This one slipped under my radar. Only the heads up from a colleague alerted me that Providence healthcare system has agreed to a fine for HIPPA violations arising out of the data loss of 2005.

FYI, along with several other lawyers, I represent patients whose unencrypted computerized data was lost when a car burgler stole data from a parked car. The case for money damages is currently pending in the Oregon Court of Appeals.  We filed our opening brief on behalf of the patients, and Providence is due to file its response shortly. After they file their response, we’ll have one more brief, and the Court of Appeals will hear oral argument. I doubt very seriously that we’ll get a decision before 2009.

As for the HIPPA fine, $100,000 seems like a lot on its face, except when you realize that hundreds of thousands of patients were affected by the data loss.  Providence has now settled with both the State of Oregon and the U.S. government. Even so, they are still fighting damage claims brought by patients who seek compensation for their harms and losses.

In the life of the case on behalf of the patients, this is a non-event. We will continue forward.

David Sugerman

There’s that commercial with the earnest, wise and sentorian guy talking about all the great things they do, ending with the intonation, “That’s Allstate’s stand.”  A new American Association of Justice study noted here names Allstate the worst insurer.

Interestingly, Allstate’s CEO’s 2007 compensation topped $10 million for the year.  That’s a lot of premium money. More to the point, it’s fair to say that Allstate has some…uh…history of being naughty.

My own experience is that some insurers are worse than others. While not all are bad news, many give injured consumers and policyholders the runaround when people make claims for their harms and losses. It’s common to hear someone in my office express surprise when Allstate or one of the other carriers fails to make good on its end of the insurance contract by, for example, failing to pay medical expenses incurred by the injured policyholder.

That’s particularly outrageous because the policyholder did what they were supposed to when they paid for the coverage. And then they get stiffed or hard-timed by Allstate. This is what we in the trenches refer to as, “Allstate’s stand.”

David Sugerman

Here’s some good news in what is something of a sleeper. Measure 51, a one-sided and unnecessary ballot measure that would limit consumers rights failed to qualify for the November ballot.  The measure would have limited attorney fees to 10 percent in most contingent fee cases.

Contingent fees are those paid as a percentage of what a lawyer recovers for an injured person.  They are an equalizer. While the wealthy and big businesses can afford to pay lawyers by the hour, the rest of us don’t have the means to do so. The contingent fee system levels the playing field, allowing middle income Oregonians and small businesses the ability to hire skilled lawyers who will work for a percentage of what they obtain for the client.

The measure limited only contingent fees; it didn’t limit what those who afford to pay by the hour could pay. Had it passed, the measure would have limited consumers’ access to the best legal talent by artificially limiting fees.

My son–a somewhat sardonic 18 year old–saw through it immediately. “Wouldn’t limiting fees actually encourage lawyers to file more frivolous lawsuits?” (He’s  smarter than his dad; I never thought of that…thanks kiddo, you’re doing the old gray fart proud.)

Here’s the thing. At bottom the one-sided measure would favor insurance companies, HMOs, and manufacturers of dangerous products. They don’t want consumers to have access to the courts. They know that the best way to close the courthouse doors is to make sure that injured consumers can’t afford to hire lawyers. This, by the way, is part of the Bush/Cheney/Rove agenda. And as with many other things they failed.

Thankfully, Oregon consumers knew better. We’ve come to realize that the initiative process is one that is used by special interests to advance a radical agenda. It’s getting harder to qualify measures, and Oregonians are getting more skeptical about the unintended consequences of poorly drafted initiatives.

That’s great news.

David Sugerman

Two stories in today’s news provide court-side glimpses of two forms of market abuse that led us skipping down the garden path to the cratered economy. In this one from the Oregonian you can learn all about the alleged scams by various Oregon flimflam men who saw that the trough was unguarded. They apparently goosed up the value of properties, got inflated appraisals, and borrowed way out of proportion to the collateral, pocketing the overage.

They could act with impunity because the banks were turning their paper to Wall Street and didn’t have any reason to scrutinize loan applications.

And of course the liar loans promoted by banks were being bought by Bear Stearns. Here’s an update on criminal proceedings against former Bear Stearns managers facing indictments. Apparently, they knew that the loans they were buying were bunk.  Going to be fun to hear them explain why they kept hyping their hedge funds while secretly selling their own shares before it all crashed down.

All of this highlights the dark underbelly of deregulation.  Want a chuckle? Remember the movie, Wall Street? “Greed is good,” we were told by pop culture, by politicians and by professors.

So this is what they meant by “Good.”

David Sugerman

ps to regular readers-I’m out of here for a couple of weeks for vacation. While David Paul may pick up the slack, the blog may well go dark while I’m away. I’ll be back to it after the 4th of July weekend.

Here’s a half-decent summary of how mandatory arbitration clauses strip away patients and families’ ability to hold bad nursing homes accountable for abusive care. It’s only half right, though, as the writer misses the most significant problem with mandatory arbitration clauses.

Too often, they come with rules that make pursuit of any claim impossible. As well, they often play into a rigged system by forcing arbitration with an organization that is notorious for finding against consumers.

When our parents and grandparents are subjected to abusive care in a nursing home, there needs to be a fair and open system that allows the family to hold the bad nursing home accountable. But when a mandatory arbitration clause prohibits going to court, when it bars claims under laws that provide for damages and attorney fees, and when it requires secrecy, families lose.

It’s even worse in the nursing home context because too often the family member who is placed in the care facility didn’t even have the ability to make an informed choice. What’s more, the family is often presented a thick stack of forms to sign that are take-it-or-leave-it deals. In other words, it’s a farce to say that grandpa chose arbitration.

Congress is starting to look at this. Let’s hope they take real action.

David Sugerman

The U.S. Supreme Court granted cert in Williams v. Philip Morris again, but it’s a little quick for Philip Morris to start celebrating, as it’s a long way to a reversal.

Here’s the kind of analysis, from Portland’s Ater Wynne, that drives me to drink: “The U.S. Supreme Court today agreed to review only whether the state court was prohibited from, in effect, ignoring its directive to apply the federal constitutional standard.”

But this is the exact question, from Philip Morris’ petition, which the U.S. Supreme Court agreed to review:

“1. Whether, after this Court has adjudicated the
merits of a party’s federal claim and remanded the
case to state court with instructions to “apply” the
correct constitutional standard, the state court may
interpose~for the first time in the litigation–a
state-law procedural bar that is neither firmly established
nor regularly followed”

And the problem, of course, is that any Oregon trial lawyer will confirm that the rule requiring a party to submit accurate jury instructions is both “firmly established” and “regularly followed.” If the U.S. Supreme Court decides the question on the merits with reference to Oregon law, the outcome will be straightforward. Of course, there is no guarantee that this Court will decide the case on the rule of law. See generally, Bush v. Gore.

David Sugerman

Interesting piece from the saints at New American Foundation’s Ed Watch blog on recent statements by Career Education Corp.’s CEO, Gary McCullough. Backstory: Mr. McCullough’s Career Education Corp (CEC) owns a number of for-profit trade schools, including Western Culinary Institute here in Portland. By way of full disclosure, I am one of the lawyers representing students pursuing a series of claims against Western Culinary and CEC over the school’s sales and enrollment practices.

Mr. McCullough provided insight into the company’s operations and financial statements in an investor briefing. It’s a let-a-smile-be-your-umbrella kind of thing. According to Mr. McCullough, CEC will emerge from its current problems in fine shape. Here’s the audio of the webcast with the CEO’s rosy predictions of better times ahead.

It gets interesting, as he explains that culinary school enrollments are down this year. But fear not: CEC is limiting admissions to “credit worthy” students, so things should turnaround.

“Credit worthy students” is a great turn of phrase. I guess what that means is that they are now agreeing that the high tuition costs of culinary schools like Western Culinary Institute are not a good lending risk. How could they be? Who would lend money–say $30,000–to students who will earn $10-12 per hour once they get out? What they fail to report is that they routinely sold students on their bright and lucrative futures, getting them to borrow tremendous sums for the “opportunity” to work in a kitchen for the kind of pay that can’t justify this level of debt.

All of this raises as many questions as it answers.  For example, I wonder how recently Mr. McCullough learned that there was a problem with credit worthiness? The smart folks at New America Foundation hypothesize that CEC has seen the light because it will now be supplying a chunk of the student loan cash to finance its students.

The other question is how a school like WCI can function in this environment. They charge eye-popping tuition that  does not provide significant net benefit to students.  How could there ever be a credit worthy student who will be upside down in the deal from the get-go?

Fun stuff, this.

David Sugerman

This is a post about what is not there. Right here in River City, a federal court jury found in favor of Adidas Corp. on its trade infringement claim against Payless Shoes, finding damages in excess of $300 million.  The Chamber of Commerce and its allies have long shouted out major screeds about the civil justice system, claiming that it is horribly unfair because juries award too much money.

But when a business got a huge award, the Chamber sat silently. I suppose this should come as no surprise, but the Chamber and its friends have nothing on their websites about the Adidas verdict.  Neither does the American Tort Reform Association.

Nope, their attacks on the civil justice system focus on cases brought by injured consumers.  And some–like the magic pants guy–are grounded in half truths. In the assinine case of the judge who sued the drycleaner for his lost pants–the magic pants guy–anyone who follows the whole story learns that the system works just fine.  But that won’t stop the Chamber from parading it as a horrible or the American Tort Reform Association’s ridicule.

So one thing that this deafening silence suggests is that the Chamber and the American Tort Reformers only complain about lawsuits brought by individuals. Another is that their complaints–too much money awarded in civil lawsuits–are really not complaints about the amount of money so much as they are about who gets the money.

I’ve got nothing in the Adidas case. They have a right to enforce the value that they’ve poured into their brands. But let’s be fair. When the Chamber wants the rest of the world to believe that its war on the civil justice system is honest and open, it will call foul when a corporation gets the outsized verdict. Anything else just smells really, really bad.

David Sugerman

Today’s Sunday Oregonian, addresses this complaint about misrepresentations regarding gas prices. The problem is the hidden credit card or ATM charge. What happens when a gas station posts its prices but fails to tell you–until after you make the purchase–that the price is higher if you pay with a credit card? Or when a gas station adds a courtesy charge or ATM charge without disclosing it at the pump?

Oregon’s Unlawful Trade Practices Act provides a means of addressing this death by a thousand paper cuts rip off. Individuals who succeed in proving an Unlawful Trade Practices Act claim can recover their or $200–whichever is higher–plus attorney fees.  There is even the possibility of seeking additional punitive damages if the practice is really bad. If the practice is wide-spread, consumers can actually pursue the matter as a class action to recover the monies illegally collected.

I’ve actually handled one of these cases before. It arose when Oregon ARCO stations charged an ATM fee. But they didn’t tell you until after you pumped the gas and then went inside to pay. The case, which was a class action, eventually settled.

They’re not big cases, but they’re important because they add up.  For consumers, gas price increases are a a huge economic issue. Another dollar or two as a surcharge is maybe only a little bit, or the equivalent of a paper cut. But consumers are being squeezed from all sides. That single little surcharge is just one more example of the fee-based ripoffs that make consumers poorer.  The charges add up in another way. When illegal charges are collected from many consumers, they add up as additional profits for the company that is violating the law. Not good.

Back to the article. It notes: “What’s unclear is whether gas stations are required to note on their marquee signs that there are two prices — one for cash, one for plastic. That once was a more common practice, but many gas station operators say they haven’t done so for years.”

I disagree. The Unlawful Trade Practices Act specifically prohibits misrepresentations about prices of goods. And a misrepresentation includes a failure to disclose information. So if a seller posts a gas price as $3.99 per gallon, and that price is a “cash only” price, it must say “cash only” or something like that, or it is risks violating the act.
David Sugerman

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