California Business Litigation Blog

PrudentChoice, an Irvine, Cal.-based seller of discount health plans, was charged with violating Vermont's Consumer Fraud Act. Attorney General William Sorrell said charges were based on the sale of plans to at least 89 Vermont residents at a cost of over $25,000. The problem was that PrudentChoice couldn't make good on its promises of discounts on services by physicians, hospitals, dentists and other health care providers.

Sorrell's office surveyed 24 customers, 21 of whom said they could not find a participating provider.

In the settlement, filed last week in Washington County Superior Court, PrudentChoice must pay the state $33,000 in civil penalties and $5,000 in costs.

The Associated Press quoted PrudentChoice attorney Craig Zimmerman as saying, "PrudentChoice has never had any unsatisfied members in the state of Vermont. PrudentChoice adamantly believes there's a place for discount health care in Vermont and in the United States."

This is another “Business 101” rule. Make sure that you can deliver anything your company sells. And if you discover you can’t, seek legal counsel and implement appropriate changes immediately.

For the record, although the charge was fraud, this could have been an example of the cart before the horse. The provider enlistment group may have missed a deadline for signing up health care providers (physicians, hospitals, dentists, etc.) and left the sales/marketing department uninformed. Although this scenario could look like fraud, it would have no fraudulent intent. This whole case could have been nothing more than poor internal communications and/or lack of clearly defined accountability.

In most well run companies, the executive team would know there was trouble long before any attorney general filed charges. Further, it is more cost effective to fix legal problems like the one above as soon as they are discovered.

The effect on a company’s bottom line can be tremendous.

Posted by Richard Oppenheim | Permalink | Email This Post

Posted In: Business Litigation

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A California Superior Court judge ruled March 29th that a startup's media server does not violate the security technology used to protect DVD disks because the standard licensing contract and specifications for the technology are so poorly worded.

Rather than spend a lot of time analyzing the specifics of this case between Kaleidescape and the DVD Copy Control Association (DVD CCA), let’s just look at this from a contract law/litigation perspective.

Judge Leslie C. Nichols stated that the DVD CCA provided a license for its Content Scramble System (CSS) to Kaleidescape without including tech specs in the license agreement. Judge Nichols also stated "This [CSS spec] is a product of a committee of lawyers."

What can we learn from this? Sadly, this is very basic contract law.

Importantly, a contract is whatever the court says it is. Further, any ambiguities in a contract are held against the writer/creator/author of the contract.

Using the above case as an example, the judge held the DVD CCA responsible for its poorly worded licensing agreement (contract) and ruled in favor of Kaleidescape.

Lastly, contract lawyers usually fall into two categories.

Continue reading "California Judge Rules in Favor of Kaleidescape and Consumers" »

Posted by Richard Oppenheim | Permalink | Email This Post

Posted In: Business Litigation   Contract Litigation

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Last month final approval was given for a class action settlement involving “click fraud” that has Yahoo paying nearly $5 million in attorney fees and giving full credits to advertisers dating back to 2004.

The judge's action on Monday settles claims by Checkmate Strategic Group that Yahoo charged advertisers for clicks on online ads that were done in bad faith or fraudulent.

Although preliminary approval was given last summer, final approval for this settlement was held up by attorneys representing parties in a similar (Google) lawsuit in Arkansas. The California settlement releases Yahoo from all similar click fraud claims against it in other actions in all other states. That’s an offer Yahoo couldn’t refuse.

Reggie Davis, Yahoo's new vice president of marketplace quality stated “Final approval of the settlement validates the strength of Yahoo's click-through protection systems, and our commitment to delivering a quality experience to both our advertisers and our consumers. Our commitment does not stop here. Quality is a top priority for Yahoo, and we have a clear road map for how we're going to create the highest-quality search-advertising network in the industry."

Additionally, in my opinion final approval of this settlement allows Yahoo to put this resource draining litigation behind them, allowing Yahoo to focus on the future of the internet search business.

Putting litigation behind you is often a wise strategy in business.

Continue reading "California Judge Gives Final OK to Yahoo Click Fraud Settlement" »

Posted by Richard Oppenheim | Permalink | Email This Post

Posted In: Business Litigation   Internet

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The U.S. Equal Employment Opportunity Commission (EEOC) today announced the settlement of a discrimination lawsuit against GLC Restaurants, Inc. (GLC) for $550,000 and substantial remedial relief on behalf of a class of teenage workers who were sexually harassed by a middle-aged male supervisor, including unwanted touching and lewd comments.

Flagstaff based GLC is a franchisee doing business as McDonald’s Restaurants in California and Arizona.

The EEOC maintained in the suit that the male supervisor in question was a repeat offender who subjected eight young women, who were part-time crew members, to a sexually hostile workplace at the McDonald’s run by GLC in Cordes Junction, Ariz. Previously, the same male manager allegedly harassed teen female employees at a GLC-owned McDonald’s Restaurant in Camp Verde, Ariz. The EEOC said that GLC knew of this manager’s earlier conduct but failed to take appropriate action to prevent him from repeating the unlawful behavior at another of its restaurants. The EEOC also alleged that the working conditions for one teenager in Cordes Junction were so intolerable that she was forced to resign.

In addition to paying $550,000 to the eight young women, the EEOC settlement by consent decree requires GLC to provide training and other relief aimed at educating its employees about sexual harassment and their rights under Title VII of the Civil Rights Act. Under additional terms of the settlement, Prescott attorney Milton W. Hathaway, Jr, the private lawyer for four of the young women, will apply to the court for an award of attorney fees up to $400,000.00.

The EEOC filed the suit in U.S. District Court for the District of Arizona after investigating multiple charges of discrimination and exhausting its efforts to reach a voluntary settlement (EEOC v. GLC Restaurants, Inc., d/b/a McDonald’s Restaurant, Civil Action No. CIV- 05-0618-PCT-DGC).

If you are an employer with a problem employee, think twice about reassigning him or her within your company. Effective, well documented lawful termination might be a less costly alternative. Further, employee problems seldom get better with time. The phrase “nip it in the bud” is right on target here.

Lastly, if the EEOC comes knocking, do absolutely everything possible to reach a voluntary settlement instead of waiting for a lawsuit to be filed. Our federal government is a powerful adversary with deep pockets. Follow these simple suggestions and you just might keep them out of yours!

Posted by Richard Oppenheim | Permalink | Email This Post

Posted In: Employment Law

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