Interesting Class Action Settlement Ruling from North Carolina

by Nick Pace

Nick Pace, a researcher at the RAND Institute for Civil Justice, kindly agreed to post his thoughts on a recent class action settlement decision.

I thought CL&P blog readers might find interesting the recent opinion in a North Carolina state court class action, Moody v. Sears, N.C. Superior Court, 02-CVS-4892 (May 7, 2007).  The opinion contains an fascinating discussion of the judge's role in overseeing consumer class action settlements. 

The decision by Judge Ben Tennille (Special Superior Court Judge for Complex Business Cases) came in the context of a class action against Sears for selling more expensive "four wheel" alignments to folks with rear wheel drives (they're only needed for four wheel or front wheel drive vehicles; I believe that a local repair shop here in L.A. once burned me on that little trick as well).  A nationwide class action was filed in Illinois four days after the N.C.-only suit was initiated.  Ultimately, a nationwide settlement, approved by a Cook County judge in December 2004, was supposed to provide the estimated class of 1,500,000 customers with either a $10 refund or a $4 coupon depending on the date of the alignment.  Sears also agreed to pay class counsel about $1 million in cash and $50,000 in coupons.  Notice of the settlement was effected through publication in 25 newspapers across the country as well as Parade and USA Weekend magazines.  Consumers learning of the settlement called or wrote in for a claim form.  All in all, this was a fairly standard notice and claiming plan.

Split Ninth Circuit decision on FCRA's "reasonable reinvestigation" requirement

by Deepak Gupta

  Under the Fair Credit Reporting Act, when a consumer disputes an item on a credit report, the reporting agency is required to "conduct a reasonable reinvestigation to determine whether the disputed information is inaccurate."   But last week, a conservative Ninth Circuit panel majority (Judges Bybee, of "torture memo" fame, and O'Scannlain) let the credit reporting agency Experian off the hook for failing to correct a credit report even after it received proof--in the form of a court document--demonstrating that the report was false.  Judge Kosinzki authored a spirited dissent.  Dennis v. BEH-1, LLC, No. 04-56230 (9th Cir. May 7, 2007).

As a result of a mistaken clerical notation, Jason Dennis's credit report said that a civil judgment had been entered against him in a dispute with his landlord.  But anyone who looked in the court file would have found a stipulation clearly stating that no judgment would be entered because the parties had actually settled their dispute; Dennis had paid his landlord and the case had been dropped.   Experian received a copy of the stipulation as a result of the reinvestigation.  Under these circumstances, said Judge Kozinski, the record supported the conclusion that Experian "made a deliberate decision not to amend [the] report or take further action, even after it obtained documentary proof that no judgment had been entered."

Judge Kozinski's dissent is the most interesting part of this otherwise pretty pedestrian decision, which ultimately doesn't stand for much.  His remarks about the importance of the FCRA's reinvestigation requirement are worth repeating here:

Burger King Reigns Supreme . . . in Killing Its Customers

by Stephen Gardner

  The Center for Science in the Public Interest, for which I am Litigation Director, filed suit on May 16 in District of Columbia Superior Court against Burger King seeking an injunction to stop Burger King's use of deadly trans fats in frying and cooking its food, or at least to clue its customers in on its dirty little secret. Burger King has more than 7,300 U.S. locations, and global sales of more than $11 billion.

Burger King is at fault in two different ways. First, of course, is the fact that Burger King is the only top restaurant chain that has not either eliminated trans fats or is making sincere and significant steps in that direction. All Burger King is willing to promise is that, by the end of 2008, it will start the process to get rid of trans fats. They want their customers to pay the price of their foot-dragging.

Second, while it is creeping along in its purported efforts, Burger King doesn't want its customers to know that it still uses trans fats. It wants to complete with places like KFC and Wendy's, which have gotten rid of trans fats, but it doesn't want to compete fairly.

This is not a negligible problem - many Burger King products have several times the maximum recommended amount for trans fat consumption in one day. A (Burger) King-size Onion Rings has 6 grams of trans fat.

Even breakfast isn't safe - a Sausage Biscuit with a large order of Hash Browns has an appalling 18 grams of trans fat - more than anyone should consume in 9 days.

Call for Papers

We've received the following call for papers: Papers are invited for assessment and possible publication in the Consumer Journal, a multi-disciplinary journal which addresses legal, socio-economic and health issues impacting on consumer protection. Contributors are free to discuss any issue relating to consumer protection including statutory enactments; judicial decisions; activities of regulatory agencies; health-related issues; industry codes of practice; consumer dispute resolution schemes; and indeed, any other contemporary issue of consumer protection.

Sixth Circuit slashes punitives in FCRA case

by Deepak Gupta 

Yesterday, the Sixth Circuit issued an opinion slashing a jury's punitive damages award in a Fair Credit Reporting Act case.  Bach v. First Union Nat'l Bank, No. 06-3660 (6th Cir. May 15, 2007).  The jury had awarded an elderly widow $400,000 in actuals plus $2,628,600 in punitives against a bank.  The district court, after an initial appeal and remand, ordered reduction of the $2,628,600 to $2,228,600.  In the second appeal, the Sixth Circuit held that the district court's subtraction of $400,000, although it "eliminated any concern regarding the potential duplication of compensatory damages and ultimately achieved a lesser ratio, of 5.57," was still not good enough because that the bank's actions were not reprehensible enough to justify the large punitive award--the only reprehensibility factor was the vulnerability of the victim.   So this time the Sixth Circuit took matters into its own hands and ordered the district court to cut the award down to no more than $400,000--the same amount as the actuals.

More on Michael Baroody

by David Arkush

This morning, the New York Times reports that Michael Baroody, the National Association of Manufacturers lobbyist whom President Bush has nominated to head the Consumer Product Safety Commission, will receive a $150,000 "severance" payment from NAM if he gets the job at CPSC.  Although the  payment would disqualify Baroody from agency matters concerning NAM for two years, Baroody would still act on matters involving NAM members.  Together, the NAM payment and an additional sum for unused leave time ($44,571) would render Baroody's take-home pay for his first year at the CSPC slightly higher than his salary last year as a lobbyist---$349,171 versus $344,607.

Brian has blogged about Baroody, and consumer groups' opposition to his confirmation, here and here.  His nomination will be before the Senate Commerce Committee next week.

Former Ameriquest Workers Tell of Deception

From Morning Edition, May 14, 2007

Americans are losing their homes in record numbers due to subprime lenders who allegedly lied to customers about their mortgages. Some former employees of Ameriquest, the nation's leading subprime lender, say the company encouraged them to conceal rate terms, make fake fixed-loan documents that pushed customers into loans they couldn't afford, and more.

Listen now.

Telephone Excise Tax Credits Going Unclaimed

by Brian Wolfman

   

A new federal law entitles millions of taxpayers to a tax credit on their 2006 income tax returns for an improperly collected 3% federal telecommunications excise tax collected between February 28, 2003 and August 1, 2006.  The credit is a flat $30 to $60, depending on family size, and the taxpayer can get all excise taxes back with proof that he or she actually paid more that the flat credit amounts.  If you are a taxpayer that paid for long distance phone service during the three-year-plus period, all you need to do is claim the credit and its yours.  Sounds like money in the bank, right?

    But perhaps the IRS did not get the word out as well as it could have.  This informative release from the Center for the Study of Responsive Law reviews a recent General Accountability Office report on the topic.  The GAO report found that nearly a third of eligible taxpayers failed to claim the credit; far worse, only a shocking 2% of the lowest income Americans filed for the credit.  An even lower percentage of non-profits are projected to take advantage.  For-profit businesses are also claiming at a very low rate.  Read the CSRL report to get more details and to learn how to file an amended return to get the money.

Did Suze Orman's Fico Kit Violate the Credit Repair Organizations Act?

The Times reports here on a proposed settlement in a class action suit brought against Fair Isaac and Equifax which would prevent them from claiming that various credit products, including Suze Orman's Fico Kit (sold by Fair Isaac), will improve consumers' creditworthiness.  The suit was brought under the Credit Repair Organizations Act.  A quote from the story:  "Fair Isaac did not admit liability, but settled the matter by paying the trial lawyers’ expenses and providing three free months of credit-score tracking to anyone who bought products between Nov. 19, 1999, and Feb. 8, 2007." 

Poverty in Business Week

Today's top story in Business Week:

The Poverty Business: Inside U.S. companies' audacious drive to extract more profits from the nation's working poor

Also:

Cutting the Cost of Poverty: Scholars are taking a fresh look at the financial problems of the working poor, and have some new suggestions on how to address them

Stop Fleecing Poor Americans (The Debate Room): The U.S. government should place greater restrictions on car sellers, pay-day lenders, and tax preparers who offer the working poor cash or credit with high fees and interest rates. Pro or con?