The long fight ahead: Consumer advocates gear up on mandatory arbitration

In their recent decision in AT&T Mobility v. Concepcion, the U.S. Supreme Court gave a hearty five thumbs up to anything-goes arbitration clauses. The Court’s opinion means that consumers will trade their 7th Amendment rights to trial by jury for expensive, secret, pro-big business private arbitration. At least some members of Congress are engaged. Sens. Franken and Blumenthal and Rep. Hank Johnson have taken on the task by re-introducing the Arbitration Fairness Act.

Here is what’s at stake. After seven years of work, we favorably settled a multi-million dollar consumer class action against Comcast. My guess is that the case would have failed had it been brought after AT&T Mobility.

Those of us who protect consumers will follow this legislation carefully and work to assist. Meantime, if you’ve been shut out of court by a one-sided arbitration clause, I would love to hear about it. Use the comments or ping me via email.

David

 

Career Education Corp and Western Culinary Institute consumer fraud class action: Notice out

We finally moved to the next phase in our Oregon consumer fraud class action against Western Culinary Institute/Le Cordon Bleu Portland and its parent, Career Education Corporation. Class notice went out last week. It took longer than expected because of a few unanticipated changes in the class brought about by the trial court’s rulings.

Here is a link to the class notice website if you have questions about the case. As class counsel, I represent all members of the class. Feel free to call or email us if you have questions about the case–it is part of my job as class counsel to respond.

My co-counsel, Portland attorney Brian Campf, and I have been working on this case since 2008. We are now engaging in merits discovery. That means reviewing thousands of pages of documents and taking depositions of defendants’ employees.

Trial lawyers often dream about trial. This is one of those dream-inducing cases. While we don’t yet have a trial date, I am eager to move us forward. It’s been a long road, and there is far to go. The good news is that last week represents major progress.

Reviving the plutocracy–U.S. Supreme Court ends consumer class actions

 

A win for the plutocracy*

Yesterday’s decision in AT&T Mobility LLC v. Concepcion represents a breathtakingly bad opinion that does profound harm to consumers. It’s a bit geeky, but the takeaway is that this is a huge win for the rich and powerful.

The problem-One of the favorite great business abuses of consumers is the nickel and dime charge. It’s no doubt happened to you. Your bank, credit card company, phone provider, utility, car dealer or cable company has incorrectly charged you a few bucks. Maybe it was a one-time $10 fee on your checking account, or maybe the cable TV company illegally collected a six dollar late fee. But of course, in this era of massive corporate sizing, you are one of a million customers. So at the same time you got billed ten bucks, so did a million other customers. And zotz…just like that…the bank has collected $10 million illegally from its customers.

Here is the tally for those keeping score at home: Bank illegally enriched $10 million. Consumers hosed. That’s why consumers have class actions. With capable counsel and a willing representative, consumers had the tools to fight the nickel and diming problem.

The ruling: The Court effectively ended future consumer class actions with yesterday’s decision. The Court broadly interpreted federal preemption under the Federal Arbitration Act. The Federal Arbitration Act requires courts to enforce valid arbitration agreements. State courts have been ruling that arbitration agreements that limit consumer remedies and ban class actions are not valid under state law. The U.S. Supreme Court decided that those state law rulings were entitled to no deference and were of no effect. Here is the bottom line: No state law may prevent a corporation from: 1) requiring arbitration of all disputes between the consumer and the business; and 2) from prohibiting class actions for those disputes.

What it means for consumers. The problem is that now there will be no class actions for nickel and diming cases, so when a bank, cable company, cell phone provider or car dealer illegally charges a million customers $10, their arbitration clause will be upheld, and consumers will not be able to band together into a class to recover the money.

This will take place soon with emails and letters from cable companies, credit card providers, banks, cell phone companies and the like. It will start with revisions to your credit card agreements, cell phone terms and conditions, and cable terms of service. Buried in that long document will be a change in terms that will add or change the arbitration clause. They will all contain class action bans. Thanks to the Supreme Court, they will likely be enforceable.

Consumers have now been stripped of their abilities to enforce state consumer laws by an over-zealous Supreme Court. Consumer protection will stand and fall on state regulation and state enforcement. Have you seen the state budget lately? I’m sure there’s plenty of extra cash available for consumer protection enforcement. Even with those states that can afford enforcement, the Supreme Court has forced states to increase regulation if states want to have consumer protection. Because God knows–or at least the Roberts Court knows–that private enforcement by consumer class action lawyers is bad for business.

We will either see more regulation, or–more likely–we will see no control. Most businesses operate rationally. If you tell someone that ripping off consumers for $10 million may subject them to a class action case that will cost them that much or more, they will act to avoid facing that liability. But if bending the rules gets you $10 million without consequences, we all know how it ends.

Load up the troughs and get out of the way. Those hogs are hungry!

It’s a win for the plutocrats.

____

*Plutocracy: “[Gk ploutokratia, fr. ploutos wealth] 1: government by the wealthy 2: a controlling class of rich men.” Webster’s New Collegiate Dictionary, p. 878 (1979)

 

Comcast Oregon late fee class action settlement–cable TV

We are starting to get calls and emails about the class action settlement with Comcast.

Here is the link to the settlement information

A few recurring questions:

1. The settlement applies to Oregon Comcast subscribers

2. It is limited to subscribers who paid late fees on Cable TV bills.

3. The link above takes you to a claim form which you must open, print, fill out and mail.

4. The mailing address for claim forms and deadline information for filing the claim are also in the link posted above.

More questions?

Contact us here. I am class counsel and will do my best to answer your questions.

U.S. Supreme Court hearing argument in case that could end consumer protections

Today, the U.S. Supreme hears oral argument in Concepcion v. AT&T Mobility. The issue–preemption under the Federal Arbitration Act–sounds technical and mind-numbingly boring.

While it looks boring, it’s an important case.  Maybe one of the most important in years.

Remember the terms and conditions or subscriber agreement or other agreement you signed or accepted when you signed up for cell service, cable TV, a bank account, a credit card or just about any of the other transactions consumers enter everyday? If you’re like 99.9 percent of all consumers, you don’t remember it all. Chances are you didn’t read the long and technical terms that appear as part of the transaction. You wanted to buy the goods, so you signed.

It’s very likely that the terms included a mandatory arbitration clause. The case focuses on whether that mandatory arbitration can prohibit class actions for consumers.

Some consumer problems involve big businesses engaging in small rip offs. We all know that a $10 rip off simply isn’t worth pursuing when doing so is expensive, timely and risky.  But what if that small rip off of $10 applies to all customers, say a million people? The business pockets $10 million illegally.

When you’re dealing with the nickel and dime consumer rip off, an individual consumer simply can’t obtain relief. One way consumers can fight back is through the consumer class action. The individual can’t bring a $10 case, but a class action allows consumers to chase the $10 million in illegally pocketed money, when a million consumers lose $10 each.

AT&T Mobility and their friends, Comcast and U.S. Chamber of Commerce, want that to change. They want a rule that allows companies to ban class actions and require you to take your case to arbitration as an individual. So that $10 rip off will never be remedied. And AT&T Mobility and its friends will be able to pocket and keep millions by only taking a small amount from each consumer.

The stakes only went up with the changes in Congress last week. If the Supreme Court incorrectly interprets a statute, like the Federal Arbitration Act, Congress can amend the statute to correct the error.  Sadly, consumers lost some of their best friends in Congress in the last election. So we should not count on Congress to bail out consumers if the Supreme Court sides with big business.

One of my favorite movies, The Life of Brian, ends with a great song, “Always Look on the Bright Side of Life.”

For now, I’m simply whistling that tune and hoping that things go okay. Guess we’ll deal with the carnage if the Court gives the Chamber of Commerce the victory it so badly wants.

Cheer up, Brian, it’s no bad.

For-profit trade school regulation–an insider speaks out

My friend and colleague, Portland attorney Josh Shulman, flagged this op-ed in today’s New York Times on trade school regulation.  The author teaches at both traditional non-profit colleges and for-profit programs.  It provides a clear explanation of the need for the gainful employment rule. The message isn’t new, but the messenger is uniquely qualified based on his work experience.

Why is the for-profit trade school industry so strongly opposed to these common sense reforms? What exactly is wrong with a rule that conditions taxpayer-funded federal aid on a program that produces valuable job skills without straddling the student with insurmountable debts? We know the horror stories. It’s time to clean up this mess.

Waiting to hear.

For-profit trade school regulations delayed…follow the money

In late summer–and with much fanfare–it looked like Congress and the Department of Education would finally address the outrageous abuses of bad actors in the for-profit education sector. Predictably, the pace has slowed to a crawl, with Department of Education delaying the promulgation of regulations.

Do you need to wonder why?

According to this report, most of the push back from Congress came from members who received campaign contributions from for-profit trade schools.

Most of the dispute focuses on the Department of Education’s proposed gainful employment rule. The gainful employment rule would put the brakes on bad actors in the for-profit trade school industry. The rules would limit federal student loan monies for those programs that saddle students with debts that cannot be reasonably repaid with degrees granted by the institutions.  Hmm…expensive degrees with heavy debt loads qualifying students for jobs that won’t allow them to pay off the debts. This sounds so familiar.

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.

Comcast late fee class action update: ruling striking defenses

This is an update report for those following our Comcast late fee class action.  In this certified class action, Oregon Comcast cable television subscribers claim that Comcast illegally assessed late fees for cable TV service. The class seeks damages. Here is the last update on the case. Go to my old blog, here, if you want a copy of the class certification decision.

So Friday, Tim Quenelle and I returned to court to argue discovery and pleading motions. We did something a bit unusual and filed motions to strike various affirmative defenses raised by Comcast.

Judge Baldwin ruled today. He granted the class’s motions to strike the following eight defenses:  Reduction of damages based on losses Comcast claims to have suffered (Sixth Affirmative Defense); Subscribers’ breach of their cable TV subscription agreements (Ninth Affirmative Defense); Failure to timely assert rights under the late fee statute (Tenth Affirmative Defense); Estoppel (Eleventh Affirmative Defense); Laches (Twelfth Affirmative Defense); Ratification (Thirteenth Affirmative Defense); Reservation of Rights; and Comcast’s prayer for attorney fees.

Judge Baldwin denied the class’s motions as to four affirmative defenses: standing of the class representatives, voluntary payment, unclean hands, and set-off for class members’ unpaid balances.

Judge Baldwin’s rulings limit Comcast’s defenses and narrow the scope of the case. It’s another step forward for the class. While there is still far to go, we’re counting it as a great day.

Western Culinary Institute class action featured in New York Times story

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.