Judge denies defense motions in Career Education Corp Western Culinary Institute class action

Happy to report that Judge Baldwin denied defendants’ motions for summary judgment and to decertify the class in Surrett v. Western Culinary Institute, our consumer fraud class action for former Western Culinary Institute/Le Cordon Bleu Portland students. We’re very pleased.

The gist of Judge Baldwin’s ruling is that there is sufficient evidence for a jury to decide whether the school and its parent corporation, Career Education Corp., defrauded students by failing to disclose important information. We’re very pleased. Now a bit more discovery and then full-on trial preparation.

It does look like we will be moving into mediation later this month. We had an early attempt at mediation long ago, and it failed miserably. Much  has happened since. Watch this space for updates or–for quicker information–like us at on Facebook here. We tend to post quicker updates there.

Update: Consumer fraud class action Career Ed Corp and Western Culinary Institute

In blog comments, we have been asked for updates on this case, which is below. A few things. First. A better source of quick update is our firm Facebook page. Assuming you are an FB user, simply go here and like the page, and you’ll get more timely information. Second. We have to be mindful of  what we post here. It’s a public page. No doubt that counsel for Career Education Corp and Western Culinary/Le Cordon Bleu Portland read this blog–greetings, Mr. Nylen–so we act accordingly.

And now to the specifics. Last Friday we appeared in front of Judge Baldwin for a long hearing on defendants’ motions to decertify the class and for summary judgment. For people keeping track at home, if granted, the first motion would end the class action and require everyone to go forward individually. If granted, the second motion would end the case, with a victory for the defendants.

Judge Baldwin did not rule from the bench and instead took the motions under advisement. This was not a surprise–there were many pages of pleadings and exhibits to review. It’s a big job digesting all of it.

I handled oral argument for the class, which went approximately two hours. While it’s not a particularly good predictor of outcomes, I felt good about how oral argument went. The defendants have since filed another motion, asking the Court to take into account a recent decision in New York dismissing a law school fraud class action. We’re not particularly impressed with the new argument–New York law is different. So are law schools.

While there is no fixed deadline, I would expect to hear back from Judge Baldwin by early or mid-April. He instructed the sides to come up with a proposed schedule for the rest of the case as well.

Meanwhile, we are preparing for trial of this large and complicated case. It’s been an interesting ride over the last four years. The legal team for the class has put in thousands of hours of work. (Yes, you read that correctly.)  The case continues to present many challenges. Our task remains to overcome each obstacle and get the case to trial.  No one said this case would be easy, but I remain pleased with our progress. And while it may look like nothing is happening, behind the scenes we continue to push forward to our day in court.

 

A modest proposal: Close your Umpqua Bank account

Great coverage here in today’s Oregonian by Brent Hunsberger regarding Umpqua Bank’s decision to cram mandatory arbitration down the throats of Umpqua customers. If you’re an Umpqua Bank customer, you might want to seriously consider moving your funds to a credit union.

By way of background, the U.S. Supreme Court decision last year in AT&T Mobility v. Concepcion touched off a race to the bottom. The Court gave corporations great power to require customers to take any disputes to arbitration, while banning class actions.

The Court fell for the old Lucy, Charlie Brown and the football argument that arbitration is cheaper, easier and better for consumers. Arbitration is none of those things to consumers–especially in small consumer cases. In those cases in which the amount at stake might be $20-200, arbitration filing fees, hearing fees and arbitrator payment fees effectively bar individual consumers from pursuing their claims.

When the likes of Umpqua Bank and ATT Mobility engage in small-dollar rip offs of many consumers, they earn large amounts of money. To put it concretely, if a bank illegally charges five dollars each year to a million customers, it earns $5 million per year in illegal profits. In the past, consumer lawyers have stopped that nickel and diming by pursuing class actions. If a class of a million consumers collects $5 per consumer plus attorney fees and costs, does anyone think the bank will continue the illegal practice?

Banks–and those who represent them–dislike class actions. They settled on a simple strategy. Ban class actions and require consumers to go to arbitration. Ending consumer class actions is a bit like filling the slop pit for a bunch of hungry swine. They’ll be all over that deal.

Once the Supreme Court decided ATT Mobility v. Concepcion, banks, cell phone providers, credit card companies–hell, almost any big business that sells things or services under a written contract–all rushed in for the feeding frenzy. So I guess it is no surprise that Umpqua wants to get in on the action.

So where are consumers in this? If you care about this issue and you are an Umpqua customer, the best response is to vote with your feet. Move it to a consumer-friendly credit union. Because if enough Umpqua customers move, I’m guessing they will get a little nervous. And if a lot of Umpqua customers move, I’m thinking they might get a lot of nervous.

So do it if you can. If they can’t treat us better than slops in a trough, seems to me they don’t deserve our business.

Oregonian on BP consumer fraud class action

The Oregonian picked up the filing of the BP class action. Their report is here on OregonLive. More on the case–including a copy of the initial complaint (pdf)–is here. A few clarifications:

1. The case covers only debit card purchases of gasoline at Oregon ARCO and AM/PM minimarket stations.

2. Under Oregon law, we must give defendants 30 days’ notice and allow them the opportunity to fix the harm that they have caused. If they do not do so within the time, we may seek money damages for the class. We will amend to seek damages for the proposed class, unless BP wants to make things right quickly.

3. If you have questions or stories you would like to share, please use this contact information to give us a shout. (We’re a small outfit,  so it may take us a while to get back to you.)

BP faces Oregon consumer fraud class action

You pull into one of BP’s Oregon ARCO or AM?PM stations, and fill up with gas. The street signs tells you that gas costs a specific amount; maybe $3.50 per gallon. BP’s ARCO and AM-PM advertise some of the lowest gas prices in Oregon. At the pump, the price per gallon matches the sign you saw from the road.

So maybe you buy five gallons. But when you pay with your debit card, you’re assessed a debit card charge of $.35 or .45. So the price per gallon just went up seven to nine cents per gallon over the amount advertised.

BP markets ARCO gas as lower cost. The debit card fee does more than just hurt consumers. It also puts honest competitors at a disadvantage.

Oregon law is clear. Street signs advertising gas prices are supposed to be truthful. The prices charged at the pump are supposed to be the prices that Oregon consumers actually pay. Gas stations have to disclose add-on charges or conditions on their prices.

Oregon BP ARCO and AM PM mini-markets are not doing it. They’re violating Oregon law with every debit card charge.

Yes, it’s only a small charge. But lots of small charges add up to a lot of money. And BP is a master at collecting a lot of money.

Somewhere along the way, things went wrong. And somehow BP and its ilk decided that they were entitled to ignore state law and charge illegal add-on charges. For consumers, this nickel and diming amounts to a series of bites out of us and our bank accounts. It’s dishonest.  To my way of thinking, the undisclosed add-on is a form of corporate corruption.

Fortunately, Oregon’s Unlawful Trade Practices Act provides a means of stopping this type of behavior. And yes, we filed the consumer fraud class action this week against BP because Oregon consumers deserve better. For those interested here is a pdf version of the complaint: Complaint Scharfstein v BP

One of the things about our commitment to handling consumer fraud class actions is that there never seems to be shortage of work for me and my law firm. Consumer fraud class actions are challenging cases, but there is something satisfying about being part of a small group of consumer lawyers willing to stand up against predation by the likes of BP. That’s why we are working late into the waning hours of 2011.

I am pleased to be joined on the case by my friend and frequent collaborator, Oregon consumer attorney Tim Quenelle. Tim and I handled the Comcast late fee class action together. We make a good team.

As with all of our major impact and consumer fraud class actions, I imagine this will be a long and hard-fought case. So this is how we close out 2011 and roll into 2012. We’ll report on it from time-to-time here. Feel free to check back for updates.

Also, if you have been bitten by the BP debit card charge in Oregon, please feel free to let us know via comment or through contact. We would love to hear your story.

Honda civic hybrid class action settlement faces social media backlash

It sounds like a lousy class action settlement, though it is possible that it is not as bad as it sounds. This report in the LA Times, about a pending class action settlement on behalf of consumers who bought the Honda Civic Hybrid, raises some eyebrows.

I don’t know anything about the case or the settlement, but a class action for car buyers that gives class members a coupon for purchases on future cars is almost always a problem. If the problem isn’t apparent, here is a stupid question: How often do you buy a new car? Consumers also get cash, but it’s apparently as low as $100 per purchaser.

Lest anyone accuse me of being totally one-sided, it’s worth noting that there are times when cases don’t work for one reason or another, and a modest settlement is appropriate. I doubt this is how the case went because the attorneys for the consumers are getting a large fee, according to the same report. Even so, I am not licensed in California, and I have no information on the case. I haven’t seen the notice or the settlement agreement, so I’m not very informed.

So all this background leads me to Heather Peters, one of the consumers who is not happy with the settlement. Through her website, Ms. Peters is campaigning to get the word out to consumers who are affected by the settlement. She’s also on Twitter here.

Props to Ms. Peters for a few reasons. First, bad class action settlements are a problem. While I still don’t know enough to know about this one, it smells bad from here. More important, Ms. Peters is apparently providing consumers with information about alternatives, including opting out and small claims.

I’m intrigued by Ms. Peters’ campaign. I hope to learn more about the merits of the settlement and whether it’s as bad as it sounds. My guess is that her pioneering use of social media may become a model for future problem class action settlements.

Update: My Twitter pal, George Wallace, aka @foolintheforest, provides helpful California law context here at his Declarations and Exclusions blog. Besides being endlessly amusing on Twitter, George brings his A-game to the world of California insurance law and civil law issues beyond. In the linked post, George asks some compelling questions about things lurking in the shadows of the LA Times report.

 

 

For-profit colleges apparently prefer lawsuits to increased regulation

When the Obama administration announced stricter regulations on for-profit trade schools, the lucrative industry went on the offensive, hiring the best lobbyists money could buy. “Best,” of course, means most effective and should not be confused with doing what is right.

The heavy investment paid off, as this report in The New York Times explains. The for-profit trade school industry succeeded in diluting the regulations that would have set real standards for these programs.

Consumer advocates should be outraged. But of course, the U.S. Supreme Court believes that corporations are people, too, at least when it comes to spending gobs of money on political advocacy. So outrage is probably wasted. Instead, I’m going with cynicism.

See, there is a certain level of irony here. Strong consumer protection regulations set standards. When businesses follow strong rules, consumers can purchase what businesses sell. Businesses make money. The market economy works.

But when there are thin rules or no rules at all, temptation and greed lead businesses down the wrong path. This era of deregulation has created a consumer fraud monster. Banking practices, mortgage scams, and trade school fraud are not coincidence. They are the result of the triumph of deregulation.

When corporate actors go too far and rip off too many for too much, those of us who dare to represent consumers can fight back. But that seems like a lousy way for our system to run. I hear a lot of carping from certain politicians about lawsuits. But isn’t that what corporations choose when they fight meaningful regulations?

They don’t, really, as many members of the plutocracy believe they are entitled to both no regulation and no exposure to lawsuits for misconduct. I only hope there is a special place in Hell for those miscreants.

I’m spending my Sunday preparing for more depositions in our ongoing trade school fraud case against Western Culinary Institute/Le Cordon Bleu Portland and its parent, Career Education Corp. My guess is that no real rules means many more of these cases in the future. I suppose I should not complain about regulatory failure because it means more business for me. In reality, I would be just as happy if I never saw another for-profit trade school fraud problem again. That’s clearly not in the cards. So be it.

Update: Consumer fraud class action against Career Education Corp and Western Culinary

This is a short update for all following our consumer fraud class action against Career Education Corporation and its Portland culinary school, Western Culinary Institute/Le Cordon Bleu Portland.

We’ve been waiting for a ruling from Judge Baldwin on Career Education Corp’s motion to compel arbitration and to dismiss this long-running class action. Judge Baldwin denied the motion, which is another battle won for consumers and members of the class. I am pleased with the ruling, but there is still far to go.

We’re moving now to complete discovery on the merits of the class’s claims. More news as it happens.

 

Career Education Corporation and the terrible, horrible, no good, very bad day

Last week, Career Education Corporation’s stock took a breathtaking fall. It started with the resignation of Gary McCullough, the CEO. That happened so quickly, he did not even have time to offer the usual walk-the-plank rap that he was leaving to spend more time with his family.

The next day, November 2, the company provided earnings information to investors in their earnings call. The earnings call reportedly included revelations that about an internal  investigation by outside counsel.

It seems that independent counsel reviewed the calculation of placement rates at some of CEC’s schools. CEC revealed that placement rates at some of its schools were improperly calculated. That is when CEC’s stock took its breathtaking fall.

The upshot is that Career Education Corporation is facing serious problems. Or, in the words of a favorite kid’s book, CEC had a terrible, horrible, no good, very bad day. Against this backdrop, we continue to pursue our consumer fraud class action against Career Education Corp. and the Western Culinary Institute/Le Cordon Bleu Portland for former culinary students at the Portland campus. The calculation of placement rates is one of the major issues in our case.

I’ll be interested to see what else comes out from these investigations. Regardless of what else comes out, we’re getting ready to complete depositions and get ready for trial.

Update: NPR did a story two days ago. Access it here

Updated: 9 Nov 2011

Fighting the robber barons: Illegal debt card charges for overdrafts

News today that West Coast Bank reached an agreement with the FDIC relating to its “courtesy coverage” overdraft protection. According to Brent Hunsberger’s report in The Oregonian, the issue was ineffective opt outs. But there is a bigger problem with Oregon banks ordering transactions in a way that triggers a cascade of overdraft charges.

I’m particularly interested in this area and looking at various cases. If you have had multiple overdraft charges assessed by Umpqua Bank, I’m interested in talking to you about the problems.

While it’s good that the FDIC stepped in, I am concerned that they did not fully take care of consumers who were affected by West Coast Bank’s overdraft charges. Still, enforcement is essential. Failing that, those of us who dare to fight the robber barons provide the next best thing.

Feel free to contact me if you have a story about Umpqua or any other Oregon bank that is overcharging on overdraft fees.

David Sugerman