sanctions

Uber Investigated for Investigating

** Uber Sanctioned for Their Tactics in Consumer Class Action Case **                                                                                                                                                                                                                                  

San Francisco, USA - May 12, 2016: Uber headquarters entrance in San Francisco with sign on the right. A woman is leaving the building through the front door. Reflections of Market street in the window.

Some interesting detours have developed in the Uber anti-trust consumer class action in the Southern District of New York (Meyer v. Kalanick, No. 1:15-cv-09796-JSR (S.D.N.Y December 12, 2015)).

The first is that the case was actually not bought against Uber, but against its CEO Travis Kalanick, possibly in order to avoid an arbitration clause in the Uber User Agreement.  Uber was successful in joining the corporation as a necessary party (Meyer v. Kalanick, No. 15 CIV. 9796, 2016 WL 3509496, at *3 (S.D.N.Y. June 20, 2016)). The court heard argument on whether the joinder case should be subject to the Uber arbitration agreement on July 14, 2016 (Dkt. No. 91).

The second detour – and not one you’d expect – Uber and its lawyers (and the private investigative firm Ergo hired by the legal team) are accused of fraudulent conduct during their informal investigation of opposing counsel and opposing parties.  Plaintiff’s counsel began to get suspicious when his friends, colleagues and acquaintances started receiving phone calls in which, it was alleged, false statements were made that the caller was compiling a profile of up-and-coming labor lawyers in the United States.  Meyer v. Kalanick, No. 15 CIV. 9796, 2016 WL 3189961, at *1 (S.D.N.Y. June 7, 2016).  Similar phone calls were allegedly made regarding the putative class representative – purportedly profiling his work as an environmental conservationist.  Plaintiff’s counsel confronted Defense counsel about these suspicious calls – and they initially responded by denying any involvement, then backtracked and admitted they had hired Ergo (but asserted that Uber or counsel did not direct Ergo to make any misrepresentations).  Id.  This was enough for the court to order discovery on what Uber and its lawyers knew and did – taking the extraordinary step of allowing depositions of Uber’s in-house legal director and Ergo over Uber’s privilege objections.  Id. at *2.  The court also ordered legal communications be turned over for in-camera review to determine if defense counsel was involved in the alleged fraud.  Id. at *3.  Following the Ergo discovery, Plaintiff’s counsel moved for sanctions under Rule 37 (Dkt. No. 103) arguing that Uber was at best reckless in its oversight of the investigation – and at worst part of the fraud.  Id. at 11.

Judge Rakoff ruled on the sanctions motion on July 29, 2016.  Meyer v. Kalanick, No. 15 CIV. 9796, 2016 WL 3981369, at *1 (S.D.N.Y. July 25, 2016).  Judge Rakoff began his opinion and order with this salvo: “It is a sad day when, in response to the filing of a commercial lawsuit, a corporate defendant feels compelled to hire unlicensed private investigators to conduct secret personal background investigations of both the plaintiff and his counsel. It is sadder yet when these investigators flagrantly lie to friends and acquaintances of the plaintiff and his counsel in an (ultimately unsuccessful) attempt to obtain derogatory information about them.”  Id.  Judge Rakoff noted that Uber claimed work-product privilege over relevant material – but at the same time – argued that the purpose of the investigation was not to secure derogatory information about Plaintiff and Plaintiff’s counsel (but merely to determine if there was a security threat to Uber personnel).  Id. at *4.  The court noted that Uber could not have its cake and eat it too.  If Uber wanted to allege that the purpose of the investigation was security–focused, then it was not in anticipation of litigation and the privilege did not apply.  As to the investigative methods employed by Ergo, Judge Rakoff was scathing.  He characterized lying to the target witnesses about the nature and intent of the calls as inherently fraudulent – and materially so.  Id. at *6.  He rejected the argument that a party to litigation may properly make misrepresentations in order to advance its own interests vis-a-vis its legal adversaries.  Id. at * 7.  The court further observed that Uber’s in-house and external counsel are bound by the New York Rules of Professional Conduct to adequately supervise non-lawyers retained to do work in order to ensure that the non-lawyers do not engage in actions that would be a violation of the Rules if a lawyer performed them.  Id. (citing N.Y. Rules of Professional Conduct § 5.3).  Judge Rakoff was also scornful of Ergo for not licensing in New York as a private investigative firm and for recording calls with targets located in states (Connecticut and New Hampshire, for example) where unilateral recording of conversations is illegal.  Id. at *8.  Judge Rakoff enjoined the Uber defendants from using any of the information obtained through Ergo’s investigation in any manner, including by presenting arguments or seeking discovery concerning the same and enjoined both Uber and Ergo from undertaking any further personal background investigations of individuals involved in the litigation.  Id.  The court noted that the parties had already come to a confidential agreement as to the payment by Uber of Plaintiff’s fees in bringing the motion.  Id.

Uber’s litigation detour provides some valuable insights into how judges will likely treat “enhanced investigation techniques” during formal discovery – and further proves the maxim that it is not the original scandal that gets people in the most trouble – it’s the attempted cover-up.

 

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Hitting Back at Class Settlement Objectors

**Plaintiff Class Counsel Seek Sanctions Against Alleged “Lawyer-Driven” Objections to its Becks Beer Settlement**

Plaintiff’s Class Counsel have been successfully using the threat of sanctions to ward off late game class objectors.  See prior post.  Another recent case has highlighted the issue.  In 2013 Beck’s Beer was sued under the theory that it’s packaging claims such as “originated in Germany” with “German quality” and “export bier” implied that the beer was a German import.  And certainly while that was true at one time, after 2008 the Beck’s Beer label was sold to the Belgian brewer Interbrew which later merged with American giant Anheuser Busch – and production of the beer moved to the U.S (in fact Beck’s Beer is brewed in the same facility as the synonymous American: Budweiser).  Plaintiff’s sued on allegations of false advertising and a class settlement was reached in June 2015: the settlement allowed a maximum award of $50 per household (less for those consumers without proof of purchase).  Marty v. Anheuser-Busch Companies, 1:13-cv-23656-JJO (S.D. Fl. June 18, 2015) ECF No. 149.  The class settlement was capped at $20 million and the attorneys’ fees were set at $3.5 million.  Id.  Class member Rene Muller (through his counsel Stephen Field) filed a settlement objection – claiming, generally, that the settlement terms were inflated and that attorney fees were too high.  Id. at ECF No. 161 (September 29, 2015).  The Court considered the objection, held a fairness hearing and overruled the objections.  Id. at ECF No. 171 (October 22, 2015).  It then granted final settlement approval.  Id. at ECF No. 172 (October 22, 2015).  Class counsel however were not satisfied – they took the deposition of Muller who (class counsel alleges) revealed that he generally knew nothing about the case, or the settlement, or his objection and was interested merely in a payoff (similar to a payoff he had received in a previous class action objection).  Id. at ECF No. 174 (November 12, 2015).  As such – class counsel sought sanctions against Muller’s attorney Stephen Field under 28 U.S.C. § 1927 which provides that: “[a]ny attorney . . . who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.”  Id.  Essentially, class counsel has argued that the only rational explanation for the objectors threadbare knowledge of his objection – was that the attorney Stephen Field put him up to it – in hope of a hefty settlement.  Id.  Field has opposed the Motion for Sanctions, amongst other things, noting the inherent irony of Plaintiff’s class counsel (who seek to get paid to settle suits) asking for sanctions against him for doing inherently the same thing.  Id. at ECF No. 177 (November 30, 2015).  The matter of sanctions is currently under advisement.

 

 

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Stop the Press – Lawyers Fighting Over Fees

**Plaintiffs’ Counsel for Class of Student Athletes Seeks Sanctions Against Late-in-the-Game Class Objectors’ Bid to Derail Settlement in Landmark NCAA College Football Case in the Northern District of California** . . .                                                                                                                                                                          

One of the blockbuster class actions cases of the last few years appeared to be settled in August of this year when Judge Wilken approved the settlement motion between Electronic Arts Inc., the National Collegiate Athletic Association and a class of former players whose names and likenesses were “licensed” (without compensation to the players) for use in video games.  O’Bannon v. National Collegiate Athletic Association, 4:09-cv-03329-CW, ECF No. 429 (N.D. Cal. Aug. 19, 2015).  Plaintiff’s counsel sued on the basis that the players’ “right of publicity” was unlawfully expropriated – and after 6 years of litigation – a $60 million settlement was agreed.  Id.  (This settlement should not be confused with the bifurcated issues of anti-trust violations by the NCAA also bought in this suit – which has recently been affirmed in part by the Ninth Circuit in favor of the athletes.)  Of the $60 million settlement in this “right of publicity” suit – the named class representatives (including name lead Plaintiff UCLA great Ed O’Bannon) will get incentive awards ranging from $5,000 to $15,000 and the balance split amongst approximately 20,000 college athletes who made claims.  Of course that is after attorney fees which were set at $17.8 million.  But not so fast.  Plaintiff counsel still had to deal with objectors who filed an appeal to the approval with the Ninth Circuit.  O’Bannon v. National Collegiate Athletic Association, No. 15-16860 (9th Cir. October 10, 2015).  On October 28, 2015, Plaintiff’s counsel made a pre-emptive strike: filing a scathing motion for sanctions.  Id. at ECF No. 9. The sanction motion makes a number of allegations against Objectors’ counsel – leaving little to the imagination – (and is worth the read).  Interestingly, Plaintiff counsel did not just seek dismissal of the appeal – they sought an award of sanctions – and engaged an expert to measure the “cost” of the delay in distributing the $60 million caused by objectors’ appeal.  The expert came up with this cost – $55,109.00.  Unsurprisingly, a week after Class counsels’ motion for sanctions Objectors stipulated to withdraw their appeal.

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