Today’s Oregonian includes this thoughtful editorial about what is at stake in our on-going case against KBR for Oregon National Guard Soldiers. I have to agree with the editorial board that what is at issue is more than whether and how KBR will be required to repair the damage done.  In the case, we can only recover money. That money can only be used to fix what can be fixed,  to help where money can provide help, and to make up for all the losses that cannot be fixed or solved with help.

Still the case is wider and deeper and raises questions about war and contracting and profits.

The latest round of revelations indicate that the government agreed to indemnify KBR for financial losses it might incur as a result of its misconduct in performing work under the Project RIO contract.  If that sounds like gobbledygook, maybe it’s easier to explain this way. In addition to the multi-billion dollar payday, KBR wanted and got a taxpayer bailout for whatever harms might be caused by its misconduct.

The legal team representing the soldiers focuses on their needs. We have a court room and a trial. We are traveling around the world to find evidence and get our witnesses. We are digging through tens of thousands of pages of documents. We hold the line and fight KBR when it seeks immunity or special treatment.  At trial we will put on the evidence, make our arguments and then leave it to the jury to deliberate and decide.

Meanwhile, it is good that Oregonians are asking these questions. Better still, our journalists and thinkers and our Congressional delegation have their teeth into their respective parts of this tragedy. That is good as well, as no one wants our vets to go quietly into the night.

Addendum (2 Sept 2010): Here is a video report on KGW8 News that ran yesterday. Nice to see that Rep. Blumenauer is on this.  For those who say Congress does nothing, you better believe that the Oregon vets appreciate the efforts made by Sen. Wyden, Sen. Merkley, Rep. Blumenauer, and Rep. Schrader.

Rep. Earl Blumenauer (D. Or.) has done his part to get to the bottom of the sad story of Oregon National Guard soldiers exposed to toxic chemicals at the KBR Qarmat Ali facility. Rep. Blumenauer previously asked the Secretary of Defense to provide information about the agreements–both for KBR and other contractors.

In today’s Oregonian, Julie Sullivan reports here that the Army has refused to produce the information because it remains confidential. The response from the Army is a bit perplexing. The Project RIO contract, which was declassified, contains an indemnification provision. So I can’t help but wonder what is classified. Maybe there are other documents the Army is withholding?

It’s all a bit curious.

The soldiers appreciate Rep.  Blumenauer’s efforts. He is helping to get to the bottom of things.  He’s raising important questions about government contracts, and contractors and oversight.

For my part, I remain focused on KBR.  That’s my job.  Lots of work ahead to prepare for trial. But we’re on it.

The Government Accounting Office released its report today,  GAO Report For Profit Colleges (pdf), highlighting a number of abuses by for-profit trade schools.  The GAO engaged in undercover testing to ferret out the fraud and abuse in for-profit admissions and lending.  Pretty scary stuff.

The GAO Report notes that approximately 2,000 for-profit colleges received federal funds of $24 billion in the 2008-2009 school year. At all 15 of the for-profit schools surveyed by GAO, admissions representatives made deceptive and questionable statements about graduation, employment and financial aid.

I’ve been laboring in a trade school class action against Career Education Corp. and Western Culinary Institute, which is now known as Le Cordon Bleu College of Culinary Arts in Portland.  I’m not particularly surprised by the GAO findings. Maybe the GAO report will spur Congress to take a hard look at these issues. That would be a good thing because we have sentenced a generation of kids to a lifetime of debt.

My view is that the current crisis stems from a nasty mix of deregulation and privatization. Give for-profit schools nearly boundless access to federal money. At the same time, do not regulate their conduct. Those were the first steps to sentencing a generation to a lifetime of debt.

Question: Will we be able to fix this thing, or are we just content to continue fiddling while Rome burns?

For those of us in the trenches representing consumers in class actions, it’s always nice to find good information resources in the law blog world. I’ve stopped by the Complex Litigator a few times. I only caught this post on a consumer class against Wells Fargo because of a Twitter post alerting me to it.

The case, Gutierrez v. Wells Fargo Co., 2010 WL 1233810, 2010 U.S. Dist. Lexis 29082 (N.D.  Cal.  Mar. 26, 2010), arises out of allegedly illegal banking practices that led to improper assessment of overdraft fees. The federal court certified a class, and Wells Fargo filed a motion to decertify the class.

Digression: In representing consumers in class action cases, I privately think of motions to decertify as “Waah! motions,” as they often stand on the same arguments that didn’t succeed, and they frequently employ heated prose to attempt to change the Court’s mind on a decision previously rendered.  In my experience, they are often an expensive waste of time.

Complex Litigator points out that the court found the small amounts at stake to be important in finding a class action would be superior. This was true when the court certified the class and remained true in the decertification motion. The small-stake problem is an important concept that sometimes gets lost in the heated U.S. Chamber of Commerce talking-point criticisms of class actions.

The nickel and diming effect is one that I’ve written about before, but the short version is that consumer class actions provide a means of stopping illegal practices that take small amounts from a large number of people. A corporation that illegally takes a few bucks from a million people makes a few million. Handsome profit if it’s not stopped.

The more interesting part of the CL blog post quotes the court.  As a side note, I’m a bit confused, as it appears to be a quote from an earlier opinion in the case, or maybe I’m missing something. I don’t see the quoted language in the cited Lexis opinion. Likely, it’s my confusion due to insufficient coffee. Nevertheless, I’ll take as a given that CL correctly quotes the court.

Wells Fargo sought decertification because–it argued–the class did a poor job of modeling class-wide damages.  As CL explains,

“It is interesting that the weaknesses in defendant’s transaction data was used by the court to nullify challenges to the methodology used by plaintiffs’ expert to assess damages for the class.  The court found that the same flaws in data would impact an individual’s attempt to prove damages.  The opinion contains a detailed discussion, with an example, of the allged (sic) practices and the damage extrapolation methodology used by plaintiffs’ expert.”

The underlying data problem is one that I see from time-to-time in consumer class actions.  Defendants often resist production of class membership and damage data in large consumer class actions. And once they produce it , they sometimes go so far as to attack the class’s damages model because of the insufficient underlying data. That’s  one of those ironic arguments that I love to see defendants make.

Anyway, kudos to Complex Litigator for pointing out the opinion. Interesting reading for class action practitioners, especially those who handle consumer class actions.

I haven’t seen the complaint yet, but multiple media reports indicate that the U.S. Department of Justice filed a False Claims Act case against KBR, Inc. and its subcontractors over allegedly improper bills for security in Iraq. Here is the CNN report.

I’m taken by this KBR quote reprinted from the linked article:

“The government fails to acknowledge that the Army breached the contract by repeatedly failing to provide the necessary force protection and, in fact, frequently left KBR, its employees and its subcontractors unprotected,” KBR said.

As one of the lawyers representing Oregon National Guard soldiers who claim to have suffered toxic exposure injuries while protecting KBR employees in Iraq, I have a point of view. Regardless, I’m guessing that National Guard soldiers who provided security to KBR employees at Qarmat Ali site in Iraq might have a slightly different view.  Or perhaps KBR is forgetting about the soldiers that provided security at the Qarmat Ali site?

Fair to say I’ll be interested in how this one turns out.

Peter Goodman of The New York Times does a nice job here of looking at the problem of for-profit trade schools. The story mentions our class action against Western Culinary Institute/Le Cordon Bleu College of Culinary Arts in Portland.  And while it’s all exciting to see the case written up in the Times, that’s hardly the point.

The Goodman article points out the disparity between the costs of trade school education and expected earnings.  I was taken by a Sr. Vice President, Brian Williams, comment, “You go in the industry and work your way up.”

I don’t have any idea how much Mr. Williams knows about labor statistics. But the cold reality is that there are very few high-paying jobs in the culinary field–at least as compared to the scads of low-wage kitchen jobs that require no training. In short, there isn’t much “up” to reach.

Some suggest that this is not different from an expensive law or medical degree or a BA in liberal arts from a four-year school. I suppose it’s tempting to take that view, but in reality the differences are profound.

Let’s look at them.

Western Culinary Institute/Le Cordon Bleu say in their catalogs that they provide entry level training. In the lawsuit, we take issue with what they don’t tell students.  A culinary degree doesn’t provide a student much in the way of qualifications for an entry level kitchen job. By comparison, you simply can’t practice law or medicine without degrees and licenses.

In marketing the program, the school tells its prospective students about high placement rates–above 90 percent. But they don’t talk about the pay.  The school collects initial placement and earnings for its graduates. As the New York Times article explains, the vast majority of students earn very low wages upon graduation. Those low earnings won’t allow most students to repay their loans.

Defenders of for-profit trade schools also cite the profoundly expensive four-year bachelors degree problem. They are right about the high cost of four year schools, but wrong to compare the two. Ivy league schools cost far in excess of most middle income families’ abilities to pay, leading many students to incur heavy debt loads.

But several things are different.  The liberal arts program doesn’t sell itself as “vocational training.” Nor does it tout its placement statistics or skill-based career training as the reason to attend. And the universities aren’t run by billion dollar corporations who are concerned about their Wall Street performance.

Our case has taken two years so far. If we succeed, students who suffered losses will recover money that will help pay down their debts.

We need better oversight of these schools, these loans and these lending practices, as students who enroll at for-profit trade schools often are underwater from the day they graduate.  Effective oversight of trade school programs and educational loans would prevent these types of abuses.

The Toyota acceleration problem has gotten a lot of press play. Most recent is yesterday’s story about a Prius that went berserk on a California interstate.  Looks like the engineering staff at Toyota doesn’t yet have this thing corralled.

One of the interesting things about the work I do representing consumers is that I’ve learned that juries are often fairly forgiving of institutions and mistakes. Here is what I mean. In court when businesses, hospitals, or government agencies admit to mistakes, my experience is that jurors are very understanding.

On the surface, it appears that Toyota is taking this, “mistakes were made” approach to defending the sudden acceleration cases.  But underneath is a story that so far has not gotten much play.

Apparently, Toyota has known for years about the problems with its cars. Not a big surprise.

But much worse, Toyota may have hidden the defects and may have violated all sorts of court rules and orders by hiding evidence and stonewalling in cases.  At least that is what one of Toyota’s former lawyers claims.

If this is true and if the story gets traction, Toyota is in major trouble.  Apart from sales issues, their liabilities will go through the roof when–not if–these Book of Knowledge documents are ordered produced.  Seems like their only hope is to completely discredit their former counsel.  I suppose it’s possible that everything he says in the linked CNN interview is fiction. But I doubt it.

The linked story talks about Toyota’s trade secrets.  Toyota thinks it doesn’t have to disclose those in injury cases. Toyota is wrong.

But as long as we’re on the subject, here is a trade secret from a consumer-side lawyer who toils in the trenches. Representing an injured consumer in a  design defect case is tough.  It’s hard to communicate the technical parts of the case. Leading the jury through the thicket of complexity to a just result for the injured consumer is a major challenge.  On the other hand, when that complicated design defect case becomes a case about hidden or destroyed evidence, the business is very likely in big trouble should the business choose to go to trial.

In Portland last week, Senator Wyden held a press conference to announce his support for expanding VA benefits for soldiers exposed to toxic chemicals in Iraq.  This arguably sounds bland.  It is not.

Senator Wyden and Oregon National Guard Vets

It’s important for a few reasons. Let’s talk first about history. Senator Wyden and I are a few years apart, but I believe that we both share the haunting memories of our Vietnam era vets exposed to Agent Orange. That was the impetus for me in joining this fight. I imagine it plays on Senator Wyden, as well. We owe our soldiers many debts. It is good that Senator Wyden sees the world this way and has committed to the fight.

I’ll be the first to admit that I don’t always agree with Senator Wyden. But that is little more than a footnote. I share his sense of mission and want to thank him for his commitment to these issues.

And that brings me to the other reasons why this is important. Senator Wyden’s commitment to these issues provides profound comfort to our injured vets. At one point during the press conference, Senator Wyden opened the mic to any of the sick vets who wanted to comment. A soldier, Sgt. (retired) Matt Hadley, moved toward the mic. He hesitated briefly–Matt is a soldier and not the kind of guy you would find hugging a mic at a press conference. He developed asthma and was forced to retire from the Oregon National Guard.

So as Matt moved to the podium, I wondered what he would say and do. He paused and then called out Senator Wyden by name. He delivered the most heartfelt thanks that anyone could imagine. I would have remembered it and reported it word-for-word, except that I was busy losing the struggle to remain dry-eyed. Sgt. Hadley gave voice to many in that brief moment, and what I heard was that our vets were thankful that they don’t fight alone.

The last reason why all of this is important is that Senator Wyden is taking up the mantle of leadership on these issues. Senator Wyden has been supportive of the vets throughout, but he has deferred to his colleagues, Senators Dorgan and Bayh.  Both are leaving the senate. So Senator Wyden’s leadership on this issue will be important.

All of this takes place as we move forward in the legal fight against KBR. Our soldiers protected KBR at the tainted Qarmat Ali site. And now they face a lifetime of health problems. As we look at these problems going forward, I’m struck by the contrast. Our soldiers did their jobs at Qarmat Ali. They didn’t complain about putting themselves on the line to protect KBR assets and personnel. And now that they are sick, I can’t help but grow angry at KBR’s refusal to cover our soldiers’ backs.

I guess that’s why God invented juries and why I have a job.

For those interested, here is an update on the Oregon late fee class action against Comcast. The short version is that with my co-counsel, Tim Quenelle, I filed a class action against Comcast for its illegal assessment of cable TV late fees in Oregon.

We filed this case in July 2004. No, that’s not a typo. The case will turn six this summer. More background on the history of the case  here and here.

While Comcast disputes this, the class claims that Comcast illegally billed cable TV late fees in Oregon for years. Comcast claims that it’s done nothing wrong, or if it did, these were simply technical violations. Comcast has many other defenses. That’s their choice, of course.

So the latest–the update–is that Comcast is asking the court to allow it another appeal. This time Comcast wants to appeal the court’s decision to allow the class to seek statutory damages of $200 per person.  Comcast already lost an earlier appeal on whether it could require mandatory arbitration of these claims.

While no one has said this directly to me, it’s pretty apparent that the defense is really to drag this out as long as possible. In that respect, the litigation strategy is ironically the opposite of the speedy internet service that Comcast advertises.  But of course, Comcast makes those choices. I suppose it makes sense if the alternative is facing the prospect of payment of millions to Oregon subscribers.

To hear some self-appointed experts talk, consumer class actions are nothing more than stick-’em-up get-rich opportunities. The damages at issue in this case are calculated in the millions. Comcast billed late fees in six dollar increments. While few consumers lost large sums of money, when you total the numbers you come to realize that billing six bucks a pop from many people is a great way to make money.

Meantime, of course, the lawyers pushing the case soldier on. We get paid if and when we bring the case to a successful conclusion, based on a fee that the court must approve as reasonable and fair. And in the six years we’ve been pushing the case, we’ve invested time and money to move it forward.

If you doubt the wisdom of that, let’s consider the alternatives. We deregulated our economy beginning in the 1980s.  So regulation isn’t an option. Even so, I imagine we can all agree that allowing businesses to illegally collect money is unacceptable.  So what’s left, other than the courthouse, when corporations rip off consumers?

For Comcast Oregon cable TV subscribers who paid late fees, all I can say is that we’ll see this through to the end. That may be another 10 years, but so be it.  My son and I were talking the other day, and he related that he’s been accused of being stubborn. “You come by it honestly,” I replied. The reality of our world is that obstinate consumer class action lawyers are one of consumers’ best weapons against corporate greed running amok.

Much is being written about President Obama’s first State of the Union address. I didn’t hear the whole thing, but thanks to the miracle of the interwebs, video clips are up. One has already caught my eye.

First some background. Here is an overview of the Court’s stunningly activist decision in Citizens United, which struck down key components of campaign finance reform. As a result of the decision, corporations may directly give to campaigns from their treasuries because corporations have expansive First Amendment rights. It’s a bizarre ruling that attributes to fictional entities rights that were never intended.  The holding of Citizens United appears to give all corporations these overbroad First Amendment rights, even those controlled by foreign interests that might be hostile to our national interests.

So in the State of the Union, President Obama questioned the Court’s Citizens United ruling. Here is what he said:

“With all due deference to separation of powers, last week the Supreme Court reversed a century of law that I believe will open the floodgates for special interests, including foreign corporations, to spend without limit in our elections.”

This video clip gives a much better feel than the text.  The video cuts to the Court members sitting somberly as members of Congress give a standing ovation. Better, it shows Justice Alito shaking his head and quietly mouthing what looks like, “It’s not true.” To Justice Alito’s credit, he’s no Joe Wilson, as he didn’t shout or interrupt.

So what are we to make of this? Keep in mind that Obama was a law professor before he entered politics. He showed as much with his reference to separation of powers that acknowledges the fundamental constitutional roles of the three branches.  Take note, as well, that the State of the Union is a power and prerogative of the President. U.S. Constitution, Art. II, Sec. 3.

While I’m no pundit or close watcher of presidential pageantry, it seemed remarkable to me that he was using the State of the Union to call out the Court.  The words may look light and bland, but insitutionally, this is closer to the old Saturday Night Live Point-Counterpoint routine with Dan Ackroyd and Jane Curtin:

Nice to see that the President calling the Court out on this. It’s a dreadful decision by an activist majority hell bent on allowing corporations to run amok.

David Sugerman