Segal McCambridge Legal Blog

From the Indianapolis Star

Law firm sues State Fair on behalf of all stage collapse victims

By Carrie Ritchie

August 23, 2011

An Indianapolis law firm has filed a class action lawsuit on behalf of all victims of the Indiana State Fair stage collapse. Cohen and Malad claims in the lawsuit, which was filed Monday in Marion Superior Court, that the State of Indiana and companies who were hired to set up the stage were negligent and didn't ensure that the stage was safe. It also claims there were design and manufacturing flaws in parts that held up the stage's roof.

The stage collapsed Aug. 13 before Sugarland was about to perform.

In a press release issued today, the law firm says it will donate its services so more of the damages can go to victims.

Several victims, including the families of three people who died in the accident, have already sued or say they intend to sue.

From Point of Law.com

“A must-read landmark decision from Judge Easterbrook in Aqua Dots Product Liability Litigation. The Chinese manufacturer of the Aqua Dots toy used the wrong adhesive in the product process; when swallowed, the adhesive metabolized into gamma-Hydroxybutyric acid, i.e., GHB, the so-called date-rape drug, with predictably adverse effects for the small children who did so.

The companies involved acted responsibly when they discovered the problem, and recalled the product, offering refunds and replacements.

There are of course legitimate personal injury claims that stem from a defective product like this. But there were also class actions seeking recovery for economic loss. What economic loss when the manufacturer is offering a refund or replacement? Well, that’s a problem, isn’t it, but lawyer-driven class actions often seek to free ride off of and take credit for what the manufacturer is already doing for the sake of justifying a large attorneys’ fee: the attorneys in the similarly free-riding Mattel Lead Paint settlement asked for $12.9 million.

This will not fly in the Seventh Circuit now: “the district court should have relied on the text of Rule 23(a)(4), which says that a court may certify a class action only if ‘the representative parties will fairly and adequately protect the interests of the class.’ Plaintiffs want relief that duplicates a remedy that most buyers already have received, and that remains available to all members of the putative class. A representative who proposes that high transaction costs (notice and attorneys’ fees) be incurred at the class members’ expense to obtain a refund that already is on offer is not adequately protecting the class members’ interests.” It is good to see a court recognize that Rule 23(a)(4)’s adequacy requirement forbids class representatives from incurring socially wasteful litigation costs for the benefit of their attorneys at the expense of the class they represent. This will be an especially important principle in merger-and-acquisition strike suits.”

The Seventh Circuit decision can be found here

From the Wall Street Journal

Supreme Court Revives Suit Against Halliburton

WASHINGTON—The U.S. Supreme Court on Monday revived a securities-fraud lawsuit against Halliburton Co., ruling that a lower court was too quick to throw out the case.

The lawsuit alleged Halliburton misled investors about its asbestos liabilities, its revenue on certain construction contracts and about the benefits of its 1998 merger with Dresser Industries.

A federal appeals court in New Orleans ruled last year the class-action lawsuit couldn’t proceed because the plaintiffs hadn’t shown that the company’s alleged misstatements inflated the company’s stock price.

But the Supreme Court, in a unanimous opinion written by Chief Justice John Roberts, said the appeals court wrongly required the investor plaintiffs to prove an essential piece of their case at early stages of the litigation.

Taken in part from the Wall Street Journal
WASHINGTON—On April 27, 2011, the Supreme Court handed business a powerful shield against consumer class actions, ruling that state laws can’t override contract clauses requiring customers to present complaints individually to a private arbitrator.

In a 5-4 ruling, split along its usual conservative-liberal divide, the court held that a “national policy favoring arbitration” pre-empted California law intended to protect consumers from widespread fraud.

California consumers had sued AT&T Inc. for allegedly defrauding them by charging $30.22 in sales tax on cellphones it advertised as free.

AT&T invoked the arbitration clause of its form contract, which required complaints to be resolved through private arbitration in an “individual capacity” and barred “any purported class or representative proceeding.”

California courts had found such provisions “unconscionable,” legal parlance for a contract term so unfair it is void. In a 2005 opinion, the California Supreme Court said that when a company schemes “to deliberately cheat large numbers of consumers out of individually small sums of money,” class actions may be the only effective form of redress. While the fraud might reap a windfall, the court’s reasoning went, each individual’s loss would be too small to dispute unless grouped into a single claim.

The 1925 Federal Arbitration Act, adopted to force states to honor arbitration clauses, says arbitration clauses can’t be set aside unless they violate the laws governing contracts in general. The question before the Supreme Court was whether the California rule simply applied general fairness principles to arbitration clauses or specifically targeted arbitration.

Writing for the majority, Justice Antonin Scalia said that class actions inherently conflicted with arbitration’s goals of speed and efficiency.

“The switch from bilateral to class arbitration sacrifices the principal advantage of arbitration—its informality—and makes the process slower, more costly, and more likely to generate procedural morass than final judgment,” he wrote in an opinion joined by Chief Justice John Roberts and Justices Anthony Kennedy, Clarence Thomas and Samuel Alito.

Justice Scalia cited statistics showing that the average individual arbitration was resolved in six months or less, while class arbitrations could drag on for years. Moreover, “class arbitration greatly increases risks” for business, he wrote. “Faced with even a small chance of a devastating loss, defendants will be pressured into settling questionable claims.”

In a dissent joined by Justices Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan, Justice Stephen Breyer wrote that since the California rule applied equally to class litigation and class arbitration, it can’t “fairly be characterized as a targeted attack on arbitration.”

The Federal Arbitration Act, Justice Breyer wrote, intended to preserve the states’ traditional authority over contract law, insisting only that arbitration receive equal footing with other contracts.

“California is free to define unconscionability as it sees fit, and its common law is of no federal concern so long as the state does not adopt a special rule that disfavors arbitration,” he added.

Wednesday’s decision was the latest in a series that has given arbitration clauses nearly ironclad protection.

In a statement, AT&T said that individual arbitration “often benefits consumers” because claims can be resolved faster than a more complicated class action. “We value our customers, and AT&T’s arbitration program is free, fair, fast, easy to use, and consumer friendly,” the company said.

Some lawmakers, however, say consumers are powerless when banks, software makers and others condition their products on form contracts whose fine print locks them into arbitration.

“In arbitration, there is no transparency, nor is there an independent arbitrator,” said Senate Judiciary Committee Chairman Patrick Leahy, a Vermont Democrat who has held hearings on consumer arbitration.

After Wednesday’s decision, “Congress needs to respond with legislation to clarify the original intent of the Federal Arbitration Act,” Mr. Leahy said.

The full Wall Street Journal article is here

The Wall Street Journal Law Blog post, “After AT&T Ruling, Should We Say Goodbye to Consumer Class Actions?” can be found here

The SCOTUS opinion, AT&T MOBILITY LLC v. CONCEPCION ET UX, 09-893 can be found here

Shareholder Jason Kennedy assisted by Associate Jill Felkins recently argued before the Indiana Court of Appeals in the case of Connie Brumley, et al v. Commonwealth Business College Education Corp., d/b/a Brown Mackie College. Segal McCambridge represents the Appellee, Brown Mackie College.  A link to the video of the oral argument can be found here

A summary of the case: Two sets of plaintiffs sued Commonwealth Business College Education Corporation d/b/a Brown Mackie College in two different Lake Superior Courts alleging, among other things, that Brown Mackie fraudulently represented that its surgical technology program was accredited, thereby inducing them to join the program. The Complaint stated that because Brown Mackie allegedly lacked accreditation, students completing the program were ineligible to sit for the NBSTSA certification exam. The cases were eventually consolidated before Judge Gerald N. Svetanoff. Brown Mackie filed a motion to compel arbitration, arguing that plaintiffs executed an Enrollment Agreement containing a provision requiring that any dispute be submitted to arbitration. A hearing was held, at which evidence was presented that all plaintiffs except one also executed an Arbitration Agreement separate from the Enrollment Agreement. Unlike the Enrollment Agreement, the Arbitration Agreement did not contain any representations concerning Brown Mackie’s accreditation. Judge Svetanoff reasoned that although Brown Mackie’s alleged fraud may have affected the enforceability of the arbitration provision in the Enrollment Agreement, it did not affect the enforceability of the separate Arbitration Agreement because that agreement did not contain any of the representations at issue. Accordingly, Judge Svetanoff granted the motion to compel arbitration as to all plaintiffs except the one who did not execute the separate Arbitration Agreement. Plaintiffs appeal arguing that they should be entitled to seek relief through a court of law and not through arbitration.

Here is a link to the video of the oral argument

In an update to our earlier post “Illinois appeals court revives Madison County Cigarette lawsuit” the Madison Record has the following article, “Tillery given fresh start on $10 billion tobacco class action”

Fifth District appeals judges granted Stephen Tillery a fresh start on his $10 billion class action against cigarette maker Philip Morris on Feb. 24.

Presiding Judge Melissa Chapman and Justices Bruce Stewart and James Wexstten ruled that a two year limit didn’t run out on Tillery’s petition to reopen the case.

Chapman wrote that “we do not believe that the ends of justice would be served if trial courts were unable to grant relief under the unusual circumstances presented here.”

Philip Morris claimed the two years started running when the Illinois Supreme Court reversed former circuit judge Nicholas Byron’s $10 billion judgment.

Tillery claimed the two years started running when Byron carried out the Supreme Court’s order to dismiss the case.

Chapman wrote, “We find little guidance in answering the question before us.”

She and her colleagues found a single case like it in an Illinois appellate court, and they reached a different result.

Chapman wrote that “this court is not obliged to follow the decisions of other districts of the appellate court.”

Byron’s successor, Circuit Judge Dennis Ruth, must now determine whether Tillery’s petition alleges enough facts to require relief from the order dismissing the case.

Tillery sued Philip Morris in 2000, on behalf of Sharon Price, claiming it violated state consumer fraud law in marketing “light” and “low tar” cigarettes.

Philip Morris argued that its marketing qualified for exemption from state consumer law because the Federal Trade Commission authorized light and low tar labeling.

Philip Morris argued that it abided by terms of consent decrees that other cigarette makers signed in 1971 and 1995.

Byron certified a class of three million smokers, held a bench trial in 2003, and awarded every penny of damages Tillery claimed.

He wrote, “No regulatory body has ever required (or even specifically approved) the use of these terms by Philip Morris.”

His judgment included $1.8 billion in fees for Tillery and his associates.

Philip Morris petitioned for direct appeal to the Supreme Court, where the Justices first denied it and then granted it.

On Dec. 15, 2005, the Justices ruled that state consumer law excluded the claim.

Tillery moved for rehearing, and the Justices denied it.

He petitioned for U.S. Supreme Court review, and the Justices in Washington denied it.

On Dec. 5, 2006, the Illinois Supreme Court issued a mandate to Byron.

On Dec. 18, 2006, Byron signed an order dismissing the case.

Two years later, to the day, Tillery moved for relief from the order.

He pleaded that a new decision from the U.S. Supreme Court proved that the Illinois Supreme Court made a mistake.

Philip Morris moved to dismiss the petition under the statute of limitations and for failure to allege a basis for relief.

Ruth held a hearing and ruled that the limit ran out, sparing himself a decision on whether Tillery alleged a basis for relief.

When Tillery appealed, Philip Morris called for the Fifth District to declare that he failed to allege a basis for relief.

The Fifth District decided the question of limitations and kicked the question of facts back to Ruth.

Chapman wrote that a party seeking relief from judgment must request that relief from a trial court, not an appeals court.

“Although this is stating the obvious, this simple fact defines the limits of what relief the trial court has the authority to provide,” she wrote.

“The trial court obviously has no authority to vacate or set aside the supreme court’s ruling in the case,” she wrote.

“Thus, if it is to grant relief at all, it must grant relief from its own order – assuming that it finds a basis for granting that relief,” she wrote.

“Just as the plaintiffs cannot challenge the dismissal order without also challenging the supreme court ruling, they cannot challenge the supreme court ruling without challenging the trial court’s dismissal order,” she wrote.

“Moreover, the supreme court chose to remand to the trial court with directions to dismiss rather than simply reversing outright and dismissing the action itself,” she wrote.

From the Associated Press

A lawsuit that led to a $10.1 billion verdict against Philip Morris USA before it was overturned by the Illinois Supreme Court has been revived by a lower court.

The unanimous ruling Thursday by the three-judge panel of the Mount Vernon-based 5th District Appellate Court cleared the way for the plaintiffs to argue that a favorable 2008 U.S. Supreme Court decision in an unrelated case may be applied to reinstate the questioned Madison County one involving Philip Morris’ marketing of “light” cigarettes.

In 2003, now-retired Madison County Circuit Judge Nicholas Byron found that Philip Morris misled customers about “light” and “low tar” cigarettes and broke state law by marketing them as safer. The state’s Supreme Court overturned that verdict in 2005, saying the Federal Trade Commission allowed companies to characterize or label their cigarettes as “light” and “low tar,” so Philip Morris could not be held liable under state law even if such terms could be found false or misleading.

The U.S. Supreme Court in late 2006 let that ruling stand, and Byron dismissed the case the next month. But in December 2008, the U.S. Supreme Court, in a 5-4 decision, ruled in a lawsuit on behalf of three Maine residents that smokers may use state consumer protection laws to sue cigarette makers for the way they promote “light” and “low tar” brands.

Counting that decision as new evidence, the attorney behind the Illinois lawsuit, Stephen Tillery, again approached the Mount Vernon appellate court in hopes of reopening his firm’s class-action lawsuit involving 1.1 million people who bought “light” cigarettes in Illinois.

That suit has claimed that Philip Morris knew when it introduced such cigarettes in 1971 that they were no healthier than regular cigarettes. But the company hid that information and the fact that light cigarettes actually had a more toxic form of tar, the lawsuit claimed.

Philip Morris, which can appeal Thursday’s order to the state’s high court, said Saturday in a statement it would continue to fight. Murray Garnick of Altria Client Services, which represents Altria Group Inc. subsidiary Philip Morris USA, said Thursday’s ruling was based solely on a procedural question about whether the plaintiffs met a statute of limitations — the appeals court found they did — and not the merits of the plaintiffs’ bid to reopen the case.

Since Illinois’ Supreme Court reversed the damages award, Garnick said, “the plaintiffs have made multiple unsuccessful attempts to reopen the case. We believe that the plaintiffs’ latest attempt is equally without merit.”

Tillery said in a statement Friday to the St. Louis Post-Dispatch, which first reported Thursday’s appellate ruling, that his St. Louis firm is “eager to return to the courtroom to seek the justice our clients deserve.”

The protracted Illinois legal fight has proven to be a headache for even some jurists on the state’s highest court. After Byron asked the Mount Vernon appellate court in May 2007 whether he had authority to reopen the lawsuit he decided against Philip Morris, the Illinois Supreme Court in 2007 ordered without explanation that Byron stop such inquiries.

“The court’s action today is entirely predictable because it quickly and quietly closes the book on a case that a majority of this court, I am sure, would rather forget,” Justice Charles Freeman wrote then in dissent in the 4-2 ruling.

Former Illinois Gov. James Thompson, a Chicago attorney who was representing Philip Morris, argued then that the appellate court has no authority to decide whether the case can be reopened.

From the Rule 23 Order:

“The two-year time limit for filing a petition for relief from judgment under section 2-1401 of the Code of Civil Procedure began to run when the trial court entered its final order on remand from the Illinois Supreme Court. The plaintiffs in this class action appeal an order dismissing their petition for relief from judgment (735 ILCS 5/2-1401 (West 2006)). They filed their petition under an unusual set of procedural circumstances. They sought relief from a judgment entered after the Illinois Supreme Court reversed a trial court judgment in their favor. At issue is when the two-year time limit for filing petitions for relief from judgment began to run: when the supreme court issued its decision or when the trial court dismissed the plaintiffs’ suit pursuant to the supreme court’s direction. The trial court agreed with the defendant that the two-year period began to run when the supreme court issued its decision, which made the plaintiffs’ petition untimely. The court accordingly dismissed the plaintiffs’ petition. We reverse and remand.”

Justice Melissa Chapman wrote the order and was joined by Justices Stewart and Wexstten.

The Rule 23 order in Prince V. Philip Morris, Inc. 5-09-0089 can be found here

The Seventh Circuit recently addressed pleading standards within the context of a class action complaint and upheld the decision of the District Court that the Second Amended Complaint was sufficient under the Twombly standard.

POSNER, Circuit Judge. A class action suit that has been consolidated for pretrial proceedings in the district court in Chicago charges the defendants with conspiring to fix prices of text messaging services in violation of federal antitrust law. The district court allowed the plaintiffs to file a second amended complaint despite the defendants' objection, based on Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), that the second complaint like the first failed to state a claim. The defendants asked the district judge to certify, for interlocutory appeal under 28 U.S.C. § 1292(b), the question of the complaint's adequacy. The judge agreed. He said: "Though (as plaintiffs argue) the Seventh Circuit had issued dozens of decisions concerning the application of Twombly, the contours of the Supreme Court's ruling, and particularly its application in the present context, remain unclear. The Court believes this is a subject on which reasonable minds could differ. The question presented is controlling, because there is at least a decent chance (though it is by no means certain) that were a court to rule the second amended complaint deficient, the case would be over. Finally, there is a good chance that immediate review may materially advance the ultimate conclusion of the case."
…
What is missing, as the defendants point out, is the smoking gun in a price-fixing case: direct evidence, which would usually take the form of an admission by an employee of one of the conspirators, that officials of the defendants had met and agreed explicitly on the terms of a conspiracy to raise price. The second amended complaint does allege that the defendants "agreed to uniformly charge an unprecedented common per unit price of ten cents for text messaging services," but does not allege direct evidence of such an agreement; the allegation is an inference from circumstantial evidence. Direct evidence of conspiracy is not a sine qua non, however. Circumstantial evidence can establish an antitrust conspiracy. … We need not decide whether the circumstantial evidence that we have summarized is sufficient to compel an inference of conspiracy; the case is just at the complaint stage and the test for whether to dismiss a case at that stage turns on the complaint's "plausibility." The Court said in Iqbal that the "plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." 129 S. Ct. at 1949. This is a little unclear because plausibility, probability, and possibility overlap. Probability runs the gamut from a zero likelihood to a certainty. What is impossible has a zero likelihood of occurring and what is plausible has a moderately high likelihood of occurring. The fact that the allegations undergirding a claim could be true is no longer enough to save a complaint from being dismissed; the complaint must establish a nonnegligible  probability that the claim is valid; but the probability need not be as great as such terms as "preponderance of the evidence" connote.

The plaintiffs have conducted no discovery. Discovery may reveal the smoking gun or bring to light additional circumstantial evidence that further tilts the balance in favor of liability. All that we conclude at this early stage in the litigation is that the district judge was right to rule that the second amended complaint provides a sufficiently plausible case of price fixing to warrant allowing the plaintiffs to proceed to discovery.

The Seventh Circuit opinion can be found here

The Law.com article can be found here

From the Indianapolis Business Journal

Eli Lilly and Co. on Friday won reversal of a ruling that granted class-action status to a lawsuit by pension funds, unions and insurers who alleged that improper marketing of Zyprexa, its schizophrenia treatment, raised their costs.

A U.S. appeals court in New York threw out a September 2008 ruling by U.S. District Judge Jack Weinstein in Brooklyn. He had said the plaintiffs could pursue as a group claims that Indianapolis-based Lilly's Zyprexa marketing caused them to pay more for the drug than what it was worth. The plaintiffs were seeking $6.8 billion in damages.

The story can be found here

In a 4-3 opinion, the Missouri Supreme Court affirmed a trial court decision which declined to compel arbitration in a complaint which sought class action status and damages for unauthorized practice of law and its deceptive practices connected with the sale of merchandise under the Missouri merchandising practices act (MPA).

The Defendant, Lee’s Summit Honda, claimed that the trial court erred in failing to compel arbitration because the claims were within scope of the parties' arbitration agreement, the unauthorized practice of law claim was subject to arbitration and the arbitration agreement was valid. The trial court overruled Honda's motion to compel, finding that the claim of unauthorized practice of law is not subject to arbitration because the courts exclusively decide what constitutes the unauthorized practice of law. The trial court also found the arbitration agreement to be procedurally and substantively unconscionable.

On appeal, Honda asserted that the trial court erred in determining that the Plaintiff's claims are beyond the scope of the arbitration agreement, that the Plaintiff's unauthorized practice of law claim is subject to arbitration and that the class arbitration waiver was not unconscionable. The Missouri Supreme Court in a 4-3 decision disagreed.

The opinion can be found here