Tomorrow is “Small Business Saturday,” (November 26), so it’s a good time to reflect upon the especially challenging regulatory and legal environments such businesses have faced in recent years. Even though the federal government maintains an entire agency whose mission is purportedly to assist small businesses—the Small Business Administration—regulators seem ever oblivious to their impact on entrepreneurs. The National Labor Relations Board’s (NLRB) effort to redefine who is an “employer” and the NLRB’s and the Department of Labor’s (DOL) enmity toward independent contracting are two current examples. A third is DOL’s so-called Fiduciary Rule, which hits sole-practitioner and small-business investment and insurance advisors especially hard.
Small businesses are also at a particular disadvantage when disputes with the government end up in court. A recent US Court of Federal Claims decision, SUFI Network Services, Inc. v. US, exhibits government’s unfortunate willingness to exploit its power in disputes with a small business and the role courts can play in protecting entrepreneurs’ rights. Continue reading
A September 7 WLF Legal Pulse commentary, Court Pours Cold Water on Unreasonable Serving-Size Class Action vs. Starbucks, discussed the US District Court for the Central District of California’s dismissal of a fraud suit alleging that Starbucks duped iced-drink consumers into purchasing a 12-ounce iced coffee/tea which, because it included ice, contained somewhat less than 12 ounces of liquid. The post noted that copycat suits were pending in federal courts in Illinois and New York. On October 14, Judge Thomas M. Durkin of the Northern District of Illinois granted Starbucks’s motion to dismiss the seven-count suit of disenchanted customer Steven Galanis. (Galanis v. Starbucks Corp.)
What Mr. Galanis, and Mr. Forouzesh before him in Forouzesh v. Starbucks Corp., in essence argue is that when purchasing a “tall” iced coffee, for which there is a 12-ounce cup, they expect to get 12 ounces of coffee plus ice. Upon receiving their drink, they, and the thousands of consumers whom they claim to represent, realize they were deceived, and that the deception made them pay more than what the product was worth. The Illinois consumer fraud law under which Galanis sued requires that the defendant’s action would mislead a reasonable consumer. Just as in Forouzesh, that requirement proved to be Mr. Galanis’s downfall.
“Galanis’s claims ask the Court to interpret Starbucks’s menus in an unreasonable fashion,” Judge Durkin explained. Referencing a screen capture of iced coffee on Starbucks’s online menu reproduced in the opinion, Judge Durkin noted that the company lists the serving size separately from the product’s contents, which specifically include “Ice” and “Brewed Coffee.” The description of the drink also references that it is coffee served “over ice.” The court added that as a matter of law, a reasonable consumer understands that “‘fluid ounces’ is a measurement of a drink’s volume, not a description of a drink’s contents.”
“Enough is enough.”
That is how Judge Clay D. Land, Chief Judge of the US District Court for the Middle District of Georgia, concluded the first paragraph of a scathing five-page order in the multidistrict litigation (MDL) proceeding In re Mentor Corp. Obtape Transobturator Sling Products Liability Litigation. The September 7, 2016 order includes three-and-a-half pages of what Judge Clay himself labeled “Obiter Dictum.” For non-lawyers or those not fluent in Latin, obiter dictum is that part of a judicial opinion that is not necessary to the holding of the case.
Dicta it may be, but those three-and-a-half pages offer a spot-on critique of the MDL process by an experienced judge who has garnered significant criticism from defense-side lawyers for some of his pro-plaintiff rulings in the In re Mentor litigation. Continue reading
Warning: Includes Ice
Since its inception in the spring of 2010, the WLF Legal Pulse has routinely cast aspersions upon (mostly California-based) class-action lawsuits alleging fraudulent food labeling and the shopping-cart-chasing lawyers who file them. The blog even has a tag devoted entirely to posts on these suits: Food Court.
Of all the lawsuits we’ve discussed here, few cases epitomize the absurdity of this litigation trend better than the recently decided Forouzesh v. Starbucks Corp. Filed not in the “Food Court” (aka the Northern District of California), but rather in the Central District of California, this suit alleged that Starbucks committed, among other wrongs, fraud, false advertising and breach of warranty by misrepresenting the specific number of ounces in an iced drink. In other words a “Grande” iced coffee or tea, which is 16 ounces, actually contains 12 ounces of coffee plus 4 ounces of ice. As reflected by the grainy photos of a Starbucks cup and a Pyrex bowl in the complaint, Forouzesh actually measured this out. He sought to represent a class of California Starbucks iced-drink purchasers and demanded compensatory and punitive damages, and injunctive relief. Continue reading
By Trey Wassdorf, a Judge K.K. Legett Fellow at Washington Legal Foundation in the summer of 2016 who is currently a third-year student at Texas Tech University School of Law.
Recently, online video-on-demand service Hulu decided to migrate from a business model that had provided either a free ad-supported service or a subscription-based premium service. The new service is a bit complicated; there will be a $7.99 per month ad-supported service, an $11.99 per month ad-free service, and users will still be able to watch some Hulu content for free through their distribution partners, most notably Yahoo’s new Yahoo View. Hulu will also offer customers that currently use its free service a 30-day free trial to the subscription service.
Hulu’s decision is one that many digitally-based businesses, especially developers of mobile-device applications, are making. They accept that some users won’t be thrilled with having to pay for what they previously got gratis, but it’s unlikely that many businesses have contemplated the threat of litigation when making such a move. Recent litigation against app developer LogMeIn, however, should act as a wake-up call to digital businesses large and small. Continue reading
By Anthony Rickey, a solo practitioner at Margrave Law LLC in Georgetown, DE, and Keola R. Whittaker, an Associate with McGuireWoods LLP in its Los Angeles, CA office.
U.S. Court of Appeals for the Seventh Circuit Judge Richard Posner’s criticism of meritless settlements in In re Walgreen Co. Stockholder Litigation, (Aug. 10, 2016) will cheer hearts skeptical of the utility of mergers-and-acquisitions (M&A) class actions. The opinion reversed and remanded a district court’s approval of a disclosure settlement arising out of the merger of Walgreen Co. and Alliance Boot GmbH. Judge Posner explained why each of the six supplemental disclosures offered to the class as settlement consideration were, variously, “worthless,” “provided no new information,” or “could be derived by simple arithmetic from data in the proxy statement. . . .” After reversing the trial court, the appellate court suggested that the class counsel who had supported such a settlement, and sought $370,000 in fees, had not adequately represented the class, and advised the district court on remand to seriously consider dismissing the suit or appointing new class counsel. Continue reading
This past May, a Cook County Associate Judge dismissed 201 Illinois False Claims Act (IFCA) cases at the request of Illinois Attorney General Lisa Madigan. The state’s action is an encouraging, albeit overdue, development in a long-running legal saga where one enterprising lawyer has harnessed the state’s enforcement power to pursue personal financial gain that provides little or no benefit to the public.
Much like its federal equivalent, the IFCA allows private citizens (relators) to file fraud claims on behalf of the state. The fraud must be based on a false claim, typically a violation of a law or regulation. If successful, relators can collect up to 30% of the award plus attorneys’ fees. Continue reading