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In class actions, the plaintiffs have long had the power to determine whether the case gets tried in state or federal court and they have most often chose to keep the cases in state courts. In 2005, Congress adopted the Class Action Fairness Act (CAFA) in order to limit the plaintiff’s power in that decision. CAFA imposed restrictions on the kinds of cases which the plaintiff would be able to prevent from getting moved to the federal courts. Among those restrictions are if the proposed class consists of at least 100 members, minimal diversities exist between the parties, and the aggregate amount involved in the dispute is at least $5 million.
In Standard Fire Insurance Co. v. Knowles, the lead plaintiff promised not to ask for more than $5 million in damages on behalf of the absent class in order to prevent the case being moved to federal court. The issue reached the U.S. Supreme Court, which then rendered its first decision on CAFA.

In the case of Standard Fire Insurance Co. v. Knowles, it is universally acknowledged that the claims of the putative class add up to more than $5 million. However, the lead plaintiff promised that the class will not ask for more than $5 million, in order to get around CAFA’s restrictions.

Although CAFA does not specifically prohibit artificially lowering the damages sought by a class action lawsuit in order to keep the case in the state courts, the Supreme Court still sided with the defendants. In its unanimous opinion, the Supreme Court reasons that, because the class had not yet been certified, the lead plaintiff was unable to make any promises regarding the value of the claims of the entire class. Until the class attains certification, the lead plaintiff can only make promises regarding the level of claims he, as an individual, seeks.
The Supreme Court pointed out that CAFA specifies that “to determine whether the matter in controversy exceeds the sum or value of $5,000,000,” the “claims of the individual class members shall be aggregated.”

The Supreme Court made sure to point out that it believed that this decision was in line with CAFA’s primary objective of ensuring “Federal court consideration of interstate cases of national importance.”

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Two shareholders and former officers of a closely-held New Jersey company, DAG Entertainment, Inc., sued two fellow shareholders, the company, and a new company formed by the defendant shareholders in U.S. District Court. The suit, Egersheim, et al v. Gaud, et al, alleged eighteen causes of action related to alleged usurpation of corporate opportunities. The defendants moved for summary judgment as to fifteen of the eighteen causes of action, and the district court ruled that those causes of action amounted to a single cause of action under the Corporate Opportunity Doctrine. The court granted summary judgment on the fifteen causes of action, allowing three causes to proceed.

Plaintiff Kathleen Egersheim owned a three percent shareholder interest in DAG and was its former Vice President and Assistant Secretary. Plaintiff Christopher Woods owned 22.5% interest and was the former Creative Director. Defendants Luis Anthonio Gaud and Philip DiBartolo owned or controlled most of the remaining stock of the company. According to the plaintiffs, DAG began exploring an opportunity to partner with the media conglomerate Comcast in 2001. The plaintiffs claim they developed characters and show ideas for children’s television programming through 2004.

In 2005, the defendant shareholders allegedly began excluding the plaintiffs from meetings and decisions regarding DAG’s activities, and also allegedly created a new business entity called Remix, LLC without plaintiffs’ knowledge. Remix entered into a formal joint venture with Comcast. The defendants proposed ceasing DAG’s major business operations, according to the plaintiffs, and the defendants voted them out of their officer positions when they objected to this plan in September 2007. DAG essentially stopped operating at that point.

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This blog has recently discussed the matter of Johnson & Johnson’s faulty hip implants. The Articular Surface Replacement (ASR) was released in the United States in 2005 and recalled in 2010. It is now the subject of more than 10,000 lawsuits filed against Johnson & Johnson. The first of these to go to trial was in Los Angeles, California and the jury recently decided in favor of the plaintiff.

Loren Kransky, a retired prison guard, was not supposed to be the first of the 10,000 cases to go to trial. He was diagnosed with terminal cancer though, and his case was moved up. The jury deliberated for five days before finding the device faulty and awarding Mr. Kransky $338,000 for his medical bills and $8 million for his pain and emotional suffering. They decided against issuing punitive damages because they did not believe that DePuy acted with fraud or malice.
Johnson & Johnson says it will appeal the ruling and it disputed the decision that the device had a flawed design.

The all-metal device’s design caused the cup and ball to strike against each other as the patient moved, shedding metallic debris into the body as it did so. The debris inflamed and damaged the surrounding tissue and bone, causing pain and, in some cases, permanent injuries.
All-metal implants have become mostly obsolete because most of them suffered from similar flaws. However, data suggests that the ASR was much worse than competing products. An internal Johnson & Johnson document for example, showed that close to 40% of patients who received the ASR would need to undergo a second operation within five years to have the device removed or replaced.

Traditional artificial hips on the other hand, made of metal and plastic, are expected to last at least 15 years before needing replacement. The normal replacement rate for early unexpected failures after five years is about 5%.

Experts have speculated that Johnson & Johnson will spend billions to resolve all of these lawsuits. If juries continue to award damages in amounts similar to the one they gave Mr. Kransky, the speculations will no doubt prove accurate enough. Thousands of the individual cases have been consolidated into one large proceeding in a Federal District Court in Ohio. That should simplify matters somewhat and speed up the process. A resolution of that action could also provide a framework for settling the bulk of the cases and determining awards to patients.

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The age of emails has made it more difficult to get away with certain things. One might find it more difficult for example, to insist on one belief or attitude if he has been found to have said the opposite in an email. Such is the case for Ron Johnson, the former head of retail at Apple and now the chief executive of J.C. Penney. He has said that, because he believes in “perfect integrity” he would never ask a person to breach a contract.

However, he engaged in discussion with Martha Stewart to sell some of her items in J.C. Penny stores, despite Ms. Stewart having an exclusive contract with Macy’s. Mr. Johnson has reportedly tried to get around the contract by claiming that there would be independent Martha Stewart stores within J.C. Penney stores.

While independent stores are allowed under the Macy’s contract, J.C. Penney has not moved to lease space to Martha Stewart Living Omnimedia (MSLO). Instead, Mr. Johnson testified in court that J.C. Penney, and not MSLO, would set prices for the merchandise, decide when it would be promoted, employ the people who sold the goods, own the goods, source the goods, book the sales, bear the risk and own the shop, J.C. Penney nonetheless insists that any space displaying the Martha Stewart mark and containing Martha Stewart merchandise qualifies as an MSLO store.

Despite his insistence that he is not inducing Ms. Stewart to breach her contract with Macy’s, Mr. Johnson admitted in an email to Ms. Stewart that her contract with Macy’s was “a major impediment” to their deal to sell her goods in J.C. Penney stores. In another email, he said, in reference to Ms. Stewart, “the ball is in her court now to talk to Macy’s about a break in a tight, exclusive agreement they have with her.” He also reportedly said that the “Macy’s deal is key. We need to find a way to break the renewal right in spring 2013.”

One person was apparently key to bringing about the J.C. Penny deal. That person was William Ackman, the activist investor whose hedge fund is J.C. Penney’s largest shareholder. After the deal was announced, Mr. Johnson wrote to Mr. Ackman, “We put Terry in a corner. Normally when that happens and you get someone on the defensive, they make bad decisions. This is good.”

The emails emerged in a New York courtroom where Macy’s has accused J.C. Penney of inducing Martha Stewart to breach her contract with Macy’s. Macy’s is also attempting to block its competitor from opening Martha Stewart stores in J.C. Penney locations.
Legal experts have been surprised that this case has made it to trial at all, since the contract itself seems fairly straightforward. Martha Stewart herself told the judge, Justice Jeffrey K. Oing of New York State Supreme Court, “I keep looking at this entire episode of this lawsuit wondering why it isn’t – it’s a contract dispute. an understanding of what is written on the page, and it just boggles my mind that we’re sitting in front of you.”

The judge agreed and ordered the parties to pursue mediation to resolve the matter.
Macy’s continues to promote Martha Stewart products with the tag line “Only at Macy’s.”

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It is widely accepted that the Internet is not a safe place for private or confidential information. Yet, when sensitive information gets leaked, people look for someone to blame. In some instances, they are correct and can bring a privacy claim especially when they can show direct injury due to the privacy breach. In other instances where they suffer no injury they have no claim.

In June of 2012, LinkedIn experienced a security breach and the passwords of 6.5 million users were posted online. A few days later, two premium LinkedIn users, Katie Szpyrka and Khalilah Wright, filed a class-action lawsuit against LinkedIn on behalf of all users.

The lawsuit alleged that LinkedIn had failed to store passwords in salted SHA1 hashed format. According to the lawsuit, this is basic industry standard security practice and, by failing to adhere to them, LinkedIn had failed to abide by its Privacy Policy.

What the Privacy Policy actually states is:
“In order to help secure your personal information, access to your data on LinkedIn is password-protected, and sensitive data (such as credit card information) is protected by SSL encryption when it is exchanged between your web browser and the LinkedIn website. To protect any data you store on our servers, LinkedIn also regularly audits its system for possible vulnerabilities and attacks, and we use a tierone secured-access data center.

“However, since the internet is not a 100% secure environment, we cannot ensure or warrant the security of any information you transmit to LinkedIn. There is no guarantee that information may not be accessed, disclosed, altered, or destroyed by breach of any of our physical, technical, or managerial safeguards.

“It is your responsibility to protect the security of your login information. Please note that emails, instant messaging, and similar means of communication with other Users of LinkedIn are not encrypted, and we strongly advise you not to communicate any confidential information through these means.”

LinkedIn’s Privacy Policy does not promise industry standard security practices and, in fact, warns the user that, despite their efforts, breaches can occur. In court, the plaintiffs admitted that they had not even read the Privacy Policy, which no doubt weakened their argument.
The lawsuit also filed for damages based on the allegation that the premium users had paid LinkedIn in order to access the premium membership status of the social networking site. The plaintiffs expected this to include enhanced security measures but the premium membership offers no such thing. Rather, it merely offered more advanced tools and usage of LinkedIn’s services. Heightened security measures were never offered as part of the premium membership and, as such, the plaintiffs could not prove that they received any financial harm or injury.
The plaintiffs also failed to prove that the injuries they suffered as a result of the breach were “concrete and particularized” or “actual and imminent”. No one stole their identities or got into their accounts and, on these grounds, the judge dismissed the lawsuit.

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Facebook has long been an issue in the domain of free speech. People post whatever they want in view of the whole world. This time, an attorney was ordered by a judge to stop posting information about a case on his Facebook page even though he was addressing important public concerns regarding what he perceived to be an unfair class action settlement. This type of issue of public concern should receive the highest First Amendment Protection. Judges like any other public official should not be free to squelch criticism just because they don’t like it and believe it is inaccurate. Vigorous debate on issues of public concern in a community should be encouraged.

The case involves two McDonald’s locations in Detroit which serve McChicken sandwiches and Chicken McNuggets which are advertised as being halal. Halal is a form of preparing food in order to meet Islamic requirements. It includes invoking God’s name before slaughtering an animal which is to provide meat for consumption.

Two McDonald’s locations (13158 Ford Road and 14860 Michigan Ave.) are believed to be the only two McDonald’s locations to serve halal chicken. According to the suit, McDonald’s served non-halal chicken when it ran out of halal and failed to tell this to their customers. The class-action lawsuit, filed by Ahmed Ahmed of Dearborn Heights, includes anyone who ate non-halal chicken at one of the two McDonald’s locations since September 2005. The defendants are McDonald’s and franchise owner Finley’s Management Co.

On January 18, Wayne County Circuit Court Judge Kathleen Macdonald approved a settlement where McDonald’s and Finley must pay $700,000 to settle the suit. Ahmed was to receive about $20,000; the Health Unit on Davison Ave. in Detroit, also known as HUDA, was to get around $274,000; the Arab National Museum in Dearborn was to get about $150,000; and the attorneys were to get around $230,000.

Majed Moughni, an attorney who was not involved in the case before the settlement, posted on the Dearborn Area Community members Facebook page, which he runs, that he believed it was unfair that most of the money would go to those who ate the non-halal chicken. He asked for page members who had eaten the haram (or forbidden) chicken to leave contact information for themselves as well as for others who had eaten the meat
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Kassem Dakhlallah, Ahmed’s lead attorney, filed a motion for injunctive relief against Moughni. Judge Macdonald ruled in Dakhlallah’s favor and order Moughni to remove information about the case from the Facebook page and to put her original class settlement and order against him on the page, which he did. She also forbade him to discuss the case with class members or the media without written permission from her and Jaafar & Mahdi Law Group, the firm representing Ahmed.

Moughni filed a motion to overturn the judge’s ruling against him, which she dismissed.
Paul Alan Levy of the Public Citizen’s Litigation Group of Washington D.C. filed a motion on behalf of Moughni to lift the order against him. They claimed that he was not acting as an attorney, but merely soliciting feedback and that his First Amendment rights had been violated.
Although the allegation that Moughni was soliciting clients through his Facebook page was never an issue when initially seeking the injunction, McDonald’s used it as a reason for the injunction to remain, as well as allegations that the comments about the case which he posted on the Facebook page were misleading.

Levy argued that Moughni was not soliciting clients, but merely speaking as a concerned member of the community. He pointed out that there was no evidence that Moughni looked to be paid for gathering the feedback, but was merely rallying the community against what he perceived to be an injustice.

Judge Macdonald said that Moughni can’t separate the fact that he’s an attorney but she did agree to dissolve the injunction and extend the settlement period. She said that Moughni can continue to identify himself as a class member, but not an attorney in the case.
While McDonald’s agreed to the removal of the injunction (having been satisfied that Moughni was not, in fact, soliciting new clients) they claimed that his misleading statements about the settlement were cause for reopening negotiations.

Levy is concerned however, that the fight may not yet be over. McDonald’s has been complaining about the added cost of reopening the settlement period. They estimate that around $30,000 will be lost from the Arab National Museum’s portion of the settlement, money which could finance ten scholarships through the charity. Levy worries that McDonald’s may be leveraging to sue Moughni for damages after the current case has settled.
This may not be the smartest move for McDonald’s, though. While Moughni’s comments might have gone largely unnoticed if left alone, McDonald’s has given the issue light by filing for the injunction. In the end, the company’s image may be damaged by flaunting their dirty laundry and airing the fact that they are trying to preclude a member of the community from someone speaking out against a settlement that gives money to charity but not to the damaged class members. Judges should not be shutting down valuable speech rights. There has been a long tradition in this country that the First Amendment precludes public officials including judges from silencing criticism they don’t like. It is particularly troublesome that the Court attempted to shut off criticism on a matter of public interest. Moughni should have been permitted to freely voice his criticism of the settlement. That could never have interfered with the Court rendering a fair decision to approve or disapprove the settlement. Having already preliminarily approved the settlement, the Court appears to have had an interest in having its ruling upheld and let that concern over ride the public’s right to vigorously debate the settlement and even make material errors in that debate. The remedy to cure any false or erroneous statements in the debate is more rather than less speech.

The settlement period has been extended for another 28 days, which all sides agree with.

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After the seller of a business sued the buyer to enforce a promissory note, signed as part of the sale, the buyer asserted a defense of fraudulent inducement in Bu v. Sunset Deli Park of NY Corp, et al. The buyer alleged that the seller misrepresented the weekly income of the business prior to the sale. The New York Supreme Court in Brooklyn denied the plaintiff’s motion for summary judgment, finding that the defendants had raised sufficient issues of fact as to their fraud defense.

The plaintiff, Su Nam Bu, sold her deli business to defendant In Suk Cho for $220,000 in September 2010. The stock purchase agreement executed by the parties stated that Cho would pay Bu $1,000 upon signing the agreement, and $49,000 at closing. Cho signed a promissory note on September 27, 2010 for the remaining $170,000, in which she would pay thirty-six monthly installments beginning in March 2011, plus a lump sum payment of $50,000 by September 15, 2012. A security agreement, or “chattel mortgage,” signed by the parties pledged the deli’s property, inventory, accounts receivable, equipment, and fixtures as collateral for the promissory note.

Cho made six payments on the note, but the seventh and eighth payments allegdly bounced. Bu filed suit to enforce the note. Cho answered with a fraudulent inducement defense, claiming that Bu represented the deli’s weekly income as $15,000 to $17,000 prior to the sale, but Cho found it to be an average of $11,000 to $12,000 upon taking over its operations.

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Chrysler’s Dodge Division has suffered a number of class action lawsuits recently regarding the brakes in its vehicles. In December of 2012, one such case was dismissed. Most recently, a class action lawsuit in California against the major car company survived a motion to dismiss, but the judge said the plaintiffs have to amend their complaint if the case is to continue.
U.S. District Judge James V. Selna gave the plaintiffs 30 days to re-plead their claims that Chrysler violated California’s Consumer Legal Remedies Act as well as its Unfair Competition Law and breach of express warranty.

The plaintiffs, Ronald Coleman and Giuliano Belle, sued Chrysler Group LLC for allegedly concealing a manufacturing or design error in their Dodge Journeys, which caused their brake pads or rotors to prematurely wear, requiring frequent and costly repairs. For obvious reasons, brake defects pose the greatest safety hazard in vehicles and the plaintiffs say they would never have bought the cars, had they known about the defects.

According to the lawsuit, Chrysler allegedly knew about the defects and, not only failed to disclose the information, but even went so far as to actively conceal it from consumers. Chrysler would have had this knowledge of the brake defect allegedly through pre-release testing data, consumer complaints, and data from authorized dealers and replacement part sales.
While Judge Selna determined that the plaintiffs adequately pled their cases that they suffered economic losses under the CLRA and UCL, he says that Coleman cannot bring his claims under those statutes because he bought his car in Texas. Belles express warranty claim, on the other hand, was denied because Belle did not allege that the brake repair he received under warranty was defective.

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