/raid1/www/Hosts/bankrupt/CAR_Public/101019.mbx
C L A S S A C T I O N R E P O R T E R
Tuesday, October 19, 2010, Vol. 12, No. 206
Headlines
3M COMPANY: Sued for Non-Payment of Overtime Compensation
ADELPHIA COMMUNICATIONS: Chimicles & Tikellis Loses Fee Hike Bid
BP PLC: Retirement Savings Plan Class Action to Be Tried in Texas
CARMAX INC: Claims in Consolidated Suit vs. Units Remain Stayed
CITIGROUP INC: Sued for Discrimination Against Female Employees
COUNTRYWIDE FIN'L: Class Suit Over Securitized Mortgages Dismissed
EATON CORP: Faces Class Action Over Class 8 Truck Monopoly
FORTUNE HI-TECH: Faces Class Suit Over Alleged Pyramid Scheme
GEORGIA: Class Suit Challenges Legitimacy of 287(g) Program
GLAXOSMITHKLINE: Faces Two Suits Over Diabetes Drug Avandia
GOOGLE INC: Settles Ads Class Action Suit for $3.5 Million
GORDON TRUCKING: Sued in Calif. for Failing to Pay Proper Wages
INDYMAC BANK: Accused in Calif. Suit of Defrauding Homebuyers
KNAUF PLASTERBOARD: Settles Chinese Drywall Class Action Claims
MOSAIC CO: Court Dismisses Strict Liability Claims Against Unit
MOSAIC CO: Appeal in Potash Antitrust Litigation Remains Pending
ONEOK INC: Plaintiff's Appeal on Decertification Still Pending
SOUTHPORT BANK: Sued for Residential Mortgage Loan Violations
U.S. GREEN BUILDING: Faces Class Suit Over LEED Rating Systems
UBS AG: Legal Action v. Ex-Bosses May Weaken U.S. Class Lawsuits
YUM! BRANDS: Faces "Harrison/Rivera" Suit in California
YUM! BRANDS: Continues to Defend "Moeller" Suit in California
YUM! BRANDS: Pizza Hut Wants Second Amended Complaint Dismissed
YUM! BRANDS: Dismissed as Defendant in "Whittington" Suit
YUM! BRANDS: LSJ Continues to Face Cole Arbitration in Tennessee
ZALE CORP: Defends Consolidated Suit in Northern Texas
* FCC Bill Shock Proposal May Spark Consumer Class Action Suits
*********
3M COMPANY: Sued for Non-Payment of Overtime Compensation
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Lara Albertsen, individually and on behalf of others similarly
situated v. 3M Company, Case No. 10-cv-04610 (N.D. Calif.
October 13, 2010), accuses the St. Paul, Minn.-based multinational
conglomerate of non-payment of overtime compensation; employing a
"variable pay" policy that violates California Labor Code Sections
204, 221, 222, resulting to late payment of wages earned,
forfeiture of wages, and improper deductions for returns; failing
to furnish accurate and itemized wage statements; and failing to
provide rest breaks and meal periods.
Ms. Albertsen asks the Court, among other things, to order 3M to
pay restitution to her and other class members for amounts
acquired through the defendant's unlawful activities pursuant to
the Calif. Bus. & Prof. Code.
Ms. Albertsen is currently employed by 3M as a Dental Practice
Specialist with previous job titles of Manufacturing or U.S. Field
Sales Representative. Ms. Albertsen was responsible for promoting
3M's products to dental professionals within her territory. Ms.
Albertsen alleges that she worked in excess of 40 hours per week
without receiving overtime compensation.
The Plaintiff demands a jury trial and is represented by:
James R. Patterson, Esq.
HARRISON, PATTERSON & O'CONNOR LLP
402 West Broadway, Suite 2900
San Diego, CA 92101
Telephone: (619) 756-6900
- and -
J. Christopher Jaczko, Esq.
Allison H. Goddard, Esq.
JACZKO GODDARD LLP
4401 Eastgate Mall
San Diego, CA 92121
Telephone: (858) 404-9205
ADELPHIA COMMUNICATIONS: Chimicles & Tikellis Loses Fee Hike Bid
----------------------------------------------------------------
Noeleen G. Walder, writing for New York Law Journal, reports a law
firm that claimed it was "solely responsible" for a $245 million
class action settlement has lost its bid to receive an additional
$17 million in attorney fees.
While the U.S. Court of Appeals for the Second Circuit agreed that
non-lead counsel Chimicles & Tikellis had conferred a substantial
benefit on the class, it nonetheless held that the district court
had not erred when it approved the lead counsel's allocation of
only $155,610 in attorney fees to the Pennsylvania-based firm.
"Although Abbey [Spanier Rodd & Abrams] and Kirby [McInerney] were
no doubt on the stingy side when it came to compensating their
brethren, we have not been convinced that the District Court
abused its discretion in approving class counsel's allocation,"
Judge Barrington D. Parker wrote for the circuit.
Judges Robert D. Sack and Richard C. Wesley rounded out the panel
in In re: Adelphia Communications Corp. Securities & Derivative
Litigation (No. II), 08-4904-cv.
The fee dispute arose from a wave of lawsuits brought against
Adelphia Communications Corp., a cable television provider that
went belly up after its founder, John J. Rigas, and his sons were
accused of looting millions of dollars from the company.
Adelphia's disclosure that it had incurred $2.3 billion in debt as
a result of the Rigases' self-dealing spawned more than 30 suits,
including two class actions brought by Chimicles & Tikellis in the
Eastern District of Pennsylvania on behalf of investors who had
purchased Adelphia notes in 2001 and 2002.
The actions, Victor v. Adelphia Communications Corp. (Victor I),
02-cv-3659, and Huhn v. Rigas (Victor II), 02-cv-4334, accused
Solomon Smith Barney and Bank of America Securities, Adelphia's
lead underwriters, of violating Sections 11 and 12(a)(2) of the
Securities Act of 1933 by making false statements or omitting
material facts in a registration statement underlying the note's
offerings.
In 2003, these and other suits against Adelphia were transferred
to the Southern District of New York, where they were
consolidated.
Soon after, Abbey Spanier Rodd & Abrams and Kirby McInerney, both
of New York, which had been appointed lead counsel in the multi-
district litigation under the Private Securities Litigation Reform
Act of 1995, brought a consolidated complaint on behalf of a class
of plaintiffs who had purchased Adelphia debt and securities
between 1999 and 2002.
While the consolidated complaint incorporated claims asserted in
the suits filed by Chimicles & Tikellis, the complaint added new
securities claims against Solomon Smith Barney, Bank of America
and other underwriters and lenders, and asserted violations of the
Trust Indenture Act of 1939 and state common law.
However, after the bank defendants successfully moved to dismiss
most of the complaint, the only securities claims that remained
were those that had been brought against Solomon Smith Barney and
Bank of America by Chimicles & Tikellis, as well as new claims
against these defendants that related back to the Victor
complaints.
In 2006, lead counsel and the bank defendants reached a $245
million settlement.
The pact provided that Abbey Spanier and Kirby McInerney would
have discretion to allocate court-awarded fees among the other
counsel.
Months later, the lead firms were awarded $52 million in attorney
fees, $155,610 of which they allocated to Chimicles & Tikellis.
The latter amount was based on a lodestar calculation and
represented the hours Chimicles & Tikellis worked before the
appointment of lead counsel.
Arguing that they had provided an "independent and substantial
benefit for the Class that no other plaintiff, including the Lead
Plaintiffs provided," Chimicles & Tikellis asked the district
court to hike their fees to $17 million.
Refusing to increase the firm's fees, Southern District Judge
Lawrence M. McKenna held that "C&T's contribution was not in any
way so unique that it can be fairly said that there would have
been no settlement of the magnitude achieved without it."
'ENTREPRENEURIAL EXERCISE'
On appeal, Chimicles & Tikellis maintained that McKenna had
misapplied Goldberger v. Integrated Resources Inc., 209 F.3d 43
(2d Cir. 2000), which among other things directs district courts
to factor in the time and labor expended by counsel and public
policy considerations when deciding whether to approve a fee
award.
The firm also argued that a lodestar analysis should not be
applied to non-lead counsel seeking attorney fees for pre-
appointment work, and insisted that the district court should have
made a "qualitative comparison between non-lead counsel's
contribution and other counsel's contribution to the ultimate
recovery."
The 2nd Circuit disagreed.
"We have not had occasion to decide the proper framework for
awarding attorney's fees to non-lead counsel under the Private
Securities Litigation Reform Act for work completed prior to the
appointment of lead plaintiff," Parker wrote for the circuit.
Noting that "securities litigation is often an entrepreneurial
exercise in which multiple attorneys file complaints in the hopes
of ultimately being appointed lead counsel," the panel observed
that complaints filed in putative securities class actions before
the appointment of lead counsel can be "duplicative" and
"artificially increase the number of plaintiffs and attorneys
involved in the litigation."
Nonetheless, Parker recognized that there are times when "work
completed by non-lead counsel prior to the appointment of lead
plaintiff can confer substantial benefits on the class."
He pointed out that the district court did not dispute that
Chimicles & Tikellis had provided a substantial benefit to the
class, but McKenna had ruled that allocating the firm $155,610 for
its pre-appointment work was "both fair and consistent with the
Goldberger factors, the cardinal principle of which is that fees
must be 'reasonable.'"
The panel agreed with Chimicles & Tikellis that a qualitative
comparison is "appropriate when determining whether non-lead
counsel has provided a substantial benefit to the class."However,
the circuit held that once a district court has concluded that
such a benefit has been conferred, "an examination of lodestar is
both relevant and useful" in weighing whether class counsel's
quantification of the benefit is "reasonable."
"Furthermore, the Goldberger factors are sufficiently flexible to
accommodate a variety of circumstances and district courts enjoy
wide discretion in applying them," Parker wrote.
In this case, he noted that the "first Goldberger factor alone,
the time and hours expended by counsel, weighs heavily against
C&T, given that it was looking to be paid $17 million in
attorneys' fees for 381.1 hours of work."
"Forty-five thousand dollars per hour seems to us to be quite high
regardless of a lawyer's talent, ability, or contribution to a
common fund," the judge wrote.
Nicholas E. Chimicles, Kimberly M. Donaldson, Denise Davis
Schwartzman and Kimberly L. Kimmel represented Chimicles &
Tikellis. Mr. Chimicles did not return a call for comment.
Roger W. Kirby, Richard L. Stone and Mark A. Strauss represented
Kirby McInerney. Arthur N. Abbey, Judith L. Spanier and Richard B.
Margolies represented Abbey Spanier.
BP PLC: Retirement Savings Plan Class Action to Be Tried in Texas
-----------------------------------------------------------------
Commodity Surge reports lawyers for workers filing a class action
lawsuit against BP (NYSE:BP) over their retirement savings plans
and the losses incurred because of the Gulf oil spill had
requested for the case to be tried in Chicago, but the Judicial
Panel on Multidistrict Litigation ruled the case will be tried in
Houston, Texas.
The Panel said, "Certainly, there are differences between the
securities actions and the ERISA actions. Notwithstanding those
differences, there is significant overlap between the ERISA and
securities actions warranting their concentration in a single
docket."
The retirement plan is managed and administered in Chicago, the
reason for the request.
Much of the lawsuits are centered around the pre-spill safety
record of BP, and what is being asserted is it made the company a
safety risk to investors.
Over $1 billion in value from the retirement plan was lost,
according to the complaint.
It isn't clear at this time how the rebound in the share price of
BP will affect the lawsuit, as shares have gained a lot back since
it bottomed out.
The legal question at hand is whether or not the stock of BP was a
good investment in the time period the class action is based upon.
CARMAX INC: Claims in Consolidated Suit vs. Units Remain Stayed
---------------------------------------------------------------
The claims in a consolidated lawsuit against CarMax Auto
Superstores California, LLC and CarMax Auto Superstores West
Coast, Inc., remain stayed.
On April 2, 2008, John Fowler filed a putative class action
lawsuit against CarMax Auto Superstores California, LLC and CarMax
Auto Superstores West Coast, Inc. in the Superior Court of
California, County of Los Angeles.
Subsequently, two other lawsuits, Leena Areso et al. v. CarMax
Auto Superstores California, LLC and Justin Weaver v. CarMax Auto
Superstores California, LLC, were consolidated as part of the
Fowler case.
The allegations in the consolidated case involved: (1) failure to
provide meal and rest breaks or compensation in lieu thereof; (2)
failure to pay wages of terminated or resigned employees related
to meal and rest breaks and overtime; (3) failure to pay overtime;
(4) failure to comply with itemized employee wage statement
provisions; and (5) unfair competition.
The putative class consisted of sales consultants, sales managers,
and other hourly employees who worked for the company in
California from April 2, 2004, to the present.
On May 12, 2009, the court dismissed all of the class claims with
respect to the sales manager putative class. On June 16, 2009,
the court dismissed all claims related to the failure to comply
with the itemized employee wage statement provisions. The court
also granted CarMax's motion for summary adjudication with regard
to CarMax's alleged failure to pay overtime to the sales
consultant putative class.
The plaintiffs have appealed the court's ruling regarding the
sales consultant overtime claim.
In addition to the plaintiffs' appeal of the overtime claim, the
claims currently remaining in the lawsuit regarding the sales
consultant putative class are: (1) failure to provide meal and
rest breaks or compensation in lieu thereof; (2) failure to pay
wages of terminated or resigned employees related to meal and rest
breaks; and (3) unfair competition.
On June 16, 2009, the court entered a stay of these claims pending
the outcome of a California Supreme Court case involving related
legal issues.
The lawsuit seeks compensatory and special damages, wages,
interest, civil and statutory penalties, restitution, injunctive
relief and the recovery of attorneys' fees.
No further updates were reported in CarMax, Inc.'s Oct. 12, 2010,
Form 10-Q filing with the U.S. Securities and Exchange Commission
for the quarter ended Aug. 31, 2010.
CarMax, Inc. -- http://www.carmax.com/-- is a holding company and
its operations are conducted through its subsidiaries. The
company is a retailer of used cars.
CITIGROUP INC: Sued for Discrimination Against Female Employees
---------------------------------------------------------------
Amy Bartoletti, et al., on behalf of themselves and others
similarly situated v. Citigroup Inc., et al., Case No. [not
indicated in complaint] (S.D.N.Y. October 13, 2010), accuses the
financial services holding company of: engaging in a Company-wide
discrimination against female employees in all facets of their
employment and subjecting female employees who lodged complaints
against Citigroup's discriminatory practices to "a pattern and
practice of retaliation for engaging in such protected activity,"
in violation of well-established federal, state and local anti-
discrimination laws.
The Plaintiffs relate that Citigroup engaged in recessionary
discrimination when, rather that fulfill its obligation to its
shareholders and retain the most qualified employees, it
terminated the employment of the Public Finance Department class
representatives, as well as other female professional employees,
as part of its Company-wide layoffs that were announced on
November 21, 2008.
Plaintiffs claim that not only did Citigroup retain less qualified
employees, a statistically significant percentage of female
employees were terminated.
The Complaint relates that Citigroup's compensation, assignment
and promotion policies, practices and procedures incorporate the
following discriminatory practices: (a) failing to compensate
females the same as similarly-situated male employees; (b) failing
to promote females at the same rate and on the same terms and
conditions as similarly-situated male employees; (c) relying on
subjective judgments, procedures and criteria which permit and
encourage the incorporation of gender stereotypes and bias by
Citigroup's predominantly male managerial and supervisory staff
in making compensation, assignment, promotion and termination
decisions; (d) generally refusing to provide equal terms and
conditions of employment for female employees; and (e) selecting
female employees for termination as part of the Company-wide
layoffs at rates that are statistically unlikely to have occurred
by chance.
In addition, with respect to plaintiff Ms. Dorly Hazan-Amir,
currently with Citigroup's Asset Finance Group, the suit says
throughout the course of Ms. Hazan-Amir's employment with Citigrup
she was subjected to inappropriate and offensive comments based on
her gender as well as discriminatory treatment which manifested
itself in the form of significantly less compensation than
similarly-situated male colleagues and a recent demotion to a less
prestigious and less lucrative position mere days after she
returned from a Family Medical Leave Act designated maternity
leave.
The Plaintiffs demand a trial by jury and are represented by:
Douglas H. Wigdor, Esq.
Kenneth P. Thompson, Esq.
Scott B. Gilly, Esq.
THOMPSON WIGDOR & GILLY LLP
85 Fifth Avenue
New York, NY 10003
Telephone: (212) 257-6800
E-mail: dwigdor@twglaw.com
kthompson@twglaw.com
sgilly@twglaw.com
COUNTRYWIDE FIN'L: Class Suit Over Securitized Mortgages Dismissed
------------------------------------------------------------------
Andrew Longstreth, writing for The American Lawyer, reports that
for the second time in three weeks, Bank of America has escaped
liability in cases involving the Countrywide mortgage business it
acquired in 2008. Last month, Manhattan federal district court
Judge P. Kevin Castel dismissed claims by two trusts that had
bought $43 million of residential mortgage-backed securities from
Countrywide. And now BofA has won the dismissal of a purported
class action brought on behalf of more than 370 trusts that bought
securitized mortgages from Countrywide. The trusts had sought a
declaration requiring Countrywide to purchase any loan on which it
agreed to reduce payments under a 2008 agreement with attorneys
general from across the country.
The stakes in the putative class action were quite large. In its
agreement with the AGs, Countrywide agreed to reduce payments on
hundreds of thousands of mortgages by up to $8.4 billion. But
according to the plaintiffs, Countrywide had sold off most of
those loans and was determined not to absorb the costs of the
payment reductions.
In dismissing the case, New York state Supreme Court Justice
Barbara Kapnick ruled that the named plaintiff -- Greenwich
Financial Services Distressed Mortgage Fund 3 LLC -- hadn't
adhered to the pooling and servicing agreements governing the
securitized mortgage loans. Among the rules, she found, is one
requiring the support of at least 25 percent of certificate
holders in order to initiate litigation.
Bank of America, which was represented by O'Melveny & Myers, said
in a statement it was "pleased" with the ruling. "These
preconditions protect investors collectively against ill-conceived
litigation forays that could prove damaging to investors -- such
as the Greenwich plaintiffs' bid, which would effectively halt all
modifications of distressed mortgages," the company said.
Greenwich Financial counsel David Grais of Grais & Elsworth did
not return a call for comment.
EATON CORP: Faces Class Action Over Class 8 Truck Monopoly
----------------------------------------------------------
Murray, Frank & Sailer LLP Thursday disclosed that it has filed a
class action complaint in the United States District Court for the
District of Kansas (Case No. 10-CV-2539 EFM/JPO) seeking to
recover damages on behalf of a nationwide class of purchasers who
indirectly bought Eaton Corporation Class 8 truck transmissions by
purchasing Class 8 trucks between October 2002 and the present
(the "Class Period"), from one or more of the following
manufacturers:
Daimler Trucks North America LLC Freightliner LLC Navistar
International Corporation International Truck and Engine
Corporation Paccar Inc. Kenworth Truck Company Peterbilt Motors
Company Volvo Trucks North America Mack Trucks, Inc.
The complaint alleges that Eaton and the manufacturers conspired
to help Eaton maintain its monopoly power in the Class 8 truck
transmission market through a series of actions designed to reduce
customer access to a competitor's Class 8 transmissions, which
resulted in the competitor's exclusion from over 90% of the truck
transmission market. As a result, Class 8 truck purchasers were
forced to pay artificially high prices for Class 8 trucks
containing Eaton transmissions.
Class 8 trucks, also known as heavy duty trucks, are trucks with a
gross vehicle weight above 33,000 pounds (14,969 kg).These include
all tractor trailer trucks.
If you would like to learn more about this class action lawsuit,
please go to our link at:
http://www.murrayfrank.com/CM/Custom/Custom162.asp
Murray Frank may be reached at:
Benjamin D. Bianco, Esq.
MURRAY, FRANK & SAILER LLP
Telephone: 212-682-1818
800-497-8076
E-mail: newcase@murrayfrank.com
http://www.murrayfrank.com/
FORTUNE HI-TECH: Faces Class Suit Over Alleged Pyramid Scheme
-------------------------------------------------------------
Jayne O'Donnell, writing for USA TODAY, reports Marie Richardson
of Daytona Beach, Fla., has never been as excited about a business
opportunity as she is about her new work for Fortune Hi-Tech
Marketing. In her first week and a half as an independent sales
representative this summer, she earned $800 in bonuses for
recruiting four customers who agreed to pay a fee to become
salespeople and buy or sell products.
Kimberly Asper of Missoula, Mont., however, says she sometimes has
to feed her family cereal or ramen noodles for dinner since she
was laid off from a job and spent thousands trying to build a
business through Fortune. She soon realized it was all about
"signing people up."
Ms. Richardson was one of several thousand salespeople who
gathered here last month for a Fortune conference to learn how to
recruit people and sell products including cellphone service and
private-label vitamins for the company, which Fortune's top money
earner, Ruel Morton, calls "the most lucrative financial
opportunity in the history of the country." Ms. Asper, meanwhile,
was one of the Montanans whose complaints led to a lawsuit filed
by the state securities commissioner and settlement that required
Fortune to tell current and new representatives that no
compensation will be paid for recruitment. Fortune paid $1
million to settle the charges, including $840,000 to reimburse
Montanans, but did not admit wrongdoing.
Multilevel or "network" marketing pays commissions to salespeople
for the products they sell, on products sold by others they
recruit, and often bonuses when their teams reach a certain level
of sales. The Direct Selling Association, which represents
companies that have multilevel compensation plans, estimates there
were about 16.1 million of these "direct" salespeople in the U.S.
last year, up from 15.1 million in 2008, thanks to high
unemployment and the need for many to supplement incomes. Avon,
Amway and Mary Kay Cosmetics are among the largest companies in
multilevel marketing, but there are hundreds of lesser-known
businesses that sell everything from jewelry to cellphone service.
Critics of Fortune, including the Montana Commissioner of
Securities and the plaintiffs in a new lawsuit seeking class-
action status, say Fortune is a "pyramid scheme" because
salespeople are primarily paid for recruiting, not product sales,
and more recent recruits can't earn anything close to what the
early entrants do. Fortune has until Nov. 2 to respond to the
lawsuit seeking class-action status.
"Presidential ambassadors" such as Morton average $1,240,992 in
income a year, yet make up just 0.07% of the company's
representatives, according to a financial disclosure Fortune filed
as part of its April settlement with Montana. The statement also
shows 30% of Fortune representatives make nothing, and 54% of
those with earnings average just $93 a month, before costs. More
than 99% of those who make money earn less than $31,524 a year.
In a written response to questions, Fortune CEO Tom Mills stressed
its independent salespeople's "success depends upon and requires
successful sales efforts, hard work, leadership and teamwork."
There's a big difference in what people make, because some people
only work part time, he says.
To afford big payouts at the upper levels, former Fortune regional
sales manager Joseph Isaacs says the company targets desperate
unemployed people, Hispanic immigrants and others who are
struggling to make ends meet. Joanne McMahon, a national sales
manager speaking at a training session USA TODAY attended here,
said it is the people who can't afford the fee to join Fortune who
need the company the most.
"I heard testimony of people who had become millionaires in a
matter of months," says Ms. Asper, 38, who once earned $100,000 a
year in retail management. "They led us to believe we'd be one of
those people."
The reward for recruitment
Fortune documents show its sales reps are paid $100 to $480 for
recruiting customers who pay fees to become representatives and
buy or sell a small number of products. They receive commissions
of up to 1% -- or less than $1 on a $100-a-month cellphone bill --
on products and services, which they are often encouraged to buy
for themselves or give away. Former sales managers including
Isaacs and Yvonne Day, a plaintiff in the lawsuit seeking class-
action status, say their product commission checks were often less
than $20, while income from bonuses totaled several thousand
dollars. A lawsuit filed by Mr. Isaacs alleges 82% of 100,000
Fortune representatives last year "failed to earn a single
residual commission over $20 despite making personal purchases."
The company says it has about 104,000 salespeople and has
customers in every state, Canada, Puerto Rico and the United
Kingdom. Mr. Mills says because its salespeople are
"independent," they aren't required to notify the company when
they have meetings. But there were still recruitment meetings in
12 states including New York, Virginia and Alabama being
publicized by Fortune on its website this week.
Fortune and its independent representatives also regularly promote
the turnaround stories of its top earners in videotaped meetings,
the conference here, a book written by its president and in
interviews in Success From Home magazine. Matt Morse of Arkansas
told the magazine his first child had hand-me-downs, but that
after he joined Fortune he became debt free, got new things for
his second child and started going to a country club twice a week
and Disney World three times a year. Anna Chorost of Oklahoma
said that since she joined Fortune, she and her husband have flown
to California "simply because we wanted a nice glass of wine."
Companies that are featured on the cover of Success From Home
agree to buy at least $330,000 worth of issues, according to a
description of the prerequisites obtained by USA TODAY.
Fortune president defends company
The Federal Trade Commission considers a company a pyramid scheme
even if it has products for sale if it's clear during recruitment
that "the real way to make money isn't by selling that product but
by recruiting other people to pay money for the right to sell that
product," says Monica Vaca, assistant director for the FTC's
division of marketing practices.
The FTC Act also prohibits "deceptive and misleading practices,"
which may include claims about what people make that don't make
"clear if it's not typical of what everyone who joins is making,"
Ms. Vaca says.
In an interview at the conference, Fortune founder and President
Paul Orberson defended his company against the charges it is a
pyramid scheme: "If it were illegal, I wouldn't be standing here."
As with laws enforced by the FTC, at least 46 states also ban the
payment of money to reward the act of recruiting another
participant, says Gerald Nehra, a multilevel marketing defense
attorney who headed Amway's legal division from 1982 to 1991.
Mr. Nehra says he advises his clients that "80% or more of money
that moves around the enterprise should be directly related to
sales of products or services." Mr. Nehra would not comment on
any particular company.
Diane Graber, a former executive sales manager from Montana who is
a supporter of Fortune, acknowledges that "if you were not
recruiting, your business was dying." The checks from product
sales were "not good enough to live on," says Ms. Graber, who was
a defendant in the Montana lawsuit.
"All compensation is based on sales, and sales alone," Mills said
in his written response. "There is never any compensation for
recruiting, only for the acquisition and retention of customers."
"Customer acquisition bonuses," he says, "reward the (independent
representatives) for acquiring new customers."
Qualifying for bonuses
Fortune only pays these customer-acquisition bonuses to those who
bring in people who pay the $99 fee to join and agree to buy or
sell some products or services. Once that new representative makes
enough sales to get five "customer points," they are qualified to
get bonuses themselves for bringing in others.
A customer, Mr. Nehra says, is a person who "has no expectation of
making money and just receives the product or service for the
value paid." They don't provide Social Security numbers or
taxpayer ID numbers and sign independent contractor agreements, he
says.
Most recurring purchases -- such as cellphone service, satellite
TV or regular deliveries of vitamins -- count for one or two
points. A "First Day Packet," distributed to new Fortune
salespeople as recently as last June, says three customer points
could be easily obtained by the new salesperson by paying a
monthly fee to have a Fortune website and a travel website. The
packet noted that the "goal" is to have 10 points with at least
two or four points representing sales to another person.
Mr. Mills says the company didn't produce or endorse the packet,
but a similar suggestion is made by Fortune presidential
ambassador Todd Rowland in a videotaped presentation viewed by USA
TODAY and sold by Fortune last year. Mr. Rowland noted the
Fortune website is the first point and that new recruits could buy
nutritional or beauty products or switch their family's cellphone
service and TV to satellite service offered by Fortune to earn
their points, as his family did.
Former managers, including Asper, Isaacs and Day, all say they
were encouraged to become customers themselves.
"You could sell the products to others, but nobody ever does
that," says Mr. Isaacs, who is being sued by Fortune for trademark
infringement and filed a counterclaim calling Fortune an "unlawful
pyramid scheme." "In reality, it isn't taught that way. All new
managers buy their first three, five or 10 points to immediately
qualify their business."
Kevin Mullens, a Pentecostal preacher and Fortune national sales
manager in Crawfordville, Fla., used the Bible in a videotaped
presentation last fall to emphasize why the downtrodden need a
plan that includes Fortune: "The Scripture says without a vision,
people perish."
Fortune, he said, is "a ministry that can produce whatever it is
that you need."
State officials step in
Some government officials aren't so sure. What states are doing:
* Montana Commissioner of Securities Monica Lindeen says she
was pitched to join Fortune by her brother. He recruited her
mother and other family members before she learned her office was
investigating. She called Fortune a "pyramid scheme" when she
filed suit against the company in March. Along with prohibiting
Fortune from paying people for recruiting and insisting that
bonuses only be based on product sales outside the home, Montana's
consent agreement requires Fortune to lower its entry fee from
$299 at the time to $75 and to give every representative a
"disclosure document" that explains how long it takes to earn
different levels of income. All of Ms. Lindeen's family members
have left Fortune.
* The Texas Attorney General's office sent Fortune a "civil
investigative demand" letter on Aug. 26. The letter asked for the
names of all state residents enrolled in Fortune, how much they
paid to get in and got in return, along with the gross product
sales in the state. The letter also asks the names and earnings
of the highest-ranking managers of the company, who is below them
on their teams and how much comes from direct product sales as
opposed to "commissions, bonuses or sales by others." Jerry
Strickland, a spokesman for Texas Attorney General Greg Abbott,
says the office is reviewing Fortune's response, and the
"investigation is ongoing."
* Kentucky Attorney General Jack Conway's office is also
investigating, according to former Fortune managers Day and
Isaacs, who have been interviewed. The office doesn't confirm or
deny investigations and wouldn't comment about Fortune. In an
interview, however, Conway said it could violate the state's anti-
pyramid scheme law if product sales alone couldn't "sustain the
people at the lower end of the chain." And it could be considered
an "unconscionable act" under the state's consumer protection law
to not disclose how unlikely it is for new salespeople to make
anything close to what more senior managers do.
* North Dakota Attorney General Wayne Stenehjem issued a
cease-and-desist order last December against Fortune for
violations of several state laws. Fortune agreed to pay a $12,500
fine and to voluntarily comply with state laws. But Mr. Stenehjem
said the state's consumer protection division would continue to
investigate whether Fortune violates the state's anti-pyramid,
consumer fraud and home-solicitation laws.
* North Carolina Attorney General Roy Cooper's office has
received "a number of complaints" about Fortune, and the consumer
protection division launched an investigation, according to
spokeswoman Noelle Talley.
* At least four other states -- Missouri, South Carolina,
Illinois and Florida -- have followed up on complaints from
disgruntled former Fortune representatives.
Non-English speakers vulnerable
Some say Fortune goes too far in targeting vulnerable Hispanics
who aren't fluent in English. Ilse Bustamante, a printing company
executive from Deland, Fla., filed a complaint with her state
after a friend tried to strong-arm her into joining Fortune
because of her Latin connections. She says Fortune is determined
to tap into the growing Hispanic market to fuel its own growth and
targets bilingual people like her to lure non-English-speakers.
"The way they (Fortune) present this info is misleading, and with
them not knowing English that well, they're going to fall for it,"
Ms. Bustamante says.
Mary Jude Ramirez, whose son-in-law left Fortune because of the
high monthly fees, agrees. "These are people who really have an
American dream," Ms. Ramirez says. "The Fortune people tell them
they only need a great desire to get ahead, and if they spread the
word of this program, riches will pour into their lap."
A central part of the Fortune pitch, as heard at the conference
here and explained by several former managers, is that it's easy
to recruit other managers because the brands and products it sells
are ones almost everyone already needs and uses. But nearly all
of the household names, including Travelocity, Citibank, Allstate
and Home Depot, that the company listed on its website as recently
as this summer are no longer named.
Currently, Fortune representatives can sell satellite TV through
Dish Network. Although it had a large display at the conference,
Dish downplayed its relationship with Fortune and told Montana
officials that it didn't have a partnership with Fortune, which it
called a "third-party independent contractor," according to the
Montana cease-and-desist order against Fortune. Dish didn't reply
to a request for comment.
Fortune representatives can also sell cellphone service for most
major carriers through a company called The Wireless Shop, which
is owned by Reston, Va.-based Simplexity. Other products include
Fortune's private-label vitamin line, True Essentials, private-
label skin-care products, online music downloads, roadside
assistance and home-security systems.
Fortune often notes that its commissions are up to 25%, but those
who choose that route forfeit the "customer points" necessary to
advance in the company and receive bonuses in bringing in other
salespeople who are also customers. And the larger commissions
are only available on its private-label products.
Fortune lowers fees after complaints
Fortune has been changing its national policies, including
lowering the entrance fee outside Montana from $299 to $199 to $99
in the last four months -- following complaints and legal charges.
In a taped conference call with his team members on Sept. 29,
Morton said the company would no longer pay recruitment bonuses
until managers have 12 people on their teams, which places them at
the regional sales manager level. To have 12 people on a team, a
person has to recruit three people who recruit three people who
get three more people who bring in another three. USA TODAY
listened to the call.
Commissions on products were also increased from 0.25% to either
0.50% or 1%, which would boost residuals from product sales but
still make Fortune's product commissions extremely low compared
with other companies using multilevel compensation plans. Mr.
Nehra says even 25% commissions would be low in multilevel
marketing, as many companies pay up to 45% commissions because
they sell such high-margin products. Kenyon Meyer, the attorney
who filed the lawsuit seeking class-action status, says such a
small change doesn't change the legality as it's still far more
lucrative to recruit." If you create a system where recruitment
is rewarded more than the sale of products, what is a rational
person going to do?" says Mr. Meyer, whose law firm has
represented subsidiaries of Gannett, the parent company of USA
TODAY.
Lou Abbott, an advocate of multilevel marketing and founder of the
website MLM-thewholetruth.com, says he believes Fortune is in "a
gray area and always has been."
"For a company to stand legal scrutiny, distributors cannot in any
way, shape or form be compensated for recruiting other
distributors," Mr. Abbott says. The lawsuit seeking class-action
status is asking the court to force Fortune to pay back the money
that representatives paid the company and to stop Fortune from
operating as an "illegal pyramid scheme."
Ms. Richardson, who has a kettle corn business at a flea market
and sells real estate, found the story of a former dishwasher in
Mexico who is now a presidential ambassador was compelling at the
conference. She's also motivated by the Lexus vehicle Fortune is
now making payments on for the person who recruited her. Fortune
agrees to make payments on certain luxury vehicles when
representatives reach the executive sales manager level -- which
means they have 90 people on their teams -- as long as they remain
at that level.
"That's my goal," Ms. Richardson says.
Kimberly Asper and her husband were both laid off more than a year
ago and lost their home in a foreclosure this summer. She's now
working up to 10 hours a week for minimum wage in a coffee shop.
She estimates she spent about $5,000 to join Fortune, buy
products, hold meetings and pay for travel to Fortune conferences.
"The people in the company who are higher up keep benefiting from
people who are struggling to be at the same level," Ms. Asper
says.
When Ms. Asper met Orberson at a Canadian conference, however, she
says he told her it didn't have to be that way: "He wanted to know
why I wasn't on stage, and when was I going to be his next
millionaire."
GEORGIA: Class Suit Challenges Legitimacy of 287(g) Program
-----------------------------------------------------------
Kate Brumback, writing for The Associated Press, reports three
immigrants in Georgia are suing to challenge a government program
that allows local authorities to enforce federal immigration law,
and they are seeking to have the case declared a class action to
represent many other immigrants.
Experts say the lawsuit, filed last week in federal court in
Atlanta, could be the first to directly challenge the legitimacy
of the 287(g) program, which has been used to identify more than
180,000 illegal immigrants for deportation nationwide since 2006.
"I have heard of nobody filing a lawsuit on this, and I would have
heard about it," said Charles Kuck, a prominent Atlanta
immigration lawyer and past president of the American Immigration
Lawyers Association.
The lawsuit names U.S. Immigration and Customs Enforcement
director John Morton, Cobb County Sheriff Neil Warren, an
investigator for the Georgia Department of Public Safety and other
officials as defendants.
A Department of Public Safety spokesman and a spokeswoman for
Sheriff Warren's office said Thursday their agencies hadn't seen
the lawsuit and couldn't comment. An ICE spokesman said the
agency doesn't comment on pending litigation.
The lawsuit seeks to define the class as "all Hispanic persons who
have been or will be restrained and interrogated within the State
of Georgia" by local authorities enforcing federal immigration law
under an agreement with U.S. Immigration and Customs Enforcement.
As of late September, the 287(g) program had been used to identify
14,692 illegal immigrants in Georgia for deportation in the four
years since Cobb became the first county in the state to launch
the program, according to ICE. Three additional counties plus the
state Department of Public Safety have since signed agreements.
The lawsuit alleges ICE has failed to train, supervise and
otherwise oversee sheriff's deputies in Cobb County, where the
three plaintiffs live. It also claims ICE has improperly
delegated its power to local authorities.
"This is a bad thing, and it tears apart families," said attorney
Erik Meder, who filed the lawsuit. "While these people are
certainly in the country illegally, they aren't criminals and
don't deserve to be locked up and separated from their families."
Immigration officials have broad discretionary power and should
not be issuing a notice to appear -- which initiates deportation
proceedings -- for illegal immigrants who are arrested and
discovered to be in the country illegally after initially having
been stopped for relatively minor offenses, the lawsuit says.
The program is part of the 1996 Immigration and Nationality Act,
but wasn't used much until 2006. It is intended to train state
and local officers in immigration law enforcement and enables them
to identify and detain illegal immigrants, who can then be turned
over to ICE.
It has become a rallying point for immigrant rights activists all
over the country who say it encourages racial profiling and
discourages Latinos from reporting crimes for fear of being
deported.
The inspector general of the Department of Homeland Security,
which includes ICE, reported in March that the 287(g) program was
poorly supervised and provided insufficient training to officers.
The inspector general made recommendations for overhauling the
program.
It was the second critical report for the program. The Government
Accountability Office had criticized it in July 2009.
Mr. Meder said the program is unconstitutional because it
"impermissibly delegates federal power to local authorities with
insufficient oversight."
Kuck doesn't support the 287(g) program but said he believes
Congress specifically authorized ICE to delegate enforcement
authority to local entities.
"Unfortunately, I don't think it's unconstitutional," he said. "I
don't think there's any harm in challenging it, but I don't expect
the suit to go anywhere. And I certainly don't think it will be
given class-action status."
Brittney Nystrom of the National Immigration Forum, a Washington-
based immigrant advocacy organization, said she hasn't heard of
any other lawsuit that directly attacks 287(g) on its merits.
"Most of the advocacy around this program is that local
authorities aren't using the authority they're given correctly,
that there's racial profiling, for example," she said.
The three named plaintiffs in the lawsuit "each represent a
different kind of abuse" of the program, Mr. Meder said.
One, a Mexican citizen who came to the U.S. legally in 2004 but
overstayed her authorization, was arrested after a car crash for
not having a driver's license and is being deported.
The second, an illegal immigrant arrested on a shoplifting charge
that she is fighting, is in deportation proceedings. But the
lawsuit argues she should be able to stay until her criminal case
is decided.
The third is an El Salvadoran immigrant who has legal
authorization to work in the U.S. but was arrested in July on
felony forgery charges. Authorities say he used a false
immigration document to renew his driver's license, a charge he
denies.
GLAXOSMITHKLINE: Faces Two Suits Over Diabetes Drug Avandia
-----------------------------------------------------------
Andrea Dearden and Kelly Holleran, writing for, Madison/St. Clair
Record, reports former St. Clair County Circuit Judge Michael
O'Malley is part of a legal team leading two separate product
liability suits filed the same day in Madison and St. Clair
counties over the diabetes drug Avandia.
Mr. O'Malley retired as judge on July 30 to join the St. Louis
personal injury firm of Carey, Danis and Lowe.
As judge, he had presided over at least one class action against
drug companies. In 2005, he certified a case against Bayer and
GlaxoSmithKline, over the cholesterol fighting drug Baycol. The
Illinois Supreme Court overturned Judge O'Malley's ruling in 2009.
In the Avandia suits filed Oct. 1, Judge O'Malley now takes on
GlaxoSmithKline as an adversary.
According to the suit filed in St. Clair County, Illinois
residents Ida Akins and Allen McAllister say GlaxoSmithKline was
wrong in selling a diabetes drug without first warning of
potential serious side effects from which they suffered.
Walgreens is a co-defendant in both suits.
Ms. Akins and Mr. McAllister claim they used Avandia to treat
their type 2 diabetes mellitus, but suffered severe injuries from
their ingestion of the drug.
Avandia caused Ms. Akins and Mr. McAllister to suffer a heart
attack, they say.
"Before and on or about the time when Avandia was prescribed and
used by Plaintiffs, GSK knew, or should have known, that Avandia
was associated with a significant increased risk of heart failure,
myocardial ischemia and ischemic events such as cardiovascular
mortality, myocardial infarction, and stroke," the suit states.
In the Madison County suit, Illinois residents Raymond Griggs and
Rudolph Klepitsch also claim the drug caused them to suffer
serious heart problems after they used it to treat their type 2
diabetes mellitus.
Messrs. Griggs and Kleptisch accuse the defendants of negligence,
negligent pharmaco-vigilance, a breach of express warranty, a
breach of implied warranty, fraud, and a failure to warn. They
say both GSK and Walgreens are liable for their injuries because
they created and heavily marketed Avandia as safe, despite knowing
the drug posed a substantial health risk to patients with type-2
diabetes.
They are suing for an undisclosed amount in actual and punitive
damages along with court costs and fees.
Madison County Circuit Court Case No. 10-L-1024
St. Clair County Circuit Court case number: 10-L-518.
GOOGLE INC: Settles Ads Class Action Suit for $3.5 Million
----------------------------------------------------------
MediaPost reports Google has agreed to pay $3.5 million to settle
a class-action lawsuit alleging that it used a misleading
registration form that tricked marketers into paying for ads that
ran on its publisher network.
The proposed settlement affects marketers that advertised on
Google between October of 2007 and July of 2009 and didn't realize
that they would be opted-in to Google's AdSense network by
default. During that time, Google displayed ads on its publisher
network if marketers registered for AdWords without filling in the
field marked "CPC content bid."
The agreement, quietly filed with the court earlier this month,
calls for those advertisers to receive refunds, says the lead
plaintiffs' lawyer Brian Kabateck. If any money is left over, it
will go to charity.
"All the money will be spent," Mr. Kabateck says. "It's real
money, not a coupon."
He adds that most of the advertisers that were affected were small
businesses that didn't use search marketing firms. "This wasn't a
problem that plagued the really sophisticated advertisers," he
says. "Small mom-and-pop advertisers are the ones who probably
got lured into this."
Google, which denied wrongdoing in the matter, said in a
statement: "We're satisfied with the agreement and are glad to
move forward."
In a motion seeking approval of the settlement, the marketers'
lawyers acknowledge that many search advertisers who were enrolled
in AdSense benefited from the program. "The value provided to the
putative class members for the clicks that this action seeks to
have refunded was, in many instances, equal to or greater than the
amount paid for those clicks," the papers state.
The deal also provides for Kabateck's law firm, Kabateck Brown
Kellner, to receive attorneys' fees of up to $1.2 million. Mr.
Kabateck previously successfully sued Google and Yahoo for click
fraud.
If approved by U.S. District Court Judge Ronald Whyte in San Jose,
Calif., the settlement would resolve a lawsuit filed in January by
retailer Largo Cargo, which alleged that Google did not adequately
communicate that its pay-per-click ads would run on the AdSense
network as well as the search results pages. Largo Cargo, which
began advertising with Google in 2008, asserted that it intended
to opt out of AdSense during the registration process by not
responding to a question asking how much it would be willing to
pay per click for contextual ads on sites that participate in
Google's publisher network.
"Plaintiff, like any reasonable consumer, expected that leaving an
input blank would indicate that it did not want to bid on content
ads," the company alleged in its lawsuit.
Before Largo Cargo sued, a different search marketer, David
Almeida, attempted to bring a class-action case against Google
based on the same allegations. But that matter was dismissed last
year after it emerged that Almeida had signed up with Google
before the company began using the registration form referenced in
the lawsuit.
GORDON TRUCKING: Sued in Calif. for Failing to Pay Proper Wages
---------------------------------------------------------------
Courthouse News Service reports that drivers claim Gordon Trucking
made them work alternating 10-hour shifts and spend 14 consecutive
days on the road to get 2 days off, and shorted them on wages, in
a class action in San Diego County Court, Vista, Calif.
A copy of the Complaint in Yanez, et al. v. Gordon Trucking Inc.,
et al., Case No. 37-2010-00060755 (Calif. Super. Ct., San Diego
Cty.) (Stern, J.), is available at:
http://www.courthousenews.com/2010/10/14/EmployTruck.pdf
The Plaintiffs are represented by:
James R. Patterson, Esq.
HARRISON PATTERSON & O'CONNOR LLP
402 West Broadway, Suite 2900
San Diego, CA 92101
Telephone: (619) 756-6990
- and -
J. Christopher Jaczko, Esq.
Allison H. Goddard, Esq.
JACZKO GODDARD LLP
4401 Eastgate Mall
San Diego, CA 92121
Telephone: (858) 404-9205
INDYMAC BANK: Accused in Calif. Suit of Defrauding Homebuyers
-------------------------------------------------------------
Courthouse News Service reports that Indymac Bank and its
successor, OneWest Bank, defrauded homebuyers by promising to
modify their mortgages, but "never at any time possessed a good
faith intention to perform on these loan modification agreements,"
a class action claims in Superior Court. "Defendant sought only
to induce homeowners into making further payments and defraud
homeowners of their money."
The class claims the bank packaged and sold "mass numbers" of
mortgages as mortgage-backed securities (MBS) and sold them to
investors, "and retained or otherwise negotiated for the servicing
rights to such mortgage loans." They claim that "Defendants knew,
or reasonably should have known, that the private investors of the
MBS in which plaintiffs' mortgage was a part of [sic], had not and
would not authorize defendants to modify plaintiffs' mortgage
loans, whereby [sic] reducing plaintiffs' monthly mortgage payment
and effective mortgage rate. . . .
"Hoping to keep their homes, thousands of defaulted borrowers
relied upon defendants' promises and paid to defendants
significant amounts of money that they would not otherwise have
paid, had they known that defendants did not possess a good faith
intention to perform pursuant to the loan modification letter
agreements. . . .
"This action seeks to stop defendants' wide-scale scheme to
defraud thousands of vulnerable California homeowners under threat
of foreclosure on their homes and to recover compensation for this
fraudulent conduct."
The class seeks promissory estoppel and punitive damages for
fraud, breach of contract, breach of faith, unjust enrichment,
negligent misrepresentation, and business code violations.
The Plaintiffs are represented by:
Caleb H. Liang, Esq.
LEE TRAN & LIANG
601 S. Figueroa Street, Suite 4025
Los Angeles, CA 90017
Telephone: 213-612-3737
E-mail: chl@ltlcounsel.com
KNAUF PLASTERBOARD: Settles Chinese Drywall Class Action Claims
---------------------------------------------------------------
Paul Brinkmann, writing for South Florida Business Journal,
reports Knauf Plasterboard Tianjin, one of the biggest makers of
defective Chinese drywall, has agreed to fix hundreds of homes in
a breakthrough settlement of class action claims.
The settlement could be the beginning of the end for the two-year
fiasco regarding Chinese drywall, which was first identified in
late 2008 as contaminating thousands of homes with corrosive
sulfur fumes.
The agreement establishes a demonstration remediation program,
funded by Knauf and a number of builders, drywall suppliers and
their insurers. Knauf and the plaintiffs' committee in class
action cases being heard in New Orleans announced the settlement
in a news release Thursday morning.
U.S. Sen. Bill Nelson, D-Florida, said in an e-mailed statement
that the settlement marks a positive step but that "the journey is
far from over."
"It's time for other foreign manufacturers of defective drywall to
step up and do right by American consumers," added Mr. Nelson, who
has been vocal about Chinese drywall problems for two years.
He has called for investigations of Chinese drywall problems and
proposed legislation aimed at initiating a recall and imposing an
immediate ban on tainted building products from China.
Senator Nelson noted that other manufacturers, including Taishan
Gypsum, have barely participated in the settlement talks.
The demonstration program includes the removal of the problem
drywall from up to 300 homes in Alabama, Mississippi, Louisiana
and Florida. It involves the remediation of homes containing all
or substantially all Knauf drywall, including removal of the
drywall; replacement of all electrical wiring, including switches
and receptacles; replacement of fire safety and home security
equipment; compensation to the homeowner for alternative living
costs during the remediation, moving and storage and personal
property damage; reservation of rights for bodily injury; and
attorneys fees and expenses to be negotiated.
Under the agreement, Knauf will retain and supervise contractors
to do the work. Environmental engineers will inspect the
completed homes and certify that they are free of drywall odors
and contamination.
The settlement's participating builders, suppliers and insurers
are New Orleans-based Interior/Exterior Building Supply, the
Louisiana Homebuilders Indemnity Trust, QBE Insurance Group and
State Farm Insurance. Other Knauf entities are signatories to and
participants in the agreement.
Members of the Plaintiffs' Steering Committee involved in
negotiating the agreement were Russ M. Herman of Herman, Herman,
Katz & Cotlar, LLP; Arnold Levin of Levin Fishbein Sedran &
Berman; and Christopher A. Seeger of Seeger Weiss LLP.
Consolidated class action cases have been overseen by U.S.
District Judge Eldon E. Fallon in New Orleans. Plaintiffs'
attorneys thanked him publicly for "his direction to the parties,
after trials in his courtroom, to negotiate a demonstration
program."
Knauf said in the news release that it "is standing behind its
product and is working with homeowners, builders, suppliers and
their insurers to repair homes containing its drywall."
Knauf attorney Greg Wallance said the demonstration program will
establish a model for the resolution of the drywall fiasco.
"Ultimately, the drywall problem should not be solved in the
courtroom," said Mr. Wallance, of Kaye Scholer LLP. "It should be
solved by a collaborative effort involving [Knauf], the
homeowners, their attorneys and the various suppliers, builders
and their insurance carriers. This is a very positive first step
towards a solution."
Chinese drywall was brought to the U.S. during a major shortage in
domestic supply that started in 2004 and 2005, at the convergence
of the building boom, hurricane reconstruction efforts and a
retooling of several local drywall plants. Sixty percent of the
drywall came through Florida ports.
MOSAIC CO: Court Dismisses Strict Liability Claims Against Unit
---------------------------------------------------------------
The U.S. District Court for the District of Kansas has granted
Vigindustries Inc.'s motions to dismiss all strict liability
claims in a lawsuit, according to The Mosaic Company's Oct. 12,
2010, Form 10-Q filing with the U.S. Securities and Exchange
Commission for the quarter ended Aug. 31, 2010. Vigindustries is
a subsidiary of Mosaic.
In January 2005, a sinkhole developed at a former IMC salt
solution mining and steam extraction facility in Hutchinson,
Kansas. Under Kansas Department of Health and Environment
oversight, the company completed measures to fill and stabilize
the sinkhole and provided KDHE information regarding its
continuous monitoring of the sinkhole as well as steps taken to
ensure its long term stability. At KDHE's request, the company
then investigated the potential for subsidence or collapse at
approximately 30 former salt solution mining wells at the
property, some of which are in the vicinity of nearby residential
properties, railroads and roadways. Subsequently, the company
entered into an agreement with KDHE and the City of Hutchinson
with respect to measures to address risks presented by the former
wells. The primary measures include the company's purchase of a
number of homes in the Careyville development that is adjacent to
the Hutchinson, Kansas facility in order to create a buffer
between the former wells and residential property, the company's
installation of an early detection monitoring system and well
stability investigation along the railroad tracks, and the City of
Hutchinson's closure of a road.
On Jan. 6, 2010, eleven residents of the Careyville development
filed a lawsuit against one of the company's subsidiaries,
Vigindustries Inc., in the District Court of Reno County, Kansas,
alleging that the former salt solution wells give rise to
actionable claims by the plaintiffs based on strict liability,
negligence, nuisance, inverse condemnation and trespass. The
company subsequently removed the lawsuit to the U.S. District
Court for the District of Kansas.
The lawsuit alleges diminution in property values as a result of
the operation and subsequent maintenance of the solution mines and
the actions taken to address risks allegedly presented by the
former salt solution mining wells at the Hutchinson, Kansas
facility. The lawsuit was filed on behalf of the named plaintiffs
and a putative class of property owners within the Careyville
development. The lawsuit seeks damages in unspecified amounts for
personal and property injuries, costs and attorneys' fees, and
unspecified equitable relief.
In June 2010 and August 2010, the court granted the company's
motions to dismiss all strict liability claims and to limit the
negligence and nuisance claims to acts occurring after January
2000, respectively.
The Mosaic Company -- http://www.mosaicco.com/-- is one of the
world's leading producers and marketers of concentrated phosphate
and potash crop nutrients. Mosaic is a single source provider of
phosphate and potash fertilizers and feed ingredients for the
global agriculture industry.
MOSAIC CO: Appeal in Potash Antitrust Litigation Remains Pending
----------------------------------------------------------------
The Mosaic Company's appeal on the denial of dismissal of the
Potash Antitrust Suits remains pending, according to the company's
Oct. 12, 2010, Form 10-Q filing with the U.S. Securities and
Exchange Commission for the quarter ended Aug. 31, 2010.
On Sept. 11, 2008, separate complaints were filed in the U.S.
District Courts for the District of Minnesota and the Northern
District of Illinois, on Oct. 2, 2008 another complaint was filed
in the U.S. District Court for the Northern District of Illinois,
and on Nov. 10, 2008 and Nov. 12, 2008, two additional complaints
(together, the "Direct Purchaser Cases") were filed in the U.S.
District Court for the Northern District of Illinois by Minn-Chem,
Inc., Gage's Fertilizer & Grain, Inc., Kraft Chemical Company,
Westside Forestry Services, Inc. d/b/a Signature Lawn Care, and
Shannon D. Flinn, respectively, against The Mosaic Company, Mosaic
Crop Nutrition, LLC and a number of unrelated defendants that
allegedly sold and distributed potash throughout the United
States.
On Nov. 13, 2008, the plaintiffs in the cases in the U.S. District
Court for the Northern District of Illinois filed a consolidated
class action complaint against the defendants, and on Dec. 2, 2008
the Minn-Chem Case was consolidated with the Gage's Fertilizer
Case.
On April 3, 2009, an amended consolidated class action complaint
was filed on behalf of the plaintiffs in the Direct Purchaser
Cases. The amended consolidated complaint added Thomasville Feed
and Seed, Inc., as a named plaintiff, and was filed on behalf of
the named plaintiffs and a purported class of all persons who
purchased potash in the United States directly from the defendants
during the period July 1, 2003 through the date of the amended
consolidated complaint. The amended consolidated complaint
generally alleges, among other matters, that the defendants:
conspired to fix, raise, maintain and stabilize the price at which
potash was sold in the United States; exchanged information about
prices, capacity, sales volume and demand; allocated market
shares, customers and volumes to be sold; coordinated on output,
including the limitation of production; and fraudulently concealed
their anticompetitive conduct. The plaintiffs in the Direct
Purchaser Cases generally seek injunctive relief and to recover
unspecified amounts of damages, including treble damages, arising
from defendants' alleged combination or conspiracy to unreasonably
restrain trade and commerce in violation of Section 1 of the
Sherman Act. The plaintiffs also seek costs of suit, reasonable
attorneys' fees and pre-judgment and post-judgment interest.
On Sept. 15, 2008, separate complaints were filed in the U.S
District Court for the Northern District of Illinois by Gordon
Tillman; Feyh Farm Co. and William H. Coaker Jr.; and Kevin
Gillespie (collectively referred to as the "Indirect Purchaser
Cases").
The defendants in the Indirect Purchaser Cases are generally the
same as those in the Direct Purchaser Cases.
On Nov. 13, 2008, the initial plaintiffs in the Indirect Purchaser
Cases and David Baier, an additional named plaintiff, filed a
consolidated class action complaint.
On April 3, 2009, an amended consolidated class action complaint
was filed on behalf of the plaintiffs in the Indirect Purchaser
Cases. The factual allegations in the amended consolidated
complaint are substantially identical to those with respect to the
Direct Purchaser Cases. The amended consolidated complaint in the
Indirect Purchaser Cases was filed on behalf of the named
plaintiffs and a purported class of all persons who indirectly
purchased potash products for end use during the Class Period in
the United States, any of 20 specified states and the District of
Columbia defined in the consolidated complaint as "Indirect
Purchaser States," any of 22 specified states and the District of
Columbia defined in the consolidated complaint as "Consumer Fraud
States", and/or 48 states and the District of Columbia and Puerto
Rico defined in the consolidated complaint as "Unjust Enrichment
States."
The plaintiffs generally sought injunctive relief and to recover
unspecified amounts of damages, including treble damages for
violations of the antitrust laws of the Indirect Purchaser States
where allowed by law, arising from defendants' alleged continuing
agreement, understanding, contract, combination and conspiracy in
restraint of trade and commerce in violation of Section 1 of the
Sherman Act, Section 16 of the Clayton Act, the antitrust, or
unfair competition laws of the Indirect Purchaser States and the
consumer protection and unfair competition laws of the Consumer
Fraud States, as well as restitution or disgorgement of profits,
for unjust enrichment under the common law of the Unjust
Enrichment States, and any penalties, punitive or exemplary
damages and/or full consideration where permitted by applicable
state law. The plaintiffs also seek costs of suit and reasonable
attorneys' fees where allowed by law and pre-judgment and post-
judgment interest.
On June 15, 2009, the company and the other defendants filed
motions to dismiss the complaints in the Potash Antitrust Cases.
On Nov. 3, 2009, the court granted the company's motions to
dismiss the complaints in the Indirect Purchaser Cases except (a)
for plaintiffs residing in Michigan and Kansas, claims for alleged
violations of the antitrust or unfair competition laws of Michigan
and Kansas, respectively, and (b) for plaintiffs residing in Iowa,
claims for alleged unjust enrichment under Iowa common law.
The court denied the company's and the other defendants' other
motions to dismiss the Potash Antitrust Cases, including the
defendants' motions to dismiss the claims under Section 1 of the
Sherman Act for failure to plead evidentiary facts which, if true,
would state a claim for relief under that section.
The court, however, stated that it recognized that the facts of
the Potash Antitrust Cases present a difficult question under the
pleading standards enunciated by the U.S. Supreme Court for claims
under Section 1 of the Sherman Act, and that it would consider, if
requested by the defendants, certifying the issue for
interlocutory appeal.
On Jan. 13, 2010, at the request of the defendants, the court
issued an order certifying for interlocutory appeal the issues of
(i) whether an international antitrust complaint states a
plausible cause of action where it alleges parallel market
behavior and opportunities to conspire; and (ii) whether a
defendant that sold product in the United States with a price that
was allegedly artificially inflated through anti-competitive
activity involving foreign markets, engaged in 'conduct involving
import trade or import commerce' under applicable law. On March
17, 2010, the United States Court of Appeals for the Seventh
Circuit agreed to hear the defendants' interlocutory appeal.
The parties have filed their appellate briefs with the Seventh
Circuit, and the court heard oral arguments from the parties on
June 3, 2010.
The Mosaic Company -- http://www.mosaicco.com/-- is one of the
world's leading producers and marketers of concentrated phosphate
and potash crop nutrients. Mosaic is a single source provider of
phosphate and potash fertilizers and feed ingredients for the
global agriculture industry.
ONEOK INC: Plaintiff's Appeal on Decertification Still Pending
--------------------------------------------------------------
The plaintiffs' motion for reconsideration in the denial of class
certification in the matter Will Price, et al. v. Gas Pipelines,
et al. (f/k/a Quinque Operating Company, et al. v. Gas Pipelines,
et al.), Case No. 99C30, remains pending in the 26th Judicial
District, District Court of Stevens County, Kansas, Civil
Department, according to the company's Oct. 12, 2010, Form 10-K/A
filing with the U.S. Securities and Exchange Commission for the
fiscal year ended Dec. 31, 2009.
Price I
The suit was filed on May 28, 1999, against the company and its
division, Oklahoma Natural Gas, four subsidiaries of ONEOK
Partners, Mid-Continent Market Center, L.L.C., ONEOK Field
Services Company, L.L.C., ONEOK WesTex Transmission, L.L.C. and
ONEOK Hydrocarbon, L.P. (formerly Koch Hydrocarbon, LP, successor
to Koch Hydrocarbon Company), as well as approximately 225 other
defendants.
Plaintiffs sought class certification for their claims for
monetary damages, alleging that the defendants had underpaid gas
producers and royalty owners throughout the United States by
intentionally understating both the volume and the heating content
of purchased gas.
After extensive briefing and a hearing, the Court refused to
certify the class sought by plaintiffs. Plaintiffs then filed an
amended petition limiting the purported class to gas producers and
royalty owners in Kansas, Colorado and Wyoming and limiting the
claim to undermeasurement of volumes.
Oral argument on the plaintiffs' motion to certify this suit as a
class action was conducted on April 1, 2005.
On Sept. 18, 2009, the Court denied the plaintiffs' motions for
class certification, which, in effect, limits the named plaintiffs
to pursuing individual claims against only those defendants who
purchased or measured their gas.
On Oct. 2, 2009, the plaintiffs filed a motion for reconsideration
of the Court's denial of class certification, and the defendants
filed their brief on Jan. 18, 2010, in opposition to plaintiffs'
motion.
Oral argument on the motion was held on Feb. 10, 2010, and the
Court took the matter under advisement.
Price II
A suit captioned Will Price and Stixon Petroleum, et al. v. Gas
Pipelines, et al., 26th Judicial District, District Court of
Stevens County, Kansas, Civil Department, Case No. 03C232, was
filed on May 12, 2003, after the Court denied class status in
Price I.
Plaintiffs in this suit are seeking monetary damages based upon a
claim that 21 groups of defendants, including the company and its
division, Oklahoma Natural Gas, four subsidiaries of ONEOK
Partners, Mid-Continent Market Center, L.L.C., ONEOK Field
Services Company, L.L.C., ONEOK WesTex Transmission, L.L.C. and
ONEOK Hydrocarbon, L.P. (formerly Koch Hydrocarbon, LP, successor
to Koch Hydrocarbon Company), intentionally underpaid gas
producers and royalty owners by understating the heating content
of purchased gas in Kansas, Colorado and Wyoming.
This suit has been consolidated with Price I for the determination
of whether either or both cases may properly be certified as class
actions.
ONEOK, Inc. -- http://www.oneok.com/-- is a diversified energy
company. The company is the general partner and own 42.8% of
ONEOK Partners, L.P., one of the largest publicly traded master
limited partnerships, which is a leader in the gathering,
processing, storage and transportation of natural gas in the U.S.
and owns one of the nation's premier natural gas liquids systems,
connecting NGL supply in the Mid-Continent and Rocky Mountain
regions with key market centers. ONEOK is among the largest
natural gas distributors in the United States, serving more than 2
million customers in Oklahoma, Kansas and Texas. The company's
energy services operation focuses primarily on marketing natural
gas and related services throughout the U.S. ONEOK is a Fortune
500 company.
SOUTHPORT BANK: Sued for Residential Mortgage Loan Violations
-------------------------------------------------------------
Irma Villate, on behalf of herself and others similarly situated
v. Southport Bank, et al., Case No. 2010-CH-44401 (Ill. Cir. Ct.,
Cook Cty. October 12, 2010), accuses the Kenosha, Wis.-based bank
and unit Comcor Mortgage, who are engaged, in part, in the
business of originating residential mortgage loans to consumers in
Illinois, of making a loan that they knew, at the time or
origination, violated Illinois High Risk Home Loan Act
prohibitions on charging more than 5% in points and fees without
providing the special disclosure as required under under 815 ILCS
137/95. In knowingly violating the IHRHLA, Ms. Villate says
defendants also violated the Illinois Consumer Fraud Act, 815 ILCS
505.
When the points and fees on a home loan will exceed 5%, the
Illinois High Risk Home Loan Act, 851 ILCS 137/1, requires the
lender to provide a special written notice to the borrower warning
her that she: is entering into a high-cost loan, could lose her
home foreclosure, might be able to obtain a loan at lower cost,
and is advised to seek advise from a housing counselor, attorney
or other financial adviser.
Ms. Villate states that she was never provided with a notice whose
text was identical or substantially similar to the statutory
language required by IHRHLA.
Ms. Villate asks the Court to order, among other things, the
disgorgement to the class of all charges over 5.0% of the total
loan amounts, plus reasonable attorney's fees, litigation expenses
and costs.
The Plaintiff is represented by:
Al Hofeld, Jr., Esq.
LAW OFFICES OF AL HOFELD, JR., LLC
1525 East 53rd Street, Suite 903
Chicago, IL 60615
Telephone: (773) 241-5844
E-mail: al@alhofeldlaw.com
U.S. GREEN BUILDING: Faces Class Suit Over LEED Rating Systems
--------------------------------------------------------------
Tristan Roberts, writing for Environmental Building News, reports
the U.S. Green Building Council and its founders have been named
as defendants in a class action lawsuit filed in federal court.
Filed on behalf of mechanical systems designer Henry Gifford,
owner of Gifford Fuel Saving, the lawsuit was stamped October 8,
2010, at the U.S. District Court for the Southern District of New
York. Among other allegations, the suit argues that USGBC is
fraudulently misleading consumers and fraudulently misrepresenting
energy performance of buildings certified under its LEED rating
systems, and that LEED is harming the environment by leading
consumers away from using proven energy-saving strategies.
Alleged fraud and deceptive practices
The suit alleges that USGBC's claim that it verifies efficient
design and construction is "false and intended to mislead the
consumer and monopolize the market for energy-efficient building
design." To support this allegation Gifford relies heavily on his
critique of a 2008 study from New Buildings Institute (NBI) and
USGBC that is, to date, the most comprehensive look at the actual
energy performance of buildings certified under LEED for New
Construction and Major Renovations (LEED-NC). While the NBI study
makes the case that LEED buildings are, on average, 25% to 30%
more efficient than the national average, Mr. Gifford published
his own analysis in 2008 concluding that LEED buildings are, on
average, 29% less efficient. A subsequent analysis of the NBI
data by National Research Council Canada supported NBI's findings,
if not its methods.
Using that study and USGBC's promotion of it, the suit alleges
fraud under the Sherman Anti-Trust Act, among other statutes. Mr.
Gifford's suit demands that USGBC cease deceptive practices and
pay $100 million in compensation to victims, in addition to legal
fees. Under the Lanham Act, the suit repeats the same concerns in
alleging deceptive marketing and unfair competition. Other
allegations include deceptive business practices and false
advertising under New York State law, as well as wire fraud and
unjust enrichment.
Class-action suit
By having his lawyer, Norah Hart of Treuhaft and Zakarin, file a
class-action lawsuit, Mr. Gifford is not only claiming that he has
been harmed by USGBC, but that he is one of a class of plaintiffs
that have been harmed. According to the suit, those plaintiffs
include owners who paid for LEED certification on false premises,
professionals like Gifford whose livelihoods have allegedly been
harmed by LEED, and taxpayers whose money has subsidized LEED
buildings.
The class action approach may be technically difficult to pursue
in this case, says lawyer Shari Shapiro in an article on her green
building law blog. Among other things, Shapiro notes that in a
class action suit it is relevant whether, among other things, "the
plaintiffs are enough alike so that their claims can be
adjudicated together" and "whether the lead plaintiffs adequately
represent members of the class." Given the variety of plaintiffs
Gifford is trying to represent, that may be hard, she says.
Ms. Shapiro, assuming that Mr. Gifford has benefited from the
green building wave, even questions whether Mr. Gifford has even
been harmed, as he would have to be to take part in the lawsuit.
However, Mr. Gifford told EBN that there's no question about that.
"Nobody hires me to fix their buildings," he said. Though not an
engineer, Mr. Gifford is respected in energy efficiency circles
for his technical knowledge. He told EBN that he has lost out
because owners are fixated on earning LEED points, and he doesn't
participate: "Unless you're a LEED AP you're not going to get
work." That's unfair, he claims, because while USGBC says that
its product saves energy, it doesn't. Mr. Gifford says that his
services actually save energy, and he's prepared to prove it by
sharing energy bills from buildings he has worked on.
Whether many other building professionals feel the way Gifford
does, and whether they're willing to go on the record, will be one
aspect of this case to watch. Mr. Gifford indicated that the
response so far has been mixed. As he told EBN, "Everybody has
the same response: thank you, thank you . . . let me know how it
goes."
Was there fraud?
If the case does move ahead, Stephen Del Percio, a lawyer and
author of the blog GreenRealEstateLaw.com, told EBN that it will
be challenging to litigate. "You can't prove fraud just by
circumstantial evidence," he said. Even if the NBI study is
false, that may not be enough. "You have to intend to mislead
people," he said. Mr. Gifford told EBN that he doesn't have
evidence that anyone at USGBC tried to mislead the public, but if
the suit proceeds the discovery process could, in theory, turn up
emails or other communications that support Mr. Gifford's case.
USGBC performance initiatives
Mr. Gifford's complaints focus on the 2008 study and how USGBC
publicized it, but they don't appear to account for other aspects
of LEED. Mr. Gifford focuses on buildings certified under LEED
for New Construction (LEED-NC), but the scope of LEED-NC and other
LEED rating systems is clearly distinct. LEED for Existing
Buildings, launched in 2004, looks at actual building performance,
and in 2006, USGBC announced that buildings certified under LEED-
NC would have the option of being enrolled at no charge in LEED
for Existing Buildings. In 2007 USGBC launched LEED for Homes.
While that system focuses on design and construction of new homes,
it requires on-site verification including blower-door testing
during construction, helping ensure that construction practices
follow the design intent.
Although this final piece may be too late for Gifford and the
contentions of his lawsuit, in 2009 USGBC began requiring
reporting of energy and water data for new buildings certified
under the newer LEED 2009, and it set up infrastructure to invite
sharing of information from all LEED-certified buildings.
Through this effort, the Building Performance Partnership, USGBC
hopes to offer special help to LEED-certified buildings that are
not living up to expected performance, according to Brendan Owens,
P.E., vice president for LEED technical development at USGBC.
Although USGBC has generally played down the possibility because
it doesn't want to discourage participation in LEED, and energy
reporting, CEO Rick Fedrizzi has suggested that non-performing
buildings may lose LEED certification in one form or another.
Despite these efforts, Mr. Gifford complained to EBN that "the
green label gives the designer, the developer, the contractor and
the owner the right to hold a press conference staying that their
building is energy-efficient, while the LEED system guarantees
anonymity" when it comes to reporting actual energy use.
Why sue?
Asked by EBN why he was motivated to go to court, Mr. Gifford
said, "I'm afraid that in a few years somebody really evil will
publicize the fact that green buildings don't save energy and
argue that the only solution [to resource constraints] is more
guns to shoot at the people who have oil underneath their sand."
In other words, he says he's hoping to make the green building
movement more honest so that it's not embarrassed down the road.
USGBC told EBN that it was reviewing the litigation and would
respond in due course. In addition to USGBC, other named
defendants are David Gottfried, a USGBC founder; Rob Watson, who
helped start LEED in the 1990s while working for the Natural
Resources Defense Council; and Rick Fedrizzi, a co-founder and
currently CEO. Responding to EBN's request for comment, Watson
said, "I can't comment on ongoing litigation except to say that
USGBC is examining the complaint. USGBC has confidence in LEED
and in our role in stimulating positive market change."
Michael Italiano, the only key USGBC founder not named as a
defendant, told EBN that while he hadn't reviewed the case, "To me
it sounds frivolous and it doesn't have much chance." He noted,
"LEED doesn't guarantee anything, and I think LEED gives people
the tools to understand that." Owners who want to verify
performance can enroll in LEED for Existing Buildings, monitor
their energy bills, and take other actions, he noted. A lawyer
and currently CEO of Market Transformation to Sustainability, a
nonprofit behind green standards, Mr. Italiano said that lawsuits
targeting standards that have allegedly constrained trade
typically focus on lack of a bona fide consensus process of
standard-setting. In the case of LEED, he said, a broad array of
stakeholders has been involved in writing and reviewing LEED
standards.
Russell Perry, FAIA, of SmithGroup, agreed that if anyone thinks
LEED for New Construction guarantees higher energy performance,
they have the wrong idea. "LEED-NC is saying that a building has
been designed to meet a certain standard, but there are many
variables that go into the actual performance, only one of which
is design." Mr. Perry also noted that LEED includes a broad array
of topics, only one of which is energy. Referring to climate
change and other environmental and health issues, Mr. Perry added,
"I don't think that this kind of distraction helps us move the
ball down the field."
UBS AG: Legal Action v. Ex-Bosses May Weaken U.S. Class Lawsuits
----------------------------------------------------------------
Emma Thomasson, writing for Reuters, reports Swiss bank UBS,
brought to its knees by the financial crisis and a U.S. tax probe,
said it would not sue former management for fear it could
compromise its position in U.S. class action lawsuits.
UBS Chairman Kaspar Villiger told a news conference bringing legal
action in Switzerland against former managers could hurt the
bank's defence in the suits, in which billions of dollars are
claimed, and increase any potential settlement sum.
Mr. Villiger was presenting a report ordered by Swiss parliament
on why UBS ran up such big losses during the crisis and allowed
its bankers to help wealthy Americans dodge taxes.
He said the bank was looking forward and not back.
"With our decision to refrain from legal proceedings, we do not
want to gloss over the mistakes made by UBS or absolve those
involved," he said. "We have learnt the lessons of the past . . .
It is important that we can now concentrate on the future," he
said.
UBS paid a $780 million fine in 2009 to settle a U.S. criminal
investigation into its offshore business and was forced to hand
over details of about 4,450 secret bank accounts to the U.S.
authorities as part of a deal to end civil litigation.
"NO SMOKING GUN"
Peter Forstmoser, a retired Zurich University law professor asked
by UBS to give his independent view alongside the report, told the
news conference there were sufficient grounds to launch legal
proceedings against former managers but the UBS board had good
reasons not to do so.
Proceedings could last as long as a decade, he said, with any
damages unlikely to be enough to assuage public anger.
"No smoking gun has been found in all the investigations so far
and one would not be found with another investigation," he said.
YUM! BRANDS: Faces "Harrison/Rivera" Suit in California
-------------------------------------------------------
KFC Corporation faces a putative class action, styled Lisa
Harrison and Noe Rivera v. KFC USA, Inc., KFC U.S. Properties,
Inc., and KFC Corporation, according to YUM! Brands, Inc.'s
Oct. 12, 2010, Form 10-Q filing with the U.S. Securities and
Exchange Commission for the quarter ended Sept. 4, 2010.
The suit was filed on Aug. 18, 2010, in California state court on
behalf of all former California hourly employees alleging various
California Labor Code violations, including failure to pay all
vacation pay, failure to reimburse business expenses (mileage and
uniforms), and waiting time penalties, as well as a claim of
unfair competition. The defendants' answer or other response was
due by Oct. 12, 2010.
YUM! Brands, Inc. -- http://www.yum.com/-- is a quick service
restaurant (QSR) with over 35,000 units in more than 100 countries
and territories. Through the five concepts of KFC, Pizza Hut,
Taco Bell, LJS and A&W (the Concepts), the company develops,
operates, franchises and licenses a worldwide system of
restaurants, which prepare, package and sell a menu of food items.
In all five of its Concepts, the company either operates units or
they are operated by independent franchisees or licensees under
the terms of franchise or license agreements. In addition, the
company owns non-controlling interests in Unconsolidated
Affiliates who operate similar to franchisees.
YUM! BRANDS: Continues to Defend "Moeller" Suit in California
-------------------------------------------------------------
Taco Bell Corp. continues to defend the matter Moeller, et al. v.
Taco Bell Corp., pending in the U.S. District Court for the
Northern District of California.
The class action was filed on Dec. 17, 2002. On Aug. 4, 2003,
plaintiffs filed an amended complaint that alleges, among other
things, that Taco Bell has discriminated against the class of
people who use wheelchairs or scooters for mobility by failing to
make its approximately 220 company-owned restaurants in California
accessible to the class.
Plaintiffs contend that queue rails and other architectural and
structural elements of the Taco Bell restaurants relating to the
path of travel and use of the facilities by persons with mobility-
related disabilities do not comply with the U.S. Americans with
Disabilities Act, the Unruh Civil Rights Act, and the California
Disabled Persons Act.
Plaintiffs have requested:
(a) an injunction from the District Court ordering Taco
Bell to comply with the ADA and its implementing
regulations;
(b) that the District Court declare Taco Bell in violation
of the ADA, the Unruh Act, and the CDPA; and
(c) monetary relief under the Unruh Act or CDPA.
Plaintiffs, on behalf of the class, are seeking the minimum
statutory damages per offense of either $4,000 under the Unruh Act
or $1,000 under the CDPA for each aggrieved member of the class.
Plaintiffs contend that there may be in excess of 100,000
individuals in the class.
On Feb. 23, 2004, the District Court granted plaintiffs' motion
for class certification. The class includes claims for injunctive
relief and minimum statutory damages.
On May 17, 2007, a hearing was held on plaintiffs' Motion for
Partial Summary Judgment seeking judicial declaration that Taco
Bell was in violation of accessibility laws as to three specific
issues: indoor seating, queue rails and door opening force. On
Aug. 8, 2007, the court granted plaintiffs' motion in part with
regard to dining room seating. In addition, the court granted
plaintiffs' motion in part with regard to door opening force at
some restaurants (but not all) and denied the motion with regard
to queue lines.
The parties participated in mediation on March 25, 2008, and again
on March 26, 2009, without reaching resolution.
On Dec. 16, 2009, the court denied Taco Bell's motion for summary
judgment on the ADA claims and ordered plaintiff to file a
definitive list of remaining issues and to select one restaurant
to be the subject of a trial. The trial will be bifurcated and
the first stage will address equitable relief and whether
violations existed at the restaurant. Taco Bell will have the
opportunity to renew its motion for summary judgment on those
issues. Depending on the findings in the first stage of the
trial, the court may address the issue of damages in a separate,
second stage.
No updates were reported in YUM! Brands, Inc.'s Oct. 12, 2010,
Form 10-Q filing with the U.S. Securities and Exchange Commission
for the quarter ended Sept. 4, 2010.
YUM! Brands, Inc. -- http://www.yum.com/-- is a quick service
restaurant (QSR) with over 35,000 units in more than 100 countries
and territories. Through the five concepts of KFC, Pizza Hut,
Taco Bell, LJS and A&W (the Concepts), the company develops,
operates, franchises and licenses a worldwide system of
restaurants, which prepare, package and sell a menu of food items.
In all five of its Concepts, the company either operates units or
they are operated by independent franchisees or licensees under
the terms of franchise or license agreements. In addition, the
company owns non-controlling interests in Unconsolidated
Affiliates who operate similar to franchisees.
YUM! BRANDS: Pizza Hut Wants Second Amended Complaint Dismissed
---------------------------------------------------------------
Pizza Hut, Inc. has filed a motion to dismiss a second amended
complaint alleging violations of the Fair Labor Standards Act,
according to YUM! Brands, Inc.'s Oct. 12, 2010, Form 10-Q filing
with the U.S. Securities and Exchange Commission for the quarter
ended Sept. 4, 2010.
On July 9, 2009, a putative class action styled Mark Smith v.
Pizza Hut, Inc. was filed in the U.S. District Court for the
District of Colorado.
The complaint alleges that Pizza Hut did not properly reimburse
its delivery drivers for various automobile costs, uniforms costs,
and other job-related expenses and seeks to represent a class of
delivery drivers nationwide under the Fair Labor Standards Act and
Colorado state law.
On Jan. 4, 2010, plaintiffs filed a motion for conditional
certification of a nationwide class of current and former Pizza
Hut, Inc., delivery drivers.
However, on March 11, 2010, the court granted Pizza Hut's pending
motion to dismiss for failure to state a claim, with leave to
amend. On March 31, 2010, plaintiffs filed an amended complaint,
which in addition to the federal FLSA claims asserts state-law
class action claims under the laws of 16 different states. Pizza
Hut filed a motion to dismiss the amended complaint, and
plaintiffs sought leave to amend their complaint a second time.
On Aug. 9, 2010, the court granted plaintiffs' motion to amend.
Pizza Hut has filed another motion to dismiss the Second Amended
Complaint.
YUM! Brands, Inc. -- http://www.yum.com/-- is a quick service
restaurant (QSR) with over 35,000 units in more than 100 countries
and territories. Through the five concepts of KFC, Pizza Hut,
Taco Bell, LJS and A&W (the Concepts), the company develops,
operates, franchises and licenses a worldwide system of
restaurants, which prepare, package and sell a menu of food items.
In all five of its Concepts, the company either operates units or
they are operated by independent franchisees or licensees under
the terms of franchise or license agreements. In addition, the
company owns non-controlling interests in Unconsolidated
Affiliates who operate similar to franchisees.
YUM! BRANDS: Dismissed as Defendant in "Whittington" Suit
---------------------------------------------------------
YUM! Brands, Inc. has been dismissed as a defendant in a putative
class action styled Jacquelyn Whittington v. Yum Brands, Inc.,
Taco Bell of America, Inc. and Taco Bell Corp., according to the
company's Oct. 12, 2010, Form 10-Q filing with the U.S.
Securities and Exchange Commission for the quarter ended Sept. 4,
2010.
The suit was filed on Aug. 6, 2010, in the U.S. District Court for
the District of Colorado.
The plaintiff seeks to represent a nationwide class of assistant
managers who were allegedly misclassified and did not receive
compensation for all hours worked and did not receive overtime pay
after 40 hours in a week. The plaintiff also purports to
represent a separate class of Colorado assistant managers under
Colorado state law, which provides for daily overtime after 12
hours in a day.
Yum has been dismissed from the case.
Defendants filed their answer on Sept. 20, 2010.
YUM! Brands, Inc. -- http://www.yum.com/-- is a quick service
restaurant (QSR) with over 35,000 units in more than 100 countries
and territories. Through the five concepts of KFC, Pizza Hut,
Taco Bell, LJS and A&W (the Concepts), the company develops,
operates, franchises and licenses a worldwide system of
restaurants, which prepare, package and sell a menu of food items.
In all five of its Concepts, the company either operates units or
they are operated by independent franchisees or licensees under
the terms of franchise or license agreements. In addition, the
company owns non-controlling interests in Unconsolidated
Affiliates who operate similar to franchisees.
YUM! BRANDS: LSJ Continues to Face Cole Arbitration in Tennessee
----------------------------------------------------------------
Long John Silver, a concept owned and operated by YUM! Brands,
Inc., continues to faces the Cole Arbitration, which is proceeding
as an "opt-out" class action.
On Nov. 26, 2001, Kevin Johnson, a former Long John Silver's
restaurant manager, filed a collective action against LJS in the
U.S. District Court for the Middle District of Tennessee alleging
violation of the Fair Labor Standards Act on behalf of himself and
allegedly similarly-situated LJS general and assistant restaurant
managers. Johnson alleged that LJS violated the FLSA by
perpetrating a policy and practice of seeking monetary restitution
from LJS employees, including Restaurant General Managers and
Assistant Restaurant General Managers, when monetary or property
losses occurred due to knowing and willful violations of LJS
policies that resulted in losses of company funds or property, and
that LJS had thus improperly classified its RGMs and ARGMs as
exempt from overtime pay under the FLSA. Johnson sought overtime
pay, liquidated damages, and attorneys' fees for himself and his
proposed class.
LJS moved the Tennessee district court to compel arbitration of
Johnson's suit. The district court granted LJS's motion on June
7, 2004, and the U.S. Court of Appeals for the Sixth Circuit
affirmed on July 5, 2005.
On Dec. 19, 2003, while the arbitrability of Johnson's claims was
being litigated, former LJS managers Erin Cole and Nick Kaufman,
represented by Johnson's counsel, initiated arbitration with the
American Arbitration Association. The Cole Claimants sought a
collective arbitration on behalf of the same putative class as
alleged in the Johnson lawsuit and alleged the same underlying
claims.
On June 15, 2004, the arbitrator in the Cole Arbitration issued a
Clause Construction Award, finding that LJS's Dispute Resolution
Policy did not prohibit Claimants from proceeding on a collective
or class basis. LJS moved unsuccessfully to vacate the Clause
Construction Award in federal district court in South Carolina.
On Sept. 19, 2005, the arbitrator issued a Class Determination
Award, finding, inter alia, that a class would be certified in the
Cole Arbitration on an "opt-out" basis, rather than as an "opt-in"
collective action as specified by the FLSA.
On Jan. 20, 2006, the district court denied LJS's motion to vacate
the Class Determination Award and the U.S. Court of Appeals for
the Fourth Circuit affirmed the district court's decision on Jan.
28, 2008. A petition for a writ of certiorari filed in the U.S.
Supreme Court seeking a review of the Fourth Circuit's decision
was denied on Oct. 7, 2008.
The parties participated in mediation on April 24, 2008, on Feb.
28, 2009, and again on Nov. 18, 2009 without reaching resolution.
Arbitration on liability during a portion of the alleged
restitution policy period began in November, 2009 and, after a
delay at the request of the plaintiffs, concluded in June, 2010
and a ruling on liability for that portion of the policy period is
expected in August. Arbitration with respect to the remaining
alleged restitution policy period has not been scheduled.
Based on the rulings issued to date in this matter, the Cole
Arbitration is proceeding as an "opt-out" class action, rather
than as an "opt-in" collective action.
No updates were reported in YUM! Brands, Inc.'s Oct. 12, 2010,
Form 10-Q filing with the U.S. Securities and Exchange Commission
for the quarter ended Sept. 4, 2010.
YUM! Brands, Inc. -- http://www.yum.com/-- is a quick service
restaurant (QSR) with over 35,000 units in more than 100 countries
and territories. Through the five concepts of KFC, Pizza Hut,
Taco Bell, LJS and A&W (the Concepts), the company develops,
operates, franchises and licenses a worldwide system of
restaurants, which prepare, package and sell a menu of food items.
In all five of its Concepts, the company either operates units or
they are operated by independent franchisees or licensees under
the terms of franchise or license agreements. In addition, the
company owns non-controlling interests in Unconsolidated
Affiliates who operate similar to franchisees.
ZALE CORP: Defends Consolidated Suit in Northern Texas
------------------------------------------------------
Zale Corporation defends a consolidated suit in the U.S. District
Court for the Northern District of Texas, according to the
company's Oct. 12, 2010, Form 10-K filing with the U.S. Securities
and Exchange Commission for the fiscal year ended July 31, 2010.
In November 2009, the company and four former officers, Neal L.
Goldberg, Rodney Carter, Mary E. Burton and Cynthia T. Gordon,
were named as defendants in two purported class-action lawsuits.
The suits alleged various violations of securities laws arising
from the financial statement errors that led to the restatement
completed by the company as part of its Annual Report on Form 10-K
for the fiscal year ended July 31, 2009.
On Aug. 9, 2010, the two lawsuits were consolidated into one. The
consolidated lawsuit requests unspecified damages and costs, and
is in the preliminary stage.
Zale Corporation -- http://www.zalecorp.com/-- is a specialty
retailer of diamonds and other jewelry products in North America,
operating approximately 1,900 retail locations throughout the
United States, Canada and Puerto Rico, as well as online. Zale
Corporation's brands include Zales Jewelers, Zales Outlet,
Gordon's Jewelers, Peoples Jewellers, Mappins Jewellers and
Piercing Pagoda. Zale also operates online at
http://www.zales.com/, http://www.zalesoutlet.com/and
http://www.gordonsjewelers.com/
* FCC Bill Shock Proposal May Spark Consumer Class Action Suits
---------------------------------------------------------------
Cecilia Kang, writing for The Washington Post, reports the biggest
risk facing wireless carriers on the Federal Communications
Commission's bill shock proposal is not so much the proposal
itself but that it could open the companies up to consumer
lawsuits, according to investment analyst Jeffrey Silva of Medley
Global Advisors.
As seen with previous episodes when lawmakers or the FCC focus on
consumer issues, the FCC's bill shock push could awaken "a new
business opportunity in the wireless litigation space," Mr. Silva
wrote in a research note.
A good example of this: In September 2008, Sen. Herb Kohl
(D-Wis.), chairman of Senate Judiciary's antitrust subcommittee,
held hearings on text message price increases. The greater
attention to text message increases led to dozens of class action
suits filed against the four national wireless carriers, costing
the industry for legal fees and damaged reputations.
Silva estimates the wireless industry has spent more than $100
million on lobbying, legal fees and court settlement related to
consumer policies. Verizon in 2008 reached a $21 million
settlement for a class action suit against its use of early
termination fees. In January 2010, AT&T reached an $18 million
class action settlement on early termination fees and Sprint
Nextel also settled an ETF class action suit about the same time.
The wireless industry has warned the Federal Communications
Commission to proceed carefully with new rules that would help
consumers avoid bill shock, but it says it is willing to work with
the agency.
*********
S U B S C R I P T I O N I N F O R M A T I O N
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