2017 Lawsuits and Class Actions

The Consumer Financial Protection Bureau (CFPB) has fined Conduent Business Services, formerly known as Xerox Business Systems, $1.1 million for erroneous information it sent about consumers to the three credit bureaus.

The CFPB said the company's software errors resulted in the incorrect information being placed on one million consumers' credit reports, which lowered their credit scores and could have impacted their ability to borrow money.

The company was also cited for its failure to tell all of its auto loan clients about the problem in its software. In addition to agreeing to the fine, Conduent has agreed to fix the software and explain the problem to its clients, CFPB said.

“We have entered into a consent order with the Consumer Financial Protection Bureau stemming from a 2014 investigation," a company spokesman said in an email to ConsumerAffairs. "We are focused on maintaining open communications with customers regarding any changes our partners make to their software that may impact their reporting.”

Flawed software

The government's complaint alleges that Conduent used "flawed, unreleased loan-servicing software" that resulted in inaccurate and incomplete information about consumers being sent to credit reporting agencies.

In some cases, CFPB said consumers’ credit files were missing the date of the borrowers’ first delinquent payment, or had an incorrect date. Other missing or incorrect information included the amounts of payments and past due amounts.

Mistakes on credit reports have plagued consumers for years. Often consumers don't learn of incorrect information in their credit reports until they apply for a loan.

Now easier to correct errors

However, attorneys general from 31 states reached a settlement with the three credit reporting agencies in 2015 to make it easier for consumers to correct errors in their credit reports.

The investigation examined how the credit reporting agencies investigate consumer disputes about errors on credit reports and increased accountability for the companies that provide credit information, known as data furnishers.

The agreement required the credit bureaus to hold data furnishers to higher standards, provide greater protections for consumers who dispute information on their credit reports, limit the kinds of information that can go on a credit report, and provide additional consumer education.

Consumers can review their credit reports from all three credit agencies once a year at no charge by going to www.annualcreditreport.com.

The Senate has voted to overturn a rule allowing consumers to sue banks and credit card companies as part of a dispute resolution.

The House had already approved the legislation, so the bill will head for President Trump's desk, where he is expected to sign it into law.

The measure rolls back a Consumer Financial Protection Bureau (CFPB) rule announced in July that banned the use of mandatory arbitration clauses in financial services contracts, including those for cellphones.

When consumers sign up for a credit card or open a bank account, the terms of service they must agree to specifically state that disputes will be resolved through arbitration. That means consumers are unable to take part in class action suits if something goes terribly wrong.

In arbitration, the consumer and the financial institution present their arguments before an independent third party. That entity, the arbitrator, hears both sides and then makes a decision. In many cases, the decision is binding, and there is no right to appeal.

'Escape accountability'

CFPB Director Richard Cordray criticized arbitration clauses, charging they allowed companies to escape accountability to their customers. Under the new rule, he said, consumers would be more likely to receive justice.

Congressional Republicans led the effort to overturn the rule. The measure nullifying the rule easily passed the House but required Vice President Pence to break a 50-50 vote in the Senate late Tuesday.

Two GOP Senators -- Lindsey Graham of South Carolina and John Kennedy of Louisiana -- voted with Democrats against the resolution and for keeping the CFPB's arbitration rule in place.

"Senators who voted in favor of this resolution just handed a gift to bad financial actors," said Melissa Stegman, senior policy counsel at the Center for Responsible Lending. "Companies, like Wells Fargo and Equifax, frequently bury forced arbitration clauses in the fine print of agreements, giving them the ability to cheat consumers with impunity. These rip-off clauses deny Americans the freedom to seek justice through our court system – a right embodied by the Constitution's Seventh Amendment."

Reasons for overturning the rule

But those who voted to roll back the arbitration rule contend it is part of Obama-era regulations that have reduced economic growth. President Trump has said he supports the repeal because he believes it harms community banks and credit unions.

Assuming Trump signs the legislation, consumers who have a dispute with their bank or credit card company must continue to resolve it through arbitration.

Lauren Saunders, associate director of the National Consumer Law Center, has called arbitration clauses "a license to steal" when a company commits fraud.

The American Bankers Association (ABA) sees it differently. ABA CEO Rob Nichols said the vote was a "win for consumers," claiming the rule would have ultimately led to higher costs.

The Americans with Disabilities Act has been in effect for 27 years, and is responsible for familiar accessibility features like handicapped-designated parking spots and ramps in public spaces and large businesses. 

Like other civil rights legislation, the ADA is enforced by either filing a complaint with the federal government or by filing suit. However, a few unscrupulous attorneys and plaintiffs have abused this to such an extent that the ADA may soon face legislation to weaken it.

In Los Angeles, a wheelchair-bound convicted pedophile sued more than 1,000 businesses over ADA violations before his legal scheme was exposed by a newspaper report. He committed suicide four months later. 

In Phoenix, a group billing itself as advocates for the disabled sued a reported 2,120 businesses over the size of their handicapped parking spots. In Austin, an attorney targeted nearly 400 small businesses with either lawsuits or demand letters asking for money to settle supposed ADA violations. 

A bill that could kill the ADA completely

Congressman Ted Poe, a Texas Republican in the House of Representatives, has introduced a bill that he claims “will curb frivolous lawsuits filed by cash-hungry attorneys and plaintiffs that abuse the ADA.”

His legislation, HR 620, recently cleared the House Judiciary Committee with support from Democratic lawmakers in California.

"The ADA is being abused by lawyers who've often never seen these properties,” says Representative Scott Peters, a California Democrat who is co-sponsoring HR 620.  

But over 200 civil rights organizations warn that HR 620 will severely weaken a landmark piece of legislation for the disabled and do little to deter the problem of ADA lawsuit “trolls," as they are sometimes called. 

Texas civil rights attorney Jim Harrington counts the ADA as one of the best civil rights laws ever enacted. But last year, Harrington took an unexpected turn defending small businesses in Austin targeted by frivolous ADA lawsuits. 

Austin attorney Omar W. Rosales sued so many local businesses over technical ADA violations that local disabled persons advocacy groups publicly denounced him. Among Rosales’ targets were small pediatric clinics, which his adult client would be unlikely to ever visit.

The “offenders” often agreed to pay Rosales settlements “because it was less expensive for them to settle than fight him, even though they would win [a court battle]," Harrington says. 

Individual attorney problem

Rosales has since been sanctioned, sued by the State Bar, and suspended from practicing law in the Federal Western District Court for the next three years. He still advertises his “commitment" to the disabled on his website, but refused attempts to be interviewed by a ConsumerAffairs reporter.

“Are you hiding from debt collectors?  IRS problems?” he responded in one hostile email to a reporter.

Critics note that HR 620 doesn’t specifically target people like Rosales. Under HR 620, if any prospective customer finds they cannot access a building because of their disability, they would be required to first send a written notice to the business owner, wait 60 days for a response, then, assuming the business owner responds, wait an additional 120 days for the business to correct the problem. Only after this waiting period would they be able to sue or lodge a complaint. 

Human Rights Watch says this bill would “act as a profound deterrent to people looking to enforce their rights under the ADA.”

Though the measure has attracted sponsorship from a slew of Democratic California lawmakers like Representative Peters, he sounds less enthusiastic when discussing the details of the bill, particularly the 180-day waiting period. "Would the ACLU agree this is a good bill if there was 60 days?" he asks. 

Harrington points out that no other civil rights law requires a person to send in a written notice before they can sue. "We don't do that with civil rights law,” he argues. 

Harrington and disability groups say that the frivolous lawsuit problem isn’t really a problem with the ADA itself, but an individual attorney problem, and should be dealt with as such.  

"These clowns around the country have given [Congressman Poe] and other folks the opportunity to come in and essentially gut the ADA,” he says. “The courts are really basically taking care of this. They really clamped down on these jerks."

Many large business associations, representing apartments, retailers and shopping centers, have thrown their support behind HR 620. But those associations don’t fit the profile of the type of businesses that Harrington and Peters say are typically victimized by frivolous ADA litigation. 

“Who I hear from mostly,” Peters says, “are these small restaurants who rent space from a land owner."

An online lead aggregator has caught the ire of the Consumer Financial Protection Bureau (CFPB) for directing consumers towards lenders who offered illegal or unlicensed loan services.

Zero Parallel, LLC has been charged by the agency of allegedly selling consumers’ payday and installment loan applications to collectors who were likely to make void loans that lenders had no legal right to collect. The CFPB’s proposed order against the company and its owner Davit Gasparyan demands an end to these illegal practices and imposes a stiff penalty.

“Zero Parallel steered consumers toward payday and installment loans that were a bad deal,” said CFPB Director Richard Cordray. “We’re ordering Zero Parallel and its owner Davit Gasparyan to pay $350,000 and to stop these illegal abusive practices.”

Void loans

The online aggregator, which is based in Glendale, California, operates by buying consumer information – or leads – from lead generators. It then turns around and sells that information to purchasers such as payday or installment lenders who take over handling the loan.

However, the CFPB charges that Zero Parallel often sold leads for consumers in states where the resulting loan was void and unable to be collected. These practices often led individuals into situations where they did not understand the risks, costs, and conditions of the loans they were being offered, the agency said.

Under the consent order, Zero Parallel must undertake reasonable efforts to ensure that loan applications it sells do not lead to loans that are void according to where consumers live. The company must also pay $100,000 to the Consumer Bureau’s Civil Penalty Fund.

In a separate suit, the CFPB has submitted a consent order against Davit Gasparyan for conducting similar practices with another lead aggregator called T3Leads. If approved, the order would ensure that the owner also undertakes reasonable efforts to verify required licenses for lead purchasers and that loan applications do not lead to void loans. The order also stipulates that Gasparyan be barred from deceiving consumers in the future and pay a $250,000 civil money penalty to the Consumer Bureau’s Civil Penalty Fund. 

Bank of America has agreed to pay $1.9 million to settle a civil lawsuit that alleged that it took too long to tell customers that their phone calls were being recorded over the past several years.

The complaint cited violations of section 632 of the California Penal Code, which states that each party of a confidential conversation must be informed if the call is being recorded. The suit said that Bank of America failed to live up to this rule by not making “clear, conspicuous, and accurate disclosure to consumers about the recording at the beginning of any such communication.”

County officials said that Bank of America worked cooperatively with regulators after learning that it violated the rule by changing its policies, but the settlement makes clear that the bank must follow California standards for recording phone calls going forward.

Of the $1.9 million being paid out, $1.6 million will be paid in civil penalties, while $240,000 will go towards prosecutors’ investigative costs. Bank of America also pledged to pay $100,000 to the Consumer Protection Prosecution Trust Fund, which was established to advance consumer protections and privacy rights.

Just over a year ago, a South Dakota woman was awarded $55 million after a jury decided that the Johnson & Johnson Baby Powder she used for years caused her to develop ovarian cancer. It was the second major blow to the company in recent months, as another jury had awarded $72 million to the family of an Alabama woman who had died of cancer after regularly using Johnson & Johnson talcum powder.

Now, yet another lawsuit against the company has found success. On Thursday, a jury awarded $110.5 million to a Virginia woman who also used the company’s talcum-based products, according to BBC News. The suit alleged that plaintiff Lois Slemp developed cancer after using Johnson & Johnson’s Baby Powder and Shower to Shower Powder for four decades.

“Once again, we’ve shown that these companies ignored the scientific evidence and continue to deny their responsibilities to the women of America,” said attorney Ted Meadows.

"Possibly carcinogenic"

Despite its legal losses, Johnson & Johnson maintains that its feminine hygiene products are safe to use; however, numerous studies have tied talcum powder to increased cancer risk. Researchers point out that the mineral talc contains asbestos, which is known to cause cancer, but the asbestos-free talc that many companies use has yielded mixed results.

A study conducted in 1982 found that women who used talc-based products around their genitals had a 92% increased risk of ovarian cancer, but industry experts argue that many studies such as these are biased because they rely only on estimations from consumers about how much talc they were exposed to over many years.

The lack of conclusive evidence resulted in the International Agency for Research on Cancer to classify talc use on genitals as “possibly carcinogenic” in 2006.

More litigation to come

Johnson & Johnson officials stated that they would be appealing the decision made on Thursday. In the past year, it has lost three similar verdicts while winning only one in March. Reuters reports that the company faces as many as 2,400 lawsuits over its talc-based products.

“We are preparing for additional trials this year and we continue to defend the safety of Johnson’s Baby Powder. . . We deeply sympathize with the women and families impacted by ovarian cancer,” the company said in a statement.

If the verdict stands, the company will pay $5.4 million in compensatory damages and $105 million in punitive damages.

Bank of America will face a $45 million fine for its alleged treatment of a California couple, which a bankruptcy judge called both “brazen” and “heartless.”

Though the bank has not yet appealed the decision, spokesman Rick Simon said on Tuesday that the decision is “unprecedented and unsupported,” though he does admit that “regrettably, the customers had a challenging experience,” according to the Wall Street Journal.

Refusals and foreclosure

However, calling the Sundquists’ ordeal “challenging” may be a bit of an understatement. Erik and Renee Sundquist were caught up in the financial downturn of 2008. They lost their construction business and elected to move to a cheaper home in Sacramento, California, which they secured with a $590,000 loan from a lender that was later taken over by Bank of America.

In their original agreement, the Sundquists were told that they would be able to request lower monthly payments on their loan, but when the couple stopped making payments in March 2009, Bank of America officials told them that the business would not consider loan modifications for customers who were current on their payments.

Over the next few years, the Sundquists made roughly 20 loan modification requests that were “routinely either lost or declared insufficient, or incomplete or stale or in need of resubmission or denied without comprehensible explanation,” according to the ruling.

The couple eventually filed for bankruptcy in June 2010, but their troubles were far from over. The filing was supposed to stop any foreclosure sales of their home, but Bank of America improperly took it over and gave the Sundquists a three-day eviction notice.

The decision and sale of the home was later reversed, but only after Mrs. Sundquist was hospitalized with stress-related heart attack symptoms. After returning home, the couple faced another unwelcome surprise, as their home owner’s association had fined them $20,000 for dead landscaping. Excerpts from Mrs. Sundquist’s journal detail harassing visits from bank-related officials and the suicide attempt of Mr. Sundquist over frustrations related to the house.

Regulators frustrated

Judge Christopher Klein said that the mortgage modification process and mistaken foreclosure left the Sundquists in “a state of battle-fatigued demoralization,” and that it was “apparent that the engine of Bank of America’s problem in this case is one of corporate culture. . . not rogue employees betraying an upstanding employer.”

The $45 million judgment will be designated primarily for law schools and consumer advocacy organizations, though the Sundquists will receive $1.1 million. Klein said that he hoped the amount would be large enough so that it won’t “be laughed off in the boardroom as petty cash or ‘chump change,’” according to Thursday’s ruling.

Experts say that the judgment relates some of the frustration that regulators and consumer advocates have been feeling against mortgage servicers who continue to employ predatory and harmful tactics.

“It’s appaling. . . You would think after all this time and all the fines that have been paid already that [mortgage companies] might actually try to get it right,” said Ira Rheingold, executive director of the National Association of Consumer Advocates.

Last May, the state of New York sued Domino’s pizza for allegedly underpaying its workers by an estimated $565,000. New York Attorney General Eric Schneiderman had said that the wage violations were the result of franchisees using a computer system called “PULSE,” which had been known to undercalculate gross wages and overtime pay.

“At some point, a company has to take responsibility for its actions and for its workers’ well-being. We’ve found rampant wage violations at Domino’s franchise stores. And, as our suit alleges, we’ve discovered that Domino’s headquarters was intensely involved in store operations, and even caused many of these violations,” said Schneiderman in a statement.

The case quickly attracted attention because it was the first time that New York had held a corporation liable for actions taken by its franchisees. However, it seems that three franchisees will ultimately be footing the bill for the suit. Shueb Ahmed, Anthony Maestri, and Matthew Denman, the owners of the three franchisees comprising ten restaurants, will pay back $150,000, $240,000, and $90,000, respectively, to affected employees.

Under the proposed agreement, Domino’s will remain a defendant in the case because of further allegations of wage theft across the New York. Schneiderman says that similar wage theft accusations and labor law violations have been resolved throughout the state, with money going back into workers’ pockets.

"The Attorney General has now settled investigations into labor law violations at 71 Domino's franchise locations in New York State, owned by fifteen individual franchisees. These locations comprise more than half of the franchise stores and over a third of the total number of Domino's stores in New York. . . The Attorney General's office has secured nearly $2 million in total restitution for Domino's workers statewide through these settlements," the Attorney General’s office stated in a release.

“My office will continue with our lawsuit against Domino’s Pizza to end the systemic violations of workers’ rights that have occurred in franchises across the State. We will not allow businesses to turn a blind e to blatant violations that are cheating hard working New Yorkers out of a fair day’s pay,” said Schneiderman.

One former employee and one current employee of Carl’s Jr. have filed a lawsuit against the chain’s parent company Carl Karcher Enterprises LLC (CKE), charging the company of wage suppression and unfair business practices, according to the Los Angeles Times.

The pair claims that CKE and its franchisees colluded with each other to bar employees in management positions from transferring between restaurants. This action, they say, effectively halts any attempt by workers who are seeking a raise from threatening to work at a different franchisee.

“If I can’t threaten my employer with going elsewhere – and taking my unique skills . . . to another Carl’s Jr. restaurant with me – then I am unable to demand as high of a salary. There’s no pro-competitive justification that we can identify that would support having a restraint like this. The only reason we can identify is to actively reduce labor costs to save them money,” said plaintiff attorney Nina DiSalvo.

Bad news for Puzder

While the lawsuit itself is problematic for CKE and Carl’s Jr., its ramifications could be even worse for CEO Andy Puzder. Puzder, who has long touted the virtues of free-market capitalism, has been nominated by President Trump to be Labor Secretary. 

Unfortunately for Puzder, this is not the first time that he has faced criticism for his business practices. Democrats have highlighted the CEO’s opposition to raising the minimum wage to $15 per hour, and past allegations claim that CKE’s restaurants violate labor laws.

Luis Bautista and Margarita Guerrero, the plaintiffs of the current suit, lend credence to these criticisms. They allege that they suffered reduced wages and had to work in “atrocious” conditions because of their franchisee’s no-hire policy. They say that CKE’s policies set up franchisees to compete with each other, but then restrict movement of workers between locations.

“CKE and Puzder cannot have it both ways. They cannot eschew their responsibilities under labor and employment laws by embracing a free-market model constituted by independent, competing franchisees, while at the same time restraining free competition to the detriment of thousands of workers employed by CKE and its franchisees,” the lawsuit states.

"Feeble and baseless"

Puzder’s legal defense has stated that the new lawsuit is nothing more than an intentionally ill-timed shot that is meant to stir up ill will before the CEO’s senate confirmation hearing.

“While we will not comment on the specifics of any pending litigation, the timing of the filing of this baseless lawsuit is obviously intended to be an attempt, albeit a feeble one, to derail the nomination of Andy Puzder,” said CKE executive vice president and general counsel Charles A. Siegel III.

Puzder’s confirmation hearing has been delayed on four separate occasions, but it is currently scheduled to take place on February 16.