FTC Restrictions On Jerk.com Reputation Website Upheld by Appellate Court

jerk

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The 1st Circuit Court of Appeals upheld a Federal Trade Commission (FTC) ruling against the creator of Jerk.com for misrepresenting that information on its site was generated by users, when it was actually scraped from the data of more than 70 million Facebook users.

The site also deceived users into believing that they could publicly dispute or remove negative information posted about them by purchasing a $30 membership.

Profiles generated by software, not users

The company’s founder, John Fanning, the former co-founder of Napster.com, launched Jerk.com – “a self-proclaimed reputation management website” in 2009.  The site falsely claimed that users or an acquaintance of a person, made profile pages where users could vote on whether someone was a “jerk” or “not a jerk” or post anonymous reviews about the person.

However, the profiles on the site were not posted by willing users, but rather a software that scraped Facebook accounts for names, photos and other data to fabricate profiles on the website.

The website contained between 73.4 and 81.6 million unique profiles.  For individuals finding their profile on the site, the company offered a “Remove Me!” page which allowed them to “manage [their] reputation and resolve disputes” through a $30 subscription.

The site also charged subscribers a $25 customer service fee to contact or email the website.  Subscribers believed the membership would allow them to alter, dispute, or delete their Jerk.com profile, but in many instances “received nothing in return.”

The company’s customer service department ignored requests to remove photos and other profile information.

FTC complaint

After hundreds of complaints were filed with the FTC, the commission issued an administrative complaint against Jerk.com alleging it falsely represented the material on the site was generated by users and that it deceived users into believing purchasing membership would provide the ability to dispute or remove information from the website.

The complaint also alleged that Fanning was individually liable because he “participated in the deceptive conduct and controlled the acts and practices” of Jerk.com.

The FTC granted summary judgement against Jerk.com and Fanning in violation of federal law prohibiting deceptive practices affecting commerce.  The commission issued an order enjoining Jerk.com and Fanning from misrepresenting the source of any personal information or content on the website or from misrepresenting the benefits of joining any service.

The order also required him to “maintain” and “make available” “advertisements and promotional materials containing any representation covered by [the] order” for a period of five years.

The order further required Fanning to notify the commission of any new business affiliation or employment and submit the business address for the next 10 years.

Creator appealed FTC order

Fanning appealed the order to the 1st Circuit Court of Appeals.  The court agreed with the FTC, finding that Fanning and Jerk.com implicitly misrepresented that the websites content was user generated, and expressly represented that a $30 membership would allow users to contest and remove negative reviews about themselves.

The court, further agreeing with the FTC ruling, rejected Fanning’s argument on appeal that the injunction violated his First Amendment free speech protection, writing that the First Amendment “does not protect misleading commercial speech.”

The court also upheld the 5-year record keeping provisions, finding it “reasonably related to Fanning’s FTC violations.”  The court also made note that Fanning started a similar website “Reper” while running Jerk.com, writing that the east with which the deceptive practices “could be transferred to other websites weighs in favor of requiring Fanning to comply with some reporting requirements.”

However, the court found the 10-year compliance monitoring provision imposed on Fanning was overbroad.  Without any guidance from the commission on the inclusion of the provision, other than its traditional practice of requiring such reporting in other cases, the court deemed the provision not reasonably related to Fanning’s violation and vacated the requirement.

 

The case is John Fanning v. Federal Trade Commission, case number 15-1520, in the United States Court of Appeals for the First Circuit.

TV and Content Marketing are Effective for Trial Lawyers

marketing shaft of lightMarketing initiatives by trial lawyers and plaintiff’s firms are now highly sophisticated and take advantage of broadcast TV and online content marketing to reach massive numbers of potential clients.

The rapid growth of broadcast legal advertisements alone has grown six times faster than all other industry advertisement from $531 million in 2008 to nearly $900 million in 2015, according to the report Trial Lawyer Marketing Broadcast, Search and Social Strategies.

The primary marketing tools used by trial lawyers are:

The product mass torts, asbestos, and data breach areas of law are the ones most effectively using these digital marketing, which have proven to be both recession-proof and politics-proof.

Broadcast Advertising

Legal broadcast advertising has grown more than 68 percent over the past eight years, doubling its share of the local spot television market during the same period.  Legal television ad spending, unlike other major TV advertising categories, such as automotive sales, restaurants, and product retailers, has consistently increased both before and after the Great Recession in 2008-2009.

Legal advertising is not only recession-proof, but also politics-proof, as it does not decrease during election years as it does for other advertisers, due to higher spot costs and lower spot availability.

Legal advertisers are more frequently securing highly desirable broadcast spaces with a high concentration of advertisements shown during syndicated talk shows and local news spots, which is the highest premium advertising spot.

Trial lawyers are primarily utilizing daytime and early morning spots, in efforts to target potential litigants as these spots are typically viewed by the most vulnerable populations.

Securing premium television spots is an effective approach for longevity because once a spot is secured, that legal advertiser often has the right of first refusal for future advertising space in that programming spot, allowing trial firms to gain more strategic advertising space once other spots become available and retain those advantageous positions in the years that follow.

Top Lawyer Advertisers

Of the near $900 million spent on broadcast advertisement, a few law firms are major players utilizing this venue, spending in excess of $10 million per year.

  • Akin Mears tops the list, spending over $25 million
  • Morgan & Morgan and Pulaski & Middleman spending over $24 million.

In addition, the major law firms are advertising in many markets, partnering with local firms for name recognition, regional trust, and knowledge of the local legal environment.

Three legal topics dominate the broadcast advertising market, including prescription drug claims with spending of $53.7 million, medical devices at $45.7 million in broadcast advertisement spending, and asbestos/mesothelioma with spending at $45.6 million.

Digital Marketing

Legal marketing blogger Victoria Blute says that many plaintiff’s lawyers and firms mistakenly rely on old-fashioned tactics like search engine optimization (SEO) and pay-per-click advertising (PPC).

Successful attorneys have switched to content marketing:

As a result, trial law firms are beginning to create single topic, informational websites on specific torts to help consumers injured by dangerous drugs. The websites also connect those users to doctors, treatment centers, and legal options, while also collecting contact information.

Links within the content direct users back to the host law firms and collect contact information, which can be used to coordinate outreach to those potential clients who have searched or requested further information on the specific area of law.

Twitter and other Social Media

Trial lawyers and firms also utilize social media, such as Twitter, as a non-traditional means of advertisement by connecting to networks and conversations with key influencers, activists, journalists, and advocates of various legal topics.  Firms connect through social media for both publicity and information.

In asbestos/mesothelioma litigation, a large, longstanding Twitter network of online community of activists, advocates, and “super-tweeters” exists, according to Trial Lawyer Marketing Broadcast, Search and Social Strategies. It consists of mesothelioma survivors and caregivers, asbestos activists, cancer centers, doctors, and attorneys specializing in asbestos/mesothelioma litigation.

This network of 9,500 accounts produced 50,000 posts discussing the medical, social, personal, and legal issues surrounding asbestos and mesothelioma during a three-week period.

Trial lawyers and firms are able to connect with Twitter advocates, such as Linda Reinstein, a mesothelioma widow, who identifies herself as “dedicated to preventing asbestos-caused diseases through education, advocacy, and community action.”  Reinstein has a large follower base and a high volume of twitter activity.

By connecting to twitter advocates such as Reinstein, attorneys, and firms are able to share information, resources, and its services with survivors and advocacy groups and connect with key influencers such as doctors, treatment centers, other activists, and journalists by sharing the posts of users with large follower counts.

The Kazan Law Firm has sponsored the twitter account Meso Cancer Circle that provides a prime information resource for patients and survivors of mesothelioma, allowing them to join conversations and connect to medical doctors and the cancer research and treatment community.

Firms, including Cohen Milstein, Lieff Cabraser, Michelle Drake, and Nichols Kaster, receive the most monthly search keyword demand in the data privacy and data breach arena.  A strong expert core consisting of data security defense attorneys, data security academics, cybersecurity experts, journalists, and trial lawyers, dominate the social media conversation in this field.

Litigators and journalists share information, allowing news to flow between trial lawyers and the media to drive interest and traffic in data security lawsuits by publicizing legal services and information on cases being litigated.  Trial lawyers are also able to track posts of key influencers in the field to keep abreast of breaking news and contribute to ongoing online conversations.

Through the use of social media networks, trial lawyers and firms are able to establish credibility, publicize lawsuits, and connect to advocates for referrals and activism.

 

Facebook Facial Recognition Tag Suggestions May Violate Privacy Law

facebook privacyFacebook must face a lawsuit against it that claims its photo-tagging system using facial recognition software to identifying users violates Illinois’s Biometric Information Privacy Act.

Chicago residents brought the lawsuit, which was transferred to a Northern California District Court at Facebook’s request, claiming Facebook collected biometric identifiers, such as faceprints, without consent and in violation of the Illinois law.

Facebook attempts to dismiss lawsuit

Facebook filed a motion for summary judgement and a motion to dismiss the case, arguing that its terms and conditions included a choice-of-law provision stipulating that claims against Facebook must be litigated in California under its law, and that the plaintiffs failed to state a claim under the Biometric Information Privacy Act (BIPA).

The court agreed with Facebook, finding that the plaintiffs assented to the user agreements when they signed up for Facebook, and were provided notice of the updated user agreement containing the California choice-of-law provision.

However, in determining whether the California choice-of-law clause was enforceable, the court applied an enforceability test looking to whether California law on the issue is contrary to a fundamental policy and if Illinois had a “materially greater interest in the determination of the matter.

Illinois privacy law applies

The court, answering both questions in the affirmative, wrote that the BIPA “manifests Illinois’ substantial policy of protecting its citizens’ right to privacy in their personal biometric data.”

The court wrote that the BIPA is premised on concerns about the use of biologically unique identifiers that once compromised, “the individual has no recourse” and is at a heightened risk for identity theft.

The BIPA protects the privacy of individuals by requiring written policies on biometric data retention and informed consent before obtaining or disclosing personal biometric information.  The act also provides a private right of action for anyone whose privacy has been compromised.

The court wrote that Facebook attempted to “downplay the conflict as merely the loss of a claim,” but rejected the argument, writing that if its motion were granted, it would write the Illinois policy of protecting its citizen’s privacy interest “out of existence.”

Finding that Illinois would suffer a “complete negation of its biometric privacy protections for its citizens if California law were applied,” the court declined to enforce the California choice-of-law provision, denying Facebook’s motion for summary judgement.

User photos are biometric information

The court also denied Facebook’s motion to dismiss, which argued that the BIPA excludes photographs and any information derived from the photographs in its definitions of “biometric identifiers” and “biometric information.”

The court found the argument “unpersuasive” and refused to read the statute to exclude images and photographs from its scope.  The court wrote that such an exclusion would “substantially undercut” the BIPA because the analysis of biometric identifiers is usually based on an image or photograph.

The court allowed the Facebook users to proceed finding that they had a plausible claim that Facebook used its facial recognition technology without their consent, but no ruling was made on whether the technology violated BIPA.

 

The case is In re Facebook Biometric Information Privacy Litigation, Case number 3:15-cv-03747-JD, in the United States District Court Northern District of California.

 

Uber Sued by Sexual Assault Victims

Uber assaultA California Court has allowed two women sexually assaulted by Uber drivers to proceed in a lawsuit against Uber, despite the company’s motion to dismiss arguing it could not be held liable for crimes committed by the drivers who they consider independent contractors.

Driver raped passenger

Jane Doe 1 of Connecticut and Jane Doe 2 of Florida brought a single lawsuit against Uber.  Boston Uber driver Abderrahim Dakiri assaulted Doe 1 during a ride home on in February 2015.  Police later arrested and charged Dakiri with assaulting Doe 1 on February 7, 2015.

The driver was a recent immigrant who had been in the country for three years, and a background check would not have turned up other relevant information.  While driving Jane Doe 1, Dakiri drove “more than 15 minutes off route” and parked in a remote area “in order to increase his opportunity to sexually assault her,” according to the opinion.

Jane Doe 2 asserts that driver Patrick Aiello, also a middle school teacher, in Charleston, S.C., raped her.  Aiello was arrested on August 9, 2015 on charges of kidnapping and first-degree criminal sexual conduct.

Uber’s seven-year background check did not pick up Aiello’s 12-year-old assault conviction stemming from a domestic violence arrest in 2003.

While driving Jane Doe 2 home, Aiello locked the car doors and drove the car to a remote parking lot near a highway where he “proceeded to viciously rape her and threaten her with harm multiple times.”

Afterwards Doe 2 was able to run to the highway where she was hit by a car while waiving it down for help.  Police took her to a hospital where she became suicidal and remained in a psychiatric unit for three days.

Uber liable as employer

Doe 1 and Doe 2 asserted claims for negligent hiring, supervision, and retention, fraud, battery, assault, false imprisonment, and intentional infliction of emotional distress under a theory of respondeat superior.

Uber requested the court dismiss the lawsuit, claiming no employment relationship exists between Uber and drivers because they are independent contractors.  Uber recently settled two class action lawsuits for $100 million brought by drivers who sought to be classified as employees.

The settlement allowed Uber to continue classifying drivers as independent contractors, although various concessions were given to drivers.

The court agreed with Doe 1 and Doe 2’s argument that Uber is an employer, who retains control over customer contact and fair price, uses a pool of non-professional drivers with no specialized skills, and may terminate drives at will.

In determining that an employment relationship existed, the court wrote, “it matters not whether Uber’s licensing agreements label drivers as independent contractors, if their conduct suggests otherwise.”

Concerns about safety of female passengers

In the alternative, Uber argued the sexual assaults that occurred were outside the scope of the driver’s employment, rendering Uber not liable for their crimes.  The court wrote that a “sexual assault by a…taxi-like driver…is not so unusual or startling” and assaults such as these are “exactly why customers would expect” background checks of Uber drivers.

Amidst concerns about the safety of female passengers and a Buzzfeed article publishing screen shots of Uber’s customer support system showing thousands of entries containing the words “rape” and “sexual assault,” Uber revealed that it received only five claims of rape and 170 claims of sexual assault between December 2012 and August 2015.

Assaults occurred within scope of employment

The court ruled that despite Uber’s effective argument, the court could not determine as a matter of law that sexual assault by an Uber driver is always outside the scope of employment.  For the purpose of Uber’s motion to dismiss, the court found that the drivers were acting in the scope of employment as drivers.

“Holding Uber liable could also forward the underlying policy goals of respondeat superior, including prevention of future injuries and assurance of compensation to victims,” wrote the court.

The court, in its ruling, dismissed the claims against Uber for the negligent hiring, supervision, and retention of Dakiri, the driver who assaulted Doe 1, because nothing was claimed to have existed in his background that Uber knew or should have known that should have prevented his approval as a driver.

The same claims against Uber for driver Aiello remain however, because Uber should have known about his criminal history.

The court denied all other of Uber’s motions to dismiss, allowing Doe 1 and Doe 2 to proceed on its claims against Uber as the employer of the drivers.

 

The case is Jane Doe 1, et al., v. Uber Technologies, INC., Case No. 15-cv-04670-SI, in the United States District Court Northern District of California.

Supreme Court Declines Review of $25M Tobacco Case Likened to Criminal Manslaughter

Philip morris oregonThe United States Supreme Court upheld a $25 million punitive damages award against tobacco giant Philip Morris USA Inc. for the family of a Oregon woman who died from lung cancer that had metastasized to a brain tumor.

The high court declined to hear Philip Morris’ appeal of an Oregon Appeals Court ruling that upheld the $25M punitive damages award reduced from a $150M jury verdict after the Oregon Supreme Court ordered a new trial solely on the issue of punitive damages.

Low-tar cigarettes marketed as safe alternative

Michelle Schwarz survivors brought the lawsuit against Philip Morris after her death in 1999.  Schwarz smoked since the age of 18 and switched to Philip Morris’s Merit Brand cigarettes which were fraudulently marketed as low tar cigarettes as a safe alternative.

The jury found Philip Morris liable for negligence, product liability, and fraud and apportioned Schwarz 49 percent of the fault, awarding $168,000 in compensatory damages and $150 million in punitive damages.

Philip Morris appealed the verdict to the Oregon Supreme Court asserting that the trial court had not properly instructed the jury regarding punitive damages.  The court ordered a new trial and limited the question on what the correct amount of punitive damages should be.

Using the binding verdicts from the first jury trial, the jury determined a punitive damages amount considering the courts emphasis that the evidence demonstrated that the tobacco giant acted with “reckless and outrageous indifference to a highly unreasonable risk of harm and …with a conscious indifference to the health, safety, and welfare of others.”

Considering what the court noted as concerns about the “degree of reprehensibility of Philip Morris’s conduct,” and the evidence regarding the tobacco company’s worth of $50 billion, the retrial jury awarded punitive damages of $25 million.

‘Extraordinarily reprehensible’ conduct compared to manslaughter

Philip Morris appealed the verdict again, arguing the award was grossly excessive in violation of the Due Process Clause.  The state’s Supreme Court rejected the argument, concluding that Philip Morris’s conduct, which it described as a “concerted decades-long effort to deceive smokers and the public about the dangers of smoking” its low-tar cigarettes, was “extraordinarily reprehensible.”

In affirming the verdict, the court referenced the state appeals court ruling that compared Philip Morris’s conduct to criminal homicide, writing that the fraudulent conduct the company engaged in resulting in Schwarz’s death could constitute first-degree manslaughter.

Supreme Court declines review

In its petition to review to the United States Supreme Court, Philip Morris asserted that Oregon’s partial-retrial of only the punitive damage issue conflicted with the high court’s rulings that partial-retrials are only allowed in unusual circumstances because they may cause “serious due process concerns.”

Philip Morris asserted that the Oregon courts were required to order a new trial on all issues, not just that of punitive damages.

The tobacco company also argued that the Supreme Court could use the case to settle state and federal court conflicts on the permissibility of partial retrials in punitive damage cases.

The company further urged the courts review of the case, claiming its implications “transcend punitive damages” and “will provide valuable guidance to…courts across the country” in complex litigation and “mass tort litigation that has proliferated in recent decades.”

Schwarz response brief pointed out that the cases cited by Philip Morris did not apply to decisions to remand for full or partial retrial.  The response further argued that issues for retrial are recognized as a matter for the court’s discretion and does not conflict with the due process clause.

The Supreme Court apparently did not find the case to be of transcending importance and declined to review, upholding the $25 million punitive damage award.

 

The case is Philip Morris USA Inc. v. Paul Scott Schwarz, case no. 15-1013, in the United States Supreme Court.

Porsche Evades Liability for Driver of Carrera GT in Paul Walker Crash

paul walker

A California district court dismissed a wrongful death and survival lawsuit brought against distributor Porsche Cars North America, Inc. by the widow of the driver killed along with actor Paul Walker IV in November 2013.

Kristine Rodas’ late husband, Roger Rodas, was a car enthusiast and experienced racecar driver who owned five to 10 Porsche vehicles and drove the Porsche Carrera GT that crashed killing him and actor Paul Walker.

While Rodas drove the Porsche Carrera GT with Paul Walker as a passenger, the car crashed while going 72 to 90 mph around a curve. After going into a spin, the car slid off the road and struck three trees and a light pole causing the car to split in two pieces and explode.

Driver autopsy

Rodas suffered three sets of injuries, “each of which was independently fatal,” according to the opinion. The first injuries were an atlanto-occipital dislocation (head dislocation from spinal column), hinge fracture of the skull, and associated brain stem laceration caused by direct impact of his head to a tree or light pole in the car’s window opening.

The second set of injuries was multiple skull fractures, with extensive fracturing on his right side, toward Walker. The third fatal set of fatal injuries multiple rib fractures, lung lacerations and contusions. The opinion states that during each of the car collisions with the trees and pole provided opportunity for Rodas and Walker to collide with one another, each having sufficient energy to potentially cause Rodas’ injuries.

Lawsuits in both District and State court

Rodas filed a lawsuit against Porsche in the Superior Court of Los Angeles County. Porsche removed the action to the district court and filed several motions to dismiss.

After Porsche submitted two motions to dismiss, Rodas’ remaining claims were based on four allegations including absence of a crash cage, substandard side impact protection, right rear toe adjuster rod failure, and lack of a fuel cell.

At the same time, Meadow Rain Walker, Paul Walker’s daughter, filed an action in the Los Angeles Superior Court against the car’s designer-manufacturer and original seller, Porsche Aktiengesellschaft (Porsche AG) and Cranbrook Partner, Inc. (Cranbrook), respectively, for the death of her father, Paul Walker IV.

Rodas’ counsel failed to amend the district court complaint to include Porsche AG and Cranbrook. Instead, she filed two subsequent actions, one in her name and the other on behalf of her children in the Los Angeles Superior Court alleging the same causes of action as in the original district court action against Porsche, naming Porsche AG and Cranbrook as defendants.

Rodas filed four motions to remand the district court case to subsequent state court actions, but the district court denied her motions in March 2016. In its denial, the court found that Rodas’ counsel appeared to be “forum shopping in order to rectify its own errors and avoid an adverse ruling by this Court” because she failed to add Porsche AG or Cranbrook to the district court action.

Porsche escapes liability

Porsche filed a motion for summary judgement on all of Rodas’ claims, arguing that Rodas provided no evidence that her allegations were the cause of her late husband’s death. Rodas did not provide any evidence showing liability, besides the Los Angeles Sheriff’s Department (LASD) accident report and her expert witness preliminary report, which only discussed the right rear toe adjuster rod suspension failure.

Rodas conceded to Porsche’s claims that she did not present any evidence that the absence of a crash cage, substandard side impact protection, or the lack of a fuel cell caused her husband’s death. Rodas focused on her expert witness’s theory on the failed suspension rod.

Rodas conceded and even supported Porsche’s arguments for summary judgment, admitting in her amended complaint that “no crash cage could prevent Rodas from moving…within the occupant compartment, and no crash cage could have prevented Rodas and Walker from colliding with each other.”

Plaintiff concedes to three of four claims

Concerning the substandard side impact protection, Rodas’ own expert opined that any unexpected “poor side impact performance…did not play a role” in Rodas’ death. Rodas further conceded that Porsche, as a car distributor, was not involved in the side impact testing, which nevertheless indicated that the Porsche Carrera GT “not only passed, but…performed better than required” on all side impact regulations that applied to the car.

Rodas’ initial complaint claimed the fuel tank ruptured and spilled fuel on the engine, causing the fire. However, Porsche provided evidence that the fuel tank was not compromised and remained intact until after the fire and after Rodas death.

The court, agreeing with Porsche’s motion for summary judgement, and using Rodas’ own information from her complaint, granted summary judgement to Porsche on these issues.

Lastly, on the issue of the failed suspension, the court granted summary judgement in favor of Porsche, finding her expert witness’s theory in his report was “speculative and unreliable.” The court wrote that the expert used “somewhat circular reasoning” from his observations of the tire patterns, concluding the failed rod caused the car to swing and yaw off the road.

Expert report unreliable

It was later discovered the expert used inaccurate information that conflicted with the LASD reports, and later submitted a supplemental declaration that directly contradicted his initial report. The court notes further that Rodas failed to submit the declaration before the deadline it set for additional disclosures, however, even if submitted on time, the court found it improper because it presented impermissible new arguments and was not a response to “new unforeseen facts.”

In granting Porsche’s motion for summary judgement, the court wrote that Rodas did not provide any evidence to prove the accident was caused by a failed rod suspension, and the only evidence of the expert opinion offered was inadmissible to the court. The survival and wrongful death claims were dismissed because no evidence competently showed Rodas’ death occurred because of any wrongdoing by Porsche.

Rodas’ Los Angeles Superior Court case alleging the same claims against Porsche Aktiengesellschaft and Cranbrook Partner, Inc. is still pending.

The case is Kristine Rodas v. Porsche Cars North America, Inc., et al., Case no. CV14-3747 PSG, in the United States District Court Central District of California.

Connecticut Court Allows Lawsuit Against Gun Makers for Sandy Hook Massacre

Twenty children and six adults tragically gunned down by an AR-15 automatic rifle on December 14, 2012.

Twenty children and six adults tragically gunned down by an AR-15 automatic rifle on December 14, 2012.

A Connecticut Superior Court has allowed a lawsuit filed by family members and a survivor of the Sandy Hook Elementary School mass shooting victims against several gun manufacturers and sellers to proceed despite the Protection of Lawful Commerce in Arms Act (PLCAA).

The Act, passed with heavy NRA backing in 2005, has been used as a legal shield to protect gun manufacturers from liability lawsuits for deaths, injuries, and public nuisances created by its weapons.

Nine families of the twenty-six people and children killed and one person injured by a Bushmaster AR-15 assault rifle used by Adam Lanza during the Sandy Hook shooting, filed a 33-count wrongful death complaint against several gun manufacturers and sellers.

Wrongful death

The complaint alleges that the gun makers know that civilians are unfit to operate AR-15, disregarding the risks created by civilian use of a weapon designed for “specialized, highly regulated institutions like the armed forces and law enforcement.”

The complaint claims that gun makers continued to sell the weapons for profit, even with the knowledge that civilian use creates an unreasonable and egregious risk such as the mass casualty event of the Sandy Hook Elementary massacre.

The families also alleged that gun manufacturers “unethically, oppressively, immorally, and unscrupulously marketed and promoted the assaultive qualities” to purchasers with the expectation and intent that purchasers would share or transfer the weapon to others, including family members

A survivor of the shooting in the lawsuit made a claim for her pain and suffering arising from the terror she experienced and injuries obtained during the shooting.  The victims also allege the gun makers knowingly violated the Connecticut Unfair Trade Practices (CUPTA)

Gun Makers claim immunity

Gun manufacturers filed a motion to dismiss for lack of subject matter jurisdiction on the grounds of their immunity by virtue of the Protection of Lawful Commerce in Arms Act (PLCAA), arguing that the wrongful death claims do not fall within the negligent entrustment exception under the Act and because the plaintiffs lacked standing to pursue CUPTA violation claims.

The victims asserted that the gun maker’s motion to dismiss concerned the legal sufficiency of the victim’s claims instead of the court’s jurisdiction, and should have been construed as a motion to strike.

The court agreed with the plaintiffs, writing that it would have been more appropriate to treat the motion to dismiss as a motion to strike because the gun makers focused solely on the legal sufficiency of the complaint in arguing.  The court, however, found it was neither practical nor desirable to consider the defendant’s motion as anything other than a motion to dismiss.

The court wrote that it would “confine its analysis to” whether the court has jurisdiction over the plaintiff’s claims, as appropriately within the scope of the gun maker’s motion to dismiss.

The court discussed that other federal courts have considered the PLCAA as a defense within a motion to dismiss that challenges the legal sufficiency of the pleading, not the court’s jurisdiction, but that in Connecticut, a motion to strike is the equivalent of a federal motion to dismiss.

The court wrote that a plaintiff’s failure to allege an essential fact under a statute goes to the legal sufficiency of the complaint, not the subject matter jurisdiction of the court.  The gun makers arguments concerning the availability of the PLCAA exception application to the plaintiff claims is an issue of legal sufficiency, and any immunity that could be provided to the gun makers under the PLCAA did not implicate the court’s jurisdiction.

The court denied the gun maker’s motion to dismiss because a claim that the court lacked jurisdiction could not be granted based on a claim of immunity under the PLCAA

Victim standing under CUPTA

The court also denied the gun makers motion to dismiss citing the victims did not have standing under CUPTA.  The gun makers argued that the victims lacked standing because they interpreted case law to require that a plaintiff’s interests under CUPTA be that of a consumer, competitor, or other businessperson.

The court again wrote that the issue of who has a protected interest under CUPTA is another legal interest and sufficiency issue, and does not affect the subject matter jurisdiction of the court.  The court wrote that it could not grant the motion to dismiss on the grounds of a challenge to the legal interest of the victims.

The ruling is a big win for gun control advocates as many gun manufacturers have been able to evade liability for the deaths firearms cause since the passage of the PLCAA.

“These companies assume no responsibility for marketing and selling a product to the general population who are not trained to use it nor even understand the power of it,” said William Sherlach to the Washington Post, whose wife Mary Joy was killed by Adam Lanza in the shooting.

Before the passage of the PLCAA, gun maker Bushmaster, a defendant in this class, was sued by two survivors and the families of six victims from the Washington sniper shootings in 2002.  They settled the case for $2.5 million.

The case is Donna L. Soto, et. al., v. Bushmaster Firearms International, LLC, et. al., case number FBT-CV-15-6048103-S in the Superior Court Judicial District of Fairfield at Bridgeport.

7th Circuit affirms $10M Unilever Hair Loss Settlement Against Class Member Appeal

burnt hair 2The Seventh Circuit Court of Appeals has affirmed a $10 million class-action settlement against Unilever United States, Inc. (Unilever USA) for its Suave Keratin Infusion 30 Day Smoothing Kit (Smoothing Kit) that melted consumers’ hair causing it to fall out and burn the scalp.

A class member objected to the settlement on many grounds, which the court dismissed, affirming the district court’s proper approval of the settlement agreement.

Three class action lawsuits were filed and consolidated into one in the Northern District of Illinois against Unilever USA in August 2012.  The class members purchased the Smoothing Kit, which was a hair product marketed to smooth hair and coat it with keratin.  An active ingredient in the product, thioglycolic acid, is extremely corrosive and when left in the hair, it can melt the hair and burn the scalp.

Settlement reached

After a year and a half of mediation, the parties reached a settlement agreement in February 2014 and an order granting approval was entered in July 2014.  The settlement provided for a reimbursement fund of $250,000 and an Injury fund of $10 million.

The reimbursement fund provided compensation to any class member with a one-time payment of $10 for the cost of purchasing the smoothing kit.

The injury fund was designed to compensate members under three benefits;

  • Benefit A provided a maximum of $40 for class members who incurred expenses for hair treatment but lack receipts;
  • Benefit B provides $800 for claimants who have receipts for hairdressers or medical bills; and
  • Benefit C provides up to $25,000 for claimants who suffered significant bodily injury.  Class counsel fees remained entirely separate from the $10,250,000 for class compensation

Class member appeals agreement

Class member Tina Martin objected to the settlement agreement and appealed the final order.  The Court of Appeals dismissed all 11 of Martin’s objections, writing many of the issues she asserted overlapped and conflicted with one another.

Martin claimed that the district court relied on inaccurate data, arguing that the settlement amount may be inadequate because the class size is probably larger than the parties assumed.  She also claimed the court did not know enough information about the number of claimants who suffered serious injuries because only 500 injury clams had been filed.

The court wrote that Martin did “not seem to be sure about what point she is making” as she asserted conflicting arguments.  Nevertheless, the court determined that district court had sufficient information to order the settlement agreement and that the amount was in a reasonable range.

In dismissing Martin’s claim that the certification of the class under Illinois law was unfair, the court found that certification in this class under one state’s law was appropriate.

The court further pointed to the terms of the settlement agreement for justification; the settlement agreement contained a choice-of-law clause, specifying the use of the law of Illinois.

Court affirms settlement agreement

Against Martin’s claim that the settlement failed to provide injunctive relief preventing Unilever from marketing or selling the Smoothing Kits, the court wrote that the agreement already carved out retailers still selling the product, negating the need for such an injunction.

Martin further objected to the procedures the court followed in approving the class counsel’s fees, claiming that her due process and procedural rights were violated because she was prevented from commenting on the counsel fee petition.

The court found no error by the district court deferring its consideration of the counsel fee motion until it had approved the settlement agreement.  Further, the attorney’s fee petition was not submitted until two weeks before the deadline for objections, which the court wrote was “plenty of time for input.”

The court also noted, “Martin herself filed an objection” to the petition.  In support of the district court decision, the court wrote that this type of provision that keeps the attorney’s fees separate from funds for compensation and defers the final award until the agreement is approved, is “to be encouraged.”

The court further dismissed Martin’s other claims for lack of standing and failing to provide evidence to support her claim.  Concerning her additional arguments against the agreement, the court “[saw] no need to address them separately” and affirmed the settlement agreement reached in the case.

 

The case is Sidney Reid et al. v. Unilever United States Inc. et al., case number 14‐3009 in the U.S. Court of Appeals for the Seventh Circuit.

Bankruptcy Court Allows Discharge of Law Student’s Bar Loan Debt

bar loan 2A bankruptcy court for the Eastern District of New York has ruled that a former law student’s bar study loan can be discharged in bankruptcy because the loan is not an educational benefit.

The court did, however, dismiss the student’s claims that the lenders misrepresented the legal obligations of the lender and borrower in the loan by fraudulently misrepresenting the loan as a student loan, which cannot be discharged in a bankruptcy.

While a student at Pace University Law School, then-student Lesley Campbell applied for and received bar loan for $15,000 in April 2009.  Campbell, who did not pass the bar, had nearly $300,000 debt, according to the Wall Street Journal.

Student sought to discharge bar loan debt

After graduation, Campbell worked as a secretary earning $49,000 a year and made payments to the bar loan until June 2012.  She filed for Chapter 7 bankruptcy in November 2014.  Campbell received a discharge in March 2015, but the bar loan was not discharged.

Campbell asserted five claims against five lenders including Citibank, N.A. and The Student Loan Corporation.  Campbell sought a determination of the dischargeability and a declaratory judgement that the bar loan is dischargeable.

She also claimed the lenders violated the Truth in Lending Act by representing that the bar loan was a nondischargeable loan by its titling the promissory note “Master Student Loan Promissory Note.”  She further claimed that the lenders fraudulently misrepresented that the bar loan was a nondischargeable student loan.

Bar Loan not an educational benefit

The U.S. Bankruptcy Court thoroughly examined the United States Bankruptcy Code provision § 523(a)(8), which pertains to the discharge of educational benefits and does not discharge a debtor from debt incurred as an educational benefit.

The court discussed that other courts have interpreted “educational benefits” to encompass any loan which relates in some way to education, but wrote that if the term extended to all education-related loans, then it would “swallow” provisions in the statute that specifically identify the particular loans by particular lenders that are excepted from discharge.

The court wrote that the bar loan, unlike an educational loan, was a private consumer loan that required a consumer credit application evaluated through a credit-scoring model.  The lenders argued that the loan was an educational benefit because eligibility was dependent on Campbell being a law student.

The court found this argument, and the case law the lenders relied on unpersuasive, writing that the underwriting standards requiring an applicant to be a law student “does not turn an arm’s length consumer credit transaction into” an educational benefit within the meaning of the statute.

The court wrote further that loans provided tuition reimbursement on a condition of continued service to a company that are nondischargeable, do not apply to the bar study loan because it is not a conditional loan.  The court found that the bar loan was not an educational benefit under the bankruptcy code, and does not fall within its exceptions to discharge.

The court agreed with the lenders on their motion to dismiss Campbell’s claims for misrepresenting legal obligations and fraudulent misrepresentation, writing that she failed to plead any facts sufficient to establish that the lenders misrepresented any legal obligations of the parties.  The court further wrote that the lenders titling of the promissory note did not create a misrepresentation of any sort.

 

The case is Lesley Campbell v. Citibank, N.A., et. al., case no. 14-45990-CECin the United States Bankruptcy Court in the Eastern District of New York.

No Liability Insurance Coverage for Defective Additive to Women’s Supplement Tablets

supplementThe Wisconsin Supreme Court ruled that a defective ingredient included in recalled health supplement tablets did not amount to “property damage” as covered under a commercial general liability insurance policy.

The court reversed an appellate court decision, ruling that the insurance companies were not required to cover the claims against two drug additive manufacturing companies.

Wisconsin Pharmacal (Pharmacal) supplies daily probiotic supplements to a major retailer.  Included in the supplement are various ingredients including the probiotic bacteria species Lactobacillus rhamnosus (LRA).

The ingredients for the supplement were supplied by Nebraska Cultures of California, Inc. (Nebraska Cultures) and Jeneil Biotech, Inc. (Jeneil), who were insured by The Evanston Insurance Co. (Evanston) and the Netherlands Insurance Co. (Netherlands), respectively.

Wrong additive supplied

The LRA Nebraska Cultures and Jeneil provided was actually Lactobacillus acidophilus (LA), rather than LRA.  The retailer notified Pharmacal that the supplement contained LA instead of LRA, which Pharmacal confirmed through its own independent testing.  As a result, the supplement was recalled and Pharmacal destroyed the tablets containing the defective LA ingredient.

Pharmacal sued Nebraska Cultures and Jeneil, and its respective general liability insurers, Evanston and Netherlands for various tort and contract claims.  Nebraska Cultures and Jeneil moved to bifurcate the proceedings pending the circuit court’s determination on whether the insurance policies provided coverage for the loss of the defective supplement.  The insurance companies, Evanston and Netherlands, moved for summary judgement claiming that the insurance policies did not cover the defective supplement.

The Circuit court granted summary judgement for the insurers, but the court of appeals reversed finding the insurance policies did provide coverage for Pharmacal’s loss because the defective product constituted property damage and exclusions under the policy did not apply.

No coverage from liability insurance

The Supreme Court reversed again finding that the commercial general liability policy applied to physical injuries to tangible property caused by a defect in the product, but not to the product damaged itself.

The court wrote that the sole purpose of the damage to property clause is to “cover the risk that the insured’s goods, products, or work will cause bodily injury or damage to property other than the product…of the insured.”

The court further determined that the appeals court erred in not conducting an integrated systems analysis, which would have determined whether the damage caused by the defective ingredient could be separated out, treating the product as a unified whole.  If the defective ingredient could be separated out, the damage would constitute damage to property other than the defective component, which would be covered under the insurance policy.

The court found that in this case, the defective ingredient included in the supplement made a unified whole product, and damage to the whole product as an integrated system, in this case, damaged the tablets themselves and was not covered under the insurance policies.

Jeneil attempted to assert that packing and shipping materials associated with the tablets suffered physical injury constituting damages coverable by the policy.  The court rejected the argument, writing that no physical damage occurred to the shipping materials.

Exclusions further negates coverage

The court also determined that even if the defective supplement tablets were eligible as a damaged product under the insurance policies, the exclusions in the policies would negate the coverage.  In examining the exclusions of the insurance policies, the court wrote that a “diminution in value, even of worthlessness, is not the same as loss of use” and an inadequate product that fails to perform as intended is not property damage.  The court found that the insurance policies did not provide a clause for coverage for loss of use of property, and so the damaged tablets were not covered.

The court further referenced an insurance policy exclusion that precluded loss of use as damages arising out of the insured’s negligent failure to perform its contractual obligations for coverage.

The court found that because there was no property damage caused by the incorporation of the defective LA ingredient, and because the exclusions in the insurance policy would negate coverage, Netherlands and Evanston were not responsible to cover the loss alleged by Pharmacal against Nebraska Cultures and Jeneil.

 

The case is Wisconsin Pharmacal Co. LLC v. Nebraska Cultures of California Inc. et al., case numbers 2013AP613 and 2013AP687, in the Supreme Court of Wisconsin.