Chicago Business Litigation Lawyer Blog
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Our Chicago consumer protection and Chicago class action lawyers are investigating food product mislabeling claims.
Articles Posted in Consumer Fraud/Consumer Protection
Woman Wins $18.6M Lawsuit Over Credit Report Mistake
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NY AG Files $40M Lawsuit Against Trump University
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NY Attorney General sues Trump University for alleged consumer fraud. Our Chicago consumer fraud and class action lawyers have successfully pursued class actions against trade schools in Illinois that have misrepresented the percentage of graduates who have obtained jobs in the field or omitted to disclose that very few graduates obtain jobs in the field. Illinois requires trade schools to disclose the percentage of graduates who obtain jobs in the field.
Our law firm is pursuing class actions and putative class actions against for profit vocational schools in the Chicago area. We have interviewed many students of for profit universities, colleges and vocational schools who believe that various for profit colleges and Universities have cheated them along with the government in getting the students to borrow money with government backed loans for essentially a worthless education.
Federal Court Dismisses Certain State Law Claims in Multidistrict Litigation Case Alleging ATM Overdraft Fee Fraud
A federal judge denied most of a motion to dismiss brought by multiple banks in a consolidated case alleging overdraft fee fraud. In re Checking Account Overdraft Litigation, 694 F.Supp.2d 1302 (S.D. Fla. 2010). The Judicial Panel on Multidistrict Litigation (JPML) consolidated multiple claims into a single matter in the Southern District of Florida in order to deal efficiently with common pretrial matters. The plaintiffs asserted causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing (“GFFD covenant”), and many individual causes asserted common law breach of contract claims and state law consumer protection claims. The defendants filed an omnibus motion to dismiss, which the trial court granted in part and denied in larger part. The court dismissed claims under certain state consumer statutes, as well as claims based on the laws of states in which no plaintiffs lived.
The central issue of the litigation was the ordering of ATM transactions from highest to lowest, regardless of the order in which the account holder performed the transaction. This allegedly reduced the account holder’s total account balance more quickly, garnering more overdraft fees for the defendants. At the time the court rendered its order on the omnibus motion to dismiss, the litigation consisted of fifteen separate complaints, each brought against an individual bank. All of the fifteen complaints pending at the time of the court’s order involved breach of GFFD covenant claims. Five complaints were filed in California as putative class actions on behalf of California customers. Eight complaints were filed outside California, putatively on behalf of nationwide classes excluding California. One complaint was filed by a California resident and sought to represent a nationwide class. The final complaint was filed by a Washington resident on behalf of a class of Washington customers. According to the JPML, the consolidated litigation has involved one hundred separate complaints since 2009, with forty-four still involved as of March 5, 2013.
Court Retains Most of a Deceptive Business Practices Putative Class Action Against a Bank for Overdraft Fees – White v. Wachovia Bank
A federal court allowed most causes to proceed in a putative class action against a bank for allegedly fraudulent overdraft fees. White, et al v. Wachovia Bank, N.A., No. 1:08-cv-1007, order (N.D. Ga., Jul. 2, 2008). The plaintiffs, who alleged that the bank had recorded transactions out of chronological order to maximize overdraft fee liability, claimed violations of state deceptive trade practice laws and several claims related to breach of contract. The court denied the defendant bank’s motion to dismiss as to all but two of the plaintiffs’ claims.
The two lead plaintiffs opened a joint checking account with Wachovia Bank in 2007. They signed a Deposit Agreement that stated that the bank could pay checks and other items in any order it chose, even if it resulted in an overdraft. It also stated that the bank could impose overdraft charges if payment of any single item exceeded the balance in the account. The plaintiffs alleged in their lawsuit that Wachovia ordered its posting of transactions in a way that would cause their account to incur overdraft fees, even when they had sufficient funds to pay the items. They also alleged that the bank imposed overdraft fees when no overdraft had occurred.
The lawsuit, originally filed in a Georgia state court in February 2008, asserted violations of the Georgia Fair Business Practices Act (FBPA), O.C.G.A. §§ 10-1-390 et seq., and breach of the duty of good faith. The plaintiffs also claimed that the clause of the Agreement related to the ordering of transaction was unconscionable, that the bank had engaged in trover and conversion, and that it had been unjustly enriched. The defendant removed the case to federal court under the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d)(2), which allows defendants to remove certain class actions to federal court. It then moved to dismiss all claims under Federal Rule of Civil Procedure 12(b)(6), which allows a court to dismiss a lawsuit that “fail[s] to state a claim upon which relief can be granted.” To defeat such a motion, a plaintiff must show a plausible factual basis for their claims.
Class Action Plaintiffs Awarded $203 Million in Lawsuit Alleging Manipulation of Bank Overdraft Charges – Gutierrez v. Wells Fargo
A California federal court awarded $203 million in damages to a class of plaintiffs in Gutierrez v. Wells Fargo Bank, NA, 730 F.Supp.2d 1080 (N.D. Cal. 2010). The lawsuit alleged that the defendant bank overcharged the plaintiffs, who held deposit accounts at the bank, for overdraft fees, using a series of deceptive bookkeeping techniques. A similar bookkeeping trick was the subject of an Illinois lawsuit resulting in a settlement, Schulte v. Fifth Third Bank, 805 F.Supp.2d 560 (N.D. Ill. 2011).
According to the court’s ruling in the Gutierrez case, Wells Fargo charged individual depositors more than $1.4 billion in overdraft fees between 2005 and 2007, just in the state of California. Gutierrez, 730 F.Supp.2d at 1082. The lawsuit, filed on behalf of individual depositors, alleged that Wells Fargo used a bookkeeping trick known as “resequencing” to turn a single $35 overdraft charge into as many as ten overdraft charges. The bank would then hide this technique behind a “facade of phony disclosure.” Id. The court outlined how the bank would sequence transactions from the highest amount to the lowest amount, out of chronological order, often resulting in a negative balance in an account earlier than if it had sequenced the transactions in any other order. This maximized the amount of overdraft fees the bank could charge to the account. Id. at 1088.
The allegations in the Schulte case were similar to those in Gutierrez. Fifth Third Bank allegedly processed ATM and debit card transactions out of chronological order. During a posting period, the bank would process the largest transactions first, proceeding in high-to-low order. Schulte, 805 F.Supp.2d at 565. This allegedly almost guaranteed that, if a depositor overdrew their account during that posting period, the bank could collect more overdraft fees.
Cass Sunstein Former Chief Regulator for the Obama Administration Discusses the Importance of Ensuring that Consumer Disclosures are Written in Plain English Which Consumers Understand
Our Chicago autofraud and Lemon law lawyers near Aurora and Naperville, Illinois bring suit for auto dealer fraud and other car dealer scams such as selling rebuilt wrecks as certified used cars or misrepresenting a car as being in good condition when it is rebuilt wreck or had the odometer rolled back. Super Lawyers has selected our DuPage, Kane, Lake and Cook County auto-fraud, car dealer fraud, consumer fraud and lemon law attorneys as among the top 5% in Illinois. We only collect our fee if we win or settle your case. For a free consultation call us at our toll free number 630-333-0333 or contact us on the web by clicking here.
Lubin Austermuehle’s Chicago Class Action Attorneys Will Fight Against Unethical Confidentiality Provisions — CBA Advisory Opinion Concludes That Confidentiality Provision Used By Car Dealer Attorneys in the Chicago Area May Be Unethical
Under the First Amendment to the Constitution and lawyers’ ethics rules, the public and litigants have a right to know about about matters that are resolved in our court and litigation system. For instance a car dealer who repeatedly engages in consumer fraud, bait and switch and false advertising or who regularly sells lemon cars should not be able to hide litigation about its misconduct from the public though use of confidential settlement agreements. This is particularly true because the Supreme Court has allowed contracts of adhesion to force consumers to arbitrate claims in secret forums against big business such as car dealers and other businesses such as cell providers and cable television companies. The combination of secret arbitration proceedings and of defendants using confidentiality clauses in settlement agreements to hide misconduct that has been exposed through litigation is keeping misconduct by many businesses secret.
In a recent case our firm litigated a so called pro-consumer rights law firm that regularly litigates consumer fraud cases on behalf of consumer victims used such a confidentiality clause to refuse to cooperate and force us to go to court to uncover the details of repeated false advertising engaged in by a business whose pattern of misconduct had already been exposed through extensive litigation. This so called pro-consumer rights law firm had documents that were not publicly available which put the lie to false testimony provided by the owners of the deceptive business. These lawyers in this firm, who have a practice that should make them sympathetic to protecting consumer rights and freedom to obtain information about public lawsuits, participated in trying to hide the very misconduct that they had litigated to expose. This type of conduct according to a recent Chicago Bar Association ethics advisory opinion violates lawyer ethics rules.
At the request of Lubin Austermuehle’s long time co-counsel Dmitry Feofanov of ChicagoLemonLaw.com , the Chicago Bar Association just issued the below ethics advisory opinion concluding that use of certain confidentiality provisions in consumer rights, class action and other important litigation are unethical under Illinois attorney ethics rules. These same rules apply in many other states. There has been a recent trend among defendants to demand these confidentiality provisions.
You can click here for a copy of the opinion.
Below is the full text of this important advisory opinion in full:
Chicago Bar Association
Informal Ethics Opinion 2012-10
Committee on Professional Responsibility
Opinions Subcommittee
The Professional Responsibility Committee of the Chicago Bar Association has
issued the following informal legal ethics opinion as a public service to aid the inquiring
lawyer in interpreting the Illinois Rules of Professional Conduct. The opinion represents
the judgment of a member or members of the Committee and does not constitute an official
act of the Chicago Bar Association. The opinion is not binding upon the Attorney
Registration and Disciplinary Commission or on any court and should not be relied upon
as substitute for legal advice.The Committee has received the following inquiry:
(1) Is the confidentiality provision of the proposed settlement agreement attached
hereto as Exhibit A ethical under Illinois Rule of Professional Conduct 3.4(f)?
(2) Is the confidentiality provision of the proposed settlement agreement attached
hereto as Exhibit A ethical under Illinois Rule of Professional Conduct 5.6(b)?
(3) May a defendant’s lawyer, as part of settlement discussions, demand that the
settlement agreement include a provision that prohibits plaintiffs counsel
from disclosing publicly available facts about the case on plaintiffs counsel’s
website or through a press release?Opinion
Inquiry 1: Settlement Agreement Non-Cooperation Provisions and Rule 3.4(f)
Illinois Rule of Professional Conduct 3.4(f) states that a “lawyer shall not. . . request a person
other than a client to refrain from voluntarily giving relevant information to another party” unless
that person is a relative or agent of the client and the lawyer reasonably believes that the person’s interests will not be adversely affected by refraining from disclosure. I I I . R. PROF’L CONDUCT R. 3.4(f) (2010). As the comments to Rule 3.4 explain, the rule is based on the belief that “[fjair competition in the adversary system is secured by prohibitions against destruction or concealment of evidence, improperly influencing witnesses, obstructive tactics in discovery
procedure, and the like.” Id. cmt. 1.Settlement agreements are not exempt from Rule 3.4(f). S.C Ethics Advisory Comm. Op. 93-20
(1993). Therefore, when negotiating a settlement agreement, a lawyer cannot ethically request
that the opposing party agree that it will not disclose potentially relevant information to another
party. Id. The Committee believes that “another party” in Rule 3.4(f) means more than just the
named parties to the present litigation. Rather, it should be interpreted more broadly to include
any person or entity with a current or potential claim against one of the parties to the settlement
agreement. A more narrow interpretation would undermine the purpose of the rule and the proper functioning of the justice system by allowing a party to a settlement agreement to conceal important information and thus obstruct meritorious lawsuits.Here, the defendant has proposed a settlement provision that would prohibit the plaintiff from,
among other things, disclosing the “existence, substance and content of the claims” and “all
information produced or located in the discovery processes in the Action” unless “disclosure is
ordered by a court of competent jurisdiction, and only if the other party has been given prior
notice of the disclosure request and an opportunity to appear and defend against disclosure . . .”
That proposed settlement provision therefore precludes the plaintiff from voluntarily disclosing
relevant information to other parties. As a result, it violates Rule 3.4(f) and a lawyer cannot
propose or accept it. I I I . R. PROF’L CONDUCT R. 3.4(f); S.C. Ethics Advisory Comm. Op. 93-20 (1993).Inquiry 2: Settlement Agreement Confidentiality Provisions and Rule 5.6(b) llinois Rule of Professional Conduct 5.6(b) states that a “lawyer shall not participate in offering or making . . . an agreement in which a restriction on the lawyer’s right to practice is part of the settlement of a client controversy.” I I I . R. PROF’L CONDUCT R. 5.6(b).There are three main public policy rationales for Rule 5.6(b): (i) to ensure the public will have broad access to legal representation; (ii) to prevent awards to plaintiffs that are based on the value of keeping plaintiffs’ counsel out of future litigation, rather than the merits of plaintiffs case; and (iii) to limit conflicts of interest.
By its own terms, Rule 5.6(b) plainly applies to direct restrictions on the right to practice law.
Moreover, certain indirect restrictions on the right to practice law violate Rule 5.6(b) as well,
namely, a lawyer agreeing not to bring future claims against a defendant, and a number of ethics
authorities have determined that some confidentiality provisions in settlement agreements violate
Rule 5.6(b).According to the American Bar Association’s Ethics Opinion 00-417, a provision in a settlement
agreement that prohibits a lawyer’s future “use” of information learned during the litigation
violates Rule 5.6(b), because preventing a lawyer from using information is no different than
prohibiting a lawyer from representing certain persons. ABA Standing Comm. on Ethics &
Prof 1 Responsibility, Formal Op. 00-417 (2000). That same opinion further determined that a
settlement provision that prohibits a lawyer’s future “disclosure” of such information generally is
permissible, because without client consent the lawyer already generally is foreclosed from
disclosing information about the representation. Id.However, not all limitations on the disclosure of information are ethical. Rather, as several
authorities have stated, whether a settlement provision restricting a lawyer’s “disclosure” of
information violates Rule 5.6(b) depends on the nature of the information. Numerous ethics
authorities have determined that settlement provisions may prohibit a party’s lawyer from
disclosing the amount and terms of the settlement (provided that information is not otherwise
known to the public), because that information generally is a client confidence and consequently
is required by the rules of professional conduct to be kept confidential absent client consent.
D.C. Bar Ethics Op. 335 (2006); N.Y. State Bar Ass’n Comm. on Prof 1 Ethics Op. 730 (2000);
N.D. State Bar Ass’n Ethics Comm Op. 97-05 (1997); Col. Bar Ass’n Ethics Comm. Op. 92 (1993); N.M. Bar Ass’n Advisory Ops. Comm. Op. 1985-5 (1985). On the other hand, ethics
authorities have found that a settlement agreement may not prohibit a party’s lawyer from disclosing information that is publicly available or that would be available through discovery in
other cases. D.C. Bar Ethics Op. 335 (2006); N.Y. State Bar Ass’n Comm. on Prof 1 Ethics Op.
730 (2000); N.D. State Bar Ass’n Ethics Comm. Op. 97-05 (1997).Based on the foregoing authority, the Committee believes that under Rule 5.6(b), a settlement
agreement may not prohibit a party’s lawyer from using information learned during the instant
litigation in the future representation of clients. The Committee agrees with the American Bar
Association that prohibiting a lawyer from using such information essentially is no different than
prohibiting a lawyer from representing certain clients in the future, and thus such a settlement
provision is an impermissible restriction on the practice of law in violation of Rule 5.6(b).
In addition, the Committee believes that pursuant to Rule 5.6(b) a settlement agreement may not
prohibit a party’s lawyer from disclosing publicly available information or information that
would be obtainable through the course of discovery in future cases. The Committee agrees with
the District of Columbia Ethics Committee, and other ethics authorities cited above, that drawing
such a line strikes an appropriate balance between the genuine interests of parties who wish to
keep truly confidential information confidential and the important policy of preserving the
public’s access to, and ability to identify, lawyers whose background and experience may make
them the best available persons to represent future litigants in similar cases.Applying those principles here, the Committee believes that the settlement provision as currently
drafted does not comply with Rule 5.6(b). While it is permissible for the settlement agreement to
prohibit the disclosure of the “substance, terms and content of the settlement agreement
(assuming that information is not otherwise publicly known), the settlement agreement violates
Rule 5.6(b) because it broadly forecloses the lawyer’s disclosure of information that appears to
be publicly available already, such as the fact that a lawsuit was filed and certain claims were
asserted, as well as other information that could be obtained (and in fact was obtained) in
discovery. The settlement agreement therefore should be re-written to permit the lawyer’s use of
information learned during the dispute and to permit the lawyer’s disclosure of publicly available
information and information that would be available through discovery in other litigation.
Inquiry 3: Settlement Agreement Restrictions on Attorney Advertising and Rule 5.6(b)
Based on the principles discussed above, the Committee believes that under Rule 5.6(b), a
settlement agreement may not prohibit a party’s lawyer from disclosing publicly available facts
about the case (such as the parties’ names and the allegations of the complaint) on the lawyer’s
website or through a press release. See, e.g., D.C. Bar Ethics Op. 335 (2006).Dated: February 12,2013
CHICAGO BAR ASSOCIATION
PROFESSIONAL RESPONSIBILITY COMMITTEE
OPINIONS SUBCOMMITTEEEXHIBIT A – Proposed Confidentiality Provision in Settlement Agreement
8. Plaintiff and his counsel agree that the existence, substance and content of the
claims of the Action, as well as all information produced or located in the discovery processes in
the Action shall be completely confidential from and after the date of this Agreement. Similarly,
the existence, substance, terms and content of this Agreement shall be and remain completely
confidential. Plaintiff shall not disclose to anyone any information described in this paragraph,
except: (a) if disclosure is ordered by a court of competent jurisdiction, and only if the other
party has been given prior notice of the disclosure request and an opportunity to appear and
defend against disclosure and/or to arrange for a protective order; (b) Plaintiff may disclose the
contents of this Agreement to his attorneys, accounting and/or tax professionals as may be
necessary for tax or accounting purposes, subject to an express agreement to become obligated
under and abide by this confidential and non-disclosure restriction; and (c) Plaintiff may disclose
that the Action has been dismissed.