Tag Archives: court

Judge OKs $1.6B settlement in Toyota class action

You may remember this story that exploded all over the news.  Around the end of 2009 and start of 2010, the news reported that some Toyota cars had sudden-acceleration defects.

Toyota recently settled a federal class action.  U.S. District Court Judge James V. Seina approved of the federal class action settlement.  The settlement approved is for $1.6 billion, which includes attorney fees and costs calculated at $227 million.  The class members are said to receive anywhere between $125 to $10,000 each.

Toyota has denied liability for the alleged sudden-acceleration problem with the vehicles, as provided in the language of the settlement.  The ABA reports that a spokeswoman for Toyota stated,

This agreement allows us to resolve a legacy legal issue in a way that provides significant value to our customers and demonstrates that they can depend on Toyota to stand behind our vehicles,

It is important to note that Toyota is still facing trials in more than 80 state court lawsuits over the alleged sudden-acceleration defects.

via Judge OKs $1.6B pact in Toyota class action as trial begins in first wrongful death case – ABA Journal.

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Detroit Bankruptcy is Unconstitutional

As a follow up to the prior post reporting on the bankruptcy filing of Detroit, now a Michigan court has ruled that the bankruptcy filing is unconstitutional.  The decision can be accessed here.

The background of this legal battle raises a lot of legal questions.  The events are as follows.  First, Detroit announces it will be declaring bankruptcy.  Then, lawsuits are filed to block bankruptcy filings/proceedings.  An emergency hearing is scheduled on Thursday (last week) in front of a judge about blocking the bankruptcy proceedings.  Five (5) minutes before the Thursday hearing, Detroit files a petition for bankruptcy.  Afterwards, another hearing is set for Friday.

On Friday, the Ingham County Court ruled against the city.  The court relied on Michigan’s state constitution, which prohibits actions that diminish or impair pension benefits of public employees.  Because Detroit was aware that declaring bankruptcy would affect negatively the pension benefits of public employees, the court ruled that it acted unconstitutionally.

Michigan’s Attorney General Schuette stated that Detroit will be appealing the ruling.  The Attorney General also stated that they will be requesting a stay on the bankruptcy proceedings until the appeal is heard.

This background is so interesting because it raises a lot of legal questions.  Filing a Chapter 9 petition gives the bankruptcy court exclusive jurisdiction over the debtor’s (Detroit) assets.  The interesting predicament is that Detroit filed a petition for bankruptcy five (5) minutes before the Thursday hearing — before any order from the Ingham County Court.

Yet, the state court is ordering the Governor to “(1) direct the Emergency Manager to immediately withdraw the Chapter 9 petition filed on July 18, and (2) not authorize any further Chapter 9 filing which threatens to diminish or impair accrued pension benefits.”

Some of the questions include how to reconcile the state’s and the bankruptcy’s court jurisdictions.  For example, can the state court order state officials (like the Governor) to withdraw the petition? How can a bankruptcy proceeding reconcile itself with Michigan’s state constitution? Are the plaintiffs subject to sanctions for violating a stay in bankruptcy court?

The Huffington Post has an interesting tidbit:

Michigan is one of nine states that explicitly protects public employee pensions in its state constitution.  But the state of Michigan doesn’t guarantee the money to public employees if a city defaults or can’t pay those bills…

The law of bankruptcy is enshrined in the U.S. Constitution.  And the limited case law of Chapter 9 bankruptcy, which applies to cities and municipalities, doesn’t say whether a judge can legally subvert Michigan’s constitution to lessen Detroit’s obligations to its pensioners.

You can read more about Michigan’s constitution protecting public employees’ pensions here.  Some other notable Chapter 9 bankruptcy proceedings nuclide Jefferson County, Alabama (2011) and Orange County, California (1994).

via Detroit bankruptcy unconstitutional, judge rules in pension case – ABA Journal.

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Sup. Ct. allows Class Action Arbitration under FAA

In Oxford Health Plans LLC v. Sutter, No. 12-125 (2013), the Supreme Court ruled that an arbitrator can require a class action arbitration.

The gist of the case is that Sutter, a pediatrician, had a fee-for-services contract, which required arbitration for all contractual disputes.  When Oxford failed to promptly pay him and other physicians, Sutter filed a class action in New Jersey.  After filing, the court compelled arbitration.  The arbitrator concluded that the contract called for class action arbitration.  Sutter appealed to higher courts, but these appeals were denied.

The Supreme Court explained its decision as follows.  First, the parties agreed to go to arbitration in their contract.  Second, an arbitrator looks at the contract, makes a decision based on the contractual language, and this decision is binding.  Thirdly, and most importantly, the Supreme Court explained that judicial review is limited to whether the arbitrator interpreted the contract, not whether the court agreed with the decision.  Consequently, because the arbitrator considered the contract, the arbitrator’s decision stands.  They only way to vacate an arbitral decision is when an arbitrator strayed from his task of interpreting the contract.  In other words, not when he performed his task poorly.

As a note: In prior decisions (Steelworkers Trilogy/Misco) in the labor context under the Labor Management Relations Act (LMRA), the Supreme Court had ruled that a contractual language had to explicitly allow class actions in the arbitration clause.  Here, the arbitration clause did not do so.

This raises the question of how the Federal Arbitration Act (FAA) reconciles with LMRA arbitrations when they are both present.  In this case, only the FAA was involved.

via Workplace Prof Blog: SCOTUS OKs Class Arbitration.

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Is a Fourth Branch in the horizon?

The Washington Post has a very interesting article, which highlights the increased deferment of cases to government agencies.  Instead of going through the court system, many cases are increasingly going through administrative agencies instead.

The question posed here is whether the right for court accessibility being challenged?  The Washington Post raises its concerns:

The growing dominance of the federal government over the states has obscured more fundamental changes within the federal government itself: It is just not bigger, it is dangerously off kilter.  Our carefully constructed system of checks and balances is being negated by the rise of a fourth branch, an administrative state of sprawling departments and agencies that govern with increasing autonomy and decreasing transparency.

The Washington Post reports that the vast majority of laws governing the United States are not passed by Congress but are issued as regulations.  A study found that in 2007, Congress enacted 138 public laws, while federal agencies finalized 2,926 rules, including 61 major regulations.

The Washington Post also reports that a citizen is 10 times more likely to be tried by an agency instead of an actual court.  While federal judges conduct roughly 95,000 adjudicatory proceedings (including trials), federal agencies complete more than 939,000.

However, there are several items the Washington Post fails to mention.  The increasingly use of administrative agencies does not only fall upon the agency.

Take for example the individual’s decision to file a charge/claim.  Going through administrative agencies is more cost-effective.  Lawsuits in court have become more expensive.  Technology, electronic evidence, growth in documents and companies, among others, lead to a higher volume of issues and motions that increase the cost of litigation.  Given both alternatives, it makes sense that an individual might choose to go through an administrative agency.

For example, an individual going through the EEOC for a discrimination charge does not have to pay anything.  While an individual going through the court system may have to pay attorney fees and might be responsible for attorney fees.

 

 

Saying that, however, the issue of transparency and timing is highly concerning.  Administrative decisions are not public.  In addition, the length of an administrative decision might take several years.

via The rise of the fourth branch of government – The Washington Post.

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Drop in Employment Civil Rights Lawsuits

TRAC Reports has recently released its latest data on the trends of employment civil rights lawsuits.  The decrease of civil rights lawsuits in the employment context is not surprising.

TRAC Reports states:

The latest available data from the federal courts show that during February 2013 the government reported 950 new employment civil rights filings. According to the case-by-case information analyzed by the Transactional Records Access Clearinghouse TRAC, this number is down 7.9 percent over the previous month when the number of filings of this type totaled 1,032, and has dropped 13.2 percent from its level one year ago see Table 1.

Drop in Employment Civil Rights Lawsuits

 

TRAC further states that the volume of civil rights matters filed in federal districts during February 2013 was 3.1 per every million persons in the US.  Last year, that number of filings was 4.2.

via Drop in Employment Civil Rights Lawsuits.

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Class action plaintiff can’t avoid federal court

The SCOTUS blog reports on Standard Fire Ins. Co. v. Knowles, 11-1450 (2013).  Here, the Supreme Court held that federal courts aren’t bound by plaintiffs in proposed class actions who try to keep cases in state court by stipulating to the amount in controversy.

The Supreme Court ruled on Tuesday in a unanimous opinion by Justice Stephen G. Breyer. Lead plaintiffs don’t have the authority to bind others prior to class certification and their stipulations don’t make “a critical difference,” Breyer said.

At issue were provisions in the Class Action Fairness Act giving federal courts original jurisdiction in class actions when the aggregated amount in controversy exceeds $5 million and there are more than 100 class members.

Lead plaintiff Greg Knowles had filed his suit in Miller County, Ark., and stipulated that the amount in controversy was less than $5 million. His would-be class action against Standard Fire Insurance Co. had alleged the insurer underpaid claims for hail damage. According to the complaint, “hundreds, and possibly thousands” of people in Arkansas had similar claims.

A federal court considering Knowles’ bid to send the case back to state court had found that the amount in controversy would have exceeded $5 million, absent the stipulation.

Breyer said Knowles’ stipulation does not remove the case from the scope of the federal class-action law. “The stipulation at issue here can tie Knowles’ hands, but it does not resolve the amount-in-controversy question in light of his inability to bind the rest of the class,” Breyer wrote. “For this reason, we believe the district court, when following the statute to aggregate the proposed class members’ claims, should have ignored that stipulation.”

via SCOTUS: Class action plaintiff can’t avoid federal court by stipulating to amount in controversy – ABA Journal.

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In Minnesota, Amendments to the Rules of Civil Procedure Highlight Proportionality

On February 4, 2013, the Supreme Court of the State of Minnesota adopted amendments to the Rules of Civil Procedure, including those affecting discovery.  Of particular note were amendments to Rules 1 and 26.  Specifically (and significantly), Rule 1 was amended to state that it is the responsibility of the parties and the court to assure proportionality throughout the litigation.  Accordingly, Rule 1 now states (new language is underlined):

These rules govern the procedure in the district courts of the State of Minnesota in all suits of a civil nature, with the exceptions stated in Rule 81.  They shall be construed and administered to secure the just, speedy, and inexpensive determination of every action.

It is the responsibility of the court and the parties to examine each civil action to assure that the process and the costs are proportionate to the amount in controversy and the complexity and importance of the issues.  The factors to be considered by the court in making a proportionality assessment include, without limitation: needs of the case, amount in controversy, parties’ resources, and complexity and importance of the issues at stake in the litigation.

Similarly, in addition to other significant amendments to Rule 26, Rule 26.02(b) has been amended to require that the scope of discovery “comport with the factors of proportionality, including without limitation, the burden or expense of the proposed discovery weighed against its likely benefit, considering the needs of the case, the amount in controversy, the parties’ resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues.”  While such limitations to discovery were previously acknowledged, the amended rule more strongly emphasizes the importance of proportionality.

Significant amendments to other rules were also adopted.  Notably, an order attaching “corrective amendments” was entered several days later.  Those orders are available HERE and HERE.  The newly adopted amendments become effective July 1, 2013.

via In Minnesota, Amendments to the Rules of Civil Procedure Highlight Proportionality : Electronic Discovery Law.

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Lawyer’s misconduct did not prevent class action certification

In a class action, lawyers’ conduct when contacting (or trying to contact) possible putative class members, is regulated by the court or federal statute.

In this case, the 7th Circuit Court of Appeals determined  that class counsel’s faxing of unsolicited advertisement was misconduct.  The decision rested on the question of whether the law firm bribed a third-party in order to obtain a list of the possible putative class members.  Due to a lack of evidence that the payment of $5,000 was a bribe, the court allowed the class to be certified.

I raise this case because it raises the issue of attorney misconduct.  First of all, there are across-the-states ethics rules that govern attorneys’ conduct.  You can access ethics rules governing attorneys by going to the state court’s website and looking for the Board of Professional Responsibility or ethics rules.

As the 7th Circuit Court of Appeals highlighted multiple times, the law firm’s misconduct could possibly warrant disciplinary action.  The Court of Appeals commented that litigants and attorneys should report to the relevant bar authority (the Board of Professional Responsibility) instances of attorney misconduct.  Otherwise, the court warned, unpunished and inappropriate attorney conduct will continue.

In fact, there are ethical rules that discuss the reporting of misconduct.  In Minnesota, Rule 8.3 discusses the reporting of professional misconduct.  Rule 8.3 states, in relevant part,

(a) A lawyer who knows that another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial question as to that lawyer’s honesty, trustworthiness, or fitness as a lawyer in other respects, shall inform the appropriate professional authority.

Secondly, in a class action, the class representatives through their class counsel must show that the class counsel can appropriately represent the class.  In other words, the court must decide that the law firm can properly represent the entire class (which may in the hundredths).

So, if a law firm possibly engaged in misconduct, i.e. shows a lack of integrity – is the law firm’s representation proper?  The court did state that unethical conduct (regardless of whether it is prejudicial) raises “serious doubt” as to counsel’s ability to adequately represent the class.

via Courthouse News Service.

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Contingency fees in Personal Injury

The ABA Journal reported on an interesting case; where the attorney was unable to get all of its full contingency fees.  The reason?  Because the client replaced the attorney with himself prior to the $1 million settlement.

New York’s Appellate Division, First Department, ruled in an unsigned opinion that the settlement wasn’t yet final when lawyer Jeffrey Aronsky handled the case because the settlement offer hadn’t been formally communicated to the defendant, Rivlab Transportation. However, the court held that Aronsky will be allowed to place a lien on Gyabaah’s recovery and receive a pro rata fee based on his contributed work, Reuters reports.

Reuters notes that in a dissent, Justice Richard Andrias considered the settlement binding because a general release was signed and defense counsel confirmed in writing that the $1 million settlement offer was accepted.

via Lawyer Replaced by Client Can’t Collect Full Contingency on $1M Settlement, Court Rules – News – ABA Journal.

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Pennsylvania Voter ID Law

From ABA Journal News:

A Pennsylvania judge has enjoined enforcement of the state’s voter ID law, allowing state voters to cast ballots in the upcoming presidential election without obtaining photo identification.

Judge Robert Simpson issued his decision on Tuesday, report the Philadelphia InquirerReutersForbesand the Associated Press.

According to the Inquirer and Forbes, Simpson found fault with a section of the law requiring voters without IDs to cast provisional ballots and then to produce photo identification within six days. Simpson said the time period was not sufficient.

Simpson ruled (PDF) after hearing testimony about state efforts to make it easier to obtain a valid photo ID. The state supreme court had directed Simpson to consider whether photo IDs were actually available and whether voter disenfranchisement would result.

via Judge Halts Enforcement of Pennsylvania Voter ID Law – News – ABA Journal.

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