DukeEmployees.com - Duke Energy Employee Advocate
Legal - Page 9
Duke Power Co - Charles Craver, George Washington University National Law Center
Slavery Suits FiledKnight Ridder by T. Pugh, M. Fan, K. Moritsugu March 30, 2002
BROOKLYN, N.Y. The great-great-granddaughter of a South Carolina slave opened a new phase in a wrenching national debate yesterday, suing three companies in federal court for a share of profits they allegedly gained from slavery.
The lawsuits by Deadria Farmer-Paellmann of New York are the first of several expected in coming months to use new strategies to seek reparations for descendants of African Americans enslaved before the United States outlawed the practice in 1865.
"We are finally holding corporations accountable for their actions against my ancestors," said Farmer-Paellmann, a prominent researcher of the role of slaves in U.S. business history.
The suits, filed on behalf of "all African-American slave descendants," single out three companies, saying they were "unjustly enriched" by slavery. They are Aetna, the nation's largest insurer; FleetBoston Financial, a financial-services company; and CSX, a leading railroad company.
The suit against Aetna claims the company insured slave owners against the deaths of their slaves.
FleetBoston is accused of purchasing a Rhode Island bank that had made profitable loans to a slave trader.
CSX allegedly purchased companies that built railroads with slave labor.
Hartford, Conn.-based Aetna apologized in March 2000 for insuring slaves but opposes reparations because slavery was legal at the time.
CSX, of Richmond, Va., vowed to "oppose the lawsuit vigorously." In a statement, it called slavery a "tragic chapter in our nation's history," but added, "It is a history shared by every American, and its impacts cannot be attributed to any single company or industry."
James Mahoney, spokesman for Boston-based Fleet, said the company had not seen the lawsuits and had no comment.
The suits say numerous other companies with histories of slavery-related gains including tobacco, cotton and textile, sugar and produce companies may be added to the claim.
Other possible targets are universities that gained directly or indirectly from slavery, state and local governments that used slave labor and newspaper companies that profited from ads for slaves.
The suits did not specify the amount of money sought.
Roger Wareham, one of a group of lawyers who prepared the suits, said damages would be put into a fund to improve health, education and housing opportunities for blacks.
"This is not about individuals receiving checks in their mailbox," Wareham said.
Several prominent black academics, activists and attorneys, including Harvard University law professor Charles Ogletree and noted trial lawyer Johnnie Cochran, also are pursuing reparations cases. They expect to file in June, said Michael Hausfeld, a Washington, D.C., attorney working with them.
Hausfeld has handled successful suits by Holocaust victims.
The new legal moves feed a heated national debate. Advocates of reparations for slavery argue that the descendants of slaves are still being hurt economically and sociologically by their ancestors' bondage. Those who argue against compensation say, among other things, slavery existed so long ago that reparations would punish people who had nothing to do with it.
Many do not expect the suits to succeed.
The legal hurdles include statutes of limitations, which require lawsuits be filed within a few years of the injury, and the lack of direct victims, since no former slaves are still alive.
But even if they fail, they may in combination with political pressure and public-relations campaigns persuade companies to settle out of court with African-American plaintiffs.
The move to the courts appears inspired partly by the recent success of Holocaust victims in winning restitution from companies that employed them as slave laborers and from Swiss banks that took their assets.
Those cases, initially regarded with skepticism by legal experts, led to multibillion-dollar settlements for the victims and, in some cases, their children.
The court strategy invokes a concept known as unjust enrichment, in which not only was someone injured, but also that another party was enriched as a result.
Pressure also is building for President Bush to appoint a commission to study whether the federal government and private corporations should pay reparations. Bush opposes reparations, as did President Clinton.
Clinton, who was popular among African Americans, offered a formal apology for slavery in 1998.
Information from The Associated Press and Reuters is included in this report.
Workers Sue Company DirectorsPension Round-Up - March 29, 2002
Global Crossing participants claim that they have lost tens of millions of dollars due to breaches of duty of the 17 company directors. The suit claims that the directors used false and deceptive accounting to inflate Global Crossing's worth and to encourage plan participants to purchase shares of company stock.
The suit alleges that the directors "actively misled the participants and beneficiaries of the plan about the appropriateness of investing in company stock and about Global Crossing's earnings prospects and business condition".
The plan was in a "lockdown" from December 14, 2001 through January 18, 2002, which prohibited plan participants from trading in their accounts during the month before it filed for Chapter 11 bankruptcy.
Enron Investors Sue PaineWebberNew York Times by Richard A. Oppel Jr. March 28, 2002
WASHINGTON, March 26 Enron executives pressed UBS PaineWebber to take action against a broker who advised some Enron employees to sell their shares in August and was fired by the brokerage firm within hours of the complaint, according to e-mail messages released today by Congressional investigators.
The broker, Chung Wu, of PaineWebber's Houston office, sent a message to clients early on Aug. 21 warning that Enron's "financial situation is deteriorating" and that they should "take some money off the table."
That afternoon, an Enron executive in charge of its stock option program sent a stern message to PaineWebber executives, including the Houston branch office manager. "Please handle this situation," the newly released message stated. "This is extremely disturbing to me."
PaineWebber fired Mr. Wu less than three hours later.
That evening, the firm retracted Mr. Wu's assessment of Enron's stock then about $36 by sending his clients an optimistic report that Enron was "likely heading higher than lower from here on out." A few months later, the stock was worthless, and the company was in bankruptcy court.
The episode illustrates just how easily Enron appears to have thrown its weight around at a Wall Street firm, which may have satisfied a big corporate customer at the expense of some retail customers.
PaineWebber managed Enron's stock option program for employees and handled brokerage accounts for many company executives. It also did substantial investment banking work for Enron, which generated fees for the firm. PaineWebber said that Mr. Wu was fired because he had violated policies by sending unauthorized e-mail messages to more than 10 clients and by failing to disclose that PaineWebber's research analyst had rated Enron a "strong buy."
But the day that Mr. Wu was fired was the day that Enron's chairman, Kenneth L. Lay, was both shedding some of his own shares and talking up the stock. On Aug. 21, Mr. Lay sold $4 million of stock to the company. He also sent an e-mail message to employees saying that one of his highest priorities was to restore investor confidence, adding that that "should result in a significantly higher stock price."
The message complaining to PaineWebber about Mr. Wu was sent by Aaron Brown, an Enron official who PaineWebber said helped oversee the stock option program. Mr. Brown could not be reached for comment. A switchboard operator at Enron said today that Mr. Brown no longer worked at the company, and a spokesman did not respond to questions.
Mr. Wu, who declined to comment through his lawyer today, previously asserted that Enron was behind his dismissal, but today's disclosure was the first to show pressure was applied by Enron officials. Mr. Wu now works for A. G. Edwards.
A PaineWebber spokesman declined to elaborate on the matter involving Mr. Wu but pointed to a letter sent to Congress last week.
In that letter, PaineWebber said that Mr. Wu violated a rule of the National Association of Securities Dealers requiring that sales literature be reviewed by a supervisor before being sent to clients. The firm also said that Mr. Wu's advice was hastily drafted and "raises basic suitability concerns" and pointed to his suggestion that investors who hold the stock or vested options might want to use options to hedge their exposure.
The firm said that Mr. Wu had acknowledged that he violated its policy and recognized the seriousness of the situation.
The PaineWebber letter stated: "Any financial adviser who sends an e-mail in the middle of the night to dozens of firm clients urging them to take an action contrary to Warburg's research recommendation, without informing the clients of that recommendation or obtaining the necessary review and approval, would be treated the same as Mr. Wu." (UBS Warburg is an affiliated firm.)
A securities lawyer suggested that PaineWebber may have overreacted. "While certainly brokerage firms should have some reasonable controls over the flow of information, this appears to be a totally egregious example," said Lewis Lowenfels, of Tolins & Lowenfels in New York and the co-author of a treatise on securities laws.
The e-mail messages from Enron were released today by Representative Henry A. Waxman of California, the ranking Democrat on the House Government Reform Committee. Mr. Waxman has accused PaineWebber of breaching its fiduciary duties in the episode and has said that Mr. Wu previously sent group messages to clients without being punished.
Mr. Waxman said today that "Enron's conduct regarding PaineWebber appears to be the latest in a series of indefensible actions."
"It appears that Enron's management pressured PaineWebber to dismiss Chung Wu, a PaineWebber financial adviser who was supposed to be independent of Enron, simply because Mr. Wu suggested to clients that they sell their Enron stock."
A lawsuit against PaineWebber filed by Enron investors, including some clients of Mr. Wu, argues that PaineWebber "directly lied to its clients for its own pecuniary gain by failing to reveal adverse information which it knew about Enron."
It asserts that other PaineWebber brokers in the Houston office "were selling as much Enron stock as they possibly could for highly placed Enron clients, despite the fact that inside PaineWebber, brokers commonly joked about Enron's stability."
The lawsuit also suggests another reason PaineWebber wanted to keep Enron happy. The brokerage firm had "an exclusive arrangement with Enron that PaineWebber would be the first brokerage company any Enron employee would deal with concerning the Enron employees' stock options and deferred benefit plans."
The suit also says that "getting first crack at these Enron employees paid off because about one out of three employees decided to keep their portfolios at PaineWebber."
That meant hundreds of millions of dollars in added revenue each year, the suit says.
A PaineWebber spokesman called the lawsuit "totally without merit."
In an e-mail message shortly after Mr. Wu's firing, PaineWebber's Houston branch office manager, Patrick Mendenhall, apologized profusely to Enron.
"I should have known that if I was this frustrated, that you, as our client, were more so," Mr. Mendenhall wrote to Mary Joyce, an Enron official who helped run the stock option program. "The financial adviser has been terminated," Mr. Mendenhall added. The PaineWebber spokesman declined to comment about the e-mail.
That evening, Mr. Mendenhall sent a message to Mr. Wu's clients. "To the fullest extent possible, on behalf of UBS PaineWebber, I hereby retract Mr. Wu's statements," he wrote. He said that Mr. Wu had violated firm policy and attached a copy of the firm's latest report from Ron Barone, who had a "strong buy." "We would be aggressive buyers of Enron at current levels," Mr. Barone's research report stated.
Providian Securities Fraud SuitThe Legal Intelligencer by Shannon P. Duffy March 23, 2002
(3/21/02) - San Francisco-based Providian Financial Corp. has agreed to pay $38 million to settle a class action securities fraud suit that accused the credit card company of inflating its profits with illegal charges to consumers that it was later forced to pay back in a $300 million settlement of a consumer class action.
In a brief filed Wednesday, plaintiffs' lawyers asked U.S. District Judge William H. Yohn Jr. of the Eastern District of Pennsylvania to grant preliminary approval of the settlement and schedule a fairness hearing.
Attorneys Lester Levy, Robert C. Finkel and Kent A. Bronson of Wolf Popper, along with Andrew J. Entwistle and Catherine Torrell of Entwistle & Capucci, both New York firms, argue that the $38 million settlement is an "excellent result" in a securities case where there was no restatement of financial statements, no investigation by the SEC and no insider trading.
And considering Providian's "deteriorated" financial condition, they argue that the settlement is "truly remarkable" since the company's only source of funds is $57 million in remaining director-and-officer insurance, and investors will be getting about two-thirds of that.
"Given the dramatic decline in Providian's common stock price in late 2001 and 2002, to prices as low as $2.01 per share, there was a material risk that Providian would file for bankruptcy and that [its insurance policies] would be claimed as assets of the bankruptcy estate," they said.
The first of the shareholders' suits was filed soon after news broke in May 1999 that the San Francisco district attorney's office was investigating Providian's credit card business practices.
The price of Providian's stock declined from $124.13 to $106.94 the day after the first news accounts and continued to plunge over the next two weeks to $78.44 -- a drop of nearly 37 percent.
If approved by the court, the settlement will benefit investors who purchased Providian stock between Jan. 21, 1999, and June 4, 1999, a period in which 27 million shares traded.
Plaintiffs' lawyers estimate that the average recovery will be about $1.40 per damaged share before the deduction of attorney fees and expenses.
Under the settlement, the plaintiffs' lawyers will be entitled to petition for fees of up to 30 percent of the fund, or $11.4 million, plus up to $275,000 in costs reimbursement.
Early on in the litigation, Providian's lawyers -- Norman J. Blears and George H. Brown of Heller Ehrman White & McAuliffe's Menlo Park, Calif., office -- urged Judge Yohn to dismiss the suit, arguing that the investors couldn't show that Providian "knew or should have known" that its practices were inappropriate or that they would result in such a large settlement.
Yohn disagreed, saying the suit "amply alleges" that Providian and two of its top executives -- CEO Shalish Mehta and Chief Financial Officer David Petrini -- knew or should have known they were making statements to investors that were either false or omitted material information.
Yohn found that the allegedly illegal sales practices and customer charges that led to the consumer suit settlement, and which the investors said were used to inflate profits, "relate to a core aspect of Providian's business."
Mehta and Petrini, he said, were "high-level managers" who can be held responsible for knowing of the alleged "deficiencies in billing and accounting" and the "materially false and deceptive sales practices," since they were "core to Providian's existence as a credit provider."
Yohn found that the suit properly alleged "scienter" on the part of both of the executives, by alleging that they received periodic sales reports and reports on consumer-fee revenue and "flash reports" that showed that Providian's improper sales and accounting practices were succeeding in inflating the company's revenues.
"This information should have notified Mehta and Petrini of Providian's remarkable success and simultaneously should have given them reason to verify the source of the success," Yohn wrote.
Reports from the company's legal collection department to senior management, he said, also showed that late and over-limit fees were "extraordinarily high" -- a fact that "should have roused the [executives'] suspicions."
Yohn said the suit also alleged that Mehta and Petrini "approved or allowed the use of high-pressure and misleading scripted sales presentations by Providian's sale force to mislead customers into accepting non-interest fee-based products, or which facilitated the improper 'adding on' of unwanted products to customers accounts."
The case meets the new, stricter requirements of the Private Securities Litigation Reform Act, Yohn said, because it alleges that "Providian's illegal or fraudulent practices permeated core aspects of Providian's business and were so pervasive that Mehta and Petrini must have known or were reckless in not knowing."
Such allegations, Yohn said, "suffice to establish facts that support a strong inference of knowledge or recklessness."
Providian's primary business is credit card lending which generates two types of revenue -- interest and non-interest.
Interest revenue comes from finance fees on outstanding credit card loans. Non-interest revenue comes from a variety of other sources, including fees for late payments, returned checks, overlimit debits, cash advances, membership and "add-on" services.
Providian's add-on services include programs for health care discounts, automobile and travel discounts, credit protection, and mortgage or rent assistance. Providian also has various programs to induce consumers to transfer credit card balances from other creditors.
In the securities suit, investors claimed that Providian's illegal sales practices resulted in a false inflation of the company's profits.
In a January 1999 press release, the company announced that its 1998 fourth-quarter net income was $94.9 million, and that full-year net income was $296.4 million -- "a 55 percent increase over net income of $191.5 million in 1997."
The press release also said "total managed revenue" had increased to $2.4 billion for the previous year, and that 1.9 million new accounts had been added, swelling the company's customer base to 8 million.
But investors said those figures were all inflated by Providian's illegal sales practices that were soon to result in a massive class action settlement.
In June 2000, Providian agreed to pay $300 million in restitution to its customers and $5.5 million in civil penalties to settle lawsuits brought by the San Francisco district attorney's office and the Connecticut Attorney General.
Those suits accused Providian of eight allegedly illegal or fraudulent business practices, most of which relate primarily to the generation of non-interest revenue:
Actuaries Can Be Sued Under ERISAPlan Sponsor by Nevin Adams March 20, 2002
March 18, 2002 (PLANSPONSOR.com) - A federal court has held that an actuary can be sued for negligence under federal pension law, notwithstanding prior US Supreme Court decisions that appear to bar such actions.
In making his decision, District Judge Alvin Hellerstein of the US District Court for the Southern District of New York acknowledged, "I am well aware that my opinion does not follow the trend of recent decisions of the United States Supreme Court. I come to my decision because I believe ERISA requires it, because the fact pattern in the case before me makes it distinguishable from the Supreme Court decisions." That distinction was made in the court's determination that the actuary was being sued not for 'aiding and abetting a fiduciary', but for its own wrongdoing - in failing to properly perform the obligations imposed on actuaries by the Employee Retirement Income Security Act (ERISA), according to the Bureau of National Affairs.
The Cement Masons Local 780 Pension Fund hired Savasta and Co. to perform actuarial services for its defined benefit pension plan. In 1996, Savasta recommended that the plan increase benefits to participants and beneficiaries because the plan was overfunded.
However, it was discovered a year later that the plan had in fact been underfunded - and now had insufficient assets to cover the cost of all vested benefits.
The fund's trustees sued Savasta in federal court, asserting claims under ERISA, as well as state claims for breach of contract.
Savasta moved to dismiss the claims, arguing that ERISA did not permit lawsuits against actuaries and that the fund's state law claims were preempted by ERISA.
The district court denied the motion, noting that the trustees had a cause of action against the actuary under ERISA.
In so ruling, the court distinguished the case from the US Supreme Court's decision in Mertens v. Hewitt Associates, where the nation's high court found that an actuary could not be sued under ERISA for knowingly participating in and aiding and abetting the wrongs of a plan fiduciary.
The district court noted that Savasta was not being sued as a fiduciary, as was the case in Mertens, but for failing to properly perform obligations imposed on actuaries by ERISA.
Rather, the court noted that since fiduciaries of an ERISA plan must rely on the actions and opinions of other professionals (including accountants, actuaries and lawyers) to ensure the financial integrity of the plan, and since their actions affect the structure and administration of those plans, the actions of those other parties are rightfully governed under ERISA.
The court cited ERISA's Section 103, which requires that actuaries and auditors "be engaged to analyze, audit and report on the employee benefit plans" and further provides a detailed framework within which they are required to operate, the court said.
However, the court noted that many federal courts, relying on the Mertens ruling, have instead determined that ERISA does not govern lawsuits against actuaries and other service professionals.
The court also noted that the case against Savasta was distinguishable from Mertens because it involved a lawsuit by fund trustees, rather than participants and beneficiaries.
Finally, citing the 'fundamental importance' of the actuarial role to the integrity of the plan, and ERISA's central purpose in protecting the interests of participants and beneficiaries, the district court noted that federal court was the proper forum established by Congress for resolving matters related to the interpretation and application of ERISA's standards.
The case is Gerosa v. Savasta, S.D.N.Y., No. 01 Civ. 1761
Andersons Feeble BlusterEmployee Advocate DukeEmployees.com March 18, 2002
There has been an abrupt change of attitude by the Arthur Anderson executives, according to the Reuters article below. Not long ago, the boast was made about how the firm would suffer very little due the Enron document shredding scandal.
Apparently the executives thought that the big business tactic of deny, deny, deny would save them. No matter what the charge, just flatly deny it, and deny that there will be any repercussions from it. Some companies have become desperate enough to buy ad space to proclaim their denials!
Anderson employees have admitted to big time shredding. The arrogant executives still did not think that they wold lose a significant number of clients because of the fiasco.
Boastful talk, without substance, is always just talk. Anderson is now facing a mass exodus of clients. Any fool could have predicted this, but not the executives. They stood steadfast in their belief that happy talk would save the day.
The firm is losing long time clients in the U. S. and in foreign countries. They are barred from any new government business, and are facing an obstruction of justice charge.
Another big business tactic is to drag out any litigation as long as possible with an assortment of motions. Anderson is losing so many clients, that they are not even going to try this approach. They have asked for a trial a quickly as possible!
Andersen Seeking Quick TrialReuters March 18, 2002
WASHINGTON - (Reuters) - The accounting firm Andersen, charged with obstructing justice for its role in the Enron Corp. scandal, plans to seek an early trial in the face of mounting defections by clients and overseas affiliates, The Washington Post said on Saturday.
Rusty Hardin, an attorney for Andersen, said the firm will ask the federal court in Houston to set a trial date in two weeks, the Post said. Andersen representatives are scheduled to make an initial appearance on the charges on Wednesday before federal Magistrate Judge Calvin Botley.
``Our position is we want as quick a trial as the court will give us. Under the speedy trial act it has to be within 70 days, and we will ask the court to do it much sooner,'' it quoted Hardin as saying.
Chicago-based Andersen was Enron's auditor until January, when the two parted ways and Andersen admitted that employees in its Houston office had shredded records related to the energy-trading company last year that had been sought by federal regulators.
Enron, a major contributor to President Bush's election campaign, made the largest bankruptcy filing in U.S. history in December amid a revelations about questionable accounting methods and extensive off-the-books partnerships.
The U.S. government suspended new business dealings with Enron and Andersen on Friday, a day after the U.S. Justice Department charged Andersen with obstruction of justice.
Andersen officials told partners in a conference call on Friday that their lawyers would meet with clients to explain why they think Andersen can win the obstruction of justice case brought by federal prosecutors, the Post said, citing a source who heard the call.
Some 45 major U.S. companies, including Delta Air Lines Inc., drug maker Merck and Co. and oil company Kerr-McGee Corp. have already fired the auditor after decades-long relationships.
Some of Andersen's overseas affiliates are also leaving, concerned that the tarnished reputation of the U.S. firm will hurt them, the Post said.
Fired Employee Awarded $1 MillionThe Recorder by Jahna Berry March 17, 2002
(3/15/02) - As Lawrence Livermore National Laboratory's lawyers gear up for a gender discrimination class action scheduled to begin next year, Alameda County jurors dealt the lab a $1 million blow in a related case on Monday.
Jurors awarded former lab worker Dee Kotla $325,000 in economic damages and $675,000 for emotional distress. Kotla was fired after she testified on behalf of Kim Norman, a woman who Kotla supervised and who sued a male lab employee for sexual harassment in 1994. The lab was a named defendant in Norman's suit, too.
"The people who [Kotla] complained to" about Norman's problems "were ultimately involved in her termination," said J. Gary Gwilliam, who, along with co-counsel Jan Nielsen, represented Kotla. Their Oakland, Calif., firm, Gwilliam, Ivary, Chiosso, Cavalli & Brewer also represented Norman and is part of the plaintiffs' legal team in the pay discrimination suit.
Kotla alleged that the lab initiated an investigation into her phone and computer use after she gave testimony at a deposition that bolstered Norman's claim that she was sexually harassed by a co-worker for two years. Norman's suit ultimately settled, but the lab fired Kotla on Feb. 20, 1997. After the lab fired her, Kotla attempted to commit suicide by taking a large dose of Prozac and was admitted into a psychiatric hospital, her lawyers say.
Kotla filed Kotla v. Regents of the University of California, V014799-8, in February 1998. The University of California manages the lab, located in Livermore, Calif., for the Department of Energy.
The laboratory's attorneys argued that Kotla was fired after officials discovered that she was using her computer and telephone for unauthorized purposes. The lab was represented by Littler Mendelson's Eric Grover and Theodora Lee as well as in-house counsel Kathryn Rauhut. Grover referred calls to the lab's spokeswoman, Susan Houghton.
Houghton said the attorneys are still weighing whether to appeal the verdict.
She noted that the jury deliberated seven days and split 9-3 on some issues, which she said shows that the jurors didn't totally agree with Kotla's allegations. Plus, Kotla admitted that she destroyed computer files after the lab began to investigate her conduct, Houghton said.
"She was operating a business at the same time that she was working at the laboratory," said Houghton.
The Alameda County decision is the first time in recent memory that a jury has ruled against the lab, she added.
Nielsen, a Gwilliam Ivary associate who worked on the case, called Houghton's claim "laughable."
The lab began sifting through Kotla's computer files and phone records shortly after she testified, he said. Kotla made several local calls and converted a computer disk, with her supervisor's permission, for a friend, he added.
In a statement, Kotla said that she was gratified by the jury's verdict.
"After five long years of litigation I feel that I have been vindicated by this jury. I am hopeful that this verdict will put an end to this type of conduct at the Laboratory."
Kotla is one of an estimated 5,000 former and current female lab workers who are part of a class action scheduled to go to trial in February 2003.
In Singleton v. Regents of the University of California, 807233-1, the plaintiffs allege that women have been paid less than male counterparts and have been passed over for promotions for years. The suit had its origins 14 years ago, when lead plaintiff Mary Singleton, a lab chemist, went to management -- humming "We Shall Overcome" -- with a salary study showing the pay gap.
At one point the plaintiffs' attorneys -- which also include lawyers from James Sturdevant's San Francisco firm and from Trial Lawyers for Public Justice -- estimated that up to 10,000 women were in the class. Alameda County, Calif., Superior Court Judge Ronald Sabraw later ruled that statute of limitations requirements excluded former female employees who worked at the lab prior to 1995.
The plaintiffs anticipate that the lab's attorneys will argue several motions before trial, including one to decertify the class, said Mark Johnson, an attorney at Sturdevant's firm.
That motion is scheduled to be heard on July 26, he said.
Ford Discrimination SettlementsAssociated Press by Ed Garsten March 17, 2002
(3/15/02) A judge in Wayne County, Mich., granted final approval Thursday to a $10.5 million settlement in two discrimination lawsuits filed against Ford Motor Co. by hundreds of current and former employees.
In a separate settlement in Virginia, the company agreed to pay at least $145,000 to three women who said they were sexually harassed at work.
Thursday's approval of the multimillion-dollar settlement reached in December ends the class action lawsuits charging that a management evaluation system put in place by former president and CEO Jacques Nasser discriminated against older white employees.
"It's a relief it's over," plaintiff John Streeter said. "For a lot of people still working at Ford, it will help heal some of their wounds."
One of the lawsuits had alleged age, race and gender bias, while the other alleged only age discrimination. According to the consent decree, the automaker denied wrongdoing, and charges of race and gender bias were dropped.
Before giving his final approval, Wayne County Circuit Court Judge Edward Thomas heard objections from four plaintiffs in the class action suits. The objections did not affect the settlement.
Each plaintiff named in the lawsuits will receive up to $100,000, minus attorney fees, depending on length of employment and other considerations. The judge's approval means the settlement is now in effect and plaintiffs can begin to receive money.
Claims also have been filed by 436 current or former employees, said plaintiffs' attorney James Fett. Thirteen people have opted out of the settlement so they can pursue their own litigation, he said.
A Ford spokeswoman said Wednesday the automaker expected the approval.
Bill Ford Jr., chairman and CEO, had promised to make settlement of the lawsuits a priority after Nasser resigned Oct. 30. Negotiations to reach out-of-court settlements were under way before Nasser's resignation.
Under the evaluation system, known as Performance Management Process, managers received grades of A, B or C. A grade of C could lead to the loss of bonuses, raises or promotions. Two consecutive C's could lead to dismissal.
Managers performing the evaluations were given quotas for meting out each grade level. The plaintiffs claimed a disproportionate number of older white men received C's.
Last July, three classifications replaced the letter grades, and the quotas were eliminated.
In the Virgina case, Ford admitted no wrongdoing in the settlement of a lawsuit filed by the Equal Employment Opportunity Commission on behalf of three women who used to work at Ford's Norfolk plant. They said they were subjected to crude notes and other sexual messages.
Ford agreed to pay a total of $145,000 to two of the three, while the third resolved her claim against Ford confidentially, according to a consent decree signed by a federal judge. Ford also must improve training aimed at reducing sexual harassment.
Della DiPietro, Ford's director of manufacturing communications, said Ford has had a zero tolerance policy against harassment for years and was already taking the steps agreed to in the settlement.
Age Bias Suits at a CrossroadsThe National Law Journal by Marcia Coyle March 13, 2002
Age discrimination differs in key ways from race or gender discrimination, the U.S. Supreme Court has said. But to Wanda Adams and more than 100 of her fired, older co-workers, there is no difference when the illegal discrimination hides behind an employer's seemingly neutral policies.
Adams and the so-called Adams group on March 20 will urge the Supreme Court to hold that job bias plaintiffs can use the disparate-impact method to prove discrimination under the Age Discrimination in Employment Act of 1967 (ADEA) -- just as victims of alleged race, sex and disability discrimination can under other federal civil rights laws.
Adams v. Florida Power Corp., No. 01-584, is a major job bias challenge in a term that is emerging as one of the most important employment law terms in the past decade.
A disparate-impact claim, says the Supreme Court, involves facially neutral employment practices that, in fact, fall more harshly on one group than another and cannot be justified by business necessity. The claim often relies on statistical evidence.
The justices first articulated the disparate-impact theory in a 1971 race discrimination case under Title VII of the 1964 Civil Rights Act. Federal courts subsequently assumed the availability of disparate-impact claims under ADEA because ADEA's language banning age bias is virtually identical to Title VII's language banning race, gender and national origin discrimination.
And interpretive guidelines issued in 1981 by the Equal Employment Opportunity Commission -- surprisingly not participating in the Adams case -- state that disparate-impact claims are viable under ADEA.
But in a 1993 decision involving intentional age discrimination, the Rehnquist Court raised doubt about the viability of disparate-impact claims under ADEA. That doubt led to a split among the circuits on the issue and ultimately led to Wanda Adams' day in the high court.
As discrimination of all types is becoming more subtle, disparate-impact claims become critical to ferreting it out, say advocates for job bias claimants.
"It's easy for the court to say if you prove intent, you win," says employment litigator Cathy Ventrell-Monsees of Chevy Chase, Md., who filed an amicus brief supporting Adams on behalf of the National Employment Lawyers Association. "That's the most obvious kind of discrimination. But to ever make real progress, you have to allow plaintiffs to prove discrimination in those neutral practices and policies that at first blush don't look like discrimination."
But neither the ADEA's language nor its legislative history supports a disparate-impact method, say business and employer advocates. Congress intended only to prohibit intentional discrimination, they argue.
Recognizing ADEA disparate-impact claims "would predictably force employers to abandon valuable practices and/or make use of quotas," warns veteran high court litigator Glen D. Nager of Jones, Day, Reavis & Pogue, counsel to Florida Power Corp.
When Congress enacted Title VII in 1964 and ADEA three years later, disparate impact and disparate treatment (intentional discrimination) were not part of the legislative lexicon.
"I don't think Chief Justice [Warren] Burger fully appreciated what he was holding in Griggs [v. Duke Power Co., 401 U.S. 424 (1971)] -- a totally separate proof construct, the far-reaching ramifications of disparate impact," says employment law scholar Charles Craver of George Washington University National Law Center. "And, I donΉt think Congress in 1964 was sure it was creating that approach. Griggs changed everything."
But in 1991, after a "more conservative Supreme Court started to whittle away" at disparate impact, adds Craver, Congress said it did indeed mean that approach. In that year, the lawmakers -- reacting to a series of job bias rulings by the high court -- expressly adopted disparate-impact claims in the Americans with Disabilities Act and amendments to Title VII. But they did not put similar language into ADEA.
"At the time of the 1991 Civil Rights Act, it was widely accepted that disparate impact was available under the ADEA," says Laurie McCann of AARP Foundation Litigation, supporting Adams. "It really wasn't under attack. I suppose we all wish we had read tea leaves then."
But the tea leaves offered no clear message in 1992 when Florida Power began a series of reorganizations. The company laid off more than 1,200 employees between 1992 and 1996. The reorganizations, it said, were necessary to maintain the company's competitiveness in a deregulated utility market.
Wanda Adams and the 116 employees in the Adams group lost their jobs as part of those reorganizations. Of the 1,200 employees laid off, more than 70 percent were at least 40 years old, says Adams' high court counsel, John G. Crabtree of Key Biscayne, Fla.
The Adams group sued Florida Power in federal court and charged that the downsizing disproportionately affected older workers in violation of ADEA. The district court in 1999 held that disparate-impact claims were not available under ADEA. Last year, a panel of the 11th U.S. Circuit Court of Appeals affirmed, 2-1.
The 11th Circuit found a key difference between ADEA and Title VII. While both laws prohibit adverse actions by employers because of the employee's age, race or other protected characteristic, ADEA, unlike Title VII, says those adverse actions may still be lawful if based on "reasonable factors other than age." That language suggests that intent or motive is the linchpin for ADEA violations, according to the 11th Circuit.
The appellate court also felt ADEA's legislative history differed from Title VII's by suggesting that policies with disparate impacts would be handled, not by ADEA, but by alternative programs or methods. And finally, the court relied heavily on the 1993 Supreme Court ruling that used dicta to cast doubt on the viability of disparate impact claims -- Hazen Paper Co. v. Biggins, 507 U.S. 604.
With the Adams ruling, the 11th Circuit joined the 1st, 3rd, 7th and 10th circuits on the issue. But the 2nd, 8th and 9th circuits have held that because ADEA's language so closely tracks Title VII, disparate-impact claims are available.
In the high court, the parties argue over statutory language, legislative history and what weight should be given to the EEOC guidelines recognizing disparate-impact claims under ADEA.
"This one is very tough," concedes Ventrell-Monsees. "I think the Supreme Court would have to come up with well-reasoned arguments to distinguish Title VII, which uses the exact same language and permits disparate-impact claims. Where there is a difference is the 'reasonable factors other than age' language."
And that difference is the "elephant in the middle of the case," says Crabtree, Adams' counsel.
But he and the groups supporting him argue that it is simply part of an employer's affirmative defense and completely consistent with the disparate-impact theory. "It allows an employer to establish that their use of neutral policies is reasonable," says Ventrell-Monsees.
Not so, counters Florida Power's Nager and business supporters. The "reasonable factors other than age" provision recognizes that "intent is outcome determinative" and that forecloses disparate-impact claims, argues Nager. ADEA prohibits only intentional discrimination, they contend.
The high court's view of age discrimination is a "huge hurdle for us to get over," says AARP's McCann. "You see constant references to the lack of history of discrimination against older workers. You see references that age, unlike race and gender, is not an immutable characteristic. We're all going to get old some day so this is not a real problem. But they seem to miss that once you are in the protected category, there's no going back."
But age is different from race or gender, and Congress recognized that when it excluded age from Title VII in 1964, says Mark S. Dichter, chairman of the labor and employment practice at Philadelphia-based Morgan, Lewis & Bockius.
"They proposed a different statute with a different scheme," he explains. "They recognized age is different -- it's a continuous process and it does affect job performance whereas, in theory, race doesn't or shouldn't affect performance."
Age discrimination, he adds, doesn't involve the same kind of inherent, societal bias that Congress and the courts were concerned about when dealing with race and gender in the workplace.
"What motivated creating this disparate-impact theory -- where you can be held liable without any proof you intended to do wrong was inherent bias," he says.
But disparate impact does serve an important function in age cases, one rather distinct from race or gender cases, says employment law scholar Steven Kaminshine of Georgia State University College of Law -- where an employer relies on age-correlative factors which are not themselves age, such as seniority, pension eligibility and salary tied to longevity, to take adverse actions against employees.
Those kind of factors, he explains, "are so hard to puncture and easy for employers to hide behind and so predictably apply to older workers, that it seems to me reasonable to require employers to simply justify the use of those factors beyond negating intent."
Disparate impact should be available under ADEA, says Kaminshine, because there is enough similarity in objective to its use in race, gender and disability cases. "I think it's similar enough, both in terms of guarding against latent intent and guarding against the convenient or casual use of neutral factors that predictably target older workers but aren't needed," Kaminshine notes.
However, he adds, the "tea leaves" are against Adams, largely because of the Court's 1993 ruling in Hazen Paper. And there are enough differences in ADEA to give disparate impact opponents "credible fodder," he says.
Kaminshine and others say the courts, litigators and others still have much to learn from the high court about how disparate impact operates. The Adams case, they say, offers the justices a key opportunity.
"I'd like to see the ruling evolve from a discussion not just on technical arguments -- the best technical argument is still the language and the language is almost identical in the two statutes -- but what it is about the theory of disparate impact, created out of this language in Title VII, that makes it appropriate or inappropriate to apply in the age setting," says Kaminshine.
"It would give us insight into the disparate-impact theory in areas we know it does apply today."
Coca-Cola Class Action SuitAssociated Press March 12, 2002
RANCHO CUCAMONGA, Calif. (AP) - Nine former and current Coca-Cola employees have sued the soft drink company, alleging it bilked workers out of at least $200 million in wages over the past four years.
The three class-action lawsuits also claim that Atlanta-based Coke and its California subsidiaries retaliated against those who tried to stop the practice.
The suits are pending in Superior Court.
Peter Santilli, a former district sales manager at a Coca-Cola sales center in Rancho Cucamonga, said he was fired after complaining that the company shaved thousands of dollars in overtime wages from the paychecks of its hourly employees.
Santilli alleges that he and other managers were expected to manipulate an electronic timekeeping system and edit out overtime hours worked by merchandisers, who typically earn $8 per hour restocking store shelves with Coke products.
Other plaintiffs in the lawsuits claim they worked 11-hour days, only to be talked out of claiming overtime by company managers.
"We'd get harassed," said Anthony Solis, 26, who worked as a Coca-Cola merchandiser from November 1997 to May 1998. "They'd tell me, 'I can send my mom out there and she'd have it done in eight hours. We need people who can do that.'"
A spokesman for Coca-Cola Bottling Co. of Southern California, which owns the sales center, denied the claims.
"We provide our employees with excellent compensation package in the marketplace," spokesman Bob Phillips told the Inland Valley Daily Bulletin. "We're committed to creating an environment in the workplace where everyone is respected and valued and is compensated accordingly."
Last year, Coke paid $20.2 million to settle a class-action suit filed on behalf of salaried account managers and merchandisers, who had alleged the company unlawfully failed to pay them overtime wages.
There are at least two similar lawsuits pending in state courts against Pepsi, Coca-Cola's chief rival in the soft drink bottling industry.