The client class members were to receive only gift cards, not cash, in the settlement with Windsor Fashions, a clothing retailer, so Los Angeles Superior Court Judge Brett Klein thought it only fair to provide that Yorba Linda attorney Neil B. Fineman be paid his fee with "12,500 ten-dollar Windsor Fashions gift cards." (Metropolitan News-Enterprise via California Civil Justice Blog).
The number of nuisance suits that right trivial "wrongs" with tiny coupons, while the lawyers collect cash, is ridiculous.
Poetic justice, indeed. Hope he looks good in a dress.
He has that Christmas favor thing down... forever.
But it'll get overturned on appeal.
You'd rather that Windsor Fashions keeps ripping people off for $10?
Seems to me that the lawyer provided a worthwhile service here.
Ever seen Office Space? When they try to steal a fraction of a penny off of each transaction and wind up with $360K? I'd say that's analogous here.
[Though I don't know what the actual offense was]
The number of nuisance suits that right trivial "wrongs" with tiny coupons, while the lawyers collect cash, is ridiculous.
Don't be silly. The attorney is being punished for mediating an agreement that resulted in a windfall for him, and only gift cards for the class members. He is not being punished for bringing the class action lawsuit, which is entirely permitted by the California Civil Code. Why? Because the store was, in fact, breaking the law.
But it'll get overturned on appeal.
Why bother appealing it? Just sell it back to the store at a small discount. Or perhaps file the appeal and then negotiate with them for a cash payment, which will be cheaper for both parties.
Cute stunt, though.
A stunt indeed, and a cheap one at that. Class actions can only be settled with the approval of the judge. If the judge didn't approve of the coupon settlement (and there are lots of reasons not to, not the least of which is that they're not really very good for the class members), the judge simply should not have approved the settlement. It's that easy. As it is, the judge didn't just stick the class attorney -- he stuck the class members as well.
The whole reason class settlements have to be approved by the judge is to make sure the class members don't get hosed. This guy blew off his responsibility just to poke an attorney in the eye. Very classy, judge. Very classy.
And yeah, Brian gets it. Class actions exist in order to make sure that businesses can't get away with nickel-and-dime ripoffs that may not hurt any one particular consumer enough to justify the burden of seeking legal redress, but in the aggregate allow the business to make a lot of illegal money. They're a good thing. They're also something libertarians should love, and here's why: They put the cost of enforcing consumer-protection laws in the private sector, since the other option is enforcing the laws through public sector prosecutions that are paid for by taxpayers as a whole. The class action mechanism allows the attorney who takes them on to act, in essence, as a private attorney general who will be paid for his or her efforts by the at-fault party, rather than by the public at large.
I'll add something else -- it's the at-fault businesses that push for coupon settlements, because coupon settlements often let the business get away with not really having to pay anybody back. Companies love to throw this kind of settlement offer out, combined with a chunk of change (call it bribery) for the plaintiff's attorney, and it does create a conflict. But as I said, that's why the settlement has to be approved by a judge. And not to repeat myself, but if the judge didn't like it, his job was to look out for whether the class members were being hosed through a coupon deal, not to play stupid tricks with attorney compensation.
I never understand why libertarians complain about lawsuits, frivilous or otherwise. They are the natural consequence of yoru philosophy. If you want a system with few or no government regulators then the alternative is the courts to deal with this type of thing. It would seem obvious the necessary evil of the regulate approach is a large beauracracy while the necessary evil of the unregulated approach is frivilous lawsuits. With imperfect humans in charge you aren't gonna get a perfect system, the question is determine much of each necessary evil are you willing to live with and strike the balance accordingly.
One is tempted to say that certain "libertarians" are actually just knee jerk pro business and anti-government or something....
Looks liek nolo and I were makign the sam epoint at teh same time, but he is a faster typist than me:-)
I believe the libertarian complaint would be that this is a waste of everyone's time and the product of an overly expansive regulatory state and the benefits go to the attorney. It is not so much the class action system as the types of frivolous cases that are brought under it to enrich attorneys while actual grievances do not exist or are not redressed that probably annoy libertarians. I feel safer knowing that Windsor Fashions won't be requesting address information from any more of their customers.
But again Bobar, the reason this kind of thing is settled via lawsuit is because it isn't regulated. In a regulation heavy state the consumer would complain to some government better buisness agnecy that would investigate and levy a penalty. Since we don't have that we do it via lawsuits.
I imagine, but I'm not really sure, that in libertarian fantasy land, a company probably wouldn't be tied up in litigation over requesting address, E mail address or telephone numbers from people who used credit cards to make the purchases. The lawyer did society a real service by stopping this injustice.
From the link above: "Fineman, 40, brought a class action by which he forced Windsor Fashions to stop committing routine violations of the Song-Beverly Credit Card Act."
In other words, it was the regulatory state which made this lawsuit possible. We're not talking about a real wrong, like fraud or personal injury, we're talking about a regulatory-state wrong being corrected by private litigation instead of customers simply refusing to do business with the store.
We're not choosing between (for instance) slaughterhouse regulations and suits for selling tainted food. Instead, we're getting two inefficiencies at once.
Rob has stated it much better than I could.
"Frivolous lawsuits are the natural consequences of yoru philosophy"
Indeed they are. And look at the Yoru today and where it's gotten them. But the Yoru aside,the alternative to a large beauracracy is not lawyers enjoying vast windfalls, the alternative is the self policing of the market. If you don't like the way a company does business, don't shop there. If a supposed offense of a company can be erased by a $10 gift card then it's trivial and as they say, lets not make a federal case out of it.
The lawyers who collect jackpots from companies are really collecting them from the customers. Every penny a company makes, every penny, comes from the customers. You screw my suppliers, you screw me.
Libertarians don't have to embrace every detail of our current civil procedure rules.
Corporate defendants do settle objectively frivolous class action suits with significant attorney fee payments, coupled with some kind of nominal payout to the actual plaintiffs. This suggests that the suits' nuisance value is driving settlement amounts. State-created procedural rules determine that nuisance value.
Second, the class action mechanism is (among other things) designed to overcome the transaction costs that ordinarily make it difficult to coordinate lots of people with small claims. These same transaction costs make it difficult for the plaintiffs to supervise their attorneys, though. Here, the attorney negotiated a nice cash payday for himself and gave his clients literally nothing: even the clients who use their gift cards will likely end up spending their own money, as well, when they go to the store, canceling out the small financial benefit from the gift card. Of course the defendant pushed for this kind of settlement. But it was the attorney's job to let himself be bribed into taking it.
Maybe the judge should have approached this differently; I don't know enough about CA civ pro to comment.
Rulings like this do discourage nuisance suits, but it makes it hard to settle nuisance suits that are brought.
Even better than giving the attorney 12,500 gift cards would have been to send a letter to every member of the class giving them the option to respond in writing in order to receive their gift cards. Then only give the attorney one gift card for every three class members that respond. That way, his level of compensation would be partly determined by the value of the settlement to the class members.
That sort of system would probably eliminate the even more egregious nuisance suits, where the attorneys get millions of dollars and the class members (say, utility customers) get checks for thirty cents each.
Rob and Bobar,
What we have today is the rules in place with no enforcement, that is what I meant by regulatory state, regulations with teeth would include the enforcement, something like what I listed, you file a complaint and there is an established process to investigate and fine the vendor, since we don't have that we leave the enforcement to the courts via lawsuits. What we have is almost the worst of both worlds. Since the government doesn't have to enforce the rules they enact there is really no cost to them to create as many rules as they can think of. Since the lawyers work on contingency fees there is no real cost to the plantiffs to file lawsuits on anything they want.
So what I am saying is if you want less frivilous lawsuits then require that regulations also have enforcement built into them, you'll also likely end up with government agencies that apply more common sense to the regulations they create if they also have to be the ones enforcing them.
You'd rather that Windsor Fashions keeps ripping people off for $10?
If a store rips me off, the LAST thing I want is a damned gift certificate to shop at the store again! Give me the $10 bucks so I can shop someplace else.
The reason these coupon and gift card payouts happen is that they don't cost the "offending" business as much money. Many (and sometimes nearly all) of the coupons end up going unused, and thus cost the company nothing. So the business gets off easy, the lawyers get money (all they cared about in the first place), and the people who supposedly suffered harm get nearly-worthless "restitution".
There's no reason to defend this if your concern is with the consumer. The only people who benefit from this are businesses and class-action lawyers. Consumers get screwed.
Keeping in mind that the store didn't actually rip anyone off for $10, it illegally collected address and phone number information or some such.
If they then used thoe phone number to spam me with phone solicitations under the "established relationship" loop hole in the Do Not Call list and sold my address to junk mailers who filled my mailbox with crap I spent more than $10 of my time dealing with the phone calls and mail:-)
After being in "classes" several times, I finally got my first check a few weeks ago, about $27 cash (check)
Sometimes - in some of these cases - management was guilty of nothing more than ineptitude but I have invested in companies where management were lying scum and ought to be in jail.
I used to take the position that the lawyers were simply scammers, but I have reached a point where I think the lawyers might be the only people to take a bite out of some of these guy's asses, and even if I don't get the money, the mere threat of the lawyers does keep 'em LL a little more honest.
I also filed a lawsuit one time against a big company and of course all their arguments were that it was frivolous and baseless, etc. but I knew it was correct and the bastards settles.
If a conservative is a liberal who's been mugged, call me a pseudo-libertarian.
This is not a case where they were harmed by a company and got "rewarded" by being forced to patronize that company again; this is a case where they suffered no harm, an ambulance-chaser found an obscure statute to play "gotcha" with, and tried to get himself big bucks at the expense of the company without benefitting the class at all.
the alternative is the self policing of the market.
Or, as equally likely as the market ever policing itself - magic money fairies could just make sure nothing bad happens to anybody!
Really helpful, that commentary in the last sentence - thanks for bringing your years of legal research and expertise to bear on this.
Not to belittle the anecdotes which I assume form the basis of your claim, but the research on this topic points pretty conclusively in the other direction.
Remember this the next time some non-economist is making a claim about which they have absolutely no expertise or empirical knowledge. Ridiculous.
You've got to expect to be screwed in little ways all the time when money is involved. That's life. You've got to expect some people to be pissed about it, not taking "that's life" to heart. You've got to expect some lawyer to take them on. That's life. He'll say the point isn't the money but to send a message and punish the XXXX thousand times petty crook corporation. Hell no, that's wrong! It's a freakin corporation for cripes sake. Hurting them hurts everyone. Think of the common good. There ought to be a law.
Or, as equally likely as the market ever policing itself - magic money fairies could just make sure nothing bad happens to anybody!
Yes, it takes "magic" to stop patronizing a corporation that behaves badly.
Well, either that or basic intelligence. Whatever works for you.
I have argued this before with my liberal atty brother and liberal atty friend. I've been joined by my conservative atty daughter and her atty husband.
For the most part, class action suits are intended to enrich lawyers. Where there has been an actual wrong done (not one by statute, as this one was) it's more difficult to prove.
There are two ways to tell if a class action suit is legitimate. 1) how large is the class? If it's very very large, the attorneys will be the only ones to benefit. 2) how significant is the harm? If it's "my god, they asked for my phone number!!", the attorneys will be the only ones to benefit.
In both cases described above, there is little to no benefit for the public. If a 100,000 people were harmed because... say their credit record was checked... what is the harm to the general public? What was the harm to each individual?
It's too small to measure. Effectively there was no harm, thus the attorneys and their fees were "stolen" from the company they sued.
Presumably those expressing this sentiment:
". . . it's 'my god, they asked for my phone number!!' . . . What was the harm to each individual? . . . Effectively there was no harm . . ."
in various ways in various posts above also would apply that same logic when it comes to providing information for firearms purchases.
No, I didn't think so.
Fantastic! I was in a plaintiff class in a similarly settled suit whereby the plaintiffs received free lousy service (lousy service prompted the suit) but the lawyers received cash. It really peeved me that the lawyers were able to settle in that manner without a vote of the plaintiffs in my case. It made me question whether the lawyers were representing their clients or the opposing party.
chsw
Rofe - that's the most agressively idiotic comment I've read all morning. If you cannot see the fundamental difference between (1) the government forcing people, in conjunction with any purchase (wherever made) of a perfectly legal product that they have a constitutional right to own if they see fit, to provide personal information that the government then keeps in a database used for criminal prosecutions, and (2) a single retail business at which people are voluntarily shopping gathering information for use in benign marketing efforts, then clearly you do not have the mental capacity to add anything useful to this discussion.
"Class actions exist in order to make sure that businesses can't get away with nickel-and-dime ripoffs...."
Well, no. As I remember it, class actions began in order to deal with big things and not nickel-and-dime ripoffs.
Yeah. I still have the check for one of these settlements. My bank wouldn't accept it because it was for less than $1. You have to love the gift card angle though. A $10 dollar gift card is enough that someone wouldn't want to waste it, but small enough that it wouldn't buy anything by itself. Think about this. If this business took the value of the gift cards as a loss and placed money in escrow to cover the value of these cards, it could take a one time loss as a tax write-off, wait for the cards to expire and then take a profit on the unclaimed cards plus any interest accrued. In the mean time, anything purchased with the cards, would generate a possible profit, depending on their mark-up percentage.
Under the California 'don't-ask-the-credit-card-customer-for-her-phone-number'law, the customer can sue in small claims court to claim a $1,000 penalty from the store. (Civil Code 1747.8(e).) The attorney could have done the class members a real favor by telling them how to do this. Instead, the settlement extinguished these claims.
Such coupon settlements are basically collusion between the lawyers for the "plaintiffs" and the defendants. The coupons are often never used, thus costing the defendants less than a straight-up cash settlement of equal face value, and the lawyers get cash for signing off on it all.
I kind of like the judge's solution. The plaintiffs and their lawyers should get the same currency of payment.
At least on the federal level the Class Action Fairness Act of 2005 helped make it harder for plaintiffs to pursue coupon settlements. I'm guessing the lawyer may have done some creative pleading to keep the suit from being removed to federal court under CAFA.
That was a creative decision from the judge. Coupon settlements are rarely beneficial to the plaintiffs, but almost always a windfall to the plaintiff's attorneys. CAFA has done a good job helping spread the benefit, but it looks like California's rules are less stringent.
I'm an attorney who does not make a living filing class action suits, and I'm not familiar with particular suit Megan is talking about in this post. However, I think generally class action suits do serve an important function. I usually advise my clients that it is simply not worth their time to sue, even in small claims court with no attorney, unless the damages will be at least $500. And even then only if their primary motivation is to get some general sense of justice as opposed to actually getting their money back. Why? Because by the time you have paid the filing fees, spent hours on the phone with the clerk's office, taken a day or two off from work to sit in court and have your case heard, etc., you have wasted at least that much money, and more, obviously, if you hire an attorney or if your own time is worth more. So in essence, there is a $500 (and usually much larger) "cushion" for a business or individual to rip people off in certain ways and never be punished for it. Not to mention all the ways they can rip people off that most people aren't aware of or don't understand (think of elaborate credit card fees). Giving an attorney the financial incentive to go after defendants who do this sort of thing is, in my book, a good thing. One, it keeps businesses honest by removing the assurance of the rip-off cushion. Two, the plaintiffs don't have to go to any trouble themselves to be compensated for their loss. I'm guessing most of the class action plaintiffs were quite happy to receive their $10 gift certificates in the mail.
In the state of California, consumers have the right to cash out any gift card with $10 or less remaining on it. Glad I won't be the one manning the register when the lawyer comes in to settle up.
http://www.dca.ca.gov/publications/legal_guides/s-11.shtml
I thought this was a terrific law until I made my annual trip to Borders to return the Christmas books I didn't intend to read and found that they wouldn't accept anything without a receipt.
The store violated a state law barring the collection of identification information from credit card customers. Basically, they collected addresses, emails, or phone numbers from credit card customers and that was proscribed by state law.
The issue is not that it was a frivolous lawsuit. The issue is that the state passed an arguably arcane law with no other enforcement than the civil courts.
If I opened a store, it would have never occurred to me that I couldn't minimize fraud by collecting some customer data, much less that I would be visited by a subpoena rather than an official state warning for violating such a obviously rational activity. I'm not arguing that the law is unjust. I'm arguing that it is unexpected and should be enforced by the enormous California state bureaucracy rather than the expensive civil courts.
The lawyer shouldn't be the one punished for the ridiculousness of the suit. The state government is at fault.
The right way to balance the interests of defendants and plaintiffs in these circumstances - i.e, to permit class actions where individual claims are too small to bother with, while still deterring frivolous shake-downs - is to allow the prevailing party to recover attorneys' fees from the losing party's attorneys.
Rob,
It's even worse than that. I write retail point-of-sale software for a living, so I know a little bit about credit-card merchant agreements. Virtually all of them contain provisions that prohibit (a) requiring this kind of information in order to accept a card for face-to-face sales, (b) charging a surcharge for credit-card sales, (c) refusing to accept a credit card for sales below a certain amount, etc. I'm not sure why the government should have an interest, one way or the other, about how much identification a store should be able to require from its customers, but in this case it's fairly redundant anyway.
Rofe, when Windsor Fashions enforcers, armed with automatic weapons and body armor, start bursting into homes, kidnapping people and shooting anyone whom they imagine to be appearing to offer any resistance, based entirely on lies told to them by known criminals, then I'll worry about giving Windsor Fashions information about what specific weapons I'm armed with.
And, even if that occurs? I still won't worry about giving them my address to buy clothing.
It seems to me (after a brief glance at the case history) that the issue here is the fact that the store collected the shoppers' personal information without their knowledge or consent and IN VIOLATION OF CALIFORNIA LAW.
Someone tell me how the plaintiffs in this lawsuit are not justified?
The store's records showed 43,000 customers were asked for their phone numbers. The store had the address of one customer, and mailed a gift certificate to her. The store had e-mail addresses for another 16,000, and e-mailed the gift certificates to them. The other 26,999 customers had three weeks to notice an announcement in the newspaper and go into a store to claim their gift certicate.
The reason that the Merchant Agreement forbids the collection of driver license and other information is to protect the card holder from dishonest clerks, not from the merchant. I'm talking about professional criminals who, with trained memories, gather information to be used by organized identity theft rings. This sounded to me like an urban legend at first, but MasterCard takes the threat seriously enough to deal with it explicitly in the Merchant Agreement.
What number of nuisance suits would that be, Megan?