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Legal News Report 1-28-2016
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FTC Sues DeVry Education Over Allegedly Deceptive Ads
Jan 27, 2016 | Wall Street Journal
By Josh Mitchell & Brent Kendall
Federal regulators took aim at another major for-profit chain of colleges Wednesday, suing DeVry Education Group Inc. for allegedly running false television and online advertisements about the employment success and earnings of its graduates. -
FTC Reaches Settlement With GM, Dealerships Over Used Vehicle Sales
Jan 28, 2016 | Wall Street Journal
By Gautham Nagesh
The Federal Trade Commission has reached settlements with General Motors Co. and two dealerships concerning allegations the parties sold preowned cars with open safety recalls despite touting extensive inspection processes. -
Gilead Faces Fights Over Hepatitis C and H.I.V. Drugs
Jan 27, 2016 | The New York Times
By Andrew Pollack
The attorney general of Massachusetts said on Wednesday that she had opened an inquiry into whether Gilead Sciences had violated state consumer protection laws by charging too much for its hepatitis C drugs. -
Judge Approves Settlement in Head Injuries Suit Against N.C.A.A.
Jan 26, 2016 | The New York Times
By Ben Strauss
A federal judge granted initial approval of a settlement Tuesday between the N.C.A.A. and a group of athletes who sued the association over its handling of head injuries. The agreement, which still needs N.C.A.A. approval, does not contain cash settlements for the plaintiffs in the proposed class-action suit, but mandates a new national protocol for head injuries sustained by players. -
Lawsuits Claim Disney Colluded to Replace U.S. Workers With Immigrants
Jan 25, 2016 | The New York Times
By Julia Preston
Leo Perrero and Dena Moore, two former employees for Walt Disney World in Orlando, have filed lawsuits in federal court in Tampa, Fla., against Disney and two global consulting companies, HCL and Cognizant, which brought in foreign workers who replaced them. They claim the companies colluded to break the law by using temporary H-1B visas to bring in immigrant workers, knowing that Americans would be replaced. -
DuPont faces 40 trials a year over cancer tied to Teflon chemical
Jan 28, 2016 | Reuters
By Jessica Dye
Chemical maker DuPont will face 40 trials a year starting April 2017 involving plaintiffs who say they developed cancer from a toxic chemical used to make Teflon that leaked from one of the company’s plants in West Virginia.
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FTC Sues DeVry Education Over Allegedly Deceptive Ads
Jan 27, 2016 | Wall Street Journal
By Josh Mitchell & Brent Kendall
WASHINGTON—Federal regulators took aim at another major for-profit chain of colleges Wednesday, suing DeVry Education GroupInc. for allegedly running false television and online advertisements about the employment success and earnings of its graduates.
The Federal Trade Commission, one of several agencies investigating the for-profit education industry, faulted DeVry advertisements that claim 90% of its graduates who sought jobs found them in their field of study within six months of graduation. For example, it accused the school of including business-administration graduates who found retail jobs like selling cars or waiting tables as having found work in their field.
The commission asked a federal judge in California for monetary remedies—including refunds and restitution—for potentially as many as 50,000 students who enrolled at the company’s various campuses since 2008, the period under scrutiny.
The FTC’s lawsuit also seeks to bar DeVry from using faulty statistics in its advertisements.
Illinois-based DeVry, one of the nation’s largest for-profit education chains by sales, denied the allegations and said it would vigorously contest the lawsuit. “DeVry University measures the employment and income of its graduates on a sound, rational and transparent basis, and has published these results in a consistent manner over the years,” the company said.
DeVry’s shares sank 15% in New York Wednesday.
Student-advocacy groups and individual borrowers are pushing the federal government—which backs most of the nation’s $1.2 trillion in student debt—to forgive the debt of borrowers who attended for-profit schools. Thousands of Americans have petitioned the government to cancel their loans on the grounds they were deceived by their institutions.Advertisement
“Educational institutions owe it to prospective students to tell the truth about whether their courses will help them obtain the jobs they want in their chosen fields,” said FTC Chairwoman Edith Ramirez.
Ted Mitchell, undersecretary of education, said the Education Department was conducting a related investigation of DeVry. He added that the department is still working on rules specifying when aggrieved borrowers can have their loans forgiven.
The DeVry lawsuit is part of an effort by federal and state officials to root out what they characterize as overaggressive—and deceptive—recruiting tactics by for-profit colleges. Officials say those tactics helped fuel a surge in for-profit school enrollment in the past two decades—particularly among poor and vulnerable Americans—helping drive up student debt.
Many of those students now are defaulting on their loans, largely because they can’t find the lucrative careers they were promised, federal officials say.
Corinthian Colleges Inc. liquidated in bankruptcy last year amid federal and state probes into similar allegations involving that company.
In November, Education Management Corp., owner of the Art Institutes, agreed to pay $95.5 million to settle Justice Department claims that it unlawfully paid admissions workers solely on the basis of the number of students they enrolled.
In addition to questioning DeVry’s job-placement claims about its graduates, the FTC also faults a claim that its graduates earned 15% more than those from other schools.
DeVry says it calculates its graduates’ job success using a method similar to one hod that was recently endorsed by attorneys general in 39 states. “DeVry University’s measures are more rigorous and further substantiated than most” other schools, the company said.
The DeVry case also touches on what student advocates have decried as a lack of data and standards across higher education to help students decide which school to attend and how much to borrow. There are no federal rules on how colleges should calculate their graduates’ employment status, said the Education Department’s Mr. Mitchell.
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FTC Reaches Settlement With GM, Dealerships Over Used Vehicle Sales
Jan 28, 2016 | Wall Street Journal
By Gautham Nagesh
The Federal Trade Commission has reached settlements with General Motors Co. and two dealerships concerning allegations the parties sold preowned cars with open safety recalls despite touting extensive inspection processes.
The settlements, announced Thursday, are related to separate allegations. In addition to concerns the FTC had with GM over its “Certified Pre-Owned” vehicle program, the agency also lodged complaints against Jim Koons Management Company, which operates dealerships in Maryland and Virginia, and Oregon-based dealer group Lithia Motors Inc.
The settlement clears another safety-related investigation off GM’s plate, coming two years after the No.1 U.S. auto seller began to recall millions of cars and face heavy scrutiny for faulty ignition switches linked to over 100 deaths.
GM disclosed the FTC’s probe in July. In a complaint Thursday, the FTC alleged the auto maker advertised cars as certified preowned vehicles at local dealerships even though they were subject to previously announced safety recalls that had not been repaired. According to the FTC’s complaint, those cars had defects that could cause serious injury, including those affected by the ignition switch defect.
GM advertises that Certified Pre-Owned Vehicles pass a 172-point vehicle inspection and reconditioning process conducted by highly trained technicians, who adhere to factory standards to ensure the vehicle is in excellent condition.Advertisement
“We made changes to our certified preowned marketing program last year to address the FTC’s concerns and we are pleased with the proposed resolution of the matter,” a GM spokesman said via email.
FTC Bureau of Consumer Protection director Jessica Rich said in a call with reporters that the agency believes that there might be millions of cars with open safety recalls being sold today.
“We really do hope these actions send a signal to the marketplace as a whole about the need to disclose unrepaired safety recalls, especially when you’re making bold claims about the inspections you’re undertaking or the safety you’re used cars might have,” Ms. Rich said.
The FTC allegations against Jim Koons Management Company and Lithia are similar, with the agency saying these stores sold cars subject to unrepaired recalls despite guaranteeing that they had passed quality inspections.
Jim Koons Automotive said in a statement that it doesn’t admit any wrongdoing as part of the settlement, and is not aware of a single customer complaint about its disclosure of recalls. The company said the allegations relate to statements made on a single page of the company’s website.
“Nevertheless, we agreed to a settlement with the FTC to avoid the costs and disruption of litigation,” the company said.
Under proposed consent orders, GM and the dealers would be banned from claiming their used vehicles are safe or have been subject to a rigorous inspection unless all safety recalls have been addresses or disclosed. The orders, which would remain in effect for 20 years, would also ban the companies from misrepresenting facts about safety of their used cars in advertising.
Ms. Rich said the companies could be subject to significant financial penalties if they violate the terms of the settlements.
GM and the dealers must also notify recent customers by mail that their vehicles may have an open recall.
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Gilead Faces Fights Over Hepatitis C and H.I.V. Drugs
Jan 27, 2016 | The New York Times
By Andrew Pollack
The attorney general of Massachusetts said on Wednesday that she had opened an inquiry into whether Gilead Sciences had violated state consumer protection laws by charging too much for its hepatitis C drugs.
The notification, which was contained in a letter to the company from the attorney general, Maura Healey, is the latest challenge to the practices of Gilead, which has become the largest and most profitable biotechnology company by dominating the market for drugs used to treat both H.I.V. and hepatitis C.
On Tuesday, the AIDS Healthcare Foundation, a nonprofit organization that treats patients with H.I.V. and AIDS, filed a lawsuit seeking to invalidate patents covering the new version of Gilead’s mainstay H.I.V. drug, tenofovir. The lawsuit also says that Gilead, to maximize product life span but to the detriment of patients, delayed the introduction of the new, safer version of tenofovir until the old version was about to lose patent protection.
The hepatitis C drugs, Sovaldi and Harvoni, are widely considered breakthroughs — curing most patients in 12 weeks with few side effects. But Sovaldi has a list price of $1,000 per daily pill, or $84,000 for 12 weeks, and Harvoni costs $94,500. Those prices, and the great demand for the drugs, have strained the budgets of state Medicaid programs and prison systems, forcing many of them to restrict treatment to those most seriously ill.
In her letter to Gilead’s chief executive, John C. Martin, Ms. Healey said her office was examining whether Gilead’s pricing would be an “unfair trade practice,” in violation of Massachusetts law.
“Because Gilead’s drugs offer a cure for a serious and life-threatening infectious disease, pricing the treatment in a manner that effectively allows H.C.V. to continue spreading through vulnerable populations, as opposed to eradicating the disease altogether, results in massive public harm,” she wrote, referring to the hepatitis C virus by its initials.
The letter does not go into detail on how Gilead’s pricing might violate the state law. A lawsuit filed by the Southeastern Pennsylvania Transportation Authority, which said Gilead’s high prices violated a California law against unfair competition, was dismissed by a federal judge.
However, Ms. Healey’s letter suggests her real intent was not to sue Gilead but to persuade it to voluntarily lower its prices.
Gilead said on Wednesday that it had contacted the attorney general to request a meeting to address questions and “ensure a mutual understanding of the work we are doing to deliver a cure for H.C.V. to as many patients as possible.”
Gilead has argued that the prices are justified by the value provided by the drugs, curing a disease that gradually destroys the liver. Use of Sovaldi or Harvoni can stave off more expensive ailments, like liver cancer or the need for a liver transplant, down the road.
The company has also argued that there are usually substantial discounts offered from the list prices, though these are typically kept secret. Insurers and others have bargained for discounts by pitting Gilead against its main competitor, AbbVie. Such bargaining should intensify with the expected regulatory approval this week of a new hepatitis C pill from Merck.
One motivation for Ms. Healey’s letter was a class-action lawsuit filed against Massachusetts’ Department of Correction asking for more inmates to be treated for hepatitis C. Ms. Healey’s letter said that treating everyone at the list price of Sovaldi would “easily exceed our entire budget for prisoner health care.”
In the H.I.V. area, Gilead has become the leading vendor based on products that combine three or four drugs into a single pill taken once a day. The bedrock drug in all those combinations has been tenofovir, which will lose patent protection in December 2017, allowing lower-priced generics to be sold.
Gilead is moving to replace tenofovir in the combination pills with a modified version called tenofovir alafenamide, usually called TAF, which will have longer patent protection. TAF is more potent than tenofovir and it causes fewer side effects, particularly kidney and bone damage. The Food and Drug Administration approved the first drug containing TAF, called Genvoya, in November.
In its lawsuit, filed in Federal District Court for Northern California, the AIDS Healthcare Foundation says that TAF is an obvious modification of tenofovir intended to stave off generic competition and therefore does not deserve patent protection.
The lawsuit also claims that Gilead is not releasing TAF as a stand-alone drug because its patents would be too easily challenged by generic companies. By contrast, the original tenofovir is sold as a single drug under the name Viread. The lack of a stand-alone TAF makes it impossible for doctors to use that one drug in a combination with non-Gilead drugs, the suit says.
The foundation, which has had a series of disputes with Gilead, also says that the company did not start clinical trials on TAF until 2011, despite presenting animal data 10 years earlier.
“They waited 10 years to actually release this, and coincidentally it’s one year before the patent on tenofovir expires,” Michael Weinstein, president of the AIDS Healthcare Foundation, said in an interview. “You consider how many people have suffered kidney damage and bone loss during that time.”
A Gilead spokeswoman said that the company believed the patents on TAF were valid. She said the company had recently filed for regulatory approval of a stand-alone version of TAF — albeit as a treatment for hepatitis B, not H.I.V.
“TAF is a novel compound,” she said. “We have been and continue to work hard to develop improved H.I.V. therapies, without delay.”
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Judge Approves Settlement in Head Injuries Suit Against N.C.A.A.
Jan 26, 2016 | The New York Times
By Ben Strauss
A federal judge granted initial approval of a settlement Tuesday between the N.C.A.A. and a group of athletes who sued the association over its handling of head injuries. The agreement, which still needs N.C.A.A. approval, does not contain cash settlements for the plaintiffs in the proposed class-action suit, but mandates a new national protocol for head injuries sustained by players.
The proposed settlement, which was first submitted in July 2014, calls for a $70 million monitoring fund for former athletes, which would allow them the opportunity to receive neurological screenings to examine brain functions and any signs of brain damage like chronic traumaticencephalopathy, a degenerative brain disease. Under the settlement, the N.C.A.A. would also prevent athletes who have sustained a concussion from returning to a game or practice that day.
United States District Judge John Z. Lee did request one notable change from the original settlement: that the N.C.A.A. not have complete immunity against class-action concussion litigation. Lee’s terms for approval include a provision that would still allow athletes at a particular college to sue their university and the N.C.A.A. as a class.
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The N.C.A.A. issued a statement saying it was still reviewing Lee’s terms.
“After all the wait, we’ve basically got 96 percent of what we expected to get,” said Steve Berman, the lead counsel for the plaintiffs. “It’s understandable, with a settlement this big, there could be some tweaking, but we’re happy with the result.”
Adrian Arrington, a former football player at Eastern Illinois University, was the first to sue the N.C.A.A. over concussions in 2011, claiming negligence related to the handling of several head injuries he sustained in his career.
Several similar cases were filed and then consolidated. Arrington announced that he opposed the proposed settlement last year, arguing that individual athletes should receive compensation.
The N.F.L. settled a concussion suit with former players that included millions of dollars to help those with one of several neurological diseases.
Regardless of the N.C.A.A.’s decision on Lee’s terms, Jay Edelson, a plaintiffs’ lawyer who opposed the initial settlement, said he was now looking into filing a new round of class-action suits against the N.C.A.A. and individual universities over their handling of concussions.
“We are going to get real relief for struggling athletes, and the court has now said filing class-action suits on a school-by-school basis is the proper way to do that,” he said.
A status hearing for the case is scheduled Thursday in Chicago.
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Lawsuits Claim Disney Colluded to Replace U.S. Workers With Immigrants
Jan 25, 2016 | The New York Times
By Julia Preston
Even after Leo Perrero was laid off a year ago from his technology job at Walt Disney World in Orlando, Fla. — and spent his final months there training a temporary immigrant from India to do his work — he still hoped to find a new position in the vast entertainment company.
But Mr. Perrero discovered that despite his high performance ratings, he and most of the other 250 tech workers Disney dismissed would not be rehired for at least a year, and probably never.
Now he and Dena Moore, another American laid off by Disney at that time, have filed lawsuits in federal court in Tampa, Fla., against Disney and two global consulting companies, HCL and Cognizant, which brought in foreign workers who replaced them. They claim the companies colluded to break the law by using temporary H-1B visas to bring in immigrant workers, knowing that Americans would be displaced.
“I don’t have to be angry or cause drama,” said Ms. Moore, 53, who had worked at Disney for 10 years. “But they are just doing things to save a buck, and it’s making Americans poor.”
Ms. Moore had also trained her replacement. After she was laid off, she applied for more than 150 other jobs at Disney. She did not get one.
The lawsuits by Mr. Perrero and Ms. Moore, who each filed a separate but similar complaint on Monday seeking class-action status, represent the first time Americans have gone to federal court to sue both outsourcing companies that imported immigrants and the American company that contracted with those businesses, claiming that they collaborated intentionally to supplant Americans with H-1B workers.
A furor over the layoffs in Orlando last January brought to light many other episodes in which American workers, mainly in technology but also in accounting and administration, said they had lost jobs to foreigners on H-1B visas, and had to train replacements as a condition of their severance. The foreign workers, mostly from India, were provided by outsourcing companies, including the two named in the lawsuits, which have dominated the H-1B visa system, packing the application process to win an outsize share of the quota set by Congress of 85,000 visas each year.
The Labor Department opened investigations of the outsourcing companies — the direct employers of the temporary immigrants — at Disney and at Southern California Edison, a utility that laid off hundreds of American workers in 2014. The investigations are continuing. At least 30 former Disney workers also filed complaints with the federal Equal Employment Opportunity Commission, claiming that they faced discrimination as American citizens.
The lawsuits by Mr. Perrero and Ms. Moore are based on the rules for H-1B visas, which Congress designed to bring foreign workers with special skills into the country. Employers are required to declare to the Department of Labor that hiring foreigners on the visas “will not adversely affect the working conditions of U.S. workers similarly employed.”
“Was I negatively affected?” Ms. Moore asked. “Yeah, I was. I lost my job.”
Sara Blackwell, a lawyer in Sarasota, Fla., representing the former Disney employees, said the suits charged that the companies had lied under oath when they said no Americans would lose their jobs.
Disney, in a statement on Monday, said, “These lawsuits are based on an unsustainable legal theory and are a wholesale misrepresentation of the facts.” The company said more than 100 of the workers who were laid off in Orlando had been rehired.
HCL has said it complies carefully with United States laws. Cognizant, in a statement on Monday, said that it would not comment on the lawsuit, but that it “fully complies with all U.S. regulations regarding H-1B visas.”
The company said an internal compliance team “ensures our practices are not merely compliant with existing laws in letter and spirit, but also adhere to best practices.” Cognizant said it employed “many thousands of U.S. citizens and residents in addition to employees on lawful H-1B visas.”
Responding to the frustration of American workers, Congress in December renewed and increased a fee on outsourcing companies that it had allowed to lapse. Larger companies employing many H-1B workers in the United States will pay an extra fee of $4,000 for each new H-1B visa — up from $2,000 — and another $4,000 to move an H-1B immigrant who is already in the country to a new employer.
Senator Bill Nelson of Florida, a Democrat who has been openly critical of Disney’s layoffs, offered a bill to reduce the H-1B quota by 15,000 visas a year to 70,000. The issue came up in the presidential race, as Senator Ted Cruz of Texas, a Republican candidate, introduced a bill with Senator Jeff Sessions of Alabama, a Republican hard-liner on immigration, to sharply increase the minimum wage for H-1B workers to $110,000 a year, to discourage outsourcing companies from using the workers to lower wages.
The Institute of Electrical and Electronics Engineers, an international association of tech workers, posted an online petition to encourage Americans who were displaced to file complaints with the Justice Department. In a letter to the group in December, Alberto Ruisanchez, a Justice Department lawyer in charge of prosecuting immigration abuses, confirmed that it would be a violation of anti-discrimination laws for an employer, or a contracting firm, to fire workers or hire replacements “because of citizenship or immigration status.”
Mr. Perrero, like many Americans who have lost their jobs, said he was long reluctant to speak out publicly against his former employer. At 42 and with a family to support, he worried that he would not find another job in Orlando, where Disney rules as the largest employer by far. He spoke with The New York Times anonymously in an article in June about the humiliation of training his foreign replacement.
But local recruiters told him that despite the company’s statements, Disney managers said they would avoid rehiring workers who had been laid off. Mr. Perrero said he knew of only two workers from the close-knit group of more than 200 who were dismissed who went back to tech jobs at Disney.
Mr. Perrero said he was “part Italian, part English, part Swedish.” He said, “I wholeheartedly believe our country needs to have amazing people come here to build a long-term foundation.” But he said the H-1B program had been abused.
Ms. Moore said that even with strong programming credentials, it was hard for her to start over in her 50s with another company. She has 13 grandchildren, and she confessed that one of the difficult losses was a pass that allowed her to take them to Disney World at no cost.
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DuPont faces 40 trials a year over cancer tied to Teflon chemical
Jan 28, 2016 | Reuters
By Jessica Dye
Chemical maker DuPont (DD.N) will face 40 trials a year starting April 2017 involving plaintiffs who say they developed cancer from a toxic chemical used to make Teflon that leaked from one of the company’s plants in West Virginia.
The schedule laid out by U.S. District Judge Edmund Sargus in the Southern District of Ohio during a hearing Wednesday is aimed at pushing the parties closer to resolving more than 3,550 lawsuits.
The outcome could have a material impact on Chemours Co (CC.N), since liability for litigation connected with the chemical C-8 was passed on to the firm spun-off by DuPont in 2015.
The cases have been filed by individuals who say they developed one of six diseases linked to perfluorooctanoic acid, also known as PFOA or C-8, which was found in their drinking water. Their cases are consolidated before Sargus.
The initial 40 trials will be selected from between 250 and 300 lawsuits brought by individuals who say they contracted kidney or testicular cancer from C-8.
"People shouldn’t have to wait ten years for a trial," Sargus said, according to a transcript of the hearing.
DuPont spokesman Dan Turner said the company was pleased plaintiffs would go to trial individually, rather than as a group, as plaintiffs’ lawyers had proposed. In the past, DuPont said "mega trials" would confuse jurors and be unfair to it.
A lead plaintiffs' lawyer, Michael London, called Sargus' plan "a good start."
The lawsuits center on claims DuPont used C-8 at a West Virginia plant for decades despite knowing it was toxic and had been found in nearby drinking water.
While the cancer claims are moving forward to trial, DuPont has said in court filings that 90 percent of the litigation involves less deadly conditions such as high cholesterol and thyroid disease.
To help estimate the aggregate value of individual suits in mass litigation, it is common to hold a series of bellwether, or test trials. The first C-8 bellwether ended in October with a $1.6 million verdict for a plaintiff who had kidney cancer. Four other trials are scheduled for 2016.
While DuPont was the named defendant, Chemours said it would cover DuPont’s liability for the first verdict. Chemours agreed to take on some of DuPont's legal liabilities when it was spun off from the company to house its performance chemicals segment.
Chemours has said an unfavorable outcome from the lawsuits could have a "material adverse effect" on its finances.
Chemours stock was little changed Thursday at $3.12 on the New York Stock Exchange. The stock has fallen 80 percent since it was spun off.
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