Chicago Business Litigation Lawyer Blog

Court Rejects Volvo’s Motion to Decertify Class Action Involving Sun Roofs That Leaked Due to a Defective Design

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

With the Supreme Court make the criteria for class certification more stringent, cases are still getting certified in the consumer protection and fraud area for products with common design defects. In a recent case against Volvo, a class action of consumers has been certified for a lawsuit against the car company alleging that defective sunroofs leaked, leading to flooding and damage inside the car. The lawsuit was filed in New Jersey U.S. District Court by Joanne Neale and seven other Volvo owners. Each plaintiff experienced an issue with the sunroof drainage system which resulted in damage to the inside of the vehicle. Each of these consumers were told that the sunroof drain was not covered under their warranty and so the cost of fixing or repairing the drain fell on the consumers. For some, this included the cost of whatever damage was cause by the faulty drain, such as replacing the carpeting in the vehicle. The cost of implementing these repairs ranged from $250 to over $1,000. The plaintiffs filed the lawsuit and asked for certification of either a nationwide class or statewide class.

The defective sunroofs allegedly affect Volvo models S40, S60, S80, V50 (model years 2004 to present), and XC90 (model years 2003 to present). The class action includes Volvo owners and lessees in Massachusetts, Florida, Hawaii, New Jersey, California, and Maryland. According to the lawsuit, the defective sunroofs allegedly resulted in damage to the vehicles’ interior components, including carpeting and safety-regulated electrical sensors and wiring. The lawsuit further alleges that Volvo knew about the design defect, based on the existence of numerous consumer complaints as well as internal Volvo communications and Technical Service Bulletins which were issued by Volvo in an attempt to deal with the problem.

Volvo filed a motion for summary judgment and to decertify against the plaintiffs saying that the definition of the nationwide class and the definition of the statewide classes were too broad. In their motion to reconsider, Volvo noted a recent Supreme Court decision in which the Court ruled in favor of the defendant, Comcast. In that case, the plaintiffs, a class of current and former Comcast cable consumers, provided an expert witness who testified with hypothetical examples of what cable prices would have been without Comcast’s allegedly illegal business practices. The Supreme Court ruled that the methodology used by the expert was unsound and, on that basis, the Court denied the plaintiffs class action status.

The Volvo case, according to the New Jersey U.S. District Court judge, had verty little in common with the Comcast case. In his opinion, Judge Dennis Cavanaugh wrote that “Defendants argue that this court should reconsider its opinion that granted plaintiffs’ motion for certification for statewide classes due to the U.S. Supreme Court’s decision in Comcast. … However, this case is entirely distinguishable from Comcast. … Here, the damages issue is much more straightforward – all class members who purchased defendants’ product were allegedly damaged by a design defect.” The U.S. District Court therefore saw no reason to decertify the statewide class action in the Volvo case and denied the defendant’s motion for to reconsider as well as the motion for summary judgment against the plaintiffs.

Arizona Court Finds Arbitration Clause Unconscionable

November 8, 2013 | Peter S. Lubin and Patrick Austermuehle

An arbitration clause is a part of a contract which requires that any dispute between the parties be handled in arbitration, rather than trial courts. An increasing number of companies are implementing these clauses and requiring everyone from their employees to their customers to sign them. The goal is to prevent class actions from forming and taking the company to court for large sums of money. However, these clauses are not always enforceable and many plaintiffs have found ways around them.

An unconscionable contract is a contract that is unenforceable in a court of law. Arbitration agreements may be found unconscionable on “such grounds as exist at law or in equity” to revoke a contract. There are two types of contractual unconscionability: procedural and substantive. Procedural unconscionability addresses the fairness of the bargaining process, which “is concerned with ‘unfair surprise’, fine print clauses, mistakes or ignorance of important facts”. Substantive unconscionability, on the other hand, determines the fairness of the terms of the contract itself. For example, a contract may be considered substantively unconscionable if its terms favor one party too heavily over another.

An arbitration agreement may be substantively unconscionable if the fees and costs to arbitrate are so excessive as to “deny a potential litigant the opportunity to vindicate his or her rights.” In such cases, it is up to the plaintiff to prove to the court that the arbitration would be prohibitively expensive.

First, the plaintiff has to present evidence concerning the cost to arbitrate. The evidence provided “must be based on specific facts showing with reasonable certainty the likely costs of arbitration.” Second, the plaintiff “must show that based on their specific income/assets, they are unable to pay the likely costs of arbitration.” The third and final consideration for the court is whether the arbitration agreement allows for a party to avoid or reduce the costs of arbitration based on financial hardship.

One case that exemplifies this is Clark v. Renaissance West in Arizona. The plaintiff sued the nursing home for medical malpractice, alleging that it was due to their negligence that he formed a pressure ulcer which required surgery and long term care to remedy. Clark had signed a contract with the nursing home that included an arbitration clause but he argued that the clause was unenforceable and took the case to trial. The trial court ruled that the arbitration clause was, indeed unconscionable, and the appellate court agreed after Renaissance West appealed the lower court’s decision.

Most arbitration clauses state that the company will choose and pay for arbitration. In this case however, the contract called for three arbitrators in the event that the parties could not agree on one, and for both parties to split the arbitration fees, regardless of who won the case. Clark brought in an expert who testified that, based on the complexity of Clark’s case, they could be in arbitration for at least five days (assuming an 8-hour day). Taking that into consideration, arbitration alone would have cost Clark about $22,800. Since Clark is retired and living on a fixed income, such an exorbitant amount is clearly beyond his means.

The appellate court’s decision is a mixed blessing for plaintiffs trying to avoid unfair arbitration provisions. On the one hand, the plaintiff won and the arbitration clause has been rejected. On the other hand, this case has proven the lengths to which plaintiffs must go in order to prove that the arbitration clause is unconscionable.

New Jersey Supreme Court Requires Mediated Settlement to be in Writing

November 7, 2013 | Peter S. Lubin and Patrick Austermuehle

While courts usually use the law to determine who has the right in a case, supreme courts can sometimes use a case as motivation to create new laws or to modify existing laws. In a recent case, the New Jersey Supreme Court did both of these things. The case, Willingboro Mall v. Franklin Avenue, involved a pre-existing law which the court used to rule in the case. However, the court determined that, in future cases, a slightly different set of standards would be used.

The case involved the sale of a mall which was handled in mediation. However, the settlement was never put in writing before the mediation closed. A few weeks after the settlement, Willingboro rejected the settlement and Franklin filed a motion to enforce the settlement. In his filing, Franklin included certifications from its attorney and the mediator. Rather than filing a motion to dismiss the case based on breach of mediation confidentiality, Willingboro filed an opposing motion in which it included certification from its manager regarding the substance of the parties’ discussion during mediation. During discovery, both Franklin and Willingboro agreed to waive any issues of confidentiality concerning the mediation process.

A four-day hearing followed, during which testimony was given from the mediator as well as Willingboro’s manager and attorney. However, halfway through the hearing, Willingboro changed its mind and moved for an order to expunge “all confidential communications” which had been disclosed and to bar any further disclosures regarding the mediation. The court ruled, however, that Willingboro had already waived its right to confidentiality and the hearing proceeded. At the end of the hearing, the trial court determined that the settlement was binding and ruled to enforce it, “[even] though the [settlement] terms were not reduced to formal writing at the mediation session.”

Willingboro appealed the decision until it reached the New Jersey Supreme Court. The Supreme Court upheld the rulings of the lower courts, enforcing the settlement. In determining a breach of confidentiality, the Court considered the rule governing mediation which states that “an agreement evidenced by a record signed by all parties to the agreement is an exception to the mediation-communication privilege.” Although this rule does not specify that the agreement must be made in writing, it does require some sort of documentation of the agreement, whether written or on tape, to be signed by all parties involved in the mediation. Given that there was no such signed record, the court ruled that this exception did not apply in the current case.

Willingboro’s attempt to dismiss the case based on this rule was therefore rejected.
Although the court agreed that the testimony of the mediator was a breach of confidentiality, it found that Willingboro had waited too long before objecting to the breach. The court further rejected Willingboro’s assertions that its own disclosures were permitted, but that Franklin’s disclosures consisted a breach of confidentiality.

However, in order to avoid such confusion from resulting in similar lawsuits in the future, the New Jersey Supreme Court added that, from now on “if the parties to mediation reach an agreement to resolve their dispute, the terms of that settlement must be reduced to writing and signed by the parties before the mediation comes to a close” in order to be enforced.”

Johnson & Johnson Pays to $2.2 Billion to Settle Whistle Blower/Qui Tam Fraud Lawsuit

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

Johnson & Johnson and its subsidiaries have agreed on Monday to pay over $2.2 billion to resolve criminal and civil allegations of promoting prescription drugs for uses not approved as safe and effective by the Food and Drug Administration – which was first brought to light by a Chicago-area whistle-blower.

Class Action Lawsuit Over Johns Hopkins Gynecologist Moves Forward

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

CBS News reports:

In a stunning new development, WJZ learns there may be as many as 9,000 victims of a Johns Hopkins gynecologist.

Dr. Nikita Levy killed himself after allegations surfaced that he secretly videotaped his patients during exams.

Mike Hellgren tells us what else his victims claim he did to them.

They say he performed extra exams and touched them inappropriately. Now — a class action settlement process is moving forward in the case, with the lawyers representing the victims praising Johns Hopkins.

Investigators say gynecologist Nikita Levy used a pen camera to record exams at Johns Hopkins’ East Baltimore Medical Center. The FBI is still sifting through thousands of images on Levy’s computer.

There may be 9,000 victims, and their lawyers are now working to settle the class action case through a mediator.

Class actions sometime provide an excellent device to help victims receive treatment for mass traumas such as occurred here. More often individualized injuries from mass torts can be organized into groups of cases for discovery and then bell weather cases can be tried to set a settlement value for the remaining cases. Treating this type of case as a class action is somewhat unusual.

Internet Auto-Fraud and Other Internet Fraud Scams

October 28, 2013 | Peter S. Lubin and Patrick Austermuehle

Watch the latest video at video.foxnews.com

How to avoid internet auto fraud, intimidation and extortion.

Ford Settles F Series Truck Class Action

October 27, 2013 | Peter S. Lubin and Patrick Austermuehle

As with all relationships, business partnerships can sometimes turn out to be more trouble than they are worth. Such was apparently the case in the relationship between Ford Motor Co. and Navistar. Beginning in 1994, Ford had Navistar build every Power Stroke engine used in Ford’s F-Series. However, the diesel engines produced by Navistar resulted in dozens of class action consumer lawsuits against Ford for cars it sold with allegedly defective engines.

Ford has now agreed to settle the lawsuits outside of court, which include all of the 2003-2007 Super Duty pickups and E-series vans sold by the car company. At the center of the lawsuit is the diesel 6-liter V-8 engine which allegedly had multiple problems with the fuel system, turbochargers, and other major components. The settlement covers any consumer in the United States who purchased or leased any 2003-2007 Ford vehicle which was equipped with a 6-liter Power Stroke diesel engine and had to replace, repair, or adjust the vehicle’s exhaust gas recirculation (EGR) cooler and EGR valve, oil cooler, fuel injectors, or turbocharger before the vehicle reached 135,000 miles or six years of age.

The settlement will reportedly cover half of the full value of all of the claims made by class members in addition to $150,000, which the car company will pay to the 16 named plaintiffs of the case. The total amount of the settlement will depend upon the number of potential class members who decide to file a claim. Each component of the diesel engine has a reimbursement limit. If a class member paid at least a $100 deductible multiple times for repairs under the five-year/100,000 mile engine warranty, Ford will reimburse the consumer $50 for each deductible paid, beginning with the second deductible and going through the fifth. They will pay up to $200 covering no more than four deductible payments. All told, each consumer will be able to claim between $50 and $825 in reimbursements for repairs to their engine and engine components as a result of this settlement.

Despite the long relationship between Ford and Navistar, poor engine quality, high repair costs, and lower customer satisfaction led to the demise of that relationship. Beginning in 2010, Ford replaced the Navistar diesel engine with a new 6.7 liter diesel V-8 which the company designs itself.

Some of the failures of the Navistar 6-liter diesel engines were so severe that Ford was forced to replace entire engines. Ford also had to issue recalls which resulted in the company buying back hundreds of trucks with engines that required extensive and costly repairs. Due to all of these problems, the relationship between Ford and Navistar grew to be more costly to Ford than beneficial. They dramatically increased the warranty costs on Ford vehicles and resulted in litigation with Navistar. However, Navistar was eventually removed from the class action lawsuit which Ford has recently agreed to settle. This leaves Ford with the full burden of costs of the class action lawsuit. Because consumers grouped together in a class action they were finally able to achieve some damages for their defective trucks.

Covenants Not to Compete Used to Tie College Football Coaches to a School

October 26, 2013 | Peter S. Lubin and Patrick Austermuehle

As of late, employers have been using non-compete provisions in their contracts with their employees with increasing frequency. A non-compete provision is part of a contract which prohibits a worker from going to work for a competitor of the employer after they leave the company’s employment. These provisions usually include a geographic radius and a time frame after termination of employment. Such provisions were initially used most often in tech companies, such as Apple and Google, who were afraid of employees taking trade secrets to their competitors. However, non-compete provisions have spread throughout the job market to include more and more positions in more and more companies.

Most recently, a college football coach, Bret Bielma, signed an employment contract with the University of Arkansas which included a Covenant Not to Compete. Having had a long and very successful career as the football coach at the University of Wisconsin, many people in the industry were surprised to see Bielma leave Wisconsin for Arkansas. However, college sports are becoming increasingly similar to their professional counterparts in the way that they compete for coaches and athletes. No doubt, the multi-million dollar contract that Arkansas offered Bielma played a role in his decision to change employers.

What was unusual about Bielma’s contract with the University of Arkansas was the Covenant Not to Compete which was included. It states that Bielma is not to coach another football team in the Southeastern Conference (SEC), in which Arkansas competes. The time limit on the non-compete is only as long as the coach’s contract with the University of Arkansas lasts: from December 4, 2012 to December 31, 2018. After that date, Bielma is free to coach any football team that he wants.

The contract points out that the University of Arkansas has a vested interest in Bielma’s coaching and that its legitimate business interests would be in jeopardy without this provision in Bielma’s contract. The agreement states, “The parties … agree that the competitiveness and success of the University’s football program affects the overall financial health and welfare of the Athletic Department and that the University maintains a vested interest in sustaining and protecting the well-being of its football program”. The contract further states that, “Coach understands and agrees that without such protection, the University’s interests would be irreparably harmed.”

The non-compete provision also gives Bielma relief from its restrictions in the event that his contract is prematurely terminated. According to the contract, “This covenant not to compete, however, shall not apply if the University exercises its right to terminate the Agreement for convenience or if the Coach terminates this Agreement for cause based upon the University’s material breach of this Agreement.”

The inclusion of a covenant not to compete illustrates the further broadening of non-compete contracts into a variety of industries. The University of Arkansas, like many other institutions, is trying to protect the substantial investment it has made in its football coach. This non-compete agreement provides the University of Alabama with preventive measures from Bielma abandoning them to coach a competing football team, as well as substantial leverage against any other university in the SEC that might want to lure Bielma away from Arkansas.

Virginia Federal Court Certifies Class Alleging That Energy Companies Cheated Property Owners Out of Natural Gas Royalties

October 23, 2013 | Peter S. Lubin and Patrick Austermuehle

It is an age old question. If a company finds and harvests gold on someone else’s property, to whom does the gold belong? The company that harvested it or the person who owns the property that the gold was found on? This is the question around which several class action lawsuits in Virginia revolve.

CNX Gas Co. and EQT Production Co. drilled Virginia’s coalfields for methane gas. In doing so, they mined the natural gas from property owned by many different residents of Virginia. So far, the companies have paid $30 million into an escrow fund to pay the residents for their share of the oil that was taken from their land. CONSOL Energy Inc., which owns CNX, has said in its statement that it complied with state law by placing the money into an escrow fund and insists that it supports efforts to release that money to the Virginia property owners.

The class action lawsuits, however, allege that the $30 million is not nearly enough to pay the landowners for the gas that was taken from their property. The lawsuits allege that CNX and EQT deducted post-production costs and other expenses far beyond what was reasonable. In this way, the lawsuits, allege the energy companies cheated the Virginia residents out of tens of millions of dollars.

Don Barrett, a Mississippi attorney who is representing the property owners who first sued, is not convinced that the $30 million is enough to properly compensate the landowners for the gas that was taken from their property. “We’re going to find that the money put in escrow is not nearly what should have been put in escrow,” he said. “What’s in escrow is not half of it.”

In arguing against class certification, the energy companies employed some familiar tactics used by defendants in class action lawsuits. They argued, first, that they had abided by state law and had done nothing wrong. They also argued that the individual claims of the class actions were too diverse and complicated to be handled as a class.

The federal judge disagreed with them and has recently certified the class actions against the companies and now the lawsuits can move forward. Barrett is pleased with the certification of the class actions, calling it “a body blow to the defendants” and “a wake-up call to them.”

According to the plaintiff class action attorney representing the class, Don Barrett, the next step is to make CNX and EQT reveal all of their business dealings with the Virginia landowners. “Now they have to go back and tell us what they’ve taken out of the ground, exactly every penny that was spent for expenses and so on, and why it was reasonable.”
If CNX and EQT are unable to provide the necessary documentation for the gas that they drilled, Barrett says that he can have his own people come up with an estimate of what is still owed to the Virginia residents. “Our experts” he says, “can go back and figure out what the best price for natural gas at that particular time and that’s what they owe.”

Although the exact size of the classes is not yet known, Barrett estimates that thousands of landowners could be included in the lawsuits.

Aaron’s Furniture Rental Chain Sued in Class Action For Allegedly Spying on Computer Rental Customers

October 22, 2013 | Peter S. Lubin and Patrick Austermuehle

Many people these days have come to accept as a fact of modern life that corporations have, and use, some of our personal information. Our browsing history, our shopping history, etc., all get recorded and sold by companies like Facebook and Google. However, according to a new class action lawsuit, which includes customers from all over the country, one company has crossed the line.

Aaron’s Inc., a furniture rental company, and SEI, the franchise owner of the Aaron’s store in Niagara Falls, as well as other local stores, have allegedly been spying on customers who rent computers from Aaron’s. The rented computers allegedly contain “spyware” that the companies installed in order to spy on their customers.

SEI claims that the software, known as “PC Rental Agent”, was used to give the company the ability to turn off the computers in case a customer failed to pay their bill. According to the class action lawsuit, however, the software enabled the companies to do much more than just that. Allegedly, the software also gave Aaron’s and SEI access to their customers’ personal information, even allowing them to turn on the webcams on the computers and record or take pictures of customers in their homes.

According to the class action lawsuit, the spyware on the rented computers sent more than 185,000 emails to the rental company, including customers’ social security numbers, passwords, and captured keystrokes. The webcams also allegedly took pictures of their customers, including nude children and people having sex, and sent these pictures back to the companies’ corporate computers.

Aaron’s has denied all responsibility for the invasion of privacy, saying that it did not install the spyware and that individual franchises, such as SEI, were responsible for the violations of privacy. Despite this claim, the class action lawsuit alleges that the sensitive information captured by the spyware was sent to computers at Aaron’s corporate headquarters.
The Federal Trade Commission has ordered seven different rental companies, including Aaron’s, to stop putting spyware on customers’ computers. The customers’ express consent is now required before rental companies can install spyware on their computers. Given this, and other recent violations committed by companies, as you’ll find on this blog, it might be a good idea for customers to begin taking a closer look at their Terms of Service and consumer contracts before signing anything.

Jon Leibowitz, the chairman of the Federal Trade Commission, has gone on record as saying that, “An agreement to rent a computer doesn’t give a company license to access consumers’ private emails, bank account information, and medical records, or, even worse, webcam photos of people in the privacy of their own homes.”

The law firm for the plaintiffs in the class action lawsuit, Herman, Herman, and Klatz, have warned that Aaron’s may still be spying on their customers through their rented computers. Anyone who suspects that they may have had their privacy violated by Aaron’s “or any of its franchises” should check to see if they fit the qualifications to join the class.