New AAJ Report Details a Year of Heinous Corporate Misconduct

From Takata’s lethal airbags to Monsanto ghostwriting scientific data, to drug companies profiting from the opioid crisis, corporations have time and again put profits before the health and safety of Americans.

A report released Wednesday by the American Association for Justice (AAJ), Worst Corporate Conduct of 2017, details this year’s worst corporate offenders, the aggressive corporate culture plaguing the United States, and the need for a strong civil justice system to make sure consumers and workers can hold corporations accountable and deter corporate misconduct.

As the report indicates, there are no signs that corporations intend to slow down their attack on Americans as they cut their compliance budgets and attempt to free themselves from regulation.

“The misconduct highlighted in this report is a stark reminder that corporations will stop at nothing to protect their profits – even if that means putting consumers and workers at risk,” said Kathleen Nastri, President of AAJ.  “As this report clearly illustrates, Americans need access to the courts so they can get justice and stand up to the onslaught of misconduct.”

One particularly timely section of the report is dedicated to Fox News, which for years has covered up rampant sexual harassment using forced arbitration clauses in employee contracts. Finally, in August of this year, the network revealed that it had paid nearly $50 million to settle sexual harassment and discrimination cases during the previous fiscal year.

Instances of sexual harassment, like those at Fox News, illustrate the need for reform to compel corporations to improve work environments and rein in misconduct.  The “Ending Forced Arbitration of Sexual Harassment Act,” which was introduced in both the House and Senate last week with bipartisan support, would restore workers’ rights by putting an end to the abusive practice of forced arbitration in workplace sex discrimination claims and give survivors of sexual harassment the opportunity to fight for justice in court.

Click here to download the full corporate misconduct report.

Federal Court Approves $142 Million Settlement in Wells Fargo Unauthorized Accounts Scandal

The federal court overseeing the first class action lawsuit filed against Wells Fargo, related to unauthorized accounts, granted preliminary approval to a $142 million settlement designed to compensate Wells Fargo customers nationwide.

The court also appointed Keller Rohrback L.L.P., to represent the class of bank victims. The national consumer class action firm brought the case, captioned Jabbari, et. al. v. Wells Fargo & Company and Wells Fargo Bank, N.A., Case No. 3:15-cv-02159-VC, in the United States District Court for the Northern District of California in 2015.

The Court found on July 8, 2017, that for the purpose of preliminary approval, it is satisfied that the revised settlement is fair, reasonable, and adequate within the meaning of Rule 23.

The settlement compensates customers for fees charged on Wells Fargo unauthorized consumer or small business checking or savings accounts, unsecured credit cards, or unsecured lines of credit, compensates them for damage to their credit resulting from any unauthorized accounts, and provides additional compensation to all class members based on the number of unauthorized accounts opened in their names.

“We are pleased that the court has preliminarily approved this groundbreaking settlement that provides substantial monetary benefits and first-of-its-kind credit repair damage to customers. The settlement is an important component of holding Wells Fargo accountable for its abuse of its customers’ trust,” said Derek Loeser, a partner at Keller Rohrback L.L.P. and lead attorney for the plaintiffs.

Information will soon be sent to class members about the settlement benefits. Potential class members can also go to the settlement website, www.WFSettlement.com, or call (866) 431-8549 for more information. The court is scheduled to hold a final fairness hearing to decide whether to grant final approval on January 4, 2018.

The class covered by the settlement consists of people for whom Wells Fargo opened a consumer or small business checking or savings account, an unsecured credit card, or an unsecured line of credit, or submitted an application for one of these, without the customers consent during the period from May 1, 2002, through April 20, 2017. The class also consists of people who obtained Wells Fargo’s Identity Theft Protection Services during the same time period.

Plaintiffs are represented by:

Derek W. Loeser
Gretchen Freeman Cappio
Daniel P. Mensher
Keller Rohrback L.L.P.
1201 Third Avenue, Suite 3200
Seattle, WA 98101

Matthew J. Preusch
Keller Rohrback L.L.P.
801 Garden Street, Suite 301
Santa Barbara, CA 93101

Jeffrey Lewis
Keller Rohrback L.L.P.
300 Lakeside Drive, Suite 1000
Oakland, CA 94612

Keller Rohrback L.L.P. is a consumer-rights class-action law firm with offices in 6 locations. Its trial lawyers have obtained judgments and settlements on behalf of clients in excess of $18 billion.

Ohio Attorney General Sues Opioid Manufacturers for Fueling Opioid Epidemic

Ohio Attorney General Mike DeWine

Ohio Attorney General Mike DeWine

Ohio Attorney General Mike DeWine has filed a lawsuit against five leading prescription opioid manufacturers and their related companies in Ross County Court of Common Pleas. The lawsuit alleges that the drug companies engaged in fraudulent marketing about the risks and benefits of prescription opioids which fueled Ohio’s opioid epidemic.

“We believe the evidence will also show that these companies got thousands and thousands of Ohioans — our friends, our family members, our co-workers, our kids — addicted to opioid pain medications, which has all too often led to use of the cheaper alternatives of heroin and synthetic opioids,” he says.

“These drug manufacturers led prescribers to believe that opioids were not addictive, that addiction was an easy thing to overcome, or that addiction could actually be treated by taking even more opioids,” DeWine says. “They knew they were wrong, but they did it anyway — and they continue to do it.  Despite all evidence to the contrary about the addictive nature of these pain medications, they are doing precious little to take responsibility for their actions and to tell the public the truth.”

The five manufacturers which are listed as defendants include:

  • Purdue Pharma, which sold OxyContin, MS Contin, Dilaudid, Butrans, Hyslingla, and Targiniq
  • Endo Health Solutions, which sold Percocet, Percodan, Opana, and Zydone
  • Teva Pharmaceutical Industries and its subsidiary Cephalon, which sold Actiq and Fentora
  • Johnson & Johnson and its subsidiary Janssen Pharmaceuticals, which sold Duragesic and Nucynta
  • Allergan, which sold Kadian, Norco, and several generic opioids

The lawsuit alleges, among several counts, that the drug companies violated the Ohio Consumer Sales Practices Act and created a public nuisance by disseminating false and misleading statements about the risks and benefits of opioids. This false marketing included medical journal advertising, sales representative statements, and the use of front groups to deliver information which downplayed the risks and inflated the benefits of certain formulations of opioids. This behavior proliferated the prescription of opioids and fueled the opioid epidemic Ohio is currently facing.

In the lawsuit, Attorney General DeWine is seeking the following remedies, including:

  • A declaration that the companies’ actions were illegal
  • An injunction to stop their continued deceptions and misrepresentations and to abate the harm they have caused
  • Damages for the money that the State spent on the opioids that these companies sold and marketed in Ohio and for other costs of their deceptive acts
  • Repayment to consumers who, like the State, paid for unnecessary opioid prescriptions for chronic pain.

The lawsuit was filed in Ross County as Southern Ohio was likely the hardest hit area in the nation by the opioid epidemic.

Consumer Financial Protection Bureau Under Legal Attack Today

Robert Weissman, Robert Weissman, president of Public Citizen

“A CFPB with a director serving at the effective pleasure of the Big Banks and the financial industry will be just another captured regulatory agency in Washington, D.C. We already have enough of those,” says said Robert Weissman, president of Public Citizen.

Today, the U.S. Court of Appeals for the D.C. Circuit hears arguments in a case challenging the constitutionality of the law that established the U.S. Consumer Financial Protection Bureau (CFPB), created in the wake of the 2008 financial crash to protect Main Street consumers against Wall Street predators.

The legal question is whether the statute that created the CFPB violates separation-of-powers principles by providing that the CFPB director can be removed by the president only for cause. A divided lower court in October held that the agency’s leadership structure is unconstitutional.

In PHH Corporation v. CFPB, Public Citizen, together with the Consumer Federation of America, Consumers Union, the National Association of Consumer Advocates, the National Consumer Law Center and Tzedek DC, filed an amicus brief. It explains that Congress created the CFPB as an independent agency to make sure that the agency could avoid political pressure and capture by the industries whose practices it was charged with regulating.

Control by Big Banks?

“Underlying the constitutional issue at stake in this case is a simple question of crucial importance to all Americans: Does the Consumer Financial Protection Bureau work for American consumers or for the Big Banks? With an independent director, the CFPB in a few years has conservatively saved Americans $12 billion and forestalled countless abuses,” said Robert Weissman, president of Public Citizen. “A CFPB with a director serving at the effective pleasure of the Big Banks and the financial industry will be just another captured regulatory agency in Washington, D.C. We already have enough of those.”

Congress determined that failures of existing regulatory agencies were largely attributable to their focusing on the interests and needs of the financial industry they regulated, while giving insufficient attention to the interests and needs of consumers.

As of February 2017, the CFPB has returned nearly $12 billion to more than 29 million consumers victimized by unlawful and fraudulent activity.

The opponents’ proposition that Congress may confer authority on an independent agency only if the agency is headed by a multimember commission finds no support in past U.S. Supreme Court decisions, the groups assert. Nor does the notion that multimember commissions might be better protectors of liberty than agencies directed by single officers bear on the separation-of-powers issue.

PHH v CFPB is a case between a special interest and the American people. Opponents have spent millions to gut an agency that has stood up for military families, students and seniors who have been harmed by financial crimes,” stated Rachel Weintraub, legislative director and general counsel at Consumer Federation of America. “The CFPB has returned $12 billion to 29 million consumers. The American people need the CFPB to stand up for them. This case is about pulling the agency down.”

 

CPSC Recommends Exemption from Confidentiality Agreements to Permit Disclosure of Product Defects

By Robert J. Stoney. This is reprinted from the Winter 2016 issue of The Trial Lawyer magazine.

Manufacturers that are forced to settle claims brought by those injured or killed by their defective products have a strong incentive to keep these settlements secret. They will typically demand that the injured plaintiff or her lawyers execute a “Confidentiality Agreement” as a condition of settlement. These agreements forbid disclosure of the settlement and prevent consumers from learning about potentially deadly defects in the products. Product safety lawyers have long known that onerous confidentiality agreements are a serious impediment to consumer safety.

The Consumer Product Safety Commission (CPSC) recognizes that these agreements can violate principles of public safety and recently recommended “Best Practices for Protective Orders and Settlement Agreements in Private Civil Litigation,” which was published in the Federal Register on December 2, 2016. The CPSC is a “public-health authority with a broad mandate to protect the public against unreasonable risks of injury associated with consumer products.” See 15 U.S.C. 2051 (2014); see also Public Health Authority Notification, 79 FR 11769 (March 3, 2014).

The CPSC acts as a clearinghouse to identify and catalog unreasonable hazards in consumer products and to force manufacturers to remove such defective products from the stream of commerce. The CPSC has been instrumental in identifying and removing such defective products as flammable children’s pajamas, hazardous baby cribs, strangling pull cords, unstable furniture and appliances, choking magnets, and thousands of other deadly and defective products.

Although manufacturers are required by law to report incidents involving their products, they often fail to do so. As the CPSC notes, “If Industry Stakeholders fail to report, CPSC has limited alternative means of obtaining this critical safety information. It is therefore possible that a product hazard will never come to CPSC’s attention. Information in private litigation could, thus, be a key resource for the CPSC when Industry Stakeholders have not satisfied their reporting obligations.”

Confidentiality agreements, however, prevent even the CPSC from learning about critical product defects discovered in civil litigation. This is not a hypothetical concern. In 2008, the United States Senate Committee on the Judiciary found that safety information related to dangerous playground equipment, collapsible cribs, and all-terrain vehicle design defects was kept from the CPSC by protective orders in private litigation. S. REP. NO. 110–439, at 6–8 (2008). The CPSC’s own “cursory review” of product liability cases found protective orders constraining publication of defects in many consumer products, including infrared liquid propane wall-mounted heaters, wheelbarrows, markers, multimeter devices, office chairs, and gas cans (Fed. Reg. Vol. 81, No. 232/Friday, December 2, 2016 / Notices 87024, n.3).

To break this barrier to information to the public, the CPSC recommends that an exclusion be included in all settlement agreements, allowing disclosure of evidence of defective products to be shared with the commission:

 “The Commission believes the best way to protect public health and safety is to preemptively exclude or exempt the reporting of relevant consumer product safety information to the CPSC (and other government public health and safety agencies) from all confidentiality provisions.”

This recommendation can easily be followed by inserting a simple sentence into all agreements such as ‘‘Nothing herein shall be construed to prohibit any party from disclosing relevant safety information to a regulatory agency or government entity that has an interest in the subject matter of the underlying suit.’’ This language can have an enormous impact on consumer safety.

All product safety lawyers should heed this recommendation and refuse to execute a confidentiality agreement that does not include this exception, and should educate the courts on its importance to the public safety.

Robert J. Stoney is a principal with Blankingship & Keith, PC in Fairfax, Virginia. His practice focuses on major automobile, commercial truck, and bus crashes; products liability; wrongful death; and traumatic brain injury cases. He can be reached at rstoney@bklawva.com.

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

jerk

Image from http://blog.sparktrust.com/?p=329

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.

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.

11th Cir. Reverses Class Denial for Exorbitant Charges by Florida Hospitals

Florida HospitalThe Eleventh Circuit revived a class action against three Florida hospitals. Area hospitals that grossly overcharged auto accident victims for X-rays, ultrasounds, CT scans, and MRIs.

The defendant, HCA Holdings Inc, owns and operates the medical facilities in question, JFK Medical Center, Memorial Healthcare Group,and  North Florida Regional Medical.

The plaintiffs claimed the charges were unreasonable as a matter of law because the patients covered by personal injury protection (PIP) plans were charged more than the non-PIP insured on all services.

PIP Coverage Exhausted

Under Florida law, all cars registered in the state must include a PIP or personal injury protection coverage of $10,000. Medical providers are allowed to charge a reasonable amount for services and supplies.

Under the PIP plan, a patients medical bills are 80% covered. The claimants alleged they were charged up to 65 times higher than usual and left patients covering medical expenses out of pocket.

One plaintiff was charged $3,359 for a spine x-ray but the Florida Medicare rate for the same x-ray is $50. Each plaintiff claimed that their PIP was prematurely exhausted by the increased rates.

Highly Individualized Claims

A Florida federal district judge denied the class action because the claims were highly individualized and failed to represent a common question of law. Each patient received different services and the court believed whether the charges were reasonable would vary from case to case.

However, on appeal the class argued that the dismissal was premature because entering discovery would have provided the court a better idea of which claims were individualized and what charges were unreasonable.

The circuit court agreed that discovery would uncover the unreasonableness of the charges and the court erred by dismissing the claims solely on the face of the complaint.

The Eleventh Circuit reversed and remanded the case to the lower court for further proceedings.

 

This case is Marisela Herrera et al. v. JFK Medical Center, HCA Holdling, et al. Case No 15-13253, U.S. Court of Appeals for the Eleventh Circuit

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.

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.