Cox Cable Customers Bond Together To Fight Bullshit Fees

Legal Issues

from the backfired dept

We’ve long covered how cable and broadband companies use a rotating array of bullshit fees to covertly jack up advertised rates, hitting you with a much higher bill after you’ve subscribed. We’ve also noted how new streamlined technologies have been turning the binding arbitration process on its head, making it easier and more affordable for consumers to bury companies with arbitration complaints.

Now those two concepts have unsurprisingly fused. Customers of cable giant Cox Communications are flooding Cox with arbitration complaints over two major fees the company routinely charges users: its “Broadcast Surcharge” and “Regional Sports Surcharge”:

The Hattis & Lukacs law firm last night “filed 295 individual consumer arbitrations against Cox with the American Arbitration Association,” representing clients in 17 of the 19 states Cox operates in, attorney Daniel Hattis told Ars. Hattis said he aims to file thousands more arbitration cases against Cox, which has an estimated 3.4 million TV customers.

Both fees, as we’ve noted previously, are bullshit. The Regional Sports surcharge is simply some of the money your cable company pays to air local sports broadcasts (despite, in many instances, being the local sports broadcaster) even if you don’t watch sports. The “broadcast surcharge,” used by many cable companies, is also just a portion of the money they pay for content buried below the line (more here).

In both instances, these are just the costs of doing business, and should be included above the line as part of your general bill. Cable companies bury them below the line to (again) falsely advertise a lower rate. But it also allows them to covertly raise prices while falsely claiming that their base prices have remained the same.

When the Supreme Court in 2011 ruled in favor of AT&T, it opened the flood gates to companies effectively banning your legal rights using contract fine print. So instead of suing companies or participating in class actions, you were forced to participate in binding arbitration, a lopsided process that’s costly for the end user, and frequently tilts in favor of corporations (the entire reason they love it).

But in more recent years, technological innovation has made it easier and more cost efficient for angry consumers (and lawyers) to file binding arbitration complaints en masse, completely deflating the reason corporations wanted this model to begin with. It’s gotten so bad, some companies (like Amazon) have found it once again makes better sense to bring such complaints back to the courtroom.

While the class action process has no shortage of problems (like consumers seeing very little in compensation while their lawyers buy a new boat), binding arbitration was shopped around by U.S. corporations as a significant improvement over that process. Instead it was a lopsided dumpster fire that made things even worse for consumers much of the time.

That eroding consumer legal rights in fine print is now backfiring spectacular is immensely entertaining. In Cox’s case, it now has to pay $3,300 per arbitration, or nearly $975,000 for the 295 arbitration complaints filed so far. Like most cable companies (Comcast, Charter also utilize the same fees), Cox obviously isn’t happy it may face something vaguely resembling accountability for false advertising.

Filed Under: binding arbitration, broadcast surcharge, cable, class action lawsuits, consumer rights, fees, regional sports surcharge, surcharges, tv
Companies: cox communications

U.S. Chamber Of Commerce Paying People $2,000 To Pretend Binding Arbitration Is Good

Policy

from the tilted-playing-field dept

For years, AT&T worked tirelessly to erode its customers’ legal rights, using mouse print in its terms of service preventing consumers from participating in lawsuits against the company. Instead, customers were forced into binding arbitration, where arbitrators, chosen and paid by the companies under fire, unsurprisingly rule in favor of companies more often than not. Initially, the lower courts derided this anti-consumer behavior for what it was, noting that however brutally flawed the class action is, binding arbitration, at least the way we let companies design it, in many ways made things worse.

But these lower court roadblocks quickly evaporated when the Supreme Court ruled in 2011 (Mobility v. Concepcion) that what AT&T was doing was perfectly OK. While lower courts saw this as an “unconscionable” abuse of consumer rights and the law, the Supreme Court bought into the ongoing myth that binding arbitration is a hyper-efficient, modern alternative to class actions. In reality, it shifted things to a form of binding arbitration that was costly, lopsided, and cumbersome for consumers, and less transparent for those used to visiting Pacer to dig up legal histories.

Fast forward to a few years ago, when a growing number of companies and services (like Fairshake) began streamlining the arbitration process, making it easier and less expensive for consumers (and yeah, class action lawyers). This shifted the balance of power back toward consumers, and starting in 2018 or so companies like Uber, AT&T and Comcast began to complain they were being swamped with arbitration feuds.

So now we’re seeing another sea change. Now, even giants like Amazon are being forced to take consumer complaints back to the courtroom, in part because a system they constructed to dodge accountability is no longer helping them do that.

At the same time, company lobbyists are firing up their opposition to the Forced Arbitration Injustice Repeal (FAIR) Act, which would (as the name implies) prohibit the practice in several sectors. The bill has already passed the House, and to prevent it from passing in the Senate companies have been busy cultivating phony “grass roots” (astroturfed) opposition to the bill. That usually involves using some proxy org (in this case the U.S. Chamber of Commerce) to throw money at people to write (or just support) op-eds in papers around the country insisting how wonderful binding arbitration is:

“The pro-arbitration op-ed was already written and included in the body of the email. The op-ed calls arbitration ?a relatively cheap and fast process? in a ?much more relaxed? environment than a courtroom, which ?could soon be eliminated if plaintiffs? lawyers have their way.? The last line makes its objective clear: ?Arizona?s workers and consumers can?t afford for Senators Sinema and [Mark] Kelly to allow [the FAIR Act] to happen.”

As with most campaigns of this kind (they’re pretty common in telecom), it involves reaching out to credible people to see if they’d willing to sell their principles downstream for some cash:

“Late last week, David Chami, an Arizona attorney who specializes in consumer protection, received an email from Drew Johnson, who identified himself as working with the U.S. Chamber of Commerce. Johnson offered Chami $2,000 if he could get one of his clients to sign their name to an op-ed opposing the Forced Arbitration Injustice Repeal (FAIR) Act, a bill in Congress.”

You know you have a sound argument when you have to pay people to support it. There’s so much valid disdain against the class action process (which usually provides lawyers a new boat and plaintiffs a $20 gift certificate to Arby’s if they’re lucky), it’s not hard to lean on that to nab support for binding arbitration. But that in and of itself doesn’t mean binding arbitration is good.

While conceptually the idea of binding arbitration isn’t terrible, the way it has been implemented in the United States is an incomprehensible mess. It reduces the chance of a fair hearing of consumer grievances and makes it as annoying as possible for consumers to challenge corporate power. That’s why surveys tend to suggest broad, bipartisan support for eliminating the practice. Yeah, the traditional class action system is also a hot mess. But replacing it with something less effective and more annoying was never quite the solution many companies pretended it was. And now that awareness of this fact is growing, they’re getting a bit nervous.

Filed Under: arbitration, arizona, astroturfing, binding arbitration, class action lawsuits, opeds
Companies: us chamber of commerce

Corporations Are Being Forced To Take Consumer Complaints Back To Court After Arbitration Push Backfires Spectacularly

Legal Issues

from the the-devil-you-know dept

For years, AT&T worked tirelessly to erode its customers’ legal rights, using mouse print in its terms of service preventing consumers from participating in lawsuits against the company. Instead, customers were forced into binding arbitration, where arbitrators, chosen and paid by the companies under fire, unsurprisingly rule in favor of companies more often than not. Initially, the lower courts derided this anti-consumer behavior for what it was, noting that however brutally flawed the class action is, binding arbitration, at least the way we let companies designed it, in many ways made things worse.

But these lower court roadblocks quickly evaporated when the Supreme Court ruled in 2011 (Mobility v. Concepcion) that what AT&T was doing was perfectly OK. While lower courts saw this as an “unconscionable” abuse of consumer rights and the law, the Supreme Court bought into the ongoing myth that binding arbitration is a hyper-efficient, modern alternative to class actions. In reality, it shifted things to a form of binding arbitration that was costly, lopsided, and cumbersome for consumers, and less transparent for those used to visiting Pacer to dig up legal histories.

Fast forward to a few years ago, when a growing number of companies and services (like Fairshake) began streamlining the arbitration process, making it easier and less expensive for consumers (and yeah, class action lawyers). This shifted the balance of power back toward consumers, and starting in 2018 or so companies like Uber, AT&T and Comcast began to complain they were being swamped with arbitration feuds. Now, a year later, even giants like Amazon are being forced to take consumer complaints back to the courtroom, in part because a system they constructed to dodge accountability is no longer helping them do that:

“With no announcement, the company recently changed its terms of service to allow customers to file lawsuits. Already, it faces at least three proposed class actions, including one brought May 18 alleging the company?s Alexa-powered Echo devices recorded people without permission.

The retail giant made the change after plaintiffs? lawyers flooded Amazon with more than 75,000 individual arbitration demands on behalf of Echo users. That move triggered a bill for tens of millions of dollars in filing fees, according to lawyers involved, payable by Amazon under its own policies.”

To be very clear, the existing class action system is broken as well, usually doling out relatively pathetic payouts to impacted consumers, while class action lawyers get new boats. But the premise that the binding arbitration system (at least as implemented) was somehow better, at least in the way we implemented it in the States, has never been true. If you ask lawyers that represent companies like Amazon and AT&T, the fact that folks developed new systems that shifted the balance of power ever so slightly back toward consumers and class action lawyers is seen as terribly unfair:

“It has the potential to be pretty unfair to the company,? said Patrick Bannon, an employment lawyer at Seyfarth Shaw LLP who has represented clients facing mass arbitrations. The arbitration fees put intense pressure on businesses to settle, he said, ?whether the claim is valid or not.”

But if you ask the folks actually fighting for consumers (and not all of them are ambulance chasers), they see it as fair play:

“Companies thought they were getting out of liability altogether,? by adding arbitration clauses, said Chicago lawyer Travis Lenkner, whose firm filed the majority of the Amazon claims. ?Now they?re seeing exactly what they bargained for, and they don?t like it.”

In short, corporations (beginning with AT&T) spent the better part of the last decade fighting for an arbitration system that resulted in fewer payouts, fewer successful complaints, and less overall transparency. And while happy about that initially, the second the internet and technology shifted the balance of power in the other direction, they were eager to flee back to the devil they knew. It should be curious to see if other giants like AT&T also begin stripping binding arbitration out of their end user agreements, or if this is just a temporary setback on the path toward less accountability.

Filed Under: arbitration, binding arbitration, class action, class action lawsuits, consumer rights, consumers

Law Firm Hoping To Add Legal Losses To Plaintiffs' Gambling Losses By Suing Google, Apple Over Casino Apps

Legal Issues

from the huckster,-llc dept

There’s a new cottage industry of Section 230 lawsuits springing up from the law offices of Tycko & Zavareei in Washington, DC (with the assistance of Pearson, Simon & Warshaw of California, the state where the lawsuits are being filed).

Over the past few years, we’ve seen a plethora of lawsuits alleging vicarious liability for terrorist attacks being filed against social media platforms by opportunists at 1-800-LAW-FIRM and Excolo Law. Not a single one of these lawsuits has made it past the pleading stage, even if one Ninth Circuit judge went off the rails a bit during oral arguments last spring. Whatever Section 230 immunity doesn’t eliminate, the law firms’ decision to sue the wrong parties (i.e., anyone but the people who committed the crimes) has generally proven fatal to their claims.

Fortunately, this new batch of lawsuits doesn’t involve exploiting people who’ve recently suffered personal tragedies. Instead, they’re trying to force companies like Google and Apple to reimburse small-time losers who lost real money to gambling apps.

No less than five putative class actions over (incredibly small) gambling losses have been filed by Hassan Zavareei of Tycko & Zavareei and Daniel Warshaw of Pearson, Simon & Warshaw. The only unique factor is the dollar amount of gambling losses. But these aren’t whales. These are small fish in the online gambling ocean demanding courts order app store purveyors pay them back for the tens of dollars they’ve lost. Not a single one of these plaintiffs has lost more than $300 to gambling apps, but every single one of them is demanding a chunk of damages their attorneys claim exceeds $5,000,000.

Everything is boilerplate, other than the named plaintiffs’ individual losses and their choice of app store purveyor. Apple is named in one lawsuit. Google is named in all the others. But they’re all equally ridiculous. Feast your eyes on this accusation:

Google permits and facilitates illegal gambling by operating as an unlicensed casino.

The lawsuits reach this conclusion by noting Google (and Apple) allow users to download gambling apps from their app stores. At no point do Google or Apple create and develop any gambling apps, nor do they operate or maintain ownership of the apps. All they do is offer a storefront. Users are responsible for their own actions while interacting with third-party apps. The companies do not need to obtain licenses to operate casinos because… THEY DON’T OPERATE CASINOS.

The lawsuits then do a bit of narrative explaining the obvious: gambling can be addictive and it can cost people vast sums of money. The suits also note that several states have laws prohibiting exchanging money for more playing time — some of those put in place recently to protect users from things like pay-to-win games and “loot boxes,” which some states have chosen to view as another form of unlicensed gambling.

Then the lawsuits quote liberally from the Statute of Anne — something we’ve seen misquoted more often in terms of copyright enforcement here at Techdirt, even though it was instrumental in creating the idea of “public domain.” The relevant part of the Statute, passed in 1710 partly as a legislative attempt to prevent British citizens from gambling themselves into bankruptcy, allowed residents to sue to recoup their gambling losses. (That it was repealed almost entirely in 2005 seems to have escaped the notice of the find legal minds at both law firms.)

[A]ny Person . . . who shall . . . by playing at Cards, Dice, Tables, or other Game or Games whatsoever, or by betting on the Sides or Hands of such as do play any of the Games aforesaid, lose to any . . . Person . . . so playing or betting in the whole, the Sum or Value of ten Pounds, and shall pay or deliver the same or any Part thereof, the Person . . . losing and paying or delivering the same, shall be at Liberty within three Months then next, to sue for and recover the Money or Goods so lost, and paid or delivered or any Part thereof, from the respective Winner . . . thereof, with Costs of Suit, by Action of Debt . . . .

So how does a 1710 British law factor into a bunch of online gaming lawsuits filed in the United States? Well, a lot of nascent US states adopted British laws because they didn’t have many of their own at that point. And it was safe to assume newly minted US citizens were just as likely to make bad decisions in games of chance. So, these laws went into the books, along with other large chucks of the Statute of Anne and its offshoots.

This aspect of the Statute has rarely the focus of gambling related litigation. But it has been used successfully in a few cases where courts allowed families/significant others to sue over gambling losses, usually under the theory an entire family shouldn’t be put into the poorhouse just because one of its residents blew a bunch of money on gambling. And in the cases that did secure a victory, the amount at stake was hundreds of thousands of dollars, rather than the $160-250 range represented in these lawsuits.

Only twenty-five states have adopted this aspect of the Statute of Anne. The litigants represented here are from states that adopted the anti-gambling text. But it’s not going to be nearly as helpful as they believe it will be. At best, the law simply makes some gambling debts unenforceable.

Online gaming in virtual casinos (unlike more direct gambling options like online betting services that provide actual cash payouts) don’t incur gambling debt, even if they may result in regular, non-gambling debt if users spend too much money gaming. No one is under any obligation to pay to do more gaming, nor are they able to obtain credit from app operators to continue gaming, which makes it impossible to rack up the sort of gambling debt this Statute was adopted to address. That’s just the beginning of the apparently willful misreading of this law by the attorneys representing these clients. There’s more.

First, the lawsuits have been filed in California, which — as a late-arriving member of the Union — did not adopt this Statute. Second, even if the courts decide that the losses occurred in the plaintiffs’ home states (rather than wherever the app developers’ gaming servers are located), it’s definitely not going to help in at least two cases. There’s a case directly on point dealing with venue-shifting by Mississippi plaintiffs hoping to use another state’s laws to allow them to recover gambling losses.

We too find that it would be a great injustice if Tennesseans could reap the benefits of gambling in states where it is legal when they are successful, but seek shelter in Tennessee courts when they lose. As a result, we conclude that there is nothing in the Mississippi laws in question that outrages the public policy of Tennessee. Therefore, the gaming contract between the parties is enforceable in Tennessee.

This means the two plaintiffs from Mississippi aren’t going to be able to use another state’s laws to claw their money back from Google and Apple. But even if local laws are given deference — along with the residents’ claims their losses occurred in Mississippi — it still won’t work. The adoption of the Statute of Anne varies from state-to-state. In some states, it only allows for government enforcement via suits brought by the state attorney general. In other states, gambling losers can sue directly, but they have to sue the entity they lost money to. No matter how the local laws are interpreted, they cannot be read to allow people who lost money to online casinos to sue a third-party that never took any money from them.

But there’s really no reason to even get into the weeds of local laws adopted hundreds of years ago by newly developed states in a brand new country. The lawsuits all note the plaintiffs lost money to app operators like Zynga, SpinX Casino, and DoubleUGames. None of those companies are listed as defendants. Only the operators of app stores are. And that’s not going to work. You have to sue the party that injured you, not one at least once step removed from the equation.

Section 230 allows Google and Apple to exit lawsuits that claim they’re responsible for content — including apps — uploaded by third parties. This holds true even if the content is vetted by Google, etc. before being allowed to go live. Moderation (or this perceived lack thereof) does not undermine these protections.

But that argument likely isn’t even likely to be considered. Suing the wrong party should result in dismissals even if the court decides not to consider Google and Apple’s expected Section 230 defense. You just can’t hope to win a case if you’re not willing to sue the right defendants.

The only silver lining in this batch of bad-faith litigation is the plaintiffs haven’t lost hundreds of thousands of dollars gambling at this point, so they likely haven’t destroyed anyone’s lives at this point, not even their own. But who’s going to take up the case of possibly hundreds of class-action plaintiffs who are going to be duped by law firms and lawyers like those pushing these cases? I mean, as long as we’re talking about holding other people responsible for your own bad decisions, why not find someone willing to go after shit-heel attorneys padding their resumes with the sad stories of rubes they’ve duped into believing they actually have something worth suing over?

Filed Under: app stores, apps, class action lawsuits, gambling, intermediary liability, loot boxes, section 230
Companies: apple, google, pearson simon and warshaw, tycko and zavareei

Corporations Not Happy Innovators Have 'Hacked' The Crappy U.S. Binding Arbitration System

Legal Issues

from the dysfunction-junction dept

For years, AT&T worked tirelessly to erode its customers’ legal rights, using mouse print in its terms of service preventing consumers from participating in lawsuits against the company. Instead, customers were forced into binding arbitration, where arbitrators chosen and paid by the companies under fire unsurprisingly rule in favor of the party likely to hire them again a huge percentage of the time. Initially, the lower courts derided this anti-consumer behavior for what it was, critics highlighting that however brutally flawed the class action system can be, binding arbitration, at least the way we let companies design it, in many ways made things worse.

But these lower court roadblocks quickly evaporated when the Supreme Court ruled in 2011 (Mobility v. Concepcion) that what AT&T was doing was perfectly OK. While lower courts saw this as an “unconscionable” abuse of consumer rights and the law, the Supreme Court bought into the ongoing myth that binding arbitration is a hyper-efficient, modern alternative to class actions. The Supreme Court reiterated its position in 2015, and now most companies employ similar language in their terms of service fine print. Thanks, AT&T.

Shockingly, despite the telecom industry being a clear and obvious train wreck rife with endless examples of clear billing fraud, users aren’t finding arbitration provides an effective path to justice. Despite having a combined 330 million video, voice, and broadband customers, just 30 people took AT&T and Comcast to arbitration last year. Driven in part by this, folks in recent years have been trying to find ways to help simplify the complicated process for pissed off consumers and employees, launching services like Radvocate and Fairshake.

As the NY Times notes, these systems are unsurprisingly driving up arbitration complaints as the process is streamlined and made more affordable for participants (consumers and employees often can’t afford to take on corporations individually):

“Mr. Lidow, a Silicon Valley entrepreneur with a law degree, figured there had to be more people upset with their cable companies. He was right. Within a few months, Mr. Lidow found more than 1,000 people interested in filing arbitration claims against the industry. About the same time last year, Travis Lenkner and his law partners at the firm Keller Lenkner had a similar realization. Arbitration clauses bar employees at many companies from joining together to mount class-action lawsuits.”

While the original arbitration idea may have been sound, corporations designed their vision of it with an eye on minimizing costs, tap dancing around accountability, and making it a costly uphill climb for employees and customers to battle them. And now that folks are actually trying to use the system, they’re unsurprisingly not excited about it:

“There is no way that the system can handle mass arbitrations,? said Cliff Palefsky, a San Francisco employment lawyer who has worked to develop fairness standards for arbitration. ?The companies are trying to weasel their way out of the system that they created.”

AT&T, which helped kick this whole shift off with its sneaky bullshit mouse print, has been one of several corporations to hype binding arbitration as a more efficient alternative to class actions. Yet once folks actually began using the process thanks to these new services, companies like AT&T were caught flat footed:

“The companies were caught off guard. It took six months for many of the claims to move through arbitration. And some were still making their way through the system two years later. To Mr. Lidow, that seemed like a long time for two of the nation?s largest companies, with ample legal resources, that have vouched publicly for the efficiencies of arbitration over court.”

Again yes, the class action system is broken, more often than not delivering new boats to attorneys and very little to those who are treated unfairly. But class actions most certainly have driven substantive change over the years (such lawsuits stopped cellular carriers from charging you long term contract early termination fees, for example). And the replacement system corporations built to replace the justice system is proving, as many predicted, to be decidedly worse.

Filed Under: arbitration, binding arbitration, class action lawsuits, lawsuits
Companies: at&t

Jury Says Apple DRM Not An Antitrust Violation

Legal Issues

from the which-is-probably-right dept

We’ve written a few times about the long-standing class action lawsuit against Apple over whether its DRM efforts, designed to block out RealNetworks’ attempt to reverse engineer a way into the iPod, violated antitrust law. As we noted recently, despite the case going on for years, the class action lawyers who brought the lawsuit ran into a bit of a stumbling block recently when it came out that none of the named plaintiffs were actually in the class, having purchased iPods outside the window which the class covered. The judge let the lawyers find a new plaintiff just a few days ago, but it certainly looks like the rotating plaintiffs issue may have helped Apple. The jury wasted little time in siding with Apple and saying that there was no antitrust violation. Apple’s lawyers played up the plaintiff problem:

?There?s not one piece of evidence of a single individual who lost a single song, not even a complaint about it,? said William Isaacson, Apple?s lead lawyer in the case. ?This is all made up at this point.?

There was a lot of interesting side notes to this case, but the failure of the class action lawyers to have an actual plaintiff was a pretty big deal — and basically made it clear that these lawyers were just in this for the money, rather than to right some sort of wrong.

And, while I’m generally interested in the idea that DRM could potentially be seen as anti-competitive, the fact that this case was about iTunes and RealNetworks kind of highlights how infrequently antitrust law makes sense in the tech industry. The entire digital music ecosystem has changed dramatically since the case began. While iTunes is certainly still a big player, it’s facing serious competition on a variety of different fronts including from streaming services like Spotify (one reason why Apple purchased Beats Music). Competition comes in all different ways, and even if you’re dominant today, it doesn’t mean you’ll be dominant very long.

Filed Under: antitrust, class action lawsuits, drm, innovation, ipods, technology
Companies: apple

Class Action Lawsuit Over Apple DRM Stumbles Because Plaintiffs Aren't Actually In The Class

Legal Issues

from the you-had-one-job... dept

We’ve written a few times about the long-running class action lawsuit against Apple alleging that its use of DRM on music (the “FairPlay” system) violated antitrust laws by locking users into Apple’s platform. The case is interesting on a few different levels — including the question of whether or not DRM could lead to antitrust violations (very interesting…) and showing how quickly the technology world changes (music DRM is basically long gone). However, with the trial being held this week, a new stumbling block arose late in the game. Apple lawyers have pointed out to the judge in the case, Yvonne Gonzalez Rogers, that neither of the two women named as plaintiffs actually qualify to be in the class.

As you might imagine, that makes for a difficult class action lawsuit, when you don’t have any actual plaintiffs.

Specifically, after testimony this week, Apple realized that the iPod that one of the plaintiffs owned was purchased outside of the period of time covered by the class action lawsuit. Apple stopped using Fairplay in March 2009, so the class action lawsuit only applies to iPods bought between September 2006 and March 2009. That’s a problem when the main plaintiff actually bought hers in… July 2009.

After plaintiff Marianna Rosen testified on Wednesday, Apple attorneys said they checked the serial number on her iPod Touch and found it was purchased in July 2009. In a letter sent to the court late Wednesday night, Apple lawyer William Isaacson said it appears the other plaintiff, Melanie Wilson, bought iPods outside the relevant time frame or, in one instance, purchased a model that didn’t have the specific version of software at issue in the case.

Isaacson, who suggested the lawsuit can’t proceed without a plaintiff, said he’s asked for proof that either woman had purchased an iPod covered by the case. Plaintiffs’ attorney Bonny Sweeney said her side is checking for other receipts. She conceded that Wilson’s iPods may not be covered, but she also noted that an estimated 8 million consumers are believed to have been purchased the affected iPods.

In other words, the class action lawyers are admitting that they may not have a plaintiff, but say it doesn’t matter because they can find another one without too much trouble.

And of course, this just reinforces what a total scam so many class action lawsuits are. We’ve written about this for years. While the basic idea may seem sound, the reality is that most class action lawsuits are just about ways for class action lawyers to get super wealthy. They seek out anything they can sue over, find a stand-in plaintiff whose only job is basically to be the name on the lawsuit, and then when the final payout comes, the lawyers take a huge chunk, the stand-in plaintiff gets a small amount, and the rest of the class splits a further tiny amount. It’s not about righting wrongs. It’s about enriching class action lawyers. The very fact that the lawyers in this case admit that they can toss out their plaintiffs and bring in others seems to highlight what a total joke this whole thing is.

Still, someone really, really, screwed up on the lawyers’ side. How the hell do you set up a class action lawsuit without first confirming that your plaintiff is in the class? That seems like a total and complete fuck up.

Thankfully, Judge Rogers seems to recognize that this is not a good situation:

“I am concerned that I don’t have a plaintiff. That’s a problem,” the judge said in court Thursday afternoon at the end of the trial’s third day of testimony in Oakland.

As interested as I am in the idea that DRM might be anticompetitive, I’m still troubled by the abuse of class action lawsuits (and related antitrust efforts in general as well). This particular case just seems like a total mess.

Filed Under: antitrust, class, class action, class action lawsuits, class action lawyers, competition, drm, plaintiffs
Companies: apple

Court Forces Activist Objecting To Questionable Class Action Settlement To Shut Up And Promote The Settlement

Free Speech

from the wow dept

Here is a rather egregious violation of basic free speech rights. For years, we’ve talked about how the class action process is quite frequently abused, such that it makes lawyers quite wealthy, while doing next to nothing for the “class” they’re representing. In extreme cases, we’ve seen “settlements” that actually make the defendants in class actions better off, while still making the lawyers (of course) quite wealthy. The stories of companies being forced to pay up millions of dollars, with none of it going to actual “victims,” are more common than you would imagine.

So, when Majed Moughni in Dearborn Michigan heard about such a class action settlement concerning McDonald’s having sold non-halal Chicken McNuggets that were advertised as halal, he decided to protest the settlement and try to get others to do so. The settlement was what is known as a cy pres settlement, in which the lawyers get paid and the defendant agrees to give a chunk of money to charity, rather than to the class (about $700,000 in this case). There are, at times, good reasons for doing a cy pres award, but it can also be open to abuse. Settlement agreements, by law, have a period of time in which people are free to object to a settlement before it is approved, and Moughni was doing exactly that, if at times crudely, with a Facebook page that may have gone a bit far in its claims. Moughni was upset with the cy pres nature of the award, but also with the fact that there was no injunction that would block McDonald’s from doing the same thing again.

However, as Paul Levy, who is now representing Moughni, makes clear in a blog post about the motion he filed in the case, the court deciding to issue a broad injunction against Moughni, barring him from talking about the case, while also forcing him to post the lawyers’ view of the case, would appear to be a pretty blatant First Amendment violation:

The lawyers for the plaintiff class threatened Moughni with both a defamation suit and disciplinary charges (Moughni is a lawyer, although not by any means a specialist in class actions). Moughni would not back down, so the plaintiff’s lawyers asked the judge to shut down the page — or, more precisely, they asked that Moughni be required to take everything he had said about the case down, and to post on his Facebook page instead what they said (and what the Court had said) (That is why I am not linking to my client’s Facebook page – it isn’t really HIS page any more. Let the parties do their own publicity.) And, they asked that Moughni be forbidden to make any statements that class members might see or hear, such as by talking about the litigation to the press which, in turn, might print stories from which class members might learn Moughni’s views.

The lawyers continued their claim that they had been defamed, but really, they said, this isn’t about us, this is about protecting the poor class members against having their confidence in the lawyers undermined, protecting public confidence in the court system, and preventing class members from being confused about whether they should object to having their claims for damages extinguished so that settlement funds could go to the charities (and the lawyers). The judge held a hearing a few days later; plaintiff’s counsel spoke his piece, McDonald’s lawyers chimed in with their agreement, but Moughni’s attempt to speak was rebuffed with a peremptory “Don’t you even” from the judge. And the judge ruled, granting the injunction almost exactly as requested.

As Levy notes, with class action settlements there is strong incentive for the lawyers from both sides and the judge to get the settlement approved. It gets a case off the docket and gets the lawyers paid. So this is a situation where all three of those parties have the incentive to team up against anyone who dares to raise questions about the settlement. In fact, Levy noted that when he contacted the lawyers, noting his own intention to represent Moughni, they threatened him with sanction too. Levy notes that Moughni’s original Facebook post may not have been as carefully worded as one would hope, but in no way should that ever lead to a broad injunction, along with compelling speech one disagrees with, in response. From the filing:

Giving Moughni only a few days’ notice, the Court convened an emergency hearing; then, without hearing from Moughni, issued a prior restraint of unparallelled breadth, barring Moughni from making any public statements about an entire subject matter, even statements that were entirely truthful and not at all misleading. It further compelled him to place speech with which he fervently disagreed on his own web page; and it forbade him from dissemination, circulation or publication of any opt-out form or objection during the crucial ten-day period before the deadline for members of the class to decide whether to opt out or object. On a literal reading of the injunction, Moughni was barred even from speaking to his own wife and children about the settlement, and even from submitting an objection to the settlement on his own behalf.

While he was pro se, Moughni acknowledged that he is not an expert in class action procedure; as his counsel, we readily concede that some of his statements could have been worded more felicitously. But Moughni was not counsel for a named party; he spoke only as a member of the affected community, and the Court’s order holding him to standards that would have been inappropriate even for a lawyer in the case violated black-letter law against prior restraints of speech. The injunction should, therefore, be vacated immediately. In addition, during the crucial ten-day period before the opt-out or objection deadline, the order deprived the class of the opportunity to hear dissenting views about whether to go along with a settlement that potentially deprives them of valuable rights. The Court should, therefore, reopen the period for the class to respond to the notice, and should defer any decision about approval of the settlement until that time has expired.

Even if you agree that Moughni may have gone too far with some of his Facebook postings, completely denying his right to talk about and object to the settlement, while then forcing him to post information he disagreed with, seems like an egregious violation of his rights. As Levy notes back in his blog post, whether or not the actual settlement is a good one is somewhat besides the point:

Moughni has his own view, but our motion takes no position on the merits of the settlement: our only point is that Moughni ought to have the right to say what he thinks about the settlement, and that the remedy for speech claimed to be false is not less speech but more speech. In my own mind, I have come to no conclusion about the merits of the proposed settlement.

But that just leaves me wondering, if the settlement is so wonderful, why the lawyers felt they had to resort to suppressing critical speech instead of just putting their own replies into the marketplace of ideas. At the hearing for an injunction, they had reminded the Court of how attentive the national media press had been to their publicity about the settlement (115 national media outlets, and a hundred million viewers, they claimed); surely the media would continue to give them a platform.

Hopefully the court is willing to recognize its mistake and vacate the injunction quickly.

Filed Under: activism, class action, class action lawsuits, cy pres, free speech, injunction, majed moughni, objections, prior restraint
Companies: mcdonald's

Lawsuits And Laws On The Way In Response To Sony Data Breach

Overhype

from the but-would-any-of-them-have-stopped-this? dept

With Sony admitting that its PlayStation Network was hacked and that lots of personal info was accessed, you knew the reaction would be swift. Within a day we have class action lawsuits being filed and new laws being proposed. I agree that it was monumentally stupid of Sony to store passwords as plaintext rather than as hashes, which certainly leaves room for negligence claims, but will laws really make a difference? About the only reasonable response from a government official has been White House cyber boss Howard Schmidt (who has a history of being more reasonable than many of his colleagues), who noted that getting hacked is a risk of doing business, and it’s not worth overreacting to Sony’s situation:

“It’s still a situation where specific incidents make it something it’s not,” he said. “Things make headlines that are just the risk of doing business in many cases.”

But, of course that won’t satisfy the class action lawyers or the politicians who are all over this. Beyond the plans to introduce laws, we’ve already seen that Senator Richard Blumenthal, who was a massive grandstander as Connecticut Attorney General, has continued his grandstanding ways with a public “demand for answers” from Sony.

Filed Under: class action lawsuits, data breach, grandstanding, playstation network
Companies: sony

Fixing Class Action Lawsuits

Legal Issues

from the objecting-to-settlements dept

For a long time, we’ve noted that while class action lawsuits do serve a useful purpose, it seems like all too often they’re abused. Quite frequently, we see the only “class” that really benefits from such lawsuits are the lawyers who file the lawsuit, who end up taking the bulk of any “settlement.” In some cases, it’s even worse — where not only do lawyers get the bulk of the settlement, the rest of the class actually gets pushed into buying more products from the company that was sued. Such class action lawsuits not only make the lawyers richer, they actually act as marketing for the company that was sued. One of the worst such cases we can remember involved Netflix, which “settled” a class action lawsuit by giving current customers a “free” one-month upgrade — but if you didn’t manually downgrade your account, they started charging you the higher price the following month. That’s not a “settlement” so much as a way to get a bunch of customers to upgrade. If I remember correctly, that settlement was actually thrown out.

Eric Goldman points us to an interesting profile of Ted Frank, a lawyer who is focusing on trying to stop such bad class action lawsuits and settlements by objecting to the settlements when they seem so far over the line. While, as the article notes, there have been a bunch of “professional settlment objectors” in the past, most have been doing it for money (getting some of the attorney’s fees). Frank, however, hasn’t taken attorney fees (though he says it’s a possibility in the future), and is funded by a charity:

“The whole reason I started this is because there is a high probability of district courts rubber-stamping settlements,” Frank says. “I think these are very bad settlements that the [9th U.S. Circuit Court of Appeals] will … provide guidance for when judges should or shouldn’t approve settlements.”

Again, the concept of a class action lawsuit isn’t bad, but it’s definitely been widely abused — so it’s nice to see someone pushing back from within to try to stop the worst abuses.

Filed Under: class action lawsuits, settlements, ted frank