires and rollovers came to light in 2000.
The plaintiffs' attorneys claim each Explorer lost approximately $1,100 to $1,300 in resale value, for a total of about $500 million.
De Alba asked why it was within his authority to award any profit "over and above that number."
San Francisco lawyer Elizabeth Cabraser responded that De Alba could order Ford to disgorge its profits if he found its behavior to have been "reprehensible and highly profitable."
The Daily Journal had two interesting articles this week — on Monday, "Strategy Uses Arbitration Terms to Break Up Class," discussing a new defense strategy involving arbitration clauses in employment cases, and on Tuesday, "Reversed Intervention" discussing the Supreme Court's decision in Fireside Bank v. Superior Court (Gonzalez), 40 Cal.4th 1069 (2007). A subscription is required to access these articles online.
On Wednesday, the Sacramento Beereported here on a very interesting UCL and CLRA class action in which trial began last week. As the article explains:
The lawyers outlined their cases in opening statements Tuesday in a class-action lawsuit filed on behalf of more than 400,000 Ford Explorer owners statewide.
The lawsuit consolidates cases from Northern and Southern California and seeks a return of unjust profits under the state's unfair competition and false advertising laws.
With a half-dozen high-powered lawyers on each side, it is being tried in Sacramento Superior Court before Judge David DeAlba, who will decide the case without a jury.
The case is Ford Explorer Cases, JCCP Nos. 4266 & 4270. I am informed that in March, Judge DeAlba denied defense motions to decertify the class and for summary judgment on the UCL and CLRA claims, allowing the action to proceed to trial.
Tuesday's Daily Journal had an article by reporter Rebecca Beyer called "Coupon-Based Settlements Get Tougher" (subscription). The article discusses limitations on coupon settlements that appear to be judicially emerging in state courts on the heels of CAFA.
To hear defense counsel spin it, the California Supreme Court's unanimous decision in Pioneer Electronics minimizes all-important privacy rights to meet trivial discovery ends, yet at the same time is so narrow that it makes no difference in existing privacy law. Pioneer Electronics USA Inc. v. Superior Court, 40 Cal.4th 360 (Jan. 25, 2007).
In a similar fashion, the same voices quickly downplayed Sav-On Drug Stores Inc v. Superior Court, 34 Cal.4th 319 (2004), as an inconsequential opinion offering little help to class plaintiffs.
When viewed dispassionately, however, Pioneer greatly aids plaintiffs in class actions, because it improves counsel's access to precertification information from putative class members - witnesses with knowledge of the claims. Pioneer addresses critical discovery issues of whether plaintiffs may receive contact information for putative class members and, if so, what steps should be taken to protect their privacy rights.
Based on the rapid appearance of conflicting analyses, the Supreme Court decision in Pioneer Electronics (USA) Inc. v. Superior Court (Olmstead), 40 Cal.4th 360 (2007), likely will have significant consequences in class actions. See, e.g., Gordon E. Bosserman, "Too Much Information?" Daily Journal, March 19, 2007; Steven B. Katz, "Class-Action Dissonance," Daily Journal, March 5, 2007; Kimberly Kralowec, "Thoughts on the Class-Action Aspects of Pioneer Electronics," UCL Practitioner (www.uclpractitioner.com /2007/01/thoughts_on_the.html), Jan. 25, 2007.
The articles by Bosserman and Katz, in particular, suggest, in their attempts to downplay the significance of Pioneer Electronics, that the defense bar is rightly concerned about the long-term consequences of this decision on class defendants.
Defense-oriented commentators have seized on the facts of Pioneer Electronics as a basis for advocating that its application should be limited. In particular, commentators have suggested that the basis for the Supreme Court's decision turns uniquely on the fact that the complaining consumers in Pioneer Electronics "consented" to the disclosure of their personal contact information by their act of complaining.
However, the strength of the Pioneer Electronics decision does not support this limited construction. Its significance is greater than the sum of its facts.
A fairer construction of Pioneer Electronics is that, through this decision, the Supreme Court has provided clarification and guidance about the propriety of access by plaintiffs to potential class members. In providing that guidance, the Supreme Court reaffirmed and strengthened important principles which hold that discovery of contact information for potential class members is presumptively appropriate.
Yesterday's San Francisco Chroniclereported that City Attorney Dennis Herrera filed a UCL action against a group of "payday loan" firms for "marketing of short-term installment loans at unlawful interest rates to low-income borrowers." A copy of the complaint, which seeks injunctive relief, restitution, and civil penalties under the UCL, is available at this link, along with the city attorney's press release.
The complaint invokes the UCL's "unlawful" prong by alleging violations of the California Deferred Deposit Transaction Law (Fin. Code §§23000 et seq.), the California Finance Lenders Law (Fin. Code §§22000 et seq.), and other laws. The complaint also invokes the "unfair" prong by alleging that the defendants' "lending and brokering practices constitute unfair business practices because they offend established public policy, and because the harm they cause to consumers in California greatly outweights any benefits associated with those practices." This, of course, is the pre-Cel-Tech formulation of "unfair." The complaint's "aiding and abetting" allegations are also interesting.
Today's San Francisco Chronicle has this story by Bob Egelko on the unpublished opinion in Mervyn's (discussed in this post from yesterday). The story quotes Monique Olivier of The Sturdevant Law Firm, who represented Californians for Disability Rights:
"It's been a long and winding road, but at last the Court of Appeal will hear the merits of the case,'' Monique Olivier, a lawyer for the organization, said Thursday. She said the evidence is largely undisputed and the disability group will ask the appeals court to ... order Mervyn's to widen its aisles.
Pamela Pressley, litigation director for the Santa Monica-based Foundation for Taxpayer and Consumer Rights, insists voters were deceived by major corporations that are now trying to pervert the initiative for their own interests.
"It was a bait and switch," Pressley says. "Voters were told one thing, and now the companies are turning around and using [Prop 64] as a shield against liability."
Pressley's allegations are the central theme of an amicus curiae brief her nonprofit group filed 10 days ago with the California Supreme Court in In re Tobacco Cases II, S147345, a major unfair-advertising suit against six of the nation's largest tobacco manufacturers.
Prop 64, which limits private attorney general suits, was heavily funded by corporate interests. The brief — which enters territory not even raised by the plaintiffs in the case — claims that support was given under the guise of stopping frivolous suits against small businesses and protecting legitimate public interest cases.
In an article titled "Limited Liability," which ran in the Daily Journal on March 22, the authors told of a "conundrum that could be explained with the well-worn phrase 'only in California.'" The "conundrum" was the specter of a product manufacturer being held liable for defrauding consumers merely "because it did not tell them that someday the product will wear out, break, or fail[.]" ....
But there's a problem with the characterization of the issues in Daugherty and the other case discussed in the article, Chamberlan v. Ford Motor Co., 223 F.R.D. 524 (N.D. Cal. 2004): The plaintiffs never sought any such thing in either of those cases. ....
... [A]t least for now, the lesson to be learned from Daugherty is that plaintiffs proceeding under a concealment theory must be vigilant about pleading facts that establish a disclosure duty that is independent of the CLRA and the UCL themselves.
According to Daugherty, one way to do this is by demonstrating the existence of a safety concern, or a violation of an independent duty to disclose. For example, establishing a violation of California's Secret Warranty Law, Civil Code Sections 1795.90-1795.93, would trigger such a duty. Alternatively, a plaintiff can show that the defendant had exclusive access to the concealed facts and/or actively concealed the facts that gave rise to the lawsuit. 5 Bernard E. Witkin, Summary of California Law, Torts Sections 793, 796-97 (10th ed. 2005). The Daugherty court found that the plaintiffs had not pled facts to support any of these theories.
Daugherty took two statutes that serve as the bulwark against deceptive and unfair business practices and transformed them into a statutory version of the common law — which is directly contrary to legislative intent. Yet lawyers who defend manufacturers tout Daugherty as a victory for common sense by constructing an argument that has nothing to do with the issues that were actually litigated. To paraphrase a hackneyed expression, "only in 21st Century America" could this be spun as a positive development in consumer-protection law.
Today's Daily Journalreports (subscription) on what sounds like a very interesting order by Judge Komar in Santa Clara County Superior Court. Citing People ex rel. Clancy v. Superior Court, 39 Cal.3d 740 (1985), he ruled that public-entity plaintiffs may not retain outside attorneys on a contingency fee basis to handle public nuisance lawsuits (in this case, against the lead paint industry). A copy of the order is available at this link (via the blog Valueplays). It sounds like an appeal is inevitable. The reason I find this interesting is I wonder what impact, if any, this development might have on public entities' efforts to retain outside counsel to handle UCL litigation (an idea that was discussed a lot in the wake of Prop. 64).
Some lawyers from both sides say Komar's ruling, even if upheld on appeal, would only apply to affirmative litigation based on a public nuisance cause of action. Still, [Santa Clara County Counsel Ann] Ravel is likely to appeal.
"I believe Judge Komar is clearly wrong, and if that decision stands, it will impair the ability of cash-strapped public entities from proceeding against defendants who create nuisances in their communities," Ravel said.
The types of suits Ravel is concerned about include not only environmental and zoning-related suits brought as public nuisance claims, but also tobacco litigation and other claims that might be brought under § 17200 of the state's Business and Professions Code.
"The reasoning could certainly impact those cases," Ravel said.
Has the California Supreme Court changed the balance between the right to discovery and privacy rights in class actions? The answer is probably "no," but reasonable minds may differ. The court has now spoken on the issue, but did it really change anything? And what about class actions that are not about consumer products, such as employment and health care actions? A very good argument could be made that the court's opinion does not address privacy issues in those areas.
The article goes on to argue that Pioneer Electronics should have no impact on non-consumer cases.
In a blow to labor unions seeking to enforce [certain wage and hour] protections, the Second District Court of Appeal ruled Wednesday(.pdf) that employees cannot transfer the ability to sue in a representative capacity.
The time I had yesterday to review and analyze this decision was limited. One thing that's not entirely clear to me is whether this decision answers the question about Proposition 64's impact on the rules of associational standing. The decision did not use that terminology, and I'm not 100% sure if the union's argument was, in fact, based on associational standing principles. Perhaps someone else who has had more time to look at the opinion and is familiar with these principles would like to post a comment.
I wouldn't call it "fishing." Remember, in Pioneer, an injured class representative had already filed suit. The purpose of the discovery requests was to gain information about potential witnesses who had also experienced problems with the allegedly defective product and to gather evidence to support class certification. A secondary purpose would be to identify possible substitute class representatives in case the original one became disqualified for any reason. Class counsel owe a fiduciary duty to the class as a whole, and one way to fulfill that duty is to ensure that if the original class representative can no longer proceed, others are waiting in the wings so that the action as a whole is not scuttled. Cf.Shapell Industries, Inc. v. Superior Court, 132 Cal.App.4th 1101 (2005) (discussed here).
This morning's Daily Journalreports (subscription) on the Supreme Court's grant of review in Tobacco:
The main question the court will decide in the newest case, lawyers for both sides said, is whether plaintiffs must show that each individual member of the class has been harmed, a nearly impossible burden. Much easier would be to prove that the named plaintiffs have suffered a loss and then later evaluate damages to the entire class.
The Court of Appeal in San Diego ruled against the cigarette plaintiffs in September. The unanimous three-judge ruling said their suit was barred by Proposition 64, a 2004 initiative limiting private class actions under the unfair competition law to injured plaintiffs who have lost money or property as a result of alleged unfair competition.
That finding is the likely focus of the Supreme Court's review, which was ordered without explanation or dissent after the justices' weekly closed-door meeting on pending petitions.
In July, The Recorderreported on contemplated UCL actions against employers who hired illegal aliens in violation of the immigration laws, to the detriment of competing companies who hired lawful workers. My coverage of that is here. The Recorder's blog now reports that the first of the suits has been filed in Kern County Superior Court, and helpfully provides a copy of the complaint (PDF). It does not include a UCL claim after all.
The Recorder reports that attorneys for the plaintiffs in Mervyn's and Branick intend to seek leave to amend to substitute plaintiffs who can satisfy Prop. 64's standing provisions:
In the suit against Mervyn's, plaintiffs' lawyer [James] Sturdevant said that since about 16 disabled individuals testified against the retailer at trial, he believes his clients wouldn't have any problem amending their complaint to comply with the high court's ruling.
Michael Spencer, a partner in Milberg Weiss Bershad & Schulman's New York office who represented the plaintiffs against Downey Savings, said he felt the same way.
"While our clients are disappointed that the Supreme Court interpreted Prop 64 to apply to pending cases," he wrote in an e-mail, "the court's reasoning should allow these cases to continue unimpaired once the complaints are amended to bring in plaintiffs who have suffered injury."
The California attorney general's office, which had participated as an amicus curiae in league with class plaintiff Steve Galfano, feels the ruling is disastrous.
"Californians should be able to defend themselves in court against false advertisements," spokesman Aaron Carruthers said. "This has always been key in enforcing unfair competition laws. This ruling makes that almost impossible.
"We believe this ruling reaches beyond the voters' intent in passing Prop 64," he continued. "We hope the state Supreme Court gets a chance to make it right."
The article also quotes counsel for the plaintiff in Branick:
Michael Spencer, a partner in Milberg Weiss Bershad & Schulman's New York office who represented two plaintiffs in one of the cases now pending before the California Supreme Court, said he didn't believe Tuesday's ruling would have any impact on the retroactivity issue.
"However," he said in an e-mail, "this court's notion that Prop 64 should be read to completely disembowel false advertising class actions is really far-fetched. The electorate was told that Prop 64 was about standing [who can sue], not about the substance of permissible claims."
The article concludes by saying that attorney Duane Westrup, who represents the plaintiff in Pfizer, will be filing a petition for review.