Articles Posted in Class-Action

After the U.S. Supreme Court’s controversial decision in Concepcion, there has been much debate over the rising tendency of companies to forbid their customers from bringing class actions against them. Another company has recently won another round. Charles Schwab Corp. modified their account agreements last year, prohibiting class-action lawsuits and restricting the ability of consumers to consolidate arbitration cases. This decision came after settlements of class-action lawsuits in which Schwab agreed to pay $235 million for misleading marketing of its high-interest YieldPlus money market fund between May 2006 and March 2008.
The Financial Industry Regulatory Authority’s (FINRA’s) enforcement department charged Schwab with violating its rules by restricting consumers’ class-action and arbitration rights. The FINRA hearing panel agreed that it was against the rules of the private group, which regulates broker-dealers and administers arbitration panels. However, due to the Supreme Court’s recent interpretation of the Federal Arbitration Act, the panel found that those rules are unenforceable.
While FINRA does not actually make or enforce the law, it can tell broker-dealers that, if they want to remain members, they have to abide by its “fair-play” rules. The Securities and Exchange Commission requires all broker-dealers to be members and all brokers who sell securities to be licensed by FINRA.

Of the three actions FINRA brought against Schwab, it did win won. The hearing panel decided that Schwab had violated FINRA’s rules by limiting the powers of arbitrators to consolidate individual client claims in hearings and fined Schwab $500,000 for the violation. It also ordered the company to remove that condition from its customer agreements. A spokesman for Schwab said the language has already been removed.

A FINRA spokeswoman said it is currently reviewing the decision and cannot yet comment on whether they will appeal to the National Adjudicatory Council. Plaintiffs lawyers though, have speculated that an appeal is almost certain.

Schwab has said in a statement that it is pleased with the decision. “The company believes that customers are better served through the existing FINRA arbitration process and that class-action lawsuits are a cumbersome and less effective means of resolving disputes – for both parties.”

Officials in the securities industry anticipate that more firms will try to revise their customer agreements after this decision.

While some have called this a significant step backwards for customers, others are not so sure. While the ruling does threaten most securities class-actions, the panel does not make the law and so this decision is unlikely to affect far-reaching law.

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The terms of a proposed class action settlement call for Merrill Lynch to pay $40 million to settle claims brought by approximately 1,400 brokers regarding deferred compensation that Merrill Lynch allegedly refused to pay the brokers after its merger with Bank of America.

Despite the large price tag, however, the proposed settlement may still leave claims with roughly 2,000 brokers unsettled, according to MSN Money. The brokers who are not party to the class action settlement would be left to privately pursue their claims against Merrill Lynch. The proposed settlement may still leave roughly 2,000 brokers to battle privately against the brokerage.

What is deferred compensation?

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Class actions have become increasingly more common in recent years as attorneys are choosing to represent businesses in complex litigation on a contingent fee basis, whereby they do not collect any fees until the plaintiff is successful in its claim.

Contingency class action business litigation is common in massive civil lawsuits involving allegations of unsafe pharmaceuticals, medical malpractice, asbestos claims, trademark infringement, and consumer fraud, to name a few. Most recently class action lawsuits have been filed against a number of large banks and financial institutions regarding allegations of fraudulent benchmark interest rates.

Advantages of Class Action

After two years, Toyota has finally agreed to settle the class-action lawsuit regarding unintended acceleration in its vehicles. If approved, the settlement, filed in a Federal District Court in California, would make cash payments for the loss of value on vehicles affected by the multiple recalls. The settlement also includes installing special safety features on about 3.2 million cars.
The suit was filed in 2010 after complaints were made to federal regulators that Toyota vehicles were accelerating suddenly and without the driver’s intent, causing accidents and injuries. Toyota has recalled more than eight million vehicles in the U.S. for problems related to pedals that could stick with the throttle open or get hampered by floor mats, which could get entangled in the pedals.

The class-action lawsuit alleged that Toyota’s electronics systems were at fault. A long investigation, conducted by government officials, found no evidence that faulty electronics contributed to the acceleration issues. However, a subsequent review of that investigation, conducted by a branch of the National Academy of Sciences, found that the federal regulators conducting the investigation did not have the expertise necessary to monitor electronic controls in automobiles.

The National Highway Traffic Safety Administration fined the car company more than $60 million for failing to inform regulators of the sudden acceleration issues. Toyota, on the other hand, has largely attributed these acceleration issues to driver error.

The proposed settlement includes a fund of $250 million to pay claims to former owners of cars affected by the acceleration recalls. Because of the large number of claimants though, each will receive a relatively small amount from the settlement. The company has also agreed to install brake override systems on cars whose pedals could stick or become trapped in floor mats. The installation of those systems is already under way, although about 550,000 cars have yet to receive the equipment.

The settlement also provides a customer support program for more than 16 million current Toyota owners who will be eligible for repairs on certain parts for up to 10 years. Additionally, Toyota will contribute $30 million to finance automotive safety research related to driver behavior and unintended acceleration.

The lead law firm for the plaintiffs estimated that the settlement could end up at a total around $1.2 – $1.4 billion. That makes it one of the largest settlements of its kind in automotive history.
One of the reasons people suspect Toyota made the offer is to prepare for the numerous individual personal-injury and wrongful death lawsuits, which are still currently pending in the courts. Of course, another reason to settle is to simply get past this. Before the acceleration issues, Toyota had enjoyed a pristine reputation of quality, safety, and reliability in their vehicles. Following these allegations, the company experienced a drop in sales, particularly in the United States. In 2012 though, the company’s sales in the U.S. rose about 28 percent, which is double the pace of growth for the overall market.

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Amid all the complaints against Facebook using private information, comes a story of success for Facebook users. Last year, five members of the social networking site filed a class action lawsuit against the company for allegedly using personal information, such as images of the users for sponsored stories. The users whose pictures were used did not give permission for Facebook to use their image, and they alleged they were not given the opportunity to opt out of having their image publicly used.

After the California judge informed the lawyers representing Facebook that they would not be able to dismiss the case they agreed to settle. The settlement includes up to $10 for each user who objected to having their image used, and a multimillion dollar donation to charity. Combined with legal fees, the total settlement will run the company about $20 million. Facebook has also said that it will add a tool which allows users to view any of their content which may have been used in sponsored stories and opt out of the process.

The settlement recently moved one step closer to resolution when the U. S. District Court judge in charge of the case determined that the settlement “has no obvious deficiencies” and “appears to be the product of serious” negotiations between the lawyers representing Facebook and the plaintiffs. The case has now been preliminarily approved by the judge.

However, the social networking site may not be finished with the court system just yet. The nonprofit Center for Public Interest Law argued that Facebook should be required to obtain consent before using the names or photos of Facebook users under the age of 18. Its attorney, Robert Fellmeth, has said that he would file a further objection and, if necessary, pursue the case in appellate court.

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Although renters usually expect to pay through the owner of the property for utilities, they usually only expect to do so if it is specifically included in the lease. According to a recent class action lawsuit against Regus PLC and its subsidiaries, the company allegedly charged fees to its renters for kitchen amenities, use of the telephones, telecom handsets, and internet activation and access.

According to the complaint, each plaintiff was provided with an “Office Agreement” which listed the location of the office, the duration of the client’s entitlement to the office, the amount of the “Initial Payment”, the amount of the security deposit, and the monthly payment from that point forward. The agreement allegedly did not “disclose any goods, services, penalties, and/or taxes for which Regus assesses charges and the amounts or methods of calculation of Regus’ charges associated with such goods, services, penalties, and/or taxes.”

However, once the plaintiffs received their bills, they found charges for things which were never mentioned in the lease. These charges included “amounts for one or more of the following …: i) ‘Kitchen Amenities Fee;’ ii) ‘Telephone Lines;’ iii) ‘Telecom Handset;’ iv) ‘Local Telephone;’ v) Internet activation and access charges; vi) taxes; and vii) penalties”. The lawsuit refers to these charges collectively as the “Unauthorized Charges”. Because of these Unauthorized Charges, the monthly payments made by clients was regularly in excess of what the Office Agreement had provided. However, if clients failed to pay these extra charges, they were allegedly subjected to penalties by Regus.

The lawsuit further alleges that Regus had clients make payment via an automated system in which the charges were automatically applied to the clients’ debit card or credit card. This meant that customers frequently got charged by Regus before even seeing a bill or having a chance to dispute the charges.

According to the complaint that was filed, Regus is also guilty of false advertising. Contrary to the experiences of the plaintiffs, the advertisements that Regus put on its website included the following:
“With Regus, you only pay for what you need when you need it”; “No up front capital expenditure required”; and “Flexible terms and one-page agreements.”

The complaint alleges that the additional fees the plaintiffs were charged directly contradict, not only the leases which were signed by the plaintiffs, but also the advertisements provided by Regus. For example, regarding the kitchen amenities, the lawsuit alleges that “Regus assessed a $30 per person monthly charge to Plaintiff … in excess of the monthly office payment amount indicated in the Office Agreement. Neither Regus’s practice of assessing this charge nor the amount of the charge is disclosed in the Office Agreement or the Fine Print. The charge was assessed regardless of whether any kitchen amenities were used.”

As far as the use of the telecom handset for which some plaintiffs were charged, the complaint alleges that “the retail value of the two handsets provided by Regus does not exceed $99.00, yet Regus charged … a total of $222.75 (including purported taxes) per month for the use of the handsets during the term of the Office Agreement.”

The lawsuit seeks to bring a class action which would include everyone who had an Office Agreement or similar agreement for one of Regus’s locations in California and who paid one or more of the Unauthorized Charges between May 8, 2008 and the time that the complaint was filed. The lawsuit is also petitioning for a second New York class which would consist of similarly situated renters in the state of New York. The plaintiffs are currently unaware of just how many people qualify to participate in the classes, but they believe that each class could consist of more than 100 members.

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