January 12, 2015

Parable of the Dead Donkey

Punitive damages are greatly misunderstood. The so-called "tort reform" movement is a campaign of misinformation designed to confuse the public about one of the most effective deterrent tools of the civil justice system. Funded by companies that engage in fraud and deceptive practices - or corporations that show callous disregard for the safety of people who use defective products they sell - groups who call themselves "tort reformers" have fought the civil remedy of punitive damages for years. Starting a few decades ago, these companies and their trade groups poured money into a campaign to convince juries, Congress, and the consumer public that punitive damages were the product of rogue juries, certain courts and a handful of trial lawyers.donkey.jpg

Not true. Punitive damages serve to prevent and deter egregious behavior that harms people, often lots of people.

Ron Burdge, an excellent consumer advocate and trial lawyer in Ohio, has posted the best metaphor I have seen to describe why we have the remedy of punitive damages for fraud and deceptive conduct. He tells it so well, a summary won't do. It reads like a parable. You can click here to read the full story, and remember Young Chuck and the Texas farmer before setting foot on any car dealer's lot.

Many people have tried to explain why that extra penalty is necessary to stop the bad acts from continuing. The free market system we live in is a kind of legal honor system, and that system fails to function if bad actors are willing to break the law - consumer laws - over and over again until they get caught. Sometimes a good, short parable - like a good picture - is worth a thousand colorful words.

January 8, 2015

Honda Faces $70 Million Fine for Under-reporting Injuries

Stepping up its enforcement authority, the National Highway Transportation Safety Agency ("NHTSA") levied two separate $35 million fines against Honda Motors this week. The total of $70 million in penalties is believed to be the highest ever assessed by NHTSA. At issue was Honda's failure to document more than 1,700 claims of injuries and even deaths, that came within data required to be disclosed by federal statute and by NHTSA's Early Warning Reporting system ("EWR"). The EWR program requires auto manufacturers to report claims they receive that blame vehicle defects for serious injuries or deaths. It is not voluntary.

The agency wanted to send a significant message, along with a fine large enough to be noticeable to management, that Honda's irresponsible and misleading nondisclosures of injuries and deaths caused by defective vehicles will not be tolerated. NHTSA's new head, Mark Rosekind, referred to the missing or misreported data as "critical safety information.”

In fact, the penalties are long overdue, as the audit period extends back all the way to 2003, a period of more than a decade. The deception came to light in large part due to the efforts of Clarence Ditlow, pictured at the left. Ditlow is Director of the Center for Auto Safety in Washington, D.C., a respected consumer advocate. In a letter to NHTSA last October, Ditlow urged NHTSA to enforce compliance with the EWR requirements. His letter reminds the agency that he had notified NHTSA of the need for action against Honda as early as 2011. You can read the full text of the letter here

Honda executives said they had just been confused by what was to be covered. That claim is hardly credible. In fact, that excuse for omissions in its reporting practices was particularly weak, when compared with what it did report. NHTSA found that Honda had failed to report 1,729 written claims of injuries or deaths from 2003 to 2014. But the shocking thing was that it only reported about 900 injuries or deaths. This was true even when there were wrongful death lawsuits involved. Clearly, this was not a minor oversight.

Since knowledge of existing design and manufacturing defects in similar make and model vehicles is one of the strongest forms of consumer protection the driving public has, it is almost certain that correct reporting of this "critical safety information" could have saved lives. A $70 million fine sounds like a lot, until one thinks that it is addressed to a callous disregard for lives and safety. Given the egregiousness of Honda's behavior, Ditlow has called for a criminal investigation.

December 2, 2014

Buckle Up For Safety

The exploding airbag saga is not going away. We previously reported on this problem on October 21, 2014, in a post entitled "Lifesaver or Lethal Weapon?" on this site. But now, Japanese manufacturer Takata Corp. appears to be defying efforts of the National Highway Traffic Safety commission to recall the dangerous components nationwide.

Testifying before Congress today, company spokesman Hiroshi Shimizu insisted "I would drive a car with a Takata air bag." Skeptical lawmakers had to wonder how much he was paid to say that.

Takata wants to pass the risk and responsibility on to its client automakers in the United States, and have them decide whether to widen the recall to all cars nationwide or not. By one account, Honda has already agreed to do so. Facing that enormous expense, other car manufacturers are hesitating. airbag-explosion.jpgEarlier this week,Toyota said it intends to ask the industry to hire an independent engineering company for testing of the suspect parts. General Motors, Nissan, Subaru, Chrysler and Ford initially agreed to cooperate and to share results so that they can evaluate potential recall repairs. But events may be moving too quickly for that. You can read more about this emerging story here. Separately, Takata's Shimizu told Congress the company will set up its own "independent quality assurance panel" to investigate the matter. Just how "independent" this panel would be will be is anyone's guess.

It sounds more like a battle of the experts is brewing. And lawsuits. With at least five deaths, and many injuries alleged to be caused by the problem, Takata is busy putting its legal team in place. The Wall Street Journal reports that former Department of Transportation Secretary Norman Mineta will be among the hired hands.

Takata may be playing for time. Earlier reports indicated that it has insufficient replacement parts on hand to comply with the possible expanded NHTSA recall. Currently, the recall only covers regions of high humidity, because air humidity is thought to be factor in the fragmentation upon deployment. But the climate limitation is expected to change as the recall widens. And it should. If Florida is humid, what about North Carolina? Texas? California? And cars move around.

In the meantime, many consumers are taking precautions themselves, such as activating the PSIR switch that can turn off the supplemental restraint system ("SRS" the common acronym for airbags). But not all cars and trucks have a PSIR switch, or other suppression capability. If you have one of the millions of affected vehicles, check your manual or call the dealer.

Remember, whether or not your car has airbags, you should always use your seat belts anyway. It's time once again to heed the old jingle, "Buckle Up for Safety, Buckle Up."

November 29, 2014

EPA Will Set New Clean Air Standards

EPA Administrator Gina McCarthy announced this week that the agency intends to issue new, stricter pollution standards in 2015. The Clean Air Act tasks the Environmental Protection Agency with the job of re-evaluating smog standards every five years.

images-1.jpg In a CNN Op-Ed, McCarthy writes, "So today, following science and the law, I am proposing to update national ozone pollution standards to clean up our air, improve access to crucial air quality information, and protect those most at-risk -- our children, our elderly, and people already suffering from lung diseases like asthma." Articulating the scientific measurement behind the effort, she continues, "This proposal would lower the current standard of 75 parts per billion (the concentration of ozone pollution in the air we breathe) to a standard in the range of 65-70 parts per billion, while taking public comment on a level as low as 60."

The Clean Air Act of 1970 is one of the strongest environmental protection laws on the books.The regulations promulgated under its authority have vastly improved the health and welfare of Americans, according to the American Lung Association. You can read about the ALA's efforts to protect the statute here.

Given the current climate in Washington, D.C., it is easy to forget that the Clean Air Act was historically the product of bipartisan support. Signed into law by Richard Nixon, it was amended and strengthened during the George H. W. Bush administration. Yet, today's Republican lawmakers vilify the regulations the Clean Air Act requires.

Every time the EPA has required tougher smog standards, the public has benefitted from cleaner air. This is especially true in California, which has more cars on the roads than any other state. Thanks to the Clean Air Act, the smog has largely lifted from Los Angeles, and the mountains are visible from downtown again on most sunny days. Residents of San Jose, San Diego, San Francisco, Sacramento and cities throughout the state all enjoy postcard perfect blue skies only when the air is clear and scrubbed of smog. Most importantly, cleaner air means Californians can breathe.

Nonetheless, the EPA message has lobbyists for the American Manufacturers Association mobilizing for a public relations offensive to block the EPA's latest efforts to improve air quality. They claim that the changes would be costly for companies, such as the auto industry. But they have made the same arguments for 44 years, since the enactment of the Clean Air Act itself. They have raised the same refrain throughout the efforts of successive administrations to strengthen ozone standards. The automotive industry has consistently complained that such regulation is costly, threatening its business model, risking jobs. But, as McCarthy writes, "Auto makers didn't fold, they flourished."

As they previously threatened when the EPA took measures to remove lead from gasoline and reduce acid rain, industry lobbyists claim that measures to reduce ground ozone levels will be ruinous to business. But, as McCarthy notes, the sky is not falling. It is just getting cleaner.

November 19, 2014

C.A.R.S. Targets CarMax for Selling Unsafe Vehicles

Consumers for Auto Reliability and Safety, known by the acronym C.A.R.S., has launched a campaign against the automotive megadealer CarMax, alleging that its used car lots engage in a widespread practice of reselling unsafe cars, some with outstanding safety recalls, while touting its extensive checkpoint system.

C.A.R.S. director Rosemary Shahan, who is known as a tireless consumer advocate, is pushing for a new state law preventing dealers from selling cars under active recalls. Shahan asserts, "Dealers should not sell unsafe, recalled cars to consumers. Period. Yet, dealers continue to sell cars with serious safety defects that have killed and maimed people, and are being recalled by the manufacturer." With that unassailable logic, Shahan and C.A.R.S. have created a facebook page to spotlight some dark practices of the CarMax group. This interactive site gathers other media coverage of the issue, consumer complaints, comments, photos, and other evidence. To the extent all of this is true, there are a lot of really dangerous cars out there on the road.

Part of the problem is that used car dealers have started claiming their inventory has passed inspection of long checklists of components and parts, or been "certified" by the dealer's own professional service departments before being offered for sale. carmax.jpg This kind of advertising lulls even naturally skeptical buyers into trusting the dealer and declining to get an independent inspection before buying the car. These programs are often deceptive, because consumers are lead to believe that a long list must include everything. Nonetheless, even a 100-item list could omit crucial things like the engine or brakes. Even buyers who read the list are apt not to notice what it doesn't include.

The issue of unaddressed recalls raises this deception to another level. That is where Shahan's proposed legislation comes in. Unresolved recalls involve, for the most part, defects that are known to be dangerous, constituting a risk of unreasonable harm, even bodily harm. An unsafe car may be unsafe not only for the driver, but for the entire stream of traffic on a busy road.

You can check out C.A.R.S. campaign to highlight the problem right here.

November 13, 2014

Kemnitzer, Barron & Krieg Named "Ambassors of Justice"

California Rural Legal Assistance has honored attorneys Bryan Kemnitzer, Nancy Barron, and Bill Krieg of the law firm Kemnitzer, Barron & Krieg with its 2014 Ambassadors of Justice Award. The award was presented to the consumer law firm on November 5, 2014, at its annual San Francisco Fiesta held at San Francisco's AT&T Park. IntialsVerticalLogo.png

Accepting the award from Executive Director, Jose Padilla, founding partner Nancy Barron emphasized the synergy between the mission of CRLA and the work of the private bar in prosecuting consumer class actions. Kemnitzer, Barron & Krieg specializes in bringing cases against the car industry for defective products and against the finance industry for deceptive practices. Kemnitzer, Barron & Krieg also employs the Unruh Civil Rights Act and financial elder abuse statutes, to enhance remedies available under financial and consumer statutes.

The use of the class action device to enforce laws enacted for the public good, and especially for the benefit of vulnerable populations, is a form of collective redress that promotes economic civil rights for millions of Californians, Nancy Barron explained. This form of collective redress in the court system is under attack by corporations and businesses that benefit from exploiting the poor and uneducated, those with little choice, those without a voice.

The consumer rights movement was born of the labor rights movement, because that which can be earned in the workplace can be stolen in the marketplace. The great civil rights leader of the 1960s, Rep. John Lewis of Georgia, recently said that economic justice - including consumer rights in the form of truth in lending, fair credit, fair debt practices, freedom from fraud, financial literacy, and fair access to the court system - is the civil rights battlefield in the new millennium.

Since its founding in 1966, California Rural Legal Assistance has grown to provide urgent and essential education and representation to more than 29,000 individuals per year. It does so through its 23 regional offices in more than 22 California counties. CRLA serves an array of clients including its traditional base of farmworkers, but also individuals with disabilities, unemployed, immigrants, children, seniors and individuals with limited English proficiency.

clra.jpg CRLA staff conducts litigation, offers outreach and legal education on the most pressing issues facing low-income communities: housing, employment, education, workplace safety, discrimination, access to healthcare, domestic violence and sexual harassment in the workplace. These are basic human needs. These are basic human rights.

Although the percent of the population living below the poverty level in California is among the highest in the country, CRLA finds reason to celebrate. Their outreach is broad, and getting broader. Their advocacy is effective, and their influence is on the rise. You can read more about CRLA and the Ambassadors of Justice Award here.

November 11, 2014

Forced Arbitration Dubbed the New "Yellow-Dog Contract"

The term "forced arbitration" refers to the small print in a standard form contract that strips consumers and employees of their right to sue in court. In an excellent Salon.com piece, authors David Seligman and Nick Clark argue that forced arbitration clauses are like new "Yellow Dog Contracts" of this millennium. yellow%20dog.jpg Yellow-Dog Contracts were the notorious provisions in early labor contracts that prohibited workers from joining a union. As Seligman and Clark explain, the phrase entered the lexicon "because they 'reduced to the level of a yellow dog' every person forced to sign them." Harsh and unconscionable terms such as these galvanized the labor movement, leading to unrest, riots, and eventually legislation. Rendered illegal by the Norris-LaGuardia Act in 1932, Yellow-Dog Contracts slunk into the shadows of the American economic landscape, a shameful vestige of oppression.

But now they are back! It is as though the old yellow dog has spawned a litter of whelps (to carry the metaphor). They're everywhere. Forced arbitration clauses are found in contracts as diverse as cell phone agreements and school enrollment forms, note the authors. Seligman and Clark sum it up this way, "And we know that these agreements, like the 'yellow-dog contracts' of the early 1900s aren't agreements at all. They are the price of being a consumer or non-union worker in 21st century America."

Once forced arbitration obliterates access to the court system, a host of illegal practices - like fraud, breach of contract, discrimination and other injustices - go unpunished. The arbitration forum has been broadly criticized as unfair and biased, stacked against the "little guy" in the workplace as well as the marketplace. The Consumer Financial Protection Bureau is in the process of studying the problem in the context of banking and borrowing, and expected to use this historical opportunity to issue a rule on the matter early next year.

In addition to requiring that claims be adjudicated in secret proceedings before a private judge, many forced arbitration clauses ban class actions. Businesses know that class actions are often the only way for ordinary people to achieve a remedy when individual recovery is relatively small or most people are ignorant of basic rights. Class actions are a powerful form of collective redress, unlike individual claims dealt with one at a time under the cloak of confidentiality. Even if successful, individual actions handled out of the public eye fail to halt unfair business practices.

Discrimination in the workplace - as well as in the marketplace for goods, services, credit, all the necessities of life in America - remains a serious problem in this country. The federal Equal Employment Opportunities Commission has leaned on the backbone of the courts to enforce civil rights laws and similar statutes in many cases. Among these, the EEOC has brought more than 30 employee discrimination cases against Doherty Enterprises, Inc. a regional owner of many fast food chains with household names like Chevy's, Applebee's, and Panera Bread.

Have these restaurants changed their practices to halt illegal discrimination? We may never know, because the parent company slipped a forced arbitration clause into its employment contracts to bar these suits in the future. To its credit, the EEOC did not take this subterfuge sitting down. The EEOC has now filed suit in the U.S. District Court for the Southern District of Florida (EEOC v. Doherty Enterprises, Inc.) to challenge the use of forced arbitration in these employment contracts.

November 10, 2014

"Bad Paper" Sheds Light On The Dirty Business of Debt-Buying

"Bad Paper - Chasing Debt From Wall Street to the Underworld," is a new book by Jake Halpern. It is a must-read for anyone who has ever been assessed a late fee, received a mysterious bill for medical debt, or missed a car payment. It is a must-read for anyone who has called in a fraud charge on their credit card, noticed an error on their credit report, or been the victim of identity theft. bad%20paper.jpg

"Bad Paper" sends an important message to anyone who has gotten a phone call from a creditor they did not recognize. If that is you, read our previous blog post on "Fake Debt Collectors" here.

Written in a vein similar to that of Michael Lewis's in-depth investigations of the investment banking world, "Bad Paper" takes the reader on a journey into the river of downstream debt in America. It is a dangerous river of rapids, strewn with debris, fed by tributaries that are virtual flashfloods of fraud.

Like Lewis, Halpern follows the money. At first it just feels slightly unsavory. Then this trip descends into the criminal realm. What comes next is shocking to the average consumer, although advocates of financial oversight have been warning of such illegal activity for years. Halpern interviews ex-cons who have found that it is easier to make money doing what the banks themselves do, rather than to rob the bank tellers at gunpoint. A stolen thumb drive containing borrowers' SSN and phone numbers is easy transfer. That thumb drive is all one needs to harass debtors for money they might not even owe. It is a business model many ex-cons understand. These transfers can actually happen in a parking lot at midnight just like a drug dealer would transfer narcotics for cash. They have taken to calling such illicit goods "White Man's Dope."

If the list of borrowers is sold multiple times or stolen, more than one person or company ends up demanding payment for the same debt from the same debtor. It is a nightmare to be on the receiving end of this harassment. California has a new law requiring a debt collector to produce the original loan paperwork to prove they actually own the debt. No one should ever default if they are sued by a debt collector, yet more than 90% of those cases end up in default judgments. Anyone in that situation should get legal advice.

While the book is an entertaining read - filled with colorful characters and colorful language - the underlying message is very, very dark. To call this a "shady business" would be way too benign. "Bad Paper" will keep you on the edge of your seat from the first page to the last. Warning: it is not a bedtime read or a cure for insomnia. It is a wake-up call.

November 3, 2014

Car Talk Host Tom Magliozzi Dies At 77

National Public Radio announced today the death of one of its most beloved radio voices: that of Tom Magliozzi, at age 77. The cause of death was complications of Alzheimer's disease. It comes as a surprise to many that the most popular show on NPR actually stopped broadcasting in 2012. This author tuned in most recently just last weekend, in fact.

Tom Magliozzi - shown here on the left - was one half of the dynamic duo of siblings who went by the collective sobriquet "Click & Clack." Tom had an infectious laugh and younger brother Ray was the very soul of wit. As it is with many comedians, a profound intelligence underlay their hilarious banter that started with a caller's question about auto mechanics and might digress into psychology, philosophy or romantic advice. It was never boring. And they were truly authentic. Although they each graduated from MIT (Tom added an MBA and a PhD to his engineering degree), they actually ran an auto repair shop called Hacker's Haven.

The popular show aired for a full 30 years, and at its peak polled a listening audience of four million. No car was too old to merit a full discussion of viable options for repair or a breath of fresh vitality. Their favorite focus of ridicule and wonder, however, was the unlikely Dodge Dart.

In addition to the radio broadcast, the Car Talk website is a wealth of information. You can read Tom Magliozzi's selfie bio, a sort of autobiographical sketch right here. And, his brother Ray has posted a letter to his fans, along with the NPR obituary right here.

The good news is that NPR will continue to play reruns as a regular feature, under the revised title "The Best of Car Talk." Stay tuned Saturday or Sunday morning, as usual, depending on the schedule of your local station.

November 3, 2014

Hyundai and Kia in Trouble Over False MPG Claims

In the largest civil penalty ever levied under the Clean Air Act, the federal government has fined two leading automakers $100,000,000 for falsely certifying the MPG statistics in over a million vehicles sold in the United States. The Clean Air Act of 1963 was amended in 1970 to greatly expand the federal mandate for protecting the public interest in fighting pollution. Within that mandate, the Environmental Protection Agency has broad powers to regulate greenhouse gas emissions of cars, trucks, motorcycles, SUVs, and motor vehicles of every kind. As most consumers are aware, such emissions are commonly measured in "Miles Per Gallon," or MPG.

This week the Justice Department and Environmental Protection Agency announced they have teamed up to investigate Hyundai and Kia's testing and certification of MPG claims. After years of denying the allegations, Hyundai and Kia have agreed to settle the matter for a hefty fine. MPG.jpgThe government investigation did not just focus on whether consumers might be mislead by the figures stated on the window sticker; but also on greenhouse gas emission credits that the companies were able to claim. Those credits can be bought, sold or traded to offset emissions for other gas-guzzling models. The value of these credits is believed to be independently worth about $200 million in the secondary market. This week's settlement, after years of investigation, also includes forfeiture of 4.75 million such credits, a reflection of the fact that the effect of such false dealing seriously thwarts the purposes of the Clean Air Act.

EPA%20logo.jpgImproved gas mileage has been a key element of the Obama administration's environment strategy. In announcing the penalties against Hyundai, EPA Chief Gina McCarthy, emphasized that, "Businesses that play by the rules shouldn't have to compete with those breaking the law. This settlement upholds the integrity of the nation's fuel economy and greenhouse gas programs and supports all Americans who want to save fuel costs and reduce their environmental impact." Attorney General Eric Holder concurred. You can read the EPA's formal announcement here.

While Hyundai and Kia are in the hot seat right now, other manufacturers may be rightly worried as well. All manufacturers must do their own mileage testing, but the EPA audits those test practices and results. Recently the EPA has told BMW (i.e., Mini Cooper), Ford and Mercedes-Benz to cut the advertised MPG estimates on at least some of their models.

Over the last four decades, the Clean Air Act has made a huge difference in air quality, particularly in California cities. Prior to its passage, air pollution in Los Angeles, for example, was so bad that it was rare to see the San Gabriel mountains from downtown L.A. Now, that picture postcard view is a pretty common sight. With increased awareness of the importance of reducing one's own carbon footprint, California consumers really study and rely on the MPG stated on the window sticker when making the decision to buy a new car. With a deterrent like the civil penalty Hyundai faces this week, it is likely that more businesses will play by the rules.