Culinary schools face regulatory pressure

Here is the link to a recent NPR story regarding culinary schools and the disconnect between culinary careers and the costs of culinary school. Interesting quote from the of Career Education Corp. executive Kirk Bachmann about the calculations of placement rates. He notes that CEC schools do not include Starbucks barristas in their placement rates. As we say at the beginning of a deposition, “Swear the witness. I have a few questions.”

On a side note, Le Cordon Bleu Portland/Western Culinary Institute recently announced plans to drop its associates degree.  We’ll be interested in finding out more about that as well.

Meanwhile, our class action case continues forward against these defendants.  Cases like this are slow, but we are on track.

 

New Report: For-profit trade school misconduct

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?

Wells’ Fargo class action flop in California via Complex Litigator

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.

Update: Western Culinary Inst. Career Education Corp. class action moves forward

Recently, Multnomah County Circuit Court Judge Richard Baldwin signed this order (pdf) certifying an Oregon consumer fraud class action against Western Culinary Institute and Career Education Corp. It took us a while to get to an order. That’s not unusual in class action cases.

There is a quiet feature to his ruling that has an important impact on the case. Judge Baldwin refused Western Culinary Institute and Career Education Corp’s request to allow an immediate appeal of his decision.

That’s important for class members because each appeal can add years to the life of a case.  Judge Baldwin also ordered the parties to present a proposed notice plan, so the next step on the case should be notice to the class.

It’s good news for Western Culinary Institute alums who are drowning in debt.  For our part, it’s a great day. Brian Campf and I continue to push forward. It’s been a long road. There is still far to go. Onward.

If you attended WCI (now known as Le Cordon Bleu Portland) on or after March 2006, and you haven’t been in touch, feel free to use the contact information to connect. We can answer questions about the status of the case and also get you into our tracking system.

David Sugerman

Comcast late fee class action update–reflections of a consumer class action lawyer

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.

Honda Civic class action coupon settlement smells of abuse

Here is a report of what looks to be an abusive coupon settlement in a class action in California. It prompts me to do some explaining, as I’m a consumer class action lawyer.

As the linked report explains, the case involves a California false advertising class action in which two consumers filed a class action against Honda for overstating the mileage on its Civic Hybrid. I’m going to assume that Herb Weisbaum, the MSNBC Consumerman columnist, got the story right. He usually does a good job on consumer issues. I don’t know anything about the case or have access to the court file. I’m relying on his report for this analysis.

The story goes that Honda and the class reached a settlement that provided for coupons and an informational DVD for the class, incentive payments for the class representatives, and a seven-figure attorney fee award for class counsel.

The coupons are the problem. According to the linked report, the coupons are worth $500-$1,000 but only redeemable on the purchase of a qualifying model of a Honda or Acura. That stinks. And it stinks in both directions. If Honda did wrong, then it should provide real relief to the class and shouldn’t be rewarded with a marketing campaign for consumer ripoffs. If, on the other hand, Honda did not violate California law then it shouldn’t be paying millions to attorneys who pursue class actions.

And as for the lawyers for the class it stinks because coupon settlements are acceptable under a rare set of circumstances. Here are some things that should be in place to make for a fair coupon settlement. They make sense when the coupons are for widely-purchased consumer goods, like gasoline or toothpaste. To be a fair settlement, coupons should almost always be transferable and/or redeemable for cash. Consumers who receive coupons to settle a class action should be able to get real benefit from them. The reported Honda coupon settlement fails on all fronts.

It’s possible that I’m missing something, and if so, as is my general practice, I will update this post. But save me the defamation threat letters that don’t include a thorough and documented explanation of how I’m missing the mark.

I imagine that much criticism will be heaped on the class lawyers for this settlement. Let’s be clear. Based upon the reported facts in the MSNBC column, that criticism is well-deserved. It looks like Honda chose to pay millions to class counsel to snuff out a liability and promote future sales of various products. Settlements take two sides. Honda deserves some of the darts on this deal as well.

The other piece is that it seems to me that class members may want to strongly consider objecting to this settlement. Class action settlements must be reviewed and approved by the court, so if you’re a class member and you get a notice, you might want to consider whether to object. A rejection of this settlement might send a message to both sides that consumers deserve better.

David Sugerman