FDCPA Fee-Shifting Applies To Appellate Proceedings, Tenth Circuit Holds

Thu, 02 Sep 2010 16:07:46 GMT

In Anchondo v. Anderson, Crenshaw & Associates, L.L.C, --- F.3d ---, 2010 WL 3261155 (10th Cir. Aug. 16, 2010), the Tenth Circuit held that, like that of the Truth in Lending Act (TLA), the Fair Debt Collection Practices Act’s (FDCPA) fee-shifting provision encompasses appellate...

Class Certification Denied in Microwave Popcorn Litigation

Thu, 02 Sep 2010 11:55:00 GMT

A federal court has denied class certification in a proposed consumer fraud class action arising from the sale of microwave popcorn with artificial butter flavoring. See Courtney Fine v. Conagra Foods, Inc., No. CV 10-01848 SJO (C.D. Calif., Aug. 27, 2010).

The facts: Diacetyl is a naturally occurring chemical in butter, and was also used in artificial butter flavors for decades. In 2007 defendant Conagra, maker of microwave popcorn, issued a press release to the public stating it was no longer adding the compound diacetyl, which has been associated with lung injury in factory workers exposed to high doses, to its butter-flavored microwave popcorn products. Since the announcement, defendant "reformulated" all butter-flavored varieties of Orville Redenbacher's and Act II microwave popcorn in response, it said, to consumer uncertainty regarding the ingredients of the microwave popcorn. Conagra also redesigned the packaging for these products to display the words "No Added Diacetyl."

Plaintiff alleged that she understood the advertising claim to be there was no diacetyl in the new popcorn, as opposed to no added diacetyl, and alleged she relied on defendant's claims that there was "no diacetyl" in the popcorn products when making the purchases. Plaintiff asserted, however, that diacetyl is still present in the products (as part of natural butter). Plaintiff further asserted that had she known the representation regarding the diacetyl was false, she would not have made the purchases.

Plaintiff alleged causes of action for: (1) false and misleading representation of material facts, constituting unfair competition within the meaning of California Business & Professions Code §§ 17200, et seq. ("UCL"); and (2) false advertising in violation of Business & Professions Code §§ 17500, et seq. ("FAL"). She further alleged that she suffered a monetary loss as a result of defendant's alleged actions, which were in violation of the Consumer Legal Remedies Act ("CLRA"), Cal. Civ. Code §§ 1750, et seq.

Last March, Conagra removed the case from state court to federal (Judge Otero). Then they filed a Motion to Dismiss based on various grounds, including that: (1) Plaintiff does not allege a cognizable injury resulting from defendant's products and therefore lacks standing; (2) Plaintiff fails to state a claim under the UCL, FAL, and CLRA as a matter of law under Rule 12(b)(6). The gist of the final argument was that plaintiff "received exactly what she paid for." But, the court was persuaded that plaintiff adequately asserted that she did not get what she paid for, as she was under the impression that defendant's popcorn products were free of diacetyl. That is, she asserted that Conagra’s placement of "No Diacetyl Added" on the packaging is a material misrepresentation, and that reasonable consumers could (somehow) have taken the label to mean that diacetyl did not exist in the product at all.

Plaintiffs then moved for certification of a class consisting of all persons residing in the state of California who purchased Orville Redenbacher's brand Light Butter, Movie Theater Butter Light microwave popcorn, and/or ACT II brand 94% Fat Free Butter, Light Butter, and Butter Lover's microwave popcorn for personal use and not for resale since September 1, 2007. Plaintiff sought certification under Rule 23(b)(3) and 23(b)(2), but argued her "primary goal is to obtain injunctive relief by way of an order enjoining Defendant from its continued practice of making misleading advertising and label claims about its butter flavored microwave popcorn products."

The court denied the motion for class certification on three related grounds. The first problem was that in the court's prior Order Denying Defendant's Motion to Dismiss (6/29/10), the court had ruled that plaintiff established standing for herself because she alleged that she incurred injury as a result of defendant's allegedly improper conduct. That is, plaintiff's spending money on defendant's popcorn in reliance of defendant's placing "No Added Diacetyl" on the packaging.

In the class Motion, plaintiff sought to certify a class that includes "all persons residing in the State of California who purchased [Defendant's] popcorn for personal use and not for resale since September 1, 2007." Named plaintiff made no mention of the proposed class being comprised only of members who made the purchase as a result of defendant's allegedly false statements, which would be necessary in order to establish standing for the rest of the class. The court noted that other courts have held that class definitions should be tailored to exclude putative class members who lack standing; each class member need not submit evidence of personal standing but, nonetheless, a class must be defined in such a way that anyone within it would have standing. Burdick v. Union Sec. Ins. Co., 2009 WL 4798873, at *4 (C.D. Cal. 2009).

Accordingly, class certification was improper here, given that plaintiff's proposed class included many people who may not have relied on defendant's alleged misrepresentations when making their purchasing decisions.

Second, a related problem was the Rule 23(a) requirement that plaintiff’s claims be typical of the class claims. The court agreed with Conagra that plaintiff failed to adduce facts suggesting that other class members have been injured by the same course of conduct that she asserts injured her. There could be no serious question, said the court, that the vast majority of putative class members here never read (let alone considered) the defendant's statement at issue, do not know what diacetyl is, and did not base their popcorn purchases on diacetyl-related issues. Plaintiff purchased popcorn, she said, because of defendant's allegedly misleading statements regarding diacetyl. Plaintiff's injury was established due to her alleged reliance on defendant's statements. But plaintiff sought to certify a class that would likely include people with varying rationales behind their purchases – many who purchased popcorn based on factors like flavor or brand. Plaintiff thus failed to establish that she could be a typical representative of the class, whose members were buying for all sorts of reasons unrelated to diacetyl.

Third, because the court found that plaintiff was not a typical representative, the court also held that plaintiff was not an adequate representative under Rule 23(a)(4).

What is refreshing about this short opinion is the recognition that Rule 23(a) matters too. Often we see courts giver very cursory analysis of the (a) elements and/or emphasize that regardless of the initial prerequisites the issues of predominance, manageability and superiority dictate the certification result. While the fact that class members undoubtedly bought microwave popcorn for many reasons would impact predominance of individual issues, it also does in fact suggest that the class representative's claims were not typical of the the class, as defined.

(NB. Your humble blogger is involved in the diacetyl litigation, but not this case.)

Update on Gulf Oil Spill Litigation

Wed, 01 Sep 2010 11:48:40 GMT

Couple of interesting issue being debated in the Gulf Oil Spill Litigation. In re: Oil Spill by the Oil Rig "Deepwater Horizon" in the Gulf of Mexico on April 20, 2010, MDL-2179 (E.D. La.).

The first concerns control over the testing of key components of the rig, once they are recovered. Readers know how important such testing can be in supporting or refuting causation theories. But the very act of testing, even if not destructive, potentially alters the condition of the product. Who goes first; what tests get run in what order; who does the testing; how tests are done... all of these can be vitally important issues in accident investigation and product liability litigation.

Defendant Transocean Ltd. unit has asked the judge in the MDL to grant a motion for a protective order that would block the government's apparent plan to unilaterally control testing of the oil rig's blowout preventer. Press reports suggest the blowout preventer could be recovered from the Gulf floor in the near future. Transocean Offshore Deepwater Drilling Inc. and several other defendants thus filed a motion last week in the U.S. District Court for the Eastern District of Louisiana for an expedited hearing on the protective order covering the blowout preventer.

The federal government has indicated that it wants to take exclusive control of the blowout preventer, transport it to a government site, and then contract for forensic testing and analysis. The motion argues that while the government has solicited input from other parties on testing protocol, it never said it would pay attention to any of those suggestions.

The second issue is a battle between Transocean and co-defendant BP over document discovery. Transocean attorneys are claiming that BP has been withholding documents and limiting Transocean's access to sensitive information connected to the accident, including records of tests on the blowout preventer, lab reports on components of the rig such as the well cement mix, and data on equipment used to keep well pipes in place during cementing. BP, for its part, calls the claim a "publicity stunt” designed to divert attention from Transocean's alleged role in the accident. BP claims it has already turned over thousands of pages of documents, including materials on the initial exploration plan, lab tests and daily drilling reports, and mud log reports.

Third, the American Petroleum Institute and other parties who are defendant-intervenors have asked the MDL judge to remand one of the many coordinated cases. Gulf Restoration Network et al. v. Salazar et al. This one is the suit brought by environmental groups against the federal government, and the argument is that it is fundamentally different from the other cases because it focuses on administrative law issues regarding the government’s approval of offshore drilling plans.

The Gulf Restoration Network, along with the Sierra Club, accused the U.S. Department of the Interior of ignoring environmental regulations when it allegedly waived safety regulations to allow BP and Transocean to conduct offshore drilling exploration in the Gulf of Mexico.

The discovery for negligence claims at the core of the MDL, these moving parties assert, will not materially assist or advance a case that stems from the legal issue whether the federal government took proper steps in granting the companies the offshore drilling exploration permits. In fact, the argument goes, keeping Gulf Restoration in the MDL would unreasonably delay what would normally be a quick resolution to an administrative law action.

State Court Allows Double-Dipping Asbestos Claim

Tue, 31 Aug 2010 11:44:03 GMT

A state appeals court has ruled that an employer may face liability under New Jersey law for allegedly exposing a plaintiff to asbestos through contact with her husband's work clothes, even if she also had worked for the employer as a direct employee herself. See Anderson v. A.J. Friedman Supply, et al., No. A-5892-07T1 (N.J. Super. Ct. App. Div., 8/20/10).

Plaintiffs alleged that Bonnie Anderson contracted mesothelioma from one or both exposures to asbestos at the Linden Bayway Refinery owned by defendant Exxon Mobil Corporation (and home of the state's largest Christmas tree apparently). The first was bystander exposure from laundering her husband John's asbestos-laden work clothes during his employment with Exxon from 1969 to 2003. (In Olivo v. Owens-Illinois Inc., 186 N.J. 394 (2006), the court had found that an employer could be liable for indirectly exposing family members to the asbestos fibers found on a employee's work clothes.) The second was direct exposure during Bonnie's own employment with Exxon from 1974 to 1986.

At trial, plaintiffs focused on the bystander exposure, and tried to downplay any significant exposure at work. A defense expert agreed that the only epidemiologically established cause of mesothelioma is asbestos exposure; it is commonly accepted today that it's possible that women can get mesothelioma from asbestos dust brought home on the clothing of a husband or parent; and that mesothelioma has an average latency period of thirty-two years.

The trial court charged the jury that asbestos brought home by John need not be the sole cause of plaintiff's asbestos-related injuries but it must be a substantial contributing factor, and if the jury were to find that Bonnie's exposure occurring during the course of her employment was the sole cause of her injury or disease, it should return a verdict for Exxon.

Exxon appealed from a judgment in favor of plaintiffs, awarding more than $7 million to the Andersons in compensatory damages.

The appellate court noted that this case presented a novel scenario of a single injury arising after a long latency period caused by one of two, or both, asbestos exposures. The court of appeals framed the question as whether Mrs. Anderson could continue to assert a claim against Exxon if she was exposed as a result of washing the clothes but she was also an employee with possible direct exposure at that time.

As to that question, the court turned to the "dual persona doctrine," which under New Jersey law generally provides that an employer may become like a third person, vulnerable to tort suit by an employee, outside the normal bar of the exclusivity of the workers comp system, if and only if it possesses a second persona so completely independent from and unrelated to its status as employer that by established standards the law recognizes that persona as a separate legal person.

The court could find no close precedents, but one might think that the role of the defendant as employer of husband and wife and its role in the alleged exposure due to the husband's work-related clothing does not rise to the the level of a separate legal person. But the court affirmed the trial court's reasoning that Exxon was such a dual persona, having an employer capacity for an eight year period, but then having a separate "relationship" to Mrs. Anderson as a bystander for 20 years. It was thought unfair to the plaintiff not to let her pursue her claim based on her bystander
exposure, which had "absolutely nothing" to do with her employment relationship with Exxon.

That is, although Exxon could not be held liable based on her direct occupational exposure, it could be held liable pursuant to her separate exposure to the asbestos brought home by John from his Exxon job.

One might assume that if the employer was a "separate legal person" who was not protected by the workers comp scheme for purposes of the alleged bystander exposure, then at least the defendant could get some recognition on the verdict form of this separate legal entity. But even though the trial judge viewed Exxon as "standing in two different pairs of shoes," the court refused Exxon's request to have the two legal persons listed on the verdict sheet, and declined to direct the jury to allocate fault between Bonnie's direct asbestos exposure as an Exxon employee and any bystander exposure from washing John's work clothes.

The court of appeals agreed, reasoning that the jury could not allocate any fault to Exxon as Bonnie's employer, because Exxon was immune from suit pursuant to the Workers Comp Act. The state's comparative fault doctrine provides that fault shall be allocated among each "party" in the case. The workers' compensation bar precluded Exxon from being a "party" in this litigation in its status as Bonnie's employer.

Thus, defendants like Exxon get the worst of both worlds: no safe haven under workers comp for having been the employer, but no allocation of fault because they were the employer under the workers comp scheme!

ADHD Linked to Pesticides

dbraslow@cpm-law.com (Derek T. Braslow) — Mon, 30 Aug 2010 15:34:30 GMT

Several recent studies suggest a strong connection between exposure to common pesticides and attention deficit hyperactivity disorder (ADHD) in children.

U.S. Urges Reversal of 2d Circuit Global Warming Nuisance Decision

Mon, 30 Aug 2010 11:21:19 GMT

The federal government (Acting Solicitor General Neal Katyal on behalf of the Tennessee Valley Authority, a government-owned company), last week urged the Supreme Court to overturn a court of appeals decision that allowed Connecticut and several other states to move forward in their suit seeking greenhouse gas emissions reductions under a federal common law nuisance theory. American Electric Power Co. v. Connecticut, No. 10-174 (U.S., brief filed 8/24/10).

Readers may recall from earlier posts that in Connecticut v. American Electric Power Co., 2009 WL 2996729 (2nd Cir. 9/21/09), two groups of plaintiffs, one consisting of eight states and New York City, and the other consisting of three land trusts, sued several electric power corporations that own and operate fossil-fuel-fired power plants, seeking abatement of defendants' alleged ongoing contributions to the "public nuisance of global warming." Plaintiffs claimed that global warming, to which the defendants allegedly contributed as large emitters of carbon dioxide, is causing and will continue to cause serious harm affecting human health and natural resources. The plaintiffs' theory is that carbon dioxide acts as a greenhouse gas that traps heat in the earth's atmosphere, and that as a result of this trapped heat, the earth's temperature has risen over the years and will continue to rise in the future. Pointing to an alleged “clear scientific consensus” that global warming has already begun to alter the natural world, plaintiffs predicted that it “will accelerate over the coming decades unless action is taken to reduce emissions of carbon dioxide.”

When thinking about "global climate" changes, MassTortDefense has always been sobered by the fact that humans have been trying to measure temperature consistently only since the1880s, during which time advocates think the world may have warmed by about +0.6 °C -- which is less than the margin of error on our ability to measure the Earth's temperature!

Anyway, plaintiffs brought these actions under the federal common law of nuisance or, in the alternative, state nuisance law, to force defendants to cap and then reduce their carbon dioxide emissions. The district court held that plaintiffs' claims presented a non-justiciable political question and dismissed the complaints. 406 F. Supp. 2d 265.

On appeal to the Second Circuit, plaintiffs argued that the political question doctrine does not bar adjudication of their claims; that they had standing to assert their claims; that they had properly stated claims under the federal common law of nuisance; and that their claims were not displaced by any federal statutes.

In a lengthy opinion, the two judges (Justice, then-Judge Sotomayor had to drop out) held that the district court erred in dismissing the complaints on political question grounds; that all of plaintiffs had standing; that the federal common law of nuisance governs their claims; that plaintiffs had stated claims under the federal common law of nuisance; that their claims were not displaced by other federal law.

In a very minimalist interpretation of what is needed for standing, the Second Circuit distinguished multiple precedents of the Supreme Court which held that to have standing a plaintiff must allege an injury that is concrete, direct, real, and palpable -- not abstract. Injury must be particularized, personal, individual, distinct, and differentiated -- not generalized or undifferentiated. The Supreme Court has further stated that the asserted injury must be actual or imminent, certainly impending and immediate --not remote, speculative, conjectural, or hypothetical. The court rejected defendants challenge that the contentions of future injury at some unspecified future date are not the kind of “imminent” injury required. The court also gave short shrift to the argument that plaintiffs could neither isolate which alleged harms will be caused by defendants' emissions, nor allege that such emissions would alone cause any future harms.

As we noted here, several defendants have filed a cert petition that raises the important, recurring question whether states and private plaintiffs have standing to seek, and whether federal common law provides authority for courts to impose, a non-statutory, judicially created regime for setting caps on greenhouse gas emissions based on vague and indeterminate nuisance concepts. It also asks the Court to decide whether judges, in addition to Congress and the EPA, may regulate greenhouse gas emissions at the behest of states and/or private parties and, if so, under what standards. Under the Second Circuit's ruling, a single judge could set emissions standards for regulated utilities across the country—or, as here, for just that subset of utilities that the plaintiffs have arbitrarily chosen to sue. Judges in subsequent cases could set different standards for other utilities or industries, or conflicting standards for these same utilities.

While the Second Circuit called this an ordinary tort suit, this litigation seeks to transfer to the judiciary nearly standard-less authority for some of the most important and sensitive economic, energy, and social policy issues presently before the country. Federal nuisance law is neither sufficiently developed nor sufficiently detailed to substitute for actual regulation. Thus, at stake is the financial health and security of numerous sectors of the economy. Indeed, virtually every entity and industry in the world is responsible for some emissions of carbon dioxide and is thus a potential defendant in climate change nuisance actions under the theory of this case. The threat of litigation, and the indeterminate exposure to monetary and injunctive relief that it entails, could substantially impede and alter the future investment decisions and employment levels of all affected industries, and ultimately every sector of the economy.

Now the government brief takes a different approach, asking the Court not to accept the case for full review, but rather to simply vacate the decision and direct the Second Circuit to reconsider two issues: whether the plaintiffs have standing to bring the lawsuit, and whether recent actions by the EPA to regulate greenhouse gas emissions supplant the reason given by the Second Circuit for allowing the lawsuit to go forward. Since the initial decision below, EPA has issued final rules establishing reporting requirements for major emitters of greenhouse gases; issued a finding that greenhouse gas emissions from cars and light trucks endanger public health and welfare; and established new greenhouse gas emissions limits for cars and light trucks. In addition, EPA has signed off on a final rule requiring that additional categories of sources begin to track and report greenhouse gas emissions under EPA's earlier GHG reporting rule. The Second Circuit decision was seemingly predicated on the "now-obsolete conclusion" that EPA had not taken action to regulate carbon-dioxide emissions from stationary sources.

The TVA brief also argues that that the lower court should dismiss the case based on “prudential standing,” a narrower ground than the case or controversy argument of the other defendants.

Fated To Lose

the10bdaily@hotmail.com (Lyle Roberts) — Sat, 28 Aug 2010 04:15:40 GMT

He's back. Judge Easterbrook has authored a new securities litigation decision for the U.S. Court of Appeals for the Seventh Circuit and, as always, it is interesting and contentious. In Schleicher v. Wendt, 2010 WL 3271964 (7th Cir. Aug. 20,...

Update on Utah's Privatization Process

Fri, 27 Aug 2010 23:17:57 GMT

As we previously reported, Utah is considering privatizing at least some aspects of its liquor control. On Wednesday, August 25, John Freeman, the Deputy Director of Operations for The Utah Department of Alcoholic Beverage Control (“DABC”) appeared before the Privatization Board to answer questions.

Mr. Freeman presented four reasons to maintain the status quo. First, he contended that privatization would decrease the state’s net revenue from alcohol sales. As previously reported, Utah garnered $59 million in profit and $41 million in tax receipts from liquor sales in 2009. Mr. Freeman cited the findings of the Alcohol Research Group, a California-based division of the Public Health Institute, which indicate that control states like Utah generate three times the revenue of non-control states. Members of the Board appeared reluctant to accept these findings, focusing instead on the state’s hard costs to run the liquor stores. As the Salt Lake Tribune reported, Randy Simmons, the Board’s chair, indicated that the primary question for him was whether the money spent to run the liquor stores (estimated at $21 million) could be put to better use. The Board did not discuss how the state would compensate for the millions of dollars in lost revenue, which appear to be far greater than the estimated savings.

Second, Mr. Freeman contended that private retailers would not have the same buying power the state has, and therefore, could not offer the same selection of products. Mr. Freeman specifically cited the state’s ability to stock stores with niche wines, indicating that more than 4,000 wines were available in the state. The Board questioned, however, whether the state is responsive to customer preferences. While there was some confusion among Board members as to whether privatization for both wholesale and retail aspects of alcohol sales were options, it appears that only the retail side is currently under discussion. Thus, the question of choice in products is likely moot as the state would still control selection and would maintain its current buying power.

Third, Mr. Freeman argued that consumers would pay more under privatization. As it stands, Utah marks products up by a statutorily-mandated 86%. Private retailers would need to add sufficient amounts to the price to cover their costs and be profitable. The discussion indicated that wages are one area that would likely cost private retailers more. Currently, the state legislature sets wages for store employees, which average barely above minimum wage.

Finally, Mr. Freeman argued that DABC’s primary responsibility was to ensure public safety and that any form of privatization would create more alcohol-related problems in the state. The Alcohol Research Group study supported these claims, showing that consumption rates in non-control states are higher than in control states, due in part to more outlets and longer hours. The Board questioned the study’s findings regarding alcohol-related problems in Utah, with Randy Simmons stating that he had read conflicting studies. The Board did not address whether the state would continue to mandate the number of outlets and their hours under privatization.

Because of time constraints, the session abruptly ended with both sides promising to forward on their sources and to continue the conversation regarding privatization. We will keep you updated as these issues develop.

Raymond James' Auction Rate Securities Problems Mount

Fri, 27 Aug 2010 22:33:37 GMT

A Financial Industry Regulatory Authority (FINRA) arbitration panel has ordered Raymond James & Associates, Inc. and one of its registered representatives to pay $925,000 to a Texas couple who purchased $1.4 million of municipal auction rate securities issued by Jefferson County, Alabama, according to August 26th articles in InvestmentNews by Bruce Kelly (“Raymond James pays more auction rate claims”) and in the Wall Street Journal by Suzanne Barlyn (“Raymond James Forced to Buy Back Securities”).

In this case, the auction system failed before the claimants’ securities first came up for auction, thirty five days after they bought their Jefferson County sewer bonds. One of the three arbitrators specifically dissented as to the size of the award, writing “I believe the award to the Glenndennings should be $1,400,000.00 instead of $925,000.00.”

This case is the second time in a period of several weeks that Raymond James has been ordered to pay back auction rate securities customers, according to the WSJ. As the InvestmentNews article notes, this is the third time Raymond James has been ordered to return money to clients who purchased auction rate securities. So far, Raymond James reportedly has been ordered to pay $3.5 million.

When the auction rate securities market froze in February 2008, Raymond James’ client reportedly held $1.9 billion in auction rate debt. Its still hold $600 million in auction rate securities for which there is no active market, according to the article.
The arbitration award shows Wall Street's misconduct that led to the market meltdown is still impacting investors more than three years after the crisis first struck the credit markets in mid-2007.

The $330 billion market for auction-rate securities froze in February 2008, when Wall Street dealers stopped supporting the periodic auctions that set the interest rates on long-term debt that Wall Street misrepresented as being safe, short-term “cash-equivalent” investments.

Raymond James has not yet been sued by a securities regulator in connection with sales of auction rate securities. Charles Schwab was sued by the New York attorney general for allegedly misrepresenting or failing to disclose the liquidity risks of auction rate securities. Likewise, the Massachusetts Securities Division ordered Oppenheimer & Co. to pay $56 million to auction rate securities investors and $250,000 to the state to cover the cost of its investigation.

Page Perry, LLC is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions. Page Perry’s attorneys have extensive experience in representing investors in auction rate securities cases. For further information, please contact us.

11th Circuit Affirms Drastically Reduced FDCPA Attorneys' Fee Award

Fri, 27 Aug 2010 18:12:52 GMT

In a decision that will affect some attorneys' willingness to prosecute Fair Debt Collection Practices Act ("FDCPA") claims, the Eleventh Circuit recently affirmed a drastic reduction in attorneys' fees in a successful FDCPA case. In Hepsen v. J.C. Christensen & Assocs.,...

11th Circuit Affirms Drastically Reduced Attorneys' Fee Award

Fri, 27 Aug 2010 18:12:52 GMT

CFPA Q&A: Describe The Bureau's Rulemaking Authority?

Fri, 27 Aug 2010 18:03:19 GMT

Expansive. The Consumer Financial Protection Act's ("CFPA") Bureau of Consumer Financial Protection ("Bureau") will not only be big, but it will have broad and sweeping rulemaking authority. Specifically, the Bureau's Director, once...

Judges Begin to Question "Sweetheart" Securities Regulatory Settlements

Fri, 27 Aug 2010 17:07:49 GMT

Some judges are starting to question lenient settlement deals proffered by Wall Street firms and their arguably captive regulator, the SEC, according to an August 19, 2010 article in the Wall Street Journal by David Weidner called “In Search Of Justice for Wall (Street).” Two U.S. District Court Judges, Jed S. Rakoff and Ellen Segal Huvelle, have rejected settlements on the ground that the penalties were too small to be fair to the investing public. Another federal judge, Emmet G. Sullivan, threatened to reject but ultimately accepted a settlement proposed by the SEC and Barclays PLC. Judge Sullivan reportedly had earlier called it a "sweetheart deal."

Judge Huvelle, who rejected a settlement agreement proposed by the SEC and Citigroup, told the parties: "I look at this and say, 'Why would I find this fair and reasonable?' You expect the court to rubber-stamp, but we can't." “The judge, striking a frustrated tone, fired several questions at the SEC, among them why it pursued only two individuals in the case and why Citigroup shareholders should have to pay for the alleged sins of bank executives.” (See “Judge Won’t Approve Citi-SEC Pact,” by Kara Scannell, Wall Street Journal, August 17, 2010. The SEC charged Citi with misleading investors by deliberately understating its subprime exposure by $37 billion, and proposed a settlement of $75 million. The judge said she was provided no guideposts to determine whether that was a fair settlement.

In his August 18, 2010 article in the Wall Street Journal, “Citigroup’s Paltry Debt Penalty,” David Reilly points out that while the SEC charged and settled with two Citigroup executives, the SEC also made it clear that more executive were involved than the two who were asked to pay $100,000 and $80,000, respectively – a relatively paltry sum for a Wall Street executive. He also pointed out that Goldman Sachs paid $550 million for a lesser offense than the $75 million being proposed for Citigroup.

The judges who have rejected proposed settlements have voiced concerns that the SEC should pursue "more serious sanctions against individual managers," according to the article, citing Robert Heim, a former SEC assistant regional director. "Right now, it's numbers negotiated between prosecutors and the accused. Judges are concerned the penalties are too small," Mr. Heim was quoted as saying. Shareholders are twice victimized – once by the wrongdoing and again by a trivial penalty.

In his “In Search of Justice…” article, Mr. Weidner asks readers to consider a group of notorious Wall Street offenders: Merrill Lynch's Henry Blodget, Credit Suisse's Frank Quattrone, Bear Stearns's Ralph Cioffi and Matthew Tanin, Bank of America's Theodore Siphol, the New York Stock Exchange's Dick Grasso, Morgan Stanley’s Mary Meeker, and Citigroup's Jack Grubman. “A few of them lost their jobs. Some were tried. But there wasn't a conviction in the bunch. Some have even thrived.” People see that and think: that is not right and fair. They are angry about it, and judges are people too.

J. Boyd Page, senior partner at Page Perry, LLC, an Atlanta-based law firm, said: “I think these judges realize that it does no good to fine a corporation that will simply pass through a fine to customers or shareholders. The wrongdoers in these cases are executive officers, and the only way to change their behavior is to put the fear of God in them. Let them know that the penalty for financial fraud is the loss of their personal assets. Then you’ll see some change.”

Page Perry, LLC is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions. Page Perry’s attorneys have extensive experience in representing investors in securities matters. For further information, please contact us.

Ninth Circuit "Strikes" a Blow for Proper Motion Procedure

Fri, 27 Aug 2010 16:18:28 GMT

Phillies' slugger Ryan Howard was ejected from a game this week in extra innings, leaving his team (which had no more position players) to insert ace pitcher Roy Oswalt into the outfield and to use him at the plate. First time the Phils used a pitcher in the field in decades. Howard argued a mistakenly called third strike on a check swing.

Today's post relates to a different kind of mistaken strike. The Ninth Circuit has explained that trial courts cannot strike a claim for damages on the ground that the damages are precluded as a matter of law. Whittlestone Inc. v. Handi-Craft Co., No. 09-16353 (9th Cir. Aug. 17, 2010). Specifically, Rule 12(f) of the Federal Rules of Civil Procedure does not authorize the court to strike the claim for damages on the basis that such damages are legally not recoverable.

Here, the defendant field a Rule 12 motion to strike the paragraphs of the complaint that sought the recovery of lost profits and consequential damages, in alleged violation of the plain language of the parties' contract. The trial court granted the motion, and plaintiff appealed.

Rule 12(f) states that a district court “may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” The function of a 12(f) motion
to strike is to avoid the expenditure of time and money that would arise from litigating spurious issues by dispensing with those issues prior to trial. While the motion here seemed to fit the purpose of the rule, it didn't fit the language. The court found that the damages allegations met none of those listed categories.

Handi-Craft argued that Whittlestone’s claim for lost profits and consequential damages should be stricken from the complaint, because such damages were precluded as a matter of law. But that meant that Handi-Craft’s 12(f) motion was really an attempt to have certain portions of Whittlestone’s complaint dismissed or to obtain summary judgment against Whittlestone as to those portions of the suit, which attempt was better suited for a Rule 12(b)(6) motion or a Rule 56
motion, not a Rule 12(f) motion.

And this was not harmless error, said the 9th, because the standard for review of the different motions is not the same, and there was some question whether a 12(b)(6) motion would be granted, had it been filed.

The court concluded that Rule 12(f) of the Federal Rules of Civil Procedure does not authorize a district court to dismiss a claim for damages on the basis it is precluded as a matter of
law.

More Municipal Fraud Charges Ahead?

Fri, 27 Aug 2010 14:48:09 GMT

Bloomberg is reporting that the SEC’s recent fraud action against the State of New Jersey may be the first of many such suits targeting public officials who raised money in the $2.8 trillion municipal bond market. New Jersey agreed to...

“They will be looking for other cases,” James Doty, a former SEC general counsel, was quoted as saying. “It’s a harbinger that they expect disclosure standards to be scrutinized and be increased.”

“There are a lot of states that are significantly underfunded,” a former SEC chief accountant was quoted as saying. “There’s likely to be a dozen that have the same type of problems as New Jersey, and it’s not just states but cities too.”

Miami is reportedly in the SEC’s cross-hairs for omitting to disclose to investors that it used funds earmarked for capital projects to replenish its general fund in fiscal 2007 and 2008, according to the article.

The SEC reportedly began investigating New Jersey in 2007 following a New York Times article criticizing the state’s pension accounting. The SEC found the state failed to inform investors that $704 million represented as pension payments were actually transfers of money already in the retirement system, and also failed to disclose a $2.4 billion decline in value of pension fund assets, which “created the false impression” that the Teachers’ Pension and Annuity Fund and the Public Employees’ Retirement System were adequately funded.

Elaine Greenberg, head the SEC’s new municipal securities and public pensions unit and former SEC enforcement attorney, was quoted as saying: “We hope to alert other states and municipalities of their disclosure obligations under the federal securities laws as it pertains specifically to their pension fund liabilities,” Greenberg said in an interview, referring to the SEC’s New Jersey action. “The obligation is that the disclosure is current and is accurate.”

More disclosure rules are needed, however, according to Mary Shapiro, who heads the SEC. Since 1975, state and local bond issuers have not been required to file offering documents with the SEC or adhere to accounting standards, as public companies must. Any disclosure requirements are imposed on the banks that underwrite their securities. The SEC wants better disclosure rules, but the Dodd-Frank financial reform law calls for a two-year study into whether tougher disclosure is needed.

Page Perry, LLC is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions. Page Perry’s attorneys have extensive experience in representing investors in municipal securities matters. For further information, please contact us.

Hip Recall by J & J

Fri, 27 Aug 2010 07:15:09 GMT

Johnson and Johnson has issued a recall of 93,000 hip implant systems. It has been found people with these hip systems required additional surgery as they suffered additional pain.

DePuy, which has sold about 93,000 units of its ASR XL Acetabular System and the ASR Hip Resurfacing System, said recent data received by the company showed an increase in the number of people who have had a second hip replacement surgery, also called a "revision surgery."

Earlier in the week the FDA had issued a warning to J & J for selling certain hip and joint products without FDA approval.

The FDA said the medical devices maker has been selling its TruMatch Personalized Solutions System, which makes artificial knee products, and the Corail Hip System without "market clearance" and in violation of the Federal Food, Drug, and Cosmetic Act. (Article)

Of course earlier this year J & J had a huge recall of some of their medications including Children's Tylenol.

If you have suffered injury from a product defect contact the Law Office of D. Hardison Wood at 919-233-0520.

Magnetic Boards Recalled

Fri, 27 Aug 2010 06:09:03 GMT

The CPSC announced Thursday a recall of about 18,500 magnetic maze boards made by Lakeshore Learning Materials. The wand presents a hazard to children as it appears it can separate leaving a magnet exposed. This magnet is a choking hazard. If multiple magnets are ingested it could be fatal.

The magnetic maze board’s plastic wand can separate and expose a magnet that can be a choking hazard to children. Also, if a child has more than one of these toys and the magnets detach and are swallowed, the magnets can attract each other and cause intestinal perforations or blockages, which can be fatal. Read the notice here

Magnets have become increasingly popular in toys, yet we are also seeing an increased amount of injury to children because of them. If your child has suffered a personal injury of any kind, please contact the Law Office of D. Hardison Wood at 919-233-0520.

Baby Hammock Recalled

Fri, 27 Aug 2010 01:02:18 GMT

The CPSC announced this week that another type of baby hammock has been recalled due to a suffocation hazard. MamaLittle Helper, LLC manufactures the hammocks. The side to side motion can cause the baby to roll and become entrapped.

The side-to-side shifting or tilting of the hammock can cause the infant to roll and become entrapped or wedged against the hammock's fabric and/or mattress pad, resulting in a suffocation hazard. Read the notice here

The CPSC recommends to immediately stop using this product. Approximately 500 units have been recalled.

If your child has suffered an injury, contact to the Law Office of D. Hardison Wood to preserve their legal rights. Call 919-233-0520.

Third Circuit Decides Case at the Intersection of the FCRA and Patriot Act

Thu, 26 Aug 2010 23:00:00 GMT

In Cortez v. Trans Union LLC, the United States Court of Appeals for the Third Circuit decided a case at the intersection of the Fair Credit Reporting Act (FCRA) and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, better...

Law Firms Announce New Joint Venture to Pursue MAT/ASTA Municipal Arbitrage Claims

Thu, 26 Aug 2010 21:31:44 GMT

The law firms of Page Perry, LLC and Robert Wayne Pearce, P.A. are proud to announce their agreement to join together in investigating and pursuing MAT/ASTA municipal arbitrage cases against Citigroup and its affiliates. Both firms have extensive experience in prosecuting MAT/ASTA cases and already have been involved in representing almost fifty (50) MAT/ASTA clients between them.

J. Boyd Page, senior partner of Page Perry, LLC, said: “Bob Pearce and I began discussing working together on the MAT/ASTA cases late last week. We were already involved in dozens of cases and decided there would be a synergy in working together. Bob is an outstanding lawyer as evidenced by his recent $1,817,000 award in a MAT/ASTA case, in which the arbitration panel found that Citigroup and its affiliates were guilty of negligent mismanagement and negligent supervision. I believe that this decision greatly expands the number of potential clients who can pursue valid claims against Citigroup affiliates. It has been obvious that various misrepresentations and sales practice violations occurred in connection with the sales of MAT/ASTA, but the misconduct didn’t seem to end there. Bob and I both believe that egregious mismanagement also occurred. I think that Bob’s recent case proves that it did occur.”

The two law firms believe that three separate bases for recovery exist in MAT/ASTA cases, depending on the facts and circumstances of the particular case. Those bases are as follows: (1) that MAT/ASTA was a flawed product; (2) that Citigroup and its affiliates misrepresented and omitted to disclose material facts at the point of sale; and (3) that Citigroup and its affiliates were guilty of negligent mismanagement of MAT/ASTA and negligent supervision of its employees.

The mismanagement claim opens the door for many more investors to bring viable claims for recovery of their losses. Since some of the MAT/ASTA products were sold prior to 2006, certain sales practice claims (e.g., misrepresentation and omission) may arguably be barred by the statute of limitations in certain states. Claims based on mismanagement and negligent supervision in 2006 and 2007, on the other hand, are still clearly actionable under the laws of most states.

Robert Pearce said: “Boyd Page and I have known each other for twenty-five years. Page Perry has nine experienced attorneys, a large support staff and significant experience in MAT/ASTA cases. I’m very excited about our new venture.”

Both firms will work together in investigating and pursuing MAT/ASTA cases and are currently involved in representing aggrieved investors in these cases all over the country.

Recent Articles in Consumer Law from LexMonitor