Fried & Bonder is once again pleased to have helped  clients reach an outstanding result.  Our clients are software developers who developed an innovative medical product and sold their business to a Fortune 100 company.  After taking possession of the product and selling it, but prior to making the promised final payments, the Fortune 100 company terminated the agreement and refused to pay our clients.

Fried & Bonder lawyers rapidly filed suit in California to enforce the agreement.  The Fortune 100 company alleged a lengthy counterclaim designed to delay resolution of the case and discourage our clients.  Despite facing two of the most well respected large law firms in the U.S., Fried & Bonder filed a series of aggressive motions, including service of a Rule 11 motion for sanctions.

Although the details are confidential, Fried & Bonder was able to settle this matter on terms very favorable to our clients.

Atlanta Magazine, as part of its Superlawyer section, selects 100 lawyers from Georgia as its designated top 100.  We are pleased to announce that Scott Bonder was honored for the second time as one of the Top 100.

We are pleased to announce that Atlanta Magazine again designated Scott Bonder, David Fried, and Joseph White as SuperLawyers.

A panel of federal judges announced on Friday that sudden acceleration cases will be consolidated in the United States District Court for the Central District of California in Santa Ana, California.  Judge James V. Selna will preside over the lawsuits, which will be combined as In Re: Toyota Motor Corp. Unintended Acceleration Marketing, Sales Practices, and Products Liability Litigation, MDL 2151, U.S. District Court, Central District of California (Santa Ana).

The decision impacts at least 177 consumer and shareholder lawsuits seeking class-action status and at least 57 individual suits claiming personal injuries or deaths caused by sudden acceleration incidents.

The consumer lawsuits seek damages for Toyota owners whose vehicles have lost value since the company initiated recalls in September 2009.  The shareholder lawsuits allege that the company hid damaging information from investors, fraudulently inflating the company’s share price.

Labor regulators from California, New York and the U.S. Department of Labor are cracking down on employers’  improper use of unpaid interns.  Meanwhile, sources such as the National Association of Colleges and Employers report that the number of unpaid intenships continues to rapidly grow.

The Fair Labor Standards Act requires employers to pay employees the federal minimum wage, plus overtime, unless their jobs qualify for a statutory exemption.  The FLSA creates a limited exemption for “trainees,” the category into which unpaid interns should fall.  To qualify for the exemption, a trainee’s position must satisfy a six part test, excerpted below.  Essentially, the job must be educational; primarily for the benefit of the trainee; not at the expense of paid employees; and not a prerequisite to permanent employment. 

The Six Part FLSA “Trainee” Test

  1. The training, even though it includes actual operation of the facilities of the employer, is similar to what would be given in a vocational school or academic educational instruction;
  2. The training is for the benefit of the trainees;
  3. The trainees do not displace regular employees, but work under their close observation;
  4. The employer that provides the training derives no immediate advantage from the activities of the trainees, and on occasion the employer’s operations may actually be impeded;
  5. The trainees are not necessarily entitled to a job at the conclusion of the training period; and
  6. The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.

 Other states impose different or additional requirements.  In California, for example, unpaid interns must receive college credit.

The temptation exists, particularly in this economy, to take this issue lightly.  Arguably, giving an unpaid intern “real work” is not only a victimless crime, it is mutually beneficial to the intern and the employer.  Students need experience to enter the work force and unpaid internships are a low risk, low cost avenue for employers to provide students with such experience.  But there is another potential set of victims here: employees who are displaced by illegal, unpaid labor.  Is it fair for an employer to dump paid employees in favor of interns who are willing to work for free?  The labor laws say it is not.

U.S. Transportation Secretary Ray LaHood announced on Monday that the government would seek the maximum available civil penalty–$16.4 million dollars–from Toyota for its failure to notify it about safety problems with the accelerators in its vehicles.  Click here to read Secretary LaHood’s  press release.

The fine is being sought under the Tread Act.  The U.S. enacted the Tread Act in the wake of the Firestone tire recall.  The Act requires car makers to notify the National Highway Traffic Safety Administration of safety defects within five business days of their discovery.

In Toyota’s case, it issued repair instructions for sticky accelerators in European countries and Canada back in September 2009.  It did not, however, initiate recalls of American sold cars with sticky accelerators until several months later.   This, according to LaHood, proves that “Toyota failed to live up to its legal obligations. Worse yet,” he added, “they knowingly hid a dangerous defect for months from U.S. officials and did not take action to protect millions of drivers and their families.”

Toyota has two weeks to accept or contest the proposed fine.  The company will likely contest the fine.  Although $16.4 million is a modest sum for Toyota–especially weighed against the billions they stand to lose in civil lawsuits–paying the fine would be tantamount to an admission of guilt both in the public consciousness and, potentially, in related litigation against the company.

The Institute for Supply Management  announced on Monday that its service index rose from a rating of 53 in February to 55.4 in March, beating the 54 rating projected by economists surveyed by Thomson Reuters.  Any reading above 50 signals expansion.

The numbers indicate that the service sector, which includes 80 percent of U.S. jobs (including restaurant workers), grew at its fastest pace in more than two years, perhaps suggesting a broader economic recovery.  Since the service sector is highly dependent on consumer spending, the numbers likely reflect an uptick in consumer confidence.  

Good news for service industry employers…and their employees.

On March 25, 2010, a former cook filed a class action against Royal Caribbean and several related entities alleging that the cruise line failed to pay ship workers overtime wages and also made unlawful deductions from their tips.  The suit was filed in the United States District Court for the Southern District of Florida.

The allegations against Royal Caribbean are familiar.  The plaintiff, Glen Roy Ellis, contends that Royal Caribbean failed to pay he and other workers (cooks, waiters and servers) overtime wages even though they regularly worked in excess of 14 hours per day.  The suit also alleges that Royal Caribbean made unlawful deductions from workers’ tips, although the lawsuit offers few specifics and it is not immediately clear that all class members would even be entitled to tips.  (Cooks, for example, are not typically considered tipped employees.)

What is unusual about the lawsuit is the statute it seeks to enforce.  The Fair Labor Standards Act (FLSA) typically governs unpaid overtime claims.  But the FLSA specifically exempts seaman on foreign vessels from its minimum wage, equal pay and overtime provisions. 

Mr. Ellis therefore has brought his claim under the Seaman’s Wage Act, 46 U.S.C. § 10313, et seq.  That statute requires vessel owners to pay seaman their wages within a certain number of days of the completion of a voyage (usually four) at risk of statutory penalties for non-compliance. 

The Seaman’s Wage Act does not, however, compel foreign vessels to pay overtime wages.  Generally, overtime is due only if a seaman’s employment contract expressly or impliedly calls for it.

Mr. Ellis’s complaint does not specify whether the ships on which he worked were foreign or American vessels (although the absence of any FLSA claims suggests the former).  It also does not identify the basis for Mr. Ellis’s overtime claim.  Thus, the foundation for the overtime claim remains unclear–an issue Royal Caribbean’s attorneys will no doubt explore as the lawsuit progresses.

The U.S. Judicial Panel on Multidistrict Litigation convenes in San Diego today to decide whether to consolidate more than 100 lawsuits that have been filed against Toyota, and in which jurisdiction to consolidate them.

Toyota’s recent recalls have prompted a variety of lawsuits against the company.  Toyota buyers have filed class action lawsuits against the company over the plummeting value of their vehicles.  Toyota shareholders have filed class action lawsuits against the company accusing it of hiding its problems in order to boost its share price.   And dozens of personal injury lawsuits have been filed against the auto maker for injuries and deaths caused by sudden acceleration and other product defects.  Perhaps the most high profile of those personal injury cases was filed in San Diego, site of today’s hearing, on behalf of Officer Mark Saylor, a California Highway Patrol Officer who was killed, along with three of his family members, when the Lexus he was driving suddenly accelerated out of control.

Today’s hearing before the Judicial Panel addresses only the consumer lawsuits concerning diminution in value.  However, the court in which those cases are ultimately consolidatedm if they are consolidated, will become the likely destination for other other lawsuits against the company.  For example, a Mississippi federal judge recently stayed a sudden acceleration lawsuit in that state pending the Judicial Panel’s decision.

The seven-member Judicial Panel can send the cases anywhere in the country.  The judges weigh factors such as a court’s caseload, the convenience of the location for the parties, and whether a judge with experience managing complex litigation is available.  Of these factors, the last is likely the most important.

Toyota is pushing for the cases to be consolidated in a Los Angeles federal court, where the most lawsuits have been filed and where the company’s North American headquarters is located.  Lawyers for the plaintiffs are divided over location, with 19 different sites being urged by different factions.  Likely destinations for the consolidated litigation include Kentucky, New Orleans and Los Angeles.  A decision is expected within two weeks.

To a listen to an NPR story regarding today’s hearing, click here.

Georgia Attorney General Thurbert Baker announced today that he would not join thirteen other state attorneys general in challenging the constitutionality of the recently enacted health care reform legislation.  In a letter to Gov. Perdue, Mr. Baker said a state lawsuit “is likely to fail and will consume significant amounts of taxpayers’ hard-earned money.”  Mr. Baker’s position is in lockstep with the White House, which has defended the constitutionality of the health care law and dismissed the state lawsuits as unlikely to succeed.

It’s been a busy couple of weeks for tort reformers and their opponents. 

As we reported in an earlier posting, the Georgia Supreme Court this week struck down the $350,000.00 cap on pain and suffering damages in med mal cases as an unconstitutional  with Georgians’ right to trial by jury.  The decision was a decisive victory for med mal victims and for opponents of tort reform.

The previous week, however, the Georgia Supreme Court upheld two other components of the contraversial 2005 tort reform legislation: (1) the “gross negligence” standard applicable to ER malpractice cases; and (2) the “offer of judgment” rule.

The “gross negligence” standard was challenged by Carol Gliemmo, who became paralyzed when a Columbus ER doctor failed to diagnose her with a brain hemorrhage.  She argued that the gross negligence standard–which required her to prove that the ER doc knowingly mistreated her–created an unreasonable and insurmountable hurdle.  The Georgia Supreme Court disagreed.  Justice George Carley, who wrote the majority opinion, stated that it was “entirely logical” for lawmakers to approve the legislation to stem the rising cost of medical malpractice lawsuits.

The “offer of judgment” rule was challenged by Salon and Cheryl Baptiste.  The Baptiste’s filed a defamation lawsuit against former Falcon Chuck Smith.  Mr. Smith made a $5,000.00 “offer of judgment”  to the Baptiste’s, which they rejected.  The court ultimately dismissed the Baptiste’s lawsuit.  Mr. Smith moved to collect his attorneys’ fees under O.C.G.A. § 9-11-68, the offer of judgment statute.  That statute permits either party to extend to the other an offer of judgment (as Mr. Smith had done) which, if rejected, could lead to the rejecting party paying the offering party’s attorneys’ fees.  The trial court, however, denied Mr. Smith’s motion on the grounds that O.C.G.A. § 9-11-68 unconstitutionally interferes with litigants’ right of access to Georgia courts.  The Supreme Court rejected that argument in upholding the offer of judgment statute.

Consumer class action lawsuits seeking damages for the diminished value of Toyota vehicles have been expanded to include racketeering allegations, ratcheting the potential damages in those cases upwards from $2 billion to potentially $10 billion.

The consumer class action lawsuits–which total around 80  in number–originally sought around $2 billion in damages for owners of Toyota vehicles.  The lawsuits were based upon data from auto evaluation services, such as Kelley Blue Book and Edmunds, that showed a 4% to 8% decline in the resale value of Toyota vehicles.

The new allegations are based upon evidence revealed during congressional testimony over the Toyota recalls.  That evidence, lawyers say, establishes that Toyota knew about sudden acceleration and other defects long before it initiated the recent recalls.  Toyota’s concealment of those defects, the plaintiffs allege, constitutes criminal conduct and subjects Toyota to liability under the Racketeer Influenced and Corrupt Organization Act (RICO).  Plaintiffs in RICO actions are entitled to three times their damages, thus the heightened damages projections.

A computer flaw affecting 1.2 million Corolla and Matrix models is the latest problem to dog embattled Japanese automaker Toyota.  The flaw causes engines to stall but, to this point, has not been linked to any injuries or deaths.  Toyota reports that it is still considering how to fix the problem.

The National Highway Traffic Safety Administration opened a probe last November into complaints of engine stalling in 2005 through 2007 Corolla and Matrix models.  Toyota attributes the problem to mechanical flaws in the vehicles’ engine-control units. 

Add the Corolla/Matrix engine stall problem to a growing list of defects and safety problems with a number of Toyota vehicles, including: sudden acceleration in various Toyota and Lexus models; steering issues with certain Corolla and Matrix models; braking problems with certain Prius models; and stability control problems with certain Sequoia SUV’s.