Articles Posted in California Business Lawsuit

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Where is the dividing line between an efficient money-making model and a pyramid scheme? That’s the question that may be answered in a new lawsuit filed against clothing company LuLaRoe.

Pyramid-Scheme-122597965-300x225LuLaRoe began operations in 2012. They have 80,000 “distributors,” most of whom are millennial moms. With more than $1 billion in sales in 2016, the company is on track to double that number in 2017. Their product consists of brightly colored leggings, shirts and dresses.

Unlike traditional retailers, LuLaRoe does not sell its products in brick-and-mortar stores. Instead, they rely upon distributors or consultants who buy the products and then hope to turn a profit when those products are sold to consumers.

Getting started as a consultant isn’t cheap. A basic package of approximately 70 leggings in adult sizes, 10 leggings in “tween” sizes and 25 dresses costs $2,074. Budding entrepreneurs could opt for a larger package containing more than 500 pieces for $9,058.25.

Three consultants from Sacramento County say they were “doomed from the start.” In their lawsuit, they claim that LuLaRoe bombarded them with demands to “buy more/sell more.” Using aggressive pressure tactics, consultants were encouraged to have at least $20,000 worth of merchandise on hand. Even if existing inventory wasn’t moving, the distributors were continually exhorted to purchase more.

The consultants say in their complaint that the company used unfair and sometimes outrageous ploys to get them to buy more inventory. LuLaRoe representatives allegedly counseled distributors to take out loans and use credit cards to purchase more product. One consultant said that she was told to sell her breast milk to raise money for buying more LuLaRoe product to sell.

In addition to accusing LuLaRoe’s principals of running a pyramid scheme, the lawsuit argues that the company violates the federal RICO act. The consultants also say that bonuses promised by the company for recruiting new distributors and buying more merchandise never materialized.

Working with a qualified business attorney helps entrepreneurs to avoid costly and time-consuming litigation. With legal advice, LuLaRoe may have been able to focus on profits without allegedly running afoul of the law.

Feel free to contact me, Richard Oppenheim with your related legal questions. I may be reached at 818-461-8500 or by using the “Contact Us” box in the right column.

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Three women who used to work at Google have filed suit against their former employer. Their complaint states that the company systematically discriminates against female employees by failing to pay them the same rate that is given to men doing the same jobs.

Gender-Discrimination-105366239-001The plaintiffs include Kelly Ellis, Holly Pease and Kelli Wisuri, and they make the argument that their lawsuit should become a class action on behalf of other female current and former employees. Ellis says that despite having four years of professional experience as a software engineer, Google hired her as a Level 3 employee in 2010. That level was considered entry level, and was designed for recent college graduates. A few weeks later, a male engineer with similar experience was hired at Level 4. This garnered him a larger salary and put him in line for extra bonuses and raises. Ellis further claims that other male employees were brought in at Level 4 even though they had less or comparable experience when compared with hers.

Ellis goes on to claim that Google hired her as a front-end engineer even though her experience was as a back-end engineer. In Google’s hierarchy, it is the back-end engineers who are the most esteemed and higher paid. Ellis says that she and other female engineers were prevented from entering similar positions. The two other plaintiffs share similar accusations.

A spokesperson for Google says that the company disputes “the central allegations” of the case, pointing out that a worker’s level and their promotion track follow a rigorous process that is meant to preclude the danger of gender bias.

However, a study by the Labor Department which recently concluded an audit of the company’s pay practices disputes this. The audit points to “systemic compensation disparities against women pretty much across the entire work force.” Google has not been charged with wrongdoing relating to these allegations.

This latest case is yet another reminder of how critical it is for companies to review their hiring, promotion and wage practices with a business attorney. Running afoul of employment laws is always bad for the bottom line.

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Sports drink brand Gatorade recently settled a lawsuit that was brought against the company by California Attorney General Xavier Becerra. At the heart of the matter was a free, downloadable game that Becerra argued disparaged water and healthy nutritional choices.

Legal-Fees-PaidGatorade made a game called Bolt! that was available to the public for free download in 2012, 2013, and then for a short time in 2017 as well. Players used a likeness of Olympic track athlete Usain Bolt to race across cell phone and tablet screens. When Bolt encountered Gatorade on the track, his speed increased, but when he encountered water, his performance deteriorated. Allegedly, the game inspired players to maintain their “performance level high and avoid water.”

Becerra argued in his complaint that the game made it appear as if water was an unhealthy choice that most athletes avoid. Accordingly, playing the game would encourage people, particularly children, to choose sports drinks instead of water.

In a statement, Becerra said: “Making misleading statements is a violation of California law. But making misleading statements aimed at our children is beyond unlawful, it’s morally wrong and a betrayal of trust.”

The day after the complaint was filed, Gatorade reached a settlement deal with the state. They agreed to a settlement of $300,000, $120,000 of which is earmarked for the promotion of better nutrition and hydration choices for young people.

Still, Gatorade does not admit to any wrongdoing in connection with the settlement. Katie Vidaillet, spokeswoman for Gatorade, notes: “The mobile game, Bolt!, was designed to highlight the unique role and benefits of sports drinks in supporting athletic performance. We recognize the role water plays in overall health and wellness … .” Moreover, the company has agreed to work harder at meeting the responsible advertising standards set by parent company PepsiCo.

Becerra hopes that the lawsuit and settlement will put other companies on notice about false advertising. While creativity is wonderful for capturing the attention of consumers, it is best to guard against making false claims. Work with a California business attorney to ensure that you company doesn’t run afoul of the law.

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The Equal Employment Opportunity Commission (EEOC) has announced a lawsuit against Big 5, which is one of the largest sports retailers in the U.S. A black employee named Robert Sanders is suing his employer over ongoing racial harassment. Sanders charges that upper management in the company failed to act even after he repeatedly reported the abuse. This story is a reminder to all employers about the necessity of investigating every harassment complaint with the utmost speed.

Retaliation-32004699-001Robert Sanders was the only black employee at Big 5’s store on Whidbey Island, Washington. As a part of the management training program, he expected to have an opportunity to learn new skills that would help him to embark on a new career. What he claims to have found instead was a racially charged atmosphere that had his coworkers referring to him with slurs like “King Kong,” “boy” and “spook.” Another trainee allegedly said that Sanders had the “face of a janitor.”

Sanders took his story to Big 5’s upper management, but he says that they did nothing to investigate his claims. Tensions reportedly grew worse in the manager training program. Sanders took multiple leaves as he tried to cope with the stress. An assistant manager allegedly told him, “We will hang you, we will seriously lynch you if you call in again this week.”

Sanders says that the behavior didn’t stop, nor did upper management offer to help in any way even after repeated reports. Eventually, Sanders took his complaint to the EEOC, which offered to act on his behalf. The EEOC pointed out to Big 5 that the behavior Sanders had been subjected to was illegal under Title VII of the Civil Rights Act of 1964. Furthermore, Sanders says that his employer retaliated against him, denying him breaks, unreasonably increasing his workload and disciplining him for things he did not do.

Big 5 and the EEOC failed to come to an agreement at the negotiation stage, which led to the filing of the lawsuit. This example demonstrates once again why employers must take swift and immediate action to investigate all harassment claims.

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 When an employer is sued by an employee, it’s natural to want to end the proceedings quickly. However, it is not legal for an employer to take any retaliatory action against a worker, especially one that is suing them. As a recent decision by the Ninth Circuit Court of Appeals demonstrates, it also may be illegal for an attorney acting on behalf of the employer to retaliate.

Retaliation-32004699-001José Arias was an undocumented alien who had been working for Angelo Dairy for a decade in 2006 when he filed a wage lawsuit. Arias alleged that he had not been paid for overtime hours and that he had not received mandatory rest and meal periods. The dairy retained lawyer Anthony Raimondo to represent them in the lawsuit. Raimondo began working on due diligence, looking into Arias’ past as well as examining other pertinent facts.

A few weeks before the trial was scheduled to begin, Arias had an appointment for a deposition. What he didn’t know was that Raimondo had gotten in touch with Immigration and Custom Enforcement, or ICE, which led the lawyer to the discovery that Arias had no legal status in the U.S. Further, Raimondo had arranged for Arias to be taken into ICE custody at the deposition. Arias learned of the plan and promptly settled the litigation.

Then, the next phase began. Arias filed suit against Raimondo for violation of the Fair Labor Standards Act. While the majority of the provisions in this law apply only to direct employers, the retaliation portions apply to employers and those who are empowered to act on their behalf. An initial court decision on the lawsuit sided with Raimondo, but Arias appealed the decision. The appeals court sided with him.

Most reputable employment lawyers are unlikely to recommend that their clients try to have an employee deported or otherwise take an adverse action against them. To do so only opens the employer up to more legal trouble, and the same is true for the lawyer who takes a direct, punitive action toward an employee. It is far better to let the courts decide.

Feel free to contact me, Richard Oppenheim with employment law questions. I may be reached at 818-461-8500 or by using the “Contact Us” box in the right column.

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Years of highly contested, and well-publicized, litigation have made employers aware of the dangers of discriminating against workers based on gender, sexual orientation, race and religion. It’s not unusual for company executives to work with an employment attorney when they are developing or revamping their practices. Unfortunately, age discrimination tends to be overlooked.

Age-Discrimination-132214651-e1500063954245This oversight is coming to the forefront with litigation filed in the U.S. District Court in New Jersey. Plaintiffs allege that their former employer, AT&T, systematically shed older workers in an effort to gain a workforce that has more advanced technological skills. The complaint relies largely on the Age Discrimination in Employment Act, a 1967 law that protects applicants and employees who are 40 or older. Essentially, the law makes it illegal for companies to make hiring, firing, promotion and compensation decisions based solely on age.

Plaintiffs argue that AT&T relied on age-based stereotypes to purge older workers. The process involved notifying the older workers that they had been placed on “surplus” status. They had a set amount of time within which they must be accepted into an alternative position within the company. However, the plaintiffs say that the selection process for those alternative positions was biased against the older employees who had been categorized as surplus. When they were unable to find another position, the workers were laid off.

Some of these employees say that they received a severance check, and that they were told by AT&T that they would be unable to sue the company under anti-discrimination laws if they took the money. Lawyers for the plaintiffs say that’s not necessarily the case, especially if the notice given to employees did not contain certain stipulated language.

The former employees cite a company blog post that described AT&T’s “Workplace 2020” program, which admitted that age-based stereotypes are being weighed in employment decisions. According to plaintiff descriptions of the blog post, older workers are the employees of yesterday while younger workers are considered more desirable.

This litigation serves as a timely reminder for all employers to be mindful of their employment practices with respect to older workers.

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Telecom giant CenturyLink is now a defendant in a potentially massive class action lawsuit in which total damages could amount to between $600 million and $12 billion if the claim is successful. Legal analysts say that CenturyLink customers should be prepared to review their bills to see if they were charged for accounts that they did not actually request.

Whistleblower-6928551-001In a situation that is eerily similar to the Wells Fargo Bank scandal that broke in 2016, CenturyLink is being accused of setting up dummy accounts, and then charging customers for them. The alleged misconduct came to light after former CenturyLink employee Heidi Heiser, who is branding herself as a whistleblower, sued her former employer over what she termed a high-pressure sales atmosphere. Heiser worked for CenturyLink for approximately one year, and charges that she was fired after using a company Q&A session to tell CEO Glen Post about suspicions that the company was charging its customers for services they did not ask for.

A lawsuit has now been filed in California on behalf of CenturyLink customers who believe they have been defrauded by the company. Among the allegations are unjust enrichment, unfair competition and fraud. Officials from the Better Business Bureau in Denver, which broadcast a warning about CenturyLink early this year, are encouraging customers to closely review their bills.

A CenturyLink spokesman states, “The allegations made by our former employee are completely inconsistent with our company policies, culture and unifying principles, which include honesty and integrity.” This lawsuit comes at a particularly critical moment for CenturyLink as they are negotiating a merger with Level 3 Communications.

The class action lawsuit names plaintiffs Craig McLeod and Steven McCauley. Both are customers of CenturyLink who say that they have been over-charged. McLeod contends that he was quoted a charge of an extra two dollars per month for a faster Internet connection. However, he was charged considerably more than that, and he also received a bill for a repair that never occurred.

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A former Amazon employee is suing his erstwhile employer over not being paid overtime. In the lawsuit, he asserts that Amazon misclassified him as a salaried manager that was not entitled to overtime. However, the worker says that the duties he performed were those of a manual laborer who should have been eligible for overtime. This case is a useful reminder for all employers to review their classification and compensation packages to ensure that they don’t encounter a similar issue.

clock-overtime-110616811-001Michael Ortiz was hired as a shift supervisor at Amazon warehouses in California. His official title was “Level-4 Manager,” a position that was supposed to cover mainly supervisory duties. Amazon’s policy defines this type of job as a salaried position that is not eligible for overtime. Entry-level “associates” whose main responsibility is moving packages, are hourly workers who can be paid overtime, and that is the work that Ortiz contends he was doing.

In the complaint filed in Contra Costa County Superior Court, Ortiz says that he spent his days loading and sorting boxes or clearing up jams on conveyor belts. Similarly, he asserts that he frequently worked days that were longer than eight hours and in excess of 40 hours per week. Only a minimum of his time was spent in supervisory or managerial duties, Ortiz contends.

According to the complaint, there may be thousands of other people who are current or former Amazon employees who may have experienced a similar situation. At the heart of the story is a central question: Did Amazon knowingly misclassify workers in an attempt to avoid paying overtime? If so, then they may find themselves on the hook for multiple thousands, if not millions, of dollars in back wages.

This lawsuit is still in its early stages, and Amazon has said that they will not comment on pending legal matters. It’s fairly safe to assume that both sides of this issue are going to dig in their heels, so a long fight is all but assured. Reviewing company classification and compensation plans with an employment lawyer is advisable for avoiding a similar situation.

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Patent trolls may find it harder to do business thanks to a decision by the U.S. Supreme Court. That is good news for any business or entrepreneur who has ever been the subject of a frivolous patent infringement lawsuit. However, the decision also may make it more difficult to pursue legitimate infringement complaints.

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Companies that function as patent trolls make a practice of buying up patents merely for the purpose of suing large companies for infringement. They don’t make a product, nor do they provide a service. They earn a “profit” by collecting settlements from businesses that want to avoid the time and expense of a lengthy lawsuit.

Formerly, patent trolls could file complaints in any court district that they felt would be most advantageous to them. The Eastern District of Texas, in particular, is considered friendly toward such lawsuits. Most of the cases were decided quickly in favor of the patent owner, resulting in large settlements. In fact, the favorable climate for filing infringement lawsuits in the area became something of a cottage industry. One hotel in Marshall, Texas even purchased an account with the U.S. District Court’s online database to improve their appeal to visiting lawyers.

Under this model, the company being sued didn’t have to be located or associated with Texas in any way, forcing representatives to travel to defend themselves. This new decision by the Supreme Court changes that as it requires that patent infringement lawsuits be filed in the state in which the defendant is incorporated.

The decision was rendered on a case involving TC Heartland, an Indiana company that was being sued for patent infringement by Kraft Heinz in Delaware. Counsel for TC Heartland argued that they shouldn’t have to be sued in Delaware, and the Supreme Court ultimately agreed. While this decision is likely to slow down patent trolls, it also may make things more difficult for entrepreneurs who want to assert their patent rights against an organization in another state.

Anyone who is being sued for patent infringement or believes that their rights are being infringed, needs to retain intellectual property counsel.

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The one-time owner of a successful car dealership group in California has been awarded more than $256 million by a jury. Mike Kahn, who ran the Superior Automotive Group with dealerships in LA and San Francisco, fought Nissan Motor Acceptance Corp. for eight years before achieving this judgment. NMAC is the financing arm of the Nissan company, and its representatives say that they plan to appeal this verdict.

1504001-Gavel-Money-2During the financial crash of 2008-2010, many new-car dealerships were struggling. Superior’s were among these, but this wasn’t always the case. Nissan had recognized Superior as one of the top three dealership groups in the world prior to 2008. The company had sold more than $1 billion of inventory in the period between 2001 and 2008. That all changed with the economic downturn. Suddenly, consumers weren’t buying cars.

Typically, car dealerships finance the purchase of new cars through an organization like NMAC. The loan on the car is frequently paid back when the car is sold to a consumer. However, with cars not moving, dealerships everywhere were defaulting on these loans. Mike Kahn’s dealerships were among these. He reached out to NMAC, asking for them to not default him on his outstanding loans. The company agreed, and then proceeded with a default anyway.

Kahn sold one of his dealerships to cover some of what he owed to NMAC, but it wasn’t enough. More than 800 employees were put out of work when all seven dealerships had to close, and NMAC sued Kahn for an additional $40 million while also seizing all of his personal and business assets. A relationship that once thrived was now deeply contentious.

Kahn countersued and eventually prevailed after nearly a decade of litigation. A jury awarded him compensatory and punitive damages in what appears to be an indictment of large corporations deliberately putting local companies on the chopping block. NMAC plans to appeal the decision, so this saga is not over yet. Nonetheless, this is an apt demonstration of how an excellent partnership can quickly go wrong, making the requirement for careful planning and good contracts a necessity.