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Walmart Settles Class Action Netflix Lawsuit, Plaintiffs Can Now Afford That Cup Of Coffee

How many times have you walked around your neighborhood, running errands and generally being the baddest dude on the planet, when you suddenly realize that the freezing chill of winter has rendered you numb with cold.  “Oh wait,” you say, “a coffee shop in the distance, I’ll just pop in for a cup of joe to warm my body and spirit.”  But oh no!  Upon entering said café you find that you have no cash on hand.

Well now you can kiss that problem goodbye, because thanks to the latest class action settlement from Walmart you now have a chance to get enough money to buy that bottomless cup of coffee you were eyeing all along.  Oh, but actually you may want to seek a cheaper beverage because this isn’t the 1950s anymore and that whopping $1.50 you get for filing your claim can’t get you much of anything anymore.

Overly long, but amusing, introductory paragraphs aside, Walmart has just thrown in the towel on its latest class action lawsuit.  The company has agreed to payout a total of $27.25 million to Netflix DVD subscribers.  You may have already gotten an email about it and likely probably deleted thinking it was a Nigerian money scam.  It’s not, by the way.  So if you were a Netflix DVD subscriber between May 19, 2005 to September 2, 2011, you have until February 14, 2012 to file a claim on this website to get a piece of that settlement.

How much of a piece you ask?  Well, as it turns out, only about a $1.50 of that $27.25 million settlement.  The attorneys heading the class action have requested about $6.8 million of the settlement for legal fees and an additional $1.7 million for costs.  At last count, Netflix had about 23.6 million subscribers since last September, so with a little arithmetic and legal history, which states that usually only about half of all class action members ever file a claim, the typical payout per subscriber will only be a slightly over a buck per head.

But hey, money is money, right?  And it’s better that the actual claimants get some of it rather than let it all go to the attorneys.  The bigger head scratcher to most people is probably why they’re getting money in the first place and why Walmart, unlike Netflix, decided to call it quits before the case ever got to court.  Well my friends, it’s a funny tale to say the least.

For those of you following the case, you’ll know that the lawsuit was first filed in 2009 by a few angry Netflix DVD subscribers who didn’t like the sudden increase in Netflix’s monthly fees.  What happened was that back in early 2000s, Walmart launched an ill-fated mail-order DVD rental service á la Netflix.  The new program didn’t do well enough to be very profitable, but it did serve as a thorn in Netflix’s side because it funneled potential subscribers away from the internet DVD rental king and cut into their potential profits.

The two companies were at an impasse: if Walmart shuttered the program, they’d lose out on a potential revenue stream, but if they kept it going it would have taken a lot more investment to keep it afloat.  So the two companies instead decided to come to an agreement.  In exchange for bowing out of the DVD rental business, Netflix would promote Walmart’s DVD sales business and Walmart in turn would promote Netflix.  It was all hunky-dory except for the fact that what they did sounds a lot like collusion.  And thus a class action lawsuit was born.

“But wait!” you may be asking. “What’s wrong with companies promoting each other? Aren’t companies and people free to contract as they please?”

Well, yes and no.  Certainly everyone is free to enter into and set the terms of their contracts.  The problem is that even if the parties agree to a contract, it doesn’t necessarily make the contract itself legal.  For instance, an agreement to buy heroin is completely void because the subject matter of the contract is illegal.

However, the problem here isn’t that renting and selling DVDs is illegal, but rather the collusive nature in the way that the companies went about it.  Collusion is the name of the game.  It happens particularly often in cases where companies or people are the sole players in an industry, in other words when a monopoly or oligopoly is involved.  Netflix is the most dominant DVD rental provider in America today. By Walmart opting out of the market and working with Netflix to help further cement itself, Walmart gave Netflix not only an unfair advantage against other companies looking to jump into the same territory, but it also gave Netflix the ability to essentially dictate the price for online DVD rentals.  And that’s the harm.  Because when Netflix decided it needed to increase its fees, subscribers had few other options to turn to in order to get their DVD rental fix.

But did collusion happen here?  There certainly always some good arguments against it.  I mean, Dish Network’s Blockbuster company is arguably a viable alternative for consumers unwilling to pay Netflix’s fees.  However, the problem is that there isn’t much more competition out there other than Blockbuster.  So because of Netflix’s position in the industry, they still would be able to dictate the prices as their resources far outpaces that of the competition.  And because of this, I think Netflix is making the wrong move by continuing to wage their losing battle against this class action.  Walmart was smart to opt out when it did as they’ll probably save much more money in the long run.

Though in the end, all this legal mumbo jumbo probably won’t be much to calm all you cranky Netflix clients out there.  But hopefully you’ll get some pleasure out of that $1.50.  Maybe the payout will come soon enough before the price for a bag chips increases again.

Walmart Gender Discrimination Lawsuit Starting Again at Square One

I blogged a few months ago about the Supreme Court, in a 5-4 decision, nixed a huge class action lawsuit against Walmart, alleging that the company engaged in discrimination against its female employees, passing them up for promotion in favor of men.

However, after several years of procedural wrangling (without ever touching on the merits of the lawsuit), the Supreme Court finally ruled earlier this year that a class action could not proceed, because the proposed class (all of Walmart’s female employees, as well as many former female employees. – about 1.5 million people) was too large, and would be completely unmanageable, considering the distinct factual and legal issues that each individual plaintiff might raise.

But as I said, the Court didn’t rule on the merits of the case. So, there’s nothing stopping the plaintiffs from filing a new, more narrowly-tailored lawsuit. With the same lead plaintiff, a new case has been filed in a federal court in California. This one has a much smaller class – it only covers Walmart’s California employees – about 45,000 people.

That’s still a very large class action, but it’s by no means the largest one that has ever been approved, and then been litigated to a final conclusion.

I think this is probably the better strategy for the plaintiffs to pursue. First of all, it’s far more manageable for the courts, which means it has a better chance of surviving motions to dismiss on the grounds that the proposed class is too large.

It also, in theory, allows the plaintiffs to do a more thorough job of vetting potential members of the class, ensuring that the issues they would raise are similar enough to warrant lumping their claims together. Furthermore, the media coverage of the case might focus more on the substantive issues this time around, rather than focusing on the record-breaking class size, and the resulting spectacle, of the previous one.

Also, by tailoring the plaintiff class more narrowly, and by region, it allows the plaintiffs to file multiple, simultaneous class-action lawsuits against Walmart across the country. Defending against several smaller class action lawsuits is probably more expensive and time-consuming than defending against just one, even if it is much larger. This might put more pressure on Walmart to settle these cases quickly, rather than take them to trial.

Of course, this says nothing about whether or not Walmart actually did discriminate against women, or if it still does. It’s worth noting that, since the first class action was filed several years ago, the company has instituted new policies designed to put more female employees on the management track, and changed its employee and manager training to make their policy against gender discrimination clearer. That’s very good news. However, if they did engage in discrimination in the past, they still can, and should, be held accountable.

For that reason, I hope that these class action lawsuits aren’t dismissed. Although we’ve made great strides in addressing gender and racial discrimination in recent years, we still have a long way to go.

Remedying this depends, in part, on holding employers who engage in discrimination accountable. And if the plaintiffs are able to prove that Walmart did, in fact, engage in discrimination, and a court holds the company liable, it will show that even the biggest corporations are not above the law. And given today’s political climate, where people on both the left and the right seem fed up with a lack of accountability, this would be a small but significant step in the right direction, and send a message to workers that at least one branch of government still cares about protecting their rights.

And, if the plaintiffs are unable to prove by a preponderance of the evidence that Walmart engaged in discrimination, the lawsuit will, and should, fail.

Can You Sue Over a Credit Card Fee?

Over the last few years, the Supreme Court, under Chief Justice John Roberts has, without question, taken a hard turn to the right. This is not a condemnation or commendation; it’s simply a statement of fact. Whether you view this as a good or a bad thing depends largely on your political views.

However, critics of the current court have plenty to complain about lately, with some arguing that the Court is tripping over itself to make it as easy as possible for large corporations to ride roughshod over the rights of consumers. The court has held, in a few cases, that corporations can essentially contract themselves into immunity from certain consumer lawsuits, essentially by putting a provision saying “you can’t sue us” into their standard contracts or terms of use.

This case at issue involved a consumer lawsuit against a credit repair organization, which issued its customers a low-limit Visa card, as part of its strategy to help them rebuild a credit rating. However, the lawsuit alleged that the company charged hidden fees, which actually made their customers’ credit ratings worse than they were before, in some cases.

Under the terms of the 1996 Credit Repair Organizations Act, a federal law designed to protect consumers from fraud and/or exploitation by credit repair companies, consumers have a right to sue credit repair services that engage in deceptive practices. The law clearly states that the right to sue under those circumstances cannot be waived by the consumer, even if they sign an agreement purporting to waive that right.

However, the contract that consumers entered with the credit repair organization stated that consumers could not sue in court, and that any disputes arising from the contract would be resolved in private arbitration. Arbitration is a process by which two parties to a dispute agree to have a private entity (usually a professional arbitrator) resolve their dispute, as opposed to taking it through the judicial system. Arbitration is sometimes cheaper and less time-consuming than litigation in the courts. However, arbitration agreements often call for arbitration in a location that’s likely to be very inconvenient for the weaker party (in this case, the consumer) to get to. For example, if most of a company’s customers are in big cities on the West and East coasts, it might set the location for arbitration somewhere in the Midwest.

Furthermore, there are some concerns that arbitrators might be biased against consumers.

In this case, the credit repair company argued before the Supreme Court that their arbitration clause satisfied consumers’ right to sue for deceptive practices.

Judging by the oral arguments (summarized and linked to in the HuffPo article linked above), and the questions that the Justices asked the attorneys, it appears that a majority have already made up their mind, and they’re going to come out the side of the company, not the consumers.

Justice Ginsburg, long known as one of the more liberal Justices on the current Supreme Court, seemed to be the only one who indicated any sympathy to the arguments of the lawyer representing the consumers.

Recently, I blogged about another recent Supreme Court decision that would also seem to limit the rights of consumers who think they’ve been wronged by corporations to seek redress. In that case, the Court held that companies, through so-called “adhesion contracts,” can draft their way out of a class action lawsuit.

“Adhesion contracts” are contracts, generally between large companies and individual consumers, which are drafted by the party with the most bargaining power (usually the company), and presented to the consumer on a take-it-or-leave-it basis, with no real opportunity to negotiate the terms. Contracts for cellphone coverage are a prime example. The court held that a provision in such a contract that bars consumers from suing the company in a class action lawsuit, and instead directs them to individual arbitration, which would be far more expensive for an individual consumer.

The Supreme Court held that these provisions are perfectly valid.

In all of these cases, the court was not involved in constitutional interpretation. Instead, it was interpreting statutes that were passed by Congress. This means that if Congress disagrees with these rulings, it could change the law. And if they’re not inclined to do so, we can elect members of Congress who are.

Of course, whether or not that will actually happen depends largely on the willingness of consumers to educate themselves about these issues, and form informed opinions about them.

Supreme Court Blocks Wal-Mart Class Action

The big news in the legal world recently came from the U.S. Supreme Court. Over the last several years, Wal-Mart has been involved in a class action lawsuit alleging that it discriminates against women in its hiring and promotion practices. The plaintiffs sought to consolidate a class of 1.5 million women – essentially all of Wal-Mart’s female employees. It was the largest employment discrimination lawsuit in the history of the United States.

It should be noted that this case has been going on for years, and no court has even ruled on the merits yet. Essentially, the dispute over the last several years has concerned whether or not such a large class of plaintiffs should be certified. So, no court has yet decided whether Wal-Mart actually discriminated against the women. It just decided that the lawsuit cannot proceed in its current form.

A class-action lawsuit is a procedure that allows a large number of individuals (the groups can range in size from a few dozen to over a million individuals) to sue a defendant, alleging that the defendant has engaged in some course of conduct that harmed all of them. Both a U.S. District Court and the 9th Circuit Court of Appeals agreed that the class should be certified, but the Supreme Court (in a unanimous opinion, I should note) has just overturned them both.

The decision to deny class certification in this case was unanimous, but there was some disagreement on the scope of the opinion, with 4 Justices dissenting in part. Essentially, what sunk the case was the fact that the plaintiff’s lawyer sought billions of dollars in back pay from the defendant, but in filing the case, used legal procedures that are designed for class actions in which monetary damages are not the primary relief sought.

However, on another, perhaps sticker issue, the court was far more divided: voting against the plaintiffs 5-4. One requirement, of several, for certifying a class is whether or not the cases of all the plaintiffs present a “common question of law or fact.” This essentially means that, by conducting a single trial, with a single body of evidence presented by both sides, the question of whether or not every single plaintiff in the class has suffered a legally-cognizable injury can be answered.

However, the plaintiffs’ attorneys made a crucial strategic error on that front: they did not allege that Wal-Mart had a uniform policy that discouraged the promotion of women. However, Wal-Mart has a policy that gives the managers of individual stores a great deal of discretion in hiring and promotion. The lawsuit alleges that this discretion allowed managers to engage in discrimination in hiring and promotion, and this created a male-dominated culture at the company, leading to a sort of unspoken policy of gender discrimination.

However, the majority opinion noted that this fact made a class action, let alone one involving every female employee of a very large company, an inappropriate tool for relief, because the answer to the question of “why was I not promoted?” as to one employee does not answer that question as to the rest. Therefore, according to Justice Scalia, the plaintiffs do not present a common question of law or fact, and employees who believe they’ve been discriminated against would have to sue individually, or in smaller class actions.

In this session, the Supreme Court has not been kind to class action lawsuits, handing down at least two decisions that might end up severely limiting the viability of the class action as a device to vindicate the rights of consumers and employees. I’m referring to another recent decision essentially holding that companies that regularly enter into service contracts with their customers (such as phone and Internet companies) can make themselves immune to class action lawsuits brought by their customers, by placing a clause in their contract that essentially says “you can’t file a class action lawsuit against us.”

While it’s hard to predict how these decisions will affect class action lawsuits in the future, the Roberts Court seems fairly determined to steer America’s jurisprudence as far to the right as possible, perhaps to counter a perceived move to the left by Congress and the executive branch.

Whatever the reasons for the court’s shift to the right, I don’t think it’s a good idea to use consumers and employees as a punching bag in the fight. The class action lawsuit is an absolutely vital tool for consumers, employees, and others to vindicate their legal rights, when large groups of people have been wronged.

In many cases, when a legal wrong has taken place, the actual harm to individual victims is not nearly large enough to justify the cost of bringing a lawsuit individually. However, if people who have been wronged in the same way, by the same defendant, band together and file a lawsuit, the individual cost to each plaintiff, in terms of money and effort, is fairly low, which significantly alters the cost/benefit calculus.

If the class action did not exist, large companies would be able to commit “small” legal wrongs against individuals with near-impunity, knowing that few (if any) people would bother to bring a lawsuit to vindicate their rights. The class action serves as a very strong deterrent to wrongdoing.

I don’t know how these decisions will affect class actions in the future. This will depend largely on how lower courts, and eventually the Supreme Court, construe their scope and meaning. Perhaps more importantly, the future of the class action lawsuit will also hinge on whether or not Congress passes legislation making a few minor alterations to the class action procedure, to reverse the effects of these decisions.

Best Buy Not Likely to Deliver On Settlement Promises

Although Best Buy recently settled a class-action lawsuit, what the company hopes to achieve in the next few years is not likely to be possible.

Class actions lawsuits against employers are not uncommon.  Best Buy workers sued the company due to the company’s practice of denying jobs and promotions to African Americans, Latinos, and women.

Best Buy has spent the past four years implementing “affirmative relief addressing the hiring, assignment, promotion, and exempt compensation claims.”  Basically Best Buy wants to improve diversity by ensuring that more African Americans, Latinos and women will be hired as a part of the Best Buy team.  “Someone” will be in charge of making sure this happens.

On the one hand it is good that major corporations are striving to promote diversity in management, non-discrimination, and anti-harassment measures.  However it is also important to implement effective procedures to do so.  Thus far, Best Buy has failed to implement effectual measures.

For example, the article states that “someone” will be in charge of ensuring the company’s team is more diverse.  Best Buy is a huge corporation with many locations.  More than one person would be needed to ensure diversity.  Perhaps the creation of an “internal affairs” team where individuals would ensure that the staff is diverse and that there is no discrimination or harassment going on would be a better solution.  Creation of such a team would increase employment, ensure affectivity, and legitimize Best Buy’s efforts to hinder any further lawsuits.

Also, displaying anti-harassment, anti-discrimination and anti-retaliation policies on an internal company website is fine for legal purposes because Best Buy’s efforts are legitimized.  However, an effective solution would be to have workshops, either monthly or once every six months, for employees regarding these issues.  The workshops could serve to educate employees on the consequences of such unprofessional conduct and the overall harm such conduct brings about for everyone.

Solutions such as these would achieve the goal that Best Buy is working towards.  It can be argued that such ideas may be in the works, and that Best Buy has not verbalized these plans.  That may well be.  However given that they just settled a class-action suit and are looking to create a more public-friendly image, verbalizing such ideas would have been a top strategy.

It is likely that the company has not thought of such solutions, does not want to implement such long-term procedures, or is just looking to fool the public into thinking they are changing their ways, when in fact they do not plan to.  Either way, future trips to Best Buy should be interesting.  I will definitely be looking out to see how much more diversity the company has brought in, as well as any other procedures implemented to achieve Best Buy’s goals.