/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/111004.mbx C L A S S A C T I O N R E P O R T E R Tuesday, October 4, 2011, Vol. 13, No. 196 Headlines AGUAS CHANAR: Sernac Files Two Class Actions Over Water Charges ANDREW BOLT: Geoff Clark Unveils Reason for Joining Class Action ASCENA RETAIL: Obtained FLSA Violation Suit Settlement OK in Aug. BA CREDIT: Oral Argument in IPO-Related Suits Set for Nov. 2 BARKWORKS: Accused in Calif. Suit of Selling "Puppy Mill" Dogs BATTAT INC: Recalls 14,000 Musical Wooden Table Toys BERNARD CHAUS: Being Sold for Too Little, Suit Claims COPART INC: Continues to Defend "Brizuela" Suit in California COPART INC: Continues to Defend "Ortiz-Torres" Suit in California DISCOVER FINANCIAL: Faces Enforcement Action Over Protection Sales DISCOVER FINANCIAL: Awaits Approval of Global Settlement EGG PRODUCERS: Four Firms to Face Conspiracy Charge, Judge Rules FOX SEARCHLIGHT: "Black Swan" Unpaid Interns File Class Action GOODRICH CORP: Sued Over Proposed Sale to United Technologies HUSQVARNA ZENOAH: Recalls 10,500 RedMax Brushcutters/Trimmers ONLINE TRAVEL COS: Sued in N.Y. for Violating Hotel Tax Laws PACIFIC DECOR: Recalls 1,300 Bottles of Pourable Gel Fuel RICOH AMERICAS: Sued for Not Reimbursing Work-Related Expenses ROYAL POWER: Faces Suit in California for FLSA Violations SEABOURN CRUISE: Sued Over Reservation Cancellation Fees SHERMAG INC: Recalls 3,100 Drop-Side Cribs for Repair SMITHKLINE BEECHAM: Judge Narrows Flonase Class Action THOR INDUSTRIES: Continues to Defend Formaldehyde Exposure Suits UNITED ARTISTS: Settles Class Action Over Unsolicited Fax Ads * Class Actions Deter Financial Wrongdoing, Study Finds * Funds Spring Up to Invest in High-Stakes Litigation ********* AGUAS CHANAR: Sernac Files Two Class Actions Over Water Charges --------------------------------------------------------------- Business News Americas reports that Chile's consumer protection agency Sernac has filed two class action suits against northern region III water utility Aguas Chanar on charges of repeated cuts of potable water service and unauthorized charges to its clients. The first lawsuit is based on cuts that occurred in late August in regional capital Copiapo. Sernac has asked the water utility to compensate its clients, a press release from the agency reads. Aguas Chanar offered to pay each client some 2,400 pesos (US$4.80) for each day that the service was suspended. Sernac found that the offer failed to take into account the expenses incurred by consumers who had to make up for the lack of potable water. The second class action relates to unauthorized charges for wastewater treatment made by Aguas Chanar between July 2010 and April this year. National sanitation service authority, Superintendencia de Servicios Sanitarios, has confirmed that the wastewater treatment plant was malfunctioning during the period. Sernac is seeking the maximum fine and compensation for the affected clients, according to the release. ANDREW BOLT: Geoff Clark Unveils Reason for Joining Class Action ---------------------------------------------------------------- Stephen Drill, writing for Herald Sun, reports that Geoff Clark has admitted that he took part in a class action against Herald Sun columnist Andrew Bolt over the general "tone" of his opinion pieces. Mr. Clark said in an interview with the Herald Sun on Sept. 29 that Mr. Bolt's writing on a range of racial issues, not just the two articles reviewed in the court case, prompted him to take legal action. "He's got a wide audience and, subject to what he says, that audience is swayed and he has a lot of influence," he said. Mr. Clark was part of a class action involving nine "fair-skinned Aboriginals", who were the subject of two articles written by Mr. Bolt in 2009. He said the "tone" of Mr. Bolt's writing was part of the reason he sued. "Certainly the tone, but the frequency -- it wasn't just one article, it was a number of articles. At the end of the day it became unbearable," he said. "It was based on the articles (but) there was certainly other ranges of views too numerous to comment." Mr. Clark said the court victory could be seen as a win for other people who had been criticized by Mr. Bolt. "People will obviously see this differently, some will see this as a win for them, some won't," he said. "It creates debate, there's nothing wrong with that debate, provided it's not harmful or offensive." Mr. Clark was charged in 2000 with two counts of raping a 16-year- old girl in January 1981 -- but those charges were later dismissed. In 2001, he was publicly accused in Melbourne newspapers of further rape allegations but he was not charged by police. Mr. Clark was suspended in 2003 as head of the Aboriginal and Torres Strait Islander Commission pending an investigation into the rape allegations. A County Court jury in a civil case in 2007 found Mr. Clark had twice raped Carol Stingel and ordered him to pay her AUD20,000 compensation. Mr. Clark confirmed to the Herald Sun on Sept. 29 that he had not sued for defamation over any articles previously published about him, including those that reference the rape allegations. Mr. Clark said his action against Mr. Bolt was not an attempt to curtail free speech in Australia. When asked if the ruling would make Mr. Bolt think twice about writing articles in the future, he replied: "Not necessarily think twice, the fact is he has to consider what he says is not hurtful or harmful in how he expresses things -- he certainly has to think about that if he is going to write articles." The Herald & Weekly Times, publisher of the Herald Sun, was still considering an appeal to Mr. Bolt's court decision on Sept. 29. ASCENA RETAIL: Obtained FLSA Violation Suit Settlement OK in Aug. ----------------------------------------------------------------- The U.S. District Court for the Eastern District of California granted final approval of Ascena Retail Group, Inc.'s settlement resolving a class action lawsuit filed against a subsidiary, according to the Company's September 28, 2011, Form 10-K filing with the U.S. Securities and Exchange Commission for the year ended July 30, 2011. On January 21, 2010, Tween Brands Inc. was sued in the U.S. District Court for the Eastern District of California. This purported class action alleged, among other things, that Tween Brands violated the Fair Labor Standards Act by not properly paying its employees for overtime and missed rest breaks. The parties agreed to a settlement of this wage and hour lawsuit. The court granted final approval of the settlement on August 10, 2011, and the Company had previously established a reserve for this settlement, which was not material to the audited consolidated financial statements. BA CREDIT: Oral Argument in IPO-Related Suits Set for Nov. 2 ------------------------------------------------------------ Oral argument on the summary judgment motions in the complaints relating to the initial public offerings of MasterCard and Visa is scheduled for November 2, 2011, according to BA Credit Card Trust's September 28, 2011, Form 10-K filing with the U.S. Securities and Exchange Commission for the year ended June 30, 2011. FIA Card Services, National Association ("FIA") issues credit cards on MasterCard's and Visa's networks. A group of merchants have filed a series of putative class actions and individual actions with regard to interchange fees associated with Visa and MasterCard payment card transactions. These actions, which have been consolidated in the U.S. District Court for the Eastern District of New York under the caption In Re Payment Card Interchange Fee and Merchant Discount Anti-Trust Litigation ("Interchange"), name Visa, MasterCard and several banks and bank holding companies, including Bank of America Corporation, as defendants. Plaintiffs allege that the defendants conspired to fix the level of default interchange rates, which represent the fee an issuing bank charges an acquiring bank on every transaction. Plaintiffs also challenge as unreasonable restraints of trade under Section 1 of the Sherman Act certain rules of Visa and MasterCard related to merchant acceptance of payment cards at the point of sale. Plaintiffs seek unspecified damages and injunctive relief based on their assertion that interchange would be lower or eliminated absent the alleged conduct. On January 8, 2008, the court granted defendants' motion to dismiss all claims for pre-2004 damages. Motions to dismiss the remainder of the complaint and plaintiffs' motion for class certification are pending. In addition, plaintiffs filed supplemental complaints against certain defendants, including Bank of America Corporation, relating to initial public offerings (the "IPOs") of MasterCard and Visa. Plaintiffs allege that the MasterCard and Visa IPOs violated Section 7 of the Clayton Act and Section 1 of the Sherman Act. Plaintiffs also assert that the MasterCard IPO was a fraudulent conveyance. Plaintiffs seek unspecified damages and to undo the IPOs. Motions to dismiss both supplemental complaints were filed in March 2009 and the motions remain pending. On June 20, 2011, plaintiffs and defendants both moved for summary judgment. Those motions are also pending; oral argument on the summary judgment motions is scheduled for November 2, 2011. Trial has been scheduled to begin on September 12, 2012. Bank of America Corporation and certain of its affiliates previously entered into loss-sharing agreements with Visa and other financial institutions in connection with certain antitrust litigation against Visa, including Interchange. Bank of America Corporation and these same affiliates have now entered into additional loss-sharing agreements for Interchange that cover all defendants, including MasterCard. Collectively, the loss-sharing agreements require Bank of America Corporation and/or certain affiliates to pay 11.6 percent of the monetary portion of any comprehensive Interchange settlement. In the event of an adverse judgment, the agreements require Bank of America Corporation and/or certain affiliates to pay 12.8 percent of any damages associated with Visa-related claims ("Visa-related damages"), 9.1 percent of any damages associated with MasterCard-related claims, and 11.6 percent of any damages associated with internetwork claims ("internetwork damages") or not associated specifically with Visa or MasterCard-related claims ("unassigned damages"). Pursuant to Visa's publicly-disclosed Retrospective Responsibility Plan (the "RRP"), Visa placed certain proceeds from its IPO into an escrow fund (the "Escrow"). Under the RRP, funds in the Escrow may be accessed by Visa and its members, including Bank of America, to pay for a comprehensive settlement or damages in Interchange, with Bank of America Corporation's payments from the Escrow capped at 12.81 percent of the funds that Visa places therein. Subject to that cap, Bank of America Corporation may use Escrow funds to cover: 73.9 percent of its monetary payment towards a comprehensive Interchange settlement, 100 percent of its payment for any Visa-related damages and 73.9 percent of its payment for any internetwork damages and unassigned damages. BARKWORKS: Accused in Calif. Suit of Selling "Puppy Mill" Dogs -------------------------------------------------------------- The Los Angeles Times reports that a Los Angeles law firm filed a lawsuit on Sept. 29 against a chain of Southern California pet stores alleging it sells puppies from commercial breeding facilities, commonly known as "puppy mills." The suit, which seeks class-action status, claims that Barkworks, a chain of six stores in Southern California, breeds puppies that are prone to a variety of illnesses and health problems while assuring customers that they come from registered breeders. Barkworks' Web site says the chain buys its puppies only from "professional, reputable breeder[s]." The plaintiffs -- five customers who bought puppies at Barkworks -- said they received the names of the breeders of their pets from the store, but the information did not correspond to U.S. Department of Agriculture registered breeders. Phone calls requesting comment from Barkworks' owner had not been returned on Sept. 29. BATTAT INC: Recalls 14,000 Musical Wooden Table Toys ---------------------------------------------------- The U.S. Consumer Product Safety Commission, in cooperation with Battat Inc., of Plattsburgh, New York, announced a voluntary recall of about 14,000 musical wooden table toys. Consumers should stop using recalled products immediately unless otherwise instructed. It is illegal to resell or attempt to resell a recalled consumer product. Small pegs on the xylophone toy can loosen and detach, posing a choking hazard to young children. CPSC and Battat have received nine reports of loose and detached pegs. No injuries have been reported. This recall involves Battat's Musical Wooden Table toys. The table has a green painted surface and colorful instruments affixed to the top. The table stands about 7 1/2-inches tall and has three supporting legs. Instruments on the table include a xylophone, cymbal, drum and two drumsticks. Pictures of the recalled products are available at: http://www.cpsc.gov/cpscpub/prerel/prhtml11/11342.html The recalled products were manufactured in China and sold at music and toy stores nationwide and on the Internet from September 2006 to October 2010 for about $30. Consumers should immediately take the recalled toys away from children and contact Battat to receive a free replacement product. For more information, contact Battat at (800) 247-6144 between 8:00 a.m. and 5:00 p.m. Eastern Time Monday through Friday or visit the firm's Web site at http://www.battatco.com/ BERNARD CHAUS: Being Sold for Too Little, Suit Claims ----------------------------------------------------- Kenneth Braun, individually and on behalf of all others similarly situated v. Joseph Chaus, Philip G. Barach, Harvey M. Krueger, Robert Flug, David Stiffman, Bernard Chaus, Inc. and Camuto Consulting Inc., Case No. 652663/2011 (N.Y. Sup. Ct., September 28, 2011) arises out of the proposed acquisition of Bernard Chaus Inc. by certain members of the Chaus family, Camuto Consulting and non-party China Ting Group. Collectively, the Buyout Group owns approximately 65% of the outstanding shares of the Company's common stock. The Plaintiff argues that the proposed $0.13 per share offer represents a wholly inadequate consideration in view of the Company's intrinsic value and future prospects. Accordingly, to prevent the Company's shareholders from suffering irreparable harm from the consummation of an unfair and inadequate takeover, the Plaintiff seeks to enjoin, preliminarily and permanently, the proposed buyout of Bernard Chaus. The Plaintiff is a shareholder of the Company. Bernard Chaus is a New York corporation with its headquarters located at 530 Seventh Avenue, in New York. Camuto is a Connecticut corporation authorized to do business in the state of New York. Non-party CTG is a Chinese corporation. The Individual Defendants are officers and directors, and substantial shareholders of the Company. The Plaintiff is represented by David A.P. Brower, Esq. Brian C. Kerr, Esq. BROWER PIVEN A Professional Corporation 488 Madison Avenue, Eighth Floor New York, NY 10022 Telephone: (212) 501-9000 Facsimile: (212) 501-0300 E-mail: brower@browerpiven.com kerr@browerpiven.com COPART INC: Continues to Defend "Brizuela" Suit in California ------------------------------------------------------------- Copart, Inc. continues to defend a purported class action lawsuit commenced by Jose E. Brizuela in California, according to the Company's September 28, 2011, Form 10-K filing with the U.S. Securities and Exchange Commission for the year ended July 31, 2011. On February 12, 2011, Jose E. Brizuela filed a lawsuit against the Company in the Superior Court, San Bernardino County, San Bernardino District, which purports to be a class action on behalf of persons employed by the Company and paid on a hourly basis in California at any time since the date four years prior to February 14, 2011. The complaint alleges failure to pay all earned wages due to an alleged practice of rounding of hours worked to the detriment of the employees. Relief sought includes class certification, injunctive relief, unpaid wages, waiting time penalty-wages, interest, and attorney's fees and costs of lawsuit. The Company believes the claim is without merit and intends to continue to vigorously defend the lawsuit. COPART INC: Continues to Defend "Ortiz-Torres" Suit in California ----------------------------------------------------------------- Copart, Inc., continues to defend a purported class action lawsuit commenced by Robert Ortiz and Carlos Torres, according to the Company's September 28, 2011, Form 10-K filing with the U.S. Securities and Exchange Commission for the year ended July 31, 2011. On September 21, 2010, Robert Ortiz and Carlos Torres filed a lawsuit against the Company in the Superior Court of San Bernardino County, San Bernardino District, which purported to be a class action on behalf of persons employed by the Company in the positions of facilities managers and assistant general managers in California at any time since the date four years prior to September 21, 2010. The complaint alleges failure to pay wages and overtime wages, failure to provide meal breaks and rest breaks, in violation of various California Labor and Business and Professional Code sections, due to alleged misclassification of facilities managers and assistant general managers as exempt employees. Relief sought includes class certification, injunctive relief, damages according to proof, restitution for unpaid wages, disgorgement of ill-gotten gains, civil penalties, attorney's fees and costs, interest, and punitive damages. The Company believes the claim is without merit and intends to continue to vigorously defend the lawsuit. DISCOVER FINANCIAL: Faces Enforcement Action Over Protection Sales ------------------------------------------------------------------ The Associated Press reports that Discover Financial Services is facing an enforcement action by the Federal Deposit Insurance Corp. over the way it sold its payment protection, identity theft protection and other products. The Riverwoods, Ill.-based credit card company said in a regulatory filing on September 28, 2011, that the agency has notified its banking division that it plans to take action, following an investigation started several months ago. Discover said it is cooperating in the probe. The FDIC would not comment. The investigation follows the filing of a series of class action lawsuits in various U.S. District Courts challenging the company's marketing. At issue are its sales policies for several products: -- Payment protection: This service allows users to put Discover Card payments on hold for up to two years following a job layoff, disability, leave of absence, hospitalization, death of a spouse or domestic partner or federal or state disaster. It also allows one-month holds on payments following happier events like a marriage, childbirth, adoption, new job, retirement, moving or graduation. -- Identity theft protection: This service monitors credit reports for changes like new accounts, address changes and potentially negative information. -- Wallet protection: This lets customers register credit cards and then provides cancellation services for those cards if a wallet is stolen. Wallet protection includes a provision for wiring customers up to $1,000 in emergency cash in the event a wallet is stolen. -- Credit score tracker: This service gives customers online access to credit reports, scores and score change alerts. Each product requires customers to choose monthly or annual billing. Fees vary, and some are at set prices and others based on card balances. The company said that in June, it reached a preliminary global settlement in the eight pending class-action suits over marketing of the products. That pact still needs a judge's approval. Details have not been released. "An important point is that it's not the actual product that's in question, it's the way that it was sold," said analyst Sanjay Sakhrani of Keefe, Bruyette & Woods. He noted the company said it changed its sales practices after the first case came up last year in California. Mr. Sakhrani said Discover's credit protection businesses generate about 3% of the company's total revenue. The new sales policies do not seem to have hurt the business he said, noting that Discover's total fee income rose about 4% from last year, according to its fiscal third-quarter report. Sterne, Agee analyst Henry Coffey said investors should have expected the FDIC to take action -- which he predicts will mean a fine for the company -- once Discover revealed the investigation in June. "We should have known there was going to be something come out of it," he said, even though the company apparently changed its policies before the FDIC probe began. "We're in a regulatory environment where the primary goal is shakedown, not to do things that are helpful for the consumers." Mr. Coffey also said he wouldn't be surprised if more state attorneys general get involved in the class action suits. DISCOVER FINANCIAL: Awaits Approval of Global Settlement -------------------------------------------------------- Discover Financial Services is awaiting court approval of its global settlement of all its pending class action lawsuits, according to the Company's September 28, 2011, Form 10-Q filing with the U.S. Securities and Exchange Commission for the quarter ended August 31, 2011. There are eight class action cases pending in relation to the sale of the Company's payment protection fee product. The cases were filed (all in United States District Courts) on: July 8, 2010, in the Northern District of California (Walker, et al. v. DFS, Inc. and Discover Bank; subsequently transferred to the Northern District of Illinois); July 16, 2010, in the Central District of California (Conroy v. Discover Financial Services and Discover Bank); October 22, 2010, in the District of South Carolina (Alexander v. Discover Financial Services, Inc.; DFS Services LLC; Discover Bank; and Morgan Stanley); November 5, 2010, in the Northern District of Illinois (Callahan v. Discover Financial Services, Inc. and Discover Bank); December 17, 2010, in the Western District of Tennessee (Sack v. DFS Services LLC; Discover Financial Services, Inc.; and Discover Bank); January 14, 2011, in the Eastern District of Pennsylvania (Boyce v. DFS Services LLC; Discover Financial Services Inc.; Discover Bank); February 15, 2011, in the Southern District of Florida (Triplett v. Discover Financial Services, Inc., DFS Financial Services LLC, Discover Bank and Morgan Stanley); and March 7, 2011, in the Eastern District of Pennsylvania (Carter v. Discover Financial Services, Inc., DFS Financial Services LLC, Discover Bank, Morgan Stanley et al.). All of the cases have been transferred to the U.S. District Court for the Northern District of Illinois pursuant to a multi-district litigation order issued by the Joint Panel on Multidistrict Litigation in February 2011. These class actions challenge the Company's marketing practices with respect to its payment protection fee product to cardmembers under various state laws and the Truth in Lending Act. The plaintiffs seek monetary remedies including unspecified damages and restitution, attorneys' fees and costs, and various forms of injunctive relief including an order rescinding the payment protection fee product enrollments of all class members. In June 2011, the Company and class counsel entered into a preliminary global settlement of all of the pending class actions. The settlement is subject to judicial approval. No further updates were reported in the Company's latest SEC filing. EGG PRODUCERS: Four Firms to Face Conspiracy Charge, Judge Rules ---------------------------------------------------------------- Reuben Kramer at Courthouse News Service reports that a federal judge has ruled that plaintiffs in a class action have offered sufficient evidence to suggest that four of the nation's largest egg producers joined in a conspiracy to reduce the supply of eggs available on store shelves and jack up prices. As a result U.S. District Judge Gene Pratter refused to dismiss the action against them. In the case of two other egg producers, however, Judge Pratter said the plaintiffs failed to plausibly suggest that they had been participants in the conspiracy, and granted the companies' motions to dismiss. The plaintiffs, direct-purchasers of eggs, alleged the egg producers engaged in eight distinct coordinated actions over the course of a decade that are hallmarks of an anticompetitive conspiracy. As a result, they said, egg prices rose between 2003 and 2009. The most prominent of those actions was an initiative known as the United Egg Producers (UEP) Certification Program. That program imposed blanket guidelines on participating egg producers, setting limits on cage size for fowl and on the number of egg-laying hens a company could maintain, according to court records. If a producer complied, it could stamp the UEP's imprimatur on its products. That mark of approval became critically important when major retailers like Wal-Mart and Kroger indicated they'd only purchase UEP-certified eggs, plaintiffs said. They went on to describe the program as an all or nothing proposition: if a producer wanted to participate, it was precluded from producing non-certified eggs at any of its facilities. The plaintiffs contend there was only one reason why producers would participate in such a program: it was a collective effort to stanch supply and jack-up egg prices. The industry responded by saying there is an obvious alternative explanation: participating companies were responding to consumers who were clamoring for eggs from chickens raised in better living conditions, and the program was therefore an inherently competitive undertaking. But in a 78-page decision filed this week, Judge Pratter found that, accepting the allegations in plaintiffs' amended class- action complaint as true, the UEP Certification Program offered no legitimate business reason for an egg producer to join. Judge Pratter found that "The SAC [second amended complaint] alleges that the companies who became certified under the UEP Certification Program were required to undertake, in order to obtain and maintain their certification, certain measures that have the effect of reducing that company's output of eggs and without apparent legitimate business rationale." "The allegations as to the program raise enough of a plausible inference that certification in the program was inconsistent with independent self-interest, at least because no non-conspiring, self-interested company would have followed the program guidelines," Judge Pratter wrote. But, she found, the same can't be said about another coordinated anticompetitive act alleged by the plaintiffs: the United States Egg Marketers Export Program. The plaintiffs said the initiative asked producers to export eggs at a loss in an effort to stifle domestic supply, and entailed a plan for trade-group members to absorb export losses incurred by individual producers. But unlike the UEP Certification Program, when taking the allegations as true, the plaintiff's characterization of the Export Program fails to foreclose the possibility that "participation in the egg export program might have been for independent, legitimate business reasons," Judge Pratter found. The plaintiffs claim the Program rings of anticompetitive conduct because domestic egg prices were generally higher than foreign rates. But, Judge Pratter said, plaintiffs have merely alleged that domestic prices were higher on average, and have therefore left open the possibility that participating in the Export Program could have been, at times, a prudent, legitimately competitive business decision. The plaintiffs' assertion that there "would have been no independent business reason for each Defendant on its own to undertake costly exports at the expense of more profitable domestic sales" isn't supported by their suit, Judge Pratter found. Judge Pratter denied four motions to dismiss on Sept. 26, finding that Michael Foods, Daybreak Foods, Rose Acre Farms and Ohio Fresh Eggs appear to have entered into a supply-management conspiracy. But Judge Pratter couldn't say the same with respect to the United Egg Association and entities associated with Hillandale Farms, so she granted without prejudice their motions to dismiss. Seventeen actions were consolidated before Judge Pratter in December 2008. The owner of Land O'Lakes agreed to a $25 million settlement last year. Judge Pratter gave preliminary approval in October 2009 to a non-monetary settlement with Sparboe Farms Inc., which agreed to aid the plaintiffs' case against the remaining defendants by producing witnesses and handing over documents. A copy of the Memorandum in In Re: Processed Egg Products Antitrust Litigation, Case No. 08-md-02002 (E.D. Pa.), is available at: http://www.courthousenews.com/2011/09/29/Eggs%20Opinion.pdf FOX SEARCHLIGHT: "Black Swan" Unpaid Interns File Class Action -------------------------------------------------------------- Christina Ng, writing for ABC News, reports that two men who interned for the film "Black Swan" have filed a class-action lawsuit against Fox Searchlight on behalf of hundreds of unpaid interns, taking aim at a long-accepted practice in the entertainment industry. The lawsuit alleges that the film production company violated federal and state labor laws by using unpaid interns. "This is a widespread practice and most of the time it's unlawful," said Elizabeth Wagoner, one of the attorneys representing the interns. "I haven't seen other suits like this, at least not on this scale. I hope their example will make others feel they can come forward and that they're owed wages for their work." The "Black Swan" interns are Alex Footman, 24, and Eric Glatt, 42. Mr. Footman interned for full five-day weeks of at least 40 hours as a production intern on the film in New York from October 2009 to February 2010. His responsibilities included preparing coffee for the production office and making sure the coffee pot was full, taking and distributing lunch orders, taking out the trash, cleaning the office and collecting receipts for expense reports, according to the lawsuit filed in Manhattan federal court on Sept. 28. "With this lawsuit, I hope that we can help interns and former interns throughout the entertainment industry who should have been paid wages under the law," Mr. Footman said in a news release from Outten and Golden, the law firm representing the interns. The film cost $13 million to produce and grossed more than $300 million worldwide. The lawsuit alleges that Fox Searchlight has been able to reduce its production costs "by employing a steady stream of unpaid interns." The class-action lawsuit is seeking "to recover unpaid wages and other damages for all unpaid interns who have worked on films produced by Fox Searchlight between Sept. 28, 2005, and the date of final judgment in this matter," according to the lawsuit. While Ms. Wagoner does not know the exact number of interns involved and cannot yet comment on the amount of money being sought, she estimated that hundreds of interns were involved. "This is not a symbolic lawsuit," Ms. Wagoner said. "They certainly have a right to be paid." The lawsuit alleges that Fox Searchlight's practices violate the federal Fair Labor Standards Act and New York Labor Laws. The U.S. Department of Labor has criteria to determine whether someone is a trainee or an employee, but the rules are rarely enforced. A person is a trainee if he or she receives training similar to what he or she would receive in an academic setting. In order for a person to be a trainee, an employer cannot derive any immediate advantage from him or her. In other words, an unpaid intern cannot do the work of a regular employee, which is what the lawsuit alleges happened at Fox Searchlight. Fox Searchlight did not respond to requests for comment. Interning on a film set has long been seen as a way for people to get a taste of the industry and get their foot into Hollywood's door, but it has also been criticized as giving an unfair advantage to those financially able to do it for no pay. "As we talked to the plaintiff, we realized that it's a pretty huge far-reaching problem in the entertainment industry and Fox Searchlight is a player in that, but they're not the only one," Ms. Wagoner said. "So we wanted to do something big and public that would let interns all over the country know that they have the right to minimum wage and overtime when working for a private corporation." GOODRICH CORP: Sued Over Proposed Sale to United Technologies ------------------------------------------------------------- Massachusetts Laborers' Pension Fund, Individually And on Behalf of All Others Similarly Situated v. Goodrich Corp., Marshall O. Larsen, Carolyn Corvi, Diane Creel, Harris E. DeLoach, Jr., James W. Griffith, William R. Holland, John P. Jumper, Lloyd W. Newton, Alfred M. Rankin, Jr., United Technologies Corp., and Charlotte Lucas Corp., Case No. 652664/2011 (N.Y. Sup. Ct., September 28, 2011) is a stockholder class action that challenges the Defendants' conduct with regard to the proposed all-cash buyout of Goodrich by United Technologies. The Plaintiff contends that the highly anticipated deal, which allegedly has been "in the works" for over a year, turns out to be smoke and mirrors, crafted by a conflicted Board, in order to benefit the Defendants at the expense of Goodrich's shareholders through an utterly flawed process. Massachusetts Laborers is a public holder of Goodrich common stock. Massachusetts Laborers provides pension benefits to approximately 17,000 participants. Goodrich is incorporated under the laws of the state of New York. Goodrich is a global supplier of systems and services to the aerospace and defense industry. United Technologies, a Delaware corporation based in Hartford, Connecticut, is a diversified conglomerate known for being the world's largest producer of elevators and air conditioners. Charlotte Lucas, a wholly owned subsidiary of United Technologies, is a New York corporation into which Goodrich is to be merged pursuant to the Merger Agreement. The Individual Defendants are officers and directors of Goodrich. The Plaintiff is represented by: Christopher J. Keller, Esq. Michael W. Stocker, Esq. Philip C. Smith, Esq. LABATON SUCHAROW LLP 140 Broadway New York, NY 10005 Telephone: (212) 907-0700 Facsimile: (212) 818-0477 E-mail: ckeller@labaton.com mstocker@labaton.com psmith@labaton.com HUSQVARNA ZENOAH: Recalls 10,500 RedMax Brushcutters/Trimmers ------------------------------------------------------------- The U.S. Consumer Product Safety Commission, in cooperation with Husqvarna Zenoah Co. Ltd., an affiliate of Husqvarna Professional Products Inc., of Charlotte, North Carolina, announced a voluntary recall of about 10,500 units of RedMax brushcutter/trimmer. Consumers should stop using recalled products immediately unless otherwise instructed. It is illegal to resell or attempt to resell a recalled consumer product. Some fuel tanks allow leakage at the fuel cap, posing a fire hazard to consumers. No reports of fire, personal injury or property damage. The recalled brushcutter/trimmer is a RedMax model TR2350S. Recalled brushcutters have shaft serial numbers ranging from 10215377 to 10625892, and engine serial numbers ranging from 10115390 to 10425910. The product is powered by a 2-cycle gasoline engine and cuts grass or weeds through the use of a spinning black trimmer head containing a spool of filament line. Model number and shaft serial number are located on a label on the shaft halfway between the trimmer head and the engine. The engine serial number is located on the bottom of the engine between the two screws that secure the fuel tank to the engine. Pictures of the recalled products are available at: http://www.cpsc.gov/cpscpub/prerel/prhtml11/11341.html The recalled products were assembled in the United States of America and sold at authorized RedMax dealers and distributors throughout the U.S. and Canada for about $260. Consumers should immediately stop using the product and return it to their local RedMax dealer for repair. For additional information, please contact Husqvarna toll-free between 8:00 a.m. and 6:00 p.m. Eastern Time Monday through Friday at (877) 257-6921 or e-mail recalls@husqvarna.com ONLINE TRAVEL COS: Sued in N.Y. for Violating Hotel Tax Laws ------------------------------------------------------------ Courthouse News Service reports that Nassau County filed a class action against 17 online travel companies like Expedia and Hotwire for allegedly violating hotel tax laws by not paying occupancy assessments. A copy of the Complaint in County of Nassau v. Expedia, Inc., et al., Index No._____ (N.Y. Sup. Ct., Nassau Cty.), is available at: http://www.courthousenews.com/2011/09/29/expedia.pdf The Plaintiff is represented by: Robert S. Schachter, Esq. ZWERLING, SCHACHTER & ZWERLING, LLP 990 Stewart Avenue, Suite 600 Garden City, NY 11530 Telephone: (516) 832-9600 E-mail rshachter@zsz.com - and - Paul Kleidman, Esq. Ana M. Cabassa, Esq. ZWERLING, SCHACHTER & ZWERLING, LLP 41 Madison Avenue, 32nd Floor New York, NY 10010 Telephone: (212) 223-3900 E-mail: pkleidman@zsz.com acabassa@zsz.com PACIFIC DECOR: Recalls 1,300 Bottles of Pourable Gel Fuel --------------------------------------------------------- The U.S. Consumer Product Safety Commission, in cooperation with Pacific Decor Ltd., of Woodinville, Washington, announced a voluntary recall of about 1,300 bottles of Pacific Flame Pourable Gel Fuel. Consumers should stop using recalled products immediately unless otherwise instructed. It is illegal to resell or attempt to resell a recalled consumer product. The pourable gel fuel can ignite unexpectedly and splatter onto people and objects nearby when it is poured into a firepot that is still burning. This hazard can occur if the consumer does not see the flame or is not aware that the firepot is still ignited. Gel fuel that splatters and ignites can pose fire and burn risks to consumers that can be fatal. No incidents or injuries have been reported. This recall involves pourable gel fuel packaged in one-quart, white plastic bottles, and sold with and without citronella. The label on the container says "Pacific Flame" and "Premium pourable gel fuel." The fuel is poured into a stainless steel cup in the center of ceramic firepots or other decorative lighting devices and ignited. These products are affected by this recall: Size Model Number SKU ---- ------------ ------------ 1 QT 160 095583001605 1 QT (with 170 095583001704 citronella) Pictures of the recalled products are available at: http://www.cpsc.gov/cpscpub/prerel/prhtml11/11344.html The recalled products were manufactured in the United States of America and sold online, in specialty and gift shops, furniture stores and home and garden stores nationwide, through home and garden catalogs and home decorators and landscape architects from June 2011 through August 2011 for between $10 and $12. Consumers should immediately stop using the pourable gel fuel in firepots and return all bottles to the retailer where the consumer purchased the fuel for a full refund. For additional information, contact Pacific Decor at (425) 949-7878 between 8:00 a.m. and 5:00 p.m. Pacific Time Monday through Friday or visit the firm's Web site at http://www.PacificDecorLtd.com/ This firm is part of a larger set of pourable gel fuel recalls. For more information, please see: News Release: Nine Manufacturers, Distributors Announce Consumer Recall of Pourable Gel Fuel Due to Burn and Flash Fire Hazards (Sept. 1, 2011) [http://www.cpsc.gov/cpscpub/prerel/prhtml11/11315.html] News Release: Napa Home & Garden Recalls NAPAfire and FIREGEL Pourable Gel Fuel Due to Fire and Burn Hazards (June 22, 2011) [http://www.cpsc.gov/cpscpub/prerel/prhtml11/11255.html] OnSafety Blog: Stop Using Pourable Gel Fuels (June 22, 2011) [http://www.cpsc.gov/onsafety/2011/09/stop-using-pourable-gel-fuels/] Alert: Press Statement on Gel Fuels and Other Illuminating Fuels (June 14, 2011) [http://www.cpsc.gov/PR/fuels06142011.html] RICOH AMERICAS: Sued for Not Reimbursing Work-Related Expenses -------------------------------------------------------------- Stewart Bishop, writing for Law360, reports that electronics giant Ricoh Americas Corp. was hit with a class action in California state court on Sept. 26 alleging the company failed to reimburse employees for work-related expenses. The suit was lodged by Parhum Zadeh on behalf of himself and other current and former account executives of Ricoh and its subsidiary Ikon Office Solutions Inc. Mr. Zadeh alleges Ricoh violated numerous provisions of California's labor code by failing to pay for expenses incurred on the job over a course of at least four years. ROYAL POWER: Faces Suit in California for FLSA Violations --------------------------------------------------------- Shalawn Brown; Art Kelly; and Carlos Orozco Cortez; individually, and on behalf of other members of the general public similarly situated v. Royal Power Management, Inc. d/b/a RPM Management, Inc., a California corporation; Gideon Rosman; and Does 1 through 10, inclusive, Case No. 3:11-cv-04822 (N.D. Calif., September 29, 2011) alleges that the Defendants failed to pay overtime compensation and minimum wages in violation of the Fair Labor Standards Act. The Plaintiffs allege that the failure to pay them and the class members was the result of the Defendants' willful and intentional violation of the provisions of the FLSA, or alternatively, the Defendants' reckless disregard for the requirements of those provisions. Shalawn Brown is a resident of the city of Oakland, County of Alameda, in California. Art Kelly and Carlos Orozco Cortez are residents of Los Angeles, California. RPMI is a California corporation and the Plaintiffs' employer. Gideon Rosman is a resident of California. The Plaintiffs allege that Mr. Rosman formed and used RPMI to perpetuate a fraud, circumvent a statute/law and accomplish some other wrongful or inequitable purpose. The true names and capacities of the Doe Defendants are currently unknown. The Plaintiffs are represented by: Edwin Aiwazian, Esq. LAWYERS FOR JUSTICE, PC 410 West Arden Avenue, Suite 203 Glendale, CA 91203 Telephone: (818) 265-1020 Facsimile: (818) 265-1021 E-mail: edwin@aiwazian.com - and - R. Rex Parris, Esq. Alexander R. Wheeler, Esq. Jason P. Fowler, Esq. Douglas Han, Esq. Kitty K. Szeto, Esq. R. REX HARRIS LAW FIRM 42220 10th Street West, Suite 109 Lancaster, CA 93534 Telephone: (661) 949-2595 Facsimile: (661) 949-7524 E-mail: rrparris@rrexparris.com awheeler@rrexparris.com jfowler@rrexparris.com dhan@rrexparris.com kszeto@rrexparris.com SEABOURN CRUISE: Sued Over Reservation Cancellation Fees -------------------------------------------------------- Courthouse News Service reports that Seabourn Cruise Line should not have charged cancellation fees to those who withdrew their reservation since the company waited until after the cancelation period had passed to announce that civil unrest in Egypt would prevent the ship from making ports of call in the country, a class claims in Superior Court. A copy of the Complaint in Gilroy, et ux. v. Seabourn Cruise Line, Ltd. d/b/a Seabourn Cruise Line, Case No. 11-2-32848-1 (Wash. Super. Ct., Seattle Cty.), is available at: http://www.courthousenews.com/2011/09/28/egypt.pdf The Plaintiffs are represented by: Anthony J. Ginster, Esq. Gordon C. Webb, Esq. 225 106th Avenue Bellevue, WA 98004 Telephone: (425) 462-8240 - and - George Kargianis, Esq. LAW OFFICES OF GEORGE KARGIANIS, INC. PS Columbia Center 701 Fifth Avenue, 4760 Seattle, WA 98104 Telephone: (206) 448-7969 SHERMAG INC: Recalls 3,100 Drop-Side Cribs for Repair ----------------------------------------------------- The U.S. Consumer Product Safety Commission and Health Canada, in cooperation with Shermag Inc., of Quebec, Canada, announced a voluntary recall of about 2,300 drop-side cribs in the United States of America and about 800 in Canada. Consumers should stop using recalled products immediately unless otherwise instructed. It is illegal to resell or attempt to resell a recalled consumer product. The drop-side rail hardware on the cribs can break or fail, allowing the drop side to detach from the crib. When the drop side detaches, a hazardous gap is created between the drop-side rail and the crib mattress in which infants and toddlers can become wedged or entrapped, posing risks of suffocation and strangulation. In addition, children can fall out of the crib when the drop-side rail falls unexpectedly or detaches from the crib. Drop-side rail failures can also occur due to incorrect assembly or with age-related wear and tear. CPSC and the firm are aware of 21 incidents involving drop sides that failed or detached. No injuries have been reported. This recall involves wooden drop-side cribs with hidden drop-side hardware. The cribs were sold in various colors. Model numbers 202647, 211047 and 272547 are included in this recall. The cribs were sold separately and as part of the "City Lights," "Fairy Tales" and "Dormez Vous" furniture collections. "Shermag" is printed on a tag on the mattress springs. The model numbers can be found on stickers and warning labels on the crib's headboard or footboard. Pictures of the recalled products are available at http://www.cpsc.gov/cpscpub/prerel/prhtml11/11343.html The recalled products were manufactured in China and sold at The Land of Nod and other baby specialty stores from September 2004 through December 2008 for between $400 and $800. Consumers should stop using these cribs immediately and contact the firm to request a free repair kit that will immobilize the drop-side. In the meantime, parents are urged to find an alternate, safe sleeping environment for the child, such as a bassinet, play yard or toddler bed depending on the child's age. For additional information, contact Shermag at (800) 567-3419 between 8:00 a.m. and 4:00 p.m. Eastern Time Monday through Friday, or visit the firm's Web site at http://www.shermag.com/ Important Message from CPSC CPSC reminds parents not to use any crib with missing, broken or loose parts. Make sure to tighten hardware from time to time to keep the crib sturdy. When using a drop-side crib, parents should check to make sure the drop side or any other moving part operates smoothly. Always check all sides and corners of the crib for parts separating that can create a gap and entrap a child. In addition, do not try to repair any side of the crib. Babies have died in cribs where repairs were attempted by caregivers. Crib age is a factor in safety. At a minimum, CPSC staff recommends that you do not use a crib that is older than 10 years old. Effective June 28, 2011, new, mandatory federal crib rules require that all cribs manufactured and sold after that date must meet new and improved safety requirements [http://www.cpsc.gov/nsn/cribrules.pdf]. Older cribs do not meet the new standard and can have a variety of safety problems. Check if your crib has been recalled at http://www.cpsc.gov/ SMITHKLINE BEECHAM: Judge Narrows Flonase Class Action ------------------------------------------------------ Reuben Kramer at Courthouse News Service reports that a federal judge pared an indirect-purchaser class action accusing SmithKline Beecham of unfairly using the FDA's citizen petition process to stifle generic competition to its steroid nasal spray Flonase. A copy of the Memorandum in In re: Flonase Antitrust Litigation, Case No. 08-cv-03301 (E.D. Pa.), is available at: http://www.courthousenews.com/2011/09/29/Flonase.pdf THOR INDUSTRIES: Continues to Defend Formaldehyde Exposure Suits ---------------------------------------------------------------- Thor Industries, Inc. continues to defend numerous lawsuits alleging exposure to formaldehyde in connection with the trailers and manufactured homes provided by the Federal Emergency Management Agency following Hurricanes Katrina and Rita in 2005, according to the Company's September 28, 2011, Form 10-K filing with the U.S. Securities and Exchange Commission for the year ended July 31, 2011. Beginning in 2006, a number of lawsuits were filed against numerous trailer and manufactured housing manufacturers, including complaints against the Company. The complaints were filed in various state and federal courts throughout Louisiana, Alabama, Texas and Mississippi on behalf of Gulf Coast residents who lived in travel trailers, park model trailers and manufactured homes provided by the Federal Emergency Management Agency ("FEMA") following Hurricanes Katrina and Rita in 2005. The complaints generally allege that residents who occupied FEMA supplied emergency housing units, such as travel trailers, were exposed to formaldehyde emitted from the trailers. The plaintiffs allege various injuries from exposure, including health issues and emotional distress. Most of the initial cases were filed as class action lawsuits. The Judicial Panel on Multidistrict Litigation (the "MDL panel") has the authority to designate one court to coordinate and consolidate discovery and pretrial proceedings. The MDL panel transferred the actions to the United States District Court for the Eastern District of Louisiana (the "MDL Court") because the actions in different jurisdictions involved common questions of fact. The MDL Court denied class certification in December 2008, and consequently, the cases are now being administered as a mass joinder of claims. There are approximately 4,100 lawsuits currently pending in the MDL Court. The number of cases currently pending against the Company is approximately 550. Many of these lawsuits involve multiple plaintiffs, each of whom have brought claims against the Company. A number of cases against the Company have been dismissed for various reasons, including duplicative and unmatched lawsuits and failure of plaintiffs to appear or prosecute their claims. In the event a case does not settle or is not dismissed during the MDL proceeding, it is remanded back to the original court for disposition or trial. In September 2009, the MDL Court commenced hearing both bellwether jury trials and bellwether summary jury trials. The summary jury trial process is an alternative dispute resolution method which is non-binding and confidential. The Company has participated in one confidential summary jury trial. Currently, the Company says it is unknown how many plaintiffs' claims against the Company will proceed in the MDL Court and how many claims will be dismissed. It is also unknown how many plaintiffs will continue to litigate if their case is dismissed without prejudice or remanded back to their court of origin. In July 2011, the MDL Court issued Corrected Pretrial Order No. 88 governing the plaintiff fact sheet deficiency process, the purpose of which, as explained in Pretrial Order 86, is to provide defendants with the necessary information to evaluate claims for global settlement. Pursuant to Corrected Pretrial Order No. 88, defendants have identified deficiencies in the plaintiffs' fact sheets required to be completed by each plaintiff. Defendants, including the Company, have identified thousands of deficiencies and provided deficiency notices to plaintiffs' counsel. If a plaintiff fails to cure material deficiencies in his or her fact sheet, the defendants are authorized to file for dismissal of such claim. At this time, the Company is unable to provide a reasonable estimate for the range of loss in the event of an adverse outcome, beyond amounts accrued as of July 31, 2011, because the number of plaintiffs is undetermined and at this stage of the proceedings, evidence of potential damages for each plaintiff has not been introduced. A group of mobile and manufactured home defendants have agreed to pay $2,625,000 to settle certain claims that plaintiffs have allegedly been sickened by levels of formaldehyde in the manufactured homes. The Company says it understands that settlements have been reached with at least two of the trailer manufacturers, but the terms have not been publicly disclosed. While the Company may consider pursuing settlement of the matter given the uncertainty of litigation and the cost of defending each individual case if the MDL proceeding ends and the MDL Court remands the individual cases back to their courts of origin, it is uncertain whether the parties can agree upon a mutually acceptable resolution of the litigation. The Company strongly disputes the allegations and continues to vigorously defend the lawsuits. UNITED ARTISTS: Settles Class Action Over Unsolicited Fax Ads ------------------------------------------------------------- Jamie Ross at Courthouse News Service reports that a $6.8 million settlement has been reached to a 2000 class action alleging that United Artists Theatre Circuit and American Blast Fax sent unsolicited faxes for movie tickets to between 57,000 and 95,000 fax numbers in Phoenix. The lawsuit, filed in May 2000 in Maricopa County Court, claimed that the defendants' faxes transmitted in September 1999 for the sale of United Artists movie tickets was conducted in the metropolitan-Phoenix area and violated the Telephone Consumer Protection Act. Of the settlement amount, class representative Starkle Ventures was awarded $57,500 as an incentive payment, and class representative Hacienda Heating and Cooling was awarded $12,500. The two law firms representing the class were awarded $1.8 million in attorneys' fees and $133,815 in preliminary costs. A copy of the Order Approving Settlement, Incentive Awards, Attorneys Fees, and Costs in Starkle Ventures, LLC, et al. v. United Artists Theatre Circuit, Inc., et al., Case No. CV1999- 020649 (Ariz. Super. Ct., Maricopa Cty.), is available at: http://is.gd/E5hIjw The Plaintiff is represented by: Edward Moomjian II, Esq. UDALL LAW FIRM, LLP 4801 E. Broadway Blvd., Suite 400 Tucson, AZ 85711-3638 Telephone: (520) 623-4353 E-mail: emoomjian@udalllaw.com - and - Christopher A. LaVoy, Esq. LAVOY & CHERNOFF, PC 201 N. Central Avenue, Suite 3300 Phoenix, AZ 85004 Telephone: (602) 253-3337 E-mail cal@lavoychernoff.com * Class Actions Deter Financial Wrongdoing, Study Finds ------------------------------------------------------- Jeff McCord of The Investor Advocate said that though often criticized as frivolous and lacking economic benefit, new research by finance and accounting professors at Rutgers and Emory universities' business schools finds that class action lawsuits are a strong deterrent to misrepresenting corporate financial results and other wrongdoing. And, in many instances class actions are a stronger deterrent than SEC enforcement actions. "Our research found statistically and economically significant deterrence associated with both SEC enforcement and class action lawsuits," said Simi Kedia, Ph.D., MBA, associate professor of finance at Rutgers University School of Business in an interview with The Investor Advocate. "We looked at firms in the same industry as the enforcement target and found that the average peer firm subject to SEC action and/or litigation reduces discretionary accruals (i.e., reporting as sales transactions for which payment has not been received) equivalent to 14% to 22% of the media return on assets in the aftermath of such enforcement." The study, a working paper presented at conferences and now being circulated for comment before publication, measured the effectiveness of the two primary methods of federal securities regulatory and law enforcement: "public" enforcement by the Securities and Exchange Commission; and, "private" enforcement through securities class action lawsuits. Regulatory Failures Enhance Importance of Class Actions A recent story by the New York Times' Gretchen Morgenson reported on why private lawsuits are particularly important at a time when federal failure to enforce the law is considered one cause of our on-going financial-economic crisis and of public discontent with government: "When federal authorities don't fulfill their obligation to enforce the law, they essentially give an imprimatur to the financial entities to do whatever they want and disregard the law," said Kathleen C. Engel, a professor at Suffolk University Law School in Boston. "To the extent there are places where shareholders and borrowers can pursue claims, they are really serving the function of the government. They are our private attorneys general." "Lawsuits have long been a crucial method for shareholders to recover losses. A February letter to the Securities and Exchange Commission from the general counsel of the California Public Employees' Retirement System noted that private litigants in the 100 largest securities class action settlements had recovered $46.7 billion for defrauded shareholders." http://www.nytimes.com/2011/08/08/business/aig-to-sue-bank-of- america-over-mortgage-bonds.html "I am not surprised at all that rigorous unbiased research now proves class action law suits are a robust deterrent to financial fraud and wrongdoing," explained Salvatore J. Graziano, Esq., president of the National Association of Shareholder and Consumer Attorneys. "On behalf of defrauded institutional investor clients, securities plaintiffs' attorneys routinely conduct thorough and ground breaking investigations of corporate defendants including securing information from knowledgeable former employees in our civil prosecutions. In fact, private investor lawsuits at times also help further investigations by the SEC and other federal agencies." Indeed, the new study found that in cases where both the SEC and class action lawsuits take action, on average private lawsuits precede SEC action by 297 days. Not surprisingly, the strongest deterrence effect was found when both SEC proceedings and class actions are launched. Class Actions Recover More Money & Can be Stronger Deterrent than SEC "Class action lawsuits, although often maligned as frivolous and socially wasteful, can have positive externalities by curbing aggressive reporting behavior of peer firms," the paper by Dr. Kedia and her colleagues states. Indeed, class action lawsuits recover far more money -- twice as much or more -- from wrongdoers than SEC actions, according to sources cited by the professors. And, in most situations, the deterrence value of class actions (in the absence of SEC enforcement) is actually stronger than that of the SEC when acting without a corresponding class action. This first study to validate the enforcement value of class actions through empirical research was conducted by Dr. Kedia and Shivaram Rajgopal, Ph.D., Chartered Accountant and Schaefer Chaired Professor of Accounting at Emory University's Goizueta Business School, with Jared Jennings, a doctoral student at the University of Washington's school of business. Their paper, entitled "The Deterrence Effects of SEC Enforcement and Class Action Litigation," reports their analysis of 474 SEC actions alleging financial statement misrepresentation and 1,111 class action lawsuits alleging violations of Generally Accepted Accounting Procedures during 1996 through 2006. The paper was first circulated for comment in June. http://papers.ssrn.com/abstract=1868578 Among other findings, the professors reported: -- "The SEC publicly targets a very small fraction of firms -- in our sample only 0.74% of firms were subject to SEC enforcement. At these low levels of enforcement, a substantial fraction of misreporting is likely to go undetected. Therefore, if potential miscreants consider the probability of detection to be too low, they are unlikely to change their behavior." -- "Securities class action litigation for alleged reporting irregularities is more likely against an average firm -- in our sample 1.28% of firms are subject to class action litigation. The greater likelihood of class action litigation, combined with higher monetary sanctions, likely renders lawsuits as a potentially effective way to deter reporting irregularities at peer firms." * Funds Spring Up to Invest in High-Stakes Litigation ----------------------------------------------------- Vanessa O'Connell at The Wall Street Journal reports that lawyers- turned-financiers are laying plans to profit from what they hope will be the new hot investment: high-stakes U.S. lawsuits. At least three start-up businesses are entering the fledgling "alternative litigation funding" market this year, creating funds that will invest at least a few million dollars in a case in exchange for a share of the lawsuit's winnings, which can be in the several-million-dollar or even billion-dollar range. One of the newcomers is: John P. "Sean" Coffey, Esq. BlackRobe Capital Partners, LLC 1185 Avenue of the Americas, 30th Floor New York, NY 10036 Telephone: 212-575-2047 E-mail: coffey@blackrobecapital.com a former plaintiff lawyer at Bernstein Litowitz Berger & Grossmann LLP and a former lead trial lawyer for investors in the case against Wall Street banks arising from the collapse of the former telecom company WorldCom Inc. After helping WorldCom investors recover more than $50 million from the pockets of former WorldCom officers and directors, Mr. Coffey unsuccessfully sought the 2010 Democratic nomination for New York state attorney general. Now, on the 31st floor of a midtown Manhattan office building, he is focusing on maximizing returns for investors from high-stakes commercial litigation via a commercial-claim investor called BlackRobe Capital Partners LLC. BlackRobe is currently exploring ways to raise capital. BlackRobe's Web site instructs that inquiries should be directed to Stephanie Reckler at reckler@blackrobecapital.com by e-mail. The idea has critics, who worry about a possible rise in frivolous lawsuits and increased pressure on defendants to settle. But some forms of third-party litigation funding have been around for decades. Search the Web for "lawsuit loans," and you'll find hundreds of companies offering cash advances, generally of up to $10,000, to people with personal-injury claims to help them offset living expenses while their claims are pending. There have also been occasional "syndicated lawsuits," allowing investors to pay a plaintiff's legal costs and gamble on receiving part of a monetary judgment or settlement. The new breed of profit-seeker sees a huge, untapped market for betting on high-stakes commercial claims. After all, companies will spend about $15.5 billion this year on U.S. commercial litigation and an additional $2.6 billion on intellectual-property litigation, according to estimates by BTI Consulting Group Inc., a Wellesley, Mass., research firm that surveyed 300 large companies in 2011. Backers say litigation funding will help to increase the number of legitimate claims that reach the legal system. Potential users of capital include small companies seeking to level the playing field against bigger opponents and publicly traded companies seeking off-balance-sheet financing for their litigation. "We have and will continue to entertain the use of third-party funding under the appropriate circumstances," says Tom Sager, general counsel of chemical maker DuPont Co., who cites the rising cost of litigation in the U.S. The business is gaining cautious backing from some partners within major U.S. law firms, including Latham & Watkins LLP, Patton Boggs LLP and Cadwalader, Wickersham & Taft LLP. The funders provide lawyers with potential referrals of new clients. They also provide an "extra measure of security that the legal fees are going to be paid without incident," notes: Barry R. Ostrager, Esq. Simpson Thacher & Bartlett LLP 425 Lexington Avenue New York, NY 10017-3954 Telephone: (212) 455-2655 E-mail: bostrager@stblaw.com whose standard rate is more than $1,000 an hour. In 2009, he introduced client Gray Development Group to a litigation-financing firm for funding of its July 2010 suit against a Chicago developer. Gray won the case. "The added capital allowed us to upgrade the legal team without betting the company's entire future on the outcome of one lawsuit," says Bruce Gray, chairman of Gray Development, one of the largest apartment developers in Arizona. Critics have philosophical concerns. John Beisner, a Skadden, Arps, Slate, Meagher & Flom LLP partner, told a House subcommittee in May that litigation funding threatens to increase frivolous claims and exacerbate litigation abuse by making "unlimited amounts of money available to litigants and attorneys." He spoke on behalf of the U.S. Chamber of Commerce. "Investors are thinking, what's the one thing you can always count on being around? It's litigation. Let's try to profit from that!" Mr. Beisner adds. "Is that what our litigation system is supposed to be about?" Others worry that defendants might feel unfairly pressured to settle. The funders tend to bet on patent or antitrust cases for the biggest profit, but "the potential downsides for the defendants are huge," says Joanna Shepherd-Bailey, an associate professor at Emory University School of Law. She cites a possibility of treble damages and preliminary injunctions as examples of "negative side effects that can ruin a company." Mr. Coffey says "the funding is not only going to result in more legitimate claims being brought, it's going to result in more effective prosecution of claims that have been filed." "There are some claims that are prosecuted that are starved a little for oxygen," he says. "Some claims that are being prosecuted somewhat anemically would be prosecuted more robustly." In the past, common law prohibited third-party financing of a lawsuit, as well as the acquisition of an interest in a lawsuit's winnings. Currently, laws vary from state to state, Prof. Shepherd-Bailey says, and no U.S. court has yet considered the legality of third-party finance of commercial claims. At the moment, BlackRobe is using space at the New York office of law firm Patton Boggs. It expects to move in the next few months, Mr. Coffey says. Down the hall, rival Fulbrook Management LLC is subleasing from Patton Boggs. Founded in March by a former Latham senior partner, Fulbrook says it looks for cases with a potential recovery of $25 million or more on investments of $1 million to $10 million. It promises to provide "professional and commercial support for claims" it backs, says founder: Selvyn Seidel, Esq. Fullbrook Management LLC 1185 Avenue of the Americas, 30th Floor New York, NY 10036 It plans to raise "a pool of capital that will be a serious fund" soon, he adds. Another new U.S. player, Bentham Capital LLC, opened for business last Monday, and it's focusing on commercial and intellectual- property litigation, according to its chief investment officer: Ralph Sutton, Esq, Bentham Capital LLC 712 Fifth Avenue, 14th Floor New York, NY 10019 Telephone: (212) 488-5331 E-mail: sutton.ralph@gmail.com a former lawyer at Cowan, DeBaets, Abrahams & Sheppard LLP. Bentham's parent, IMF Australia Ltd., has more than 87 million Australian dollars in assets. Two existing players -- Juridica Investments Ltd. and Burford Capital Ltd., both hedge funds publicly traded in the U.K. -- reported promising results last month. ********* S U B S C R I P T I O N I N F O R M A T I O N Class Action Reporter is a daily newsletter, co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Leah Felisilda, Noemi Irene A. Adala, Joy A. Agravante, Julie Anne Lopez, Christopher Patalinghug, Frauline Abangan and Peter A. Chapman, Editors. Copyright 2011. All rights reserved. ISSN 1525-2272. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. * * * End of Transmission * * *