Chicago Business Litigation Lawyer Blog

TCPA Texting Class Action Alleges Insurance Carriers Violate Privacy Rights Through Illegal Text Message Campaign

December 15, 2013 | Peter S. Lubin and Patrick Austermuehle

In 1991, Congress enacted the Telephone Consumer Protection Act (TCPA) which specifically prohibits the use of auto-dialers in making calls to a wireless number without the prior express consent of the person being called. The only exception to this rule is in the case of an emergency. One of the main reasons for this Act is the fact that owners of wireless phones are often charged for their incoming calls as well as the calls that they make. This means that, aside from being annoying and potentially time consuming, the telemarketing calls are also costing their targets money out of pocket.

Despite the institution of this Act, companies appear to be unwilling to cooperate, as evidenced by the fact that companies which use auto-dialers to contact potential customers are still thriving. One of these companies is Variable Marketing, LLC and it has recently been hit with a class action lawsuit alleging violations of the TCPA.

Filed in the District Court for the Northern District of Illinois, the lawsuit names American Automobile Association, Inc.; Farmers Group, Inc.; Government Employees Insurance Company; Nationwide Mutual Insurance Company; State Farm Mutual Automobile Insurance Company; and Variable Marketing, LLC as defendants. All of these defendants allegedly used a lead-generator marketing company (Variable Marketing), to market their services in violation of the TCPA.

The plaintiffs are five consumers who received calls from Variable on their cell phones. When they answered or returned the calls, a pre-recorded message played before they were able to reach a live operator. According to the lawsuit, only one of the five plaintiffs had ever had any business dealings with any of these insurance companies prior to receiving the call and none of them had expressed their consent to receive these calls. The plaintiffs are seeking statutory damages and injunctive relief under the TCPA.

The proposed class is defined as “All persons within the United States who received a non-emergency telephone call from Variable, placed while Variable was acting on behalf of the Insurance Company Defendants, to a cellular telephone through the use of an automatic telephone dialing system or an artificial or prerecorded voice.”
This proposed class could end up consisting of tens of thousands of members. Under the law, each of those members is entitled to up to $1,500 for each call that they received from Variable. This brings the total award sought by the plaintiffs to over $5,000,000, not including interest and attorneys’ fees.

Despite the fact that Variable is the company which actually placed the calls using an auto-dialer, all of the companies for which Variable did this are responsible for having violated the TCPA. The Federal Communications Commission (FCC), the agency which Congress put in charge of regulating and implementing the TCPA, determined that “a company on whose behalf a telephone solicitation is made bears the responsibility of any violations.” According to the FCC, the seller and the telemarketer do not need a contract in order for the seller to be liable. All that the FCC requires is that the telemarketer have “the apparent (if not actual) authority” to make the calls.

A representative of Variable told one of the plaintiffs that he was calling on behalf of “lots of the big [insurance companies], including Geico and AAA.” This suggests that Variable was given authority to use the Insurance Company Defendants’ trade name, trademark and service marks. This fulfills the requirement of “apparent (if not actual) authority” for holding the insurance companies accountable for the damages incurred as a result of their violation of the TCPA.

Court Rejects Claims that Compaq Violated Confidentiality Agreement

December 12, 2013 | Peter S. Lubin and Patrick Austermuehle

Non-disclosure agreements exist so that companies can safely have discussions about developing ideas of technology without worrying about one company stealing the trade secrets of another. However, the language involved in the non-disclosure agreement is crucial. The line between what information is confidential and what information is not confidential must be clearly defined. When a company lays out the parameters for confidential information in their non-disclosure agreement, it is advisable that the company then be sure to work within the parameters which they have set.

One company that ran into trouble with the definition of confidential information as laid out in their own non-disclosure agreement is Convolve. Beginning in the late 1990’s, Convolve and Compaq Computers began doing business together using non-disclosure agreements. Those agreements specified that confidential information was to be defined as any information which was marked as confidential at the time that it was disclosed. If it was unmarked, or if the information was disclosed in a presentation, then it had to be designated as confidential in a written memorandum following the disclosure.

In late 1999, Convolve made certain presentations to Compaq regarding computer hard-drive technology, but the two companies never reached a licensing agreement for the technology. When Company then went on to use some of the information which they had gleaned from those presentations, Convolve sued Compaq for breach of contract. However, the presentations at issue were never followed by written memos to confirm that the information presented was confidential. The lower court ruled that, without the necessary memos, as laid out in the non-disclosure agreement, the agreement did not apply to any information which was disclosed in those presentations. The court decided that the non-disclosure agreements “do not appear reasonably susceptible to the interpretation Convolve urges.”

Convolve appealed the decision, arguing that, despite the lack of written memos, Compaq had understood that all of their disclosures were confidential. The appellate court rejected this argument, pointing out that it contradicted the terms of the non-disclosure agreement.
Convolve then tried to argue that, regardless of the non-disclosure agreement, state confidentiality law still applied. The appellate court also rejected that argument, stating that a non-disclosure agreement replaced any implied duty of confidentiality which might have existed between the two companies under the law. According to the Court, Convolve could not force their business partners to abide by one set of rules as laid out in their non-disclosure agreement while simultaneously forcing them to abide by a different set of rules under the law. The Court stated that “One party should not be able to circumvent its contractual obligations or impose new ones over the other via some implied duty of confidentiality.”

The Court therefore ruled in favor of Compaq, having decided that “Convolve did not follow the procedures set forth in the NDA to protect the shared information, so no duty ever arose to maintain secrecy of that information.”

The lesson learned here is that, if you are going to specifically define confidential information in your non-disclosure agreement, you should be careful to abide by all the terms of your own contract if you wish for your information to remain safe.

Alternatives to Non-Compete Agreements Become Popular With Employers

December 11, 2013 | Peter S. Lubin and Patrick Austermuehle

As this blog has discussed, non-compete agreements have become increasingly prevalent in recent years. However, they have also grown in severity in some companies, such that they frequently impose undue hardship on an employee’s search for future employment. As a result, courts in some states have grown increasingly unfavorable towards non-compete agreements. California courts, for example, are hard pressed to enforce any non-compete agreements.

If an employee breaches a non-compete agreement, the former employer can take the employee to court for breach of contract, but these lawsuits can be long and costly. While employees often rely on the allegation that the non-compete agreement imposed undue hardship, many courts rely on a three-pronged system to determine the validity of a non-compete agreement, of which undue hardship is only one consideration.

Completing the test of validity therefore requires the court to consider all the facts of the case. This can lead to very lengthy discovery, making the lawsuit even more costly. After all that, there is never a guarantee that a court will rule in the company’s favor, and even if they do, a customer lost is unlikely to come back.

For these reasons, alternatives to non-compete agreements have been proposed, although they still have yet to achieve the same popularity in American businesses. The first alternative is garden leave contracts. In these agreements, the employee agrees to give the employer notice of a certain amount of time before leaving the company. This is what is known as the garden leave period, but the employer continues the pay the employee a salary during this period. Garden leave contracts have two advantages over non-compete agreements:

1) If an employee fails to abide by the agreement it would not only prove breach of contract but also break the common law of duty of loyalty. In this case, an employer would not only be able to collect on salary paid during this period, but might be able to recover punitive damages as well.

2) It undercuts one of the main defenses that employees use when they breach their non-compete agreements: undue hardship. When an employee is still receiving a salary, undue hardship becomes significantly more difficult to prove.

As with non-compete agreements, the length of the garden leave period must be reasonable. Also, while it might be tempting for employers to reduce garden leave pay to a percentage of the employee’s normal salary, such a reduction risks inviting a court to apply higher scrutiny to the clause, which leads to the possibility of the court dismissing the agreement as invalid.

Another option is to replace the non-compete agreement with a safety net payment. Safety net payments are similar to garden leave agreements with the main difference of applying after the employee and employer have broken off all relations with one another. Once payment is made, the employee agrees to refrain from certain competitive actions, such as contacting specified customers. In this case, the safety net payment does the same thing as the garden leave payment does as far as ensuring that an employee cannot claim that the contract imposes undue hardship in their search for new employment.

Some companies have chosen to make payments like this staggered over a certain period of time, such as six months or one year. If the employee breaches the contract, the employer can then stop future installments of the safety net pay. However, employers must be careful to specify in the contract that a breach on the part of the employee will result in termination of all future payments. Otherwise, the cessation of installments could result in the employer getting taken to court for breach of contract.

The third and final alternative to non-compete agreements is client purchase agreements. These agreements do not expressly prohibit competition, but they do enact punishment in the event that the competition happens. In these arrangements, an employee agrees to pay the employer if she chooses to participate in certain competitive behaviors, such as by working with specified customers.

Settlement in Miley Cyrus Jewelry Class Action Alleging Jewelry Has Dangerous Levels of Cadmium

December 5, 2013 | Peter S. Lubin and Patrick Austermuehle

Many consumers frequently rely on important information provided by the manufacturer of a product in order to determine whether or not to buy that product. If a product does not list a particular ingredient, such as gluten, which is a protein found in many processed foods, consumers will frequently assume that the protein is not present in that product. Only recently have food producers begun to label their products as specifically gluten-free.
Walmart has recently encountered a lawsuit by consumers who purchased jewelry from their stores with Miley Cyrus’s brand. The jewelry, which is made by BCBG Max Azria Group Inc., and sold in Walmart stores, allegedly contained cadmium.

Cadmium is a soft metal which is frequently used to stabilize plastics and to prevent corrosion. However, cadmium has been found to have toxic properties and it is included on the European Restriction of Hazardous Substances. This Restriction bans certain hazardous substances in electrical and electronic equipment, although it does allow for certain exemptions and exclusions. Some studies have linked cadmium with lung cancer and prostrate cancer and some people have theorized that the soft metal imitates estrogen and causes breast cancer.

In the past few years, jewelry sold at Walmart and collectible drinking glasses sold at McDonald’s have been recalled when it was discovered that these products contained cadmium. In 2010, reports of high levels of cadmium in children’s jewelry led to an investigation by the U.S. Consumer Product Safety Commission. Despite the fact that there appears to be little hard evidence available that cadmium is dangerous, there have been enough scares and warnings to make consumers wary of the metal.

The plaintiffs of the current lawsuit against Walmart regarding the Miley Cyrus-brand jewelry say that they never would have purchased the jewelry if they had known that the product contained cadmium. A settlement has been reached in the case, but the defendants continue to deny having done anything wrong and any liability. Anyone who purchased Miley Cyrus-branded jewelry from a Walmart retail store after July 1, 2005 is eligible to participate in the class. Class members have four options:

TO REMAIN IN THE SETTLEMENT: In order to remain in the settlement, purchasers of the jewelry must submit a claim form in order to receive a payment from the settlement. They must also agree to the terms of the settlement which include forfeiting their right to sue the defendants in the future.

TO GET OUT OF THE SETTLEMENT: If class members do not wish to
remain as part of the settlement, they can choose to exclude themselves from the class.

TO REMAIN IN THE SETTLEMENT AND OBJECT: Those who decide to remain in the settlement will have the opportunity to object to the settlement.

APPEAR AND SPEAK AT THE FINAL APPROVAL HEARING: Just because a settlement has been reached between the two parties does not mean that it has yet been finalized. A judge must first grant the settlement court approval. If members of the class choose to do so, they can appear at the approval hearing and speak, or they can have an attorney appear and speak on their behalf. Should they chose one or both of these options, it would be entirely at their own expense.

Overly Broad Non-Compete Agreements are Not Enforceable

December 4, 2013 | Peter S. Lubin and Patrick Austermuehle

As the popularity of covenants not to compete increases, the competitive practices which are prohibited by those agreements also seem to grow. However, there are laws in place which ensure that covenants not to compete that are deemed too stringent cannot be upheld in a court of law. One of the most common limitations on covenants not to compete is the one which states that the agreement must be broad enough only to cover the company’s legitimate business interests and no more.

Another very common limitation that courts consider is whether or not the agreement poses undue hardship on an employee. When cases of disputed covenants not to compete reach a court, it is the court’s duty to balance the needs of the business to protect their legitimate business interests with the needs of the employee to find work. If a covenant not to compete is too broad, it may make it inordinately difficult for an employee to find any work at all after her employment with the company comes to an end.

One such case in which a court found that the covenant not to compete was overly broad is the case of Orca Communications Unlimited LLC v. Ann J. Noder et al. In this case, Orca Communications, a public relations firm located in Arizona, hired Noder to be its President. Prior to taking this job, Noder had had no experience with public relations. She learned everything about the business while working for Orca.

Noder signed a Confidentiality, Customer and Employee Non-Solicitation, and Non-Competition Agreement which prevented her from advertising, or soliciting or providing conflicting services for any company which competes with Orca. After Noder left Orca to start her own public relations firm, Orca sued her for breach of contract.

The Agreement further prevented Noder from convincing any former or current or prospective customer of Orca to end its relationship with Orca. This was one of the main areas of Agreement with which the court took issue. To prevent Noder from enticing away from Orca a current Orca customer is to protect Orca’s legitimate business interests. However, to prevent Noder from doing so with companies which have never had any business dealings with Orca, the court found to be overly broad and imposed undue hardship on Noder in her efforts to find gainful employment after her time at Orca.
The Agreement also contained a confidentiality provision which prohibited Noder from using or disclosing any of Orca’s confidential information without Orca’s consent. “Confidential Information” was defined as knowledge or information which is not generally known to the public or to the public relations industry or was “readily accessible to the public in a written publication.” However, the Agreement did cover information which was only available through “substantial searching of published literature” or that had been “pieced together” from a number of different publications and sources.

This provision of the Agreement the court also found to be too broad. To protect company trade secrets is well within the limitations of protecting a company’s legitimate business interests. However, even if one has to conduct substantial research to gain knowledge, that knowledge is still considered to be in the public domain and therefore cannot be covered under a confidentiality agreement.

The trial court found that the Agreement was overly broad and dismissed the case. Orca appealed and the Arizona Court of Appeals upheld the ruling of the lower court and dismissed the case.

Consumers Beware — Don’t Contract Away First Amendment Rights to Give Negative Reviews of Businesses

December 2, 2013 | Peter S. Lubin and Patrick Austermuehle

Our Chicago defamation, slander, libel, cyberbullying and First Amendment attorneys concentrate in this area of the law. We have defended or prosecuted a number of defamation and libel cases, including cases representing a consumer sued by a large luxury used car dealer in federal court for hundreds of negative internet reviews and videos which resulted in substantial media coverage of the suit; one of Loyola University’s largest contributors when the head basketball coach sued him for libel after he was fired; and a lawyer who was falsely accused of committing fraud with the false allegation published to the Dean of the University of Illinois School of Law, where the lawyer attended law school and the President of the University of Illinois. One of our partners also participated in representing a high profile athlete against a well-known radio shock jock.

Our Chicago defamation lawyers defend individuals’ First Amendment and free speech rights to post on Facebook, Yelp and other websites information that criticizes businesses and addresses matters of public concern. Our Chicago Cybersquatting attorneys also represent and prosecute claims on behalf of businesses throughout the Chicago area including in Lake Forest and Vernon Hills, who have been unfairly and falsely criticized by consumers and competitors in defamatory publications in the online and offline media. We have successfully represented businesses who have been the victim of competitors setting up false rating sites and pretend consumer rating sites that are simply forums to falsely bash or business clients. We have also represented and defended consumers First Amendment and free speech rights to criticize businesses who are guilty of consumer fraud and false advertising.

Super Lawyers named Chicago and Oak Brook business trial attorney Peter Lubin a Super Lawyer in the Categories of Class Action, Business Litigation, and Consumer Rights Litigation. Lubin Austermuehle’s Oak Brook and Chicago business trial lawyers have over a quarter of century of experience in litigating complex class action, consumer rights and business and commercial litigation disputes. We handle emergency business law suits involving injunctions, and TROS, defamation, libel and covenant not to compete, franchise, distributor and dealer wrongful termination and trade secret lawsuits and many different kinds of business disputes involving shareholders, partnerships, closely held businesses and employee breaches of fiduciary duty. We also assist businesses and business owners who are victims of fraud or defamatory attacks on their business and reputations.

US Supreme Court Agrees to Hear Securities Fraud Class Action and to Consider Fraud on the Market Damage Theory

December 2, 2013 | Peter S. Lubin and Patrick Austermuehle

Class action status is an important tool for plaintiffs in many different types of lawsuits. It gives plaintiffs strength in numbers when filing lawsuits against large corporations. It also allows plaintiffs to collect claims which would normally be too small to justify filing a lawsuit if the plaintiff were left to do so on her own. It is the number of plaintiffs and the subsequently larger claim against the defendant which makes it possible for these plaintiffs to seek redress against defendants.

Many companies utilize illegal business practices and rely on people determining that the small claims are not worth a lawsuit in order to continue those practices. Even if a customer or investor loses a small amount of money, a company that uses the same practice with hundreds of thousands of similarly situated people could potentially rake in millions of dollars illegally.

Despite the fact that class action status is a necessary tool which is provided to plaintiffs in the laws of the United States, the Supreme Court has recently displayed a pattern of ruling against class actions. Such rulings are making it increasingly difficult for plaintiffs to file class action lawsuits which can be upheld in court. As a result of the Supreme Court’s recent rulings, lower courts have had to consistently deny plaintiffs class action status in cases which would normally have been allowed to move forward as class action lawsuits.

The Supreme Court has agreed to hear another case in which the parties are disputing whether or not the case can continue as a class action lawsuit. The lawsuit was brought against Halliburton, a publicly traded energy company, by a class action of the company’s share holders. The shareholders allege that Halliburton misrepresented its potential liability in asbestos litigation, revenue from construction contracts, and benefits from a merger. According to the lawsuit, shareholders allegedly lost money after the company’s stock prices dropped after news about one or more of these factors was revealed.

The plaintiffs in the case are relying on a landmark decision which was made in 1988 in the case of Basic v. Levinson. In that case, the court determined that shareholders have the right to know about a potential merger, even before it happens. The ruling also determined that shareholders don’t have to prove that they made investment decisions based on a company’s misstatement of facts. Instead, the ruling upheld the concept of “fraud on the market,” which assumes that misleading corporate assertions are reflected in a company’s stock price.

Halliburton is hoping that the court will overturn the 1988 ruling in their favor, arguing that “Real-world experience has crippled the theoretical underpinnings of Basic”. The shareholders, on the other hand, argue that “A reversal of Basic v. Levinson would represent the most radical change in the private enforcement of the federal securities law in a generation and would be a severe blow to investors’ rights.”

According to Halliburton, even in a well-developed securities market, “stock prices do not efficiently incorporate all types of information at all times.” Because of this, the energy company argues, shareholders should not be able to sue a company based on price fluctuations alone.

7th Circuit Affirms Dismissal of Consumer Fraud Claims Against Wachovia

November 24, 2013 | Peter S. Lubin and Patrick Austermuehle

While lawsuits have become increasingly common in today’s society, they have grown no less costly. Because of the cost and time consuming nature of lawsuits, plaintiffs should be advised to thoroughly consider every line of their contracts, as well as the law, before taking a person or company to court. In a recent case handled by the Seventh Circuit Court of Appeals, Martha Schilke either failed to thoroughly read her mortgage contract, or she failed to fully understand it. Either way, the result was much time spent in court that could have been avoided.

Schilke purchased a town house in 2006 using a mortgage from Wachovia Mortgage, FSB. One of the conditions of her mortgage was that Schilke buy and maintain insurance on her property. If, at any point, she failed to do so, the contract stipulated that Wachovia had the right to purchase insurance on her behalf and charge her for the premium. The contract even went so far as to warn Schilke that, due to fewer insurance options, insurance coverage bought by them would likely be at a much higher premium and less coverage than insurance Schilke could buy on her own.

The contract further stated that “[i]f at any time during the life of the loan, a policy is cancelled or replaced or an insurance agent is substituted, we must receive written evidence of the insurance and written evidence of the substitution of the insurance agent. Written evidence of insurance is defined as: a copy of the reinstatement notice for the cancelled policy or a copy of the replacement policy. … If we do not receive such evidence prior to the termination date of the previous coverage, we may at our sole option, obtain an insurance policy for our benefit only, which would not protect your interest in the property or the contents. We would charge the premium due in under such a policy to your loan and the loan payment would increase accordingly.”

In January of 2008, Schilke purchased insurance for her property. In May of that same year, Wachovia sent her a notice that her policy had ended on April 8. The letter requested that Schilke provide proof of insurance within 14 days. She never replied. Wachovia sent Schilke another letter in June, once again requesting proof of insurance and notifying her that it had acquired temporary insurance coverage through American Security Insurance (ASI). Enclosed with the letter was an “Illinois Notice of Placement Insurance” in which Wachovia described the terms of the temporary insurance coverage and informed Schilke that she was responsible for the cost. The letter further stated that, if Schilke could provide proof of insurance, Wachovia would cancel the temporary insurance coverage and refund any premiums paid by Schilke. It also stated that, in the event that Schilke failed to provide proof of insurance in the next 30 days, Wachovia would cancel the temporary insurance and replace it with a 12-month insurance policy, for which Schilke would be charged.

In July 2008, Wachovia wrote to Schilke to inform her that it had purchased a 12-month insurance policy on her mortgaged property and of the cost of that coverage. One year later, Schilke filed a class action lawsuit, on behalf of herself and others similarly situated, against Wachovia and ASI for allegedly engaging in deceptive practices by failing to disclose that Wachovia was receiving “kickbacks” from ASI.

Wachovia and ASI moved to dismiss the motion and the district court granted it.
Schilke then sought leave to file an amended complaint in which she added claims for breach of contract against both Wachovia and ASI and “clarified” that her claim under the Consumer Fraud Act was based on allegations that Wachovia’s conduct was both “deceptive” and “unfair” as defined by the Act. The district court rejected the proposed amendment, concluding that Schilke’s “clarification” of her amendment did not change the fact that she did not have a claim under the Act.

Schilke then submitted another amended complaint. In this version, she proposed to add Assurant, Inc., ASI’s parent company, as a defendant. She also proposed to add claims for conspiracy, aiding and abetting, acting “in concert”, and “intentional interference”. The judge denied leave to amend the complaint, stating that none of the changes significantly changed the allegations in the complaint. Schilke appealed and the case moved to the Seventh Circuit Court of Appeals.

As to Schilke’s claims under the Consumer Fraud Act, the Act prohibits any “unfair” or “deceptive” business practices to be used by a person or entity in order to gain an unfair advantage. The Act defines these terms as including “the use or employment of any deception, fraud, false pretense, false promise, misrepresentation or the concealment, suppression or omission of any material fact, with intent that others rely upon the concealment, suppression, or omission”. The court found that, due to the contract provided by Wachovia, as well as its notices and correspondence to Schilke, the company had provided sufficient evidence that it had not violated the Consumer Fraud Act.

Schilke tried to claim that, even if Wachovia’s business practices were not deceptive, they were unfair because they “coerced” her into buying insurance through them. She backed this statement by saying that, had she refused to pay for the insurance through Wachovia, or failed to make a payment on her mortgage, Wachovia would have cancelled her mortgage, therefore she was “coerced” into buying the more expensive insurance. The court, however, pointed out that Wachovia had provided plenty of chances for Schilke to purchase cheaper insurance and, since having insurance was always a part of the legal contract, the court denied these allegations.

Because Wachovia received a commission from ASI for purchasing insurance on one of its properties, Schilke called it a “kickback” and claimed that it was unlawful. However, a “kickback” is defined as a bribe or payment which might be used to divide loyalties. This was never the case because Wachovia was not acting on Schilke’s behalf. Instead, the bank was merely acting to protect its own interests in the property it had purchased, for which Schilke was paying them back. Such a commission is fully within the limits of the law.

The Seventh Circuit Court of Appeals therefore upheld the ruling of the district court and dismissed the case.

NCAA Loses Injunction Ruling in Class Action Regarding Use of Player Images in Video Games

November 20, 2013 | Peter S. Lubin and Patrick Austermuehle

Generally, when filing a lawsuit, the plaintiff has one of two aims: to reap payment for damages incurred; or for the court to order an injunction against the defendant. Many plaintiffs seek both. In the current case against the NCAA regarding the rights of student athletes, the plaintiffs have managed to gain court approval to move forward as a class to seek one of these goals, but not the other.

U.S. District Judge Claudia Wilken ruled that the plaintiffs can move forward as a class in their lawsuit against the NCAA regarding what student athletes receive in exchange for playing sports for their colleges. However, Wilken denied the motion to certify a class which sought billions of dollars in damages from the NCAA in exchange for improper use of the athletes’ names and likenesses in several forms, including live television broadcasts. According to Wilken, the plaintiffs had failed to identify a legitimate method to calculate damages for former players and that was her reason for refusing to certify a class to seek damages.

Sonny Vaccaro had mixed feelings about the ruling. Vaccaro is the form sneaker marketing executive who convinced O’Bannon, a former UCLA basketball star, to file the lawsuit against the NCAA. Vaccaro was disappointed that the class won’t be able to pursue damages, but he was optimistic about moving the case forward to elicit changes from the NCAA. According to Vaccaro, O’Bannon said of the ruling, “This is what I wanted … They’ll have rights. I never had rights. I didn’t think I would ever have rights.” The goal in this lawsuit now is to prevent the NCAA from taking advantage of student athletes in the future and using their names and likenesses, not only on television, but also in things like video games for EA.

Vaccaro also said that the plaintiffs “won in the sense we’re going forward, … Those damages, whatever they would have been, if we win, going forward, there’s no limit to what the numbers are in the future.

Vaccaro and O’Bannon aren’t the only ones who are pleased with the court’s ruling. Michael Hausfeld, one of the attorneys for the plaintiffs, released a statement saying that, “The court’s decision is a victory for all current and former student-athletes who are seeking compensation on a going forward basis. While we are disappointed that the court did not permit the athletes to seek past damages as a group, we are nevertheless hopeful that the court’s decision will cause the NCAA to reconsider its business practices.”

Another attorney for the plaintiffs, Hilary Sherrer, said, “There is a growing public recognition that the NCAA’s business practices are unfair and must be changed. The court’s ruling is a giant leap in the effort to end these unfair practices.”

The NCAA also claimed that the ruling was a victory for their side. They released a statement which says, “We have long maintained that the plaintiffs in this matter are wrong on the facts and wrong on the law. This ruling is one step closer to validating that position”.

HSBC Hit With $2.5 Billion Class Action Judgment

November 18, 2013 | Peter S. Lubin and Patrick Austermuehle

Some companies might want to make sure to be very careful before making large acquisitions. Otherwise they might find themselves fighting a legal battle for something the company being acquired did years ago. Such is the case for HSBC Holdings Plc, a British bank, which has recently been hit with the largest judgment yet made in U.S. courts. The judgment, a record breaking $2.46 billion, was made against HSBC by U.S. Judge Ronald Guzman following a jury trial in a class action against Household International, which is now a division of HSBC.

According to the class action lawsuit, Household International’s chief executive, chief financial officers, and head of consumer lending all made false and misleading statements about the company in order to artificially inflate the company’s share price. The lawsuit further alleges that Household International engaged in predatory lending and intentionally concealed the quality of its loan portfolio.

Reports of Household International’s lending practices began to reach the public in 2001, which resulted in the company’s share prices sinking to the lowest it had been in seven years. The class action lawsuit was filed against Household International in 2002, the same year that HSBC bought out the U.S. lender. Now HSBC is stuck dealing with the lawsuit. A spokesman for the company sounded confident however, saying that HSBC plans to appeal and believes that it has a strong case. Despite its embroilment in the current legal battle, HSBC seems not to regret the purchase of the U.S. lending company. On the contrary, it appears to be eager to continue the battle against the class action lawsuit. The spokesman did add, however, that the matter has been noted in HSBC’s regulatory filings. It might affect future acquisitions made by the British bank after all.

The case is notable because securities fraud class actions almost always settle before reaching a jury. Defendants frequently prefer to settle outside of court to avoid the negative media attention as well as to avoid the extremely high judgments. When a class is certified by a judge, it frequently puts pressure on the defendant to settle the case outside of court, given that class action status gives the plaintiffs greater leverage.

Plaintiffs in securities fraud class action lawsuits generally rely on the “fraud on the market” theory as a key tool in their litigation. This is the theory that the price of a security trading in an efficient market reflects all publicly available information about that security. Working on that premise, the theory assumes that investors rely on material misrepresentations which are reflected in market prices at the time that the security is traded. Like most securities fraud class action lawsuits, the one against Household International also relied on evidence that investors and the market relied on unreliable statements provided by high-level executives at Household International. Because of the misrepresentations of the company and its lending practices, investors were led to buy shares which they would not have otherwise purchased, or were led to buy them at a higher price than that at which they would normally have bought them.