Recently in Settlements Category

A prominent construction-defect law firm that boasts on its Website that it has recovered in excess of $500 million for its clients and maintains a "commitment to...high professional standards" has been sued by eight former clients in Sacramento for fraud, deceit, malpractice, and breach of fiduciary duty.

The complaint against Santa Monica-based Milstein, Adelman & Kreger alleges that the firm obtained blank signature pages that were subsequently attached to a settlement accepted by the Milstein firm without the clients' knowledge and not reported to them for more than eight months after settlement was reached.

In their June 18 filing, the homeowners state that the settlement with US Home totaled only about 10 percent of what Milstein's own expert estimated the damages to be worth - about $150,000 per home - and never told its clients of the expert's estimate.

They also allege that one client who initially withheld returning the blank signature page was threatened by the firm with dismissal of the client's case.

The former Milstein clients are seeking punitive damages for intentionally deceiving them, in addition to $1.5 million in damages.

You can read the complaint on the California Building Industry Association Website. (Full disclosure: We worked for CBIA for almost a decade and the Association is a member of CJAC.)

The small town of Colfax, about an hour northeast of Sacramento, was sued by Lawyers for Clean Water, a San Francisco "public interest" firm, over Clean Water Act violations stemming from the city's aging sewer system. In April, a federal judge deferred setting attorney's fees until the evidentiary hearing process was completed.

But now, the firm is asking for its money before the process is complete. City Manager Bruce Kranz wrote a scathing op-ed in the Colfax Record about the law firm's latest action to collect its money up-front and to triple the fees to be paid, despite the city's precarious financial position. An excerpt:

In the midst of this mess and fiscal nightmare, Lawyers for Clean Water have flown into town, allegedly to assist damaged neighbors suing the city. In fact, San Francisco-based lawyers paid $550 an hour, eating a celebratory $125 lunch at (a Sacramento restaurant) and giving 40 percent tips are acting like vultures feasting upon Colfax like it was roadkill.

One of the plaintiffs' lawyers put the matter bluntly to the local CBS TV station:

"We were concerned that they might go bankrupt and hose us out of our money," said Daniel Cooper of Lawyers for Clean Water. "So we asked the court to give us interim fees - and that figure was around $186,000."

You can read Kranz's op-ed here and the TV report here.

A few weeks ago, we reported on a proposed class action lawsuit settlement against Volkswagen of America over leaky sunroofs. Some car owners would get reimbursed for repair work already done, and VW would inspect and repair some other cars for free. The amount of repair work and reimbursements was capped at $8 million.

But most car owners would only get a piece of paper to insert into their owners manuals to remind them to clean out the sunroof drains every 40,000 miles. Because the trial lawyers "valued the total monetary and non-monetary benefits to the class in the amount of at least $125 million" - the lawyers originally asked for almost $32 million in fees and expenses.

Perhaps due to widespread criticism of the deal, the lawyers have already reduced their request to "just" $22 million. And today, the Washington, DC-based Center for Class Action Fairness filed an objection on behalf of four class members, including one who will receive nothing despite water leakage into the passenger compartment of his car which required over $1,000 in repairs. There's a link to the Center's filing on that page. It's very informative.

The fairness hearing is July 26; we'll keep you posted.

One of our CJAC staff members recently received an e-mail reminding her that she is a member of a class action suit against Expedia.com, the online site for booking airfares, hotel rooms, and other travel needs at a discount. Expedia was charged with violating Washington State consumer protection laws.

As is often the case, Expedia agreed to settle because it was cheaper to do so than keep the legal meter running, and the company agreed to pay up to $123 million in cash payments and settlement credits. That's the amount that could be paid out if every member of the class took the cash, but since the amounts of the disputed "tax recovery charges" and "service fees" were small, many people, like our staffer, decided not to fill out the paperwork.

After all, as the settlement points out, "It is certain, however, that your available Expedia Settlement Credit will be 2.17 times higher than your available cash payment." Such a deal, right?

Our staffer's credit? A whopping $4.17, which has to be used by the end of July 2011 and the trip taken by January 31, 2012. She hasn't decided if she should go to Maui or Europe.

The lawyers? They got $10 million. Which is just over half of what Expedia actually expects to pay out in the settlement.

A number of objections to the settlement were filed last year, but the court overruled them. The court documents can be accessed here.

We should also point out that the other day, our friends at "Protect Consumer Justice.org" - a wholly owned subsidiary of the trial lawyers' lobbying unit - issued a detailed critique of a recent CJAC blog posting that documented how the "victims" in a class action lawsuit against Classmates.com would only get a $2 coupon while the lawyers would receive $1.3 million in fees, plus expenses.

Perhaps they were a bit defensive since one of the lucky law firms in that case includes a name partner who is in line to become their lobbying group's president in a couple of years.

Since none of their officers is involved in this latest example of how such suits usually benefit the lawyers far more than the "victims," we suspect their response will be more muted this time.

The other day, we reported that pressure was continuing to build on New York trial lawyers to reduce the huge amount of money they wanted as their cut for representing 9/11 rescue and response workers who became ill after heroic work saving lives at Ground Zero. You can read the original post here.

Thursday, it was reported that the lawyers have done so, although perhaps by a smaller amount than the New York Daily News would have liked. Under the new agreement, the plaintiffs' lawyers have grudgingly agreed to reduce their fees to a maximum of 25 percent of the settlement amount, down from the 33.33 percent initially called for. As a result, the actual victims will get to keep an additional $50 million.

You can read more on The Wall Street Journal law blog and the Daily News article.

"So I get a piece of paper telling me something I already knew, and the attorneys who claim to represent my interests expect nearly $32 million? WTF? Please, your honor, don't approve this settlement."

That's what Alabama VW owner Ted Major wrote on his blog (hat tip to Overlawyered) about a tentative settlement of the claim that the cars' sunroofs leak if their drains aren't kept clean.

Major explained that under the proposed settlement, Volkswagen of America will send owners of affected cars a page to add to their owner's manuals that advises them to check their sunroof drains every 40,000 miles.

"That's it, no reimbursement, no inspection, no free drain cleaning, nothing," he complains.

He continues:

Other class members will be eligible to be reimbursed for repairs, but the total amount of the repair fund is $8 million. The plaintiff's attorneys have, however, valued the "total monetary and non-monetary benefit" to class members at $125 million (the collective value of a reminder to check your sunroof drains is $117 million?) and are asking for a fee of $30 million plus $1.5 million in expenses.

You can read the blog entry here, and review the settlement terms here (PDF).

The Toyota lawsuit circus could break new ground in illustrating how class action lawyers get the money and their clients get...well, here's how the Wall Street Journal sized it up today:

People suing Toyota Motor Corp. over reports that some of its vehicles suddenly accelerate hope they will be compensated for the loss in resale value of their Camry, Corolla or other model. But plaintiffs in similar product-liability cases have been disappointed.

Sometimes the awards went only to charity. In other cases, owners of the affected products were issued coupons of limited value that carry restrictions.

Legal experts say that product-liability suits often result in outcomes that favor the attorneys rather than the consumers involved. For instance, a 2008 settlement of a class action against Ford Motor Co., involving incidents in which Firestone tires exploded on Ford Explorers, offered certain Explorer owners coupons worth $500 toward the purchase of a new Explorer and $300 toward the purchase of any other Ford vehicle.

As of March, only 148 people had redeemed a coupon out of 1,647 people eligible. The plaintiffs' attorneys who led that litigation collected about $19 million in fees.

"It was rather absurd," said Julie Hamilton Webber of Glendale, Calif., a class member who has a 1993 Ford Explorer. "The net result was the attorneys were enriched and did nothing for the class."

You can read the entire article here. (Subscription required) And other recent examples are here, here, and here.

The Center for Class Action Fairness this week filed a brief with the Ninth Circuit to void yet another class action lawsuit settlement in which the supposed victims get zilch and the lawyers get rich.

In this case, trial lawyers filed 26 class action suits against the makers of wireless "Bluetooth" headphones, arguing that the companies failed to disclose the risk of hearing loss from extended use of the products at a high volume. It was similar to another class action against Apple over use of its popular iPod, which was dismissed since the plaintiffs couldn't demonstrate they had suffered any loss.

But in this case, the manufacturers thought it cheaper to settle. The class received nothing, the representative plaintiffs got up to $12,000, four favored non-profits that had nothing to do with the case received a total of $100,000, and the companies agreed to add even more lawyered language in their product guides about how you shouldn't listen to sounds with the volume cranked up for an extended period.

The lawyers? They got $800,000, plus $50,000 in costs.

Dozens of class members objected, but the federal district court approved the settlement anyway.

As CCAF stated in its brief, "The putative class attorneys have brought either (1) a meritorious case that is being settled for an infinitesimal fraction of the case's real value in a 'sellout' of the attorneys' and class representatives' fiduciary duties to the class, or (2) a meritless lawsuit where the 'class device had been used to obtain leverage for one person's benefit.'...the court should reverse and remand, with instructions to reject the settlement and provide a clear command to district courts to provide searching scrutiny of class action settlements to fulfill their fiduciary duty to absent class members."

We were flipping through the pages of Newsweek a few days ago when we ran across one of those class action lawsuit settlement ads. This one's a classic.

It seems the folks at Dannon Yogurt were alleged to have engaged in some misleading advertising over their Activa and DanActive products, the ones actress Jamie Lee Curtis has been promoting for the company.

As part of the record-setting $35 million settlement - the largest-ever for a suit alleging false advertising of a food product - Dannon, without admitting guilt, has agreed to slightly modify its advertising. For example, it will replace the words "clinically proven" and/or "scientifically proven" with phrases such as "clinical studies show." They also will list the genus, species, and strain designation for the bacterium it has trademarked as Bifidus Regularis.

Well, we're all for truth in advertising, and had we been a biology major perhaps we'd understand the importance of specifying that the bug in question is Bifidobacterium lactis DN 073-010.

But what about the alleged victims?

Under terms of the settlement, every American who has seen one of these slightly annoying commercials is entitled to $15 cash money, no questions asked. All you have to do is fill out a form, conveniently included in the ad.

If you were a moderate user of Activa or DanActive yogurt, and are willing to sign on the dotted line that you really did eat that much of the stuff, you can get up to $30. And if you were a really hard-core user, you can get up to $100. Of course, for anything over $30 you had to have kept your grocery receipts - doesn't everybody? - and also have to sign a statement that you're submitting the claim under penalty of perjury.

But what about the lawyers? Surely they need to be compensated for achieving this monumental victory?

Don't worry. Coughlin Stoia Rudman & Robbins - the San Diego-based class action firm that formerly employed disgraced superlawyer Bill Lerach - will do just fine. The firm will get up to $10 million in fees, plus expenses.

And according to the Web site consumeraffairs.com, the firm isn't done yet protecting Americans from a problem they probably weren't aware existed. Coughlin Stoia is also suing General Mills' Yoplait Yo-Plus yogurt on similar grounds.

We will sleep better tonight, knowing that the trial lawyers are working so diligently and selflessly on our behalf.

Here's another article you won't see the trial lawyers talking much about, courtesy of today's National Law Journal.

A federal judge in Riverside has balked at a proposed class action settlement with American Honda Motor Co. over ads for the company's Civic Hybrid after objectors, including the attorneys general of 25 states, questioned whether the plaintiffs or their attorneys would benefit most. Our own AG, Jerry Brown, was one of those questioning the settlement.

And rightly so:

• The alleged victims of Honda's allegedly misleading advertising - 158,000 Civic Hybrid owners - would have received a DVD on how to maximize fuel efficiency and rebates on future purchases of Honda vehicles ranging from $500 to $1,000. If an owner had made a documented complaint, he or she would get $100 cash.

• The plaintiffs' attorneys would have collected nearly $3 million in fees.

The usually loquacious lead attorneys on the case were unavailable for comment.

You can read the full article here.

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."

It's a scheme that sounds more fit for a legal thriller than real life: A group of top plaintiffs' lawyers and doctors conspiring to recruit accident victims and persuade them to undergo serious -- sometimes needless -- surgeries, to inflate the size of personal-injury claims.

The result, as Fortune magazine reported, was multimillion-dollar insurance settlements, even for dubious cases, and lucrative fees for the doctors, the lawyers, and one man whom prosecutors allege was at the center of the fraud: Howard Awand, who called himself a "medical consultant."

According to Fortune:

The alleged scheme began in 1999 and lasted for at least six years, prosecutors charge. Business and court records and local press reports suggest that the group -- which numbered about 30 -- colluded in hundreds of suits that yielded hundreds of millions in settlements. According to government evidence, the group coordinated their testimony as expert witnesses, lied under oath, protected one another from malpractice lawsuits -- even after the surgeries left a few patients paralyzed -- and ate away at the plaintiffs' settlement money with kickbacks disguised as contingency fees.

In May 2007, federal prosecutors unveiled indictments against Awand and plaintiffs' lawyer Noel Gage that charged them with conspiracy, fraud, and (in Awand's case) witness tampering. But so far, Awand and his associates have thwarted medical prosecutors. A judge dismissed indictments against Awand and one plaintiffs' lawyer because a key witness wouldn't testify.

Awand moved to Indiana in 2007, but now faces a second case: He and his wife were charged with four counts of misdemeanor tax evasion. They have pleaded not guilty and the trial is scheduled for September.

The tippy Explorer case against Ford Motor Company is getting a lot of ink because of the settlement: The lawyers got millions and the class members got coupons worth nothing to most. But what's so unusual about that?

The real story here is that this lawsuit did not involve vehicles that rolled over, were damaged, or hurt anyone. If you had a car that did, you couldn't get in this case if you tried!

No, this one was filed on behalf of people whom the lawyers claimed "suffered" a loss in Explorer resale value due to news of rollover problems.

Plaintiffs' lawyers justified the coupon deal as the best they could do for their "clients." It's hard to believe these lawyers launched a suit like this really believing they would achieve anything net positive for the class members. In fact, it would be entirely logical (and appropriate?) for a follow-up class action against the plaintiffs' lawyers in this case, alleging that their lawsuit and its publicity caused a further reduction in the resale value of Explorers.

We await these lawyers' next foray into "value diminution" litigation. The opportunities are endless. Say I bought a 2005 Snorecedes and a subsequent Consumer Reports says the 2006 model makes mine loud and polluting in comparison. Kicks my trade-in value in the teeth. Class action! Other examples come to mind. But why give the lawyers more ideas?

Is this starting to sound familiar? In a settlement agreement of a class action lawsuit against Wal-Mart Stores Inc., plaintiffs' lawyers will get $10.5 million.

The class members will receive between $50 and $950, depending on how long they worked for Wal-Mart and how much detail they can provide about the violations they suffered, according to an Associated Press story. The company has agreed to pay up to $35 million to settle the suit over meal and rest breaks brought on behalf of 88,000 workers at Washington state stores. The three plaintiffs who brought the suit will each receive $10,000.

Wal-Mart announced in December it would pay as much as $640 million to settle 63 lawsuits across the country over wage and hour violations. Only cases in California and Pennsylvania went to trial, and those verdicts are on appeal, said a Seattle lawyer for the Washington plaintiffs.

Plaintiffs' lawyers from 13 firms have received more than $25 million in attorney's fees and expenses in a class action lawsuit against Ford Motor Company.

But fewer than 100 people out of a million covered in the class action lawsuit in four states (including 414,000 in California) have redeemed their settlement award -- a coupon worth between $300 and $500 toward the purchase of a new vehicle.

Under terms of the settlement, anyone in California, Texas, Illinois, and Connecticut who owned an Explorer between roughly 1991 and 2000 was eligible to receive a voucher, The Sacramento Bee reported.

So far, the dollar value remitted to plaintiffs in the class-action lawsuit has added up to about $37,500.

The discrepancy between the lawyers' fees and the plaintiffs' award has more than a few critics -- some unexpected and noteworthy. John C. Sims, who worked 11 years for Ralph Nader's Public Citizen Litigation Group, said the plaintiffs' attorneys "hijacked" the case and made it more about themselves than consumers.

"It's an outrage to have anything labeled as a consumer class action if the lawyers get $25 million and the class members effectively get nothing," said Sims, now a McGeorge School of Law professor.

In a June 29 filing in Sacramento Superior Court, attorneys for the plaintiffs reported that as of last month, a total of 2,267 people had filed claims for the coupons. Some 620 claims had been rejected by Ford, leaving 1,647 vouchers approved and issued.

Of that total, only 75 had been redeemed, the plaintiffs said.

During the last legislative session, the Civil Justice Association of California sponsored a bill that would have brought more fairness to class action lawsuits. Senate Bill 1202, authored by Senator Tom Harman, would have helped ensure that class action settlement money is distributed to the class members by allowing judges, at their discretion, to withhold part of the plaintiff's attorney's fees until the class members have been contacted and received their share of the funds.

A federal judge approved a settlement involving Motorola's Bluetooth headsets but raised questions about a request for $800,000 in attorney's fees -- even though the plaintiffs will receive no economic recoveries.

The preliminary settlement approved by U.S. District Judge Dale S. Fischer requires Motorola Inc., Plantronics Inc., and GN Netcom Inc. to pay $100,000 to four institutions related to hearing loss (this is called a cy pres award -- a charitable contribution that comes from unclaimed funds in class action settlements). An additional $12,000 would go to the representative plaintiffs.

Ted Frank, a resident fellow specializing in liability reform at the American Enterprise Institute's Legal Center for the Public Interest, filed court documents objecting to the settlement on behalf of seven potential class members.

"Cy pres is one way that bad settlements are negotiated through courts," Frank said, according to the National Law Journal. "Where parties used to use coupons to exaggerate the value of the settlement, now they're using charitable donations."

Frank said that if the attorney's fees are reduced, so that they aren't receiving the majority of the recovery, "it's a completely different settlement than when the attorney fees are getting eight times the cy pres and the class is getting zero."

According to court documents, the plaintiffs' attorneys are seeking $800,000 in fees plus $50,000 in reimbursed litigation expenses.

Given the chronic underfunding of California's courts, our judges can certainly be excused for their vigorous attempts to get parties to settle prior to trial. A recent Court of Appeal case, however, explains the limits to such persuasion.

The setting: A Los Angeles County courtroom where two occupants of a vehicle that was struck from behind claimed injuries and medical expenses, including a medical exam of the pregnant passenger. The defendant driver of the second vehicle argued that the plaintiff's vehicle had stopped so suddenly that it was impossible to keep her from striking the car they occupied. Through her attorney, the defendant driver argued that the accident was so minor that it could not have caused any injury.

At a mandatory settlement conference attended by attorneys and a representative of the defendant's insurance company, the two plaintiffs demanded $15,000 each. The defendant offered $1,000 -- prompting a stern rebuke from a frustrated judge: "Counsel and the adjuster came to court today unprepared to discuss damages, unprepared to discuss costs of defense, unprepared to have an intelligent conversation about how they derive a thousand dollars in total to be paid to the plaintiffs. There is an auto claim as well for repair of the vehicle ... of which little or no discussion could be elicited from counsel. ... I have every intention of imposing monetary sanctions. I find there was bad faith conduct by counsel."

Contrary to his first instinct, the judge imposed $1,857.50 in sanctions not on the defendant's attorney, but on the insurance company. Though sympathetic to the judge, the Second District Court of Appeal in Vidrio v. Hernandez (Mercury Insurance Company) found he went too far.

"Even were we to agree with the trial court's assessment of the conduct of counsel and the adjuster, the failure to increase a settlement offer or to otherwise participate meaningfully in settlement negotiations violates no rule of court and is not a proper basis for an award of sanctions," the three-judge panel wrote. In concluding, the Court of Appeal noted that the defendant filed the appropriate paperwork, attended the conference, and participated in it. "While the trial court's frustration at the parties' lack of movement is understandable, no more was required."

Defendants appearing at mandatory settlement conferences no doubt often feel that the "mandatory" part of the hearing applies to the settlement, not just the attendance. The Vidrio case is a reminder that the constant pressure on judges notwithstanding, all parties are entitled to their day in court.

Gordon Ownby is general counsel of the Cooperative of American Physicians, Inc., www.cap-mpt.com, and can be reached at gownby@cap-mpt.com.

With more than $3.8 billion in recoveries, Milberg Weiss tops the list of plaintiffs' law firms ranked by the largest total dollar amount of final securities class action suits settlements in 2007 in which the firms served as lead or co-lead counsel.

"There were more settlements in 2007 than at any other time in history," said Adam Savett of RiskMetrics, which released the Securities Class Action Services annual list of the top 50 plaintiffs firms.

The other top firms and their settlement totals are:

• Grant & Eisenhofer -- $3,451,300,000
• Schiffrin Barroway Topaz & Kessler -- $3,302,265,000
• Coughlin Stoia Geller Rudman & Robbins -- $1,853,990,000
• Bernstein Litowitz Berger & Grossmann -- $1,338,110,000

In a RiskMetrics Group press release, Savett said he expects the number of new cases to continue to rise, in part due to the ongoing expansion of the subprime fallout.