Decided - The FindLaw Noteworthy Decisions and Settlements Blog

August 2010 Archives

HP to Pay $55M in Fraud, Kickbacks Settlement

Hewlett-Packard has settled for $55 million dollars with the U.S. Department of Justice. HP was accused of paying kickbacks to companies in exchange for persuading U.S. Government agencies to purchase HP products. In addition, the settlement covers allegations dating back to 2002, when a contract was executed between California-based HP and the General Services Administration.

The contract allegedly had errors in pricing caused by HP's failure to provide complete and accurate information to the government. The settlement is part of a several year investigation by the DOJ which began after whistleblowers Norman Rille and Neal Roberts came forward in 2004, The Associated Foreign Press reports.

Metrolink Offers $200M to Settle Los Angeles Rail Crash

Los Angeles County Superior Court is being asked to consider a settlement of $200 million over the 2008 head on Metrolink and Connex train collision. The accident killed 25 people and injured more than 100. Under federal law, $200 million is the maximum level of financial liability. Investigators concluded that the commuter train's engineer was likely sending text messages when he went through a red light and hit a Union Pacific freight train head on in San Fernando Valley.

"The rationale is this is the maximum that could be recovered in any event and will expeditiously get the maximum compensation to the victims and their families," said Keith Millhouse, board chairman of the Southern California Regional Rail Authority, The Associated Press reports.

Louisiana Citizens Ins. Settles for $23 in Post-Katrina Dispute

Louisiana Citizens Insurance Corporation has reached a $23 million settlement in post- Hurricane Katrina and Hurricane Rita homeowners dispute, according to Insurance News. The sizeable settlement affects upwards of 10,000 claimants, who argued that the insurance company insufficiently compensated them for storm repairs following the two hurricanes.

Louisiana Citizens Insurance Chief Executive Officer, John Wortman told Insurance News, "We are happy to have this behind us so we can move forward." The insurance company admitted no wrongdoing in the class-action settlement, and Wortman has since stepped down from his position with the company.

Court Stops Fed Funding of Embryonic Stem Cell Research

U.S. District Judge Royce C. Lamberth has temporarily stopped federal funding of embryonic stem cell research. Lamberth granted a preliminary injunction Monday, ruling that the research destroys embryos, going against the will of the U.S. Congress. The ruling is a setback for President Obama. The Obama administration issued guidelines last year to detail how embryonic stem cell research could be conducted and allowed federal funding for the research. Obama issued a 2009 executive order repealing President G.W. Bush's prohibition against using federal dollars for human stem cell research.

However, Judge Lamberth found that the embryonic stem cell research being conducted destroys embryos, which violates an amendment included in the federal spending bill called the Dickey-Wicker Amendment, which "unambiguously prohibits the use of federal funds for all research in which a human embryo is destroyed ... Thus, if ESC research is research in which an embryo is destroyed, the guidelines, by funding ESC research, violate the Dickey-Wicker Amendment," Lamberth ruled, CNN reports.

Minnesota Bridge Collapse Settlement: URS Agrees to $52.4M

The San Francisco-based company that consulted on the engineering for the bridge that collapsed in Minneapolis in 2007 has agreed to a settlement. URS Corp. was sued by more than 100 plaintiffs claiming the company missed warning signs in the bridge before it collapsed during the rush hour commute. Thirteen people died and 145 more were injured.

According to the Associated Press, under the settlement agreement announced August 23, URS Corp has agreed to pay $52.4 to victims of the collapse. The company had defended itself by asserting the URS engineers did not know about a design flaw in the bridge which made it vulnerable to collapse. The trial was slated to begin next spring. By avoiding trial, the company also avoided the possibility of a jury assigning it the punitive damages which the plaintiffs were seeking in the case.

New Jersey, First State Charged with Securities Fraud, Settles

The federal government, in the form of the SEC, is becoming more interested in the regulation of municipal bonds. On August 19, it was reported that New Jersey became the first state the SEC has charged with securities fraud for its failure to disclose to bond buyers it had underfunded its state pensions. New Jersey has agreed to settle the case.

According to Reuters, this is the first time the SEC has charged a state with violations of federal securities statutes. The action by the government is seen as evidence of an increasing interest in those who sell municipal bonds. This debt is used for public purposes such as roads, bridges, schools and hospitals.

Affinion, GameStop, Avon, Classmates Settle Online Fraud Charges

It isn't nice to trick people.

New York Attorney General Andrew Cuomo announced that Affinion Group, Inc. and its subsidiary Trilegiant have agreed to an $8 million settlement over allegedly deceiving consumers into signing up for discount clubs that had hidden fees. Five companies included in the settlement allowed Affinion or other marketing companies to use such techniques on their websites. The companies are GameStop, Avon,, FTD Inc., and Budget. They jointly agreed agreed to pay an additional $2 million in refunds and penalties.

Shoppers at Affinion, and other sites using their tactics, would see a message on their websites which indicated that they could receive cash back. The message indicated they only had to click a box and complete their transaction and the cash back would be theirs. However, in actuality, there were disclosures warning the customers that accepting the cash back offer enrolled them in a "club" that included a monthly fee, The Associated Press reports. Many customers did not realize what was happening for months. The charges they would receive were small so they were easy to gloss over, assuming the customer was reviewing their statement at all.

9th Circuit Court Grants Stay on Same Sex Marriage

We are now back where we started, nearly. Late yesterday afternoon, August 16, a three judge panel of the 9th Circuit Court of Appeals made a U-turn in the legal journey of Perry v. Schwarzenegger and reinstated the stay placing same sex marriage on hold in California.

In addition to granting the motion by the proponents of Proposition 8 for a stay, the panel of judges; Edward Leavy, Michael Daly Hawkins and Sidney R. Thomas have also set the appeal itself on a fast track. In their Order, the judges set aside the previous briefing schedule and have ordered the first briefs for the appeal to be filed in September, with the appellate hearing set for the first week in December.

Long Beach, CA Wrongful Conviction Suit Settles for $8M

How much would 24 years behind bars be worth to you? Thomas Lee Goldstein, who was wrongfully imprisoned, got his answer Thursday: $7.95 million. It is the largest California pretrial settlement ever in a wrongful conviction suit, his attorney Barry Litt said.

"We don't believe there was any wrongdoing" by city officials, said Monte Machit, who defended Long Beach in the case. "This is a lot of money, but in light of the potential verdict," which could have been $24 million to $30 million and lawyers' fees, he said, reported the New York Times, "we thought it better to get it resolved."

When a person proves a case of wrongful conviction, they are generally entitled to some form of compensation for their lost time and pain and suffering. In a recent Ohio case an exonerated man received about $47,000 for each year he was wrongly imprisoned in his wrongful conviction suit. Goldstein recovered over $330,000 per year.

BP Agrees to Record $50M Fine for Texas Accident

Can you think of a company that needs bad news any less than BP? One would be hard pressed to do so.

Unfortunately, the company is in the headlines yet again, this time after agreeing to pay a $50 million fine for violations of safety regulations at its Texas City refinery. The facility is the company's largest refinery, producing nearly 460,000 barrels of oil per day.

Attorneys for the workers killed and injured in the 2005 Texas accident applauded the $50M fine agreement. BP was originally fined $21 million dollars after the Occupational Safety and Health Administration (OSHA) found that BP did not sufficiently protect its employees, the Associated Foreign Press reports. After the fine, the company spent around a billion dollars to upgrade safety. Despite the spending, inspectors found that BP was still not adequately protecting its employees. Their fine was more than doubled to $50.6 million in 2009. 

Proposition 8: Stay Denied by Judge Vaughn Walker

Depending on whom you ask, the decision of U.S. District Court Chief Judge Vaugh Walker to refuse to grant the stay motion by the proponents of Proposition 8 is either another victory for those supporting same sex marriage, a statement that nothing will change right now, or a green light for the opposition to Prop. 8, as no marriages can yet take place. In some ways, all these conclusions are correct.

Judge Walker issued his Order denying the stay on his decision to overturn Proposition 8 at about 12:30 PST, on August 12. In his order, the judge found that none of the arguments offered by the the proponents of Prop 8 were sufficient to warrant the stay. The judge reviewed the four factors necessary for granting a stay: 1. would parties seeking a stay be likely to win on appeal, 2. would parties seeking the stay be irreparably harmed if the stay were denied, 3. would the stay if granted, harm any other party or person, and 4. would the stay be in the public interest or not. The law requires the judge give the most weight to the first two requirements.

Wells Fargo to Pay $200M in Overdraft Fee Case

Question: What happens when a bank uses slight of hand to routinely turn single overdrafts into multiple overdrafts, exponentially increasing fees?

Answer: A $203 million judgment for restitution.

Wells Fargo had a nefarious habit of manipulating overdraft fees by using a "bookkeeping device" that would turn one instance of overdrawing into many more, up to 10. This in part allowed the bank to collect $1.8 billion in overdraft fees from 2005 to 2007. "The revenue generated from these fees has been massive," wrote U.S. District Court Judge William Alsup of Northern California. Further, Alsup said that the bank made considerable efforts to hide the manipulations while at the same time, they constructed a complex facade of phony disclosure. 

Lowe's Settles Defective Drywall Class Action Suit

One more agreement has been reached in the myriad of cases surrounding defective drywall. As has been covered in many previous posts on FindLaw's Common Law, and Injured blogs, homeowners in many states, but especially in the southeast, have been complaining of problems they say are caused by the imported drywall their homes were built with.

Suits by homeowners in Virginia, Florida and Louisiana have all addressed the issues of corroded metal, loss in home value and even health problems all linked to the drywall. Now, major home improvement chain Lowe's has agreed to a settlement in a drywall action.

Senate Fails to Approve Settlement for Minority Farmers

The U.S. Senate did not approve a $4.6 billion settlement between black farmers and the U.S. Department of Agriculture (USDA). The settlement, which was based on the 1997 case of Pigford v. Glickman, was first reached in 1999. The case arose when Timothy Pigford, a black farmer from North Carolina, alleged that the USDA discriminated in the way it awarded loans and other aid to farmers.

The government earlier paid over $1 billion to approximately 16,000 farmers to settle the case for about $50,000 per farmer. However tens of thousands of additional farmers argue that their claims were rejected because they filed their claims after the deadline.

The House approved a bill in July that included money to pay the additional settlement claims. Under the settlement, qualified black farmers would have received $50,000 per person to settle the lawsuit over racial bias.

$10.5M Accutane Verdict Overturned

It's not over in a recent Accutane acne drug case, ruled a New Jersey Superior Court Appellate Judge, despite a $10.5 million jury verdict. The judge ordered the Accutane verdict overturned "because the original verdict followed from an unfair trial," said Christopher Vancheri, a U.S.-based spokesman for the drugmaker, in an e-mailed statement.

During the trial Roche, the maker of Accutane, was not allowed to present evidence regarding how many people used Accutane until the final stages of the trial. The New Jersey Appellate Court ruled that Roche did not have "a full and fair opportunity... to present and advocate the relevant numbers evidence," Bloombery reports.

Rite Aid Pays $1M to Settle HIPAA Privacy Policy Issue

Drugstore chain Rite Aid has settled with the Department of Health and Human Services over allegations that employee actions violated the privacy requirements under the Health Insurance Portability and Accountability Act of 1996, better known as HIPAA. In a related action, Rite Aid has also signed a consent consent order with the Federal Trade Commission (FTC) to settle potential violations of the FTC Act. Under the settlement, the company will pay $1 million and will provide more training to its employees regarding customer privacy.

The action against Rite Aid began, according to InformationWeek, when a television station taped Rite Aid employees dumping labeled medicine bottles and prescriptions with personal patient information into the dumpsters near various stores. This lead to an investigation by the HHS Office for Civil Rights (OCR) into whether or not the requirements protecting patient information under HIPAA privacy regulations were being followed. The OCR confirmed that the dumping of private information was going on in various cities, followed by media reports in many of them.

Prop 8 Found Unconstitutional by Federal Court

In the much anticipated opinion in Perry v. Schwarzenegger, Chief Judge of the U.S. District Court for the Northern District of California, Vaughn Walker, found on August 4 that California's law banning same sex marriage violates the Constitution of the United States. Proposition 8 was passed by a narrow margin of voters in 2008. Previous to its passage, 18,000 same sex couples were granted marriage licenses in the state of California. Today's Prop 8 ruling, like those before from the state courts, does not affect those marriages.

In his opinion, Judge Walker found the state law violated both the Equal Protection and the Due Process clauses of the Constitution. SCOTUS Blog writes that after consideration, the court found that the proponents of Prop 8 did not show that the state had a rational basis (the lowest of the tests for constitutional validity applied by the courts) for excluding same sex couples from the right to marry. The judge found the law specifically, "... fails to advance any rational basis in singling out gay men and lesbians for denial of a marriage age license. Indeed, the evidence shows Proposition 8 does nothing more than enshrine in the California Constitution the notion that opposite sex couples are superior to same-sex couples ..."

Countrywide Settles for $600M in Sub-Prime Lending Suit

In what amounts to the largest shareholder settlement since the mortgage meltdown in 2007, Countrywide has agreed to pay $624 million to former shareholders for the company's failure to disclose essential information relating to the company's dealings with subprime mortgages. Countrywide (which was purchased by Bank of America Corporation in 2008) hopes the settlement will put an end to several securities class action suits currently against the company on this issue.

CNN quotes New York Comptroller John Yu's statement regarding the settlement: "This historic settlement sends a strong message that this type of behavior is unacceptable in Corporate America, and that management will be accountable to shareholders, especially when they put self-interest ahead of shareholders' interest." Although Countrywide did not admit any wrongdoing in the settlement, class-action suits against sub-prime lending are not unique to Countrywide as companies such as Washington Mutual and Merrill Lynch have also felt the sting of a subprime lender lawsuit.

CA Sup. Court Upholds Affirmative Action Ban

In the clash of the California Constitution and a San Francisco affirmative action program, the constitution prevails ... for now. The California Supreme Court, in a 6-1 decision, recently held up the state's affirmative action ban in public programs. At issue in this case was whether a San Francisco ordinance, designed to aid minorities and female-owned businesses in the public contracting process, was counter to Proposition 209 -- a law that prohibits race and sex-based discrimination or preferences in government contracting, employment, and education.

The question of whether the San Francisco program is serving to facilitate preferential treatment or equal access will be remanded to lower courts to review. A winning challenge to Prop. 209 will rest on a successful showing that San Francisco has a history of intentional or purposeful discrimination against minorities and women, such that the ordinance is necessary to undo those effects. The San Francisco law gave a 5-10% preference to women and minorities in the contracting bids submitted to the city.