Category: Lawyers

I filed my second objection to the Honda Civic Hybrid Settlement this year, and they were nice enough to send me a CD of all the other letters that were submitted to the court.

Scorecard

• There were 3 letters in favor of the settlement
• There were 45 letters opposing the settlement

The Supporting Letters Were From

• The lawyers, Jonathan Cuneo and Nicholas Chimicles (who also filed for fee reimbursement of $2.332M and $2.995M, respectively).
• The mediator of the original settlement, Howard Wiener.
• Rust Consulting, paid for by American Honda Motor.

Summary

• The lawyers who are getting paid millions love it.
• Not a single member of the settlement class wrote in favor of the settlement.
• Honda just wants to pay this ransom and move on.

I’m under no illusion that my letter will have any effect.

It is a measurable fact that Cuneo and Chimicles are poor negotiators. Although damages are in the thousands of dollars per individual, they could only negotiate a $100 settlement for us. This is in spite of the fact that another member of the class, Heather Peters, was able to successfully negotiate $9,867 for herself – nearly 100 times more than Cuneo and Chimicles.

Sadly, Cuneo and Chimicles will not be fired for their lackluster performance. Instead, for this one case, they will each be paid a multi-million dollar sum greater than the average American will earn in his entire lifetime (median salary * 45 years).

Just spent 3 days waiting for turnaround on a contract where the other party’s counsel did nothing but twiddle the bits on the confidentiality clause. What a waste of time, productivity, and legal bills.

Don’t get me wrong – the other lawyer is not the only one at fault here. My lawyer is equally to blame.

What the hell? Why is it that my lawyer, and the other lawyer both thought they needed to reinvent a confidentiality clause? Can’t we just create one, have it ratified by the courts and live with it? Why do two lawyers get to rack up wages at $300/hr to modify 2 sentences that they’ve modified a thousand times before?

Lawyers who don’t work on fixing this problem are the problem. They all need to get together, settle this, and stop raping America.

Heather Peters has become semi-famous this week because of her small-claims suit against Honda. Honda reached a class-action settlement because the gas mileage of the Civic is simply not up to par. This matches my own experience. Aside from the first few months owning the car where I was both actively hypermiling and also driving exclusively highway miles, the gas mileage in my car has been disappointing. My hybrid gets ~38mpg right now, a far cry worse than the claimed 50mpg that I should be getting.

The class action lawsuit was a joke. The lawyers walked away with millions, while the consumers were compensated with $100 and a video. And each Civic Hybrid consumer has thousands of dollars in damages. Worse, the settlement bars anyone who even complained about the settlement from receiving the settlement. I complained, of course, and my punishment is that I didn’t get the $100.

Since there seems to be renewed interest in this whole affair, here is the full text of the letter I submitted to the court regarding the class action suit back in December 2009.

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
EASTERN DISTRICT – RIVERSIDE

JOHN TRUE, et al.,
Plaintiffs, Case No.: 5:07-cv-00287-VAP-OP

v.

AMERICAN HONDA MOTOR CO., INC

Defendants.

OBJECTIONS TO CLASS ACTION SETTLEMENT

I am a member of the settlement class for Case No. 5:07-cv-00287-VAP-OP (True vs. Honda Motor Company Inc.). This letter officially declares my objection to the settlement on the grounds that this settlement is not in the best interest of the members of the settlement class.

Background
This lawsuit was brought against American Honda Motors (AMH) because the fuel efficiency of their cars does not match the advertised claims. Evidence has been presented that the cars were advertised to achieve 50MPG while only actually achieving 32MPG for many drivers. Drivers of these cars often purchase them specifically because of the alleged low cost of operation. When the gas mileage fails to achieve advertised claims, the consumer is left to pay the difference. I believe the difference is an accurate representation of the damages caused by AMH.

The Honda Civic warranties apply to various parts of the car for 50,000 to 150,000 miles, and consumers are sold the car with the expectation that 100,000 miles is reasonable
. Gasoline in California has averaged ~$3.20 per gallon over the last 3 years
. Using these figures, if the car only achieved 32MPG instead of 50MPG, the per-consumer damages are ~$3,600.

Objections
I have 4 objections to this settlement.

Objection #1: Failure to correct damages for the settlement class
Given the magnitude of damages to consumers, the settlement offer simply is not in the best interest of the settlement class. The settlement reimburses the members of the class for less than 2% of the damages incurred.

In the settlement, members are given 3 options:
a) Sell your hybrid, and get a $1000 coupon on another Honda (not a hybrid).
b) Give your hybrid to a family member, get a $500 coupon on another Honda (not a hybrid).
c) Get a $100 check.
All 3 options include a video for how to get better gas mileage.

Even if the settlement member wanted a new car (which many do not), the $1,000 rebate still would still be less than one-third of the damages incurred due to unexpectedly low cost-of-operation.

But worse, for most consumers, the $100 settlement is so small that it does not offset the damages at all. At the same time, this settlement greatly reduces the consumer’s claims against Honda, and may even void the consumers current warranty. Why would any consumer sell this privilege for a mere $100? (see the second objection #2).

Objection #2: Overreaching settlement releases
As part of this settlement, all members of the settlement class release all claims against AMH regarding anything related to the fuel economy of the vehicle. Specifically, the settlement covers anything

“involving, based on, relating to, arising out of or in any way connected with, directly or indirectly, the advertising of the fuel economy or m.p.g. of the HCH…”

With regard to existing warranties, it states

“Nothing in this Agreement shall be interpreted to modify or diminish the manufacturer’s limited warranty with respect to a Class Vehicle; provided, however, that any such claim of breach of any warranty or any extended warranty based on the advertising or representations made by AHM with respect to fuel economy, mileage or m.p.g are in fact released.”

This clause is completely overreaching! For instance, Honda warrants the batteries in the vehicle for 50-150K miles. When I was sold the vehicle, the salesperson told me that the batteries would not need replacement for 150K miles. However, as the batteries get old (much like the batteries in your cellphone), they hold their charge for diminishing amounts of time. The car will still operate just fine even with diminished battery life, but the MPG rating will drop significantly! I fear that if I accept this settlement, and then I go to Honda to get help with replacement of my previously-under-warranty batteries, I will no longer have a claim. Honda will be able to say that my car is working fine, and that the battery problem related to MPG was Released as part of this settlement.

As such, this contract specifically DOES alter my warranty, despite claims to the contrary.

Objection #3: The retaliatory nature of the settlement against its members.
As part of this settlement, any member of the settlement class that objects to the settlement is specifically barred from collecting any benefits if the settlement is accepted by the court. This clause is clearly not in the best interest of the settlement class, and is actually retaliatory in nature.

It is clear to me that the damages I have personally incurred due to AMH’s wrongful advertising are far in excess of the $100 settlement. Purchasing a new Honda has no appeal to me. I do not want to purchase a new car from Honda at any time in the future, and even if I did, I would like to get a hybrid. As such, options (a) and (b) simply do not make any sense.

But the negotiators of this settlement have defined only 3 options, and I am required to either accept them or be ignored from any settlement result. This clearly only serves the interest of the legal staff and does not serve the interest of the plaintiffs.

Objection #4: Negotiation of excessive attorney compensation at the expense of the settlement members
I recognize that the attorneys have worked hard on this case for the last year. While they are pushing for a quick settlement which will enable them to receive a hefty payout of nearly 3 million dollars, they have failed to negotiate a settlement which actually addresses the original problem in the claim. If they believe that settlement members would benefit by accepting a plan which voids their warranty and only recoups 2% of the damages, then the attorney fees should also be diminished – I propose they should be set to 2% of the requested fees, or $92,187.

My Status in the Settlement Class
The following responses are the required responses as per the proposed settlement in progress.

(i) Name address and phone number
Michael Belshe
[DETAILS OMITTED FROM BLOG]

(iii) Grounds for objection
Stated above.
(iv) Proof
Stated above.
(v) No persons will be called to testify
(vi) I do intend to appear at the Final Approval Hearing, schedule permitting.
(vii) I have appeared in no other cases as a settlement objector or counsel in the past 5 years.

Recommendations
I have 5 recommendations for the settlement:
(a) The negotiators should compute a reasonable figure for damages to each consumer. (I computed $3,600).
(b) The negotiators should negotiate a settlement for at least 50% of those damages.
(c) Objecting to a proposal must not cause members to be excluded from a settlement.
(d) The settlement must re-address the warranty voiding effects mentioned above.
(e) The attorney fees should be in-line with what settlement members receive in the settlement. If the settlement members recoup 50% of their damages, then the attorneys should only collect 50% of their $2.95M fee as well.

Respectfully,

Michael A Belshe

Every day I enter my workplace which proudly displays this sign.  But I see the same sign pretty much everywhere.  If you wish to put one at your own house, you can buy it at Amazon here.

But why do Californians pay to put the same worthless sign on every building?  How much does this useless warning cost us?  Has one of these signs ever helped anyone?  Has it deterred anyone from entering the building?  I see pregnant women walk right past these signs all the time.  Surely it is exaggerated?

Doing some research we find that this sign stems out of Proposition 65, passed in 1986.

25249.6. Required Warning Before Exposure To Chemicals Known to Cause Cancer Or Reproductive Toxicity. No person in the course of doing business shall knowingly and intentionally expose any individual to a chemical known to the state to cause cancer or reproductive toxicity without first giving clear and reasonable warning to such individual, except as provided in Section 25249.10.

So why do businesses post the signs?  Because if you don’t, and some squirrelly lawyer finds that there is a bad chemical in your building, they can sue you for $2500 per day!

Of course, the law intended to make sure that building owners disclose real hazards.  But, in practice this has just become a cover-your-ass sign.  Building owners don’t know what toilet cleaner might be considered hazardous now or in the future (the official list of hazardous chemicals is maintained by the Attorney General and contains over 850 chemicals), so to protect themselves from suits, they just post the disclosure.  So now we’ve plastered the same sign on every single building, regardless of whether or not there is any real risk.  And by putting it on every building, we’ve completely neutered any chance that the sign could ever have value.

But lawyers are making money on it.  Read here.  Or read about how they hire bounty hunters here. 

I used to only despise lawyers collectively, but not individually.  These days, however, I blame the individuals too.  If you aren’t part of the solution, you’re part of the problem.  And lawyers are not working to make our lives better.  If you are a practicing lawyer, and I ever meet you, know that in my core, I think you’re a bad person. You’re a cockroach and I want to step on you and watch your guts ooze on the sidewalk under my shoe.  Holding a law degree is shameful.

I watched the Arrington/Reback interview last week.  It was quite interesting.  Reback claims (and I agree) that competition is what ensures a fair marketplace.  Without competition, consumers ultimately get burned.

I was thinking about how this applies to lawyers in America.  Does competition keep the legal industry in check?

Consider what would happen if tomorrow, the population of Accountants in the United States doubled.  Suddenly there would be too many accountants.  The price for accounting work would drop instantly due to over supply.

Now consider what would happen if tomorrow, the population of lawyers doubled.  Unfortunately, there would be no such drop.  A lawyer’s job is to make an argument (lawsuit).  And we’ve created a government which has infinite capacity for new lawsuits.   If there were twice as many lawyers filing claims, our government is *required by law* to expand to meet the needs of all those lawyers.  Is this right?

According to this study, we can see the number of lawyers in America has sharply increased between 1970 and 2000.  Was this growth due to increased demand for lawyers?  Or do we have a supply/demand chain in the legal profession which is out of whack?  Could it be that the same claims which Reback makes about businesses needing competitive pressure to remain balanced applies to lawyers?  And if so, when we’ve got a government willing to accept any lawsuit, from any lawyer at unbounded capacity, how do we enforce competition in the legal industry?

The problem boils down to “frivolous”.  Currently it is virtually impossible to get a case thrown out as frivolous.  “Frivolous” is a specific legal term which has to do with making an grossly wasteful case.  Generally, lawyers can make most any claim and sue anyone without being frivolous.  This process can potentially cost the defendant hundreds of thousands of dollars to defend; and because it is so costly, defendants usually find it easier to settle, even for moderatly large amounts of $25,000 to $100,000.  Even if the defendant is ultimately right and wins in court, the plaintiff owes the defendant nothing for all that wasted time.  Further, the taxpayers were left with the bill for all the court costs.  Why is this so?  When bringing forth a lawsuit where you ultimately lose, why doesn’t the loser pay court costs and defendant costs?  What other checks-and-balances can we put in place to provide the equivalent of “competition” in a legal system which inherently has no bounds on growth?

Unfortunately, our legal system is the pinnacle of the conflict of interest.  Lawyers are one of the highest paid professions in the United States.  Laws which regulate lawsuits will bring down lawyer wages.  How can we expect politicians (largely lawyers themselves), judges, and lawyers to accept legislation which limits their livelihood?  We cannot.

The press is abuzz today with news that Microsoft is suing TomTom over patent violations involving linux.

Sadly – the recession is probably going to bring more of this desperation. 

Patents always start out well-intentioned.  Companies tell their employees, “We just need a few good patents for defensive purposes.  If someone sues us, we need leverage.”  Sadly, there is truth to this.

But patents last for seventeen years and the average start-up does not.  So, once the company gets into financial trouble, those innocent ‘defensive’ patents can turn into funding to keep the company afloat for a short while longer, or worse, fall into a lawyer’s hands after the fire sale.  A classic example of this is Visto, a once exciting Silicon Valley startup that never managed to quite make it ‘over the hump’.  In 2005, the company sold equity to NTP (the lawyer group that sued RIM) and agreed to allow NTP access to Visto’s “defensive” patent portfolio aggressively.  Visto/NTP have been filing lawsuits ever since.

If patents are indeed meant to be defensive when they are created, and all employers claim that they are, then we should create a contract which codifies this. 

What if we could draft a contract, between the inventor(s) and the employer.  The contract would give the company rights to the patent so long as the patent is only used for “defensive” purposes only.  The patent would not be transferable to other companies.  We could distribute this contract freely on the net, and encourage inventors to get their employers to sign them.    Over time, hopefully the world would have a lot of “defensive” patents, but not aggressive ones.  Of course, the legal definition of “defensive” is pretty tricky.  Perhaps a non-transferable patent is the only feasible contract.  I don’t know; I’m not a legal expert.

If you are a corporate attorney, and think this is a good idea, drop me a note.