Lieff Cabraser: Consumer Law Newsletter Issue No. 1

Consumer Law Newsletter:
Issue No. 1

November 12, 1999

Highlights:

$4.3 Billion Diet Drugs Proposed Settlement
$1.2 Billion Trial Verdict Against State Farm
National Class Action of Lung Cancer Victims Filed Against Tobacco Industry
Class Certification of Overtime Wage Case Against Denny's
Alleged Illegal Kickbacks in Title Insurance Industry
Handgun Litigation Summary

Proposed $4.3 Billion Settlement in Fen/Phen Diet Drugs Litigation

On October 7, 1999, a proposed settlement was reached between attorneys for plaintiffs involved in diet drug litigation and American Home Products Corporation, the manufacturer of Pondimin (fenfluramine) and Redux (dexfenfluramine). The settlement could affect up to six million U.S. consumers who used Pondimin and/or Redux, for any length of time, alone or in combination with phentermine. The settlement provides medical monitoring as well as compensation for injury through two funds which could total up to $4.83 billion.

Once a full Settlement Agreement has been finalized, a federal district court will review the merits of the settlement. This process will include the mailing of a legal notice with detailed information about the Settlement terms, who qualifies, and the legal rights of those affected. It is anticipated that the notice will be mailed early next year.

Jury and Judge Rule Against State Farm's Auto Parts Practices

On October 4, 1999, an Illinois jury ruled that State Farm Mutual Automobile Insurance Co., the nation's largest auto insurer, had breached its contract with policyholders by requiring body shops to use lower-priced generic parts for crash repairs, rather than parts made by auto manufacturers. Under the class-action verdict, State Farm must pay $456 million as compensation to policyholders who filed a total of about 4.7 million claims.

These parts -- frequently called "after market" parts, since they do not come from the manufacturer -- often sell for significantly less than those offered by auto companies, but often do not fit right and diminish the appearance, functioning and resale value of a car. "They're not made to the same standards and specifications," said Lieff Cabraser partner Elizabeth Cabraser. "They don't have quality control, and they're not crash-tested."

One week after the jury verdict on the breach of contract claims, the judge presiding over the case determined that State Farm should pay an additional $730-million award in finding that the company deliberately defrauded policyholders by requiring body shops to use inferior crash parts to repair their damaged vehicles. The combined award totals $1.18 billion. State Farm plans to appeal.

Proposed National Class Action of Lung Cancer
Victims Filed Against Tobacco Industry

Lieff Cabraser serves as co-counsel in a proposed smokers class action in the federal court for the Eastern District of New York, entitled Ellis Simon, et al. v. Phillip Morris, Inc., et al. On October 15, 1999, plaintiffs filed an amended class action complaint. The case, still in its early stages, seeks personal injury damages for all persons who have smoked defendants' cigarettes and have a timely claim as of April 9, 1999, for lung cancer.

Unlike the current class action trial in Miami, Florida which covers only Florida residents, the proposed class in the Simon case includes smokers nationwide. Among the allegations raised in the Simon case are that over a course of decades the cigarette companies manufactured and sold cigarettes in a dangerous condition because the cigarettes were not accompanied with adequate warnings, and the cigarette companies fraudulently denied and concealed from smokers the significant health risks of smoking.

Class Certification of Overtime Wage Case Against Denny's

On November 1, 1999, class notice was sent to all general managers and managers of Denny's who worked at company-owned restaurants on or after September 2, 1994. Plaintiffs allege that Denny's unlawfully failed to pay overtime compensation in violation of California law. Discovery is proceeding.

Alleged Illegal Kickbacks in the Title Insurance Industry

On October 26, 1999, an amended class action complaint was filed in federal court in the Northern District of California against one of the nation's largest title insurance companies, Fidelity National Financial, its principal subsidiary, Fidelity National Title Insurance Company, and Bank of America for engaging in widespread misconduct. Lieff Cabraser serves as plaintiff's co-counsel in this case.

The suit alleges that Bank of America has paid illegal kickbacks to Fidelity Title in the form of payments of secret interest on customer escrow trust accounts for almost 20 years. Monies deposited in escrow trust accounts, prior to closing, belong to the depositing party, and any interest paid on these accounts must be returned to the depositor. The suit alleges that Fidelity and Bank of America conspired to deprive customers of the interest earned on their deposits, instead of refunding this interest.