Archive for May, 2008

Irony: Lobbying against mortgage lending regulations and getting stiffed for your work

Friday, May 30th, 2008

Double dose of irony in this report in today’s Oregonian. It seems that a lobbyist for the Oregon Coalition of Mortgage Originators, Shane Jackson, filed suit in Multnomah County Circuit Court to collect his unpaid fees of $20,000. According to the news report, he sued both the Oregon Coalition of Mortgage Originators and its president, William Ridge.

Back story: Jackson and the Oregon Coalition of Mortgage Originators worked to stop reforms aimed at tightening the rules on mortgage lending. Alert readers might immediately connect this effort to the whole lack of regulation that got us into the mortgage lending crisis.

More detail: The Oregon Coalition of Mortgage Originators took great glee in killing SB 965 in the 2007 session. The bill,  Senate Bill 965, would have required plain language disclosures and use of underwriting standards.  It would also have allowed consumers harmed by mortgage lenders misconduct to directly sue.

According to the news report, the real estate market downturn put Mr. Ridge in a position of being unable to meet the payments on his new South Waterfront Condo.  Ridge apparently defaulted. That’s apparently part of the reason why Mr. Jackson has not been paid.

So here’s the first level of irony. These cowboys were so busy protecting their “rights” (read: positions at the trough) that they wouldn’t acknowledge the obvious. Lack of regulation and market oversight caused the mortgage lending meltdown.  And that is the main culprit in the real estate slide that bit Mr. Ridge in the backside.  While no one knows whether prompt action would have boosted consumers’ confidence in the market, it’s easy to see how Mr. Ridge, the Oregon Coalition of Mortgage Originators, and their lobbyist have all gotten swept up by the under-regulated markets.

And as for the second level of irony, my vague recollection is that the Oregon Coalition of Mortgage Originators opposed reforms in part because they allowed consumers harmed by misconduct to…gasp…file a lawsuit if the lender’s misconduct injured the consumer.  I guess Mr. Jackson didn’t lose any sleep over filing a lawsuit when he got stiffed for his rightfully owed $20,000. Maybe he now has a different take on the need to be able to pursue claims in court?

The whole thing would be little more than a belly laugh if so many others weren’t otherwise harmed by the collapse.  Can’t help but wonder what my friends at Our Oregon think of all this. They fought valiantly for consumers on SB 965. Angela Martin from Our Oregon was demonized for taking the lead. A number of good people–my friend Phil Goldsmith, for example–spent countless hours working on behalf of consumers on these issues.

I wonder now if Mr. Ridge and Mr. Jackson have had second thoughts about their work opposing lending  reform or about Our Oregon’s work on SB 965?

David Sugerman

Berkman at trial: “My bad”

Thursday, May 29th, 2008

I’m totally transfixed by news reports on the Craig Berkman trial. According to this report, Mr. Berkman admitted that he falsified his personal financial statement. It wasn’t one of those tiny little white lies, either. Apparently, he circulated financial statements showing his net worth to be $25 million when he was actually $5 million in debt.

Short version backstory: Craig Berkman is a former Oregon guberntorial candidate who lived the good life as a way wealth investment hotshot. Apparently, that living came either from self-lending made without investors’ knowledge or from outright theft. (Or maybe it’s somewhere in between?)

There are a number of other misstatements set forth in the article, too. But let’s not rush to judgment. Mr. Berkman apparently still denies that he stole money, claiming, instead, that the borrowed it and paid it back with interest.

One of the striking things about the news report is that it shows that it took a lawsuit to get to the bottom of his dealings. Until lawyers at Bullivant Houser filed a lawsuit, the investors couldn’t get the records that sheds the light that forced Mr. Berkman’s admissions.  I wonder what the story would be today if the lawyers for the investors hadn’t dug deep to get the records?

Can’t wait to see how this one turns out, but if I had to bet money–and I don’t–I wouldn’t be betting on Mr. Berkman here. At least not from what I read in the press.

David Sugerman

Nothing new: Bill Sizemore held in contempt

Wednesday, May 28th, 2008

I’m not a Bill Sizemore fan. My view is that he has taken Oregon’s treasured initiative system and turned it into a mockery for his personal aggrandizement and financial gain. So I was amused to read this account of how Judge Janice Wilson found him in contempt of court yesteday.

As most people know, “contempt” is actually a techical legal term.  So Judge Wilson’s findings ocurred after a hearing on the merits. It’s probably just coincidence that many people held Mr. Sizemore in contempt well before the news report.

The backstory is that an Oregon jury found Mr. Sizemore’s Taxpayers United PAC responsible for damages due to his illegal campaign practices (racketeering, forging signatures, falsifying campaign expenditure reports). The court entered a judgment against Mr. Sizemore’s organization. Mr. Sizemore appealed, and he lost.  It’s a long opinion, but here’s a copy from the Oregon Court of Appeals that affirmed the bulk of the trial judge’s rulings. That case is apparently on appeal to the Oregon Supreme Court.

Mr. Sizemore apparently decided that he could play a shell game with his money so that unions and the state could not collect on its judgment. And that’s where he ran into trouble in Judge Wilson’s courtroom.

Those of us who know Judge Wilson will tell you that she is smart and tough. She doesn’t suffer fools lightly, and she really dislikes game playing. Bad draw for Mr. Sizemore, I imagine.  In the article, Mr. Sizemore complained that Judge Wilson upheld “a blatantly unconstitutional ruling” by another judge. The answer to that is an appeal. So far, Mr. Sizemore has lost that argument, though who knows what will happen at the Oregon Supreme Court.

David Sugerman

Mortgage crisis: A former insider talks about how we got here

Tuesday, May 27th, 2008

NPR’s story and interview of a insider from the mortgage lending world provides a chilling glimpse into how we got here. Tracy Warren worked as a loan auditor reviewing mortgage loans that were being sold to Wall Street investment banks, like Bear Stearns.

The radio story makes for a great listen, as Ms. Warren comes across as straightforward and direct. She explains how she routinely saw loans for $500,000 homes in California. The borrowers were hotel workers who claimed to be making $15,000 a month.  Ms. Warren provides a compelling account of how her supervisors routinely overrode her reviews that sought to cull out bad loans before selling them on to Wall Street investment firms.

Sounds like the auditing firm that she worked for, Watterson-Prime, may have been eating at the trough. It would be interesting to see whether her supervisors were paid based on the numbers of loans approved or whether Watterson-Prime had a piece of the action of loans that moved on to Wall Street.

I can’t wait to hear Wall Street banks like Bear Stearns point the finger back at the auditors.  You know we’re in trouble when the smartest guys and gals in our financial system claim that they were duped. And of course, no one has the will to stand up and talk about the naked emperor here. When you insist on deregulating financial markets and transactions, greed will out. And no, unchecked greed is not a good thing.

The other thing is that I imagine we’ll hear similar stories coming out of what appears to be an impending  student loan system collapse.  But of course, it’s early yet.

David Sugerman

The difference between Oregon and Texas lawyers?

Friday, May 23rd, 2008

It sounds like a set up in search of a punch line: What’s the difference between an Oregon lawyer and a Texas lawyer? If you’re an Oregon consumer, you can have a laugh, and if you live in Texas, well, shed another tear.

Oregon requires that each Oregon lawyer carry liability insurance, as a way to protect consumers in case the Oregon lawyer mishandles the client’s matter.  The Professional Liability Fund provides the first level of insurance to all Oregon lawyers. And that’s part of the secret to its success. There’s a lot of purchasing power when you have a large group buying insurance. As a result, the annual premiums are affordable.

Texas takes a different approach. A commission set up by the Texas Supreme Court recently rejected a rule that would require all Texas lawyers to inform clients about whether they have liability insurance.  The proposed rule was fairly straightforward. It simply required all Texas lawyers to disclose whether they had malpractice insurance. The commission rejected the rule. I guess it’s there own special version of, “Don’t ask; don’t tell.”

According to the news report, the commission rejected the rule because…gasp!…it could lead to mandatory insurance.  Oregon lawyers and consumers have got to be ridiculing Texas over this one. Lord knows that mandatory liability insurance could lead to actual protection of the public interest.

This one is a no brainer.  As an ex-Texan, I can say with the certainty of one who was born and raised there, no one ever accused the mighty Lonestar State of being long on brains. (And of course, I feel compelled to explain that it was a long time ago, I had no say in the matter, and…and…and….)

Having insurance is actually one of those comforts for both me and my clients. I’ve handled multiple lawyer malpractice cases over the years, and I’ve learned that lawyers sometimes make mistakes that can do great damage to our clients.

So why would anyone go without?  The Texas commission really missed the boat on this one.  Mandatory insurance has protects the public in Oregon.  And even if Texas won’t insist on insurance, the Texas commission chose to sow more seeds of distrust by blowing past the chance to provide Texas consumers with a small bit of protection. Bad call.

David Sugerman

Verdict Upheld Against Nuclear Facility for Property Contamination

Wednesday, May 21st, 2008

Probably just coincidence, but it caused me to snicker.

Last night I was channel surfing in a vain attempt to find Oregon primary election results.  I happened upon an earnest woman who confided in me and all my fellow viewers that we really need to be concerned about global warming and foreign oil. With a knowing but concerned smile–and with chirping birds in the background–she faced the camera and explained that we need nuclear power now more than ever.

Like I say, it’s probably just coincidence. Today’s news reveals that a federal judge court upheld a $350 million dollar verdict in a class action brought on behalf of some 15,000 landowners against the nuclear industry.  They claimed that their lands were contaminated from the operations of the Rocky Flats nuclear weapons plant.  The jury agreed, awarding the aforementioned damages. The judge also added interest, increasing the $350 million verdict to about $900 million. Guess we’re going to see an appeal….

This is one of those staggering cases, in terms of size and duration. I don’t know anything about it other than what I read in the paper.

Even so, it’s easy to fill in the blanks. A nuclear waste contamination case would be profoundly expensive to pursue because of legal fees and the costs of experts. The nuclear industry would surely defend such a claim in a tough and hard-nosed fashion. For those reasons, a case like this probably could not go forward without the class action device.

I’m sure that the team representing the landowners has done an unimaginable amount of work to get to this point.  It takes an amazing level of commitment to take on a case like this and to see it through to the end. Let’s hope that the landowners see justice soon, and the legal team representing them is properly rewarded for taking on a very tough case.

And as for the brightly lit woman and her soothing dulcet tones who talks so earnestly about our nuclear power needs….Can’t help but wonder what the Rocky Flats people would say about that.

David Sugerman

Oregon Attorney General Settles with Merck over Vioxx Marketing

Tuesday, May 20th, 2008

Just announced today: The Oregon Attorney General’s office led the way in a multi-state settlement with Merk over its marketing of Vioxx.  The settlement includes a payment of $58 million to the participating states. As well, the settlement requires Merk to get pre-approval of its advertising from the FDA.

Merck aggressively promoted Vioxx in direct consumer ads. Based on the Oregon press release, it looks like Merck’s marketeers may have been a tad…uh…aggressive.

No word on how the money from the settlement will be distributed.

Kudos to the folks in the Department of Justice consumer section for pushing.  Proper enforcement of consumer laws is especially important when a drug that can cause serious injury is oversold by a drug company.

David Sugerman

Update: Providence Data Loss Case

Monday, May 19th, 2008

Back in late 2005, a car prowler stole unencrypted computerized medical records of 365,000 Providence Health System patients from an employee’s car. We filed a case here in Portland on behalf of the 365,000 patients, and the trial judge granted Providence’s motion to dismiss the claim. We appealed and recently filed our opening brief with the Oregon Court of Appeals.

I co-authored the brief with my friend and colleague, Brian Campf. Here is a pdf version:

Providence Class Action: Patients’ Opening Brief Oregon Court of Appeals

Appeals move at their own pace. I don’t expect a decision from the Court of Appeals until 2009.

David Sugerman

Myspace ruling raises questions about social network sites censorship

Sunday, May 18th, 2008

There is nothing surprising about Friday’s ruling by the U.S. Court of Appeals ruling that Myspace is immune from a lawsuit brought by a parent of a sexually abused child. In Doe v. Myspace, Inc., the Fifth Circuit ruled that the Communications Deceny Act, 47 USC Sec 230 (”CDA”) bars claims against providers like Myspace for damages that arise out of publication by providers of content supplied to the provider. For law geeks keeping score at home, the Court relied on CDA Sec 230(e)(3).

This is the whole preemption thing again. At least this is true preemption that was clearly intended by Congress, rather than a political agenda being pushed by an out-of-control administration.

But that’s not as interesting to me as how this ruling shines a light on censorship by web 2.0 providers like Facebook and Myspace. The CDA protects publishers of content. So why would Facebook remove posts that were critical of Career Education Corp? Facebook couldn’t be required to answer to claims under the CDA. So what gives?

I can’t see any other explanation other than web 2.0 providers play a kind of 3-card Monte with censorship rules. When faced with a liability lawsuit, they rightfully raise the CDA as a complete defense. Fine. That’s how Congress wrote the law. While I have trouble with the result in Doe, it’s about personal beliefs and nothing relating to the correct interpretation of the CDA. But when other interests demand the removal of content–like unflattering posts–the provider should stick to the same position.

To be sure, I’m not a big fan of the CDA’s grant of wide immunity. In pre-web days, publishers like newspapers could be held to answer for harm caused by defamation if they recklessly published untrue information. Personally, I would prefer that model so that web providers take some responsibility for content. But maybe I’m misguided on this particular issue.

Interestingly, there may come a time down the road where web 2.0 providers’ inconsistent actions create a different set of problems. I can foresee that lawyers representing future Doe families will have new and interesting arguments to get around the CDA if Facebook censors for its friends but doesn’t take similar steps for trolling sexual predators. I realize this last thought might be a little obtuse. Apologies. Untangling it would only lead to a long and dense post that would surely bore you to tears. You can thank me for being a self-censoring law geek….

David Sugerman

Oregon Supreme Court rules no wages for employees’ missed rest breaks

Friday, May 16th, 2008

Those of us who handle wage and hour cases learned yesterday that the Oregon Supreme Court issued a major decision denying employees the right to collect wages. In the case, Gafur v. Legacy Good Sam Hospital, workers who did not get mandatory rest breaks sued to collect unpaid wages.

Oregon law provides that employees get 10 minutes of rest for every four hours worked, and no pay may be deducted for the rest break. The employees argued that Oregon’s rest break rules means that they should have been paid 10 minutes’ wages when they were denied rest breaks. The logic to the argument is sound, in that for employees time is money. So if you’re not allowed to take the time provided to you, you should at least get the money.

But logic and law don’t always mesh. The Court got there by finding that the regulations are for health and safety and don’t create an entitlement to pay.

The other interesting thing is that the State Bureau of Labor and Industries–”BOLI”–filed an amicus, or friend of the court, brief that supported the employees. So the employees had both logic and BOLI on their side. Neither swung it with the Court.

The last interesting point is that the Court–as is common–was unanimous in its decision. At least two of the Oregon Supreme Court justices had significant background representing employees before they became judges. And most of the rest of the court had substantial experience representing the State–here BOLI. But as is common with our court, the judges’ pre-appointment backgrounds proved to be poor predictors of the outcome. This is one of those other measures of judicial integrity and judicial independence–two critically important features of our courts.

I can say as much, even though I believe the Court got it wrong. No doubt this is because I represent employees in wage claims and see these issues through a partisan filter.

David Sugerman