The California Civil Justice Blog

More than 20 years since a fire at the Dupont Plaza Hotel killed nearly 100 people in San Juan, Puerto Rico, the litigation in the case has wrapped up with the distribution of the remaining $126,977 in settlement funds.

As J. Russell Jackson wrote on his Consumer Class Actions & Mass Torts blog, the court had distributed all the settlements funds that it could, but still had unclaimed funds.

In the opinion in In re San Juan Dupont Plaza Hotel Fire Litigation, the court introduced the cy pres doctrine, which the courts created as a way to make a charitable contribution with the unclaimed funds in class action settlements.

Jackson stated: "As (federal) Judge Raymond Acosta observed, 'cy pres' actually means 'as near as possible.' So what 'as near as possible' charity did Judge Acosta pick to receive the unclaimed settlement funds from the hotel fire litigation?"

The National Fire Protection Association? The International Association of Fire Chiefs? The American Red Cross? Or a local fire service organization or disaster relief organization in Puerto Rico?

The answer, Jackson revealed was: None of the above. Instead, the nearly $127,000 went to the Animal Legal Defense Fund, based in Sonoma County, California.

Jackson concluded: "This decision is destined to be cited by some advocates as yet another instance of class action cy pres distribution gone terribly wrong."

Former Milberg Weiss plaintiffs' lawyer Bill Lerach, out of jail and now serving probation, has filed a request to take a 44-day vacation to 18 cities in Europe this summer accompanied by as many as 18 family members and friends.

Justice Department officials are fighting the request from Lerach, who pleaded guilty to one count of conspiracy for his involvement in a plaintiff kickback scheme, according to Politico.

In court papers filed in Los Angeles on Monday, prosecutors state that Lerach has made a series of public statements seeking to minimize the seriousness of his guilty plea and seems to be backing away from offers he made during the sentencing process in 2008 to perform community service by speaking to lawyers about the need to avoid the kinds of legal and ethics breaches he committed.

"It is premature for defendant to obtain the Court's approval of a lengthy European vacation starting a few months after his supervised release term begins while his fulfillment of a key component of his sentence -- performing 1000 hours of community service -- remains essentially unresolved," states the court document from the U.S. attorney's office in Los Angeles.

Josh Gerstein of Politico writes that prosecutors seem particularly galled by a recent interview Lerach gave to the California Lawyer. "I'm not ashamed of myself in any way," Lerach said in the interview. He said there was "no question this was a politically motivated prosecution," but also added, "You can be targeted and be guilty. They're not mutually inconsistent."

A founding partner of a Florida-based plaintiffs' firm was found to have breached his duty to a proposed class by orchestrating a $7 million class action settlement that benefited only seven people rather than all Miami taxpayers.

In a disciplinary case brought by the Florida Bar, Broward Circuit Judge Jack Tuter ruled that plaintiffs' lawyer Henry Adorno accepted an excessive attorney fee of $2 million for his work on the settlement, which was thrown out when its limitations were uncovered, according to an article in the Daily Business Review.

Tuter sided with Adorno on another count, ruling he could not conclude from a brief transcript that the attorney intentionally misled Miami-Dade Circuit Judge Peter Lopez into approving the settlement in a suit challenging an unconstitutional city fire fee.

But Tuter concluded, "No rational person could explain how seven individual plaintiffs ... could end up dividing $5 million in settlement proceeds and their attorneys $2 million."

Adorno was admitted to The Florida Bar in 1973 and attended the University of Florida, Fredric G. Levin College of Law.

Is the era of securities class-action lawsuits coming to an end? According to a study issued by Stanford Law School and Cornerstone Research, securities-fraud class-action suits fell 24% in 2009 as litigation related to the credit crunch began to dry up.

"That pig has moved through the python," Stanford Law School Professor Joseph Grundfest told Bloomberg. "All of the major cases that were profitable have already been filed. The pool is in effect fished out."

The number of companies sued on stock-fraud claims dropped to 169 from 223 in 2008, compared with an annual average of 197 cases over the previous decade, according to The Wall Street Journal Law Blog.

The study also found there was a longer delay from the time of the fraud, as alleged in complaints, to the filing of suits. More than 60% of claims with such a time-lag of more than six months were filed by Bill Lerach's former firm, Coughlin Stoia, according to the study.

Lerach was sentenced to a two-year term in prison in 2008 for his role in an alleged scheme to pay kickbacks to clients who agreed to take the lead in securities fraud litigation. He was released into a halfway house in Southern California a full six months before his release date.

The American Lawyer's Brian Baxter noted several other tidbits from the Stanford report: only 53 securities class action filings in 2009 involved the subprime/liquidity crisis, a sharp drop from the 100 such suits filed in 2008; the percentage of filings against foreign issuers declined for the second straight year to 12.4%, compared to a high of 16.4% in 2007; and 4.6% of companies in the S&P 500 index were sued in a securities class action last year, compared with 9.2% in 2008.

The study can be found by clicking here.

So far this year the Legislature is off to a better start, as far as civil litigation goes. On January 6, Assembly Member Marty Block pulled his bill, AB 989, before it could be heard before the Assembly Insurance Committee.

The bill would have let private lawyers become self-deputized vigilantes and go after insurance companies to get damages and -- no surprise -- attorney's fees. It would allow lawsuits against insurers by anyone alleging to be harmed -- including people who aren't even policyholders.

As CJAC President John H. Sullivan wrote in an op-ed published on Fox&Hounds Daily, this is the first proposal to crop up this legislative session that would expand plaintiffs' lawyers' ability to sue, but it isn't likely to be the last.

In previous years, plaintiffs' lawyers have worked hard to crush consumers' right to settle their disputes in arbitration, fought against any efforts to reform California's vague class action rules, and worked to preserve laws that make the state a haven for speculative lawsuits and a risky place for businesses to operate and create jobs.

Also on January 6, the Governor announced he is proposing another class action reform proposal, along with other changes to bring balance to a system now tilted against business and individual -- and at times even government -- defendants.

"Now legislators should go on the offensive and start enacting laws that improve the legal climate and produce jobs for their constituents," Sullivan wrote.

Governor Arnold Schwarzenegger on Wednesday announced a plan to curb excessive litigation and propose reforms to improve the legal climate for California businesses.

In his annual State of the State address before a joint session of the state Legislature, the Governor said his top priority is creating jobs and getting California's economy back on track. To accomplish that, and to create an environment in which businesses can thrive, he plans to propose a series of changes to regulations governing class action law suits, products liability suits, and seek to cap punitive damage awards.

According to out an outline of the proposal from his office, Schwarzenegger will propose a set of statutory changes that will set forth clear guidelines for class action lawsuits to improve California's litigation climate by allowing defendants to appeal class action certifications and by requiring the plaintiff rather than the defendant to pay for notification to other potential class members.

In addition, these reforms will provide for limitations on the scope of damages assessed against business persons for defective products and eliminate unreasonable and excessive noneconomic and punitive damages awards.

As the statement describes, "Unfair and frivolous suits impact where companies locate or expand. California's current litigation laws lead to large settlements with little value to consumers but become worth millions to lawyers at the expense of California businesses.

"Current statutes also impede growth by holding businesspersons liable for defective products -- even if the seller had no knowledge or control over the defect -- and allowing for punitive damage awards that are wildly unpredictable among similar cases."

The Civil Justice Association of California has in past legislative sessions sponsored legislation to improve the state's class action law. The most recent effort in last year's Assembly Bill 298 would have given defendants in a class action lawsuit the same right plaintiffs have, the right to appeal the class certification decision.

Other CJAC proposals in the area of class action and employment law can be found in an op-ed here.

The federal Ninth Circuit Court of Appeals has unplugged a speculative class action filed against Apple by lawyers claiming iPod music players are defective by posing an unreasonable risk of hearing loss to its users.

The court ruled that the plaintiffs -- a California man and a Louisiana man -- lacked standing to assert a claim under California's Unfair Competition Law (UCL) because they "do not claim that they suffered or imminently would suffer hearing loss from use of their iPods."

"To have standing under California's UCL, as amended by California's Proposition 64, plaintiffs must establish that they (1) suffered an injury in fact and (2) lost money or property as a result of the unfair competition," states the opinion, written by Judge David R. Thompson.

"Although the plaintiffs allege that Apple has sold more than 100 million iPods, they do not claim that they, or anyone else, have suffered or are substantially certain to suffer hearing loss from using an iPod. As discussed above, as a result of this omission, the plaintiffs fail to state an implied warranty claim, and they have no standing to assert a UCL claim," he wrote. "The plaintiffs' alleged injury in fact is premised on the loss of a 'safety' benefit that was not part of the bargain to begin with."

Read the opinion here: Birdsong v. Apple Inc.pdf

On Wednesday, the Assembly Insurance Committee will consider a scheme that would let private lawyers become self-deputized vigilantes and go after insurance companies to get damages and, of course, attorney's fees.

The attempt in Assembly Bill 989 would allow lawsuits against insurance companies by anyone alleging to be harmed -- including people who aren't even policyholders.

CJAC President John H. Sullivan pointed out in an opinion article in Capitol Weekly, a Sacramento newspaper, that this isn't the only area in which plaintiffs' lawyers are trying to expand their "private attorney general" status.

For example, they are attacking a long-respected case rule that protects government impartiality by prohibiting public prosecutors from hiring private lawyers on a contingency-fee basis.

However, as Sullivan notes, state legislators have another chance this legislative session to consider reforms that would help reverse the perception that California is a sue-happy state. Read about suggested reforms in the op-ed here.

Sullivan wrote: "Jobs and the economy suffer when a state's litigation field tilts toward plaintiffs' lawyers. State lawmakers should grab a mallet and wallop Assembly Bill 989, then focus on some affirmative ways to rein in abuses of our civil justice system."

With California mired in a financial crisis, some bloggers and opinion writers have compared California to other states, namely Texas.

And California is not coming out on top.

Trends Magazine pointed out the state was rated the worst to do business in, according to readers of Chief Executive magazine (which has rated California as the very worst state in which to do business for each of the past four years). Texas, which was listed the best place in which to place headquarters, boasts more Fortune 500 headquarters than any other state in the nation and an unemployment rate two percentage points below the national average.

And, as a piece in The Economist notes: "Texas also clearly offers a different model, based on small government. It has no state capital-gains or income tax, and a business-friendly and immigrant-tolerant attitude."

But also, Texas has focused on streamlining the regulatory and litigation burden on its residents, according to an article in NewGeography.com: "Texas has been aggressive in minimizing the enormous burden of frivolous lawsuits."

NewGeography.com writer Tory Gattis of Houston added a personal note to his post on the subject of frivolous lawsuits in California:

"I was just visiting my brother out in CA, and a friend of his with a small store was being hit with a large disability discrimination lawsuit for a minor oversight (handicapped parking was marked on the ground and had the requisite walkways and ramps, but lacked a pole sign). Evidently this has become a cottage industry in California, where lawyers guide the disabled through stores looking for very minor violations of a vague law (things like high shelves or tables), then sue (expecting a quick settlement, of course). Under CA law, discrimination guilt is assumed if there's anything in the store the disabled can't do that a normal customer can do, regardless of the availability of employees to provide assistance. His friend was clearly exasperated with the unwinnable situation. Just plain nuts."

We wrote recently on the CJAC Blog about a law passed last year aimed at increasing access while cutting down on extortionate lawsuits filed under the Americans with Disabilities Act. But Senate Bill 1608, which CJAC supported, has yet to impact the number of ADA lawsuits filed.

'Tis the season for overtime litigation, as new lawsuits pile up and two federal judges gave early holiday gifts to class action plaintiffs, the National Law Journal's Tresa Baldas reported.

Those gifts include one from a federal judge in Minnesota who last week denied a request by Qwest Communications International Inc. to decertify a class of more than 1,500 call center employees who allege that they have not been paid for time spent booting up and shutting down their computers.

The day before, a federal judge in Arkansas granted class certification to a group of former Butterball employees who allege that the poultry company didn't pay them for time spent donning and doffing protective equipment and clothing.

Also last week, security guards at Madison Square Garden filed a proposed class action in New York federal court, claiming that they have routinely and deliberately been shorted on overtime payments.

Read the full story here.