Equifax, which knows more about you than your own mother, (1) failed to maintain its servers, (2) was hacked and lost sensitive personal data for 143 million people, (3) concealed that fact for months, (4) blamed another company for the problem, then (5) finally admitted it caused the problem. To make matters worse, after the hack but before disclosing it, three executives sold off nearly $2 million in Equifax stock.

“What should I do to protect myself?” is a difficult question to answer. The Federal Trade Commission put up a page recommending checking your credit reports, placing a credit freeze, placing a fraud alert, and filing your taxes early so that a scammer doesn’t file them for you and obtain your tax refund. Brian Krebs has a much more thorough FAQ over here.

To call this situation “frustrating” would be an understatement. Virtually everyone with a credit history now bears the burden of making sure their own identity is safe due to Equifax’s negligence. People have already filed class-action lawsuits, and rightly so.
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The lawsuit brought by financier Amir Shenaq against mass-torts law firm AkinMears has made the rounds of the tort reform blogs (e.g., SETexas Record, Daniel Fisher at Forbes, and Paul Barrett at Bloomberg), so I figured some plaintiff-side commentary was in order. The details of the lawsuit confirm what I’ve been saying for years: “Mass torts is not an area in which you want to dabble and start throwing around discounts. It’s work, it’s risky, and it can be very, very expensive.”

In essence, a former hedge fund executive filed suit against the law firm claiming that he was hired to raise millions of dollars in funding so that the firm could acquire thousands of transvaginal mesh lawsuits. He alleges that he brought in the funding (through his connections in the finance world), but, once he did, the firm fired him.

Shenaq’s complaint was filed publicly then sealed by the court. As Forbes recounts, the Complaint alleges:

“AkinMears is not run like a traditional plaintiff’s law office, and the Firm’s lawyers do not do the types of things that regular trial lawyers do,” like meet clients, file pleadings and motions, attend depositions “or, heaven forbid, try a lawsuit,” Shenaq claims in his suit. “Despite the fact that AkinMears’ lawyers do not have to dirty their hands with the mundane chores that come with actually practicing law,” the firm charges a 40% contingency fee “which is then divided in some fashion among the participants in its ever-shifting syndicate.”

And, of course, there’s also an allegation about the plaintiff’s lawyers buying themselves an interest in a private jet.
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Tort reformer Ted Frank and I have had our disagreements over the years. (See here and here.) In recent years, he has focused his work on filing objections to class action settlements through the Center for Class Action Fairness. Some of his work has focused on getting a better deal for class action members who, he alleged, weren’t receiving fair portions of the proposed settlement, but the bulk of his objections — at least to my knowledge — have focused on reducing the attorney’s fees claimed by the class counsel.

 

As Alison Frankel reported yesterday, it seems that, in the course of his contingent-fee work on behalf of people objecting to class action settlements, Frank has found himself in a situation he himself describes as “lurid, complex and Grishamesque.” The situation seems to have arisen from his personal goals as a lawyer being different from one of his client’s goals, and from his fee-splitting relationship with another firm, the very same issues he so frequently raises in his objections.

 

It would seem like a perfect opportunity for schadenfreude, but, in fact, all I can feel for him is sympathy — and his misfortune in the In Re: Capital One Telephone Consumer Protection Act Litigation presents a tremendous opportunity for tort reformers, politicians, the press, and the public to see just how difficult class actions, mass tort, and other large-scale litigation can be. In that case, Frank filed an appeal on behalf of a class member objecting to the fee claimed by Lieff Cabraser, and then everything went south. 
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Back in January 2012, I posted a short item titled, Supreme Court Sets The Tone For 2012 Term: Might Makes Right, in which I recounted how the Supreme Court had begun the 2011-2012 term with two opinions that were great if you own a prison management company or fake credit repair company, but not so great if you were injured by a private prison’s malfeasance or defrauded by a consumer credit company.

The rest of that term went as expected, with opinions knocking our various discrimination plaintiffs (Hosanna-Tabor Church v. EEOC), mesothelioma victims (Kurns v. Railroad Friction Products) and workers wrongly denied overtime (Christopher v. SmithKline Beecham Corp.). There were certainly some blockbuster cases that term — like the surprise Affordable Care Act decision — but nothing earth-shattering relating to civil justice.

Now we’ve reached the end of the 2012-2013 term, at least as it comes to cases affecting civil litigation brought by or against consumers and patients — you know, the people — and it’s time to recount the worst cases, the ones that contorted all logic and sense to deny people they day in court. As The Atlantic reported, June 24, 2013 in particular was “good for corporations,” with the Vance, Barlett, and Nasser opinions all at once, each of which we’ll cover.
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As Judge Posner remarked, “only a lunatic or a fanatic sues for $30,” Carnegie v. Household Int’l, Inc., 376 F.3d 656 (7th Cir. 2004), and that’s because it costs money to seek civil justice. For all the complaints by corporate defendants about the “rising costs of litigation,” those costs are just as frequently — perhaps more frequently — borne by plaintiffs. I’ve had individual wrongful death cases that required hundreds of thousands of dollars in litigation expenses alone, not including attorney and paralegal time.

Here in Philadelphia, the tallest building by far is the Comcast Center, built in part by the enormous profits reaped by way of Comcast’s monopoly power over cable-television services in the area, causing Philadelphia-area consumers to be overcharged by over $875 million from 1998 to 2007, as alleged by the Behrend lawsuit. I was a Comcast customer in that timeframe, and you know how much my individual antitrust claim is worth? Zero. I was personally overcharged no more than $500; the $350 filing fee for my complaint will eat up most of what I could recover, and certainly the remaining $150 in potential damages won’t justify the millions of dollars in litigation expenses and tens of thousands of hours of attorney time I’ll need to invest in the case.

This problem was solved nearly fifty years ago, when Federal Rule of Civil Procedure 23 was amended to create a streamlined procedure for these types of cases. “The policy at the very core of the class action mechanism is to overcome the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights.” Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 617 (1997)(internal quotation omitted).

The actual requirements of Fed.R.Civ.P. 23 are not particularly strict.
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Today the Supreme Court holds oral arguments in Standard Fire v. Knowles, a Class Action Fairness Act (CAFA) case. According to the defendant, an insurance company, the case involves plaintiffs’ attorneys “manipulating their complaints to evade federal diversity jurisdiction” by stipulating to the class recovering less than $5,000,000, the CAFA threshold that allows defendants to remove class actions from state court to federal court. According to the plaintiff, an Arkansas homeowner who alleges the insurance company routinely failed to pay for general contractors’ bills in home repairs, the issue here is just another example of the 70-year-old rule that a plaintiff can stay out of federal court by stipulating to recovering only damages below the jurisdictional amount.

I don’t want to discuss the case in detail (many others have; e.g., Alison Frankel has covered it a couple times, and Kevin Walsh discussed an amicus brief filed by a manufacturers’ association, and the lawyers who filed the brief responded), but to address the broader issue raised by the case. Like many plaintiff’s lawyers, I’ve longed been dismayed at the efforts of insurance companies and large corporations to force more and more civil lawsuits into federal court. Nearly three years ago, I summarized some of the supposed reasons why defendants prefer to be in federal court (while discussing the Hertz v. Friend case on diversity jurisdiction):

  • federal juries, by virtue of their larger geographic range, include fewer urban jurors and more rural jurors, and thus (according to lawyers’ lore) will award lower verdicts;
  • the Federal Rules of Civil Procedure place express limits on the amount of discovery available;
  • federal courts are (and were even before Ashcroft v. Iqbal) more prone to grant motions to dismiss (and motions for summary judgment) than state courts.

Is any of that true? Does it make a difference to the bottom line when all is said and done? Who knows, but it’s lawyer’s lore that federal courts are better for defendants while state courts are better for plaintiffs. A lawyer wouldn’t disregard the lore about federal court, much like how a sailor wouldn’t leave port on Friday or a driver wouldn’t race in a green car. For what it’s worth, though, state courts are typically the home of large personal injury verdicts — because the vast majority of wrongful death cases are there — federal juries do indeed award large damages in many cases. In 2012, for example, the second largest non-patent verdict nationwide was $167 million from a federal jury in an employment / sexual harassment case.

But lately the rush to put purely state law cases (like Standard Fire v. Knowles and Hertz v. Friend) in federal court seems to come from a different motivation: to get lawsuits out of fast-moving state courts and into federal courts hobbled by judicial vacancies.
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I complained back when the Supreme Court’s Perdue v. Kenny A. opinion first came out more than a year ago, knocking down attorney’s fees awarded to a set of extraordinary children’s rights lawyers:

It’s no stretch to say those lawyers single-handedly reformed the foster care system in metropolitan Atlanta.

And they did that by spending their own money and putting in their own time, with no guarantee they would recoup any of their out-of-pocket costs, much less get paid a fee for their services. Had they been paid by the hour as they went along, their services would have been worth more than $7 million.

But they weren’t paid by the hour to pursue the case. They were paid nothing at all; instead, they paid money — $1.65 million — for the privilege of cleaning up abuse and neglect in the foster care system.

As Blawgletter explains, there’s a big difference between getting paid to defend a case and paying to pursue one. The former is safe and simple and can be done in perpetuity. The latter is risky and complicated and can only be done for as long as funds are available.

Class actions are, by their nature, extraordinary, more expensive and riskier than even ordinary contingent fee representation. The District Court that oversaw the Perdue litigation recognized that and awarded the plaintiffs’ attorneys their costs, their $7 million or so in hourly fees, and then gave them an “enhancement” of $4.5 million.

The Supreme Court — the Justices of which have a combined experience in contingent fee litigation of exactly 0.0 hours — reversed, holding the plaintiffs’ lawyers, who fought for years without being paid a dime and indeed paying out their own money to fund the case, were entitled only to a fee “that roughly approximates the fee that the prevailing attorney would have received if he or she had been representing a paying client who was billed by the hour in a comparable case.”

It was a phony and vindictive legal fiction designed to dissuade plaintiffs’ lawyers from taking these cases, part of a long campaign against class actions in general that culminated in the Wal-Mart v. Dukes opinion.

Last week, the opinion came back around again to bite a group of employment discrimination lawyers who had been litigating a Title VII class action since 1997. Via the Workplace Class Action Blog comes McClain, et al. v. Lufkin Industries, Inc., No. 10-40036 (5th Cir. Aug. 8, 2011). As they describe:

Plaintiffs had filed a class action in the U.S. District Court for the Eastern District of Texas under Title VII alleging that defendant engaged in unlawful employment practices, including disparate treatment and disparate impact. Id. at *2. The district court certified a class. Id. at *3. After realizing that defendant was not going to settle the case and that they did not have the resources to prosecute an employment class action through trial, plaintiffs’ counsel sought the assistance of another law firm. Id. However, plaintiffs’ counsel was not able to find another law firm in Texas that was willing or able to commit the time and resources necessary to assist in the prosecution of the class action, so plaintiffs’ counsel was forced to turn to an Oakland, California firm with a nationwide reputation as a plaintiffs’ employment discrimination class action firm. Id. at *3-5.

The opinion (here’s the copy at the Workplace Class Action Blog) includes at footnote 4 some remarkable comments about how risky and unprofitable it is to take on these types of cases:

J.  Derek Braziel,  an  experienced Texas litigator in  labor and
employment law, explained: “I do not work on employment discrimination class action cases for largely financial reasons, even though I am competent and have the resources to do so. . . . Employment discrimination class actions usually take much longer to litigate than the average employment discrimination  or wage and hour  case.  Defendant companies often use their substantial  financial advantage  to  outstaff  and  outwork plaintiffs with  limited  personal resources.  …

Steven B. Thorpe, an experienced litigator in Dallas, declared: “My practice focuses in large part on employment civil rights cases in which I represent plaintiffs. . . . [T]he greatest portion of my practice prior to approximately 1985 was in the representation of plaintiffs in class action discrimination suits.  At that time I and the firm with which I was associated largely abandoned that area of practice because we found it to be financially infeasible. At this time and for more than a decade I have done no class action employment litigation.

All of that hesitation despite the extraordinary facts that the plaintiff’s lawyer, Timothy Garrigan, had discovered and proven in front of the court during class certification:

During the class certification hearing, one allegation was that African American employees were disproportionately sent to Lufkin’s foundry to work under horrible conditions. The company officials were testifying that the conditions there weren’t so bad. Judge [Howell] Cobb immediately recessed the class certification hearing and ordered everyone to take a tour of the foundry when no one was expecting us to be there.

It was actually the first time I’d been there. The descriptions I’d heard of the place were like something out of Charles Dickens or the Dark Ages, and they turned out to be accurate. It was hot, dark, dirty, ankle deep in dust, with flames leaping out of the darkness just a few feet away from you. It was everything the plaintiffs had been describing. I do think that was a significant point in the case. It confirmed what many of the plaintiffs had been saying and contradicted much of what the company had been saying.

Literally unable to find anyone in Texas willing to take the case, Garrigan reached out across the nation and found Goldstein, Demchak, Baller, Borgen & Dardarian in California, which has long fought these sorts of battles. As Garrigan described back in 2008, while the case was still going on:
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I am a fan of the American court system. There is no natural law requiring people to resolve their differences by asking third parties to represent them and advocate on their behalf in front of impartial decision-makers. The folks in classical Athens and Rome thought it was a good idea, the Europeans rediscovered the practice