Philip Morris owes $13.8 Million to plaintiff

Posted on August 22, 2011 by Jordan Parkhurst

The Second District Court of Appeal, sitting here in Los Angeles, recently upheld a punitive award of $13.8 million against Philip Morris in a suit alleging the corporation “defraud[ed the plantiff] by deceptively marketing an addictive and lethal product in the years before the government required warning labels on cigarette packages.”

The jury awarded the plaintiff, the late Betty Bullock of Newport Beach, $850,000 in compensatory damages, making the punitive award just over 16 times that award, which Philip Morris maintains is “constitutionally excessive.” At the same time, Philip Morris reported over $6.3 billion in profits in 2010, making the punitive part of the award approximately 0.0460% of its yearly profits last year.

The Supreme Court ruled in 1996 that punitive damage awards, intended to punish Defendants and deter similar conduct in the future, may violate Due Process if the award proves “grossly excessive.” (BMW, Inc. v. Gore, 517 U.S. 559, 562) In order to make that determination, the Supreme Court considers several factors, including but not limited to, the reprehensibility of the Defendant’s conduct, the ratio to actual damages and the financial position of the defendant (Id. At 589-593).

Philip Morris is expected to appeal the decision to the California Supreme Court.
 

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Retailers Face Lawsuits Over ZIP Code Collecting

Posted on February 22, 2011 by Audrey Rounds

A recent ruling by the California Supreme Court has unleashed a rash of lawsuits against big retailers that ask their customers to provide zip codes when making purchases with a credit card.

Lawyers representing store customers filed lawsuits last week against Best Buy Co., Coach Inc., Nordstrom Inc. and Macy's Inc., among other retailers.

The lawsuits come on the heels of a Feb. 10 ruling by California's highest court that found Williams-Sonoma Inc. violated the state's credit-card law by asking a customer for her zip code when making a purchase in 2008. The customer sued the home-goods retailer, contending that it used the zip code to determine her address, which is now contained in the company's database.

Stores regularly mine customer data as a way to measure buying habits and target promotions. They also sometimes sell the information to other companies.

Companies that violate the state law face fines of $250 for the first violation and as much as $1,000 for each subsequent violation. Plaintiffs in the cases are seeking those penalty fees.

The case was based on the state's 1971 credit-card law that prohibits merchants from requesting or requiring a cardholder's "personal identification information" as a condition of accepting the card for payment. The court determined that a zip code qualifies as that type of information because it is part of the cardholder's address.

Retailers routinely ask customers for their zip codes as a security measure to guard against fraudulent transactions. The practice is particularly common at gas stations, where customers often must enter their zip codes when filling up their own tanks.

After handing down its ruling, the California Supreme Court sent the Williams-Sonoma case back to a lower court, which will rule on a motion for class-action status. The lower court will also determine potential civil penalties in the case.

More information on lawsuits over zip code question can be found here and here.

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Are Consumer Class Actions In Danger of Becoming Obsolete?: Supreme Court Hears Oral Argument on the Pivotal Issue of Contractual Class Action Bans

Posted on November 10, 2010 by Katie McSweeney

On November 9th the business-friendly Roberts Court heard oral argument on the pivotal issue of whether the Federal Arbitration Act of 1925 preempts a state court’s ability to strike down a contractual class action ban. If the Court ultimately rules in AT&T’s favor, corporations will have the right to contractually prohibit consumers from pursuing class action relief. Meaning that, as confounding as it may sound, the next time you are presented with pages of endless fine print in connection with a purchase or service agreement, you could be unwittingly signing away certain legal rights, and be doing so as part of a perfectly legal transaction.

The case at issue, Concepcion v. AT&T Mobility, LLC was initially brought as a straightforward class action claim by a husband and wife who signed a contract with AT&T for wireless service under the guise that the contract would include two “free” cell phones, which in reality came with a litany of undisclosed service charges amounting to roughly $30. However, the seemingly simple case took on new and far more significant meaning when the U.S. District Court for the Southern District of California declined to dismiss the case on the grounds proffered by AT&T- that the Concepcions, in signing a fine print laden contract for their wireless service, had agreed to pursue arbitration and forego class action litigation in the event of a legal dispute.

When AT&T appealed the ruling in the 9th Circuit Court of Appeals the issue at hand was not whether or not the company had defrauded a class of consumers to the tune of $30 each, but whether a Federal Act reaching back to 1925 trumps a state’s court’s ability to rule that a ban on class action litigation is unconscionable. The subject Act protects arbitration provisions which are common in consumer contracts and require that a consumer resolve their legal disputes in the more informal arena of arbitration rather than seeking relief through the court system. However, this seemingly innocuous tool often translates in practice to an unfair advantage to corporations who, as was the case with AT&T's provision, can force plaintiffs to arbitrate at pre-selected, privately owned firms that may or may not be in the corporation’s back pocket. At the very least, such a provision denies consumers the right to select the vehicle with which to pursue their grievance. For these reasons, California courts have consistently found such binding arbitration provisions are unconscionable, and not surprisingly the 9th Circuit adhered to California precedent and affirmed the lower court’s ruling.

However, it is equally unsurprising that AT&T was not content to let the 9th Circuit’s ruling stand and sought Supreme Court review. While the Supreme Court granting review of the decision was a blow to consumers in and of itself, it remains unclear how the Court will rule following yesterday’s oral argument. This is a promising sign given the Court’s history of skepticism towards class actions and tendency to protect arbitration provisions. Fueling the Court’s uncertainty may be the fact that ruling in favor of AT&T’s preemption argument would require it to affirmatively reject the California Supreme Court’s holding that class action waivers in form contracts are unconscionable, a proposition that prompted the notoriously conservative Justice Scalia to ask “are we going to tell the State of California what it has to consider unconscionable?”.

That said, the conservative Court could go either way and a victory for AT&T could have devastating and far-reaching consequences for consumer rights as it would leave many consumers with no legitimate redress for corporate harms. Although, perhaps even more concerning is the likelihood that deceptive business practices will increase exponentially without the threat of class action litigation to serve as a deterrent.
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Health Care Reform: How It Affects Medical Device Manufacturers

Posted on April 28, 2010 by Neda Sargordan

On March 21, 2010, the United States Congress passed the Health Care and Education Affordability Reconciliation Act of 2010 (H.R. 4872). This legislation will reform the nation’s broken health insurance system by providing medical coverage to uninsured, vulnerable Americans who would otherwise not be able to receive adequate health care. Passage of this Act is truly a democratic success and a milestone in our nation’s history.

Such change does not come cheap. According to the Congressional Budget Office, health care reform will cost an estimated $940 billion over the course of 10 years. To offset the costs imposed on the government, the Act appropriately imposes tax increases on certain classes and industries. One such area is the medical device manufacturing industry.

 

Effective 2013, a 2.3% excise tax will be imposed on sales of medical devices. The medical device excise tax will apply to devices ranging from surgical instruments to bedpans. The provision is expected to raise $20 billion over the course of 10 years. 

The Medical Device Manufacturers Association (MDMA) is very concerned about the tax’s impact on manufacturer profits. The MDMA argues that the tax will stifle innovation and cut into research and development (R&D) of medical devices. While the long term effect of the tax on manufacturers remains unclear, one thing is certain: proper R&D of medical devices is absolutely critical to the safety of patients and consumers. For manufacturers to threaten the imposition of such an excise tax with a reduction in R&D is nothing short of reckless and irresponsible. 

Per the Supreme Court’s decision in Riegel v. Medtronic, Inc., 552 U.S. 312 (2008),  injured patients are barred from bringing tort law claims against manufacturers of Class III, FDA approved, medical devices (devices which sustain/support life, are implanted into the body, or pose serious risk of illness or injury).  If manufacturers are in fact considering cutting into R&D of their products, consumers will find themselves in a position of greater risk without opportunity for legal recourse. For this reason, passage of the Medical Safety Device Act should be made a priority in 2010.

 
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The March KPA Monthly Update is out now, check your email!

Posted on March 17, 2010 by Breanna Wilson

The latest edition of the KPA Monthly Update was released yesterday to subscribers.

This month's issue includes these articles from the KPA staff:

Katie McSweeney - "The California Supreme Court's Holding in Schacter v. Citigroup: A Minor Victory for Employers and a Cautionary Tale for Employees"

Neda Sargordan - "Medical Device Safety Act - A Fight Against Corporate Immunity"

Adam Kerns, J.D., C.P.A. - "Client Trust Accounting: A Snapshot of What Lawyers Need to Know"

 

Didn't get this month's edition?  Join our mailing list now - it's free!

 

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Will the Notice Pleading Restoration Act be Enough?

Posted on August 24, 2009 by Bahar Dejban

The U.S. Supreme Court decisions in Ashcroft v. Iqbal and Bell Atlantic v. Twombly has made it much easier for Defendants to have Plaintiff’s cases dismissed before there is even an opportunity to begin discovery.   Both cases interpreted Rule 8 of the Federal Rules of Civil Procedure and together require that sufficient factual allegations are made in the complaint. So basically, Plaintiff attorneys need to do discovery in order to get the information need to prepare a complaint that will not be dismissed under Twombly and Iqbal in order to be able to be given the opportunity to then begin discovery. Sequentially, something is inherently wrong with what the Supreme Court is now requiring at the pleading stage.

Senator Arlen Spector has proposed legislation, known as the Notice Pleading Restoration Act of 2009, that will change this seemingly illogical decision…..or will it. The proposed Bill does not really provide a standard for dismissal of claims in federal court, but rather simply says that the standard used should be the one that the Supreme Court used in Conley v. Gibson.   This is problematic because unlike stating an explicit standard, reference merely to the standard in Conley  leaves open the possibility for different interpretations of what that standard exactly is.   I mean, Twombly and Iqbal could be considered explanations of what the standard is in Conley. It leaves the door open to further debate as to what the Bill really does and what the Conley standard really means. Although Spector’s intent may be to go back to more liberal pleading requirements, it’s the actual words in the Bill that that are going to be interpreted, and as it stands, those words alone to not make Spector’s intent definitively clear.   

 

 

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A New Era: Limiting the Preemption Doctrine

Posted on August 5, 2009 by Deborah Gutierrez

The Supreme Court’s decision in Wyeth v. Levine, 129 S. Ct. 1187 (U.S. 2009), represents a victory for consumer advocates and a change in tide within the preemption debate. On March 4, 2009, the Court found Wyeth, the pharmaceutical giant, liable for the adverse affects of one of its drugs. Phenergan, which is administered intravenously to treat migraine-induced nausea, caused plaintiff Levine to suffer the amputation of her arm after an “IV push” injection of the drug caused irreversible gangrene. Wyeth argued that the Food and Drug Administration’s (“FDA”) regulations preempted Levine’s lawsuit, but the Court disagreed. 

The Court expressly rejected Wyeth’s preemption argument for two reasons: (1) state law claims did not obstruct the FDA’s authority to regulate drug labeling; and (2) the evidence actually suggested that Wyeth had long ignored reports showing the dangers of injecting the drug using the IV push method. In fact, the Court observed that Wyeth could have “analyzed the accumulating data and added a stronger warning about IV push administration of the drug.” The Court also rejected Wyeth’s companion arguments, which spouted the impossibilities of complying with both state law and the FDA’s regulatory scheme and the danger of allowing a “lay jury’s decision about drug labeling” act as a substitute for the “expert judgment of the FDA.”

The Court’s decision was welcomed by consumer advocates who previously feared that pharmaceutical companies like Wyeth would be insulated from liability, especially given the Bush Administration’s expansive view of preemption. Following the Wyeth decision, President Obama made his narrowed view of preemption known when the White House released a memorandum on the subject. On May 20, 2009, President Obama asked heads of agencies and departments to reevaluate their preemption policies, advising them only to issue preemptive statements “if [they are] supported by sufficient legal principles.” President Obama’s memorandum symbolizes a return to traditional federalist ideals, emphasizing the importance of state laws and the ways in which they work in tandem with federal laws to create safeguards for the public. 

In the months following Wyeth, advocates on both sides of the preemption debate have spoken out. Those in favor of preemption call the Wyeth decision “catastrophic” for patients and doctors.   They foresee an insurmountable stall on new drugs entering the market; new drugs that could help combat serious illnesses like cancer and HIV/AIDS. Other analysts are shocked that this medical malpractice case reached the Supreme Court at all, let alone resulted in a lay jury determining the adequacy of a federal agency’s regulatory scheme. Consumer advocates, on the other hand, view the decision as a triumph for the little guy, meaning consumers like Levine. . However, both sides agree on one thing: consumers will test the durability of the Wyeth decision to see just how much liability pharmaceutical companies will bear in the future. 

In any case, Wyeth is not the last time we will see the preemption issue under scrutiny. But, for now, consumer advocates and victims of pharmaceutical drug companies can relish in this victory and rest assured that they have preserved their right to hold pharmaceutical companies accountable in court. 

 

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